What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-05-06 compared with 2020-11-05 · 121 added, 317 removed, 313 unchanged (58% of the section changed)

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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 98.6% of our total segment operating profit for the nine months ended September 30, 2020.

Our primary business line is our site leasing business, which contributed 97.8% of our total segment operating profit for the three months ended March 31, 2021.

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, 2020, we owned 32,724 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 March 31, 2021, we owned 33,711 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 September 30, 2020, (1) no U.S.

As of March 31, 2021, no U.S.

state or territory accounted for more than 10% of our total tower portfolio by tower count, and no U.S.

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

In addition, as of September 30, 2020, approximately 30% 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.

state or territory accounted for more than 10% of our total revenues for the three months ended March 31, 2021.

In addition, as of March 31, 2021, approximately 30% 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, Tigo, 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 years to 10 years with multiple five year renewal periods at the option of the tenant.

In the United States and Canada, our tenant leases are generally for an initial term of five years to 10 years with multiple 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 South Africa and our Central and South American markets typically have an initial term of 10 years with multiple five year renewal periods.

Tenant leases in South Africa and our Central and South American markets typically have an initial term of 10 years with multiple 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 and South Africa escalate in accordance with a standard cost of living index.

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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 September 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.

As of March 31, 2021, 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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For the three months ended

For the nine months ended

September 30,

Segment operating profit as a percentage of total

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For information regarding our operating segments, see Note 14 of our condensed notes to consolidated financial statements in this quarterly report.

We lease tower space to and perform site development services for all of the large U.S.

wireless service providers.

In both our site leasing and site development businesses, we work with large national providers and smaller regional, local, or private operators.

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

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

For the three months ended September 30, 2020, T-Mobile represented 40.2% of our total domestic site leasing revenue and 67.6% of our site development revenue.

For the nine months ended September 30, 2020, T-Mobile represented 40.6% of our total domestic site leasing revenue and 59.7% of our site development revenue.

Capital Allocation Strategy

Our capital allocation strategy is aimed at increasing shareholder value through investment in quality assets that meet our return criteria, stock repurchases when we believe our stock price is below its intrinsic value, and by returning cash generated by our operations in the form of cash dividends.

While the addition of a cash dividend to our capital allocation strategy has provided us with a new tool to return value to our shareholders, we will also continue to make investments focused on increasing Adjusted Funds From Operations per share.

While the addition of a cash dividend to our capital allocation strategy in 2019 has provided us with a new tool to return value to our shareholders, we will also continue to make investments focused on increasing Adjusted Funds From Operations per share.

To achieve this, we expect to continue to deploy capital to portfolio growth and stock repurchases, subject to compliance with REIT distribution requirements, available funds and market conditions, while maintaining our target leverage levels.

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We believe that share repurchases, when purchased at the right price, will facilitate our goal of increasing our Adjusted Funds From Operations per share.

In 2019, we added dividends as an additional component of our strategy of returning value to shareholders.

Cash di vidends are an additional component of our strategy of returning value to shareholders.

We do not expect our dividend to require any changes in our leverage and, we believe, it will allow us to continue to focus on building and buying quality assets and opportunistically buying back our stock.

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COVID-19 Update

During the nine months ended September 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.

While the full impact of COVID-19 is not yet known, we will continue to monitor this recent outbreak and the potential effects on our business.

For more information regarding COVID-19, refer to Item 1A.

Risk Factors.

We have 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 or its variants, and methods taken to contain or treat the outbreak of COVID-19 including a vaccine distribution program.

While the full impact of COVID-19 is not yet known, we will continue to monitor these developments and the potential effects on our business.

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.

We have identified the policies and significant estimation processes listed below and in our 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.

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There can be no assurance that actual results will not differ from those estimates and such differences could be significant.

Reference Rate Reform

ASU 2020-04 and ASU 2021-01, Reference Rate Reform, provide optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship.

An entity may elect to apply the amendments prospectively through December 31, 2022.

The ICE Benchmark Administration Limited (“IBA”) intends to cease the publication of USD LIBOR as follows:

the 1 week and 2 month tenors on December 31, 2021 and all other tenors on June 30, 2023.

As of March 31, 2021, we have not modified any contracts as a result of reference rate reform and are evaluating the impact this standard may have on our consolidated financial statements.

RESULTS OF OPERATIONS

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

Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020

Revenues and Segment Operating Profit:

For the three months ended

September 30,

Currency Impact

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Site development

Domestic site leasing revenues increased $16.3 million for the three months ended September 30, 2020, as compared to the prior year, primarily due to (1) revenues from 120 towers acquired and 21 towers built since July 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 $1.9 million for the three months ended September 30, 2020, as compared to the prior year.

Domestic site leasing revenues increased $17.2 million for the three months ended March 31, 2021, as compared to the prior year, primarily due to (1) revenues from 858 towers acquired (including wireless tenant licenses on 697 utility transmission structures from the PG&E transaction) and built since January 1, 2020 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 decreased $4.5 million for the three months ended March 31, 2021, as compared to the prior year.

On a constant currency basis, international site leasing revenues increased $8.1 million.

These changes were primarily due to (1) revenues from 2,316 towers acquired (including 1,313 and 911 towers acquired in Brazil and South Africa, respectively) and 446 towers built since July 1, 2019 and (2) organic site leasing growth from new leases, amendments, and contractual escalators.

These changes were primarily due to (1) revenues from 106 towers acquired and 356 towers built since January 1, 2020 and (2) organic site leasing growth from new leases, amendments, and contractual escalators.

Site leasing revenue in Brazil represented 11.0% 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 $2.8 million for the three months ended September 30, 2020, as compared to prior year, as a result of decreased carrier activity driven primarily by T-Mobile and Sprint.

Site development revenues increased $18.9 million for the three months ended March 31, 2021, as compared to prior year, as a result of increased carrier activity driven primarily by T-Mobile.

Operating Profit

Domestic site leasing segment operating profit increased $15.9 million for the three months ended September 30, 2020, as compared to the prior year, primarily due to additional profit generated by (1) towers acquired and built since July 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 $2.6 million for the three months ended September 30, 2020, as compared to the prior year.

Domestic site leasing segment operating profit increased $16.0 million for the three months ended March 31, 2021, as compared to the prior year, primarily due to additional profit generated by (1) towers acquired and built since January 1, 2020 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 decreased $2.8 million for the three months ended March 31, 2021, as compared to the prior year.

On a constant currency basis, international site leasing segment operating profit increased $5.5 million.

These changes were primarily due to additional profit generated by (1) towers acquired and built since July 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 $1.1 million for the three months ended September 30, 2020, as compared to the prior year, as a result of decreased carrier activity driven primarily by T-Mobile and Sprint.

These changes were primarily due to additional profit generated by (1) towers acquired and built since January 1, 2020 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 increased $4.2 million for the three months ended March 31, 2021, as compared to the prior year, as a result of increased carrier activity driven primarily by T-Mobile.

Selling, General, and Administrative Expenses:

For the three months ended

September 30,

Currency Impact

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Site development

Selling, general, and administrative expenses increased $5.9 million for the three months ended September 30, 2020, as compared to the prior year.

Selling, general, and administrative expenses increased $2.0 million for the three months ended March 31, 2021, as compared to the prior year.

On a constant currency basis, selling, general, and administrative expenses increased $2.3 million.

These changes were primarily as a result of increases in noncash compensation, personnel and other support related costs due in part to our continued international expansion and charitable contributions related to COVID-19 relief, and back-office operating expenses, partially offset by a decrease in travel related expenses.

These changes were primarily as a result of an increase in noncash compensation, partially offset by decreases in personnel and other support related costs as well as travel related expenses.

Acquisition and New Business Initiatives Related Adjustments and Expenses:

For the three months ended

September 30,

Currency Impact

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For the three months ended

September 30,

Currency Impact

3 unchanged sentences

International site leasing

Asset impairment and decommission costs increased $0.3 million for the three months ended September 30, 2020, as compared to the prior year.

On a constant currency basis, asset impairment and decommission costs increased $0.8 million.

These changes were primarily as a result of a $1.4 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 $1.1 million decrease in the impairment charge related to sites decommissioned in the third quarter of 2020 compared to the prior year period.

Asset impairment and decommission costs decreased $9.5 million for the three months ended March 31, 2021, as compared to the prior year.

This change was primarily as a result of a $7.9 million decrease 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 $1.6 million decrease in the impairment charge related to sites decommissioned in the first quarter of 2021 compared to the prior year period.

Depreciation, Accretion, and Amortization Expense:

For the three months ended

September 30,

Currency Impact

5 unchanged sentences

Site development

Depreciation, accretion, and amortization expense increased $5.3 million for the three months ended September 30, 2020, as compared to the prior year.

Depreciation, accretion, and amortization expense increased $1.3 million for the three months ended March 31, 2021, as compared to the prior year.

On a constant currency basis, depreciation, accretion, and amortization expense increased $6.6 million.

These changes were primarily due to an increase in the number of towers we acquired and built since July 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 January 1, 2020, partially offset by the impact of assets that became fully depreciated since the prior year period.

Operating Income (Expense):

For the three months ended

September 30,

Currency Impact

5 unchanged sentences

Site development

Domestic site leasing operating income increased $9.7 million for the three months ended September 30, 2020, as compared to the prior year, primarily due to higher segment operating profit, partially offset by increases in selling, general, and administrative expenses and depreciation, accretion, and amortization expense.

International site leasing operating income did not change significantly on an actual basis for the three months ended September 30, 2020, as compared to the prior year.

Domestic site leasing operating income increased $18.3 million for the three months ended March 31, 2021, as compared to the prior year, primarily due to higher segment operating profit and a decrease in asset impairment and decommission costs, partially offset by increases in depreciation, accretion, amortization expense, acquisition and new business initiatives related adjustments and expenses, and selling, general, and administrative expenses.

International site leasing operating income increased $2.9 million for the three months ended March 31, 2021, as compared to the prior year.

On a constant currency basis, international site leasing operating income increased $5.6 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, and asset impairment and decommission costs.

Site development operating income decreased $1.3 million for the three months ended September 30, 2020, as compared to the prior year, primarily due to lower segment operating profit driven by less activity from T-Mobile and Sprint and an increase in selling, general, and administrative expenses .

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

Site development operating income increased $1.4 million for the three months ended March 31, 2021, as compared to the prior year, primarily due to higher segment operating profit driven by more activity from T-Mobile, partially offset by an increase in selling, general, and administrative expenses .

Other Income (Expense):

For the three months ended

September 30,

Currency Impact

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Other expense, net

Interest expense decreased $6.8 million for the three months ended September 30, 2020, as compared to the prior year primarily due to a lower weighted average interest rate due in part to the new interest rate swap entered into during the third quarter of 2020, partially offset by a higher average principal amount of cash-interest bearing debt outstanding.

Non-cash interest expense increased $7.7 million for the three months ended September 30, 2020, as compared to the prior year primarily related to amortization of accumulated losses related to our interest rate swaps de-designated as cash flow hedges.

Loss from extinguishment of debt was $2.6 million for the three months ended September 30, 2020 representing the write-off of unamortized financing fees related to the repayment of the 2015-1C and 2016-1C Tower Securities.

Other expense, net includes a $38.6 million loss on the remeasurement of U.S.

dollar denominated intercompany loans with foreign subsidiaries for the three months ended September 30, 2020, while the prior year period included a $31.9 million loss.

Benefit (Provision) for Income Taxes:

Interest expense decreased $5.8 million for the three months ended March 31, 2021, as compared to the prior year primarily due to a lower weighted average interest rate due in part to the interest rate swap entered into during the third quarter of 2020, partially offset by a higher average principal amount of cash-interest bearing debt outstanding.

Non-cash interest expense increased $9.4 million for the three months ended March 31, 2021, as compared to the prior year primarily related to amortization of accumulated losses related to our interest rate swaps de-designated as cash flow hedges.

Loss from extinguishment of debt was $11.7 million for the three months ended March 31, 2021 representing the payment of a $7.5 million call premium and the write-off of $4.2 million of unamortized financing fees related to the repayment of the 2017 Senior Notes.

Loss from extinguishment of debt was $16.9 million for the three months ended March 31, 2020 representing 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 an $86.3 million loss on the remeasurement of U.S.

dollar denominated intercompany loans with foreign subsidiaries for the three months ended March 31, 2021, while the prior year period included a $230.1 million loss.

Benefit for Income Taxes:

For the three months ended

September 30,

Currency Impact

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(in thousands)

Benefit (provision) for income taxes

Benefit for income taxes increased $6.4 million for the three months ended September 30, 2020, as compared to the prior year.

On a constant currency basis, benefit for income taxes increased $3.7 million primarily due to a decrease in domestic and foreign withholding taxes, partially offset by an increase in foreign income taxes.

Benefit for income taxes

For the three months ended

September 30,

Currency Impact

1 unchanged sentence

(in thousands)

Net income increased $0.9 million for the three months ended September 30, 2020, as compared to the prior year.

On a constant currency basis, net income increased $7.9 million.

This change was primarily due to increases in operating income and benefit for income taxes and a decrease in cash interest expense related to the interest rate swaps, partially offset by increases in non-cash interest expense related to the interest rate swap and loss from extinguishment of debt.

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

Revenues and Segment Operating Profit:

For the nine months ended

September 30,

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 $58.6 million for the nine months ended September 30, 2020, as compared to the prior year, primarily due to (1) revenues from 230 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 $23.2 million for the nine months ended September 30, 2020, as compared to the prior year.

On a constant currency basis, international site leasing revenues increased $76.8 million.

These changes were primarily due to (1) revenues from 2,342 towers acquired and 591 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 11.5% 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 $35.5 million for the nine months ended September 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 $60.9 million for the nine months ended September 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 $19.9 million for the nine months ended September 30, 2020, as compared to the prior year.

On a constant currency basis, international site leasing segment operating profit increased $56.1 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 $11.3 million for the nine months ended September 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 nine months ended

September 30,

Currency Impact

Currency Change

(in thousands)

Domestic site leasing

International site leasing

Total site leasing

Site development

Selling, general, and administrative expenses decreased $1.9 million for the nine months ended September 30, 2020, as compared to the prior year.

On a constant currency basis, selling, general, and administrative expenses increased $1.2 million.

These changes were primarily as a result of increases in personnel and other support related costs due in part to our continued international expansion and charitable contributions related to COVID-19 relief, partially offset by 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, travel related expenses, and back-office operating expenses.

Acquisition and New Business Initiatives Related Adjustments and Expenses:

For the nine months ended

September 30,

Currency Impact

Currency Change

(in thousands)

Domestic site leasing

International site leasing

Acquisition and new business initiatives related adjustments and expenses increased $2.9 million for the nine months ended September 30, 2020, as compared to the prior year.

On a constant currency basis, acquisition and new business initiatives related adjustments and expenses increased $3.6 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 nine months ended

September 30,

Currency Impact

Currency Change

(in thousands)

Domestic site leasing

International site leasing

Asset impairment and decommission costs increased $5.5 million for the nine months ended September 30, 2020, as compared to the prior year.

On a constant currency basis, asset impairment and decommission costs increased $6.4 million.

These changes were primarily as a result of a $10.2 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 $4.8 million decrease in the impairment charge related to sites decommissioned in the nine months ended September 30, 2020 compared to the prior year period.

Depreciation, Accretion, and Amortization Expenses:

For the nine months ended

September 30,

Currency Impact

Currency Change

(in thousands)

Domestic site leasing

International site leasing

Total site leasing

Site development

Depreciation, accretion, and amortization expense increased $24.0 million for the nine months ended September 30, 2020, as compared to the prior year.

On a constant currency basis, depreciation, accretion, and amortization expense increased $47.8 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.

Operating Income (Expense):

For the nine months ended

September 30,

Currency Impact

Currency Change

(in thousands)

Domestic site leasing

International site leasing

Total site leasing

Site development

Domestic site leasing operating income increased $44.2 million for the nine months ended September 30, 2020, as compared to the prior year, primarily due to higher segment operating profit, partially offset by increases in depreciation, accretion, and amortization expense, asset impairment and decommission costs, acquisition and new business initiatives related adjustments and expenses, and selling, general, and administrative expenses.

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

On a constant currency basis, international site leasing operating income increased $9.1 million.

Site development operating income decreased $7.9 million for the nine months ended September 30, 2020, as compared to the prior year, primarily due to lower segment operating profit driven by less activity from T-Mobile and Sprint , partially offset by a decrease in selling, general, and administrative expenses .

Other Income (Expense):

For the nine months ended

September 30,

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, net

Interest income decreased $2.4 million for the nine months ended September 30, 2020, as compared to the prior year.

On a constant currency basis, interest income decreased $2.0 million.

These changes were primarily due to a lower rate of interest earned on both domestic and international investments.

Interest expense decreased $11.4 million for the nine months ended September 30, 2020, as compared to the prior year.

These changes were primarily due to a lower weighted average interest rate due in part to the new interest rate swap entered into during third quarter of 2020, partially offset by a higher average principal amount of cash-interest bearing debt outstanding.

Non-cash interest expense increased $11.1 million for the nine months ended September 30, 2020, as compared to the prior year primarily related to amortization of accumulated losses related to our interest rate swaps de-designated as cash flow hedges.

Loss from extinguishment of debt was $19.5 million for the nine months ended September 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 in February 2020, as well as the write-off of $2.6 million of unamortized financing fees related to the repayment of the 2015-1C and 2016-1C Tower Securities in July 2020.

Other expense, net includes a $299.9 million loss on the remeasurement of U.S.

dollar denominated intercompany loans with foreign subsidiaries for the nine months ended September 30, 2020, while the prior year period included a $24.8 million loss.

Benefit (Provision) for Income Taxes:

For the nine months ended

September 30,

Currency Impact

Currency Change

(in thousands)

Benefit (provision) for income taxes

Benefit for income taxes increased $99.0 million for the nine months ended September 30, 2020, as compared to the prior year.

On a constant currency basis, benefit for income taxes increased $6.1 million.

These changes were primarily due to a decrease in domestic income taxes and foreign withholding taxes, partially offset by an increase in foreign income taxes.

Net (Loss) Income:

For the nine months ended

September 30,

Currency Impact

Currency Change

(in thousands)

Net (loss) income

Net loss was $82.1 million for the nine months ended September 30, 2020, as compared to net income of $79.7 million in the prior year period.

Net loss decreased $116.2 million for the three months ended March 31, 2021, 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, a loss from extinguishment of debt in the current year period, and an increase in non-cash interest expense, partially offset by increases in operating income, interest expense, and benefit for income taxes.

dollar denominated intercompany loans with foreign subsidiaries, an increase in operating income, and decreases in cash interest expense related to the interest rate swaps and loss from extinguishment of debt.

This was partially offset by a decrease in benefit for income taxes and an increase in non-cash interest expense.

NON-GAAP FINANCIAL MEASURES

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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 and new business initiatives 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.

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For the three months ended

September 30,

Currency Impact

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Adjusted EBITDA

For the nine months ended

September 30,

Currency Impact

Currency Change

(in thousands)

Net (loss) income

Non-cash straight-line leasing revenue

Non-cash straight-line ground lease expense

Non-cash compensation

Loss from extinguishment of debt, net

Other expense, 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

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

(2) (Benefit) provision for taxes includes $235 and $214 of franchise taxes for the three months ended September 30, 2020 and 2019, respectively, and $682 and $610 of franchise taxes for the nine months ended September 30, 2020 and 2019, respectively, reflected in selling, general, and administrative expenses on the Consolidated Statements of Operations.

Adjusted EBITDA increased $17.9 million for the three months ended September 30, 2020, as compared to the prior year period.

On a constant currency basis, Adjusted EBITDA increased $30.5 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.

Adjusted EBITDA increased $63.8 million for the nine months ended September 30, 2020, as compared to the prior year period.

(2) Benefit for taxes includes $220 and $227 of franchise taxes for the three months ended March 31, 2021 and 2020, respectively, reflected in selling, general, and administrative expenses on the Consolidated Statements of Operations.

Adjusted EBITDA increased $20.1 million for the three months ended March 31, 2021, as compared to the prior year period.

On a constant currency basis, Adjusted EBITDA increased $28.3 million.

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

LIQUIDITY AND CAPITAL RESOURCES

SBAC is a holding company with no business operations of its own.

SBA Communications Corporation (“SBAC”) is a holding company with no business operations of its own.

SBAC’s only significant asset is 100% of the outstanding capital stock of SBA Telecommunications, LLC (“Telecommunications”), which is also a holding company that owns equity interests in entities that directly or indirectly own all of our domestic and international towers and assets.

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A summary of our cash flows is as follows:

For the nine months ended

September 30, 2020

September 30, 2019

For the three months ended

March 31, 2021

March 31, 2020

(in thousands)

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Cash used in investing activities

Cash used in financing activities

Cash provided by (used in) financing activities

Change in cash, cash equivalents, and restricted cash

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Operating Activities

Cash provided by operating activities was $882.9 million for the nine months ended September 30, 2020 as compared to $705.0 million for the nine months ended September 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.

Cash provided by operating activities was $285.5 million for the three months ended March 31, 2021 as compared to $277.7 million for the three months ended March 31, 2020.

The increase was primarily due to an increase in operating profit and a decrease in cash selling, general, and administrative expenses, partially offset by a decrease in cash inflows associated with working capital changes primarily from timing of customer payments, the negative impact on cash from changes in foreign currency exchange rates, and an increase in net cash interest paid.

Investing Activities

A detail of our investing activities is as follows:

For the nine months ended September 30,

A detail of our cash capital expenditures is as follows:

For the three months ended March 31,

(in thousands)

Acquisitions of towers and related intangible assets

Acquisition of right-of-use assets (1)

Land buyouts and other assets (2)

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General corporate

Net purchases of investments

Other investing activities

Net cash used in investing activities

(1) Excludes $5.9 million and $13.1 million spent to extend ground lease terms for the nine months ended September 30, 2020 and 2019, respectively.

Includes amounts paid related to the acquisition of data centers for the nine months ended September 30, 2020 and 2019.

Subsequent to September 30, 2020, we acquired 54 towers and related assets for $14.6 million in cash.

(1) On February 16, 2021, the Company acquired the exclusive right to lease and operate 697 utility transmission structures, which included existing wireless tenant licenses from PG&E.

(2) Excludes $2.8 million and $1.7 million spent to extend ground lease terms for the three months ended March 31, 2021 and 2020, respectively.

Subsequent to March 31, 2021, we acquired 17 tower and related assets for $6.0 million in cash.

In addition, we agreed to purchase 401 additional sites for $110.8 million.

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A detail of our financing activities is as follows:

For the nine months ended

September 30, 2020

September 30, 2019

For the three months ended

March 31, 2021

March 31, 2020

(in thousands)

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Repayment of Senior Notes (1)

Proceeds from issuance of Tower Securities, net of fees (1)

Repayment of Tower Securities (1)

Termination of interest rate swap

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

Repurchase and retirement of common stock (2)

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Other financing activities

Net cash used in financing activities

Net cash provided by (used in) financing activities

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

(2) During the nine months ended September 30, 2020, we repurchased 1.4 million shares of our Class A common stock for $375.6 million, at an average price per share of $267.57.

Subsequent to September 30, 2020, we repurchased 0.4 million shares of our Class A common stock for $124.4 million at a weighted average price per share of $299.54.

Shares repurchased were retired.

On November 2, 2020, our Board of Directors authorized a new $1.0 billion stock repurchase plan, replacing the prior plan authorized on July 29, 2019 which had a remaining authorization of $124.3 million.

This new plan authorizes the purchase, from time to time, of up to $1.0 billion of our outstanding Class A common stock through open market repurchases in compliance with Rule 10b-18 under the Exchange Act and/or in privately negotiated transactions at management’s discretion based on market and business conditions, applicable legal requirements and other factors.

Shares repurchased will be retired.

The new plan has no time deadline and will continue until otherwise modified or terminated by our Board of Directors at any time in its sole discretion.

As of the date of this filing, we had the full $1.0 billion of authorization remaining under the new plan.

For the nine months ended September 30, 2020, we paid the following cash dividends:

(2) For additional information, refer to Item 2.

Issuer Purchases of Equity Securities.

For the three months ended March 31, 2021, we paid the following cash dividends:

Payable to Shareholders

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March 26, 2021

$52.0 million

June 18, 2020

August 3, 2020

August 25, 2020

$52.0 million

September 21, 2020

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

Dividends paid in 2021 and 2020 were ordinary dividends.

Subsequent to March 31, 2021, we declared the following cash dividends:

Payable to Shareholders

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Date to be Paid

November 2, 2020

November 19, 2020

December 17, 2020

April 26, 2021

June 15, 2021

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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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, 2020, we did not issue any shares of Class A common stock under this registration statement.

As of September 30, 2020, we had approximately 1.2 million shares of Class A common stock remaining under this 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.

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.

We have on file with the Securities and Exchange Commission (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, 2021, we did not issue any shares of Class A common stock under this registration statement.

As of March 31, 2021, we had approximately 1.2 million shares of Class A common stock remaining under this registration statement.

On February 26, 2021, we filed with the Commission an automatic shelf registration statement for well-known seasoned issuers on Form S-3, which enables us to issue shares of our Class A common stock, preferred stock, debt securities, warrants, or depositary shares as well as units that include any of these securities.

We will file a prospectus supplement containing the amount and type of securities each time we issue securities under our automatic shelf registration statement on Form S-3.

No securities were issued under this registration statement through the date of this filing.

On August 6, 2020, we filed a registration statement on Form S-8 with the Securities and Exchange Commission registering 3.4 million shares of our Class A common stock, consisting of 3.0 million shares of Common Stock issuable under the 2020 Performance and Equity Incentive Plan (the “2020 Plan”) and 400,000 shares of Common Stock subject to awards granted under the 2010 Plan that may become available for issuance or reissuance, as applicable, under the 2020 Plan if such awards are forfeited or are settled in cash or otherwise expire or terminate without the delivery of the shares.

Debt Instruments and Debt Service Requirements

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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 September 30, 2020, no amounts were borrowed or repaid under the Revolving Credit Facility.

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

As of September 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 0.20% per annum on the amount of the unused commitment.

As of September 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.

During the three months ended March 31, 2021, we borrowed $710.0 million and repaid $500.0 million of the outstanding balance under the Revolving Credit Facility.

As of March 31, 2021, the balance outstanding under the Revolving Credit Facility was $590.0 million accruing interest at 1.590% per annum.

In addition, SBA Senior Finance II was required to pay a commitment fee of

0.20% per annum on the amount of the unused commitment.

As of March 31, 2021, SBA Senior Finance II was in compliance with the financial covenants contained in the Senior Credit Agreement.

Subsequent to March 31, 2021, we repaid $95.0 million of the outstanding balance under the Revolving Credit Facility.

As of the date of this filing, $495.0 million was outstanding under the Revolving Credit Facility.

Term Loan under the Senior Credit Agreement

2018 Term Loan

On April 11, 2018, we, through our wholly owned subsidiary, SBA Senior Finance II, obtained a new term loan (the “2018 Term Loan”) under the amended and restated Senior Credit Agreement.

On April 11, 2018, we, through our wholly owned subsidiary, SBA Senior Finance II LLC, obtained a new term loan (the “2018 Term Loan”) under the amended and restated Senior Credit Agreement.

The 2018 Term Loan consists of a senior secured term loan with an initial aggregate principal amount of $2.4 billion that matures on April 11, 2025.

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 September 30, 2020, the 2018 Term Loan was accruing interest at 1.900% per annum.

The 2018 Term Loan was issued at 99.75% of par value.

As of March 31, 2021, the 2018 Term Loan was accruing interest at 1.860% 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 and nine months ended September 30, 2020, we repaid an aggregate of $6.0 million and $18.0 million of principal on the 2018 Term Loan, respectively.

As of September 30, 2020, the 2018 Term Loan had a principal balance of $2.3 billion.

On August 4, 2020, we, through our wholly owned subsidiary, SBA Senior Finance II, terminated our existing $1.95 billion cash flow hedge on a portion of our 2018 Term Loan in exchange for a payment of $176.2 million.

On the same date, we entered into an interest rate swap for $1.95 billion of notional value accruing interest at one month LIBOR plus 175 basis points for a fixed rate of 1.874% per annum through the maturity date of the 2018 Term Loan.

During the three months ended March 31, 2021, we repaid an aggregate of $6.0 million of principal on the 2018 Term Loan.

As of March 31, 2021, the 2018 Term Loan had a principal balance of $2.3 billion.

On August 4, 2020, we, through our wholly owned subsidiary, SBA Senior Finance II, entered into an interest rate swap for $1.95 billion of notional value accruing interest at one month LIBOR plus 175 basis points for a fixed rate of 1.874% per annum through the maturity date of the 2018 Term Loan.

Secured Tower Revenue Securities

As of September 30, 2020, we, through a New York common law trust (the “Trust”), had issued and outstanding an aggregate of $5.1 billion of Secured Tower Revenue Securities (“Tower Securities”).

Tower Revenue Securities Terms

As of March 31, 2021, we, through a New York common law trust (the “Trust”), had issued and outstanding an aggregate of $5.1 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 will be paid from the operating cash flows from the aggregate 9,988 tower sites owned by the Borrowers as of March 31, 2021.

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.

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

The table below sets forth the material terms of our outstanding Tower Securities as of March 31, 2021:

Amount Outstanding

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$600.0 million

As of September 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 $14.0 million in relation to this transaction which are being amortized through the anticipated repayment date of the 2020 Tower Securities.

(1) On April 29, 2021, we, through the Trust, priced $1.165 billion of Secured Tower Revenue Securities Series 2021-1C which have an anticipated repayment date of November 9, 2026 and a final maturity date of May 9, 2051 (the “2021-1C Tower Securities”).

This transaction is expected to close May 14, 2021.

The 2021-1C Tower Securities have a fixed interest rate of 1.631% per annum, payable monthly.

Net proceeds from this offering will be used to repay the entire aggregate principal amount of the 2017-1C Tower Securities ($760.0 million) and the Secured Tower Revenue Securities, Series 2017-1R ($40.0 million) and for general corporate purposes.

As of March 31, 2021, 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.

Risk Retention Tower Securities

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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:

On April 29, 2021, SBA Guarantor, LLC, a wholly owned subsidiary, agreed to purchase $61.4 million of Secured Tower Revenue Securities Series 2021-1R issued by the Trust.

These securities have an anticipated repayment date of November 9, 2026 and a final maturity date of May 9, 2051 (the “2021-1R Tower Securities”).

The fixed interest rate on the 2021-1R Tower Securities is 3.625% per annum, payable monthly.

Principal and interest payments made on the 2021-1R Tower Securities will eliminate in consolidation.

The table below sets forth the material terms of our outstanding senior notes as of March 31, 2021:

Amount Outstanding

Interest Rate

Interest Rate Coupon

Maturity Date

Interest Due Dates

% of Par Value

2016 Senior Notes

Optional Redemption Date

2016 Senior Notes

$750.0 million

2020 Senior Notes

2021 Senior Notes

$500.0 million

(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 Statements of Operations.

Interest on the 2020 Senior Notes began August 15, 2020.

We incurred financing fees of $18.0 million in relation to this transaction, which are being amortized through the maturity date.

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.

Prior to February 15, 2023, we may, at our option, redeem up to 35% of the aggregate principal amount of the 2020 Senior Notes originally issued at a redemption price of 103.875% of the principal amount of the 2020 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest with the net proceeds of certain equity offerings.

We may redeem the 2020 Senior Notes during the twelve-month period beginning on the following dates at the following redemption prices:

February 15, 2023 at 101.938%, February 15, 2024 at 100.969%, or February 15, 2025 until maturity at 100.000%, of the principal amount of the 2020 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest.

The unsecured senior notes are subject to redemption in whole or in part at the redemption prices set forth in the indenture agreement plus accrued and unpaid interest.

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

As of September 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 September 30, 2020 and the interest rates accruing on those amounts on such date (in thousands):

As of March 31, 2021, 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, 2021 and the interest rates accruing on those amounts on such date (in thousands):

Revolving Credit Facility

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(1) Total debt service on the 2018 Term Loan includes the impact of the interest rate swap entered into on August 4, 2020, which swapped $1.95 billion of notional value accruing interest at one month LIBOR plus 175 basis points for a fixed rate of 1.874% per annum through the maturity date of the 2018 Term Loan.

(2) The 2017-1C Tower Securities are expected to be repaid on May 14, 2021 in connection with the issuance of the 2021-1C Tower Securities.

Total amount excludes debt service with respect to the $1.165 billion aggregate principal amount of the 2021-1C Tower Securities.

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