What is the primary driver behind the significant increase in operating expenses?

The primary driver for the significant increase in operating expenses, specifically the 71% rise to $554.0 million for the three months ended September 30, 2002, was the recording of substantial impairment charges. This included a $271.0 million charge for impairments and net loss on sale of long-lived assets, such as assets within the SFNA segment, non-core towers, and abandoned construction projects. Additionally, the adoption of SFAS No. 142 led to a $562.6 million goodwill impairment charge, which is reflected in the nine-month results as a cumulative effect of an accounting principle change.

How is the company's core Rental and Management segment performing?

The Rental and Management segment demonstrated strong performance, with revenues increasing by 18% to $141.7 million for the third quarter of 2002 compared to the same period in 2001. This growth is attributed to the company's success in adding new tenants to its existing towers and those acquired or constructed more recently. Management expects this segment's leasing revenue to continue growing at a more rapid rate than other segments due to increased tower utilization.

What is the outlook for the company's cash flow and liquidity?

American Tower Corporation expects to become free cash flow positive by early 2003, meaning its operating cash flow will be sufficient to cover operational needs, interest expenses, and capital expenditures. The company plans to fund its liquidity needs through internally generated funds from operations, selective divestitures of non-core assets, and, if necessary, borrowings under its credit facilities. Management is actively pursuing strategic divestitures to enhance efficiency and focus on core tower operations.

AMT 10-Q Quarterly Report Q3 FY2002 — Revenue, Net Income, EPS

Q: What impact has the adoption of new accounting standards had on the company's financial statements?

The adoption of SFAS No. 142, 'Goodwill and Other Intangible Assets,' as of January 1, 2002, resulted in a significant non-cash goodwill impairment charge of $562.6 million. This charge was primarily recognized in the Satellite and Fiber Network Access Services (SFNA) and Network Development Services segments. The adoption of this standard also reduced amortization expense, leading to a positive impact on net loss per share compared to prior accounting methods.

Summary

American Tower Corporation (AMT) reported its third-quarter 2002 results, highlighting a significant shift in its business operations and financial performance. The company experienced a notable decrease in total revenues, primarily driven by a substantial decline in its Network Development Services segment, reflecting the ongoing challenges within the telecommunications industry. This was partially offset by a strong increase in Rental and Management revenue, indicating resilience and growth in its core tower leasing business due to adding new tenants and acquiring/constructing new towers. A major financial event for the quarter was the adoption of SFAS No. 142, which resulted in a significant non-cash goodwill impairment charge of $562.6 million. This write-down primarily impacted the Satellite and Fiber Network Access Services (SFNA) and Network Development Services segments. The company also recorded substantial impairments and losses on the sale of long-lived assets, including specific asset write-downs within the SFNA segment and non-core tower assets. Despite these challenges, AMT's management is focused on achieving positive free cash flow by early 2003 through operational improvements, cost reduction initiatives, and strategic divestitures of non-core assets. The company continues to manage its significant debt obligations and is evaluating financing alternatives for its convertible notes.

Key Highlights

1Total revenues decreased by 3% to $266.6 million for the three months ended September 30, 2002, compared to $273.7 million in the prior year period. This was mainly due to a 30% drop in Network Development Services revenue.
2Rental and Management revenue increased by 18% to $141.7 million, driven by adding approximately 4,600 broadband equivalent tenants to existing and new towers.
3The company adopted SFAS No. 142, resulting in a substantial $562.6 million non-cash goodwill impairment charge as of January 1, 2002, impacting the SFNA and Services segments.
4Significant impairments and net loss on sale of long-lived assets were recorded, totaling $271.0 million for the third quarter, related to SFNA segment assets, non-core towers, and abandoned construction projects.
5Total operating expenses surged by 71% to $554.0 million, largely due to the aforementioned impairment charges.
6The company reported a net loss of $353.9 million for the quarter, a significant increase from the $124.9 million net loss in the prior year, heavily influenced by the goodwill impairment and other asset write-downs.
7AMT anticipates becoming free cash flow positive in early 2003, supported by operational improvements, cost-saving measures, and planned divestitures of non-core assets.

AMERICAN TOWER CORP /MA/ Quarterly Report for Q3 Ended Sep 30, 2002

Summary

Key Highlights

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