10-QPeriod: Q2 FY2002

AMERICAN TOWER CORP /MA/ Quarterly Report for Q2 Ended Jun 30, 2002

Filed August 14, 2002For Securities:AMT

Summary

American Tower Corporation (AMT) reported its second-quarter 2002 financial results, revealing a significant shift in its business segments and a substantial non-cash goodwill impairment charge. While total revenues saw a modest increase of 4% year-over-year to $257.4 million for the quarter, driven by strong performance in the rental and management segment, the company's overall net loss widened considerably. The most striking event was the adoption of SFAS No. 142, leading to a $562.6 million non-cash goodwill impairment charge, primarily impacting the Satellite and Fiber Network Access Services (SFNA) and Network Development Services segments. This charge significantly increased the net loss to $101.2 million for the quarter, compared to a $103.9 million loss in the prior year period, though excluding the impairment charge, the operational performance showed some improvement. The company is strategically divesting non-core assets, evidenced by the sale of its components businesses. Management anticipates becoming free cash flow positive in 2003, supported by expected growth in the core tower leasing business, which is seen as the primary driver for future revenue and profitability. Investors should monitor the company's progress in deleveraging its balance sheet and achieving positive cash flow amidst ongoing restructuring and strategic realignments.

Key Highlights

  • 1Reported total revenues of $257.4 million for Q2 2002, a 4% increase year-over-year, primarily driven by a 27% increase in Rental and Management revenues.
  • 2Recognized a significant non-cash goodwill impairment charge of $562.6 million due to the adoption of SFAS No. 142, resulting in a net loss of $101.2 million for the quarter.
  • 3Network Development Services revenue decreased by 26% ($21.5 million) due to a downturn in the telecommunications industry.
  • 4The company incurred $12.3 million in restructuring expenses during the quarter related to organizational realignments and cost-reduction initiatives.
  • 5Committed to dispose of its components businesses, presenting their results as discontinued operations and recognizing an estimated loss on disposal of $16.0 million.
  • 6Cash flow from operations improved to $32.5 million for the first six months of 2002, compared to a cash usage of $14.3 million in the same period of 2001.
  • 7Total long-term debt stood at approximately $3.6 billion as of June 30, 2002, with management planning to fund liquidity needs through operations and selective divestitures, anticipating free cash flow positivity in 2003.

Frequently Asked Questions

The primary driver for the substantial net loss of $101.2 million was a non-cash goodwill impairment charge of $562.6 million. This charge was recognized due to the adoption of the new accounting standard SFAS No. 142, which requires companies to assess goodwill for impairment rather than amortizing it. The impairment was recognized primarily in the Satellite and Fiber Network Access Services (SFNA) and Network Development Services segments.

The Rental and Management segment showed strong performance, with revenues increasing by 27% to $135.5 million for the quarter. This growth was attributed to leasing activity on newly acquired and constructed towers, as well as increased revenue from existing towers. Management views this segment as the core business with significant future growth potential.

American Tower Corporation anticipates becoming free cash flow positive in 2003, meaning its operating cash flows will be sufficient to cover operational needs, interest expenses, and capital expenditures. Management plans to fund liquidity needs through internally generated funds from operations, selective divestiture activities, and nominal borrowings. The company is also actively managing its debt obligations and expects to reduce its overall debt levels over time.

The company is strategically shifting its focus and divesting non-core assets. This is evidenced by the sale of its components businesses, which are now reported as discontinued operations. Management is prioritizing growth in the core tower leasing business and is undertaking restructuring initiatives to reduce costs and improve efficiency across its operations.