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8-K/A - FORM 8-K AMENDMENT - SBA COMMUNICATIONS CORPd450876d8ka.htm
EX-99.2 - TOWERCO II HOLDINGS LLC AUDITED COMBINED FINANCIAL STATEMENTS FOR THE YEAR ENDED - SBA COMMUNICATIONS CORPd450876dex992.htm
EX-99.1 - TOWERCO II HOLDINGS LLC UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS - SBA COMMUNICATIONS CORPd450876dex991.htm
EX-23.1 - CONSENT OF MCGLADREY LLP, INDEPENDENT AUDITOR. - SBA COMMUNICATIONS CORPd450876dex231.htm

Exhibit 99.3

SBA COMMUNICATIONS CORPORATION AND TOWERCO II HOLDINGS LLC

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The unaudited pro forma condensed combined statements of income for the fiscal year ended December 31, 2011, and for the six months ended June 30, 2012, combine the historical consolidated statements of income of SBA Communications Corporation (“SBA”) and TowerCo II Holdings LLC (“TowerCo”) giving effect to the acquisition of TowerCo by SBA, as if it had occurred on January 1, 2011. The unaudited pro forma condensed combined balance sheet as of June 30, 2012, combines the historical consolidated balance sheets of SBA and TowerCo, giving effect to the acquisition as if it had occurred on June 30, 2012. The historical consolidated financial information has been adjusted in the unaudited pro forma condensed combined financial statements to give effect to pro forma events that are (1) directly attributable to the acquisition, (2) factually supportable, and (3) with respect to the statements of income, expected to have a continuing impact on the combined results. The unaudited pro forma condensed combined financial information should be read in conjunction with the accompanying notes to the unaudited pro forma condensed combined financial statements. In addition, the unaudited pro forma condensed combined financial information was based on and should be read in conjunction with the:

 

   

separate historical financial statements of SBA as of and for the year ended December 31, 2011, and the related notes included in SBA’s Annual Report on Form 10-K for the year ended December 31, 2011, which is incorporated by reference into this 8-K filing;

 

   

separate historical financial statements of TowerCo as of and for the year ended December 31, 2011 and the related notes included in TowerCo’s Annual Reports for the year ended December 31, 2011, which are included within this 8-K filing;

 

   

separate historical financial statements of SBA as of and for the six months ended June 30, 2012, and the related notes included in SBA’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2012, which is incorporated by reference into this 8-K filing;

 

   

separate unaudited historical financial statements of TowerCo as of and for the six months ended June 30, 2012, which is included within this 8-K filing; and

 

   

separate unaudited pro forma condensed combined financial statements of SBA and Mobilitie Investments, LLC, Mobilitie Investments II, LLC as of and for the year ended December 31, 2011, which is incorporated by reference into this 8-K filing.

In connection with, and immediately preceding our acquisition of Towerco, TowerCo’s wholly-owned subsidiaries, TowerCo III Holdings LLC and TowerCo Staffing, Inc. (collectively “TowerCo III”), were distributed to the then owners of TowerCo. TowerCo had contributed certain assets and liabilities to TowerCo III in anticipation of our acquisition and those assets and liabilities were, therefore, not part of the acquired entity. For purposes of the pro forma financial statements, we have adjusted the historical balance sheet of TowerCo as of June 30, 2012 to remove the excluded assets and liabilities respective values as of June 30, 2012. Such excluded amounts are denoted by the caption, ‘Excluded Subsidiary’ within the pro forma financial statements.

The unaudited pro forma condensed combined financial information has been presented for informational purposes only. The pro forma information is not necessarily indicative of what the combined company’s financial position or results of operations actually would have been had the acquisition been completed as of the dates indicated. In addition, the unaudited pro forma condensed combined financial information does not purport to project the future financial position or operating results of the combined company. There were no material transactions between SBA and TowerCo during the periods presented in the unaudited pro forma condensed combined financial statements that would need to be eliminated.

The unaudited pro forma condensed combined financial information has been prepared using the acquisition method of accounting under existing U.S. generally accepted accounting principles (“GAAP standards”), which are subject to change and interpretation. SBA has been treated as the acquirer in the acquisition for accounting purposes. The acquisition accounting is dependent upon certain valuations and other studies that have yet to commence or progress to a stage where there is sufficient information for a definitive measurement. Accordingly, the pro forma adjustments included herein are preliminary and have been made solely for the purpose of providing unaudited pro forma condensed combined financial information, and may be revised as additional information becomes available and as additional analyses are performed. Differences between the preliminary estimates reflected in these unaudited pro forma condensed combined financial statements and the final acquisition accounting will likely occur, and these differences could have a material impact on the accompanying unaudited pro forma condensed combined financial statements and the combined company’s future results of operations and financial position.

Also, the unaudited pro forma condensed combined financial information does not reflect any cost savings, operating synergies or revenue enhancements that the combined company may achieve as a result of the acquisition, the costs to integrate the operations of SBA and TowerCo or the costs necessary to achieve these cost savings, operating synergies and revenue enhancements.


UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

As of June 30, 2012

(In thousands)

 

     SBA     TowerCo     Excluded
Subsidiary
    TowerCo
Adjusted
    Disposed
Towers
    Acquisition
Adjustments
    Other
Adjustments
    Pro Forma
Combined
 

ASSETS

                

Current assets:

                

Cash and cash equivalents

   $ 86,739      $ 6,318      $ (11   $ 6,307      $ —        $        $ (37,807 )(c)    $ 55,239   

Restricted cash

     16,910        —          —          —          —              16,910   

Short term investments

     5,016        —          —          —          —              5,016   

Accounts receivable, net of allowance

     26,249        1,507        —          1,507        —              27,756   

Costs and estimated earnings in excess of billings on uncompleted contracts

     18,100        —          —          —          —              18,100   

Prepaid and other current assets

     25,150        7,871        (527     7,344        —              32,494   

Assets held for sale

     125,000        —          —          —          (125,000 )(d)      —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

   $ 303,164      $ 15,696      $ (538   $ 15,158      $ (125,000   $ —        $ (37,807   $ 155,515   

Property and equipment, net

     2,066,765        500,596        (1,459     499,137        —          69,267 (b1)        2,635,169   

Intangible assets, net

     2,121,389        145,676        —          145,676        —          772,236 (c7)        3,039,301   

Deferred financing fees, net

     40,568        6,724        —          6,724        —          (6,724 )(b1)      19,650 (c2)      60,218   

Other assets

     261,774        46,039        —          46,039        —          (34,757 )(c12)      —          273,056   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 4,793,660      $ 714,731      $ (1,997   $ 712,734      $ (125,000   $ 800,022      $ (18,157   $ 6,163,259   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)

                

Current liabilities:

                

Current maturities of long-term debt and short-term debt

   $ 918,006      $ 4,000      $ —        $ 4,000      $ —        $ (4,000 )(c8)    $        $ 918,006   

Accounts payable

     16,833        1,129        —          1,129        —              17,962   

Accrued expenses

     31,471        —          —          —          —              31,471   

Deferred revenue

     54,515        —          —          —          —              54,515   

Accrued interest

     24,708        —          —          —          —              24,708   

Other current liabilities

     5,299        19,469        (2,223     17,246        —          —          —          22,545   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

     1,050,832        24,598        (2,223     22,375        —          (4,000     —          1,069,207   

Long term liabilities:

                

Long-term debt

     3,091,382        391,000        —          391,000        —          809,000 (c8)        4,291,382   

Other long-term liabilities

     159,189        83,483        —          83,483        —          (77,740 )(c5)(c12)      —          164,932   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total long term liabilities

     3,250,571        474,483        —          474,483        —          731,260        —          4,456,314   

Commitments and contingencies

                

Redeemable noncontrolling interests

     12,062        —          —          —          —              12,062   

Shareholders’ equity (deficit):

                

Common stock – Class A, par value $0.01, 400,000 shares authorized, 121,495 and 109,675 shares issued and outstanding at June 30, 2012 and December 31, 2011, respectively

     1,215        —          —          —          —          46 (c9)        1,261   

Additional paid-in capital

     2,835,974        252,001        226        252,227        (125,000 )(d)      36,365 (c10)        2,999,566   

Accumulated deficit

     (2,357,242     (36,351     —          (36,351     —          36,351 (c11)      (18,157 )(c11)      (2,375,399

Accumulated other comprehensive income, net

     248        —          —          —          —          —          —          248   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total shareholders’ equity (deficit)

     480,195        215,650        226        215,876        (125,000     72,762        (18,157     625,676   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 4,793,660      $ 714,731      $ (1,997   $ 712,734      $ (125,000   $ 800,022      $ (18,157   $ 6,163,259   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

For the six months ended June 30, 2012

(In thousands, except per share data)

 

     SBA     Mobilitie
Q1’12
    TowerCo     Disposed
Towers
    Pro Forma
Adjustments
    Pro Forma
Combined
 

Revenues:

            

Site leasing

   $ 376,504      $ 27,998      $ 77,933      $ (2,759 )(d1)    $ —        $ 479,675   

Site development

     45,133        —          —          —            45,133   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     421,637        27,998        77,933        (2,759     —          524,808   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

            

Cost of revenues (exclusive of depreciation, accretion and amortization shown below):

            

Cost of site leasing

     80,166        10,042        33,713        (613 )(d1)        123,307   

Cost of site development

     38,232        —          —          —            38,232   

Selling, general and administrative

     34,959        5,946        7,945        —            48,850   

Asset impairment

     995        —          —          —            995   

Acquisition related expenses

     16,160        —          —          —          18,157 (c)      34,317   

Depreciation, accretion and amortization

     176,098        9,893        28,236        (1,222 )(d1)      24,143 (c4)(c5)      237,148   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     346,610        25,881        69,894        (1,835     42,300        482,849   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss) from continuing operations

     75,027        2,117        8,039        (924     (42,300     41,959   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense):

            

Interest income

     84        63        —          —            147   

Interest expense

     (86,150     (4,990     (9,920     —          (14,192 )(c1)      (115,252

Non-cash interest expense

     (34,407     —          —          —            (34,407

Amortization of deferred financing fees

     (6,094     —          (725     —          (1,652 )(c2)(c3)      (8,471

Loss from extinguishment of debt, net

     (27,149     —          —          —            (27,149

Other income (expense), net

     4,984        —          (2,239     —          2,157        4,902   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense

     (148,732     (4,927     (12,884     —          (13,687     (180,230
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss before provision for income taxes

     (73,705     (2,810     (4,845     (924     (55,986     (138,270

Provision for income taxes

     (3,780     —          (87     —   (d1)      14 (c6)      (3,853
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss from continuing operations

   $ (77,485   $ (2,810   $ (4,932   $ (924   $ (55,972   $ (142,123
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss from continuing operations per common share attributable to SBA Communications Corporation:

            

Basic and diluted

   $ (0.67           $ (1.17

Basic and diluted weighted average number of common shares

     116,374              4,589 (a1)      120,963   


UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

For the year ended December 31, 2011

(In thousands, except per share data)

 

     SBA +
Mobilitie Pro
Forma
    TowerCo     Disposed
Towers
    Pro Forma
Adjustments
    Pro Forma
Combined
 

Revenues:

          

Site leasing

   $ 722,302      $ 140,319      $ (9,774 )(d1)    $ —        $ 852,847   

Site development

     81,876        —          —            81,876   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     804,178        140,319        (9,774     —          934,723   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

          

Cost of revenues (exclusive of depreciation, accretion and amortization shown below):

          

Cost of site leasing

     170,806        70,639        (2,107 )(d1)        239,338   

Cost of site development

     71,005        —          —            71,005   

Selling, general and administrative

     82,894        14,886        —            97,780   

Acquisition related expenses

     17,434        —          —          18,157 (c)      35,591   

Asset impairment

     5,472        —          —            5,472   

Depreciation, accretion and amortization

     384,430        54,567        (2,797 )(d1)      50,292 (c4)(c5)      486,492   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     732,041        140,092        (4,904     68,449        935,678   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss) from continuing operations

     72,137        227        (4,870     (68,449     (955
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense):

             —     

Interest income

     151        1        —            152   

Interest expense

     (184,267     (20,798     —          (27,309 )(c1)      (232,374

Non-cash interest expense

     (63,629     —          —            (63,629

Amortization of deferred financing fees

     (14,688     (1,400     —          (3,304 )(c2)(c3)      (19,392

Loss from extinguishment of debt, net

     (1,696     (6,620     —            (8,316

Other (expense) income

     66        (2,016     —            (1,950
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense

     (264,063     (30,833     —          (30,613     (325,509
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss before provision for income taxes

     (191,926     (30,606     (4,870     (99,062     (326,464

Provision for income taxes

     (2,233     (59     —          (69 )(c6)      (2,361
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss from continuing operations

   $ (194,159   $ (30,665   $ (4,870   $ (99,131   $ (328,825
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss from continuing operations per common share attributable to SBA Communications Corporation:

          

Basic and diluted

   $ (1.67     —          —          $ (2.72

Basic and diluted weighted average number of common shares

     116,184        —          —          4,589 (a1)      120,773   


NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

1. Description of Transaction

On October 1, 2012, SBA, through its wholly-owned subsidiary SBA 2012 Acquisition, LLC, completed its previously announced acquisition of TowerCo II Holdings LLC, which owns 3,256 tower sites in 47 states across the U.S. and Puerto Rico (the “merger”). As consideration for the acquisition, SBA paid $1.2 billion in cash and issued 4.59 million shares of its Class A common stock.

 

2. Basis of Presentation

The unaudited pro forma condensed combined financial information was prepared under existing U.S. GAAP standards, which are subject to change and interpretation. The accompanying unaudited pro forma condensed combined financial statements are provided for illustrative purposes only and do not purport to represent what the actual consolidated results of operations or the consolidated financial position of SBA would have been had the TowerCo merger occurred on the date assumed, nor are they necessarily indicative of future consolidated results of operations or consolidated financial position. The unaudited pro forma condensed combined financial statements do not include the realization of cost savings from operating efficiencies or restructuring costs anticipated to result from the TowerCo merger. The unaudited pro forma condensed combined financial statements should be read in conjunction with the separate historical consolidated financial statements and accompanying notes of SBA that are incorporated by reference in this 8-K filing and of TowerCo that are included within this 8-K filing. Certain reclassifications have been made to the historical presentation of TowerCo to conform to the presentation used in the unaudited pro forma condensed consolidated balance sheet and relate primarily to deferred contract costs, deferred contract revenues, advanced billings to client, deferred income taxes, and capital leases obligations. Certain reclassifications have been made to the historical presentation of TowerCo to conform to the presentation used in the unaudited pro forma condensed consolidated income statement primarily related to revenues; selling, general and administrative expenses; reimbursable expenses; goodwill; and gain on sale of businesses.

The historical income statements for TowerCo are presented for the year ended December 31, 2011, and for the six months ended June 30, 2012.

As of the date of this 8-K filing, SBA has performed the detailed valuation studies necessary to arrive at the required preliminary estimates of the fair market value of the TowerCo’s assets to be acquired and the TowerCo liabilities to be assumed and the related allocations of purchase price. Also, it has identified the adjustments necessary to conform TowerCo’s accounting policies to SBA’s accounting policies. As indicated in Note 5 to the unaudited pro forma condensed combined financial statements, SBA has made certain adjustments to the June 30, 2012 historical book values of the assets and liabilities of TowerCo to reflect certain preliminary estimates of the fair values necessary to prepare the unaudited pro forma condensed combined financial statements. There was no excess purchase price over the historical net assets of TowerCo, as adjusted to reflect estimated fair values, therefore no goodwill has been recorded.

SBA is still in the process of finalizing its review for other intangibles such as favorable/unfavorable contracts and favorable/unfavorable real estate leases. The company anticipates that there will be unfavorable real estate leases and is in the process of working with a specialist to identify these leases and the related impact on the pro forma condensed combined financial statements. There can be no assurance that such finalization will not result in material changes.

The merger will be accounted for as an acquisition in accordance with the guidance related to business combinations. This guidance requires that all transaction and restructuring costs related to business combinations be expensed as incurred, and it requires that changes in deferred tax asset valuation allowances and liabilities for tax uncertainties subsequent to the acquisition date that do not meet certain re-measurement criteria be recorded in the income statement, among other changes. Under the acquisition method, the total estimated acquisition price (consideration transferred) as described in Note 4 to the unaudited pro forma condensed combined financial information was measured at the closing date of the merger using the market price at that time. The accounting guidance also requires that acquisition related transaction costs (i.e. advisory, legal, valuation, other professional fees) are not included as a component of the consideration transferred but are accounted for as expenses in the periods in which the costs are incurred. Total acquisition related transaction costs expected to be incurred by SBA are estimated to be approximately $10 million and are reflected in these unaudited pro forma condensed combined financial statements as a reduction of cash and an increase to accumulated deficit.

 

3. Accounting Policies

Upon consummation of the merger, SBA will continue the review of TowerCo’s accounting policies. As a result of that review, SBA may identify differences between the accounting policies of the two companies that, when conformed, could have a material impact on the combined financial statements. At this time, SBA is not aware of any differences that would have a material impact on the combined financial statements. The unaudited pro forma condensed combined financial statements do not assume any differences in accounting policies.


NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

4. Estimate of Consideration Expected to be Transferred

The following is a preliminary estimate of the consideration to be transferred to effect the transaction:

 

         Common Shares
(stated value $.01
share)
     Capital in Excess of
Par Value
    Total  
 

Issuance of SBA Class A common stock to TowerCo

        (c10  
 

shareholders (4.59 million shares at $62.90)

   $ 46       $ 288,592      $ 288,638   

(a1)

 

Issuance of debt to finance transaction:

       
 

High Yield Debt Offering

          500,000   
 

Term Loan B

          300,000   
 

CMBS issuance

          400,000   
         

 

 

 
 

Total consideration

        $ 1,488,638   

The purchase price is approximately $1.49 billion, consisting of $1.2 billion of cash and the issuance of 4.59 million shares of SBA common stock. SBA is not offering any type of options to TowerCo members. As a result of the transaction, $395 million in pre-existing TowerCo long-term debt was paid off with the proceeds received by SBA. Therefore, no debt was assumed by SBA as a result of the transaction.

 

5. Estimate of Assets to be Acquired and Liabilities to be Assumed

A preliminary estimate of the assets to be acquired and the liabilities to be assumed by SBA in the acquisition, reconciled to the estimate of consideration expected to be transferred is provided below. The final valuation of net assets acquired is expected to be completed as soon as possible after the acquisition date.

 

(b1)

 

Book value of net assets acquired at June 30, 2012

   $ 215,650   
 

Adjusted for:

  
 

Exclusion of Staffing balances

     226   
    

 

 

 
 

Adjusted book value of net assets acquired

     215,876   
 

Adjustment to:

  
 

Fair value of property and equipment

     69,267   
 

Fair value of intangible assets related to customer contracts and network/location (b2)

     772,236   
 

ARO liability

     29,737   
 

Deferred rent asset

     (34,757
 

Deferred rent liability

     48,003   
 

Deferred financing cost - long term

     (6,724
    

 

 

 
 

Estimate of consideration expected to be transferred

     1,093,638   
 

Debt paid at closing

     395,000   
    

 

 

 
 

Total consideration

   $ 1,488,638   
    

 

 

 

At the date of acquisition, both SBA and TowerCo agreed to exclude certain assets and liabilities from the group of purchased assets and assumed liabilities as such assets and liabilities were related to TowerCo Staffing. SBA selected $2.0 million in staffing-related assets and $2.2 million in staffing-related liabilities to be excluded from the purchased assets and liabilities for this merger.


NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

(b2) The components of the estimated fair value of acquired identifiable intangible assets are as follows:

 

(in millions)

   Estimated Fair
Value
     Estimated Useful
Lives (Years)
 

Customer Relationship

   $ 769,912         15   

Network Locations

     148,000         15   
  

 

 

    

Total

   $ 917,912      
  

 

 

    

As of the effective time of the merger, identifiable intangible assets are required to be measured at fair value and these acquired assets could include assets that are not intended to be used or sold or that are intended to be used in a manner other than their highest and best use. For purposes of these unaudited pro forma condensed combined financial statements, it is assumed that all assets will be used and that all assets will be used in a manner that represents the highest and best use of those assets, but it is not assumed that any market participant synergies will be achieved. The consideration of synergies has been excluded because they are not considered to be factually supportable, which is a required condition for these pro forma adjustments.

For purposes of the preliminary allocation, SBA has estimated a fair value for TowerCo’s intangible asset related to customer relationships and network locations based on the net present value of the projected income stream of those intangible assets. The fair value adjustment is being amortized over an estimated useful life of 15 years.


NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

6. Pro Forma Adjustments

 

(c) To record the cash used in the merger excluding the cash portion of acquisition purchase price and to record estimated payments which are estimated to be $37.8 million and are assumed to be made on or before the merger including $7.6 million of fees associated with the high-yield debt issuance, $3.3 million of fees associated with the Term Loan B issuance, $8.7 million of prorated fees associated with the CMBS securitization and $18.2 million for advisory, legal, regulatory and valuation costs associated with the transaction ($2.2m in legal expenses were originally recorded by TowerCo). These costs are expected to be incurred by SBA and are reflected in the unaudited pro forma condensed combined financial statements as a reduction to cash and retained earnings and SBA views these expenses as non-recurring acquisition-related expenses.

 

(c1) On September 28, 2012, SBA entered into a $500 million high-yield debt issuance and a $300 million term loan with certain lenders in connection with the financing of a portion of the purchase consideration expected to be transferred in the merger. The high-yield debt issuance and term loan both have terms of 7 years from the effective time of the merger and provides SBA with financing in a total principal amount up to $800 million. In addition, to fund the remaining cash consideration, SBA utilized $400 million from its previous CMBS issuance.

SBA estimates additional interest expense of $27.3 million and $14.2 million for the year ended December 31, 2011 and six months ended June 30, 2012, respectively, associated with the incremental debt SBA has issued in connection with the merger after retiring TowerCo existing debt.

The impact to deferred financing costs, interest expense and equity are summarized below.

 

(c2) Net deferred financing fees associated with the $500 million high-yield debt issuance, the $300 million term loan and the $400 million drawn from the CMBS securitization will increase by $19.7 million at June 30, 2012. However, to appropriately reflect the amortization of the newly incurred deferred financing fees, $3.3 million and $1.7 million will be recorded to amortization expense for the year ended December 31, 2011 and six months ended June 30, 2012, respectively.

 

         12 months ending      6 months ending  
         Dec 31, 2011      Jun 30, 2012  

(c3)

 

Amortization of high-yield debt issuance financing costs into interest expense

   $ 1,098       $ 549   
 

Amortization of term loan financing costs into interest expense

     471         236   
 

Amortization of prorated CMBS securitization financing costs into interest expense

     1,735         867   
    

 

 

    

 

 

 
 

Equity effect of the loss on extinguishment of debt, financing fees, and transaction costs

   $ 3,304       $ 1,652   
    

 

 

    

 

 

 

Total advisory, legal, regulatory and valuation costs expected to be incurred by SBA are estimated to be approximately $18.2 million, and are reflected in these unaudited pro forma condensed combined financial statements as a reduction to cash and retained earnings and SBA views these expenses as non recurring.

 

(c4) The unaudited pro forma condensed combined statements of operations have been adjusted to reflect the adjustments to TowerCo’s acquired assets.

 

     12 months ending     6 months ending  
     Dec 31, 2011     Jun 30, 2012  

The elimination of TowerCo’s historical asset depreciation and amortization

   $ (52,839   $ (26,837

The increase in depreciation and amortization expense resulting from the fair value adjustments.

     104,732        52,316   
  

 

 

   

 

 

 
   $ 51,893      $ 25,479   
  

 

 

   

 

 

 

 

(c5) The unaudited pro forma condensed combined statements of operations have been adjusted to reflect the adjustments to TowerCo’s asset retirement obligation (ARO). The ARO asset and liability amounts, along with the corresponding income statement impact, have been adjusted for via an ARO conformity adjustment, conforming the former TowerCo ARO balances to SBA’s ARO accounting policy.

 

     12 months ending     6 months ending  
     Dec 31, 2011     Jun 30, 2012  

The elimination of TowerCo’s ARO liability accretion expense

   $ (1,727   $ (1,399

The increase in accretion expense resulting from the ARO conformity adjustment.

     126        63   
  

 

 

   

 

 

 
   $ (1,601   $ (1,336
  

 

 

   

 

 

 

 

     As of  
     Jun 30, 2012  

The elimination of TowerCo’s ARO liability balance

   $ 31,703   

ARO liability balance resulting from ARO conformity adjustment

     (1,965
  

 

 

 
   $ 29,737   
  

 

 

 

In accordance with Section 2.14 of the merger agreement, SBA’s merger with TowerCo has been designated as an asset purchase. Therefore, the appropriate tax treatment for this transaction has no impact on deferred taxes and will not result in a deferred tax asset or liability.


NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

(c6) To record estimated tax impact of the merger on the income statement related to the pro forma adjustments.

 

     12 months ending     6 months ending  

US$ in thousands

   Dec 31, 2011     Jun 30, 2012  

Eliminate TowerCo’s historical provision for income taxes

   $ (59   $ (87

Estimated provision for income taxes post merger

     (128     (73
  

 

 

   

 

 

 

Total adjusted amount

   $ (69   $ 14   
  

 

 

   

 

 

 

 

(c7) To adjust intangible assets to an estimate of fair value, as follows:

 

US$ in thousands

   As of
Jun 30, 2012
 

Eliminate TowerCo’s historical intangible assets

   $ (145,676

Estimated fair value of intangible assets acquired

     917,912   
  

 

 

 

Total

   $ 772,236   
  

 

 

 

 

(c8) Upon merger, the entire pre-existing TowerCo debt balance was paid off using transaction proceeds, therefore no TowerCo debt was actually assumed by SBA as a result of the transaction. To adjust debt as follows:

 

US$ in thousands

   As of
Jun 30, 2012
 

Current Portion of Long Term Debt:

  

Eliminate TowerCo’s historical current debt

   $ (4,000

Long Term Debt:

  

Eliminate TowerCo’s historical long-term debt

   $ (391,000

New debt issued/utilized:

  

High Yield Debt Offering

     500,000   

Term Loan B

     300,000   

CMBS issuance

     400,000   
  

 

 

 

Total

   $ 809,000   
  

 

 

 

 

(c9) To record the stock portion of the transaction consideration, at par, and to eliminate TowerCo common stock, at par, as follows:

 

US$ in thousands

   As of
Jun 30, 2012
 

Eliminate TowerCo’s common stock

   $ —     

Issuance of SBA common stock

     46   
  

 

 

 

Total

   $ 46   
  

 

 

 

 

(c10) To record the stock portion of the transaction consideration, at fair value less par, and to eliminate TowerCo additional paid in capital, as follows:

 

US$ in thousands

   As of
Jun 30, 2012
 

Eliminate TowerCo’s equity

   $ (252,001

Excluded balances

     (226
  

 

 

 

Adjusted TowerCo common stock to be eliminated

   $ (252,227

Issuance of SBA common stock

     288,592   
  

 

 

 

Total

   $ 36,365   
  

 

 

 

 

(c11) To eliminate TowerCo’s retained earnings, and to record estimated non-recurring merger and prepayment-related costs of SBA, as follows:

 

US$ in thousands

   As of
Jun 30, 2012
 

Eliminate TowerCo’s accumulated deficit

   $ 36,351   

Estimated merger related expenses, costs related to new financing and prepayment penalty on existing debt assumed to be non recurring

     (18,157
  

 

 

 

Total

   $ 18,194   
  

 

 

 

 

(c12) To eliminate all deferred rent assets and liabilities previously recorded by TowerCo in accordance with ASC 840. Deferred rent accounts in accordance with ASC 840 will reset to zero as a result of SBA’s merger with TowerCo and recording of new deferred rent will be recorded prospectively by SBA in its consolidated financial statements.

 

US$ in thousands

   As of
Jun 30, 2012
 

Deferred rent asset

   $ (34,757

Deferred rent liability

     48,003   


NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

(d) To eliminate disposed tower assets and correlating operating activity and results. On September 6, 2012 and October 23, 2012, the Company sold $125 million in DAS Towers which had been purchased as part of the Mobilitie acquisition on April 2, 2012. Given the materiality of this disposal transaction, the asset value and operating activity are presented as a pro forma adjustment within the pro forma condensed combined financial statements. Operating results for the disposed towers are shown in the table in (d1) below.

 

(d1) To eliminate all operating activity related to disposed tower assets.

 

     12 months ending     6 months ending  

US$ in thousands

   Dec 31, 2011     Jun 30, 2012  

Site leasing revenue

   $ 9,774      $ 2,759   

Cost of site leasing

     (2,107     (613

Depreciation, accretion and amortization

     (2,797     (1,222
  

 

 

   

 

 

 

Operating income

   $ 4,870      $ 924   
  

 

 

   

 

 

 


NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

7. Forward-looking Statements

These Unaudited Pro Forma Condensed Combined Financial Statements may be deemed to be forward-looking statements within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically identified by the words “believe,” “expect,” “anticipate,” “intend,” “estimate” and similar expressions. Such statements may include, but are not limited to, statements about the benefits of the pending merger between TowerCo by SBA, including future financial and operating results, the combined company’s plans, objectives, expectations and intentions and other statements that are not historical facts. These forward-looking statements are based largely on management’s expectations and are subject to a number of risks and uncertainties. Actual results could differ materially from these forward-looking statements. Neither SBA nor TowerCo undertake any obligation to update publicly or revise any forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: the possibility that the expected synergies from SBA’s pending merger with TowerCo will not be realized, or will not be realized within the expected time period, due to, among other things, the impact of industry regulation and pending legislation that could affect the respective industry; the risk that the businesses will not be integrated successfully; disruption from the merger making it more difficult to maintain business and operational relationships; the possibility that the merger does not close, including, but not limited to, due to the failure to satisfy the closing conditions; SBA’s and TowerCo’s ability to accurately predict future market conditions; and the exposure to litigation and/or regulatory actions. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in SBA’s 2011 Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 27, 2011, included in the “Risk Factors” section of each of this filing, and SBA’s other filings with the SEC available at the SEC’s Internet site (http://www.sec.gov).