What changed in this filing

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Item 1A. Risk Factors

2024-05-09 compared with 2023-11-09 · 25 added, 34 removed, 1 unchanged (98% of the section changed)

We may not realize the anticipated benefits of the acquisition of Sprint Communications, and the integration of the Sprint Business may disrupt our business and management.

The success of our acquisition of the Sprint Business of Sprint Communications, including the realization of anticipated benefits and cost savings, will depend, in part, on our ability to successfully combine our business and the Sprint Business.

The integration may be more difficult, costly or time consuming than expected.

The integration process involves numerous risks.

These risks include:

inability to achieve the financial and strategic goals for the Sprint Business and the combined businesses;

inability to achieve the projected cost savings for the Sprint Business and the combined businesses and the resulting impact on profitability;

difficulty in, and the cost of, effectively integrating the operations, technologies, products or services, and personnel of the Sprint Business;

entry into markets in which we have minimal prior experience and where competitors in such markets have stronger market positions;

disruption of our ongoing business and distraction of our management and other employees from other opportunities and challenges;

inability to retain key personnel of the Sprint Business;

inability to retain key customers, vendors and other business partners of the Sprint Business or to migrate customers from legacy services;

any non-occurrence of anticipated tax benefits or potential for adverse tax consequences;

the effects of complex accounting requirements on our reported results;

incurring acquisition-related costs or amortization costs for acquired intangible assets that could impact our operating results;

elevated delinquency or bad debt write-offs related to receivables of the Sprint Business we assume;

difficulty in maintaining internal controls, procedures and policies during the transition and integration;

impairment of our relationships with employees, customers, partners, distributors or third-party providers of our technologies, products or services;

failure of our due diligence processes to identify significant problems, liabilities or other challenges of the Sprint Business or technology;

Management believes that as of March 31, 2024, there have been no material changes to our risk factors from those disclosed in Item 1A “Risk Factors,” of our annual report on Form 10-K for the year ended December 31, 2023, except as noted below.

We have substantial debt, which we may not be able to repay when due.

Our total indebtedness, at par, at March 31, 2024 was $1.5 billion and includes $500.0 million of our 3.50% senior secured notes due in May 2026 (“2026 Notes”) and $450.0 million of our 7.00% senior unsecured notes due in June 2027 (“2027 Notes”).

Our 2026 Notes require interest payments of $17.5 million per year and our 2027 Notes require interest payments of $31.5 million per year, each paid semi-annually.

All of our noteholders have the right to be paid the principal and any applicable premium upon an event of default and upon certain designated events, such as certain changes of control.

Our total indebtedness at March 31, 2024 included $517.5 million of finance lease obligations for dark fiber primarily under 15 to 43 year IRUs.

Our total indebtedness March 31, 2024 excludes $387.5 million of operating lease liabilities which were required to be recorded as right-to-use assets and operating lease liabilities.

The amount of our IRU finance lease obligations may be impacted due to our expansion activities, the timing of payments and fluctuations in foreign currency rates.

Subsequent to March 31, 2024, our indirect wholly owned subsidiary issued $206 million of secured IPv4 address revenue notes, pursuant to the Securitization completed on May 2, 2024.

If we do not have sufficient funds to pay the interest, principal and premium related to these obligations at the time we are obligated to do so, we could be forced into in bankruptcy, or we may only be able to raise the necessary funds on unfavorable terms.

The agreements governing our various debt obligations impose restrictions on our business and could adversely affect our ability to undertake certain corporate actions.

The agreements governing our various debt obligations include covenants imposing significant restrictions on our business.

These restrictions may affect our ability to operate our business and may limit our ability to take advantage of potential business opportunities as they arise.

These covenants place restrictions on our ability to, among other things:

● incur additional debt;

● create liens;

● make certain investments;

● enter into certain transactions with affiliates;

● declare or pay dividends, redeem stock or make other distributions to stockholders;

● consolidate, merge or transfer or sell all or substantially all of our assets.

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exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of, the Transaction, such as claims from terminated employees, customers, or other third parties;

inability to conclude that our internal control over financial reporting is effective;

delay in customer purchasing decisions due to uncertainty about the direction of our product and service offerings;

Transition Services costs for longer than anticipated;

increased accounts receivables collection times and working capital requirements associated with business models of the Sprint Business;

incompatibility of business cultures.

If we experience difficulties during the integration process and are unable to integrate the Sprint Business successfully or in a timely manner, we may not realize the benefits of the Transaction to the extent anticipated.

These integration matters could have an adverse effect on us during the transition period and on the combined company for an undetermined period after completion of the Transaction.

We maintain our cash and cash equivalents at financial institutions in amounts in excess of insured limits.

The Company maintains the majority of its cash and cash equivalents in accounts with U.S.

and multi-national financial institutions, and our deposits at certain of these institutions, including the counterparty to our Swap Agreement, exceed insured limits.

Market conditions can affect the viability of these institutions.

In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we would be able to access uninsured funds in a timely manner or at all.

Any inability to access or delay in accessing these funds could adversely affect our business and financial position.

Management believes that as of September 30, 2023, except as set forth herein there have been no material changes to our risk factors from those disclosed in Item 1A “Risk Factors,” of our annual report on Form 10-K for the year ended December 31, 2022, except as disclosed in Item 1A - Risk Factors.

In addition, our IPv4 address securitization facility requires us to maintain a specified debt service coverage ratio.

Failure to maintain the debt service coverage ratio at a specified triggered level could adversely affect our business, including full or partial amortization or an event of default, as applicable.

Our ability to comply with these agreements may be affected by events beyond our control, including prevailing economic, financial and industry conditions.

These covenants could have an adverse effect on our business by limiting our ability to take advantage of financing, merger and acquisition or other corporate opportunities.

The breach of any of these covenants or restrictions could result in a default under the agreements governing our debt obligations.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors