10-Q 1 sbac-20150331x10q.htm 10-Q 20150331 Q1

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2015

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                       to                     

 

Commission file number: 000-30110

 

SBA COMMUNICATIONS CORPORATION

(Exact name of Registrant as specified in its charter)

 

 

 

 

Florida

65-0716501

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

 

 

 

 

8051 Congress Avenue

 

Boca Raton, Florida

33487

(Address of principal executive offices)

(Zip Code)

 

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

 

Securities registered pursuant to Section 12(b) of the Act:

 

 

 

Title of Each Class

Name of Each Exchange on Which Registered

Class A Common Stock, $0.01 par value per share

The NASDAQ Stock Market LLC

 

(NASDAQ Global Select Market)

 

Securities registered pursuant to Section 12(g) of the Act:

None

 

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No   

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes     No  

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

 

 

 

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-Accelerated filer

Smaller reporting company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)    Yes      No   

 

Indicate the number of shares outstanding of each issuer’s classes of common stock, as of the latest practicable date: 129,454,487 shares of Class A common stock as of April 30, 2015.

 


 

Table of Contents 

 

 

 

 

 

 

 

 

 

Page

PART I – FINANCIAL INFORMATION 

 

 

 

Item 1.

Financial Statements

 

Consolidated Balance Sheets as of March 31, 2015 (unaudited) and December 31, 2014

 

Consolidated Statements of Operations (unaudited) for the three months ended March 31, 2015 and 2014

 

Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three months ended March 31, 2015 and 2014

 

Consolidated Statement of Shareholders’ Deficit (unaudited) for the three months ended March 31, 2015

 

Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2015 and 2014

 

Condensed Notes to Consolidated Financial Statements (unaudited)

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

19 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

31 

Item 4.

Controls and Procedures

34 

 

PART II – OTHER INFORMATION 

 

 

 

Item 6.

Exhibits

34 

 

 

 

SIGNATURES 

35 

 

 

 

 

 

 


 

PART I – FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except par values)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

 

2015

 

2014

ASSETS

 

(unaudited)

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

62,371 

 

$

39,443 

Restricted cash

 

 

41,438 

 

 

52,519 

Short-term investments

 

 

4,816 

 

 

5,549 

Accounts receivable, net of allowance of $1,044 and $889

 

 

 

 

 

 

at March 31, 2015 and December 31, 2014, respectively

 

 

91,468 

 

 

104,268 

Costs and estimated earnings in excess of billings on uncompleted contracts

 

 

29,209 

 

 

30,078 

Prepaid expenses and other current assets

 

 

95,711 

 

 

95,031 

Total current assets

 

 

325,013 

 

 

326,888 

Property and equipment, net

 

 

2,702,188 

 

 

2,762,417 

Intangible assets, net

 

 

3,925,992 

 

 

4,189,540 

Deferred financing fees, net

 

 

93,429 

 

 

95,237 

Other assets

 

 

480,677 

 

 

467,043 

Total assets

 

$

7,527,299 

 

$

7,841,125 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' DEFICIT

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Accounts payable

 

$

33,805 

 

$

42,851 

Accrued expenses

 

 

55,619 

 

 

65,553 

Current maturities of long-term debt

 

 

33,750 

 

 

32,500 

Deferred revenue

 

 

108,630 

 

 

120,047 

Accrued interest

 

 

37,966 

 

 

53,178 

Other current liabilities

 

 

16,706 

 

 

16,921 

Total current liabilities

 

 

286,476 

 

 

331,050 

Long-term liabilities:

 

 

 

 

 

 

Long-term debt

 

 

7,929,829 

 

 

7,828,299 

Other long-term liabilities

 

 

347,781 

 

 

342,576 

Total long-term liabilities

 

 

8,277,610 

 

 

8,170,875 

 

 

 

 

 

 

 

Shareholders' deficit:

 

 

 

 

 

 

Preferred stock - par value $.01,  30,000 shares authorized, no shares issued

 

 

 

 

 

 

or outstanding

 

 

 —

 

 

 —

Common stock - Class A, par value $.01,  400,000 shares authorized, 129,428 and

 

 

 

 

 

 

129,134 shares issued and outstanding at March 31, 2015 and

 

 

 

 

 

 

December 31, 2014, respectively

 

 

1,294 

 

 

1,291 

Additional paid-in capital

 

 

1,940,265 

 

 

2,062,775 

Accumulated deficit

 

 

(2,621,410)

 

 

(2,542,380)

Accumulated other comprehensive loss, net

 

 

(356,936)

 

 

(182,486)

Total shareholders' deficit

 

 

(1,036,787)

 

 

(660,800)

Total liabilities and shareholders' deficit

 

$

7,527,299 

 

$

7,841,125 

 

The accompanying condensed notes are an integral part of these consolidated financial statements.

1


 

SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS 

(unaudited) (in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

For the three months

 

 

ended March 31,

 

 

2015

 

2014

Revenues:

 

 

 

 

Site leasing

 

$

369,727 

 

$

309,320 

Site development

 

 

40,367 

 

 

36,230 

Total revenues

 

 

410,094 

 

 

345,550 

Operating expenses:

 

 

 

 

 

 

Cost of revenues (exclusive of depreciation, accretion, and

 

 

 

 

 

 

amortization shown below):

 

 

 

 

 

 

Cost of site leasing

 

 

80,217 

 

 

69,740 

Cost of site development

 

 

30,893 

 

 

27,427 

Selling, general, and administrative (1)

 

 

29,884 

 

 

24,676 

Acquisition related adjustments and expenses

 

 

1,339 

 

 

8,561 

Asset impairment and decommission costs

 

 

6,822 

 

 

3,568 

Depreciation, accretion, and amortization

 

 

171,853 

 

 

144,442 

Total operating expenses

 

 

321,008 

 

 

278,414 

Operating income

 

 

89,086 

 

 

67,136 

Other income (expense):

 

 

 

 

 

 

Interest income

 

 

293 

 

 

86 

Interest expense

 

 

(77,654)

 

 

(66,027)

Non-cash interest expense

 

 

(280)

 

 

(10,304)

Amortization of deferred financing fees

 

 

(4,544)

 

 

(4,237)

Loss from extinguishment of debt, net

 

 

 —

 

 

(1,951)

Other (expense) income, net

 

 

(82,968)

 

 

18,390 

Total other expense

 

 

(165,153)

 

 

(64,043)

(Loss) income before provision for income taxes

 

 

(76,067)

 

 

3,093 

Provision for income taxes

 

 

(2,963)

 

 

(1,686)

Net (loss) income

 

 

(79,030)

 

 

1,407 

Net (loss) income per common share

 

 

 

 

 

 

Basic and diluted

 

$

(0.61)

 

$

0.01 

Weighted average number of common shares

 

 

 

 

 

 

Basic

 

 

129,235 

 

 

128,560 

Diluted

 

 

129,235 

 

 

138,356 

 

 (1)Includes non-cash compensation of $6,884 and $4,541 for the three months ended March 31, 2015 and 2014, respectively.

The accompanying condensed notes are an integral part of these consolidated financial statements.

 

2


 

SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) 

(unaudited) (in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months

 

 

ended March 31,

 

 

2015

 

2014

Net (loss) income

 

$

(79,030)

 

$

1,407 

Foreign currency translation adjustments

 

 

(174,450)

 

 

33,007 

Comprehensive (loss) income

 

$

(253,480)

 

$

34,414 

 

The accompanying condensed notes are an integral part of these consolidated financial statements.

 

3


 

SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS’  DEFICIT 

(unaudited) (in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

Class A

 

Additional

 

 

 

 

Other

 

 

 

 

 

Common Stock

 

Paid-In

 

Accumulated

 

Comprehensive

 

 

 

 

 

Shares

 

Amount

 

Capital

 

Deficit

 

Loss

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE, December 31, 2014

 

129,134 

 

$

1,291 

 

$

2,062,775 

 

$

(2,542,380)

 

$

(182,486)

 

$

(660,800)

Net loss

 

 —

 

 

 —

 

 

 —

 

 

(79,030)

 

 

 —

 

 

(79,030)

Common stock issued in connection with

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

stock purchase/option plans

 

294 

 

 

 

 

5,643 

 

 

 —

 

 

 —

 

 

5,646 

Non-cash compensation

 

 —

 

 

 —

 

 

7,083 

 

 

 —

 

 

 —

 

 

7,083 

Settlement of common stock warrants

 

 —

 

 

 —

 

 

(135,236)

 

 

 —

 

 

 —

 

 

(135,236)

Foreign currency translation adjustments

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(174,450)

 

 

(174,450)

BALANCE, March 31, 2015

 

129,428 

 

$

1,294 

 

$

1,940,265 

 

$

(2,621,410)

 

$

(356,936)

 

$

(1,036,787)

 

The accompanying condensed notes are an integral part of these consolidated financial statements.

 

4


 

SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited) (in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months

 

 

ended March 31,

 

 

2015

 

2014

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net (loss) income

 

$

(79,030)

 

$

1,407 

Adjustments to reconcile net (loss) income to net cash provided by operating

 

 

 

 

 

 

activities:

 

 

 

 

 

 

Depreciation, accretion, and amortization

 

 

171,853 

 

 

144,442 

Non-cash interest expense

 

 

280 

 

 

10,304 

Deferred income tax expense

 

 

557 

 

 

474 

Non-cash asset impairment and decommission costs

 

 

5,027 

 

 

2,858 

Non-cash compensation expense

 

 

6,988 

 

 

4,618 

Amortization of deferred financing fees

 

 

4,544 

 

 

4,237 

Loss from extinguishment of debt, net

 

 

 —

 

 

1,951 

Non-cash earnout adjustments

 

 

1,552 

 

 

(648)

Loss on remeasurement of U.S. dollar denominated intercompany loan

 

 

83,995 

 

 

 —

Gain on foreign currency swap contract

 

 

 —

 

 

(17,891)

Other non-cash items reflected in the Statements of Operations

 

 

21 

 

 

220 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

 

Accounts receivable and costs and estimated earnings in excess of

 

 

 

 

 

 

billings on uncompleted contracts, net

 

 

4,445 

 

 

8,644 

Prepaid and other assets

 

 

(6,286)

 

 

1,196 

Accounts payable and accrued expenses

 

 

730 

 

 

(71)

Accrued interest

 

 

(15,212)

 

 

(4,485)

Other liabilities

 

 

(1,056)

 

 

2,959 

Net cash provided by operating activities

 

 

178,408 

 

 

160,215 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Acquisitions

 

 

(53,279)

 

 

(927,653)

Capital expenditures

 

 

(68,100)

 

 

(32,238)

Proceeds from foreign currency swap contract

 

 

 —

 

 

17,891 

Other investing activities

 

 

(175)

 

 

444 

Net cash used in investing activities

 

 

(121,554)

 

 

(941,556)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Borrowings under Revolving Credit Facility

 

 

135,000 

 

 

175,000 

Repayments under Revolving Credit Facility

 

 

(25,000)

 

 

(390,000)

Repayment of Term Loans

 

 

(7,500)

 

 

(293,000)

Proceeds from Term Loans, net of fees

 

 

 —

 

 

1,483,470 

Payments for settlement of common stock warrants

 

 

(135,236)

 

 

 —

Payments for earn-outs

 

 

(1,199)

 

 

(4,598)

Payment of deferred financing fees

 

 

(2,736)

 

 

(676)

Other financing activities

 

 

5,142 

 

 

(6,034)

Net cash (used in) provided by financing activities

 

 

(31,529)

 

 

964,162 

Effect of exchange rate changes on cash and cash equivalents

 

 

(2,397)

 

 

17,981 

NET INCREASE IN CASH AND CASH EQUIVALENTS

 

 

22,928 

 

 

200,802 

CASH AND CASH EQUIVALENTS:

 

 

 

 

 

 

Beginning of period

 

 

39,443 

 

 

122,112 

End of period

 

$

62,371 

 

$

322,914 

 

The accompanying condensed notes are an integral part of these consolidated financial statements.

5


 

SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months

 

 

ended March 31,

 

 

2015

 

2014

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

Interest

 

$

92,911 

 

$

70,324 

Income taxes

 

$

1,514 

 

$

1,951 

 

 

 

 

 

 

 

SUPPLEMENTAL CASH FLOW INFORMATION OF NON-CASH ACTIVITIES:

 

 

 

 

 

 

Assets acquired through capital leases

 

$

1,464 

 

$

115 

Issuance of stock for settlement of convertible debt and warrants, net of hedges

 

$

 —

 

$

34 

 

The accompanying condensed notes are an integral part of these consolidated financial statements.

 

6


 

SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.BASIS OF PRESENTATION 

The accompanying consolidated financial statements should be read in conjunction with the Annual Report on Form 10-K for the fiscal year ended December 31, 2014 for SBA Communications Corporation and its subsidiaries (the “Company”). These financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X and, therefore, omit or condense certain footnotes and other information normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States. In the opinion of the Company’s management, all adjustments (consisting of normal recurring accruals) considered necessary for fair financial statement presentation have been made. The results of operations for an interim period may not give a true indication of the results for the year. Certain reclassifications have been made to prior year amounts or balances to conform to the presentation adopted in the current year.

The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported in consolidated financial statements and accompanying notes. While the Company believes that such estimates are fair when considered in conjunction with the consolidated financial statements and accompanying notes, the actual amounts, when known, may vary from these estimates.

Foreign Currency Translation 

All assets and liabilities of foreign subsidiaries that do not utilize the United States dollar as its functional currency (Brazil and Canada) are translated at period-end rates of exchange, while revenues and expenses are translated at monthly weighted average rates of exchange for the period. Unrealized translation gains and losses are reported as foreign currency translation adjustments through Accumulated other comprehensive loss in the accompanying Consolidated Statement of Shareholders’ Deficit. 

Intercompany Loans

In accordance with Accounting Standards Codification (ASC) 830, the Company remeasures intercompany loans not denominated in the functional currency with the corresponding remeasurement adjustment being recorded in Other (expense) income, net in the Consolidated Statements of Operations. For the three months ended March 31, 2015, the Company recorded an $84.0 million foreign exchange loss on the remeasurement of an intercompany loan with a Brazilian subsidiary.

 

Recent Accounting Pronouncements Not Yet Adopted

 

In May 2014, the Financial Accounting Standards Board ("FASB") released updated guidance regarding the recognition of revenue from contracts with customers, exclusive of those contracts within lease accounting. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: (1) identify the contracts with the customer; (2) identify the performance obligations in the contract; (3) determine the contract price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. This guidance is effective for the Company as of January 1, 2017. In April 2015, the FASB proposed a one-year deferral of the effective date. Under the proposal, the standard would be required to be adopted by public business entities in annual periods beginning on or after December 15, 2017. The FASB also proposed to permit early adoption at the original effective date.  This guidance is required to be applied (1) retrospectively to each prior reporting period presented, or (2) with the cumulative effect being recognized at the date of initial application. The Company is evaluating the guidance including the impact on its consolidated financial statements.

 

In April 2015, the FASB issued ASU 2015-03, Interest—Imputation of Interest. The standard requires debt issuance costs to be presented on the balance sheet as a direct deduction from the related debt liability rather than as an asset. Once adopted, entities are required to apply the new guidance retrospectively to all prior periods presented. ASU 2015-03 is effective for annual and interim periods beginning after December 15, 2015 and early application is permitted. The Company has not elected to early adopt the standard.

2.FAIR VALUE MEASUREMENTS

Items Measured at Fair Value on a Recurring Basis— The Company’s earnout liabilities related to acquisitions are measured at fair value on a recurring basis using Level 3 inputs. Level 3 valuations rely on unobservable inputs for the asset or liability, and

7


 

include situations where there is little, if any, market activity for the asset or liability. The Company determines the fair value of acquisition-related earnouts (contingent consideration) and any subsequent changes in fair value using a discounted probability-weighted approach using Level 3 inputs. The fair value of the earnouts is reviewed quarterly and is based on the payments the Company expects to make based on historical internal observations related to the anticipated performance of the underlying assets. The Company’s estimate of the fair value of its obligation if the performance targets contained in various acquisition agreements were met was $13.4 million and $15.1 million as of March 31, 2015 and December 31, 2014, respectively, which the Company recorded in Accrued expenses in the accompanying Consolidated Balance Sheets. Changes in estimate are recorded in Acquisition related adjustments and expenses in the accompanying Consolidated Statement of Operations. The maximum potential obligation related to the performance targets was $21.4 million as of March 31, 2015.

The following summarizes the activity of the accrued earnouts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2015

 

2014

 

 

 

 

 

 

 

 

 

(in thousands)

Beginning balance, December 31, 2014 and 2013 , respectively

 

$

15,086 

 

$

30,063 

Additions

 

 

1,372 

 

 

1,048 

Payments

 

 

(1,234)

 

 

(5,019)

Change in estimate

 

 

(1,552)

 

 

648 

Foreign currency translation adjustments

 

 

(319)

 

 

2,558 

Ending balance, March 31, 2015 and March 31, 2014, respectively

 

$

13,353 

 

$

29,298 

 

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

 

During the three months ended March 31, 2015, the Company recognized an impairment charge of $6.8 million. The impairment charge includes the write off of $3.9 million in carrying value of decommissioned towers and $1.8 million of other third party decommission costs incurred related to the Company’s long-lived assets and intangibles for the three months ended March 31, 2015. In addition, the impairment charge includes $1.1 million in disposal costs related to the Company’s former corporate headquarters building for the three months ended March 31, 2015. During the three months ended March 31, 2014, the Company recognized an impairment charge of $3.6 million. The impairment charge includes the write off of $2.9 million in carrying value of decommissioned towers and $0.7 million of other third party decommission costs incurred related to the Company’s long-lived assets and intangibles for the three months ended March 31, 2014. These write offs result from the Company’s analysis that the future cash flows from certain towers would not recover the carrying value of the investment in those towers. Asset impairment and decommission costs and the related impaired assets relate to the Company’s site leasing operating segment.

Fair Value of Financial Instruments— The carrying values of cash and cash equivalents, accounts receivable, restricted cash, accounts payable, and short-term investments approximate their estimated fair values due to the short maturity of these instruments. Short-term investments consisted of $4.6 million and $5.3 million in certificate of deposits, as of March 31, 2015 and December 31, 2014, respectively. The Company’s estimate of the fair value of its held-to-maturity investments in treasury and corporate bonds, including current portion, are based primarily upon Level 1 reported market values. As of March 31, 2015 and December 31, 2014, the carrying value and fair value of the held-to-maturity investments, including current portion, were $1.0 million and $1.1 million, respectively.

The Company determines fair value of its debt instruments utilizing various Level 2 sources including quoted prices and indicative quotes (non-binding quotes) from brokers that require judgment to interpret market information including implied credit spreads for similar borrowings on recent trades or bid/ask prices. The fair value of the Revolving Credit Facility is considered to approximate the carrying value because the interest payments are based on Eurodollar rates that reset every month. The Company does not believe its credit risk has changed materially from the date the applicable Eurodollar Rate plus 137.5 to 200.0 basis points was set for the Revolving Credit Facility. Refer to Note 10 for the fair values, principal balances, and carrying values of the Company’s debt instruments.

 

 

8


 

3.RESTRICTED CASH

Restricted cash consists of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

As of

 

 

 

 

March 31, 2015

 

December 31, 2014

 

Included on Balance Sheet

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

Securitization escrow accounts

 

$

41,038 

 

$

52,117 

 

Restricted cash - current asset

Payment and performance bonds

 

 

400 

 

 

402 

 

Restricted cash - current asset

Surety bonds and workers compensation

 

 

5,934 

 

 

5,934 

 

Other assets - noncurrent

Total restricted cash

 

$

47,372 

 

$

58,453 

 

 

 

Pursuant to the terms of the Tower Securities (see Note 10), the Company is required to establish a securitization escrow account, held by an indenture trustee, into which all rents and other sums due on the towers that secure the Tower Securities are directly deposited by the lessees. These restricted cash amounts are used to fund reserve accounts for the payment of (1) debt service costs, (2) ground rents, real estate and personal property taxes and insurance premiums related to towers, (3) trustee and servicing expenses, and (4) management fees and to reserve a portion of advance rents from tenants. The restricted cash in the securitization escrow account in excess of required reserve balances is subsequently released to the Borrowers (as defined in Note 10) monthly, provided that the Borrowers are in compliance with their debt service coverage ratio and that no event of default has occurred. All monies held by the indenture trustee are classified as Restricted cash on the Company’s Consolidated Balance Sheets.

Payment and performance bonds relate primarily to collateral requirements for tower construction currently in process by the Company. Cash is pledged as collateral related to surety bonds issued for the benefit of the Company or its affiliates in the ordinary course of business and primarily relates to the Company’s tower removal obligations. As of March 31, 2015 and December 31, 2014, the Company had $38.9 million and $38.3 million in surety bonds and payment and performance bonds, respectively, for which it was only required to post $1.7 million in collateral. The Company periodically evaluates the collateral posted for its bonds to ensure that it meets the minimum requirements. As of March 31, 2015 and December 31, 2014, the Company had also pledged $2.6 million as collateral related to its workers compensation policy.

4.OTHER ASSETS

The Company’s other assets are comprised of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

As of

 

 

March 31, 2015

 

December 31, 2014

 

 

 

 

 

 

 

 

 

 

(in thousands)

Restricted cash

 

$

5,934 

 

$

5,934 

Long-term investments

 

 

44,105 

 

 

44,095 

Prepaid land rent

 

 

136,073 

 

 

134,148 

Straight-line rent receivable

 

 

240,450 

 

 

230,384 

Other

 

 

54,115 

 

 

52,482 

Total other assets

 

$

480,677 

 

$

467,043 

 

 

 

5.ACQUISITIONS

The Company acquired 59 communication sites during the three months ended March 31, 2015. These acquisitions were not significant to the Company and, accordingly, a preliminary estimate of the fair value of the assets acquired and liabilities assumed has not been presented. The Company evaluates all acquisitions after the applicable closing date of each transaction to determine whether any additional adjustments are needed to the allocation of the purchase price paid for the assets acquired and liabilities assumed by major balance sheet caption, as well as the separate recognition of intangible assets from goodwill if certain criteria are met.

9


 

The following table summarizes all of the Company’s cash acquisition capital expenditures:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months

 

 

ended March 31,

 

 

2015

 

2014

 

 

 

 

 

 

 

 

 

(in thousands)

Towers and related intangible assets

 

$

42,630 

 

$

918,071 

Ground lease buyouts (1)

 

 

10,649 

 

 

9,582 

Total cash acquisition capital expenditures

 

$

53,279 

 

$

927,653 

 

(1)

In addition, the Company paid $3.3 million and $1.3 million for ground lease extensions and term easements during the three months ended March 31, 2015 and 2014, respectively. The Company recorded these amounts in prepaid rent on its Consolidated Balance Sheets.

Subsequent to March 31, 2015 and through April 23, 2015, the date of the Company’s most recent public earnings press release, the Company acquired 20 towers for $17.6 million in cash. Subsequent to April 23, 2015 and through the date of this filing, the Company did not complete any material acquisitions.

6.INTANGIBLE ASSETS, NET

The following table provides the gross and net carrying amounts for each major class of intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of March 31, 2015

 

As of December 31, 2014

 

 

Gross carrying

 

Accumulated

 

Net book

 

Gross carrying

 

Accumulated

 

Net book

 

 

amount

 

amortization

 

value

 

amount

 

amortization

 

value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

Current contract intangibles

 

$

3,926,022 

 

$

(946,412)

 

$

2,979,610 

 

$

4,090,129 

 

$

(891,374)

 

$

3,198,755 

Network location intangibles

 

 

1,379,832 

 

 

(433,450)

 

 

946,382 

 

 

1,402,704 

 

 

(411,919)

 

 

990,785 

Intangible assets, net

 

$

5,305,854 

 

$

(1,379,862)

 

$

3,925,992 

 

$

5,492,833 

 

$

(1,303,293)

 

$

4,189,540 

 

All intangible assets noted above are included in the Company’s site leasing segments. The Company amortizes its intangible assets using the straight-line method over an estimated economic life of 15 years. Amortization expense relating to the intangible assets was $91.4 million and $74.8 million for the three months ended March 31, 2015  and 2014, respectively.

7.PROPERTY AND EQUIPMENT, NET

Property and equipment, net (including assets held under capital leases) consists of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

As of

 

 

March 31, 2015

 

December 31, 2014

 

 

 

 

 

 

 

 

 

(in thousands)

Towers and related components

 

$

4,188,307 

 

$

4,194,375 

Construction-in-process

 

 

30,111 

 

 

35,855 

Furniture, equipment, and vehicles

 

 

55,562 

 

 

51,832 

Land, buildings, and improvements

 

 

443,118 

 

 

426,974 

Total property and equipment

 

 

4,717,098 

 

 

4,709,036 

Less: accumulated depreciation

 

 

(2,014,910)

 

 

(1,946,619)

Property and equipment, net

 

$

2,702,188 

 

$

2,762,417 

 

Construction-in-process represents costs incurred related to towers that are under development and will be used in the Company’s site leasing operations. Depreciation expense was $80.4 million and $69.0 million for the three months ended March 31, 2015 and 2014, respectively. At March 31, 2015 and December 31, 2014, non-cash capital expenditures that are included in accounts payable and accrued expenses were $12.7 million and $29.0 million, respectively.

10


 

8.COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS

Costs and estimated earnings on uncompleted contracts consist of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

As of

 

 

March 31, 2015

 

December 31, 2014

 

 

 

 

 

 

 

 

 

(in thousands)

Costs incurred on uncompleted contracts

 

$

90,204 

 

$

113,654 

Estimated earnings

 

 

38,647 

 

 

48,949 

Billings to date

 

 

(107,364)

 

 

(143,323)

 

 

$

21,487 

 

$

19,280 

 

These amounts are included in the accompanying Consolidated Balance Sheets under the following captions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

As of

 

 

March 31, 2015

 

December 31, 2014

 

 

 

 

 

 

 

 

 

(in thousands)

Costs and estimated earnings in excess of billings on

 

 

 

 

 

 

uncompleted contracts

 

$

29,209 

 

$

30,078 

Billings in excess of costs and estimated earnings on

 

 

 

 

 

 

uncompleted contracts (included in Other current liabilities)

 

 

(7,722)

 

 

(10,798)

 

 

$

21,487 

 

$

19,280 

 

Eight significant customers comprised 97.0% and 92.7% of the costs and estimated earnings in excess of billings on uncompleted contracts, net of billings in excess of costs and estimated earnings on uncompleted contracts at March 31, 2015 and December 31, 2014, respectively.

 

9.ACCRUED EXPENSES

The Company’s accrued expenses are comprised of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

As of

 

 

March 31, 2015

 

December 31, 2014

 

 

 

 

 

 

 

 

 

(in thousands)

Accrued earnouts

 

$

13,353 

 

$

15,086 

Salaries and benefits

 

 

8,879 

 

 

13,440 

Real estate and property taxes

 

 

5,794 

 

 

5,331 

Other

 

 

27,593 

 

 

31,696 

Total accrued expenses

 

$

55,619 

 

$

65,553 

 

 

 

11


 

10.     DEBT

The carrying and principal values of debt consist of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

As of

 

 

 

 

March 31, 2015

 

December 31, 2014

 

 

Maturity Date

Principal Balance

 

Fair Value

 

Carrying Value

 

Principal Balance

 

Fair Value

 

Carrying Value

5.625% Senior Notes

 

Oct. 1, 2019

 

$

500,000 

 

$

526,250 

 

$

500,000 

 

$

500,000 

 

$

511,250 

 

$

500,000 

5.750% Senior Notes

 

July 15, 2020

 

 

800,000 

 

 

839,000 

 

 

800,000 

 

 

800,000 

 

 

816,000 

 

 

800,000 

4.875% Senior Notes

 

July 15, 2022

 

 

750,000 

 

 

731,250 

 

 

744,311 

 

 

750,000 

 

 

721,875 

 

 

744,150 

2010 Tower Securities

 

April 17, 2017

 

 

550,000 

 

 

573,359 

 

 

550,000 

 

 

550,000 

 

 

576,901 

 

 

550,000 

2012 Tower Securities

 

Dec. 15, 2017

 

 

610,000 

 

 

620,547 

 

 

610,000 

 

 

610,000 

 

 

620,175 

 

 

610,000 

2013-1C Tower Securities

 

April 17, 2018

 

 

425,000 

 

 

424,681 

 

 

425,000 

 

 

425,000 

 

 

420,776 

 

 

425,000 

2013-2C Tower Securities

 

April 17, 2023

 

 

575,000 

 

 

593,941 

 

 

575,000 

 

 

575,000 

 

 

584,344 

 

 

575,000 

2013-1D Tower Securities

 

April 17, 2018

 

 

330,000 

 

 

329,987 

 

 

330,000 

 

 

330,000 

 

 

330,551 

 

 

330,000 

2014-1C Tower Securities

 

Oct. 15, 2019

 

 

920,000 

 

 

933,349 

 

 

920,000 

 

 

920,000 

 

 

920,515 

 

 

920,000 

2014-2C Tower Securities

 

Oct. 15, 2024

 

 

620,000 

 

 

646,034 

 

 

620,000 

 

 

620,000 

 

 

629,474 

 

 

620,000 

Revolving Credit Facility

 

Feb. 5, 2020

 

 

235,000 

 

 

235,000 

 

 

235,000 

 

 

125,000 

 

 

125,000 

 

 

125,000 

2012-1 Term Loan

 

May 9, 2017

 

 

168,750 

 

 

168,539 

 

 

168,750 

 

 

172,500 

 

 

171,422 

 

 

172,500 

2014 Term Loan

 

Mar. 24, 2021

 

 

1,488,750 

 

 

1,481,306 

 

 

1,485,518 

 

 

1,492,500 

 

 

1,458,919 

 

 

1,489,149 

Total debt

 

 

 

$

7,972,500 

 

$

8,103,243 

 

$

7,963,579 

 

$

7,870,000 

 

$

7,887,202 

 

$

7,860,799 

Less: current maturities of long-term debt

 

 

 

 

 

(33,750)

 

 

 

 

 

 

 

 

(32,500)

Total long-term debt, net of current maturities

 

 

 

 

$

7,929,829 

 

 

 

 

 

 

 

$

7,828,299 

 

The table below reflects cash and non-cash interest expense amounts recognized by debt instrument for the periods presented:  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended March 31,

 

 

2015

 

2014

 

 

Cash

 

Non-cash

 

Cash

 

Non-cash

 

 

Interest

 

Interest

 

Interest

 

Interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

4.0% Convertible Senior Notes

 

$

 —

 

$

 —

 

$

4,998 

 

$

10,202 

8.25% Senior Notes

 

 

 —

 

 

 —

 

 

5,027 

 

 

48 

5.625% Senior Notes

 

 

7,031 

 

 

 —

 

 

7,031 

 

 

 —

5.75% Senior Notes

 

 

11,500 

 

 

 —

 

 

11,500 

 

 

 —

4.875% Senior Notes

 

 

9,141 

 

 

161 

 

 

 —

 

 

 —

2010 Tower Securities

 

 

7,058 

 

 

 —

 

 

14,345 

 

 

 —

2012 Tower Securities

 

 

4,531 

 

 

 —

 

 

4,521 

 

 

 —

2013 Tower Securities

 

 

10,804 

 

 

 —

 

 

10,804 

 

 

 —