July 29, 2015

SBA Communications Corporation Reports 2nd Quarter 2015 Results; Provides 3rd Quarter and Updated Full Year 2015 Outlook

BOCA RATON, Fla., July 29, 2015 (GLOBE NEWSWIRE) -- SBA Communications Corporation (Nasdaq:SBAC) ("SBA" or the "Company") today reported results for the quarter ended June 30, 2015. Highlights of the results include:

Second quarter over year earlier period:

  • Site leasing revenue growth of 9%
  • Tower Cash Flow growth of 10%
  • Net income increased from a $9.5 million loss to $28.3 million in income
  • Adjusted EBITDA growth of 9%
  • AFFO Per Share growth of 8%

"SBA had a solid second quarter," commented Jeffrey A. Stoops, President and Chief Executive Officer. "US leasing activity increased materially from first quarter levels, and we experienced our strongest quarter yet of leasing activity internationally. We expect this activity to produce strong financial results on a constant currency basis as we move through the remainder of 2015 and into 2016. We do expect reported results compared to our initial 2015 Outlook to be impacted by the USD/Brazilian Real exchange ratio. We had another strong quarter of operational performance and expense control, posting a record adjusted EBITDA margin and highlighting the operating leverage in our business. We had a very successful quarter allocating capital, investing significant amounts in both portfolio growth and stock repurchases. We built and acquired assets that we expect to meet or exceed our investment return requirements, and we repurchased stock at prices which we believe are well below intrinsic value. We expect to continue this balanced capital allocation while we maintain our current views on capital structure and leverage. We believe the combination of expected solid organic leasing growth, strong execution and disciplined yet opportunistic capital allocation will continue to create material growth in AFFO per share."

Operating Results

Total revenues in the second quarter of 2015 were $410.7 million compared to $383.4 million in the year earlier period, an increase of 7.1%. Site leasing revenue of $370.5 million increased 8.8% over the year earlier period. Domestic cash site leasing revenue was $300.2 million in the second quarter of 2015 compared to $276.6 million in the year earlier period, an increase of 8.5%. International cash site leasing revenue was $57.0 million in the second quarter of 2015 compared to $48.6 million in the year earlier period, an increase of 17.3%. Eliminating the impact of changes in foreign currency exchange rates, total site leasing revenue and international cash site leasing revenue would have increased 13.9% and 49.0%, respectively, over the year earlier period. Site development revenues were $40.2 million in the second quarter of 2015 compared to $43.0 million in the year earlier period, a decrease of 6.3%.

Site leasing Segment Operating Profit of $288.7 million increased 8.9% over the year earlier period. Site leasing contributed 96.7% of the Company's total Segment Operating Profit in the second quarter of 2015. Domestic site leasing Segment Operating Profit of $243.8 million increased 8.4% over the year earlier period. International site leasing Segment Operating Profit of $44.9 million increased 11.7% over the year earlier period. Eliminating the impact of changes in foreign currency exchange rates, total site leasing Segment Operating Profit and international site leasing Segment Operating Profit would have increased 13.2% and 41.3%, respectively, over the year earlier period. Site development Segment Operating Profit Margin was 24.5% in the second quarter of 2015 compared to 25.4% in the year earlier period.

Tower Cash Flow for the second quarter of 2015 was $284.0 million, a 9.7% increase over the year earlier period. Tower Cash Flow Margin for the second quarter of 2015 was 79.5% compared to 79.6% in the year earlier period. Domestic Tower Cash Flow for the second quarter of 2015 was $244.2 million compared to $224.4 million in the year earlier period, an increase of 8.8%. International Tower Cash Flow for the second quarter of 2015 was $39.9 million compared to $34.7 million in the year earlier period, an increase of 15.0%. Eliminating the impact of changes in foreign currency exchange rates, total Tower Cash Flow and international Tower Cash Flow would have increased 13.4% and 44.3%, respectively, over the year earlier period.

Net income for the second quarter of 2015 was $28.3 million or $0.22 per share compared to a $9.5 million loss or $0.07 loss per share in the year earlier period. Net income for the second quarter of 2015 included a $15.7 million gain on the currency related remeasurement of a U.S. dollar denominated intercompany loan with our Brazilian subsidiary.

Adjusted EBITDA in the second quarter of 2015 was $274.3 million compared to $251.1 million in the year earlier period, an increase of 9.2%. Eliminating the impact of changes in foreign currency exchange rates, Adjusted EBITDA would have increased 12.9% over the year earlier period. Adjusted EBITDA Margin was 69.0% in the second quarter of 2015 compared to 68.2% in the year earlier period.

Net Cash Interest Expense was $78.2 million in the second quarter of 2015 compared to $71.3 million in the year earlier period. 

AFFO increased 8.2% to $184.5 million in the second quarter of 2015 compared to $170.6 million in the year earlier period. AFFO per share increased 8.4% to $1.42 in the second quarter of 2015 compared to $1.31 in the year earlier period.

Investing Activities

During the second quarter of 2015, SBA purchased 317 communication sites and other assets for $220.1 million in cash. SBA also built 117 towers during the second quarter of 2015. As of June 30, 2015, SBA owned or operated 24,808 communication sites, 15,467 of which are located in the United States and its territories, and 9,341 of which are located internationally. In addition, the Company spent $54.9 million to purchase land and easements and to extend lease terms. Total cash capital expenditures for the second quarter of 2015 were $320.1 million, consisting of $8.5 million of non-discretionary cash capital expenditures (tower maintenance and general corporate) and $311.6 million of discretionary cash capital expenditures (new tower builds, tower augmentations, acquisitions, purchasing land and easements, and capital expenditures associated with the refurbishment of a new headquarters building).

Subsequent to the second quarter of 2015, the Company acquired 19 communication sites for an aggregate consideration of $28.4 million in cash. In addition, the Company has agreed to purchase in the U.S. and internationally 254 communication sites for an aggregate amount of $71.5 million. The Company anticipates that most of these acquisitions will be consummated by the end of the fourth quarter of 2015.

Financing Activities and Liquidity

SBA ended the second quarter with $8.3 billion of total debt, $117.6 million of cash and cash equivalents, short-term restricted cash, and short-term investments, and $8.2 billion of Net Debt.  SBA's Net Debt and Net Secured Debt to Annualized Adjusted EBITDA Leverage Ratios were 7.4x and 5.6x, respectively.

During the second quarter of 2015, the Company, through its wholly owned subsidiary, SBA Senior Finance II LLC, obtained a new senior secured Term Loan with an aggregate principal amount of $500 million that was issued at 99.0% of par value and matures on June 10, 2022 (the "2015 Term Loan"). Net proceeds from the 2015 Term Loan were used to repay $490.0 million of the outstanding balance under the Company's Revolving Credit Facility.

As of the date of this press release, there was $170.0 million outstanding under the $1.0 billion Revolving Credit Agreement.

During the second quarter, SBA repurchased the remaining $150.0 million of Class A common stock authorized under its $300.0 million stock repurchase plan, completing this plan. The Company repurchased 1.305 million shares, or just over one percent of the shares outstanding, at an average price per share of $114.96.

On June 4, 2015, the Company announced the authorization of a new $1.0 billion stock repurchase plan. This new plan authorizes the Company to purchase from time to time the Company's outstanding common stock through open market repurchases in compliance with Rule 10b-18 of the Securities Exchange Act of 1934, as amended, and/or in privately negotiated transactions at management's discretion. Shares purchased will be retired.

Subsequent to June 30, 2015, the Company repurchased 0.8 million shares of its Class A common stock for $91.9 million, at an average price per share of $115.50. The Company currently has $908.1 million of repurchase authorization remaining under its existing $1.0 billion stock repurchase program.

Outlook

The Company is providing its third quarter 2015 Outlook and updating its Full Year 2015 Outlook for anticipated results. The Outlook provided is based on a number of assumptions that the Company believes are reasonable at the time of this press release. Information regarding potential risks that could cause the actual results to differ from these forward-looking statements is set forth below and in the Company's filings with the Securities and Exchange Commission.

The Company's third quarter 2015 Outlook assumes approximately $13.0 million of non-cash straight-line leasing revenue while the full year 2015 Outlook assumes approximately $51.0 million of non-cash straight-line leasing revenue. The full year 2015 Outlook for site leasing revenue, Tower Cash Flow, Adjusted EBITDA and AFFO includes an assumed negative impact of $16.0 million associated with 2015 iDEN lease terminations. The third quarter 2015 Outlook and full year 2015 Outlook assume the acquisitions of only those communication sites under contract at the time of this press release. The Company intends to spend additional capital in 2015 on acquiring revenue producing assets not yet identified or under contract, the impact of which is not reflected in the 2015 guidance. The Company's full year 2015 Outlook includes new tower builds in the U.S. and internationally of 575 to 595 towers. The Outlook does not contemplate any new financings or any repurchases of the Company's stock during 2015 other than the financings and stock repurchases completed year to date as of the date of this press release. Finally, the Company's Outlook assumes an average foreign currency exchange rate of 3.35 Brazilian Reais to 1.0 U.S. Dollar and 1.30 Canadian Dollars to 1.0 U.S. Dollar for the third quarter of 2015 and 3.40 Brazilian Reais to 1.0 U.S. Dollar and 1.30 Canadian Dollars to 1.0 U.S. Dollar for the fourth quarter of 2015. When compared to the Company's Full Year 2015 Outlook provided April 23, 2015, the variances in the actual second quarter foreign currency exchange rates versus the Company's assumptions, and the changes in the Company's foreign currency rate assumptions for the remainder of the year negatively impact the full year 2015 Outlook by approximately $9.0 million for Site Leasing Revenue and $5.0 million for Tower Cash Flow, Adjusted EBITDA and AFFO. On a constant currency basis, the 2015 Outlook below at the midpoint represents an approximately 1% increase in site leasing revenue, Adjusted EBITDA and AFFO over the respective midpoints of our Initial Full Year 2015 Outlook provided November 4, 2014.

                
                
 Quarter ending  Full
 September 30, 2015 Year 2015
                
 ($'s in millions)
Site leasing revenue (1)$ 367.5 to $ 372.5 $ 1,474.0 to $ 1,489.0
Site development revenue$ 35.5 to $ 40.5 $ 149.0 to $ 159.0
Total revenues$ 403.0 to $ 413.0 $ 1,623.0 to $ 1,648.0
Tower Cash Flow$ 282.5 to $ 287.5 $ 1,133.0 to $ 1,148.0
Adjusted EBITDA$ 271.5 to $ 276.5 $ 1,086.0 to $ 1,101.0
Net cash interest expense (2)$ 80.0 to $ 82.0 $ 315.0 to $ 320.0
Non-discretionary cash capital expenditures (3)$ 8.5 to $ 9.5 $ 30.0 to $ 35.0
AFFO$ 177.5 to $ 186.5 $ 721.0 to $ 749.0
Discretionary cash capital expenditures (4)$ 115.0 to $ 125.0 $ 580.0  to $ 600.0
                

(1) The Company's Outlook for site leasing revenue includes revenue associated with pass through reimbursable expenses.
(2) Net cash interest expense is defined as interest expense less interest income. Net cash interest expense does not include amortization of deferred financing fees or non-cash interest expense.
(3) Consists of tower maintenance and general corporate capital expenditures.
(4) Consists of new tower builds, tower augmentations, communication site acquisitions, ground lease purchases, and capital expenditures associated with the purchase and refurbishment of a new corporate headquarters building. Excludes expenditures for revenue producing assets not under contract at the date of this press release.

Conference Call Information

SBA Communications Corporation will host a conference call on Thursday, July 30, 2015 at 10:00 AM (EDT) to discuss the quarterly results. The call may be accessed as follows:

When:                                  Thursday, July 30, 2015 at 10:00 AM (EDT)    
Dial-in Number:                    (800) 230-1766 
Conference Name:                SBA second quarter results 
Replay Available:                July 30, 2015 at 12:30 PM (EDT) through August 13, 2015 at 11:59 PM (EDT)
Replay Number:                  (800) 475-6701 
Access Code:                        363703 
Internet Access:                    www.sbasite.com 
   

Information Concerning Forward-Looking Statements

This press release includes forward-looking statements, including statements regarding the Company's expectations or beliefs regarding (i) continued strength in the leasing and services segments for 2015, (ii) portfolio and organic growth for 2015, both domestically and internationally, and investment opportunities that meet the Company's return criteria, (iii) the Company's stock repurchase program and the impact of stock repurchases, (iv) the impact of such portfolio growth and stock purchases on AFFO per share, (v) the Company's ability to meet or exceed its investment return requirements with respect to its built and acquired assets, (vi) the Company's financial and operational guidance for the third quarter of 2015 and full year 2015 and the ability to improve upon its full year 2015 Outlook, (vii) timing of closing for currently pending acquisitions, (viii) spending additional capital in 2015 on acquiring revenue producing assets not yet identified or under contract, (ix) customer activity levels during 2015, (x) Canada and Brazil's foreign exchange rates and their impact on the Company's financial and operational guidance, (xi) the impact associated with iDEN lease terminations, (xii) the Company's access to capital, and (xiii) the condition of the Company's balance sheet and its strategy with respect to debt leverage levels. These forward-looking statements may be affected by the risks and uncertainties in the Company's business. This information is qualified in its entirety by cautionary statements and risk factor disclosures contained in the Company's Securities and Exchange Commission filings, including the Company's annual report on Form 10-K filed with the Commission on March 2, 2015.

The Company wishes to caution readers that certain important factors may have affected and could in the future affect the Company's actual results and could cause the Company's actual results for subsequent periods to differ materially from those expressed in any forward-looking statement made by or on behalf of the Company. With respect to the Company's expectations regarding all of these statements, including its financial and operational guidance, such risk factors include, but are not limited to: (1) the ability and willingness of wireless service providers to maintain or increase their capital expenditures; (2) the Company's ability to identify and acquire sites at prices and upon terms that will allow the portfolio growth to be accretive to AFFO per share; (3) the Company's ability to accurately identify any risks associated with its acquired sites, to effectively integrate such sites into its business and to achieve the anticipated financial results; (4) the Company's ability to secure and retain as many site leasing tenants as planned at anticipated lease rates; (5) the impact of continued consolidation among wireless service providers on the Company's leasing revenue; (6) the Company's ability to successfully manage the risks associated with international operations, including risks associated with foreign currency exchange rates; (7) the Company's ability to secure and deliver anticipated services business at contemplated margins; (8) the Company's ability to maintain expenses and cash capital expenditures at appropriate levels for its business; (9) the Company's ability to acquire land underneath towers on terms that are accretive; (10) the Company's ability to realize economies of scale from its tower portfolio; (11) the economic climate for the wireless communications industry in general and the wireless communications infrastructure providers in particular in the United States, Brazil, and internationally; (12) the continued dependence on towers and outsourced site development services by the wireless carriers; (13) the Company's ability to protect its rights to land under its towers; and (14) the Company's ability to obtain future financing at commercially reasonable rates or at all. With respect to the Company's plan for new builds, these factors also include zoning and regulatory approvals, weather, availability of labor and supplies and other factors beyond the Company's control that could affect the Company's ability to build 575 to 595 towers in 2015. With respect to its expectations regarding the ability to close pending acquisitions, these factors also include satisfactorily completing due diligence, the amount and quality of due diligence that the Company is able to complete prior to closing of any acquisition and its ability to accurately anticipate the future performance of the acquired towers, the ability to receive required regulatory approval, the ability and willingness of each party to fulfill their respective closing conditions and their contractual obligations and the availability of cash on hand or borrowing capacity under the Revolving Credit Facility to fund the consideration. With respect to repurchases under the Company's stock repurchase program, the amount of shares repurchased, if any, and the timing of such repurchases will depend on, among other things, the trading price of the Company's common stock, which may be positively or negatively impacted by the repurchase program, market and business conditions, the availability of stock, the Company's financial performance or determinations following the date of this announcement in order to use the Company's funds for other purposes.

This press release contains non-GAAP financial measures. Reconciliation of each of these non-GAAP financial measures and the other Regulation G information is presented below under "Non-GAAP Financial Measures."

This press release will be available on our website at www.sbasite.com.

About SBA Communications Corporation

SBA Communications Corporation is a first choice provider and leading owner and operator of wireless communications infrastructure in North, Central, and South America. By "Building Better Wireless," SBA generates revenue from two primary businesses - site leasing and site development services. The primary focus of the Company is the leasing of antenna space on its multi-tenant communication sites to a variety of wireless service providers under long-term lease contracts. For more information please visit: www.sbasite.com.

 
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited) (in thousands, except per share amounts)
             
  For the three months For the six months
  ended June 30, ended June 30,
  2015 2014 2015 2014
Revenues:         
Site leasing $  370,462  $  340,452  $  740,189  $  649,771 
Site development    40,242     42,968     80,609     79,198 
Total revenues    410,704     383,420     820,798     728,969 
Operating expenses:            
Cost of revenues (exclusive of depreciation, accretion, and            
 amortization shown below):            
Cost of site leasing    81,731     75,382     161,950     145,122 
Cost of site development    30,381     32,056     61,274     59,483 
Selling, general, and administrative (1)    28,262     25,441     58,145     50,118 
Acquisition related adjustments and expenses    5,780     2,225     7,119     10,786 
Asset impairment and decommission costs     4,010     3,994     10,832      7,562 
Depreciation, accretion, and amortization    162,377     161,005     334,230     305,447 
Total operating expenses    312,541     300,103     633,550     578,518 
Operating income    98,163     83,317     187,248     150,451 
Other income (expense):            
Interest income    715     180     1,008     266 
Interest expense    (78,908)    (71,498)    (156,562)    (137,525)
Non-cash interest expense    (322)    (8,293)    (601)    (18,596)
Amortization of deferred financing fees    (4,626)    (4,278)    (9,170)    (8,516)
Loss from extinguishment of debt, net    —     (8,236)    —    (10,187)
Other income (expense), net     15,507     1,384     (67,461)     19,774 
Total other expense    (67,634)    (90,741)    (232,786)     (154,784)
Income (loss) before provision for income taxes    30,529     (7,424)    (45,538 )    (4,333)
Provision for income taxes    (2,224)    (2,043)    (5,187)    (3,728)
Net income (loss)    28,305     (9,467)    (50,725)     (8,061)
Net income (loss) per common share             
Basic $  0.22  $  (0.07) $  (0.39) $  (0.06)
Diluted $  0.22   $  (0.07) $  (0.39) $  (0.06)
Weighted average number of common shares            
Basic    128,809     128,950      129,021     128,756 
Diluted    129,948     128,950      129,021     128,756 
                     

(1) Includes non-cash compensation of $8,089 and $6,090 for the three months ended June 30, 2015 and 2014, respectively, and $14,972 and $10,631 for the six months ended June 30, 2015 and 2014, respectively.


 
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par values)
       
  June 30, December 31,
  2015 2014
  (unaudited)   
ASSETS      
Current assets:      
Cash and cash equivalents $  69,846  $  39,443 
Restricted cash    47,061      52,519 
Short-term investments    699     5,549 
Accounts receivable, net of allowance of $1,052 and $889      
 at June 30, 2015 and December 31, 2014, respectively     93,374     104,268 
Costs and estimated earnings in excess of billings on uncompleted contracts    24,271     30,078 
Prepaid and other current assets    109,231     95,031 
Total current assets    344,482     326,888 
Property and equipment, net    2,787,464     2,762,417 
Intangible assets, net    4,031,524     4,189,540 
Deferred financing fees, net    93,980     95,237 
Other assets    494,413     467,043 
Total assets $  7,751,863  $  7,841,125 
       
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)       
Current Liabilities:      
Accounts payable $  29,809  $  42,851 
Accrued expenses    65,364     65,553 
Current maturities of long-term debt    40,000     32,500 
Deferred revenue    113,295     120,047 
Accrued interest    52,614     53,178 
Other current liabilities    12,972     16,921 
Total current liabilities    314,054     331,050 
Long-term liabilities:      
Long-term debt    8,216,400     7,828,299 
Other long-term liabilities    354,641     342,576 
Total long-term liabilities    8,571,041     8,170,875 
       
Shareholders' deficit:      
Preferred stock - par value $.01, 30,000 shares authorized, no shares issued      
or outstanding   —   —
Common stock - Class A, par value $.01, 400,000 shares authorized, 128,228 and       
129,134 shares issued and outstanding at June 30, 2015 and      
December 31, 2014, respectively    1,282     1,291 
Additional paid-in capital    1,939,004     2,062,775 
Accumulated deficit    (2,743,115)    (2,542,380)
Accumulated other comprehensive loss    (330,403)    (182,486)
Total shareholders' deficit    (1,133,232)    (660,800)
Total liabilities and shareholders' deficit $  7,751,863  $  7,841,125 


 
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited) (in thousands)
       
  For the three months
  ended June 30,
  2015 2014
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net income (loss) $  28,305  $  (9,467)
Adjustments to reconcile net income (loss) to net cash provided by operating      
activities:      
Depreciation, accretion, and amortization    162,377      161,005 
Non-cash interest expense    322     8,293 
Deferred income tax expense (benefit)    (365)    (437)
Non-cash asset impairment and decommission costs    2,875     2,405 
Non-cash compensation expense    8,213      6,196 
Amortization of deferred financing fees    4,626     4,278 
Loss from extinguishment of debt, net    —     8,236 
Non-cash earnout adjustments    649     2,566 
Gain on remeasurement of U.S. denominated intercompany loan    (15,703)    — 
Other non-cash items reflected in the Statements of Operations    (189)    (110)
Changes in operating assets and liabilities, net of acquisitions:      
Accounts receivable and costs and estimated earnings in excess of       
billings on uncompleted contracts, net    2,016     (9,300)
Prepaid expenses and other assets    (17,862)    (19,532)
Accounts payable and accrued expenses    (784)    (1,973)
Accrued interest    14,648     11,816 
Other liabilities    7,996     8,816 
Net cash provided by operating activities    197,124     172,792 
CASH FLOWS FROM INVESTING ACTIVITIES:      
Acquisitions    (269,803)    (39,821)
Capital expenditures    (50,292)    (39,913)
Other investing activities     5,039     (3,421)
Net cash used in investing activities    (315,056)    (83,155)
CASH FLOWS FROM FINANCING ACTIVITIES:      
Net borrowings (repayments) under Revolving Credit Facility    (195,000 )    100,000 
Repayment of Term Loans    (7,500)    (2,500)
Proceeds from Term Loans, net of fees    489,899     (20)
Payments for settlement of convertible debt    —    (121,289)
Payments for settlement of common stock warrants    (15,638)    (276,227)
Payments for earn-outs    (1,853)     (9,841)
Repurchase and retirement of common stock   (150,023)    — 
Other financing activities    5,428     4,709 
Net cash provided by (used in) financing activities    125,313      (305,168)
Effect of exchange rate changes on cash and cash equivalents    94     269 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS    7,475     (215,262)
CASH AND CASH EQUIVALENTS:      
Beginning of period    62,371     322,914 
End of period $  69,846  $  107,652 
           

Selected Capital Expenditure Detail

       
  For the three For the six 
  months ended months ended
  June 30, 2015 June 30, 2015
       
  (in thousands)
Tower new build construction $ 24,068 $ 55,105
Tower upgrades/augmentations   14,967   37,199
Purchase/refurbishment of headquarters building   2,718   10,173
Non-discretionary capital expenditures:      
Maintenance/improvement capital expenditures   7,504   13,925
General corporate expenditures   1,035   1,990
Total non-discretionary capital expenditures   8,539   15,915
Total capital expenditures $ 50,292 $ 118,392
       

Communication Site Portfolio Summary

       
  Domestic International Total
        
       
Sites owned at March 31, 2015   15,151   9,242   24,393 
Sites acquired during the second quarter   290    27   317 
Sites built during the second quarter   45   72   117 
Sites reclassified/decommissioned during the second quarter    (19)  —   (19)
Sites owned at June 30, 2015   15,467   9,341   24,808 
           

Segment Operating Profit and Segment Operating Profit Margin

The reconciliation of Site Leasing Segment Operating Profit and Site Development Segment Operating Profit and the calculation of Segment Operating Profit Margin are as follows:

                   
  Domestic Site Leasing Int'l Site Leasing Total Site Leasing
  For the three months  For the three months For the three months
  ended June 30, ended June 30, ended June 30,
  2015 2014 2015 2014 2015 2014
  (in thousands)
                   
Segment revenue $  307,361  $  285,168  $  63,101  $  55,284  $  370,462  $  340,452 
Segment cost of revenues (excluding                  
 depreciation,  accretion, and                  
  amortization)    (63,563)    (60,314)    (18,168)    (15,068)    (81,731)    (75,382)
Segment operating profit $  243,798  $  224,854  $  44,933  $  40,216  $  288,731  $  265,070 
                   
Segment operating profit margin   79.3%   78.8%   71.2%   72.7%   77.9%    77.9%


           
           
      Site Development
      For the three months
      ended June 30,
      2015 2014
      (in thousands)
           
Segment revenue     $  40,242  $  42,968 
Segment cost of revenues (excluding          
 depreciation,  accretion, and          
  amortization)        (30,381)    (32,056)
Segment operating profit     $  9,861  $  10,912 
           
Segment operating profit margin       24.5%   25.4%
               

Non-GAAP Financial Measures

The press release contains non-GAAP financial measures including (i) Cash Site Leasing Revenue; (ii) Tower Cash Flow and Tower Cash Flow Margin; (iii) Adjusted EBITDA, Annualized Adjusted EBITDA, and Adjusted EBITDA Margin; (iv) Net Debt, Net Secured Debt, Leverage Ratio, and Secured Leverage Ratio (collectively, our "Non-GAAP Debt Measures"); (v) Funds from Operations ("FFO"), Adjusted Funds from Operations ("AFFO"), and AFFO per share; and (vi) certain financial metrics after eliminating the impact of changes in foreign currency exchange rates (collectively, our "Constant Currency Measures").
           
We have included these non-GAAP financial measures because we believe that they provide investors additional tools in understanding our financial performance and condition.  Specifically, we believe that:

(1) Cash Site Leasing Revenue and Tower Cash Flow are indicators of the performance of our site leasing operations;
(2) Adjusted EBITDA, FFO, AFFO, and AFFO per share are useful indicators of the financial performance of our core businesses; and
(3) Our Non-GAAP Debt Measures provide investors a more complete understanding of our net debt and leverage position as they include the full principal amount of our debt which will be due at maturity; and
(4) Our Constant Currency measures provide management and investors the ability to evaluate the performance of the business without the impact of foreign exchange fluctuations.

In addition, Tower Cash Flow, Adjusted EBITDA, and our Non-GAAP Debt Measures are components of the calculations used by our lenders to determine compliance with certain covenants under our Senior Credit Agreement and indentures relating to our 5.625% Notes, 5.75% Notes, and 4.875% Notes. 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. 

We believe that FFO, AFFO, and AFFO per share, which are also being used by American Tower Corporation and Crown Castle International (our two public company peers in the communication site industry), provide investors useful indicators of the financial performance of our core 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 not necessarily indicative of the operating results that would have been achieved had we converted to a REIT. In addition, our FFO, AFFO, and AFFO per share may not be comparable to those reported in accordance with National Association of Real Estate Investment Trusts or by the other communication site companies as the calculation of these non-GAAP measures requires us to estimate the impact had we converted to a REIT, including estimates of the tax provision adjustment to reflect our estimate of our cash taxes had we been a REIT.

Cash Site Leasing Revenue, Tower Cash Flow, and Tower Cash Flow Margin

The tables below set forth the reconciliation of Cash Site Leasing Revenue and Tower Cash Flow to their most comparable GAAP measurement and Tower Cash Flow Margin, which is calculated by dividing Tower Cash Flow by Cash Site Leasing Revenue. Tower Cash Flow for each of the periods set forth in the Outlook section above will be calculated in the same manner.

                    
  Domestic Site Leasing  Int'l Site Leasing Total Site Leasing
  For the three months For the three months For the three months
  ended June 30, ended June 30, ended June 30,
   2015 2014 2015 2014 2015 2014
  (in thousands)
Site leasing revenue $  307,361  $  285,168  $  63,101  $  55,284  $  370,462  $  340,452 
Non-cash straight-line leasing revenue    (7,154)    (8,562)    (6,064)    (6,655)    (13,218)    (15,217)
Cash site leasing revenue    300,207     276,606     57,037     48,629     357,244     325,235 
Site leasing cost of revenues (excluding                  
 depreciation, accretion, and amortization)     (63,563)    (60,314)     (18,168)    (15,068)    (81,731 )    (75,382)
Non-cash straight-line ground lease expense    7,540     8,079     983     1,093     8,523     9,172 
Tower Cash Flow $  244,184  $  224,371  $  39,852   $  34,654  $  284,036  $  259,025 
Tower Cash Flow Margin   81.3%   81.1%   69.9%   71.3%    79.5%   79.6%
                               

Adjusted EBITDA, Annualized Adjusted EBITDA, and Adjusted EBITDA Margin

The table below sets forth the reconciliation of Adjusted EBITDA to its most comparable GAAP measurement. Adjusted EBITDA for each of the periods set forth in the Outlook section above will be calculated in the same manner: 

          
     For the three months
     ended June 30,
     2015  2014
     (in thousands)
Net income (loss)    $  28,305  $  (9,467)
Non-cash straight-line leasing revenue       (13,218)    (15,217)
Non-cash straight-line ground lease expense       8,523     9,172 
Non-cash compensation       8,213     6,196 
Loss from extinguishment of debt, net       —     8,236 
Other income        (15,507)    (1,384)
Acquisition related adjustments and expenses       5,780     2,225 
Asset impairment and decommission costs       4,010     3,994 
Interest income       (715)    (180)
Total interest expense (1)       83,856     84,069 
Depreciation, accretion, and amortization       162,377     161,005 
Provision for taxes (2)       2,627     2,407 
Adjusted EBITDA    $  274,251  $  251,056 
Annualized Adjusted EBITDA (3)    $  1,097,004  $  1,004,224 
              

(1) Total interest expense includes interest expense, non-cash interest expense, and amortization of deferred financing fees.
(2) For the three months ended June 30, 2015 and 2014, these amounts included $403 and $364, respectively, of franchise and gross receipts taxes reflected in the Statements of Operations in selling, general and administrative expenses.
(3) Annualized Adjusted EBITDA is calculated as Adjusted EBITDA for the most recent quarter multiplied by four.

The calculation of Adjusted EBITDA Margin is as follows:

          
     For the three months
     ended June 30,
     2015 2014
     (in thousands)
Total revenues    $  410,704  $  383,420 
Non-cash straight-line leasing revenue       (13,218)    (15,217)
Total revenues minus non-cash straight-line leasing revenue    $  397,486  $  368,203 
Adjusted EBITDA    $  274,251  $  251,056 
Adjusted EBITDA Margin      69.0%   68.2%
              

Funds from Operations ("FFO") and Adjusted Funds from Operations ("AFFO")

The tables below set forth the reconciliations of FFO and AFFO to their most comparable GAAP measurement. AFFO for each of the periods set forth in the Outlook section above will be calculated in the same manner:

          
     For the three months
     ended June 30,
     2015 2014
     (in thousands)
Net income (loss)    $  28,305  $  (9,467)
Adjusted tax provision (benefit) (1)       (401)    (218)
Real estate related depreciation, amortization, and accretion       160,970     159,638 
FFO     $  188,874  $  149,953 
          
Adjustments to FFO:         
Non-cash straight-line leasing revenue       (13,218)    (15,217)
Non-cash straight-line ground lease expense       8,523     9,172 
Non-cash compensation       8,213     6,196 
Non-real estate related depreciation, amortization, and accretion       1,407     1,367 
Amortization of deferred financing costs and debt discounts       4,948     12,571 
Interest deemed paid upon conversion of convertible notes           145 
Loss from extinguishment of debt, net        —    8,236 
Other income        (15,507)    (1,384)
Acquisition related adjustments and expenses        5,780     2,225 
Asset impairment and decommission costs       4,010     3,994 
Non-discretionary cash capital expenditures       (8,539)    (6,686)
AFFO    $   184,491  $  170,572 
          
Weighted average number of common shares (2)       129,948     130,034 
          
AFFO per share    $  1.42  $  1.31 
              

(1) Adjusts the income tax provision during the period, to reflect our estimate of cash income taxes (primarily foreign taxes) that would have been payable had we been a REIT.
(2) 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.

Net Debt, Net Secured Debt, Leverage Ratio, and Secured Leverage Ratio

Net Debt is calculated using the notional principal amount of outstanding debt. Under GAAP policies, the notional principal amount of the Company's outstanding debt is not necessarily reflected on the face of the Company's financial statements.

The Net Debt and Leverage calculations are as follows:

         
      June 30,
      2015
         
      (in thousands)
2010-2C Tower Securities      $  550,000 
2012-1C Tower Securities         610,000 
2013-1C Tower Securities         425,000 
2013-2C Tower Securities         575,000 
2013-1D Tower Securities         330,000 
2014-1C Tower Securities         920,000 
2014-2C Tower Securities         620,000 
Revolving Credit Facility         40,000 
2012-1 Term Loan A         165,000 
2014 Term Loan B (carrying value of $1,481,891)         1,485,000 
2015 Term Loan B (carrying value of $495,035)         500,000 
Total secured debt         6,220,000 
         
5.625% 2019 Senior Notes         500,000 
5.75% 2020 Senior Notes         800,000 
4.875% 2022 Senior Notes (carrying value of $744,474)         750,000 
Total unsecured debt         2,050,000 
Total debt      $  8,270,000 
         
Leverage Ratio        
Total debt      $  8,270,000 
Less: Cash and cash equivalents, short-term restricted cash        
and short-term investments         (117,606)
Net debt      $  8,152,394 
          
Divided by: Annualized Adjusted EBITDA      $  1,097,004 
         
Leverage Ratio        7.4x
         
Secured Leverage Ratio        
Total secured debt      $  6,220,000 
Less: Cash and cash equivalents, short-term restricted cash        
and short-term investments         (117,606)
Net Secured Debt       $  6,102,394 
          
Divided by: Annualized Adjusted EBITDA      $  1,097,004 
         
Secured Leverage Ratio       5.6x
         

Financial Metrics After Eliminating The Impact Of Changes In Foreign Currency Exchange Rates

We eliminate the impact of changes in foreign currency exchange rates for each of the following financial metrics by dividing the current period's financial results by the average monthly exchange rates of the prior year period. The table below provides the reconciliation of the reported growth rate year-over-year, of each of the following measures to the growth rate, after eliminating the impact of changes in foreign currency exchange rates to such measure: (1) total site leasing revenue and international site leasing revenue, (2) total site leasing segment operating profit and international site leasing segment operating profit, (3) total Tower Cash Flow and international Tower Cash Flow, and (4) Adjusted EBITDA.

       
      Growth
   2015  Foreign Excluding Foreign
  Growth Rate Currency Impact Currency Impact
       
Total site leasing revenue  8.8%  (5.1%)  13.9%
International cash site leasing revenue  17.3%  (31.7%)  49.0%
Total site leasing segment operating profit   8.9%  (4.3%)  13.2%
International site leasing segment operating profit  11.7%  (29.6%)  41.3%
Total site leasing tower cash flow  9.7%  (3.7%)  13.4%
International site leasing tower cash flow  15.0%  (29.3%)  44.3%
Adjusted EBITDA  9.2%  (3.6%)  12.9%
              
Contacts



Mark DeRussy, CFA

Capital Markets

561-226-9531



Lynne Hopkins

Media Relations

561-226-9431

Source: SBA Communications Corporation

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