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, 2001 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 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 9, 2001 Class A Common Stock - 41,544,938 shares Class B Common Stock - 5,455,595 shares 1
SBA COMMUNICATIONS CORPORATION INDEX <TABLE> <CAPTION> Page ---- <S> <C> PART I - FINANCIAL INFORMATION Item 1. Unaudited Financial Statements Consolidated Balance Sheets as of March 31, 2001 and December 31, 2000 3 Consolidated Statements of Operations for the three months ended March 31, 2001 and 2000 4 Consolidated Statements of Cash Flows for the three months ended March 31, 2001 and 2000 5 Consolidated Statement of Shareholders' Equity as of March 31, 2001 6 Condensed Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3. Quantitative and Qualitative Disclosures About Market Risk 15 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 16 SIGNATURES 17 </TABLE> 2
ITEM 1: UNAUDITED FINANCIAL STATEMENTS SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited) (in thousands, except per share amounts) <TABLE> <CAPTION> March 31, 2001 December 31, 2000 -------------- ----------------- <S> <C> <C> ASSETS Current assets: Cash and cash equivalents $250,365 $14,980 Accounts receivable, net of allowance of $3,026 and $2,117 in 2001 and 2000, respectively 58,617 47,704 Prepaid and other current assets 5,601 5,968 Costs and estimated earnings in excess of billings on uncompleted contracts 8,696 13,584 ---------- -------- Total current assets 323,279 82,236 Property and equipment, net 910,471 765,815 Intangible assets, net 102,309 83,387 Other assets 13,615 17,380 ---------- -------- Total assets $1,349,674 $948,818 ========== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $46,842 $ 76,944 Accrued expenses 10,492 13,504 Current portion - notes payable 50 2,606 Billings in excess of costs and estimated earnings on uncompleted contracts 4,801 5,942 Other current liabilities 22,281 10,714 ---------- -------- Total current liabilities 84,466 109,710 ---------- -------- Long-term liabilities: Senior discount notes payable 215,194 209,042 Senior notes payable 500,000 - Notes payable 116 72,625 Deferred tax liabilities, net 20,501 18,445 Other long-term liabilities 996 836 ---------- -------- Total long-term liabilities 736,807 300,948 ---------- -------- Commitments and contingencies (see Note 8) Shareholders' equity: Common stock-Class A par value $.01 (100,000 shares authorized), 41,489 and 40,989 shares issued and outstanding in 2001 and 2000, respectively 415 410 Common stock-Class B par value $.01 (8,100 shares authorized), 5,456 shares issued and outstanding in 2001 and 2000 55 55 Additional paid-in capital 640,602 627,370 Accumulated deficit (112,671) (89,675) ---------- -------- Total shareholders' equity 528,401 538,160 ---------- -------- Total liabilities and shareholders' equity $1,349,674 $948,818 ========== ======== </TABLE> The accompanying Notes to Consolidated Financial Statements on pages 7 through 10 herein are an integral part of these consolidated financial statements. 3
SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (in thousands, except per share amounts) <TABLE> <CAPTION> For the three months ended March 31, ------------------------------------- 2001 2000 ---- ---- <S> <C> <C> Revenues: Site development $ 32,673 $20,342 Site leasing 20,283 10,087 -------- ------- Total revenues 52,956 30,429 -------- ------- Cost of revenues (exclusive of depreciation and amortization shown below): Cost of site development 25,018 15,569 Cost of site leasing 7,128 3,866 -------- ------- Total cost of revenues 32,146 19,435 -------- ------- Gross profit 20,810 10,994 Operating expenses: Selling, general and administrative 10,641 6,118 Depreciation and amortization 15,007 6,830 -------- ------- Total operating expenses 25,648 12,948 -------- ------- Operating loss (4,838) (1,954) Other income (expense): Interest income 3,000 1,528 Interest expense, net of amounts capitalized (8,683) (2,907) Non-cash amortization of original issue discount and debt issuance costs (6,968) (6,217) Other (84) 51 -------- ------- Total other expenses (12,735) (7,545) -------- ------- Loss before provision for income taxes and extraordinary item (17,573) (9,499) Provision for income taxes (354) (224) -------- ------- Loss before extraordinary item (17,927) (9,723) Extraordinary item, write-off of deferred financing fees (5,069) - -------- ------- Net loss $(22,996) $(9,723) ======== ======= Basic and diluted loss per common share before extraordinary item $ (0.38) $ (0.27) Extraordinary item (0.11) - -------- ------- Basic and diluted loss per common share $ (0.49) $ (0.27) ======== ======= Basic and diluted weighted average number of shares of common stock 46,801 35,382 ======== ======= </TABLE> The accompanying Notes to Consolidated Financial Statements on pages 7 through 10 herein are an integral part of these consolidated financial statements. 4
SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in thousands) <TABLE> <CAPTION> For the three months ended March 31, ------------------------------------- 2001 2000 ---- ---- <S> <C> <C> CASH FLOWS PROVIDED BY OPERATING ACTIVITIES: Net loss $ (22,996) $ (9,723) Adjustments to reconcile net loss to net cash used in operating activities- Depreciation and amortization 15,007 6,830 Non-cash compensation expense 788 203 Provision for doubtful accounts 399 327 Amortization of original issue discount and debt issuance costs 6,968 6,216 Write-off of deferred financing fees 5,069 - Changes in operating assets and liabilities: (Increase) decrease in- Accounts receivable (8,883) (3,524) Prepaid and other current assets 382 136 Costs and estimated earnings in excess of billings on uncompleted contracts 5,577 (3,791) Other assets 3,620 (35) Increase (decrease) in- Accounts payable (30,952) (4,289) Accrued expenses (3,175) 2,744 Other liabilities 12,742 (13) Billings in excess of costs and estimated earnings on uncompleted contracts (1,206) 2,145 --------- -------- Total adjustments 6,336 6,949 --------- -------- Net cash used in operating activities (16,660) (2,774) --------- -------- CASH FLOWS USED IN INVESTING ACTIVITIES: Tower and other capital expenditures (158,306) (60,591) --------- -------- Net cash used in investing activities (158,306) (60,591) --------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from common stock offerings - 229,579 Proceeds from option exercises 1,433 1,866 Proceeds from senior notes payable, net of financing fees 483,987 - Proceeds from notes payable 30,000 11,000 Repayment of notes payable (105,069) (70,513) --------- -------- Net cash provided by financing activities 410,351 171,932 --------- -------- Net increase in cash and cash equivalents 235,385 108,567 CASH AND CASH EQUIVALENTS: Beginning of period 14,980 3,130 --------- -------- End of period $ 250,365 $111,697 ========= ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 9,805 $ 3,710 ========= ======== Taxes $ 1,229 $ 463 ========= ======== NON-CASH ACTIVITIES: Assets acquired in acquisitions $ 23,470 $ 4,519 Liabilities assumed in acquisitions $ (2,126) $ (309) Stock issued for acquisitions $ (10,929) $ (4,166) </TABLE> The accompanying Notes to Consolidated Financial Statements on pages 7 through 10 herein are an integral part of these consolidated financial statements. 5
SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 2001 (unaudited) (in thousands) <TABLE> <CAPTION> Common Stock --------------------------------------- Class A Class B Additional ----------------- ---------------- Paid-In Accumulated Number Amount Number Amount Capital Deficit Total ------ ------ ------ ------ ---------- ----------- -------- <S> <C> <C> <C> <C> <C> <C> <C> BALANCE, December 31, 2000 40,989 $410 5,456 $55 $627,370 $ (89,675) $538,160 Common stock issued in connection with acquisitions 277 3 - - 10,926 - 10,929 Exercise of employee stock options 223 2 - - 1,431 - 1,433 Non-cash compensation adjustment - - - - 875 - 875 Net loss - - - - - (22,996) (22,996) ------ ---- ----- --- -------- --------- -------- BALANCE, March 31, 2001 41,489 $415 5,456 $55 $640,602 $(112,671) $528,401 ====== ==== ===== === ======== ========= ======== </TABLE> The accompanying Notes to Consolidated Financial Statements on pages 7 through 10 herein are an integral part of these consolidated financial statements. 6
SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The accompanying consolidated financial statements should be read in conjunction with the 2000 Form 10-K for SBA Communications Corporation. These financial statements 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 accounting principles generally accepted in the United States. In the opinion of the Company's management, all adjustments (consisting of normal recurring accruals) considered necessary for fair financial statement presentation have been made. Certain amounts included in the prior year's consolidated financial statements have been reclassified to conform to the current year's presentation. The results of operations for an interim period may not give a true indication of the results for the year. During the three months ended March 31, 2001 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 stock options. These potential common stock equivalents were not included in diluted loss per share because the effect would have been anti-dilutive. Accordingly, basic and diluted loss per common share and the weighted average number of shares used in the computation are the same for all periods presented. There were 3.5 million and 3.0 million options outstanding at March 31, 2001 and 2000, respectively. 2. CURRENT ACCOUNTING PRONOUNCEMENTS In June 2000, the Financial Accounting Standards Board ("FASB") issued SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment of SFAS 133. SFAS 133 established accounting and reporting standards for derivative instruments including certain derivative instruments embedded in other contracts, and for hedging activities. SFAS 138 addresses a limited number of issues causing implementation difficulties for numerous entities that apply SFAS 133 and amends the accounting and reporting standards of SFAS 133 for certain derivative instruments and certain hedging activities. The Company adopted SFAS 138 on January 1, 2001 and there was not a significant impact from the adoption. 3. PROPERTY AND EQUIPMENT Property and equipment consists of the following: March 31, December 31, 2001 2000 --------- ------------ (in thousands) Towers $880,674 $721,361 Construction in process 65,651 69,012 Furniture, equipment and vehicles 21,199 19,497 Land 10,363 10,014 Buildings and improvements 681 625 -------- -------- 978,568 820,509 Less: Accumulated depreciation and amortization (68,097) (54,694) -------- -------- Property and equipment, net $910,471 $765,815 ======== ======== 7
Construction in process represents costs incurred related to towers which are under development and will be used in the Company's operations. 4. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS Costs and estimated earnings on uncompleted contracts consist of the following: March 31, 2001 December 31, 2000 -------------- ----------------- (in thousands) Costs incurred on uncompleted contracts $ 53,794 $ 48,060 Estimated earnings 12,163 9,941 Billings to date (62,062) (50,359) -------- -------- $ 3,895 $ 7,642 ======== ======== As of As of March 31, 2001 December 31, 2000 -------------- ----------------- (in thousands) Costs and estimated earnings in excess of billings on uncompleted contracts $ 8,696 $13,584 Billings in excess of costs and estimated earnings on uncompleted contracts (4,801) (5,942) ------- ------- $ 3,895 $ 7,642 ======= ======= 5. CURRENT AND LONG-TERM DEBT <TABLE> <CAPTION> As of As of March 31, 2001 December 31, 2000 -------------- ----------------- (in thousands) <S> <C> <C> Senior credit facility term loan, repaid in February 2001. $ - $ 50,000 Senior credit facility revolving loan, repaid in March 2001. - 25,000 12% senior discount notes, net of unamortized original issue discount of $53,806 at March 31, 2001, unsecured, cash interest payable semi-annually in arrears beginning September 1, 2003, balloon principal payment of $269,000 due at maturity on March 1, 2008. 215,194 209,042 10 1/4% senior notes, unsecured, interest payable semi-annually beginning August, 2001. 500,000 - Note payable, interest at varying rates (7.7275% at March 31, 2001). 166 231 -------- -------- 715,360 284,273 Less: current maturities (50) (2,606) -------- -------- Long-term debt $715,310 $281,667 ======== ======== </TABLE> 6. SHAREHOLDERS' EQUITY In January 2001, the Company entered into bonus agreements with certain executives and employees to issue shares, or options to acquire shares, of the Company's Class A common stock. The Company expects to record approximately $3.2 million of non-cash compensation expense in 2001 and $1.2 million in non- cash compensation expense in each year from 2002 through 2006. The Company recorded approximately $0.8 million in non-cash compensation expense, net of amounts capitalized, in the quarter ended March 31, 2001. 8
7. INCOME TAXES The components of the provision for income taxes are as follows: For the three months ended ----------------------------------- March 31, 2001 March 31, 2000 -------------- -------------- (in thousands) Federal income tax $ 7,698 $ 3,128 State income tax (353) (223) Foreign tax (1) (1) Change in valuation allowance (7,698) (3,128) ------- ------- $ (354) $ (224) ======= ======= The Company has taxable losses in the three months ended March 31, 2001 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. As part of the consideration for its acquisitions, the Company sometimes agrees to issue additional shares of Class A common stock if the towers or businesses that are acquired meet or exceed certain earnings or new tower targets in the 1-3 years after they have been acquired. As of March 31, 2001, the Company had the obligation to issue approximately 0.6 million additional shares of Class A common stock and pay approximately $4.0 million if the earnings targets identified in various acquisition agreements are met. 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. These business units are managed separately based on the fundamental differences in their operations. The Company's segment information for revenues, gross profit, capital expenditures (including assets acquired through the issuance of the Company's Class A common stock) and assets is as follows: For the three months ended March 31, ------------------------------------ 2001 2000 ---- ---- (in thousands) Revenues: Site development - consulting $ 6,304 $ 5,577 Site development - construction 26,369 14,765 Site leasing 20,283 10,087 -------- -------- $ 52,956 $ 30,429 ======== ======== Gross profit: Site development - consulting $ 2,008 $ 2,056 Site development - construction 5,647 2,717 Site leasing 13,155 6,221 -------- -------- $ 20,810 $ 10,994 ======== ======== 9
Capital expenditures: Site development - consulting $ 346 $ 5,153 Site development - construction 13,579 3,407 Site leasing 154,436 55,607 Assets not identified by segment 874 590 -------- -------- $169,235 $ 64,757 ======== ======== As of As of March 31,2001 December 31, 2000 ------------- ----------------- (in thousands) Assets: Site development - consulting $ 12,680 $ 14,248 Site development - construction 114,703 99,962 Site leasing 947,539 815,660 Assets not identified by segment 274,752 18,948 ---------- -------- $1,349,674 $948,818 ========== ======== 9. SUBSEQUENT EVENTS In April 2001, the Company received a commitment for a $300.0 million senior secured credit facility. The credit facility will be underwritten by Lehman Commercial Paper, Inc., Barclay's Bank PCC, Bankers Trust Company, Citibank, N.A. and Toronto Dominion (Texas), Inc. The credit facility is subject to a number of customary closing conditions and is expected to close by June 30, 2001. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS We are a leading independent owner and operator of wireless communications towers in the United States. We generate revenues from our two primary businesses, site leasing and site development. In our site leasing business, we lease antenna space to wireless service providers on towers and other structures that we own or manage for others. The towers that we own have either been constructed by us at the request of a carrier, built or constructed based on our own initiative or acquired. In our site development business, we offer wireless service providers assistance in developing their own networks, including designing a network with full signal coverage, identifying and acquiring locations to place their antennas, obtaining zoning approvals, building towers when necessary and installing their antennas. Since our founding in 1989, we have participated in the development of more than 15,000 antenna sites in 49 of the 51 major wireless markets in the United States. Site Leasing Services In 1997, we began aggressively expanding our site leasing business by capitalizing on our nationally recognized site development experience and strong relationships with wireless service providers to take advantage of the trends toward independent tower ownerships and co-location, which is the placement of multiple antennas on one tower. As of March 31, 2001, we owned or controlled 2,389 towers and had agreements or options to acquire 406 towers. We also had carrier directives to build over 550 additional towers and had, in various phases of development, over 1,050 locations which we had internally identified as desirable locations on which to build a tower. We believe our history and experience in providing site development services gives us a competitive advantage in choosing the most attractive locations on which to build new towers or buy existing towers, as measured by our success in increasing tower revenues and cash flows. Based on tenant leases executed as of March 31, 2001, same tower revenue growth for the trailing twelve months on the 1,351 towers we owned as of March 31, 2000 was 34%. We signed 303 new tenant leases in the quarter ended March 31, 2001 on the 2,390 towers we owned at the beginning of the quarter, at an average initial monthly rent of $1,527. Our annualized rate of tenants added per tower, on a broadband equivalent basis, was .52, .56, .59, and .64 for the quarters ended March 31, 2001, December 31, 2000, 10
September 30, 2000 and June 30, 2000, respectively. A broadband equivalent basis is calculated by dividing total lease revenue by $1,500, an industry benchmark for monthly rent per tenant. We believe that our annualized rate of new tenants added per tower per quarter is among the highest in the industry. As of March 31, 2001, the tenant count on owned towers was 6,425 or an average of 2.3 tenants per tower. We have focused our capital expenditures on building new towers and acquiring existing towers. In general, we have chosen to build rather than buy the majority, 61%, of our towers because we believe the economics of building are more favorable. To date, our average construction cost of a new tower is approximately $240,000, while we believe the industry's average acquisition cost of a new tower over the last two years has been approximately $400,000. While we have focused primarily on building new towers for growth, we have also acquired 1,115 towers as of March 31, 2001. We seek to acquire towers where we can increase cash flow to substantially reduce the tower cash flow multiple paid at acquisition through additional tenant leases. For the quarter ended March 31, 2001, we acquired 267 towers. The 267 acquisitions were completed at an aggregate purchase price of $91.8 million, an average price of approximately $343,900 per tower. In addition to what we have previously acquired, we are actively negotiating to acquire additional existing towers. In 2000 we entered into agreements to purchase 275 existing towers from TeleCorp PCS, Inc. (TeleCorp), and a total of 300 towers from U.S. Unwired. In March 2001, we acquired 203 towers under the TeleCorp agreement for $66.5 million, and we anticipate that we will acquire up to the remaining 72 towers from TeleCorp in the second and third quarter of 2001 for $23.6 million. In March 2001, we acquired an additional 14 towers from US Unwired and expect to acquire up to the remaining 159 towers from U.S. Unwired in the second and third quarters of 2001 for $54.1 million. As of March 31, 2001, we had agreements to acquire 306 towers in 29 separate transactions for an aggregate purchase price of approximately $101.8 million or an average acquisition price of approximately $333,000 per tower. These numbers do not include an option to purchase up to 100 additional towers from U.S. Unwired later in 2001. These acquisitions are subject to a number of conditions and may or may not close. The following chart shows the number of towers we constructed for our own account and the number of towers we acquired during the periods indicated: Three months ended Year ended March 31, 2001 December 31, 2000 ------------------ ----------------- Towers constructed 182 779 Towers acquired 267 448 Site Development Services Our site development business consists of two segments, site development consulting and site development construction, through which we provide wireless service providers a full range of end-to-end services. In the consulting segment of our site development business, we offer clients the following services: (1) network pre-design; (2) identification of potential locations for towers and antennas; (3) support in buying or leasing of the location; and (4) assistance in obtaining zoning approvals and permits. In the construction segment of our site development business we provide a number of services, including the following: (1) tower and related site construction; (2) switch construction; and (3) antenna installation. We believe that our total site development business will grow with the expected overall growth of wireless and other telecommunications networks. We anticipate that site development construction revenues will continue to exceed site development consulting revenues. We also believe that our site leasing revenues will grow as wireless service providers continue to lease antenna space on our towers and the number of towers we own or control grows. 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 11
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, interest income and interest expense each increased significantly in the three month period ended March 31, 2001 as compared to the respective period in the prior year, and some or all of those items may continue to increase significantly in future periods. Additionally, in the quarter ended March 31, 2001, we recorded an extraordinary loss of $5.1 million for the write-off of deferred financing fees associated with the termination of a senior credit facility. We believe that our new tower build programs may have a material effect on future financial results, which effect will probably be negative until such time, if ever, as the newly constructed towers attain higher levels of tenant use. First Quarter 2001 Compared to the First Quarter 2000 Total revenues increased 74.0% to $53.0 million for the first quarter of 2001 from $30.4 million for the first quarter of 2000. Site development revenues increased 60.6% to $32.7 million in the first quarter of 2001 from $20.3 million in the first quarter of 2000 due to increases in both site development consulting revenues and construction revenues. Site development consulting revenues increased 13.0% to $6.3 million for the first quarter 2001 from $5.6 million for the first quarter of 2000, due to the increased demand for site acquisition and zoning services from wireless communications carriers. Site development construction revenues increased 78.6% to $26.4 million for the first quarter of 2001 from $14.8 million for the first quarter of 2000, due to the increased demand for construction services from wireless communications carriers and the number of projects on which services were rendered. Site leasing revenues increased 101.1% to $20.3 million for the first quarter of 2001, from $10.1 million for the first quarter of 2000, due to the increased number of tenants added to our towers, higher average rents received and the increase in the number of towers added to our portfolio. Total cost of revenues increased 65.4% to $32.1 million for the first quarter of 2001 from $19.5 million for the first quarter of 2000. Site development cost of revenues increased 60.7% to $25.0 million for the first quarter of 2001 from $15.6 million in the first quarter of 2000 due to the increased volume in both site development consulting and construction revenues. Site development consulting cost of revenues increased 22.0% to $4.3 million for the first quarter of 2001 from $3.5 million for the first quarter of 2000 due primarily to higher revenues. Site development construction cost of revenues increased 72.0% to $20.7 million for the first quarter of 2001 from $12.0 million in the first quarter of 2000 due primarily to higher revenues. Site leasing cost of revenues increased 84.4% to $7.1 million for the first quarter of 2001 from $3.9 million for the first quarter of 2000, 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 89.3% to $20.8 million for the first quarter of 2001 from $11.0 million for the first quarter of 2000, due to increased site development and site leasing revenues. Gross profit from site development increased 60.4% to $7.7 million in the first quarter of 2001 from $4.8 million in the first quarter of 2000 due to higher site development revenues. Gross profit margins for site development remained relatively consistent for the first quarter of 2001 and 2000. Gross profit margin on site development consulting decreased to 31.9% for the first quarter of 2001 from 36.9% for the first quarter of 2000, reflecting different stages of project completions. Gross profit margin on site development construction increased in the first quarter of 2001 to 21.4% from 18.4% in the first quarter of 2000 as a result of our efforts to emphasize higher margin projects, such as antenna installation and use of less subcontractor labor. Gross profit for the site leasing business increased 111.4% to $13.2 million in the first quarter of 2001 from $6.2 million in the first quarter of 2000, and site leasing gross profit margin improved to 64.9% in the first quarter of 2001 from 61.7% in the first quarter of 2000. The increased gross profit was due to the substantially greater number of towers owned, the increase in the number of tenants, and the greater average revenue per tower in the 2001 period. The increase in gross margin was due to the increase in average revenue per tower, which was greater than the increase in average expenses. As a percentage of total revenues, gross profit increased to 39.3% of total revenues for the first quarter of 2001 from 36.1% for the first quarter of 2000 due primarily to increased levels of higher margin site leasing gross profit. Selling, general and administrative expenses increased to $10.6 million for the first quarter of 2001 from $6.1 million for the first quarter of 2000. As a percentage of total revenues, selling, general and administrative expenses remained relatively consistent for the first quarter of 2001 and 2000. The increase in selling, general and administrative expenses represents the addition of additional offices, personnel and other infrastructure necessary to support our 12
continued growth as well as increased non-cash compensation expense and development expenses. The amount recorded as non-cash compensation in the first quarter of 2001 was $0.8 million as compared to $0.2 million in the first quarter of 2000. This increase results from the Company's increased usage of both stock and options as a means of both rewarding and retaining key employees. The increase in developmental expenses is associated with much higher levels of new build and acquisition activity, particularly in our strategic siting efforts, and a more focused approach resulting in higher selectivity in the strategic sites we build. A portion of the increase in developmental expense is due to an increasingly difficult zoning environment. To a lesser extent, some of these expenses relate to pending acquisitions which ultimately did not close. This level of developmental expense may continue or even increase for the forseeable future. Depreciation and amortization increased to $15.0 million for the first quarter of 2001 as compared to $6.8 million for the first quarter of 2000. This increase is directly related to the increased amount of fixed assets (primarily towers) we owned in 2001 as compared to 2000. Operating loss was $(4.8) for the first quarter 2001, as compared to an operating loss of $(2.0) million for the first quarter of 2000. Total other expenses increased to $(12.7) million for the first quarter of 2001, as compared to $(7.5) million for the first quarter of 2000, primarily as a result of increased interest expense. The increase in interest expense is primarily due to additional interest expense on our $500.0 million 10 1/4 % senior notes issued in February 2001. The extraordinary item in 2001 of $(5.1) million relates to the write-off of deferred financing fees associated with a credit facility we terminated in the first quarter of 2001. Net loss was $(23.0) million for the first quarter of 2001 as compared to net loss of $(9.7) million for the first quarter of 2000. Earnings before interest, taxes, depreciation and amortization, non-cash compensation expense and extraordinary items ("EBITDA") increased 115.7% to $11.0 million for the first quarter of 2001 from $5.1 million in the first quarter of 2000. The following table provides a reconciliation of EBITDA to net loss: Three months ended March 31, ---------------------------- 2001 2000 ---- ---- (in thousands) EBITDA $ 10,957 $ 5,079 Interest expense (8,683) (2,907) Amortization of original issue discount and debt issuance costs (6,968) (6,217) Interest income 3,000 1,528 Provision for income taxes (354) (224) Depreciation and amortization (15,007) (6,830) Other income (expense) (84) 51 Non-cash compensation expense (788) (203) Extraordinary item (5,069) - -------- ------- Net loss $(22,996) $(9,723) ======== ======= 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, other than financings, is distributions with respect to our ownership interest in our subsidiaries from the net earnings and cash flow generated by these subsidiaries. Even if we decided to pay a dividend on or make a distribution 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. 13
Net cash used in operations during the three months ended March 31, 2001 was $(16.7) million as compared to $(2.8) million in the three months ended March 31, 2000. Net cash used in investing activities for the three months ended March 31, 2001 was $(158.3) million compared to $(60.6) million for the three months ended March 31, 2000. This increase is primarily attributable to a higher level of tower acquisition and new build activity in 2001 versus 2000. Net cash provided by financing activities for the three months ended March 31, 2001 was $410.4 million compared to $171.9 million for the three months ended March 31, 2000. The increase in net cash provided by financing activities is primarily due to the issuance of our $500.0 million 10 1/4% senior notes completed in February 2001. Our balance sheet reflected positive working capital of $238.8 million as of March 31, 2001 compared to $(27.5) million as of December 31, 2000. This change is primarily attributable to increased cash balances as a result of the issuance of our $500.0 million 10 1/4% senior notes completed in February 2001 and a reduction in payables. In February 2001, the Company issued $500.0 million 10 1/4% senior notes due 2009, which produced net proceeds of approximately $484.0 million after deducting offering expenses. The Company used $105.0 million of these proceeds to repay all borrowings under the senior credit facility and terminated the senior credit agreement. On March 16, 2001, the Company used $66.5 million of the remaining proceeds to purchase 203 towers under our agreement with TeleCorp. We intend to use approximately $23.6 million of the remaining proceeds to purchase the remaining 72 towers under the TeleCorp agreement and approximately $49.8 million to purchase the remaining 159 towers from US Unwired. Remaining proceeds will be used to finance the construction and acquisitions of additional towers and related businesses and for general working capital purposes. Interest on these notes is payable on February 1 and August 1 of each year, beginning August 1, 2001. The 10 1/4% senior notes are unsecured and pari passu in right of payment with the Company's other existing and future senior indebtedness. The 10 1/4% senior notes place certain restrictions on, among other things, the incurrence of debt and liens, issuance of preferred stock, payment of dividends or other distributions, sale of assets, transactions with affiliates, sale and leaseback transactions, certain investments and our ability to merge or consolidate with other entities. We have on file with the Commission shelf registration statements on Form S-4 registering up to a total of 3,000,000 shares of Class A common stock that we may issue in connection with the acquisition of wireless communication towers or companies that provide related services at various locations in the United States. During the three months ended March 31, 2001, we issued 277,202 shares of Class A common stock in connection with two acquisitions. Our cash capital expenditures for the three month ended March 31, 2001 were $158.3 million, and for the year ended December 31, 2000 were $445.3 million. We currently plan to make total cash capital expenditures during the year ending December 31, 2001 of at least $400.0 million to $450.0 million, including up to $77.7 for the acquisition of up to 275 towers we have acquired or will acquire from TeleCorp and approximately $54.1 million for the acquisition of up to 173 towers we have acquired or will acquire from U.S. Unwired. Substantially all of these planned capital expenditures are expected to be funded by the proceeds of our $500.0 million 10 1/4% senior note offering completed in February 2001 and cash flow from operations. In April 2001, the Company received a commitment for a $300.0 million senior secured credit facility. The facility provides for a $100.0 million term loan and a $200.0 million revolving loan. This loan is expected to close in June 2001. At closing, $50.0 million of the term loan will be drawn. The additional $50.0 million available under the term loan will be drawn within six months of closing. The proceeds of this credit facility, if fully drawn, are expected to be sufficient to fund the existing capital expenditure plan thorough the end of 2002, as currently planned. Current plans for fiscal year 2002 cash capital expenditures are approximately $300.0 million. Availability under this facility will be based on certain covenants. The exact amount of our future capital expenditures will depend on a number of factors including 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. Thereafter, however, or in the event we exceed current anticipated cash capital expenditures, we anticipate that we will need to seek additional equity or debt financing to fund our business plan. In the event that we do not have sufficient liquidity and 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. 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 12% and the 10 1/4% senior notes) on or prior to scheduled maturity. 14
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 (including the 12% and the 10 1/4% senior notes), 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. 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. ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT 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. Substantially all of our indebtedness currently conisists of fixed rate debt. The following table presents the future principal payment obligations and weighted average interest rates associated with our long-term debt instruments assuming our actual level of long-term debt indebtedness as of March 31, 2001: (in thousands) 2001 2002 2003 2004 Thereafter ---- ---- ---- ---- ---------- Long-term debt: Fixed rate (12.0%) -- -- -- -- $269,000 Fixed rate (101/4%) -- $500,000 Note Payable variable rate (7.7275% at March 31, 2001) $ 41 $ 50 $ 50 $ 25 -- 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 notes at maturity at market rates, (3) the impact of interest rate movements on our ability to meet interest expense requirements and 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 and sometimes hedging instruments. 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 indentures governing our 12% senior discount notes due 2008 and our 10 1/4% senior notes due 2009 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 indentures, for the most recent fiscal quarter and Adjusted Consolidated Cash Flow, as defined in the indentures, for the most recently completed four-quarter period. As of March 31, 2001 we had no unrestricted subsidiaries. Tower cash flow, as defined in the indentures, for the quarter ended March 31, 2001 was $8.0 million. Adjusted Consolidated Cash Flow for the twelve months ended March 31, 2001 was $41.8 million. Disclosure Regarding Forward-Looking Statements This quarterly report contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities 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: 15
o our strategy to transition the primary focus of our business from site development services toward the site leasing business, including our intent to make strategic acquisitions of towers and tower companies; o anticipated trends in the site development industry and its effect on our revenues and profits; o our estimates regarding the future development of the site leasing industry and its effect on our site leasing revenues; o our plan to continue to construct and acquire tower assets and the resulting effect on our revenues, capital expenditures, expenses and net income; o 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; o our estimate of the amount of cash capital expenditures for the years ending December 31, 2001 and 2002 that will be required for the construction or acquisition of communications sites; o our intention to fund capital expenditures through the end of 2002 from the net proceeds of February 2001 10 1/4% senior note offering, cash flow from operations and borrowings under any new senior secured credit facility we enter into; and o the potential for continued developmental expenses at or greater than levels experienced in the first quarter of 2001. 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 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: o our ability to secure as many site leasing tenants as planned; o our ability to expand our site leasing business and maintain or expand our site development business; o 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; o our ability to identify and acquire new towers, including our capability to timely complete a review of the business, financial, and legal aspects of a new tower and obtain third party consents; o our ability to retain current lessees on newly acquired towers; o our ability to realize economies of scale for newly acquired towers; o the continued dependence on towers and outsourced site development services by the wireless communications industry; o our ability to compete effectively for new tower opportunities and site development services in light of increased competition; and o our ability to close on our senior secured credit facility and raise substantial additional financing to expand our tower holdings. We assume no responsibility for updating forward-looking statements in this quarterly report. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) None (b) REPORTS ON FORM 8-K The Company filed a report on Form 8-K on January 22, 2001. In the report, the Company reported under Item 9 certain operational results. The Company filed a report on Form 8-K on February 1, 2001. In the report, the Company reported under Item 5 the issuance of $500.0 million 10 1/4% senior notes. 16
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, 2001 /s/ John Marino ---------------------------- John Marino Chief Financial Officer (Duly Authorized Officer) May 15, 2001 /s/ Pamela J. Kline ----------------------------- Pamela J. Kline Chief Accounting Officer (Principal Accounting Officer) 17