modifications and add additional modules such
as treasury and purchasing during the coming
months. On March 4, 2005, we also implemented a separate software
package, manageStar, to manage our
communications sites, tenant and ground leases and records.
The integration of these software systems
with our business was a significant project, and we may
encounter difficulties with
these
integrations
that may be time consuming and costly, and result in
systems interruptions and the loss of data. These two
new systems handle our most significant business
processes and difficulties with the implementation of
these systems may adversely affect our
day-to-day operations and our ability to service our
customers, which in turn may harm our ability to
operate our business.
If we are unable to successfully compete, our business will
suffer.
We believe that tower
location and capacity, price, quality of service and density within
a geographic market historically have been,
and will continue to be, the most significant competitive
factors affecting our site operations business. We
compete for customers
with:
Some of
our competitors have significantly more financial resources than we do.
The intense competition in our industry may
make it more difficult for us to attract new tenants, increase
our gross margins or maintain or increase
our market share.
Competing
technologies may offer alternatives to ground-based antenna systems,
which could reduce the future demand for our
sites.
Most types of wireless and
broadcast services currently require ground-based network
facilities, including communications sites
for transmission and reception. The development and growth
of communications and other new technologies
that do not require ground-based sites could reduce the
demand for space on our towers. For example, the growth
in delivery of video, voice and data services
by satellites or high
altitude air ships, which allow
communication directly to users' terminals without the use of
ground-based facilities, could lessen demand
for our sites. Moreover, the FCC has issued licenses for
several additional satellite systems
(including low earth orbit systems) that are intended to provide
more advanced, high-speed data services
directly to consumers. These satellite systems compete with
land-based wireless communications systems, thereby
reducing the demand for the services that we
gnal Inc. and its qualified REIT
subsidiaries will generally not be subject to Federal income tax at
the corporate level if 90% of its
taxable income is distributed to its stockholders. REITs are also
subject to a number of other organizational
and operational requirements. If we fail to qualify as a REIT in
any taxable year, our taxable income will be
subject to Federal income tax at regular corporate tax
rates. Even during taxable years for which
we qualify as a REIT, we may be subject to certain state and
local taxes and to Federal income and excise taxes on
undistributed income.
The capital
contribution from the new investors upon our emergence from
bankruptcy, established a change in
ownership as defined in Section 382 of the Internal Revenue Code. As
a result, utilization of our tax attributes
(primarily NOL's and depreciation) will be limited each year
in the future as a result of this ownership
change.
Our REIT net operating losses
(‘‘NOL's") of approximately $456.6
million incurred prior to November 1, 2002
have been reduced to approximately $142.6 million at December 31, 2003,
yielding a net decrease in NOL's of
$314.0 million. The decrease resulted from the
following:
 |
|
| • |
a decrease of
$11.1 due to utilization of NOL carryforwards for the year ended
December 31,
2003. |
Our NOL's
increased to $231.8 million at December 31, 2004 as a result of the
following incurred during
2004:
|
|
| • |
an
increase of $12.4 million due to additional
NOL's; |
|
|
| • |
an
increase of $76.8 million due to built-in
losses. |
Future NOL's may be
used to offset all or a portion of our REIT income, and as a result,
reduce the amount that we must distribute to
stockholders to maintain our status as a
REIT.
We also own non-REIT
subsidiaries that are subject to Federal and state income taxes
(taxable REIT subsidiaries). These entities
are consolidated with Global Signal Inc. for financial
reporting purposes but file separately from
Global Signal Inc. for income tax reporting purposes. As of
December 31, 2004, these subsidiaries have net
operating loss carryforwards of approximately $0.8
million. These subsidiaries had net deferred tax
liabilities in the amount of approximately $0.6 million.
Our use of the NOL carryforwards is also limited on an
annual basis as a result of the Section 382
rules applicable to ownership
changes.
Equipment
and software developments are increasing our tenants' ability to
more efficiently utilize spectral capacity
and to share transmitters, which could reduce the future demand for our
sites.
Technological developments
are also making it possible for carriers to expand their use of
existing facilities to provide service
without additional tower facilities. The increased use by carriers of
signal combining and related technologies,
which allow two or more carriers to provide services on
different transmission frequencies using the
communications antenna and other facilities normally used by
only one carrier, could reduce the demand
for tower space. Technologies that enhance spectral
capacity, such as beam forming or
"smart antennae", which can increase the
capacity at existing sites and reduce the
number of additional sites a given carrier needs to serve any given
subscriber base, may have the same
effect.
Carrier joint ventures and
roaming agreements, which allow for the use of competitor
transmission facilities and spectrum, may
reduce future demand for incremental
sites.
Carriers are, through joint
ventures, sharing (or considering the sharing of)
telecommunications infrastructure in ways
that might adversely impact the growth of our business. Furthermore,
wireless service providers frequently enter
into roaming agreements with
their competitors which allow them
to
27
utilize one another's
wireless communications facilities to accommodate customers who are out
of range of their home providers'
services, so that the home providers do not need to lease space
for their own antennae on communications
sites we own. For example, over the past two years,
Cingular, through AT&T Wireless, has
entered into roaming agreements with T-Mobile and more than 30
rural or regional carriers, including
Western Wireless and Dobson Communications, covering parts of
30 states. Any of the conditions and
developments described above could reduce demand for our
ground-based antenna sites and decrease demand for our
site space from current levels and our ability
to attract additional customers and may negatively
affect our profitability.
We may be
unable to modify our towers or procure
additional ground space, which could harm
our ability to add additional site space to
our communications sites and new customers,
which could result in our inability to execute our growth strategy and
limit our revenue
growth.
Our business depends on our
ability to modify towers, procure
additional ground space and add new
customers as they expand their tower network
infrastructure. Regulatory and other barriers could adversely affect
our ability to modify
towers or procure additional ground
space in accordance with the requirements of
our customers, and, as a result, we may not be
able to meet our customers' requirements. Our
ability to modify towers, procure
additional ground space and add new
customers to towers may be affected by a
number of factors beyond our control, including zoning and
local permitting requirements, FAA
considerations, FCC tower registration and radio frequency
emission procedures and requirements,
historic preservation and environmental requirements, availability
of tower components, additional ground space
and construction equipment, availability of skilled
construction personnel, weather conditions and
environmental compliance issues. In addition, because
public concern over tower proliferation has grown in
recent years, many communities now restrict
tower modifications or delay granting permits required
for adding new customers. In addition, we may
not be able to overcome the barriers to modifying
towers or adding new customers. Our failure to
complete the necessary
modifications or procure additional ground
space could harm our ability to add
additional site space and new customers
which could result in our inability to execute our growth strategy and
limit our revenue
growth.
We may not
be able to obtain credit facilities in the future on favorable terms to
enable us to pursue our acquisition plan,
and we may not be able to finance our newly acquired assets in the
future or
refinance
outstanding inde/p>
We believe that our low
cost debt, combined with appropriate leverage, should allow us
to maintain operating and financial
flexibility. Our strategy is to utilize credit facilities to provide us
with funds to acquire communications sites,
and our capital management strategy is then to finance newly
acquired assets, on a long-term basis, using equity
issuances combined with low-cost fixed-rate debt
obtained through the periodic issuance of
mortgage-backed securities. We may not be able to obtain
credit facilities or successfully issue equity or
mortgage-backed securities in the future or on terms that
are favorable to us. If we are unable to obtain assets
through the use of funds from a credit facility or
finance our newly acquired assets through the issuance
of mortgage-backed securities our debt may be
more expensive and our expenses to finance new
acquisitions may increase. Ading-left:0pt; padding-right:0pt; margin: 0pt; text-indent: 0pt; padding-bottom: 6pt; background-color: #ffffff;">Reconciliation of
Net Income to Estimated Taxable Income
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year
Ended
December 31,
2003 |
|
Year
Ended
December 31,
2004 |
| |
|
(in
thousands) |
| Net
income |
|
$ |
13,162 |
|
|
$ |
6,872 |
|
| Add
back Federal inome tax
expense |
|
|
(665 |
) |
|
|
341 |
|
| Add
net loss of taxable REIT
subsidiaries |
|
|
1,344 |
|
|
|
922
In addition, in connection with the
Sprint
transaction we executed a non-binding term sheet for
bridge financing of
approximately
$850.0
million with a one-year term and two
six-month renewal options.
Furthermore, the
acquisition credit
facility
is
due on April 24,
2006
and will need to be
refinanced.
We intend to refinance the
bridge
loan
and
the acquisition credit
facility with
one or
more mortgage
loans
in the
future. If we are unable to refinance
the
loans
or refinance on favorable terms
it
will have an adverse affect on our
financial
condition.
28
Repayment of the principal of our
outstanding indebtedness (including
repayment of our
acquisition credit
facility and our proposed bridge facility
to finance a portion of the upfront rental payment due
in connection with the
Sprint transaction)
will
require additional financing that we cannot
ensure
will be available to
us.
We have historically financed our operations primarily with
indebtedness. Our ability to generate
sufficient cash flow from operations to make scheduled
payments on our debt obligations will continue to
depend on our future financial performance. As of
December 31, 2004, our long-term debt obligations
consisted of $411.9 million outstanding on our
February 2004 mortgage loan, $293.8 million outstanding
on our December 2004 mortgage loan and $1.2 million
outstanding on a capital lease. In addition, in
connection with the Sprint
transaction, we
executed a non-binding term sheet with Morgan Stanley Asset
Funding Inc., Bank of America, N.A. and Banc of
America Securities
LLC,
affiliates
of
the
representatives of the
underwriters,
setting forth the terms on
which they would provide bridge financing of up to
$850.0 million to us for use in funding the Sprint
transaction.
As
of April 25,
2005, we
entered into a 364-day $200.0
million acquisition
credit facility to provide funding for the
acquisition of additional communication sites.
Of the outstanding obligations at December
31, 2004, $8.3 million is due in less than one year, $17.9 million is
due between one and three years and $680.8
million is due between four and five years based on
anticipated maturities on our February 2004
mortgage loan. If we
are able to
consummate the
Sprint transaction and close on
the bridge financing,
the bridge loan
will be due in 24
months,
assuming we exercise our two six-month options to extend.
In addition, the
acquisition credit
facility is due
on April 24,
2006.
We currently
anticipate that in order to pay the
principal of our outstanding February 2004 and December 2004 mortgage
loans on the anticipated repayment date of
January 2009 and the maturity date of December 2009, respectively, we
will likely be required to pursue one or
more alternatives, such as refinancing our indebtedness or selling our
equity securities or the equity securities
or assets of our operating partnership and our subsidiaries. There
can be no assurance that we will be able to
refinance our indebtedness on attractive terms and conditions
or that we will be able to obtain
additional debt financing. If we are unable to refinance our
indebtedness in full, we may be required to
issue additional equity securities or sell assets. If we are required
to sell equity securities, investors who
purchase common stock in this offering may have their holdings diluted.
If we are required to sell interests in our
operating partnership, this would have a similar effect as a sale
of assets and the market price of our
common stock may decline. In addition, there can be no assurance
as to the terms and prices at which we will
be able to sell additional equity securities or operating
partnership interests or that we will be
able to sell additional equity securities or sell operating partnership
interests at all. If we are required to
sell assets to refinance our indebtedness, there can be no assurance as
to the price we will obtain for the assets
sold and whether those sales will realize sufficient funds to repay
our outstanding indebtedness. To the extent
we are required to sell assets at prices lower than their
fair market values, the market price of our
common stock may decline.
Our
mortgage loans restrict the ability of our two largest operating
subsidiaries, Pinnacle Towers
LLC
and Pinnacle Towers Acquisition
LLC, and
their
respective
subsidiaries,
from incurring additional indebtedness or
further encumbering their assets. In addition, so long as the tangible
assets of Pinnacle Towers LLC under the
February 2004 mortgage loan represent at least 25% of our
assets, it will be an event of default
under the February 2004 mortgage loan if we incur any unsecured
indebtedness for borrowed money without
confirmation from the rating agencies that rated the commercial
mortgage pass-through certificates issued
in connection with the February 2004 mortgage loan that none of
the ratings will be adversely affected. Our
mortgage loans do not otherwise restrict our ability to
obtain additional financing. If we require
additional financing in connection with acquisitions, we
anticipate having
to raise equity, obtain a credit facility
similar to the acquisition
credit facility
or obtain financing
through a securitization of acquired sites similar
to the ones completed on February 5, 2004 and December
7, 2004. In addition, we expect that we
will need to refinance our $200.0 million
acquisition credit
facility and our $850.0 million bridge loan.
We cannot assure you that we
could effect any of the foregoing
alternatives on terms satisfactory to us, that any of the foregoing
alternatives would enable us to pay the
interest or principal of our indebtedness or that any of such
alternatives would be permitted by the
terms of our credit facility and other indebtedness then in
effect.
29
|
|
| Adjusted
net
income |
|
|
13,841 |
|
|
|
8,135 |
|
| Book/tax
depreciation
difference |
|
|
4,007 |
|
|
|
(5,125 |
) |
| Exercise
of non-qualified stock
options |
|
|
— |
|
|
|
(20,970 |
) |
| Other
book/tax differences,
net |
|
|
(4,239 |
) |
|
|
5,598 |
|
Our failure to comply with federal,
state and local laws and regulations could result in our being
fined, liable for damages and, in some
cases, the loss of our right to conduct some of our
business.
We are subject to a
variety of regulations, including those at the federal, state and local
levels. Both the FCC and
the Federal Aviation
Administration,
or FAA, regulate towers and other sites used
for wireless communications transmitters and
receivers. See the section
entitled
"Business—Regulatory
Matters." In addition, under the FCC's
rules, we are fully liable for the acts or
omissions of our contractors. We generally indemnify our
customers against any failure by us to
comply with applicable standards. Our failure to comply with
any applicable laws and regulations
(including as a result of acts or omissions of our contractors,
which may be beyond our control) may lead to
monetary forfeitures or other enforcement actions, as well
as civil penalties, contractual liability
and tort liability and, in some cases, losing our right to
conduct some of our business, any of which
could have an adverse impact on our business. We also are
subject to local regulations and
restrictions that typically require tower owners to obtain a permit or
other approval from local officials or
community standards organizations prior to tower construction
or modification. Local regulations could
delay or prevent new tower construction or modifications, as
well as increase our expenses, any of which could
adversely impact our ability to implement or
achieve our business
objectives.
The failure of our
communications sites to be in compliance with environmental laws could
result in liability and claims for damages
that could result in a significant increase in the cost of operating
our
business.
We are
subject to environmental laws and regulations that impose liability,
including those without regard to fault.
These laws and regulations place responsibility on us to investigate
potential environmental and other effects of
operations and to disclose any significant effects in an
environmental assessment prior to constructing a tower
or adding a new customer on a tower. In the
event the FCC determines that one of our owned towers
would have a significant environmental
impact, the FCC would require us to prepare and file an
environmental impact statement with it. The
environmental review process mandated by the National
Environmental Policy Act of 1969, or NEPA,
can be costly and may cause significant delays in the
registration of a particular tower or
collocating
an antenna. In addition, various
environmental interest groups routinely petition the FCC to
deny applications to register new towers,
further complicating the registration process and increasing
potential expenses and delays. In August 2003, the FCC
released a Notice of Inquiry requesting
comments and information on the potential impact of
communications towers on migratory birds. On
December 14, 2004, the FCC released a public notice
inviting comments on the analysis and report
provided by its environmental consultant regarding the
relationship of towers and avian mortality. Any
changes to FCC rules that come from this proceeding, as
well as changes resulting from other
potential rulemakings, could delay or prevent new tower
construction or modifications as well as
increase our expenses related
thereto.
In addition to the
FCC's environmental regulations, we are subject to various
federal, state and local environmental laws
that may require the investigation and remediation of any contamination
at facilities that we own or operate, or
that we previously owned or operated, or at third-party
waste disposal sites at which our waste
materials have been disposed. These laws could impose liability
even if we did not know of, or were not
responsible for, the
contamination,
and the amount of protection that we may
receive from sellers with respect to liabilities arising before our
ownership of the asset varies based on
the terms of the
applicable
purchase agreement. The terms of the
purchase agreements themselves
often
depend upon the nature of the sale process, price paid and
the amount
of competition for the
asset. Under these
laws, we may also be required to obtain
permits from governmental authorities or may be subject
to record keeping and reporting obligations.
If we violate or fail to comply with these laws, we
could be fined or otherwise sanctioned by
regulators. The expenses of complying with existing or
future environmental laws, responding to
petitions filed by environmental interest groups or
other activists, investigating and remediating any
contaminated real property and resolving any related
liability could result in a significant increase in
the cost of operating our business, which would harm
our profitability. See the section
entitled
"Business
—
Regulatory
Matters
—
Environmental Regulations."
30
Because we generally lease, sublease,
license or have easements relating to the land under our
towers, our ability to conduct our business,
secure financing and generate revenues may be harmed if we
fail to obtain lease renewals or protect our
rights under our leases, subleases, licenses and
easements.
Our real property
interests relating to towers primarily consist of leasehold interests,
private easements, and permits granted by
governmental entities. A loss of these interests for any
reason, including losses arising from the
bankruptcy of a significant number of our lessors, from the default
by a significant number of our lessors under
their mortgage financings or from a legal challenge to our
interest in the real property, would interfere with our
ability to conduct our business and generate
revenues. Similarly, if the grantors oft: 10pt; text-indent: -10pt;padding-top: 0pt" align="left" valign="bottom" colspan="3">Current
year ordinary income
(loss) |
|
|
13,609 |
|
|
|
(12,362 |
) |
| NOL
carryforward
utilized |
|
|
(11,078 |
) |
|
|
— |
|
| Estimated
taxable ordinary income
(loss) |
|
$ |
2,531 |
|
|
$ |
(12,362 |
) |
|
Income
Tax Characterization of Dividends
For income tax purposes, dividends to common stockholders are
characterized as ordinary income, capital
gains or as a return of a stockholder's invested capital. During
2004, we declared and paid to all of our
stockholders cumulative quarterly dividends of $1.3125 per share of
common stock, or an aggregate of $58.9
million, of which $56.4 million represented a return of capital to
our stockholders and $2.5 million
represented ordinary income pursuant to an IRC Sec. 858 dividend
of 2003 taxable income. In addition, on
February 5, 2004, we also paid a special distribution
aggregating $142.2 million to all of our
stockholders which represented a return of
capital.
The income tax
characterization of dividends to common stockholders is based on the
calculation of Taxable Earnings and Profits,
as defined in the Internal Revenue Code. Taxable Earnings
and Profits differ from regular taxable
income due primarily to differences in the estimated useful
lives and methods used to compute
depreciation and in the recognition of gains and losses on the sale
of real estate
assets.
F-48
In addition, we previously made
acquisitions and did not always analyze and verify all
information regarding title and other issues prior to
completing an acquisition of communications
sites. Our inability to protect our rights to the land
under our towers could interfere with our ability
to conduct our business and generate revenues.
Generally, we have attempted to protect our rights in
the sites by obtaining title insurance on the owned fee
sites and the ground lease sites and relying on
title warranties and covenants from sellers and
landlords. Furthermore, the protections we
are able to obtain in the purchase agreements vary and often depend
upon the nature of the sale process, price paid and the amount of
competition for the asset.
Our
ability to protect our rights against persons claiming superior rights
in towers or real property depends on our
ability
to:
|
|
| • |
recover
under title insurance policies, the policy limits of which may be less
than the purchase
price or economic
value of a particular
tower; |
|
|
| • |
in the
absence of title insurance coverage, recover under title warranties
given by tower sellers,
which
warranties often terminate after the expiration of a specific period
(typically one to three years), contain
various exceptions and are dependent on the general
creditworthiness of sellers making the title
warranties; |
|
|
| • |
obtain
estoppels from landlords in connection with acquisitions of
communications
sites, which protect the collateral of our
lenders and may provide a basis for defending post-closing
claims arising from pre-closing
events; |
|
|
| • |
recover
from landlords under title covenants contained in lease agreements,
which is dependent on the general
creditworthiness of landlords making the title covenants;
and |
|
|
| • |
obtain
"non-disturbance agreements" from
mortgagee
and superior lienholders of the land under
our towers. |
Our tenant leases
require us to be responsible for the maintenance and repair of the
sites and for other obligations and
liabilities associated with the sites and our obligations to maintain
the sites may affect our
revenues.
None of our tenant leases
is a net lease. Accordingly, as landlord we are responsible for
the maintenance and repair of the sites and
for other obligations and liabilities (including for
environmental compliance and remediation) associated
with the sites, such as the payment of real
estate taxes, ground lease rents and the maintenance of
insurance. Our failure to perform our
obligations under a tenant lease could entitle the
related tenant to an abatement of rent or, in some
circumstances, result in a termination of the tenant
lease. An unscheduled reduction or cessation of
payments due under a tenant lease would result in a
reduction of our revenues. Similarly, if the
expenses of maintaining and operating one or more sites
exceeds amounts budgeted, and if lease
revenues from other sites are not available to cover
the shortfall, amounts that would otherwise be
used for other purposes may be required to pay the
shortfall.
31
Components of Tax Benefit
(Expense)
Our income tax benefit
(expense) is comprised of the following for each of the periods
presented
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Predecessor
Company |
|
Successor
Company |
| |
|
Ten
Months
Ended
October
31, 2002 |
|
Two
Months
Ended
December
31,
2002 |
|
Year
Ended
December
31,
2003 |
|
Year
Ended
December
31,
2004 |
| |
|
|
|
(in
thousands) |
| Current
tax
expense |
|
$ |
(573 |
) |
|
$ |
(89 |
) |
|
$ |
(4 |
Site management
agreements may be terminated prior to expiration, which may adversely
affect our
revenues.
Approximately 807 sites, as of December 31, 2004 (representing
approximately 17.8% of our revenues
for the year ended December 31, 2004), are managed sites where we
market and/or sublease space under site
management agreements with third party owners. The management
agreements or subleases on 302 of these
sites, which represented 5.3% of our revenues for the year ended
December 31, 2004, are month-to-month or
will expire by their terms prior to December 31, 2005. In many
cases, the site management agreements may be
terminated early at the third party owner's discretion
or upon the occurrence of certain events
(such as the sale of the relevant site by the third party
owner, our default, a change of control with
respect to our company and other events negotiated with the
third party owner including discretionary
terminations). If a site management agreement is not
renewed or is terminated early, our revenues would be
reduced.
Our towers may be damaged
by disaster and other unforeseen events for which our insurance may
not provide adequate coverage and which may
cause service interruptions affecting our reputation and
revenues and resulting in unanticipated
expenditures.
Our towers are subject
to risks associated with natural disasters, such as ice and wind
storms, fire, tornadoes, floods, hurricanes
and earthquakes, as well as other unforeseen events. Our sites and
any tenants' equipment are also
vulnerable to damage from human error, physical or electronic
security breaches, power loss, other
facility failures, sabotage, vandalism and similar events. In the event
of casualty, it is possible that any tenant
sustaining damage may assert a claim against us for such
damages. If reconstruction (for example, following fire
or other casualty) or any major repair or
improvement is required to the property, changes in
laws and governmental regulations may be
applicable and may raise our cost or impair our ability
to effect such reconstruction, major repair or
improvement.
Since
January 1, 2002, 12 of our owned towers have been destroyed by natural
disasters, including hurricanes, two have
been destroyed in vehicular accidents and two in fire accidents. In
addition, as of December 31, 2004, we own,
lease and license a large number of towers in geographic areas,
including 226 sites in California, 369 sites
in Florida, 141 sites in North Carolina and 175 sites in South
Carolina, that have historically been
subject to natural disasters, such as high winds, hurricanes,
floods, earthquakes and severe weather.
There can be no assurance that the amount of insurancnt-weight: normal; font-style: normal; border-bottom: 3px double #ffffff; padding-top: 0pt " align="left" valign="bottom" nowrap="nowrap">) |
In addition, any of these
events or other unanticipated problems at one or more of the sites
could interrupt tenants' ability to
provide their services from the sites. This could damage our
reputation, making it difficult to attract
new tenants and causing existing tenants to terminate their leases,
which in turn would reduce our
revenues.
If radio frequency
emissions from our towers or other equipment used in our tenants'
businesses are demonstrated, or perceived,
to cause negative health effects, our business and revenues may
be harmed.
The safety guidelines for radio frequency emissions from our sites
require us to undertake safety measures to
protect workers whose activities bring them into proximity with the
emitters and to restrict access to our sites
by others. If radio frequency emissions from our sites or other
equipment used in our tenants'
businesses are found, or perceived, to be harmful, we and our customers
could face fines imposed by the FCC, private
lawsuits claiming damages from these emissions, and
increased opposition to our development of
new towers. Demand for wireless services and new towers, and
thus our business and revenues, may be
harmed. Although we have not been subject to any personal
injury claims relating to radio frequency
emissions, we cannot assure you that these claims will not arise
in the future or that they will not
negatively impact our
business.
32
The terms of our mortgage
loans,
Revolving
Credit
Agreement,
acquisition credit
facility and the Sprint
Agreement to
Lease may
restrict our current and future
operations,
which could adversely affect our ability to respond to changes in our
business and to manage our
operations.
Our existing mortgage
loans,
Revolving
Credit
Agreement and
acquiop: 0pt "> |
$ |
— |
|
| Deferred tax
benefit
(expense) |
|
|
5,768 |
|
|
|
70 |
|
|
|
669 |
|
|
|
(341 |
) |
| Net
tax benefit
(expense) |
|
$ |
5,195 |
|
|
$ |
(19 |
) |
|
$ |
665 |
|
|
$ |
(341 |
)sition credit facility contain, and any
future indebtedness of ours or of any of our
subsidiaries, including indebtedness entered into in connection with
the Sprint
transaction,
would likely contain, a number of restrictive covenants that impose
significant operating and financial
restrictions on us and/or certain of our subsidiaries, including
restrictions on our or our
subsidiaries' ability to, among other
things:
|
|
| • |
incur
additional debt, or additional unsecured debt without rating agency
approval; |
|
|
| • |
issue
stock; |
|
|
| • |
create
liens; |
|
|
| • |
make
investments, loans and
advances; |
|
|
| • |
engage
in sales of assets and subsidiary
stock; |
|
|
| • |
enter
into sale-leaseback
transactions; |
|
|
| • |
enter
into transactions with our
affiliates; |
• |
change
the nature of our business; |
|
|
| • |
transfer all or substantially all of our
assets or enter into certain merger or consolidation
transactions;
and |
|
|
| • |
pay
dividends. |
Our February 2004 and
December 2004 mortgage loans contain a covenant requiring
reserve accounts if the debt service
coverage ratio falls to 1.45 and 1.30 or lower, respectively, as of the
end of any calendar quarter. Debt service
coverage ratio is defined as the preceding 12 months of net
cash flow, as defined in the mortgage loans,
divided by the amount of principal and interest payments
required under the mortgage loans over the next 12
months. Net cash flow, as defined in the mortgage
loans, is approximately equal to gross margin minus
capital expenditures made for the purpose of
maintaining our sites, minus 10% of revenues.
The funds in the respective reserve account will not be
released to us unless the debt service coverage ratio
exceeds 1.45 and 1.30 times, respectively, for two
consecutive calendar quarters. If the debt service
cover:10pt; width: 456pt; text-align: left; font-style: italic; line-height: 12pt; padding-top: 12pt; padding-left:0pt; padding-right:0pt; margin: 0pt; text-indent: 0pt; padding-bottom: 6pt; background-color: #ffffff;">Statutory
Rate
Reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Predecessor
Company |
|
Successor
Company |
| |
|
Ten
Months
Ended
October
31, 2002 |
|
Two
Months
Ended
December
31,
2002 |
|
Year
Ended
December
31,
2003 |
|
Year
Ended
December
31,
2004 |
| |
|
|
|
|
|
(in
thousands) |
| Tax at
statutory
rate |
|
$ |
(87,842 |
) |
|
$ |
342 |
|
|
$ |
A failure by us to comply with
the covenants or financial ratios contained in our Revolving
Credit Agreement
or acquisition credit
facility could result in an event of default under
the
agreement
which could adversely affect our ability to
respond to changes in our business and manage our operations. In the
event of any default under our Revolving
Credit Agreement or acquisition credit
facility,
including pursuant to a change in control of us, the lenders
under the facility will not be required to lend us any
additional amounts. Our lenders also could elect
to declare all amounts outstanding to be immediately
due and payable. If the indebtedness under
one of
our credit
facilities
were to be accelerated, and we are not able to make the required cash
payments, our lenders will have the option
of foreclosing on any of the collateral pledged as security for the
loan.
The Revolving Credit Agreement
continues to be guaranteed by us, Global Signal GP, LLC and
certain subsidiaries of Global Signal OP. It is secured
by a pledge of Global Signal OP's assets,
including a pledge of 65% of its interest in our
United Kingdom subsidiary, 100% of its interest in
certain other domestic subsidiaries, a pledge by us and
Global Signal GP, LLC of our interests in
Global Signal OP and a pledge by us of 65% of
our interest in our Canadian subsidiary. As of
December 31, 2004, the pledged interests in the United
Kingdom and Canadian subsidiaries
collectively constituted 1.0% of our total
assets' book value.
33
Under both the February 2004 mortgage
loan and the December 2004 mortgage loan, if an event
of default occurs, the lenders will have the option to
foreclose on any of the collateral pledged as
security for the respective mortgage loan. The mortgage
loans are secured by (1) mortgage liens on
our interests (fee, leasehold or easement) in a portion
of our communications sites, (2) a security
interest in substantially all of Pinnacle Towers LLC
and its subsidiaries', and Pinnacle Towers
Acquisition Holdings LLC and its subsidiaries',
personal property and fixtures, including our rights
under substantially all of our site management
agreements, tenant leases (excluding tenant leases for
sites referred to in (1) above) and management
agreement with GS Services and (3) a pledge of
certain of our subsidiaries' capital stock (or
equivalent equity interests) (including a pledge of the
membership interests of Pinnacle Towers LLC, from its
direct parent, Global Signal Holdings II LLC
and a pledge of the membership interests of Pinnacle
Towers Acquisition Holdings LLC, from its
direct parent, Global Signal Holdings III LLC). There
can be no assurance that our assets would be
sufficient to repay this indebtedness in
full.
Our
failure to comply with the covenants or obligations in the
Sprint
Agreement
to
Lease,
including our obligation to timely pay
ground
lease
rent, could result in an event of default
under
this
master lease. Subject
to arbitration and cure rights, in the event of an uncured default
under a ground lease, the Sprint entity lessors may terminate the
master lease as to the applicable ground lease site. In the event of an
uncured default with respect to more than 20% of the
sites
within any rolling five-year period, the
Sprint entity lessors will have the right to terminate
the entire master lease under certain
circumstances. If the Sprint entity lessors terminate
the master lease with respect to all of or a significant
number of tower sites, our results of operations could
be materially adversely
affected.
In
addition, the Revolving Credit Facility and the
acquisition credit
facility each provide that it is an event
of default if certain of our present larger shareholders or their
affiliates cease to collectively own or
control, in
certain limited circumstances, at least
51% of the voting interest in our
capital stock
(other than as a
result of an issuance of capital stock by us, in which case such
percentage
shall be reduced to
40%). However, we have a
30-day grace period to repay the loans or otherwise cure the default if
any such change in ownership results from (1) a margin call under the
Fortress credit agreement secured by its holdings of shares of our
common stock or (2) from a sale by such shareholders of shares of our
common stock (unless any such sale causes such ownership percentage to
fall below 40%, in which case there would be an immediate event
of default). In addition, it is an event of
default if, within any 12 month period, a
mding-left: 0pt; text-indent: 0pt; padding-top: 0pt" align="right" valign="bottom" colspan="1" nowrap="nowrap">
(4,374
It is also an event of
default under the Revolving Credit Facility and the
acquisition
credit facility if, at any time, Wesley R.
Edens, or a replacement who is acceptable to our lenders, ceases to
be Chairman of our board of directors,
unless a replacement Chairman is appointed, or, if a
replacement Chairman has not been
appointed, all of the obligations under the Revolving Credit Facility
or the acquisition
credit facility, as applicable, have been paid in full, within
30
days.
) |
|
$ |
(2,524 |
) |
| Exemption
for
REIT |
|
|
92,939 |
|
|
|
(348 |
) |
|
|
499 |
|
|
|
(5,125 |
) |
| REIT
NOL
utilized |
|
|
— |
|
|
|
— |
|
|
|
3,875 |
|
|
|
7,649 |
Our Chief Executive Officer
has management responsibilities with other companies and may not
be able to devote sufficient time to the
management of our business operations.
Our Chief Executive Officer, Wesley R. Edens, is also the Chairman
of the Board and Chairman of the Management
Committee of Fortress Investment Group LLC and the Chairman of the
Board and Chief Executive Officer of
Newcastle Investment Corp., a publicly traded real estate
securities business, and the Chairman of the
Board and Chief Executive Officer of Eurocastle Investment
Limited, a publicly traded real estate securities
business, listed on the London Stock Exchange. As
Chairman of the Management Committee of Fortress
Investment Group, he manages and invests in
other real estate related investment vehicles. As a
result, he may not be able to devote sufficient time
to the management of our business
operations.
34
Risks
Relating to Our REIT
Status
Our
failure to
qualify
as a REIT would result in higher taxes and reduce cash available for
dividends.
We
intend to operate in a manner so as to
qualify
as a REIT for federal income tax purposes. Although we do not intend to
request a ruling from the Internal Revenue Service as to our REIT
status, we expect to receive an opinion of Skadden, Arps, Slate,
Meagher & Flom LLP with respect to our qualification as a REIT.
This opinion will be issued in connection with this offering of common
stock. Investors should be aware, however, that opinions of counsel are
not binding on the IRS or any court. The opinion of Skadden, Arps will
represent only the view of our counsel based on our counsel's
review and analysis of existing law and on certain representations as
to factual matters and covenants made by us, including representations
relating to the values of our assets, the sources of our income, and
the nature, construction, character and intended use of our properties.
We have asked Skadden, Arps to assume for purposes of its opinion that
any prior legal opinions we received to the effect that we were taxable
as a REIT are correct. The opinion of Skadden, Arps, a copy of which
will be filed as an exhibit to the registration statement of which this
prospectus is a part, will be expressed as of the date issued, and will
not cover subsequent periods. The opinions of counsel impose no
obligation on them to advise us or the holders of our common stock of
any subsequent change in the matters stated, represented or assumed, or
of any subsequent change in applicable law.
Furthermore, both
the validity of the tax opinions, and our continued qualification as a
REIT will depend on our satisfaction of certain asset, income,
organizational, distribution, stockholder ownership and other
requirements on a continuing basis, the results of which will not be
monitored by tax counsel. Our ability to satisfy the asset tests
depends upon our analysis of the characterization and fair market
values of our assets, some of which are not susceptible to a precise
determination, and for which we will not obtain independent appraisals.
Our compliance with the REIT income and quarterly asset requirements
also depends upon our ability to successfully manage the composition of
our income and assets on an ongoing
basis.
If
we were to fail to qualify as a REIT in any taxable year, we would be
subject to federal income tax, including any applicable alternative
minimum tax, on our taxable income at regular corporate rates, and
distributions to stockholders would not be deductible by us in
computing our taxable income. Any such corporate tax liability could be
substantial and would reduce the amount of cash available for
distribution to our stockholders, which in turn could have an adverse
impact on the value of, and trading prices for, our common stock.
Unless entitled to relief under certain Internal Revenue Code
provisions, we also would be disqualified from taxation as a REIT for
the four taxable years following the year during which we ceased to
qualify as a REIT. See "Federal Income Tax
Considerations" for a discussion of material federal
income tax consequences relating to us and our common
stock.
Dividends payable by REITs
generally do not qualify for the reduced tax rates under
tax
legislation enacted in
2003.
Tax
legislation enacted in 2003
reduces the maximum tax rate for dividends
payable to individuals from 38.6% to
15.0% through 2008. Dividends payable by REITs, however, are
generally not eligible for the reduced
rates. Although this legislation does not adversely affect the taxation
of REITs or dividends paid by REITs, the
more favorable rates applicable to regular corporate dividends could
cause investors who are individuals to
perceive investments in REITs to be relatively less attractive than
investments in the stocks of non-REIT
corporations that pay dividends, which could adversely affect the value
of the stock of REITs, including our
common
stock.
In addition, the relative attractiveness of real estate in general
may be adversely affeadding-top: 0pt " align="left" valign="bottom" nowrap="nowrap"> |
| Deferred
tax
benefit |
|
|
5,768 |
|
|
|
70 |
|
|
|
(2,210 |
) |
|
|
(244 |
) |
| Change
in valuation
allowance |
|
|
(5,670 |
) |
|
|
(83 |
) |
|
|
2,875 |
|
|
|
(97 |
) |
| Net
tax benefit
(expense) |
|
$ |
5,195 |
REIT
distribution requirements could adversely affect our
liquidity.
We generally must
distribute annually at least 90% of our net taxable income,
excluding any net capital gain, in order for
corporate income tax not to apply to earnings that we distribute. We
intend to
35
make distributions to our
stockholders to comply with the requirements of the Internal Revenue
Code. However, differences between the
recognition of taxable income and the actual receipt of cash
could require us to sell assets or borrow
funds on a short-term or long-term basis to meet the 90%
distribution requirement of the Internal
Revenue Code. Certain types of assets generate substantial
mismatches between taxable income and
available cash. Such assets include rental real estate that has been
financed through financing structures which
require some or all of available cash flows to be used to
service borrowings. As a result, the
requirement to distribute a substantial portion of our taxable income
could cause us to: (1) sell assets in
adverse market conditions, (2) borrow on unfavorable terms or (3)
distribute amounts that would otherwise be
invested in future acquisitions, capital expenditures or repayment
of debt in order to comply with REIT
requirements.
Our mortgage loans
contain covenants providing for reserve accounts if our debt service
coverage ratio falls to 1.45 or 1.30 times
or lower for our February 2004 mortgage loan and December
2004 mortgage loan, respectively. If our
debt service coverage ratio were to fall to
these
levels and we
had taxable income, as defined by tax
regulations, our ability to distribute 90% of our taxable
income, and hence our REIT status, could be
jeopardized. Further, amounts distributed will not be available to fund
our
operations.
Prior to
our emergence from Chapter 11 bankruptcy, we funded our operations
primarily through debt and equity capital.
Since our emergence from bankruptcy on November 1, 2002, we have funded
our operations through operating cash flow.
We expect to finance our future operations through operating
cash flows and our future acquisitions through debt and
equity capital. If we fail to obtain debt or equity
capital in the future, it could limit our ability to
grow, which could have a material adverse effect on the
value of our
common
stock.
The stock ownership limits imposed by the Internal Revenue Code
of 1986, as amended,
for REITs and our amended and
restated certificate of incorporation may inhibit
market activity in our stock and may restrict our
business
combination opportunities.
In order for us to
maintain
our qualification as a REIT under the Internal Revenue Code, not
more than 50% in value of our
outstanding stock may be owned, directly or indirectly, by five or
fewer individuals (as defined in the
Internal Revenue Code) at any time during the last half of each taxable
year after our first year. Our amended and
restated certificate of incorporation states that, unless exempted
by our board of directors, no person, other
than certain of our existing stockholders and subsequent
owners of their stock, may own more than
9.9% of the aggregate value of the outstanding shares of any
class or series of our stock. Our board may
grant such an exemption in its sole discretion, subject to
such conditions, representations and
undertakings as it may determine. These ownership limits could delay
or prevent a transaction or a change in our
control that might involve a premium price for our
common
stock
or otherwise be in the best interest of our
stockholders.
Risks Relating to this Offering
The market price of our
common stock could be negatively affected by sales of substantial
amounts of our common stock in the public markets.
As adjusted
for this offering, there will be
57,993,989
shares of our common stock outstanding and options and warrants to
purchase a total of
3,104,279
shares of common stock, of which warrants to purchase
468,000
shares of common stock have an exercise price of $8.53 and options to
purchase
2,636,279
shares of common stock have a weighted average exercise price of
$12.33 per share.
The outstanding options
include options to purchase an aggregate
of
772,800
shares of common stock with an exercise price per share of $18.00 held
by Fortress Registered Investment
Trust, an affiliate of Fortress, and Greenhill, or
affiliates of such entities but
excludes the 9,803,922 shares to be issued in connection with the
Sprint transaction to the Investors pursuant to the
Investment
Agreement. There will be
58,568,987 shares
outstanding if the underwriters exercise their overallotment option in
full. Of our outstanding shares, all the shares of our common stock
sold in this offering and
29,695,189
shares of common stock already outstanding will be freely transferable,
except for
18,376,384
shaerif; font-size: 10pt; color: #000000; font-weight: normal; font-style: normal; border-bottom: 3px double #ffffff; padding-top: 0pt " align="left" valign="bottom" nowrap="nowrap"> |
|
$ |
(19 |
) |
|
$ |
665 |
|
|
$ |
(341 |
) |
|
Components
of Deferred Assets and
Liabilities
|
|
|
|
|
|
|
|
|
|
|
| |
|
December
31,
2003 |
|
December
31,
2004 |
| |
|
(in
thousands) |
| Net operating
losses from non-REIT
subsidiaries |
|
$ |
1,002 |
|
|
$ |
783 |
|
| Valuation
allowance |
|
|
36
"affiliates," as
that term is defined in Rule 144 under the Securities Act of 1933, as
amended ("Securities Act").
The amounts alone do
not include the
9,803,922
restricted shares of our common stock
expected to be issued to Fortress, Greenhill and Abrams
or
their affiliates pursuant to the Investment
Agreement in connection with the Sprint
transaction.
Pursuant to our Amended and Restated Investor Agreement, Fortress
Pinnacle Acquisition LLC and its affiliates, Greenhill Capital
Partners, L.P. and its related partnerships and Abrams Capital Partners
II, L.P. and its related partnerships have the right to require us to
register their shares of our common stock, including
shares to be issued pursuant to the Investment
Agreement,
under the Securities Act for sale into the public markets.
Upon the effectiveness of such a registration statement, all shares
covered by the registration statement will be freely
transferable.
We
and our executive officers, directors and each of our stockholders
holding 10% or more of our outstanding common stock have agreed
with the underwriters that, subject to
certain
exceptions, including the exception for
Fortress,
discussed
below,
for a period of
30
days after the date of this prospectus, we and they will not directly
or indirectly offer, pledge, sell, contract to sell, sell any option or
contract to purchase or otherwise dispose of any shares of common stock
or any securities convertible into or exercisable or exchangeable for
shares of common stock, or in any manner transfer all or a portion of
the economic consequences associated with the ownership of shares of
common stock, or cause a registration statement covering any shares of
common stock to be filed, without the prior written consent of the
representatives. The representatives may waive these restrictions at
their discretion. It is
contemplated that the lock-up
agreements with
our largest stockholder,
Fortress,
and
our second largest
stockholder,
Greenhill, will contain an exception to
allow the lenders under the credit
facilities
described under "Certain Relationships and
Related
Party Transactions — Pledge Shelf
Registration Statement" to dispose of the shares pledged
under the credit agreement or to seize the
pledged shares in
the event of a
default.
It
is also contemplated that the lock-up agreements with our officers will
contain an exception allowing (i) one of
our officers to sell during the lock-up period shares of our common
stock that are beneficially owned by such
officer in accordance with his pre-existing trading plan established
pursuant to Rule 10b5-1(c)(1) of the
Exchange Act and (ii) our other officers to establish new trading plans
pursuant to Rule 10b5-1(c)(1) during the
lock-up period, in each case as part of such officer's personal
long-term investment strategy for asset
diversification, liquidity and estate planning. However, during the
lock-up period officers will not be
permitted to sell any shares of our common stock pursuant to any new
trading plan implemented during the lock-up
period.
In addition, following the completion of our
initial public offering, we filed a registration statement on Form S-8
under the Securities Act registering an aggregate of
6,476,911 shares of our common
stock reserved for issuance under our stock incentive programs. Subject
to the exercise of issued and outstanding options, shares registered
under the registration statement on Form S-8 are available for sale
into the public markets.
The
market price of
our stock could be negatively affected by
sales of substantial amounts
of our common stock
if Fortress or
Greenhill, our
two
largest
stockholders,
default
under credit
agreements
secured by their
respective holdings of shares of our common
stock.
On
December 21, 2004,
Fortress,
our largest stockholder, informed us of the
following:
An
affiliate of Fortress
entered into a credit
agreement, dated as of December 21, 2004,
with Bank of America, N.A., Morgan Stanley Asset
Funding Inc., the other lenders
that may become
parties thereto and
Banc of America Securities LLC. Pursuant to the credit
agreement, the affiliate has borrowed
$160.0 million
from the lenders thereunder and this amount has been secured
by
a pledge
by the affiliate of a total of 19,162,248 shares of our
common stock owned by such affiliate. The
term
of the
credit
agreement
is 18 months. The 19,162,248 shares of
common stock represents approximately
37%
of our issued and outstanding common stock as of
April
25,
2005.
The credit agreement contains
representations,
covenants
and
default provisions, relating to
Fortress,
such
affiliate and our
company and also requires prepayment of
a portion of the borrowings by the
37
(597 |
) |
|
|
(694 |
) |
| Deferred
tax
assets |
|
|
405 |
|
|
|
89 |
|
| Fixed
assets —
related |
|
|
(705 |
) |
|
|
(730 |
) |
| Deferred
tax
liabilities |
|
|
(705 |
) |
|
|
(730 |
) |
| Net
deferred tax
liability |
|
$ |
(300 |
) |
affiliate in the event the trading price of
our common stock decreases below
$15.65
and prepayment or payment in full at prices
below certain other
lower specified
levels. In the event of a default under the
credit agreement by the affiliate, the lenders may foreclose upon
and sell any and
all shares of common stock pledged to them.
The affiliate has agreed in the credit agreement to exercise its right
to cause us to file a shelf registration
statement pursuant to the Amended and Restated Investor
Agreement dated as of March 31, 2004 among
us, Fortress Pinnacle Acquisition LLC, Greenhill Capital Partners,
L.P., and its related partnerships named
therein, and Abrams Capital Partners II, L.P. and certain of its
related partnerships named therein, and
other parties named therein. The registration statement will cover
sales by the lenders of shares of the
pledged common stock in the event of a foreclosure by any of them
and is required to be filed by June 6, 2005
pursuant to the credit
agreement.
We are not a party to the credit agreement and
have
not made any
representations or
covenants and have
no obligations thereunder. Mr. Wesley Edens,
our Chief Executive Officer and Chairman of
our board of directors owns an interest in Fortress
and
is the Chairman of its Management
Committee.
In addition, on February 16, 2005,
Greenhill, our second largest
stockholder, informed us as follows:
An
affiliate of Greenhill Capital Partners LLC entered into a credit
agreement, dated as of February 16, 2005, with Morgan Stanley
Mortgage Capital, Inc. as Administrative Agent and certain lenders.
Pursuant to the credit agreement, the affiliate has borrowed
$70.0 million
from the lenders thereunder and this amount has been secured by, among
other things, a pledge by the affiliate of a total of 8,383,234 shares
of our common stock owned by such affiliate, representing approximately
16%
of our issued and outstanding common stock as of
April
25,
2005.
The credit agreement contains customary default provisions
and also requires prepayment of a portion of the borrowings by the
affiliate in the event the trading price of our common stock decreases
below $15.65 and prepayment in full at
prices below certain other lower specified levels.
In
the event of a default under the credit agreement by the affiliate, the
lenders thereunder may foreclose upon any and all shares of common
stock pledged to them. The affiliate has agreed in the credit agreement
to exercise its right to cause us to
file a shelf registration statement pursuant
to the Amended and Restated Investor Agreement dated as of March 31,
2004 among us, Fortress Pinnacle Acquisition LLC, Greenhill Capital
Partners, L.P., and its related partnerships named therein, and Abrams
Capital Partners II, L.P. and certain of its related partnerships named
therein, and other parties named therein. The registration statement
will cover sales by the lenders of shares of the pledged common stock
in the event of a foreclosure by any of them and is required to
be filed by
June 6,
2005 pursuant to the credit agreement.
We are not a party to the
credit agreement and have no obligations thereunder. Mr. Robert H.
Niehaus, the Vice Chairman of our
board
of
directors,
owns an interest in the private equity funds managed by Greenhill
Capital LLC and is the Chairman of Greenhill Capital LLC which acts as
the general partner of the manager of the borrower and of one of our
principal stockholders, Greenhill Capital Partners,
L.P.
It is contemplated that the
lock-up agreements with our
two
largest stockholders,
Fortress and Greenhill, will contain an exception to allow the lenders
under the credit facilities described above and under
"Certain Relationships and Related Party
Transactions
—
Fortress Pledge Shelf Registration
Statement,"
and
"Certain Relationships and
Related Party Transactions
—
Greenhill Pledge Shelf Registration
Statement"
to dispose of the shares pledged under the credit agreement
or
to seize the
pledged
shares
in the event of a
default.
It
is also contemplated that our
lock-up
agreement with the underwriters will contain an exception to allow us
to issue the shares we are obliged to sell to the investors under the
Investment Agreement.
The issuance of additional
stock in connection with acquisitions or otherwise will dilute all
other stockholdings.
After the Sprint
transaction and this offering, assuming the exercise in full
by the underwriters of their overallotment option, we will have an
aggregate of
85,809,558 shares of
common stock authorized but unissued and not reserved for issuance
under our option plans or under outstanding warrants
or options, assuming no other option or warrant
exercises after
April
25,
2005. In addition, we expect to issue
38
an additional
9,803,922
shares of our common stock pursuant to the Investment Agreement in
connection with the Sprint transaction at a
price of $25.50 per share. We
may issue the remainingop: 0pt "> |
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(641 |
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17. Related
Party Transactions
In connection
with our emergence from Chapter 11, an arrangement was entered into
with two of our investors, Fortress and
Greenhill, which provided for the payment of an annual fee
(‘‘Monitoring Fee")
of $2.0 million in exchange for management services. The Monitoring Fee
was for an initial period of one year and
was renewed in December 2003 extending the period until October 31,
2004. During the two months ended December
31, 2002 and the year ended December 31, 2003, $0.3 million
and $2.5 million was paid to Fortress, including a $0.5
million prepayment for the fee relating to the
first quarter of 2004. The monitoring arrangement was
terminated effective March 31, 2004 and no
additional payments were made. Prior to our emergence
from bankruptcy, we had no obligations for
management services or related reimbursable
costs.
In addition, our chairman and
chief executive officer, Wesley Edens, is also the Chairman of
the Management Committee of Fortress
Investment Group LLC, an affiliate of our majority
stockholder. We do not pay Mr. Edens a
salary or any other form of
compensation.
Pinnacle Towers Ltd,
our UK subsidiary, outsources the management of its communication
sites to Mapley Limited, an affiliate of
Fortress. During the years ended December 31, 2004 and 2003
we incurred expenses to Mapley in connection
with its services of $171,000 and $48,000,
respectively.
F-49
As described in Note 14 –
Stockholders' Equity above, in connection with the initial
public offering, and to compensate Fortress
and Greenhill for their successful efforts in raising capital in
the offering, in March 2004 we granted
options to Fortress and Greenhill, or their respective affiliates,
to purchase the number of shares of our
common stock equal to an aggregate of 10% of the number
of shares issued in the initial public
offering in the following amounts (1) for Fortress (or its
affiliates), the right to acquire 644,000
shares which is equal to 8% of the number of shares issued in
the initial public offering, including the
over-allotment and (2) for Greenhill (or its affiliate), the right to
acquire 161,000 shares which is equal to
2% of the number of shares issued in the initial public
offering, including the over-llotment, all
at an exercise price per share equal to the initial offering price
of $18.00 per share. All of the options were
immediately vested and are exercisable for ten years from
June 8, 2004. We recognized the fair value of these
options using the Black-Scholes method on the
offering date as a cost of the offering of $1.9
million, by netting it against the net proceeds of the
offering.
As
described in Note 14 – Stockholders' Equity above, in
August 2003, our board of directors awarded
options to purchase shares of our common stock to an employee of
Fortress Capital Finance LLC, who was a
member of our board of directors and provided financial advisory
services to us. These options were scheduled
to vest at various times over a three-year period, the period
during which this individual was expected to
perform services. This agreement was terminated in March
2004 and the vesting of the outstanding
options was modified. As a result of the services provided
before the termination, the termination of
this individual's agreement and the resulting modification,
we recorded a total expense of $2.6 million
in 2004 related to these stock options which concludes all
charges to be recognized related to this agreement.
During 2003, we recognized $1.5 million in
non-cash stock-based compensation related to this
agreement.
As of December 31, 2003,
certain of our stockholders also held a total of $14.5 million of
the outstanding borrowings under our old
credit facility. Our old credit facility was repaid and
terminated in February
2004.
18. Employee Benefit
Plan
Effective January 1, 1997, we
established a 401(k) plan that covers substantially all
employees. Benefits vest based on number of
years of service. To participate in the plan, employees must be
at least 21 years old. During the year ended
December 31, 2004, we contributed $0.1 million to the plan.
We did not make any contrib
shares without any action or approval by our stockholders. We intend to
continue to actively pursue strategic acquisitions of wireless
communications towers and other communications sites. We may pay for
such acquisitions, at least partly, through the issuance of partnership
units in our operating partnership which may be redeemed for shares of
our common stock, or by the issuance of additional equity. Any shares
issued in connection with our acquisitions, including the issuance of
common stock upon the redemption of operating partnership units, the
exercise of outstanding warrants or stock options or otherwise would
dilute the percentage ownership held by the investors who purchase our
shares in this offering.
The price of our common stock may
fluctuate substantially, which could negatively affect us and the
holders of our common stock.
The trading price of our common
stock may be volatile in response to a number of factors, many of which
are beyond our control, including:
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a decrease in the demand for our
communications sites; |
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the economies,
real estate markets and wireless communications industry in the regions
where our sites are located; |
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consolidation in the wireless industry; |
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the creditworthiness of our tenants;
and |
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fluctuations in interest rates. |
In addition, our financial results may be below the expectations of
securities analysts and investors. If this were to occur, the market
price of our common stock could decrease, perhaps significantly. Any
volatility of or a significant decrease in the market price of our
common stock could also negatively affect our ability to make
acquisitions using our common stock as consideration. In addition, the
U.S. securities markets, and telecommunications stocks in particular,
have experienced significant price and volume fluctuations. These
fluctuations often have been unrelated to the operating performance of
companies in these markets. Broad market and industry factors may
negatively affect the price of our common stock, regardless of our
operating performance. You may not be able to sell your shares at or
above the public offering price, or at all. Further, if we were to be
the object of securities class action litigation as a result of
volatility in our common stock price or for other reasons, it could
result in substantial expenses and diversion of our management's
attention and resources, which could negatively affect our financial
results. In addition, if we decide to settle any class action
litigation against us, our decision to settle may not necessarily be
related to the merits of the claim.
Investors in this offering
will suffer immediate and substantial dilution.
The public
offering price of our common stock is substantially higher than the net
tangible book value per share of our common stock outstanding
immediately after this offering. Our net tangible book value per share
as of December 31,
2004 was
approximately $(0.73)
and represents the amount of our stockholders' equity of
$153.2
million minus intangible assets of
$171.6
million and deferred debt
issuance
costs of
$18.9 million,
divided by the
51,304,769 shares of
our common stock that were outstanding on
December 31,
2004. Our
net book value per share of
$2.99
as of December 31,
2004 represents the amount of our stockholders'
equity of $153.2 million
divided by the
51,304,769 shares of common stock that were outstanding on
December 31, 2004.
19. Other Subsequent
Events
Sprint
Transaction
On February 14, 2005,
we, Sprint Corporation ("Sprint") and certain
Sprint subsidiaries (the
"Sprint Contributors"),
entered into an agreement to contribute, lease and sublease (the
"Agreement to
Lease"). Under the Agreement to Lease, we have agreed to
lease or, if certain required consents have
not been obtained, operate, for a period of 32 years over 6,600
wireless communications tower sites and the
related towers and assets (collectively, the "Sprint
Towers") from one or more newly
formed special purpose entities of Sprint
(collectively, "Sprint TowerCo"), under one
or more master leases for which we agreed to
pay an upfront payment of approximately $1.2 billion as prepaid
rent (the "Upfront Rental
Payment"), subject to certain conditions, adjustments and
pro-rations (the "Sprint
Transaction"). The closing of the Sprint Transaction is
expected to occur toward the end of the
second quarter of 2005. Certain Sprint entities will
collocate
on approximately 6,400 of the Sprint Towers
(as discussed below), and the Sprint Towers have over 5,600 collocation
leases with other wireless tenants and
substantially all of the revenue is derived from wireless telephony
tenants. We will account for this
transaction as a capital lease reflecting the substance similar to an
acquisition.
Upon the signing of the
Agreement to Lease, we placed a $50.0 million deposit in escrow.
This deposit was funded by borrowings under
the Amended and Restated Credit Agreement described
below. If the closing of the Sprint Transaction occurs,
the deposit and earnings thereon will be
credited against the Upfront Rental Payment. If,
however, the closing of the Sprint Transaction does
not occur as a result
F-50
of our material breach, or in the event that
we are unable to obtain the funds necessary
to close the Sprint Transaction, then Sprint will be entitled to retain
the deposit.
The Agreement to Lease
also contains various covenants, including, but not limited to,
(a) covenants by us to use commercially
reasonable efforts to obtain certain consents and to enter
into agreements with respect to the
financing needed to consummate the Sprint Transaction and
(b) covenants by Sprint to conduct its
business pending closing of the Sprint Transaction in the
ordinary course and not to solicit any
submissions, or engage in any discussions with any third party,
with respect to any proposal for the
acquisition or lease of the Sprint Towers. In addition, both
parties covenant to use their respective
commercially reasonable efforts to close the Sprint
Transaction.
Sprint has agreed to
indemnify us (including our officers, directors and affiliates) for any
losses related to (i) a breach of a Sprint
representation, (ii) a breach of a Sprint covenant, (iii) any taxes
of Sprint or Sprint TowerCo created in
connection with the Agreement to Lease (other than those
which we expressly assume), and (iv) the
assets and liabilities of Sprint specifically excluded in
the Agreement to Lease. We have agreed to
indemnify Sprint (including its officers, directors and
affiliates) for any losses related to (i) a breach of
any of our representations, (ii) a breach of any of
our covenants, and (iii) any failure by us to discharge
the liabilities we assume in connection with the
Sprint Transaction. We and Sprint have agreed that,
subject to certain exceptions, neither party shall
make any indemnity claim for any individual loss
related to a breach of a representation that is less
than $15,000 unless and until all indemnifiable losses,
irrespective of amount, related to breaches of
representations exceed $10.0 million, in the
aggregate.
The Agreement to Lease
contains certain other customary covenants and agreements,
including termination rights for each of
Sprint and us, including the right of either party to terminate if
the closing does not occur within 180 days
of signing. In the event that we do not meet certain
milestones in obtaining certain consents,
Sprint may have additional termination rights; however, we may be
able to extend such milestones and/or waive
the consent requirements and proceed to
closing.
Sprint Master
Lease
At the closing of the
Sprint Transaction, the Sprint TowerCo will enter into a Master Lease
and Sublease with one or more special
purpose entities (collectively, "Lessee")
created by us (the "Master
Lease"). The term of the Master Lease will
expire in 2037 and there are no contractual renewal
options. Except for the Upfront Rental Payment, the
Lessee will not be required to make any further
payments to the Sprint TowerCo for the right to lease
or operate the Sprint Towers during the term of
the Master Lease. The Sprint Contributors currently
lease the ground under substantially all of the
Sprint Towers from third parties and the Lessee will
assume all of the Sprint Contributors' obligations
that arise under the Sprint Towers ground leases post
ng-right:0pt; padding-bottom: 6pt; margin: 0pt; text-indent: 20pt; background-color: #ffffff">Investors who purchase our common stock in this offering will pay a
price per share that substantially exceeds the net tangible book value
per share of our common stock. If you purchase our common stock in this
offering, you will experience immediate and substantial dilution of
$28.07
in the net tangible book value per share of our common stock based on
an assumed offering price of
$30.12
per share (assuming the 9,803,922 shares of our common
stock are issued pursuant to the Investment Agreement). Our
net tangible book value per share on a pro forma as adjusted basis at
December 31,
2004 was
approximately
$2.05
and represents the amount of our
stockholders' equity of
$565.5
million minus intangible assets of
39
$405.4
million and deferred finance expenses of
$23.2
million, divided by
66,858,691
shares of our common stock outstanding after giving effect
to this offering and the Sprint transaction, including
the expected issuance of an additional 9,803,922 shares of our common
stock pursuant to the Investment Agreement
in connection with the Sprint transaction.
If the Sprint transaction does not occur and we do not
issue the additional 9,803,922 shares of
our common stock pursuant to the Investment Agreement, you will experience
dilution of $28.11 in
the net tangible book value per share of
our common stock. Our net tangible book value per share on a pro forma as adjusted basis at December 31, 2004
was approximately $2.01 and represents the
amount of our stockholders' equity of $316.2 million
minus intangible assets of $181.9 million
and deferred financing expenses of $19.8 million, divided by 57,054,769 shares of our common
stock outstanding after giving effect to
this offering. Additional dilution will occur upon the
exercise of outstanding options and
warrants.
See the pro forma
condensed consolidated
balance sheet included elsewhere
in this
prospectus.
As part of our
reorganization, we issued warrants to purchase 1,229,850 shares of our
common stock, of which warrants to purchase
468,000
shares of our common stock, as of
April
25,
2005, were outstanding and exercisable through October 31,
2007, at an exercise price of $8.53 per share. These warrants were
issued in connection with the cancellation of the 5 1/2%
convertible subordinated notes due 2007, and with the receipt of
certain releases given by former stockholders as part of our
reorganization and by plaintiffs in the settlement of a stockholder
class action suit. The issuance of these shares will have a dilutive
effect on the value of our common stock when these warrants are
exercised.
ERISA may restrict investments by Plans in our
common stock.
A plan fiduciary considering an investment in our
common stock should consider, among other things, whether such an
investment might constitute or give rise to a prohibited transaction
under the Employee Retirement Income Security Act of 1974, as amended,
the Internal Revenue Code or any substantially similar federal, state
or local law and whether an exemption from such prohibited transaction
rules is available. See "ERISA
Considerations."
Our authorized but unissued
common and preferred stock may prevent a change in our control.
Our amended and restated certificate of incorporation authorizes us
to issue additional authorized, but unissued shares of our common stock
or preferred stock. In addition, our board of directors may classify or
reclassify any unissued shares of our preferred stock and may set the
preferences, rights and other terms of the classified or reclassified
shares. As a result, our board may establish a series of preferred
stock that could delay or prevent a transaction or a change in control
that might involve a premium price for our common stock or otherwise be
in the best interest of our stockholders.
Anti-takeover provisions in our amended and restated
certificate of incorporation, the
Revolving
Credit Agreement and the
acquisition credit
facility could have effects that conflict with the interests
of our stockholders.
Certain provisions of our amended and
restated certificate of incorporation and amended and restated bylaws
could make it more difficult or less beneficial
for a third party to acquire control of us or for us to
acquire control of a third party even if such a change in control would
be beneficial to you.
We have a number of anti-takeover devices
in place that will hinder takeover attempts and could reduce the market
value of our common stock. Our anti-takeover provisions include:
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a staggered board of directors; |
The Lessee will be
entitled to all revenue from the Sprint Towers leased or operated by it
during the term of the Master Lease,
including amounts payable under existing Sprint Towers
collocation agreements with third parties.
In addition, under the Master Lease, Sprint entities that are part
of Sprint's wireless division have
agreed to sublease or otherwise occupy collocation space (the
"Sprint Collocation
Agreement") at approximately 6,400 of the Sprint Towers
for an initial monthly collocation charge of
$1,400 per Tower (the "Sprint Collocation
Charge") for an initial period of ten
years. The Sprint Collocation Charge is scheduled to
increase each year, beginning January 2006, at a
rate equal to the lesser of (i) 3% or (ii) the
sum of 2% plus the increase in the Consumer Price
Index during the prior year. After ten
years, Sprint may terminate the Sprint Collocation Agreement at
any or all Sprint Towers; provided, however,
that if Sprint does not exercise its termination right prior
to the end of nine years at a Sprint Tower
(effective as of the end of the tenth year), the Sprint
Collocation Agreement at that Sprint Tower will
continue for a further five-year period. Sprint may,
subsequent to the ten-year initial term, terminate
F-51
the Sprint Collocation Agreement as to any
or all Sprint Towers upon the 15th, 20th,
25th, or 30th anniversary of the commencement of the Master
Lease.
Subject to
arbitration and cure rights of the Lessee's lender, in the event
of an uncured default under a ground lease,
Sprint TowerCo may terminate the Master Lease as to the applicable
ground lease site. In the event of an
uncured default with respect to more than 20% of the Sprint
Towers during any rolling five-year period,
and subject to certain other conditions, Sprint TowerCo may
terminate the entire Master
Lease.
We will guarantee, up to a
maximum aggregate amount of $200 million, the full and
timely payment and performance and
observance of all of the Lessee's terms, provisions, covenants
and obligations under the Master
Lease.
Sprint Investment
Agreement
On February 14, 2005,
in connection with the execution of the Sprint Transaction, we entered
into an Investment Agreement (the
"Investment Agreement") with (a) Fortress
Investment Fund II LLC, a Delaware limited
liability company ("FIF II"), an affiliate of
our largest stockholder, Fortress; (b)
various affiliates of our third largest stockholder
Abrams Capital, LLC; and (c) Greenhill, our second
largest stockholder and certain of its affiliates.
Greenhill, with FIF II and Abrams, are referred to as
the "Investors", and each
individually as an
"Investor".
Under the Investment Agreement, the Investors committed to purchase,
at the closing of the Sprint Transaction, up
to an aggregate of $500.0 million of our Common Stock, par value $0.01
per share ("Common
Stock") at a price of $25.50 per share. The $500.0 million
aggregate commitment from the Investors will
automatically be reduced by (1) the amount of net proceeds received by
us pursuant to any offering of our equity
securities prior to the closing of the Sprint Transaction, and
(2) the amount of any borrowings in excess
of $750.0 million outstanding prior to the closing of the
Sprint Transaction under any credit facility
or similar agreements provided to us in connection with the
Sprint Transaction, provided that the Investors'
aggregate commitment will not be reduced below
$250.0 million. Pursuant to the terms of the Investment
Agreement, each of Fortress, Abrams and
Greenhill shall purchase such number of shares of
Common Stock equal to 48%, 32% and 20%,
respectively, of the total number of shares of Common
Stock to be purchased under the Investment
Agreement. The purchase of the shares by the Investors
is conditioned upon the occurrence of the
closing of the Sprint Transactions, and will close
simultaneously with the Sprint Transaction. In the
event an Investor fails to purchase the shares of
common stock it is obligated to purchase, the other
Investors have the right, but not the obligation, to
purchase such shares. This issuance of these
securities will be made pursuant to an exemption from
registration provided by Section 4(2) of the
Securities Act of 1933, as
amended.
Sprint Option
Agreement
If we do not complete
an offering of our equity securities prior to the closing of the
Sprint Transaction, the Investors will issue
to us, at the closing of the Investment Agreement, a
one-time option to purchase from the
Investors a number of shares of Common Stock having a value equal
to the difference between the total
consideration paid by the Investors for the common stock at
tdding="0" cellspacing="0" border="0" width="602">
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removal of directors only for cause, by
80% of the voting interest of stockholders entitled to vote; |
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blank-check preferred stock; |
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a provision denying stockholders the
ability to call special meetings with the exception of Fortress
FRIT PINN LLC, Fortress Pinnacle Investment Fund LLC,
Greenhill Capital Partners, L.P. and their respective affiliates, so
long as they collectively beneficially own at least 50% of our
issued and outstanding common
stock; |
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our amended and
restated certificate of incorporation provides that Global Signal has
opted out of the provisions of Section 203 of the Delaware General
Corporation Law. Section 203 restricts certain business combinations
with interested stockholders in certain situations; and |
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advance notice requirements by stockholders
for director nominations and actions to be taken at annual
meetings. |
In
addition, the Revolving Credit
Agreement
and the acquisition
credit facility each provide that it is an event of default if certain
of our present larger shareholders or their affiliates cease to
collectively
own
or
control, in
certain limited
circumstances, at least
51%
of the voting interest in our capital stock
(other than as a
result of an issuance of capital stock by us, in which case such
percentage shall be reduced to
40%). However, we have a
30-day grace period to repay the loans or otherwise cure the default if
any such change in ownership results from (1) a margin call under the
Fortress credit agreement secured by its holdings of shares of our
common stock or (2) from a sale by such shareholders of shares of our
common stock (unless any such sale causes such ownership percentage to
fall below 40%, in which case there would be an immediate event
of default). In addition, it is an event of
default if, within any he closing of the Sprint Transactions and
$250.0 million. This option would be issued by the Investors
pursuant to an Option Agreement among the Investors and
us. Pursuant t12 month period, a
majority of the members of the board of directors cease to be those
persons who were directors as of the first day of that period, or
persons whose nomination or election was approved by the board members
as of the first day of that period (excluding in the latter case any
person whose initial nomination or assumption occurs as a result of an
actual or threatened solicitation of proxies or consents for the
election or removal of one or more directors by any person or group
other than board of
directors).
It
is also an event of default under the Revolving Credit
Agreement
and the acquisition
credit facility if, at any time, Wesley R. Edens, or
a replacement
who is acceptable to our lenders, ceases to be Chairman of our
board
of
directors,
unless a replacement Chairman is appointed, or, if a replacement
Chairman has not been appointed, all of the obligations under the
Revolving Credit
Agreement
or the acquisition
credit facility, as applicable, have been paid in full, within
30
days.
We have not
established
a minimum dividend
payment
level,
there are no assurances of our
ability to
pay dividends in the future, and
our
ability to maintain
our current
dividend level depends both on our earnings from existing operations
and our ability to invest our capital to achieve targeted
returns.
We intend to pay
quarterly dividends and to make distributions to our stockholders in
amounts such that all or substantially all of our taxable income in
each year, subject to certain adjustments, is distributed. We have not
established a minimum dividend payment level, and our ability to pay
dividends may be adversely affected by the risk factors described in
this prospectus. All distributions will be made at the discretion of
our board of directors and will depend on our earnings, our financial
condition, maintenance of our REIT status and such other factors as our
board oo the Option Agreement, we
would purchase the shares at a price per share of $26.50. The option
would be immediately vested upon issuance at
the closing and would expire six months and one day after the closing
of the Sprint Transactions. If we were to
exercise the option, we would purchase shares from each Investor
in proportion to that Investor's
participation in the Investment Agreement set forth above. In the
event that we complete an offering of our
equity securities prior to the closing of the Sprint Transaction,
we would not be entitled to this option and
no option would be issued by the Investors. The option will
be
non-transferable.
F-52
Sprint Bridge
Financing
On February 8, 2005,
we received a letter from Morgan Stanley Asset Funding Inc., Bank
of America, N.A. and Banc of America
Securities LLC setting forth the terms on which they would
provide bridge financing of approximately $750.0
million to us for use in funding the Sprint
Transaction. On March 10, 2005, we executed a
non-binding term sheet with Morgan Stanley Asset
Funding Inc., Bank of America, N.A. and Banc of America
Securities LLC which increased the amount of
bridge financing up to $850.0 million and provides for the following
terms. The borrower is expected to be one or
more newly created entities, under our direct or indirect control, that
will own 100% of our interest in the
Sprint Towers. The loan is expected to be secured by, among other
things, the ownership interests in the
borrower, borrower's leasehold and subleasehold interests
(including purchase options) in the Sprint
Towers, and an assignment of leases and rents. The loan is expected
to have a term of 12 months after the
closing, and, subject to compliance with certain conditions,
two six-month extensions at our option.
During the first 12 months of the loan, the loan is expected
to bear interest at 30-day LIBOR plus either
1.5% or 1.75% per annum, depending on cash flows
related to the Sprint Towers. In either
case, the rate is expected to increase by 0.25% upon the first
extension and 0.75% upon the second,
if such extension options are exercised. The loan is expected to
require an origination fee of 0.375%
of the $775.0 million loan amount and an extension fee in
connection with each extension option of
0.25% of the loan amount. In addition, we expect to be required
under the facility to pay an exit fee under
certain circumstances. The loan is expected to contain
customary events of default including,
bankruptcy of the borrower or the Company, change of control or
cross default to other indebtedness of the
Company.
In addition, the executed
term sheet provided for a loan advance of $75.0 million prior to
the closing of the bridge financing. Of this
advance, $50.0 million is to be used to repay a $50.0
million term loan currently outstanding
under our revolving credit facility discussed below, and the
remaining $25.0 million is expected to be
used to finance closing costs associated with the Sprint
Transaction. The loan advance would have to
be repaid by the earlier of (i) August 14, 2005, (ii) the date on
which we receive a refund of the $50.0
million deposit under the Agreement to Lease or (iii) the
consummation of the acquisition of the Sprint towers.
The loan advance will bear interest at 30-day
LIBOR plus 1.75%.
Amended And Restated Credit
Agreement
On February 9, 2005,
Global Signal OP amended and restated its 364-day $20.0 million
revolving credit agreement (originally dated
December 3, 2004) with Morgan Stanley Asset Funding Inc. and
Bank of America, N.A., to provide an additional $50.0
million term loan facility in connection with
the Sprint Transaction. On February 14, 2005, the full
amount of the term loan was posted as a
deposit, as required by the Agreement to
Lease.
2005 Interest Rate
Swaps
On January 11, 2005, in
anticipation of the issuance of a third mortgage loan to finance
the acquisition of additional wireless
communication towers we expect to acquire during 2005, we
entered into six additional forward starting
interest rate swaps agreements with Morgan Stanley as
counterparty to hedge the variability of future
interest rates on our anticipated mortgage financing.
Under the interest rate swaps, we agreed to pay the
counterparty a weighted average fixed interest
rate of 4.403% on a total notional amount of
$300.0 million beginning on various dates between
July 29, 2005 and November 30, 2005 and
continuing through September 2010 with a mandatory
termination date of January 31, 2006 in exchange for
receiving floating payments based on three-
month LIBOR on the same notional amounts for the same
period.
On February 2, 2005, in
connection with the Sprint Transaction, we entered into eight
additional interest rate swap agreements for
a total notional value of $750.0 million with Bank of America,
N.A. as counterparty, in anticipation of
securing $750.0 million or more of bridge financing, which
is expected to be replaced by a mortgage
loan. Under the interest rate swaps, we agreed to pay the
counter party a fixed interest rate of 4.303% on
a total notional amount of $750.0 million beginning on
June 1, 2005 through December 1, 2010, with a mandatory
termination date of March 31, 2006, in
exchange for receiving floating payments based on
three-month LIBOR on the same notional amount
for the same period.
While we have not established a formal
dividend policy, to date we have paid
quarterly
dividends based
on our net cash
flow from operations, less capital
expenditure,
after
consideration of pending acquisitions of
communications
sites,
with the cash raised in our mortgage
loans and equity
financings. As of April
25,
2005, we have
$15.2
million remaining in a site
acquisition reserve account established as part of our December
2004 mortgage loan pending its investment in qualified
communications
sites.
On April 29,
2005 we used $14.5 million of the balance
to partially fund the ForeSite 2005
acquisition and expect to use the balance
to fund other pending
acquisitions. In
addition, as part of this offering, we expect to issue
5,750,000
shares
(6,325,000
shares
if
the underwriters exercise the
overallotment option) to
raise approximately
$163.0
million ($179.5
million if the underwriters exercise the
overallotment option) of
additional capital, net of offering
costs. Our ability to
continue to pay dividends
at current levels will
depend,
among other things, on our ability to invest
amounts held in the site acquisition reserve account, as well as the
capital raised in this offering, at returns similar to the acquisitions
we have closed to date.
Global Signal Inc. is a
holding company with no material direct operations.
Global
Signal Inc. is a holding company with no material direct operations.
Its principal assets are the equity interests it holds in its operating
subsidiaries. In addition, we own substantially all of our assets and
conduct substantially all of our operations through Global Signal OP.
As a result, Global Signal Inc. is dependent on loans, dividends and
other payments from its subsidiaries and from Global Signal OP to
41
generate the funds necessary to meet its
financial obligations and pay dividends. Global Signal Inc.'s
subsidiaries and Global Signal OP are legally distinct from Global
Signal Inc. and have no obligation to make funds available to
it.
Your ability to influence corporate matters may be limited because
a small number of stockholders beneficially own a substantial amount of
our common stock.
After giving effect to the offering, assuming
no exercise by the underwriters of their overallotment option,
as of April
25,
2005 Fortress and its
affiliates will beneficially own approximately
25,443,696 million
shares, or
43.4%, of our
common stock, Greenhill and its affiliates
will beneficially own approximately
8,583,194 million
shares, or
14.8%, of our
common stock and Abrams
Capital, LLC and its affiliates will
beneficially own approximately
5,569,986 million
shares, or
9.6% of our
common stock. In addition,
if the Sprint transaction closes, we will issue at least
9,803,922
shares
of our common stock to
Fortress, Greenhill and
Abrams Capital
LLC or their
affiliates who would
beneficially
own 44.1%, 15.5%, and 12.8%, respectively of our
common stock following
those
issuances.
Three of our directors are associated with these
stockholders. As a result, Fortress, Greenhill, and Abrams Capital, LLC
and their respective affiliates could exert
significant influence over our management and policies and may have
interests that are different from yours and may vote in a way with
which you disagree and which may be adverse to your interests. In
addition, this concentration of ownership may have the effect of
preventing, discouraging or deferring a change of control, which could
depress the market price of our common stock.
An increase in
interest rates would result in an increase in our interest expense
which could adversely affect our results of operations and financial
condition.
Any indebtedness we incur under
Global Signal OP's
$95.0
million
Revolving
Credit
Agreement
bears interest at floating rates, based on either LIBOR or the
bank's base rate. Accordingly, an increase in the bank's
base rate or LIBOR could lead to an increase in
Global Signal
OP's interest
expense, which could have an adveight:normal;color:#000000;font-size:10pt; text-align: center; width: 456pt;">F-53
Our
fiduciary obligations to Global Signal OP may conflict with the
interests of our stockholders.
Our wholly owned subsidiary
Global Signal GP LLC, as the managing general partner of Global Signal
OP, may have fiduciary obligations in the future to the limited
partneront-family:serif;font-weight:normal;color:#000000;font-size:10pt; width: 456pt; text-align: left; font-style: normal; line-height: 12pt; padding-top:6pt; padding-left:0pt; padding-right:0pt; padding-bottom: 0pt; margin: 0pt; text-indent: 20pt; background-color: #ffffff">On March 21, 2005, in connection with the
Sprint Transaction and the $850.0 million bridge loan
term sheet we executed on March 10, 2005, we entered
into two additional forward-starting interest
rate swap agreements for a total notional amount of
$100.0 million with Bank of America, N.A. as
counterparty. This brings the total notional amount of
swap agreements related to financing the Sprint
Transaction to $850.0 million. These swap agreements
are in anticipation of the Sprint Transaction
bridge financing described above, which is expected to
be replaced by a mortgage loan of at least
$850.0 million. Under the interest rate swaps, we
agreed to pay the counterparty a fixed interest rate
of 4.733% on the total notional amount of $100.0
million beginning June 1, 2005 through December 1,
2010, with a mandatory maturity date of March 31, 2006,
in exchange for receiving floating payments
based on three-month LIBOR on the same notional amount
for the same period.
Other
Purchase Commitments
As of December
31, 2004, we had executed definitive purchase agreements with several
unrelated sellers to acquire 27
communication sites and 17 land parcels under existing communication
towers for an aggregate purchase price of
approximately $11.9 million, including estimated fees and expenses.
As of December 31, 2004, we also had
non-binding letters of intent to purchase 261 communication
sites for approximately $80.8 million,
including estimated fees and expenses. As of March 22, 2005, we
have closed on the acquisition of 13 of the
communication sites and on 12 fee-interests or long-term
leases for an aggregate purchase price of
$4.3 million, including estimated fees and
expenses.
Since December 31, 2004, we
have entered into asset purchase agreements to acquire 223
communications sites from nine unrelated sellers for a
total estimated purchase price of $72.7 million,
including estimated fees and expenses, including the
Triton PCS Holdings, Inc. acquisition described
below. As of March 22, 2005, we completed the
acquisition of 46 of these communication sites for an
aggregate purchase price of $13.4 million, including
estimated fees and expenses. A number of our
acquisition agreements provide for additional proceeds
to be paid to the sellers for future lease
commencements during a certain period, usually one year
or less, after the acquisition is completed or
upon the occurrence of a specific event. The amount of
this contingent purchase price is not expected
to be material. As of December 31, 2004 and 2003, we
had no accruals for future contingent
acquisitions payments as they were not yet earned,
however the maximum additional contingent
payments at December 31, 2004 were $1.5
million.
On March 21, 2005, we
entered into an agreement to purchase 169 wireless
communications towers for approximately
$55.1 million from Triton PCS Holdings, Inc. The transaction is
expected to close in the second half of
2005, and is subject to customary closing conditions. The towers
are primarily located in the Charlotte,
Raleigh and Greensboro markets of North Carolina, with
additional sites located in North and South Carolina
and Puerto Rico. All of the revenues on these
towers are derived from wireless telephony tenants. As
part of the transaction, Global Signal and
Triton have agreed to enter into a 10-year master lease
agreement at an initial monthly rate of $1,850
for each of the 169 towers, with three 5-year lease
renewal options. Additionally, we obtained an
exclusive option to acquire an additional 70 existing
towers owned by Triton, together with an option
to acquire all new towers constructed by Triton during
a one-year period after closing.
Dividends
On March 30,
2005, our board of directors declared a dividend of $0.40 per share of
our common stock for the three months ended
March 31, 2005, payable on April 21, 2005 to the stockholders
of record as of April 11, 2005. The portion
of this dividend which exceeds our accumulated earnings as
of March 31, 2005 will represent a return of
capital.
F-54
20. Selected
Quarterly Financial Information — Unaudited
We have set
forth selected quarterly financial data for the years ended December
31, 2003 and
2004.
The following
tables set forth selected
quarterly financial information for the year ended
December 31, 2004 (in thousands, except per share
data):
|
|
|
|
Future limited
partners of Global Signal OP may exercise their voting rights in a
manner that conflicts with the interests of our stockholders.
Currently, Global Signal OP does
not have any limited partners
other
than
Global
Signal. In the
future,
those persons holding units of Global Signal OP, as limited
partners, have the right to vote as a class on certain amendments to
the operating partnership agreement and individually to approve certain
amendments that would adversely affect their rights, which voting
rights may be exercised by future limited partners in a manner that
conflicts with the interests of those investors who acquire our common
stock in this
offering.
42
CAUTIONARY
STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
This
prospectus contains certain forward-looking statements which are
subject to various risks and uncertainties, including without
limitation, statements relating to our ability to deploy capital, close
accretive acquisitions, close
dispositions of under-performing sites, close
acquisitions under letters of
intent and purchase
agreements, close the Sprint
transaction,
close on the Investment
Agreement, come to
favorable resolution on the timing and the
terms of any renewal or
extension of the Arch Lease, anticipate,
manage and address industry trends and their
effect on our business as well as the rate and timing of the deployment
of new radio communications systems and
equipment by governmental customers; whether our current or
prospective tenants who are analog television
broadcasters install new equipment at our sites; whether
we successfully address other future technological
changes in the wireless industry, pay and grow
dividends, generate growth organically or through
acquisitions, secure financing and increase revenues,
earnings,
Adjusted
EBITDA and/or
Adjusted
FFO (or AFFO)
and add telephony tenants; and statements
relating to the final cost of the Sprint
transaction
(including fees and expenses), and how the proceeds of
future financings will be used.
Forward-looking statements are generally identifiable by use of
forward-looking terminology such as "may,"
"will," "should,"
"potential,"
"intend," "expect,"
"endeavor," "seek,"
"anticipate,"
"estimate,"
"overestimate,"
"underestimate,"
"believe," "could,"
"would,"
"project,"
"predict,"
"continue" or other similar words or
expressions. Forward-looking statements are based on certain
assumptions or estimates, discuss future
expectations, describe future plans and strategies, contain projections
of results of operations or of financial condition or state other
forward-looking information. Our ability to predict results or the
actual effect of future plans or strategies is inherently uncertain.
Although we believe that the expectations reflected in such
forward-looking statements are based on reasonable assumptions,
actual results and performance could differ
materially from those set forth in the forward-looking statements.
Factors which could have a material adverse effect on our operations
and future prospects
or which could cause
events or circumstances to differ from the
forward-looking
statements include, but are not
limited to,
failure to
close the Sprint transaction, failure to successfully and efficiently
integrate the Sprint transaction into our
operations,
difficulties in acquiring towers
at attractive prices or integrating acquisitions with our operations,
a decrease in the demand for our
communications sites and our ability to
attract additional
tenants, the
economies, real estate markets and wireless
communications
industries in the regions where our sites
are located, consolidation in the wireless industry and changes to the
regulations governing wireless services,
the creditworthiness of our tenants, customer concentration and the
loss of one or more of our major customers,
the renewal of the Arch Lease, the terms of our leases,
integration of new software systems, our
ability to compete, competing technologies, equipment and
software developments, our ability to
modify our towers, our ability to obtain credit facilities on favorable
terms, our failure to comply with federal,
state and local laws and regulations and
ch!--col #: 2 / width: 84 / data-type: financial-->
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|
|
|
|
|
|
|
|
|
|
|
| |
|
Successor
Company |
|
Successor
Company |
| |
|
Three
Months
Ended
March
31, 2004 |
|
Three
Months
Ended
June
30, 2004 |
|
Three
Months
Ended
September 30,
2004 |
|
Three
Months
Ended
December
31,
2004 |
| Condensed
Statements of
Operations |
|
| Revenues |
|
$ |
43,105 |
|
|
$ |
43,860 |
|
|
$ |
46,348 |
|
|
$ |
49,551 |
|
| Direct
site operating expenses, excluding
impairment losses, depreciation,
amortization and
accretion |
|
|
Although we believe that the
expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity,
performance or achievements. We are under no duty to update any of the
forward-looking statements after the date of this prospectus to conform
these statements to actual results or
events.
43
USE OF PROCEEDS
Based on the
assumed offering price of
$30.12,
our net cash proceeds from the sale of the shares of common stock will
be approximately
$163.0
million, or approximately
$179.5
million if the underwriters exercise their overallotment option in full
after deducting assumed underwriting discounts, commissions and
estimated offering expenses.
We intend to use the net proceeds
of this offering as follows:
|
|
| • |
Approximately
$82.0
million to finance a
portion of the upfront rental payment
of approximately $1.2
billion (subject to certain conditions, adjustments and prorations) to
be paid in connection with
the
Sprint
transaction.
For
a more
detailed description of the Sprint
transaction,
see the section
entitled
"Business
— Sprint
Transaction."
The Sprint
transaction
is subject to certain closing conditions and may
not close. In the event the
Sprint
transaction
does not close,
we intend to use the net proceeds of this offering
to
finance the acquisition of other
communications sites
and
for general corporate
purposes.
We expect
the
remaining portion of the up front rental payment will be financed
through the
$850.0 million
bridge financing and an equity issuance
pursuant to the
Investment Agreement. |
|
|
| • |
Approximately $55.0 million to repay the
debt outstanding under our Revolving Credit Agreement with Morgan
Stanley Asset Funding Inc. and Bank of America, N.A.,
affiliates
of the representatives
of the underwriters, including $50.0
million incurred to finance the Sprint transaction deposit, currently
held in escrow, and $5.0 million incurred to pay for a portion of the
costs and expenses of the Sprint transaction. The $50.0 million was
borrowed under the term loan
portion of the
Revolving Credit Agreement and the $5.0 million was borrowed under the
multi-draw term loan
portion of the
Revolving Credit Agreement.
On April
25,
2005, the interest rate on
the multi-draw portion
of the Revolving Credit Agreement was
4.74% and the interest rate on the
term loan portion of the Revolving Credit Agreements was
4.68%.
The
term
loans
mature
on the earlier to occur of (1) August 14, 2005, (2) the date that we
receive a refund of our $50.0 million deposit from Sprint under the
Agreement to Lease, or (3) the date of the closing of the Sprint
transaction.
We
expect to
use borrowings under the Revolving Credit
Agreement primarily to fund
costs
and expenses relating to the Sprint transaction and
general corporate
purposes, including funding acquisitions,
from time to time, of additional wireless communications towers and
other communications
sites; |
|
|
| • |
Approximately
$26.0
million to be used for working capital and
other general corporate purposes,
which may include future
acquisitions. |
Pending these uses, we
intend to invest net proceeds in interest-bearing, short-term
investment grade securities or money-market accounts, which is
consistent with
our
intention to
qualify as a
REIT.
13,676 |
MARKET PRICE FOR COMMON
STOCK AND DISTRIBUTION
POLICY
In general, we will not pay a corporate-level income tax
on our earnings to the extent we distribute our earnings to our
stockholders. In order to satisfy the REIT requirements, we must
distribute to our stockholders an amount at least equal to (1)
90% of our REIT taxable income (determined before the deduction
for dividends paid and excluding any net capital gain) plus (2)
90% of the excess of our net income from foreclosure property
(as defined in Section 856 of the Internal Revenue Code) over the tax
imposed on such income by the Internal Revenue Code less (3) any excess
non-cash income (as determined under the Internal Revenue Code). See
"Federal Income Tax Considerations."
As of April 21, 2005, we will
have distributed in excess of 90% of our estimated 2005
year-to-date taxable income. The actual amount and timing of
future distributions, however, will be aht: normal; font-style: normal; border-bottom: 3px double #ffffff; padding-top: 0pt " align="left" valign="bottom" nowrap="nowrap"> |
|
|
13,564 |
|
|
|
14,883 |
|
|
|
15,339 |
|
| Selling,
general and administrative
expenses, excluding non-cash
stock based compensation
expense |
|
|
6,559 |
|
|
|
5,856 |
|
|
|
5,621 |
|
|
|
5,375 |
|
| State
franchise, excise and minimum
taxes |
|
|
172 |
|
|
|
165 |
44
dividends. Global Signal's
subsidiaries and Global Signal OP are legally distinct from Global
Signal and have no obligation to make funds available to
it.
The table below is a
summary of our dividend history.
Dividend
Summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Dividend
Period |
|
Pay
Date |
|
Dividend
per
Share
($) |
|
Total
Dividend
($
million) |
|
Amount of
Dividend
Accounted For
As
Return
of
Stockholders'
Capital
($
million) |
| January
1 – March 31,
2005 |
|
April 21,
2005 |
|
$ |
0.4000 |
|
|
$ |
20.9 |
|
|
$ |
17.0 |
|
| |
|
|
163 |
|
|
|
(431 |
) |
| Depreciation,
amortization and
accretion |
|
|
12,347 |
|
|
|
12,413 |
|
|
|
13,816 |
|
|
|
15,712 |
|
| Non-cash
stock-based compensation
expense |
|
|
2,604 |
|
|
|
608 |
|
|
|
228 |
|
October
1 – December 31,
2004 |
|
January 20,
2005 |
|
|
0.4000 |
|
|
|
20.9 |
|
|
|
16.4 |
|
| July
1 – September 30, 2004 |
|
October
20,
2004 |
|
|
0.3750 |
|
|
|
19.1 |
|
|
|
16.3 |
|
| June
1 – June 30, 2004 |
|
July 20,
2004 |
|
|
0.1030 |
|
|
|
5.2 |
|
|
796 |
|
| Operating
income |
|
|
7,747 |
|
|
|
11,254 |
|
|
|
11,637 |
|
|
|
12,760 |
|
| Interest
expense,
net |
|
|
6,090 |
|
|
|
6,810 |
|
|
|
6,393 |
|
|
|
8,235 |
|
| |
|
|
5.2 |
|
| April
1 – May 31, 2004 |
|
June 14,
2004 |
|
|
0.2095 |
|
|
|
8.8 |
|
|
|
8.8 |
|
| January
1 – March 31, 2004 |
|
April 22,
2004 |
|
|
0.3125 |
|
|
|
13.1 |
|
|
|
13.1 |
|
| October
1 – December 31, 2003 |
|
February
5,
2004 |
|
|
Loss
on early extinguishment of
debt |
|
|
8,449 |
|
|
|
|
|
|
|
— |
|
|
|
569 |
|
| Other
income |
|
|
(118 |
) |
|
|
(11 |
) |
|
|
(75 |
) |
|
|
(47 |
) |
| Income
tax
expense |
|
|
11 |
|
|
0.3125 |
|
|
|
12.8 |
|
|
|
0.6 |
|
| One-time
special distribution |
|
February 5,
2004 |
|
|
3.4680 |
|
|
|
142.2 |
|
|
|
142.2 |
|
|
We
intend to continue to make regular quarterly distributions to the
holders of our common stock. Distributions, including
distributions of capital, assets or
dividends, will be made at the discretion of our board of directors and
will depend on many factors, including our financial condition,
earnings, legal requirements and other factors as our board of
directors deems relevant.
It is anticipated that distributions
generally will be either (1) taxable as ordinary income, (2) a
non-taxable return of capital, (3) taxable as a long-term capital gain,
or (4) to the extent attributable
to our taxable REIT
subsidiaries, taxable as qualified dividends eligible for the
15% maximum federal income tax rate for individuals. We will
furnish annually to each of our stockholders a statement setting forth
distributions paid during the preceding year and their federal income
tax status. For a discussion of the federal income tax treatment of
distributions by us, see "Federal Income Tax
Considerations — Taxation of Global Signal" and
"— Taxation of
Stockholders."
Our ordinary shares
began publicly trading on June 3, 2004 on the NYSE under
the symbol "GSL." Prior to
that time, there was no trading market for our
ordinary shares. The following table sets forth, for
the fiscal quarters and periods indicated,
the high and low sales prices per ordinary
share as
reported on the
NYSE since our initial public offering on June 3, 2004:
|
|
|
|
102 |
|
|
|
212 |
|
|
|
16 |
|
| Income
(loss) from continuing
operations |
|
|
(6,685 |
) |
|
|
4,353 |
|
|
|
5,107 |
|
|
|
3,987 |
|
| Income
(loss) from discontinued
operations |
|
|
51 |
|
|
|
(284 |
) |
|
|
|
|
|
|
|
|
|
| 2004 |
|
High |
|
Low |
| From
June 3, 2004 through June 30,
2004 |
|
$ |
23.40 |
|
|
$ |
20.00 |
|
| Third
quarter |
|
$ |
24.00 |
|
|
$ |
19.80 |
|
| Fourth
quarter |
|
$ |
29.80 |
|
|
$ |
22.50 |
|
| 2005 |
|
| First
quarter |
|
$ |
|
193 |
|
|
|
150 |
|
| Net
income
(loss) |
|
$ |
(6,634 |
) |
|
$ |
4,069 |
|
|
$ |
5,300 |
|
|
$ |
4,137 |
|
| Basic
earnings (loss) per
share: |
|
| Income
(loss) from continuing
operations |
|
$ |
(0.16 |
) |
|
$ |
0.10 |
|
|
$ |
0.10 |
|
![]() 32.46 |
|
|
$ |
25.45 |
|
| Second
quarter (through April
25,
2005) |
|
$ |
30.20 |
|
|
$ |
28.70 |
|
|
On
April
25,
2005, the closing
price of our common stock as reported on the NYSE was
$30.12
per share. As of
April
25,
2005, there were
138
record holders of our common stock and
64
record holders of warrants currently exercisable for shares of our
common stock.
45
CAPITALIZATION
The following table sets forth our consolidated capitalization as of
December 31, 2004 on (i)
an actual basis and
(ii)
a pro forma as
adjusted basis to
reflect (a) the sale of
5,750,000
shares of our common stock offered by us in
this offering at an assumed public offering price of
$30.12
per share, less assumed underwriting
discounts, commissions and estimated offering expenses payable by us
and the use of the proceeds as described
under the section entitled "Use of
Proceeds,"
including financing a
portion of the Sprint
transaction,
(b)
the
Triton and
ForeSite
2005
acquisitions
and
(c)
the Sprint
transaction
and related financing
including the
$850.0 million bridge
facility, the $55.0 million of borrowings
under the Revolving Credit Agreement and
the issuance of $250.0 million of common stock pursuant to the
Investment
Agreement.
The ForeSite
2005 acquisition closed on April 29, 2005.
The Sprint transaction
and the Triton
acquisition
are subject to customary closing conditions and we can provide no
assurances that they will close.
|
|
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|
|
|
|
|
|
|
|
| |
|
As
of December 31,
2004 |
| |
|
Actual |
|
Pro
Forma
As Adjusted |
| &nbsspacer.gif" height="1" width="2"> |
$ |
0.08 |
|
| Income
(loss) from discontinued
operations |
|
|
0.00 |
|
|
|
(0.01 |
) |
|
|
0.00 |
|
|
|
0.00 |
|
| Net
income
(loss) |
|
$ |
(0.16 |
) |
|
$ |
0.09 |
|
|
$ |
0.10 |
|
|
$ |
0.08 |
|
|
| |
(in thousands) |
| Cash
and cash equivalents
(1) |
|
$ |
5,991 |
|
|
|
31,657 |
|
| Notes
payable and current portion of long-term debt |
|
$ |
8,268 |
|
|
|
932,795 |
|
| Long-term
debt |
|
|
698,652 |
|
|
|
698,652 |
|
| |
|
| Stockholders'
equity: |
|
| Preferred stock, $0.01 par value: 20 million
shares authorized; no shares issued and outstanding on an actual and
pro forma as adjusted
basis |
|
|
— |
|
 Diluted
earnings (loss) per
share: |
|
| Income
(loss) from continuing
operations |
|
$ |
(0.15 |
) |
|
$ |
0.09 |
|
|
$ |
0.10 |
|
|
$ |
0.08 |
|
| Income
(loss) from discontinued
operations |
|
|
0.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
| Net
income
(loss) |
|
$ |
|
|
— |
|
| Common
stock, $0.01 par value: 150 million shares
authorized; 51.3
million shares issued and outstanding on an actual
basis and
66.9
million shares issued and outstanding on a pro forma as adjusted basis
(2) |
|
|
513 |
|
|
|
669 |
|
| Additional
paid-in
capital |
|
|
157,004 |
|
|
|
569,131 |
|
| Deferred
stock-based
compensation |
|
|
(3,101 |
) |
|
|
(3,101 |
) |
| Accumulated
other comprehensive
loss |
|
|
(1,219 |
) |
|
(0.15 |
) |
|
$ |
0.09 |
|
|
$ |
0.10 |
|
|
$ |
0.08 |
|
| Basic
shares |
|
|
41,058 |
|
|
|
44,461 |
|
|
|
50,608 |
|
|
|
51,107 |
|
| Diluted
shares |
|
|
44,475 |
|
|
|
|
(1,219 |
) |
| Retained
earnings |
|
|
— |
|
|
|
— |
|
| Total
stockholders'
equity |
|
|
153,197 |
|
|
|
47,282 |
565,480 |
|
| Total
capitalization |
|
$ |
860,117 |
|
|
|
2,196,927 |
|
|
|
|
| (1) |
Excludes
$72.9
million of restricted cash related to
amounts held in escrow
pending the closing of certain acquisitions,
and amounts held in imposition and insurance reserves in connection
with our February 2004 and December 2004
mortgage loans
and
amounts held in
the site acquisition reserve account in connection with the December
2004 mortgage loan to fund the purchase
price of future
qualifying acquisitions. See
Adjustment
B2
and C1 to the Pro
Forma
Condensed
Consolidated
Balance Sheet included elsewhere in this
prospectus. |
F-55
The following tables set forth
selected quarterly
financial information for the year ended
December 31, 2003 (in thousands, except per share
data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Successor
Company |
| |
|
Three
Months
Ended
March 31,
2003 |
|
Three
Months
Ended
June
30, 2003 |
|
Three
Months
Ended
September 30, 2003 |
|
Three
Months
Ended
December 31,
2003 |
| Condensed
Statements of
Operations |
|
| Revenues |
|
$ |
40,926 |
|
|
$ |
(2) |
The
common stock outstanding as of
December 31, 2004 as shown
excludes (i)
2,199,032 shares of
common stock available at that date for
future issuance under our stock option plan, (ii)
1,000,000 shares
of
common stock available on January 1, 2005 due to automatic annual
increases, (iii) 3,780,384
shares of common stock issuable under then
outstanding options, and
(iv)
471,878 shares of
common stock issuable under then outstanding warrants.
See
Adjustment
C3
and D4 to the
Pro
Forma
Condensed
Consolidated Balance Sheet included elsewhere in this
prospectus. |
46
SELECTED
HISTORICAL CONSOLIDATED FINANCIAL
INFORMATION
The following table sets forth selected historical consolidated
financial data and other information. The
statements of operations and statements of cash flows data for the
years ended December 31, 2000, 2001, 2003,
2004, and the ten months ended October 31, 2002 and the two
months ended December 31, 2002 are derived
from our audited consolidated financial statements. In
addition, the balance sheet data as of
December 31, 2000, 2001, 2002, 2003 and 2004 are derived from
our audited consolidated financial
statements. The balance sheet data as of October 31, 2002 are
derived from our unaudited
consolidated
financial
statements.
The pro forma as adjusted statement of operations data reflects (i)
the issuance of the February 2004 mortgage
loan of $418.0 million and the application of the net
loan proceeds therefrom, (ii) the initial public offering of
8,050,000 shares of our common stock at an offering
price of $18.00 per share of common stock, and the
application of the net proceeds therefrom,
including a portion to fund the Tower Ventures acquisition, (iii) the
consummation of the Sprint transaction and
related financing, including the funding of the $850.0 million bridge
facility, the $55.0
million of borrowing under the Revolving Credit Agreement, and the
issuance of $250.0 million of common stock
pursuant to the Investment Agreement, (iv) five other acquisitions:
ForeSite 2005, Lattice, Didier
Communications, Towers of Texas, and Triton,
all of which have been
consummated, except for
Triton, which is currently subject
to a
definitive purchase
agreement,
(v) the issuance of the
December 2004 mortgage loan of $293.8 million and the
application of the net proceeds therefrom,
and (vi) this offering
of 5,750,000 shares of common stock at an assumed offering
price of
$30.12
per share, the closing price of our shares of common stock on
April 25,
2005, and the application of the
net proceeds therefrom, as more fully
described in the pro forma financial statements and the related notes
included elsewhere in this prospectus, as if
they had occurred on January 1, 2004. Tdding-top: 0pt" align="right" valign="bottom" colspan="1" nowrap="nowrap">41,570 |
On November 1, 2002, we emerged from Chapter 11. In accordance with
AICPA Statement of Position 90-7 Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code,
we adopted fresh start accounting as of
November 1, 2002 and our emergence from Chapter 11 resulted
in a new reporting entity. Under fresh start accounting,
the reorganization value of the entity is
allocated to the entity's assets based on fair
values, and liabilities are stated at the present value of
amounts to be paid determined at appropriate current
interest rates. The effective date is considered
to be the close of business on November 1, 2002, for
financial reporting purposes. As stated above,
the periods presented prior to November 1, 2002, have
been designated
"predecessor
company"
and the periods starting on November 1, 2002,
have been designated
"successor
company."
As a result of the implementation of fresh
start accounting as of November 1, 2002, our financial statements
after that date are not comparable to our
financial statements for prior periods because of the differences
in the basis of accounting and the debt and
equity structure for the
predecessor
company
and the
successor
company.
The more significant effects of the differences in the basis of
accounting on the
successor
company's
financial statements are (1) lower depreciation and amortization
expense as a result of the revaluation of our
long-lived assets downward by $357.2 million through the
application of fresh start accounting and (2)
lower interest expense as a result of the discharge of $404.8
million of debt upon our emergence from
bankruptcy.
Following a statement issued by the staff of the Office of the Chief
Accountant of the Securities and Exchange
Commission, or SEC, on February 7, 2005 clarifying
certain issues related to lease accounting, we announced that
we would change our accounting with respect
to certain types of leases. In March 2005, we restated our
financial statements for the two months
ended December 31, 2002, the fiscal year ended December 31, 2003 and
the first three fiscal quarters of 2004 for
errors in our lease accounting with respect to certain types of leases
and related long-lived assets. These
restatements were reflected in our annual report on Form 10-K for the
year ended December 31, 2004.
In March 2005, our independent registered public accounting firm
informed the audit committee of our board of
directors, as a part of
their audit of our financial statements and primarily as a result of
the restatement
of a material weakness
related to the design or operation of the internal control
components over our accounting for leases and
depreciation of leasehold improvements. We have started to
take corrective actions to remedy this
internal control deficiency.
|
|
$ |
41,677 |
|
|
$ |
42,498 |
|
| Direct
site operating expenses, excluding
impairment losses, depreciation,
amortization and
accretion |
|
|
13,670 |
|
|
|
13,986 |
|
|
|
14,586 |
|
|
|
14,330 |
|
| Selling,
general and administrative expenses,
excluding non-cash stock based compensation
expense |
|
|
6,512 |
|
|
|
6,696 |
|
|
|
47
The information set forth below should be
read in conjunction with "Use of Proceeds,"
"Capitalization,"
"Management's Discussion and Analysis of Financial
Condition and Results of Operations," our consolidated
financial statements, our pro forma condensed
consolidated financial statements, Tower Ventures',
Foresite's, Lattice's, Didier
Communications', Towers of
Texas', Triton's and
Sprint Sites
USA's statements of revenue and certain expenses, and
each of their related notes included elsewhere in this
prospectus.
48
Selected
Historical Consolidated Financial
Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
6,519 |
Predecessor
Company |
|
Successor
Company |
| (dollars
and shares in thousands, except per share
data) |
|
Year
Ended
December
31,
2000 |
|
Year
Ended
December
31,
2001 |
|
Ten
Months
Ended
October
31,
2002 |
|
Two
Months
Ended
December
31,
2002 |
|
Year
Ended
December
31,
2003 |
|
Year
Ended
December 31,
2004 |
| Historical |
|
Pro
Forma
As
Adjusted |
|
| STATEMENT
OF OPERATIONS
DATA(1) |
|
|
|
|
7,188 |
|
| State
franchise, excise and minimum
taxes |
|
|
209 |
|
|
|
208 |
|
|
|
208 |
|
|
|
223 |
|
| Depreciation,
amortization and
accretion |
|
|
11,986 |
|
|
|
11,879 |
|
|
|
11,648 |
|
|
|
11,625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Revenues |
|
$ |
159,810 |
|
|
$ |
174,024 |
|
|
$ |
137,435 |
|
|
$ |
27,454 |
|
| Non-cash
stock-based compensation
expense |
|
|
— |
|
|
|
— |
|
|
|
592 |
|
|
|
887 |
|
| Operating
income |
|
|
8,549 |
|
|
|
8,801 |
|
|
|
8,124 |
|
|
|
8,245 |
|
| Interest
expense,
net |
|
|
|
|
$ |
166,670 |
|
|
$ |
182,865 |
|
|
$ |
433,387 |
|
| Direct
site operating expenses (excluding impairment
losses, depreciation, amortization and
accretion
expense) |
|
|
55,435 |
|
|
5,751 |
|
64,672 |
|
|
|
46,570 |
|
|
|
9,028 |
|
|
|
56,572 |
|
|
|
57,462 |
|
|
|
|
|
5,092 |
|
|
|
4,988 |
|
|
|
4,646 |
|
| Loss
on early extinguishment of
debt |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Other
expense |
|
|
29 |
|
|
|
24 |
|
203,837 |
|
| Gross
margin |
|
|
104,375 |
|
|
|
109,352 |
|
|
|
90,865 |
|
|
|
18,426 |
|
|
|
110,098 |
|
|
|
125,403 |
|
|
|
229,550 |
|
| Other
expenses: |
|
|
|
|
|
|
|
|
67 |
|
|
|
495 |
|
| Income
tax expense
(benefit) |
|
|
(76 |
) |
|
|
(343 |
) |
|
|
93 |
|
|
|
(339 |
) |
| Income
from continuing
operations |
|
|
2,845 |
|
|
|
4,028 |
|
|
|
2,976 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Selling,
general and
administrative |
|
|
54,068 |
|
|
|
48,034 |
|
|
|
27,523 |
|
|
|
4,743 |
|
|
|
26,914 |
|
3,443 |
|
| Income
(loss) from discontinued
operations |
|
|
114 |
|
|
|
134 |
|
|
|
(14 |
) |
|
|
(365 |
) |
| Net
income |
|
$ |
2,959 |
|
|
$ |
4,162 |
|
|
$ |
2,962 |
|
|
$ |
3,078 |
|
| Basic
and diluted earnings per
share: |
![]() |
|
|
23,410 |
|
|
|
31,671 |
|
| State
franchise, excise and minimum
taxes |
|
|
1,184 |
|
|
|
1,877 |
|
|
|
1,671 |
|
|
|
330 |
|
|
|
848 |
|
|
|
69 |
|
|
|
69 |
|
Depreciation,
amortization and
accretion (2)
|
|
|
| Income from
continuing
operations |
|
$ |
0.07 |
|
|
$ |
0.10 |
|
|
|
0.07 |
|
|
|
0.08 |
|
| Income
(loss) from discontinued
operations |
|
|
0.00 |
|
|
|
0.00 |
|
|
|
(0.00 |
) |
|
|
(0.01 |
) |
| Net
income |
|
$ |
0.07 |
|
111,560 |
|
|
|
118,447 |
|
|
|
73,508 |
|
|
|
10,119 |
|
|
|
47,137 |
|
|
|
54,288 |
|
|
|
154,955 |
|
| Non-cash
stock based compensation
expense |
|
|
— |
|
|
|
— |
|
|
|
|
|
$ |
0.10 |
|
|
$ |
0.07 |
|
|
$ |
0.07 |
|
| Basic
shares |
|
|
41,000 |
|
|
|
41,000 |
|
|
|
41,000 |
|
|
|
41,000 |
|
| Diluted
shares |
|
|
— |
|
|
|
— |
|
— |
|
|
|
— |
|
|
|
1,479 |
|
|
|
4,235 |
|
|
|
4,235 |
|
| Impairment
loss on
assets |
|
|
— |
|
|
|
293,372 |
|
|
|
5,559 |
|
|
|
— |
|
|
|
— |
|
|
|
|
41,000 |
|
|
|
41,448 |
|
|
|
|
| Note
21. |
Other Events (unaudited) Subsequent to Date
of Report of Independent Registered Certified Public
Accountants |
On
April 15, 2005, we amended and restated the Revolving Credit
Agreement described in note
11 to provide an additional $25 million
multi-draw term loan to be used for fees and expenses
incurred in connection with the Sprint transaction.
Interest on the $20 million revolving portion of this
credit facility is payable, at Global Signal OP's
option, at either the LIBOR plus 3.0% or the bank's
base rate plus 2.0%. Interest on the
term loans under the credit facility is payable at our option at
either, LIBOR plus 1.75% or the
bank's base rate plus 0.75%. The credit facility, through
the Revolving Credit Agreement and the
related ancillary documentation, contains covenants and restrictions
customary for a facility of this type
including a limitation on our consolidated indebtedness at
approximately $1.0 billion and a requirement
to limit our ratio of consolidated indebtedness to consolidated EBITDA,
as defined in the loan document, to 7.0 to
1.0. The consolidated indebtedness will be increased to approximately
$1.8 billion and the ratio
F-56
to 7.65 to 1.0 upon consummation of the
bridge financing for the Sprint transaction.
The credit facility continues to be guaranteed by us,
Global Signal GP, LLC and certain subsidiaries of
Global Signal OP. It is secured by a pledge of Global
Signal OP's assets, including a pledge of 65% of
its interest in our United Kingdom
subsidiary, 100% of its interest in certain other domestic
subsidiaries, a pledge by us and Global
Signal GP, LLC of our interests in Global Signal OP, and a pledge by us
of 65% of our interest in our
Canadian subsidiary. The term loans must be repaid on the earlier of
(1) August 14, 2005, (2) the date that we
receive a refund of the deposit from Sprint under the Agreement to
Lease, and (3) the date of the closing of
the Sprint
transaction.
Acquisition Credit
Facility
As
of April 25,
2005, our wholly
owned subsidiary, Global Signal Acquisitions LLC, or Global
Signal Acquisitions, entered into a 364-day
$200.0 million credit facility, which we refer to as the
acquisition credit facility, with Morgan
Stanley Asset Funding Inc. and Bank of America, N.A. (affiliates of
the representatives of the underwriters) to
provide funding for the acquisition of additional
communications sites. The acquisition credit
facility is guaranteed
by Global Signal OP and
future subsidiaries of Global Signal
Acquisitions. Moreover, it
is secured by substantially all of Global
Signal Acquisitions' tangible and
intangible assets and by a pledge of Global Signal OP's equity
interest in Global Signal Acquisitions. In addition, we have agreed to
enter into a guarantee agreement with respect to the acquisition credit
facility, and to secure that guarantee by a pledge of our equity
interest in Global Signal OP, no later than May 17, 2005.
We intend to fund future acquisitions with
this credit facility along with a portion of
the net proceeds from this offering and incremental equity offerings,
and for a short period of time may fund
100% of the purchase price of acquisitions with the acquisition
credit facility.
The
level of borrowings under the acquisition
credit facility is limited based on a borrowing base, as defined
therein. Borrowings under the acquisition credit facility will bear
interest at our option at either the Eurodollar rate plus
1.5% or the bank's base rate
plus approximately 1.25% provided the loan balance is equal to
or lower than 68% of the aggregate
acquisition price (as defined therein) of towers owned, leased or
managed by Global Signal Acquisitions, from
time to time. If the loan balance is higher than 68% of the
aggregate acquisition price of towers owned,
leased or managed by Global Signal Acquisitions, from time to time,
then borrowings under the acquisition credit
facility will bear interest at our option at either the
Eurodollar rate plus 2.0% or the
bank's base rate plus approximately 1.75%. In connection
with closing the acquisition credit
facility, we paid an origination fee of 0.375% of the $200.0
million commitment and agreed to pay to
Morgan Stanley Asset Funding Inc. and Bank of America, N.A. an exit fee
of 0.375% of the principal amount of
loans under the acquisition credit facouble #ffffff;padding-top: 0pt" align="right" valign="bottom" colspan="1"> |
— |
|
|
|
— |
|
| Reorganization
costs
|
|
|
— |
|
|
|
— |
|
|
|
59,124 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Unsuccessful
debt restructuring
costs |
|
|
F-57
REPORT
OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTANTS
Stockholders and Board of Directors of Global Signal
Inc.
We have audited the statement of revenue and certain
expenses of Tower Ventures as described in Note 1 for the year ended
December 31, 2003. This statement of revenue and certain expenses is
the responsibility of Tower Ventures' management. Our
responsibility is to express an opinion on this statement of revenue
and certain expenses based on our audit.
We conducted our audit
in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
statement of revenue and certain expenses is free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of revenue and
certain expenses. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall presentation of the statement of revenue and
certain expenses. We believe that our audit of the statement of revenue
and certain expenses provides a reasonable basis for our opinion.
The accompanying statement of revenue and certain expenses was
prepared for the purpose of complying with the rules and regulations of
the Securities and Exchange Commission for inclusion in
a Form S-11 of Global
Signal Inc. as described in Note 1 and is not intended to be a complete
presentation of Tower Ventures' revenues and
expenses.
In our
opinion, the statement of revenue and certain expenses referred to
above presents fairly, in all material respects, the revenue and
certain expenses of Tower Ventures for the year ended December 31,
2003, in conformity with U.S. generally accepted accounting
principles.
As more fully described in Note 3
– Restatement of Previously Issued Statement of Revenue
and Certain Expenses, the accompanying
statement of revenue and certain expenses for the year ended
December 31, 2003 has been restated to correct the
accounting for ground leases.
|
/s/
Ernst & Young LLP |
Tampa,
Florida
April
18,
2005
F-58
TOWER
VENTURES
STATEMENTS OF REVENUE AND CERTAIN
EXPENSES
(dollars in
thousands)
|
|
|
|
|
|
|
— |
|
|
|
1,702 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Total
operating
expenses |
|
|
166,812 |
|
|
|
463,432 |
|
|
|
167,385 |
|
|
|
|
| |
|
Year
Ended
December 31, 2003 |
|
Six Months Ended
June 30,
2004 |
| |
|
(Restated) |
|
(unaudited) |
| Revenue |
|
$ |
4,460 |
|
|
$ |
2,467 |
|
| |
|
|
|
|
|
|
|
|
| Certain
expenses: |
|
|
|
|
|
|
|
|
| Ground
rent |
|
|
|
|
15,192 |
|
|
|
76,378 |
|
|
|
82,002 |
|
|
|
190,930 |
|
| Operating
income (loss)
|
|
|
(62,437 |
) |
|
|
(354,080 |
) |
|
|
(76,520 |
) |
|
|
3,234 |
|
|
|
33,720 |
|
|
|
|
1,014 |
|
|
|
537 |
|
| Property
taxes |
|
|
177 |
|
|
|
76 |
|
| Other tower operating
expenses |
|
|
262 |
|
|
|
125 |
|
| Selling, general
& administrative
expenses |
|
|
12 |
|
|
|
4 |
|
| Total
certain
expenses |
|
|
1,465 |
43,401 |
|
|
|
38,620 |
|
| Gain
(loss) on extinguishment of
debt |
|
|
— |
|
|
|
— |
|
|
|
404,838 |
|
|
|
— |
|
|
|
— |
|
|
|
(9,018 |
) |
|
|
(9,018 |
) |
| Interest
expense,
net |
|
|
65,707 | t-weight: normal; font-style: normal; border-bottom: 1px double #ffffff ; padding-top: 0pt " align="left" valign="bottom" nowrap="nowrap">
|
|
742 |
|
| Revenue
in excess of certain
expenses |
|
$ |
2,995 |
|
|
$ |
1,725 |
|
|
See
accompanying notes to the Statements of Revenue and Certain
Expenses.
F-59
TOWER
VENTURES
NOTES TO STATEMENTS OF REVENUE AND CERTAIN
EXPENSES
Year Ended December
31, 2003 and Six Months Ended June 30, 2004
(unaudited)
(dollars in
thousands)
1. Summary of
Significant Accounting Policies
Business
The accompanying statement of revenue
and certain expenses relate to the operations of Tower Ventures. Tower
Ventures represents a portfolio of 97 tower sites located in Tennessee,
Missouri, Mississippi, Arkansas and South Carolina. On April 22, 2004,
a definitive purchase agreement was signed by Pinnacle Towers
Acquisition LLC, a wholly-owned subsidiary of Global Signal Inc. (the
"Company") to acquire all of the
members' interests of Tower Ventures; the acquisition closed on
June 30, 2004. The portfolio of 97 sites acquired does not include
three tower sites previously owned by Tower Ventures III LLC that will
be distributed to the prior members before the closing. The revenue and
certain expenses related to these tower sites are not included in the
accompanying statements.
Basis of
Presentation
The accompanying statements of revenue
and certain expenses were prepared for the purpose of complying with
the rules and regulations of the Securities and Exchange Commission for
inclusion in a Form S-11 of the Company. The statements are not
representative of the actual operations of Tower Ventures for the
periods presented nor indicative of future operations as certain
expenses, primarily consisting of interest expense, depreciation,
amortization, management fees and corporate expenses have been
excluded.
The
accompanying statements of revenue and certain expenses for the period
from January 1, 2004 to June 30, 2004 which includes operating results
for each tower until its acquisition by the Company, are unaudited and
have been prepared in accordance with generally accepted accounting
principles for interim financial information and Article 10 of
Regulation S-X. Revenues and certain expenses for the period from
January 1, 2004 to June 30, 2004, are not necessarily indicative of
that which may be expected for the year ending December 31,
2004.
Use of Estimates
|
|
|
88,731 |
|
|
|
45,720 |
|
|
|
4,041 |
|
|
|
20,477 |
|
|
|
27,529 |
|
|
|
95,464 |
|
| Income
(loss) from continuing
operations |
|
|
(127,732 |
) |
|
|
(436,068 |
) |
|
|
288,326 |
|
|
The
preparation of financial statements in conformity with accounting
principles generally accepted in the United
States requires management to make estimates and use assumptions that
affect the reported amounts of revenues and
expenses during the reporting period. Actual results may vary from
estimates used and such variances could be
material.
Revenue Recognition
Tower Ventures
generates revenue by leasing space on communications sites it owns.
Revenue is recorded in the month in which it is earned. Revenue from
lease arrangements with tenants on communications sites that have
fixed-rate escalation clauses are recognized on a straight-line basis
over the contractual life of the related lease agreements.
Tower
Ventures further evaluates
its revenue recognition
and defers any revenue if the following
criteria are not met: persuasive evidence of an arrangement exists,
payment is not contingent upon other performance or other obligations,
the price is fixed or determinable and collectibility is reasonably
assured.
Concentration of Credit Risk
Substantially all of
Tower Ventures'
revenues are with national and local wireless communications providers,
a vast majority of which are concentrated in wireless
telephony.
F-60
The significant tenants of Tower Ventures
and the revenues earned from these tenants, as a percentage of total
revenues, are as
follows:
|
|
|
|
|
|
|
|
|
|
|
| Tenant |
|
Year
Ended
December 31,
2003 |
|
Six
Months
Ended
June 30,
2004 |
| |
|
|
|
(unaudited) |
| AT&T
Wireless |
|
|
23.8 |
% |
|
|
23.6 |
% |
| |
(910 |
) |
|
|
14,018 |
|
|
|
6,637 |
|
|
$ |
(66,079 |
) |
| Income
(loss) from discontinued
operations |
|
|
3,437 |
|
|
|
(6,490 |
) |
|
|
(32,076 |
) |
|
|
(84 |
) |
|
|
(131 |
) |
|
|
111 |
Cellular
South |
|
|
18.7 |
% |
|
|
18.6 |
% |
| T-Mobile |
|
|
14.4 |
% |
|
|
14.3 |
% |
| Cingular |
|
|
11.3 |
% |
|
|
11.2 |
% |
| Sprint |
|
|
9.1 |
% |
|
|
9.1 |
% |
| Verizon |
|
00000; font-weight: normal; font-style: normal; border-bottom: 3px double #ffffff; padding-top: 0pt " align="left" valign="bottom" nowrap="nowrap"> |
|
| Net
income
(loss) |
|
$ |
(124,295 |
) |
|
$ |
(448,202 |
) |
|
$ |
256,172 |
|
|
$ |
(996 |
) |
|
$ |
13,161 |
|
|
$ |
6,872 |
|
|
| Income
(loss) from continuing operations per share
(basic) |
|
$ |
(2.67 |
) |
|
$ |
(9.00 |
) |
|
$ |
5.94 |
| 9.0 |
% |
|
|
9.4 |
% |
|
2. Leases
Lease
Obligations
As lessee, Tower
Ventures is obligated under non-cancelable operating leases for ground
space under communications towers and at
other sites, as well as space on communications towers that
expire at various times through
2040.
The majority of the ground, tower and other site leases have
multiple renewal options, which range up to
5 years each. Certain of the ground and managed site leases
have purchase options at the end of the
original lease term.
The
future minimum lease payment commitments under these ground leases in
effect at December 31,
2003, without giving effect to the impact of straight
line rent adjustments, are as
follows:
|
|
|
|
|
|
|
| Year
ending December
31, |
|
| 2004 |
|
$ |
748 |
|
| 2005 |
|
|
481 |
|
| 2006 |
|
|
145 |
|
| 2007 |
|
|
|
$ |
(0.02 |
) |
|
$ |
0.34 |
|
|
$ |
0.14 |
|
|
$ |
(1.00 |
) |
| Income
(loss) from continuing operations per share
(diluted) |
|
|
$ |
(2.67 |
) |
|
$ |
(9.00 |
) |
|
$ |
5.94 |
|
|
$ |
(0.02 |
) |
|
$ |
0.34 |
|
|
21 |
|
| 2008 |
|
|
21 |
|
| 2009
and thereafter |
|
|
49 |
|
| Total
minimum lease
payments |
|
$ |
1,465 |
|
|
Many
of Tower Ventures Acquisition's lease agreements contain
escalation clauses which are typically based
on either a fixed percentage rate or the change in the Consumer Price
Index. For leases with escalation clauses
based on a fixed percentage rate, rental expense
is
recognized in our statements of revenue and
certain expenses on a straight line basis over the initial term of the
lease plus the future optional renewal
periods where there is a reasonable assurance that the lease will be
renewed based on our evaluation at the
inception of the lease or our assumption of the lease due to our
acquisition of the related tower
asset.
Total ground rental expense of
$1,014
for the year ended December 31, 2003 includes
$953.6 of minimum and
$60.4 of contingent rental
expense. Total ground rental expense of
$537
for the six months ended June 30, 2004 includes
$506.4 of minimum and
$30.6
of contingent rental
expense.
Tenant
Leases
Tower Ventures leases antenna space on communications towers to
various wireless service providers and other
wireless communications users under non-cancelable operating leases.
These leases are generally for terms of 5 to
10 years. Generally, Tower Ventures Acquisition's tenant leases
provide for annual escalations and multiple
renewal periods, at the tenant's option.
Leases with
fixed-rate escalation clauses, or those that
have no escalation, have
been included below based on the contractual tenant lease
amounts. Leases that escalate based upon non-fixed
rates, such as the Consumer Price Index, are included
below at the current contractual rate over the
remaining term of the lease. The tenant rental payments
included in the table below do not assume exercise of
tenant renewal
options.
F-61
As lessor, Tower Ventures is due to
receive rental payments from customers of tower space under
non-cancelable lease agreements in effect as of
December 31, 2003, without giving effect to
the impact of straight line rent
adjustments, as
follows:
|
|
|
|
|
$ |
0.13 |
|
|
$ |
(1.00 |
) |
| Net
income (loss) per share
(basic) |
|
$ |
(2.59 |
) |
|
$ |
(9.25 |
) |
|
$ |
5.27 |
|
|
$ |
(0.02 |
) |
|
$ |
0.32 |
|
|
$ |
0.15 |
|
|
|
|
|
| Net
income (loss) per share
(diluted) |
|
$ |
|
| Year
ending December
31, |
|
| 2004 |
|
$ |
4,698 |
|
| 2005 |
|
|
3,119 |
|
| 2006 |
|
|
1,296 |
|
| 2007 |
|
|
489 |
|
| 2008 |
|
|
491 |
|
| 2009
and
thereafter |
|
|
278 |
(2.59 |
) |
|
$ |
(9.25 |
) |
|
$ |
5.27 |
|
|
$ |
|
| |
|
$ |
10,371 |
|
|
(0.02 |
) |
|
$ |
0.32 |
|
|
$ |
0.14 |
|
|
| Ordinary
cash dividends declared per share |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
3. Restatement
of Previously Issued Statement of Revenue and Certain
Expenses
Tower
Ventures restated the accompanying statement
of revenue and certain expenses as of
December 31, 2003. The restatement adjustment reflected in the
following tables corrects an error in the
recognition of additional ground lease rent
expense on a straight-line basis over the initial term
of the lease plus the future optional
renewal periods where there is reasonable assurance that the
lease will be renewed, based on
Tower
Ventures' evaluation at the inception
of the lease.
The following table presents the impact of the restatement
adjustments on
Tower
Ventures' previously reported results
for the year ended December 31,
2003:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
December
31,
2003 |
| |
|
As
Previously
Reported |
|
Adjustments |
|
As
Restated |
| Revenue |
|
$ |
4,460 |
|
|
$ |
— |
|
|
$ |
4,460 |
|
| Certain
expenses: |
|
|
|
|
$ |
0.31 |
|
|
$ |
1.40 |
|
|
|
|
|
| Special
cash distribution declared per
share |
|
$ |
— |
|
|
$ |
|
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
3.47 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
| Rent |
|
|
739 |
|
|
|
275 |
|
|
|
1,014 |
|
| Property
taxes |
|
|
177 |
|
|
|
— |
|
|
|
177 |
|
| Other
tower operating
expense |
|
|
262 |
|
|
| Weighted
average shares of
common
stock
outstanding
(basic) |
|
|
47,918 |
|
|
|
48,431 |
|
|
|
48,573 |
|
|
|
41,000 |
|
|
|
41,000 |
|
|
|
46,831 |
|
|
|
65,759 |
|
| Weighted
average shares of
common
stock
outstanding
(diluted) |
|
|
47,918 |
|
|
|
|
|
|
— |
|
|
|
262 |
|
| Selling,
general & administrative
expenses |
|
|
12 |
|
|
|
— |
|
|
|
12 |
|
| Total
certain
expenses |
|
|
1,190 |
|
|
|
275 |
|
|
|
48,431 |
|
|
|
48,573 |
1,465 |
|
| Revenue
in excess of certain
expenses |
|
$ |
|
|
|
41,000 |
|
|
|
41,112 |
|
|
|
49,683 |
|
|
|
65,759 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,270 |
|
|
$ |
(275 |
) |
|
$ |
2,995 |
|
|
F-62
REPORT
OF INDEPENDENT REGISTERED
PUBLIC
ACCOUNTING
FIRM
Stockholders
and Board of Directors of Global Signal,
Inc.
We have audited the accompanying
statement of revenue and certain expenses of Lattice Acquisition as
described in Note 1 for the year ended December 31, 2003. This
statement of revenue and certain expenses is the responsibility of
Lattice Acquisition's management. Our responsibility is to
express an opinion on this statement of revenue and certain expenses
based on our audit.
We conducted our audit in accordance with the
standards of the Public Company Accounting Oversight Board (United
States). Those
standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the statement of revenue and certain expenses is free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement of
revenue and certain expenses. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the
statement of revenue and certain expenses. We believe that our audit of
the statement of revenue and certain expenses provides a reasonable
basis for our opinion.
The accompanying statement of revenue and
certain expenses was prepared for the purpose of complying with the
rules and regulations of the Securities and Exchange Commission for
inclusion in
a
Form S-11 of Global Signal
Inc. as described in Note 1 and is not intended to be a complete
presentation of Lattice Acquisition's revenues and
expenses.
In
our opinion, the statement of revenue and certain expenses referred to
above presents fairly, in all material respects, the revenue and
certain expenses of Lattice Acquisition as described in Note 1 for the
year ended December 31, 2003 in conformity with U.S. generally accepted
accounting principles.
As more fully
described in Note 3 – Restatement of Previously Issued Statement
of Revenue and Certain Expenses, the
accompanying statement of revenue and certain expenses for the year
ended December 31, 2003 has been restated to
correct the accounting for ground
leases.
/s/ Ernst
& Young LLP
font-size: 8pt; color: #000000; font-weight: normal; font-style: normal; border-bottom: 3px double #ffffff;padding-top: 0pt" align="right" valign="bottom" colspan="1"> |
|
|
|
|
Cincinnati,
Ohio
April
21,
2005
F-63
LATTICE
ACQUISITION
STATEMENTS
OF REVENUE AND CERTAIN
EXPENSES
(dollars
in
thousands)
|
|
|
|
| BALANCE
SHEET
DATA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash
and cash
equivalents |
|
$ |
44,233 |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year
Ended
December 31, 2003 |
|
Period from
January 1, 2004
to
December 31, 2004 |
| |
|
|
|
(Unaudited) |
| Revenue |
|
$ |
10,255 |
|
|
$ |
10,464 |
|
| Certain
Expenses: |
|
| Rent |
|
|
2,054 |
|
|
|
1,826 |
|
| Property taxes |
|
|
378 |
|
|
|
$ |
13,187 |
|
|
$ |
21,819 |
|
|
$ |
4,350 |
|
|
$ |
9,661 |
|
|
$ |
5,991 |
|
|
$ |
31,657 |
|
| Total
assets
|
|
|
1,469,607 |
|
|
|
1,034,333 |
|
|
|
909,098 |
|
|
|
528,066 |
279 |
|
| Other tower operating expenses |
|
|
565 |
|
|
|
690 |
|
| Selling, general & administrative
expenses |
|
|
189 |
|
|
|
246 |
|
| Total certain
expenses |
|
|
3,186 |
|
|
|
3,041 |
|
| Revenue in excess of certain
expenses |
|
$ |
|
|
|
519,967 |
|
7,069
|
|
$ |
7,423 |
|
|
|
|
923,369 |
|
|
|
2,273,867 |
|
| Total
debt |
|
|
869,392 |
|
|
|
885,471 |
|
|
|
491,473 |
|
|
|
277,844 |
|
|
|
264,251 |
|
|
|
706,920 |
|
|
See
accompanying notes to Statements of Revenue and Certain
Expenses.
F-64
LATTICE
ACQUISITION
NOTES
TO STATEMENTS OF REVENUE AND CERTAIN
EXPENSES
Year Ended December 31,
2003 and December 31,
2004
(Unaudited)
(dollars
in
thousands)
1. Business
and Summary of Significant Accounting Policies
Business
Lattice Communications, LLC and the company of which it is the sole
member, LB Tower Company LLC ("LB Tower";
collectively, "Lattice"), are principally
engaged in providing services to the wireless communications industry
by leasing antenna sites on multi-tenant towers. Lattice leases tower
space to a diverse range of wireless communications industries,
including microwave, personal communications services, cellular,
paging, mobile telephone, radio and television broadcasting,
specialized mobile radio and enhanced specialized mobile radio.
Lattice's communications sites are located throughout the United
States.
Lattice is jointly owned by Cinergy Telecommunications
Holding Company, Inc. ("CT") –
43.5%; an investor partnership, Lattice Investors, L.P. –
43.5%; and, Lattice Partners, Ltd.
("LP") – 13%. LP is a limited
liability company whose members include various officers and employees
of Lattice. The majority of Lattice's related party transactions
are conducted with The Cincinnati Gas & Electric Company and PSI
Energy, Inc., under lease agreements assigned by their sister company,
CT, to Lattice.
On July 30, 2004, a definitive purchase
agreement was signed by Pinnacle Towers Acquisition LLC, a wholly-owned
subsidiary of Global Signal Inc. (the
"Company"), to acquire from Lattice 220 owned
towers and agreements relating to
17 other towers under
management or lease. The purchase agreement and these Statements of
Revenues and Certain Expenses exclude towers owned by LB Tower as well
as certain assets of Lattice related to tower development.
"Lattice Acquisition" represents the assets
to be acquired by the Company.
Pinnacle Towers
Acquisition LLC consummated the acquisition of the towers in stages as
follows:
|
|
|
|
|
|
|
| Date |
|
Number
of Towers |
| October 29,
2004 |
|
|
167 |
|
| November
30, 2004 |
|
|
22 |
1,631,447 |
|
| Stockholders'
equity |
|
|
534,103 |
|
|
|
83,798 |
|
|
|
354,917 |
|
|
|
204,330 |
|
|
|
217,531 |
|
|
|
153,197 |
|
|
|
565,480 |
|
| |
|
|
|
|
|
|
|
| December 30,
2004 |
|
|
36 |
|
|
As of
December 31, 2004,
twelve
towers remained under contract but the acquisitions had not been
consummated.
Eleven
of these towers were acquired in March 2005, leaving only one tower
remaining to be acquired.
Basis of Presentation
The accompanying statements of revenue and certain expenses were
prepared for the purpose of complying with the rules and regulations of
the Securities and Exchange Commission for inclusion in a Form
S-11 of the Company. The
statements, which encompass the towers and agreements to be sold to the
Company, are not representative of the actual operations of Lattice
Acquisition for the periods presented or indicative of future
operations, as they exclude the following: certain selling, general and
administrative expenses; interest expense; and depreciation and
amortization.
The accompanying statements of
revenue and certain expenses for the period from January 1, 2004 to
December 31, 2004, which includes operating results for each tower
until its acquisition by the Company, are unaudited and have been
prepared in accordance with generally accepted accounting principles
for interim financial information and Article 10 of Regulation S-X.
Revenues and certain expenses for the period from January 1, 2004 to
December 31, 2004, are not necessarily indicative of that which may be
expected for the year ending December 31, 2004.
F-65
Use of Estimates
The preparation
of financial statements in conformity with U.S. generally accepted
accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates and such variances could be material.
Revenue
Recognition
Revenues are recognized when earned. Escalation
clauses present in lease agreements with Lattice's customers are
recognized on a straight-line basis over the term of the lease.
Concentration of Credit Risk
Lattice
Acquisition derives the
largest portion of its revenues from customers who require wireless
communications services. Excluding related parties, no single customer
exceeded 10% of unrelated revenues in the year ended December
31, 2003 or the period from
January 1, 2004 to December 31, 2004.
|
|
|
|
|
2. Leases
Lease
Obligations
As
lessee, Lattice
Acquisition is obligated under non-cancelable operating leases for
ground space under communications towers and
at other sites, as well as space on communications towers that
expire at various times through
2099.
The majority of the ground, tower and other site leases have
multiple renewal options, which range up to
10 years each. Certain of the ground and managed site leases
have purchase options at the end of the
original lease term.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49
|
|
|
|
(1) |
During
the ten months ended October 31, 2002, the two months ended December
31, 2002 and the years ended December 31,
2003 and 2004, we disposed of, or held for disposal by
sale, certain non-core assets and under performing sites, which have
been accounted for as discontinued
operations. Their results for all periods presented are not included in
results from continuing
operations. |
|
|
|
|
(2) |
Depreciation, amortization and
accretion expense for the ten months ended October 31, 2002 and two
months ended December 31,
2002 are not proportional
because the
successor
company's
depreciable assets have a lower basis. Following the
restructuring transaction, assets were
revalued, including all long-lived assets, to their fair market value,
thereby lowering the depreciable basis. |
|
|
|
|
(3) |
Pro forma as adjusted net income
(loss) per share (basic and diluted) represents amounts from continuing
operations. |
50
MANAGEMENT'S
DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
You should read the following
discolor:#000000;font-size:10pt; width: 456pt; text-align: left; font-style: normal; line-height: 12pt; padding-top:6pt; padding-left:0pt; padding-right:0pt; padding-bottom: 6pt; margin: 0pt; text-indent: 20pt; background-color: #ffffff">Future minimum
rental payments due by Lattice Acquisition under operating leases in
effect at December 31, 2003, without giving effect to the impact of
straight-line rent adjustments, are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Related
Party |
|
Other |
|
Total |
| 2004 |
|
$ |
594 |
|
|
$ |
806 |
|
|
$ |
1,400 |
|
| 2005 |
|
|
608 |
|
|
Executive Overview
Global Signal,
formerly known as Pinnacle Holdings Inc., is one of the largest
wireless communications tower owners in the
United States, based on the number of towers
owned. Our
strategy is to grow our Adjusted EBITDA and Adjusted
Funds From Operations (1) organically by
adding additional tenants to our towers, (2) by
acquiring towers with existing telephony tenants in
locations where we believe there are opportunities
for organic growth and (3)
by financing these newly acquired towers, on
a long-term basis, using equity issuances
combined with low-cost fixed-rate
debt obtained through the issuance of
mortgage-backed securities. Through this strategy we will seek
to increase our dividend per share over time.
We paid a dividend of $0.40 per share of our
common
stock
for the quarter ended December 31, 2004, which is a 28.0%
increase over the dividend we paid for the
quarter ended December 31, 2003.
In
addition, on March 30,
2005, our board
of directors declared a dividend of $0.40 per share of our common stock
for the three months ended March 31, 2005,
which was paid
on April 21, 2005 to stockholders of record as of April
11, 2005.
|
640 |
|
|
|
1,248 |
We are organized, and
conduct our operations to qualify, as a REIT for federal income
tax purposes. As such, we will generally not
be subject to federal income tax on that portion of our
income that is distributed to our stockholders if we
distribute at least 90% of our REIT taxable
income to our stockholders and comply with various other
requirements. We also have certain
subsidiaries that are not qualified REIT subsidiaries
and, therefore, their operations
are
subject to federal income tax. Since May 12,
2004, we have
owned
substantially all of our assets and have conducted
substantially all of our operations through
our
operating partnership, Global Signal OP. Global Signal
Inc. is the special limited partner and our wholly owned
subsidiary, Global Signal GP, LLC, is the
managing general partner of Global Signal OP. Global
Signal Inc. holds 99% of the partnership
interests and Global Signal GP, LLC holds 1% of
the partnership interests in Global Signal OP. On
June 2, 2004, we completed our initial public offering
through the issuance of 8,050,000 shares of our
common
stock
at $18.00 per share of
common
stock.
Our customers include a wide variety of wireless service providers,
government agencies, operators of private
networks and broadcasters. These customers operate networks from
our communications sites and provide wireless
telephony, mobile radio, paging, broadcast and data
services. As of December 31, 2004, we had an aggregate
of more than 15,000 leases on our
communications sites with over 2,000 customers. The
average number of tenants on our owned towers,
as of December 31, 2004, was 4.1, which included an
average of 1.6 wireless telephony tenants.
The percentage of
our revenues from
wireless telephony tenants
have
increased from 41.0% of revenues for the month of
December 2003 to 51.1% of revenues for the month
of December 2004.
Over the past few
years, new wireless technologies, devices and applications have become
more advanced and broadly utilized by
wireless subscribers. As new technologies, devices and
applications have developed, new networks
have been deployed to support the more advanced applications
and the growth in the number of wireless
subscribers while more mature technologies, such as paging,
have experienced shrinking subscriber bases and network
contraction. Some of the key indicators that
we regularly monitor to evaluate growth trends affecting
wireless technology usage are the growth or
contraction of a particular technology's wireless
subscribers and the usage as measured in minutes of
use or network capacity
utilization.
The material
opportunities, challenges and risks of our business have changed
significantly over the past several years.
More recently, concurrent with an increased focus on improving
network quality, many
51
of our wireless
telephony
customers have experienced a general
improvement in their overall financial
condition. This has resulted in an increase in these customers'
abilities to invest in their networks and a
related increase in our telephony tenant base. During 2003 and 2004,
the demand by wireless telephony service
providers for our communications sites increased compared to the
demand we experienced during 2002 and 2001.
Our growth will be primarily affected by the future demand
for communications sites by wireless
telephony service providers, paging service providers, users of
mobile radio services and government
agencies. The demand for communications site space by
wireless telephony service providers is
expected to be driven by growth in their subscribers' and
their utilization of wireless telephony
services, including utilization of their networks for data services.
In addition, demand could also be affected by
carrier consolidation, because consolidation could result in
duplicative coverage and excess network capacity. On
October 26, 2004, Cingular merged with AT&T
Wireless, which could adversely impact tenant lease
revenues at some of our communications sites.
For example, as of December 31, 2004, 102 of our sites
are occupied by both Cingula="left" valign="bottom" nowrap="nowrap"> |
| 2006 |
|
|
625 |
|
|
|
401 |
|
|
|
1,026 |
|
| 2007 |
|
|
657 |
|
|
|
296 |
|
|
|
953 |
|
| 2008 |
|
|
689 |
|
|
|
209 |
|
|
|
898 |
Since
our reorganization, we have installed a new management team,
reengineered our business processes and
reduced our debt. Our debt was reduced primarily as a result of the
extinguishment of $404.8 million of
indebtedness pursuant to the terms of our reorganization in November
2002. We subsequently
refinanced our balance sheet through a $418.0 million tower asset
securitization in February 2004, which has
provided us with low-cost fixed-rate debt. Furthermore, we have
disposed of certain non-core communications
sites and under-performing sites to enhance our operating
margins. Our growth opportunities are
primarily linked to organic growth on our existing towers and
acquiring and developing new towers on which
our wireless customers will seek to locate their equipment,
thereby growing our overall tenant base.
From
December 2003 through
April
25,
2005, we acquired
1,025
wireless
communications
sites for approximately
$427.3
million including fees and expenses. We
have
refinanced these
newly acquired
communications
sites on a long-term basis
with a portion of the net proceeds
from our initial public offering and our $293.8 million
December 2004 mortgage loan.
A key
component of our growth strategy is our capital management strategy,
which supports the
financing
of our tower acquisition strategy. Our capital management strategy is
to
finance
newly acquired assets, on a long-term basis,
using additional equity issuances combined with low-cost fixed-rate
debt obtained
through the periodic issuance of mortgage-backed securities. Prior to
financing newly acquired towers using
mortgage-backed securities, our strategy is to finance communications
sites we acquire on a short-term basis
through credit facilities we expect to
obtain like the
acquisition
credit facility
we
entered into as of April 25,
2005.
Prior to our reorganization we acquired certain non-strategic assets
unrelated to our core tower business, which
have subsequently been sold, and our former management was unable to
efficiently integrate and manage our
communications sites. Our current growth strategy, which is in part
based on a new site acquisition and
development strategy, is significantly different. The primary
differences are (1) our strategy to finance
our assets using a capital structure which we believe does not rely
on growth to
52
reduce leverage and uses low-cost fixed-rate
debt obtained through the issuance of
mortgage-backed securities combined with proceeds from
equity offerings to finance our new tower
acquisitions, (2) our strategy to buy core tower assets
with in-place telephony, government or
investment grade tenants where we believe there is a
high likelihood of multiple lease renewals, (3)
our stringent underwriting process which is generally
designed to allow us to evaluate and price
acquisitions based on their current yield and on the
asset and tenant attributes and location of the
asset and (4) our focus on integrating, maintaining and
operating the assets we acquire efficiently and
effectively.
The
primary factors affecting our determination of the value of a
communications site are its location and the
immediate area's competitive structures, tenant base, tenant
credit quality and zoning restrictions. While
we have
communications
sites located throughout the United States, Canada and the
United Kingdom, our communications sites are primarily
located in the southeastern and mid-Atlantic
regions of the United States. The locations of our sites
are diverse and include sites along active
transportation corridors, in dense urban centers and in
growing surburban communities. We also have a
diverse tenant base, which includes government agencies, large and
small wireless service providers and
operators of private communication networks. The credit quality of our
tenants varies greatly from investment grade
credits to significantly lesser credits,
including small independent
operations.
Recent
Restatements of Our Financial
Statements
During late 2004 and
early 2005, many public companies announced their intention to modify
their accounting treatment of rent and
depreciation expense associated with long-lived assets subject to
leases.le #ffffff; padding-top: 0pt " align="left" valign="bottom" nowrap="nowrap"> |
| Thereafter |
|
|
578 |
|
|
|
5,703 |
|
|
|
6,281 |
|
| Total |
|
$ |
3,751 |
|
|
$ |
8,055 |
|
|
$ |
11,806 |
|
|
Many
of Lattice Acquisition's lease agreements contain escalation
clauses which are typically based on either
a fixed percentage rate or the change in the Consumer Price Index. For
leases with escalation clauses based on a
fixed percentage rate, rental expense
is
recognized in our statements of revenue and
certain expenses on a straight line basis over the
initial term of the lease plus the future optional renewal
periods where there is a reasonable assurance that the
lease will be renewed based on our evaluation at
the inception of the lease or our assumption of the
lease due to our acquisition of the related tower asset.
Rent expense for operating leases was
$2,054
($936 related party)
for the year ended December 31, 2003 and
$1,826
($818 related party)
(unaudited) for the year
ended December 31,
2004.
Customer Leases
Lattice
Acquisition leases
antenna space on communications towers to various wireless service
providers and other wireless communications users under non-cancelable
operating leases. These leases are generally for terms of 5 to 10
years.
Generally, Lattice Acquisition's
tenant leases provide for annual escalations and multiple
renewal periods, at the tenant's
option. Leases
with fixed-rate escalation clauses,
As a part of our filing on
Form 10-K for the year ended December 31, 2004, we restated our
financial statements as of December 31, 2002
and 2003, for the two months ended December 31, 2002, for the
year ended December 31, 2003 and each of the
quarters therein, and for the first, second and third quarters
of 2004. All amounts herein reflect the
restated results. The restatement corrected errors relating to (i)
the recognition of additional ground lease
and other subleased sites' rent expense on a straight-line basis
over the initial term of the lease or
sublease plus the future optional renewal periods where there is
reasonable assurance that the lease will be
renewed, based on our evaluation at the inception of the lease or
our assumption of the lease due to our
acquisition of the related tower asset and (ii) the amortization
period of leasehold improvements (primarily
wireless towers) to amortize such improvements over the lesser
of the remaining term of the underlying
lease or sublease including the renewal periods assumed above
or the estimated useful life of the
leasehold
improvement.
Prior to the restatement, we calculated straight-line rent expense
using the current lease term (typically 5 to
10 years) without regard to renewal options. In addition, we
depreciated our wireless towers over a 13 to
16 year useful life without regard to the underlying lease term because
of our historical experience in successfully
renewing or extending leases prior to expiration. As a result of the
correction, we calculated our straight-line
lease expense over the shorter of (i) the contracted term of the
lease agreement assuming we exercise all of
the renewal options or (ii) the contractual term of the
lease agreement through and including the
first renewal option period ending after the later of (a) our
tenant leases which were in place or which
we anticipated to being in place at the date we entered into the
lease or acquired the communication site or
(b) the depreciable life of the leasehold asset (primarily
wireless towers) located on the leased
property. The result of the depreciation correction was to shorten
the depreciable lives of certain tower
assets such that they are depreciated over the lesser of the
remaining term of the underlying lease or
the estimated useful life of the
tower.
53
Our restatements did not impact historical
or future cash flows provided by operating activities, the
timing or amount of payments under the related leases,
or compliance with any financial ratio covenants
under our credit facility or other financial covenants
under our mortgage loans.
We did not
restate any periods for the
predecessor
company
as the effect is immaterial and has no
cumulative impact on the operating results or financial
position of the
successor
company.
Revenues
We
generate substantially all of our revenues from leasing space on
communications sites to various tenants
including wireless service providers, government agencies, operators of
private networks and broadcasters. Factors
affecting our revenues include the rate at which our
customers deploy capital to enhance and
expand their networks, the rate at which customers rationalize
their networks, the renewal rates of our
tenants and fixed-price annual escalation clauses in our
contracts that allow us to increase our
tenants' rental rates over time.
For the year ended December 31, 2004, 82% and 92% of
our revenues and gross margin, respectively,
were generated from our owned
communications
sites, while 18% and 8% of our revenues
and gross margin, respectively, were generated from our
managed
communications
sites. For the year ended December 31, 2003,
79% and 89% of our revenues and gross margin,
respectively, were generated from our owned
communications
sites, while 21% and 11% of our revenues and
gross margin, respectively, were generated
from our managed
communications
sites. Typically, our tenant lease agreements
are specific to a site, are for terms of one to ten years and are
renewable for multiple pre-determined periods
at the option of the tenant. Rents under the tenant leases
are generally due to us on a monthly basis,
and revenues from each agreement are recognized monthly.
These agreements typically contain fixed-price annual
escalation clauses. However rental revenues are
recognized in our financial statements on a
straight-line basis over the contractual term of the
agreements excluding customer renewal
options.
Our tenants are responsible
for the installation and maintenance of their equipment at our
sites. These tenants transmit from our sites
utilizing a wide variety of technologies including personal
communication services (PCS), cellular, enhanced
specialized mobile radio (ESMR), mobile radio,
paging, and radio and television broadcast. For the
months of Degn: center; width: 456pt;">F-66
or those that have
no escalation,
have been included below based on the contractual
tenant lease amounts. Leases that escalate based upon
non-fixed rates, such as the Consumer Price Index, are
included below at the current contractual rate over
the remaining term of the lease. The tenant rental
payments included in the table below do not assume
exercise of tenant renewal
options.
Future
minimum rental revenues due to Lattice Acquisition under operating
leases in effect at December 31, 2003, without giving effect to the
impact of straight-line rent adjustments, are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Related
Party |
|
Other |
|
Total |
| 2004 |
|
$ |
4,325 |
|
|
$ |
6,560 |
|
|
$ |
10,885 |
|
| 2005 |
|
Revenues Percentage
by Tenant Technology
Type
|
|
|
|
|
4,541 |
|
|
|
5,790 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Percent
of Revenues for the Month of
December |
| Tenant
Technology
Type |
|
2001 |
|
2002 |
|
2003 |
|
2004 |
| Telephony
(PCS, Cellular,
ESMR) |
|
|
32.2 |
% |
|
|
37.0 |
% |
|
|
41.0 |
% |
|
|
51.1 |
% |
| Mobile
radio |
|
|
|
|
|
10,331 |
|
| 2006 |
|
|
4,768 |
|
|
|
3,660 |
|
|
|
8,428 |
|
| 2007 |
|
|
5,006 |
|
|
|
2,327 |
|
|
|
7,333 |
|
| 2008 |
|
|
5,236 |
|
|
|
1,430 |
30.9 |
|
|
|
28.5 |
|
|
|
25.5 |
|
|
|
21.9 |
|
| Paging |
|
|
25.3 |
|
|
|
22.4 |
|
|
|
21.5 |
|
|
|
17.8 |
|
| Broadcast |
|
|
6.1 |
|
|
|
7.0 |
|
|
|
6,666 |
|
| Thereafter |
|
|
3,628 |
|
|
|
2,905 |
|
|
|
6,533 |
|
| Total |
|
$ |
27,504 |
|
|
$ |
22,672 |
|
|
$ |
50,176 |
|
|
3. Restatement
of Previously Issued Statement of Revenue and Certaont-size: 10pt; color: #000000; font-weight: normal; font-style: normal; border-bottom: 3px double #ffffff; padding-top: 0pt " align="left" valign="bottom" nowrap="nowrap"> |
|
|
7.1 |
|
Lattice
Acquisition restated the accompanying
statement of revenue and certain expenses as of December 31,
2003. The restatement adjustment reflected in the
following tables corrects an error in the recognition of
additional ground lease rent expense on a straight-line
basis over the initial term of the lease plus the
future optional renewal periods where there is
reasonable assurance that the lease will be renewed, based
on
Lattice
Acquisition evaluation at the inception of
the
lease.
The
following table presents the impact of the restatement adjustments on
the Lattice
Acquisition's previously reported
results for the year ended December 31,
2003:
e="padding-top: 0pt "> |
|
6.5 |
|
| Wireless
data and
other |
|
|
5.5 |
|
|
|
5.1 |
|
|
|
4.9 |
|
|
|
2.7 |
|
| Total |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
December
31, 2003 |
| |
|
As
Previously
Reported |
|
Adjustments |
|
As
Restated |
| Revenue |
|
$ |
10,255 |
|
|
$ |
— |
|
|
$ |
10,255 |
|
| Certain
expenses: |
|
| Rent |
|
|
1,270 |
|
|
|
784 |
|
|
|
|
|
100.0 |
% |
|
Direct
Site Operating Expenses and Other
Expenses
Direct site operating
expenses consist of ground rents (if we do not own the land at our
site), utilities, property and ad valorem
taxes, insurance and site maintenance costs. Many of our
ground lease agreements contain escalation
clauses which are typically based on either a fixed percentage
rate or the change in the Consumer Price
Index. For ground leases with escalation clauses based on a
fixed percentage rate, ground rental expenses
are recognized in our financial statements on a
straight-line basis over the shorter of (i)
the contractual term of the ground lease agreement assuming we
exercise all renewal options or (ii) the
first renewal option period ending after the later of (a) our tenant
leases which were in place or which we
anticipated being in place at the date we entered
into the ground
lease or acquired the
communications
site
and
(b) the depreciable life of the assets located on the leased
property.
54
Other shared costs such as property
management, site operations and contract administration are
included in selling, general and administrative as
described below. Because the costs of operating an
owned site generally do not increase significantly as we
add additional tenants, new lease revenues
from additional tenants to a particular site provide
high incremental gross margin for that site.
Similarly, the loss of any tenant on an owned site does
not significantly reduce the costs associated
with operating that site; and as a result, the lost
lease revenues will reduce cash flows and gross
margin from that site. Fluctuations in our gross margins
on owned sites are directly related to changes
in our tenant lease revenues. For managed sites, we
typically pay the site owner either a fixed rental
payment, a percentage of revenues or a combination of a
fixed rental payment plus a percentage of
revenues. In instances where we pay the landlord a
percentage of revenues, changes in revenues result
in an increase or decrease, as applicable, in our
communications site operating expenses.
Selling, general and administrative expenses consist of five major
components (1) sales, marketing and
collocations; (2) property management and site operations; (3)
contracts administration; (4) business
development including acquisitions and new builds and (5)
administrative support including legal, human
resources, finance, accounting and information
technology.
Acquisitions and
Dispositions of Communications Sites
Our financial results are also impacted by the timing, size and
number of acquisitions and dispositions we
complete in a period. Our number of active communications sites
decreased from 3,881 at December 31, 2001 to
3,276 at December 31, 2003 and increased to 4,060 at December
31, 2004. In addition, we routinely review
and dispose of under-performing sites which generate
negative cash flows and which are not
compatible with our strategy. During 2002, our dispositions
principally related to our sale of 266
non-core microwave sites. During 2003 and 2004, we disposed of 134 and
81 under-performing sites, respectively,
primarily consisting of managed sites, and as of December
31, 2004, we had 45 other sites held for
sale.
During 2001, we reclassified our
portfolio of five wireline telephony collocation facilities to
assets held for sale. Three were sold in 2001
and two were sold in the ten months ended October 31, 2002.
These facilities contributed $6.4 million and $1.1
million to revenues during 2001 and the ten months
ended October 31, 2002 for the
predecessor
company, respectively, prior to the sale of
the last facility in October 2002. These
dispositions are not classified in "discontinued
operations" as they did not meet
the required segment criteria in 2001 and this was prior to our
adoption of SFAS No. 144,
"Accounting for the Impairment and
Disposal of Long-lived
Assets."
In 2002, we
sold other assets including certain rental buildings, two wholly owned
subsidiaries and a portfolio of microwave
tower sites. The results of operations for these assets have been
reclassified to discontinued operations under
SFAS No. 144 which became effective January 1, 2002. In
addition, the under-performing sites we
disposed of in 2002 that were not previously held for sale were
also reclassified as discontinued
operations.
2,054
|
| Property
taxes |
|
|
378 |
|
|
|
— |
|
|
|
378 |
|
| Other
tower operating
expense |
|
|
565 |
|
|
|
— |
|
|
|
565 |
|
| Selling,
general and
administrative |
|
|
189 |
|
|
|
— |
On September 23, 2003, a
majority of our stockholders formed a new company, Pinnacle
Towers Acquisition Holdings LLC
or
Pinnacle
Acquisition, then known
as Pinnacle Towers Acquisition Inc. This
entity had no operations until December 4, 2003, when its subsidiary,
Pinnacle Towers Acquisition LLC, acquired,
from TowerCom Enterprises, L.L.C. and its affiliates, a portfolio of
67 towers which are primarily located in
Florida, Georgia, Alabama and Mississippi and are generally
less than five years old. The purchase price was $27.3
million, including fees and expenses, and
Pinnacle Acquisition accounted for the purchase using
purchase accounting. Pinnacle Acquisition was
initially funded through a $100.0 million acquisition
credit facility, provided by Morgan Stanley, which
was increased to $200.0 million on February 6, 2004 and
to $250.0 million on October 15, 2004. In
addition, on February 6, 2004, we exercised our option
to acquire all the outstanding common stock of
Pinnacle Acquisition, and Pinnacle Acquisition became
our wholly owned subsidiary. We acquired the
common stock of Pinnacle Acquisition for approximately
$21,000. Global Signal and Pinnacle
Acquisition had 99% common controlling
stockholders. Since our acquisition of Pinnacle Acquisition
was a business combination among "entities
under common control," we have accounted for it in
a manner similar to a pooling of interests.
As a result, we have included the financial statements of
Pinnacle Acquisition in our consolidated financial
statements included elsewhere in this
prospectus,
beginning September 23, 2003.
55
During 2004, we acquired 862
communications sites from 48 sellers unrelated to us. Prior
to December 7, 2004, the acquisitions were
funded through borrowings under our credit facility and a
portion of the net proceeds from our initial public
offering. After December 7, 2004, the date of our
December 2004 mortgage loan, the acquisitions were
funded with cash from the site acquisition
reserve account established as part of the December 2004
mortgage loan. Some of the more significant
acquisitions we completed during 2004
and
early 2005 are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Seller |
|
Acquisition
Closing Dates |
|
No. of
Acquired
Communications
Sites |
|
Purchase
Price, including
Fees
&
Expenses
($
million) |
|
% of
Revenue
From
Investment
Grade
or
Wireless
Telephony
Tenants(1) |
|
Primary
Site
Locations |
| Towers
of Texas
Inc. |
|
December
2004
and
January
2005 |
|
|
48 |
|
|
$ |
|
189 |
|
| Total
certain
expenses |
|
|
2,402 |
|
|
|
784 |
|
|
|
3,186 |
|
| Revenue
in excess of certain
expenses |
|
$ |
7,853 |
|
|
$ |
(784 |
) |
|
$ |
7,069 |
|
|
F-67
REPORT
OF INDEPENDENT REGISTERED CERTIFIED PUBLIC
ACCOUNTANTS
To the Stockholders and Board of Directors of Global
Signal, Inc.
We have audited the accompanying statement of
revenue and certain expenses of Didier Communications Acquisition as
described in Note 1 for the year ended December 31, 2003. This
statement of revenue and certain expenses is the responsibility of
Didier Communication Acquisition's management. Our responsibility
is to express an opinion on this statement of revenue and certain
expenses based on our audit.
25.5 |
|
|
|
99.5 |
% |
|
Texas |
| Didicom
Towers,
Inc. |
|
December
2004 |
|
|
95 |
|
|
|
27.0 |
|
|
|
93.3 |
|
|
Arkansas,
Missouri and
Oklahoma |
| GoldenState
Towers, LLC(2) |
|
November
2004 |
|
|
214 |
|
|
|
64.5 |
|
|
|
98.2 |
|
|
We conducted our audit in
accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
statement of revenue and certain expenses is free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of revenue and
certain expenses. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall presentation of the statement of revenue and
certain expenses. We believe that our audit of the statement of revenue
and certain expenses provides a reasonable basis for our opinion.
The accompanying statement of revenue and certain expenses was
prepared for the purpose of complying with
the rules and regulations of the Securities
and Exchange Commission for inclusion
in a
Form S-11 of Global
Signal Inc. as described
in Note 1 and is not intended to be a complete presentation of Didier
Communications Acquisition's revenues and
expenses.
In our opinion, the statement of revenue and certain expenses
referred to above presents fairly, in all material respects, the
revenue and certain expenses of Didier Communications Acquisition as
described in Note 1 for the year ended December 31, 2003 in conformity
with U.S. generally accepted accounting
principles.
As more fully described
in Note 3 – Restatement of Previously Issued Statement of Revenue
and Certain Expenses the accompanying
statement of revenue and certain expenses for the year ended
December 31, 2003 has been restated to correct the
accounting for ground leases.
/s/ Ernst & Young LLP
Tampa,
Florida
April
18,
2005
F-68
DIDIER
COMMUNICATIONS
ACQUISITION
STATEMENTS OF REVENUE AND CERTAIN
EXPENSES
(dollars
in
thousands)
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year
Ended
December 31, 2003 |
|
Period
from
January 1,
2004
to
December 17,
2004 |
| |
|
(restated) |
|
(unaudited) |
| Revenue |
|
$ |
2,177 |
|
|
$ |
California,
Oregon, Idaho,
Washington, Nevada
and
Arizona |
| Lattice
Communications,
LLC |
|
October
2004
through
March
2005 |
|
|
236 |
|
|
|
116.0 |
|
|
|
86.4 |
|
|
Indiana,
Ohio, Alabama, Kansas
and
Georgia |
| Tower
Ventures III LLC(2) |
|
June
2004 |
|
|
97 |
|
|
|
53.0 |
|
|
|
99.6 |
|
|
Tennessee,
Mississippi, Missouri
and
Arkansas |
|
|
|
| (1) |
As
of the time of acquisition. |
3,152 |
|
| Certain
expenses: |
|
|
|
|
|
| Rent |
|
|
654 |
|
|
|
744 |
|
| Property
taxes |
|
|
43 |
|
|
|
94 |
|
| Other
tower operating
expense |
|
|
70 |
|
|
|
100 |
|
| Total
certain
expenses |
|
|
|
|
|
| (2) |
We
acquired the
membership interests of the
named entity, which owned the towers. |
Reorganization
Prior to our
reorganization, we funded our operations through bank credit facilities
and issuances of debt and equity securities.
Prior to our emergence from bankruptcy, we were unable to meet
our financial obligations due primarily to
(1) our highly leveraged capital structure, (2) the
non-strategic acquisition of assets we have
subsequently disposed of that were unrelated to our core tower
business and (3) the inability of our former
management to efficiently integrate and manage our
communications sites. In addition, to a lesser extent,
we were unable to meet our financial obligations
due to the reduced amount of capital spending by
wireless carriers on their networks in 2001 and
2002. On May 21, 2002, Global Signal, then known as
Pinnacle Holdings Inc., filed a voluntary
petition for relief under Chapter 11 of the Bankruptcy
Code in the United States Bankruptcy Court
for the Southern District of New York. On October 9,
2002, the Bankruptcy Court entered an order
confirming the Second Amended Joint Plan Of
Reorganization dated September 23, 2002
or the
Prearranged
Plan, which became
effective on
November 1,
2002.
56
Under the Prearranged Plan, Fortress and
Greenhill purchased 22,526,598 shares of our
common
stock
for an aggregate purchase price of $112.6 million and elected to
receive an additional 9,040,166 shares of
common
stock
in lieu of $45.2 million of cash for the 10%
senior
notes
due 2008, they held making their total
investment in us in connection with the reorganization $157.8 million.
Other senior noteholders entitled to receive
$47.2 million of cash elected to receive 9,433,236 shares of
common
stock in
lieu of cash, making the total equity investment $205.0 million. In
December 2002, Fortress purchased 1,440,000
shares of our
common
stock
from Abrams Capital Partners I, L.P., Abrams
Capital Partners II, L.P., and Whitecrest Partners,
L.P., affiliates of Abrams Capital LLC, our third
largest stockholder for an aggregate purchase price of
approximately $7.3 million. On February 5,
2004, Fortress and Greenhill's total investment
was reduced by $113.8 million to $51.3 million
(including the amount invested in connection with the
purchase of shares from Abrams Capital, LLC
and certain of its affiliates) as a result of our
special distribution which represented a return of capital.
In April 2004, Fortress exercised its warrants for
418,050 shares at an aggregate exercise price of $3.6
million. On December 22, 2004, Greenhill increased their
holding of our
common
stock
through the exercise of 32,200 options. Since
our reorganization, Fortress and Greenhill have received
distributions representing a return of
capital totaling
$167.1
million comprising a
special distribution on February 5, 2004, and
returns of capital related to their portion of our
ordinary dividends to
the extent the dividends exceeded accumulated
earnings, thereby decreasing
Fortress and
Greenhill's
total investment to
$2.1
million.
Under the Prearranged Plan, we satisfied $325.0 million of
indebtedness related to our
senior
notes for
$21.6 million and 18,473,402 shares of our
common
stock
valued at $92.4 million, and satisfied $187.5
million of indebtedness related to our 5.5%
convertible
notes
due 2007 for $1.0 million and warrants to
purchase 820,000 shares of our
common
stock.
In total, $404.8 million, including $7.3
million of accrued interest, was discharged under the reorganization.
Under the Prearranged Plan, our then existing
senior credit facility lenders were paid approximately $93.0
million in cash, with the balance of the full
amount owed to them incorporated into an amended and
restated credit facility comprising a
three-year secured term loan of $275.0 million. In addition, certain of
these lenders provided a secured revolving
credit facility of $30.0 million. We refer to the term loan
and revolving credit facility, collectively,
as our old credit facility. On February 5, 2004, the old
credit facility was paid in full and
terminated.
Our emergence from
bankruptcy and adoption of fresh start accounting resulted in
the extinguishment of $404.8 million of
indebtedness and significantly reduced our interest expense
and depreciation and amortization expense. In
addition to our reorganization, we have taken a number of
other measures to minimize potential net losses in the
future, including the sale of non-performing
communications sites, the reduction of overhead and
capital expenditures and the installation of a new
management team.
2000/2001 Securities and Exchange Commission
Investigation
In August 2000, we
became the subject of an investigation by the SEC. On December 6, 2001,
we entered into a settlement with the SEC
relating to our original accounting for the August 1999
acquisition of certain communications sites from
Motorola, Inc. We restated our financial statements
to change our accounting for that transaction in filings
made with the SEC in April and May 2001. In
the settlement, we consented, without admitting or
denying the SEC's findings, to the SEC's entry
of an administrative order that we cease and
desist from committing or causing violations of the
reporting, books and records and internal control
provisions of the federal securities laws. The SEC's
order does ngn="right" valign="bottom" colspan="1" nowrap="nowrap">767
|
|
|
938 |
|
| Revenue
in excess of certain
expenses |
|
$ |
1,410 |
|
|
$ |
2,214 |
|
|
See
accompanying notes to Statements of Revenue and Certain
Expenses
F-69
DIDIER
COMMUNICATIONS
ACQUISITION
NOTES TO STATEMENTS OF REVENUE AND
CERTAIN
EXPENSES
Year Ended December 31, 2003 and
Period from January 1,
2004 to December 17, 2004
(Unaudited)
(dollars
in
thousands)
1. Business and Summary of Significant Accounting
Policies
Business
Didicom, Inc.
("Didicom"), Ozark Towers, Inc.
("Ozark"), Ridgeline Communications, Inc.
("Ridgeline"), Law Towers I, LLC
("Law"), and Centerville Towers, LLC
("Centerville"), collectively,
"Didier Communications," are principally
engaged in providing services to the wireless communications industry
by leasing antenna sites on multi-tenant towers. Didier Communications
leases tower space primarily to personal communications services and
cellular service providers. Didier Communications sites are located in
Arkansas, Louisiana, Mississippi, Missouri, Oklahoma, and Texas.
A single shareholder owns Didicom, Ozark, Ridgeline, and
Centerville. Five partners, including the single shareholder in the
other entities, own equal shares in Law. All of Didier
Communications' related party transactions are conducted with the
single shareholder under ground lease
agreements.
On December 3, 2004 and December 17, 2004, Pinnacle Towers
Acquisition LLC, a wholly-owned subsidiary
of Global Signal Inc. (the "Company"),
acquired 74 and 21 owned towers, respectively, from
Didier Communications. The purchase agreement and these
Statements of Revenues and Certain Expenses
exclude towers as well as certain assets of Didier Communications
related to tower development.
"Didier Communications Acquisition"
represents the assets to be acquired by the
Company.
Basis of Presentation
The accompanying statements of revenue and certain expenses were
prepared for the purpose of complying with the rules and regulations of
the Securities and Exchange Commission for inclusion
in
a Form S-11 of the Company. The statements,
which encompass the towers
sold to the Company, are
not representative of the actual operatiot claim any violation of the antifraud
provisions of the federal securities laws, nor does it
assess a monetary penalty or fine against us. As
previously disclosed, we cooperated fully with the
SEC in its inquiry.
Basis of Accounting
In the
following discussion, we refer to ourselves in the periods prior to our
emergence from Chapter 11 as
"predecessor
company"
and in the periods subsequent to the date of our emergence
from bankruptcy as
"successor
company."
The following is a discussion of our financial condition and
results of operations for the ten months ended October
31, 2002, for the
predecessor
company,
and the two months ended December 31, 2002
and the years ended December 31, 2003 and 2004 for the
successor
company.
We refer to the years ended December 31, 2003 and 2004 as 2003 and
2004,
respectively. The discussion should be read in
conjunction with our financial statements included
elsewhere in this
prospectus.
57
As a result of the adoption of fresh
start accounting as of November 1, 2002, our financial
statements after that date are not comparable to our
financial statements for prior periods because of
the differences in the basis of accounting and the
different debt and equity structures for the
predecessor
company
and the
successor
company.
The more significant effects of the differences in
the basis of accounting on the
successor
company's
financial statements are lower depreciation and
amortization expense as a result of the revaluation of
our long-lived assets downward by $357.2
million through the application of fresh start
accounting, and lower interest expense as a result of the
discharge of $404.8 million of debt upon our emergence
from bankruptcy. In addition, as required
under fresh start accounting, we early adopted SFAS No.
143,
"Accounting
for Asset Retirement
Obligations"
at that time.
Financial
Developments
The following are certain changes in our
financial results which have occurred or we expect to occur
in 2005 and beyond, as compared to our 2004
results.
As a new public company, we have incurred,
and will continue to incur, significant legal,
accounting and other expenses that we did not incur as a
private company related to corporate
governance, SEC reporting and compliance with the
various provisions of the Sarbanes-Oxley Act of
2002. In particular, we expect to incur significant
incremental expenses associated with Sarbanes-Oxley
Section 404 compliance documentation and remediation. In
addition, as a New York Stock Exchange-listed
company, we were required to establish an internal audit function and
did so, on an outsourced basis, in October
2004. As a result we will incur additional
costs associated
with this function. We also expect these new
rules and regulations to make it more difficult and more
expensive for us to obtain director and
officer liability insurance, and we may be required to accept
reduced coverage or incur substantially
higher costs to obtain coverage.
Since
2003 we have become a more acquisition-focused company. As we evaluate
towers for potential acquisition, we incur
costs for various third parties' assistance, including in
connection with due diligence, negotiation
and structuring of these acquisitions. These costs are capitalized once
the acquisition is deemed probable. If an
acquisition is abandoned, these costs will be expensed. If
the acquisition is consummated, these costs
will be capitalized as a part of the total purchase
price.
Although we have not yet analyzed the impact, the new accounting
requirements for stock options and other
stock-based compensation will require us to recognize expense whereas
generally we have not been required to do so
in the past.
Effect of Sprint
Transaction
If we consummate the
Sprint transaction as
planned,
on a pro forma basis as of December 31, 2004
after this offering, we will own, manage or
lease over
10,600 wireless communications sites. In
addition, on a pro forma
basis, without giving effect to Sprint's pending merger with
Nextel Communications,
Sprint would
become our largest
customer,
representing 31.1% of our
revenue, for the year
ended December 31, 2004.
We will account for the Sprint
transaction as a capital lease and hence will recognize the assets
and the lease obligations on our balance
sheet. We will allocate the upfront rental payment along
with transaction fees and costs to the
leased assets (primarily towers and identifiable intangible assets)
based on their fair market value similar to
an acquisition of tower assets. We will depreciate and amortize
these tangible and intangible assets over
their estimated useful lives, whions of Didier Communications
Acquisition for the periods presented or indicative of future
operations, as they exclude the following: certain selling, general and
administrative expenses; interest expense; and depreciation and
amortization.
The accompanying statements of revenue and certain
expenses for the
period
from January 1, 2004 to December 17, 2004,
which includes operating results for each
tower until its acquisition by the
Company, are
unaudited and have been prepared in accordance with generally accepted
accounting principles for interim financial information and Article 10
of Regulation S-X. Revenues and certain expenses for the
period from January 1,
2004 to December 17, 2004, are not
necessarily indicative of that which may be expected for the year
ending December 31, 2004.
Use of Estimates
The
preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates and such variances could be material.
Revenue
Recognition
Revenues are recognized when earned. Escalation
clauses present in lease agreements with Didier Communications
Acquisition's customers are recognized on a straight-line basis
over the term of the
lease.
Concentration of Credit Risk
Didier Communications
Acquisition derives the largest portion of its revenues from customers
who require wireless communications services. Alltel, Cingular, Nextel,
and AT&T represented 36.8%, 22.8%,
F-70
15.5%, and
12.3%, respectively, of revenues for the year ended December 31,
2003 and
40.7%,
25.8%,
12.7%,
and
8.1%,
respectively, for the
period from January 1,
2004 to December 17, 2004 (unaudited).
2. Leases
Lease
Obligations
As lessee, Didier
Communications Acquisition
is obligated under non-cancelable operating
leases for ground space under communications
towers and at other sites, as well as space on communications towers
that expire at various times through
2057.
The majority of the ground, tower and other site leases have
multiple renewal options, which range up to 25 years
each. Certain of the ground and managed site leases
have purchase options at the end of the original lease
term.
Didier Communications Acquisition holds
nine land leases with a shareholder. Future minimum rental payments due
by Didier Communications Acquisition under operating leases in effect
at December 31, 2003, without giving effect to the impact of
straight-line rent adjustments, are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Year |
|
Related
Party |
|
We expect
to finance the Sprint transaction with an $850.0 million bridge loan,
which will substantially increase the amount
of our debt outstanding and interest expense. In addition,
the shares issued in this offering and the
shares
we will issue
pursuant to the Investment
Agreement, will increase
the number of shares outstanding and hence
affect our future income (loss) per
share.
The
Sprint transaction is significantly larger than any acquisition
we have completed to
date.
There
are more Sprint
Towers than the number of
communications sites we currently
operate.
The
integration
58
of the over 6,600
Sprint Towers into our operations will be a significant
undertaking.
To
manage the Sprint Towers, we expect to add over 100 additional
employees which will add significant
costs. We will also
incur a substantial amount of non-recurring integration costs with
respect to the Sprint transaction which will be expensed primarily in
2005.
As a result of our increased
depreciation
and amortization, accretion, integration
costs, additional
selling,
general and administrative
expenses
and interest expense, we expect to generate
net losses after the closing of the Sprint
transaction.
In
addition, in connection with the closing of
the Sprint transaction, we will use
a portion of the
net proceeds of this offering to
repay and terminate
the outstanding borrowings on the
$50.0
million and
$25.0
million term loans under our
Revolving
Credit
Agreement.
As a result, we will write off the remaining
unamortized deferred debt issuance costs as a loss on the early
extinguishment of debt.
Results of
Operations
Comparison
of 2003 to
2004
The following table sets forth, for the periods indicated, each
statement of operations item and such item as
a percentage of revenues.
The results of
operations for any particular period are not necessarily indicative
of results for any future period. The
following data should be read in conjunction with our
consolidated financial statements and notes
thereto included
herein.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year
Ended December
31, |
| (dollars in
thousands) |
|
2003 |
|
Other |
|
Total |
| 2004 |
|
$ |
51 |
|
|
$ |
414 |
|
|
$ |
465 |
|
| 2005 |
|
|
52 |
|
|
|
429 |
|
|
|
481 |
|
| 2006 |
|
|
54 |
|
|
|
430 |
|
|
|
% |
|
2004 |
|
% |
|
Var |
|
% |
| |
|
|
|
|
|
|
|
|
|
|
|
| Revenues |
|
$ |
166,670 |
|
|
|
100.0
|
% |
|
$ |
182,865 |
|
|
|
100.0
|
% |
|
$ |
16,195 |
|
|
|
9.7
|
484 |
|
| 2007 |
|
|
54 |
|
|
|
383 |
|
|
|
437 |
|
| 2008 |
|
|
52 |
|
|
|
254 |
|
|
|
306 |
|
| Thereafter |
|
|
776 |
|
|
|
1,739 |
|
|
|
% |
| Direct site
operating expenses (excluding depreciation,
amortization and
accretion) |
|
|
56,572 |
|
|
|
33.9 |
|
|
|
57,462 |
|
|
|
31.4 |
|
|
|
890 |
|
|
|
1.6 |
|
| Gross
margin |
|
|
110,098 |
|
|
|
66.1 |
|
|
|
125,403 |
|
|
2,515 |
|
| |
|
$ |
1,039 |
|
|
$ |
3,649 |
|
|
$ |
4,688 |
|
|
Many
of Didier Communications Acquisition's lease agreements contain
escalation clauses which are typically based
on either a fixed percentage rate or the change in the Consumer Price
Index. For leases with escalation clauses
based on a fixed percentage rate, rental expense
is
recognized in our statements of revenue and
certain expenses on a straight line basis over the initial term of the
lease plus the future optional renewal
periods where there is a reasonable assurance that the lease will be
renewed based on our evaluation at the
inception of the lease or our assumption of the lease due to our
acquisition of the related tower
asset.
Rent expense for operating
leases was
$654
(including $50 from related party) for the year ended December 31, 2003
and
$744
(including
$51
from related party) (unaudited) for the
period from January 1,
2004 to December 17, 2004.
Customer
Leases
Didier Communications Acquisition leases antenna space
on communications towers to various wireless service providers and
other wireless communications users under non-cancelable operating
leases. These leases are generally for terms of 1 to 30
years.
Generally, Didier Communications Acquisition's tenant leases
provide for annual escalations and multiple
renewal periods, at the tenant's option.
Leases with
fixed-rate escalation clauses, or those that
have no
escalation, have been included below based on the contractual tenant
lease amounts. Leases that escalate based
upon non-fixed rates, such as the Consumer Price Index, are included
below at the current contractual rate over
the remaining term of the lease. The tenant rental payments included in
the table below do not assume exercise of
tenant renewal options.
Future minimum
rental revenues due to Didier Communications Acquisition under
operating leases in effect at December 31, 2003, without giving effect
to the impact of straight-line rent adjustments, are as
follows:
F-71
|
|
|
|
|
|
|
| Year |
|
Total |
| 68.6 |
|
|
|
15,305 |
|
|
|
13.9 |
|
| Other
expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Selling,
general and administrative (excluding
non-cash stock-based compensation
expense) |
|
2004 |
|
$ |
2,396 |
|
| 2005 |
|
|
2,578 |
|
| 2006 |
|
|
2,626 |
|
| 2007 |
|
|
2,702 |
|
| 2008 |
|
|
2,752 |
|
| Thereafter |
|
|
69,187 |
|
| |
|
$ |
82,241 |
|
|
3. Restatement
of Previously Issued Statement of Revenue and Certain Expenses
|
26,914 |
|
|
|
16.1 |
|
|
|
23,410 |
|
|
|
12.8 |
|
|
|
(3,504 |
) |
|
|
(13.0 |
) |
| State
franchise, excise and minimum
taxes |
|
|
848 |
|
|
|
0.5 |
|
|
|
69 |
|
|
|
0.0 |
Didier
Communications
Acquisition
restated the accompanying statement of revenue and
certain expenses as of December 31, 2003.
The restatement adjustment reflected in the following tables corrects
an error in the recognition of additional
ground lease rent expense on a straight-line basis over the initial
term of the lease plus the future optional
renewal periods where there is reasonable assurance that the lease will
be renewed, based on
Didier Communications
Acquisition's evaluation at the
inception of the
lease.
The following table presents the impact of the restatement
adjustments on the
Didier
Communications Acquisition's
previously reported results for the year ended December 31,
2003:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
December
31, 2003 |
| |
|
As
Previously
Reported |
|
Adjustments |
|
As
Restated |
| Revenue |
|
$ |
2,177 |
|
|
$ |
— |
|
|
$ |
2,177 |
|
| Certain
expenses: |
|
| Rent |
|
|
412 |
|
|
|
(779 |
) |
|
|
(91.9 |
) |
| Depreciation,
amortization and
accretion |
|
|
47,137 |
|
|
|
28.3 |
|
|
|
54,288 |
|
|
|
29.7 |
|
|
|
7,151 |
|
|
|
15.2 |
|
| Non-cash
stock-based compensation
expense |
|
|
1,479 |
|
|
|
|
242 |
|
|
|
654 |
|
| Property
taxes |
|
|
43 |
|
|
|
— |
|
|
|
43 |
|
| Other
tower operating
expense |
|
|
70 |
|
|
|
— |
|
|
|
70 |
|
| Total
certain
expenses |
|
|
525 |
|
|
0.9 |
|
|
|
4,235 |
|
|
|
2.3 |
|
|
|
2,756 |
|
|
|
1.8 |
|
| |
|
|
76,378 |
|
|
|
45.8 |
|
|
|
82,002 |
|
|
|
44.8 |
|
|
|
|
|
|
242 |
|
|
|
767 |
|
| Revenue
in excess of certain
expenses |
|
$ |
1,652 |
|
|
$ |
(242 |
) |
|
$ |
1,410 |
|
|
F-72
REPORT
OF INDEPENDENT REGISTERED CERTIFIED PUBLIC
ACCOUNTANTS
To the Stockholders and Board of Directors of Global
Signal, Inc.
We have audited the accompanying statement of
revenue and certain expenses of Towers of Texas Acquisition as
described in Note 1 for the year ended December 31, 2003. This
statement of revenue and certain expenses is the responsibility of
Towers of Texas Acquisition's management. Our responsibility is
to express an opinion on this statement of revenue and certain expenses
based on our audit.
We conducted our audit in accordance with
the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of revenue and
certain expenses is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the statement of revenue and certain expenses. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
presentation of the statement of revenue and certain expenses. We
believe that our audit of the statement of revenue and certain expenses
provides a reasonable basis for our opinion.
The accompanying
statement of revenue and certain expenses was prepared for the purpose
of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion
in a
Form S-11 of Global
Signal Inc. as described
in Note 1 and is not intended to be a complete presentation of Towers
of Texas Acquisition's revenues and
expenses.
5,624 |
|
|
|
7.4 |
|
| Operating
income |
|
|
33,720 |
|
|
|
20.2 |
|
|
|
43,401 |
|
|
|
23.7 |
|
|
|
9,681 |
|
|
|
28.7 |
|
| Interest
expense,
net |
|
|
20,477 |
|
|
|
12.3 |
In our opinion, the statement of revenue and certain expenses
referred to above presents fairly, in all material respects, the
revenue and certain expenses of Towers of Texas Acquisition as
described in Note 1 for the year ended December 31, 2003 in conformity
with U.S. generally accepted accounting principles.
As more fully described in Note 3 –
Restatement of Previously Issued Statement of Revenue and
Certain Expenses the accompanying statement of revenue
and certain expenses for the year ended
December 31, 2003 has been restated to correct the
accounting for ground leases.
/s/
Ernst & Young LLP
Tampa,
Florida
April
18,
2005
F-73
TOWERS
OF TEXAS
ACQUISITION
STATEMENTS OF REVENUE AND CERTAIN
EXPENSES
(dollars
in
thousands)
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year
Ended
December 31,
2003 |
|
Period
from January 1, 2004
to December
30,
2004 |
| |
|
(restated) |
|
(unaudited) |
| |
|
|
|
|
|
|
|
|
| Revenue |
|
$ |
1,794 |
|
ouble #ffffff; padding-top: 0pt " align="left" valign="bottom" nowrap="nowrap"> |
|
|
27,529 |
|
|
|
15.1 |
|
|
|
7,052 |
|
|
|
34.4 |
|
| Loss
on early extinguishment of
debt |
|
|
— |
|
|
|
0.0 |
|
|
|
9,018 |
|
|
|
4.9 |
|
|
|
9,018 |
|
|
|
$ |
2,041 |
|
| Certain
expenses: |
|
|
|
|
|
|
|
|
| Rent |
|
|
204 |
|
|
|
199 |
|
| Property
taxes |
|
|
62 |
|
|
|
66 |
|
| Other
tower operating
expense |
|
|
190 |
|
|
|
< font-style: normal; border-bottom: 3px double #ffffff; padding-left: 0pt; text-indent: 0pt; padding-top: 0pt" align="right" valign="bottom" colspan="1" nowrap="nowrap">0.0 |
|
| Other
expense
(income) |
|
|
(110 |
) |
|
|
(0.1 |
) |
|
|
(124 |
) |
|
|
(0.1 |
) |
|
|
(14 |
) |
|
|
12.7 |
|
| Income
(loss) from continuing operations before
income tax benefit
(expense) |
|
|
13,353 |
|
|
|
8.0 |
|
|
|
220 |
|
| Total
certain
expenses |
|
|
456 |
|
|
|
485 |
|
| Revenue
in excess of certain
expenses |
|
$ |
1,338 |
|
|
$ |
1,556 |
|
|
See
accompanying notes to Statements of Revenue and Certain
Expenses
F-74
TOWERS
OF TEXAS
ACQUISITION
NOTES TO STATEMENTS OF REVENUE AND
CERTAIN
EXPENSES
Year Ended December 31, 2003 and
Period from January 1,
2004 to December
30,
2004
(Unaudited)
(dollars
in
thousands)
1. Business and Summary of Significant Accounting
Policies
Business
Towers of Texas, Inc.
("Towers of Texas") is principally engaged in
providing services to the wireless communications industry by leasing
antenna sites on multi-tenant towers. Towers of Texas leases tower
space primarily to personal communications services and cellular
service providers. Towers of Texas communications sites are located in
Texas, Kansas and Oklahoma.
Towers of Texas is majority owned by
a single shareholder. with its primary lender being the only other
shareholder and holding an approximate 5% ownership. Towers of
Texas pays fees to Site Development, Inc. for the performance of tower
maintenance services and general and administrative services. Site
Development, Inc. is 100% owned by the majority shareholder of
Towers of
Texas.
On December 17, 2004 and December
30,
2004, Pinnacle Towers Acquisition LLC, a wholly-owned
subsidiary of Global Signal Inc. (the
"Company"), acquired 43 and 4 owned towers,
respectively, from Towers of Texas. The
purchase agreement and these Statements of Revenues and Certain
Expenses exclude certain towers which are
not being acquired as well as certain assets of Towers of Texas
related to tower development.
"Towers of Texas Acquisition" represents the
assets to be acquired by" colspan="1" nowrap="nowrap">6,978 |
|
|
|
3.8 |
|
|
|
(6,375 |
) |
|
|
(47.7 |
) |
| Income
tax benefit
(expense) |
|
|
665 |
|
|
|
0.4 |
|
|
|
(341 |
) |
|
|
(0.2 |
) |
|
|
(1,006 |
) |
|
|
(151.3 |
) |
| Basis of
Presentation
The accompanying statements of revenue and certain
expenses were prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission for inclusion
in a
Form S-11 of the
Company. The statements, which encompass the towers to be sold to the
Company, are not representative of the actual operations of Towers of
Texas Acquisition for the periods presented or indicative of future
operations, as they exclude the following: certain selling, general and
administrative expenses; interest expense; and depreciation and
amortization.
The accompanying
statements of revenue and certain expenses for the
period
from January 1, 2004 to December
30,
2004, which
includes operating results for each tower until its acquisition by the
Company, are unaudited and have been prepared
in accordance with generally accepted accounting principles for interim
financial information and Article 10 of Regulation S-X. Revenues
and certain expenses for the
period from January 1,
2004 to December
30,
2004, are not necessarily indicative of that
which may be expected for the year ending December 31,
2004.
Use of Estimates
The
preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates and such variances could be material.
Revenue
Recognition
Revenues are recognized when earned. Escalation
clauses present in lease agreements with Towers of Texas
Acquisition's customers are recognized on a straight-line basis
over the term of the
lease.
Concentration of Credit Risk
Towers of Texas Acquisition
derives the largest portion of its revenues from customers who require
wireless communications services. Sprint PCS, Verizon Wireless, Dobson
Cellular Systems and Cingular Wireless represented 25.9%,
16.9%, 15.5% and 14.6% respectively, of revenues
in the year ended December 31, 2003 and 23.6%,
14.6%,
13.2% and
21.9%,
respectively, for the
period
from January 1, 2004 to December
30,
2004 (unaudited).
F-75
2. Leases
Lease
Obligations
As
lessee, Towers of Texas
is obligated under non-cancelable operating leases for ground
space under communications towers and at
other sites, as well as space on communications towers that
expire at various times through
2051.
The majority of the ground, tower and other site leases have
multiple renewal options, which range up to
10 years each. Certain of the ground and managed site leases
have purchase options at the end of the
original lease term.
Towers of Texas
holds one land lease with a company that is wholly owned
by the majority shareholder. Future minimum rental payments due by
Towers of Texas Acquisition under operating leases in effect at
December 31, 2003, without giving effect to the impact of straight-line
rent adjustments, are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
ing-left: 10pt; text-indent: -10pt;padding-top: 0pt" align="left" valign="bottom" colspan="3">Income
(loss) from continuing
operations |
|
|
14,018 |
|
|
|
8.4 |
|
|
|
6,637 |
|
|
|
3.6 |
|
|
|
(7,381 |
) |
|
|
(52.7 |
) |
| Income
(loss) from discontinued
operations |
|
|
(131 |
) |
|
|
(0.1 |
) |
|
|
111 |
|
|
|
|
| Year |
|
Related
Party |
|
Other |
|
Total |
| 2004 |
|
$ |
7 |
|
|
$ |
154 |
|
|
$ |
161 |
|
| 2005 |
|
|
7 |
|
|
|
162 |
|
|
|
169 |
|
| 2006 |
|
|
7 |
|
|
|
0.1 |
|
|
|
242 |
|
|
|
(184.7 |
) |
| Income
(loss) before gain (loss) on sale of
properties |
|
|
13,887 |
|
|
|
8.3 |
|
|
|
6,748 |
|
|
|
3.7 |
|
|
|
(7,139 |
) |
|
|
(51.4 |
) |
| Gain
(loss) on sale of
properties |
|
|
128 |
|
|
|
135 |
|
| 2007 |
|
|
7 |
|
|
|
53 |
|
|
|
60 |
|
| 2008 |
|
|
2 |
|
|
|
29 |
|
|
|
31 |
|
| Thereafter |
|
|
— |
|
|
|
(726 |
) |
|
|
(0.4 |
) |
|
|
124 |
|
|
|
0.1 |
|
|
|
850 |
|
|
|
(117.1 |
) |
| Net
income
(loss) |
|
$ |
13,161 |
|
|
|
7.9
|
% |
|
$ |
6,872 |
|
|
|
3.8
|
% |
|
37 |
|
|
|
37 |
|
| |
|
$ |
30 |
|
|
$ |
563 |
|
|
$ |
593 |
|
|
Many
of Towers of Texas Acquisition's lease agreements contain
escalation clauses which are typically based
on either a fixed percentage rate or the change in the Consumer Price
Index. For leases with escalation clauses
based on a fixed percentage rate, rental expense
is
recognized in our statements of revenue and
certain expenses on a straight line basis over the initial term of the
lease plus the future optional renewal
periods where there is a reasonable assurance that the lease will be
renewed based on our evaluation at the
inception of the lease or our assumption of the lease due to our
acquisition of the related tower
asset.
Rent expense for operating
leases was
$204.0
(including $6.7 from related party) for the year ended December 31,
2003 and
$199.0
(including $5.2 from related party) (unaudited) for the
period from January 1,
2004 to December
30,
2004.
Customer Leases
Towers
of Texas Acquisition
leases antenna space on communications towers
to various wireless service providers and other wireless communications
users under non-cancelable operating leases. These leases are generally
for terms of 5 to 20
years.
Generally, Towers of Texas
Acquisition's tenant leases provide for annual escalations and
multiple renewal periods, at the
tenant's option.
Leases with
fixed-rate escalation clauses, or those that have
no escalation, have been
included below based on the contractual tenant lease amounts. Leases
that escalate based upon non-fixed rates,
such as the Consumer Price Index, are included below at the
current contractual rate over the remaining
term of the lease. The tenant rental payments included in the
table below do not assume exercise of tenant
renewal
options.
Future minimum rental revenues due to Towers of Texas Acquisition
under operating leases in effect at December 31, 2003, without giving
effect to the impact of straight-line rent adjustments, are as
follows:
F-76
Revenues
Our revenues increased $16.2 million or 9.7%, primarily as a
result of approximately $11.1 million in
revenues from our acquisition of 929 communications sites during the
period from December 1, 2003 through December
31, 2004, and from internal growth. Our internal revenue growth of
3.1% was primarily
59
driven by growth in our revenues generated
from telephony customers of 13.5%, which was
in part offset by a decline in our revenues generated by
our non-telephony tenants.
For 2004,
USA Mobility, our largest customer, accounted for 15.0% of our
revenues. One of our primary master tenant
leases with USA Mobility, the Arch Lease, expires in May 2005. The
Arch Lease allows Arch Wireless, one of the
two companies that merged to form USA Mobility, to locate a
fixed number of transmitters on any of our sites for a
fixed minimum rate. The number of sites that
Arch Wireless currently occupies is significantly less
than the maximum number of sites allowable
under the current contract for the fixed minimum rate.
Consequently, we believe that it is likely that
the Arch Lease will be renewed
or extended on
terms and rates that are significantly less favorable to us
than those currently in
place and we expect our revenues from any
renewal or extension
of the Arch Lease to be significantly lower
starting
June
2005.
Expenses
Direct
site operating expenses (excluding depreciation, amortization and
accretion)
Our direct site operating expenses increased $0.9
million primarily due to increased tower cost
associated with the 929 wireless communications sites we
have acquired during the period from December
1, 2003 through December 31, 2004. These additional costs from the
acquired communications towers were partially
offset by decreases in maintenance expenses at our existing
communications sites. As a percentage of revenues, our
direct site operating expenses decreased to
31.4% of revenues for 2004 from 33.9% of
revenues for 2003.
Selling, general and administrative (excluding
non-cash stock-based compensation)
Our selling, general and
administrative expenses decrease of $3.5 million was
primarily attributable to a $0.9 million
decline in legal and professional fees, a $1.5 million decline in
monitoring fees paid to Fortress and
Greenhill, as the monitoring agreement was terminated effective
March 2004, and a decline in personnel
related costs. As a percentage of revenues, our selling, general
and administrative expenses declined to
12.8% of revenues for 2004 from 16.1% of revenues for
2003.
State franchise,
excise and minimum taxes
Our state franchise, excise and
minimum taxes decreased to $0.1 million in 2004 from $0.8
million in 2003 primarily as a result of a
reversal of various tax reserves related to contingencies which are
no longer
probable.
Depreciation,
amortization and accretion
|
|
|
| Year |
|
Total |
| 2004 |
|
$ |
1,841 |
|
| 2005 |
|
|
1,736 |
|
| 2006 |
|
|
1,418 |
|
| 2007 |
|
|
719 |
|
| 2008 |
|
|
246 |
|
| Thereafter |
|
|
— |
|
| |
|
$ |
5,960 |
The increase in depreciation,
amortization and accretion of $7.2 million for 2004 compared
to 2003 was primarily due to the acquisition
of 929 communications sites during the period from
December 1, 2003 through December 31,
2004.
Non-cash
stock-based compensation expense
Our non-cash stock based
compensation expense increased to $4.2 million in 2004 from
$1.5 million in 2003. In August 2003, our
board of directors awarded options to purchase shares of our
common
stock
to an employee of Fortress Capital Finance LLC, who provided financial
advisory services to us. This agreement was
terminated in March 2004 and the vesting of the outstanding
options was modified. As a result of the services
provided before the termination, the termination of
this individual's agreement and the resulting
modification, we recorded a total expense of $2.6 million
in 2004 related to these stock options which concludes
all charges to be recognized related to this
agreement. During 2003, we recognized $1.5 million in
non-cash stock-based compensation related to
this agreement. In addition, during 2004, we recognized
$0.4 million in stock-based compensation
related to 20,000 fully-vested, unrestricted shares of
common
stock
issued to our four independent directors upon
consummation of our initial public offering and $1.3 million related to
options granted to an executive which were
granted at an exercise price less than the market value of the stock on
the grant date.
60
Interest expense, net
Our net interest expense increase of $7.1 million is related to the
increase in the amount of debt in our capital
structure resulting from (i) the February 5, 2004 mortgage loan
transaction, which included the repayment of
our old credit facility and borrowing $418.0 million under the
February 2004 mortgage loan and (ii)
borrowings related to the acquisition of wireless
communications
sites during 2004.
Loss
on early extinguishment of debt
On February 5, 2004, Pinnacle
Towers LLC, then known as Pinnacle Towers Inc., and 13 of
its direct and indirect subsidiaries borrowed
$418.0 million under a mortgage loan, the February 2004
mortgage loan, made payable to a newly formed trust. A
portion of the net proceeds was used to repay
outstanding borrowings under our old credit facility, and as a result
of this repayment, this facility was
terminated and $8.4 million of unamortized deferred financing costs
related to the old credit facility were
expensed. On December 7, 2004, we borrowed $293.8 million under a
second mortgage loan to finance newly
acquired wireless
communications
sites. A portion of the net proceeds was used
to repay outstanding borrowings under our credit facility, and as a
result of this repayment, this facility was
terminated and $0.6 million of unamortized deferred financing costs
related to the credit facility were
expensed.
Income tax
expense
Our income tax expense in 2004 of $0.3 million
primarily relates to changes in estimates of our
2003 tax expense, recorded in 2004 when known. During
2003, we had an income tax benefit of $0.7
million resulting primarily from other changes in
estimates of tax expense.
Comparison
of the ten months ended October 31, 2002, and the two months ended
December 31, 2002
to
2003
Our results before November 1, 2002 are not generally comparable to
the results of operations after that date due
to the effects of fresh start accounting and our
reorganization.
The following presents an overview of our results of operations for
2003, the ten months ended October 31, 2002
and the two months ended December 31,
2002.
61
3. Restatement
of Previously Issued Statement of Revenue and Certain Expenses
Towers
of Texas
Acquisition
restated the accompanying statement of revenue and certain expenses as
of December 31, 2003. The restatement
adjustment reflected in the following tables corrects an error in the
recognition of additional ground lease rent
expense on a straight-line basis over the initial term of the lease
plus the future optional renewal periods
where there is reasonable assurance that the lease will be renewed,
based on
Towers of Texas
Acquisition's evaluation at the
inception of the lease or
its
assumption of the lease due to
its
acquisition of the related tower
asset.
The following table presents
the impact of the restatement adjustments on the Company's
previously reported results for the year
ended December 31,
2003:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
December
31,
2003 |
| |
|
As
Previously
Reported |
|
Adjustments |
|
As
Restated |
| Revenue |
|
$ |
1,794 |
|
|
$ |
— |
|
|
$ |
1,794 |
|
| Certain
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Predecessor
Company |
|
Successor
Company |
| |
|
Ten
Months Ended
October 31,
2002 |
|
Two Months
Ended
December 31,
2002 |
|
Year
Ended
December 31,
2003 |
| (dollars in
thousands) |
|
$ |
|
%
of
Revenues |
|
$ |
|
%
of
Revenues |
|
$ |
|
%
of
Revenues |
| |
|
|
|
|
|
|
|
| Revenues |
|
$ |
137,435 |
|
|
|
|
|
|
|
|
|
|
| Rent |
|
|
171 |
|
|
|
33 |
|
|
|
204 |
|
| Property
taxes |
|
|
62 |
|
|
|
— |
|
|
|
62 |
|
| Other
tower operating
expense |
|
|
190 |
|
|
100.0 |
% |
|
$ |
27,454 |
|
|
|
100.0 |
% |
|
$ |
166,670 |
|
|
|
100.0 |
% |
| Direct
site operating expenses (excluding impairment
losses, depreciation, amortization and
accretion) |
|
|
46,570 |
|
|
|
33.9 |
|
|
|
9,028 |
|
|
|
32.9 |
|
|
|
56,572 |
|
|
— |
|
|
|
190 |
|
| Total
certain
expenses |
|
|
423 |
|
|
|
33 |
|
|
|
456 |
|
| Revenue
in excess of certain
expenses |
|
$ |
1,371 |
|
|
$ |
(33 |
) |
|
$ |
1,338 |
|
|
F-77
REPORT
OF INDEPENDENT REGISTERED
PUBLIC
ACCOUNTING
FIRM
To the Stockholders and Board of Directors of Global Signal,
Inc.
|
|
33.9 |
|
| Gross
margin |
|
|
90,865 |
|
|
|
66.1 |
|
|
|
18,426 |
|
|
|
67.1 |
|
|
|
110,098 |
|
|
|
66.1 |
|
| Other
expenses: |
|
|
|
|
|
|
|
|
|
We have audited the accompanying statement of revenue and
certain expenses of ForeSite
2005 Acquisition, as described in Note A, for
the year ended December 31, 2004. This statement of revenue and certain
expenses is the responsibility of ForeSite
2005 Acquisition's management. Our
responsibility is to express an opinion on this statement of revenue
and certain expenses based on our audit.
We conducted our audit
in accordance with
the
standards of the Public
Company Accounting Oversight Board (United
States).
Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of revenue and certain
expenses is
free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the statement of revenue and certain expenses. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall presentation of the statement of revenue and certain expenses.
We believe that our audit of the statement of revenue and certain
expenses provides a reasonable basis for our opinion.
The
accompanying statement of revenue and certain expenses was prepared for
the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in a Form S-11 of
Global Signal
Inc.,
as described in Note A, and is not intended to be a complete
presentation of ForeSite
2005 Acquisition's revenues and
expenses.
In our opinion, the statement of revenue and certain
expenses referred to above presents fairly, in all material respects,
the revenue and certain expenses of ForeSite Acquisition, as described
in Note A, for the year ended December 31, 2004, in conformity with
United States generally accepting accounting
principles.
|
/s/ Dixon
Hughes
PLLC |
Birmingham,
Alabama
April
20,
2005
F-78
FORESITE
2005
ACQUISITION
STATEMENT OF REVENUE AND
CERTAIN EXPENSES
Year
Ended
December 31, 2004
(dollars in
thousands)
|
|
|
|
|
|
|
| |
|
Year
Ended
December 31,
2004 |
| Revenue |
|
$ |
3,302 |
|
| Certain
Expenses: |
|
|
|
|
| Rent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Selling,
general and administrative (excluding $0, $0,
and $1,479 of non-cash stock-based
compensation,
respectively) |
|
|
27,523 |
|
|
|
20.0 |
|
|
|
4,743 |
|
|
|
17.3 |
|
|
|
26,914 |
|
|
|
16.1 |
497 |
|
| Property
taxes |
|
|
118 |
|
| Other
tower operating
costs |
|
|
251 |
|
| Selling,
general, and
administrative |
|
|
721 |
|
| Total
certain
expenses |
|
|
1,587 |
|
| Revenue
over certain
expenses |
|
$ |
1,715 |
|
|
See
accompanying notes.
F-79
FORESITE
2005
ACQUISITION
NOTES TO STATEMENT OF REVENUE
AND CERTAIN EXPENSES
Year Ended
December 31,
2004
(dollars in
thousands)
Note A — Business
and Summary of Significant Accounting Policies
Business
|
| State
franchise, excise and minimum
taxes |
|
|
1,671 |
|
|
|
1.2 |
|
|
|
330 |
|
|
|
1.2 |
|
|
|
848 |
|
|
|
0.5 |
|
| Depreciation,
amortization and
accretion |
|
|
73,508 |
|
|
|
53.5 |
|
|
|
10,119 |
ForeSite Towers, LLC ("ForeSite") and its
wholly-owned subsidiaries, ForeSite, LLC and ForeSite Services, Inc.
("Services") are principally engaged in
providing services to the wireless communications industry by leasing
antenna sites on multi-tenant towers throughout the Southeastern United
States. ForeSite leases tower space primarily to personal
communications services, cellular service providers, and utility
companies. Services is principally engaged in tower construction and
antenna installation.
ForeSite is a portfolio investee of Allied
Capital REIT ("Allied"), which owns a
controlling interest in ForeSite.
On April
14,
2005, Pinnacle Towers Acquisition LLC, a subsidiary of Global
Signal Inc.
(the
Company), entered
into a definitive purchase agreement to
acquire 172
telecommunications towers from ForeSite. The purchase agreement and
this Statement of Revenue and Certain Expenses excludes Services.
"ForeSite 2005
Acquisition" represents the
assets acquired by Global.
ForeSite pays a management fee of
$774,993 per year to Services, a related party, for site management,
marketing, and operating services for telecommunications sites. This
fee is not dependent on the number of towers owned or revenues earned.
For purposes of this Statement of Revenue and Certain Expenses, the
management fee has been allocated to ForeSite Acquisition based on the
relationship of ForeSite 2005
Acquisition's revenues to the aggregate
revenue for ForeSite's entire tower portfolio. The allocated
management fee of $720,743 for the year ended December 31, 2004 is
reflected in the accompanying Statement of Revenue and Certain Expenses
as selling, general, and administrative expenses.
Basis of
Presentation
The accompanying Statement of Revenue and Certain
Expenses was prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission for inclusion in
a Form S-11 for Global. The statement, which encompass the towers to be
sold to the
Company are not representative of the actual
operations of ForeSite 2005
Acquisition for the period presented or
indicative of future operations, as
they
exclude the following:
certain selling, general and administrative expenses; interest expense;
and depreciation and amortization expense.
Use of
Estimates
The preparation of financial statements in conformity
with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates and such variances
could be material.
Revenue
Recognition
Tower rental revenue is recognized on a straight-line basis over the
life of the related lease agreements. Revenue is recorded in the month
in which it is due. Any rental amounts received in advance of the month
due are recorded as deferred revenue. Provision is made for any
anticipated losses in the period that such losses are determined.
Concentration of Credit Risk
ForeSite
2005
Acquisition's customer base is
concentrated in the telecommunications industry. For the year ended
December 31, 2004, El Paso (formally, Southern Natural Gas Company),
AT&T, and
F-80
Verizon accounted for approximately
20%, 33%, and 12%, respectively, of total tower
rental revenues. No other tenant accounted for more than 10% of
lease revenues in 2004.
Note B
—
Leases
Lease Obligations
ForeSite
2005 Acquisition
leases property
under
ground leases, office space, and equipment undgn="left" valign="bottom" nowrap="nowrap"> |
|
|
36.9 |
|
|
|
47,137 |
|
|
|
28.3 |
|
| Non-cash
stock based compensation
expense |
|
|
— |
|
|
|
0.0 |
|
|
|
— |
|
|
|
0.0 |
|
|
|
1,479 |
|
|
|
0.9 |
|
| Impairment
loss on assets held for
sale |
|
Future minimum
lease payments due by ForeSite 2005
Acquisition under noncancellable operating
leases at December 31, 2004, are as
follows:
|
|
|
|
|
|
|
| Years
ending December
31: |
|
| 2005 |
|
$ |
374 |
|
| 2006 |
|
|
276 |
|
| 2007 |
|
|
216 |
|
| 2008 |
|
|
150 |
|
| 2009 |
|
|
27 |
|
| Total |
|
$ |
1,043 |
|
|
1,018 |
|
|
|
0.7 |
|
|
|
— |
|
|
|
0.0 |
|
|
|
— |
|
|
|
0.0 |
|
| Impairment
loss on assets held for
use |
|
|
4,541 |
|
|
|
3.3 |
|
|
|
— |
|
|
|
ForeSite
Acquisition's total rental expense for operating leases was
$497,232 for the year ended December 31, 2004.
Tenant
Leases
ForeSite 2005
Acquisition leases antenna space on
communications towers to various wireless service providers and other
wireless communications users under operating leases, some of which are
cancelable upon relatively short notice. Substantially all of the
leases provide for renewal of varying lengths of time and escalators
upon renewal.
The following is a schedule of future minimum
rental revenue due to ForeSite
2005 Acquisition under non-cancelable leases
in effect as of December 31,
2004:
|
|
|
|
|
|
|
| Years
ending December
31: |
|
|
| 2005 |
|
$ |
643 |
|
| 2006 |
|
|
643 |
|
| 2007 |
|
|
643 |
|
| 2008 |
|
|
643 |
|
| 2009 |
|
|
0.0 |
|
|
|
— |
|
|
|
0.0 |
|
| Reorganization
expenses |
|
|
59,124 |
|
|
|
43.0 |
|
|
|
— |
|
|
|
0.0 |
|
|
|
— |
|
|
|
0.0 |
|
| |
|
|
167,385 |
643 |
|
| Thereafter |
|
|
643 |
|
| Total |
|
$ |
3,858 |
|
|
F-81
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
and Stockholders of Triton PCS
Holdings, Inc.
We have audited the accompanying statement of
revenue and direct operating expenses of SunCom Acquisition as
described in Note 1 for the year ended December 31, 2004. This
statement of revenue and direct operating expenses is the
responsibility of Triton PCS Holdings, Inc.'s management.
Our responsibility is to express an opinion on this statement of
revenue and direct operating expenses based on our audit.
We
conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of revenue and direct
operating expenses is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the statement of revenue and direct operating
expenses. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall presentation of the statement of revenue and
direct operating expenses. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying statement of
revenue and direct operating expenses was prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission (for inclusion in the registration statement on Form S-11 of
Global Signal, Inc.) as described in Note 1 and is not intended to be a
complete presentation of SunCom Acquisition's revenues and
expenses.
In our opinion, the statement of revenue and direct
operating expenses referred to above presents fairly, in all material
respects, the revenue and direct operating expenses described in Note 1
of SunCom Acquisition for the year ended December 31, 2004, in
conformity with accounting principles generally accepted in the United
States of America.
/s/ PRICEWATERHOUSECOOPERS
LLP
Philadelphia, Pennsylvania
April
15,
2005
F-82
SUNCOM
ACQUISITION
STATEMENT OF REVENUE AND DIRECT OPERATING
EXPENSES
(dollars in
thousands)
|
|
|
121.8 |
|
|
|
15,192 |
|
|
|
55.3 |
|
|
|
76,378 |
|
|
|
45.8 |
|
| Operating
income
(loss) |
|
|
(76,520 |
) |
|
|
(55.7 |
) |
|
|
3,234 |
|
|
|
11.8 |
|
|
|
|
|
|
|
|
|
|
| |
|
Year
Ended
December 31, 2004 |
| Revenue |
|
$ |
2,640 |
|
| Direct
Operating
Expenses: |
|
|
|
|
| Rent |
|
|
2,485 |
|
| Property taxes |
|
|
366 |
|
| Other tower
operating expenses |
|
|
102 |
|
| Total
direct operating
expenses |
|
|
2,953 |
|
| Revenue less than direct operating
expenses |
|
33,720 |
|
|
|
20.2 |
|
| Interest
expense,
net |
|
|
45,720 |
|
|
|
33.3 |
|
|
|
4,041 |
|
|
|
14.7 |
|
|
|
20,477 |
|
|
|
12.3 |
|
| Gain
on extinguishment of
debt |
|
|
(404,838 |
) |
|
|
(294.6 |
< serif; font-size: 10pt; color: #000000; font-weight: normal; font-style: normal; border-bottom: 3px double #000000 ;padding-top: 0pt" align="right" valign="bottom" colspan="1">$
(313 |
) |
|
See
accompanying notes to Statement of Revenue and Direct Operating
Expenses.
F-83
SUNCOM
ACQUISITION
NOTES TO STATEMENT OF REVENUE AND DIRECT OPERATING
EXPENSES
Year Ended December 31, 2004
(dollars
in thousands)
|
|
| 1. |
Business and Summary of
Significant Accounting Policies |
Business
SunCom
Wireless, Inc. and its wholly-owned subsidiaries including SunCom
Wireless Operating Company LLC, Triton PCS Property Company LLC and AWS
Network Newco LLC (collectively, "SunCom"),
are principally engaged in providing wireless services in the
Southeastern United States, Puerto Rico and the Virgin Islands. SunCom
Wireless, Inc. is a direct, wholly-owned subsidiary of SunCom Wireless
Investment Co., LLC. SunCom Wireless Investment Co., LLC is a direct,
wholly-owned subsidiary of Triton PCS Holdings, Inc.
On March
18, 2005, a definitive purchase agreement was signed by Global Signal
Acquisitions LLC, a wholly-owned subsidiary of Global Signal Inc.
("Global
Signal"), to acquire from SunCom
169 owned towers and related land leases and co-location income leases
("related agreements"). The definitive
purchase agreement and this Statement of Revenue and Direct Operating
Expenses exclude towers owned by SunCom that are not subject to the
definitive purchase agreement. "SunCom
Acquisition" represents the assets to be acquired by
Global Signal subject to the definitive purchase agreement.
Basis of Presentation
The accompanying statement of revenue
and direct operating expenses was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange
Commission for inclusion in a Form S-11 of
Global
Signal. The statement, which encompasses the
towers and related agreements to be sold to
Global
Signal, are not representative of the actual
operations of SunCom Acquisition for the period presented or indicative
of future operations, as they exclude the following: corporate
expenses, interest expense, income taxes,
accretion of the
asset retirement obligations, and
depreciation and amortization. In addition, the statement reflects
revenue and expenses directly attributable to the towers and related
agreements to be sold to
Global
Signal, as well as allocations
for property taxes, maintenance and
monitoring, insurance and utilities deemed
reasonable by SunCom management to present the statement of revenue and
direct operating expenses on a stand alone basis.
Use of
Estimates
The preparation of financial statements in conformity
with U.S. generally accepted accounting principles requires SunCom
management to make estimates and assumptions that affect the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates and such variances could be
material.
Revenue Recognition
Rental revenues are
recognized when earned. Escalation clauses present in lease agreements
with SunCom's customers are recognized on a straight-line basis
over the term of the lease.
) |
|
|
— |
|
|
|
0.0 |
|
|
|
— |
|
|
|
0.0 |
|
| Other
loss
(income) |
|
|
(533 |
) |
|
|
(0.4 |
) |
|
|
84 |
|
|
|
0.3 |
|
|
|
(110 |
) |
|
Rent
Expense
Rent expense is recognized as incurred. Escalation
clauses present in lease agreements with SunCom's vendors are
recognized on a straight-line basis over the term of the lease.
Concentration of Credit Risk
SunCom Acquisition
derives its revenues from various wireless service providers and other
wireless communications users for the lease of antenna space on
communication towers under non-cancelable operating leases. Five
wireless service providers individually exceeded 10% of revenues
in the year ended December 31,
2004.
F-84
|
|
| 2. |
Leases |
Lease Obligations
SunCom Acquisition leases land under
non-cancelable operating leases. Ground leases are generally for terms
of 5 or 10 years and are renewable at the option of SunCom. Future
minimum rental payments due by SunCom Acquisition under
the current term of
operating leases in effect at December 31,
2004, without giving effect to the impact of straight-line rent
adjustments, are as follows:
|
|
|
|
|
|
|
| |
|
Total |
| 2005 |
|
$ |
2,380 |
|
| 2006 |
|
|
1,980 |
|
| 2007 |
|
|
1,487 |
|
(0.1 |
) |
| Income
from continuing operations before income tax
benefit
(expense) |
|
|
283,131 |
|
|
|
206.0 |
|
|
|
(891 |
) |
|
|
(3.2 |
) |
|
|
13,353 |
|
|
|
8.0 |
|
| Income
tax benefit
(expense) |
|
|
5,195 |
|
|
|
3.8 |
|
|
|
2008 |
|
|
806 |
|
| 2009 |
|
|
435 |
|
| Thereafter |
|
|
1,295 |
|
| Total |
|
$ |
8,383 |
|
|
Rent
expense for operating leases was
$2,485
for the year ended December 31, 2004.
Customer Leases
SunCom Acquisition leases antenna space on communications towers to
various wireless service providers and other wireless communications
users under non-cancelable operating leases. These leases are generally
for terms of 5 years, with multiple renewals at the option of the
tenant. Most leases have escalator provisions, whereby rent is
increased at a fixed percentage or in relation to increases in the
consumer price index.
Future minimum rental revenues due to
SunCom Acquisition under the current term of
operating leases in effect at December 31,
2004, without giving effect to the impact of straight-line rent
adjustments, are as follows:
|
|
|
|
|
|
|
| |
|
Total |
| 2005 |
|
$ |
(19 |
) |
|
|
(0.1 |
) |
|
|
665 |
|
|
|
0.4 |
|
| Income
from continuing
operations |
|
|
288,326 |
|
|
|
209.8 |
|
|
|
(910 |
) |
|
|
(3.3 |
) |
|
|
14,018 |
|
|
|
8.4 |
|
| 2,523 |
|
| 2006 |
|
|
1,731 |
|
| 2007 |
|
|
1,306 |
|
| 2008 |
|
|
804 |
|
| 2009 |
|
|
341 |
|
| Thereafter |
|
|
— |
|
| Total |
|
$ |
6,705 |
|
|
F-85
Report
of Independent Registered Public Accounting
Firm
The
Board of Directors
Sprint Corporation:
Loss
from discontinued
operations |
|
|
(32,076 |
) |
|
|
(23.3 |
) |
|
|
(84 |
) |
|
|
(0.3 |
) |
|
|
(131 |
) |
|
|
(0.1 |
) |
| Income
before loss on disposal of
properties |
|
|
256,250 |
|
|
|
186.5 |
|
|
|
(994 |
) |
|
We have audited the
accompanying Statement of Revenue and Certain Expenses of Sprint Sites
USA (the Company), comprising the operations of certain wireless
communications towers owned by subsidiaries of Sprint Corporation to be
leased to Global Signal, Inc., for the year ended December 31, 2004.
This financial statement is the responsibility of the Company's
management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in
accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for
our opinion.
The accompanying Statement of Revenue and Certain
Expenses was prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission and for inclusion
in the registration statement on Form S-11 of Global Signal, Inc., as
described in Note 1 to the Statement of Revenue and Certain Expenses.
It is not intended to be a complete presentation of the
properties' revenues and expenses.
In our opinion, the
financial statement referred to above presents fairly, in all
material respects,
the revenue and certain expenses (as described in Note 1) for the year
ended December 31, 2004 in conformity with U.S. generally accepted
accounting
principles.
/s/
KPMG LLP
Kansas City,
Missouri
March 30,
2005
F-86
SPRINT
SITES USA,
A COMPONENT OF SPRINT CORPORATION AND ITS
SUBSIDIARIES
STATEMENT OF REVENUE AND
CERTAIN EXPENSES
(dollars in
thousands)
|
|
|
|
|
|
|
| |
|
Year
Ended
December 31,
2004 |
| Revenues |
|
| Lease
revenues |
|
$ |
95,624 |
|
| Other
service
revenues |
|
|
8,142 |
|
| Tm: 3px double #ffffff;padding-top: 0pt" align="right" valign="bottom" colspan="1"> |
(3.6 |
) |
|
|
13,887 |
|
|
|
8.3 |
|
| Loss
on disposal of
properties |
|
|
(78 |
) |
|
|
(0.1 |
) |
|
|
(2 |
) |
|
|
0.0 |
|
|
|
(726 |
) |
|
|
(0.4 |
) |
| Net
income |
|
$ |
|
|
103,766 |
|
| Certain
Expenses |
|
| Lease
expense |
|
|
111,763 |
|
| Property
taxes |
|
|
16,887 |
|
| Maintenance
and
repairs |
|
|
9,783 |
|
| Selling,
general and
administrative |
|
|
7,290 |
|
| Total
certain
expenses |
|
|
145,723 |
|
| Certain
expenses in excess of
revenue |
|
$ |
(41,957 |
) |
|
256,172 |
|
|
|
186.4 |
% |
|
$ |
(996 |
) |
|
|
(3.6 |
)% |
|
$ |
13,161 |
|
|
|
7.9 |
% |
|
Revenues
Our average monthly revenue during 2003 and 2002 remained relatively
constant. Our mix of revenues from wireless
telephony customers increased to 41.1% of revenues for the month
of December 2003, from 37.0% of
revenues for the month of December 2002.
In 2003, our largest customer, USA Mobility, a paging service
provider, accounted for 16.2% of our
revenues. For the ten months ended October 31, 2002, USA Mobility
accounted for 16.2% of our revenues
and for the two months ended December 31, 2002, USA Mobility accounted
for 16.5% of our revenues. Arch
Wireless, one of the two companies that merged to form USA
Mobility,
reorganized under Chapter 11 in late 2001 and exited
bankruptcy in May 2002. In connection with
Arch Wireless' exit from bankruptcy we entered
into a new three-year master lease agreement
requiring Arch Wireless to make fixed minimum payments
to us each month, which allows Arch Wireless
to locate up to a fixed number of transmitters on any of our sites.
Under this agreement, the monthly revenues we
earned from Arch Wireless decreased by approximately 21.2% from
that which we earned under our prior
agreement with Arch Wireless prior to its emergence from bankruptcy.
The number of sites that Arch Wireless
currently occupies is significantly less than the maximum
number of sites allowable under the current
contract for the fixed minimum rate. Consequently, we
believe that it is likely that the Arch Lease
will be renewed on terms and rates that are significantly
less favorable to us than those currently in
place.
62
Expenses
Direct site operating expenses (excluding impairment
losses, depreciation, amortization and accretion)
See
accompanying Notes to Statement of Revenue and Certain
Expenses.
F-87
SPRINT
SITES USA,
A COMPONENT OF SPRINT
CORPORATION AND ITS SUBSIDIARIES
NOTES
TO STATEMENT OF REVENUE AND CERTAIN
EXPENSES
1. Summary
of Significant Accounting Policies
Operations and Basis of
Presentation
The financial statements include the operations of
certain wireless communications towers owned by certain subsidiaries of
Sprint Corporation (together with its subsidiaries,
"Sprint") in connection with its PCS wireless
telephony products and services business ("Sprint
PCS"). These towers represent those to be leased by Global
Signal Inc. as described in the next paragraph. These communications
towers are located on real property primarily leased from a variety of
third party individual and commercial landlords. For the purposes of
these financial statements, Sprint's investment in these towers,
and the associated operations, including leasing activities with
landlords, maintenance of the communications towers, and the marketing
and leasing of available tower capacity on the communications towers to
other wireless service providers, are collectively referred to as
Sprint Sites USA ("SSUSA"). SSUSA is not a
legal entity.
On February 14, 2005, a definitive agreement was
reached by Sprint and Global Signal Inc. under which Global Signal Inc.
will have exclusive rights to lease and operate approximately 6,600
sites which are included in this Statement of Revenue and Certain
Expenses. Under the terms of the transaction, which is expected to
close in the second quarter of 2005, Global Signal Inc. will also take
over the existing collocation arrangements with tenants who lease space
on the towers. Sprint has committed to sublease space on the towers
from Global Signal Inc. for a minimum of 10 years. The agreement and
this Statement of Revenue and Certain Expenses exclude certain other
Sprint-owned wireless sites and related assets that are not subject to
the agreement.
The accompanying statement of revenue and certain
expenses was prepared for the purpose of complying with Rule 3-14 of
the Securities and Exchange Commission. The statement, which
encompasses the towers and agreements to be leased to Global Signal
Inc., is not representative of the actual operations of SSUSA for the
period presented or indicative of future operations of SSUSA as no
revenue for Sprint PCS' occupation of tower space has been
included, as discussed below in Revenue Recognition. Additionally,
certain expenses, primarily consisting of certain selling, general and
administrative expenses, interest expense, depreciation and
amortization have been excluded.
The financial statements of
SSUSA are prepared using accounting principles generally accepted in
the United States. These principles require management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent assets and liabilities,
and the reported amounts of revenues and expenses. Actual results could
differ from those estimates.
Revenue Recognition
SSUSA
recognizes revenues, which consist primarily of collocation leasing
revenues, as services are rendered to non-affiliate customers. No
revenue has been recognized by SSUSA in conjunction with Sprint
PCS' occupation of tower space. Escalation clauses, excluding
those tied to the Consumer Price Index (CPI), and other incentives
present in the lease agreements with SSUSA's customers are
recognized on the straight-line basis over the current term of the
lease excluding renewal periods exercisable at the option of the
tenant. Amounts received prior to being earned are deferred until such
time as the earnings process is complete.
SSUSA recognizes other
revenue, including application fees which
are deferred and amortized over five years,
and fee-based service revenue, as services are rendered.
Lease
Expense
SSUSA recognizes lease expense, primarily on ground
leases, as incurred. Escalation clauses, excluding those tied to the
CPI, present in the lease agreements between SSUSA and the lessors
are
F-88
Our direct
site operating expenses as a percentage of revenues in 2003 were
consistent with our direct operating expenses
as a percentage of revenue for the ten months ended October 31, 2002.
Our direct operating expenses in the two
months ended December 31, 2002 as a percentage of revenues
were
1.0%, of
revenues lower than our direct operating expense in the ten months
ended October 31, 2002 and 2003 primarily as
a result of lower utility costs.
Selling, general and administrative (excluding
non-cash stock-based compensation)
The decrease in selling,
general and administrative expenses as a percentage of revenues in
2003 was primarily attributable to declines
in (1) salaries and salary related expenses due to the effects
of workforce reductions, (2) professional
fees, (3) bad debt expense, (4) aborted construction
expenses and (5) insurance expense related
specifically to the cost of directors and officers insurance
expense incurred during the ten months ended
October 31, 2002. The overall decrease was offset by an
increase in (1) temporary help and professional services
related to special projects geared toward
improving internal processes and our document data base
library, (2) severance and relocation
expenses related to our installation of a new management
team and (3) management fees paid to our
principal stockholders beginning November 1,
2002.
State franchise,
excise and minimum taxes
The decrease in state franchise,
excise and minimum taxes as a percentage of revenues in 2003
was a result of recharacterizing certain subsidiaries as
qualified REIT subsidiaries, divesting a taxable
REIT subsidiary and reorganizing the overall operations
to more effectively minimize state franchise
and income taxes as well as an adjustment of our prior
year estimated taxes. These taxes are
calculated using various methods including an
apportionment based on our property within a given
state, or our capital structure or based upon a minimum
tax in lieu of income taxes.
Depreciation, amortization and accretion
The
decrease in depreciation, amortization and accretion as a percentage of
revenues during 2003 as compared to the ten
months ended October 31, 2002 was primarily due to the adoption of
fresh start accounting, which reduced the
depreciable basis of long-lived assets by $357.2 million,
resulting in decreases in depreciation
expense, offset by an increase in accretion of our asset
retirement obligation. The decrease in
depreciation expense as a percentage of revenues during 2003 compared
to the two months ended December 31, 2002 was
primarily as a result of depreciation of tower assets on
ground leases and other subleased sites, having a
month-to-month term being fully depreciated in one
month.
Non-cash stock based compensation expense
In
August 2003, our board of directors awarded options to purchase shares
of our
common
stock
to an employee of Fortress Capital Finance LLC, who
provided financial advisory services to us.
These options originally vested at various times over a
three-year period, the period during which this
individual was expected to perform services. During
2003, we recorded an expense of $1.5 million
related to these options based on the estimated market
value of our stock at December 31, 2003. This
agreement was terminated in March 2004 and the vesting
of the outstanding options was modified.
Impairment loss on assets held for sale
During the ten months ended October 31, 2002, we recorded an
additional impairment loss of $1.0 million on
a collocation facility reclassified as held for sale in 2001, based on
a decrease in the net proceeds we expected to
receive. The facility was sold in 2002.
Impairment loss on assets held for use
During
the ten months ended October 31, 2002, we identified specific sites
with impairment indicators and recorded an
impairment loss of $4.5 million.
63
Reorganization
expenses
recognized using a
straight-line basis including renewal option periods that are
reasonably assured. Expense recognized in advance of required payments
is accrued as a liability.
Certain
ground leases contain provisions which require SSUSA to pay the
landlord a certain percentage or fixed amount of revenues earned from
tenants added subsequent to the anchor tenant. This amounted to
approximately 11% of total lease expense for the year ended
December 31, 2004, in the accompanying statement of revenue and certain
expenses.
Major Customers
SSUSA has ten customers that generated an aggregate of approximately
90% of revenues in 2004, including five customers that each
generated more than 10% of revenues. This information is
summarized in the table below for the year ended December 31, 2004:
|
|
|
|
|
|
|
| Percent
of Revenues by
Customers |
|
| Customer
A |
|
|
20 |
% |
| Customer
B |
|
|
19 |
% |
| Customer
C |
|
|
18 |
% |
| Customer
D |
|
|
13 |
% |
| Customer
E |
|
|
As a result of our reorganization, we incurred $59.1
million in nonrecurring expenses related to
our reorganization and the related bankruptcy filing
during the ten months ended October 31, 2002.
These expenses include the acceleration of the accretion
of the original issue discount of $23.1 million
on our 10% Senior Notes due 2008 and the
write-off of $9.1 million of deferred debt issuance
expenses on our Senior Notes and our 51/2%
Convertible Notes due 2007. Also included in these
nonrecurring expenses are $26.9 million of additional
legal fees, consultant fees, the reimbursement of
due diligence fees and employee retention plan expenses.
Our reorganization was completed as of
November 1, 2002; therefore, no reorganization expenses
were incurred in the two months ended
December 31, 2002 or the year ended December 31,
2003.
Interest expense,
net
As a percentage of revenue, interest expense, net, for the
two months ended December 31, 2002 and the
ten months ended October 31, 2002 were 14.7% and 33.3%,
respectively. This decline was primarily the
result of changes to our debt structure because of our Chapter 11
bankruptcy filing on May 21, 2002 and
ultimate emergence on November 1, 2002. Included in the decrease was
(1) a decline in interest on the Convertible
Notes which stopped accruing interest upon our bankruptcy
filing, (2) a decrease in interest on the old credit
facility as a result of a significant decrease in the
principal balance and drop in the LIBOR rate and (3) a
decline in the amortization of original issue
discount on the Senior Notes and amortization of
deferred debt issuance expenses on the Senior
Notes and Convertible Notes, both of which stopped
amortizing upon our bankruptcy filing. The
Senior Notes and Convertible Notes were discharged on
November 1, 2002 upon our emergence from
Chapter 11. As a percentage of revenues, interest
expense in 2003 and the two months ended
December 31, 2002 was 12.3% and 14.7%,
respectively. This decrease in interest expense as a
percentage of revenues during 2003 is a result of our
repayment from operating cash flow of a portion
of the outstanding debt under our old credit facility
and a drop in LIBOR rates.
Gain on extinguishment of debt
The $404.8
million gain on extinguishment of debt recorded during the ten months
ended October 31, 2002 was the result of our
reorganization. In connection with our emergence from
Chapter 11, we satisfied $519.8 million in debt for
payments totaling $115.0 million. Debt discharged
during the bankruptcy included $211.0 million of our
Senior Notes, $186.5 million of our Convertible
Notes and $7.3 million of related accrued interest.
There was no gain on the extinguishment of debt
for the two months ended December 31, 2002 or the year
ended December 31, 2003.
Income tax benefit (expense)
We are organized
as a REIT for federal income tax purposes and accordingly only provide
for income taxes based on the operating
results of our taxable REIT subsidiaries. The decline in tax
benefit is primarily attributable to our corporate
restructuring activities in the ten months ended
October 31, 2002. A large part of our deferred tax
assets relating to net operating losses was
eliminated under the provisions of fresh start
accounting and SFAS No. 109, Accounting for Income
Taxes.
Loss from discontinued operations
Under SFAS
No. 144, Accounting for the Impairment or Disposal of Long-lived
Assets, we classified certain sites as
discontinued operations based on when the asset met the
"held for sale"
criteria or was actually disposed. For the periods
presented, our discontinued operations primarily
include two wholly owned subsidiaries, a portfolio of
microwave sites and certain non-core
under-performing sites. The operations related to each
of these assets were sold or liquidated by
December 31, 2003 except for 69 under-performing sites
that were held for disposal by sale. With
respect to our discontinued operations, for the ten
months ended October 31, 2002, we recorded an
impairment charge of $31.4 million compared to no
impairment charge for the two months ended
December 31, 2002 and a $0.4 million impairment charge
for 2003.
64
Liquidity and Capital
Resources
Our liquidity needs arise from working capital
requirements, debt service, tower acquisitions,
construction costs for occasional new tower builds and
tower augmentations, other capital
expenditures and dividend payments. We expect to meet
our cash requirements for the next twelve
months by using cash generated from operating
activities, cash generated from equity offerings, cash
in the December 2004 mortgage loan site acquisition
reserve account described below, borrowings
under the Revolving Credit Agreement and from additional
mortgage loans and credit facilities we may
obtain, in"background-color: #ffffff;">11 |
% |
|
2. Related Party
Transactions and Allocations
Sprint PCS is the anchor tenant
occupying space on many of the towers operated by SSUSA during 2004. No
revenue has been recognized in conjunction with Sprint PCS'
occupation of tower space as no formal contract exists between SSUSA
and Sprint PCS.
SSUSA is dependent upon Sprint to fund its
operations and anticipates that this funding requirement will continue
until the transaction with Global Signal Inc. is completed.
Sprint does not file separate property tax returns for the SSUSA
property and equipment. For purposes of these financial statements,
property taxes were determined by applying the property tax rates
applicable to Sprint against the total SSUSA investment in property and
equipment.
All other direct costs of the towers have been
reflected in these financial statements and include no allocations
other than property taxes.
3. Operating Lease Revenue
At December 31, 2004, minimum future rental revenue
receipts
for leased space on owned towers from non-affiliate tenants based on
contracted rates for the contractually obligated periods, but excluding
any renewal periods exercisable at the option of the tenant, are as
follows (in
thousands):
|
|
|
|
|
|
|
| 2005 |
|
$ |
|
|
|
|
94,704 |
|
| 2006 |
|
|
|
|
|
|
73,813 |
|
| Acquisition
Credit Facility
As
of April 25,
2005,
our wholly owned
subsidiary, Global Signal
Acquisitions LLC,
or Global Signal
Acquisitions,
entered
into a 364-day
$200.0 million credit
facility, which
we refer to as the
acquisition credit
facility, with
Morgan Stanley Asset Funding Inc.
and Bank of America, N.A.
(affiliates
of the representatives
of the
underwriters) to provide funding for the
acquisition of additional communications
sites.
The
acquisition
credit facility
is
guaranteed by Global Signal
OP
and
future
subsidiaries of
Global
Signal
Acquisitions.
Moreover, it
is secured by substantially all of Global
Signal Acquisitions' tangible and
intangible assets and
by a pledge of Global
Signal
OP's equity interest in Global Signal
Acquisitions. In addition, we have agreed to enter into a guarantee
agreement with respect to the acquisition credit facility, and to
secure that guarantee by a pledge of our equity interest
in
Global Signal OP, no later than
May 17, 2005.
We
intend
to fund future acquisitions with this credit facility
along with a
portion of the net proceeds from this offering and incremental equity
offerings, and
for a short period of time may fund 100% of the purchase price
of acquisitions with the
acquisition credit
facility. The
level of borrowings under the acquisition
credit facility is limited based on a borrowing base, as defined
therein. Borrowing under the acquisition
credit facility will bear interest at our option at either the
Eurodollar rate plus 1.5% or the
bank's base rate plus approximately 1.25% provided the
loan balance is equal to or lower than 68% of the aggregate acquisition price (as defined
therein) of towers owned, leased or managed by Global Signal Acquisitions, from time to time. If the loan
balance is higher than 68% of the aggregate
acquisition price of towers owned, leased
or managed by Global Signal Acquisitions, from time to time,
then borrowings under the acquisition
credit facility will bear interest at our option at either the
Eurodollar rate plus 2.0% or the
bank's base rate plus approximately 1.75%. In connection
with closing the acquisition credit
facility, we paid an origination fee of 0.375% of the $200.0
million commitment and agreed to pay to
Morgan Stanley Asset Funding Inc. and Bank of America, N.A. an exit fee
of 0.375% of the principal amount of
loans under the acquisition credit facility in connection with any
refinancing of such borrowings. In
addition, to the extent the principal amount of borrowings related to
an acquisition of towers to be owned,
leased or managed exceeds 68% of the acquisition price thereof,
we will be required to pay an additional
origination fee to Morgan Stanley Asset Funding Inc. and Bank of
America, N.A. in an amount equal to
0.125% of the amount borrowed for such acquisition and an
additional exit fee in the amount of
0.125% of the amount borrowed for such acquisition in connection
with the refinancing of such borrowing. Any
exit fees shall be credited against fees payable to each of Morgan
Stanley and Bank of America, N.A. if they
are offered the position of co-lead lender with respect to a
refinancing of the acquisition credit
facility. The acquisition credit facility contains typical
representations and covenants for facilities of this
type.
Sprint
Transaction and Related
Financing
On February 14, 2005, we, Sprint
Corporation,
or
Sprint,
and certain Sprint subsidiaries (the
"Sprint Contributors") entered
into an agreement to contribute, lease and
sublease,
which we refer to as
the
Agreement
to Lease.
Under the Agreement to Lease, we have agreed to lease or, if certain
consents have not been obtained, operate for
a period of 32 years over 6,600 wireless communications tower sites
and the related towers and
assets
(collectively,
the Sprint
Towers)
from one or more newly formed special
65
purpose entities of Sprint (collectively,
"Sprint
TowerCo"), under one or more master leases
for which we agreed to pay an upfront payment of
approximately $1.2 billion as prepaid
rent,
which
we refer to as the
upfront
rental
payment,
subject to certain conditions, adjustments and
prorations.
At the closing of the Sprint
transaction,
we will also enter into a master lease
agreement,
which we refer
to as
the
Master
Lease, which will expire
in 2037. During the period commencing one year prior
to the expiration of the Master Lease and ending 120
days prior to the expiration of the Master
Lease, the Lessee will have the option to purchase all
(but not less than all) of the Sprint Towers then
leased for approximately $2.3 billion, subject to
adjustment, including based on a final appraisal of the
Sprint Towers to be completed prior to closing. The
closing of the Sprint
transaction
is expected to occur
towards the end of
the second quarter of
2005.
On February 14, 2005, in connection with
the execution of the Sprint
transaction,
we entered into an Investment Agreement
with
the Investors, which
consist of the following
entities:
|
|
| • |
2007 |
|
|
|
|
|
|
55,143 |
|
| 2008 |
|
|
|
|
|
|
35,404 |
|
| 2009 |
|
|
|
|
|
|
13,446 |
|
| Thereafter |
|
|
|
|
|
|
910 |
|
|
F-89
Fortress Investment Fund II
LLC, a Delaware limited liability
company,
or FIF
II, an affiliate of our
largest stockholder, Fortress; |
|
|
| • |
Abrams
Capital Partners II, L.P., a Delaware limited partnership, Abrams
Capital Partners I, L.P., a Delaware limited partnership, Whitecrest
Partners, L.P., a Delaware limited partnership, Abrams Capital
International, LTD, a Cayman
Islands limited
liability company and Riva Capital Partners, L.P., a Delaware limited
partnership, affiliates of our third largest
stockholder,
Abrams Capital, LLC (collectively, the "Abrams
Investors");
and |
|
|
| • |
Greenhill Capital Partners, L.P.,
a Delaware limited partnership, which together with its affiliates, is
our second largest stockholder, and the following affiliates of
Greenhill Capital Partners,
L.P.,
Greenhill Capital Partners (Executive), L.P., a Delaware limited
partnership, Greenhill Capital, L.P., a Delaware limited partnership,
Greenhill Capital Partners (Cayman), L.P., a Cayman Islands limited
partnership, and
Greenhill Capital Partners (Employees) II,
L.P., a Delaware limited partnership (collectively the
"Greenhill
Investors"). |
Under the Investment Agreement, the Investors committed to purchase,
severally and not jointly, at the closing of
the Sprint
transaction,
up to $500.0 million of our
common
stock,
at a price of $25.50 per share. The $500.0
million aggregate commitment from the Investors will automatically
be reduced by (1) the amount of net proceeds
received by us pursuant to any offering of our equity
securities prior such date prior to the closing of the
Sprint
transaction,
and (2) the amount of any borrowings in
excess of $750.0 million outstanding at the closing of the Sprint
transaction
under any credit facility or similar
agreements provided to us in connection with the Sprint
transaction,
provided that the
Investors'
aggregate commitment will not be reduced below $250.0 million. Pursuant
to the terms of the Investment Agreement,
each of FIF
II, the
Abrams
Investors and the
Greenhill
Investors shall
purchase such number of shares of
common
stock
equal to 48%, 32% and 20%, respectively, of the
total number of shares of
common
stock
to be purchased under the Investment Agreement. The purchase of
the shares by the Investors is conditioned
upon the occurrence of the closing of the Sprint
transaction,
and will close simultaneously with the Sprint
transaction.
In the event an Investor fails to purchase
the shares of
common
stock
it is obligated to purchase, the other Investors have the right, but
not the obligation, to purchase such shares.
The
issuance of these securities will be made pursuant to an
exemption from registration provided by Section 4(2) of
the Securities Act. If we do not complete an
offering of our equity securities prior to the closing
of the Sprint
transaction,
under an Option Agreement with us, the
Investors will issue to us, at the closing of the Investment Agreement,
a one-time option to purchase from the
Investors a number of shares of
common
stock,
at a price of $26.50 per share having a value
equal to the difference between the total consideration paid by
the Investors for the
common
stock
at the closing of the Sprint
transaction
and $250.0 million. The option would be
immediately vested upon issuance at the closing and would expire six
months and one day after the closing of the
Sprint
transaction.
The option will be non-transferable. If we were to
exercise the option, we would purchase shares from each
Investor in proportion to that Investor's
participation in the Investment Agreement set forth
above. In the event that we complete an offering
of our equity securities prior to the closing of the
Sprint
transaction,
no option would be issued by the
Investors.
66
On February 8, 2005, we received a letter
from Morgan Stanley Asset Funding Inc., Bank of
America, N.A. and Banc of America Securities
LLC, affiliates
of the
representatives
of the
underwriters,
setting forth the terms on which they would
provide, subject to certain
conditions, bridge financing of approximately
$750.0 million to
us for use in funding the Sprint
transaction.
On March 10, 2005, we executed a non-binding term sheet
with Morgan Stanley Asset Funding Inc., Bank
of America, N.A. and Banc of America Securities
LLC, affiliates of
the
representatives
of the underwriters,
which increased the amount
of bridge financing up to $850.0 million. The
borrower is expected to be Global Signal
Acquisitions II LLC and/or one or more
other newly
created entities, under our direct
control which we refer to as the
borrower, that will own
100% of our interest
in the Sprint Towers. The loan is expected to
be secured by, among other things, the ownership interests in the
borrower, borrower's leasehold and
subleasehold interests (including purchase options) in the Sprint
Towers, and an assignment of leases and
rents. The loan is expected to have a term of 12 months after the
closing and subject to compliance with
certain conditions, two six-month extensions at our option. During the
first 12 months of the loan, the loan is
expected to bear interest at 30-day LIBOR plus either 1.5%
or 1.75% per annum, depending on cash
flows related to the Sprint Towers. In either case, the rate
is expected to increase by 0.25% upon
the first extension and
0.75%
upon the second, if such extension options
are exercised. The loan is expected to require an origination fee of
0.375% of $775.0 million of the loan
amount and an extension fee in connection with each extension option of
0.25% of the loan amount. In addition,
we expect to be required under the facility to pay an exit fee under
certain circumstances. The loan is expected
to contain customary conditions precedent to closing including
no material adverse change, and customary
events of default including, bankruptcy of the borrower or
us, changing-bottom: 0pt; background-color: #ffffff;">4. Operating Lease Expense
Minimum rental expense
payments
at December 31, 2004 for all non-cancelable operating leases,
consisting mainly of ground leases, are as follows (in
thousands):
|
|
|
|
|
|
|
| 2005 |
|
$ |
|
|
|
|
93,732 |
|
| 2006 |
|
|
|
|
|
|
97,640 |
|
| 2007 |
|
|
|
|
|
|
100,381 |
|
| 2008 |
|
|
|
|
|
In connection with the Sprint
transaction,
we entered into interest rate swap agreements for a
total notional value of $750.0 million with Bank of
America, N.A., an affiliate of one of the
representatives of the
underwriters, as counterparty, in
anticipation of securing $750.0 million or
more of bridge financing, which is expected to be replaced by a
mortgage loan of a greater amount. Under the
interest rate swaps, we agreed to pay the counterparty a
fixed interest rate of 4.303% on a
total notional amount of $750.0 million beginning on June 1, 2005
through December 1, 2010, with a mandatory
termination date of March 31, 2006, in exchange for
receiving floating payments based on
three-month LIBOR on the same notional amount for the same
period.
On March 21, 2005, in
connection with the Sprint
transaction
and the $850.0 million bridge loan term sheet
we executed on March 10, 2005, we entered into additional interest rate
swap agreements for a total notional amount
of $100.0 million with Bank of America,
N.A.
as counterparty. This brings
the total notional amount of swap agreements related to
financing the Sprint
transaction
to $850.0 million. These swap agreements are
in anticipation of the Sprint
transaction
bridge financing, which is expected to be
replaced by a mortgage loan of at least $850.0 million. Under the
interest rate swaps, we agreed to pay the
counterparty a fixed interest rate of 4.733% on the total
notional amount of $100.0 million beginning
on June 1, 2005 through December 1, 2010, with a mandatory maturity
date of March 31, 2006, in exchange for
receiving floating payments based on three-month LIBOR on
the same notional amount for the same
period.
Other Financings
On
December 3, 2004, Global Signal
OP entered into a 364-day
$20.0 million revolving credit
facility pursuant to a revolving
credit agreement which we refer to as the
Revolving Credit
Agreement,
with Morgan Stanley Asset Funding Inc. and Bank of
America,
N.A. to provide funding for
working capital and other corporate purposes.
On February 9, 2005,
Global Signal OP amended and restated
the
Revolving Credit Agreement with Morgan Stanley Asset Funding
Inc. and Bank of America, N.A., to provide an additional
$50.0 million term loan facility in
connection with the Sprint
transaction.
On February 14, 2005, the full amount of the term loan was
posted as a deposit, as required by the Agreement to
Lease. On April
15,
2005, we amended and restated the Revolving
Credit Agreement to provide an additional $25 million
multi-draw term loan further
to be used for
fees and expenses incurred in connection with the Sprint
transaction, and as of April 25, 2005 have
borrowed $5.0 million under the multi-draw
term loan.
Amounts available under the revolving credit
facility are reduced to $15.0 million
67
upon the earlier
of June 3, 2005 or the completion of certain equity
issuances by us in excess of $5.0 million (excluding any
equity issuances by us in connection with the Sprint
transaction, including this offering, or as a result of
the exercise of options or warrants outstanding as of
February 9, 2005). Interest on the
$20 million revolving
portion of this credit facility is payable,
at Global Signal OP's option, at either
the LIBOR plus 3.0% or the bank's base rate plus
2.0%. Interest on the term loans
under the
Revolving
Credit Agreement is payable at our
option at either, LIBOR plus 1.75% or
the bank's base rate plus
0.75%. In connection with the Sprint
transaction, we expect to repay and terminate the $50.0 million and
$25.0 million term loans. As a result, we
will write-off as a loss on early extinguishment of
debt
any unamortized deferred
debt issuance costs associated with
the term
loans.
The revolving
credit facility, through the Revolving Credit
Agreement and the related ancillary documentation,
contains covenants and restrictions customary for a
facility of this type including a limitation on our
consolidated indebtedness at
approximately $1.0 billion
and
a requirement to
limit
our ratio of consolidated indebtedness to consolidated EBITDA, as
defined in the loan document, to
7.0 to
1.0.
The limitations
on consolidated
indebtedness will be increased to
approximately
$1.8
billion and the ratio
to 7.65 to
1.0
upon consummation of the bridge financing for
the Sprint
transaction.
The Revolving Credit
Agreement continues to be guaranteed by us,
Global Signal GP, LLC and certain subsidiaries of Global Signal
OP. It is secured by a pledge of Global
Signal OP's assets, including a pledge of 65% of its
interest in our United Kingdom subsidiary,
100% of its interest in certain other domestic subsidiaries, a
pledge by us and Global Signal GP, LLC of our
interests in Global Signal OP, and a pledge by us of 65% of
our interest in our Canadian subsidiary. The
term loans must be
repaid on the earlier of (1)
August 14,
2005, (2) the date that we receive a refund
of the deposit from Sprint under the
Agreement to Lease, and (3) the date of the closing of the Sprint
transaction.
On December 7, 2004, our wholly owned subsidiary, Pinnacle Towers
Acquisition Holdings LLC, and five of its
direct and indirect subsidiaries borrowed approximately $293.8 million
under a mortgage loan made payable to a newly
created trust that issued approximately $293.8 million in
fixed rate commercial mortgage pass-through
certificates, which we refer to as the December 2004
mortgage loan, to provide fixed rate
financing for the communications sites we acquired since December 1,
2003 along with certain additional
communications sites we expect to acquire. The proceeds of
the December 2004 mortgage loan were used
primarily to repay the $181.7 million of then outstanding
borrowings under our credit facility and to partially
fund a $120.7 million site acquisition reserve
account to be used to acquire additional qualifying
wireless communications sites over the six-month
period following closing. As of
April
25,
2005,
the site acquisition reserve account had a balance
of
$15.2
million
and
on size: 10pt; color: #000000; font-weight: normal; font-style: normal; border-bottom: 3px double #ffffff;padding-top: 0pt" align="right" valign="bottom" colspan="1"> |
100,415 |
|
| 2009 |
|
|
|
|
|
|
102,900 |
|
| Thereafter |
|
|
|
|
|
|
1,632,405 |
|
|
The
table includes renewal options that generally have five-year terms and
are reasonably assured.
F-90
Prospective
investors may rely only on the information contained in this
Prospectus. Neither Global Signal nor any underwriter has authorized
anyone to provide prospective investors with different or additional
information. This Prospectus is not an offer to sell nor is it seeking
an offer to buy these securities in any jurisdiction where the offer or
sale is not permitted. The information contained in this Prospectus is
correct only as of the date of this Prospectus, regardless of the time
of the delivery of this Prospectus or any sale of these securities.
Until , 2005 (25 days after the date of this
prospectus) all dealers that buy, sell or trade our common stock,
whether or not participating in this offering, may be required to
deliver a prospectus. This requirement is in addition to the
dealers' obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or
subscriptions.
On June
2, 2004, we completed our initial public offering of 8,050,000 shares
of our
common
stock,
including shares issued pursuant to the exercise of the
underwriters' overallotment option, for
$18.00 per share raising net cash proceeds of $131.2
million. The net cash proceeds were used in part
to repay $33.4 million outstanding under our credit
facility, and to fund the purchase of wireless
communications towers by Pinnacle Towers Acquisition
LLC, including the Tower Ventures acquisition
for $53.0 million.
On February 5,
2004, our largest operating subsidiary, Pinnacle Towers LLC, then known
as Pinnacle Towers Inc., and 13 of its direct
and indirect subsidiaries borrowed $418.0 million under a
mortgage loan made payable to a newly formed trust,
which we refer to as the February 2004
mortgage loan. The February 2004 mortgage loan requires
monthly payments of principal and interest of
approximately $2.4 million, bears interest at a weighted average
interest rate of approximately 5.0% as
of December 31, 2004, with a final maturity date of January 2029.
However, the loan documents impose material
penalties if we fail to repay the February 2004 mortgage loan on or
prior to January 2009. The net proceeds from
the February 2004 mortgage loan were used primarily to repay
the $234.4 million of then outstanding
68
borrowings under our old credit facility and
to fund a $142.2 million one-time special
distribution to our stockholders. In connection with the repayment of
our old credit facility, we also terminated
our ability to borrow under its line of credit. The February
2004 mortgage loan restricts the ability of
our largest operating subsidiary, Pinnacle Towers LLC, and
its subsidiaries from incurring other
indebtedness or further encumbering their assets. In addition, so
long as the tangible assets of the borrowers
under the February 2004 mortgage loan represent at least
25% of the assets of Global Signal
Inc., it will be an event of default under the February 2004
mortgage loan if Global Signal Inc. incurs
any unsecured indebtedness for borrowed money without
confirmation from the rating agencies that rated the
commercial mortgage pass-through certificates
that none of the ratings will be adversely
affected.
In addition, on February 6,
2004, we acquired all of the outstanding common stock of
Pinnacle Acquisition, then known as Pinnacle
Towers Acquisition Inc., through the exercise of an option
granted to us by its stockholders, which constituted the
majority of our stockholders. Because this
acquisition was a business combination among
"entities under common control," we have
accounted for it in a manner similar to a
pooling of interests.
In connection
with the
February
2004 acquisition of Pinnacle
Acquisition's outstanding stock, we increased the
capacity on our credit facility to $200.0 million,
including a $5.0 million working capital line, and
extended the maturity date to February 6, 2005. The
maturity date was extended further to October 1,
2005, upon consummation of our initial public offering.
On October 15, 2004, we amended and restated
our $200.0 million credit facility with Morgan Stanley Asset Funding
Inc. to, among other things, increase the
commitment by the lenders to $250.0 million, to remove the $5.0 million
working capital line previously included in
the credit facility and to add Bank of America, N.A. as a
lender. Borrowings under the amended and
restated credit facility were limited based on a borrowing
base equal to 65% of the value of
acquired communications towers as defined in the credit
facility agreement. We repaid the outstanding
borrowings under our credit facility with a portion of the
net proceeds from our December 2004 mortgage
loan and terminated the facility.
Cash Flows
Net cash flows
provided by operating activities were $83.5 million for 2004, compared
to $59.2 million for 2003. The increase of
$24.3 million of net cash flows provided by operating activities
is primarily the result of (i) internal
revenue growth and higher net margins on the
communications
site portfolio we owned for the full year of
2004, (ii) cash flows generated on
communications
sites acquired during 2004 and (iii) less
cash flows being used in working capital. During 2004, $1.6
million in cash flows were provided by
working capital as compared to $9.2 million of cash flows used
in working capital in 2003. During 2003, we
made payments of liabilities accrued prior to and in
connection with our emergence from Chapter 11 bankruptcy
which resulted in a decrease in our accounts
payable and accrued expenses and cash flows from operating activities
being used in working
capital.
Net cash flows
provided by operating activities were $59.2 million forfff"> ,
2005
PART
II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item
30. Quantitative and Qualitative
Disclosures About Market
Risk
Interest Rate Risk
We
are exposed to market risks from changes in interest rates charged on
our credit facilities used to finance
acquired communication sites on an interim basis. The impact on
our earnings and
the value of
our long-term debt is subject to change as a
result of movements in market rates and prices. As of
December 31, 2004, we had $706.9 million in
long-term fixed rate debt and no variable rate debt. As of
December 31, 2004, the total fixed rate debt
outstanding had a
weighted average interest
rate of
4.9%.
The following table presents the future principal payment
obligations and weighted-average interest
rates at December 31, 2004, associated with our
existing long-term debt
instruments,
using our actual level of long-term
indebtedness of $1.2 million under capital leases, $411.9 million under
our February 2004 mortgage loan, and $293.8
million under our December 2004 mortgage
loan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Weighted
Average
Interest
Rate |
|
Expected Maturity Date
— Year Ended December
31, |
| |
|
Total |
|
2005 |
|
2006 |
|
2007 |
Net cash flows used in investing
activities were $447.7 million for 2004 compared to $36.2
million for 2003. Investing activities for
2004 consisted of (1) investments to expand our business including
(i) the acquisition of 648 wireless
communications
towers and other
communications
sites for $294.0 million, including fees and
expenses, (ii) the purchase of a business and its 214
wireless
communications
towers
69
for $64.5 million, including fees and
expenses, (iii) the purchase of interests in
land under towers where we had previously held a
leasehold interest for $7.2 million, and (iv) the
purchase of the minority interest in our subsidiary,
Pinnacle Towers Limited, for $1.2 million, (2) the
net activity of restricted cash totaling $72.9 million
into escrow accounts as (i) deposits on future
acquisitions, (ii) imposition reserve account activity
for insurance, taxes and ground rents as a part of
our February and December 2004 mortgage loan
transactions and (iii) an acquisition reserve account
to be used to acquire future wireless towers established
in connection with our December 2004 mortgage
loan and (3) $9.1 million of capital expenditures related to our
implementation of new software systems,
improvements to our existing communications sites and other general
corporate assets. These uses were, in part,
offset by proceeds of $1.0 million from the disposals of
under-performing sites. Investing activities of $36.2
million in 2003 consisted of (1) our acquisition of
67 towers located in the southeastern United States, (2)
our acquisition of fee owned interest and
long-term easements under several towers we own where we
previously had a leasehold interest, and (3)
additions and improvements to our communications sites offset by
proceeds from the disposals of
under-performing sites.
Net cash flows used in investing activities were $3.9 million for
the ten months ended October 31, 2002 and
$0.7 million for the two months ended December 31, 2002. During the ten
months ended October 31, 2002 and the two
months ended December 31, 2002, our investing activities of
$3.9 million and $0.7 million, respectively,
related almost exclusively to improvements and additions to
our communications sites net of proceeds from
the disposal of under-performing sites.
Net cash flows provided by financing activities were $361.4 million
for 2004 and are primarily related to (1)
$418.0 million in borrowings associated with our mortgage loan
transaction on February 5, 2004, (2) $293.8
million in
borrowings
associated with our mortgage loan transaction on December 7,
2004, (3) net cash proceeds of $131.2 million from the
initial public offering, (4) proceeds of $15.1
million from the exercise of
common
stock
options and warrants and (5) $187.0 million in borrowings
on the previous credit facility. These funds were in
part offset by (1) $235.9 million used to repay in
full our old credit facility, (2) $215.0 million to
repay the outstanding borrowings under our previous
credit facility at the time of our initial public
offering and in connection with our December 2004
mortgage loan, (3) $6.1 million of principal paid on our
February 2004 mortgage loan, (4) $4.2 million
of net payments to terminate the interest rate swap used
to hedge our February and December 2004
mortgage loans, (5) debt issuance costs of $14.8
million, $5.6 million and $0.5 million related to our
February 2004 mortgage loan, December 2004 mortgage loan
and the revolving credit facility,
respectively, (6) $0.5 million in payments on capital
leases, (7) payments of $58.9 million in ordinary
dividends, of which $44.0 million represents a return of
capital, and (8) a $142.2 million one-time
special distribution to our stockholders which
represented a return of capital. Net cash used in
financing activities for 2003 of $17.8 million primarily
consisted of $44.0 million of principal
repayments related to the
old credit facility and $28.0 million of
borrowings on our credit facility primarily
to fund the acquisition of 67 wireless
communications
towers.
Net cash flows used in financing activities were $22.1
million for the ten months ended October 31,
2002 and $9.6 million for the two months ended December 31, 2002. Net
cash flows used in financing activities for
the ten months ended October 31, 2002 included proceeds from
our reorganization of $205.0 million offset
by repayment of $115.0 million of our Senior Notes and
Convertible Notes discharged in bankruptcy and $93.0
million in repayments on our old credit facility.
Net cash flows used in financing activities for the two
months ended December 31, 2002 consisted
entirely of repayment of long-term
obligations.
Capital expenditures were
$9.1 million for 2004
compared to $8.5 million for 2003. The capital
expenditures for these two periods primarily consisted
of the purchase of tower-related equipment and
tower augmentations and improvements which totaled $7.1
million and $6.6 million for 2003 and 2004,
respectively. In addition, we capitalized $3.0 million
of coststh="2"> |
2008 |
|
2009 |
|
Thereafter |
|
| |
|
|
|
(thousands
of dollars) |
| February
2004 mortgage
loan |
|
|
5.0 |
% |
|
$ |
411,909 |
|
|
$ |
7,823 |
|
|
$ |
8,305 |
|
|
$ |
8,817 |
|
|
$ |
9,361 |
|
|
$ |
377,603 |
|
|
$ |
As of December 31, 2004,
we had executed definitive agreements to acquire 27
communications sites and to acquire fee
interest or long-term easements under an additional 17
communications
towers, for an
70
aggregate purchase price of approximately
$11.9 million, including estimated fees and expenses.
As of April
25,
2005, we have closed on the acquisition of
24
of the
communications
sites and on 13
fee-interests or long-term leases for an aggregate
purchase price of
$9.9
million including estimated fees and
expenses. A number of our acquisition agreements provide for additional
proceeds to be paid to the sellers for future
lease commencements during a certain period, usually one year or less,
after the acquisition is completed, or upon
the occurrence of a specific event. The amount of this
contingent purchase price is not expected to
be material. In addition, on February 14, 2005 we entered into
the Agreement to Lease discussed above with
Sprint. See the
section entitled
"Business—Sprint
Transaction."
We have no material commitments for
capital expenditures, other than planned site acquisitions.
However, we anticipate we will incur capital
expenditures for tower related equipment and tower
augmentations and improvements during 2005 comparable on
a per tower basis to that which we incurred
in 2004. In addition, during 2005, we are finalizing the implementation
of our new software systems. We have
completed the initial implementation of our PeopleSoft software system
for all of our accounting functions including
accounts payable, accounts receivable and all internal
reporting functions. We are also implementing
a separate software system, manageStar, to manage data
related to our communications sites,
including tenant leases, ground leases and other operational data.
For 2004, we have incurred $3.0 million of
costs related to these implementations. We have obtained
three-year financing for approximately $1.4 million of
these costs related to new hardware and
software. The remaining costs were paid from
cash.
Contractual
Commitments
The following tables
provide a summary of our material debt, including the related
interest
payments,
lease and other contractual commitments as of and
at December 31,
2004.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Contractual
Obligations |
|
Total |
|
Less
than
1
Year |
|
1-3
Years |
|
4-5
Years |
|
After
5
Years |
| |
|
— |
|
| December
2004 mortgage
loan |
|
|
4.7 |
% |
|
|
293,825 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
293,825 |
|
|
|
— |
|
| Capital
lease
obligation |
|
|
(dollars
in
thousands) |
| Operating
Lease
Payments |
|
$ |
198,062 |
|
|
$ |
36,335 |
|
|
$ |
57,542 |
|
|
$ |
36,072 |
|
|
$ |
68,113 |
|
| Asset
Retirement Obligations
(1) |
|
|
62,903 |
|
|
|
1,140 |
|
|
|
653 |
|
|
|
896 |
10.3 |
% |
|
|
1,186 |
|
|
|
445 |
|
|
|
492 |
|
|
|
249 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Total
debt |
|
|
|
|
|
$ |
706,920 |
|
|
|
|
|
60,214 |
|
| February
2004 Mortgage Loan
(2)(3) |
|
|
493,403 |
|
|
|
28,260 |
|
|
|
57,084 |
|
|
|
408,059 |
|
|
|
— |
|
| December
2004 Mortgage Loan
(2)(4) |
|
|
363,287 |
|
|
|
14,038 |
|
|
|
27,712 |
|
|
$ |
8,268 |
|
|
$ |
8,797 |
|
|
$ |
9,066 |
|
|
$ |
9,361 |
|
|
$ |
671,428 |
|
|
$ |
— |
|
|
Foreign
Currency Exchange Risk
Our
exposure to adverse movements in foreign currency exchange rates is
primarily related to our subsidiaries'
operating revenues
and expenses, primarily in the United
Kingdom and Canada, denominated in the
respective local currency. A hypothetical change of
10% in foreign currency exchange rates would not
have a material impact on our consolidated financial
statements or results of
operations.
Item
31. Other Expenses
of Issuance and
Distribution.
The following table sets forth the estimated expenses
expected to be incurred in
connection with the sale and distribution of the securities being
registered.
|
|
|
|
|
|
|
| Securities
and Exchange Commission
registration
fee |
|
|
321,537 |
|
|
|
— |
|
| Revolving
Credit Facility
(5)(2) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Capital
Lease Obligation
(2) |
|
|
1,398 |
|
|
|
541 |
|
|
|
$ |
22,393.13 |
|
| National
Association of Securities Dealers, Inc.
fees |
|
$ |
19,525.60 |
|
| NYSE
listing
fee |
|
|
21,000.00 |
|
| Printing
and engraving
expenses |
|
|
150,000.00 |
|
| Legal
fees and
expenses |
|
|
1,000,000.00 |
|
| Accounting
fees and
expenses |
|
|
1,100,000.00 |
|
| Miscellaneous |
|
|
100,341.18 |
|
| Total |
|
$ |
2,413,259.91 |
857 |
|
|
|
— |
|
|
|
— |
|
| Commitments
Under Acquisition Purchase Agreements
(6) |
|
|
11,892 |
|
|
|
11,892 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Total
contractual cash obligations at December 31, 2004
(7) |
|
$ |
1,130,945 |
|
|
$ |
|
|
Item
32. Sales to Special Parties.
Not applicable.
Item 33. Recent Sales of Unregistered
Securities.
The
following is a summary of transactions by us involving sales of our
securities that were not registered under
the Securities Act during the last three years preceding the date of
this Registration
Statement on Amendment No.
2
to Form S-11.
II-1
In November 2002, in connection with our
reorganization, we cancelled our former notes, old
common stock and stock options. Pursuant to our
reorganization plan, we issued 41,000,000 shares of
Common Stock and warrants to purchase 1,229,850 shares
of our Common Stock that are presently
exercisable through October 31, 2007, at an exercise
price of $10 per share. As of
April
25,
2005, warrants to
purchase
761,850
shares of Common Stock have been exercised. Shares of our
Common Stock were issued in connection with
the cancellation of our Senior Notes and pursuant to a
$205.0 million equity investment made by
Fortress and Greenhill and those senior noteholders who
elected shares of our Common Stock in lieu of cash.
Under the prearranged plan of reorganization,
Fortress and Greenhill purchased 22,526,598 shares of
Common Stock for an aggregate purchase price
of $112.6 million and elected to receive an additional
9,040,166 shares of Common Stock in lieu of
$45.2 million of cash for the 10% Senior Notes
due 2008 they held making their total investment in us
in connection with the reorganization $157.8 million
(before Fortress' stock purchase from Abrams
Capital Partners I, L.P., Abrams Capital Partners II,
L.P., and Whitecrest Partners, L.P., affiliates of
Abrams Capital LLC, our third largest stockholder,
warrant exercise and the return of capital arising
from the February 5, 2004 special distribution and
our
ordinary
dividends). Other
senior noteholders entitled to receive $47.2
million of cash elected to receive 9,433,296 shares of
Common Stock in lieu of cash, making the
total equity investment $205.0 million. The warrants were issued
in cancellation of the 5½%
convertible subordinated notes due 2007 to former stockholders with
the receipt of certain releases and to
plaintiffs in the settlement of a stockholder class action. Fortress
was issued 24,381,646 shares and 418,050
warrants exercisable at $10 per share pursuant to its equity
investment and the cancellation of its senior and
Convertible Notes. On April 5, 2004, Fortress
exercised all of its warrants for 418,050 shares of
Common Stock, at an exercise price of $8.53 per
share of Common Stock. Greenhill was issued 8,422,194
shares pursuant to its equity investment and
the cancellation of its Senior Notes. The 18,473,402
shares of our Common Stock issued to holders of
our Senior Notes in consideration for the cancellation
of the notes, and the 1,229,850 warrants and the
761,850
shares of Common Stock issued pursuant to the exercise of warrants were
issued pursuant to an exemption from
registration under the Securities Act in reliance on the provisions of
Section 1145 of the United States Bankruptcy
Code. The 22,526,598 shares of our Common Stock issued
pursuant to the $112.6 million equity
investment made by Fortress and Greenhill were issued in a
private transaction, entered into in
connection with our reorganization plan, exempt from registration
under the Securities Act by virtue of the
exemption provided under Section 4(2) of the Securities
Act.
From November 1, 2002 through
April
25,
2005, we granted options, net of
forfeitures, to purchase a total of
1,799,163
shares of our Common Stock at an exercise price of $4.26 per
share,
2,004,163
options to purchase shares of Common Stock at an exercise price of
$8.53 per share and 615,000 options to
purchase shares of Common Stock at an exercise price of $18.00 per
share. These options were granted to
employees and directors under our stock option plan. This includes
options to purchase 820,000 shares of our
Common Stock granted to Mr. Kevin Czinger, a former employee
of Fortress Capital Finance LLC, who served
on our board of directors from January 2003 until February
2004, and provided financial advisory services to us
through March 2004. Of these options, 30% vested
on January 9, 2003, 30% were scheduled to vest
on December 31, 2004, and the remaining 40% were
scheduled to vest on December 31, 2005. Half the
options had an exercise price of $5 per share and
the remainder have an exercise price of $10 per share.
Pursuant to the terms of our stock option plan,
the exercise price of the then outstanding options was
adjusted from $10 to $8.53 per share and from
$5 to $4.26 per share, due to the special distribution
declared and paid to our stockholders on
February 5, 2004. We terminated Mr. Czinger's
agreement to provide financial advisory services in
March 2004 and the vesting of the outstanding options
was modified. Following this modification, he
was entitled to exercise 246,000 shares at an exercise
price of $4.26 per share and 246,000 shares at an
exercise price of $8.53 per share until December 31,
2004. The remaining options to acquire 328,000
shares expired upon his termination pursuant to the
terms of the award. As of December 31, 2004,
all of
his options were
either exercised or expired. These grants were exempt from the
registration requirements of the Securities
Act pursuant to Rule 701 under the Securities
Act.
In March 2004, ine #000000 ; padding-left: 0pt; text-indent: 0pt; padding-top: 0pt" align="right" valign="bottom" colspan="1" nowrap="nowrap">92,206 |
|
|
$ |
143,848 |
|
|
$ |
766,564 |
|
|
$ |
128,327 |
|
|
|
|
| (1) |
Reflects
the future estimated cash payments after giving effect to estimated
annual increases of 2.5% in expenses to
dismantle our towers discounted at an average annual
discount rate of approximately 12.0–13.0%. The liability
is recorded in the financial statements at
its present value. |
|
|
| (2) |
Includes contractual interest for all fixed-rate
debt instruments and assumes interest on variable rate instruments at
the December 31, 2004
rates. |
|
|
| (3) |
The
February 2004 mortgage loan has a final maturity date of January 2029.
However the loan document imposes material
penalties if we fail to repay the February 2004 mortgage
loan on or prior to January 2009 (the "Anticipated
Repayment Date"). The principal
amount of the February 2004 mortgage loan is divided into seven
tranches, each having a different level of
seniority. Interest accrues on each tranche at a fixed rate per annum.
As of December 31, 2004, the weighted average
interest rate on the various tranches was approximately 5.0%. If
the February 2004 mortgage loan is not repaid in
its entirety by the Anticipated Repayment Date the
interest rate on the February 2004 mortgage loan will increase by
a minimum of 5.0% and substantially
all of Pinnacle Tower LLC's excess cash flow from operations will
be utilized to repay outstanding amounts due
under the February 2004 mortgage loan. The actual amount of interest
payable after the Anticipated Repayment Date
is dependent on the amount of excess cash flow utilized to repay the
February 2004 mortgage loan, the interest
rate and the outstanding mortgage loan balance. Total contractual
interest to be paid on the February 2004
mortgage loan is $20.5 million in the less than 1 year period, $40.1 in
the 1 to 3 year period, $26.0 million in the
4 to 5 year period, assuming repayment of the outstanding balance on
the Anticipated Repayment Date. We have
assumed the February 2004 mortgage loan is repaid on its
Anticipated Repayment Date. |
|
|
| (4) |
The principal amount of the December 2004 mortgage
loan is divided into seven tranches, each having a different level
of seniority. Interest accrues on each
tranche at a fixed rate per annum. As of December 31, 2004, the
weighted average interest |
71
|
|
|
II-2
and Greenhill or their respective affiliates,
to purchase shares of our Common Stock in the
following amounts: (1) for Fortress (or its
affiliates), the right to acquire 644,000 shares which is
equal to 8% of the number of shares
issued in our initial public offering and (2) for Greenhill (or
its affiliate), the right to acquire 161,000
shares which is equal to 2% of the number of shares issued
in our initial public offering at an
exercise price per share equal to our initial public offering price of
the shares in our initial public offering.
All of the options are immediately vested and exercisable and
will remain exercisable for ten years from
the date of grant. These grants were made in a private
transaction exempt from registration under the
Securities Act by virtue of the exemption provided
under Section 4(2) of the Securities Act. On December
20, 2004, we issued 32,200 shares of our
Common Stock to Greenhill, pursuant to an exercise of
their stock options.
On March 15,
2004, we issued 222,713 shares of our Common Stock to Mr. W. Scot
Lloyd pursuant to an exercise of stock
options granted to him under our stock option plan prior to
the termination of his employment on January
16, 2004. In addition, on April 8, 2004, we issued 15,376
shares of our Common Stock to Mr. Paul Nussbaum,
pursuant to an exercise of stock options granted
to him under our stock option plan prior to the
termination of his employment on February 3, 2004.
The shares of Common Stock issued to Mr. Lloyd and Mr.
Nussbaum were exempt from the registration
requirements of the Securities Act pursuant to Rule 701 under the
Securities Act.
On February 14, 2005,
in connection with the Sprint
transaction,
we entered into an Investment Agreement
pursuant to which we will issue on the closing of the Sprint
transaction
to the Investors up to 19,607,843 shares of
our Common Stock for a purchase price up to $500.0 million. We
expect these shares to be issued in a
private transaction exempt from registration under the Securities Act
by virtue of the exemption provided under
Section 4(2) of the Securities Act. For more details on the
Sprint
transaction
and the Investment Agreement, please see
"Business—Sprint
Transaction."
Item 34. Indemnification of Directors and
Officers.
Section 102 of the Delaware General Corporation
Law, as amended, allows a corporation to eliminate the personal
liability of a director of a corporation to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a
director, except where the director breached his or her duty of loyalty
to the corporation or its stockholders, failed to act in good faith,
engaged in intentional misconduct or knowingly violated a law,
authorized the payment of a dividend or approved a stock purchase or
redemption in violation of Delaware corporate law or obtained an
improper personal benefit.
Section 145 of the Delaware General
Corporation Law provides, among other things, that a corporation may
indemnify any person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or
proceeding (other than an action by or in the right of the corporation)
by reason of the fact that the person is or was a director, officer,
employee or agent of the corporation, or is or was serving at the
corporation's request as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other
enterprise, against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with the action, suit or
proceeding. The power to indemnify applies (1) if such person is
successful on the merits or otherwise in defense of any action, suit or
proceeding or (2) if such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of
the corporation, and with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The power
to indemnify applies to actions brought by or in the right of the
corporation as well, but only to the extent of defense expenses
(including attorneys' fees but excluding amounts paid in
settlement) actually and reasonably incurred and not to any
satisfaction of judgment or settlement of the claim itself, and with
the further limitation that in such actions no indemnification shall be
made in the event of any adjudication of negligence or misconduct in
the performance of his duties to the corporation, unless a court
believes that in light of all the circumstances indemnification should
apply.
Section 174 of the Delaware General Corporation Law
provides, among other things, that a director who willfully and
negligently approves of an unlawful payment of dividends or an unlawful
stock purchase or redemption may be held liable for such actions. A
director who was either absent when the unlawful
II-3
actions were approved or dissented at the
time, may avoid liability by causing his or her dissent to such actions
to be entered in t;">
rate on the various tranches was
approximately 4.74%. The borrowers are required to make monthly
payments of interest on the December 2004
mortgage loan until its maturity in December 2009 when the unpaid
principal amount will be due. Total
contractual interest to be paid on the December 2004 mortgage loan is
$13.9 million in the less than 1-year period,
$27.7 in the 1 to 3 year
period
and $27.8 million in the 4 to 5 year
period. |
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| (5) |
The
revolving credit facility is a 364-day facility entered into with
Morgan Stanley Asset Funding Inc. and Bank of
America, N.A.,
affiliates
of the representatives of
the
underwriters,
by Global Signal OP. As of December 31, 2004, no amounts were
outstanding on the revolving credit facility.
Amounts available under the revolving credit facility are reduced to
$15.0 million upon the earlier of June 3, 2005
or the completion of certain equity issuances by us in
excess of $5.0 million. On February 9, 2005, we amended and
restated our revolving credit facility to provide an
additional $50.0 million term loan facility in connection with the
Sprint
transaction.
On February 14, 2005, the full amount of the term loan was posted as a
deposit, as required by the Agreement to
Lease. The term loan must be repaid on the earlier of (1) the six month
anniversary of the funding of the term loans,
(2) the date that we receive a refund of
our
$50.0 million deposit from Sprint under the
Agreement to Lease, and (3) the date of the
closing of the Sprint
transaction.
Interest on the revolving credit facility is payable at our option of
either LIBOR, plus 3.0% or the
bank's base rate plus
2.0%. |
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| (6) |
Reflects our commitment as of December 31, 2004
under asset purchase agreements to acquire 27 towers from
four unrelated sellers and 17 land parcels
under our existing towers. All of these acquisitions are expected to
close in less than one
year. |
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| (7) |
As of
December 31, 2004, we did not have any material purchase obligations
other than obligations under contracts to
acquire tower
assets, as all of
our operational contracts are generally either month-to-month or have
mutual cancellation clauses. |
The
February 2004 Mortgage Loan
Our
largest operating subsidiary, Pinnacle Towers LLC (known as Pinnacle
Towers Inc. at the time) and 13 of its direct
and indirect subsidiaries are borrowers under a $418.0 million mortgage
loan payable to a newly formed trust, Global
Signal Trust I, made on February 5, 2004, which we refer to
as the February 2004 mortgage loan. The trust
simultaneously issued $418.0 million in commercial
mortgage pass-through certificates with terms that
correspond to the February 2004 mortgage loan.
The February 2004 mortgage loan is secured by (1)
mortgage liens on the borrowers' interests (fee,
leasehold or easement) in more than 1,100 of our
communications sites, (2) a security interest in
substantially all of the borrowers' personal
property and fixtures including our rights under
substantially all of our site management agreements,
tenant leases (excluding tenant leases for sites
referred to in (1) above) and a management agreement
with GS Services and (3) a pledge of the
capital stock (or equivalent equity interests) of each
of the borrowers (including a pledge of the
ownership interests of Pinnacle Towers from its direct
parent). Our consolidated financial statements
include the February 2004 mortgage loan but do not
include the financial statements of the
trust.
The principal amount of the
February 2004 mortgage loan is divided into seven tranches,
each having a different level of seniority.
Interest accrues on each tranche at a fixed rate per annum. As
of December 31, 2004, the weighted average
interest rate on the various tranches was approximately
5.0%.
The
borrowers are required to make monthly payments of principal and
interest on the February 2004 mortgage loan.
The amount of principal due each month will initially be calculated
based on a 25-year amortization schedule,
with a final maturity date of January 2029. However, the
loan documents impose material penalties if
the borrowers fail to repay the February 2004 mortgage loan
on or prior to the monthly payment date in January 2009,
including the following: accruing additional
interest, requiring all excess cash flow after the
payment of principal, interest, reserves and certain
operating expenses, as defined to be applied to repay
the loan, and at the election of the lender,
transferring servicing of the sites to an unrelated
third party.
If the debt service
coverage ratio, defined in the February 2004 mortgage loan as the net
cash flow for the sites for the immediately
preceding twelve calendar month period divided by the amount
of principal and interest that the borrowers will be
required to pay over the succeeding twelve months
on the February 2004 mortgage loan, as of the end of any
calendar quarter falls to 1.45 times or lower,
then all excess cash flow will be deposited into a
reserve account instead of being released to us. The
funds in the reserve account will not be released to us
unless the debt service coverage ratio exceeds
1.45 times for two consecutive calendar quarters. If the
debt service he books containing the minutes of the meetings of
the board of directors at the time the action occurred or immediately
after the absent director receives notice of the unlawful acts.
Our amended and restated certificate of incorporation states that no
director shall be liable to us or any of our stockholders for monetary
damages for breach of fiduciary duty as director, except for breaches
of the duty of loyalty, and for acts or omissions in bad faith or
involving intentional misconduct or knowing violation of law. Directors
are also not exempt from liability for any transaction from which he or
she derived an improper personal benefit, or for violations of Section
174 of the Delaware Corporation Law. To the maximum extent permitted
under Section 145 of the Delaware Corporation Law, our amended and
restated certificate of incorporation authorizes us to indemnify any
and all persons whom we have the power to indemnify under the law.
Our amended and restated bylaws indemnify, to the fullest extent
permitted by the Delaware Corporation Law, each person who was or is
made a party or is threatened to be made a party in any legal
proceeding by reason of the fact that he or she is or was our director
or officer. However, such indemnification is permitted only if such
person acted in good faith, lawfully and not against our best
interests. Indemnification is authorized on a case-by-case basis by (1)
our board of directors by a majority vote of disinterested directors,
(2) by a committee of the disinterested directors, (3) by independent
legal counsel in a written opinion if (1) and (2) are not available, or
if disinterested directors so direct, or (4) by the stockholders.
Indemnification of former directors or officers shall be determined by
any person authorized to act on the matter on our behalf. Expenses
incurred by a director or officer in defending against such legal
proceedings are payable before the final disposition of the action,
provided that the director or officer undertakes to repay us if later
determined that he or she is not entitled to indemnification.
We
have entered into indemnification agreements (the
"Indemnification Agreements") with certain of
our directors and officers (individually, the
"Indemnitee"). The Indemnification
Agreements, among other things, provide for indemnification to the
fullest extent permitted by law and our amended and restated
certificate of incorporation and amended and restated by-laws against
any and all expenses, judgments, fines, penalties and amounts paid in
settlement of any claim. The Indemnification Agreements provide for the
advancement or payment of all expenses to the Indemnitee and for
reimbursement to us if it is found that such Indemnitee is not entitled
to such indemnification under applicable law and our amended and
restated certificate of incorporation and amended and restated
by-laws.
Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors, officers or
persons controlling the registrant pursuant to the foregoing
provisions, the registrant has been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is therefore
unenforceable.
We maintain directors' and officers'
liability insurance for our officers and directors.
The
partnership agreement of Global Signal OP provides that neither we, as
special limited partner, nor Global Signal GP LLC, as managing general
partner, nor any of our directors and officers or the directors and
officers of Global Signal GP are liable to the partnership or to any of
its partners as a result of errors in judgment or mistakes of fact or
law or of any act or omission, if we, Global Signal GP, our director or
our officer or a director or
officer of Global Signal
GP act in good faith.
In addition, the partnership agreement
requires our operating partnership to indemnify and hold us, as special
limited partner, and our directors, officers and any other person we
designate, and Global Signal GP LLC, as managing general partner, and
its directors, officers and any other person it designates from and
against any and all claims arising from operations of the operating
partnership in which any such indemnitee may be involved, or is
threatened to be involved, as a party or otherwise, unless it is
established that:
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indemnitee acted
with willful misconduct or a knowing violation of the law, or |
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the indemnitee actually received an
improper personal benefit in violation or breach of any provision of
the Partnership Agreement, |
II-4
72
their net cash flows which are primarily a
result of new and existing leasing activities
on the existing communications sites, the existing tenant credit
worthiness and lease renewals, and the future
expenses we incur to maintain the sites.
The borrowers may not prepay the February 2004 mortgage loan in
whole or in part at any time prior to
February 5, 2006, the second anniversary of the closing date, except in
limited circumstances (such as the occurrence
of certain casualty and condemnation events relating to the
communications sites securing the February
2004 mortgage loan). Thereafter, prepayment is permitted provided it
is accompanied by any applicable prepayment
consideration. If the prepayment occurs within three
months of the January 2009 monthly payment date, no
prepayment consideration is due.
The
February 2004 mortgage loan documents include covenants customary for
mortgage loans subject to rated
securitizations. Among other things, the borrowers are prohibited from
incurring additional indebtedness or further
encumbering their assets. In addition, so long as the tangible
assets of the borrowers represent at least
25% of the total tangible assets of Global Signal Inc., it will
be an event of default under the February
2004 mortgage loan if Global Signal Inc. incurs any
unsecured indebtedness for borrowed money
without confirmation from the rating agencies that rated the
commercial mortgage pass-through certificates that none
of the ratings will be adversely
affected.
The December 2004 Mortgage
Loan
On December 7, 2004, our
subsidiary, Pinnacle Towers Acquisition Holdings LLC, and five of
its direct and indirect subsidiaries issued a
$293.8 million mortgage loan, which we refer
to as the December 2004 mortgage loan, to a
newly formed trust, Global Signal Trust
II. The trust then
issued an identical amount of commercial
mortgage pass-through certificates in a private transaction. We have
continued to consolidate our subsidiaries,
but have not consolidated the Trust in our financial statements. The
net proceeds of the December 2004 mortgage
loan were used primarily to repay the $181.7 million of then
outstanding borrowings under our credit facility and to
partially fund a $120.7 million site acquisition
reserve account to be used to acquire additional
qualifying wireless communications sites over the
six-month period following the December 2004 closing.
Under our December 2004 mortgage loan, we are
required to prepay the loan plus applicable prepayment penalties with
funds in our acquisition reserve account to
the extent such funds are not used to acquire additional qualifying
wireless communications sites during the six
month period following the closing of the loan. As of
April
25,
2005,
the
site acquisition reserve account had a balance of $15.2
million. On
April 29, 2005 we used $14.5 million of the
balance to partially fund the ForeSite 2005
acquisition and expect to use the balance to fund other pending
acquisitions.
The principal amount of
the December 2004 mortgage loan is divided into seven tranches,
each having a different level of seniority.
Interest accrues on each tranche at a fixed rate per annum. As
of December 31, 2004, the weighted average
interest rate on the various tranches was approximately
4.74%. The borrowers are required to make monthly
payments of interest on the December 2004
mortgage loan until its maturity in December 2009 when
the unpaid principal balance will be due. The
December 2004 mortgage loan is secured by, among other
things, (1) mortgage liens on the borrowers'
interests (fee, leasehold or easement) in substantially
all of their wireless communications sites, (2) a
security interest in substantially all of the
borrowers' personal property and fixtures and (3) a
pledge of the capital stock (or equivalent
equity interests) of each of the borrowers (including a pledge of
the equity interests of Pinnacle Towers
Acquisition Holdings LLC from its direct parent, Global
Signal Holdings III
LLC).
If the debt service coverage
ratio, defined in the December 2004 mortgage loan as the net
cash flow for the sites for the immediately
preceding twelve calendar month period (adjusted to account
for new sites) divided by the amount of
interest that we will be required to pay over the succeeding
twelve months on the December 2004 mortgage loan, as of
the end of any calendar quarter falls to 1.30
times or lower, then all excess cash flow will be deposited into a
reserve account instead of being released to
us. The funds in the reserve account will not be released to us unless
the debt service coverage ratio exceeds 1.30
times for two consecutive calendar quarters. If the debt service
coverage ratio falls below 1.15 times as of
the end of any calendar quarter, then all funds on deposit in
the reserve account along with future excess
cash flows will be applied to prepay the December 2004
mortgage loan. As of December 31, 2004, the debt
73
service coverage ratio was 2.18. The
borrowerst:normal;color:#000000;font-size:10pt; width: 456pt; text-align: left; font-style: normal; line-height: 12pt; padding-top:6pt; padding-left:0pt; padding-right:0pt; padding-bottom: 0pt; margin: 0pt; text-indent: 20pt; background-color: #ffffff">The partnership agreement provides that no
indemnitee may subject any partner of our operating partnership to
personal liability with respect to the indemnification obligation.
Item 35. Treatment of Proceeds From Stock Being
Registered.
Not applicable.
Item
36. Financial Statements and Exhibits.
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| (a)
The following financial statements are being filed as part of this
registration
statement: |
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Financial
Statements and
Schedules
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| Pro
Forma Condensed Consolidated Financial Statements of Global Signal
Inc.
(unaudited): |
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| Pro
Forma Condensed Consolidated Balance Sheet as of December 31, 2004
(unaudited) |
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| Pro
Forma Condensed Consolidated Statement of Operations for the Year
Ended December 31, 2004
(unaudited) |
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| Notes
to the Pro Forma Condensed Consolidated Financial Statements
(unaudited) |
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We may not prepay the December
2004 mortgage loan in whole or in part at any time prior to
December 7, 2006, the second anniversary of the closing
date, except in limited circumstances (such as
the occurrence of certain casualty and condemnation
events relating to the communications sites
securing the December 2004 mortgage loan). Thereafter,
prepayment is permitted provided it is
accompanied by any applicable prepayment consideration.
If the prepayment occurs within three months
of the December 2009 monthly payment date, no prepayment consideration
is due.
The December 2004 mortgage
loan documents include covenants customary for mortgage
loans subject to rated securitizations. Among
other things, the borrowers are prohibited from incurring
additional indebtedness or further encumbering their
assets.
Revolving Credit
Facility
On December 3, 2004, Global
Signal OP entered into a 364-day $20.0
million revolving credit facility pursuant
to a revolving
credit
agreement,
which we refer to as the Revolving
Credit
Agreement,
with Morgan Stanley Asset Funding Inc. and Bank of America, N.A.,
affiliates of the
representatives of the
underwriters, to
provide funding for working capital and other
corporate purposes. Amounts available under the revolving
credit facility are reduced to $15.0 million
upon the earlier of June 3, 2005 or the completion of
certain equity issuances by us in excess of
$5.0 million. On February 9, 2005, we amended and restated
the Revolving Credit Agreement to provide an
additional $50.0 million term loan facility in connection
with the Sprint
transaction.
On February 14, 2005, the full amount of the term loan was posted as
a deposit, as required by the Agreement to
Lease. On April
15,
2005, we amended and restated the Revolving
Credit Agreement to provide an additional
$25.0 million
multi-draw term loan to be used for fees and
expenses incurred in connection with the Sprint
transaction, and as of April 25, 2005 have
borrowed
$5.0
million under the multi-draw term
loan. The term
loans must be
repaid on the earlier of (1)
August 14,
2005,
(2) the date that we receive a refund of
our $50.0
million deposit from Sprint under the
Agreement to Lease, and (3) the date of the closing of the
Sprint
transaction.
Interest on the revolving credit facility is payable at our option of
either LIBOR
plus 3.0% or the bank's base
rate plus 2.0%. Interest on the term
loans under the credit facility is payable
at our option at either
LIBOR plus 1.75% or the bank's base rate
plus 0.75%. The
Revolving Credit
Agreement contains covenants and restrictions
standard for a facility of this type
including a limitation on our consolidated indebtedness at
approximately $1.0 billion
and a requirement to
limit
our ratio of consolidated indebtedness to consolidated EBITDA, as
defined in the loan document, to 7.0 to
1.0. The
limitations on
consolidated indebtedness
will be increased to approximately
$1.8 billion and
the ratio to 7.65
to 1.0 upon consummation
of the bridge financing for the Sprint
transaction.
The Revolving Credit
Agreement is guaranteed by Global
Signal, Global Signal GP, LLC and certain
subsidiaries of Global Signal OP that are not party to the
December and February 2004 mortgage loans. It is secured
by a pledge of Global Signal OP's assets,
including a pledge of 65% of its interest in our
United Kingdom subsidiary, 100% of its interest in
certain other domestic subsidiaries and a pledge by us
of 65% of our interest in our Canadian
subsidiary.
Acquisition
Credit Facility
As
of April 25,
2005,
our wholly owned
subsidiary
Global Signal
Acquisitions
entered
into a 364-day
$200.0 million credit facility, which we
refer to as the
acquisition
credit facility, with Morgan Stanley and Bank of
America, N.A. (affiliates of the
representatives
of the
underwriters),
to provide funding for the acquisition of
additional communications sites.
For a more detailed
description of the
acquisition credit
facility, see the above section entitled "—Liquidity
and Capital
Resources—Acquisition
Credit
Facility."
Previous Credit Facilities
On September 23, 2003, a
majority of our stockholders formed a new corporation,
Pinnacle Acquisition, then known as Pinnacle
Towers Acquisition Inc., to acquire and develop
strategically located
74
towers and other communications sites.
Pinnacle Acquisition was initially funded through a
$100.0 million committed credit facility, provided by
Morgan Stanley. On February 6, 2004, we
exercised our option with respect to all the outstanding
common stock of Pinnacle Acquisition, and
Pinnacle Acquisition became our wholly owned subsidiary.
On February 6, 2004, we amended our $100.0
million credit facility with Morgan Stanley to, amoadding-top: 0pt " align="left" valign="bottom" nowrap="nowrap"> |
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| Consolidated
Financial Statements of Global Signal
Inc.: |
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| Report
of Independent Registered Certified Public
Accountants |
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| Consolidated
Balance Sheets at December 31, 2003 and
2004 |
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| Consolidated
Statements of Operations for the Ten Months Ended October 31, 2002,
the Two Months Ended December 31, 2002, and
the Years Ended December 31, 2003 and
2004 |
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| Consolidated Statement of Changes in
Stockholders' Equity for the Ten Months Ended
October 31, 2002, the Two Months Ended December 31,
2002, and the Years Ended December 31, 2003
and 2004 |
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| Consolidated Statements of Cash Flows for the
Ten Months Ended October 31, 2002, the Two
Months Ended December 31, 2002, and the Years Ended December 31, 2003
and 2004 |
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Borrowings under the credit facility were limited based on a
borrowing base, which was calculated as
65% of the value of all towers owned, leased or managed by
Pinnacle Acquisition or its subsidiaries.
Borrowings under the credit facility bore interest, at our option, at
either the federal funds rate plus
2.1175% per annum or LIBOR plus 2.50% per annum. The
credit facility contained typical
representations and covenants for facilities of this type, including,
but not limited to restrictions on our
ability to (1) incur consolidated indebtedness in excess of $685.0
million and (2) permit our leverage ratio,
defined as the ratio of debt for borrowed money, to consolidated
EBITDA, to be greater than 6:1. The credit
facility required a commitment fee of $1.25 million which has been
paid. We repaid the outstanding borrowings
under the credit facility with a portion of the proceeds
from our December 2004 mortgage loan and
terminated the facility. As a result, we expensed the
remaining unamortized deferred financing cost
of approximately $0.6 million in December
2004.
Prior to the issuance of the
February 2004 mortgage loan in 2004, our largest operating
subsidiary, Pinnacle Towers LLC, then known
as Pinnacle Towers Inc., and 13 of its direct and indirect
subsidiaries, were party to an amended and restated bank
credit facility, which provided a term loan
for $275.0 million with outstanding borrowings totaling
$235.0 million at December 31, 2003 and a
revolving line of credit of $15.0 million with no
borrowings outstanding at December 31, 2003. This
old credit facility was provided by a syndicate of
lenders, for which Bank of America, N.A. served as
the administrative agent. The amount available under our
line of credit was reduced, at our option,
from $30.0 million to $15.0 million. Interest on both
the term loan and revolving line of credit was
charged at our option, at either LIBOR plus 4.5%
or our agent bank's base rate plus 3.5%. In
addition, we were required to pay a commitment fee of
1.0% per annum in respect of the undrawn
portion of the revolving line of credit. In connection
with our issuance of the February 2004 mortgage
loan, we repaid all outstanding amounts due under the
term loan and terminated the old credit
facility's line of credit. As a result, we
expensed the remaining unamortized deferred financing
expenses of approximately $8.4 million in February
2004.
Interest Rate Swap
Agreements
On December 11, 2003, in
anticipation of the issuance of the February 2004 mortgage
loan, Pinnacle Towers LLC entered into a
forward-starting interest rate swap agreement with Morgan
Stanley as the counterparty to hedge the variability of
future interest payments under the anticipated
February 2004 mortgage loan. Under the swap agreement,
Pinnacle Towers agreed to pay Morgan Stanley
a fixed rate of 3.816% on a notional amount of $400.0 million
for five years beginning in March 2004 in
exchange for
75
receiving floating payments based on the
three month LIBOR on the notional amount for
the same five-year period. The swap, effective on December 11, 2003,
required us to begin making monthly payments
to the counterparty equal to the difference between 3.816%
and the then-current three-month LIBOR rate,
which was 1.13% on February 5, 2004, on the notional
amount of $400.0 million. The swap was terminated in
connection with the issuance of the February
2004 mortgage loan at a cost to us of $6.2
million.
On March 26, 2004 and August
27, 2004, in anticipation of acquisitions of additional
communications sites and the issuance of the December
2004 mortgage loan, we entered into six
forward-starting interest rate swaps with Morgan Stanley
as counterparty to hedge the variability of
future interest rates on our anticipated mortgage
financing. Under the interest rate swaps, we agreed
to pay the counterparty a fixed interest rate of
3.416% on a total notional amount of $200.0 million
and 3.84% on a total notional amount of $100.0
million beginning in October 2004 through April 2009
in exchange for receiving the three month LIBOR on the
same notional amounts for the same period.
Concurrent with the pricing of the December 2004
mortgage loan, we terminated the six interest rate
swaps and received a net payment of $2.0 million.
Because the $300.0 million total notional value of
the six interest rate swaps exceeded the $293.8 million
principal amo>
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| Notes to Consolidated Financial
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| Financial
Statements of Tower
Ventures: |
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| Report
of Independent Registered Certified Public
Accountants |
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| Statements
of Revenue and Certain Expenses for the Year Ended December 31, 2003
and the Six Months Ended June 30, 2004
(unaudited) |
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| Notes
to Statements of Revenue and Certain
Expenses |
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unt of the December 2004
mortgage loan, we recognized approximately $40,000 as
additional interest expense, related to one of
the August 2004 swaps, during the fourth quarter of
2004.
On January 11, 2005, in
anticipation of the issuance of a third mortgage loan to finance
the acquisition of wireless
communications
towers we expect to acquire during 2005, we entered into six
forward starting interest rate
swap agreements with Morgan
Stanley as counterparty to hedge the
variability of future interest rates on our anticipated
mortgage financing. Under the interest rate
swaps, we agreed to pay the counterparty a weighted
average fixed interest rate of 4.403% on a total
notional amount of $300.0 million beginning on various
dates between July 29, 2005 and November 30,
2005 through September 2010 in exchange for receiving floating payments
based on the three month LIBOR on the same
notional amounts for the same period.
On February 2, 2005, in anticipation of the Sprint
transaction
and the issuance of a mortgage loan as
financing, we entered into eight interest rate swap agreements with
Bank of America, N.A. as the counterparty to
hedge the variability of expected future interest payments. Under the
swap agreements, we agreed to pay Bank of
America, N.A. a fixed rate of 4.303% on a total
notional amount of $750.0 million beginning
June 1, 2005 through December 2010 in exchange for receiving
floating payments based on the three month LIBOR on the
same notional amount for the same
period.
On March 21,
2005, in connection with the Sprint
transaction
and the $850.0 million bridge loan term sheet
we executed on March 10, 2005, we entered into additional interest rate
swap agreements for a total notional amount
of $100.0 million with Bank of America, N.A. as counterparty. This
brings the total notional amount of swap
agreements related to financing the Sprint
transaction
to $850.0 million. These swap agreements are
in anticipation of the Sprint bridge financing, which is expected
to be replaced by a mortgage loan of at least
$850.0 million. Under the interest rate swaps, we agreed to
pay the counterparty a fixed interest rate of
4.733% on the total notional amount of $100.0 million
beginning on June 1, 2005 through December 1, 2010, with
a mandatory maturity date of March 31, 2006,
in exchange for receiving floating payments based on
the three-month
LIBOR on the same notional amount for the
same period.
Critical Accounting
Policies and Estimates
The
preparation of our financial statements in conformity with accounting
principles generally accepted in the United
States requires us to make estimates and judgments that affect our
reported amounts of assets and liabilities,
revenues and expenses. We consider an accounting estimate to
be critical if it requires assumptions to be
made that were uncertain at the time the estimate was made
and changes in the estimate, or different estimates that
could have been selected, could have a
material impact on our consolidated results of
operations or financial condition. We have identified
the following critical accounting policies that affect
the more significant estimates and
judgments.
76
Revenues
Site
operations revenues are recognized when earned based on lease and
license agreements. Rate increases based on
fixed escalation clauses that are included in certain lease and
license agreements are recognized on a
straight-line basis over the term of the lease or license.
Revenues from fees, such as engineering and
site inspection fees, are recognized upon delivery of the
related products and services to the
customer.
A portion of the revenue we
generate is related to the management of wireless
communications towers and sites on rooftops
owned by third parties. Under most of the site management
agreements, we lease space from the third
party under an operating lease and we then sublease that space or
a portion of that space to our tenants. We
recognize these tenant revenues on a gross basis. For 21 of
our managed sites, we earn a fee based on a percentage
of the gross revenues derived from the
rooftop site subject to the agreement and we recognize
these fee revenues when earned on a net
basis.
We evaluate our revenues based
on the criteria of SAB 104, Revenue Recognition in
Financial Statements, which allows us to
only recognize revenues if collectability is reasonably assured at
the time of sale. In instances where
collectability is not reasonably assured, we recognize revenues as
cash is
collected.
Lease
Accounting
As a part of our accounting for ground leases and
other subleased sites, we must evaluate various
facts and circumstances that would lead us to
| Financial
Statements of Lattice
Acquisition: |
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| Report
of Independent Registered Certified Public Accounting
Firm |
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| Statements
of Revenue and Certain Expenses for the Year Ended December 31, 2003
and for the period from January 1, 2004 to
December 31, 2004
(unaudited) |
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| Notes
to Statements of Revenue and Certain
Expenses |
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| Financial
Statements of Didier Communications
Acquisition: |
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| Report
of Independent Registered Certified Public
Accountants |
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| Statements
of Revenue and Certain Expenses for the Year Ended December 31, 2003
and for the period from January 1, 2004 to
December 17, 2004
(unaudited) |
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| Notes
to Statements of Revenue and Certain
Expenses |
Allowance for
Uncollectible Accounts
We evaluate the collectability of our
accounts receivable and our straight-line receivable
resulting under SFAS No. 13, Accounting
for Leases, based on a combination of factors. In circumstances
where we are aware that a specific
customer's ability to meet its financial obligations to us is in
question (for example, bankruptcy filings,
default status of their account), we record a specific allowance
against amounts due to reduce the net
recognized receivable and related income from the customer to
the amount we reasonably believe to be
collectible. For all other customers, we reserve a percentage
of the remaining outstanding accounts
receivable balance based on a review of the aging of
customer balances, industry experience and
the current economic environment. If circumstances change
(for example, higher than expected defaults
or an unexpected material adverse change in one or more
significant customers' ability to meet their
financial obligations to us), our estimates of
recoverability of amounts due us could be
reduced by a material amount.
Property and Equipment
Property and equipment
built, purchased, leased or licensed under long-term leasehold or
license agreements are recorded at cost less
impairment losses, if any, and depreciated over their
estimated useful lives or in the case of
assets located on leased land, the shorter of the useful life or the
ground lease term including all renewal
options we control. Those assets owned at November 1, 2002
were revalued and recorded at reorganization
value, which approximated fair value at that date, in
accordance with fresh start accounting. We capitalize
expenses incurred in bringing property and
equipment to an operational state. Expenses clearly
associated with the acquisition, development and
construction of property and equipment are capitalized
as a cost of the assets. Indirect expenses that
relate to several assets are capitalized and allocated
to the assets to which the expenses relate. Indirect
expenses that do not clearly relate to projects under
development or construction are charged to
expense as incurred. Depreciation on
77
towers is computed using the straight-line
method over the estimated useful lives of 13
years for towers owned at November 1, 2002 and 15 to 16 years for
towers built or acquired after that date.
With regard to towers and other property and equipment located
on leased land, the depreciable life is the
shorter of their estimated useful lives or the ground lease
term including all renewal options we
control. Depreciation on property and equipment excluding towers
is computed using the straight-line method
over the estimated useful lives of the assets ranging from
three to forty years.
In connection with the adoption of fresh start accounting on
November 1, 2002, we re-established, for
financial reporting purposes, the remaining estimated useful lives for
tower assets owned at November 1, 2002, to 13
years. In addition, during the year ended December 31, 2004, we
obtained third party appraisals of certain
tower assets acquired and as a result established lives of 15 to
16 years for these newly acquired tower
assets. Other than the change in depreciable lives of tower
assets owned at November 1, 2002, for the
years ended December 31, 2004 and 2003, two months ended
December 31, 2002 and ten months ended October 31, 2002
no significant changes were made to the
depreciable lives applied to operating assets, the
underlying assumptions related to estimates of
depreciation, or the methodology applied. If the
estimated lives of all assets being depreciated were
increased by one year, the consolidated depreciation
expense would have decreased by approximately
$3.1 million, or 8.5%, for 2004. If the estimated
lives of all assets being depreciated were decreased by
one year, the consolidated depreciation expense would
have increased by approximately $3.2 million,
or 9.0%, for 2004.
Intangible Assets
Intangible assets post
reorganization include goodwill, lease absorption value, leasehold
interest and lease origination value
recognized in accordance with fresh start accounting and at the time
of acquisitions arising after our adoption of
SFAS No. 141.
Goodwill represents the
aggregate purchase price of business acquisitions in excess of the
fair value of the acquisitions. Negative
goodwill is allocated to tangible and intangible assets on a pro
rata basis. Goodwill will be evaluated for
impairment on an annual basis or more frequently if an event
occurs or circumstances change that would more likely
than not reduce the fai="1" width="2"> |
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| Financial
Statements of Towers of Texas
Acquisition: |
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| Report
of Independent Registered Certified Public
Accountants |
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| Statements
of Revenue and Certain Expenses for the Year Ended December 31, 2003
and for the period from January 1, 2004 to
December 30, 2004
(unaudited) |
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| Notes
to Statements of Revenue and Certain
Expenses |
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| Financial
Statements of
ForeSite
2005
Acquisition: |
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| Report
of Independent Registered
Public
Accounting
Firm |
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Lease absorption value, which
was also recorded in connection with our adoption of fresh
start accounting and other acquisitions,
represents the value attributable to in-place leases. This
intangible represents the lease rentals which
we would have foregone during the period of time required to
attract a new tenant lease for each of the tenant leases
in-place at the date of our
fresh start accounting or business
combinations. In connection with our fresh start accounting we recorded
lease absorption value at $127.3 million and
$50.7 million in connection with the acquisitions made since
December 2003. The lease absorption value is being
amortized over the remaining contractual term of
the in-place leases and their expected renewals, in an
accelerated manner consistent with the lease
revenues associated with the in-place leases and their
expected renewals. We evaluate our lease
absorption value for impairment when indicators of
impairment arise by determining the ability of the
in-place leases at the time lease absorption value was
established to generate future cash flows
sufficient to recover the unamortized balance over the
remaining useful life. We estimate future cash
flows based primarily on the current performance of the
in-place leases and our expectations for the
future. If lease absorption value is determined to be
unrecoverable, the carrying amount will be
reduced to its estimated fair value in the period in
which such determination is made. If the estimated
lives of the lease absorption value being amortized were
increased by one year, the consolidated
amortization expense would have decreased by
approximately $0.2 million or 1.7%, for 2004. If the
estimated lives of the lease absorption value being
amortized were decreased by one year, the
consolidated amortization expense would have increased
by approximately $0.3 million, or 2.2%, for
2004.
Leasehold
interests represent our interest as a tenant in various rooftops and
other leased telecommunications sites and is
stated at cost except those existing at November 1, 2002, which
was revalued in accordance with fresh start
accounting. Leasehold interests are amortized over four
years,
78
using the straight line
method. We evaluate our leasehold interest for impairment as indicators
of impairment arise by determining the
ability of the leasehold interests to generate future cash
flows sufficient to recover the unamortized
balance over the remaining useful life. We estimate future
cash flows based primarily on the current
performance of the in-place leases and our expectations for
the future. If leasehold interests are
determined to be unrecoverable, the carrying amount will be
reduced to its estimated fair value in the
period in which such determination is made. If the estimated lives
of the leasehold interests being amortized
were increased by one year, the consolidated amortization
expense would have decreased by approximately $0.8
million or 18.5%, for 2004. If the estimated lives
of the leasehold interests being amortized were
decreased by one year, the consolidated amortization
expense would have increased by approximately $1.4
million, or 33.0%, for 2004.
Lease origination value was recorded as an intangible asset in
connection with our adoption of fresh start
accounting and represents the value associated with the
"cost avoidance" of acquiring an
in-place lease. Fair value of this intangible was
determined based on our estimate of the incremental
cost (primarily sales commissions) to replace all leases
with greater than three years remaining on the
current term. This intangible was valued at $2.7 million
in connection with our fresh start accounting
and $2.3 million in connection with the acquisitions
made since December 2003 and is being amortized
over the remaining contractual lease terms and expected
renewals. Similar expenses incurred prior to
and subsequent to fresh start accounting are expensed
because the amounts have been immaterial to
our operations. We evaluate our lease origination value
for impairment as indicators of impairment
arise by determining the ability of the assets acquired
to generate future cash flows sufficient to
recover the unamortized balance over the remaining
useful life. We estimate future cash flows based
primarily on the current performance of the acquired
assets and our business plan for those assets.
Changes in business conditions, major customers or other
factors could result in changes in those
estimates. If lease origination value is determined to
be unrecoverable, the carrying amount will be
reduced to its estimated fair value in the period in
which such determination is made. If the estimated
lives of the lease origination value being amortized
were increased or decreased by one year, the
consolidated amortization expense would have changed by
an immaterial amount for 2004.
Impairment of Long-lived Assets
Long-lived
assets, such as property and equipment, and purchased intangible
assets, are evaluated for impairment whenever
events or changes in circumstances indicate the carrying value of an
asset may not be recoverable. An impairment
loss is recognized when estimated undiscounted future cash
flows expected to result from the use of the asset plus
net proceeds expected from disposition of the
asset (if any) are less than the carrying value of the
asset. When impairment is identified, the carrying
amount of the asset is reduced to its estimated fair
value. Effective January 1, 2002, potential
impairment of long-lived assets other than goodwill and
purchased intangible assets with indefinite
useful lives is evaluated using the guidance provided by
SFAS No. 144, Accounting for the Impairment
or Disposal of Long-lived Assets. Goodwill is
evaluated for impairment using the guidance provided
by SFAS No. 142, |
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| Statement
of Revenue and Certain Expenses for the Year Ended December 31,
2004 |
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| Notes to Statement
of Revenue and Certain
Expenses |
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II-5
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| Financial
Statements of SunCom Acquisition
(Triton): |
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| Report
of Independent Registered Public Accounting
Firm |
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| Statement
of Revenue and Direct Operating Expenses for the Year Ended December
31, 2004 |
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| Notes to Statement of Revenue and Direct
Operating
Expenses |
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Goodwill and Other Intangible
Assets, at least annually or more often if indicators
of impairment arise.
Asset Retirement Obligation
Effective with
our emergence from Chapter 11, we adopted SFAS No. 143, Accounting
for Asset Retirement Obligations. SFAS
No. 143 addresses the accounting and reporting obligations
associated with the retirement of tangible
long-lived assets and the associated retirement expenses and
requires that the fair value of a liability
for an asset retirement obligation be recognized in the period in
which it is incurred if a reasonable estimate
of fair value can be made. We recorded an asset retirement
obligation of $5.3 million for our estimated future
obligation to dismantle towers on leased land sites
in connection with our fresh start accounting and $1.3
million in connection with the acquisitions
made since December 1, 2003, using discounted cash flows
of expected dismantling expenses. We used a
discount factor of 13% in connection with our fresh start
accounting and a rate of 12% for
subsequent additions and an annual cost increase factor
of 2.5%. If our estimates regarding the future
cost to dismantle these sites had increased by
10% the original liability recorded would have
increased by $0.6 million or
10.1%.
Our original asset
retirement obligation of $5.3 million was increased by accretion
expense of $0.2 million in the two months
ended December 31, 2002 resulting in a balance at December 31, 2002
of $5.5
79
million. During 2003 we recorded an
additional asset retirement obligation of $0.1 million in
connection with our purchase of 67 telecommunication
tower assets as well as accretion expense of
$0.4 million. In 2003 we revised our estimate of
dismantling costs and reduced the obligation and the
tower assets by $1.3 million. The asset retirement
obligation balance at December 31, 2003 was $4.7
million. During 2004 we recorded additional asset
retirement obligations of $1.2 million in connection
with our acquisitions as well as an accretion expense of
$0.5 million. The asset retirement obligation
balance at December 31, 2004 is $6.4 million.
Stock-Based Compensation Expense
When we
grant stock options to employees, we are required to compare the fair
value of the stock to the exercise price on
the date of grant to determine if compensation expense must
be recognized. We also provide pro forma
disclosures reflecting the impact of employee stock options
using the fair value method, rather than the intrinsic
value method. We use the Black-Scholes method
to calculate this pro forma impact. When we grant stock
options to non-employees for services, we
measure the compensation expense related to those
options at their vesting date using the
Black-Scholes method, and recognize the expense for
options with graded vesting using the
accelerated method over the service period. Prior to the
vesting date, the expense is recognized based
on the fair value of the options at the end of each
financial reporting period, also using the
Black-Scholes method. The Black-Scholes method requires
us to use assumptions related to the fair
value of our stock, the expected life of the options,
volatility, the risk-free interest rate and the
dividend yield.
When we
grant restricted stock awards to employees, we measure the compensation
expense related to the grant at the date of
the grant and recognize the expense for options with graded
vesting using the accelerated method over the
vesting period.
Derivatives
We periodically enter into
interest rate swaps to effectively fix the variable-interest rates
of certain of our debt instruments or to fix
certain variables which will be used to price anticipated
debt instruments, and must recognize these
derivatives at their fair value on our balance sheet. While
we generally obtain this fair value
information from the counterparty, this valuation includes
certain assumptions about market conditions.
In addition, for the anticipated transactions, we must
continually evaluate the probability that the
transaction will occur as anticipated and on the
anticipated timeline. If an anticipated transaction is
no longer probable, then we would cease to
qualify for hedge accounting. The judgment of
probability is significant and has a high degree of
uncertainty.
Income Taxes
We review our deferred tax
assets on a regular basis to evaluate their recoverability based
on projections of the turnaround timing of
our deferred tax liabilities, projections of future taxable
income, and tax planning strategies that we might employ
to utilize such assets, including net
operating loss carry-forwards. Unless it is
"more likely thcolspan="1" nowrap="nowrap"> |
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| Financial
Statements of Sprint Sites
USA: |
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| Report
of Independent Registered Public Accounting
Firm |
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| Statement
of Revenue and Certain Expenses for the Year Ended December 31,
2004 |
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| Notes to
Statement of Revenue and Certain
Expenses |
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| Schedules: |
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| Report
of Independent Registered Certified Public Accountants on
Schedules |
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| Schedule
I—Condensed Financial Information of
Registrant |
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| Schedule
II—Valuation and Qualifying Accounts and
Reserves |
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Recently Issued
Accounting Pronouncements
In January
2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities. FIN No. 46
requires an investor with a majority of the variable interests in a
variable interest entity
("VIE") to consolidate the entity and also
requires majority and significant variable interest
investors to provide certain disclosures. A variable
interest entity is an entity in which the equity
investors do not have a controlling interest, or the
equity investment at risk is insufficient to finance
the entity's activities without receiving
additional subordinated financial support from the other
parties. For arrangements entered into with variable
interest entities created prior to February 1, 2003,
the provisions of FIN No. 46
80
are effective in fiscal periods ending after
December 31, 2003. The provisions of FIN No.
46 are effective immediately for all arrangements entered into with
new variable interest entities created after
January 31, 2003. We do not believe we have any investments
in variable interest entities as of December
31, 2004 that would require a change in our consolidation
policy, and thus do not expect the impact of FIN No. 46
to be material to our financial statements at
this time. While we do not currently expect to enter
into any types of VIE arrangements, if we did so
the impact could be
material.
In December 2004, the FASB
issued its SFAS No. 123(R) Share-Based Payment, which is
a revision to SFAS No. 123, Accounting for
Stock-Based Compensation. Generally, the approach in the
new pronouncement is similar to the approach described
in SFAS No. 123. However, SFAS No. 123(R)
would require all share-based payments to employees, including grants
of employee stock options, to be recognized
in the income statement based on their fair values. The pronouncement
is effective for us as of
January 1,
2006. As of the
required effective date, we will apply this Statement using a modified
version of prospective application. Under
that transition method, compensation cost for the portion of awards for
which the requisite service has not been
rendered that are outstanding as of the required effective date shall
be recognized as the requisite service is
rendered on or after the required effective date, based on
the grant date fair value of those awards
calculated under SFAS No. 123. We have not yet determined
the effect of the new standard on our
financial statements.
Inflation
Some of our expenses,
such as those for tower operating expenses, wages and benefits,
generally increase with inflation. In
addition, many of our tenant leases and ground leases contain
fixed escalations or escalations based on the
change in the Consumer Price Index. However, we do not
believe that our financial results have been, or
are likely
to be, adversely affected by inflation in a
material way.
Non-GAAP Financial
Measures
Adjusted
EBITDA
We define Adjusted EBITDA as net income before interest,
income tax expense (benefit), depreciation,
amortization, and accretion, non-cash stock based compensation expense
and gain or losses on the extinguishment of
debt. Adjusted EBITDA is not a measure of performance
calculated in accordance with accounting
principles generally accepted in the United States, or
"GAAP."
We
use Adjusted EBITDA as a measure of operating performance. Adjusted
EBITDA should not be considered in isolation
or as a substitute for operating income, net income or loss, cash
flows provided by operating, investing and
financing activities or other income statement or cash flow
statement data prepared in accordance with
GAAP.
We believe Adjusted EBITDA is
useful to an investor in evaluating our operating
performance
because:
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(b) The
following is a list of exhibits filed as part of this registration
statement.
II-6
Report of Independent Registered
Certified Public
Accountants
Stockholders and Board
of Directors of Global Signal Inc.
We
have audited the consolidated financial statements of Global Signal
Inc. as of December 31, 2004 and 2003, and
for the years ended
December 31, 2004 and 2003, the two months ended
December 31, 2002 and the ten months ended October 31,
2002 and have issued our report thereon dated
March 28, 2005, except for the last paragraph of
footnote 19 as to which the date is March 30, 2005
(included elsewhere in this Registration Statement).
Our audits also included the financial statement
schedules listed in
Item
36
of this Registration Statement. These schedules are the responsibility
of the Company's management. Our
responsibility is to express an opinion based on our
audits.
In our opinion, the financial
statement schedules referred to above, when considered in relation
to the basic financial statements taken as a
whole, present fairly in all material respects the information
set forth
therein.
|
/s/ Ernst
& Young LLP |
Tampa,
Florida
March 28, 2005
II-7
Schedule
I — Condensed Financial Information of Registrant
Global
Signal Inc. (Parent Company Only)
Condensed Balance
Sheets
(in
thousands)
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December
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2004 |
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(restated) |
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| Assets |
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it
is one of the primary measures used by our management to evaluate the
economic productivity of our operations,
including the efficiency of our employees and the
profitability associated with their
performance, the realization of contract revenues under our
tenant leases, our ability to obtain and
maintain our customers and our ability to operate our
leasing business
effectively; |
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it
is widely used in the wireless tower industry to measure operating
performance without regard to items such as
depreciation and amortization, which can vary depending upon
accounting methods and the book value of assets;
and |
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we
believe it helps investors meaningfully evaluate and compare the
results of our operations from period to
period by removing the impact of our capital structure (primarily
interest charges from our outstanding debt)
and asset base (primarily depreciation and amortization)
from our operating
results. |
81
Our management uses Adjusted
EBITDA:
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| • |
in
presentations to our board of directors to enable it to have the same
measurement of operating performance used by
management; |
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| • |
for
planning purposes, including the preparation of our annual operating
budget; |
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for
compensation purposes, including as the basis for annual incentive
bonuses for certain
employees; |
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as
a valuation measure in strategic analyses in connection with the
purchase and sale of
assets; |
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with
respect to compliance with our prior credit facility that we repaid
with a portion of the net proceeds of the
December 2004 mortgage loan, which required us to maintain
certain financial ratios based on
Consolidated EBITDA, which is equivalent to Adjusted EBITDA
except that Consolidated EBITDA (i) annualizes the
Adjusted EBITDA contribution from newly
acquired towers until such towers have been owned for twelve months and
(ii) excludes asset impairment charges, gains
or losses on foreign currency exchange and certain
other non-cash charges; we expect any future credit
facilities we obtain to contain similar
financial ratios based on Consolidated EBITDA;
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as a
measurement of operating performance because it assists us in comparing
our operating performance on a consistent
basis as it removes the impact of our capital structure
(primarily interest charges from our
outstanding debt) and asset base (primarily depreciation and
amortization) from our operating
results. |
There are material
lie: 10pt; color: #000000; font-weight: normal; font-style: normal; border-bottom: 3px double #ffffff;padding-top: 0pt" align="right" valign="bottom" colspan="1"> |
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| Current
assets: |
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| Cash
and cash
equivalents |
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$ |
390 |
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$ |
188 |
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| Accounts
receivable,
net |
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— |
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1 |
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| Other
current
assets |
|
|
The table below shows Adjusted
EBITDA for the ten months ended October 31, 2002, for the
predecessor
company
and the two months ended December 31, 2002, and the years ended
December 31, 2003 and 2004 for the
successor
company:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Predecessor
Company |
|
Successor
Company |
|
Pro Forma
As
Adjusted
Year Ended
December 31,
2004 |
| |
|
Ten
Months
Ended
October 31,
2002 |
|
Two
Months
Ended
December 31,
2002 |
|
Year
Ended
December 31,
2003 |
|
Year
Ended
December 31,
2004 |
|
| |
|
|
|
(thousands
of
dollars) |
|
|
|
| Net
income |
|
$ |
256,172 |
|
|
1,269 |
|
|
|
465 |
|
| Total
current
assets |
|
|
1,659 |
|
|
|
654 |
|
| Fixed
assets,
net |
|
|
31 |
|
|
|
32 |
|
| Deferred
debt issuance costs,
net |
|
|
— |
|
|
|
590 |
|
| Investment
in
subsidiaries |
|
|
216,987 |
|
|
$ |
(996 |
) |
|
$ |
13,161 |
|
|
$ |
6,872 |
|
|
$ |
(66,079 |
) |
| Depreciation,
amortization and
accretion |
|
|
76,956 |
|
|
|
10,165 |
|
|
|
47,173 |
|
|
|
54,370 |
|
|
|
155,036 |
|
| Interest,
net |
|
|
164,651 |
|
| Other
non-current
assets |
|
|
— |
|
|
|
9,633 |
|
| Total
assets |
|
$ |
218,677 |
|
|
$ |
175,560 |
|
| |
|
|
|
|
|
|
|
|
| Liabilities
and Stockholders'
Equity |
|
|
|
|
|
|
|
45,720 |
|
|
|
4,041 |
|
|
|
20,477 |
|
|
|
27,529 |
|
|
|
95,464 |
|
| Income
tax expense
(benefit) |
|
|
(5,195 |
) |
|
|
19 |
|
|
|
(665 |
) |
|
|
341 |
|
|
|
341 |
|
| Current
liabilities: |
|
|
|
|
|
|
|
|
| Accounts
payable and other current
liabilities |
|
$ |
33 |
|
|
$ |
653 |
|
| Dividend
payable |
|
|
— |
|
|
|
20,491 |
|
| Total
current
liabilities |
|
|
33 |
|
|
|
21,144 |
|
| |
| Loss
(gain) on early extinguishment of
debt |
|
|
(404,838 |
) |
|
|
— |
|
|
|
— |
|
|
|
9,018 |
|
|
|
9,018 |
|
| Non-cash
stock based
compensation |
|
|
— |
|
|
|
— |
|
|
|
1,479 |
|
|
|
4,235 |
|
Stockholders'
equity: |
|
|
|
|
|
|
|
|
| Common
stock |
|
|
410 |
|
|
|
513 |
|
| Additional
paid-in
capital |
|
|
206,069 |
|
|
|
157,004 |
|
| Deferred
stock-based
compensation |
|
|
— |
|
|
|
(3,101 |
) |
| Retained
earnings |
|
|
|
|
4,235 |
|
| Adjusted
EBITDA |
|
$ |
(31,185 |
) |
|
$ |
13,229 |
|
|
$ |
81,625 |
|
|
$ |
102,365 |
|
|
$ |
198,015 |
|
|
Adjusted
Funds From Operations
We believe Adjusted Funds From
Operations, or AFFO, is an appropriate measure of the
performance of REITs because it provides investors with
an understanding of our ability to incur and
82
service debt and make capital
expenditures. AFFO, for our purposes, represents net income
available for stockholders (computed in
accordance with GAAP, excluding gains (or losses) on the
disposition of real estate assets and real
estate depreciation, amortization and accretion and non-cash stock
based compensation
expense).
AFFO does not represent cash generated from operating activities in
accordance with GAAP and therefore should not
be considered an alternative to net income as an indicator of our
operating performance or as an alternative to
cash flow provided by operations as a measure of liquidity and
is not necessarily indicative of funds
available to fund our cash needs including our ability to
pay dividends. In addition, AFFO may not be
comparable to similarly titled measurements employed by
other companies. Our management uses
AFFO:
|
|
| &bullor: #000000; font-weight: normal; font-style: normal; border-bottom: 1px solid #000000 ; padding-left: 0pt; text-indent: 0pt; padding-top: 0pt" align="right" valign="bottom" colspan="1" nowrap="nowrap">12,165 |
|
|
|
— |
|
| |
|
|
218,644 |
|
|
|
154,416 |
|
| Total
liabilities and stockholders'
equity |
|
$ |
218,677 |
|
|
$ |
175,560 |
|
|
II-8
Schedule I — Condensed Financial
Information of Registrant — (continued)
Global Signal
Inc. (Parent Company Only)
Condensed Statements of
Operations
(in
thousands except per share
data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
in
management reports given to our board of
directors; |
|
|
| • |
to
provide a measure of our REIT operating performance that can be
compared to other companies using AFFO;
and |
|
|
| • |
as
an important supplemental measure of operating
performance. |
Adjusted Funds From
Operations is calculated as follows for the ten months ended October
31, 2002, for the
predecessor
company
and the two months ended December 31, 2002 and the years
ended December 31, 2003 and 2004 for the
successor
company:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Predecessor
Company |
|
Successor
Company |
|
Pro Forma
As
Adjusted
Year Ended
December 31,
2004 |
| |
|
Ten
Months
Ended
October 31,
2003 |
|
Two
Months
Ended
December 31,
2002 |
|
Year
Ended
December 31,
2003 |
|
Year
Ended
December 31,
2004 |
|
| |
|
|
|
(thousands
of
dollars) |
|
|
|
| Predecessor
Company |
|
Successor
Company |
| |
|
Ten
Months
Ended
October 31,
2002 |
|
Two Months
Ended
December 31,
2002 |
|
Year Ended
December
31,
2003 |
|
Year Ended
December
31,
2004 |
| |
|
|
|
(restated) |
|
(restated) |
|
|
| Revenues |
|
$ |
29 |
|
|
$ |
5 |
|
|
$ |
33 |
|
|
$ |
34 |
|
| Direct site operating expenses excluding
depreciation |
|
|
14 |
|
|
Net
income |
|
$ |
256,172 |
|
|
$ |
(996 |
) |
|
$ |
13,161 |
|
|
$ |
6,872 |
|
|
$ |
(66,079 |
) |
| Real
estate depreciation, amortization and
accretion |
|
|
75,613 |
|
|
|
8,993 |
|
|
|
44,764 |
|
|
|
52,286 |
|
|
|
|
5 |
|
|
|
32 |
|
|
|
19 |
|
| Gross
margin |
|
|
15 |
|
|
|
— |
|
|
|
1 |
|
|
|
15 |
|
| Selling, general and
administrative
expenses |
|
|
1,970 |
|
|
|
1 |
|
|
152,952 |
|
| (Gain)
loss on sale of
properties |
|
|
176 |
|
|
|
2 |
|
|
|
726 |
|
|
|
(631 |
) |
|
|
(631 |
) |
| Loss
(gain) on early extinguishment of
debt |
|
|
(404,838 |
) |
|
|
— |
|
|
|
— |
|
|
|
|
1,539 |
|
|
|
931 |
|
| State franchise, excise and minimum
taxes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
149 |
|
| Depreciation
expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
9,018 |
|
|
|
9,018 |
|
| Non-cash
stock based
compensation |
|
|
— |
|
|
|
— |
|
|
|
1,479 |
|
|
|
4,235 |
|
|
|
4,235 |
|
| Adjusted
funds from
operations |
|
$ |
(72,877 |
) |
|
$ |
7,999 |
|
|
$ |
1 |
|
| Interest
expense,
net |
|
|
16,274 |
|
|
|
— |
|
|
|
— |
|
|
|
(1,278 |
) |
| Gain
on extinguishment of
debt |
|
|
(404,838 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Non-cash
stock-based compensation
expense |
|
60,130 |
|
|
$ |
71,780 |
|
|
$ |
99,495 |
|
|
Interest
Rate
Risk
We are exposed to market risks from changes in interest rates
charged on our credit facilities used to
finance acquired communication sites on an interim basis. The impact on
our earnings and
the value of
our long-term debt is subject to change as a
result of movements in market rates and prices. As of
December 31, 2004, we had $706.9 million in
long-term fixed rate debt and no variable rate debt. As of
December 31, 2004, the total fixed rate debt
outstanding had a
weighted average interest
rate of
4.9%.
The following table presents the future principal payment
obligations and weighted-average interest
rates at December 31, 2004, associated with our
existing long-term debt
instruments,
using our actual level of long-term
indebtedness of $1.2 million under capital leases, $411.9 million under
our February 2004 mortgage loan, and $293.8
million under our December 2004 mortgage
loan.
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Weighted
Average
Interest
Rate |
|
Expected Maturity Date
— Year Ended December
31, |
| |
|
Total |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4,235 |
|
| Reorganization
costs |
|
|
31,987 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Income
(loss) before taxes and equity in income (loss) of subsidiaries
|
|
|
354,622 |
|
|
|
2005 |
|
2006 |
|
2007 |
|
2008 |
|
2009 |
|
Thereafter |
|
| |
|
|
|
(thousands
of dollars) |
| February
2004 mortgage
loan |
|
|
5.0 |
% |
|
$ |
411,909 |
|
|
$ |
7,823 |
|
|
$ |
8,305 |
|
|
$ |
8,817 |
|
|
$ |
9,361 |
|
|
$ |
(1 |
) |
|
|
(1,538 |
) |
|
|
(4,023 |
) |
| Income
tax benefit
(expense) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
| Equity
in income (loss) of
subsidiaries |
|
|
(98,450 |
) |
|
|
(995 |
) |
|
|
377,603 |
|
|
$ |
— |
|
| December
2004 mortgage
loan |
|
|
4.7 |
% |
|
|
293,825 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
293,825 |
|
|
|
— |
14,699 |
|
|
|
10,895 |
|
| Net
income
(loss) |
|
$ |
256,172 |
|
|
$ |
(996 |
) |
|
$ |
13,161 |
|
|
$ |
6,872 |
|
|
II-9
Schedule I — Condensed Financial
Information of Registrant — (continued)
Global Signal
Inc. (Parent Company Only)
Condensed Statements of Cash
Flows
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Predecessor
Company |
|
|
| Capital
lease
obligation |
|
|
10.3 |
% |
|
|
1,186 |
|
|
|
445 |
|
|
|
492 |
|
|
|
249 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Total
debt |
|
|
|
|
|
Successor
Company |
| |
|
Ten
Months
Ended
October
31,
2002 |
|
Two
Months
Ended
December
31,
2002 |
|
Year
Ended
December
31,
2003 |
|
Year
Ended
December
31,
2004 |
| Net
cash flows provided by (used in) operating
activities |
|
$ |
(91,061 |
) |
|
$ |
3 |
|
|
$ |
317 |
|
|
$ |
2,896 |
|
| Cash
flows from investing
activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
706,920 |
|
|
$ |
8,268 |
|
|
$ |
8,797 |
|
|
$ |
9,066 |
|
|
$ |
9,361 |
|
|
$ |
671,428 |
|
|
$ |
— |
|
|
Foreign
Currency Exchange
Risk
Our exposure to adverse movements in foreign currency exchange rates
is primarily related to our
subsidiaries' operating
revenues and
expenses, primarily in the United Kingdom
and Canada, denominated in the respective
local currency. A hypothetical change of 10% in foreign currency
exchange rates would not have a material
impact on our consolidated financial statements or results of
operations.
84
INDUSTRY
Industry
Strengths
We
believe that the tower industry is attractive because of the following
characteristics:
| |
|
|
| Loss
on disposal of
assets |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Purchase
of fixed
assets |
|
|
— |
|
|
|
— |
|
|
|
(10 |
) |
|
|
— |
|
| Dividends
received from
subsidiaries |
|
|
| • |
Strong Industry
Outlook. We believe that the following factors will drive the
growth of new tenant leases: |
|
|
| o |
growth in the number of wireless
telephony subscribers; |
|
|
| o |
increasing
wireless telephony usage per subscriber; |
|
|
| o |
increasing wireless data usage; |
|
|
| o |
customer demand for high network
quality and coverage; |
|
|
| o |
new wireless
technologies, devices and applications; and |
|
|
| o |
significant investments by wireless
telephony service providers in their networks to increase
coverage, quality and accommodate new
technologies. |
|
|
| • |
High Operating
Leverage. Operating expenses associated with adding
incremental wireless tenants to an existing owned tower are relatively
low resulting in a significant percentage of new revenues being
converted to cash flow provided by operating activities. |
|
|
| • |
Low Maintenance Capital
Expenditures. Generally, wireless towers require minimal
annual capital investments to maintain. During the year ended December
31, 2004, our average
capital expenditure for the maintenance of our owned towers was less
than $1,250 per tower. |
|
|
| • |
Low Churn of Wireless Telephony
Customers. Due to the expense of modifying their wireless
network architecture and relocating their equipment, wireless carriers
tend to be long-term tenants that enter into
multi year
leases and renew
them. |
|
|
| • |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
52,336 |
|
| Cash
flows provided by investing
activities |
|
|
— |
|
|
|
— |
|
|
|
(10 |
) |
|
|
52,336 |
|
| Cash
flows from financing
activities |
|
|
|
|
|
Large and Fragmented
Industry. There are over
100,000 wireless communications towers in the United States
with over 45,000 towers
owned by small tower operators and individuals and over
17,000 towers owned by
wireless telephony service providers, which provides significant
acquisitions opportunities. |
Industry Overview
Like many
other real estate businesses, the wireless communications site business
is characterized by a relatively stable
cash flow stream that is generated from tenant leases, a fixed cost
base with additional leases providing high operating leverage and
requiring minimal annual capital investments to maintain existing
communications sites. Typically, telephony wireless tenants enter into
three to five year leases with three to five renewal options of similar
duration at the option of the tenant. The leases usually include annual
rental rate increases, or escalators, of three to five percent. A tower
can accommodate anywhere from one to 30 tenants or more, depending on
the size and strength of the tower and the type of equipment that each
tenant needs to install. Typically, however, the average tower will
accommodate three to six telephony tenants.
The direct expenses
associated with operating the tower consist of ground lease rent,
property insurance, utilities, property taxes and site maintenance and
monitoring expenses. Most ground leases consist of an initial five to
ten year term with multiple five to ten year renewal terms and often
provide for annual escalators similar to those in the tenant leases.
The magnitude of the other direct expenses associated with operating
the tower vary from site to site depending on the taxing jurisdiction
and the height and age of the tower but typically do not make up a
large percentage of total operating expenses. The ongoing maintenance
requirements are typically minimal and include replacing lighting
systems, maintaining common shelters, maintaining heating, ventilation
and cooling systems in the common shelters, painting a tower or
upgrading or repairing an access road or fencing.
Given the
fixed nature of the direct expenses of a single tower, there is
significant operating leverage in the economic model through the
addition of multiple tenants to a single tower. For example, on a
single
85
hypothetical tower with one tenant paying
approximately $18,000 per year in rent to lease site space, and annual
operating expenses of approximately $12,000, which is the approximate
average direct operating expenses for a telephony site with a ground
lease, the gross margin would be $6,000, or 33%. If a second
tenant is added to the tower, there would be an additional
approximately $18,000 of annual revenues and minimal additional
operating expenses (assume $1,000), providing for a gross margin of
approximately $23,000, or 64%, or almost twice the gross profit
margin with only one tenant.
Wireless communications service
providers tend to invest significant amounts of capital in their
network design and the purchase and installation of their base station
equipment and therefore have difficulty moving their equipment to
another competitive tower without altering their network architecture
and incurring significant relocation expenses. In some cases, a
customer can invest as much as $250,000 in the equipment and its
installation at a communications tower site and often that equipment is
optimized for a specific location. If a customer decides to move its
equipment and switch site providers, it will have to invest additional
capital which could be as much as $75,000 to redeploy equipment to
another tower site. Given the significant expense in modifying wireless
network architecture, relative to the monthly rental payments,
customers infrequently move their equipment to another tower site.
The significant capital and regulatory requirements involved in
developing and obtaining permits for a communications tower provide
important competitive barriers to entry. The cost of constructing a new
tower can range from $175,000 to $250,000 or more, depending on several
variables including the height and various zoning and permitting
expenses. In many jurisdictions, the local zoning requirements make it
difficult to get permission to build a new tower. Furthermore, once a
tower has been permitted and constructed, the local authorities often
require that potential new wireless tenants attempt to locate on
existing towers prior to permitting the construction of a new tower. As
a result, it is often administratively difficult and usually not
economically worthwhile to build a competitive tower close to another
operator's tower site.
Existing
Towers
In general, wireless communications towers are vertical
metal structures of three types: guyed towers, lattice towers and
monopole towers.
|
|
| &buont-style: normal; border-bottom: 3px double #ffffff;padding-top: 0pt" align="right" valign="bottom" colspan="1"> |
|
|
|
|
|
|
|
|
|
|
| Repayment
of long-term
debt |
|
|
(115,000 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Proceeds
from issuance of common
stock |
|
|
205,000 |
|
|
|
— |
|
|
| Guyed towers generally
range in height between 200 and 2,000 feet and are supported by cables
attached at different levels on the tower that run to anchor
foundations in the ground. Guyed towers typically have the capacity to
accommodate wireless communications equipment for up to 30 tenants or
more, depending on their design. |
|
|
| • |
Lattice towers generally range in height
between 150 and 400 feet and are self-supporting with three or four
legs that taper up from the bottom and join either at the top of the
tower or at a lower location from which a fully vertical extension
rises. They typically have the capacity to accommodate wireless
communications equipment for up to 12 tenants, depending on their
design. |
|
|
| • |
Monopole towers generally range
in height between 50 and 200 feet and are self-supporting vertical
tubular structures that are lighter than other tower types and
typically have the capacity to accommodate wireless communications
equipment for up to five tenants, depending on their design. |
Wireless communications equipment may also be placed on building
rooftops or other structures. Rooftop sites are common in urban areas
where tall buildings are available and zoning restrictions render tower
construction difficult, and where multiple communications sites are
required because of relatively higher volume and density of wireless
traffic. The types of technology and number of tenants that may be
accommodated at any particular rooftop depend on the construction and
height of the building, the area of its rooftop available for use and
the types of wireless communications equipment that tenants seek to
deploy.
Market Demand
The key demand drivers for
additional tenants locating on existing sites and new tower sites are
(1) the growth in wireless communication services including the
deployment of new technologies and (2) the
86
growth in the number of new wireless
subscribers and the volume of their use of the wireless technology.
There are numerous distinct wireless technologies in broad use today
and we believe that the number of wireless communication technologies
that can be deployed on communications towers will increase over
time.
Because of the continuing growth in the number of wireless
telephony subscribers and the minutes each subscriber uses, we have
seen, and expect to continue to see over the next several years, a
higher percentage of growth coming from telephony customers.
Increasing subscriber demand is driving the current expansion of
telephony service providers' transmission networks. According to
independent industry analysts, the number of wireless subscribers in
the United States grew from 61 million in June 1998 to
182 million as of
December
2004, or a compound annual
growth rate of more than
18% per year. This
number is projected by some industry analysts to grow to over 200
million by the end of 2008.
Furthermore, we believe that the
introduction of wireless number portability, which allows wireless
subscribers to change local carriers without having to change their
mobile number, has increased the pressure on the major carriers to
provide higher quality network service and improved coverage to combat
customer churn. In addition, the
FCC's rules
requiring wireline to wireless number portability
in all areas of the U.S.
may allow the wireless carriers to expand their market base and
continue to grow the number of their subscribers.
87
BUSINESS
Business
Overview
— |
|
|
|
146,268 |
|
| Special
distribution declared and
paid |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(142,188 |
) |
| Ordinary
dividends
declared |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Global Signal,
formerly known as Pinnacle Holdings Inc., is one of the largest
wireless communications tower owners in the
United States, based on the number of towers owned. On June
2, 2004, we completed our initial public offering
through the issuance of 8,050,000 shares of our
common
stock
at $18.00 per share of
common
stock.
On February 14, 2005, we, Sprint, and certain Sprint subsidiaries
entered into an agreement to lease or otherwise operate over 6,600
wireless communications tower sites and the related towers and assets.
The consummation of the Sprint transaction will substantially increase
the size and scope of our operations.
Our strategy is to grow our Adjusted EBITDA and Adjusted Funds From
Operations (1) organically by adding
additional tenants to our towers, (2) by acquiring towers with
existing telephony tenants in locations
where we believe there are opportunities for organic growth and (3)
by financing these newly acquired towers, on
a long-term basis, using equity issuances combined with
low-cost fixed-rate debt obtained through the issuance
of mortgage-backed securities. Through this
strategy,
we seek to increase our
dividend per share over time. We are organized as a real
estate investment trust, or REIT, and as
such are required to distribute at least 90% of our taxable
income to our stockholders. We paid a
dividend of $0.40 per share of our
common
stock
for the quarter ended December 31, 2004
which is a 28.0% increase over the dividend we paid for the
quarter ended December 31,
2003. In
addition, on March 30, 2005, our board of directors declared a
dividend of
$0.40
per share of our common stock for the three months ended March 31,
2005, which was
paid on April 21, 2005 to stockholders of
record as of April 11, 2005.
For the
years ended December 31, 2003 and 2004, substantially all of our
revenues came from our ownership, leasing
and management of communications towers and other communications
sites. Although we have
communications
sites located throughout the United States, Canada and the
United Kingdom, our communications sites are
primarily located in the southeastern and mid-Atlantic
regions of the United States. As of December
31, 2004, we owned 2,988 towers and 265 other communications
sites. We own in fee or have long-term easements on the
land under 915 of these towers and we lease
the land under 2,073 of these towers. In addition, as
of December 31, 2004, we managed 807 towers,
rooftops and other communications sites where we had
the right to market space or where we had a
sublease arrangement with the site owner. As of
December 31, 2004, we owned or managed a total of
4,060 communications sites.
On a pro forma basis
for the Sprint transaction and the
Triton
and ForeSite 2005
acquisitions,
as of December 31, 2004, we would own,
manage or lease,
over
11,000 communications sites and we would be the third largest wireless
communications tower
operator
based on number of towers owned, managed or
leased.
Our customers include a wide
variety of wireless service providers, government agencies,
operators of private networks and broadcasters. These
customers operate networks from our
communications sites and provide wireless telephony,
mobile radio, paging, broadcast and data
services. As of December 31, 2004, we had an aggregate
of more than 15,000 leases on our
communications sites with over 2,000 customers. The
average number of tenants on our owned towers,
as of December 31, 2004, was 4.1, which included an
average of 1.6 wireless telephony tenants.
The percentage of
our revenues from
wireless telephony tenants has increased from 41.0% of our total
revenues for the month of December 2003 to
51.1% of our total revenues for the month of December
2004.
For the years ended December
31, 2003 and 2004, we generated:
|
|
|
|
|
|
|
|
|
|
|
| |
|
2003 |
|
2004 |
| |
|
($
in
millions) |
| Revenues |
|
$ |
— |
|
| Ordinary
dividends declared and
paid |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(58,924 |
) |
| Restricted
shares |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Deferred
debt issuance
costs |
|
166.7 |
|
|
$ |
182.9 |
|
| Net
income |
|
$ |
13.2 |
|
|
$ |
6.9 |
|
| Adjusted
EBITDA(1) |
|
$ |
81.6 |
|
|
$ |
102.4 |
|
| Adjusted Funds from
Operations(1) |
|
$ |
60.1 |
|
|
$ |
71.8 |
|
|
88
|
|
| (1) |
Adjun="bottom" colspan="1"> |
— |
|
|
|
— |
|
|
|
— |
|
|
|
(590 |
) |
| Cash
provided by
financing
activities |
|
|
90,000 |
|
|
|
— |
|
|
|
— |
|
|
|
(55,434 |
) |
| Net
increase (decrease) in cash and cash
equivalents |
|
|
(1,061 |
) |
|
|
|
Growth
Strategy
Our
objective is to increase our Adjusted EBITDA, AFFO and our dividend per
share of our
common
stock.
Key elements of our strategy to achieve this objective
include:
|
|
| • |
Grow our Revenues by Adding
New Tenants to our Existing Communications
Sites. We believe that we can take
advantage of our site capacity and locations, strong
customer relationships and operational
expertise to attract new tenants to our existing
communications
sites.
On a pro forma basis
for the Sprint transaction and the
Triton and ForeSite
2005
acquisitions,
as of December 31, 2004, we would own,
manage or lease,
over
11,000 communications sites and we would be the
third largest wireless communications tower
operator
based on number of towers owned, managed or
leased. |
|
|
| • |
Expand
our Communications Sites Network Through Acquisition and Development
of
Towers. We
plan to purchase or selectively develop towers in locations where we
believe there is, or will be, significant
demand for wireless services which should drive network
expansion and increase demand for space on our towers.
We will focus our acquisition efforts on
towers that already have an existing telephony tenant, or in the case
of new builds, a telephony customer
committed to a new lease, and have the potential to add
multiple additional telephony tenants. We
believe that telephony tenants provide a
relatively stable revenue
stream and that there is a high likelihood of lease
renewals by multiple tenants. Since 1998, we
have experienced average annualized churn as a result of non-renewal
and other lease terminations from our
telephony tenants of less than 1% of annualized telephony
revenues. |
|
|
| • |
Maintain
an Efficient Capital Structure. We believe that our low-cost
debt, combined with appropriate leverage,
will allow us to maintain operating and financial flexibility. Our
capital management strategy is to finance
newly acquired assets, on a long-term basis, using equity
issuances combined with low-cost fixed-rate debt
obtained through the periodic issuance of
mortgage-backed securities. Prior to issuing
mortgage-backed securities, our strategy is to
finance communications sites we acquire on a short-term
basis through credit facilities we expect to
obtain on terms similar to the credit facility we repaid with a portion
of the net proceeds from our December 2004
mortgage loan. |
|
|
| • |
Build on Relationships with Wireless
Telephony Carriers. We maintain a consistent and
focused dialogue with our wireless telephony carriers
in order to
meet their network
needs. |
|
|
| • |
Outsource New
Tower Development and Construction. We outsource all aspects
of new tower development, including
engineering, initial land acquisition, zoning and construction.
We believe that by outsourcing, we avoid
most of the high overhead and risks associated with
providing these services. |
Our
Strengths
|
|
| 3 |
|
|
|
307 |
|
|
|
(202 |
) |
| Cash
and cash equivalents
at beginning of
period |
|
|
1,141 |
|
|
|
80 |
|
|
|
83 |
|
|
|
390 |
|
| Cash
and cash equivalents
at end of
period |
|
$ |
80 |
|
|
$ |
83 |
|
|
$ |
• |
High Quality Communications Sites with
Diversified and Relatively
Stable Cash Flows. As of
December 31, 2004, we
owned
or
managed 4,060
communications sites, including 2,988 owned towers. Our
diversified customer base, which includes over 2,000
customers with over 15,000 leases, has
historically provided us with a
relatively
stable cash flow stream. Our tenants include
a wide variety of wireless service
providers, government agencies, operators of private networks
and
broadcasters. |
89
|
|
| • |
Efficient and
Well-Organized Operating Platform. We have recently spent a
significant amount of time and capital on
improving our operations. Our organizational structure,
sales force, business processes and systems
are oriented towards improving customer service and
adding new tenants. For example, we have recently
implemented new computer
systems
to manage our
communications
sites, tenant and ground leases, and to handle our accounting
and billing functions. In addition, we
recently
implemented
a digital library that provides us with easy
access to our key records and allows us to rapidly
respond to customer requests and to deploy
new tenants on our
sites. |
|
|
| • |
Experienced
Management Team. We have an experienced management team that
is highly focused on growing our business.
Our management team owns, and is incentivized with
options to acquire, a total of approximately
4.1% of our
common
stock
on a fully diluted basis, as of December 31,
2004. |
|
|
| • |
Tax-Efficient REIT Status. We
are organized as a REIT, which enables us to reduce our
corporate-level income taxes by making dividend
distributions to our stockholders and to pass
our capital gains through to our stockholders in the
form of capital gains
dividends. |
Communications Sites
As of December 31,
2004, we owned or managed a total of 4,060 wireless communications
towers, rooftops and other communications
sites. As of December 31, 2004,
on a pro forma basis
for
the Sprint transaction
and the Triton and
ForeSite
2005
acquisitions,
we would own, manage, or lease
over
11,000 communications sites and we would be the third largest wireless
communications tower operator based on the number of towers owned,
managed or leased. The average number of
tenants on all of our towers, rooftops and
land sites as of December 31, 2004 is 3.9. No single communications
site accounted for more than 1% of
the gross margin for the year ended December 31, 2004. We routinely
review and dispose of sites which generate
negative cash flows and for which the growth prospects are
not compatible with our strategy. During
2003 and 2004, we disposed of 134 sites and 81 sites,
respectively, of which 125 and 65,
respectively, were managed
sites.
The following table outlines the number and type of our
communications sites and the number of
tenant leases as of December 31, 2004, as well as the
relative contribution to our revenues and gross
margin for the year ended December 31,
2004:
90
Type of Communications
Sites
|
|
|
|
|
|
|
|
|
|
|
|
| ht" valign="bottom" colspan="1" nowrap="nowrap">390
|
|
$ |
188 |
|
|
II-10
Schedule I — Condensed Financial
Information of Registrant — (continued)
Global Signal
Inc. (Parent Company Only)
Notes to Condensed Financial Information
of Registrant
Note A — Basis
of Presentation
In the
parent-company-only financial statements, our investment in
subsidiaries is stated at cost plus equity
in undistributed earnings of subsidiaries since the dates of
acquisition. Our share of the net income
(loss) of our unconsolidated subsidiaries is included
in consolidated income (loss) using the equity
method. The parent-company-only financial statements
should be read in conjunction with the Company's
consolidated financial
statements.
II-11
Schedule II — Valuation and
Qualifying Accounts and Reserves
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Balance
at
Beginning
of
Period |
|
Charged
to
Operations |
|
Deductions |
|
Other* |
|
Balance
at
end of
Period |
| |
|
(in
thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
As
of December 31, 2004 |
|
For the
Year Ended December 31,
2004 |
| Type
of Communications Sites |
|
Number
of
Communications
Sites |
|
Number
of
Tenant
Leases |
|
Aggregate
Revenues |
|
Percentage
of
Total
Revenues |
|
Gross
Margin |
|
Percentage
of Total
Gross
Margin |
| |
|
(dollars
in
thousands) |
| Owned |
|
|
|
|
|
| Towers |
|
|
|
|
|
| Guyed |
|
|
1,574 |
|
|
Allowance
for doubtful
accounts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Year
ended December 31,
2004 |
|
$ |
1,303 |
|
|
$ |
796 |
|
|
$ |
(1,305 |
) |
|
$ |
— |
|
|
$ |
|
7,071 |
|
|
$ |
83,216 |
|
|
|
45.5 |
% |
|
$ |
63,698 |
|
|
|
50.8 |
% |
| Lattice |
|
|
895 |
|
|
|
3,865 |
|
|
|
48,893 |
|
|
|
26.7 |
|
|
|
36,896 |
794 |
|
| Year
ended December 31,
2003 |
|
|
5,088 |
|
|
|
1,452 |
|
|
|
(5,237 |
) |
|
|
— |
|
|
|
1,303 |
|
| Two
months ended December 31,
2002 |
|
|
13,088 |
|
|
|
686 |
|
|
|
(8,686 |
) |
|
|
|
|
|
29.4 |
|
| Monopole |
|
|
519 |
|
|
|
1,340 |
|
|
|
14,662 |
|
|
|
8.0 |
|
|
|
11,171 |
|
|
|
8.9 |
|
| Total |
|
|
2,988 |
|
|
|
12,276 |
|
|
— |
|
|
|
5,088 |
|
| Ten
months ended October 31,
2002 |
|
|
12,227 |
|
|
|
6,733 |
|
|
|
(5,875 |
) |
|
|
— |
|
|
|
13,088 |
|
| Income
tax valuation
allowance: |
|
|
|
|
|
|
|
|
|
|
|
|
146,771 |
|
|
|
80.2 |
|
|
|
111,765 |
|
|
|
89.1 |
|
| Other
communications
sites |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Year
ended December 31,
2004 |
|
$ |
597 |
|
|
$ |
97 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
694 |
|
| Year
ended December 31,
2003 |
|
|
3,472 |
|
|
|
— |
|
|
| Land |
|
|
242 |
|
|
|
242 |
|
|
|
2,304 |
|
|
|
1.3 |
|
|
|
2,202 |
|
|
|
1.8 |
|
| Rooftop |
|
|
23 |
|
|
|
113 |
|
|
|
1,298 |
|
 |
|
(2,875 |
) |
|
|
(6,566 |
) |
|
|
597 |
|
| Two
months ended December 31,
2002 |
|
|
9,955 |
|
|
|
83 |
|
|
|
— |
|
|
|
— |
|
|
|
3,472 |
|
| Ten
months ended October 31,
2002 |
|
|
4,285 |
|
|
|
|
0.7 |
|
|
|
909 |
|
|
|
0.7 |
|
| Total |
|
|
265 |
|
|
|
355 |
|
|
|
3,602 |
|
|
|
2.0 |
|
|
|
3,111 |
|
|
|
2.5 |
|
| Owned
sub-total |
|
|
5,670 |
|
|
|
— |
|
|
|
— |
|
|
|
9,955 |
|
|
|
|
| * |
The
change in the income tax valuation allowance resulted from fresh start
accounting adjustments and changes in net
operating losses, pursuant to our
reorganization. |
II-12
|
|
|
|
|
|
|
Exhibit
Number |
|
Description |
| 1.1 |
|
Form
of Underwriting
Agreement |
| 2.1 |
|
Order
Confirming Second Amended Joint Plan of Reorganization of Pinnacle
Towers III Inc., Pinnacle Holdings Inc., Pinnacle Towers Inc. and
Pinnacle San Antonio LLC, dated October 9, 2002 (incorporated by
reference to Exhibit 2.1 to the Company's Registration Statement
on Form S-11 (No. 333-112839) filed on February 13,
2004) |
| 2.2.1 |
|
First Amended Joint Plan of
Reorganization of Pinnacle Holdings Inc., Pinnacle Towers Inc.,
Pinnacle Towers III Inc. and Pinnacle San Antonio LLC, dated June 27,
2002 (incorporated by reference to Exhibit 2.2 to the Company's
Registration Statement on Form S-11 (No. 333-112839) filed on February
13, 2004) (incorporated by reference to Exhibit 2.2 to the
Company's Form 8-K (N #000000 ;padding-top: 0pt" align="right" valign="bottom" colspan="1"> |
3,253 |
|
|
|
12,631 |
|
|
|
150,373 |
|
|
|
82.2 |
|
|
|
114,876 |
|
|
|
91.6 |
|
| Managed |
|
|
|
|
|
| Towers |
|
|
|
|
|
|
|
|
|
|
2.2.2 |
|
Amendment
to Debtors' First Amended Disclosure Statement and First Amended
Joint Plan of Reorganization, dated
September 18, 2002 (incorporated by reference to Exhibit
2.3 to the Company's Registration Statement on
Form S-11 (No. 333-112839) filed on February
13,
2004) |
| 2.3 |
|
Asset
Purchase Agreement by and between Lattice Communications, LLC and
Pinnacle Towers Acquisition LLC, dated as of July 29, 2004.
(incorporated by reference to Exhibit 2.2 of
the Company's Form 10-Q (No. 001-32168 ) filed on August 13,
2004)† |
| 2.4 |
|
Membership
Interest Purchase Agreement by and among Pinnacle Towers Acquisition
LLC, as Purchaser, and Billy Orgel, Lee Holland, Craig Weiss, Jay H.
Lindy and Majestic Communications, Inc., as Sellers, dated as of April
22, 2004. (incorporated by reference to
Exhibit 2.4 to the Company's Registration Statement on Form S-11
(Amendment No. 2) (No. 333-112839) filed on April 29,
2004)† |
| 2.4.1 |
|
First
Amendment to Membership Interest Purchase Agreement by and among
Pinnacle Towers Acquisition LLC, as Purchaser, and Billy Orgel, Lee
Holland, Craig Weiss, Jay H. Lindy and Majestic Communications, Inc.,
as Sellers, dated as of June 30, 2004 (incorporated by reference to
Exhibit 2.2 to the Company's Current Report on Form 8-K (No.
001-32168) filed on July 1,
2004) |
| 2.5 |
|
Purchase and Sale Agreement by and
among VSS-Goldenstate, LLC, Goldenstate Towers, LLC, and Pinnacle
Towers Acquisition LLC and for the limited purposes set forth therein
VS&A Communications Partners III, L.P., dated September 29, 2004.
(incorporated by reference to Exhibit 2.3 to
the Company's Form 10-Q (No.001-32168) filed on November 9,
2004).† |
| 3.1 |
|
Amended
and restated Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit 3.1 to the Company's
Registration Statement on Form S-11 (Amendment No. 1) (No. 333-112839)
filed on April 2, 2004) |
| 3.2 |
|
Certificate of
Amendment of Amended and Restated Certificate of Incorporation
(incorporated by reference to Exhibit 3.2 to the Company's
Registration Statement on Form S-11 (Amendment No. 3) (No. 333-112839)
filed on May 19, 2004) |
| 3.3 |
|
Amended and
Restated Bylaws of the Registrant (incorporated by reference to Exhibit
3.3 to the Company's Registration Statement on Form S-11
(Amendment No. 1) (No. 333-112839) filed on April 2,
2004) |
| 4.1 |
|
Form of Certificate for common
stock (incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-11 (Amendment No. 3) (No. 333-112839)
filed on May 19, 2004) |
|
II-13
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Guyed |
|
|
222 |
|
|
|
817 |
|
|
|
7,167 |
|
|
|
3.9 |
|
|
|
2,398 |
|
|
|
1.9 |
|
|
|
|
|
|
|
|
Exhibit
Number |
|
Description |
| 4.2 |
|
Amended and Restated
Investor Agreement dated as of March 31, 2004 among Global Signal Inc.,
Fortress Pinnacle Acquisition LLC, Greenhill Capital Partners, L.P.,
and its related partnerships named therein, and Abrams Capital Partners
II, L.P. and certain of its related partnerships named therein, and
other parties named therein (incorporated by reference to Exhibit 4.2
to the Company's Registration Statement on Form S-11 (Amendment
No. 1) (No. 333-112839) filed on April 2,
2004) |
| 4.3 |
|
Warrant Agreement between Pinnacle
Holdings Inc. and Wachovia Bank, N.A., dated November 1, 2002
(incorporated by reference to Exhibit 4.3 to the Company's
Registration Statement on Form S-11 (No. 333-112839) filed on February
13, 2004) |
| 5.1 |
|
Opinion of Skadden, Arps,
Slate, Meagher & Flom LLP relating to the validity of the common
stock |
| 8.1 |
|
Opinion of
Skadden, Arps, Slate, Meagher & Flom
LLP |
| 10.1 |
|
Master Antenna
Lease by and between Pinnacle Towers Inc. and Arch Wireless Holdings,
Inc., dated May 24, 2002 (incorporated by
reference to Exhibit 10.1 to the Company's Registration Statement
on Form S-11 (Amendment No. 6) (No. 333-112839) filed on June 2,
2004)† |
| 10.2 |
|
Amended
and Restated Loan and Security Agreement dated February 5, 2004 between
Pinnacle Towers Inc. and any other Borrowers that may become a party
hereto and Towers Finco LLC (incorporated by reference to Exhibit 10.2
to the Company's Registration Statement on Form S-11 (No.
333-112839) filed on February 13,
2004) |
| 10.2.1 |
|
Amended and Restated Loan and
Security Agreement, dated as of December 7, 2004, by and between
Pinnacle Towers Acquisition Holdings LLC, other Borrowers (as defined
therein) and Towers Finco II LLC (incorporated by reference to Exhibit
10.1 to the Company's Current Report on Form 8-K (No. 001-32168)
filed on December 13, 2004) |
| 10.3 |
|
Credit
Agreement dated October 29, 2003 between Pinnacle Towers Acquisition
Inc. and Morgan Stanley Asset Funding Inc. (incorporated by reference
to Exhibit 10.3 to the Company's Registration Statement on Form
S-11 (No. 333-112839) filed on February 13,
2004) |
| 10.4 |
|
Lattice |
|
|
210 |
|
|
|
613 |
|
|
|
5,881 |
|
|
|
3.2 |
|
|
|
2,180 |
|
|
|
1.7 |
|
| Monopole |
|
|
19 |
|
|
|
58 |
|
|
|
547 |
|
|
Amendment No. 1 to Credit
Agreement, dated February 6, 2004 between Pinnacle Tower Acquisitions
Inc. and Morgan Stanley Asset Funding Inc. (incorporated by reference
to Exhibit 10.4 to the Company's Registration Statement on Form
S-11 (No. 333-112839) filed on February 13,
2004) |
| 10.4.1 |
|
Amendment No. 2 to Credit
Agreement, dated May 11, 2004 between Pinnacle Tower Acquisition
Holdings LLC and Morgan Stanley Asset Funding Inc. (incorporated by
reference to Exhibit 10.4.1 to the Company's Registration
Statement on Form S-11 (Amendment No. 3) (No. 333-112839) filed on May
19, 2004) |
| 10.4.2 |
|
Amended and Restated Credit
Agreement, dated as of October 15, 2004, by and among Pinnacle Towers
Acquisition Holdings LLC, the lenders from time to time parties to the
Credit Agreement, and Morgan Stanley Asset Funding Inc. as
administrative agent and collateral agent (incorporated by reference to
Exhibit 10.1 to the Company's Current Report on Form 8-K (No.
001-32168) filed on October 21,
2004) |
| 10.5 |
|
Limited Guarantee, dated October
29, 2003, made by each Guarantor in favor of Morgan Stanley Mortgage
Asset Funding Inc. (incorporated by reference to Exhibit 10.5 to the
Company's Registration Statement on Form S-11 (No. 333-112839)
filed on February 13, 2004) |
|
II-14
|
|
|
|
|
|
|
Exhibit
Number |
|
Description |
| 10.6 |
|
Guarantee Supplement
and Amendment No. 1 to Guarantee, dated February 6, 2004 made by Global
Signal Inc. in favor of Morgan Stanley Asset Funding Inc. (incorporated
by reference to Exhibit 10.6 to the Company's Registration
Statement on Form S-11 (No. 333-112839) filed on February 13,
2004) |
| 10.6.1 |
|
Guarantee Supplement and
Amendment No. 2 to Guarantee, dated May 11, 2004 made by Global Signal
Inc. in favor of Morgan Stanley Asset Funding Inc. (incorporated by
reference to Exhibit 10.6.1 to the Company's Registration
Statement on Form S-11 (Amendment No. 3) (No. 333-112839) filed on May
19, 2004) |
| 10.7 |
|
Securities Purchase Agreement
among Pinnacle Holdings, Inc., Pinnacle Towers, Inc. and the Investors
named therein, dated April 25, 2000 (incorporated by reference to
Exhibit 10.7 to the Company's Registration Statement on Form S-11
(No. 333-112839) filed on February 13,
2004) |
| 10.8 |
|
Executive Employment Agreement
between David J. Grain and Pinnacle Holdings, Inc., dated January 31,
2003 (incorporated by reference to Exhibit 10.8 to the Company's
Registration Statement on Form S-11 (No. 333-112839) filed on February
13, 2004) |
| |
0.4 |
|
|
|
224 |
|
|
|
0.2 |
|
| Total |
|
|
446 |
|
|
|
1,488 |
|
|
|
13,596 |
|
|
|
7.5 |
|
|
|
4,802 |
|
|
|
3.8 |
|
| Other
communications
sites |
|
|
10.9 |
|
Agreement and General Release
between Steven R. Day and Pinnacle Holdings, Inc., dated January 31,
2003 (incorporated by reference to Exhibit 10.9 to the Company's
Registration Statement on Form S-11 (No. 333-112839) filed on February
13, 2004) |
| 10.10 |
|
Amendment to Stock Option
Agreement, Consent to Plan Amendment and Acknowledgment of Employment
Arrangements between Pinnacle Holdings Inc. and William T. Freeman,
dated August 22, 2003 (incorporated by reference to Exhibit 10.10 to
the Company's Registration Statement on Form S-11 (No.
333-112839) filed on February 13,
2004) |
| 10.11 |
|
Employment Agreement among
William T. Freeman, Pinnacle Holdings Inc. and Pinnacle Towers Inc.,
dated August 19, 2003 (incorporated by reference to Exhibit 10.11 to
the Company's Registration Statement on Form S-11 (No.
333-112839) filed on February 13,
2004) |
| 10.12 |
|
Employment Agreement between
Jeffrey Langdon and Pinnacle Holdings, Inc., dated February 26, 2003
(incorporated by reference to Exhibit 10.12 to the Company's
Registration Statement on Form S-11 (No. 333-112839) filed on February
13, 2004) |
| 10.13 |
|
Amendment to Stock Option
Agreement, Consent to Plan Amendment and Acknowledgment of Employment
Arrangements between Pinnacle Holdings Inc. and Jeffrey Langdon
(incorporated by reference to Exhibit 10.13 to the Company's
Registration Statement on Form S-11 (No. 333-112839) filed on February
13,
2004) |
| 10.14 |
|
Employment
Offer Letter from Pinnacle Towers, Inc. to Massoud Sedigh, dated April
30, 2003 (incorporated by reference to Exhibit 10.16 to the
Company's Registration Statement on Form S-11 (No. 333-112839)
filed on February 13,
2004) |
| 10.15 |
|
Consent
to Change in Employment Arrangements with Massoud Sedigh, dated July
15, 2003 (incorporated by reference to Exhibit 10.17 to the
Company's Registration Statement on Form S-11 (No. 333-112839)
filed on February 13,
2004) |
| 10.16 |
|
Employment
Agreement between Ronald G. Bizick, II and Pinnacle Holdings, Inc.,
dated November 26, 2003 (incorporated by reference to Exhibit 10.18 to
the Company's Registration Statement on Form S-11 (No.
333-112839) filed on February 13, 2004) |
|
II-15
|
|
|
|
|
|
|
Exhibit
Number |
|
Description |
| |
|
|
| Land |
|
|
23 |
|
|
|
33 |
|
|
|
382 |
|
|
|
0.2 |
|
|
|
152 |
|
|
|
0.1 |
|
| Rooftop |
|
|
333 |
|
|
|
1,610 |
|
|
|
18,514 |
10.17 |
|
Employment
Agreement between W. Scot Lloyd and Pinnacle Holdings, Inc., dated
November 25, 2002 (incorporated by reference to Exhibit 10.19 to the
Company's Registration Statement on Form S-11 (No. 333-112839)
filed on February 13,
2004) |
10.18
|
|
Employment
Agreement, between Global Signal Services LLC and Greerson G.
McMullen, dated June 18, 2004 (incorporated
by reference to Exhibit 10.32 to the Company's Form
10-Q filed on August 13,
2004) |
| 10.19 |
|
Amendment
to Stock Option Agreement, Consent to Plan Amendment and Acknowledgment
of Employment Arrangements between Pinnacle Holdings, Inc., and W.
Scott Lloyd, dated July 15, 2003 (incorporated by reference to Exhibit
10.20 to the Company's Registration Statement on Form S-11 (No.
333-112839) filed on February 13,
2004) |
| 10.20 |
|
Assignment
and Assumption Agreement between Pinnacle Towers Inc., Global Signal
Inc. and Global Signal Services LLC, dated February 5, 2004
(incorporated by reference to Exhibit 10.21 to the Company's
Registration Statement on Form S-11 (Amendment No. 2) (No. 333-112839)
filed on April 29,
2004) |
| 10.21 |
|
Global
Signal Inc. Omnibus Stock Incentive Plan (incorporated by reference to
Exhibit 10.22 to the Company's Registration Statement on Form
S-11 (No. 333-112839) filed on February 13,
2004) |
| 10.22 |
|
Securities
and Exchange Commission Settlement Order, dated December 6, 2001
(incorporated by reference to Exhibit 10.22 to the Company's
Registration Statement on Form S-11 (No. 333-112839) filed on February
13,
2004) |
| 10.23 |
|
Stipulation
and Agreement of Settlement, dated September 19, 2002 and Order and
Final Judgment, dated February 4, 2003 (incorporated by reference to
Exhibit 10.24 to the Company's Registration Statement on Form
S-11 (No. 333-112839) filed on February 13,
2004) |
| 10.24 |
|
Agreement
of Limited Partnership of Global Signal Operating Partnership, L.P.
(incorporated by reference to Exhibit 10.25 to the Company's
Registration Statement on Form S-11 (No. 333-112839) filed on February
13,
2004) |
| 10.25 |
|
Management
Agreement between Pinnacle Towers Inc. and the subsidiaries listed on
the signature pages, and Global Signal Services LLC, dated as of
February 5, 2004 (incorporated by reference to Exhibit 10.26 to the
Company's Registration Statement on Form S-11 (Amendment No. 2)
(No. 333-112839) filed on April 29,
2004) |
| 10.26 |
|
Management
Agreement between Pinnacle Towers Acquisition Inc. and Pinnacle Towers
Inc., dated as of September 25, 2003 (incorporated by reference to
Exhibit 10.27 to the Compa-size: 9pt; color: #000000; font-weight: normal; font-style: normal; border-bottom: 1px double #ffffff ; padding-top: 0pt " align="left" valign="bottom" nowrap="nowrap"> |
|
|
10.1 |
|
|
|
5,573 |
|
|
|
4.5 |
|
| Total |
|
|
356 |
|
|
|
1,643 |
|
|
|
18,896 |
|
|
|
10.3 |
|
|
|
5,725 |
|
|
|
4.6 |
|
| Manageny's Registration Statement on Form
S-11 (Amendment No. 2) (No. 333-112839) filed on April 29,
2004) |
| 10.27 |
|
Assignment
and Assumption of Management Agreement between Pinnacle Towers Inc.,
and Global Signal Services LLC, dated February 5, 2004 (incorporated by
reference to Exhibit 10.28 to the Company's Registration
Statement on Form S-11 (Amendment No. 2) (No. 333-112839) filed on
April 29,
2004) |
| 10.28 |
|
First
Amendment to Management Agreement between Pinnacle Towers Acquisition
Holdings LLC and Global Signal Services LLC, dated May 13, 2004
(incorporated by reference to Exhibit 10.29 to the Company's
Registration Statement on Form S-11 (Amendment No. 3) (No. 333-112839)
filed on May 19, 2004) |
|
II-16
|
|
|
|
|
|
|
Exhibit
Number |
|
Description |
| 10.29 |
|
Management
Agreement, dated as of December 7, 2004, between Pinnacle Towers
Acquisition Holdings LLC, the Subsidiaries thereof, and Global Signal
Services LLC (incorporated by reference to Exhibit 10.2 to the
Company's Current Report on Form 8-K (No. 001-32168) filed on
December 13,
2004) |
| 10.30 |
|
Purchase
Agreement between Pinnacle Towers Acquisition LLC and Hightower
Communication Services, LLC, dated April 15, 2004 (incorporated by
reference to Exhibit 10.30 to the Company's Registration
Statement on Form S-11 (Amendment No. 3) (No. 333-112839) filed on May
19,
2004) |
| 10.31 |
|
Purchase
Agreement between Pinnacle Towers Acquisition LLC and Skylink
Properties, L.L.C., dated February 26, 2004 (incorporated by reference
to Exhibit 10.31 to the Company's Registration Statement on Form
S-11 (Amendment No. 3) (No. 333-112839) filed on May 19,
2004) |
| 10.32 |
|
Form
of Restricted Shares Award Agreement (incorporated by reference to
Exhibit 10.1 to the Company Current Report
on Form 8-K (No. 001-32168) filed on January 12,
2005) |
| 10.33 |
|
Agreement
to Contribute, Lease and Sublease, dated as of February 14, 2005 among
Sprint Corporation, the Sprint subsidiaries
named therein and Global Signal Inc. (incorporated by
reference to Exhibit 10.1 to the Company's
Current Report of Form 8-K (No. 001-32168) filed
on February 17,
2005) |
| 10.34 |
|
Form
of Option Agreement, by and among Globd
sub-total |
|
|
807 |
|
|
|
3,131 |
|
|
|
32,492 |
|
|
|
17.8 |
|
|
|
10,527 |
|
|
|
8.4 |
|
| Total |
|
|
4,060 |
|
|
|
15,762 |
|
|
$ |
182,865 |
|
|
|
10.35 |
|
Amended
and Restated Credit Agreement, dated as of February 9, 2005, among
Global Signal Operating Partnership, L.P.
Bank of America, N.A., Morgan Stanley Asset Funding Inc.
(incorporated by reference to Exhibit 10.4 to the
Company's Current Report
on
Form 8-K
filed on February 17,
2005) |
| 10.35.1 |
|
Second
Amended and Restated Credit Agreement, dated April 15, 2005, among
Global Signal Operating Partnership, L.P., Bank of America, N.A. and
the other lenders named
therein |
| 10.36 |
|
Investment
Agreement, dated as of February 14, 2005, by and among Global Signal
Inc., Fortress Investment Fund II LLC,
Abrams Capital Partners II, L.P., Abrams Capital Partners
I, L.P. Whitecrest Partners, L.P., Abrams Capital
International, LTD, Riva Capital Partners,
L.P., Greenhill Capital Partners, L.P., Greenhill
Capital Partners (Cayman), L.P., Greenhill
Capital Partners (Executives), L.P., Greenhill Capital,
L.P., and Greenhill Capital Partners
(Employees) II, L.P. (incorporated by reference to
Exhibit 10.2 to the Company's Current
Report
on
Form 8-K filed on February 17,
2005) |
| 10.37 |
|
Acquisition
Credit Agreement, dated as of April 25,
2005, by and
among Global Signal Acquisitions LLC, Morgan Stanley Asset Funding
Inc. and Bank of America,
N.A. (incorporated by reference to Exhibit
10.1 to the Company's Current
Report on Form 8-K filed on April 28,
2005) |
| 12.1 |
|
Calculation
of the non-GAAP Measurement Financial Ratios (incorporated by reference
to Exhibit 12.1 to the Company's Registration Statement on Form
S-11 (Amendment No. 3) (No. 333-112839) filed on May 19,
2004) |
|
II-17
|
|
|
|
|
|
|
Exhibit
Number |
|
Description |
| 21.1 |
|
Subsidiaries of the
Registrant
(incorporated by reference to Exhibit 21.1
to the Company's Annual Report on Form
10-K filed on March 31,
2005) |
| 23.1 |
|
Consent
of Ernst & Young LLP – Tampa,
Florida |
| 23.2 |
![]() 100.0 |
% |
|
$ |
125,403 |
|
|
|
100.0 |
% |
|
91
We further classify our
communications
sites into core owned telephony sites, defined as those
sites that have or have at one point had a telephony
tenant, acquired sites, defined as those sites we
have acquired since December 1, 2003, non-telephony
sites, defined as those owned sites that have
never had a telephony tenant, and managed sites. The
table below sets forth the revenues and gross
profit for our core owned telephony sites, acquired
sites, non-telephony sites and managed sites for
the year ended December 31, 2003 and
2004:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
No.
of
Communication
Sites as of
December
31,
2004 |
|
For the Year Ended
December
31, |
| |
|
2003 |
|
2004 |
|
Variance |
|
| |
|
$ |
|
|
Consent of Ernst & Young
LLP – Cincinnati, Ohio |
| 23.3 |
|
Consent of
KPMG
LLP |
| 23.4 |
|
Consent
of
PricewaterhouseCoopers
LLP |
| 23.5 |
|
Consent
of
Dixon
Hughes PLLC |
| 23.6 |
|
Consent
of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit
5.1 and Exhibit
8.1) |
| 24.1 |
|
Power of
Attorney†† |
| 99.1 |
|
Opinion of Bear Stearns & Co. Inc., dated
February 9, 2005 (incorporated by reference to Annex A to the
Company's Schedule 14C filed on April 5,
2005.) |
|
|
|
| † |
Certain
information omitted pursuant to a request for confidential treatment
filed separately with the Securities and Exchange
Commission. |
|
|
| †† |
Previously
filed. |
Item
37. Undertakings.
(a) The undersigned registrant
hereby undertakes to provide to the underwriters at the closing
specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the
underwriters to permit prompt delivery to each purchaser.
(b)
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.%
of
Total |
|
$ |
|
%
of
Total |
|
$ |
|
%
Change |
|
| |
|
|
|
|
|
|
|
(dollars
in
thousands) |
|
|
|
|
| Revenues |
|
|
|
|
|
| Core
owned telephony
communications
sites prior to December
2003(1) |
|
|
1,508 |
|
|
$ |
107,382 |
|
|
|
64.3 |
% |
|
$ |
115,217 |
&/p>
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under
the Securities Act, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the registrant pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the time it was
declared effective.
(2) For the purposes of
determining any liability under the Securities Act of 1933, each
post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering
thereof.
II-18
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-11
and has duly caused this Amendment No.
2
to the registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Sarasota,
State of Florida, on
May
2,
2005.
|
GLOBAL
SIGNAL INC. |
|
By: /s/
David J.
Grain |
|
Name:
David J. Grain
Title:
President |
Pursuant to the requirements of the Securities Act of 1933,
as amended, this registration statement has been signed by the
following persons in the capacities and on the dates
indicated.
|
|
|
|
|
| Signature |
|
Title |
|
Date |
|
| * |
|
Chief Executive Officer and
Chairman of
the
Board |
|
May
2,
2005 |
|
| Wesley
R. Edens |
|
| /s/
David J. Grain |
|
President |
|
May
2,
2005 |
|
| David J.
Grain |
 |
|
63.0 |
% |
|
$ |
7,835 |
|
|
|
7.3 |
% |
| Acquired
communications sites since December
2003 |
|
|
928 |
|
|
|
240 |
|
|
|
0.1 |
|
|
|
11,347 |
|
|
|
6.2 |
|
|
|
11,107 |
|
|
|
|
| * |
|
Executive Vice President, Chief
Financial Officer, and Assistant
Secretary |
|
May
2,
2005 |
|
| William
T. Freeman |
|
| * |
|
Controller |
|
May
2,
2005 |
|
| Camille
Blommer |
|
| * |
|
Director |
|
May
2,
2005 |
|
| David
Abrams |
|
| * |
|
Director |
|
May
2,
2005 |
|
| Robert
Niehaus |
|
| * |
|
Director |
|
May
2,
2005 |
|
| Robert
Gidel |
|
| * |
|
Director |
|
May
2,
2005 |
|
| Howard
Rubin |
|
| * |
|
Director |
|
May
2,
2005 |
|
| Mark
Whiting |
|
| * |
|
Director |
|
May
2,
2005 |
|
| Douglas
Jacobs |
|
| *By /s/ David
J.
Grain |
|
|
|
|
|
| Attorney-in-fact |
|
II-19
nm |
|
| Non-telephony
communications
sites |
|
|
873 |
|
|
|
24,322 |
|
|
|
14.6 |
|
|
|
23,948 |
|
|
|
13.1 |
|
|
|
(374 |
) |
|
|
(1.5 |
) |
| Managed
communications
sites |
|
|
751 |
|
|
|
34,726 |
EXHIBIT
INDEX
|
|
|
|
|
|
|
Exhibit
Number |
|
Description |
| 1.1 |
|
Form
of Underwriting
Agreement |
| 2.1 |
|
Order
Confirming Second Amended Joint Plan of Reorganization of Pinnacle
Towers III Inc., Pinnacle Holdings Inc., Pinnacle Towers Inc. and
Pinnacle San Antonio LLC, dated October 9, 2002 (incorporated by
reference to Exhibit 2.1 to the Company's Registration Statement
on Form S-11 (No. 333-112839) filed on February 13,
2004) |
| 2.2.1 |
|
First Amended Joint Plan of
Reorganization of Pinnacle Holdings Inc., Pinnacle Towers Inc.,
Pinnacle Towers III Inc. and Pinnacle San Antonio LLC, dated June 27,
2002 (incorporated by reference to Exhibit 2.2 to the Company's
Registration Statement on Form S-11 (No. 333-112839) filed on February
13, 2004) (incorporated by reference to Exhibit 2.2 to the
Company's Form 8-K (No. 001-32168) filed on July 1,
2004) |
| 2.2.2 |
|
Amendment
to Debtors' First Amended Disclosure Statement and First Amended
Joint Plan of Reorganization, dated
September 18, 2002 (incorporated by reference to Exhibit
2.3 to the Company's Registration Statement on
Form S-11 (No. 333-112839) filed on February
13,
2004) |
| 2.3 |
|
Asset
Purchase Agreement by and between Lattice Communications, LLC and
Pinnacle Towers Acquisition LLC, dated as of July 29, 2004.
(incorporated by reference to Exhibit 2.2 of
the Company's Form 10-Q (No. 001-32168 ) filed on August 13,
2004)† |
| 2.4 |
|
Membership
Interest Purchase Agreement by and among Pinnacle Towers Acquisition
LLC, as Purchaser, and Billy Orgel, Lee Holland, Craig Weiss, Jay H.
Lindy and Majestic Communications, Inc., as Sellers, dated as of April
22, 2004. (incorporated by reference to
Exhibit 2.4 to the Company's Registration Statement on Form S-11
(Amendment No. 2) (No. 333-112839) filed on April 29,
2004)† |
| 2.4.1 |
|
First
Amendment to Membership Interest Purchase Agreement by and among
Pinnacle Towers Acquisition LLC, as Purchaser, and Billy Orgel, Lee
Holland, Craig Weiss, Jay H. Lindy and Majestic Communications, Inc.,
as Sellers, dated as of June 30, 2004 (incorporated by reference to
Exhibit 2.2 to the Company's Current Report on Form 8-K (No.
001-32168) filed on July 1,
2004) |
| 2.5 |
|
Purchase and Sale Agreement by and
among VSS-Goldenstate, LLC, Goldenstate Towers, LLC, and Pinnacle
Towers Acquisition LLC and for th font-size: 9pt; color: #000000; font-weight: normal; font-style: normal; border-bottom: 1px double #ffffff ; padding-top: 0pt " align="left" valign="bottom" nowrap="nowrap"> |
|
|
21.0 |
|
|
|
32,353 |
|
|
|
17.7 |
|
|
|
(2,374 |
) |
|
|
(6.8 |
) |
| Total |
|
|
4,060 |
|
|
$ |
166,670 |
|
|
|
100.0 |
% |
|
$ |
182,865 |
|
|
|
|
| 3.1 |
|
Amended
and Restated Certificate of
Incorporation of the Registrant (incorporated by reference to Exhibit
3.1 to the Company's Registration Statement on Form S-11
(Amendment No. 1) (No. 333-112839) filed on April 2,
2004) |
| 3.2 |
|
Certificate of Amendment of
Amended and Restated Certificate of Incorporation (incorporated by
reference to Exhibit 3.2 to the Company's Registration Statement
on Form S-11 (Amendment No. 3) (No. 333-112839) filed on May 19,
2004) |
| 3.3 |
|
Amended and Restated Bylaws of the
Registrant (incorporated by reference to Exhibit 3.3 to the
Company's Registration Statement on Form S-11 (Amendment No. 1)
(No. 333-112839) filed on April 2, 2004) |
|
|
|
|
|
|
|
|
Exhibit
Number |
|
Description |
| 4.1 |
|
Form of Certificate for
common stock (incorporated by reference to Exhibit 4.1 to the
Company's Registration Statement on Form S-11 (Amendment No. 3)
(No. 333-112839) filed on May 19,
2004) |
| 4.2 |
|
Amended and Restated Investor
Agreement dated as of March 31, 2004 among Global Signal Inc., Fortress
Pinnacle Acquisition LLC, Greenhill Capital Partners, L.P., and its
related partnerships named therein, and Abrams Capital Partners II,
L.P. and certain of its related partnerships named therein, and other
parties named therein (incorporated by reference to Exhibit 4.2 to the
Company's Registration Statement on Form S-11 (Amendment No. 1)
(No. 333-112839) filed on April 2,
2004) |
| 4.3 |
|
Warrant Agreement between Pinnacle
Holdings Inc. and Wachovia Bank, N.A., dated November 1, 2002
(incorporated by reference to Exhibit 4.3 to the Company's
Registration Statement on Form S-11 (No. 333-112839) filed on February
13, 2004) |
| 5.1 |
|
Opinion of Skadden, Arps,
Slate, Meagher & Flom LLP relating to the validity of the common
stock |
| 8.1 |
|
Opinion of
Skadden, Arps, Slate, Meagher & Flom
LLP |
| 100.0 |
% |
|
$ |
16,194 |
|
|
|
9.7 |
% |
| Gross
Profit |
|
|
|
|
|
| Core
owned telephony
communications
sites prior to December
2003(1) |
|
|
|
|
|
$ |
82,491 |
|
|
|
74.9 |
% |
|
$ |
90,995 |
|
|
|
72.6 |
% |
|
$ |
10.1 |
|
Master Antenna
Lease by and between Pinnacle Towers Inc. and Arch Wireless Holdings,
Inc., dated May 24, 2002 (incorporated by reference to
Exhibit 10.1 to the Company's Registration Statement on Form S-11
(Amendment No. 6) (No. 333-112839) filed on June 2,
2004)† |
| 10.2 |
|
Amended
and Restated Loan and Security Agreement dated February 5, 2004 between
Pinnacle Towers Inc. and any other Borrowers that may become a party
hereto and Towers Finco LLC (incorporated by reference to Exhibit 10.2
to the Company's Registration Statement on Form S-11 (No.
333-112839) filed on February 13,
2004) |
| 10.2.1 |
|
Amended and Restated Loan and
Security Agreement, dated as of December 7, 2004, by and between
Pinnacle Towers Acquisition Holdings LLC, other Borrowers (as defined
therein) and Towers Finco II LLC (incorporated by reference to Exhibit
10.1 to the Company's Current Report on Form 8-K (No. 001-32168)
filed on December 13, 2004) |
| 10.3 |
|
Credit
Agreement dated October 29, 2003 between Pinnacle Towers Acquisition
Inc. and Morgan Stanley Asset Funding Inc. (incorporated by reference
to Exhibit 10.3 to the Company's Registration Statement on Form
S-11 (No. 333-112839) filed on February 13,
2004) |
| 10.4 |
|
Amendment No. 1 to Credit
Agreement, dated February 6, 2004 between Pinnacle Tower Acquisitions
Inc. and Morgan Stanley Asset Funding Inc. (incorporated by reference
to Exhibit 10.4 to the Company's Registration Statement on Form
S-11 (No. 333-112839) filed on February 13,
2004) |
| 10.4.1 |
|
Amendment No. 2 to Credit
Agreement, dated May 11, 2004 between Pinnacle Tower Acquisition
Holdings LLC and Morgan Stanley Asset Funding Inc. (incorporated by
reference to Exhibit 10.4.1 to the Company's Registration
Statement on Form S-11 (Amendment No. 3) (No. 333-112839) filed on May
19, 2004) |
| 10.4.2 |
|
Amended and Restated Credit
Agreement, dated as of October 15, 2004, by and among Pinnacle Towers
Acquisition Holdings LLC, the lenders from time to time parties to the
Credit Agreement, and Morgan Stanley Asset Funding Inc. as
administrative agent and collateral agent (incorporated by reference to
Exhibit 10.1 to the Company's Current Report on Form 8-K (No.
001-32168) filed on October 21, 2004) |
|
|
|
|
|
|
|
|
Exhibit
Number |
|
Description |
| 10.5 |
|
Limited Guarantee, dated
October 29, 2003, made by each Guarantor in favor of Morgan Stanley
Mortgage Asset Funding Inc. (incorporated by reference to Exhibit 10.5
to the Company's Registration Statement on Form S-11 (No.
t-style: normal; border-bottom: 3px double #ffffff; padding-left: 0pt; text-indent: 0pt; padding-top: 0pt" align="right" valign="bottom" colspan="1" nowrap="nowrap">8,504 |
|
|
|
10.3 |
% |
| Acquired
communications sites since December
2003 |
|
|
|
|
|
|
151 |
|
|
|
0.1 |
|
|
|
8,114 |
|
|
|
6.5 |
|
|
|
7,963 |
|
|
|
nm |
|
| Non-telephony
communications
sites |
|
|
|
| 10.6 |
|
Guarantee Supplement and
Amendment No. 1 to Guarantee, dated February 6, 2004 made by Global
Signal Inc. in favor of Morgan Stanley Asset Funding Inc. (incorporated
by reference to Exhibit 10.6 to the Company's Registration
Statement on Form S-11 (No. 333-112839) filed on February 13,
2004) |
| 10.6.1 |
|
Guarantee Supplement and
Amendment No. 2 to Guarantee, dated May 11, 2004 made by Global Signal
Inc. in favor of Morgan Stanley Asset Funding Inc. (incorporated by
reference to Exhibit 10.6.1 to the Company's Registration
Statement on Form S-11 (Amendment No. 3) (No. 333-112839) filed on May
19, 2004) |
| 10.7 |
|
Securities Purchase Agreement
among Pinnacle Holdings, Inc., Pinnacle Towers, Inc. and the Investors
named therein, dated April 25, 2000 (incorporated by reference to
Exhibit 10.7 to the Company's Registration Statement on Form S-11
(No. 333-112839) filed on February 13,
2004) |
| 10.8 |
|
Executive Employment Agreement
between David J. Grain and Pinnacle Holdings, Inc., dated January 31,
2003 (incorporated by reference to Exhibit 10.8 to the Company's
Registration Statement on Form S-11 (No. 333-112839) filed on February
13, 2004) |
| 10.9 |
|
Agreement and General Release
between Steven R. Day and Pinnacle Holdings, Inc., dated January 31,
2003 (incorporated by reference to Exhibit 10.9 to the Company's
Registration Statement on Form S-11 (No. 333-112839) filed on February
13, 2004) |
| 10.10 |
|
Amendment to Stock Option
Agreement, Consent to Plan Amendment and Acknowledgment of Employment
Arrangements between Pinnacle Holdings Inc. and William T. Freeman,
dated August 22, 2003 (incorporated by reference to Exhibit 10.10 to
the Company's Registration Statement on Form S-11 (No.
333-112839) filed on February 13,
2004) |
| 10.11 |
|
Employment Agreement among
William T. Freeman, Pinnacle Holdings Inc. and Pinnacle Towers Inc.,
dated August 19, 2003 (incorporated by reference to Exhibit 10.11 to
the Company's Registration Statement on Form S-11 (No.
333-112839) filed on February 13,
2004) |
| 10.12 |
|
Employment Agreement between
Jeffrey Langdon and Pinnacle Holdings, Inc., dated February 26, 2003
(incorporated by reference to Exhibit 10.12 to the Company's
Registration Statement on Form S-11 (No. 333-112839) filed on February
13, 2004) |
| 10.13 |
|
Amendment to Stock Option
Agreement, Consent to Plan Amendment and Acknowledgment of Employment
Arrangements between Pinnacle Holdings Inc. and Jeffrey Langdon
(incorporated by reference to Exhibit 10.13 to the Company's
Registration Statement on Form S-11 (No. 333-112839) filed on February
13,
2004) |
| 10.14 |
|
|
|
|
|
15,587 |
|
|
|
14.2 |
|
|
|
15,837 |
|
|
|
12.6 |
|
|
|
249 |
|
|
|
1.6 |
|
| Managed
communications
sites |
|
|
|
|
|
|
11,869 |
|
|
|
10.8 |
|
|
Employment
Offer Letter from Pinnacle Towers, Inc. to Massoud Sedigh, dated April
30, 2003 (incorporated by reference to Exhibit 10.16 to the
Company's Registration Statement on Form S-11 (No. 333-112839)
filed on February 13,
2004) |
| 10.15 |
|
Consent
to Change in Employment Arrangements with Massoud Sedigh, dated July
15, 2003 (incorporated by reference to Exhibit 10.17 to the
Company's Registration Statement on Form S-11 (No. 333-112839)
filed on February 13, 2004) |
|
|
|
|
|
|
|
|
Exhibit
Number |
|
Description |
| 10.16 |
|
Employment
Agreement between Ronald G. Bizick, II and Pinnacle Holdings, Inc.,
dated November 26, 2003 (incorporated by reference to Exhibit 10.18 to
the Company's Registration Statement on Form S-11 (No.
333-112839) filed on February 13,
2004) |
| 10.17 |
|
Employment
Agreement between W. Scot Lloyd and Pinnacle Holdings, Inc., dated
November 25, 2002 (incorporated by reference to Exhibit 10.19 to the
Company's Registration Statement on Form S-11 (No. 333-112839)
filed on February 13,
2004) |
10.18
|
|
Employment Agreement, between Global
Signal Services LLC and Greerson G. McMullen,
dated June 18, 2004 (incorporated by reference to Exhibit 10.32 to
the Company's Form 10-Q filed on August
13,
2004) |
| 10.19 |
|
Amendment
to Stock Option Agreement, Consent to Plan Amendment and Acknowledgment
of Employment Arrangements between Pinnacle Holdings, Inc., and W.
Scott Lloyd, dated July 15, 2003 (incorporated by reference to Exhibit
10.20 to the Company's Registration Statement on Form S-11 (No.
333-112839) filed on February 13,
2004) |
| 10.20 |
|
Assignment
and Assumption Agreement between Pinnacle Towers Inc., Global Signal
Inc. and Global Signal Services LLC, dated February 5, 2004
(incorporated by reference to Exhibit 10.21 to the Company's
Registration Statement on Form S-11 (Amendment No. 2) (No. 333-112839)
filed on April 29,
2004) |
| 10.21 |
|
Global
Signal Inc. Omnibus Stock Incentive Plan (incorporated by reference to
Exhibit 10.22 to the Company's Registration Statement on Form
S-11 (No. 333-112839) filed on February 13,
2004) |
| 10.22 |
|
Securities
and Exchange Commission Settlement Order, dated December 6, 2001
r-bottom: 1px solid #000000 ;padding-top: 0pt" align="right" valign="bottom" colspan="1"> |
10,457 |
|
|
|
8.3 |
|
|
|
(1,412 |
) |
|
|
(11.9 |
) |
| Total |
|
|
|
|
|
$ |
110,098 |
|
|
|
100.0 |
% |
|
$ |
125,403 |
|
|
|
100.0 |
% |
|
$ |
15,304 |
10.23 |
|
Stipulation
and Agreement of Settlement, dated September 19, 2002 and Order and
Final Judgment, dated February 4, 2003 (incorporated by reference to
Exhibit 10.24 to the Company's Registration Statement on Form
S-11 (No. 333-112839) filed on February 13,
2004) |
| 10.24 |
|
Agreement
of Limited Partnership of Global Signal Operating Partnership, L.P.
(incorporated by reference to Exhibit 10.25 to the Company's
Registration Statement on Form S-11 (No. 333-112839) filed on February
13,
2004) |
| 10.25 |
|
Management
Agreement between Pinnacle Towers Inc. and the subsidiaries listed on
the signature pages, and Global Signal Services LLC, dated as of
February 5, 2004 (incorporated by reference to Exhibit 10.26 to the
Company's Registration Statement on Form S-11 (Amendment No. 2)
(No. 333-112839) filed on April 29,
2004) |
| 10.26 |
|
Management
Agreement between Pinnacle Towers Acquisition Inc. and Pinnacle Towers
Inc., dated as of September 25, 2003 (incorporated by reference to
Exhibit 10.27 to the Company's Registration Statement on Form
S-11 (Amendment No. 2) (No. 333-112839) filed on April 29,
2004) |
| 10.27 |
|
Assignment
and Assumption of Management Agreement between Pinnacle Towers Inc.,
and Global Signal Services LLC, dated February 5, 2004 (incorporated by
reference to Exhibit 10.28 to the Company's Registration
Statement on Form S-11 (Amendment No. 2) (No. 333-112839) filed on
April 29, 2004) |
|
|
|
|
|
|
|
|
Exhibit
Number |
|
Description |
| 10.28 |
|
First
Amendment to Management Agreement between Pinnacle Towers Acquisition
Holdings LLC and Global Signal Services LLC, dated May 13, 2004
(incorporated by reference to Exhibit 10.29 to the Company's
Registration Statement on Form S-11 (Amendment No. 3) (No. 333-112839)
filed on May 19,
2004) |
| 10.29 |
|
Management
Agreement, dated as of December 7, 2004, between Pinnacle Towers
Acquisition Holdings LLC, the Subsidiaries thereof, and Global Signal
Services LLC (incorporated by reference to Exhibit 10.2 to the
Company's Current Report on Form 8-K (No. 001-32168) filed on
December 13,
2004) |
| 10.30 |
|
Purchase
Agreement between Pinnacle Towers Acquisitionight: normal; font-style: normal; border-bottom: 3px double #ffffff; padding-top: 0pt " align="left" valign="bottom" nowrap="nowrap"> |
|
|
13.9 |
% |
|
|
|
| (1) |
Our
acquisition program began in December
2003. |
Since the beginning
of our acquisition program on December 1, 2003, through
April
25,
2005, we have acquired
1,025
communications sites for an aggregate purchase price of
approximately
$427.3
million, including fees and expenses. In addition, during
this
time, we
invested an
additional
$9.4
million, including fees and expenses, to
acquire a fee interest or long-term easement under
93
wireless communications towers where we
previously had a leasehold interest.
As of April
25,
2005, including the Triton and ForeSite
2005
acquisitions,
we
had
definitive agreements
to acquire an additional
343
communications sites and to acquire fee
interest or long-term easements under an additional
10
communications
towers, for an aggregate purchase price of
approximately
$91.3
million, including estimated fees and expenses. In addition, as of
April
25,
2005, we also had non-binding letters of intent with
other parties to purchase an additional
36
towers for approximately
$19.6
million, including estimated fees and expenses.
The ForeSite 2005 acquisition closed on
April 29, 2005 and was funded from our site acquisition reserve account
and from borrowings under the acquisition credit facility.
We are in the process of performing
due diligence on these towers and seek to
negotiate definitive agreements.
We
believe the towers we acquired and have contracted to acquire are in
locations where there are opportunities for
organic growth and that these towers generally have significant
additional capacity to accommodate new tenants.
The above pending acquisitions
are subject to customary closing conditions for real estate
transactions of this type and may not be
successfully
completed.
During the first quarter of
2005, we were in the process of performing due
diligence on these
towers
and were seeking to negotiate
definitive agreements or closing on such transactions.
We believe the towers
92
we acquired and have
contracted to acquire are in locations where there are
opportunities for organic growth and that these
towers generally have significant additional capacity
to accommodate new tenants.
Capacity
is not usually a limiting factor on our leasing of space, as we can
usually augment a tower to accommodate
additional tenants. On
occasions, we are unable
to modify a tower to satisfy a prospective
tenant's timing requirements.
As of December 31, 2004, we owned in fee or had long-term easements
on the land under 915 of our owned towers
and 255 of our other communications sites. For the land that we do not
own or hold in easement, the average
remaining life on the ground leases, including our options to renew,
was 24.4 years. Generally, our ground leases
terminate upon the occurrence of an event of default under
the terms of the lease, by our written notice prior to
a lease renewal, or by the terms of the lease
which may set a maximum number of renewals. For the
years ended December 31, 2003 and 2004, we
incurred $13.7 million and $14.9 million, respectively,
in rent expense for our ground leases for an
average annual lease payment of $10,372 for the year
ended December 31, 2003 and $7,179 for the
year ended December 31, 2004 based on 1,319 and 2,083
ground leases at December 31, 2003 and
December 31,
2004,
respectively. The lower rate per site at December 31, 2004 was due in
part to the 688
communications
sites acquired during the fourth quarter ended December 31, 2004. Rent
payments are generally payable on a monthly
or annual basis during the term of the lease. We often have
the right to sublease or assign ground
leases, and to grant licenses to use the leased communications
sites. We are generally responsible for the
indemnification of the landlord, and the payment of real
estate taxes, general liability insurance
and ordinary maintenance costs at the leased sites. Under the
terms of the ground leases, we periodically
also have the right of first refusal to purchase the leased
property when the landlord receives a third
party offer to purchase. The table below indicates our interest
in the real property underlying our towers
and other communications sites at Decem LLC and Hightower
Communication Services, LLC, dated April 15, 2004 (incorporated by
reference to Exhibit 10.30 to the Company's Registration
Statement on Form S-11 (Amendment No. 3) (No. 333-112839) filed on May
19,
2004) |
| 10.31 |
|
Purchase
Agreement between Pinnacle Towers Acquisition LLC and Skylink
Properties, L.L.C., dated February 26, 2004 (incorporated by reference
to Exhibit 10.31 to the Company's Registration Statement on Form
S-11 (Amendment No. 3) (No. 333-112839) filed on May 19,
2004) |
| 10.32 |
|
Form
of Restricted Shares Award Agreement (incorporated by reference to
Exhibit 10.1 to the Company Current Report
on Form 8-K (No. 001-32168) filed on January 12,
2005) |
| 10.33 |
|
Agreement
to Contribute, Lease and Sublease, dated as of February 14, 2005 among
Sprint Corporation, the Sprint subsidiaries
named therein and Global Signal Inc. (incorporated by
reference to Exhibit 10.1 to the Company's
Current Report of Form 8-K (No. 001-32168) filed
on February 17,
2005) |
| 10.34 |
|
Form
of Option Agreement, by and among Global Signal Inc., Fortress
Investment Fund II LLC, Abrams Capital
Partners II, L.P., Abrams Capital Partners I, L.P., Whitecrest
Partners, L.P., Abrams Capital
International, LTD, Riva Capital Partners, L.P., Greenhill
Capital Partners, L.P., Greenhill Capital
Partners (Cayman), L.P., Greenhill Capital Partners
(Executives), L.P., Greenhill Capital, L.P., and
Greenhill Capital partners (Employees) II, L.P.
(incorporated by reference to Exhibit 10.3 to the
Company's Current Report of Form 8-K
(No. 001-32168) filed on February 17,
2005) |
| 10.35 |
|
Amended
and Restated Credit Agreement, dated as of February 9, 2005, among
Global Signal Operating Partnership, L.P.
Bank of America, N.A., Morgan Stanley Asset Funding Inc.
(incorporated by reference to Exhibit 10.4 to the
Company's Current Report
on
Form 8-K filed on February 17,
2005) |
| 10.35.1 |
|
Second
Amended and Restated Credit Agreement, dated April 15, 2005,
among Global Signal Operating Partnership,
L.P., Bank of
America, N.A. and
the
other
lenders
named
therein |
| 10.36 |
|
Investment
Agreement, dated as of February 14, 2005, by and among Global Signal
Inc., Fortress Investment Fund II LLC,
Abrams Capital Partners II, L.P., Abrams Capital Partners
I, L.P. Whitecrest Partners, L.P., Abrams Capital
International, LTD, Riva Capital Partners,
L.P., Greenhill Capital Partners, L.P., Greenhill
Capital Partners (Cayman), L.P., Greenhill
Capital Partners (Executives), L.P., Greenhill Capital,
L.P., and Greenhill Capital Partners
(Employees) II, L.P. (incorporated by reference to
Exhibit 10.2 to the Company's Current
Report
on
Form 8-K filed on February 17, 2005) |
|
|
|
|
|
|
|
|
Exhibit
Number |
|
Description |
Real Property Interest Classification for Owned
Communications
Sites
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
Property Interest
Classification |
|
No.
of
Towers |
|
No. of
Other
Communications
Sites |
|
Total No.
of
Communications
Sites |
| Fee
owned |
|
|
704 |
|
|
|
191 |
|
|
|
895 |
|
| Ground
lease |
|
|
2,073 |
|
|
|
10 |
|
|
|
2,08310.37 |
|
Acquisition
Credit Agreement, dated as of April 25, 2005, by and among Global
Signal Acquisitions LLC, Morgan Stanley Asset Funding
Inc. and Bank of America,
N.A.
(incorporated by reference to Exhibit 10.1 to the Company's
Current Report
on Form 8-K
filed on April 28,
2005) |
| 12.1 |
|
Calculation
of the non-GAAP Measurement Financial Ratios (incorporated by reference
to Exhibit 12.1 to the Company's Registration Statement on Form
S-11 (Amendment No. 3) (No. 333-112839) filed on May 19,
2004) |
| 21.1 |
|
Subsidiaries of the
Registrant
(incorporated by
reference to Exhibit 21.1 to the
Company's Annual Report on Form 10-K filed on March 31,
2005) |
| 23.1 |
|
Consent
of Ernst & Young LLP – Tampa,
Florida |
| 23.2 |
|
Consent of Ernst & Young
LLP – Cincinnati,
Ohio |
| 23.3 |
|
Consent of
KPMG
LLP |
| 23.4 |
|
Consent
of
PricewaterhouseCoopers
LLP |
| 23.5 |
|
Consent of
Dixon Hughes
PLLC |
| 23.6 |
|
Consent
of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit
5.1 and Exhibit
8.1) |
| 24.1 |
|
Power of
Attorney†† |
| 99.1 |
|
Opinion of Bear
Stearns & Co. Inc., dated February 9, 2005 (incorporated by
reference to Annex A to the Company's
Schedule 14C filed on April 5,
2005.) |
|
|
|
| &dfont> |
|
| Easement |
|
|
211 |
|
|
|
64 |
|
|
|
275 |
|
| Total |
|
|
2,988 |
|
|
|
265 |
|
|
|
3,253 |
|
|
During
the years ended December 31, 2003 and 2004, we expensed $1.5 million in
real estate taxes in each year and $3.0
million in personal property taxes in each year for an annual total of
$4.5 million in real estate and property
taxes, or an average of $1,937 per site for the year ended
December 31, 2003 and approximately $1,501 per site for
the year ended December 31, 2004 based on
2,280 and 2,988 owned towers at December 31, 2003 and
December 31,
2004,
respectively. The lower rate per site at
December 31, 2004 was due in part to the 688
communications
sites acquired during the fourth quarter
ended December 31, 2004 for which we incurred only small amounts of tax
for the partial period of ownership. We hold
real and tangible property in over 3,000 jurisdictions in
the United States, Canada and the United
Kingdom. Property tax assessment methodologies and rates
vary widely throughout the various taxing
jurisdictions.
93
As of December 31, 2004, we owned or
managed a total of 4,060 communications sites, including
3,751 located in the United States, 176 located in
Canada, and 133 located in the United Kingdom.
Our towers and other communications sites are
geographically diversified. The table below represents
the concentrations of our owned
or
managed communications sites at December 31,
2004:
Certain
information omitted pursuant to a request for confidential treatment
filed separately with the Securities and Exchange
Commission. |
|
|
| †† |
Previously
filed. |
|
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