01—Abstract
Summary
Summary of the 10-K filed February 25, 2021. Cited figures are marked; the original filing is the authoritative source.
American Tower (AMT) closed 2020 with revenue of $8.04 billiona (up 6% year over year), operating income of $2.89 billion, and net income of $1.69 billion, down 12% from 2019 mainly because of a $71.8 million loss on debt retirement, a $216.4 million foreign currency loss, and higher impairments.
Property operations generated 99% of revenue. Adjusted EBITDA rose 9% to $5.16 billionb, and AFFO attributable to common stockholders rose 9% to $3.76 billion. The company holds roughly $47.2 billion in assets, with about $29.5 billion of total debt and $4.9 billion of liquidity at year-end.
Investors should note that approximately 42% of revenue and 52% of operating expenses are denominated in foreign currencies, which made 2020 results sensitive to currency swings. Churn was about 3% of tenant billings, and it is expected to stay elevated for several years in the U.S. & Canada segment because of the T-Mobile master lease agreement and in India because of carrier consolidation and Indian Supreme Court rulings. The company's growth strategy centers on the InSite Acquisition (about $3.5 billionc, closed December 2020) and the pending Telxius acquisition of roughly 31,000 sites in Europe and Latin America for about $9.4 billion.
The Telxius deal, expected to close in tranches beginning in Q2 2021, is being funded with new bridge financing, delayed-draw term loans, and expanded revolving credit facilities. This will substantially increase leverage. Management's covenants show about $2.5 billiond of additional debt capacity under the total leverage test, and the company has indicated it will be allowed to temporarily exceed 6.0x leverage after closing.
Investors should weigh the benefits of diversified, long-duration, largely contracted cash flows against higher leverage, integration risk, and dependence on a small number of large tenants, which account for 55% of revenue. The company remains a REIT, with 2020 distributions of $4.33 per share (about $1.9 billion paid) and a February 2021 dividend of $1.21 per share. Management expects 2021 total distributions of about $2.3 billion and capital expenditures of $1.35 to $1.45 billion.
The filing's remaining risks include the REIT qualification and distribution requirements, international regulatory and currency exposure, LIBOR transition, and climate-related weather risk. Deloitte issued an unqualified opinion on both the financial statements and internal controls, but excluded InSite from its controls assessment because the acquisition closed only in late 2020.
02—Key points
Key Highlights
- Revenue rose 6% to $8.04 billion in 2020, with property operations at 7% growth and U.S. & Canada revenue up 8% to $4.52 billion, while Africa grew 52% because of the Eaton Towers acquisition.
- Adjusted EBITDA increased 9% to $5.16 billion, and AFFO attributable to common stockholders increased 9% to $3.76 billion, reflecting strong operating leverage from the tenant-leasing model.
- Net income declined 12% to $1.69 billion, mainly due to $216.4 million of foreign currency losses, a $71.8 million loss on debt retirement, and $222.8 million of impairment charges.
- Approximately $59 billion of non-cancellable tenant lease revenue is expected over future periods, supported by 5-to-10-year leases with average escalators of about 3% in the U.S.
- The pending Telxius acquisition (about 31,000 sites, roughly $9.4 billion) and the InSite acquisition ($3.5 billion) significantly expand the portfolio, with total debt of $29.5 billion and $4.9 billion of available liquidity at year-end.
- Churn averaged about 3% of tenant billings in 2020, with elevated churn expected for several years in the U.S. & Canada segment due to the T-Mobile master lease agreement and in India due to carrier consolidation.
- The company paid $4.33 per share in distributions during 2020 and declared $1.21 per share in February 2021, with 2021 distributions expected at about $2.3 billion, consistent with its REIT obligations.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 25, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $8.04B$7.58B | +6.1% |
| SG&A Expenses | $778.70M$730.40M | +6.6% |
| Operating Expenses | $5.15B$4.89B | +5.4% |
| Operating Income | $2.89B$2.69B | +7.4% |
| Interest Expense | $793.50M$814.20M | −2.5% |
| Net Income | $1.69B$1.89B | −10.4% |
| EPS (Basic) | $3.81$4.27 | −10.8% |
| EPS (Diluted) | $3.79$4.24 | −10.6% |
| Shares Outstanding (Basic) | 443.64M442.32M | +0.3% |
| Shares Outstanding (Diluted) | 446.10M445.52M | +0.1% |
05—Questions
Frequently Asked Questions
How much debt does American Tower carry, and how will the Telxius acquisition affect leverage?
Total outstanding indebtedness was $29.5 billion at December 31, 2020, with $0.8 billion current. Financing for the roughly $9.4 billion Telxius acquisition includes a bridge commitment (reduced to about $5.2 billion), roughly $2.3 billion of delayed-draw term loans, and expanded revolving credit facilities. The credit agreements were amended to permit total debt to Adjusted EBITDA of up to 7.5x for four quarters after closing, stepping down to 6.0x thereafter. Investors should expect leverage to rise meaningfully before it declines.
Why did net income fall in 2020 even though revenue and Adjusted EBITDA grew?
Net income decreased 12% to $1.69 billion, mainly because of foreign currency losses of $216.4 million (versus a $6.1 million gain in 2019), a $71.8 million loss on early retirement of long-term debt, higher other operating expenses including impairments, and a higher income tax provision. These items are largely non-cash or non-recurring, so Adjusted EBITDA and AFFO are better indicators of underlying operating performance.
How concentrated is the company's revenue among tenants?
Concentration is significant. AT&T, T-Mobile, and Verizon Wireless accounted for 22%, 19%, and 14% of consolidated 2020 operating revenue, respectively, for a combined 55%. T-Mobile's share rose from 10% in 2019 due to the InSite acquisition and the amended master lease. Tenant creditworthiness and consolidation among carriers are therefore key risks.
What are the main risks to REIT status and the dividend?
Failure to qualify as a REIT would subject the company to corporate tax rates on its income and eliminate the dividends-paid deduction. The company must distribute at least 90% of its REIT taxable income. Income from its taxable REIT subsidiaries, which are concentrated in international operations, is subject to foreign withholding taxes and currency controls, and may be limited to 25% of gross income. The filing also notes that a substantial portion of cash flows is generated outside the U.S., which can complicate repatriation.
What is the exposure to foreign currency and emerging-market operations?
In 2020, 42% of revenue and 52% of operating expenses were denominated in foreign currencies. A 10% adverse move in exchange rates on unsettled intercompany balances would produce about $129.2 million of unrealized losses. Currency translation reduced 2020 revenue by about $315 million and operating profit by about $172 million. The company has historically not hedged most non-dollar operations, so further currency weakness could materially affect reported results.
06—Continue