TMCnet News
SBA COMMUNICATIONS CORP - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(Edgar Glimpses Via Acquire Media NewsEdge) We are a leading independent owner and operator of wireless communications tower structures, rooftops and other structures that support antennas used for wireless communications, which we collectively refer to as "towers" or "sites." Our principal operations are in the United States and its territories. In addition, we own and operate towers in Canada, Central America, and South America. Our primary business line is our site leasing business, which contributed 96.3% of our total segment operating profit for the nine months ended September 30, 2014. In our site leasing business, we (1) lease antenna space to wireless service providers on towers that we own or operate and (2) manage rooftop and tower sites for property owners under various contractual arrangements. The towers that we own have been constructed by us at the request of a wireless service provider, constructed based on our own initiative, or acquired. As of September 30, 2014, we owned 22,454 towers, a substantial portion of which have been built by us or built by other tower owners or operators who, like us, have built such towers to lease space to multiple wireless service providers. We also managed or leased approximately 4,700 actual or potential towers, approximately 500 of which were revenue producing as of September 30, 2014. Our other business line is our site development business, through which we assist wireless service providers in developing and maintaining their own wireless service networks. Site Leasing Services Our primary focus is the leasing of antenna space on our multi-tenant towers to a variety of wireless service providers under long-term lease contracts in the United States, Canada, Central America, and South America. Commencing in the second quarter of 2014, we have classified our site leasing business into two reporting segments, domestic site leasing and international site leasing, as a result of our international site leasing revenues exceeding 10% of our total revenues. Site leasing revenues are received primarily from wireless service provider tenants, including AT&T, Sprint, Verizon Wireless, T-Mobile, Oi, Digicel, American Movile, and Telefonica. Cost of site leasing revenue primarily consists of: •Rental payments on ground leases and other underlying property interests; •Straight-line rent adjustment for the difference between rental payments made and the expense recorded as if the payments had been made evenly throughout the lease term (which may include renewal terms) of the underlying property interests; •Property taxes; •Site maintenance and monitoring costs (exclusive of employee related costs); •Utilities; •Property insurance; and •Deferred lease origination cost amortization. As of September 30, 2014, approximately 72% of our tower structures were located on parcels of land that we own, land subject to perpetual easements, or parcels of land in which we have a leasehold interest that extends beyond 20 years. For any given tower, costs are relatively fixed over a monthly or an annual time period. As such, operating costs for owned towers do not generally increase as a result of adding additional customers to the tower. The amount of direct costs associated with operating a tower varies from site to site depending on the taxing jurisdiction and the height and age of the tower. The ongoing maintenance requirements are typically minimal and include replacing lighting systems, painting a tower, or upgrading or repairing an access road or fencing. Domestic Site Leasing As of September 30, 2014, we had 15,099 sites in the United States. For the three months ended September 30, 2014, we generated 84.2% of our site leasing revenue from these sites. In the United States, wireless service providers typically enter into tenant leases with us, each of which relates to the lease or use of space at an individual tower. Our tenant leases in the United States are generally for an initial term of five to ten years with five 5-year renewal periods at the option of the tenant. These tenant leases 23 -------------------------------------------------------------------------------- Table of Contents typically contain specific rent escalators, which typically average 3-4% per year. Our ground leases in the United States are generally for an initial term of five years or more with multiple renewal terms of 5-year periods, at our option, and provide for rent escalators which typically average 2-3% annually. International Site Leasing As of September 30, 2014, we had 7,355 sites in our international markets, located in Canada, Costa Rica, El Salvador, Guatemala, Nicaragua, Panama, and Brazil. For the three months ended September 30, 2014, we generated 15.8% of our site leasing revenue from these sites. Our operations in these countries are solely in the site leasing business, and we expect to expand operations through new builds and acquisitions. Our tenant leases in Canada typically have similar terms and conditions as those in the United States with an initial term of five to ten years with five 5-year renewal periods at the option of the tenant. These tenant leases typically contain specific rent escalators, which average 3-4% per year. Tenant leases in our Central America and Brazil markets typically have an initial term of 10 years with 5-year renewal periods. In Central America, we have similar rent escalators to that of leases in the United States and Canada while our leases in Brazil typically escalate in accordance with a standard cost of living index. In Brazil, site leases are typically governed by master lease agreements, which provide for the material terms and conditions that will govern the terms of the use of the site. These site leases typically provide for a fixed rental amount and a pass-through charge for a portion of the underlying ground lease rent. Our ground leases in Canada, Central America and Brazil generally have similar terms and conditions as those in the United States, except that the annual escalator in Brazil is based on a cost of living index. In our Central American markets, significantly all of our revenue under our tenant leases and most of our operating expenses, including our ground leases, are denominated in U.S. dollars. In our Central American markets, our local currency denominated operating expenses are principally limited to (1) permitting and other local fees, (2) utilities, (3) taxes, and (4) selling, general, and administrative expenses. In our Canadian and Brazilian operations, significantly all of our revenue and expenses are denominated in the respective local currency. As indicated in the table below, our site leasing business generates substantially all of our total segment operating profit. For information regarding our operating segments, see Note 15 of our Condensed Notes to Consolidated Financial Statements included in this quarterly report. Revenues For the three months ended For the nine months ended September 30, September 30, 2014 2013 2014 2013 (dollars in thousands) Domestic site leasing revenue $ 293,775 $ 267,540 $ 854,003 $ 781,366 International site leasing revenue $ 55,235 $ 19,943 $ 144,778 $ 59,122 Total site leasing revenue $ 349,010 $ 287,483 $ 998,781 $ 840,488 Total revenues $ 393,293 $ 332,094 $ 1,122,262 $ 969,470 Domestic site leasing revenue as percentage of total revenues 74.7% 80.6% 76.1% 80.6% International site leasing revenue as percentage of total revenues 14.0% 6.0% 12.9% 6.1% Total site leasing revenue as percentage of total revenues 88.7% 86.6% 89.0% 86.7% Domestic site leasing segment operating profit was 82.0% and 82.9% of total segment operating profit for the three and nine months ended September 30, 2014, respectively, as compared to 90.2% and 90.3% for the three and nine months ended September 30, 2013, respectively. International site leasing segment operating profit was 14.4% and 13.3% of total segment operating profit for the three and nine months ended September 30, 2014, respectively, as compared to 5.8% and 5.9% for the three and nine months ended September 30, 2013, respectively. We believe that over the long-term, site leasing revenues will continue to grow as wireless service providers lease additional antenna space on our towers due to increasing minutes of network use and data transfer, network expansion and network coverage requirements. We believe our site leasing business is characterized by stable and long-term recurring revenues, predictable operating costs and minimal non-discretionary capital expenditures. Due to the relatively young age and mix of our tower portfolio, we expect 24 -------------------------------------------------------------------------------- Table of Contents future expenditures required to maintain these towers to be minimal. Consequently, we expect to grow our cash flows by (1) adding tenants to our towers at minimal incremental costs by using existing tower capacity or requiring wireless service providers to bear all or a portion of the cost of tower modifications and (2) executing monetary amendments as wireless service providers upgrade their equipment. Furthermore, because our towers are strategically positioned and our customers typically do not relocate, we have historically experienced low tenant lease terminations as a percentage of revenue, and we expect that our non-iDEN churn in 2015 will be within the high end of our historical churn range of 1.0 to 1.5%. Site Development Services Our site development business, which is conducted in the United States only, is complementary to our site leasing business and provides us the ability to keep in close contact with the wireless service providers who generate substantially all of our site leasing revenue and to capture ancillary revenues that are generated by our site leasing activities, such as antenna and equipment installation at our tower locations. Site development services revenues are earned primarily from providing a full range of end to end services to wireless service providers or companies providing development or project management services to wireless service providers. Our services include: (1) network pre-design; (2) site audits; (3) identification of potential locations for towers and antennas; (4) support in buying or leasing of the location; (5) assistance in obtaining zoning approvals and permits; (6) tower and related site construction; (7) antenna installation; and (8) radio equipment installation, commissioning, and maintenance. We provide site development services at our towers and at towers owned by others. Site development segment operating profit was 3.7% and 3.7% of total segment operating profit for the three and nine months ended September 30, 2014, respectively, as compared to 4.1% and 3.8% for the three and nine months ended September 30, 2013, respectively. Critical Accounting Policies and Estimates We have identified the policies and significant estimation processes listed in the Annual Report on Form 10-K as critical to our business operations and the understanding of our results of operations. The listing is not intended to be a comprehensive list. In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States, with no need for management's judgment in their application. In other cases, management is required to exercise judgment in the application of accounting principles with respect to particular transactions. The impact and any associated risks related to these policies on our business operations is discussed throughout "Management's Discussion and Analysis of Financial Condition and Results of Operations" where such policies affect reported and expected financial results. For a detailed discussion on the application of these and other accounting policies, see Note 2 of our Consolidated Financial Statements contained in our Annual Report on Form 10-K for the year ended December 31, 2013. Our preparation of our financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses during the reporting periods. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. There can be no assurance that actual results will not differ from those estimates and such differences could be significant. KEY PERFORMANCE INDICATORS Non-GAAP Financial Measures This report contains a non-GAAP measure, Adjusted EBITDA information. We have provided below a description of Adjusted EBITDA, a reconciliation of Adjusted EBITDA to its most directly comparable GAAP measure and an explanation as to why management utilizes this measure. Adjusted EBITDA We define Adjusted EBITDA as net income (loss) excluding the impact of non-cash straight-line leasing revenue, non-cash straight-line ground lease expense, non-cash compensation, net loss from extinguishment of debt, other income and expenses, acquisition related adjustments and expenses, asset impairment and decommission costs, net interest expenses, depreciation, accretion, and amortization, provision (benefit) for taxes, and income from discontinued operations. We believe that Adjusted EBITDA is an indicator of the financial performance of our core businesses. Adjusted EBITDA is a component of the calculation that has been used by our lenders to determine compliance with certain covenants under our Senior Credit Agreement and the indentures relating to our 8.25% Notes, 5.625% Notes, 5.75% Notes, and 4.875% Notes. Adjusted EBITDA is not intended to be an alternative measure of operating income or gross profit margin as determined in accordance with GAAP. 25 -------------------------------------------------------------------------------- Table of Contents The reconciliation of Adjusted EBITDA is as follows: For the three months For the nine months ended September 30, Dollar ended September 30, Dollar 2014 2013 Change 2014 2013 Change (in thousands) Net (loss) income $ (16,624) $ 21,531 $ (38,155) $ (24,686) $ (36,747) $ 12,061 Non-cash straight-line leasing revenue (16,489) (16,598) 109 (42,734) (50,890) 8,156 Non-cash straight-line ground lease expense 9,225 8,857 368 27,370 26,985 385 Non-cash compensation 6,416 4,207 2,209 17,231 13,011 4,220 Loss from extinguishment of debt, net 14,893 3 14,890 25,080 5,764 19,316 Other income (611) (34,175) 33,564 (20,384) (34,873) 14,489 Acquisition related adjustments and expenses (58) 3,599 (3,657) 10,728 11,378 (650) Asset impairment and decommission costs 5,992 6,190 (198) 13,554 16,405 (2,851) Interest income (161) (274) 113 (428) (1,612) 1,184 Interest expense (1) 91,005 76,610 14,395 255,641 236,228 19,413 Depreciation, accretion, and amortization 159,410 133,281 26,129 464,858 400,006 64,852 Provision for taxes (2) 1,342 452 890 5,832 2,136 3,696 Adjusted EBITDA $ 254,340 $ 203,683 $ 50,657 $ 732,062 $ 587,791 $ 144,271 (1)Interest expense includes interest expense, non-cash interest expense, and amortization of deferred financing fees. (2)Provision for taxes includes $360 and $245 of franchise and gross receipt taxes for the three months ended September 30, 2014 and 2013, respectively, and $1,122 and $695 of franchise and gross receipt taxes for the nine months ended September 30, 2014 and 2013, respectively, reflected in selling, general, and administrative expenses on the Consolidated Statement of Operations. Adjusted EBITDA increased $50.7 million for the three months ended September 30, 2014 as compared to the prior year and increased $144.3 million for the nine months ended September 30, 2014 as compared to the prior year, primarily the result of increased segment operating profit from our site leasing and site development segments offset partially by the increase in our cash selling, general, and administrative expenses. 26 -------------------------------------------------------------------------------- Table of Contents RESULTS OF OPERATIONS Three months ended September 30, 2014 compared to three months ended September 30, 2013 For the three months ended September 30, Dollar Percentage 2014 2013 Change Change (in thousands) Revenues: Domestic site leasing $ 293,775 $ 267,540 $ 26,235 9.8% International site leasing 55,235 19,943 35,292 177.0% Site development 44,283 44,611 (328) (0.7%) Total revenues 393,293 332,094 61,199 18.4% Operating expenses: Cost of revenues (exclusive of depreciation, accretion, and amortization shown below): Cost of domestic site leasing 63,108 61,259 1,849 3.0% Cost of international site leasing 14,818 6,783 8,035 118.5% Cost of site development 33,950 35,253 (1,303) (3.7%) Selling, general, and administrative 26,589 21,827 4,762 21.8% Acquisition related adjustments and expenses (58) 3,599 (3,657) (101.6%) Asset impairment and decommission costs 5,992 6,190 (198) (3.2%) Depreciation, accretion, and amortization 159,410 133,281 26,129 19.6% Total operating expenses 303,809 268,192 35,617 13.3% Operating income 89,484 63,902 25,582 40.0% Other income (expense): Interest income 161 274 (113) (41.2%) Interest expense (78,170) (62,987) (15,183) 24.1% Non-cash interest expense (8,236) (9,642) 1,406 (14.6%) Amortization of deferred financing fees (4,599) (3,981) (618) 15.5% Loss from extinguishment of debt, net (14,893) (3) (14,890) 496,333.3% Other income 611 34,175 (33,564) (98.2%) Total other expense (105,126) (42,164) (62,962) 149.3% (Loss) income before provision for income taxes (15,642) 21,738 (37,380) (172.0%) Provision for income taxes (982) (207) (775) 374.4% Net (loss) income $ (16,624) $ 21,531 $ (38,155) (177.2%) Revenues: Domestic site leasing revenues increased $26.2 million for the three months ended September 30, 2014, as compared to the prior year, due largely to (i) revenues from 356 towers acquired and 128 towers built since July 1, 2013 and (ii) organic site leasing growth from new leases, contractual rent escalators, and lease amendments which increased the related rent to reflect additional equipment added to our towers. International site leasing revenues increased $35.3 million for the three months ended September 30, 2014, as compared to the prior year, due largely to (i) revenues from 4,388 towers acquired and 286 towers built since July 1, 2013 and (ii) organic site leasing growth from new leases, contractual rent escalators, and lease amendments which increased the related rent to reflect additional equipment added to our towers. Site development revenues decreased $0.3 million for the three months ended September 30, 2014, as compared to the prior year, as a result of a reduction in the volume of work performed due to the timing of our wireless carrier customers' initiatives. 27 -------------------------------------------------------------------------------- Table of Contents Segment Operating Profit: Domestic site leasing segment operating profit increased $24.4 million for the three months ended September 30, 2014, as compared to the prior year, primarily due to additional profit generated by (i) 356 towers acquired and 128 towers built since July 1, 2013 and (ii) organic site leasing growth from new leases, contractual rent escalators, and lease amendments with current tenants which increased the related rent as a result of additional equipment added to our towers in addition to improving control of our site leasing cost of revenue, and the positive impact of our ground lease purchase program. International site leasing segment operating profit increased $27.3 million for the three months ended September 30, 2014, as compared to the prior year, primarily due to additional profit generated by (i) 4,388 towers acquired and 286 towers built since July 1, 2013 and (ii) organic site leasing growth from new leases, contractual rent escalators, and lease amendments with current tenants which increased the related rent as a result of additional equipment added to our towers in addition to improving control of our site leasing cost of revenue, and the positive impact of our ground lease purchase program. Site development segment operating profit increased $1.0 million for the three months ended September 30, 2014 as compared to the prior year primarily due to higher margin carrier direct work performed in the current year, in particular the Sprint 2.5 GHz initiative. Selling, General, and Administrative Expenses: Selling, general, and administrative expenses increased $4.8 million for the three months ended September 30, 2014, as compared to the prior year, primarily as a result of an increase in personnel, salaries, benefits, non-cash compensation, and other expenses due in large part to our continued portfolio expansion. Acquisition Related Adjustments and Expenses: Acquisition related adjustments and expenses decreased $3.7 million for the three months ended September 30, 2014, as compared to the prior year, primarily as a result of a reduction in an estimated pre-acquisition contingency, partially offset by an increase in acquisition and integration related activities including an acquisition from Oi S.A. which closed on March 31, 2014. Depreciation, Accretion, and Amortization Expenses: Depreciation, accretion, and amortization expense increased $26.1 million for the three months ended September 30, 2014, as compared to the prior year, due to the increase in the number of towers we acquired and built since July 1, 2013. Operating Income: Domestic site leasing operating income increased $15.1 million for the three months ended September 30, 2014, as compared to the prior year, primarily due to higher segment operating profit, partially offset by increases in selling, general, and administrative expenses, acquisition related adjustments and expenses, and depreciation, accretion, and amortization expense. International site leasing operating income increased $11.0 million for the three months ended September 30, 2014, as compared to the prior year, primarily due to higher segment operating profit and a reduction in acquisition related adjustments and expenses, partially offset by increases in selling, general, and administrative expenses and depreciation, accretion, and amortization expense. Site development operating income decreased $0.1 million for the three months ended September 30, 2014, as compared to the prior year, primarily due to higher selling, general, and administrative expenses partially offset by higher segment operating profit and a decrease in depreciation, accretion, and amortization expense. Other Income (Expense): Interest expense increased $15.2 million due to the higher average principal amount of cash-interest bearing debt outstanding for the three months ended September 30, 2014 compared to the prior year, primarily resulting from the issuance of the 2014 Term Loan and the 4.875% Notes, partially offset by the full repayment of the 2011 Term Loan and 2012-2 Term Loan, the full redemption of the 8.25% Notes, and the settlement of a portion of the 4.0% Notes. 28 -------------------------------------------------------------------------------- Table of Contents Non-cash interest expense decreased $1.4 million for the three months ended September 30, 2014, as compared to the prior year. This decrease is primarily driven by the settlement of a portion of the 4.0% Notes. Amortization of deferred financing fees increased $0.6 million for the three months ended September 30, 2014 compared to the prior year, primarily resulting from the issuance of the 2014 Term Loan and the 4.875% Notes, partially offset by the full repayment of the 2011 Term Loan and 2012-2 Term Loan. Loss from extinguishment of debt increased $14.9 million for the three months ended September 30, 2014, as compared to the prior year, primarily due to the premium paid and write-off of a portion of the related debt discount and deferred financing fees associated with the full redemption of the 8.25% Notes as well as the settlement of a portion of the 4.0% Notes. Other income decreased by $33.6 million from the prior year primarily due to a $27.3 million gain on the settlement of a bankruptcy claim and $6.9 million unrealized gain on a foreign currency swap contract recognized in the prior year period. Net Loss: Net loss was $16.6 million for the three months ended September 30, 2014 as compared to net income of $21.5 million in the prior year, a decrease of $38.2 million. The decrease is primarily due to a reduction in other income as well as increases in selling, general and administrative expenses, loss from extinguishment of debt, depreciation, accretion, and amortization expense, and interest expense, offset by an increase in our total segment operating profit and a decrease in acquisition related adjustments and expenses as compared to the prior year. 29 -------------------------------------------------------------------------------- Table of Contents Nine months ended September 30, 2014 compared to nine months ended September 30, 2013 For the nine months ended September 30, Dollar Percentage 2014 2013 Change Change (in thousands) Revenues: Domestic site leasing $ 854,003 $ 781,366 $ 72,637 9.3% International site leasing 144,778 59,122 85,656 144.9% Site development 123,481 128,982 (5,501) (4.3%) Total revenues 1,122,262 969,470 152,792 15.8% Operating expenses: Cost of revenues (exclusive of depreciation, accretion, and amortization shown below): Cost of domestic site leasing 185,637 183,869 1,768 1.0% Cost of international site leasing 37,412 20,058 17,354 86.5% Cost of site development 93,432 103,788 (10,356) (10.0%) Selling, general, and administrative 76,707 63,765 12,942 20.3% Acquisition related adjustments and expenses 10,728 11,378 (650) (5.7%) Asset impairment and decommission costs 13,554 16,405 (2,851) (17.4%) Depreciation, accretion, and amortization 464,858 400,006 64,852 16.2% Total operating expenses 882,328 799,269 83,059 10.4% Operating income 239,934 170,201 69,733 41.0% Other income (expense): Interest income 428 1,612 (1,184) (73.4%) Interest expense (215,695) (185,569) (30,126) 16.2% Non-cash interest expense (26,832) (39,151) 12,319 (31.5%) Amortization of deferred financing fees (13,114) (11,508) (1,606) 14.0% Loss from extinguishment of debt, net (25,080) (5,764) (19,316) 335.1% Other income 20,384 34,873 (14,489) (41.5%) Total other expense (259,909) (205,507) (54,402) 26.5% Loss before provision for income taxes (19,975) (35,306) 15,331 (43.4%) Provision for income taxes (4,710) (1,441) (3,269) 226.9% Net loss $ (24,685) $ (36,747) $ 12,062 (32.8%) Revenues: Domestic site leasing revenues increased $72.6 million for the nine months ended September 30, 2014, as compared to the prior year, due largely to (i) revenues from 404 towers acquired and 185 towers built since January 1, 2013 and (ii) organic site leasing growth from new leases, contractual rent escalators, and lease amendments which increased the related rent to reflect additional equipment added to our towers. International site leasing revenues increased $85.7 million for the nine months ended September 30, 2014, as compared to the prior year, due largely to (i) revenues from 4,425 towers acquired and 371 towers built since January 1, 2013 and (ii) organic site leasing growth from new leases, contractual rent escalators, and lease amendments which increased the related rent to reflect additional equipment added to our towers. The increase in international site leasing revenues includes the negative impact of $1.8 million from fluctuations in foreign currency exchange rates as compared to the prior year. Site development revenues decreased $5.5 million for the nine months ended September 30, 2014, as compared to the prior year, as a result of a reduction in the volume of work performed due to the timing of our wireless carrier customers' initiatives. 30 -------------------------------------------------------------------------------- Table of Contents Segment Operating Profit: Domestic site leasing segment operating profit increased $70.9 million for the nine months ended September 30, 2014, as compared to the prior year, primarily due to additional profit generated by (i) 404 towers acquired and 185 towers built since January 1, 2013 and (ii) organic site leasing growth from new leases, contractual rent escalators, and lease amendments with current tenants which increased the related rent as a result of additional equipment added to our towers in addition to improving control of our site leasing cost of revenue, and the positive impact of our ground lease purchase program. International site leasing segment operating profit increased $68.3 million for the nine months ended September 30, 2014, as compared to the prior year, primarily due to additional profit generated by (i) 4,425 towers acquired and 371 towers built since January 1, 2013 and (ii) organic site leasing growth from new leases, contractual rent escalators, and lease amendments with current tenants which increased the related rent as a result of additional equipment added to our towers in addition to improving control of our site leasing cost of revenue, and the positive impact of our ground lease purchase program. The increase in international segment operating profit includes the negative impact of $1.0 million from fluctuations in foreign currency exchange rates as compared to the prior year. Site development segment operating profit increased $4.9 million for the nine months ended September 30, 2014 as compared to the prior year, primarily due to higher margin carrier direct work performed in the current year, in particular the Sprint 2.5 GHz initiative. Selling, General, and Administrative Expenses: Selling, general, and administrative expenses increased $12.9 million for the nine months ended September 30, 2014, as compared to the prior year, primarily as a result of an increase in personnel, salaries, benefits, non-cash compensation, and other expenses due in large part to our continued portfolio expansion. Depreciation, Accretion, and Amortization Expenses: Depreciation, accretion, and amortization expense increased $64.9 million for the nine months ended September 30, 2014, as compared to the prior year, due to the increase in the number of towers we acquired and built since January 1, 2013. Operating Income: Domestic site leasing operating income increased $42.0 million for the nine months ended September 30, 2014, as compared to the prior year, primarily due to higher segment operating profit and a reduction in asset impairment and decommission costs, partially offset by increases in selling, general, and administrative expenses and acquisition related adjustments and expenses. International site leasing operating income increased $25.4 million for the nine months ended September 30, 2014, as compared to the prior year, primarily due to higher segment operating profit and a reduction in acquisition related adjustments and expenses, partially offset by increases in selling, general, and administrative expenses and depreciation, accretion, and amortization expense. Site development operating income increased $3.6 million for the nine months ended September 30, 2014, as compared to the prior year, primarily due to higher segment operating profit, partially offset by an increase in depreciation, accretion, and amortization expense. Other Income (Expense): Interest expense increased $30.1 million due to the higher average principal amount of cash-interest bearing debt outstanding for the nine months ended September 30, 2014 compared to the prior year, primarily resulting from the issuance of the 2013 Tower Securities, 2014 Term Loan, and 4.875% Notes, partially offset by the maturity of the 1.875% Notes, full repayment of the 2011 Term Loan and 2012-2 Term Loan, full redemption of the 8.25% Notes, and the settlement of a portion of the 4.0% Notes. Non-cash interest expense decreased $12.3 million for the nine months ended September 30, 2014, as compared to the prior year. This decrease primarily reflects the full repayment of the 1.875% Notes and the settlement of a portion of the 4.0% Notes. Amortization of deferred financing fees increased $1.6 million for the nine months ended September 30, 2014 compared to the prior year, primarily resulting from the issuance of the 2013 Tower Securities, 2014 Term Loan, and 4.875% Notes, partially offset by 31 -------------------------------------------------------------------------------- Table of Contents the maturity of the 1.875% Notes, full repayment of the 2011 Term Loan and 2012-2 Term Loan, full redemption of the 8.25% Notes, and the settlement of a portion of the 4.0% Notes. Loss from extinguishment of debt increased $19.3 million for the nine months ended September 30, 2014, as compared to the prior year, primarily due to the premium paid and write-off of the debt discount and deferred financing fees associated with the full redemption of the 8.25% Notes, and the write-off of a portion of the related debt discount and deferred financing fees associated with the repayment of the 2011 Term Loan, 2012-2 Term Loan, and the settlement of a portion of the 4.0% Notes. Other income decreased $14.5 million for the nine months ended September 30, 2014, as compared to the prior year. This decrease is primarily due to gains of $27.3 million and $6.9 million recognized in the prior year period related to the sale of a bankruptcy claim and an unrealized foreign currency swap contract, respectively. The current year period reflects a $17.9 million gain realized on the settlement of two foreign currency contracts which were entered into and settled during the first quarter of 2014 in order to hedge the purchase price of the Oi acquisition in Brazil which closed March 31, 2014. Net Loss: Net loss was $24.7 million for the nine months ended September 30, 2014, a decrease of $12.1 million compared to a loss of $36.7 million in the prior year. The decrease is primarily due to an increase in our total segment operating profit and a decrease in non-cash interest expense as compared to the prior year, offset by increases in selling, general, and administrative expenses, loss from extinguishment of debt, depreciation, amortization, and accretion, and interest expense, as well as, a decrease in other income as compared to the prior year. LIQUIDITY AND CAPITAL RESOURCES SBA Communications Corporation ("SBAC") is a holding company with no business operations of its own. SBAC's only significant asset is the outstanding capital stock of SBA Telecommunications LLC ("Telecommunications"), which is also a holding company that owns equity interests in entities that directly or indirectly own all of our domestic and international towers and assets. We conduct all of our business operations through Telecommunications' subsidiaries. Accordingly, our only source of cash to pay our obligations, other than financings, is distributions with respect to our ownership interest in our subsidiaries from the net earnings and cash flow generated by these subsidiaries. A summary of our cash flows is as follows: For the nine months ended September 30, 2014 2013 (in thousands) Cash provided by operating activities $ 503,179 $ 343,048 Cash used in investing activities (1,181,877) (449,468) Cash provided by financing activities 990,363 61,510 Increase (decrease) in cash and cash equivalents 311,665 (44,910) Effect of exchange rate changes on cash and cash equivalents 16,480 1,220 Cash and cash equivalents, beginning of the period 122,112 233,099 Cash and cash equivalents, end of the period $ 450,257 $ 189,409 Operating Activities Cash provided by operating activities was $503.2 million for the nine months ended September 30, 2014 as compared to $343.0 million for the nine months ended September 30, 2013. This increase was primarily due to an increase in segment operating profit from the site leasing and site development operating segments and increases in cash inflows associated with working capital changes partially offset by increased selling, general, and administrative expenses, as well as increased cash interest payments relating to the higher average amount of cash-interest bearing debt outstanding for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013. 32 -------------------------------------------------------------------------------- Table of Contents Investing Activities A detail of our cash capital expenditures is as follows: For the nine months ended September 30, 2014 2013 (in thousands) Acquisitions (1) $ 1,019,733 $ 311,191Construction and related costs on new tower builds 57,953 55,703 Augmentation and tower upgrades 42,257 33,120 Ground lease buyouts (2) 29,015 35,864 Purchase of headquarters building 11,131 1,222 Tower maintenance 14,205 9,532 General corporate 5,801 3,796 Total cash capital expenditures $ 1,180,095 $ 450,428 (1) Included in our cash capital expenditures for the nine months ended September 30, 2014 is $673.9 million related to our acquisition of 2,007 towers from Oi S.A. which closed on March 31, 2014. (2) Excludes $7.8 million and $7.6 million spent on ground lease extensions and term easements for the nine months ended September 30, 2014 and 2013, respectively. Subsequent to September 30, 2014, we acquired 52 towers and related assets for $40.6 million in cash. During all of 2014, inclusive of the capital expenditures made during the nine months ended September 30, 2014, we expect to incur non-discretionary cash capital expenditures associated with tower maintenance and general corporate expenditures of $26.5 million to $27.5 million and discretionary cash capital expenditures, based on current obligations, of $1,772.2 million to $1,782.2 million primarily associated with the Oi acquisition which closed March 31, 2014 and the acquisition of an additional 1,641 sites from Oi for R$1.2 billion (or approximately $470.3 million at current exchange rates) expected to close before year-end, as well as new tower construction, additional tower acquisitions, tower augmentations, and ground lease purchases. We expect to fund these cash capital expenditures from cash on hand, cash flow from operations, and borrowings under the Revolving Credit Facility or new financings. The exact amount of our future cash capital expenditures will depend on a number of factors including amounts necessary to support our tower portfolio, our new tower build and acquisition programs, and our ground lease purchase program. Financing Activities During the first quarter of 2014, our subsidiary, SBA Senior Finance II, obtained a new senior secured term loan with an initial aggregate principal amount of $1.5 billion that was issued at 99.75% of par value and matures on March 24, 2021 (the "2014 Term Loan"). Net proceeds from the 2014 Term Loan were used to (1) repay in full the remaining $180.5 million balance of the 2011 Term Loan, (2) repay in full the remaining $110.0 million balance of the 2012-2 Term Loan, (3) repay the $390.0 million outstanding balance under our Revolving Credit Facility, and (4) pay the cash consideration in connection with the Oi S.A. acquisition which closed on March 31, 2014. The remaining net proceeds were used for general corporate purposes. During the nine months ended September 30, 2014, we borrowed $575.0 million and repaid $490.0 million under the Revolving Credit Facility. As of September 30, 2014, we had $300.0 million outstanding under the $770.0 million Revolving Credit Facility. As of the date of this filing, no amounts were outstanding under the Revolving Credit Facility, and the amount available based on specified covenants under the facility was $770.0 million. During the nine months ended September 30, 2014, holders of the 4.0% Notes converted $132.9 million in principal which was settled for $132.6 million in cash and 3.0 million shares of our Class A common stock. Concurrently with the settlement of our conversion obligation, we settled the convertible note hedges receiving 3.0 million shares of our Class A common stock. As a result, our outstanding share count was not impacted by the conversion of these notes. During the final settlement period, we received conversion notices totaling $367 million in principal of the 4.0% Notes and settled these on October 1, 2014 for $367 million in cash and 8.7 million shares of Class A common stock. Concurrently with the settlement of our conversion obligation, we settled the convertible note hedges that we had purchased at the time the 4.0% Notes were 33 -------------------------------------------------------------------------------- Table of Contents issued, receiving 8.7 million shares of our Class A common stock. As a result, our outstanding share count was not impacted by the conversion of these notes. The remaining $38,000 aggregate principal amount of 4.0% Notes that was not converted matured on October 1, 2014 and was settled in cash at principal plus accrued interest. During the nine months ended September 30, 2014, we paid $602.8 million to early settle approximately 62% of the original warrants sold in connection with the issuance of the 4.0% Notes, representing approximately 10.2 million underlying shares of Class A common stock, originally scheduled to mature in the first quarter of 2015. Subsequent to September 30, 2014, we early settled approximately 7% of the original total outstanding warrants for $74.3 million, representing approximately 1.2 million underlying shares, originally scheduled to mature in the first quarter of 2015. As of the date of this filing, we have approximately 31% of the original warrants still outstanding representing approximately 5.1 million underlying shares, which are scheduled to mature in the first quarter of 2015. On July 1, 2014, we issued $750.0 million aggregate principal amount of our 4.875% Senior Notes due 2022 (the "4.875% Notes"). The 4.875% Notes were issued at 99.178% of par value. Interest on the 4.875% Notes is payable semi-annually on January 15 and July 15 of each year beginning January 15, 2015. The 4.875% Notes mature on July 15, 2022. Net proceeds from the 4.875% Notes were used to (i) redeem all of the 8.25% Notes due 2019 including the associated call premium for $253.0 million and (ii) pay the conversion obligations with respect to approximately $121.0 million aggregate principal amount of our 4.0% Notes (defined below). All remaining net proceeds were used for general corporate purposes. Subsequent September 30, 2014, we, through our existing SBA Tower Trust, issued $920.0 million of 2.898% Secured Tower Revenue Securities Series 2014-1C which have an anticipated repayment date of October 2019 and a final maturity date of October 2044 and $620.0 million of 3.869% Secured Tower Revenue Securities Series 2014-2C which have an anticipated repayment date of October 2024 and a final maturity date of October 2049 (collectively the "2014 Tower Securities"). The aggregate $1.54 billion of 2014 Tower Securities have a blended interest rate of 3.289% and a weighted average life through the anticipated repayment date of 7.0 years. Net proceeds from this offering were used to prepay in full $680 million of series 2010-1C securities and to repay the $300 million outstanding balance under the Revolving Credit Facility which had been drawn in order to partially repay the 4.0% Notes due October 1, 2014. The remaining net proceeds will be used for general corporate purposes. During the nine months ended September 30, 2014, we did not repurchase any shares of our Class A common stock under our stock repurchase program. As of September 30, 2014, we had a remaining authorization to repurchase $150.0 million of Class A common stock under our current $300.0 million stock repurchase program. Registration Statements We have on file with the Commission a shelf registration statement on Form S-4 registering shares of Class A common stock that we may issue in connection with the acquisition of wireless communication towers or antenna sites and related assets or companies who own wireless communication towers, antenna sites, or related assets. During the nine months ended September 30, 2014, we did not issue any shares of Class A common stock under this registration statement. As of September 30, 2014, we had approximately 1.7 million shares of Class A common stock remaining under this shelf registration statement. On February 27, 2012, we filed with the Commission an automatic shelf registration statement for well-known seasoned issuers on Form S-3ASR. This registration statement enables us to issue shares of our Class A common stock, preferred stock or debt securities either separately or represented by warrants, or depositary shares as well as units that include any of these securities. Under the rules governing automatic shelf registration statements, we will file a prospectus supplement and advise the Commission of the amount and type of securities each time we issue securities under this registration statement. No shares were issued in 2013 or the first and nine months of 2014. Debt Instruments and Debt Service Requirements Revolving Credit Facility under the Senior Credit Agreement The Revolving Credit Facility is governed by the Senior Credit Agreement. As of September 30, 2014, the Revolving Credit Facility consisted of a revolving loan under which up to $770.0 million aggregate principal amount may be borrowed, repaid and redrawn, subject to compliance with specific financial ratios and the satisfaction of other customary conditions to borrowing. Amounts borrowed under the Revolving Credit Facility accrue interest at the Eurodollar Rate plus a margin that ranges from 187.5 basis points to 237.5 basis points or at a Base Rate plus a margin that ranges from 87.5 basis points to 137.5 basis points, in each case based on the ratio of Consolidated Total Debt to Annualized Borrower EBITDA, calculated in accordance with the Senior Credit Agreement. If not earlier terminated by SBA Senior Finance II LLC ("SBA Senior Finance II"), a subsidiary of the Company, the Revolving Credit 34 -------------------------------------------------------------------------------- Table of Contents Facility will terminate on, and SBA Senior Finance II will repay all amounts outstanding on or before, May 9, 2017. The proceeds available under the Revolving Credit Facility may be used for general corporate purposes. A per annum commitment fee of 0.375% to 0.5% of the unused commitments under the Revolving Credit Facility is charged based on the ratio of Consolidated Total Debt to Annualized Borrower EBITDA (calculated in accordance with the Senior Credit Agreement). SBA Senior Finance II may, from time to time, borrow from and repay the Revolving Credit Facility. Consequently, the amount outstanding under the Revolving Credit Facility at the end of a period may not be reflective of the total amounts outstanding during such period. As of September 30, 2014, the Revolving Credit Facility was accruing interest at 2.535% per annum. During the three and nine months ended September 30, 2014, we borrowed $300.0 million and $575.0 million, respectively, under the Revolving Credit Facility. During the three and nine months ended September 30, 2014, we repaid $100.0 million and $490.0 million, respectively, of the outstanding balance under the Revolving Credit Facility. As of September 30, 2014, $300.0 million was outstanding under the Revolving Credit Facility. Subsequent to September 30, 2014, we repaid the remaining $300.0 million outstanding balance under the Revolving Credit Facility with proceeds from the issuance of the 2014 Tower Securities (defined below). As of the date of this filing, no amounts were outstanding under the Revolving Credit Facility, and the amount available based on specified covenants under the facility was $770.0 million. On February 7, 2014, SBA Senior Finance II entered into a Second Amended and Restated Credit Agreement (as amended and restated, the "Senior Credit Agreement") with several banks and other financial institutions or entities from time to time parties to the Senior Credit Agreement to, among other things, obtain a $1.5 billion senior secured term loan (the "2014 Term Loan") and to amend certain terms of the existing senior credit agreement. In addition to providing for the 2014 Term Loan, the Senior Credit Agreement was amended to, among other things, amend the terms of certain events of default, modify certain negative covenants and remove the parent financial maintenance leverage covenant to reflect the increased size of SBA Senior Finance II and its restricted subsidiaries. All other material terms of the Senior Credit Agreement, as it existed prior to February 7, 2014, remained unchanged. Term Loans under the Senior Credit Agreement 2011 Term Loan On February 7, 2014, we repaid the remaining $180.5 million outstanding principal balance of the 2011 Term Loan. In connection with the prepayment, we expensed $1.1 million of net deferred financing fees and $0.3 million of discount related to the debt. 2012-1 Term Loan The 2012-1 Term Loan consists of a senior secured term loan with an initial aggregate principal amount of $200.0 million that matures on May 9, 2017. The 2012-1 Term Loan accrues interest, at SBA Senior Finance II's election, at either the Base Rate plus a margin that ranges from 100 to 150 basis points or the Eurodollar Rate plus a margin that ranges from 200 to 250 basis points, in each case based on the ratio of Consolidated Total Debt to Annualized Borrower EBITDA (calculated in accordance with the Senior Credit Agreement). As of September 30, 2014, the 2012-1 Term Loan was accruing interest at 2.66% per annum. Principal payments on the 2012-1 Term Loan commenced on September 30, 2012 and are being made in quarterly installments on the last day of each March, June, September and December, in an amount equal to $2.5 million for each of the first eight quarters, $3.75 million for the next four quarters and $5.0 million for each quarter thereafter. SBA Senior Finance II has the ability to prepay any or all amounts under the 2012-1 Term Loan without premium or penalty. To the extent not previously repaid, the 2012-1 Term Loan will be due and payable on the maturity date. The 2012-1 Term Loan was issued at par. We incurred deferred financing fees of $2.7 million in relation to this transaction which are being amortized through the maturity date. During the three and nine months ended September 30, 2014, we repaid $3.8 million and $8.8 million, respectively, of principal on the 2012-1 Term Loan. As of September 30, 2014, the 2012-1 Term Loan had a principal balance of $176.3 million. 2012-2 Term Loan On February 7, 2014, we repaid the entire $110.0 million outstanding principal balance of the 2012-2 Term Loan. In connection with the prepayment, we expensed $1.0 million of net deferred financing fees and $0.2 million of discount related to the debt. 35 -------------------------------------------------------------------------------- Table of Contents 2014 Term Loan The 2014 Term Loan consists of a senior secured term loan with an initial aggregate principal amount of $1.5 billion that matures on March 24, 2021. The 2014 Term Loan accrues interest, at SBA Senior Finance II's election, at either the Base Rate plus 150 basis points (with a Base Rate floor of 1.75%) or the Eurodollar Rate plus 250 basis points (with a Eurodollar Rate floor of 0.75%). The 2014 Term Loan was issued at 99.75% of par value. As of September 30, 2014, the 2014 Term Loan was accruing interest at 3.25% per annum. Principal payments on the 2014 Term Loan commenced on September 30, 2014 and will be made in quarterly installments on the last day of each March, June, September, and December in an amount equal to $3.75 million. SBA Senior Finance II has the ability to prepay any or all amounts under the 2014 Term Loan. We incurred deferred financing fees of approximately $12.9 million to date in relation to this transaction which are being amortized through the maturity date. Net proceeds from the 2014 Term Loan were used (1) to repay in full the remaining $180.5 million balance of the 2011 Term Loan, (2) to repay in full the remaining $110.0 million balance of the 2012-2 Term Loan, (3) to repay the $390.0 million outstanding balance under the Revolving Credit Facility, (4) to pay the cash consideration in connection with our acquisition of towers from Oi S.A. in Brazil, and (5) for general corporate purposes. Secured Tower Revenue Securities 2010 Tower Securities On April 16, 2010, we, through a New York common law trust (the "Trust"), issued $680.0 million of 2010-1 Tower Securities and $550.0 million of 2010-2 Tower Securities (together the "2010 Tower Securities"). The 2010-1 Tower Securities have an annual interest rate of 4.254% and the 2010-2 Tower Securities have an annual interest rate of 5.101%. The weighted average annual fixed interest rate of the 2010 Tower Securities is 4.7%, including borrowers' fees, payable monthly. The anticipated repayment date and the final maturity date for the 2010-1 Tower Securities was April 15, 2015 and April 16, 2040, respectively. The anticipated repayment date and the final maturity date for the 2010-2 Tower Securities is April 17, 2017 and April 15, 2042, respectively. The sole asset of the Trust consists of a non-recourse mortgage loan made in favor of the Borrowers. We incurred deferred financing fees of $18.0 million in relation to this transaction which are being amortized through the anticipated repayment date of each of the 2010 Tower Securities. On October 15, 2014, we repaid in full the 2010-1 Tower Securities with proceeds from the 2014 Tower Securities (defined below). In connection with the prepayment, we expensed $1.1 million of net deferred financing fees. 2012-1 Tower Securities On August 9, 2012, we, through the Trust, issued $610.0 million of Secured Tower Revenue Securities Series 2012-1 (the "2012-1 Tower Securities") which have an anticipated repayment date and a final maturity date of December 15, 2017 and December 15, 2042, respectively. The fixed interest rate of the 2012-1 Tower Securities is 2.933% per annum, payable monthly. We incurred deferred financing fees of $14.9 million in relation to this transaction which are being amortized through the anticipated repayment date of the 2012-1 Tower Securities. 2013 Tower Securities On April 18, 2013, we, through the Trust, issued $425.0 million of 2.240% Secured Tower Revenue Securities Series 2013-1C which have an anticipated repayment date and a final maturity date of April 16, 2018 and April 15, 2043, respectively, $575.0 million of 3.722% Secured Tower Revenue Securities Series 2013-2C which have an anticipated repayment date and a final maturity date of April 17, 2023 and April 15, 2048, respectively, and $330.0 million of 3.598% Secured Tower Revenue Securities Series 2013-1D which have an anticipated repayment date and a final maturity date of April 16, 2018 and April 15, 2043, respectively (collectively the "2013 Tower Securities"). The aggregate $1.33 billion of 2013 Tower Securities have a blended interest rate of 3.218% and an initial weighted average life through the anticipated repayment date of 7.2 years. We incurred an aggregate of deferred financing fees of $25.5 million in relation to this transaction which are being amortized through the anticipated repayment date of each of the 2013 Tower Securities. 2014 Tower Securities On October 15, 2014, we, through the Trust, issued $920.0 million of 2.898% Secured Tower Revenue Securities Series 2014-1C which have an anticipated repayment date and a final maturity date of October 15, 2019 and October 17, 2044, respectively, and $620.0 million of 3.869% Secured Tower Revenue Securities Series 2014-2C which have an anticipated repayment date and a final 36 -------------------------------------------------------------------------------- Table of Contents maturity date of October 15, 2024 and October 15, 2049, respectively, (collectively the "2014 Tower Securities"). The aggregate $1.54 billion of 2014 Tower Securities have a blended interest rate of 3.289% and a weighted average life through the anticipated repayment date of 7.0 years. Net proceeds from this offering were used to prepay in full $680 million of Series 2010-1 securities and to repay the $300 million outstanding balance under the Revolving Credit Facility which had been drawn in order to partially repay the 4.0% Notes. The remaining net proceeds will be used for general corporate purposes. We have incurred deferred financing fees in the aggregate of $20.9 million in relation to this transaction which are being amortized through the anticipated repayment date of each of the 2014 Tower Securities. 4.0% Convertible Senior Notes due 2014 On April 24, 2009, we issued $500.0 million of our 4.0% Convertible Senior Notes (the "4.0% Notes") in a private placement transaction. Interest was payable semi-annually on April 1 and October 1 and the notes matured on October 1, 2014. The 4.0% Notes were convertible, at the holder's option, into shares of our Class A common stock, at an initial conversion rate of 32.9164 shares of our Class A common stock per $1,000 principal amount of 4.0% Notes (subject to certain customary adjustments), which is equivalent to an initial conversion price of approximately $30.38 per share or a 22.5% conversion premium based on the last reported sale price of $24.80 per share of our Class A common stock on the Nasdaq Global Select Market on April 20, 2009, the purchase agreement date. Concurrently with the pricing of the 4.0% Notes, we entered into convertible note hedge and warrant transactions with affiliates of certain of the initial purchasers of the convertible notes. The initial strike price of the convertible note hedge transactions relating to the 4.0% Notes is $30.38 per share of our Class A common stock (the same as the initial conversion price of the 4.0% Notes) and the upper strike price of the warrant transactions is $44.64 per share. At the time of the issuance of the 4.0% Notes, we elected to settle our conversion obligations in stock. Effective March 17, 2014, we elected to settle the principal amount of any conversions in cash and any additional conversion consideration at the conversion rate then applicable in shares of our Class A common stock. Concurrently with the settlement of any 4.0% Notes converted, we settled the associated convertible note hedges and received an equal number of shares to those issued to the noteholders. During the three and nine months ended September 30, 2014, holders of the 4.0% Notes converted $11.3 million and $132.9 million, respectively, in principal amount of 4.0% Notes. We settled our conversion obligation through the payment of the principal amount in cash and the issuance of 0.3 million and 3.0 million shares of our Class A common stock during the three and nine months ended September 30, 2014, respectively. Concurrently with these conversions, the related convertible note hedges were settled, and we received 0.4 million (of which 0.1 million related to notices received during the second quarter of 2014) and 3.0 million shares of our Class A common stock during the three and nine months ended September 30, 2014, respectively. As a result, our outstanding share count was not impacted by the conversion of these notes. During the final settlement period, we received conversion notices totaling $367 million in principal of the 4.0% Notes and settled these on October 1, 2014 for $367 million in cash and 8.7 million shares of Class A common stock. Concurrently with the settlement of our conversion obligation, we settled the convertible note hedges that we had purchased at the time the 4.0% Notes were issued, receiving 8.7 million shares of our Class A common stock. As a result, our outstanding share count was not impacted by the conversion of these notes. The remaining $38,000 aggregate principal amount of 4.0% Notes that was not converted matured on October 1, 2014 and was settled in cash at principal plus accrued interest. During the three months ended September 30, 2014, we paid $326.6 million to early settle approximately 32% of the outstanding warrants sold in connection with the issuance of the 4.0% Notes, representing approximately 5.3 million underlying shares of Class A common stock, originally scheduled to mature in the first quarter of 2015. During the nine months ended September 30, 2014, we paid $602.8 million to early settle approximately 62% of the original warrants sold in connection with the issuance of the 4.0% Notes, representing approximately 10.2 million underlying shares of Class A common stock, originally scheduled to mature in the first quarter of 2015. Subsequent to September 30, 2014, we early settled approximately 7% of the original total outstanding warrants for $74.3 million, representing approximately 5.1 million underlying shares, originally scheduled to mature in the first quarter of 2015. As of the date of this filing, we have approximately 31% of the original warrants still outstanding representing approximately 5.1 million underlying shares, which are currently scheduled to mature in the first quarter of 2015. 37 -------------------------------------------------------------------------------- Table of Contents Senior Notes 8.25% Senior Notes On July 24, 2009, SBA Telecommunications LLC ("Telecommunications"), our wholly owned subsidiary, issued $375.0 million of unsecured senior notes due August 15, 2019 (the "8.25% Notes"). On April 13, 2012, we used the proceeds of an equity offering to redeem $131.3 million in aggregate principal amount of our 8.25% Notes and to pay $10.8 million as a premium on the redemption of the 8.25% Notes. We expensed $0.9 million and $2.4 million of debt discount and deferred financing fees, respectively, related to the redemption of the 8.25% Notes. On August 15, 2014, we used proceeds from the 4.875% Notes (defined below) to redeem the remaining $243.8 million principal balance and to pay $10.1 million as a premium on redemption of the 8.25% Notes. We expensed $1.2 million and $3.3 million of debt discount and deferred financing fees, respectively, related to the redemption of the 8.25% Notes. 5.75% Senior Notes On July 13, 2012, Telecommunications issued $800.0 million of unsecured senior notes due July 15, 2020 (the "5.75% Notes"). The 5.75% Notes accrue interest at a rate of 5.75% and were issued at par. Interest on the 5.75% Notes is due semi-annually on July 15 and January 15 of each year beginning on January 15, 2013. We incurred deferred financing fees of $14.0 million in relation to this transaction which are being amortized through the maturity date. 5.625% Senior Notes On September 28, 2012, we issued $500.0 million of unsecured senior notes due October 1, 2019 (the "5.625% Notes"). The 5.625% Notes accrue interest at a rate of 5.625% per annum and were issued at par. Interest on the 5.625% Notes is due semi-annually on April 1 and October 1 of each year beginning on April 1, 2013. We incurred deferred financing fees of $8.6 million in relation to this transaction which are being amortized through the maturity date. 4.875% Senior Notes On July 1, 2014, we issued $750.0 million of unsecured senior notes due July 15, 2022 (the "4.875% Notes"). The 4.875% Notes accrue interest at a rate of 4.875% per annum and were issued at 99.178% of par value. Interest on the 4.875% Notes is due semi-annually on January 15 and July 15 of each year beginning January 15, 2015. We incurred deferred financing fees of $11.4 million in relation to this transaction which are being amortized through the maturity date. Net proceeds from the 4.875% Notes were used to (i) redeem all of the 8.25% Notes due 2019 including the associated call premium for $253.0 million and (ii) pay the conversion obligations with respect to approximately $121.0 million aggregate principal amount of our 4.0% Notes. All remaining net proceeds were used for general corporate purposes. BNDES Loans During the nine months ended September 30, 2014, we had borrowings of $0.4 million and repayments of $6.3 million under the BNDES Loans. The BNDES Loans were repaid in full in April 2014. Debt Service As of September 30, 2014, we believe that our cash on hand, capacity available under our Revolving Credit Facility, our cash flows from operations for the next twelve months, and future financings will be sufficient to service our outstanding debt during the next twelve months. 38 -------------------------------------------------------------------------------- Table of Contents The following table illustrates our estimate of our debt service requirement over the next twelve months based on the amounts outstanding as of September 30, 2014 and the interest rates accruing on those amounts on such date (in thousands): 4.000% Convertible Senior Notes due 2014 $ 367,068 5.625% Senior Notes due 2019 28,125 5.750% Senior Notes due 2020 46,000 4.8750% Senior Notes due 2020 36,563 4.254% Secured Tower Revenue Securities Series 2010-1 (1) 695,786 5.101% Secured Tower Revenue Securities Series 2010-2 28,230 2.933% Secured Tower Revenue Securities Series 2012-1 18,085 2.240% Secured Tower Revenue Securities Series 2013-1C 9,655 3.722% Secured Tower Revenue Securities Series 2013-2C 21,584 3.598% Secured Tower Revenue Securities Series 2013-1D 11,978 Revolving Credit Facility 9,368 2012-1 Term Loan 20,681 2014 Term Loan 63,323 Total debt service for next 12 months: (2) (3) $ 1,356,445 (1) On October 15, 2014, we repaid in full the 2010-1 Tower Securities with proceeds from the 2014 Tower Securities. (2) Our total debt service does not include any amounts for the 2014 Tower Securities issued October 15, 2014. Total debt service for the next twelve months related to the 2014 Tower Securities is $49.2 million. (3) Total debt service excludes amounts necessary to settle the remaining 6.2 million warrants as of September 30, 2014 scheduled to settle over a 60 trading day period commencing on January 2, 2015. 39 -------------------------------------------------------------------------------- Table of Contents |