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 infrastructure, including tower structures, rooftops
and other structures that support antennas used for wireless communications, which we collectively refer to as “towers” or “sites.” Our principal operations are in the United States and its territories. In addition, we own and operate towers in
South America, Central America,
and Canada. Our primary business line is our site leasing business, which contributed
98.7%
of our total segment operating profit for the
nine
months ended
September 30, 2017
. In our site leasing business, we (1) lease antenna space to wireless service providers on towers that we own or operate and (2) manage rooftop and tower sites for property owners under various contractual arrangements. As of
September 30, 2017
, we owned
26,764
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
5,300
actual or potential
sites
, approximately
500
of which were revenue producing as of
September 30, 2017
. 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
September 30, 2017
, (1) no U.S. state or territory accounted for more than 10% of our total tower portfolio by tower count, and (2) no U.S. state or territory accounted for more than 10% of our total revenues for the
nine
months ended
September 30, 2017
. In addition, as of
September 30, 2017
, approximately
27.6%
of our total towers are located in Brazil and less than 3% of our total towers are located in
any
of our other international markets (each country is considered a market). We derive site leasing revenues primarily from wireless service provider tenants, including AT&T, T-Mobile, Verizon Wireless, Sprint, Oi S.A., Telefonica, Claro, and TIM. Wireless service providers enter into tenant leases with us, each of which relates to the lease or use of space at an individual site. In the United States and Canada, our tenant leases are generally for an initial term of 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. Site leases in South America typically provide for a fixed rental amount and a pass through charge for the underlying ground lease rent.
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 Brazil, Canada,
Chile
,
and Colombia,
significantly all of our revenue, expenses, and capital expenditures, including tenant leases, ground leases, and other tower-related expenses are denominated in local currency.
In Argentina and Peru, our revenue, expenses, and capital expenditures, including tenant leases, ground leases, and other tower-related expenses are denominated in a mix of local currency and U.S. dollars.
Cost of site leasing revenue primarily consists of:
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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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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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Deferred lease origination cost amortization.
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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
September 30, 2017
, approximately
70%
of our tower structures were located on parcels of land that we own, land subject to perpetual easements, or parcels of land in which we have a leasehold interest that extends beyond 20 years. For any given tower, costs are relatively fixed over a monthly or an annual time period. As such, operating costs for owned towers do not generally increase as a result of adding additional customers to the tower. The amount of
property taxes
varies from site to site depending on the taxing jurisdiction and the height and
age of the tower.
The ongoing maintenance requirements are typically minimal and include replacing lighting systems, painting a tower, or upgrading or repairing an access road or fencing.
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 nine months ended
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September 30,
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September 30,
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Segment operating profit as a percentage of total
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2017
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2016
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2017
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2016
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Domestic site leasing
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81.6%
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83.0%
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81.8%
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83.7%
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International site leasing
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17.1%
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15.7%
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16.9%
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14.8%
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Total site leasing
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98.7%
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98.7%
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98.7%
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98.5%
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We believe that over the long-term, site leasing revenues will continue to grow as wireless service providers
lease additional antenna space on
our towers due to increasing minutes of network use and data transfer, network expansion and network coverage requirements. During
the remainder of
2017
, we expect organic site leasing revenue
growth
in both our domestic and international segments to be consistent with our growth in
2016
and
the nine months ended September 30, 2017.
We believe our site leasing business is characterized by stable and long-term recurring revenues, predictable operating costs and minimal non-discretionary capital
expenditures. Due to the relatively young age and mix of our tower portfolio, we expect future expenditures required to maintain these towers to be minimal. Consequently, we expect to grow our cash flows by (1) adding tenants to our towers at minimal incremental costs by using existing tower capacity or requiring wireless service providers to bear all or a portion of the cost of tower modifications and (2) executing monetary amendments as wireless service providers
add or
upgrade their equipment. Furthermore, because our towers are strategically positioned 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 specific technology (e.g. iDEN, MetroPCS, Clearwire, and Cricket)
.
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
on existing infrastructure
; (4) support in leasing of the location; (5) assistance in obtaining zoning approvals and permits; (6) tower and related
site construction; (7) antenna installation; and (8) radio equipment installation, commissioning, and maintenance. We provide site development services at our towers and at towers owned by others
on a local basis, through regional, market, and project offices. The market offices are responsible for all site development operations
.
Capital Allocation Strategy
Our capital allocation strategy is to prioritize investment in quality assets that meet our return criteria and then stock repurchases when we believe our stock price is below its intrinsic value. A primary goal of our capital allocation strategy is to increase our Adjusted Funds From Operations per share. To achieve this, we expect we would continue to deploy capital between portfolio growth and stock repurchases, subject to compliance with REIT distribution requirements, available funds and market conditions, while maintaining our target leverage levels. Key elements of our capital allocation strategy include:
Portfolio Growth.
We intend to continue to grow our tower portfolio, domestically and internationally, through tower acquisitions and the construction of new towers.
Stock
R
epurchase
P
rogram.
We currently utilize stock repurchases as part of our capital allocation policy when we believe our share price is below
its
intrinsic value. We believe that share repurchases, when purchased at the right price, will facilitate our goal of increasing our Adjusted Funds From Operations per share.
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, 2016
. 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.
Acquisitions
In January 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business. The standard provides guidance to help entities determine whether transactions should be accounted for as acquisitions or disposals of assets or businesses. ASU 2017-01 provides revised guidance to determine when an acquisition meets the definition of a business or
when the acquisition
should be accounted for as an asset acquisition. We adopted this standard effective January 1, 2017 and all changes will be accounted for prospectively. The adoption of ASU 2017-01 did not have a material impact on our unaudited consolidated financial statements and related disclosures.
Under the new standard, o
ur acquisitions
will
generally qualify for asset acquisition treatment under ASC 360, Property, Plant, and Equipment, rather than business combination treatment under ASC 805 Business Combinations. For acquisitions which qualify as asset acquisitions, the aggregate purchase price is allocated on a relative fair value basis to
towers and related intangible
assets. For asset acquisitions, external, direct transaction costs will be capitalized as a component of the cost of the asset acquired.
We will continue to expense internal acquisition costs as incurred.
We account for business combinations under the acquisition method of accounting. The assets and liabilities acquired are recorded at fair market value at the date of each acquisition and the results of operations of the acquired assets are included with those from the dates of the respective acquisitions. We continue to evaluate all acquisitions for a period not to exceed one year 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 as a result of information available at the acquisition date.
The fair values of net assets acquired are based on management’s estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. The fair value estimates are based on available historical information and on future expectations and assumptions deemed reasonable by management at the
time. If the actual results differ from the estimates and judgments used in these fair values, the amounts recorded in the consolidated financial statements could be subject to a possible impairment of the intangible assets, or require acceleration of the amortization expense of intangible assets in subsequent periods.
The intangible assets represent the value associated with the current leases at the acquisition date (“Current contract intangibles”) and future tenant leases anticipated to be added to the towers (“Network location intangibles”) and were calculated using the discounted values of the current or future expected cash flows. The intangible assets are estimated to have a useful life consistent with the useful life of the related tower assets, which is typically 15 years.
In connection with certain acquisitions, we may agree to pay contingent consideration (or earnouts) in cash or stock if the communication sites or businesses that are acquired meet or exceed certain performance targets over a period of one to three years after they have been acquired. We accrue for contingent consideration in connection with business combinations at fair value as of the date of the acquisition. All subsequent changes in fair value of contingent consideration payable in cash are recorded through Consolidated Statements of Operations. Contingent consideration in connection with asset acquisitions will be recognized at the time when the contingency is resolved or becomes payable and will increase the cost basis of the assets acquired.
REIT Conversion
We believe that our business has been operated in a manner that complies with the REIT rules since January 1, 2016, and as a result, we made the election to be subject to tax as a REIT commencing with our taxable year end
ed
December 31, 2016. A REIT is a
n entity
that qualifies for special treatment for U.S. federal income tax purposes because, among other things, it derives most of its income from real estate-based sources and makes a special election under the Code. We operate as a REIT that principally invests in, and derives most of its income from the ownership, operation and leasing of, towers. As a REIT, we generally will be entitled to a deduction for dividends that we pay and therefore not subject to U.S. federal corporate income tax on that portion of our net income that we distribute to our shareholders. However, we will continue to pay U.S. federal income tax on earnings, if any, from assets and operations held through taxable REIT subsidiaries (“TRSs”). These assets and operations currently consist primarily of our site development services and our international operations. Our international operations will continue to be subject, as applicable, to foreign taxes in the jurisdictions in which those operations are located. We may also be subject to a variety of taxes, including payroll taxes and state, local and foreign income, property and other taxes on our assets and operations.
As a REIT, we will generally be required to distribute at least 90% of our REIT taxable income after the utilization of any available
net operating losses
(“
NOLs
”)
(determined without regard to the dividends paid deduction and excluding net capital gain) each year to our shareholders. In addition to the REIT distribution requirements, our determination as to the timing and amount of future dividend distributions will be based on a number of factors, including investment opportunities around our core business, the availability of our existing federal NOLs of approximately $1.1 billion as of December 31, 2016 that are attributes of the REIT, our financial condition, earnings, debt covenants, and other possible uses of such funds. We may use these NOLs to offset our REIT taxable income, and thus any required distributions to shareholders may be reduced or eliminated until such time as the NOLs have been fully utilized.
RESULTS OF OPERATIONS
This report presents our financial results and other financial metrics after eliminating the impact of changes in foreign currency exchange rates. We believe that providing these financial results and metrics on a constant currency basis, which are non-GAAP measures, gives management and investors the ability to evaluate the performance of our business without the impact of foreign currency exchange rate fluctuations. We eliminate the impact of changes in foreign currency exchange rates by dividing the current period’s financial results by the average monthly exchange rates of the prior year period
, as well as
by
eliminating the impact of
the
remeasurement
of our intercompany loans
.
Three
Months Ended
September 30, 2017
Compared to
Three
Months Ended
September 30, 2016
Revenues and Segment
Operating Profit:
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For the three months ended
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Constant
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September 30,
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Foreign
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Constant
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Currency
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2017
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2016
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Currency Impact
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Currency Change
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% Change
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Revenues
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(in thousands)
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Domestic site leasing
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$
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328,395
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$
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319,109
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$
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—
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|
$
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9,286
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2.9%
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International site leasing
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80,143
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69,059
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1,521
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9,563
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13.8%
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Site development
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25,407
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23,151
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—
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2,256
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9.7%
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Total
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$
|
433,945
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$
|
411,319
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$
|
1,521
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$
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21,105
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5.1%
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Cost of Revenues
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Domestic site leasing
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$
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65,226
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$
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65,353
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$
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—
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$
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(127)
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(0.2%)
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International site leasing
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25,125
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21,001
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531
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3,593
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17.1%
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Site development
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21,117
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19,114
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—
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2,003
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10.5%
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Total
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$
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111,468
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$
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105,468
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$
|
531
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$
|
5,469
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5.2%
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Operating Profit
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Domestic site leasing
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$
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263,169
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$
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253,756
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$
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—
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$
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9,413
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3.7%
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International site leasing
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55,018
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48,058
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|
990
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5,970
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12.4%
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Site development
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4,290
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|
4,037
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—
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253
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6.3%
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Revenues
Domestic site
leasing revenues
increase
d
$9.3
million for the
three
months ended
September 30, 2017
, as compared to the prior year, due to (i) revenues from
248
towers acquired and
60
towers built since
July 1, 2016
and (ii) organic site leasing growth, primarily from monetary lease amendments for additional equipment added to our towers as well as new leases and contractual rent escalators, partially offset by lease non-renewals primarily by MetroPCS, Clearwire, and Cricket.
International site leasing revenues
increase
d
$11.1
million for the
three
months ended
September 30, 2017
, as compared to the prior year. On a constant currency basis, international site leasing revenues
increase
d
$9.6
million. These changes were primarily due to (i) revenues from
560
towers acquired and
439
towers built since
July 1, 2016
, (ii) organic site leasing growth from new leases and contractual escalators, and (iii) an increase in reimbursable pass-through expenses. Site leasing revenue in Brazil represented
13.5%
of total site leasing revenue for the period. No other individual international market represented more than 3% of our total site leasing revenue.
Site development revenues
increase
d $
2.3
million for the
three
months ended
September 30, 2017
, as compared to the prior year, as a result of
increase
d carrier activity.
Operating Profit
Domestic site leasing segment
operating profit
increase
d
$9.4
million for the
three
months ended
September 30, 2017
, as compared to the prior year, primarily due to additional profit generated by (i) towers acquired and built since
July 1, 2016
and organic site leasing growth as noted above, (ii) continued control of our site leasing cost of revenue, and (iii) the positive impact of our ground lease purchase program.
International site leasing segment operating profit
increase
d
$7.0
million for the
three
months ended
September 30, 2017
, as compared to the prior year. On a constant currency basis, international site leasing segment operating profit
increased
$6.0
million. These changes were primarily due to towers acquired and built since
July 1, 2016
and organic site leasing growth as noted above, partially offset by increases in cost of revenues.
Site development segment operating
profit
increase
d
$0.3
million for the
three
months ended
September 30, 2017
, as compared to the prior year, primarily due
to
increased revenue
,
partially offset by
lower margins due to
a change in the mix of work performed.
Selling, General, and Administrative
E
xpenses
:
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For the three months ended
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Constant
|
|
|
September 30,
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Foreign
|
|
Constant
|
|
Currency
|
|
|
2017
|
|
2016
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
|
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|
|
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(in thousands)
|
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Domestic site leasing
|
|
$
|
16,945
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|
$
|
19,206
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|
$
|
—
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|
$
|
(2,261)
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|
(11.8%)
|
International site leasing
|
|
|
6,658
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|
5,277
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|
121
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|
1,260
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|
23.9%
|
Total site leasing
|
|
$
|
23,603
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|
$
|
24,483
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$
|
121
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$
|
(1,001)
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|
(4.1%)
|
Site development
|
|
|
3,826
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|
|
3,128
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|
—
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|
698
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|
|
22.3%
|
Not identified by segment
|
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|
5,130
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|
4,644
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—
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|
|
486
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|
10.5%
|
Total
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|
$
|
32,559
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$
|
32,255
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$
|
121
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$
|
183
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0.6%
|
Selling, general, and
administrative expenses
increase
d
$0.3
million for the
three
months ended
September 30, 2017
, as compared to the prior year. On a constant currency basis, selling, general, and administrative expenses
increase
d
$0.2
million. These change
s were primarily as a result of
increase
s
in non-cash compensation, personnel, salaries, benefits, and other support costs
particularly in connection with our international expansion,
partially offset by a decrease in
the provision for doubtful accounts
associated with our domestic site leasing business
.
Acquisition Related Adjustments and Expenses:
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For the three months ended
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Constant
|
|
|
September 30,
|
|
Foreign
|
|
Constant
|
|
Currency
|
|
|
2017
|
|
2016
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
(in thousands)
|
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|
|
Domestic site leasing
|
|
$
|
962
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|
$
|
335
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|
$
|
—
|
|
$
|
627
|
|
|
187.2%
|
International site leasing
|
|
|
621
|
|
|
2,635
|
|
|
(12)
|
|
|
(2,002)
|
|
|
(76.0%)
|
Total
|
|
$
|
1,583
|
|
$
|
2,970
|
|
$
|
(12)
|
|
$
|
(1,375)
|
|
|
(46.3%)
|
Acquisition related adjustments and expenses
decrease
d
$1.4
million, on an actual and constant currency basis, for the
three
months ended
September 30, 2017
, as compared to the prior year. These changes were primarily as a result of
a reduction in third party acquisition costs expensed
in the current year as compared
to the prior year.
A
sset Impairment and Decommission Costs
:
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|
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|
For the three months ended
|
|
|
|
|
|
|
|
Constant
|
|
|
September 30,
|
|
Foreign
|
|
Constant
|
|
Currency
|
|
|
2017
|
|
2016
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
Domestic site leasing
|
|
$
|
7,898
|
|
$
|
1,974
|
|
$
|
—
|
|
$
|
5,924
|
|
|
300.1%
|
International site leasing
|
|
|
1,554
|
|
|
331
|
|
|
66
|
|
|
1,157
|
|
|
349.5%
|
Total site leasing
|
|
$
|
9,452
|
|
$
|
2,305
|
|
$
|
66
|
|
$
|
7,081
|
|
|
307.2%
|
Site development
|
|
|
(35)
|
|
|
—
|
|
|
—
|
|
|
(35)
|
|
|
—%
|
Total
|
|
$
|
9,417
|
|
$
|
2,305
|
|
$
|
66
|
|
$
|
7,046
|
|
|
305.7%
|
A
sset impairment and decommission
costs
increase
d
$7.1
million
for
the
three
months ended
September 30, 2017
, as
compared to the
prior year. On a constant currency basis, asset impairment and decommission costs
increase
d
$7.0
million. These changes were primarily as a result of
a
$9.0
million gain on the sale of fiber assets recorded in the prior year period,
partially offset by
a
$2.5
million
decrease
in impairment charges
from the prior year associated with
our
regular
analysis
of whether
the future cash flows
are adequate to
recover the carryi
ng value of the investment
.
Depreciation,
A
ccretion, and
A
mortization
E
xpense
s
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
|
|
|
|
|
Constant
|
|
|
September 30,
|
|
Foreign
|
|
Constant
|
|
Currency
|
|
|
2017
|
|
2016
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
Domestic site leasing
|
|
$
|
125,142
|
|
$
|
126,059
|
|
$
|
—
|
|
$
|
(917)
|
|
|
(0.7%)
|
International site leasing
|
|
|
34,548
|
|
|
31,453
|
|
|
662
|
|
|
2,433
|
|
|
7.7%
|
Total site leasing
|
|
$
|
159,690
|
|
$
|
157,512
|
|
$
|
662
|
|
$
|
1,516
|
|
|
1.0%
|
Site development
|
|
|
605
|
|
|
997
|
|
|
—
|
|
|
(392)
|
|
|
(39.3%)
|
Not identified by segment
|
|
|
1,612
|
|
|
1,602
|
|
|
—
|
|
|
10
|
|
|
0.6%
|
Total
|
|
$
|
161,907
|
|
$
|
160,111
|
|
$
|
662
|
|
$
|
1,134
|
|
|
0.7%
|
Depreciation, accretion, and
amortization expense
increased
$1.8
million for the
three
months ended
September 30, 2017
, as compared to the prior year. On a constant currency basis, depreciation, accretion, and amortization expense
increased
$1.1
million. These changes were primarily due to
additional international site leasing depreciation associated with the increase in the number of towers we acquired and built since
July 1, 2016
, partially offset by
a decrease in domestic site leasing depreciation associated with assets that became fully depreciated since the prior
year period
.
Operating Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
|
|
|
|
|
Constant
|
|
|
September 30,
|
|
Foreign
|
|
Constant
|
|
Currency
|
|
|
2017
|
|
2016
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
Domestic site leasing
|
|
$
|
112,222
|
|
$
|
106,182
|
|
$
|
—
|
|
$
|
6,040
|
|
|
5.7%
|
International site leasing
|
|
|
11,637
|
|
|
8,362
|
|
|
153
|
|
|
3,122
|
|
|
37.3%
|
Total site leasing
|
|
$
|
123,859
|
|
$
|
114,544
|
|
$
|
153
|
|
$
|
9,162
|
|
|
8.0%
|
Site development
|
|
|
(106)
|
|
|
(88)
|
|
|
—
|
|
|
(18)
|
|
|
20.5%
|
Not identified by segment
|
|
|
(6,742)
|
|
|
(6,246)
|
|
|
—
|
|
|
(496)
|
|
|
7.9%
|
Total
|
|
$
|
117,011
|
|
$
|
108,210
|
|
$
|
153
|
|
$
|
8,648
|
|
|
8.0%
|
Domestic site leasing
operating income
increase
d
$6.0
million for the
three
months ended
September 30, 2017
, as compared to the prior year, primarily due to higher segment operating profit and decreases in selling, general, and administrative expenses
and depreciation, accretion, and amortization expenses, partially offse
t by
increase
s
in asset impairment and decommission costs
and acquisition related adjustments and expenses
.
International site leasing operating income
increased
$3.3
million for the
three
months ended
September 30, 2017
, as compared to the prior year. On a constant currency basis, international site leasing operating income
increase
d
$3.1
million. These changes were primarily due to higher segment operating profit and a decrease in
acquisition related adjustments and expenses, partially offset by increases in depreciation, accretion, and amortization expenses,
selling, general,
and
administrative expenses
, and asset impairment and decommission costs.
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
|
|
|
|
|
Constant
|
|
|
September 30,
|
|
Foreign
|
|
Constant
|
|
Currency
|
|
|
2017
|
|
2016
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
Interest income
|
|
$
|
2,505
|
|
$
|
3,101
|
|
$
|
42
|
|
$
|
(638)
|
|
|
(20.6%)
|
Interest expense
|
|
|
(81,357)
|
|
|
(83,426)
|
|
|
(3)
|
|
|
2,072
|
|
|
(2.5%)
|
Non-cash interest expense
|
|
|
(725)
|
|
|
(585)
|
|
|
—
|
|
|
(140)
|
|
|
23.9%
|
Amortization of deferred financing fees
|
|
|
(4,957)
|
|
|
(5,445)
|
|
|
—
|
|
|
488
|
|
|
(9.0%)
|
Loss from extinguishment of debt, net
|
|
|
—
|
|
|
(34,512)
|
|
|
—
|
|
|
34,512
|
|
|
—%
|
Other (expense) income, net
|
|
|
20,062
|
|
|
(1,139)
|
|
|
21,521
|
|
|
(320)
|
|
|
28.1%
|
Total
|
|
$
|
(64,472)
|
|
$
|
(122,006)
|
|
$
|
21,560
|
|
$
|
35,974
|
|
|
(29.5%)
|
Interest
expense
decreased
$2.1
million, on an actual and constant currency basis, for the
three
months ended
September 30, 2017
, as compared to the prior year,
due to a lower weighted average interest rate on debt
and lower
average principal amount of cash-interest bearing debt outstanding as compared to the prior year. The decrease primarily resulted from the repayment of the 2010-2C Tower Securities in July 2016, the 5.75% Senior Notes in August 2016, the 5.625% Senior Notes in October 2016, and the 2012-1C Tower Securities in April 2017, partially offset by the issuance of the 2016 Senior Notes in August
2016
and the 2017-1C Tower Securities in April 2017, and a higher average balance outstanding on the Revolving Credit Facility in the current year period.
Loss from extinguishment of deb
t was $
34.5
million for the
three
months ended
September 30, 2016
due to the
payment of a $25.8 million c
all premium
on the redemption of the 5.75% Senior Notes, the write-off of $7.7 million in deferred financing fees related to the 5.75% Senior Notes, and the write-
off of
$1.0 million in deferred financing fees related to the redemption
of the 2010-2C Tower Securities
.
Other (expense)
income
, net includes a
n
$18.4
million
gain
on the remeasurement of
a U.S. dollar denominated intercompany loan with a Brazilian subsidiary
for the
three
months ended
September 30, 2017
, while the prior year period included a
$3.2
million
loss
.
Provision for Income Taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
|
|
|
|
|
Constant
|
|
|
September 30,
|
|
Foreign
|
|
Constant
|
|
Currency
|
|
|
2017
|
|
2016
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
Provision for income taxes
|
|
$
|
(3,378)
|
|
$
|
(1,574)
|
|
$
|
8
|
|
$
|
(1,812)
|
|
|
115.1%
|
Provision for income taxes
increased
$1.8
million, on an actual and constant currency basis, for the
three
months ended
September 30, 2017
, as compared to the prior year. These changes were primarily d
ue to an increase in state tax
provisions
from
becoming a taxpa
yer in additional jurisdictions
.
Net
Income
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
|
|
|
|
|
Constant
|
|
|
September 30,
|
|
Foreign
|
|
Constant
|
|
Currency
|
|
|
2017
|
|
2016
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
Net income (loss)
|
|
$
|
49,161
|
|
$
|
(15,370)
|
|
$
|
21,705
|
|
$
|
42,826
|
|
|
278.6%
|
Net
income
increased
$64.5
million for the
three
months ended
September 30, 2017
, as compared to the prior year.
On a constant currency basis, net income
increased
$42.8
million.
Th
ese
change
s
w
ere
primarily due to
fluctuations in our foreign currency exchange rates including changes
recorded on the remeasurement of
the
intercompany loan
,
an increase in operating income
,
and
a decrease in the
loss from extinguishment of debt
.
Nine
Months Ended
September 30, 2017
Compared to
Nine
Months Ended
September 30, 2016
Revenues and Segment Operating Pr
ofit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended
|
|
|
|
|
|
|
|
Constant
|
|
|
September 30,
|
|
Foreign
|
|
Constant
|
|
Currency
|
|
|
2017
|
|
2016
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
(in thousands)
|
|
|
|
Domestic site leasing
|
|
$
|
974,850
|
|
$
|
951,181
|
|
$
|
—
|
|
$
|
23,669
|
|
|
2.5%
|
International site leasing
|
|
|
234,239
|
|
|
193,280
|
|
|
16,365
|
|
|
24,594
|
|
|
12.7%
|
Site development
|
|
|
75,513
|
|
|
72,159
|
|
|
—
|
|
|
3,354
|
|
|
4.6%
|
Total
|
|
$
|
1,284,602
|
|
$
|
1,216,620
|
|
$
|
16,365
|
|
$
|
51,617
|
|
|
4.2%
|
Cost of Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic site leasing
|
|
$
|
195,903
|
|
$
|
196,027
|
|
$
|
—
|
|
$
|
(124)
|
|
|
(0.1%)
|
International site leasing
|
|
|
73,167
|
|
|
59,582
|
|
|
5,738
|
|
|
7,847
|
|
|
13.2%
|
Site development
|
|
|
62,713
|
|
|
59,021
|
|
|
—
|
|
|
3,692
|
|
|
6.3%
|
Total
|
|
$
|
331,783
|
|
$
|
314,630
|
|
$
|
5,738
|
|
$
|
11,415
|
|
|
3.6%
|
Operating Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic site leasing
|
|
$
|
778,947
|
|
$
|
755,154
|
|
$
|
—
|
|
$
|
23,793
|
|
|
3.2%
|
International site leasing
|
|
|
161,072
|
|
|
133,698
|
|
|
10,627
|
|
|
16,747
|
|
|
12.5%
|
Site development
|
|
|
12,800
|
|
|
13,138
|
|
|
—
|
|
|
(338)
|
|
|
(2.6%)
|
Revenues
Domestic site leasing
revenues
increase
d
$23.7
million for the
nine
months ended
September 30, 2017
, as compared to the prior year, due to (i) revenues from
402
towers acquired and
85
towers built since
January 1, 2016
and (ii) organic site leasing growth, primarily from monetary lease amendments for additional equipment added to our towers as well as new leases and contractual rent escalators, partially offset by lease non-renewals primarily by MetroPCS, Clearwire, and Cricket.
International site leasing revenues
increase
d
$41.0
million for the
nine
months ended
September 30, 2017
, as compared to the prior year. On a constant currency basis, international site leasing revenues
increase
d
$24.6
million. These changes were primarily due to (i) revenues from
565
towers acquired and
575
towers built since
January 1, 2016
, (ii) organic site leasing growth from new leases and contractual escalators, and (iii) an increase in reimbursable pass-through expenses.
Site leasing revenue in Brazil represented
13.4%
of total site leasing revenue for the period. No other individual international market represented more than 3% of our total site leasing revenue.
Site development revenues
increase
d
$3.4
million for the
nine
months ended
September 30, 2017
, as compared to the prior year, as a result of
increase
d carrier activity.
Operating Profit
Domestic site leasing segment operating profit
increase
d
$23.8
million for the
nine
months ended
September 30, 2017
, as compared to the prior year, primarily due to additional profit generated by (i) towers acquired and built since
January 1, 2016
and organic site leasing growth as noted above, (ii) continued control of our site leasing cost of revenue, and (iii) the positive impact of our ground lease purchase program.
International site leasing segment operating profit
increase
d
$27.4
million for the
nine
months ended
September 30, 2017
, as compared to the prior year. On a constant currency basis, international site leasing segment operating profit
increase
d
$16.7
million. These changes were primarily due to towers acquired and built since
January 1, 2016
and organic site leasing growth as noted above, partially offset by increases in cost of rev
enues.
Site development segment operating
profit
decrease
d
$0.3
million for the
nine
months ended
September 30, 2017
, as compared to the prior year, primarily due to
lower margin
s
resulting from
a change in the mix of work performed
, partially offset by an increase in revenue due to
increased
carrier activity
.
Selling,
G
eneral, and
A
dministrative
E
xpenses
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended
|
|
|
|
|
|
|
|
Constant
|
|
|
September 30,
|
|
Foreign
|
|
Constant
|
|
Currency
|
|
|
2017
|
|
2016
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
Domestic site leasing
|
|
$
|
53,147
|
|
$
|
55,141
|
|
$
|
—
|
|
$
|
(1,994)
|
|
|
(3.6%)
|
International site leasing
|
|
|
19,007
|
|
|
30,727
|
|
|
911
|
|
|
(12,631)
|
|
|
(41.1%)
|
Total site leasing
|
|
$
|
72,154
|
|
$
|
85,868
|
|
$
|
911
|
|
$
|
(14,625)
|
|
|
(17.0%)
|
Site development
|
|
|
11,495
|
|
|
9,960
|
|
|
—
|
|
|
1,535
|
|
|
15.4%
|
Not identified by segment
|
|
|
16,528
|
|
|
14,498
|
|
|
—
|
|
|
2,030
|
|
|
14.0%
|
Total
|
|
$
|
100,177
|
|
$
|
110,326
|
|
$
|
911
|
|
$
|
(11,060)
|
|
|
(10.0%)
|
Selling, general, and
administrative expenses
decrease
d
$10.1
million for the
nine
months ended
September 30, 2017
, as compared to the prior year. On a constant currency basis, selling, general, and administrative expenses
decrease
d
$11.1
million. These changes were primarily as a result of a decrease in
the provision for doubtful accounts
which included
the $16.5 million Oi reserve recorded in the second quarter of 2016, partially offset by increases in
non-cash compensation
,
personnel, salaries, benefits, and other support costs.
Acquisition Related Adjustments and Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended
|
|
|
|
|
|
|
|
Constant
|
|
|
September 30,
|
|
Foreign
|
|
Constant
|
|
Currency
|
|
|
2017
|
|
2016
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
Domestic site leasing
|
|
$
|
4,300
|
|
$
|
3,533
|
|
$
|
—
|
|
$
|
767
|
|
|
21.7%
|
International site leasing
|
|
|
2,557
|
|
|
5,441
|
|
|
194
|
|
|
(3,078)
|
|
|
(56.6%)
|
Total
|
|
$
|
6,857
|
|
$
|
8,974
|
|
$
|
194
|
|
$
|
(2,311)
|
|
|
(25.8%)
|
Acquisition related adjustments and
expenses
decrease
d
$2.1
million for the
nine
months ended
September 30, 2017
, as compared to the prior year. On a constant currency basis, acquisition related adjustments and expenses
decrease
d
$2.3
million. These changes were primarily as a result of changes in our
estimated pre-acquisition contingencies as compared to the prior year period and
a reduction in
third party
acquisition
costs
expensed in the current year as compared to the prior year
.
Asset Impairment and Decommission Costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended
|
|
|
|
|
|
|
|
Constant
|
|
|
September 30,
|
|
Foreign
|
|
Constant
|
|
Currency
|
|
|
2017
|
|
2016
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
Domestic site leasing
|
|
$
|
22,746
|
|
$
|
19,359
|
|
$
|
—
|
|
$
|
3,387
|
|
|
17.5%
|
International site leasing
|
|
|
2,956
|
|
|
1,476
|
|
|
201
|
|
|
1,279
|
|
|
86.7%
|
Total site leasing
|
|
$
|
25,702
|
|
$
|
20,835
|
|
$
|
201
|
|
$
|
4,666
|
|
|
22.4%
|
Site development
|
|
|
206
|
|
|
—
|
|
|
—
|
|
|
206
|
|
|
—%
|
Not identified by segment
|
|
|
—
|
|
|
2,345
|
|
|
—
|
|
|
(2,345)
|
|
|
(100.0%)
|
Total
|
|
$
|
25,908
|
|
$
|
23,180
|
|
$
|
201
|
|
$
|
2,527
|
|
|
10.9%
|
Asset impairment and decommission
costs
increase
d by
$2.7
million for the
nine
months ended
September 30, 2017
, as compared to the prior year. On a constant currency basis, asset impairment and decommission costs
increase
d
$2.5
million. These changes were primarily as a result of
a $9.0 million gain on the sale of fiber assets recorded in the prior year period, partially offset by
a $2.3 million decrease in write-off and disposal costs related to our former corporate headquarters building during the second quarter of 2016 and a
$4.0
million
decrease
in impairment charges resulting from our
regular
analysis
of whether
the future cash flows
are adequate to
recover the carrying value of the investment.
Depreciation, Accretion, and Amortization Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended
|
|
|
|
|
|
|
|
Constant
|
|
|
September 30,
|
|
Foreign
|
|
Constant
|
|
Currency
|
|
|
2017
|
|
2016
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
Domestic site leasing
|
|
$
|
373,262
|
|
$
|
384,208
|
|
$
|
—
|
|
$
|
(10,946)
|
|
|
(2.8%)
|
International site leasing
|
|
|
100,388
|
|
|
88,111
|
|
|
6,988
|
|
|
5,289
|
|
|
6.0%
|
Total site leasing
|
|
$
|
473,650
|
|
$
|
472,319
|
|
$
|
6,988
|
|
$
|
(5,657)
|
|
|
(1.2%)
|
Site development
|
|
|
1,968
|
|
|
2,661
|
|
|
—
|
|
|
(693)
|
|
|
(26.0%)
|
Not identified by segment
|
|
|
4,839
|
|
|
4,655
|
|
|
—
|
|
|
184
|
|
|
4.0%
|
Total
|
|
$
|
480,457
|
|
$
|
479,635
|
|
$
|
6,988
|
|
$
|
(6,166)
|
|
|
(1.3%)
|
Depreciation, accretion, and
amortization expense
increase
d
$0.8
million for the
nine
months ended
September 30, 2017
, as compared to the prior year. On a constant currency basis, depreciation, accretion, and amortization expense
decrease
d
$6.2
million. These changes were primarily due to
a decrease in domestic site leasing depreciation
associated with assets that became fully depreciated since the prior year period, partially offset by additional
international site leasing
depreciation associated with
an
increase in the number of towers we acquired and built since
January 1, 2016
.
Operating Income
(Expense)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended
|
|
|
|
|
|
|
|
Constant
|
|
|
September 30,
|
|
Foreign
|
|
Constant
|
|
Currency
|
|
|
2017
|
|
2016
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
Domestic site leasing
|
|
$
|
325,492
|
|
$
|
292,913
|
|
$
|
—
|
|
$
|
32,579
|
|
|
11.1%
|
International site leasing
|
|
|
36,164
|
|
|
7,943
|
|
|
2,333
|
|
|
25,888
|
|
|
325.9%
|
Total site leasing
|
|
$
|
361,656
|
|
$
|
300,856
|
|
$
|
2,333
|
|
$
|
58,467
|
|
|
19.4%
|
Site development
|
|
|
(869)
|
|
|
517
|
|
|
—
|
|
|
(1,386)
|
|
|
(268.1%)
|
Not identified by segment
|
|
|
(21,367)
|
|
|
(21,498)
|
|
|
—
|
|
|
131
|
|
|
(0.6%)
|
Total
|
|
$
|
339,420
|
|
$
|
279,875
|
|
$
|
2,333
|
|
$
|
57,212
|
|
|
20.4%
|
Domestic site leasing operating
income
increase
d
$32.6
million for the
nine
months ended
September 30, 2017
, as compared to the prior year, primarily due to higher segment operating profit and decreases in depreciation, accretion, and amortization expense and
selling, general, and administrative expenses, partially offset by an increase in
asset impairment and decommission costs.
International site leasing operating income
increase
d
$28.2
million for the
nine
months ended
September 30, 2017
, as compared to the prior year. On a constant currency basis, international site leasing operating income
increase
d
$25.9
million. These changes were primarily due to higher segment operating profit and decreases in selling, general, and administrative expenses resulting from the $16.5 million Oi reserve recorded in the second quarter of 2016 and acquisition related adjustments and e
xpenses, partially offset by
increase
s
in depreciation, accretion, and amortization expenses
and asset impairment and decommission costs
.
Site development operating income
decrease
d
$1.4
million for the
nine
months ended
September 30, 2017
, as compared to the prior year, primarily due to lower segment operating profit and increases in selling, general, and administrative expenses and asset impairment and decommission costs, partially offset by a decrease
in depreciation, accretion, and amortization expense.
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended
|
|
|
|
|
|
|
|
Constant
|
|
|
September 30,
|
|
Foreign
|
|
Constant
|
|
Currency
|
|
|
2017
|
|
2016
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
Interest income
|
|
$
|
8,648
|
|
$
|
7,704
|
|
$
|
685
|
|
$
|
259
|
|
|
3.4%
|
Interest expense
|
|
|
(237,415)
|
|
|
(250,913)
|
|
|
(3)
|
|
|
13,501
|
|
|
(5.4%)
|
Non-cash interest expense
|
|
|
(2,146)
|
|
|
(1,500)
|
|
|
—
|
|
|
(646)
|
|
|
43.1%
|
Amortization of deferred financing fees
|
|
|
(16,603)
|
|
|
(16,035)
|
|
|
—
|
|
|
(568)
|
|
|
3.5%
|
Loss from extinguishment of debt, net
|
|
|
(1,961)
|
|
|
(34,512)
|
|
|
—
|
|
|
32,551
|
|
|
(94.3%)
|
Other (expense) income, net
|
|
|
16,218
|
|
|
92,137
|
|
|
(78,029)
|
|
|
2,110
|
|
|
2.3%
|
Total
|
|
$
|
(233,259)
|
|
$
|
(203,119)
|
|
$
|
(77,347)
|
|
$
|
47,207
|
|
|
(23.2%)
|
Interest
expense
decrease
d
$13.5
million, on an actual and constant currency basis, for the
nine
months ended
September 30, 2017
, as compared to the prior year,
due to a lower weighted average interest rate on debt
and
a
low
er average principal amount of cash-interest bearing debt outstanding as compared to the prior year. The decrease primarily resulted from the repayment of the 2010-2C Tower Securities in July 2016, the 5.75% Senior Notes in August 2016, the 5.625% Senior Notes in October 2016, and the 2012-1C Tower Securities in April 2017, partially offset by the issuance of the 2016-1C Tower Securities in July 2016, the 2016 Senior Notes in August 2016, and the 2017-1C Tower Securities in April 2017, and a higher average balance outstanding on the Revolving Credit Facility in the current year period.
Loss from extinguishment of deb
t was $2.0 million
for the
nine
months ended
September 30, 2017
due to
the
write-off of unamortized financing costs associated with the
repayment of the 2012-1C Tower Securities in April 2017.
Loss from e
xtinguishment of debt was
$34.5 million for the nine months ended September 30, 2016 due to the payment of a $25.8 million call premium
and
the write off of $7.7 million in deferred financing fees
on the redemption of the 5.75% Senior Notes, and the write off of $1.0 million in deferred financing fees related to the redemption of the 2010-2C Tower Securities.
Other (expense)
income
, net includes a
n
$11.6
million
gain
on the remeasurement of
a U.S. dollar denominated intercompany loan with a Brazilian subsidiary
for the
nine
months ended
September 30, 2017
, while the prior year period included a
n
$89.0
million
gain
.
Provision for Income Taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended
|
|
|
|
|
|
|
|
Constant
|
|
|
September 30,
|
|
Foreign
|
|
Constant
|
|
Currency
|
|
|
2017
|
|
2016
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
Provision for income taxes
|
|
$
|
(10,167)
|
|
$
|
(5,780)
|
|
$
|
19
|
|
$
|
(4,406)
|
|
|
76.2%
|
Provision for income taxes
increased
$4.4
million, on an actual and constant currency basis, for the
nine
months ended
September 30, 2017
, as compared to the prior year. These changes were primarily d
ue to an increase in state tax
provisions
from
becoming a taxpa
yer in additional jurisdictions
.
Net Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended
|
|
|
|
|
|
|
|
Constant
|
|
|
September 30,
|
|
Foreign
|
|
Constant
|
|
Currency
|
|
|
2017
|
|
2016
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
Net income
|
|
$
|
95,994
|
|
$
|
70,976
|
|
$
|
(75,033)
|
|
$
|
100,051
|
|
|
141.0%
|
Net
income
increase
d
$25.0
million
for the
nine
months ended
September 30, 2017
, as compared to the prior year.
On a constant currency basis, net income
increased
$100.1
million.
Th
ese
change
s
w
ere
primarily due to
an increase in operating income and a decrease in interest expense
, partially offset by
fluctuations in our foreign currency exchange rates including changes recorded on the remea
surement of
the intercompany loan.
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
, as well as by eliminating the impact of the remeasurement of our intercompany loans
.
In addition, w
e believe that excluding the Oi reserve, which represents a
$16.5
million one-time provision
for doubtful accounts
recorded in the prior year
, 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
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
to
meaningfully evaluate and compare the results of our operations (1) from period to period and (2) to our competitors, by excluding the impact of our capital structure (primarily interest charges from our outstanding debt) and asset base (primarily depreciation, amortization and accretion) from our financial results. Management also believes Adjusted EBITDA is frequently used by investors or other interested parties in the evaluation of REITs. In addition, Adjusted EBITDA is 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 2014 Senior Notes
,
2
016 Senior Notes
, and 2017 Senior Notes
. Adjusted EBITDA should be considered only as a supplement to net income computed in accordance with GAAP as a measure of our performance.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
|
|
|
|
|
Constant
|
|
|
September 30,
|
|
Foreign
|
|
Constant
|
|
Currency
|
|
|
2017
|
|
2016
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
Net income (loss)
|
|
$
|
49,161
|
|
$
|
(15,370)
|
|
$
|
21,705
|
|
$
|
42,826
|
|
|
(278.6%)
|
Non-cash straight-line leasing revenue
|
|
|
(4,376)
|
|
|
(7,334)
|
|
|
(86)
|
|
|
3,044
|
|
|
(41.5%)
|
Non-cash straight-line ground lease expense
|
|
|
7,698
|
|
|
8,323
|
|
|
14
|
|
|
(639)
|
|
|
(7.7%)
|
Non-cash compensation
|
|
|
9,423
|
|
|
8,076
|
|
|
31
|
|
|
1,316
|
|
|
16.3%
|
Loss from extinguishment of debt, net
|
|
|
—
|
|
|
34,512
|
|
|
—
|
|
|
(34,512)
|
|
|
—%
|
Other expense (income), net
|
|
|
(20,062)
|
|
|
1,139
|
|
|
(21,521)
|
|
|
320
|
|
|
28.1%
|
Acquisition related adjustments and expenses
|
|
|
1,583
|
|
|
2,970
|
|
|
(12)
|
|
|
(1,375)
|
|
|
(46.3%)
|
Asset impairment and decommission costs
|
|
|
9,417
|
|
|
2,305
|
|
|
66
|
|
|
7,046
|
|
|
305.7%
|
Interest income
|
|
|
(2,505)
|
|
|
(3,101)
|
|
|
(42)
|
|
|
638
|
|
|
(20.6%)
|
Interest expense
(1)
|
|
|
87,039
|
|
|
89,456
|
|
|
3
|
|
|
(2,420)
|
|
|
(2.7%)
|
Depreciation, accretion, and amortization
|
|
|
161,907
|
|
|
160,111
|
|
|
662
|
|
|
1,134
|
|
|
0.7%
|
Provision for taxes
(2)
|
|
|
3,835
|
|
|
2,123
|
|
|
8
|
|
|
1,704
|
|
|
80.3%
|
Adjusted EBITDA
|
|
$
|
303,120
|
|
$
|
283,210
|
|
$
|
828
|
|
$
|
19,082
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended
|
|
|
|
|
|
|
|
Constant
|
|
|
September 30,
|
|
Foreign
|
|
Constant
|
|
Currency
|
|
|
2017
|
|
2016
|
|
Currency Impact
|
|
Currency Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
Net income
|
|
$
|
95,994
|
|
$
|
70,976
|
|
$
|
(75,033)
|
|
$
|
100,051
|
|
|
141.0%
|
Non-cash straight-line leasing revenue
|
|
|
(12,440)
|
|
|
(24,955)
|
|
|
(1,061)
|
|
|
13,576
|
|
|
(54.4%)
|
Non-cash straight-line ground lease expense
|
|
|
23,461
|
|
|
26,610
|
|
|
130
|
|
|
(3,279)
|
|
|
(12.3%)
|
Non-cash compensation
|
|
|
28,894
|
|
|
24,752
|
|
|
110
|
|
|
4,032
|
|
|
16.3%
|
Loss from extinguishment of debt, net
|
|
|
1,961
|
|
|
34,512
|
|
|
—
|
|
|
(32,551)
|
|
|
(94.3%)
|
Other expense (income), net
|
|
|
(16,218)
|
|
|
(92,137)
|
|
|
78,029
|
|
|
(2,110)
|
|
|
2.3%
|
Acquisition related adjustments and expenses
|
|
|
6,857
|
|
|
8,974
|
|
|
194
|
|
|
(2,311)
|
|
|
(25.8%)
|
Asset impairment and decommission costs
|
|
|
25,908
|
|
|
23,180
|
|
|
201
|
|
|
2,527
|
|
|
10.9%
|
Interest income
|
|
|
(8,648)
|
|
|
(7,704)
|
|
|
(685)
|
|
|
(259)
|
|
|
3.4%
|
Interest expense
(1)
|
|
|
256,164
|
|
|
268,448
|
|
|
3
|
|
|
(12,287)
|
|
|
(4.6%)
|
Depreciation, accretion, and amortization
|
|
|
480,457
|
|
|
479,635
|
|
|
6,988
|
|
|
(6,166)
|
|
|
(1.3%)
|
Provision for taxes
(2)
|
|
|
11,680
|
|
|
7,185
|
|
|
50
|
|
|
4,445
|
|
|
61.9%
|
Adjusted EBITDA
|
|
|
894,070
|
|
|
819,476
|
|
|
8,926
|
|
|
65,668
|
|
|
|
Oi reserve
|
|
|
—
|
|
|
16,498
|
|
|
—
|
|
|
(16,498)
|
|
|
|
Adjusted EBITDA excluding Oi reserve
|
|
$
|
894,070
|
|
$
|
835,974
|
|
$
|
8,926
|
|
$
|
49,170
|
|
|
|
|
(1)
|
|
Interest expense includes
interest expense, non-cash interest expense, and amortization of deferred financing fees.
|
|
(2)
|
|
Provision for taxes includes
$457
and
$549
of franchise and gross receipts taxes for the
three
months ended
September 30, 2017
and
2016
, respectively, and
$1,513
and
$1,405
of franchise and gross receipts taxes for the
nine
months ended
September 30, 2017
and
2016
, respectively, reflected in selling, general, and administrative expenses on the Consolidated Statement of Operations.
|
Adjusted EBITDA
increase
d
$19.9
million for the
three
months ended
September 30, 2017
, as compared to the prior year period. On a constant currency basis,
A
djusted EBITDA
increase
d
$19.1
million. These changes were primarily due to increases in domestic site leasing, international site leasing, and site development segment operating profit.
Adjusted EBITDA excluding the Oi reserve
increase
d
$58.1
million for the
nine
months ended
September 30, 2017
, as compared to the prior year period. On a constant currency basis,
A
djusted EBITDA excluding the Oi reserve
increase
d
$49.2
million. These changes were primarily due to increases in domestic and international site leasing segment operating profit
,
partially offset by
an increase
in selling, general, and administrative expenses
after excluding the Oi reserve
and
a decrease in site development segment operating profit.
LIQUIDITY AND CAPITAL RESOURCES
SBAC is a holding company with no business
operations of its own. SBAC’s only significant asset is 100% of the outstanding capital stock of SBA Telecommunications, LLC (“Telecommunications”), which is also a holding company that owns equity interests in entities that directly or indirectly own all of our domestic and international towers and assets. We conduct all of our business operations through Telecommunications’ subsidiaries. Accordingly, our only source of cash to pay our obligations, other than financings,
is distributions with respect to our ownership interest in our subsidiaries from the net earnings and cash flow generated by these subsidiaries.
A summary of our cash flows is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended
|
|
|
September 30, 2017
|
|
September 30, 2016
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Cash provided by operating activities
|
|
$
|
591,472
|
|
$
|
527,231
|
Cash used in investing activities
|
|
|
(290,915)
|
|
|
(300,213)
|
Cash (used in) provided by financing activities
|
|
|
(317,602)
|
|
|
333,534
|
Change in cash, cash equivalents, and restricted cash
|
|
|
(17,045)
|
|
|
560,552
|
Effect of exchange rate changes on cash, cash equiv., and restricted cash
|
|
|
3,537
|
|
|
13,760
|
Cash, cash equivalents, and restricted cash, beginning of period
|
|
|
185,970
|
|
|
146,619
|
Cash, cash equivalents, and restricted cash, end of period
|
|
$
|
172,462
|
|
$
|
720,931
|
Operating Activities
Cash
provided by operating activities was
$591.5
million for the
nine
months ended
September 30, 2017
as compared to
$527.2
million for the
nine
months ended
September 30, 2016
. The
increase
of
$64.2
million was primarily due to
increases in segment operating profit
from domestic site leasing
and
international site leasing
operating segments
and
a decrease in interest payments
.
Investing Activities
A detail of our cash capital expenditures is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months
|
|
|
ended September 30,
|
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Acquisitions of towers and related intangible assets
(1)(2)
|
|
$
|
124,476
|
|
$
|
144,535
|
Construction and related costs on new tower builds
|
|
|
49,650
|
|
|
51,487
|
Augmentation and tower upgrades
|
|
|
31,704
|
|
|
28,201
|
Land buyouts and other assets
(3)
|
|
|
36,531
|
|
|
46,867
|
Tower maintenance
|
|
|
21,752
|
|
|
21,125
|
General corporate
|
|
|
3,204
|
|
|
3,507
|
Total cash capital expenditures
|
|
$
|
267,317
|
|
$
|
295,722
|
|
(1)
|
|
The nine months ended September 30,
2017
excludes
$63.3 m
illion of acquisition costs funded
through the issuance of 487,963 shares of Class A common stock.
|
|
(2)
|
|
The nine months ended September 30, 2017 excludes $21.0 million of acquisitions completed during the second quarter of 2017 which were not funded as of September 30, 2017.
|
|
(3)
|
|
In addition, we paid
$10.6
million and
$8.7
million
for
ground lease extensions and term easements on land underlying our towers
during
the
nine
months ended
September 30, 2017
and
2016
, respectively.
|
During all of
2017
, inclusive of the capital expenditures made during the
nine
months ended
September 30, 2017
, we expect to incur non-discretionary cash capital expenditures associated with tower maintenance and general corporate expenditures of
$32.5
million to
$37.5
million and discretionary cash capital expenditures, based on current acquisition obligations, planned new tower construction, forecasted tower augmentations, and forecasted ground lease purchases, of
$395.0
million to
$415.0
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
nine
months ended
September 30, 2017
, we borrowed
$415.0
million and repaid
$375.0
million
of the outstanding balance
under the Revolving Credit Facility. As of
September 30, 2017
, we had
$430.0
million outstanding under the $1.0 billion Revolving Credit Facility. Subsequent to
September 30, 2017
, we borrowed
an additional
$30.0
million
and repaid
$460.0
million of the outstanding balance
under the Revolving Credit Facility
with proceeds from the 2017 Senior Notes (defined below)
.
As of the date of this filing,
no amount
was outstanding under the Revolving Credit Facility.
During the
nine
months ended
September 30, 2017
, we repurchased
3.9
million shares of our Class A common stock under our current stock repurchase plan for
$538.9
million at a weighted average price per share of
$139.16
. Subsequent to
September 30, 2017
, we repurchased
0.8
million shares of our Class A common stock under our current stock repurchase plan for
$111.1
million at a weighted average price per share of
$147.19
. Shares
re
purchased were retired.
As of the date of this filing,
we
had
$350.0
million of authorization remaining under the current stock repurchase p
lan
.
On January 20, 2017, SBA Senior Finance II repriced its senior secured
term loans from a Eurodollar Rate plus 250 basis points (with a Eurodollar Rate floor of 0.75%) to a Eurodollar Rate plus 225
basis points (with a zero Eurodollar floor).
On April 17, 2017, we, through a New York common law trust (the “Trust”), issued $760.0 million of 2017-1C Tower Securities
(as defined below)
. The fixed interest rate on the 2017-1C Tower Securities is 3.168% per annum, payable monthly. Net proceeds from this offering were used to prepay the entire $610.0 million aggregate principal amount, as well as accrued and unpaid interest, of the 2012-1C Tower Securities and for general corporate purposes.
O
n
Octo
ber
13
, 2017, we
issued
$
750.0 million
of
2017 Senior Notes
(as defined below
). The 2017 Senior Notes accrue interest at a rate of 4.0% per annum. Interest on the 2017 Senior Notes is due
semi-annually on April 1 and October 1 of each year, beginning on April 1, 2018. Net proceeds from this offering were used to
repay
$4
6
0.0 million
outstanding under the Revolving Credit Facility and for general corporate purposes.
Registration Statements
We have on file with the Commission a shelf
registration statement on Form S-4 registering shares of Class A common stock that we may issue in connection with the acquisition of wireless communication towers or antenna sites and related assets or companies who own wireless communication towers, antenna sites, or related assets. During the
nine
months ended
September 30, 2017
, we issued 487,963 shares of Class A common stock under this registration statement. As of
September 30, 2017
, we had approximately
1.2
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 s
ecurities
were issued
under this registration statement
from March 3, 2015
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.
As of
September 30, 2017
, the balance outstanding under the Revolving Credit Facility was accruing interest at
3.20%
per annum.
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.
As of
September 30, 2017
, SBA Senior Finance II was in compliance with the financial covenants contained in the Senior Credit Agreement.
Term Loans under the Senior Credit Agreement
Repricing Amendment to the Senior Credit Agreement
On January 20, 2017, SBA Senior Finance II amended its Senior Credit Agreement, primarily to reduce the stated rate of interest applicable to its senior secured term loans. As amended, the senior secured term loans accrue interest, at SBA Senior Finance II’s election, at either the Base Rate plus 125 basis points (with a zero Base Rate floor) or the Eurodollar Rate plus 225 basis points (with a zero Eurodollar Rate floor).
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.
Prior to the reduction in the term loan interest rates as discussed above, t
he 2014 Term Loan accrue
d
interest, at SBA Senior
Finance II’s election, at either the Base Rate plus 150 basis points (with a Base Rate floor of 1.75%) or the Eurodollar Rate plus 250 basis points (with a Eurodollar Rate floor of 0.75%). The 2014 Term Loan was issued at 99.75% of par value. As of
September 30, 2017
, the 2014 Term Loan was accruing interest at
3.49%
per annum. Principal payments on the 2014 Term Loan commenced 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
$14.1
million in relation to this transaction
,
which are being amortized through the maturity date.
During the
three
and
nine
months ended
September 30, 2017
, we repaid
$3.8
million and
$11.3
million of principal on the 2014 Term Loan. As of
September 30, 2017
, the 2014 Term Loan had a principal balance of
$1,451.3
m
illion.
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. Prior to the reduction in the term loan interest rates as discussed above, the 2015 Term Loan accrued 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
September 30, 2017
, the 2015 Term Loan was accruing interest at
3.49%
per annum. Principal payments on the 2015 Term Loan commenced 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
$5.5
million in relation to this transaction
,
which are being amortized through the maturity date.
During the
three
and
nine
months ended
September 30, 2017
, we repaid
$1.3
million and
$3.8
million of principal on the 2015 Term Loan. As of
September 30, 2017
, the 2015 Term Loan had a principal balance of
$488.8
million.
Secured Tower Revenue Securities
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 ha
d
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 wa
s 2.933% per annum, payable monthly. We incurred deferred financing
fees of
$14.9
million in relation to this transaction
,
which were being amortized through the anticipated repayment date of the 2012-1C Tower Securities.
On April 17, 2017, we repaid in full the 2012-1C Tower Securities with proceeds from the 2017-1C Tower Securities. In connection with the prepayment, we expensed $2.0 million of net deferred financing fees.
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”).
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 10, 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 10, 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 10, 2045 (the “2015-1C Tower Securities”). The fixed interest rate of the 2015-1C Tower Securities is 3.156% per annum, payable monthly. We incurred deferred financing fees of
$11.2
million in relation to this transaction
,
which are being amortized through the anticipated repayment date of the 2015-1C Tower Securities.
2016-1C Tower Securities
On July 7, 2016, we, through the Trust, issued $700.0 million of Secured Tower Revenue Securities Series 2016-1C
,
which have an anticipated repayment date of July 9, 2021 and a final maturity date of July 10, 2046 (the “2016-1C Tower Securities”). The fixed interest rate of the 2016-1C Tower Securities is 2.877% per annum, payable monthly. 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
$9.5
million in relation to this transaction
,
which are being amortized through the anticipated repayment date of the 2016-1C Tower Securities.
2017-1C Tower Securities
On April 17, 2017, we, through the Trust, issued $760.0 million of Secured Tower Revenue Securities Series 2017-1C
,
which have an anticipated repayment date of April 11, 2022 and a final maturity date of April 9, 2047 (the “2017-1C Tower Securities”). The fixed interest rate on the 2017-1C Tower Securities is 3.168% per annum, payable monthly. Net proceeds from this offering were used to prepay the entire $610.0 million aggregate principal amount, as well as accrued and unpaid interest, of the 2012-1C Tower Securities and for general corporate purposes. We incurred deferred
financing fees of
$10.2
million
in relation to this transaction
,
which are being amortized through the anticipated repayment date of the 2017-1C Tower Securities.
In addition, to satisfy certain risk retention requirements of Regulation RR promulgated under the Securities Exchange Act of 1934, SBA Guarantor, LLC, a wholly owned subsidiary, purchased $40.0 million of Secured Tower Revenue Securities Series 2017-1R issued by the Trust
,
which have an anticipated repayment date of April 11, 2022 and a final maturity date of April 9, 2047 (the “2017-
1R Tower Securities”). The fixed interest rate on the 2017-1R Tower Securities is 4.459% per annum, payable monthly. Principal and interest payments made on the 2017-1R Tower Securities eliminate in consolidation.
In connection with the issuance of the 2017-1C Tower Securities, the non-recourse mortgage loan was increased by $800.0 million (or by a net of $190.0 million after giving effect to prepayment of the loan components relating to the 2012-1C Tower Securities). The new loan accrues interest at the same rate as the 2017-1C Tower Securities; however, it is subject to all other material terms of the existing mortgage loan, including collateral and interest rate after the anticipated repayment date.
Debt Covenants
As of
September 30, 2017
, 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
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 15, 2016, we issued $1.1 billion of unsecured senior notes due September 1, 2024 (the “2016 Senior Notes”). The 2016 Senior Notes accrue interest at a rate of 4.875% per annum and were issued at 99.178% of par value. Interest on the 2016 Senior Notes is due semi-annually on March 1 and September 1 of each year, beginning on March 1, 2017. We incurred deferred financing fees of
$12.8
million in relation to this transaction
,
which are being amortized through the maturity date. Net proceeds from this offering and cash on hand were used 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.
2017 Senior Notes
On
Octo
ber
13
, 2017, we issued $750.0 million of unsecured senior notes
due October 1, 2022 (the “2017 Senior Notes”). The 2017 Senior Notes accrue interest at a rate of 4.0% per annum. Interest on the 2017 Senior Notes is due semi-annually on April 1 and October 1 of each year, beginning on April 1, 2018.
We
incurred deferred financing
fees of
$8.2
million in relation to this transaction, which are being amortized through the maturity date. Net proceeds from this offering were
used to
repay
$4
6
0.0 million outstanding
under the Revolving Credit Facility and for general corporate purposes.
Debt Service
As
of
September 30, 2017
, we believe that our
cash on hand, capacity available under
our Revolving Credit Facility and
cash flows from operations for the next twelve months
will be sufficient to service our outstanding debt during the next twelve months.
The following table
illustrates our estimate of our debt service requirement over the twelve months ended
September 30,
2018
based on the amounts outstanding as of
September 30, 2017
and the interest rates accruing on those amounts on such date (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 Senior Notes
|
|
|
|
|
$
|
36,563
|
2016 Senior Notes
|
|
|
|
|
|
53,625
|
2013-1C Tower Securities
(1)
|
|
|
|
|
|
430,281
|
2013-2C Tower Securities
|
|
|
|
|
|
21,585
|
2013-1D Tower Securities
(1)
|
|
|
|
|
|
336,552
|
2014-1C Tower Securities
|
|
|
|
|
|
26,954
|
2014-2C Tower Securities
|
|
|
|
|
|
24,185
|
2015-1C Tower Securities
|
|
|
|
|
|
15,939
|
2016-1C Tower Securities
|
|
|
|
|
|
20,361
|
2017-1C Tower Securities
|
|
|
|
|
|
24,318
|
Revolving Credit Facility
|
|
|
|
|
|
15,185
|
2014 Term Loan
|
|
|
|
|
|
65,452
|
2015 Term Loan
|
|
|
|
|
|
21,992
|
Total debt service for the next 12 months
(2)
|
|
|
|
|
$
|
1,092,992
|
|
(1)
|
|
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 2013-1D Tower Securities are April 10, 2018 and April 9, 2043, respectively.
|
(2)
|
|
Amounts exclude interest payments on the 2017 Senior Notes which are due semi-annually on April 1 and October 1 of each year, beginning on April 1, 2018.
On October 13, 2017,
proceeds from the issuance of the 2017 Senior Notes were used to repay the full $460.0 million outstanding under the Revolving Credit Facility
at such time
.
|