ITEM 2.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We are a leading independent owner and operator of wireless communica
tions 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
98.5%
of our total segment operating profit for the
six
months
ended
June 30, 2016
. In our site leasing business, we (1) lease antenna space to wireless service providers on towers that we own or operate and (2) manage rooftop and tower sites for property owners under various contractual arrangements. As of
June 30, 2016
, we owned
25,670
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
5,500
actual or potential
tower
s, approximately
500
of which were revenue producing as of
June 30, 2016
. 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
.
As of
June 30, 2016
, we owned
15,843
towers in the United States and its territories and
9,827
towers in our international markets. We receive
s
ite leasing revenues primarily from wireless service provider tenants, including AT&T, Sprint, T-Mobile, Verizon Wireless,
Claro, Digicel,
Oi
S.A.
,
and
Telefonica.
Wireless service providers enter into tenant leases with us, each of which relates to the lease or use of space at an individual
site
. In the United States and Canada, our tenant leases are generally for an initial term of 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, including the renewal option periods. Tenant leases in our Central American and
South American
markets typically have an initial term of
ten
years with
multiple five year
renewal
periods. In Central America, we have similar rent escalators to that of leases in the United States and Canada while our leases in South America escalate in accordance with a standard cost of living index.
In our Central American
markets
and Ecuador
, significantly all of our revenue,
expenses,
and capital expenditures arising from our new build activities are
denominated in U.S. dollars.
Specifically, most of our ground leases, tenant leases, and tower-related expenses are
due and paid in U.S. dollars.
In our Central American markets, our local currency
obligations
are principally limited to (1) permitting and other local fees, (2) utilities,
and
(3) taxes. In our Canadian and
Brazilian
operations, significantly all of our
revenue
,
expenses
, and capital expenditures,
including tenant leases, ground leases, and other tower-related expenses are denominated in local currency.
Cost of site leasing revenue primarily consists of:
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·
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Rental payments on ground leases and other underlying property interests;
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·
|
|
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;
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·
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Site maintenance and monitoring costs (exclusive of employee related costs);
|
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·
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Property insurance; and
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·
|
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Deferred lease origination cost amortization.
|
Ground leases are generally for an initial term of five years or more with multiple renewal terms of five
-
year periods at our option and provide for rent escalators which typically average 2-3% annually, or in
our South American markets,
adjust in accordance with a standard cost of living index.
As of
June 30, 2016
, approximately
74%
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.
As indicated in the table below, our site leasing business generates substantially all of our total segment operating profit. For information regarding our operating segments, see Note 14 of our Condensed Notes to Consolidated Financial Statements included in this quarterly report.
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For the three months ended
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For the six months ended
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|
June 30,
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|
June 30,
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Segment operating profit as a percentage of total
|
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2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic site leasing
|
|
|
83.8%
|
|
|
81.7%
|
|
|
84.1%
|
|
|
81.7%
|
International site leasing
|
|
|
15.0%
|
|
|
15.0%
|
|
|
14.4%
|
|
|
15.1%
|
Total site leasing
|
|
|
98.8%
|
|
|
96.7%
|
|
|
98.5%
|
|
|
96.8%
|
We believe that over the long-term, site leasing revenues will continue to grow as wireless service providers
increase their use of our towers
due to increasing minutes of network use and data transfer, network expansion and network coverage requirements.
In the current environment, we expect that this activity will primarily be in the form of amendments to current leases as wireless service
providers seek to upgrade their antennas
,
and in the long-term, new leases as these providers continue to expand and upgrade their networks.
We believe our site leasing business is characterized by stable and long-term recurring revenues, predictable operating costs and minimal non-discretionary capital expenditures. Due to the relatively young age and mix of our tower portfolio, we expect future expenditures required to maintain these towers to be minimal. Consequently, we expect to grow our cash flows
on existing towers
by (1) adding tenants to our towers at minimal incremental costs by using existing tower capacity or requiring wireless service providers to bear all or a portion of the cost of tower modifications and (2) executing monetary amendments as wireless service providers
add or
upgrade their equipment. Furthermore, because our towers are strategically positioned and our customers typically do not relocate, we have historically experienced low tenant lease terminations as a percentage of revenue
other than in connection with customer consolidation or cessations of service (e.g. iDen)
.
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
on a local basis, through regional, territory, and project offices. The regional offices are responsible for all site development operations, including hiring employees and opening or closing project offices, and a substantial portion of the sales in such area
.
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, 2015
. 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.
RESULTS OF OPERATIONS
This report presents our financial results and other financial metrics after eliminating the impact of changes in foreign currency exchange rates. We believe that providing these financial results and metrics on a constant currency basis, which are non-GAAP measures, gives management and investors the ability to evaluate the performance of our business without the impact of foreign currency exchange rate fluctuations. We eliminate the impact of changes in foreign currency exchange rates by dividing the current period’s financial results by the average monthly exchange rates of the prior year period.
Three Months Ended June 30, 2016 Compared to Three Months Ended June 30, 2015
Revenues and Segment Operating Profit:
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|
|
|
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|
|
|
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|
|
For the three months ended
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|
|
|
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|
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Constant
|
|
|
June 30,
|
|
Foreign
|
|
Constant
|
|
Currency
|
|
|
2016
|
|
2015
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
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Revenues
|
|
(in thousands)
|
|
|
|
Domestic site leasing
|
|
$
|
316,842
|
|
$
|
307,361
|
|
$
|
—
|
|
$
|
9,481
|
|
|
3.1%
|
International site leasing
|
|
|
65,001
|
|
|
63,101
|
|
|
(6,412)
|
|
|
8,312
|
|
|
13.2%
|
Site development
|
|
|
23,689
|
|
|
40,242
|
|
|
—
|
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|
(16,553)
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|
|
(41.1%)
|
Total
|
|
$
|
405,532
|
|
$
|
410,704
|
|
$
|
(6,412)
|
|
$
|
1,240
|
|
|
0.3%
|
Cost of Revenues
|
|
|
|
|
|
|
|
|
|
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|
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|
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Domestic site leasing
|
|
$
|
66,199
|
|
$
|
63,563
|
|
$
|
—
|
|
$
|
2,636
|
|
|
4.1%
|
International site leasing
|
|
|
20,294
|
|
|
18,168
|
|
|
(2,225)
|
|
|
4,351
|
|
|
23.9%
|
Site development
|
|
|
20,074
|
|
|
30,381
|
|
|
—
|
|
|
(10,307)
|
|
|
(33.9%)
|
Total
|
|
$
|
106,567
|
|
$
|
112,112
|
|
$
|
(2,225)
|
|
$
|
(3,320)
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|
|
(3.0%)
|
Operating Profit
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|
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|
|
|
|
|
|
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Domestic site leasing
|
|
$
|
250,643
|
|
$
|
243,798
|
|
$
|
—
|
|
$
|
6,845
|
|
|
2.8%
|
International site leasing
|
|
|
44,707
|
|
|
44,933
|
|
|
(4,187)
|
|
|
3,961
|
|
|
8.8%
|
Site development
|
|
|
3,615
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|
|
9,861
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|
|
—
|
|
|
(6,246)
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|
(63.3%)
|
Revenues
Domestic site leasing revenues
increase
d
$9.5
million for the
three
months ended
June 30, 2016
, as compare
d to the prior year, due
to (i) revenues from
784
towers acquired and
127
towers built since
April
1, 201
5
and (ii) organic site leasing growth,
primarily from monetary lease amendments for additional equipment added to our towers as well as new leases and contractual rent escalators, partially offset by lease non-renewals in 2015 primarily related to Sprint, which we expect will impact our year-over-year growth rates during the first three quarters of 2016.
International site leasing revenues
increase
d
$1.9
million for
the
three
months ended
June 30, 2016
, as compared to the prior year. On a constant currency basis, international site leasing revenues
increase
d
$8.3
million. These
increase
s were primarily
due
to (i) revenues from
209
towers acquired and
378
towers built
since April 1, 2015, (ii) organic site leasing growth from new leases and contractual escalators, and (iii) an increase in reimbursable pass-through expenses
.
Site development revenues
decrease
d $
16.6
million for the
three
months ended
June 30, 2016
, as compared to the prior year,
as a result of a
decrease
in the volume of work performed
,
particularly as it related to Sprint.
Operating Profit
Domestic site leasing segment operating profit
increase
d
$6.8
million for the
three
months ended
June 30, 2016
, as compared to the prior year, primarily due to additional
operating
profit generated by (
i) towers acquired and built since
April
1, 2015 and organic site leasing growth as noted above, (ii)
continued
control of our site leasing cost of revenues, and (iii) the positive impact of our ground lease purchase program.
International site leasing segment operating
profit
decrease
d
$0.2
million for t
he
three
months ended
June 30, 2016
, as compared to the prior year
. On a constant currency basis
,
i
nternational site leasing segment operating prof
it
increased
$4.0
million
.
These changes were
primarily due to
additional operating profit generated by towers acquired and
built
since April 1, 2015 and organic site leasing growth as noted above, partially offset by increases in cost of revenues.
Site development segment operating profit
decrease
d
$6.2
million for the
three
months e
nded
June 30, 2016
,
as compared to the prior year
,
primarily due to
a
decrease
in the volume of work performed
,
particularly as it related to Sprint
.
Selling,
G
eneral, and
A
dministrative
E
xpenses
:
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|
|
|
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|
|
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|
|
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|
|
|
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|
|
For the three months ended
|
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|
|
|
|
|
|
Constant
|
|
|
June 30,
|
|
Foreign
|
|
Constant
|
|
Currency
|
|
|
2016
|
|
2015
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
Total
|
|
$
|
47,664
|
|
$
|
28,262
|
|
$
|
(272)
|
|
$
|
19,674
|
|
|
69.6%
|
Selling, general, and administrative expenses
increase
d
$19.4
million
for the
three
months ended
June 30, 2016
, as compared to the prior year
. On a constant currency basis, s
elling, general, and administrative expenses
increase
d
$19.7
million
. These
increase
s were
primarily as a result of
the
$16.5
million Oi reserve recorded in the second quarter of 2016 and
an
increase
in personnel, salaries, benefits, non-cash compensation, and other
support costs arising principally from
our continued portfolio expansion.
Acquisition Related Adjustments and Expenses:
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|
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|
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|
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|
|
|
|
|
|
|
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|
|
For the three months ended
|
|
|
|
|
|
|
|
Constant
|
|
|
June 30,
|
|
Foreign
|
|
Constant
|
|
Currency
|
|
|
2016
|
|
2015
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
Domestic site leasing
|
|
$
|
1,355
|
|
$
|
6,566
|
|
$
|
—
|
|
$
|
(5,211)
|
|
|
(79.4%)
|
International site leasing
|
|
|
1,466
|
|
|
(786)
|
|
|
(116)
|
|
|
2,368
|
|
|
(301.3%)
|
Total
|
|
$
|
2,821
|
|
$
|
5,780
|
|
$
|
(116)
|
|
$
|
(2,843)
|
|
|
(49.2%)
|
Acquisition related
adjustments and
expenses
decrease
d
$3.0
million
for the
three
months ended
June 30, 2016
, as compared to the prior year
.
On a constant currency basis,
a
cquisition related
adjustments and
expenses
decrease
d
$2.8
million. These
decrease
s were
primarily as a
result of
a decrease in the number of acquisitions and integration related expenses, as well as changes in our estimated pre-acquisition contingencies as compared to the prior year period
.
A
sset Impairment and Decommission Costs
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
|
|
|
|
|
Constant
|
|
|
June 30,
|
|
Foreign
|
|
Constant
|
|
Currency
|
|
|
2016
|
|
2015
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
Domestic site leasing
|
|
$
|
11,363
|
|
$
|
3,962
|
|
$
|
—
|
|
$
|
7,401
|
|
|
186.8%
|
International site leasing
|
|
|
983
|
|
|
48
|
|
|
(95)
|
|
|
1,030
|
|
|
2,145.8%
|
Total site leasing
|
|
$
|
12,346
|
|
$
|
4,010
|
|
$
|
(95)
|
|
$
|
8,431
|
|
|
210.2%
|
Not identified by segment
|
|
|
2,345
|
|
|
—
|
|
|
—
|
|
|
2,345
|
|
|
—%
|
Total
|
|
$
|
14,691
|
|
$
|
4,010
|
|
$
|
(95)
|
|
$
|
10,776
|
|
|
268.7%
|
A
sset impairment and decommission costs
increased
by
$10.7
million
for
the
three
months ended
June 30, 2016
, as
compared to the prior year
. On a constant currency basis, a
sset impairment and decommission costs
increase
d
$10.8
m
illion
. These
increase
s were
primarily as a
resul
t of
$7.5
million of additional impairment charges resulting from the Company’s analysis that the future cash flows would not recover the c
arrying value of the investment resulting from increased lease terminations, including iDen related terminations, a
$0.9
million
increase
in the impairment charge recorded on decommissioned towers, as well as a
$2.2
million increase in write off and disposal costs related to our former corporate headquarters building for the
three
months ended
June 30, 2016
.
Depreciation,
A
ccretion, and
A
mortization
E
xpense
s
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
|
|
|
|
|
Constant
|
|
|
June 30,
|
|
Foreign
|
|
Constant
|
|
Currency
|
|
|
2016
|
|
2015
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
Domestic site leasing
|
|
$
|
126,756
|
|
$
|
129,679
|
|
$
|
—
|
|
$
|
(2,923)
|
|
|
(2.3%)
|
International site leasing
|
|
|
29,781
|
|
|
31,044
|
|
|
(2,943)
|
|
|
1,680
|
|
|
5.4%
|
Total site leasing
|
|
$
|
156,537
|
|
$
|
160,723
|
|
$
|
(2,943)
|
|
$
|
(1,243)
|
|
|
(0.8%)
|
Site development
|
|
|
639
|
|
|
759
|
|
|
—
|
|
|
(120)
|
|
|
(15.8%)
|
Not identified by segment
|
|
|
2,547
|
|
|
895
|
|
|
—
|
|
|
1,652
|
|
|
184.6%
|
Total
|
|
$
|
159,723
|
|
$
|
162,377
|
|
$
|
(2,943)
|
|
$
|
289
|
|
|
0.2%
|
Depreciation, accretion, and amortization expense
decreased
$2.7
million for
the
three
months ended
June 30, 2016
, as compared to the prior year
. On a constant currency basis, d
epreciation, accretion, and amortization expense
increased
$0.3
million. These changes were primarily
due to
additional depreciation associated with the increase in the number of towers we acquired and b
uilt since
April 1, 2015, as well as additional depreciation from our Corporate headquarters building, partially offset by a decrease in depreciation associated with assets that became fully depreciated since the prior year period.
Operating Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
|
|
|
|
|
Constant
|
|
|
June 30,
|
|
Foreign
|
|
Constant
|
|
Currency
|
|
|
2016
|
|
2015
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
Domestic site leasing
|
|
$
|
93,233
|
|
$
|
86,777
|
|
$
|
—
|
|
$
|
6,456
|
|
|
7.4%
|
International site leasing
|
|
|
(8,588)
|
|
|
10,563
|
|
|
(761)
|
|
|
(18,390)
|
|
|
(174.1%)
|
Total site leasing
|
|
$
|
84,645
|
|
$
|
97,340
|
|
$
|
(761)
|
|
$
|
(11,934)
|
|
|
(12.3%)
|
Site development
|
|
|
(319)
|
|
|
6,488
|
|
|
—
|
|
|
(6,807)
|
|
|
(104.9%)
|
Not identified by segment
|
|
|
(10,260)
|
|
|
(5,665)
|
|
|
—
|
|
|
(4,595)
|
|
|
81.1%
|
Total
|
|
$
|
74,066
|
|
$
|
98,163
|
|
$
|
(761)
|
|
$
|
(23,336)
|
|
|
(23.8%)
|
Domestic site leasing operating
income
increase
d
$6.5
million for the
three
months ended
June 30, 2016
, as compared to the
prior year, primarily due to higher segment operating profit and decreases in acquisition related adjustments and expenses and depreciation, accretion, and amortization expense, partially offset by increases in asset impairment and decommission costs and selling, general, and administrative expenses.
International site leasing operating
income
decreased
$19.2
million
for the
three
months ended
June 30, 2016
, as compared to the prior year
. On a constant currency basis, i
nternational site leasing operating
income
decrease
d
$18.4
million. These
decrease
s were
primarily due to
the
$16.5
million Oi reserve recorded in the second quarter of 2016 and increases
in
acquisition related adjustments and expenses
and asset impairment and decommission costs, partially offset by
higher segment operating profit.
Site development operating
income
decrease
d
$6.8
million for
the
three
months ended
June 30, 2016
, as compared to the prior year, primarily due to
lower segment operating profit and increases in depreciation, accretion, and amortization expenses and selling, general, and administrative expenses
.
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
|
|
|
|
|
Constant
|
|
|
June 30,
|
|
Foreign
|
|
Constant
|
|
Currency
|
|
|
2016
|
|
2015
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
Interest income
|
|
$
|
2,737
|
|
$
|
715
|
|
$
|
(341)
|
|
$
|
2,363
|
|
|
330.5%
|
Interest expense
|
|
|
(83,682)
|
|
|
(78,908)
|
|
|
2
|
|
|
(4,776)
|
|
|
6.1%
|
Non-cash interest expense
|
|
|
(460)
|
|
|
(322)
|
|
|
—
|
|
|
(138)
|
|
|
42.9%
|
Amortization of deferred financing fees
|
|
|
(5,325)
|
|
|
(4,626)
|
|
|
—
|
|
|
(699)
|
|
|
15.1%
|
Other income (expense), net
|
|
|
47,376
|
|
|
15,507
|
|
|
31,662
|
|
|
207
|
|
|
1.3%
|
Total
|
|
$
|
(39,354)
|
|
$
|
(67,634)
|
|
$
|
31,323
|
|
$
|
(3,043)
|
|
|
4.5%
|
Interest income
increase
d
$2.0
million for the
three
months ended
June 30, 2016
, as compared to the prior year. On a constant currency basis, interest income
increase
d
$2.4
million. These
increase
s were primarily
due to
a higher amount of investments held and a higher average interest rate on those investments held as
compared to the prior year
period.
Interest expense
increased
$4.8
million for the
three
months ended
June 30, 2016
, as compared to the prior year,
due to the higher average principal amount of cash-interest bearing debt outstanding
as
compared to the prior year, primarily resulting from
the issuance of the 201
5-1C
Tower Securities
in October 2015
and
the
2015 Term Loan
in June 2015, partially offset
by the repayment of the 2012 Term Loan
in November 2015
and a higher average balance outstanding on the revolving credit facility
in
the prior year period
.
Other income (expense), net includes
a
$47.4
million gain
on the remeasurement of intercompany loans for
the
three
months ended
June 30, 2016
, while the prior year period included
a
$15.7
million
gain.
Net
Income
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
|
|
|
|
|
Constant
|
|
|
June 30,
|
|
Foreign
|
|
Constant
|
|
Currency
|
|
|
2016
|
|
2015
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
Net income
|
|
$
|
32,711
|
|
$
|
28,305
|
|
$
|
30,570
|
|
$
|
(26,164)
|
|
|
(92.4%)
|
Net
income
increased
$4.4
million
for the
three
months ended
June 30, 2016
, as
compared to
the prior year. On a constant currency basis, net income
decreased
$26.2
million. These changes were
primarily due to
a decrease in operating income and other income (expense)
.
Six
Months Ended
June 30, 2016
Compared to
Six
Months Ended
June 30, 2015
Revenues and Segment Operating Profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended
|
|
|
|
|
|
|
|
Constant
|
|
|
June 30,
|
|
Foreign
|
|
Constant
|
|
Currency
|
|
|
2016
|
|
2015
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
(in thousands)
|
|
|
|
Domestic site leasing
|
|
$
|
632,072
|
|
$
|
613,311
|
|
$
|
—
|
|
$
|
18,761
|
|
|
3.1%
|
International site leasing
|
|
|
124,221
|
|
|
126,878
|
|
|
(20,906)
|
|
|
18,249
|
|
|
14.4%
|
Site development
|
|
|
49,008
|
|
|
80,609
|
|
|
—
|
|
|
(31,601)
|
|
|
(39.2%)
|
Total
|
|
$
|
805,301
|
|
$
|
820,798
|
|
$
|
(20,906)
|
|
$
|
5,409
|
|
|
0.7%
|
Cost of Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic site leasing
|
|
$
|
130,674
|
|
$
|
125,251
|
|
$
|
—
|
|
$
|
5,423
|
|
|
4.3%
|
International site leasing
|
|
|
38,581
|
|
|
36,699
|
|
|
(7,266)
|
|
|
9,148
|
|
|
24.9%
|
Site development
|
|
|
39,907
|
|
|
61,274
|
|
|
—
|
|
|
(21,367)
|
|
|
(34.9%)
|
Total
|
|
$
|
209,162
|
|
$
|
223,224
|
|
$
|
(7,266)
|
|
$
|
(6,796)
|
|
|
(3.0%)
|
Operating Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic site leasing
|
|
$
|
501,398
|
|
$
|
488,060
|
|
$
|
—
|
|
$
|
13,338
|
|
|
2.7%
|
International site leasing
|
|
|
85,640
|
|
|
90,179
|
|
|
(13,640)
|
|
|
9,101
|
|
|
10.1%
|
Site development
|
|
|
9,101
|
|
|
19,335
|
|
|
—
|
|
|
(10,234)
|
|
|
(52.9%)
|
Revenues
Domestic site leasing revenues
increase
d
$18.8
million for the
six
months ended
June 30, 2016
, as compared to the prior year, due to (i) revenues from
838
towers acquired and
163
towers built since
January
1, 2015 and (ii) organic site leasing growth, primarily from monetary lease amendments for additional equipment added to our towers as well as new leases and contractual rent escalators, partially offset by lease non-renewals in 2015 primarily related to Sprint, which we expect will impact our year-over-year growth rates during the first
three
quarters of 2016.
International site leasing revenues
decrease
d
$2.7
million for the
six
months ended
June 30, 2016
, as compared to the prior year
.
O
n a constant currency basis,
i
nternational site leasing revenues
increase
d
$18.2
million
. These changes were primarily
due to (i) revenues from
214
towers acquired and
449
towers built since
January
1, 2015
,
(ii) organic site leasing growth from new leases and contractual escalators
, and (iii) an increase in reimbursable pass-through expenses
.
Site development revenues
decrease
d
$31.6
million for the
six
months ended
June 30, 2016
, as compared to the prior year, as a result of
a
decrease
in
the volume of work performed
, particularly as it related to Sprint.
Operating Profit
Domestic site leasing segment operating profit
increase
d
$13.3
million for the
six
months ended
June 30, 2016
, as compared to the prior year, primarily due to additional
operating
profit generated by (i) towers acquired and built since
January
1, 2015 and organic site leasing growth as noted above, (ii)
continued
control of our site leasing cost of revenues, and (iii) the positive impact of our ground lease purchase program.
International site leasing segment operating profit
decrease
d
$4.5
million
for the
six
months ended
June 30, 2016
, as compared to the prior year
. O
n a constant currency basis,
i
nternational site leasing segment operating profit
increase
d
$9.1
million
. These changes were
primarily due to towers acquired and built since
January
1, 2015 and organic site leasing growth as noted above,
partially
offset by increases in cost of revenues.
Site development segment operating profit
decrease
d
$10.2
million for the
six
months ended
June 30, 2016
,
as compared to the prior year, primarily due to a
decrease
in the volume of work performed, particularly as it related to Sprint
.
Selling,
G
eneral, and
A
dministrative
E
xpenses
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended
|
|
|
|
|
|
|
|
Constant
|
|
|
June 30,
|
|
Foreign
|
|
Constant
|
|
Currency
|
|
|
2016
|
|
2015
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
Total
|
|
$
|
78,071
|
|
$
|
58,145
|
|
$
|
(891)
|
|
$
|
20,817
|
|
|
35.8%
|
Selling, general, and administrative expenses
increase
d
$19.9
million for the
six
months ended
June 30, 2016
,
as compared to the prior year
. O
n a constant currency basis,
sel
ling, general, and administrative expenses
increase
d
$20.8
million
. These
increase
s were
primarily as a result of
the
$16.5
million Oi reserve recorded in the second quarter of 2016 and an increase in personnel, salaries, benefits, non-cash compensation, and other support costs due in large part to our continued portfolio expansion.
Acquisition Related Adjustments and Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended
|
|
|
|
|
|
|
|
Constant
|
|
|
June 30,
|
|
Foreign
|
|
Constant
|
|
Currency
|
|
|
2016
|
|
2015
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
Domestic site leasing
|
|
$
|
3,197
|
|
$
|
7,042
|
|
$
|
—
|
|
$
|
(3,845)
|
|
|
(54.6%)
|
International site leasing
|
|
|
2,806
|
|
|
77
|
|
|
(372)
|
|
|
3,101
|
|
|
4,027.3%
|
Total
|
|
$
|
6,003
|
|
$
|
7,119
|
|
$
|
(372)
|
|
$
|
(744)
|
|
|
(10.5%)
|
Acquisition related adjustments and expenses
decrease
d
$1.1
million
for the
six
months ended
June 30, 2016
, as compared to the prior year
. On
a constant currency basis
, a
cquisition related adjustments and expenses
decrease
d
$0.7
million. These
decrease
s were
primarily as a result of a
decrease
in the number of acquisitions and integration related expenses, as well as, changes in our estimated pre-acquisition contingencies as compared to the prior year period.
Asset Impairment and Decommission Costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended
|
|
|
|
|
|
|
|
Constant
|
|
|
June 30,
|
|
Foreign
|
|
Constant
|
|
Currency
|
|
|
2016
|
|
2015
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
Domestic site leasing
|
|
$
|
17,384
|
|
$
|
10,556
|
|
$
|
—
|
|
$
|
6,828
|
|
|
64.7%
|
International site leasing
|
|
|
1,145
|
|
|
276
|
|
|
(100)
|
|
|
969
|
|
|
351.1%
|
Total site leasing
|
|
$
|
18,529
|
|
$
|
10,832
|
|
$
|
(100)
|
|
$
|
7,797
|
|
|
72.0%
|
Not identified by segment
|
|
|
2,345
|
|
|
—
|
|
|
—
|
|
|
2,345
|
|
|
—%
|
Total
|
|
$
|
20,874
|
|
$
|
10,832
|
|
$
|
(100)
|
|
$
|
10,142
|
|
|
93.6%
|
Asset impairment and decommission costs
increase
d by
$10.0
million
for the
six
months ended
June 30, 2016
, as compared to the prior year
. O
n a constant currency basis
,
a
sset impairment and decommission costs
increase
d
$10.1
million
. These
increase
s were
primarily as a result
of
$7.5
million of additional impairment charges resulting from the Company’s analysis that the future cash flows would not recover the c
arrying value of the investment resulting from increased lease terminations, including iDen related terminations,
a
$1.3
millio
n
increase
in the impairment charge recorded on decommissioned towers, as well as
an increase
in
write off and
disposal costs related to our former corporate headquarters building for the
six
months ended
June 30, 2016
, as compared to the prior year period.
Depreciation, Accretion, and Amortization Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended
|
|
|
|
|
|
|
|
Constant
|
|
|
June 30,
|
|
Foreign
|
|
Constant
|
|
Currency
|
|
|
2016
|
|
2015
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
Domestic site leasing
|
|
$
|
258,149
|
|
$
|
267,139
|
|
$
|
—
|
|
$
|
(8,990)
|
|
|
(3.4%)
|
International site leasing
|
|
|
56,658
|
|
|
63,470
|
|
|
(9,558)
|
|
|
2,746
|
|
|
4.3%
|
Total site leasing
|
|
$
|
314,807
|
|
$
|
330,609
|
|
$
|
(9,558)
|
|
$
|
(6,244)
|
|
|
(1.9%)
|
Site development
|
|
|
1,664
|
|
|
1,466
|
|
|
—
|
|
|
198
|
|
|
13.5%
|
Not identified by segment
|
|
|
3,053
|
|
|
2,155
|
|
|
—
|
|
|
898
|
|
|
41.7%
|
Total
|
|
$
|
319,524
|
|
$
|
334,230
|
|
$
|
(9,558)
|
|
$
|
(5,148)
|
|
|
(1.5%)
|
Depreciation, accretion, and amortization expense
decrease
d
$14.7
million for the
six
months ended
June 30, 2016
, as compared to the prior year
. O
n a constant currency basis,
d
epreciation, accretion, and amortization expense
decrease
d
$5.1
million
. These
decrease
s were primarily
due
to a decrease in depreciation associated with
assets that became fully depreciated
since the prior year period
, partially of
fset by additional depreciation associated with
the increase in
the number of towers we acquired and built since
January
1, 2015.
Operating Income
(Expense)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended
|
|
|
|
|
|
|
|
Constant
|
|
|
June 30,
|
|
Foreign
|
|
Constant
|
|
Currency
|
|
|
2016
|
|
2015
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
Domestic site leasing
|
|
$
|
186,733
|
|
$
|
168,855
|
|
$
|
—
|
|
$
|
17,878
|
|
|
10.6%
|
International site leasing
|
|
|
(419)
|
|
|
18,399
|
|
|
(2,719)
|
|
|
(16,099)
|
|
|
(87.5%)
|
Total site leasing
|
|
$
|
186,314
|
|
$
|
187,254
|
|
$
|
(2,719)
|
|
$
|
1,779
|
|
|
1.0%
|
Site development
|
|
|
605
|
|
|
13,133
|
|
|
—
|
|
|
(12,528)
|
|
|
(95.4%)
|
Not identified by segment
|
|
|
(15,252)
|
|
|
(13,139)
|
|
|
—
|
|
|
(2,113)
|
|
|
16.1%
|
Total
|
|
$
|
171,667
|
|
$
|
187,248
|
|
$
|
(2,719)
|
|
$
|
(12,862)
|
|
|
(6.9%)
|
Domestic site leasing operating income
increase
d
$17.9
million for the
six
months ended
June 30, 2016
, as compared to the prior year, primarily due to higher segment
operating profit and decreases in depreciation, accretion, and amortization expense
and
acquisition related adjustments and expenses, partially
offset by
increases in asset impairment and decommission costs and selling, general, and administrative expenses.
International site leasing operating
income
decrease
d
$18.8
million for the
six
months ended
June 30, 2016
, as compared to the prior year
. O
n a constant currency basis,
i
nternational site leasing operating income
decrease
d
$16.1
million
. These
decrease
s were
primarily due
the
$16.5
million Oi reserve recorded in the second quarter of 2016
,
increases in acquisition related adjustments and expenses
,
asset impai
rment and decommission costs, and depreciation, accretion, and amortization expense, partially offset by
higher segment operating profit
.
Site development
operating
income
decrease
d
$12.5
million for the
six
months ended
June 30, 2016
, as compared to the prior year, primarily due to lower segment operating profit and increases in selling, general, and administrative expenses.
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended
|
|
|
|
|
|
|
|
Constant
|
|
|
June 30,
|
|
Foreign
|
|
Constant
|
|
Currency
|
|
|
2016
|
|
2015
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
Interest income
|
|
$
|
4,603
|
|
$
|
1,008
|
|
$
|
(946)
|
|
$
|
4,541
|
|
|
450.5%
|
Interest expense
|
|
|
(167,486)
|
|
|
(156,562)
|
|
|
1
|
|
|
(10,925)
|
|
|
7.0%
|
Non-cash interest expense
|
|
|
(915)
|
|
|
(601)
|
|
|
—
|
|
|
(314)
|
|
|
52.2%
|
Amortization of deferred financing fees
|
|
|
(10,590)
|
|
|
(9,170)
|
|
|
—
|
|
|
(1,420)
|
|
|
15.5%
|
Other income (expense), net
|
|
|
93,275
|
|
|
(67,461)
|
|
|
160,962
|
|
|
(226)
|
|
|
0.3%
|
Total
|
|
$
|
(81,113)
|
|
$
|
(232,786)
|
|
$
|
160,017
|
|
$
|
(8,344)
|
|
|
3.6%
|
Interest income
increase
d
$3.6
million
for the
six
months ended
June 30, 2016
, as compared to the prior year. O
n a constant currency basis,
interest income
increase
d
$4.5
million
. These
increase
s were primarily
due to a higher amount of investments held and a higher average interest rate on those investments held as compared to the prior year period.
Interest expense
increase
d
$10.9
million
for the
six
months ended
June 30, 2016
, as compared to the prior year,
due to the higher average principal amount of cash-interest bearing debt outstanding
as
compared to the prior year, primarily resulting from the issuance of the 2015
-1C
Tower Securities in October 2015 and the 2015 Term Loan in June 2015, partially offset by the repayment of the 2012 Term Loan
in November 2015
and a higher average balance outstanding on the revolving credit facility in the prior year period.
O
ther income (expense), net includes a
$92.1
million gain on the remeasurement of intercompany loans for the
six
months ended
June 30, 2016
, while the prior year period included a
$68.3
million
loss
.
Net
Income (
Loss
)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended
|
|
|
|
|
|
|
|
Constant
|
|
|
June 30,
|
|
Foreign
|
|
Constant
|
|
Currency
|
|
|
2016
|
|
2015
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
Net income (loss)
|
|
$
|
86,348
|
|
$
|
(50,725)
|
|
$
|
157,311
|
|
$
|
(20,238)
|
|
|
39.9%
|
Net income
(loss)
increase
d
$137.1
million, for the
six
months ended
June 30, 2016
, as compared to the prior year
. O
n a constant currency basis,
net income (loss)
decreased
$20.2
million
. These changes were
primarily due to
a decrease in operating income and other income (expense).
NON-GAAP FINANCIAL MEASURES
This report contains information regarding a non-GAAP measure, Adjusted EBITDA. We have provided below a description of Adjusted EBITDA, a reconciliation of Adjusted EBITDA to its most directly comparable GAAP measure and an explanation as to why management utilizes this measure.
This report also presents our financial results and other financial metrics after eliminating the impact of changes in foreign currency exchange rates
and the Oi reserve recorded in the second quarter of 2016
. We believe that providing these financial results and metrics on a constant currency basis, which are non-GAAP measures, gives management and investors the ability to evaluate the performance of our business without the impact of foreign currency exchange rate fluctuations. We eliminate the impact of changes in foreign currency exchange rates by dividing the current period’s financial results by the average monthly exchange rates of the prior year period.
We believe that excluding the Oi reserve, which represents a
$16.5
million one-time bad debt provision for all amounts owed or potentially owed by Oi prior to the date of Oi’s June 2016 petition for judicial reorganization, provides management and investors the ability to better analyze our core results without the impact of what we believe is a non-recurring event.
Adjusted EBITDA
We define Adjusted EBITDA as net
(
loss
) income
excluding the impact of non-cash straight-line leasing revenue, non-cash straight-line ground lease expense, non-cash compensation, net loss from extinguishment of debt, other income and expenses, acquisition related adjustments and expenses, asset impairment and decommission costs, interest income, interest expenses, depreciation, accretion, and amortization,
and
provision for or benefit from taxes.
We believe that Adjusted EBITDA is useful to investors or other interested parties in evaluating our financial performance. Adjusted EBITDA is the primary measure used by management (1) to evaluate the economic productivity of our operations and (2) for purposes of making decisions about allocating resources to, and assessing the performance of, our operations. Management believes that Adjusted EBITDA helps investors or other interested parties meaningfully evaluate and compare the results of our operations (1) from period to period and (2) to our competitors, by excluding the impact of our capital structure (primarily interest charges from our outstanding debt) and asset base (primarily depreciation, amortization and accretion) from our financial results. Management also believes Adjusted EBITDA is frequently used by investors or other interested parties in the evaluation of REITs. In addition, Adjusted EBITDA is 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 the 5.625% Senior Notes, 5.75% Senior Notes, and 2014 Senior Notes. Adjusted EBITDA should be considered only as a supplement to net income computed in accordance with GAAP as a measure of our performance.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
|
|
|
|
|
Constant
|
|
|
June 30,
|
|
Foreign
|
|
Constant
|
|
Currency
|
|
|
2016
|
|
2015
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
Net income
|
|
$
|
32,711
|
|
$
|
28,305
|
|
$
|
30,570
|
|
$
|
(26,164)
|
|
|
(92.4%)
|
Non-cash straight-line leasing revenue
|
|
|
(8,775)
|
|
|
(13,218)
|
|
|
(546)
|
|
|
4,989
|
|
|
(37.7%)
|
Non-cash straight-line ground lease expense
|
|
|
9,794
|
|
|
8,523
|
|
|
(59)
|
|
|
1,330
|
|
|
15.6%
|
Non-cash compensation
|
|
|
8,893
|
|
|
8,213
|
|
|
(13)
|
|
|
693
|
|
|
8.4%
|
Other income
|
|
|
(47,376)
|
|
|
(15,507)
|
|
|
(31,662)
|
|
|
(207)
|
|
|
1.3%
|
Acquisition related adjustments and expenses
|
|
|
2,821
|
|
|
5,780
|
|
|
(116)
|
|
|
(2,843)
|
|
|
(49.2%)
|
Asset impairment and decommission costs
|
|
|
14,691
|
|
|
4,010
|
|
|
(95)
|
|
|
10,776
|
|
|
268.7%
|
Interest income
|
|
|
(2,737)
|
|
|
(715)
|
|
|
341
|
|
|
(2,363)
|
|
|
330.5%
|
Interest expense
(1)
|
|
|
89,467
|
|
|
83,856
|
|
|
(2)
|
|
|
5,613
|
|
|
6.7%
|
Depreciation, accretion, and amortization
|
|
|
159,723
|
|
|
162,377
|
|
|
(2,943)
|
|
|
289
|
|
|
0.2%
|
Provision for taxes
(2)
|
|
|
2,402
|
|
|
2,627
|
|
|
(8)
|
|
|
(217)
|
|
|
(8.3%)
|
Adjusted EBITDA
|
|
$
|
261,614
|
|
$
|
274,251
|
|
$
|
(4,533)
|
|
$
|
(8,104)
|
|
|
|
Oi reserve
|
|
|
16,498
|
|
|
—
|
|
|
—
|
|
|
16,498
|
|
|
|
Adjusted EBITDA net of the Oi reserve
|
|
$
|
278,112
|
|
$
|
274,251
|
|
$
|
(4,533)
|
|
$
|
8,394
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended
|
|
|
|
|
|
|
|
Constant
|
|
|
June 30,
|
|
Foreign
|
|
Constant
|
|
Currency
|
|
|
2016
|
|
2015
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
Net income (loss)
|
|
$
|
86,348
|
|
$
|
(50,725)
|
|
$
|
157,311
|
|
$
|
(20,238)
|
|
|
39.9%
|
Non-cash straight-line leasing revenue
|
|
|
(17,622)
|
|
|
(27,459)
|
|
|
(1,897)
|
|
|
11,734
|
|
|
(42.7%)
|
Non-cash straight-line ground lease expense
|
|
|
18,288
|
|
|
17,238
|
|
|
(194)
|
|
|
1,244
|
|
|
7.2%
|
Non-cash compensation
|
|
|
16,677
|
|
|
15,201
|
|
|
(33)
|
|
|
1,509
|
|
|
9.9%
|
Other (income) expense
|
|
|
(93,275)
|
|
|
67,461
|
|
|
(160,962)
|
|
|
226
|
|
|
0.3%
|
Acquisition related adjustments and expenses
|
|
|
6,003
|
|
|
7,119
|
|
|
(372)
|
|
|
(744)
|
|
|
(10.5%)
|
Asset impairment and decommission costs
|
|
|
20,874
|
|
|
10,832
|
|
|
(100)
|
|
|
10,142
|
|
|
93.6%
|
Interest income
|
|
|
(4,603)
|
|
|
(1,008)
|
|
|
946
|
|
|
(4,541)
|
|
|
450.5%
|
Interest expense
(1)
|
|
|
178,991
|
|
|
166,333
|
|
|
(1)
|
|
|
12,659
|
|
|
7.6%
|
Depreciation, accretion, and amortization
|
|
|
319,524
|
|
|
334,230
|
|
|
(9,558)
|
|
|
(5,148)
|
|
|
(1.5%)
|
Provision for taxes
(2)
|
|
|
5,062
|
|
|
6,047
|
|
|
(13)
|
|
|
(972)
|
|
|
(16.1%)
|
Adjusted EBITDA
|
|
$
|
536,267
|
|
$
|
545,269
|
|
$
|
(14,873)
|
|
$
|
5,871
|
|
|
|
Oi reserve
|
|
|
16,498
|
|
|
—
|
|
|
—
|
|
|
16,498
|
|
|
|
Adjusted EBITDA net of the Oi reserve
|
|
$
|
552,765
|
|
$
|
545,269
|
|
$
|
(14,873)
|
|
$
|
22,369
|
|
|
|
|
(1)
|
|
Interest expense includes interest expense, non-cash interest expense, and amortization of deferred financing fees.
|
|
(2)
|
|
Provision for taxes includes
$401
and
$403
of franchise taxes for the
three
months ended
June 30, 2016
and
2015
, respectively
,
and
$856
and
$860
of franchise taxes for the
six
months ended
June 30, 2016
and
2015
, respectively
,
reflected in selling, general, and administrative expenses on the Consolidated Statement of Operations.
|
Adjusted EBITDA
net of the Oi reserve
increase
d
$3.9
million for th
e
three
months ended
June 30, 2016
,
as compared to
the prior year
period
. On a constant currency basis, adjusted EBITDA, net of the Oi reserve
increase
d
$8.4
million. The
increase
s were
primarily due to
increase
s
in
domestic and international
site leasing segment operating profit
, partially offset by
increase
s
in selling, general, and administrative expenses
and
a
decrease in site development segment operatin
g profit
.
Adjusted EB
IT
DA net of the Oi reserve
increase
d
$7.5
million
for the
six
months ended
June 30, 2016
, as compared to the prior year period
. O
n a constant currency basis,
adjusted EBITDA net of the Oi reserve
increase
d
$22.4
million
. The
increase
s were
primarily due to
increase
s
in
domestic and international
site leasing segment operating profit
, partially offset by
an
increase in selling, general, and administrative expenses
and
a decrease in site development segment operating
profit
.
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 100% of the outstanding capital stock of SBA Telecommunications, LLC (“Telecommunications”), which is also a holding company that owns equity interests in entities that directly or indirectly own all of our domestic and international towers and assets. We conduct all of our business operations through Telecommunications’ subsidiaries. Accordingly, our only source of cash to pay our obligations, other than financings,
is distributions with respect to our ownership interest in our subsidiaries from the net earnings and cash flow generated by these subsidiaries.
A summary of our cash flows is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended
|
|
|
June 30, 2016
|
|
June 30, 2015
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Cash provided by operating activities
|
|
$
|
354,646
|
|
$
|
375,532
|
Cash used in investing activities
|
|
|
(229,427)
|
|
|
(436,610)
|
Cash (used in) provided by financing activities
|
|
|
(124,300)
|
|
|
93,784
|
Increase in cash and cash equivalents
|
|
|
919
|
|
|
32,706
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
14,998
|
|
|
(2,303)
|
Cash and cash equivalents, beginning of the period
|
|
|
118,039
|
|
|
39,443
|
Cash and cash equivalents, end of the period
|
|
$
|
133,956
|
|
$
|
69,846
|
Operating Activities
Cash provided by operating
activities was
$354.6
million for the
six
months
ended
June 30, 2016
as compared to
$375.5
million for the
six
months
ended
June 30, 2015
. The
decrease
of
$20.9
million
was primarily due to increases in cash outflows associated with working capital changes,
decreased site development segment operating profit,
increased selling, general, and administrative expenses
,
increased cash interest payments relating to the higher average amount of cash-interest bearing debt outstanding
, and the negative impact of changes in foreign currency exchange rates on cash flows from operating activities, partially offset by
an increase in segment operating profit from domestic site leasing
and
international site leasing
operating segments
.
Investing Activities
A detail of our cash capital expenditures is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months
|
|
|
ended June 30,
|
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Acquisitions
|
|
$
|
113,512
|
|
$
|
263,369
|
Construction and related costs on new tower builds
|
|
|
34,692
|
|
|
55,104
|
Augmentation and tower upgrades
|
|
|
19,396
|
|
|
37,199
|
Land buyouts and other assets
(1)
|
|
|
35,192
|
|
|
59,713
|
Refurbishment of headquarters building
|
|
|
—
|
|
|
10,174
|
Tower maintenance
|
|
|
14,049
|
|
|
13,925
|
General corporate
|
|
|
2,524
|
|
|
1,990
|
Total cash capital expenditures
|
|
$
|
219,365
|
|
$
|
441,474
|
|
(1)
|
|
Excludes
$6.6
million and
$8.7
million spent on ground lease extensions and term easements
on land
underlying our towers
for the
six
months
ended
June 30, 2016
and
2015
, respectively.
|
Subsequent to
June 30, 2016
, we acquired
12
completed
towers
and related assets and liabilities
for
$8.4
million in cash.
During all of
2016
, inclusive of the capital expenditures made during the
six
months
ended
June 30, 2016
, we expect to incur non-discretionary cash capital expenditures associated with tower maintenance and general corporate expenditures of
$32.0
million to
$37.0
million and discretionary cash capital expenditures, based on current acquisition obligations, planned new tower construction, forecasted tower augmentations, and forecasted ground lease purchases, of
$295.0
million to
$315.0
million as well as potential, additional tower acquisitions not yet under contract. 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
six
months
ended
June 30, 2016
, we borrowed
$140.0
million and repaid
$110.0
million under the Revolving Credit Facility. As of
June 30, 2016
, we had
$30.0
million outstanding under the $1.0 billion Revolving Credit Facility.
Subsequent to
June 30, 2016
, we repaid the
$30.0
million balance outstanding under the Revolving Credit Facility.
During the
six
months ended
June 30, 2016
,
we repurchased
1.5
million shares of our Class A common stock for
$150.0
million
at a weighted average price per share of
$98.08
.
As of the date of this filing, we had
$550.0
million of repurchase
authorization remaining under
our
$1.0 billion stock repurchase program.
On July 7, 2016,
we
, through
our
existing SBA Tower Trust, issued $700.0 million of 2.877% Secured Tower Revenue Securities Series 2016-1C which have an anticipated repayment date of July 2021 and a final maturity date of July 2046 (the “2016
-1C
Tower Securities”). Net proceeds from this offering were used to prepay the full $550.0 million outstanding on the
2010-2C
Tower Securities and for general corporate purposes.
On August
1
, 2016,
we
priced an offering of $1.1 billion of senior notes due 2024 (the “
2016 Senior
Notes”).
We
expect the closing of the
2016 Senior
Notes to occur on August 15, 2016. The
2016 Senior
Notes will have an interest coupon of 4.875% and will be issued at a price of 99.178% of their face value.
We
intend to use the net proceeds from the offering and cash on hand to redeem $800
.0
million, the aggregate principal amount outstanding, of Telecommunications’ 5.75%
Senior Notes
and $250
.0
million of
our 5.625% Senior Notes
and pay the associated call premiums
.
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
six
months
ended
June 30, 2016
, we did not issue any shares of Class A common stock under this registration statement. As of
June 30, 2016
, we had approximately
1.7
million shares of Class A common stock remaining under this shelf registration statement.
On
March 3, 2015
, 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
under this registration statement
through the date of this filing.
Debt Instruments and Debt Service Requirements
Revolving Credit Facility under the Senior Credit Agreement
The Revolving Credit Facility is governed by the Senior Credit Agreement.
T
he Revolving Credit Facility consists of a revolving loan under which up to $1.0 billion
aggregate principal amount may be borrowed, repaid and redrawn,
based upon
specific financial ratios and
subject to
the satisfaction of other customary conditions to borrowing. Amounts borrowed under the Revolving Credit Facility accrue interest
,
at
SBA Senior Finance II’s election, at either (i)
the Eurodollar Rate plus a margin that ranges from 1
3
7.5 basis points to 2
00.0
basis points or
(ii) the
Base Rate plus a margin that ranges from
3
7.5 basis points to
100.0
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.
In addition, SBA Senior Finance II is required to pay a commitment fee of 0.25% per annum on the amount of unused commitment.
If not earlier terminated
by SBA Senior Finance II,
the Revolving Credit Facility will terminate on, and SBA Senior Finance II will repay all amounts outstanding on or before,
February 5, 2020
. The proceeds available under the Revolving Credit Facility may be used for general corporate purposes. SBA Senior Finance II may, from time to time, borrow from and repay the Revolving Credit Facility. Consequently, the amount outstanding under the Revolving Credit Facility at the end of a period may not be reflective of the total amounts outstanding during such period.
During the
three
and
six
months
ended
June 30, 2016
, we borrowed
$70.0
million and
$140.0
million
, respectively, and
repaid
$60.0
million and
$110.0
million
, respectively,
of the outstanding balance under the Revolving Credit Facility. As of
June 30, 2016
,
$30.0
million was outstanding under the Revolving Credit Facility.
Subsequent to
June 30, 2016
, we repaid the
$30.0
million balance outstanding on the Revolving Credit Facility.
As of
June 30, 2016
, SBA Senior Finance II was in compliance with the financial covenants contained in the Senior Credit Agreement.
Term Loans under the Senior Credit Agreement
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
June 30, 2016
, the 2014 Term Loan was accruing interest at
3.25%
per annum. Principal payments on the 2014 Term Loan commence
d
on September 30, 2014 and
are being
made in quarterly installments on the last day of each March, June, September, and December in an amount equal to $3.
8
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 in relation to this transaction which are being amortized through the maturity date.
During the
three
and
six
months
ended
June 30, 2016
,
we
repaid
$3.8
million
and
$7.5
million
of principal on the 2014 Term Loan. As of
June 30, 2016
, the 2014 Term Loan had a principal balance of
$1.47
billion.
2015 Term Loan
The 2015 Term Loan consists of a
senior secured term loan with an initial aggregate principal amount of $500.0 million that matures on June 10,
2022
.
The 2015 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 2015 Term Loan was issued at 99.0% of par value. As of
June 30, 2016
, the 2015 Term Loan was accruing interest at
3.25%
per annum. Principal payments
on the 2015 Term Loan commence
d
on September 30, 2015 and
are being
made in quarterly installments on the last day of each March, June, September, and December in an amount equal to $1.3 million. SBA Senior Finance II has the ability to prepay any or all amounts under the 2015 Term Loan.
We
incurred deferred financing fees of approximately
$5.1
million in relation to this transaction which are being amortized through the maturity date.
During
the
three
and
six
months
ended
June 30, 2016
, we repaid
$1.3
million and
$2.5
million
of principal on the 201
5
Term Loan.
As of
June 30, 2016
, the 2015 Term Loan had a principal balance of
$495.0
million.
Secured Tower Revenue Securities
2010-2C Tower Securities
On April 16, 2010,
we, through
a New York
common law trust (the “Trust”), issued $550.0 million of
Secured Tower Revenue Securities Series
2010-2
C
(the “2010-2C
Tower Securities”). The 2010
-2C
Tower Securities have an annual interest rate of 5.101%. The anticipated repayment date and the final maturity date for the
2010
-2C
Tower Securities are April 1
1
, 2017 and April
9
, 2042, respectively. The sole asset of the Trust consists of a non-recourse mortgage loan made in favor of those entities that are borrowers on the mortgage loan (the “Borrowers”). We incurred deferred financing fees of
$8.1
million in relation to this transaction which
we
re being amortized through the anticipated repayment date of the 2010
-2C
Tower Securities.
On July 15, 2016, we repaid the full
$550.0 million outstanding o
f
the 2010
-2C
Tower Securities
using net proceeds from the 2016-1C Tower Securities (described below).
2012
-1C
Tower Securities
On August 9, 2012, we, through the Trust, issued $610.0 million of
Secured Tower Revenue Securities Series 2012
-1C
(the “2012
-1C
Tower Securities”) which have an anticipated repayment date of December 1
1
, 2017 and a final maturity date
of
December
9
, 2042. The fixed interest rate of the 2012
-1C
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
-1C
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 of April 1
0
, 2018 and a final maturity date
of
April
9
, 2043
(the “2013-1C Tower Securities”)
, $575.0 million of 3.722% Secured Tower Revenue Securities Series 2013-2C which have an anticipated repayment date of April
11
, 2023
and a final maturity date
of
April
9
, 2048
(the “2013-2C Tower Securities”)
, and $330.0 million of 3.598% Secured Tower Revenue Securities Series 2013-1D which have an anticipated repayment date of April 1
0
, 2018 and a final maturity date
of
April
9
, 2043
(the “2013-1D Tower Securities”)
(collectively the “2013 Tower Securities”). The aggregate $1.33 billion of 2013 Tower Securities have a blended interest rate of 3.218%
per annum, payable monthly
. We incurred 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 of October
8,
2019
and
a final maturity date
of
October
11,
2044
(the “2014-1C Tower Securities”)
and $620.0 million of 3.869% Secured Tower Revenue Securities Series 2014-2C which have an anticipated repayment date of October
8,
2024
and
a final maturity date
of
October
8,
2049
(the “2014-2C Tower Securities”)
(collectively the “2014 Tower Securities”). The aggregate $1.54 billion of 2014 Tower Securities have a blended interest rate of 3.289%
per annum, payable monthly
.
We incurred deferred financing fees
of
$22.5
million
in relation to this transaction which are being amortized through the anticipated repayment date of each of the 2014 Tower Securities.
2015
-1C
Tower Securities
On October 14, 2015,
we
, through the Trust, issued $500.0 million of Secured Tower Revenue Securities Series 2015-1C which have an anticipated repayment date of October
8
, 2020 and a final maturity date of October 1
0
, 2045 (the “2015
-1C
Tower Securities”).
The fixed
interest rate of the 2015
-1C
Tower Securities is 3.156% per annum, payable monthly.
We have
incurred deferred financing fees of
$10.9
million in relation to this transaction which are being amortized through the anticipated repayment date of the 2015
-1C
Tower Securities
.
201
6-1C
Tower Securities
On July 7, 2016,
we
, through
the Trust
, issued $700.0 million of Secured Tower Revenue Securities Series 2016-1
C
which have an anticipated repayment date of July 2021 and a final maturity date of July 2046 (the “2016
-1C
Tower Securities”).
The fixed interest rate of the 2016-1C Tower Securities is 2.877
%
per annum, payable monthly.
Net proceeds from this offering were used to prepay the full $550.0 million outstanding on the 2010
-2C Tower Securities
and for general corporate purposes.
We incurred deferred financing fees of
$9.2
million to date in relation to this transaction which are being amortized through the anticipated repayment date of the 2016-1C Tower Securities.
Debt Covenants
As of
June 30, 2016
, the Borrowers met the debt service coverage ratio required by the mortgage loan agreement and were in compliance with all other covenants as set forth in the agreement.
Senior Notes
5.75% Senior Notes
O
n July 13, 2012,
Telecommunications issued $800.0 million of unsecured senior notes due July 15, 2020 (the “5.75%
Senior
Notes”). The 5.75%
Senior
Notes accrue interest at a rate of 5.75% and were issued at par. Interest on the 5.75%
Senior
Notes is due semi-annually on July 15 and January 15 of each year. We incurred deferred financing fees of
$14.0
million in relation to this transaction which are being amortized through the maturity date.
SBAC has fully and unconditionally guaranteed the Senior Notes issued by Telecommunications.
5.625% Senior Notes
On September 28, 2012, we issued $500.0 million of unsecured senior notes due October 1, 2019 (the “5.625%
Senior
Notes”). The 5.625%
Senior
Notes accrue interest at a rate of 5.625% per annum and were issued at par. Interest on the 5.625%
Senior
Notes is due semi-annually on April 1 and October 1 of each year. We incurred deferred financing fees of
$8.6
million in relation to this transaction which are being amortized through the maturity date.
2014
Senior Notes
On July 1, 2014,
we
issued $750.0 million of unsecured senior notes due July 15, 2022 (the “
2014
Senior
Notes”). The
2014
Senior
Notes
accrue interest at a rate of 4.875% per annum and
were issued at 99.178% of par value. Interest on the
2014
Senior
Notes is
due
semi-annually on January 15 and July 15 of each year.
We
incurred deferred financing fees of
$11.6
million in relation to this transaction which are being amortized through the maturity date
.
2016 Senior Notes
On August
1
, 2016,
we
priced an offering of $1.1 billion of senior notes due
September 1,
2024 (the “
2016 Senior
Notes”).
We
expect the closing of the
2016 Senior
Notes to occur on August 15, 2016. The
2016 Senior
Notes will
accrue
interest
at a rate
of 4.875% and will be issued at a price of 99.178% of
par
value.
Interest on the 2016
Senior
Notes will be due semi-annually on March 1 and September 1 of each year, beginning on March 1, 2017.
We
intend to use the net proceeds from the offering and cash on hand to redeem $800
.0
million, the aggregate principal amount outstanding, of Telecommunications’ 5.75%
Senior Notes
and $250
.0
million of
our 5.625% Senior Notes
and pay the associated call premiums
.
Debt Service
As of
June 30, 2016
, 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.
The following table illustrates our estimate of our debt service requirement over the next twelve months based on the amounts outstanding
as of
June 30, 2016
and the
interest rates accruing on those amounts on such date (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.625% Senior Notes
|
|
|
|
|
$
|
28,125
|
5.750% Senior Notes
|
|
|
|
|
|
46,000
|
2014 Senior Notes
|
|
|
|
|
|
36,563
|
2010-2C Tower Securities
(1)
|
|
|
|
|
|
573,554
|
2012-1C Tower Securities
|
|
|
|
|
|
18,085
|
2013-1C Tower Securities
|
|
|
|
|
|
9,655
|
2013-2C Tower Securities
|
|
|
|
|
|
21,584
|
2013-1D Tower Securities
|
|
|
|
|
|
11,978
|
2014-1C Tower Securities
|
|
|
|
|
|
26,954
|
2014-2C Tower Securities
|
|
|
|
|
|
24,185
|
2015-1C Tower Securities
|
|
|
|
|
|
15,938
|
Revolving Credit Facility
|
|
|
|
|
|
3,159
|
2014 Term Loan
|
|
|
|
|
|
62,592
|
2015 Term Loan
|
|
|
|
|
|
21,027
|
Total debt service for next twelve months
(2)
|
|
|
|
|
$
|
899,399
|
|
(1)
|
|
On July 15, 2016, we repaid in full the 2010-2C Tower Securities with proceeds from the 2016-1C Tower Securities.
|
|
(2)
|
|
Our total debt service does not include any amounts for the 2016-1C Tower Securities issued July 7, 2016. Total debt service for the next twelve months related to the 2016-1C Tower Securities is $19.9 million.
|
ITEM 3.
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to certain market risks that are inherent in our financial instruments. These risks arise from transactions entered into in the normal course of business.
The following table presents the future principal payment obligations and fair values associated with our long-term debt instruments assuming our actual level of long-term
indebtedness as of
June 30, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
Thereafter
|
|
Total
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt:
|
|
(in thousands)
|
5.625% Senior Notes
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
500,000
|
|
$
|
—
|
|
$
|
—
|
|
$
|
500,000
|
|
$
|
516,250
|
5.750% Senior Notes
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
800,000
|
|
|
—
|
|
|
800,000
|
|
|
824,000
|
2014 Senior Notes
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
750,000
|
|
|
750,000
|
|
|
746,250
|
2010-2C Tower Securities
(1)(2)
|
|
|
—
|
|
|
550,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
550,000
|
|
|
551,078
|
2012-1C Tower Securities
(1)
|
|
|
—
|
|
|
610,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
610,000
|
|
|
612,025
|
2013-1C Tower Securities
(1)
|
|
|
—
|
|
|
—
|
|
|
425,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
425,000
|
|
|
425,472
|
2013-2C Tower Securities
(1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
575,000
|
|
|
575,000
|
|
|
579,014
|
2013-1D Tower Securities
(1)
|
|
|
—
|
|
|
—
|
|
|
330,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
330,000
|
|
|
335,514
|
2014-1C Tower Securities
(1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
920,000
|
|
|
—
|
|
|
—
|
|
|
920,000
|
|
|
936,266
|
2014-2C Tower Securities
(1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
620,000
|
|
|
620,000
|
|
|
629,474
|
2015-1C Tower Securities
(1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
500,000
|
|
|
—
|
|
|
500,000
|
|
|
510,350
|
Revolving Credit Facility
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
30,000
|
|
|
—
|
|
|
30,000
|
|
|
30,000
|
2014 Term Loan
|
|
|
7,500
|
|
|
15,000
|
|
|
15,000
|
|
|
15,000
|
|
|
15,000
|
|
|
1,402,500
|
|
|
1,470,000
|
|
|
1,457,137
|
2015 Term Loan
|
|
|
2,500
|
|
|
5,000
|
|
|
5,000
|
|
|
5,000
|
|
|
5,000
|
|
|
472,500
|
|
|
495,000
|
|
|
488,194
|
Total debt obligation
|
|
$
|
10,000
|
|
$
|
1,180,000
|
|
$
|
775,000
|
|
$
|
1,440,000
|
|
$
|
1,350,000
|
|
$
|
3,820,000
|
|
$
|
8,575,000
|
|
$
|
8,641,024
|
|
(1)
|
|
The anticipated repayment date and the final maturity date for the 2010-2C Tower Securities is April 11, 2017 and April 9, 2042, respectively.
|
The anticipated repayment date and the final maturity date for the 2012-1C Tower Securities is December 11, 2017 and December 9, 2042, respectively.
The anticipated repayment date and the final maturity date for the 2013-1C Tower Securities is April 10, 2018 and April 9, 2043, respectively.
The anticipated repayment date and the final maturity date for the 2013-2C Tower Securities is April 11, 2023 and April 9, 2048, respectively.
The anticipated repayment date and the final maturity date for the 2013-1D Tower Securities is April 10, 2018 and April 9, 2043, respectively.
The anticipated repayment date and the final maturity date for the 2014-1C Tower Securities is October 8, 2019 and October 11, 2044, respectively.
The anticipated repayment date and the final maturity date for the 2014-2C Tower Securities is October 8, 2024 and October 8, 2049, respectively.
The anticipated repayment date and the final maturity date for the 2015-1C Tower Securities is October 8, 2020 and October 10, 2045, respectively.
(2)
On July 15, 2016, the 2010-2C Tower Securities were repaid in full with proceeds from the 2016-1C Tower Securities.
Our current primary market risk exposure is interest rate risk relating to (1) our ability to refinance our debt at commercially reasonable rates, if at all, and (2) interest rate risk relating to the impact of interest rate movements on our 2014 Term Loan and 2015 Term Loan and any borrowings that we may incur under our Revolving Credit Facility, which are at floating rates. We manage the interest rate risk on our outstanding debt through our large percentage of fixed rate debt. While we cannot predict our ability to refinance existing debt or the impact interest rate movements will have on our existing debt, we continue to evaluate our financial position on an ongoing basis.
We are exposed to market risk from changes in foreign currency exchange rates in connection with our operations in Brazil
and Ca
nada,
and to a lesser extent, our markets in Central America. In each of these markets
, we pay most of our selling, general, and administrative expenses and a portion of our operating expenses, such as taxes and utilities incurred in the country in local currency. In addition, in Brazil and Canada, we receive significantly all of our revenue and pay significantly all of our operating expenses in local currency. All transactions denominated in currencies other than the U.S. Dollar are reported in U.S. Dollars at the applicable
exchange rate. All assets and liabilities are translated into U.S. Dollars at exchange rates in effect at the end of the applicable fiscal reporting period and all revenues and expenses are translated at average rates for the period. The cumulative translation effect is included in equity as a component of Accumulated other comprehensive income (loss).
For
the
six
months
ended
June 30, 2016
, approximately
11.0%
of our revenues and approximately
14.9%
of our total operating expenses were denominated in foreign currencies.
We have performed a sensitivity analysis assuming a hypothetical 10% adverse movement in the Brazilian Rea
l
from the quoted foreign currency exchange rates at
June 30, 2016
. As of
June 30, 2016
, the analysis indicated that such an adverse movement would have caused our revenues and operating
income
to fluctuate by
approximately
0.9%
and
2.9%
, respectively, for
the
six
months
ended
June 30, 2016
.
As of
June 30, 2016
, we
ha
d intercompany debt, which is denominated in a currency other than the functional currency of the subsidiary in which it is recorded. As this debt had not been designated as being a long-term investment in nature, any changes in the foreign currency exchange rates will result in unrealized gains or losses, which will be included in our
determination of net income. A
change of 10% in the underlying exchange rates of our unsettled intercompany debt
at
June 30, 2016
would
have
result
ed
in
approximately
$43.0
million
of unrealized gains or losses that would
have
be
en
included in Other
income (
expense
), net
in our condensed consolidated statements of operations for the
six
months
ended
June 30, 2016
.
Special Note Regarding Forward-Looking Statements
This quarterly report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements concern expectations, beliefs, projections, plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. Specifically, this quarterly report contains forward-looking statements regarding:
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·
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our expectations on the future growth and financial health of the wireless industry and the industry participants, the drivers of such growth, the demand for our towers, and the trends developing in our industry;
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·
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our beliefs regarding our ability to capture and capitalize on industry growth and the impact of such growth on our financial and operational results;
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·
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our belief that over the long-term, site leasing revenues will continue to grow as wireless service providers increase their use of our towers due to increasing minutes of network use and data transfer, network expansion and network coverage requirements, on an organic basis, in our domestic and international segments;
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|
·
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our expectation that customer activity will primarily be in the form of, in the current environment, amendments to current leases as wireless service providers seek to upgrade their antennas and, in the long-term, new leases as these providers continue to expand and upgrade their networks;
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·
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our belief that our site leasing business is characterized by stable and long-term recurring revenues, predictable operating costs, and minimal non-discretionary capital expenditures;
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·
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our expectation that, due to the relatively young age and mix of our tower portfolio, future expenditures required to maintain these towers will be minimal;
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·
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our expectation that we will grow our cash flows by adding tenants to our towers at minimal incremental costs and executing monetary amendments;
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·
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our expectations regarding foreign currency exchange rates;
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·
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our expectations regarding the churn rate of our non-iDEN tenant leases;
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·
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our expectations regarding the impact of the Oi reorganization;
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·
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our expectations regarding our future cash capital expenditures, both discretionary and non-discretionary, including expenditures required to maintain, improve, and modify our towers, ground lease purchases, and general corporate expenditures, and the source of funds for these expenditures;
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·
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our intended use of our liquidity;
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·
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our expectations regarding our annual debt service in 2016 and thereafter, and our belief that our cash on hand, capacity 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;
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·
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our belief regarding our credit risk; and
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·
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our estimates regarding certain accounting and tax matters.
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These forward-looking statements reflect our current views about future events and are subject to risks, uncertainties and assumptions. We wish to caution readers that certain important factors may have affected and could in the future affect our actual results and could cause actual results to differ significantly from those expressed in any forward-looking statement. The most important factors that could prevent us from achieving our goals, and cause the assumptions underlying forward-looking statements
and the actual results to differ materially from those expressed in or implied by those forward-looking statements include, but are not limited to, the following:
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·
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the impact of consolidation among wireless service providers on our leasing revenue;
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·
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our ability to continue to comply with covenants and the terms of our credit instruments and our ability to obtain additional financing to fund our capital expenditures;
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·
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our ability to successfully manage the risks associated with international operations, including risks relating to political or economic conditions, tax laws, currency restrictions and exchange rate fluctuations, legal or judicial systems, and land ownership;
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·
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our ability to successfully manage the risks associated with our acquisition initiatives, including our ability to effectively integrate acquired towers into our business and to achieve the financial results projected in our valuation models for the acquired towers;
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·
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developments in the wireless communications industry in general, and for wireless communications infrastructure providers in particular, that may slow growth or affect the willingness or ability of the wireless service providers to expend capital to fund network expansion or enhancements;
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·
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our ability to secure as many site leasing tenants as anticipated, recognize our expected economies of scale with respect to new tenants on our towers, and retain current leases on towers;
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·
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our ability to secure and deliver anticipated services business at contemplated margins;
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·
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our ability to build new towers, including our ability to identify and acquire land that would be attractive for our customers and to successfully and timely address zoning, permitting, weather, availability of labor and supplies and other issues that arise in connection with the building of new towers;
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·
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competition for the acquisition of towers and other factors that may adversely affect our ability to purchase towers that meet our investment criteria and are available at prices which we believe will be accretive to our shareholders and allow us to maintain our long-term target leverage ratios;
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·
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our ability to protect our rights to the land under our towers, and our ability to acquire land underneath our towers on terms that are accretive;
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·
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our ability to sufficiently increase our revenues and maintain expenses and cash capital expenditures at appropriate levels to permit us to meet our anticipated uses of liquidity for operations, debt service and estimated portfolio growth;
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·
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our ability to successfully estimate the impact of regulatory and litigation matters;
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·
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our ability to successfully estimate the impact of certain accounting and tax matters, including the effect on our company of adopting certain accounting pronouncements and the availability of sufficient net operating losses to offset future taxable income;
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·
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natural disasters and other unforeseen damage for which our insurance may not provide adequate coverage;
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·
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a decrease in demand for our towers;
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·
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the willingness and ability of Oi to continue to make payments to us in accordance with the terms of our contracts; and
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·
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the introduction of new technologies or changes in a tenant’s business model that may make our tower leasing business less desirable to potential tenants.
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