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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________ .
COMMISSION FILE NUMBER 0-27217
SPECTRASITE HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 56-2027322
(STATE OR OTHER JURISDICTION OF INCORPORATION (I.R.S. EMPLOYER IDENTIFICATION NO.)
OR ORGANIZATION)
100 REGENCY FOREST DRIVE, SUITE 400
CARY, NORTH CAROLINA 27511
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(919) 468-0112
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $.001 PAR VALUE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [ ]
As of February 28, 2001, the aggregate market value of the Common Stock
held by non-affiliates of the registrant was $1,017,941,866 based on the closing
price on the Nasdaq National Market on such date.
There were 146,529,186 shares of Common Stock outstanding as of February
28, 2001.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 2001 Annual Meeting of Stockholders
are incorporated by reference into Part III of this report.
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SPECTRASITE HOLDINGS, INC.
FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PAGE
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PART I
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 10
Item 3. Legal Proceedings........................................... 10
Item 4. Submission of Matters to a Vote of Security Holders......... 10
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 11
Item 6. Selected Consolidated Financial Data........................ 12
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 14
Item 7A. Quantitative and Qualitative Disclosures About Market
Risks....................................................... 21
Item 8. Consolidated Financial Statements and Supplementary Data.... 21
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 21
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 22
Item 11. Executive Compensation...................................... 22
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 22
Item 13. Certain Relationships and Related Transactions.............. 22
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 22
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, including statements concerning possible or assumed future
results of operations of SpectraSite and those preceded by, followed by or that
include the words may, will, should, could, expects, plans, anticipates,
believes, estimates, predicts, potential or continue or the negative of such
terms and other comparable terminology. You should understand that the factors
described below, in addition to those discussed elsewhere in this report, could
affect our future results and could cause those results to differ materially
from those expressed in such forward-looking statements. These factors include:
- material adverse changes in economic conditions in the markets we serve;
- future regulatory actions and conditions in our operating areas;
- competition from others in the communications tower industry;
- the integration of our operations with those of businesses we have
acquired or may acquire in the future and the realization of the expected
benefits; and
- other risks and uncertainties as may be detailed from time to time in our
public announcements and SEC filings.
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PART I
ITEM 1. BUSINESS
INTRODUCTION
SpectraSite Holdings, Inc. is a Delaware corporation. Our principal
executive offices are located at 100 Regency Forest Drive, Suite 400, Cary,
North Carolina 27511, and our telephone number at that address is (919)
468-0112. Our World Wide Web site address is http://www.spectrasite.com. The
information in our website is not part of this report.
We operate in two business segments, site leasing and network services. For
certain financial information about our business segments, as well as certain
financial information about the geographic areas in which we operate, refer to
Note 10 to our consolidated financial statements located elsewhere in this
report.
In this report, Holdings refers to SpectraSite Holdings, Inc. and
SpectraSite, we, us and our refer to SpectraSite Holdings, Inc., its wholly
owned subsidiaries and all predecessor entities collectively, unless the context
requires otherwise. The term common stock refers to Holdings' common stock, par
value $.001 per share.
OVERVIEW
We are one of the largest wireless tower operators in the United States and
a leading provider of outsourced network services to the wireless communications
and broadcast industries in the United States and Canada. Our businesses include
the ownership and leasing of antenna sites on towers, managing rooftop and
in-building telecommunications access on commercial real estate, network
planning and deployment and construction of towers and related wireless
facilities. Our customers are leading wireless communications providers and
broadcasters, including Nextel, SBC Wireless (now Cingular Wireless), Sprint
PCS, AT&T Wireless, AirTouch (now Verizon Wireless), Teligent, WinStar, Cox
Broadcasting, Clear Channel Communications and Paxson Communications. As of
December 31, 2000, after giving effect to all pending transactions, we will own
or manage over 26,000 sites, including 8,260 towers, primarily in the top 100
markets in the United States and with major metropolitan market clusters in Los
Angeles, Chicago, San Francisco, Philadelphia, Detroit and Dallas. We also own
50% of SpectraSite-Transco Communications Ltd., which owns 714 towers and 1,500
sites and has the option to construct towers on an additional 30,000 potential
sites in the United Kingdom.
The wireless communications industry is growing rapidly and carriers are
making large capital investments to expand their networks. We believe that the
number of wireless communications sites, including towers, is likely to continue
to increase together with the growth in demand for wireless services. This
expected growth in communications sites is the result of several factors,
including:
- the continuing build-out of higher frequency technologies, such as
personal communications services, which have a reduced cell range and
require a more concentrated network of towers than previous wireless
technologies;
- the need to expand the capacity of existing networks;
- the issuance of new wireless network licenses requiring the construction
of new wireless networks; and
- the emergence of new wireless technologies.
As carriers deploy these networks, they are faced with a proliferation in
both the number and type of competitors. Because of this increasingly
competitive environment, carriers must also focus on satisfying customer demand
for enhanced services, seamless and comprehensive coverage, better call quality,
faster data transmission and lower prices.
We believe that as carriers face the increased challenges of expanding
their networks and improving their services, they must allocate their available
capital and resources in the most efficient manner. In particular, carriers are
increasingly outsourcing tower ownership, as well as network planning deployment
and management to independent tower owners like SpectraSite. This outsourcing
allows our customers to focus on their
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core competencies and to rely on us for planning and deploying their networks.
Our services are designed to improve our customers' competitive positions
through the efficient planning, deployment and management of their networks.
PRODUCTS AND SERVICES
Wireless Tower Ownership and Leasing
We are one of the largest independent owners and operators of wireless
communications towers in the United States and Canada. We provide antenna site
leasing services, which primarily involve the leasing of antenna space on our
communications towers to wireless carriers. In leasing antenna space, we
generally receive monthly lease payments from customers. Our customer leases
typically have original terms of five years, with four or five renewal periods
of five years each, and usually provide for periodic price increases. Monthly
lease pricing varies with the number and type of antennas installed on a
communications site.
The following chart shows the locations of our owned towers as of December
31, 2000:
NUMBER
STATE/PROVINCE OF TOWERS
-------------- ---------
California................................................. 1,111
Illinois................................................... 490
Texas...................................................... 307
Florida.................................................... 290
Ohio....................................................... 283
Michigan................................................... 220
Georgia.................................................... 213
Alabama.................................................... 163
Louisiana.................................................. 151
Pennsylvania............................................... 150
North Carolina............................................. 135
Washington................................................. 133
Missouri................................................... 108
Wisconsin.................................................. 95
Tennessee.................................................. 84
Indiana.................................................... 80
Nevada..................................................... 80
Mississippi................................................ 75
Oregon..................................................... 71
Arkansas................................................... 57
South Carolina............................................. 56
Arizona.................................................... 54
Massachusetts.............................................. 54
Oklahoma................................................... 50
Utah....................................................... 48
Iowa....................................................... 45
Maryland................................................... 45
New Jersey................................................. 45
New York................................................... 40
Colorado................................................... 39
Minnesota.................................................. 37
New Mexico................................................. 31
Idaho...................................................... 28
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NUMBER
STATE/PROVINCE OF TOWERS
-------------- ---------
Virginia................................................... 25
Quebec..................................................... 23
Delaware................................................... 19
Kansas..................................................... 19
Connecticut................................................ 15
Alberta.................................................... 13
Other...................................................... 48
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Total............................................ 5,030
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In addition to the towers we will build for Nextel Communications under a
master site commitment agreement and for SBC Communications under a
build-to-suit agreement, we expect to expand our tower portfolio primarily
through other build-to-suit programs and acquisitions. In addition, we evaluate
other tower development opportunities from time to time which we believe have
higher than average co-location opportunities. Under build-to-suit programs, we
utilize our network development capabilities to construct tower networks after
we have signed an antenna site lease agreement with an anchor tenant and have
determined that the initial or planned capital investment for that tower network
would not exceed a targeted multiple of tower cash flow after a certain period
of time.
In addition to leasing antenna space, we also provide maintenance and
management services at our communications sites. In providing these services to
our customers we use a combination of in-house personnel and independent
contractors. In-house personnel are responsible for oversight and supervision of
all aspects of site maintenance and management and are particularly responsible
for monitoring, security, access and lighting, radio frequency emission and
interference issues, signage, structural engineering and tower capacity, tenant
relations and supervision of independent contractors. We hire local independent
contractors to perform routine maintenance functions, such as landscaping, pest
control, snow removal and site access.
Wireless Rooftop and In-Building Access
We are the largest independent provider of rooftop and in-building access
services in the United States. We are the exclusive site manager for over 17,500
real estate properties, with significant access clusters in New York,
Philadelphia, Baltimore/Washington, D.C., Atlanta, New England, Florida, Western
Pennsylvania/Ohio/Indiana, Chicago, Seattle, Southern California, Texas and St.
Louis. A principal attraction of this portion of our business is the opportunity
to develop new revenues for building owners by managing:
- rooftops for transmitting and receiving installations; and
- rooftops, risers and internal telecommunications equipment space for
competitive voice, data and Internet services offered to in-building
tenants.
Wireless communications carriers utilize our managed sites as transmitting
locations, often where there are no existing towers for co-location or where new
towers are difficult to build. Our transmitting tenants encompass a broad array
of wireless communications providers, including personal communications service,
cellular, enhanced specialized mobile radio, specialized mobile radio, wireless
data, two-way radio, microwave, wireless cable and paging companies. We provide
services to the facilities-based (wired and wireless) competitive local exchange
carrier and Internet service provider market. We have executed agreements
allowing these carriers access to over 5,000 properties, including agreements
with national providers such as AT&T Local Services, XO Communications, Teligent
and WinStar, as well as numerous regional carriers. These access agreements are,
to date, predominantly for office and industrial properties.
Our managed portfolio contains 4,900 office and industrial properties
encompassing over 460 million square feet. Our management contracts are
generally for an initial period of three to five years. These contracts contain
automatic extension provisions and continue after the initial period unless
terminated by either party. Under these contracts, we are engaged as the
exclusive site manager for rooftop management. In most cases,
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we are also engaged as the exclusive manager for riser and telecommunications
access management. As the site manager, we are responsible for marketing the
properties as part of our portfolio of potential telecommunications sites,
reviewing existing license agreements, negotiating new license agreements,
managing and enforcing those agreements, supervising installation of equipment
by carriers to ensure, among other things, non-interference with other users, as
well as site billing, collections and contract administration. For these
services, we receive a percentage of occupancy fees. Upon any termination of a
contract, unless due to our default, we are entitled to continue to receive our
percentage with respect to carriers added during the term of our management
agreement for so long as they remain tenants.
Network Design and Deployment Services
We are a leading provider of design and deployment services for wireless
networks. These services include architectural and engineering design, tower
construction, line and antenna installation and site acquisition services. We
offer these services individually and as an integrated package. We believe that
we have a competitive advantage in our ability to provide comprehensive network
development services by eliminating our customers' need to seek services from
different providers.
In providing these network design and deployment services, we have
developed the capability to effectively manage multiple site acquisition and
tower development projects in various locations at the same time. Where
appropriate, we supplement our in-house expertise with a pre-qualified pool of
local contractors and advisors. In addition, we have developed detailed and
standardized site acquisition and construction specifications and procedures
that allow us to rapidly construct tower networks. Wireless carriers require
aggressive network build-out schedules, and uniform procedures and
specifications allow for reduced employee training time, improved vendor
performance and quicker identification of potential tower sites.
Architectural and Engineering Design. Our architecture and engineering team
manages a complex array of electrical, structural and architectural elements
while interfacing with our clients and construction crews to ensure that
site-specific objectives are reflected in construction documents. Our structural
engineering and design abilities enable us to construct towers that have maximum
antenna site capacity based on the physical features of the land on which the
tower is constructed and the demand in the market in which the tower is located.
We seek to design aesthetically acceptable sites and construct towers with
minimal environmental impact. Our custom structure design abilities combined
with our engineering skills also allow us to build towers in geographically
difficult locations at competitive prices. We believe that this specialty
service will enable us to compete effectively in regions in which other
companies are not able to participate on a cost-efficient basis.
Tower Construction. Our engineering, general contracting, electrical,
structural steel and other specialty licenses allow us to perform services
required to design, develop and construct communications towers. Our ability to
perform civil and electrical engineering as well as tower construction enables
us to expedite and simplify this phase of development by minimizing the need to
subcontract.
During tower construction, a project team of five to seven people is
dispatched to the site. A temporary field office is established at the site. The
project team is typically composed of our permanent employees, but may be
supplemented with local hires.
We use our information technology abilities to create construction models,
development budgets, critical path schedules and status reports covering
schedules and costs throughout the course of a project. Our civil engineering
capability allows us to prepare the construction site by leveling the land,
removing vegetation and installing access roads as needed. Based on the results
of soil tests that we conduct at each site, we design and build the tower
foundation. After the foundation is in place, we erect the tower. We utilize our
structural engineering capability by constructing a tower designed for maximum
antenna capacity.
Line and Antenna Installation. After erecting the tower and placing the
equipment shelter, we install the antennas and feed lines. Depending on the
project, electricity is installed either during the erection process to conform
with the FAA lighting requirements or after the tower has been constructed. Our
technical crews are regularly trained in cellular, microwave, fiber optic and
direct current power plant system installation and
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testing methods. We are also a leader in designing and implementing in-building
wireless systems, as well as a broad range of cellular and personal
communications services repeater systems. Our test equipment and dedicated radio
frequency testing teams allow us to monitor and maintain system integrity and
quality control.
We also offer the ability to construct the switch facility that controls an
antenna's communications with other communications sites. Although switch
construction is not performed at every project site, it is an additional
specialty service we provide.
After constructing the tower, placing the equipment shelter and completing
the antenna work, we install grounding lines and protective fencing around the
site. We then perform final grounding and landscaping as necessary to complete
the project.
Site Acquisition Services. We offer a full range of communications site
acquisition services, including network pre-design, site selection, site
acquisition and local zoning and permitting. We offer these services through
independent local contractors who have knowledge and expertise in the specific
geographic area.
Broadcast Tower Development and Leasing
We are a leading provider of broadcast tower analysis, design, fabrication,
installation, and technical services. We have over 50 years of experience in the
broadcast tower industry and have worked on the development of more than 700
broadcast towers, which we believe represent approximately 50% of the existing
broadcast tower infrastructure in the United States. Our broadcast tower group
extends our core business of outsourced wireless antenna sites to broadcast
towers.
In 1996, the FCC mandated the conversion of analog television signals to
digital. The mandate specifies that by May 1, 2002, each commercial television
station in the United States must complete construction of new digital
broadcasting facilities. (Non-commercial stations have been given until May 1,
2003, to complete digital construction.) By April 21, 2003, all television
stations must be simulcasting at least 50% of their programming on both their
analog and digital facilities and must convert to 100% simulcasting within two
years. The simulcasting transition is scheduled to end in 2006, when television
broadcasters will be required to terminate analog service, unless that date has
been extended based on satisfaction of statutory standards demonstrating that
significant portions of the viewing public do not have the ability to receive
digital television signals. This conversion to digital creates significant
potential demand for co-location on broadcast towers.
Broadcast towers require a high level of technical design and erection
expertise, as they reach heights of up to 2,000 feet. The existing domestic
broadcast tower infrastructure was generally developed to accommodate individual
broadcast signals. This broadcast tower infrastructure was built primarily in
the 1940's and 1950's. Today, it is considered to be at capacity and somewhat
antiquated. The FCC mandate requiring the conversion of analog to digital
broadcast signals creates significant infrastructure deployment requirements for
the broadcast community in the United States. In addition, the engineering and
construction expertise for broadcast towers is limited to a relatively small
number of fabrication and construction companies that specialize in broadcast
towers.
CUSTOMERS
Our primary customers currently are Nextel and Sprint PCS, which
represented approximately 25% and 12% of our revenues for the year ended
December 31, 2000, respectively. In addition, our customers also include several
of the largest wireless service providers in the United States, including AT&T
Wireless and Cingular. We also have provided services to enhanced specialized
mobile radio, specialized mobile radio and cellular wireless providers. For the
year ended December 31, 1999, Nextel accounted for 35% of our revenues. For the
year ended December 31, 1998, Powertel and Tritel accounted for 47% and 24%,
respectively, of our revenues.
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SALES AND MARKETING
We believe that our ability to satisfy a wide range of our customers'
network deployment requirements will make us a preferred provider of all
outsourced antenna site and network services. Our sales and marketing goals are
to:
- use existing relationships and develop new relationships with wireless
service providers to lease antenna space on our owned and managed
communication sites; and
- form affiliations with select communications system vendors who utilize
end-to-end services, including those provided by SpectraSite, which will
enable us to market our services and products through additional channels
of distribution.
Historically, we have capitalized on the strength of our experience,
performance and relationships with wireless service providers to obtain
build-to-suit projects, and we intend to continue to emphasize our capability in
these areas in selling our broad range of services.
Maintaining and cultivating relationships with wireless service providers
is a main focus of senior management. In addition, we have a dedicated group of
representatives focused on sales efforts and establishing relationships with
wireless service providers. The representatives are assigned specific accounts
based on historical experience with a provider and the quality of the
relationship between the SpectraSite representative and such provider. Most
wireless service providers have national corporate headquarters with regional
offices. We believe that most decisions for site acquisition and site leasing
services are made by providers at the regional level with input from their
corporate headquarters. Our sales representatives work with provider
representatives at the local level and, when appropriate, at the national level.
Our sales staff compensation is heavily weighted to incentive-based goals and
measurements. In addition to our dedicated marketing and sales staff, we rely
upon our executive and operations personnel at the national and field office
levels to identify sales opportunities within existing customer accounts, as
well as acquisition opportunities.
COMPETITION
Our principal competitors include American Tower Corporation, Crown Castle
International Corp., Pinnacle Holdings Inc. and SBA Communications Corporation.
Towers are not the only kind of platform for radio transmitters. The growth
in delivery of video services by direct broadcast satellites could also
adversely affect demand for our antenna space. The FCC has authorized numerous
entities and is considering applications from many others to provide fixed and
mobile satellite services using various frequency bands in a manner that may
compete with terrestrial service providers. Two systems, Iridium and GlobalStar,
had been offering commercial service; however, Iridium had to terminate
operations because of bankruptcy; although it recently announced it had been
sold to new owners and planned to resume operations, focusing initially on
provision of service to government and defense customers. GlobalStar, a provider
of mobile satellite services, is offering commercial service. Teledesic soon
plans to provide high-speed fixed satellite data services through
non-geostationary orbit satellites. In 1997, the FCC allocated one gigahertz of
spectrum in the 47 gigahertz band for any use consistent with the spectrum
allocation table. Although the FCC had decided to auction this spectrum in 200
megahertz blocks for the provision of communications services, it recently
terminated a rulemaking proceeding considering licensing and service rules for
the band. The development of signal combining technologies, which allow one
communications antenna to service two different transmission frequencies and, as
a result, two customers, may reduce the need for tower-based broadcast
transmissions and the demand for our antenna space. It is unclear whether these
new technologies will be commercially feasible, and to what extent they will
offer significant competitive alternatives to terrestrial structures.
EMPLOYEES
As of December 31, 2000, SpectraSite had 1,963 employees, none of whom are
represented by a collective bargaining agreement. We consider our employee
relations to be good. Due to the nature of the site
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construction business, we may experience fluctuations in the number of our
employees as site construction contracts are entered into or completed.
INTERNATIONAL
We own 50% of SpectraSite-Transco Communications Ltd., which owns 714
towers and 1,500 sites and has the option to construct towers on an additional
30,000 potential sites in the United Kingdom. On June 8, 2000, we completed this
joint venture with Lattice Group to develop a tower business to support Europe's
growing mobile communications industry. Lattice Group transferred existing
operational communications towers and industrial land suitable for construction
of new towers into the joint venture, and SpectraSite provided intellectual
property and wireless network development skills. In addition, we contributed
$164.1 million for future developments and possible acquisitions. We also
contributed Ample Design into the joint venture, which is a wireless network
development company in the United Kingdom that we acquired in April 2000. In
January 2001, SpectraSite-Transco purchased 19% of the share capital of
Paris-based telecommunications network development company SOFRER S.A.
In 2000, we formed a wholly-owned subsidiary to begin the development of a
tower business in Mexico. We purchased Sierra Towers for $7.8 million on July
28, 2000 and Infracom for $4.2 million on November 27, 2000. Both companies are
communications tower development companies. At December 31, 2000, we owned six
towers in Mexico.
Our primary focus is on operations in North America and Europe. However, we
continue to evaluate other international opportunities we consider attractive
and may, in the future, expand our international focus.
REGULATORY AND ENVIRONMENTAL MATTERS
Federal Regulations
Both the FCC and the FAA regulate towers used for communications
transmitters and receivers. Such regulations control the siting, marking and
lighting of towers and may, depending on the characteristics of particular
towers, require registration of tower facilities. Wireless and broadcast
communications antennas operating on towers are separately regulated and
independently authorized by the FCC based upon the particular frequency being
used and the service being provided. In addition to these regulations,
SpectraSite must comply with certain environmental laws and regulations.
Under the requirements of the Communications Act of 1934, as amended, the
FCC, in conjunction with the FAA, has developed standards to consider proposals
for new or modified antenna structures. These standards mandate that the FCC and
the FAA consider the height of the proposed antenna structure, the relationship
of the structure to existing natural or man-made obstructions and the proximity
of the structure to runways and airports. Proposals to construct or modify
existing structures above certain heights or within certain proximity to
airports are reviewed by the FAA to ensure they will not present a hazard to
aviation. The FAA may condition its issuance of no-hazard determinations upon
compliance with specified lighting and marking requirements. The FCC will not
authorize the operation of communications antennas on towers unless the tower
has been registered with the FCC or a determination has been made that such
registration is not necessary. The FCC will not register a tower unless it has
received all necessary clearances from the FAA. The FCC also enforces special
lighting and painting requirements. Owners of towers on which communications
antennas are located have an obligation to maintain painting and lighting to
conform to FCC standards. Tower owners may also bear the responsibility of
notifying the FAA of any tower lighting failures. We generally indemnify our
customers against any failure to comply with applicable regulatory standards.
Failure to comply with the applicable requirements may lead to civil penalties
and tort liability.
In 1995, the FCC adopted regulations making the owners of towers, rather
than communications licensees, primarily responsible for compliance with antenna
structure painting and lighting requirements. These rule changes are based on
statutory amendments adopted by Congress in 1992 extending regulatory
jurisdiction to tower owners. Communications licensees are now secondarily
responsible for tower maintenance if the tower owners are unwilling or unable to
perform those duties. Currently, these requirements apply
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to antenna structures that are more than 200 feet in height or that may
interfere with the approach or departure space of a nearby airport runway.
The regulatory requirements adopted in 1995 required tower owners, like
SpectraSite, to register existing structures by state, in accordance with filing
windows, over a two-year period between July 1, 1996 and June 30, 1998.
Historically, tower locations were determined using area maps. The FCC has
recognized that, with the proliferation of inexpensive, satellite-based locating
devices, such as Global Positioning System receivers, structures can now be
easily located with a higher degree of accuracy. Accordingly, the FCC has told
owners who determined that tower registration information conflicted with
previously issued licenses for antennas on their towers to register their
structures using the new data and to seek new FAA determinations of no hazard as
necessary under the FAA's rules. The FCC also has instructed licensees or
permittees who discovered that the coordinates on their authorizations differed
from those determined by more accurate means to submit corrective applications.
In February 1999, the FCC's Wireless Telecommunications Bureau announced a new
policy under which defective applications for wireless authorizations and
antenna structure registrations will be summarily dismissed, without giving the
applicants an opportunity to amend but requiring them to correct and retender
their applications. As part of the new policy, the Bureau said that effective
May 1, 1999, it will return and not process tower registration applications
including data that do not agree with information listed on previously issued
FAA determinations. The FCC also announced that applications for FCC
communications authorizations would be dismissed if a tower registration number
is not listed on the FCC application. Although the FCC initially said the rule
affecting communications applications would apply beginning May 1, 1999, for
applicants proposing antennas on existing structures, and July 1, 1999, for
applicants proposing to utilize new towers, the FCC in late April 1999 extended
these deadlines. For services, such as cellular, paging, and personal
communications services, which have already had their records converted to the
FCC's new Uniform Licensing System database, the new tougher dismissal rule
applied effective July 1, 1999. For other communications services that have not
yet been converted to the Uniform Licensing System, the FCC said the new
processing rules would go into effect six months after each service's
incorporation into the Uniform Licensing System. This new policy means that for
towers to be of use to FCC wireless applicants, it will be necessary for tower
owners to notify the FAA and obtain FCC tower registrations well in advance of
the date tenants will be filing FCC applications.
In December 1998, the FCC announced that an audit of existing antenna
structures revealed that over one quarter of the audited structures had not been
registered as required by the FCC's rules. In light of this finding and several
reported near misses of towers by aircraft, the FCC in January 1999 announced a
no-tolerance policy, requiring all owners of existing unregistered structures to
register them immediately or face monetary forfeitures or civil fines.
SpectraSite has been working to review the registration of the towers it has
acquired and to confirm the accuracy of the information submitted to the FAA and
the FCC by the prior owners.
The Telecommunications Act of 1996 amended the Communications Act of 1934
by limiting state and local zoning authorities' jurisdiction over the
construction, modification and placement of wireless communications towers. The
new law preserves local zoning authority but prohibits any action that would
discriminate between different providers of wireless services or ban altogether
the construction, modification or placement of communications towers. It also
prohibits state or local restrictions based on the environmental effects of
radio frequency emissions to the extent the facilities comply with the FCC
regulations. The 1996 Telecom Act also requires the federal government to help
licensees of wireless communications services gain access to preferred sites for
their facilities. This may require that federal agencies and departments work
directly with licensees to make federal property available for tower facilities.
In October 2000, the FCC adopted rules and policies related to
telecommunications service providers' access to rooftops, other rights-of-way
and conduits in multi-tenant buildings. The FCC prohibited telecommunications
carriers in commercial settings from entering into new exclusive contracts with
building owners, including contracts that effectively restrict premises owners
or their agents from permitting access to other telecommunications service
providers. The FCC also established procedures to ensure that the demarcation
point in buildings, which marks the end of the incumbent local exchange
carrier's control over on-premises wiring and the beginning of the customer's or
building owner's control, will be at the "minimum point of
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entry" to the structure rather than further inside the premises. In addition,
the FCC determined that, under the Communications Act, utilities, including
local exchange carriers, will be required to afford telecommunications carriers
and cable service providers reasonable and nondiscriminatory access to conduits
and rights-of-way in customer buildings, to the extent such conduits and
rights-of-way are owned or controlled by the utility. Finally, the FCC amended
its existing rules to give building tenants the same ability to place on their
balconies small satellite dishes for receiving telecommunications and other
fixed wireless signals that they currently have for receiving video services.
In the same October 2000 decision, the FCC sought comment on a number of
related issues, including whether the prohibition on exclusive contracts should
be extended to residential buildings; whether it should be broadened to prohibit
preferences other than exclusive access, such as exclusive marketing or landlord
bonuses for tenants; whether the FCC should prohibit carriers from enforcing
exclusive access provisions in existing contracts for commercial or residential
multi-tenant buildings; and whether the agency has authority to prohibit local
exchange carriers from providing services to multi-tenant buildings where the
owners maintain policies unreasonably preventing competing carriers from gaining
access to potential customers within the building. Federal legislation
addressing the building access issue had also been pending before the FCC
decision was adopted. We cannot predict with certainty whether the FCC's
proposals or any legislative initiatives will be adopted, and, if they are, the
effect they will have on our business.
State and Local Regulations
Most states regulate certain aspects of real estate acquisition and leasing
activities. Where required, SpectraSite outsources site acquisition to licensed
real estate brokers or agents. Local regulations include city and other local
ordinances, zoning restrictions and restrictive covenants imposed by community
developers. These regulations vary greatly, but typically require tower owners
to obtain approval from local officials or community standards organizations
prior to tower construction. Local zoning authorities generally have been
hostile to construction of new transmission towers in their communities because
of the height and visibility of the towers. Companies owning or seeking to build
towers have encountered an array of obstacles arising from state and local
regulation of tower site construction, including environmental assessments, fall
radius assessments, marking/lighting requirements, and concerns with
interference to other electronic devices. The delays resulting from the
administration of such restrictions can last for several months, and when
appeals are involved, can take several years.
Environmental and Related Regulations
Owners and operators of communications towers are subject to environmental
laws. The FCC's decision to register a proposed tower may be subject to
environmental review under the National Environmental Policy Act of 1969, which
requires federal agencies to evaluate the environmental impacts of their
decisions under certain circumstances. The FCC has issued regulations
implementing the National Environmental Policy Act as well as the National
Historic Preservation Act, the Endangered Species Act and the American Indian
Religious Freedom Act. These regulations place responsibility on each applicant
to investigate potential environmental and other effects of operations and to
disclose any significant effects in an environmental assessment prior to
constructing a tower. In the event the FCC determines the proposed tower would
have a significant environmental impact based on the standards the FCC has
developed, the FCC would be required to prepare an environmental impact
statement. This process could significantly delay the registration of a
particular tower. In addition, we are subject to environmental laws which may
require investigation and clean-up of any contamination at facilities we own or
operate or at third-party waste disposal sites. These laws could impose
liability even if we did not know of, or were not responsible for, the
contamination. Although we believe that we currently have no material liability
under applicable environmental laws, the costs of complying with existing or
future environmental laws, investigating and remediating any contaminated real
property and resolving any related liability could have a material adverse
effect on our business, financial condition or results of operations.
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ITEM 2. PROPERTIES
SpectraSite is headquartered in Cary, North Carolina, where it currently
leases 108,676 square feet of office space. In addition, we have an agreement to
lease 109,570 square feet of office space adjacent to our current headquarter
space in the first quarter of 2001. We have established regional offices in:
Atlanta, Georgia; Chicago, Illinois; Dallas, Texas; Jackson, Mississippi;
Portland, Oregon; Columbus, Ohio; Los Angeles, California; Houston, Texas; and
San Francisco, California. We open and close project offices from time to time
in connection with our network design and development services, which offices
are generally leased for periods not exceeding three years.
We own a broadcast tower manufacturing facility located in Pine Forge,
Pennsylvania. We also own five acres of land in Surrey, British Columbia,
Canada, on which a 10,000 square foot wireless tower fabrication, assembly and
storage facility and a 5,000 square foot office building are located; four acres
of land near Montreal, Quebec, Canada, on which a 7,000 square foot facility is
located; a one acre lot in Houston, Texas, on which approximately 2,500 square
feet of office space and 5,000 square feet of warehouse space are located; 8.6
acres of land in Visalia, California, on which a 57,000 square foot broadcast
tower manufacturing facility is located; one acre of land in Charlotte, North
Carolina on which approximately 43,000 square feet of space is located; 0.8
acres of land in Tequesta, Florida on which 17,000 square feet of office space
is located; 11.2 acres of land in Cary, North Carolina adjacent to our leased
office space; and 0.4 acres of land in Tucson, Arizona, on which a 6,250 square
foot office building is located. We also lease office space in 27 states in the
United States and three provinces in Canada.
Our interests in communications sites are comprised of a variety of fee
interests, leasehold interests created by long-term lease agreements, private
easements, and easements and licenses or rights-of-way granted by government
entities. In rural areas, a communications site typically consists of a
three-to-five acre tract which supports towers, equipment shelters and guy wires
to stabilize the structure. Less than 2,500 square feet are required for a
self-supporting tower structure of the kind typically used in metropolitan
areas. Land leases generally have an initial term of five years, with five
additional five-year renewal periods. You should read "-- Products and
Services -- Wireless Tower Ownership and Leasing" for a list of the locations of
our owned towers.
ITEM 3. LEGAL PROCEEDINGS
From time to time, SpectraSite is involved in various legal proceedings
relating to claims arising in the ordinary course of business. We are not
currently a party to any such legal proceeding, the adverse outcome of which,
individually or in the aggregate, is expected to have a material adverse effect
on our business, financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET PRICES
Prior to the Westower merger, our common stock was privately held with no
public trading market. On September 1, 1999, our common stock was approved for
trading on the Nasdaq National Market under the symbol "SITE", and public
trading commenced on September 3, 1999. The following table sets forth on a per
share basis the high and low sales prices for consolidated trading in our common
stock as reported on the Nasdaq National Market for the period from September 3,
1999 through September 30, 1999, the fourth quarter of 1999, the first, second,
third and fourth quarter of 2000 and the first quarter of 2001 through March 16,
2001.
COMMON STOCK
--------------------
HIGH LOW
-------- --------
1999
Third quarter (beginning September 3).................. $14.8750 $11.0000
Fourth quarter......................................... 12.1250 7.3750
2000
First quarter.......................................... 30.3750 10.7500
Second quarter......................................... 28.5000 15.1250
Third quarter.......................................... 29.5000 14.5000
Fourth quarter......................................... 21.3750 10.8750
2001
First quarter (through March 16, 2001)................. 18.4375 6.1250
As of March 16, 2001, there were approximately 249 holders of record of our
common stock.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock. For
the foreseeable future, we intend to retain any earnings to finance the
development and expansion of our business, and we do not anticipate paying any
cash dividends on our common stock. In addition, our credit facility and the
indentures governing our senior discount notes restrict our ability to pay
dividends. Any future determination to pay dividends will be at the discretion
of our board of directors and will be dependent upon then existing conditions,
including our financial condition and results of operations, capital
requirements, contractual restrictions, business prospects and other factors
that the board of directors consider relevant. Furthermore, because SpectraSite
Holdings is a holding company, it depends on the cash flow of its subsidiaries,
and SpectraSite Communications' credit facility imposes restrictions on
Holdings' subsidiaries' ability to distribute cash to Holdings.
SALES OF UNREGISTERED SECURITIES
On January 28, 2000, Holdings issued 350,000 shares of common stock to the
stockholders of International Towers Inc. in connection with the acquisition of
International Towers and its subsidiaries, including S&W Communications Inc. On
November 20, 2000, Holdings sold 4.0 million shares of common stock to Trimaran
Fund II, L.L.C. and certain other investors participating in the Trimaran
investment program, which we refer to as the Trimaran group, for $18.75 per
share. The Trimaran group also received warrants to purchase an additional 1.5
million shares at exercise prices ranging from $21.56 to $28.00 per share. The
total aggregate consideration that Holdings received for the common stock and
the warrants issued to the Trimaran group was $75.0 million. On December 14,
2000, Holdings issued 2,544,882 shares of common stock to SBC Communications,
Inc. in connection with the acquisition of subleasehold interests in towers
owned by SBC Communications. The issuance of these securities were deemed to be
exempt from
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registration under the Securities Act in reliance on Section 4(2) of the
Securities Act or Regulation D promulgated under the Securities Act as
transactions by an issuer not involving a public offering. The recipients of
securities in each such transaction represented their intentions to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof and appropriate legends were affixed to the
instruments representing such securities issued in such transactions. All
recipients had adequate access to information about SpectraSite.
On November 20, 2000, Holdings issued $200.0 million aggregate principal
amount of 6 3/4% senior convertible notes due 2010 at a conversion price of
$21.5625 per share, subject to adjustment if certain events affecting our common
stock occur. Morgan Stanley & Co. Incorporated acted as the placement agent for
the sale of the convertible notes. The aggregate underwriting discounts and
commissions received by Morgan Stanley with respect to the convertible notes was
$6.0 million. The issuance of the convertible notes was deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2), and the
resale by Morgan Stanley was conducted in accordance with Rule 144A as sales to
"qualified institutional buyers" and Regulation S as sales to non-U.S. persons.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth summary historical financial data derived
from our consolidated financial statements, as of and for:
- the year ended December 31, 1996;
- the period from January 1, 1997 to May 12, 1997;
- the period from SpectraSite's inception on April 25, 1997 to December 31,
1997 and
- the years ended December 31, 1998, 1999 and 2000.
The information set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and related notes.
EBITDA consists of operating income (loss) before depreciation and
amortization expense, non-cash compensation charges and restructuring and
non-recurring charges. EBITDA is provided because it is a measure commonly used
in the communications site industry as a measure of a company's operating
performance. EBITDA is not a measurement of financial performance under
generally accepted accounting principles and should not be considered an
alternative to net income as a measure of performance or to cash flow as a
measure of liquidity. EBITDA is not necessarily comparable with similarly titled
measures for other companies. SpectraSite believes that EBITDA can assist in
comparing company performance on a consistent basis without regard to
depreciation and amortization expense, which may vary significantly depending on
accounting methods where acquisitions are involved or non-operating factors such
as historical cost bases.
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TELESITE (PREDECESSOR)
------------------------- SPECTRASITE SPECTRASITE
JANUARY 1, APRIL 25, TELESITE & YEAR ENDED
YEAR ENDED 1997 - 1997 - SPECTRASITE DECEMBER 31,
DECEMBER 31, MAY 12, DECEMBER 31, COMBINED -----------------------------------
1996 1997 1997 1997 1998 1999 2000
------------ ---------- ------------ ----------- -------- ---------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS DATA:
Revenues:
Site leasing.................. $ -- $ -- $ -- $ -- $ 656 $ 46,515 $ 116,476
Network services.............. 8,841 1,926 5,002 6,928 8,142 53,570 230,432
------ ------ ------- ------- -------- ---------- -----------
Total revenues.......... 8,841 1,926 5,002 6,928 8,798 100,085 346,908
------ ------ ------- ------- -------- ---------- -----------
Operating expenses:
Costs of operations (excluding
depreciation and
amortization expense:)
Site leasing................ -- -- -- -- 299 17,825 46,667
Network services............ 2,255 595 1,120 1,715 2,492 36,489 176,247
Selling, general and
administrative expenses....... 4,256 1,742 4,790 6,532 9,690 37,832 65,321
Depreciation and amortization
expense....................... 91 56 489 545 1,268 37,976 96,734
Non-cash compensation charges... -- -- 2,600 2,600 -- 350 2,572
Restructuring and non-recurring
charges....................... -- -- -- -- -- 7,727 --
------ ------ ------- ------- -------- ---------- -----------
Total operating expenses........ 6,602 2,393 8,999 11,392 13,749 138,199 387,541
------ ------ ------- ------- -------- ---------- -----------
Operating income (loss)......... $2,239 $ (467) $(3,997) $(4,464) $ (4,951) $ (38,114) $ (40,633)
====== ====== ======= ======= ======== ========== ===========
Net income(loss)................ $2,289 $ (503) $(3,890) $(4,393) $ (9,079) $ (97,668) $ (157,616)
Net income (loss) applicable to
common shareholders........... 2,289 (503) (4,390) (4,893) (11,235) (98,428) (157,616)
Net loss per share (basic and
diluted)...................... $ (5.21) $ (11.98) $ (12.48) $ (1.31)
Weighted average common shares
outstanding (basic and
diluted)...................... 842 938 7,886 120,731
OTHER DATA:
Net cash provided by (used in)
operating activities.......... $1,109 $ (71) $ 223 $ 152 $ (2,347) $ 17,555 11,365
Net cash provided by (used in)
investing activities.......... (853) (322) (7,178) (7,500) (45,002) (813,225) (1,108,690)
Net cash provided by (used in)
financing activities.......... (266) 390 9,189 9,579 144,663 733,900 1,612,200
EBITDA.......................... 2,330 (411) (908) (1,319) (3,683) 7,939 58,673
Capital expenditures............ 498 64 850 914 26,598 644,778 658,283
SELECTED OPERATING DATA (AT END
OF PERIOD):
Number of owned towers.................................................... 5 106 2,765 5,030
BALANCE SHEET DATA (AT END OF
PERIOD):
Cash, cash equivalents and short term investments....................................... $114,962 $ 37,778 $ 552,653
Total assets............................................................................ 161,946 1,219,953 3,054,105
Total long-term debt.................................................................... 132,913 718,778 1,709,055
Total shareholders' (deficiency) equity................................................. (14,067) 457,756 1,224,800
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
BUSINESS OVERVIEW
This discussion contains forward-looking statements, including statements
concerning possible or assumed future results of operations. You should
understand that the factors described below, in addition to those discussed
elsewhere, could affect our future results and could cause those results to
differ materially from those expressed in such forward-looking statements. These
factors include:
- material adverse changes in economic conditions in the markets we serve;
- future regulatory actions and conditions in our operating areas;
- competition from others in the communications tower industry;
- the integration of our operations with those of businesses we have
acquired or may acquire in the future and the realization of the expected
benefits; and
- other risks and uncertainties as may be detailed from time to time in our
public announcements and SEC filings.
We are one of the largest wireless tower operators in the United States and
a leading provider of outsourced network services to the wireless communications
and broadcast industries in the United States and Canada. Our businesses include
the ownership and leasing of antenna sites on towers, managing rooftop and
in-building telecommunications access on commercial real estate, network
planning and deployment and construction of towers and related facilities. As of
December 31, 2000, we owned 5,030 towers as compared to 2,765 towers at December
31, 1999. We also own 50% of SpectraSite-Transco Communications, Ltd., a joint
venture with Lattice Group plc, the former arm of BG Group plc that operates
Britain's natural gas distribution network.
As a result of recent acquisitions, principally the acquisition of 2,000
communications towers from Nextel Communications, Inc. in April 1999, the
planned acquisition of 3,900 communications towers from SBC Communications, Inc.
and the merger with Westower Corporation in September 1999, we expect that
network services and antenna site leasing will generate most of our revenues. We
believe that our site leasing business will continue to represent a substantial
portion of our revenues and will continue to grow as we increase our network of
towers.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2000 COMPARED TO THE YEAR ENDED DECEMBER 31, 1999
Consolidated revenues for the year ended December 31, 2000 were $346.9
million, an increase of $246.8 million from the year ended December 31, 1999.
Revenues from site leasing increased to $116.5 million for the year ended
December 31, 2000 from $46.5 million for the year ended December 31, 1999,
primarily as a result of revenues derived from communications towers which we
acquired or constructed during 1999 and 2000. We owned 5,030 communications
towers at December 31, 2000, as compared to 2,765 communications towers at
December 31, 1999. The remaining factor contributing to the increase is
incremental revenue in 2000 for towers that existed as of December 31, 1999 from
new co-location tenants.
Revenues from network services increased to $230.4 million for the year
ended December 31, 2000 compared to $53.6 million for the year ended December
31, 1999, primarily as a result of revenue generated from acquisitions in late
1999 and in 2000.
Costs of operations increased to $222.9 million for the year ended December
31, 2000 from $54.3 million for the year ended December 31, 1999. The increase
in costs was primarily attributable to operating costs of the communications
towers acquired or constructed during 1999 and 2000, acquisitions in late 1999
and in 2000 and overall growth in operating activities. Costs of operations for
site leasing as a percentage of site leasing revenues increased to 40% for the
year ended December 31, 2000 from 38% for the year ended December 31, 1999. The
increase was primarily due to the addition of new towers and higher tower
operating expenses partially offset by increased revenues generated from new
co-location tenants on existing towers. As our site leasing operations mature we
expect that additional tenants on a tower will generate increases in our margins
for site leasing and in cash flow because a significant percentage of tower
operating costs are fixed and
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do not increase with additional tenants. Costs of operations for network
services as a percentage of network services revenues increased to 76% for the
year ended December 31, 2000 from 68% for the year ended December 31, 1999. This
increase is due to construction activities associated with Westower operations
that have higher levels of direct costs than site acquisition activities. We
ceased directly providing site acquisition services in late 1999.
Selling, general and administrative expenses increased to $65.3 million for
the year ended December 31, 2000 from $37.8 million for the year ended December
31, 1999. The increase is a result of expenses related to additional corporate
overhead and field operations to manage and operate the growth of our ongoing
operations and acquisition activities. Selling, general and administrative
expenses as a percentage of revenues decreased to 19% for the year ended
December 31, 2000 from 38% for the year ended December 31, 1999. The decrease
was primarily the result of high levels of administrative expenses incurred in
1999 associated with site acquisition activities and costs associated with the
integration of towers acquired from Nextel.
Depreciation and amortization expense increased to $96.7 million for the
year ended December 31, 2000 from $38.0 million for the year ended December 31,
1999, primarily as a result of the increased depreciation from towers we have
acquired or constructed and amortization of goodwill related to acquisitions.
For the year ended December 31, 2000, we recorded non-cash compensation
charges of $2.6 million related to the issuance of stock options and restricted
shares of common stock to employees. We recorded non-cash compensation charges
of $0.4 million in the year ended December 31, 1999 related to stock options and
restricted shares of common stock issued to employees.
In March 1999, we announced that we would relocate our marketing and
administrative operations from Little Rock, Arkansas and Birmingham, Alabama to
our corporate headquarters in Cary, North Carolina. As a result, we recorded a
restructuring and non-recurring charge of $0.6 million for employee termination
and other costs related to the relocation of these activities. In September
1999, we announced that we would no longer directly provide site acquisition
services. As a result, we recorded restructuring and non-recurring charges of
$7.1 million, of which $6.2 million related to the write-off of goodwill
associated with the purchase of Telesite Services, LLC and $0.9 million related
to costs of employee severance.
As a result of the factors discussed above, our loss from operations was
$40.6 million for the year ended December 31, 2000, compared to a loss of $38.1
million for the year ended December 31, 1999.
Net interest expense increased to $106.3 million during the year ended
December 31, 2000 from $58.6 million for the year ended December 31, 1999. The
increase reflects additional interest expense due to the issuance of our 11 1/4%
senior discount notes due 2009 in April 1999, our 12 7/8% senior discount notes
due 2010 in March 2000, our 10 3/4% senior notes due 2010 in March 2000, our
6 3/4% senior convertible notes due 2010 in November 2000 and our 12 1/2% senior
notes due 2010 in December 2000, as well as borrowings under our credit
facility.
YEAR ENDED DECEMBER 31, 1999 COMPARED TO THE YEAR ENDED DECEMBER 31, 1998
Consolidated revenues for the year ended December 31, 1999 were $100.1
million, an increase of $91.3 million from the year ended December 31, 1998.
Revenues from site leasing increased to $46.5 million for the year ended
December 31, 1999 from $0.7 million for the year ended December 31, 1998,
primarily as a result of revenues derived from 2,000 communications towers we
acquired from Nextel in April 1999. We owned 2,765 communications towers at
December 31, 1999, as compared to 106 communications towers at December 31,
1998.
Revenues from network services increased to $53.6 million for the year
ended December 31, 1999 compared to $8.1 million for the year ended December 31,
1998, primarily as a result of the acquisition of Westower in September 1999. In
September 1999, we announced that we would no longer directly provide site
acquisition services. Revenues from site acquisition activities were $7.2
million and $8.1 million in the years ended December 31, 1999 and 1998,
respectively.
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Costs of operations increased to $54.3 million for the year ended December
31, 1999 from $2.8 million for the year ended December 31, 1998. The increase in
costs was attributable to operating costs of the 2,000 communications towers
purchased from Nextel in April 1999 and the acquisition of Westower in September
1999. Costs of operations for site leasing as a percentage of site leasing
revenues decreased to 38% for the year ended December 31, 1999 from 46% for the
year ended December 31, 1998 primarily due to revenues generated from the
acquisition of towers from Nextel and co-location revenues on those towers.
Costs of operations for network services as a percentage of network services
revenues increased to 68% for the year ended December 31, 1999 from 31% for the
year ended December 31, 1998. This increase was due to construction activities
associated with Westower operations that have higher levels of direct costs than
our historical site acquisition activities.
Selling, general and administrative expenses increased to $37.8 million for
the year ended December 31, 1999 from $9.7 million for the year ended December
31, 1998. The increase was a result of expenses related to additional corporate
overhead and field operations implemented to manage and operate the growth in
our ongoing activities and the acquisition of Westower.
Depreciation and amortization expense increased to $38.0 million for the
year ended December 31, 1999 from $1.3 million for the year ended December 31,
1998, primarily as a result of the increased depreciation from the towers we
acquired or constructed and amortization of goodwill related to the Westower
acquisition.
We recorded non-cash compensation charges of $0.4 million in the year ended
December 31, 1999 related to stock options and restricted shares of common stock
issued to employees. The Company did not incur any such charges in 1998.
For the year ended December 31, 1999, we recorded restructuring and
non-recurring charges of $7.7 million. In March 1999, SpectraSite announced that
it would relocate its marketing and administrative operations from Little Rock,
Arkansas and Birmingham, Alabama to its corporate headquarters in Cary, North
Carolina. As a result, we recorded a non-recurring charge of $0.6 million for
employee termination and other costs related to the relocation of these
activities. In September 1999, we announced that we would no longer directly
provide site acquisition services. As a result, we recorded restructuring
charges of $7.1 million, of which $6.2 million related to the write-off of
goodwill associated with the purchase of Telesite Services, LLC and $0.9 million
related to costs of employee severance.
As a result of the factors discussed above, our loss from operations was
$38.1 million for the year ended December 31, 1999, as compared to a loss of
$5.0 million for the year ended December 31, 1998.
Net interest expense increased to $58.6 million during the year ended
December 31, 1999 from $4.6 million for the year ended December 31, 1998,
reflecting additional interest expense due to the issuance of our 12% senior
discount notes due 2008 in June 1998 and our 11 1/4% senior discount notes due
2009 in April 1999, as well as borrowings under our credit facility beginning in
April 1999.
LIQUIDITY AND CAPITAL RESOURCES
SpectraSite Holdings is a holding company whose only significant asset is
the outstanding capital stock of its subsidiaries, SpectraSite Communications
and SpectraSite International. Our only source of cash to pay interest on and
principal of our indebtedness is distributions from SpectraSite Communications
and SpectraSite International. On June 26, 1998, we privately placed $225.2
million aggregate principal amount at maturity of 12% senior discount notes due
2008. Prior to July 15, 2003, interest expense on the 12% discount notes will
consist solely of non-cash accretion of original issue discount and the 2008
notes will not require annual cash interest payments. After such time, the 12%
discount notes will have accreted to $225.2 million and will require semi-annual
cash interest payments of $13.5 million. The 12% discount notes mature on July
15, 2008. On April 20, 1999, we privately placed $586.8 million aggregate
principal amount at maturity of our 11 1/4% senior discount notes due 2009.
Prior to April 15, 2004, interest expense on the 11 1/4% discount notes will
consist solely of non-cash accretion of original issue discount and the 11 1/4%
discount notes will not require annual cash interest payments. After such time,
the 11 1/4% discount notes will have accreted to $586.8 million and will require
semi-annual cash interest payments of $33.0 million. The 11 1/4% discount notes
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mature on April 15, 2009. On March 10, 2000, we privately placed $200.0 million
aggregate principal amount of our 10 3/4% senior notes due 2010 and $559.8
million aggregate principal amount at maturity of our 12 7/8% senior discount
notes due 2010. The 10 3/4% notes require semi-annual cash interest payments of
$10.75 million and mature March 15, 2010. The 12 7/8% discount notes will not
require cash interest payments prior to October 15, 2005, and mature March 15,
2010. On March 15, 2005, the 12 7/8% discount notes will have accreted to $559.8
million and will require semi-annual cash interest payments of $36.0 million. On
November 20, 2000, we privately placed $200.0 million aggregate principal amount
of our 6 3/4% senior convertible notes due 2010. The 6 3/4% convertible notes
require semi-annual cash interest payments of $6.75 million and mature on
November 15, 2010. On December 20, 2000, we privately placed $200.0 million
aggregate principal amount of our 12 1/2% senior notes due 2010. The 12 1/2%
notes require semi-annual cash interest payments of $12.5 million. Furthermore,
our credit facility provides for periodic principal and interest payments.
Our ability to fund capital expenditures, make scheduled payments of
principal or pay interest on our debt obligations and our ability to refinance
any such debt obligations will depend on our future performance, which, to a
certain extent, is subject to general economic, financial, competitive,
legislative, regulatory and other factors that are beyond our control. Our
business strategy contemplates substantial capital expenditures, primarily to
fund the construction and acquisition of additional communications towers. We
believe that cash flow from operations, available cash on hand and anticipated
borrowings under our credit facility will be sufficient to fund our capital
expenditures for the foreseeable future. However, if we make additional
acquisitions or pursue other opportunities or if our estimates prove inaccurate,
we may seek additional sources of debt or equity capital or reduce the scope of
tower construction and acquisition activity. We cannot assure you that we will
generate sufficient cash flow from operations or that future borrowings or
equity or debt financings will be available on terms acceptable to us, in
amounts sufficient to service our indebtedness and make anticipated capital
expenditures.
At December 31, 2000, we had $200.0 million outstanding and $300.0 million
available under our existing credit facility to fund new tower construction or
acquisition activity. The weighted average interest rate on outstanding
borrowings under our credit facility as of December 31, 2000 was 9.36%. The
facility also requires compliance with certain financial covenants. At December
31, 2000, we were in compliance with these covenants. In addition, our cash and
cash equivalents were $552.7 million at December 31, 2000. In February 2001, we
amended and restated the credit facility. The amended and restated credit
facility consists of a $350.0 million revolving credit facility of which $50.0
million may be drawn, subject to the satisfaction of certain financial
covenants, at any time prior to the earlier of February 22, 2002 or the date on
which at least 50% of the multiple draw term loan has been funded, and, after
that date, $350.0 million may be drawn, subject to the satisfaction of certain
financial covenants, at any time prior to June 30, 2007, at which time all
amounts drawn under the revolving credit facility must be paid in full; a $500.0
million multiple draw term loan that may be drawn, subject to the satisfaction
of certain financial covenants, at any time through August 22, 2002, of which
the amount drawn must be repaid in quarterly installments beginning on September
30, 2003 and ending on June 30, 2007; and a $450.0 million term loan that was
drawn in full in February 2001 which will, from September 30, 2003 through June
30, 2007, amortize at a rate of 0.25% per quarter and be payable in quarterly
installments and, from July 1, 2007 through December 31, 2007, amortize at a
rate of 48% per quarter and be payable on September 30, 2007 and December 31,
2007. At the date of the closing of the amended and restated facility, we
borrowed an additional $300.0 million under the facility and incurred $20.0
million in origination fees.
Cash Flows
For the year ended December 31, 2000, cash flows provided by operating
activities were $11.4 million as compared to $17.6 million provided by operating
activities in the year ended December 31, 1999. The change is primarily
attributable to increased working capital needed to support the growing
operations of the business partially offset by the favorable cash flow generated
from earnings before interest, depreciation and amortization.
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For the year ended December 31, 2000, cash flows used in investing
activities were $1,108.7 million compared to $813.2 million for the year ended
December 31, 1999. In the year ended December 31, 2000, SpectraSite invested
$681.3 million in purchases of property and equipment and deposits on future
acquisitions, primarily related to the acquisition of communication towers. In
addition, we used an aggregate of $224.5 million in connection with our
acquisitions, including Lodestar, Apex, ITI and U.S. RealTel. We also invested
$198.0 million in affiliates, primarily related to our joint venture in the U.K.
In the year ended December 31, 1999, we invested $692.8 million in purchases of
property and equipment and deposits on future acquisitions, primarily related to
the acquisition of communications towers from Nextel. In addition, we used
$128.4 million in our acquisitions, including Westower and Stainless. These
investments were partially offset by $15.4 million in maturities of short-term
investments.
In the year ended December 31, 2000, cash flows provided by financing
activities were $1,612.2 million, as compared to $733.9 million in the year
ended December 31, 1999. The cash provided by financing activities in 2000 was
attributable to the proceeds from the issuance of common stock, senior notes,
senior convertible notes and senior discount notes. The cash provided by
financing activities in 1999 was primarily attributable to the proceeds from the
issuance of preferred stock, the 11 1/4% senior discount notes and from
borrowings under the credit facility.
Merger and Acquisition Activity
2000 Acquisitions -- During the year ended December 31, 2000, we
consummated transactions involving the acquisition of various communications
sites and service providers for an estimated purchase price of $765.1 million,
including the issuance of approximately 9.2 million shares of common stock
valued at $165.0 million. The purchase price also includes the issuance of
191,465 options to purchase common stock at a price of $3.58 per share valued at
$2.0 million. The principal transactions were as follows:
On January 5, 2000, we acquired Apex Site Management Holdings, Inc. in a
merger transaction for 4.5 million shares of common stock valued at $55.8
million and 191,465 options to purchase common stock at an exercise price of
$3.58 per share. We also used approximately $6.2 million in cash to repay
outstanding indebtedness and other obligations of Apex in connection with the
merger. Apex provides rooftop and in-building access to wireless carriers.
On January 28, 2000, we acquired substantially all of the assets of
International Towers Inc. and its subsidiaries, including S&W Communications
Inc. ITI owned a broadcast tower manufacturing facility and, through S&W
Communications, provided integrated services for the erection of broadcast
towers, foundations and multi-tenant transmitter buildings. We paid $5.4 million
and issued 0.35 million shares of common stock, valued at $7.1 million, in
connection with this acquisition.
On February 17, 2000, we entered into an agreement with AirTouch
Communications and several of its affiliates, under which it agreed to lease or
sublease approximately 430 communications towers located throughout southern
California for $155.0 million, subject to adjustment. As partial security for
obligations under the master sublease, we deposited $23.0 million into escrow.
The AirTouch transaction closed in stages with the initial closing occurring on
August 15, 2000 and the final closing occurring on February 15, 2001. At each
respective closing, we paid for the towers included in that closing according to
a formula contained in the master sublease. During 2000, we subleased 233 towers
for aggregate cash consideration of $83.9 million, including $12.5 million
released from the deposit escrow. The final closing of 69 towers occurred on
February 15, 2001 for aggregate cash consideration of $24.8 million, including
$3.7 million released from the deposit escrow. The leases for the remaining 128
towers contemplated in the original agreement were not closed, and as a result,
the remaining $6.8 million escrow deposit was returned to us on the date of the
final closing. In March 2001, we agreed to amend our agreement with AirTouch and
extend the opportunity to sublease the remaining 128 towers through the second
quarter of 2001. We expect additional closings to involve at least ten towers.
We cannot predict the timing of any additional closings and there can be no
assurance we will lease any additional towers from AirTouch at this time.
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On May 18, 2000, we acquired Lodestar Towers, Inc. for approximately $178.6
million in cash. As of May 18, 2000, Lodestar owned 110 wireless towers and 11
broadcast towers and managed an additional 120 wireless towers and 10 broadcast
towers.
On July 17, 2000, we acquired 11 broadcast towers from Pegasus
Communications for approximately 1.4 million shares of common stock valued at
$37.5 million. Under the agreement, we will build up to five new digital
television towers for Pegasus in the 12 months following closing.
On August 24, 2000, we acquired 12 broadcast towers and 14 other
communications towers from GOCOM Holdings, LLC and its subsidiaries for $28.2
million in cash.
On August 25, 2000, we entered into an agreement to acquire leasehold and
sub-leasehold interests in approximately 3,900 wireless communications towers
from affiliates of SBC Communications in exchange for $982.7 million in cash and
approximately 14.3 million in shares of common stock, subject to adjustment,
valued at $325.0 million. The SBC transaction will close in stages and the
initial closing occurred on December 14, 2000. The initial closing involved 739
towers, for which we paid $175.0 million in cash and issued 2.5 million shares
of common stock valued at $57.9 million. In February 2001, we subleased an
additional 333 towers for which we paid $85.2 million in cash and issued 1.2
million shares of common stock valued at $28.2 million. At each closing, we will
make a pro rata payment of cash and stock to SBC for the actual towers
subleased. We expect the final closing to occur in the first quarter of 2002.
On December 8, 2000, we purchased substantially all of the United States
assets and operations of U.S. RealTel, Inc. for $16.5 million in cash. U.S.
RealTel is an international provider of rooftop and in-building
telecommunication access.
1999 Acquisitions -- During the year ended December 31, 1999, we
consummated transactions involving the acquisition of various communications
sites and service providers for an estimated purchase price of $972.4 million,
including the issuance of approximately 16.0 million shares of common stock
valued at $211.0 million. In addition, this purchase price includes 14.0 million
shares of Series C preferred stock and 1.7 million options to purchase common
stock valued at $70.0 million and $7.4 million, respectively. The principal 1999
transactions were as follows:
In April 1999, we purchased 2,000 communications towers from Nextel for
$560.0 million in cash and 14.0 million shares of Series C preferred stock,
which represented approximately 18% of our outstanding capital stock at that
time. Of the total consideration paid to Nextel, $45.0 million was allocated as
a deposit relating to this commitment. We used $150.0 million of borrowings
under a $500.0 million committed credit facility, $340.0 million from the
proceeds of the 11 1/4% discount notes and $231.4 million from the sale of
Series C preferred stock to fund the cash purchase price and to pay related fees
and expenses. In addition, certain of Nextel's subsidiaries entered into a
master site commitment agreement under which Nextel and its controlled
affiliates offer us exclusive opportunities, under specific terms and
conditions, relating to the construction or purchase of, or co-location on,
1,700 additional communications sites. These sites will then be leased by
subsidiaries of Nextel under the terms of the master site lease agreement. If
the number of new sites leased is less than the agreed upon number as of
particular dates, Nextel has agreed to make payments to us. The master site
commitment agreement also gives us a right of first refusal to acquire any
towers that Nextel or certain affiliates desire to sell. During 1999, we
purchased 148 towers under the master site commitment agreement for an aggregate
purchase price of $28.5 million. During 2000, we purchased an additional 479
towers under this agreement for an aggregate purchase price of $86.9 million.
In September 1999, we consummated a merger with Westower Corporation. Under
the terms of the merger agreement, Westower shareholders received 1.81 shares of
common stock for each share of Westower common stock. In the aggregate, we
exchanged 15.5 million shares of our common stock valued at $205.6 million for
8.6 million shares of Westower common stock and assumed $81.5 million of debt.
We repaid $72.2 million of such assumed debt at closing. In addition, we assumed
the outstanding Westower employee stock options, which were converted into
options to purchase 1.7 million shares of our common stock.
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On December 30, 1999, we acquired Stainless, Inc., formerly a wholly owned
subsidiary of Northwest Broadcasting, L.P., for $40.0 million in cash. Stainless
provides engineering, fabrication and other services in connection with the
erection of towers used for television broadcast companies.
Financing Transactions
In connection with the Nextel tower acquisition, we privately placed 46.3
million shares of Series C preferred stock for an aggregate purchase price of
$231.4 million. On April 20, 1999, SpectraSite completed the private offering of
$586.8 million aggregate principal amount at maturity of 11 1/4% senior discount
notes due 2009.
Also on April 20, 1999, we entered into a $500.0 million seven-year credit
facility. We borrowed $150.0 million under this facility at the closing of the
Nextel tower acquisition and an additional $50.0 million in December 1999. We
also issued 2.0 million shares of common stock to various parties as
consideration for providing financing commitments related to the Nextel tower
acquisition. We did not utilize these commitments for the Nextel acquisition
primarily because of the success of the 11 1/4% discount notes offering.
On February 4, 2000, we completed an underwritten public offering of our
common stock. We sold 25.6 million shares of common stock, including an
over-allotment option exercised by the underwriters. Upon closing of the
offering, all 70.7 million outstanding shares of our preferred stock converted
into shares of common stock on a share-for-share basis. We received net proceeds
of $411.3 million from the offering.
On March 15, 2000, we privately placed $559.8 million aggregate principal
amount at maturity of 12 7/8% senior discount notes due 2010 for gross proceeds
of $300.0 million and $200.0 million aggregate principal amount of 10 3/4%
senior notes due 2010.
On July 28, 2000, we completed an underwritten public offering of 11.0
million shares of common stock for net proceeds of approximately $220.2 million.
On August 2, 2000, the underwriters purchased an additional 1.65 million shares
of common stock pursuant to the exercise of their overallotment option for net
proceeds of $33.2 million.
On November 20, 2000, the Trimaran group purchased 4.0 million shares of
common stock for $75.0 million. In addition, the Trimaran group received
warrants to purchase an additional 1.5 million shares of common stock. The
warrants are immediately exercisable; the exercise price for 0.6 million shares
is $21.56 per share, the exercise price for 0.45 million shares is $23.86 per
share and the exercise price for the remaining 0.45 million shares is $28.00 per
share.
On November 20, 2000, we issued $200.0 million aggregate principal amount
of 6 3/4% senior convertible notes due 2010. Each note is convertible into
common stock at any time on or before November 15, 2010 at a conversion price of
$21.5625 per share, subject to adjustment if certain events affecting our common
stock occur. In connection with the offering of convertible notes, we agreed to
register the notes and the common stock issuance upon conversion of the notes
for resale. On February 9, 2001, the SEC declared our resale registration
statement covering the notes and the underlying common stock effective.
On December 20, 2000, we issued $200.0 million aggregate principal amount
of 12 1/2% senior notes due 2010 for proceeds of $195.9 million, net of original
issue discount. On February 28, 2001, we completed an exchange offer pursuant to
which all outstanding 12 1/2% notes were exchanged for identical notes
registered under the Securities Act of 1933.
Inflation
Some of our expenses, such as those for marketing, wages and benefits,
generally increase with inflation. However, we do not believe that our financial
results have been, or will be, adversely affected by inflation in a material
way.
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RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS 133
requires that derivative instruments be recognized as either assets or
liabilities in the consolidated balance sheet based on their fair values.
Changes in the fair values of such derivative instruments will be recorded
either in results of operations or in other comprehensive income, depending on
the intended use of the derivative instrument. The initial application of SFAS
133 will be reported as the effect of a change in accounting principle. SFAS 133
became effective for us on January 1, 2001. We currently do not have any
derivative instruments that are impacted by SFAS 133 and do not expect adoption
of SFAS 133 to have a material impact on our consolidated financial statements.
The SEC issued Staff Accounting Bulletin No. 101 "Revenue Recognition"
which provides the SEC staff's views in applying generally accepted accounting
principles to selected revenue recognition issues. SAB No. 101 was effective for
us for the year ended December 31, 2000. The adoption of SAB No. 101 did not
have a material impact on our consolidated financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
We use financial instruments, including fixed and variable rate debt, to
finance our operations. The information below summarizes our market risks
associated with debt obligations outstanding as of December 31, 2000. The
following table presents principal cash flow and related weighted average
interest rates by fiscal year of maturity. Variable interest rate obligations
under the credit facility are not included in the table. We have no long-term
variable interest obligations other than borrowings under the credit facility.
EXPECTED MATURITY DATE
---------------------------------------------
2001 2002 2003 2004 2005 THEREAFTER TOTAL
---- ---- ---- ---- ---- ---------- ----------
(DOLLARS IN THOUSANDS)
Long-term obligations:
Fixed rate..................... $ -- $ -- $ -- $ -- $ -- $1,508,243 $1,508,243
Average interest rate.......... -- -- -- -- -- 11.19% 11.19%
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and related financial information required by this
Item are included in this report beginning on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The information required by this Item is incorporated by reference to
SpectraSite's Proxy Statement for the 2001 Annual Meeting of Stockholders.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to
SpectraSite's Proxy Statement for the 2001 Annual Meeting of Stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to
SpectraSite's Proxy Statement for the 2001 Annual Meeting of Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to
SpectraSite's Proxy Statement for the 2001 Annual Meeting of Stockholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents incorporated by reference or filed with this report
(1) The required financial statements are included in this report
beginning on page F-1.
(2) No financial statement schedules are required to be filed by Items
8 and 14(d) of this report because they are not required or are not
applicable, or the required information is set forth in the applicable
financial statements or notes thereto.
(3) Listed below are the exhibits which are filed or incorporated by
reference as part of this report (according to the number assigned to them
in Item 601 of Regulation S-K).
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2.1 Merger Agreement and Plan of Reorganization, dated as of
November 24, 1999, among SpectraSite Holdings, Inc. (the
"Registrant"), Apex Merger Sub, Inc. and Apex Site
Management Holdings, Inc. Incorporated by reference to
exhibit no. 2.4 to the Registrant's registration statement
on Form S-1, file no. 333-93873.
2.2 Agreement to Sublease, dated as of February 16, 2000, by and
between AirTouch Communications, Inc. and the other parties
named therein as Sublessors, California Tower, Inc. and the
Registrant. Incorporated by reference to exhibit no. 2.9 to
the Registrant's Form 10-K for the year ended December 31,
1999.
2.3 Joint Venture Shareholders' Agreement, dated as of April 13,
2000, by and among SpectraSite International, Inc., Transco
Telecommunications Asset Development Company Limited and
EVER 1267 Limited. Incorporated by reference to exhibit no
2.2 of the Registrant's report on Form 8-K filed on April
18, 2000.
2.4 Agreement to Sublease, dated as of August 25, 2000, by and
among SBC Wireless, Inc. and certain of its affiliates, the
Registrant, and Southern Towers, Inc. (the "SBC Agreement").
Incorporated by reference to exhibit no. 10.1 to the
Registrant's Form 8-K dated August 25, 2000 and filed August
31, 2000.
2.5 Amendment No. 1 to the SBC Agreement. Incorporated by
reference to exhibit no. 2.8 to the registration statement
on Form S-3 of the Registrant, file no. 333-45728.
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EXHIBIT
NUMBER DESCRIPTION
------- -----------
3.1 Second Amended and Restated Certificate of Incorporation of
the Registrant. Incorporated by reference to exhibit no. 3.1
to the amended registration statement on Form 8-A/A of the
Registrant, filed on December 12, 2000.
3.2 Amended Bylaws of SpectraSite Holdings, Inc. Incorporated by
reference to exhibit no. 3.8 to the registration statement
on Form S-1 of the Registrant, file no. 333-93873.
4.1 Indenture, dated as of June 26, 1998, between the Registrant
and United States Trust Company of New York, as trustee.
Incorporated by reference to exhibit no. 4.1 to the
registration statement on Form S-4 of the Registrant, file
no. 333-67043.
4.2 First Supplemental Indenture, dated as of March 25, 1999,
between the Registrant and United States Trust Company of
New York, as trustee. Incorporated by reference to exhibit
no. 4.2 to the registration statement on Form S-4 of the
Registrant, file no. 333-67043.
4.3 Second Supplemental Indenture, dated as of June 6, 2000,
between the Registrant and United States Trust Company of
New York, as trustee. Incorporated by reference to exhibit
no. 4.1 of the Registrant's report on Form 8-K, dated June
6, 2000 and filed June 21, 2000.
4.4 Indenture, dated as of April 20, 1999, between the
Registrant and United States Trust Company of New York, as
trustee. Incorporated by reference to exhibit no. 4.3 to the
registration statement on Form S-4 of the Registrant, file
no. 333-67043.
4.5 Indenture, dated as of March 15, 2000, between the
Registrant and United States Trust Company of New York, as
trustee. (10 3/4% senior notes) Incorporated by reference to
exhibit no. 4.4 of the registration statement on Form S-4 of
the Registrant, file no. 333-35094.
4.6 Indenture, dated as of March 15, 2000, between the
Registrant and United States Trust Company of New York, as
trustee. (12 7/8% senior notes) Incorporated by reference to
exhibit no. 4.5 of the Registrant's registration statement
on Form S-4, file no. 333-35094.
4.7 Indenture, dated as of November 20, 2000, between
SpectraSite Holdings, Inc. and United States Trust Company
of New York, as trustee. Incorporated by reference to
exhibit 4.1 of the Registrant's report on Form 8-K, dated
November 20, 2000 and filed November 22, 2000.
4.8 Indenture, dated as of December 20, 2000, between the
Registrant and United States Trust Company of New York, as
trustee. Incorporated by reference to exhibit no. 4.17 to
the registration statement on Form S-3 of the Registrant,
file no. 333-45728.
4.9 Second Amended and Restated Registration Rights Agreement,
dated as of April 20, 1999. Incorporated by reference to
exhibit no. 10.5 to the registration statement on Form S-4
of the Registrant, file no. 333-67043.
4.10 Joinder Agreement to SpectraSite Restated Registration
Rights Agreement, dated January 5, 2000. Incorporated by
reference to exhibit no. 10.36 to the Registrant's
registration statement on Form S-1, file no. 333-93873.
4.11 Consent and Agreement to SBCW Registration Rights and
Amendment to Second Amended and Restated Registration Rights
Agreement. Incorporated by reference to exhibit 4.10 to the
amended registration statement on Form 8-A/A of the
Registrant, filed on December 12, 2000.
4.12 Registration Rights Agreement, dated as of November 20,
2000, among SpectraSite Holdings, Inc. and Trimaran Fund II,
L.L.C., Trimaran Capital, L.L.C., Trimaran Parallel Fund II,
L.P., CIBC Employee Private Equity Fund (Trimaran) Partners
and CIBC World Markets Ireland Limited. Incorporated by
reference to exhibit 4.4 of the Registrant's report on Form
8-K, dated November 20, 2000 and filed November 22, 2000.
4.13 Joinder Agreement to the Second Amended and Restated
Registration Rights Agreement, dated as of December 14,
2000. Incorporated by reference to exhibit no. 4.12 to the
registration statement on Form S-3 of the Registrant, file
no. 333-45728.
4.14 Third Amended and Restated Stockholders' Agreement, dated as
of April 20, 1999. Incorporated by reference to exhibit no.
10.6 to the registration statement on Form S-4 of the
Registrant, file no. 333-67043.
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EXHIBIT
NUMBER DESCRIPTION
------- -----------
4.15 Amendment No. 1 to the Third Amended and Restated
Stockholders' Agreement, dated as of November 20, 2000.
Incorporated by reference to exhibit 4.6 of the Registrant's
report on Form 8-K, dated November 20, 2000 and filed
November 22, 2000.
4.16 Amendment No. 2 to the Third Amended and Restated
Stockholders' Agreement, dated as of December 14, 2000.
Incorporated by reference to exhibit no. 4.16 to the
registration statement on Form S-3 of the Registrant, file
no. 333-45728.
4.17 Warrant Agreement, dated as of November 20, 2000, between
SpectraSite Holdings, Inc. and First Union National Bank, as
Warrant Agent. Incorporated by reference to exhibit 4.5 of
the Registrant's report on Form 8-K, dated November 20, 2000
and filed November 22, 2000.
10.1 Employment Agreement with Stephen H. Clark. Incorporated by
reference to exhibit no. 10.7 to the Registrant's
registration statement on Form S-4, file no. 333-67043.
10.2 Employment Agreement with David P. Tomick. Incorporated by
reference to exhibit no. 10.8 to the Registrant's
registration statement on Form S-4, file no. 333-67043.
10.3 Employment Agreement with Richard J. Byrne. Incorporated by
reference to exhibit no. 10.9 to the Registrant's
registration statement on Form S-4, file no. 333-67043.
10.4 Employment Agreement with Calvin J. Payne. Incorporated by
referenced to exhibit 10.1 to the Registrant's report on
Form 8-K, dated September 2, 1999 and filed September 17,
1999.
10.5 Employment Agreement with Timothy G. Biltz.
10.6 Credit Agreement, dated as of February 22, 2001, by and
among SpectraSite Communications, Inc., as Borrower; the
Registrant, as a Guarantor; CIBC World Markets Corp. and
Credit Suisse First Boston, as Joint Lead Arrangers and
Bookrunners; CIBC World Markets Corp., Credit Suisse First
Boston, Bank Of Montreal, Chicago Branch and TD Securities
(USA) Inc., as Arrangers; Credit Suisse First Boston, as
Syndication Agent; Bank Of Montreal, Chicago Branch and TD
Securities (USA) Inc., as Co-Documentation Agents; Canadian
Imperial Bank Of Commerce, as Administrative Agent and
Collateral Agent; and the other credit parties party
thereto.
10.7 SpectraSite Holdings, Inc. Stock Incentive Plan.
Incorporated by reference to the exhibit no. 10.16 to the
Registrant's registration statement on Form S-4, file no.
333-67043.
10.8 SpectraSite Holdings, Inc. Employee Stock Purchase Plan.
Incorporated by reference to the exhibit no. 10.17 to the
Registrant's registration statement on Form S-4, file no.
333-67043.
10.9 Security & Subordination Agreement, dated as of April
20,1999, with Nextel Communications, Inc. ("Nextel").
Incorporated by reference to exhibit no. 10.32 to the
Registrant's registration statement on Form S-4, file no.
333-67043.
10.10 Master Site Commitment Agreement, dated as of April 20,
1999, with Nextel. Incorporated by reference to exhibit no.
10.33 to the Registrant's registration statement on Form
S-4, file no. 333-67043.
10.11 Master Site Lease Agreement, dated as of April 20, 1999,
with Nextel. Incorporated by reference to exhibit no. 10.34
to the Registrant's registration statement on Form S-4, file
no. 333-67043.
10.12 Agreement to Build to Suit by and among SBC Wireless, Inc.,
for itself and as agent for certain SBCW parties designated
on the signatures page thereof, the Registrant and
SpectraSite Communications, Inc. Incorporated by reference
to Exhibit D of the SBC Agreement.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP.
24.1 Powers of Attorney (included on the signature page to this
report).
(4) Reports on Form 8-K filed during the quarter ended December 31,
2000:
An Item 5 report on Form 8-K/A, dated August 25, 2000, was filed on
November 17, 2000 to (I) set forth certain details regarding (a) the
agreement with SBC Communications, Inc. to lease
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approximately 3,900 communications towers from SBC, and (b) the agreement
with Trimaran Fund II, L.L.C. pursuant to which Trimaran agreed to purchase
4.0 million shares of SpectraSite Holdings' common stock at a price of
$18.75 per share in a private placement exempt from the registration
requirements of the Securities Act of 1933; and (II) to announce the
receipt of a commitment letter from CIBC World Markets Corp. to provide
approximately $1.2 billion pursuant to an amended and restated credit
facility.
An Item 5 report on Form 8-K, dated November 20, 2000, was filed on
November 22, 2000 to announce (a) the completion of the private placement
of $200 million aggregate principal amount of SpectraSite's 6 3/4% senior
convertible notes due 2010 pursuant to Rule 144A promulgated under the
Securities Act of 1933, as amended, and (b) the completion of the private
sale of 4,000,000 shares of common stock to Trimaran Fund II, L.L.C. and
certain other investors participating in the Trimaran investment program.
An Item 5 report on Form 8-K/A, dated August 25, 2000, was filed on
December 18, 2000 to announce (a) the initial closing on December 14, 2000
of the agreement with SBC Communications, Inc. to lease communications
towers from SBC; and (b) the entering into an agreement to sell $200
million aggregate principal amount of SpectraSite's 12 1/2% senior notes
due 2010 pursuant to Rule 144A and Regulation S promulgated under the
Securities Act of 1933, as amended.
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INDEX TO FINANCIAL STATEMENTS
PAGE
----
Report of Independent Auditors.............................. F-2
Consolidated Balance Sheets as of December 31, 1999 and
2000...................................................... F-3
Consolidated Statements of Operations for the years ended
December 31, 1998, 1999 and 2000.......................... F-4
Consolidated Statement of Redeemable Convertible Preferred
Stock and Shareholders' Equity (Deficiency) for the years
ended December 31, 1998, 1999 and 2000.................... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1999 and 2000.......................... F-6
Notes to Consolidated Financial Statements.................. F-7
F-1
29
REPORT OF INDEPENDENT AUDITORS
Board of Directors
SpectraSite Holdings, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of SpectraSite
Holdings, Inc. and subsidiaries as of December 31, 1999 and 2000 and the related
consolidated statements of operations, redeemable convertible preferred stock
and shareholders' equity (deficiency) and cash flows for each of the three years
in the period ended December 31, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audits 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 audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of SpectraSite
Holdings, Inc. and subsidiaries at December 31, 1999 and 2000 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2000 in conformity with accounting
principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
February 16, 2001
Raleigh, North Carolina
F-2
30
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
AS OF DECEMBER 31,
------------------------
1999 2000
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents................................. $ 37,778 $ 552,653
Accounts receivable, net of allowance of $1,530 and
$3,585................................................. 31,785 92,487
Costs and estimated earnings in excess of billings........ 11,545 20,531
Inventories............................................... 4,083 8,995
Prepaid expenses and other................................ 4,353 10,044
---------- ----------
Total current assets.............................. 89,544 684,710
Property and equipment, net................................. 763,757 1,540,337
Goodwill and other intangible assets, net................... 307,197 570,749
Investments in affiliates................................... 3,706 177,117
Other assets................................................ 55,749 81,192
---------- ----------
Total assets...................................... $1,219,953 $3,054,105
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 21,230 $ 54,562
Accrued and other expenses................................ 16,942 45,227
Billings in excess of costs and estimated earnings........ 5,247 10,218
---------- ----------
Total current liabilities......................... 43,419 110,007
Long-term debt.............................................. 202,527 200,812
Senior notes................................................ -- 400,000
Senior convertible notes.................................... -- 200,000
Senior discount notes....................................... 516,251 908,243
Other long-term liabilities................................. -- 10,243
---------- ----------
Total liabilities................................. 762,197 1,829,305
---------- ----------
Shareholders' equity:
Series A convertible preferred stock, $0.001 par value,
3,462,830 and zero shares authorized and outstanding,
stated at liquidation value............................ 10,000 --
Series B convertible preferred stock, $0.001 par value,
7,000,000 and zero shares authorized and outstanding,
stated at liquidation value............................ 28,000 --
Series C convertible preferred stock, $0.001 par value,
60,286,795 and zero shares authorized and outstanding,
stated at liquidation value............................ 301,494 --
Common stock, $0.001 par value, 300,000,000 shares
authorized, 20,191,604 and 144,914,484 issued and
outstanding, respectively.............................. 20 145
Additional paid-in-capital................................ 230,546 1,492,845
Accumulated other comprehensive income.................... 192 1,922
Accumulated deficit....................................... (112,496) (270,112)
---------- ----------
Total shareholders' equity........................ 457,756 1,224,800
---------- ----------
Total liabilities and shareholders' equity........ $1,219,953 $3,054,105
========== ==========
See accompanying notes.
F-3
31
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR YEAR YEAR
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1999 2000
------------ ------------ ------------
Revenues:
Site leasing........................................ $ 656 $ 46,515 $ 116,476
Network services.................................... 8,142 53,570 230,432
-------- -------- ---------
Total revenues.............................. 8,798 100,085 346,908
-------- -------- ---------
Operating expenses:
Cost of operations, excluding depreciation and
amortization expense:
Site leasing..................................... 299 17,825 46,667
Network services................................. 2,492 36,489 176,247
Selling, general and administrative expenses........ 9,690 37,832 65,321
Depreciation and amortization expense............... 1,268 37,976 96,734
Non-cash compensation charges....................... -- 350 2,572
Restructuring and non-recurring charges............. -- 7,727 --
-------- -------- ---------
Total operating expenses.................... 13,749 138,199 387,541
-------- -------- ---------
Operating loss........................................ (4,951) (38,114) (40,633)
-------- -------- ---------
Other income (expense):
Interest income..................................... 3,569 8,951 28,391
Interest expense.................................... (8,170) (67,513) (134,664)
Other income (expense).............................. 473 (424) (8,536)
-------- -------- ---------
Total other income (expense)................ (4,128) (58,986) (114,809)
-------- -------- ---------
Loss before income taxes.............................. (9,079) (97,100) (155,442)
Income tax expense.................................... -- 568 2,174
-------- -------- ---------
Net loss.............................................. $ (9,079) $(97,668) $(157,616)
======== ======== =========
Loss applicable to common shareholders:
Net loss.............................................. $ (9,079) $(97,668) $(157,616)
Accretion of redemption value of preferred stock...... (2,156) (760) --
-------- -------- ---------
Net loss applicable to common shareholders............ $(11,235) $(98,428) $(157,616)
======== ======== =========
Net loss per common share:
Basic and diluted................................... $ (11.98) $ (12.48) $ (1.31)
======== ======== =========
Weighted average common shares outstanding:
Basic and diluted................................... 938 7,886 120,731
======== ======== =========
See accompanying notes.
F-4
32
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF REDEEMABLE
CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY (DEFICIENCY)
(DOLLARS IN THOUSANDS)
REDEEMABLE CONVERTIBLE
PREFERRED STOCK
------------------------- SHAREHOLDERS' EQUITY (DEFICIENCY)
REDEEMABLE REDEEMABLE --------------------------------------------------------------
CONVERTIBLE CONVERTIBLE CONVERTIBLE CONVERTIBLE CONVERTIBLE
PREFERRED PREFERRED PREFERRED PREFERRED PREFERRED COMMON STOCK
STOCK STOCK STOCK STOCK STOCK --------------------
SERIES A SERIES B SERIES A SERIES B SERIES C SHARES AMOUNT
----------- ----------- ----------- ----------- ----------- ----------- ------
Balance at December 31, 1997.......... $ 10,500 $ -- $ -- $ -- $ -- 931,753 $ 1
Exercise of warrants.................. -- -- -- -- -- 150,000 --
Issuance of preferred stock, net of
stock issuance costs of $434......... -- 28,000 -- -- -- -- --
Accretion of redemption value......... 800 1,356 -- -- -- -- --
Repurchase of common stock............ -- -- -- -- -- (125,000) --
Net loss.............................. -- -- -- -- -- --
-------- -------- -------- -------- --------- ----------- ----
Balance at December 31, 1998.......... 11,300 29,356 -- -- -- 956,753 1
Net loss.............................. -- -- -- -- -- -- --
Foreign currency translation
adjustment........................... -- -- -- -- -- -- --
Total comprehensive loss..............
Issuance of common stock, net of stock
issuance costs of $6,714............. -- -- -- -- -- 19,234,851 19
Issuance of Series C preferred
stock................................ -- -- -- -- 301,494 -- --
Accretion of redemption value......... 200 560 -- -- -- -- --
Cancellation of redemption status of
preferred stock...................... (11,500) (29,916) 10,000 28,000 -- -- --
-------- -------- -------- -------- --------- ----------- ----
Balance at December 31, 1999.......... -- -- 10,000 28,000 301,494 20,191,604 20
Net loss.............................. -- -- -- -- -- -- --
Foreign currency translation
adjustment........................... -- -- -- -- -- -- --
Unrealized holding gains arising
during period........................ -- -- -- -- -- -- --
Total comprehensive loss..............
Issuance of common stock, net of stock
issuance costs of $37,150............ -- -- -- -- -- 53,973,255 54
Issuance of warrants.................. -- -- -- -- -- -- --
Non-cash compensation charges......... -- -- -- -- -- -- --
Conversion of preferred stock to
common stock......................... -- -- (10,000) (28,000) (301,494) 70,749,625 71
-------- -------- -------- -------- --------- ----------- ----
Balance at December 31, 2000.......... $ -- $ -- $ -- $ -- $ -- 144,914,484 $145
======== ======== ======== ======== ========= =========== ====
SHAREHOLDERS' EQUITY (DEFICIENCY)
---------------------------------------------------------------------
ACCUMULATED
ADDITIONAL COMPREHENSIVE OTHER
PAID-IN INCOME COMPREHENSIVE ACCUMULATED
CAPITAL (LOSS) INCOME DEFICIT TOTAL
---------- ------------- ------------- ----------- ----------
Balance at December 31, 1997.......... $ 1,991 $ -- $ (3,890) $ (1,898)
Exercise of warrants.................. -- -- -- --
Issuance of preferred stock, net of
stock issuance costs of $434......... (434) -- -- (434)
Accretion of redemption value......... (1,557) -- (599) (2,156)
Repurchase of common stock............ -- -- (500) (500)
Net loss.............................. -- $ (9,079) -- (9,079) (9,079)
---------- ========= -------- --------- ----------
Balance at December 31, 1998.......... -- (14,068) (14,067)
Net loss.............................. -- $ (97,668) -- (97,668) (97,668)
Foreign currency translation
adjustment........................... -- 192 192 -- 192
---------
Total comprehensive loss.............. $ (97,476)
=========
Issuance of common stock, net of stock
issuance costs of $6,714............. 227,130 -- -- 227,149
Issuance of Series C preferred
stock................................ -- -- -- 301,494
Accretion of redemption value......... -- -- (760) (760)
Cancellation of redemption status of
preferred stock...................... 3,416 -- -- 41,416
---------- -------- --------- ----------
Balance at December 31, 1999.......... 230,546 192 (112,496) 457,756
Net loss.............................. -- $(157,616) -- (157,616) (157,616)
Foreign currency translation
adjustment........................... -- (14,946) (14,946) -- (14,946)
Unrealized holding gains arising
during period........................ -- 16,676 16,676 -- 16,676
---------
Total comprehensive loss.............. $(155,886)
=========
Issuance of common stock, net of stock
issuance costs of $37,150............ 906,584 -- -- 906,638
Issuance of warrants.................. 13,720 -- -- 13,720
Non-cash compensation charges......... 2,572 2,572
Conversion of preferred stock to
common stock......................... 339,423 -- -- --
---------- -------- --------- ----------
Balance at December 31, 2000.......... $1,492,845 $ 1,922 $(270,112) $1,224,800
========== ======== ========= ==========
See accompanying notes.
F-5
33
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1999 DECEMBER 31, 2000
----------------- ----------------- -----------------
OPERATING ACTIVITIES
Net loss................................................... $ (9,079) $(97,668) (157,616)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation............................................. 712 31,967 65,368
Amortization of goodwill and other intangibles........... 556 6,009 31,366
Amortization of debt issuance costs...................... 244 3,086 5,507
Non-cash financing charge................................ -- 9,000 --
Amortization of senior discount notes.................... 7,689 43,558 92,018
Non-cash compensation charges............................ -- 350 2,572
Write-off of goodwill.................................... -- 6,178 --
Equity in net loss of an affiliate....................... -- 408 8,748
Changes in operating assets and liabilities, net of
acquisitions:
Accounts receivable.................................... (1,451) (8,535) (57,738)
Costs and estimated earnings in excess of billings..... -- (4,240) (13,608)
Inventories............................................ -- 1,526 (3,759)
Prepaid expenses and other............................. (923) (4,024) (8,179)
Accounts payable....................................... 591 11,457 27,721
Other current liabilities.............................. (213) 18,388 18,965
Other, net............................................. (473) 95 --
-------- -------- ----------
Net cash provided by (used in) operating
activities....................................... (2,347) 17,555 11,365
-------- -------- ----------
INVESTING ACTIVITIES
Purchases of property and equipment........................ (26,598) (644,778) (658,283)
Acquisitions, net of cash acquired......................... (1,989) (128,414) (224,518)
Issuance of note receivable................................ -- (500) --
Investment in affiliates................................... -- (4,167) (198,039)
Loan to affiliate.......................................... -- (2,875) (4,850)
Purchases of investments................................... (30,005) -- --
Maturities of short-term investments....................... 15,350 15,414 --
Repurchase of common stock................................. (500) -- --
Deposits on acquisitions................................... (1,750) (48,069) (23,000)
Other, net................................................. 490 164 --
-------- -------- ----------
Net cash used in investing activities.............. (45,002) (813,225) (1,108,690)
-------- -------- ----------
FINANCING ACTIVITIES
Proceeds from issuance of preferred stock.................. 28,000 231,494 --
Proceeds from issuance of common stock..................... -- 1,007 790,397
Stock issuance costs....................................... (434) (6,714) (37,150)
Proceeds from issuance of long-term debt................... -- 200,000 --
Proceeds from issuance of senior notes..................... -- -- 395,926
Proceeds from issuance of senior convertible notes......... -- -- 200,000
Proceeds from issuance of senior discount notes............ 125,000 340,004 299,974
Debt issuance costs........................................ (4,836) (29,307) (35,526)
Repayment of note to shareholder and other debt............ (3,067) (2,584) (1,421)
-------- -------- ----------
Net cash provided by financing activities.......... 144,663 733,900 1,612,200
-------- -------- ----------
Net increase (decrease) in cash and cash equivalents....... 97,314 (61,770) 514,875
Cash and cash equivalents at beginning of period........... 2,234 99,548 37,778
-------- -------- ----------
Cash and cash equivalents at end of period................. $ 99,548 $ 37,778 $ 552,653
======== ======== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest..................................... $ 216 $ 9,019 $ 35,372
Cash paid for taxes........................................ -- -- 1,106
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Series C preferred stock issued for the purchase of
property and equipment................................... $ -- $ 70,000 $ --
Common stock issued for acquisitions and property and
equipment................................................ 224 217,855 167,004
See accompanying notes.
F-6
34
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
SpectraSite Holdings, Inc. ("SpectraSite") and its wholly owned
subsidiaries (collectively referred to as the "Company"), are principally
engaged in providing services to companies operating in the telecommunications
industry, including leasing antenna sites on multi-tenant towers, network
design, tower construction and antenna installation throughout the United States
and Canada.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
SpectraSite and its subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
REVENUE RECOGNITION
Site leasing revenues are recognized when earned. Fixed escalation clauses
present in the lease agreements with the Company's customers are recognized on a
straight-line basis over the term of the lease. Network service revenues from
site selection, construction and construction management activities are derived
under service contracts with customers which provide for billing on a time and
materials or fixed price basis. Revenues are recognized as services are
performed with respect to time and materials contracts. Revenues are recognized
using the percentage-of-completion method for fixed price contracts, measured by
the percentage of contract costs incurred to date compared to estimated total
contract costs. Costs and estimated earnings in excess of billings on
uncompleted contracts represent revenues recognized in excess of amounts billed.
Billings in excess of costs and estimated earnings on uncompleted contracts
represent billings in excess of revenues recognized. Provisions for estimated
losses on uncompleted contracts are made in the period in which such losses are
determined.
INVENTORIES
Inventories are stated at the lower of cost or market using the first-in,
first-out method and consist primarily of materials purchased for future
construction not associated with specific jobs.
INVESTMENTS IN AFFILIATES
An investment in an entity in which the Company owns more than 20% and up
to 50% is accounted for using the equity method. Under the equity method, the
investment is stated at cost plus the Company's equity in net income (loss) of
the entity since acquisition. The equity in net income (loss) of such entity is
recorded in "Other income (expense)" in the accompanying consolidated statements
of operations. An investment in an entity in which the Company owns less than
20% is accounted for using the cost method.
F-7
35
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AVAILABLE-FOR-SALE SECURITIES
Available-for-sale securities are classified as "Other assets" and are
stated at-fair value, with the unrealized gains and losses reported in other
comprehensive income. Realized gains and losses and declines in value judged to
be other-than-temporary on available-for-sale securities are included in "Other
income (expense)."
PROPERTY AND EQUIPMENT
Property and equipment, including towers, are stated at cost less
accumulated depreciation. The Company capitalizes costs incurred in bringing
towers to an operational state. Direct costs related to the development and
construction of towers, including interest, are capitalized and are included in
construction in progress. Approximately $1.1 million and $5.2 million of
interest was capitalized for the years ended December 31, 1999 and 2000,
respectively. Depreciation is computed using the straight-line method over the
estimated useful lives of the assets ranging from three to fifteen years.
GOODWILL
The Company has classified as goodwill the cost in excess of fair value of
net assets acquired in business combinations. Goodwill is being amortized on a
straight-line basis over fifteen years. On an on going basis, the Company
assesses the recoverability of its goodwill by determining the ability of the
specific assets acquired to generate future cash flows sufficient to recover the
unamortized cost of the assets and related goodwill over the remaining useful
life. Goodwill determined to be unrecoverable based on future cash flows would
be written-off in the period in which such determination is made.
DEBT ISSUANCE COSTS
The Company capitalized costs relating to the issuance of long-term debt,
senior notes, senior convertible notes and senior discount notes. The costs are
amortized using the straight-line method over the term of the related debt.
INCOME TAXES
The liability method is used in accounting for income taxes and deferred
tax assets and liabilities are determined based on differences between the
financial reporting and tax basis of assets and liabilities.
FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents and the credit facility
approximates fair value for these instruments. The estimated fair values of the
senior notes, senior convertible notes and senior discount notes are based on
the quoted market prices. The estimated fair values of the Company's financial
instruments, along with the carrying amounts of the related assets
(liabilities), are as follows:
DECEMBER 31, 1999 DECEMBER 31, 2000
---------------------- ----------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------- --------- --------- ---------
(IN THOUSANDS)
Cash and cash equivalents................... $ 37,778 $ 37,778 $ 552,653 $ 552,653
Senior Notes................................ -- -- (400,000) (380,500)
Senior Convertible Notes.................... -- -- (200,000) (159,500)
Senior Discount Notes....................... (516,251) (445,361) (908,243) (730,448)
Credit Facility............................. (200,000) (200,000) (200,000) (200,000)
F-8
36
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
EARNINGS PER SHARE
Basic and diluted earnings per share are calculated in accordance with
Statement of Financial Accounting Standards No. 128 "Earnings per Share." The
Company has potential common stock equivalents related to its convertible notes,
warrants and outstanding stock options and had potential common stock
equivalents related to its convertible preferred stock until all such preferred
stock converted into common stock in February 2000. These potential common stock
equivalents were not included in diluted earnings per share for all periods
because the effect would have been antidilutive. Accordingly, basic and diluted
net loss per share are the same for all periods presented.
COSTS OF OPERATIONS
Costs of operations for network services consist of direct costs incurred
to provide the related services excluding depreciation and amortization expense.
Costs of operations for site leasing consist of direct costs incurred to provide
the related services including ground lease cost, tower maintenance and related
real estate taxes. Costs of operations for site leasing does not include
depreciation and amortization expense on the related assets.
SIGNIFICANT CUSTOMERS
The Company's customer base consists of businesses operating in the
wireless telecommunications industry. The Company's exposure to credit risk
consists primarily of unsecured accounts receivable from these customers.
For the years ended December 31, 1999 and 2000, one customer, which is a
significant stockholder of the Company, accounted for 35% and 25% of the
Company's revenues, respectively. In 2000, a different customer accounted for
12% of the Company's revenues. In 1998, two different customers accounted for
47% and 24% of the Company's revenues.
RESTRUCTURING AND NON-RECURRING CHARGES
In September 1999, the Company announced that it would no longer directly
provide site acquisition services. As a result, the Company recorded
restructuring charges of $7.1 million, of which $6.2 million related to the
write-off of goodwill related to the purchase of Telesite and $0.9 million was
related to the cost of employee severance. In March 1999, the Company announced
that it would relocate its marketing and administrative operations from Little
Rock, Arkansas and Birmingham, Alabama to its corporate headquarters in Cary,
North Carolina. As a result, the Company recorded a non-recurring charge of $0.6
million for employee termination and other costs related to the relocation of
these activities.
STOCK OPTIONS
The Company has elected under the provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock Based Compensation" ("SFAS
123") to account for its employee stock options in accordance with Accounting
Principle Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB
25"). Companies that account for stock based compensation arrangements for their
employees under APB No. 25 are required by SFAS 123 to disclose the pro forma
effect on net income (loss) as if the fair value based method prescribed by SFAS
123 had been applied. The Company plans to continue to account for stock based
compensation using the provisions of APB 25 and has adopted the disclosure
requirements of SFAS 123.
F-9
37
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
EMPLOYEE BENEFIT PLAN
The Company provides a 401(k) plan for the benefit of all its employees
meeting specified eligibility requirements. The Company's expenses related to
the plan are discretionary and totaled approximately $0.1 million, $0.1 million
and $0.9 million for the years ended December 31, 1998, 1999 and 2000,
respectively.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). SFAS 133 requires that derivative instruments be recognized as either
assets or liabilities in the consolidated balance sheet based on their fair
values. Changes in the fair values of such derivative instruments will be
recorded either in results of operations or in other comprehensive income,
depending on the intended use of the derivative instrument. The initial
application of SFAS 133 will be reported as the effect of a change in accounting
principle. SFAS 133 will be effective for the Company January 1, 2001. The
Company currently does not have any derivative instruments that are impacted by
SFAS 133 and does not expect adoption of SFAS 133 to have a material impact on
the consolidated financial statements.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1998 and 1999 consolidated
financial statements to conform to the 2000 presentation. These
reclassifications had no effect on net loss or shareholders' equity (deficiency)
as previously reported.
2. LONG-LIVED ASSETS
Property and equipment consist of the following:
DECEMBER 31,
----------------------
1999 2000
-------- ----------
(IN THOUSANDS)
Towers............................................... $723,075 $1,344,627
Equipment............................................ 9,884 23,295
Land................................................. -- 15,468
Buildings............................................ -- 17,427
Other................................................ 17,496 29,847
-------- ----------
750,455 1,430,664
Less accumulated depreciation........................ (32,837) (98,205)
-------- ----------
717,618 1,332,459
Construction in progress............................. 46,139 207,878
-------- ----------
Property and equipment, net.......................... $763,757 $1,540,337
======== ==========
F-10
38
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Goodwill and other intangible assets consist of the following:
DECEMBER 31,
--------------------
1999 2000
-------- --------
(IN THOUSANDS)
Goodwill............................................... $283,105 $543,653
Debt issuance costs.................................... 34,151 73,751
-------- --------
317,256 617,404
Less accumulated amortization.......................... (10,059) (46,655)
-------- --------
$307,197 $570,749
======== ========
3. DEBT
Debt consists of the following:
DECEMBER 31,
----------------------
1999 2000
-------- ----------
(IN THOUSANDS)
Credit facility...................................... $200,000 $ 200,000
10 3/4% Senior Notes Due 2010........................ -- 200,000
12 1/2% Senior Notes Due 2010........................ -- 200,000
6 3/4% Senior Convertible Notes Due 2010............. -- 200,000
12% Senior Discount Notes Due 2008, net of
discount........................................... 149,137 167,517
11 1/4% Senior Discount Notes Due 2009, net of
discount........................................... 367,114 409,451
12 7/8% Senior Discount Notes Due 2010, net of
discount........................................... -- 331,275
Other long-term debt................................. 3,128 1,148
-------- ----------
719,379 1,709,391
Less current portion................................. (601) (336)
-------- ----------
Long-term debt, less current portion................. $718,778 $1,709,055
======== ==========
CREDIT FACILITY
In April 1999 in connection with the acquisition of communications towers
from Nextel Communications, Inc. ("Nextel"), SpectraSite Communications, Inc.
("Communications"), a wholly-owned subsidiary of SpectraSite, entered into a
$500.0 million credit facility. The credit facility consists of a $50.0 million
revolving credit facility that, subject to the satisfaction of certain financial
covenants, may be drawn at any time up to December 31, 2005, at which time all
amounts drawn under the revolving credit facility must be paid in full; a $300.0
million multiple draw term loan that may be drawn at any time through March 31,
2002, which requires that the amount drawn be repaid in quarterly installments
commencing on June 30, 2002 and ending on December 31, 2005; and a $150.0
million term loan that was drawn in full at the closing of the Nextel tower
acquisition and that amortizes at a rate of 1.0% annually, payable in quarterly
installments beginning on June 30, 2002 through December 31, 2005, $67.5 million
on March 31, 2006 and the balance due on June 30, 2006.
The revolving credit loans and the multiple draw term loans will bear
interest, at the Company's option, at either Canadian Imperial Bank of
Commerce's base rate plus an applicable margin of 1.5% per annum initially or
the reserve adjusted London Interbank Offered Rate plus an applicable margin of
3.0% per annum initially. After a period of time, the margin may decrease based
on a leverage ratio.
F-11
39
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The term loan bears interest, at the Company's option, at either Canadian
Imperial Bank of Commerce's base rate plus 2.0% per annum or the reserve
adjusted London Interbank Offered Rate plus 3.5% per annum. After a period of
time, the margin may decrease based on a leverage ratio.
Communications will be required to pay a commitment fee of between 1.25%
and 0.50% per annum in respect of the undrawn portion of the multiple draw term
loan, depending on the amount undrawn. The Company is required to pay a
commitment fee of 0.50% per annum in respect of the undrawn portion of the
revolving credit facility.
Communications may be required to prepay the credit facility in part upon
the occurrence of certain events, such as a sale of assets, the incurrence of
certain additional indebtedness, the issuance of equity and the generation of
excess cash flow. SpectraSite and each of Communications' subsidiaries has
guaranteed the obligations under the credit facility. The credit facility is
further secured by substantially all the tangible and intangible assets of
Communications and its subsidiaries and a pledge of all of the capital stock of
Communications and its subsidiaries.
The credit facility contains a number of covenants that, among other
things, restrict the Company's ability to incur additional indebtedness; create
liens on assets; make investments, make acquisitions, or engage in mergers or
consolidations; dispose of assets; enter into new lines of business; engage in
certain transactions with affiliates; and pay dividends or make capital
distributions. Communications, however, is permitted to pay dividends, for the
purpose of paying interest on the senior notes, senior convertible notes and
senior discount notes so long as no default under the credit facility then
exists or would exist after giving effect to such payment.
In addition, the credit facility requires compliance with certain financial
covenants, including requiring Communications and its subsidiaries, on a
consolidated basis, to maintain a maximum permitted ratio of total debt to
annualized EBITDA; a minimum interest coverage ratio; a minimum fixed charge
coverage ratio; and a minimum annualized EBITDA, for the first year only.
12 7/8% SENIOR DISCOUNT NOTES DUE 2010 (THE "12 7/8% DISCOUNT NOTES") AND
10 3/4% SENIOR NOTES DUE 2010 (THE "10 3/4 % SENIOR NOTES")
On March 10, 2000, SpectraSite issued $559.8 million aggregate principal
amount at maturity of its 12 7/8% Discount Notes for gross proceeds of $300.0
million and $200.0 million aggregate principal amount of its 10 3/4% Senior
Notes. The 12 7/8% Discount Notes will not pay any interest until March 15,
2005, at which time semi-annual interest payments will commence and become due
on each March 15 and September 15 thereafter. Semi-annual interest payments for
the 10 3/4% Senior Notes are due on each March 15 and September 15 and commenced
on September 15, 2000.
After March 15, 2005, the Company may redeem all or a portion of the
12 7/8% Discount Notes and the 10 3/4% Senior Notes at specified redemption
prices, plus accrued and unpaid interest. On one or more occasions prior to
March 15, 2003, the Company may redeem up to 35% of the aggregate principal
amount at maturity of the 12 7/8% Discount Notes and the 10 3/4% Senior Notes
with the net cash proceeds from one or more equity offerings. The redemption
price would be 112.875% and 110.750%, respectively, of the accreted value on the
redemption date. The Company is required to comply with certain covenants under
the terms of the 12 7/8% Discount Notes and the 10 3/4% Senior Notes that
restrict the Company's ability to incur additional indebtedness and make certain
payments, among other things.
12 1/2% SENIOR NOTES DUE 2010 (THE "12 1/2% SENIOR NOTES")
On December 20, 2000, SpectraSite issued $200.0 million aggregate principal
amount at maturity of 12 1/2% Senior Notes for proceeds of $195.9 million, net
of original issue discount of $4.1 million. Semi-annual interest payments for
the 12 1/2% Senior Notes are due on each May 15 and November 15, commencing on
F-12
40
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
May 15, 2001. After November 15, 2005, the Company may redeem all or a portion
of the 12 1/2% Senior Notes at specified redemption prices, plus accrued and
unpaid interest. On one or more occasions prior to November 15, 2003, the
Company may redeem up to 35% of the aggregate principal amount at maturity of
the 12 1/2% Senior Notes with the net cash proceeds from one or more equity
offerings. The redemption price would be 112.5% of the principal amount on the
redemption date. The Company is required to comply with certain covenants under
the terms of the 12 1/2% Senior Notes that restrict the Company's ability to
incur additional indebtedness and make certain payments, among other things.
6 3/4% SENIOR CONVERTIBLE NOTES DUE 2010 (THE "6 3/4% CONVERTIBLE NOTES")
On November 20, 2000, SpectraSite issued $200.0 million aggregate principal
amount of 6 3/4% Convertible Notes. Semi-annual interest payments for the 6 3/4%
Convertible Notes are due on each May 15 and November 15, commencing on May 15,
2001. The 6 3/4% Convertible Notes may be converted into common stock at any
time on or before November 15, 2010 at a conversion price of $21.5625 per share,
subject to adjustment. After November 20, 2003, the Company may redeem all or a
portion of the 6 3/4% Convertible Notes at specified redemption prices together
with accrued interest.
12% SENIOR DISCOUNT NOTES DUE 2008 (THE "12% DISCOUNT NOTES")
On June 23, 1998, the Company issued $225.2 million aggregate principal
amount at maturity of 12% Discount Notes for gross proceeds of $125.0 million.
The 12% Discount Notes will not pay any interest until July 15, 2003, at which
time semi-annual interest payments will commence and become due on each January
15 and July 15 thereafter. After July 15, 2003, the Company may redeem all or a
portion of the 12% Discount Notes at specified redemption prices, plus accrued
and unpaid interest, to the applicable redemption date. On one or more occasions
prior to July 15, 2001, the Company may redeem up to 25% of the aggregate
principal amount at maturity of the 12% Discount Notes with the net cash
proceeds from one or more equity offerings. The redemption price would be 112%
of the accreted value on the redemption date. The Company is required to comply
with certain covenants under the terms of the 12% Discount Notes that restrict
the Company's ability to incur indebtedness, make certain payments and issue
preferred stock among other things.
11 1/4% SENIOR DISCOUNT NOTES DUE 2009 (THE "11 1/4% DISCOUNT NOTES")
On April 13, 1999, the Company issued $586.8 million aggregate principal
amount at maturity of 11 1/4% Discount Notes for gross proceeds of $340.0
million. The 11 1/4% Discount Notes will not pay any interest until April 15,
2004, at which time semi-annual interest payments will commence and become due
on each April 15 and October 15 thereafter. After April 15, 2004, the Company
may redeem all or a portion of the 11 1/4% Discount Notes at specified
redemption prices, plus accrued and unpaid interest, to the applicable
redemption date. On one or more occasions prior to April 15, 2002, the Company
may redeem up to 35% of the aggregate principal amount at maturity of the
11 1/4% Discount Notes with the net cash proceeds from one or more equity
offerings. The redemption price would be 111.25% of the accreted value on the
redemption date. The Company is required to comply with certain covenants under
the terms of the 11 1/4% Discount Notes that restrict the Company's ability to
incur additional indebtedness, make certain payments and issue preferred stock,
among other things.
OTHER LONG-TERM DEBT
In connection with the acquisition of Westower Corporation ("Westower"),
the Company assumed certain long-term obligations of the acquired entity.
Substantially all of Westower's outstanding long-term obligations were repaid
prior to the acquisition, with the remaining unpaid obligations payable in
monthly installments through 2004.
F-13
41
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. CONVERTIBLE VOTING PREFERRED STOCK AND SHAREHOLDERS' EQUITY
CONVERTIBLE VOTING PREFERRED STOCK
At December 31, 1998, SpectraSite had mandatorily redeemable convertible
preferred stock consisting of Series A and Series B cumulative redeemable
preferred stock, each with a $0.001 par value, 10,462,830 shares authorized in
the aggregate and 3,462,830 and 7,000,000 shares issued and outstanding,
respectively. In connection with closing the Nextel tower acquisition in April
1999, provisions for dividends and redemption were eliminated with respect to
the Series A and Series B preferred stock. Previously accrued dividends have
been eliminated, and the outstanding balances have been reclassified as
convertible preferred stock in shareholders' equity in the balance sheet as of
December 31, 1999. In connection with closing the Nextel tower acquisition,
SpectraSite sold 46,286,795 million shares of Series C preferred stock at a
price of $5.00 per share. In addition, Nextel received 14,000,000 shares of
Series C preferred stock. At December 31, 1999, SpectraSite had 60,286,795 of
$0.001 par value Series C shares authorized, issued and outstanding. Each share
of Series A, B and C preferred stock was convertible into one share of common
stock and entitled the holder to vote on an as-converted basis with holders of
common stock. Contemporaneously with the closing of an underwritten public
offering of common stock, the outstanding shares of Series A, B and C preferred
stock automatically converted to common stock on February 4, 2000.
On November 16, 2000, SpectraSite's shareholders authorized the issuance of
40,000,000 shares of preferred stock for such times, for such purposes and for
such consideration as the Board of Directors may determine. No preferred stock
had been issued at December 31, 2000.
COMMON STOCK AND WARRANTS
On February 4, 2000, SpectraSite completed an underwritten public offering
of 25,645,000 shares of common stock for net proceeds of approximately $411.3
million. As a result of the offering, all outstanding shares of Series A, B and
C preferred stock automatically converted to common stock on a share-for-share
basis.
On July 28, 2000, SpectraSite completed an underwritten public offering of
11,000,000 shares of common stock for net proceeds of approximately $220.2
million. On August 2, 2000, the underwriters purchased an additional 1,650,000
shares of common stock pursuant to the exercise of their overallotment option
for net proceeds of $33.2 million.
On November 20, 2000, SpectraSite completed a private placement of
4,000,000 shares of common stock for proceeds of $75.0 million. In addition, the
purchasing shareholders received warrants to purchase an additional 1,500,000
shares of common stock. The warrants are immediately exercisable; the exercise
price for 600,000 shares is $21.56 per share, the exercise price for 450,000
shares is $23.86 per share and the exercise price for the remaining 450,000
shares is $28.00 per share.
During September and October 1998, 150,000 shares of common stock were
issued in connection with the exercise of common stock warrants at a price of
$0.001 per share.
STOCK OPTIONS
During 1997, the Company adopted a stock option plan which provides for the
purchase of common stock by key employees, directors, advisors and consultants
of the Company. The maximum number of shares which may be issued under the plan,
as amended, may not exceed 20,000,000 shares. Stock options are granted under
various stock option agreements. Each stock option agreement contains specific
terms.
The options without a performance acceleration feature, which were granted
under the terms of the incentive stock option agreement, and options granted
under the terms of the non-qualified stock option
F-14
42
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
agreement vest and become exercisable ratably over a four or five-year period,
commencing one year after date of grant.
The options with a performance acceleration feature, which were granted
under the terms of the incentive stock option agreement, and the non-qualified
stock option agreement vest and become exercisable upon the seventh anniversary
of the grant date. Vesting, however, can be accelerated upon the achievement of
certain milestones defined in each agreement.
In accordance with SFAS 123, the fair value of each option grant was
determined using the Black-Scholes option pricing model with the following
weighted average assumptions for the years ended December 31, 1998, 1999 and
2000: dividend yield of 0.0%; volatility of .70; risk free interest rate of 6.0%
to 5.0%; and expected option lives of 7 years. Had compensation cost for the
Company's stock options been determined based on the fair value at the date of
grant consistent with the provisions of SFAS 123, the Company's net loss and net
loss per share would have been $9.5 million and $12.44 for the year ended
December 31, 1998, $100.9 million and $12.80 for the year ended December 31,
1999 and $169.2 million and $1.40 for the year ended December 31, 2000.
Option activity under the Company's plans is summarized below:
WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
---------- --------
Outstanding at December 31, 1997...................... 884,700 $ 2.89
Granted............................................... 842,000 3.33
Exercised............................................. -- --
Canceled.............................................. (158,800) 2.92
----------
Outstanding at December 31, 1998...................... 1,567,900 3.12
Granted............................................... 2,705,810 5.32
Exercised............................................. (200,006) 2.52
Canceled.............................................. (271,670) 3.41
Options assumed in Westower acquisition............... 1,921,757 8.62
----------
Outstanding at December 31, 1999...................... 5,723,791 6.02
Granted............................................... 7,962,616 12.56
Exercised............................................. (2,182,968) 5.74
Canceled.............................................. (791,227) 10.35
Options assumed in Apex acquisition................... 191,359 3.58
----------
Outstanding at December 31, 2000...................... 10,903,571 10.48
==========
F-15
43
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
There were 185,475, 1,765,666 and 1,657,237 options exercisable under the
stock option plan at December 31, 1998, 1999 and 2000, respectively.
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------- -------------------------
WEIGHTED WEIGHTED WEIGHTED
NUMBER AVERAGE AVERAGE NUMBER AVERAGE
OUTSTANDING REMAINING EXERCISE EXERCISABLE EXERCISE
EXERCISE PRICES AS OF 12/31/00 CONTRACTUAL LIFE PRICE AS OF 12/31/00 PRICE
- --------------- -------------- ---------------- -------- -------------- --------
$ 2.89 - $ 5.00 2,726,114 8.02 $ 4.63 776,257 $ 4.44
$ 7.40 - $10.56 3,633,764 8.97 10.29 565,319 9.63
$10.98 - $13.47 2,812,320 9.63 12.16 266,186 12.28
$13.69 - $22.22 1,731,373 9.41 17.39 49,475 14.36
---------- ---------
$ 2.89 - $22.22.. 10,903,571 8.97 10.48 1,657,237 7.84
========== =========
The weighted average remaining contractual life of the stock options
outstanding was 9.98 years, 8.81 years and 8.97 years at December 31, 1998, 1999
and 2000, respectively.
EMPLOYEE STOCK PURCHASE PLAN
In August 1999, SpectraSite adopted the SpectraSite Holdings, Inc. Employee
Stock Purchase Plan. The board of directors has reserved and authorized one
million shares of common stock for issuance under the plan. Eligible employees
may purchase a number of shares of common stock equal to the total dollar amount
contributed by the employee to a payroll deduction account during each six-month
offering period divided by the purchase price per share. The price of the shares
offered to employees under the plan will be 85% of the lesser of the fair market
value at the beginning or end of each six-month offering period. SpectraSite
initiated the first offering period on September 1, 2000.
STOCK RESERVED FOR FUTURE ISSUANCE
The Company has reserved shares of its authorized shares of common stock
for future issuance as follows:
AS OF
DECEMBER 31,
2000
------------
Outstanding stock options............................... 10,903,571
Outstanding warrants.................................... 1,500,000
Outstanding senior convertible notes.................... 9,275,362
Possible future issuance under stock option plans....... 6,463,455
Employee stock purchase plan............................ 1,000,000
----------
Total......................................... 29,142,388
==========
F-16
44
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. LEASES
OPERATING LEASES FROM OTHERS
The Company leases land ("ground leases"), office space and certain office
equipment under noncancelable operating leases. Ground leases are generally for
terms of five years and are renewable at the option of the Company. Rent expense
was approximately $0.6 million, $17.9 million and $32.9 million for the years
ended December 31, 1998, 1999 and 2000 respectively. The future minimum lease
payments for these leases are as follows:
AS OF
DECEMBER 31,
2000
--------------
(IN THOUSANDS)
2001................................................... $ 54,736
2002................................................... 48,369
2003................................................... 39,820
2004................................................... 29,977
2005................................................... 14,116
Thereafter............................................. 69,671
--------
Total........................................ $256,689
========
ANTENNA SPACE LEASED TO OTHERS
The Company currently leases antenna space on multi-tenant towers to a
variety of wireless service providers under non-cancelable operating leases. The
tenant leases are generally for initial terms of five years and include options
for renewal. The approximate future minimum rental income under operating leases
that have initial or remaining non-cancelable terms in excess of one year are as
follows:
AS OF
DECEMBER 31,
2000
--------------
(IN THOUSANDS)
2001................................................... $168,613
2002................................................... 165,197
2003................................................... 161,649
2004................................................... 137,918
2005................................................... 49,241
Thereafter............................................. 186,248
--------
Total........................................ $868,866
========
6. INCOME TAXES
The provision for income taxes is comprised of the following:
YEAR ENDED DECEMBER 31,
-------------------------
1998 1999 2000
----- ----- -------
(IN THOUSANDS)
Current:
State..................................................... $-- $ 40 $ 663
Foreign................................................... -- 528 1,511
--- ---- ------
Total provision for income taxes.................. $-- $568 $2,174
=== ==== ======
F-17
45
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The reconciliation of income taxes computed at the U.S. federal statutory
rate to income tax expense is as follows:
YEAR ENDED DECEMBER 31,
-----------------------
1998 1999 2000
----- ----- -----
Federal income tax benefit at statutory rate................ (35.0)% (35.0)% (35.0)%
Foreign tax rate differential............................... -- 0.6% 0.1%
Non-deductible goodwill amortization........................ -- 2.0% 4.1%
Non-deductible interest expense............................. 5.8% 0.5% 0.1%
State taxes................................................. -- -- 1.0%
Non-cash compensation charges............................... -- -- 0.6%
Change in valuation allowance............................... 29.2% 32.5% 30.5%
----- ----- -----
Effective income tax rate................................... --% 0.6% 1.4%
===== ===== =====
The components of net deferred taxes are as follows:
AS OF DECEMBER 31,
-------------------------------
1998 1999 2000
------- -------- --------
(IN THOUSANDS)
Deferred tax assets:
Tax loss carryforwards.............................. $ 1,038 $ 15,600 $ 39,326
Accreted interest on senior discount notes.......... 2,978 19,730 56,077
Accrued liabilities................................. -- 1,920 1,920
Bad debt reserves................................... -- -- 1,416
Depreciation........................................ 41 1,760 --
------- -------- --------
Total gross deferred tax assets........... 4,057 39,010 98,739
Valuation allowance................................. (4,057) (39,010) (98,739)
------- -------- --------
Total net deferred tax assets............. $ -- $ -- $ --
======= ======== ========
The Company has a federal net operating loss carryforward of approximately
$100.3 million that begins to expire in 2012. Also, the Company has state tax
loss carryforwards of $94.5 million that expire beginning in 2002. Based on the
Company's history of losses to date, management has provided a valuation
allowance to fully offset the Company's deferred tax assets.
The Company receives an income tax deduction related to stock options
calculated as the difference between the fair market value of the stock issued
at the time of exercise and the option price, tax effected. The amount of these
benefits generated during 2000 was approximately $4.4 million. The Company has
provided a 100% valuation reserve against this asset as of December 31, 2000.
The benefits resulting from these deductions will be credited directly to
shareholders' equity when realized.
7. RELATED PARTY TRANSACTIONS
On April 20, 1999, in connection with the Nextel tower acquisition,
affiliates of three significant stockholders received an aggregate of two
million shares of SpectraSite's common stock valued at $9.0 million as
consideration for financing commitments made in connection with the Nextel tower
acquisition. Affiliates of each entity are members of the Company's board of
directors.
Affiliates of a financial institution which owns 7% of the Company's common
stock, have provided, and may continue to provide, investment banking services
to the Company. One affiliate of the financial institution is acting as agent
and lender under the Company's credit facility and receives customary fees for
the performance of these activities. In addition, the affiliate was an initial
purchaser of the 12% Discount Notes,
F-18
46
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
the 11 1/4% Discount Notes, the 10 3/4% Senior Notes, the 12 7/8% Discount Notes
and the 12 1/2% Senior Notes and was an underwriter of the Company's public
offerings of common stock in February and July 2000. The Company has $200
million outstanding under the credit facility at December 31, 2000.
Certain investors participating in an investment group are also affiliates
of the financial institution discussed above. In November 2000, this investment
group purchased 4.0 million shares of the Company's common stock in a private
placement at a purchase price of $18.75 per share and received warrants to
purchase 1.5 million shares of common stock at exercise prices ranging from
$21.56 per share to $28.00 per share.
The Company has loans to officers totaling $0.8 million and $1.9 million at
December 31, 1999 and 2000, respectively. These loans are secured by shares of
SpectraSite stock or by shares of common stock to be issued to the officer upon
the exercise of options. The loans bear interest at the applicable federal rate
under the Internal Revenue Code ranging from 5.36% to 5.82% and have maturities
ranging from August 2002 to September 2004. The Company had interest income of
$15,000 and $111,000 from amounts outstanding under the loans in 1999 and 2000,
respectively.
The Company has a revolving loan arrangement with an affiliate under which
the affiliate may borrow up to $14.4 million. The loan accrues interest at 12%
and is collateralized by property, equipment, investments, contracts and other
assets of the affiliate. The affiliate owed $2.9 million and $7.8 million to the
Company under the loan at December 31, 1999 and 2000, respectively. The Company
had interest income of $0.1 million and $0.6 million from amounts outstanding
under the loan in 1999 and 2000.
8. INVESTMENTS IN AFFILIATES
On April 7, 2000, the Company acquired Ample Design, Ltd. for approximately
$20.2 million. Ample Design provides wireless network development services in
the United Kingdom. On June 8, 2000, the Company completed a joint venture with
Lattice Group, the former arm of BG Group plc which runs Britain's natural gas
network. The Company and Lattice Group each own 50% of the joint venture.
Lattice Group transferred existing operational communications towers and
industrial land suitable for construction of new towers into the joint venture,
and the Company provided intellectual property and wireless network development
skills. The Company contributed $164.1 million in cash to be used for future
developments and possible acquisitions. The Company also contributed Ample
Design to the joint venture. The fair value of assets acquired exceeded the cost
of the investment by $10.5 million which is being amortized on a straight-line
basis over 15 years in "Other income (expense)." At December 31, 2000, the
carrying value of the investment was $168.6 million.
9. ACQUISITION ACTIVITY
General -- The acquisitions consummated during 1998, 1999 and 2000 have
been accounted for using the purchase method of accounting. The purchase prices
have been allocated to the net assets acquired, principally tangible and
intangible assets, and the liabilities assumed based on their estimated fair
values at the date of acquisition. The excess of the purchase price over the
estimated fair value of the net assets acquired has been recorded as goodwill
and other intangible assets and is being amortized on a straight-line basis over
15 years. For certain acquisitions, the financial statements reflect the
preliminary allocation of purchase price as the appraisals of the assets and
liabilities acquired have not been finalized. The Company does not expect any
changes in goodwill or in depreciation and amortization as a result of such
appraisals to be material to the consolidated financial statements. The
operating results of these acquisitions have been included in the Company's
consolidated results of operations from the date of acquisition.
2000 Acquisitions -- During the year ended December 31, 2000, the Company
consummated transactions involving the acquisition of various communications
sites and service providers for an estimated purchase
F-19
47
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
price of $765.1 million, including the issuance of approximately 9.2 million
shares of the Company's common stock valued at $165.0 million. The purchase
price also includes the issuance of 191,465 options to purchase the Company's
common stock at a price of $3.58 per share. These options were valued at $2.0
million using the Black-Scholes option pricing model. The principal transactions
were as follows:
Apex transaction -- On January 5, 2000, the Company acquired Apex Site
Management Holdings, Inc. in a merger transaction for 4.5 million shares of
SpectraSite's common stock valued at $55.8 million and 191,465 options to
purchase common stock at an exercise price of $3.58 per share. SpectraSite also
used approximately $6.2 million in cash to repay outstanding indebtedness and
other obligations of Apex in connection with the merger. Apex provides rooftop
and in-building access to wireless carriers.
ITI transaction -- On January 28, 2000, the Company acquired substantially
all of the assets of International Towers Inc. and its subsidiaries ("ITI"),
including S&W Communications Inc. ITI owned a broadcast tower manufacturing
facility and, through S&W Communications, provided integrated services for the
erection of broadcast towers, foundations and multi-tenant transmitter
buildings. The Company paid $5.4 million and issued 350,000 shares of
SpectraSite's common stock, valued at $7.1 million, in connection with this
acquisition. During the fourth quarter of 2000, the Company recorded adjustments
to ITI goodwill due to the finalization of appraisals of assets which resulted
in a decrease to fourth quarter costs of network services operations of $1.2
million.
AirTouch transaction -- On February 17, 2000, the Company entered into an
agreement with AirTouch Communications and several of its affiliates, under
which it agreed to lease or sublease approximately 430 communications towers
located throughout southern California for $155.0 million, subject to
adjustment. As partial security for obligations under the master sublease, the
Company deposited $23.0 million into escrow. Under the terms of the agreement
and the master sublease, the Company will manage, maintain and lease the
available space on the AirTouch towers covered by the agreement. AirTouch will
pay a monthly fee per site for its cellular, microwave and paging facilities.
The Company also has the right to lease available tower space to co-location
tenants in specified situations. In addition, the Company entered into a
three-year exclusive build-to-suit agreement with AirTouch in southern
California. Under the terms of the build-to-suit agreement, the Company will
develop and construct locations for wireless communications towers on real
property designated by AirTouch.
The AirTouch transaction closed in stages with the initial closing
occurring on August 15, 2000 and the final closing occurring on February 15,
2001. At each respective closing, the Company paid for the towers included in
that closing according to a formula contained in the master sublease. During
2000, the Company subleased 233 towers for aggregate cash consideration of $83.9
million, including $12.5 million released from the deposit escrow. The final
closing of 69 towers occurred on February 15, 2001 for aggregate cash
consideration of $24.8 million, including $3.7 million released from the deposit
escrow. The leases for the remaining 128 towers contemplated in the original
agreement were not closed. As a result, the remaining $6.8 million escrow
deposit was returned to the Company on the date of the final closing.
Lodestar transaction -- On May 18, 2000, the Company acquired Lodestar
Towers, Inc. for approximately $178.6 million in cash. As of May 18, 2000,
Lodestar owned 110 wireless towers and 11 broadcast towers, and managed an
additional 120 wireless towers and 10 broadcast towers.
Pegasus acquisition -- On July 17, 2000, the Company acquired 11 broadcast
towers from Pegasus Communications for approximately 1.4 million shares of
common stock valued at $37.5 million. Under the agreement, the Company will
build up to five new digital television towers for Pegasus in the 12 months
following closing.
GOCOM acquisition -- On August 24, 2000, the Company acquired 12 broadcast
towers and 14 other communications towers from GOCOM Holdings, LLC and its
subsidiaries for $28.2 million in cash.
F-20
48
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SBC transaction -- On August 25, 2000, the Company entered into an
agreement to acquire leasehold and sub-leasehold interests in approximately
3,900 wireless communications towers from affiliates of SBC Communications in
exchange for $982.7 million in cash and approximately 14.3 million in shares of
common stock, subject to adjustment, valued at $325.0 million. The Company will
manage, maintain and lease available space on the SBC towers and will have the
right to co-locate tenants on the towers. SBC is an anchor tenant on all of the
towers and will pay a monthly fee per tower of $1,400, subject to an annual
adjustment. In addition, the Company entered into a five-year exclusive
build-to-suit agreement with SBC under which it will develop and construct
substantially all of SBC's new towers during the term of the agreement. The SBC
transaction will close in stages and the initial closing occurred on December
14, 2000. The initial closing involved 739 towers, for which the company paid
$175.0 million in cash and issued 2.5 million shares of common stock valued at
$57.9 million. On February 1, 2001, the Company subleased 163 towers, for which
the Company paid $41.8 million in cash and issued 0.6 million shares of common
stock valued at $14.0 million. At each closing, the Company will make a pro rata
payment of cash and stock to SBC for the actual towers subleased. The Company
expects the final closing to occur in the first quarter of 2002.
Nextel acquisitions -- As discussed below, during 1999, the Company entered
into a master site commitment agreement with certain of Nextel's subsidiaries.
During 2000, the Company acquired 479 wireless communications towers from Nextel
and its controlled affiliates under this agreement for a total purchase price of
$86.9 million in cash.
U.S. RealTel transaction -- On December 8, 2000, the Company purchased
substantially all of the United States assets and operations of U.S. RealTel,
Inc. for a purchase price of $16.5 million in cash. U.S. RealTel is an
international provider of rooftop and in-building telecommunication access.
1999 Acquisitions -- During the year ended December 31, 1999, the Company
consummated transactions involving the acquisition of various communications
sites and service providers for an estimated purchase price of $972.4 million,
including the issuance of approximately 16.0 million shares of the Company's
common stock valued at $211.0 million. In addition, this purchase price includes
14.0 million shares of Series C preferred stock and 1.7 million options to
purchase the Company's common stock valued at $70.0 million and $7.4 million,
respectively. The principal 1999 transactions were as follows:
Nextel transaction -- In April 1999, the Company purchased 2,000
communications towers from Nextel for $560.0 million in cash and 14 million
shares of Series C preferred stock valued at $70.0 million, which represented
approximately 18% of all the Company's outstanding capital stock at that time.
Of the total consideration paid to Nextel, $45.0 million has been allocated as a
deposit relating to this commitment. The Company used $150.0 million of
borrowings under a $500.0 million committed credit facility, $340.0 million from
the proceeds of the 11 1/4% Discount Notes and $231.4 million from the sale of
Series C preferred stock to fund the cash purchase price and to pay related fees
and expenses. In addition, SpectraSite and certain of Nextel's subsidiaries
entered into a master site commitment agreement under which Nextel and its
controlled affiliates will offer SpectraSite exclusive opportunities, under
specific terms and conditions, relating to the construction or purchase of, or
co-location on, 1,700 additional communications sites. These sites will then be
leased by subsidiaries of Nextel under the terms of the master site lease
agreement. If the number of new sites leased is less than the agreed upon number
as of particular dates, Nextel has agreed to make payments to SpectraSite. The
master site commitment agreement also gives SpectraSite a right of first refusal
to acquire any towers that Nextel or certain affiliates desire to sell. During
1999, the Company purchased 148 towers under the master site commitment
agreement for a purchase price of $28.5 million in cash.
In connection with the purchase, Nextel entered into a master site lease
agreement to become the anchor tenant on each of the acquired towers and also
conveyed to the Company certain third-party co-location site leases associated
with the acquired assets. Nextel also transferred to the Company certain
non-cancelable ground leases, and the Company assumed all operating and other
costs associated with the acquired assets.
F-21
49
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Westower transaction -- In September 1999, the Company consummated a merger
with Westower. Under the terms of the merger agreement, Westower shareholders
received 1.81 shares of SpectraSite common stock for each share of Westower
common stock. In the aggregate, SpectraSite exchanged 15.5 million shares of its
common stock valued at $205.6 million for 8.6 million shares of Westower common
stock and assumed $81.5 million of debt. The Company repaid $72.2 million of
such assumed debt at closing. In addition, the Company assumed the outstanding
Westower employee stock options, which were converted into options to purchase
1.7 million shares of SpectraSite's common stock.
Stainless transaction -- On December 30, 1999, SpectraSite acquired
Stainless, Inc., formerly a wholly-owned subsidiary of Northwest Broadcasting,
L.P., for $40.0 million in cash. Stainless provides engineering, fabrication and
other services in connection with the erection of towers used for television
broadcast companies.
1998 Acquisitions -- During the year ended December 31, 1998, the Company
consummated transactions involving the acquisition of various communications
sites and service providers for a purchase price of $15.7 million in cash.
Unaudited Pro Forma Operating Results -- The following unaudited pro forma
summary presents the consolidated results of operations as if all business
combinations, including Apex, ITI, Lodestar, U.S. RealTel, Westower and
Stainless, had occurred as of January 1, 1999. The pro forma information does
not necessarily reflect the actual results that would have been achieved, nor is
it necessarily indicative of future consolidated results for the Company.
YEAR ENDED DECEMBER 31,
------------------------
1999 2000
---------- ----------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
Total revenues....................................... $ 235,924 $ 359,991
Net loss............................................. (148,957) (169,562)
Basic and diluted net loss per common share.......... $ (5.44) $ (1.40)
10. BUSINESS SEGMENTS
The Company operates in two business segments, site leasing and network
services. The site leasing segment provides for leasing and subleasing of
antenna sites on multi-tenant towers for a diverse range of wireless
communication services, including personal communication services, paging,
cellular and microwave. The network services segment offers a broad range of
network development services, including network design, tower construction and
antenna installation.
In evaluating financial performance, management focuses on operating profit
(loss), excluding depreciation and amortization and restructuring charges. This
measure of operating profit (loss) is also before interest income, interest
expense, other income (expense) and income taxes. All reported segment revenues
are generated from external customers as intersegment revenues are not
significant.
F-22
50
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Summarized financial information concerning each reportable segment is
shown in the following table. The "Other" column represents amounts excluded
from specific segments, such as income taxes, corporate general and
administrative expenses, depreciation and amortization, restructuring and other
non-recurring charges and interest. In addition, "Other" also includes corporate
assets such as cash and cash equivalents, tangible and intangible assets and
income tax accounts which have not been allocated to a specific segment.
SITE NETWORK
LEASING SERVICES OTHER TOTAL
---------- ---------- ---------- ----------
(IN THOUSANDS)
YEAR ENDED DECEMBER 31, 2000
Revenues................................... $ 116,476 $230,432 $ -- $ 346,908
Income (loss) before income taxes.......... 61,878 30,906 (248,226) (155,442)
Assets..................................... 1,588,504 137,571 1,328,030 3,054,105
YEAR ENDED DECEMBER 31, 1999
Revenues................................... $ 46,515 $ 53,570 $ -- $ 100,085
Income (loss) before income taxes.......... 28,661 7,915 (133,676) (97,100)
Assets..................................... 756,442 60,149 403,362 1,219,953
YEAR ENDED DECEMBER 31, 1998
Revenues................................... $ 656 $ 8,142 $ -- $ 8,798
Income (loss) before income taxes.......... 357 5,650 (15,086) (9,079)
Assets..................................... 25,865 -- 136,081 161,946
Net revenues were located in geographic areas as follows:
FOR THE YEAR ENDED
DECEMBER 31,
--------------------
1999 2000
-------- --------
(IN THOUSANDS)
United States.......................................... $ 90,984 $308,600
Canada................................................. 13,794 48,404
Eliminations........................................... (4,693) (10,096)
-------- --------
Consolidated net revenues.............................. $100,085 $346,908
======== ========
Long-lived assets were located in geographic areas as follows:
YEAR ENDED DECEMBER 31,
------------------------
1999 2000
---------- ----------
(IN THOUSANDS)
United States....................................... $1,065,256 $2,129,235
United Kingdom...................................... -- 168,594
Canada.............................................. 65,153 57,488
Mexico.............................................. -- 14,078
---------- ----------
Consolidated long-lived assets...................... $1,130,409 $2,369,395
========== ==========
11. SUBSEQUENT EVENTS (UNAUDITED)
On February 22, 2001, the Company completed an amended and restated credit
agreement increasing its senior credit facility from $500.0 million to $1.3
billion. The facility consists of a $350 million revolving credit facility and
$950 million in term loans. The new credit facility will be used to provide
financing for previously announced transactions, including the Company's
acquisition of sub-lease rights to more than 3,900 wireless communication towers
from SBC Communications, Inc., for capital expenditures related to the
construction of new wireless towers and for general corporate purposes. At the
date of the closing of the agreement, the
F-23
51
SPECTRASITE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Company borrowed an additional $300.0 million under the facility and incurred
approximately $20.0 million in origination fees.
12. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data for the years ended December 31, 1999 and
2000 is as follows:
THREE MONTHS ENDED
---------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- -------- ------------ -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
2000
Revenues.................................... $ 75,237 $ 77,783 $ 90,484 $103,404
Gross profit(1)............................. (10,980) (11,353) (9,240) (9,060)
Net loss.................................... (32,495) (38,434) (40,880) (45,807)
Net loss per common share, basic and
diluted................................... $ (0.38) $ (0.31) $ (0.31) $ (0.33)
1999
Revenues.................................... $ 2,955 $ 14,382 $ 26,080 $ 56,668
Gross profit(1)............................. (1,280) (6,037) (10,763) (12,307)
Net loss.................................... (4,517) (27,499) (34,500) (31,152)
Net loss per common share, basic and
diluted................................... $ (5.51) $ (9.70) $ (4.21) $ (1.59)
- ---------------
(1) Represents revenues less operating expenses excluding restructuring and
other non-recurring charges.
F-24
52
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, SpectraSite Holdings, Inc. has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Cary, State of North Carolina, on March 20, 2001.
SPECTRASITE HOLDINGS, INC.
By: /s/ STEPHEN H. CLARK
------------------------------------
Stephen H. Clark
President, Chief Executive Officer
and Director
Spectrasite Holdings, Inc., a Delaware corporation, and each person whose
signature appears below constitutes and appoints Stephen H. Clark and David P.
Tomick, and either of them, with full power to act without the other, such
person's true and lawful attorneys-in-fact, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign this Annual Report on Form 10-K, and any and all amendments
to such Annual Report on Form 10-K and other documents in connection therewith,
and to file the same, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact, and each of them, full power and authority to do and
perform each and every act and thing necessary or desirable to be done in and
about the premises, as fully and to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact, or either of them, or their substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of SpectraSite
Holdings, Inc. and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ STEPHEN H. CLARK President, Chief Executive March 20, 2001
- ----------------------------------------------------- Officer and Director
Stephen H. Clark (Principal Executive Officer)
/s/ DAVID P. TOMICK Executive Vice President and March 20, 2001
- ----------------------------------------------------- Chief Financial Officer
David P. Tomick (Principal Financial Officer)
/s/ CALVIN J. PAYNE Executive Vice March 20, 2001
- ----------------------------------------------------- President -- Design and
Calvin J. Payne Construction and Director
/s/ DANIEL I. HUNT Vice President -- Finance March 20, 2001
- ----------------------------------------------------- and Administration
Daniel I. Hunt (Principal Accounting Officer)
/s/ LAWRENCE B. SORREL Chairman of the Board of March 20, 2001
- ----------------------------------------------------- Directors
Lawrence B. Sorrel
/s/ THOMAS E. MCINERNEY Director March 20, 2001
- -----------------------------------------------------
Thomas E. McInerney
/s/ TIMOTHY M. DONAHUE Director March 20, 2001
- -----------------------------------------------------
Timothy M. Donahue
/s/ MICHAEL J. PRICE Director March 20, 2001
- -----------------------------------------------------
Michael J. Price
/s/ MICHAEL R. STONE Director March 20, 2001
- -----------------------------------------------------
Michael R. Stone
/s/ STEVEN M. SHINDLER Director March 20, 2001
- -----------------------------------------------------
Steven M. Shindler