Fair Value Measurements

6 Months Ended

Jun. 30, 2019

2.FAIR VALUE MEASUREMENTS

Items Measured at Fair Value on a Recurring Basis— The Company’s earnout liabilities related to business combinations are measured at fair value on a recurring basis using Level 3 inputs and are recorded in Accrued expenses in the Consolidated Balance Sheets. Changes in estimates are recorded in Acquisition and new business initiatives related adjustments and expenses in the Consolidated Statements of Operations. The Company determines the fair value of earnouts (contingent consideration) and any subsequent changes in fair value using a discounted probability-weighted approach using Level 3 inputs. Level 3 valuations rely on unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. The fair value of the earnouts is reviewed quarterly and is based on the payments the Company expects to make based on historical internal observations related to the anticipated performance of the underlying assets. The Company’s estimate of the fair value of its obligation contained in acquisitions prior to January 1, 2017 (adoption of ASU 2017-01) was $0.1 million and $0.5 million as of June 30, 2019 and December 31, 2018, respectively. The maximum potential obligation related to the performance targets for these acquisitions was $0.1 million and $0.7 million as of June 30, 2019 and December 31, 2018, respectively. The maximum potential obligation related to the performance targets for acquisitions after January 1, 2017, which have not been recorded on the Company’s Consolidated Balance Sheet, were $8.9 million and $13.3 million as of June 30, 2019 and December 31, 2018, respectively.

The Company’s asset retirement obligations are measured at fair value on a recurring basis using Level 3 inputs and are recorded in Other long-term liabilities in the Consolidated Balance Sheets. The fair value of the asset retirement obligations is calculated using a discounted cash flow model.

Items Measured at Fair Value on a Nonrecurring Basis— The Company’s long-lived and intangible assets are measured at fair value on a nonrecurring basis using Level 3 inputs. The Company considers many factors and makes certain assumptions when making this assessment, including but not limited to: general market and economic conditions, historical operating results, geographic location, lease-up potential and expected timing of lease-up. The fair value of the long-lived and intangible assets is calculated using a discounted cash flow model.

‎

Asset impairment and decommission costs for all periods presented and the related impaired assets primarily relate to the Company’s site leasing operating segment. The following summarizes the activity of asset impairment and decommission costs (in thousands):



	For the three months				For the six months
	ended June 30,				ended June 30,
	2019		2018		2019		2018

Asset impairment ⁽¹⁾	$	4,282	$	4,526	$	7,585	$	10,382
Write-off of carrying value of decommissioned towers		5,007		2,370		7,164		4,371
Other (including third party decommission costs)		331		508		642		1,156
Total asset impairment and decommission costs	$	9,620	$	7,404	$	15,391	$	15,909

(1)Represents impairment charges resulting from the Company’s regular analysis of whether the future cash flows from certain towers are adequate to recover the carrying value of the investment in those towers.

Fair Value of Financial Instruments— The carrying values of cash and cash equivalents, accounts receivable, restricted cash, accounts payable, and short-term investments approximate their estimated fair values due to the shorter maturity of these instruments. Short-term investments consisted of $0.2 million in Treasury securities as of June 30, 2019 and December 31, 2018. The Company’s estimate of the fair value of its held-to-maturity investments in treasury and corporate bonds, including current portion, are based primarily upon Level 1 reported market values. As of June 30, 2019 and December 31, 2018, the carrying value and fair value of the held-to-maturity investments, including current portion, were $0.2 million. The current portion is recorded in Prepaid and other current assets in the Consolidated Balance Sheets, while held-to-maturity investments are recorded in Other assets. As of June 30, 2019, the Company had $25.3 million of short-term investments. For the three months ended June 30, 2019, the Company purchased $130.0 million and sold $105.0 million of short-term investments. For the six months ended June 30, 2019, the Company purchased $280.0 million and sold $255.0 million of short-term investments.

On February 1, 2019, the Company, through its wholly owned subsidiary, SBA Senior Finance II, LLC, entered into a four-year interest rate swap on a portion of its 2018 Term Loan in order to reduce the Company’s exposure to fluctuations in interest rates. The interest rate swap has a $1.2 billion notional value receiving interest at one month LIBOR plus 200 basis points and paying a fixed rate of 4.495% per annum settled monthly. The Company designated this swap as a cash flow hedge.

On May 23, 2019, the Company, through its wholly owned subsidiary, SBA Senior Finance II, LLC, entered into a four-year interest rate swap on a portion of its 2018 Term Loan. The interest rate swap has a $750.0 million notional value receiving interest at one month LIBOR plus 200 basis points and paying a fixed rate of 4.08% per annum settled monthly. The Company designated this swap as a cash flow hedge.

On a quarterly basis, the Company evaluates whether the swaps remain highly effective in offsetting changes in cash flows. As of June 30, 2019, the Company believes that the hedges remain highly effective and changes in the fair value were recorded in Accumulated other comprehensive loss, net on the Consolidated Balance Sheet. As of June 30, 2019, the fair value of the swaps using Level 2 inputs resulted in a liability of $51.6 million and was included within Other long-term liabilities on the Consolidated Balance Sheet. The Company is exposed to counterparty credit risk to the extent that a counterparty fails to meet the terms of a contract. The Company’s exposure is limited to the current value of the contract at the time the counterparty fails to perform.

The Company determines fair value of its debt instruments utilizing various Level 2 sources including quoted prices and indicative quotes (non-binding quotes) from brokers that require judgment to interpret market information including implied credit spreads for similar borrowings on recent trades or bid/ask prices. The fair value of the Revolving Credit Facility is considered to approximate the carrying value because the interest payments are based on Eurodollar rates that reset monthly or more frequently. The Company does not believe its credit risk has changed materially from the date the applicable Eurodollar Rate was set for the Revolving Credit Facility (112.5 to 175.0 basis points). Refer to Note 10 for the fair values, principal balances, and carrying values of the Company’s debt instruments.

‎

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details