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Item 3. Quantitative and Qualitative Disclosures About Market Risk

2024-05-06 compared with 2023-11-07 · 22 added, 21 removed, 76 unchanged (36% of the section changed)

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These instruments arise from transactions entered into in the normal course of business.

The following table presents the future principal payment obligations and fair values associated with our long-term debt instruments assuming our actual level of long-term indebtedness as of September 30, 2023:

(in thousands)

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We manage the interest rate risk on our outstanding debt through our large percentage of fixed rate debt, including interest rate swaps.

The ICE Benchmark Administration Limited ceased publication of the one month LIBOR on June 30, 2023.

On August 4, 2020, and amended June 21, 2023, we, through our wholly owned subsidiary, SBA Senior Finance II, entered into an interest rate swap which swapped $1.95 billion of notional value accruing interest at (i) one month LIBOR plus 175 basis points for a fixed rate of 1.874% per annum through July 31, 2023 and (ii) Term SOFR plus 185 basis points (inclusive of a CSA of 0.10%) for an all-in fixed rate of 1.900% per annum from August 1, 2023 through the maturity date of the 2018 Term Loan.

While we cannot predict our ability to refinance existing debt or the impact interest rate movements will have on our existing debt, we continue to evaluate our financial position on an ongoing basis.

On July 3, 2023, we, through our wholly owned subsidiary, SBA Senior Finance II, amended our Revolving Credit Facility and 2018 Term Loan to replace LIBOR with Term SOFR as the benchmark interest rate.

The amendment includes a 0.10% CSA for the 2018 Term Loan.

We have performed a sensitivity analysis assuming a hypothetical 1% increase in our variable interest rates as of September 30, 2023.

As of September 30, 2023, the analysis indicated that such an adverse movement would have caused our interest expense to increase by approximately 4.6% for the next twelve months ended September 30, 2024.

We are exposed to market risk from changes in foreign currency exchange rates in connection with our operations in Brazil, Canada, Chile, Peru, Argentina, Colombia, South Africa, the Philippines, Tanzania, and to a lesser extent, our markets in Central America.

We have performed a sensitivity analysis assuming a hypothetical 1% increase in our variable interest rates as of March 31, 2024.

As of March 31, 2024, the analysis indicated that such an adverse movement would have caused our interest expense to increase by approximately 4.7% for the three months ended March 31, 2024.

We are exposed to market risk from changes in foreign currency exchange rates in connection with our operations in Brazil, Canada, Chile, Peru, Colombia, South Africa, the Philippines, Tanzania, and to a lesser extent, our markets in Central America.

In each of these countries, we pay most of our selling, general, and administrative expenses and a portion of our operating expenses, such as taxes and utilities incurred in the country in local currency.

In addition, in Brazil, Canada, Chile, South Africa, and the Philippines, we receive significantly all of our revenue and pay significantly all of our operating expenses in local currency.

In Argentina, Colombia, Costa Rica, Peru, and Tanzania, we receive our revenue and pay our operating expenses in a mix of local currency and U.S.

In Colombia, Costa Rica, Peru, and Tanzania, we receive our revenue and pay our operating expenses in a mix of local currency and U.S.

All transactions denominated in currencies other than the U.S.

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Dollars at exchange rates in effect at the end of the applicable fiscal reporting period, and all revenues and expenses are translated at average rates for the period.

The cumulative translation effect is included in equity as a component of Accumulated other comprehensive income (loss).

For the nine months ended September 30, 2023, approximately 21.6% of our revenues and approximately 26.8% of our total operating expenses were denominated in foreign currencies.

We have performed a sensitivity analysis assuming a hypothetical 10% adverse movement in the Brazilian Real from the quoted foreign currency exchange rates at September 30, 2023.

As of September 30, 2023, the analysis indicated that such an adverse movement would have caused our revenues and operating income to decline by approximately 1.3% and 0.9%, respectively, for the nine months ended September 30, 2023.

As of September 30, 2023, we had intercompany debt, which is denominated in a currency other than the functional currency of the subsidiary in which it is recorded.

The cumulative translation effect is included in equity as a component of Accumulated other comprehensive income (loss), net.

For the three months ended March 31, 2024, approximately 22.3% of our revenues and approximately 29.7% of our total operating expenses were denominated in foreign currencies.

We have performed a sensitivity analysis assuming a hypothetical 10% adverse movement in the Brazilian Real from the quoted foreign currency exchange rates at March 31, 2024.

As of March 31, 2024, the analysis indicated that such an adverse movement would have caused our revenues and operating income to decline by approximately 1.3% and 1.1%, respectively, for the three months ended March 31, 2024.

As of March 31, 2024, we had intercompany debt, which is denominated in a currency other than the functional currency of the subsidiary in which it is recorded.

As settlement of this debt is anticipated or planned in the foreseeable future, any changes in the foreign currency exchange rates will result in unrealized gains or losses, which will be included in our determination of net income.

A change of 10% in the underlying exchange rates of our unsettled intercompany debt at September 30, 2023 would have resulted in approximately $130.4 million of unrealized gains or losses that would have been included in Other income (expense), net in our Consolidated Statements of Operations for the nine months ended September 30, 2023.

A change of 10% in the underlying exchange rates of our unsettled intercompany debt at March 31, 2024 would have resulted in approximately $125.5 million of unrealized gains or losses that would have been included in Other (expense) income, net in our Consolidated Statements of Operations for the three months ended March 31, 2024.

Special Note Regarding Forward-Looking Statements

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 our ability to capture and capitalize on industry growth and the impact of such growth on our financial and operational results;

 our expectations regarding consolidation of wireless service providers and the impact of such consolidation on our financial and operational results;

 our expectations regarding DISH Wireless;

 our expectations regarding the consolidation of wireless service providers and the impact of such consolidation on our financial and operational results;

 our intent to grow our tower portfolio domestically and internationally and expand through acquisitions, new builds and organic lease up on existing towers;

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 our expectation that, due to the relatively young age and mix of our tower portfolio, future expenditures required to maintain these towers will be minimal;

 our expectation that we will grow our cash flows by adding tenants to our towers at minimal incremental costs and executing monetary amendments;

 our expectation regarding the scalability of our operations and growth of our cash flows by adding tenants to our towers at minimal incremental costs and executing monetary amendments;

 our expectations regarding churn rates, including with respect to legacy Sprint leases and Oi leases;

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 our election to be subject to tax as a REIT and our intent to continue to operate as a REIT;

 our belief that our business is operated in a manner that complies with the REIT rules and our intent to continue to do so;

 our beliefs regarding compliance with applicable laws and regulations, including environmental laws, and the impact of various legal proceedings;

 our plans regarding our distribution policy, and the amount and timing of, and source of funds for, any such distributions;

 our expectations regarding the use of NOLs to reduce REIT taxable income;

 our expectations regarding our capital allocation strategy, including future allocation decisions among portfolio growth, stock repurchases, and dividends, the impact of our election to be taxed as a REIT on that strategy, and our goal of increasing our Adjusted Funds From Operations per share;

 our expectations regarding our capital allocation strategies, including future allocation decisions among portfolio growth, stock repurchases, and dividends, the impact of our election to be taxed as a REIT on that strategy, and our goal of increasing our Adjusted Funds From Operations per share;

 our expectations regarding dividends and our ability to grow our dividend in the future and the drivers of such growth;

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These forward-looking statements reflect our current views about future events and are subject to risks, uncertainties and assumptions.

We undertake no obligation to update forward-looking statements to reflect events or circumstances after the date hereof, unless otherwise required by law.

We wish to caution readers that certain important factors may have affected and could in the future affect our actual results and could cause actual results to differ significantly from those expressed in any forward-looking statement.

The most important factors that could prevent us from achieving our goals, and cause the assumptions underlying forward-looking statements and the actual results to differ materially from those expressed in or implied by those forward-looking statements include, but are not limited to, the following:

The most important factors that could prevent us from achieving our goals, and cause the assumptions underlying forward-looking

statements and the actual results to differ materially from those expressed in or implied by those forward-looking statements include, but are not limited to, the following:

 developments in, and macroeconomic influences on, the wireless communications industry in general, and for wireless communications infrastructure providers in particular, that may slow growth or affect our customers’ access to sufficient capital, or ability to expend capital to fund network expansion or enhancements;

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 our ability to successfully manage the risks associated with our acquisition initiatives, including our ability to satisfactorily complete due diligence on acquired towers, the amount and quality of due diligence that we are able to complete prior to closing of any acquisition, our ability to accurately anticipate the future performance of the acquired towers, our ability to receive required regulatory approval, the ability and willingness of each party to fulfill their respective closing conditions and their contractual obligations, and, once acquired, our ability to effectively integrate acquired towers into our business and to achieve the financial results projected in our valuation models for the acquired towers;

 the health of the South African and Tanzanian economies and wireless communications market, and the willingness of carriers to invest in their networks in that market;

 the health of the economies and wireless communications markets of the international jurisdictions we operate in, and the willingness of carriers to invest in their networks in such markets;

 our ability to secure as many site leasing tenants as anticipated, recognize our expected economies of scale with respect to new tenants on our towers, and retain current leases on towers;

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 our ability to successfully estimate the impact of certain accounting and tax matters, including the effect on our company of adopting certain accounting pronouncements and the availability of sufficient NOLs to offset future REIT taxable income;

 other risks, including those described in Item 1A.

– Risk Factors in our Annual Report on Form 10-K and those described from time to time in our other filings with the SEC.

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 3. Quantitative and Qualitative Disclosures About Market Risk