UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
OR
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number:
(Exact name of Registrant as specified in its charter)
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(State or other jurisdiction of | (I.R.S. Employer |
incorporation or organization) | Identification No.) |
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(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code (
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered |
Class A Common Stock, $0.01 par value per share | SBAC | The NASDAQ Stock Market LLC |
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| (NASDAQ Global Select Market) |
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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x | Accelerated filer | ¨ | |
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Non-Accelerated filer | ¨ | Smaller reporting company | |
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| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ¨
Indicate the number of shares outstanding of each issuer’s classes of common stock, as of the latest practicable date:
Table of Contents
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Item 1. |
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| Consolidated Balance Sheets as of September 30, 2019 (unaudited) and December 31, 2018 | 1 |
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| 3 | |
| 4 | |
| 6 | |
| Condensed Notes to Consolidated Financial Statements (unaudited) | 8 |
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 29 |
Item 3. | 48 | |
Item 4. | 51 | |
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Item 2. | 52 | |
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Item 6. | 52 | |
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53 |
PART I – FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (in thousands, except par values)
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| September 30, |
| December 31, | ||
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| 2018 | ||
ASSETS |
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Current assets: |
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Cash and cash equivalents |
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Restricted cash |
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Accounts receivable, net |
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Costs and estimated earnings in excess of billings on uncompleted contracts |
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Prepaid expenses and other current assets (1) |
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Total current assets |
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Property and equipment, net (1) |
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Intangible assets, net |
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Right-of-use assets, net (1) |
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Other assets (1) |
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Total assets |
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| $ | |
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, |
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AND SHAREHOLDERS' DEFICIT |
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Current Liabilities: |
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Accounts payable |
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Accrued expenses |
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Current maturities of long-term debt |
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Deferred revenue |
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Accrued interest |
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Current lease liabilities (1) |
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Other current liabilities (1) |
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Total current liabilities |
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Long-term liabilities: |
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Long-term debt, net |
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Long-term lease liabilities (1) |
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Other long-term liabilities (1) |
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Total long-term liabilities |
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Redeemable noncontrolling interest |
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Shareholders' deficit: |
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Preferred stock - par value $ |
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Common stock - Class A, par value $ |
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shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively |
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Additional paid-in capital |
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Accumulated deficit |
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Accumulated other comprehensive loss, net |
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Total shareholders' deficit |
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Total liabilities, redeemable noncontrolling interests, and shareholders' deficit |
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| $ | |
(1)
The accompanying condensed notes are an integral part of these consolidated financial statements.
SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited) (in thousands, except per share amounts)
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| For the three months |
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Revenues: |
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Site leasing |
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Site development |
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Total revenues |
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Operating expenses: |
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Cost of revenues (exclusive of depreciation, accretion, |
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and amortization shown below): |
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Cost of site leasing |
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Cost of site development |
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Selling, general, and administrative (1) |
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Acquisition and new business initiatives related |
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adjustments and expenses |
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Asset impairment and decommission costs |
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Depreciation, accretion, and amortization |
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Total operating expenses |
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Operating income |
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Other income (expense): |
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Interest income |
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Interest expense |
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Non-cash interest expense |
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Amortization of deferred financing fees |
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Loss from extinguishment of debt, net |
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Other income (expense), net |
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Total other income (expense), net |
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Income (loss) before income taxes |
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(Provision) benefit for income taxes |
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Net income (loss) |
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Net (income) attributable to the noncontrolling interest |
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Net income (loss) attributable to SBA Communications |
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Corporation |
| $ | |
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| $ | |
| $ | ( |
Net income (loss) per common share attributable to SBA |
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Communications Corporation: |
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Basic |
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Diluted |
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Weighted average number of common shares |
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Basic |
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Diluted |
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(1)
The accompanying condensed notes are an integral part of these consolidated financial statements.
SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(unaudited) (in thousands)
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| For the three months |
| For the nine months | ||||||||
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| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||
Net income (loss) |
| $ | |
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| $ | ( |
Change in fair value of cash flow hedge |
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Foreign currency translation adjustments |
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Comprehensive loss |
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Comprehensive income attributable to noncontrolling interest |
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Comprehensive loss attributable to SBA Communications |
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Corporation |
| $ | ( |
| $ | ( |
| $ | ( |
| $ | ( |
The accompanying condensed notes are an integral part of these consolidated financial statements.
SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT
(unaudited) (in thousands)
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| Accumulated |
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| Class A |
| Additional |
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| Other |
| Total | ||||||
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| Common Stock |
| Paid-In |
| Accumulated |
| Comprehensive |
| Shareholders' | |||||||
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| Shares |
| Amount |
| Capital |
| Deficit |
| Loss, Net |
| Deficit | |||||
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BALANCE, December 31, 2018 |
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| $ | ( |
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Net income attributable to SBA |
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Communications Corporation |
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Common stock issued in connection with |
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stock purchase/option plans |
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Non-cash stock compensation |
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Common stock issued in connection with |
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acquisitions |
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Change in fair value of cash flow hedge |
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Foreign currency translation adjustments |
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Impact of adoption of ASU 2016-02 |
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related to leases |
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BALANCE, March 31, 2019 |
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| $ | ( |
| $ | ( |
Net income attributable to SBA |
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Communications Corporation |
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Common stock issued in connection with |
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stock purchase/option plans |
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Non-cash stock compensation |
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Change in fair value of cash flow hedge |
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Repurchase and retirement of common stock |
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Foreign currency translation adjustments |
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BALANCE, June 30, 2019 |
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Net income attributable to SBA |
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Communications Corporation |
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Common stock issued in connection with |
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stock purchase/option plans |
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Non-cash stock compensation |
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Change in fair value of cash flow hedge |
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Repurchase and retirement of common stock |
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Foreign currency translation adjustments |
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Payment of dividends on common stock |
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BALANCE, September 30, 2019 |
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| Accumulated |
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| Additional |
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| Other |
| Total | ||||||
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| Paid-In |
| Accumulated |
| Comprehensive |
| Shareholders' | |||||||
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| Shares |
| Amount |
| Capital |
| Deficit |
| Loss |
| Deficit | |||||
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BALANCE, December 31, 2017 |
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| $ | ( |
| $ | ( |
| $ | ( |
Net income attributable to SBA |
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Communications Corporation |
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Common stock issued in connection with |
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stock purchase/option plans |
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Non-cash stock compensation |
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Repurchase and retirement of common stock |
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Foreign currency translation adjustments |
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BALANCE, March 31, 2018 |
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| $ | ( |
| $ | ( |
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Net loss attributable to SBA |
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Communications Corporation |
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Common stock issued in connection with |
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stock purchase/option plans |
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Non-cash stock compensation |
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Repurchase and retirement of common stock |
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Foreign currency translation adjustments |
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BALANCE, June 30 2018 |
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| $ | |
| $ | |
| $ | ( |
| $ | ( |
| $ | ( |
Net income attributable to SBA |
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Communications Corporation |
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Common stock issued in connection with |
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stock purchase/option plans |
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Non-cash stock compensation |
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Repurchase and retirement of common stock |
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Foreign currency translation adjustments |
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BALANCE, September 30, 2018 |
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| $ | |
| $ | |
| $ | ( |
| $ | ( |
| $ | ( |
The accompanying condensed notes are an integral part of these consolidated financial statements.
SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) (in thousands)
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| For the nine months ended September 30, | ||||
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| 2019 |
| 2018 | ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net income (loss) |
| $ | |
| $ | ( |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
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Depreciation, accretion, and amortization |
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Non-cash asset impairment and decommission costs |
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| |
|
| |
Non-cash compensation expense |
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| |
|
| |
Deferred income tax expense (benefit) |
|
| |
|
| ( |
Loss on remeasurement of U.S. dollar denominated intercompany loans |
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| |
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| |
Other non-cash items reflected in the Statements of Operations |
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| |
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| |
Changes in operating assets and liabilities, net of acquisitions: |
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|
AR and costs and est. earnings in excess of billings on uncompleted contracts, net |
|
| ( |
|
| ( |
Prepaid expenses and other assets |
|
| |
|
| ( |
Operating lease right-of-use assets, net |
|
| |
|
| — |
Accounts payable and accrued expenses |
|
| ( |
|
| ( |
Accrued interest |
|
| ( |
|
| ( |
Long-term lease liabilities |
|
| ( |
|
| — |
Other liabilities |
|
| |
|
| |
Net cash provided by operating activities |
|
| |
|
| |
CASH FLOWS FROM INVESTING ACTIVITIES: |
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|
Acquisitions |
|
| ( |
|
| ( |
Capital expenditures |
|
| ( |
|
| ( |
Purchase of investments |
|
| ( |
|
| ( |
Proceeds from sale of investments |
|
| |
|
| |
Other investing activities |
|
| ( |
|
| ( |
Net cash used in investing activities |
|
| ( |
|
| ( |
CASH FLOWS FROM FINANCING ACTIVITIES: |
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|
Borrowings under Revolving Credit Facility |
|
| |
|
| |
Repayments under Revolving Credit Facility |
|
| ( |
|
| ( |
Repayment of Tower Securities |
|
| ( |
|
| ( |
Proceeds from issuance of Tower Securities, net of fees |
|
| |
|
| |
Repurchase and retirement of common stock |
|
| ( |
|
| ( |
Proceeds from employee stock purchase/stock option plans |
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| |
|
| |
Repayment of Term Loans |
|
| ( |
|
| ( |
Proceeds from Term Loans, net of fees |
|
| — |
|
| |
Payment of dividends on common stock |
|
| ( |
|
| — |
Other financing activities |
|
| ( |
|
| ( |
Net cash used in financing activities |
|
| ( |
|
| ( |
Effect of exchange rate changes on cash, cash equivalents, and restricted cash |
|
| ( |
|
| ( |
NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH |
|
| ( |
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| |
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH: |
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|
Beginning of period |
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| |
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| |
End of period |
| $ | |
| $ | |
The accompanying condensed notes are an integral part of these consolidated financial statements.
SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
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| For the nine months ended September 30, | ||||
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| 2019 |
| 2018 | ||
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
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Cash paid during the period for: |
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Interest |
| $ | |
| $ | |
Income taxes |
| $ | |
| $ | |
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SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES: |
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Right-of-use assets obtained in exchange for new operating lease liabilities |
| $ | |
| $ | — |
Operating lease modifications and reassessments |
| $ | |
| $ | — |
Right-of-use assets obtained in exchange for new finance lease liabilities |
| $ | |
| $ | |
Common stock issued in connection with acquisitions |
| $ | |
| $ | — |
Consolidation of an equity method investment |
| $ | |
| $ | — |
The accompanying condensed notes are an integral part of these consolidated financial statements.
SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. While the Company believes that such estimates are fair when considered in conjunction with the consolidated financial statements and accompanying notes, the actual amounts, when known, may vary from these estimates.
All assets and liabilities of foreign subsidiaries that do not utilize the U.S. dollar as its functional currency are translated at period-end exchange rates, while revenues and expenses are translated at monthly average exchange rates during the period. Unrealized remeasurement gains and losses are reported as foreign currency translation adjustments through Accumulated Other Comprehensive Loss in the Consolidated Statement of Shareholders’ Deficit.
For foreign subsidiaries where the U.S. dollar is the functional currency, monetary assets and liabilities of such subsidiaries, which are not denominated in U.S. dollars, are remeasured at exchange rates in effect at the balance sheet date, and revenues and expenses are remeasured at monthly average rates prevailing during the year. Unrealized translation gains and losses are reported as other income (expense), net in the Consolidated Statements of Operations.
In accordance with Accounting Standards Codification (ASC) 830, the Company remeasures foreign denominated intercompany loans with the corresponding change in the balance being recorded in Other income (expense), net in the Consolidated Statement of Operations as settlement is anticipated or planned in the foreseeable future. The Company recorded a $
The Company adopted ASU No. 2016-02, Leases (“Topic 842”) using the modified retrospective adoption method with an effective date of January 1, 2019. The consolidated financial statements for 2019 are presented under the new standard, while the comparative periods presented are not adjusted and continue to be reported in accordance with the Company's historical accounting policy. This standard requires all lessees to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments. The Company has elected not to separate nonlease components from the associated lease component for all underlying classes of assets.
The adoption of the new lease standard had a significant impact on the Company’s Consolidated Balance Sheets resulting in the recognition of $
Accumulated deficit on the Consolidated Balance Sheet related to the unamortized deferred lease costs incurred in prior periods which do not meet the definition of initial direct costs under Topic 842.
The adoption of Topic 842 did not have a significant impact on the Company’s lease classification or a material impact on its Consolidated Statements of Operations and liquidity. Additionally, the adoption of Topic 842 did not have a material impact on the Company’s debt covenant compliance under its current agreements.
The components of the right-of-use assets and lease liabilities as of September 30, 2019 are as follows (in thousands):
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Operating lease right-of-use assets, net |
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| $ | |
Financing lease right-of-use assets, net |
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Right-of-use assets, net |
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| $ | |
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Current operating lease liabilities |
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| $ | |
Current financing lease liabilities |
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Current lease liabilities |
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| $ | |
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Long-term operating lease liabilities |
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| $ | |
Long-term financing lease liabilities |
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Long-term lease liabilities |
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| $ | |
Operating Leases
Ground leases. The Company enters into long-term lease contracts for land that underlies its tower structures. Ground lease agreements generally include renewal options which can be exercised exclusively at the Company’s election. In making the determination of the period for which the Company is reasonably certain to remain on the site, the Company will assume optional renewals are reasonably certain of being exercised for the greater of: (1) a period sufficient to cover all tenants under their current committed term where the Company has provided rights to the tower not to exceed the contractual ground lease terms including renewals, and (2) a period sufficient to recover the investment of significant leasehold improvements located on the site.
Substantially all leases provide for rent rate escalations. The most common provisions provide for fixed rent escalators which typically average
Office leases. The Company’s office leases consist of long-term leases for international, regional, and certain site development office locations. Office leases include a single lease component, lease of the office space and sometimes nonlease components such as common area maintenance expenses. The lease term for office leases are generally considered to be the contractually committed term.
Finance Leases
Vehicle leases. The Company leases vehicles that are used in its site development business. These leases are accounted for as financing leases and have lease terms that are contractually committed and do not include optional renewal terms.
Discount Rate
When available, the Company uses the rate implicit in the lease to discount lease payments to present value. However, the Company’s ground leases generally do not provide a readily determinable implicit rate. Therefore, the Company estimates the incremental borrowing rate to discount lease payments based on information available at lease commencement or upon a modification. The Company uses publicly available data for instruments with similar characteristics when calculating its incremental borrowing rates.
Lease Cost
Variable lease payments include escalations based on standard cost of living indexes and are initially recognized using the prevailing index at the date of initial measurement or upon reassessment of the lease term. Subsequent changes in standard cost of living increases are recognized as variable lease costs. Variable lease payments also include contingent rent provisions.
The components of lease cost, lease term, and discount rate as of September 30, 2019 are as follows:
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| For the three months |
| For the nine months | ||
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| ended September 30, 2019 |
| ended September 30, 2019 | ||
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| (in thousands) | ||||
Amortization of right-of-use assets |
| $ | |
| $ | | |||
Interest on finance lease liabilities |
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| |
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| | |||
Total finance lease cost |
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| |
|
| | |||
Operating lease cost (1) |
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| |
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| | |||
Variable lease cost (1) |
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| |
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| | |||
Total lease cost |
| $ | |
| $ | | |||
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Weighted Average Remaining Lease Term as of September 30, 2019 |
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| |||
Operating leases |
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Finance leases |
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Weighted Average Discount Rate as of September 30, 2019 |
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| |||
Operating leases |
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Finance leases |
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| For the nine months | |
Other information: |
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| ended September 30, 2019 | |
Cash paid for amounts included in measurement of lease liabilities: |
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| |||
Cash flows from operating leases |
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|
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| $ | | |||
Cash flows from finance leases |
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| $ | |
(1)For the three and nine months ended September 30, 2018, operating lease costs were $
Tenant (Operating) Leases
The Company enters into long-term lease contracts with wireless service providers to lease antenna space on towers that it owns or operates. Each tenant lease relates to the lease or use of space at an individual site. Tenant leases are generally for an initial term of
Tenant lease agreements generally include renewal options which can be exercised exclusively at the tenant’s election. The only common exception is if the Company no longer has a right to the ground underlying the site, the lease agreements permit the Company to terminate the lease. Despite high frequency of renewal of options to extend the lease by its tenants, the Company has concluded that the exercise of a renewal option by a tenant is not reasonably certain of occurrence; therefore, only the current committed term is included in the determination of the lease term.
Certain tenant leases provide for a reimbursement of costs incurred by the Company. The Company pays these costs directly and is not relieved of the primary obligation for the expenses. These reimbursements are recorded as revenue on the Statements of Operations.
Deferred Lease Costs
Prior to the adoption of ASU 2016-02, the Company deferred certain initial direct costs associated with the origination of tenant leases and lease amendments and amortized these costs over the remaining lease term. These costs included an allocation of a portion of the employees’ total compensation and payroll related benefits related to time spent performing those activities. Such deferred costs were approximately $
ASU 2016-02, defines initial direct costs as incremental costs that would not have been incurred if the lease had not been obtained. These costs, including commissions paid related to the origination of specific tenant leases, will continue to be deferred and amortized over the remaining lease term. Upon adoption, the Company recognized a $
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 maximum potential obligation related to the performance targets for acquisitions, which have not been recorded on the Company’s Consolidated Balance Sheet, were $
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):
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| For the three months |
| For the nine months | ||||||||
|
| ended September 30, |
| ended September 30, | ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||
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| |||
Asset impairment (1) |
| $ | |
| $ | |
| $ | |
| $ | |
Write-off of carrying value of decommissioned towers |
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| |
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| |
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| |
|
| |
Other (including third party decommission costs) |
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| |
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| |
|
| |
|
| |
Total asset impairment and decommission costs |
| $ | |
| $ | |
| $ | |
| $ | |
(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 $
On February 1, 2019, the Company, through its wholly owned subsidiary, SBA Senior Finance II, LLC, entered into a
On May 23, 2019, the Company, through its wholly owned subsidiary, SBA Senior Finance II, LLC, entered into a
On a quarterly basis, the Company evaluates whether the swaps remain highly effective in offsetting changes in cash flows. As of September 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 September 30, 2019, the fair value of the swaps using Level 2 inputs resulted in a liability of $
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 (
The cash, cash equivalents, and restricted cash balances on the Consolidated Statements of Cash Flows consist of the following:
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| As of |
| As of |
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| ||
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| September 30, 2019 |
| December 31, 2018 |
| Included on Balance Sheet | ||
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| (in thousands) |
|
| |||
Cash and cash equivalents |
| $ | |
| $ | |
|
|
Securitization escrow accounts |
|
| |
|
| |
| Restricted cash - current asset |
Payment and performance bonds |
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| |
|
| |
| Restricted cash - current asset |
Surety bonds and workers compensation |
|
| |
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| |
| Other assets - noncurrent |
Total cash, cash equivalents, and restricted cash |
| $ | |
| $ | |
|
|
Pursuant to the terms of the Tower Securities (see Note 10), the Company is required to establish a securitization escrow account, held by the indenture trustee, into which all rents and other sums due on the towers that secure the Tower Securities are directly deposited by the lessees. These restricted cash amounts are used to fund reserve accounts for the payment of (1) debt service costs, (2) ground rents, real estate and personal property taxes and insurance premiums related to towers, (3) trustee and servicing expenses, and (4) management fees. The restricted cash in the securitization escrow account in excess of required reserve balances is subsequently released to the Borrowers (as defined in Note 10) monthly, provided that the Borrowers are in compliance with their debt service coverage ratio and that no event of default has occurred. All monies held by the indenture trustee are classified as restricted cash on the Company’s Consolidated Balance Sheets.
The Company’s costs and estimated earnings on uncompleted contracts are comprised of the following:
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| As of |
| As of | ||
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| September 30, 2019 |
| December 31, 2018 | ||
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| (in thousands) | ||||
Costs incurred on uncompleted contracts |
| $ | |
| $ | |
Estimated earnings |
|
| |
|
| |
Billings to date |
|
| ( |
|
| ( |
|
| $ | |
| $ | |
These amounts are included in the Consolidated Balance Sheets under the following captions:
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| As of |
| As of | ||
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| September 30, 2019 |
| December 31, 2018 | ||
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| (in thousands) | ||||
Costs and estimated earnings in excess of billings on uncompleted contracts |
| $ | |
| $ | |
Billings in excess of costs and estimated earnings on |
|
|
|
|
|
|
uncompleted contracts (included in Other current liabilities) |
|
| ( |
|
| ( |
|
| $ | |
| $ | |
The following table summarizes the Company’s acquisition activity:
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| For the three months |
| For the nine months | ||||||||
|
| ended September 30, |
| ended September 30, | ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||
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| (in thousands) | ||||||||||
Acquisitions of towers and related intangible assets (1) (2) |
| $ | |
| $ | |
| $ | |
| $ | |
Land buyouts and other assets (3) |
|
| |
|
| |
|
| |
|
| |
Total cash acquisition capital expenditures |
| $ | |
| $ | |
| $ | |
| $ | |
(1)The nine months ended September 30, 2019 excludes $
(2)On August 30, 2019, the Company acquired an additional interest of a previously unconsolidated joint venture in South Africa which resulted in the consolidation of the entity. The cash consideration is included herein. Furthermore, the three and nine months ended September 30, 2019 excludes $
(3)In addition, the Company paid $
During the nine months ended September 30, 2019, the Company allocated the purchase price of
The Company’s prepaid expenses and other current assets are comprised of the following:
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| As of |
| As of | ||
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| September 30, 2019 |
| December 31, 2018 | ||
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|
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| (in thousands) | |||
Prepaid ground rent (1) |
| $ | |
| $ | |
Loan receivables |
|
| — |
|
| |
Marketable Securities |
|
| |
|
| |
Prepaid real estate taxes |
|
| |
|
| |
Other |
|
| |
|
| |
Total prepaid expenses and other current assets |
| $ | |
| $ | |
(1)Prepaid ground rent related to non-contingent rent provisions was reclassified to Right-of-use assets, net on the Consolidated Balance Sheets in the first quarter of 2019 due to the adoption of ASU 2016-02.
The Company’s other assets are comprised of the following:
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| As of |
| As of | ||
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| September 30, 2019 |
| December 31, 2018 | ||
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| (in thousands) | |||
Prepaid ground rent (1) |
| $ | — |
| $ | |
Straight-line rent receivable |
|
| |
|
| |
Loan receivables |
|
| |
|
| |
Deferred lease costs, net (1) |
|
| |
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| |
Deferred tax asset - long term |
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| |
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| |
Other |
|
| |
|
| |
Total other assets |
| $ | |
| $ | |
Property and equipment, net consists of the following:
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| As of |
| As of | ||
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| September 30, 2019 |
| December 31, 2018 | ||
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| (in thousands) | ||||
Towers and related components |
| $ | |
| $ | |
Construction-in-process (1) |
|
| |
|
| |
Furniture, equipment, and vehicles (2) |
|
| |
|
| |
Land, buildings, and improvements |
|
| |
|
| |
Total property and equipment |
|
| |
|
| |
Less: accumulated depreciation (2) |
|
| ( |
|
| ( |
Property and equipment, net |
| $ | |
| $ | |
(1)Construction-in-process represents costs incurred related to towers that are under development and will be used in the Company’s site leasing operations.
(2)Financing lease right-of-use assets are included in the prior period but are included in Right-of-use assets, net on the Consolidated Balance Sheets for the current period.
8.INTANGIBLE ASSETS, NET
The following table provides the gross and net carrying amounts for each major class of intangible assets:
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| As of September 30, 2019 |
| As of December 31, 2018 | ||||||||||||||
|
| Gross carrying |
| Accumulated |
| Net book |
| Gross carrying |
| Accumulated |
| Net book | ||||||
|
| amount |
| amortization |
| value |
| amount |
| amortization |
| value | ||||||
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| (in thousands) | ||||||||||||||||
Current contract intangibles |
| $ | |
| $ | ( |
| $ | |
| $ | |
| $ | ( |
| $ | |
Network location intangibles |
|
| |
|
| ( |
|
| |
|
| |
|
| ( |
|
| |
Intangible assets, net |
| $ | |
| $ | ( |
| $ | |
| $ | |
| $ | ( |
| $ | |
The Company’s accrued expenses are comprised of the following:
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| As of |
| As of | ||
|
| September 30, 2019 |
| December 31, 2018 | ||
|
|
|
|
|
|
|
|
| (in thousands) | ||||
Salaries and benefits |
| $ | |
| $ | |
Real estate and property taxes |
|
| |
|
| |
Unpaid capital expenditures |
|
| |
|
| |
Other |
|
| |
|
| |
Total accrued expenses |
| $ | |
| $ | |
The principal values, fair values, and carrying values of debt consist of the following (in thousands):
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| As of |
| As of | ||||||||||||||
|
|
|
| September 30, 2019 |
| December 31, 2018 | ||||||||||||||
|
| Maturity Date |
| Principal |
| Fair Value |
| Carrying |
| Principal |
| Fair Value |
| Carrying | ||||||
2014 Senior Notes |
|
| $ | |
| $ | |
| $ | |
| $ | |
| $ | |
| $ | | |
2016 Senior Notes |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | |
2017 Senior Notes |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | |
2013-2C Tower Securities |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | |
2014-1C Tower Securities |
|
|
| — |
|
| — |
|
| — |
|
| |
|
| |
|
| | |
2014-2C Tower Securities |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | |
2015-1C Tower Securities |
|
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| |
|
| |
|
| |
|
| |
|
| |
|
| | |
2016-1C Tower Securities |
|
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| |
|
| |
|
| |
|
| |
|
| |
|
| | |
2017-1C Tower Securities |
|
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| |
|
| |
|
| |
|
| |
|
| |
|
| | |
2018-1C Tower Securities |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | |
2019-1C Tower Securities |
|
|
| |
|
| |
|
| |
|
| — |
|
| — |
|
| — | |
Revolving Credit Facility |
|
|
|
|
|
|
|
|
|
|
|
| |
|
| |
|
| | |
2018 Term Loan |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | |
Total debt |
|
|
| $ | |
| $ | |
| $ | |
| $ | |
| $ | |
| $ | |
Less: current maturities of long-term debt |
|
|
|
|
| ( |
|
|
|
|
|
|
|
| ( | |||||
Total long-term debt, net of current maturities |
|
|
|
| $ | |
|
|
|
|
|
|
| $ | |
The table below reflects cash and non-cash interest expense amounts recognized by debt instrument for the periods presented:
|
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|
|
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|
|
|
|
|
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|
|
|
|
|
|
|
|
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|
|
|
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|
|
|
|
| For the three months ended September 30, |
| For the nine months ended September 30, | ||||||||||||||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||||||||||||||
|
| Cash |
| Non-cash |
| Cash |
| Non-cash |
| Cash |
| Non-cash |
| Cash |
| Non-cash | ||||||||
|
| Interest |
| Interest |
| Interest |
| Interest |
| Interest |
| Interest |
| Interest |
| Interest | ||||||||
|
|
|
|
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|
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|
|
| (in thousands) | ||||||||||||||||||||||
2014 Senior Notes |
| $ | |
| $ | |
| $ | |
| $ | |
| $ | |
| $ | |
| $ | |
| $ | |
2016 Senior Notes |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
2017 Senior Notes |
|
| |
|
| — |
|
| |
|
| — |
|
| |
|
| — |
|
| |
|
| — |
2013 Tower Securities |
|
| |
|
| — |
|
| |
|
| — |
|
| |
|
| — |
|
| |
|
| — |
2014 Tower Securities |
|
| |
|
| — |
|
| |
|
| — |
|
| |
|
| — |
|
| |
|
| — |
2015-1C Tower Securities |
|
| |
|
| — |
|
| |
|
| — |
|
| |
|
| — |
|
| |
|
| — |
2016-1C Tower Securities |
|
| |
|
| — |
|
| |
|
| — |
|
| |
|
| — |
|
| |
|
| — |
2017-1C Tower Securities |
|
| |
|
| — |
|
| |
|
| — |
|
| |
|
| — |
|
| |
|
| — |
2018-1C Tower Securities |
|
| |
|
| — |
|
| |
|
| — |
|
| |
|
| — |
|
| |
|
| — |
2019-1C Tower Securities |
|
| |
|
| — |
|
| — |
|
| — |
|
| |
|
| — |
|
| — |
|
| — |
Revolving Credit Facility |
|
| |
|
| — |
|
| |
|
| — |
|
| |
|
| — |
|
| |
|
| — |
2014 Term Loan |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| |
|
| |
2015 Term Loan |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| |
|
| |
2018 Term Loan |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Other |
|
| |
|
| — |
|
| ( |
|
| — |
|
| |
|
| — |
|
| ( |
|
| — |
Total |
| $ | |
| $ | |
| $ | |
| $ | |
| $ | |
| $ | |
| $ | |
| $ | |
Senior Credit Agreement
Revolving Credit Facility under the Senior Credit Agreement
The Revolving Credit Facility consists of a revolving loan under which up to $
During the three months ended September 30, 2019, the Company borrowed $
Term Loans under the Senior Credit Agreement
2014 Term Loan
The 2014 Term Loan consisted of a senior secured term loan with an initial aggregate principal amount of $
During the three months ended March 31, 2018, the Company repaid $
2015 Term Loan
The 2015 Term Loan consisted of a senior secured term loan with an initial aggregate principal amount of $
During the three months ended March 31, 2018, the Company repaid $
2018 Term Loan
On April 11, 2018, the Company, through its wholly owned subsidiary, SBA Senior Finance II LLC, obtained a new term loan (the “2018 Term Loan”) under the amended and restated Senior Credit Agreement. The 2018 Term Loan consists of a senior secured term loan with an initial aggregate principal amount of $
During the three and nine months ended September 30, 2019, the Company repaid $
On February 1, 2019, the Company, through its wholly owned subsidiary, SBA Senior Finance II, LLC, entered into a
On May 23, 2019, the Company, through its wholly owned subsidiary, SBA Senior Finance II, LLC, entered into a
Secured Tower Revenue Securities
2013 Tower Securities
On April 18, 2013, the Company, through a New York common law trust (the “Trust”), issued $
On March 9, 2018, the Company repaid the entire aggregate principal amount of the 2013-1C Tower Securities and 2013-1D Tower Securities in connection with the issuance of the 2018-1C Tower Securities (as defined below).
2014 Tower Securities
On October 15, 2014, the Company, through the Trust, issued $
On September 13, 2019, the Company repaid the entire aggregate principal amount of the 2014-1C Tower Securities in connection with the issuance of the 2019-1C Tower Securities (as defined below).
2015-1C Tower Securities
On October 14, 2015, the Company, through the Trust, issued $
2016-1C Tower Securities
On July 7, 2016, the Company, through the Trust, issued $
2017-1C Tower Securities
On April 17, 2017, the Company, through the Trust, issued $
In addition, to satisfy certain risk retention requirements of Regulation RR promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), SBA Guarantor, LLC, a wholly owned subsidiary, purchased $
2018-1C Tower Securities
On March 9, 2018, the Company, through the Trust, issued $
In addition, to satisfy certain risk retention requirements of Regulation RR promulgated under the Exchange Act, SBA Guarantor, LLC, a wholly owned subsidiary, purchased $
2019-1C Tower Securities
On September 13, 2019, the Company, through the Trust, issued $
In addition, to satisfy certain risk retention requirements of Regulation RR promulgated under the Exchange Act, SBA Guarantor, LLC, a wholly owned subsidiary, purchased $
“2019-1R Tower Securities”). The fixed interest rate on the 2019-1R Tower Securities is
In connection with the issuance of the 2019-1C Tower Securities, the non-recourse mortgage loan was increased by $
Debt Covenants and Terms of the Tower Revenue Securities
As of September 30, 2019, the entities that are borrowers on the mortgage loan (the “Borrowers”) met the debt service coverage ratio required by the mortgage loan agreement and were in compliance with all other covenants as set forth in the agreement.
The sole asset of the Trust consists of a non-recourse mortgage loan made in favor of the Borrowers.
Senior Notes
2014 Senior Notes
On July 1, 2014, the Company issued $
The 2014 Senior Notes are subject to redemption in whole or in part at the redemption prices set forth in the indenture agreement plus accrued and unpaid interest. The Company may redeem the 2014 Senior Notes during the twelve-month period beginning on the following dates at the following redemption prices:
2016 Senior Notes
On August 15, 2016, the Company issued $
2017 Senior Notes
On October 13, 2017, the Company issued $
Common Stock Equivalents
The Company has outstanding stock options and restricted stock units which were considered in the Company’s diluted earnings per share calculation (see Note 15).
Stock Repurchases
On July 29, 2019, the Company’s Board of Directors authorized a new $
During the three months ended September 30, 2019, the Company repurchased
Dividends
Stock Options
The Company records compensation expense for employee stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes option-pricing model with the assumptions included in the table below. The Company uses a combination of historical data and historical volatility to establish the expected volatility, as well as to estimate the expected option life. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the estimated life of the option. The following assumptions were used to estimate the fair value of options granted using the Black-Scholes option-pricing model:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the nine months ended | |||
|
|
|
|
|
| September 30, | |||
|
|
|
|
|
| 2019 |
|
| 2018 |
|
|
|
|
|
|
|
|
|
|
Risk free interest rate |
|
|
|
|
|
|
| ||
Dividend yield |
|
|
|
|
|
|
| ||
Expected volatility |
|
|
|
|
|
|
| ||
Expected lives |
|
|
|
|
|
|
|
The following table summarizes the Company’s activities with respect to its stock option plans for the nine months ended September 30, 2019 as follows (dollars and shares in thousands, except for per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted- |
| Weighted-Average |
|
|
| |
|
|
|
| Average |
| Remaining |
|
|
| |
|
| Number |
| Exercise Price |
| Contractual |
| Aggregate | ||
|
| of Shares |
| Per Share |
| Life (in years) |
| Intrinsic Value | ||
Outstanding at December 31, 2018 |
| |
| $ |
|
|
|
|
| |
Granted |
| |
| $ |
|
|
|
|
| |
Exercised |
| ( |
| $ |
|
|
|
|
| |
Forfeited/canceled |
| ( |
| $ |
|
|
|
|
| |
Outstanding at September 30, 2019 |
| |
| $ |
|
| $ | | ||
Exercisable at September 30, 2019 |
| |
| $ |
|
| $ | | ||
Unvested at September 30, 2019 |
| |
| $ |
|
| $ | |
The weighted-average per share fair value of options granted during the nine months ended September 30, 2019 was $
Restricted Stock Units
The following table summarizes the Company’s restricted stock unit activity for the nine months ended September 30, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted-Average | |
|
|
|
|
|
|
| Number of |
| Grant Date Fair | |
|
|
|
|
|
|
| Shares |
| Value per Share | |
|
|
|
|
|
|
| (in thousands) |
|
|
|
Outstanding at December 31, 2018 |
|
|
|
|
|
| |
| $ | |
Granted |
|
|
|
|
|
| |
| $ | |
Vested |
|
|
|
|
|
| ( |
| $ | |
Forfeited/canceled |
|
|
|
|
|
| ( |
| $ | |
Outstanding at September 30, 2019 |
|
|
|
|
|
| |
| $ | |
The primary reasons for the difference between the Company’s effective tax rate and the U.S. statutory rate are the Company’s REIT election and the Company’s full valuation allowance on the net deferred tax assets of the U.S. taxable REIT subsidiary (“TRS”). The Company has concluded that it is not more likely than not that its deferred tax assets will be realized and has recorded a full valuation allowance. A foreign tax provision is recognized because certain foreign subsidiaries of the Company have profitable operations or are in a net deferred tax liability position.
The Company elected to be taxed as a REIT commencing with its taxable year ended December 31, 2016. As a REIT, the Company generally will be entitled to a deduction for dividends that it pays, and therefore, not subject to U.S. federal corporate income tax on that portion of its net income that it distributes to its shareholders. As a REIT, the Company will continue to pay U.S.
The Company operates principally in
Revenues, cost of revenues (exclusive of depreciation, accretion and amortization), capital expenditures (including assets acquired through the issuance of shares of the Company’s Class A common stock) and identifiable assets pertaining to the segments in which the Company continues to operate are presented below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Domestic Site |
| Int'l Site |
| Site |
|
|
|
| |||||
|
| Leasing |
| Leasing |
| Development |
| Other |
| Total | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended September 30, 2019 |
| (in thousands) | |||||||||||||
Revenues |
| $ | |
| $ | |
| $ | |
| $ | — |
| $ | |
Cost of revenues (2) |
|
| |
|
| |
|
| |
|
| — |
|
| |
Operating profit |
|
| |
|
| |
|
| |
|
| — |
|
| |
Selling, general, and administrative |
|
| |
|
| |
|
| |
|
| |
|
| |
Acquisition and new business initiatives related |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
adjustments and expenses |
|
| |
|
| |
|
| — |
|
| — |
|
| |
Asset impairment and decommission costs |
|
| |
|
| |
|
| — |
|
| — |
|
| |
Depreciation, amortization and accretion |
|
| |
|
| |
|
| |
|
| |
|
| |
Operating income (loss) |
|
| |
|
| |
|
| |
|
| ( |
|
| |
Other expense (principally interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and other income (expense)) |
|
|
|
|
|
|
|
|
|
|
| ( |
|
| ( |
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Cash capital expenditures (3) |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
| $ | |
| $ | |
| $ | |
| $ | — |
| $ | |
Cost of revenues (2) |
|
| |
|
| |
|
| |
|
| — |
|
| |
Operating profit |
|
| |
|
| |
|
| |
|
| — |
|
| |
Selling, general, and administrative |
|
| |
|
| |
|
| |
|
| |
|
| |
Acquisition and new business initiatives related |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
adjustments and expenses |
|
| |
|
| |
|
| — |
|
| — |
|
| |
Asset impairment and decommission costs |
|
| |
|
| |
|
| — |
|
| — |
|
| |
Depreciation, amortization and accretion |
|
| |
|
| |
|
| |
|
| |
|
| |
Operating income (loss) |
|
| |
|
| |
|
| |
|
| ( |
|
| |
Other expense (principally interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and other income (expense)) |
|
|
|
|
|
|
|
|
|
|
| ( |
|
| ( |
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Cash capital expenditures (3) |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Domestic Site |
| Int'l Site |
| Site |
|
|
|
| |||||
|
| Leasing |
| Leasing |
| Development |
| Other |
| Total | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended September 30, 2019 |
| (in thousands) | |||||||||||||
Revenues |
| $ | |
| $ | |
| $ | |
| $ | — |
| $ | |
Cost of revenues (2) |
|
| |
|
| |
|
| |
|
| — |
|
| |
Operating profit |
|
| |
|
| |
|
| |
|
| — |
|
| |
Selling, general, and administrative |
|
| |
|
| |
|
| |
|
| |
|
| |
Acquisition and new business initiatives related |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
adjustments and expenses |
|
| |
|
| |
|
| — |
|
| — |
|
| |
Asset impairment and decommission costs |
|
| |
|
| |
|
| — |
|
| — |
|
| |
Depreciation, amortization and accretion |
|
| |
|
| |
|
| |
|
| |
|
| |
Operating income (loss) |
|
| |
|
| |
|
| |
|
| ( |
|
| |
Other expense (principally interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and other income (expense)) |
|
|
|
|
|
|
|
|
|
|
| ( |
|
| ( |
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Cash capital expenditures (3) |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
| $ | |
| $ | |
| $ | |
| $ | — |
| $ | |
Cost of revenues (2) |
|
| |
|
| |
|
| |
|
| — |
|
| |
Operating profit |
|
| |
|
| |
|
| |
|
| — |
|
| |
Selling, general, and administrative |
|
| |
|
| |
|
| |
|
| |
|
| |
Acquisition and new business initiatives related |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
adjustments and expenses |
|
| |
|
| |
|
| — |
|
| — |
|
| |
Asset impairment and decommission costs |
|
| |
|
| |
|
| |
|
| — |
|
| |
Depreciation, amortization and accretion |
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| |
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| |
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| |
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| |
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| |
Operating income (loss) |
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| |
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| |
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| |
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| ( |
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| |
Other expense (principally interest expense |
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and other income (expense)) |
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| ( |
|
| ( |
Loss before income taxes |
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| ( |
Cash capital expenditures (3) |
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| Domestic Site |
| Int'l Site |
| Site |
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| |||||
|
| Leasing |
| Leasing |
| Development |
| Other (1) |
| Total | |||||
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Assets |
| (in thousands) | |||||||||||||
As of September 30, 2019 |
| $ | |
| $ | |
| $ | |
| $ | |
| $ | |
As of December 31, 2018 |
| $ | |
| $ | |
| $ | |
| $ | |
| $ | |
(1)Assets in Other consist primarily of general corporate assets.
(2)Excludes depreciation, amortization, and accretion.
(3)Includes cash paid for capital expenditures and acquisitions and financing leases.
Other than Brazil, no foreign country represented a material amount of the Company’s total revenues in any of the periods presented. Site leasing revenue in Brazil was $
Basic earnings per share was computed by dividing net income (loss) attributable to common shareholders by the weighted-average number of shares of Common Stock outstanding for each respective period. Diluted earnings per share was calculated by dividing net income (loss) attributable to common shareholders by the weighted-average number of shares of Common Stock outstanding adjusted for any dilutive Common Stock equivalents, including unvested restricted stock and shares issuable upon exercise of stock options as determined under the “Treasury Stock” method.
The following table sets forth basic and diluted net income (loss) per common share attributable to common shareholders for the three and nine months ended September 30, 2019 and 2018 (in thousands, except per share data):
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| For the three months |
| For the nine months | ||||||||
|
| ended September 30, |
| ended September 30, | ||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||
Numerator: |
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Net income (loss) attributable to SBA |
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Communications Corporation |
| $ | |
| $ | |
| $ | |
| $ | ( |
Denominator: |
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Basic weighted-average shares outstanding |
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| |
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| |
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| |
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Dilutive impact of stock options and restricted shares |
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| |
|
| |
|
| |
|
| — |
Diluted weighted-average shares outstanding |
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| |
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| |
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| |
|
| |
Net income (loss) per common share attributable to SBA |
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Communications Corporation: |
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Basic |
| $ | |
| $ | |
| $ | |
| $ | ( |
Diluted |
| $ | |
| $ | |
| $ | |
| $ | ( |
For the three and nine months ended September 30, 2019, the diluted weighted average number of common shares outstanding excluded an additional
For the three months ended September 30, 2018, the diluted weighted average number of common shares outstanding excluded an additional
16. COMMITMENTS AND CONTINGENCIES
The Company is obligated under various non-cancelable operating leases for land, office space, equipment and site leases. In addition, the Company is obligated under various non-cancelable financing leases for vehicles. The annual minimum lease payments, including fixed rate escalations, as of September 30, 2019 are as follows (in thousands):
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| Finance Leases |
| Operating Leases | ||
The remainder of 2019 |
| $ | |
| $ | |
2020 |
|
| |
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| |
2021 |
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| |
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| |
2022 |
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| |
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| |
2023 |
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Thereafter |
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| |
Total minimum lease payments |
|
| |
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| |
Less: amount representing interest |
|
| ( |
|
| ( |
Present value of future payments |
|
| |
|
| |
Less: current obligations |
|
| ( |
|
| ( |
Long-term obligations |
| $ | |
| $ | |
Tenant (Operating) Leases
The annual minimum tower lease income to be received for tower space rental under non-cancelable operating leases, including fixed rate escalations, as of September 30, 2019 is as follows:
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| (in thousands) | |
The remainder of 2019 |
|
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| $ | |
2020 |
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| |
2021 |
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2022 |
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2023 |
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Thereafter |
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Total |
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| $ | |
In August 2019, the Company acquired an additional interest of a previously unconsolidated joint venture in South Africa which operated under the name Atlas Tower South Africa (“Atlas SA”). As a result of the transaction, the Company has consolidated the results of the entity into its financial statements. The incremental investment is reflected within Acquisitions on the Consolidated Statement of Cash Flows. As of the acquisition date, the fair market value of the
In connection with the acquisition of the additional interest in Atlas SA, the parties agreed to both a put option exercisable by the noncontrolling interest holder and a call option exercisable by the Company. The put option allows the noncontrolling interest holder to sell its
The Company allocates income and losses to the noncontrolling interest holder based on the applicable membership interest percentage. At each reporting period, the redeemable noncontrolling interest is recognized at the higher of (1) the initial carrying amount of the noncontrolling interest as adjusted for accumulated income or loss attributable to the noncontrolling interest holder, or (2) the contractually-defined redemption value as of the balance sheet date. Adjustments to the carrying amount of redeemable noncontrolling interest are charged against retained earnings (or additional paid-in capital if there are no retained earnings).
The components of the redeemable noncontrolling interest as of September 30, 2019 are as follows (in thousands):
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BALANCE, December 31, 2018 |
| $ |
|
Purchase of noncontrolling interest |
|
| |
Net income attributable to the noncontrolling interest |
|
| |
BALANCE, September 30, 2019 |
| $ | |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We are a leading independent owner and operator of wireless communications infrastructure, including tower structures, rooftops and other structures that support antennas used for wireless communications, which we collectively refer to as “towers” or “sites.” Our principal operations are in the United States and its territories. In addition, we own and operate towers in South America, Central America, Canada, and South Africa. Our primary business line is our site leasing business, which contributed 97.5% of our total segment operating profit for the nine months ended September 30, 2019. In our site leasing business, we (1) lease antenna space to wireless service providers on towers that we own or operate and (2) manage rooftop and tower sites for property owners under various contractual arrangements. As of September 30, 2019, we owned 30,904 towers, a substantial portion of which have been built by us or built by other tower owners or operators who, like us, have built such towers to lease space to multiple wireless service providers. Our other business line is our site development business, through which we assist wireless service providers in developing and maintaining their own wireless service networks.
Site Leasing
Our primary focus is the leasing of antenna space on our multi-tenant towers to a variety of wireless service providers under long-term lease contracts in the United States, Canada, Central America, South America, and South Africa. As of September 30, 2019, (1) no U.S. state or territory accounted for more than 10% of our total tower portfolio by tower count, and (2) no U.S. state or territory accounted for more than 10% of our total revenues for the nine months ended September 30, 2019. In addition, as of September 30, 2019, approximately 27.7% of our total towers are located in Brazil and less than 3% of our total towers are located in any of our other international markets (each country is considered a market). We derive site leasing revenues primarily from wireless service provider tenants, including AT&T, T-Mobile, Sprint, Verizon Wireless, Oi S.A., Telefonica, Claro, and TIM. Wireless service providers enter into tenant leases with us, each of which relates to the lease or use of space at an individual site. In the United States and Canada, our tenant leases are generally for an initial term of 5 to ten years with multiple 5 year renewal periods at the option of the tenant. These tenant leases typically contain specific rent escalators, which average 3-4% per year, including the renewal option periods. Tenant leases in South Africa and our Central and South American markets typically have an initial term of ten years with multiple 5 year renewal periods. In Central America, we have similar rent escalators to that of leases in the United States and Canada while our leases in South America and South Africa escalate in accordance with a standard cost of living index. Site leases in South America typically provide for a fixed rental amount and a pass through charge for the underlying ground lease rent.
Cost of site leasing revenue primarily consists of:
Cash and non-cash rental expense on ground leases and other underlying property interests;
Property taxes;
Site maintenance and monitoring costs (exclusive of employee related costs);
Utilities;
Property insurance; and
Lease initial direct cost amortization.
In the United States, Canada, Central America, and South America, ground leases are generally for an initial term of 5 years or more with multiple 5 year renewal periods at our option. In South Africa, ground leases are generally for an initial term of ten years with three 10 year renewal periods at our option. Ground leases provide for rent escalators which typically average 2-3% annually, or in our South American markets and South Africa, adjust in accordance with a standard cost of living index. As of September 30, 2019, approximately 72% of our tower structures were located on parcels of land that we own, land subject to perpetual easements, or
parcels of land in which we have a leasehold interest that extends beyond 20 years. For any given tower, costs are relatively fixed over a monthly or an annual time period. As such, operating costs for owned towers do not generally increase as a result of adding additional customers to the tower. The amount of property taxes varies from site to site depending on the taxing jurisdiction and the height and age of the tower. The ongoing maintenance requirements are typically minimal and include replacing lighting systems, painting a tower, or upgrading or repairing an access road or fencing.
In our Central American markets and Ecuador, significantly all of our revenue, expenses, and capital expenditures arising from our new build activities are denominated in U.S. dollars. Specifically, most of our ground leases, tenant leases, and tower-related expenses are paid in U.S. dollars. In our Central American markets, our local currency obligations are principally limited to (1) permitting and other local fees, (2) utilities, and (3) taxes. In Brazil, Canada, Chile, and South Africa significantly all of our revenue, expenses, and capital expenditures, including tenant leases, ground leases, and other tower-related expenses are denominated in local currency. In Colombia, Argentina, and Peru, our revenue, expenses, and capital expenditures, including tenant leases, ground leases, and other tower-related expenses are denominated in a mix of local currency and U.S. dollars.
As indicated in the table below, our site leasing business generates substantially all of our total segment operating profit. For information regarding our operating segments, see Note 14 of our Condensed Notes to consolidated financial statements included in this quarterly report.
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| For the three months ended |
| For the nine months ended | ||||||||
|
| September 30, |
| September 30, | ||||||||
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Segment operating profit as a percentage of total |
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic site leasing |
|
| 80.9% |
|
| 81.8% |
|
| 80.8% |
|
| 81.3% |
International site leasing |
|
| 16.9% |
|
| 16.1% |
|
| 16.7% |
|
| 16.9% |
Total site leasing |
|
| 97.8% |
|
| 97.9% |
|
| 97.5% |
|
| 98.2% |
We believe that the site leasing business continues to be attractive due to its long-term contracts, built-in rent escalators, high operating margins, and low customer churn (which refers to when a customer does not renew its lease or cancels its lease prior to the end of its term) other than in connection with customer consolidation or cessation of a particular technology. We believe that over the long-term, site leasing revenues will continue to grow as wireless service providers lease additional antenna space on our towers due to increasing minutes of network use and data transfer, network expansion and network coverage requirements. During the remainder of 2019, we expect organic site leasing revenue in both our domestic and international segments to increase over 2018 levels due in part to wireless carriers deploying unused spectrum. We believe our site leasing business is characterized by stable and long-term recurring revenues, predictable operating costs and minimal non-discretionary capital expenditures. Due to the relatively young age and mix of our tower portfolio, we expect future expenditures required to maintain these towers to be minimal. Consequently, we expect to grow our cash flows by (1) adding tenants to our towers at minimal incremental costs by using existing tower capacity or requiring wireless service providers to bear all or a portion of the cost of tower modifications and (2) executing monetary amendments as wireless service providers add or upgrade their equipment. Furthermore, because our towers are strategically positioned, we have historically experienced low tenant lease terminations as a percentage of revenue other than in connection with customer consolidation or cessations of a specific technology (e.g. MetroPCS, Leap, Clearwire, and iDEN).
Site Development
Our site development business, which is conducted in the United States only, is complementary to our site leasing business and provides us the ability to keep in close contact with the wireless service providers who generate substantially all of our site leasing revenue and to capture ancillary revenues that are generated by our site leasing activities, such as antenna and equipment installation at our tower locations. Site development revenues are earned primarily from providing a full range of end to end services to wireless service providers or companies providing development or project management services to wireless service providers. Our services include: (1) network pre-design; (2) site audits; (3) identification of potential locations for towers and antennas on existing infrastructure; (4) support in leasing of the location; (5) assistance in obtaining zoning approvals and permits; (6) tower and related site construction; (7) antenna installation; and (8) radio equipment installation, commissioning, and maintenance. We provide site development services at our towers and at towers owned by others on a local basis, through regional, market, and project offices. The market offices are responsible for all site development operations.
Capital Allocation Strategy
Our capital allocation strategy is aimed at increasing shareholder value through investment in quality assets that meet our return criteria, stock repurchases when we believe our stock price is below its intrinsic value and by returning cash generated by our operations in the form of a cash dividend distribution. While the addition of a cash dividend to our capital allocation strategy has provided us with a new tool to return value to our shareholders, we will also continue to make investments focused on increasing our Adjusted Funds From Operations per share. To achieve this, we expect to continue to deploy capital to portfolio growth and stock repurchases, subject to compliance with REIT distribution requirements, available funds and market conditions, while maintaining our target leverage levels. Key elements of our capital allocation strategy include:
Portfolio Growth. We intend to continue to grow our tower portfolio, domestically and internationally, through tower acquisitions and the construction of new towers that meet our internal return on invested capital criteria.
Stock Repurchase Program. We currently utilize stock repurchases as part of our capital allocation policy when we believe our share price is below its intrinsic value. We believe that share repurchases, when purchased at the right price, will facilitate our goal of increasing our Adjusted Funds From Operations per share.
Dividend. Commencing in the third quarter of 2019, we added dividends as an additional component of our strategy of returning value to shareholders. We do not expect our dividend to require any changes in our leverage and, we believe, it will allow us to continue to focus on building and buying quality assets and opportunistically buying back our stock. While the timing and amount of future dividends will be subject to approval by our Board of Directors, we believe that our future cash flow generation will permit us to grow our cash dividend in the future.
Critical Accounting Policies and Estimates
We have identified the policies and significant estimation processes listed in the Annual Report on Form 10-K as critical to our business operations and the understanding of our results of operations. The listing is not intended to be a comprehensive list. In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States, with no need for management’s judgment in their application. In other cases, management is required to exercise judgment in the application of accounting principles with respect to particular transactions. The impact and any associated risks related to these policies on our business operations is discussed throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations” where such policies affect reported and expected financial results. For a detailed discussion on the application of these and other accounting policies, see Note 2 of our consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2018. Our preparation of our financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses during the reporting periods. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. There can be no assurance that actual results will not differ from those estimates and such differences could be significant.
Lease Accounting
We adopted ASU No. 2016-02, Leases (“Topic 842”) using the modified retrospective adoption method with an effective date of January 1, 2019. This standard requires all lessees to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments. The adoption of the new lease standard had a significant impact on our Consolidated Balance Sheets but did not have a significant impact on our lease classification or a material impact on our Consolidated Statements of Operations and liquidity. Additionally, the adoption of Topic 842 did not have a material impact on our debt covenant compliance under our current agreements. We have elected to not separate nonlease components from the associated lease component for all underlying classes of assets.
In order to calculate our lease liability, we make certain assumptions related to lease term and discount rate. For lease terms, we evaluate renewal options. For the discount rate, we use the rate implicit in the lease when available to discount lease payments to present value. However, our ground leases generally do not provide a readily determinable implicit rate. Therefore, we estimate the incremental borrowing rate to discount lease payments based on the lease term and lease currency. We use publicly available data for instruments with similar characteristics when calculating our incremental borrowing rates. For a further discussion on lease accounting, refer to Note 1 of our Condensed Notes to consolidated financial statements included in this quarterly report.
RESULTS OF OPERATIONS
This report presents our financial results and other financial metrics after eliminating the impact of changes in foreign currency exchange rates. We believe that providing these financial results and metrics on a constant currency basis, which are non-GAAP measures, gives management and investors the ability to evaluate the performance of our business without the impact of foreign currency exchange rate fluctuations. We eliminate the impact of changes in foreign currency exchange rates by dividing the current period’s financial results by the average monthly exchange rates of the prior year period, as well as by eliminating the impact of the remeasurement of our intercompany loans.
Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018
Revenues and Segment Operating Profit:
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| For the three months ended |
|
|
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|
|
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| Constant | |||||
|
| September 30, |
| Foreign |
| Constant |
| Currency | |||||||
|
| 2019 |
| 2018 |
| Currency Impact |
| Currency Change |
| % Change | |||||
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Revenues |
| (in thousands) |
|
|
| ||||||||||
Domestic site leasing |
| $ | 374,705 |
| $ | 353,502 |
| $ | — |
| $ | 21,203 |
|
| 6.0% |
International site leasing |
|
| 93,867 |
|
| 81,758 |
|
| (649) |
|
| 12,758 |
|
| 15.6% |
Site development |
|
| 38,975 |
|
| 31,961 |
|
| — |
|
| 7,014 |
|
| 21.9% |
Total |
| $ | 507,547 |
| $ | 467,221 |
| $ | (649) |
| $ | 40,975 |
|
| 8.8% |
Cost of Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic site leasing |
| $ | 63,836 |
| $ | 66,862 |
| $ | — |
| $ | (3,026) |
|
| (4.5%) |
International site leasing |
|
| 29,157 |
|
| 25,432 |
|
| (223) |
|
| 3,948 |
|
| 15.5% |
Site development |
|
| 30,516 |
|
| 24,447 |
|
| — |
|
| 6,069 |
|
| 24.8% |
Total |
| $ | 123,509 |
| $ | 116,741 |
| $ | (223) |
| $ | 6,991 |
|
| 6.0% |
Operating Profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic site leasing |
| $ | 310,869 |
| $ | 286,640 |
| $ | — |
| $ | 24,229 |
|
| 8.5% |
International site leasing |
|
| 64,710 |
|
| 56,326 |
|
| (426) |
|
| 8,810 |
|
| 15.6% |
Site development |
|
| 8,459 |
|
| 7,514 |
|
| — |
|
| 945 |
|
| 12.6% |
Revenues
Domestic site leasing revenues increased $21.2 million for the three months ended September 30, 2019, as compared to the prior year, primarily due to (1) revenues from 161 towers acquired and 28 towers built since July 1, 2018 and (2) organic site leasing growth, primarily from monetary lease amendments for additional equipment added to our towers as well as new leases and contractual rent escalators, partially offset by lease non-renewals primarily by MetroPCS, Leap, Clearwire, and Sprint iDEN.
International site leasing revenues increased $12.1 million for the three months ended September 30, 2019, as compared to the prior year. On a constant currency basis, international site leasing revenues increased $12.8 million. These changes were primarily due to (1) revenues from 1,700 towers acquired and 488 towers built since July 1, 2018 and (2) organic site leasing growth from new leases, amendments, and contractual escalators. Site leasing revenue in Brazil represented 12.1% of total site leasing revenue for the period. No other individual international market represented more than 3% of our total site leasing revenue.
Site development revenues increased $7.0 million for the three months ended September 30, 2019, as compared to prior year, as a result of increased carrier activity primarily driven by network related projects by Sprint and T-Mobile.
Operating Profit
Domestic site leasing segment operating profit increased $24.2 million for the three months ended September 30, 2019, as compared to the prior year, primarily due to additional profit generated by (1) towers acquired and built since July 1, 2018 and organic
site leasing growth as noted above, (2) continued control of our site leasing cost of revenue, and (3) the positive impact of our ground lease purchase program.
International site leasing segment operating profit increased $8.4 million for the three months ended September 30, 2019, as compared to the prior year. On a constant currency basis, international site leasing segment operating profit increased $8.8 million. These changes were primarily due to additional profit generated by (1) towers acquired and built since July 1, 2018 and organic site leasing growth as noted above and (2) the positive impact of our ground lease purchase program.
Site development segment operating profit increased $0.9 million for the three months ended September 30, 2019, as compared to the prior year, primarily due to an increase in revenue from increased carrier activity primarily driven by network related projects by Sprint and T-Mobile partially offset by a change in the mix of work performed.
Selling, General, and Administrative Expenses:
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| For the three months ended |
|
|
|
|
|
|
| Constant | |||||
|
| September 30, |
| Foreign |
| Constant |
| Currency | |||||||
|
| 2019 |
| 2018 |
| Currency Impact |
| Currency Change |
| % Change | |||||
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
|
| ||||||||||
Domestic site leasing |
| $ | 21,840 |
| $ | 17,763 |
| $ | — |
| $ | 4,077 |
|
| 23.0% |
International site leasing |
|
| 8,626 |
|
| 6,734 |
|
| (110) |
|
| 2,002 |
|
| 29.7% |
Total site leasing |
| $ | 30,466 |
| $ | 24,497 |
| $ | (110) |
| $ | 6,079 |
|
| 24.8% |
Site development |
|
| 4,183 |
|
| 3,934 |
|
| — |
|
| 249 |
|
| 6.3% |
Other |
|
| 7,623 |
|
| 6,477 |
|
| — |
|
| 1,146 |
|
| 17.7% |
Total |
| $ | 42,272 |
| $ | 34,908 |
| $ | (110) |
| $ | 7,474 |
|
| 21.4% |
Selling, general, and administrative expenses increased $7.4 million for the three months ended September 30, 2019, as compared to the prior year. On a constant currency basis, selling, general, and administrative expenses increase $7.5 million. These changes were primarily as a result of increases in personnel costs, noncash compensation, benefits, and other support-related costs.
Acquisition and New Business Initiatives Related Adjustments and Expenses:
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| For the three months ended |
|
|
|
|
|
|
| Constant | |||||
|
| September 30, |
| Foreign |
| Constant |
| Currency | |||||||
|
| 2019 |
| 2018 |
| Currency Impact |
| Currency Change |
| % Change | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
|
| ||||||||||
Domestic site leasing |
| $ | 2,717 |
| $ | 1,887 |
| $ | — |
| $ | 830 |
|
| 44.0% |
International site leasing |
|
| 1,975 |
|
| 1,108 |
|
| (31) |
|
| 898 |
|
| 81.0% |
Total |
| $ | 4,692 |
| $ | 2,995 |
| $ | (31) |
| $ | 1,728 |
|
| 57.7% |
Acquisition and new business initiatives related adjustments and expenses increased $1.7 million, on an actual and constant currency basis, for the three months ended September 30, 2019, as compared to the prior year. These changes were primarily as a result of incremental costs incurred in support of new business initiatives.
Asset Impairment and Decommission Costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended |
|
|
|
|
|
|
| Constant | |||||
|
| September 30, |
| Foreign |
| Constant |
| Currency | |||||||
|
| 2019 |
| 2018 |
| Currency Impact |
| Currency Change |
| % Change | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
|
| ||||||||||
Domestic site leasing |
| $ | 6,027 |
| $ | 2,801 |
| $ | — |
| $ | 3,226 |
|
| 115.2% |
International site leasing |
|
| 2,213 |
|
| 4,067 |
|
| (12) |
|
| (1,842) |
|
| (45.3%) |
Total |
| $ | 8,240 |
| $ | 6,868 |
| $ | (12) |
| $ | 1,384 |
|
| 20.2% |
Asset impairment and decommission costs increased $1.4 million for the three months ended September 30, 2019, as compared to the prior year. This change was primarily as a result of a $2.8 million increase in impairment charges resulting from our regular analysis of whether the future cash flows from certain towers are adequate to recover the carrying value of the investment in those towers, partially offset by a $1.4 million decrease in the impairment charge recorded due to less sites decommissioned in the third quarter of 2019 compared to the prior year period.
Depreciation, Accretion, and Amortization Expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended |
|
|
|
|
|
|
| Constant | |||||
|
| September 30, |
| Foreign |
| Constant |
| Currency | |||||||
|
| 2019 |
| 2018 |
| Currency Impact |
| Currency Change |
| % Change | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
|
| ||||||||||
Domestic site leasing |
| $ | 132,650 |
| $ | 129,246 |
| $ | — |
| $ | 3,404 |
|
| 2.6% |
International site leasing |
|
| 40,208 |
|
| 36,310 |
|
| (313) |
|
| 4,211 |
|
| 11.6% |
Total site leasing |
| $ | 172,858 |
| $ | 165,556 |
| $ | (313) |
| $ | 7,615 |
|
| 4.6% |
Site development |
|
| 660 |
|
| 646 |
|
| — |
|
| 14 |
|
| 2.2% |
Other |
|
| 1,469 |
|
| 1,501 |
|
| — |
|
| (32) |
|
| (2.1%) |
Total |
| $ | 174,987 |
| $ | 167,703 |
| $ | (313) |
| $ | 7,597 |
|
| 4.5% |
Depreciation, accretion, and amortization expense increased $7.3 million for the three months ended September 30, 2019, as compared to the prior year. On a constant currency basis, depreciation, accretion, and amortization expense increased $7.6 million. These changes were primarily due to an increase in the number of towers we acquired and built since July 1, 2018, partially offset by the impact of assets that became fully depreciated since the prior year period.
Operating Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended |
|
|
|
|
|
|
| Constant | |||||
|
| September 30, |
| Foreign |
| Constant |
| Currency | |||||||
|
| 2019 |
| 2018 |
| Currency Impact |
| Currency Change |
| % Change | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
|
| ||||||||||
Domestic site leasing |
| $ | 147,635 |
| $ | 134,943 |
| $ | — |
| $ | 12,692 |
|
| 9.4% |
International site leasing |
|
| 11,688 |
|
| 8,107 |
|
| 40 |
|
| 3,541 |
|
| 43.7% |
Total site leasing |
| $ | 159,323 |
| $ | 143,050 |
| $ | 40 |
| $ | 16,233 |
|
| 11.3% |
Site development |
|
| 3,616 |
|
| 2,934 |
|
| — |
|
| 682 |
|
| 23.2% |
Other |
|
| (9,092) |
|
| (7,978) |
|
| — |
|
| (1,114) |
|
| 14.0% |
Total |
| $ | 153,847 |
| $ | 138,006 |
| $ | 40 |
| $ | 15,801 |
|
| 11.4% |
Domestic site leasing operating income increased $12.7 million for the three months ended September 30, 2019, as compared to the prior year, primarily due to higher segment operating profit, partially offset by increases in selling, general, and administrative expenses, depreciation, accretion, and amortization expense, and asset impairment and decommission costs.
International site leasing operating income increased $3.6 million for the three months ended September 30, 2019, as compared to the prior year. On a constant currency basis, international site leasing operating income increased $3.5 million. These changes were primarily due to higher segment operating profit and a decrease in asset impairment and decommission costs, partially offset by increases in depreciation, accretion, and amortization expenses and selling, general, and administrative expenses.
Site development operating income increased $0.7 million for the three months ended September 30, 2019, as compared to the prior year, primarily due to higher segment operating profit, partially offset by increases in selling, general, and administrative expenses.
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended |
|
|
|
|
|
|
| Constant | |||||
|
| September 30, |
| Foreign |
| Constant |
| Currency | |||||||
|
| 2019 |
| 2018 |
| Currency Impact |
| Currency Change |
| % Change | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
|
| ||||||||||
Interest income |
| $ | 1,311 |
| $ | 2,006 |
| $ | (4) |
| $ | (691) |
|
| (34.4%) |
Interest expense |
|
| (96,567) |
|
| (95,717) |
|
| — |
|
| (850) |
|
| 0.9% |
Non-cash interest expense |
|
| (662) |
|
| (632) |
|
| — |
|
| (30) |
|
| 4.7% |
Amortization of deferred financing fees |
|
| (5,157) |
|
| (4,980) |
|
| — |
|
| (177) |
|
| 3.6% |
Loss from extinguishment of debt, net |
|
| (457) |
|
| — |
|
| — |
|
| (457) |
|
| —% |
Other (expense) income, net |
|
| (33,551) |
|
| (24,518) |
|
| (5,994) |
|
| (3,039) |
|
| NM |
Total |
| $ | (135,083) |
| $ | (123,841) |
| $ | (5,998) |
| $ | (5,244) |
|
| 5.4% |
Interest expense increased $0.9 million for the three months ended September 30, 2019, as compared to the prior year. These changes were due to a higher average principal amount of cash-interest bearing debt outstanding as compared to the prior year, partially offset by a lower weighted average interest rate as compared to the prior year.
Other (expense) income, net includes a $31.9 million loss on the remeasurement of U.S. dollar denominated intercompany loans with foreign subsidiaries for the three months ended September 30, 2019, while the prior year period included a $25.9 million loss.
(Provision) Benefit for Income Taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended |
|
|
|
|
|
|
| Constant | |||||
|
| September 30, |
| Foreign |
| Constant |
| Currency | |||||||
|
| 2019 |
| 2018 |
| Currency Impact |
| Currency Change |
| % Change | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
|
| ||||||||||
(Provision) benefit for income taxes |
| $ | 3,002 |
| $ | 1,979 |
| $ | 2,417 |
| $ | (1,394) |
|
| 20.5% |
Benefit for income taxes increased $1.0 million for the three months ended September 30, 2019, as compared to the prior year. On a constant currency basis, provision for income taxes increased $1.4 million. This change was primarily due an increase in foreign income and withholding taxes partially offset by a decrease in state taxes.
Net Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended |
|
|
|
|
|
|
| Constant | |||||
|
| September 30, |
| Foreign |
| Constant |
| Currency | |||||||
|
| 2019 |
| 2018 |
| Currency Impact |
| Currency Change |
| % Change | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
|
| ||||||||||
Net income |
| $ | 21,766 |
| $ | 16,144 |
| $ | (3,541) |
| $ | 9,163 |
|
| 27.5% |
Net income increased $5.6 million for the three months ended September 30, 2019, as compared to the prior year. This change was primarily due to increases in operating income and a benefit for income taxes, partially offset by fluctuations in foreign currency exchange rates including changes recorded on the remeasurement of the U.S. dollar denominated intercompany loans with foreign subsidiaries (net of the tax impact).
Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018
Revenues and Segment Operating Profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the nine months ended |
|
|
|
|
|
|
| Constant | |||||
|
| September 30, |
| Foreign |
| Constant |
| Currency | |||||||
|
| 2019 |
| 2018 |
| Currency Impact |
| Currency Change |
| % Change | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
| (in thousands) |
|
|
| ||||||||||
Domestic site leasing |
| $ | 1,106,722 |
| $ | 1,041,892 |
| $ | — |
| $ | 64,830 |
|
| 6.2% |
International site leasing |
|
| 273,036 |
|
| 253,794 |
|
| (15,589) |
|
| 34,831 |
|
| 13.7% |
Site development |
|
| 121,229 |
|
| 86,160 |
|
| — |
|
| 35,069 |
|
| 40.7% |
Total |
| $ | 1,500,987 |
| $ | 1,381,846 |
| $ | (15,589) |
| $ | 134,730 |
|
| 9.8% |
Cost of Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic site leasing |
| $ | 194,525 |
| $ | 199,633 |
| $ | — |
| $ | (5,108) |
|
| (2.6%) |
International site leasing |
|
| 84,642 |
|
| 79,167 |
|
| (5,276) |
|
| 10,751 |
|
| 13.6% |
Site development |
|
| 92,606 |
|
| 67,693 |
|
| — |
|
| 24,913 |
|
| 36.8% |
Total |
| $ | 371,773 |
| $ | 346,493 |
| $ | (5,276) |
| $ | 30,556 |
|
| 8.8% |
Operating Profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic site leasing |
| $ | 912,197 |
| $ | 842,259 |
| $ | — |
| $ | 69,938 |
|
| 8.3% |
International site leasing |
|
| 188,394 |
|
| 174,627 |
|
| (10,313) |
|
| 24,080 |
|
| 13.8% |
Site development |
|
| 28,623 |
|
| 18,467 |
|
| — |
|
| 10,156 |
|
| 55.0% |
Revenues
Domestic site leasing revenues increased $64.8 million for the nine months ended September 30, 2019, as compared to the prior year, due to (i) revenues from 415 towers acquired and 48 towers built since January 1, 2018 and (ii) organic site leasing growth, primarily from monetary lease amendments for additional equipment added to our towers as well as new leases and contractual rent escalators, partially offset by lease non-renewals primarily by MetroPCS, Leap, Clearwire, and Sprint iDEN.
International site leasing revenues increased $19.2 million for the nine months ended September 30, 2019, as compared to the prior year. On a constant currency basis, international site leasing revenues increased $34.8 million. These changes were primarily due to (i) revenues from 2,004 towers acquired and 622 towers built since January 1, 2018 and (ii) organic site leasing growth from new leases, amendments, and contractual escalators. Site leasing revenue in Brazil represented 12.2% of total site leasing revenue for the period. No other individual international market represented more than 3% of our total site leasing revenue.
Site development revenues increased $35.1 million for the nine months ended September 30, 2019, as compared to the prior year, as a result of increased carrier activity primarily driven by network related projects by Sprint and T-Mobile.
Operating Profit
Domestic site leasing segment operating profit increased $69.9 million for the nine months ended September 30, 2019, as compared to the prior year, primarily due to additional profit generated by (i) towers acquired and built since January 1, 2018 and organic site leasing growth as noted above, (ii) continued control of our site leasing cost of revenue, and (iii) the positive impact of our ground lease purchase program.
International site leasing segment operating profit increased $13.8 million for the nine months ended September 30, 2019, as compared to the prior year. On a constant currency basis, international site leasing segment operating profit increased $24.1 million. These changes were primarily due to additional profit generated by (i) towers acquired and built since January 1, 2018 and organic site leasing growth as noted above, (ii) continued control of our site leasing cost of revenue, and (iii) the positive impact of our ground lease purchase program.
Site development segment operating profit increased $10.2 million for the nine months ended September 30, 2019, as compared to the prior year, primarily due to an increase in revenue from increased carrier activity primarily driven by network related projects by Sprint and T-Mobile partially offset by a change in the mix of work performed.
Selling, General, and Administrative Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the nine months ended |
|
|
|
|
|
|
| Constant | |||||
|
| September 30, |
| Foreign |
| Constant |
| Currency | |||||||
|
| 2019 |
| 2018 |
| Currency Impact |
| Currency Change |
| % Change | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
|
| ||||||||||
Domestic site leasing |
| $ | 77,926 |
| $ | 55,047 |
| $ | — |
| $ | 22,879 |
|
| 41.6% |
International site leasing |
|
| 22,624 |
|
| 20,242 |
|
| (786) |
|
| 3,168 |
|
| 15.7% |
Total site leasing |
| $ | 100,550 |
| $ | 75,289 |
| $ | (786) |
| $ | 26,047 |
|
| 34.6% |
Site development |
|
| 16,774 |
|
| 11,943 |
|
| — |
|
| 4,831 |
|
| 40.5% |
Other |
|
| 31,431 |
|
| 19,669 |
|
| — |
|
| 11,762 |
|
| 59.8% |
Total |
| $ | 148,755 |
| $ | 106,901 |
| $ | (786) |
| $ | 42,640 |
|
| 39.9% |
Selling, general, and administrative expenses increased $41.9 million for the nine months ended September 30, 2019, as compared to the prior year. On a constant currency basis, selling, general, and administrative expenses increased $42.6 million. These changes were primarily as a result of a $27.8 million increase in noncash compensation as well as increases in personnel, compensation, benefits, and other support-related costs, partially offset by a $2.3 million partial recovery of the Oi reserve in the first quarter of 2019.
Acquisition and New Business Initiatives Related Adjustments and Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the nine months ended |
|
|
|
|
|
|
| Constant | |||||
|
| September 30, |
| Foreign |
| Constant |
| Currency | |||||||
|
| 2019 |
| 2018 |
| Currency Impact |
| Currency Change |
| % Change | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
|
| ||||||||||
Domestic site leasing |
| $ | 4,698 |
| $ | 5,242 |
| $ | — |
| $ | (544) |
|
| (10.4%) |
International site leasing |
|
| 4,971 |
|
| 3,929 |
|
| (250) |
|
| 1,292 |
|
| 32.9% |
Total |
| $ | 9,669 |
| $ | 9,171 |
| $ | (250) |
| $ | 748 |
|
| 8.2% |
Asset Impairment and Decommission Costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the nine months ended |
|
|
|
|
|
|
| Constant | |||||
|
| September 30, |
| Foreign |
| Constant |
| Currency | |||||||
|
| 2019 |
| 2018 |
| Currency Impact |
| Currency Change |
| % Change | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
|
| ||||||||||
Domestic site leasing |
| $ | 18,476 |
| $ | 15,971 |
| $ | — |
| $ | 2,505 |
|
| 15.7% |
International site leasing |
|
| 5,155 |
|
| 6,475 |
|
| (169) |
|
| (1,151) |
|
| (17.8%) |
Total site leasing |
| $ | 23,631 |
| $ | 22,446 |
| $ | (169) |
| $ | 1,354 |
|
| 6.0% |
Site development |
|
| — |
|
| 332 |
|
| — |
|
| (332) |
|
| (100.0%) |
Total |
| $ | 23,631 |
| $ | 22,778 |
| $ | (169) |
| $ | 1,022 |
|
| 4.5% |
Depreciation, Accretion, and Amortization Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the nine months ended |
|
|
|
|
|
|
| Constant | |||||
|
| September 30, |
| Foreign |
| Constant |
| Currency | |||||||
|
| 2019 |
| 2018 |
| Currency Impact |
| Currency Change |
| % Change | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
|
| ||||||||||
Domestic site leasing |
| $ | 394,308 |
| $ | 382,490 |
| $ | — |
| $ | 11,818 |
|
| 3.1% |
International site leasing |
|
| 117,197 |
|
| 113,550 |
|
| (6,750) |
|
| 10,397 |
|
| 9.2% |
Total site leasing |
| $ | 511,505 |
| $ | 496,040 |
| $ | (6,750) |
| $ | 22,215 |
|
| 4.5% |
Site development |
|
| 1,900 |
|
| 1,936 |
|
| — |
|
| (36) |
|
| (1.9%) |
Other |
|
| 4,185 |
|
| 4,683 |
|
| — |
|
| (498) |
|
| (10.6%) |
Total |
| $ | 517,590 |
| $ | 502,659 |
| $ | (6,750) |
| $ | 21,681 |
|
| 4.3% |
Depreciation, accretion, and amortization expense increased $14.9 million for the nine months ended September 30, 2019, as compared to the prior year. On a constant currency basis, depreciation, accretion, and amortization expense increased $21.7 million. These changes were primarily due to an increase in the number of towers we acquired and built since January 1, 2018, partially offset by the impact of assets that became fully depreciated since the prior year period.
Operating Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the nine months ended |
|
|
|
|
|
|
| Constant | |||||
|
| September 30, |
| Foreign |
| Constant |
| Currency | |||||||
|
| 2019 |
| 2018 |
| Currency Impact |
| Currency Change |
| % Change | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
|
| ||||||||||
Domestic site leasing |
| $ | 416,789 |
| $ | 383,509 |
| $ | — |
| $ | 33,280 |
|
| 8.7% |
International site leasing |
|
| 38,447 |
|
| 30,431 |
|
| (2,358) |
|
| 10,374 |
|
| 34.1% |
Total site leasing |
| $ | 455,236 |
| $ | 413,940 |
| $ | (2,358) |
| $ | 43,654 |
|
| 10.5% |
Site development |
|
| 9,949 |
|
| 4,256 |
|
| — |
|
| 5,693 |
|
| 133.8% |
Other |
|
| (35,616) |
|
| (24,352) |
|
| — |
|
| (11,264) |
|
| 46.3% |
Total |
| $ | 429,569 |
| $ | 393,844 |
| $ | (2,358) |
| $ | 38,083 |
|
| 9.7% |
Domestic site leasing operating income increased $33.3 million for the nine months ended September 30, 2019, as compared to the prior year, primarily due to higher segment operating profit, partially offset by increases in selling, general, and administrative expenses, depreciation, accretion, and amortization expense, and asset impairment and decommission costs.
International site leasing operating income increased $8.0 million for the nine months ended September 30, 2019, as compared to the prior year. On a constant currency basis, international site leasing operating income increased $10.4 million. These changes were primarily due to higher segment operating profit and a decrease in asset impairment and decommission costs, partially offset by increases in depreciation, accretion, and amortization expenses, selling, general, and administrative expenses, and acquisition and new business initiatives related adjustments and expenses.
Site development operating income increased $5.7 million for the nine months ended September 30, 2019, as compared to the prior year, primarily due to higher segment operating profit, partially offset by increases in selling, general, and administrative expenses.
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the nine months ended |
|
|
|
|
|
|
| Constant | |||||
|
| September 30, |
| Foreign |
| Constant |
| Currency | |||||||
|
| 2019 |
| 2018 |
| Currency Impact |
| Currency Change |
| % Change | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
|
| ||||||||||
Interest income |
| $ | 4,692 |
| $ | 4,972 |
| $ | (151) |
| $ | (129) |
|
| (2.6%) |
Interest expense |
|
| (292,681) |
|
| (278,278) |
|
| (8) |
|
| (14,395) |
|
| 5.2% |
Non-cash interest expense |
|
| (1,954) |
|
| (2,002) |
|
| — |
|
| 48 |
|
| (2.4%) |
Amortization of deferred financing fees |
|
| (15,333) |
|
| (15,265) |
|
| — |
|
| (68) |
|
| 0.4% |
Loss from extinguishment of debt, net |
|
| (457) |
|
| (14,443) |
|
| — |
|
| 13,986 |
|
| (96.8%) |
Other (expense) income, net |
|
| (21,296) |
|
| (110,175) |
|
| 88,143 |
|
| 736 |
|
| 24.8% |
Total |
| $ | (327,029) |
| $ | (415,191) |
| $ | 87,984 |
| $ | 178 |
|
| (0.1%) |
Interest expense increased $14.4 million for the nine months ended September 30, 2019, as compared to the prior year. These changes were primarily due to a higher average principal amount of cash-interest bearing debt outstanding as compared to the prior year, partially offset by a lower weighted average interest rate as compared to the prior year.
Loss from extinguishment of debt was $14.4 million for the nine months ended September 30, 2018 due to the write-off of the original issuance discount and unamortized financing fees associated with the repayment of the 2013-1C Tower Securities and 2013-1D Tower Securities in March 2018, as well as the 2014 Term Loan and 2015 Term Loan in April 2018.
Other (expense) income, net includes a $24.8 million loss on the remeasurement of U.S. dollar denominated intercompany loans with foreign subsidiaries for the nine months ended September 30, 2019, while the prior year period included an $113.1 million loss.
(Provision) Benefit for Income Taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the nine months ended |
|
|
|
|
|
|
| Constant | |||||
|
| September 30, |
| Foreign |
| Constant |
| Currency | |||||||
|
| 2019 |
| 2018 |
| Currency Impact |
| Currency Change |
| % Change | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
|
| ||||||||||
(Provision) benefit for income taxes |
| $ | (22,813) |
| $ | 11,645 |
| $ | (28,512) |
| $ | (5,946) |
|
| 22.2% |
Provision for income taxes increased $34.5 million for the nine months ended September 30, 2019, as compared to the prior year. On a constant currency basis, provision for income taxes increased $5.9 million. This change was primarily due to an increase in foreign income and withholding taxes.
Net Income (Loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the nine months ended |
|
|
|
|
|
|
| Constant | |||||
|
| September 30, |
| Foreign |
| Constant |
| Currency | |||||||
|
| 2019 |
| 2018 |
| Currency Impact |
| Currency Change |
| % Change | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
|
| ||||||||||
Net income (loss) |
| $ | 79,727 |
| $ | (9,702) |
| $ | 57,114 |
| $ | 32,315 |
|
| (5.0%) |
Net income increased $89.4 million for the nine months ended September 30, 2019, as compared to the prior year. This change was primarily due to increases in operating income, fluctuations in foreign currency exchange rates including changes recorded on the remeasurement of the U.S. dollar denominated intercompany loans with foreign subsidiaries (net of the tax impact), and a decrease in loss from extinguishment of debt, partially offset by increases in the provision for income taxes and interest expense.
NON-GAAP FINANCIAL MEASURES
This report contains information regarding a non-GAAP measure, Adjusted EBITDA. We have provided below a description of Adjusted EBITDA, a reconciliation of Adjusted EBITDA to its most directly comparable GAAP measure and an explanation as to why management utilizes this measure. This report also presents our financial results and other financial metrics after eliminating the impact of changes in foreign currency exchange rates. We believe that providing these financial results and metrics on a constant currency basis, which are non-GAAP measures, gives management and investors the ability to evaluate the performance of our business without the impact of foreign currency exchange rate fluctuations. We eliminate the impact of changes in foreign currency exchange rates by dividing the current period’s financial results by the average monthly exchange rates of the prior year period, as well as by eliminating the impact of the remeasurement of our intercompany loans.
Adjusted EBITDA
We define Adjusted EBITDA as net income excluding the impact of non-cash straight-line leasing revenue, non-cash straight-line ground lease expense, non-cash compensation, net loss from extinguishment of debt, other income and expenses, acquisition and new business initiatives related adjustments and expenses, asset impairment and decommission costs, interest income, interest expenses, depreciation, accretion, and amortization, and provision for or benefit from taxes.
We believe that Adjusted EBITDA is useful to investors or other interested parties in evaluating our financial performance. Adjusted EBITDA is the primary measure used by management (1) to evaluate the economic productivity of our operations and (2) for purposes of making decisions about allocating resources to, and assessing the performance of, our operations. Management believes that Adjusted EBITDA helps investors or other interested parties to meaningfully evaluate and compare the results of our operations (1) from period to period and (2) to our competitors, by excluding the impact of our capital structure (primarily interest charges from our outstanding debt) and asset base (primarily depreciation, amortization and accretion) from our financial results. Management also believes Adjusted EBITDA is frequently used by investors or other interested parties in the evaluation of REITs. In addition, Adjusted EBITDA is similar to the measure of current financial performance generally used by our lenders to determine compliance with certain covenants under our Senior Credit Agreement and the indentures relating to the 2014 Senior Notes, 2016 Senior Notes, and 2017 Senior Notes. Adjusted EBITDA should be considered only as a supplement to net income computed in accordance with GAAP as a measure of our performance.
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the three months ended |
|
|
|
|
|
|
| Constant | |||||
|
| September 30, |
| Foreign |
| Constant |
| Currency | |||||||
|
| 2019 |
| 2018 |
| Currency Impact |
| Currency Change |
| % Change | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
|
| ||||||||||
Net income |
| $ | 21,766 |
| $ | 16,144 |
| $ | (3,541) |
| $ | 9,163 |
|
| 27.5% |
Non-cash straight-line leasing revenue |
|
| (3,807) |
|
| (5,064) |
|
| 6 |
|
| 1,251 |
|
| (24.7%) |
Non-cash straight-line ground lease expense |
|
| 4,522 |
|
| 6,961 |
|
| (1) |
|
| (2,438) |
|
| (35.0%) |
Non-cash compensation |
|
| 12,732 |
|
| 10,433 |
|
| (24) |
|
| 2,323 |
|
| 22.3% |
Loss from extinguishment of debt, net |
|
| 457 |
|
| — |
|
| — |
|
| 457 |
|
| —% |
Other (income) expense, net |
|
| 33,551 |
|
| 24,518 |
|
| 5,994 |
|
| 3,039 |
|
| NM |
Acquisition and new business initiatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
related adjustments and expenses |
|
| 4,692 |
|
| 2,995 |
|
| (31) |
|
| 1,728 |
|
| 57.7% |
Asset impairment and decommission costs |
|
| 8,240 |
|
| 6,868 |
|
| (12) |
|
| 1,384 |
|
| 20.2% |
Interest income |
|
| (1,311) |
|
| (2,006) |
|
| 4 |
|
| 691 |
|
| (34.4%) |
Total interest expense (1) |
|
| 102,386 |
|
| 101,329 |
|
| — |
|
| 1,057 |
|
| 1.0% |
Depreciation, accretion, and amortization |
|
| 174,987 |
|
| 167,703 |
|
| (313) |
|
| 7,597 |
|
| 4.5% |
Provision (benefit) for income taxes (2) |
|
| (2,788) |
|
| (1,786) |
|
| (2,417) |
|
| 1,415 |
|
| 20.2% |
Adjusted EBITDA |
| $ | 355,427 |
| $ | 328,095 |
| $ | (335) |
| $ | 27,667 |
|
| 8.4% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the nine months ended |
|
|
|
|
|
|
| Constant | |||||
|
| September 30, |
| Foreign |
| Constant |
| Currency | |||||||
|
| 2019 |
| 2018 |
| Currency Impact |
| Currency Change |
| % Change | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
|
| ||||||||||
Net income (loss) |
| $ | 79,727 |
| $ | (9,702) |
| $ | 57,114 |
| $ | 32,315 |
|
| (5.0%) |
Non-cash straight-line leasing revenue |
|
| (9,344) |
|
| (15,691) |
|
| 213 |
|
| 6,134 |
|
| (39.1%) |
Non-cash straight-line ground lease expense |
|
| 15,880 |
|
| 20,328 |
|
| (5) |
|
| (4,443) |
|
| (21.9%) |
Non-cash compensation |
|
| 60,633 |
|
| 32,140 |
|
| (228) |
|
| 28,721 |
|
| 89.4% |
Loss from extinguishment of debt, net |
|
| 457 |
|
| 14,443 |
|
| — |
|
| (13,986) |
|
| (96.8%) |
Other (income) expense, net |
|
| 21,296 |
|
| 110,175 |
|
| (88,143) |
|
| (736) |
|
| (24.8%) |
Acquisition and new business initiatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
related adjustments and expenses |
|
| 9,669 |
|
| 9,171 |
|
| (250) |
|
| 748 |
|
| 8.2% |
Asset impairment and decommission costs |
|
| 23,631 |
|
| 22,778 |
|
| (169) |
|
| 1,022 |
|
| 4.5% |
Interest income |
|
| (4,692) |
|
| (4,972) |
|
| 151 |
|
| 129 |
|
| (2.6%) |
Total interest expense (1) |
|
| 309,968 |
|
| 295,545 |
|
| 8 |
|
| 14,415 |
|
| 4.9% |
Depreciation, accretion, and amortization |
|
| 517,590 |
|
| 502,659 |
|
| (6,750) |
|
| 21,681 |
|
| 4.3% |
Provision (benefit) for income taxes (2) |
|
| 23,423 |
|
| (11,069) |
|
| 28,510 |
|
| 5,983 |
|
| 21.8% |
Adjusted EBITDA |
| $ | 1,048,238 |
| $ | 965,805 |
| $ | (9,549) |
| $ | 91,983 |
|
| 9.5% |
(1)Total interest expense includes interest expense, non-cash interest expense, and amortization of deferred financing fees.
(2)Provision for taxes includes $214 and $193 of franchise taxes for the three months ended September 30, 2019 and 2018, respectively, and $610 and $576 of franchise taxes for the nine months ended September 30, 2019 and 2018, respectively, reflected in selling, general, and administrative expenses on the Consolidated Statements of Operations.
Adjusted EBITDA increased $27.3 million for the three months ended September 30, 2019, as compared to the prior year period. On a constant currency basis, Adjusted EBITDA increased $27.7 million. These changes were primarily due to higher segment operating profit, partially offset by an increase in cash selling, general, and administrative expenses.
Adjusted EBITDA increased $82.4 million for the nine months ended September 30, 2019, as compared to the prior year period. On a constant currency basis, Adjusted EBITDA increased $92.0 million. These changes were primarily due to higher segment operating profit, partially offset by an increase in cash selling, general, and administrative expenses.
LIQUIDITY AND CAPITAL RESOURCES
SBAC is a holding company with no business operations of its own. SBAC’s only significant asset is 100% of the outstanding capital stock of SBA Telecommunications, LLC (“Telecommunications”), which is also a holding company that owns equity interests in entities that directly or indirectly own all of our domestic and international towers and assets. We conduct all of our business operations through Telecommunications’ subsidiaries. Accordingly, our only source of cash to pay our obligations, other than financings, is distributions with respect to our ownership interest in our subsidiaries from the net earnings and cash flow generated by these subsidiaries.
A summary of our cash flows is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the nine months ended | ||||
|
| September 30, 2019 |
| September 30, 2018 | ||
|
|
|
|
|
|
|
|
| (in thousands) | ||||
Cash provided by operating activities |
| $ | 704,984 |
| $ | 624,143 |
Cash used in investing activities |
|
| (415,066) |
|
| (520,317) |
Cash used in financing activities |
|
| (307,581) |
|
| (31,189) |
Change in cash, cash equivalents, and restricted cash |
|
| (17,663) |
|
| 72,637 |
Effect of exchange rate changes on cash, cash equiv., and restricted cash |
|
| (1,957) |
|
| (13,608) |
Cash, cash equivalents, and restricted cash, beginning of period |
|
| 178,300 |
|
| 104,295 |
Cash, cash equivalents, and restricted cash, end of period |
| $ | 158,680 |
| $ | 163,324 |
Operating Activities
Cash provided by operating activities was $705.0 million for the nine months ended September 30, 2019 as compared to $624.1 million for the nine months ended September 30, 2018. The increase was primarily due to an increase in segment operating profit and a decrease in cash outflows associated with working capital changes, partially offset by increases in selling, general, and administrative expenses and cash interest payments.
Investing Activities
A detail of our investing activities is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the nine months ended September 30, | ||||
|
| 2019 |
| 2018 | ||
|
|
|
|
|
|
|
|
| (in thousands) | ||||
Acquisitions of towers and related intangible assets |
| $ | (224,585) |
| $ | (372,054) |
Land buyouts and other assets (1) |
|
| (59,116) |
|
| (31,781) |
Construction and related costs on new builds |
|
| (40,191) |
|
| (45,029) |
Augmentation and tower upgrades |
|
| (46,571) |
|
| (34,978) |
Tower maintenance |
|
| (21,480) |
|
| (21,616) |
General corporate |
|
| (3,139) |
|
| (3,343) |
Purchase of investments |
|
| (528,915) |
|
| (99,823) |
Proceeds from sale of investments |
|
| 515,557 |
|
| 95,890 |
Other investing activities |
|
| (6,626) |
|
| (7,583) |
Net cash used in investing activities |
| $ | (415,066) |
| $ | (520,317) |
(1)Excludes $13.1 million and $16.4 million spent to extend ground lease terms for the nine months ended September 30, 2019 and 2018, respectively.
Subsequent to September 30, 2019, we acquired 6 towers and related assets for $6.7 million in cash. In addition, we have agreed to purchase and anticipate to close on 107 additional communication sites for an aggregate of $32.7 million.
For 2019, including capital expenditures made during the nine months ended September 30, 2019, we expect to incur non-discretionary cash capital expenditures associated with tower maintenance and general corporate expenditures of $31.0 million to $37.0 million and discretionary cash capital expenditures, based on current or potential acquisition obligations, planned new tower construction, forecasted tower augmentations, and forecasted ground lease purchases, of $468.0 million to $478.0 million. We expect to fund these cash capital expenditures from cash on hand, cash flow from operations, and borrowings under the Revolving Credit Facility or new financings. The exact amount of our future cash capital expenditures will depend on a number of factors, including amounts necessary to support our tower portfolio, our new tower build and acquisition programs, and our ground lease purchase program.
Financing Activities
A detail of our financing activities is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the nine months ended | ||||
|
| September 30, 2019 |
| September 30, 2018 | ||
|
|
|
|
|
|
|
|
| (in thousands) | ||||
Net (repayments) borrowings under Revolving Credit Facility (1) |
| $ | (325,000) |
| $ | 80,000 |
Repayment of Tower Securities (1) |
|
| (920,000) |
|
| (755,000) |
Proceeds from issuance of Tower Securities, net of fees (1) |
|
| 1,153,036 |
|
| 631,479 |
Repurchase and retirement of common stock (2) |
|
| (267,534) |
|
| (453,539) |
Proceeds from employee stock purchase/stock option plans |
|
| 112,909 |
|
| 33,678 |
Repayment of Term Loans (1) |
|
| (18,000) |
|
| (1,941,000) |
Proceeds from Term Loans, net of fees (1) |
|
| — |
|
| 2,377,264 |
Payment of dividends on common stock |
|
| (41,873) |
|
| — |
Other financing activities |
|
| (1,119) |
|
| (4,071) |
Net cash used in financing activities |
| $ | (307,581) |
| $ | (31,189) |
(1)For additional information regarding our debt offerings, refer to the Debt Instruments and Debt Service Requirements below.
(2)On July 29, 2019, our Board of Directors authorized a new $1.0 billion stock repurchase plan, replacing the prior plan authorized on February 16, 2018 which had a remaining authorization of $110.0 million. This new plan authorizes us to purchase, from time to time, up to $1.0 billion of our outstanding Class A common stock through open market repurchases in compliance with Rule 10b-18 under the Exchange Act and/or in privately negotiated transactions at management’s discretion based on market and business conditions, applicable legal requirements and other factors. The new plan has no time deadline and will continue until otherwise modified or terminated by our Board of Directors at any time in its sole discretion. During the nine months ended September 30, 2019, we repurchased 1.2 million shares of our Class A common stock for $270.3 million, at an average price per share of $231.20. Shares repurchased were retired. As of the date of this filing, the Company had $824.3 million of authorization remaining under the current stock repurchase plan.
Dividend
On September 25, 2019, we paid a cash dividend of $0.37 per share, or an aggregate amount of $41.9 million, to shareholders of record at the close of business on August 28, 2019. On October 25, 2019, our Board of Directors declared a quarterly cash dividend of $0.37 per share on shares of our Class A common stock. The dividend will be payable on December 19, 2019 to shareholders of record at the close of business on November 21, 2019. Future dividends are subject to the approval of our Board of Directors. We expect to continue to invest our cash flow after dividends, if declared, consistent with our past practice of investing in acquisitions, the construction of new sites, land purchases and the repurchase of our own shares.
Registration Statements
We have on file with the Commission a shelf registration statement on Form S-4 registering shares of Class A common stock that we may issue in connection with the acquisition of wireless communication towers or antenna sites and related assets or companies who own wireless communication towers, antenna sites, or related assets. During the nine months ended September 30, 2019, we issued 10,000 shares of Class A common stock under this registration statement. As of September 30, 2019, we had approximately 1.2 million shares of Class A common stock remaining under this shelf registration statement.
On March 5, 2018, we filed with the Commission an automatic shelf registration statement for well-known seasoned issuers on Form S-3ASR. This registration statement enables us to issue shares of our Class A common stock, preferred stock or debt securities either separately or represented by warrants, or depositary shares as well as units that include any of these securities. Under the rules governing automatic shelf registration statements, we will file a prospectus supplement and advise the Commission of the amount and type of securities each time we issue securities under this registration statement. No securities were issued under this registration statement through the date of this filing.
Debt Instruments and Debt Service Requirements
Revolving Credit Facility under the Senior Credit Agreement
The Revolving Credit Facility consists of a revolving loan under which up to $1.25 billion aggregate principal amount may be borrowed, repaid and redrawn, based upon specific financial ratios and subject to the satisfaction of other customary conditions to borrowing. Amounts borrowed under the Revolving Credit Facility accrue interest, at SBA Senior Finance II’s election, at either (1) the Eurodollar Rate plus a margin that ranges from 112.5 basis points to 175.0 basis points or (2) the Base Rate plus a margin that ranges from 12.5 basis points to 75.0 basis points, in each case based on the ratio of Consolidated Net Debt to Annualized Borrower EBITDA, calculated in accordance with the Senior Credit Agreement. In addition, SBA Senior Finance II is required to pay a commitment fee of between 0.20% and 0.25% per annum on the amount of unused commitment. If not earlier terminated by SBA Senior Finance II, the Revolving Credit Facility will terminate on, and SBA Senior Finance II will repay all amounts outstanding on or before, April 11, 2023. The proceeds available under the Revolving Credit Facility may be used for general corporate purposes. SBA Senior Finance II may, from time to time, borrow from and repay the Revolving Credit Facility. Consequently, the amount outstanding under the Revolving Credit Facility at the end of the period may not be reflective of the total amounts outstanding during such period.
During the three months ended September 30, 2019, we borrowed $175.0 million and repaid $255.0 million of the outstanding balance under the Revolving Credit Facility. During the nine months ended September 30, 2019, we borrowed $265.0 million and repaid $590.0 million of the outstanding balance under the Revolving Credit Facility. As of September 30, 2019, there was no balance outstanding under the Revolving Credit Facility. In addition, SBA Senior Finance II was required to pay a commitment fee of 0.20% per annum on the amount of the unused commitment. As of September 30, 2019, SBA Senior Finance II was in compliance with the financial covenants contained in the Senior Credit Agreement.
Term Loans under the Senior Credit Agreement
2018 Term Loan
On April 11, 2018, we, through our wholly owned subsidiary, SBA Senior Finance II LLC, obtained a new term loan (the “2018 Term Loan”) under the amended and restated Senior Credit Agreement. The 2018 Term Loan consists of a senior secured term loan with an initial aggregate principal amount of $2.4 billion that matures on April 11, 2025. The 2018 Term Loan accrues interest, at SBA Senior Finance II’s election at either the Base Rate plus 100 basis points (with a zero Base Rate floor) or the Eurodollar Rate plus 200 basis points (with a zero Eurodollar Rate floor). The 2018 Term Loan was issued at 99.75% of par value. As of September 30, 2019, the 2018 Term Loan was accruing interest at 4.05% per annum. Principal payments on the 2018 Term Loan commenced on September 30, 2018 and are being made in quarterly installments on the last day of each March, June, September, and December in an amount equal to $6.0 million. We incurred deferred financing fees of approximately $16.8 million in relation to this transaction, which are being amortized through the maturity date. The proceeds from the 2018 Term Loan were used (1) to retire the outstanding $1.93 billion in aggregate principal amount of the 2014 Term Loan and 2015 Term Loan, (2) to pay down the existing outstanding balance under the Revolving Credit Facility, and (3) for general corporate purposes.
During the three and nine months ended September 30, 2019, we repaid $6.0 million and $18.0 million, respectively, of principal on the 2018 Term Loan. As of September 30, 2019, the 2018 Term Loan had a principal balance of $2.4 billion.
On February 1, 2019, we, through our wholly owned subsidiary, SBA Senior Finance II, LLC, entered into a four year interest rate swap on a portion of our 2018 Term Loan in order to reduce our 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.
On May 23, 2019, we, through our wholly owned subsidiary, SBA Senior Finance II, LLC, entered into a four year interest rate swap on a portion of our 2018 Term Loan in order to reduce our exposure to fluctuations in interest rates. 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.
Secured Tower Revenue Securities
2013-2C Tower Securities
On April 18, 2013, we, through a New York common law trust (the “Trust”), issued $575.0 million of 3.722% Secured Tower Revenue Securities Series 2013-2C, which have an anticipated repayment date of April 11, 2023 and a final maturity date of April 9, 2048 (the “2013-2C Tower Securities”). We incurred financing fees of $11.0 million in relation to this transaction, which were being amortized through the anticipated repayment date of each of the 2013 Tower Securities.
2014 Tower Securities
On October 15, 2014, we, through the Trust, issued $920.0 million of 2.898% Secured Tower Revenue Securities Series 2014-1C, which had an anticipated repayment date of October 8, 2019 and a final maturity date of October 11, 2044 (the “2014-1C Tower Securities”) and $620.0 million of 3.869% Secured Tower Revenue Securities Series 2014-2C, which have an anticipated repayment date of October 8, 2024 and a final maturity date of October 8, 2049 (the “2014-2C Tower Securities”) (collectively the “2014 Tower Securities”). The aggregate $1.54 billion of 2014 Tower Securities have a blended interest rate of 3.289% per annum, payable monthly. We incurred financing fees of $22.5 million in relation to this transaction, which were being amortized through the anticipated repayment date of each of the 2014 Tower Securities.
On September 13, 2019, we repaid the entire aggregate principal amount of the 2014-1C Tower Securities in connection with the issuance of the 2019-1C Tower Securities (as defined below).
2015-1C Tower Securities
On October 14, 2015, we, through the Trust, issued $500.0 million of Secured Tower Revenue Securities Series 2015-1C, which have an anticipated repayment date of October 8, 2020 and a final maturity date of October 10, 2045 (the “2015-1C Tower Securities”). The fixed interest rate of the 2015-1C Tower Securities is 3.156% per annum, payable monthly. We incurred financing
fees of $11.2 million in relation to this transaction, which are being amortized through the anticipated repayment date of the 2015-1C Tower Securities.
2016-1C Tower Securities
On July 7, 2016, we, through the Trust, issued $700.0 million of Secured Tower Revenue Securities Series 2016-1C, which have an anticipated repayment date of July 9, 2021 and a final maturity date of July 10, 2046 (the “2016-1C Tower Securities”). The fixed interest rate of the 2016-1C Tower Securities is 2.877% per annum, payable monthly. We incurred financing fees of $9.5 million in relation to this transaction, which are being amortized through the anticipated repayment date of the 2016-1C Tower Securities.
2017-1C Tower Securities
On April 17, 2017, we, through the Trust, issued $760.0 million of Secured Tower Revenue Securities Series 2017-1C, which have an anticipated repayment date of April 11, 2022 and a final maturity date of April 9, 2047 (the “2017-1C Tower Securities”). The fixed interest rate on the 2017-1C Tower Securities is 3.168% per annum, payable monthly. We incurred financing fees of $10.2 million in relation to this transaction, which are being amortized through the anticipated repayment date of the 2017-1C Tower Securities.
In addition, to satisfy certain risk retention requirements of Regulation RR promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), SBA Guarantor, LLC, a wholly owned subsidiary, purchased $40.0 million of Secured Tower Revenue Securities Series 2017-1R issued by the Trust, which have an anticipated repayment date of April 11, 2022 and a final maturity date of April 9, 2047 (the “2017-1R Tower Securities”). The fixed interest rate on the 2017-1R Tower Securities is 4.459% per annum, payable monthly. Principal and interest payments made on the 2017-1R Tower Securities eliminate in consolidation.
2018-1C Tower Securities
On March 9, 2018, we, through the Trust, issued $640.0 million of Secured Tower Revenue Securities Series 2018-1C, which have an anticipated repayment date of March 9, 2023 and a final maturity date of March 9, 2048 (the “2018-1C Tower Securities”). The fixed interest rate on the 2018-1C Tower Securities is 3.448% per annum, payable monthly. We incurred financing fees of $8.6 million in relation to this transaction, which are being amortized through the anticipated repayment date of the 2018-1C Tower Securities.
In addition, to satisfy certain risk retention requirements of Regulation RR promulgated under the Exchange Act, SBA Guarantor, LLC, a wholly owned subsidiary, purchased $33.7 million of Secured Tower Revenue Securities Series 2018-1R issued by the Trust. These securities have an anticipated repayment date of March 9, 2023 and a final maturity date of March 9, 2048 (the “2018-1R Tower Securities”). The fixed interest rate on the 2018-1R Tower Securities is 4.949% per annum, payable monthly. Principal and interest payments made on the 2018-1R Tower Securities eliminate in consolidation.
2019-1C Tower Securities
On September 13, 2019, we, through the Trust, issued $1.165 billion of Secured Tower Revenue Securities Series 2019-1C, which have an anticipated repayment date of January 12, 2025 and a final maturity date of January 12, 2050 (the “2019-1C Tower Securities”). The fixed interest rate on the 2019-1C Tower Securities is 2.836% per annum, payable monthly. Net proceeds from this offering were used to repay the entire aggregate principal amount of the 2014-1C Tower Securities ($920.0 million), as well as accrued and unpaid interest, amounts outstanding on the Revolving Credit Facility, and any remaining amount was used for general corporate purposes. We have incurred deferred financing fees of $12.0 million to date in relation to this transaction, which are being amortized through the anticipated repayment date of the 2019-1C Tower Securities.
In addition, to satisfy certain risk retention requirements of Regulation RR promulgated under the Exchange Act, SBA Guarantor, LLC, a wholly owned subsidiary, purchased $61.4 million of Secured Tower Revenue Securities Series 2019-1R issued by the Trust. These securities have an anticipated repayment date of January 12, 2025 and a final maturity date of January 12, 2050 (the “2019-1R Tower Securities”). The fixed interest rate on the 2019-1R Tower Securities is 4.213% per annum, payable monthly. Principal and interest payments made on the 2019-1R Tower Securities eliminate in consolidation.
In connection with the issuance of the 2019-1C Tower Securities, the non-recourse mortgage loan was increased by $1.2 billion (but increased by a net of $306.4 million after giving effect to prepayment of the loan components relating to the 2014-1C Tower Securities). The new loan, after eliminating the risk retention securities, accrues interest at the same rate as the 2019-1C Tower
Securities and is subject to all other material terms of the existing mortgage loan, including collateral and interest rate after the anticipated repayment date.
Debt Covenants and Terms of the Tower Revenue Securities
As of September 30, 2019, the entities that are borrowers on the mortgage loan (the “Borrowers”) met the debt service coverage ratio required by the mortgage loan agreement and were in compliance with all other covenants as set forth in the agreement.
The sole asset of the Trust consists of a non-recourse mortgage loan made in favor of the Borrowers.
Senior Notes
2014 Senior Notes
On July 1, 2014, we issued $750.0 million of unsecured senior notes due July 15, 2022 (the “2014 Senior Notes”). The 2014 Senior Notes accrue interest at a rate of 4.875% per annum and were issued at 99.178% of par value. Interest on the 2014 Senior Notes is due semi-annually on January 15 and July 15 of each year. We incurred financing fees of $11.6 million in relation to this transaction, which are being amortized through the maturity date.
The 2014 Senior Notes are subject to redemption in whole or in part at the redemption prices set forth in the indenture agreement plus accrued and unpaid interest. We may redeem the 2014 Senior Notes during the twelve-month period beginning on the following dates at the following redemption prices: July 15, 2019 at 101.219% or July 15, 2020 until maturity at 100.000% of the principal amount of the 2014 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest.
2016 Senior Notes
On August 15, 2016, we issued $1.1 billion of unsecured senior notes due September 1, 2024 (the “2016 Senior Notes”). The 2016 Senior Notes accrue interest at a rate of 4.875% per annum and were issued at 99.178% of par value. Interest on the 2016 Senior Notes is due semi-annually on March 1 and September 1 of each year, beginning on March 1, 2017. We incurred financing fees of $12.8 million in relation to this transaction, which are being amortized through the maturity date. The 2016 Senior Notes are subject to redemption in whole or in part on or after September 1, 2019 at the redemption prices set forth in the indenture agreement plus accrued and unpaid interest. We may redeem the 2016 Senior Notes during the twelve-month period beginning on the following dates at the following redemption prices: September 1, 2019 at 103.656%, September 1, 2020 at 102.438%, September 1, 2021 at 101.219%, or September 1, 2022 until maturity at 100.000%, of the principal amount of the 2016 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest.
2017 Senior Notes
On October 13, 2017, we issued $750.0 million of unsecured senior notes due October 1, 2022 (the “2017 Senior Notes”). The 2017 Senior Notes accrue interest at a rate of 4.0% per annum. Interest on the 2017 Senior Notes is due semi-annually on April 1 and October 1 of each year, beginning on April 1, 2018. We incurred financing fees of $8.9 million in relation to this transaction, which are being amortized through the maturity date.
The 2017 Senior Notes are subject to redemption in whole or in part on or after October 1, 2019 at the redemption prices set forth in the indenture agreement plus accrued and unpaid interest. Prior to October 1, 2020, we may, at our option, redeem up to 35% of the aggregate principal amount of the 2017 Senior Notes originally issued at a redemption price of 104.000% of the principal amount of the 2017 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest with the net proceeds of certain equity offerings. We may redeem the 2017 Senior Notes during the twelve-month period beginning on the following dates at the following redemption prices: October 1, 2019 at 102.000%, October 1, 2020 at 101.000%, or October 1, 2021 until maturity at 100.000%, of the principal amount of the 2017 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest.
Debt Service
As of September 30, 2019, we believe that our cash on hand, capacity available under our Revolving Credit Facility and cash flows from operations for the next twelve months will be sufficient to service our outstanding debt during the next twelve months.
The following table illustrates our estimate of our debt service requirement over the twelve months ended September 30, 2020 based on the amounts outstanding as of September 30, 2019 and the interest rates accruing on those amounts on such date (in thousands):
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2014 Senior Notes |
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| $ | 36,563 |
2016 Senior Notes |
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| 53,625 |
2017 Senior Notes |
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| 30,000 |
2013-2C Tower Securities |
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| 21,585 |
2014-2C Tower Securities |
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| 24,185 |
2015-1C Tower Securities |
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| 15,939 |
2016-1C Tower Securities |
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| 20,361 |
2017-1C Tower Securities |
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| 24,318 |
2018-1C Tower Securities |
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| 22,270 |
2019-1C Tower Securities |
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| 33,409 |
Revolving Credit Facility (1) |
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| 2,500 |
2018 Term Loan |
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| 125,550 |
Total debt service for the next 12 months |
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| $ | 410,305 |
(1)Amount represents the unused commitment fee. No amounts were outstanding under the Revolving Credit Facility as of September 30, 2019.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to certain market risks that are inherent in our financial instruments. These instruments arise from transactions entered into in the normal course of business.
The following table presents the future principal payment obligations and fair values associated with our long-term debt instruments assuming our actual level of long-term indebtedness as of September 30, 2019:
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| 2019 |
| 2020 |
| 2021 |
| 2022 |
| 2023 |
| Thereafter |
| Total |
| Fair Value | ||||||||
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| (in thousands) | ||||||||||||||||||||||
2014 Senior Notes |
| $ | — |
| $ | — |
| $ | — |
| $ | 750,000 |
| $ | — |
| $ | — |
| $ | 750,000 |
| $ | 757,500 |
2016 Senior Notes |
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| — |
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| — |
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| — |
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| — |
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| — |
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| 1,100,000 |
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| 1,100,000 |
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| 1,141,250 |
2017 Senior Notes |
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| — |
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| — |
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| — |
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| 750,000 |
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| — |
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| — |
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| 750,000 |
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| 763,125 |
2013-2C Tower Securities (1) |
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| — |
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| — |
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| — |
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| — |
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| 575,000 |
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| — |
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| 575,000 |
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| 589,410 |
2014-2C Tower Securities (1) |
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| — |
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| — |
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| — |
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| — |
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| — |
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| 620,000 |
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| 620,000 |
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| 650,175 |
2015-1C Tower Securities (1) |
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| — |
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| 500,000 |
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| — |
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| — |
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| — |
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| — |
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| 500,000 |
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| 502,500 |
2016-1C Tower Securities (1) |
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| — |
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| — |
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| 700,000 |
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| — |
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| — |
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| — |
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| 700,000 |
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| 705,236 |
2017-1C Tower Securities (1) |
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| — |
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| — |
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| — |
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| 760,000 |
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| — |
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| — |
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| 760,000 |
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| 766,300 |
2018-1C Tower Securities (1) |
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| — |
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| — |
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| — |
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| — |
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| 640,000 |
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| — |
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| 640,000 |
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| 662,586 |
2019-1C Tower Securities (1) |
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| — |
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| — |
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| — |
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| — |
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| — |
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| 1,165,000 |
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| 1,165,000 |
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| 1,165,501 |
2018 Term Loan |
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| 6,000 |
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| 24,000 |
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| 24,000 |
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| 24,000 |
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| 24,000 |
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| 2,268,000 |
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| 2,370,000 |
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| 2,372,963 |
Total debt obligation |
| $ | 6,000 |
| $ | 524,000 |
| $ | 724,000 |
| $ | 2,284,000 |
| $ | 1,239,000 |
| $ | 5,153,000 |
| $ | 9,930,000 |
| $ | 10,076,546 |
(1)The anticipated repayment date and the final maturity date for the 2013-2C Tower Securities is April 11, 2023 and April 9, 2048, respectively.
The anticipated repayment date and the final maturity date for the 2014-2C Tower Securities is October 8, 2024 and October 8, 2049, respectively.
The anticipated repayment date and the final maturity date for the 2015-1C Tower Securities is October 8, 2020 and October 10, 2045, respectively.
The anticipated repayment date and the final maturity date for the 2016-1C Tower Securities is July 9, 2021 and July 10, 2046, respectively.
The anticipated repayment date and the final maturity date for the 2017-1C Tower Securities is April 11, 2022 and April 9, 2047, respectively.
The anticipated repayment date and the final maturity date for the 2018-1C Tower Securities is March 9, 2023 and March 9, 2048, respectively.
The anticipated repayment date and the final maturity date for the 2019-1C Tower Securities is January 12, 2025 and January 12, 2050, respectively.
Our current primary market risk exposure is (1) interest rate risk relating to our ability to refinance our debt at commercially reasonable rates, if at all, and (2) interest rate risk relating to the impact of interest rate movements on the variable portion of our 2018 Term Loan and any borrowings that we may incur under our Revolving Credit Facility, which are at floating rates. We manage the interest rate risk on our outstanding debt through our large percentage of fixed rate debt, including two four year interest rate swaps on a majority of our 2018 Term Loan entered into on February 1, 2019 and May 23, 2019. The first 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 second 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. While we cannot predict our ability to refinance existing debt or the impact interest rate movements will have on our existing debt, we continue to evaluate our financial position on an ongoing basis.
We are exposed to market risk from changes in foreign currency exchange rates in connection with our operations in Brazil, Canada, Chile, Peru, Argentina, Colombia, South Africa, and to a lesser extent, our markets in Central America. In each of these countries, we pay most of our selling, general, and administrative expenses and a portion of our operating expenses, such as taxes and utilities incurred in the country in local currency. In addition, in Brazil, Canada, Chile, and South Africa, we receive significantly all of our revenue and pay significantly all of our operating expenses in local currency. In Colombia, Argentina, and Peru, we receive our revenue and pay our operating expenses in a mix of local currency and U.S. dollars. All transactions denominated in currencies other than the U.S. Dollar are reported in U.S. Dollars at the applicable exchange rate. All assets and liabilities are translated into U.S. Dollars at exchange rates in effect at the end of the applicable fiscal reporting period, and all revenues and expenses are translated at average rates for the period. The cumulative translation effect is included in equity as a component of Accumulated other comprehensive income (loss). For the nine months ended September 30, 2019, approximately 13.0% of our revenues and approximately 15.8% of our total operating expenses were denominated in foreign currencies.
We have performed a sensitivity analysis assuming a hypothetical 10% adverse movement in the Brazilian Real from the quoted foreign currency exchange rates at September 30, 2019. As of September 30, 2019, the analysis indicated that such an adverse movement would have caused our revenues and operating income to decline by approximately 1.0% and 0.6%, respectively, for the nine months ended September 30, 2019.
As of September 30, 2019, we had intercompany debt, which is denominated in a currency other than the functional currency of the subsidiary in which it is recorded. As settlement of this debt is anticipated or planned in the foreseeable future, any changes in the foreign currency exchange rates will result in unrealized gains or losses, which will be included in our determination of net income. A change of 10% in the underlying exchange rates of our unsettled intercompany debt at September 30, 2019 would have resulted in approximately $37.8 million of unrealized gains or losses that would have been included in Other income (expense), net in our Consolidated Statements of Operations for the nine months ended September 30, 2019.
Special Note Regarding Forward-Looking Statements
This quarterly report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements concern expectations, beliefs, projections, plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. Specifically, this quarterly report contains forward-looking statements regarding:
our expectations on the future growth and financial health of the wireless industry and the industry participants, the drivers of such growth, the demand for our towers, the future capital investments of our customers, the trends developing in our industry, and competitive factors;
our ability to capture and capitalize on industry growth and the impact of such growth on our financial and operational results;
our intent to grow our tower portfolio domestically and internationally and expand through acquisitions, new builds, and organic lease up on existing towers;
our belief that over the long-term, site leasing revenues will continue to grow as wireless service providers increase their use of our towers due to increasing minutes of network use and data transfer, network expansion and network coverage requirements;
our expectation regarding site leasing revenue growth, on an organic basis, in our domestic and international segments, and the drivers of such growth;
our focus on our site leasing business and belief that our site leasing business is characterized by stable and long-term recurring revenues, reduced exposure to changes in customer spending, predictable operating costs, and minimal non-discretionary capital expenditures;
our expectation that, due to the relatively young age and mix of our tower portfolio, future expenditures required to maintain these towers will be minimal;
our expectation that we will grow our cash flows by adding tenants to our towers at minimal incremental costs and executing monetary amendments;
our expectations regarding churn rates;
our election to be subject to tax as a REIT and our intent to continue to operate as a REIT;
our belief that our business is currently operated in a manner that complies with the REIT rules and our intent to continue to do so;
our plans regarding our distribution policy, and the amount and timing of, and source of funds for, any such distributions;
our expectations regarding the use of NOLs to reduce REIT taxable income;
our expectations regarding our capital allocation strategy, including future allocation decisions among portfolio growth, stock repurchases and dividends, the impact of our election to be taxed as a REIT on that strategy, and our goal of increasing our Adjusted Funds From Operations per share;
our expectations regarding dividends and our ability to grow our dividend in the future and the drivers of such growth;
our expectations regarding our future cash capital expenditures, both discretionary and non-discretionary, including expenditures required for new builds and to maintain, improve, and modify our towers, ground lease purchases, and general corporate expenditures, and the source of funds for these expenditures;
our expectations regarding our business strategies, including our strategy for securing rights to the land underlying our towers, and the impact of such strategies on our financial and operational results;
our intended use of our liquidity;
our intent to maintain our target leverage levels, including in light of our dividend;
our expectations regarding our debt service in 2019 and our belief that our cash on hand, capacity under our Revolving Credit Facility, and our cash flows from operations for the next twelve months will be sufficient to service our outstanding debt during the next twelve months; and
our expectations and estimates regarding certain tax and accounting matters, including the impact on our financial statements.
These forward-looking statements reflect our current views about future events and are subject to risks, uncertainties and assumptions. We wish to caution readers that certain important factors may have affected and could in the future affect our actual results and could cause actual results to differ significantly from those expressed in any forward-looking statement. The most important factors that could prevent us from achieving our goals, and cause the assumptions underlying forward-looking statements and the actual results to differ materially from those expressed in or implied by those forward-looking statements include, but are not limited to, the following:
the impact of consolidation among wireless service providers, including the potential impact of the proposed merger between Sprint and T-Mobile if consummated, on our leasing revenue;
our ability to continue to comply with covenants and the terms of our credit instruments and our ability to obtain additional financing to fund our capital expenditures;
our ability to successfully manage the risks associated with international operations, including risks relating to political or economic conditions, inflation, tax laws, currency restrictions and exchange rate fluctuations, legal or judicial systems, and land ownership;
our ability to successfully manage the risks associated with our acquisition initiatives, including our ability to satisfactorily complete due diligence on acquired towers, the amount and quality of due diligence that we are able to complete prior to closing of any acquisition, our ability to accurately anticipate the future performance of the acquired towers, our ability to receive required regulatory approval, the ability and willingness of each party to fulfill their respective closing conditions and their contractual obligations, and, once acquired, our ability to effectively integrate acquired towers into our business and to achieve the financial results projected in our valuation models for the acquired towers;
the health of the South Africa economy and wireless communications market, and the willingness of carriers to invest in their networks in that market;
developments in the wireless communications industry in general, and for wireless communications infrastructure providers in particular, that may slow growth or affect the willingness or ability of the wireless service providers to expend capital to fund network expansion or enhancements;
our ability to secure as many site leasing tenants as anticipated, recognize our expected economies of scale with respect to new tenants on our towers, and retain current leases on towers;
our ability to secure and deliver anticipated services business at contemplated margins;
our ability to build new towers, including our ability to identify and acquire land that would be attractive for our customers and to successfully and timely address zoning, permitting, weather, availability of labor and supplies and other issues that arise in connection with the building of new towers;
competition for the acquisition of towers and other factors that may adversely affect our ability to purchase towers that meet our investment criteria and are available at prices which we believe will be accretive to our shareholders and allow us to maintain our long-term target leverage ratios while achieving our expected portfolio growth levels;
our capital allocation decisions and the impact on our ability to achieve our expected tower portfolio growth levels;
our ability to protect our rights to the land under our towers, and our ability to acquire land underneath our towers on terms that are accretive;
our ability to sufficiently increase our revenues and maintain expenses and cash capital expenditures at appropriate levels to permit us to meet our anticipated uses of liquidity for operations, debt service and estimated portfolio growth;
the impact of rising interest rates on our results of operations and our ability to refinance our existing indebtedness at commercially reasonable rates or at all;
our ability to successfully estimate the impact of regulatory and litigation matters;
natural disasters and other unforeseen damage for which our insurance may not provide adequate coverage;
a decrease in demand for our towers;
the introduction of new technologies or changes in a tenant’s business model that may make our tower leasing business less desirable to existing or potential tenants;
our ability to qualify for treatment as a REIT for U.S. federal income tax purposes and to comply with and conduct our business in accordance with such rules;
our ability to utilize available NOLs to reduce REIT taxable income; and
our ability to successfully estimate the impact of certain accounting and tax matters, including the effect on our company of adopting certain accounting pronouncements and the availability of sufficient NOLs to offset future REIT taxable income.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
In order to ensure that the information we must disclose in our filings with the Commission is recorded, processed, summarized and reported on a timely basis, we have formalized our disclosure controls and procedures. Our principal executive officer and principal financial officer have reviewed and evaluated the effectiveness of our disclosure controls and procedures, as defined in Securities and Exchange Act Rule 13a-15(e) as of September 30, 2019. Based on such evaluation, such officers have concluded that, as of September 30, 2019, our disclosure controls and procedures were effective.
PART II – OTHER INFORMATION
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
The following table presents information related to our repurchases of Class A common stock during the third quarter of 2019:
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| Total |
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| Total Number of Shares |
| Approximate Dollar Value | ||
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| Number |
| Average |
| Purchased as Part of |
| of Shares that May Yet Be | ||
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| of Shares |
| Price Paid |
| Publicly Announced |
| Purchased Under the | ||
Period |
| Purchased |
| Per Share |
| Plans or Programs (1) |
| Plans or Programs | ||
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7/1/2019 - 7/31/2019 |
| — |
| $ | — |
| — |
| $ | 1,000,000,000 |
8/1/2019 - 8/31/2019 |
| 112,482 |
| $ | 262.38 |
| 112,482 |
| $ | 970,486,675 |
9/1/2019 - 9/30/2019 |
| 593,012 |
| $ | 246.50 |
| 593,012 |
| $ | 824,306,904 |
Total |
| 705,494 |
| $ | 249.04 |
| 705,494 |
| $ | 824,306,904 |
1)On July 29, 2019, our Board of Directors authorized a new $1.0 billion stock repurchase plan, replacing the prior plan authorized on February 16, 2018 which had a remaining authorization of $110.0 million. This new plan authorizes us to purchase, from time to time, up to $1.0 billion of our outstanding Class A common stock through open market repurchases in compliance with Rule 10b-18 under the Exchange Act and/or in privately negotiated transactions at management’s discretion based on market and business conditions, applicable legal requirements and other factors. Shares repurchased will be retired. The new plan has no time deadline and will continue until otherwise modified or terminated by our Board of Directors at any time in its sole discretion.
ITEM 6. EXHIBITS
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Exhibit No. | Description of Exhibits |
31.1 | |
31.2 | |
32.1 | |
32.2 | |
101.INS | XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
101.SCH | XBRL Taxonomy Extension Schema Document. |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. |
104 | Cover Page Interactive File (formatted in Inline XBRL and contained in Exhibit 101). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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| SBA COMMUNICATIONS CORPORATION |
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November 7, 2019 | /s/ Jeffrey A. Stoops |
| Jeffrey A. Stoops |
| Chief Executive Officer |
| (Duly Authorized Officer) |
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November 7, 2019 | /s/ Brendan T. Cavanagh |
| Brendan T. Cavanagh |
| Chief Financial Officer |
| (Principal Financial Officer) |