2008 Annual Report
SBA Communications Corporation
400
300
200
100
0
300
225
150
75
0
$ 400
$ 395.5
0
.
4
4
1
$
3
.
1
6
1
$
2
.
6
5
2
$
8
.
1
2
3
$
’04
’05
’06
’07
2008
Site Leasing Revenues
(in millions)
$ 400
$ 395.5
$ 300
$ 299.4
200
0
150
0
200
0
0
.
4
4
1
$
3
.
1
6
1
$
2
.
6
5
2
$
8
.
1
2
3
$
’04
’05
’06
’07
2008
Site Leasing Revenues
(in millions)
7
.
6
9
$
0
.
4
1
1
$
5
.
5
8
1
$
8
.
3
3
2
$
’04
’05
’06
’07
2008
Site Leasing Operating
Profit (in millions)
$ 400
80
$ 395.5
$ 300
$ 299.4
80%
75.7%
400
300
200
100
0
300
225
150
75
0
80
70
400
300
200
100
0
300
225
150
75
0
80
70
60
50
40
100
95
90
85
80
20000
15000
10000
5000
0
1900
1800
1700
1600
1500
70
200
60
50
0
40
0
.
4
4
1
$
3
.
1
6
1
$
2
.
6
5
2
$
8
.
1
2
3
$
’04
’05
’06
’07
2008
Site Leasing Revenues
(in millions)
100
$ 300
$ 299.4
.
7
6
9
$
.
0
4
1
1
$
.
5
5
8
1
$
.
8
3
3
2
$
’04
’05
’06
’07
2008
Site Leasing Operating
Profit (in millions)
Cost of revenues (exclusive of depreciation, amortization
Financial Highlights 2008 vs 2007
For the year ended December 31,
60
(in thousands, except per share data)
Revenues:
Site leasing
Site development
Total revenues
50
40
and accretion):
Site leasing
Site development
100
Total cost of revenues
Operating profit:
95
Site leasing segment
Site development segment
90
Total operating profit
80%
75.7%
20000
Selling, general and administrative expenses
85
Net loss
%
2
Basic and diluted net loss per share
.
7
6
Weighted average number of shares
’04
80
%
7
.
0
7
%
4
.
2
7
%
7
.
2
7
’05
’06
’07
2008
For the year ended December 31,
(in thousands)
Site Leasing Operating
Profit Margin
Cash, cash equivalents and short-term restricted cash
Total assets
Total debt
95
90
150
85
80
0
15000
60
10000
5000
40
0
150
0
7
.
6
9
$
0
.
4
1
1
$
5
.
5
8
1
$
8
.
3
3
2
$
’04
’05
’06
’07
2008
Site Leasing Operating
Profit (in millions)
60
40
%
2
.
7
6
%
7
.
0
7
%
4
.
2
7
%
7
.
2
7
’04
’05
’06
’07
2008
Site Leasing Operating
Profit Margin
80%
75.7%
100%
97.6%
60
Percentage
2007
2008
Change
90
80
.
%
1
22.9%
4
9
(8.1)%
’04
%
1
5
9
.
%
4
5
9
.
%
5
5
9
.
’05
’06
’07
2008
16.4%
Site Leasing Operating
Profit Margin Contribution
9.3%
(4.5)%
2.9%
28.0%
(32.7)%
25.3%
7.2%
(40.0)%
20,000
19,344
10,000
9
2
4
,
5
1
6
2
7
,
5
1
1
5
8
,
6
1
1
8
3
,
8
1
’074Q
’081Q 2Q 3Q
4Q
Number of Tenants
0
.
.
.
%
%
%
4
7
2
$ 321,818
2
0
7
7
7
6
86,383
’05
’06
408,201
’04
%
7
2
7
.
’07
$ 395,541
79,413
40
2008
474,954
Site Leasing Operating
Profit Margin
88,006
75,347
96,175
71,990
100%
163,353
168,165
233,812
11,036
$ 244,848
97.6%
299,366
7,423
90
$ 306,789
$
$
%
1
$
.
4
9
’04
45,569
(77,879)
%
%
4
1
(0.74)
.
.
5
5
9
9
104,743
’05
’06
$
$
%
5
.
$
5
9
48,841
(46,763)
(0.43)
109,882
2008
80
’07
Site Leasing Operating
Profit Margin Contribution
2008
2007
$ 107,873
$ 117,455
$ 2,384,323
$ 3,211,508
100%
$ 1,905,000
$ 2,554,660
20000
15000
10000
5000
0
1900
1800
1700
1600
1500
1900
97.6%
20,000
19,344
$ 1,900
8000
$ 1,886
7000
6000
5000
4000
3000
2000
1000
300
250
200
150
100
50
0
1800
90
1700
1600
80
%
1
.
4
9
%
1
.
5
9
%
4
.
5
9
%
5
.
5
9
’04
’05
’06
’07
2008
Site Leasing Operating
1500
Profit Margin Contribution
20,000
19,344
$ 1,900
8000
$ 1,886
7000
10,000
1,700
4000
9
2
4
,
5
1
6
2
7
,
5
1
1
5
8
,
6
1
1
8
3
,
8
1
’074Q
’081Q 2Q 3Q
4Q
Number of Tenants
7
0
8
,
1
$
8
2
8
,
1
$
0
4
8
,
1
$
9
5
8
,
1
$
0
’074Q
’081Q 2Q 3Q
4Q
1,500
0
Average Monthly Cash Rents
$ 1,900
$ 1,886
1,700
7
0
8
,
1
$
8
2
8
,
1
$
0
4
8
,
1
$
9
5
8
,
1
$
’074Q
’081Q 2Q 3Q
4Q
1,500
Average Monthly Cash Rents
6000
5000
3000
2000
1000
300
250
200
150
100
50
0
40
35
30
25
20
15
10
5
0
1
2
.
4
3
$
1
2
.
4
3
$
0
0
.
9
2
$
8
6
.
6
3
$
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1
.
8
2
$
0
5
.
8
3
$
1
8
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0
3
$
6
4
.
0
3
$
5
7
.
5
2
$
4
0
.
4
3
$
3
9
.
3
2
$
2
0
.
9
2
$
4
0
.
8
3
$
0
5
.
8
3
$
0
1
.
3
2
$
8
6
.
5
2
$
9
4
.
9
$
’07 1Q
2Q
3Q
4Q
’08 1Q
2Q
3Q
4Q
High and Low Sales Price for Class A Common Stock
5
0
.
4
.
8
3
$
0
8
3
$
6
4
.
0
3
$
5
7
.
5
2
$
0
0
.
9
2
$
0
5
.
8
3
$
1
8
.
0
3
$
8
6
.
6
3
$
4
1
.
8
2
$
4
0
.
4
3
$
3
9
.
3
2
$
2
0
.
9
2
$
0
1
.
3
2
$
8
6
.
5
2
$
9
4
.
9
$
Other Telephony
17%
AT&T
25%
Alltel 5%
Other Non-Telephony
6%
T-Mobile
11%
Tenant Revenue
Percentage by
Customer
Sprint
25%
Verizon
11%
40
35
30
25
20
15
10
5
0
1
2
.
4
3
$
40
35
30
25
20
15
10
5
0
’07 1Q
2Q
3Q
4Q
’08 1Q
2Q
3Q
4Q
High and Low Sales Price for Class A Common Stock
5
0
.
4
.
8
3
$
0
8
3
$
6
4
.
0
3
$
5
7
.
5
2
$
0
0
.
9
2
$
0
5
.
8
3
$
1
8
.
0
3
$
8
6
.
6
3
$
4
1
.
8
2
$
4
0
.
4
3
$
3
9
.
3
2
$
2
0
.
9
2
$
0
1
.
3
2
$
8
6
.
5
2
$
9
4
.
9
$
Other Telephony
17%
AT&T
25%
Alltel 5%
Other Non-Telephony
6%
T-Mobile
11%
Tenant Revenue
Percentage by
Customer
Sprint
25%
Verizon
11%
’07 1Q
2Q
3Q
4Q
’08 1Q
2Q
3Q
4Q
High and Low Sales Price for Class A Common Stock
Other Telephony
17%
AT&T
25%
Alltel 5%
Other Non-Telephony
6%
T-Mobile
11%
Tenant Revenue
Percentage by
Customer
Sprint
25%
Verizon
11%
8,000
7,854
4,000
0
6
0
,
3
4
0
3
,
3
1
5
5
,
5
0
2
2
,
6
’04
’05 ’06 ’07
2008
0
Total Towers in Continuing
Operations at Year End
$ 300
$ 269.2
150
0
8,000
7,854
4,000
$ 300
$ 269.2
150
0
8000
7000
6000
5000
4000
3000
2000
1000
0
300
250
200
150
100
50
0
8,000
7,854
4,000
$ 269.2
$ 300
150
8
.
8
7
$
3
.
5
9
$
8
.
1
6
1
$
4
.
9
0
2
$
0
6
0
,
3
4
0
3
,
3
1
5
5
,
5
0
2
2
,
6
’04
’05 ’06 ’07
2008
Total Towers in Continuing
Operations at Year End
0
’04
’05 ’06 ’07
2008
Growth in Adjusted EBITDA
(in millions)
8
.
8
7
$
3
.
5
9
$
8
.
1
6
1
$
4
.
9
0
2
$
’04
’05 ’06 ’07
2008
0
Growth in Adjusted EBITDA
(in millions)
10,000
1,700
9
2
4
,
5
1
6
2
7
,
5
1
1
5
8
,
6
1
1
8
3
,
8
1
’074Q
’081Q 2Q 3Q
4Q
Number of Tenants
7
0
8
,
1
$
8
2
8
,
1
$
0
4
8
,
1
$
9
5
8
,
1
$
0
’074Q
’081Q 2Q 3Q
4Q
1,500
0
Average Monthly Cash Rents
0
6
0
,
3
4
0
3
,
3
1
5
5
,
5
0
2
2
,
6
’04
’05 ’06 ’07
2008
Total Towers in Continuing
Operations at Year End
8
.
8
7
$
3
.
5
9
$
8
.
1
6
1
$
4
.
9
0
2
$
0
’04
’05 ’06 ’07
2008
Growth in Adjusted EBITDA
(in millions)
We have structured SBA as a high quality,
growth company focused on increasing
positive equity free cash flow.
1
SBA is one of the largest independent tower owners and operators in
the United States, as well as one of the nation’s largest providers of
professional site development services to companies in the wireless
telecommunications industry.
SBA has grown dramatically since it was first established in 1989, partici-
pating in the development of more than 45,000 antenna sites across the
United States. Based in Boca Raton, Florida, SBA completed an initial
public offering in June of 1999. The Company is listed on the NASdAq
Global Select Market under the symbol SBAC.
clear
visibility
smart
operations
positive
developments
strong
fundamentals
2
To Our Shareholders,
For SBA, 2008 was a year of extreme opposites.
Operationally, we had a very good year. We posted
industry-leading growth, we beat our budget, we met
or exceeded our financial guidance each quarter, and
we increased the size of our tower portfolio by 26%.
Additionally, we completed two financing transactions,
and ended the year with solid cash and liquidity positions.
All in all, we were very pleased with, and proud of, our
operational performance in 2008.
3
7,854 towers strategically
located nationwide
Nebraska 22
Nevada 41
New Hampshire 77
New Jersey 27
New Mexico 16
New York 213
North Carolina 355
North Dakota 33
Ohio 266
Oklahoma 211
Oregon 41
Pennsylvania 333
Puerto Rico 57
Rhode Island 19
South Carolina 248
South Dakota 8
Tennessee 392
Texas 578
Utah 18
Vermont 29
Virginia 187
Virgin Islands 14
Washington 23
West Virginia 109
Wisconsin 203
Wyoming 2
2008 SBA
Footprint
Alabama 418
Arizona 56
Arkansas 421
California 74
Colorado 49
Connecticut 110
Delaware 26
Florida 282
Georgia 532
Idaho 63
Illinois 118
Indiana 259
Iowa 79
Kansas 140
Kentucky 136
Louisiana 465
Maine 38
Maryland 50
Massachusetts 132
Michigan 220
Minnesota 149
Mississippi 331
Missouri 184
However, our stock did not perform well in 2008. We believe the
poor performance of our stock was directly related to concerns
over access to capital and future costs of capital. In September
2008, worldwide capital markets began a steep decline and,
for a period of time in the fourth quarter, credit markets were
essentially closed. This set of circumstances created concerns
in the minds of investors, particularly for a company like SBA
that uses debt as an essential component of its capital structure.
Even though SBA has no debt maturities until the second half
of 2010, we believe the state of the credit markets was so bad
that investors feared the worst about our refinancing prospects
and bid our stock down in November 2008 to a three-year low.
Although the general economy remains challenging, the credit
markets have improved since the fourth quarter 2008 and our
stock price has partially recovered as of the date of this letter.
of 2008 have confirmed our belief that wireless is a strong and
growing business which is more resilient in challenging eco-
nomic times than many other businesses. Throughout 2008
our wireless carrier customers showed continued growth and
strength in their wireless businesses. The wireless carriers
enjoyed subscriber growth in general with even higher growth
in the use of data services. It became evident that more and
more consumers were choosing wireless services over their
wireline phones. Some wireless customers have chosen to use
“smartphones” instead of personal computers. We hesitate to
say that the recent tough economic times have now proven that
wireless service is a consumer staple, but the trend is certainly
in that direction. We believe the continued growth in wireless
in general and data services in particular will lead to additional
We have learned a few things from the events of 2008 that we
network demands for our customers. While our customers’
will apply in our future planning. Most importantly, the events
capital expenditures may vary short-term with the economy,
400
300
200
100
0
300
225
150
75
0
80
70
60
50
40
100
95
90
85
80
20000
15000
10000
5000
0
1900
1800
1700
1600
1500
$ 400
$ 395.5
200
0
150
0
60
40
90
80
0
.
4
4
1
$
3
.
1
6
1
$
2
.
6
5
2
$
8
.
1
2
3
$
’04
’05
’06
’07
2008
Site Leasing Revenues
(in millions)
$ 300
$ 299.4
7
.
6
9
$
0
.
4
1
1
$
5
.
5
8
1
$
8
.
3
3
2
$
’04
’05
’06
’07
2008
Site Leasing Operating
Profit (in millions)
80%
75.7%
%
2
.
7
6
%
7
.
0
7
%
4
.
2
7
%
7
.
2
7
’04
’05
’06
’07
2008
Site Leasing Operating
Profit Margin
100%
97.6%
%
1
.
4
9
%
1
.
5
9
%
4
.
5
9
%
5
.
5
9
’04
’05
’06
’07
2008
Site Leasing Operating
Profit Margin Contribution
9
2
4
,
5
1
6
2
7
,
5
1
1
5
8
,
6
1
1
8
3
,
8
1
’074Q
’081Q 2Q 3Q
4Q
Number of Tenants
0
20,000
19,344
10,000
$ 1,900
$ 1,886
1,700
7
0
8
,
1
$
8
2
8
,
1
$
0
4
8
,
1
$
9
5
8
,
1
$
’074Q
’081Q 2Q 3Q
4Q
1,500
Average Monthly Cash Rents
4
over time we believe the expected continued growth in wireless
our debt leverage. However, we intend to continue our strategy
will require material capital investment in additional antenna
of additional portfolio growth as capital market conditions
and related infrastructure by our customers. We expect to
permit because we believe the growth profile of the assets we
benefit from that investment, and the recent economic troubles
acquire will continue to be very favorable. We will have many
have not dimmed our long-term optimism about the growth of
opportunities to grow our portfolio at prices that we believe
our business.
will produce excellent returns for our shareholders.
The growth in wireless and the resulting demand for antenna
We also demonstrated our continued ability to perform well
space, even in a difficult economy, has reaffirmed our view of
operationally. Unlike many companies, we did not experience
the appropriateness of our strategic goal of continued portfolio
any material adverse impact to our revenue or gross profit in
growth. We completed three large acquisitions of tower port-
2008 as a result of the declining economy. We increased our
folios in 2008 as well as a number of smaller ones. We are very
leasing revenue materially, at the highest growth rate in our
good at acquiring and integrating towers into our company. In
industry, while at the same time keeping our overhead, or cash
2008 we integrated almost 1,700 towers ahead of schedule and
selling, general and administrative expenses, in line. As a result,
below budget. We are very pleased with the assets we acquired,
we materially increased our Adjusted EBITDA and Adjusted
and they are performing well. In response to changing capital
EBITDA margin in 2008. Our same tower revenue and tower
market conditions, we have reduced our appetite for additional
cash flow growth once again led the industry. We increased our
portfolio growth and instead are focused primarily on reducing
new tower build production to our highest output in six years,
Strong Industry
Fundamentals
Growth in wireless has reaffirmed
our strategic goal of continued
portfolio growth.
8000
7000
6000
5000
4000
3000
2000
1000
0
300
250
200
150
100
50
0
8,000
7,854
4,000
0
6
0
3
,
4
0
3
3
,
1
5
5
5
,
0
2
2
6
,
’04
’05 ’06 ’07
2008
0
Total Towers in Continuing
Operations at Year End
$ 269.2
$ 300
150
8
.
8
7
$
3
.
5
9
$
8
.
1
6
1
$
4
.
9
0
2
$
’04
’05 ’06 ’07
2008
0
Growth in Adjusted EBITDA
(in millions)
40
35
30
25
20
15
10
5
0
1
2
.
4
3
$
0
0
.
9
2
$
8
6
.
6
3
$
4
1
.
8
2
$
0
5
.
8
3
$
1
8
.
0
3
$
6
4
.
0
3
$
5
7
.
5
2
$
4
0
.
4
3
$
3
9
.
3
2
$
2
0
.
9
2
$
4
0
.
8
3
$
0
5
.
8
3
$
0
1
.
3
2
$
8
6
.
5
2
$
9
4
.
9
$
’07 1Q
2Q
3Q
4Q
’08 1Q
2Q
3Q
4Q
High and Low Sales Price for Class A Common Stock
Other Telephony
17%
AT&T
25%
Alltel 5%
Other Non-Telephony
6%
T-Mobile
11%
Tenant Revenue
Percentage by
Customer
Sprint
25%
Verizon
11%
400
300
200
100
0
300
225
150
75
0
80
70
60
50
40
100
95
90
85
80
20000
15000
10000
5000
0
1900
1800
1700
1600
1500
$ 400
$ 395.5
0
.
4
4
1
$
3
.
1
6
1
$
2
.
6
5
2
$
8
.
1
2
3
$
’04
’05
’06
’07
2008
Site Leasing Revenues
(in millions)
$ 300
$ 299.4
7
.
6
9
$
0
.
4
1
1
$
5
.
5
8
1
$
8
.
3
3
2
$
’04
’05
’06
’07
2008
Site Leasing Operating
Profit (in millions)
80%
75.7%
%
2
.
7
6
%
7
.
0
7
%
4
.
2
7
%
7
.
2
7
’04
’05
’06
’07
2008
Site Leasing Operating
Profit Margin
100%
97.6%
200
0
150
0
60
40
90
80
%
1
.
4
9
%
1
.
5
9
%
4
.
5
9
%
5
.
5
9
’04
’05
’06
’07
2008
5
Site Leasing Operating
Profit Margin Contribution
20,000
19,344
10,000
9
2
4
,
5
1
6
2
7
,
5
1
1
5
8
,
6
1
1
8
3
,
8
1
’074Q
’081Q 2Q 3Q
4Q
Number of Tenants
0
$ 1,900
$ 1,886
1,700
7
0
8
,
1
$
8
2
8
,
1
$
0
4
8
,
1
$
9
5
8
,
1
$
’074Q
’081Q 2Q 3Q
4Q
1,500
Average Monthly Cash Rents
Smart Financial
Operations
8000
7000
6000
5000
4000
3000
2000
8,000
7,854
4,000
We materially increased
1000
our Adjusted EBITDA and
Adjusted EBITDA margin
in 2008.
0
0
6
0
,
3
4
0
3
,
3
1
5
5
,
5
0
2
2
,
6
’04
’05 ’06 ’07
2008
0
Total Towers in Continuing
Operations at Year End
300
250
200
150
100
50
0
$ 269.2
$ 300
150
.
8
8
7
$
.
3
5
9
$
.
8
1
6
1
$
.
4
9
0
2
$
’04
’05 ’06 ’07
2008
0
Growth in Adjusted EBITDA
(in millions)
and ended the year in a position to build even more towers in
expense continues to decline as a percentage of our revenue.
2009. We believe we are well positioned to efficiently and
Our success operationally in both good and challenging
profitably handle material additional growth, whether from our
economic times has given us the confidence to continue our
existing assets or through new towers added to our portfolio.
current path without the need for any material change in our
We have responded to deteriorating economic conditions
operational structure.
operationally by refreshing our focus on cost control and
One of the most important areas where change is likely to
oper ational efficiency. For 2009, we anticipate holding our
occur is in the area of capital structure. We have always sought
headcount relatively flat, with only minor increases to our cash
to have a capital structure at SBA which facilitated maximum
SG&A expense. We expect to be able to achieve these efficien-
shareholder appreciation over a five-year period of time with an
cies notwithstanding material portfolio and leasing revenue
appropriate balance of risk and reward. Prior to the Fall of 2008,
growth. Our ability to produce these results is a testament
we believed we had the appropriate structure and our share-
to both our operational performance and the fundamental
holder returns over the preceding five years were evidence of
attractiveness of our business model, which continues to
our success. We maintained our debt leverage at the high end
accommodate very large increases in portfolio size and leasing
of our target range, our operational results easily serviced our
revenue with only minor increases in overhead. Our overhead
annual debt requirements and debt capital was readily available.
40
35
30
25
20
15
10
5
0
1
2
.
4
3
$
0
0
.
9
2
$
8
6
.
6
3
$
4
1
.
8
2
$
0
5
.
8
3
$
1
8
.
0
3
$
6
4
.
0
3
$
5
7
.
5
2
$
4
0
.
4
3
$
3
9
.
3
2
$
2
0
.
9
2
$
4
0
.
8
3
$
0
5
.
8
3
$
0
1
.
3
2
$
8
6
.
5
2
$
9
4
.
9
$
’07 1Q
2Q
3Q
4Q
’08 1Q
2Q
3Q
4Q
High and Low Sales Price for Class A Common Stock
Other Telephony
17%
AT&T
25%
Alltel 5%
Other Non-Telephony
6%
T-Mobile
11%
Tenant Revenue
Percentage by
Customer
Sprint
25%
Verizon
11%
400
300
200
100
0
300
225
150
75
0
80
70
60
50
40
100
95
90
85
80
20000
15000
10000
5000
0
1900
1800
1700
1600
1500
$ 400
$ 395.5
200
0
150
0
60
40
90
80
0
.
4
4
1
$
3
.
1
6
1
$
2
.
6
5
2
$
8
.
1
2
3
$
’04
’05
’06
’07
2008
Site Leasing Revenues
(in millions)
$ 300
$ 299.4
7
.
6
9
$
0
.
4
1
1
$
5
.
5
8
1
$
8
.
3
3
2
$
’04
’05
’06
’07
2008
Site Leasing Operating
Profit (in millions)
80%
75.7%
%
2
.
7
6
%
7
.
0
7
%
4
.
2
7
%
7
.
2
7
’04
’05
’06
’07
2008
Site Leasing Operating
Profit Margin
100%
97.6%
%
1
.
4
9
%
1
.
5
9
%
4
.
5
9
%
5
.
5
9
’04
’05
’06
’07
2008
Site Leasing Operating
Profit Margin Contribution
9
2
4
,
5
1
6
2
7
,
5
1
1
5
8
,
6
1
1
8
3
,
8
1
’074Q
’081Q 2Q 3Q
4Q
Number of Tenants
0
20,000
19,344
10,000
$ 1,900
$ 1,886
1,700
7
0
8
,
1
$
8
2
8
,
1
$
0
4
8
,
1
$
9
5
8
,
1
$
’074Q
’081Q 2Q 3Q
4Q
1,500
Average Monthly Cash Rents
8000
7000
6000
5000
4000
3000
2000
1000
0
300
250
200
150
100
50
0
0
6
0
,
3
4
0
3
,
3
1
5
5
,
5
0
2
2
,
6
’04
’05 ’06 ’07
2008
0
Total Towers in Continuing
Operations at Year End
8,000
7,854
4,000
$ 269.2
$ 300
150
8
.
8
7
$
3
.
5
9
$
8
.
1
6
1
$
4
.
9
0
2
$
’04
’05 ’06 ’07
2008
0
Growth in Adjusted EBITDA
(in millions)
40
35
30
25
20
15
10
5
0
6
4
0
.
4
3
$
3
9
.
3
2
$
1
2
.
4
3
$
0
0
.
9
2
$
8
6
.
6
3
$
4
1
.
8
2
$
0
5
.
8
3
$
1
8
.
0
3
$
6
4
.
0
3
$
5
7
.
5
2
$
Recent Positive
Developments
0
5
.
8
3
4
0
.
8
3
$
$
2
0
.
9
2
$
0
1
.
3
2
$
8
6
.
5
2
$
9
4
.
9
$
Wireless is a strong and growing
business which is more resistant to
difficult economic times than many
other businesses.
’07 1Q
2Q
3Q
4Q
’08 1Q
2Q
3Q
4Q
High and Low Sales Price for Class A Common Stock
More consumers are choosing
wireless services over their
wireline phones.
Other Telephony
17%
AT&T
25%
Alltel 5%
Other Non-Telephony
6%
T-Mobile
11%
Tenant Revenue
Percentage by
Customer
Sprint
25%
Verizon
11%
As a result, we grew the company and equity free cash flow per
by the cost of our debt, we believe the perceived increase in
share materially. We believed our debt structure had optimized
the cost of new debt for SBA directly led to the decline in our
value creation for our shareholders.
stock price which we experienced in the last four months of
All of that changed with the collapse of the capital markets in
the Fall of 2008. Credit market conditions deteriorated to a level
2008, notwithstanding the continued strong operational perfor-
mance in our business.
not seen in generations. Although we did not access or need
Our primary long-term goal continues to be above-average
to access any debt financing in the second half of 2008, the
capital appreciation for our shareholders. In light of the magni-
perceived cost of new debt financing for SBA rose dramatically,
tude of the capital markets decline that occurred in late 2008
as evidenced by declining prices in our outstanding publicly-
and the impact it had on our stock price, we are taking a fresh
traded debt. Given the fact that the value we can create for
look at our capital structure to determine the structure that
shareholders with our business model is significantly impacted
we believe will optimize future shareholder value. Our capital
400
300
200
100
0
300
225
150
75
0
80
70
$ 400
$ 395.5
0
.
4
4
1
$
3
.
1
6
1
$
2
.
6
5
2
$
8
.
1
2
3
$
’04
’05
’06
’07
2008
Site Leasing Revenues
(in millions)
200
0
150
0
$ 400
$ 395.5
$ 300
$ 299.4
200
0
0
.
4
4
1
$
3
.
1
6
1
$
2
.
6
5
2
$
8
.
1
2
3
$
’04
’05
’06
’07
2008
Site Leasing Revenues
(in millions)
7
.
6
9
$
0
.
4
1
1
$
5
.
5
8
1
$
8
.
3
3
2
$
’04
’05
’06
’07
2008
Site Leasing Operating
Profit (in millions)
$ 300
$ 299.4
80%
75.7%
60
150
structure goals remain the same. We want to maintain a capital
60
capital structure as fast as is prudent for long-term shareholder
structure that facilitates material growth without undue refinanc-
value creation, at which time material portfolio growth, by seiz-
7
50
40
7
.
6
9
0
.
4
1
1
5
.
5
8
1
8
.
3
3
2
ing or interest rate risk. Our views around eliminating the undue
%
7
.
2
refinancing or interest rate risk have been most influenced by
7
0
the condition of the capital markets. At this time, it is our belief
%
2
.
7
6
%
7
.
0
7
%
4
.
2
7
2008
’06
’06
’05
’04
’05
’04
’07
’07
$
$
$
$
Site Leasing Operating
that the optimal capital structure for SBA going forward will
Profit Margin
Site Leasing Operating
Profit (in millions)
ing the right opportunities, will once again be a primary objective.
In closing, I would say that it is through the more difficult eco-
40
2008
nomic times that the strength and stability of our company are
most appreciated. We expect 2009 to be a difficult year for
likely have less debt leverage than we believed was appropriate
prior to the collapse of the capital markets in the Fall of 2008.
100
During 2009 we will focus more on balance sheet management
80%
the general economy, so much so that many other companies
are struggling with their views of and certainty around the future.
100%
Fortunately, that is not the case with SBA.
95
90
85
80
20000
15000
10000
5000
0
1900
1800
1700
1600
1500
and less on portfolio growth. It is our goal to attain an optimal
75.7%
97.6%
Clear Multi-Year Visibility
60
90
%
2
7
6
.
%
7
0
7
.
%
4
2
7
.
%
7
2
7
.
’04
’05
’06
’07
2008
Site Leasing Operating
Profit Margin
%
1
4
9
.
%
1
5
9
.
%
4
5
9
.
%
5
5
9
.
40
’04
’05
’06
’07
2008
80
Site Leasing Operating
Profit Margin Contribution
100%
Continued growth and strength
in our customers’ wireless
businesses.
97.6%
19,344
90
%
1
4
9
.
%
1
5
9
.
%
4
5
9
.
%
5
5
9
.
Our business is stable,
predictable and certain.
20,000
10,000
’04
’05
’06
’07
2008
80
Site Leasing Operating
Profit Margin Contribution
9
2
4
5
1
,
6
2
7
5
1
,
1
5
8
6
1
,
1
8
3
8
1
,
’074Q
’081Q 2Q 3Q
4Q
Number of Tenants
0
20,000
19,344
10,000
9
2
4
5
1
,
6
2
7
5
1
,
1
5
8
6
1
,
1
8
3
8
1
,
’074Q
’081Q 2Q 3Q
4Q
0
7
0
8
,
1
$
8
2
8
,
1
$
0
4
8
,
1
$
9
5
8
,
1
$
’074Q
’081Q 2Q 3Q
8000
$ 1,900
$ 1,886
7000
6000
5000
4000
3000
2000
1000
0
4Q
1,700
1,500
Number of Tenants
Average Monthly Cash Rents
$ 1,900
$ 1,886
1,700
7
0
8
,
1
$
8
2
8
,
1
$
0
4
8
,
1
$
9
5
8
,
1
$
’074Q
’081Q 2Q 3Q
4Q
1,500
Average Monthly Cash Rents
300
250
200
150
100
50
0
8000
7000
6000
5000
4000
3000
2000
1000
0
300
250
200
150
100
50
0
0
6
0
,
3
4
0
3
,
3
1
5
5
,
5
0
2
2
,
6
’04
’05 ’06 ’07
2008
0
Total Towers in Continuing
Operations at Year End
8,000
7,854
4,000
$ 300
$ 269.2
150
0
8,000
7,854
4,000
0
6
0
3
,
4
0
3
3
,
1
5
5
5
,
0
2
2
6
,
’04
’05 ’06 ’07
2008
8
.
8
7
$
3
.
5
9
$
8
.
1
6
1
$
4
.
9
0
2
$
0
’04
’05 ’06 ’07
2008
Total Towers in Continuing
Operations at Year End
Growth in Adjusted EBITDA
(in millions)
$ 269.2
$ 300
150
8
.
8
7
$
3
.
5
9
$
8
.
1
6
1
$
4
.
9
0
2
$
’04
’05 ’06 ’07
2008
0
Growth in Adjusted EBITDA
(in millions)
400
300
200
100
0
300
225
150
75
0
80
70
60
50
40
100
95
90
85
80
20000
15000
10000
5000
0
1900
1800
1700
1600
1500
1
2
.
4
3
$
0
0
.
9
2
$
8
6
.
6
3
$
4
1
.
8
2
$
0
5
.
8
3
$
1
8
.
0
3
$
6
4
.
0
3
$
5
7
.
5
2
$
4
0
.
4
3
$
3
9
.
3
2
$
2
0
.
9
2
$
4
0
.
8
3
$
0
5
.
8
3
$
0
1
.
3
2
$
8
6
.
5
2
$
9
4
.
9
$
40
35
30
25
20
15
10
5
0
High and Low Sales Price for Class A Common Stock
0
.
.
4Q
’08 1Q
2Q
3Q
4Q
1
2
.
4
3
$
0
0
.
9
2
$
8
6
.
6
3
$
4
1
.
8
2
$
0
5
.
8
3
$
1
8
.
0
3
$
6
4
.
0
3
$
5
7
.
5
2
$
2Q
4
8
3
$
2
0
.
9
2
$
’07 1Q
4
0
.
4
3
$
3
9
.
3
2
$
3Q
0
5
8
3
$
0
1
.
3
2
$
’07 1Q
2Q
3Q
4Q
’08 1Q
2Q
3Q
4Q
High and Low Sales Price for Class A Common Stock
8
6
.
5
2
$
9
4
.
9
$
Other Telephony
17%
AT&T
25%
Alltel 5%
Other Non-Telephony
6%
T-Mobile
11%
Tenant Revenue
Percentage by
Customer
Sprint
25%
Verizon
11%
40
35
30
25
20
15
10
5
0
Other Telephony
17%
AT&T
25%
Alltel 5%
Other Non-Telephony
6%
T-Mobile
11%
Tenant Revenue
Percentage by
Customer
Sprint
25%
Verizon
11%
8
We are structured for
growth in equity free cash
flow per share.
Our business is stable, predictable and certain. The long-term
confident that the strength of our operating performance and
nature of our leasing revenue and the strength of our customers
our business model will increasingly differentiate SBA as the
give us tremendous comfort around our future cash flows. We
high-quality company we have become. Move than ever, we
intend to continue our practice of providing regular quarterly
remain confident and optimistic about our prospects for creat-
financial guidance, and we expect to meet or exceed that guid-
ing additional value for our shareholders. As always, I want
ance as we have done in the past. We are projecting material
to thank our shareholders, customers and employees for their
organic growth in 2009 in leasing revenue, Adjusted EBITDA
part in our success, and we look forward to reporting our
and equity free cash flow. As we move through 2009, I am
future results.
Sincerely,
Jeffrey A. Stoops
President & Chief Executive Officer
2008
SBA Communications Corporation
Form 10-K
87260FINv3 1
3/24/09 12:23:58 PM
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(cid:2)
(cid:3)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2008
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
(State or other jurisdiction of
incorporation or organization)
5900 Broken Sound Parkway NW
Boca Raton, Florida
(Address of principal executive offices)
65-0716501
(I.R.S. Employer
Identification No.)
33487
(Zip Code)
Registrant’s telephone number, including area code: (561) 995-7670
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Class A Common Stock, $0.01 par value per share
Name of Each Exchange on Which Registered
The NASDAQ Stock Market LLC
(NASDAQ Global Select Market)
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:2) No (cid:3)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
Yes (cid:3) No (cid:2)
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 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes (cid:2) No (cid:3)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. (cid:3)
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer (cid:2) Accelerated filer (cid:3) Non-Accelerated filer (cid:3) Smaller reporting company (cid:3)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. Yes (cid:3) No (cid:2)
The aggregate market value of the voting stock held by non-affiliates of the Registrant was approximately $3.7 billion as of June 30, 2008.
The number of shares outstanding of the Registrant’s common stock (as of February 24, 2009): Class A common stock — 118,280,317 shares
Portions of the Registrant’s definitive proxy statement for its 2009 annual meeting of shareholders, which proxy statement will be filed no later than
120 days after the close of the Registrant’s fiscal year ended December 31, 2008, are hereby incorporated by reference in Part III of this Annual
Report on Form 10-K.
Documents Incorporated By Reference
87260FIN.pdf 3
87260FIN.pdf 3
3/17/09 12:16 PM
3/17/09 12:16 PM
Table of Contents
PART I
ITEM 1.
ITEM 1A.
ITEM 1B.
ITEM 2.
ITEM 3.
ITEM 4.
BUSINESS
RISK FACTORS
UNRESOLVED STAFF COMMENTS
PROPERTIES
LEGAL PROCEEDINGS
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PART II
ITEM 5.
ITEM 6.
ITEM 7.
ITEM 7A.
ITEM 8.
ITEM 9.
ITEM 9A.
ITEM 9B.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
SELECTED FINANCIAL DATA
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
CONTROLS AND PROCEDURES
OTHER INFORMATION
PART III
ITEM 10.
ITEM 11.
ITEM 12.
ITEM 13.
ITEM 14.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
EXECUTIVE COMPENSATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
PRINCIPAL ACCOUNTANT FEES AND SERVICES
PART IV
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
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ITEM 1.
BUSINESS
General
We are a leading independent owner and operator of wireless communications towers in 47 of the 48 contiguous
United States, Puerto Rico and the U.S. Virgin Islands. Our principal business line is our site leasing business, which
contributed 97.6% of our segment operating profit for the year ended December 31, 2008. In our site leasing business, we
lease antenna space to wireless service providers on towers and other structures that we own, manage or lease from others.
The towers that we own have been constructed by us at the request of a wireless service provider, constructed based on our
own initiative or acquired. As of December 31, 2008, we owned 7,854 towers, the substantial majority of which have been
built by us or built by other tower owners or operators who, like us, have built such towers to lease space to wireless service
providers. We also manage or lease approximately 4,200 actual or potential communications sites, of which approximately
600 are revenue producing. Our second business line is our site development business, through which we assist wireless
service providers in developing and maintaining their own wireless service networks.
Site Leasing Services
Our primary focus is the leasing of antenna space on our multi-tenant towers to a variety of wireless service
providers under long-term lease contracts. Site leasing revenues are received primarily from wireless service provider tenants,
including AT&T, Sprint, T-Mobile and Verizon Wireless. Wireless service providers enter into numerous different tenant
leases with us, each of which relates to the lease or use of space at an individual tower site. Tenant leases are generally for an
initial term of five years with five 5-year renewal periods at the option of the tenant. These tenant leases typically contain
specific rent escalators, which average 3%– 4% per year, including the renewal option periods.
As of December 31, 2008, we owned 7,854 towers, up from 6,220 as of December 31, 2007. Due to the recent
instability in the credit markets and the challenging macroeconomic environment in the U.S., we currently intend to grow our
tower portfolio modestly in 2009. We intend to obtain this modest growth primarily through new tower builds. Pursuant to
our historical growth initiatives, we built 85 towers and acquired 1,560 towers during 2008, compared to the year ended 2007
where we built 61 towers and acquired 612 towers.
In addition, in late 2008 as part of our acquisition of Light Tower Wireless, LLC (“Light Tower”) we acquired five
distributed antenna system (“DAS”) networks. The DAS networks constitute our first experience offering this type of
wireless service. DAS is a low visibility network that uses hub and spoke architecture to connect base station equipment to a
low power, fiber-optic-fed network. DAS is a complement to traditional tower leasing in areas with challenging zoning
regulations or physical obstructions that significantly degrade or restrict coverage. DAS networks can be deployed by
attaching the discrete radio-frequency equipment to existing structures, such as utility poles and street lights.
In our new build program, we construct towers in locations that were strategically chosen by us or under build-to-
suit arrangements. Under build-to-suit arrangements, we build towers for wireless service providers at locations that they
have identified. We retain ownership of the tower and the exclusive right to co-locate additional tenants on the tower. When
we construct towers in locations chosen by us, we utilize our knowledge of our customer’s network requirements to identify
locations where, we believe, multiple wireless service providers need, or will need, to locate antennas to meet capacity or
service demands. We seek to identify attractive locations for new towers and complete pre-construction procedures necessary
to secure the site concurrently with our leasing efforts. We intend to have at least one signed tenant lease on each new build
tower on the day that it is completed and expect that some will have multiple tenants. We intend to build 80 to 100 new
towers during 2009.
In our tower acquisition program, we pursue towers that meet or exceed our internal guidelines regarding current
and future potential returns. For each acquisition, we prepare various analyses that include projections of a five-year
unlevered internal rate of return, review of available capacity, future lease up projections and a summary of current and future
tenant/technology mix. Due to the current economic environment, we currently intend to limit our acquisition strategy to
acquisitions for stock consideration that we believe will be accretive to our shareholders both short and long-term and which
meet our investment returns and criteria. We intend to resume acquisitions for cash at such time as we see sufficient
improvement in the credit markets.
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The table below provides information regarding the development and status of our tower portfolio over the past
three years.
Towers owned at beginning of period ........................................
Towers acquired in AAT Acquisition ........................................
Other towers acquired (1) ............................................................
Towers constructed ....................................................................
Towers reclassified/disposed of (2) .............................................
Towers owned at end of period ..................................................
For the year ended December 31,
2007
2008
2006
6,220
5,551
3,304
—
—
1,850
1,560
612
339
85
61
60
(11)
(4)
(2)
7,854
6,220
5,551
(1)
(2)
2008 includes 528 towers acquired in the Optasite acquisition, 423 towers acquired in the Tower Co.
acquisition and 340 towers acquired in the Light Tower acquisition.
Reclassifications reflect the combination for reporting purposes of multiple tower structures on a single
parcel of real estate, which we market and customers view as a single location, into a single owned tower
site. Dispositions reflect the decommissioning, sale, conveyance or other legal transfer of owned tower
sites.
As of December 31, 2008, we had 19,344 tenants on the 7,854 tower sites we owned as of that date, or an average of
2.5 tenants per tower.
Our site leasing business generates substantially all of our total segment operating profit. As indicated in the tables
below, our site leasing business generated 83.3% of our total revenues during the past year and has represented 95% or more
of our total segment operating profit for the past three years.
Site leasing revenue ..................................................................
$ 256,170
2006
Revenues
For the year ended December 31,
2007
(dollars in thousands)
$ 321,818
2008
395,541
Total revenues ...........................................................................
$ 351,102
$ 408,201
474,954
Percentage of total revenue .......................................................
73.0%
78.8%
83.3%
Site leasing segment operating profit (1) ....................................
$ 185,507
2006
Segment Operating Profit
For the year ended December 31,
2007
(dollars in thousands)
$ 233,812
2008
299,366
Total segment operating profit (1) ..............................................
$ 194,516
$ 244,848
306,789
Site leasing operating profit percentage contribution of total
segment operating profit (1) ....................................................
95.4%
95.5%
97.6%
(1)
Site leasing segment operating profit and total segment operating profit are non-GAAP financial measures.
We reconcile these measures and other Regulation G disclosures in this annual report in the section entitled
Non-GAAP Financial Measures.
Site Development Services
Our site development business is complementary to our site leasing business, and provides us the ability to keep in
close contact with the wireless service providers who generate substantially all of our site leasing revenue and capture
ancillary revenues that are generated by our site leasing activities, such as antenna installation and equipment installation at
our tower locations. 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. We
principally perform services for third parties in our core, historical areas of wireless expertise, specifically site acquisition,
zoning, technical services and construction.
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In the consulting segment of our site development business, we offer clients the following range of services: (1)
network pre-design; (2) site audits; (3) identification of potential locations for towers and antennas; (4) support in buying or
leasing of the location; and (5) assistance in obtaining zoning approvals and permits. In the construction segment of our site
development business we provide a number of services, including, but not limited to the following: (1) tower and related site
construction; (2) antenna installation; and (3) radio equipment installation, commissioning and maintenance. Personnel in our
site development business also support our leasing and new tower build functions through an integrated plan across the
divisions.
We provide our site development consulting and construction services on a local basis, through regional offices,
territory offices and project offices. The regional offices are responsible for all site development operations, including hiring
employees and opening or closing project offices, and a substantial portion of the sales in such area.
For financial information about our operating segments, please see Note 22 of our Consolidated Financial
Statements included in this Form 10-K.
Industry Overview
We believe that growing wireless traffic, the successful recent spectrum auctions and technology developments will
require wireless service providers to improve their network infrastructure and increase their network capacity resulting in an
increase in the number of communication sites that they use. First, consumers continue to increase minutes of use, whether
through wireline to wireless migration, increasing use of broadband services, new data products or simply talking more.
Consumers are demanding quality wireless networks, and list network coverage and quality as two of the greatest
contributors to their dissatisfaction when terminating or changing service. To decrease subscriber churn rate and drive
revenue growth, wireless carriers have made substantial capital expenditures on wireless networks to improve service quality
and expand coverage. Second, we expect that the roll-out of 3G and 4G wireless services by existing carriers will require our
customers to add a large number of additional cell sites and increase the amount of their equipment at current cell sites. The
Federal Communications Commission’s (the “FCC”) successful advanced wireless service spectrum auction 66 for advanced
broadband services and the more recent FCC spectrum auction 73, relating to the auction of the 700 MHz band, have
provided existing carriers the opportunity to deploy spectrum for 3G and 4G wireless service which will further drive the
demand for communication sites. Finally, the third area of growth in the U.S. market comes from new market launches for
emerging carriers in traditional wireless services or new technologies like WiMAX. For example, Leap Wireless and Metro
PCS acquired spectrum in auction 66 in new coverage areas that have led and continue to lead to the launch of brand new
networks while Clearwire is in the process of building out new markets as well. Despite the current recessionary conditions
affecting the global marketplace, based on these factors, we believe that the U.S. wireless industry will continue to grow and
is well-capitalized, highly competitive and focused on quality and advanced services. Therefore, we expect that we will see a
multi-year trend of strong additional cell site demand from our customers, which we believe will translate into strong leasing
growth for us.
Business Strategy
Our primary strategy is to capture the maximum benefits from our position as a leading owner and operator of
wireless communications towers. Key elements of our strategy include:
Focusing on our Site Leasing Business with Stable, Recurring Revenues. We intend to continue to focus on
expanding our site leasing business due to its attractive characteristics such as long-term contracts, built-in rent escalators,
high operating margins and low customer churn. The long-term nature of the revenue stream of our site leasing business
makes it less volatile than our site development business, which is more cyclical. By focusing on our site leasing business, we
believe that we can maintain a stable, recurring cash flow stream and reduce our exposure to cyclical changes in customer
spending.
Maximizing Use of Tower Capacity. We generally have constructed or acquired towers that accommodate multiple
tenants and a substantial majority of our towers are high capacity lattice or guyed towers. Most of our towers have significant
capacity available for additional antennas and we believe that increased use of our towers can be achieved at a low
incremental cost. We actively market space on our towers through our internal sales force.
Disciplined Growth of our Tower Portfolio . During 2009, we intend to modestly grow our tower portfolio
principally through new builds. We have historically used our available cash from operating activities and available liquidity,
including borrowings, to build and acquire new towers at prices which allow us to maintain our long-term target leverage
ratios. However, given the recent instability in the credit markets, we have begun to focus some of our available cash
resources on reducing our leverage levels. In addition, we may pursue some tower acquisitions for stock in situations that we
believe will be accretive to our shareholders both short and long-term and which meet our investment returns and criteria. We
intend to resume acquisitions for cash at such time as we see sufficient improvement in the credit markets. We believe that
our tower operations are highly scalable. Consequently, we believe that we are able to materially increase our tower portfolio
without proportionately increasing selling, general and administrative expenses.
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Controlling our Underlying Land Positions . We have purchased and intend to continue to purchase and/or enter
into long-term leases for the land that underlies our towers, to the extent available at commercially reasonable prices. We
believe that these purchases and/or long-term leases will increase our margins, improve our cash flow from operations and
minimize our exposure to increases in ground lease rents in the future. As of December 31, 2008, we own or control, for a
minimum period of fifty years, land under 26% of our communication sites.
Using our Local Presence to Build Strong Relationships with Major Wireless Service Providers. Given the nature of
towers as location specific communications facilities, we believe that substantially all of what we do is done best locally.
Consequently, we have a broad field organization that allows us to develop and capitalize on our experience, expertise and
relationships in each of our local markets which in turn enhances our customer relationships. Due to our presence in local
markets, we believe we are well positioned to capture additional site leasing business and new tower build opportunities in
our markets and identify and participate in site development projects across our markets.
Capitalizing on our Management Experience. Our management team has extensive experience in site leasing and
site development. Management believes that its industry expertise and strong relationships with wireless service providers
will allow us to expand our position as a leading provider of site leasing and site development services.
Customers
Since commencing operations, we have performed site leasing and site development services for all of the large
wireless service providers. In both our site development and site leasing businesses, we work with large national providers
and smaller regional, local or private operators.
We depend on a relatively small number of customers for our site leasing and site development revenues. The
following customers represented at least 10% of our total revenues during at least one of the last three years:
Sprint ............................................................................
AT&T ...........................................................................
Verizon Wireless ..........................................................
27.6%
21.4%
9.7%
30.5%
21.0%
9.7%
23.2%
21.3%
11.2%
During the past two years, we provided services for a number of customers, including:
Percentage of Total Revenues
for the year ended December 31,
2008
2007
2006
Aircell
AT&T
Bechtel Corporation
Cellular South
Centennial
Clearwire
Ericsson
Fibertower
General Dynamics
Goodman Networks
iPCS
Leap Wireless
M/A-COM
MediaFLO
Metro PCS
Motorola
Nokia
Nortel
Northrop Grumman
Nsoro
NYSEG
Pocket Communication
Samsung
Siemens
Sprint
T-Mobile
U.S. Cellular
Verizon Wireless
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Sales and Marketing
Our sales and marketing goals are to:
•
•
use existing relationships and develop new relationships with wireless service providers to lease
antenna space on and sell related services with respect to our owned or managed towers, enabling
us to grow our site leasing business; and
successfully bid and win those site development services contracts that will contribute to our
operating margins and/or provide a financial or strategic benefit to our site leasing business.
We approach sales on a company-wide basis, involving many of our employees. We have a dedicated sales force
that is supplemented by members of our executive management team. Our dedicated salespeople are based regionally as well
as in the corporate office. We also rely on our regional vice presidents, general managers and other operations personnel to
sell our services and cultivate customers. Our strategy is to delegate sales efforts to those employees of ours who have the
best relationships with our customers. Most wireless service providers have national corporate headquarters with regional and
local offices. We believe that wireless service providers make most decisions for site development and site leasing services at
the regional and local levels with input from their corporate headquarters. Our sales representatives work with wireless
service provider representatives at the regional and local levels and at the national level when appropriate. Our sales staff
compensation is heavily weighted to incentive-based goals and measurements.
Our primary marketing and sales support is centralized and directed from our headquarters office in Boca Raton,
Florida and is supplemented by our regional and territory offices. We have a full-time staff dedicated to our marketing and
sales efforts. The marketing and sales support staff is charged with implementing our marketing strategies, prospecting and
producing sales presentation materials and proposals. In addition to our marketing and sales staff, we rely upon our executive
and operations personnel at the regional and local office levels to identify sales opportunities within existing customer
accounts.
Competition
Site Leasing – Our primary competitors for our site leasing activities are (1) the large independent tower companies,
American Tower Corporation, Crown Castle International and Global Tower Partners, (2) a large number of smaller
independent tower owners, (3) wireless service providers who currently market excess space on their owned towers to other
wireless service providers and (4) alternative facilities such as rooftops, broadcast towers and utility poles. There has been
significant consolidation among the large independent tower companies in the past four years. Specifically, American Tower
completed its merger with SpectraSite, Inc. in 2005, we completed our acquisition of AAT Communications Corporation in
2006 and Crown Castle completed its merger with Global Signal, Inc. in 2007. As a result of these consolidations, American
Tower and Crown Castle have substantially more towers and greater financial resources than we do. Wireless service
providers that own and operate their own tower networks are also generally substantially larger and have greater financial
resources than we do. We believe that tower location and capacity, quality of service to our tenants, and, to a lesser extent,
price have been and will continue to be the most significant competitive factors affecting the site leasing business.
Site Development – The site development business is extremely competitive and price sensitive. We believe that the
majority of our competitors in the site development business operate within local market areas exclusively, while some firms
appear to offer their services nationally, including Bechtel Corporation, Black & Veatch Corporation, Goodman Networks,
General Dynamics Corporation, Nsoro, and Wireless Facilities, Inc. The market includes participants from a variety of
market segments offering individual, or combinations of, competing services. The field of competitors includes site
development consultants, zoning consultants, real estate firms, right-of-way consulting firms, construction companies, tower
owners/managers, radio frequency engineering consultants, telecommunications equipment vendors, which provide end-to-
end site development services through multiple subcontractors, and wireless service providers’ internal staff. We believe that
providers base their decisions for site development services on a number of criteria, including a company’s experience, track
record, local reputation, geographic reach, price and time for completion of a project.
Employees
Our executive, corporate development, accounting, finance, human resources, legal and regulatory, information
technology and site administration personnel, and our network operations center are located in our headquarters in Boca
Raton, Florida. Certain sales, new tower build support and tower maintenance personnel are also located in our Boca Raton
office. Our remaining employees are based in our regional and local offices.
As of December 31, 2008, we had 627 employees, none of whom are represented by a collective bargaining
agreement. We consider our employee relations to be good.
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Regulatory and Environmental Matters
Federal Regulations. Both the Federal Communications Commission (the “FCC”) and the Federal Aviation
Administration (the “FAA”) regulate antenna towers and structures that support wireless communications and radio or
television antennas. Many FAA requirements are implemented in FCC regulations. These regulations govern the
construction, lighting and painting or other marking of towers and structures and may, depending on the characteristics of
particular towers or structures, require prior approval and registration of towers or structures before they may be constructed,
altered or used.
Wireless communications equipment and radio or television stations operating on towers or structures are separately
regulated and may require independent customer licensing depending upon the particular frequency or frequency band used.
In addition, any applicant for an FCC antenna tower or structure registration must certify that, consistent with the Anti-Drug
Abuse Act of 1988, neither the applicant nor its principals are subject to a denial of Federal benefits because of a conviction
for the possession or distribution of a controlled substance.
Pursuant to the requirements of the Communications Act of 1934, as amended, the FCC, in conjunction with the
FAA, has developed standards to consider proposals involving new or modified antenna towers or structures. These standards
mandate that the FCC and the FAA consider the height of the proposed tower or structure, the relationship of the tower or
structure to existing natural or man-made obstructions and the proximity of the tower or structure to runways and airports.
Proposals to construct or to modify existing towers or structures above certain heights must be reviewed by the FAA to
ensure the structure will not present a hazard to air navigation. The FAA may condition its issuance of a no-hazard
determination upon compliance with specified lighting and/or painting requirements. Antenna towers that meet certain height
and location criteria must also be registered with the FCC. A tower or structure that requires FAA clearance will not be
registered by the FCC until it is cleared by the FAA. Upon registration, the FCC may also require special lighting and/or
painting. Owners of wireless communications antenna towers and structures may have an obligation to maintain painting and
lighting or other marking in conformance with FAA and FCC regulations. Antenna tower and structure owners and licensees
that operate on those towers or structures also bear the responsibility of monitoring any lighting systems and notifying the
FAA of any lighting outage or malfunction.
Owners and operators of antenna towers and structures may be subject to, and therefore must comply with,
environmental laws. Any licensed radio facility on an antenna tower or structure is subject to environmental review pursuant
to the National Environmental Policy Act of 1969, among other statutes, which requires federal agencies to evaluate the
environmental impact of their decisions under certain circumstances. The FCC has issued regulations implementing the
National Environmental Policy Act. These regulations place responsibility on applicants to investigate potential
environmental effects of their operations and to disclose any potential significant effects on the environment in an
environmental assessment prior to constructing or modifying an antenna tower or structure and prior to commencing certain
operation of wireless communications or radio or television stations from the tower or structure. In the event the FCC
determines the proposed structure or operation would have a significant environmental impact based on the standards the
FCC has developed, the FCC would be required to prepare an environmental impact statement, which will be subject to
public comment. This process could significantly delay the registration of a particular tower or structure.
We generally indemnify our customers against any failure to comply with applicable regulatory standards relating to
the construction, modification, or placement of antenna towers or structures. Failure to comply with the applicable
requirements may lead to civil penalties.
The Telecommunications Act of 1996 amended the Communications Act of 1934 by preserving state and local
zoning authorities’ jurisdiction over the construction, modification and placement of towers. The law, however, limits local
zoning authority by prohibiting any action that would discriminate among different providers of personal wireless services or
ban altogether the construction, modification or placement of radio communication towers. Finally, the Telecommunications
Act of 1996 requires the federal government to help licensees for wireless communications services gain access to preferred
sites for their facilities. This may require that federal agencies and departments work directly with licensees to make federal
property available for tower facilities.
Our DAS network provides service providers with facilities to offer various wireless communications services. We
therefore offer facilities supporting other communications services, providing service within a state as a competitive local
exchange carrier (“CLEC”). CLEC status enables us to negotiate access to utility poles and conduits on fair, reasonable and
non-discriminatory terms, consistent with the Communications Act and applicable state law. In a number of states, we must
obtain a certificate of public convenience and necessity or similar authority to provide CLEC service. Additionally, as a
CLEC, federal regulation requires us to comply with regulatory and filing requirements of a ministerial nature.
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As an owner and operator of real property, we are subject to certain environmental laws that impose strict, joint and
several liability for the cleanup of on-site or off-site contamination and related personal or property damage. We are also
subject to certain environmental laws that govern tower or structure placement, including pre-construction environmental
studies. Operators of towers or structures must also take into consideration certain radio frequency (“RF”) emissions
regulations that impose a variety of procedural and operating requirements. Certain proposals to operate wireless
communications and radio or television stations from antenna towers and structures are also reviewed by the FCC to ensure
compliance with requirements relating to human exposure to RF emissions. Exposure to high levels of RF energy can
produce negative health effects. The potential connection between low-level RF energy and certain negative health effects,
including some forms of cancer, has been the subject of substantial study by the scientific community in recent years. We
believe that we are in substantial compliance with and we have no material liability under any applicable environmental laws.
These costs of compliance with existing or future environmental laws and liability related thereto may have a material
adverse effect on our prospects, financial condition or results of operations.
State and Local Regulations. Most states regulate certain aspects of real estate acquisition, leasing activities and
construction activities. Where required, we conduct the site acquisition portions of our site development services business
through licensed real estate brokers’ agents, who may be our employees or hired as independent contractors, and conduct the
construction portions of our site development services through licensed contractors, who may be our employees or
independent contractors. Local regulations include city and other local ordinances, zoning restrictions and restrictive
covenants imposed by community developers. These regulations vary greatly from jurisdiction to jurisdiction, but typically
require tower and structure owners to obtain approval from local officials or community standards organizations, or certain
other entities prior to tower or structure construction and establish regulations regarding maintenance and removal of towers
or structures. In addition, many local zoning authorities require tower and structure owners to post bonds or cash collateral to
secure their removal obligations. Local zoning authorities generally have been unreceptive to construction of new antenna
towers and structures in their communities because of the height and visibility of the towers or structures, and have, in some
instances, instituted moratoria.
Backlog
Backlog related to our site leasing business consists of lease agreements and amendments, which have been signed,
but have not yet commenced. As of December 31, 2008, we had 338 new leases which had been executed with customers but
which had not begun generating revenue. These leases contractually provided for approximately $8.3 million of annual
revenue. By comparison, at December 31, 2007 we had 265 new leases which had been executed with customers but which
had not begun generating revenue. These leases contractually provided for approximately $5.9 million of annual revenue.
Our backlog for site development services consists of the value of work that has not yet been completed on executed
contracts. As of December 31, 2008, we had approximately $17.4 million of contractually committed revenue as compared to
approximately $40.6 million as of December 31, 2007.
Availability of Reports and Other Information
Our corporate website is www.sbasite.com . We make available, free of charge, access to our Annual Report on
Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statement on Schedule 14A and
amendments to those materials filed or furnished pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of
1934 on our website under “Investor Relations—SEC Filings,” as soon as reasonably practicable after we file electronically
such material with, or furnish it to, the United States Securities and Exchange Commission (the “Commission”). In addition,
the Commission’s website is www.sec.gov. The Commission makes available on this website, free of charge, reports, proxy
and information statements, and other information regarding issuers, such as us, that file electronically with the Commission.
Additionally, our reports, proxy and information statements may be read and copied at the Commission’s public reference
room at 100 F Street, NE, Washington, DC 20549. Information regarding the operation of the public reference room may be
obtained by calling the Commission at 1-800-SEC-0330. Information on our website or the Commission’s website is not part
of this document.
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ITEM 1A.
RISK FACTORS
Risks Related to Our Business
We have a substantial level of indebtedness, a large portion of which we will need to refinance in the next three years. In
the event we are not able to refinance or repay such indebtedness, we may not be able to access the cash flow from all of
our towers and we may need to take certain actions to service our debt obligations.
We have a substantial amount of indebtedness (approximately $2.55 billion as of December 31, 2008), and we
anticipate refinancing a significant amount of this indebtedness within the next three years. As of February 24, 2009, we had
$2.0 billion of indebtedness outstanding that has an initial or anticipated maturity date within the next three years, including
$391.8 million of our 2005 Commercial Mortgage-Backed Pass-Through Certificates (which have an anticipated repayment
date of November 2010), $1.1 billion of our 2006 Commercial Mortgage-Backed Pass-Through Certificates (which have an
anticipated repayment date of November 2011), $104.2 million of 0.375% Convertible Senior Notes due November 2010,
$230.6 million of borrowings under our senior secured revolving credit facility and $149.0 million under our credit facility
assumed in the Optasite acquisition (the “Optasite Credit Facility”) (each facility matures in 2010).
If our CMBS Certificates are not fully repaid by their anticipated repayment dates, November 2010 for the 2005
CMBS Certificates and November 2011 for the 2006 CMBS Certificates, then the interest rates on each of the CMBS
Certificates, on such date, will increase by the greater of (i) 5% or (ii) the amount, if any, by which the sum of (x) the ten-
year U.S. treasury rate plus (y) the credit-based spread for such component (as set forth in the mortgage loan agreement) plus
(z) 5%, exceeds the original interest rate for such component. Such additional interest will accrue and be payable once the
principal of all CMBS Certificates are repaid. Furthermore, if our 2005 CMBS Certificates are not fully repaid by November
2010, then substantially all of the cash flows from the 4,969 towers owned by the borrowers under the CMBS Certificates
will be trapped by the Trustee and applied first to repay the original cash coupons on the CMBS Certificates, then to fund
reserves and administrative costs and then to repay principal of the 2005 and the 2006 CMBS Certificates in the order of their
investment grade (i.e. the 2005-1A and 2006-1A subclasses would have their respective principal repaid equally prior to
repayment of the other subclasses of the CMBS Certificates). If we are unable to repay our 2005 CMBS Certificates on
November 2010, then we would only have access to the cash flow generated by the remaining approximately 2,900 towers to
repay our other indebtedness and pay all our other corporate expenses.
During 2007 a crisis began in the subprime mortgage sector of the U.S. economy as a result of credit quality
deterioration and rising delinquencies, and that crisis has continued and strengthened throughout 2008 and into 2009 which
has led to continued deterioration of the credit markets, a closing up of the debt markets and widening credit spreads. Also
stemming from this crisis, the U.S. economy is undergoing a period of recession, slowdown and high volatility. This crisis
has adversely impacted our access to capital, and there can be no assurance that this crisis will not worsen or impact the
availability or cost of debt financing in the future. There can be no assurance that we will be able to effect the anticipated
refinancing described above on terms as favorable as our current debt, on commercially acceptable terms, or at all.
If we are unable to refinance our debt, we cannot guarantee that we will generate enough cash flow from operations
or that we will be able to obtain enough capital to service our debt obligations and fund our planned capital expenditures. In
such event, we might need to sell certain assets or lines of business, issue common stock or securities convertible into
common stock to fulfill our debt obligations. If implemented, these actions could negatively impact our business or dilute our
existing shareholders.
We have a substantial level of indebtedness which may have an adverse effect on our business or limit our ability to take
advantage of business, strategic or financing opportunities.
As indicated below, we have and will continue to have a significant amount of indebtedness relative to our equity.
The following table sets forth our total debt and shareholders’ equity as of December 31, 2007 and 2008.
Total indebtedness ...................................................................... $ 1,905,000
337,391
Shareholders’ equity ................................................................... $
$ 2,554,660
$ 491,759
Our substantial level of indebtedness increases the possibility that we may be unable to generate cash sufficient to
pay the principal, interest or other amounts when due. Subject to certain restrictions under our existing indebtedness, we and
our subsidiaries may also incur significant additional indebtedness in the future, some of which may be secured debt. This
may have the effect of increasing our total leverage.
As of December 31,
2007
2008
(in thousands)
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As a consequence of our indebtedness, (1) demands on our cash resources may increase, (2) we are subject to
restrictive covenants that further limit our financial and operating flexibility and (3) we may choose to institute self-imposed
limits on our indebtedness based on certain considerations including market interest rates, our relative leverage and our
strategic plans. For example, as a result of our substantial level of indebtedness and the uncertainties arising in the credit
markets and the U.S. economy:
•
•
•
•
•
•
•
we may be more vulnerable to general adverse economic and industry conditions;
we may find it more difficult to obtain additional financing to fund future working capital, capital
expenditures and other general corporate requirements that would be in our best long-term interests;
we may be required to dedicate a substantial portion of our cash flow from operations to the payment of
principal and interest on our debt, reducing the available cash flow to fund other investments, including
capital expenditures;
we have already reduced our annual tower acquisition goals and may, in the future, be required to reduce
our annual tower new build goals;
we may have limited flexibility in planning for, or reacting to, changes in our business or in the industry;
we may have a competitive disadvantage relative to other companies in our industry that are less leveraged;
and
we may be required to sell debt or equity securities or sell some of our core assets, possibly on unfavorable
terms, in order to meet payment obligations.
These restrictions could have an adverse effect on our business by limiting our ability to take advantage of
financing, new tower development, mergers and acquisitions or other opportunities.
In addition, fluctuations in market interest rates may increase interest expense relating to our floating rate
indebtedness, which we expect to incur under our senior secured revolving credit facility and our Optasite Credit Facility
assumed in the Optasite acquisition and may make it difficult to refinance our existing indebtedness, including our CMBS
Certificates at a commercially reasonable rate or at all. There is no guarantee future refinancing of our indebtedness will have
fixed interest rates or that interest rates on such indebtedness will be equal to or lower than the rates on our current
indebtedness.
Any slowdown in demand for wireless communications services or for tower space could adversely affect our future
growth and revenues.
Demand for antenna space on our towers and for our site development services depends on demand for wireless
services. From 2001 through 2003, economic downturns in the U.S. economy, including the wireless telecommunications
industry, negatively influenced demand for tower space and site development services. The current economic downturn in the
U.S. economy and similar slowdowns in the future may adversely affect:
•
•
•
•
•
•
consumer demand for wireless services;
the financial condition of wireless service providers;
the ability and willingness of wireless service providers to maintain or increase capital
expenditures;
the availability and cost of capital, including interest rates;
volatility in the equity and debt markets; and
the willingness of our tenants to renew their leases for additional terms.
As a result of these factors wireless service providers may delay or abandon implementation of new systems and
technologies, including 3G, 4G or other wireless services or, worse, elect not to renew existing antenna leases in order to
reduce operating expenses.
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We may not secure as many site leasing tenants as planned or our lease rates for new tenant leases may decline.
If tenant demand for tower space or our lease rates on new leases decrease, we may not be able to successfully grow
our site leasing business as expected. This may have a material adverse effect on our strategy, revenue growth and our ability
to satisfy our financial and other contractual obligations. Our plan for the growth of our site leasing business largely depends
on our management’s expectations and assumptions concerning future tenant demand and potential lease rates for our towers.
If our wireless service provider customers combine their operations to a significant degree, our growth, our revenue and
our ability to service our indebtedness could be adversely affected.
Demand for our services may decline if there is additional significant consolidation among our wireless service
provider customers as they may then reduce capital expenditures in the aggregate or fail to renew existing leases for tower
space because many of their existing networks and expansion plans may overlap. As a result of regulatory changes in January
2003 which removed prior restrictions on wireless service providers from owning more than 45 MHz of spectrum in any
given geographical area, there have been significant consolidations of the large wireless service providers. Specifically,
Cingular acquired AT&T Wireless in October 2004 and Sprint PCS and Nextel merged to form Sprint Nextel Corporation in
August 2005. As a result of the Cingular/AT&T Wireless merger, as of December 31, 2008, AT&T had terminated 307
tenant leases with us, which had $7.7 million of annualized rental revenue, on towers where both Cingular and AT&T
Wireless had previously had antennas. In addition, AT&T did not renew certain tenant leases for other communication sites
in close proximity to the extent that it believed it did not need the additional capacity. Although we have not currently
experienced any significant amount of churn as a result of the Sprint/Nextel merger, due primarily to the different
technologies utilized and their decision to operate two networks, we may in the future experience terminations and/or non-
renewals due to this merger. Furthermore, to the extent that other wireless service providers consolidate in the future, they
may not renew any duplicative leases that they have on our towers and/or may not lease as much space on our towers in the
future. This would adversely affect our growth, our revenue and our ability to service our indebtedness.
Similar consequences may occur if wireless service providers engage in extensive sharing or roaming or resale
arrangements as an alternative to leasing our antenna space. Wireless voice service providers frequently enter into roaming
agreements with competitors allowing them to use another’s wireless communications facilities to accommodate customers
who are out of range of their home provider’s services. Wireless voice service providers may view these roaming agreements
as a superior alternative to leasing antenna space on communication sites owned or controlled by us or others. The
proliferation of these roaming agreements could have a material adverse effect on our revenue.
Delays or changes in the deployment or adoption of new technologies or slowing consumer adoption rates may have a
material adverse effect on our growth rate.
There can be no assurances that 3G, 4G or other new wireless technologies will be deployed or adopted as rapidly as
projected or that these new technologies will be implemented in the manner anticipated. The deployment of 3G has already
experienced significant delays from the original projected timelines of the wireless and broadcast industries. The
announcement of 4G is relatively new and its deployment has been limited to date. Additionally, the demand by consumers
and the adoption rate of consumers for these new technologies once deployed may be lower or slower than anticipated. These
factors could have a material adverse effect on our growth rate since growth opportunities and demand for our tower space as
a result of such new technologies may not be realized at the times or to the extent anticipated.
We depend on a relatively small number of customers for most of our revenue, therefore if any of our significant
customers reduced their demand for tower space or became financially unstable it may materially decrease our revenues.
We derive a significant portion of our revenue from a small number of customers. The loss of any one of our
significant customers, as a result of bankruptcy, merger with other customers of ours or otherwise could materially decrease
our revenue and have an adverse effect on our growth.
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The following is a list of significant customers (representing at least 10% of revenue in any of the last three years)
and the percentage of our total revenues for the specified time periods derived from these customers:
Sprint .......................................................................
AT&T ......................................................................
Verizon Wireless .....................................................
27.6%
21.4%
9.7%
30.5%
21.0%
9.7%
23.2%
21.3%
11.2%
Percentage of Total Revenues
for the year ended December 31,
2006
2007
2008
We also have client concentrations with respect to revenues in each of our financial reporting segments:
AT&T ........................................................................
Sprint .........................................................................
Verizon Wireless .......................................................
26.7%
26.2%
9.7%
25.6%
26.5%
10.0%
25.3%
25.1%
11.1%
Percentage of Site Leasing Revenues
for the year ended December 31,
2006
2007
2008
Verizon Wireless .......................................................
Sprint .........................................................................
Metro PCS .................................................................
26.6%
38.0%
0.7%
17.4%
59.7%
3.9%
Percentage of Site Development
Consulting Revenues
for the year ended December 31,
2007
2006
2008
24.1%
22.9%
13.3%
Percentage of Site Development
Construction Revenues
for the year ended December 31,
2006
2007
2008
T-Mobile ...................................................................
Metro PCS .................................................................
Sprint .........................................................................
4.6%
0.2%
30.0%
5.8%
1.1%
39.8%
15.8%
11.9%
10.8%
Revenue from these clients is derived from numerous different site leasing contracts and site development contracts.
Each site leasing contract relates to the lease of space at an individual tower site and is generally for an initial term of five
years renewable for five 5-year periods at the option of the tenant. However, if any of our significant site leasing clients were
to experience financial difficulty, substantially reduce their capital expenditures or reduce their dependence on leased tower
space and fail to renew their leases with us, our revenues, future revenue growth and results of operations would be adversely
affected.
Our site development customers engage us on a project-by-project basis, and a customer can generally terminate an
assignment at any time without penalty. In addition, a customer’s need for site development services can decrease, and we
may not be successful in establishing relationships with new customers. Furthermore, our existing customers may not
continue to engage us for additional projects.
Increasing competition in the tower industry may adversely affect us.
Our industry is highly competitive. Competitive pressures for tenants could adversely affect our lease rates. In
addition, the loss of existing customers or the failure to attract new customers would lead to an accompanying adverse effect
on our revenues, margins and financial condition.
In the site leasing business, we compete with:
•
•
•
•
wireless service providers that own and operate their own towers and lease, or may in the future
decide to lease, antenna space to other providers;
other large independent tower companies;
smaller local independent tower companies; and
alternative facilities such as rooftops, broadcast towers and utility poles.
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There has been significant consolidation among the large independent tower companies in the past three years.
Specifically, American Tower Corporation completed its merger with SpectraSite, Inc. in 2005, we completed our acquisition
of AAT Communication Corporation in 2006 and Crown Castle International completed its merger with Global Signal, Inc.
in 2007. As a result of these consolidations, American Tower and Crown Castle are substantially larger and have greater
financial resources than us. This could provide them with advantages with respect to establishing favorable leasing terms
with wireless service providers or in their ability to acquire available towers.
Wireless service providers that own and operate their own tower networks are also generally substantially larger and
may have greater financial resources than we do. We believe that tower location and capacity, quality of service, density
within a geographic market and, to a lesser extent, price historically have been and will continue to be the most significant
competitive factors affecting the site leasing business.
The site development segment of our industry is also extremely competitive. There are numerous large and small
companies that offer one or more of the services offered by our site development business. As a result of this competition,
margins in this segment continue to be under pressure. Many of our competitors have lower overhead expenses and therefore
may be able to provide services at prices that we consider unprofitable. If margins in this segment were to further decrease,
our consolidated revenues and our site development segment operating profit could be adversely affected.
The market price of our Class A common stock could be affected by significant volatility, which could adversely impact
our ability to use equity to fund our growth plan.
The market price of our Class A common stock has historically experienced significant fluctuations. Since the fall of
2008, the U.S. stock market has been undergoing a period of very high volatility where changes in the market prices of equity
securities have often been abrupt and profound over short periods of time. The market price of our Class A common stock is
likely to continue to be volatile and subject to significant price and volume fluctuations in response to market and other
factors, including the other factors discussed elsewhere in “Risk Factors” and in “Forward-Looking Statements.” Volatility or
depressed market prices of our Class A common stock could make it difficult for shareholders to resell their shares of Class
A common stock, when they want or at attractive prices. Consequently, volatility of the market price of our Class A common
stock may make it less likely that sellers will accept our equity as consideration in connection with our tower acquisitions and
may make it more difficult for us to use our equity to fund our future growth plans. If we were unable to use equity to fund
growth of our tower portfolio, we may be required to either use debt to increase our tower portfolio or reduce our anticipated
growth.
Counterparties to our convertible note hedge transactions may be unable to fulfill their obligations and such failure could
subject us to significant costs to replace any such portion of our convertible note hedge transactions or subject us to
potential dilution or additional cost, if settled in cash, upon conversion of our convertible notes.
Concurrently with the pricing of our 0.375% Notes and our 1.875% Notes, we entered into convertible note hedge
transactions with affiliates of certain of the initial purchasers of both convertible note offerings. The initial strike price of the
convertible note hedge transactions relating to our 0.375% Notes is $33.56 per share of our Class A common stock (the same
as the initial conversion price of the 0.375% Notes) and cover 10,429,720 shares of our Class A common stock. The initial
strike price of the convertible note hedge transactions relating to our 1.875% Notes is $41.46 per share of our Class A
common stock (the same as the initial conversion price of our 1.875% convertible notes) and cover 13,265,780 shares of our
Class A common stock.
Since the fall of 2008, global economic conditions and the financial markets have been and continue to be volatile.
Certain financial institutions have filed for bankruptcy, have sold some or all of their assets, or may be looking to enter into a
merger or other transaction with another financial institution. As a result of these conditions, some of the counterparties to
our convertible note hedge transactions may be unable to perform their obligations under such instruments. One of the
convertible note hedge transactions entered into in connection with our 1.875% Notes was with Lehman Brothers OTC
Derivatives Inc. (“Lehman Derivatives”) which covers 55% of the 13,265,780 shares of our Class A common stock
potentially issuable upon conversion. In October 2008, Lehman Derivatives filed a voluntary petition for protection under
Chapter 11 of the United States Bankruptcy Code which constituted an “event of default” under the convertible note hedge
transaction with Lehman Derivatives. As a result, on November 7, 2008 we terminated the convertible note hedge transaction
with Lehman Derivatives. Based on information available to us, we have no indication, as of the date of filing this Form 10-
K, that any party other than Lehman Derivatives would be unable to fulfill their obligations to us under the convertible note
hedge transactions.
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If we were to elect to replace the convertible note hedge transaction with Lehman Derivatives or any other
counterparty, we would incur significant costs to replace such hedge transactions. Additionally, if we do not elect to replace
our convertible note hedge transactions that were previously with Lehman Derivatives or any other counterparty fails to
perform its obligations under our outstanding convertible note hedge transactions, we would be subject to potential dilution
or additional cost, if settled in cash, upon conversion of the applicable 0.375% Notes and 1.875% Notes.
Increasing competition to acquire existing towers may negatively impact our ability to grow our tower portfolio long-term.
Although our current plans only contemplate modest growth of our tower portfolio in 2009, primarily through new
tower builds, our ability to achieve material long-term tower portfolio growth will depend on our ability to acquire towers
from third parties. Traditionally, our acquisition strategy has focused on acquiring towers from smaller tower companies,
independent tower developers and wireless service providers. However, as a result of consolidation in the tower industry
there are fewer of these mid-sized tower transactions available and there is more competition to acquire existing towers.
Increased competition for acquisitions may result in fewer acquisition opportunities for us, higher acquisition prices, reduced
willingness of sellers to accept equity as consideration for their towers and increased difficulty in negotiating and
consummating agreements to acquire such towers. Furthermore, to the extent that the tower acquisition opportunities are for
significant tower portfolios, many of our competitors are significantly larger and have greater financial resources than us. If
we are not able to successfully resolve these issues, we may not be able to materially increase our tower portfolio in the long-
term.
We may not be able to build as many towers as we anticipate.
We currently intend to build 80 to 100 new towers during 2009. However, our ability to build these new towers is
dependent upon the availability of sufficient capital to fund construction, our ability to locate, and acquire at commercially
reasonable prices, attractive locations for such towers and our ability to obtain the necessary zoning and permits.
Due to these risks, it may take longer to complete our new tower builds than anticipated, the costs of constructing or
acquiring these towers may be higher than we expect or we may not be able to add as many towers as we had planned in
2009. If we are not able to increase our tower portfolio as anticipated, it could negatively impact our ability to achieve our
financial goals.
Our debt instruments contain restrictive covenants that could adversely affect our business by limiting our flexibility.
Our senior secured revolving credit facility and the Optasite Credit Facility contain certain restrictive covenants.
Among other things, these covenants limit our ability to:
•
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•
•
incur additional indebtedness;
sell assets;
make certain investments;
engage in certain restricted payments from SBA Senior Finance to us;
engage in mergers or consolidations;
incur liens; and
enter into affiliate transactions.
These covenants could place us at a disadvantage compared to some of our competitors which may have fewer
restrictive covenants and may not be required to operate under these restrictions. Further, these covenants could have an
adverse effect on our business by limiting our ability to take advantage of financing, new tower development, merger and
acquisitions or other opportunities. If we fail to comply with these covenants, it could result in an event of default under the
senior secured revolving credit facility. In addition, if we default in the payment of our other indebtedness, including under
our CMBS Certificates and our Notes, then such default could cause a cross-default under our senior secured revolving credit
facility.
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The mortgage loan relating to our CMBS Certificates also contains financial covenants that require that the
mortgage loan borrowers maintain, on a consolidated basis, a minimum debt service coverage ratio. To the extent that the
debt service coverage, as of the end of any calendar quarter, (1) is less than 1.30 times, all cash flow generated by the pledged
towers must be deposited into a reserve account and (2) is less than 1.15 times, then an “amortization period” will commence
and all funds on deposit in the reserve account will be applied to prepay the mortgage loan until such time as the debt service
coverage ratio exceeds 1.15 times for a calendar quarter. As lease payments from 4,969 towers of our total tower portfolio are
pledged as collateral under the mortgage loan, if this cash flow was not available to us it would adversely impact our ability
to pay our indebtedness, other than the mortgage loan, and to operate our business.
New technologies and their use by carriers may have a material adverse effect on our growth rate and results of
operations.
The emergence of new technologies could reduce the demand for space on our towers. For example, the increased
use by wireless service providers of signal combining and related technologies and products that allow two or more wireless
service providers to provide services on different transmission frequencies using the same communications antenna and other
facilities normally used by only one wireless service provider could reduce the demand for our tower space. Additionally, the
use of technologies that enhance spectral capacity, such as beam forming or “smart antennae,” that can increase the range and
capacity of an antenna could reduce the number of additional sites a wireless service provider needs to adequately serve a
certain subscriber base and therefore reduce demand for our tower space. The development and growth of communications
and other new technologies that do not require ground-based sites, such as the growth in delivery of video, voice and data
services by satellites or other technologies, could also adversely affect the demand for our tower space.
Our dependence on our subsidiaries for cash flow may negatively affect our business.
We are a holding company with no business operations of our own. Our only significant asset is and is expected to
be the outstanding capital stock and membership interests of our subsidiaries. We conduct, and expect to conduct, all of our
business operations through our subsidiaries. Accordingly, our ability to pay our obligations is dependent upon dividends and
other distributions from our subsidiaries to us. Additionally, the borrowers on the mortgage loan supporting the CMBS
Certificates must repay the components of the mortgage loan. If such borrowers’ cash flow is insufficient to cover such
repayments, we may be required to refinance the mortgage loan or sell a portion or all of our interests in the 4,969 tower sites
that secure, along with their operating cash flows, the mortgage loan. Other than the cash required to repay amounts due
under the CMBS Certificates, we currently expect that substantially all the earnings and cash flow of our subsidiaries will be
retained and used by them in their operations, including servicing their debt obligations. Our operating subsidiaries are
separate and distinct legal entities and have no obligation, contingent or otherwise, to repay our Notes, the components of the
mortgage loan pursuant to the CMBS Certificates (other than those entities obligated under the CMBS Certificates), or make
any funds available to us for payment. The ability of our operating subsidiaries to pay dividends or transfer assets to us is
restricted by applicable state law and contractual restrictions, including the terms of the senior secured revolving credit
facility and the CMBS Certificates.
Our quarterly operating results for our site development services fluctuate and therefore we may not be able to adjust our
cost structure on a timely basis with regard to such fluctuations.
The demand for our site development services fluctuates from quarter to quarter and should not be considered
indicative of long-term results. Numerous factors cause these fluctuations, including:
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•
•
•
•
the timing and amount of our customers’ capital expenditures;
the size and scope of our projects;
the business practices of customers, such as deferring commitments on new projects until after the
end of the calendar year or the customers’ fiscal year;
delays relating to a project or tenant installation of equipment;
seasonal factors, such as weather, vacation days and total business days in a quarter;
the use of third party providers by our customers;
the rate and volume of wireless service providers’ network development; and
general economic conditions.
Although the demand for our site development services fluctuates, we incur significant fixed costs, such as
maintaining a staff and office space in anticipation of future contracts. In addition, the timing of revenues is difficult to
forecast because our sales cycle may be relatively long. Therefore, we may not be able to adjust our cost structure on a timely
basis to respond to the fluctuations in demand for our site development services.
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We are not profitable and expect to continue to incur losses.
We are not profitable. The following chart shows the net losses we incurred for the periods indicated:
2006
For the year ended December 31,
2007
(in thousands)
2008
Net loss .....................................................................
$ (133,448) $ (77,879) $
(46,763)
Our losses are principally due to depreciation, amortization and accretion expenses, interest expense (including non-
cash interest expense and amortization of deferred financing fees), and losses from the write-off of deferred financing fees
and extinguishment of debt as well as impairment charges on our towers and auction rate securities in the periods presented
above. We expect to continue to incur significant losses, which may affect our ability to service our indebtedness.
The loss of the services of certain of our key personnel or a significant number of our employees may negatively affect our
business.
Our success depends to a significant extent upon performance and active participation of our key personnel. We
cannot guarantee that we will be successful in retaining the services of these key personnel. We have employment agreements
with Jeffrey A. Stoops, our President and Chief Executive Officer, Kurt L. Bagwell, our Senior Vice President and Chief
Operating Officer and Thomas P. Hunt, our Senior Vice President, Chief Administrative Officer and General Counsel. We do
not have employment agreements with any of our other key personnel. If we were to lose any key personnel, we may not be
able to find an appropriate replacement on a timely basis and our results of operations could be negatively affected. Further,
the loss of a significant number of employees or our inability to hire a sufficient number of qualified employees could have a
material adverse effect on our business.
Our costs could increase and our revenues could decrease due to perceived health risks from radio frequency (“RF”)
energy.
The government imposes requirements and other guidelines relating to exposure to RF energy. Exposure to high
levels of RF energy can cause negative health effects. The potential connection between exposure to low levels of RF energy
and certain negative health effects, including some forms of cancer, has been the subject of substantial study by the scientific
community in recent years. According to the Federal Communications Commission (the “FCC”), the results of these studies
to date have been inconclusive. However, public perception of possible health risks associated with cellular and other
wireless communications media could slow the growth of wireless companies, which could in turn slow our growth. In
particular, negative public perception of, and regulations regarding, health risks could cause a decrease in the demand for
wireless communications services. Moreover, if a connection between exposure to low levels of RF energy and possible
negative health effects, including cancer, were demonstrated, we could be subject to numerous claims. If we were subject to
claims relating to exposure to RF energy, even if such claims were not ultimately found to have merit, our financial condition
could be materially and adversely affected.
Our business is subject to government regulations and changes in current or future regulations could harm our business.
We are subject to federal, state and local regulation of our business. In particular, both the Federal Aviation
Administration (“FAA”) and FCC regulate the construction, modification and maintenance of antenna towers and structures
that support wireless communications and radio and television antennas. In addition, the FCC separately licenses and
regulates wireless communications equipment and television and radio stations operating from such towers and structures.
FAA and FCC regulations govern construction, lighting, painting and marking of towers and structures and may, depending
on the characteristics of the tower or structure, require registration of the tower or structure. Certain proposals to construct
new towers or structures or to modify existing towers or structures are reviewed by the FAA to ensure that the tower or
structure will not present a hazard to air navigation.
Antenna tower owners and antenna structure owners may have an obligation to mark or paint towers or structures or
install lighting to conform to FAA and FCC regulations and to maintain such marking, painting and lighting. Antenna tower
owners and antenna structure owners may also bear the responsibility of notifying the FAA of any lighting outages. Certain
proposals to operate wireless communications and radio or television stations from antenna towers and structures are also
reviewed by the FCC to ensure compliance with environmental impact requirements. Failure to comply with existing or
future applicable requirements may lead to civil penalties or other liabilities and may subject us to significant indemnification
liability to our customers against any such failure to comply. In addition, new regulations may impose additional costly
burdens on us, which may affect our revenues and cause delays in our growth.
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Local regulations, including municipal or local ordinances, zoning restrictions and restrictive covenants imposed by
community developers, vary greatly, but typically require antenna tower and structure owners to obtain approval from local
officials or community standards organizations prior to tower or structure construction or modification. Local regulations can
delay, prevent, or increase the cost of new construction, co-locations, or site upgrades, thereby limiting our ability to respond
to customer demand. In addition, new regulations may be adopted that increase delays or result in additional costs to us.
These factors could have a material adverse effect on our future growth and operations.
Our towers are subject to damage from natural disasters.
Our towers are subject to risks associated with natural disasters such as tornadoes, hurricanes and earthquakes. We
maintain insurance to cover the estimated cost of replacing damaged towers, but these insurance policies are subject to loss
limits and deductibles. We also maintain third party liability insurance, subject to loss limits and deductibles, to protect us in
the event of an accident involving a tower. A tower accident for which we are uninsured or underinsured, or damage to a
significant number of our towers, could require us to incur significant expenditures and may have a material adverse effect on
our operations or financial condition.
We could have liability under environmental laws that could have a material adverse effect on our business, financial
condition and results of operations.
Our operations, like those of other companies engaged in similar businesses, are subject to the requirements of
various federal, state, local and foreign environmental and occupational safety and health laws and regulations, including
those relating to the management, use, storage, disposal, emission and remediation of, and exposure to, hazardous and non-
hazardous substances, materials, and wastes. As owner, lessee or operator of numerous tower sites, we may be liable for
substantial costs of remediating soil and groundwater contaminated by hazardous materials, without regard to whether we, as
the owner, lessee or operator, knew of or were responsible for the contamination. We may be subject to potentially significant
fines or penalties if we fail to comply with any of these requirements. The current cost of complying with these laws is not
material to our financial condition or results of operations. However, the requirements of these laws and regulations are
complex, change frequently, and could become more stringent in the future. It is possible that these requirements will change
or that liabilities will arise in the future in a manner that could have a material adverse effect on our business, financial
condition and results of operations.
We have adopted anti-takeover provisions that could make it more difficult for a third party to acquire us.
Provisions of our articles of incorporation, our bylaws and Florida law could make it more difficult for a third party
to acquire us, even if doing so would be beneficial to our shareholders. We adopted a shareholder rights agreement, which
could make it considerably more difficult or costly for a person or group to acquire control of us in a transaction that our
board of directors opposes. These provisions, alone or in combination with each other, may discourage transactions involving
actual or potential changes of control, including transactions that otherwise could involve payment of a premium over
prevailing market prices to holders of our Class A common stock, or could limit the ability of our shareholders to approve
transactions that they may deem to be in their best interests.
Our issuance of equity securities and other associated transactions may trigger a future ownership change which may
negatively impact our ability to utilize net operating loss deferred tax assets in the future.
The issuance of equity securities and other associated transactions may increase the chance that we will have a
future ownership change under Section 382 of the Internal Revenue Code of 1986. We may also have a future ownership
change, outside of our control, caused by future equity transactions by our current shareholders. Depending on our market
value at the time of such future ownership change, an ownership change under Section 382 could negatively impact our
ability to utilize our net operating loss deferred tax assets in the event we generate future taxable income. Currently, we have
recorded a full valuation allowance against our net operating loss deferred tax asset because we have concluded that our loss
history indicates that it is not “more likely than not” that such deferred tax assets will be realized.
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Future sales of our Class A common stock in the public market or the issuance of other equity may cause dilution or
adversely affect the market price of our Class A common stock and our ability to raise funds in new equity or equity-
related offerings.
Sales of a substantial number of shares of our Class A common stock or other equity-related securities in the public
market, including sales by any selling shareholder or conversion of the Notes, could depress the market price of our Class A
common stock and impair our ability to raise capital through the sale of additional equity securities. We cannot predict the
effect that future sales of our Class A common stock or other equity-related securities would have on the market price of our
Class A common stock.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
PROPERTIES
We are headquartered in Boca Raton, Florida, where we currently lease approximately 73,000 square feet of space.
We have entered into long-term leases for regional and certain site development office locations where we expect our
activities to be longer-term. We open and close project offices from time to time in connection with our site development
business. We believe our existing facilities are adequate for our current and planned levels of operations and that additional
office space suited for our needs is reasonably available in the markets within which we operate.
Our interests in towers are comprised of a variety of fee interests, leasehold interests created by long-term lease
agreements, perpetual easements, easements and licenses or rights-of-way granted by government entities. Of the 7,854
towers in our portfolio, approximately 26% are located on parcels of land that we own, land subject to perpetual easements,
and parcels of land that have a leasehold interest that extends beyond 50 years. In rural areas, a wireless communications site
typically consists of up to a 10,000 square foot tract, which supports towers, equipment shelters and related equipment. Less
than 2,500 square feet is required for a monopole or self-supporting tower structure of the kind typically used in metropolitan
areas for wireless communication tower sites. Land leases generally have an initial term of five years with five or more
additional automatic renewal periods of five years, for a total of thirty years or more.
ITEM 3.
LEGAL PROCEEDINGS
We are involved in various legal proceedings relating to claims arising in the ordinary course of business. We do not
believe that the ultimate resolution of these matters will have a material adverse effect on our business, financial condition,
results of operations or liquidity.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to the vote of security holders during the fourth quarter of fiscal 2008.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Our Class A common stock commenced trading under the symbol “SBAC” on The NASDAQ National Market
System on June 16, 1999. We now trade on the NASDAQ Global Select Market, a segment of the NASDAQ Global Market,
formally known as the NASDAQ National Market System.
The following table presents the high and low sales price for our Class A common stock for the periods indicated:
Quarter ended December 31, 2008 .....................................................
Quarter ended September 30, 2008 ....................................................
Quarter ended June 30, 2008 ..............................................................
Quarter ended March 31, 2008 ...........................................................
Quarter ended December 31, 2007 .....................................................
Quarter ended September 30, 2007 ....................................................
Quarter ended June 30, 2007 ..............................................................
Quarter ended March 31, 2007 ...........................................................
High
$ 25.68
$ 38.50
$ 38.04
$ 34.04
$ 38.50
$ 36.68
$ 34.21
$ 30.46
Low
$ 9.49
$ 23.10
$ 29.02
$ 23.93
$ 30.81
$ 28.14
$ 29.00
$ 25.76
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As of February 20, 2009, there were 181 record holders of our Class A common stock.
Dividends
We have never paid a dividend on any class of common stock and anticipate that we will retain future earnings, if
any, to fund the development and growth of our business. Consequently, we do not anticipate paying cash dividends on our
common stock in the foreseeable future.
Equity Compensation Plan Information
The following table gives information about our common stock that may be issued upon the exercise of options,
warrants, and rights under all existing equity compensation plans as of December 31, 2008:
Equity Compensation Plan Information
(in thousands except exercise price)
Number of Securities to
be Issued Upon Exercise of
Outstanding Options,
Warrants and Rights
Weighted Average Exercise
Price of Outstanding
Options, Warrants and
Rights
Number of Securities Remaining
Available for Future Issuance
Under Equity Compensation
Plans (excluding securities
reflected in first column) (1)
Equity compensation plans
approved by security holders .........
Equity compensation plans not
approved by security holders .........
Total ..................................................
3,788
$
—
3,788
$
20.31
—
20.31
8,314
—
8,314
(1)
The maximum number of shares of Class A common stock that may be issued pursuant to awards under the
2001 Equity Participation Plan shall be 15% of the “adjusted common stock outstanding” as defined in the
2001 Equity Participation Plan, subject to certain limitations for specific types of awards.
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ITEM 6.
SELECTED FINANCIAL DATA
The following table sets forth selected historical financial data as of and for each of the five years ended December
31, 2008. The financial data for the fiscal years ended 2008, 2007, 2006, 2005, and 2004 have been derived from our audited
consolidated financial statements. You should read the information set forth below in conjunction with our “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the
related notes to those consolidated financial statements included in this Form 10-K.
2004
(audited)
For the year ended December 31,
2006
2005
(audited)
(audited)
(in thousands except for per share data)
2007
(audited)
2008
(audited)
Operating data:
Revenues:
Site leasing ........................................................
Site development ...............................................
Total revenues ...............................................
$ 144,004
87,478
231,482
$ 161,277
98,714
259,991
$ 256,170
94,932
351,102
$ 321,818 $ 395,541
79,413
474,954
86,383
408,201
Operating expenses:
Cost of revenues (exclusive of depreciation,
accretion and amortization shown below):
Cost of site leasing ............................................
Cost of site development ...................................
Selling, general and administrative ..........................
Restructuring and other (credits) charges ................
Asset impairment charges ........................................
Depreciation, accretion and amortization ................
Total operating expenses ...............................
Operating (loss) income ................................
Other income (expense):
Interest income ..................................................
Interest expense, net of amounts capitalized .....
Non-cash interest expense .................................
Amortization of deferred financing fees ...........
(Loss) gain from write-off of deferred
financing fees and extinguishment of debt ....
Other income (expense) ....................................
Total other expense........................................
Loss from continuing operations before
47,283
81,398
28,887
250
7,092
90,453
255,363
(23,881)
47,259
92,693
28,178
50
398
87,218
255,796
4,195
70,663
85,923
42,277
(357)
—
133,088
331,594
19,508
88,006
75,347
45,569
—
—
169,232
378,154
30,047
96,175
71,990
48,841
—
921
211,445
429,372
45,582
516
(47,460)
(28,082)
(3,445)
2,096
(40,511)
(26,234)
(2,850)
3,814
(81,283)
(6,845)
(11,584)
10,182
(92,498)
—
(8,534)
6,883
(104,253)
(412)
(11,671)
(41,197)
236
(119,432)
(29,271)
31
(96,739)
(57,233)
692
(152,439)
(431)
(15,777)
(107,058)
31,623
(13,478)
(91,308)
income taxes ...............................................
Provision for income taxes ......................................
(143,313)
(710)
(92,544)
(2,104)
(132,931)
(517)
(77,011)
(868)
(45,726)
(1,037)
Loss from continuing operations ...................
(144,023)
(94,648)
(133,448)
(77,879)
(46,763)
Loss from discontinued operations, net of income
taxes......................................................................
(3,257)
(61)
—
—
—
Net loss ..........................................................
Basic and diluted loss per common share amounts:
Loss from continuing operations .............................
Loss from discontinued operations ..........................
Net loss per common share ......................................
Basic and diluted weighted average shares
$ (147,280) $ (94,709) $ (133,448) $ (77,879) $ (46,763)
$
$
(2.47) $
(0.05)
(2.52) $
(1.28) $
—
(1.28) $
(1.36) $
—
(1.36) $
(0.74) $
—
(0.74) $
(0.43)
—
(0.43)
outstanding ...........................................................
58,420
73,823
98,193
104,743
109,882
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Balance Sheet Data:
Cash and cash equivalents ..............................
Short-term investments ...................................
Restricted cash (1) ............................................
Property and equipment, net ...........................
Intangibles, net ................................................
Total assets .....................................................
Total debt (2) ....................................................
Total shareholders’ equity (deficit) (3) .............
2004
(audited)
2005
(audited)
As of December 31,
2006
(audited)
(in thousands)
2007
(audited)
2008
(audited)
$
69,627
—
2,017
745,831
1,365
917,244
927,706
(88,671)
$
45,934
19,777
19,512
728,333
31,491
952,536
784,392
81,431
$
46,148
—
34,403
1,105,942
724,872
2,046,292
1,555,000
385,921
$
70,272
55,142
37,601
1,191,969
868,999
2,384,323
1,905,000
337,391
$
78,856
162
38,599
1,502,672
1,425,132
3,211,508
2,554,660
491,759
For the year ended December 31,
2004
(audited)
2005
(audited)
2006
(audited)
(in thousands)
2007
(audited)
2008
(audited)
Other Data:
Cash provided by (used in):
Operating activities .....................................
Investing activities .......................................
Financing activities .....................................
$
14,216
1,326
45,747
$
49,767
(99,283)
25,823
$
73,730
(738,353)
664,837
$
122,934
(301,884)
203,074
$
173,696
(580,549)
415,437
For the year ended December 31,
2007
2008
2006
Tower Data Rollforward:
Towers owned at the beginning of period ...............................................
Towers acquired in AAT Acquisition ......................................................
Towers acquired (4) ..................................................................................
Towers constructed ..................................................................................
Towers reclassified/disposed of (5) ...........................................................
Total towers owned at the end of period ..................................................
3,304
1,850
339
60
(2)
5,551
5,551
—
612
61
(4)
6,220
6,220
—
1,560
85
(11)
7,854
(1)
(2)
(3)
(4)
(5)
Restricted cash of $38.6 million as of December 31, 2008 consisted of $36.2 million related to CMBS Mortgage
loan requirements and $2.4 million related to surety bonds issued for our benefit. Restricted cash of $37.6 million as
of December 31, 2007 consisted of $35.3 million related to CMBS Mortgage loan requirements and $2.3 million
related to surety bonds issued for our benefit. Restricted cash of $34.4 million as of December 31, 2006 consisted of
$30.7 million related to CMBS mortgage loan requirements and $3.7 million related to surety bonds issued for our
benefit. Restricted cash of $19.5 million as of December 31, 2005 consisted of $17.9 million related to CMBS
mortgage loan requirements and $1.6 million related to surety bonds issued for our benefit. Restricted cash of $2.0
million as of December 31, 2004 was related to surety bonds issued for our benefit.
Includes deferred gain on interest rate swap of $1.9 million as of December 31, 2004.
Includes deferred loss from the termination of nine interest rate swap agreements of $7.4 million as of December 31,
2008, $10.2 million as of December 31, 2007 and $12.5 million as of December 31, 2006. Includes deferred gain
from the termination of two interest rate swap agreements of $5.9 million as of December 31, 2008, $8.9 million as
of December 31, 2007, $11.8 million as of December 31, 2006 and $14.5 million as of December 31, 2005.
December 31, 2008 includes 528 towers acquired in the Optasite acquisition, 423 towers acquired in the Tower Co.
acquisition and 340 towers acquired in the Light Tower acquisition.
Reclassifications reflect the combination for reporting purposes of multiple tower structures on a single parcel of
real estate, which we market and customers view as a single location, into a single owned tower site. Dispositions
reflect the decommissioning, sale, conveyance or other legal transfer of owned tower sites.
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with the
information contained in our consolidated financial statements and the notes thereto. The following discussion includes
forward-looking statements that involve certain risks and uncertainties, including, but not limited to, those described in Item
1A. Risk Factors. Our actual results may differ materially from those discussed below. See “Special Note Regarding
Forward-Looking Statements” and Item 1A. Risk Factors.
We are a leading independent owner and operator of wireless communications towers in 47 of the 48 contiguous
United States, Puerto Rico and the U.S. Virgin Islands. Our principal business line is our site leasing business, which
contributes approximately 98% of our total segment operating profit. In our site leasing business, we lease antenna space to
wireless service providers on towers and other structures that we own, manage or lease from others. The towers that we own
have been constructed by us at the request of a wireless service provider, built or constructed based on our own initiative or
acquired. As of December 31, 2008, we owned 7,854 towers. We also manage or lease approximately 4,200 actual or
potential communications sites, of which approximately 600 are revenue producing. Our second business line is our site
development business, through which we assist wireless service providers in developing and maintaining their own wireless
service networks.
Site Leasing Services
Our primary focus is the leasing of antenna space on our multi-tenant towers to a variety of wireless service
providers under long-term lease contracts. Site leasing revenues are received primarily from wireless service provider tenants,
including AT&T, Sprint, T-Mobile and Verizon Wireless. Wireless service providers enter into numerous different tenant
leases with us, each of which relates to the lease or use of space at an individual tower site. Each tenant lease is generally for
an initial term of five years with five 5-year renewal periods at the option of the tenant. These tenant leases typically contain
specific rent escalators, which average 3%—4% per year, including the renewal option periods. Tenant leases are generally
paid on a monthly basis and revenue from site leasing is recorded monthly on a straight-line basis over the current term of the
related lease agreements. Rental amounts received in advance are recorded in deferred revenue.
Cost of site leasing revenue primarily consists of:
•
•
•
•
•
•
Rental payments on ground and other underlying property leases;
Straight line rent adjustment for the difference between rental payments made and the expense
recorded as if the payments had been made evenly throughout the minimum lease term (which
may include renewal terms) of the underlying property lease;
Property taxes;
Site maintenance and monitoring costs (exclusive of employee related costs);
Utilities; and
Property insurance.
For any given tower, such costs are relatively fixed over a monthly or an annual time period. As such, operating
costs for owned towers do not generally increase significantly as a result of adding additional customers to the tower. The
amount of other direct costs associated with operating a tower varies from site to site depending on the taxing jurisdiction and
the height and age of the tower but typically do not make up a large percentage of total operating costs. The ongoing
maintenance requirements are typically minimal and include replacing lighting systems, painting a tower or upgrading or
repairing an access road or fencing. Lastly, ground leases are generally for an initial term of five years or more with multiple
renewable options of five year periods at our option and provide for rent escalators which typically average 3% - 4% annually
or provide for term escalators of approximately 15%.
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Our site leasing business generates substantially all of our segment operating profit. The table below details the
percentage of total company revenues and total segment operating profit contributed by the site leasing business.
For the year ended December 31, 2008 ............................
For the year ended December 31, 2007 ............................
For the year ended December 31, 2006 ............................
83.3%
78.8%
73.0%
97.6%
95.5%
95.4%
Percentage of
Revenues
Site Leasing Segment
Operating Profit
Contribution (1)
(1)
Site leasing segment operating profit and total segment operating profit are non-GAAP financial measures. We
reconcile these measures and other Regulation G disclosures in this annual report in the section entitled Non-GAAP
Financial Measures.
We believe that over the long-term, site leasing revenues will continue to grow as wireless service providers lease
additional antenna space on our towers due to increasing minutes of network use, network expansion and network coverage
requirements. We believe our site leasing business is characterized by stable and long-term recurring revenues, predictable
operating costs and minimal capital expenditures. Due to the relatively young age and mix of our tower portfolio, we expect
future expenditures required to maintain these towers to be minimal. Consequently, we expect to grow our cash flows by
adding tenants to our towers at minimal incremental costs by using existing tower capacity or requiring wireless service
providers to bear all or a portion of the cost of tower modifications. Furthermore, because our towers are strategically
positioned and our customers typically do not re-locate, we have historically experienced low customer churn as a percentage
of revenue.
Site Development Services
Our site development business is complimentary to our site leasing business, and provides us the ability to keep in
close contact with the wireless service providers who generate substantially all of our site leasing revenue and capture
ancillary revenues that are generated by our site leasing activities, such as antenna installation and equipment installation at
our tower locations. 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. We
principally perform services for third parties in our core, historical areas of wireless expertise, specifically site acquisition,
technical services and construction.
Site development services revenues are received primarily from wireless service providers or companies providing
development or project management services to wireless service providers. Our site development customers engage us on a
project-by-project basis, and a customer can generally terminate an assignment at any time without penalty. Site development
projects, both consulting and construction, include contracts on a time and materials basis or a fixed price basis. The majority
of our site development services are billed on a fixed price basis. Time and materials based site development contracts are
billed and revenue is recognized at contractual rates as the services are rendered. Our site development projects generally take
from three to twelve months to complete. For those site development consulting contracts in which we perform work on a
fixed price basis, we bill the client, and recognize revenue, based on the completion of agreed upon phases of this project on a
per site basis. Upon the completion of each phase, we recognize the revenue related to that phase.
Our revenue from site development construction contracts is recognized on the percentage-of-completion method of
accounting, determined by the percentage of cost incurred to date, compared to management’s estimated total cost for each
contract. This method is used because management considers total cost to be the best available measure of progress on the
contracts. These amounts are based on estimates, and the uncertainty inherent in the estimates initially is reduced as work on
the contracts nears completion. Revenue from our site development construction business may fluctuate from period to
period depending on construction activities, which are a function of the timing and amount of our clients’ capital
expenditures, the number and significance of active customer engagements during a period, weather and other factors.
Cost of site development consulting revenue and construction revenue includes all costs of materials, salaries and
labor costs, including payroll taxes, subcontract labor, vehicle expense and other costs directly and indirectly related to the
projects. All costs related to site development consulting contracts and construction contracts are recognized as incurred.
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The table below provides the percentage of total company revenues contributed by site development services over
the last three years. Information regarding the total assets used in our site development services business is included in Note
22 of our Consolidated Financial Statements included in this annual report.
Site development consulting ..........................................................
Site development construction .......................................................
Critical Accounting Policies and Estimates
2008
Percentage of Revenues
For the year ended December 31,
2007
2006
4.7%
6.0%
12.8% 15.2% 22.3%
3.9%
We have identified the policies and significant estimation processes below as critical to our business operations and
the understanding of our results of operations. The listing is not intended to be a comprehensive list. In many cases, the
accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the
United States, with no need for management’s judgment in their application. In other cases, management is required to
exercise judgment in the application of accounting principles with respect to particular transactions. The impact and any
associated risks related to these policies on our business operations is discussed throughout “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” where such policies affect reported and expected financial
results. For a detailed discussion on the application of these and other accounting policies, see Note 2 in the Notes to
Consolidated Financial Statements for the year ended December 31, 2008, included herein. Our preparation of our financial
statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure
of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses
during the reporting periods. Management bases its estimates on historical experience and on various other assumptions that
are believed to be reasonable under the circumstances. There can be no assurance that actual results will not differ from those
estimates and such differences could be significant.
Construction Revenue
Revenue from construction projects is recognized using the percentage-of-completion method of accounting,
determined by the percentage of cost incurred to date compared to management’s estimated total cost for each contract. This
method is used because we consider total cost to be the best available measure of progress on each contract. These amounts
are based on estimates, and the uncertainty inherent in the estimates initially is reduced as work on each contract nears
completion. The asset “costs and estimated earnings in excess of billings on uncompleted contracts” represents expenses
incurred and revenues recognized in excess of amounts billed. The liability “billings in excess of costs and estimated earnings
on uncompleted contracts” represents billings in excess of revenues recognized.
Allowance for Doubtful Accounts
We perform periodic credit evaluations of our customers. We continuously monitor collections and payments from
our customers and maintain an allowance for estimated credit losses based upon our historical experience and any specific
customer collection issues that we have identified. Establishing reserves against specific accounts receivable and the overall
adequacy of our allowance is a matter of judgment.
Asset Impairment
We evaluate the potential impairment of individual long-lived assets, principally the tower sites. We record an
impairment charge when we believe an investment in towers or intangible assets has been impaired, such that future
undiscounted cash flows would not recover the then current carrying value of the investment in the tower site. We consider
many factors and make certain assumptions when making this assessment, including but not limited to: general market and
economic conditions, historical operating results, geographic location, lease-up potential and expected timing of lease-up. In
addition, we make certain assumptions in determining an asset’s fair value for purposes of calculating the amount of an
impairment charge. Changes in those assumptions or market conditions may result in a fair value which is different from
management’s estimates. Future adverse changes in market conditions could result in losses or an inability to recover the
carrying value, thereby possibly requiring an impairment charge in the future. In addition, if our assumptions regarding future
undiscounted cash flows and related assumptions are incorrect, a future impairment charge may be required.
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Property Tax Expense
We typically receive notifications and invoices in arrears for property taxes associated with the tangible personal
property and real property used in our site leasing business. As a result, we recognize property tax expense, which is reflected
as a component of site leasing cost of revenue, based on our best estimate of anticipated property tax payments related to the
current period. We consider several factors in establishing this estimate, including our historical level of incurred property
taxes, the location of the property, our awareness of jurisdictional property value assessment methods and industry related
property tax information. If our estimates regarding anticipated property tax expenses are incorrect, a future increase or
decrease in site leasing cost of revenue may be required.
RESULTS OF OPERATIONS
Year Ended 2008 Compared to Year Ended 2007
Revenues:
Site leasing ...................................................
Site development consulting .........................
Site development construction ......................
Total revenues .......................................
For the year ended December 31,
Dollar
Change
2008
2007
(in thousands, except for percentages)
$ 321,818
24,349
62,034
$ 408,201
$ 395,541
18,754
60,659
$ 474,954
73,723
(5,595)
(1,375)
66,753
Percentage
Change
22.9%
(23.0)%
(2.2)%
16.4%
Site leasing revenue increased $73.7 million for the year ended December 31, 2008 due to an increase in the number
of tenants and the amount of equipment added to our historical towers and from revenue generated by the towers that we
acquired or constructed subsequent to December 31, 2007. As of December 31, 2008, we had 19,344 tenants as compared to
15,429 tenants at December 31, 2007. Additionally, we have experienced, on average, higher rents per tenant due to higher
rents from new tenants, higher annual rents upon renewal by existing tenants and higher rents from additional equipment
added by existing tenants.
Site development consulting and construction revenue for the year ended December 31, 2008 compared to the same
period of 2007 decreased $7.0 million as a result of a lower volume of work and a wind down of certain of our prior contracts
with Sprint offset by additional contracts with T-Mobile and Metro PCS.
Operating Expenses:
For the year ended December 31,
2008
2007
(in thousands)
Dollar
Change
Percentage
Change
Cost of revenues (exclusive of depreciation,
accretion and amortization):
Site leasing ............................................. $
Site development consulting ..................
Site development construction ...............
Selling, general and administrative ..............
Asset impairments and other (credits)
96,175
15,212
56,778
48,841
charges ......................................................
Depreciation, accretion and amortization .....
921
211,445
Total operating expenses ................ $ 429,372
$
88,006
19,295
56,052
45,569
—
169,232
$ 378,154
$
$
8,169
(4,083)
726
3,272
921
42,213
51,218
9.3%
(21.2)%
1.3%
7.2%
100.0%
24.9%
13.5%
Site leasing cost of revenues increased $8.2 million primarily as a result of the growth in the number of towers
owned by us, which was 7,854 at December 31, 2008 up from 6,220 at December 31, 2007 offset by the positive impact of
our ground lease purchase program.
Site development cost of revenues for the year ended December 31, 2008 decreased $3.4 million compared to the
same period of 2007 as a result of a decline in the volume of work performed for Sprint offset by additional contracts with T-
Mobile and Metro PCS.
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Selling, general, and administrative expenses increased $3.3 million primarily as a result of a $0.9 million one-time
severance expense related to the departure of our former Chief Financial Officer, a $0.6 million one-time settlement expense
associated with the termination of the pension plan the Company acquired as part of its acquisition of AAT Communications
Corporation in 2006 and an increase in salaries, benefits and other employee related expenses resulting primarily from a
higher number of employees, and increased non-cash compensation expense that we recognized for the year ended December
31, 2008 compared to the same period of 2007.
Asset impairment of $0.9 million for the year ended December 31, 2008 is the result of a reevaluation of future cash
flow expectations for eight towers that have not achieved expected lease up results as determined using a discounted cash
flow analysis compared to the related net book value of the tower asset and related intangibles.
Depreciation, accretion and amortization expense increased $42.2 million to $211.4 million for the year ended
December 31, 2008 from $169.2 million for the year ended December 31, 2007 due to an increase in the number of towers
and associated intangible assets we owned for the year ended December 31, 2008 compared to the same period of 2007.
Operating Income:
Operating income was $45.6 million for the year ended December 31, 2008 as compared to $30.0 million for the
year ended December 31, 2007. The increase of $15.6 million is primarily the result of higher site leasing segment operating
profit, offset by an increase in selling, general and administrative expenses and depreciation, accretion and amortization
expense.
Segment Operating Profit:
For the year ended December 31,
2008
2007
(in thousands)
Dollar
Change
Percentage
Change
Segment operating profit:
Site leasing ....................................
Site development consulting .........
Site development construction ......
Total ..........................................
$ 299,366
3,542
3,881
$ 306,789
$ 233,812
5,054
5,982
$ 244,848
$
$
65,554
(1,512)
(2,101)
61,941
28.0%
(29.9)%
(35.1)%
25.3%
The increase in site leasing segment operating profit of $65.6 million is primarily related to additional revenue
generated by the number of towers acquired and constructed for the year ended December 31, 2008, as well as additional
revenue from the increased number of tenants and tenant equipment on our sites for the year ended December 31, 2008
compared to the same period of 2007 without a commensurate increase in site leasing cost of revenue. We reconcile these
non-GAAP financial measures and provide the Regulation G disclosures in this annual report in the section titled Non-GAAP
Financial Measures.
Other Income (Expense):
Interest income ...............................................
Interest expense ..............................................
Non-cash interest expense ..............................
Amortization of deferred financing fees .........
Gain (loss) from extinguishment of debt and
write-off of deferred financing fees ............
Other expense .................................................
Total other expense ..................................
For the year ended December 31,
2008
2007
(in thousands)
Dollar
Change
Percentage
Change
$
6,883
(104,253)
(412)
(11,671)
$
$
10,182
(92,498)
—
(8,534)
(3,299 )
(11,755 )
(412 )
(3,137 )
(32.4)%
12.7%
100%
36.8%
31,623
(13,478)
$ (91,308)
(431)
(15,777)
$ (107,058) $
32,054
2,299
15,750
(7,437.1)%
(14.6)%
(14.7)%
Interest income decreased $3.3 million for the year ended December 31, 2008 when compared to the year ended
December 31, 2007. The decrease is primarily the result of lower interest rates coupled with a decrease in the average cash
balances for the year ended December 31, 2008 compared to the same period of 2007.
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Interest expense for the year ended December 31, 2008 increased $11.8 million from the year ended December 31,
2007. This increase is primarily due to the higher weighted average amount of cash-interest bearing debt outstanding for the
year ended December 31, 2008 as compared to the year ended December 31, 2007, which is partially offset by a reduction in
our weighted average cash interest rate for the same periods. Specifically, we issued $550.0 million of 1.875% convertible
senior notes in May 2008, borrowed $465.6 million and paid fees and interest on borrowings under our senior secured
revolving credit facility, which we entered into in January 2008, and assumed as part of the Optasite acquisition its $150
million fully-drawn credit facility in September 2008.
Non-cash interest for the year ended December 31, 2008 is due to the accretion of interest for the discount on the
credit facility which was assumed as part of the Optasite acquisition in September 2008. There was no non-cash interest for
the year ended December 31, 2007.
Amortization of deferred financing fees increased by $3.1 million for the year ended December 31, 2008, as
compared to the year ended December 31, 2007. This increase was primarily a result of the amortization of fees relating to
the senior secured revolving credit facility entered into during the first quarter of 2008 and the $550.0 million principal
amount of 1.875% convertible senior notes issued in May 2008.
The net gain from extinguishment of debt and write-off of deferred financing fees was $31.6 million for the year
ended December 31, 2008. The net gain includes $55.6 million associated with the extinguishment of $138.1 million in
principal amount of our 0.375% Convertible Senior Notes and $65.5 million of our CMBS Certificates for $147.8 million in
cash. The net gain was offset by a loss of $19.5 million related to the exchange of 3,407,914 shares of our Class A common
stock for $73.8 million in principal amount of 0.375% Notes and the write-off of $4.5 million of deferred financing fees
related to the portion of the debt extinguished and the reduction in the aggregate commitment of the lenders under the senior
secured revolving credit facility as a result of Lehman Commercial Paper Inc.’s default of its funding obligations. See
discussion in Note 12 to the Notes to the Consolidated Financial Statements for more information. The loss from write-off of
deferred financing fees and extinguishment of debt was $0.4 million for the year ended December 31, 2007 associated with
the termination of the senior revolving credit facility in April 2007.
Other expense of $13.5 million and $15.8 million includes an other-than-temporary impairment loss on investments
for the year ended December 31, 2008 and December 31, 2007, respectively, associated with our investments in auction rate
securities. See discussion in “Liquidity and Capital Resources” in Part II, Item 7 as well as Note 4 to the Consolidated
Financial Statements for more information on our investments in auction rate securities and this other-than-temporary
impairment charge.
Adjusted EBITDA
Adjusted EBITDA was $269.2 million for the year ended December 31, 2008 as compared to $209.4 million for the
year ended December 31, 2007. The increase of $59.8 million is primarily the result of increased segment operating profit
from our site leasing segment. We reconcile this measure and other Regulation G disclosures in this annual report in the
section entitled Non-GAAP financial measures.
Net Loss:
Net loss was $46.8 million for the year ended December 31, 2008 as compared to $77.9 million for the year ended
December 31, 2007. The decrease of $31.1 million is primarily the result of the net gains from the early extinguishment of
debt and an increase in site leasing segment operating profit partially offset by an increase in depreciation, accretion and
amortization expense, interest expense, amortization of deferred financing fees and other expense.
Year Ended 2007 Compared to Year Ended 2006
Revenues:
For the year ended December 31,
Site leasing ............................................................
Site development consulting ..................................
Site development construction ...............................
Total revenues ................................................
Dollar
Change
2007
2006
(in thousands, except for percentages)
$ 256,170
16,660
78,272
$ 351,102
$ 321,818
24,349
62,034
$ 408,201
65,648
7,689
(16,238 )
57,099
Percentage
Change
25.6%
46.2%
(20.7)%
16.3%
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Site leasing revenue increased $65.6 million due to an increase in the number of tenants and the amount of
equipment added to our historical towers and from revenue generated by the towers that we acquired in our April 2006
acquisition of AAT Communications Corporation (“AAT”) and the other towers we acquired or constructed subsequent to
December 31, 2005. The 1,850 AAT towers were only owned for eight months for the year ended December 31, 2006 as
compared to the entire year ended December 31, 2007. The AAT towers contributed approximately $98.6 million of the total
revenues for the fiscal year ended December 31, 2007 compared to approximately $63.2 million for the same period of 2006,
an increase of approximately $35.4 million. As of December 31, 2007, we had 15,429 tenants as compared to 13,602 tenants
at December 31, 2006. Additionally, we have experienced, on average, higher rents per tenant due to higher rents from new
tenants, higher annual rents upon renewal by existing tenants and increased rental rates associated with additional equipment
added by existing tenants.
Site development consulting revenue increased $7.7 million as a result of a higher volume of work for the year
ended December 31, 2007 versus the same period of 2006. The higher volume of work was primarily due to services
provided in connection with Sprint’s development of its network.
Site development construction revenue decreased $16.2 million due to the wind down or completion of certain of
our prior construction contracts from the larger wireless service providers, as well as a significant decline in the volume of
work performed for AT&T during 2007 as compared to the same period in the prior year.
Operating Expenses:
Cost of revenues (exclusive of depreciation,
accretion and amortization):
Site leasing ................................................
Site development consulting .....................
Site development construction ..................
Selling, general and administrative .................
Restructuring credits ........................................
Depreciation, accretion and amortization ........
Total operating expenses .......................
For the year ended December 31,
2007
2006
(in thousands)
Dollar
Change
Percentage
Change
$
88,006
19,295
56,052
45,569
—
169,232
$ 378,154
$
70,663
14,082
71,841
42,277
(357)
133,088
$ 331,594
$
$
17,343
5,213
(15,789)
3,292
357
36,144
46,560
24.5%
37.0%
(22.0)%
7.8%
(100.0)%
27.2%
14.0%
Site leasing cost of revenues increased $17.3 million primarily as a result of the AAT towers and the growth in the
number of towers owned by us, which was 6,220 at December 31, 2007 up from 5,551 at December 31, 2006. The AAT
towers contributed approximately $27.8 million to the total site leasing cost of revenues for the year ended December 31,
2007 compared to approximately $19.6 million for the year ended December 31, 2006, an increase of approximately $8.2
million.
Site development consulting cost of revenues increased $5.2 million as a result of higher volume of work for the
year ended December 31, 2007 versus the same period of 2006, largely due to services provided during 2007 in connection
with Sprint’s development of its network. Site development construction cost of revenue decreased $15.8 million due to the
wind down or completion of certain of our prior construction contracts from the larger wireless service providers, as well as a
significant decline in the volume of work performed for AT&T for the year ended December 31, 2007 as compared to the
same period in the prior year.
Selling, general, and administrative expenses increased $3.3 million primarily as a result of an increase in salaries,
benefits, and other back office expenses resulting primarily from a higher number of employees, a significant portion of
which is attributable to the AAT Acquisition. Selling, general, and administrative expenses were also impacted by $6.3
million of stock option and employee stock purchase plan expense that we recognized for the year ended December 31, 2007
in accordance with SFAS 123R as compared to $5.3 million in the comparable period in 2006, an increase of $1.0 million.
Depreciation, accretion and amortization expense increased $36.1 million to $169.2 million for the year ended
December 31, 2007 from $133.1 million for the year ended December 31, 2006. Approximately $71.2 million was associated
with the AAT towers for the year ended December 31, 2007 versus approximately $46.4 million for the comparable period in
2006, an increase of approximately $24.8 million.
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Operating Income:
Operating income was $30.0 million for the year ended December 31, 2007 as compared to $19.5 million for the
year ended December 31, 2006. The increase of $10.5 million is primarily the result of higher revenues without a
commensurate increase in cost of revenues in the site leasing and site development consulting segments, offset by an increase
in selling, general and administrative expenses and depreciation, accretion and amortization expense.
Segment Operating Profit:
For the year ended December 31,
2007
2006
(in thousands)
Dollar
Change
Percentage
Change
Segment operating profit:
Site leasing ....................................................
Site development consulting .........................
Site development construction ......................
Total ..........................................................
$ 233,812
5,054
5,982
$ 244,848
$ 185,507
2,578
6,431
$ 194,516
$
$
48,305
2,476
(449)
50,332
26.0%
96.0%
(7.0)%
25.9%
The increase in site leasing segment operating profit of $48.3 million is primarily related to additional revenue
generated by the increased number of towers acquired in the AAT Acquisition. The AAT towers contributed approximately
$70.8 million of the total site leasing segment operating profit for the year ended December 31, 2007 as compared to
approximately $43.6 million for the year ended December 31, 2006, an increase of approximately $27.2 million. The
remaining increase in our site leasing segment operating profit is due to increased revenue from the increased number of
tenants and tenant equipment on our sites for the year ended December 31, 2007 versus the same period in 2006 without a
commensurate increase in site leasing cost of revenue. We reconcile these non-GAAP financial measures and provide the
Regulation G disclosures in this annual report in the section titled Non-GAAP Financial Measures.
Other Income (Expense):
For the year ended December 31,
2007
2006
(in thousands)
Dollar
Change
Percentage
Change
Interest income ...................................................
Interest expense ..................................................
Non-cash interest expense ..................................
Amortization of deferred financing fees .............
Loss from write-off of deferred financing fees
and extinguishment of debt .............................
Other ...................................................................
Total other expense ......................................
$
10,182
(92,498)
—
(8,534)
(431)
(15,777)
$ (107,058)
$
$
3,814
(81,283)
(6,845)
(11,584)
(57,233)
692
$ (152,439) $
6,368
(11,215)
6,845
3,050
56,802
(16,469)
45,381
167.0%
13.8%
(100.0)%
(26.3)%
(99.2)%
(2,379.9)%
(29.8)%
Interest income increased $6.4 million for the year ended December 31, 2007 when compared to the year ended
December 31, 2006. The increase is primarily the result of investment earnings on the net proceeds of the Convertible Senior
Notes (the “Notes”) offering completed at the end of the first quarter of 2007.
Interest expense for the year ended December 31, 2007 increased $11.2 million from the year ended December 31,
2006. This increase is primarily due to the higher weighted average amount of cash-interest bearing debt outstanding for the
year ended December 31, 2007 as compared to the year ended December 31, 2006, which is partially offset by a reduction in
our weighted average cash interest rate for the same periods. Specifically, (1) our $1.1 billion bridge loan for the AAT
Acquisition was only outstanding for seven months of the year ended December 31, 2006 and was not outstanding during any
portion of the year ended December 31, 2007, while the $1.1 billion CMBS Certificates issued in 2006, which were used to
refinance the bridge loan, were outstanding for a little over one month for the year ended December 31, 2006 and were
outstanding for the full year ended December 31, 2007, and (2) we had $350.0 million of additional debt outstanding for nine
months in 2007 consisting of our 0.375% Notes compared to none in the year ended December 31, 2006.
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There was no non-cash interest for the year ended December 31, 2007 compared to $6.8 million for the year ended
December 31, 2006. The decrease was a result of the repurchase of all of the outstanding 9 ¾ % senior discount notes in
April 2006.
Amortization of deferred financing fees decreased by $3.1 million for the year ended December 31, 2007, as
compared to the year ended December 31, 2006. This decrease was primarily a result of fully amortizing fees relating to the
$1.6 billion of CMBS Certificates over a period of five years, with one year of amortization during the year ended December
31, 2007 as compared to fully amortizing fees on the $1.1 billion bridge loan over nine months, with seven months of
amortization during the year ended December 31, 2006.
The loss from write-off of deferred financing fees and extinguishment of debt was $0.4 million for the year ended
December 31, 2007 associated with the termination of the senior revolving credit facility in April 2007. This amount was
$57.2 million for the year ended December 31, 2006 associated with the loss from write-off of $10.2 million of deferred
financing fees and $47.0 million of losses on extinguishment of debt resulting from the prepayment of the $1.1 billion bridge
loan in November 2006 and the repurchase of the 8 ½% senior notes and 9 ¾ % senior discount notes in April 2006.
Other expense of $15.8 million includes an other-than-temporary impairment loss on short-term investments of
$15.6 million for the year ended December 31, 2007 associated with our investments in auction rate securities. See discussion
in Note 4 to the Consolidated Financial Statements for more information on our investments in auction rate securities and this
other-than-temporary impairment charge.
Adjusted EBITDA
Adjusted EBITDA was $209.4 million for the year ended December 31, 2007 as compared to $161.8 million for the
year ended December 31, 2006. The increase of $47.6 million is primarily the result of increased segment operating profit
from our site leasing segment largely driven from the AAT Acquisition. We reconcile this measure and other Regulation G
disclosures in this annual report in the section entitled Non-GAAP financial measures.
Net Loss:
Net loss was $77.9 million for the year ended December 31, 2007 as compared to $133.4 million for the year ended
December 31, 2006. The decrease of $55.5 million is primarily the result of the decrease in loss from write-off of deferred
financing fees and extinguishment of debt.
LIQUIDITY AND CAPITAL RESOURCES
SBA Communications Corporation (“SBA”) is a holding company with no business operations of its own. Our only
significant asset is the outstanding capital stock of SBA Telecommunications, Inc. (“Telecommunications”) which is also a
holding company that owns the outstanding capital stock of SBA Infrastructure Holdings I, Inc. (“Infrastructure,” formerly
known as Optasite) and SBA Senior Finance, Inc., an indirect wholly-owned subsidiary of SBA (“SBA Senior Finance”).
SBA Senior Finance directly or indirectly, owns the equity interest in substantially all of our non-Infrastructure subsidiaries.
We conduct all of our business operations through our SBA Senior Finance subsidiaries, the primary borrowers under the
mortgage loan underlying the CMBS Certificates, SBA Senior Finance II LLC and Infrastructure. Accordingly, our only
source of cash to pay our obligations, other than financings, is distributions with respect to our ownership interest in our
subsidiaries from the net earnings and cash flow generated by these subsidiaries.
A summary of our cash flows is as follows:
For the year ended
December 31, 2008
(in thousands)
Summary cash flow information:
Cash provided by operating activities ..............................................
Cash used in investing activities ......................................................
Cash provided by financing activities ..............................................
Increase in cash and cash equivalents .......................................
Cash and cash equivalents, December 31, 2007 ...............................
Cash and cash equivalents, December 31, 2008 ...............................
$
$
173,696
(580,549)
415,437
8,584
70,272
78,856
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Sources of Liquidity
We fund our growth, including our tower portfolio growth, through cash flows from operations, long-term
indebtedness and equity issuances.
Cash provided by operating activities was $173.7 million for the year ended December 31, 2008 as compared to
$122.9 million for the year ended December 31, 2007. This increase was primarily the result of segment operating profit from
the site leasing segment, net of interest expense and selling, general and administrative expenses.
In January 2008, SBA Senior Finance entered into a senior secured revolving credit facility. The aggregate
commitment of the senior secured revolving credit facility is currently $285 million. The facility may be borrowed, repaid
and redrawn, subject to compliance with certain covenants. Proceeds available under the facility may only be used for the
construction or acquisition of towers and for ground lease buyouts. Amounts borrowed under the facility will accrue interest
at the Eurodollar rate plus a margin that ranges from 150 basis points to 300 basis points or at a Base Rate plus a margin that
ranges from 50 basis points to 200 basis points, in each case based on consolidated total debt to SBA Senior Finance’s
annualized EBITDA ratio (calculated excluding the impact from the borrowers under the mortgage loan underlying the
CMBS Certificates and funds borrowed under the Optasite Credit Facility). The material terms of the senior secured
revolving credit facility are described below under “Debt Instruments – Senior Secured Revolving Credit Facility.” As of
December 31, 2008, $230.6 million was outstanding and $54.4 million was the remaining availability under the facility.
On May 16, 2008, we issued $550.0 million of our 1.875% Convertible Senior Notes due in 2013, which we refer to
as the 1.875% Notes. Semi-annual interest payments on the 1.875% Notes are due each May 1 and November 1, beginning
November 1, 2008. The maturity date of the 1.875% Notes is May 1, 2013. The 1.875% Notes are convertible, at the holder’s
option, into shares of our Class A common stock, at an initial conversion rate of 24.1196 shares per $1,000 principal amount
of 1.875% Notes (subject to certain customary adjustments), which is equivalent to an initial conversion price of
approximately $41.46 per share or a 20% conversion premium based on the last reported sale price of $34.55 per share of
Class A common stock on the Nasdaq Global Select Market on May 12, 2008. The net proceeds from the 1.875% Note
offering were approximately $536.8 million after deducting discounts, commissions and expenses. A portion of the net
proceeds from the sale of the 1.875% Notes was used to repurchase and retire approximately 3.47 million shares of our Class
A common stock at a price of $34.55 per share, or approximately $120.0 million. A portion of the net proceeds from the sales
of the 1.875% Notes and the warrants (see Note 12 in Notes to Consolidated Financial Statements) was used to pay for the
cost of the convertible note hedge transactions, repay approximately $235.0 million drawn under the senior secured revolving
credit facility, to finance future acquisitions of complementary businesses, to finance future acquisition or construction of
towers and the purchase or extension of leases of land underlying our towers, future stock repurchases and for general
corporate purposes. The remainder of the net proceeds from the sale of the 1.875% Notes and the warrant transactions is
invested in cash equivalents.
On September 16, 2008, in connection with the acquisition of Optasite, we assumed Optasite’s fully drawn $150
million senior credit facility with Morgan Stanley Asset Funding, Inc. which we recorded at its fair value of $147.0 million.
The Optasite Credit Facility is secured by all of the property and interest in property of Optasite Towers, LLC, a subsidiary of
Optasite. Interest on the Optasite Credit Facility accrues at one month Eurodollar Rate plus 165 basis points and interest is
paid monthly. Commencing November 1, 2008, we began paying an amount equal to the monthly percentage share of the
aggregate outstanding principal amount of the Optasite Credit Facility based on a twenty-five year amortization and the
facility cannot be re-drawn. The Optasite Credit Facility matures on November 1, 2010, when the remaining principal will be
due in full. The material terms of the Optasite Credit Facility are described below under “Debt Instruments – Optasite Credit
Facility.” As of December 31, 2008, there was $149.0 million outstanding under the Optasite Credit Facility which was
recorded at its accreted carrying value of $146.4 million.
In order to manage our leverage position and to ensure continued compliance with our financial covenants, we may
decide to pursue a variety of actions. These actions may include the issuance of additional indebtedness to stay at target
leverage levels, selling certain assets or lines of business, issuing common stock or securities convertible into shares of
common stock, or pursuing other financing alternatives, including securitization transactions. If implemented, these actions
could increase our interest expense and/or dilute our existing shareholders. We cannot assure you that we will implement any
of these strategies or that, if implemented, these strategies could be implemented on terms favorable to our company and its
shareholders.
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Equity Issuances
We have on file with the Commission a shelf registration statement on Form S-4 registering shares of Class A
common stock that we may issue in connection with the acquisition of wireless communication towers, companies who own
towers or companies that provide related services. During 2008, we issued approximately 1.3 million shares of Class A
common stock under this registration statement in connection with the acquisition of towers. As of December 31, 2008, we
had approximately 2.6 million shares of Class A common stock remaining under this shelf registration statement.
On April 14, 2006, we filed with the Commission an automatic shelf registration statement for well-known seasoned
issuers on Form S-3ASR. This registration statement enables us to issue shares of our Class A common stock, shares of
preferred stock, which may be represented by depositary shares, unsecured senior, senior subordinated or subordinated debt
securities, and warrants to purchase any of these securities in any amounts approved by our board of directors, subject to the
requirements of the Nasdaq Stock Market and the securities and other laws applicable to us. Under the rules governing
automatic shelf registration statements, we will file a prospectus supplement and advise the Commission of the amount and
type of securities each time we issue securities under this registration statement. For the year ended December 31, 2008, we
did not issue any securities under this automatic shelf registration statement.
Uses of Liquidity
Our principal use of liquidity is cash capital expenditures associated with the growth of our tower portfolio. Our
cash capital expenditures, including cash used for acquisitions, for the year ended December 31, 2008 were $620.7 million.
The $620.7 million included cash capital expenditures of $564.9 million that we incurred in connection with the acquisition
of 1,560 completed towers and earnouts associated with previous acquisitions for the year ended December 31, 2008, net of
related prorated rental receipts and payments. The $620.7 million also includes $23.5 million related to new tower
construction, $5.1 million for maintenance tower capital expenditures, $6.3 million for augmentations and tower upgrades,
$1.3 million for general corporate expenditures, and $19.6 million for ground lease purchases. The $23.5 million of new
tower construction included costs associated with the completion of 85 new towers for the year ended December 31, 2008
and costs incurred on sites currently in process.
During the fourth quarter of 2008, we consummated privately negotiated exchanges of stock for outstanding 0.375%
Notes in reliance on Section 3(a)(9) of the Securities Act of 1933, as amended. Pursuant to these exchanges we issued
3,407,914 shares of our Class A common stock in exchange for $73.8 million in principal amount of 0.375% Notes. We also
repurchased in privately negotiated transactions $138.1 million in principal amount of 0.375% Notes and $65.5 of our CMBS
Certificates for $147.8 million in cash. The 0.375% Notes repurchased and exchanged represent 60.5% of the original $350
million principal amount of 0.375% Notes issued.
From time to time, in order to optimize our liquidity and leverage and take advantage of certain market
opportunities, we have and may in the future repurchase, for cash or equity, our outstanding indebtedness, including our
0.375% Convertible Notes due 2010, our 1.875% Convertible Senior Notes due 2013 and our 2005 and 2006 collateralized
mortgage backed securities, in privately-negotiated transactions or in open market transactions.
In order to manage our leverage position and/or to ensure continued compliance with our financial covenants, we
may decide to pursue a variety of other financial transactions. These transactions may include the issuance of additional
indebtedness, the repurchase of outstanding indebtedness for cash or equity, selling certain assets or lines of business, issuing
common stock or securities convertible into shares of common stock, or pursuing other financing alternatives, including
securitization transactions. If either our debt repurchases or exchanges or any of the other financial transactions are
implemented, these actions could materially impact the amount and composition of indebtedness outstanding, increase our
interest expense and/or dilute our existing shareholders. We cannot assure you that we will not implement any of these
strategies or that, if implemented, these strategies could be implemented on terms favorable to us and our shareholders.
Based on the current state of the credit markets, during 2009 we expect to limit our cash capital expenditures to (1)
non-discretionary cash capital expenditures associated with tower maintenance and general corporate expenditures, which we
expect to be in the range of $6.0 million to $9.0 million in 2009, and (2) discretionary cash capital expenditures primarily
associated with the 80 to 100 towers we intend to build in 2009, tower augmentations and ground lease purchases, which we
expect to be in the range of $30.0 million to $50.0 million in 2009. If we refinance some of our debt in 2009, we may
increase our cash capital expenditures. In the interim, we may pursue limited tower acquisitions for stock when we can do so
on an immediately accretive basis and the acquisition otherwise meets our investment returns and criteria.
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We estimate we will incur approximately $1,000 per tower per year for capital improvements or modifications to
our towers. All of these planned cash capital expenditures are expected to be funded by cash on hand, cash flow from
operations and borrowings under the senior secured revolving credit facility. The exact amount of our future capital
expenditures will depend on a number of factors including amounts necessary to support our tower portfolio, our new tower
build and tower acquisition program, and our ground lease purchase program.
Debt Service Requirements
At December 31, 2008, we had $398.8 million outstanding of Initial CMBS Certificates. The Initial CMBS
Certificates have an anticipated repayment date of November 2010. Interest on the Initial CMBS Certificates is payable
monthly at a blended annual rate of 5.6%. Based on the amounts outstanding at December 31, 2008, debt service for the next
twelve months on the Initial CMBS Certificates is $22.3 million.
At December 31, 2008, we had $1.1 billion outstanding of Additional CMBS Certificates. The Additional CMBS
Certificates have an anticipated repayment date of November 2011. Interest on the Additional CMBS Certificates is payable
monthly at a blended annual rate of 6.0%. Based on the amounts outstanding at December 31, 2008, debt service for the next
twelve months on the Additional CMBS Certificates is $65.4 million.
At December 31, 2008, we had $138.1 million outstanding of 0.375% Notes. The 0.375% Notes have a maturity
date of December 1, 2010. Interest on the 0.375% Notes is payable semi-annually each June 1 and December 1 at an annual
rate of 0.375%. Based on the amounts outstanding at December 31, 2008, debt service for the next twelve months on the
0.375% Notes is $0.5 million.
At December 31, 2008, we had $550.0 million outstanding of 1.875% Notes. The 1.875% Notes have a maturity
date of May 1, 2013. Interest on the 1.875% Notes is payable semi-annually each May 1 and November 1 at an annual rate of
1.875%. Based on the amounts outstanding at December 31, 2008, debt service for the next twelve months on the 1.875%
Notes will be $10.3 million.
At December 31, 2008, we had $230.6 million outstanding under our senior secured revolving credit facility.
Amounts borrowed under the facility accrue interest at the Eurodollar rate plus a margin that ranges from 150 basis points to
300 basis points or at a Base Rate (as defined in the Senior Credit Agreement) plus a margin that ranges from 50 basis points
to 200 basis points. The facility will terminate and we will repay all amounts outstanding on the earlier of (i) the third
anniversary of January 18, 2008 and (ii) the date which is three months prior to (x) the final maturity date of the 0.375%
Notes (or any instrument that refinances the 0.375% Notes) or (y) the anticipated repayment date (November 2010) of the
Initial CMBS Certificates (or any other refinancing of these instruments). However, we may request that each lender, in its
sole discretion, extend the termination date of the facility for one additional year. In addition, we had approximately $0.1
million of letters of credit posted against the availability of this facility at December 31, 2008. Based on the outstanding
amount and rates in effect at December 31, 2008, we estimate our debt service for the next twelve months will be
approximately $9.9 million.
At December 31, 2008, we had $149.0 million outstanding under our Optasite Credit Facility that was recorded at its
accreted carrying value of $146.4 million. Interest on the Optasite Credit Facility accrues at the one month Eurodollar Rate
plus 165 basis points and interest is paid monthly. Commencing November 1, 2008, we began paying an amount equal to the
monthly percentage share of the aggregate outstanding principal amount of the Optasite Credit Facility based on a twenty-
five year amortization and the facility cannot be re-drawn. The Optasite Credit Facility matures on November 1, 2010, when
the remaining principal will be due in full. Based on the outstanding amount and rates in effect at December 31, 2008, we
estimate our debt service for the next twelve months will be approximately $4.2 million.
At December 31, 2008, we believe that our cash flows from operations for the next twelve months will be sufficient
to service our outstanding debt during the next twelve months.
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Debt Instruments
CMBS Certificates
On November 18, 2005, SBA CMBS-1 Depositor LLC (the “Depositor”), an indirect subsidiary of ours, sold in a
private transaction $405.0 million of Initial CMBS Certificates issued by the SBA CMBS Trust (the “Trust”).
The Initial CMBS Certificates consist of five classes, all of which are rated investment grade with a principal
balance and pass-through interest rate as indicated in the table below:
Subclass
2005-1A ....................................
2005-1B ....................................
2005-1C ....................................
2005-1D ....................................
2005-1E ....................................
Total..........................................
Annual
Pass-through
Interest Rate
Initial Subclass
Principal
Original
Balance
Repurchases
Initial Subclass
Principal
Balance at
12/31/08
(in thousands)
5.369% $
5.565%
5.731%
6.219%
6.706%
$
238,580
48,320
48,320
48,320
21,460
405,000
$
$
$
—
—
—
(6,200)
—
(6,200) $
238,580
48,320
48,320
42,120
21,460
398,800
The weighted average annual fixed coupon interest rate of the Initial CMBS Certificates as of December 31, 2008 is
5.6%, payable monthly, and the effective weighted average annual fixed interest rate is 4.8% after giving effect to a
settlement of two interest rate swap agreements entered into in contemplation of the transaction. The Initial CMBS
Certificates have an anticipated repayment date of November 2010 with a final repayment date in 2035. The proceeds of the
Initial CMBS Certificates were primarily used to purchase the prior senior credit facility of SBA Senior Finance and to fund
reserves and pay expenses associated with the offering.
During the fourth quarter of 2008, SBA repurchased, for cash, $6.2 million in principal amount of Initial CMBS
Certificates subclass 1D in privately negotiated transactions. In accordance with APB 26 “Early Extinguishment of Debt,”
SBA recorded in its Consolidated Statement of Operations a $0.6 million gain on the early extinguishment of debt net of the
write-off of unamortized deferred financing fees.
On November 6, 2006, the Depositor sold, in a private transaction, $1.15 billion of Additional CMBS Certificates
issued by the Trust. The Additional CMBS Certificates consist of nine classes with a principal balance and pass-through
interest rate for each class as indicated in the table below:
Subclass
2006-1A ..................................
2006-1B ...................................
2006-1C ...................................
2006-1D ..................................
2006-1E ...................................
2006-1F ...................................
2006-1G ..................................
2006-1H ..................................
2006-1J ....................................
Annual
Pass-through
Interest Rate
Additional
Subclass
Principal
Original
Balance
Repurchases
Additional
Subclass
Principal
Balance at
12/31/08
(in thousands)
5.314% $
5.451%
5.559%
5.852%
6.174%
6.709%
6.904%
7.389%
7.825%
439,420
106,680
106,680
106,680
36,540
81,000
121,000
81,000
71,000
$
$
—
—
(5,000)
(13,000)
(7,000)
(10,000)
(11,272)
(12,726)
(255)
439,420
106,680
101,680
93,680
29,540
71,000
109,728
68,274
70,745
Total ........................................
$
1,150,000
$ (59,253) $ 1,090,747
The weighted average annual fixed interest rate of the Additional CMBS Certificates as of December 31, 2008 is
6.0%, payable monthly, and the effective weighted average annual fixed interest rate is 6.3% after giving effect to the
settlement of the nine interest rate swap agreements entered into in contemplation of the transaction. The Additional CMBS
Certificates have an anticipated repayment date of November 2011 with a final repayment date in 2036. The proceeds of the
Additional CMBS Certificates were primarily used to repay the bridge loan incurred in connection with the acquisition of
AAT and to fund required reserves and expenses associated with the Additional CMBS Transaction.
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During the fourth quarter of 2008, SBA repurchased, for cash, $59.3 million in principal amount of Additional
CMBS Certificates in privately negotiated transactions. In accordance with APB 26 “Early Extinguishment of Debt,” SBA
recorded in its Consolidated Statement of Operations an $18.6 million gain on the early extinguishment of debt net of the
write-off of unamortized deferred financing fees.
The assets of the Trust, which issued both the Initial CMBS Certificates and the Additional CMBS Certificates,
consist of a non-recourse mortgage loan initially made in favor of SBA Properties as the initial borrower. In connection with
the Additional CMBS Certificates, each of SBA Sites, Inc., SBA Structures, Inc., SBA Towers, Inc., SBA Puerto Rico, Inc.
and SBA Towers USVI, Inc. (the “Additional Borrowers” and collectively with SBA Properties, Inc., the “Borrowers”) were
added as additional borrowers under the mortgage loan and the principal amount of the mortgage loan was increased by $1.15
billion to an aggregate of $1.56 billion. The mortgage loan consists of multiple tranches, or components, each of which has
terms that are identical to the subclass of CMBS Certificates to which it relates. The Borrowers are special purpose vehicles
which exist solely to hold the towers which are subject to the securitization.
The mortgage loan is to be paid from the operating cash flows from the aggregate 4,969 towers owned by the
Borrowers (the “CMBS Towers”). Subject to certain limited exceptions described below, no payments of principal will be
required to be made for the components of the mortgage loan corresponding to the Initial CMBS Certificates prior to the
monthly payment date in November 2010, which is the anticipated repayment date for the components of the mortgage loan
corresponding to the Initial CMBS Certificates, and no payments of principal will be required to be made for the components
of the mortgage loan corresponding to the Additional CMBS Certificates prior to the monthly payment date in November
2011, which is the anticipated repayment date for the components of the mortgage loan corresponding to the Additional
CMBS Certificates.
The Borrowers may prepay the mortgage loan in whole or in part at any time prior to November 2010 for the
components of the mortgage loan corresponding to the Initial CMBS Certificates and November 2011 for the components of
the mortgage loan corresponding to the Additional CMBS Certificates upon payment of the applicable prepayment
consideration. The prepayment consideration is determined per class and consists of an amount equal to the excess, if any, of
(1) the present value on the date of prepayment of all future installments of principal and interest required to be paid from the
date of prepayment to and including the first due date that is nine months prior to the anticipated repayment date, assuming
the entire unpaid principal amount of such class is required to be paid, over (2) that portion of the principal balance of such
class prepaid on the date of such prepayment. If the prepayment occurs (i) within nine months of the anticipated repayment
date, (ii) with proceeds received as a result of any condemnation or casualty of the Borrowers’ sites or (iii) during an
amortization period, no prepayment consideration is due. The entire unpaid principal balance of the mortgage loan
components corresponding to the Initial CMBS Certificates will be due in November 2035 and those corresponding to the
Additional CMBS Certificates will be due in November 2036. However, to the extent that the full amount of the mortgage
loan component corresponding to the Initial CMBS Certificates or the amount of the mortgage loan component
corresponding to the Additional CMBS Certificates are not fully repaid by their respective anticipated repayment dates, the
interest rate of each component would increase by the greater of (i) 5% or (ii) the amount, if any, by which the sum of (x) the
ten-year U.S. treasury rate plus (y) the credit-based spread for such component (as set forth in the mortgage loan agreement)
plus (z) 5%, exceeds the original interest rate for such component. In addition, if our 2005 CMBS Certificates are not fully
repaid by November 2010, then excess cash flow (as defined below) will be trapped by the Trustee and applied first to repay
the original cash coupons on the CMBS Certificates, to fund all reserve accounts, fund operating expenses associated with the
towers, pay the management fees and then to repay principal of the 2005 and the 2006 CMBS Certificates in order of their
investment grade (i.e. the 2005-1A and 2006-1A subclasses would have their respective principal repaid equally prior to
repayment of the other subclasses of the CMBS Certificates). The mortgage loan may be defeased in whole at any time prior
to the anticipated repayment date.
The mortgage loan is secured by (1) mortgages, deeds of trust and deeds to secure debt on substantially all of the
tower sites and their operating cash flows, (2) a security interest in substantially all of the Borrowers’ personal property and
fixtures, (3) the Borrowers’ rights under the management agreement they entered into with SBA Network Management, Inc.
(“SBA Network Management”) relating to the management of the Borrowers’ tower sites by SBA Network Management
pursuant to which SBA Network Management arranges for the payment of all operating expenses and the funding of all
capital expenditures out of amounts on deposit in one or more operating accounts maintained on the Borrowers’ behalf, (4)
the Borrowers’ right under certain site management agreements, (5) the Borrowers’ rights under certain tenant leases, (6) the
pledge by SBA CMBS-1 Guarantor LLC and SBA CMBS-1 Holdings, LLC of equity interest of the initial borrower and
SBA CMBS-1 Guarantor LLC, (7) the various deposit accounts and collection accounts of the Borrowers and (8) all proceeds
of the foregoing. For each calendar month, SBA Network Management is entitled to receive a management fee equal to 7.5%
of the Borrowers’ operating revenues for the immediately preceding calendar month.
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In connection with the issuance of the CMBS Certificates, we established a deposit account into which all rents and
other sums due on the CMBS Towers are directly deposited by the lessees and are held by the trustee. The funds in this
deposit account are used to fund a restricted cash amount, which represents the cash held in escrow pursuant to the mortgage
loan governing the CMBS Certificates to fund certain reserve accounts for the payment of debt service costs, ground rents,
real estate and personal property taxes, insurance premiums related to tower sites, trustee and service expenses, and to reserve
a portion of advance rents from tenants on the 4,969 tower sites. Based on the terms of the CMBS Certificates, all rental cash
receipts each month are restricted and held by the indenture trustee. The monies held by the indenture trustee are classified as
restricted cash on our Consolidated Balance Sheets. The monies held by the indenture trustee in excess of required reserve
balances are subsequently released to the Borrowers on or before the 15 th calendar day following month end. However, if the
debt service coverage ratio, defined as the Net Cash Flow (as defined in the mortgage loan agreement) divided by the amount
of interest on the mortgage loan, servicing fees and trustee fees that the Borrowers will be required to pay over the
succeeding twelve months, as of the end of any calendar quarter, falls to 1.30 times or lower, then all cash flow in excess of
amounts required to make debt service payments, to fund required reserves, to pay management fees and budgeted operating
expenses and to make other payments required under the loan documents, referred to as “excess cash flow”, will be deposited
into a reserve account instead of being released to the Borrowers. The funds in the reserve account will not be released to the
Borrowers unless the debt service coverage ratio exceeds 1.30 times for two consecutive calendar quarters. If the debt service
coverage ratio falls below 1.15 times as of the end of any calendar quarter, then an “amortization period” will commence and
all funds on deposit in the reserve account will be applied to prepay the mortgage loan until such time as the debt service
coverage ratio exceeds 1.15 times for a calendar quarter.
As of December 31, 2008, we met the required debt service coverage ratio as defined by the mortgage loan
agreement.
0.375% Convertible Senior Notes due 2010
On March 26, 2007, we issued $350.0 million of our 0.375% Convertible Senior Notes due 2010. Interest is payable
semi-annually on June 1 and December 1. The maturity date of the Notes is December 1, 2010. The Notes are convertible, at
the holder’s option, into shares of our Class A, common stock, at an initial conversion rate of 29.7992 shares per $1,000
principal amount of Notes (subject to certain customary adjustments), which is equivalent to an initial conversion price of
approximately $33.56 per share or a 19% conversion premium based on the last reported sale price of $28.20 per share of
Class A common stock on the Nasdaq Global Select Market on March 20, 2007, the purchase agreement date. The Notes are
only convertible under the following circumstances:
•
•
•
•
during any calendar quarter commencing at any time after June 30, 2007 and only during such calendar
quarter, if the last reported sale price of our Class A common stock for at least 20 trading days in the 30
consecutive trading day period ending on the last trading day of the preceding calendar quarter is more than
130% of the applicable conversion price per share of Class A common stock on the last day of such
preceding calendar quarter;
during the five business day period after any 10 consecutive trading day period in which the trading price
of a 0.375% Note for each day in the measurement period was less than 95% of the product of the last
reported sale price of our Class A common stock and the applicable conversion rate;
if specified distributions to holders of our Class A common stock are made or specified corporate
transactions occur; and
at any time on or after October 12, 2010.
Upon conversion, we have the right to settle the conversion of each $1,000 principal amount of 0.375% Notes with
either of the three following alternatives, at our option, delivery of (1) 29.7992 shares of our Class A common stock, (2) cash
equal to the value of 29.7992 shares of our Class A common stock calculated at the market price per share of our Class A
common stock at the time of conversion or (3) a combination of cash and shares of our Class A common stock.
Concurrently with the pricing of the 0.375% Notes, we entered into convertible note hedge transactions whereby we
purchased from affiliates of two of the initial purchasers of the 0.375% Notes, an option covering 10,429,720 shares of our
Class A common stock at an initial price of $33.56 per share. Separately and concurrently with the pricing of the 0.375%
Notes, we entered into warrant transactions whereby we sold to affiliates of two of the initial purchasers of the 0.375% Notes
warrants to acquire 10,429,720 shares of our Class A common stock at an initial exercise price of $55.00 per share. The
convertible note hedge transactions and the warrant transactions, taken as a whole, effectively increase the conversion price
of the 0.375% Notes from $33.56 per share to $55.00 per share. As we cannot determine when, or whether, the 0.375% Notes
will be converted, the convertible note hedge transactions and the warrant transactions, taken as a whole, minimize the
dilution risk associated with early conversion of the 0.375% Notes until such time that our Class A common stock is trading
at a price above $55.00 per share (the upper strike of the warrants).
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During the fourth quarter of 2008, we consummated privately negotiated exchanges of stock for outstanding 0.375%
Notes in reliance on Section 3(a)(9) of the Securities Act of 1933, as amended. Pursuant to these exchanges, we issued
3,407,914 shares of SBA’s Class A common stock in exchange for $73.8 million in principal amount of 0.375% Notes. In
addition, we also repurchased $138.1 million in principal amount of 0.375% Notes for $102.5 million in cash. The notes
repurchased represent 60.5% of the original $350 million principal amount of 0.375% Notes issued. See Note 12 in the Notes
to Consolidated Financial Statements for further discussion.
1.875% Convertible Senior Notes due 2013
On May 16, 2008 we issued $550.0 million of our 1.875% Convertible Senior Notes due 2013. Interest is payable
semi-annually on May 1 and November 1, beginning November 1, 2008. The maturity date of the 1.875% Notes is May 1,
2013. The 1.875% Notes are convertible, at the holder’s option, into shares of our Class A common stock, at an initial
conversion rate of 24.1196 shares of Class A common stock per $1,000 principal amount of 1.875% Notes (subject to certain
customary adjustments), which is equivalent to an initial conversion price of approximately $41.46 per share or a 20%
conversion premium based on the last reported sale price of $34.55 per share of Class A common stock on the Nasdaq Global
Select Market on May 12, 2008, the purchase agreement date. The 1.875% Notes are only convertible under the following
circumstances:
•
•
•
•
during any calendar quarter commencing at any time after June 30, 2008 and only during such calendar
quarter, if the last reported sale price of our Class A common stock for at least 20 trading days during the
30 consecutive trading days ending on the last trading day of the preceding calendar quarter is more than
130% of the applicable conversion price per share of Class A common stock on the last trading day of such
preceding calendar quarter;
during the five business day period after any 10 consecutive trading day period in which the trading price
per $1,000 principal amount of 1.875% Notes for each day in the measurement period was less than 95% of
the product of the last reported sale price of our Class A common stock and the applicable conversion rate;
if specified distributions to holders of our Class A common stock are made or specified corporate
transactions occur; and
at any time on or after February 19, 2013.
Upon conversion, we have the right to settle the conversion of each $1,000 principal amount of 1.875% Notes with
any of the three following alternatives, at our option: delivery of (1) 24.1196 shares of our Class A common stock, (2) cash
equal to the value of 24.1196 shares of our Class A common stock calculated at the market price per share of our Class A
common stock at the time of conversion or (3) a combination of cash and shares of our Class A common stock.
Concurrently with the pricing of the 1.875% Notes, we entered into convertible note hedge transactions originally
covering 13,265,780 shares of our Class A common stock at an initial price of $41.46 per share. Separately and concurrently
with the pricing of the 1.875% Notes, we entered into warrant transactions whereby we sold warrants to each of the hedge
counterparties to acquire 13,265,780 shares of our Class A common stock at an initial exercise price of $67.37 per share. The
convertible note hedge transactions and the warrant transactions, taken as a whole, effectively increase the conversion price
of the 1.875% Notes from $41.46 per share to $67.37 per share. As we cannot determine when, or whether, the 1.875% Notes
will be converted, the convertible note hedge transactions and the warrant transactions, taken as a whole, minimize the
dilution risk associated with early conversion of the 1.875% Notes until such time that our Class A common stock is trading
at a price above $67.37 per share (the upper strike of the warrants).
One of the convertible note hedge transactions entered into in connection with the 1.875% Notes was with Lehman
Brothers OTC Derivatives Inc. (“Lehman Derivatives”). The convertible note hedge transaction with Lehman Derivatives
covers 55% of the 13,265,780 shares of Company Class A common stock potentially issuable upon conversion of the 1.875%
Notes. In October 2008, Lehman Derivatives filed a voluntary petition for protection under Chapter 11 of the United States
Bankruptcy Code. The filing by Lehman Derivatives of a voluntary Chapter 11 bankruptcy petition constituted an “event of
default” under the convertible note hedge transaction with Lehman Derivatives. As a result, on November 7, 2008 we
terminated the convertible note hedge transaction with Lehman Derivatives. Based on information available to us, we have
no indication, as of the date of filing this Form 10-K, that any party other than Lehman Derivatives would be unable to fulfill
their obligations to us under the convertible note hedge transactions.
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The net cost of the convertible note hedge transaction with Lehman Derivatives was recorded as an adjustment to
Additional Paid in Capital and did not have any impact on our consolidated balance sheet. However, we could incur
significant costs to replace this hedge transaction if we elect to do so. If we do not elect to replace the convertible note hedge
transaction, then we will be subject to potential dilution upon conversion of the 1.875% Notes, if on the date of conversion
the per share market price of SBA’s Class A common stock exceeds the conversion price of $41.46.
Senior Secured Revolving Credit Facility
On January 18, 2008, SBA Senior Finance, an indirect wholly-owned subsidiary of SBA, entered into a $285.0
million senior secured revolving credit facility. On March 5, 2008, SBA Senior Finance entered into a new lender supplement
in connection with the senior secured revolving credit facility, which increased the commitment from $285.0 million to
$335.0 million. In September 2008, we made a drawing request under the senior secured revolving credit facility and Lehman
Commercial Paper Inc. (“LCPI”), who was a lender under the senior secured revolving credit facility, did not fund its share
of such request. As a result of such failure to fund, we delivered a letter to LCPI declaring that LCPI was in default of its
obligations under the senior secured revolving credit facility agreement. On October 5, 2008, LCPI filed a motion for
protection under Chapter 11 of the United States Bankruptcy Code. LCPI, a subsidiary of Lehman Brothers Holding Inc.,
originally had committed $50.0 million of the original aggregate of $335.0 million in commitments under the senior secured
revolving credit facility. As a result, the aggregate commitment of the senior secured revolving credit facility is currently
$285.0 million. No lender within the facility is committed to fund more than $50.0 million.
The senior secured revolving credit facility may be borrowed, repaid and redrawn, subject to compliance with the
financial and other covenants in the Senior Credit Agreement. Amounts borrowed under the facility accrue interest at the
Eurodollar rate plus a margin that ranges from 150 basis points to 300 basis points or at a Base Rate (as defined in the Senior
Credit Agreement) plus a margin that ranges from 50 basis points to 200 basis points, in each case based on the Consolidated
Total Debt to Annualized Borrower EBITDA ratio (as defined in the Senior Credit Agreement and discussed below). The
facility will terminate and we will repay all amounts outstanding on the earlier of (i) the third anniversary of January 18, 2008
and (ii) the date which is three months prior to (x) the final maturity date of the 0.375% Notes (or any instrument that
refinances the 0.375% Notes) or (y) the anticipated repayment date (November 2010) of the Initial CMBS Certificates (or any
other refinancing of these instruments). However, we may request that each lender, in its sole discretion, extend the
termination date of the facility for one additional year. The proceeds available under the facility may only be used for the
construction or acquisition of towers and for ground lease buyouts.
The Senior Credit Agreement requires SBA Senior Finance and SBA to maintain specific financial ratios, including,
at the SBA Senior Finance level, a Consolidated Total Debt to Annualized Borrower EBITDA ratio (as defined in the Senior
Credit Agreement) that does not exceed 6.9x for any fiscal quarter and an Annualized Borrower EBITDA to Annualized Cash
Interest Expense ratio (as defined in the Senior Credit Agreement) of not less than 2.0x for any fiscal quarter. In addition,
SBA’s ratio of Consolidated Total Net Debt to Consolidated Adjusted EBITDA (as defined in the Senior Credit Agreement)
for any fiscal quarter cannot exceed 9.9x. The Senior Credit Agreement also contains customary affirmative and negative
covenants that, among other things, limit SBA Senior Finance’s ability to incur indebtedness, grant certain liens, make
certain investments, enter into sale leaseback transactions or merge or consolidate, or engage in certain asset dispositions,
including a sale of all or substantially all of our assets. As of December 31, 2008, we were in full compliance with the
financial covenants contained in this agreement.
Upon the occurrence of certain bankruptcy and insolvency events with respect to SBA or certain of our subsidiaries,
the revolving credit loans automatically terminate and all amounts due under the Senior Credit Agreement and other loan
documents become immediately due and payable. If certain other events of default occur, including failure to pay the
principal and interest when due, a breach of our negative covenants, or failure to perform any other requirement in the Senior
Credit Agreement, the Guarantee and Collateral Agreement (as described below) and/or certain other debt instruments,
including the CMBS Certificates, then with the permission of a majority of the lenders, the revolving credit commitments
will terminate and all amounts due under the Senior Credit Agreement and other loan documents become immediately due
and payable.
In connection with the senior secured revolving credit facility, we entered into a Guarantee and Collateral
Agreement, pursuant to which SBA, Telecommunications and substantially all of the domestic subsidiaries of SBA Senior
Finance which are not Borrowers under the CMBS Certificates guarantee amounts owed under the senior secured revolving
credit facility. Amounts borrowed under the senior secured revolving credit facility are secured by a first lien on substantially
all of SBA Senior Finance’s assets not previously pledged under the CMBS Certificates and substantially all of the assets,
other than leasehold, easement or fee interest in real property, of the guarantors, including SBA and Telecommunications.
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On July 18, 2008, SBA Senior Finance entered into the First Amendment to the senior secured revolving credit
facility to effect the terms of the Agreement and Plan of Merger, dated July 18, 2008, among us, Optasite, and the other
parties thereto, which was effective upon the acquisition of Optasite. The First Amendment (i) deletes from the definition of
Annualized Borrower EBITDA, any EBITDA generated by Optasite and its subsidiaries to the extent that such entities are
not guarantors under the Guarantee and Collateral Agreement, and, to the extent not permitted under the Optasite Credit
Facility, (ii) excludes Optasite and its subsidiaries from an obligation to become guarantors under the Guarantee and
Collateral Agreement and (iii) permits us to not pledge any stock or rights that we own in Optasite or any of its subsidiaries
as collateral under the Guarantee and Collateral Agreement.
As of December 31, 2008, we had $230.6 million outstanding under this facility and had approximately $0.1 million
of letters of credit posted against the availability of the credit facility outstanding. In addition, as of December 31, 2008,
availability under the credit facility was approximately $54.4 million.
Optasite Credit Facility
On September 16, 2008, in connection with the acquisition of Optasite, we assumed Optasite’s fully drawn $150
million senior credit facility. At the time of the acquisition, the Optasite Credit Facility consisted of a fully drawn $150
million loan which is secured by all of the property and interest in property of Optasite Towers, LLC (subsequently renamed
SBA Infrastructure, Inc. (“Infrastructure”)). Interest on the Optasite Credit Facility accrues at one month Eurodollar Rate plus
165 basis points and interest payments are due monthly. Commencing November 1, 2008, we began paying an amount equal
to the monthly percentage share of the aggregate outstanding principal amount of the Optasite Credit Facility based on a
twenty-five year amortization and the facility cannot be re-drawn. The Optasite Credit Facility matures on November 1,
2010, when the remaining principal will be due in full.
The Optasite Credit Facility agreement requires Infrastructure to maintain specific financial ratios, including that
Infrastructure’s consolidated debt to Aggregate Tower Cash Flow (as defined in the Optasite Credit Facility agreement) be
less than 7.0x, that its Debt Service Coverage Ratio (as defined in the Optasite Credit Facility agreement) be more than 1.5x,
and that the aggregate amount of Annualized Rents generated from Tenant Leases in respect of rooftop towers does not
exceed 5% of Aggregate Annualized Rent. The Optasite Credit Facility agreement also contains customary affirmative and
negative covenants that, among other things, limit Infrastructure’s ability to incur additional indebtedness, grant certain liens,
assume certain guarantee obligations, enter into certain mergers or consolidations, including a sale of all or substantially all
of its assets, or engage in certain asset dispositions. As of December 31, 2008, we were in full compliance with the financial
covenants and the terms of the credit agreement.
Upon the occurrence of certain bankruptcy and insolvency events with respect to Infrastructure or SBA or any of
SBA’s subsidiaries, all amounts due under the Optasite Credit Facility agreement become immediately due and payable. If
certain other events of default occur, such as the failure to pay any principal of any loan when due, or are continuing, such as
failure to pay interest on any loan when due, failure to comply with the financial ratios, a change of control of SBA or failure
to perform under any other Infrastructure loan document, all amounts due under the Optasite Credit Facility agreement may
be immediately due and payable.
As of December 31, 2008, we had $149.0 million outstanding under the Optasite Credit Facility, which was
recorded at its accreted carrying value of $146.4 million.
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 particularly in light of the fact that our site
leasing revenues are governed by long-term contracts with pre-determined pricing that we will not be able to increase in
response to increases in inflation.
Recent Accounting Pronouncements
In September 2008, Financial Accounting Standards Board (“FASB”) issued Emerging Issues Task Force (“EITF”)
Issue No. 07-5, “Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity’s Own Stock” (“EITF
07-5”). EITF 07-5 supercedes EITF Issue No. 01-6, “The Meaning of Indexed to a Company’s Own Stock” and addresses the
determination of whether an instrument (or an embedded feature) is indexed to an entity’s own stock. EITF 07-5 is effective
for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years and management does not
expect it to have a material impact on our consolidated financial condition, results of operations or cash flows.
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In June 2008, FASB issued EITF Issue 08-4, “Transition Guidance for Conforming Changes to Issue No. 98-5
(“EITF 08-4”)”. The objective of EITF No.08-4 is to provide transition guidance for conforming changes made to EITF No.
98-5, “Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion
Ratios”, that result from EITF 00-27 “Application of Issue No. 98-5 to Certain Convertible Instruments”, and SFAS No. 150,
“Accounting for Certain Financial Instruments with characteristics of both Liabilities and Equity”. This Issue is effective for
financial statements issued for fiscal years ending after December 15, 2008. Early application is permitted. EITF 08-4 did not
have a material impact on our consolidated financial condition, results of operations or cash flows.
In May 2008, FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS
162”). The statement is intended to improve financial reporting by identifying a consistent hierarchy for selecting accounting
principles to be used in preparing financial statements that are prepared in conformance with generally accepted accounting
principles. Unlike Statement on Auditing Standards (SAS) No. 69, “The Meaning of Present Fairly in Conformity With
GAAP,” SFAS 162 is directed to the entity rather than the auditor. The statement is effective November 15, 2008 and did not
have any impact on our consolidated financial condition, results of operations or cash flows.
In May 2008, FASB issued FASB Staff Position (“FSP”) Accounting Principles Board (“APB”) 14-1, “Accounting
for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (“FSP
APB 14-1”) . “FSP APB 14-1 requires the issuer of certain convertible debt instruments that may be settled in cash (including
partial cash settlement) on conversion to separately account for the liability (debt) and equity (conversion option) components
of the instrument in a manner that reflects the issuer’s non-convertible debt borrowing rate. FSP APB 14-1 is effective for
fiscal years beginning after December 15, 2008 and interim periods within those fiscal years. Early adoption is prohibited.
Upon adoption, FSP APB 14-1 requires companies to retrospectively apply the requirements of the pronouncements to all
periods presented. SBA’s 0.375% Convertible Senior Notes due 2010 and 1.875% Convertible Senior Notes due 2013 will be
subject to FSP APB 14-1. Consequently, we are currently evaluating the impact of FSP APB 14-1 on our consolidated
balance sheets and statements of operations beginning in the first quarter of fiscal 2009. We will be required to reduce the
carrying value of our convertible debt and accrete the reduced value back to its full principal balance over the term of the
Notes. We will record this accretion as non-cash interest expense related to its outstanding convertible debt instruments.
In April 2008, FASB issued FSP FAS No. 142-3, “Determination of the Useful Life of Intangible Assets” (FSP FAS
142-3”). FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used
to determine the useful life of a recognized intangible asset under FASB Statement No. 142, “Goodwill and Other Intangible
Assets .” FSP FAS 142-3 is effective for fiscal years beginning after December 15, 2008 and early adoption is prohibited. We
are currently evaluating the impact the adoption of FSP FAS 142-3 will have on our consolidated financial condition, results
of operations or cash flows.
In March 2008, FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an
Amendment to FASB Statement No. 133” (“SFAS 161”). SFAS 161 establishes the disclosure requirements for derivative
instruments and hedging activities and expands the disclosure requirements of SFAS No. 133. SFAS 161 is effective for
financial statements issued for fiscal years and interim periods beginning after November 15, 2008. We do not expect the
adoption of SFAS 161 to have a material impact on our consolidated financial condition, results of operations or cash flows.
In December 2007, FASB issued SFAS No. 141(R), “Business Combinations” (“SFAS 141(R)”) which requires the
acquiring entity in a business combination to record all assets acquired and liabilities assumed at their respective acquisition-
date fair values and changes other practices under SFAS No. 141 “Business Combinations” , some of which could have a
material impact on how we account for business combinations. These changes include, among other things, expensing
acquisition costs as incurred as a component of operating expense. We presently capitalize these acquisition costs as part of
the purchase price and then amortize these costs using the straight line method over the life of the associated acquired assets.
SFAS 141(R) also requires additional disclosure of information surrounding a business combination, such that users of the
entity’s financial statements can fully understand the nature and financial impact of a business combination. SFAS 141(R) is
effective for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years. We are currently
evaluating the impact the adoption of SFAS 141 (R) will have on our consolidated financial condition, results of operations
or cash flows.
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In December 2007, FASB issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements”
(“SFAS 160”) which requires entities to report non-controlling (minority) interest in subsidiaries as equity in the consolidated
financial statements. SFAS 160 is effective for fiscal years beginning after December 15, 2008. The adoption of SFAS 160 is
not expected to have a material impact on our consolidated financial condition, results of operations or cash flows.
In February 2007, FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial
Liabilities – Including an Amendment of FASB Statement No. 115” (“SFAS 159”) , which provides companies with an option
to report selected financial assets and liabilities at their fair values. The objective is to improve financial reporting by
providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge accounting provisions. SFAS 159 became effective for us on
January 1, 2008. The adoption of SFAS 159 did not have a material impact on our financial condition, results of operations or
cash flows.
In September 2006, FASB issued SFAS No. 157 “Fair Value Measurements” (“SFAS 157”) which defines fair
value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurements. SFAS 157
is effective for fiscal years beginning after November 15, 2007. However, in February 2008, the FASB issued FSP SFAS No.
157-1 and FSP SFAS No. 157-2. FSP SFAS No. 157-1 amends SFAS 157 to exclude SFAS No. 13 “Accounting for Leases”
and other accounting pronouncements that address fair value measurements for purposes of lease classification or
measurement under SFAS No. 13. FSP SFAS No. 157-2 delays the effective date of SFAS 157 for all nonfinancial assets and
nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually). This FSP partially defers the effective date of SFAS 157 to fiscal years beginning after November
15, 2008, or in fiscal 2009 for us, and interim periods within those fiscal years for items within the scope of this FSP. In
October 2008, the FASB issued FSP FAS 157-3 which clarifies the application of SFAS 157 in an inactive market by
providing an illustrative example to demonstrate how the fair value of a financial asset is determined when the market for the
financial asset is inactive. Effective January 1, 2008, the guidelines of SFAS 157 were applied in recording our investments
at their fair market value, which is further discussed in Note 4. The adoption of SFAS 157 did not have a material impact on
our consolidated financial condition, results of operations or cash flows.
Commitments and Contractual Obligations
The following table summarizes our scheduled contractual commitments as of December 31, 2008 (in thousands):
Contractual Obligations
Long-term debt ..............................................
Interest payments (1) .......................................
Operating leases .............................................
Capital leases .................................................
Employment agreements ................................
Total
$ 2,557,248
294,803
1,463,828
1,246
2,974
$ 4,320,099
Less than 1
Year
$
6,000
109,156
57,206
453
1,655
$ 174,470
1-3 Years
$ 2,001,248
171,897
113,475
715
1,319
$ 2,288,654
3-5 Years
$ 550,000
13,750
110,442
78
—
$ 674,270
More than 5
Years
$
—
—
1,182,705
—
—
$ 1,182,705
(1)
Represents interest payments based on the CMBS Certificates with a weighted average coupon fixed interest rate of
5.9% and 6.0%, the Convertible Senior Notes interest rate of 0.375% and 1.875%, the senior revolving credit facility
interest rates ranging from 2.47% to 3.44% and the Optasite credit facility interest rate of 2.85%
Off-Balance Sheet Arrangements
We are not involved in any off-balance sheet arrangements.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to certain market risks that are inherent in our financial instruments. These instruments arise from
transactions entered into in the normal course of business.
The following table presents the future principal payment obligations and fair value associated with our long-term
debt instruments assuming our actual level of long-term indebtedness as of December 31, 2008:
2009
2010
2011
2012
2013
Thereafter
Total
Fair Value
(in thousands)
Long-term debt:
Fixed rate CMBS
Certificates (1) ...... $ — $ 398,800 $ 1,090,747 $ — $
0.375% Convertible
— $
— $ 1,489,547 $ 1,173,842
Senior Notes ....... $ — $ 138,149 $
— $ — $
— $
— $ 138,149 $
112,481
1.875% Convertible
Senior Notes ....... $ — $
— $
— $ — $ 550,000 $
— $ 550,000 $
314,890
Senior Secured
Revolving Credit
Facility ................ $ — $ 230,552 $
Optasite Senior
— $ — $
— $
— $ 230,552 $
205,876
Credit Facility ..... $ 6,000 $ 143,000 $
— $ — $
— $
— $ 149,000 $
135,729
(1)
The anticipated repayment date is November 2010 for the Initial CMBS Certificates and November 2011 for the
Additional CMBS Certificates.
Our current primary market risk exposure is interest rate risk relating to (1) the impact of interest rate movements on
our ability to refinance the CMBS Certificates on their expected repayment dates or at maturity at market rates, (2) our ability
to meet financial covenants and (3) the interest rate associated with our floating rate loans that are outstanding under the
senior secured revolving credit facility and the Optasite Credit Facility. We manage the interest rate risk on our outstanding
debt through our use of fixed 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.
Special Note Regarding Forward-Looking Statements
This annual 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 of 1934. These statements concern expectations, beliefs, projections,
plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts.
Specifically, this annual report contains forward-looking statements regarding:
•
•
•
•
•
•
•
our expectation that we will continue to incur losses;
our expectations that site leasing revenues will continue to grow as wireless service providers
lease additional space on our towers due to increasing minutes of use, network expansion and
network coverage requirements;
our belief that our site leasing business is characterized by stable and long-term recurring
revenues, predictable operating costs and minimal capital expenditures;
our expectations regarding the growth of our cash flows by adding tenants to our towers at
minimal incremental costs by using existing tower capacity or requiring wireless service providers
to bear all or a portion of the cost of tower modifications;
our intent to grow our tower portfolio only modestly in 2009, primarily through new tower builds;
our intent to build 80 to 100 new towers in 2009 and our intent to have at least one signed tenant
lease on each new tower on the day it is completed;
our intent to limit our acquisition strategy to stock acquisitions that will be accretive to our
shareholders, and to resume acquisitions for cash when we see sufficient improvement in the
credit markets;
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•
•
•
•
•
•
•
•
•
•
our expectations regarding the amount of future cash capital expenditures, both discretionary and
non-discretionary, including expenditures required to maintain, improve and modify our towers;
our belief that our towers have significant capacity to accommodate additional tenants, that our
tower operations are highly scalable and that we can add tenants to our towers at minimal
incremental costs;
our belief regarding our position to capture additional site leasing business in our markets and
identify and participate in site development projects across our markets;
our expectations regarding our cash capital expenditures in 2009 for maintenance and
augmentation and for new tower builds and ground lease purchases and our ability to fund such
cash capital expenditures;
actions we may pursue to manage our leverage position and ensure continued compliance with our
financial covenants including the amount, consideration or price that we may pay in connection
with any debt repurchases;
our estimates regarding our liquidity, our sources of liquidity and our ability to fund operations,
and refinance or repay our obligations as they become due;
our estimates regarding our annual debt service in 2009 and thereafter, and our belief that our cash
flows from operations for the next twelve months will be sufficient to service our outstanding debt
during the next twelve months;
our expectations regarding the impact of our convertible note hedge transactions, and the
termination of such transactions, with Lehman Derivatives;
our intent and ability to continue to purchase and/or enter into long-term leases for the land that
underlies our towers and the effect of such ground lease purchases on our margins and long-term
financial condition; and
our estimates regarding certain accounting and tax matters, including the adoption of certain
accounting pronouncements and the availability of sufficient net operating losses to offset future
taxable income.
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:
•
•
•
•
•
our ability to sufficiently increase our revenues and maintain expenses and cash capital
expenditures at appropriate levels to permit us to meet our anticipated uses of liquidity for
operations and estimated portfolio growth;
the ability of our clients to access sufficient capital or their willingness to expend capital to fund
network expansion or enhancements;
our ability to continue to comply with covenants and the terms of our credit instruments;
our ability to successfully refinance our indebtedness ahead of their maturity dates or anticipated
repayment dates, on favorable terms, or at all;
our ability to secure as many site leasing tenants as planned, including our ability to retain current
leases on towers and deal with the impact, if any, of recent consolidation among wireless service
providers;
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•
•
•
•
•
•
•
•
•
our ability to identify towers and land underneath towers that would be attractive to our clients and
accretive to our financial results; and to negotiate and consummate agreements to acquire such
towers and land;
our ability to build 80-100 new towers in 2009;
our ability to secure and deliver anticipated services business at contemplated margins;
our ability to successfully and timely address zoning issues, permitting and other issues that arise
in connection with the building of new towers;
our ability to realize economies of scale from our tower portfolio;
the business climate for the wireless communications industry in general and the wireless
communications infrastructure providers in particular;
the state of the credit markets and capital markets, including the level of volatility, illiquidity and
interest rates that may affect our ability to pursue actions to manage our leverage position;
the continued use of towers and dependence on outsourced site development services by the
wireless communications industry; and
our ability to successfully estimate certain accounting and tax matters, including the effect on our
company of adopting certain accounting pronouncements and the availability of sufficient net
operating losses to offset taxable income.
Non-GAAP Financial Measures
This report contains certain non-GAAP measures, including Adjusted EBITDA and Segment Operating Profit
information. We have provided below a description of such non-GAAP measures, a reconciliation of such non-GAAP
measures to their most directly comparable GAAP measures, an explanation as to why management utilizes these measures,
their respective limitations and how management compensates for such limitations.
Adjusted EBITDA
We define Adjusted EBITDA as net loss excluding the impact of net interest expenses (including amortization of
deferred financing fees), provision for taxes, depreciation, accretion and amortization, asset impairment and other charges,
non-cash compensation, loss from write-off of deferred financing fees and extinguishment of debt, other income and
expenses (including in 2008 the $13.3 million other-than-temporary impairment charge on our auction rate securities), non-
recurring acquisition related integration costs associated with the Optasite and Light Tower acquisitions, non-cash leasing
revenue and non-cash ground lease expense. In addition, Adjusted EBITDA excludes acquisition related costs which are
currently capitalized but, commencing January 1, 2009, is required to be expensed and included within operating expenses
pursuant to the adoption of SFAS 141(R). We have included this non-GAAP financial measure because we believe this item
is an indicator of the performance of our core operations and reflects the changes in our operating results. Adjusted EBITDA
is not intended to be an alternative measure of operating income or gross profit margin as determined in accordance with
GAAP.
The non-GAAP measurement of Adjusted EBITDA has certain material limitations, including:
•
•
•
it does not include interest expense. Because we have borrowed money in order to finance our
operations, interest expense is a necessary element of our costs and ability to generate profits and
cash flows. Therefore, any measure that excludes interest expense has material limitations,
it does not include depreciation, accretion and amortization expense. Because we use capital
assets, depreciation, accretion and amortization expense is a necessary element of our costs and
ability to generate profits. Therefore, any measure that excludes depreciation, accretion and
amortization expense has material limitations,
it does not include provision for taxes. Because the payment of taxes is a necessary element of our
costs, particularly in the future, any measure that excludes tax expense has material limitations,
and
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•
it does not include non-cash expenses such as asset impairment and other charges, non-cash
compensation, other expenses/income, non-cash leasing revenue and non-cash ground lease
expense. Because these non-cash items are a necessary element of our costs and our ability to
generate profits, any measure that excludes these non-cash items has material limitations.
We compensate for these limitations by using Adjusted EBITDA as only one of several comparative tools, together
with GAAP measurements, to assist in the evaluation of our profitability and operating results.
The reconciliation of Adjusted EBITDA is as follows:
Net loss .....................................................................................................
Interest income ..........................................................................
Interest expense .........................................................................
Depreciation, accretion and amortization ..................................
Asset impairment and other (credit) charges .............................
Provision for income taxes (1) ....................................................
(Gain) loss from extinguishment of debt and write-off of
deferred financing fees ..........................................................
Non-cash compensation ............................................................
Non-cash leasing revenue .........................................................
Non-cash ground lease expense ................................................
Other expense (income) ............................................................
Acquisition integration costs .....................................................
Adjusted EBITDA ....................................................................................
2006
2008
For the year ended December 31,
2007
(in thousands)
$ (46,763) $ (77,879) $ (133,448)
(3,814)
99,712
133,088
(357)
1,375
(10,182)
101,032
169,232
—
1,993
(6,883)
116,336
211,445
921
2,371
(31,623)
7,207
(7,810)
10,387
13,478
120
$ 269,186
431
6,612
(8,870)
11,248
15,777
5
$ 209,399
57,233
5,410
(6,575)
7,569
(692)
2,313
$ 161,814
(1)
Includes $1,334, $1,125, and $858 of franchise taxes reflected on the Statement of Operations in selling, general and
administrative expenses for the year ended 2008, 2007 and 2006, respectively.
Segment Operating Profit
Each respective Segment Operating Profit is defined as segment revenues less segment cost of revenues (excluding
depreciation, accretion and amortization). Total Segment Operating Profit is the total of the operating profits of the three
segments. Segment Operating Profit is, in our opinion, an indicator of the operating performance of our site leasing and site
development segments and is used to provide management with the ability to monitor the operating results and margin of
each segment, while excluding the impact of depreciation, accretion and amortization, which is largely fixed. Segment
Operating Profit is not intended to be an alternative measure of revenue or segment gross profit as determined in accordance
with GAAP.
The non-GAAP measurement of Segment Operating Profit has certain material limitations. Specifically this
measurement does not include depreciation, accretion and amortization expense. As we use capital assets in our business,
depreciation, accretion and amortization expense is a necessary element of our costs and ability to generate profit. Therefore,
any measure that excludes depreciation, accretion and amortization expense has material limitations. We compensate for
these limitations by using Segment Operating Profit as only one of several comparative tools, together with GAAP
measurements, to assist in the evaluation of the operating performance of our segments.
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Segment revenue .......................................................................................
Segment cost of revenues (excluding depreciation, accretion and
Site leasing segment
2008
For the year ended December 31,
2007
(in thousands)
$ 321,818
2006
$ 256,170
$ 395,541
amortization) .........................................................................................
Segment operating profit ...........................................................................
(96,175 )
$ 299,366
(88,006)
$ 233,812
(70,663)
$ 185,507
Site development consulting segment
Segment revenue .......................................................................................
Segment cost of revenues (excluding depreciation, accretion and
amortization) .........................................................................................
Segment operating profit ...........................................................................
Segment revenue .......................................................................................
Segment cost of revenues (excluding depreciation, accretion and
amortization) .........................................................................................
Segment operating profit ...........................................................................
$
$
$
$
2008
For the year ended December 31,
2007
(in thousands)
$ 24,349
18,754
2006
$ 16,660
(15,212 )
3,542
(19,295)
5,054
$
(14,082)
2,578
$
Site development construction segment
2008
For the year ended December 31,
2007
(in thousands)
$ 62,034
60,659
2006
$ 78,272
(56,778 )
3,881
(56,052)
5,982
$
(71,841)
6,431
$
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements and supplementary data are on pages F-1 through F-50.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures - We maintain disclosure controls and procedures that are designed to ensure
that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and
forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer
(“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure. In
designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures,
no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives,
as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.
In connection with the preparation of this Annual Report on Form 10-K, as of December 31, 2008, an evaluation
was performed under the supervision and with the participation of our management, including the CEO and CFO, of the
effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on
such evaluation, our CEO and CFO concluded that, as of December 31, 2008, our disclosure controls and procedures were
effective.
There has been no change in our internal control over financial reporting during the quarter ended December 31,
2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
47
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Management’s Annual Report on Internal Control over Financial Reporting - Management is responsible for
establishing and maintaining adequate internal control over financial reporting, and for performing an assessment of the
effectiveness of internal control over financial reporting as of December 31, 2008. Internal control over financial reporting is
a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. Our system of
internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of SBA; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of SBA are being made only in accordance
with authorizations of management and directors of SBA; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition of SBA’s assets that could have a material effect on the
financial statements.
Management performed an assessment of the effectiveness of SBA’s internal control over financial reporting as of
December 31, 2008 based upon criteria in Internal Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on our assessment, management determined that SBA’s internal
control over financial reporting was effective as of December 31, 2008 based on the criteria in Internal Control-Integrated
Framework issued by COSO.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Ernst & Young LLP, the independent registered public accounting firm that audited the financial statements
included in this Annual Report on Form 10-K, has issued an attestation report on SBA’s internal control over financial
reporting.
48
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Report of Independent Registered Certified Public Accounting Firm
The Board of Directors and Shareholders of SBA Communications Corporation and Subsidiaries
We have audited SBA Communications Corporation and Subsidiaries’ internal control over financial reporting as of
December 31, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (the COSO criteria). SBA Communications Corporation and
Subsidiaries’ management is responsible for maintaining effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s
Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s
internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, SBA Communications Corporation and Subsidiaries maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2008, based on the COSO criteria .
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the consolidated balance sheets of SBA Communications Corporation and Subsidiaries as of December 31, 2008 and 2007,
and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the three years in the
period ended December 31, 2008 of SBA Communications Corporation and Subsidiaries and our report dated February 26,
2009 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
West Palm Beach, Florida
February 26, 2009
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ITEM 9B. OTHER INFORMATION
On January 15, 2009, we entered into indemnification agreements with our directors and certain officers that provide for the
indemnification of our directors and certain officers, to the fullest extent permitted by the Florida Business Corporation Act,
our articles of incorporation and our bylaws, against expenses incurred by such persons in connection with their service as (i)
our director or officer, (ii) in any capacity with respect to any of our employee benefit plans, or (iii) as a director, partner,
trustee, officer, employee or agent of any other entity at our request. In addition, the agreements provide for our obligation to
advance expenses, under certain circumstances, and provide for additional procedural protections.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERANCE
We have adopted a Code of Ethics that applies to our Chief Executive Officer, Chief Financial Officer and Chief
Accounting Officer. The Code of Ethics is located on our internet web site at www.sbasite.com under “Investor Relations-
Corporate Governance – Other Documents.”
The remaining items required by Part III, Item 10 are incorporated herein by reference from the Registrant’s Proxy
Statement for its 2009 Annual Meeting of Shareholders to be filed on or before April 30, 2009.
ITEM 11. EXECUTIVE COMPENSATION
The items required by Part III, Item 11 are incorporated herein by reference from the Registrant’s Proxy Statement
for its 2009 Annual Meeting of Shareholders to be filed on or before April 30, 2009.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The items required by Part III, Item 12 are incorporated herein by reference from the Registrant’s Proxy Statement
for its 2009 Annual Meeting of Shareholders to be filed on or before April 30, 2009.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The items required by Part III, Item 13 are incorporated herein by reference from the Registrant’s Proxy Statement
for its 2009 Annual Meeting of Shareholders to be filed on or before April 30, 2009.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The items required by Part III, Item 14 are incorporated herein by reference from the Registrant’s Proxy Statement
for its 2009 Annual Meeting of Shareholders to be filed on or before April 30, 2009.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Documents filed as part of this report:
(1) Financial Statements
50
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See Item 8 for Financial Statements included with this Annual Report on Form 10-K.
(2) Financial Statement Schedules
None.
(3) Exhibits
Exhibit No.
3.4
Description of Exhibits
Fourth Amended and Restated Articles of Incorporation of SBA Communications Corporation. (1)
3.5
4.6
4.6A
4.11
4.12
4.13
Amended and Revised By-Laws of SBA Communications Corporation. (1)
Rights Agreement, dated as of January 11, 2002, between SBA Communications Corporation and the
Rights Agent. (4)
First Amendment to Rights Agreement, dated as of March 17, 2006, between SBA Communications
Corporation and Computershare Trust Company, N.A (8)
Indenture, dated March 26, 2007, between SBA Communications Corporation and U.S. Bank National
Association. (10)
Form of 0.375% Convertible Senior Notes due 2010 (included in Exhibit 4.11). (10)
Indenture, dated May 16, 2008, between SBA Communications Corporation and U.S. Bank National
Association. (16)
4.14
Form of 1.875% Convertible Senior Notes due 2013 (included in Exhibit 4.13). (16)
5.1
10.1
10.23
10.24
10.25
10.27
10.28
Opinion of Holland & Knight LLP regarding validity of common stock.*
SBA Communications Corporation Registration Rights Agreement dated as of March 5, 1997, among the
Company, Steven E. Bernstein, Ronald G. Bizick, II and Robert Grobstein. (2)
1996 Stock Option Plan. (1)+
1999 Equity Participation Plan. (1)+
1999 Employee Stock Purchase Plan. (1)+
Incentive Stock Option Agreement, dated as of September 5, 2000, between SBA Communications
Corporation and Thomas P. Hunt. (3)+
Restricted Stock Agreement, dated as of September 5, 2000, between SBA Communications Corporation
and Thomas P. Hunt. (3)+
10.33
2001 Equity Participation Plan as Amended and Restated on May 16, 2002. (5)+
10.35C
10.35D
10.49
10.50
10.51
Amended and Restated Employment Agreement, made and entered into as of January 1, 2008, between
SBA Communications Corporation and Jeffrey A. Stoops. (14) +
Amendment No. 1 to Amended and Restated Employment Agreement made and entered into as of
September 18, 2008, between SBA Communications Corporation and Jeffrey A. Stoops. (18) +
Amended and Restated Loan and Security Agreement, dated as of November 18, 2005, by and between
SBA Properties, Inc. and the Additional Borrower or Borrowers that may become a party thereto and SBA
CMBS 1 Depositor LLC. (6)
Management Agreement, dated as of November 18, 2005, by and among SBA Properties, Inc., SBA
Network Management, Inc. and SBA Senior Finance, Inc. (6)
Stock Purchase Agreement, dated March 17, 2006, by and among AAT Holdings, LLC II, AAT
Communications Corp., AAT Acquisition LLC and SBA Communications Corporation. (7)
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10.57A
Amended and Restated Employment Agreement, made and entered into as of January 1, 2008, between
SBA Communications Corporation and Kurt L. Bagwell. (14) +
10.58A
Amended and Restated Employment Agreement, made and entered into as of January 1, 2008, between
SBA Communications Corporation and Thomas P. Hunt. (14) +
10.59A
Amended and Restated Employment Agreement, made and entered into as of January 1, 2008, between
SBA Communications Corporation and Anthony J. Macaione. (14) +
10.60
10.61
10.63
10.64
10.65
10.66
Joinder and Amendment to Management Agreement, dated November 6, 2006, by and among SBA
Properties, Inc., SBA Towers, Inc., SBA Puerto Rico, Inc., SBA Sites, Inc., SBA Towers USVI, Inc., and
SBA Structures, Inc., and SBA Network Management, Inc., and SBA Senior Finance, Inc. (9)
Second Loan and Security Agreement Supplement and Amendment, dated as of November 6, 2006, by
and among SBA Properties, Inc., and SBA Towers, Inc., SBA Puerto Rico, Inc., SBA Sites, Inc., SBA
Towers USVI, Inc., and SBA Structures, Inc. and Midland Loan Services, Inc., as Servicer on behalf of
LaSalle Bank National Association, as Trustee. (9)
Registration Rights Agreement, dated March 26, 2007 by and among SBA Communications Corporation
and Lehman Brothers Inc., Citigroup Global Markets Inc. and Deutsche Bank Securities Inc. as
representatives of the several initial purchasers. (10)
Form of Convertible Bond Hedge Transaction Agreement entered into by SBA Communications
Corporation with Citibank, N.A. and Deutsche Bank AG, London Branch. (11)
Bond Hedge Transaction Agreement entered into by SBA Communications Corporation with Citibank,
N.A. and Deutsche Bank AG, London Branch
Form of Issuer Warrant Transaction Letter Agreement entered into by SBA Communications Corporation
with Citibank, N.A. and Deutsche Bank AG, London Branch. (11)
$285,000,000 Credit Agreement, dated as of January 18, 2008, among SBA Senior Finance, Inc., as
borrower, the several banks and other financial institutions or entities from time to time parties to the
credit agreement (the “Lenders”),Wachovia Bank, National Association and Lehman Commercial Paper
Inc., as co-syndication agents, Citicorp North America, Inc. and JPMorgan Chase Bank, N.A. as co-
documentation agents, and Toronto Dominion (Texas) LLC, as administrative agent. (12)
10.66A
First Amendment, dated as of July 18, 2008, to the Credit Agreement, dated as of January 18, 2008,
among SBA Senior Finance, Inc., as Borrower, the Several Lenders from time to time parties thereto,
Toronto Dominion (Texas) LLC, As Administrative Agent and the other agents parties thereto. (18)
10.67
10.68
10.69
10.70
10.71
Guarantee and Collateral Agreement, dated as of January 18, 2008, by SBA Communications Corporation,
SBA Telecommunications, Inc., SBA Senior Finance, Inc. and certain of its subsidiaries in favor of
Toronto Dominion (Texas) LLC, as administrative agent. (12)
New Lender Supplement, effective March 6, 2008, entered into between SBA Senior Finance, Inc. and
The Royal Bank of Scotland Group plc and accepted by Toronto Dominion (Texas) LLC, as
Administrative Agent, and The Toronto-Dominion Bank, as Issuing Lender. (13)
Purchase Agreement, dated May 12, 2008, among SBA Communications Corporation and Deutsche Bank
Securities Inc., Citigroup Global Markets Inc. and Lehman Brothers Inc., as representatives of the several
initial purchasers listed on Schedule I of the Purchase Agreement. (15)
Registration Rights Agreement, dated May 16, 2008, among SBA Communications Corporation and
Deutsche Bank Securities Inc., Citigroup Global Markets Inc. and Lehman Brothers Inc., as
representatives of the several initial purchasers listed on Schedule 1 of the Purchase Agreement. (16)
Form of Convertible Bond Hedge Transaction Agreement entered into by SBA Communications
Corporation with each of Lehman Brothers OTC Derivatives Inc., Citibank, N.A., Deutsche Bank AG
London Branch, and Wachovia Capital Markets, LLC and Wachovia Bank, National Association. (17)
52
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10.72
10.73
10.74
10.75
10.76
21
23.1
31.1
31.2
32.1
32.2
Form of Issuer Warrant Transaction Letter Agreement entered into by SBA Communications Corporation
with each of Lehman Brothers OTC Derivatives Inc., Citibank, N.A., Deutsche Bank AG London Branch,
and Wachovia Capital Markets, LLC and Wachovia Bank, National Association. (17)
Second Amended and Restated Credit Agreement, made and entered into as of July 18, 2008, among
Optasite Towers LLC as borrower, the lenders from time to time party thereto, and Morgan Stanley Asset
Funding Inc. as administrative agent and collateral agent. (18)
Resignation Agreement, made and entered into as of August 26, 2008, between SBA Communications
Corporation and Anthony J. Macaione. (18) +
SBA Communications Corporation 2008 Employee Stock Purchase Plan. (19)
Form of Indemnification Agreement dated January 15, 2009 between SBA Communications Corporation
and its directors and certain officers. *
Subsidiaries.*
Consent of Ernst & Young LLP.*
Certification by Jeffrey A. Stoops, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.*
Certification by Brendan T. Cavanagh, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002.*
Certification by Jeffrey A. Stoops, Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.*
Certification by Brendan T. Cavanagh, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.*
(2)
(3)
(4)
(5)
+ Management contract or compensatory plan or arrangement.
*
(1)
Filed herewith
Incorporated by reference to the Registration Statement on Form S-1/A, previously filed by the Registrant
(Registration No. 333-76547).
Incorporated by reference to the Registration Statement on Form S-4, previously filed by the Registrant (Registration
No. 333-50219).
Incorporated by reference to the Form 10-K for the year ended December 31, 2000, previously filed by the Registrant.
Incorporated by reference to the Form 8-K dated January 11, 2002, previously filed by the Registrant.
Incorporated by reference to the Schedule 14A Preliminary Proxy Statement dated May 16, 2002, previously filed by
the Registrant.
Incorporated by reference to the Form 10-K for the year ended December 31, 2005, previously filed by the Registrant.
Incorporated by reference to the Form 8-K dated March 20, 2006, previously filed by the Registrant.
Incorporated by reference to the Form 10-Q for the quarter ended March 31, 2006, previously filed by the Registrant.
Incorporated by reference to the Form 10-K for the year ended December 31, 2006, previously filed by the Registrant.
(6)
(7)
(8)
(9)
(10) Incorporated by reference to the Form 8-K dated March 26, 2007, previously filed by the Registrant.
(11) Incorporated by reference to the Form 10-Q for the quarter ended March 31, 2007, previously filed by the Registrant.
(12) Incorporated by reference to the Form 8-K dated January 24, 2008, previously filed by the Registrant.
(13) Incorporated by reference to the Form 8-K dated March 7, 2008, previously filed by the Registrant.
(14) Incorporated by reference to the Form 10-Q for the quarter ended March 31, 2008, previously filed by the Registrant.
(15) Incorporated by reference to the Form 8-K dated May 16, 2008, previously filed by the Registrant.
(16) Incorporated by reference to the Form 8-K dated May 22, 2008, previously filed by the Registrant.
(17) Incorporated by reference to the Form 10-Q for the quarter ended June 30, 2008, previously filed by the Registrant.
(18) Incorporated by reference to the Form 10-Q for the quarter ended September 30, 2008, previously filed by the
Registrant.
(19) Incorporated by reference to the Form S-8 dated November 12, 2008, previously filed by the Registrant.
53
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Pursuant to the requirements of Section 13 or 15(d) 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.
SIGNATURES
SBA COMMUNICATIONS CORPORATION
By:
/s/ Jeffrey A. Stoops
Jeffrey A. Stoops
Chief Executive Officer and President
Date: February 27, 2009
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
Chairman of the Board of Directors
February 27, 2009
/s/ Steven E. Bernstein
Steven E. Bernstein
/s/ Jeffrey A. Stoops
Jeffrey A. Stoops
Chief Executive Officer and President
(Principal Executive Officer)
/s/ Brendan T. Cavanagh
Brendan T. Cavanagh
Chief Financial Officer
(Principal Financial Officer)
/s/ Brian D. Lazarus
Brian D. Lazarus
/s/ Brian C. Carr
Brian C. Carr
/s/ Duncan H. Cocroft
Duncan H. Cocroft
/s/ Philip L. Hawkins
Philip L. Hawkins
/s/ Jack Langer
Jack Langer
/s/ Steven E. Nielsen
Steven E. Nielsen
Chief Accounting Officer
(Principal Accounting Officer)
Director
Director
Director
Director
Director
February 27, 2009
February 27, 2009
February 27, 2009
February 27, 2009
February 27, 2009
February 27, 2009
February 27, 2009
February 27, 2009
54
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SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
Table of Contents
Report of Independent Registered Certified Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2008 and 2007
Consolidated Statements of Operations for the years ended December 31, 2008, 2007 and 2006
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2008, 2007 and 2006
Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006
Notes to Consolidated Financial Statements
Page
F-1
F-2
F-3
F-4
F-5
F-7
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REPORT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of SBA Communications Corporation and Subsidiaries
We have audited the accompanying consolidated balance sheets of SBA Communications Corporation and
Subsidiaries as of December 31, 2008 and 2007, and the related consolidated statements of operations, shareholders’ equity
and cash flows for each of the three years in the period ended December 31, 2008. These financial statements are the
responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated
financial position of SBA Communications Corporation and Subsidiaries at December 31, 2008 and 2007, and the
consolidated results of their operations and their cash flows for each of the three years in the period ended December 31,
2008, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), SBA Communications Corporation and Subsidiaries’ internal control over financial reporting as of December 31,
2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission, and our report dated February 26, 2009 expressed an unqualified opinion
thereon.
/s/ Ernst & Young LLP
West Palm Beach, Florida
February 26, 2009
F-1
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SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
December 31, 2008
December 31, 2007
$
$
$
Current assets:
ASSETS
Cash and cash equivalents ......................................................................................
Short-term investments...........................................................................................
Restricted cash ........................................................................................................
Accounts receivable, net of allowance of $852 and $1,186 in 2008 and 2007,
respectively .........................................................................................................
Costs and estimated earnings in excess of billings on uncompleted contracts .......
Prepaid and other current assets .............................................................................
Total current assets .............................................................................................
Property and equipment, net ......................................................................................
Intangible assets, net ..................................................................................................
Deferred financing fees, net .......................................................................................
Other assets ................................................................................................................
Total assets ..........................................................................................................
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt ......................................................................
Accounts payable ...................................................................................................
Accrued expenses ...................................................................................................
Deferred revenue ....................................................................................................
Interest payable ......................................................................................................
Billings in excess of costs and estimated earnings on uncompleted contracts .......
Other current liabilities ...........................................................................................
Total current liabilities ........................................................................................
Long-term liabilities:
Long-term debt .......................................................................................................
Other long-term liabilities ......................................................................................
Total long-term liabilities ...................................................................................
Commitments and contingencies ...............................................................................
Shareholders’ equity:
Preferred stock - par value $.01, 30,000 shares authorized, none issued or
$
78,856
162
38,599
16,351
10,658
9,689
154,315
1,502,672
1,425,132
33,384
96,005
3,211,508
6,000
8,963
21,529
45,306
5,946
359
2,491
90,594
$
$
70,272
55,142
37,601
20,183
21,453
8,561
213,212
1,191,969
868,999
33,578
76,565
2,384,323
—
11,357
20,964
37,557
3,499
1,195
1,598
76,170
2,548,660
80,495
2,629,155
1,905,000
65,762
1,970,762
outstanding ..........................................................................................................
—
—
Common stock - Class A, par value $.01, 200,000 shares authorized, 117,525
and 108,380 shares issued and outstanding at December 31, 2008 and 2007,
respectively .........................................................................................................
Additional paid-in capital .......................................................................................
Accumulated deficit ...............................................................................................
Accumulated other comprehensive loss, net ..........................................................
Total shareholders’ equity ...................................................................................
Total liabilities and shareholders’ equity ............................................................
$
1,175
1,893,168
(1,401,035)
(1,549)
491,759
3,211,508
$
1,084
1,571,894
(1,234,307)
(1,280)
337,391
2,384,323
The accompanying notes are an integral part of these consolidated financial statements.
F-2
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SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Revenues:
Site leasing ..........................................................................................
Site development .................................................................................
Total revenues ..............................................................................
$
$
395,541
79,413
474,954
$
321,818
86,383
408,201
256,170
94,932
351,102
For the year ended December 31,
2007
2006
2008
Operating expenses:
Cost of revenues (exclusive of depreciation, accretion and
amortization shown below):
Cost of site leasing ...........................................................................
Cost of site development ..................................................................
Selling, general and administrative .....................................................
Asset impairments and other (credits) charges ....................................
Depreciation, accretion and amortization ............................................
Total operating expenses ..............................................................
96,175
71,990
48,841
921
211,445
429,372
88,006
75,347
45,569
—
169,232
378,154
70,663
85,923
42,277
(357)
133,088
331,594
Operating income .........................................................................
45,582
30,047
19,508
Other income (expense):
Interest income ....................................................................................
Interest expense ...................................................................................
Non-cash interest expense ...................................................................
Amortization of deferred financing fees ..............................................
Gain (loss) from extinguishment of debt and write-off of deferred
financing fees ...................................................................................
Other ....................................................................................................
Total other expense.......................................................................
Loss before provision for income taxes ........................................
Provision for income taxes .....................................................................
Net loss .........................................................................................
6,883
(104,253)
(412)
(11,671)
10,182
(92,498)
—
(8,534)
31,623
(13,478)
(91,308)
(45,726)
(1,037)
(46,763) $
(431)
(15,777)
(107,058)
(77,011)
(868)
(77,879) $
$
3,814
(81,283)
(6,845)
(11,584)
(57,233)
692
(152,439)
(132,931)
(517)
(133,448)
Basic and diluted loss per common share amounts:
Net loss per common share ...........................................................
$
(0.43) $
(0.74) $
(1.36)
Basic and diluted weighted average number of common shares ............
109,882
104,743
98,193
The accompanying notes are an integral part of these consolidated financial statements.
F-3
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87260FINv2 69
3/20/09 3:06:22 AM
SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the year ended December 31,
2007
2006
2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ........................................................................................................................................................
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation, accretion, and amortization ..................................................................................................
Accretion of discount on Optasite credit facility ........................................................................................
Deferred tax provision ................................................................................................................................
Asset impairment and other (credits) charges ............................................................................................
Gain on the termination of derivative instruments .....................................................................................
Write-down of investments .........................................................................................................................
Disposition of assets ...................................................................................................................................
Non-cash compensation expense ................................................................................................................
(Credit) provision for doubtful accounts ....................................................................................................
Amortization of deferred financing fees and non-cash interest expense ...................................................
(Gain) loss from extinguishment of debt and write-off of deferred financing fees ...................................
Amortization of deferred gain/loss on derivative financial instruments, net .............................................
Changes in operating assets and liabilities:
Accounts receivable and costs and estimated earnings in excess of billings on uncompleted
contracts, net ........................................................................................................................................
Prepaid and other assets ..........................................................................................................................
Accounts payable and accrued expenses ................................................................................................
Other liabilities .......................................................................................................................................
Net cash provided by operating activities ..........................................................................................
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments ............................................................................................................
Sales and maturities of short-term investments ..........................................................................................
Capital expenditures ....................................................................................................................................
Acquisitions and related earn-outs, net of cash acquired ...........................................................................
Payment for purchase of AAT Communications, net of cash acquired .....................................................
Proceeds from disposition of fixed assets ...................................................................................................
Payment of restricted cash relating to tower removal obligations .............................................................
Net cash used in investing activities ..................................................................................................
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of convertible senior notes, net of fees paid ........................................................
Repurchase and retirement of common stock.............................................................................................
Payments on extinguishment of convertible debt .......................................................................................
Borrowings under revolving credit facility ................................................................................................
Repayment of revolving credit facility .......................................................................................................
Repayment of Optasite credit facility .........................................................................................................
Proceeds from issuance of common stock warrants ...................................................................................
Purchase of convertible note hedges ...........................................................................................................
Payment related to termination of derivative instruments ..........................................................................
Proceeds from employee stock purchase/stock option plans .....................................................................
Net increase in restricted cash relating to CMBS Certificates ...................................................................
Initial funding of restricted cash relating to CMBS Certificates ................................................................
Payment relating to settlement of swap ......................................................................................................
Proceeds from CMBS Certificates, net of fees paid ...................................................................................
Payment of deferred financing fees relating to revolving credit facility ...................................................
Proceeds from bridge financing, net of fees paid .......................................................................................
Repayment of bridge financing ..................................................................................................................
Repurchase of 9 ¾% senior discount notes ...............................................................................................
Repurchase of 8 ½% senior notes ..............................................................................................................
Net cash provided by financing activities ..........................................................................................
NET INCREASE IN CASH AND CASH EQUIVALENTS .........................................................................
CASH AND CASH EQUIVALENTS:
$
(46,763)
$
(77,879)
$
(133,448)
211,445
412
159
921
(519)
13,256
341
7,207
(81)
11,671
(31,623)
(557)
14,408
(10,906)
(6,189)
10,514
173,696
—
41,044
(36,166)
(584,498)
—
51
(980)
(580,549)
536,815
(120,000)
(147,839)
465,552
(235,000)
(1,000)
56,183
(137,698)
(3,890)
6,503
(928)
—
—
(480)
(2,781)
—
—
—
—
415,437
8,584
169,232
—
201
—
—
15,558
397
6,612
150
8,534
431
(565)
(1,183)
(18,319)
3,645
16,120
122,934
(208,251)
137,551
(27,771)
(201,466)
—
131
(2,078)
(301,884)
341,452
(91,236)
—
—
—
—
27,261
(77,200)
7,750
(4,564)
—
—
(389)
—
—
—
—
—
203,074
24,124
133,088
—
47
(357)
—
—
(244)
5,410
100
18,429
57,233
(2,370)
3,301
(12,060)
(8,392)
12,993
73,730
—
19,900
(28,969)
(81,089)
(645,148)
265
(3,312)
(738,353)
—
—
—
(89)
—
—
—
—
10,491
(5,260)
(7,494)
(14,503)
1,126,235
—
1,088,734
(1,100,000)
(251,826)
(181,451)
664,837
214
Beginning of period ....................................................................................................................................
End of period ...............................................................................................................................................
70,272
78,856
46,148
70,272
$
$
$
45,934
46,148
(continued)
F-5
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SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the year ended December 31,
2007
2008
2006
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ....................................................................................................................
Income taxes ...........................................................................................................
SUPPLEMENTAL CASH FLOW INFORMATION OF NON-CASH ACTIVITIES:
Assets acquired through capital leases ....................................................................
Class A common stock issued relating to acquisitions and earnouts ......................
Fair Value of debt assumed through acquisition .....................................................
Stock issued in connection with early extinguishment of debt ...............................
$ 103,085 $ 93,868 $ 82,215
1,158
$
359 $
860 $
960 $
781 $
—
$
$ 295,631 $ 155,546 $ 435,857
—
$ 147,000 $
—
$ 93,366 $
— $
— $
The accompanying condensed notes are an integral part of these consolidated financial statements.
F-6
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SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
SBA Communications Corporation (the “Company” or “SBA”) was incorporated in the State of Florida in March
1997. The Company is a holding company that holds all of the outstanding capital stock of SBA Telecommunications, Inc.
(“Telecommunications”). Telecommunications is a holding company that holds all of the capital stock of SBA Infrastructure
Holdings I, Inc. (“Infrastructure” formerly known as Optasite) and SBA Senior Finance, Inc. (“SBA Senior Finance”). SBA
Senior Finance is a holding company that holds, directly and indirectly, the equity interest in certain subsidiaries that issued
the Commercial Mortgage Pass Through Certificates, Series 2005-1 (the “Initial CMBS Certificates”) and the Commercial
Mortgage Pass Through Certificates, Series 2006-1 (the “Additional CMBS Certificates”) (collectively, the “CMBS
Certificates”) and certain subsidiaries that were not involved in the issuance of the CMBS Certificates. With respect to the
subsidiaries involved in the issuance of the CMBS Certificates, SBA Senior Finance is the sole member of SBA CMBS-1
Holdings LLC and SBA CMBS-1 Depositor LLC. SBA CMBS-1 Holdings is the sole member of SBA CMBS-1 Guarantor
LLC. SBA CMBS-1 Guarantor LLC holds all of the capital stock of SBA Properties, Inc. (“SBA Properties”), SBA Towers,
Inc. (“SBA Towers”), SBA Puerto Rico, Inc. (“SBA Puerto Rico”), SBA Sites, Inc. (“SBA Sites”), SBA Towers USVI, Inc.
(“SBA Towers USVI”), and SBA Structures, Inc. (“SBA Structures”) (collectively known as the “Borrowers”). With respect
to the subsidiaries not involved in the issuance of the CMBS Certificates, SBA Senior Finance holds all of the membership
interests of SBA Senior Finance II LLC (“SBA Senior Finance II”) and certain non-operational subsidiaries. SBA Senior
Finance II holds, directly and indirectly, all the capital stock and/or membership interests of certain other tower companies
(“Other Tower Companies”) (collectively with the Borrowers known as “Tower Companies”). SBA Senior Finance II also
holds, directly or indirectly, all the capital stock and/or membership interests of certain other subsidiaries involved in
providing services, including SBA Network Services, Inc. (“Network Services”). SBA Senior Finance II also holds all the
capital stock of SBA Network Management, Inc. (“Network Management”) which manages and administers the operations of
the Borrowers.
The table below outlines the legal structure of the Company at December 31, 2008:
The Tower Companies own and operate wireless communications towers in 47 of the 48 contiguous United States,
Puerto Rico and the U.S. Virgin Islands. Space on these towers is leased primarily to wireless service providers. As of
December 31, 2008, the Company owns 7,854 tower sites.
Network Services provides comprehensive turnkey services for the telecommunications industry in the areas of site
development services for wireless carriers and the construction and repair of transmission towers. Site development
consulting services include (1) network pre-design; (2) site audits; (3) identification of potential locations for towers and
antennas; (4) support in buying or leasing of the location; and (5) assistance in obtaining zoning approvals and permits. Site
construction services of the Company’s site development business provides a number of services, including, but not limited
to the following: (1) tower and related site construction; (2) antenna installation; and (3) radio equipment installation,
commissioning and maintenance.
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SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the preparation of the accompanying consolidated
financial statements is as follows:
a. Principles of Consolidation
The consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America (“U.S. GAAP”) and include the Company and its wholly owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in consolidation.
b. Use of Estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to
make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying
notes. The significant estimates made by management relate to the allowance for doubtful accounts, the costs and revenue
relating to the Company’s construction contracts, stock-based compensation, valuation allowance related to deferred tax
assets, fair value of long-lived assets, the useful lives of towers and intangible assets, anticipated property tax assessments,
fair value of investments and asset retirement obligations. Management develops estimates based on historical experience and
on various assumptions about the future that are believed to be reasonable based on the information available. These
estimates ultimately may differ from actual results and such differences could be material.
c. Cash and Cash Equivalents
Cash and cash equivalents consist primarily of cash in banks, money market funds, commercial paper and other
marketable securities with an original maturity of three months or less at the time of purchase. These investments are carried
at cost, which approximates fair value.
d. Investments
Investment securities with original maturities of more than three months but less than one year at time of purchase
are considered short-term investments. Investment securities with maturities of more than a year are considered long-term
investments. Long-term investments at December 31, 2008 consist of auction rate securities which the Company believes that
it will not be able to liquidate within the next twelve months due to insufficient demand in the marketplace and as such are
classified in other assets on the accompanying Consolidated Balance Sheets at fair value (See Note 4). Fair value is
determined in accordance with the framework established by Statement of Financial Accounting Standard (“SFAS”) No. 157
“Fair Value Measurements” which uses quoted market prices for those securities when available. When quoted market
prices are not available, the Company has estimated fair value based upon the best available market information at the
Balance Sheet date. Temporary unrealized holding gains and losses are recorded, net of tax, as a separate component of
accumulated other comprehensive income (loss). Unrealized losses are charged against net earnings when a decline in fair
value is determined to be other-than-temporary. The Company follows the guidance in Financial Accounting Standards
Board Staff Position Nos. FAS 115-1 and FAS 124-1, “The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments,” when determining whether impairment is other than temporary. The Company reviews
several factors to determine whether a loss is other-than-temporary. These factors include but are not limited to: (1) the length
of time a security is in an unrealized loss position, (2) the extent to which fair value is less than cost, (3) the financial
condition and near term prospects of the issuer and (4) the Company’s ability to hold the security for a period of time
sufficient to allow for any anticipated recovery in fair value.
e. Restricted Cash
The Company classifies all cash pledged as collateral to secure certain obligations and all cash whose use is limited
as restricted cash. This includes cash held in escrow to fund certain reserve accounts relating to the CMBS Certificates, for
payment and performance bonds, and surety bonds issued for the benefit of the Company in the ordinary course of business.
F-8
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SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In connection with the issuance of the CMBS Certificates (as defined in Note 12), the Company is required to fund a
restricted cash amount, which represents the cash held in escrow pursuant to the mortgage loan agreement governing the
CMBS Certificates. This restricted cash amount is used to fund certain reserve accounts for the payment of debt service costs,
ground rents, real estate and personal property taxes, insurance premiums related to tower sites, trustee and service expenses,
and to reserve a portion of advance rents from tenants. Pursuant to the terms of the mortgage loan agreement, all rents and
other sums due on the towers that secure the CMBS Certificates are directly deposited into a controlled deposit account by
the lessees and are held by the indenture trustee. The restricted cash held by the indenture trustee in excess of required
reserve balances is subsequently released to the Borrowers (as defined in Note 12) on or before the 15 th calendar day
following month end providing that the Company is in compliance with its debt service coverage ratio and that no Event of
Default has occurred. All monies held by the indenture trustee after the release date are classified as restricted cash in current
assets on the Company’s Consolidated Balance Sheets.
f. Property and Equipment
Property and equipment are recorded at cost or at estimated fair value (in case of acquired properties), adjusted for
asset impairment and estimated asset retirement obligations. Costs associated with the acquisition, development and
construction of towers are capitalized as a cost of the towers. Costs for self-constructed towers include direct materials and
labor, indirect costs and capitalized interest. Approximately $0.2 million of interest cost was capitalized in both 2008 and
2007, respectively.
Depreciation on towers and related components is provided using the straight-line method over the estimated useful
lives, not to exceed the minimum lease term of the underlying ground lease. The Company defines the minimum lease term
as the shorter of the period from lease inception through the end of the term of all tenant lease obligations in existence at
ground lease inception, including renewal periods, or the ground lease term, including renewal periods. If no tenant lease
obligation exists at the date of ground lease inception, the initial term of the ground lease is considered the minimum lease
term. Leasehold improvements are amortized on a straight-line basis over the shorter of the useful life of the improvement or
the minimum lease term of the lease. All rental obligations due to be paid out over the minimum lease term, including fixed
escalations, are straight-lined evenly over the minimum lease term. For all other property and equipment, depreciation is
provided using the straight-line method over the estimated useful lives.
The Company performs ongoing evaluations of the estimated useful lives of its property and equipment for
depreciation purposes. The estimated useful lives are determined and continually evaluated based on the period over which
services are expected to be rendered by the asset. If the useful lives of assets are reduced, depreciation may be accelerated in
future years. Property and equipment under capital leases are amortized on a straight-line basis over the term of the lease or
the remaining estimated life of the leased property, whichever is shorter, and the related amortization is included in
depreciation expense. Expenditures for maintenance and repair are expensed as incurred.
Asset classes and related estimated useful lives are as follows:
Towers and related components .....................................................................
Furniture, equipment and vehicles .................................................................
Buildings and improvements .........................................................................
3 - 15 years
2 - 7 years
5 - 10 years
Betterments, improvements and extraordinary repairs, which increase the value or extend the life of an asset, are
capitalized and depreciated over the remaining estimated useful life of the respective asset. Changes in an asset’s estimated
useful life are accounted for prospectively, with the book value of the asset at the time of the change being depreciated over
the revised remaining useful life. There has been no material impact for changes in estimated useful lives for any years
presented.
g. Deferred Financing Fees
Financing fees related to the issuance of debt have been deferred and are being amortized using the effective interest
rate method over the expected length of related indebtedness.
h. Deferred Lease Costs
The Company defers certain initial direct costs associated with the origination of tenant leases and lease
amendments and amortizes these costs over the initial lease term, generally five years, or over the lease term remaining if
related to a lease amendment. Such deferred costs were approximately $3.8 million, $3.6 million, and $2.8 million in 2008,
2007, and 2006, respectively. Amortization expense was $2.7 million, $2.5 million, and $2.0 million for the years ended
December 31, 2008, 2007 and 2006, respectively, and is included in cost of site leasing on the accompanying Consolidated
Statements of Operations. As of December 31, 2008 and 2007, unamortized deferred lease costs were $7.6 million and $6.6
million, respectively, and are included in other assets on the accompanying Consolidated Balance Sheets.
F-9
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SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
i. Intangible Assets
The Company classifies as intangible assets the fair value of current leases in place at the acquisition date of towers
and related assets (referred to as the “current contract intangibles”), and the fair value of future tenant leases anticipated to be
added to the acquired towers (referred to as the “network location intangibles”). These intangibles are estimated to have an
economic useful life consistent with the economic useful life of the related tower assets, which is typically 15 years. For all
intangible assets, amortization is provided using the straight-line method over the estimated useful lives as the benefit
associated with these intangible assets is anticipated to be derived evenly over the life of the asset.
j. Impairment of Long-Lived Assets
The Company evaluates individual long-lived assets, including the intangibles with finite lives, and the tower sites,
for impairment in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long- Lived Assets. The
Company records an impairment charge when the Company believes an investment in towers or the intangible assets has
been impaired, such that future undiscounted cash flows would not recover the then current carrying value of the investment
in the tower site and related intangible. Estimates and assumptions inherent in the impairment evaluation include, but are not
limited to, general market and economic conditions, historical operating results, geographic location, lease-up potential and
expected timing of lease-up. In addition, the Company makes certain assumptions in determining an asset’s fair value for the
purpose of calculating the amount of an impairment charge. The Company recorded an impairment charge of $0.9 million for
the twelve months ended December 31, 2008 (See Note 16).
k. Fair Value of Financial Instruments
The carrying values of the Company’s financial instruments, which primarily includes cash and cash equivalents,
short-term investments, restricted cash, accounts receivable, and accounts payable, approximates fair value due to the short
maturity of those instruments. Long-term investments consist of auction rate securities that the Company believes it will not
be able to liquidate within the next twelve months. Due to insufficient demand in the marketplace for auction rate securities,
the Company relies in part on the report of a third party valuation firm to value the auction rate securities. Refer to Note 4 for
a further discussion of fair value of the auction rate securities investment.
The following table reflects fair values as determined by quoted market prices and carrying values of the Company’s
debt instruments:
At December 31, 2008
At December 31, 2007
Fair Value
Carrying Value
Fair Value
Carrying Value
0.375% Convertible Senior Notes .................................
1.875% Convertible Senior Notes .................................
Additional CMBS Certificates ......................................
Initial CMBS Certificates .............................................
Senior Secured Revolving Credit Facility ....................
Optasite Credit Facility .................................................
$
$
$
$
$
$
112.5
314.5
839.0
334.8
205.9
135.7
$
$
$
$
$
$
l. Revenue Recognition and Accounts Receivable
(in millions)
138.1
550.0
1,090.7
398.8
230.6
146.4
393.3
$
$
—
$ 1,115.4
404.5
$
$
—
$
—
$
$
$
$
$
$
350.0
—
1,150.0
405.0
—
—
Revenue from site leasing is recorded monthly and recognized on a straight-line basis over the current term of the
related lease agreements, which are generally five years. Receivables recorded related to the straight-lining of site leases are
reflected in other assets on the Consolidated Balance Sheets. Rental amounts received in advance are recorded as deferred
revenue on the Consolidated Balance Sheets.
Site development projects in which the Company performs consulting services include contracts on a time and
materials basis or a fixed price basis. Time and materials based contracts are billed at contractual rates as the services are
rendered. For those site development contracts in which the Company performs work on a fixed price basis, site development
billing (and revenue recognition) is based on the completion of agreed upon phases of the project on a per site basis. Upon
the completion of each phase on a per site basis, the Company recognizes the revenue related to that phase. Site development
projects generally take from 3 to 12 months to complete.
F-10
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SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Revenue from construction projects is recognized on the percentage-of-completion method of accounting,
determined by the percentage of cost incurred to date compared to management’s estimated total cost for each contract. This
method is used because management considers total cost to be the best available measure of progress on the contracts. These
amounts are based on estimates, and the uncertainty inherent in the estimates initially is reduced as work on the contracts
nears completion. The asset “costs and estimated earnings in excess of billings on uncompleted contracts” represents
expenses incurred and revenues recognized in excess of amounts billed. The liability “billings in excess of costs and
estimated earnings on uncompleted contracts” represents billings in excess of revenues recognized. Provisions for estimated
losses on uncompleted contracts are made in the period in which such losses are determined to be probable.
Cost of site leasing revenue includes ground lease rent, property taxes, maintenance (exclusive of employee related
costs) and other tower operating expenses. Liabilities recorded related to the straight lining of ground leases are reflected in
other long-term liabilities on the Consolidated Balance Sheets. Cost of site development revenue includes the cost of
materials, salaries and labor costs, including payroll taxes, subcontract labor, vehicle expense and other costs directly and
indirectly related to the projects. All costs related to site development projects are recognized as incurred.
The Company performs periodic credit evaluations of its customers. The Company monitors collections and
payments from its customers and maintains a provision for estimated credit losses based upon historical experience, specific
customer collection issues identified and past due balances as determined based on contractual terms. Interest is charged on
outstanding receivables from customers on a case by case basis in accordance with the terms of the respective contracts or
agreements with those customers. Amounts determined to be uncollectible are written off against the allowance for doubtful
accounts in the period in which uncollectability is determined to be probable.
The following is a rollforward of the allowance for doubtful accounts for the years ended December 31, 2008, 2007,
and 2006:
Beginning balance .................................................................................
Allowance recorded relating to Acquisition of AAT .............................
(Credits) provision for doubtful accounts ..............................................
Write-offs, net of recoveries ..................................................................
Ending balance ......................................................................................
$
$
m. Income Taxes
2008
2006
For the year ended December 31,
2007
(in thousands)
1,316
$
(280 )
150
—
1,186
1,186
—
(81)
(253)
852
$
$
$
1,136
1,000
100
(920)
1,316
The Company had taxable losses during the years ended December 31, 2008 and 2007, 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
losses.
In July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation Number 48,
“Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109 ,” (“FIN No. 48”). FIN No. 48
prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a
tax position taken in a tax return. The Company must determine whether it is “more-likely-than-not” that a tax position will
be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical
merits of the position. Once it is determined that a position meets the more-likely-than-not recognition threshold, the position
is measured to determine the amount of benefit to recognize in the financial statements. FIN No. 48 applies to all tax
positions related to income taxes subject to FASB Statement No. 109, “Accounting for Income Taxes” (“SFAS No. 109”) .
The interpretation does not relate to non income tax positions accounted for under FASB Statement No. 5, “Accounting for
Contingencies” (“SFAS No. 5”) . FIN No. 48 is effective for fiscal years beginning after December 15, 2006. Any
cumulative effect of applying the provisions of FIN No. 48 was required to be reported as an adjustment to the opening
balance of retained earnings on January 1, 2007. Upon adopting the provisions of FIN No. 48 beginning in the first quarter of
2007, the Company determined that no such adjustment to its opening balance was required. During 2007 and 2008, the
Company did not identify any exposures under FIN No. 48 that required an adjustment. In the future, to the extent that the
Company records unrecognized tax exposures in accordance with FIN No. 48, any related interest and penalties will be
recognized as interest expenses in the Company’s Consolidated Statement of Operations.
F-11
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SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
n. Stock-Based Compensation
Effective January 1, 2006, the Company adopted the provisions of SFAS No. 123R “Share-Based Payments”
(“SFAS 123R”) which requires the measurement and recognition of compensation expense for all share-based payment
awards to employees and directors based on estimated fair values. SFAS 123R supersedes the Company’s previous
accounting methodology using the intrinsic value method under Accounting Principles Board Opinion No. 25 “Accounting
for Stock Issued to Employees” (“APB 25”). The Company accounts for stock issued to non-employees in accordance with
the provisions of Emerging Issues Task Force (“EITF”) Issue No. 96-18, “Accounting for Equity Instruments That Are Issued
to Other Than Employees for Acquiring, or in Conjunction with Selling Goods or Services.”
The Company adopted SFAS 123R using the modified prospective transition method. Under this transition method,
compensation expense recognized during the year ended December 31, 2006 included: (a) compensation expense for all
share-based awards granted prior to, but not yet vested, as of December 31, 2005, based on the grant date fair value estimated
in accordance with the original provisions of SFAS 123, and (b) compensation expense for all share-based awards granted
subsequent to December 31, 2005, based on the grant date fair value estimated in accordance with the provisions of SFAS
123R. In accordance with the modified prospective transition method, the Company’s Consolidated Financial Statements for
prior periods have not been restated to reflect the impact of SFAS 123R.
On November 10, 2005, FASB issued FASB Staff Position FAS 123R-3, “Transition Election Related to
Accounting for the Tax Effects of Share-Based Payment Awards.” The Company has elected to adopt the alternative transition
method provided in the FASB Staff Position for calculating the tax effects of share-based compensation pursuant to SFAS
123R. The alternative transition method includes simplified methods to establish the beginning balance of the additional
paid-in capital pool (“APIC Pool”) related to the tax effects of employee share-based compensation, and to determine the
subsequent impact on the APIC Pool and consolidated statements of cash flows of the tax effects of employee and director
share-based awards that are outstanding upon adoption of SFAS 123R.
o. Asset Retirement Obligations
In accordance with SFAS 143, “Accounting for Asset Retirement Obligations” (“SFAS 143”) , the Company
recognizes asset retirement obligations in the period in which they are incurred, if a reasonable estimate of a fair value can be
made, and accretes such liability through the obligation’s estimated settlement date. The associated asset retirement costs are
capitalized as part of the carrying amount of the related tower fixed assets, and over time, the liability is accreted to its
present value each period and the capitalized cost is depreciated over the estimated useful life of the tower.
The Company has entered into ground leases for the land underlying the majority of the Company’s towers. A
majority of these leases require the Company to restore leaseholds to their original condition upon termination of the ground
lease. SFAS 143 requires that the net present value of future restoration obligations be recorded as a liability as of the date
the legal obligation arises and this amount be capitalized to the related operating asset. The asset retirement obligation at
December 31, 2008 and December 31, 2007 was $4.2 million and $2.9 million, respectively, and is included in other long-
term liabilities on the Consolidated Balance Sheets. Upon settlement of the obligations, any difference between the cost to
retire an asset and the recorded liability is recorded in the Consolidated Statements of Operations as a gain or loss. In
determining the impact of SFAS 143, the Company considered the nature and scope of the contractual restoration obligations
contained in the Company’s third party ground leases, the historical retirement experience as an indicator of future restoration
probabilities, intent in renewing existing ground leases through lease termination dates, current and future value and timing
of estimated restoration costs and the credit adjusted risk-free rate used to discount future obligations.
F-12
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SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following summarizes the activity of the asset retirement obligation liability:
Asset retirement obligation at January 1 ....................................................
Fair value of liability recorded for the Optasite, Light Tower and Tower
Co acquisitions ........................................................................................
Additional liabilities accrued ......................................................................
Accretion expense ......................................................................................
Revision in estimates ..................................................................................
Ending balance ...........................................................................................
$
$
p. Loss Per Share
For the year ended December 31,
2008
2007
(in thousands)
2,869
$
723
348
316
(58)
4,198
$
2,632
—
147
164
(74)
2,869
Basic and diluted loss per share is calculated in accordance with SFAS No. 128, “Earnings per Share”. The
Company has potential common stock equivalents related to its outstanding stock options and Convertible Notes. These
potential common stock equivalents were not included in diluted loss per share because the effect would have been anti-
dilutive in calculating the full year earnings per share. Accordingly, basic and diluted loss per common share and the
weighted average number of shares used in the computations are the same for all periods presented in the Consolidated
Statements of Operations.
q. Comprehensive Income (Loss)
Comprehensive income (loss) is defined as the change in equity (net assets) of a business enterprise during a period
from transactions and other events and circumstances from non-owner sources, and is comprised of net income (loss) and
“other comprehensive income (loss).” Comprehensive loss is presented in the Consolidated Statements of Shareholders’
Equity.
3. CURRENT ACCOUNTING PRONOUNCEMENTS
In September 2008, FASB issued Emerging Issues Task Force (“EITF”) Issue No. 07-5, “Determining Whether an
Instrument (or Embedded Feature) is Indexed to an Entity’s Own Stock” (“EITF 07-5”). EITF 07-5 supercedes EITF Issue
No. 01-6, “The Meaning of Indexed to a Company’s Own Stock” and addresses the determination of whether an instrument
(or an embedded feature) is indexed to an entity’s own stock. EITF 07-5 is effective for fiscal years beginning after
December 15, 2008 and interim periods within those fiscal years. Management does not expect it to have a material impact
on the Company’s consolidated financial condition, results of operations or cash flows.
In June 2008, FASB issued EITF Issue 08-4, “Transition Guidance for Conforming Changes to EITF Issue No. 98-
5” (“EITF 08-4”). The objective of EITF No. 08-4 is to provide transition guidance for conforming changes made to EITF
No. 98-5, “Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable
Conversion Ratios”, that result from EITF 00-27 “Application of Issue No. 98-5 to Certain Convertible Instruments”, and
SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity”. This
Issue is effective for financial statements issued for fiscal years ending after December 15, 2008. Early application is
permitted. EITF 08-4 did not have any impact on the Company’s consolidated financial condition, results of operations or
cash flows.
In May 2008, FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS
162”). The statement is intended to improve financial reporting by identifying a consistent hierarchy for selecting accounting
principles to be used in preparing financial statements that are prepared in conformance with generally accepted accounting
principles. Unlike Statement on Auditing Standards (SAS) No. 69, “The Meaning of Present Fairly in Conformity With
Generally Accepted Accounting Principles,” SFAS 162 is directed to the entity rather than the auditor. The statement became
effective on November 15, 2008 and did not have any impact on the Company’s consolidated financial condition, results of
operations or cash flows.
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In May 2008, FASB issued FASB Staff Position (“FSP”) Accounting Principles Board (“APB”) 14-1, “Accounting
for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (“FSP
APB 14-1”) .” FSP APB 14-1 requires the issuer of certain convertible debt instruments that may be settled in cash (including
partial cash settlement) on conversion to separately account for the liability (debt) and equity (conversion option) components
of the instrument in a manner that reflects the issuer’s non-convertible debt borrowing rate. FSP APB 14-1 is effective for
fiscal years beginning after December 15, 2008 and interim periods within those fiscal years. Early adoption is prohibited.
Upon adoption, FSP APB 14-1 requires companies to retrospectively apply the requirements of the pronouncements to all
periods presented. The Company’s 0.375% Convertible Senior Notes due 2010 and 1.875% Convertible Senior Notes due
2013 will be subject to FSP APB 14-1. Consequently, the Company is currently evaluating the impact of FSP APB 14-1 on
its consolidated balance sheets and statements of operations beginning in the first quarter of fiscal 2009 and prior period. The
Company will be required to reduce the carrying value of its convertible debt and accrete the reduced carrying value back to
its full principal balance over the term of the Notes. The Company will record this accretion as non-cash interest expense
related to its outstanding convertible debt instruments on the Company’s consolidated statement of operations.
In April 2008, FASB issued FSP FAS No. 142-3, “Determination of the Useful Life of Intangible Assets” (FSP FAS
142-3”). FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used
to determine the useful life of a recognized intangible asset under FASB Statement No. 142, “Goodwill and Other Intangible
Assets.” FSP FAS 142-3 is effective for fiscal years beginning after December 15, 2008 and early adoption is prohibited. The
Company is currently evaluating the impact the adoption of FSP FAS 142-3 will have on the Company’s consolidated
financial condition, results of operations or cash flows.
In March 2008, FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an
Amendment to FASB Statement No. 133” (“SFAS 161”). SFAS 161 establishes the disclosure requirements for derivative
instruments and hedging activities and expands the disclosure requirements of SFAS No. 133. SFAS 161 is effective for
financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company does not
expect the adoption of SFAS 161 to have a material impact on the Company’s consolidated financial condition, results of
operations or cash flows.
In December 2007, FASB issued SFAS No. 141(R), “Business Combinations” (“SFAS 141(R)”) which requires the
acquiring entity in a business combination to record all assets acquired and liabilities assumed at their respective acquisition-
date fair values and changes other practices under SFAS No. 141 “Business Combinations,” some of which could have a
material impact on how the Company accounts for business combinations. These changes include, among other things,
expensing acquisition costs as incurred as a component of operating expense. The Company presently capitalizes these
acquisition costs as part of the purchase price and then amortizes these costs using the straight line method over the life of the
associated acquired assets. SFAS 141(R) also requires additional disclosure of information surrounding a business
combination, such that users of the entity’s financial statements can fully understand the nature and financial impact of a
business combination. SFAS 141(R) is effective for fiscal years beginning after December 15, 2008 and interim periods
within those fiscal years. The Company is currently evaluating the impact the adoption of SFAS 141(R) will have on the
Company’s consolidated financial condition, results of operations or cash flows.
In December 2007, FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements”
(“SFAS 160”) which requires entities to report non-controlling (minority) interest in subsidiaries as equity in the consolidated
financial statements. SFAS 160 is effective for fiscal years beginning after December 15, 2008. The adoption of SFAS 160 is
not expected to have a material impact on the Company’s consolidated financial condition, results of operations or cash
flows.
In February 2007, FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial
Liabilities – Including an amendment of FASB Statement No. 115” (“SFAS 159”) , which provides companies with an option
to report selected financial assets and liabilities at their fair values. The objective is to improve financial reporting by
providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge accounting provisions. SFAS 159 became effective for the
Company on January 1, 2008. The adoption of SFAS 159 did not have a material impact on the Company’s financial
condition, results of operations or cash flows.
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In September 2006, FASB issued SFAS No. 157 “Fair Value Measurements” (“SFAS 157”) which defines fair
value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurements. SFAS 157
is effective for fiscal years beginning after November 15, 2007. However, in February 2008, FASB issued FSP SFAS No.
157-1 and FSP SFAS No. 157-2. FSP SFAS No. 157-1 amends SFAS 157 to exclude SFAS No. 13 “Accounting for Leases”
and other accounting pronouncements that address fair value measurements for purposes of lease classification or
measurement under SFAS No. 13. FSP SFAS No. 157-2 delays the effective date of SFAS 157 for all nonfinancial assets and
nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually). This FSP partially defers the effective date of SFAS 157 to fiscal years beginning after November
15, 2008, or in fiscal 2009 for the Company, and interim periods within those fiscal years for items within the scope of this
FSP. In October 2008, the FASB issued FSP FAS 157-3 which clarifies the application of SFAS 157 in an inactive market by
providing an illustrative example to demonstrate how the fair value of a financial asset is determined when the market for the
financial asset is inactive. Effective January 1, 2008, the guidelines of SFAS 157 were applied in recording the Company’s
investments at their fair market value, which is further discussed in Note 4. The adoption of SFAS 157 did not have a
material impact on the Company’s consolidated financial condition, results of operations or cash flows.
4. INVESTMENTS
Auction rate securities are debt instruments with long-term scheduled maturities that have interest rates that are
typically reset at predetermined intervals, usually every 7, 28, 35 or 90 days, at which time the securities would historically
be purchased or sold, creating a liquid market. Historically, an active secondary market existed for such investments and the
rate reset for each instrument was an opportunity to roll over the holdings or obtain immediate liquidity by selling the
securities at par. However, in the third quarter of 2008, due to insufficient demand in the marketplace driven by the state of
the credit markets, the Company no longer believed it would be able to liquidate the remaining auction rate securities within
a twelve month period and thus reclassified the auction rate securities to long-term investments. As of December 31, 2008,
the Company held investments in three securities with a par value of $29.8 million and a fair value of $1.0 million which are
included in other assets on the Company’s Consolidated Balance Sheet.
These securities were issued by trusts which held investments in investment-grade commercial paper. Two of these
trusts were a party to put agreements with Ambac Assurance Corporation (“Ambac”), and the third trust was a party to a put
agreement with Financial Guaranty Insurance Company (“FGIC”). These put agreements provided Ambac or FGIC,
respectively, the right to compel the trust to purchase either Ambac or FGIC preferred stock by liquidating the investments
held by the trust.
In October 2008, FGIC exercised their put right (associated with $9.8 million of par value auction rate securities
held by the Company) resulting in the issuing trust purchasing and holding FGIC Series C Perpetual Preferred Stock (“FGIC
Preferred Stock”). If FGIC fails to pay dividends on the FGIC Preferred Stock, the trust must liquidate and dissolve, and 98
shares of FGIC Preferred Stock must be distributed to the Company. On November 19, 2008, the Company was notified by
the trustee that FGIC does not have sufficient funds legally available to make dividend payments on the FGIC Preferred
Stock. As such, the Company expects the trust to be liquidated and dissolved, and expects shares of FGIC Preferred Stock to
be distributed to the Company. As of December 31, 2008 the trust had not been liquidated.
In December 2008, Ambac exercised its put rights (associated with $20.0 million of par value auction rate securities
held by the Company) resulting in the issuing trusts purchasing Ambac Auction Market Preferred Shares (“Ambac Preferred
Stock”). In January 2009, pursuant to the exercise of the put right, the Ambac Preferred Stock was issued to the trust, which
then distributed the shares of Ambac Preferred Stock to the security holders and liquidated. The Company received 800
shares of Ambac Preferred Stock.
The Company held auction rate securities with a par value of $70.7 million as of December 31, 2007. Gross
purchases and sales of these investments are presented within “Cash flows from investing activities” on the Company’s
Consolidated Statements of Cash Flows. As of December 31, 2007, the Company classified the auction rate securities as
short-term based on its intent to continue to liquidate these investments within a twelve month period.
SFAS 157 establishes a framework for measuring fair value and establishes a fair value hierarchy based on the
inputs used to measure fair value. Traditionally, the fair value of auction rate securities approximated par value due to the
frequent resets through the auction rate process. However, as a result of insufficient demand in the marketplace, the auction
rate process has resulted in numerous “failed auctions” over the past twelve months and the Company, like other holders of
auction rate securities, has not been able to liquidate the three remaining auction rate securities held in the Company’s
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
portfolio. Consequently, the Company has estimated the fair value of these auction rate securities based on values provided
by a third party valuation firm utilizing a Level 3 valuation methodology. SFAS 157 defines Level 3 valuations as those
which rely on unobservable inputs for the asset or liability, and includes situations where there is little, if any, market activity
for the asset or liability. Management validated the assumptions used in the valuation including the ultimate time horizon
over which dividends are anticipated to be paid on the preferred stock, the coupon rate for these securities, and the
appropriate discount margins. The Company continues to monitor market and other conditions in assessing whether further
changes in the fair value of these securities are warranted. Due to the lack of a market for Ambac Preferred Stock and FGIC
Preferred Stock, the established fair value of these securities is a matter of judgment. These estimated fair values could
change based on future market conditions and as such, the Company may be required to record additional unrealized losses
for impairment if the Company determines there are further declines in their fair value.
The following table presents the Company’s auction rate securities measured at fair value:
Beginning balance, December 31, 2007 ...........................................................................
Sales ..............................................................................................................................
Other-than-temporary impairment charge .....................................................................
Ending balance, December 31, 2008 ................................................................................
$
55,142
(40,900)
(13,256)
986
Auction Rate
Securities
(in thousands)
$
The Company recorded $13.3 million and $15.6 million of other–than–temporary impairment charges in other
income (expense) on its Consolidated Statements of Operations for the years ended December 31, 2008 and 2007,
respectively. The Company determined the other-than-temporary impairment charges based on a variety of factors, including
the significant decline in fair value indicated for the individual investments, the adverse market conditions impacting auction
rate securities and the exercise of the put rights that resulted in the Company indirectly owning shares of FGIC Preferred
Stock and directly owning shares of Ambac Preferred Stock.
5. RESTRICTED CASH
Restricted cash consists of the following:
CMBS Certificates ............................................ $
Payment and performance bonds ......................
Surety bonds and workers compensation ..........
Total restricted cash ................................... $
As of
December 31, 2008
As of
December 31, 2007
Included on Balance Sheet
(in thousands)
36,182 $
2,417
16,660
55,259 $
35,254 Restricted cash - current asset
2,347 Restricted cash - current asset
15,873 Other assets - noncurrent
53,474
In connection with the issuance of the CMBS Certificates (as defined in Note 12), the Company is required to fund a
restricted cash amount, which represents the cash held in escrow pursuant to the mortgage loan agreement governing the
CMBS Certificates. This restricted cash amount is used to fund certain reserve accounts for the payment of debt service costs,
ground rents, real estate and personal property taxes, insurance premiums related to tower sites, and trustee and servicing
expenses, and to reserve a portion of advance rents from tenants. Pursuant to the terms of the mortgage loan agreement, all
rents and other sums due on the towers that secure the CMBS Certificates are directly deposited into a controlled deposit
account by the lessees and are held by the indenture trustee. The restricted cash held by the indenture trustee in excess of
required reserve balances is subsequently released to the Borrowers (as defined in Note 12) on or before the 15 th calendar day
following month end provided that the Company is in compliance with its debt service coverage ratio and that no Event of
Default has occurred. All monies held by the indenture trustee after the release date are classified as restricted cash on the
Company’s Consolidated Balance Sheets.
Payment and performance bonds relate primarily to collateral requirements relating to tower construction currently
in process by the Company. Cash is pledged as collateral related to surety bonds issued for the benefit of the Company or its
affiliates in the ordinary course of business and primarily related to the Company’s tower removal obligations. In addition, at
December 31, 2008 and 2007, the Company had pledged $2.0 million and $2.2 million, respectively, as collateral related to
its workers compensation policy. These amounts are included in other assets on the Company’s Consolidated Balance Sheets.
As of December 31, 2008, the Company had $1.3 million in removal bonds for which it is not required to post
collateral.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. ACQUISITIONS
On September 16, 2008, a wholly-owned subsidiary of the Company merged with Optasite Holding Company Inc.
(“Optasite”) and Optasite became a wholly-owned subsidiary of the Company. As of the closing, Optasite owned 528 tower
sites, located in 31 states, Puerto Rico and the U.S. Virgin Islands and had approximately 38 managed site locations. Pursuant
to the terms of the merger agreement, the Company issued 7.25 million shares of SBA Class A common stock to the Optasite
securityholders, assumed Optasite’s fully-drawn $150 million senior credit facility (see Note 12) and assumed approximately
$26.9 million of additional liabilities. The aggregate consideration paid for Optasite was approximately $433.3 million. The
results of operations of Optasite are included with those of the Company from the date of the acquisition.
On October 20, 2008, a wholly-owned subsidiary of the Company acquired Light Tower Wireless, LLC (“Light
Tower”), the wireless infrastructure subsidiary of Light Tower LLC. Light Tower became a wholly-owned subsidiary of the
Company. As of the closing, Light Tower owned 340 wireless communications towers, five managed sites and five
distributed antenna system (“DAS”) networks. The aggregate purchase price paid for these towers and related assets was
approximately $224.0 million which was paid in cash. The results of operations of Light Tower are included with those of the
Company from the date of the acquisition.
In addition to the Optasite and Light Tower acquisitions, during 2008, the Company acquired 587 completed towers
(including 423 towers from the TowerCo LLC acquisition) and related assets and liabilities from various sellers as well as the
equity interest of six entities, whose holdings consisted of 114 towers and related assets and liabilities. The aggregate
consideration paid for these towers and related assets was $479.6 million, consisting of $441.1 million in cash (excluding
$9.2 million of working capital adjustments, due diligence and other acquisition related costs) and approximately 1.2 million
shares of Class A common stock valued at $38.6 million (excluding $0.7 million of negative working capital adjustments).
The Company accounted for all of the above tower acquisitions at fair market value at the date of each acquisition. The
results of operations of the acquired assets are included with those of the Company from the dates of the respective
acquisitions. These acquisitions were not significant to the Company’s consolidated financial statements and accordingly, pro
forma financial information has not been presented. Also, during 2008, the Company paid in cash $19.9 million for land and
easement purchases in addition to $3.3 million spent for long-term lease extensions related to the land underneath the
Company’s towers.
During 2007, the Company acquired 529 completed towers, related assets and liabilities from various sellers as well
as the equity interest of three entities, whose assets consisted of approximately 83 towers and related assets and liabilities.
The aggregate net consideration paid for these additional assets was $330.0 million, consisting of $166.3 million in cash
(excluding $3.2 million of cash payments for working capital adjustments, and due diligence and other acquisition related
costs) and approximately 4.7 million shares of Class A common stock valued at $163.7 million (excluding an offset of $8.2
million associated with negative working capital adjustments). The Company accounted for all of the above tower
acquisitions at fair market value at the date of each acquisition. The results of operations of the acquired assets are included
with those of the Company from the dates of their respective acquisitions. None of the individual acquisitions or aggregate
acquisitions consummated was significant to the Company’s consolidated financials statements and accordingly, pro forma
financial information has not been presented. Also, during 2007, the Company paid in cash $23.4 million for land and
easement purchases in addition to $10.9 million spent for long-term lease extensions related to the land underneath the
Company’s towers.
In accordance with the provisions of SFAS No. 141, Business Combinations , the Company continues to evaluate all
acquisitions within one year after the applicable closing date of each transaction to determine whether any additional
adjustments are needed to the allocation of the purchase price paid for the assets acquired and liabilities assumed by major
balance sheet caption, as well as the separate recognition of intangible assets from goodwill if certain criteria are met. These
intangible assets represent the value associated with current leases in place (“Current Contract Intangibles”) at the acquisition
date and future tenant leases anticipated to be added to the acquired towers (“Network Location Intangible”) and were
calculated using the discounted values of the current or future expected cash flows. The intangible assets are estimated to
have an economic useful life consistent with the economic useful life of the related tower assets, which is typically 15 years.
From time to time, the Company agrees to pay additional consideration for such acquisitions if the towers or
businesses that are acquired meet or exceed certain performance targets in the 1-3 years after they have been acquired. As of
December 31, 2008, the Company had an obligation to pay up to an additional $9.4 million in consideration if the
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
performance targets contained in various acquisition agreements are met. These obligations are associated with new build and
tower acquisition programs within the Company’s site leasing segment. In certain acquisitions, the additional consideration
may be paid in cash or shares of Class A common stock at the Company’s option. The Company records such obligations as
additional consideration when it becomes probable that the targets will be met.
For the years ended December 31, 2008 and 2007, certain earnings targets associated with the acquired towers were
achieved, and therefore, the Company paid in cash $3.5 million and $5.5 million, respectively. In addition, for the year ended
December 31, 2008, the Company issued approximately 67,000 shares of Class A common stock in settlement of contingent
price amounts payable as a result of acquired towers exceeding certain performance targets. During the year ended December
31, 2007, the Company did not issue any shares of Class A Common stock in settlement of contingent price amounts.
7. INTANGIBLE ASSETS, NET
The following table provides the gross and net carrying amounts for each major class of intangible assets:
Gross carrying
amount
As of December 31, 2008
Accumulated
amortization
Net book
value
Gross carrying
amount
Accumulated
amortization
Net book
value
As of December 31, 2007
Current Contract Intangibles .......
Network Location Intangibles .....
$
1,022,022 $ (103,837) $
569,301
(62,354)
(in thousands)
918,185 $
506,947
604,456 $
353,279
(54,873) $ 549,583
(33,863) 319,416
Intangible assets, net ...................
$
1,591,323 $ (166,191) $ 1,425,132 $
957,735 $
(88,736) $ 868,999
All intangibles noted above are contained in the Company’s site leasing segment. The Company amortizes its
intangibles using the straight line method over fifteen years. Amortization expense relating to the intangible assets above was
$77.5 million, $54.3 million and $33.9 million for the years ended December 31, 2008, 2007 and 2006, respectively. These
amounts are subject to changes in estimates until the preliminary allocation of the purchase price is finalized for each
acquisition.
Estimated amortization expense on the Company’s current contract and network location intangibles is as follows:
For the year ended
December 31,
2009 ..........................................................................
2010 ..........................................................................
2011 ..........................................................................
2012 ..........................................................................
2013 ..........................................................................
Thereafter .....................................................................
Total .........................................................................
(in thousands)
106,088
$
106,088
106,088
106,088
106,088
894,692
1,425,132
$
8. PROPERTY AND EQUIPMENT, NET
Property and Equipment, net (including assets held under capital leases) consists of the following:
As of
December 31, 2008
As of
December 31, 2007
Towers and related components .............................................................
Construction-in-process ..........................................................................
Furniture, equipment and vehicles ..........................................................
Land, buildings and improvements .........................................................
$
Less: accumulated depreciation ..............................................................
Property and equipment, net ...................................................................
$
(in thousands)
2,136,179
10,295
29,563
102,898
2,278,935
(776,263)
1,502,672
$
$
1,741,662
5,265
28,877
64,925
1,840,729
(648,760)
1,191,969
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Construction-in-process represents costs incurred related to towers that are under development and will be used in
the Company’s operations.
Depreciation expense was $133.7 million, $114.8 million, and $99.0 million for the years ended December 31, 2008,
2007, and 2006, respectively. At December 31, 2008 and 2007, non-cash capital expenditures that are included in accounts
payable and accrued expenses were $2.7 million and $4.3 million, respectively.
9. COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS
Costs and estimated earnings in excess of billings on uncompleted contracts consist of the following:
Costs incurred on uncompleted contracts .............................................
Estimated earnings ................................................................................
Billings to date ......................................................................................
As of
December 31, 2008
As of
December 31, 2007
$
$
(in thousands)
43,945
13,486
(47,132)
10,299
$
$
115,823
23,175
(118,740)
20,258
These amounts are included in the accompanying consolidated balance sheets under the following captions:
As of
December 31, 2008
As of
December 31, 2007
(in thousands)
Costs and estimated earnings in excess of billings on uncompleted
contracts ............................................................................................
$
10,658
$
Billings in excess of costs and estimated earnings on uncompleted
contracts ............................................................................................
$
(359 )
10,299
$
21,453
(1,195)
20,258
At December 31, 2008, five significant customers comprised 66.7% of the costs and estimated earnings in excess of
billings, net of billings in excess of cost, while at December 31, 2007, one significant customer comprised 66.6% of the costs
and estimated earnings in excess of billings, net of billings in excess of costs.
10. CONCENTRATION OF CREDIT RISK
The Company’s credit risks consist primarily of accounts receivable with national, regional and local wireless
service providers and federal and state government agencies. The Company performs periodic credit evaluations of its
customers’ financial condition and provides allowances for doubtful accounts, as required, based upon factors surrounding
the credit risk of specific customers, historical trends and other information. The Company generally does not require
collateral. The following is a list of significant customers and the percentage of total revenue derived from such customers.
Sprint .....................................................................................................................................
AT&T ...................................................................................................................................
Verizon Wireless ...................................................................................................................
2008
Percentage of Total Revenue
for the year ended December 31,
2006
2007
27.6%
21.4%
9.7%
23.2% 30.5%
21.3% 21.0%
9.7%
11.2%
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company’s site leasing, site development consulting and site development construction segments derive
revenue from these customers. Client percentages of total revenue in each of the segments are as follows:
AT&T .................................................................................................................................
Sprint ...................................................................................................................................
Verizon Wireless .................................................................................................................
25.3%
25.1%
11.1%
25.6%
26.5%
10.0%
Percentage of Site Leasing Revenue
for the year ended December 31,
2008
2007
2006
26.7%
26.2%
9.7%
Verizon Wireless .................................................................................................................
Sprint ...................................................................................................................................
Metro PCS ...........................................................................................................................
Percentage of Site Development
Consulting Revenue
for the year ended December 31,
2008
2006
2007
26.6%
38.0%
0.7%
24.1%
22.9%
13.3%
17.4%
59.7%
3.9%
T-Mobile .............................................................................................................................
Metro PCS ...........................................................................................................................
Sprint ...................................................................................................................................
Percentage of Site Development
Construction Revenue
for the year ended December 31,
2006
2008
2007
15.8%
11.9%
10.8%
5.8%
1.1%
39.8%
4.6%
0.2%
30.0%
Five significant customers comprised 41.7% of total gross accounts receivable at December 31, 2008 compared to
one significant customer which comprised 42.9% of total gross accounts receivable at December 31, 2007.
11. ACCRUED EXPENSES
The Company’s accrued expenses are comprised of the following:
Salaries and benefits ..................................................
Real estate and property taxes ...................................
Other ..........................................................................
As of
December 31, 2008
As of
December 31, 2007
$
$
(in thousands)
3,956
7,734
9,839
21,529
$
$
4,401
6,820
9,743
20,964
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SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. DEBT
Debt consists of the following:
Commercial mortgage pass-through certificates, series 2005-1, secured, interest
payable monthly in arrears, balloon payment of principal with an anticipated
repayment date of November 9, 2010. Interest at fixed rates ranging from
5.369% to 6.706%. ...............................................................................................
Commercial mortgage pass-through certificates, series 2006-1, secured, interest
payable monthly in arrears, balloon payment of principal with an anticipated
repayment date of November 9, 2011. Interest at fixed rates ranging from
5.314% to 7.825%. ...............................................................................................
Convertible senior notes, unsecured, interest payable June 1 and December 1,
aggregate principal amount with a maturity date of December 1, 2010. Interest
at 0.375%. .............................................................................................................
As of
December 31, 2008
As of
December 31, 2007
(in thousands)
$
398,800
$
405,000
1,090,747
1,150,000
138,149
350,000
Convertible senior notes, unsecured, interest payable May 1 and November 1,
aggregate principal amount with a maturity date of May 1, 2013. Interest
at 1.875%. .............................................................................................................
550,000
Senior secured revolving credit facility originated in January 2008. Interest at
varying rates ranging from 2.47% to 3.44%. ........................................................
230,552
—
—
Optasite credit facility with a maturity date of November 1, 2010 assumed
through an acquisition in September 2008, net of $2.6 million discount. Interest
at 2.85%. ...............................................................................................................
Total debt .................................................................................................................
Less: current maturities of long-term debt ...............................................................
Total long-term debt, net of current maturities ........................................................
$
146,412
2,554,660
(6,000)
2,548,660
$
—
1,905,000
—
1,905,000
The aggregate amount of long-term debt maturing in each of the next five years is $6.0 million in 2009, $910.5 million in
2010, $1,090.7 million in 2011, $0 in 2012 and $550.0 million in 2013.
The CMBS Certificates
Commercial Mortgage Pass-Through Certificates, Series 2005-1
On November 18, 2005, SBA CMBS-1 Depositor LLC (the “Depositor”), an indirect subsidiary of the Company,
sold in a private transaction, $405.0 million of Initial CMBS Certificates, Series 2005-1 (the “Initial CMBS Certificates”)
issued by SBA CMBS Trust (the “Trust”), a trust established by the Depositor (the “Initial CMBS Transaction”).
The Initial CMBS Certificates consist of five classes, all of which are rated investment grade with a principal
balance and annual pass-through interest rate, as indicated in the table below:
Subclass
2005-1A ........................................................
2005-1B ........................................................
2005-1C ........................................................
2005-1D ........................................................
2005-1E ........................................................
Total .............................................................
Annual
Pass-through
Interest Rate
Initial Subclass
Principal
Original
Balance
(in thousands)
Initial Subclass
Principal
Balance at
12/31/08
Repurchases
5.369% $
5.565%
5.731%
6.219%
6.706%
$
238,580 $
48,320
48,320
48,320
21,460
405,000 $
— $
—
—
(6,200 )
—
(6,200 ) $
238,580
48,320
48,320
42,120
21,460
398,800
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The weighted average annual fixed coupon interest rate of the Initial CMBS Certificates as of December 31, 2008 is
5.6%, payable monthly, and the effective weighted average fixed interest rate is 4.8%, after giving effect to the settlement of
two interest rate swap agreements entered into in contemplation of the transaction (see Note 13). The Initial CMBS
Certificates have an anticipated repayment date in November 2010 with a final repayment date in 2035. The Company
incurred deferred financing fees of $12.2 million associated with the closing of this transaction.
During the fourth quarter of 2008, the Company repurchased, for cash, $6.2 million in principal amount of Initial
CMBS Certificates subclass 1D in privately negotiated transactions. In accordance with APB 26 “Early Extinguishment of
Debt ,” the Company recorded a $0.6 million gain on the early extinguishment of debt net, of the write-off of unamortized
deferred financing fees in its Consolidated Statement of Operations.
Commercial Mortgage Pass-Through Certificates, Series 2006-1
On November 6, 2006, the Depositor sold in a private transaction $1.15 billion of the Additional CMBS Certificates,
Series 2006-1 (the “Additional CMBS Certificates” and collectively with the Initial CMBS Certificates referred to as the
“CMBS Certificates”) issued by the Trust. The Additional CMBS Certificates consist of nine classes with a principal balance
and annual pass-through interest rate as indicated in the table below:
Subclass
2006-1A .............................
2006-1B .............................
2006-1C .............................
2006-1D .............................
2006-1E .............................
2006-1F ..............................
2006-1G .............................
2006-1H .............................
2006-1J ..............................
Annual
Pass-through
Interest Rate
Additional
Subclass
Principal
Original
Balance
Repurchases
Additional
Subclass
Principal
Balance at
12/31/08
(in thousands)
5.314% $ 439,420
106,680
5.451%
106,680
5.559%
106,680
5.852%
36,540
6.174%
81,000
6.709%
121,000
6.904%
81,000
7.389%
71,000
7.825%
$
—
—
(5,000)
(13,000)
(7,000)
(10,000)
(11,272)
(12,726)
(255)
$ 439,420
106,680
101,680
93,680
29,540
71,000
109,728
68,274
70,745
Total ...................................
$ 1,150,000
$
(59,253) $ 1,090,747
The weighted average annual fixed coupon interest rate of the Additional CMBS Certificates as of December 31,
2008 is 6.0%, payable monthly, and the effective weighted average fixed interest rate is 6.3% after giving effect to the
settlement of the nine interest rate swap agreements entered into in contemplation of the transaction (see Note 13). The
Additional CMBS Certificates have an anticipated repayment date in November 2011 with a final repayment date in 2036.
The Company incurred deferred financing fees of $24.1 million associated with the closing of this transaction.
During the fourth quarter of 2008, the Company repurchased, for cash, $59.3 million in principal amount of
Additional CMBS Certificates in privately negotiated transactions. In accordance with APB 26 “Early Extinguishment of
Debt,” the Company recorded an $18.6 million gain on the early extinguishment of debt net of the write-off of unamortized
deferred financing fees in its Consolidated Statement of Operations.
The assets of the Trust, which issued both the Initial CMBS Certificates and the Additional CMBS Certificates,
consist of a non-recourse mortgage loan initially made in favor of SBA Properties as the initial borrower. In connection with
the issuance of the Additional CMBS Certificates, each of SBA Sites, Inc., SBA Structures, Inc., SBA Towers, Inc., SBA
Puerto Rico, Inc. and SBA Towers USVI, Inc. (the “Additional Borrowers” and collectively with SBA Properties, Inc., the
“Borrowers”) were added as additional borrowers under the mortgage loan and the principal amount of the mortgage loan
was increased by $1.15 billion to an aggregate of $1.56 billion. The mortgage loan consists of multiple tranches, or
components, each of which has terms that are identical to the subclass of CMBS Certificates to which it relates. The
Borrowers are special purpose vehicles which exist solely to hold the towers which are subject to the securitization. The
Borrowers are jointly and severally liable under the mortgage loan.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The mortgage loan is to be paid from the operating cash flows from the aggregate 4,969 towers owned by the
Borrowers (the “CMBS Towers”). Subject to certain limited exceptions described below, no payments of principal will be
required to be made in relation to the components of the mortgage loan corresponding to the Initial CMBS Certificates prior
to the monthly payment date in November 2010, which is the anticipated repayment date for the components of the mortgage
loan corresponding to the Initial CMBS Certificates, and no payments of principal will be required to be made in relation to
the components of the mortgage loan corresponding to the Additional CMBS Certificates prior to the monthly payment date
in November 2011, which is the anticipated repayment date for the components of the mortgage loan corresponding to the
Additional CMBS Certificates.
The Borrowers may prepay the mortgage loan in whole or in part at any time prior to November 2010 for the
components of the mortgage loan corresponding to the Initial CMBS Certificates and November 2011 for the components of
the mortgage loan corresponding to the Additional CMBS Certificates upon payment of the applicable prepayment
consideration. The prepayment consideration is determined per class and consists of an amount equal to the excess, if any, of
(1) the present value on the date of prepayment of all future installments of principal and interest required to be paid from the
date of prepayment to and including the first due date that is nine months prior to the anticipated repayment date, assuming
the entire unpaid principal amount of such class is required to be paid, over (2) that portion of the principal balance of such
class prepaid on the date of such prepayment. If the prepayment occurs (i) within nine months of the anticipated repayment
date, (ii) with proceeds received as a result of any condemnation or casualty of the Borrowers’ sites or (iii) during an
amortization period, no prepayment consideration is due. The entire unpaid principal balance of the mortgage loan
components corresponding to the Initial CMBS Certificates will be due in November 2035 and those corresponding to the
Additional CMBS Certificates will be due in November 2036. However, to the extent that the full amount of the mortgage
loan component corresponding to the Initial CMBS Certificates or the amount of the mortgage loan component
corresponding to the Additional CMBS Certificates are not fully repaid by their respective anticipated repayment dates, the
interest rate of each component would increase by the greater of (i) 5% or (ii) the amount, if any, by which the sum of (x) the
ten-year U.S. treasury rate plus (y) the credit-based spread for such component (as set forth in the mortgage loan agreement)
plus (z) 5%, exceeds the original interest rate for such component. In addition, if the 2005 CMBS Certificates are not fully
repaid by November 2010, then excess cash flow (as defined below) will be trapped by the Trustee and applied first to repay
the original cash coupons on the CMBS Certificates, to fund all reserve accounts, fund operating expenses associated with the
towers, pay the management fees and then to repay principal of the 2005 and the 2006 CMBS Certificates in order of their
investment grade (i.e. the 2005-1A and 2006-1A subclasses would have their respective principal repaid equally prior to
repayment of the other subclasses of the CMBS Certificates). The mortgage loan may be defeased in whole at any time prior
to the anticipated repayment date.
The mortgage loan is secured by (1) mortgages, deeds of trust and deeds to secure debt on substantially all of the
CMBS tower sites and their operating cash flows, (2) a security interest in substantially all of the Borrowers’ personal
property and fixtures, (3) the Borrowers’ rights under the management agreement they entered into with SBA Network
Management, Inc. (“SBA Network Management”), relating to the management of the Borrowers’ tower sites by SBA
Network Management pursuant to which SBA Network Management arranges for the payment of all operating expenses and
the funding of all capital expenditures out of amounts on deposit in one or more operating accounts maintained on the
Borrowers’ behalf, (4) the Borrowers’ rights under certain site management agreements, (5) the Borrowers’ rights under
certain tenant leases, (6) the pledge by SBA CMBS-1 Guarantor LLC and SBA CMBS-1 Holdings, LLC of equity interests
of the initial borrower and SBA CMBS-1 Guarantor LLC, (7) the various deposit accounts and collection accounts of the
Borrowers and (8) all proceeds of the foregoing. For each calendar month, SBA Network Management is entitled to receive a
management fee equal to 7.5% of the Borrowers’ operating revenues for the immediately preceding calendar month.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In connection with the issuance of the CMBS Certificates, the Company established a deposit account into which all rents
and other sums due on the CMBS Towers are directly deposited by the lessees and are held by the indenture trustee. The
funds in this deposit account are used to fund a restricted cash amount, which represents the cash held in escrow pursuant to
the mortgage loan governing the CMBS Certificates to fund certain reserve accounts for the payment of debt service costs,
ground rents, real estate and personal property taxes, insurance premiums related to tower sites, trustee and service expenses,
and to reserve a portion of advance rents from tenants on the 4,969 tower sites. The monies held by the indenture trustee in
excess of required reserve balances are subsequently released to the Borrowers on or before the 15th calendar day following
month end. The monies held by the indenture trustee after the release date are classified as restricted cash on the Company’s
Consolidated Balance Sheets (see Note 5). However, if the debt service coverage ratio, defined as the net cash flow (as
defined in the Mortgage Loan Agreement) divided by the amount of interest on the mortgage loan, servicing fees and trustee
fees that the Borrowers will be required to pay over the succeeding twelve months, as of the end of any calendar quarter, falls
to 1.30 times or lower, then all cash flow in excess of amounts required to make debt service payments, to fund required
reserves, to pay management fees and budgeted operating expenses and to make other payments required under the loan
documents, referred to as “excess cash flow,” will be deposited into a reserve account instead of being released to the
Borrowers. The funds in the reserve account will not be released to the Borrowers unless the debt service coverage ratio
exceeds 1.30 times for two consecutive calendar quarters. If the debt service coverage ratio falls below 1.15 times as of the
end of any calendar quarter, then an “amortization period” will commence and all funds on deposit in the reserve account will
be applied to prepay the mortgage loan until such time that the debt service coverage ratio exceeds 1.15 times for a calendar
quarter. As of December 31, 2008, we met the required debt service coverage ratio as defined by the mortgage loan
agreement.
0.375% Convertible Senior Notes due 2010
On March 26, 2007, the Company issued $350.0 million of its 0.375% Convertible Senior Notes (the “0.375%
Notes”). Interest is payable semi-annually on June 1 and December 1. The 0.375% Notes have a maturity date of December
1, 2010. The Company incurred deferred financing fees of $8.6 million with the issuance of the 0.375% Notes.
The 0.375% Notes are convertible, at the holder’s option, into shares of the Company’s Class A common stock, at
an initial conversion rate of 29.7992 shares of Class A common stock per $1,000 principal amount of 0.375% Notes (subject
to certain customary adjustments), which is equivalent to an initial conversion price of approximately $33.56 per share or a
19% conversion premium based on the last reported sale price of $28.20 per share of Class A common stock on the Nasdaq
Global Select Market on March 20, 2007, the purchase agreement date. The 0.375% Notes are convertible only under the
following certain circumstances: (1) during any calendar quarter commencing at any time after June 30, 2007 and only during
such calendar quarter, if the last reported sale price of the Company’s Class A common stock for at least 20 trading days in
the 30 consecutive trading day period ending on the last trading day of the preceding calendar quarter is more than 130% of
the applicable conversion price per share of Class A common stock on the last day of such preceding calendar quarter, (2)
during the five business day period after any ten consecutive trading day period in which the trading price of a 0.375% Note
for each day in the measurement period was less than 95% of the product of the last reported sale price of Class A common
stock and the applicable conversion rate, (3) if specified distributions to holders of Class A common stock are made or
specified corporate transactions occur, and (4) at any time on or after October 12, 2010.
Upon conversion, the Company has the right to settle the conversion of each $1,000 principal amount of 0.375%
Notes with any of the three following alternatives, at its option, delivery of (1) 29.7992 shares of the Company’s Class A
common stock, (2) cash equal to the value of 29.7992 shares of the Company’s Class A common stock calculated at the
market price per share of the Company’s Class A common stock at the time of conversion or (3) a combination of cash and
shares of our Class A common stock.
The net proceeds from this offering were approximately $341.4 million after deducting discounts, commissions and
expenses. A portion of the net proceeds from the sale of the 0.375% Notes was used to repurchase approximately 3.24
million shares of Class A common stock, valued at approximately $91.2 million based on the closing stock price of $28.20 on
March 20, 2007. These repurchased shares were immediately retired by the Company. The repurchased shares were recorded
as a reduction to Class A common stock for the par value of the Class A common stock as well as an increase to accumulated
deficit on the Company’s Consolidated Balance Sheet.
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SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Concurrently with the sale of the 0.375% Notes, the Company entered into convertible note hedge transactions with
affiliates of two of the initial purchasers of the 0.375% Notes. The initial strike price of the convertible note hedge
transactions is $33.56 per share of the Company’s Class A common stock (the same as the initial conversion price of the
0.375% Notes) and is similarly subject to certain customary adjustments. The convertible note hedge transactions cover
10,429,720 shares of Class A common stock. The cost of the convertible note hedge transactions was $77.2 million. A
portion of the net proceeds from the sale of the 0.375% Notes and the warrants discussed below were used to pay for the cost
of the convertible note hedge transactions. The cost of the convertible note hedge transactions was recorded as a reduction to
additional paid-in capital on the Company’s Consolidated Balance Sheet.
Separately and concurrently with entering into the convertible note hedge transactions, the Company entered into warrant
transactions whereby the Company sold warrants to each of the hedge counterparties to acquire 10,429,720 shares of Class A
common stock at an initial exercise price of $55.00 per share. The aggregate proceeds from the issuance of the warrants were
$27.3 million. The proceeds for the issuance of the warrants were recorded as an increase to additional paid-in capital on the
Company’s Consolidated Balance Sheet.
During the fourth quarter of 2008, the Company consummated privately negotiated exchanges of stock for
outstanding 0.375% Notes in reliance on Section 3(a)(9) of the Securities Act of 1933, as amended. Pursuant to these
exchanges, the Company issued 3,407,914 shares of the Company’s Class A common stock in exchange for $73.8 million in
principal amount of 0.375% Notes. In accordance with SFAS No. 84, “Induced Conversion of Convertible Debt” the
Company recorded a loss on the early extinguishment of debt of $19.5 million and an adjustment of $93.4 million to
additional paid-in capital related to these transactions. In addition, the Company also repurchased in privately negotiated
transactions $138.1 million in principal amount of 0.375% Notes for $102.5 million in cash. In accordance with APB 26
“Early Extinguishment of Debt ,” the Company recorded a gain on the early extinguishment of debt of $35.6 million related
to these transactions. The notes acquired represent 60.5% of the original $350 million principal amount of 0.375% Notes
issued. The company has written off unamortized deferred financing fees of $3.0 million in its Consolidated Statement of
Operations.
1.875% Convertible Senior Notes due 2013
On May 16, 2008, the Company issued $550.0 million of its 1.875% Convertible Senior Notes (the “1.875%
Notes”). Interest is payable semi-annually on May 1 and November 1, beginning November 1, 2008. The 1.875% Notes have
a maturity date of May 1, 2013. The Company incurred deferred financing fees of $12.9 million with the issuance of the
1.875% Notes.
The 1.875% Notes are convertible, at the holder’s option, into shares of the Company’s Class A common stock, at
an initial conversion rate of 24.1196 shares of Class A common stock per $1,000 principal amount of 1.875% Notes (subject
to certain customary adjustments), which is equivalent to an initial conversion price of approximately $41.46 per share or a
20% conversion premium based on the last reported sale price of $34.55 per share of Class A common stock on the Nasdaq
Global Select Market on May 12, 2008, the purchase agreement date. The 1.875% Notes are convertible only under the
following certain circumstances: (1) during any calendar quarter commencing at any time after June 30, 2008 and only during
such calendar quarter, if the last reported sale price of the Company’s Class A common stock for at least 20 trading days
during the 30 consecutive trading days ending on the last trading day of the preceding calendar quarter is more than 130% of
the applicable conversion price per share of the Company’s Class A common stock on the last trading day of such preceding
calendar quarter, (2) during the five business day period after any ten consecutive trading day period in which the trading
price per $1,000 principal amount of 1.875% Notes for each day in the measurement period was less than 95% of the product
of the last reported sale price of the Company’s Class A common stock and the applicable conversion rate, (3) if specified
distributions to holders of the Company’s Class A common stock are made or specified corporate transactions occur, and (4)
at any time on or after February 19, 2013.
Upon conversion, the Company has the right to settle the conversion of each $1,000 principal amount of 1.875%
Notes with any of the three following alternatives, at its option: delivery of (1) 24.1196 shares of the Company’s Class A
common stock, (2) cash equal to the value of 24.1196 shares of the Company’s Class A common stock calculated at the
market price per share of the Company’s Class A common stock at the time of conversion or (3) a combination of cash and
shares of the Company’s Class A common stock.
The net proceeds from this offering were approximately $536.8 million after deducting discounts, commissions and
expenses. A portion of the net proceeds from the sale of the 1.875% Notes was used to repurchase and retire approximately
3.47 million shares of Class A common stock, valued at $120.0 million based on the closing stock price of $34.55 on May
12, 2008. The repurchased shares were recorded as a reduction to Class A common stock for the par value of the Class A
common stock as well as an increase to accumulated deficit on the Company’s Consolidated Balance Sheets.
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SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Concurrently with the pricing of the 1.875% Notes, the Company entered into convertible note hedge transactions with
affiliates of four of the initial purchasers of the 1.875% Notes. The initial strike price of the convertible note hedge transactions is
$41.46 per share of the Company’s Class A common stock (the same as the initial conversion price of the 1.875% Notes) and is
similarly subject to certain customary adjustments. The convertible note hedge transactions originally covered 13,265,780 shares of
Class A common stock. The cost of the convertible note hedge transactions was $137.7 million. A portion of the net proceeds from
the sale of the 1.875% Notes and the warrant transactions discussed below were used to pay for the cost of the convertible note
hedge transactions. The cost of the convertible note hedge transactions was recorded as a reduction to additional paid-in capital on
the Company’s Consolidated Balance Sheet.
Separately and concurrently with entering into the convertible note hedge transactions, the Company entered into warrant
transactions whereby the Company sold warrants to each of the hedge counterparties to acquire an aggregate of 13,265,780 shares
of Class A common stock at an initial exercise price of $67.37 per share. The aggregate proceeds from the warrant transactions were
$56.2 million. The proceeds from issuance of the warrants were recorded as an increase to additional paid-in capital on the
Company’s Consolidated Balance Sheet.
One of the convertible note hedge transactions entered into in connection with the 1.875% Notes was with Lehman
Brothers OTC Derivatives Inc. (“Lehman Derivatives”). The convertible note hedge transaction with Lehman Derivatives covers
55% of the 13,265,780 shares of Company Class A common stock potentially issuable upon conversion of the 1.875% Notes. In
October 2008, Lehman Derivatives filed a motion for protection under Chapter 11 of the United States Bankruptcy Code. The filing
by Lehman Derivatives of a voluntary Chapter 11 bankruptcy petition constituted an “event of default” under the convertible note
hedge transaction with Lehman Derivatives. As a result, on November 7, 2008 the Company terminated the convertible note hedge
transaction with Lehman Derivatives. Based on information available to the Company, there is no indication, as of the date of filing
this Form 10-K, that any party other than Lehman Derivatives would be unable to fulfill their obligations under the convertible note
hedge transactions.
The net cost of the convertible note hedge transaction with Lehman Derivatives was recorded as an adjustment to
additional paid in capital and therefore the “event of default” did not have any impact on the Company’s financial position or results
of operations. However, the Company could incur significant costs to replace this hedge transaction if it elects to do so. If the
Company does not elect to replace the convertible note hedge transaction, then the Company would be subject to potential dilution
or additional cost (depending on if the note is settled with shares or cash) upon conversion of the 1.875% Notes, if on the date of
conversion the per share market price of the Company’s Class A common stock exceeded the conversion price of $41.46.
Senior Revolving Credit Facility
On December 21, 2005, SBA Senior Finance II LLC, a subsidiary of the Company, closed on a senior revolving credit
facility in the amount of $160.0 million. Amounts borrowed under this facility were secured by a first lien on substantially all of
SBA Senior Finance II’s assets and were guaranteed by the Company and certain of its other subsidiaries. This facility replaced the
prior facility which was assigned and became the mortgage loan underlying the Initial CMBS Certificates issuance. The Company
incurred deferred financing fees of $1.2 million associated with the closing of this transaction.
On March 29, 2007, the Company provided the lenders with a termination notice with respect to the senior revolving
credit facility. In accordance with the terms of the credit agreement, the senior revolving credit facility terminated April 3, 2007.
The Company had no borrowings under the senior revolving credit facility at the time of its termination. No early termination
penalties were incurred by the Company as a result of the termination. The Company recorded a $0.4 million loss from write-off of
deferred financing fees in connection with the termination of the senior revolving credit facility.
Senior Secured Revolving Credit Facility
On January 18, 2008, SBA Senior Finance, Inc. (“SBASF”), an indirect wholly-owned subsidiary of the Company, entered
into a $285.0 million senior secured revolving credit facility with several banks and other financial institutions or entities from time
to time parties to the credit agreement (the “Lenders”): Wachovia Bank, National Association, Lehman Commercial Paper Inc.
(“LCPI”), Citicorp North America, Inc., JPMorgan Chase Bank, N.A., Deutsche Bank Securities, Inc. and Toronto Dominion
(Texas) LLC (the “Senior Credit Agreement”). On March 5, 2008, SBASF entered into a new lender supplement with The Royal
Bank of Scotland Group in connection with the senior secured revolving credit facility, which increased the aggregate commitment
of the lenders to $335.0 million. In September 2008, the Company made a drawing request under the senior secured credit facility
and LCPI, who was a lender under the senior secured revolving credit facility, did not fund its share of such request. As a result of
such failure to fund, SBA delivered a letter to LCPI declaring that LCPI was in default of its obligations under the senior secured
revolving credit facility agreement. In October 2008, LCPI filed a voluntary petition for protection under Chapter 11 of the United
States Bankruptcy Code. LCPI, a subsidiary of Lehman Brothers Holding Inc. had committed $50.0 million of the original
aggregate of $335.0 million in commitments under the senior secured revolving credit facility. As a result, the aggregate
commitment of the senior secured revolving credit facility is currently $285.0 million. No lender within the facility is committed to
fund more than $50.0 million.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The senior secured revolving credit facility may be borrowed, repaid and redrawn, subject to compliance with the financial
and other covenants in the Senior Credit Agreement. Amounts borrowed under the facility accrue interest at the Eurodollar rate plus
a margin that ranges from 150 basis points to 300 basis points or at a Base Rate (as defined in the Senior Credit Agreement) plus a
margin that ranges from 50 basis points to 200 basis points, in each case based on the Consolidated Total Debt to Annualized
Borrower EBITDA ratio (as defined in the Senior Credit Agreement and discussed below). A 0.5% per annum fee is charged on the
amount of unused commitment. The facility will terminate and SBASF will repay all amounts outstanding on the earlier of (i) the
third anniversary of January 18, 2008 and (ii) the date which is three months prior to the (x) final maturity date of the 0.375% Notes
(or any instrument that refinances the 0.375% Notes) or (y) the anticipated repayment date (November 9, 2010) of the Initial CMBS
Certificates (or any other refinancing of these instruments). At the termination date, each lender under the facility may, in its sole
discretion and upon the request of SBASF, extend the maturity date of the facility for one additional year. The proceeds available
under the facility may only be used for the construction or acquisition of towers and for ground lease buyouts. The Company
incurred deferred financing fees of $2.8 million associated with the closing of this transaction. As a result of the bankruptcy filing of
LCPI, the Company has written off unamortized deferred financing fees of $0.4 million in its Consolidated Statement of Operations.
The Senior Credit Agreement requires SBASF and SBA Communications to maintain specific financial ratios, including,
at the SBASF level, a Consolidated Total Debt to Annualized Borrower EBITDA ratio (as defined in the Senior Credit Agreement)
that does not exceed 6.9x for any fiscal quarter and an Annualized Borrower EBITDA to Annualized Cash Interest Expense ratio (as
defined in the Senior Credit Agreement) of not less than 2.0x for any fiscal quarter. In addition, the Company’s ratio of
Consolidated Total Net Debt to Consolidated Adjusted EBITDA (as defined in the Senior Credit Agreement) for any fiscal quarter
cannot exceed 9.9x. The Senior Credit Agreement also contains customary affirmative and negative covenants that, among other
things, limit SBASF’s ability to incur indebtedness, grant certain liens, make certain investments, enter into sale leaseback
transactions or merge or consolidate, or engage in certain asset dispositions, including a sale of all or substantially all of our assets.
As of December 31, 2008, SBASF was in full compliance with the terms of the senior secured revolving credit facility.
Upon the occurrence of certain bankruptcy and insolvency events with respect to the Company or certain of our
subsidiaries, the revolving credit loans automatically terminate and all amounts due under the Senior Credit Agreement and other
loan documents become immediately due and payable. If certain other events of default occur, including failure to pay the principal
and interest when due, a breach of the Company’s negative covenants, or failure to perform any other requirement in the Senior
Credit Agreement, the Guarantee and Collateral Agreement (as described below) and/or certain other debt instruments, including
the Notes and the CMBS Certificates, then, with the permission of a majority of the lenders, the revolving credit commitments will
terminate and all amounts due under the Senior Credit Agreement and other loan documents become immediately due and payable.
In connection with the senior secured revolving credit facility, the Company entered into a Guarantee and Collateral
Agreement, pursuant to which SBA Communications, Telecommunications and substantially all of the domestic subsidiaries of
SBASF which are not Borrowers under the CMBS Certificates, guarantee amounts owed under the senior secured revolving credit
facility. Amounts borrowed under the senior secured revolving credit facility will be secured by a first lien on substantially all of
SBASF’s assets not previously pledged under the CMBS Certificates and substantially all of the assets, other than leasehold,
easement or fee interests in real property, of the guarantors, including SBA Communications and SBA Telecommunications.
On July 18, 2008, SBASF entered into the First Amendment to the Senior Credit Agreement to effect the terms of the
Agreement and Plan of Merger among the Company, Optasite and the other parties thereto, which was effective upon the
acquisition of Optasite. The First Amendment deletes from the definition of Annualized Borrower EBITDA, any EBITDA
generated by Optasite and its subsidiaries to the extent that such entities are not guarantors under the Guarantee and Collateral
Agreement, and, to the extent not permitted under the Optasite Credit Facility, (i) excludes Optasite and its subsidiaries from an
obligation to become guarantors under the Guarantee and Collateral Agreement and (ii) permits the Company to not pledge any
stock or rights that it owns in Optasite or any of its subsidiaries as collateral under the Guarantee and Collateral Agreement.
During 2008, SBASF borrowed $465.6 million and repaid $235.0 million under this facility, which is presented within
“Cash flows from financing activities” on the Company’s Consolidated Statements of Cash Flows. The Company used or
designated such proceeds for construction and acquisition of towers (including those acquired from TowerCo LLC and Light Tower
Wireless) and for ground lease buyouts. As of December 31, 2008, the Company had $230.6 million outstanding under this facility
and had approximately $0.1 million of letters of credit posted against the availability of the facility outstanding. The weighted
average effective interest rate for amounts borrowed under the senior secured revolving credit facility for the year ended December
31, 2008 was 4.3%. As of December 31, 2008, availability under the senior secured revolving credit facility was approximately
$54.4 million.
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SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Optasite Credit Facility
On September 16, 2008, in connection with the acquisition of Optasite, the Company assumed Optasite’s fully
drawn $150 million senior credit facility (the “Optasite Credit Facility”) “) pursuant to a credit agreement by and among
Optasite Towers LLC, (a subsidiary of Optasite) as borrower (“Optasite Towers”), Morgan Stanley Asset Funding Inc.
(“Morgan Stanley”), as administrative agent and collateral agent, and the lenders (the “Lenders”) from time to time party
thereto (the “Optasite Credit Facility Agreement”). The Optasite Credit Facility is secured by all of the property and interest
in property of Optasite Towers. The Company recorded the Optasite Credit Facility at its fair value of $147.0 million on the
date of acquisition. Interest on the Optasite Credit Facility accrues at the one month Eurodollar Rate plus 165 basis points and
interest payments are due monthly. Commencing November 1, 2008, the Company began paying an amount equal to the
monthly percentage share of the aggregate outstanding principal amount of the Optasite Credit Facility based on a twenty-
five year amortization and the facility cannot be re-drawn. The Optasite Credit Facility matures on November 1, 2010, when
the remaining principal will be due in full. Principal outstanding under the Optasite Credit Facility may be partially prepaid at
the option of Optasite Towers, and must be prepaid, in certain circumstances, from the proceeds of new indebtedness, asset
sales or insurance claims.
The Optasite Credit Facility Agreement requires Optasite Towers to maintain specific financial ratios, including that
Optasite Towers’ consolidated debt to Aggregate Tower Cash Flow (as defined in the Optasite Credit Facility Agreement) be
less than 7.0x, that its Debt Service Coverage Ratio (as defined in the Optasite Credit Facility Agreement) be more than 1.5x,
and that the aggregate amount of Annualized Rents generated from Tenant Leases in respect of rooftop towers does not
exceed 5% of Aggregate Annualized Rent. The Optasite Credit Facility Agreement also contains customary affirmative and
negative covenants that, among other things, limit Optasite Tower’s ability to incur additional indebtedness, grant certain
liens, assume certain guarantee obligations, enter into certain mergers or consolidations, including a sale of all or
substantially all of its assets, or engage in certain asset dispositions. As of December 31, 2008, the Company was in full
compliance with the terms of the Optasite Credit Facility.
Upon the occurrence of certain bankruptcy and insolvency events with respect to Optasite Towers or the Company
or any of the Company’s subsidiaries, all amounts due under the Optasite Credit Facility become immediately due and
payable. If certain other events of default occur, such as the failure to pay any principal of any loan when due, or are
continuing, such as failure to pay interest on any loan when due, failure to comply with the financial ratios, a change of
control of the Company or failure to perform under any other Optasite loan document, all amounts due under the Optasite
Credit Facility may be immediately due and payable.
In connection with its assumption of the Optasite Credit Facility, the Company entered into Guarantee Agreements
dated as of July 18, 2008 by and among the Company and Morgan Stanley pursuant to which the Company guaranteed
Optasite Towers’ obligations under the Optasite Credit Facility, including but not limited to, principal and interest owed
under the Optasite Credit Facility, as well as the lenders’ actual losses arising out of (i) fraud or intentional misrepresentation
of Optasite Towers, (ii) intentional actions by Optasite Towers, (iii) failure of Optasite Towers to comply with environmental
laws or (iv) bankruptcy or other insolvency proceedings of Optasite Towers.
As of December 31, 2008, the outstanding balance under the Optasite Credit Facility was $149.0 million and the
accreted carrying value was $146.4 million. The interest rate for amounts borrowed under the Optasite Credit Facility as of
December 31, 2008 was 2.9%.
13. DERIVATIVE FINANCIAL INSTRUMENTS
Optasite Derivative Instruments
The Company acquired various derivative instruments as part of the Optasite acquisition on September 16, 2008
which were valued at $4.4 million. The derivative instruments did not qualify for hedge accounting. The Company
terminated the majority of the derivative instruments on October 3, 2008 for $3.9 million. For the year ended December 31,
2008, the Company recognized a net gain of $0.5 million on these derivatives, which is included in interest expense on the
Company’s Consolidated Statement of Operations.
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SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Additional CMBS Certificate Swaps
At various dates during 2006, in anticipation of the Additional CMBS Transaction (see Note 12), an indirect wholly-
owned subsidiary of the Company entered into nine forward-starting interest rate swap agreements (the “Additional CMBS
Certificate Swaps”), with an aggregate notional principal amount of $1.0 billion, to hedge the variability of future interest
rates in anticipation of the issuance of debt, which the Company originally expected to be issued on or before December 21,
2007. Under the Additional CMBS Certificate Swaps, the subsidiary had agreed to pay a fixed interest rate ranging from
5.019% to 5.47% on the total notional amount of $1.0 billion, beginning on the originally expected debt issuance dates for a
period of five years, in exchange for receiving floating payments based on the three month LIBOR on the same $1.0 billion
notional amount for the same five year period.
On October 30, 2006, an indirect subsidiary of the Company entered into a purchase agreement with JP Morgan
Securities, Inc., Lehman Brothers Inc. and Deutsche Bank Securities Inc. regarding the purchase and sale of $1.15 billion of
commercial mortgage pass-through certificates issued by the Trust, a trust established by the Depositor. In connection with
this agreement, the Company terminated the Additional CMBS Certificate Swaps, resulting in a $14.5 million settlement
payment by the Company which was recorded in the Statements of Cash Flows as a financing activity. The Company
determined a portion of the swaps to be ineffective, and as a result, the Company recorded $1.7 million as interest expense on
the Consolidated Statements of Operations during 2006. The additional deferred loss of $12.8 million of the Additional
CMBS Certificate Swaps was recorded in accumulated other comprehensive loss, net of applicable income taxes on the
Company’s Consolidated Balance Sheets as it was determined to be an effective cash flow hedge. The deferred loss is being
amortized utilizing the effective interest method over the anticipated five year life of the Additional CMBS Certificates and
increases the effective interest rate on these certificates by 0.3% over the weighted average fixed interest rate of 6.0%. The
unamortized value of the net deferred loss is recorded in accumulated other comprehensive loss, net on the Company’s
Consolidated Balance Sheets. For 2008, 2007 and 2006, amortization of $2.4 million, $2.3 million, and $0.3 million,
respectively, was recorded as interest expense.
Initial CMBS Certificates Swaps
On June 22, 2005, in anticipation of the Initial CMBS Transaction (see Note 12), an indirect wholly-owned
subsidiary of the Company entered into two forward-starting interest rate swap agreements (the “Initial CMBS Certificate
Swaps”), each with a notional principal amount of $200.0 million to hedge the variability of future interest rates on the Initial
CMBS Transaction. Under the swap agreements, the subsidiary agreed to pay the counterparties a fixed interest rate of
4.199% on the total notional amount of $400.0 million, beginning on December 22, 2005 through December 22, 2010 in
exchange for receiving floating payments based on the three-month LIBOR on the same notional amount for the same five-
year period.
On November 4, 2005, an indirect subsidiary of the Company entered into a purchase agreement with Lehman
Brothers Inc. and Deutsche Bank Securities Inc. regarding the purchase and sale of $405.0 million of commercial mortgage
pass-through certificates issued by the Trust, a trust established by the Depositor. In connection with this agreement, the
Company terminated the Initial CMBS Certificate Swaps, resulting in a $14.8 million settlement payment to the Company
which was recorded in the Statements of Cash Flows as a financing activity. The Company determined the Initial CMBS
Certificate Swaps to be effective cash flow hedges and recorded the deferred gain of the Initial CMBS Certificate Swaps in
accumulated other comprehensive loss, net of applicable income taxes on the Company’s Consolidated Balance Sheets. The
deferred gain is being amortized utilizing the effective interest method over the anticipated five year life of the Initial CMBS
Certificates and reduces the effective interest rate on the Certificates by 0.8%. For 2008, 2007 and 2006, the Company
recorded as an offset to interest expense amortization of $3.0 million, $2.8 million and $2.7 million, respectively.
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SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. SHAREHOLDERS’ EQUITY
a. Common Stock
The Company has potential common stock equivalents related to its outstanding stock options and Convertible
Senior Notes (see Note 12). These potential common stock equivalents were not included in diluted loss per share because
the effect would have been anti-dilutive for the years ended December 31, 2008, 2007 and 2006. Accordingly, basic and
diluted loss per common share and the weighted average number of shares used in the computation are the same for the years
presented.
In May 2008, the Company repurchased and retired approximately 3.47 million shares, valued at approximately
$120.0 million based on the closing stock price of $34.55 on May 12, 2008, in connection with the issuance of the 1.875%
Notes (See Note 12).
On March 19, 2007, the Board of Directors authorized the repurchase of up to 6.0 million shares of Class A common
stock from time to time until December 31, 2007. In March 2007, the Company repurchased and retired approximately 3.24
million shares valued at approximately $91.2 million based on the closing price of $28.20 on March 20, 2007, in connection
with the issuance of the 0.375% Notes (see Note 12).
b. Registration of Additional Shares
The Company filed shelf registration statements on Form S-4 with the Securities and Exchange Commission
registering 4.0 million, 4.0 million, 5.0 million and 3.0 million of its Class A common stock in 2007, 2006, 2001 and 2000,
respectively. These shares may be issued in connection with acquisitions of wireless communication towers or companies
that provide related services. During the years ended December 31, 2008, 2007 and 2006, the Company issued approximately
1.3 million shares, 4.7 million shares and 1.8 million shares, respectively, of its Class A common stock pursuant to these
registration statements in connection with acquisitions. At December 31, 2008, approximately 2.6 million shares remain
available for issuance under the shelf registration statement dated November 16, 2007.
On November 12, 2008, the Company filed a registration statement on Form S-8 with the Securities and Exchange
Commission registering 0.5 million shares of its Class A common stock issuable under the 2008 Employee Stock Purchase
Plan.
On November 27, 2006, the Company filed a registration statement on Form S-8 with the Securities and Exchange
Commission registering an additional 2.5 million shares of its Class A common stock issuable under the 2001 Equity
Participation Plan.
On April 14, 2006, the Company filed with the Commission an automatic shelf registration statement for well-
known seasoned issuers on Form S-3ASR. This registration statement enables the Company to issue shares of its Class A
common stock, shares of preferred stock, which may be represented by depositary shares, unsecured senior, senior
subordinated or subordinated debt securities, and warrants to purchase any of these securities. Under the rules governing the
automatic shelf registration statements, the Company will file a prospectus supplement and advise the Commission of the
amount and type of securities each time the Company issues securities under this registration statement. During the year
ended December 31, 2008, the Company did not issue any securities under this shelf registration statement.
On May 17, 2007, the Company filed with the Commission an automatic shelf registration statement on Form S-3
registering the resale by selling securityholders of our 0.375% Notes and shares of our Class A Common Stock which are
issuable upon conversion of the 0.375% Notes. The 0.375% Notes were originally issued in a private placement on March 26,
2007.
c. Other Common Stock Transactions
During 2008, in connection with the Optasite acquisition, the Company issued 7.25 million shares of its Class A
common stock.
During 2006, in connection with the AAT Acquisition, the Company issued 17.1 million shares of its Class A
common stock.
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SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
d. Shareholder Rights Plan and Preferred Stock
During January 2002, the Company’s Board of Directors adopted a shareholder rights plan and declared a dividend
of one preferred stock purchase right for each outstanding share of the Company’s common stock. Each of these rights which
are currently not exercisable will entitle the holder to purchase one one-thousandth (1/1000) of a share of the Company’s
newly designated Series E Junior Participating Preferred Stock. In the event that any person or group acquires beneficial
ownership of 15% or more of the outstanding shares of the Company’s common stock or commences or announces an
intention to commence a tender offer that would result in such person or group owning 15% or more of the Company’s
common stock, each holder of a right (other than the acquirer) will be entitled to receive, upon payment of the exercise price,
a number of shares of common stock having a market value equal to two times the exercise price of the right. In order to
retain flexibility and the ability to maximize shareholder value in the event of transactions that may arise in the future, the
Board retains the power to redeem the rights for a set amount. The rights were distributed on January 25, 2002 and expire on
January 10, 2012, unless earlier redeemed or exchanged or terminated in accordance with the Rights Agreement.
15. STOCK BASED COMPENSATION
Effective January 1, 2006, the Company adopted SFAS No. 123 (revised 2004), “Share-Based Payment ,” (“SFAS
No. 123R”), which requires the measurement and recognition of compensation expense for all share-based payment awards
made to employees and directors, including stock options and employee stock purchases under employee stock purchase
plans. SFAS No. 123R supersedes the Company’s previous accounting under Accounting Principles Board Opinion No. 25,
“Accounting for Stock Issued to Employees” (“APB No. 25”). In accordance with the modified prospective transition
method, the Company’s consolidated financial statements for prior periods have not been restated to reflect the impact of
SFAS No. 123R. The Company accounts for stock issued to non-employees in accordance with the provisions of Emerging
Issues Task Force (“EITF”) Issue No. 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees
for Acquiring, or in Conjunction with Selling Goods or Services.” In accordance with EITF 96-18, the stock options granted
to non-employees are valued using the Black-Scholes option-pricing model on the basis of the market price of the underlying
common stock on the “valuation date,” which for options to non-employees is the vesting date. Expense related to the options
granted to non-employees is recognized on a straight-line basis over the shorter of the period over which services are to be
received or the vesting period.
In September 2006, pursuant to Staff Accounting Bulletin (“SAB”) 108, “Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial Statements”, the Company corrected a cumulative
error in its accounting for equity-based compensation by recording a non-cash cumulative effect adjustment of $8.4 million to
additional paid-in capital with an offsetting amount of $7.7 million to accumulated deficit within shareholders’ equity as well
as adjustments to property and equipment in the amount of $0.4 million and intangible assets of $0.3 million in its
consolidated balance sheet as of December 31, 2006. The capitalized amounts relate to acquisition related costs.
Stock Options
The Company has three equity participation plans (the 1996 Stock Option Plan, the 1999 Equity Participation Plan
and the 2001 Equity Participation Plan) whereby options (both non-qualified and incentive stock options), stock appreciation
rights and restricted stock may be granted to directors, employees and consultants. Upon adoption of the 2001 Equity
Participation Plan, no further grants are permitted under the 1996 Stock Option Plan and the 1999 Equity Participation Plan.
The 2001 Equity Participation Plan provides for a maximum issuance of shares, together with all outstanding options and
unvested shares of restricted stock under all three of the plans, equal to 15% of the Company’s Class A common stock
outstanding, adjusted for shares issued and the exercise of certain options. These options generally vest between three and
four years from the date of grant on a straight-line basis and generally have a seven-year or a ten-year life.
From time to time, restricted shares of Class A common stock or options to purchase Class A common stock have
been granted under the Company’s equity participation plans at prices below market value at the time of grant. The Company
did not have any non-cash compensation expense during the years ended December 31, 2008 and 2007, respectively, relating
to the issuance of these shares or options. The Company recorded approximately $0.4 million of non-cash compensation
expense during the year ended December 31, 2006, relating to the issuance of these shares or options.
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SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company records compensation expense for employee stock options based on the estimated fair value of the options on
the date of grant using the Black-Scholes option-pricing model with the assumptions included in the table below. The
Company uses a combination of historical data and implied volatility to establish the expected volatility. Historical data is
used to estimate the expected option life and the expected forfeiture rate. The risk-free rate is based on the U.S. Treasury
yield curve in effect at the time of grant for the estimated life of the option. The following assumptions were used to estimate
the fair value of options granted using the Black-Scholes option-pricing model:
Risk free interest rate...................................
Dividend yield .............................................
Expected volatility ......................................
Expected lives .............................................
For the year ended December 31,
2008
2.10% - 2.97%
0.0%
41.6%
3.35 - 3.73 years
2007
4.60% - 5.12%
0.0%
42.7%
3.28 - 4.13 years
2006
4.20% - 5.10%
0.0%
43.7% - 45.0%
3.75 years
A summary of shares reserved for future issuance under these plans as of December 31, 2008 is as follows:
Reserved for 1996 Stock Option Plan ..................................................................
Reserved for 1999 Equity Participation Plan .......................................................
Reserved for 2001 Equity Participation Plan .......................................................
Number of shares
(in thousands)
—
102
12,000
12,102
The following table summarizes the Company’s activities with respect to its stock option plans for the years ended
2008, 2007 and 2006 as follows (dollars and number of shares in thousands, except for per share data):
Options
Outstanding at December 31, 2005 ................
Granted ...................................................
Exercised ................................................
Canceled .................................................
Outstanding at December 31, 2006 ................
Granted ...................................................
Exercised ................................................
Canceled .................................................
Outstanding at December 31, 2007 ................
Granted ...................................................
Exercised ................................................
Canceled .................................................
Outstanding at December 31, 2008 ................
Exercisable at December 31, 2008 ................
Unvested at December 31, 2008 ....................
Number
of Shares
Weighted-
Average
Exercise Price
Per Share
Weighted-
Average
Remaining
Contractual
Life (in years)
$
4,581
1,126
$
(1,181) $
(368) $
$
4,158
1,028
$
(1,196) $
(193) $
$
3,797
917
$
(655) $
(271) $
$
3,788
$
1,600
$
2,188
8.22
20.02
8.07
26.04
9.87
28.90
5.63
22.67
15.71
32.55
8.45
25.84
20.31
13.03
25.64
5.7
5.3
6.1
The weighted-average fair value of options granted during the years ended December 31, 2008, 2007 and 2006 was
$10.96, $11.04 and $8.18, respectively. The total intrinsic value for options exercised during the years ended December 31,
2008, 2007 and 2006 was $14.6 million, $30.6 million and $21.2 million, respectively.
Cash received from option exercises under all plans for the years ended December 31, 2008, 2007 and 2006 was
approximately $5.5 million, $6.7 million and $9.5 million, respectively. No tax benefit was realized for the tax deductions
from option exercises under all plans for the years ended December 31, 2008, 2007 and 2006, respectively.
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SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Additional information regarding options outstanding and exercisable at December 31, 2008 is as follows:
Range
$0.05 - $2.63 ..........
$2.64 - $9.69 ..........
$9.70 - $14.80 ........
$14.81 - $24.75 ......
$24.76 - $50.13 ......
Outstanding
(in thousands)
133
1,027
86
786
1,756
3,788
Options Outstanding
Weighted
Average
Contractual Life
(in years)
4.1
5.4
5.1
6.4
5.7
Weighted
Average
Exercise Price
$
$
$
$
$
1.88
6.93
13.75
18.73
30.57
Exercisable
(in thousands)
133
734
86
384
263
1,600
Options Exercisable
Weighted
Average
Exercise Price
1.88
$
$
6.52
13.75
$
18.31
$
28.92
$
Aggregate
Intrinsic Value
(in thousands)
$
9,423
The following table summarizes the activity of options outstanding that had not yet vested:
Weighted-
Average
Number
Fair Value
Per Share
of Shares
(in thousands, except for per share amounts)
Aggregrate
Intrinsic
Value
Unvested as of December 31, 2007 .....................................................................
Shares granted ......................................................................................................
Vesting during period ..........................................................................................
Forfeited or cancelled ..........................................................................................
Unvested as of December 31, 2008 .....................................................................
$
2,555
917
$
(1,059) $
(225) $
$
2,188
6.80
10.96
6.22
9.62
8.91
$
2,445
As of December 31, 2008, there were options to purchase 2.2 million shares of SBA common stock that had not yet
vested and were expected to vest in future periods at a weighted average exercise price of $25.64. The aggregate intrinsic
value for stock options in the preceding tables represents the total intrinsic value, based on the Company’s closing stock price
of $16.32 as of December 31, 2008. The amount represents the total intrinsic value that would have been received by the
holders of the stock-based awards had these awards been exercised and sold as of that date.
As of December 31, 2008, the total unrecognized compensation cost related to unvested stock options outstanding
under the Plans is $18.9 million. That cost is expected to be recognized over a weighted average period of 1.9 years.
The total fair value of shares vested during 2008, 2007, and 2006 was $6.2 million, $4.7 million, and $4.1 million,
respectively.
Employee Stock Purchase Plan
In 1999, the Board of Directors of the Company adopted the 1999 Stock Purchase Plan (the “1999 Purchase Plan”).
A total of 500,000 shares of Class A common stock were reserved for purchase under the 1999 Purchase Plan. During 2003,
an amendment to the 1999 Purchase Plan was adopted which increased the number of shares reserved for purchase from
500,000 to 1,500,000 shares. During 2008, the Company adopted the 2008 Employee Stock Purchase Plan (“2008 Purchase
Plan”) which reserved 500,000 shares of Class A common stock for purchase. The 1999 and 2008 Purchase Plans permit
eligible employee participants to purchase Class A common stock at a price per share which is equal to 85% of the fair
market value of Class A common stock on the last day of an offering period. For the year ended December 31, 2008,
approximately 41,000 shares of Class A common stock were issued under the 1999 Purchase Plan, which resulted in cash
proceeds to the Company of approximately $1.0 million compared to the year ended December 31, 2007 when approximately
39,700 shares of Class A common stock were issued under the 1999 Purchase Plan, which resulted in cash proceeds to the
Company of $1.0 million. At December 31, 2008, approximately 547,000 shares remained available for issuance under the
1999 Purchase Plan. There were no shares issued under the 2008 Purchase Plan in 2008 and there will be no subsequent share
issuances under the 1999 Purchase Plan. In addition, the Company recorded $0.2 million of non-cash compensation expense
relating to the shares issued under the 1999 Purchase Plan for each of the years ended December 31, 2008 and 2007,
respectively.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Non-Cash Compensation Expense
The table below reflects a break out by category of the amounts recognized on the Company’s Statements of
Operations for the years ended December 31, 2008, 2007 and 2006, respectively, for non-cash compensation expense (in
thousands, except per share data):
Cost of revenues .....................................................................................
Selling, general and administrative ........................................................
Total cost of non-cash compensation included in loss before
provision for income taxes ...........................................................
Amount of income tax recognized in earnings .......................................
Amount charged against loss .................................................................
Impact on net loss per common share:
For the year ended
December 31,
2007
$ 286
6,326
2006
$
151
5,259
2008
$
295
6,912
7,207
—
$ 7,207
6,612
—
$ 6,612
5,410
—
$ 5,410
Basic and diluted .............................................................................
$ (0.07) $ (0.06) $ (0.06)
In addition, the Company capitalized $0.2 million and $1.2 million relating to non-cash compensation for the years
ended December 31, 2008 and December 31, 2007, respectively, to fixed and intangible assets.
16. ASSET IMPAIRMENT AND OTHER (CREDITS) CHARGES
The Company evaluated its individual long-lived assets, including the intangibles with finite lives, and the tower
sites, for impairment in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. As
a result of the annual impairment evaluation, the Company recorded a $0.9 million impairment charge on eight towers that
had not achieved expected lease-up results as determined by using a discounted cash flow analysis.
During 2006, the Company reevaluated the remaining liability relating to its restructuring program initiated in 2002.
The Company determined that the liability was no longer needed as all office space included in the restructuring liability is
now being fully utilized by the Company in its operations. As a result, the Company recorded a credit of $0.4 million which
is included in asset impairments and other (credits) charges on the Consolidated Statements of Operations for the year ended
December 31, 2006.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. ACCUMULATED OTHER COMPREHENSIVE LOSS, NET
Accumulated other comprehensive loss, net has no impact on the Company’s net loss but is reflected in the
Consolidated Balance Sheet through adjustments to shareholders’ equity. Accumulated other comprehensive loss, net derives
from the amortization of deferred gain/loss from settlement of derivative financial instruments relating to the CMBS
Certificates issuance (see Note 13) and the unfunded projected benefit obligation relating to the Company’s pension plan (see
Note 21). The Company specifically identifies the amount of the amortization of deferred gain/loss from settlement of
derivative financial instruments recognized in other comprehensive loss. A rollforward of accumulated other comprehensive
loss, net for the years ended December 31, 2008, 2007 and 2006 is as follows:
Deferred
Gain/(Loss)
from Settlement
of Swaps
Change in
Unfunded
Projected
Benefit
Obligation
(in thousands)
Balance, December 31, 2005 .........................................
Deferred loss from settlement of terminated swaps ......
Amortization of deferred gain/loss from settlement of
terminated swaps, net .................................................
Change in unfunded projected benefit obligation .........
Balance, December 31, 2006 .........................................
Amortization of deferred gain/loss from settlement of
terminated swaps, net .................................................
Change in unfunded projected benefit obligation .........
Balance, December 31, 2007 .........................................
Amortization of deferred gain/loss from settlement of
terminated swaps, net .................................................
Write-off of deferred gain/loss from settlement of
terminated swaps related to repurchase of debt .........
Change in unfunded projected benefit obligation as a
$
14,460
(12,836)
$
(2,370)
—
(746)
(565)
—
(1,311)
(557)
319
—
—
—
80
80
—
(49)
31
—
—
Total
$ 14,460
(12,836)
(2,370)
80
(666)
(565)
(49)
(1,280)
(557)
319
result of plan termination ...........................................
Balance, December 31, 2008 .........................................
$
—
(1,549) $
(31)
—
(31)
$ (1,549)
There is no net tax impact for the components of other comprehensive income (loss) due to the full valuation
allowance on the Company’s deferred tax assets.
18. INCOME TAXES
The provision (benefit) for income taxes from continuing operations consists of the following components:
Current provision for taxes:
Federal .................................................................
Foreign .................................................................
State .....................................................................
Total current ........................................................
Deferred provision (benefit) for taxes:
Federal income tax ...............................................
State and local taxes ............................................
Foreign tax ...........................................................
Increase in valuation allowance ...........................
Total deferred ......................................................
Total .....................................................................
$
$
For the year ended December 31,
2008
2007
(in thousands)
2006
127
4
747
878
$
—
$
—
667
667
470
470
(17,854)
(3,987)
(2)
22,002
159
1,037
(25,406)
(3,693)
(4)
29,304
201
868
$
(53,747)
(13,827)
—
67,621
47
517
$
F-35
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SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation of the provision (benefit) for income taxes from continuing operations at the statutory U.S. Federal
tax rate (35%) and the effective income tax rate is as follows:
Statutory Federal benefit ..............................................
Foreign tax ...................................................................
State and local taxes .....................................................
Federal rate differential ................................................
Convertible debt interest expense and COD income ...
Other ............................................................................
Valuation allowance ....................................................
2008
2006
For the year ended December 31,
2007
(in thousands)
$ (16,004) $ (26,954) $ (46,526)
—
(13,827)
(3,847)
—
(2,904)
67,621
517
$
(4)
(1,966)
—
—
488
29,304
868
$
(4)
(2,106)
—
(3,514)
663
22,002
1,037
$
The components of the net deferred income tax asset (liability) accounts are as follows:
As of December 31,
2008
2007
(in thousands)
Current deferred tax assets:
Allowance for doubtful accounts ...................................................................................
Deferred revenue ............................................................................................................
Accrued liabilities ..........................................................................................................
Valuation allowance ......................................................................................................
Total current deferred tax assets, net..............................................................................
$
$
327
19,578
1,210
(21,115)
—
$
$
Noncurrent deferred tax assets:
Net operating losses .......................................................................................................
Property, equipment & intangible basis .........................................................................
Accrued liabilities ..........................................................................................................
Straight-line rents ...........................................................................................................
Non-cash Compensation ................................................................................................
Other ..............................................................................................................................
Total noncurrent deferred tax assets ..............................................................................
344,958
31,894
9,534
6,430
3,505
617
396,938
Noncurrent deferred tax liabilities:
434
15,856
1,193
(17,483)
—
330,187
24,891
7,456
5,933
376
368,843
Property, equipment & intangible basis .........................................................................
Early extinguishment of debt .........................................................................................
Valuation allowance ......................................................................................................
Total noncurrent deferred tax assets, net ........................................................................
(372,813)
(606)
(23,519)
—
$
$
(293,803)
(497)
(74,543)
—
The Company has recorded a valuation allowance for deferred tax assets as management believes that it is not “more
likely than not” that the Company will be able to generate sufficient taxable income in future periods to recognize the assets.
The net change in the valuation allowance for the years ended December 31, 2008, 2007 and 2006 was $(47.4) million,
$(22.2) million, and $(160.1) million, respectively. Additionally, at December 31, 2008 the Company recorded a valuation
allowance of approximately $0.6 million relating to tax credit carryovers that expire beginning 2025.
The Company has available at December 31, 2008, a net federal operating tax loss carry-forward of approximately
$931.4 million and an additional $87.9 million of net operating tax loss carry forward from stock options which will benefit
additional paid-in capital when the loss is utilized. These net operating tax loss carry-forwards will expire between 2019 and
2028. The Internal Revenue Code places limitations upon the future availability of net operating losses based upon changes
in the equity of the Company. If these occur, the ability of the Company to offset future income with existing net operating
losses may be limited. In addition, the Company has available at December 31, 2008, a net state operating tax loss carry-
forward of approximately $625.1 million. These net operating tax loss carry-forwards will expire between 2009 and 2028.
In accordance with the Company’s methodology for determining when stock option deductions are deemed realized
under SFAS 123(R), the Company utilizes a “with-and-without” approach that will result in a benefit not being recorded in
APIC if the amount of available net operating loss carryforwards generated from operations is sufficient to offset the current
year taxable income.
F-36
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SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
19. COMMITMENTS AND CONTINGENCIES
a . Operating Leases and Capital Leases
The Company is obligated under various non-cancelable operating leases for land, office space, equipment and site
leases that expire at various times through December 2106. In addition, the Company is obligated under various non-
cancelable capital leases for vehicles that expire at various times through December 2012. The amounts applicable to capital
leases for vehicles included in property and equipment, net was:
Vehicles ....................................................................................
Less: accumulated depreciation ................................................
Vehicles, net .............................................................................
$
$
(in thousands)
1,741
(397)
1,344
$
$
960
(113)
847
As of
December 31, 2008
As of
December 31, 2007
The annual minimum lease payments under non-cancelable operating and capital leases in effect as of December 31,
2008 are as follows (in thousands):
For the year ended December 31,
2009 ..........................................................................................
2010 ..........................................................................................
2011 ..........................................................................................
2012 ..........................................................................................
2013 ..........................................................................................
Thereafter .................................................................................
Total minimum lease payments ................................................
Less: amount representing interest ...........................................
Present value of future payments .............................................
Less: current obligations ..........................................................
Long-term obligations ..............................................................
Capital
Leases
453
432
283
78
—
—
1,246
(67)
1,179
(415)
764
$
$
$
Operating Leases
57,206
56,975
56,500
55,300
55,142
1,182,705
1,463,828
$
Principally, all of the operating leases provide for renewal at varying escalations. Fixed rate escalations have been
included in the table disclosed above.
Rent expense for operating leases was $63.3 million, $57.9 million and $47.5 million for the years ended December
31, 2008, 2007 and 2006, respectively. In addition, certain of the Company’s leases include contingent rent provisions which
provide for the lessor to receive additional rent upon the attainment of certain tower operating results and or lease-up.
Contingent rent expense for the years ended December 31, 2008, 2007 and 2006 was $8.1 million, $7.2 million and $5.3
million, respectively.
b. Tenant Leases
The annual minimum tower lease income to be received for tower space and antenna rental under non-cancelable
operating leases in effect as of December 31, 2008 is as follows:
For the year ended December 31,
2009 .................................................................................................................
2010 .................................................................................................................
2011 .................................................................................................................
2012 .................................................................................................................
2013 .................................................................................................................
Thereafter .........................................................................................................
Total .................................................................................................................
(in thousands)
413,738
$
345,446
254,022
178,745
108,549
239,222
$ 1,539,722
F-37
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SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Principally, all of the leases provide for renewal, generally at the tenant’s option, at varying escalations. Fixed rate
escalations have been included in the table disclosed above.
c. Litigation
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 will not have a material adverse effect on the Company’s consolidated financial position, results of operations or
liquidity.
d. Contingent Purchase Obligations
From time to time, the Company agrees to pay additional consideration for acquisitions if the towers or businesses
that are acquired meet or exceed certain performance targets in the 1-3 years after they have been acquired. As of December
31, 2008, the Company has an obligation to pay up to an additional $9.4 million in consideration if the targets contained in
various acquisition agreements are met. These obligations are associated with new build and tower acquisition programs
within the Company’s site leasing segment. On certain acquisitions, at the Company’s option, additional consideration may
be paid in cash or shares of Class A common stock. The Company records such obligations as additional consideration when
it becomes probable that the targets will be met. For the years ended December 31, 2008 and 2007, certain earnings targets
associated with the acquired towers were achieved, and therefore, the Company paid in cash $3.5 million and $5.5 million,
respectively. For the year ended December 31, 2008, the Company issued approximately 67,000 shares of Class A common
stock in settlement of contingent price amounts payable as a result of acquired towers exceeding certain performance targets.
During the year ended December 31, 2007, the Company did not issue shares of Class A Common stock in settlement of
contingent price amounts.
20. DEFINED CONTRIBUTION PLAN
The Company has a defined contribution profit sharing plan under Section 401(k) of the Internal Revenue Code that
provides for voluntary employee contributions up to $15,500 of compensation. Employees have the opportunity to participate
following completion of three months of employment and must be 21 years of age. Employer matching begins immediately
upon the employee’s participation in the plan. For the years ended December 31, 2008, 2007 and 2006, the Company made a
discretionary matching contribution of 50% of an employee’s contributions up to a maximum of $3,000. Company matching
contributions were approximately $0.7 million, $0.7 million and $0.5 million for years ended December 31, 2008, 2007 and
2006, respectively.
21. PENSION PLANS
The Company has a defined benefit pension plan (the “Pension Plan”) for all employees of AAT Communications
hired on or before January 1, 1996. AAT ceased all benefit accruals for active participants on December 31, 1996. The
Pension Plan was included in the acquisition of AAT Communications by the Company. The Pension Plan provides for
defined benefits based on the number of years of service and average salary.
During 2008, the Company began the process of terminating the Pension Plan. During the fourth quarter of 2008, the
Company received a favorable determination letter from the Internal Revenue Service on the termination of the Pension Plan.
The Company liquidated the assets of the Pension Plan and began final distribution of the assets. As a result of terminating
the plan, the Company recorded a settlement expense of $0.6 million in connection with the projected final benefit settlement
which is included in selling, general and administrative expenses in the Consolidated Statement of Operations. As of
December 31, 2008, the Company paid $1.3 million and has a remaining liability of $0.8 million for the remaining
termination payments which is included in other liabilities in the Consolidated Balance Sheet.
In December 2006, the Company adopted the recognition and disclosure provisions of SFAS No. 158, which
required the Company to recognize assets for all of its overfunded postretirement benefit plans and liabilities for its
underfunded plans at December 31, 2006, with a corresponding noncash adjustment to accumulated other comprehensive
loss, net of tax, in shareholders’ equity. The funded status is measured as the difference between the fair value of the plan’s
assets and the projected benefit obligation (PBO) of the plan. The adjustment to shareholders’ equity represents the net
unrecognized actuarial losses and prior service costs in accordance with SFAS No. 87.
F-38
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SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The unrecognized amounts recorded in accumulated other comprehensive loss, net will be subsequently recognized
as net periodic pension cost. Actuarial gains and losses that arise in future periods and are not recognized as net periodic
pension cost in those periods will be recognized as increases or decreases in other comprehensive income, net of tax, in the
period they arise. Actuarial gains and losses recognized in other comprehensive income are adjusted as they are subsequently
recognized as a component of net periodic pension cost.
The incremental impact of adopting the provisions of SFAS No. 158 on the Company’s balance sheet at December
31, 2006 was to record $0.1 million of additional liability which was recorded in other long-term liabilities and in
accumulated other comprehensive loss, net on the Company’s Consolidated Balance Sheet. The adoption of FAS 158 had no
effect on the Company’s Statements of Operations or Cash Flows for the years ended December 31, 2008, 2007, and 2006.
Due to the termination of the plan in 2008, the Company recognized as a component of net periodic pension cost all amounts
in accumulated other comprehensive income.
The following table includes the components of pension costs, the fair value of plan assets, and the funded status of
the Pension Plan for the year ended December 31, 2008 and 2007:
Change in benefit obligation
Obligation at beginning of year ..............................................................................
Interest Cost ...........................................................................................................
Actuarial gain (loss) ...............................................................................................
Benefit payments ....................................................................................................
Settlement ...............................................................................................................
Obligation at end of year ........................................................................................
Change in fair value of plan assets
Fair value of plan assets at beginning of year ........................................................
Actual return on plan assets ....................................................................................
Employer contributions ..........................................................................................
Benefits payments and plan expenses ....................................................................
Settlements .............................................................................................................
Fair value of plan assets at end of year ...................................................................
Funded status at the end of the year .......................................................................
As of December 31,
2008
2007
(in thousands)
$
$
$
$
$
1,883
95
271
(139)
(2,110)
—
1,863
(260)
646
(139)
(2,110)
—
—
$
$
$
$
$
1,748
100
142
(107)
—
1,883
1,636
192
142
(107)
—
1,863
(20)
The accumulated benefit obligation for the Pension Plan for the years ended December 31, 2008 and December 31,
2007 was approximately $0 and $1.9 million, respectively. As of December 31, 2008, the projected benefit obligation and
fair value of plan assets were zero due to the termination of the Pension Plan.
The following table summarizes the components of net periodic pension costs:
As of December 31,
2008
2007
(in thousands)
Interest cost .................................................................................................................
Expected return on plan assets ....................................................................................
Net periodic pension (income) / cost ..........................................................................
Settlement loss ............................................................................................................
Net periodic pension cost after settlements .................................................................
$
$
95
(109)
(14)
609
595
$
$
100
(98)
2
—
2
Assumptions used to develop the net periodic pension cost were:
Discount rate .................................................................................................................
Expected long-term rate of return on assets ..................................................................
F-39
As of December 31,
2008
2007
4.52%
—
5.25%
6.00%
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SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22. SEGMENT DATA
The Company operates principally in three business segments: site leasing, site development consulting, and site
development construction. 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. The site leasing segment includes results of
the managed and sublease businesses. Revenues, cost of revenues (exclusive of depreciation, accretion and amortization),
capital expenditures (including assets acquired through the issuance of shares of the Company’s Class A common stock) and
identifiable assets pertaining to the segments in which the Company continues to operate are presented below:
Site
Leasing
Site
Development
Consulting
Site
Development
Construction
(in thousands)
Not
Identified by
Segment (1)
For the year ended December 31, 2008
Revenues ......................................................... $
Cost of revenues ............................................. $
Depreciation, amortization and accretion ....... $
Operating income (loss) .................................. $
Capital expenditures (2) ................................... $
For the year ended December 31, 2007
Revenues ......................................................... $
Cost of revenues ............................................. $
Depreciation, amortization and accretion ....... $
Operating income (loss) .................................. $
Capital expenditures (2) ................................... $
395,541 $
96,175 $
209,298 $
50,290 $
915,452 $
321,818 $
88,006 $
166,785 $
39,878 $
384,430 $
For the year ended December 31, 2006
256,170 $
Revenues ......................................................... $
70,663 $
Cost of revenues ............................................. $
129,878 $
Depreciation, amortization and accretion ....... $
Operating income (loss) .................................. $
30,037 $
Capital expenditures (2) ................................... $ 1,187,903 $
Assets
As of December 31, 2008 ............................... $ 3,092,965 $
As of December 31, 2007 ............................... $ 2,195,747 $
60,659 $
56,778 $
759 $
(2,100) $
688 $
— $
— $
1,207 $
(4,355) $
748 $
62,034 $
56,052 $
749 $
(906) $
408 $
— $
— $
1,521 $
(11,393) $
682 $
Total
474,954
168,165
211,445
45,582
917,076
408,201
163,353
169,232
30,047
385,658
78,272 $
71,841 $
868 $
7 $
1,233 $
— $
— $
2,254 $
(11,842) $
351,102
156,586
133,088
19,508
1,004 $ 1,190,356
18,754 $
15,212 $
181 $
1,747 $
188 $
24,349 $
19,295 $
177 $
2,468 $
138 $
16,660 $
14,082 $
88 $
1,306 $
216 $
4,375 $
6,395 $
25,413 $
38,467 $
88,755 $ 3,211,508
143,714 $ 2,384,323
(1)
(2)
Assets not identified by segment consist primarily of general corporate assets.
Includes acquisitions and related earn-outs and vehicle capital lease additions.
23. QUARTERLY FINANCIAL DATA (unaudited)
December 31,
2008
September 30,
2008
June 30,
2008
March 31,
2008
Quarter Ended
Revenues ................................................................................. $
Operating income ....................................................................
Depreciation, accretion, and amortization ..............................
Gain (loss) from extinguishment of debt and write-off of
deferred financing fees ........................................................
Net income (loss) .................................................................... $
Net income (loss) per share - basic ......................................... $
Net income (loss) per share - diluted ...................................... $
F-40
(in thousands, except per share amounts)
$ 111,952
10,790
(49,253)
118,656
11,427
(52,725)
134,429
11,527
(62,114)
$
$ 109,917
11,838
(47,353)
32,037
2,684
0.02
0.02
$
$
$
—
(414)
—
(16,423) $ (18,390) $ (14,634)
(0.13)
(0.13)
(0.15) $
(0.15) $
(0.17) $
(0.17) $
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SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31,
2007
September 30,
2007
June 30,
2007
March 31,
2007
Quarter Ended
Revenues ................................................................................. $
Operating income ....................................................................
Depreciation, accretion and amortization ...............................
Loss from write-off of deferred financing fees and
extinguishment of debt ........................................................
Net loss ................................................................................... $
Per common share - basic and diluted:
Net loss per share .................................................................... $
(in thousands, except per share amounts)
$ 100,289
7,811
(41,650)
103,201
5,311
(42,949)
108,903
9,700
(44,340)
$
$ 95,808
7,225
(40,293)
—
(28,879) $
—
—
(17,534) $ (15,072) $ (16,394)
(431)
(0.27) $
(0.17) $
(0.15) $
(0.16)
Basic net income (loss) per share is computed by dividing net income by the weighted average number of shares for
the period. Diluted net income per share for the quarter ended December 31, 2008 is computed by dividing net income by the
weighted average number of common shares outstanding during the period plus potentially dilutive common shares arising
from the assumed exercise of stock options and convertible debt, if dilutive. The dilutive impact of potentially dilutive stock
options is determined by applying the treasury stock method and the dilutive impact of the convertible debt is determined by
applying the “if converted” method. Potentially dilutive shares for the periods prior to the quarter ended December 31, 2008
have been excluded from the computation of diluted loss per share as their impact would have been anti-dilutive.
Because loss per share amounts are calculated using the weighted average number of common and dilutive common
shares outstanding during each quarter, the sum of the per share amounts for the four quarters may not equal the total loss per
share amounts for the year.
24. SUBSEQUENT EVENTS
Subsequent to December 31, 2008, the Company repurchased in privately negotiated transactions $34.0 million in
principal amount of 0.375% Notes and $7.6 million of the CMBS Notes for $25.3 million in cash and 0.6 million shares of its
Class A common stock.
F-41
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Opinion of Holland & Knight LLP
regarding the validity of the Class A common stock
February 27, 2009
Exhibit 5.1
SBA Communications Corporation
5900 Broken Sound Parkway NW
Boca Raton, Florida 33487
Ladies and Gentlemen:
SBA Communications Corporation, a Florida corporation (the “Company”), filed with the Securities and Exchange
Commission on November 16, 2007, a Shelf Registration Statement on Form S-4, Registration No. 333-147473 (the “Shelf
Registration Statement”), under the Securities Act of 1933, as amended (the “Securities Act”). The Shelf Registration
Statement relates to the offering by the Company of the Company’s Class A common stock, $.01 par value per share (the
“Class A Common Stock”). We have acted as counsel to the Company in connection with the preparation and filing of the
Shelf Registration Statement and the issuance of 312,636 shares (the “Shares”) of Class A Common Stock pursuant to the
Shelf Registration Statement, in connection with the acquisition of 10 towers and earnouts from previous acquisitions.
In so acting, we have examined originals, or copies certified or otherwise identified to our satisfaction, of such documents,
records, certificates and other instruments of the Company as in our judgment are necessary or appropriate for purposes of
this opinion.
Based upon the foregoing examination, we are of the opinion that the Shares have been duly authorized and, when issued,
will be validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the Shelf Registration Statement and to the use of our name
under the caption “Legal Matters” in the Shelf Registration Statement. In giving such consent, we do not thereby admit that
we are included within the category of persons whose consent is required under Section 7 of the Securities Act or the rules
and regulations promulgated thereunder.
Sincerely,
/s/ Holland & Knight LLP
HOLLAND & KNIGHT LLP
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Exhibit 10.76
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this “Agreement”) is made and entered into this 15th day of
January, 2009, by and between [ ] (the “Indemnitee”) and SBA Communications Corporation, a Florida corporation (the
“Corporation”).
WITNESSETH
WHEREAS , the Board of Directors of the Corporation (the “Board of Directors”) has reviewed and analyzed the
protection from liability available to directors or officers of the Corporation (hereinafter, “Directors” or “Officers”) and its
subsidiaries under the Corporation’s existing corporate documents and applicable law; and
WHEREAS , increases in corporate litigation subjects Directors and Officers to expensive litigation risks at the
same time that the availability of directors’ and officers’ liability insurance has been limited; and
WHEREAS , the Board of Directors has determined that the protection offered by the Corporation’s existing
corporate documents, applicable law, and liability insurance is not sufficient to fully protect its Directors or Officers from
liability; and
WHEREAS , it is essential to the Corporation to attract and retain the most capable persons available as Directors
and/or Officers; and
WHEREAS , the Board of Directors has determined that highly competent persons will be difficult to attract and
retain as Directors and/or Officers unless they are adequately protected against liabilities incurred in performance of their
duties in such capacity; and
WHEREAS , the Board of Directors has determined that the use of indemnification agreements will allow the
Corporation to offer additional appropriate protection from liability to its Directors or Officers; and
WHEREAS , the Indemnitee is a Director and/or Officer; and
WHEREAS, the indemnification and advancement provisions of Section 607.0850 of the Florida Business
Corporation Act (the “FBCA”), Article VIII of the bylaws of the Corporation (the “Bylaws”), and Article VII of the Articles
of Incorporation of the Corporation (the “Articles of Incorporation”) expressly provide that they are non-exclusive; and
NOW THEREFORE, in consideration of the Indemnitee’s services to the Corporation, the mutual agreements and
covenants contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
Section 1. Definitions . For purposes of this Agreement:
(a) “Change in Control” shall mean, and a Change of Control shall be deemed to have occurred if, on or
after the date of this Agreement, (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended (the “Act”)), other than (A) a trustee or other fiduciary holding securities under an employee benefit
plan of one or more of the Corporation, or any of its subsidiaries, as the case may be, acting in such capacity or (B) a
corporation owned directly or indirectly by the stockholders of the Corporation in substantially the same proportions as their
ownership of stock of the Corporation, becomes the “beneficial owner” (as defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Corporation representing more than thirty three percent (33%) of the total voting power
represented by the Corporation’s then outstanding Voting Securities (as defined below), (ii) during any period of two (2)
consecutive years, individuals who at the beginning of such period constitute the Board of Directors and any new director
whose election by the Board of Directors or nomination for election by the Corporation’s stockholders was approved by a
vote of at least two thirds ((cid:2)) of the Directors then still in office who either were Directors at the beginning of the period or
whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof,
(iii) the stockholders of the Corporation approve a merger or consolidation of the Corporation with any other corporation
other than a merger or consolidation that would result in the Voting Securities of the Corporation outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least eighty percent (80%) of the total voting power represented by the Voting Securities of the
Corporation or such surviving entity outstanding immediately after such merger or consolidation, (iv) the stockholders of the
Corporation approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the
Corporation of (in one transaction or a series of related transactions) all or substantially all of the Corporation’s assets, or (v)
the Corporation shall file or have filed against it, and such filing shall not be dismissed, any bankruptcy, insolvency or
dissolution proceedings, or a trustee, administrator or creditors committee shall be appointed to manage or supervise the
affairs of the Corporation.
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(b) “Corporate Status” describes the status of a person who is serving or has served (i) as a director or
officer of the Corporation, (ii) in any capacity with respect to any employee benefit plan of the Corporation, or (iii) as a
director, partner, trustee, officer, employee or agent of any other Entity at the request of the Corporation. For purposes of this
Agreement, an officer or director of the Corporation who is serving or has served as a director, partner, trustee, officer,
employee or agent of a Subsidiary shall be deemed to be serving at the request of the Corporation.
Proceeding in respect of which indemnification is sought by Indemnitee.
(c) “Disinterested Director” means a director of the Corporation who is not and was not a party to the
(d) “Effective Date” means the date first listed above.
association, organization or other legal entity.
(e) “Entity” shall mean any corporation, partnership, limited liability company, joint venture, foundation,
(f) “Expenses” shall mean all fees, costs and expenses incurred in connection with any Proceeding (as
defined below), including, without limitation, attorneys’ fees, disbursements and retainers, fees and disbursements of expert
witnesses, private investigators and professional advisors (including, without limitation, accountants and investment
bankers), court costs, transcript costs, fees of experts, travel expenses, duplicating, printing and binding costs, telephone and
fax transmission charges, postage, delivery services, secretarial services, and other disbursements and expenses.
(g) “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of
corporate law and neither presently is, nor in the past five years has been, retained to represent: (i) the Corporation or
Indemnitee in any matter material to either such party, or (ii) any other party to the Proceeding giving rise to a claim for
indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person
who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing
either the Corporation or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.
amounts paid in settlement.
(h) “Liabilities” shall mean judgments, damages, liabilities, losses, penalties, excise taxes, fines and
(i) “Proceeding” includes any threatened, pending or completed action, suit, arbitration, alternative dispute
resolution mechanism, investigation, administrative hearing or any other proceeding, whether civil, criminal, administrative
or investigative, including appeals, except one initiated by an Indemnitee pursuant to Section 10 or Section 13(b) of this
Agreement to enforce his rights under this Agreement.
(j) “Subsidiary” shall mean any Entity of which the Corporation owns (either directly or through or
together with another Subsidiary of the Corporation) either (i) a general partnership, managing membership or other similar
interest or (ii) fifty percent (50%) or more of the (A) voting power of the voting capital equity interests of such Entity, or (B)
outstanding voting capital stock or other voting equity interests of such Entity.
Directors.
(k) “Voting Securities” means securities of the Corporation that entitle the holder to vote for the election of
Section 2. Services by Indemnitee . In consideration of the Corporation’s covenants and commitments hereunder,
Indemnitee agrees to continue to serve as a Director or Officer. However, this Agreement shall not impose any obligation on
Indemnitee or the Corporation to continue Indemnitee’s service to the Corporation beyond any period otherwise required by
law or by other agreements or commitments of the parties, if any.
Section 3. Agreement to Indemnify. The Corporation agrees to indemnify Indemnitee as follows:
(a) Subject to the exceptions contained in Section 4 below, if Indemnitee was or is a party or is threatened
to be made a party to any Proceeding (other than an action by or in the right of the Corporation) by reason of Indemnitee’s
Corporate Status, Indemnitee shall be indemnified by the Corporation against all Expenses and Liabilities incurred or paid by
Indemnitee in connection with such Proceeding (referred to herein as “Indemnifiable Expenses” and “Indemnifiable
Liabilities ,” respectively, and collectively as “Indemnifiable Amounts”) if (i) Indemnitee acted in good faith and in a
manner Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Corporation, and (ii) with respect
to any criminal action or proceeding, Indemnitee had no reasonable cause to believe that Indemnitee’s conduct was unlawful.
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(b) Subject to the exceptions contained in Section 4 below, if Indemnitee was or is a party or is threatened
to be made a party to any Proceeding by or in the right of the Corporation to procure a judgment in its favor by reason of
Indemnitee’s Corporate Status, Indemnitee shall be indemnified by the Corporation against all Indemnifiable Expenses and
amounts paid in settlement if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in, or not
opposed to, the best interests of the Corporation, except that no indemnification shall be made under this subsection in
respect of any claim, issue or matter as to which Indemnitee shall have been adjudged by a court of competent jurisdiction
that Indemnitee is liable to the Corporation, unless, and only to the extent that, the court in which such Proceeding was
brought or another court of competent jurisdiction determines upon application that in view of all the circumstances of the
case, that Indemnitee is fairly and reasonably entitled to indemnity for such Indemnifiable Expenses and amounts paid in
settlement, then Indemnitee shall be entitled to payment in such amount as such court deems proper.
(c) If Indemnitee, in connection with Indemnitee’s Corporate Status, is compelled or asked to be a witness
in connection with any Proceeding but is not otherwise a party or threatened to be made a party to such Proceeding,
Indemnitee shall be indemnified by the Corporation against all Indemnifiable Expenses.
(d) Notwithstanding the exceptions listed in Section 4 below, to the extent that Indemnitee has been
successful on the merits or otherwise in defense of any Proceeding referred to in subsections 3(a) or 3(b), or in defense of any
claim, issue, or matter therein, Indemnitee shall be indemnified by the Corporation against Indemnifiable Expenses actually
and reasonably incurred by Indemnitee in connection therewith.
(e) If Indemnitee is entitled under any provisions of this Agreement to indemnification by the Corporation
for some or a portion of Indemnifiable Amounts but not, however, for the total amount thereof, the Corporation shall
nevertheless indemnify Indemnitee for the portion of such Indemnifiable Amounts to which Indemnitee is entitled.
(f) Good Faith Definition. For purposes of this Section 3 only, the Indemnitee shall be deemed to have
acted in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the
Corporation, or, with respect to any criminal Proceeding, to have had no reasonable cause to believe the Indemnitee’s
conduct was unlawful, if such action was based on a reasonable reliance upon any of the following: (a) the records or books
of the Corporation or applicable Entity, including financial statements, supplied to the Indemnitee by the officers of such
Entity in the course of their duties; (b) the advice of legal counsel for the Corporation or the applicable Entity; or (c)
information or records given in reports made to the Corporation or the applicable Entity by it’s independent certified public
accountant or by an appraiser or other expert selected with reasonable care by such entity. The provisions of this Section 3(f)
shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed to
have met the applicable standard of conduct set forth in this Section 3.
Section 4. Exceptions to Indemnification. Indemnitee shall be entitled to indemnification under Sections 3(a) and
3(b) above in all circumstances unless it has been determined in accordance with Section 7 that, in connection with the
subject of the Proceeding out of which the claim for indemnification has arisen, a judgment or other final adjudication
establishes that his or her actions, or omissions to act, were material to the cause of action so adjudicated and constitute:
(i) a violation of the criminal law, unless the Indemnitee had reasonable cause to believe his or her
conduct was lawful or had no reasonable cause to believe his or her conduct was unlawful;
(ii) a transaction from which Indemnitee derived an improper personal benefit;
(iii) in the event the Indemnitee is a director, a circumstance under which the liability provisions
of Section 607.0834 of the FBCA are applicable; or
(iv) willful misconduct or a conscious disregard for the best interests of the Corporation, in each
case, in a Proceeding by or in the right of the Corporation to procure a judgment in its favor or in a
proceeding by or in the right of a shareholder.
Section 5. Advancement of Expenses. The Corporation shall advance all Indemnifiable Expenses within thirty (30)
days after the receipt by the Corporation of a written request from Indemnitee for such advancement and on a current basis
thereafter, whether prior to or after final disposition of the underlying Proceeding. Such written request shall be accompanied
by evidence of the Indemnifiable Expenses incurred by Indemnitee and shall include a written undertaking by or on behalf of
Indemnitee to repay any and all amounts advanced if it shall ultimately be determined that Indemnitee is not entitled to
indemnification by the Corporation under this Agreement. Indemnitee’s repayment undertaking shall be unsecured and
interest-free. However, advancement of Indemnifiable Expenses shall not be made to Indemnitee if a judgment or other final
adjudication establishes that his or her actions, or omissions to act, were material to the cause of action so adjudicated and
constitute:
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conduct was lawful or had no reasonable cause to believe his or her conduct was unlawful;
(a) A violation of the criminal law, unless the Indemnitee had reasonable cause to believe his or her
(b) A transaction from which Indemnitee derived an improper personal benefit;
607.0834 of the FBCA are applicable; or
(c) In the event the Indemnitee is a director, a circumstance under which the liability provisions of Section
or in the right of the Corporation to procure a judgment in its favor or in a proceeding by or in the right of a shareholder.
(d) Willful misconduct or a conscious disregard for the best interests of the Corporation in a Proceeding by
Section 6. Defense of the Underlying Proceeding.
(a) Notice by Indemnitee. Upon being served with any summons, citation, subpoena, complaint, indictment,
information, or other document relating to any Proceeding which may result in the payment of Indemnifiable Amounts or the
advancement of Indemnifiable Expenses hereunder, Indemnitee shall notify the Corporation promptly, but in all events no
later than the earlier of (i) fourteen (14) days after actual receipt or (ii) as soon as necessary after actual receipt to prevent the
Corporation from being materially and adversely prejudiced by late notice.
(b) Option to Control Defense. Subject to the provisions of Section 6(c), in the event the Corporation is
obligated to advance Indemnifiable Expenses under Section 5, the Corporation shall have the right to participate in any
Proceeding and, at its option, assume the defense of any Proceeding with counsel approved by Indemnitee (which approval
shall not be unreasonably withheld or delayed), upon the delivery to Indemnitee of written notice of its election to do so.
However, the Indemnitee shall have the right to effectively participate in the defense and/or settlement of such Proceeding,
including receiving copies of all correspondence and participating in all meetings and teleconferences concerning the
Proceeding. In no event shall the Corporation consent to the entry of any judgment against Indemnitee or enter into any
settlement or compromise without the prior written consent of the Indemnitee, which consent shall not be unreasonably
withheld or delayed.
(c) Limitation of Obligation to Reimburse Defense Expenses. In the event the Corporation assumes the
defense of any Proceeding pursuant to Section 6(b), the Corporation will not be liable to Indemnitee under this Agreement for
any fees of counsel subsequently incurred by Indemnitee with respect to the same Proceeding; provided that (i) the
Corporation shall indemnify Indemnitee for reasonable costs and expenses of counsel for Indemnitee to monitor the
Proceeding (provided, however, that such counsel for Indemnitee will not appear as counsel of record in any such
Proceeding) and (ii) if (A) the employment of counsel by Indemnitee has been previously authorized by the Corporation, (B)
Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Corporation and Indemnitee
in the conduct of any such defense, or (C) the Corporation shall not continue to retain the approved counsel to defend such
Proceeding, then the fees and expenses of Indemnitee’s counsel shall be at the expense of the Corporation. Except as
otherwise provided by Section 6(d) below, the Corporation’s obligation to indemnify Indemnitee with respect to legal fees
shall be limited to the fees charged by counsel selected by Indemnitee and all other persons similarly entitled to
indemnification by the Corporation in the same Proceeding on account of their Corporate Status to defend the interests of all
such persons entitled to indemnification.
(d) Indemnitee’s Right to Individual Counsel. Notwithstanding the provisions of Section 6(c) above, if in a
Proceeding to which Indemnitee is a party by reason of Indemnitee’s Corporate Status, Indemnitee reasonably concludes that
it may have separate defenses or counterclaims to assert with respect to any issue which may not be consistent with the
position of other defendants in such Proceeding, Indemnitee shall be entitled to be represented by separate legal counsel of
Indemnitee’s choice at the expense of the Corporation. In addition, if the Corporation fails to comply with any of its
obligations under this Agreement or in the event that the Corporation or any other person takes any action to declare all or
any part of this Agreement void or unenforceable, or institutes any action, suit or proceeding to deny or to recover from
Indemnitee the benefits intended to be provided to Indemnitee hereunder, Indemnitee shall have the right to retain counsel of
Indemnitee’s choice, at the expense of the Corporation, to represent Indemnitee in connection with any such matter.
Section 7. Procedure for Determination of Entitlement to Indemnification.
(a) To obtain indemnification under this Agreement, Indemnitee shall submit to the Corporation a written
request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is
reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Secretary of the
Corporation shall, promptly upon receipt of such a request for indemnification, advise the Board of Directors in writing that
Indemnitee has requested indemnification.
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(b) Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section 7(a)
above, a determination with respect to Indemnitee’s entitlement thereto shall be made (unless made by a court) in the specific
case: (i) if a Change in Control shall have occurred, by Independent Counsel (unless Indemnitee shall request that such
determination be made by the Board of Directors or the stockholders, in which case by the person or persons or in the manner
provided for in clauses (ii) or (iii) of this Section 7(b)) in a written opinion to the Board of Directors, a copy of which shall be
delivered to Indemnitee; (ii) if a Change of Control shall not have occurred, (A) by the Board of Directors by a majority vote
of a quorum consisting of Disinterested Directors, or (B) if a quorum of the Board of Directors consisting of Disinterested
Directors is not obtainable or, even if obtainable, by majority vote of a committee duly designated by the Board of Directors
(in which non-Disinterested Directors may participate) consisting solely of two or more Disinterested Directors; or (C) by
Independent Counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to Indemnitee or (D)
by the stockholders of the Corporation by a majority vote of a quorum consisting of shareholders who were not parties to
such Proceeding or, if no such quorum is obtainable, by a majority vote of shareholders who were not parties to such
Proceeding; or (iii) as provided in Section 8(b) of this Agreement. If it is so determined that Indemnitee is entitled to
indemnification, payment to Indemnitee shall be made within ten (10) days after such determination. Indemnitee shall
cooperate with the person, persons or Entity making such determination with respect to Indemnitee’s entitlement to
indemnification, including providing to such person, persons or Entity upon reasonable advance request any documentation
or information which is not privileged or otherwise protected from disclosure and which is reasonably available to
Indemnitee and reasonably necessary to such determination. Any costs or expenses (including attorneys’ fees and
disbursements) incurred by Indemnitee in so cooperating with the person, persons or Entity making such determination shall
be borne by the Corporation (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the
Corporation hereby agrees to indemnify and hold Indemnitee harmless therefrom.
(c) In the event the determination of entitlement to indemnification is to be made by Independent Counsel
pursuant to Section 7(b), the Independent Counsel shall be selected as provided in this Section 7(c) and such determination
shall be made in accordance with the standards set forth in Section 8 below. If a Change of Control shall not have occurred,
the Independent Counsel shall be selected by the Board of Directors in the manner prescribed in Subsections 7(b)(ii)(A) or
(ii)(B), or if a quorum of the Directors cannot be obtained for Subsections 7(b)(ii)(A) and the committee cannot be designated
under Subsections 7(b)(ii)(B), selected by a majority vote of the Board of Directors (in which non-Disinterested Directors
may participate), and the Corporation shall give written notice to Indemnitee advising him of the identity of the Independent
Counsel so selected. If a Change of Control shall have occurred, the Independent Counsel shall be selected by Indemnitee
(unless Indemnitee shall request that such selection be made by the Board of Directors, in which event the preceding sentence
shall apply), and Indemnitee shall give written notice to the Corporation advising it of the identity of the Independent
Counsel so selected. In either event, Indemnitee or the Corporation, as the case may be, may, within seven (7) days after such
written notice of selection shall have been given, deliver to the Corporation or to Indemnitee, as the case may be, a written
objection to such selection. Such objection may be asserted only on the ground that the Independent Counsel so selected does
not meet the requirements of “Independent Counsel” as defined in Section 1(g), and the objection shall set forth with
particularity the factual basis of such assertion. If such written objection is made, the Independent Counsel so selected may
not serve as Independent Counsel unless and until a court has determined that such objection is without merit. If, within
twenty (20) days after submission by Indemnitee of a written request for indemnification pursuant to Section 7(a), the parties
cannot resolve any objections to the selected Independent Counsel or mutually agree on another Independent Counsel, either
the Corporation or Indemnitee may petition the Circuit Court of Palm Beach County, Florida or other court of competent
jurisdiction having jurisdiction over Palm Beach County, Florida for resolution of any objection which shall have been made
by the Corporation or Indemnitee to the other’s selection of Independent Counsel and/or for the appointment as Independent
Counsel of a person selected by the Court or by such other person as the Court shall designate, and the person with respect to
whom an objection is so resolved or the person so appointed shall act as Independent Counsel under Section 7(b). The
Corporation shall pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent
Counsel in connection with acting pursuant to Section 7(b), and the Corporation shall pay all reasonable fees and expenses
incident to the procedures of this Section 7 (c), regardless of the manner in which such Independent Counsel was selected or
appointed. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 10(a)(iii), Independent
Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of
professional conduct then prevailing).
Section 8. Presumptions and Effect of Certain Proceedings.
(a) In making a determination with respect to Indemnitee’s entitlement to indemnification, including any
determination made by Independent Counsel pursuant to Section 7(b) and set forth in an opinion delivered by such
Independent Counsel, the person, persons or Entity making such determination shall presume that Indemnitee is entitled to
indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section
7(a), and the Corporation shall have the burden of proof by clear and convincing evidence to overcome that presumption in
connection with the making by any person, persons or Entity of any determination contrary to that presumption.
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(b) If the person, persons or Entity empowered or selected under Section 7 to determine whether
Indemnitee is entitled to indemnification shall not have made a determination within sixty (60) days after receipt by the
Corporation of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have
been made and Indemnitee shall be entitled to such indemnification, absent (i) a misstatement by Indemnitee of a material
fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection
with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; provided, however,
that such sixty (60)-day period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the
person, persons or Entity making the determination with respect to entitlement to indemnification in good faith requires such
additional time for the obtaining or evaluating of documentation and/or information relating thereto; and provided, further,
that the foregoing provisions of this Section 8(b) shall not apply (i) if the determination of entitlement to indemnification is to
be made by the stockholders pursuant to Section 7(b) of this Agreement and if (A) within fifteen (15) days after receipt by the
Corporation of the request for such determination, the Board of Directors has resolved to submit such determination to the
stockholders for their consideration at an annual meeting thereof to be held within seventy-five (75) days after such receipt
and such determination is made thereat, or (B) a special meeting of stockholders is called within fifteen (15) days after such
receipt for the purpose of making such determination, such meeting is held for such purpose within sixty (60) days after
having been so called and such determination is made thereat, or (ii) if the determination of entitlement to indemnification is
to be made by Independent Counsel pursuant to Section 7(b) of this Agreement.
(c) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order,
settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly
provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that
Indemnitee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that
his conduct was unlawful.
Section 9. Exception to Right of Indemnification or Advancement of Expenses. Any other provision herein to the
contrary notwithstanding, the Corporation shall not be obligated pursuant to the terms of this Agreement to provide
indemnification and/or advancement in the following instances:
(a) Claims Initiated by the Indemnitee. To indemnify or advance Expenses to the Indemnitee with respect
to proceedings or claims initiated or brought voluntarily by the Indemnitee and not by way of defense, counterclaim or
crossclaim, except with respect to proceedings brought to establish or enforce a right to indemnification under this
Agreement or any other statute or law or otherwise as required under Section 607.0850(3) of the FBCA or other similar
provision of any other applicable corporations law, but such indemnification or advancement of Expenses may be provided
by the Corporation in specific cases if the Board of Directors has approved the initiation or bringing of such suit.
(b) Lack of Good Faith. To indemnify the Indemnitee for any Expenses incurred by the Indemnitee with
respect to any proceeding instituted by the Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that all of the material assertions made by the Indemnitee in such proceeding were not made in good
faith or were frivolous.
(c) Insured Claims. To indemnify the Indemnitee for expenses or liabilities of any type whatsoever
(including, but not limited to, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) which have
been paid directly to the Indemnitee by an insurance carrier under a policy of directors and officers liability insurance
maintained by the Corporation or from any other source.
(d) Claims Under Section 16(b). To indemnify the Indemnitee for Expenses and the payment of profits
arising from the purchase and sale by the Indemnitee of securities in violation of Section 16(b) of the Act or any similar
successor statute.
Section 10. Remedies of Indemnitee.
(a) In the event that (i) a determination is made pursuant to Section 7 that Indemnitee is not entitled to
indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 5, (iii) the
determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 7(b) and such
determination shall not have been made and delivered in a written opinion within ninety (90) days after receipt by the
Corporation of the request for indemnification, (iv) payment of indemnification is not made pursuant to Section 3(c) within
ten (10) days after receipt by the Corporation of a written request therefor, or (v) payment of indemnification is not made
within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification or such determination
is deemed to have been made pursuant to Sections 7 or 8, Indemnitee shall be entitled to an adjudication in an appropriate
court of competent jurisdiction located in Palm Beach County, Florida of his entitlement to such indemnification or
advancement of Expenses. The Corporation shall not oppose Indemnitee’s right to seek any such adjudication.
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(b) In the event that a determination shall have been made pursuant to Section 7 that Indemnitee is not
entitled to indemnification of Indemnifiable Amounts, any judicial proceeding commenced pursuant to this Section 10 shall
be conducted in all respects as a de novo trial on the merits and Indemnitee shall not be prejudiced by reason of that adverse
determination. In any judicial proceeding commenced pursuant to this Section 10, the Corporation shall have the burden of
proving by a preponderance of the evidence that Indemnitee is not entitled to indemnification of Indemnifiable Amounts or
advancement of Indemnifiable Expenses, as the case may be.
(c) If a determination shall have been made or deemed to have been made pursuant to Sections 7 or 8 that
Indemnitee is entitled to indemnification of Indemnifiable Amounts, the Corporation shall be bound by such determination in
any judicial proceeding commenced pursuant to this Section 10, absent (i) a misstatement by Indemnitee of a material fact, or
an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the
request for indemnification, or (ii) a prohibition of such indemnification under applicable law.
(d) Unless contrary to applicable law, neither the Corporation nor the Indemnitee may assert in any judicial
proceeding commenced pursuant to this Section 10 that the procedures and presumptions of this Agreement are not valid,
binding and enforceable and the Corporation and the Indemnitee shall stipulate in any such court that they are bound by all
the provisions of this Agreement.
(e) In the event that Indemnitee, pursuant to this Section 10, seeks a judicial adjudication to enforce his
rights under, or to recover damages for breach of, this Agreement, Indemnitee shall be entitled to recover from the
Corporation, and shall be indemnified by the Corporation against, any and all expenses (of the types described in the
definition of Expenses in Section 1) actually and reasonably incurred by him in such judicial adjudication, but only if he
prevails therein. If it shall be determined in such judicial adjudication that Indemnitee is entitled to receive part but not all of
the indemnification or advancement of expenses sought, Indemnitee shall be indemnified for the expenses incurred by
Indemnitee in connection with such judicial adjudication to the extent such expenses are reasonably related to the part of the
indemnification of Indemnifiable Amounts or advancement of Indemnifiable Expenses awarded to Indemnitee.
Section 11. Insurance. Prior to any Change in Control, the Corporation shall maintain an insurance policy or policies
with reputable and creditworthy insurance companies with ratings of A- (excellent) or better from A.M. Best or another
nationally recognized rating agency providing liability insurance for directors and officers or of any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise which such person serves at the request of the
Corporation and providing for coverage substantially similar or better, in all material respects, to the coverage maintained by
the Corporation as of the Effective Date; provided, however, that this provision shall not apply should the Board of Directors
be unable to maintain such insurance for which the premium is not grossly excessive relative to the coverage provided
thereunder. In all policies of director and officer liability insurance purchased by the Corporation, Indemnitee shall be named
as an insured in such a manner as to provide Indemnitee the same rights and benefits as are accorded to the most favorably
insured of the Corporation’s Directors and Officers (other than in the case of an independent director liability insurance
policy, which would only apply to independent or outside Directors). The Corporation shall promptly notify Indemnitee of
any good faith determination not to provide such coverage.
Section 12. Insurance Upon a Change of Control. In the event of and immediately upon a Change of Control, the
Corporation (or any successor to the interests of the Corporation by way of merger, sale of assets or otherwise) shall be
obligated to continue, procure and/or otherwise maintain in effect for a period of six (6) years from the date on which such
Change of Control is effective a policy or policies of insurance (the “Change of Control Coverage”) with reputable and
creditworthy insurance companies with ratings of A- (excellent) or better from A.M. Best or another nationally recognized
rating agency providing Indemnitee with coverage for losses from wrongful acts occurring on or before the effective date of
the Change of Control, and to ensure the Corporation’s performance of its indemnification obligations under this Agreement.
If such insurance is in place immediately prior to the Change of Control, then the Change of Control Coverage shall contain
limits, deductibles and exclusions substantially identical to those in place immediately prior to the Change in Control. In the
event that the Corporation does not maintain such insurance immediately prior to the Change of Control, the Change of
Control Coverage shall contain such limits, deductibles, terms and exclusions as are customary for companies of similar size
as determined by an insurance brokerage company of national reputation, provided, however, that in no event shall the
Change of Control Coverage contain limits, deductibles, terms and exclusions that are less favorable to Indemnitee than those
set forth in the policy or policies most recently maintained by the Corporation. Each policy evidencing the Change of Control
Coverage shall be non-cancellable by the insurer except for non-payment of premium.
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Section 13. Insurance Claims.
(a) If the Corporation has a policy of liability insurance for Directors and Officers in effect at the time the
Corporation receives notification from either the Indemnitee or a third party of summons, citation, subpoena, complaint,
indictment, information, or other document relating to any Proceeding which may result in the payment of Indemnifiable
Amounts or the advancement of Indemnifiable Expenses hereunder, the Corporation shall give prompt notice of such
potential claim to the insurers in accordance with the procedures set forth in the respective policies. The Corporation shall
thereafter take all necessary or desirable action, consistent with the Corporation’s obligations under the policy and to its
shareholders and its other Directors and Officers, to cause such insurers to pay, on behalf of Indemnitee, all losses and
expenses payable as a result of such Claim in accordance with the terms of such policies.
(b) In the event that Indemnitee is required to seek judicial adjudication to enforce his rights for
reimbursement or payment of any insured losses under, or to recover damages for breach of, the Corporation’s Director and
Officer insurance policy, Indemnitee shall be entitled to recover from the Corporation, and shall be indemnified by the
Corporation against, any and all expenses (of the types described in the definition of Expenses in Section 1) actually and
reasonably incurred by him in such judicial adjudication, unless the court determines that such action was not brought in
good faith or was frivolous. If it shall be determined in such judicial adjudication that Indemnitee is entitled to receive part
but not all of the claimed losses or expenses, Indemnitee shall be indemnified for the expenses incurred by Indemnitee in
connection with such judicial adjudication to the extent such expenses are reasonably related to the part of the insured losses
or expenses awarded to Indemnitee.
Section 14. Subrogation. In the event of any payment under this Agreement by the Corporation, the Corporation
shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers
required and take all action reasonably necessary to secure such rights, including execution of such documents as are
necessary to enable the Corporation to bring suit to enforce such rights.
Section 15. Duration of Agreement. This Agreement shall continue until and terminate upon the later of (a) ten (10)
years after the date that Indemnitee shall have ceased to serve (i) as a director or officer of the Corporation, (ii) in any
capacity with respect to any employee benefit plan of the Corporation, or (iii) as a director, partner, trustee, officer, employee
or agent of any other Entity at the request of the Corporation or (b) the final termination of all pending Proceedings in respect
of which Indemnitee is granted rights of indemnification of Indemnifiable Amounts or advancement of Indemnifiable
Expenses hereunder and of any proceeding commenced by Indemnitee pursuant to Section 10 or 13 (b) of this Agreement
relating thereto. This Agreement shall be binding upon the Corporation and its successors and assigns and shall inure to the
benefit of Indemnitee and his heirs, executors and administrators.
Section 16. Representations and Warranties of the Corporation. The Corporation hereby represents and warrants to
Indemnitee as follows:
(a) Authority. The Corporation has all necessary power and authority to enter into, and be bound by the terms of,
this Agreement, and the execution, delivery and performance of the undertakings contemplated by this Agreement have been
duly authorized by the Corporation.
(b) Enforceability. This Agreement, when executed and delivered by the Corporation in accordance with the
provisions hereof, shall be a legal, valid and binding obligation of the Corporation, enforceable against the Corporation in
accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws affecting the enforcement of creditors’ rights generally.
Section 17. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or
unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this
Agreement (including without limitation, each portion of any section of this Agreement containing any such provision held to
be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or
impaired thereby; and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each
portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not
itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held
invalid, illegal or unenforceable.
Section 18. Notices. All notices, requests, demands and other communications hereunder shall be in writing and
shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other
communication shall have been directed, (ii) when transmitted by facsimile and receipt is acknowledged, or (iii) sent by
recognized commercial overnight courier service, on the second business day after the date on which it is so sent:
8
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If to the Corporation:
SBA Communications Corporation
5900 Broken Sound Parkway NW
Boca Raton, Florida 33487
Attention: General Counsel
If to Indemnitee:
[__________]
Section 19. Subsequent Legislation. If the FBCA is amended after adoption of this Agreement to expand further the
indemnification permitted to directors or officers, then the Corporation shall indemnify Indemnitee to the fullest extent
permitted by the FBCA, as so amended.
Section 20. Non-Exclusivity. The rights to payment of Indemnifiable Amounts and advancement of Indemnifiable
Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any
time be entitled under applicable law, the Articles of Incorporation or the Bylaws, any agreement, a vote of stockholders or a
resolution of Directors, or otherwise. The parties hereto intend that this Agreement shall provide for indemnification in
excess of that expressly permitted by statute, including, without limitation, any indemnification provided by the
Corporation’s Articles of Incorporation, its Bylaws, vote of its shareholders or Disinterested Directors, or applicable law. No
amendment, alteration or termination of this Agreement or any provision hereof shall be effective as to any Indemnitee with
respect to any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or
termination. As set forth in Section 15 above, Indemnitee’s rights hereunder shall continue after Indemnitee has ceased acting
as an agent of the Corporation.
Section 21. Enforcement. The Corporation shall be precluded from asserting in any judicial proceeding that the
procedures and presumptions of this Agreement are not valid, binding and enforceable. The Corporation agrees that its
execution of this Agreement shall constitute a stipulation by which it shall be irrevocably bound in any court of competent
jurisdiction in which a proceeding by Indemnitee for enforcement of his rights hereunder shall have been commenced,
continued or appealed, that its obligations set forth in this Agreement are unique and special, and that failure of the
Corporation to comply with the provisions of this Agreement shall cause irreparable and irremediable injury to Indemnitee,
for which a remedy at law shall be inadequate. As a result, in addition to any other right or remedy Indemnitee may have at
law or in equity with respect to breach of this Agreement, Indemnitee shall be entitled to injunctive or mandatory relief
directing specific performance by the Corporation of its obligations under this Agreement.
Section 22. Interpretation of Agreement. It is understood that the parties hereto intend this Agreement to be
interpreted and enforced so as to provide indemnification to Indemnitee to the fullest extent now or hereafter permitted by
law.
Section 23. Entire Agreement. This Agreement and the documents expressly referred to herein constitute the entire
agreement between the parties hereto with respect to the matters covered hereby, and any other prior or contemporaneous oral
or written understandings or agreements with respect to the matters covered hereby are expressly superseded by this
Agreement.
Section 24. Modification and Waiver. No supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall
be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute
a continuing waiver.
Section 25. Successor and Assigns. All of the terms and provisions of this Agreement shall be binding upon, shall
inure to the benefit of and shall be enforceable by the parties hereto and their respective successors, assigns, heirs, executors,
administrators and legal representatives. The Corporation shall require and cause any direct or indirect successor (whether by
purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Corporation, by written
agreement in form and substance reasonably satisfactory to Indemnitee, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent that the Corporation would be required to perform if no such
succession had taken place.
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Section 26. Service of Process and Venue. For purposes of any claims or proceedings to enforce this agreement, the
Corporation consents to the jurisdiction and venue of any federal or state court of competent jurisdiction in the State of
Florida, and waives and agrees not to raise any defense that any such court is an inconvenient forum or any similar claim.
Section 27. Governing Law. This Agreement shall be governed exclusively by and construed according to the laws
of the State of Florida. If a court of competent jurisdiction shall make a final determination that the provisions of the law of
any state other than Florida govern indemnification by the Corporation of its Directors or Officers, then the indemnification
provided under this Agreement shall in all instances be enforceable to the fullest extent permitted under such law,
notwithstanding any provision of this Agreement to the contrary.
Section 28. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be
deemed to be an original and all of which together shall be deemed to be one and the same instrument, notwithstanding that
both parties are not signatories to the original or same counterpart.
Section 29. Headings. The section and subsection headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered to be effective as of the date first written
above.
SBA COMMUNICATIONS CORPORATION
By
Name:
Title:
INDEMNITEE
By
Name:
Title:
10
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Subsidiaries of SBA Communications Corporation
Name
SBA Telecommunications, Inc.
Relationship
100% owned by SBA Communications Corporation
Jurisdiction
Florida
Exhibit 21
SBA Infrastructure Holdings I, Inc.
100% owned by SBA Telecommunications, Inc.
SBA Senior Finance, Inc.
100% owned by SBA Telecommunications, Inc.
SBA Senior Finance II LLC
100% owned by SBA Senior Finance, Inc.
SBA Network Services, Inc.
100% owned by SBA Senior Finance II LLC
SBA Towers II, LLC
100% owned by SBA Senior Finance II LLC
SBA CMBS-1 Holdings LLC
100% owned by SBA Senior Finance, Inc.
SBA CMBS-1 Depositor LLC
100% owned by SBA Senior Finance, Inc.
SBA CMBS-1 Guarantor LLC
100% owned by SBA CMBS-1 Holdings LLC
SBA Towers, Inc.
100% owned by SBA CMBS-1 Guarantor LLC
SBA Properties, Inc.
100% owned by SBA CMBS-1 Guarantor LLC
SBA Sites, Inc.
100% owned by SBA CMBS-1 Guarantor LLC
SBA Structures, Inc.
100% owned by SBA CMBS-1 Guarantor LLC
Florida
Florida
Florida
Florida
Florida
Delaware
Delaware
Delaware
Florida
Florida
Florida
Florida
As of December 31, 2008, SBA Senior Finance, Inc. owned, directly or indirectly, 22 additional subsidiaries, 18 of
which are incorporated in U.S. jurisdictions and four of which are organized in foreign jurisdictions. These subsidiaries, in
the aggregate as a single subsidiary, would not constitute a “Significant Subsidiary” as defined in Rule 405 under the
Securities Act as of December 31, 2008.
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CONSENT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the following Registration Statements:
Exhibit 23.1
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
Registration Statement (Form S-3 No. 333-41306)
Registration Statement (Form S-3 No. 333-41308)
Registration Statement (Form S-3 No. 333-133303)
Registration Statement (Form S-3 No. 333-143033)
Registration Statement (Form S-4 No. 333-71460)
Registration Statement (Form S-4 No. 333-46730)
Registration Statement (Form S-4 No. 333-139005)
Registration Statement (Form S-4 No. 333-147473)
Registration Statement (Form S-8 No. 333-155289) pertaining to 2008 Employee Stock Purchase Plan
Registration Statement (Form S-8 No. 333-69236) pertaining to 2001 Equity Participation Plan
Registration Statement (Form S-8 No. 333-46734) pertaining to 1999 Equity Participation Plan
Registration Statement (Form S-8 No. 333-82245) pertaining to 1996 Stock Option Plan, 1999 Employee
Stock Purchase Plan, 1999 Equity Participant Plan, and Stock Option Agreement between SBA
Communications Corporation and Robert M. Grobstein
Registration Statement (Form S-8 No. 333-115246) pertaining to Amended and Restated 1999 Employee
Stock Purchase Plan
Registration Statement (Form S-8 No. 333-139006) pertaining to 2001 Equity Participation Plan, as
Amended and Restated on May 16, 2002
of our reports dated February 26, 2009 with respect to the consolidated financial statements of SBA Communications
Corporation and Subsidiaries and the effectiveness of internal control over financial reporting of SBA Communications
Corporation and Subsidiaries, included in this Annual Report (Form 10-K) for the year ended December 31, 2008.
/s/ Ernst & Young LLP
West Palm Beach, Florida
February 26, 2009
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CERTIFICATION
Exhibit 31.1
I, Jeffrey A. Stoops, Chief Executive Officer, certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of SBA Communications Corporation;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
b.
c.
d.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes, in accordance with
generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a.
b.
All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.
Date: February 27, 2009
/s/ Jeffrey A. Stoops
By:
Name: Jeffrey A. Stoops
Title: Chief Executive Officer
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Exhibit 31.2
I, Brendan T. Cavanagh, Chief Financial Officer, certify that:
CERTIFICATION
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of SBA Communications Corporation;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
b.
c.
d.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes, in accordance with
generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a.
b.
All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.
Date: February 27, 2009
/s/ Brendan T. Cavanagh
By:
Name: Brendan T. Cavanagh
Title: Chief Financial Officer
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Exhibit 32.1
Certification Required by 18 U.S.C. Section 1350
(as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)
In connection with the Annual Report of SBA Communications Corporation (the “Company”), on Form 10-K for
the period ended December 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the
“Report”), I, Jeffrey A. Stoops, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act, that to the best of my knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended, and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company.
Date: February 27, 2009
/s/ Jeffrey A. Stoops
Jeffrey A. Stoops
Chief Executive Officer
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Exhibit 32.2
Certification Required by 18 U.S.C. Section 1350
(as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)
In connection with the Annual Report of SBA Communications Corporation (the “Company”), on Form 10-K for
the period ended December 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the
“Report”), I, Brendan T. Cavanagh, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act, that to the best of my knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended, and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company.
Date: February 27, 2009
/s/ Brendan T. Cavanagh
Brendan T. Cavanagh
Chief Financial Officer
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1000
800
600
400
200
0
Performance Graph
SBA’s Class A Common Stock began trading on The NASDAQ National Market on June 16, 1999 when its initial public offering com-
menced and is currently traded on the NASDAQ Global Select Market. The following graph shows the total return to the shareholders
of an investment in SBA’s Class A Common Stock as compared to (i) an investment in the NASDAQ Composite Index; and (ii) an
investment in a peer group made up of American Tower Corporation, Crown Castle International Corporation, Global Signal, Inc.(1)
and SpectraSite, Inc.(2) (the “Peer Group”). The Peer Group was selected because it is a comprehensive peer group comprised of all
of the comparable public companies in the business of owning and operating wireless communications towers, including companies
that have emerged from bankruptcy proceedings.
Total shareholder return is determined by dividing (i) the sum of (A) the cumulative amount of dividends for a given period (assuming
dividend reinvestment) and (B) the change in share price between the beginning and end of the measurement period, by (ii) the
share price at the beginning of the measurement period.
Total Shareholder Returns
SBA COMMUNICATIONS CORPORATION
NASDAQ COMPOSITE INDEX
PEER GROUP
$1,000
800
600
400
200
s
r
a
l
l
o
D
n
I
0
Dec. 31,
2003
Dec. 31,
2004
Dec. 31,
2005
Dec. 31,
2006
Dec. 31,
2007
Dec. 31,
2008
Company Name/Index
SBA Communications Corporation
NASDAQ Composite Index
Peer Group
Base
Period
12/31/03
INDEXED RETURNS
Years Ending
2004
2005
2006
2007
2008
$100.00
$246.81
$ 476.81
$ 731.38
$ 900.00
$ 434.04
$100.00
$108.41
$ 110.79
$ 122.16
$ 134.29
$ 79.25
$100.00
$158.36
$ 241.08
$ 315.27
$ 368.18
$ 212.80
Reflects $100 invested on December 31, 2003 in (i) the Class A Common Stock of SBA, (ii) the basket of companies comprising the NASDAQ Composite
Index, and (iii) the companies comprising the Peer Group.
(1) Global Signal, Inc. emerged from Chapter 11 bankruptcy in 2002 and completed its initial public offering in June 2004. Information about Global Signal,
Inc. is included in the Peer Group beginning in June 2004. Global Signal was acquired by Crown Castle International Corporation in January 2007.
(2) SpectraSite, Inc. emerged from Chapter 11 bankruptcy in February 2003, at which time it cancelled its outstanding common stock and issued new
common stock in accordance with its plan of reorganization. Information about SpectraSite, Inc. is included in the Peer Group from February 2003
to August 2005. SpectraSite, Inc. was acquired by American Tower Corporation in August 2005.
Special Note Regarding Forward-Looking Statements
This annual report contains forward-looking statements that concern expectations, beliefs, projections, strategies, anticipated events or
trends concerning our future operational and financial performance. These forward-looking statements are qualified in their entirety by
cautionary statements and risk factor disclosures contained in our Form 10-K filed with the Securities and Exchange Commission on
February 27, 2009 and our quarterly earnings press releases included as exhibits to our Form 8-Ks previously furnished to the Securities
and Exchange Commission.
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HEADQUARTERS
5900 Broken Sound Parkway NW
Boca Raton, FL 33487
561.995.7670
800.487.SITE (7483)
REGIONAL OFFICES
Birmingham, AL
Boston, MA
Iselin, NJ
Las Vegas, NV
St. Louis, MO
AUDITORS
Ernst & Young LLP
One Clearlake Centre, Suite 900
250 Australian Avenue
West Palm Beach, FL 33401
TRANSFER AGENT
Computershare Trust Company, N.A.
P.O. Box 43069
Providence, RI 02940-3069
DIRECTORS
Steven E. Bernstein,
Chairman of the Board
Jeffrey A. Stoops,
Director, President and Chief Executive Officer
Brian C. Carr,
Director
Duncan H. Cocroft,
Director
Philip L. Hawkins,
Director
Jack Langer,
Director
Steven E. Nielsen,
Director
OFFICERS
Jeffrey A. Stoops,
President and Chief Executive Officer
Kurt L. Bagwell,
Senior Vice President and Chief Operating Officer
Brendan T. Cavanagh,
www.computershare.com/equiserve
Senior Vice President and Chief Financial Officer
INVESTOR RELATIONS
Senior Vice President, Chief Administrative Officer
Thomas P. Hunt,
SBA Communications Corporation
5900 Broken Sound Parkway NW
Boca Raton, FL 33487
invest@sbasite.com
and General Counsel
Jason V. Silberstein,
Senior Vice President—Property Management
William J. Bates,
Vice President—Business Development
NOTICE OF ANNUAL MEETING
Reid Boynton,
The annual meeting of shareholders will
Vice President—Northeast
be held at 10:00 a.m. on May 7, 2009 at
Corporate Headquarters
5900 Broken Sound Parkway NW
Boca Raton, FL 33487
INTERNET WEB SITE
www.sbasite.com
COMMON STOCK
TRADING SYMBOL
Class A shares of SBA Communications
Corporation are traded on the NASDAQ
Global Select Market under the symbol SBAC.
Mark R. Ciarfella,
Vice President—Tower Development
Johnny R. Crawford,
Vice President—Business Development
Jorge Grau,
Vice President and Chief Information Officer
Pamela J. Kline,
Vice President—Capital Markets
Brian D. Lazarus,
Vice President and Chief Accounting Officer
Don R. Mueller,
Vice President—Managed Sites
Jo Carol Rutherford,
Vice President—Human Resources
David L. Tribble,
Vice President—Construction Services
Jim D. Williamson,
Vice President—Southeast
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5900 Broken Sound Parkway NW, Boca Raton, FL 33487
www.sbasite.com