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AMERICAN TOWER CORP /MA/ - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
[July 30, 2014]

AMERICAN TOWER CORP /MA/ - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


(Edgar Glimpses Via Acquire Media NewsEdge) This Quarterly Report on Form 10-Q contains forward-looking statements relating to our goals, beliefs, plans or current expectations and other statements that are not of historical facts. For example, when we use words such as "project," "believe," "anticipate," "expect," "forecast," "estimate," "intend," "should," "would," "could," "may" or other words that convey uncertainty of future events or outcomes, we are making forward-looking statements. Certain important factors may cause actual results to differ materially from those indicated by our forward-looking statements, including those set forth under the caption "Risk Factors" in Part II, Item 1A. of this Quarterly Report on Form 10-Q.

Forward-looking statements represent management's current expectations and are inherently uncertain. We do not undertake any obligation to update forward-looking statements made by us.

The discussion and analysis of our financial condition and results of operations that follow are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). The preparation of our financial statements requires us to make estimates and judgments 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 significantly from these estimates under different assumptions or conditions. This discussion should be read in conjunction with our condensed consolidated financial statements herein and the accompanying notes thereto, information set forth under the caption "Critical Accounting Policies and Estimates" of our Annual Report on Form 10-K for the year ended December 31, 2013, and in particular, the information set forth therein under Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations." Overview We are a leading independent owner, operator and developer of wireless and broadcast communications real estate. Our primary business is leasing antenna space on multi-tenant communications sites to wireless service providers, radio and television broadcast companies, wireless data and data providers, government agencies and municipalities and tenants in a number of other industries. We refer to this business as our rental and management operations, which accounted for approximately 98% of our total revenues for the six months ended June 30, 2014. Through our network development services, we offer tower-related services domestically, including site acquisition, zoning and permitting services and structural analysis services, which primarily support our site leasing business and the addition of new tenants and equipment on our sites. We began operating as a real estate investment trust ("REIT") for federal income tax purposes effective January 1, 2012.

Our communications real estate portfolio of 69,200 sites, as of June 30, 2014, includes wireless and broadcast communications towers and distributed antenna system ("DAS") networks, which provide seamless coverage solutions in certain in-building and outdoor wireless environments. Our portfolio primarily consists of towers that we own and towers that we operate pursuant to long-term lease arrangements, including, as of June 30, 2014, 28,203 towers domestically and 40,619 towers internationally. Our portfolio also includes 378 DAS networks. 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 property interests that we lease to communications service providers and third-party tower operators.

In October 2013, we acquired MIP Tower Holdings LLC ("MIPT"), a private REIT and parent company to Global Tower Partners ("GTP"), an owner and operator of approximately 5,370 communications sites, through its various operating subsidiaries, in the United States, Costa Rica and Panama. GTP also manages rooftops and holds property interests that it leases to communications service providers and third-party tower operators. As a result of our acquisition of MIPT, we own an interest in a subsidiary REIT, and are currently evaluating the continued election of MIPT's private REIT status.

35-------------------------------------------------------------------------------- Table of Contents The following table details the number of communications sites we own or operate as of June 30, 2014: Number of Number of Country Owned Sites Operated Sites (1) United States 21,286 7,211 International: Brazil 6,774 155 Chile 1,191 - Colombia 2,835 706 Costa Rica 460 - Germany 2,031 - Ghana 2,009 - India 12,131 - Mexico 8,517 199 Panama (2) 58 - Peru 499 - South Africa 1,912 - Uganda 1,226 - (1) All of the communications sites we operate are held pursuant to long-term capital leases, including those subject to purchase options.

(2) During the three months ended June 30, 2014, we determined that the operations in Panama were held-for-sale.

Our continuing operations are reported in three segments: domestic rental and management, international rental and management and network development services. Among other factors, in evaluating operating performance in each business segment, management uses segment gross margin and segment operating profit. We define segment gross margin as segment revenue less segment operating expenses, excluding stock-based compensation expense recorded in costs of operations; Depreciation, amortization and accretion; Selling, general, administrative and development expense; and Other operating expense. We define segment operating profit as segment gross margin less Selling, general, administrative and development expense attributable to the segment, excluding stock-based compensation expense and corporate expenses. Segment gross margin and segment operating profit for the international rental and management segment also include Interest income, TV Azteca, net (see note 15 to our condensed consolidated financial statements included herein). These measures of segment gross margin and segment operating profit are also before Interest income, Interest expense, Loss on retirement of long-term obligations, Other income (expense), Net income (loss) attributable to noncontrolling interest, Income (loss) on equity method investments and Income tax provision (benefit).

In the section that follows, we provide information regarding management's expectations of long-term drivers of demand for our communications sites, as well as our current results of operations, financial position and sources and uses of liquidity. In addition, we highlight key trends, which management believes provide valuable insight into our operating and financial resource allocation decisions.

Revenue Growth. Due to our diversified communications site portfolio, our tenant lease rates vary considerably depending upon numerous factors, including but not limited to, tower location, amount and type of tenant equipment on the tower, ground space required by the tenant and remaining tower capacity. 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 through tower augmentation.

The primary factors affecting the revenue growth of our domestic and international rental and management segments are: • Recurring revenues from tenant leases attributable to sites that existed in our portfolio as of the beginning of the prior year period ("legacy sites"); • Contractual rent escalations on existing tenant leases, net of cancellations; 36 -------------------------------------------------------------------------------- Table of Contents • New revenue attributable to leasing additional space on our legacy sites; and • New revenue attributable to sites acquired or constructed since the beginning of the prior year period ("new sites").

The majority of our tenant leases with wireless carriers are typically for an initial non-cancellable term of five to ten years, with multiple five-year renewal terms. Accordingly, nearly all of the revenue generated by our rental and management operations during the six months ended June 30, 2014 is 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 June 30, 2014, we expect to generate approximately $23 billion of non-cancellable tenant lease revenue over future periods, absent the impact of straight-line lease accounting. Most of our tenant leases have provisions that periodically increase the rent due under the lease, typically annually based on a fixed escalation (approximately 3.0% in the United States) or an inflationary index in our international markets.

Revenue lost from either cancellations of leases at the end of their terms or rent negotiations historically has not had a material adverse effect on the revenues generated by our rental and management operations. During the six months ended June 30, 2014, loss of revenue from tenant lease cancellations or renegotiations represented less than 1.5% of our rental and management operations revenues.

Demand Drivers. We continue to believe that our site leasing revenue is likely to increase due to the growing use of wireless communications services and our ability to meet the corresponding incremental demand for wireless real estate by adding new tenants and new equipment for existing tenants on our legacy sites, which increases these sites' utilization and profitability. In addition, we believe the majority of our site leasing activity will continue to come from wireless service providers. Our legacy 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 the organic growth on our legacy sites by selectively developing or acquiring new sites in our existing and new markets where we can achieve our risk adjusted return on investment objectives.

Based on industry research and projections, we expect the following key industry trends will result in incremental revenue opportunities for us: • The deployment of advanced wireless technology across existing wireless networks will provide higher speed data services and enable fixed broadband substitution. As a result, we expect our tenants to continue to deploy additional equipment across their existing networks.

• Wireless service providers compete based on the overall capacity and coverage of their existing wireless networks. To maintain or improve their network performance as overall network usage increases, our tenants continue to deploy 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 are also investing in reinforcing their networks through incremental backhaul and the utilization of on-site generators, which typically results in additional equipment or space leased at the tower site, and incremental revenue.

• Wireless service providers continue to acquire additional spectrum, and as a result are expected to add additional sites and equipment to their network as they seek to optimize their network configuration.

As part of our international expansion initiatives, we have targeted markets in three stages of network development in order 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 37 -------------------------------------------------------------------------------- Table of Contents large multinational carriers such as MTN Group Limited, Telefónica S.A. and Vodafone Group PLC. We believe that consistent carrier investments in their networks across our international markets position us to generate meaningful organic revenue growth going forward.

In emerging markets, such as Ghana, India 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 underdeveloped areas. In more developed urban locations within these markets, early-stage data network deployments are underway. Carriers are focused on completing voice network build-outs while also investing in initial data networks as wireless data usage and smartphone penetration within their customer bases begin to accelerate.

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 third generation (3G) network build outs, with select investments in fourth generation (4G) technology. 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 growing rapidly, which mandates that carriers continue to invest in their networks in order to maintain and augment their quality of service.

Finally, in markets with more mature network technology, such as Germany, carriers are focused on deploying 4G data networks to account for rapidly increasing wireless data usage. With a more mature customer base, higher smartphone 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 ultimately be replicated in our less advanced international markets. As a result, we expect to be able to leverage our extensive international portfolio of over 40,000 communications sites and the relationships we have built with our carrier customers to drive sustainable, long-term growth.

Rental and Management Operations Expenses. Direct operating expenses incurred by our domestic and international rental and management segments include direct site level expenses and consist primarily of ground rent, property taxes, repairs and maintenance, security and power and fuel costs, some of which may be passed through to our tenants. 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 condensed consolidated statements of operations. In general, our domestic and international rental and management segments' selling, general, administrative and development expenses do not significantly increase as a result of adding incremental tenants to our legacy sites and typically increase only modestly year-over-year. As a result, leasing additional space to new tenants on our legacy sites provides significant incremental cash flow. We may, however, incur additional segment selling, general, administrative and development expenses as we increase our presence in geographic areas where we have recently launched operations or are focused on expanding our portfolio. Our profit margin growth is therefore positively impacted by the addition of new tenants to our legacy sites and can be temporarily diluted by our development activities.

Network Development Services Segment Revenue Growth. As we continue to focus on growing our rental and management operations, we anticipate that our network development services revenue will continue to represent a small percentage of our total revenues. Through our network development services segment, we offer tower-related services, including site acquisition, zoning and permitting services and structural analysis services, which primarily support our site leasing business and the addition of new tenants and equipment on our sites, including in connection with provider network upgrades.

38-------------------------------------------------------------------------------- Table of Contents 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") and Adjusted Funds From Operations ("AFFO").

We define Adjusted EBITDA as Net income before Income (loss) on discontinued operations, net; Income (loss) on equity method investments; Income tax provision (benefit); Other income (expense); 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 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 declared on preferred stock, and including adjustments for (i) unconsolidated affiliates and (ii) noncontrolling interest.

We define AFFO as NAREIT FFO before (i) straight-line revenue and expense; (ii) stock-based compensation expense; (iii) the non-cash portion of our tax provision; (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) loss on retirement of long-term obligations; (viii) other operating income (expense); and adjustments for (ix) unconsolidated affiliates and (x) noncontrolling interest, less cash payments related to capital improvements and cash payments related to corporate capital expenditures.

Adjusted EBITDA, NAREIT FFO and AFFO are not intended to replace net income or any other performance measures determined in accordance with GAAP. Neither NAREIT FFO nor AFFO represent 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 of funds available to fund our cash needs, including our ability to make cash distributions. Rather, Adjusted EBITDA, NAREIT FFO and AFFO 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 purposes of decision making and for evaluating the performance of our operating segments; (2) Adjusted EBITDA is a component of the calculation used by our lenders to determine compliance with certain debt covenants; (3) Adjusted EBITDA is widely used in the tower industry 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) 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 (5) each provides investors with a measure for comparing our results of operations to those of other companies.

Our measurement of Adjusted EBITDA, NAREIT FFO and AFFO may not, however, be fully comparable to similarly titled measures used by other companies.

Reconciliations of Adjusted EBITDA, NAREIT FFO and AFFO to net income, the most directly comparable GAAP measure, have been included below.

39-------------------------------------------------------------------------------- Table of Contents Results of Operations Three Months Ended June 30, 2014 and 2013 (in thousands, except percentages) Revenue Three Months Ended Amount of Percent June 30, Increase Increase 2014 2013 (Decrease) (Decrease) Rental and management Domestic $ 659,743 $ 521,043 $ 138,700 27 % International 346,018 268,156 77,862 29 Total rental and management 1,005,761 789,199 216,562 27 Network development services 25,696 19,631 6,065 31 Total revenues $ 1,031,457 $ 808,830 $ 222,627 28 % Total revenues for the three months ended June 30, 2014 increased 28% to $1,031.5 million. The increase was primarily attributable to an increase in both of our rental and management segments, including organic revenue growth attributable to our legacy sites, and revenue growth attributable to the approximately 13,545 new sites that we have constructed or acquired since April 1, 2013. Approximately $84.0 million of the increase was attributable to revenues generated by MIPT.

Domestic rental and management segment revenue for the three months ended June 30, 2014 increased 27% to $659.7 million. This growth was comprised of: • Revenue growth of approximately 15% attributable to the addition of approximately 4,860 domestic sites, as well as managed sites, rooftops and land interests under third-party sites in connection with our acquisition of MIPT; • Revenue growth from legacy sites of approximately 11%, which includes approximately 8% from new tenant leases and amendments to existing tenant leases, and less than 2% from accelerated revenue recognition under a multi-year equipment agreement with a major tenant. In addition, approximately 1% of the revenue growth on our legacy sites was attributable to contractual rent escalations, net of tenant lease cancellations; • Revenue growth from new sites (excluding MIPT) of approximately 2%, resulting from the construction or acquisition of approximately 810 new sites, as well as land interests under third-party sites since April 1, 2013; and • A decrease of approximately 1% from the impact of straight-line lease accounting.

International rental and management segment revenue for the three months ended June 30, 2014 increased 29% to $346.0 million. This growth was comprised of: • Revenue growth from new sites (excluding MIPT) of approximately 19%, resulting from the construction or acquisition of approximately 7,365 new sites since April 1, 2013; • Revenue growth from legacy sites of approximately 17%, which includes approximately 14% due to incremental revenue primarily generated from new tenant leases and amendments to existing tenant leases on our legacy sites and approximately 3% attributable to contractual rent escalations, net of tenant lease cancellations; • Revenue growth of approximately 3% from the impact of straight-line lease accounting; • Revenue growth of over 1% attributable to the addition of approximately 510 sites in Costa Rica and Panama in connection with our acquisition of MIPT; and 40 -------------------------------------------------------------------------------- Table of Contents • A decrease of approximately 11% attributable to the negative impact from foreign currency translation, which includes, among others, the negative impact of approximately 4% related to fluctuations in Ghanaian Cedi ("GHS"), approximately 3% related to fluctuations in Brazilian Reais ("BRL") and approximately 2% related to fluctuations in Indian Rupees ("INR").

Network development services segment revenue for the three months ended June 30, 2014 increased 31% to $25.7 million. The increase was primarily due to increased revenue from structural engineering services.

Gross Margin Three Months Ended Amount of Percent June 30, Increase Increase 2014 2013 (Decrease) (Decrease) Rental and management Domestic $ 533,403 $ 425,835 $ 107,568 25 % International 212,179 168,990 43,189 26 Total rental and management 745,582 594,825 150,757 25 Network development services 16,715 12,288 4,427 36 % Domestic rental and management segment gross margin for the three months ended June 30, 2014 increased 25% to $533.4 million. This growth was comprised of: • Gross margin growth of approximately 14% attributable to the addition of approximately 4,860 domestic sites, as well as managed sites, rooftops and land interests under third-party sites, in connection with our acquisition of MIPT; • Gross margin growth from legacy sites of approximately 11%, primarily associated with the increase in revenue, as described above; • Gross margin growth from new sites (excluding MIPT) of approximately 2%, resulting from the construction or acquisition of approximately 810 new sites, as well as land interests under third-party sites since April 1, 2013; and • A decrease of approximately 2% from the impact of straight-line lease accounting.

International rental and management segment gross margin for the three months ended June 30, 2014 increased 26% to $212.2 million. This growth was comprised of: • Gross margin growth from new sites (excluding MIPT) of approximately 15%, resulting from the construction or acquisition of approximately 7,365 new sites since April 1, 2013; • Gross margin growth from legacy sites of approximately 15%, primarily associated with the increase in revenue, as described above; • Gross margin growth of approximately 5% from the impact of straight-line lease accounting; • Gross margin growth of less than 2% attributable to the addition of approximately 510 sites in Costa Rica and Panama in connection with our acquisition of MIPT; and • A decrease of approximately 11% attributable to the negative impact from foreign currency translation, which includes, among others, the negative impact of approximately 4% related to fluctuations in GHS, approximately 3% related to fluctuations in BRL and less than 2% related to fluctuations in Mexican Pesos ("MXN").

Network development services segment gross margin for the three months ended June 30, 2014 increased 36% to $16.7 million, primarily due to the increase in revenue as described above.

41 -------------------------------------------------------------------------------- Table of Contents Selling, General, Administrative and Development Expense Three Months Ended Amount of Percent June 30, Increase Increase 2014 2013 (Decrease) (Decrease)Rental and management Domestic $ 28,313 $ 24,243 $ 4,070 17 % International 34,472 32,490 1,982 6 Total rental and management 62,785 56,733 6,052 11 Network development services 2,326 2,324 2 - Other 33,388 40,746 (7,358 ) (18 ) Total selling, general, administrative and development expense $ 98,499 $ 99,803 $ (1,304 ) (1 )% Total selling, general, administrative and development expense ("SG&A") for the three months ended June 30, 2014 decreased 1% to $98.5 million. The decrease was primarily attributable to a decrease in other SG&A, partially offset by increased SG&A in our domestic and international rental and management segments.

Domestic rental and management segment SG&A for the three months ended June 30, 2014 increased 17% to $28.3 million. The increase was primarily driven by increasing personnel costs to support our business, including additional costs associated with the acquisition of MIPT.

International rental and management segment SG&A for the three months ended June 30, 2014 increased 6% to $34.5 million. The increase was primarily due to the impact of increased personnel costs to support our business, partially offset by the impact of foreign currency fluctuations, as well as the reversal of bad debt expense for amounts previously reserved.

Network development services segment SG&A for the three months ended June 30, 2014 remained constant at $2.3 million.

Other SG&A for the three months ended June 30, 2014 decreased 18% to $33.4 million, primarily due to a $9.1 million decrease in corporate SG&A, partially offset by an increase of $1.7 million related to stock-based compensation expense. The decrease in corporate SG&A was primarily related to the recovery of $6.7 million in legal expenses and the reversal of a $2.8 million reserve associated with a non-recurring state tax item. The decrease in corporate SG&A was partially offset by an increase in personnel costs to support our business.

Operating Profit Three Months Ended Amount of Percent June 30, Increase Increase 2014 2013 (Decrease) (Decrease) Rental and management Domestic $ 505,090 $ 401,592 $ 103,498 26 % International 177,707 136,500 41,207 30 Total rental and management 682,797 538,092 144,705 27 Network development services 14,389 9,964 4,425 44 % Domestic rental and management segment operating profit for the three months ended June 30, 2014 increased 26% to $505.1 million. The growth was primarily attributable to the increase in our domestic rental and management segment gross margin (25%) and was partially offset by an increase in our domestic rental and management segment SG&A (17%).

42-------------------------------------------------------------------------------- Table of Contents International rental and management segment operating profit for the three months ended June 30, 2014 increased 30% to $177.7 million. The growth was primarily attributable to the increase in our international rental and management segment gross margin (26%) and was partially offset by an increase in our international rental and management segment SG&A (6%).

Network development services segment operating profit for the three months ended June 30, 2014 increased 44% to $14.4 million. The increase was primarily attributable to the increase in network development services segment gross margin (36%).

Depreciation, Amortization and Accretion Three Months Ended Amount of Percent June 30, Increase Increase 2014 2013 (Decrease) (Decrease) Depreciation, amortization and accretion $ 245,427 $ 184,608 $ 60,819 33 % Depreciation, amortization and accretion for the three months ended June 30, 2014 increased 33% to $245.4 million. The increase was primarily attributable to the depreciation, amortization and accretion associated with the acquisition or construction of approximately 13,545 sites since April 1, 2013, which resulted in an increase in property and equipment and intangible assets subject to amortization.

Other Operating Expenses Three Months Ended Amount of Percent June 30, Increase Increase 2014 2013 (Decrease) (Decrease) Other operating expenses $ 12,757 $ 5,898 $ 6,859 116 % Other operating expenses for the three months ended June 30, 2014 increased 116% to $12.8 million. The increase was primarily attributable to an increase of $4.8 million in integration and acquisition related costs, as well as, an increase of $3.9 million in impairment charges, which included the write down to fair value of certain of our assets held-for-sale. This increase was partially offset by a decrease in losses from sale or disposal of assets.

Interest Expense Three Months Ended Amount of Percent June 30, Increase Increase 2014 2013 (Decrease) (Decrease) Interest expense $ 146,234 100,815 $ 45,419 45 % Interest expense for the three months ended June 30, 2014 increased 45% to $146.2 million. The increase was primarily attributable to an increase of $5.3 billion in our average debt outstanding, which was primarily used to fund our acquisitions, partially offset by a decrease in our annualized weighted average cost of borrowing from 4.69% to 4.03%. The weighted average contractual interest rate was 4.07% at June 30, 2014.

Loss on Retirement of Long-Term Obligations Three Months Ended Amount of Percent June 30, Increase Increase 2014 2013 (Decrease) (Decrease) Loss on retirement of long-term obligations $ 1,284 $ 2,669 $ (1,385 ) (52 )% 43 -------------------------------------------------------------------------------- Table of Contents During the three months ended June 30, 2014 and 2013, we recorded a loss on retirement of long-term obligations of $1.3 million and $2.7 million, respectively. During the three months ended June 30, 2014, we repaid the notes assumed in connection with the acquisition of entities holding a portfolio of communications sites from Richland Properties LLC and other related entities ("Richland") and paid prepayment consideration and wrote-off the unamortized premium associated with the fair value adjustment. During the three months ended June 30, 2013, we recorded $2.7 million of loss related to the acceleration of the remaining deferred financing costs associated with our $1.0 billion unsecured revolving credit facility entered into in April 2011 (the "2011 Credit Facility"), which was terminated in June 2013.

Other Expense Three Months Ended Amount of Percent June 30, Increase Increase 2014 2013 (Decrease) (Decrease) Other expense $ 16,463 $ 141,660 $ (125,197 ) (88 )% During the three months ended June 30, 2014, other expense was $16.5 million, which reflected $23.6 million of unrealized foreign currency losses, as compared to $142.9 million of unrealized foreign currency losses during the three months ended June 30, 2013. We record unrealized foreign currency gains or losses as a result of fluctuations in the foreign currency exchange rates primarily associated with our intercompany notes and similar unaffiliated balances denominated in a currency other than the subsidiaries' functional currencies.

During the three months ended June 30, 2014, we recorded unrealized foreign currency losses of $53.2 million, of which $29.6 million was recorded in Accumulated other comprehensive income (loss) ("AOCI") and $23.6 million was recorded in Other expense (see note 1 to the condensed consolidated financial statements included herein).

Income Tax Provision (Benefit) Three Months Ended Amount of Percent June 30, Increase Increase 2014 2013 (Decrease) (Decrease)Income tax provision (benefit) $ 21,802 (11,447 ) $ 33,249 290 % Effective tax rate 9.0 % (15.8 )% The income tax provision for the three months ended June 30, 2014 was $21.8 million compared to an income tax benefit of $11.4 million for the three months ended June 30, 2013. The effective tax rate ("ETR") for the three months ended June 30, 2014 increased to 9.0% from (15.8)%. This increase was primarily attributable to the income tax benefits of certain unrealized foreign currency losses during the three months ended June 30, 2013, as well as an increase in foreign tax expense from foreign operations during the three months ended June 30, 2014.

The ETR on income from continuing operations for the three months ended June 30, 2014 and 2013 differs from the federal statutory rate primarily due to our qualification for taxation as a REIT and adjustments for foreign items.

As a REIT, we may deduct earnings distributed to stockholders against the income generated in our qualified REIT subsidiaries or other disregarded entities ("QRSs"). In addition, we are able to offset income in both our taxable REIT subsidiaries ("TRSs") and QRSs by utilizing our net operating losses ("NOLs"), subject to specified limitations.

44-------------------------------------------------------------------------------- Table of Contents Net Income/Adjusted EBITDA Three Months Ended Amount of Percent June 30, Increase Increase 2014 2013 (Decrease) (Decrease) Net income $ 221,659 $ 84,113 $ 137,546 164 % Income tax provision (benefit) 21,802 (11,447 ) 33,249 290 Other expense 16,463 141,660 (125,197 ) (88 ) Loss on retirement of long-term obligations 1,284 2,669 (1,385 ) (52 ) Interest expense 146,234 100,815 45,419 45 Interest income (2,281 ) (1,412 ) 869 62 Other operating expenses 12,757 5,898 6,859 116 Depreciation, amortization and accretion 245,427 184,608 60,819 33 Stock-based compensation expense 18,835 17,055 1,780 10 Adjusted EBITDA $ 682,180 $ 523,959 $ 158,221 30 % Net income for the three months ended June 30, 2014 increased 164% to $221.7 million primarily due to the increase in our operating profit of $149.1 million, as described above, as well as a decrease in other expense. The increase in net income was partially offset by increases in depreciation, amortization and accretion expense, interest expense and income tax provision.

Adjusted EBITDA for the three months ended June 30, 2014 increased 30% to $682.2 million. Adjusted EBITDA growth was primarily attributable to the increase in our gross margin of $155.2 million, as well as a decrease in SG&A of $3.0 million, excluding the impact of stock-based compensation expense.

Net Income/NAREIT FFO/AFFO Three Months Ended Amount of Percent June 30, Increase Increase 2014 2013 (Decrease) (Decrease) Net income $ 221,659 $ 84,113 $ 137,546 164 % Real estate related depreciation, amortization and accretion 219,171 160,610 58,561 36 Losses from sale or disposal of real estate and real estate related impairment charges 559 2,401 (1,842 ) (77 ) Dividends declared on preferred stock (4,375 ) - 4,375 N/A Adjustments for unconsolidated affiliates and noncontrolling interest 6,965 8,813 (1,848 ) (21 ) NAREIT FFO $ 443,979 $ 255,937 $ 188,042 73 % Straight-line revenue (33,148 ) (34,442 ) (1,294 ) (4 ) Straight-line expense 7,872 7,911 (39 ) - Stock-based compensation expense 18,835 17,055 1,780 10 Non-cash portion of tax provision (benefit) 5,120 (15,057 ) 20,177 134 Non-real estate related depreciation, amortization and accretion 26,256 23,998 2,258 9 Amortization of deferred financing costs, capitalized interest, debt discounts and premiums and long-term deferred interest charges 3,176 7,395 (4,219 ) (57 ) Other expense (1) 16,463 141,660 (125,197 ) (88 ) Loss on retirement of long-term obligations 1,284 2,669 (1,385 ) (52 ) Other operating expenses (2) 12,198 3,497 8,701 249 Capital improvement capital expenditures (17,225 ) (26,442 ) (9,217 ) (35 ) Corporate capital expenditures (3,939 ) (9,157 ) (5,218 ) (57 ) Adjustments for unconsolidated affiliates and noncontrolling interest (6,965 ) (8,813 ) (1,848 ) (21 ) AFFO $ 473,906 $ 366,211 $ 107,695 29 % (1) Primarily includes unrealized losses on foreign currency exchange rate fluctuations.

(2) Primarily includes acquisition related costs, impairment charges and integration costs.

45 -------------------------------------------------------------------------------- Table of Contents NAREIT FFO for the three months ended June 30, 2014 was $444.0 million as compared to NAREIT FFO of $255.9 million for the three months ended June 30, 2013. AFFO for the three months ended June 30, 2014 increased 29% to $473.9 million as compared to $366.2 million for the three months ended June 30, 2013.

AFFO growth was primarily attributable to the increase in our operating profit and a decrease in capital improvement and corporate capital expenditures, partially offset by an increase in cash paid for interest and cash paid for taxes.

Six Months Ended June 30, 2014 and 2013 (in thousands, except percentages) Revenue Six Months Ended Amount of Percent June 30, Increase Increase 2014 2013 (Decrease) (Decrease) Rental and management Domestic $ 1,295,522 $ 1,036,719 $ 258,803 25 % International 670,359 529,913 140,446 27 Total rental and management 1,965,881 1,566,632 399,249 25 Network development services 49,665 44,926 4,739 11 Total revenues $ 2,015,546 $ 1,611,558 $ 403,988 25 % Total revenues for the six months ended June 30, 2014 increased 25% to $2,015.5 million. The increase was primarily attributable to an increase in both of our rental and management segments, including organic revenue growth attributable to our legacy sites, and revenue growth attributable to the approximately 14,915 new sites that we have constructed or acquired since January 1, 2013.

Approximately $169.0 million of the increase was attributable to revenues generated by MIPT.

Domestic rental and management segment revenue for the six months ended June 30, 2014 increased 25% to $1,295.5 million. This growth was comprised of: • Revenue growth of approximately 15% attributable to the addition of approximately 4,860 domestic sites, as well as managed sites, rooftops and land interests under third-party sites in connection with our acquisition of MIPT; • Revenue growth from legacy sites of approximately 9%, including approximately 7% from new tenant leases and amendments to existing tenant leases, and less than 1% from accelerated revenue recognition under a multi-year equipment agreement with a major tenant. In addition, approximately 1% of the revenue growth on our legacy sites was attributable to contractual rent escalations, net of tenant lease cancellations; • Revenue growth from new sites (excluding MIPT) of approximately 2%, resulting from the construction or acquisition of approximately 880 new sites, as well as land interests under third-party sites since January 1, 2013; and • A decrease of approximately 1% from the impact of straight-line lease accounting.

International rental and management segment revenue for the six months ended June 30, 2014 increased 27% to $670.4 million. This growth was comprised of: • Revenue growth from new sites (excluding MIPT) of approximately 21%, resulting from the construction or acquisition of approximately 8,665 new sites since January 1, 2013; • Revenue growth from legacy sites of approximately 16%, which includes approximately 13% due to incremental revenue primarily generated from new tenant leases and amendments to existing tenant leases on our legacy sites and approximately 3% attributable to contractual rent escalations, net of tenant lease cancellations; 46 -------------------------------------------------------------------------------- Table of Contents • Revenue growth of approximately 2% from the impact of straight-line lease accounting; • Revenue growth of over 1% attributable to the addition of approximately 510 sites in Costa Rica and Panama in connection with our acquisition of MIPT; and • A decrease of approximately 13% attributable to the negative impact from foreign currency translation, which includes, among others, the negative impact of approximately 4% related to fluctuations in BRL, approximately 4% related to fluctuations in GHS and approximately 2% related to fluctuations in INR.

Network development services segment revenue for the six months ended June 30, 2014 increased 11% to $49.7 million. The increase was primarily due to increased revenue from structural engineering services, partially offset by a decline in zoning, permitting and site acquisition projects for one of our major customers during the six months ended June 30, 2014 as compared to the six months ended June 30, 2013.

Gross Margin Six Months Ended Amount of Percent June 30, Increase Increase 2014 2013 (Decrease) (Decrease) Rental and management Domestic $ 1,047,673 $ 849,678 $ 197,995 23 % International 410,161 335,074 75,087 22 Total rental and management 1,457,834 1,184,752 273,082 23 Network development services 30,882 27,304 3,578 13 % Domestic rental and management segment gross margin for the six months ended June 30, 2014 increased 23% to $1,047.7 million. This growth was comprised of: • Gross margin growth of approximately 14% attributable to the addition of approximately 4,860 domestic sites, as well as managed sites, rooftops and land interests under third-party sites, in connection with our acquisition of MIPT; • Gross margin growth from legacy sites of approximately 10%, primarily associated with the increase in revenue, as described above; • Gross margin growth from new sites (excluding MIPT) of approximately 1%, resulting from the construction or acquisition of approximately 880 new sites, as well as land interests under third-party sites since January 1, 2013; and • A decrease of approximately 2% from the impact of straight-line lease accounting.

International rental and management segment gross margin for the six months ended June 30, 2014 increased 22% to $410.2 million. This growth was comprised of: • Gross margin growth from new sites (excluding MIPT) of approximately 16%, resulting from the construction or acquisition of approximately 8,665 new sites since January 1, 2013; • Gross margin growth from legacy sites of approximately 14%, primarily associated with the increase in revenue, as described above; • Gross margin growth of approximately 3% from the impact of straight-line lease accounting; • Gross margin growth of over 1% attributable to the addition of approximately 510 sites in Costa Rica and Panama in connection with our acquisition of MIPT; and • A decrease of approximately 12% attributable to the negative impact from foreign currency translation, which includes, among others, the negative impact of approximately 4% related to fluctuations in BRL, approximately 3% related to fluctuations in GHS and less than 2% related to fluctuations in MXN.

47 -------------------------------------------------------------------------------- Table of Contents Network development services segment gross margin for the six months ended June 30, 2014 increased 13% to $30.9 million. The increase was primarily attributable to the increase in revenue as described above.

Selling, General, Administrative and Development Expense Six Months Ended Amount of Percent June 30, Increase Increase 2014 2013 (Decrease) (Decrease)Rental and management Domestic $ 55,722 $ 47,141 $ 8,581 18 % International 63,688 62,025 1,663 3 Total rental and management 119,410 109,166 10,244 9 Network development services 4,856 5,225 (369 ) (7 ) Other 84,262 86,565 (2,303 ) (3 ) Total selling, general, administrative and development expense $ 208,528 $ 200,956 $ 7,572 4 % Total SG&A for the six months ended June 30, 2014 increased 4% to $208.5 million. The increase was primarily attributable to an increase in our domestic and international rental and management segments, partially offset by a decrease in other SG&A.

Domestic rental and management segment SG&A for the six months ended June 30, 2014 increased 18% to $55.7 million. The increase was primarily driven by increasing personnel costs to support our business, including additional costs associated with the acquisition of MIPT.

International rental and management segment SG&A for the six months ended June 30, 2014 increased 3% to $63.7 million. The increase was primarily due to the impact of increased personnel costs to support our business, partially offset by the impact of foreign currency fluctuations, as well as the reversal of bad debt expense for amounts previously reserved.

Network development services segment SG&A for the six months ended June 30, 2014 decreased 7% to $4.9 million primarily due to a decrease in personnel expense.

Other SG&A for the six months ended June 30, 2014 decreased 3% to $84.3 million primarily due to a $7.5 million decrease in corporate SG&A, partially offset by an increase of $5.2 million related to stock-based compensation expense. The decrease in corporate SG&A was primarily related to a reduction in legal expenses of $10.2 million, including the recovery of expenses during the six months ended June 30, 2014, and the reversal of a $2.8 million reserve associated with a non-recurring state tax item. The decrease in corporate SG&A was offset primarily by an increase in personnel costs to support our business.

Operating Profit Six Months Ended Amount of Percent June 30, Increase Increase 2014 2013 (Decrease) (Decrease) Rental and management Domestic $ 991,951 $ 802,537 $ 189,414 24 % International 346,473 273,049 73,424 27 Total rental and management 1,338,424 1,075,586 262,838 24 Network development services 26,026 22,079 3,947 18 % 48 -------------------------------------------------------------------------------- Table of Contents Domestic rental and management segment operating profit for the six months ended June 30, 2014 increased 24% to $992.0 million. The growth was primarily attributable to the increase in our domestic rental and management segment gross margin (23%) and was partially offset by an increase in our domestic rental and management segment SG&A (18%).

International rental and management segment operating profit for the six months ended June 30, 2014 increased 27% to $346.5 million. The growth was primarily attributable to the increase in our international rental and management segment gross margin (22%) and was partially offset by an increase in our international rental and management segment SG&A (3%).

Network development services segment operating profit for the six months ended June 30, 2014 increased 18% to $26.0 million. The increase was primarily attributable to the increase in network development services segment gross margin (13%) and by a decrease in our network development services segment SG&A (7%).

Depreciation, Amortization and Accretion Six Months Ended Amount of Percent June 30, Increase Increase 2014 2013 (Decrease) (Decrease) Depreciation, amortization and accretion $ 491,190 $ 370,412 $ 120,778 33 % Depreciation, amortization and accretion for the six months ended June 30, 2014 increased 33% to $491.2 million. The increase was primarily attributable to the depreciation, amortization and accretion associated with the acquisition or construction of approximately 14,915 sites since January 1, 2013, which resulted in an increase in property and equipment and intangible assets subject to amortization.

Other Operating Expenses Six Months Ended Amount of Percent June 30, Increase Increase 2014 2013 (Decrease) (Decrease) Other operating expenses $ 26,648 $ 20,217 $ 6,431 32 % Other operating expenses for the six months ended June 30, 2014 increased 32% to $26.6 million. The increase was primarily attributable to an increase of $3.8 million in impairment charges, which included the write down to fair value of certain of our assets held-for-sale, and a net increase of $3.4 million in integration and acquisition related costs.

Interest Expense Six Months Ended Amount of Percent June 30, Increase Increase 2014 2013 (Decrease) (Decrease) Interest expense $ 289,541 212,581 $ 76,960 36 % Interest expense for the six months ended June 30, 2014 increased 36% to $289.5 million. The increase was primarily attributable to an increase of $5.5 billion in our average debt outstanding, which was primarily used to fund our acquisitions, partially offset by a decrease in our annualized weighted average cost of borrowing from 4.70% to 3.99%.

49-------------------------------------------------------------------------------- Table of Contents Loss on Retirement of Long-Term Obligations Six Months Ended Amount of Percent June 30, Increase Increase 2014 2013 (Decrease) (Decrease) Loss on retirement of long-term obligations $ 1,522 $ 37,967 $ (36,445 ) (96 )% During the six months ended June 30, 2014 and 2013, we recorded a loss on retirement of long-term obligations of $1.5 million and $38.0 million, respectively. During the six months ended June 30, 2014, we repaid the notes assumed in connection with the acquisition from Richland and paid prepayment consideration and wrote-off the unamortized premium associated with the fair value adjustment. During the six months ended June 30, 2013, we recorded a loss of $35.3 million as we repaid the $1.75 billion outstanding balance of the Commercial Mortgage Pass-Through Certificates, Series 2007-1 issued in the securitization transaction completed in May 2007 and incurred prepayment consideration and recorded the acceleration of deferred financing costs. In addition, during the six months ended June 30, 2013, we recorded a loss of $2.7 million related to the acceleration of the remaining deferred financing costs associated with the 2011 Credit Facility, which was terminated in June 2013.

Other Expense Six Months Ended Amount of Percent June 30, Increase Increase 2014 2013 (Decrease) (Decrease) Other expense $ 20,206 $ 119,369 $ (99,163 ) (83 )% During the six months ended June 30, 2014, other expense was $20.2 million, which reflected $25.6 million of unrealized foreign currency losses, as compared to $120.8 million of unrealized foreign currency losses during the six months ended June 30, 2013. During the six months ended June 30, 2014, we recorded unrealized foreign currency losses of $68.7 million, of which $43.1 million was recorded in AOCI and $25.6 million was recorded in Other expense.

Income Tax Provision Six Months Ended Amount of Percent June 30, Increase Increase 2014 2013 (Decrease) (Decrease) Income tax provision $ 39,451 7,775 $ 31,676 407 % Effective tax rate 8.7 % 3.1 % The income tax provision for the six months ended June 30, 2014 and 2013 was $39.5 million and $7.8 million, respectively. The ETR for the six months ended June 30, 2014 increased to 8.7% from 3.1%. This increase was primarily attributable to income tax benefits of certain unrealized foreign currency losses during the six months ended June 30, 2013, as well as an increase in foreign tax expense from our foreign operations for six months ended June 30, 2014.

The ETR on income from continuing operations for the six months ended June 30, 2014 and 2013 differs from the federal statutory rate primarily due to our qualification for taxation as a REIT and adjustments for foreign items.

As a REIT, we may deduct earnings distributed to stockholders against the income generated in our QRSs. In addition, we are able to offset income in both our TRSs and QRSs by utilizing our NOLs, subject to specified limitations.

50-------------------------------------------------------------------------------- Table of Contents Net Income/Adjusted EBITDA Six Months Ended Amount of Percent June 30, Increase Increase 2014 2013 (Decrease) (Decrease) Net income $ 414,972 $ 245,061 $ 169,911 69 % Income tax provision 39,451 7,775 31,676 407 Other expense 20,206 119,369 (99,163 ) (83 ) Loss on retirement of long-term obligations 1,522 37,967 (36,445 ) (96 ) Interest expense 289,541 212,581 76,960 36 Interest income (4,299 ) (3,126 ) 1,173 38 Other operating expenses 26,648 20,217 6,431 32 Depreciation, amortization and accretion 491,190 370,412 120,778 33 Stock-based compensation expense 43,439 38,097 5,342 14 Adjusted EBITDA $ 1,322,670 $ 1,048,353 $ 274,317 26 % Net income for the six months ended June 30, 2014 increased 69% to $415.0 million primarily due to the increase in our operating profit of $266.8 million, as described above, as well as a decrease in other expense and loss on retirement of long-term obligations. The increase in net income was partially offset by increases in depreciation, amortization and accretion expense, interest expense and income tax provision.

Adjusted EBITDA for the six months ended June 30, 2014 increased 26% to $1,322.7 million. Adjusted EBITDA growth was primarily attributable to the increase in our gross margin of $276.7 million, and was partially offset by an increase in SG&A of $2.3 million, excluding the impact of stock-based compensation expense.

Net Income/NAREIT FFO/AFFO Six Months Ended Amount of Percent June 30, Increase Increase 2014 2013 (Decrease) (Decrease) Net income $ 414,972 $ 245,061 $ 169,911 69 % Real estate related depreciation, amortization and accretion 436,189 324,352 111,837 34 Losses from sale or disposal of real estate and real estate related impairment charges 2,229 2,670 (441 ) (17 ) Dividends declared on preferred stock (4,375 ) - 4,375 N/A Adjustments for unconsolidated affiliates and noncontrolling interest 9,411 11,643 (2,232 ) (19 ) NAREIT FFO $ 858,426 $ 583,726 $ 274,700 47 % Straight-line revenue (64,378 ) (68,682 ) (4,304 ) (6 ) Straight-line expense 17,350 15,026 2,324 15 Stock-based compensation expense 43,439 38,097 5,342 14 Non-cash portion of tax provision (benefit) 3,675 (9,378 ) 13,053 139 Non-real estate related depreciation, amortization and accretion 55,001 46,060 8,941 19 Amortization of deferred financing costs, capitalized interest, debt discounts and premiums and long-term deferred interest charges 6,593 14,922 (8,329 ) (56 ) Other expense (1) 20,206 119,369 (99,163 ) (83 ) Loss on retirement of long-term obligations 1,522 37,967 (36,445 ) (96 ) Other operating expenses (2) 24,419 17,547 6,872 39 Capital improvement capital expenditures (34,456 ) (42,324 ) (7,868 ) (19 ) Corporate capital expenditures (9,162 ) (16,675 ) (7,513 ) (45 ) Adjustments for unconsolidated affiliates and noncontrolling interest (9,411 ) (11,643 ) (2,232 ) (19 ) AFFO $ 913,224 $ 724,012 $ 189,212 26 % (1) Primarily includes unrealized losses on foreign currency exchange rate fluctuations.

(2) Primarily includes acquisition related costs, integration costs and impairment charges.

51 -------------------------------------------------------------------------------- Table of Contents NAREIT FFO for the six months ended June 30, 2014 was $858.4 million as compared to NAREIT FFO of $583.7 million for the six months ended June 30, 2013. AFFO for the six months ended June 30, 2014 increased 26% to $913.2 million as compared to $724.0 million for the six months ended June 30, 2013. AFFO growth was primarily attributable to the increase in our operating profit and a decrease in capital improvement and corporate capital expenditures, partially offset by an increase in cash paid for interest and cash paid for taxes.

Liquidity and Capital Resources The information in this section updates as of June 30, 2014 the "Liquidity and Capital Resources" section of our Annual Report on Form 10-K for the year ended December 31, 2013 and should be read in conjunction with that report.

Overview 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 offerings. As of June 30, 2014, we had approximately $3.5 billion of total liquidity, comprised of approximately $0.3 billion in cash and cash equivalents and the ability to borrow up to $3.2 billion, net of any outstanding letters of credit, under our $2.0 billion multi-currency senior unsecured revolving credit facility entered into in June 2013 (the "2013 Credit Facility"), our $1.0 billion senior unsecured revolving credit facility entered into in January 2012 (the "2012 Credit Facility") and our $1.0 billion senior unsecured revolving credit facility entered into in September 2013 (the "Short-Term Credit Facility").

Summary cash flow information for the six months ended June 30, 2014 and 2013 is set forth below (in thousands).

Six months ended June 30, 2014 2013 Net cash provided by (used for): Operating activities $ 1,072,382 $ 784,521 Investing activities (836,805 ) (601,774 ) Financing activities (249,232 ) (94,860 ) Net effect of changes in exchange rates on cash and cash equivalents 3,038 (8,058 ) Net (decrease) increase in cash and cash equivalents $ (10,617 ) $ 79,829 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 REIT qualification under the Internal Revenue Code of 1986, as amended (the "Code"), and fund our stock repurchase program. We may also repurchase our existing indebtedness from time to time. We typically fund our international expansion efforts primarily through a combination of cash on hand, intercompany debt and equity contributions.

As of June 30, 2014, we had total outstanding indebtedness of approximately $14.0 billion, with a current portion of $1.2 billion. During the six months ended June 30, 2014, we generated sufficient cash flow from operations to fund our capital expenditures and debt service obligations, as well as our required REIT distributions. We believe the cash generated by operations during the next 12 months, together with our borrowing capacity under our credit facilities, will be sufficient to fund our REIT distribution requirements, 5.25% Mandatory Convertible Preferred Stock, Series A (the "Mandatory Convertible Preferred Stock") dividend payments, capital expenditures, debt service (interest and principal repayments) obligations and pending 52-------------------------------------------------------------------------------- Table of Contents acquisitions for the next 12 months. As of June 30, 2014, we had approximately $171.1 million of cash and cash equivalents held by our foreign subsidiaries, of which $61.4 million was held by our joint ventures. Historically, it has not been our practice to repatriate cash 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 taxes.

Cash Flows from Operating Activities For the six months ended June 30, 2014, cash provided by operating activities was $1,072.4 million, an increase of $287.9 million as compared to the six months ended June 30, 2013. This increase was primarily due to an increase in the operating profit of our rental and management segments and cash provided by working capital as compared to the six months ended June 30, 2013, partially offset by an increase in cash paid for interest. Working capital was positively impacted by the receipt of capital contributions from tenants and a value added tax refund, partially offset by an increase in accounts receivable.

Cash Flows from Investing Activities For the six months ended June 30, 2014, cash used for investing activities was $836.8 million, an increase of $235.0 million as compared to the six months ended June 30, 2013.

Our significant investing transactions during the six months ended June 30, 2014 included the following: • We spent $466.2 million for purchases of property and equipment and construction activities, including (i) $266.6 million of capital expenditures for discretionary capital projects, including for the completion of the construction of approximately 1,325 communications sites and the installation of approximately 460 shared generators domestically, (ii) $67.7 million spent to acquire land under our towers that was subject to ground agreements (including leases), (iii) $43.6 million of capital expenditures related to capital improvements primarily attributable to our communications sites and corporate capital expenditures primarily attributable to information technology improvements, (iv) $78.7 million for the redevelopment of existing communications sites to accommodate new tenant equipment and (v) $9.6 million of capital expenditures related to start-up capital projects primarily attributable to acquisitions and new market launches and costs that are contemplated in the business cases for these investments.

• We spent $315.5 million for the acquisition of communications sites in Brazil, Mexico and the United States, as well as obligations related to sites acquired during the year ended December 31, 2013 in Brazil, South Africa and the United States.

We plan to continue to allocate our available capital, after our REIT distribution requirements and Mandatory Convertible Preferred Stock dividend payments, among investment alternatives that meet our return on investment criteria. Accordingly, we expect to continue to deploy our capital through our annual capital expenditure program, including land purchases and new site construction, and through acquisitions. We expect that our 2014 total capital expenditures will be between approximately $925 million and $1,025 million, including (i) between $115 million and $125 million for capital improvements and corporate capital expenditures, (ii) between $35 million and $45 million for start-up capital projects, (iii) between $180 million and $190 million for the redevelopment of existing communications sites, (iv) between $115 million and $125 million for ground lease purchases and (v) between $480 million and $540 million for other discretionary capital projects, including the construction of approximately 2,250 to 2,750 new communications sites.

Cash Flows from Financing Activities For the six months ended June 30, 2014, cash used for financing activities was $249.2 million, as compared to $94.9 million during the six months ended June 30, 2013.

53 -------------------------------------------------------------------------------- Table of Contents Our significant financing transactions during the six months ended June 30, 2014 included (x) the completion of a registered public offering through a reopening of our 3.40% senior unsecured notes due 2019 (the "3.40% Notes"), in an aggregate principal amount of $250.0 million and 5.00% senior unsecured notes due 2024 (the "5.00% Notes"), in an aggregate principal amount of $500.0 million, (y) a registered public offering of 6,000,000 shares of our Mandatory Convertible Preferred Stock and (z) borrowings of $360.0 million under the 2013 Credit Facility and the repayment of (i) $1.4 billion under the 2013 Credit Facility, (ii) $196.5 million of secured debt assumed in connection with the acquisition from Richland, (iii) $88.0 million under the 2012 Credit Facility, (iv) 1.1 billion MXN (approximately $80.4 million on the date of repayment) under the 5.2 billion MXN denominated unsecured bridge loan entered into by one of our Mexican subsidiaries (the "Mexican Loan") and (v) $32.6 million of secured debt in Costa Rica (the "Costa Rica Loan").

Mandatory Convertible Preferred Stock Offering. On May 12, 2014, we completed a registered public offering of 6,000,000 shares of our Mandatory Convertible Preferred Stock. The net proceeds of the offering were $582.9 million after deducting commissions and estimated expenses. We used the net proceeds from this offering to fund recent acquisitions, including the Richland Acquisition, initially funded by indebtedness incurred under the 2013 Credit Facility.

Unless converted earlier, each share of the Mandatory Convertible Preferred Stock will automatically convert on May 15, 2017, into between 0.9174 and 1.1468 shares of common stock, depending on the applicable market value of the common stock and subject to anti-dilution adjustments. Subject to certain restrictions, at any time prior to May 15, 2017, holders of the Mandatory Convertible Preferred Stock may elect to convert all or a portion of their shares into common stock at the minimum conversion rate then in effect.

Dividends on shares of Mandatory Convertible Preferred Stock are payable on a cumulative basis when, as and if declared by our Board of Directors (or an authorized committee thereof) at an annual rate of 5.25% on the liquidation preference of $100.00 per share, on February 15, May 15, August 15 and November 15 of each year, commencing on August 15, 2014 to, and including, May 15, 2017. We may pay dividends in cash or, subject to certain limitations, in shares of common stock or any combination of cash and shares of common stock.

The terms of the Mandatory Convertible Preferred Stock provide that, unless full cumulative dividends have been paid or set aside for payment on all outstanding Mandatory Convertible Preferred Stock for all prior dividend periods, no dividends may be declared or paid on our common stock.

Costa Rica Loan. In connection with our acquisition of MIPT, we assumed $32.6 million of secured debt under the Costa Rica Loan, which we repaid in full in February 2014.

Colombian Bridge Loans. In connection with the acquisition of communications sites in Colombia, one of our Colombian subsidiaries entered into six Colombian Peso ("COP") denominated bridge loans for an aggregate principal amount of 108.0 billion COP (approximately $57.4 million). As of June 30, 2014, the interest rate was 7.86% and the maturity date of the loans was July 31, 2014. In July 2014, the maturity date of the loans was extended to August 31, 2014.

Mexican Loan. In connection with the acquisition of towers in Mexico from NII Holdings, Inc. ("NII") during the fourth quarter of 2013, one of our Mexican subsidiaries entered into the Mexican Loan and subsequently borrowed approximately 4.9 billion MXN (approximately $374.7 million at the date of borrowing). The Mexican subsidiary's ability to draw down the remaining 0.3 billion MXN under the Mexican Loan expired in February 2014. During the six months ended June 30, 2014, the Mexican subsidiary repaid 1.1 billion MXN (approximately $80.4 million on the date of repayment) of the outstanding indebtedness with cash on hand. As of June 30, 2014, we had 3.9 billion MXN (approximately $298.6 million) outstanding under the Mexican Loan.

Colombian Loan. In connection with the establishment of our joint venture with Millicom International Cellular SA ("Millicom") and the acquisition of certain communications sites in Colombia, ATC Colombia B.V., our majority owned subsidiary, entered into a U.S. Dollar-denominated shareholder loan agreement (the "Colombian Loan"), as the borrower, with our wholly owned subsidiary (the "ATC Colombian Subsidiary"), and 54-------------------------------------------------------------------------------- Table of Contents a wholly owned subsidiary of Millicom (the "Millicom Subsidiary"), as the lenders. The portion of the Colombian Loan made by the ATC Colombian Subsidiary is eliminated in consolidation, and the portion of the Colombian Loan made by the Millicom Subsidiary is reported as outstanding debt. During the six months ended June 30, 2014, the joint venture borrowed an additional $3.0 million under the Colombian Loan, which was subsequently converted from debt to equity, and the balance as of June 30, 2014 was $35.1 million. In July 2014, we purchased Millicom's interest in the joint venture and the Colombian Loan using proceeds from borrowings under the 2013 Credit Facility.

Richland Notes. In connection with the acquisition from Richland, we assumed approximately $196.5 million of secured debt (the "Richland Notes"), which we repaid in full in June 2014.

2012 Credit Facility. During the six months ended June 30, 2014, we repaid $88.0 million of outstanding indebtedness under the 2012 Credit Facility with net proceeds from a registered public offering of reopened 3.40% Notes and reopened 5.00% Notes. As of June 30, 2014, we had no amounts outstanding under the 2012 Credit Facility and $7.5 million of undrawn letters of credit. We maintain the ability to draw down and repay amounts under the 2012 Credit Facility in the ordinary course.

The 2012 Credit Facility matures on January 31, 2017, does not require amortization of principal and may be paid prior to maturity in whole or in part at our option without penalty or premium. The current margin over the London Interbank Offered Rate ("LIBOR") that we would incur (should we choose LIBOR) on borrowings is 1.625%, and the current commitment fee on the undrawn portion of the 2012 Credit Facility is 0.225%.

2013 Credit Facility. During the six months ended June 30, 2014, we repaid $1.4 billion of outstanding indebtedness under the 2013 Credit Facility using (i) proceeds from the reopened 3.40% Notes and reopened 5.00% Notes, (ii) proceeds from the issuance of the Mandatory Convertible Preferred Stock and (iii) cash on hand. During the six months ended June 30, 2014, we borrowed an additional $360.0 million under the 2013 Credit Facility, which was primarily used to fund recent acquisitions, including the acquisition from Richland, and the repayment of the Richland Notes.

As of June 30, 2014, we had $783.0 million outstanding under the 2013 Credit Facility and $3.2 million of undrawn letters of credit. In July 2014, we borrowed a net amount of $140.0 million under the 2013 Credit Facility, a portion of which we used to purchase Millicom's interest in the Colombian joint venture and the Colombian Loan. The 2013 Credit Facility includes an expansion option allowing us to request additional commitments of up to $750.0 million, including in the form of a term loan. We maintain the ability to draw down and repay amounts under the 2013 Credit Facility in the ordinary course.

The 2013 Credit Facility matures on June 28, 2018 and includes two one-year renewal periods at our option. The 2013 Credit Facility does not require amortization of principal and may be paid prior to maturity in whole or in part at our option without penalty or premium. The current margin over LIBOR that we incur on borrowings is 1.250%, and the current commitment fee on the undrawn portion of the 2013 Credit Facility is 0.150%.

Short-Term Credit Facility. On September 20, 2013, we entered into the Short-Term Credit Facility. The Short-Term Credit Facility does not require amortization of principal and may be repaid prior to maturity in whole or in part at our option without penalty or premium. We may reduce or terminate the unutilized portion of the commitments under the Short-Term Credit Facility in whole or in part without penalty.

The Short-Term Credit Facility matures on September 19, 2014. The current margin over LIBOR that we would incur (should we choose LIBOR) on borrowings is 1.250%, and the current commitment fee on the undrawn portion is 0.150%. As of June 30, 2014, we had no amounts outstanding under the Short-Term Credit Facility and maintain the ability to draw down and repay amounts under the Short-Term Credit Facility in the ordinary course.

2013 Term Loan. On October 29, 2013, we entered into a $1.5 billion unsecured term loan (the "2013 Term Loan"), which includes an expansion option allowing us to request additional commitments of up to $500.0 million. The 2013 Term Loan matures on January 3, 2019, and the current interest rate is LIBOR plus 1.250%.

55 -------------------------------------------------------------------------------- Table of Contents Senior Notes Offering. On January 10, 2014, we completed a registered public offering of reopened 3.40% Notes and reopened 5.00% Notes in aggregate principal amounts of $250.0 million and $500.0 million, respectively. The net proceeds from the offering were approximately $763.8 million, after deducting commissions and estimated expenses. As a result, the aggregate outstanding principal amount of each of the 3.40% Notes and the 5.00% Notes is $1.0 billion.

We used a portion of the proceeds, together with cash on hand, to repay $88.0 million of outstanding indebtedness under the 2012 Credit Facility and $710.0 million of outstanding indebtedness under the 2013 Credit Facility.

The reopened 3.40% Notes issued on January 10, 2014 have identical terms as, are fungible with and are part of a single series of senior debt securities with the 3.40% Notes issued on August 19, 2013. The reopened 5.00% Notes issued on January 10, 2014 have identical terms as, are fungible with and are part of a single series of senior debt securities with the 5.00% Notes issued on August 19, 2013.

The 3.40% Notes mature on February 15, 2019 and bear interest at a rate of 3.40% per annum. The 5.00% Notes mature on February 15, 2024 and bear interest at a rate of 5.00% per annum. Accrued and unpaid interest on the 3.40% Notes and the 5.00% Notes is payable in U.S. Dollars semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2014. Interest on the 3.40% Notes and the 5.00% Notes accrues from August 19, 2013 and is computed on the basis of a 360-day year comprised of twelve 30-day months.

We may redeem the 3.40% Notes or the 5.00% Notes at any time at a redemption price equal to 100% of the principal amount, plus a make-whole premium, together with accrued interest to the redemption date. If we undergo a change of control and ratings decline, each as defined in the supplemental indenture, we may be required to repurchase all of the 3.40% Notes and the 5.00% Notes at a purchase price equal to 101% of the principal amount of the 3.40% Notes and the 5.00% Notes, plus accrued and unpaid interest (including additional interest, if any), up to but not including the repurchase date. The 3.40% Notes and the 5.00% 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, as well as 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.

Stock Repurchase Program. In March 2011, our Board of Directors approved a stock repurchase program, pursuant to which we are authorized to purchase up to $1.5 billion of common stock (the "2011 Buyback"). On September 6, 2013, we temporarily suspended repurchases in connection with our acquisition of MIPT.

Under the 2011 Buyback, we are authorized to purchase shares from time to time through open market purchases or privately negotiated transactions at prevailing prices in accordance with securities laws and other legal requirements, and subject to market conditions and other factors. To facilitate repurchases, we make purchases pursuant to trading plans under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which allows us to repurchase shares during periods when we otherwise might be prevented from doing so under insider trading laws or because of self-imposed trading blackout periods.

We continue to manage the pacing of the remaining $1.1 billion under the 2011 Buyback in response to general market conditions and other relevant factors, including our financial policies. We expect to fund any 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 2011 Buyback are subject to us having available cash to fund repurchases.

56-------------------------------------------------------------------------------- Table of Contents Sales of Equity Securities. We receive proceeds from sales of our equity securities pursuant to our employee stock purchase plan and upon exercise of stock options granted under our equity incentive plans. During the six months ended June 30, 2014, we received an aggregate of $30.7 million in proceeds upon exercises of stock options and from our employee stock purchase plan.

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. Since our conversion to a REIT in 2012, we have distributed an aggregate of approximately $1.1 billion to our stockholders, which is typically taxed as ordinary income.

The amount, timing and frequency of future distributions, however, will be at the sole discretion of our Board of Directors and will be declared based upon various factors, a number of which may be beyond our control, including our financial condition and operating cash flows, the amount required to maintain REIT status 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 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. See Item 5 of our Annual Report on Form 10-K for the year ended December 31, 2013 under the caption "Dividends" for discussion of the factors considered.

During the six months ended June 30, 2014, we declared an aggregate of $261.2 million in regular cash distributions to our common stockholders, which included our second quarter distribution of $0.34 per share (approximately $134.6 million) to common stockholders of record at the close of business on June 17, 2014. During the six months ended June 30, 2014, we declared a dividend of $1.3563 per share, or approximately $8.1 million in the aggregate, payable on August 15, 2014 to preferred stockholders of record at the close of business on August 1, 2014.

We accrue distributions on unvested restricted stock unit awards granted subsequent to January 1, 2012, which are payable upon vesting. As of June 30, 2014, the amount accrued for distributions payable related to unvested restricted stock units was $2.3 million. During the six months ended June 30, 2014, we paid $0.6 million of distributions upon the vesting of restricted stock units.

57 -------------------------------------------------------------------------------- Table of Contents Contractual Obligations. The following table summarizes our contractual obligations, reflecting discounts and premiums, as of June 30, 2014 (in thousands): Balance Indebtedness Outstanding Maturity Date American Tower subsidiary debt: Secured Tower Revenue Securities, Series 2013-1A (1) $ 500,000 March 15, 2018 Secured Tower Revenue Securities, Series 2013-2A (1) 1,300,000 March 15, 2023 GTP Notes (2) 1,526,470 Various Unison Notes, Series 2010-1 Class C, Series 2010-2 Class C and Series 2010-2 Class F notes (3) 204,559 Various Colombian bridge loans (4) 57,418 July 31, 2014 Mexican Loan (5) 298,575 May 1, 2015 Ghana loan (6) 158,327 May 4, 2016 Uganda loan (6) 69,004 June 29, 2019 South African facility (7) 84,852 March 31, 2020 Colombian long-term credit facility (8) 71,399 November 30, 2020 Colombian Loan (6)(9) 35,095 February 22, 2022 Indian working capital facility - - Other debt, including capital lease obligations 82,174 Various Total American Tower subsidiary debt 4,387,873 American Tower Corporation debt: 2012 Credit Facility - January 31, 2017 2013 Credit Facility 783,000 June 28, 2018 Short-Term Credit Facility - September 19, 2014 2013 Term Loan 1,500,000 January 3, 2019 4.625% senior notes 599,875 April 1, 2015 7.00% senior notes 500,000 October 15, 2017 4.50% senior notes 999,575 January 15, 2018 3.40% Notes 1,006,137 February 15, 2019 7.25% senior notes 296,999 May 15, 2019 5.05% senior notes 699,454 September 1, 2020 5.90% senior notes 499,444 November 1, 2021 4.70% senior notes 698,928 March 15, 2022 3.50% senior notes 992,872 January 31, 2023 5.00% Notes 1,011,306 February 15, 2024 Total American Tower Corporation debt 9,587,590 Total $ 13,975,463 (1) Issued in our March 2013 securitization transaction (the "Securitization").

Maturity date is the anticipated repayment date.

(2) In connection with our acquisition of MIPT, we assumed approximately $1.49 billion principal amount of existing indebtedness under six series, consisting of eleven separate classes, of Secured Tower Revenue Notes issued by certain subsidiaries of GTP in several securitization transactions (the "GTP Notes"). Anticipated repayment dates begin February 15, 2015.

(3) Assumed by us in connection with the acquisition of certain legal entities holding a portfolio of property interests from Unison Holdings, LLC and Unison Site Management II, L.L.C. (the "Unison Acquisition"). Anticipated repayment dates begin April 15, 2017.

(4) Denominated in COP. In July 2014, the maturity date of the loans was extended to August 31, 2014. The maturity date for the Colombian bridge loans may be extended from time to time.

(5) Denominated in MXN.

(6) Denominated in U.S. Dollars.

(7) Denominated in South African Rand (ZAR) and amortizes through March 31, 2020.

(8) Denominated in COP and amortizes through November 30, 2020.

(9) In July 2014, we purchased Millicom's interest in the Colombian Loan.

58 -------------------------------------------------------------------------------- Table of Contents A description of our contractual debt obligations is set forth under the caption "Quantitative and Qualitative Disclosures about Market Risk" in Part I, Item 3 of this Quarterly Report on Form 10-Q. We classify uncertain tax positions as non-current income tax liabilities. We expect the unrecognized tax benefits to change over the next twelve 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 and have classified $33.2 million as Other non-current liabilities in the condensed consolidated balance sheet as of June 30, 2014. We also classified $34.8 million of accrued income tax related interest and penalties as Other non-current liabilities in the condensed consolidated balance sheet as of June 30, 2014.

Factors Affecting Sources of Liquidity As discussed in the "Liquidity and Capital Resources" section of our Annual Report on Form 10-K for the year ended December 31, 2013, our liquidity is dependent 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.

Restrictions Under Loan Agreements Relating to Our Credit Facilities. The loan agreements for the 2012 Credit Facility, the 2013 Credit Facility, the Short-Term Credit Facility and the 2013 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 include limitations on additional debt, distributions and dividends, guaranties, sales of assets and liens. The loan agreements also contain covenants that establish three financial tests with which we and our restricted subsidiaries must comply related to total leverage, senior secured leverage and interest coverage, as set forth below. As of June 30, 2014, we were in compliance with each of these covenants.

Consolidated Total Leverage Ratio: This ratio requires that we not exceed a ratio of Total Debt to Adjusted EBITDA (each as defined in the loan agreements) of 6.50 to 1.00 through September 30, 2014, and of 6.00 to 1.00 thereafter.

Based on our financial performance for the 12 months ended June 30, 2014, we could incur approximately $3.0 billion of additional indebtedness and still remain in compliance with this ratio. In addition, if we maintain our existing debt levels and our expenses do not change materially from current levels, our revenues could decrease by approximately $462 million and we would still remain in compliance with this ratio.

Consolidated Senior Secured Leverage Ratio: This ratio requires that we not exceed a ratio of Senior Secured Debt (as defined in the loan agreements) to Adjusted EBITDA of 3.00 to 1.00. Based on our financial performance for the 12 months ended June 30, 2014, we could incur approximately $4.0 billion of additional Senior Secured Debt and still remain in compliance with the current ratio (effectively, however, this ratio would be limited to approximately $3.0 billion to remain in compliance with other covenants). In addition, if we maintain our existing Senior Secured Debt levels and our expenses do not change materially from current levels, our revenues could decrease by approximately $1.3 billion and we would still remain in compliance with the current ratio.

Interest Coverage Ratio: In the event our debt ratings fall below investment grade, we will be required to maintain a ratio of Adjusted EBITDA to Interest Expense (as defined in the loan agreements) of not less than 2.50 to 1.00. Based on our financial performance for the 12 months ended June 30, 2014, our interest expense, which was $508 million for that period, could increase by approximately $516 million and we would still remain in compliance with this ratio. In addition, if our interest expense does not change materially from current levels, our revenues could decrease by approximately $1.3 billion and we would still remain in compliance with this ratio.

59-------------------------------------------------------------------------------- Table of Contents The loan agreements for our credit facilities also contain reporting and information covenants that require us to provide financial and operating information 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.

Any failure to comply with the financial maintenance tests and operating covenants of the loan agreements for our credit facilities would not only prevent us from being able to borrow additional funds under these credit facilities, but would 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 Securitization and the GTP Notes.

The First Amended and Restated Loan and Security Agreement related to the Securitization (the "Loan Agreement") and the indentures governing the GTP Notes (the "GTP Indentures") include certain financial ratios and operating covenants and other restrictions customary for transactions subject to rated securitizations. Among other things, American Tower Asset Sub, LLC and American Tower Asset Sub II, LLC (the "Borrowers"), and the issuers of the GTP Notes (the "GTP Issuers") 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 Loan Agreement and GTP Indentures).

Under the terms of the agreements, amounts due will be paid from the cash flows generated by the assets securing the nonrecourse loan relating to the Securitization (the "Loan") or the GTP Notes (as applicable), which must be deposited, 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, the excess cash flows generated from the operation of the assets securing the Loan or the GTP Notes are released to the Borrowers or the applicable GTP Issuer, which can then be distributed to, and used by, us. During the six months ended June 30, 2014, the Borrowers distributed excess cash to us of $369.8 million. During the six months ended June 30, 2014, the GTP Issuers distributed excess cash to us of $91.2 million.

In order to distribute this excess cash flow to us, the Borrowers and the GTP Issuers must maintain a specified debt service coverage ratio ("DSCR"), calculated as the ratio of the net cash flow (as defined in the Loan Agreement or the applicable GTP Indenture) to the amount of interest required to be paid over the succeeding twelve months on the principal amount of the Loan or the principal amount of the GTP Notes that will be outstanding on the payment date following such date of determination, plus the amount of the payable trustee and servicing fees. If the DSCR with respect to the Secured Tower Revenue Securities, Series 2013-1A and Series 2013-2A issued in our Securitization (the "Securities") or any series of GTP Notes issued by GTP Towers Issuer, LLC ("GTP Towers") or GTP Acquisition Partners I, LLC ("GTP Partners") is equal to or below 1.30x (the "Cash Trap DSCR") at the end of any calendar quarter and it continues for two consecutive calendar quarters, or if the DSCR with respect to any series of GTP Notes issued by GTP Cellular Sites, LLC ("GTP Cellular Sites") is equal to or below the Cash Trap DSCR at the end of any calendar month and it continues for two consecutive calendar months, then 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 with respect to the particular series of Securities or GTP Notes under the Loan Agreement or GTP Indentures, as applicable, will be deposited into reserve accounts instead of being released to the Borrowers or the GTP Issuers. The funds in the reserve accounts will not be released to the Borrowers, GTP Towers or GTP Partners for distribution to us unless the DSCR with respect to such series of Securities or GTP Notes exceeds the Cash Trap DSCR for two consecutive calendar quarters. Likewise, the funds in the reserve account will not be released to GTP Cellular Sites for distribution to us unless the DSCR with respect to such series of GTP Notes exceeds the Cash Trap DSCR for two consecutive calendar months.

60-------------------------------------------------------------------------------- Table of Contents Additionally, an "amortization period," commences as of the end of any calendar quarter with respect to the Securities and the series of GTP Notes issued by GTP Towers and GTP Partners, and as of the end of any calendar month with respect to the series of GTP Notes issued by GTP Cellular Sites, if the DSCR of such series equals or falls below 1.15x (the "Minimum DSCR"). The "amortization period" will continue to exist until the end of any calendar quarter with respect to the Securities and the series of GTP Notes issued by GTP Towers and GTP Partners for which the DSCR exceeds the Minimum DSCR for two consecutive calendar quarters.

Similarly, the "amortization period" will continue to exist until the end of any calendar month with respect to the series of GTP Notes issued by GTP Cellular Sites, for which the DSCR exceeds the Minimum DSCR for two consecutive calendar months.

If on the anticipated repayment date, the outstanding principal amount with respect to any series of the GTP Notes or the component of the Loan corresponding to the applicable subclass of the Securities has not been paid in full, an "amortization period" will continue until such principal amount of the applicable series of GTP Notes or the component of the Loan corresponding to the applicable subclass of Securities is repaid in full.

During an amortization period, all excess cash flow and any amounts then in the reserve accounts because the Cash Trap DSCR was not met would be applied to pay principal of the applicable subclass of Securities or series of GTP Notes 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 subclass of the Securities or series of GTP Notes from and after the anticipated repayment date at a per annum rate determined in accordance with the Loan Agreement or the GTP Indentures, as applicable.

Consequently, a failure to meet the noted DSCR tests could prevent the Borrowers or GTP Issuers from distributing excess cash flow to us, which could affect our ability to fund our capital expenditures, including tower construction and acquisitions, meet REIT distribution requirements, make Mandatory Convertible Preferred Stock dividend payments and fund our stock repurchase program. If the Borrowers were to default on the Loan, the trustee could seek to foreclose upon or otherwise convert the ownership of the 5,195 wireless and broadcast communications towers that secure the Loan (the "Secured Towers"), in which case we could lose the Secured Towers and the revenue associated with the towers. In addition, upon occurrence and during an event of default, the trustee may, in its discretion or at direction of holders of more than 50% of the aggregate outstanding principal of any series of GTP Notes, declare such series of GTP Notes immediately due and payable, in which case any excess cash flow would need to be used to pay holders of such GTP Notes. Furthermore, if the GTP Issuers were to default on a series of the GTP Notes, the trustee may demand, collect, take possession of, receive, settle, compromise, adjust, sue for, foreclose or realize upon all or any portion of an aggregate of 3,979 sites and 1,320 property interests owned by subsidiaries of the GTP Issuers and other related assets that secure the GTP Notes (the "GTP Secured Towers") securing such series, in which case we could lose the GTP Secured Towers and the revenue associated with those assets.

As of June 30, 2014, the Borrowers' DSCR was 10.24x. Based on the Borrowers' net cash flow for the calendar quarter ended June 30, 2014 and the amount of interest, servicing fees and trustee fees payable over the succeeding twelve months on the Loan, the Borrowers could endure a reduction of approximately $430 million in net cash flow before triggering the Cash Trap DSCR, and approximately $437 million in net cash flow before triggering the Minimum DSCR. As of June 30, 2014, the DSCR of GTP Towers, GTP Partners and GTP Cellular Sites were 3.64x, 2.83x, and 2.49x, respectively. Based on the net cash flow of GTP Towers, GTP Partners and GTP Cellular Sites for the calendar quarter ended June 30, 2014 and the amount of interest, servicing fees and trustee fees payable over the succeeding twelve months on the applicable series of GTP Notes, GTP Towers, GTP Partners and GTP Cellular Sites could endure a reduction of approximately $30.5 million, $66.5 million and $15.8 million, respectively, in net cash flow before triggering the Cash Trap DSCR, and approximately $32.5 million, $73.0 million and $17.7 million, respectively, in net cash flow before triggering the Minimum DSCR.

As discussed above, we use our available liquidity and seek new sources of liquidity to refinance and repurchase our outstanding indebtedness. In addition, in order to fund capital expenditures, future growth and expansion initiatives, satisfy our REIT distribution requirements and fund our stock repurchase program, we may 61 -------------------------------------------------------------------------------- Table of Contents need to raise additional capital through financing activities. 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, pay Mandatory Convertible Preferred Stock dividends, refinance our existing indebtedness or fund our stock repurchase program.

In addition, our liquidity depends on our ability to generate cash flow from operating activities. As set forth under the caption "Risk Factors" in Part II, Item 1A. of this Quarterly Report on Form 10-Q, 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.

For more information regarding the terms of our outstanding indebtedness, please see note 8 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2013.

Critical Accounting Policies and Estimates Management's discussion and analysis of financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments 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, including those related to impairment of assets, asset retirement obligations, accounting for acquisitions, revenue recognition, rent expense, stock-based compensation and income taxes, which we discussed in our Annual Report on Form 10-K for the year ended December 31, 2013. Management bases its estimates on historical experience and other various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values 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 six months ended June 30, 2014. We have made no material changes to the critical accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2013.

Accounting Standards Updates In April 2014, the Financial Accounting Standards Board (the "FASB") issued additional guidance on reporting discontinued operations. Under this guidance, only disposals representing a strategic shift in operations would be presented as discontinued operations. This guidance requires expanded disclosure that provides information about the assets, liabilities, income and expenses of discontinued operations. Additionally, the guidance requires additional disclosure for a disposal of a significant part of an entity that does not qualify for discontinued operations reporting. This guidance will be effective for reporting periods beginning on or after December 15, 2014 with early adoption permitted for disposals or classifications as held-for-sale that have not been reported in financial statements previously issued or available for issuance. We adopted this guidance during the six months ended June 30, 2014, and the adoption did not have a material effect on our financial statements.

In May 2014, the FASB issued new revenue recognition guidance, which requires an entity to recognize revenue in an amount that reflects the consideration to which the entity expects to be entitled in exchange for the transfer of promised goods or services to customers. The standard will replace most existing revenue recognition guidance in GAAP. The amendment will become effective on January 1, 2017, and early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. Leases are not included in the scope of this standard. We are evaluating the impact this standard will have on our financial statements.

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