| SBA COMMUNICATIONS CORP ITEM 1A RISK FACTORS Risks Related to Our Business We may not be able to service our substantial indebtedness |
| As indicated below, we have and will continue to have a significant amount of indebtedness relative to our equity |
| As of December 31, 2005 2004 (in thousands) Total indebtedness* $ 784cmam392 $ 925cmam797 Shareholders’ equity (deficit) $ 81cmam431 $ (88cmam671 ) * Excludes deferred gain on interest rate swap of dlra1cmam909 at December 31, 2004 |
| Our ability to service our debt obligations will depend on our future operating performance |
| In order to manage our substantial amount of indebtedness, we may from time to time sell assets, issue equity, or repurchase, restructure or refinance some or all of our debt (all of which we have done at various times in the last two years) |
| We may not be able to effectuate any of these alternative strategies on satisfactory terms in the future, if at all |
| The implementation of any of these alternative strategies may dilute our current shareholders or subject us to additional costs or restrictions on our ability to manage our business and as a result could have a material adverse effect on our financial condition and growth strategy |
| We may not have sufficient liquidity or cash flow from operations to repay our 9^ 3/4prca senior discount notes or our 8^ 1/2prca senior notes upon their respective maturities |
| Therefore, prior to the maturity of our outstanding 8 ______________________________________________________________________ [10]Table of Contents notes we may be required to refinance and/or restructure some or all of this debt |
| We cannot assure you that we will be able to refinance or restructure this debt on acceptable terms or at all, and, in particular, we cannot assure you that interest rates will be favorable to us at the time of any such refinancing or restructuring |
| If we were unable to refinance, restructure or otherwise repay the principal amount of this debt upon its maturity, we may need to sell assets, cease operations and/or file for protection under the bankruptcy laws |
| We may not have sufficient liquidity or cash flow from operations to repay the components of the mortgage loan that comprises part of the CMBS Transaction |
| Therefore, prior to the final repayment date for the components of the mortgage loan we may be required to refinance the mortgage loan or sell a portion or all of our interests in the 1cmam714 tower sites that |
| among other things, secure along with their operating cash flows the mortgage loan |
| Although, the mortgage loan is a limited recourse obligation of SBA Properties, Inc |
| and no holder of the mortgage loan will have recourse to SBA Communications, our operations would be adversely affected if SBA Properties is unable to repay the components of the mortgage loan |
| We cannot assure you that our assets would be sufficient to repay this indebtedness in full |
| As of December 31, 2005, we had no borrowings under our dlra160dtta0 million senior credit facility of which dlra39dtta1 million was available (giving effect to leverage limitations contained in the indenture governing the 9^ 3/4prca senior discount notes) subject to maintenance covenants, borrowing base limitations and other conditions |
| Furthermore, we and our subsidiaries may be able to incur significant additional indebtedness in the future, subject to the restrictions contained in our debt instruments, some of which may be secured debt |
| We may not secure as many site leasing tenants as planned or our lease rates for new tenant leases may decline |
| If tenant demand for tower space or our lease rates for new tenant leases decrease, we may not be able to successfully grow our site leasing business |
| This may have a material adverse effect on our strategy, revenue growth and our ability to satisfy our financial and other contractual obligations |
| Our plan for the growth of our site leasing business largely depends on our management’s expectations and assumptions concerning future tenant demand and potential lease rates for independently owned towers |
| If our wireless service provider customers combine their operations to a significant degree, our growth, our revenue and our ability to service our indebtedness could be adversely affected |
| Demand for our services may decline if there is significant consolidation among our wireless service provider customers as they may then reduce capital expenditures in the aggregate because many of their existing networks and expansion plans overlap |
| As a result of regulatory changes in January 2003 which removed prior restrictions on wireless service providers from owning more than 45 MHz of spectrum in any given geographical area, there have been significant consolidations of the large wireless service providers |
| Specifically, Cingular acquired AT&T Wireless in October 2004 and Sprint PCS and Nextel merged to form Sprint Nextel Corporation in August 2005 |
| To the extent that our customers have consolidated or that other customers may consolidate in the future, they may not renew any duplicative leases that they have on our towers and/or may not lease as much space on our towers in the future |
| This would adversely affect our growth, our revenue and our ability to service our indebtedness |
| 9 ______________________________________________________________________ [11]Table of Contents As of December 31, 2005, Cingular and the former AT&T Wireless both had leases on 274 of our 3cmam304 towers |
| The contractual revenue generated by these leases on these towers at December 31, 2005 was approximately dlra13dtta6 million |
| Consequently, if Cingular were not to renew duplicate leases, we could lose 50prca or more of such revenue |
| As of December 31, 2005, the average remaining contractual life of such duplicate leases was approximately 2dtta9 years |
| Our risk of revenue loss from the integration of Cingular and AT&T is not limited to leases on the same tower |
| We expect Cingular to terminate or not renew some leases on our towers where they have other antenna sites in close proximity |
| Such terminations or non-renewals could have a material adverse impact on our growth rate |
| As of December 31, 2005, Sprint Nextel and affiliated entities had multiple leases on 421 of our 3cmam304 towers |
| The contractual revenue generated by these leases on these towers at December 31, 2005 was approximately dlra19dtta7 million |
| Consequently, if Sprint Nextel were not to renew duplicate leases, we could lose 50prca or more of such revenue |
| As of December 31, 2005, the average remaining contractual life of such duplicate leases was approximately 3dtta5 years |
| Our risk of revenue loss from the integration of Sprint Nextel merger is not limited to leases on the same tower |
| We expect Sprint Nextel to terminate or not renew some leases on our towers where they have other antenna sites in close proximity |
| Such terminations or non-renewals could have a material adverse impact on our growth rate |
| Similar consequences may occur if wireless service providers engage in extensive sharing or roaming or resale arrangements as an alternative to leasing our antenna space |
| Wireless voice service providers frequently enter into roaming agreements with competitors allowing them to use another’s wireless communications facilities to accommodate customers who are out of range of their home provider’s services |
| Wireless voice service providers may view these roaming agreements as a superior alternative to leasing antenna space on communications sites owned or controlled by us or others |
| The proliferation of these roaming agreements could have a material adverse effect on our revenue |
| We depend on a relatively small number of customers for most of our revenue |
| We derive a significant portion of our revenue from a small number of customers, particularly in our site development services business |
| The loss of any significant customer could have a material adverse effect on our revenue |
| The following is a list of significant customers and the percentage of our total revenues for the specified time periods derived from these customers: For the year ended December 31, 2005 2004 2003 Cingular 25dtta5 % 22dtta7 % 20dtta3 % Sprint Nextel 20dtta8 % 21dtta4 % 13dtta5 % Bechtel Corporation 5dtta0 % 6dtta1 % 10dtta4 % 10 ______________________________________________________________________ [12]Table of Contents We also have client concentrations with respect to revenues in each of our financial reporting segments: Percentage of Site Leasing Revenue for the year ended December 31, 2005 2004 2003 Cingular 28dtta0 % 27dtta5 % 28dtta0 % Sprint Nextel 15dtta0 % 14dtta3 % 13dtta9 % Verizon 10dtta1 % 9dtta5 % 10dtta0 % Percentage of Site Development Consulting Revenue for the year ended December 31, 2005 2004 2003 Verizon Wireless 32dtta4 % 26dtta1 % 13dtta6 % Cingular 28dtta3 % 26dtta6 % 4dtta3 % Bechtel Corporation* 23dtta3 % 24dtta7 % 40dtta3 % Percentage of Site Development Construction Revenue for the year ended December 31, 2005 2004 2003 Sprint Nextel 34dtta9 % 39dtta2 % 15dtta3 % Cingular 20dtta3 % 12dtta5 % 5dtta5 % Bechtel Corporation* 11dtta6 % 14dtta5 % 28dtta9 % * Substantially all of the work performed for Bechtel Corporation was for its client Cingular |
| Revenues from these clients are derived from numerous different site leasing contracts and site development contracts |
| Each site leasing contract relates to the lease of space at an individual tower site and is generally for an initial term of five years renewable for five five-year periods at the option of the tenant |
| 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 |
| Our substantial indebtedness may negatively impact our ability to implement our business plan |
| Our substantial indebtedness may negatively impact our ability to implement our business plan |
| For example, it could: • limit our ability to fund future working capital, capital expenditures and development costs; • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; • increase our vulnerability to general economic and industry conditions; • subject us to interest rate risk in connection with any potential future refinancing of our debt; • place us at a competitive disadvantage to our competitors that are less leveraged; 11 ______________________________________________________________________ [13]Table of Contents • require us to sell debt or equity securities or sell some of our core assets, possibly on unfavorable terms in order to meet payment obligations; and • limit our ability to borrow additional funds |
| Risks associated with our plans to increase our tower portfolio could negatively impact our results of operations or our financial condition |
| We currently intend to increase our tower portfolio through new builds and acquisitions |
| We intend to review all available acquisition opportunities (including some that are currently available) and some of these acquisitions could have the effect of materially increasing our tower portfolio |
| While we intend to fund a portion of the cash required to implement this plan from our cash flow from operating activities, we may finance some or all of the costs associated with these new builds and acquisitions |
| Furthermore, if we were to consummate any significant acquisition, we would be required to finance these acquisitions through additional indebtedness, which would increase our indebtedness and interest expense and could increase our leverage ratio, and/or issuances of equity, which could be dilutive to our shareholders |
| If we were unable to recognize the expected returns from these new towers, or if we did not recognize the expected returns in our anticipated time frames, the increase in debt levels without a proportionate increase in our revenues could negatively impact our results of operations and our financial condition |
| Due to the long-term expectation of revenue from our tenant leases, we are dependent on the financial strength and creditworthiness of our customers |
| Due to the long-term nature of our tenant leases, we, like others in the tower industry, are dependent on the continued financial strength of our tenants |
| The economic slowdown and intense competition in the wireless and telecommunications industries in 2001 through 2003 had impaired the financial condition of some of our customers, certain of which operate with substantial leverage |
| As a result, a number of our site leasing customers have filed for bankruptcy including almost all of our paging customers |
| Although these bankruptcies have not had a material adverse effect on our business or revenues, any future bankruptcies may have a material adverse effect on our business, revenues, and/or the collectability of our accounts receivable |
| In the future, the financial uncertainties facing our customers could reduce demand for our communications sites, increase our bad debt expense and reduce prices on new customer contracts |
| This could affect our ability to satisfy our obligations |
| In addition, our anticipated growth could be negatively impacted if our customers’ access to debt and equity capital were limited |
| From 2001 through 2003, when capital market conditions were difficult for the telecommunications industry, wireless service providers conserved capital by not spending as much as originally anticipated to finance expansion activities |
| This decrease adversely impacted demand for our services and consequently our financial condition |
| If our customers are not able to access the capital markets in the future, our growth strategy, revenues and financial condition may again be adversely affected |
| Our debt instruments contain restrictive covenants that could adversely affect our business |
| Our senior credit facility and the indentures governing our outstanding notes each contain certain restrictive covenants |
| Among other things, these covenants limit our ability to: • incur additional indebtedness; • sell assets; • pay dividends, or repurchase our common stock; • make certain investments; • engage in other restricted payments; • engage in mergers or consolidations; • incur liens; and • enter into affiliate transactions |
| If we fail to comply with these covenants, it could result in an event of default under one or all of these debt instruments |
| The acceleration of amounts due under one of our debt instruments would also cause a cross-default under our other debt instruments |
| SBA Senior Finance II LLC (“Senior Finance II”), which owns, directly or indirectly, all of the common stock and membership interests of the majority of our operating subsidiaries, is the borrower under our senior credit facility |
| The senior credit facility requires Senior Finance II to maintain specified financial ratios, including ratios regarding Senior Finance II’s debt to annualized operating cash flow, cash interest expense and fixed charges for each quarter |
| In addition, the senior credit facility contains additional negative covenants that, among other things, limit our ability to commit to capital expenditures and build or acquire towers without anchor or acceptable tenants |
| Our ability to meet these financial ratios and tests and comply with these covenants can be affected by events beyond our control, and we may not be able to do so |
| A breach of any of these covenants, if not remedied within the specified period, could result in an event of default under the senior credit facility |
| 12 ______________________________________________________________________ [14]Table of Contents Upon the occurrence of any default, our senior credit facility lenders can prevent us from borrowing any additional amounts under the senior credit facility |
| In addition, upon the occurrence of any event of default, other than certain bankruptcy events, senior credit facility lenders, by a majority vote, can elect to declare all amounts of principal outstanding under the senior credit facility, together with all accrued interest, to be immediately due and payable |
| The acceleration of amounts due under our senior credit facility would cause a cross-default under our indentures, thereby permitting the acceleration of such indebtedness |
| If the indebtedness under the senior credit facility and/or indebtedness under our outstanding notes were to be accelerated, our current assets would not be sufficient to repay in full the indebtedness |
| If we were unable to repay amounts that become due under the senior credit facility, the senior credit facility lenders could proceed against the collateral granted to them to secure that indebtedness |
| Amounts borrowed under the senior credit facility are secured by a first lien on substantially all of Senior Finance II’s assets and are guaranteed by SBA Communications and certain of its subsidiaries |
| In such an event of default, our assets may not be sufficient to satisfy our obligations under the notes |
| Our dlra405dtta0 million mortgage loan relating to our CMBS Certificates contains a covenant requiring 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 be deposited into a reserve account if the debt service coverage ratio falls to 1dtta30 times or lower, as of the end of any calendar quarter |
| Debt service coverage ratio is defined as the Net Cash Flow (as defined in the mortgage loan) divided by the amount of interest on the mortgage loan, servicing fees and trustee fees that SBA Properties, Inc |
| will be required to pay over the succeeding twelve months |
| If the debt service coverage ratio falls below 1dtta15 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 |
| The funds in the reserve account will not be released to SBA Properties unless the debt service coverage ratio exceeds 1dtta30 times for two consecutive calendar quarters |
| Failure to maintain the debt service coverage ratio above 1dtta30 times would impact our ability to pay our indebtedness other than the mortgage loan and to operate our business |
| The mortgage loan provides for customary remedies if an event of default occurs including foreclosure against all or part of the property pledged as security for the mortgage loan |
| The mortgage loan is secured by (1) mortgages, deeds of trust and deeds to secure debt on substantially all of the 1cmam714 collateralized tower sites and their operating cash flows, (2) a security interest in substantially all of SBA Properties’ personal property and fixtures and (3) SBA Properties’ rights under the management agreement with SBA Network Management, Inc |
| We cannot assure you that our assets would be sufficient to repay this indebtedness in full |
| Our quarterly operating results for our site development services fluctuate and therefore should not be considered indicative of our long-term results |
| The demand for our site development services fluctuates from quarter to quarter and should not be considered as 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, 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 |
| 13 ______________________________________________________________________ [15]Table of Contents 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 in a timely basis to accommodate market slowdowns |
| We are not profitable and expect to continue to incur losses |
| The following chart shows the net losses we incurred for the periods indicated: For the year ended December 31, 2005 2004 2003 (in thousands) Net loss $ (94cmam709 ) $ (147cmam280 ) $ (175cmam148 ) Our losses are principally due to significant interest expense and depreciation and amortization in each of the periods presented above |
| For the year ended December 31, 2005, we recorded asset impairment charges of dlra0dtta4 million and a charge associated with the write-off of deferred financing fees and loss on the extinguishment of debt of dlra29dtta3 million |
| For the year ended December 31, 2004, we recorded an asset impairment charge of dlra7dtta1 million and a charge associated with the write-off of deferred financing fees and loss on the extinguishment of debt of dlra41dtta2 million |
| We recorded an asset impairment charge of dlra13dtta0 million, a charge associated with the loss from write-off of deferred financing fees and extinguishment of debt of dlra24dtta2 million, and a restructuring charge of dlra2dtta1 million during the year ended December 31, 2003 |
| We expect to continue to incur significant losses which may affect our ability to service our indebtedness |
| Increasing competition in the tower industry may adversely affect us |
| Our industry is highly competitive |
| Competitive pressures for tenants from our competitors could adversely affect our lease rates and services income |
| In addition, the loss of existing customers or the failure to attract new customers would lead to an accompanying adverse effect on our revenues, margins and financial condition |
| Increasing competition could also make the acquisition of quality tower assets more costly, which could adversely affect our ability to successfully implement and/or maintain our tower acquisition program |
| In the site leasing business, we compete with: • wireless service providers that own and operate their own towers and lease, or may in the future decide to lease, antenna space to other providers; • other large independent tower companies; and • smaller local independent tower operators |
| Wireless service providers that own and operate their own tower networks and several of the other tower companies generally are substantially larger and have greater financial resources than we do |
| We believe that tower location and capacity, quality of service, density within a geographic market and, to a lesser extent, price historically have been and will continue to be the most significant competitive factors affecting the site leasing business |
| The site development services segment of our industry is also extremely competitive |
| There are numerous large and small companies that offer one or more of the services offered by our site development business |
| As a result of this competition, margins in this segment have decreased over the past few years |
| Many of our competitors have lower overhead expenses and therefore may be able to provide services at prices that we 14 ______________________________________________________________________ [16]Table of Contents consider unprofitable |
| If margins in this segment were to further decrease, our consolidated revenues and our site development segment operating profit could be adversely affected |
| We may not be able to build and/or acquire as many towers as we anticipate |
| We currently intend to build 80 to 100 new towers during 2006 and to consummate a number of tower acquisitions |
| However, our ability to build these new towers is dependent upon the availability of sufficient capital to fund construction, our ability to locate, and acquire at commercially reasonable prices, attractive locations for such towers and our ability to obtain the necessary zoning and permits |
| Our ability to consummate tower acquisitions is also subject to risks |
| Specifically, these risks include (1) sufficient capital to fund such acquisitions, (2) our ability to identify those towers that would be attractive to our clients and accretive to our financial results, and (3) our ability to negotiate and consummate agreements to acquire such towers |
| Due to these risks, it may take longer to complete our new tower builds than anticipated, the costs of constructing or acquiring these towers may be higher than we expect or we may not be able to add as many towers as we had planned in 2006 |
| If we are not able to increase our tower portfolio as anticipated, it could negatively impact our ability to achieve our financial goals |
| The loss of the services of certain of our key personnel or a significant number of our employees may negatively affect our business |
| Our success depends to a significant extent upon performance and active participation of our key personnel |
| We cannot guarantee that we will be successful in retaining the services of these key personnel |
| We have employment agreements with Jeffrey A Stoops, our President and Chief Executive Officer, Kurt L Bagwell, our Senior Vice President and Chief Operating Officer, and Thomas P Hunt, our Senior Vice President and General Counsel |
| We do not have employment agreements with any of our other key personnel |
| If we were to lose any key personnel, we may not be able to find an appropriate replacement on a timely basis and our results of operations could be negatively affected |
| Further, the loss of a significant number of employees or our inability to hire a sufficient number of qualified employees could have a material adverse effect on our business |
| New technologies and their use by wireless service providers may have a material adverse effect on our growth rate and results of operations |
| The emergence of new technologies could reduce the demand for space on our towers |
| For example, the increased use by wireless service providers of signal combining and related technologies and products that allow two or more wireless service providers to provide services on different transmission frequencies using the communications antenna and other facilities normally used by only one wireless service provider could reduce the demand for our tower space |
| Additionally, the use of technologies that enhance spectral capacity, such as beam forming or “smart antennae,” that can increase the range and capacity of an antenna could reduce the number of additional sites a wireless service provider needs to adequately serve a certain subscriber base and therefore reduce demand for our tower space |
| The development and growth of communications and other new technologies that do not require ground-based sites, such as the growth in delivery of video, voice and data services by satellites or other technologies, could also adversely affect the demand for our tower space |
| In addition, the deployment of WiFi and WiMax technologies could impact the network needs of our existing customers providing wireless telephony services |
| This could have a material adverse effect on our growth rate and results of operations |
| Delays or changes in the deployment or adoption of new technologies as well as lower consumer demand and slower consumer adoption rates than anticipated may have a material adverse effect on our growth rate |
| There can be no assurances that 3G or other new wireless technologies will be deployed or adopted as rapidly as projected or that these new technologies will be implemented in the manner anticipated |
| The deployment of 3G has already experienced significant delays from the original projected timelines of the wireless and broadcast industries |
| Additionally, the demand by consumers and the adoption rate of consumers for these new technologies once deployed may be lower or slower than anticipated |
| These factors could have a material 15 ______________________________________________________________________ [17]Table of Contents 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 |
| Our costs could increase and our revenues could decrease due to perceived health risks from radio frequency (“RF”) energy |
| The government imposes requirements and other guidelines on our towers relating 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 demand for wireless communications services |
| Moreover, if a connection between exposure to low levels of RF energy and possible negative health effects, including cancer, were demonstrated, we could be subject to numerous claims |
| If we were subject to claims relating to RF energy, even if such claims were not ultimately found to have merit, our financial condition could be materially and adversely affected |
| Our business is subject to government regulations and changes in current or future regulations could harm our business |
| We are subject to federal, state and local regulation of our business |
| In particular, both the FCC and FAA regulate the construction and maintenance of antenna towers and structures that support wireless communications and radio and television antennas |
| In addition, the FCC separately licenses and regulates wireless communications equipment and television and radio stations operating from such towers and structures |
| FAA and FCC regulations govern construction, lighting, painting and marking of towers and structures and may, depending on the characteristics of the tower or structure, require registration of the tower or structure |
| Certain proposals to construct new towers or structures or to modify existing towers or structures are reviewed by the FAA to ensure that the tower or structure will not present a hazard to air navigation |
| Antenna tower owners and antenna structure owners may have an obligation to mark or paint towers or structures or install lighting to conform to FAA standards and to maintain such marking, painting and lighting |
| Antenna tower owners and antenna structure owners may also bear the responsibility of notifying the FAA of any lighting outages |
| Certain proposals to operate wireless communications and radio or television stations from antenna towers and structures are also reviewed by the FCC to ensure compliance with environmental impact requirements |
| Failure to comply with existing or future applicable requirements may lead to civil penalties or other liabilities and may subject us to significant indemnification liability to our customers against any such failure to comply |
| In addition, new regulations may impose additional costly burdens on us, which may affect our revenues and cause delays in our growth |
| Local regulations, including municipal or local ordinances, zoning restrictions and restrictive covenants imposed by community developers, vary greatly, but typically require antenna tower and structure owners to obtain approval from local officials or community standards organizations prior to tower or structure construction or modification |
| Local regulations can delay, prevent, or increase the cost of new construction, co-locations, or site upgrade projects, thereby limiting our ability to respond to customer demand |
| In addition, new regulations may be adopted that increase delays or result in additional costs to us |
| These factors could have a material adverse effect on our future growth and operations |
| Our towers are subject to damage from natural disasters |
| Our towers are subject to risks associated with natural disasters such as tornadoes and hurricanes |
| 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 deductibles, to protect us in the event of an accident involving a tower |
| A tower accident for which we are uninsured or 16 ______________________________________________________________________ [18]Table of Contents underinsured, or damage to a significant number of our towers, could require us to make significant capital expenditures and may have a material adverse effect on our operations or financial condition |
| We could have liability under environmental laws that could have a material adverse effect on our business, financial condition and results of operations |
| Our operations, like those of other companies engaged in similar businesses, are subject to the requirements of various federal, state, local and foreign environmental and occupational safety and health laws and regulations, including those relating to the management, use, storage, disposal, emission and remediation of, and exposure to, hazardous and non-hazardous substances, materials, and wastes |
| As owner, lessee or operator of numerous tower sites, we may be liable for substantial costs of remediating soil and groundwater contaminated by hazardous materials, without regard to whether we, as the owner, lessee or operator, knew of or were responsible for the contamination |
| We may be subject to potentially significant fines or penalties if we fail to comply with any of these requirements |
| The current cost of complying with these laws is not material to our financial condition or results of operations |
| However, the requirements of these laws and regulations are complex, change frequently, and could become more stringent in the future |
| It is possible that these requirements will change or that liabilities will arise in the future in a manner that could have a material adverse effect on our business, financial condition and results of operations |
| Our dependence on our subsidiaries for cash flow may negatively affect our business |
| We are a holding company with no business operations of our own |
| Our only significant asset is and is expected to be the outstanding capital stock of our subsidiaries |
| We conduct, and expect to conduct, all of our business operations through our subsidiaries |
| Accordingly, our ability to pay our obligations, including the principal and interest, premium, if any, and additional interest, if any, on our outstanding 9^ 3/4prca senior discount notes and our 8^ 1/2prca senior notes, is dependent upon dividends and other distribution from our subsidiaries to us |
| Additionally, SBA Properties as the borrower under the CMBS Transaction must repay the components of the mortgage loan thereto |
| If SBA Properties’ cash flow is insufficient to cover such repayments, we may be required to refinance the mortgage loan or sell a portion or all of our interests in the 1cmam714 tower sites that among other things, secure along with their operating cash flows the mortgage loan |
| Other than the amounts required to make interest and principal payments on the notes and repayment of amounts under the CMBS Transaction, we currently expect that the earnings and cash flow of our subsidiaries will be retained and used by them in their operations, including servicing their debt obligations |
| Our operating subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise to pay the principal, interest and other amounts on the notes, or repay the components of the mortgage loan pursuant to the CMBS Transaction (other than SBA Properties, as the borrower, and SBA CMBS-1 Guarantor LLC and CMBS-1 Holdings, LLC, as guarantors), or make any funds available to us for payment |
| The ability of our operating subsidiaries to pay dividends or transfer assets to us may be restricted by applicable state law and contractual restrictions, including the terms of the senior credit facility and the CMBS Certificates |
| Although the indentures governing the notes will limit the ability of our operating subsidiaries to enter into consensual restrictions on their ability to pay dividends to us, these limitations are subject to a number of significant qualifications and exceptions |