What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-08-06 compared with 2020-05-06 · 263 added, 104 removed, 343 unchanged (52% of the section changed)

2 unchanged sentences

In addition, we own and operate towers in South America, Central America, Canada, and South Africa.

Our primary business line is our site leasing business, which contributed 98.8% of our total segment operating profit for the three months ended March 31, 2020.

Our primary business line is our site leasing business, which contributed 98.8% of our total segment operating profit for the six months ended June 30, 2020.

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 March 31, 2020, we owned 32,515 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.

As of June 30, 2020, we owned 32,610 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.

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.

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, South America, Central America, Canada, and South Africa.

As of March 31, 2020, (1) no U.S.

As of June 30, 2020, (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 three months ended March 31, 2020.

In addition, as of March 31, 2020, approximately 30.5% 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, Sprint, Verizon Wireless, Oi S.A., Telefonica, Claro, and TIM.

state or territory accounted for more than 10% of our total revenues for the six months ended June 30, 2020.

In addition, as of June 30, 2020, approximately 30.4% of our total towers are located in Brazil and less than 4% 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 T-Mobile, AT&T, Verizon Wireless, 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.

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 Lease initial direct cost amortization.

Ground leases and other property interests provide for rent escalators which typically average 2-3% annually, or in our South American markets and South Africa, adjust in accordance with a standard cost of living index.

As of March 31, 2020, 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.

In the United States and our international markets, ground leases and other property interests are generally for an initial term of five years to 10 years with multiple renewal periods, at our option, and provide for rent escalators which typically average 2-3% annually, or in our South American markets and South Africa, adjust in accordance with a standard cost of living index.

As of June 30, 2020, approximately 71% 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.

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In Brazil, Canada, Chile, and South Africa significantly all of our revenue, expenses, and capital expenditures, including tenant leases, ground leases and other property interests, and other tower-related expenses are denominated in local currency.

In Colombia, Argentina, and Peru, our revenue, expenses, and

capital expenditures, including tenant leases, ground leases and other property interests, and other tower-related expenses are denominated in a mix of local currency and U.S.

In Colombia, Argentina, and Peru, our revenue, expenses, and capital expenditures, including tenant leases, ground leases and other property interests, and other tower-related expenses are denominated in a mix of local currency and U.S.

As indicated in the table below, our site leasing business generates substantially all of our total segment operating profit.

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For the three months ended

For the six months ended

Segment operating profit as a percentage of total

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Internationally, we lease tower space to all major service providers in South America, Central America, Canada, and South Africa.

Subsequent to March 31, 2020, T-Mobile finalized a merger with Sprint.

For the three months ended March 31, 2020, T-Mobile and Sprint represented 17.7% and 15.6% of our total revenue, respectively.

For the three months ended March 31, 2020, T-Mobile and Sprint represented 22.0% and 19.0% of our total domestic site leasing revenue, respectively, and 24.9% and 29.7% of our site development revenue.

On April 1, 2020, T-Mobile finalized a merger with Sprint and now operates as T-Mobile.

For the three months ended June 30, 2020, T-Mobile represented 40.4% of our total domestic site leasing revenue and 53.0% of our site development revenue.

For the six months ended June 30, 2020, T-Mobile represented 40.8% of our total domestic site leasing revenue and 53.8% of our site development revenue.

Capital Allocation Strategy

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COVID-19 Update

During the three months ended March 31, 2020, we experienced minimal impact to our business or results of operations from the coronavirus (COVID-19) pandemic.

During the six months ended June 30, 2020, we experienced minimal impact to our business or results of operations from the coronavirus (COVID-19) pandemic.

The extent to which COVID-19 could adversely affect our future business operations will depend on future developments such as the duration of the outbreak, new information on the severity of COVID-19, and methods taken to contain or treat the outbreak of COVID-19.

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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 March 31, 2020 Compared to Three Months Ended March 31, 2019

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 June 30, 2020 Compared to Three Months Ended June 30, 2019

Revenues and Segment Operating Profit:

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Site development

Domestic site leasing revenues increased $23.5 million for the three months ended March 31, 2020, as compared to the prior year, primarily due to (1) revenues from 200 towers acquired and 29 towers built since January 1, 2019 and (2) 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.

International site leasing revenues increased $16.7 million for the three months ended March 31, 2020, as compared to the prior year.

Domestic site leasing revenues increased $18.8 million for the three months ended June 30, 2020, as compared to the prior year, primarily due to (1) revenues from 180 towers acquired and 28 towers built since April 1, 2019 and (2) 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.

International site leasing revenues increased $4.6 million for the three months ended June 30, 2020, as compared to the prior year.

On a constant currency basis, international site leasing revenues increased $26.0 million.

These changes were primarily due to (1) revenues from 2,312 towers acquired and 443 towers built since January 1, 2019 and (2) organic site leasing growth from new leases, amendments, and contractual escalators.

These changes were primarily due to (1) revenues from 2,294 towers acquired and 451 towers built since April 1, 2019 and (2) organic site leasing growth from new leases, amendments, and contractual escalators.

Site leasing revenue in Brazil represented 10.8% of total site leasing revenue for the period.

No other individual international market represented more than 4% of our total site leasing revenue.

Site development revenues decreased $16.4 million for the three months ended March 31, 2020, as compared to prior year, as a result of decreased carrier activity driven primarily by Sprint and T-Mobile.

Site development revenues decreased $16.3 million for the three months ended June 30, 2020, as compared to prior year, as a result of decreased carrier activity driven primarily by T-Mobile and Sprint.

Operating Profit

Domestic site leasing segment operating profit increased $24.7 million for the three months ended March 31, 2020, as compared to the prior year, primarily due to additional profit generated by (1) towers acquired and built since January 1, 2019 and organic site leasing growth as noted above, (2) continued control of our site leasing cost of revenue, and (3) the positive impact of our ground lease purchase program.

International site leasing segment operating profit increased $12.4 million for the three months ended March 31, 2020, as compared to the prior year.

Domestic site leasing segment operating profit increased $20.3 million for the three months ended June 30, 2020, as compared to the prior year, primarily due to additional profit generated by (1) towers acquired and built since April 1, 2019 and organic site leasing growth as noted above, (2) continued control of our site leasing cost of revenue, and (3) the positive impact of our ground lease purchase program.

International site leasing segment operating profit increased $4.9 million for the three months ended June 30, 2020, as compared to the prior year.

On a constant currency basis, international site leasing segment operating profit increased $19.5 million.

These changes were primarily due to additional profit generated by (1) towers acquired and built since January 1, 2019 and organic site leasing growth as noted above, (2) continued control of our site leasing cost of revenue, and (3) the positive impact of our ground lease purchase program.

Site development segment operating profit decreased $5.0 million for the three months ended March 31, 2020, as compared to the prior year, as a result of decreased carrier activity driven primarily by Sprint and T-Mobile.

These changes were primarily due to additional profit generated by (1) towers acquired and built since April 1, 2019 and organic site leasing growth as noted above, (2) continued control of our site leasing cost of revenue, and (3) the positive impact of our ground lease purchase program.

Site development segment operating profit decreased $5.2 million for the three months ended June 30, 2020, as compared to the prior year, as a result of decreased carrier activity driven primarily by T-Mobile and Sprint.

Selling, General, and Administrative Expenses:

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Site development

Selling, general, and administrative expenses decreased $1.3 million for the three months ended March 31, 2020, as compared to the prior year.

Selling, general, and administrative expenses decreased $6.4 million for the three months ended June 30, 2020, as compared to the prior year.

On a constant currency basis, selling, general, and administrative expenses decreased $5.0 million.

These changes were primarily as a result of a decrease in noncash compensation due to the acceleration of unrecognized stock compensation expense in the prior year related to the adoption of the retirement plan.

This was partially offset by increases in personnel costs, benefits, and other support-related costs due in part to our continued international expansion.

These changes were primarily as a result of decreases in noncash compensation due to the acceleration of unrecognized stock compensation expense in the prior year related to the adoption of the retirement plan, back-office operating expenses, and travel related expenses.

These decreases were partially offset by increases in personnel and other support related costs due in part to our continued international expansion and charitable contributions related to COVID-19 relief.

Acquisition and New Business Initiatives Related Adjustments and Expenses:

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International site leasing

Acquisition and new business initiatives related adjustments and expenses increased $1.4 million for the three months ended March 31, 2020, as compared to the prior year.

Acquisition and new business initiatives related adjustments and expenses increased $2.1 million for the three months ended June 30, 2020, as compared to the prior year.

On a constant currency basis, acquisition and new business initiatives related adjustments and expenses increased $2.3 million.

7 unchanged sentences

International site leasing

Asset impairment and decommission costs increased $8.6 million for the three months ended March 31, 2020, as compared to the prior year.

This change was primarily as a result of a $7.7 million increase in impairment charges resulting from our regular analysis of whether the future cash flows from certain towers are adequate to recover the carrying value of the investment in those towers and a $0.9 million increase in the impairment charge recorded due to sites decommissioned in the first quarter of 2020 compared to the prior year period.

Asset impairment and decommission costs decreased $3.4 million for the three months ended June 30, 2020, as compared to the prior year.

On a constant currency basis, asset impairment and decommission costs decreased $3.1 million.

These changes were primarily as a result of a $4.5 million decrease in the impairment charge recorded due to sites decommissioned in the second quarter of 2020 compared to the prior year period, partially offset by a $1.1 million increase in impairment charges resulting from our regular analysis of whether the future cash flows from certain towers are adequate to recover the carrying value of the investment in those towers.

Depreciation, Accretion, and Amortization Expense:

7 unchanged sentences

Site development

Depreciation, accretion, and amortization expense increased $11.5 million for the three months ended March 31, 2020, as compared to the prior year.

Depreciation, accretion, and amortization expense increased $7.1 million for the three months ended June 30, 2020, as compared to the prior year.

On a constant currency basis, depreciation, accretion, and amortization expense increased $16.7 million.

These changes were primarily due to an increase in the number of towers we acquired and built since January 1, 2019, partially offset by the impact of assets that became fully depreciated since the prior year period.

These changes were primarily due to an increase in the number of towers we acquired and built since April 1, 2019, partially offset by the impact of assets that became fully depreciated since the prior year period.

Operating Income (Expense):

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Site development

Domestic site leasing operating income increased $13.6 million for the three months ended March 31, 2020, as compared to the prior year, primarily due to higher segment operating profit and a decrease in selling, general, and administrative expenses, partially offset by increases in asset impairment and decommission costs, depreciation, accretion, and amortization expense, and acquisition and new business initiatives related adjustments and expenses.

International site leasing operating income increased $1.4 million for the three months ended March 31, 2020, as compared to the prior year.

Domestic site leasing operating income increased $20.9 million for the three months ended June 30, 2020, as compared to the prior year, primarily due to higher segment operating profit and decreases in asset impairment and decommission costs and selling, general, and administrative expenses, partially offset by increases in depreciation, accretion, and amortization expense and acquisition and new business initiatives related adjustments and expenses.

International site leasing operating income decreased $0.1 million for the three months ended June 30, 2020, as compared to the prior year.

On a constant currency basis, international site leasing operating income increased $2.9 million.

These changes were primarily due to higher segment operating profit and a decrease in acquisition and new business initiatives related adjustments and expenses, partially offset by increases in depreciation, accretion, and amortization expense, selling, general, and administrative expenses, and asset impairment and decommission costs.

Site development operating income decreased $3.8 million for the three months ended March 31, 2020, as compared to the prior year, primarily due to lower segment operating profit, partially offset by a decrease in selling, general, and administrative expenses.

These changes were primarily due to higher segment operating profit, partially offset by increases in depreciation, accretion, and amortization expense, selling, general, and administrative expenses, acquisition and new business initiatives related adjustments and expenses, and asset impairment and decommission costs.

Site development operating income decreased $2.8 million for the three months ended June 30, 2020, as compared to the prior year, primarily due to lower segment operating profit driven by less activity from Sprint and T-Mobile, partially offset by a decrease in selling, general, and administrative expenses .

Other Income (Expense):

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Amortization of deferred financing fees

Loss from extinguishment of debt, net

Other expense, net

Interest expense decreased $2.8 million for the three months ended March 31, 2020, as compared to the prior year primarily due to a lower weighted average interest rate as compared to the prior year, partially offset by a higher average principal amount of cash-interest bearing debt outstanding as compared to the prior year.

Non-cash interest expense increased $1.8 million for the three months ended March 31, 2020, as compared to the prior year primarily related to amortization on our interest rate swaps de-designated as cash flow hedges.

Loss from extinguishment of debt was $16.9 million for the three months ended March 31, 2020 due to the payment of a $9.1 million call premium and the write-off of $7.7 million of the original issuance discount and financing fees related to the redemption of the 2014 Senior Notes.

Other expense, net includes a $230.1 million loss on the remeasurement of U.S.

dollar denominated intercompany loans with foreign subsidiaries as well as a $4.0 million net gain on the change in fair value related to interest rate swaps not designated as hedges for the three months ended March 31, 2020.

For the three months ended March 31, 2019, other expense, net included a $2.1 million loss on the remeasurement of U.S.

Other (expense) income, net

Interest expense decreased $1.8 million for the three months ended June 30, 2020, as compared to the prior year primarily due to a lower weighted average interest rate as compared to the prior year, partially offset by a higher average principal amount of cash-interest bearing debt outstanding as compared to the prior year.

Non-cash interest expense increased $1.7 million for the three months ended June 30, 2020, as compared to the prior year primarily related to amortization on our interest rate swaps de-designated as cash flow hedges.

Other (expense) income, net includes a $31.2 million loss on the remeasurement of U.S.

dollar denominated intercompany loans with foreign subsidiaries for the three months ended June 30, 2020.

For the three months ended June 30, 2019, other (expense) income, net included a $9.1 million gain on the remeasurement of U.S.

dollar denominated intercompany loans with foreign subsidiaries.

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Benefit (provision) for income taxes

Benefit for income taxes increased $76.7 million for the three months ended March 31, 2020, as compared to the prior year.

On a constant currency basis, provision for income taxes decreased primarily due to a decrease in the state current tax provision.

Net (Loss) Income:

Benefit for income taxes increased $15.8 million for the three months ended June 30, 2020, as compared to the prior year.

On a constant currency basis, provision for income taxes decreased $0.7 million primarily due to a decrease in domestic and foreign income taxes partially offset by an increase in foreign withholding taxes.

For the three months ended

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(in thousands)

Net income decreased $8.9 million for the three months ended June 30, 2020, as compared to the prior year.

This change was primarily due to fluctuations in foreign currency exchange rates including changes recorded on the remeasurement of the U.S.

dollar denominated intercompany loans with foreign subsidiaries, partially offset by increases in operating income and benefit for income taxes.

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

Revenues and Segment Operating Profit:

For the six months ended

Currency Impact

Currency Change

(in thousands)

Domestic site leasing

International site leasing

Site development

Cost of Revenues

Domestic site leasing

International site leasing

Site development

Operating Profit

Domestic site leasing

International site leasing

Site development

Domestic site leasing revenues increased $42.3 million for the six months ended June 30, 2020, as compared to the prior year, primarily due to (1) revenues from 208 towers acquired and 35 towers built since January 1, 2019 and (2) 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.

International site leasing revenues increased $21.2 million for the six months ended June 30, 2020, as compared to the prior year.

On a constant currency basis, international site leasing revenues increased $54.7 million.

These changes were primarily due to (1) revenues from 2,320 towers acquired and 516 towers built since January 1, 2019 and (2) organic site leasing growth from new leases, amendments, and contractual escalators.

Site leasing revenue in Brazil represented 11.8% of total site leasing revenue for the period.

No other individual international market represented more than 4% of our total site leasing revenue.

Site development revenues decreased $32.7 million for the six months ended June 30, 2020, as compared to prior year, as a result of decreased carrier activity driven primarily by T-Mobile and Sprint.

Operating Profit

Domestic site leasing segment operating profit increased $45.0 million for the six months ended June 30, 2020, as compared to the prior year, primarily due to additional profit generated by (1) towers acquired and built since January 1, 2019 and organic site leasing growth as noted above, (2) continued control of our site leasing cost of revenue, and (3) the positive impact of our ground lease purchase program.

International site leasing segment operating profit increased $17.3 million for the six months ended June 30, 2020, as compared to the prior year.

On a constant currency basis, international site leasing segment operating profit increased $40.0 million.

Site development segment operating profit decreased $10.3 million for the six months ended June 30, 2020, as compared to the prior year, as a result of decreased carrier activity driven primarily by T-Mobile and Sprint.

Selling, General, and Administrative Expenses:

For the six months ended

Currency Impact

Currency Change

(in thousands)

Domestic site leasing

International site leasing

Total site leasing

Site development

Selling, general, and administrative expenses decreased $7.8 million for the six months ended June 30, 2020, as compared to the prior year.

On a constant currency basis, selling, general, and administrative expenses decreased $5.9 million.

Acquisition and New Business Initiatives Related Adjustments and Expenses:

For the six months ended

Currency Impact

Currency Change

(in thousands)

Domestic site leasing

International site leasing

Acquisition and new business initiatives related adjustments and expenses increased $3.5 million for the six months ended June 30, 2020, as compared to the prior year.

On a constant currency basis, acquisition and new business initiatives related adjustments and expenses increased $3.8 million.

These changes were primarily as a result of incremental costs incurred in support of new business initiatives.

Asset Impairment and Decommission Costs:

For the six months ended

Currency Impact

Currency Change

(in thousands)

Domestic site leasing

International site leasing

Asset impairment and decommission costs increased $5.2 million for the six months ended June 30, 2020, as compared to the prior year.

On a constant currency basis, asset impairment and decommission costs increased $5.6 million.

These changes were primarily as a result of a $8.8 million increase in impairment charges resulting from our regular analysis of whether the future cash flows from certain towers are adequate to recover the carrying value of the investment in those towers, partially offset by a $3.6 million decrease in the impairment charge recorded due to sites decommissioned in the six months ended June 30, 2020 compared to the prior year period.

Depreciation, Accretion, and Amortization Expenses:

For the six months ended

Currency Impact

Currency Change

(in thousands)

Domestic site leasing

International site leasing

Total site leasing

Site development

Depreciation, accretion, and amortization expense increased $18.7 million for the six months ended June 30, 2020, as compared to the prior year.

On a constant currency basis, depreciation, accretion, and amortization expense increased $33.6 million.

Operating Income (Expense):

For the six months ended

Currency Impact

Currency Change

(in thousands)

Domestic site leasing

International site leasing

Total site leasing

Site development

Domestic site leasing operating income increased $34.5 million for the six months ended June 30, 2020, as compared to the prior year, primarily due to higher segment operating profit and a decrease in selling, general, and administrative expenses, partially offset by increases in depreciation, accretion, and amortization expense, asset impairment and decommission costs, and acquisition and new business initiatives related adjustments and expenses.

International site leasing operating income increased $1.4 million for the six months ended June 30, 2020, as compared to the prior year.

On a constant currency basis, international site leasing operating income increased $6.5 million.

These changes were primarily due to higher segment operating profit, partially offset by increases in depreciation, accretion, and amortization expense, selling, general, and administrative expenses, asset impairment and decommission costs, and acquisition and new business initiatives related adjustments and expenses.

Site development operating income decreased $6.6 million for the six months ended June 30, 2020, as compared to the prior year, primarily due to lower segment operating profit driven by less activity from Sprint and T-Mobile , partially offset by a decrease in selling, general, and administrative expenses .

Other Income (Expense):

For the six months ended

Currency Impact

Currency Change

(in thousands)

Interest income

Interest expense

Non-cash interest expense

Amortization of deferred financing fees

Loss from extinguishment of debt, net

Other (expense) income, net

Interest income decreased $1.8 million for the six months ended June 30, 2020, as compared to the prior year.

On a constant currency basis, interest income decreased $1.6 million.

These changes were primarily due to a lower amount of interest bearing domestic investments.

Interest expense decreased $4.6 million for the six months ended June 30, 2020, as compared to the prior year.

These changes were primarily due to a lower weighted average interest rate as compared to the prior year, partially offset by a higher average principal amount of cash-interest bearing debt outstanding as compared to the prior year.

Non-cash interest expense increased $3.5 million for the six months ended June 30, 2020, as compared to the prior year primarily related to amortization on our interest rate swaps de-designated as cash flow hedges.

Loss from extinguishment of debt was $16.9 million for the six months ended June 30, 2020 due to the payment of a $9.1 million call premium and the write-off of $7.7 million of the original issuance discount and financing fees related to the redemption of the 2014 Senior Notes.

Other (expense) income, net includes a $261.3 million loss on the remeasurement of U.S.

dollar denominated intercompany loans with foreign subsidiaries as well as a $3.2 million net gain on the change in fair value related to interest rate swaps not designated as hedges for the six months ended June 30, 2020.

Other (expense) income, net includes a $7.0 million gain on the remeasurement of U.S.

dollar denominated intercompany loans with foreign subsidiaries for the six months ended June 30, 2019.

Benefit (Provision) for Income Taxes:

For the six months ended

Currency Impact

Currency Change

(in thousands)

Benefit (provision) for income taxes

Benefit for income taxes increased $92.5 million for the six months ended June 30, 2020, as compared to the prior year.

On a constant currency basis, provision for income taxes decreased $2.4 million primarily due to a decrease in domestic and foreign income taxes partially offset by an increase in foreign withholding taxes.

Net (Loss) Income:

Net income decreased $153.9 million for the three months ended March 31, 2020, as compared to the prior year.

On a constant currency basis, net income increased primarily due to an increase in operating income and decreases in interest expense and provision for income taxes, partially offset by a loss from extinguishment of debt in the current year period.

For the six months ended

Currency Impact

Currency Change

(in thousands)

Net (loss) income

Net loss was $104.8 million for the six months ended June 30, 2020, as compared to net income of $58.0 million in the prior year period.

This change was primarily due to fluctuations in foreign currency exchange rates including changes recorded on the remeasurement of the U.S.

dollar denominated intercompany loans with foreign subsidiaries and a loss from extinguishment of debt in the current year period, partially offset by increases in operating income and benefit for income taxes.

NON-GAAP FINANCIAL MEASURES

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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.

This report also presents our financial results and other financial metrics after eliminating the impact of changes in foreign currency exchange rates.

12 unchanged sentences

(in thousands)

Non-cash straight-line leasing revenue

Non-cash straight-line ground lease expense

Non-cash compensation

Other expense (income), net

Acquisition and new business initiatives

related adjustments and expenses

Asset impairment and decommission costs

Interest income

Total interest expense (1)

Depreciation, accretion, and amortization

(Benefit) provision for income taxes (2)

Adjusted EBITDA

For the six months ended

Currency Impact

Currency Change

(in thousands)

Net (loss) income

3 unchanged sentences

Loss from extinguishment of debt, net

Other (income) expense, net

Other expense (income), net

Acquisition and new business initiatives

7 unchanged sentences

(1) Total interest expense includes interest expense, non-cash interest expense, and amortization of deferred financing fees.

(2) Provision for taxes includes $227 and $197 of franchise taxes for the three months ended March 31, 2020 and 2019, respectively, reflected in selling, general, and administrative expenses on the Consolidated Statements of Operations.

Adjusted EBITDA increased $24.4 million for the three months ended March 31, 2020, as compared to the prior year period.

(2) (Benefit) provision for taxes includes $220 and $200 of franchise taxes for the three months ended June 30, 2020 and 2019, respectively, and $447 and $396 of franchise taxes for the six months ended June 30, 2020 and 2019, respectively, reflected in selling, general, and administrative expenses on the Consolidated Statements of Operations.

Adjusted EBITDA increased $21.5 million for the three months ended June 30, 2020, as compared to the prior year period.

On a constant currency basis, Adjusted EBITDA increased $35.0 million.

These changes were primarily due to an increase in segment operating profit, partially offset by an increase in cash selling, general, and administrative expenses.

These changes were primarily due to an increase in site leasing segment operating profit, partially offset by a decrease in site development segment operating profit.

Adjusted EBITDA increased $45.9 million for the six months ended June 30, 2020, as compared to the prior year period.

On a constant currency basis, Adjusted EBITDA increased $67.4 million.

These changes were primarily due to an increase in site leasing segment operating profit, partially offset by a decrease in site development segment operating profit and an increase in cash selling, general, and administrative expenses.

LIQUIDITY AND CAPITAL RESOURCES

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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.

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 three months ended

March 31, 2020

March 31, 2019

For the six months ended

June 30, 2020

June 30, 2019

(in thousands)

7 unchanged sentences

Operating Activities

Cash provided by operating activities was $277.7 million for the three months ended March 31, 2020 as compared to $222.7 million for the three months ended March 31, 2019.

The increase was primarily due to an increase in segment operating profit and an increase in cash inflows associated with working capital changes, partially offset by an increase in cash selling, general, and administrative expenses and lower interest income earned on interest bearing deposits.

Cash provided by operating activities was $592.4 million for the six months ended June 30, 2020 as compared to $466.1 million for the six months ended June 30, 2019.

The increase was primarily due to increases in site leasing segment operating profit and cash inflows associated with working capital changes primarily from timing of customer payments, partially offset by a decrease in site development segment operating profit and an increase in cash selling, general, and administrative expenses.

Investing Activities

A detail of our investing activities is as follows:

For the three months ended March 31,

For the six months ended June 30,

(in thousands)

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General corporate

Net purchases of investments

Other investing activities

Net cash used in investing activities

(1) Excludes $1.7 million and $3.8 million spent to extend ground lease terms for the three months ended March 31, 2020 and 2019, respectively.

Subsequent to March 31, 2020, we have purchased or agreed to purchase 137 additional communication sites for an aggregate amount of $52.0 million.

(1) Excludes $3.6 million and $6.7 million spent to extend ground lease terms for the six months ended June 30, 2020 and 2019, respectively.

Subsequent to June 30, 2020, we acquired 25 towers and related assets and one data center for $61.6 million in cash.

In addition, we agreed to purchase 100 additional sites for $42.0 million.

For 2020, we expect to incur non-discretionary cash capital expenditures associated with tower maintenance and general corporate expenditures of $31.0 million to $41.0 million and discretionary cash capital expenditures, based on current or potential acquisition obligations, planned new tower construction, forecasted tower augmentations, and forecasted ground lease purchases, of $325.0 million to $345.0 million.

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.

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

A detail of our financing activities is as follows:

For the three months ended

March 31, 2020

March 31, 2019

For the six months ended

June 30, 2020

June 30, 2019

(in thousands)

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Repayment of Senior Notes (1)

Proceeds from employee stock purchase/stock option plans

Payments related to stock option net share settlements

Proceeds from employee stock purchase/stock option plans, net of taxes

Repurchase and retirement of common stock (2)

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Net cash used in financing activities

(1) For additional information regarding our debt offerings, refer to the Debt Instruments and Debt Service Requirements below.

(2) During the three months ended March 31, 2020, we repurchased 0.8 million shares of our Class A common stock for $200.0 million, at an average price per share of $242.86.

(1) For additional information regarding our debt instruments and financings, refer to the Debt Instruments and Debt Service Requirements below.

(2) During the six months ended June 30, 2020, we repurchased 0.8 million shares of our Class A common stock for $200.0 million, at an average price per share of $242.86.

Shares repurchased were retired.

As of the date of this filing, the Company had $424.3 million of authorization remaining under the current stock repurchase plan.

For additional information, refer to Item 2.

Issuer Purchases of Equity Securities.

For the three months ended March 31, 2020, we paid the following cash dividend:

As of the date of this filing, we had $424.3 million of authorization remaining under the current stock repurchase plan.

For the six months ended June 30, 2020, we paid the following cash dividends:

Payable to Shareholders

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March 26, 2020

Subsequent to March 31, 2020, we declared the following cash dividend:

$52.0 million

June 18, 2020

Subsequent to June 30, 2020, we declared the following cash dividends:

Payable to Shareholders

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Date to be Paid

June 18, 2020

August 3, 2020

August 25, 2020

September 22, 2020

The amount of future distributions will be determined, from time to time, by our Board of Directors to balance our goal of increasing long-term shareholder value and retaining sufficient cash to implement our current capital allocation policy, which prioritizes investment in quality assets that meet our return criteria, and then stock repurchases when we believe our stock price is below its intrinsic value.

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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 three months ended March 31, 2020, we did not issue any shares of Class A common stock under this registration statement.

As of March 31, 2020, we had approximately 1.2 million shares of Class A common stock remaining under this shelf registration statement.

During the six months ended June 30, 2020, we did not issue any shares of Class A common stock under this registration statement.

As of June 30, 2020, we had approximately 1.2 million shares of Class A common stock remaining under this shelf registration statement.

On March 5, 2018, 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.

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.

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Consequently, the amount outstanding under the Revolving Credit Facility at the end of the period may not be reflective of the total amounts outstanding during such period.

During the three months ended March 31, 2020, we borrowed $500.0 million and repaid $505.0 million of the outstanding balance under the Revolving Credit Facility.

As of March 31, 2020, the balance outstanding under the Revolving Credit Facility was $485.0 million accruing interest at 2.206% per annum.

During the three months ended June 30, 2020, we borrowed $15.0 million and repaid $500.0 million of the outstanding balance under the Revolving Credit Facility.

During the six months ended June 30, 2020, we borrowed $515.0 million and repaid $1.0 billion of the outstanding balance under the Revolving Credit Facility.

As of June 30, 2020, we had no amount outstanding under the $1.25 billion Revolving Credit Facility.

In addition, SBA Senior Finance II was required to pay a commitment fee of 0.25% per annum on the amount of the unused commitment.

As of March 31, 2020, SBA Senior Finance II was in compliance with the financial covenants contained in the Senior Credit Agreement.

Subsequent to March 31, 2020, we borrowed $15.0 million and repaid $120.0 million of the outstanding balance under the Revolving Credit Facility.

As of the date of this filing, $380.0 million was outstanding under the Revolving Credit Facility.

As of June 30, 2020, SBA Senior Finance II was in compliance with the financial covenants contained in the Senior Credit Agreement.

As of the date of this filing, we had no amount outstanding under the Revolving Credit Facility.

Term Loan under the Senior Credit Agreement

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The 2018 Term Loan accrues interest, at SBA Senior Finance II’s election at either the Base Rate plus 75 basis points (with a zero Base Rate floor) or the Eurodollar Rate plus 175 basis points (with a zero Eurodollar Rate floor).

As of March 31, 2020, the 2018 Term Loan was accruing interest at 2.74% per annum.

As of June 30, 2020, the 2018 Term Loan was accruing interest at 1.93% per annum.

Principal payments on the 2018 Term Loan are being made in quarterly installments on the last day of each March, June, September, and December in an amount equal to $6.0 million.

During the three months ended March 31, 2020, we repaid an aggregate of $6.0 million of principal on the 2018 Term Loan.

As of March 31, 2020, the 2018 Term Loan had a principal balance of $2.4 billion.

During the three and six months ended June 30, 2020, we repaid an aggregate of $6.0 million and $12.0 million of principal on the 2018 Term Loan, respectively.

As of June 30, 2020, the 2018 Term Loan had a principal balance of $2.4 billion.

On December 3, 2019, we, through our wholly owned subsidiary, SBA Senior Finance II LLC, entered into a series of interest rate swaps on a portion of our 2018 Term Loan.

As a result, we swapped $1.95 billion of notional value receiving interest at one month LIBOR plus 175 basis points for a fixed rate of 3.78% per annum settled monthly through the maturity date of the 2018 Term Loan.

On August 6, 2020, we, through our wholly owned subsidiary, SBA Senior Finance II LLC, terminated interest rate swaps entered into in 2019 in exchange for a payment of $176.2 million.

On the same date, we entered into an interest rate swap with $1.95 billion of notional value receiving interest at one month LIBOR for a fixed rate of 0.1239% per annum settled monthly through the maturity date of the 2018 Term Loan.

Secured Tower Revenue Securities

As of March 31, 2020, we, through a New York common law trust (the “Trust”), had issued and outstanding an aggregate of $5.0 billion of Secured Tower Revenue Securities (“Tower Securities”).

The sole asset of the Trust consists of a non-recourse mortgage loan made in favor of certain of our subsidiaries that are borrowers on the mortgage loan (the “Borrowers”) under which there is a loan tranche for each Tower Security outstanding with the same interest rate and maturity date as the corresponding Tower Security.

As of June 30, 2020, we, through a New York common law trust (the “Trust”), had issued and outstanding an aggregate of $5.0 billion of Secured Tower Revenue Securities (“Tower Securities”).

The sole asset of the Trust consists of a non-recourse

mortgage loan made in favor of certain of our subsidiaries that are borrowers on the mortgage loan (the “Borrowers”) under which there is a loan tranche for each Tower Security outstanding with the same interest rate and maturity date as the corresponding Tower Security.

The mortgage loan is secured by (1) mortgages, deeds of trust, and deeds to secure debt on a substantial portion of the tower sites, (2) a security interest in the tower sites and substantially all of the Borrowers’ personal property and fixtures, (3) the Borrowers’ rights under certain tenant leases, and (4) all of the proceeds of the foregoing.

For each calendar month, SBA Network Management,

Inc., an indirect subsidiary (“Network Management”), is entitled to receive a management fee equal to 4.5% of the Borrowers’ operating revenues for the immediately preceding calendar month.

For each calendar month, SBA Network Management, Inc., an indirect subsidiary (“Network Management”), is entitled to receive a management fee equal to 4.5% of the Borrowers’ operating revenues for the immediately preceding calendar month.

The table below sets forth the material terms of our outstanding Tower Securities:

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$1.165 billion

As of March 31, 2020, 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.

(1) On July 14, 2020, we repaid the entire aggregate principal amounts of the 2015-1C Tower Securities and the 2016-1C Tower Securities in connection with the issuance of the 2020 Tower Securities (as defined below).

As of June 30, 2020, 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.

On July 14, 2020, we, through the Trust, issued $750.0 million of 1.884% Secured Tower Revenue Securities Series 2020-1C which have an anticipated repayment date of January 9, 2026 and a final maturity date of July 11, 2050 (the “2020-1C Tower Securities”) and $600.0 million of 2.328% Secured Tower Revenue Securities Series 2020-2C which have an anticipated repayment date of January 11, 2028 and a final maturity date of July 9, 2052 (the “2020-2C Tower Securities”) (collectively the “2020 Tower Securities”).

The aggregate $1.35 billion of 2020 Tower Securities have a blended interest rate of 2.081% and a weighted average life through the anticipated repayment date of 6.4 years.

Net proceeds from this offering were used to repay the entire aggregate principal amount of the 2015-1C Tower Securities ($500.0 million) and the 2016-1C Tower Securities ($700.0 million).

The remaining net proceeds of the 2020 Tower Securities were used for general corporate purposes.

We have incurred deferred financing fees of $13.6 million to date in relation to this transaction which are being amortized through the anticipated repayment date of the 2020 Tower Securities.

Risk Retention Tower Securities

In addition, to satisfy certain risk retention requirements of Regulation RR promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), SBA Guarantor, LLC, a wholly owned subsidiary, purchased (1) $40.0 million of Secured Tower Revenue Securities Series 2017-1R (the “2017-1R Tower Securities”) issued by the Trust with a fixed interest rate of 4.459% per annum, payable monthly, and with the same anticipated repayment date and final maturity date as the 2017-1C Tower Securities, (2) $33.7 million of Secured Tower Revenue Securities Series 2018-1R (the “2018-1R Tower Securities”) issued by the Trust with a fixed interest rate of 4.949% per annum, payable monthly, and with the same anticipated repayment date and final maturity date as the 2018-1C Tower Securities, and (3) $61.4 million of Secured Tower Revenue Securities Series 2019-1R (the “2019-1R Tower Securities”) issued by the Trust with a fixed interest rate of 4.213% per annum, payable monthly, and with the same anticipated repayment date and final maturity date as the 2019-1C Tower Securities.

Principal and interest payments made on the 2017-1R Tower Securities, 2018-1R Tower Securities and 2019-1R Tower Securities eliminate in consolidation.

In addition, to satisfy certain risk retention requirements of Regulation RR promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), SBA Guarantor, LLC, a wholly owned subsidiary, purchased (1) $40.0 million of Secured Tower Revenue Securities Series 2017-1R (the “2017-1R Tower Securities”) issued by the Trust with a fixed interest rate of 4.459% per annum, payable monthly, and with the same anticipated repayment date and final maturity date as the 2017-1C Tower Securities, (2) $33.7 million of Secured Tower Revenue Securities Series 2018-1R (the “2018-1R Tower Securities”) issued by the Trust with a fixed interest rate of 4.949% per annum, payable monthly, and with the same anticipated repayment date and final maturity date as the 2018-1C Tower Securities, (3) $61.4 million of Secured Tower Revenue Securities Series 2019-1R (the “2019-1R Tower Securities”) issued by the Trust with a fixed interest rate of 4.213% per annum, payable monthly, and with the same anticipated repayment date and final maturity date as the 2019-1C Tower Securities, and (4) $71.1 million of Secured Tower Revenue Securities Series 2020-2R (the “2020-2R Tower Securities”) issued by the Trust with a fixed interest rate of 4.336% per annum, payable monthly, and with the same anticipated repayment date and final maturity date as the 2020-2C Tower Securities.

Principal and interest payments made on the 2017-1R Tower Securities, 2018-1R Tower Securities, 2019-1R Tower Securities, and 2020-2R Tower Securities eliminate in consolidation.

The table below sets forth the material terms of our outstanding senior notes:

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2016 Senior Notes

2017 Senior Notes

$750.0 million

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$500.0 million

2020 Senior Notes (2)

(1) On February 20, 2020, we redeemed the entire $750.0 million balance on the 2014 Senior Notes with proceeds from the 2020 Senior Notes (defined below).

(1) On February 4, 2020, we issued $1.0 billion of unsecured senior notes at par value (the “2020-1 Senior Notes”), and on May 26, 2020, we issued $500.0 million of additional unsecured senior notes under the same indenture at 99.500% of par value (the “2020-2 Senior Notes”) (collectively, the “2020 Senior Notes”).

Net proceeds from these offerings were used to redeem the entire $750.0 million outstanding principal amount of the 2014 Senior Notes, repay amounts outstanding under the Revolving Credit Facility, and for general corporate purposes.

In addition, we paid a $9.1 million call premium and expensed $7.7 million for the write-off of the original issue discount and financing fees related to the redemption of the 2014 Senior Notes which are reflected in loss from extinguishment of debt on the Consolidated Statement of Operations.

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We incurred financing fees of $17.3 million to date in relation to this transaction, which are being amortized through the maturity date.

Net proceeds from this offering were used to redeem all of the outstanding principal amount of the 2014 Senior Notes and repay a portion of the amount outstanding under the Revolving Credit Facility.

The 2020 Senior Notes are subject to redemption in whole or in part on or after February 15, 2023 at the redemption prices set forth in the indenture agreement plus accrued and unpaid interest.

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We may redeem each of the senior notes during the time periods and at the redemption prices set forth in the indentures.

As of March 31, 2020, 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 next twelve months based on the amounts outstanding as of March 31, 2020 and the interest rates accruing on those amounts on such date (in thousands):

As of June 30, 2020, 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 next twelve months based on the amounts outstanding as of June 30, 2020 and the interest rates accruing on those amounts on such date (in thousands):

Revolving Credit Facility

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Total debt service for the next 12 months (3)

(1) Total debt service on the 2018 Term Loan includes the impact of interest rate swaps entered into in 2019 which swapped $1.95 billion of notional value accruing interest at one month LIBOR plus 175 basis points for a fixed rate of 3.78% per annum through the maturity date of the 2018 Term Loan.

annum through the maturity date of the 2018 Term Loan.

Total debt service on the 2018 Term Loan excludes the impact of the interest rate swap entered into on August 6, 2020.

(2) The anticipated repayment date and the final maturity date for the 2015-1C Tower Securities is October 8, 2020 and October 10, 2045, respectively.

Interest expense included above is through the anticipated repayment date.

(3) Total debt service excludes interest payments on the $1.35 billion 2020 Tower Securities issued July 14, 2020, proceeds from which were used to repay the entire aggregate principal amount of the 2015-1C Tower Securities ($500.0 million) and the 2016-1C Tower Securities ($700.0 million).

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 2. Management’s Discussion and Analysis