SBA Communications
Annual Report 2017

Plain-text annual report

SBA COMMUNICATIONS CORPORATION ANNUAL REPORT 2017 PAGE 4 PAGE 9 CUSTOMERS EMPLOYEES OUR VISION To be the most respected organization in our industry by our customers, employees, shareholders and communities. PAGE 16 PAGE 22 SHAREHOLDERS COMMUNITIES SBA Generates Revenue from Two Primary Businesses SITE LEASING SBA leases antenna space on our multi-tenant towers to a variety of wireless service providers under long-term lease contracts. We own and operate over 28,000 sites across the Western Hemisphere. In addition, SBA manages approximately 9,000 communication site locations on behalf of third-party owners. Site Leasing represented 94% of our total 2017 revenue. SITE DEVELOPMENT SERVICES SBA offers wireless service providers assistance in developing their own networks. Our extensive site development experience includes participation in the development of over 120,000 communication sites over our 29-year history. 3 SBA COMMUNICATIONSAnnual Report 2017OUR CUSTOMERS Our customers include wireless companies and government entities that use our infrastructure for essential communications networks. SBA COMMUNICATIONS PROVIDES THE WIRELESS INFRASTRUCTURE AND SERVICES THAT ENABLE OUR CUSTOMERS TO FULFILL THEIR NETWORK NEEDS ACROSS THE WESTERN HEMISPHERE. SBA owns and operates wireless towers in 13 countries, supporting wireless network operators as they provide communications services to their subscribers. Our customers include wireless carriers, broadcasters, and government entities. These customers have invested heavily in communications networks, including approximately $500 billion in the U.S. alone since the inception of the wireless industry.* Today, there are more wireless devices than people in the United States. Wireless service is an increasingly important part of people’s everyday life. The average U.S. consumer checks their phone 50 times throughout the day.* infrastructure SBA provides critical infrastructure for wireless communications. Our is used by wireless companies to house transmission equipment. Deployment and optimization of spectrum, to meet demand growth, often leads to additional site leasing revenue for SBA towers. As wireless usage has grown, our business has followed. More growth is expected: Cisco forecasts global mobile data traffic will increase seven-fold by 2021. *Source: CTIA 4 SBA COMMUNICATIONSAnnual Report 2017This is forecast to increase to 77% by 2020.*61% Sustained growth in wireless usage and high-capacity applications: In 2016, 61% of mobile traffic was from video. 5 SBA COMMUNICATIONSAnnual Report 2017RESILIENT INFRASTRUCTURE 2017 was a particularly active year for major storms. Four storms hit the United States and its territories where 2/3 of our towers are located, and our assets performed well. Only 1 out of more than 2,000 sites in the storms’ path was significantly damaged. Immediately following the passing of the storms, SBA worked with our customers to quickly help them restore their wireless networks. 6 SBA COMMUNICATIONSAnnual Report 2017One way to meet growing demand is to develop new infrastructure. SBA has been building towers since its inception. SBA builds towers for itself and for wireless service providers. SBA provides construction services on a single tower basis or by delivering a complete turnkey network deployment solution tailored to meet specific needs. For wireless service providers, our proven ability to adhere to customer budget restrictions, deadlines and technical requirements, combined with our knowledge of local requirements and superior safety record, makes SBA the first choice provider for our customers. SBA has participated in the development of more than 120,000 sites over our 29-year history. t-mobile Our largest customers as a percentage of site leasing revenue are: 26% at&t 16% 15% 15% 8% 20% other Telephony verizon sprint oI +2 SBA entered two new markets in 2017: Peru and Argentina, where America Movil and Telefonica are the primary mobile service providers. Our extensive portfolio of Central and South American assets has grown through acquisitions and new tower builds. 7 SBA COMMUNICATIONSAnnual Report 2017We support government agencies with wireless infrastructure solutions, including the expected deployment of the FirstNet public safety network. 8 SBA COMMUNICATIONSAnnual Report 2017OUR EMPLOYEES Our employees seek and achieve excellence in all they do. The success SBA has achieved as a company is based upon the focused passion and dedication of our people. Our employees’ commitment to SBA provides better service to our clients, creates an inclusive and collegial working environment and generates long-term value for our shareholders and the communities in which we serve. SBA encourages an inclusive work environment and we respect the diversity our employees bring to the organization through their unique ideas, opinions and contributions. Our employees exemplify our mission statement of seeking and achieving excellence in all we do at SBA. We have offices around the world and, no matter where we are located, we embrace and foster a unified culture that embodies our guiding principles. All of our employees are shareholders at SBA – we have the ownership mindset. SBA is committed to hiring military veterans and has been recognized on the 2017 Military Friendly® Employers list by Victory Media. The 2017 list of Military Friendly® Employers distinguishes elite the companies who boast strongest job opportunities, hiring practices and retention transitioning programs service members seeking civilian employment. for 9 SBA COMMUNICATIONSAnnual Report 2017One of our top priorities is the safety of our tower climbers. Since 2001, tower climber training has been required for SBA employees and taught in the field. In 2013, SBA took a quantum step forward in the safety area when we opened our internal facility “Tower U”, headquartered in our Southeast Region, to consolidate training in one location. This facility was developed in response to the need for highly skilled tower professionals and provides a four-day safety certification program that all SBA employed tower climbers must complete before climbing. From time to time, we also train first responders and others in tower rescue and related skills, and we are pleased and fortunate to be able to share our skills and resources with the communities where we work and live. 10 SBA COMMUNICATIONSAnnual Report 2017TM 11 SBA COMMUNICATIONSAnnual Report 2017ANIMALS CHILDREN Over the years our organization has been able to impact over 100 different charitable organizations through our corporate philanthropic program “SBA Cares”. We have a large corporate giving program. We offer team and individual volunteer time off each year as well as contributions to match employee charitable donations. Dozens of diverse nonprofits, located across a wide geography, have benefited over the years from the 12 SBA COMMUNICATIONSAnnual Report 2017Philanthropy is a key focus for SBA and we are proud of the impact our employees have in supporting their communities. HEALTH SOCIAL SERVICES support of our employees. Participation is voluntary, but has continued to grow year after year with 2017 being our largest year ever in terms of aggregate giving. In 2017, the main area of focus for our employees fell into four categories: Animals, Children, Health and Social Services. SBA is committed to our philanthropic endeavors and proud of how our people truly “Change Lives”. 13 SBA COMMUNICATIONSAnnual Report 2017+5.7% Site leasing segment operating profit for the year 2017 was $1,264 million compared to $1,196 million for the year 2016; an increase of 5.7%. +5.5% leasing revenue Site for the year 2017 was $1,623 million compared to $1,538 million for the year 2016; an increase of 5.5%. 1,481 1,360 1,133 846 1,059 1,156 862 657 1,623 1,538 1,264 1,196 2012 2013 2014 2015 2016 2017 14 Site Leasing Revenues in Millions Site Leasing Operating Profit in Millions SBA COMMUNICATIONSAnnual Report 2017FINANCIAL HIGHLIGHTS 2016 vs 2017 In thousands (except per share data) for year ended December 31, 2016 2017 % Change Revenues Site Leasing Site Development Total Revenues Cost of Revenues Site Leasing Site Development $1,538,070 $1,623,173 $95,055 $104,501 $1,633,125 $1,727,674 $342,215 $78,682 $359,527 $86,785 Total Cost of Revenues $420,897 $446,312 Operating Profit Site Leasing Site Development $1,195,855 $1,263,646 $16,373 $17,716 Total Operating Profit $1,212,228 $1,281,362 Selling, general & administrative expenses $143,349 $130,697 Net income attributable to SBA Communications Corporation Basic & diluted net income per share Weighted average number of shares (basic) Weighted average number of shares (diluted) $76,238 $103,654 $0.61 124,448 125,144 $0.86 119,860 121,022 As of December 31, cash, cash equivalents, short-term investments and short-term restricted cash $183,118 $101,937 Total Assets $7,360,945 $7,320,205 Total Principal Amount of Indebtedness $8,875,000 $9,405,000 5.5% 9.9% 5.8% 5.1% 10.3% 6.0% 5.7% 8.2% 5.7% -8.8% 15 SBA COMMUNICATIONSAnnual Report 2017OUR SHAREHOLDERS Our shareholders include large institutions, individual investors, employees and others. TO OUR SHAREHOLDERS: 2017 was an exceptionally strong year for SBA Communications, a page torn directly from the historical SBA play book. We posted solid operational results, deployed capital wisely, grew the portfolio organically, expanded our domestic and international footprint, maintained our leverage ratio within our stated range, and improved operating margins while still reducing our share count. Our shareholders were handsomely rewarded with our stock appreciating 58%, the best performing year since 2012. We were among the top 50 performers within the S&P 500 in 2017 and outperformed the index by 36%, a display of our ability to create value well beyond the general market’s ebb and flow. In September, SBA was selected to replace an outgoing member of the S&P 500 Index, joining our U.S. public tower company peers among the index constituents. We view this as a great honor and a testament to what we’ve been able to accomplish over the 19 years as a U.S. listed public company. In 2017, our operational results were solid. Total revenue grew 5.8%, site leasing revenue grew 5.5%, tower cash flow grew 6.6%, adjusted EBITDA grew 8.8% and AFFO per share grew 16.8%. We posted the highest annual adjusted EBITDA margin in Company 16 history at 70.4%. An impressive feat as we continued to grow our international footprint, add employees and overhead in new markets, and layer in less mature and lower margin sites into the overall portfolio. We ended the year with 27,909 sites and achieved our goal of five to ten percent annual portfolio growth, actually growing 6.5%. Our international business reached $300 million of site leasing revenue and $200 million of tower cash flow, a material jump from where we were just five years ago. We continued to expand our operations, entering into two new markets, totaling 12 geographies outside the United States. We ended the year with over 16,000 tenants and 11,930 communication sites in our international markets. We built a company high 412 international sites in one year, building in 11 out of the 12 markets we operate in. Of those new builds, roughly 200 were built in Brazil, the largest number of sites we’ve ever built in a given year in a country outside the United States. Beyond our new build program, we purchased over 940 sites in Brazil in the largest international transaction since our Oi transaction in June of 2014. We continue to remain bullish on all of our international markets, particularly Brazil, as our customers continue to improve on network quality in a manner similar to what we have seen in the United States. SBA COMMUNICATIONSAnnual Report 2017S&P500 In 2017, we were added to the S&P 500 Index. 17 SBA COMMUNICATIONSAnnual Report 20172017 was a milestone year for our international business. We continued to stay focused on both direct and non- direct expenses. In 2017, our cash cost of site leasing revenues represented 20.5% of cash site leasing revenues, down approximately 50 basis points from 2012. We attributed this reduction primarily to the success of our general cost control initiatives, land buyout program, and the fact that our contracted revenues outpaced our contracted expenses. We also continued to focus on securing the land beneath our sites and the associated ground rent expense, our largest expense within our cost structure. In 2017, in conjunction with our land buyout program we spent an aggregate of $67.4 million buying land and easements as well as extending ground lease terms, levels similar to that of 2015 and 2016. We believe there is much to do on this front, particularly as we enter new markets with untapped savings potential. Second to operational excellence, we view capital allocation as the most important tool for value creation. In 2017, SBA allocated $1.5 billion with the large majority going toward acquisitions and share repurchases. Of the $1.5 billion, $456 million went to acquisitions in nine different markets, two being new geographies for SBA, Peru and Argentina. We’re excited about these new markets as both geographies complement our existing Latin America footprint. In Peru, there are four competitive active wireless carriers and rapid growth occurring in the percentage of the population accessing wireless mobile Internet services. Argentina is one of the largest markets in South America and we believe will be a source of meaningful growth opportunities over the coming years. The investment in wireless in infrastructure has been significantly Argentina for many years. We expect competition and lagging wireless network performance to be drivers of meaningful investment by the wireless service providers for years to come. Our strategy in these new markets will be the same as throughout lacking 18 the rest of Latin America: establish SBA as a long- term player with superior financial and operational resources and cultivate deep relationships with our customers based on trust and performance. While we’re certainly satisfied with our decision to focus on the Western Hemisphere, we continue to remain open to new geographies across the globe. However, we are also deeply committed to staying disciplined. Our core strengths and stringent investment criteria will continue to govern our decision making. As with all of our investments, superior risk-adjusted returns and what’s best for our shareholders will always drive the final investment decision. While our preference is portfolio growth, we’ve seen good opportunities to repurchase our common stock at attractive prices. In 2017, we spent $855 million to repurchase our shares, the most in any year in Company history. We retired 5.8 million shares, or approximately 5% of our current shares outstanding. On average, we repurchased shares at $146.11 per share, levels we believe to be well below intrinsic value. Since reinitiating our buyback program in 2015, we’ve purchased $1.9 billion worth of common stock, outpacing all other capital allocation activities. We continue to view share repurchases as opportunistic and remain at the ready to take advantage of short- term market dislocations. Moving forward, we expect share repurchases to be an integral part of our capital allocation decisions and view this program as an important component of our efforts to achieve our goal of $10.00 or more of AFFO per share by 2020. The debt capital markets continued to treat SBA as a preferred issuer. In 2017, we successfully issued $1.5 billion of debt with an average weighted coupon of 3.6%, levels similar to that of our overall weighted average coupon across all debt instruments. At current prices, we intend to maintain leverage within our stated range of 7.0x to 7.5x net debt to annualized adjusted EBITDA and invest incremental capital. SBA COMMUNICATIONSAnnual Report 2017Conversely, we feel very comfortable with our ability to de-lever quickly should we feel the need to alter our balance sheet strategy. Our built-in escalators and high tenant renewal rates provide us the opportunity to organically de-lever, should we deem it appropriate to do so. We continue to believe our capital structure strategy remains a key differentiator among our peer group. Steven E. Bernstein Founder and Chairman of the Board Jeffrey A. Stoops Director, President and Chief Executive Officer As a predominantly U.S. macro tower company, the future looks as bright as ever. We believe the United States wireless market is the best in the world and SBA is at the center of a robust spending cycle which should lead to years of elevated organic growth. From smartphones to tablets, the U.S. consumer continues to embed wireless devices into their everyday life and their dependency on a reliable wireless network is ever-growing. According to Cisco’s white paper titled, “Visual Networking Index: Forecast and Methodology, 2016-2021,” published on June 6, 2017, Cisco projects mobile data traffic over the next five years to grow 47% and 34% per year in Latin America and North America, respectively. Demand has never been higher for wireless services and our customers continue to invest in their network in an effort to satisfy their customers’ insatiable appetite for ubiquitous mobile wireless services. they Source: CTIA We’re actively engaged with all four major U.S. wireless carriers as focus on network upgrades and densification. We believe 2018 will provide opportunities for SBA to sign up new business above and beyond levels seen in 2017. Our customers have a lot to do. One of these opportunities is the FirstNet initiative. FirstNet is an independent authority within the U.S. Department of Commerce, authorized by Congress 93% Competitive Carrier Market 93% of Americans have more than 4 choices of a wireless provider. Kevin L. Beebe Director Brian C. Carr Director Mary S. Chan Director Duncan H. Cocroft Director George R. Krouse Jr. Director Jack L. Langer Director 19 SBA COMMUNICATIONSAnnual Report 2017in 2012, to provide broadband services through dedicated spectrum to first responders. As of the end of 2017, all 50 states opted in for the FirstNet program and AT&T, FirstNet’s partner, should be very busy over the next several years deploying 700 megahertz spectrum nationwide. Other near-term opportunities include 2.5 GHz, AWS-3, WCS and 600 MHz spectrum and 600 MHz spectrum deployments. We expect to be very busy in 2018 as our application backlog continues to grow in connection with these projects. In the not-too-distant-future, 5G will be here, paving the way for future growth opportunities. We’re excited about SBA’s potential to benefit from 5G wireless business use cases such as autonomous driving, IoT services and business-to-business communication. We continue to strategically pursue opportunities that leverage our existing assets and expertise in order to maximize our growth as the world of wireless continues to evolve. While we can’t state with certainty what the future will hold, we do believe macro cell sites will continue to be the backbone for future wireless networks. 5G 2017 was a difficult year for natural disasters, from wild fires in California to multiple hurricane landings in the United States and its territories. Among the four major hurricanes, Harvey, Irma, Maria and Nate, we were pleased to report only one structure out of thousands the many in hurricanes’ path suffered material damage. While these occurrences are never welcomed, we pleased with were and strength the Further Wireless Innovation 5G will unlock new cycles of innovation and investment across the mobile ecosystem. Source: CTIA the 20 20B IoT devices worldwide Number of IoT devices worldwide is forecast to surpass 20 billion in 2020. underscored durability of our affected sites, and the responses of our employees. These major storms and highlighted the importance of our meticulous approach to building and purchasing sites, sites which are constructed to survive even in the harshest conditions. Source: Gartner review, SBA performed In exceptionally well this year against the backdrop of strong operational results and an enhanced outlook for the future of our industry. We believe we have the best tower assets in the world and 2017 was a reflection of that. We remain on track to achieve our goal of at least $10 or more of AFFO per share by 2020 and will work diligently to achieve that goal. In conclusion, I would like to personally thank each and every employee for their hard work. I truly believe we have the best employees in the industry and I have the utmost confidence in their ability to deliver strong results year in and year out. To our shareholders, we remain grateful for your support and I look forward to communicating in the future. Sincerely, Jeffrey A. Stoops President and Chief Executive Officer SBA COMMUNICATIONSAnnual Report 2017SBAC Publicly traded and listed on the NASDAQ exchange 28,000 Approaching 28,000 sites across the Western Hemisphere REIT Specialized real estate business elected REIT status January 2016 Stellar Shareholder Return ” Since our IPO in June 1999, SBA share price has grown an average of 17% per year, something we are very proud of. Jeffrey A. Stoops President and Chief Executive Officer Nasdaq: SBAC June 1999 - Dec 2017 94% Site Leasing 94% of revenue comes from our site leasing business, where we lease antenna space to wireless service providers on towers that we own or operate 1.8x Customers Average of 1.8 tenants per tower structure and an average capacity of 4.0 tenants. Increasing mobile data consumption will drive demand for tower space 13Countries Own 27,909 sites in 13 countries. Our biggest international market is Brazil with over 7,300 sites which we entered in December 2012 20+ Management Team Extensive experience in site leasing and site development. On average, management has over 21 years of experience in the telecom industry and 18 years with SBA 58% Stock Price Performance in 2017 21 99 16 17 SBA COMMUNICATIONSAnnual Report 2017OUR COMMUNITIES Our communities are spread throughout the Western Hemisphere. SBA owns and operates infrastructure that supports wireless communications in 13 countries including the United States. We have approximately 16,000 towers in the United States representing a significant portion of the domestic infrastructure necessary to support wireless communication, including voice calls, texting and video consumption. SBA IS AN INTEGRAL PART OF WIRELESS COMMUNICATION AND HAS SUPPORTED THE RAPID GROWTH OF THE WIRELESS INDUSTRY SINCE OUR FOUNDING IN 1989. Our investment in tower assets is meant to support sustained growth in wireless communication for many years. As shared infrastructure, towers are an efficient solution for wireless networks. SBA works with local zoning boards to meet their requirements for new towers. Zoning restrictions limit tower deployment, thus creating efficient use of real estate and a more aesthetically pleasing landscape. Municipalities benefit from a relationship with SBA through enhanced wireless service and revenue generation. SBA leases land from hundreds of municipalities in the United States. By working together with its municipal partners, SBA has been able to determine the best municipal-owned lands on which to place new towers in order to meet both wireless needs and community concerns. SBA has been building wireless infrastructure since 1989, and has developed efficient processes to meet both municipal zoning requirements and community needs. 22 *Source: CTIA SBA COMMUNICATIONSAnnual Report 20174.6MThe wireless industry directly supports the greater community with more than 4.6 million jobs in the United States ecosystem.* 23 SBA COMMUNICATIONSAnnual Report 2017Superior service and strong long-term relationships We have very close relations with our property owners, working together with thousands of property and venue owners to provide our infrastructure. We communicate regularly with property owners in an effort to build strong, long-term relationships. We provide these owners real estate income, and will consult with them on other options. Often, we acquire land or rights and offer a competitive price and quick closing. SBA looks to potential future opportunities in which to collaborate with our property partners to develop new profitable relationships. SBA is a trusted tenant, who provides superior service, predictability and a commitment to preserve valued relationships with property owners. Network Operations Control Center (NOCC) provides dependable support Our Network Operations Control Center (NOCC) provides dependable support for towers in local communities from our headquarters in Boca Raton, Florida and currently provides monitoring throughout the United States and Canada, helping to ensure compliance with all Federal Aviation Authority, Federal Communications Commission and Canadian Regulations. The NOCC is staffed 24/7, 365 days a year by trained specialists, and is equipped with a fully redundant emergency back-up system. In addition to monitoring the NOCC also infrastructure, communications serves as a national and international call center, fielding various types of service calls from South and Central America, Canada and the United States, all tracked through a reliable ticketing system. 24 SBA COMMUNICATIONSAnnual Report 2017FORM 10-K 2017 Financial Information UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2017 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: 001-16853 SBA COMMUNICATIONS CORPORATION (Exact name of Registrant as specified in its charter) Florida (State or other jurisdiction of incorporation or organization) 8051 Congress Avenue 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 No 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 No 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 No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No 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. Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer Non-Accelerated filer Accelerated filer Smaller reporting company 1812036_textBW.indd 1 3/15/18 4:55 PM Emerging growth company If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes No The aggregate market value of the voting stock held by non-affiliates of the Registrant was approximately $16.2 billion as of June 30, 2017. The number of shares outstanding of the Registrant’s common stock (as of February 21, 2018): Class A common stock — 116,507,867. Documents Incorporated By Reference Portions of the Registrant’s definitive proxy statement for its 2018 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, 2017, are hereby incorporated by reference in Part III of this Annual Report on Form 10-K. 1812036_textBW.indd 2 3/15/18 4:55 PM Table of Contents PART I BUSINESS ITEM 1. ITEM 1A. RISK FACTORS ITEM 2. ITEM 3. ITEM 4. MINE SAFETY DISCLOSURE PROPERTIES LEGAL PROCEEDINGS PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES ITEM 6. ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND SELECTED FINANCIAL DATA RESULTS OF OPERATIONS ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ITEM 8. ITEM 9. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE ITEM 9A. CONTROLS AND PROCEDURES PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE ITEM 11. EXECUTIVE COMPENSATION ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES ITEM 16. FORM 10-K SUMMARY Signatures Page 1 8 22 23 23 23 25 26 53 56 57 57 59 59 59 59 59 59 65 66 1812036_textBW.indd 3 3/15/18 4:55 PM ITEM 1. BUSINESS General We are a leading independent owner and operator of wireless communications infrastructure, including tower structures, rooftops, and other structures that support antennas used for wireless communications, which we collectively refer to as “towers” or “sites.” Our principal operations are in the United States and its territories. In addition, we own and operate towers in South America, Central America, and Canada. Our primary business line is our site leasing business, which contributed 98.7% of our total segment operating profit for the year ended December 31, 2017. In our site leasing business, we (1) lease antenna space to wireless service providers on towers that we own or operate and (2) manage rooftop and tower sites for property owners under various contractual arrangements. As of December 31, 2017, we owned 27,909 towers, a substantial portion of which have been built by us or built by other tower owners or operators who, like us, have built such towers to lease space to multiple wireless service providers. We also managed or leased approximately 9,000 actual or potential sites, approximately 500 of which were revenue producing as of December 31, 2017. Our other business line is our site development business, through which we assist wireless service providers in developing and maintaining their own wireless service networks. 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 in the United States, Canada, Central America, and South America. We derive site leasing revenues primarily from wireless service provider tenants. Wireless service providers enter into tenant leases with us, each of which relates to the lease or use of space at an individual site. Our site leasing business generates substantially all of our total segment operating profit, representing 96.8% or more of our total segment operating profit for the past three fiscal years. Our site leasing business is classified into two reportable segments, domestic site leasing and international site leasing. Domestic Site Leasing As of December 31, 2017, we owned 15,979 sites in the United States and its territories. For the year ended December 31, 2017, we generated 80.6% of our total site leasing revenue from these sites. We derive domestic site leasing revenues primarily from AT&T, T-Mobile, Sprint, and Verizon Wireless. Wireless service providers enter into tenant leases with us, each of which relates to the lease or use of space at each individual site. In the United States, our tenant leases are generally for an initial term of five to ten 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. Our ground leases in the United States are generally for an initial term of five years or more with multiple renewal terms of five-year periods, at our option, and provide for rent escalators which typically average 2-3% annually. As of December 31, 2017, (1) no U.S. state or territory included more than 10% of our total tower portfolio by tower count, and (2) no U.S. state or territory accounted for more than 10% of our total revenues for the year ended December 31, 2017. International Site Leasing We currently operate in 12 international markets throughout Canada, Central America, and South America. Our largest international market is Brazil. As of December 31, 2017, we owned 11,930 towers in our international markets. As of December 31, 2017, 30.1% of our total towers are located in Brazil and less than 3% of our total towers are located in each of our other international markets (each country is considered a market). We continue to focus on growing our international site leasing business through the acquisition and development of towers. During 2017, we continued our international expansion with our acquisition of sites in Peru and Argentina, as well as additional sites in existing international markets. We believe that we can create substantial value by expanding our site leasing services into select international markets which we believe have a high-growth wireless industry and relatively stable political and regulatory environments. Our operations in these countries are solely in the site leasing business, and we expect to continue to expand operations through acquisitions and new builds, as well as organic lease up on our existing towers. We derive international site leasing revenues primarily from Oi S.A., Telefonica, Claro, and TIM. In Canada, our tenant leases are generally for an initial term of five to ten 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 in our Central American and South American markets typically have an initial term of ten years with multiple five year renewal periods. In Central America, we have similar fixed rent escalators to that of leases in the United States and Canada while our leases in South America escalate in accordance with a standard cost of living index. In Brazil, tenant leases are typically governed by master lease agreements, which provide for the material terms and conditions that will govern the terms of the use of the site. Tenant leases in South America typically provide a pass-through charge for the underlying ground lease rent in addition to the base tenant rent. Our 1 1812036_textBW.indd 4 3/15/18 4:55 PM ground leases in Canada, Central America and South America generally have similar terms and conditions as those in the United States, except that the annual escalators in our South American ground leases are based on a cost of living index. Our operations in Central America and Ecuador are primarily denominated in United States Dollars. In Brazil, Canada, Chile, and Colombia, significantly all of our revenue, expenses, and capital expenditures, including tenant leases, ground leases, and other tower-related expenses are denominated in local currency. In Argentina and Peru, our revenue, expenses, and capital expenditures, including tenant leases, ground leases, and other tower-related expenses are dominated in a mix of local currency and U.S. dollars. Domestic and International Expansion We expand our tower portfolio, both domestically and internationally, through the acquisition of towers from third parties and through the construction of new tower structures. 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 several different investment return metrics, review of available capacity, future lease up projections, and a summary of current and future tenant/technology mix. The majority of our international markets typically have less mature wireless networks with limited wireline infrastructure and lower wireless data penetration rates than those in the United States. Accordingly, our expansion in these markets is primarily driven by (i) wireless service providers seeking to increase the quality and coverage of their networks, (ii) increased consumer mobile data traffic, such as media streaming, mobile apps and games, web browsing, and email, and (iii) incremental spectrum auctions, which have resulted in new market entrants, as well as incremental voice and data network deployments. Since we first entered the Central and South American markets, we have built or acquired 11,655 towers as of December 31, 2017 and continue to expand in these markets to respond to growing demand. We consider various factors when identifying a market for our international expansion, including: • Country analysis – We consider the country’s economic and political stability, and whether the country’s general business, legal and regulatory environment is conducive to the sustainability and growth of our business. • Market potential – We analyze the expected demand for wireless services, and whether a country has multiple wireless service providers who are actively seeking to invest in deploying voice and data networks, as well as spectrum auctions that have occurred or that are anticipated to occur. • Risk adjusted return criteria – We consider whether buying or building towers in a country, and providing our management and leasing services, will meet our return criteria. As part of this analysis, we consider the risk of entering into an international market (for example, the impact of foreign currency exchange rates, real estate, permitting, and taxation risks), and how our expansion meets our long-term strategic objectives for the region and our business generally. In our new build program, we construct tower structures (1) under build-to-suit arrangements or (2) in locations that are strategically chosen by us. Under build-to-suit arrangements, we build tower structures for wireless service providers at locations that they have identified. Under these arrangements, we retain ownership of the tower structure and the exclusive right to co-locate additional tenants. When we construct tower structures in locations chosen by us, we utilize our knowledge of our customers’ 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 tower structures and complete pre-construction procedures necessary to secure the site concurrently with our leasing efforts. We generally will have at least one signed tenant lease for each new build tower structure on the day that it is completed and expect that some will have multiple tenants. Site Development Services Our site development business, which is conducted in the United States only, is complementary to our site leasing business and provides us the ability to keep in close contact with the wireless service providers that generate substantially all of our site leasing revenue and to capture revenues that are generated by our site leasing activities, such as antenna and equipment installation at our tower locations. Site development services revenues are earned primarily from providing a full range of end to end services to wireless service providers or companies providing development or project management services to wireless service providers. Our services include: (1) network pre-design; (2) site audits; (3) identification of potential locations for towers and equipment on existing infrastructure; (4) support in leasing of the location; (5) obtaining zoning approvals and permits; (6) tower and related site construction; (7) antenna installation; and (8) radio equipment installation, commissioning, and maintenance. We provide site development services at our towers and at towers owned by others on a local basis, through market and regional offices. These market offices are responsible for all site development operations. 2 1812036_textBW.indd 5 3/15/18 4:55 PM For financial information about our operating segments, please see Note 18 of our Consolidated Financial Statements included in this Form 10-K. Industry Developments We believe that growing wireless data traffic will require wireless service providers to continue to increase the capacity of their networks, and we believe that the continued capacity increases will require our customers to install equipment at new sites and add new equipment at existing sites. We expect that the wireless communications industry will continue to experience growth as a result of the following trends: • Consumers are increasing their demand for wireless connectivity due to the adoption of bandwidth-intensive wireless data applications, such as video, social networking and enhanced web browsing. As a result, according to industry estimates, global mobile data traffic will grow at an approximately 46% compound annual growth rate from 2016 to 2021 and will grow at a rate three times faster than non-mobile data traffic over the same period. • The velocity of spectrum development is expected to remain dynamic as carriers continue to deploy new bands and optimize bands that are currently in service, both of which activities we expect will require carriers to install equipment at new sites and add new equipment at existing sites. For example, recent spectrum auctions and a new network for first responders that is being developed by AT&T for the First Responder Network Authority (“FirstNet”), an independent authority within the Department of Commerce, are expected to contribute to growth in the upcoming years. • Consumers list network quality as a key contributor when terminating or changing service. To remain competitive and to decrease subscriber churn rates, wireless carriers have made substantial capital investments into their wireless networks to improve service quality and expand coverage. We expect wireless carriers to continue to expend capital to differentiate their product offerings. We believe that the world-wide wireless industry will continue to grow and is reasonably well-capitalized, highly competitive and focused on quality and advanced services. Therefore, we expect that we will see a multi-year trend of additional demand for tower space from our customers, which we believe will translate into steady leasing growth for us. Business Strategy Our primary strategy is to continue to focus on expanding our site leasing business. The long-term and repetitive 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. Key elements of our strategy include: Maximizing Use of Tower Capacity. We generally have constructed or acquired towers that accommodate multiple tenants and a majority of our towers are high capacity tower structures. Most of our towers have significant capacity available for additional antennas, and we believe that increased use of our towers can generate additional lease revenue and be achieved at a low incremental cost. We measure the available capacity of our existing sites to support additional tenants by assessing several factors, including tower height, tower type, wind loading, environmental conditions, existing equipment on the tower and zoning and permitting regulations in effect in the jurisdiction where the tower is located. We actively market space on our towers through our internal sales force. As of December 31, 2017, we had an average of 1.7 tenants per tower structure. Disciplined Growth of our Tower Portfolio. 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. We intend to continue to grow our tower portfolio, domestically and internationally, through tower acquisitions and the construction of new tower structures. In connection with our international expansion, we have targeted select international markets that we believe have relatively stable political environments and a growing wireless communications industry. We intend to use a portion of our available cash from operating activities and available liquidity, including borrowings, to build and/or acquire new towers at prices that we believe will be accretive to our shareholders both in the short and long term and which allow us to maintain our long-term target leverage ratios. Capitalizing on our Scale and Management Experience. We are a large owner, operator and developer of towers, with substantial capital, human, and operating resources. We have been developing towers for wireless service providers in the U.S. since 1989 and owned and operated towers for ourselves since 1997. We believe our size, experience, capabilities, and resources make us a preferred partner for wireless service providers both in the U.S. and internationally. Our management team has extensive experience in site leasing and site development, with some of the longest tenures in the tower and site development industries. We believe that our 3 1812036_textBW.indd 6 3/15/18 4:55 PM 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. Controlling our Underlying Land Positions. We have purchased and/or entered into perpetual easements or long-term leases for the land that underlies our tower structures and intend to continue to do so, to the extent available at commercially reasonable prices. We believe that these purchases, perpetual easements, 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, 2017, approximately 70% of our tower structures were located on land that we own or control for more than 20 years and the average remaining life under our ground leases, including renewal options under our control, was 33 years. As of December 31, 2017, approximately 6.9% of our tower structures had ground leases maturing in the next 10 years. 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. We are seeking to replicate this operating model internationally. 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. Customers Since commencing operations, we have leased tower space and performed site development services for all of the large U.S. wireless service providers. In both our site leasing and site development businesses, we work with large national providers and smaller regional, local, or private operators. Internationally, we lease tower space to all the major service providers in Canada, Central America, and South America. 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 the last three years: Percentage of Total Revenues AT&T Wireless T-Mobile Verizon Wireless Sprint For the year ended December 31, 2017 2016 2015 25.0% 16.5% 15.2% 15.1% 25.7% 17.0% 15.2% 16.1% 24.2% 16.0% 13.8% 19.6% In addition to the Big 4 wireless carriers (AT&T, T-Mobile, Sprint, and Verizon Wireless), we have also provided services or leased space to a number of customers including: Cable & Wireless Cellular South Claro CNT Digicel Ericsson, Inc. ICE NII Holdings Nokia, Inc. Mastec Oi S.A. SouthernLinc TIM Telefonica U.S. Cellular 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 our 4 1812036_textBW.indd 7 3/15/18 4:55 PM corporate office. We also rely on our vice presidents, general managers, and other operations personnel to sell our services and cultivate customers. Our strategy is to delegate sales efforts by geographic region or 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’s compensation is heavily weighted to incentive-based goals and measurements. Competition Domestic Site Leasing – In the U.S., our primary competitors for our site leasing activities are (1) large independent tower companies including American Tower Corporation and Crown Castle International, (2) a large number of regional independent tower owners, (3) 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, and (4) alternative facilities such as rooftops, outdoor and indoor distributed antenna system (“DAS”) networks, billboards, utility poles, and electric transmission towers. 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. International Site Leasing – Internationally, our competition consists of wireless service providers that own and operate their own tower networks, large national and regional independent tower companies, and alternative facilities such as rooftop, outdoor and indoor DAS networks, billboards, utility poles, and electric transmission towers. Site Development – The site development business is competitive and price sensitive. We believe that the majority of our competitors in the U.S. site development business operate within local region and market areas, while some firms offer their services nationally. 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, construction companies, tower owners/managers, 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 company experience, price, track record, local reputation, geographic reach, and time for completion of a project. Employees Our corporate offices are located in our headquarters in Boca Raton, Florida. We also have employees located in our international, regional, and local offices. As of December 31, 2017, we had 1,291 employees of which 303 were based outside of the U.S. and its territories. We consider our employee relations to be good. Regulatory and Environmental Matters Federal Regulations. In the U.S., which accounted for 80.6% of our total site leasing revenue for the year ended December 31, 2017, both the Federal Communications Commission (the “FCC”) and the Federal Aviation Administration (the “FAA”) regulate towers. Many FAA requirements are implemented in FCC regulations. These regulations govern the construction, lighting, and painting or other marking of towers, as well as the maintenance, inspection, and record keeping related to towers, and may, depending on the characteristics of particular towers, require prior approval and registration of towers before they may be constructed, altered or used. Wireless communications equipment and radio or television stations operating on towers 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 tower structure registration (through the FCC’s Antenna Structure Registration System) 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. New tower construction also requires approval from the state or local governing authority for the proposed site: compliance with the National Environmental Policy Act (“NEPA”); compliance with the National Historic Preservation Act (“NHPA”); compliance with the Endangered Species Act (“ESA”); and may require notification to the FAA. 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 towers. These standards mandate that the FCC and the FAA consider the height of the proposed tower, the relationship of the tower to existing natural or man-made obstructions, and the proximity of the tower to runways and airports. Proposals to construct or to modify existing towers 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- 5 1812036_textBW.indd 8 3/15/18 4:55 PM hazard determination upon compliance with specified lighting and/or painting requirements. Towers that meet certain height and location criteria must also be registered with the FCC. A tower 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 towers may have an obligation to maintain painting and lighting or other marking in conformance with FAA and FCC regulations. Tower owners and licensees that operate on those towers also bear the responsibility of monitoring any lighting systems and notifying the FAA of any lighting outage or malfunction. Owners and operators of towers may be subject to, and therefore must comply with, environmental laws, including NEPA, NHPA and ESA. Any licensed radio facility on a tower is subject to environmental review pursuant to the NEPA, 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 NEPA. 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 a tower and prior to commencing certain operations of wireless communications or radio or television stations from the tower. 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. We generally indemnify our customers against any failure to comply with applicable regulatory standards relating to the construction, modification, or placement of towers. 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. 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 injury or property damage. We are also subject to certain environmental laws that govern tower placement and may require pre-construction environmental studies. Operators of towers 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 tower 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 owners to obtain approval from local officials or community standards organizations, or certain other entities prior to tower construction and establish regulations regarding maintenance and removal of towers. In addition, many local zoning authorities require tower owners to post bonds or cash collateral to secure their removal obligations. Local zoning authorities generally have been unreceptive to construction of new towers in their communities because of the height and visibility of the towers, and have, in some instances, instituted moratoria. International. Regulatory regimes outside of the U.S. and its territories vary by country and locality; however, these regulations typically require tower owners and/or licensees to obtain approval from local officials or government agencies prior to tower construction or modification or the addition of a new antenna to an existing tower. Additionally, some regulations include ongoing obligations regarding painting, lighting, and maintenance. Our international operations may also be subject to limitations on foreign ownership of land in certain areas. Based on our experience to date, these regimes have been similar to, but not more rigorous, burdensome or comprehensive than, those in the U.S. Non-compliance with such regulations may lead to monetary penalties or deconstruction orders. Our international operations are also subject to various regulations and guidelines regarding employee relations 6 1812036_textBW.indd 9 3/15/18 4:55 PM and other occupational health and safety matters. As we expand our operations into additional international geographic areas, we will be subject to regulations in these jurisdictions. 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, 2017, we had 1,205 new leases and amendments which had been executed with customers but which had not begun generating revenue. These leases and amendments will contractually provide for approximately $9.2 million of annual revenue. By comparison, as of December 31, 2016, we had 955 new leases and amendments which had been executed with customers but which had not begun generating revenue. These leases and amendments contractually provided for approximately $8.7 million of annual revenue. Our backlog for site development services consists of the value of work that has not yet been completed under executed contracts. As of December 31, 2017, we had approximately $47.5 million of contractually committed revenue as compared to approximately $26.0 million as of December 31, 2016. Availability of Reports and Other Information SBA Communications Corporation was incorporated in the State of Florida in March 1997. 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, as amended (the “Exchange Act”), on our website under “Investor Relations – Reports and Results – 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”). ITEM 1A. RISK FACTORS Risks Related to Our Business If our wireless service provider customers combine their operations to a significant degree, our future operating results, ability to service our indebtedness, and stock price could be adversely affected. Significant consolidation among our wireless service provider customers may result in our customers failing to renew existing leases for tower space or reducing future capital expenditures in the aggregate because their existing networks and expansion plans may overlap or be very similar, or acquired technologies may be discontinued. In connection with the combinations of Verizon Wireless and ALLTEL (to form Verizon Wireless), Cingular and AT&T Wireless (to form AT&T Mobility) and Sprint PCS and Nextel (to form Sprint), the combined companies have rationalized duplicative parts of their networks, and, in the case of Sprint, the Nextel iDEN network was discontinued, which has led and may continue to lead to the non-renewal of certain leases on our towers. During 2013, Sprint acquired Clearwire Communications and T-Mobile acquired MetroPCS, and in 2014, AT&T acquired Leap Wireless (Cricket Wireless). These consolidations have led and may continue to lead to non-renewal of certain of our tower leases. If our wireless service provider customers continue to consolidate as a result of, among other factors, limited wireless spectrum for commercial use in the U.S., these consolidations could significantly impact the number of tower leases that are not renewed or the number of new leases that our wireless service provider customers require to expand their networks, which could materially and adversely affect our future operating results and our ability to service our indebtedness. These risks could be exacerbated due to changes in governmental policy that may favor industry consolidation. In addition, the market price of our Class A common stock may be affected by the economic and market perception of the announcement or consummation of wireless service provider customer consolidations and their impact on our future operating results. 7 1812036_textBW.indd 10 3/15/18 4:55 PM 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 deficit. The following table sets forth our total principal amount of debt and shareholders’ deficit as of December 31, 2017 and 2016. As of December 31, 2017 2016 (in thousands) Total principal amount of indebtedness Shareholders' deficit $ $ 9,405,000 $ 8,875,000 (2,599,114) $ (1,995,921) 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 due on our indebtedness. 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. For example, on October 13, 2017, we issued $750.0 million of unsecured senior notes, which contributed to the $530 million increase of our total indebtedness during 2017. 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 have to pay higher interest rates upon refinancing or on our variable rate indebtedness if interest rates rise, thereby reducing our cash flows; 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 share repurchases, tower acquisition and new build capital expenditures, or to satisfy our REIT distribution requirements; 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 a material adverse effect on our business by limiting our ability to take advantage of financing, new tower development, mergers and acquisitions, share repurchases, or other opportunities and to satisfy our REIT distribution requirements. In addition, fluctuations in market interest rates or changes in central bank monetary policy may increase interest expense relating to our floating rate indebtedness, which we expect to incur pursuant to our Revolving Credit Facility and Term Loans, and may make it difficult to refinance our existing indebtedness at a commercially reasonable rate or at all. There is no guarantee that the 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. 8 1812036_textBW.indd 11 3/15/18 4:55 PM Our variable rate indebtedness and refinancing obligations subject us to interest rate risk, which could cause our debt service obligations to increase significantly. An increase in market interest rates would increase our interest expense arising on our existing and future floating rate indebtedness or upon refinancing of our fixed rate debt. Pursuant to the terms of our Credit Agreement, the interest rate that we pay on indebtedness incurred under the Revolving Credit Facility or Term Loans varies based on a fixed margin over either a base rate or a Eurodollar rate which references the LIBOR rate. As a result, we are exposed to interest rate risk. Interest rates, including LIBOR, have recently increased and are expected to continue to increase in future periods. If interest rates continue to increase, our debt service obligations on the variable rate indebtedness will increase even though the amount borrowed remained the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease. Furthermore, in an environment of increasing interest rates, it is likely that any future refinancing of our indebtedness will be either at fixed interest rates higher than our current fixed interest rates or at variable rates. In the future, we may enter into interest rate swaps that involve the exchange of floating for fixed rate interest payments in order to reduce interest rate volatility. However, we may not maintain interest rate swaps with respect to all of our variable rate indebtedness, and any swaps we enter into may not fully mitigate our interest rate risk. We currently have no interest rate swaps. We depend on a relatively small number of customers for most of our revenue, and the loss, consolidation or financial instability of any of our significant customers may materially decrease our revenue and adversely affect our financial condition. We derive a significant portion of our revenue from a small number of customers. Consequently, a reduction in demand for site leasing, reduced future capital expenditures on the networks, or the loss, as a result of bankruptcy, merger with other customers of ours or otherwise, of any of our largest customers could materially decrease our revenue and have an adverse effect on our growth. On June 20, 2016, Oi, S.A. (“Oi”), our largest customer in Brazil, filed a petition for judicial reorganization in Brazil. For the year ended December 31, 2017, Oi comprised approximately 7.5% of our total site leasing revenue. While we initially recorded a $16.5 million bad debt provision during the second quarter of 2016 relating to amounts owed or potentially owed by Oi as of the petition date, since that date we have continued to do business with Oi in the ordinary course. On January 8, 2018, Oi’s reorganization plan was approved by the Brazilian courts and Oi is expected to resolve all its pre-petition obligations in accordance with the terms of the plan. However, if Oi is unable to successfully fulfill its reorganization obligations or cannot operate its business on a go-forward basis, it could adversely affect our future results of operation. 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: Percentage of Total Revenues AT&T Wireless T-Mobile Verizon Wireless Sprint For the year ended December 31, 2017 2016 2015 25.0% 16.5% 15.2% 15.1% 25.7% 17.0% 15.2% 16.1% 24.2% 16.0% 13.8% 19.6% 9 1812036_textBW.indd 12 3/15/18 4:55 PM We also have client concentrations with respect to revenues in each of our financial reporting segments: Percentage of Domestic Site Leasing Revenue AT&T Wireless T-Mobile Verizon Wireless Sprint Percentage of International Site Leasing Revenue Oi S.A. Telefonica Claro Percentage of Site Development Revenue T-Mobile Sprint Verizon Wireless Nokia, Inc. Ericsson, Inc. For the year ended December 31, 2017 2016 2015 32.7% 19.7% 19.0% 18.9% 32.7% 19.6% 18.2% 19.8% 31.9% 19.0% 16.3% 22.3% For the year ended December 31, 2017 2016 2015 42.2% 25.7% 10.0% 43.9% 26.4% 9.4% 48.8% 24.7% 8.0% For the year ended December 31, 2017 2016 2015 26.9% 12.9% 12.8% 10.1% 7.4% 28.4% 11.7% 16.5% 7.1% 5.0% 17.6% 28.5% 14.8% 6.3% 15.3% We derive revenue through numerous site leasing contracts and site development contracts. Each site leasing contract relates to the lease of space at an individual tower and is generally for an initial term of five to ten years in the U.S. and Canada, and renewable for five 5-year periods at the option of the tenant. Site leasing contracts in our Central American and South American markets typically have an initial term of ten years with multiple five year renewal periods. However, if any of our significant site leasing customers 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. In addition, many of our tenants in our international markets are subsidiaries of global telecommunications companies. These subsidiaries may not have the explicit or implied financial support of their parent entities, which may impact their creditworthiness. 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 may negatively impact our ability to grow our communication site portfolio long term. We intend to continue growing our tower portfolio, domestically and internationally, through acquisitions and new builds. Our ability to meet our growth targets significantly depends on our ability to build or acquire existing towers that meet our investment requirements. 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 in the U.S. and there is more competition to acquire existing towers. Increased competition for acquisitions may result in fewer acquisition opportunities for us, higher acquisition prices, and increased difficulty in negotiating and consummating agreements to acquire such towers. For example, in 2017, we passed on more U.S. acquisitions than we did in 2016 due to asset quality, price, or lease terms. 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 we do. Finally, laws regulating competition, domestically and internationally, may limit our ability to acquire certain portfolios. As a result of these risks, the cost of 10 1812036_textBW.indd 13 3/15/18 4:55 PM acquiring these towers may be higher than we expect or we may not be able to meet our annual and long-term tower portfolio growth targets. If we are not able to successfully address these challenges, we may not be able to materially increase our tower portfolio in the long-term through acquisitions. Our ability to build 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. 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. With respect to our international new builds, our tower construction may be delayed or halted as a result of local zoning restrictions, inconsistencies between laws or other barriers to construction in international markets. Due to these risks, it may take longer to complete our new tower builds, domestically and internationally, than anticipated, and the costs of constructing these towers may be higher than we expect or we may not be able to add as many towers as we had planned in 2018. If we are not able to increase our new build tower portfolio as anticipated, it could negatively impact our ability to achieve our financial goals. Increasing competition in the tower industry may create pricing pressures or result in non-renewals that may materially and adversely affect us. Our industry is highly competitive, and our wireless service provider customers sometimes have alternatives for leasing antenna space. However, 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. However competitive pricing pressures for tenants on towers from competitors could materially and adversely affect our lease rates. In addition, the increasing number of towers (1) may provide customers the ability to relocate their antennae to other towers if they determine that a more suitable, efficient or economic location exists, which could lead to non-renewal of existing leases, or (2) may adversely impact our ability to enter into new customer leases. Any of these factors could materially and adversely affect our growth rate and our future operations. 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; national and regional tower companies who may be substantially larger and have greater financial resources than we do; and alternative facilities such as rooftops, outdoor and indoor DAS networks, billboards and electric transmission towers. The site development segment of our industry is also 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 may come 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 decrease, our consolidated revenues and our site development segment operating profit could be adversely affected. A slowdown in demand for wireless communications services or for tower space could materially and adversely affect our future growth and revenues, and we cannot control that demand. Additional revenue growth on our towers other than through contractual escalators comes directly from additional investment by our wireless service provider customers in their networks. If consumers significantly reduce their minutes of use or data usage, or fail to widely adopt and use wireless data applications, our wireless service provider customers could experience a decrease in demand for their services. Regardless of consumer demand, each wireless service provider must have substantial capital resources and capabilities to build out their wireless networks, including licenses for spectrum. In addition, our wireless service customers have engaged in increased use of network sharing, roaming or resale arrangements. As a result of all of the above, wireless service providers may scale back their business plans or otherwise reduce their spending, which could materially and adversely affect demand for our tower space and our wireless communications services business, which could have a material adverse effect on our business, results of operations and financial condition. 11 1812036_textBW.indd 14 3/15/18 4:55 PM Our international operations are subject to economic, political and other risks that could materially and adversely affect our revenues or financial position. Our current business operations in Canada, Central America, and South America, and our expansion into any other international markets in the future, could result in adverse financial consequences and operational problems not typically experienced in the United States. The consolidated revenues generated by our international operations were approximately 18.2% during the year ended December 31, 2017, and we anticipate that our revenues from our international operations will continue to grow in the future. Accordingly, our business is and will in the future be subject to risks associated with doing business internationally, including: • • • • • • • • • • • • • • changes in a specific country’s or region’s political or economic conditions; laws and regulations that tax or otherwise restrict repatriation of earnings or other funds or otherwise limit distributions of capital; laws and regulations that dictate how we operate our towers and conduct business, including zoning, maintenance and environmental matters, and laws related to ownership of real property; laws and regulations governing our employee relations, including occupational health and safety matters; changes to existing or new domestic or international tax laws or fees directed specifically at the ownership and operation of towers, which may be applied and enforced retroactively; expropriation and governmental regulation restricting foreign ownership or requiring reversion or divestiture; laws effecting telecommunications infrastructure including the sharing of such infrastructure; restriction or revocation of spectrum licenses; our ability to comply with, and the costs of compliance with, anti-bribery laws such as the Foreign Corrupt Practices Act and similar local anti-bribery laws; our ability to compete with owners and operators of wireless towers that have been in the international market for a longer period of time than we have; uncertainties regarding legal or judicial systems, including inconsistencies between and within laws, regulations and decrees, and judicial application thereof, and delays in the judicial process; health or similar issues, such as a pandemic or epidemic; difficulty in recruiting and retaining trained personnel; and language and cultural differences. If we are unable to protect our rights to the land under our towers, it could adversely affect our business and operating results. Our real property interests relating to the land under our tower structures consist primarily of leasehold and sub-leasehold interests, fee interests, easements, licenses, rights-of-way, and other similar interests. From time to time, we experience disputes with landowners regarding the terms of the agreements for the land under our tower structures, which can affect our ability to access and operate such towers. Further, landowners may not want to renew their agreements with us, they may lose their rights to the land, or they may transfer their land interests to third parties, including ground lease aggregators and our competitors, which could affect our ability to renew agreements on commercially viable terms or at all. In addition, the land underlying the 2,113 towers we acquired in 2013 from Oi, one of Brazil’s largest telecommunications providers, is subject to a concession from the Federal Republic of Brazil that expires in 2025. At the end of the term, the Brazilian government will have the right to (i) renew the concession upon newly negotiated terms or (ii) terminate the concession and take possession of the land and the tower on such land. Although Oi has entered into a non-terminable lease with us for 35 years, if the concession is not renewed, our site leasing revenue from co-located tenants 12 1812036_textBW.indd 15 3/15/18 4:55 PM would terminate prior to the end of such lease. For the year ended December 31, 2017, we generated 11.5% of our total international site leasing revenue from these 2,113 towers of which 7.3% related to Oi and 4.2% represented revenue from co-located tenants. As of December 31, 2017, the average remaining life under our ground leases, including renewal options under our control, was approximately 33 years, and approximately 6.9% of our tower structures have ground leases maturing in the next 10 years. Failure to protect our rights to the land under our towers may have a material adverse effect on our business, results of operations or financial condition. New technologies or network architecture or changes in a customer’s business model may reduce demand for our wireless infrastructure or negatively impact our revenues. Improvements or changes in the efficiency, architecture, and design of wireless networks or changes in a wireless service provider customer’s business model may reduce the demand for our wireless infrastructure. In addition, as customers deploy increased capital to the development and implementation of new technologies, they may allocate less of their budgets to lease space on our towers. For example, new technologies that may promote network sharing, joint development, or resale agreements by our wireless service provider customers, such as signal combining technologies or network functions virtualization, may reduce the need for our wireless infrastructure. In addition, other technologies and architectures, such as WiFi, DAS, femtocells, other small cells, or satellite (such as low earth orbiting) and mesh transmission systems may, in the future, serve as substitutes for, or alternatives to, the traditional macro site cellular architecture that is the basis of substantially all of our site leasing business. In addition, new technologies that enhance the range, efficiency, and capacity of wireless equipment could reduce demand for our wireless infrastructure. Further, a customer may decide to no longer outsource wireless infrastructure or otherwise change its business model. Any significant reduction in demand for our wireless infrastructure resulting from new technologies or new architectures or changes in a customer’s business model may negatively impact our revenues or otherwise have a material adverse effect on us. Currency fluctuations may negatively affect our results of operations. Our operations in Central America and Ecuador are primarily denominated in U.S. Dollars. In Brazil, Canada, Chile, and Colombia, significantly all of our revenue, expenses, and capital expenditures, including tenant leases, ground leases, and other tower- related expenses are denominated in local currency. In Argentina and Peru, our revenue, expenses, and capital expenditures, including tenant leases, ground leases, and other tower-related expenses are dominated in a mix of local currency and U.S. dollars. Our foreign currency denominated revenues and expenses are translated into U.S. dollars at average exchange rates for inclusion in our consolidated financial statements. For the year ended December 31, 2017, approximately 18.6% of our total cash site leasing revenue was generated by our international operations, of which 13.6% was generated in non-U.S. dollar currencies, including 12.7% which was denominated in Brazilian Reais. The exchange rates between our foreign currencies and the U.S. Dollar have fluctuated significantly in recent years and may continue to do so in the future. For example, the Brazilian Real has historically been subject to substantial volatility and strengthened 8.7% when comparing the average rate for the years ended December 31, 2017 and 2016. This trend has affected, and may in the future continue to affect, our reported results of operations. Changes in exchange rates between these local currencies and the U.S. dollar will affect the recorded levels of site leasing revenue, segment operating profit, assets and/or liabilities. Volatility in foreign currency exchange rates can also affect our ability to plan, forecast and budget for our international operations and expansion efforts. Furthermore, we have intercompany loan agreements which permit one of our Brazilian entities to borrow amounts up to $1,250 million. As of December 31, 2017, the aggregate outstanding balance under these agreements was $560.9 million. In accordance with ASC 830, we remeasure foreign denominated intercompany loans with the corresponding change in the balance being recorded in Other income (expense), net in our Consolidated Statements of Operations as settlement is anticipated or planned in the foreseeable future. Consequently, if the U.S. Dollar strengthens against the Brazilian Real, our results of operations would be adversely affected. For the years ended December 31, 2017 and 2016, we recorded a $8.8 million loss and a $90.0 million gain, respectively, on the remeasurement of the intercompany loan due to changes in foreign currency exchange rates. We may not be able to fully recognize the anticipated benefits of towers that we acquire. A key element of our growth strategy is to increase our tower portfolio through acquisitions. We rely on our due diligence of the towers and the representations and financial records of the sellers and other third parties to establish the anticipated revenues and expenses and whether the acquired towers will meet our internal guidelines for current and future potential returns. In addition, we may not always have the ability to analyze and verify all information regarding title, access and other issues regarding the land 13 1812036_textBW.indd 16 3/15/18 4:55 PM underlying acquired towers. This is particularly true in our international acquisitions of towers from wireless service providers. To the extent that these towers were acquired in individually material transactions, we may be required to place enhanced reliance on the financial and operational representations and warranties of the sellers. If (i) these records are not complete or accurate, (ii) we do not have complete access to, or use of, the land underlying the acquired towers or (iii) the towers do not achieve the financial results anticipated, it could adversely affect our revenues and results of operations. In addition, acquisitions which would be material in the aggregate may exacerbate the risks inherent with our growth strategy, such as (i) an adverse impact on our overall profitability if the acquired towers do not achieve the projected financial results, (ii) unanticipated costs associated with the acquisitions that may impact our results of operations for a period, (iii) increased demands on our cash resources that may, among other things, impact our ability to explore other opportunities, (iv) undisclosed and assumed liabilities that we may be unable to recover, (v) increased vulnerability to general economic conditions, (vi) an adverse impact on our existing customer relationships, (vii) additional expenses and exposure to new regulatory, political and economic risks if such acquisitions were in new jurisdictions and (viii) diversion of managerial attention. The process of integrating any acquired towers into our operations may result in unforeseen operating difficulties and large expenditures and may absorb significant management attention that would otherwise be available for the ongoing development of our business. It may also result in the loss of key customers and/or personnel and expose us to unanticipated liabilities. These risks may be exacerbated in those circumstances in which we acquire a material number of towers. Further, we may not be able to retain the key employees that may be necessary to operate the business we acquire, and we may not be able to timely attract new skilled employees and management to replace them. There can be no assurance that we will be successful in integrating acquisitions into our existing business. This is particularly true in our international acquisitions of towers from wireless service providers. 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, including long-term evolution (“LTE”), advanced wireless service in the 1695-1710 MHz, 1755-1780 MHz, and 2155-2180 MHz bands (the “AWS-3” bands), or other new wireless technologies such as 5G 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 in the United States experienced delays from the original projected timelines of the wireless and broadcast industries, and continued deployment of 4G could experience delays. Additionally, the demand by consumers and the adoption rate of consumers for these new technologies once deployed may be lower or slower than anticipated, particularly in certain of our international markets. 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. The documents governing our indebtedness contain restrictive covenants that could adversely affect our business by limiting our flexibility. The indentures governing the 2014 Senior Notes, the 2016 Senior Notes, and the 2017 Senior Notes, the Senior Credit Agreement, and the mortgage loan underlying the Tower Securities contain restrictive covenants imposing significant operational and financial restrictions on us, including restrictions that may limit our ability to engage in acts that may be in our long-term best interests. Among other things, the covenants under each instrument limit our ability to: • • • • • merge, consolidate or sell assets; make restricted payments, including pay dividends or make other distributions; enter into transactions with affiliates; enter into sale and leaseback transactions; and issue guarantees of indebtedness. We are required to maintain certain financial ratios under the Senior Credit Agreement. The Senior Credit Agreement, as amended, requires SBA Senior Finance II to maintain specific financial ratios, including (1) a ratio of Consolidated Total Debt to Annualized Borrower EBITDA not to exceed 6.5 times for any fiscal quarter, (2) a ratio of Consolidated Total Debt and Net Hedge Exposure (calculated in accordance with the Senior Credit Agreement) to Annualized Borrower EBITDA for the most recently ended 14 1812036_textBW.indd 17 3/15/18 4:56 PM fiscal quarter not to exceed 6.5 times for 30 consecutive days and (3) a ratio of Annualized Borrower EBITDA to Annualized Cash Interest Expense (calculated in accordance with the Senior Credit Agreement) of not less than 2.0 times for any fiscal quarter. Additionally, the mortgage loan relating to our Tower Securities contains financial covenants that require that the borrowers maintain, on a consolidated basis, a minimum debt service coverage ratio. To the extent that the debt service coverage ratio, 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. 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 our debt instruments. If any default occurs, all amounts outstanding under our outstanding notes and the Senior Credit Agreement may become immediately due and payable. 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 assets are, and are expected to be, the outstanding capital stock and membership interests of our subsidiaries. We conduct, and expect to continue conducting, 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. Most of our indebtedness is owed directly by our subsidiaries, including the mortgage loan underlying the Tower Securities, the Term Loans and any amounts that we may borrow under the Revolving Credit Facility. Consequently, the first use of any cash flow from operations generated by such subsidiaries will be payments of interest and principal, if any, under their respective indebtedness. Other than the cash required to repay amounts due under our 2014 Senior Notes, 2016 Senior Notes, and 2017 Senior Notes and funds to be utilized for stock repurchases, 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 respective debt obligations. 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 their outstanding debt instruments. 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: • • • • • • • • 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, holidays and 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. 15 1812036_textBW.indd 18 3/15/18 4:56 PM 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. 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 Executive Vice President and President—International, Thomas P. Hunt, our Executive Vice President, Chief Administrative Officer and General Counsel, and Brendan T. Cavanagh, our Executive Vice President and Chief Financial Officer. 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 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, both in the U.S. and internationally. In the U.S., both the FAA and the FCC regulate the construction, modification, and maintenance of towers and structures that support antennas used for wireless communications and radio and television broadcasts. In addition, the FCC separately licenses and regulates wireless communications equipment and television and radio stations operating from such towers. FAA and FCC regulations govern construction, lighting, painting, and marking of towers and may, depending on the characteristics of the tower, require registration of the tower. Certain proposals to construct new towers or to modify existing towers are reviewed by the FAA to ensure that the tower will not present a hazard to air navigation. Tower owners may have an obligation to mark or paint such towers or install lighting to conform to FAA and FCC regulations and to maintain such marking, painting and lighting. Tower 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 towers are also reviewed by the FCC to ensure compliance with environmental impact requirements established in federal statutes, including NEPA, NHPA and ESA. 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. Local regulations, including municipal or local ordinances, zoning restrictions and restrictive covenants imposed by community developers, vary greatly, but typically require tower owners to obtain approval from local officials or community standards organizations prior to tower 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. In our international operations, the impact of these zoning, permitting and related regulations and restrictive covenants on our new builds, co-locations and operations could be exacerbated as some of these markets may lack established permitting processes for towers, have inconsistencies between national and local regulations and have other barriers to timely construction and permitting of towers. As a result, tower construction in some of our international markets may be delayed or halted or our acquired towers may not perform as anticipated. These factors could have a material adverse effect on our future growth and operations. Security breaches and other disruptions could compromise our information, which would cause our business and reputation to suffer. As part of our day-to-day operations, we rely on information technology and other computer resources and infrastructure to carry out important business activities and to maintain our business records. Our computer systems, or those of our cloud or Internet- based providers, could fail on their own accord and are subject to interruption or damage from power outages, computer and telecommunications failures, computer viruses, security breaches (including through cyber-attack and data theft), errors, catastrophic events such as natural disasters and other events beyond our control. If our or our vendors’ computer systems and backup systems are compromised, degraded, damaged, or breached, or otherwise cease to function properly, we could suffer interruptions in our operations or unintentionally allow misappropriation of proprietary or confidential information (including information about our tenants or landlords). This could damage our reputation and disrupt our operations and the services we provide to customers, which could adversely affect our business and operating results. 16 1812036_textBW.indd 19 3/15/18 4:56 PM Our towers are subject to damage from natural disasters and other unforeseen events. Our towers are subject to risks associated with natural disasters such as tornadoes, hurricanes and earthquakes or may collapse for any number of reasons, including structural deficiencies. 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 and may harm our reputation. To the extent that we are not able to meet our contractual obligations to our customers, due to a natural disaster or other catastrophic circumstances, our customers may not be obligated or willing to pay their lease expenses; however, we may be required to continue paying our fixed expenses related to the affected tower, including ground lease expenses. If we are unable to meet our contractual obligations to our customers for a material portion of our towers, our operations could be materially and adversely affected. 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 structures, 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 could suffer adverse tax and other financial consequences if taxing authorities do not agree with our tax positions. We are periodically subject to a number of tax examinations by taxing authorities in the states and countries where we do business. We also have significant net operating losses (“NOLs”) in U.S. federal and state taxing jurisdictions. Generally, for U.S. federal and state tax purposes, NOLs generated prior to the 2018 tax year can be carried forward and used for up to twenty years, and all of our tax years will remain subject to examination until three years after our NOLs are used or expire. NOLs generated starting in the 2018 tax year can be carried forward indefinitely but are subject to the 80% utilization limitation. We expect that we will continue to be subject to tax examinations in the future. In addition, U.S. federal, state and local, as well as international, tax laws and regulations are extremely complex and subject to varying interpretations. If our tax benefits, including from our use of NOLs or other tax attributes, are challenged successfully by a taxing authority, we may be required to pay additional taxes or penalties, or make additional distributions, which could have a material adverse effect on our business, results of operations and financial condition. Our issuance of equity securities and other associated transactions may trigger a future ownership change which may negatively impact our ability to utilize NOLs 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 NOLs and could result in us having to make additional cash distributions. Our costs could increase and our revenues could decrease due to perceived health risks from RF energy. The U.S. 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 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 17 1812036_textBW.indd 20 3/15/18 4:56 PM 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. Our current policies provide no coverage for claims based on RF energy exposure. 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. The recently adopted US tax legislation may result in additional tax liabilities that may affect our future results and profitability. On December 22, 2017, the U.S. government enacted comprehensive tax legislation, commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”), that significantly revises the U.S. tax code by, among other things, lowering the corporate income tax rate from a top marginal rate of 35% to a flat 21%, imposing a mandatory one-time deemed repatriation of foreign earnings (commonly referred to as the “transition tax”), limiting deductibility of interest expense and certain executive compensation and implementing a territorial tax system. The SEC staff acknowledged the challenges companies face incorporating the effects of the Tax Act by their financial reporting deadlines. In response, Staff Accounting Bulletin No. 118 (“SAB 118”) was issued on December 22, 2017, regarding application of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 740, Income Taxes (“ASC Topic 740”), specifically to the Tax Act. SAB 118 addresses the application of US GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete accounting for certain income tax effects of the Tax Act. The Tax Act impacted our consolidated results of operations during the fourth quarter and may impact our consolidated results of operations in future periods. In particular, the transition tax resulted in a one-time income inclusion of $52.4 million related to previously unremitted earnings of certain non-U.S. subsidiaries, which we will elect to include in income over the next eight tax years. The inclusion will be offset by our existing NOLs to the extent possible during the eight-year recognition period. In addition, we recorded a one-time reduction to our deferred tax asset and offsetting valuation allowance in the amount of $31.5 million; $19.2 million related to the reduction of the U.S. corporate tax rate and $12.3 million related to the new limitations on the deductibility of executive compensation. These amounts represent our provisional estimate of the relevant charges, but will be subject to adjustment as we finalize the relevant computations and as additional IRS rules and guidance on the Tax Act provisions are adopted. Since the Tax Act was passed late in the fourth quarter of 2017, and ongoing guidance and accounting interpretation are expected over the next 12 months, we consider the accounting of the Transition Tax, GILTI, Section 162(m) adjustment, state taxes, and other items to be incomplete due to the forthcoming guidance and our ongoing analysis of final year-end data and tax positions. We expect to complete our analysis within the measurement period in accordance with SAB 118. Any material revisions in our computations could adversely affect our results of operations in future periods. In addition, many of the provisions of the Tax Act will require guidance through the issuance of Treasury regulations in order to assess their effect. There may be a substantial delay before such regulations are promulgated, increasing the uncertainty as to the ultimate effect of the statutory amendments on us. Future regulatory or administrative guidance may also have an adverse impact on us or our shareholders. Risks Related to Our Status as a REIT Complying with the REIT requirements may cause us to liquidate assets or hinder our ability to pursue otherwise attractive asset acquisition opportunities. To qualify as a REIT for federal income tax purposes, we must continually satisfy tests concerning, among other things, the nature and diversification of our assets, the sources of our income and the amounts we distribute to our shareholders. For example, to qualify as a REIT, we must ensure that, at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and “real estate assets” (as defined in the Code), including towers and certain mortgage loans and securities. The remainder of our investments (other than government securities, qualified real estate assets and securities issued by a taxable REIT subsidiary (“TRS”) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our total assets (other than government securities, qualified real estate assets and securities issued by a TRS) can consist of the securities of any one issuer, and no more than 25% (for taxable years beginning on or before December 31, 2017) or 20% (for taxable years beginning after December 31, 2017) of the value of our total assets can be represented by securities of one or more TRSs. If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate assets. 18 1812036_textBW.indd 21 3/15/18 4:56 PM In addition to the asset tests set forth above, to qualify and be subject to tax as a REIT, we will generally be required to distribute at least 90% of our REIT taxable income after the utilization of any available NOLs (determined without regard to the dividends paid deduction and excluding net capital gain) each year to our shareholders. Our determination as to the timing or amount of future dividends will be based on a number of factors, including investment opportunities around our core business and the availability of our existing NOLs. To the extent that we satisfy the 90% distribution requirement, but distribute less than 100% of our REIT taxable income (after the application of available NOLs, if any), we will be subject to U.S. federal corporate income tax on our undistributed taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our shareholders for a calendar year is less than a minimum amount specified under the Code. These distribution requirements could hinder our ability to pursue otherwise attractive asset acquisition opportunities. Furthermore, our ability to compete for acquisition opportunities in domestic and international markets may be adversely affected if we need, or require, the target company to comply with certain REIT requirements. These actions could have the effect of reducing our income, amounts available for distribution to our shareholders and amounts available for making payments on our indebtedness. Qualifying as a REIT involves highly technical and complex provisions of the Code. If we fail to qualify as a REIT or fail to remain qualified as a REIT, to the extent we have REIT taxable income and have utilized our NOLs, we will be subject to U.S. federal income tax as a regular corporation and could face a substantial tax liability, which would reduce the amount of cash available for distribution to our shareholders. Qualification as a REIT involves the application of highly technical and complex Code provisions for which only limited judicial and administrative authorities exist. Even a technical or inadvertent violation could jeopardize our REIT qualification. Our qualification as a REIT will depend on our satisfaction of certain asset, income, organizational, distribution, shareholder ownership and other requirements on a continuing basis. We received an opinion of our special REIT tax counsel with respect to our qualification as a REIT. Investors should be aware, however, that opinions of counsel are not binding on the IRS or any court. The opinion represents only the view of such counsel based on its review and analysis of existing law and on certain representations as to factual matters and covenants made by us, including representations relating to the values of our assets and the sources of our income. The opinion is expressed as of the date issued. Our qualification as a REIT will depend on our satisfaction of certain asset, income, organizational, distribution, shareholder ownership and other requirements on a continuing basis. Our ability to satisfy the asset tests depends upon our analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination, and for which we will not obtain independent appraisals. If we fail to qualify as a REIT in any taxable year, to the extent we have REIT taxable income and have utilized our NOLs, we would be subject to U.S. federal income tax, including any applicable alternative minimum tax, on our taxable income at regular corporate rates, and dividends paid to our shareholders would not be deductible by us in computing our taxable income. Any resulting corporate tax liability could be substantial and would reduce the amount of cash available for distribution to our shareholders, which in turn could have an adverse impact on the value of our common stock. Unless we were entitled to relief under certain provisions of the Code, we also would be disqualified from re-electing to be taxed as a REIT for the four taxable years following the year in which we failed to qualify as a REIT. If we fail to qualify for taxation as a REIT, we may need to borrow additional funds or liquidate assets to pay any additional tax liability. Accordingly, funds available for investment and making payments on our indebtedness would be reduced. We may be required to borrow funds, sell assets, or raise equity to satisfy our REIT distribution requirements. From time to time, we may generate REIT taxable income greater than our cash flow as a result of differences in timing between the recognition of taxable income and the actual receipt of cash or the effect of nondeductible capital expenditures, the creation of reserves or required debt or amortization payments. If we do not have other funds available in these situations, we may need to borrow funds, sell assets or raise equity, even if the then-prevailing market conditions are not favorable for these borrowings, sales or offerings, to enable us to satisfy the REIT distribution requirement and to avoid U.S. federal corporate income tax and the 4% excise tax in a particular year. These alternatives could increase our costs and our leverage, decrease our Adjusted Funds From Operations per share or require us to distribute amounts that would otherwise be invested in future acquisitions or stock repurchases. Thus, compliance with the REIT requirements may hinder our ability to grow, which could adversely affect the value of our common stock. Furthermore, compliance with the REIT distribution requirements may increase the financing we need to fund capital expenditures, future growth, or expansion initiatives, which would increase our total leverage. Covenants specified in our current and future debt instruments may limit our ability to make required REIT distributions. The Senior Credit Agreement, the mortgage loan agreement related to our securitization transactions and the indentures governing our 2014 Senior Notes, 2016 Senior Notes, and 2017 Senior Notes contain certain covenants that could limit our ability to 19 1812036_textBW.indd 22 3/15/18 4:56 PM make distributions to our shareholders. Under the Senior Credit Agreement, our subsidiaries may make distributions to us to satisfy our REIT distribution requirements and additional amounts to distribute up to 100% of our REIT taxable income, so long as SBA Senior Finance II’s ratio of Consolidated Total Debt to Annualized Borrower EBITDA does not exceed 6.5 times for any fiscal quarter. In addition, under the mortgage loan agreement related to our securitization transactions, or Securitization, a failure to comply with the Debt Service Coverage Ratio in that agreement could prevent our borrower subsidiaries from distributing any excess cash from the operation of their towers to us. Finally, while the indentures governing the 2014 Senior Notes, 2016 Senior Notes, and 2017 Senior Notes permit us to make distributions to our shareholders to the extent such distributions are necessary to maintain our status as a REIT or to avoid entity level taxation, this authority is subject to the conditions that no default or event of default exists or would result therefrom and that the obligations under the 2014 Senior Notes, 2016 Senior Notes, or 2017 Senior Notes, as applicable, have not otherwise been accelerated. If these limits prevent us from satisfying our REIT distribution requirements, we could fail to qualify for taxation as a REIT. If these limits do not jeopardize our qualification for taxation as a REIT but do nevertheless prevent us from distributing 100% of our REIT taxable income, we will be subject to U.S. federal corporate income tax, and potentially the nondeductible 4% excise tax, on the retained amounts. Our payment of cash distributions in the future is not guaranteed and the amount of any future cash distributions may fluctuate, which could adversely affect the value of our Class A common stock. REITs are required to distribute annually at least 90% of their REIT taxable income (determined before the deduction for dividends paid and excluding any net capital gain). As of December 31, 2017, $956.7 million of the federal NOLs are attributes of the REIT. We may use these NOLs to offset our REIT taxable income, and thus any required distributions to shareholders may be reduced or eliminated until such time as the NOLs have been fully utilized. The Internal Revenue Code places limitations upon the future availability of NOLs based upon changes in our equity. If these occur, our ability to offset future income with existing NOLs may be limited. We currently expect that we will utilize available NOLs to reduce all or a portion of our REIT taxable income and therefore we may not initially make any distributions, which may adversely affect the market value of our Class A common stock. The amount of future distributions will be determined, from time to time, by the Board of Directors to balance our goal of increasing long-term shareholder value and retaining sufficient cash to implement our current capital allocation policy, which prioritizes investment in quality assets that meet our return criteria, and then stock repurchases, when we believe our stock price is below its intrinsic value. The actual timing and amount of distributions will be as determined and declared by the Board of Directors and will depend on, among other factors, our NOLs, our financial condition, earnings, debt covenants and other possible uses of such funds. Consequently, our future distribution levels may fluctuate. Certain of our business activities may be subject to corporate level income tax and foreign taxes, which would reduce our cash flows, and would have potential deferred and contingent tax liabilities. We may be subject to certain federal, state, local and foreign taxes on our income and assets, including alternative minimum taxes, taxes on any undistributed income and state, local or foreign income, franchise, property and transfer taxes. In addition, we could, in certain circumstances, be required to pay an excise or penalty tax, which could be significant in amount, in order to utilize one or more relief provisions under the Code to maintain qualification for taxation as a REIT. In addition, we may incur a 100% excise tax on transactions with a TRS if they are not conducted on an arm’s length basis. Any of these taxes would decrease our earnings and our available cash. Our TRS assets and operations also will continue to be subject, as applicable, to federal and state corporate income taxes and to foreign taxes in the jurisdictions in which those assets and operations are located. If we continue our international expansion, we may have additional TRS assets and operations subject to such taxes. Any of these taxes would decrease our earnings and our available cash. We will also be subject to a federal corporate level tax at the highest regular corporate rate (35% in 2017 and 21% as of January 1, 2018) on the gain recognized from a sale of assets occurring during our first five years as a REIT, up to the amount of the built-in gain that existed on January 1, 2016, which is based on the fair market value of those assets in excess of our tax basis in those assets as of January 1, 2016. Gain from a sale of an asset occurring after the specified period ends will not be subject to this corporate level tax. We currently do not expect to sell any asset if the sale would result in the imposition of a material tax liability. We cannot, however, assure you that we will not change our plans in this regard. Our use of TRSs may cause us to fail to qualify as a REIT. The net income of our TRSs is not required to be distributed to us, and such undistributed TRS income is generally not subject to our REIT distribution requirements. However, if the accumulation of cash or reinvestment of significant earnings in our TRSs 20 1812036_textBW.indd 23 3/15/18 4:56 PM causes the fair market value of our securities in those entities, taken together with other non-qualifying assets, to represent more than 25% of the fair market value of our assets, or causes the fair market value of our TRS securities alone to represent more than 25% (for taxable years beginning on or before December 31, 2017) or 20% (for taxable years beginning after December 31, 2017) of the value of our total assets, in each case, as determined for REIT asset testing purposes, we would, absent timely responsive action, fail to qualify as a REIT. If we continue our international expansion, we may have increased net income from TRSs, which may cause us to rise above these thresholds. Legislative or other actions affecting REITs could have a negative effect on us. The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the Treasury. Changes to the tax laws or interpretations thereof, with or without retroactive application, could materially and adversely affect our investors or us. We cannot predict how changes in the tax laws might affect our investors or us. New legislation, U.S. Treasury Regulations, administrative interpretations or court decisions could significantly and negatively affect our ability to qualify as a REIT or the U.S. federal income tax consequences to our investors and us of such qualification. Our Board’s ability to revoke our REIT qualification, without shareholder approval, may cause adverse consequences to our shareholders. Our articles of incorporation provide that our Board of Directors may revoke or otherwise terminate our REIT election, without the approval of our shareholders, if it determines that it is no longer in our best interests to continue to qualify as a REIT. If we cease to be a REIT, we will not be allowed a deduction for dividends paid to shareholders, if any, in computing our taxable income, and to the extent we have taxable income and have utilized our NOLs, we will be subject to U.S. federal income tax at regular corporate rates and state and local taxes, which may have adverse consequences on our total return to our shareholders. We have limited experience operating as a REIT, which may adversely affect our financial condition, results of operations, cash flow, per share trading price of our common stock and ability to satisfy debt service obligations. We have limited experience operating as a REIT, and as a result, we may not be able to operate successfully as a REIT. In addition, we will be required to implement substantial control systems and procedures in order to maintain our status as a REIT. As a result, we may incur additional legal, accounting and other expenses that we have not previously incurred, which could be significant, and our management and other personnel may need to devote additional time to comply with these rules and regulations and controls required for continued compliance with the Code. These costs and time commitments could be substantially more than we currently expect. Therefore, our historical combined consolidated financial statements may not be indicative of our future costs and performance as a REIT. If our performance is adversely affected, it could affect our financial condition, results of operations, cash flow and ability to satisfy our debt service obligations. The historical market price of our Class A common stock prior to our REIT conversion may not be indicative of the market price of our Class A common stock following our REIT conversion. The historical market price of our Class A common stock prior to our REIT conversion, which commenced with our taxable year ending December 31, 2016, may not be indicative of how the market values our Class A common stock following our REIT conversion because of the change in our organization from a taxable C corporation to a REIT. Although we do not currently anticipate commencing distributions until a future date, the stock price of REIT securities have historically been affected by changes in market interest rates as investors evaluate the annual yield from distributions on the entity’s common stock as compared to yields on other financial instruments. In addition, the market price of our Class A common stock may be affected by the economic and market perception of REIT securities as well as general market conditions. Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends. The maximum U.S. federal income tax rate applicable to income from “qualified dividends” payable to U.S. shareholders that are individuals, trusts and estates is currently 20%. Dividends payable by REITs, however, generally are not eligible for the reduced rates applicable to qualified dividends. Although these rules do not adversely affect the taxation of REITs, the more favorable rates applicable to regular corporate qualified dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the stock of REITs, including our common stock. 21 1812036_textBW.indd 24 3/15/18 4:56 PM Risks Related to Ownership of our Class A Common Stock The REIT-related ownership and transfer restrictions may restrict or prevent our shareholders from engaging in certain transfers of our common stock. In order for us to satisfy the requirements for REIT qualification, no more than 50% in value of all classes or series of our outstanding shares of stock may be owned, beneficially or constructively, by five or fewer individuals (as defined in the Code to include certain entities) at any time during the last half of each taxable year (other than the first year for which an election to be subject to tax as a REIT has been made). In addition, our capital stock must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months or during a proportionate part of a shorter taxable year (other than the first year for which an election to be taxed as a REIT has been made). Our articles of incorporation contain REIT-related ownership and transfer restrictions that generally restrict shareholders from owning more than 9.8%, by value or number of shares, whichever is more restrictive, of our outstanding shares of Class A common stock, or 9.8% in aggregate value of the outstanding shares of all classes and series of our capital stock. Under applicable constructive ownership rules, any shares of stock owned by certain affiliated owners generally would be added together for purposes of the ownership limits. These ownership and transfer restrictions could have the effect of delaying, deferring or preventing a transaction or a change in control that might involve a premium price for our capital stock or otherwise be in the best interest of our shareholders. 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, 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. Our articles of incorporation, our bylaws and Florida law provide for 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. 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. ITEM 2. PROPERTIES We own our headquarters in Boca Raton, Florida where we currently have approximately 160,000 square feet of office space. We also own or have entered into long-term leases for international and regional locations convenient for the management and operation of our site leasing activities, and in 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 and the land beneath them are comprised of a variety of fee interests, leasehold interests created by long- term lease agreements, perpetual easements, easements, licenses, rights-of-way, and other similar interests. As of December 31, 2017, approximately 70% of our tower structures were located on parcels of land that we own, land subject to perpetual easements, or parcels of land that have an interest that extends beyond 20 years. The average remaining life under our ground leases, including renewal options under our control, is 33 years. In rural areas, support for our towers, equipment shelters, and related equipment requires a tract of land typically up to 10,000 square feet. Less than 2,500 square feet is required for a monopole or self-supporting tower of the kind typically used in metropolitan areas for wireless communications towers. Ground leases are generally for an initial term of five years or more with five or more additional automatic renewal periods of five years, for a total of thirty years or more. Most of our towers have significant capacity available for additional antennas. We measure the available capacity of our existing facilities to support additional tenants and generate additional lease revenue by assessing several factors, including tower height, tower type, wind loading, environmental conditions, existing equipment on the tower and zoning and permitting regulations in effect in the jurisdiction where the tower is located. As of December 31, 2017, we had an average of 1.7 tenants per tower structure. 22 1812036_textBW.indd 25 3/15/18 4:56 PM 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. MINE SAFETY DISCLOSURE Not Applicable. PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market for our Class A Common Stock 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, 2017 Quarter ended September 30, 2017 Quarter ended June 30, 2017 Quarter ended March 31, 2017 Quarter ended December 31, 2016 Quarter ended September 30, 2016 Quarter ended June 30, 2016 Quarter ended March 31, 2016 $ $ $ $ $ $ $ $ High Low 173.97 154.71 140.38 120.51 116.27 118.57 108.30 107.44 $ $ $ $ $ $ $ $ 142.31 133.27 118.59 102.06 95.66 107.36 96.68 82.80 As of February 21, 2018, there were 67 record holders of our Class A common stock. Dividends We have never paid a dividend on any class of common stock. As a REIT, we are required to distribute annually at least 90% of our REIT taxable income after the utilization of any available NOLs (determined before the deduction for dividends paid and excluding any net capital gain). As of December 31, 2017, $956.7 million of the federal NOLs are attributes of the REIT. We may use these NOLs to offset our REIT taxable income, and thus any required distributions to shareholders may be reduced or eliminated until such time as our NOLs have been fully utilized. The amount of future distributions will be determined, from time to time, by the board of directors to balance our goal of increasing long-term shareholder value and retaining sufficient cash to implement our current capital allocation policy, which prioritizes investment in quality assets that meet our return criteria, and then stock repurchases when we believe our stock price is below its intrinsic value. The actual amount, timing and frequency of future dividends, will be at the sole discretion of the board of directors and will be declared based upon various factors, many of which are beyond our control. 23 1812036_textBW.indd 26 3/15/18 4:56 PM Issuer Purchases of Equity Securities The following table presents information related to our repurchases of Class A common stock during the fourth quarter of 2017: Total Number of Shares Total Number of Shares Approximate Dollar Value Average Price Paid Purchased as Part of of Shares that May Yet Be Publicly Announced Purchased Under the Period Purchased Per Share Plans or Programs (1) Plans or Programs 10/1/2017 - 10/31/2017 754,955 $ 11/1/2017 - 11/30/2017 1,187,788 $ 12/1/2017 - 12/31/2017 — $ 147.19 168.38 — 754,955 1,187,788 — $ $ $ 350,002,722 150,002,829 150,002,829 Total 150,002,829 (1) On February 16, 2018, our Board of Directors authorized a new stock repurchase plan, replacing the plan authorized on January 1,942,743 1,942,743 160.15 $ $ 12, 2017 which had a remaining authorization of $150.0 million. This plan authorizes us to purchase, from time to time, up to $1.0 billion of our outstanding Class A common stock through open market repurchases in compliance with Rule 10b-18 under the Exchange Act, and/or in privately negotiated transactions at management’s discretion based on market and business conditions, applicable legal requirements and other factors. Shares repurchased will be retired. The new plan has no time deadline and will continue until otherwise modified or terminated by our Board of Directors at any time in its sole discretion. 24 1812036_textBW.indd 27 3/15/18 4:56 PM  ITEM 6. SELECTED FINANCIAL DATA The following table sets forth selected historical financial data as of and for each of the five years in the period ended December 31, 2017. The financial data for the fiscal years ended 2017, 2016, 2015, 2014, and 2013 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. For the year ended December 31, 2017 2016 2015 2014 2013 (audited) (in thousands, except for per share data) Revenues: Site leasing Site development Total revenues Operating expenses: $ 1,623,173 $ 1,538,070 $ 1,480,634 $ 1,360,202 $ 1,133,013 171,853 166,794 157,840 104,501 95,055 1,727,674 1,633,125 1,638,474 1,526,996 1,304,866 Cost of revenues (exclusive of depreciation, accretion, and amortization shown below): Cost of site leasing Cost of site development 359,527 342,215 324,655 301,313 270,772 86,785 78,682 119,744 127,172 137,481 Selling, general, and administrative 130,697 143,349 114,951 103,317 Acquisition related adjustments and expenses Asset impairment and decommission costs Depreciation, accretion, and amortization Total operating expenses Operating income Other income (expense): Interest income Interest expense Non-cash interest expense Amortization of deferred financing fees Loss from extinguishment of debt, net Other income (expense) Total other expense Income (loss) before provision for income taxes (Provision) benefit for income taxes Net income (loss) Basic net income (loss) per common share Diluted net income (loss) per common share Weighted average common shares outstanding: Basic Diluted 12,367 36,697 643,100 1,269,173 458,501 13,140 30,242 638,189 1,245,817 387,308 11,864 94,783 660,021 1,326,018 312,456 7,798 23,801 85,476 19,198 28,960 627,072 533,334 1,190,473 1,075,221 336,523 229,645 11,337 10,928 3,894 677 1,794 (323,749) (329,171) (322,366) (292,600) (249,051) (2,879) (2,203) (1,505) (27,112) (49,085) (21,940) (21,136) (19,154) (17,572) (15,560) (1,961) (52,701) (783) (26,204) (6,099) (2,418) (341,610) 116,891 (13,237) 103,654 $ 94,278 (300,005) 87,303 (11,065) 76,238 $ (139,137) (479,051) (166,595) (9,061) (175,656) $ 10,628 31,138 (352,183) (286,863) (15,660) (57,218) (8,635) 1,309 (24,295) $ (55,909) 0.86 $ 0.86 $ 0.61 $ 0.61 $ (1.37) $ (1.37) $ (0.19) $ (0.19) $ (0.44) (0.44) 119,860 124,448 127,794 128,919 127,769 121,022 125,144 127,794 128,919 127,769 $ $ $ 25 1812036_textBW.indd 28 3/15/18 4:56 PM Balance Sheet Data Cash and cash equivalents Restricted cash - current Property and equipment, net Intangibles, net Total assets Total debt 2017 2016 2015 2014 2013 (audited) (in thousands) As of December 31, $ 68,783 $ 146,109 $ 118,039 $ 39,443 $ 122,112 32,924 36,786 25,353 52,519 47,305 2,812,346 2,792,076 2,782,353 2,762,417 2,578,444 3,598,131 3,656,924 3,735,413 4,189,540 3,387,198 7,320,205 7,360,945 7,312,980 7,748,635 6,714,025 9,310,686 8,775,583 8,452,070 7,768,309 5,807,444 Total shareholders' (deficit) equity (2,599,114) (1,995,921) (1,706,144) (660,801) 356,966 Other Data Cash provided by (used in): Operating activities Investing activities Financing activities 2017 2016 2015 2014 2013 For the year ended December 31, (audited) (in thousands) $ 818,470 $ (605,107) (294,574) 742,525 $ (428,235) (288,557) 723,030 $ (737,065) 75,751 674,340 $ (1,764,127) 995,298 509,852 (820,197) 218,170 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 infrastructure, including tower structures, rooftops and other structures that support antennas used for wireless communications, which we collectively refer to as “towers” or “sites.” Our principal operations are in the United States and its territories. In addition, we own and operate towers in South America, Central America, and Canada. Our primary business line is our site leasing business, which contributed 98.7% of our total segment operating profit for the year ended December 31, 2017. In our site leasing business, we (1) lease antenna space to wireless service providers on towers that we own or operate and (2) manage rooftop and tower sites for property owners under various contractual arrangements. As of December 31, 2017, we owned 27,909 towers, a substantial portion of which have been built by us or built by other tower owners or operators who, like us, have built such towers to lease space to multiple wireless service providers. We also managed or leased approximately 9,000 actual or potential towers, approximately 500 of which were revenue producing as of December 31, 2017. Our other business line is our site development business, through which we assist wireless service providers in developing and maintaining their own wireless service networks. 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 in the United States, Canada, Central America, and South America. As of December 31, 2017, (1) no U.S. state or territory accounted for more than 10% of our total tower portfolio by tower count, and (2) no U.S. state or territory accounted for more than 10% of our total revenues for the year ended December 31, 2017. In addition, as of December 31, 2017, approximately 30.1% of our total towers are located in Brazil and less than 3% of our total towers are located in any of our other international markets (each country is considered a market). We derive site leasing revenues primarily from wireless service provider tenants, including AT&T, T-Mobile, Verizon Wireless, Sprint, Oi S.A., Telefonica, Claro, and TIM. Wireless service providers enter into tenant leases with us, each of which relates to the lease or use of space at an individual site. In the United States and Canada, our 26 1812036_textBW.indd 29 3/15/18 4:56 PM tenant leases are generally for an initial term of five to ten 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 in our Central American and South American markets typically have an initial term of ten years with multiple five year renewal periods. In Central America, we have similar rent escalators to that of leases in the United States and Canada while our leases in South America escalate in accordance with a standard cost of living index. Site leases in South America typically provide for a fixed rental amount and a pass through charge for the underlying ground lease rent. In our Central American markets and Ecuador, significantly all of our revenue, expenses, and capital expenditures arising from our new build activities are denominated in U.S. dollars. Specifically, most of our ground leases, tenant leases, and tower-related expenses are due and paid in U.S. dollars. In our Central American markets, our local currency obligations are principally limited to (1) permitting and other local fees, (2) utilities, and (3) taxes. In Brazil, Canada, Chile, and Colombia, significantly all of our revenue, expenses, and capital expenditures, including tenant leases, ground leases, and other tower-related expenses are denominated in local currency. In Argentina and Peru, our revenue, expenses, and capital expenditures, including tenant leases, ground leases, and other tower-related expenses are denominated in a mix of local currency and U.S. dollars. Cost of site leasing revenue primarily consists of: • • • • • • • Rental payments on ground leases and other underlying property interests; 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 lease term (which may include renewal terms) of the underlying property interests; Property taxes; Site maintenance and monitoring costs (exclusive of employee related costs); Utilities; Property insurance; and Deferred lease origination cost amortization. Ground leases are generally for an initial term of five years or more with multiple renewal terms of five year periods at our option and provide for rent escalators which typically average 2-3% annually, or in our South American markets, adjust in accordance with a standard cost of living index. As of December 31, 2017, approximately 70% of our tower structures were located on parcels of land that we own, land subject to perpetual easements, or parcels of land in which we have a leasehold interest that extends beyond 20 years. For any given tower, costs are relatively fixed over a monthly or an annual time period. As such, operating costs for owned towers do not generally increase as a result of adding additional customers to the tower. The amount of property taxes varies from site to site depending on the taxing jurisdiction and the height and age of the tower. The ongoing maintenance requirements are typically minimal and include replacing lighting systems, painting a tower, or upgrading or repairing an access road or fencing. As indicated in the table below, our site leasing business generates substantially all of our total segment operating profit. For information regarding our operating segments, see Note 18 of our Consolidated Financial Statements included in this annual report. For the year ended Segment operating profit as a percentage of total 2017 2016 2015 Domestic site leasing International site leasing Total site leasing 81.8% 16.9% 98.7% 83.6% 15.1% 98.7% 82.4% 14.4% 96.8% We believe that the site leasing business continues to be attractive due to its long-term contracts, built-in rent escalators, high operating margins, and low customer churn (which refers to when a customer does not renew its lease or cancels its lease prior to the end of its term) other than in connection with customer consolidation or cessation of a particular technology. We believe that over the 27 1812036_textBW.indd 30 3/15/18 4:56 PM 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 and data transfer, network expansion and network coverage requirements. During 2018, we expect organic site leasing revenue in both our domestic and international segments to increase over 2017 levels due in part to wireless carriers deploying unused spectrum and spectrum acquired during auctions completed in 2017. We believe our site leasing business is characterized by stable and long-term recurring revenues, predictable operating costs and minimal non-discretionary 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 (1) 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 and (2) executing monetary amendments as wireless service providers add or upgrade their equipment. Furthermore, because our towers are strategically positioned and our customers typically do not relocate, we have historically experienced low tenant lease terminations as a percentage of revenue other than in connection with customer consolidation or cessations of a specific technology (e.g. iDEN, MetroPCS, Clearwire, and Cricket). Site Development Services Our site development business, which is conducted in the United States only, 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 to capture ancillary revenues that are generated by our site leasing activities, such as antenna and equipment installation at our tower locations. Site development services revenues are earned primarily from providing a full range of end to end services to wireless service providers or companies providing development or project management services to wireless service providers. Our services include: (1) network pre-design; (2) site audits; (3) identification of potential locations for towers and antennas on existing infrastructure; (4) support in leasing of the location; (5) assistance in obtaining zoning approvals and permits; (6) tower and related site construction; (7) antenna installation; and (8) radio equipment installation, commissioning, and maintenance. We provide site development services at our towers and at towers owned by others on a local basis, through regional, market, and project offices. The market offices are responsible for all site development operations. For information regarding our operating segments, see Note 18 of our Consolidated Financial Statements included in this annual report. Capital Allocation Strategy Our capital allocation strategy is to prioritize investment in quality assets that meet our return criteria and then stock repurchases when we believe our stock price is below its intrinsic value. A primary goal of our capital allocation strategy is to increase our Adjusted Funds From Operations per share. To achieve this, we expect we would continue to deploy capital between portfolio growth and stock repurchases, subject to compliance with REIT distribution requirements, available funds and market conditions, while maintaining our target leverage levels. Key elements of our capital allocation strategy include: Portfolio Growth. We intend to continue to grow our tower portfolio, domestically and internationally, through tower acquisitions and the construction of new towers. Stock Repurchase Program. We currently utilize stock repurchases as part of our capital allocation policy when we believe our share price is below intrinsic value. We believe that share repurchases, when purchased at the right price, will facilitate our goal of increasing our Adjusted Funds From Operations per share. Critical Accounting Policies and Estimates 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 of our Consolidated Financial Statements for the year ended December 31, 2017, 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 28 1812036_textBW.indd 31 3/15/18 4:56 PM 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. Revenue Recognition and Accounts Receivable 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 to ten 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 we perform 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 and revenue is recognized as the services are rendered. For those site development contracts in which we perform 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, we recognize the revenue related to that phase. Site development projects generally take from 3 to 12 months to complete. Amounts billed in advance (collected or uncollected) are recorded as deferred revenue on our Consolidated Balance Sheets. 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 costs incurred and revenues recognized in excess of amounts billed. The liability “billings in excess of costs and estimated earnings on uncompleted contracts,” included within other current liabilities on our Consolidated Balance Sheets, represents billings in excess of costs incurred and revenues recognized. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined to be probable. We perform periodic credit evaluations of our customers. We monitor collections and payments from our customers and maintain 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 uncollectibility is determined to be probable. Asset Impairment We evaluate individual long-lived and related assets with finite lives for indicators of impairment to determine when an impairment analysis should be performed. We evaluate our tower assets and current contract intangibles at the tower level, which is the lowest level for which identifiable cash flows exists. We evaluate our network location intangibles for impairment at the tower leasing business level whenever indicators of impairment are present. We have established a policy to at least annually evaluate our tower assets and current contract intangibles for impairment. We record an impairment charge when we believe an investment in towers or related assets has been impaired, such that future undiscounted cash flows would not recover the then current carrying value of the investment in the tower and related intangible. If the future undiscounted cash flows are lower than the carrying value of the investment in the tower and related intangible, we calculate future discounted cash flows and compare those amounts to the carrying value. We record an impairment charge for any amounts lower than the carrying value. 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, we make certain assumptions in determining an asset’s fair value for the purpose of calculating the amount of an impairment charge. Acquisitions In January 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business. ASU 2017-01 provides revised guidance to determine when an acquisition meets the definition of a business or when the acquisition should be accounted for as an asset acquisition. We adopted this standard effective January 1, 2017 and all changes will be accounted for prospectively. The adoption of ASU 2017-01 did not have a material impact on our unaudited consolidated financial statements and related disclosures. 29 1812036_textBW.indd 32 3/15/18 4:56 PM Under the new standard, our acquisitions will generally qualify for asset acquisition treatment under ASC 360, Property, Plant, and Equipment, rather than business combination treatment under ASC 805 Business Combinations. For acquisitions which qualify as asset acquisitions, the aggregate purchase price is allocated on a relative fair value basis to towers and related intangible assets. For asset acquisitions, external, direct transaction costs will be capitalized as a component of the cost of the asset acquired. We will continue to expense internal acquisition costs as incurred. We account for business combinations under the acquisition method of accounting. The assets and liabilities acquired are recorded at fair market value at the date of each acquisition and the results of operations of the acquired assets are included with those from the dates of the respective acquisitions. We continue to evaluate all acquisitions for a period not to exceed 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 as a result of information available at the acquisition date. The fair values of net assets acquired are based on management’s estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. The fair value estimates are based on available historical information and on future expectations and assumptions deemed reasonable by management at the time. If the actual results differ from the estimates and judgments used in these fair values, the amounts recorded in the consolidated financial statements could be subject to a possible impairment of the intangible assets, or require acceleration of the amortization expense of intangible assets in subsequent periods. The intangible assets represent the value associated with the current leases at the acquisition date (“Current contract intangibles”) and future tenant leases anticipated to be added to the towers (“Network location intangibles”) and were calculated using the discounted values of the current or future expected cash flows. The intangible assets are estimated to have a useful life consistent with the useful life of the related tower assets, which is typically 15 years. In connection with certain acquisitions, we may agree to pay contingent consideration (or earnouts) in cash or stock if the communication sites or businesses that are acquired meet or exceed certain performance targets over a period of one to three years after they have been acquired. Contingent consideration in connection with asset acquisitions will be recognized at the time when the contingency is resolved or becomes payable and will increase the cost basis of the assets acquired. We accrue for contingent consideration in connection with business combinations at fair value as of the date of the acquisition. All subsequent changes in fair value of contingent consideration payable in cash are recorded through Consolidated Statements of Operations. (cid:3) RESULTS OF OPERATIONS This report presents our financial results and other financial metrics after eliminating the impact of changes in foreign currency exchange rates. We believe that providing these financial results and metrics on a constant currency basis, which are non-GAAP measures, gives management and investors the ability to evaluate the performance of our business without the impact of foreign currency exchange rate fluctuations. We eliminate the impact of changes in foreign currency exchange rates by dividing the current period’s financial results by the average monthly exchange rates of the prior year period, as well as by eliminating the impact of the remeasurement of our intercompany loans. 30 1812036_textBW.indd 33 3/15/18 4:56 PM Year Ended 2017 Compared to Year Ended 2016 Revenues and Segment Operating Profit: For the year ended December 31, Foreign Constant Constant Currency 2017 2016 Currency Impact Currency Change % Change (in thousands) $ 1,308,389 $ 1,273,866 $ — $ 34,523 2.7% 314,784 264,204 17,423 33,157 12.5% 104,501 95,055 — 9,446 $ 1,727,674 $ 1,633,125 $ 17,423 $ 77,126 9.9% 4.7% $ 260,826 $ 260,941 $ — $ (115) (0.0%) 98,701 81,274 86,785 78,682 6,100 — 11,327 8,103 $ 446,312 $ 420,897 $ 6,100 $ 19,315 13.9% 10.3% 4.6% $ 1,047,563 $ 1,012,925 $ — $ 34,638 3.4% 216,083 182,930 11,323 21,830 11.9% 17,716 16,373 — 1,343 8.2% Revenues Domestic site leasing International site leasing Site development Total Cost of Revenues Domestic site leasing International site leasing Site development Total Operating Profit Domestic site leasing International site leasing Site development Revenues Domestic site leasing revenues increased $34.5 million for the year ended December 31, 2017, as compared to the prior year, due largely to (i) revenues from 438 towers acquired and 97 towers built since January 1, 2016 and (ii) organic site leasing growth, primarily from monetary lease amendments for additional equipment added to our towers as well as new leases and contractual rent escalators, partially offset by lease non-renewals primarily by MetroPCS, Clearwire, and Cricket. International site leasing revenues increased $50.6 million for the year ended December 31, 2017, as compared to the prior year. On a constant currency basis, international site leasing revenues increased $33.2 million. These changes were primarily due to (i) revenues from 1,518 towers acquired and 739 towers built since January 1, 2016, (ii) organic site leasing growth from new leases and contractual escalators, and (iii) an increase in reimbursable pass-through expenses. Site leasing revenue in Brazil represented 13.4% of total site leasing revenue for the period. No other individual international market represented more than 3% of our total site leasing revenue. Site development revenues increased $9.4 million for the year ended December 31, 2017, as compared to prior year, as a result of increased carrier activity. Operating Profit Domestic site leasing segment operating profit increased $34.6 million for the year ended December 31, 2017, as compared to the prior year, primarily due to additional profit generated by (i) towers acquired and built since January 1, 2016 and organic site leasing growth as noted above, (ii) continued control of our site leasing cost of revenue, and (iii) the positive impact of our ground lease purchase program. International site leasing segment operating profit increased $33.2 million for the year ended December 31, 2017, as compared to the prior year. On a constant currency basis, international site leasing segment operating profit increased $21.8 million. These changes were primarily due to towers acquired and built since January 1, 2016 and organic site leasing growth as noted above, partially offset by increases in ground rent and repairs and maintenance costs. 31 1812036_textBW.indd 34 3/15/18 4:56 PM Site development segment operating profit increased $1.3 million for the year ended December 31, 2017, as compared to the prior year, primarily due to an increase in revenue from increased carrier activity partially offset by lower margins due to the type of work performed. Selling, General, and Administrative Expenses: For the year ended December 31, Foreign Constant Constant Currency 2017 2016 Currency Impact Currency Change % Change (in thousands) $ 67,263 $ 72,701 $ — $ (5,438) (7.5%) 24,320 35,897 1,005 (12,582) (35.1%) $ 91,583 $ 108,598 $ 1,005 $ (18,020) (16.6%) 15,433 13,039 23,681 21,712 — — 2,394 18.4% 1,969 9.1% $ 130,697 $ 143,349 $ 1,005 $ (13,657) (9.5%) Domestic site leasing International site leasing Total site leasing Site development Not identified by segment Total Selling, general, and administrative expenses decreased $12.7 million for the year ended December 31, 2017, as compared to the prior year. On a constant currency basis, selling, general, and administrative expenses decreased $13.7 million. These changes were primarily as a result of decreases in the provision for doubtful accounts, which included the $16.5 million Oi reserve recorded in the second quarter of 2016, and REIT conversion expenses, partially offset by increases in non-cash compensation, personnel, salaries, benefits, and other support costs. Acquisition Related Adjustments and Expenses: For the year ended December 31, Foreign Constant Constant Currency 2017 2016 Currency Impact Currency Change % Change (in thousands) Domestic site leasing International site leasing Total $ 8,171 $ 6,233 $ 4,196 6,907 $ 12,367 $ 13,140 $ — $ 211 211 $ 1,938 31.1% (2,922) (42.3%) (984) (7.5%) Acquisition related adjustments and expenses decreased $0.8 million for the year ended December 31, 2017, as compared to the prior year. On a constant currency basis, acquisition related adjustments and expenses decreased $1.0 million. These changes were primarily as a result of changes in our estimated pre-acquisition contingencies as compared to the prior year period and a reduction in third party acquisition costs expensed in the current year as compared to the prior year. 32 1812036_textBW.indd 35 3/15/18 4:56 PM Asset Impairment and Decommission Costs: For the year ended December 31, Foreign Constant Constant Currency 2017 2016 Currency Impact Currency Change % Change (in thousands) $ 29,523 $ 26,073 $ 6,994 1,824 $ 36,517 $ 27,897 $ 180 — — 2,345 — $ 318 318 $ — — 3,450 13.2% 4,852 266.0% 8,302 29.8% 180 NM (2,345) (100.0%) $ 36,697 $ 30,242 $ 318 $ 6,137 20.3% Domestic site leasing International site leasing Total site leasing Site Development Not identified by segment Total Asset impairment and decommission costs increased $6.5 million for the year ended December 31, 2017 as compared to the prior year. On a constant currency basis, asset impairment and decommission costs increased $6.1 million. These changes were primarily as a result of a $8.9 million gain on the sale of fiber assets recorded in the prior year period, partially offset by a $2.3 million decrease in write-off and disposal costs related to our former corporate headquarters building. Depreciation, Accretion, and Amortization Expense: For the year ended December 31, Foreign Constant Constant Currency 2017 2016 Currency Impact Currency Change % Change (in thousands) $ 498,842 $ 509,108 $ — $ (10,266) (2.0%) 135,155 119,466 7,457 8,232 6.9% $ 633,997 $ 628,574 $ 7,457 $ (2,034) (0.3%) 2,580 6,523 3,402 6,213 — — (822) (24.2%) 310 5.0% $ 643,100 $ 638,189 $ 7,457 $ (2,546) (0.4%) Domestic site leasing International site leasing Total site leasing Site development Not identified by segment Total Depreciation, accretion, and amortization expense increased $4.9 million for the year ended December 31, 2017, as compared to the prior year. On a constant currency basis, depreciation, accretion, and amortization expense decreased $2.5 million. These changes were primarily due to a decrease in domestic site leasing depreciation associated with assets that became fully depreciated since the prior year period, partially offset by additional international site leasing depreciation associated with an increase in the number of towers we acquired and built since January 1, 2016. 33 1812036_textBW.indd 36 3/15/18 4:56 PM Operating Income (Loss): Domestic site leasing International site leasing Total site leasing Site development Not identified by segment Total For the year ended December 31, Foreign Constant Constant Currency 2017 2016 Currency Impact Currency Change % Change (in thousands) $ 443,764 $ 398,810 $ — $ 44,954 11.3% 45,418 18,836 2,332 24,250 128.7% $ 489,182 $ 417,646 $ 2,332 $ 69,204 16.6% (477) (68) (30,204) (30,270) — — (409) 601.5% 66 (0.2%) $ 458,501 $ 387,308 $ 2,332 $ 68,861 17.8% Domestic site leasing operating income increased $45.0 million for the year ended December 31, 2017, as compared to the prior year, primarily due to higher segment operating profit and decreases in depreciation, accretion, and amortization expense, and selling, general, and administrative expenses, partially offset by increases in asset impairment, decommission costs, and acquisition related adjustments and expenses. International site leasing operating income increased $26.6 million for the year ended December 31, 2017, as compared to the prior year. On a constant currency basis, international site leasing operating income increased $24.3 million. These changes were primarily due to higher segment operating profit and decreases in selling, general, and administrative expenses primarily resulting from the $16.5 million Oi reserve and acquisition related adjustments and expenses, partially offset by increases in depreciation, accretion, and amortization expenses, and asset impairment and decommission costs. Site development operating income decreased $0.4 million for the year ended December 31, 2017, as compared to the prior year, primarily due to increases in selling, general, and administrative expenses and asset impairment and decommission costs, partially offset by an increase in segment operating profit and a decrease in depreciation, accretion, and amortization expense. Other Income (Expense): Interest income Interest expense Non-cash interest expense For the year ended December 31, Foreign Constant Constant Currency 2017 2016 Currency Impact Currency Change % Change $ 11,337 $ 10,928 $ 711 $ (in thousands) (323,749) (329,171) (2,879) (2,203) (2) — — — (302) 5,424 (676) (804) (2.8%) (1.6%) 30.7% 3.8% 50,740 (96.3%) Amortization of deferred financing fees (21,940) (21,136) Loss from extinguishment of debt, net (1,961) (52,701) Other income (expense), net (2,418) 94,278 (99,624) 2,928 3.1% Total $ (341,610) $ (300,005) $ (98,915) $ 57,310 (19.1%) Interest income increased $0.4 million for the year ended December 31, 2017, as compared to the prior year. On a constant currency basis, interest income decreased $0.3 million. These changes were primarily due to a lower average interest rate offset by a higher amount of interest bearing deposits held in Brazil as compared to the prior year. Interest expense decreased $5.4 million, on an actual and constant currency basis, for the year ended December 31, 2017, as compared to the prior year, due to the lower weighted average interest rate on debt, partially offset by a higher average principal amount of cash-interest bearing debt outstanding as compared to the prior year. The decrease primarily resulted from the repayment of the 2010-2C Tower Securities in July 2016, the 5.75% Senior Notes in August 2016, the 5.625% Senior Notes in October 2016, and 34 1812036_textBW.indd 37 3/15/18 4:56 PM the 2012-1C Tower Securities in April 2017, partially offset by the issuance of the 2016-1C Tower Securities in July 2016, 2016 Senior Notes in August 2016, 2017-1C Tower Securities in April 2017, 2017 Senior Notes in October 2017, and a higher average balance outstanding on the Revolving Credit Facility in the current year period. Non-cash interest expense increased $0.7 million for the year ended December 31, 2017, as compared to the prior year, primarily due to the amortization of the discount related to the 2016 Senior Notes (defined below) issued in August 2016. Amortization of deferred financing fees increased $0.8 million for the year ended December 31, 2017, as compared to the prior year, primarily resulting from the issuance of the 2017-1C Tower Securities in April 2017, the 2016-1C Tower Securities in July 2016, the 2016 Senior Notes in August 2016, and the 2017 Senior Notes in October 2017, partially offset by the repayment of the 2010-2C Tower Securities in July 2016, the 2012-1C Tower Securities in April 2017, the 5.75% Senior Notes in August 2016, and the 5.625% Senior Notes in October 2016. Loss from extinguishment of debt was $2.0 million for the year ended December 31, 2017 due to the write-off of unamortized financing costs associated with the repayment of the 2012-1C Tower Securities in April 2017. Loss from the extinguishment of debt was $52.7 million for the year ended December 31, 2016 due to the payment of a $25.8 million call premium and the write-off of $7.7 million in deferred financing fees on the redemption of the 5.75% Senior Notes, the payment of a $14.1 million call premium and the write-off of $4.1 million in deferred financing fees on the redemption of the 5.625% Senior Notes, and the write-off of $1.0 million in deferred financing fees related to redemption of the 2010-2C Tower Securities. Other income (expense), net includes an $8.8 million loss on the remeasurement of a U.S. dollar denominated intercompany loan with a Brazilian subsidiary for the year ended December 31, 2017, while the prior year included a $90.0 million gain. Provision for Income Taxes: For the year ended December 31, Foreign Constant Constant Currency 2017 2016 Currency Impact Currency Change % Change (in thousands) Provision for income taxes $ (13,237) $ (11,065) $ (76) $ (2,096) 18.9% Provision for income taxes increased $2.2 million, on an actual and constant currency basis, for the year ended December 31, 2017, as compared to the prior year. These changes were primarily due to an increase in state tax provisions from becoming a taxpayer in additional jurisdictions. Net Income: For the year ended December 31, Foreign Constant Constant Currency 2017 2016 Currency Impact Currency Change % Change (in thousands) Net income $ 103,654 $ 76,238 $ (96,507) $ 123,923 162.5% Net income increased $27.4 million for the year ended December 31, 2017, as compared to the prior year. On a constant currency basis, net income increased $123.9 million. These changes were primarily due to an increase in operating income, decreases in interest expense and loss from extinguishment of debt, net, partially offset by fluctuations in our foreign currency exchange rates including changes recorded on the remeasurement of the intercompany loans. 35 1812036_textBW.indd 38 3/15/18 4:56 PM Year Ended 2016 Compared to Year Ended 2015 Revenues and Segment Operating Profit: For the year ended December 31, Foreign Constant Constant Currency 2016 2015 Currency Impact Currency Change % Change (in thousands) $ 1,273,866 $ 1,236,758 $ — $ 37,108 3.0% 264,204 243,876 (10,305) 30,633 12.6% 95,055 157,840 — (62,785) (39.8%) $ 1,633,125 $ 1,638,474 $ (10,305) $ 4,956 0.3% $ 260,941 $ 252,493 $ — $ 8,448 3.3% 81,274 72,162 (3,599) 12,711 17.6% 78,682 119,744 — (41,062) (34.3%) $ 420,897 $ 444,399 $ (3,599) $ (19,903) (4.5%) $ 1,012,925 $ 984,265 $ — $ 28,660 2.9% 182,930 171,714 (6,706) 17,922 10.4% 16,373 38,096 — (21,723) (57.0%) Revenues Domestic site leasing International site leasing Site development Total Cost of Revenues Domestic site leasing International site leasing Site development Total Operating Profit Domestic site leasing International site leasing Site development Revenues Domestic site leasing revenues increased $37.1 million for the year ended December 31, 2016, as compared to the prior year, due largely to (i) revenues from 951 towers acquired and 183 towers built since January 1, 2015 and (ii) organic site leasing growth, primarily from monetary lease amendments for additional equipment added to our towers as well as new leases and contractual rent escalators, partially offset by non-lease renewals in 2015 primarily related to carrier consolidation, including Sprint’s iDEN network, which impacted our year-over-year growth rates during 2016. International site leasing revenues increased $20.3 million for the year ended December 31, 2016, as compared to the prior year. On a constant currency basis, international site leasing revenues increased $30.6 million. These changes were due largely to (i) revenues from 473 towers acquired and 640 towers built since January 1, 2015, (ii) organic site leasing growth from new leases and contractual rent escalators, and (iii) an increase in reimbursable pass-through expenses. Site leasing revenue in Brazil represented 11.6% of total site leasing revenue for the period. No other individual international market represented more than 3% of our total site leasing revenue. Site development revenues decreased $62.8 million for the year ended December 31, 2016, as compared to the prior year, as a result of a decrease in the volume of work performed, particularly as it related to Sprint. Operating Profit Domestic site leasing segment operating profit increased $28.7 million for the year ended December 31, 2016, as compared to the prior year, primarily due to additional profit generated by (i) towers acquired and built since January 1, 2015 and organic site leasing growth as noted above, (ii) improving control of our site leasing cost of revenue, and (iii) the positive impact of our ground lease purchase program. International site leasing segment operating profit increased $11.2 million for the year ended December 31, 2016, as compared to the prior year. On a constant currency basis, international site leasing segment operating profit increased $17.9 million. These changes were primarily due to towers acquired and built since January 1, 2015 and organic site leasing growth as noted above, partially offset by increases in cost of revenues. 36 1812036_textBW.indd 39 3/15/18 4:56 PM Site development segment operating profit decreased $21.7 million for the year ended December 31, 2016, as compared to the prior year, primarily due to a decrease in the volume of work performed, particularly as it related to Sprint. Selling, General, and Administrative Expenses: For the year ended December 31, Foreign Constant Constant Currency 2016 2015 Currency Impact Currency Change % Change (in thousands) $ 72,701 $ 67,413 $ — $ 5,288 7.8% 35,897 16,196 (343) 20,044 123.8% $ 108,598 $ 83,609 $ (343) $ 25,332 30.3% 13,039 12,247 21,712 19,095 — — 792 2,617 $ 143,349 $ 114,951 $ (343) $ 28,741 6.5% 13.7% 25.0% Domestic site leasing International site leasing Total site leasing Site development Not identified by segment Total Selling, general, and administrative expenses increased $28.4 million for the year ended December 31, 2016, as compared to the prior year. On a constant currency basis, selling, general, and administrative expenses increased $28.7 million. These changes were primarily as a result of the $16.5 million Oi reserve recorded in the second quarter of 2016 as well as increases in REIT conversion related costs, bad debt expense, non-cash compensation, and other support costs due in large part to our continued portfolio expansion. Acquisition Related Adjustments and Expenses: For the year ended December 31, Foreign Constant Constant Currency 2016 2015 Currency Impact Currency Change % Change (in thousands) Domestic site leasing International site leasing Total $ 6,233 $ 9,975 $ — $ (3,742) (37.5%) 6,907 1,889 $ 13,140 $ 11,864 $ (107) (107) $ 5,125 271.3% 1,383 11.7% Acquisition related adjustments and expenses increased $1.3 million for the year ended December 31, 2016, as compared to the prior year. On a constant currency basis, acquisition related adjustments and expenses increased $1.4 million. These changes were primarily as a result of an increase in the number of international towers we acquired and changes in our estimated pre-acquisition contingencies as compared to the prior year, partially offset by a decrease in the number of domestic towers we acquired. 37 1812036_textBW.indd 40 3/15/18 4:56 PM Asset Impairment and Decommission Costs: For the year ended December 31, Foreign Constant Constant Currency 2016 2015 Currency Impact Currency Change % Change (in thousands) $ 26,073 $ 93,977 $ — $ (67,904) (72.3%) 1,824 806 (74) 1,092 135.5% $ 27,897 $ 94,783 $ (74) $ (66,812) (70.5%) 2,345 — — 2,345 —% $ 30,242 $ 94,783 $ (74) $ (64,467) (68.0%) Domestic site leasing International site leasing Total site leasing Not identified by segment Total Asset impairment and decommission costs decreased $64.5 million, on an actual and constant currency basis, for the year ended December 31, 2016, as compared to the prior year. These changes were primarily as a result of a $56.7 million impairment charge in the third quarter of 2015 related to fiber assets acquired in the 2012 Mobilitie transaction, and an $8.9 million gain on the sale of fiber assets recorded in 2016. Depreciation, Accretion, and Amortization Expense: For the year ended December 31, Foreign Constant Constant Currency 2016 2015 Currency Impact Currency Change % Change $ 509,108 $ 534,436 $ — $ (25,328) (4.7%) (in thousands) 119,466 118,886 (4,767) 5,347 $ 628,574 $ 653,322 $ (4,767) $ (19,981) 3,402 6,213 3,662 3,037 — — (260) 3,176 104.6% $ 638,189 $ 660,021 $ (4,767) $ (17,065) (2.6%) 4.5% (3.1%) (7.1%) Domestic site leasing International site leasing Total site leasing Site development Not identified by segment Total Depreciation, accretion, and amortization expense decreased $21.8 million for the year ended December 31, 2016, as compared to the prior year. On a constant currency basis, depreciation, accretion, and amortization expense decreased $17.1 million. These changes were primarily due to a decrease in depreciation associated with assets that became fully depreciated since the prior year, partially offset by additional depreciation associated with the increase in the number of towers we acquired and built since January 1, 2015. 38 1812036_textBW.indd 41 3/15/18 4:56 PM Operating Income (Loss): Domestic site leasing International site leasing Total site leasing Site development Not identified by segment Total For the year ended December 31, Foreign Constant Constant Currency 2016 2015 Currency Impact Currency Change % Change (in thousands) $ 398,810 $ 278,464 $ — $ 120,346 43.2% 18,836 33,937 (1,415) (13,686) (40.3%) $ 417,646 $ 312,401 $ (1,415) $ 106,660 34.1% (68) 22,187 (30,270) (22,132) — — $ 387,308 $ 312,456 $ (1,415) $ (22,255) (100.3%) (8,138) 76,267 36.8% 24.4% Domestic site leasing operating income increased $120.3 million for the year ended December 31, 2016, as compared to the prior year, primarily due to higher segment operating profit and decreases in asset impairment and decommission costs, depreciation, accretion, and amortization expense, and acquisition related adjustments and expenses, partially offset by an increase in selling general, and administrative expenses. International site leasing operating income decreased $15.1 million for the year ended December 31, 2016, as compared to the prior year. On a constant currency basis, international site leasing operating income decreased $13.7 million. These changes were primarily due to the $16.5 million Oi reserve recorded in the second quarter of 2016, increases in selling, general, and administrative expenses, acquisition related adjustments and expenses, depreciation, accretion, and amortization expense, and asset impairment and decommission costs, partially offset by higher segment operating profit. Site development operating income decreased $22.3 million for the year ended December 31, 2016, as compared to the prior year, primarily due to lower segment operating profit and an increase in selling, general, and administrative expenses, partially offset by a decrease in depreciation, accretion, and amortization expense. Other Income (Expense): Interest income Interest expense Non-cash interest expense For the year ended December 31, Foreign Constant Constant Currency 2016 2015 Currency Impact Currency Change % Change $ 10,928 $ 3,894 $ (402) $ 7,436 191.0% (in thousands) (329,171) (322,366) (2,203) (1,505) 5 — — — (6,810) (698) (1,982) 2.1% 46.4% 10.3% (51,918) 6,630.7% Amortization of deferred financing fees (21,136) (19,154) Loss from extinguishment of debt, net (52,701) (783) Other (expense) income, net 94,278 (139,137) 270,184 (36,769) Total $ (300,005) $ (479,051) $ 269,787 $ (90,741) 26.4% 18.9% Interest income increased $7.0 million for the year ended December 31, 2016, as compared to the prior year. On a constant currency basis, interest income increased $7.4 million. These changes were primarily due to a higher amount of interest bearing deposits held as compared to the prior year. Interest expense increased $6.8 million, on an actual and constant currency basis, for the year ended December 31, 2016, as compared to the prior year, due to the higher average principal amount of cash-interest bearing debt outstanding as compared to the prior year, primarily resulting from the issuance of the 2015 Term Loan (defined below) in June 2015, the 2015-1C Tower Securities (defined below) in October 2015, the 2016-1C Tower Securities (defined below) in July 2016, and the 2016 Senior Notes (defined 39 1812036_textBW.indd 42 3/15/18 4:56 PM below) in August 2016, partially offset by the repayment of the 2012-1C Term Loan in November 2015, the 2010-2C Tower Securities (defined below) in July 2016, the 5.75% Senior Notes (defined below) in August 2016, and the 5.625% Senior Notes (defined below) in October 2016, and a lower average balance outstanding under the Revolving Credit Facility in the current year. Non-cash interest expense increased $0.7 million for the year ended December 31, 2016, as compared to the prior year, primarily due the amortization of the discount related to the 2015 Term Loan (defined below) issued in June 2015 and the 2016 Senior Notes (defined below) issued in August 2016. Amortization of deferred financing fees increased $2.0 million for the year ended December 31, 2016, as compared to the prior year, primarily resulting from the issuance of the 2015 Term Loan (defined below) in June 2015, the 2015-1C Tower Securities (defined below) in October 2015, the 2016-1C Tower Securities (defined below) in July 2016, and the 2016 Senior Notes (defined below) in August 2016, partially offset by the repayment of the 2010-2C Tower Securities (defined below) in July 2016, the 5.75% Senior Notes (defined below) in August 2016, and the 5.625% Senior Notes (defined below) in October 2016. Loss from the extinguishment of debt was $52.7 million for the year ended December 31, 2016 due to the payment of a $25.8 million call premium and the write-off of $7.7 million in deferred financing fees on the redemption of the 5.75% Senior Notes, the payment of a $14.1 million call premium and the write-off of $4.1 million in deferred financing fees on the redemption of the 5.625% Senior Notes, and the write-off of $1.0 million in deferred financing fees related to redemption of the 2010-2C Tower Securities. Loss from extinguishment of debt was $0.8 million for the year ended December 31, 2015 due to the write off of deferred financing fees related to the prepayment of the 2012-1 Term Loan. Other income (expense), net includes a $90.0 million gain on the remeasurement of intercompany loans for the year ended December 31, 2016. The prior year period included a $178.9 million loss. Other income (expense), net for the year ended December 31, 2015 included a gain on the sale of our investment in Extenet of $37.2 million. Net Income (Loss): For the year ended December 31, Foreign Constant Constant Currency 2016 2015 Currency Impact Currency Change % Change (in thousands) Net income (loss) $ 76,238 $ (175,656) $ 268,381 $ (16,487) 9.4% Net income increased $251.9 million for the year ended December 31, 2016, as compared to the prior year. On a constant currency basis, net income decreased $16.5 million. These changes were primarily due to an increases in operating income, partially offset by increases in loss from extinguishment of debt, net, other income (expense), net, and interest expense. NON-GAAP FINANCIAL MEASURES This report contains information regarding a non-GAAP measure, Adjusted EBITDA. We have provided below a description of Adjusted EBITDA, a reconciliation of Adjusted EBITDA to its most directly comparable GAAP measure and an explanation as to why management utilizes this measure. This report also presents our financial results and other financial metrics after eliminating the impact of changes in foreign currency exchange rates and the Oi reserve recorded in the second quarter of 2016. We believe that providing these financial results and metrics on a constant currency basis, which are non-GAAP measures, gives management and investors the ability to evaluate the performance of our business without the impact of foreign currency exchange rate fluctuations. We eliminate the impact of changes in foreign currency exchange rates by dividing the current period’s financial results by the average monthly exchange rates of the prior year period, as well as by eliminating the impact of the remeasurement of our intercompany loans. In addition, we believe that excluding the Oi reserve, which represents a $16.5 million one-time provision for doubtful accounts recorded in the prior year, provides management and investors the ability to better analyze our core results without the impact of what we believe is a non-recurring event. Adjusted EBITDA We define Adjusted EBITDA as net income excluding the impact of non-cash straight-line leasing revenue, non-cash straight- line ground lease expense, non-cash compensation, net loss from extinguishment of debt, other income and expenses, acquisition 40 1812036_textBW.indd 43 3/15/18 4:56 PM related adjustments and expenses, asset impairment and decommission costs, interest income, interest expenses, depreciation, accretion, and amortization, and provision for or benefit from taxes. We believe that Adjusted EBITDA is useful to investors or other interested parties in evaluating our financial performance. Adjusted EBITDA is the primary measure used by management (1) to evaluate the economic productivity of our operations and (2) for purposes of making decisions about allocating resources to, and assessing the performance of, our operations. Management believes that Adjusted EBITDA helps investors or other interested parties to meaningfully evaluate and compare the results of our operations (1) from period to period and (2) to our competitors, by excluding the impact of our capital structure (primarily interest charges from our outstanding debt) and asset base (primarily depreciation, amortization and accretion) from our financial results. Management also believes Adjusted EBITDA is frequently used by investors or other interested parties in the evaluation of REITs. In addition, Adjusted EBITDA is a component of the calculation that has been used by our lenders to determine compliance with certain covenants under our Senior Credit Agreement and the indentures relating to the 2014 Senior Notes, 2016 Senior Notes, and 2017 Senior Notes. Adjusted EBITDA should be considered only as a supplement to net income computed in accordance with GAAP as a measure of our performance. 41 1812036_textBW.indd 44 3/15/18 4:56 PM Interest income Interest expense (1) For the year ended December 31, Foreign 2017 2016 Currency Impact Constant Currency Currency Change % Change Constant (in thousands) Net income $ 103,654 $ 76,238 $ (96,507) $ 123,923 162.5% Non-cash straight-line leasing revenue (16,419) (31,650) (1,110) 16,341 (51.6%) Non-cash straight-line ground lease expense 30,850 34,708 Non-cash compensation 38,249 32,915 Loss from extinguishment of debt, net 1,961 52,701 140 129 — (3,998) (11.5%) 5,205 15.8% (50,740) (96.3%) Other income (expense), net 2,418 (94,278) 99,624 (2,928) 3.1% Acquisition related adjustments and expenses 12,367 13,140 Asset impairment and decommission costs 36,697 30,242 (11,337) (10,928) 211 318 (711) (984) (7.5%) 6,137 20.3% 302 (2.8%) 348,568 352,510 2 (3,944) (1.1%) Depreciation, accretion, and amortization 643,100 638,189 7,457 (2,546) (0.4%) Provision for taxes (2) Adjusted EBITDA Oi reserve 14,026 12,708 1,204,134 1,106,495 (45) 9,508 1,363 10.7% 88,131 — 16,498 — (16,498) Adjusted EBITDA excl. the Oi reserve $ 1,204,134 $ 1,122,993 $ 9,508 $ 71,633 For the year ended December 31, Foreign 2016 2015 Currency Impact Constant Currency Currency Change % Change Constant (in thousands) Net income (loss) $ 76,238 $ (175,656) $ 268,381 $ (16,487) 9.4% Non-cash straight-line leasing revenue (31,650) (49,064) Non-cash straight-line ground lease expense 34,708 34,204 Non-cash compensation 32,915 28,747 Loss from extinguishment of debt, net 52,701 783 (1,029) (104) (2) — 18,443 (37.6%) 608 1.8% 4,170 14.5% 51,918 6,630.7% Other (expense) income, net (94,278) 139,137 (270,184) 36,769 26.4% Acquisition related adjustments and expenses 13,140 11,864 Asset impairment and decommission costs 30,242 94,783 (10,928) (3,894) (107) (74) 402 1,383 11.7% (64,467) (68.0%) (7,436) 191.0% Interest income Interest expense (1) 352,510 343,025 (5) 9,490 2.8% Depreciation, accretion, and amortization 638,189 660,021 (4,767) (17,065) (2.6%) Provision for taxes (2) Adjusted EBITDA Oi reserve 12,708 10,827 (9) 1,890 17.5% 1,106,495 1,094,777 (7,498) 16,498 — — 19,216 16,498 Adjusted EBITDA excluding Oi reserve $ 1,122,993 $ 1,094,777 $ (7,498) $ 35,714 Interest expense includes interest expense, non-cash interest expense, and amortization of deferred financing fees. (1) (2) Provision for taxes includes $789, $1,643, and $1,766 of franchise and gross receipts taxes for the year ended 2017, 2016, and 2015, respectively, reflected in selling, general, and administrative expenses on the Consolidated Statement of Operations. 42 1812036_textBW.indd 45 3/15/18 4:56 PM Adjusted EBITDA increased $81.1 million for the year ended December 31, 2017, as compared to the prior year. On a constant currency basis, adjusted EBITDA, excluding the Oi reserve, increased $71.6 million. These changes were primarily due to increases in domestic site leasing, international site leasing, and site development segment operating profit, partially offset by an increase in selling, general, and administrative expenses after excluding the Oi reserve. Adjusted EBITDA, excluding the Oi reserve, increased $28.2 million for the year ended December 31, 2016, as compared to the prior year. On a constant currency basis, adjusted EBITDA, excluding the Oi reserve, increased $35.7 million. These changes were primarily due to increases in domestic and international site leasing segment operating profit, partially offset by an increase in selling, general, and administrative expenses after excluding the Oi reserve and a decrease in site development segment operating profit. LIQUIDITY AND CAPITAL RESOURCES SBAC is a holding company with no business operations of its own. SBAC’s only significant asset is 100% of the outstanding capital stock of SBA Telecommunications, LLC (“Telecommunications”), which is also a holding company that owns equity interests in entities that directly or indirectly own all of our domestic and international towers and assets. We conduct all of our business operations through Telecommunications’ subsidiaries. Accordingly, our only source of cash to pay our obligations, other than financings, is distributions with respect to our ownership interest in our subsidiaries from the net earnings and cash flow generated by these subsidiaries. A summary of our cash flows is as follows: For the year ended December 31, 2017 2016 2015 Summary cash flow information (in thousands) Cash provided by operating activities $ 818,470 $ 742,525 $ Cash used in investing activities Cash (used in) provided by financing activities Change in cash, cash equivalents, and restricted cash Effect of exchange rate changes on cash, cash equiv., and restricted cash (605,107) (294,574) (81,211) (464) (428,235) (288,557) 25,733 13,618 Cash, cash equiv., and restr. cash, beginning of year 185,970 146,619 Cash, cash equiv., and restr. cash, end of year $ 104,295 $ 185,970 $ 723,030 (737,065) 75,751 61,716 (12,993) 97,896 146,619 Operating Activities Cash provided by operating activities was $818.5 million for the year ended December 31, 2017 as compared to $742.5 million for the year ended December 31, 2016. The increase was primarily due to an increase in segment operating profit from the domestic site leasing, international site leasing, and site development operating segments, a decrease in selling, general, and administrative expenses, and a decrease in interest payments as compared to the prior year. 43 1812036_textBW.indd 46 3/15/18 4:56 PM Investing Activities A detail of our cash capital expenditures is as follows: Acquisitions of towers and related intangible assets (1) $ 392,902 $ 214,686 $ 525,802 For the year ended December 31, 2017 2016 2015 (in thousands) Construction and related costs on new builds Augmentation and tower upgrades Land buyouts and other assets (2) Purchase and refurbishment of headquarters building Tower maintenance General corporate 69,407 100,736 68,790 43,028 48,645 — 38,123 62,149 — 30,091 27,718 5,135 4,734 61,410 83,728 12,961 28,626 4,974 Total cash capital expenditures $ 588,591 $ 416,817 $ 818,237 (1) (2) The year ended December 31, 2017 excludes $63.3 million of acquisition costs funded through the issuance of 487,963 shares of Class A common stock. Excludes $18.8 million, $14.1 million, and $16.3 million spent to extend ground lease terms for the years ended December 31, 2017, 2016, and 2015, respectively. Subsequent to December 31, 2017, we acquired 308 towers and related assets for $79.5 million in cash. During 2018, we expect to incur non-discretionary cash capital expenditures associated with tower maintenance and general corporate expenditures of $34.0 million to $44.0 million and discretionary cash capital expenditures, based on current acquisition obligations, planned new tower construction, forecasted tower augmentations, and forecasted ground lease purchases, of $530.0 million to $550.0 million as well as potential, additional tower acquisitions not yet under contract. We expect to fund these cash capital expenditures from cash on hand, cash flow from operations, and borrowings under the Revolving Credit Facility or new financings. The exact amount of our future cash capital expenditures will depend on a number of factors including amounts necessary to support our tower portfolio, our new tower build and acquisition programs, and our ground lease purchase program. Financing Activities On January 12, 2017, the Board of Directors authorized a new stock repurchase plan, replacing the plan authorized on June 4, 2015 which had a remaining authorization of $150.0 million. This plan authorized us to purchase, from time to time, up to $1.0 billion of our outstanding Class A common stock through open market repurchases in compliance with Rule 10b-18 under the Exchange Act and/or in privately negotiated transactions at management’s discretion based on market and business conditions, applicable legal requirements and other factors. During the year ended December 31, 2017, we repurchased 5.8 million shares of our Class A common stock under our stock repurchase program for $850.0 million, excluding commissions, at a weighted average price per share of $146.17. Shares repurchased were retired. During the year ended December 31, 2017, we borrowed $525.0 million and repaid $875.0 million under the Revolving Credit Facility. As of December 31, 2017, we had $40.0 million outstanding under the Revolving Credit Facility. Subsequent to December 31, 2017, we borrowed an additional $55.0 million and repaid $20.0 million of the outstanding balance under the Revolving Credit Facility. As of the date of this filing, $75.0 million was outstanding under the Revolving Credit Facility. On February 16, 2018, our Board of Directors authorized a new $1.0 billion stock repurchase plan, replacing the prior plan authorized on January 12, 2017 which had a remaining authorization of $150.0 million. This new plan authorizes us to purchase, from time to time, up to $1.0 billion of our outstanding Class A common stock through open market repurchases in compliance with 44 1812036_textBW.indd 47 3/15/18 4:56 PM Rule 10b-18 under the Exchange Act and/or in privately negotiated transactions at management’s discretion based on market and business conditions, applicable legal requirements and other factors. Shares repurchased will be retired. The new plan has no time deadline and will continue until otherwise modified or terminated by our Board of Directors at any time in its sole discretion. As of the date of this filing, we had the full $1.0 billion authorization remaining under the new plan. On January 20, 2017, SBA Senior Finance II repriced its senior secured term loans from a Eurodollar Rate plus 250 basis points (with a Eurodollar Rate floor of 0.75%) to a Eurodollar Rate plus 225 basis points (with a zero Eurodollar floor). On April 17, 2017, we, through a New York common law trust (the “Trust”), issued $760.0 million of 2017-1C Tower Securities (as defined below). The fixed interest rate on the 2017-1C Tower Securities is 3.168% per annum, payable monthly. Net proceeds from this offering were used to repay the entire $610.0 million aggregate principal amount, as well as accrued and unpaid interest, of the 2012-1C Tower Securities and for general corporate purposes. On October 13, 2017, we issued $750.0 million of 2017 Senior Notes (as defined below). The 2017 Senior Notes accrue interest at a rate of 4.0% per annum. Interest on the 2017 Senior Notes is due semi-annually on April 1 and October 1 of each year, beginning on April 1, 2018. Net proceeds from this offering were used to repay $460.0 million outstanding under the Revolving Credit Facility and for general corporate purposes. On February 16, 2018, we agreed to issue, through a Trust, $640.0 million of 2018-1C Tower Securities (as defined below), which offering is expected to close March 9, 2018. The fixed interest rate on the 2018-1C Tower Securities will be 3.448% per annum, payable monthly, and the net proceeds of this offering, in combination with borrowings under the Revolving Credit Facility, will be used to repay the entire aggregate principal amount of the 2013-1C Tower Securities ($425.0 million) and 2013-1D Tower Securities ($330.0 million), as well as accrued and unpaid interest. We have classified $755.0 million of the combined 2013-1C Tower Securities and 2013-1D Tower Securities as a long-term obligation, as we intend to repay these securities with the net proceeds of the 2018-1C Tower Securities, in combination with borrowings under the Revolving Credit Facility. Registration Statements We have on file with the Commission a shelf registration statement on Form S-4 registering shares of Class A common stock that we may issue in connection with the acquisition of wireless communication towers or antenna sites and related assets or companies who own wireless communication towers, antenna sites, or related assets. During the year ended December 31, 2017, we issued 487,963 shares of Class A common stock under this registration statement. As of December 31, 2017, we had approximately 1.2 million shares of Class A common stock remaining under this shelf registration statement. On March 3, 2015, we filed with the Commission an automatic shelf registration statement for well-known seasoned issuers on Form S-3ASR. This registration statement enables us to issue shares of our Class A common stock, preferred stock or debt securities either separately or represented by warrants, or depositary shares as well as units that include any of these securities. Under the rules governing automatic shelf registration statements, we will file a prospectus supplement and advise the Commission of the amount and type of securities each time we issue securities under this registration statement. No securities were issued under this registration statement from March 3, 2015 through the date of this filing. Debt Instruments and Debt Service Requirements Senior Credit Agreement On February 7, 2014, SBA Senior Finance II entered into a Second Amended and Restated Credit Agreement with several banks and other financial institutions or entities from time to time parties to the Second Amended and Restated Credit Agreement to, among other things, incur the 2014 Term Loan and amend certain terms of the existing senior credit agreement (as amended, the “Senior Credit Agreement”). Terms of the Senior Credit Agreement The Senior Credit Agreement, as amended, requires SBA Senior Finance II to maintain specific financial ratios, including (1) a ratio of Consolidated Total Debt to Annualized Borrower EBITDA not to exceed 6.5 times for any fiscal quarter, (2) a ratio of Consolidated Total Debt and Net Hedge Exposure (calculated in accordance with the Senior Credit Agreement) to Annualized Borrower EBITDA for the most recently ended fiscal quarter not to exceed 6.5 times for 30 consecutive days and (3) a ratio of Annualized Borrower EBITDA to Annualized Cash Interest Expense (calculated in accordance with the Senior Credit Agreement) of 45 1812036_textBW.indd 48 3/15/18 4:56 PM not less than 2.0 times for any fiscal quarter. The Senior Credit Agreement contains customary affirmative and negative covenants that, among other things, limit the ability of SBA Senior Finance II and its subsidiaries to incur indebtedness, grant certain liens, make certain investments, enter into sale leaseback transactions, merge or consolidate, make certain restricted payments, enter into transactions with affiliates, and engage in certain asset dispositions, including a sale of all or substantially all of their property. The Senior Credit Agreement is also subject to customary events of default. Pursuant to the Second Amended and Restated Guarantee and Collateral Agreement, amounts borrowed under the Revolving Credit Facility, the Term Loans and certain hedging transactions that may be entered into by SBA Senior Finance II or the Subsidiary Guarantors (as defined in the Senior Credit Agreement) with lenders or their affiliates are secured by a first lien on the membership interests of SBA Telecommunications, LLC, SBA Senior Finance, LLC and SBA Senior Finance II and on substantially all of the assets (other than leasehold, easement and fee interests in real property) of SBA Senior Finance II and the Subsidiary Guarantors. The Senior Credit Agreement, as amended, permits SBA Senior Finance II, without the consent of the other lenders, to request that one or more lenders provide SBA Senior Finance II with increases in the Revolving Credit Facility or additional term loans provided that after giving effect to the proposed increase in Revolving Credit Facility commitments or incremental term loans the ratio of Consolidated Total Debt to Annualized Borrower EBITDA would not exceed 6.5 times. SBA Senior Finance II’s ability to request such increases in the Revolving Credit Facility or additional term loans is subject to its compliance with customary conditions set forth in the Senior Credit Agreement including compliance, on a pro forma basis, with the financial covenants and ratios set forth therein and, with respect to any additional term loan, an increase in the margin on existing term loans to the extent required by the terms of the Senior Credit Agreement. Upon SBA Senior Finance II’s request, each lender may decide, in its sole discretion, whether to increase all or a portion of its Revolving Credit Facility commitment or whether to provide SBA Senior Finance II with additional term loans and, if so, upon what terms. Revolving Credit Facility under the Senior Credit Agreement The Revolving Credit Facility is governed by the Senior Credit Agreement. The Revolving Credit Facility consists of a revolving loan under which up to $1.0 billion aggregate principal amount may be borrowed, repaid and redrawn, based upon specific financial ratios and subject to the satisfaction of other customary conditions to borrowing. Amounts borrowed under the Revolving Credit Facility accrue interest, at SBA Senior Finance II’s election, at either (i) the Eurodollar Rate plus a margin that ranges from 137.5 basis points to 200.0 basis points or (ii) the Base Rate plus a margin that ranges from 37.5 basis points to 100.0 basis points, in each case based on the ratio of Consolidated Total Debt to Annualized Borrower EBITDA, calculated in accordance with the Senior Credit Agreement. As of December 31, 2017, the balance outstanding under the Revolving Credit Facility was accruing interest at 3.48% per annum. In addition, SBA Senior Finance II is required to pay a commitment fee of 0.25% per annum on the amount of unused commitment. If not earlier terminated by SBA Senior Finance II, the Revolving Credit Facility will terminate on, and SBA Senior Finance II will repay all amounts outstanding on or before, February 5, 2020. The proceeds available under the Revolving Credit Facility may be used for general corporate purposes. SBA Senior Finance II may, from time to time, borrow from and repay the Revolving Credit Facility. Consequently, the amount outstanding under the Revolving Credit Facility at the end of a period may not be reflective of the total amounts outstanding during such period. As of December 31, 2017, SBA Senior Finance II was in compliance with the financial covenants contained in the Senior Credit Agreement. During the year ended December 31, 2017, we borrowed $525.0 million and repaid $875.0 million under the Revolving Credit Facility. As of December 31, 2017, we had $40.0 million outstanding under the Revolving Credit Facility. Subsequent to December 31, 2017, we borrowed an additional $55.0 million and repaid $20.0 million of the outstanding balance under the Revolving Credit Facility. As of the date of this filing, $75.0 million was outstanding under the Revolving Credit Facility. Term Loans under the Senior Credit Agreement Repricing Amendment to the Senior Credit Agreement On January 20, 2017, SBA Senior Finance II amended its Senior Credit Agreement, primarily to reduce the stated rate of interest applicable to our senior secured term loans. As amended, the senior secured term loans accrue interest, at SBA Senior Finance 46 1812036_textBW.indd 49 3/15/18 4:56 PM II’s election, at either the Base Rate plus 125 basis points (with a zero Base Rate floor) or the Eurodollar Rate plus 225 basis points (with a zero Eurodollar Rate floor). 2014 Term Loan The 2014 Term Loan consists of a senior secured term loan with an initial aggregate principal amount of $1.5 billion that matures on March 24, 2021. The 2014 Term Loan was issued at 99.75% of par value. As of December 31, 2017, the 2014 Term Loan was accruing interest at 3.82% per annum. Principal payments on the 2014 Term Loan commenced on September 30, 2014 and are being made in quarterly installments on the last day of each March, June, September, and December in an amount equal to $3.8 million. SBA Senior Finance II has the ability to prepay any or all amounts under the 2014 Term Loan. We incurred deferred financing fees of approximately $14.1 million in relation to this transaction which are being amortized through the maturity date. During the year ended December 31, 2017, we repaid $15.0 million of principal on the 2014 Term Loan. As of December 31, 2017, the 2014 Term Loan had a principal balance of $1,447.5 million. 2015 Term Loan The 2015 Term Loan consists of a senior secured term loan with an initial aggregate principal amount of $500.0 million that matures on June 10, 2022. The 2015 Term Loan was issued at 99.0% of par value. As of December 31, 2017, the 2015 Term Loan was accruing interest at 3.82% per annum. Principal payments on the 2015 Term Loan commenced on September 30, 2015 and are being made in quarterly installments on the last day of each March, June, September, and December in an amount equal to $1.3 million. SBA Senior Finance II has the ability to prepay any or all amounts under the 2015 Term Loan. We incurred deferred financing fees of approximately $5.5 million in relation to this transaction which are being amortized through the maturity date. During the year ended December 31, 2017, we repaid $5.0 million of principal on the 2015 Term Loan. As of December 31, 2017, the 2015 Term Loan had a principal balance of $487.5 million. Secured Tower Revenue Securities Tower Revenue Securities Terms The mortgage loan underlying the 2012-1C Tower Securities, 2013 Tower Securities, 2014 Tower Securities, 2015-1C Tower Securities, 2016-1C Tower Securities, and 2017-1C Tower Securities (together the “Tower Securities”) will be paid from the operating cash flows from the aggregate 10,442 tower sites owned by the Borrowers. The sole asset of the Trust consists of a non- recourse mortgage loan made in favor of those entities that are borrowers on the mortgage loan (the “Borrowers”). The mortgage loan is secured by (i) mortgages, deeds of trust, and deeds to secure debt on a substantial portion of the tower sites, (ii) a security interest in the tower sites and substantially all of the Borrowers’ personal property and fixtures, (iii) the Borrowers’ rights under certain tenant leases, and (iv) all of the proceeds of the foregoing. For each calendar month, SBA Network Management, Inc., an indirect subsidiary (“Network Management”), is entitled to receive a management fee equal to 4.5% of the Borrowers’ operating revenues for the immediately preceding calendar month. The Borrowers may prepay any of the mortgage loan components, in whole or in part, with no prepayment consideration, (i) within twelve months (in the case of the component corresponding to the Secured Tower Revenue Securities Series 2012-1C, Secured Tower Revenue Securities Series 2013-1C, Secured Tower Revenue Securities Series 2013-1D, Secured Tower Revenue Securities Series 2014-1C, Secured Tower Revenue Securities Series 2015-1C, Secured Tower Revenue Securities Series 2016-1C and Secured Tower Revenue Securities 2017-1C) or eighteen months (in the case of the components corresponding to the Secured Tower Revenue Securities Series 2013-2C and Secured Tower Revenue Securities Series 2014-2C) of the anticipated repayment date of such mortgage loan component, (ii) with proceeds received as a result of any condemnation or casualty of any tower owned by the Borrowers or (iii) during an amortization period. In all other circumstances, the Borrowers may prepay the mortgage loan, in whole or in part, upon payment of the applicable prepayment consideration. The prepayment consideration is determined based on the class of the Tower Securities to which the prepaid mortgage loan component corresponds and consists of an amount equal to the excess, if any, of (1) the present value associated with the portion of the principal balance being prepaid, calculated in accordance with the formula set forth in the mortgage loan agreement, 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 within twelve months (in the case of the component corresponding to the Secured Tower Revenue Securities Series 2012-1C, Secured Tower Revenue Securities Series 2013-1C, Secured Tower Revenue Securities Series 2013-1D, Secured Tower Revenue Securities Series 2014-1C, Secured Tower Revenue Securities Series 2015-1C, Secured Tower Revenue Securities Series 2016-1C, and Tower Revenue Securities 2017-1C) or eighteen months (in the case of the components corresponding to the Secured Tower Revenue Securities Series 2013-2C and Secured Tower Revenue 47 1812036_textBW.indd 50 3/15/18 4:56 PM Securities Series 2014-2C) of the anticipated repayment date of such mortgage loan component over (2) that portion of the principal balance of such class prepaid on the date of such prepayment. To the extent that the mortgage loan components corresponding to the Tower Securities are not fully repaid by their respective anticipated repayment dates, the interest rate of each such component will increase by the greater of (i) 5% and (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. Pursuant to the terms of the Tower Securities, all rents and other sums due on any of the towers owned by the Borrowers are directly deposited by the lessees into a controlled deposit account and are held by the indenture trustee. The monies held by the indenture trustee after the release date are classified as short-term restricted cash on the Consolidated Balance Sheets (see Note 4). 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 are required to pay over the succeeding twelve months, as of the end of any calendar quarter, falls to 1.30x 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 1.30x for two consecutive calendar quarters. If the Debt Service Coverage Ratio falls below 1.15x 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 1.15x for a calendar quarter. In addition, if any of the Tower Securities are not fully repaid by their respective anticipated repayment dates, the cash flow from the towers owned by the Borrowers will be trapped by the trustee for the Tower Securities and applied first to repay the interest, at the original interest rates, on the mortgage loan components underlying the Tower Securities, second to fund all reserve accounts and operating expenses associated with those towers, third to pay the management fees due to Network Management, fourth to repay principal of the Tower Securities and fifth to repay the additional interest discussed above. Furthermore, the advance rents reserve requirement states that the Borrowers are required to maintain an advance rents reserve at any time the monthly tenant Debt Service Coverage Ratio is equal to or less than 2:1 and for two calendar months after such coverage ratio again exceeds 2:1. The mortgage loan agreement, as amended, also includes covenants customary for mortgage loans subject to rated securitizations. Among other things, the Borrowers are prohibited from incurring other indebtedness for borrowed money or further encumbering their assets. As of December 31, 2017, the Borrowers met the debt service coverage ratio required by the mortgage loan agreement and were in compliance with all other covenants as set forth in the agreement. 2012-1C Tower Securities On August 9, 2012, we, through the Trust, issued $610.0 million of Secured Tower Revenue Securities Series 2012-1C (the “2012-1C Tower Securities”), which had an anticipated repayment date of December 11, 2017 and a final maturity date of December 9, 2042. The fixed interest rate of the 2012-1C Tower Securities was 2.933% per annum, payable monthly. We incurred deferred financing fees of $14.9 million in relation to this transaction which were being amortized through the anticipated repayment date of the 2012-1C Tower Securities. On April 17, 2017, we repaid in full the 2012-1C Tower Securities with proceeds from the 2017-1C Tower Securities. In connection with the repayment, we expensed $2.0 million of net deferred financing fees. 2013 Tower Securities On April 18, 2013, we, through the Trust, issued $425.0 million of 2.240% Secured Tower Revenue Securities Series 2013-1C, which have an anticipated repayment date of April 10, 2018 and a final maturity date of April 9, 2043 (the “2013-1C Tower Securities”), $575.0 million of 3.722% Secured Tower Revenue Securities Series 2013-2C, which have an anticipated repayment date of April 11, 2023 and a final maturity date of April 9, 2048 (the “2013-2C Tower Securities”), and $330.0 million of 3.598% Secured Tower Revenue Securities Series 2013-1D, which have an anticipated repayment date of April 10, 2018 and a final maturity date of April 9, 2043 (the “2013-1D Tower Securities”) (collectively the “2013 Tower Securities”). The aggregate $1.33 billion of 2013 Tower Securities have a blended interest rate of 3.218% per annum, payable monthly. We incurred deferred financing fees of $25.5 million in relation to this transaction, which are being amortized through the anticipated repayment date of each of the 2013 Tower Securities. We expect to repay the entire aggregate principal amount of the 2013-1C Tower Securities and 2013-1D Tower Securities in connection with the issuance of the 2018-1C Tower Securities (as discussed below). 48 1812036_textBW.indd 51 3/15/18 4:56 PM 2014 Tower Securities On October 15, 2014, we, through the Trust, issued $920.0 million of 2.898% Secured Tower Revenue Securities Series 2014- 1C, which have an anticipated repayment date of October 8, 2019 and a final maturity date of October 11, 2044 (the “2014-1C Tower Securities”) and $620.0 million of 3.869% Secured Tower Revenue Securities Series 2014-2C, which have an anticipated repayment date of October 8, 2024 and a final maturity date of October 8, 2049 (the “2014-2C Tower Securities”) (collectively the “2014 Tower Securities”). The aggregate $1.54 billion of 2014 Tower Securities have a blended interest rate of 3.289% per annum, payable monthly. We incurred deferred financing fees of $22.5 million in relation to this transaction, which are being amortized through the anticipated repayment date of each of the 2014 Tower Securities. 2015-1C Tower Securities On October 14, 2015, we, through the Trust, issued $500.0 million of Secured Tower Revenue Securities Series 2015-1C, which have an anticipated repayment date of October 8, 2020 and a final maturity date of October 10, 2045 (the “2015-1C Tower Securities”). The fixed interest rate of the 2015-1C Tower Securities is 3.156% per annum, payable monthly. We incurred deferred financing fees of $11.2 million in relation to this transaction, which are being amortized through the anticipated repayment date of the 2015-1C Tower Securities. 2016-1C Tower Securities On July 7, 2016, we, through the Trust, issued $700.0 million of Secured Tower Revenue Securities Series 2016-1C which have an anticipated repayment date of July 9, 2021 and a final maturity date of July 10, 2046 (the “2016-1C Tower Securities”). The fixed interest rate of the 2016-1C Tower Securities is 2.877% per annum, payable monthly. Net proceeds from this offering were used to prepay the full $550.0 million outstanding on the 2010-2C Tower Securities and for general corporate purposes. We incurred deferred financing fees of $9.5 million in relation to this transaction which are being amortized through the anticipated repayment date of the 2016-1C Tower Securities. 2017-1C Tower Securities On April 17, 2017, we, through the Trust, issued $760.0 million of Secured Tower Revenue Securities Series 2017-1C, which have an anticipated repayment date of April 11, 2022 and a final maturity date of April 9, 2047 (the “2017-1C Tower Securities”). The fixed interest rate on the 2017-1C Tower Securities is 3.168% per annum, payable monthly. Net proceeds from this offering were used to prepay the entire $610.0 million aggregate principal amount, as well as accrued and unpaid interest, of the 2012-1C Tower Securities and for general corporate purposes. We incurred deferred financing fees of $10.2 million in relation to this transaction, which are being amortized through the anticipated repayment date of the 2017-1C Tower Securities. In connection with the issuance of the 2017-1C Tower Securities, the non-recourse mortgage loan was increased by $800.0 million (or by a net of $190.0 million after giving effect to prepayment of the loan components relating to the 2012-1C Tower Securities). The new loan accrues interest at the same rate as the 2017-1C Tower Securities; however, it is subject to all other material terms of the existing mortgage loan, including collateral and interest rate after the anticipated repayment date. 2018-1C Tower Securities On February 16, 2018, we agreed to issue, through a Trust, $640.0 million of Secured Tower Revenue Securities Series 2018- 1C (the “2018-1C Tower Securities”), which offering is expected to close March 9, 2018. These securities are expected to have an anticipated repayment date of March 9, 2023 and a final maturity date of March 9, 2048. The fixed interest rate on the 2018-1C Tower Securities will be 3.448% per annum, payable monthly, and the proceeds of this offering, in combination with borrowings under the Revolving Credit Facility, will be used to repay the entire aggregate principal amount of the 2013-1C Tower Securities ($425.0 million) and 2013-1D Tower Securities ($330.0 million), as well as accrued and unpaid interest. We have classified $755.0 million of the combined 2013-1C Tower Securities and 2013-1D Tower Securities as a long-term obligation, as we intend to repay these securities with the net proceeds from the offering of the 2018-1C Tower Securities, in combination with borrowings under the Revolving Credit Facility. 49 1812036_textBW.indd 52 3/15/18 4:56 PM Senior Notes 2014 Senior Notes On July 1, 2014, we issued $750.0 million of unsecured senior notes due July 15, 2022 (the “2014 Senior Notes”). The 2014 Senior Notes accrue interest at a rate of 4.875% per annum and were issued at 99.178% of par value. Interest on the 2014 Senior Notes is due semi-annually on January 15 and July 15 of each year. We incurred deferred financing fees of $11.6 million in relation to this transaction which are being amortized through the maturity date. The 2014 Senior Notes are subject to redemption in whole or in part on or after July 15, 2017 at the redemption prices set forth in the indenture agreement plus accrued and unpaid interest. We may redeem the 2014 Senior Notes during the twelve-month period beginning on the following dates at the following redemption prices: July 15, 2017 at 103.656%, July 15, 2018 at 102.438%, July 15, 2019 at 101.219%, or July 15, 2020 until maturity at 100.000%, of the principal amount of the 2014 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest. 2016 Senior Notes On August 15, 2016, we issued $1.1 billion of unsecured senior notes due September 1, 2024. The 2016 Senior Notes accrue interest at a rate of 4.875% per annum and were issued at 99.178% of par value. Interest on the 2016 Senior Notes is due semi- annually on March 1 and September 1 of each year, beginning on March 1, 2017. We incurred deferred financing fees of $12.8 million in relation to this transaction which are being amortized through the maturity date. Net proceeds from this offering and cash on hand were used to redeem $800.0 million, the aggregate principal amount outstanding, of Telecommunications’ 5.75% Senior Notes and $250.0 million of our 5.625% Senior Notes and pay the associated call premiums. The 2016 Senior Notes are subject to redemption in whole or in part on or after September 1, 2019 at the redemption prices set forth in the indenture agreement plus accrued and unpaid interest. Prior to September 1, 2019, we may at our option redeem up to 35% of the aggregate principal amount of the 2016 Senior Notes originally issued at a redemption price of 104.875% of the principal amount of the 2016 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest with the net proceeds of certain equity offerings. We may redeem the 2016 Senior Notes during the twelve-month period beginning on the following dates at the following redemption prices: September 1, 2019 at 103.656%, September 1, 2020 at 102.438%, September 1, 2021 at 101.219%, or September 1, 2022 until maturity at 100.000%, of the principal amount of the 2016 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest. 2017 Senior Notes On October 13, 2017, we issued $750.0 million of unsecured senior notes due October 1, 2022 (the “2017 Senior Notes”). The 2017 Senior Notes accrue interest at a rate of 4.0% per annum. Interest on the 2017 Senior Notes is due semi-annually on April 1 and October 1 of each year, beginning on April 1, 2018. We incurred deferred financing fees of $8.2 million in relation to this transaction, which are being amortized through the maturity date. Net proceeds from this offering were used to repay $460.0 million outstanding under the Revolving Credit Facility and for general corporate purposes. The 2017 Senior Notes are subject to redemption in whole or in part on or after October 1, 2019 at the redemption prices set forth in the indenture agreement plus accrued and unpaid interest. Until October 1, 2020, we may at our option redeem up to 35% of the aggregate principal amount of the 2017 Senior Notes originally issued, at a redemption price of 104.000% of the principal amount of the 2017 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest with the net proceeds of certain equity offerings. We may redeem the 2017 Senior Notes during the twelve-month period beginning on the following dates at the following redemption prices: October 1, 2019 at 102.000%, October 1, 2020 at 101.000%, or October 1, 2021 until maturity at 100.000%, of the principal amount of the 2017 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest. Indentures Governing Senior Notes The Indentures governing the Senior Notes contain customary covenants, subject to a number of exceptions and qualifications, including restrictions on the ability of SBAC and Telecommunications to (1) incur additional indebtedness unless the Consolidated Indebtedness to Annualized Consolidated Adjusted EBITDA Ratio (as defined in the Indenture), pro forma for the additional indebtedness does not exceed, with respect to any fiscal quarter, 9.5x for SBAC, (2) merge, consolidate or sell assets, (3) make restricted payments, including dividends or other distributions, (4) enter into transactions with affiliates, and (5) enter into sale and 50 1812036_textBW.indd 53 3/15/18 4:56 PM leaseback transactions and restrictions on the ability of the Restricted Subsidiaries of SBAC (as defined in the Indentures) to incur liens securing indebtedness. Debt Service As of December 31, 2017, we believe that our cash on hand, capacity available under our Revolving Credit Facility, and cash flows from operations for the next twelve months will be sufficient to service our outstanding debt during the next twelve months. The following table illustrates our estimate of our debt service requirement over the twelve months ended December 31, 2018 based on the amounts outstanding as of December 31, 2017 and the interest rates accruing on those amounts on such date (in thousands): 2014 Senior Notes 2016 Senior Notes 2017 Senior Notes 2013-1C Tower Securities (1) 2013-2C Tower Securities 2013-1D Tower Securities (2) 2014-1C Tower Securities 2014-2C Tower Securities 2015-1C Tower Securities 2016-1C Tower Securities 2017-1C Tower Securities Revolving Credit Facility 2014 Term Loan 2015 Term Loan $ 36,563 53,625 30,000 427,867 21,585 333,558 26,954 24,185 15,939 20,361 24,318 3,792 70,080 23,551 Total debt service for the next 12 months (3) $ 1,112,378 (1) The anticipated repayment date and the final maturity date for the 2013-1C Tower Securities is April 10, 2018 and April 9, 2043, respectively. Interest expense included above is through the maturity date. The 2013-1C Tower Securities are expected to be repaid in connection with the issuance of the 2018-1C Tower Securities on March 9, 2018. (2) The anticipated repayment date and the final maturity date for the 2013-1D Tower Securities are April 10, 2018 and April 19, 2043, respectively. Interest expense included above is through the maturity date. The 2013-1D Tower Securities are expected to be repaid in connection with the issuance of the 2018-1C Tower Securities. (3) Excludes debt service with respect to the $640.0 million aggregate principal amount of 2018-1C Tower Securities expected to be issued on March 9, 2018. The debt service for the 2018-1C Tower Securities in 2018 is expected to be $18.3 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 other than our contracts in South America which have inflationary index based rental escalators. 51 1812036_textBW.indd 54 3/15/18 4:56 PM Commitments and Contractual Obligations The following table summarizes our scheduled contractual commitments as of December 31, 2017: 2018 2019 2020 2021 2022 Thereafter (in thousands) Principal payments of debt $ 775,000 $ 940,000 $ 560,000 $ 2,107,500 $ 2,727,500 $ 2,295,000 Interest payments (1) Operating leases Capital leases Employment agreements 337,378 324,494 295,646 232,169 157,773 139,053 220,190 222,489 224,148 226,528 228,093 3,769,586 1,199 2,350 654 800 226 800 31 — — — — — Total contractual obligations $ 1,336,117 $ 1,488,437 $ 1,080,820 $ 2,566,228 $ 3,113,366 $ 6,203,639 (1) Represents interest payments based on the 2013-1C Tower Securities interest rate of 2.240%, the 2013-2C Tower Securities interest rate of 3.722%, the 2013-1D Tower Securities interest rate of 3.598%, the 2014-1C Tower Securities interest rate of 2.898%, the 2014-2C Tower Securities interest rate of 3.869%, the 2015-1C Tower Securities interest rate of 3.156%, the 2016- 1C Tower Securities interest rate of 2.877%, the 2017-1C Tower Securities interest rate of 3.168%, the 2014 Term Loan at an interest rate of 3.82% as of December 31, 2017, the 2015 Term Loan at an interest rate of 3.82% as of December 31, 2017, the revolver at an average interest rate of 3.48% as of December 31, 2017, the 2015 Senior Notes interest rates of 4.875%, 2016 Senior Notes interest rates of 4.875%, and the 2017 Senior Notes interest rate of 4.000%. The 2013-1C Tower Securities and 2013-1D Tower Securities are expected to be repaid in connection with the expected issuance on March 9, 2018 of the $640.0 million of 2018-1C Tower Securities with a fixed interest rate of 3.448% per annum. Off-Balance Sheet Arrangements We are not involved in any off-balance sheet arrangements. 52 1812036_textBW.indd 55 3/15/18 4:56 PM 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 values associated with our long-term debt instruments assuming our actual level of long-term indebtedness as of December 31, 2017: 2018 2019 2020 2021 2022 Thereafter Total Fair Value (in thousands) 2014 Senior Notes $ — $ — $ — $ — $ 750,000 $ — $ 750,000 $ 770,625 2016 Senior Notes 2017 Senior Notes — — 2013-1C Tower Securities (1)(2) 425,000 2013-2C Tower Securities (1) — 2013-1D Tower Securities (1)(2) 330,000 — — — — — 2014-1C Tower Securities (1) — 920,000 — — — — — — — — — — — — — — — 1,100,000 1,100,000 1,127,500 — 750,000 — — 750,000 750,938 425,000 423,853 575,000 575,000 578,433 — — 330,000 330,145 920,000 915,216 620,000 620,000 620,942 — — — — 500,000 496,840 700,000 691,166 760,000 751,404 40,000 40,000 — 1,447,500 1,451,119 — — — — — — — — — — 500,000 — — — — 700,000 — — 760,000 — — — — — — 40,000 — 15,000 15,000 15,000 1,402,500 2014-2C Tower Securities (1) 2015-1C Tower Securities (1) 2016-1C Tower Securities (1) 2017-1C Tower Securities (1) Revolving Credit Facility 2014 Term Loan 2015 Term Loan 5,000 5,000 5,000 5,000 467,500 — 487,500 488,109 Total debt obligation $ 775,000 $ 940,000 $ 560,000 $ 2,107,500 $ 2,727,500 $ 2,295,000 $ 9,405,000 $ 9,436,290 (1) The anticipated repayment date and the final maturity date for the 2013-1C Tower Securities is April 10, 2018 and April 9, 2043, respectively. The anticipated repayment date and the final maturity date for the 2013-2C Tower Securities is April 11, 2023 and April 9, 2048, respectively. The anticipated repayment date and the final maturity date for the 2013-1D Tower Securities is April 10, 2018 and April 9, 2043, respectively. The anticipated repayment date and the final maturity date for the 2014-1C Tower Securities is October 8, 2019 and October 11, 2044, respectively. The anticipated repayment date and the final maturity date for the 2014-2C Tower Securities is October 8, 2024 and October 8, 2049, respectively. The anticipated repayment date and the final maturity date for the 2015-1C Tower Securities is October 8, 2020 and October 10, 2045, respectively. The anticipated repayment date and the final maturity date for the 2016-1C Tower Securities is July 9, 2021 and July 10, 2046, respectively. The anticipated repayment date and the final maturity date for the 2017-1C Tower Securities is April 11, 2022 and April 9, 2047, respectively. (2) Proceeds from the issuance of the 2018-1C Tower Securities, which, once issued, will be due March 9, 2023, are expected to be used to repay the full $425.0 million outstanding under the 2013-1C Tower Securities and the full $330.0 million outstanding under the 2013-1D Tower Securities. Our current primary market risk exposure is (1) interest rate risk relating to our ability to refinance our debt at commercially reasonable rates, if at all, and (2) interest rate risk relating to the impact of interest rate movements on our 2014 Term Loan and 2015 Term Loan and any borrowings that we may incur under our Revolving Credit Facility, which are at floating rates. We manage the interest rate risk on our outstanding debt through our large percentage of fixed rate debt. While we cannot predict our ability to 53 1812036_textBW.indd 56 3/15/18 4:56 PM 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. We are exposed to market risk from changes in foreign currency exchange rates in connection with our operations in Brazil, Canada, Chile, Peru, Argentina, Colombia, and to a lesser extent, our markets in Central America. In each of these countries, we pay most of our selling, general, and administrative expenses and a portion of our operating expenses, such as taxes and utilities incurred in the country in local currency. In addition, in Brazil, Canada, Chile, and Colombia, we receive significantly all of our revenue and pay significantly all of our operating expenses in local currency. In Peru and Argentina, we receive our revenue and pay our operating expenses in a mix of local currency and U.S. dollars. All transactions denominated in currencies other than the U.S. Dollar are reported in U.S. Dollars at the applicable exchange rate. All assets and liabilities are translated into U.S. Dollars at exchange rates in effect at the end of the applicable fiscal reporting period, and all revenues and expenses are translated at average rates for the period. The cumulative translation effect is included in equity as a component of Accumulated other comprehensive income (loss). For the year ended December 31, 2017, approximately 13.5% of our revenues and approximately 16.3% of our total operating expenses were denominated in foreign currencies. We have performed a sensitivity analysis assuming a hypothetical 10% adverse movement in the Brazilian Real from the quoted foreign currency exchange rates at December 31, 2017. As of December 31, 2017, the analysis indicated that such an adverse movement would have caused our revenues and operating income to decline by approximately 1.1% and 2.8%, respectively, for the year ended December 31, 2017. As of December 31, 2017, we had intercompany debt, which is denominated in a currency other than the functional currency of the subsidiary in which it is recorded. As settlement of this debt is anticipated or planned in the foreseeable future, any changes in the foreign currency exchange rates will result in unrealized gains or losses, which will be included in our determination of net income. A change of 10% in the underlying exchange rates of our unsettled intercompany debt at December 31, 2017 would have resulted in approximately $56.4 million of unrealized gains or losses that would have been included in Other income (expense), net in our Consolidated Statements of Operations for the year ended December 31, 2017. 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, as amended, and Section 21E of the Exchange Act. 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 expectations on the future growth and financial health of the wireless industry and the industry participants, the drivers of such growth, the demand for our towers, the trends developing in our industry, and competitive factors; our ability to capture and capitalize on industry growth and the impact of such growth on our financial and operational results; our intent to grow our tower portfolio domestically and internationally and expend through organic lease up on existing towers; our ability to grow our tower portfolio without proportionately increasing selling, general, and administrative expenses; our belief that over the long-term, site leasing revenues will continue to grow as wireless service providers increase their use of our towers due to increasing minutes of network use and data transfer, network expansion and network coverage requirements; our expectation regarding site leasing revenue growth, on an organic basis, in our domestic and international segments; our belief that our site leasing business is characterized by stable and long-term recurring revenues, predictable operating costs, and minimal non-discretionary capital expenditures; our expectation that, due to the relatively young age and mix of our tower portfolio, future expenditures required to maintain these towers will be minimal; 54 1812036_textBW.indd 57 3/15/18 4:56 PM • • • • • • • • • • • • • • • our expectation that we will grow our cash flows by adding tenants to our towers at minimal incremental costs and executing monetary amendments; our belief regarding the impact of our ground lease purchase program; our ability to remain qualified as a REIT and the timing of such qualification and our election to be subject to tax as a REIT; our belief that our business is currently operated in a manner that complies with the REIT rules and our intent to continue to do so; our plans regarding our distribution policy, and the amount and timing of, and source of funds for, any such distributions; our expectations regarding the use of NOLs to reduce REIT taxable income; our expectations regarding our capital allocation strategy, the impact of our election to be taxed as a REIT on that strategy, and our goal of increasing our Adjusted Funds From Operations per share; and our goal of increasing our Adjusted Funds From Operations per share; our expectations regarding our future cash capital expenditures, both discretionary and non-discretionary, including expenditures required to maintain, improve, and modify our towers, ground lease purchases, and general corporate expenditures, and the source of funds for these expenditures; our intended use of our liquidity; our expectations regarding our debt service in 2018 and our belief that our cash on hand, capacity under our Revolving Credit Facility, and our cash flows from operations for the next twelve months will be sufficient to service our outstanding debt during the next twelve months; the timing of closing of pending financings and the expected use of proceeds; our belief regarding our credit risk; our estimates with respect to tax matters as a result of the Tax Act and our expectation that one-time income charges recognized as a result of the Tax Act will be offset by our existing NOLs; and our estimates regarding certain tax and accounting matters, including the impact on our financial statements. 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: • • • the impact of consolidation among wireless service providers on our leasing revenue; our ability to continue to comply with covenants and the terms of our credit instruments and our ability to obtain additional financing to fund our capital expenditures; our ability to successfully manage the risks associated with international operations, including risks relating to political or economic conditions, tax laws, currency restrictions and exchange rate fluctuations, legal or judicial systems, and land ownership; 55 1812036_textBW.indd 58 3/15/18 4:56 PM • • • • • • • • • • • • • • • • • • our ability to successfully manage the risks associated with our acquisition initiatives, including our ability to effectively integrate acquired towers into our business and to achieve the financial results projected in our valuation models for the acquired towers; developments in the wireless communications industry in general, and for wireless communications infrastructure providers in particular, that may slow growth or affect the willingness or ability of the wireless service providers to expend capital to fund network expansion or enhancements; our ability to secure as many site leasing tenants as anticipated, recognize our expected economies of scale with respect to new tenants on our towers, and retain current leases on towers; our ability to secure and deliver anticipated services business at contemplated margins; our ability to build new towers, including our ability to identify and acquire land that would be attractive for our customers and to successfully and timely address zoning, permitting, weather, availability of labor and supplies and other issues that arise in connection with the building of new towers; competition for the acquisition of towers and other factors that may adversely affect our ability to purchase towers that meet our investment criteria and are available at prices which we believe will be accretive to our shareholders and allow us to maintain our long-term target leverage ratios while achieving our expected portfolio growth levels; our capital allocation decisions and the impact on our ability to achieve our expected tower portfolio growth levels; our ability to protect our rights to the land under our towers, and our ability to acquire land underneath our towers on terms that are accretive; 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, debt service and estimated portfolio growth; the impact of rising interest rates and our ability to refinance our existing indebtedness at commercially reasonable rates or at all; our ability to successfully estimate the impact of regulatory and litigation matters; natural disasters and other unforeseen damage for which our insurance may not provide adequate coverage; a decrease in demand for our towers; the introduction of new technologies or changes in a tenant’s business model that may make our tower leasing business less desirable to existing or potential tenants; our ability to qualify for treatment as a REIT for U.S. federal income tax purposes and to comply with and conduct our business in accordance with such rules; our ability to utilize available NOLs to reduce REIT taxable income; the complexity of the Tax Act and our ability to accurately interpret and predict its impact on our financial condition and results; and our ability to successfully estimate the impact of certain accounting and tax matters, including the effect on our company of adopting certain accounting pronouncements and the availability of sufficient NOLs to offset future REIT taxable income. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Financial statements and supplementary data are on pages F-1 through F-40. 56 1812036_textBW.indd 59 3/15/18 4:56 PM 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, 2017, 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, 2017, 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, 2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 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, 2017. 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 SBAC; (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 SBAC are being made only in accordance with authorizations of management and directors of SBAC; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of SBAC’s assets that could have a material effect on the financial statements. Management performed an assessment of the effectiveness of SBAC’s internal control over financial reporting as of December 31, 2017 based upon criteria in Internal Control – Integrated Framework (2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment, management determined that SBAC’s internal control over financial reporting was effective as of December 31, 2017 based on the criteria in Internal Control – Integrated Framework (2013 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 SBAC’s internal control over financial reporting. 57 1812036_textBW.indd 60 3/15/18 4:56 PM Report of Independent Registered Certified Public Accounting Firm To the Shareholders and the Board of Directors of SBA Communications Corporation and Subsidiaries Opinion on Internal Control over Financial Reporting We have audited SBA Communications Corporation and Subsidiaries’ internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, SBA Communications Corporation and Subsidiaries’ (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, 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 the Company as of December 31, 2017 and 2016 and the related consolidated statements of operations, comprehensive income (loss), shareholders’ deficit, and cash flows for each of the three years in the period ended December 31, 2017, and the related notes and financial statement schedule listed in the Index at Item 15(a) of the Company and our report dated March 1, 2018 expressed an unqualified opinion thereon. Basis for Opinion The Company’s 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 are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. 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. Definition and Limitations of Internal Control Over Financial Reporting 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. /s/ Ernst & Young LLP Boca Raton, Florida March 1, 2018 58 1812036_textBW.indd 61 3/15/18 4:56 PM 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 – Governance Documents.” We intend to provide disclosure of any amendments or waivers of our Code of Ethics on our website within four business days following the date of the amendment or waiver. The remaining items required by Part III, Item 10 are incorporated herein by reference from the Registrant’s Proxy Statement for its 2018 Annual Meeting of Shareholders to be filed on or before April 29, 2018. 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 2018 Annual Meeting of Shareholders to be filed on or before April 29, 2018. 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 2018 Annual Meeting of Shareholders to be filed on or before April 29, 2018. 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 2018 Annual Meeting of Shareholders to be filed on or before April 29, 2018. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The items required by Part III, Item 14 are incorporated herein by reference from the Registrant’s Proxy Statement for its 2018 Annual Meeting of Shareholders to be filed on or before April 29, 2018. PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES (a) Documents filed as part of this report: (1) Financial Statements See Item 8 for Financial Statements included with this Annual Report on Form 10-K. (2) Financial Statement Schedules Schedule III—Schedule of Real Estate and Accumulated Depreciation (see below) All other schedules are omitted because they are not applicable or because the required information is contained in the financial statements or notes thereto included in this Form 10-K. 59 1812036_textBW.indd 62 3/15/18 4:56 PM Schedule III—Schedule of Real Estate and Accumulated Depreciation Cost Accumulated Capitalized Gross Amount Depreciation Initial Subsequent Carried at Close at Close Life on Which Depreciation in Latest Income Description Encumbrances Company Acquisition Period Period Construction Acquired Computed Cost to to of Current of Current Date of Date Statement is 27,909 sites (1) $ 6,805,000 (2) (3) (3) $ 5,340,858 (4) $ (2,627,841) Various Various Up to 20 years (in thousands) (1) No single site exceeds 5% of the aggregate gross amounts at which the assets were carried at the close of the period set forth in the table above. (2) As of December 31, 2017, certain assets secure debt of $6.8 billion. (3) The Company has omitted this information, as it would be impracticable to compile such information on a site-by-site basis. (4) Does not include those sites under construction. Gross amount at beginning Additions during period: Acquisitions (1) Construction and related costs on new builds Augmentation and tower upgrades Land buyouts and other assets Tower maintenance Other (2) Total additions Deductions during period: Cost of real estate sold or disposed Impairment Other (2) Total deductions: Balance at end 2017 2016 2015 (in thousands) $ 5,079,660 $ 4,839,874 $ 4,577,296 112,979 72,456 203,441 70,361 58,143 43,288 37,861 41,657 44,574 29,391 28,257 87,088 52,146 47,148 27,123 — 45,829 — 297,676 287,120 416,946 (1,027) (12,842) (26,506) (34,102) (34,491) (34,373) (1,350) — (93,489) (36,479) (47,334) (154,368) $ 5,340,858 $ 5,079,660 $ 4,839,874 (1) Inclusive of changes between the final purchase price allocation and the preliminary purchase price allocations. 60 1812036_textBW.indd 63 3/15/18 4:56 PM Gross amount of accumulated depreciation at beginning $ (2,396,587) $ (2,160,530) $ (1,912,906) 2017 2016 2015 (in thousands) Additions during period: Depreciation Other (2) Total additions Deductions during period: (248,818) (254,982) (282,831) — (5,557) — (248,818) (260,539) (282,831) Amount of accumulated depreciation for assets sold or disposed 17,051 24,483 25,909 Other (2) Total deductions Balance at end 513 — 9,298 17,564 24,483 35,207 $ (2,627,841) $ (2,396,587) $ (2,160,530) (2) Primarily represents cumulative translation adjustments related to changes in foreign currency exchange rates. (3) Exhibits Exhibit Nb. 2.1 Exhibit Description Agreement and Plan of Merger, by and between SBA Communications Corporation and SBA Communications REIT Corporation, dated November 10, 2016. 3.1 Amended and Restated Articles of Incorporation of SBA Communications Corporation, effective as of January 13, 2017. 3.2 Articles of Merger, effective as of January 13, 2017. 3.3 Second Amended and Restated Bylaws of SBA Communications Corporation, effective as of January 14, 2017. 4.15A Form of Senior Indenture. 4.16A Form of Subordinated Indenture. Incorporated by Reference Form 8-K Period Covered or Date of Filing 01/17/17 8-K 8-K 8-K S-3ASR (333-202477) S-3ASR (333-202477) 01/17/17 01/17/17 01/18/17 03/03/15 03/03/15 4.24 Indenture, dated July 1, 2014, between SBA Communications Corporation and 8-K 07/01/14 U.S. Bank National Association. 4.24A Supplemental Indenture, dated as of January 13, 2017, between SBA 8-K 01/17/17 Communications Corporation and U.S. Bank National Association, to the Indenture dated as of July 1, 2014, between SBA Communications Corporation and U.S. Bank National Association. 4.25 Form of 4.875% Senior Notes due 2022 (included in Exhibit 4.24). 4.26 Indenture, dated August 15, 2016, between SBA Communications Corporation and U.S. Bank National Association. 8-K 8-K 07/01/14 08/16/16 61 1812036_textBW.indd 64 3/15/18 4:56 PM 4.26A Supplemental Indenture, dated as of January 13, 2017, between SBA 8-K 01/17/17 Communications Corporation and U.S. Bank National Association, to the Indenture dated as of August 15, 2016, between SBA Communications Corporation and U.S. Bank National Association. 4.27 Form of 4.875% Senior Notes due 2024 (included in Exhibit 4.26). 4.28 Indenture, dated as of October 13, 2017, between SBA Communications Corporation and U.S. Bank National Association 4.29 Form of 4.00% Senior Notes due 2022 (included in Exhibit 4.28). 8-K 8-K 8-K 10.1 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. S-4 (333-50219) 08/16/16 10/16/17 10/16/17 04/15/98 10.3 2015 Revolving Refinancing Amendment, dated as of February 5, 2015, among 10-K SBA Senior Finance II, as borrower, the several lenders from time to time parties thereto, and Toronto Dominion (Texas) LLC, as administrative agent. Year ended December 31, 2014 10.4 10.5 Purchase Agreement, dated April 4, 2013, among SBA Senior Finance, LLC, Deutsche Bank Trust Company Americas, as trustee, and the several initial purchasers listed on Schedule I thereto. 8-K 04/23/13 Incremental Term Loan B-2 Amendment, dated as of June 10, 2015, among SBA Senior Finance II LLC, as borrower, the several lenders from time to time parties thereto, and Toronto Dominion (Texas) LLC, as administrative agent. 10-Q Quarter ended June 30, 2015 10.6 Purchase Agreement, dated October 6, 2015, among SBA Senior Finance, LLC, 8-K 10/09/15 Deutsche Bank Trust Company Americas, as trustee, and the several initial purchasers listed on Schedule I thereto. 10.7 Second Amended and Restated Credit Agreement, dated as of February 7, 2014, among SBA Senior Finance II LLC, as borrower, the several lenders from time to time parties thereto, Citigroup Global Capital Markets Inc. and Barclays Bank PLC, as incremental tranche B-1 term loan joint lead arrangers and syndication agents, Deutsche Bank Securities Inc., J.P. Morgan Securities LLC, TD Securities (USA) LLC, The Royal Bank of Scotland plc and Wells Fargo Securities, LLC, as co-incremental Tranche B-1 term loan documentation agents, and Toronto Dominion (Texas) LLC, as administrative agent. 8-K 02/13/14 10.7A Seventh Amendment, dated as of January 20, 2017, among SBA Senior Finance II LLC, as borrower, the lenders parties thereto, and Toronto Dominion (Texas) LLC, as administrative agent. 10-K Year ended December 31, 2016 10.8 Second Amended and Restated Guarantee and Collateral Agreement, dated as of 8-K 02/13/14 February 7, 2014, among SBA Communications Corporation, SBA Telecommunications, LLC, SBA Senior Finance, LLC, SBA Senior Finance II LLC and certain of its subsidiaries, as identified in the Second Amended and Restated Guarantee and Collateral Agreement, in favor of Toronto Dominion (Texas) LLC, as administrative agent. 62 1812036_textBW.indd 65 3/15/18 4:56 PM 10.11 Purchase Agreement, dated October 7, 2014, among SBA Senior Finance, LLC, 8-K 10/10/14 Deutsche Bank Trust Company, as trustee, and several initial purchasers listed on Schedule I thereto. 10.12 Second Amended and Restated Loan and Security Agreement, dated as of October 15, 2014, among SBA Properties, LLC, SBA Sites, LLC, SBA Structures, LLC, SBA Infrastructure, LLC, SBA Monarch Towers III, LLC, SBA 2012 TC Assets PR, LLC, SBA 2012 TC Assets, LLC, SBA Towers IV, LLC, SBA Monarch Towers I, LLC, SBA Towers USVI, Inc., SBA GC Towers, LLC, SBA Towers VII, LLC and any Additional Borrower or Borrowers that may become a party thereto and Midland Loan Services, as Servicer on behalf of Deutsche Bank Trust Company Americas, as Trustee. 10-Q Quarter ended September 30, 2014 10.12A First Loan and Security Agreement Supplement and Amendment, dated as of 8-K 10/20/15 October 14, 2015, by and among the Borrowers named therein and Midland Loan Services, a division of PNC Bank, National Association, as Servicer on behalf of Deutsche Bank Trust Company Americas, as Trustee. 10.12B Second Loan and Security Agreement Supplement, dated as of July 7, 2016, by and among the Borrowers named therein and Midland Loan Services, a division of PNC Bank, National Association, as Servicer on behalf of Deutsche Bank Trust Company Americas, as Trustee. 10.12C Third Loan and Security Agreement Supplement and Amendment, dated as of April 7, 2017, by and among the Borrowers named therein and Midland Loan Services, a division of PNC Bank, National Association, as Servicer on behalf of Deutsche Bank Trust Company Americas, as Trustee. 8-K 07/08/16 8-K 04/21/17 10.13 Purchase Agreement, dated June 21, 2016, among SBA Senior Finance, LLC, Deutsche Bank Trust Company Americas, as trustee, and the several initial purchasers listed on Schedule I thereto. 8-K 06/24/16 10.14 Purchase Agreement, dated August 1, 2016, between SBA Communications 8-K 08/02/16 Corporation and Deutsche Bank Securities Inc. and J.P. Morgan Securities LLC, as representatives of the several initial purchasers listed on Schedule 1 thereto. 10.15 Registration Rights Agreement, dated August 15, 2016, among SBA 8-K 08/16/16 Communications Corporation and the several initial purchasers listed on Schedule I thereto (incorporated by reference to Exhibit 10.16 to the Form 8-K filed on August 16, 2016). 10.16 Purchase Agreement, dated April 4, 2017, among SBA Senior Finance, LLC, Deutsche Bank Trust Company Americas, as trustee, and the several initial purchasers listed on Schedule I thereto. 8-K 04/07/17 10.17 Registration Rights Agreement, dated October 13, 2017, between SBA 8-K 10/16/17 Communications Corporation and Citigroup Global Markets Inc. and J.P. Morgan Securities LLC, as representatives of the several initial purchasers listed on Schedule I thereto. 10.18 Purchase Agreement, dated September 28, 2017, between SBA Communications Corporation and Citigroup Global Markets, Inc. and J.P. Morgan Securities LLC, as representatives of the several initial purchasers listed on Schedule I thereto. 8-K Quarter ended September 30, 2017 63 1812036_textBW.indd 66 3/15/18 4:56 PM 10.19 Purchase Agreement, dated February 16, 2018, among SBA Senior Finance, 8-K 02/22/18 LLC, Deutsche Bank Trust Company Americas, as trustee, and the several initial purchasers listed on Schedule I thereto. 10.33 2001 Equity Participation Plan as Amended and Restated on May 16, 2002.† DEF 14A 04/16/02 10.35G Employment Agreement, dated August 15, 2017, between SBA Communications 10-Q Corporation and Jeffrey A. Stoops.† Quarter ended September 30, 2017 10.35H Amendment to Employment Agreement, effective as of August 15, 2017, between SBA Communications Corporation and Jeffrey A. Stoops.†* 10.50 Management Agreement, dated as of November 18, 2005, by and among SBA Properties, Inc., SBA Network Management, Inc. and SBA Senior Finance, Inc. 10-K Year ended December 31, 2005 10.57D Amended and Restated Employment Agreement, dated as of December 7, 2015, 10-K between SBA Communications Corporation and Kurt L. Bagwell.† Year ended December 31, 2015 10.57E Amendment to Amended and Restated Employment Agreement, effective as of December 7, 2015, between SBA Communications Corporation and Kurt L. Bagwell.†* 10.58D Amended and Restated Employment Agreement, dated as of December 7, 2015, 10-K between SBA Communications Corporation and Thomas P. Hunt.† Year ended December 31, 2015 10.58E Amendment to Amended and Restated Employment Agreement, effective as of December 7, 2015, between SBA Communications Corporation and Thomas P. Hunt.†* 10.60 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. 10-K Year ended December 31, 2006 10.75A SBA Communications Corporation 2008 Employee Stock Purchase Plan, as 10-Q Quarter ended June amended on May 4, 2011.† 10.76 Form of Indemnification Agreement dated January 15, 2009 between SBA 10-K Communications Corporation and its directors and certain officers. 30, 2011 Year ended December 31, 2008 10.85C Amended and Restated Employment Agreement, dated as of December 7, 2015, between SBA Communications Corporation and Brendan T. Cavanagh.† 10-K Year ended December 31, 2015 10.85D Amendment to Amended and Restated Employment Agreement, effective as of December 7, 2015, between SBA Communications Corporation and Brendan T. Cavanagh.†* 10.89A SBA Communications Corporation 2010 Performance and Equity Incentive Plan, 10-Q Quarter ended June as amended and restated.† 21 Subsidiaries.* 23.1 Consent of Ernst & Young LLP.* 30, 2017 64 1812036_textBW.indd 67 3/15/18 4:56 PM 31.1 Certification by Jeffrey A. Stoops, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* 31.2 Certification by Brendan T. Cavanagh, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* 32.1 Certification by Jeffrey A. Stoops, Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ** 32.2 Certification by Brendan T. Cavanagh, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ** 101.INS XBRL Instance Document.* 101.SCH XBRL Taxonomy Extension Schema Document.* 101.DEF XBRL Taxonomy Extension Definition Linkbase Document.* 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.* 101.LAB XBRL Taxonomy Extension Label Linkbase Document.* 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.* ______________ † Management contract or compensatory plan or arrangement. * Filed herewith. ** Furnished herewith. ITEM 16. FORM 10-K SUMMARY None. 65 1812036_textBW.indd 68 3/15/18 4:56 PM 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: March 1, 2018 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 /s/ Steven E. Bernstein Steven E. Bernstein /s/ Jeffrey A. Stoops Jeffrey A. Stoops /s/ Brendan T. Cavanagh Brendan T. Cavanagh /s/ Brian D. Lazarus Brian D. Lazarus /s/ Brian C. Carr Brian C. Carr /s/ Mary S. Chan Mary S. Chan /s/ Duncan H. Cocroft Duncan H. Cocroft /s/ George R. Krouse Jr. George R. Krouse Jr. /s/ Jack Langer Jack Langer /s/ Kevin L. Beebe Kevin L. Beebe Chairman of the Board of Directors March 1, 2018 Chief Executive Officer and President (Principal Executive Officer) March 1, 2018 Chief Financial Officer and Executive Vice President (Principal Financial Officer) March 1, 2018 Chief Accounting Officer and Senior Vice President (Principal Accounting Officer) March 1, 2018 March 1, 2018 March 1, 2018 March 1, 2018 March 1, 2018 March 1, 2018 March 1, 2018 Director Director Director Director Director Director 66 1812036_textBW.indd 69 3/15/18 4:56 PM SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS Table of Contents Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2017 and 2016 Consolidated Statements of Operations for the years ended December 31, 2017, 2016 and 2015 Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2017, 2016 and 2015 Consolidated Statements of Shareholders’ Deficit for the years ended December 31, 2017, 2016, and 2015 Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016 and 2015 Notes to Consolidated Financial Statements Page F-1 F-2 F-3 F-4 F-5 F-6 F-8 1812036_textBW.indd 70 3/15/18 4:56 PM Report of Independent Registered Certified Public Accounting Firm To the Shareholders and the Board of Directors of SBA Communications Corporation and Subsidiaries Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of SBA Communications Corporation and Subsidiaries (the Company) as of December 31, 2017 and 2016, and the related consolidated statements of operations, comprehensive income (loss), shareholders’ deficit, and cash flows for each of the three years in the period ended December 31, 2017, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements“). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, 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) (PCAOB), the Company's internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control- Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 1, 2018 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company‘s management. Our responsibility is to express an opinion on the Company‘s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2002 Boca Raton, Florida March 1, 2018 F-1 1812036_textBW.indd 71 3/15/18 4:56 PM SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except par values) ASSETS Current assets: Cash and cash equivalents Restricted cash Accounts receivable, net Costs and estimated earnings in excess of billings on uncompleted contracts Prepaid expenses and other current assets Total current assets Property and equipment, net Intangible assets, net Other assets Total assets LIABILITIES AND SHAREHOLDERS' DEFICIT Current liabilities: Accounts payable Accrued expenses Current maturities of long-term debt Deferred revenue Accrued interest Other current liabilities Total current liabilities Long-term liabilities: Long-term debt, net Other long-term liabilities Total long-term liabilities Shareholders' deficit: December 31, December 31, 2017 2016 $ 68,783 $ 146,109 32,924 90,673 17,437 49,716 259,533 2,812,346 3,598,131 650,195 36,786 78,344 11,127 52,205 324,571 2,792,076 3,656,924 587,374 $ 7,320,205 $ 7,360,945 $ 33,334 $ 69,862 20,000 97,969 48,899 8,841 278,905 9,290,686 349,728 9,640,414 28,320 61,129 627,157 101,098 44,503 11,240 873,447 8,148,426 334,993 8,483,419 Preferred stock - par value $.01, 30,000 shares authorized, no shares issued or outst. — — Common stock - Class A, par value $.01, 400,000 shares authorized, 116,446 and 121,004 shares issued and outstanding at December 31, 2017 and December 31, 2016, respectively Additional paid-in capital Accumulated deficit Accumulated other comprehensive loss, net Total shareholders' deficit Total liabilities and shareholders' deficit 1,164 2,167,470 (4,388,288) (379,460) 1,210 2,010,520 (3,637,467) (370,184) (2,599,114) (1,995,921) $ 7,320,205 $ 7,360,945 The accompanying notes are an integral part of these consolidated financial statements. F-2 1812036_textBW.indd 72 3/15/18 4:56 PM SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) Revenues: Site leasing Site development Total revenues 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 Acquisition related adjustments and expenses Asset impairment and decommission costs Depreciation, accretion, and amortization Total operating expenses Operating income Other income (expense): Interest income Interest expense Non-cash interest expense Amortization of deferred financing fees Loss from extinguishment of debt, net Other income (expense), net Total other expense, net Income (loss) before provision for income taxes Provision for income taxes Net income (loss) Net income (loss) per common share: Basic Diluted Weighted average common shares outstanding: Basic Diluted For the year ended December 31, 2017 2016 2015 $ 1,623,173 $ 1,538,070 $ 1,480,634 104,501 95,055 157,840 1,727,674 1,633,125 1,638,474 359,527 86,785 342,215 78,682 324,655 119,744 130,697 143,349 114,951 12,367 36,697 13,140 30,242 11,864 94,783 643,100 638,189 660,021 1,269,173 1,245,817 1,326,018 458,501 387,308 312,456 11,337 10,928 3,894 (323,749) (329,171) (322,366) (2,879) (21,940) (1,961) (2,418) (2,203) (21,136) (52,701) (1,505) (19,154) (783) 94,278 (139,137) (341,610) (300,005) (479,051) 116,891 (13,237) 87,303 (166,595) (11,065) (9,061) $ 103,654 $ 76,238 $ (175,656) $ $ 0.86 $ 0.86 $ 0.61 $ 0.61 $ (1.37) (1.37) 119,860 121,022 124,448 125,144 127,794 127,794 The accompanying notes are an integral part of these consolidated financial statements. F-3 1812036_textBW.indd 73 3/15/18 4:56 PM SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) For the year ended December 31, 2017 2016 2015 Net income (loss) $ 103,654 $ 76,238 $ (175,656) Foreign currency translation adjustments (9,276) 131,861 (319,559) Comprehensive income (loss) $ 94,378 $ 208,099 $ (495,215) The accompanying notes are an integral part of these consolidated financial statements. F-4 1812036_textBW.indd 74 3/15/18 4:56 PM SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT (in thousands) Class A Additional Other Common Stock Paid-In Accumulated Comprehensive Accumulated Shares Amount Capital Deficit Loss Total BALANCE, December 31, 2014 129,134 $ 1,291 $ 2,062,775 $ (2,542,380) $ (182,486) $ (660,800) Net loss Common stock issued in connection with stock purchase/option plans Non-cash stock compensation Settlement of common stock warrants Repurchase and retirement of common stock Foreign currency translation adjustments — 591 — — — 6 — — — (175,656) — (175,656) 21,604 29,208 (150,874) — — — — — — 21,610 29,208 (150,874) (3,982) (40) — (450,033) — (450,073) — — — — (319,559) (319,559) BALANCE, December 31, 2015 125,743 1,257 1,962,713 (3,168,069) (502,045) (1,706,144) Net income Common stock issued in connection with stock purchase/option plans Non-cash stock compensation — 602 — — 6 — — 76,238 — 76,238 14,404 33,403 — — — — 14,410 33,403 Repurchase and retirement of common stock Foreign currency translation adjustments (5,341) (53) — (545,636) — (545,689) — — — — 131,861 131,861 BALANCE, December 31, 2016 121,004 1,210 2,010,520 (3,637,467) (370,184) (1,995,921) Net income Common stock issued in connection with stock purchase/option plans Non-cash stock compensation Common stock issued in connection with acquisitions — — — 103,654 — 103,654 812 — 8 — 54,798 38,844 488 5 63,308 — — — — 54,806 — 38,844 — 63,313 Repurchase and retirement of common stock Foreign currency translation adjustments (5,858) (59) — (854,475) — (854,534) — — — — (9,276) (9,276) BALANCE, December 31, 2017 116,446 $ 1,164 $ 2,167,470 $ (4,388,288) $ (379,460) $ (2,599,114) The accompanying notes are an integral part of these consolidated financial statements F-5 1812036_textBW.indd 75 3/15/18 4:56 PM SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 103,654 $ 76,238 $ (175,656) Adjustments to reconcile net income (loss) to net cash provided by operating activities: For the year ended December 31, 2017 2016 2015 Depreciation, accretion, and amortization Non-cash asset impairment and decommission costs Non-cash compensation expense Amortization of deferred financing fees (Gain) loss on remeasurement of U.S. denominated intercompany loan Gain on sale of cost method investments Loss from extinguishment of debt, net Provision for doubtful accounts Other non-cash items reflected in the Statements of Operations Changes in operating assets and liabilities, net of acquisitions: AR and costs and est. earnings in excess of billings on uncompleted contracts, net Prepaid expenses and other assets Accounts payable and accrued expenses Other liabilities Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions Capital expenditures Proceeds from sale of investments Other investing activities Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under Revolving Credit Facility Repayments under Revolving Credit Facility Repayment of Term Loans Proceeds from issuance of Term Loans, net of fees Payments for settlement of common stock warrants Payment for the redemption of 5.625% Senior Notes Payment for the redemption of 5.75% Senior Notes Proceeds from issuance of Senior Notes, net of fees Proceeds from issuance of Tower Securities, net of fees Repayment of Tower Securities Repurchase and retirement of common stock, inclusive of fees Other financing activities Net cash provided by (used in) financing activities Effect of exchange rate changes on cash, cash equivalents, and restricted cash NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH CASH, CASH EQUIVALENTS, AND RESTRICTED CASH: 643,100 32,423 38,249 21,940 8,754 — 1,961 2,909 (4,850) (20,893) (16,888) 3,555 4,556 818,470 (441,547) (147,044) 231 (16,747) (605,107) 525,000 (875,000) (20,000) — — — — 741,108 749,764 (610,000) (854,534) 49,088 (294,574) (464) (81,675) 638,189 25,693 32,915 21,136 (90,030) — 52,701 22,516 (1,225) (7,270) (40,289) (10,516) 22,467 742,525 (276,835) (139,982) 712 (12,130) (428,235) 580,000 (190,000) (20,000) — — (514,065) (825,795) 1,078,123 690,475 (550,000) (545,689) 8,394 (288,557) 13,618 39,351 Beginning of year End of year 185,970 146,619 $ 104,295 $ 185,970 $ (continued) F-6 660,021 89,406 28,747 19,154 178,854 (38,326) 783 896 (5,255) 15,975 (62,934) 7,366 3,999 723,030 (609,530) (208,707) 89,728 (8,556) (737,065) 770,000 (895,000) (190,000) 489,884 (150,874) — — — 489,100 — (450,073) 12,714 75,751 (12,993) 48,723 97,896 146,619 1812036_textBW.indd 76 3/15/18 4:56 PM SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) For the year ended December 31, 2017 2016 2015 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 Common stock issued in connection with acquisitions $ $ $ $ 319,562 $ 338,409 $ 322,396 14,653 $ 9,655 $ 9,431 254 $ 63,313 $ 1,386 $ — $ 2,627 — The accompanying notes are an integral part of these consolidated financial statements. F-7 1812036_textBW.indd 77 3/15/18 4:56 PM 1. GENERAL SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SBA Communications Corporation (the “Company” or “SBAC”) 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, LLC (“Telecommunications”). Telecommunications is a holding company that holds the outstanding capital stock of SBA Senior Finance, LLC (“SBA Senior Finance”), and other operating subsidiaries which are not a party to any loan agreement. SBA Senior Finance is a holding company that holds, directly or indirectly, the equity interest in certain subsidiaries that issued the Tower Securities (see Note 12) and certain subsidiaries that were not involved in the issuance of the Tower Securities. With respect to the subsidiaries involved in the issuance of the Tower Securities, SBA Senior Finance is the sole member of SBA Holdings, LLC and SBA Depositor, LLC. SBA Holdings, LLC is the sole member of SBA Guarantor, LLC. SBA Guarantor, LLC directly or indirectly holds all of the capital stock of the companies referred to as the “Borrowers” under the Tower Securities. With respect to subsidiaries not involved in the issuance of the Tower Securities, SBA Senior Finance holds all of the membership interests in SBA Senior Finance II, LLC (“SBA Senior Finance II”) and certain non-operating subsidiaries. SBA Senior Finance II holds, directly or indirectly, all the capital stock of certain international subsidiaries and certain other tower companies (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, LLC (“Network Services”) as well as SBA Network Management, Inc. (“Network Management”) which manages and administers the operations of the Borrowers. As of December 31, 2017, the Company owned and operated wireless towers in the United States and its territories. In addition, the Company owned towers in Argentina, Brazil, Canada, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Nicaragua, Panama, and Peru. Space on these towers is leased primarily to wireless service providers. As of December 31, 2017, the Company owned and operated 27,909 towers of which 15,979 are domestic and 11,930 are international. 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: 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 majority and wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. 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 assumptions, 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. Cash and Cash Equivalents Cash and cash equivalents consist primarily of cash in banks, money market funds, commercial paper, highly liquid short-term investments, 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. 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 Tower Securities as well as for payment and F-8 1812036_textBW.indd 78 3/15/18 4:56 PM performance bonds and surety bonds issued for the benefit of the Company in the ordinary course of business, as well as collateral associated with workers’ compensation plans (see Note 4). 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. The Company’s short-term investments primarily consist of certificates of deposit with maturities of less than a year. Investment securities with maturities of more than a year are considered long-term investments and are classified in other assets on the accompanying Consolidated Balance Sheets. Long-term investments primarily consist of U.S. Treasuries, mutual funds, and preferred securities. Gross purchases and sales of the Company’s investments are presented within “Cash flows from investing activities” on the Company’s Consolidated Statements of Cash Flows. The Company accounts for its investments in privately held companies under the cost and equity method. The Company evaluates its investments for impairment at least annually. The Company determines the fair value of its investments by considering available evidence, including general market conditions, the investee’s financial condition, near-term prospects, market comparables and subsequent rounds of financing. The Company measures and records its investments at fair value when they are deemed to be other-than-temporarily impaired. The Company did not recognize any impairment loss associated with its investments during the years ended December 31, 2017, 2016, and 2015. During the years ended December 31, 2017 and 2016, the Company received proceeds related to the sale or maturity of investments of $0.2 million and $0.7 million, respectively. During the year ended December 31, 2017 and 2016, no gain or loss was recorded related to the sale or maturity of investments. The proceeds are reflected in Net cash used in investing activities on the Consolidated Statements of Cash Flows, and the related gain or loss on sale or maturity is reflected in Other income (expense), net in the accompanying Consolidated Statement of Operations. The aggregate carrying value of the Company’s investments was approximately $8.6 million and $8.1 million as of December 31, 2017 and 2016, respectively, and is classified within short-term investments and other assets on the Company’s consolidated balance sheets. Property and Equipment Property and equipment are recorded at cost or at estimated fair value (in the case of acquired properties), adjusted for asset impairment and estimated asset retirement obligations. Costs for self-constructed towers include direct materials and labor, indirect costs and capitalized interest. Approximately $1.1 million, $1.0 million, and $0.8 million of interest cost was capitalized in 2017, 2016 and 2015, 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. 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 10 - 30 years Betterments, improvements, and significant repairs, which increase the value or extend the life of an asset, are capitalized and depreciated over the estimated useful life of the respective asset. Changes in an asset’s estimated useful life are accounted for F-9 1812036_textBW.indd 79 3/15/18 4:56 PM 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. 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 duration of the related indebtedness (see Note 12). For all of the Company’s debt, except for the Revolving Credit Facility where the debt issuance costs are being presented as an asset on the accompanying Consolidated Balance Sheet, debt issuance costs are presented on the balance sheet as a direct deduction from the related debt liability rather than as an asset. 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 or over the lease term remaining if related to a lease amendment. Such deferred costs were approximately $11.0 million, $10.2 million, and $10.9 million in 2017, 2016, and 2015, respectively. Amortization expense was $13.1 million, $11.3 million, and $9.0 million for the years ended December 31, 2017, 2016 and 2015, respectively, and is included in cost of site leasing on the accompanying Consolidated Statements of Operations. As of December 31, 2017 and 2016, unamortized deferred lease costs were $27.7 million and $29.7 million, respectively, and are included in other assets on the accompanying Consolidated Balance Sheets. 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 a useful life consistent with the 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. Impairment of Long-Lived Assets The Company evaluates its individual long-lived and related assets with finite lives for indicators of impairment to determine when an impairment analysis should be performed. The Company evaluates its tower assets and Current contract intangibles at the tower level, which is the lowest level for which identifiable cash flows exists. The Company evaluates its Network location intangibles for impairment at the tower leasing business level whenever indicators of impairment are present. The Company has established a policy to at least annually evaluate its tower assets and Current contract intangibles for impairment. The Company records an impairment charge when the Company believes an investment in towers or related assets has been impaired, such that future undiscounted cash flows would not recover the then current carrying value of the investment in the tower and related intangible. If the future undiscounted cash flows are lower than the carrying value of the investment in the tower and related intangible, the Company calculates future discounted cash flows and compares those amounts to the carrying value. The Company records an impairment charge for any amounts lower than the carrying value. 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 recognized impairment charges of $36.7 million, $30.2 million, and $94.8 million for the years ended December 31, 2017, 2016 and 2015, respectively. Refer to Note 3 for further detail of these amounts. F-10 1812036_textBW.indd 80 3/15/18 4:56 PM Fair Value Measurements The Company determines the fair market values of its financial instruments based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The following three levels of inputs may be used to measure fair value: Level 1 Level 2 Level 3 Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Revenue Recognition 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 to ten 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 and revenue is recognized 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. Amounts billed in advance (collected or uncollected) are recorded as deferred revenue on the Company’s Consolidated Balance Sheets. 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 costs incurred and revenues recognized in excess of amounts billed. The liability “billings in excess of costs and estimated earnings on uncompleted contracts,” included within other current liabilities on the Company’s Consolidated Balance Sheets, represents billings in excess of costs incurred and revenues recognized. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined to be probable. Allowance for Doubtful Accounts 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 uncollectibility is determined to be probable. F-11 1812036_textBW.indd 81 3/15/18 4:56 PM The following is a rollforward of the allowance for doubtful accounts: For the year ended December 31, 2017 2016 2015 (in thousands) Beginning balance $ 24,518 $ 1,681 $ Provision for doubtful accounts Write-offs, net of recoveries Currency translation adjustment 2,909 (647) (299) 22,516 (614) 935 889 896 (72) (32) Ending balance $ 26,481 $ 24,518 $ 1,681 On June 20, 2016, Oi, S.A. (“Oi”), the Company’s largest customer in Brazil, filed a petition for judicial reorganization in Brazil. Prior to the filing of the reorganization petition, Oi was current in all payment obligations to the Company. These obligations related to periods ending on or before April 30, 2016. As a result of the relief provisions available in a judicial reorganization proceeding, obligations of Oi to the Company arising from the periods from May 1, 2016 to June 20, 2016 remain unpaid. Due to the uncertainty surrounding the recoverability of amounts owed by Oi relating to services provided prior to the date of Oi’s petition, the Company has recorded a $16.5 million bad debt provision (the “Oi reserve”) which covers amounts owed or potentially owed by Oi as of the filing date. Under Brazilian law governing judicial reorganizations, the contracts governing post-petition obligations such as tower rents remain unchanged, and debtors do not have the ability to reject or terminate the contracts other than pursuant to their original terms. Since the filing, the Company has received all rental payments due in connection with obligations of Oi accruing post- petition. The Oi reserve was recorded in Selling, general, and administrative expense on the consolidated statement of operations for the year ended December 31, 2016. On January 8, 2018, Oi’s reorganization plan was approved by the Brazilian courts and Oi is expected to fully resolve all its pre-petition obligations in accordance with the terms of the plan. Cost of Revenue Cost of site leasing revenue includes ground lease rent, property taxes, amortization of deferred lease costs, maintenance and other tower operating expenses. All ground lease rental obligations due to be paid out over the lease term, including fixed escalations, are recorded on a straight-line basis over the minimum lease term. 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. Income Taxes The Company recognizes deferred tax assets and liabilities for the estimated future tax consequences attributable to differences between the financial reporting and tax bases of existing assets and liabilities. Deferred tax assets and liabilities are measured using tax rates in effect for the year in which the temporary differences are expected to reverse. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets if it is "more-likely-than-not" that those assets will not be realized. The Company considers many factors when assessing the likelihood of future realization, including the Company's recent cumulative earnings experience by taxing jurisdiction, expectations of future taxable income, prudent and feasible tax planning strategies that are available, the carryforward periods available to the Company for tax reporting purposes and other relevant factors. The Company began operating as a REIT for federal income tax purposes effective January 1, 2016. As a REIT, the Company generally is not subject to corporate level federal income tax on taxable income it distributes to its stockholders as long as it meets the organizational and operational requirements under the REIT rules. However, certain subsidiaries have made an election with the IRS to be treated as a taxable REIT subsidiary (“TRS”) in conjunction with the Company's REIT election. The TRS elections permit SBA to engage in certain business activities in which the REIT may not engage directly, so long as these activities are conducted in entities that elect to be treated as TRSs under the Internal Revenue Code. A TRS is subject to federal and state income taxes on the income from these activities. Additionally, the Company has included in TRSs the Company’s tower operations in most foreign jurisdictions; however, the REIT holds selected tower assets in Puerto Rico and USVI. Those operations will continue to be subject to foreign taxes in the jurisdiction in which such assets and operations are located regardless of whether they are included in a TRS. F-12 1812036_textBW.indd 82 3/15/18 4:56 PM The Company will continue to file separate federal tax returns for the REIT and TRS for the year ended December 31, 2017. The REIT had taxable income and utilized net operating losses (“NOLs”) to offset its distribution requirement. The TRS generated a NOL which will be carried forward to use in future years. The NOLs generated by the TRS are fully reserved by a valuation allowance. The Company records a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. The Company has not identified any tax exposures that require a reserve. To the extent that the Company records unrecognized tax exposures, any related interest and penalties will be recognized as interest expense in the Company’s Consolidated Statements of Operations. Stock-Based Compensation The Company measures and recognizes compensation expense for all share-based payment awards made to employees and directors, including stock options, restricted stock units and employee stock purchases under employee stock purchase plans. The Company records compensation expense, for stock options and restricted stock units on a straight-line basis over the vesting period. Compensation expense for employee stock options is based on the estimated fair value of the options on the date of the grant using the Black-Scholes option-pricing model. Compensation expense for restricted stock units is based on the fair market value of the units awarded at the date of the grant. Asset Retirement Obligations 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 land interests to their original condition upon termination of the ground lease. 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 asset retirement obligation 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. In determining the measurement of the asset retirement obligations, the Company considered the nature and scope of the contractual restoration obligations contained in the Company’s 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. The following summarizes the activity of the asset retirement obligation liability: Beginning balance Additions Currency translation adjustment Accretion expense Removal Revision in estimates Ending balance For the year ended December 31, 2017 2016 2015 $ 6,442 $ 6,309 $ 5,856 (in thousands) 818 (10) 665 (280) (421) 1,091 121 318 (290) (1,107) $ 7,214 $ 6,442 $ 781 (57) 373 (50) (594) 6,309 F-13 1812036_textBW.indd 83 3/15/18 4:56 PM 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 foreign currency adjustments. Foreign Currency Translation All assets and liabilities of foreign subsidiaries that do not utilize the U.S. dollar as its functional currency are translated at period-end rates of exchange, while revenues and expenses are translated at monthly average rates of exchange prevailing during the year. Unrealized remeasurement gains and losses are reported as foreign currency translation adjustments through Accumulated Other Comprehensive Loss in the accompanying Consolidated Statement of Shareholders’ Deficit. For foreign subsidiaries where the U.S. dollar is the functional currency, monetary assets and liabilities of such subsidiaries, which are not denominated in U.S. dollars, are remeasured at exchange rates in effect at the balance sheet date, and revenues and expenses are remeasured at monthly average rates prevailing during the year. Unrealized translation gains and losses are reported as other income (expense), net in the Consolidated Statement of Operations. Acquisitions In January 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business. ASU 2017-01 provides revised guidance to determine when an acquisition meets the definition of a business or when the acquisition should be accounted for as an asset acquisition. The Company adopted this standard effective January 1, 2017 and all changes are being accounted for prospectively. The adoption of ASU 2017-01 did not have a material impact on the Company’s unaudited consolidated financial statements and related disclosures. Under the new standard, the Company’s acquisitions will generally qualify for asset acquisition treatment under ASC 360, Property, Plant, and Equipment, rather than business combination treatment under ASC 805 Business Combinations. For acquisitions which qualify as asset acquisitions, the aggregate purchase price is allocated on a relative fair value basis to towers and related intangible assets. For asset acquisitions, external, direct transaction costs will be capitalized as a component of the cost of the asset acquired. The Company will continue to expense internal acquisition costs as incurred. The Company accounts for business combinations under the acquisition method of accounting. The assets and liabilities acquired are recorded at fair market value at the date of each acquisition and the results of operations of the acquired assets are included with those from the dates of the respective acquisitions. The Company continues to evaluate all acquisitions for a period not to exceed 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 as a result of information available at the acquisition date. The fair values of net assets acquired are based on management’s estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. The fair value estimates are based on available historical information and on future expectations and assumptions deemed reasonable by management at the time. If the actual results differ from the estimates and judgments used in these fair values, the amounts recorded in the consolidated financial statements could be subject to a possible impairment of the intangible assets, or require acceleration of the amortization expense of intangible assets in subsequent periods. In connection with certain acquisitions, the Company may agree to pay contingent consideration (or earnouts) in cash or stock if the communication sites or businesses that are acquired meet or exceed certain performance targets over a period of one to three years after they have been acquired. The Company accrues for contingent consideration in connection with business combinations at fair value as of the date of the acquisition. All subsequent changes in fair value of contingent consideration payable in cash are recorded through Consolidated Statements of Operations. Contingent consideration in connection with asset acquisitions will be recognized at the time when the contingency is resolved or becomes payable and will increase the cost basis of the assets acquired. Intercompany Loans Subject to Remeasurement The Company has two wholly owned subsidiaries, Brazil Shareholder I, LLC, a Florida limited liability company, and SBA Torres Brasil, Limitada, a limitada existing under the laws of the Republic of Brazil, which have entered into intercompany loan agreements pursuant to which the entities may from time to time agree to lend/borrow amounts under the terms of each agreement. The first agreement entered into in November 2014 was for $750.0 million and was created to fund the acquisition of 1,641 towers in F-14 1812036_textBW.indd 84 3/15/18 4:56 PM Brazil. The second agreement entered into in December 2017 was for $500.0 million and was created to fund the acquisition of 941 towers in Brazil. In accordance with ASC 830, the Company remeasures foreign denominated intercompany loans with the corresponding change in the balance being recorded in Other income (expense), net in the Consolidated Statements of Operations as settlement is anticipated or planned in the foreseeable future. For the years ended December 31, 2017, 2016, and 2015, the Company recorded a $8.8 million loss, a $90.0 million gain, and a $178.9 million loss, respectively, on the remeasurement of intercompany loans due to changes in foreign exchange rates. As of December 31, 2017, the aggregate amount outstanding under the two intercompany loan agreements with the Company’s Brazilian subsidiary was $560.9 million. Recent Accounting Pronouncements Not Yet Adopted In May 2014, the FASB released an updated standard regarding the recognition of revenue from contracts with customers, exclusive of those contracts within lease accounting. The core principle of the standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: (1) identify the contracts with the customer; (2) identify the performance obligations in the contract; (3) determine the contract price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. This standard is effective for the Company in the first quarter of 2018. This standard is required to be applied retrospectively to each prior reporting period presented (full retrospective) or with the cumulative effect being recognized at the date of initial application (modified retrospective). The Company will apply the modified retrospective transition method upon adoption. The Company has finalized its review of the impact of adopting this new guidance, and there will not be any material changes to the timing or measurement of revenue recognition. The standard only affects the Company’s site development segment, which represents approximately 6% of the Company’s total revenues. In February 2016, the FASB issued ASU 2016-02, Leases. The standard requires lessees to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments for all leases with a term greater than 12 months. The accounting for lessors remains largely unchanged from existing guidance. This standard is effective for annual and interim periods beginning after December 15, 2018. Early adoption is permitted; however, the Company does not currently plan to early adopt. The Company has established a cross functional project plan and is assessing the impact of the standard on its consolidated financial statements. The Company expects this guidance to have a material impact on its consolidated balance sheet due to the recognition of right-of-use assets and lease liabilities for its ground leases. The Company does not expect adoption to have a significant impact on its lease classification or to have a material impact on its consolidated statement of operations. 3. FAIR VALUE MEASUREMENTS Items Measured at Fair Value on a Recurring Basis— The Company’s earnout liabilities related to business combinations are measured at fair value on a recurring basis using Level 3 inputs and are recorded in Accrued expenses in the accompanying Consolidated Balance Sheets. Changes in estimates are recorded in Acquisition related adjustments and expenses in the accompanying Consolidated Statement of Operations. The Company determines the fair value of earnouts (contingent consideration) and any subsequent changes in fair value using a discounted probability-weighted approach using Level 3 inputs. Level 3 valuations rely on unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. The fair value of the earnouts is reviewed quarterly and is based on the payments the Company expects to make based on historical internal observations related to the anticipated performance of the underlying assets. The Company’s estimate of the fair value of its obligation contained in various acquisitions prior to January 1, 2017 (adoption of ASU 2017-01) was $2.5 million and $4.1 million as of December 31, 2017 and 2016, respectively. The maximum potential obligation related to the performance targets for these various acquisitions was $3.1 million and $5.8 million as of December 31, 2017 and 2016, respectively. The maximum potential obligation related to the performance targets for acquisitions after January 1, 2017, which have not been recorded on the Company’s Consolidated Balance Sheet, was $11.1 million as of December 31, 2017. Items Measured at Fair Value on a Nonrecurring Basis— The Company’s long-lived assets, intangibles, and asset retirement obligations are measured at fair value on a nonrecurring basis using Level 3 inputs. The Company considers many factors and makes 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. The fair value of the long-lived assets, intangibles, and asset retirement obligations is calculated using a discounted cash flow model. F-15 1812036_textBW.indd 85 3/15/18 4:56 PM Asset impairment and decommission costs for all periods presented and the related impaired assets primarily relate to the Company’s site leasing operating segment. The following summarizes the activity of asset impairment and decommission costs (in thousands): Asset impairment (1) Impairment of fiber assets (2) Write-off of carrying value of decommissioned towers Write-off and disposal of former corporate headquarters Gain on sale of fiber assets (2) Other third party decommission costs For the year ended December 31, 2017 2016 2015 $ 15,389 $ 19,217 $ 10,287 — — 56,733 16,861 12,967 21,231 — — 2,345 1,154 (8,919) — 5,378 4,447 4,632 Total asset impairment and decommission costs $ 36,697 $ 30,242 $ 94,783 (1) Represents impairment charges resulting from the Company’s regular analysis of whether the future cash flows from certain (2) towers are adequate to recover the carrying value of the investment in those towers. The impairment review of the fiber assets acquired in the 2012 Mobilitie transaction was triggered by a strategic decision made by the Company in 2015. The gain on sale in 2016 related to the sale of these fiber assets. Fair Value of Financial Instruments— The carrying values of cash and cash equivalents, accounts receivable, restricted cash, accounts payable, and short-term investments approximate their estimated fair values due to the short maturity of these instruments. Short-term investments consisted of $0.2 million in Treasury securities as of December 31, 2017 and 2016. The Company’s estimate of the fair value of its held-to-maturity investments in treasury and corporate bonds, including current portion, are based primarily upon Level 1 reported market values. As of December 31, 2017, the carrying value and fair value of the held-to-maturity investments, including current portion, was $0.5 million. As of December 31, 2016, the carrying value and fair value of the held-to-maturity investments, including current portion, was $0.7 million. The current portion is recorded in Prepaid and Other Current Assets in the accompanying Consolidated Balance Sheets, while the held-to-maturity investments are recorded in Other Assets. The Company determines fair value of its debt instruments utilizing various Level 2 sources including quoted prices and indicative quotes (non-binding quotes) from brokers that require judgment to interpret market information including implied credit spreads for similar borrowings on recent trades or bid/ask prices. The fair value of the Revolving Credit Facility is considered to approximate the carrying value because the interest payments are based on Eurodollar rates that reset monthly or more frequently. The Company does not believe its credit risk has changed materially from the date the applicable Eurodollar Rate plus 137.5 to 200.0 basis points was set for the Revolving Credit Facility. Refer to Note 12 for the fair values, principal balances, and carrying values of the Company’s debt instruments. F-16 1812036_textBW.indd 86 3/15/18 4:56 PM 4. RESTRICTED CASH The cash, cash equivalents, and restricted cash balances on the consolidated statement of cash flows consists of the following: As of As of As of December 31, 2017 December 31, 2016 December 31, 2015 Included on Balance Sheet Cash and cash equivalents Securitization escrow accounts Payment and performance bonds Surety bonds and workers compensation $ (in thousands) 68,783 $ 32,699 225 2,588 146,109 $ 36,607 118,039 25,135 Restricted cash - current asset 179 3,075 218 Restricted cash - current asset 3,227 Other assets - noncurrent Total cash, cash equivalents, and restricted cash $ 104,295 $ 185,970 $ 146,619 Pursuant to the terms of the Tower Securities (see Note 12), the Company is required to establish a securitization escrow account, held by the indenture trustee, into which all rents and other sums due on the towers that secure the Tower Securities are directly deposited by the lessees. These restricted cash amounts are used to fund reserve accounts for the payment of (1) debt service costs, (2) ground rents, real estate and personal property taxes and insurance premiums related to towers, (3) trustee and servicing expenses, and (4) management fees. The restricted cash in the securitization escrow account in excess of required reserve balances is subsequently released to the Borrowers (as defined in Note 12) monthly, provided that the Borrowers are in compliance with their debt service coverage ratio and that no event of default has occurred. All monies held by the indenture trustee are classified as restricted cash on the Company’s Consolidated Balance Sheets. Payment and performance bonds relate primarily to collateral requirements for 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. As of December 31, 2017 and 2016, the Company had $39.5 million and $39.2 million in surety, payment and performance bonds, respectively, for which it is only required to post $0.5 million in collateral as of December 31, 2016. As of December 31, 2017, no collateral was required to be posted. The Company periodically evaluates the collateral posted for its bonds to ensure that it meets the minimum requirements. As of December 31, 2017 and 2016, the Company had also pledged $2.5 million as collateral related to its workers compensation policy. 5. PREPAID EXPENSES AND OTHER CURRENT ASSETS The Company’s prepaid expenses and other current assets are comprised of the following: Prepaid ground rent Other Total prepaid expenses and other current assets As of As of December 31, 2017 December 31, 2016 $ $ (in thousands) 32,505 $ 17,211 49,716 $ 33,975 18,230 52,205 F-17 1812036_textBW.indd 87 3/15/18 4:56 PM 6. ACQUISITIONS The following table summarizes the Company’s acquisition activity: Tower acquisitions (number of towers) For the year ended December 31, 2017 2016 2015 1,425 531 893 The following table summarizes the Company’s cash acquisition capital expenditures: For the year ended December 31, 2017 2016 2015 (in thousands) Acquisitions of towers and related intangible assets (1) $ 392,902 $ 214,686 $ 525,802 Land buyouts and other assets (2) 48,645 62,149 83,728 Total cash acquisition capital expenditures $ 441,547 $ 276,835 $ 609,530 (1) (2) The year ended December 31, 2017 excludes $63.3 million of acquisition costs funded through the issuance of 487,963 shares of Class A common stock. In addition, the Company paid $18.8 million, $14.1 million, and $16.3 million for ground lease extensions and term easements on land underlying the Company’s towers during the years ending December 31, 2017, 2016, and 2015, respectively. The Company recorded these amounts in prepaid rent on its Consolidated Balance Sheets. For acquisitions which qualify as asset acquisitions, the aggregate purchase price is allocated on a relative fair value basis to towers and related intangible assets. The fair values of these net assets acquired are based on management’s estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. The fair value estimates are based on available historical information and on future expectations and assumptions deemed reasonable by management at the time. If the actual results differ from the estimates and judgments used in these fair values, the amounts recorded in the consolidated financial statements could be subject to a possible impairment of the intangible assets, or require acceleration of the amortization expense of intangible assets in subsequent periods. For business combinations, the estimates of the fair value of the assets acquired and liabilities assumed at the date of an acquisition are subject to adjustment during the measurement period (up to one year from the particular acquisition date). During the measurement period, the Company will adjust assets and/or liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in a revised estimated value of those assets and/or liabilities as of that date. The primary areas of the preliminary purchase price allocations that are not yet finalized relate to the fair value of certain tangible and intangible assets acquired and liabilities assumed, including contingent consideration and any related tax impact. During the year ended December 31, 2017, the Company acquired 1,425 completed towers and related assets and liabilities consisting of $114.7 million of property and equipment, $345.3 million of intangible assets, and $3.8 million of working capital adjustments. During the year ended December 31, 2016, the Company acquired 531 completed towers and related assets and liabilities for $214.7 million in cash consisting of $72.8 million of property and equipment, $144.4 million of intangible assets, and $2.5 million of working capital adjustments. During the year ended December 31, 2015, the Company acquired 893 completed towers and related assets and liabilities for $525.8 million in cash consisting of $176.3 million of property and equipment, $351.0 million of intangible assets, and $1.5 million of working capital adjustments. Subsequent to December 31, 2017, the Company acquired 308 towers and related assets for $79.5 million in cash. F-18 1812036_textBW.indd 88 3/15/18 4:56 PM 7. INTANGIBLE ASSETS, NET The following table provides the gross and net carrying amounts for each major class of intangible assets: As of December 31, 2017 As of December 31, 2016 Gross carrying Accumulated Net book Gross carrying Accumulated Net book amount amortization value amount amortization value Current contract intangibles $ 4,355,171 $ (1,673,270) $ 2,681,901 $ 4,141,968 $ (1,401,025) $ 2,740,943 Network location intangibles 1,617,441 (701,211) 916,230 1,515,348 (599,367) 915,981 Intangible assets, net $ 5,972,612 $ (2,374,481) $ 3,598,131 $ 5,657,316 $ (2,000,392) $ 3,656,924 (in thousands) All intangible assets noted above are included in the Company’s site leasing segment. The Company amortizes its intangible assets using the straight-line method over 15 years. Amortization expense relating to the intangible assets above was $384.1 million, $369.9 million, and $363.1 million for the years ended December 31, 2017, 2016 and 2015, respectively. Estimated amortization expense on the Company’s intangibles assets is as follows: For the year ended December 31, (in thousands) 2018 2019 2020 2021 2022 $ 397,596 397,302 396,445 363,988 343,536 8. PROPERTY AND EQUIPMENT, NET Property and equipment, net (including vehicles held under capital leases) consists of the following: Towers and related components Construction-in-process Furniture, equipment, and vehicles Land, buildings, and improvements Total property and equipment Less: accumulated depreciation Property and equipment, net As of As of December 31, 2017 December 31, 2016 (in thousands) $ 4,772,807 $ 4,563,756 34,689 53,260 630,370 5,491,126 38,926 50,671 578,680 5,232,033 (2,678,780) (2,439,957) $ 2,812,346 $ 2,792,076 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 $258.4 million, $268.1 million, and $296.5 million for the years ended December 31, 2017, 2016, and 2015, respectively. At December 31, 2017 and 2016, non-cash capital expenditures that are included in accounts payable and accrued expenses were $12.4 million and $7.0 million, respectively. F-19 1812036_textBW.indd 89 3/15/18 4:56 PM 9. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS Costs and estimated earnings on uncompleted contracts consist of the following: Costs incurred on uncompleted contracts Estimated earnings Billings to date As of As of December 31, 2017 December 31, 2016 (in thousands) $ 31,404 $ 10,541 (24,771) $ 17,174 $ 34,577 11,185 (36,027) 9,735 These amounts are included in the accompanying Consolidated Balance Sheets under the following captions: As of As of December 31, 2017 December 31, 2016 (in thousands) Costs and estimated earnings in excess of billings on uncompleted contracts $ 17,437 $ 11,127 Billings in excess of costs and estimated earnings on uncompleted contracts (included in Other current liabilities) (263) $ 17,174 $ (1,392) 9,735 At December 31, 2017 and 2016, eight customers comprised 87.9% and 81.6%, respectively, of the costs and estimated earnings in excess of billings on uncompleted contracts, net of billings in excess of costs and estimated earnings. 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 (representing at least 10% of revenue for any period reported) and the percentage of total revenue for the specified time periods derived from such customers: Percentage of Total Revenues AT&T Wireless T-Mobile Verizon Wireless Sprint For the year ended December 31, 2017 2016 2015 25.0% 16.5% 15.2% 15.1% 25.7% 17.0% 15.2% 16.1% 24.2% 16.0% 13.8% 19.6% F-20 1812036_textBW.indd 90 3/15/18 4:56 PM The Company’s site leasing and site development segments derive revenue from these customers. Client percentages of total revenue in each of the segments are as follows: Percentage of Domestic Site Leasing Revenue AT&T Wireless T-Mobile Verizon Wireless Sprint Percentage of International Site Leasing Revenue Oi S.A. Telefonica Claro Percentage of Site Development Revenue T-Mobile Sprint Verizon Wireless Nokia, Inc. Ericsson, Inc. For the year ended December 31, 2017 2016 2015 32.7% 19.7% 19.0% 18.9% 32.7% 19.6% 18.2% 19.8% 31.9% 19.0% 16.3% 22.3% For the year ended December 31, 2017 2016 2015 42.2% 25.7% 10.0% 43.9% 26.4% 9.4% 48.8% 24.7% 8.0% For the year ended December 31, 2017 2016 2015 26.9% 12.9% 12.8% 10.1% 7.4% 28.4% 11.7% 16.5% 7.1% 5.0% 17.6% 28.5% 14.8% 6.3% 15.3% Five customers comprised 66.9% of total gross accounts receivable at December 31, 2017 compared to five customers which comprised 59.3% of total gross accounts receivable at December 31, 2016. 11. EARNINGS PER SHARE Basic earnings per share was computed by dividing net income attributable to common shareholders by the weighted-average number of shares of Common Stock outstanding for each respective period. Diluted earnings per share was calculated by dividing net income attributable to common shareholders by the weighted-average number of shares of Common Stock outstanding adjusted for any dilutive Common Stock equivalents, including unvested restricted stock and shares issuable upon exercise of stock options as determined under the “If-Converted” method and also Common Stock warrants as determined under the “Treasury Stock” method. F-21 1812036_textBW.indd 91 3/15/18 4:56 PM The following table sets forth basic and diluted net income per common share for the years ended December 31, 2017, 2016, and 2015 (in thousands, except per share data): Numerator: Net income (loss) Denominator: Basic weighted-average shares outstanding Dilutive impact of stock options and restricted shares Diluted weighted-average shares outstanding Net income (loss) per common share: Basic Diluted For the year ended December 31, 2017 2016 2015 $ 103,654 $ 76,238 $ (175,656) 119,860 124,448 127,794 1,162 696 — 121,022 125,144 127,794 $ $ 0.86 $ 0.86 $ 0.61 0.61 $ $ (1.37) (1.37) For the year ended December 31, 2017, the diluted weighted average number of common shares outstanding excluded an additional 1.0 million shares issuable upon exercise of the Company’s stock options because the impact would be anti-dilutive. For the year ended December 31, 2016, the diluted weighted average number of common shares outstanding excluded an additional 2.2 million shares issuable upon exercise of the Company’s stock options because the impact would be anti-dilutive. For the year ended December 31, 2015, all potential common stock equivalents, including 3.8 million shares of stock options outstanding and 0.3 million shares of restricted stock units outstanding, were excluded as the effect would be anti-dilutive. F-22 1812036_textBW.indd 92 3/15/18 4:56 PM 12. DEBT The principal values, fair values, and carrying values of debt consist of the following (in thousands): As of As of December 31, 2017 December 31, 2016 Maturity Date Principal Balance Fair Value Carrying Value Principal Balance Fair Value Carrying Value 2014 Senior Notes July 15, 2022 $ 750,000 $ 770,625 $ 739,079 $ 750,000 $ 763,125 $ 736,992 2016 Senior Notes Sep. 1, 2024 1,100,000 1,127,500 1,081,262 1,100,000 1,083,500 1,078,954 2017 Senior Notes Oct. 1, 2022 750,000 750,938 741,437 — — — 2012-1C Tower Securities Dec. 11, 2017 — — — 610,000 610,165 607,157 2013-1C Tower Securities April 10, 2018 425,000 423,853 424,482 425,000 423,381 422,768 2013-2C Tower Securities April 11, 2023 575,000 578,433 568,609 575,000 563,322 567,545 2013-1D Tower Securities April 10, 2018 330,000 330,145 329,585 330,000 334,521 328,225 2014-1C Tower Securities Oct. 8, 2019 920,000 915,216 914,929 920,000 922,199 912,219 2014-2C Tower Securities Oct. 8, 2024 620,000 620,942 613,461 620,000 608,921 612,641 2015-1C Tower Securities Oct. 8, 2020 500,000 496,840 493,474 500,000 495,145 491,289 2016-1C Tower Securities July 9, 2021 700,000 691,166 693,118 700,000 688,072 691,322 2017-1C Tower Securities April 11, 2022 760,000 751,404 751,076 — — — Revolving Credit Facility Feb. 5, 2020 40,000 40,000 40,000 390,000 390,000 390,000 2014 Term Loan Mar. 24, 2021 1,447,500 1,451,119 1,439,373 1,462,500 1,467,984 1,452,039 2015 Term Loan June 10, 2022 487,500 488,109 480,801 492,500 494,347 484,432 Total debt $ 9,405,000 $ 9,436,290 $ 9,310,686 $ 8,875,000 $ 8,844,682 $ 8,775,583 Less: current maturities of long-term debt Total long-term debt, net of current maturities (20,000) $ 9,290,686 (627,157) $ 8,148,426 The Company’s future principal payment obligations over the next five years (based on the outstanding debt as of December 31, 2017 and assuming the Tower Securities are repaid at their respective anticipated repayment dates) are as follows: For the year ended December 31, (in thousands) 2018 2019 2020 2021 2022 $ 775,000 940,000 560,000 2,107,500 2,727,500 F-23 1812036_textBW.indd 93 3/15/18 4:56 PM The table below reflects cash and non-cash interest expense amounts recognized by debt instrument for the periods presented: For the year ended December 31, 2017 2016 2015 Cash Non-cash Cash Non-cash Cash Non-cash Interest Interest Interest Interest Interest Interest — — 36,563 53,625 6,500 — 5,330 43,217 51,138 15,939 20,361 17,182 8,046 — 49,414 16,641 (207) — — 724 954 — — — — — — — — — — 525 676 — (in thousands) 21,094 28,494 36,563 20,258 — 15,213 18,107 43,217 51,138 15,939 9,898 — 4,167 — 48,962 16,487 (366) — — 689 348 — — — — — — — — — — 510 656 — 28,125 46,000 36,563 — — 28,230 18,111 43,217 51,138 3,453 — — 5,552 3,959 48,992 9,243 (217) — — 655 — — — — — — — — — — — 492 358 — 5.625% Senior Notes 5.75% Senior Notes 2014 Senior Notes 2016 Senior Notes 2017 Senior Notes 2010 Tower Securities 2012-1C Tower Securities 2013 Tower Securities 2014 Tower Securities 2015-1C Tower Securities 2016-1C Tower Securities 2017-1C Tower Securities Revolving Credit Facility 2012-1 Term Loan 2014 Term Loan 2015 Term Loan Capitalized interest and other Total $ 323,749 $ 2,879 $ 329,171 $ 2,203 $ 322,366 $ 1,505 Senior Credit Agreement On February 7, 2014, SBA Senior Finance II entered into a Second Amended and Restated Credit Agreement with several banks and other financial institutions or entities from time to time parties to the Second Amended and Restated Credit Agreement to, among other things, incur the 2014 Term Loan and amend certain terms of the existing senior credit agreement (as amended, the “Senior Credit Agreement”). Terms of the Senior Credit Agreement The Senior Credit Agreement, as amended, requires SBA Senior Finance II to maintain specific financial ratios, including (1) a ratio of Consolidated Total Debt to Annualized Borrower EBITDA not to exceed 6.5 times for any fiscal quarter, (2) a ratio of Consolidated Total Debt and Net Hedge Exposure (calculated in accordance with the Senior Credit Agreement) to Annualized Borrower EBITDA for the most recently ended fiscal quarter not to exceed 6.5 times for 30 consecutive days and (3) a ratio of Annualized Borrower EBITDA to Annualized Cash Interest Expense (calculated in accordance with the Senior Credit Agreement) of not less than 2.0 times for any fiscal quarter. The Senior Credit Agreement contains customary affirmative and negative covenants that, among other things, limit the ability of SBA Senior Finance II and its subsidiaries to incur indebtedness, grant certain liens, make certain investments, enter into sale leaseback transactions, merge or consolidate, make certain restricted payments, enter into transactions with affiliates, and engage in certain asset dispositions, including a sale of all or substantially all of their property. The Senior Credit Agreement is also subject to customary events of default. Pursuant to the Second Amended and Restated Guarantee and Collateral Agreement, amounts borrowed under the Revolving Credit Facility, the Term Loans and certain hedging transactions that may be entered into by SBA Senior Finance II or the Subsidiary Guarantors (as defined in the Senior Credit Agreement) with lenders or their affiliates are secured by a first lien on the membership interests of SBA Telecommunications, LLC, SBA Senior Finance, LLC F-24 1812036_textBW.indd 94 3/15/18 4:56 PM and SBA Senior Finance II and on substantially all of the assets (other than leasehold, easement and fee interests in real property) of SBA Senior Finance II and the Subsidiary Guarantors. The Senior Credit Agreement, as amended, permits SBA Senior Finance II, without the consent of the other lenders, to request that one or more lenders provide SBA Senior Finance II with increases in the Revolving Credit Facility or additional term loans provided that after giving effect to the proposed increase in Revolving Credit Facility commitments or incremental term loans the ratio of Consolidated Total Debt to Annualized Borrower EBITDA would not exceed 6.5 times. SBA Senior Finance II’s ability to request such increases in the Revolving Credit Facility or additional term loans is subject to its compliance with customary conditions set forth in the Senior Credit Agreement including compliance, on a pro forma basis, with the financial covenants and ratios set forth therein and, with respect to any additional term loan, an increase in the margin on existing term loans to the extent required by the terms of the Senior Credit Agreement. Upon SBA Senior Finance II’s request, each lender may decide, in its sole discretion, whether to increase all or a portion of its Revolving Credit Facility commitment or whether to provide SBA Senior Finance II with additional term loans and, if so, upon what terms. Revolving Credit Facility under the Senior Credit Agreement The Revolving Credit Facility is governed by the Senior Credit Agreement. The Revolving Credit Facility consists of a revolving loan under which up to $1.0 billion aggregate principal amount may be borrowed, repaid and redrawn, based upon specific financial ratios and subject to the satisfaction of other customary conditions to borrowing. Amounts borrowed under the Revolving Credit Facility accrue interest, at SBA Senior Finance II’s election, at either (i) the Eurodollar Rate plus a margin that ranges from 137.5 basis points to 200.0 basis points or (ii) the Base Rate plus a margin that ranges from 37.5 basis points to 100.0 basis points, in each case based on the ratio of Consolidated Total Debt to Annualized Borrower EBITDA, calculated in accordance with the Senior Credit Agreement. As of December 31, 2017, the balance outstanding under the Revolving Credit Facility was accruing interest at 3.48% per annum. In addition, SBA Senior Finance II is required to pay a commitment fee of 0.25% per annum on the amount of unused commitment. If not earlier terminated by SBA Senior Finance II, the Revolving Credit Facility will terminate on, and SBA Senior Finance II will repay all amounts outstanding on or before, February 5, 2020. The proceeds available under the Revolving Credit Facility may be used for general corporate purposes. SBA Senior Finance II may, from time to time, borrow from and repay the Revolving Credit Facility. Consequently, the amount outstanding under the Revolving Credit Facility at the end of a period may not be reflective of the total amounts outstanding during such period. During the year ended December 31, 2017, the Company borrowed $525.0 million and repaid $875.0 million of the outstanding balance under the Revolving Credit Facility. As of December 31, 2017, $40.0 million was outstanding under the Revolving Credit Facility. As of December 31, 2017, SBA Senior Finance II was in compliance with the financial covenants contained in the Senior Credit Agreement. Subsequent to December 31, 2017, the Company borrowed an additional $55.0 million and repaid $20.0 million of the outstanding balance under the Revolving Credit Facility. As of the date of this filing, $75.0 million was outstanding under the Revolving Credit Facility. Term Loans under the Senior Credit Agreement Repricing Amendment to the Senior Credit Agreement On January 20, 2017, SBA Senior Finance II amended its Senior Credit Agreement, primarily to reduce the stated rate of interest applicable to its senior secured term loans. As amended, the senior secured term loans accrue interest, at SBA Senior Finance II’s election, at either the Base Rate plus 125 basis points (with a zero Base Rate floor) or the Eurodollar Rate plus 225 basis points (with a zero Eurodollar Rate floor). 2012-1 Term Loan The 2012-1 Term Loan consisted of a senior secured term loan with an initial aggregate principal amount of $200.0 million that was to mature on May 9, 2017. The 2012-1 Term Loan accrued interest, at SBA Senior Finance II’s election, at either the Base Rate plus a margin that ranged from 100 to 150 basis points or the Eurodollar Rate plus a margin that ranged from 200 to 250 basis points, in each case based on the ratio of Consolidated Total Debt to Annualized Borrower EBITDA (calculated in accordance with the Senior Credit Agreement). The 2012-1 Term Loan was issued at par. The Company incurred deferred financing fees of $2.7 million in relation to this transaction which were being amortized through the maturity date. F-25 1812036_textBW.indd 95 3/15/18 4:56 PM During the year ended December 31, 2015, the Company repaid the entire outstanding balance of $172.5 million on the 2012-1 Term Loan. Included in this amount was a prepayment of $160.0 million made on November 18, 2015. In connection with the prepayment, the Company expensed $0.8 million of net deferred financing fees. 2014 Term Loan The 2014 Term Loan consists of a senior secured term loan with an initial aggregate principal amount of $1.5 billion that matures on March 24, 2021. Prior to the reduction in the term loan interest rates as discussed above, the 2014 Term Loan accrued interest, at SBA Senior Finance II’s election, at either the Base Rate plus 150 basis points (with a Base Rate floor of 1.75%) or the Eurodollar Rate plus 250 basis points (with a Eurodollar Rate floor of 0.75%). The 2014 Term Loan was issued at 99.75% of par value. As of December 31, 2017, the 2014 Term Loan was accruing interest at 3.82% per annum. Principal payments on the 2014 Term Loan commenced on September 30, 2014 and are being made in quarterly installments on the last day of each March, June, September, and December in an amount equal to $3.8 million. SBA Senior Finance II has the ability to prepay any or all amounts under the 2014 Term Loan. The Company incurred deferred financing fees of approximately $14.1 million in relation to this transaction which are being amortized through the maturity date. During the year ended December 31, 2017, the Company repaid $15.0 million of principal on the 2014 Term Loan. As of December 31, 2017, the 2014 Term Loan had a principal balance of $1,447.5 million. 2015 Term Loan The 2015 Term Loan consists of a senior secured term loan with an initial aggregate principal amount of $500.0 million that matures on June 10, 2022. Prior to the reduction in the term loan interest rates as discussed above, the 2015 Term Loan accrued interest, at SBA Senior Finance II’s election, at either the Base Rate plus 150 basis points (with a Base Rate floor of 1.75%) or the Eurodollar Rate plus 250 basis points (with a Eurodollar Rate floor of 0.75%). The 2015 Term Loan was issued at 99.0% of par value. As of December 31, 2017, the 2015 Term Loan was accruing interest at 3.82% per annum. Principal payments on the 2015 Term Loan commenced on September 30, 2015 and are being made in quarterly installments on the last day of each March, June, September, and December in an amount equal to $1.3 million. SBA Senior Finance II has the ability to prepay any or all amounts under the 2015 Term Loan. The Company incurred deferred financing fees of approximately $5.5 million in relation to this transaction which are being amortized through the maturity date. During the year ended December 31, 2017, the Company repaid $5.0 million of principal on the 2015 Term Loan. As of December 31, 2017, the 2015 Term Loan had a principal balance of $487.5 million. Secured Tower Revenue Securities Tower Revenue Securities Terms The mortgage loan underlying the 2013 Tower Securities, 2014 Tower Securities, 2015-1C Tower Securities, 2016-1C Tower Securities, and 2017-1C Tower Securities (together the “Tower Securities”) will be paid from the operating cash flows from the aggregate 10,442 tower sites owned by the Borrowers. The sole asset of the Trust consists of a non-recourse mortgage loan made in favor of those entities that are borrowers on the mortgage loan (“the Borrowers”). The mortgage loan is secured by (i) mortgages, deeds of trust, and deeds to secure debt on a substantial portion of the tower sites, (ii) a security interest in the tower sites and substantially all of the Borrowers’ personal property and fixtures, (iii) the Borrowers’ rights under certain tenant leases, and (iv) all of the proceeds of the foregoing. For each calendar month, SBA Network Management, Inc., an indirect subsidiary (“Network Management”), is entitled to receive a management fee equal to 4.5% of the Borrowers’ operating revenues for the immediately preceding calendar month. The Borrowers may prepay any of the mortgage loan components, in whole or in part, with no prepayment consideration, (i) within twelve months (in the case of the component corresponding to the Secured Tower Revenue Securities Series 2013-1C, Secured Tower Revenue Securities Series 2013-1D, Secured Tower Revenue Securities Series 2014-1C, Secured Tower Revenue Securities Series 2015-1C, Secured Tower Revenue Securities Series 2016-1C, and Secured Tower Revenue Securities Series 2017- 1C) or eighteen months (in the case of the components corresponding to the Secured Tower Revenue Securities Series 2013-2C and Secured Tower Revenue Securities Series 2014-2C) of the anticipated repayment date of such mortgage loan component, (ii) with proceeds received as a result of any condemnation or casualty of any tower owned by the Borrowers or (iii) during an amortization period. In all other circumstances, the Borrowers may prepay the mortgage loan, in whole or in part, upon payment of the applicable prepayment consideration. The prepayment consideration is determined based on the class of the Tower Securities to which the prepaid mortgage loan component corresponds and consists of an amount equal to the excess, if any, of (1) the present value F-26 1812036_textBW.indd 96 3/15/18 4:56 PM associated with the portion of the principal balance being prepaid, calculated in accordance with the formula set forth in the mortgage loan agreement, 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 within twelve months (in the case of the component corresponding to the Secured Tower Revenue Securities Series 2013-1C, Secured Tower Revenue Securities Series 2013-1D, Secured Tower Revenue Securities Series 2014-1C, Secured Tower Revenue Securities Series 2015-1C, Secured Tower Revenue Securities Series 2016-1C, and Secured Tower Revenue Securities Series 2017-1C) or eighteen months (in the case of the components corresponding to the Secured Tower Revenue Securities Series 2013-2C and Secured Tower Revenue Securities Series 2014-2C) of the anticipated repayment date of such mortgage loan component over (2) that portion of the principal balance of such class prepaid on the date of such prepayment. To the extent that the mortgage loan components corresponding to the Tower Securities are not fully repaid by their respective anticipated repayment dates, the interest rate of each such component will increase by the greater of (i) 5% and (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. Pursuant to the terms of the Tower Securities, all rents and other sums due on any of the towers owned by the Borrowers are directly deposited by the lessees into a controlled deposit account and are held by the indenture trustee. The monies held by the indenture trustee after the release date are classified as short-term restricted cash on the Consolidated Balance Sheets (see Note 4). 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 are required to pay over the succeeding twelve months, as of the end of any calendar quarter, falls to 1.30x 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 1.30x for two consecutive calendar quarters. If the Debt Service Coverage Ratio falls below 1.15x 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 1.15x for a calendar quarter. In addition, if any of the Tower Securities are not fully repaid by their respective anticipated repayment dates, the cash flow from the towers owned by the Borrowers will be trapped by the trustee for the Tower Securities and applied first to repay the interest, at the original interest rates, on the mortgage loan components underlying the Tower Securities, second to fund all reserve accounts and operating expenses associated with those towers, third to pay the management fees due to Network Management, fourth to repay principal of the Tower Securities and fifth to repay the additional interest discussed above. Furthermore, the advance rents reserve requirement states that the Borrowers are required to maintain an advance rents reserve at any time the monthly tenant Debt Service Coverage Ratio is equal to or less than 2:1 and for two calendar months after such coverage ratio again exceeds 2:1. The mortgage loan agreement, as amended, also includes covenants customary for mortgage loans subject to rated securitizations. Among other things, the Borrowers are prohibited from incurring other indebtedness for borrowed money or further encumbering their assets. As of December 31, 2017, the Borrowers met the debt service coverage ratio required by the mortgage loan agreement and were in compliance with all other covenants as set forth in the agreement. 2010 Tower Securities On April 16, 2010, the Company, through a New York common law trust (the “Trust”), issued $550.0 million of 2010-2C Tower Securities (the “2010-2C Tower Securities”) (together the “2010 Tower Securities”). The 2010-2C Tower Securities had an annual interest rate of 5.101%. The anticipated repayment date and the final maturity date for the 2010–2C Tower Securities were April 11, 2017 and April 9, 2042, respectively. The Company incurred deferred financing fees of $8.1 million in relation to this transaction which were being amortized through the anticipated repayment date of each of the 2010 Tower Securities. On July 15, 2016, the Company repaid in full the 2010-2C Tower Securities with proceeds from the 2016-1C Tower Securities. Additionally, the Company expensed $1.0 million of deferred financing fees related to the redemption of the 2010-2C Tower Securities, which are reflected in loss from extinguishment of debt on the Consolidated Statement of Operations. 2012-1C Tower Securities On August 9, 2012, the Company, through the Trust, issued $610.0 million of Secured Tower Revenue Securities Series 2012- 1C (the “2012-1C Tower Securities”), which had an anticipated repayment date of December 11, 2017 and a final maturity date of December 9, 2042. The fixed interest rate of the 2012-1C Tower Securities was 2.933% per annum, payable monthly. The Company incurred deferred financing fees of $14.9 million in relation to this transaction, which were being amortized through the anticipated repayment date of the 2012-1C Tower Securities. F-27 1812036_textBW.indd 97 3/15/18 4:56 PM On April 17, 2017, the Company repaid in full the 2012-1C Tower Securities with proceeds from the 2017-1C Tower Securities. In connection with the prepayment, the Company expensed $2.0 million of net deferred financing fees. 2013 Tower Securities On April 18, 2013, the Company, through the Trust, issued $425.0 million of 2.240% Secured Tower Revenue Securities Series 2013-1C, which have an anticipated repayment date of April 10, 2018 and a final maturity date of April 9, 2043 (the “2013-1C Tower Securities”), $575.0 million of 3.722% Secured Tower Revenue Securities Series 2013-2C, which have an anticipated repayment date of April 11, 2023 and a final maturity date of April 9, 2048 (the “2013-2C Tower Securities”), and $330.0 million of 3.598% Secured Tower Revenue Securities Series 2013-1D, which have an anticipated repayment date of April 10, 2018 and a final maturity date of April 9, 2043 (the “2013-1D Tower Securities”) (collectively the “2013 Tower Securities”). The aggregate $1.33 billion of 2013 Tower Securities have a blended interest rate of 3.218% per annum, payable monthly. The Company incurred deferred financing fees of $25.5 million in relation to this transaction, which are being amortized through the anticipated repayment date of each of the 2013 Tower Securities. The Company expects to repay the entire aggregate principal amount of the 2013-1C Tower Securities and 2013-1D Tower Securities in connection with the issuance of the 2018-1C Tower Securities (as discussed below). 2014 Tower Securities On October 15, 2014, the Company, through the Trust, issued $920.0 million of 2.898% Secured Tower Revenue Securities Series 2014-1C, which have an anticipated repayment date of October 8, 2019 and a final maturity date of October 11, 2044 (the “2014-1C Tower Securities”) and $620.0 million of 3.869% Secured Tower Revenue Securities Series 2014-2C, which have an anticipated repayment date of October 8, 2024 and a final maturity date of October 8, 2049 (the “2014-2C Tower Securities”) (collectively the “2014 Tower Securities”). The aggregate $1.54 billion of 2014 Tower Securities have a blended interest rate of 3.289% per annum, payable monthly. The Company incurred deferred financing fees of $22.5 million in relation to this transaction, which are being amortized through the anticipated repayment date of each of the 2014 Tower Securities. 2015-1C Tower Securities On October 14, 2015, the Company, through the Trust, issued $500.0 million of Secured Tower Revenue Securities Series 2015-1C, which have an anticipated repayment date of October 8, 2020 and a final maturity date of October 10, 2045 (the “2015-1C Tower Securities”). The fixed interest rate of the 2015-1C Tower Securities is 3.156% per annum, payable monthly. The Company incurred deferred financing fees of $11.2 million in relation to this transaction, which are being amortized through the anticipated repayment date of the 2015-1C Tower Securities. 2016-1C Tower Securities On July 7, 2016, the Company, through the Trust, issued $700.0 million of Secured Tower Revenue Securities Series 2016-1C, which have an anticipated repayment date of July 9, 2021 and a final maturity date of July 10, 2046 (the “2016-1C Tower Securities”). The fixed interest rate of the 2016-1C Tower Securities is 2.877% per annum, payable monthly. Net proceeds from this offering were used to prepay the full $550.0 million outstanding on the 2010-2C Tower Securities and for general corporate purposes. The Company incurred deferred financing fees of $9.5 million in relation to this transaction, which are being amortized through the anticipated repayment date of the 2016-1C Tower Securities. 2017-1C Tower Securities On April 17, 2017, the Company, through the Trust, issued $760.0 million of Secured Tower Revenue Securities Series 2017- 1C, which have an anticipated repayment date of April 11, 2022 and a final maturity date of April 9, 2047 (the “2017-1C Tower Securities”). The fixed interest rate on the 2017-1C Tower Securities is 3.168% per annum, payable monthly. Net proceeds from this offering were used to prepay the entire $610.0 million aggregate principal amount, as well as accrued and unpaid interest, of the 2012- 1C Tower Securities and for general corporate purposes. The Company incurred deferred financing fees of $10.2 million in relation to this transaction, which are being amortized through the anticipated repayment date of the 2017-1C Tower Securities. In addition, to satisfy certain risk retention requirements of Regulation RR promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), SBA Guarantor, LLC, a wholly owned subsidiary, purchased $40.0 million of Secured Tower Revenue Securities Series 2017-1R issued by the Trust, which have an anticipated repayment date of April 11, 2022 and a final maturity date of April 9, 2047 (the “2017-1R Tower Securities”). The fixed interest rate on the 2017-1R Tower Securities is 4.459% per annum, payable monthly. Principal and interest payments made on the 2017-1R Tower Securities eliminate in consolidation. F-28 1812036_textBW.indd 98 3/15/18 4:56 PM In connection with the issuance of the 2017-1C Tower Securities, the non-recourse mortgage loan was increased by $800.0 million (or by a net of $190.0 million after giving effect to prepayment of the loan components relating to the 2012-1C Tower Securities). The new loan accrues interest at the same rate as the 2017-1C Tower Securities; however, it is subject to all other material terms of the existing mortgage loan, including collateral and interest rate after the anticipated repayment date. In connection with the issuance of the 2017-1C Tower Securities, SBA Properties, LLC, SBA Sites, LLC, SBA Structures, LLC, SBA Infrastructure, LLC, SBA Monarch Towers III, LLC, SBA 2012 TC Assets PR, LLC, SBA 2012 TC Assets, LLC, SBA Towers IV, LLC, SBA Monarch Towers I, LLC, SBA Towers USVI, Inc., SBA Towers VII, LLC, SBA GC Towers, LLC, SBA Towers V, LLC, and SBA Towers VI, LLC (collectively, the “Borrowers”), each an indirect subsidiary of SBAC, and Midland Loan Services, a division of PNC Bank, National Association, as servicer, on behalf of the Trustee entered into the Second Loan and Security Agreement Supplement and Amendment pursuant to which, among other things, (i) the outstanding principal amount of the mortgage loan was increased by $760.0 million and (ii) the Borrowers became jointly and severally liable for the aggregate $4.8 billion borrowed under the mortgage loan corresponding to the 2012-1C Tower Securities, 2013 Tower Securities, 2014 Tower Securities, 2015-1C Tower Securities, 2016-1C Tower Securities, and the newly issued 2017-1C Tower Securities. 2018-1C Tower Securities On February 16, 2018, the Company agreed to issue, through a Trust, $640.0 million of Secured Tower Revenue Securities Series 2018-1C (the “2018-1C Tower Securities”), which offering is expected to close March 9, 2018. These securities are expected to have an anticipated repayment date of March 9, 2023 and a final maturity date of March 9, 2048. The fixed interest rate on the 2018- 1C Tower Securities will be 3.448% per annum, payable monthly, and the proceeds of this offering, in combination with borrowings under the Revolving Credit Facility, will be used to repay the entire aggregate principal amount of the 2013-1C Tower Securities ($425.0 million) and 2013-1D Tower Securities ($330.0 million), as well as accrued and unpaid interest. Management has classified $755.0 million of the combined 2013-1C Tower Securities and 2013-1D Tower Securities as a long-term obligation, as the Company intends to repay these securities with the net proceeds from the offering of the 2018-1C Tower Securities, in combination with borrowings under the Revolving Credit Facility. In addition, to satisfy certain risk retention requirements of Regulation RR promulgated under the Exchange Act, SBA Guarantor, LLC, a wholly owned subsidiary, agreed to purchase $33.7 million of Secured Tower Revenue Securities Series 2018-1R to be issued by the Trust. These securities are expected to have an anticipated repayment date of March 9, 2023 and a final maturity date of March 9, 2048 (the “2018-1R Tower Securities”). The fixed interest rate on the 2018-1R Tower Securities will be 4.949% per annum, payable monthly. Principal and interest payments made on the 2018-1R Tower Securities eliminate in consolidation. 4.0% Convertible Senior Notes due 2014 On April 24, 2009, the Company issued $500.0 million of its 4.0% Convertible Senior Notes (“4.0% Notes”). Interest was payable semi-annually on April 1 and October 1. As of December 31, 2014, the Company settled its conversion obligations and associated convertible note hedges. During the year ended December 31, 2015, the Company settled the remaining outstanding warrants for $150.9 million, representing approximately 2.1 million underlying shares. Senior Notes 5.75% Senior Notes On July 13, 2012, Telecommunications issued $800.0 million of unsecured senior notes due July 15, 2020 (the “5.75% Senior Notes”). The 5.75% Senior Notes accrued interest at a rate of 5.75% and were issued at par. The Company incurred deferred financing fees of $14.0 million in relation to this transaction, which were being amortized through the maturity date. On August 15, 2016, the Company used proceeds from the 2016 Senior Notes to redeem the full $800.0 million in aggregate principal amount of the 5.75% Senior Notes and to pay $25.8 million for the call premium and accrued interest on the redemption of the notes. Additionally, the Company expensed $7.7 million of deferred financing fees related to the redemption of the notes. The call premium and the write-off of deferred financing fees are reflected in loss from extinguishment of debt on the Consolidated Statement of Operations. SBAC is a holding company with no business operations of its own and its only significant asset is the outstanding capital stock of Telecommunications. Telecommunications is 100% owned by SBAC. SBAC had fully and unconditionally guaranteed the Senior Notes issued by Telecommunications. F-29 1812036_textBW.indd 99 3/15/18 4:56 PM 5.625% Senior Notes On September 28, 2012, the Company issued $500.0 million of unsecured senior notes due October 1, 2019 (the “5.625% Senior Notes”). The 5.625% Senior Notes accrued interest at a rate of 5.625% per annum and were issued at par. Interest on the 5.625% Senior Notes was due semi-annually on April 1 and October 1 of each year. The Company incurred deferred financing fees of $8.6 million in relation to this transaction, which were being amortized through the maturity date. On October 1, 2016, the Company redeemed the 5.625% Senior Notes in full. On October 3, 2016, the Company repaid $500.0 million in outstanding principal, $14.1 million related to the call premium on the early redemption of the notes, and $14.1 million in accrued interest. Repayment was made using (1) the proceeds from the 2016 Senior Notes, (2) borrowings under the Revolving Credit Facility, and (3) cash on hand. In addition, the Company expensed $4.1 million of deferred financing fees related to the redemption of the notes. The call premium and the write-off of deferred financing fees are reflected in loss from extinguishment of debt on the Consolidated Statement of Operations. 2014 Senior Notes On July 1, 2014, the Company issued $750.0 million of unsecured senior notes due July 15, 2022 (the “2014 Senior Notes”). The 2014 Senior Notes accrue interest at a rate of 4.875% per annum and were issued at 99.178% of par value. Interest on the 2014 Senior Notes is due semi-annually on January 15 and July 15 of each year. The Company incurred deferred financing fees of $11.6 million in relation to this transaction, which are being amortized through the maturity date. The 2014 Senior Notes are subject to redemption in whole or in part on or after July 15, 2017 at the redemption prices set forth in the indenture agreement plus accrued and unpaid interest. The Company may redeem the 2014 Senior Notes during the twelve- month period beginning on the following dates at the following redemption prices: July 15, 2017 at 103.656%, July 15, 2018 at 102.438%, July 15, 2019 at 101.219%, or July 15, 2020 until maturity at 100.000%, of the principal amount of the 2014 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest. 2016 Senior Notes On August 15, 2016, the Company issued $1.1 billion of unsecured senior notes due September 1, 2024 (the “2016 Senior Notes”). The 2016 Senior Notes accrue interest at a rate of 4.875% per annum and were issued at 99.178% of par value. Interest on the 2016 Senior Notes is due semi-annually on March 1 and September 1 of each year, beginning on March 1, 2017. The Company incurred deferred financing fees of $12.8 million in relation to this transaction, which are being amortized through the maturity date. Net proceeds from this offering and cash on hand were used to redeem $800.0 million, the aggregate principal amount outstanding, of Telecommunications’ 5.75% Senior Notes and $250.0 million of the Company’s 5.625% Senior Notes and pay the associated call premiums. The 2016 Senior Notes are subject to redemption in whole or in part on or after September 1, 2019 at the redemption prices set forth in the indenture agreement plus accrued and unpaid interest. Prior to September 1, 2019, the Company may at its option redeem up to 35% of the aggregate principal amount of the 2016 Senior Notes originally issued at a redemption price of 104.875% of the principal amount of the 2016 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest with the net proceeds of certain equity offerings. The Company may redeem the 2016 Senior Notes during the twelve-month period beginning on the following dates at the following redemption prices: September 1, 2019 at 103.656%, September 1, 2020 at 102.438%, September 1, 2021 at 101.219%, or September 1, 2022 until maturity at 100.000%, of the principal amount of the 2016 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest. 2017 Senior Notes On October 13, 2017, the Company issued $750.0 million of unsecured senior notes due October 1, 2022 (the “2017 Senior Notes”). The 2017 Senior Notes accrue interest at a rate of 4.0% per annum. Interest on the 2017 Senior Notes is due semi-annually on April 1 and October 1 of each year, beginning on April 1, 2018. The Company incurred deferred financing fees of $8.9 million in relation to this transaction, which are being amortized through the maturity date. Net proceeds from this offering were used to repay $460.0 million outstanding under the Revolving Credit Facility and for general corporate purposes. The 2017 Senior Notes are subject to redemption in whole or in part on or after October 1, 2019 at the redemption prices set forth in the indenture agreement plus accrued and unpaid interest. Prior to October 1, 2020, the Company may, at the Company’s option, redeem up to 35% of the aggregate principal amount of the 2017 Senior Notes originally issued at a redemption price of 104.000% of the principal amount of the 2017 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest F-30 1812036_textBW.indd 100 3/15/18 4:56 PM with the net proceeds of certain equity offerings. The Company may redeem the 2017 Senior Notes during the twelve-month period beginning on the following dates at the following redemption prices: October 1, 2019 at 102.000%, October 1, 2020 at 101.000%, or October 1, 2021 until maturity at 100.000%, of the principal amount of the 2017 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest. Indentures Governing Senior Notes The Indentures governing the Senior Notes contain customary covenants, subject to a number of exceptions and qualifications, including restrictions on the ability of SBAC and Telecommunications to (1) incur additional indebtedness unless the Consolidated Indebtedness to Annualized Consolidated Adjusted EBITDA Ratio (as defined in the Indenture), pro forma for the additional indebtedness does not exceed, with respect to any fiscal quarter, 9.5x for SBAC, (2) merge, consolidate or sell assets, (3) make restricted payments, including dividends or other distributions, (4) enter into transactions with affiliates, and (5) enter into sale and leaseback transactions and restrictions on the ability of the Restricted Subsidiaries of SBAC (as defined in the Indentures) to incur liens securing indebtedness. 13. SHAREHOLDERS’ EQUITY Common Stock Equivalents The Company has potential common stock equivalents (see Note 14) related to its outstanding stock options and restricted stock units These potential common stock equivalents were considered in the Company’s diluted earnings per share calculation (see Note 11). Stock Repurchases On April 27, 2011, the Company’s Board of Directors authorized a stock repurchase plan. This plan authorized the Company to purchase, from time to time, up to $300.0 million of the Company’s outstanding Class A common stock through open market repurchases in compliance with Rule 10b-18 under the Exchange Act, and/or in privately negotiated transactions at management’s discretion based on market and business conditions, applicable legal requirements and other factors. During the year ended December 31, 2015, the Company repurchased 1.3 million shares of its Class A common stock at an average price of $114.96 with the remaining $150.0 million authorized under the $300.0 million stock repurchase plan, completing this plan. Shares repurchased were retired. On June 4, 2015, the Company’s Board of Directors authorized a new stock repurchase plan. This plan authorized the Company to purchase, from time to time, up to $1.0 billion of the Company’s outstanding Class A common stock through open market repurchases in compliance with Rule 10b-18 under the Exchange Act, and/or in privately negotiated transactions at management’s discretion based on market and business conditions, applicable legal requirements and other factors. During the year ended December 31, 2015, the Company repurchased an additional 2.7 million shares of its Class A common stock under this stock repurchase plan for $300.0 million at a weighted average price per share of $112.04. During the year ended December 31, 2016, the Company repurchased an additional 5.3 million shares of its Class A common stock under this stock repurchase program for $545.7 million at a weighted average price per share of $102.14. As of December 31, 2016, the Company had a remaining authorization to repurchase $154.4 million of Class A common stock under the $1.0 billion stock repurchase plan dated June 4, 2015. During the year ended December 31, 2017, the Company repurchased 42,163 shares of its Class A common stock under the stock repurchase plan dated June 4, 2015 for $4.4 million at a weighted average price per share of $104.81. Shares repurchased were retired. On January 12, 2017, the Company’s Board of Directors authorized a new stock repurchase plan, replacing the plan authorized on June 4, 2015 which had a remaining authorization of $150.0 million. This plan authorized the Company to purchase, from time to time, up to $1.0 billion of the Company’s outstanding Class A common stock through open market repurchases in compliance with Rule 10b-18 under the Exchange Act, and/or in privately negotiated transactions at management’s discretion based on market and business conditions, applicable legal requirements and other factors. During the year ended December 31, 2017, the Company repurchased 5.8 million shares of its Class A common stock under this plan for $850.0 million, at an average price per share of $146.17. Shares repurchased were retired. On February 16, 2018, the Company’s Board of Directors authorized a new $1.0 billion stock repurchase plan, replacing the prior plan authorized on January 12, 2017 which had a remaining authorization of $150.0 million. This new plan authorizes the Company to purchase, from time to time, up to $1.0 billion of our outstanding Class A common stock through open market repurchases in compliance with Rule 10b-18 under the Exchange Act and/or in privately negotiated transactions at management’s discretion based on market and business conditions, applicable legal requirements and other factors. Shares repurchased will be retired. The new plan has no time deadline and will continue until otherwise modified or terminated by the Company’s Board of F-31 1812036_textBW.indd 101 3/15/18 4:56 PM Directors at any time in its sole discretion. As of the date of this filing, the Company had the full $1.0 billion authorization remaining under the new plan. Registration of Additional Shares On May 20, 2010, the Company filed a registration statement on Form S-8 with the Securities and Exchange Commission registering 15.0 million shares of the Company’s Class A common stock issuable under the 2010 Performance and Equity Incentive Plan (see Note 14). The Company filed a shelf registration statement on Form S-4 with the Securities and Exchange Commission registering 4.0 million shares of its Class A common stock in 2007. These shares may be issued in connection with acquisitions of wireless communication towers or antenna sites and related assets or companies that own wireless communication towers, antenna sites, or related assets. During the years ended December 31, 2016 and 2015, the Company did not issue any shares of its Class A common stock pursuant to this registration statement in connection with acquisitions. During the year ended December 31, 2017, the company issued 487,963 shares of Class A common stock under this registration statement. As of December 31, 2017, the Company had approximately 1.2 million shares of Class A common stock remaining under this registration statement. On March 3, 2015, 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, preferred stock or debt securities either separately or represented by warrants, or depositary shares as well as units that include any of these securities. Under the rules governing automatic shelf registration statements, the Company will file a prospectus supplement and advise the Commission of the amount and type of securities each time it issues securities under this registration statement. For the years ended December 31, 2017, 2016, and 2015, the Company did not issue any securities under this automatic shelf registration statement. 14. STOCK-BASED COMPENSATION The Company has two equity participation plans (the 2001 Equity Participation Plan and the 2010 Performance and Equity Incentive Plan, the “2010 Plan”) whereby options (both non-qualified and incentive stock options), restricted stock units, stock appreciation rights, and other equity and performance based instruments may be granted to directors, employees, and consultants. The options and restricted stock units generally vest from the date of grant on a straight-line basis over the vesting term and generally have a seven-year or a ten-year contractual life. Upon the adoption of the 2010 Plan by the Company’s shareholders on May 6, 2010, the 2001 Equity Participation Plan was terminated and the Company is no longer eligible to issue shares pursuant to that plan. The 2010 Plan provides for the issuance of a maximum of 15.0 million shares of the Company’s Class A common stock, of which 7.5 million shares remain available for future issuance as of December 31, 2017. However, the aggregate number of shares that may be issued pursuant to restricted stock awards, restricted stock unit awards, stock bonus awards, performance awards, other stock-based awards, or other awards granted under the 2010 Plan will not exceed 7.5 million shares, of which 6.6 million shares remain available for future issuance as of December 31, 2017. Stock Options 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 historical volatility to establish the expected volatility, as well as to estimate the expected option life. 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: F-32 1812036_textBW.indd 102 3/15/18 4:56 PM Risk free interest rate Dividend yield Expected volatility Expected lives For the year ended December 31, 2017 2016 2015 1.70% - 1.97% 1.11% - 1.43% 1.21% - 1.46% 0.0% 20.0% 0.0% 20.0% 0.0% 20.0% 4.6 years 4.7 years 4.6 years The following table summarizes the Company’s activities with respect to its stock option plans for the years ended December 31, 2017, 2016 and 2015 as follows (dollars and number of shares in thousands, except for per share data): Weighted- Average Weighted- Average Remaining Number of Shares Exercise Price Contractual Aggregate Per Share Life (in years) Intrinsic Value Outstanding at December 31, 2014 Granted Exercised Canceled Outstanding at December 31, 2015 Granted Exercised Canceled Outstanding at December 31, 2016 Granted Exercised Canceled Outstanding at December 31, 2017 Exercisable at December 31, 2017 Unvested at December 31, 2017 3,276 $ 1,076 $ (495) (63) 3,794 $ $ $ 1,357 $ (603) (101) 4,447 $ $ $ 1,171 $ (709) (67) 4,842 1,982 2,860 $ $ $ $ $ 66.85 124.24 51.58 93.74 84.66 96.64 46.03 105.37 93.09 115.41 80.73 105.81 100.12 87.42 108.93 4.3 3.0 5.3 $ $ $ 306,100 150,501 155,599 The weighted-average per share fair value of options granted during the years ended December 31, 2017, 2016 and 2015 was $23.88, $19.19, and $24.75, respectively. The total intrinsic value for options exercised during the years ended December 31, 2017, 2016 and 2015 was $37.2 million, $36.8 million and $33.0 million, respectively. Cash received from option exercises under all plans for the years ended December 31, 2017, 2016 and 2015 was approximately $56.5 million, $27.4 million, and $25.4 million, respectively. No tax benefit was realized for the tax deductions from option exercises under all plans for the years ended December 31, 2017, 2016 and 2015, respectively. The aggregate intrinsic value for stock options in the preceding table represents the total intrinsic value based on the Company’s closing stock price of $163.36 as of December 31, 2017. 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. F-33 1812036_textBW.indd 103 3/15/18 4:56 PM Additional information regarding options outstanding and exercisable at December 31, 2017 is as follows: Options Outstanding Weighted Average Remaining Weighted Average Options Exercisable Weighted Average Range Outstanding Contractual Life Exercise Price Exercisable Exercise Price $0.00 - $45.00 $45.01 - $90.00 $90.01 - $115.00 $115.01 - $145.00 (in thousands) 99 731 1,973 2,039 4,842 (in years) 0.4 1.9 4.4 5.3 (in thousands) $ $ 40.39 64.76 96.39 99 $ 730 $ 760 40.39 64.71 96.16 $ 119.32 393 $ 124.48 1,982 The following table summarizes the activity of options outstanding that had not yet vested: Unvested as of December 31, 2016 Shares granted Vesting during period Forfeited Unvested as of December 31, 2017 Weighted- Average Fair Value Per Share Number of Shares (in thousands) 2,814 1,171 (1,058) (67) 2,860 $ $ $ $ $ 20.62 23.88 20.25 21.23 22.08 As of December 31, 2017, the total unrecognized compensation expense related to unvested stock options outstanding under the Plans is $39.8 million. That cost is expected to be recognized over a weighted average period of 2.5 years. The total fair value of options vested during 2017, 2016, and 2015 was $21.4 million, $18.5 million, and $15.1 million, respectively. F-34 1812036_textBW.indd 104 3/15/18 4:56 PM Restricted Stock Units The following table summarizes the Company’s restricted stock unit activity for the year ended December 31, 2017: Outstanding at December 31, 2016 Granted Vested Forfeited/canceled Outstanding at December 31, 2017 Weighted- Average Grant Date Number of Fair Value per Shares Share (in thousands) 291 171 (122) (12) 328 $ $ $ $ $ 101.74 116.52 98.75 111.67 110.20 As of December 31, 2017, total unrecognized compensation expense related to unvested restricted stock units granted under the 2010 Plan was $24.4 million and is expected to be recognized over a weighted-average period of 2.6 years. Employee Stock Purchase Plan In 2008, the Board of Directors of 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 2008 Purchase Plan permits 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, 2017, 28,232 shares of Class A common stock were issued under the 2008 Purchase Plan, which resulted in cash proceeds to the Company of approximately $3.3 million, compared to the year ended December 31, 2016 when 31,165 shares of Class A common stock were issued under the 2008 Purchase Plan which resulted in cash proceeds to the Company of $2.7 million. At December 31, 2017, 244,942 shares remained available for issuance under the 2008 Purchase Plan. In addition, the Company recorded $0.6 million, $0.5 million, and $0.5 million of non-cash compensation expense relating to the shares issued under the 2008 Purchase Plans for each of the years ended December 31, 2017, 2016, and 2015. Non-Cash Compensation Expense The table below reflects a break out by category of the non-cash compensation expense amounts recognized on the Company’s Statements of Operations for the years ended December 31, 2017, 2016, and 2015, respectively: 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 For the year ended December 31, 2017 2016 2015 (in thousands) $ 1,013 $ 418 $ 37,236 32,497 38,249 — 32,915 — 405 28,342 28,747 — Amount charged against loss $ 38,249 $ 32,915 $ 28,747 In addition, the Company capitalized $0.6 million, $0.5 million and $0.5 million of non-cash compensation for the years ended December 31, 2017, 2016 and 2015, respectively, to fixed assets. F-35 1812036_textBW.indd 105 3/15/18 4:56 PM 15. INCOME TAXES As discussed in Note 2, the Company began operating in compliance with REIT requirements for federal income tax purposes effective January 1, 2016. As a REIT, the Company must distribute at least 90 percent of its taxable income (including dividends paid to it by its TRSs) except to the extent offset by NOLs. In addition, the Company must meet a number of other organizational and operational requirements. It is management's intention to adhere to these requirements and maintain the Company's REIT status. Most states where SBA operates conform to the federal rules recognizing REITs. Certain subsidiaries have made an election with the Company to be treated as TRSs in conjunction with the Company's REIT election; the TRS elections permit SBA to engage in certain business activities in which the REIT may not engage directly. A TRS is subject to federal and state income taxes on the income from these activities. A provision for taxes of the TRSs and of foreign branches of the REIT are included in its consolidated financial statements. Income (loss) before provision for income taxes by geographic area is as follows: Domestic Foreign Total For the year ended December 31, 2017 2016 2015 (in thousands) $ $ 73,405 $ (28,671) $ (22,698) 43,486 115,974 (143,897) 116,891 $ 87,303 $ (166,595) The provision for income taxes consists of the following components: For the year ended December 31, 2017 2016 2015 (in thousands) Current provision: State Foreign Total current Deferred provision (benefit) for taxes: Federal State Foreign Change in valuation allowance Total deferred $ 5,513 $ 1,535 $ 11,681 17,194 8,121 9,656 18,736 (241) 9,155 (31,607) (3,957) 170,177 22,992 30,425 (222,185) 1,409 Total provision for income taxes $ 13,237 $ 11,065 $ 2,752 6,314 9,066 (3,023) (3,106) (40,636) 46,760 (5) 9,061 F-36 1812036_textBW.indd 106 3/15/18 4:56 PM A reconciliation of the provision for income taxes at the statutory U.S. Federal tax rate (35%) and the effective income tax rate is as follows: Statutory federal expense (benefit) Foreign tax rate differential State and local tax expense (benefit) REIT adjustment Permanent differences Tax Act impact on deferred taxes Foreign exchange rate changes Other Valuation allowance For the year ended December 31, 2017 2016 2015 $ 40,912 $ 30,555 $ (58,307) (in thousands) 3,745 5,415 (34,346) (1,365) 31,547 (55) (1,009) (31,607) 1,083 3,941 205,317 (3,577) — (5,822) 1,753 (222,185) 3,534 (230) — 4,892 — 9,212 3,200 46,760 9,061 Provision for income taxes $ 13,237 $ 11,065 $ F-37 1812036_textBW.indd 107 3/15/18 4:56 PM The components of the net deferred income tax asset (liability) accounts are as follows: Noncurrent deferred tax assets: Net operating losses Property, equipment, and intangible basis differences Accrued liabilities Non-cash compensation Deferred revenue Allowance for doubtful accounts Currency translation Other Valuation allowance Total noncurrent deferred tax assets, net (1) Noncurrent deferred tax liabilities: Property, equipment, and intangible basis differences Straight-line rents Deferred lease costs Other As of December 31, 2017 2016 (in thousands) $ 65,257 $ 3,038 11,933 7,500 2,110 5,978 34,895 2,698 (38,802) 94,607 (98,589) (22,740) (2,242) (136) 50,143 2,583 12,264 19,908 3,904 6,187 33,088 1,032 (70,233) 58,876 (65,459) (18,081) (1,087) (922) Total noncurrent deferred tax liabilities, net (1) $ (29,100) $ (26,673) (1) Of these amounts, $1,670 and $30,770 are included in Other assets and Other long-term liabilities, respectively on the accompanying Consolidated Balance Sheets as of December 31, 2017. As of December 31, 2016, $774 and $27,447 are included in Other assets and Other long-term liabilities on the accompanying Consolidated Balance Sheet. A deferred tax asset is reduced by a valuation allowance if based on the weight of all available evidence, including both positive and negative evidence, it is more likely than not (a likelihood of more than 50%) that the value of such assets will not be realized. The valuation allowance should be sufficient to reduce the deferred tax asset to the amount that is more likely than not to be realized. The realization of deferred tax assets, including carryforwards and deductible temporary differences, depends upon the existence of sufficient taxable income of the same character during the carryback or carryforward period. All sources of taxable income available to realize the deferred tax asset, including the future reversal of existing temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards, taxable income in carryback years and tax-planning strategies, should be considered. The Company has recorded a valuation allowance for the majority of its deferred tax assets as management believes that it is not “more-likely-than-not” that the Company will generate sufficient taxable income in future periods to recognize the assets. Valuation allowances of $38.8 million and $70.2 million were being carried to offset net deferred income tax assets as of December 31, 2017 and 2016, respectively. The net change in the valuation allowance for the years ended December 31, 2017 and 2016 was $31.4 million and $222.6 million, respectively. The Company has available at December 31, 2017, a federal NOL carry-forward of approximately $1.1 billion. These NOL carry-forwards will expire between 2022 and 2036. As of December 31, 2017, $956.7 million of the federal NOLs are attributes of the REIT. The Company may use these NOLs to offset its REIT taxable income, and thus any required distributions to shareholders may be reduced or eliminated until such time as the NOLs have been fully utilized. The Internal Revenue Code places limitations upon the future availability of NOLs based upon changes in the equity of the Company. If these occur, the ability of the Company to offset future income with existing NOLs may be limited. In addition, the Company has available at December 31, 2017, a foreign NOL F-38 1812036_textBW.indd 108 3/15/18 4:56 PM carry-forward of $79.5 million and a net state operating tax loss carry-forward of approximately $456.1 million. These net operating tax loss carry-forwards begin to expire in 2018. The U.S. tax losses generated in tax years 1999 through 2014 remain subject to adjustment, and tax years 2014 through 2017 are open to examination by the major jurisdictions in which the Company operates. On December 22, 2017, the U.S. government enacted comprehensive tax legislation in the form of the Tax Cuts and Jobs Act (the “Tax Act”) that significantly revises the U.S. tax code effective January 1, 2018 by, among other things, lowering the corporate income tax rate from a top marginal rate of 35% to a flat 21%, imposing a mandatory one-time deemed repatriation of foreign earnings (commonly referred to as the “transition tax”), limiting deductibility of interest expense and certain executive compensation and implementing a territorial tax system. The full impact of this change in tax law is provisional and subject to further analysis. The Company does not expect to remit earnings from its foreign subsidiaries. Undistributed earnings of the Company’s foreign subsidiaries amounted to approximately $102.2 million at December 31, 2017. Those earnings are considered to be permanently reinvested and the Company could be subject to withholding taxes payable to various foreign countries. The Tax Act passed December 22, 2017 caused the Company to record a one-time income inclusion of unremitted earnings in the amount of $52.4 million. The Company's provisional calculation of its remaining outside basis difference is not considered material. Determining the amount of unrecognized deferred tax liability related to any additional outside basis difference in these entities (i.e., basis difference other than those subject to the one-time transition tax) is not practicable due to the complexities of the hypothetical calculation in determining residual taxes on undistributed earnings, including the availability of foreign tax credits, applicability of any additional local withholding tax, and other indirect tax consequence that may arise due to the distribution of these earnings. The global intangible low-taxed income (“GILTI”) provisions of the Tax Act impose a tax on the income of certain foreign subsidiaries in excess of a specified return on tangible assets used by the foreign companies. FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred. Given the complexity of the GILTI provisions, the Company is still evaluating the effects of the GILTI provisions and has not yet determined the new accounting policy. At December 31, 2017, the Company is still evaluating the GILTI provisions and the analysis of future taxable income that is subject to GILTI, the Company is still unable to make a reasonable estimate and has not reflected any adjustments related to GILTI in the Company's consolidated financial statements. 16. COMMITMENTS AND CONTINGENCIES 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 2152. In addition, the Company is obligated under various non-cancelable capital leases for vehicles that expire at various times through September 2021. The annual minimum lease payments under non-cancelable operating (primarily ground or land leases) and capital leases for the next five years as of December 31, 2017 are as follows (in thousands): For the year ended December 31, Capital Leases Operating Leases 2018 2019 2020 2021 2022 Total minimum lease payments Less: amount representing interest Present value of future payments Less: current obligations Long-term obligations 220,190 222,489 224,148 226,528 228,093 $ 1,199 $ 654 226 31 — 2,110 (113) 1,997 (1,147) 850 $ F-39 1812036_textBW.indd 109 3/15/18 4:56 PM Future minimum rental payments under noncancelable ground leases include payments for certain renewal periods at the Company’s option because failure to renew could result in a loss of the applicable tower and related revenue from tenant leases, thereby making it reasonably assured that the Company will renew the lease. The majority of 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 $266.4 million, $253.7 million and $239.8 million for the years ended December 31, 2017, 2016 and 2015, 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, 2017, 2016 and 2015 was $26.6 million, $25.0 million and $24.4 million, respectively. Tenant Leases The annual minimum tower lease income to be received for tower space and antenna rental under non-cancelable operating leases for the next five years as of December 31, 2017 are as follows: For the year ended December 31, (in thousands) 2018 2019 2020 2021 2022 $ 1,437,107 1,267,458 1,060,017 803,351 536,685 The Company’s tenant leases provide for annual escalations and multiple renewal periods, at the tenant’s option. The tenant rental payments disclosed in the table above do not assume exercise of any tenant renewal options, however, fixed rate escalations have been included for the current term. 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. Contingent Purchase Obligations From time to time, the Company agrees to pay additional consideration (or earnouts) for acquisitions if the towers or businesses that are acquired meet or exceed certain performance targets in the one to three years after they have been acquired. Please refer to Note 3. 17. 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 the limitations set forth in Section 402(g) of the Internal Revenue Code. 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. The Company makes a discretionary matching contribution of 75% of an employee’s contributions up to a maximum of $4,000 annually. Company matching contributions were approximately $2.0 million, $2.0 million and $2.1 million for the years ended December 31, 2017, 2016 and 2015, respectively. F-40 1812036_textBW.indd 110 3/15/18 4:56 PM 18. SEGMENT DATA The Company operates principally in two business segments: site leasing and site development. The Company’s site leasing business includes two reportable segments, domestic site leasing and international site leasing. The Company’s business 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. The site development segment includes the results of both consulting and construction related activities. The Company’s Chief Operating Decision Maker utilizes segment operating profit and operating income as his two measures of segment profit in assessing performance and allocating resources at the reportable segment level. 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. F-41 1812036_textBW.indd 111 3/15/18 4:56 PM For the year ended December 31, 2017 (in thousands) Domestic Site Int'l Site Site Not Identified Leasing Leasing Development by Segment Total Revenues Cost of revenues (2) Operating profit Selling, general, and administrative Acquisition related adjustments and expenses Asset impairment and decommission costs Depreciation, amortization and accretion Operating income (loss) Other expense (principally interest expense and other expense) Income before provision for income taxes Cash capital expenditures (3) For the year ended December 31, 2016 Revenues Cost of revenues (2) Operating profit Selling, general, and administrative (4) Acquisition related adjustments and expenses Asset impairment and decommission costs Depreciation, amortization and accretion Operating income (loss) Other expense (principally interest expense and other expense) Income before provision for income taxes Cash capital expenditures (3) For the year ended December 31, 2015 Revenues Cost of revenues (2) Operating profit Selling, general, and administrative Acquisition related adjustments and expenses Asset impairment and decommission costs Depreciation, amortization and accretion Operating income (loss) Other expense (principally interest expense and other expense) Loss before provision for income taxes $ 1,308,389 $ 314,784 $ 104,501 $ — $ 1,727,674 260,826 1,047,563 67,263 8,171 29,523 498,842 443,764 98,701 216,083 24,320 4,196 6,994 135,155 45,418 86,785 17,716 15,433 — 180 2,580 (477) — — 446,312 1,281,362 23,681 130,697 — — 6,523 (30,204) 12,367 36,697 643,100 458,501 (341,610) (341,610) 116,891 225,074 358,691 1,221 3,859 588,845 $ 1,273,866 $ 264,204 $ 95,055 $ — $ 1,633,125 260,941 1,012,925 72,701 6,233 26,073 509,108 398,810 81,274 182,930 35,897 6,907 1,824 119,466 18,836 78,682 16,373 13,039 — — 3,402 (68) — — 420,897 1,212,228 21,712 143,349 — 2,345 6,213 (30,270) 13,140 30,242 638,189 387,308 (300,005) (300,005) 87,303 310,256 102,282 1,955 3,710 418,203 $ 1,236,758 $ 243,876 $ 157,840 $ — $ 1,638,474 252,493 984,265 67,413 9,975 93,977 534,436 278,464 72,162 171,714 16,196 1,889 806 118,886 33,937 119,744 38,096 12,247 — — 3,662 22,187 — — 444,399 1,194,075 19,095 114,951 — — 3,037 (22,132) (479,051) 11,864 94,783 660,021 312,456 (479,051) (166,595) Cash capital expenditures (3) 709,337 94,693 3,495 13,339 820,864 F-42 1812036_textBW.indd 112 3/15/18 4:56 PM Domestic Site Int'l Site Site Not Identified Leasing Leasing Development by Segment (1) Total Assets As of December 31, 2017 As of December 31, 2016 $ 5,171,190 $ 2,028,479 $ 49,487 $ 71,049 $ 7,320,205 $ 5,396,394 $ 1,839,703 $ 43,769 $ 81,079 $ 7,360,945 (in thousands) (1) Assets not identified by segment consist primarily of general corporate assets. (2) Excludes depreciation, amortization, and accretion. (3) (4) Includes cash paid for capital expenditures and acquisitions and vehicle capital lease additions. International site leasing includes the impact of the $16,498 Oi reserve for the year ended December 31, 2016. Other than Brazil, no foreign country represented a material amount of our total revenues in any of the periods presented. Site leasing revenue in Brazil was $217.4 million for 2017, $178.3 million for 2016, and $169.6 million for 2015. Total long-lived assets in Brazil was $1,278.9 million as of December 31, 2017, $1,096.4 million as of December 31, 2016, and $923.6 million as of December 31, 2015. F-43 1812036_textBW.indd 113 3/15/18 4:56 PM 19. QUARTERLY FINANCIAL DATA (unaudited) Revenues Operating income Depreciation, accretion, and amortization Loss from extinguishment of debt, net Net income Quarter Ended December 31, September 30, June 30, March 31, 2017 2017 2017 2017 (in thousands, except per share amounts) $ 443,073 $ 433,945 $ 427,294 $ 423,362 119,081 117,011 114,590 107,819 (162,643) (161,907) (159,520) (159,030) — — (1,961) — 7,660 49,161 9,233 37,600 Net income per common share - basic (1) Net income per common share - diluted $ 0.07 $ 0.06 0.41 $ 0.08 $ 0.41 0.08 0.31 0.31 Revenues Operating income Depreciation, accretion, and amortization Loss from extinguishment of debt, net Net income (loss) Quarter Ended December 31, September 30, June 30, March 31, 2016 2016 2016 2016 (in thousands, except per share amounts) $ 416,505 $ 411,319 $ 405,532 $ 399,769 107,430 108,210 74,066 97,602 (158,554) (160,111) (159,723) (159,801) (18,189) (34,512) — — 5,256 (15,370) 32,711 53,641 Net income per common share - basic Net income per common share - diluted $ 0.04 $ (0.12) $ 0.26 $ 0.04 (0.12) 0.26 0.43 0.43 (1) The sums of quarterly earnings per share data may not equal annual data due to rounding. Basic and diluted net income (loss) per share is computed by dividing net income by the weighted average number of shares for the period. Potentially dilutive instruments have been excluded from the computation of diluted loss per share as their impact would have been anti-dilutive. Because net income (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. F-44 1812036_textBW.indd 114 3/15/18 4:56 PM Performance Graph SBA Communications Corporation’s (“SBA” or “we”) Class A Common Stock began trading on The Nasdaq National Market on June 16, 1999 when its initial public offering commenced 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 (1) an investment in each of the S&P 500 Index and the Nasdaq Composite Index, (2) an investment in the FTSE NAREIT All Equity REITs Index and (3) an investment in a peer group made up of American Tower Corporation and Crown Castle International Corporation, the comparable large domestic public wireless tower companies. During 2017, SBA completed its conversion to a Real Estate Investment Trust, or REIT, and was also added to the S&P 500 Index. As a result of these developments: (cid:120) We replaced the Nasdaq Composite Index with the S&P 500 Index, which is required by SEC rules to be included now that we are included in that index, and have included both below for comparison purposes; and (cid:120) We added the FTSE NAREIT All Equity REITs Index to provide additional comparison to other REITs. 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 S&P 500 Index Large Public Tower Company Peers FTSE NAREIT All Equity REITs Index Nasdaq Composite Index s r a l l o D n I $250 $200 $150 $100 $50 12/31/12 12/31/13 12/31/14 12/31/15 12/31/16 12/31/17 INDEXED RETURNS Company Name / Index SBA Communications Corporation S&P 500 Index Large Public Tower Company Peers FTSE NAREIT All Equity REITs Index Nasdaq Composite Index Base Period 12/31/12 $100.00 $100.00 $100.00 $100.00 $100.00 2013 $126.57 $132.39 $103.54 $102.86 $140.12 Years Ending 2015 $148.03 $152.59 $130.64 $135.40 $171.97 2014 $156.04 $150.51 $122.97 $131.68 $160.78 2016 $145.48 $170.84 $141.58 $147.09 $187.22 2017 $230.15 $208.14 $192.15 $159.85 $242.71 Reflects $100 invested on December 31, 2012 in (i) the Class A Common Stock of SBA, (ii) the basket of companies comprising each of the S&P 500 Index and the Nasdaq Composite Index, (iii) the companies comprising the group of Large Public Tower Company Peers, and (iv) the basket of companies comprising the FTSE NAREIT All Equity REITs Index. 1812036_textBW.indd 115 3/15/18 4:56 PM Required Disclosures Non-GAAP Financial Measures in Accordance with Regulation G SBA often makes disclosures of non-GAAP financial measures, such as (i) Tower Cash Flow; (ii) Adjusted EBITDA and Adjusted EBITDA Margin; (iii) Funds from Operations (“FFO”), Adjusted Funds from Operations (“AFFO”), and AFFO per share; and (iv) Cash Site Leasing Revenues and Cash Cost of Site Leasing Revenues. Following is a reconciliation of these non-GAAP financial measures to their most comparable GAAP measures and the other information required by Regulation G. Adjusted EBITDA, which is included in this annual report, is discussed and included in our Form 10-K which accompanies this annual report. We believe that Tower Cash Flow, Cash Site Leasing Revenue and Cash Cost of Site Leasing Revenues are useful indicators of the performance of our site leasing operations. We believe that Annualized Adjusted EBITDA and Adjusted EBITDA Margin are useful to investors or other interested parties in evaluating our financial performance. Adjusted EBITDA is the primary measure used by management (1) to evaluate the economic productivity of our operations and (2) for purposes of making decisions about allocating resources to, and assessing the performance of, our operations. Management believes that Adjusted EBITDA helps investors or other interested parties meaningfully evaluate and compare the results of our operations (1) from period to period and (2) to our competitors, by excluding the impact of our capital structure (primarily interest charges from our outstanding debt) and asset base (primarily depreciation, amortization and accretion) from our financial results. Management also believes Adjusted EBITDA is frequently used by investors or other interested parties in the evaluation of REITs. In addition, Adjusted EBITDA is similar to the measure of current financial performance generally used in our debt covenant calculations. Adjusted EBITDA should be considered only as a supplement to net income computed in accordance with GAAP as a measure of our performance. We believe that FFO, AFFO and AFFO per share, which are metrics used by our public company peers in the communication site industry, provide investors useful indicators of the financial performance of our business and permit investors an additional tool to evaluate the performance of our business against those of our two principal competitors. FFO, AFFO, and AFFO per share are also used to address questions we receive from analysts and investors who routinely assess our operating performance on the basis of these performance measures, which are considered industry standards. We believe that FFO helps investors or other interested parties meaningfully evaluate financial performance by excluding the impact of our asset base (primarily depreciation, amortization and accretion). We believe that AFFO and AFFO per share help investors or other interested parties meaningfully evaluate our financial performance as they include (1) the impact of our capital structure (primarily interest expense on our outstanding debt) and (2) sustaining capital expenditures and exclude the impact of our (1) asset base (primarily depreciation, amortization and accretion) and (2) certain non-cash items, including straight-lined revenues and expenses related to fixed escalations and rent free periods and the non-cash portion of our reported tax provision. GAAP requires rental revenues and expenses related to leases that contain specified rental increases over the life of the lease to be recognized evenly over the life of the lease. In accordance with GAAP, if payment terms call for fixed escalations, or rent free periods, the revenue or expense is recognized on a straight-lined basis over the fixed, non-cancelable term of the contract. We only use AFFO as a performance measure. AFFO should be considered only as a supplement to net income computed in accordance with GAAP as a measure of our performance and should not be considered as an alternative to cash flows from operations or as residual cash flow available for discretionary investment. We believe our definition of FFO is consistent with how that term is defined by the National Association of Real Estate Investment Trusts (“NAREIT”) and that our definition and use of AFFO and AFFO per share is consistent with those reported by the other communication site companies. In addition, Tower Cash Flow and Adjusted EBITDA are components of the calculations used by our lenders to determine compliance with certain covenants under our debt instruments. These non-GAAP financial measures are not intended to be an alternative to any of the financial measures provided in our results of operations or our balance sheet as determined in accordance with GAAP. 1812036_textBW.indd 116 3/15/18 4:56 PM Tower Cash Flow The table below sets forth the reconciliation of consolidated Tower Cash Flow to its most comparable GAAP measurement. Site leasing revenue Non-cash straight-line leasing revenue Cash site leasing revenue Site leasing cost of revenues (excluding depreciation, accretion, and amortization) Non-cash straight-line ground lease expense Tower Cash Flow For the year ended December 31, 2017 2016 ($ in thousands) 1,623,173 $ (16,419) 1,606,754 1,538,070 (31,650) 1,506,420 (359,527) 30,850 1,278,077 $ (342,215) 34,708 1,198,913 $ $ The table below sets forth the reconciliation of International Tower Cash Flow to its most comparable GAAP measurement. International site leasing revenue International non-cash straight-line leasing revenue International cash site leasing revenue International site leasing cost of revenues (excluding depreciation, accretion, and amortization) International non-cash straight-line ground lease expense International Tower Cash Flow $ $ For the year ended December 31, 2017 2016 ($ in thousands) 314,785 $ (15,492) 299,293 (98,701) 3,740 204,332 $ 264,204 (19,190) 245,014 (81,275) 3,646 167,385 Adjusted EBITDA Margin The table below sets forth the reconciliation of Adjusted EBITDA Margin to its most comparable GAAP measurement. See our Form 10-K which accompanies this annual report for a discussion and reconciliation of Adjusted EBITDA. Total revenues Non-cash straight-line leasing revenue Total revenues minus non-cash straight-line leasing revenue Adjusted EBITDA Adjusted EBITDA Margin For the year ended December 31, 2017 2016 ($ in thousands) 1,727,674 $ (16,419) 1,711,255 1,204,134 $ 70.4% 1,633,125 (31,650) 1,601,475 1,106,495 69.1% $ $ $ 1812036_textBW.indd 117 3/15/18 4:56 PM Funds from Operations (“FFO”), Adjusted Funds from Operations (“AFFO”) and AFFO per share The table below sets forth the reconciliations of FFO, AFFO and AFFO per share to their most comparable GAAP measurement. For the year ended December 31, 2017 2016 Net income (loss) Real estate related depreciation, amortization and accretion Adjustments for unconsolidated joint ventures (1) FFO Adjustments to FFO: Non-cash straight-line leasing revenue Non-cash straight-line ground lease expense Non-cash compensation Adjustment for non-cash portion of tax provision (2) Non-real estate related depreciation, amortization and accretion Amortization of deferred financing costs and debt discounts Loss from extinguishment of debt, net Other expense (income) Acquisition related adjustments and expenses Asset impairment and decommission costs Non-discretionary cash capital expenditures Adjustments for unconsolidated joint ventures (1) AFFO Weighted average number of common shares (3) AFFO per share $ $ $ ($ in thousands, except per share amounts) $ 103,654 $ 639,219 1,640 744,513 $ 76,238 632,985 — 709,223 (16,419) 30,850 38,249 (3,961) 3,882 24,819 1,961 2,418 12,367 36,697 (35,225) 349 840,500 $ 121,022 6.95 $ (31,650) 34,708 32,915 1,409 5,204 23,339 52,701 (94,278) 13,140 30,242 (32,452) — 744,501 125,144 5.95 (1) Adjustments for unconsolidated joint ventures represent (a) with respect to the calculation of FFO, that portion of the joint ventures’ depreciation, amortization and accretion to the extent included in our net income and (b) with respect to the calculation of AFFO, that portion of the joint ventures’ straight-line leasing revenue and ground lease expense, other (income) expense and acquisition related adjustments and expenses, in each case to the extent included in our net income. (2) Removes the non-cash portion of the tax provision for the period specified (3) For purposes of the AFFO per share calculation, the basic weighted average number of common shares has been adjusted to include the dilutive effect of stock options and restricted stock units. 1812036_textBW.indd 118 3/15/18 4:56 PM Cash Site Leasing Revenue and Cash Cost of Site Leasing Revenue The table below sets forth the reconciliations of Cash Site Leasing Revenue and Cash Cost of Site Leasing Revenue to their most comparable GAAP measurement. For the year ended 12/31/2017 12/31/2012 Site leasing revenue Non-cash straight-line leasing revenue Cash site leasing revenue Site leasing cost of revenues (excluding depreciation, accretion, and amortization) Non-cash straight-line ground lease expense Cash cost of site leasing revenue Cash cost as a percentage of cash site leasing $ $ $ revenue (in thousands) $ 1,623,173 (16,419) 1,606,754 359,527 (30,850) 328,677 20.46% $ $ 846,094 (52,009) 794,085 188,951 (22,463) 166,488 20.97% 1812036_textBW.indd 119 3/15/18 4:56 PM Special Note Regarding Forward-Looking Statements This annual report contains forward-looking statements that concern expectations, beliefs, projections, strategies, anticipated events or trends regarding (i) the growth and development of the wireless industry in our domestic markets and international markets, particularly Brazil, the drivers of such growth, emerging technologies and the key industry growth catalysts, (ii) the infrastructure needed to meet future growth in demand and our positioning to participate in such growth, including the continued need for macro sites, (iii) the geographic markets in which we operate, potential entry into new markets in the future and our strategy with respect to new markets, (iv) future portfolio and organic growth, both domestically and internationally, and the drivers of that growth, (v) future customer activity levels, including with respect to FirstNet, customer spending cycles and backlog, (vi) investment by our customers in their networks and the drivers of that investment, (vii) our capital allocation strategy and investment criteria with respect to portfolio growth and stock repurchases and their impact on shareholder value creation, (viii) our long term goal of producing AFFO of $10 or more per share in 2020, the factors contributing to our ability to achieve that goal and our progress toward achieving that goal, (ix) our balance sheet strategy, including our target leverage range, and the availability of future financing, and (x) our growth and financial results for 2018. These forward-looking statements are qualified in their entirety by cautionary statements set forth under “Special Note Regarding Forward-Looking Statements” and the risk factor disclosures contained in our Form 10-K filed with the Securities and Exchange Commission on March 1, 2018 and included in this annual report. 1812036_textBW.indd 120 3/15/18 4:56 PM SBA COMMUNICATIONS directors Steven E. Bernstein Chairman of the Board Mary S. Chan Director Jeffrey A. Stoops Director, President and Chief Executive Officer Kevin L. Beebe Director Brian C. Carr Director senior managEment Jeffrey A. Stoops President and Chief Executive Officer Kurt Bagwell President, International Brendan T. Cavanagh Executive Vice President and Chief Financial Officer Mark R. Ciarfella Executive Vice President, Operations Thomas P. Hunt Executive Vice President, Chief Administrative Officer and General Counsel Jason V. Silberstein Executive Vice President, Site Leasing Duncan H. Cocroft Director George R. Krouse Jr. Director Jack L. Langer Director Brian M. Allen Senior Vice President, Site Leasing Jorge Grau Senior Vice President and Chief Information Officer Brian D. Lazarus Senior Vice President and Chief Accounting Officer Jo Carol Rutherford Senior Vice President and Chief Human Resources Officer Neil H. Seidman Senior Vice President, Mergers and Acquisitions COMMON STOCK TRADING SYMBOL Class A shares of SBA Communications Corporation are traded on the NASDAQ Global Select Market under the symbol: SBAC INTERNET WEBSITE www.sbasite.com © 2018 SBA Communications Corporation. All Rights Reserved. The SBA logo, Your Signal Starts Here and Building Better Wireless are all registered trademarks owned by SBA Telecommunications, Inc. and affiliated SBA companies. Other brands and product names mentioned herein may be trademarks or registered trademarks of their respective companies. HEADQUARTERS 8051 Congress Avenue Boca Raton, FL 33487-1307 T + 561.995.7670 T + 800.487.SITE (7483) REGIONAL OFFICES North America Montreal, Canada Alpharetta, Georgia Biddeford, Maine Chicago, Illinois Fenton, Missouri Indianapolis, Indiana Nashville, Tennessee Pelham, Alabama Pittsburgh, Pennsylvania Santa Ana, California Woodbridge, New Jersey Central America Guatemala City, Guatemala Managua, Nicaragua Panama City, Panama San Jose, Costa Rica San Salvador, El Salvador South America Bogota, Colombia Buenos Aires, Argentina Lima, Peru Quito, Ecuador Santiago, Chile Sao Paulo, Brazil AUDITORS Ernst & Young LLP 5100 Town Center Circle Suite 500 Boca Raton, FL 33486 TRANSFER AGENT Computershare Trust Company, N.A. P.O. Box 43069 Providence, RI 02940-3069 www.computershare.com/equiserve INVESTOR RELATIONS SBA Communications Corporation 8051 Congress Avenue Boca Raton, FL 33487-1307 ir@sbasite.com NOTICE OF ANNUAL MEETING The annual meeting of shareholders will be held at 10:00 AM (Eastern) on Thursday, May 17, 2018 at the corporate headquarters: 8051 Congress Avenue Boca Raton, FL 33487-1307 8051 Congress Avenue, Boca Raton, FL 33487 800.487.SITE www.sbasite.com ir@sbasite.com 

Continue reading text version or see original annual report in PDF format above