How did SBA's financial position change in 2005?

Shareholders' equity moved from a deficit of $88.67 million at December 31, 2004 to positive equity of $81.43 million at December 31, 2005. Total debt fell from $925.80 million to $784.39 million, mainly through equity offerings and the November 2005 CMBS transaction that refinanced the prior senior credit facility.

What are the main risks to tenant revenue?

Consolidation among wireless carriers may lead to non-renewal of duplicate leases. At December 31, 2005, Cingular and the former AT&T Wireless had leases on 274 of the company's 3,304 towers, generating about $13.6 million of contractual revenue, and Sprint Nextel had multiple leases on 421 towers, generating about $19.7 million. The company also depends on a small number of customers for most of its revenue.

Does the company expect to remain unprofitable?

Yes. The filing states that the company is not profitable and expects to continue incurring significant losses, which it says may affect its ability to service its indebtedness. Its losses are principally driven by interest expense and depreciation and amortization.

What liquidity and refinancing risks does SBA disclose?

The company says it may not have sufficient liquidity or cash flow to repay its 9 3/4% senior discount notes and 8 1/2% senior notes at maturity and may need to refinance, sell assets, or in the worst case file for bankruptcy protection. The $405.0 million CMBS mortgage loan carries cash sweep provisions tied to debt service coverage ratios of 1.30 times and 1.15 times.

What are management's plans for 2006 growth?

Management intends to build 80 to 100 new towers in 2006 and to pursue tower acquisitions. The filing estimates 2006 cash capital expenditures of $25.5 million to $32.5 million for new builds, and about $48.4 million to complete acquisition of 164 towers already acquired or under signed purchase agreements as of February 20, 2006.

SBAC 10-K FY2005 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed March 10, 2006. Cited figures are marked; the original filing is the authoritative source.

SBA Communications Corporation's 10-K for fiscal 2005 shows a company still reporting net losses but moving toward operating breakeven, with site leasing as its primary business.

Total revenues rose to $259.99 million^a in 2005 from $231.48 million in 2004, and site leasing revenue reached $161.28 million (62.0% of revenues). Operating income from continuing operations was $4.20 million, compared with an operating loss of $23.88 million in 2004. Net loss narrowed to $94.71 million from $147.28 million, and Adjusted EBITDA increased to $95.32 million from $78.79 million.

The balance sheet improved meaningfully during 2005. Shareholders' equity turned positive at $81.43 million^b, compared with a deficit of $88.67 million at December 31, 2004. Total debt declined to $784.39 million from $925.80 million, funded by two equity offerings (May and October 2005, $75.4 million and $151.5 million net) and a $405.0 million CMBS financing completed in November 2005.

Cash and cash equivalents fell to $45.93 million^c, and operating cash flow was $49.77 million. The company also disclosed a $160.0 million revolving credit facility, with no amounts drawn at year-end and $39.1 million available. Its weighted average cost of debt decreased to 7.4% from 7.7%.

The filing highlights material risks for investors. Leverage remains high, with total indebtedness of $784.39 million^d against shareholders' equity of $81.43 million. Revenue is concentrated, with Cingular at 25.5% and Sprint Nextel at 20.8% of 2005 total revenues.

Consolidation among wireless carriers could lead to non-renewal of duplicate tower leases, and the company expects to continue incurring losses. Management plans to build 80 to 100 new towers in 2006 and to pursue additional acquisitions.

02—Key points

Key Highlights

Total revenues increased to $259.99 million in 2005 from $231.48 million in 2004; site leasing revenue was $161.28 million, or 62.0% of total revenues.
Operating income from continuing operations was $4.20 million in 2005, compared with an operating loss of $23.88 million in 2004.
Net loss narrowed to $94.71 million ($1.28 per share) from $147.28 million ($2.52 per share) in 2004.
Adjusted EBITDA rose 21.0% to $95.32 million from $78.79 million.
Shareholders' equity improved to $81.43 million from a deficit of $88.67 million at year-end 2004.
Total indebtedness declined to $784.39 million from $925.80 million, supported by $226.9 million of 2005 equity offerings and the $405.0 million CMBS financing.
Customer concentration remains high: Cingular accounted for 25.5% and Sprint Nextel for 20.8% of 2005 total revenues.

03—Questions

Frequently Asked Questions

How did SBA's financial position change in 2005?
Shareholders' equity moved from a deficit of $88.67 million at December 31, 2004 to positive equity of $81.43 million at December 31, 2005. Total debt fell from $925.80 million to $784.39 million, mainly through equity offerings and the November 2005 CMBS transaction that refinanced the prior senior credit facility.
What are the main risks to tenant revenue?
Consolidation among wireless carriers may lead to non-renewal of duplicate leases. At December 31, 2005, Cingular and the former AT&T Wireless had leases on 274 of the company's 3,304 towers, generating about $13.6 million of contractual revenue, and Sprint Nextel had multiple leases on 421 towers, generating about $19.7 million. The company also depends on a small number of customers for most of its revenue.
Does the company expect to remain unprofitable?
Yes. The filing states that the company is not profitable and expects to continue incurring significant losses, which it says may affect its ability to service its indebtedness. Its losses are principally driven by interest expense and depreciation and amortization.
What liquidity and refinancing risks does SBA disclose?
The company says it may not have sufficient liquidity or cash flow to repay its 9 3/4% senior discount notes and 8 1/2% senior notes at maturity and may need to refinance, sell assets, or in the worst case file for bankruptcy protection. The $405.0 million CMBS mortgage loan carries cash sweep provisions tied to debt service coverage ratios of 1.30 times and 1.15 times.
What are management's plans for 2006 growth?
Management intends to build 80 to 100 new towers in 2006 and to pursue tower acquisitions. The filing estimates 2006 cash capital expenditures of $25.5 million to $32.5 million for new builds, and about $48.4 million to complete acquisition of 164 towers already acquired or under signed purchase agreements as of February 20, 2006.

04—Continue

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