Form 8-K Amendment

0001193125-12-503334.txt : 20121214 0001193125-12-503334.hdr.sgml : 20121214 20121214161239 ACCESSION NUMBER: 0001193125-12-503334 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20121001 ITEM INFORMATION: Completion of Acquisition or Disposition of Assets ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20121214 DATE AS OF CHANGE: 20121214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SBA COMMUNICATIONS CORP CENTRAL INDEX KEY: 0001034054 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATION SERVICES, NEC [4899] IRS NUMBER: 650716501 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-30110 FILM NUMBER: 121265740 BUSINESS ADDRESS: STREET 1: 5900 BROKEN SOUND PARKWAY CITY: BOCA RATON STATE: FL ZIP: 33487 BUSINESS PHONE: 5619957670 MAIL ADDRESS: STREET 1: 5900 BROKEN SOUND PARKWAY CITY: BOCA RATON STATE: FL ZIP: 33487 8-K/A 1 d450876d8ka.htm FORM 8-K AMENDMENT Form 8-K Amendment

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported) October 1, 2012

SBA Communications Corporation

(Exact Name of Registrant as Specified in its Charter)


Florida	000-30110	65-0716501
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

5900 Broken Sound Parkway N.W. Boca Raton, FL		33487
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code: (561) 995-7670

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.01 Completion of Acquisition or Disposition of Assets.

On October 1, 2012, SBA Communications Corporation (the “Company”) filed a Form 8-K in connection with the completion of the acquisition of TowerCo II Holdings LLC (the “TowerCo acquisition”).

This Form 8-K/A amends the Form 8-K the Company filed on October 1, 2012 to include (i) unaudited consolidated financial statements as of, and for the six months ended, June 30, 2012 of TowerCo II Holdings LLC (“TowerCo”), (ii) audited consolidated financial statements as of, and for the year ended, December 31, 2011 of TowerCo, and (iii) unaudited pro forma condensed combined financial information of the Company giving effect to the TowerCo acquisition, required by Items 9.01(a) and 9.01(b) of Form 8-K.

Item 9.01 Financial Statements and Exhibits.

(a) Financial statements of businesses acquired.

The unaudited consolidated financial statements of TowerCo and the notes thereto, for the six months ended June 30, 2012, are included as Exhibit 99.1 hereto and are incorporated herein by reference.

The audited consolidated financial statements of TowerCo and the notes thereto, for the year ended December 31, 2011, are included as Exhibit 99.2 hereto and are incorporated herein by reference.

(b) Pro forma financial information.

The following unaudited pro forma condensed combined financial information of the Company, giving effect to the TowerCo acquisition, is included in Exhibit 99.3 hereto and is incorporated herein by reference:

Unaudited Pro Forma Condensed Combined Balance Sheet as of June 30, 2012;

Unaudited Pro Forma Condensed Combined Statement of Operations for the six months ended June 30, 2012; and

Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2011.

(d) Exhibits


Exhibit No.		Description

23.1		Consent of McGladrey LLP, Independent Auditor.

99.1		TowerCo II Holdings LLC Unaudited Consolidated Financial Statements for the six months ended June 30, 2012.

99.2		TowerCo II Holdings LLC Audited Consolidated Financial Statements for the year ended December 31, 2011.

99.3		Unaudited Pro Forma Condensed Combined Financial Information.

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 hereunto duly authorized.


SBA COMMUNICATIONS CORPORATION

By:		/s/ Brendan T. Cavanagh
		Brendan T. Cavanagh
		Senior Vice President and Chief Financial Officer

Date: December 14, 2012

EX-23.1 2 d450876dex231.htm CONSENT OF MCGLADREY LLP, INDEPENDENT AUDITOR. Consent of McGladrey LLP, Independent Auditor.

Exhibit 23.1

Consent of Independent Auditor

We consent to the incorporation by reference in the Registration Statement (Nos. 333-41306 and 333-179737) on Form S-3, (No. 333-147473) on Form S-4, and (Nos. 333-166969, 333-155289, 333-69236, 333-46734 and 333-139006) on Form S-8 of SBA Communications Corporation of our report dated February 15, 2012, relating to our audit of the consolidated financial statements of TowerCo II Holdings LLC and subsidiaries as of and for the year ended December 31, 2011, included in this Current Report on Form 8-K/A.

/s/ McGladrey LLP

Raleigh, North Carolina

December 14, 2012

EX-99.1 3 d450876dex991.htm TOWERCO II HOLDINGS LLC UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS TowerCo II Holdings LLC Unaudited Condensed Combined Financial Statements

Exhibit 99.1

TowerCo II Holdings LLC

and Subsidiaries

Consolidated Financial Report

June 30, 2012

Contents


Financial Statements

Consolidated balance sheets		1

Consolidated statements of income		2

Consolidated statements of cash flows		3 - 4

Notes to consolidated financial statements		5 - 15

TowerCo II Holdings LLC and Subsidiaries

Consolidated Balance Sheets

June 30, 2012 and December 31, 2011

(Dollars in Thousands)


	2012		2011
	(unaudited)
Assets
Current Assets
Cash and cash equivalents	$	6,318	$	10,025
Accounts receivable, less allowance for doubtful accounts of $69 and $51 at June 30, 2012 and December 31, 2011, respectively		1,507		478
Prepaid expenses and other		7,871		8,309

Total current assets		15,696		18,812
Property, Equipment and Leasehold Improvements, net		500,596		505,538

Network Location Intangibles, net		145,676		152,151

Debt Issuance Costs, net		6,724		6,622

Other		46,039		34,477

Total assets	$	714,731	$	717,600

Liabilities and Members’ Interest
Current Liabilities
Accounts payable	$	1,129	$	2,042
Accrued expenses		19,469		17,038
Current portion of long-term debt		4,000		4,000

Total current liabilities		24,598		23,080

Asset Retirement Obligation		31,702		30,192

Long-Term Debt, less current portion		391,000		397,000

Other Long-Term Liabilities		51,781		46,751

Total liabilities		499,081		497,023

Commitments (Notes 4 and 6)

Members’ Interest		215,650		220,577

Total liabilities and members’ interest	$	714,731	$	717,600

See Notes to Consolidated Financial Statements.

TowerCo II Holdings LLC and Subsidiaries

Consolidated Statements of Income

Six Months Ended June 30, 2012 and June 30, 2011

(Unaudited)

(Dollars in Thousands)


	2012			2011
Revenues	$	77,933		$	67,106

Operating expenses:
Cost of operations, excluding depreciation, amortization and accretion expenses		33,713			35,956
Selling, general and administrative expenses		7,945			7,264
Depreciation, amortization and accretion expenses		28,236			27,299
Expense related to company sale (Note 9)		2,162			—

Total operating expenses		72,056			70,519

Income (loss) from operations		5,877			(3,413	)

Other (expense) income:
Interest expense		(10,645	)		(10,670	)
Change in value of interest rate caps		(119	)		(1,164	)
Net gain on disposal of property, equipment and leasehold improvements		42			48
Loss on early extinguishment of debt		—			(6,620	)

Total other expense		(10,722	)		(18,406	)

Loss before income taxes		(4,845	)		(21,819	)
Income tax provision		(87	)		(78	)

Net loss	$	(4,932	)	$	(21,897	)

See Notes to Consolidated Financial Statements.

TowerCo II Holdings LLC and Subsidiaries

Consolidated Statements of Cash Flows

Six Months Ended June 30, 2012 and June 30, 2011

(Unaudited)

(Dollars in Thousands)


	2012			2011
Cash Flows From Operating Activities
Net loss	$	(4,932	)	$	(21,897	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation, amortization and accretion expenses		28,236			27,299
Amortization of debt issuance costs in interest expense		725			725
Provision for doubtful accounts		18			20
Change in value of interest rate caps		119			1,164
Non-cash equity compensation		5			—
Net gain on disposal of property, equipment and leasehold improvements		(42	)		(48	)
Loss on early extinguishment of debt		—			6,620
Changes in assets and liabilities:
(Increase) decrease in accounts receivable		(1,047	)		334
Increase in prepaid expenses and other		(11,252	)		(3,192	)
Increase (decrease) in accounts payable, accrued expenses and other long-term liabilities		6,535			(1,921	)

Net cash provided by operating activities		18,365			9,104

Cash Flows From Investing Activities
Purchase of property, equipment and leasehold improvements		(15,244	)		(10,211	)
Purchase of intangible assets		(15	)		(126	)
Purchase of interest rate caps		—			(1,663	)
Proceeds from sale of property, equipment, intangibles, and leasehold improvements		13			93

Net cash used in investing activities		(15,246	)		(11,907	)

Cash Flows From Financing Activities
Proceeds from long-term debt		3,000			405,000
Payments on long-term debt		(9,000	)		(206,000	)
Debt issuance costs		(826	)		(7,856	)
Distributions to members		—			(200,391	)

Net cash used in financing activities		(6,826	)		(9,247	)

(Continued)

TowerCo II Holdings LLC and Subsidiaries

Consolidated Statements of Cash Flows (Continued)

Six Months Ended June 30, 2012 and June 30, 2011

(Unaudited)

(Dollars in Thousands)


	2012			2011
Net decrease in cash and cash equivalents	$	(3,707	)	$	(12,050	)
Cash and cash equivalents:
Beginning		10,025			15,267

Ending	$	6,318		$	3,217

Supplemental Disclosures of Cash Flow Information
Income taxes paid	$	90		$	73

Interest paid	$	12,370		$	10,216

Supplemental Schedule of Noncash Investing and Financing Activities
Asset retirement obligation incurred in connection with purchase of property, equipment, and leasehold improvements and ground lease amendments	$	168		$	77

See Notes to Consolidated Financial Statements.

TowerCo II Holdings LLC and Subsidiaries

Notes to Consolidated Financial Statements

Note 1. Nature of Business and Significant Accounting Policies

TowerCo II Holdings LLC (“TowerCo”) was formed as a Delaware limited liability company on April 16, 2008. The majority of the Class A Units are held by Tailwind Holdings (“ERISA”) UBTI, LP, Tailwind TowerCo II Holdings LLC, Soros Strategic Partners II LP, Altpoint TowerCo Holdings LLC, and Vulcan Tower Holdings LLC (see Note 8).

TowerCo and its wholly owned subsidiaries (collectively referred to as the “Company”) develop and own communication towers in 46 states, Puerto Rico and the District of Columbia. At June 30, 2012, the Company owned 3,258 tower sites and generates revenues by leasing space on these towers primarily to wireless service providers.

In the preparation of the accompanying unaudited consolidated interim financial statements, certain information and disclosures normally included in comprehensive annual financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted. Management believes that the disclosures included in these consolidated interim financial statements are adequate to make the information presented not misleading. It is suggested that these financial statements be read in conjunction with the consolidated financial statements and notes thereto of TowerCo for the year ended December 31, 2011. In the opinion of management, all adjustments necessary to present fairly TowerCo’s financial position as of June 30, 2012, results of operations for the six months ended June 30, 2012 and 2011, and cash flows for the six months ended June 30, 2012 and 2011 have been included. Operating results for any interim period are not necessarily indicative of results that may be expected for the full year.

A summary of the Company’s significant accounting policies follows:

Basis of presentation: The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts of TowerCo and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Use of estimates: The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The significant estimates made by management relate to the fair value and estimated useful lives of long-lived assets, accrued tower construction costs, valuation of management units and assumptions related to asset retirement obligations. These estimates ultimately may differ from actual results and such differences could be material.

Revenue recognition: Revenues from leasing and licensing activities are recognized when earned based on lease or license agreements. Rate increases based on fixed escalation clauses that are included in lease or license agreements are recognized on a straight-line basis over the non-cancelable term of the license or lease. The amounts related to the straight-lining of tenant leases are $35.0 million and $26.9 million as of June 30, 2012 and December 31, 2011, respectively, and are reflected in Other assets on the consolidated balance sheets. Revenues from fees, such as structural analysis fees and site inspection fees, are recognized upon delivery of the related product or service. Amounts received but not yet earned are reflected as unearned revenue. As of June 30, 2012, unearned revenue of $11.3 million and $3.9 million, respectively, are expected to be recognized as revenue during the twelve months ending June 30, 2013 and during periods subsequent to June 30, 2013. As of December 31, 2011, unearned revenue of $10.1 million and $3.4 million, respectively, are expected to be recognized as revenue during 2012 and during periods subsequent to 2012.

TowerCo II Holdings LLC and Subsidiaries

Notes to Consolidated Financial Statements

Note 1. Nature of Business and Significant Accounting Policies (Continued)

Cash and cash equivalents: The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. At times, the Company maintains deposits with banks in amounts in excess of federal depository insurance limits but believes such amounts do not represent a significant credit risk. Cash and cash equivalents also include restricted cash of $0 and approximately $50,000 as of June 30, 2012 and December 31, 2011, respectively.

Property, equipment and leasehold improvements: Property, equipment and leasehold improvements are recorded at cost or at estimated fair value (in the case of acquired properties), adjusted for asset impairment and estimated asset retirement obligations. The Company capitalizes costs incurred in bringing property and equipment to an operational state. Costs clearly associated with the acquisition, development and construction of property and equipment are capitalized as a cost of the assets. Indirect costs that relate to several assets are capitalized and allocated to the assets to which the costs relate. Indirect costs that do not clearly relate to projects under development or construction are charged to expense as incurred.

Depreciation on property and equipment, excluding towers, is computed using the straight-line method over the estimated useful lives of the assets ranging from three to ten years. Depreciation on towers is computed using the straight-line method over the estimated useful life of the shorter of 15 years or the minimum lease term of the underlying ground lease, including estimated renewals. Depreciation on leasehold improvements is computed using the straight-line method over the shorter of the expected lease term or the estimated useful life of the leasehold improvements.

The Company evaluates property, equipment, and leasehold improvements, as well as network location intangibles, whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability of these assets is based on an estimate of the undiscounted future cash flows resulting from the use of the assets and their eventual disposition. In the event such cash flows are not expected to be sufficient to recover the carrying value of the assets, the useful lives of the assets are revised or the assets are written down to their estimated fair values.

Expenditures for maintenance and repairs are expensed as incurred. Betterments, improvements and extraordinary repairs which increase the value or extend the life of an asset are capitalized and depreciated over the remaining estimated useful life of the respective asset.

Network location intangibles: At the acquisition date of towers, the Company classifies the fair value of future tenant leases anticipated to be added to acquired towers as network location intangibles. These intangibles are estimated to have an economic useful life consistent with the economic useful life of the related tower assets, which is typically 15 years. Amortization is provided using the straight-line method over the estimated useful life, as the benefit associated with these intangible assets is anticipated to be derived evenly over the life of the assets.

Debt issuance costs: The Company capitalizes costs relating to the issuance of long-term debt. The costs are amortized using the straight-line method over the term of the related debt, which approximates the effective interest method.

Asset retirement obligation: The Company complies with the provisions of the Asset Retirement and Environmental Obligations topic of the FASB Accounting Standards Codification (“ASC 410”). ASC 410 addresses the financial accounting and reporting requirements associated with the Company’s contractual or legal obligation to retire tangible long-lived assets and the related asset retirement costs.

TowerCo II Holdings LLC and Subsidiaries

Notes to Consolidated Financial Statements

Note 1. Nature of Business and Significant Accounting Policies (Continued)

The fair value of a liability for asset retirement obligations is recognized in the period in which it is incurred and can be reasonably estimated. Such asset retirement costs are capitalized as part of the carrying amount of the related long-lived asset and depreciated over the asset’s useful life. Fair value estimates of liabilities for asset retirement obligations generally involve discounting of estimated future cash flows. Periodic accretion of such liabilities due to the passage of time is recorded as an accretion expense as part of operating expenses. The Company has certain legal obligations related to tower assets, principally obligations to remediate leased land on which certain of the Company’s tower assets are located. The significant assumptions used in estimating the Company’s aggregate asset retirement obligation are: timing of tower removals; cost of tower removals; timing and number of land lease renewals; expected inflation rates; and credit-adjusted risk-free interest rates that approximate the Company’s incremental borrowing rate.

Activity in the asset retirement obligation for the six months ended June 30, 2012 and 2011 is as follows (in thousands):


	2012			2011
Balance, beginning	$	30,192		$	27,240
Additions		168			77
Adjustments due to lease amendments		—			(1,124	)
Discharge of asset retirement obligation		(306	)		(369	)
Accretion due to passage of time		1,648			1,454

Balance, ending	$	31,702		$	27,278

Significant concentrations and credit risk: The Company’s credit risk consists primarily of accounts receivable with national, regional and local wireless communications providers. The Company performs periodic credit evaluations of its customers’ financial condition and provides allowances for doubtful accounts, as required, based upon factors surrounding the credit risk of specific customers, historical trends and other information. The Company generally does not require collateral. The following is a list of significant customers and the percentage of total revenue derived from such customers for the six months ended June 30, 2012 and 2011.


	2012			2011
Sprint Nextel		57.3	%		55.0	%
AT&T		10.8			10.3

		68.1	%		65.3	%

Sprint Nextel accounted for 8.7% and 5.6% of total accounts receivable at June 30, 2012 and December 31, 2011, respectively. AT&T accounted for 1.1% and 11.8% of total accounts receivable at June 30, 2012 and December 31, 2011, respectively. Two other customers comprised 43.3% and 11.5% of total accounts receivable at June 30, 2012, and three other customers comprised 21.0%, 17.1% and 11.8% of total accounts receivable at December 31, 2011.

Income taxes: The Company is a limited liability corporation (“LLC”) and is treated as a partnership for federal and state income tax purposes, except for those states that do not recognize pass-through treatment and impose “entity-level” income taxes. Accordingly, income, losses and credits are passed through directly to the members. As an LLC, each member’s liability is limited to the extent of their individual capital account. However, one of the Company’s subsidiaries, TowerCo Staffing, Inc., is a taxable entity. For that subsidiary, the liability method is used in accounting for income taxes, and deferred income tax assets and liabilities are determined based on differences between the financial reporting and income tax basis of assets and liabilities.

TowerCo II Holdings LLC and Subsidiaries

Notes to Consolidated Financial Statements

Note 1. Nature of Business and Significant Accounting Policies (Continued)

As part of the process of preparing the consolidated financial statements, the Company is required to estimate income taxes in each of the jurisdictions in which it operates. This process involves estimating the actual current income tax liability together with assessing temporary differences resulting from differing treatment of items for income tax and accounting purposes. These differences result in deferred income tax assets and liabilities. The Company must then assess the likelihood that its deferred income tax assets will be recovered from future taxable income. To the extent that the Company believes that recovery is not more likely than not, it must establish a valuation allowance. Significant management judgment is required in determining the provision for income taxes, deferred income tax assets and liabilities and any valuation allowance recorded against net deferred income tax assets.

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. With few exceptions, the Company is no longer subject to income tax examinations by the U.S. federal, state, or local tax authorities for years before 2008.

Property taxes: The Company typically receives notifications and invoices in arrears for property taxes associated with the tangible personal property and real property used in its site leasing business. As a result, the Company recognizes property tax expense, which is reflected as a component of cost of operations, based on its best estimate of anticipated property tax payments related to the current period. The Company considers several factors in establishing this estimate, including the historical level of incurred property taxes, the location of the property, awareness of jurisdictional property value assessment methods and industry related property tax information. If estimates regarding anticipated property tax expenses are incorrect, a future increase or decrease in cost of operations may be required. Accrued property tax at June 30, 2012 and December 31, 2011 is $2.3 million and $1.8 million, respectively, and reflected within accrued expenses on the consolidated balance sheets.

Financial instruments: The carrying amount of cash and cash equivalents approximates fair value for these instruments. The carrying amount of long-term debt approximates fair value due to its variable interest rate approximating a market rate. Interest rate caps are reported at fair value. These estimated fair value amounts have been determined using available market information or other appropriate valuation methodologies.

TowerCo II Holdings LLC and Subsidiaries

Notes to Consolidated Financial Statements

Note 1. Nature of Business and Significant Accounting Policies (Continued)

Derivative financial instruments: Derivative financial instruments are recognized as either assets or liabilities at their fair value in the balance sheet with the changes in the fair value reported in current period income. The only derivative financial instruments at June 30, 2012 and December 31, 2011 are interest rate caps with fair values of less than $0.1 million and $0.1 million, respectively, and these are reported on the balance sheets within other long-term assets. During February 2011, the Company purchased three interest rate caps for $0.9 million which terminate in February 2014. During February 2011, the Company also paid $0.1 million to extend the termination date of its existing interest rate caps, previously purchased for an aggregate amount of $2.9 million during 2009 and 2010, to February 2014. At June 30, 2012, the Company’s caps have a total notional amount of $200 million and require the bank to pay TowerCo an amount equal to the excess of the 3-month LIBOR over the cap rate of 3%, if any. The caps do not qualify for hedge accounting. Changes in the fair value of the instruments are recorded on the income statement as change in value of interest rate cap. The Company recognized losses of $0.1 million and $1.2 million during the six months ended June 30, 2012 and 2011, respectively, on these instruments.

The Company is exposed to certain risks relating to its ongoing business operations. The primary risk managed by using its derivative instruments is interest rate risk. An interest rate cap is entered into to manage interest rate risk associated with the Company’s variable-rate borrowings. The Company is exposed to credit losses in the event of significant changes of interest rates in the future.

Member interest-based compensation: Member interest-based compensation is recognized as compensation expense measured at fair value on the grant date in accordance with FASB ASC 718 Compensation – Stock Compensation.

Costs of operations: Costs of operations consist of direct costs incurred to provide the related services including ground lease cost, tower maintenance and related real estate taxes. Costs of operations do not include depreciation and accretion expense on the related assets.

Losses on executory contracts: In connection with tower land leases and tower antenna space leases as further described in Note 4, certain tower sites may generate future lease expense in excess of current contractual lease revenue over the remaining term of the respective agreements. The Company recognizes losses on these executory contracts as incurred.

Employee benefit plans: The Company provides a 401(k) plan for the benefit of all its employees meeting specified eligibility requirements. The Company’s contributions were $0.2 million for each of the six months ended June 30, 2012 and 2011.

TowerCo II Holdings LLC and Subsidiaries

Notes to Consolidated Financial Statements

Note 2. Property, Equipment and Leasehold Improvements

Property, equipment and leasehold improvements consist of the following at June 30, 2012 and December 31, 2011 (in thousands):


	2012			2011
Towers	$	578,235		$	574,361
Land easements		69,228			57,971
Furniture and fixtures		558			551
Equipment		1,852			1,820
Leasehold improvements		87			87
Software		972			885
Autos		78			123
Data		92			—

		651,102			635,798
Less accumulated depreciation		(152,213	)		(131,903	)

		498,889			503,895
Construction in progress		1,707			1,643

	$	500,596		$	505,538

Towers are generally located on land leased by the Company. Such leases generally have initial terms of five years with options for renewal. The Company assumes that tower land leases will be renewed through the life of the existing tenant leases. In order to secure permanent rights to land under its towers, the Company routinely purchases perpetual easements for that land.

Note 3. Network Location Intangibles

When the Company acquires towers accounted for as asset acquisitions, the Company allocates the purchase price to property, equipment and leasehold improvements and any related tangible property and intangible assets, referred to as a “network location intangible”, based on their relative estimated fair values.

The gross and net carrying amounts for network location intangibles are as follows at June 30, 2012 and December 31, 2011 (in thousands):


	2012			2011
Gross carrying amount	$	194,601		$	194,586
Less accumulated amortization		(48,925	)		(42,435	)

Network location intangibles, net	$	145,676		$	152,151

Estimated amortization expense on the Company’s network intangibles is $6.5 million for the six months ending December 31, 2012 and $13.0 million for each of the next four years thereafter.

TowerCo II Holdings LLC and Subsidiaries

Notes to Consolidated Financial Statements

Note 4. Leases

As lessee: The Company leases land and office facilities under noncancelable operating leases which have expiration dates at various times through 2111. Towers are generally located on land leased by the Company. Such leases generally have initial terms of five years with options for renewal. The following is a schedule of future minimum lease payments for operating leases as of June 30, 2012, assuming renewal of tower land leases, to the extent contractually available, through the life of the existing tenant leases, including renewals (in thousands):


Year Ending December 31,	Amount
2012	$	26,218
2013		53,384
2014		54,455
2015		55,282
2016		56,269
Thereafter		999,000

	$	1,244,608

Total rent expense incurred was $31.4 million and $32.5 million for the six months ended June 30, 2012 and 2011, respectively. Rate increases based on fixed escalation clauses that are included in tower land lease agreements are recognized on a straight-line basis over the same period described above. The amounts related to the straight-lining of tower land leases are $47.9 million and $43.3 million at June 30, 2012 and December 31, 2011, respectively, and are reflected in other long-term liabilities on the consolidated balance sheets.

As lessor: The Company leases antenna space on multi-tenant towers to a variety of wireless service providers under noncancelable operating leases. The tenant leases are generally for initial terms of five to ten years and include options for renewal. As of June 30, 2012, future minimum rental receipts under operating leases that have initial or remaining noncancelable terms are as follows (in thousands):


Year Ending December 31,	Amount
2012	$	60,194
2013		141,807
2014		134,646
2015		116,578
2016		81,240
Thereafter		319,938

	$	854,403

TowerCo II Holdings LLC and Subsidiaries

Notes to Consolidated Financial Statements

Note 5. Income Taxes

The Company’s loss before income taxes for the six months ended June 30, 2012 and 2011 is broken down as follows (in thousands):


	2012			2011
Income (loss) before income taxes:
Flow through entities	$	(5,079	)	$	(22,027	)
Taxable entity		234			208

Loss before income taxes	$	(4,845	)	$	(21,819	)

The reconciliation of income taxes computed at the U.S. federal statutory rate to income tax expense for the six months ended June 30, 2012 and 2011 is as follows:


	2012			2011
Federal income tax benefit at statutory rate		—	%		—	%
Income taxes in taxable subsidiary		1.80			0.36

Effective income tax rate		1.80	%		0.36	%

The Company’s taxable subsidiary, TowerCo Staffing, Inc., has deferred income tax amounts as follows at June 30, 2012 and December 31, 2011 (in thousands):


	2012		2011
Current:
Deferred income tax assets:
Accrued expenses	$	211	$	209

Total net deferred income taxes, current	$	211	$	209

Note 6. Long-Term Debt

On February 2, 2011, the Company amended and restated a prior credit facility, creating a $440 million Senior Secured Credit Facility (the “2011 Credit Facility”). The 2011 Credit Facility includes a $400 million term loan (the “2011 Term Loan”) that bore interest at a rate of LIBOR plus 3.75%, with a LIBOR floor of 1.50%. The Company incurred costs of $7.3 million related to the 2011 Term Loan, which are being amortized over the life of the loan. The 2011 Term Loan requires the Company to re-pay $1 million of principal at the end of each quarter, beginning June 30, 2011 through December 31, 2016, with the $377 million balance due on February 2, 2017. The current portion of the long-term debt was $4.0 million at June 30, 2012.

TowerCo II Holdings LLC and Subsidiaries

Notes to Consolidated Financial Statements

Note 6. Long-Term Debt (Continued)

On March 23, 2012, the Company amended the 2011 Credit Facility. This amendment reduced the interest rate to LIBOR plus 3.50%, with a LIBOR floor of 1.00%. No other terms of the 2011 Credit Facility were changed in this amendment. The Company incurred costs of $0.8 million related to the amendment of the 2011 Credit Facility, which are being amortized over the remaining life of the loan.

The 2011 Credit Facility also includes a $40 million Revolving Line of Credit (the “2011 Revolver”). The 2011 Revolver bears interest at a rate of LIBOR plus 3.50%. In addition, the Company is required to pay a commitment fee of 0.50% per annum on undrawn portions of the 2011 Revolver and a $150,000 annual administrative fee. The 2011 Revolver expires on February 2, 2015, and any outstanding amounts under the 2011 Revolver are due at that date.

The outstanding amount under the 2011 Revolver was $0 and $4.0 million at June 30, 2012 and December 31, 2011, respectively. At June 30, 2012 and December 31, 2011, the Company was using $1.80 million and $1.75 million of capacity, respectively, on the 2011 Revolver to secure letters of credit securing removal bonds for towers. As such, the available borrowing under the 2011 Revolver was $38.20 million and $34.25 million at June 30, 2012 and December 31, 2011, respectively. The Company incurred costs of $0.5 million related to the 2011 Revolver, which are being amortized over the life of the loan.

The 2011 Credit Facility is collateralized by all of the tangible and intangible assets of the Company. The 2011 Credit Facility contains a number of covenants that, among other things, restrict the Company’s ability to incur additional indebtedness; create liens on assets; merge with or acquire any other company; engage in certain transactions with affiliates; pay dividends or make capital distributions. In addition, the 2011 Credit Facility requires compliance with certain financial covenants including maintaining a maximum debt to pro forma Annualized EBITDA ratio, a minimum interest coverage ratio, and maximum capital expenditure limits, all as further defined in the 2011 Credit Facility. As of June 30, 2012 the Company was in compliance with all required debt covenants. The weighted average interest rate on outstanding borrowings under the 2011 Credit Facility was 4.50% at June 30, 2012. Accrued interest was $1.2 million and $1.7 million at June 30, 2012 and December 31, 2011, respectively, and primarily related to the credit facilities described above.

The Company accounted for the 2011 Credit Facility as an extinguishment of a previous credit facility, and recorded a loss on extinguishment of debt during the six months ended June 30, 2011 of $6.6 million related to the write-off of unamortized debt issuance costs.

TowerCo II Holdings LLC and Subsidiaries

Notes to Consolidated Financial Statements

Note 7. Fair Value Measurements

Guidance provided by the FASB defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company utilizes valuation techniques to maximize the use of observable inputs and minimize the use of unobservable inputs. Assets and liabilities recorded at fair value are categorized within the fair value hierarchy based upon the level of judgment associated with the inputs used to measure their value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Inputs are broadly defined as assumptions market participants would use in pricing an asset or liability. The three levels of the fair value hierarchy are described below:


Level 1:		Financial instruments with unadjusted, quoted prices listed on active market exchanges.

Level 2:		Financial instruments determined using prices for recently traded financial instruments with similar underlying terms as well as directly or indirectly observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3:		Financial instruments that are not actively traded on an active exchange. This category includes situations where there is little, if any, market activity for the financial instrument. The prices are determined using significant unobservable inputs or valuation techniques.

Assets measured at fair value on a recurring basis: The Company has interest rate caps which are measured at fair value on a recurring basis; that is, the instruments are measured at fair value at each reporting period. The following tables present the Company’s financial instruments carried on the balance sheet by level within the fair value hierarchy (as described above) as of June 30, 2012 for which a recurring change in fair value has been recorded during the six months ended June 30, 2012 (in thousands):


	June 30, 2012
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Interest rate caps	$	—	$	9	$	—	$	9

The Company’s interest rate caps require the bank to pay the Company an amount equal to the excess of the 3-month LIBOR over the cap rate of 3%, if any. The LIBOR cap rate is observable at commonly quoted intervals for the full term of the caps and is therefore considered a Level 2 item.

TowerCo II Holdings LLC and Subsidiaries

Notes to Consolidated Financial Statements

Note 8. Members’ Interest

The Company has the authority to issue 740,591 Class A Units, 8,775,000 Class B Units, 8,775,000 Class C Units and 8,775,000 Class D Units. At June 30, 2012, there are 740,591 Class A Units, 8,535,350 Class B Units, 8,718,000 Class C Units and 8,000,000 Class D Units issued and outstanding. Class B Units, Class C Units, and Class D Units are nonvoting (“nonvoting units”).

The Company issued all of the nonvoting units to employees at an aggregate purchase price of nil. Nonvoting units issued vest over three years and do not expire. Vesting can be accelerated upon a change of control as defined. As the nonvoting units were issued at an estimated de minimis fair value, no compensation expense was recorded related to the issuance or vesting. There were 8,338,808 and 8,506,551 vested Class B Units at June 30, 2012 and December 31, 2011, respectively. There were 8,419,697 and 8,299,500 vested Class C Units at June 30, 2012 and December 31, 2011, respectively. There were 7,600,000 vested Class D Units at both June 30, 2012 and December 31, 2011.

In corresponding alphabetical order of the class unit letter, each class of member interest has distribution preference over subsequent classes. For example, Class B Units are eligible to share in distributions only if all Class A Units have received minimum distributions, as defined in the agreements.

Note 9. Subsequent Events

On June 25, 2012, the Company entered into an agreement with SBA Communications Corp. (“SBA”) to sell the Company, excluding its wholly owned subsidiaries TowerCo Staffing, Inc. and TowerCo III Holdings LLC. The closing occurred on October 1, 2012 and the consideration paid by SBA was $1.2 billion in cash and 4.6 million shares of SBA Class A common stock.

As of June 30, 2012, the Company had incurred approximately $2.2 million of costs related to the transaction, primarily professional fees, which are reflected as expenses related to company sale on the consolidated statements of income.

In connection with, and immediately preceding, the above transaction, TowerCo III Holdings LLC and TowerCo Staffing, Inc. (collectively “TowerCo III”) were distributed to the then owners of the Company. TowerCo III retained assets in amounts expected to be needed to satisfy certain liabilities that were also retained by TowerCo III. Those liabilities primarily relate to employee severance and commitments under an operating lease for office space.

EX-99.2 4 d450876dex992.htm TOWERCO II HOLDINGS LLC AUDITED COMBINED FINANCIAL STATEMENTS FOR THE YEAR ENDED TowerCo II Holdings LLC Audited Combined Financial Statements for the Year Ended

Exhibit 99.2

TowerCo II Holdings LLC

and Subsidiaries

Consolidated Financial Report

December 31, 2011

Contents


Independent Auditor’s Report		1

Financial Statements

Consolidated balance sheet		2

Consolidated statement of income		3

Consolidated statement of members’ interest		4

Consolidated statement of cash flows		5 - 6

Notes to consolidated financial statements		7 - 16

Independent Auditor’s Report

To the Board of Representatives

TowerCo II Holdings LLC

Cary, North Carolina

We have audited the accompanying consolidated balance sheet of TowerCo II Holdings LLC and subsidiaries (the “Company”) as of December 31, 2011, and the related consolidated statements of income, members’ interest, and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of TowerCo II Holdings LLC and subsidiaries as of December 31, 2011, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ McGladrey LLP

Raleigh, North Carolina

February 15, 2012, except for

Note 9, as to which the date

is December 14, 2012

Member of the RSM International network of independent accounting, tax and consulting firms.

TowerCo II Holdings LLC and Subsidiaries

Consolidated Balance Sheet

December 31, 2011

(Dollars in Thousands)


Assets
Current Assets
Cash and cash equivalents	$	10,025
Accounts receivable, less allowance for doubtful accounts of $51		478
Prepaid expenses and other		8,309

Total current assets		18,812

Property, Equipment and Leasehold Improvements, net		505,538

Network Location Intangibles, net		152,151

Debt Issuance Costs, net		6,622

Other		34,477

Total assets	$	717,600

Liabilities and Members’ Interest
Current Liabilities
Accounts payable	$	2,042
Accrued expenses		17,038
Current portion of long-term debt		4,000

Total current liabilities		23,080

Asset Retirement Obligation		30,192

Long-Term Debt, less current portion		397,000

Other Long-Term Liabilities		46,751

Total liabilities		497,023

Commitments (Notes 4 and 6)

Members’ Interest		220,577

Total liabilities and members’ interest	$	717,600

See Notes to Consolidated Financial Statements.

TowerCo II Holdings LLC and Subsidiaries

Consolidated Statement of Income

Year Ended December 31, 2011

(Dollars in Thousands)


Revenues	$	140,319

Operating expenses:
Cost of operations, excluding depreciation, amortization and accretion expenses		70,639
Selling, general and administrative expenses		14,886
Depreciation, amortization and accretion expenses		54,567

Total operating expenses		140,092

Income from operations		227

Other (expense) income:
Interest expense		(22,198	)
Change in value of interest rate caps		(1,535	)
Net loss on disposal of property, equipment and leasehold improvements		(481	)
Loss on early extinguishment of debt		(6,620	)
Interest income		1

Total other expense		(30,833	)

Loss before income taxes		(30,606	)
Income tax provision		(59	)

Net loss	$	(30,665	)

See Notes to Consolidated Financial Statements.

TowerCo II Holdings LLC and Subsidiaries

Consolidated Statement of Members’ Interest

Year Ended December 31, 2011

(Dollars in Thousands)


Balance at December 31, 2010		451,633
Distributions		(200,391	)
Net loss		(30,665	)

Balance at December 31, 2011	$	220,577

See Notes to Consolidated Financial Statements.

TowerCo II Holdings LLC and Subsidiaries

Consolidated Statement of Cash Flows

Year Ended December 31, 2011

(Dollars in Thousands)


Cash Flows From Operating Activities
Net loss	$	(30,665	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation, amortization and accretion expenses		54,567
Amortization of debt issuance costs in interest expense		1,400
Provision for doubtful accounts		(9	)
Change in value of interest rate caps		1,535
Net loss on disposal of property, equipment and leasehold improvements		481
Loss on early extinguishment of debt		6,620
Changes in assets and liabilities:
Decrease in accounts receivable		212
Increase in prepaid expenses and other		(14,943	)
Increase in accounts payable, accrued expenses and other long-term liabilities		8,776

Net cash provided by operating activities		27,974

Cash Flows From Investing Activities
Purchase of property, equipment and leasehold improvements		(24,926	)
Purchase of intangible assets		(177	)
Purchase of interest rate caps		(1,068	)
Proceeds from sale of property, equipment, intangibles, and leasehold improvements		202

Net cash used in investing activities		(25,969	)

Cash Flows From Financing Activities
Proceeds from issuance of long-term debt		409,000
Payments on long-term debt		(208,000	)
Debt issuance costs		(7,856	)
Distributions to members		(200,391	)

Net cash used in financing activities		(7,247	)

(Continued)

TowerCo II Holdings LLC and Subsidiaries

Consolidated Statement of Cash Flows (Continued)

Year Ended December 31, 2011

(Dollars in Thousands)


Net decrease in cash and cash equivalents	$	(5,242	)
Cash and cash equivalents:
Beginning		15,267

Ending	$	10,025

Supplemental Disclosures of Cash Flow Information
Income taxes paid	$	180

Interest paid	$	21,012

Supplemental Schedule of Noncash Investing and Financing Activities
Asset retirement obligation incurred in connection with purchase of property, equipment, and leasehold improvements and ground lease amendments	$	1,275

See Notes to Consolidated Financial Statements.

TowerCo II Holdings LLC and Subsidiaries

Notes to Consolidated Financial Statements

Note 1. Nature of Business and Significant Accounting Policies

TowerCo and its wholly owned subsidiaries (collectively referred to as the “Company”) develop and own communication towers in 46 states, Puerto Rico and the District of Columbia. At December 31, 2011, the Company owns 3,243 tower sites and generates revenues by leasing space on these towers primarily to wireless service providers. The Company intends to actively build and acquire additional communication towers.

A summary of the Company’s significant accounting policies follows:

Revenue recognition: Revenues from leasing and licensing activities are recognized when earned based on lease or license agreements. Rate increases based on fixed escalation clauses that are included in lease or license agreements are recognized on a straight-line basis over the non-cancelable term of the license or lease. This amount related to the straight-lining of tenant leases is $26.9 million at December 31, 2011 and is reflected in Other assets on the consolidated balance sheet. Revenues from fees, such as structural analysis fees and site inspection fees, are recognized upon delivery of the related product or service. Amounts received but not yet earned are reflected as unearned revenue. Unearned revenue of $10.1 million and $3.4 million, respectively, are expected to be recognized as revenue during 2012 and during periods subsequent to 2012.

TowerCo II Holdings LLC and Subsidiaries

Notes to Consolidated Financial Statements

Note 1. Nature of Business and Significant Accounting Policies (Continued)

TowerCo II Holdings LLC and Subsidiaries

Notes to Consolidated Financial Statements

Note 1. Nature of Business and Significant Accounting Policies (Continued)

Activity in the asset retirement obligation for the year ended December 31, 2011 is as follows (in thousands):


Balance, beginning	$	27,240
Additions		242
Adjustments due to lease amendments		1,033
Discharge of asset retirement obligation		(797	)
Accretion due to passage of time		2,474

Balance, ending	$	30,192


Sprint Nextel	55.7	%
AT&T	10.4

	66.1	%

Sprint Nextel accounted for 5.6% of total accounts receivable at December 31, 2011. AT&T accounted for 11.8% of total accounts receivable at December 31, 2011. Three other customers comprised 21.0%, 17.1% and 11.8% of total accounts receivable at December 31, 2011.

TowerCo II Holdings LLC and Subsidiaries

Notes to Consolidated Financial Statements

Note 1. Nature of Business and Significant Accounting Policies (Continued)

Property taxes: The Company typically receives notifications and invoices in arrears for property taxes associated with the tangible personal property and real property used in its site leasing business. As a result, the Company recognizes property tax expense, which is reflected as a component of cost of operations, based on its best estimate of anticipated property tax payments related to the current period. The Company considers several factors in establishing this estimate, including the historical level of incurred property taxes, the location of the property, awareness of jurisdictional property value assessment methods and industry related property tax information. If estimates regarding anticipated property tax expenses are incorrect, a future increase or decrease in cost of operations may be required. Accrued property tax at December 31, 2011 is $1.8 million and reflected within accrued expenses on the consolidated balance sheet.

Derivative financial instruments: Derivative financial instruments are recognized as either assets or liabilities at their fair value in the balance sheet with the changes in the fair value reported in current period income. The only derivative financial instruments at December 31, 2011 are interest rate caps with a fair value of $0.1 million and these are reported on the balance sheet within other long-term assets. During February, 2011, the Company purchased three interest rate caps for $0.9 million which terminate in February 2014. During February, 2011, the Company also paid $0.1 million to extend the termination date of its existing interest rate caps, previously purchased for an aggregate amount of $2.9 million during 2009 and 2010, to February 2014. At December 31, 2011, the Company’s caps have a total notional amount of $200 million and require the bank to pay TowerCo an amount equal to the excess of the 3-month LIBOR over the cap rate of 3%, if any. The caps do not qualify for hedge accounting. Changes in the fair value of the instruments are recorded on the income statement as change in value of interest rate cap. The Company recognized losses of $1.5 million during 2011 on these instruments.

TowerCo II Holdings LLC and Subsidiaries

Notes to Consolidated Financial Statements

Note 1. Nature of Business and Significant Accounting Policies (Continued)

Employee benefit plans: The Company provides a 401(k) plan for the benefit of all its employees meeting specified eligibility requirements. The Company’s contribution was $0.3 million for the year ended December 31, 2011.

Note 2. Property, Equipment and Leasehold Improvements

Property, equipment and leasehold improvements consist of the following at December 31, 2011 (in thousands):


Towers	$	574,361
Land easements		57,971
Furniture and fixtures		551
Equipment		1,820
Leasehold improvements		87
Software		885
Autos		123

		635,798
Less accumulated depreciation		(131,903	)

		503,895
Construction in progress		1,643

	$	505,538

TowerCo II Holdings LLC and Subsidiaries

Notes to Consolidated Financial Statements

Note 3. Network Location Intangibles

The gross and net carrying amounts for network location intangibles at December 31, 2011 are as follows (in thousands):


Gross carrying amount	$	194,586
Less accumulated amortization		(42,435	)

Network location intangibles, net	$	152,151

Estimated amortization expense on the Company’s network intangibles is $13.0 million for each of the next five years.

Note 4. Leases

As lessee: The Company leases land and office facilities under noncancelable operating leases which have expiration dates at various times through 2111. Towers are generally located on land leased by the Company. Such leases generally have initial terms of five years with options for renewal. The following is a schedule of future minimum lease payments for operating leases for the years ending December 31, assuming renewal of tower land leases, to the extent contractually available, through the life of the existing tenant leases, including renewals (in thousands):


Year Ending December 31,	Amount
2012	$	52,385
2013		53,615
2014		54,697
2015		55,709
2016		56,879
Thereafter		987,786

	$	1,261,071

Total rent expense incurred was $64.0 million for the year ended December 31, 2011. Rate increases based on fixed escalation clauses that are included in tower land lease agreements are recognized on a straight-line basis over the same period described above. This amount related to the straight-lining of tower land leases is $43.3 million at December 31, 2011 and is reflected in other long-term liabilities on the consolidated balance sheet.

TowerCo II Holdings LLC and Subsidiaries

Notes to Consolidated Financial Statements

Note 4. Leases (Continued)

As lessor: The Company leases antenna space on multi-tenant towers to a variety of wireless service providers under noncancelable operating leases. The tenant leases are generally for initial terms of five to ten years and include options for renewal. Future minimum rental receipts under operating leases that have initial or remaining noncancelable terms are as follows (in thousands):


Year Ending December 31,	Amount
2012	$	132,667
2013		128,819
2014		121,183
2015		103,331
2016		69,508
Thereafter		295,349

	$	850,857

Note 5. Income Taxes

The Company’s loss before income taxes for the year ended December 31, 2011 is broken down as follows (in thousands):


Income (loss) before income taxes:
Flow through entities	$	(31,023	)
Taxable entity		417

Loss before income taxes	$	(30,606	)

The reconciliation of income taxes computed at the U.S. federal statutory rate to income tax expense for the year ended December 31, 2011 is as follows:


Federal income tax benefit at statutory rate	—	%
Income taxes in taxable subsidiary	0.19

Effective income tax rate	0.19	%

The Company’s taxable subsidiary, TowerCo Staffing, Inc., has deferred income tax amounts at December 31, 2011 as follows (in thousands):


Current:
Deferred income tax assets:
Accrued expenses	$	211

Total net deferred income taxes, current	$	211

TowerCo II Holdings LLC and Subsidiaries

Notes to Consolidated Financial Statements

Note 6. Long-Term Debt

On November 24, 2009 the Company completed a $240 million Senior Secured Credit Facility (the “2009 Credit Facility”). The 2009 Credit Facility included a $200 million term loan (the “2009 Term Loan”) that bore interest at a rate of LIBOR plus 4%, with a LIBOR floor of 2%. The Company incurred costs of $7.5 million related to the 2009 Term Loan, which were being amortized over the 5-year life of the loan. The 2009 Term Loan required the Company to re-pay $0.5 million of principal at the end of each quarter. The 2009 Credit Facility also included a $40 million revolving line of credit (the “2009 Revolver”) that bore interest at a rate of LIBOR plus 3.75%, with a LIBOR floor of 2.0%. The Company incurred costs of $1.5 million related to the 2009 Revolver, which were being amortized over the 3-year life of the loan.

On February 2, 2011, the Company amended and restated the 2009 Credit Facility, creating a $440 million Senior Secured Credit Facility (the “2011 Credit Facility”). The 2011 Credit Facility includes a $400 million term loan (the “2011 Term Loan”) that bears interest at a rate of LIBOR plus 3.75%, with a LIBOR floor of 1.50%. The Company incurred costs of $7.3 million related to the 2011 Term Loan, which are being amortized over the 5-year life of the loan. The 2011 Term Loan requires that the Company re-pay $1 million of principal at the end of each quarter, beginning June 30, 2011 through December 31, 2016, with the $377 million balance due on February 2, 2017. The current portion of the long-term debt was $4.0 million at December 31, 2011.

The outstanding amount under the 2011 Revolver was $4.0 million at December 31, 2011. In addition to the outstanding amount, at December 31, 2011 the Company was using $1.75 million of capacity on the 2011 Revolver to secure letters of credit securing removal bonds for towers. As such, the available borrowing under the 2011 Revolver was $34.25 million at December 31, 2011. The Company incurred costs of $0.5 million related to the 2011 Revolver, which are being amortized over the 4-year life of the loan.

The 2011 Credit Facility is collateralized by all of the tangible and intangible assets of the Company. The 2011 Credit Facility contains a number of covenants that, among other things, restrict the Company’s ability to incur additional indebtedness; create liens on assets; merge with or acquire any other company; engage in certain transactions with affiliates; pay dividends or make capital distributions. In addition, the 2011 Credit Facility requires compliance with certain financial covenants including maintaining a maximum debt to pro forma Annualized EBITDA ratio, a minimum interest coverage ratio, and maximum capital expenditure limits, all as further defined in the 2011 Credit Facility. As of December 31, 2011 the Company was in compliance with all required debt covenants. The weighted average interest rate on outstanding borrowings under the 2011 Credit Facility was 5.25% at December 31, 2011. Accrued interest was $1.7 million at December 31, 2011 and primarily related to the credit facilities described above.

The Company accounted for the 2011 Credit Facility as an extinguishment of the 2009 Credit Facility, and recorded a loss on extinguishment of debt during 2011 of $6.6 million related to the write-off of unamortized debt issuance costs.

TowerCo II Holdings LLC and Subsidiaries

Notes to Consolidated Financial Statements

Note 7. Fair Value Measurements


Level 1:		Financial instruments with unadjusted, quoted prices listed on active market exchanges.

Level 2:		Financial instruments determined using prices for recently traded financial instruments with similar underlying terms as well as directly or indirectly observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3:		Financial instruments that are not actively traded on an active exchange. This category includes situations where there is little, if any, market activity for the financial instrument. The prices are determined using significant unobservable inputs or valuation techniques.

Assets measured at fair value on a recurring basis: The Company has interest rate caps which are measured at fair value on a recurring basis; that is, the instruments are measured at fair value at each reporting period. The following table presents the Company’s financial instruments carried on the balance sheet by level within the fair value hierarchy (as described above) as of December 31, 2011, for which a recurring change in fair value has been recorded during the year ended December 31, 2011 (in thousands):

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Total

Interest rate caps

—

128

—

128

TowerCo II Holdings LLC and Subsidiaries

Notes to Consolidated Financial Statements

Note 8. Members’ Interest

The Company has the authority to issue 740,591 Class A Units, 8,775,000 Class B Units, 8,775,000 Class C Units and 8,775,000 Class D Units. At December 31, 2011, there are 740,591 Class A Units, 8,535,350 Class B Units, 8,650,000 Class C Units and 7,600,000 Class D Units issued and outstanding. Class B Units, Class C Units, and Class D Units are nonvoting (“nonvoting units”). In February 2011, the Company distributed $200.4 million to holders of Class A units.

The Company issued all of the nonvoting units to employees at an aggregate purchase price of nil. Nonvoting units issued vest over three years and do not expire. Vesting can be accelerated upon a change of control as defined. As the nonvoting units were issued at an estimated de minimis fair value, no compensation expense was recorded related to the issuance or vesting. At December 31, 2011, there were 8,506,551, 8,299,500, and 7,600,000 vested Class B Units, vested Class C Units and vested Class D Units, respectively.

Note 9. Subsequent Events

In connection with, and immediately preceding, the above transaction, TowerCo III Holdings LLC and TowerCo Staffing, Inc. (collectively “TowerCo III”) were distributed to the owners of the Company. TowerCo III retained assets in amounts expected to be needed to satisfy certain liabilities that were also retained by TowerCo III. Those liabilities primarily relate to employee severance and commitments under an operating lease for office space.

The Company has performed an evaluation of events that have occurred subsequent to December 31, 2011 and as of December 14, 2012. There have been no subsequent events that occurred during such period, other than disclosed in the paragraph above, that would require disclosure or recognition in the consolidated financial statements as of or for the year ended December 31, 2011.

EX-99.3 5 d450876dex993.htm UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION. Unaudited Pro Forma Condensed Combined Financial Information.

Exhibit 99.3

SBA COMMUNICATIONS CORPORATION AND TOWERCO II HOLDINGS LLC

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The unaudited pro forma condensed combined statements of income for the fiscal year ended December 31, 2011, and for the six months ended June 30, 2012, combine the historical consolidated statements of income of SBA Communications Corporation (“SBA”) and TowerCo II Holdings LLC (“TowerCo”) giving effect to the acquisition of TowerCo by SBA, as if it had occurred on January 1, 2011. The unaudited pro forma condensed combined balance sheet as of June 30, 2012, combines the historical consolidated balance sheets of SBA and TowerCo, giving effect to the acquisition as if it had occurred on June 30, 2012. The historical consolidated financial information has been adjusted in the unaudited pro forma condensed combined financial statements to give effect to pro forma events that are (1) directly attributable to the acquisition, (2) factually supportable, and (3) with respect to the statements of income, expected to have a continuing impact on the combined results. The unaudited pro forma condensed combined financial information should be read in conjunction with the accompanying notes to the unaudited pro forma condensed combined financial statements. In addition, the unaudited pro forma condensed combined financial information was based on and should be read in conjunction with the:

•

separate historical financial statements of SBA as of and for the year ended December 31, 2011, and the related notes included in SBA’s Annual Report on Form 10-K for the year ended December 31, 2011, which is incorporated by reference into this 8-K filing;

•

separate historical financial statements of TowerCo as of and for the year ended December 31, 2011 and the related notes included in TowerCo’s Annual Reports for the year ended December 31, 2011, which are included within this 8-K filing;

•

separate historical financial statements of SBA as of and for the six months ended June 30, 2012, and the related notes included in SBA’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2012, which is incorporated by reference into this 8-K filing;

•

separate unaudited historical financial statements of TowerCo as of and for the six months ended June 30, 2012, which is included within this 8-K filing; and

•

separate unaudited pro forma condensed combined financial statements of SBA and Mobilitie Investments, LLC, Mobilitie Investments II, LLC as of and for the year ended December 31, 2011, which is incorporated by reference into this 8-K filing.

In connection with, and immediately preceding our acquisition of Towerco, TowerCo’s wholly-owned subsidiaries, TowerCo III Holdings LLC and TowerCo Staffing, Inc. (collectively “TowerCo III”), were distributed to the then owners of TowerCo. TowerCo had contributed certain assets and liabilities to TowerCo III in anticipation of our acquisition and those assets and liabilities were, therefore, not part of the acquired entity. For purposes of the pro forma financial statements, we have adjusted the historical balance sheet of TowerCo as of June 30, 2012 to remove the excluded assets and liabilities respective values as of June 30, 2012. Such excluded amounts are denoted by the caption, ‘Excluded Subsidiary’ within the pro forma financial statements.

The unaudited pro forma condensed combined financial information has been presented for informational purposes only. The pro forma information is not necessarily indicative of what the combined company’s financial position or results of operations actually would have been had the acquisition been completed as of the dates indicated. In addition, the unaudited pro forma condensed combined financial information does not purport to project the future financial position or operating results of the combined company. There were no material transactions between SBA and TowerCo during the periods presented in the unaudited pro forma condensed combined financial statements that would need to be eliminated.

The unaudited pro forma condensed combined financial information has been prepared using the acquisition method of accounting under existing U.S. generally accepted accounting principles (“GAAP standards”), which are subject to change and interpretation. SBA has been treated as the acquirer in the acquisition for accounting purposes. The acquisition accounting is dependent upon certain valuations and other studies that have yet to commence or progress to a stage where there is sufficient information for a definitive measurement. Accordingly, the pro forma adjustments included herein are preliminary and have been made solely for the purpose of providing unaudited pro forma condensed combined financial information, and may be revised as additional information becomes available and as additional analyses are performed. Differences between the preliminary estimates reflected in these unaudited pro forma condensed combined financial statements and the final acquisition accounting will likely occur, and these differences could have a material impact on the accompanying unaudited pro forma condensed combined financial statements and the combined company’s future results of operations and financial position.

Also, the unaudited pro forma condensed combined financial information does not reflect any cost savings, operating synergies or revenue enhancements that the combined company may achieve as a result of the acquisition, the costs to integrate the operations of SBA and TowerCo or the costs necessary to achieve these cost savings, operating synergies and revenue enhancements.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

As of June 30, 2012

(In thousands)


	SBA			TowerCo			Excluded Subsidiary			TowerCo Adjusted			Disposed Towers			Acquisition Adjustments			Other Adjustments			Pro Forma Combined
ASSETS
Current assets:
Cash and cash equivalents	$	86,739		$	6,318		$	(11	)	$	6,307		$	—		$			$	(37,807	)(c)	$	55,239
Restricted cash		16,910			—			—			—			—									16,910
Short term investments		5,016			—			—			—			—									5,016
Accounts receivable, net of allowance		26,249			1,507			—			1,507			—									27,756
Costs and estimated earnings in excess of billings on uncompleted contracts		18,100			—			—			—			—									18,100
Prepaid and other current assets		25,150			7,871			(527	)		7,344			—									32,494
Assets held for sale		125,000			—			—			—			(125,000	)(d)		—			—			—

Total current assets	$	303,164		$	15,696		$	(538	)	$	15,158		$	(125,000	)	$	—		$	(37,807	)	$	155,515
Property and equipment, net		2,066,765			500,596			(1,459	)		499,137			—			69,267	(b1)					2,635,169
Intangible assets, net		2,121,389			145,676			—			145,676			—			772,236	(c7)					3,039,301
Deferred financing fees, net		40,568			6,724			—			6,724			—			(6,724	)(b1)		19,650	(c2)		60,218
Other assets		261,774			46,039			—			46,039			—			(34,757	)(c12)		—			273,056

Total assets	$	4,793,660		$	714,731		$	(1,997	)	$	712,734		$	(125,000	)	$	800,022		$	(18,157	)	$	6,163,259


LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt and short-term debt	$	918,006		$	4,000		$	—		$	4,000		$	—		$	(4,000	)(c8)	$			$	918,006
Accounts payable		16,833			1,129			—			1,129			—									17,962
Accrued expenses		31,471			—			—			—			—									31,471
Deferred revenue		54,515			—			—			—			—									54,515
Accrued interest		24,708			—			—			—			—									24,708
Other current liabilities		5,299			19,469			(2,223	)		17,246			—			—			—			22,545

Total current liabilities		1,050,832			24,598			(2,223	)		22,375			—			(4,000	)		—			1,069,207

Long term liabilities:
Long-term debt		3,091,382			391,000			—			391,000			—			809,000	(c8)					4,291,382
Other long-term liabilities		159,189			83,483			—			83,483			—			(77,740	)(c5)(c12)		—			164,932

Total long term liabilities		3,250,571			474,483			—			474,483			—			731,260			—			4,456,314

Commitments and contingencies
Redeemable noncontrolling interests		12,062			—			—			—			—									12,062
Shareholders’ equity (deficit):
Common stock – Class A, par value $0.01, 400,000 shares authorized, 121,495 and 109,675 shares issued and outstanding at June 30, 2012 and December 31, 2011, respectively		1,215			—			—			—			—			46	(c9)					1,261
Additional paid-in capital		2,835,974			252,001			226			252,227			(125,000	)(d)		36,365	(c10)					2,999,566
Accumulated deficit		(2,357,242	)		(36,351	)		—			(36,351	)		—			36,351	(c11)		(18,157	)(c11)		(2,375,399	)
Accumulated other comprehensive income, net		248			—			—			—			—			—			—			248

Total shareholders’ equity (deficit)		480,195			215,650			226			215,876			(125,000	)		72,762			(18,157	)		625,676

Total liabilities and shareholders’ equity	$	4,793,660		$	714,731		$	(1,997	)	$	712,734		$	(125,000	)	$	800,022		$	(18,157	)	$	6,163,259

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

For the six months ended June 30, 2012

(In thousands, except per share data)


	SBA			Mobilitie Q1’12			TowerCo			Disposed Towers			Pro Forma Adjustments			Pro Forma Combined
Revenues:
Site leasing	$	376,504		$	27,998		$	77,933		$	(2,759	)(d1)	$	—		$	479,675
Site development		45,133			—			—			—						45,133


Total revenues		421,637			27,998			77,933			(2,759	)		—			524,808


Operating expenses:
Cost of revenues (exclusive of depreciation, accretion and amortization shown below):
Cost of site leasing		80,166			10,042			33,713			(613	)(d1)					123,307
Cost of site development		38,232			—			—			—						38,232
Selling, general and administrative		34,959			5,946			7,945			—						48,850
Asset impairment		995			—			—			—						995
Acquisition related expenses		16,160			—			—			—			18,157	(c)		34,317
Depreciation, accretion and amortization		176,098			9,893			28,236			(1,222	)(d1)		24,143	(c4)(c5)		237,148


Total operating expenses		346,610			25,881			69,894			(1,835	)		42,300			482,849


Operating income (loss) from continuing operations		75,027			2,117			8,039			(924	)		(42,300	)		41,959


Other income (expense):
Interest income		84			63			—			—						147
Interest expense		(86,150	)		(4,990	)		(9,920	)		—			(14,192	)(c1)		(115,252	)
Non-cash interest expense		(34,407	)		—			—			—						(34,407	)
Amortization of deferred financing fees		(6,094	)		—			(725	)		—			(1,652	)(c2)(c3)		(8,471	)
Loss from extinguishment of debt, net		(27,149	)		—			—			—						(27,149	)
Other income (expense), net		4,984			—			(2,239	)		—			2,157			4,902


Total other expense		(148,732	)		(4,927	)		(12,884	)		—			(13,687	)		(180,230	)


Loss before provision for income taxes		(73,705	)		(2,810	)		(4,845	)		(924	)		(55,986	)		(138,270	)
Provision for income taxes		(3,780	)		—			(87	)		—	(d1)		14	(c6)		(3,853	)


Loss from continuing operations	$	(77,485	)	$	(2,810	)	$	(4,932	)	$	(924	)	$	(55,972	)	$	(142,123	)


Loss from continuing operations per common share attributable to SBA Communications Corporation:
Basic and diluted	$	(0.67	)													$	(1.17	)

Basic and diluted weighted average number of common shares		116,374												4,589	(a1)		120,963

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

For the year ended December 31, 2011

(In thousands, except per share data)


	SBA + Mobilitie Pro Forma			TowerCo			Disposed Towers			Pro Forma Adjustments			Pro Forma Combined
Revenues:
Site leasing	$	722,302		$	140,319		$	(9,774	)(d1)	$	—		$	852,847
Site development		81,876			—			—						81,876


Total revenues		804,178			140,319			(9,774	)		—			934,723


Operating expenses:
Cost of revenues (exclusive of depreciation, accretion and amortization shown below):
Cost of site leasing		170,806			70,639			(2,107	)(d1)					239,338
Cost of site development		71,005			—			—						71,005
Selling, general and administrative		82,894			14,886			—						97,780
Acquisition related expenses		17,434			—			—			18,157	(c)		35,591
Asset impairment		5,472			—			—						5,472
Depreciation, accretion and amortization		384,430			54,567			(2,797	)(d1)		50,292	(c4)(c5)		486,492


Total operating expenses		732,041			140,092			(4,904	)		68,449			935,678


Operating income (loss) from continuing operations		72,137			227			(4,870	)		(68,449	)		(955	)


Other income (expense):														—
Interest income		151			1			—						152
Interest expense		(184,267	)		(20,798	)		—			(27,309	)(c1)		(232,374	)
Non-cash interest expense		(63,629	)		—			—						(63,629	)
Amortization of deferred financing fees		(14,688	)		(1,400	)		—			(3,304	)(c2)(c3)		(19,392	)
Loss from extinguishment of debt, net		(1,696	)		(6,620	)		—						(8,316	)
Other (expense) income		66			(2,016	)		—						(1,950	)


Total other expense		(264,063	)		(30,833	)		—			(30,613	)		(325,509	)


Loss before provision for income taxes		(191,926	)		(30,606	)		(4,870	)		(99,062	)		(326,464	)
Provision for income taxes		(2,233	)		(59	)		—			(69	)(c6)		(2,361	)


Loss from continuing operations	$	(194,159	)	$	(30,665	)	$	(4,870	)	$	(99,131	)	$	(328,825	)


Loss from continuing operations per common share attributable to SBA Communications Corporation:
Basic and diluted	$	(1.67	)		—			—					$	(2.72	)

Basic and diluted weighted average number of common shares		116,184			—			—			4,589	(a1)		120,773

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

1.	Description of Transaction

On October 1, 2012, SBA, through its wholly-owned subsidiary SBA 2012 Acquisition, LLC, completed its previously announced acquisition of TowerCo II Holdings LLC, which owns 3,256 tower sites in 47 states across the U.S. and Puerto Rico (the “merger”). As consideration for the acquisition, SBA paid $1.2 billion in cash and issued 4.59 million shares of its Class A common stock.

2.	Basis of Presentation

The unaudited pro forma condensed combined financial information was prepared under existing U.S. GAAP standards, which are subject to change and interpretation. The accompanying unaudited pro forma condensed combined financial statements are provided for illustrative purposes only and do not purport to represent what the actual consolidated results of operations or the consolidated financial position of SBA would have been had the TowerCo merger occurred on the date assumed, nor are they necessarily indicative of future consolidated results of operations or consolidated financial position. The unaudited pro forma condensed combined financial statements do not include the realization of cost savings from operating efficiencies or restructuring costs anticipated to result from the TowerCo merger. The unaudited pro forma condensed combined financial statements should be read in conjunction with the separate historical consolidated financial statements and accompanying notes of SBA that are incorporated by reference in this 8-K filing and of TowerCo that are included within this 8-K filing. Certain reclassifications have been made to the historical presentation of TowerCo to conform to the presentation used in the unaudited pro forma condensed consolidated balance sheet and relate primarily to deferred contract costs, deferred contract revenues, advanced billings to client, deferred income taxes, and capital leases obligations. Certain reclassifications have been made to the historical presentation of TowerCo to conform to the presentation used in the unaudited pro forma condensed consolidated income statement primarily related to revenues; selling, general and administrative expenses; reimbursable expenses; goodwill; and gain on sale of businesses.

The historical income statements for TowerCo are presented for the year ended December 31, 2011, and for the six months ended June 30, 2012.

As of the date of this 8-K filing, SBA has performed the detailed valuation studies necessary to arrive at the required preliminary estimates of the fair market value of the TowerCo’s assets to be acquired and the TowerCo liabilities to be assumed and the related allocations of purchase price. Also, it has identified the adjustments necessary to conform TowerCo’s accounting policies to SBA’s accounting policies. As indicated in Note 5 to the unaudited pro forma condensed combined financial statements, SBA has made certain adjustments to the June 30, 2012 historical book values of the assets and liabilities of TowerCo to reflect certain preliminary estimates of the fair values necessary to prepare the unaudited pro forma condensed combined financial statements. There was no excess purchase price over the historical net assets of TowerCo, as adjusted to reflect estimated fair values, therefore no goodwill has been recorded.

SBA is still in the process of finalizing its review for other intangibles such as favorable/unfavorable contracts and favorable/unfavorable real estate leases. The company anticipates that there will be unfavorable real estate leases and is in the process of working with a specialist to identify these leases and the related impact on the pro forma condensed combined financial statements. There can be no assurance that such finalization will not result in material changes.

The merger will be accounted for as an acquisition in accordance with the guidance related to business combinations. This guidance requires that all transaction and restructuring costs related to business combinations be expensed as incurred, and it requires that changes in deferred tax asset valuation allowances and liabilities for tax uncertainties subsequent to the acquisition date that do not meet certain re-measurement criteria be recorded in the income statement, among other changes. Under the acquisition method, the total estimated acquisition price (consideration transferred) as described in Note 4 to the unaudited pro forma condensed combined financial information was measured at the closing date of the merger using the market price at that time. The accounting guidance also requires that acquisition related transaction costs (i.e. advisory, legal, valuation, other professional fees) are not included as a component of the consideration transferred but are accounted for as expenses in the periods in which the costs are incurred. Total acquisition related transaction costs expected to be incurred by SBA are estimated to be approximately $10 million and are reflected in these unaudited pro forma condensed combined financial statements as a reduction of cash and an increase to accumulated deficit.

3.	Accounting Policies

Upon consummation of the merger, SBA will continue the review of TowerCo’s accounting policies. As a result of that review, SBA may identify differences between the accounting policies of the two companies that, when conformed, could have a material impact on the combined financial statements. At this time, SBA is not aware of any differences that would have a material impact on the combined financial statements. The unaudited pro forma condensed combined financial statements do not assume any differences in accounting policies.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

4.	Estimate of Consideration Expected to be Transferred

The following is a preliminary estimate of the consideration to be transferred to effect the transaction:


		Common Shares (stated value $.01 share)		Capital in Excess of Par Value			Total

	Issuance of SBA Class A common stock to TowerCo				(c10	)
	shareholders (4.59 million shares at $62.90)	$	46	$	288,592		$	288,638
(a1)	Issuance of debt to finance transaction:
	High Yield Debt Offering							500,000
	Term Loan B							300,000
	CMBS issuance							400,000

	Total consideration						$	1,488,638

The purchase price is approximately $1.49 billion, consisting of $1.2 billion of cash and the issuance of 4.59 million shares of SBA common stock. SBA is not offering any type of options to TowerCo members. As a result of the transaction, $395 million in pre-existing TowerCo long-term debt was paid off with the proceeds received by SBA. Therefore, no debt was assumed by SBA as a result of the transaction.

5.	Estimate of Assets to be Acquired and Liabilities to be Assumed

A preliminary estimate of the assets to be acquired and the liabilities to be assumed by SBA in the acquisition, reconciled to the estimate of consideration expected to be transferred is provided below. The final valuation of net assets acquired is expected to be completed as soon as possible after the acquisition date.


(b1)	Book value of net assets acquired at June 30, 2012	$	215,650
	Adjusted for:
	Exclusion of Staffing balances		226

	Adjusted book value of net assets acquired		215,876
	Adjustment to:
	Fair value of property and equipment		69,267
	Fair value of intangible assets related to customer contracts and network/location (b2)		772,236

	ARO liability		29,737
	Deferred rent asset		(34,757	)
	Deferred rent liability		48,003
	Deferred financing cost - long term		(6,724	)

	Estimate of consideration expected to be transferred		1,093,638
	Debt paid at closing		395,000

	Total consideration	$	1,488,638

At the date of acquisition, both SBA and TowerCo agreed to exclude certain assets and liabilities from the group of purchased assets and assumed liabilities as such assets and liabilities were related to TowerCo Staffing. SBA selected $2.0 million in staffing-related assets and $2.2 million in staffing-related liabilities to be excluded from the purchased assets and liabilities for this merger.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

(b2)	The components of the estimated fair value of acquired identifiable intangible assets are as follows:


(in millions)	Estimated Fair Value		Estimated Useful Lives (Years)

Customer Relationship	$	769,912		15
Network Locations		148,000		15

Total	$	917,912

As of the effective time of the merger, identifiable intangible assets are required to be measured at fair value and these acquired assets could include assets that are not intended to be used or sold or that are intended to be used in a manner other than their highest and best use. For purposes of these unaudited pro forma condensed combined financial statements, it is assumed that all assets will be used and that all assets will be used in a manner that represents the highest and best use of those assets, but it is not assumed that any market participant synergies will be achieved. The consideration of synergies has been excluded because they are not considered to be factually supportable, which is a required condition for these pro forma adjustments.

For purposes of the preliminary allocation, SBA has estimated a fair value for TowerCo’s intangible asset related to customer relationships and network locations based on the net present value of the projected income stream of those intangible assets. The fair value adjustment is being amortized over an estimated useful life of 15 years.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

6.	Pro Forma Adjustments

(c)

To record the cash used in the merger excluding the cash portion of acquisition purchase price and to record estimated payments which are estimated to be $37.8 million and are assumed to be made on or before the merger including $7.6 million of fees associated with the high-yield debt issuance, $3.3 million of fees associated with the Term Loan B issuance, $8.7 million of prorated fees associated with the CMBS securitization and $18.2 million for advisory, legal, regulatory and valuation costs associated with the transaction ($2.2m in legal expenses were originally recorded by TowerCo). These costs are expected to be incurred by SBA and are reflected in the unaudited pro forma condensed combined financial statements as a reduction to cash and retained earnings and SBA views these expenses as non-recurring acquisition-related expenses.

(c1)

On September 28, 2012, SBA entered into a $500 million high-yield debt issuance and a $300 million term loan with certain lenders in connection with the financing of a portion of the purchase consideration expected to be transferred in the merger. The high-yield debt issuance and term loan both have terms of 7 years from the effective time of the merger and provides SBA with financing in a total principal amount up to $800 million. In addition, to fund the remaining cash consideration, SBA utilized $400 million from its previous CMBS issuance.

SBA estimates additional interest expense of $27.3 million and $14.2 million for the year ended December 31, 2011 and six months ended June 30, 2012, respectively, associated with the incremental debt SBA has issued in connection with the merger after retiring TowerCo existing debt.

The impact to deferred financing costs, interest expense and equity are summarized below.

(c2)

Net deferred financing fees associated with the $500 million high-yield debt issuance, the $300 million term loan and the $400 million drawn from the CMBS securitization will increase by $19.7 million at June 30, 2012. However, to appropriately reflect the amortization of the newly incurred deferred financing fees, $3.3 million and $1.7 million will be recorded to amortization expense for the year ended December 31, 2011 and six months ended June 30, 2012, respectively.


		12 months ending		6 months ending
		Dec 31, 2011		Jun 30, 2012
(c3)	Amortization of high-yield debt issuance financing costs into interest expense	$	1,098	$	549
	Amortization of term loan financing costs into interest expense		471		236
	Amortization of prorated CMBS securitization financing costs into interest expense		1,735		867

	Equity effect of the loss on extinguishment of debt, financing fees, and transaction costs	$	3,304	$	1,652

Total advisory, legal, regulatory and valuation costs expected to be incurred by SBA are estimated to be approximately $18.2 million, and are reflected in these unaudited pro forma condensed combined financial statements as a reduction to cash and retained earnings and SBA views these expenses as non recurring.

(c4)	The unaudited pro forma condensed combined statements of operations have been adjusted to reflect the adjustments to TowerCo’s acquired assets.


	12 months ending			6 months ending
	Dec 31, 2011			Jun 30, 2012
The elimination of TowerCo’s historical asset depreciation and amortization	$	(52,839	)	$	(26,837	)
The increase in depreciation and amortization expense resulting from the fair value adjustments.		104,732			52,316

	$	51,893		$	25,479

(c5)

The unaudited pro forma condensed combined statements of operations have been adjusted to reflect the adjustments to TowerCo’s asset retirement obligation (ARO). The ARO asset and liability amounts, along with the corresponding income statement impact, have been adjusted for via an ARO conformity adjustment, conforming the former TowerCo ARO balances to SBA’s ARO accounting policy.


	12 months ending			6 months ending
	Dec 31, 2011			Jun 30, 2012
The elimination of TowerCo’s ARO liability accretion expense	$	(1,727	)	$	(1,399	)
The increase in accretion expense resulting from the ARO conformity adjustment.		126			63

	$	(1,601	)	$	(1,336	)


	As of
	Jun 30, 2012
The elimination of TowerCo’s ARO liability balance	$	31,703
ARO liability balance resulting from ARO conformity adjustment		(1,965	)

	$	29,737

In accordance with Section 2.14 of the merger agreement, SBA’s merger with TowerCo has been designated as an asset purchase. Therefore, the appropriate tax treatment for this transaction has no impact on deferred taxes and will not result in a deferred tax asset or liability.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

(c6)	To record estimated tax impact of the merger on the income statement related to the pro forma adjustments.


	12 months ending			6 months ending
US$ in thousands	Dec 31, 2011			Jun 30, 2012
Eliminate TowerCo’s historical provision for income taxes	$	(59	)	$	(87	)
Estimated provision for income taxes post merger		(128	)		(73	)

Total adjusted amount	$	(69	)	$	14

(c7)	To adjust intangible assets to an estimate of fair value, as follows:


US$ in thousands	As of Jun 30, 2012
Eliminate TowerCo’s historical intangible assets	$	(145,676	)
Estimated fair value of intangible assets acquired		917,912

Total	$	772,236

(c8)	Upon merger, the entire pre-existing TowerCo debt balance was paid off using transaction proceeds, therefore no TowerCo debt was actually assumed by SBA as a result of the transaction. To adjust debt as follows:


US$ in thousands	As of Jun 30, 2012
Current Portion of Long Term Debt:
Eliminate TowerCo’s historical current debt	$	(4,000	)

Long Term Debt:
Eliminate TowerCo’s historical long-term debt	$	(391,000	)

New debt issued/utilized:
High Yield Debt Offering		500,000
Term Loan B		300,000
CMBS issuance		400,000

Total	$	809,000

(c9)	To record the stock portion of the transaction consideration, at par, and to eliminate TowerCo common stock, at par, as follows:


US$ in thousands	As of Jun 30, 2012
Eliminate TowerCo’s common stock	$	—
Issuance of SBA common stock		46

Total	$	46

(c10)

To record the stock portion of the transaction consideration, at fair value less par, and to eliminate TowerCo additional paid in capital, as follows:


US$ in thousands	As of Jun 30, 2012
Eliminate TowerCo’s equity	$	(252,001	)
Excluded balances		(226	)

Adjusted TowerCo common stock to be eliminated	$	(252,227	)
Issuance of SBA common stock		288,592

Total	$	36,365

(c11)

To eliminate TowerCo’s retained earnings, and to record estimated non-recurring merger and prepayment-related costs of SBA, as follows:


US$ in thousands	As of Jun 30, 2012
Eliminate TowerCo’s accumulated deficit	$	36,351
Estimated merger related expenses, costs related to new financing and prepayment penalty on existing debt assumed to be non recurring		(18,157	)

Total	$	18,194

(c12)

To eliminate all deferred rent assets and liabilities previously recorded by TowerCo in accordance with ASC 840. Deferred rent accounts in accordance with ASC 840 will reset to zero as a result of SBA’s merger with TowerCo and recording of new deferred rent will be recorded prospectively by SBA in its consolidated financial statements.


US$ in thousands	As of Jun 30, 2012
Deferred rent asset	$	(34,757	)
Deferred rent liability		48,003

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

(d)

To eliminate disposed tower assets and correlating operating activity and results. On September 6, 2012 and October 23, 2012, the Company sold $125 million in DAS Towers which had been purchased as part of the Mobilitie acquisition on April 2, 2012. Given the materiality of this disposal transaction, the asset value and operating activity are presented as a pro forma adjustment within the pro forma condensed combined financial statements. Operating results for the disposed towers are shown in the table in (d1) below.

(d1)	To eliminate all operating activity related to disposed tower assets.


	12 months ending			6 months ending
US$ in thousands	Dec 31, 2011			Jun 30, 2012
Site leasing revenue	$	9,774		$	2,759
Cost of site leasing		(2,107	)		(613	)
Depreciation, accretion and amortization		(2,797	)		(1,222	)

Operating income	$	4,870		$	924

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

7.	Forward-looking Statements

These Unaudited Pro Forma Condensed Combined Financial Statements may be deemed to be forward-looking statements within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically identified by the words “believe,” “expect,” “anticipate,” “intend,” “estimate” and similar expressions. Such statements may include, but are not limited to, statements about the benefits of the pending merger between TowerCo by SBA, including future financial and operating results, the combined company’s plans, objectives, expectations and intentions and other statements that are not historical facts. These forward-looking statements are based largely on management’s expectations and are subject to a number of risks and uncertainties. Actual results could differ materially from these forward-looking statements. Neither SBA nor TowerCo undertake any obligation to update publicly or revise any forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: the possibility that the expected synergies from SBA’s pending merger with TowerCo will not be realized, or will not be realized within the expected time period, due to, among other things, the impact of industry regulation and pending legislation that could affect the respective industry; the risk that the businesses will not be integrated successfully; disruption from the merger making it more difficult to maintain business and operational relationships; the possibility that the merger does not close, including, but not limited to, due to the failure to satisfy the closing conditions; SBA’s and TowerCo’s ability to accurately predict future market conditions; and the exposure to litigation and/or regulatory actions. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in SBA’s 2011 Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 27, 2011, included in the “Risk Factors” section of each of this filing, and SBA’s other filings with the SEC available at the SEC’s Internet site (http://www.sec.gov).