UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended March 31, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITES
EXCHANGE ACT OF 1934.
For the transition period from to
Commission file number 000-30110
SBA COMMUNICATIONS CORPORATION
------------------------------
(Exact name of registrant as specified in its charter)
Florida 65-0716501
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Town Center Road, Boca Raton, Florida 33486
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(561) 995-7670
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve (12) months (or for such shorter period that the registrant
was required to file such report), and (2) has been subject to such filing
requirement for the past 90 days.
Yes X No
--- ---
Number of shares of common stock outstanding at May 11, 2000
Class A Common Stock - 32,629,127 shares
Class B Common Stock - 6,559,401 shares
1
SBA COMMUNICATIONS CORPORATION
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements
Consolidated Balance Sheets as of December 31, 1999 and March 31, 2000..............................4
Consolidated Statements of Operations for the three months ended
March 31, 1999 and 2000.......................................................................5
Consolidated Statements of Cash Flows for the three months ended March 31, 1999
and 2000......................................................................................6
Consolidated Statement of Shareholders' Equity for the three months ended March 31, 2000............7
Condensed Notes to Consolidated Financial Statements................................................8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................................................11
Item 3. Quantitative and Qualitative Disclosures About Market Risk......................................14
PART II - OTHER INFORMATION
Item 2 - Changes in Securities..........................................................................16
Item 6 - Exhibits and Reports on Form 8-K...............................................................16
SIGNATURES...................................................................................................18
2
SBA COMMUNICATIONS CORPORATION
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
The following unaudited consolidated financial statements of SBA Communications
Corporation, a Florida corporation (the "Company") have been prepared in
accordance with the instructions to Form 10-Q and therefore, omit or condense
certain footnotes and other information normally included in financial
statements prepared in accordance with generally accepted accounting principles.
In the opinion of management, all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation of the financial
information for the interim period reported have been made. Results of
operations for the three months ended March 31, 2000 are not necessarily
indicative of the results for the entire fiscal year ending December 31, 2000.
3
SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
December 31, 1999 March 31, 2000
----------------- --------------
ASSETS
Current assets:
Cash and cash equivalents, includes interest bearing amounts
of $2,399,115 and $111,115,665 in 1999 and 2000 $ 3,130,912 $111,697,155
Accounts receivable, net of allowance of $785,299 and
$1,071,794 in 1999 and 2000 22,644,777 25,839,980
Prepaid and other current assets 4,946,561 4,810,226
Costs and estimated earnings in excess of billings on
uncompleted contracts 2,888,963 6,679,917
------------ ------------
Total current assets 33,611,213 149,027,278
Property and equipment, net 338,891,513 397,249,448
Intangible assets, net 34,387,262 33,956,359
Other assets 22,933,238 22,271,144
------------ ------------
Total assets $429,823,226 $602,504,229
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 40,655,950 $ 36,367,114
Accrued expenses 6,094,669 8,837,041
Notes payable 50,176 50,176
Due to shareholder 2,500,000 -
Billings in excess of costs and estimated earnings
on uncompleted contracts 1,600,981 3,745,626
Other current liabilities 3,654,584 3,607,729
------------ ------------
Total current liabilities 54,556,360 52,607,686
------------ ------------
Other liabilities:
Senior discount notes payable 186,041,542 191,516,653
Notes payable 132,175,616 75,163,072
Deferred tax liabilities 7,950,454 7,943,821
Other long-term liabilities 517,007 557,028
------------ ------------
Total long-term liabilities 326,684,619 275,180,574
------------ ------------
Commitments and contingencies (see Note 8)
Shareholders' equity:
Common stock:
Class A, par value $.01 (100,000,000 shares authorized) 21,546,737
and 32,539,564 shares issued and outstanding in 1999 and 2000 215,467 325,396
Class B, par value $.01 (8,100,000 shares authorized) 7,644,264 and
6,559,401 shares outstanding in 1999 and 2000 76,443 65,594
Additional paid in capital 109,049,538 344,807,597
Accumulated deficit (60,759,201) (70,482,618)
------------ ------------
Total shareholders' equity 48,582,247 274,715,969
------------ ------------
Total liabilities and shareholders' equity $429,823,226 $602,504,229
============ ============
The accompanying notes to consolidated financial statements are an integral part
of these consolidated balance sheets.
4
SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
For the three months
ended March 31,
---------------------------------
1999 2000
---- ----
Revenues:
Site development revenue $ 8,574,687 $ 20,341,580
Site leasing revenue 5,141,614 10,087,445
------------ ------------
Total revenues 13,716,301 30,429,025
------------ ------------
Cost of revenues (exclusive of depreciation shown below)
Cost of site development revenue 6,623,195 15,712,237
Cost of site leasing revenue 2,377,506 3,865,641
------------ ------------
Total cost of revenues 9,000,701 19,577,878
------------ ------------
Gross profit 4,715,600 10,851,147
Operating expenses:
Selling, general and administrative 4,077,573 5,974,932
Depreciation and amortization 3,131,301 6,830,274
------------ ------------
Total operating expenses 7,208,874 12,805,206
------------ ------------
Operating loss (2,493,274) (1,954,059)
Other income (expense):
Interest income 506,943 1,527,784
Interest expense (815,490) (2,907,265)
Amortization of original issue discount and
debt issuance costs (5,200,244) (6,216,926)
Other 9,215 51,535
------------ ------------
Total other income (expense) (5,499,576) (7,544,872)
------------ ------------
Loss before provision for income taxes and
extraordinary item (7,992,850) (9,498,931)
(Provision) benefit for income taxes 785,582 (224,486)
------------ ------------
Net loss before extraordinary item (7,207,268) (9,723,417)
Extraordinary item (1,149,954) -
------------ ------------
Net loss (8,357,222) (9,723,417)
Dividends on preferred stock (712,500) -
------------ ------------
Net loss to common stockholders $ (9,069,722) $ (9,723,417)
============ ============
Basic and diluted loss per common share before
extraordinary item $ (0.88) $ (0.27)
Extraordinary item (0.13) -
------------ ------------
Basic and diluted loss per common share $ (1.01) $ (0.27)
============ ============
Basic and diluted weighted average number of shares of
common stock 8,955,922 35,382,348
============ ============
The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements of operations.
5
SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For the three months ended March 31,
------------------------------------
1999 2000
---- ----
CASH FLOWS USED IN OPERATING ACTIVITIES:
Net loss $ (8,357,222) $ (9,723,417)
Adjustments to reconcile net income to net cash provided by
(used in) operating activities-
Depreciation and amortization 3,131,301 6,830,274
Non-cash compensation expense 24,562 202,701
Provision for doubtful accounts 101,822 328,869
Amortization of original issue discount and debt issue costs 5,200,244 6,216,926
Interest on shareholder note (55,162) -
Write-off of deferred financing fees 1,149,954 -
Changes in operating assets and liabilities:
(Increase) decrease in-
Accounts receivable (1,753,515) (3,524,072)
Prepaid and other current assets (1,624,769) 136,334
Costs and estimated earnings in excess of
billings on uncompleted contracts 239,442 (3,790,954)
Other assets (240,138) (35,266)
Intangible assets (5,000) -
Increase (decrease) in-
Accounts payable (2,331,507) (4,288,836)
Accrued expenses 150,692 2,742,372
Other liabilities (80,661) (13,468)
Other long-term liabilities 30,679 -
Billings in excess of costs and estimated earnings on uncompleted
contracts (40,192) 2,144,645
------------ ------------
Total adjustments 3,897,752 6,949,525
------------ ------------
Net cash used in operating activities (4,459,470) (2,773,892)
------------ ------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Tower and other capital expenditures (36,869,661) (60,591,240)
------------ ------------
Net cash used in investing activities (36,869,661) (60,591,240)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from offering of common stock - 229,622,744
Proceeds from option exercise - 1,865,631
Proceeds from notes payable 40,000,000 11,000,000
Repayment of notes payable (17,001,000) (70,512,544)
Deferred financing fees (6,135,609) (44,456)
------------ ------------
Net cash provided by financing activities 16,863,391 171,931,375
------------ ------------
Net increase (decrease) in cash and cash equivalents (24,465,740) 108,566,243
CASH AND CASH EQUIVALENTS:
Beginning of period 26,743,270 3,130,912
------------ ------------
End of period $ 2,277,530 $111,697,155
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 813,682 $ 3,710,469
============ ============
Taxes $ 182,496 $ 463,193
============ ============
NON-CASH ACTIVITIES:
Dividends on preferred stock $ 712,500 $ -
============ ============
Interest on bonds payable $ 4,872,707 $ 5,475,111
============ ============
Common stock issued in connection with acquisition $ - $ 4,166,063
============ ============
The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements of cash flows.
6
SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
-----------------------------------------------
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
----------------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31, 2000
----------------------------------------
(unaudited)
Additional
Paid In
Common Stock Capital
------------------------------------------------------------ --------------------
Class A Class B
------- -------
Number Amount Number Amount
------ ------ ------ ------
BALANCE, December 31, 1999 21,546,737 $ 215,467 7,644,264 $76,443 $ 109,049,538
Offering of common stock, net of
issuance costs 9,000,000 90,000 - - 229,532,744
Exercise of employee stock options 462,639 4,627 - - 1,861,004
Exercise of warrants 357,387 3,574 - - (3,574)
Common stock issued in connection with
Acquisition 87,938 879 - - 4,165,184
Conversion of Series B to Series A 1,084,863 10,849 (1,084,863) (10,849) -
Non-cash compensation adjustment - - - - 202,701
Net loss - - - - -
---------- ---------- -------- ------- -------------
BALANCE, March 31, 2000 32,539,564 $ 325,396 6,559,401 $65,594 $ 344,807,597
========== ========== ========= ======= =============
Accumulated
Deficit Total
------------ ------------
BALANCE, December 31, 1999 $(60,759,201) $ 48,582,247
Offering of common stock, net of
issuance costs - 229,622,744
Exercise of employee stock options - 1,865,631
Exercise of warrants - -
Common stock issued in connection with
Acquisition - 4,166,063
Conversion of Series B to Series A - -
Non-cash compensation adjustment - 202,701
Net loss (9,723,417) (9,723,417)
------------ ------------
BALANCE, March 31, 2000 $(70,482,618) $274,715,969
============ ============
The accompanying notes to consolidated financial statements are an integral part
of this statement.
7
SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
-----------------------------------------------
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
1. BASIS OF PRESENTATION
---------------------
The accompanying unaudited condensed consolidated financial statements include
the accounts of SBA Communications Corporation and its subsidiaries (the
"Company"). All significant inter-company accounts and transactions have been
eliminated. Certain information related to the Company's organization,
significant accounting policies and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These unaudited condensed
consolidated financial statements reflect, in the opinion of management, all
material adjustments (which included only normal recurring adjustments)
necessary to fairly state the financial position and the results of operations
for the periods presented and the disclosures herein are adequate to make the
information presented not misleading. Operating results for interim periods are
not necessarily indicative of the results that can be expected for a full year.
These interim financial statements should be read in conjunction with the
Company's audited consolidated financial statements and notes thereto.
Certain reclassifications have been made to the 1999 financial statements to
conform to the 2000 presentation.
During the three months ended March 31, 1999 and 2000, the Company did not have
any changes in its equity resulting from non-owner sources and accordingly,
comprehensive income was equal to the net loss amounts presented for the
respective periods in the accompanying Consolidated Statements of Operations.
The Company has potential common stock equivalents related to its outstanding
exercisable stock options. Potential common stock equivalents of 893,649 and
917,072 shares were not included in diluted loss per share calculation for the
three months ended March 31, 1999 and 2000, respectively, because the effect
would have been antidulutive. Accordingly, basic and diluted loss per common
share are the same for all periods presented.
2. CURRENT ACCOUNTING PRONOUNCEMENTS
---------------------------------
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
No. 133 required that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. SFAS
No. 133 is effective for fiscal years beginning after June 15, 1999. In June
1999, the FASB issued SFAS No. 137 Accounting for Derivative Investments and
Hedging Activities - Deferral of the Effective Date of SFAS No. 133. This
statement deferred the effective date of SFAS No. 133 until fiscal years
beginning after June 15, 2000. Management believes adopting this statement will
not have a material impact upon the Company's results of operations or financial
position.
3. PROPERTY AND EQUIPMENT
----------------------
Property and equipment, net, consists of the following:
December 31, March 31,
1999 2000
------------------------------
Towers $329,046,558 $384,398,680
Construction in process 18,648,109 25,871,600
Furniture and fixtures 6,880,071 8,653,421
Vehicles 667,756 667,756
Buildings and improvements 596,676 618,238
Land 6,664,178 6,932,918
------------ ------------
362,503,348 427,142,613
Less: Depreciation and
amortization (23,611,835) (29,893,165)
------------ ------------
Property and equipment, net $338,891,513 $397,249,448
============ ============
8
Construction in process represents costs incurred related to towers which are
under development and will be used in the Company's operations. As part of its
construction costs, the Company capitalizes certain overhead costs directly
related to the oversight of its construction projects.
4. COST AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
----------------------------------------------------
Costs and estimated earnings on uncompleted contracts consist of the
following:
As of As of
December 31, 1999 March 31, 2000
----------------- --------------
Costs incurred on uncompleted contracts $ 11,259,511 $ 23,828,462
Estimated earnings 2,830,072 4,788,546
Billings to date (12,801,601) (25,682,717)
------------- ------------
$ 1,287,982 $ 2,934,291
============= ============
As of As of
December 31, 1999 March 31, 2000
----------------- --------------
Costs and estimated earnings in excess of billings on uncompleted
contracts $ 2,888,963 $ 6,679,917
Billings in excess of costs and estimated earnings on uncompleted
contracts (1,600,981) (3,745,626)
------------ -----------
$ 1,287,982 $ 2,934,291
============ ===========
5. CURRENT AND LONG TERM DEBT
--------------------------
As of As of
December 31, 1999 March 31, 2000
----------------- --------------
Senior Credit Facility term loans, interest at variable rates
(9.59% to 9.68% at March 31, 2000) quarterly installments
based on reduced availability beginning March 31, 2001,
maturing December 31, 2004 and December 31, 2005. $ 75,000,000 $ 75,000,000
Senior Credit Facility revolving loan, interest at variable rates
(9.62% to 11.0% at December 31, 1999) quarterly installments
based on reduced availability beginning March 31, 2001,
maturing December 31, 2004. 57,000,000 -
Senior 12% discount notes, net of unamortized original issue
discount of $77,483,347 at March 31, 2000, unsecured, cash
interest payable semi-annually in arrears beginning September 1,
2003, balloon principal payment of $269,000,000 due at maturity
on March 1, 2008. 186,041,542 191,516,653
Note Payable, monthly principal installments of $4,181 plus
Interest at 90 day LIBOR plus 2.25% (8.38% at March 31, 2000),
maturing June 30, 2004. Secured by vehicles. 225,792 213,248
------------ ------------
318,267,334 266,729,901
Less: current maturities (50,176) (50,176)
------------- ------------
Long-term debt $ 318,217,158 $266,679,725
============= ============
9
6. SHAREHOLDERS' EQUITY
--------------------
a. Offering of Common Stock
------------------------
On February 2, 2000, the Company completed a follow-on offering of 9.0
million shares of its Class A common stock. The Company raised gross
proceeds of $243.0 million, which produced net proceeds of approximately
$229.6 million, after deduction of the underwriting discount and estimated
offering expenses. The Company used $70.5 million of these net proceeds to
repay all revolving credit loans under the Senior Credit Facility.
Remaining proceeds have and will be used for the construction and
acquisition of towers and for general working capital purposes.
On February 3, 2000, the managing underwriters of the follow-on offering
exercised and closed on their over-allotment option to purchase an
additional 1,350,000 shares of the Company's Class A common stock. Certain
shareholders along with the Company had granted this option to the
underwriters in connection with the follow-on offering. These certain
shareholders satisfied from their shareholdings the exercise of the
over-allotment option in full, resulting in no proceeds to the Company as a
result of this exercise.
b. Registration of Additional Shares
---------------------------------
In January 2000, the Company filed a registration statement with the
Securities and Exchange Commission registering 1.0 million shares of its
Class A common stock. These shares are currently reserved for issuance in
connection with acquisitions of wireless communication towers or companies
that provide related services at various locations in the United States
from time to time. On March 17, 2000, the Company issued 87,938 shares of
Class A common stock in connection with an acquisition of six towers and
related assets. The Company accounted for the acquisition using the
purchase method of accounting. The results of operations of the acquired
assets are included with those of the Company from the date of the
acquisition. The historical results of operations of the acquired towers
are not material in relation to the Company's consolidated financial
statements; accordingly, pro forma financial information has not been
presented. As of the date of this report, 912,062 shares remain reserved
for future issuance.
c. Exercise of Warrants
--------------------
In February 2000, the holders of the warrants issued in connection with the
private placement in 1997, exercised their right to exchange the warrants
for Class A common stock. The fair market value of the common stock was
$33.25 per share at the time of exercise. In lieu of remitting cash to the
Company for the exercise, warrants to acquire 45,113 shares were
surrendered to the Company.
7 INCOME TAXES
------------
Income taxes have been provided for based upon the Company's annual effective
income tax rate. A reconciliation of the statutory U.S. Federal tax rate (34%)
and the effective income tax rate for the period is as follows:
For the three months ended
--------------------------
March 31, 1999 March 31, 2000
-------------- --------------
Federal income tax $(2,717,569) $(3,127,637)
State income tax 140,034 223,222
Foreign tax 230,998 1,264
Change in valuation allowance 1,560,955 3,127,637
------------ ---------
$ (785,582) $ 224,486
============ =========
The Company recorded a benefit in the first quarter of 1999 as a result of net
operating loss carry-backs available. The amount recorded as a benefit
represents the entire carry-back amount available The Company has taxable losses
in the first quarter of 1999 and 2000, and as a result net operating loss
carry-forwards have been generated. These net operating loss carry-forwards are
fully reserved as management believes it is not "more likely than not" that the
Company will generate sufficient taxable income in future periods to recognize
the assets.
8. COMMITMENTS AND CONTINGENCIES
-----------------------------
The Company is involved in various claims, lawsuits and proceedings arising in
the ordinary course of business. While there are uncertainties inherent in the
ultimate outcome of such matters and it is impossible to presently determine the
ultimate costs that may be incurred, management believes the resolution of such
uncertainties and the incurrence of such costs should not have a material
adverse effect on the Company's consolidated financial position or results of
operations.
10
9. SEGMENT DATA
------------
The Company operates principally in three business segments: site development
consulting, site development construction, and site leasing. The Company's
reportable segments are strategic business units that offer different services.
They are managed separately based on the fundamental differences in their
operations. Revenue, operating income, identifiable assets, capital expenditures
and depreciation and amortization pertaining to the segments in which the
Company operates are presented below:
For the three months ended
-----------------------------------
March 31, 1999 March 31, 2000
-------------- --------------
Revenue:
Site development - consulting $ 3,921,229 $ 5,577,363
Site development - construction 4,653,458 14,764,217
Site leasing 5,141,614 10,087,445
----------- -----------
$13,716,301 $30,429,025
=========== ===========
Gross Profit:
Site development - consulting $ 888,369 $ 2,055,275
Site development - construction 1,063,123 2,574,068
Site leasing 2,764,108 6,221,804
----------- -----------
$ 4,715,600 $10,851,147
=========== ===========
Capital expenditures:
Site development - consulting $ 2,427,225 $ 5,153,049
Site development - construction 1,006 3,406,876
Site leasing 33,928,913 55,606,251
Assets not identified by segment 512,517 591,127
----------- -----------
$36,869,661 $64,757,303
=========== ===========
As of As of
December 31, 1999 March 31, 2000
----------------- --------------
Assets:
Site development - consulting $ 22,418,344 $ 6,832,961
Site development - construction 48,519,024 57,139,636
Site leasing 338,722,978 520,480,879
Assets not identified by segment 20,162,880 18,050,753
------------ ------------
$429,823,226 $602,504,229
============ ============
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS
-------------
The following discussion and analysis reflects only changes from information
previously presented for the 1999 fiscal year. Financial information relating to
the March 31, 1999 and March 31, 2000 periods is unaudited. This interim
discussion and analysis should be read in conjunction with our 1999 audited
financial statements, notes thereto and management's discussion and analysis of
financial condition and results of operations. The following discussion should
be read in conjunction with our Form S-3 filed with the SEC on January 28, 2000
and our Form 10-K filed with the SEC on March 30, 2000.
We continue to be a leading independent owner and operator of wireless
communications infrastructure in the United States. Our strategy is to utilize
our historical leadership position in the site development business, a project
revenue business, to expand our ownership and leasing of communication towers, a
recurring revenue business. We began in 1997 and continue to transition our
revenue stream from project driven revenues to recurring revenues through the
leasing of antennae space at or on communications facilities. We owned 586
towers as of March 31, 1999 and 1,351 towers as of March 31, 2000.
While we intend to continue to offer site development services to wireless
carriers where demand and profitable opportunities exist, we will emphasize our
site leasing business through the construction of owned towers for lease to
wireless service providers, the acquisition of existing sites and the leasing,
subleasing and management of other antennae sites. As the site development
industry has matured our revenues and gross profit from the consulting segment
of that business have declined substantially over the last two years,
notwithstanding an increase in the first quarter of 2000 over the prior
comparable period, as wireless service providers chose to outsource ownership of
communication sites in order to conserve capital. We believe our site
development consulting business may experience continued declines in revenues as
this outsourcing trend continues. We also believe that, over the longer term,
site leasing revenues will increase as carriers move to outsource tower
ownership and the number of towers we own grows.
11
As a result of these trends and the shift in focus of our business, our net loss
increased 2000 from the prior periods due to substantially increased
depreciation expense, and capital expenditures increased sharply as we continued
to accumulate towers. We expect capital expenditures to increase more in 2000 as
compared to 1999. In addition, we anticipate that our operating expenses will
increase above 1999 levels as we continue to build the infrastructure to enable
us to construct, acquire, and operate tower assets.
We derive our revenues from two businesses-site development and site leasing.
Our site development business consists of site development consulting and site
development construction. We provide site development services, both consulting
and construction, on a contract basis which is usually customer and project
specific. We also provide site leasing services on a contract basis. Revenue
from our site development business may fluctuate from period to period depending
on construction schedules, which are a function of our clients' build-out
schedules, weather and other factors. Our antenna site leases are typically
long-term agreements with renewal periods. Leases are generally paid on a
monthly basis. Because of the low variable operating costs of the site leasing
business, additional tenants on a tower generate disproportionately larger
increases in tower cash flow.
We have focused our capital deployment on building new towers and "mom and pop"
acquisitions. Of the 1,351 towers we owned as of March 31, 2000, 875 were new
builds. In general, we have chosen to build rather than buy the substantial
majority (65%) of our towers due to what we believe are more favorable
economics. To date, our construction cost of a new tower averages approximately
$225,000, while we believe the industry's average acquisition cost of a tower
over the last two years has been approximately $400,000. At March 31, 2000, we
had non-binding mandates to build over 600 additional towers under build-to-suit
programs (the majority of which we expect will result in binding anchor tenant
lease agreements). We believe we have one of the largest number of non-binding
build-to-suit mandates from wireless service providers in the industry. At March
31, 2000, we were also pursuing over 900 new strategic builds in locations
chosen by us based on our industry knowledge and experience. While we have
focused primarily on new build towers for growth, we have also acquired 476
towers as of March 31, 2000. Our acquisition strategy has focused on small, "mom
and pop'" acquisition targets, those which we believe offer better opportunities
for value. We seek to acquire towers where we can, through additional tenant
leases, increase cash flow to substantially reduce the tower cash flow multiple
from the multiple paid at acquisition. The 476 tower acquisitions to date have
been completed at an average acquisition price of approximately $377,000 per
tower and a 14.9 times multiple of annualized tower cash flow to purchase price,
or an aggregate purchase price of $179.4 million. In addition to what we have
already acquired, we are currently actively negotiating to acquire existing
towers. At March 31, 2000, we had letters of intent or definitive agreements to
acquire 124 towers in 34 separate transactions for an aggregate purchase price
of approximately $45.0 million, or an average acquisition price of approximately
$376,000 per tower, and a 13.9 times multiple of annualized tower cash flow to
purchase price. We cannot assure you that we will be able to close these
transactions, or identify towers or tower companies to acquire in the future.
RESULTS OF OPERATIONS
As we continue our transition into site leasing, operating results in prior
periods may not be meaningful predictors of future prospects. You should be
aware of the dramatic changes in the nature and scope of our business when
reviewing the ensuing discussion of comparative historical results. We expect
that the acquisitions consummated to date and any future acquisitions, as well
as our new tower builds, will have a material impact on future revenues,
expenses and net loss. Revenues, cost of revenues, selling, general and
administrative expenses, depreciation and amortization and interest expense each
increased significantly in the period ended March 31, 2000 over the year earlier
period, and some or all of those items may continue to increase significantly in
future periods. We believe that our construction programs will have a material
effect on future operation, which effect will probably be negative until such
time, if ever, as the newly constructed towers attain higher levels of tenant
use.
First Quarter 2000 Compared to First Quarter 1999
Total revenues increased 121.8% to $30.4 million for the first quarter of 2000
from $13.7 million for the first quarter of 1999. We derive our revenues from
two businesses, site development and site leasing. Our site development business
consists of site development consulting and site development construction. Site
development revenues increased 137.2% to $20.3 million in the first quarter of
2000 from $8.6 million in the first quarter of 1999 due to increases in both
site development consulting revenues and construction revenues. Site development
consulting revenues increased 42.2% to $5.6 million for the first quarter 2000
from $3.9 million for the first quarter of 1999, due to the increased demand for
site acquisition and zoning services from wireless communications carriers. Site
development construction revenues increased 217.3% to $14.8 million for the
first quarter of 2000 from $4.7 million for the first quarter of 1999, due to
the inclusion of Com-Net, which was acquired in April 1999, the expanded
customer base of our construction company and the number of projects on which
services were rendered. Site leasing revenues increased 96.2% to $10.1 million
for quarter of 2000, from $5.1 million for the first quarter of 1999, due to the
substantially greater number of towers in our portfolio during 2000 compared to
1999.
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Total cost of revenues increased 117.5% to $19.6 million for the first quarter
of 2000 from $9.0 million for the first quarter of 1999. Site development cost
of revenues increased 137.2% to $15.7 million for the 2000 period from $6.6
million in 1999 period due to the increased volume in the site development
consulting and construction revenues. Site development consulting cost of
revenues increased 16.1% to $3.5 million for the first quarter of 2000 from $3.0
million for the first quarter of 1999 period due primarily to higher revenues.
Site development construction cost of revenues increased 239.5% to $12.2 million
for the 2000 period from $3.6 million in the first quarter of 1999 due primarily
to increased revenues. Site leasing cost of revenues increased 62.6% to $3.9
million for the 2000 period from $2.4 million for 1999 period, due primarily to
the increased number of towers owned resulting in an increased amount of lease
payments to site owners and related site costs.
Gross profit increased 130.1% to $10.9 million for 2000 from $4.7 million for
1999, due to increased site development and site leasing revenues. Gross profit
from site development increased 137.2% to $4.6 million in 2000 from $2.0 million
in 1999 due to higher site development revenues. Gross profit margins for site
development remained constant in the first quarter of 2000 as compared to the
first quarter of 1999. Gross profit margin on site development construction
dropped in 2000 to 17.4% from 19.1% in 1999, reflecting the increased use of
subcontract labor in 1999. Gross profit for the site leasing business increased
125.1% to $6.2 million in 2000 from $2.8 million in the 1999 period, and site
leasing gross profit margin improved to 61.7% in 2000 from 53.8% in 1999. The
increased gross profit and improved margin were both due to the substantially
greater number of towers owned and the greater number of tenants in the 2000
period. As a percentage of total revenues, gross profit increased to 35.7% of
total revenues in 2000 from 34.4% in 1999 due to increased levels of higher
margin site leasing gross profit.
Selling, general and administrative expenses increased to $6.0 million for the
first quarter of 2000 from $4.1 million for the first quarter of 1999. As a
percentage of total revenues, selling, general and administrative expenses
decreased to 19.6% for 2000 from 29.7% in 1999. The increase in selling, general
and administrative expenses represents the addition of additional offices and
personnel which represent the infrastructure necessary to support the continued
growth of the Company.
Depreciation and amortization increased to $6.8 million for 2000 as compared to
$3.1 million for 1999. This increase is directly related to the increased amount
of fixed assets (primarily towers) we owned in 2000 as compared to 1999.
Operating loss decreased to $(2.0) million for 2000 from ($2.5) million for 1999
as a result of the increased revenues in 2000. Other income (expense) increased
to $(7.5) million for 2000 from $(5.5) million for 1999. This increase resulted
from the interest expense associated with the senior credit facility and
amortization of deferred financing fees, partially offset by interest income.
The extraordinary item in 1999 of $1.1 million relates to the write-off of
deferred financing fees associated with our prior bank credit agreement. Net
loss was $(9.7) million for 2000 as compared to net loss of $(8.4) million for
1999.
LIQUIDITY AND CAPITAL RESOURCES
SBA Communications Corporation is a holding company with no business operations
of its own. Our only significant asset is the outstanding capital stock of our
subsidiaries. We conduct all our business operations through our subsidiaries.
Accordingly, our only source of cash to pay our obligations is distributions
with respect to our ownership interest in our subsidiaries from the net earnings
and cash flow generated by these subsidiaries. Even if we decided to pay a
dividend on or make a distribution in respect of the capital stock of our
subsidiaries, we cannot assure you that our subsidiaries will generate
sufficient cash flow to pay a dividend or distribute funds, or that we will be
permitted to pay any dividends under the terms of the senior credit facility.
Net cash used in operations during the three months ended March 31, 2000 was
$2.8 million compared to net cash used in operations of $4.5 million in the
three months ended March 31, 1999. Net cash used in investing activities for the
three months ended March 31, 2000 was $60.6 million compared to $36.9 million
for the three months ended March 31, 1999. This increase is attributable to a
higher level of tower acquisition and new build activity in 2000 versus 1999.
Net cash provided by financing activities for the three months ended March 31,
2000 was $171.9 million compared to $16.9 million for the three months ended
March 31, 1999. The increase in net cash provided by financing activities in
2000 was attributable to our follow-on offering of Class A common stock which
closed in February 2000.
Our balance sheet reflected positive working capital of $96.4 million as of
March 31, 2000 and negative working capital of $(20.9) million as of December
31, 1999. This change is attributable to increased cash balances as a result of
the follow-on offering.
In February 2000, we completed a follow-on offering of 9.0 million shares of our
Class A common stock. We raised gross proceeds of $243.0 million, which produced
net proceeds of approximately $229.6 million, after deduction of the
underwriting discount and offering expenses. We used $70.5 million of these net
proceeds to repay all revolving credit loans under the Senior Credit Facility.
Remaining proceeds have and will be used for the construction and acquisition of
towers and for general working capital purposes. Additionally, in February 2000
the managing underwriters of the follow-on offering exercised and closed on
their over-allotment option to purchase an additional 1,350,000 shares of our
Class A common stock from certain shareholders. We did not receive any proceeds
as a result of this exercise.
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In the event that the business acquired in the Com-Net acquisition achieves
certain EBITDA targets in 2000, we may be obligated to issue up to 400,000
million additional shares of Class A common stock to the former shareholders of
Com-Net.
Our senior credit facility, as amended, consists of two term loans in an
aggregate amount of $75.0 million and a $225.0 million revolving line of credit.
Availability under the senior credit facility is determined by a number of
factors, including the number of towers built by us with anchor tenants
on the date of completion, the financial performance of our other towers,
site development and construction segments, as well as by other financial
covenants, financial ratios and other conditions. The revolving line of credit
and the $25.0 million term loan mature on December 31, 2004 and reduced
availability of the revolving credit commitments and amortization of the
term loan begins on March 31, 2001. The $50.0 million term loan matures on
December 31, 2005 and amortization of this term loan begins on March 31, 2002.
The senior credit facility is secured by substantially all of the assets of
Telecommunications and its direct and indirect subsidiaries and requires
Telecommunications to maintain certain financial covenants, and places
restriction on, among other things, the incurrence of debt and liens,
disposition of assets, transactions with affiliates and certain investments.
As of March 31, 2000, we had $75.0 million of borrowings outstanding under the
senior credit facility at variable rates ranging from 9.59% to 9.68%.
We currently anticipate building a significant number of towers for which we
have non-binding mandates pursuant to our build-to-suit program or pursuant to
our strategic site initiatives. We also intend to continue to explore
opportunities to acquire additional towers, tower companies and/or related
businesses. The exact amount of our future capital expenditures will depend on a
number of factors. Our future capital expenditures will depend in part upon
acquisition opportunities that become available during the period, the needs of
our build-to-suit customers and the availability to us of additional debt or
equity capital on acceptable terms. Our cash capital expenditures for the year
ended December 31, 1999 were $208.9 million, and for the three months ended
March 31, 2000 were $60.6 million. We currently plan to make total cash capital
expenditures in 2000 of at least $200.0 million to $250.0 million. Substantially
all of these planned capital expenditures are expected to be funded by proceeds
from our follow-on offering, borrowings under our senior credit facility and
cash flow from operations. In the event that there is not sufficient
availability under the senior credit facility when an acquisition or
construction opportunity arises, we would be required to seek additional debt or
equity financing. We cannot assure you that any required financing will be
available on commercially reasonable terms or at all or that any additional debt
financing would be permitted by the terms of our existing indebtedness. In
addition, we have on file with the Commission a shelf registration on Form S-4
registering up to 1,000,000 shares of Class A common stock which we may issue in
connection with the acquisition of towers or related businesses. As of the date
of this report, 912,062 shares remain reserved for future issuance. On March 17,
2000, the Company issued 87,938 shares of Class A common stock in connection
with an acquisition of six towers and related assets.
Our ability to make scheduled payments of principal of, or to pay interest on,
our debt obligations, and our ability to refinance any such debt obligations, or
to fund planned capital expenditures, will depend on our future performance,
which, to a certain extent, is subject to general economic, financial,
competitive, legislative, regulatory and other factors that are beyond our
control. Our business strategy contemplates substantial capital expenditures in
connection with our planned tower build-out and acquisitions. Based on our
current operations and anticipated revenue growth, we believe that, if our
business strategy is successful cash flow from operations, the proceeds of the
follow-on offering, and available borrowings under the senior credit facility
will be sufficient to fund our anticipated capital expenditures in fiscal 2000.
Thereafter, however, or in the event we exceed our currently anticipated capital
expenditures for 2000, we anticipate that we will need to seek additional equity
or debt financing to fund our business plan. Failure to obtain any such
financing could require us to significantly reduce our planned capital
expenditures and scale back the scope of our tower build-out or acquisitions,
either of which could have a material adverse effect on our projected financial
condition or results of operations. In addition we may need to refinance all or
a portion of our indebtedness (including the Notes and/or the senior credit
facility) on or prior to its scheduled maturity. We cannot assure you that we
will generate sufficient cash flow from operations in the future, that
anticipated revenue growth will be realized or that future borrowings or equity
contributions will be available in amounts sufficient to service our
indebtedness and make anticipated capital expenditures. In addition, we cannot
assure you that we will be able to effect any required refinancing of our
indebtedness (including the Notes) on commercially reasonable terms or at all.
Inflation
The impact of inflation on our operations has not been significant to date.
However, we cannot assure you that a high rate of inflation in the future will
not adversely affect our operating results.
Market Risk
We are exposed to certain market risks which are inherent in our financial
instruments. These instruments arise from transactions entered into in the
normal course of business, and in some cases relate to our acquisition of
related businesses. We are subject to interest rate risk on our senior credit
facility and any future financing requirements. Our fixed rate debt consists
primarily of the accreted balance of the Senior Discount Notes.
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The following table presents the future principal payment obligations and
weighted average interest rates associated with our existing long-term debt
instruments assuming our actual level of long-term debt indebtedness:
2000 2001 2002 2003 2004 Thereafter
---- ---- ---- ---- ---- ----------
Long-term debt:
Fixed rate (12.0%) -- -- -- -- -- $269,000,000
Term loan ($25.0 million)
variable rate (9.59% at
March 31, 2000) -- $2,500,000 $2,500,000 $ 7,500,000 $12,500,000 --
Term loan ($50.0 million)
variable rate (9.68% at
March 31, 2000) -- -- $ 500,000 $ 500,000 $ 500,000 $ 48,500,000
Note Payable
variable rate (8.38% at
March 31, 2000) $37,632 $ 50,176 $ 50,176 $ 50,176 $ 25,088 --
Our primary market risk exposure relates to (1) the interest rate risk on long-
term and short-term borrowings, (2) our ability to refinance our Senior Discount
Notes at maturity at market rates, (3) the impact of interest rate movements on
our ability to meet interest expense requirements and exceed financial covenants
and (4) the impact of interest rate movements on our ability to obtain adequate
financing to fund future acquisitions. We manage the interest rate risk on our
outstanding long-term and short-term debt through our use of fixed and variable
rate debt. While we cannot predict or manage 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.
Senior Discount Note Disclosure Requirements
The indenture governing our 12% Senior Discount Notes due 2008 require certain
financial disclosures for restricted subsidiaries separate from unrestricted
subsidiaries and the disclosure to be made of Tower Cash Flow, as defined in the
indenture, for the most recent fiscal quarter and Adjusted Consolidated Cash
Flow, as defined in the indenture, for the most recently completed four-quarter
period. As of March 31, 2000 we had no unrestricted subsidiaries. Tower cash
flow, as defined in the indenture, for the quarter ended March 31, 2000 was
$3.5 million. Adjusted Consolidated Cash Flow for the year ended March 31,
2000 was $18.3 million.
Cautionary Information Regarding Forward-Looking Statements
This quarterly report contains "forward-looking statements" within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act.
Discussions containing forward-looking statements may be found in the material
set forth in the section "Management's Discussion and Analysis of Financial
Condition and Results of Operations." These statements concern expectations,
beliefs, projections, future plans and strategies, anticipated events or trends
and similar expressions concerning matters that are not historical facts.
Specifically, this quarterly report contains forward-looking statements
regarding:
. our business strategy to transition our business from site development
services toward the site leasing business, including our intent to
make strategic acquisitions of towers and tower companies;
. anticipated trends in the maturation of the site development industry
and its effect on our revenues and profits;
. our estimates regarding the future development of the site leasing
industry and its effect on our site leasing revenues;
. our plan to continue to construct and acquire tower assets and the
resulting effect on our revenues, capital expenditures, expenses and
net income;
. our ability to successfully conclude letters of intent or definitive
agreements for newly built towers or acquisitions of existing towers
and the resulting effect on our financial operations;
. our estimate of the amount of capital expenditures for fiscal year
2000 that will be required for the construction or acquisition of
communications sites and the contingent share issuance related to the
acquisition of Com-Net; and
15
. our intention to fund capital expenditures for fiscal year 2000 from
cash from the follow-on offering, operations, and borrowings under our
senior credit facility.
These forward-looking statements reflect our current views about future events
and are subject to risks, uncertainties and assumptions. 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 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:
. our ability to secure as many site leasing tenants as planned;
. our ability to expand our site leasing business and our site
development business;
. our ability to complete construction of new towers on a timely and
cost-efficient basis, including our ability to successfully address
zoning issues, carrier design changes, changing local market
conditions and the impact of adverse weather conditions;
. our ability to identify and acquire new towers, including our
capability to timely complete due diligence and obtain third party
consents;
. our ability to retain current lessees on newly acquired towers;
. our ability to realize economies of scale for newly acquired towers;
. the continued dependence on towers by the wireless communications
industry;
. our ability to compete effectively for new tower opportunities in
light of increased competition; and
. our ability to raise substantial additional financing to expand our
tower holdings.
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
---------------------
In February 2000, the holders of warrants issued in 1997
exercised, pursuant to a cashless exercise option, warrants to
purchase 402,500 shares of SBA's Class A Common Stock at an
exercise price of $3.73 per share. Pursuant to the cashless exercise
option, the Company issued 357,387 shares of Class A Common
Stock and the holders surrendered warrants to purchase 45,113
additional shares as consideration. The shares of Class A
Common Stock were issued pursuant to Section 4(2) of the Securities
Act.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) EXHIBITS
27. Financial Data Schedule (filed only electronically with the SEC)
(b) REPORTS ON FORM 8-K
The Company filed a report on Form 8-K on January 11, 2000. In
the report, the Company reported under Item 5, that it had filed
a registration statement with the SEC to register $100.0 million
of its shares of Class A common stock that will be offered by
SBA.
The Company filed a report on Form 8-K on January 11, 2000. In
the report, the Company reported under Item 5, certain
operational results.
The Company filed a report on Form 8-K on February 4, 2000. In
the report, the Company reported under Item 5, that it had
priced its offering of Class A Common Stock. Prior to pricing
the Company filed an amendment to its Registration Statement,
increasing the number of shares from 6,000,000 shares to
9,000,000 shares of its Class A Common Stock plus up to 15% of
additional shares that may be offered by certain shareholders
to cover any over-allotments. The price of the Class A common
stock was set at $27.00 per share.
16
The Company filed a report on Form 8-K on February 4, 2000. In
the report, the Company reported under Item 5, that underwriters
of the recent offering of 9,000,000 shares of Class A common
stock exercised their over-allotment option to purchase 1,350,000
shares of SBA's Class A common stock from certain stockholders.
The Company will not receive the proceeds from any sale of shares
by the selling shareholders.
The Company filed a report on Form 8-K on February 23, 2000. In
the report, the Company reported financial results for the three
months and fiscal year ended December 31, 1999.
17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
May 15, 2000 /s/ John Marino
----------------
John Marino
Chief Financial Officer
(Duly Authorized Officer)
May 15, 2000 /s/ Pamela J. Kline
---------------
Pamela J. Kline
Chief Accounting Officer
(Principal Accounting Officer)
18