<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 31, 1999
PINNACLE HOLDINGS INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-24773 65-0652634
-------- ------- ----------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
1549 Ringling Boulevard, Third Floor Sarasota, Florida 34236
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (941) 364-8886
N/A
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
This Report on Form 8-K contains forward-looking statements within the
meaning of that term in Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. Such
statements are based on the Registrant's current expectations. Statements
contained herein that are not historical facts are forward-looking statements
made pursuant to the safe harbor provisions described above. Future events and
actual results are subject to a number of risks and uncertainties and could
differ materially from those currently anticipated or desired as a result of a
number of factors, including, the effect of the substantial indebtedness and the
Registrant's ability to service such indebtedness; the Registrant's dependence
upon successfully identifying, consummating and integrating acquisitions; a
significant portion of the Registrant's revenues coming from a limited number of
customers; fulfilling the Registrant's anticipated capital needs for future
acquisition and construction activity; business conditions and growth in the
wireless communications industry; the impact of competition from the
Registrant's competitors; and other risks and uncertainties, some of which have
been or will be identified from time to time in the Registrant's reports filed
with the Securities and Exchange Commission. Additional discussion of these
factors effecting the Registrant's business and prospects is contained in the
Registrant's filings with the Securities and Exchange Commission. Readers are
cautioned not to place undue reliance on any forward-looking statements
contained herein, which speak only as of the date hereof. The Registrant
undertakes no obligation to publicly update or revise such forward-looking
statements.
On September 14, 1999, the Registrant filed a report on Form 8-K with
respect to the acquisition of certain assets of Motorola, Inc. At that time it
was impracticable to provide the financial statements and pro forma information
required to be filed therewith relative to the acquired assets, and the
Registrant stated in such Form 8-K that it intended to file the required
financial statements and proforma financial information as soon as practicable,
but no later than 60 days from the date of that filing. By this amendment to
such Form 8-K, the Registrant is amending and restating Item 7 thereof to
include the required financial statements and pro forma financial information.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
. Report of Independent Auditors
. Statements of Net Assets as of December 31, 1997 and 1998 and July 4,
1999 (unaudited)
. Statements of Operations and Changes in Net Assets for the years
ended December 31, 1996, 1997 and 1998 and the six months ended
June 26, 1998 and July 4, 1999 (unaudited)
. Statements of Cash Flows for the years ended December 31, 1996, 1997
and 1998 and the six months ended June 26, 1998 and July 4, 1999
(unaudited)
(b) Pro Forma Financial Information.
. Introduction to Unaudited Pro Forma Consolidated Financial
Information
. Unaudited Pro Forma Consolidated Balance Sheet as of June 30, 1999
. Notes to Unaudited Pro Forma Consolidated Balance Sheet as of June
30, 1999
. Unaudited Pro Forma Consolidated Statement of Operations for the year
ended December 31, 1998
<PAGE>
. Unaudited Pro Forma Consolidated Statement of Operations for the
six months ended June 30, 1999
. Notes to Unaudited Pro Forma Consolidated Statements of
Operations
(c) Exhibits.
Exhibit Number Description
-------------- -----------
2.1 Agreement for Purchase and Sale of Assets dated
June 25, 1999 between Pinnacle Towers Inc. and
Motorola, Inc.*
2.2 Amendment to Agreement for Purchase and Sale of
Assets dated as of August 31, 1999 between Pinnacle
Towers Inc. and Motorola, Inc.+
4.1 Registration Rights Agreement dated as of August
31, 1999 between the Registrant and Motorola, Inc.+
*Incorporated by reference to the Registrant's Registration
Statement on Form S-3 (SEC File No 333-82273), as amended, filed with the
Securities and Exchange Commission on July 2, 1999.
+Previously filed.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PINNACLE HOLDINGS INC.
(Registrant)
By: /s/ Steven R. Day
____________________________________
Steven R. Day, Chief Financial
Officer,
Vice President and Secretary
Date: November 15, 1999
3
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Motorola, Inc.:
We have audited the accompanying statements of net assets of the North
American Antenna Sites Business of Motorola, Inc. (Business), as of December
31, 1997 and 1998 and the related statements of operations and changes in net
assets and cash flows for each of the years in the three-year period ended
December 31, 1998. These financial statements are the responsibility of the
Business' management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
The accompanying financial statements were prepared on the basis of
presentation described in Note 2. The accompanying financial statements include
allocations for common services provided by Motorola, Inc. and are not
necessarily indicative of the financial position, results of operations, and
cash flows had the Business operated as a stand-alone entity.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the net assets of the Business as of December 31,
1997 and 1998, and the results of its operations and its cash flows for each of
the years in the three-year period ended December 31, 1998, on the basis
described in Note 2, in conformity with generally accepted accounting
principles.
KPMG LLP
Chicago, IL
June 16, 1999
4
<PAGE>
NORTH AMERICAN ANTENNA SITES
BUSINESS OF MOTOROLA, INC.
STATEMENTS OF NET ASSETS
December 31, 1997 and 1998 and July 4, 1999 (unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
December 31, July 4,
--------------- -----------
1997 1998 1999
------- ------- -----------
(unaudited)
<S> <C> <C> <C>
Assets
Current assets:
Accounts receivable, net of allowance for
doubtful accounts of $227, $49, and $315 at
December 31, 1997 and 1998, and July 4, 1999.. $ 3,908 $ 2,892 $ 3,300
Prepaid rent.................................... 4,037 3,606 4,342
------- ------- -------
Total current assets.......................... 7,945 6,498 7,642
Property and equipment, net....................... 41,593 39,533 36,765
Goodwill, net of accumulated amortization of $134,
$138, and $151 at December 31, 1997 and 1998, and
July 4, 1999.................................... 183 574 996
------- ------- -------
Total assets.................................. $49,721 $46,605 $45,403
======= ======= =======
Liabilities and Net Assets
Current liabilities:
Accounts payable................................ $ 1,838 $ 1,717 $ 1,465
Accrued expenses................................ 2,457 1,988 810
Deferred revenue................................ 1,786 1,793 3,157
------- ------- -------
Total current liabilities..................... 6,081 5,498 5,432
Net assets........................................ 43,640 41,107 39,971
------- ------- -------
Total liabilities and net assets.............. $49,721 $46,605 $45,403
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
NORTH AMERICAN ANTENNA SITES
BUSINESS OF MOTOROLA, INC.
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
Years ended December 31, 1996, 1997, and 1998 and the six months
ended June 26, 1998 (unaudited) and July 4, 1999 (unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Six months ended
Years ended December 31, -----------------
---------------------------- June 26, July 4,
1996 1997 1998 1998 1999
-------- -------- -------- --------- -------
(unaudited)
<S> <C> <C> <C> <C> <C>
Net revenue:
Parent...................... $ 10,163 $ 8,917 $ 7,563 $ 4,543 $ 3,319
Other parties............... 78,473 80,182 78,045 38,605 38,762
-------- -------- -------- ------- -------
Total net revenue......... 88,636 89,099 85,608 43,148 42,081
Operating expenses:
Direct tower costs.......... 50,466 51,553 50,416 25,217 24,023
Selling, general, and
administrative............. 8,194 10,966 11,516 5,629 5,258
Depreciation and
amortization............... 9,292 9,271 8,476 4,305 4,197
Allocated costs from the
parent..................... 9,871 6,265 4,168 2,772 1,534
-------- -------- -------- ------- -------
Income before income
taxes.................... 10,813 11,044 11,032 5,225 7,069
Income taxes.................. 4,318 4,398 4,382 2,074 2,800
-------- -------- -------- ------- -------
Net income................ 6,495 6,646 6,650 3,152 4,269
Net assets, beginning of
period....................... 47,329 43,878 43,640 43,640 41,107
Transfers to Parent........... (9,946) (6,884) (9,183) (5,215) (5,405)
-------- -------- -------- ------- -------
Net assets, end of period..... $ 43,878 $ 43,640 $ 41,107 $41,577 $39,971
======== ======== ======== ======= =======
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
NORTH AMERICAN ANTENNA SITES
BUSINESS OF MOTOROLA, INC.
STATEMENTS OF CASH FLOWS
Years ended December 31, 1996, 1997, and 1998 and the six months
ended June 26, 1998 (unaudited) and July 4, 1999 (unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Years ended December 31, Six months ended
---------------------------- ------------------
June 26, July 4,
1996 1997 1998 1998 1999
-------- -------- -------- --------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income................... $ 6,495 $ 6,646 $ 6,650 $ 3,152 $ 4,269
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and
amortization............... 9,292 9,271 8,476 4,305 4,197
Allowance for doubtful
accounts................... (124) 148 (178) (98) 30
Change in assets and
liabilities:
Accounts receivable........ 2,879 (1,358) 1,194 (145) 402
Prepaid rent............... (766) 479 431 (130) (167)
Accounts payable........... (391) 229 (121) (339) (53)
Accrued expenses and
deferred revenue.......... (843) 391 (463) 2,360 (2,801)
-------- -------- -------- ------- -------
Net cash provided by
operating activities..... 16,542 15,806 15,989 9,105 5,877
-------- -------- -------- ------- -------
Cash used in investing
activities--capital
expenditures................. (6,596) (8,922) (6,806) (3,890) (472)
-------- -------- -------- ------- -------
Cash used in financing
activities--net cash
transferred to Parent........ (9,946) (6,884) (9,183) (5,215) (5,405)
-------- -------- -------- ------- -------
Cash at beginning and end
of period................ $ -- $ -- $ -- $ -- $ --
======== ======== ======== ======= =======
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
NORTH AMERICAN ANTENNA SITES
BUSINESS OF MOTOROLA, INC.
NOTES TO FINANCIAL STATEMENTS
Years ended December 31, 1996, 1997, and 1998 and the six months ended
March 28, 1998 (unaudited) and July 4, 1999 (unaudited)
(dollars in thousands)
(1) Description of Business
The primary function of the North American Antenna Sites Business of
Motorola, Inc. (Business) is the renting, managing, and operating of antenna
and transmitter space on communication towers and provides related services to
and for companies using or providing cellular telephone, personal
communications services, paging, microwave, and specialized mobile radio
services. The Business currently owns, manages, and/or leases approximately
2,000 communication tower sites located in both the United States and Canada.
The Business is wholly-owned by its parent, Motorola, Inc. (Parent).
(2) Basis of Presentation
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles utilizing the accounting practices and
procedures of its Parent and have been derived from the accounting records of
the Parent. The financial statements include allocations for common services
provided by the Parent and are not necessarily indicative of the financial
position, results of operations, or cash flows had the Business operated as a
stand-alone entity.
The statements of net assets, statements of operations and changes in net
assets, and statements of cash flows as of and for the quarters ended March 28,
1998 and April 3, 1999 are unaudited but include, in the opinion of management
of the Business, all adjustments, consisting only of normal recurring items,
necessary for a fair presentation of such financial statements.
The Business' cash resources are managed under a centralized system wherein
receipts are deposited to the Parent's corporate accounts and disbursements are
centrally funded. Accordingly, cash, income taxes, and other common services or
activities provided by the Parent and related-party transactions are reflected
as a change in the net assets account.
Where it is possible to specifically identify operating costs with the
activities of the Business, these amounts have been charged or credited
directly to the Business without allocation or apportionment.
Expenses for certain common services provided by the Parent, such as cash
management and other treasury services, legal, patent, tax, insurance
administration, payroll administration, corporate accounting, audit, and human
resources have been included in the financial statements. Expenses for common
services provided by the Parent have been allocated to the Business based on a
budget formula that was agreed upon at the beginning of each year. Individual
expense categories are generally allocated on the basis of revenue or other
measures of business unit activity levels.
In management's opinion, the methods employed in allocating the expenses
described above are reasonable. However, the amounts may not represent the
amounts that would have been incurred had these transactions occurred with
third parties at "arm's length".
(3) Summary of Significant Accounting Policies
(a) 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 reported amounts of assets and
8
<PAGE>
NORTH AMERICAN ANTENNA SITES
BUSINESS OF MOTOROLA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Years ended December 31, 1996, 1997, and 1998 and the six months ended
March 28, 1998 (unaudited) and July 4, 1999 (unaudited)
(dollars in thousands)
liabilities at the date of the financial statements, and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
(b) Property and Equipment
Property and equipment is stated at cost. Depreciation of antenna towers and
related equipment is calculated using accelerated and straight-line methods
over the estimated useful lives of the assets, which are five to seven years.
Depreciation of buildings is calculated using accelerated methods over the
estimated useful lives of the assets, which are twenty years. Depreciation of
office equipment is calculated using accelerated and straight-line methods over
the estimated useful lives of the assets, which are three to seven years.
Depreciation of automobiles is calculated using straight-line methods over the
estimated useful lives of the assets, which are two to four years.
Repairs and maintenance are expensed as incurred and betterments are
capitalized.
(c) Goodwill
The excess of cost over fair value of antenna sites acquired is amortized on
a straight-line basis over its estimated useful life of ten years.
(d) Deferred Revenue
Deferred revenue consists of advance site rent payments from customers. The
amount is amortized to revenue when the Business provides the customer with the
site rental service.
(e) Revenue Recognition
Revenues are recognized as tower services are provided. Amounts received
prior to services being performed are deferred until such time as the revenue
is earned.
(f) Income Taxes
The Business represents a business unit of Motorola, Inc. and as such does
not file separate income tax returns. The results of operations are included in
the consolidated tax return of the Parent. The income tax provision included in
the accompanying statements of operations and changes in net assets has been
computed as if the Business were a separate company.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to the difference between financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Income taxes are settled
through net transfers to Parent.
(g) Concentration of Customer and Credit Risks
The Business' customers are comprised of wireless communication providers
who rent antenna and transmitter space on the Business' antenna towers.
Financial instruments which potentially subject the Business to concentrations
of credit risk consist principally of accounts receivable. As of December 31,
9
<PAGE>
NORTH AMERICAN ANTENNA SITES
BUSINESS OF MOTOROLA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Years ended December 31, 1996, 1997, and 1998 and the six months ended
March 28, 1998 (unaudited) and July 4, 1999 (unaudited)
(dollars in thousands)
1997 and 1998, one customer accounted for 11% and 24% of the total accounts
receivable balance, respectively. For the years ended December 31, 1996, 1997,
and 1998, the Parent accounted for 11%, 10%, and 9% of net revenue,
respectively and one other customer accounted for 24%, 21%, and 18% of net
revenue, respectively.
Accounts receivable are generally unsecured; management believes its
allowance for doubtful accounts is adequate to cover any exposure to loss.
(h) Fair Values of Financial Instruments
The Business believes that the carrying amounts of its financial
instruments, consisting of accounts receivable, accounts payable, and accrued
expenses, approximate the fair value of such items due to the short term nature
of these instruments.
(i) Reclassifications
Certain amounts in prior years' financial statements and related notes have
been reclassified to conform to the 1998 presentation. In addition, certain
amounts previously classified as an element of net assets have been
reclassified to property and equipment and prepaid rent to properly reflect the
assets that are specifically identifiable to the Business.
(4) Property and Equipment
Property and equipment consists of the following:
<TABLE>
<CAPTION>
December 31,
--------------------
1997 1998
--------- ---------
<S> <C> <C>
Antenna towers and related equipment................... $ 107,481 $ 107,313
Buildings.............................................. 32,365 33,620
Land................................................... 5,750 5,822
Office equipment....................................... 2,501 2,420
Automobiles............................................ 1,419 1,407
--------- ---------
149,516 150,582
Less accumulated depreciation.......................... (107,923) (111,049)
--------- ---------
$ 41,593 $ 39,533
========= =========
</TABLE>
10
<PAGE>
NORTH AMERICAN ANTENNA SITES
BUSINESS OF MOTOROLA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Years ended December 31, 1996, 1997, and 1998 and the six months ended
March 28, 1998 (unaudited) and July 4, 1999 (unaudited)
(dollars in thousands)
(5) Accrued Expenses
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
December 31,
-------------
1997 1998
------ ------
<S> <C> <C>
Accrued real estate taxes..................................... $ 200 $ 200
Accrued bonus................................................. 799 --
Accrued vacation.............................................. 172 193
Accrued commissions........................................... 84 132
Accrued rent.................................................. 945 1,221
Accrued other................................................. 257 242
------ ------
$2,457 $1,988
====== ======
</TABLE>
(6) Related-party Transactions
Details with respect to the net transfers from (to) Parent, follow:
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Cash receipts by the Parent on behalf of the
Business.................................... $(90,297) $(87,735) $(86,624)
Cash disbursements by the Parent on behalf of
the Business................................ 76,033 76,453 73,059
Current and deferred income tax liabilities.. 4,318 4,398 4,382
-------- -------- --------
$ (9,946) $ (6,884) $ (9,183)
======== ======== ========
</TABLE>
Employees of the Business are eligible for various benefits under programs
maintained by the Parent. Related liabilities or assets are not included in the
Business' financial statements but rather are reported as an element of net
assets.
The Business engages in transactions with its Parent in the normal course of
its business. These transactions include the renting of antenna tower space and
the allocation of certain expenses.
In management's opinion, the foregoing transactions were consummated based
on amounts agreed upon between the respective parties and are reasonable.
However, these amounts may not represent the amounts that would have been
incurred has these transactions occurred with third parties at "arms-length."
11
<PAGE>
NORTH AMERICAN ANTENNA SITES
BUSINESS OF MOTOROLA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Years ended December 31, 1996, 1997, and 1998 and the six months ended
March 28, 1998 (unaudited) and July 4, 1999 (unaudited)
(dollars in thousands)
(7) Income Taxes
Income tax expense (benefit) for the years ended December 31, 1996, 1997,
and 1998 consists of:
<TABLE>
<CAPTION>
Current Deferred Total
------- -------- ------
<S> <C> <C> <C>
Year ended December 31, 1996:
U.S. Federal..................................... $4,415 $(1,239) $3,176
State and local.................................. 949 (267) 682
Foreign.......................................... 460 -- 460
------ ------- ------
$5,824 $(1,506) $4,318
====== ======= ======
Year ended December 31, 1997:
U.S. Federal..................................... $4,759 $(1,409) $3,350
State and local.................................. 1,023 (303) 720
Foreign.......................................... 328 -- 328
------ ------- ------
$6,110 $(1,712) $4,398
====== ======= ======
Year ended December 31, 1998:
U.S. Federal..................................... $3,069 $ 370 $3,439
State and local.................................. 660 80 740
Foreign.......................................... 203 -- 203
------ ------- ------
$3,932 $ 450 $4,382
====== ======= ======
</TABLE>
Income tax expense differed from the amounts computed by applying the U.S.
Federal income tax rate of 35% to income before income taxes as a result of
the following:
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Income tax expense at statutory rate............ $ 3,785 $ 3,866 $ 3,861
Increase in tax expense resulting from:
State and local income taxes, net of Federal
benefit...................................... 444 468 481
Taxes on non-U.S. earnings.................... 89 64 40
-------- -------- --------
$ 4,318 $ 4,398 $ 4,382
======== ======== ========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities are presented below:
<TABLE>
<CAPTION>
December 31,
----------------
1997 1998
------- -------
<S> <C> <C>
Deferred tax assets--liabilities not currently deductible
for tax purposes........................................ $ 944 $ 729
Deferred tax liabilities--property and equipment,
principally due to differences in depreciation.......... (1,850) (2,085)
------- -------
Net deferred tax liability............................. $ (906) $(1,356)
======= =======
</TABLE>
12
<PAGE>
NORTH AMERICAN ANTENNA SITES
BUSINESS OF MOTOROLA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Years ended December 31, 1996, 1997, and 1998 and the six months ended
March 28, 1998 (unaudited) and July 4, 1999 (unaudited)
(dollars in thousands)
The foregoing net deferred tax liability has been settled through Transfers
to Parent and is included as a component of net assets at December 31, 1997 and
1998.
(8) Commitments and Contingencies
Leases
Certain antenna sites are leased by the Business under operating leases with
noncancelable lease terms expiring at various dates through 2029. Future
minimum payments under these lease agreements are as follows:
<TABLE>
<CAPTION>
Year ending
December 31, Amount
------------ -------
<S> <C>
1999........................................................... $ 6,055
2000........................................................... 5,372
2001........................................................... 4,546
2002........................................................... 3,621
2003........................................................... 3,431
Thereafter..................................................... 15,299
-------
$38,324
=======
</TABLE>
Rent expense for the years ended December 31, 1996, 1997, and 1998 amounted
to $37,319, $38,895, and $38,484, respectively, and is reported in the
statements of operations as an element of direct tower costs.
13
<PAGE>
INTRODUCTION TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The Unaudited Pro Forma Consolidated Balance Sheet at June 30, 1999 gives pro
forma effect to:
. the Registrant's acquisition of approximately 1,858 communications sites
from Motorola, Inc. (the "Motorola Antenna Site Acquisition") and related
financing; and
. the Registrant's public offering of 11,000,000 shares of its common stock
(including 2,550,000 shares sold by certain stockholders) at a price per
share of $25.00 (the "Secondary Offering");
as if each had occurred as of June 30, 1999.
The Unaudited Pro Forma Consolidated Statement of Operations for the year ended
December 31, 1998 and the six months ended June 30, 1999 gives pro forma effect
to:
. the Registrant's acquisition of 201 towers from Southern Communications
for approximately $83.5 million plus fees and expenses (the "Southern
Towers Acquisition");
. the Registrant's acquisition of 166 towers from Mobile Media and its
affiliates for approximately $170 million (the "MobileMedia Acquisition");
. the Motorola Antenna Site Acquisition;
. related financing of the acquisitions referred to above;
. the Registrant's initial public offering ("IPO"); and
. the Secondary Offering;
as if each had occurred as of January 1, 1998.
The Registrant accounts for its acquisitions under the purchase method of
accounting. The total cost of site rental businesses acquired including related
fees and expenses is allocated to the underlying tangible and intangible assets
acquired and liabilities assumed based on their respective fair values. The
purchase price allocations for the respective acquisitions included in the
unaudited pro forma data are preliminary. However, the Registrant does not
expect that the final allocation of the purchase price will be materially
different from its preliminary allocation.
The unaudited pro forma financial data are provided for informational
purposes only and are not necessarily indicative of our results of operations or
financial position had the transactions assumed therein occurred, nor are they
necessarily indicative of the results of operations that may be expected to
occur in the future. Furthermore, the unaudited pro forma financial data are
based upon assumptions that the Registrant believes are reasonable and should be
read in conjunction with the financial statements and the accompanying notes
thereto.
14
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
As of June 30, 1999
(in thousands)
<TABLE>
<CAPTION>
Adjustments
Pinnacle for Adjustments
Holdings Motorola for Pro forma
June 30, Antenna Site Secondary as
Assets 1999 Acquisition(a) Offering(b) Adjusted
----------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
Current Assets:
Cash and equivalents $ 5,065 $ $ $ 5,065
Accounts receivable 3,423 3,300 - 6,723
Prepaid expenses and other
current assets 1,424 4,342 - 5,766
----------- -------------- ------------ ----------
Total current assets 9,912 7,642 - 17,554
Tower assets, net 616,607 191,493 - 808,100
Leasehold interest, net - 81,190 - 81,190
Fixed assets, net 2,517 892 - 3,409
Land 21,587 5,469 - 27,056
Deferred debt costs, net 13,366 - 13,366
Other assets 1,288 - - 1,288
----------- -------------- ------------ ----------
$ 665,277 $ 286,686 $ - $ 951,963
=========== ============== ============ ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 6,744 $ 1,465 $ - $ 8,209
Accrued expenses 13,916 28,260 42,176
Deferred revenue 3,043 3,157 - 6,200
Current portion of long-term debt 1,074 - - 1,074
----------- -------------- ------------ ----------
Total current liabilities 24,777 32,882 - 57,659
Long-term debt 442,095 245,000 (205,519) 481,576
Other liabilities 268 - - 268
----------- -------------- ------------ ----------
467,140 277,882 (205,519) 539,503
----------- -------------- ------------ ----------
Stockholders' Equity
Common stock 32 - 8 40
Additional paid-in
Capital 274,974 8,804 205,511 489,289
Accumulated deficit (76,869) - - (76,869)
----------- -------------- ------------ ----------
Total stockholder's equity 198,137 8,804 205,519 412,460
----------- -------------- ------------ ----------
$ 665,277 $ 286,686 $ - $ 951,963
=========== ============== ============ ==========
</TABLE>
See accompanying Notes to Unaudited Pro Forma
Consolidated Balance Sheet
15
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(a) Represents the pro forma impact of the Motorola Antenna Site Acquisition
for a total cost of $253,804, and the Registrant's preliminary allocation
of purchase price in accordance with the purchase method of accounting,
and the related debt financing under its credit facility and issuance of
the Common Stock, as follows:
<TABLE>
<CAPTION>
Motorola
as of Pro Forma
July 4, 1999 for Motorola
(unaudited) Adjustments(1) Acquisition
------------- -------------- ------------
<S> <C> <C> <C>
Accounts receivable................... $ 3,300 $ -- $ 3,300
Prepaid rent.......................... 4,342 -- 4,342
Tower assets, net..................... 36,765 154,728 191,493
Leasehold interests, net.............. -- 81,190 81,190
Fixed assets, net..................... -- 892 892
Land ................................. -- 5,469 5,469
Other assets.......................... 996 (996) --
------------- -------------- ------------
Total assets.......................... $ 45,403 $ 241,283 $ 286,686
============= ============== ============
Accounts payable...................... 1,465 1,465
Accrued expenses...................... 810 27,450 28,260
Other liabilities..................... 3,157 -- 3,157
Debt.................................. -- 245,000 245,000
Additional paid in capital............ -- 8,804 8,804
Net assets............................ 39,971 (39,971) --
------------- -------------- ------------
Total liabilities and net assets. $ 45,403 $ 241,283 $ 286,686
============= ============== ============
</TABLE>
(1) Reflects the Registrant's preliminary allocation of purchase price,
the incurrence of pro forma debt under the credit facility and the
issuance of the Common Stock.
(b) Reflects the receipt and use of estimated net proceeds of the Secondary
Offering to the Registrant of $205,519 net of the estimated underwriting
discounts and commissions and expenses from such offering totaling
$10,731.
16
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 1998
(in thousands, except per share amount)
<TABLE>
<CAPTION>
Adjustments Adjustments Adjustments
Pinnacle for Adjustments for for Adjustments
Holdings Southern for Motorola Initial for
December 31, Towers MobileMedia Antenna Site Public Secondary
1998 Acquisition(a) Acquisition(b) Acquisition(c) Offering(d) Offering(e)
-------------- -------------- --------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Site rental revenue $ 32,019 $ 836 $ 8,863 $ 85,108 $ - $ -
Site operating expenses, excluding
depreciation and amortization
6,166 185 836 47,582 - -
-------------- -------------- --------------- -------------- ------------- --------------
Gross margin, excluding
depreciation and amortization 25,853 651 8,027 37,526 - -
Other expenses:
General and administrative 4,175 15 381 14,034 - -
Corporate development 6,382 - - - - -
State franchise, excise and
minimum taxes 686 - - - - -
Depreciation 22,513 955 7,636 45,370 - -
-------------- -------------- --------------- -------------- ------------- --------------
33,756 970 8,017 59,404 - -
(7,903) (319) 10 (21,878) - -
Interest expense 12,300 (1,969) 5,599 20,825 (10,661)(f) (17,469)(f)
Amortization of original issue
discount and debt issuance costs 16,427 4,138 - -
-------------- -------------- --------------- -------------- ------------- --------------
Income/(loss) before extraordinary
item (36,630) (2,488) (5,589) (42,703) 10,661 17,469
Extraordinary loss from
extinguishment of debt 5,641 - - - - -
Net loss (42,271) (2,488) (5,589) (42,703) 10,661 17,469
Payable in kind preferred dividends
and accretion 3,094 - 6,438 - (9,532) -
============== ============== =============== ============== ============= ==============
Net loss attributable to common
shareholders $ (45,365) $ (2,488) $ (12,027) $ (42,703) $ 20,193 $ 17,469
==========================================================================================
Basic loss per common share:
Loss before extraordinary item $ (4.95)
Extraordinary item (13.48)
--------------
Net loss $ (108.453)
==============
Weighted average number of
common shares 418
<CAPTION>
Pro
forma
as
Adjusted
------------
<S> <C>
Site rental revenue $ 126,826
Site operating expenses, excluding
depreciation and amortization
54,769
------------
Gross margin, excluding
depreciation and amortization 72,057
Other expenses:
General and administrative 18,605
Corporate development 6,382
State franchise, excise and
minimum taxes 686
Depreciation 76,474
------------
102,147
(30,090)
Interest expense 8,625
Amortization of original issue
discount and debt issuance costs 20,565
------------
Income/(loss) before extraordinary
item (59,280)
Extraordinary loss from
extinguishment of debt 5,641
Net loss (64,921)
Payable in kind preferred dividends
and accretion -
============
Net loss attributable to common
shareholders $ (64,921)
============
Basic loss per common share: $ (1.44)
loss before Extraordinary item (0.14)
------------
Extraordinary item
Net loss $ (1.58)
============
Weighted Average Number
of common shares 41,069
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Statements of
Operations
17
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Six Months Ended June 30, 1999
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Adjustments
for
Pinnacle Motorola Adjustments Adjustments Pro
Holdings Antenna for for forma
June 30, Site Initial Public Secondary as
1999 Acquisition(g) Offering(d) Offering(e) Adjusted
-------- -------------- -------------- ------------- --------
<S> <C> <C> <C> <C> <C>
Site rental revenue $ 25,757 $ 41,747 $ - $ - $ 67,504
Site operating expenses, excluding
depreciation and amortization 4,827 22,522 - - 27,349
-------- ------------- ---------- --------- --------
Gross margin, excluding
depreciation and amortization 20,930 19,225 - - 40,155
Other expenses:
General and administrative 1,612 5,967 - - 7,579
Corporate development 3,271 - - - 3,271
State franchise, excise and
minimum taxes 404 - - - 404
Depreciation 19,649 22,685 - - 42,334
-------- ------------- ---------- --------- --------
24,936 28,652 - - 53,588
Income (loss) from operations (4,006) (9,427) - - (13,433)
Interest expense 8,240 10,413 (5,330)(f) (8,735)(f) 4,588
Amortization of original issue
discount and debt issuance costs 11,228 - - - 11,228
-------- ------------- ---------- --------- --------
Net loss (23,474) (19,840) 5,330 8,735 (29,249)
======== ============= ========== ========= ========
Payable in kind preferred
dividends and accretion 2,930 - (2,930) - -
-------- ------------- ---------- --------- --------
Net loss attributable to common
shareholders $(26,404) $ (19,840) $ 8,260 $ 8,735 $(29,249)
======== ============= ========== ========= ========
Basic and diluted loss per
common share $ (1.05) $ (0.86)
Weighted averaged number
of shares of common stock
outstanding 25,085 34,154
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Statements of
Operations
18
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(a) Reflects the historical operating results of Southern Communications site
operations and the pro forma effect of site rental revenue, site operating
expenses and site asset depreciation, and the related financing of the
Southern Towers Acquisition under the Registrant's credit facility,
assuming the transaction was completed on January 1, 1998, as follows:
<TABLE>
<CAPTION>
Southern Towers
for the Period Adjustments for
from January 1, Southern
1998 through Towers
March 3, 1998 Adjustments Acquisition
------------- ----------- -----------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Site rental revenues........................................ $ 178 $ 658 (1) $ 836
Site operating expenses, excluding depreciation and
amortization............................................. 153 32 (1) 185
--------------- -------- --------------
Gross profit excluding depreciation and amortization........ 25 626 651
General and administrative.................................. 15 -- 15
Depreciation................................................ 340 615 (2) 955
--------------- -------- --------------
Loss from operations........................................ (330) 11 (319)
Interest income............................................. -- (1,969)(3) (1,969)
Amortization of original issue discount and debt
issuance costs........................................... -- 4,138 (3) 4,138
--------------- -------- --------------
Net loss.................................................... $ (330) $ (2,158) $ (2,488)
=============== ======== ==============
</TABLE>
(1) Represents incremental increases in pro forma site rental revenues and
operating expenses pursuant to the executed lease agreement with
Southern Communications, and related affiliates.
(2) Reflects the increase in pro forma depreciation on site assets
acquired resulting from the Registrant's preliminary application of
purchase accounting.
(3) Reflects the pro forma increase in net interest expense associated
with the financing of the Southern Towers Acquisition and the
subsequent issuance of the 10% Senior Discount Notes Due 2008.
(b) Reflects the historical operating results of MobileMedia and its
subsidiaries' tower operations and the pro forma effect of site rental
revenue, site operating expenses and site asset depreciation, and the
related financing of the MobileMedia Acquisition, assuming the transaction
was completed on January 1, 1998, as follows:
<TABLE>
<CAPTION>
Mobile Media
for the
Period from
January 1, 1998 Adjustments for
through Mobile Media
September 2, 1998 Adjustments Acquisitions
----------------- ----------- ------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Site rental revenues.................................... $ 1,698 $ 7,165 (1) $ 8,863
Site operating expenses, excluding depreciation and
amortization............................................ 690 146 (1) 836
---------------- -------- --------------
Gross profit excluding depreciation and amortization.... 1,008 7,019 8,027
General and administrative.............................. 381 -- 381
Depreciation............................................ 356 7,280 (2) 7,636
---------------- -------- --------------
Loss from operations.................................... 271 (261) 10
Interest expense........................................ -- 5,599 (3) 5,599
Net income (loss)....................................... 271 (5,860) (5,589)
Dividends and accretion on preferred stock.............. -- 6,438 (4) 6,438
---------------- -------- --------------
Net income (loss) attributate to common stock........... $ 271 $(12,298) $ (12,027)
================ ======== ==============
</TABLE>
19
<PAGE>
(1) Represents incremental increases in pro forma tower revenues and
operating pursuant to the executed lease agreement with MobileMedia,
and its subsidiaries.
(2) Reflects the increase in pro forma depreciation on tower assets
acquired resulting from the Registrant's preliminary application of
purchase accounting.
(3) Reflects the increase in pro forma interest expense associated with
the debt financing of the MobileMedia Acquisition under the
Registrant's credit facility.
(4) Reflects dividends accrued and accretion to liquidation value on
preferred stock that the Registrant previously had outstanding.
(c) Reflects the historical operating results of Motorola antenna site business
and the pro forma effect of operations, and the related financing of the
Motorola Antenna Site Acquisition under our credit facility and the
issuance of the Common Stock, assuming the transaction was completed on
January 1, 1998, as follows:
<TABLE>
<CAPTION>
Motorola
for the Adjustments for
Period Ended Motorola
December 31, Antenna Site
1998 Adjustments Acquisition(1)
---------------------- ------------------- -----------------
(unaudited) (unaudited)
<S> <C> <C> <C>
Site rental revenue..................................... $ 85,608 $ (500)(1) $ 85,108
Site operating expenses, excluding depreciation and
amortization............................................ 50,416 (2,834)(2) 47,582
--------------------- --------------- -----------------
Gross margin excluding depreciation and amortization.... 35,192 2, 334 37,526
Other expenses:
General and administrative........................... 11,516 (1,650)(3) 9,866
Corporate development................................ -- -- --
State franchise, excise and minimum taxes........... -- -- --
Allocated costs from parent.......................... 4,168 -- 4,168
Depreciation and amortization........................ 8,476 36,894 (4) 45,370
--------------------- -------------- -----------------
Income (loss) from operations........................... 11,032 (32,910) (21,878)
Interest expense........................................ -- 20,825 (5) 20,825
--------------------- -------------- -----------------
Net income (loss) before income taxes................... $ 11,032 $ (53,735) $ (42,703)
===================== ============== ==================
</TABLE>
(1) Represents the pro forma adjustment to site rental revenue for those
sites leased from the Registrant by the Motorola antenna site
business, as such amounts will be eliminated as a direct result of the
Motorola Antenna Site Acquisition.
(2) Represents the pro forma adjustment to site operating expense for
those sites leased from the Registrant by the Motorola antenna site
business, as such amounts will be eliminated as a direct result of the
Motorola Antenna Site Acquisition as well as elimination of certain
losses on adverse leases that are accrued for under the
Registrant's preliminary application of purchase accounting.
(3) Represents elimination of historical personnel costs related to
employees who will not continue under the Motorola Purchase Agreement
that are accrued for under the Registrant's preliminary application of
purchase accounting.
(4) Represents the increase in depreciation and amortization expense as a
result of the Registrant's application of purchase accounting and the
Registrant's preliminary fair value determination of acquired assets.
(5) Represents the additional pro forma interest expense associated with
the financing of the Motorola Antenna Site Acquisition under the
Registrant's credit facility.
(d) Reflects the pro forma effects of the IPO, assuming it was completed as of
January 1, 1998.
(e) Reflects the pro forma effect of the Secondary Offering.
20
<PAGE>
(f) Reflects the decrease in pro forma interest expense resulting from the use
of a portion of the net proceeds from both the IPO and Secondary Offering
to repay pro forma outstanding debt under the Registrant's credit facility,
assuming such transactions were completed as of January 1, 1998.
(g) Reflects the historical operating results of the Motorola antenna site
business and the pro forma effect of operations and the related financing
of the Motorola Antenna Site Acquisition under the Registrant's credit
facility and the issuance of Common Stock, assuming the transaction was
completed on January 1, 1998, as follows:
<TABLE>
<CAPTION>
Adjustments for
Motorola for the Motorola
Period Ended Antenna
July 4, Site
1999 Adjustments Acquisition
---------------- ------------- --------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Site rental revenue $ 42,081 $ (334)(1) $ 41,747
Site operating expenses, excluding depreciation and
amortization......................................... 24,023 (1,501)(2) 22,522
------------------ ------------- --------------
Gross margin, excluding depreciation and
amortization......................................... 18,058 1,167 19,225
Other expenses:
Selling, general and administrative.................. 5,258 (825)(3) 4,433
Corporate development................................ -- -- --
State franchise, excise and minimum taxes........... -- -- --
Allocated costs from parent.......................... 1,534 -- 1,534
Depreciation and amortization........................ 4,197 18,488 (4) 22,685
------------------ ------------- --------------
Income (loss) from operations........................... 7,069 (16,496) (9,427)
Interest expense........................................ -- 10,413 (5) 10,413
------------------ ------------- --------------
Net income (loss) before income taxes................... $ 7,069 $ (26,909) $ (19,840)
================= ============= ==============
</TABLE>
(1) Represents the pro forma adjustment to site rental revenue for those
sites leased from the Registrant by the Motorola antenna site
business, as such amounts will be eliminated as a direct result of the
Motorola Antenna Site Acquisition.
(2) Represents the pro forma adjustments to site rental revenue for those
sites leased from the Registrant by the Motorola antenna site
business, as such amounts will be eliminated as a direct result of the
Motorola Antenna Site Acquisition as well as the elimination of
certain losses on adverse leases that are accrued for under the
Registrant's preliminary application of purchase accounting.
(3) Represents elimination of historical personnel costs related to
employees who will not continue under the Motorola Purchase Agreement
that are accrued for under the Registrant's preliminary application of
purchase accounting.
(4) Represents the increase in depreciation and amortization expense as a
result of the Registrant's application of purchase accounting and its
preliminary fair value determination of acquired assets.
(5) Represents the additional pro forma interest expense associated with
the financing of the Motorola Antenna Site Acquisition under the
Registrant's credit facility.
21
