Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The discussion and analysis of our financial condition and results of operations that follow are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and the related disclosure of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates and such differences could be material to the financial statements. This discussion should be read in conjunction with our consolidated financial statements included in this Annual Report and the accompanying notes, and the information set forth under the caption “Critical Accounting Policies and Estimates” below.

We report our results in five segments: U.S. property, Asia property, EMEA property, Latin America property and services. In evaluating financial performance in each business segment, management uses, among other factors, segment gross margin and segment operating profit (see note 20 to our consolidated financial statements included in this Annual Report).

Executive Overview

We are one of the largest global REITs and a leading independent owner, operator and developer of multitenant communications real estate. Our primary business is the leasing of space on communications sites to wireless service providers, radio and television broadcast companies, wireless data providers, government agencies and municipalities and tenants in a number of other industries. In addition to the communications sites in our portfolio, we manage rooftop and tower sites for property owners under various contractual arrangements. We also hold other telecommunications infrastructure, fiber and property interests that we lease primarily to communications service providers and third-party tower operators. We refer to this business as our property operations, which accounted for 98% of our total revenues for the year ended December 31, 2018 and includes our U.S. property segment, Asia property segment, EMEA property segment and Latin America property segment.

We also offer tower-related services in the United States, including site acquisition, zoning and permitting and structural analysis, which primarily support our site leasing business, including the addition of new tenants and equipment on our sites.

The following table details the number of communications sites, excluding managed sites, that we owned or operated as of December 31, 2018:

Number of Owned TowersNumber of Operated Towers (1)Number of Owned DAS Sites
Domestic:
United States24,45415,905398
Asia:
India74,804—1,068
EMEA:
France2,1863099
Germany2,208——
Ghana2,279—24
Kenya715
Nigeria4,760——
South Africa (2)2,652——
Uganda1,523——
EMEA total16,32330933
Latin America:
Argentina (3)36—4
Brazil (3)16,6322,25791
Chile1,298—18
Colombia4,943—2
Costa Rica553—2
Mexico (4)9,04718685
Paraguay1,276——
Peru690272—
Latin America total34,4752,715202
(1)Approximately 98% of the operated towers are held pursuant to long-term capital leases, including those subject to purchase options.
(2)In South Africa, we also own fiber.
(3)In Argentina and Brazil, we also own or operate urban telecommunications assets, fiber and the rights to utilize certain existing utility infrastructure for future telecommunications equipment installation.
(4)In Mexico, we also own or operate urban telecommunications assets, including fiber, concrete poles and other infrastructure.

In most of our markets, our tenant leases with wireless carriers generally have an initial non-cancellable term of at least ten years, with multiple renewal terms. Accordingly, the vast majority of the revenue generated by our property operations during the year ended December 31, 2018 was recurring revenue that we should continue to receive in future periods. Based upon foreign currency exchange rates and the tenant leases in place as of December 31, 2018, we expect to generate nearly $35 billion of non-cancellable tenant lease revenue over future periods, before the impact of straight-line lease accounting. Most of our tenant leases have provisions that periodically increase the rent due under the lease, typically based on an annual fixed escalation (averaging approximately 3% in the United States) or an inflationary index in our international markets, or a combination of both. In addition, certain of our tenant leases provide for additional revenue primarily to cover costs, such as ground rent or power and fuel costs.

The revenues generated by our property operations may be affected by cancellations of existing tenant leases. As discussed above, most of our tenant leases with wireless carriers and broadcasters are multiyear contracts, which typically are non-cancellable; however, in some instances, a lease may be cancelled upon the payment of a termination fee.

Revenue lost from either cancellations or the non-renewal of leases or rent renegotiations, which we refer to as churn, historically has not had a material adverse effect on the revenues generated by our consolidated property operations. This was again the case during the year ended December 31, 2018, in which loss of tenant billings from tenant lease cancellations, non-renewal or renegotiations represented approximately 4% of our tenant billings.

In 2018, we experienced an increase in revenue lost from cancellations or non-renewals primarily due to carrier consolidation-driven churn in India, which we expect will continue to result in a higher impact on our revenues, including tenant billings, as compared to the historical average, in 2019. We also expect this churn will compress our gross margin and operating profit in 2019, particularly in our Asia property segment, although we expect this to be partially offset by lower expenses due to reduced tenancy on existing sites or the decommissioning of sites. In addition, we expect to periodically evaluate the carrying value of our Indian assets, which may result in the realization of additional impairment expense or other similar charges. For more information, please see the information under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates.”

In October 2018, we entered into agreements with one of our tenants in India, Tata Teleservices and related entities (collectively, “Tata”), for a settlement and release of certain contractual lease obligations of Tata.

For the year ended December 31, 2018, carrier consolidation-driven churn in India, including churn associated with our settlement with Tata, negatively impacted our consolidated property revenue by $189.1 million, including approximately $61.0 million in pass-through revenue, and negatively impacted our gross margin and operating profit by $119.8 million.

The effects of carrier consolidation-driven churn described above were offset by the impact of the settlement with Tata, which resulted in a net positive impact to property revenue of $333.7 million as a result of the $345.5 million cash payment, partially offset by the impact of straight-line accounting and other amounts directly related to the settlement. The settlement also resulted in a net positive impact to operating profit of $326.9 million.

On a net basis, carrier consolidation-driven churn and our settlement with Tata positively impacted our full year 2018 consolidated property revenue by $144.6 million and our full year 2018 operating profit by $207.1 million. In 2019, we expect carrier consolidation-driven churn in India, excluding the impact of the nonrecurrence of one-time items related to the settlement with Tata in 2018, to negatively impact our consolidated property revenue by approximately $191.2 million, including approximately $22.3 million in pass-through revenue, and our operating profit by approximately $148.0 million.

We also recorded impairment charges of $164.2 million as a result of the settlement with Tata in October 2018 and $147.4 million as a result of one of our tenants in India, Aircel Ltd.’s (“Aircel”), filing for bankruptcy protection in February 2018.

Property Operations Revenue Growth. Due to our diversified communications site portfolio, our tenant lease rates vary considerably depending upon numerous factors, including, but not limited to, amount, type and position of tenant equipment on the tower, remaining tower capacity and tower location. We measure the remaining tower capacity by assessing several factors, including tower height, tower type, environmental conditions, existing equipment on the tower and zoning and permitting regulations in effect in the jurisdiction where the tower is located. In many instances, tower capacity can be increased with relatively modest tower augmentation capital expenditures.

The primary factors affecting the revenue growth of our property segments are:

•Growth in tenant billings, including:
•New revenue attributable to leases in place on day one on sites acquired or constructed since the beginning of the prior-year period;
•New revenue attributable to leasing additional space on our sites (“colocations”) and lease amendments; and
•Contractual rent escalations on existing tenant leases, net of churn.
•Revenue growth from other items, including additional tenant payments primarily to cover costs, such as ground rent or power and fuel costs included in certain tenant leases (“pass-through”), straight-line revenue and decommissioning.

We continue to believe that our site leasing revenue is likely to increase due to the growing use of wireless services globally and our ability to meet the corresponding incremental demand for our communications real estate. By adding new tenants and new equipment for existing tenants on our sites, we are able to increase these sites’ utilization and profitability. We believe the majority of our site leasing activity will continue to come from wireless service providers, with tenants in a number of other industries contributing incremental leasing demand. Our site portfolio and our established tenant base provide us with new business opportunities, which have historically resulted in consistent and predictable organic revenue growth as wireless carriers seek to increase the coverage and capacity of their existing networks, while also deploying next generation wireless technologies. In addition, we intend to continue to supplement our organic growth by selectively developing or acquiring new sites in our existing and new markets where we can achieve our risk-adjusted return on investment objectives.

Property Operations Organic Revenue Growth. Consistent with our strategy to increase the utilization and return on investment from our sites, our objective is to add new tenants and new equipment for existing tenants through colocation and lease amendments. Our ability to lease additional space on our sites is primarily a function of the rate at which wireless carriers

and other tenants deploy capital to improve and expand their wireless networks. This rate, in turn, is influenced by the growth of wireless services, the penetration of advanced wireless devices, the level of emphasis on network quality and capacity in carrier competition, the financial performance of our tenants and their access to capital and general economic conditions. According to industry data, recent aggregate annual wireless capital spending in the United States has averaged approximately $30 billion, resulting in consistent demand for our sites.

Based on industry research and projections, we expect that a number of key industry trends will result in incremental revenue opportunities for us:

•In less advanced wireless markets where initial voice and data networks are still being deployed, we expect these deployments to drive demand for our tower space as carriers seek to expand their footprints and increase the scope and density of their networks. We have established operations in many of these markets at the early stages of wireless development, which we believe will enable us to meaningfully participate in these deployments over the long term.
•Subscribers’ use of mobile data continues to grow rapidly given increasing smartphone and other advanced device penetration, the proliferation of bandwidth-intensive applications on these devices and the continuing evolution of the mobile ecosystem. We believe carriers will be compelled to deploy additional equipment on existing networks while also rolling out more advanced wireless networks to address coverage and capacity needs resulting from this increasing mobile data usage.
•The deployment of advanced mobile technology, such as 4G and 5G, across existing wireless networks will provide higher speed data services and further enable fixed broadband substitution. As a result, we expect that our tenants will continue deploying additional equipment across their existing networks.
•Wireless service providers compete based on the quality of their existing networks, which is driven by capacity and coverage. To maintain or improve their network performance as overall network usage increases, our tenants continue deploying additional equipment across their existing sites while also adding new cell sites. We anticipate increasing network densification over the next several years, as existing network infrastructure is anticipated to be insufficient to account for rapidly increasing levels of wireless data usage.
•Wireless service providers continue to acquire additional spectrum, and as a result are expected to add additional sites and equipment to their networks as they seek to optimize their network configuration and utilize additional spectrum.
•Next generation technologies requiring wireless connectivity have the potential to provide incremental revenue opportunities for us. These technologies may include autonomous vehicle networks and a number of other internet-of-things, or IoT, applications, as well as other potential use cases for wireless services. These technologies may create new and complementary use cases for our communications real estate over time, although these use cases are currently in nascent stages.

As part of our international expansion initiatives, we have targeted markets in various stages of network development to diversify our international exposure and position us to benefit from a number of different wireless technology deployments over the long term. In addition, we have focused on building relationships with large multinational carriers such as Airtel, Telefónica S.A. and Vodafone Group PLC, among others. We believe that consistent carrier network investments across our international markets position us to generate meaningful organic revenue growth going forward.

In emerging markets, such as Ghana, India, Kenya, Nigeria and Uganda, wireless networks tend to be significantly less advanced than those in the United States, and initial voice networks continue to be deployed in certain underdeveloped areas. A majority of consumers in these markets still utilize basic wireless services, predominantly on feature phones, while advanced device penetration remains low. In more developed urban locations within these markets, data network deployments are underway. Carriers are focused on completing voice network build-outs while also investing in initial data networks as mobile data usage and smartphone penetration within their customer bases begin to accelerate.

In India, the ongoing transition from 2G technology to 4G technology has included a period of carrier consolidation, which we expect to continue through 2019, whereby the number of carriers operating in the marketplace has been reduced through mergers, acquisitions and select carrier exits from the marketplace. Over the long term, this consolidation process is expected to result in a more favorable structural environment for both the wireless carriers as well as communications infrastructure providers. In the shorter term, as described above, the consolidation process continues to result in elevated levels of churn within our India business, as merging carriers rationalize redundant legacy equipment installations and as select carriers exit the marketplace.

In markets with rapidly evolving network technology, such as South Africa and most of the countries in Latin America where we do business, initial voice networks, for the most part, have already been built out, and carriers are focused on 3G and 4G network build outs. Consumers in these regions are increasingly adopting smartphones and other advanced devices, in particular as lower cost smartphones become increasingly available. As a result, the usage of bandwidth-intensive mobile applications is growing materially. Recent spectrum auctions in these rapidly evolving markets have allowed incumbent carriers to accelerate their data network deployments and have also enabled new entrants to begin initial investments in data networks. Smartphone penetration and wireless data usage in these markets are advancing rapidly, which typically requires that carriers continue to invest in their networks to maintain and augment their quality of service.

Finally, in markets with more mature network technology, such as Germany and France, carriers are focused on deploying 4G data networks to account for rapidly increasing wireless data usage among their customer base. With higher smartphone and advanced device penetration and significantly higher per capita data usage, carrier investment in networks is focused on 4G coverage and capacity.

We believe that the network technology migration we have seen in the United States, which has led to significantly denser networks and meaningful new business commencements for us over a number of years, will be replicated in our less advanced international markets over time. As a result, we expect to be able to leverage our extensive international portfolio of approximately 129,930 communications sites and the relationships we have built with our carrier tenants to drive sustainable, long-term growth.

We have master lease agreements with certain of our tenants that provide for consistent, long-term revenue and reduce the likelihood of churn. Certain of those master lease agreements are holistic in nature and further build and augment strong strategic partnerships with our tenants and have significantly reduced colocation cycle times, thereby providing our tenants with the ability to rapidly and efficiently deploy equipment on our sites.

Demand for our communications sites could be negatively impacted by a number of factors, including an increase in network sharing or consolidation among our tenants, as set forth in Item 1A of this Annual Report under the caption “Risk Factors—If our tenants consolidate their operations, exit the telecommunications business or share site infrastructure to a significant degree, our growth, revenue and ability to generate positive cash flows could be materially and adversely affected.” In addition, the emergence and growth of new technologies could reduce demand for our sites, as set forth under the caption “Risk Factors—New technologies or changes in our or a tenant’s business model could make our tower leasing business less desirable and result in decreasing revenues and operating results.” Further, our tenants may be subject to new regulatory policies from time to time that materially and adversely affect the demand for our communications sites.

Property Operations New Site Revenue Growth. During the year ended December 31, 2018, we grew our portfolio of communications real estate through the acquisition and construction of approximately 24,465 sites globally, as well as the acquisition of certain urban telecommunications assets in Brazil. In a majority of our Asia, EMEA and Latin America markets, the revenue generated from newly acquired or constructed sites resulted in increases in both tenant and pass-through revenues (such as ground rent or power and fuel costs) and expenses. We continue to evaluate opportunities to acquire communications real estate portfolios, both domestically and internationally, to determine whether they meet our risk-adjusted hurdle rates and whether we believe we can effectively integrate them into our existing portfolio.

New Sites (Acquired or Constructed)201820172016
U.S.28563565
Asia21,4701,13543,865
EMEA1,0552,755665
Latin America1,6552,360715

Property Operations Expenses. Direct operating expenses incurred by our property segments include direct site level expenses and consist primarily of ground rent and power and fuel costs, some or all of which may be passed through to our tenants, as well as property taxes, repairs and maintenance. These segment direct operating expenses exclude all segment and corporate selling, general, administrative and development expenses, which are aggregated into one line item entitled Selling, general, administrative and development expense in our consolidated statements of operations. In general, our property segments’ selling, general, administrative and development expenses do not significantly increase as a result of adding incremental tenants to our sites and typically increase only modestly year-over-year. As a result, leasing additional space to new tenants on our sites provides significant incremental cash flow. We may, however, incur additional segment selling, general, administrative and development expenses as we increase our presence in our existing markets or expand into new markets. Our

profit margin growth is therefore positively impacted by the addition of new tenants to our sites but can be temporarily diluted by our development activities.

Services Segment Revenue Growth. As we continue to focus on growing our property operations, we anticipate that our services revenue will continue to represent a small percentage of our total revenues.

Non-GAAP Financial Measures

Included in our analysis of our results of operations are discussions regarding earnings before interest, taxes, depreciation, amortization and accretion, as adjusted (“Adjusted EBITDA”), Funds From Operations, as defined by the National Association of Real Estate Investment Trusts (“Nareit FFO”) attributable to American Tower Corporation common stockholders, Consolidated Adjusted Funds From Operations (“Consolidated AFFO”) and AFFO attributable to American Tower Corporation common stockholders.

We define Adjusted EBITDA as Net income before Income (loss) from equity method investments; Income tax benefit (provision); Other income (expense); Gain (loss) on retirement of long-term obligations; Interest expense; Interest income; Other operating income (expense); Depreciation, amortization and accretion; and stock-based compensation expense.

Nareit FFO attributable to American Tower Corporation common stockholders is defined as net income before gains or losses from the sale or disposal of real estate, real estate related impairment charges, real estate related depreciation, amortization and accretion and dividends on preferred stock, and including adjustments for (i) unconsolidated affiliates and (ii) noncontrolling interests. In this section, we refer to Nareit FFO attributable to American Tower Corporation common stockholders as “Nareit FFO (common stockholders).”

We define Consolidated AFFO as Nareit FFO (common stockholders) before (i) straight-line revenue and expense; (ii) stock-based compensation expense; (iii) the deferred portion of income tax; (iv) non-real estate related depreciation, amortization and accretion; (v) amortization of deferred financing costs, capitalized interest, debt discounts and premiums and long-term deferred interest charges; (vi) other income (expense); (vii) gain (loss) on retirement of long-term obligations; (viii) other operating income (expense); and adjustments for (ix) unconsolidated affiliates and (x) noncontrolling interests, less cash payments related to capital improvements and cash payments related to corporate capital expenditures.

We define AFFO attributable to American Tower Corporation common stockholders as Consolidated AFFO, excluding the impact of noncontrolling interests on both Nareit FFO (common stockholders) and the other adjustments included in the calculation of Consolidated AFFO. In this section, we refer to AFFO attributable to American Tower Corporation common stockholders as “AFFO (common stockholders).”

Adjusted EBITDA, Nareit FFO (common stockholders), Consolidated AFFO and AFFO (common stockholders) are not intended to replace net income or any other performance measures determined in accordance with GAAP. None of Adjusted EBITDA, Nareit FFO (common stockholders), Consolidated AFFO or AFFO (common stockholders) represents cash flows from operating activities in accordance with GAAP and, therefore, these measures should not be considered indicative of cash flows from operating activities, as a measure of liquidity or a measure of funds available to fund our cash needs, including our ability to make cash distributions. Rather, Adjusted EBITDA, Nareit FFO (common stockholders), Consolidated AFFO and AFFO (common stockholders) are presented as we believe each is a useful indicator of our current operating performance. We believe that these metrics are useful to an investor in evaluating our operating performance because (1) each is a key measure used by our management team for decision making purposes and for evaluating our operating segments’ performance; (2) Adjusted EBITDA is a component underlying our credit ratings; (3) Adjusted EBITDA is widely used in the telecommunications real estate sector to measure operating performance as depreciation, amortization and accretion may vary significantly among companies depending upon accounting methods and useful lives, particularly where acquisitions and non-operating factors are involved; (4) Consolidated AFFO is widely used in the telecommunications real estate sector to adjust Nareit FFO (common stockholders) for items that may otherwise cause material fluctuations in Nareit FFO (common stockholders) growth from period to period that would not be representative of the underlying performance of property assets in those periods; (5) each provides investors with a meaningful measure for evaluating our period-to-period operating performance by eliminating items that are not operational in nature; and (6) each provides investors with a measure for comparing our results of operations to those of other companies, particularly those in our industry.

Our measurement of Adjusted EBITDA, Nareit FFO (common stockholders), Consolidated AFFO and AFFO (common stockholders) may not, however, be fully comparable to similarly titled measures used by other companies. Reconciliations of Adjusted EBITDA, Nareit FFO (common stockholders), Consolidated AFFO and AFFO (common stockholders) to net income, the most directly comparable GAAP measure, have been included below.

Results of Operations

Years Ended December 31, 2018, 2017 and 2016

(in millions, except percentages)

Revenue

Year Ended December 31,Percent Change 2018 vs 2017Percent Change 2017 vs 2016
201820172016
Property
U.S.$3,822.1$3,605.7$3,370.16%7%
Asia1,540.51,164.4827.63241
EMEA687.3626.2529.51018
Latin America1,264.81,169.6985.9819
Total property7,314.76,565.95,713.11115
Services125.498.072.62835
Total revenues$7,440.1$6,663.9$5,785.712%15%

Year ended December 31, 2018

U.S. property segment revenue growth of $216.4 million was attributable to:

•Tenant billings growth of $264.0 million, which was driven by:
•$188.5 million due to colocations and amendments;
•$59.6 million from contractual escalations, net of churn; and
•$21.0 million generated from newly acquired or constructed sites;
•Partially offset by a decrease of $5.1 million from other tenant billings; and
•A decrease of $47.6 million in other revenue, which includes an $81.3 million decrease due to straight-line accounting.

Asia property segment revenue growth of $376.1 million was attributable to:

•Tenant billings growth of $31.0 million, which was driven by:
•$123.7 million generated from newly acquired or constructed sites, including $117.7 million from the transactions with Vodafone (the “Vodafone Acquisition”) and Idea (the “Idea Acquisition”);
•$49.5 million due to colocations and amendments; and
•$0.6 million from other tenant billings;
•Partially offset by a decrease of $142.8 million resulting from churn in excess of contractual escalations, including $128.1 million due to carrier consolidation-driven churn in India;
•Pass-through revenue growth of $59.7 million; and
•An increase of $349.3 million in other revenue, primarily due to the net impact of our settlement with Tata and a decrease in revenue reserves. The settlement with Tata contributed $333.7 million to other revenue, as a result of the approximately $345.5 million cash settlement payment, partially offset by the net impacts of straight-line accounting and other amounts directly related to the settlement.

Segment revenue growth was partially offset by a decrease of $63.9 million attributable to the negative impact of foreign currency translation related to fluctuations in Indian Rupees (“INR”).

EMEA property segment revenue growth of $61.1 million was attributable to:

•Tenant billings growth of $47.1 million, which was driven by:
•$17.3 million due to colocations and amendments;
•$13.8 million from contractual escalations, net of churn;
•$15.0 million generated from newly acquired or constructed sites, primarily due to the full-year impact of the 2017 acquisition of FPS Towers in France through our European joint venture (the “FPS Acquisition”) and the acquisition of communication sites in Kenya (the “Kenya Acquisition”); and
•$1.0 million from other tenant billings;
•An increase of $15.4 million in other revenue, primarily due to back-billing; and
•Pass-through revenue growth of $8.2 million.

Segment growth was partially offset by a decrease of $9.6 million attributable to the negative impact of foreign currency translation, which included, among others, $8.6 million related to fluctuations in Nigerian Naira (“NGN”) and $7.4 million related to fluctuations in Ghanaian Cedi (“GHS”), and was partially offset by an increase of $6.0 million related to fluctuations in the Euro (“EUR”).

Latin America property segment revenue growth of $95.2 million was attributable to:

•Tenant billings growth of $118.2 million, which was driven by:
•$48.1 million due to colocations and amendments;
•$34.0 million from contractual escalations, net of churn;
•$26.1 million generated from newly acquired or constructed sites; and
•$10.0 million from other tenant billings;
•Pass-through revenue growth of $25.6 million; and
•An increase of $49.8 million in other revenue, due in part to $62.6 million from our fiber businesses in Mexico and Brazil and a $6.0 million reduction in revenue reserves from a settlement related to the judicial reorganization of a tenant in Brazil, partially offset by the impact of straight-line accounting.

Segment revenue growth was partially offset by a decrease of $98.4 million attributable to the negative impact of foreign currency translation, which included, among others, $81.1 million related to fluctuations in Brazilian Reais (“BRL”), $10.2 million related to fluctuations in Argentinean Pesos (“ARS”) and $7.1 million related to fluctuations in Mexican Pesos (“MXN”).

The increase in services segment revenue of $27.4 million was primarily attributable to an increase in site acquisition projects.

Year ended December 31, 2017

U.S. property segment revenue growth of $235.6 million was attributable to:

•Tenant billings growth of $206.6 million, which was driven by:
•$151.2 million due to colocations and amendments;
•$42.9 million from contractual escalations, net of churn;
•$11.5 million generated from newly acquired or constructed sites; and
•$1.0 million from other tenant billings; and
•$29.0 million of other revenue growth, primarily due to a $66.4 million impact of straight-line accounting, partially offset by a $37.4 million net decrease in other revenue, primarily due to the absence of $38.8 million in decommissioning revenue recognized in the prior year.

Asia property segment revenue growth of $336.8 million was attributable to:

•Tenant billings growth of $192.2 million, which was driven by:
•$143.7 million generated from newly acquired sites, due to the Viom Acquisition;
•$58.8 million due to colocations and amendments; and
•$6.8 million generated from newly constructed sites;
•Partially offset by,
▪A decrease of $16.8 million from churn in excess of contractual escalations; and
▪A decrease of $0.3 million from other tenant billings;
•Pass-through revenue growth of $129.3 million, primarily due to the Viom Acquisition; and
•A decrease of $20.2 million in other revenue, primarily due to an increase of $13.1 million in revenue reserves.

Segment revenue also increased by $35.5 million attributable to the impact of foreign currency translation related to fluctuations in INR.

EMEA property segment revenue growth of $96.7 million was attributable to:

•Tenant billings growth of $99.1 million, which was driven by:
•$62.4 million generated from newly acquired or constructed sites, primarily due to the full-year impact of the FPS Acquisition;
•$17.9 million due to colocations and amendments;
•$17.8 million from contractual escalations, net of churn; and
•$1.0 million from other tenant billings;
•Pass-through revenue growth of $35.3 million; and
•$3.4 million of other revenue growth, primarily attributable to the impact of straight-line accounting.

Segment revenue growth was partially offset by a decrease of $41.1 million attributable to the negative impact of foreign currency translation, which included, among others, $35.0 million related to fluctuations in NGN and $14.5 million related to fluctuations in GHS, partially offset by an increase of $9.8 million related to fluctuations in South African Rand (“ZAR”).

Latin America property segment revenue growth of $183.7 million was attributable to:

•Tenant billings growth of $92.4 million, which was driven by:
•$38.9 million due to colocations and amendments;
•$32.7 million from contractual escalations, net of churn;
•$18.7 million generated from newly acquired or constructed sites; and
•$2.1 million from other tenant billings;
•Pass-through revenue growth of $22.2 million; and
•$17.6 million of other revenue growth, due in part to $7.1 million from our newly acquired fiber business in Mexico and a $7.0 million reduction in revenue in the prior-year period resulting from a judicial reorganization of a tenant in Brazil, partially offset by the impact of straight-line accounting.

Segment revenue also increased $51.5 million attributable to the positive impact of foreign currency translation, which included, among others, $49.9 million related to fluctuations in BRL and $2.8 million related to fluctuations in Colombian Pesos (“COP”), partially offset by a decrease of $3.3 million related to fluctuations in MXN.

The increase in services segment revenue of $25.4 million was primarily attributable to an increase in site acquisition projects.

Gross Margin

Year Ended December 31,Percent Change 2018 vs 2017Percent Change 2017 vs 2016
201820172016
Property
U.S.$3,051.1$2,859.2$2,636.77%8%
Asia829.6515.4361.76142
EMEA449.2387.9305.81627
Latin America858.4794.3658.8821
Total property5,188.34,556.83,963.01415
Services77.264.245.620%41%

Year ended December 31, 2018

•The increase in U.S. property segment gross margin was primarily attributable to the increase in revenue described above, partially offset by an increase in direct expenses of $24.5 million.
•The increase in Asia property segment gross margin was primarily attributable to the increase in revenue described above and a benefit of $36.5 million attributable to the impact of foreign currency translation on direct expenses, partially offset by an increase in direct expenses of $98.4 million, primarily due to the Vodafone Acquisition and the Idea Acquisition.
•The increase in EMEA property segment gross margin was primarily attributable to the increase in revenue described above and a benefit of $9.4 million attributable to the impact of foreign currency translation on direct expenses,

partially offset by an increase in direct expenses of $9.2 million, primarily due to the FPS Acquisition and the Kenya Acquisition.

•The increase in Latin America property segment gross margin was primarily attributable to the increase in revenue described above and a benefit of $33.3 million attributable to the impact of foreign currency translation on direct expenses, partially offset by an increase in direct expenses of $53.5 million, primarily due to our fiber businesses in Mexico and Brazil, and a reduction of $10.9 million in interest income related to TV Azteca, S.A. de C.V. (“TV Azteca”).
•The increase in services segment gross margin was primarily due to an increase in revenue, as described above, partially offset by an increase in direct expenses of $14.4 million.

Year ended December 31, 2017

•The increase in U.S. property segment gross margin was primarily attributable to the increase in revenue described above, partially offset by an increase in direct expenses of $13.1 million.
•The increase in Asia property segment gross margin was primarily attributable to the increase in revenue described above, partially offset by an increase in direct expenses of $163.1 million, primarily due to the Viom Acquisition. Direct expenses increased by an additional $20.0 million attributable to the impact of foreign currency translation.
•The increase in EMEA property segment gross margin was primarily attributable to the increase in revenue described above and a benefit of $35.1 million attributable to the impact of foreign currency translation on direct expenses, partially offset by an increase in direct expenses of $49.7 million, partially due to the FPS Acquisition.
•The increase in Latin America property segment gross margin was primarily attributable to the increase in revenue described above, partially offset by an increase in direct expenses of $29.6 million, partially due to our acquisitions of urban telecommunications assets and fiber, in Mexico and Argentina. Direct expenses increased by an additional $18.6 million due to the impact of foreign currency translation.
•The increase in services segment gross margin was primarily due to an increase in site acquisition projects.

Selling, General, Administrative and Development Expense (“SG&A”)

Year Ended December 31,Percent Change 2018 vs 2017Percent Change 2017 vs 2016
201820172016
Property
U.S.$165.2$151.4$147.69%3%
Asia110.782.448.23471
EMEA69.167.960.9211
Latin America83.577.560.7828
Total property428.5379.2317.41319
Services14.413.712.5510
Other290.3244.1213.51914
Total selling, general, administrative and development expense$733.2$637.0$543.415%17%

Year Ended December 31, 2018

•The increases in each of our U.S., EMEA and Latin America property segment SG&A were primarily driven by increased personnel costs to support our business, including our acquisitions of urban telecommunications assets in our Latin America property segment.
•The increase in our Asia property segment SG&A was primarily driven by an increase in bad debt expense of $25.1 million as a result of receivable reserves with certain tenants.
•The increase in our services segment SG&A was primarily attributable to an increase in the allocation of personnel costs to our tower services group.
•The increase in other SG&A was primarily attributable to an increase in stock-based compensation expense of $28.6 million, principally due to the acceleration of expense associated with amendments to existing grants, and an increase in corporate SG&A.

Year Ended December 31, 2017

•The increases in each of our property segments’ SG&A were primarily driven by increased personnel costs to support our business, including additional costs as a result of the Viom Acquisition in our Asia property segment and the FPS Acquisition in our EMEA property segment. The increase in our Asia property segment SG&A was partially driven by an increase in bad debt expense of $24.6 million as a result of aged receivables with certain tenants and the increase in our EMEA property segment SG&A was partially offset by the impact of foreign currency fluctuations and a reduction in bad debt expense of $3.7 million.
•The increase in our services segment SG&A was primarily attributable to an increase in personnel costs within our tower services group.
•The increase in other SG&A was primarily attributable to an increase in stock-based compensation expense of $18.1 million and an increase in corporate SG&A.

Operating Profit

Year Ended December 31,Percent Change 2018 vs 2017Percent Change 2017 vs 2016
201820172016
Property
U.S.$2,885.9$2,707.8$2,489.17%9%
Asia718.9433.0313.56638
EMEA380.1320.0244.91931
Latin America774.9716.8598.1820
Total property4,759.84,177.63,645.61415
Services62.850.533.124%53%

Year Ended December 31, 2018

•The increases in operating profit for each of our property segments, as well as our services segment, were primarily attributable to an increase in our segment gross margin, partially offset by increases in our segment SG&A.

Year Ended December 31, 2017

•The growth in operating profit for each of our property segments was primarily attributable to an increase in our segment gross margin, partially offset by increases in our segment SG&A.
•The growth in operating profit for our services segment was primarily attributable to an increase in our segment gross margin, partially offset by an increase in our segment SG&A.

Depreciation, Amortization and Accretion

Year Ended December 31,Percent Change 2018 vs 2017Percent Change 2017 vs 2016
201820172016
Depreciation, amortization and accretion$2,110.8$1,715.9$1,525.623%12%

The increase in depreciation, amortization and accretion expense for the year ended December 31, 2018 was primarily attributable to $327.5 million of accelerated amortization of a tenant relationship intangible asset as a result of the settlement with Tata. Also contributing to the increase was the acquisition, lease or construction of new sites since the beginning of the prior-year period, which resulted in an increase in property and equipment and intangible assets subject to amortization.

The increase in depreciation, amortization and accretion expense for the year ended December 31, 2017 was primarily attributable to the acquisition, lease or construction of new sites since the beginning of the prior-year period, which resulted in an increase in property and equipment and intangible assets subject to amortization.

Other Operating Expenses

Year Ended December 31,Percent Change 2018 vs 2017Percent Change 2017 vs 2016
201820172016
Other operating expenses$513.3$256.0$73.3101%249%

The increase in other operating expenses for the year ended December 31, 2018 was primarily attributable to an increase in impairment charges of $182.6 million and an increase of $52.8 million in losses on sales or disposals of assets. The impairment charges included $258.3 million related to tower and network intangible assets and $107.3 million related to tenant relationships in our Asia property segment due to the settlement with Tata, Aircel’s filing for bankruptcy protection and other carrier consolidation-driven churn in India. The increase was also attributable to the nonrecurrence of a $22.2 million refund of acquisition costs recorded in the prior-year period related to an acquisition in Brazil, partially offset by $10.0 million to fund our charitable foundation in the prior-year period.

The increase in other operating expenses for the year ended December 31, 2017 was primarily attributable to an increase in impairment charges of $182.9 million. These charges included $81.0 million related to tower and network intangible assets and $100.1 million related to tenant relationships in our Asia property segment, primarily due to carrier consolidation-driven churn. The increase in other operating expenses also included an increase of $7.7 million in losses on sales or disposals of assets and $10.0 million to fund our charitable foundation. These items were partially offset by aggregate purchase price refunds of $22.2 million of acquisition costs, primarily relating to an acquisition in Brazil completed in 2014.

Total Other Expense

Year Ended December 31,Percent Change 2018 vs 2017Percent Change 2017 vs 2016
201820172016
Total Other expense$750.4$742.3$727.11%2%

Total other expense consists primarily of interest expense and realized and unrealized foreign currency gains and losses. We record unrealized foreign currency gains or losses as a result of foreign currency fluctuations primarily associated with our intercompany notes and similar unaffiliated balances denominated in a currency other than the subsidiaries’ functional currencies.

The increase in total other expense during the year ended December 31, 2018 was primarily due to additional interest expense of $75.9 million due to a $2.0 billion increase in our average debt outstanding and foreign currency losses of $4.5 million in the current period, compared to foreign currency gains of $26.4 million in the prior-year period. The increase was partially offset by (i) a decrease in loss on retirement of long-term obligations of $66.9 million due to the nonrecurrence of a loss of $70.2 million recorded in the prior-year period attributable to the redemptions of the 7.25% senior unsecured notes due 2019 (the “7.25% Notes”) and the 4.500% senior unsecured notes due 2018 (the “4.500% Notes”) and the repayment of the Secured Cellular Site Revenue Notes, Series 2012-2 Class A, Series 2012-2 Class B and Series 2012-2 Class C and Secured Cellular Site Revenue Notes, Series 2010-2, Class C and Series 2010-2, Class F (collectively, the “GTP Notes”), (ii) an increase in other income of $23.4 million partially due to the write-offs of the capital lease liability and Economic Rights Agreement and related amortization in conjunction with the note extinguishment with TV Azteca (as described in note 5 to our consolidated

financial statements included in this Annual Report) and (iii) an additional $19.3 million in interest income, compared to the prior-year period.

The increase in total other expense during the year ended December 31, 2017 was primarily due to a loss on retirement of long-term obligations of $70.2 million attributable to the redemptions of the 7.25% Notes and the 4.500% Notes and the repayment of the GTP Notes, compared to the year ended December 31, 2016, where we recorded a gain on retirement of long-term obligations of $1.2 million attributable to the repayment of the Secured Tower Cellular Site Revenue Notes, Series 2012-1, Class A and the Secured Cellular Site Revenue Notes, Series 2010-1, Class C. The increase was also attributable to additional interest expense of $32.5 million due to a $0.9 billion increase in our average debt outstanding. These items were partially offset by foreign currency gains of $26.4 million compared to foreign currency losses of $48.9 million in the prior-year period, as well an additional $9.8 million in interest income compared to the prior-year period.

Income Tax (Benefit) Provision

Year Ended December 31,Percent Change 2018 vs 2017Percent Change 2017 vs 2016
201820172016
Income tax (benefit) provision$(110.1)$30.7$155.5(459)%(80)%
Effective tax rate(9.5)%2.4%13.8%

As a REIT, we may deduct earnings distributed to stockholders against the income generated by our REIT operations. In addition, we are able to offset certain income by utilizing our NOLs, subject to specified limitations. Consequently, the effective tax rate on income from continuing operations for each of the years ended December 31, 2018, 2017 and 2016 differs from the federal statutory rate.

The change in the income tax (benefit) provision for the year ended December 31, 2018 was primarily attributable to the receipt of the payment associated with the Tata settlement, offset by the deferred tax benefit of impairment charges and accelerated amortization in India. Additionally, we restructured our international operations in certain jurisdictions resulting in a current-year benefit of $85.7 million, which was offset by the nonrecurrence of prior-year benefit from a clarification in income tax law in Ghana.

The decrease in the income tax provision for the year ended December 31, 2017 was primarily attributable to lower uncertain tax position reserve recorded in 2017 than in 2016, a decrease in foreign earnings in India due to impairments, as well as changes in tax laws in certain foreign jurisdictions.

Net Income / Adjusted EBITDA and Net Income / Nareit FFO attributable to American Tower Corporation common stockholders / Consolidated AFFO / AFFO attributable to American Tower Corporation common stockholders

Year Ended December 31,Percent Change 2018 vs 2017Percent Change 2017 vs 2016
201820172016
Net income$1,264.7$1,225.4$970.43%26%
Income tax (benefit) provision(110.1)30.7155.5(459)(80)
Other (income) expense(23.8)(31.3)47.7(24)(166)
Loss (gain) on retirement of long-term obligations3.370.2(1.2)(95)(5,950)
Interest expense825.5749.6717.1105
Interest income(54.7)(35.4)(25.6)5538
Other operating expenses513.3256.073.3101249
Depreciation, amortization and accretion2,110.81,715.91,525.62312
Stock-based compensation expense137.5108.589.92721
Adjusted EBITDA$4,666.5$4,089.6$3,552.714%15%
Year Ended December 31,Percent Change 2018 vs 2017Percent Change 2017 vs 2016
201820172016
Net income$1,264.7$1,225.4$970.43%26%
Real estate related depreciation, amortization and accretion1,915.21,516.91,358.92612
Losses from sale or disposal of real estate and real estate related impairment charges (1)479.7244.454.596348
Dividends on preferred stock(9.4)(87.4)(107.1)(89)(18)
Dividend to noncontrolling interest(13.8)(13.2)—5100
Adjustments for unconsolidated affiliates and noncontrolling interests(427.4)(189.1)(88.2)126114
Nareit FFO attributable to American Tower Corporation common stockholders$3,209.0$2,697.0$2,188.51923
Straight-line revenue(87.6)(194.4)(131.7)(55)48
Straight-line expense57.962.367.8(7)(8)
Stock-based compensation expense137.5108.589.92721
Deferred portion of income tax (2)(274.0)(105.8)59.2159(279)
Non-real estate related depreciation, amortization and accretion195.6199.0166.7(2)19
Amortization of deferred financing costs, capitalized interest, debt discounts and premiums and long-term deferred interest charges19.026.823.1(29)16
Other (income) expense (3)(23.8)(31.3)47.7(24)(166)
Loss (gain) on retirement of long-term obligations3.370.2(1.2)(95)(5,950)
Other operating expenses (4)33.611.618.8190(38)
Capital improvement capital expenditures(149.5)(114.2)(110.2)314
Corporate capital expenditures(9.2)(17.0)(16.4)(46)4
Adjustments for unconsolidated affiliates and noncontrolling interests427.4189.188.2126114
Consolidated AFFO$3,539.2$2,901.8$2,490.422%17%
Adjustments for unconsolidated affiliates and noncontrolling interests (5)(348.7)(147.0)(90.2)137%63%
AFFO attributable to American Tower Corporation common stockholders$3,190.5$2,754.8$2,400.216%15%
(1)Included in these amounts are impairment charges of $394.0 million, $211.4 million and $28.5 million for the years ended December 31, 2018, 2017 and 2016, respectively.
(2)For the year ended December 31, 2018, amount includes a tax benefit primarily attributable to the tax effect of an increase in impairment charges and a one-time benefit for restructuring-related activity in foreign jurisdictions offset by the nonrecurrence of prior-year benefit from a clarification in income tax law in Ghana.
(3)Includes losses (gains) on foreign currency exchange rate fluctuations of $4.5 million, ($26.4 million) and $48.9 million, respectively.
(4)Primarily includes acquisition-related costs and integration costs. For the year ended December 31, 2017, amount also includes refunds for acquisition costs and a charitable contribution.
(5)Includes adjustments for the impact on both Nareit FFO attributable to American Tower Corporation common stockholders as well as the other line items included in the calculation of Consolidated AFFO.

Year Ended December 31, 2018

The increase in net income was primarily due to an increase in our operating profit, the change in the income tax (benefit) provision and the nonrecurrence of a loss on retirement of long-term obligations of $70.2 million recorded in the prior-year period, partially offset by an increase in other operating expenses, primarily related to an increase in impairment charges of $182.6 million, and increases in depreciation, amortization and accretion expense and interest expense.

The increase in Adjusted EBITDA was primarily attributable to the increase in our gross margin and was partially offset by an increase in SG&A of $67.6 million, excluding the impact of stock-based compensation expense.

The growth in Consolidated AFFO and AFFO attributable to American Tower Corporation common stockholders was primarily attributable to the increase in our operating profit, a decrease in dividends on preferred stock and a decrease in the adjustment for straight-line revenue, partially offset by increases in cash paid for interest, capital improvement capital expenditures and corporate SG&A.

Year Ended December 31, 2017

The increase in net income was primarily due to an increase in our operating profit, decreases in our income tax provision and foreign currency losses included in other expense, partially offset by an increase in depreciation, amortization and accretion expense, and increases in other operating expenses, interest expense and a loss on retirement of long-term obligations of $70.2 million.

The increase in Adjusted EBITDA was primarily attributable to the increase in our gross margin and was partially offset by an increase in SG&A of $75.5 million, excluding the impact of stock-based compensation expense.

The growth in Consolidated AFFO and AFFO attributable to American Tower Corporation common stockholders was primarily attributable to the increase in our operating profit and a decrease in dividends on preferred stock, partially offset by increases in straight-line revenue, cash paid for interest and income taxes and corporate SG&A and capital improvement expenditures.

Liquidity and Capital Resources

Overview

During the year ended December 31, 2018, we increased our financial flexibility and our ability to grow our business while maintaining our long-term financial policies. Our significant 2018 financing transactions included:

•A registered public offering of an aggregate of 500.0 million EUR ($589.0 million at the date of issuance) of 1.950% senior unsecured notes due 2026 (the “1.950% Notes”).
•Senior unsecured $1.5 billion term loan (the “2018 Term Loan”).
•Securitization transactions, including the repayment of the $500.0 million aggregate principal amount outstanding under the Secured Tower Revenue Securities, Series 2013-1A (the “Series 2013-1A Securities”) and the issuance of $500.0 million aggregate principal amount of Secured Tower Revenue Securities, Series 2018-1, Subclass A (the “Series 2018-1A Securities”).
•Amendments to our multicurrency senior unsecured revolving credit facility entered into in June 2013, as amended (the “2013 Credit Facility”), our senior unsecured revolving credit facility entered into in January 2012, as amended and restated in September 2014, as further amended (the “2014 Credit Facility”) and our unsecured term loan entered into in October 2013, as amended (the “2013 Term Loan”) to, among other things, extend each of the maturity dates by one year, increase commitments under each of the 2013 Credit Facility and the 2014 Credit Facility by $100.0 million and reduce the Applicable Margins under the 2014 Credit Facility and the 2013 Term Loan (as defined in each of the applicable loan agreements) to conform to the 2013 Credit Facility.

As a holding company, our cash flows are derived primarily from the operations of, and distributions from, our operating subsidiaries or funds raised through borrowings under our credit facilities and debt or equity offerings.

The following table summarizes our liquidity as of December 31, 2018 (in millions):

Available under the 2013 Credit Facility$975.0
Available under the 2014 Credit Facility2,100.0
Letters of credit(10.0)
Total available under credit facilities, net3,065.0
Cash and cash equivalents1,208.7
Total liquidity$4,273.7

Subsequent to December 31, 2018, we borrowed an additional $570.0 million under the 2013 Credit Facility and $605.0 million under the 2014 Credit Facility, which were primarily used to repay indebtedness, including the 3.40% notes due 2019, and for general corporate purposes.

Summary cash flow information is set forth below for the years ended December 31, (in millions):

201820172016
Net cash provided by (used for):
Operating activities$3,748.3$2,925.6$2,701.7
Investing activities(2,749.5)(2,800.9)(2,102.3)
Financing activities(607.7)(113.0)(99.3)
Net effect of changes in foreign currency exchange rates on cash and cash equivalents, and restricted cash(41.1)6.7(26.5)
Net increase in cash and cash equivalents, and restricted cash$350.0$18.4$473.6

We use our cash flows to fund our operations and investments in our business, including tower maintenance and improvements, communications site construction and managed network installations and tower and land acquisitions. Additionally, we use our cash flows to make distributions, including distributions of our REIT taxable income to maintain our qualification for taxation as a REIT under the Code. We may also repay or repurchase our existing indebtedness or equity from time to time. We typically fund our international expansion efforts primarily through a combination of cash on hand, intercompany debt and equity contributions. In the fourth quarter of 2018, two of our minority holders in India exercised their put options with respect to certain shares in our Indian subsidiary, ATC TIPL in accordance with the provisions in the

shareholder agreement (see note 14 to our consolidated financial statements included in this Annual Report). Accordingly, we expect to pay 29.4 billion INR (approximately $420.0 million) to redeem the put shares in the first half of 2019.

As of December 31, 2018, we had total outstanding indebtedness of $21.3 billion, with a current portion of $2.8 billion. During the year ended December 31, 2018, we generated sufficient cash flow from operations to fund our capital expenditures and debt service obligations, as well as our required distributions. We believe the cash generated by operating activities during the year ending December 31, 2019, together with our borrowing capacity under our credit facilities, will be sufficient to fund our required distributions, capital expenditures, debt service obligations (interest and principal repayments) and signed acquisitions. As of December 31, 2018, we had $1.1 billion of cash and cash equivalents held by our foreign subsidiaries, of which $711.6 million was held by our joint ventures. While certain subsidiaries may pay us interest or principal on intercompany debt, it has not been our practice to repatriate earnings from our foreign subsidiaries primarily due to our ongoing expansion efforts and related capital needs. However, in the event that we do repatriate any funds, we may be required to accrue and pay certain taxes.

Cash Flows from Operating Activities

For the year ended December 31, 2018, cash provided by operating activities increased $822.7 million as compared to the year ended December 31, 2017. The primary factors that impacted cash provided by operating activities as compared to the year ended December 31, 2017, include:

•An increase in our operating profit of $594.5 million;
•An increase of approximately $77.6 million in cash paid for interest;
•A decrease in cash required for working capital, primarily as a result of accounts receivable collection; and
•An increase of approximately $27.4 million in cash paid for taxes.

For the year ended December 31, 2017, cash provided by operating activities increased $223.9 million as compared to the year ended December 31, 2016. The primary factors that impacted cash provided by operating activities as compared to the year ended December 31, 2016, include:

•An increase in our operating profit of $549.4 million;
•An increase of approximately $67.0 million in cash paid for interest;
•An increase of approximately $62.7 million in straight-line revenue; and
•An increase of approximately $40.3 million in cash paid for taxes.

Cash Flows from Investing Activities

Our significant investing activities during the year ended December 31, 2018 are highlighted below:

•We spent approximately $1.9 billion for acquisitions, primarily related to the funding of the Idea and Vodafone acquisitions, as well as asset acquisitions in the United States, Kenya and Brazil.
•We spent $937.1 million for capital expenditures, as follows (in millions):
Discretionary capital projects (1)$254.7
Ground lease purchases162.7
Capital improvements and corporate expenditures (2)158.7
Redevelopment232.4
Start-up capital projects128.6
Total capital expenditures (3)$937.1
(1)Includes the construction of 2,441 communications sites globally.
(2)Includes $32.0 million of capital lease payments included in Repayments of notes payable, credit facilities, senior notes, term loan and capital leases in the cash flow from financing activities in our consolidated statements of cash flows.
(3)Net of purchase credits of $8.1 million on certain assets, which are reported in operating activities in our consolidated statements of cash flows.

Our significant investing transactions in 2017 included the following:

•We spent approximately $2.0 billion for acquisitions, primarily related to the funding of the FPS Acquisition, as well as tower acquisitions in the United States, and the acquisition of urban telecommunication assets in Mexico.
•We spent $824.2 million for capital expenditures, as follows (in millions):
Discretionary capital projects (1)$170.0
Ground lease purchases131.2
Capital improvements and corporate expenditures (2)131.2
Redevelopment204.5
Start-up capital projects187.3
Total capital expenditures$824.2
(1)Includes the construction of 1,960 communications sites globally.
(2)Includes $31.8 million of capital lease payments included in Repayments of notes payable, credit facilities, term loan, senior notes, secured debt and capital leases in the cash flow from financing activities in our consolidated statement of cash flows.
(3)Net of purchase credits of $11.2 million on certain assets, which are reported in operating activities in our consolidated statements of cash flows.

We plan to continue to allocate our available capital, after satisfying our distribution requirements, among investment alternatives that meet our return on investment criteria, while maintaining our commitment to our long-term financial policies. Accordingly, we expect to continue to deploy capital through our annual capital expenditure program, including land purchases and new site construction, and through acquisitions. We also regularly review our tower portfolios as to capital expenditures required to upgrade our towers to our structural standards or address capacity, structural or permitting issues. In 2018, we conducted a review as to whether any additional capital was required for such upgrades and determined that our capital planning was appropriate.

We expect that our 2019 total capital expenditures will be between $900.0 million and $1.0 billion, as follows (in millions):

Discretionary capital projects (1)$265to$305
Ground lease purchases150to160
Capital improvements and corporate expenditures160to180
Redevelopment255to265
Start-up capital projects70to90
Total capital expenditures$900to$1,000
(1)Includes the construction of approximately 2,500 to 3,500 communications sites globally.

Cash Flows from Financing Activities

Our significant financing activities were as follows (in millions):

Year ended December 31,
201820172016
Proceeds from issuance of senior notes, net$584.9$2,674.0$3,236.4
(Repayments of) proceeds from credit facilities, net(695.9)628.6(1,277.1)
Distributions paid on common and preferred stock(1,342.4)(1,164.4)(993.2)
Purchases of common stock(232.8)(766.3)—
Repayments of securitized debt(500.0)(302.5)(161.1)
(Distributions to) contributions from noncontrolling interest holders, net (1)(14.4)264.3238.5
Repayment of senior notes—(1,300.0)—
Proceeds from (repayments of) term loan1,500.0—(1,000.0)
Proceeds from issuance of securities in securitization transaction500.0——

(1) 2017 contributions primarily relate to the funding of the FPS Acquisition.

Senior Notes

1.950% Senior Notes Offering. On May 22, 2018, we completed a registered public offering of 500.0 million EUR ($589.0 million at the date of issuance) aggregate principal amount of the 1.950% Notes. The net proceeds from this offering were approximately 493.2 million EUR (approximately $581.0 million at the date of issuance), after deducting commissions and estimated expenses. We used the net proceeds to repay existing indebtedness under the 2013 Credit Facility.

The 1.950% Notes will mature on May 22, 2026 and bear interest at a rate of 1.950% per annum. Accrued and unpaid interest on the 1.950% Notes will be payable in EUR in arrears on May 22 of each year, beginning on May 22, 2019. Interest on the 1.950% Notes will be computed on the basis of the actual number of days in the period for which interest is being calculated and the actual number of days from and including the last date on which interest was paid on the 1.950% Notes and commenced accruing on May 22, 2018.

We may redeem the 1.950% Notes at any time, in whole or in part, at a redemption price equal to 100% of the principal amount of the notes plus a make-whole premium, together with accrued interest to the redemption date. If we redeem the 1.950% Notes on or after February 22, 2026, we will not be required to pay a make-whole premium. In addition, if we undergo a change of control and corresponding ratings decline, each as defined in the supplemental indenture, we may be required to repurchase all of the notes at a purchase price equal to 101% of the principal amount of such notes, plus accrued and unpaid interest (including additional interest, if any), up to but not including the repurchase date. The notes rank equally with all of our other senior unsecured debt and are structurally subordinated to all existing and future indebtedness and other obligations of our subsidiaries.

The supplemental indenture contains certain covenants that restrict our ability to merge, consolidate or sell assets and our (together with our subsidiaries’) ability to incur liens. These covenants are subject to a number of exceptions, including that we and our subsidiaries may incur certain liens on assets, mortgages or other liens securing indebtedness if the aggregate amount of such liens does not exceed 3.5x Adjusted EBITDA, as defined in the supplemental indenture.

Securitizations

Repayment of Series 2013-1A Securities. On the March 2018 payment date, we repaid the $500.0 million aggregate principal amount outstanding under the Series 2013-1A Securities, pursuant to the terms of the agreements governing such securities. The repayment was funded with borrowings under the 2014 Credit Facility and cash on hand.

Secured Tower Revenue Securities, Series 2018-1, Subclass A and Series 2018-1, Subclass R. On March 29, 2018, we completed the 2018 Securitization in which the American Tower Trust I (the “Trust”) issued $500.0 million aggregate principal amount of the Series 2018-1A Securities. To satisfy the applicable risk retention requirements of Regulation RR promulgated under the Exchange Act (such requirements, the “Risk Retention Rules”), the Trust issued, and one of our affiliates purchased, $26.4 million aggregate principal amount of Secured Tower Revenue Securities, Series 2018-1, Subclass R (the “Series 2018-1R Securities” and, together with the Series 2018-1A Securities, the “2018 Securities”) to retain an “eligible horizontal residual interest” (as defined in the Risk Retention Rules) in an amount equal to at least 5% of the fair value of the 2018 Securities.

The assets of the Trust consist of a nonrecourse loan (the “Loan”) made by the Trust to American Tower Asset Sub, LLC and American Tower Asset Sub II, LLC (together, the “AMT Asset Subs”). The AMT Asset Subs are jointly and severally liable under the Loan, which is secured primarily by mortgages on the AMT Asset Subs’ interests in 5,116 broadcast and wireless communications towers and related assets (the “Trust Sites”).

The 2018 Securities correspond to components of the Loan made to the AMT Asset Subs pursuant to the Second Amended and Restated Loan and Security Agreement among the Trust and the AMT Asset Subs, dated as of March 29, 2018 (the “Loan Agreement”) and were issued in two separate subclasses of the same series. The 2018 Securities represent a pass-through interest in the components of the Loan corresponding to the 2018 Securities. The Series 2018-1A Securities have an interest rate of 3.652% and the Series 2018-1R Securities have an interest rate of 4.459%. The 2018 Securities have an expected life of approximately ten years with a final repayment date in March 2048.

The AMT Asset Subs may prepay the Loan in whole or in part at any time provided it is accompanied by applicable prepayment consideration. If the prepayment occurs within 36 months of the anticipated repayment date for the component of

the Loan corresponding to the 2018 Securities, no prepayment consideration is due. The entire unpaid principal balance of the components of the Loan corresponding to the 2018 Securities will be due in March 2048.

The Loan is secured by (1) mortgages, deeds of trust and deeds to secure debt on substantially all of the Trust Sites and their operating cash flows, (2) a security interest in substantially all of the AMT Asset Subs’ personal property and fixtures and (3) the AMT Asset Subs’ rights under that certain management agreement among the AMT Asset Subs and SpectraSite Communications, LLC entered into in March 2013. American Tower Holding Sub, LLC (the “Guarantor”), whose only material assets are its equity interests in each of the AMT Asset Subs, and American Tower Guarantor Sub, LLC whose only material asset is its equity interests in the Guarantor, have each guaranteed repayment of the Loan and pledged their equity interests in their respective subsidiary or subsidiaries as security for such payment obligations.

The Secured Tower Revenue Securities, Series 2013-2A (the “Series 2013-2A Securities”) issued in the 2013 Securitization remain outstanding and are subject to the terms of the Second Amended and Restated Trust and Servicing Agreement entered into in connection with the 2018 Securitization. The component of the Loan corresponding to the Series 2013-2A Securities also remains outstanding and is subject to the terms of the Loan Agreement.

For more information regarding the Trust Securitizations, see “—Factors Affecting Sources of Liquidity” below.

Bank Facilities

On November 28, 2018, we entered into amendment agreements with respect to the 2013 Credit Facility, the 2014 Credit Facility and the 2013 Term Loan, which, among other things, (i) extend the maturity dates by one year to June 28, 2022, January 31, 2024 and January 31, 2024, respectively, (ii) increase the commitments under each of the 2013 Credit Facility and the 2014 Credit Facility by $100.0 million to $2.85 billion and $2.1 billion, respectively, (iii) increase the maximum Revolving Loan Commitments, after giving effect to any Incremental Commitments (each as defined in the applicable loan agreement) to $4.5 billion and $3.25 billion under the 2013 Credit Facility and the 2014 Credit Facility, respectively, (iv) amend the limitation on indebtedness of, and guaranteed by, our subsidiaries to the greater of (x) $2.5 billion and (y) 50% of Adjusted EBITDA (as defined in the applicable loan agreement) of us and our subsidiaries on a consolidated basis, (v) increase the threshold for certain defaults with respect to judgments, attachments or acceleration of indebtedness from $300.0 million to $400.0 million and (vi) add provisions regarding the establishment of an alternative rate of interest in the event that LIBOR is no longer available. In addition, the amendments to the 2014 Credit Facility and the 2013 Term Loan reduce the Applicable Margins (as defined in the applicable loan agreement) to conform to the Applicable Margins in the 2013 Credit Facility (as defined therein).

2013 Credit Facility. We have the ability to borrow up to $2.85 billion under the 2013 Credit Facility, which includes a $1.0 billion sublimit for multicurrency borrowings, a $200.0 million sublimit for letters of credit and a $50.0 million sublimit for swingline loans. During the year ended December 31, 2018, we borrowed an aggregate of $2.1 billion and repaid an aggregate of $2.3 billion of revolving indebtedness. We used the borrowings to fund acquisitions, repay existing indebtedness and for general corporate purposes. We currently have $3.8 million of undrawn letters of credit and maintain the ability to draw down and repay amounts under the 2013 Credit Facility in the ordinary course.

2014 Credit Facility. We have the ability to borrow up to $2.1 billion under the 2014 Credit Facility, which includes a $200.0 million sublimit for letters of credit and a $50.0 million sublimit for swingline loans. During the year ended December 31, 2018, we borrowed an aggregate of $1.1 billion and repaid an aggregate of $1.5 billion of revolving indebtedness. We used the borrowings to repay existing indebtedness, including the Series 2013-1A Securities, to fund acquisitions and for general corporate purposes. We currently have $6.2 million of undrawn letters of credit and maintain the ability to draw down and repay amounts under the 2014 Credit Facility in the ordinary course.

2018 Term Loan. On March 29, 2018, we entered into the 2018 Term Loan, the net proceeds of which were used to repay $1.1 billion of outstanding indebtedness under the 2013 Credit Facility and $445.0 million of outstanding indebtedness under the 2014 Credit Facility. The 2018 Term Loan had a maturity date of March 29, 2019. On February 14, 2019, we repaid all amounts outstanding under the 2018 Term Loan with proceeds from the 2019 Term Loan (as defined below) and cash on hand.

As of December 31, 2018, the key terms under the 2013 Credit Facility, the 2014 Credit Facility, the 2013 Term Loan and the 2018 Term Loan were as follows:

Bank Facility (1)Outstanding Principal BalanceMaturity DateLIBOR borrowing interest rate range (2)Base rate borrowing interest rate range (2)Current margin over LIBOR and the base rate, respectively
2013 Credit Facility$1,875.0June 28, 2022(3)0.875% - 1.750%0.000% - 0.750%1.125% and 0.125%
2014 Credit Facility$—January 31, 2024(3)0.875% - 1.750%0.000% - 0.750%1.125% and 0.125%
2013 Term Loan$1,000.0January 31, 20240.875% - 1.750%0.000% - 0.750%1.125% and 0.125%
2018 Term Loan$1,500.0March 29, 20190.625% - 1.500%0.000% - 0.500%0.875% and 0.000%

(1) Currently borrowed at LIBOR.

(2)Represents interest rate above LIBOR for LIBOR based borrowings and the interest rate above the defined base rate for base rate borrowings, in each case based on our debt ratings.
(3)Subject to two optional renewal periods.

The 2013 Credit Facility and the 2014 Credit Facility are subject to two optional renewal periods and we must pay a quarterly commitment fee on the undrawn portion of each facility. The commitment fee for the 2013 Credit Facility and the 2014 Credit Facility ranges from 0.100% to 0.350% per annum, based upon our debt ratings, and is currently 0.125%.

2019 Term Loan. On February 14, 2019, we entered into a $1.3 billion unsecured term loan (the “2019 Term Loan”), the net proceeds of which were used to repay outstanding indebtedness under the 2018 Term Loan. The 2019 Term Loan matures on February 13, 2020 and has an interest rate that ranges between 0.550% and 1.375% above LIBOR for LIBOR based borrowings or up to 0.375% above the defined base rate for base rate borrowings, in each case based upon our debt ratings. The current margin over LIBOR for the 2019 Term Loan is 0.800%. Any outstanding principal and accrued but unpaid interest will be due and payable in full at maturity.

The 2013 Credit Facility, the 2014 Credit Facility, the 2013 Term Loan and the 2019 Term Loan do not require amortization of principal and may be paid prior to maturity in whole or in part at our option without penalty or premium. We have the option of choosing either a defined base rate or the LIBOR as the applicable base rate for borrowings under these bank facilities.

The loan agreements for each of the 2013 Credit Facility, the 2014 Credit Facility, the 2013 Term Loan and the 2019 Term Loan contain certain reporting, information, financial and operating covenants and other restrictions (including limitations on additional debt, guaranties, sales of assets and liens) with which we must comply. Failure to comply with the financial and operating covenants of the loan agreements could not only prevent us from being able to borrow additional funds under the revolving credit facilities, but may constitute a default, which could result in, among other things, the amounts outstanding, including all accrued interest and unpaid fees, becoming immediately due and payable.

India Indebtedness. Amounts outstanding and key terms of the India indebtedness consisted of the following as of December 31, 2018 (in millions, except percentages):

Amount Outstanding (INR)Amount Outstanding (USD)Interest Rate (Range)Maturity Date (Range)
Term loans (1)16,751$240.18.75% - 8.95%January 1, 2019 - November 30, 2024
Working capital facilities (2)—$—8.40% - 8.75%March 18, 2019 - October 23, 2019
(1)In January 2019, we repaid approximately 5.0 billion INR ($72.0 million) of India indebtedness.
(2)5.7 billion INR ($81.8 million) of borrowing capacity as of December 31, 2018.

The India indebtedness includes several term loans, with maturities ranging from one to ten years, which are generally secured by the borrower’s short-term and long-term assets. Each of the term loans bear interest at the applicable bank’s Marginal Cost of Funds based Lending Rate (as defined in the applicable agreement), plus a spread. Interest rates on the term loans are fixed until certain reset dates. Generally, the term loans can be repaid without penalty on the reset dates; repayments at dates other than the reset dates are subject to prepayment penalties, typically of 1% to 2%. Scheduled repayment terms include either ratable or staggered amortization with repayments typically commencing between six and thirty-six months after the initial disbursement of funds.

The India indebtedness also includes several working capital facilities, most of which are subject to annual renewal, and which are generally secured by the borrower’s short-term and long-term assets. The working capital facilities bear interest at rates that consist of the applicable bank’s Marginal Cost of Funds based Lending Rate (as defined in the applicable agreement), plus a spread. Generally, the working capital facilities are payable on demand prior to maturity.

Stock Repurchase Programs. We have two stock repurchase programs, the 2011 Buyback and the 2017 Buyback.

During the year ended December 31, 2018, we repurchased 1,647,489 shares of our common stock under the 2011 Buyback for an aggregate of $232.8 million, including commissions and fees. We had no repurchases under the 2017 Buyback.

Under each program, we are authorized to purchase shares from time to time through open market purchases, in privately negotiated transactions not to exceed market prices, and (with respect to such open market purchases) pursuant to plans adopted in accordance with Rule 10b5-1 under the Exchange Act in accordance with securities laws and other legal requirements, and subject to market conditions and other factors.

We expect to continue managing the pacing of the remaining $2.1 billion under the Buyback Programs in response to general market conditions and other relevant factors. We expect to fund further repurchases of our common stock through a combination of cash on hand, cash generated by operations and borrowings under our credit facilities. Purchases under the Buyback Programs are subject to us having available cash to fund repurchases.

Sales of Equity Securities. We receive proceeds from sales of our equity securities pursuant to our employee stock purchase plan (the “ESPP”) and upon exercise of stock options granted under our equity incentive plans. For the year ended December 31, 2018, we received an aggregate of $98.9 million in proceeds upon exercises of stock options and sales pursuant to the ESPP.

Distributions. As a REIT, we must annually distribute to our stockholders an amount equal to at least 90% of our REIT taxable income (determined before the deduction for distributed earnings and excluding any net capital gain). Generally, we have distributed, and expect to continue to distribute, all or substantially all of our REIT taxable income after taking into consideration our utilization of NOLs. We have distributed an aggregate of approximately $5.7 billion to our common stockholders, including the dividend paid in January 2019, primarily classified as ordinary income that may be treated as qualified REIT dividends under Section 199A of the Code for taxable years ending after 2017 and before 2026.

The amount, timing and frequency of future distributions will be at the sole discretion of our Board of Directors and will depend on various factors, a number of which may be beyond our control, including our financial condition and operating cash flows, the amount required to maintain our qualification for taxation as a REIT and reduce any income and excise taxes that we otherwise would be required to pay, limitations on distributions in our existing and future debt and preferred equity instruments, our ability to utilize NOLs to offset our distribution requirements, limitations on our ability to fund distributions using cash generated through our TRSs and other factors that our Board of Directors may deem relevant.

In March 2015, we issued 5.50% Mandatory Convertible Preferred Stock, Series B (the “Series B Preferred Stock”) with a dividend rate of 5.50%. Dividends were payable quarterly in arrears, subject to declaration by our Board of Directors. On February 15, 2018, we paid the final dividend of $13.75 per share, or $18.9 million, to holders of the Series B Preferred Stock of record at the close of business on February 1, 2018. On February 15, 2018, all outstanding shares of the Series B Preferred Stock converted at a rate of 8.7420 per share of Series B Preferred Stock, or 0.8742 per depositary share, each representing a 1/10th interest in a share of Series B Preferred Stock, into shares of our common stock pursuant to the provisions of the Certificate of Designations governing the Series B Preferred Stock. As a result of the conversions of the Series B Preferred Stock in 2018, we issued an aggregate of 12,020,064 shares of our common stock.

During the year ended December 31, 2018, we paid $3.01 per share, or $1.3 billion, to common stockholders of record. In addition, we declared a distribution of $0.84 per share, or $370.5 million, paid on January 14, 2019 to our common stockholders of record at the close of business on December 27, 2018.

We accrue distributions on unvested restricted stock units, which are payable upon vesting. The amount accrued for distributions payable related to unvested restricted stock units was $13.7 million and $10.1 million as of December 31, 2018 and 2017, respectively. During the year ended December 31, 2018, we paid $4.3 million of distributions upon the vesting of restricted stock units.

For more details on the cash distributions paid to our common and preferred stockholders during the year ended December 31, 2018, see note 15 to our consolidated financial statements included in this Annual Report.

Contractual Obligations. The following table summarizes our contractual obligations as of December 31, 2018 (in millions):

Contractual Obligations20192020202120222023ThereafterTotal
Long-term debt, including current portion:
American Tower Corporation debt:
2018 Term Loan (1)$1,500.0$—$—$—$—$—1,500.0
2013 Credit Facility$—$—$—$1,875.0$—$—1,875.0
2013 Term Loan$—$—$—$—$—$1,000.01,000.0
2014 Credit Facility$—$—$—$—$—$——
3.40% senior notes (2)$1,000.0$—$—$—$—$—1,000.0
2.800% senior notes$—$750.0$—$—$—$—750.0
5.050% senior notes$—$700.0$—$—$—$—700.0
3.300% senior notes$—$—$750.0$—$—$—750.0
3.450% senior notes$—$—$650.0$—$—$—650.0
5.900% senior notes$—$—$500.0$—$—$—500.0
2.250% senior notes$—$—$—$600.0$—$—600.0
4.70% senior notes$—$—$—$700.0$—$—700.0
3.50% senior notes$—$—$—$—$1,000.0$—1,000.0
3.000% senior notes$—$—$—$—$700.0$—700.0
5.00% senior notes$—$—$—$—$—$1,000.01,000.0
1.375% senior notes$—$—$—$—$—$573.3573.3
4.000% senior notes$—$—$—$—$—$750.0750.0
4.400% senior notes$—$—$—$—$—$500.0500.0
1.950% senior notes$—$—$—$—$—$573.3573.3
3.375% senior notes$—$—$—$—$—$1,000.01,000.0
3.125% senior notes$—$—$—$—$—$400.0400.0
3.55% senior notes$—$—$—$—$—$750.0750.0
3.600% senior notes—————700.0700.0
Total American Tower Corporation debt2,500.01,450.01,900.03,175.01,700.07,246.617,971.6
American Tower subsidiary debt:
Series 2013-2A securities (3)————1,300.0—1,300.0
Series 2018-1A securities (3)—————500.0500.0
Series 2015-1 notes (4)—350.0————350.0
Series 2015-2 notes (5)—————525.0525.0
India indebtedness (6)101.930.230.230.230.217.4240.1
India preference shares (7)23.9—————23.9
Shareholder loan (8)59.9—————59.9
Other subsidiary debt (9)38.133.264.717.3——153.3
Total American Tower subsidiary debt223.8413.494.947.51,330.21,042.43,152.2
Long-term obligations, excluding capital leases2,723.81,863.41,994.93,222.53,030.28,289.021,123.8
Cash interest expense702.0635.0560.0434.3315.8567.73,214.8
Capital lease payments (including interest)40.732.727.823.719.2117.5261.6
Total debt service obligations3,466.52,531.12,582.73,680.53,365.28,974.224,600.2
Operating lease payments (10)926.0904.2879.8834.2792.66,173.110,509.9
Other non-current liabilities (11)(12)7.76.17.039.814.62,738.52,813.7
Total$4,400.2$3,441.4$3,469.5$4,554.5$4,172.4$17,885.8$37,923.8
(1)Repaid in full on February 14, 2019.
(2)Repaid in full on the maturity date in February 2019 with borrowings from the 2013 Credit Facility and the 2014 Credit Facility.
(3)Represents anticipated repayment date; final legal maturity is March 15, 2048.
(4)Represents anticipated repayment date; final legal maturity is June 15, 2045.
(5)Represents anticipated repayment date; final legal maturity is June 15, 2050.
(6)Denominated in INR. Debt includes India working capital facilities, remaining debt assumed by us in connection with the Viom Acquisition and debt that has been entered into by ATC TIPL.
(7)Mandatorily redeemable preference shares (the “Preference Shares”) classified as debt. The Preference Shares have a dividend rate of 10.25% per annum. Denominated in INR. We intend to redeem these shares on March 2, 2019.
(8)Reflects balances owed to our joint venture partner in Ghana. The Ghana loan is denominated in GHS.
(9)Includes our South African credit facility, which is denominated in ZAR and amortizes through December 17, 2020, our Colombian credit facility, which is denominated in COP and amortizes through April 24, 2021, our Brazil credit facility, which is denominated in BRL and matures on January 15, 2022, debt entered into by our Kenyan subsidiary in connection with an acquisition of sites in Kenya (the “Kenya Debt”), which is required to be paid either (i) in future installments subject to the satisfaction of specified conditions or (ii) three years from the note origination date, and U.S. subsidiary debt related to a seller-financed acquisition.
(10)Includes payments under non-cancellable initial terms, as well as payments for certain renewal periods at our option, which we expect to renew because failure to do so could result in a loss of the applicable communications sites and related revenues from tenant leases.
(11)Primarily represents our asset retirement obligations and excludes certain other non-current liabilities included in our consolidated balance sheet, primarily our straight-line rent liability for which cash payments are included in operating lease payments and unearned revenue that is not payable in cash.
(12)Excludes $85.8 million of liabilities for unrecognized tax positions and $19.1 million of accrued income tax related interest and penalties included in our consolidated balance sheet as we are uncertain as to when and if the amounts may be settled. Settlement of such amounts could require the use of cash flows generated from operations. We expect the unrecognized tax benefits to change over the next 12 months if certain tax matters ultimately settle with the applicable taxing jurisdiction during this timeframe. However, based on the status of these items and the amount of uncertainty associated with the outcome and timing of audit settlements, we are currently unable to estimate the impact of the amount of such changes, if any, to previously recorded uncertain tax positions.

Off-Balance Sheet Arrangements. We have no material off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Factors Affecting Sources of Liquidity

Our liquidity depends on our ability to generate cash flow from operating activities, borrow funds under our credit facilities and maintain compliance with the contractual agreements governing our indebtedness. We believe that the debt agreements discussed below represent our material debt agreements that contain covenants, our compliance with which would be material to an investor’s understanding of our financial results and the impact of those results on our liquidity.

Internally Generated Funds. Because the majority of our tenant leases are multiyear contracts, a significant majority of the revenues generated by our property operations as of the end of 2018 is recurring revenue that we should continue to receive in future periods. Accordingly, a key factor affecting our ability to generate cash flow from operating activities is to maintain this recurring revenue and to convert it into operating profit by minimizing operating costs and fully achieving our operating efficiencies. In addition, our ability to increase cash flow from operating activities depends upon the demand for our communications sites and our related services and our ability to increase the utilization of our existing communications sites.

Restrictions Under Loan Agreements Relating to Our Credit Facilities. The loan agreements for the 2013 Credit Facility, the 2014 Credit Facility, the 2013 Term Loan, the 2018 Term Loan and the 2019 Term Loan contain certain financial and operating covenants and other restrictions applicable to us and our subsidiaries that are not designated as unrestricted subsidiaries on a consolidated basis. These restrictions include limitations on additional debt, distributions and dividends, guaranties, sales of assets and liens. The loan agreements also contain covenants that establish financial tests with which we and our restricted subsidiaries must comply related to total leverage and senior secured leverage, as set forth in the table below. In the event that our debt ratings fall below investment grade, we must also maintain an interest coverage ratio of Adjusted EBITDA to Interest Expense (each as defined in the applicable loan agreement) of at least 2.50:1.00. As of December 31, 2018, we were in compliance with each of these covenants.

Compliance Tests For The 12 Months Ended December 31, 2018 ($ in billions)
Ratio (1)Additional Debt Capacity Under Covenants (2)Capacity for Adjusted EBITDA Decrease Under Covenants (3)
Consolidated Total Leverage RatioTotal Debt to Adjusted EBITDA ≤ 6.00:1.00~ $7.6~ $1.3
Consolidated Senior Secured Leverage RatioSenior Secured Debt to Adjusted EBITDA ≤ 3.00:1.00~ $11.2 (4)~ $3.7 (4)

(1) Each component of the ratio as defined in the applicable loan agreement.

(2) Assumes no change to Adjusted EBITDA.

(3) Assumes no change to our debt levels.

(4) Effectively, however, additional Senior Secured Debt under this ratio would be limited to the capacity under the Consolidated Total Leverage Ratio.

The loan agreements for our credit facilities also contain reporting and information covenants that require us to provide financial and operating information to the lenders within certain time periods. If we are unable to provide the required information on a timely basis, we would be in breach of these covenants.

Failure to comply with the financial maintenance tests and certain other covenants of the loan agreements for our credit facilities could not only prevent us from being able to borrow additional funds under these credit facilities, but may constitute a default under these credit facilities, which could result in, among other things, the amounts outstanding, including all accrued interest and unpaid fees, becoming immediately due and payable. If this were to occur, we may not have sufficient cash on hand to repay such indebtedness. The key factors affecting our ability to comply with the debt covenants described above are our financial performance relative to the financial maintenance tests defined in the loan agreements for these credit facilities and our ability to fund our debt service obligations. Based upon our current expectations, we believe our operating results during the next 12 months will be sufficient to comply with these covenants.

Restrictions Under Agreements Relating to the 2015 Securitization and the Trust Securitizations. The indenture and related supplemental indentures governing the American Tower Secured Revenue Notes, Series 2015-1, Class A (the “Series 2015-1 Notes”) and the American Tower Secured Revenue Notes, Series 2015-2, Class A (the “Series 2015-2 Notes,” and, together with the Series 2015-1 Notes, the “2015 Notes”) issued by GTP Acquisition Partners I, LLC (“GTP Acquisition Partners”) in the 2015 Securitization and the loan agreement related to the Trust Securitizations include certain financial ratios and operating covenants and other restrictions customary for transactions subject to rated securitizations. Among other things, GTP Acquisition Partners and the AMT Asset Subs are prohibited from incurring other indebtedness for borrowed money or further encumbering their assets, subject to customary carve-outs for ordinary course trade payables and permitted encumbrances (as defined in the applicable agreement).

Under the agreements, amounts due will be paid from the cash flows generated by the assets securing the 2015 Notes or the Loan, as applicable, which must be deposited into certain reserve accounts, and thereafter distributed solely pursuant to the terms of the applicable agreement. On a monthly basis, after payment of all required amounts under the applicable agreement, subject to the conditions described in the table below, the excess cash flows generated from the operation of such assets are released to GTP Acquisition Partners or the AMT Asset Subs, as applicable, which can then be distributed to, and used by, us. As of December 31, 2018, $80.1 million held in such reserve accounts was classified as restricted cash.

Certain information with respect to the 2015 Securitization and the Trust Securitizations is set forth below. The debt service coverage ratio (“DSCR”) is generally calculated as the ratio of the net cash flow (as defined in the applicable agreement) to the amount of interest, servicing fees and trustee fees required to be paid over the succeeding 12 months on the principal amount of the 2015 Notes or the Loan, as applicable, that will be outstanding on the payment date following such date of determination.

Issuer or BorrowerNotes/Securities IssuedConditions Limiting Distributions of Excess CashExcess Cash Distributed During Year Ended December 31, 2018DSCR as of December 31, 2018Capacity for Decrease in Net Cash Flow Before Triggering Cash Trap DSCR (1)Capacity for Decrease in Net Cash Flow Before Triggering Minimum DSCR (1)
Cash Trap DSCRAmortization Period
(in millions)(in millions)(in millions)
2015 SecuritizationGTP Acquisition PartnersAmerican Tower Secured Revenue Notes, Series 2015-1 and Series 2015-21.30x, Tested Quarterly (2)(3)(4)$197.38.67x$196.9$200.9
Trust SecuritizationsAMT Asset SubsSecured Tower Revenue Securities, Series 2013-2A, Secured Tower Revenue Securities, Series 2018-1, Subclass A and Secured Tower Revenue Securities, Series 2018-1, Subclass R1.30x, Tested Quarterly (2)(3)(5)$612.910.65x$558.4$567.4
(1)Based on the net cash flow of the applicable issuer or borrower as of December 31, 2018 and the expenses payable over the next 12 months on the 2015 Notes or the Loan, as applicable.
(2)Once triggered, a Cash Trap DSCR condition continues to exist until the DSCR exceeds the Cash Trap DSCR for two consecutive calendar quarters. During a Cash Trap DSCR condition, all cash flow in excess of amounts required to make debt service payments, fund required reserves, pay management fees and budgeted operating expenses and make other payments required under the applicable transaction documents, referred to as excess cash flow, will be deposited into a reserve account (the “Cash Trap Reserve Account”) instead of being released to the applicable issuer or borrower.
(3)An amortization period commences if the DSCR is equal to or below 1.15x (the “Minimum DSCR”) at the end of any calendar quarter and continues to exist until the DSCR exceeds the Minimum DSCR for two consecutive calendar quarters.
(4)No amortization period is triggered if the outstanding principal amount of a series has not been repaid in full on the applicable anticipated repayment date. However, in such event, additional interest will accrue on the unpaid principal balance of the applicable series, and such series will begin to amortize on a monthly basis from excess cash flow.
(5)An amortization period exists if the outstanding principal amount has not been paid in full on the applicable anticipated repayment date and continues to exist until such principal has been repaid in full.

A failure to meet the noted DSCR tests could prevent GTP Acquisition Partners or the AMT Asset Subs from distributing excess cash flow to us, which could affect our ability to fund our capital expenditures, including tower construction and acquisitions and meet REIT distribution requirements. During an “amortization period,” all excess cash flow and any amounts in the applicable Cash Trap Reserve Account would be applied to pay principal of the 2015 Notes or the Loan, as applicable, on each monthly payment date, and so would not be available for distribution to us. Further, additional interest will begin to accrue with respect to any series of the 2015 Notes or subclass of the Loan from and after the anticipated repayment date at a per annum rate determined in accordance with the applicable agreement. With respect to the 2015 Notes, upon the occurrence and during an event of default, the applicable trustee may, in its discretion or at the direction of holders of more than 50% of the aggregate outstanding principal of any series of the 2015 Notes, declare such series of 2015 Notes immediately due and payable, in which case any excess cash flow would need to be used to pay holders of such notes. Furthermore, if GTP Acquisition Partners or the AMT Asset Subs were to default on a series of the 2015 Notes or the Loan, the applicable trustee may seek to foreclose upon or otherwise convert the ownership of all or any portion of the 3,556 communications sites that secure the 2015 Notes or the 5,116 broadcast and wireless communications towers and related assets that secure the Loan, respectively, in which case we could lose such sites and the revenue associated with those assets.

As discussed above, we use our available liquidity and seek new sources of liquidity to fund capital expenditures, future growth and expansion initiatives, satisfy our distribution requirements and repay or repurchase our debt. If we determine that it is desirable or necessary to raise additional capital, we may be unable to do so, or such additional financing may be prohibitively expensive or restricted by the terms of our outstanding indebtedness. If we are unable to raise capital when our needs arise, we may not be able to fund capital expenditures, future growth and expansion initiatives, satisfy our REIT distribution requirements and debt service obligations or refinance our existing indebtedness.

In addition, our liquidity depends on our ability to generate cash flow from operating activities. As set forth under Item 1A of this Annual Report under the caption “Risk Factors,” we derive a substantial portion of our revenues from a small number of tenants and, consequently, a failure by a significant tenant to perform its contractual obligations to us could adversely affect our cash flow and liquidity.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as related disclosures of contingent assets and liabilities. We evaluate our policies and estimates on an ongoing basis. Management bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We have reviewed our policies and estimates to determine our critical accounting policies for the year ended December 31, 2018. We have identified the following policies as critical to an understanding of our results of operations and financial condition. This is not a comprehensive list of our accounting policies. See note 1 to our consolidated financial statements included in this Annual Report for a summary of our significant accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP, with no need for management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result.

•Impairment of Assets—Assets Subject to Depreciation and Amortization: We review long-lived assets for impairment at least annually or whenever events, changes in circumstances or other indicators or evidence indicate that the carrying amount of our assets may not be recoverable.

We review our tower portfolio and network location intangible assets for indicators of impairment at the lowest level of identifiable cash flows, typically at an individual tower basis. Possible indicators include a tower not having current tenant leases or having expenses in excess of revenues. A cash flow modeling approach is utilized to assess recoverability and incorporates, among other items, the tower location, the tower location demographics, the timing of additions of new tenants, lease rates and estimated length of tenancy and ongoing cash requirements.

We review our tenant-related intangible assets on a tenant by tenant basis for indicators of impairment, such as high levels of turnover or attrition, non-renewal of a significant number of contracts or the cancellation or termination of a relationship. We assess recoverability by determining whether the carrying amount of the tenant-related intangible assets will be recovered primarily through projected undiscounted future cash flows.

If the sum of the estimated undiscounted future cash flows of our long-lived assets is less than the carrying amount of the assets, an impairment loss may be recognized. An impairment loss would be based on the fair value of the asset, which is based on an estimate of discounted future cash flows to be provided from the asset. We record any related impairment charge in the period in which we identify such impairment.

On February 28, 2018, one of our tenants in Asia, Aircel, filed for bankruptcy protection. We performed an impairment test based on current expectations of the impact of the bankruptcy on projected cash flows for assets related to Aircel. These assets consisted primarily of towers, network location intangibles and tenant-related intangibles. As a result, an impairment of $40.1 million was taken on the tower and network intangible assets. We also fully impaired the tenant-related intangible asset for Aircel, which resulted in an impairment of $107.3 million during the year ended December 31, 2018.

In October 2017, one of our tenants in Asia, Tata Teleservices, informed the Department of Telecommunications in India of its intent to exit the wireless telecommunications business and announced plans to transfer its business to another telecommunications provider. On October 23, 2018, we entered into agreements with Tata for a settlement and release of certain contractual lease obligations effective November 1, 2018. As part of the arrangement, we received an upfront one-time INR-denominated cash payment equal to approximately $345.5 million for the termination of lease obligations with Tata Teleservices in India. In addition, we entered into new leasing arrangements with a number of Tata-affiliated entities. As a result of the settlement and new leasing agreements, we expect an approximately 80% reduction in revenues from Tata as compared to what had previously been generated from the terminated leases. In connection with the acceleration of the contractual arrangements, we also accelerated the amortization of our tenant-

related intangible asset with Tata Teleservices, which resulted in an additional amortization expense of $327.5 million in 2018. We also recorded an impairment of $164.2 million for tower and network location intangible assets as a result of the settlement.

Impairment of Assets—Goodwill: We review goodwill for impairment at least annually (as of December 31) or whenever events or circumstances indicate the carrying amount of an asset may not be recoverable.

Goodwill is recorded in the applicable segment and assessed for impairment at the reporting unit level. We utilize the two step impairment test and employ a discounted cash flow analysis when testing goodwill for impairment. The key assumptions utilized in the discounted cash flow analysis include current operating performance, terminal sales growth rate, management’s expectations of future operating results and cash requirements, the current weighted average cost of capital and an expected tax rate. Under the first step of this test, we compare the fair value of the reporting unit, as calculated under an income approach using future discounted cash flows, to the carrying amount of the applicable reporting unit. If the carrying amount exceeds the fair value, we conduct the second step of this test, in which the implied fair value of the applicable reporting unit’s goodwill is compared to the carrying amount of that goodwill. If the carrying amount of goodwill exceeds its implied fair value, an impairment loss would be recognized for the amount of the excess.

During the year ended December 31, 2018, no potential impairment was identified as the fair value of each of our reporting units was in excess of its carrying amount. The fair value of our India reporting unit, which is based on the present value of forecasted future value cash flows (the income approach) exceeded the carrying value by approximately $311.1 million, or 8%. Key assumptions include future revenue growth rates and operating margins, capital expenditures, terminal period growth rate and the weighted-average cost of capital, which were determined considering historical data and current assumptions related to the impacts of the carrier consolidation.

For this reporting unit, we performed a sensitivity analysis on our significant assumptions and determined that a (i) 6% reduction of projected revenues, (ii) 58 basis point increase in the weighted-average cost of capital or (iii) 28% reduction in terminal sales growth rate, individually, each of which we determined to be reasonable, would impact our conclusion that the fair value of the India reporting unit exceeds its carrying value. Events that could negatively affect our India reporting unit’s financial results include increased customer attrition exceeding our forecast resulting from the ongoing carrier consolidation, carrier tenant bankruptcies and other factors set forth in Item 1A of this Annual Report under the caption “Risk Factors.”

The carrying value of goodwill in the India reporting unit was $1,045.5 million as of December 31, 2018, which represents 19% of our consolidated balance of $5,501.9 million.

•Asset Retirement Obligations: When required, we recognize the fair value of obligations to remove our tower assets and remediate the leased land upon which certain of our tower assets are located. Generally, the associated retirement costs are capitalized as part of the carrying amount of the related tower assets and depreciated over their estimated useful lives and the liability is accreted through the obligation’s estimated settlement date.

We updated our assumptions used in estimating our aggregate asset retirement obligation, which resulted in a net decrease in the estimated obligation of $14.6 million during the year ended December 31, 2018. The change in 2018 primarily resulted from changes in timing of certain settlement date and cost assumptions. Fair value estimates of liabilities for asset retirement obligations generally involve discounting of estimated future cash flows. Periodic accretion of such liabilities due to the passage of time is included in Depreciation, amortization and accretion expense in the consolidated statements of operations. The significant assumptions used in estimating our aggregate asset retirement obligation are: timing of tower removals; cost of tower removals; timing and number of land lease renewals; expected inflation rates; and credit-adjusted risk-free interest rates that approximate our incremental borrowing rate. While we feel the assumptions are appropriate, there can be no assurances that actual costs and the probability of incurring obligations will not differ from these estimates. We will continue to review these assumptions periodically and we may need to adjust them as necessary.

•Acquisitions: We evaluate each of our acquisitions under the accounting guidance framework to determine whether to treat an acquisition as an asset acquisition or a business combination. For those transactions treated as asset acquisitions, the purchase price is allocated to the assets acquired, with no recognition of goodwill. For those acquisitions that meet the definition of a business combination, we apply the acquisition method of accounting where assets acquired and liabilities assumed are recorded at fair value at the date of each acquisition, and the results of operations are included with our results from the dates of the respective acquisitions. Any excess of the purchase price paid over the amounts recognized for assets acquired and liabilities assumed is recorded as goodwill. We continue to

evaluate acquisitions accounted for as business combinations for a period not to exceed one year after the applicable acquisition date of each transaction to determine whether any additional adjustments are needed to the allocation of the purchase price paid for the assets acquired and liabilities assumed. The fair value of the assets acquired and liabilities assumed is typically determined by using either estimates of replacement costs or discounted cash flow valuation methods. When determining the fair value of tangible assets acquired, we must estimate the cost to replace the asset with a new asset taking into consideration such factors as age, condition and the economic useful life of the asset. When determining the fair value of intangible assets acquired, we must estimate the applicable discount rate and the timing and amount of future tenant cash flows, including rate and terms of renewal and attrition.

•Revenue Recognition: Our revenue from leasing arrangements, including fixed escalation clauses present in non-cancellable lease arrangements, is reported on a straight-line basis over the term of the respective leases when collectibility is probable. Escalation clauses tied to the Consumer Price Index or other inflation-based indices, and other incentives present in lease agreements with our tenants are excluded from the straight-line calculation. Total property straight-line revenues for the years ended December 31, 2018, 2017 and 2016 were $87.6 million, $194.4 million and $131.7 million, respectively. Amounts billed upfront in connection with the execution of lease agreements are initially deferred and reflected in Unearned revenue in the accompanying consolidated balance sheets and recognized as revenue over the terms of the applicable lease arrangements. Amounts billed or received for services prior to being earned are deferred and reflected in Unearned revenue in the accompanying consolidated balance sheets until the criteria for recognition have been met.

We derive the largest portion of our revenues, corresponding trade receivables and the related deferred rent asset from a small number of tenants in the telecommunications industry, with 51% of our revenues derived from four tenants. In addition, we have concentrations of credit risk in certain geographic areas. We mitigate the concentrations of credit risk with respect to notes and trade receivables by actively monitoring the creditworthiness of our borrowers and tenants. In recognizing tenant revenue we assess the collectibility of both the amounts billed and the portion recognized on a straight-line basis. This assessment takes tenant credit risk and business and industry conditions into consideration to ultimately determine the collectibility of the amounts billed. To the extent the amounts, based on management’s estimates, may not be collectible, recognition is deferred until such point as the uncertainty is resolved. Any amounts that were previously recognized as revenue and subsequently determined to be uncollectible are charged to bad debt expense. Accounts receivable are reported net of allowances for doubtful accounts related to estimated losses resulting from a tenant’s inability to make required payments and allowances for amounts invoiced whose collectibility is not reasonably assured.

•Rent Expense: Many of the leases underlying our tower sites have fixed rent escalations, which provide for periodic increases in the amount of ground rent payable over time. In addition, certain of our tenant leases require us to exercise available renewal options pursuant to the underlying ground lease if the tenant exercises its renewal option. We calculate straight-line ground rent expense for these leases based on the fixed non-cancellable term of the underlying ground lease plus all periods, if any, for which failure to renew the lease imposes an economic penalty to us such that renewal appears to be reasonably assured.

Effective January 1, 2019, we will adopt the new lease accounting guidance, which requires us to recognize a Right of Use (“ROU”) lease asset and lease liability for operating and finance leases. The ROU asset will be measured as the sum of the lease liability, prepaid or accrued lease payments, any initial direct costs incurred and any other applicable amounts.

The calculation of the lease liability requires us to make certain assumptions for each lease, including lease term and discount rate implicit in each lease, which could significantly impact the gross lease obligation, the duration and the present value of the lease liability. When calculating the lease term, we will consider the renewal, cancellation and termination rights available to us and the lessor. We will determine the discount rate by calculating the incremental borrowing rate on a collateralized basis at the commencement of a lease or upon a change in the lease term.

•Income Taxes: Accounting for income taxes requires us to estimate the timing and impact of amounts recorded in our financial statements that may be recognized differently for tax purposes. To the extent that the timing of amounts recognized for financial reporting purposes differs from the timing of recognition for tax reporting purposes, deferred tax assets or liabilities are required to be recorded. Deferred tax assets and liabilities are measured based on the rate at which we expect these items to be reflected in our tax returns, which may differ from the current rate. We do not expect to pay federal income taxes on our REIT taxable income.

We periodically review our deferred tax assets, and we record a valuation allowance if, based on the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Management

assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. Valuation allowances would be reversed as a reduction to the provision for income taxes, if related deferred tax assets are deemed realizable based on changes in facts and circumstances relevant to the assets’ recoverability.

We recognize the benefit of uncertain tax positions when, in management’s judgment, it is more likely than not that positions we have taken in our tax returns will be sustained upon examination, which are measured at the largest amount that is greater than 50% likely of being realized upon settlement. We adjust our tax liabilities when our judgment changes as a result of the evaluation of new information or information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the tax liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which additional information is available or the position is ultimately settled under audit.

The December 2017 legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”) significantly changed how the U.S. taxes corporations. The Tax Act contains several key provisions including, among other things, a one-time mandatory deemed repatriation of all post-1986 untaxed foreign earnings and profits, a reduction in the corporate income rate from 35% to 21% for tax years beginning after December 31, 2017 and the introduction of a new U.S. tax on certain off-shore earnings.

The SEC staff issued guidance to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Tax Act and allows the registrant to record provisional amounts during a measurement period not to extend beyond one year from the enactment date. We recognized the provisional impacts of the Tax Act in our consolidated financial statements for the year ended December 31, 2017 and finalized these amounts in 2018 with no significant changes to preliminary amounts.

Accounting Standards Update

For a discussion of recent accounting standards updates, see note 1 to our consolidated financial statements included in this Annual Report.

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