<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1999
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 0-24773
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PINNACLE HOLDINGS INC.
Incorporated in Delaware I.R.S. Employer Identification No. 65-0652634
1549 Ringling Blvd., 3rd Floor, Sarasota, Florida 34236
Telephone: (941) 364-8886
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 ____ (The Company has not been
---
subject to such filing requirements for the past 90 days.).
At August 13, 1999, Registrant has outstanding 40,676,000 shares of $.001 par
value Common Stock.
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
-----
Item 1. Financial Statements
<S> <C>
Condensed Consolidated Balance Sheets as of December 31, 1998 and June 30, 1999 1
Condensed Consolidated Statements of Operations for the six months ended
June 30, 1998 and 1999 2
Condensed Consolidated Statements of Operations for the three months ended
June 30, 1998 and 1999 3
Condensed Consolidated Statement of Changes in Stockholders' Equity for the six months
ended June 30, 1999 4
Condensed Consolidated Statements of Cash Flows for the six months ended
June 30, 1998 and 1999 5
Notes to Condensed Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9-15
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15-16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2 Not Applicable 17
Items 3 Not Applicable
Item 4 Not Applicable 17
Item 5 Not Applicable 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
EXHIBIT INDEX 19
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
--------------------
PINNACLE HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, June 30
1998 1999
-------------- --------------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 13,801,190 $ 5,064,737
Accounts receivable, net 1,679,390 3,423,494
Prepaid expenses and other current assets 1,432,428 1,424,282
------------- -------------
Total current assets 16,913,008 9,912,513
Tower assets, net 473,942,309 616,606,810
Fixed assets, net 2,476,666 2,516,631
Land 14,613,365 21,587,295
Deferred debt issue costs, net 6,686,683 13,366,219
Other assets 1,516,070 1,287,862
------------- -------------
$ 516,148,101 $ 665,277,330
============= =============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 3,280,809 $ 6,743,652
Accrued expenses 5,761,016 13,916,177
Deferred revenue 1,448,432 3,043,024
Current portion of long-term debt 15,692,912 1,074,181
------------- -------------
Total current liabilities 26,183,169 24,777,034
Long-term debt 417,524,802 442,094,869
Other liabilities 125,152 267,998
------------- -------------
443,833,123 467,139,901
------------- -------------
Redeemable stock:
Series A senior preferred stock, Class B common stock, and Class D common stock 31,643,338 --
------------- -------------
Stockholders' equity:
Series B junior preferred stock 59,928,980 --
Common stock:
Class A common stock, 202,500 and 0 shares issued and outstanding at December 31, 1998 and
June 30, 1999, respectively 203 --
Class E common stock, 174,766 and 0 shares issued and outstanding at December 31, 1998 and
June 30, 1999, respectively 175 --
Common Stock , $.001 par value, 100,000,000 shares authorized; 0 and 32,026,000 shares issued
and outstanding at December 31, 1998 and June 30, 1999, respectively -- 32,026
Warrants 1,000,000 --
Additional paid-in capital 33,136,302 274,973,939
Accumulated deficit (53,394,020) (76,868,536)
------------- -------------
40,671,640 198,137,429
------------- -------------
$ 516,148,101 $ 665,277,330
============= =============
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these condensed financial statements.
1
<PAGE>
PINNACLE HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------------
1998 1999
--------------- ---------------
(unaudited) (unaudited)
<S> <C> <C>
Revenue $ 12,544,096 $ 25,756,967
Operating expenses, excluding depreciation and amortization 2,530,987 4,827,407
-------------- --------------
Gross margin, excluding depreciation and amortization 10,013,109 20,929,560
Other expenses:
General and administrative 1,409,856 1,612,255
Corporate development 3,277,978 3,271,064
State franchise, excise and minimum taxes 282,647 404,334
Depreciation 7,970,717 19,648,671
-------------- --------------
12,941,198 24,936,324
-------------- --------------
Loss from operations (2,928,089) (4,006,764)
Interest expense 4,550,342 8,240,059
Amortization of original issue discount and debt issuance costs 5,660,731 11,227,693
-------------- --------------
Net loss ($ 13,139,162) ($ 23,474,516)
============== ==============
Payable-in-kind preferred dividends and accretion - 2,930,338
============== ==============
Net loss attributable to common shareholders ($ 13,139,162) ($ 26,404,854)
============== ==============
Basic and diluted loss per common share/(a)/ ($ 1.37) ($ 1.05)
============== ==============
Weighted average number of common shares outstanding 9,560,270 25,085,326
============== ==============
</TABLE>
(a) Basic loss per common share in 1999 and 1998 have been computed based on the
weighted average number of common shares outstanding during the periods, after
giving retroactive effect for the conversion of the Company's common stock
outstanding prior to the Company's initial public offering in accordance with
the recapitalization effected contemporaneously with the completion of the
initial public offering (Note 3).
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these condensed financial statements.
2
<PAGE>
PINNACLE HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
June 30,
--------------------------------
1998 1999
-------------- ---------------
(unaudited) (unaudited)
<S> <C> <C>
Revenue $ 7,171,263 $ 13,748,759
Operating expenses, excluding depreciation and amortization 1,679,616 2,594,756
------------- --------------
Gross margin, excluding depreciation and amortization 5,491,647 11,154,003
Other expenses:
General and administrative 990,047 768,791
Corporate development 1,989,171 1,559,781
State franchise, excise and minimum taxes 212,223 203,359
Depreciation 5,019,867 10,654,460
------------- --------------
8,211,308 13,186,391
------------- --------------
Loss from operations (2,719,661) (2,032,388)
Interest expense 1,447,516 4,339,867
Amortization of original issue discount and debt issuance costs 5,050,260 5,799,189
------------- --------------
Net loss ($ 9,217,437) ($ 12,171,444)
============= ==============
Payable-in-kind preferred dividends and accretion - -
============= ==============
Net loss attributable to common shareholders ($ 9,217,437) ($ 12,171,444)
============= ==============
Basic and diluted loss per common share(a) ($ 0.92) ($ 0.38)
============= ==============
Weighted average number of common shares outstanding 10,000,000 32,026,000
============= ==============
</TABLE>
(a) Basic loss per common share in 1999 and 1998 have been computed based on the
weighted average number of common shares outstanding during the periods, after
giving retroactive effect for the conversion of the Company's common stock
outstanding prior to the Company's initial public offering in accordance with
the recapitalization effected contemporaneously with the completion of the
initial public offering (Note 3).
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these condensed financial statements.
3
<PAGE>
PNNACLE HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Series B
Junior Class A Class E
preferred Stock Common stock common stock common stock
-------------------- ------------------------ -------------------- ----------------------
Shares Amount Shares Amount Shares Amount Shares Amount
------ ----------- ---------- ------- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1998 60.40 $59,928,980 - - 202,500 $ 203 174,766 $ 175
Unaudited:
Dividends and accretion on
Preferred Stock 1.27 1,767,106 - -
Issuance of common stock,
net of issuance costs, and
conversion (Note 2) 32,026,000 $32,026 (202,500) (203) (174,766) (175)
Liquidation of Series A
Senior Preferred Stock
Liquidation of Series B
Junior Preferred Stock (61.67) (61,696,086)
Distribution of
contributed capital
and yield on various
classes of common stock
Net Loss
------ ----------- ---------- ------- ------ ------- ------- -----
Balance at June 30, 1999 - $ - 32,026,000 $32,026 - $ - - $ -
====== =========== ========== ======= ====== ======= ======= =====
<CAPTION>
Additional
paid-in Accumulated Stockholders
Warrants capital deficit equity
------------ ------------ -------------- ------------
<C> <C> <C> <C>
Balance at December 31, 1998 $ 1,000,000 $ 33,136,302 ($53,394,020) $ 40,671,640
Dividends and accretion on
Preferred Stock (2,930,338) (1,163,232)
Issuance of common stock,
net of issuance costs, and
conversion (Note 2) 288,515,709 288,547,357
Liquidation of Series A
Senior Preferred Stock (1,000,000) (1,000,000)
Liquidation of Series B
Junior Preferred Stock (61,696,086)
Distribution of
contributed capital
and yield on various
classes of common stock (43,747,734) (43,747,734)
Net Loss (23,474,516) (23,474,516)
Balance at June 30, 1999 ----------- ------------ ----------- ------------
$ - $274,973,939 ($76,868,536) $198,137,429
=========== ============ =========== =============
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these condensed financial statements.
4
<PAGE>
PINNACLE HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------------------
1998 1999
----------------- -----------------
(unaudited) (unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss ($ 13,139,161) ($ 23,474,516)
------------ ------------
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation 7,491,853 19,648,671
Amortization of original issue discount and debt issuance costs 6,139,595 11,227,693
Provision for doubtful accounts 125,000 -
(Increase) decrease in:
Accounts receivable, gross (687,177) (1,744,104)
Prepaid expenses and other current assets ( 77,695) 8,146
Other assets ( 28,957) 228,208
Increase (decrease) in:
Accounts payable 551,165 3,462,843
Accrued expenses 334,508 8,155,161
Deferred revenue 695,217 1,594,592
Other liabilities 436,070 142,846
------------ ------------
Total adjustments 14,979,579 42,724,056
------------ ------------
Net cash provided by operating activities 1,840,418 19,249,540
------------ ------------
Cash flows from investing activities:
Payments made in connection with acquisitions:
Tower assets (134,122,836) (133,408,741)
Land (5,313,807) (6,973,931)
Capital expenditures:
Tower assets (20,692,616) (23,578,316)
Fixed assets (630,374) (475,829)
------------ ------------
Net cash used in investing activities (160,759,633) (164,436,817)
------------ ------------
Cash flows from financing activities:
Borrowings under long-term debt, net 355,821,177 304,850,661
Repayment of long-term debt (206,235,241) (317,696,803)
Proceeds from issuance of common stock, net 10,767,709 286,786,317
Liquidation of PIK preferred stock and warrants - (93,741,617)
Distribution of contributed capital and payment of
accretion on various classes of common stock (412,888) (43,747,734)
------------ ------------
Net cash provided by financing activities 159,940,757 136,450,824
------------ ------------
Net increase (decrease) in cash and cash equivalents 1,021,542 (8,736,453)
Cash and cash equivalents, beginning of period 1,693,923 13,801,190
------------ ------------
Cash and cash equivalents, end of period $ 2,715,465 $ 5,064,737
============ ============
Supplemental disclosure of cash flows:
Cash paid for interest $ 5,462,202 $ 9,540,955
============ ============
Non-Cash Transactions:
Seller debt issued in connection with acquisitions $ 1,073,000 $ 4,890,250
</TABLE>
The accompanying notes to Condensed Consolidated Financial Statements are an
integral part of these condensed financial statements.
5
<PAGE>
Pinnacle Holdings Inc.
Notes to Condensed Consolidated Financial Statements
1. Financial Statements
The accompanying condensed consolidated financial statements reflect the
financial position and results of operations and cash flows of Pinnacle Holdings
Inc. and its wholly owned subsidiaries: Pinnacle Towers Inc., Coverage Plus
Antenna Systems, Inc. and Tower Systems, Inc., collectively referred to as the
"Company". All significant intercompany balances and transactions have been
eliminated. Preparation of the consolidated financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the consolidated
financial statements. Actual results may vary from estimates used.
Results of operations for any interim period are not necessarily indicative of
results of any other periods or for the year. The consolidated statements as of
June 30, 1999 and for the six month and three month periods ended June 30, 1999
and 1998 are unaudited, but in the opinion of management include all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation
of results for such periods. These consolidated financial statements should be
read in conjunction with the Company's financial statements and notes thereto
for the year ended December 31, 1998.
The Company's Consolidated Statements of Operations for the six month and three
month periods ended June 30, 1999, reflect all components of Comprehensive
Income as defined by SFAS No. 130, "Reporting Comprehensive Income."
Accordingly, no separate Consolidated Statement of Comprehensive Income is
presented as would otherwise be required.
2. Acquisitions
The Company actively acquires communications towers and related real estate
assets.
On March 4, 1998, the Company completed the acquisition of 201 communications
sites from Southern Communications Services, Inc. ("Southern Communications"), a
subsidiary of Southern Company. The Company paid $83,500,000 for these
communications sites, located in Georgia, Alabama, Mississippi, and Florida.
On September 3, 1998, the Company acquired from MobileMedia Corporation
("MobileMedia") and several of its affiliates 166 communications towers for an
aggregate purchase price of approximately $170 million (the "MobileMedia
Acquisition"). MobileMedia assigned its existing tenant leases on the towers to
the Company. The Company entered into a lease (the "Lease") with MobileMedia
Communications, Inc., an affiliate of MobileMedia, providing such affiliate of
MobileMedia the non-exclusive right to install a certain amount of its equipment
on the acquired communications sites for aggregate rent of $10.7 million per
year. The Lease has an initial term of 15 years and one five-year renewal term
exercisable at the option of the lessee. Prior to this acquisition, space on
the towers was primarily for the exclusive use of MobileMedia and its
affiliates. The Company has integrated these communications sites into its
rental tower business and is leasing space on these towers to other third party
wireless communications providers. The communications sites are located in the
Southeastern United States, Southern California and New England.
In addition to the Southern Communications and MobileMedia transactions
described above, the Company completed 80 acquisitions of 526 communications
sites and related assets, all of which were individually insignificant to the
Company, from various sellers during the year ended December 31, 1998 for an
aggregate
6
<PAGE>
purchase price of $331,204,262, consisting of $328,789,297 in cash and
$2,414,965 of notes payable to the former tower owners.
During the six months ended June 30, 1999, the Company completed 63 acquisitions
of 166 communications sites and related assets, all of which were individually
insignificant to the Company, from various sellers for an aggregate purchase
price of $133,231,001 consisting of $128,340,757 in cash and $4,890,250 of notes
payable to the former tower owners.
The Company accounts for its acquisitions using the purchase method of
accounting. The results of operations of the acquired assets are included with
those of the Company from the dates of the respective acquisitions. The pro
forma results of operations listed below reflect purchase accounting and pro
forma adjustments as if the transactions occurred as of January 1, 1998. The
unaudited pro forma condensed consolidated financial information are not
necessarily indicative of the results that would have occurred if the assumed
transactions had occurred on the dates indicated and are not necessarily
indicative of the expected results of operations in the future.
<TABLE>
<CAPTION>
Pro Forma
-----------------------------------------
June 30, June 30,
1998 1999
------------------- --------------------
(unaudited) (unaudited)
<S> <C> <C>
Revenue $ 21,222,386 $ 28,168,461
Gross margin, excluding depreciation 16,986,005 22,947,229
Net loss (36,206,999) (26,545,830)
Net loss attributable to common shareholders (36,206,999) (29,476,169)
Basic and diluted net loss per common share (3.79) (1.18)
</TABLE>
3. Initial Public Offering and Stockholders' Equity
On February 19, 1999, the Company completed its initial public offering of
common stock ("the IPO") whereby the Company sold 20,000,000 shares of a new
class of common stock (the "Common Stock"). In addition, on March 19, 1999, the
Underwriters over-allotment options were exercised to the extent that an
additional 2,026,000 shares were sold. The initial price per share was $14,
resulting in net proceeds from the IPO of approximately $288 million.
In connection with the IPO, pursuant to a recapitalization agreement between the
Company, its largest stockholder, ABRY Broadcast Partners II, L.P. ("ABRY II"),
and certain members of the Company's management that are stockholders of the
Company, the Company converted all outstanding shares of each class of the
Company's five classes of common stock into shares identical to the Common Stock
sold in the IPO and paid to the holders of certain of such classes of common
stock preferential amounts and yields. The certificate of incorporation of the
Company was amended immediately prior to the consummation of the IPO to
eliminate the multiple classes of the Company's common stock and create the now
single class of Common Stock, and all of the outstanding shares of all the
classes of common stock of the Company other than Class D Common Stock were
converted into approximately 8,571,309 shares of Common Stock and all shares of
Class D common Stock were converted into approximately 1,428,691 shares of
Common Stock.
The holders of the Company's outstanding (prior to the above described
conversion) shares of Class A Common Stock, Class B Common Stock and Class E
Common Stock were collectively paid approximately $38.9 million by the Company
from proceeds of the IPO, which amount equaled the amount of preferences such
shares were entitled to over the other classes of the Company's common stock
pursuant to the Company's certificate of incorporation before giving effect to
the amendment relative to the conversion of those shares as described
7
<PAGE>
above. In addition, the holders of the Company's outstanding (prior to the above
described conversion) shares of Class A Common Stock were collectively paid
approximately $4.8 million by the Company from proceeds of the IPO, which amount
equaled the amount of yield such shares had accrued from the date of their
issuances through June 30, 1997 pursuant to the Company's certificate of
incorporation before giving effect to the amendment relative to the conversion
of those shares as described above.
Other uses of proceeds from the IPO were: (1) approximately $32.0 redeemed the
outstanding shares of the Company's Series A Senior Preferred Stock (the "Senior
Preferred Stock"); (2) approximately $61.7 million redeemed the outstanding
shares of the Company's Series B Junior Preferred Stock (the "Junior Preferred
Stock"); (3) approximately $15.7 million repaid in full and retired a loan from
ABRY II; (4) approximately $123.8 million repaid outstanding borrowings under
the Company's Senior Credit Facility (as defined herein); and, (5) $11.4 was
used to fund the closing of pending acquisitions proximate to the date the funds
were available from the IPO.
4. Long-term Debt
As of June 25, 1999, the Company amended its Senior Credit Facility to provide
$520 million of financing, of which $470 million is currently committed.
Advances under the Senior Credit Facility accrue interest at the Company's
option of either LIBOR plus a margin of up to 3.00%, as defined in the related
agreement, or at the greater of the Federal Funds Effective Rate plus 0.50% or
the prime rate, plus a margin of up to 1.75%. Additionally, certain financial
covenants were modified.
The Senior Credit Facility is secured by a lien on substantially all of the
Company's assets and a pledge of substantially all of the capital stock of the
Company's subsidiaries. The Senior Credit Facility contains customary covenants
such as limitations on the Company's ability to incur indebtedness, to incur
liens or encumbrances on assets, to make certain investments, to make
distributions to shareholders, or prepay subordinated debt. Under the Senior
Credit Facility, the Company may not permit the ratio of senior debt to
annualized EBITDA as defined in the agreement to exceed certain amounts.
5. Commitments
As of and subsequent to June 30, 1999, the Company entered into several letters
of intent with various third parties to purchase 1,971 additional communications
sites, including an agreement with Motorola, Inc. ("Motorola") to acquire 499
owned sites, 526 "managed" sites and 833 "leased" sites for $255 million plus
fees and expenses (the "Motorola Antenna Site Acquisition"), reflecting an
aggregate commitment to pay approximately $293,032,301, all of which are subject
to consummation of transactions pending completion of due diligence efforts and
any further negotiation which may result therefrom.
6. Subsequent Events
On July 22, 1999, the Company completed a secondary offering of common stock
(the "Secondary Offering") whereby the Company sold 8,650,000 shares of its
Common Stock. The price per share was $25, resulting in net proceeds from the
Secondary Offering of approximately $206 million. Certain stockholders of the
Company also sold 2,350,000 shares of common stock, the net proceeds of which
are not available to the Company. The proceeds from the Secondary Offering will
be invested initially in short-term liquid securities and then used in
conjunction with the Company's availability of senior debt under its amended
Senior Credit Facility to fund the expected consummation of the Motorola Antenna
Site Acquisition and other acquisitions and development of communications sites.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations:
-------------
The following discussion of the consolidated financial condition and results of
operations of the Company should be read in conjunction with the condensed
consolidated financial statements and related notes thereto. This discussion
contains forward-looking statements within the meaning of the federal securities
laws. The words "believe," "estimate," "expect," "intend," "anticipate," "plan,"
and similar expressions and variations of such expressions identify certain of
such forward-looking statements that speak only as of the dates on which they
were made. Prospective investors are cautioned that any such forward-looking
statements are not guarantees of future performance and involve risks and
uncertainties. Actual events or results may differ materially from those
discussed in the forward-looking statements as a result of various factors,
including, without limitation, the risk factors set forth in the Company's
Amendment No. 2 to Registration Statement on Form S-3 (No. 333-82273) filed on
July 21, 1999 (the "Registration Statement").
The Company
The Company acquires and constructs communications towers and leases space on
such towers to a broad base of wireless communications providers, operators of
private networks, government agencies and other customers. The Company's
objective is to own or manage and operate clusters of rental communications
sites in areas where there is significant existing and expected continued growth
in the demand for rental communications sites by wireless communications
providers. The Company seeks to obtain a substantial number of communications
sites in its targeted markets in order to offer "one-stop shopping" to wireless
communications providers who are deploying or expanding wireless communications
networks.
The Company's growth has come primarily from aggressively pursuing tower
acquisitions in areas that complement the Company's existing base of rental
communications sites and the expansion into additional high growth wireless
communications markets. The Company also selectively constructs new
communications sites to further augment its tower portfolio. Additionally, the
Company realizes organic revenue growth from new tenants, escalations and
repricing of existing tenant leases. The Company is the leading provider of
wireless communications rental tower space in the Southeastern United States.
Recently, the Company has expanded its tower operations to new markets in New
England and Southern California, and with the Motorola Antenna Site Acquisition
will expand operations to a North American footprint. The Company continues to
consider attractive tower acquisition opportunities in other areas with high
wireless communications growth.
Since commencing operations in May 1995, through June 30, 1999, the Company has
completed 279 acquisitions through which it has acquired 965 communications
sites and has constructed an additional 108 communications sites in such high
growth markets as Atlanta, Birmingham, New Orleans, Orlando and Tampa. As of
June 30, 1999, the Company also has agreements or letters of intent to acquire
1,971 additional communications sites. As a result of its extensive existing and
growing tower base, the Company believes it is well-positioned to continue to
capitalize on the growth opportunities available in the rapidly consolidating
and highly fragmented tower rental industry.
The Company has a diversified base of over 800 customers consisting of wireless
communications providers, operators of private networks and government agencies
that include Southern Communications, Nextel, Sprint PCS, PageNet, Motorola,
BellSouth Mobility, MobileMedia, Teletouch, Skytel, Pagemart, Federal Bureau of
Investigation and Bureau of Alcohol, Tobacco & Firearms. The Company's leases
generally range in duration from three to five years and many provide for
scheduled minimum rent increases of the greater of a specified percentage (which
typically ranges from 3-5%) or the change for the relevant period in the
Consumer Price Index. Unlike a number of other participants in the tower rental
industry, the Company focuses exclusively on the rental of wireless
communications tower space.
9
<PAGE>
The Company has designed and implemented a three-tiered growth strategy that
focuses on: (i) increasing revenue yield per tower through aggressive marketing
and development; (ii) continuing to acquire communications sites in key markets;
and (iii) selective new tower construction. In order to effect its strategy,
the Company has created a highly focused, structured organization in which
significant resources are devoted to acquiring or constructing communications
sites on strategically located sites supported by customer demand. In addition
to supporting the purchase decision regarding potential acquisitions, the
Company uses its proprietary information systems and other systems to rapidly
integrate new communications sites and initiate sales and marketing efforts
immediately following their acquisition or construction.
Results of Operations
Six months ended June 30, 1999 compared to six months ended June 30, 1998
Tower revenues increased 105.3% to $25.8 million for the six month period ended
June 30, 1999 from $12.5 million for the six month period ended June 30, 1998.
This increase is attributable to additional revenue resulting from the
acquisition and construction of 197 communications sites during the six month
period ended June 30, 1999, the results of which are reflected from the time of
acquisition or construction in the six month period ended June 30, 1999, the
inclusion of results from 231 communications sites acquired or constructed
during the period from July 1, 1998 through December 31, 1998 for the entire six
month period ended June 30, 1999, and the inclusion of results from 201
communications sites acquired in March 1998 for the full six month period ended
June 30, 1999. In addition, the increase is due to growth in per tower revenue
as a result of expanded marketing efforts to increase the number of customers
per tower, as well as regular, contractual price escalations for existing
customers.
Operating expenses, excluding depreciation and amortization, increased 90.7% to
$4.8 million for the six month period ended June 30, 1999 from $2.5 million for
the six month period ended June 30, 1998. This increase is consistent with the
purchase and construction of communications sites and the related increases in
revenue as discussed above. Operating expenses as a percentage of revenue
decreased to 18.7% for the six month period ended June 30, 1999 from 20.2% for
the six month period ended June 30, 1998. The change primarily results from
the continuing change in the mix of tower assets due to ongoing acquisition and
build activity occurring since June 30, 1998. The portfolio of tower assets
owned by the Company during the six months ended June 30, 1999 have slightly
lower expenses as a percentage of tower revenue than the smaller portfolio of
tower assets owned during the six months ended June 30, 1998. The specific
areas of expenses effected include ground rents, property taxes and certain
maintenance costs related to the Company's site improvement program, which is
designed to enhance marketability of sites to the Company's customers.
General and administrative expenses, as a percentage of revenue, decreased to
6.3% of revenue for the six month period ended June 30, 1999 from 11.2% for the
six month period ended June 30, 1998 reflecting the growth in revenues resulting
from the Company's continued success in implementing its growth strategy over
the past year. The decrease in percentage results from economies of scale
realized from increases in tower revenues as a result of the Company's
acquisitions and construction of communications sites, offset partially by the
effect of increases in expenses from additional staffing due to the Company
becoming a public registrant and related increases in professional fees,
increased levels of advertising and marketing expenditures and increases in rent
and related costs associated with the Company's growth.
Corporate development expenses were substantially unchanged at $3.3 million for
the six month periods ended June 30, 1999 and June 30, 1998. Corporate
development expenses decreased as a percentage of revenue from 26.1% for the six
month period ended June 30, 1998 to 12.7% for the six month period ended June
30, 1999 because of the incremental increase in revenue from the comparative
period in 1998 and economies of scale resulting from such growth plus expense
reductions achieved by outsourcing certain acquisition functions previously
performed by employees of the Company.
10
<PAGE>
State franchise, excise and minimum taxes, which represent taxes assessed in
connection with the Company's operations in various state jurisdictions
increased to $0.40 million for the six month period ended June 30, 1999 from
$0.28 million for the six month period ended June 30, 1998. Such taxes are
calculated using various methods such as a portion of the Company's property
within a given state, the Company's capital structure or based upon a minimum
tax in lieu of income taxes. The increase in 1999 is primarily attributable to
the Company's significant expansion of its geographic region primarily through
acquisitions.
Depreciation expense increased 146.5% to $19.6 million for the six month period
ended June 30, 1999 from $8.0 million for the six month period ended June 30,
1998 as a result of the increase in tower assets through the acquisition
activities of the Company as described above.
Interest expense increased 81.0% to $8.2 million for the six month period ended
June 30, 1999 from $4.5 million for the six month period ended June 30, 1998.
The increase in interest expenses was attributable to increased average
borrowings associated with the Company's acquisitions during the six month
period ended June 30, 1999 as compared to the six month period ended June 30,
1998, offset by the Company being subject to lower average interest rates on its
average borrowings for the six month period ended June 30, 1999 as compared to
the six month period ended June 30, 1998.
Amortization of original issue discount and debt issuance cost increased to
$11.2 million for the six month period ended June 30, 1999 from $5.7 million for
the six month period ended June 30, 1998. The prior year period included
amortization of original issue discount for only three full and one partial
month as the sale of the Company's 10% Senior Discount Notes due March 15, 2008
("Senior Discount Notes") was consummated on March 20, 1998, compared to a full
six months of amortization on the accreted balance for the 1999 period.
Three months ended June 30, 1999 compared to three months ended June 30, 1998
Tower revenues increased 91.7% to $13.7 million for the three month period ended
June 30, 1999 from $7.2 million for the three month period ended June 30, 1998.
This increase is attributable to additional revenue resulting from the
acquisition and construction of 428 communications sites during the twelve month
period ended June 30, 1999, the results of which are reflected from the time of
acquisition or construction in the three month period ended June 30, 1999 and
the inclusion of results from 356 communications sites acquired or constructed
during the period from July 1, 1998 through March 31, 1999 for the entire three
month period ended June 30, 1999. In addition, the increase is due to growth in
per tower revenue as a result of expanded marketing efforts to increase the
number of customers per tower, as well as regular, contractual price escalations
for existing customers.
Operating expenses, excluding depreciation and amortization, increased 54.5% to
$2.6 million for the three month period ended June 30, 1999 from $1.7 million
for the three month period ended June 30, 1998. This increase is consistent with
the purchase and construction of communications sites and the related increases
in revenue as discussed above. Operating expenses as a percentage of revenue
decreased to 18.9% for the three month period ended June 30, 1999 from 23.4% for
the three month period ended June 30, 1998. The change primarily results from
the continuing change in the mix of tower assets due to ongoing acquisition and
build activity occurring since June 30, 1998. The portfolio of tower assets
owned by the Company during the three months ended June 30, 1999 have lower
expenses as a percentage of tower revenue than the smaller portfolio of tower
assets owned during the three months ended June 30, 1998. The specific areas of
expenses effected include ground rents, property taxes and certain maintenance
costs related to the Company's site improvement program, which is designed to
enhance marketability of sites to the Company's customers.
General and administrative expenses, as a percentage of revenue, decreased to
5.6% of revenue for the three month period ended June 30, 1999 from 13.8% for
the three month period ended June 30, 1998 reflecting the
11
<PAGE>
growth in revenues resulting from the Company's continued success in
implementing its growth strategy over the past year. The decrease in percentage
results from economies of scale realized from increases in tower revenues as a
result of the Company's acquisitions and construction of communications sites,
offset partially by the effect of increases in expenses from additional staffing
due to the Company becoming a public registrant and related increases in
professional fees, increased levels of advertising and marketing expenditures
and increases in rent and related costs associated with the Company's growth.
Corporate development expenses decreased 21.6% to $1.6 million for the three
month period ended June 30, 1999 from $2.0 million for the three month period
ended June 30, 1998. The decrease in corporate development expenses reflects the
higher costs for the 1998 period associated with the Company's focus on
expansion of its acquisition and construction strategies during that time frame
and related tower development efforts. Corporate development expenses decreased
as a percentage of revenue from 27.7% for the three month period ended June 30,
1998 to 11.3% for the three month period ended June 30, 1999 because of the
incremental increase in revenue from the comparative period in 1998 and
economies of scale resulting from such growth expense reductions achieved by
outsourcing certain acquisition functions previously performed by employees of
the Company.
State franchise, excise and minimum taxes, which represent taxes assessed in
connection with the Company's operations in various state jurisdictions was
approximately $0.20 million for the three month periods ended June 30, 1999 and
June 30, 1998. Such taxes are calculated using various methods such as a
portion of the Company's property within a given state, the Company's capital
structure or based upon a minimum tax in lieu of income taxes.
Depreciation expense increased 112.2% to $10.7 million for the three month
period ended June 30, 1999 from $5.0 million for the three month period ended
June 30, 1998 as a result of the increase in tower assets through the
acquisition activities of the Company as described above.
Interest expense increased 199.8% to $4.3 million for the three month period
ended June 30, 1999 from $1.4 million for the three month period ended June 30,
1998. The increase in interest expenses was attributable to increased average
borrowings associated with the Company's acquisitions during the three month
period ended June 30, 1999 as compared to the three month period ended June 30,
1998, offset by the Company being subject to lower average interest rates on its
average borrowings for the three month period ended June 30, 1999 as compared to
the three month period ended June 30, 1998.
Amortization of original issue discount and debt issuance cost increased to $5.8
million for the three month period ended June 30, 1999 from $5.0 million for the
three month period ended June 30, 1998. The increase reflects the compounding
of the amortized original issue discount at the end of each six month period
from the date the Senior Discount Notes were issued (March 20, 1998) through
March 15, 2003.
Liquidity and Capital Resources
The Company's liquidity needs arise from its acquisition-related activities,
debt service, working capital and capital expenditures. The Company has
historically funded its liquidity needs with proceeds from equity contributions,
bank borrowings, cash flow from operations and the offering of its Senior
Discount Notes. The Company had a working capital deficit of $14.9 million and
$9.3 million (inclusive of a $15.0 million bridge loan owed to ABRY II repaid on
February 24, 1999) as of June 30, 1999 and December 31, 1998, respectively. The
Company's ratio of total debt to stockholders' equity was 2.2 to 1.0 at June 30,
1999 and 10.7 to 1.0 at December 31, 1998.
The Senior Credit Facility with Bank of America, N.A. and certain other lenders
provides a combination of term loans and revolving lines of credit for
borrowings of up to $520 million, of which $470 million is currently committed.
The Company may make borrowings and repayments until June 30, 2006. Beginning
June 30, 2001, the availability under the term loans and revolving lines of
credit start reducing by specified amounts on a
12
<PAGE>
quarterly basis until June 30, 2007 when the availability will be reduced to
zero. Loans under the Senior Credit Facility bear interest at a rate per annum,
at the borrower's request, equal to the agent bank's prime rate plus a margin of
up to 1.75% or the 90-day London Interbank Offered Rate plus a margin of up to
3.00%. Outstanding borrowings under the Senior Credit Facility have been used
primarily to fund acquisitions and construction of communications sites. As of
June 30, 1999, there was approximately $231.4 million available under the Senior
Credit Facility (exclusive of the additional $50 million of uncommitted amount)
after giving effect to approximately $46.6 million of outstanding letters of
credit, which reduce availability under the Senior Credit Facility.
The Company also uses seller financing to fund certain of its tower
acquisitions. The Company had outstanding notes that it issued to sellers
bearing interest at rates ranging from 8.5% to 13.0% per annum in the aggregate
amount of $24.4 million at June 30, 1999.
In March 1998, the Company completed its offering of its Senior Discount Notes.
The Company received net proceeds of approximately $192.8 million from that
offering. The proceeds were used to repay outstanding borrowings under the
Senior Credit Facility, to repay in full and retire a $12.5 million bridge loan
from ABRY II and accrued interest thereon, to repay in full and retire a $20
million subordinated term loan and accrued interest thereon and to pay a
distribution preference to holders of Class B Common Stock. The Senior Discount
Notes were issued under an indenture dated as of March 20, 1998 and will mature
on March 15, 2008. Until March 15, 2003, the Company's interest expense on the
Senior Discount Notes will consist solely of the accretion of original issue
discount. Thereafter, the Senior Discount Notes will require annual cash
interest payments of $32.5 million.
In September 1998, in order to finance the MobileMedia Acquisition, the Company
sold two newly issued series of Preferred Stock, the Senior Preferred Stock with
a liquidation preference of $30.0 million and the Junior Preferred Stock with a
liquidation preference of $32.5 million. Included in the sale of the Senior
Preferred Stock were warrants to purchase approximately .75% of the Company's
outstanding common stock. The warrants were cancelled upon the redemption of
the Senior Preferred Stock. ABRY/Pinnacle, Inc., an affiliate of ABRY II,
purchased the Junior Preferred Stock. In addition to the proceeds from the above
sales, the MobileMedia Acquisition was funded with the ABRY Bridge Loan and
borrowings under the Senior Credit Facility. In December 1998, the Company
issued $26.2 million of additional Junior Preferred Stock to ABRY/Pinnacle, Inc.
The proceeds from the sale of the Junior Preferred Stock were used to fund tower
acquisitions and pay operating costs. The Senior Preferred Stock and the Junior
Preferred Stock were entitled to receive dividends, payable quarterly, at a
current rate of 14% per annum. The Senior Preferred Stock and the Junior
Preferred Stock were redeemable, at the option of the Company, in whole (but not
in part), at any time at a redemption price equal to the aggregate liquidation
preference thereof, plus all accumulated but unpaid dividends to the date of
redemption.
The principal stockholders of the Company (ABRY II, and Messrs. Wolsey, Dell'Apa
and Day) were parties to a Subscription and Stockholders Agreement, dated as of
May 16, 1996, as amended (the "Stockholders Agreement"). Pursuant to the
Stockholders Agreement, ABRY II agreed to make capital contributions to the
Company, up to an aggregate capital contribution of $50.0 million. As of
December 31, 1998, ABRY II had contributed $37.2 million and had guaranteed an
additional $3.9 million of other debt under the aggregate $50.0 million capital
contribution commitment. Such capital contribution commitment terminated upon
the closing of the IPO. Additionally, as of December 31, 1998, ABRY II or an
affiliate had contributed separately $73.7 million to the Company, including
$15.0 million outstanding under the ABRY Bridge Loan and $58.7 million of Junior
Preferred Stock. The Stockholders Agreement was terminated upon completion of
the IPO.
On February 19, 1999, the Company completed the IPO whereby the Company sold
20,000,000 shares of Common Stock. In addition, on March 19, 1999, the
Underwriters over-allotment options were exercised to
13
<PAGE>
the extent that an additional 2,026,000 shares were sold. The initial price per
share was $14, resulting in net proceeds from the IPO of approximately $290
million before deducting costs of the IPO.
In connection with the IPO, pursuant to a recapitalization agreement between the
Company, its largest stockholder, ABRY II, and certain members of the Company's
management that are stockholders of the Company, the Company converted all
outstanding shares of each class of the Company's five classes of common stock
into shares of the Common Stock sold in the IPO and paid to the holders of
certain of such classes of common stock preferential amounts and yields. The
certificate of incorporation of the Company was amended immediately prior to the
consummation of the IPO to eliminate the multiple classes of the Company's
common stock and create the now single class of Common Stock, and all of the
outstanding shares of all the classes of common stock of the Company other than
Class D Common Stock were converted into approximately 8,571,309 shares of
Common Stock and all shares of Class D common Stock were converted into
approximately 1,428,691 shares of Common Stock.
The holders of the Company's outstanding (prior to the above described
conversion) shares of Class A Common Stock, Class B Common Stock and Class E
Common Stock were collectively paid approximately $38.9 million by the Company
from proceeds of the IPO, which amount equaled the amount of preferences such
shares were entitled to over the other classes of the Company's common stock
pursuant to the Company's certificate of incorporation before giving effect to
the amendment relative to the conversion of those shares as described above. In
addition, the holders of the Company's outstanding (prior to the above described
conversion) shares of Class A Common Stock were collectively paid approximately
$4.8 million by the Company from proceeds of the IPO, which amount equaled the
amount of yield such shares had accrued from the date of their issuances through
June 30, 1997 pursuant to the Company's certificate of incorporation before
giving effect to the amendment relative to the conversion of those shares as
described above.
Other uses of proceeds from the IPO were: (1) approximately $32.0 redeemed the
outstanding shares of the Company's Senior Preferred Stock; (2) approximately
$61.7 million redeemed the outstanding shares of the Company's Junior Preferred
Stock; (3) approximately $15.7 million repaid in full and retired a loan from
ABRY II; (4) approximately $123.8 million repaid outstanding borrowings under
the Company's Senior Credit Facility; and, (5) $11.4 was used to fund the
closing of pending acquisitions proximate to the date the funds were available
from the IPO.
On July 22, 1999, the Company completed the Secondary Offering whereby the
Company sold 8,650,000 shares of common stock. The price per share was $25,
resulting in net proceeds from the Secondary Offering of approximately $206
million. Certain stockholders of the Company also sold 2,350,000 shares of
common stock, the net proceeds of which are not available to the Company. The
proceeds from the Secondary Offering were invested initially in short-term
liquid securities and will be used in conjunction with the Company's
availability of senior debt under the Senior Credit Facility to fund the
expected consummation of the Motorola Antenna Site Acquisition and other
acquisitions and development of communications sites.
Capital expenditures, including acquisitions, for the six months ended June 30,
1999 were $164.4 million, compared to $160.8 million in the comparable 1998
period. The Company anticipates that it will spend approximately $316.5 million
on capital expenditures during the period from July 1, 1999 through December 31,
1999, including the Motorola Antenna Site Acquisition, various individually
immaterial acquisitions in the Company's current targeted acquisitions pipeline,
construction and upgrading of communications sites. Depending on availability
of additional capital, the Company expects that it may make substantial capital
expenditures for acquisitions, construction and upgrading of additional
communications sites in 1999 and 2000.
The Company believes that cash flow from operations and existing cash balances
will be sufficient to meet working capital requirements for existing properties.
The Company currently anticipates that it will seek additional financing in
order to pursue additional acquisitions, construction activity and other capital
14
<PAGE>
expenditures that will require funding in excess of available proceeds from the
Secondary Offering and funds available under its Senior Credit Facility. Such
additional financing may be obtained by the Company through public or private
debt and equity offerings or increasing availability under its Senior Credit
Facility. There can be no assurance that such financing will be commercially
available through an increased commitment under the Senior Credit Facility or
otherwise or be permitted by the terms of the Company's existing indebtedness.
To the extent that the Company is unable to finance future capital expenditures,
it may not be able to achieve its current business strategy.
Inflation
Because of the relatively low levels of inflation experienced in 1998 and as of
June 30, 1999, inflation did not have a significant effect on the Company's
results in such years.
Year 2000
Many computer systems in use today were designed and developed using two digits,
rather than four, to specify years. As a result, such systems will recognize
the year 2000 as "00" or 1900. This could cause many computer applications to
fail completely or to create erroneous results unless corrective measures are
taken.
We utilize management information systems and software technology that may be
affected by Year 2000 issues throughout our businesses. During 1996, we began
to implement plans to assess our systems to determine their ability to meet our
internal and external requirements. During 1998, we completed our initial
comprehensive testing of and modifications to our information systems in
response to that testing. We have developed questionnaires and contacted key
suppliers regarding their Year 2000 compliance to determine any impact on our
operations. In general, our suppliers and customers appear to have developed or
are in the process of developing plans to address Year 2000 issues. We will
continue to monitor and evaluate the progress of our suppliers and customers on
this matter.
Year 2000 issues are not expected to have a material impact on our current
information systems as a result of the steps already completed to try and make
our systems Year 2000 compliant. Based on the nature of our business, we
anticipate that we are not likely to experience material business interruption
due to the impact of Year 2000 compliance on our customers and vendors, although
if our customers and vendors experience Year 2000 problems, our results of
operations could be materially adversely affected. We estimate that we will
spend approximately $100,000 in 1999 to continue to monitor and test our systems
for Year 2000 compliance including our software applications that we
continuously develop and enhance. As a result, we do not anticipate that
incremental expenditures to address Year 2000 compliance will be material to our
liquidity, financial position or results of operations prior to the Year 2000.
Recent Accounting Pronouncements
Not applicable.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
----------------------------------------------------------
The Company is exposed to certain market risks inherent in the Company's
financial instruments. These instruments arise from transactions entered into
in the normal course of business and, in some cases, relate to the Company's
acquisitions of related businesses. The Company is subject to interest rate
risk on its existing Senior Credit Facility and any future financing
requirements. The Company's fixed rate debt consists primarily of outstanding
balances on its Senior Discount Notes and notes payable to former tower owners
and its variable rate debt relates to borrowings under its Senior Credit
Facility. See "-Liquidity and Capital Resources".
15
<PAGE>
The following table represents the future principal payment obligations and
weighted-average interest rates associated with the Company's existing long-term
debt instruments assuming the Company's actual level of long-term indebtedness
of $418,815,896 under the Senior Discount Notes and the Senior Credit Facility
as of June 30, 1999:
<TABLE>
<CAPTION>
Expected Maturity Date
<S> <C> <C> <C> <C> <C> <C>
1999 2000 2001 2002 2003 Thereafter
Liabilities
Long-term Debt
Fixed Rate
(10.00%) $ -- $ -- $ -- $ -- $ -- $325,000,000
Variable Rate
(Weighted Average
Interest Rate of 8.33%) -- -- 3,450,000 4,300,000 4,810,000 179,440,000
</TABLE>
The Company's primary market risk exposure relates to (i) the interest rate risk
on long-term and short-term borrowings, (ii) its ability to refinance its Senior
Discount Notes at maturity at market rates, (iii) the impact of interest rate
movements on its ability to meet interest expense requirements and exceed
financial covenants and (iv) the impact of interest rate movements on the
Company's ability to obtain adequate financing to fund future acquisitions. The
Company manages interest rate risk on its outstanding long-term and short-term
debt through its use of fixed and variable rate debt. While the Company can not
predict or manage its ability to refinance existing debt or the impact interest
rate movements will have on its existing debt, management continues to evaluate
its financial position on an ongoing basis.
16
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
-----------------
The Company is from time to time involved in ordinary litigation incidental to
the conduct of its business. The Company believes that none of its pending
litigation will have a material adverse effect on the Company's business,
financial condition or results of operations.
Item 2. Changes in Securities and Use of Proceeds.
-----------------------------------------
Not applicable.
Item 3. Defaults Upon Senior Securities.
-------------------------------
Not applicable.
Item 4 Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
Not applicable.
Item 5. Other Information.
-----------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) The Exhibits listed in the "Exhibit Index" are filed as part of this
report.
(b) Reports on Form 8-K. The Company filed no reports on form 8-K during the six
month period ended June 30, 1999.
17
<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 thereunto duly authorized.
Pinnacle Holdings Inc.
Date August 16, 1999 By: /s/ Steven R. Day
------------------
Steven R. Day
Chief Financial Officer
Vice President
Duly Authorized Officer and Principal
Financial Officer.
18
<PAGE>
EXHIBIT INDEX
Designation Description
- ----------- -----------
3.1.1 Amended and Restated Certificate of Incorporation.*
3.1.2 Bylaws of the Company.**
10.1 Agreement for Purchase and Sale of Assets between Pinnacle Towers Inc.
and Motorola, Inc., dated June 25, 1999.***
10.2 Fourth Amended and Restated Credit Agreement, dated June 25, 1999.****
27.1 Financial Data Schedule
__________________
* Previously filed on February 17, 1999 with Amendment No. 6 to the Company's
Registration Statement on Form S-11 (S.E.C. File No. 333-59297).
** Previously filed on April 1, 1998 with the Company's Registration Statement
on Form S-4 (S.E.C. File No. 333-49147).
*** Previously filed on July 2, 1999 with the Company's Registration Statement
on Form S-3 (S.E.C. File No. 333-82273).
**** Previously filed on July 21, 1999 with Amendment No. 2 to the Company's
Registration Statement on Form S-3 (S.E.C. File No. 333-82273).
19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> JUN-30-1998 JUN-30-1999
<CASH> 2,715,465 5,064,737
<SECURITIES> 0 0
<RECEIVABLES> 2,334,752 3,548,494
<ALLOWANCES> 195,000 125,000
<INVENTORY> 0 0
<CURRENT-ASSETS> 5,970,359 9,912,513
<PP&E> 309,000,565 690,235,675
<DEPRECIATION> 15,223,593 49,524,939
<TOTAL-ASSETS> 311,989,514 665,277,330
<CURRENT-LIABILITIES> 298,269,736 24,777,034
<BONDS> 290,170,858 442,094,869
0 0
0 0
<COMMON> 378 32,026
<OTHER-SE> 11,968,360 198,137,429
<TOTAL-LIABILITY-AND-EQUITY> 311,999,514 665,277,330
<SALES> 12,544,096 25,756,967
<TOTAL-REVENUES> 12,544,096 25,756,967
<CGS> 0 0
<TOTAL-COSTS> 2,530,987 4,827,407
<OTHER-EXPENSES> 11,446,336 33,176,383
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 4,550,342 8,240,059
<INCOME-PRETAX> (13,139,161) (23,474,516)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (13,139,161) (23,474,516)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (13,139,161) (23,474,516)
<EPS-BASIC> (34.24) (1.05)
<EPS-DILUTED> 0 0
</TABLE>
