##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-Q þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2005
 o
    
    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: 001-31769 SpectraSite, Inc. (Exact Name of registrant as specified in its charter)
 Delaware(State or jurisdiction of
incorporation or organization)
    
    4899(Primary Standard Industrial
Classification Code Number)
    
    56-2027322(I.R.S. Employer
Identification Number)
 SpectraSite, Inc.
400 Regency Forest Drive
Cary, North Carolina 27511
(919) 468-0112(Address and telephone number of principal executive offices and principal place of business) 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 þ Noo Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
the Exchange Act). Yes þ Noo Indicate by check mark whether the registrant has filed all documents and reports required to be
filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court. Yes þ Noo As of May 6, 2005, the registrant had only one outstanding class of common stock, of which there
were 46,939,823 shares outstanding.   1




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##### 



INDEX PART I - FINANCIAL INFORMATIONITEM 1 -FINANCIAL STATEMENTSCondensed Consolidated Balance Sheets at March 31, 2005 (unaudited) and December 31, 2004
    
    
    3Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2005 and the three months ended March 31, 2004
    
    
    4Unaudited Consolidated Statement of Stockholders Equity for the three months ended March 31, 2005
    
    
    5Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2005 and the three months ended March 31, 2004
    
    
    6Notes to the Unaudited Condensed Consolidated Financial Statements
    
    
    8ITEM 2 - MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    25ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    48ITEM 4 - CONTROLS AND PROCEDURES
    
    
    48PART II - OTHER INFORMATIONITEM 1 - LEGAL PROCEEDINGS
    
    
    50ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    50ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
    
    
    51ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    51ITEM 5 - OTHER INFORMATION
    
    
    51ITEM 6 - EXHIBITS
    
    
    51SIGNATURES
    
    
    53EXHIBITS
  2




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##### 



SPECTRASITE, INC. AND SUBSIDIARIES 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 March 31, 2005
    
    
    December 31, 2004(unaudited)(In thousands, except share and per shareamounts)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    69,709
    
    
    $
    34,649Accounts receivable, net of allowance of
$4,997 and $5,882, respectively
    
    
    10,300
    
    
    
    9,061Prepaid expenses and other
    
    
    14,198
    
    
    
    13,855Total current assets
    
    
    94,207
    
    
    
    57,565Property and equipment, net
    
    
    1,149,068
    
    
    
    1,166,396Customer contracts, net
    
    
    149,776
    
    
    
    160,163Goodwill
    
    
    2,827
    
    
    
    Accrued straight-line rents receivable
    
    
    27,466
    
    
    
    25,461Other assets
    
    
    27,129
    
    
    
    21,487Total assets
    
    $
    1,450,473
    
    
    $
    1,431,072LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    4,904
    
    
    $
    7,050Accrued and other expenses
    
    
    45,517
    
    
    
    31,959Deferred revenue
    
    
    41,483
    
    
    
    45,668Current portion of credit facility
    
    
    4,000
    
    
    
    4,000Total current liabilities
    
    
    95,904
    
    
    
    88,677Long-term portion of credit facility
    
    
    545,000
    
    
    
    546,000Senior notes
    
    
    200,000
    
    
    
    200,000Deferred revenue, net of current portion
    
    
    15,135
    
    
    
    19,969Deferred straight-line lease expense
    
    
    41,466
    
    
    
    36,902Other long-term liabilities
    
    
    42,941
    
    
    
    42,205Total long-term liabilities
    
    
    844,542
    
    
    
    845,076Commitments and ContingenciesStockholders equity:Common stock, $0.01 par value, 250,000,000
shares authorized, 50,552,963 and 49,725,592
issued at March 31, 2005 and December 31,
2004, respectively
    
    
    505
    
    
    
    497Additional paid-in-capital
    
    
    727,532
    
    
    
    717,320Treasury stock at cost (3,679,881 shares at
March 31, 2005 and December 31, 2004)
    
    
    (205,444
    )
    
    
    (196,050
    )Accumulated deficit
    
    
    (12,566
    )
    
    
    (24,448
    )Total stockholders equity
    
    
    510,027
    
    
    
    497,319Total liabilities and stockholders equity
    
    $
    1,450,473
    
    
    $
    1,431,072
 See accompanying notes. 3




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##### 



SPECTRASITE, INC. AND SUBSIDIARIES 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months
    
    
    Three MonthsEnded
    
    
    EndedMarch 31,
    
    
    March 31,2005
    
    
    2004(In thousands, except per share amounts)Revenues
    
    $
    93,816
    
    
    $
    84,740Operating Expenses:Costs of operations, excluding depreciation, amortization and
accretion expenses
    
    
    31,508
    
    
    
    30,393Selling, general and administrative expenses
    
    
    15,170
    
    
    
    12,042Depreciation, amortization and accretion expenses
    
    
    30,587
    
    
    
    29,188Total operating expenses
    
    
    77,265
    
    
    
    71,623Operating income
    
    
    16,551
    
    
    
    13,117Other income (expense):Interest income
    
    
    266
    
    
    
    214Interest expense
    
    
    (11,604
    )
    
    
    (9,891
    )Other income (expense)
    
    
    14,013
    
    
    
    (1,584
    )Total other income (expense)
    
    
    2,675
    
    
    
    (11,261
    )Income from continuing operations before income taxes
    
    
    19,226
    
    
    
    1,856Income tax expense:Income tax  current
    
    
    287
    
    
    
    337Income tax  deferred
    
    
    7,307
    
    
    
    400Total income tax expense
    
    
    7,594
    
    
    
    737Income from continuing operations
    
    
    11,632
    
    
    
    1,119Discontinued operations:Loss from operations of discontinued broadcast services division
    
    
    
    
    
    
    (124
    )Income (loss) on disposal of discontinued segment
    
    
    250
    
    
    
    (343
    )Net income
    
    $
    11,882
    
    
    $
    652Basic earnings per share:Income from continuing operations
    
    $
    0.25
    
    
    $
    0.02Discontinued operations
    
    
    
    
    
    
    (0.01
    )Net income
    
    $
    0.25
    
    
    $
    0.01Diluted earnings per share:Income from continuing operations
    
    $
    0.23
    
    
    $
    0.02Discontinued operations
    
    
    0.01
    
    
    
    (0.01
    )Change in
fair value of ASB contract (see Note 1)
    
    
    (0.11
    )
    
    
    Net income (see Note 1)
    
    $
    0.13
    
    
    $
    0.01Weighted average common shares outstanding (basic)
    
    
    46,686
    
    
    
    47,880Weighted average common shares outstanding (diluted)
    
    
    50,363
    
    
    
    52,368
 See accompanying notes. 4




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##### 



SPECTRASITE, INC. AND SUBSIDIARIES 
 UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
 Common
    
    
    Additional
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    TotalStock
    
    
    Paid-in
    
    
    Treasury Stock
    
    
    Accumulated
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Shares
    
    
    Cost
    
    
    Deficit
    
    
    Equity(In thousands)Balance at December 31, 2004
    
    
    49,725,592
    
    
    $
    497
    
    
    $
    717,320
    
    
    
    (3,679,881
    )
    
    $
    (196,050
    )
    
    $
    (24,448
    )
    
    $
    497,319Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,882
    
    
    
    11,882Warrant and employee stock
option exercises
    
    
    827,371
    
    
    
    8
    
    
    
    10,133
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,141Purchases of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,394
    )
    
    
    
    
    
    
    (9,394
    )Non-cash compensation charges
    
    
    
    
    
    
    
    
    
    
    79
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    79Balance at March 31, 2005
    
    
    50,552,963
    
    
    $
    505
    
    
    $
    727,532
    
    
    
    (3,679,881
    )
    
    $
    (205,444
    )
    
    $
    (12,566
    )
    
    $
    510,027
 See accompanying notes. 5




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##### 



SPECTRASITE, INC. AND SUBSIDIARIES 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Three Months
    
    
    Three MonthsEnded
    
    
    EndedMarch 31,
    
    
    March 31,2005
    
    
    2004(In thousands)Operating activitiesNet income
    
    $
    11,882
    
    
    $
    652Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation
    
    
    26,453
    
    
    
    24,774Amortization of intangible assets
    
    
    3,055
    
    
    
    3,855Amortization of debt issuance costs
    
    
    628
    
    
    
    1,067Amortization of asset retirement obligation
    
    
    1,079
    
    
    
    559Non-cash compensation charges
    
    
    79
    
    
    
    Write-off of debt issuance costs
    
    
    12
    
    
    
    7(Gain) loss on disposal of assets
    
    
    (1,492
    )
    
    
    175Write-off of customer contracts
    
    
    58
    
    
    
    567Gain on derivative instruments
    
    
    (7,322
    )
    
    
    (Gain) loss on disposal of discontinued operations
    
    
    (250
    )
    
    
    343Deferred income taxes
    
    
    7,307
    
    
    
    400Changes in operating assets and liabilities, net of
acquisitions:Accounts receivable
    
    
    (1,239
    )
    
    
    (687
    )Prepaid expenses and other
    
    
    (2,014
    )
    
    
    (3,018
    )Accounts payable
    
    
    (2,230
    )
    
    
    (2,822
    )Other liabilities
    
    
    (584
    )
    
    
    1,968Net cash provided by operating activities
    
    
    35,422
    
    
    
    27,840Investing activitiesPurchases of property and equipment
    
    
    (9,203
    )
    
    
    (6,309
    )Acquisitions of towers and customer contracts
    
    
    
    
    
    
    (1,671
    )Disposal of discontinued operations, net of cash sold
    
    
    
    
    
    
    (551
    )Collection of notes receivable
    
    
    1,071
    
    
    
    Proceeds from the disposition of assets
    
    
    1,681
    
    
    
    714Acquisitions of businesses, net of cash acquired
    
    
    (2,761
    )
    
    
    Net cash used in investing activities
    
    
    (9,212
    )
    
    
    (7,817
    )Financing activitiesProceeds from issuance of common stock
    
    
    10,141
    
    
    
    4,506Payments of debt and capital leases
    
    
    (1,147
    )
    
    
    (522
    )Payments received on executive notes
    
    
    
    
    
    
    304Debt issuance costs
    
    
    (144
    )
    
    
    (392
    )Net cash provided by financing activities
    
    
    8,850
    
    
    
    3,896Net increase in cash and cash equivalents
    
    
    35,060
    
    
    
    23,919Cash and cash equivalents at beginning of period
    
    
    34,649
    
    
    
    60,410Cash and cash equivalents at end of period
    
    $
    69,709
    
    
    $
    84,329Supplemental disclosures of cash flow information:Cash paid for interest (net of interest capitalized)
    
    $
    6,398
    
    
    $
    5,047Cash paid for income taxes
    
    
    243
    
    
    
    1,245Tower acquisitions applied against liability under
SBC agreement
    
    
    
    
    
    
    639Supplemental disclosures of non-cash investing and
financing activities:
 6




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##### 



Three Months
    
    
    Three MonthsEnded
    
    
    EndedMarch 31,
    
    
    March 31,2005
    
    
    2004(In thousands)Interest capitalized
    
    $
    291
    
    
    $
    155Capital lease obligations incurred related to
property and equipment, net
    
    
    285
    
    
    
    (95
    )
 See accompanying notes. 7




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##### 



SPECTRASITE, INC. AND SUBSIDIARIES 
  1. Description of Business, Basis of Presentation and Significant Accounting Policies SpectraSite, Inc. and its wholly owned subsidiaries (collectively referred to as the
Company, SpectraSite, we, and us) are engaged in providing services to companies operating
in the telecommunications and broadcast industries, including leasing and licensing antenna sites
on multi-tenant towers, the licensing of distributed antenna systems within buildings, and
managing, leasing and licensing rooftop telecommunications access on commercial real estate in the
United States. Basis of Presentation The accompanying consolidated financial statements include the accounts of SpectraSite and its
subsidiaries. All significant intercompany transactions and balances have been eliminated in
consolidation. As discussed in this Note under Assets Held for Sale and Discontinued Operations,
on March 1, 2004, the Company sold its broadcast services division. Unaudited Interim Financial Statements The accompanying unaudited condensed consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial reporting and in
accordance with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and disclosures normally required by generally accepted
accounting principles for complete financial statements or those normally reflected in the
Companys Annual Report on Form 10-K. The financial information included herein reflects all
adjustments (consisting of normal recurring adjustments the three months ended March 31, 2004 and
2005), which are, in the opinion of management, necessary for a fair presentation of results for
interim periods. Results of interim periods are not necessarily indicative of the results to be
expected for a full year. Restatement of Previously Issued Financial Statements In the Companys Annual Report on Form 10-K for the year ended December 31, 2004, filed on
March 16, 2005, the Company restated its consolidated balance sheet as of December 31, 2003 and its
consolidated statements of operations, stockholders equity and cash flows for the eleven months
ended December 31, 2003. In addition, the restatement affected the two months ended March 31, 2003,
the second and third quarters of 2003 and the first, second and third quarters of 2004. The
restatement corrected errors relating to the Companys accounting for (i) the recognition of ground
lease rent expense related to certain ground leases underlying our tower sites, and (ii) the
amortization of leasehold improvements (primarily wireless and broadcast towers). The following table presents the impact of the restatement adjustments described below on net
income for the three months ended March 31, 2004: Net Income for theThree MonthsEndedMarch 31,2004(In thousands)As previously reported
    
    $
    7,130Restatement adjustments:Non-cash ground rent expense
    
    
    (4,650
    )Depreciation, amortization and accretion expenses
    
    
    (3,772
    )Deferred income tax benefit
    
    
    2,069Other(1)
    
    
    (125
    )As restated
    
    $
    652
   (1)
    
    Consists of certain other corrected items, none of which was considered material individually
or in the aggregate. 8




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The following tables present the impact of the restatement adjustments on the Companys
previously reported results for the three months ended March 31, 2004 on a condensed basis: Three Months EndedMarch 31, 2004AsPreviously
    
    
    AsReported
    
    
    Restated(In thousands, except pershare amounts)Statement of operations:Revenues
    
    $
    84,590
    
    
    $
    84,740Cost of operations, excluding depreciation, amortization and
accretion expenses
    
    
    25,743
    
    
    
    30,393Selling, general and administrative expenses
    
    
    12,042
    
    
    
    12,042Depreciation, amortization and accretion expenses
    
    
    25,416
    
    
    
    29,188Other expense, net
    
    
    10,986
    
    
    
    11,261Income tax expense
    
    
    2,806
    
    
    
    737Loss from discontinued operations
    
    
    467
    
    
    
    467Net income
    
    $
    7,130
    
    
    $
    652Basic income per share
    
    $
    0.15
    
    
    $
    0.01Diluted income per share
    
    $
    0.14
    
    
    $
    0.01
 March 31, 2004AsPreviously
    
    
    AsReported
    
    
    Restated(In thousands)Balance Sheet:Current assets
    
    $
    107,888
    
    
    $
    107,888Property and equipment, net
    
    
    1,191,115
    
    
    
    1,175,489Other assets
    
    
    216,269
    
    
    
    219,827Total long-term assets
    
    
    1,407,384
    
    
    
    1,395,316Total assets
    
    $
    1,515,272
    
    
    $
    1,503,204Current liabilities
    
    $
    138,388
    
    
    $
    139,686Long-term portion of credit facility
    
    
    439,155
    
    
    
    439,155Senior notes
    
    
    200,000
    
    
    
    200,000Other long-term liabilities
    
    
    56,056
    
    
    
    78,581Stockholders equity
    
    
    681,673
    
    
    
    645,782Total liabilities and stockholders equity
    
    $
    1,515,272
    
    
    $
    1,503,204
 Use of Estimates The preparation of financial statements in conformity with generally accepted accounting
principles in the United States requires management to make estimates and assumptions that affect
the amounts reported in the unaudited condensed consolidated financial statements and accompanying
notes. Actual results could differ from those estimates. Significant estimates that are susceptible
to change include the Companys estimate of the allowance for uncollectible accounts, fair value of
long-lived assets and asset retirement obligations. 9




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##### 



Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less
when purchased to be cash equivalents. Revenue Recognition Revenues from leasing and licensing activities are recognized when earned based on lease or
license agreements. Rate increases based on fixed escalation clauses that are included in certain
lease or license agreements are recognized on a straight-line basis over the current term of the
lease or license. The non-cash portion of revenues attributable to straight-line recognition was
approximately $1.8 million and $3.0 million for the three months ended March 31, 2005 and 2004,
respectively. Revenues from fees, such as structural analysis fees and site inspection fees, are
recognized once an agreement has been executed, the price is fixed and determinable, delivery of
services has occurred and collectibility is reasonably assured. Additionally, the Company generates
revenues related to the management of sites on rooftops. Under each site management agreement, the
Company is entitled to a recurring fee based on a percentage of the gross revenue derived from the
rooftop site subject to the agreement. The Company recognizes these recurring fees as revenue when
earned. Deferred Revenue The Company recognizes revenue from leasing and licensing activities when earned based on the
lease or license agreements. The unearned portion of customer payments are deferred upon receipt
and then recognized as revenue ratably over the billing period as defined by the lease or license
agreements. Allowance for Uncollectible Accounts The Company evaluates the collectibility of accounts receivable based on a combination of
factors. In circumstances where a specific customers ability to meet its financial obligations to
the Company is in question, the Company records a specific allowance against amounts due to reduce
the net recognized receivable from that customer to the amount it reasonably believes will be
collected. For all other customers, the Company reserves a percentage of the remaining outstanding
accounts receivable balance based on a review of the aging of customer balances, industry
experience and the current economic environment. The allowance for uncollectible accounts, computed
based on the above methodology, was $5.0 million and $5.9 million as of March 31, 2005 and December
31, 2004, respectively. Activity in the allowance for uncollectible accounts consisted of the
following: Three MonthsEndedMarch 31, 2005(In thousands)Beginning allowance
    
    $
    5,882Provisions for uncollectible accounts
    
    
    948Write-offs of uncollectible accounts
    
    
    (1,833
    )Ending allowance
    
    $
    4,997
 Costs of Operations Costs of operations consist of direct costs incurred to provide the related services including
ground lease expense, tower maintenance, utilities and related real estate taxes. Ground lease
expense is recognized on a straight-line basis over the lease term, including cancelable option
periods where failure to exercise such options would result in an economic penalty such that at
lease inception the renewal option is reasonably assured of being exercised. The non-cash portion
of ground lease expense attributable to straight-line recognition was approximately $4.3 million
and $4.8 million for the three months ended March 31, 2005 and 2004, respectively. Costs of
operations do not include depreciation and amortization expense on the related assets. 10




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##### 



Investments in Other Entities The Company makes strategic investments in companies that have developed or are developing
innovative wireless technology. Investments in corporate entities with less than a 20% voting
interest are generally accounted for under the cost method. Investments in entities where the
Company owns less than twenty percent but has the ability to exercise significant influence over
operating and financial policies of the entity or where the Company owns more than twenty percent
of the voting stock of the individual entity, but not in excess of fifty percent, are accounted for
using the equity method. The Companys investments are in companies that are not publicly traded,
and, therefore, no established market for these securities exists. The Company reviews the fair
value of its investments on a regular basis to evaluate the carrying value of the investments in
these companies. If the Company believes that the carrying value of an investment is carried at an
amount in excess of fair value and the decline is other than temporary, the Company records an
impairment charge to adjust the carrying value to market value. As of March 31, 2005 and December
31, 2004, the Companys investments in other entities were accounted for using the cost method and
the carrying value was $2.0 million. Property and Equipment Property and equipment built, purchased or leased under long-term leasehold agreements are
recorded at cost. Self-constructed assets include both direct and indirect costs associated with
construction as well as capitalized interest. Approximately $0.3 million and $0.2 million of
interest was capitalized for the three months ended March 31, 2005 and 2004, respectively. In
addition, upon initial recognition of a liability for the retirement of a purchased or constructed
asset under Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement
Obligations,the cost of that liability is capitalized as part of the cost basis of the related
asset and depreciated over the related life of the asset. Depreciation is recorded using the straight-line method over the estimated useful lives of the
related assets. Property and equipment acquired through capitalized leases and leasehold
improvements (primarily wireless and broadcast towers) are amortized over the shorter of the lease
term or their estimated useful life. Lease terms include cancelable option periods where failure to
exercise such options would result in an economic penalty such that at lease inception the renewal
option is reasonably assured of exercise. The estimated useful lives of our significant property
and equipment classifications are as follows: YearsWireless towers
    
    
    15Broadcast towers and tower components
    
    
    10-30Equipment
    
    
    3-15Buildings
    
    
    39
 Goodwill The excess of the purchase price over the fair value of net assets acquired in purchase
business combinations has been recorded as goodwill. Goodwill is evaluated for impairment on an
annual basis or as impairment indicators are identified, in accordance with Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets(SFAS 142). On an ongoing
basis, the Company assesses the recoverability of goodwill by determining the ability of the
specific assets acquired to generate future cash flows sufficient to recover the goodwill over the
remaining useful life. The Company estimates future cash flows based on the current performance of
the acquired assets and its business plan for those assets. Changes in business conditions, major
customers or other factors could result in changes in those estimates. Goodwill determined to be
unrecoverable based on future cash flows is written off in the period in which such determination
is made. The Company had no recorded goodwill as of December 31, 2004 and $2.8 million of goodwill
as of March 31, 2005. Goodwill as of March 31, 2005 is associated with the acquisition of Green
Mountain Wireless, Inc., a New Hampshire corporation. See Note 4 for further discussion of this
acquisition. 11




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##### 



Intangible Assets Subject to Amortization In accordance with AICPA Statement of Position 90-7, Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code(SOP 90-7), the Company adopted fresh start accounting
on January 31, 2003. Under SOP 90-7, deferred tax benefits related to federal and state net
operating loss carry-forwards and tax basis differences generated prior to the Companys emergence
from bankruptcy that are realized by the Company will be first utilized to reduce intangible assets
until such intangible assets are reduced to zero and thereafter will be reported as additions to
paid-in-capital. During the three months ended March 31, 2005, the Company recognized deferred
income tax expense and reduced its customer contracts by $7.3 million. Customer Contracts The Company assesses the value of customer contracts relating to existing leases or licenses
on assets acquired and records such customer contracts at fair value at the date of acquisition.
Upon completion of the Companys reorganization and the implementation of fresh start accounting,
the Company recorded intangible assets relating to the fair value of customer contracts in the
amount of $190.9 million as of January 31, 2003. These contracts are amortized over the lesser of
the remaining life of the lease contract (including renewal options) or the remaining life of the
related tower asset, not to exceed 15 years for wireless towers and 30 years for broadcast towers.
Changes in customer contracts for the three months ended March 31, 2005 consisted of the following: Balance
    
    
    
    
    
    
    Deferred Tax
    
    
    
    
    
    
    BalanceJanuary 1, 2005
    
    
    Amortization
    
    
    Benefit Reduction
    
    
    Write-offs
    
    
    March 31, 2005(In thousands)Customer contracts
    
    $
    184,047
    
    
    $
    
    
    
    $
    (7,307
    )
    
    $
    (62
    )
    
    $
    176,678Accumulated amortization
    
    
    (23,884
    )
    
    
    (3,022
    )
    
    
    
    
    
    
    4
    
    
    
    (26,902
    )Customer contracts, net
    
    $
    160,163
    
    
    $
    (3,022
    )
    
    $
    (7,307
    )
    
    $
    (58
    )
    
    $
    149,776
 The Company estimates amortization expense related to customer contracts to be
approximately $11.5 million for each of the next five years. Right to Lease Agreements The Company has entered into Right to Lease agreements with various licensees to provide
access to interior space for in-building equipment. The initial access fees for these agreements
are amortized over a period of either 3 or 10 years, depending on the terms of the lease agreement.
Changes in right to lease agreements for the three months ended March 31, 2005 consisted of the
following: Balance
    
    
    
    
    
    
    
    
    
    
    BalanceJanuary 1, 2005
    
    
    Additions
    
    
    Amortization
    
    
    March 31, 2005(In thousands)Right to lease agreements
    
    $
    575
    
    
    $
    75
    
    
    $
    
    
    
    $
    650Accumulated amortization
    
    
    (84
    )
    
    
     ̄
    
    
    
    (29
    )
    
    
    (113
    )Right to lease agreements, net
    
    $
    491
    
    
    $
    75
    
    
    $
    (29
    )
    
    $
    537
 The Company estimates amortization expense related to right to lease agreements to be
approximately $0.1 million per year through 2006 and decrease to approximately $0.05 million per
year from 2007 through 2009. Debt Issuance Costs The Company capitalizes costs relating to the issuance of long-term debt and senior notes.
These capitalized debt issuance costs are included in Other assets in the accompanying consolidated
balance sheets. These costs are amortized to interest expense using the straight-line method over
the term of the related debt. 12




---



##### 



The following table summarizes activity with respect to debt issuance costs for the three
months ended March 31, 2005: Balance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    BalanceJanuary 1, 2005
    
    
    Additions
    
    
    Amortization
    
    
    Write-offs
    
    
    March 31, 2005(In thousands)Credit facility
    
    $
    10,927
    
    
    $
    134
    
    
    $
    (390
    )
    
    $
    (12
    )
    
    $
    10,659Senior notes
    
    
    5,079
    
    
    
    9
    
    
    
    (238
    )
    
    
    
    
    
    
    4,850Debt issuance costs, net
    
    $
    16,006
    
    
    $
    143
    
    
    $
    (628
    )
    
    $
    (12
    )
    
    $
    15,509
 Impairment of Long-Lived Assets Long-lived assets, such as property and equipment, goodwill and purchased intangible assets,
are evaluated for impairment whenever events or changes in circumstances indicate the carrying
value of an asset may not be recoverable in accordance with Statement of Financial Accounting
Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets(SFAS 144). An
impairment loss is recognized when estimated undiscounted future cash flows expected to result from
the use of the asset plus net proceeds expected from disposition of the asset (if any) are less
than the carrying value of the asset. When an impairment is identified, the carrying amount of the
asset is reduced to its estimated fair value. Derivative Financial Instruments The Company accounts for derivative financial instruments in accordance with Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities(SFAS 133), as amended by Statement of Financial Accounting Standards No. 138,
Accounting for Certain Instruments and Certain Hedging Activities(SFAS 138) and as further
amended by Statement of Financial Accounting Standards No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities(SFAS 149). The Company records derivative
financial instruments in the consolidated financial statements at fair value. Changes in the fair
value of derivative financial instruments are either recognized in earnings or in stockholders
equity (deficit) as a component of accumulated other comprehensive income (loss) depending on
whether the derivative financial instrument qualifies for hedge accounting as defined by SFAS 133.
Changes in fair values of derivatives not qualifying for hedge accounting are reported in earnings
as they occur. In February 2003, the Company entered into an interest rate cap agreement at a cost of $0.8
million in order to limit exposure to fluctuations in interest rates on its variable rate credit
facility. This transaction has not been designated as a fair value hedge. Accordingly, gains and
losses from the change in the fair value of this instrument are recognized in other income and
expense during the period of change. During the three months ended March 31, 2005 and 2004, the
Company recognized a loss on the change in the fair value of this instrument of approximately $200
and $0.1 million, respectively. The carrying amount and fair value of this instrument was
negligible as of March 31, 2005 and December 31, 2004 and is included in Other assets in the
accompanying consolidated balance sheets. In December 2004, the Company entered into an interest rate swap agreement in order to limit
exposure to fluctuations in interest rates on its variable rate credit facility. This transaction
has not been designated as a fair value hedge. Accordingly, gains and losses from the change in the
fair value of this instrument are recognized in other income and expense. The carrying amount and
fair value of this instrument was $7.9 million and $0.6 million as of March 31, 2005 and December
31, 2004, respectively, and is included in Other assets in the consolidated balance sheet. During
the three months ended March 31, 2005, the Company recognized a gain on the change in fair value of
this instrument of $7.3 million. Including the effect of the interest rate swap, the weighted
average interest rate on outstanding borrowings under the credit facility was 5.07% and 4.83% as of
March 31, 2005 and December 31, 2004, respectively. Liabilities under SBC Agreement On January 31, 2003, the Company recorded liabilities in the amount of $60.5 million related
to its obligation to complete the lease or sublease of the remaining 600 towers under the
agreements with affiliates of SBC Communications (SBC).
This amount was determined as the difference between the estimated purchase price for the remaining
600 towers, including direct costs to place the towers in 13




---



##### 



service, and the estimated fair value of the towers based on an independent valuation. At each
closing, the liability was reduced by a portion of the purchase price of each tower. In addition,
the liability was reduced by the amount of costs incurred to place the acquired towers in service.
In the three months ended March 31, 2004, the Company leased or subleased 6 towers, for which it
paid $1.7 million, of which $0.6 million was charged against the liability. In addition, on
February 17, 2004, the parties agreed to reduce the Companys remaining commitment by five towers.
In connection with this reduction, the associated liability was reduced by $0.5 million and was
recorded as Other income. On August 16, 2004, the Company completed its last closing under its
agreement with SBC. Assets Held for Sale and Discontinued Operations On December 16, 2003, the Company decided to sell its broadcast services division and, on
March 1, 2004, the division was sold. In connection with the sale, the Company recorded promissory
notes receivable from the buyer. At the time of sale, the notes receivable were recorded at their
estimated fair value by recording a valuation allowance against the notes. During the three months
ended March 31, 2004, the Company recorded a loss on disposal of the division of $0.3 million. The
valuation allowance is periodically evaluated against actual collection experience and estimates of
future collectibility. In the three months ended March 31, 2005, the Company recorded a gain of
$0.3 million on the disposal of the division relating to the partial collection and re-evaluation
of the collectibility of the notes receivable as of March 31, 2005. The results of the broadcast
services operations have been reported separately as discontinued operations in the unaudited
consolidated statements of operations. As permitted under Statement of Financial Accounting
Standards No. 95, Statement of Cash Flows, the statements of cash flows do not separately
disclose the cash flows related to discontinued operations. Significant Customers The Companys customer base consists of businesses operating in the wireless
telecommunications and broadcast industries. The Companys exposure to credit risk consists
primarily of unsecured accounts receivable from these customers. Customers representing 10% or more of the Companys consolidated revenues are presented below
for the applicable periods: Three Months
    
    
    Three MonthsEnded
    
    
    EndedMarch 31,
    
    
    March 31,2005
    
    
    2004(Dollars in thousands)Significant Customer RevenueCingular Wireless*
    
    $
    30,520
    
    
    $
    26,332% Total Consolidated Revenue
    
    
    33
    %
    
    
    31
    %Nextel and affiliates**
    
    $
    25,853
    
    
    $
    23,974% Total Consolidated Revenue
    
    
    28
    %
    
    
    28
    %Sprint**
    
    $
    5,231
    
    
    $
    3,773% Total Consolidated Revenue
    
    
    6
    %
    
    
    4
    %Total Consolidated Revenue
    
    $
    93,816
    
    
    $
    84,740
   *
    
    As of October 27, 2004, Cingular Wireless merged with AT&T Wireless. As of March 31, 2005, we have
511 wireless sites where Cingular Wireless and AT&T Wireless are both located pursuant to separate
licensing agreements. Revenues shown above include both Cingular
Wireless and AT&T Wireless.**
    
    As of December 16, 2004, Sprint and Nextel entered into a merger agreement which has not yet
closed. Revenues from Sprint are included above for informational purposes. As of March 31, 2005, we have 619
wireless sites where Sprint and Nextel are both located pursuant to separate licensing agreements. 14




---



##### 



Restructuring and Non-recurring Charges The following table displays activity related to the accrued restructuring liability. Such
liability is reflected in Accrued and other expenses in the accompanying condensed consolidated
balance sheets. All activity, other than cash payments, for the period presented below is included
in the determination of net income. Liability as of
    
    
    
    
    
    
    
    
    
    
    Liability as ofJanuary 1,
    
    
    Additions/
    
    
    Cash
    
    
    March 31,2005
    
    
    (Reductions)
    
    
    Payments, net
    
    
    2005(In thousands)Accrued restructuring liabilities:Reduced tower acquisition and developmentEmployee severance
    
    $
    21
    
    
    $
    1
    
    
    $
    (22
    )
    
    $
    Lease termination and office closing
    
    
    (204
    )
    
    
    (11
    )
    
    
    44
    
    
    
    (171
    )(183
    )
    
    
    (10
    )
    
    
    22
    
    
    
    (171
    )Cingular Wireless BTS terminationLease termination and office closing
    
    
    685
    
    
    
    (28
    )
    
    
    (124
    )
    
    
    533685
    
    
    
    (28
    )
    
    
    (124
    )
    
    
    533Total
    
    $
    502
    
    
    $
    (38
    )
    
    $
    (102
    )
    
    $
    362
 Accounting for Income Taxes As
part of the process of preparing its consolidated financial
statements, the Company is required to
estimate income taxes in each of the jurisdictions in which it
operates. This process involves
estimating the actual current tax liability together with assessing temporary differences resulting
from differing treatment of items for tax and accounting purposes. These differences result in
deferred tax assets and liabilities. The Company must then assess the
likelihood that its deferred tax
assets will be recovered from future taxable income. To the extent
that it believes that recovery is
not likely, a valuation allowance must be established. Significant management judgment is required in
determining the provision for income taxes, deferred tax assets and liabilities and any valuation
allowance recorded against net deferred tax assets. The Company has recorded a valuation allowance of
$523.5 million and $530.8 million as of March 31, 2005 and December 31, 2004, respectively, due to
uncertainties related to utilization of deferred tax assets, primarily consisting of net operating
loss carryforwards and tax basis in fixed assets. In
accordance with SOP 90-7, the Company adopted fresh start accounting on January 31, 2003. Under
SOP 90-7, deferred tax benefits related to federal and state net operating loss carry-forwards and
tax basis differences generated prior to its emergence from
bankruptcy that are realized by it will
be first utilized to reduce intangible assets until such intangible assets are reduced to zero and
thereafter will be reported as additions to paid-in-capital. During the three months ended March
31, 2005 and 2004, the Company recognized deferred income tax expense
and reduced its intangible assets by
$7.3 million and $0.4 million, respectively. Earnings Per Share Basic and diluted income (loss) per share are calculated in accordance with Statement of
Financial Accounting Standards No. 128, Earnings per Share(SFAS 128). During the three months
ended March 31, 2005 and 2004, the Company had potential common stock equivalents related to its
new warrants and outstanding stock options on common stock. Approximately 3.5 million options to
purchase common stock and warrants exercisable into approximately 2.0 million shares of common
stock were included in the calculation of diluted earnings per share for the three months ended
March 31, 2005. Approximately 5.1 million options to purchase common stock and warrants exercisable
into approximately 2.5 million shares of common stock were included in the calculation of diluted
earnings per share for the three months ended March 31, 2004. The shares used in computation of the
Companys basic and diluted earnings per share are reconciled as follows: 15




---



##### 



Three Months
    
    
    Three MonthsEnded
    
    
    EndedMarch 31, 2005
    
    
    March 31, 2004(In thousands)Weighted average common shares outstanding (basic)
    
    
    46,686
    
    
    
    47,880Effect of dilutive stock options
    
    
    1,994
    
    
    
    3,088Effect of dilutive warrants and awards
    
    
    1,683
    
    
    
    1,400Weighted average common shares outstanding (diluted)
    
    
    50,363
    
    
    
    52,368
 On November 19, 2004, the Company repurchased 2,693,481 shares of common stock at a purchase
price of $150.0 million under an accelerated stock buyback agreement (the ASB) with Goldman Sachs
& Co. Under the ASB, the repurchased shares are subject to a market price adjustment provision
which may require settlement in either cash or stock by the Company based on the volume weighted
average market trading price of the Companys shares from November 19, 2004 through March 18, 2005.
Based on average trading prices of the Companys shares through December 31, 2004, the estimated
fair value of the market price adjustment was $3.8 million. At the end of the trading period on
March 18, 2005, the market price adjustment was approximately $9.4 million, which was settled in
cash on April 29, 2005. In accordance with the provisions of Emerging Issues Task Force Topic
D-72, Effect of Contracts That May Be Settled in Stock or Cash on the Computation of Diluted
Earnings per Share, the change in fair value of the market price adjustment during the three months
ended March 31, 2005 of $5.6 million has been deducted from net income for purposes of computing
diluted net income per share. The following table reconciles net income, as reported, to the
adjusted net income used to compute diluted earnings per share: Three MonthsEndedMarch 31, 2005(In thousands, exceptper share amounts)Net income
    
    $
    11,882Change in fair value of the ASB contract
    
    
    (5,570
    )$
    6,312Diluted earnings per share:Income from continuing operations
    
    $
    0.23Discontinued operations
    
    
    0.01Change in fair value of the ASB contract
    
    
    (0.11
    )Diluted earnings per share
    
    $
    0.13
 For the year ended December 31, 2004, the Company computed diluted earnings per share assuming
the ASB market price adjustment would be settled through a net share settlement. Accordingly, the
estimated shares issuable based on the fair market value of the ASB contract at December 31, 2004
was originally included in the weighted average shares outstanding used to compute diluted earnings
per share. Had the Company reflected the cash settlement of the ASB market price in the
computation of diluted earnings per share for the year ended December 31, 2004, such per share
amounts would have decreased from $0.47 per share to $0.40 per share. Stock Options and Awards The Company has elected under the provisions of Statement of Financial Accounting Standards
No. 123, Accounting for Stock Based Compensation(SFAS 123), as amended by Statement of Financial
Accounting Standards No. 148, Accounting for Stock Based Compensation  Transition and Disclosure
(SFAS 148), to account for its employee stock options under the intrinsic value method in
accordance with Accounting Principle Board Opinion No. 25, Accounting for Stock Issued to Employees
(APB 25) and has not adopted the fair value method of accounting for stock based employee
compensation. Companies that account for stock based compensation arrangements for their employees
under APB 25 are required by SFAS 123 to disclose the pro forma 16




---



##### 



effect on net income (loss) as if the fair value based method prescribed by SFAS 123 had been
applied. The Company plans to continue to account for stock based compensation using the provisions
of APB 25 and has adopted the disclosure requirements of SFAS 123 and SFAS 148. On February 10, 2003, the Company adopted the 2003 Equity Incentive Plan to grant equity-based
incentives in common stock to employees and directors. The maximum number of shares which can be
issued under the plan, as amended, does not exceed 6.0 million shares. Stock options are granted
under various stock option agreements and each stock option agreement contains specific terms. In March 2003, the Company granted approximately 5.4 million options to purchase common stock
under this plan. In general, the initial options granted to employees vest and become exercisable
as follows: 20% on the grant date, 50% ratably over a thirty-six month period commencing one month
after date of grant and 30% which vest automatically on the sixth anniversary of the grant date.
Vesting of this 30% could be accelerated upon the achievement of certain performance milestones
approved by the Board of Directors (the Performance Arrangement). In general, options granted to
employees subsequent to the initial grant vest and become exercisable as follows: 70% ratably over
a thirty-six month period commencing one month after date of grant and 30% under the Performance
Arrangement. Options granted to members of the board of directors vest 20% on the grant date and
80% ratably over a thirty-six month period commencing one month after date of grant. Had compensation cost for the Companys stock options to purchase common stock been determined
based on the fair value at the date of grant consistent with the provisions of SFAS 123, the
Companys net income (loss) and net income (loss) per share for the three months ended March 31,
2005 and 2004 would have been as follows: Three Months
    
    
    Three MonthsEnded
    
    
    EndedMarch 31, 2005
    
    
    March 31, 2004(In thousands, except per share amounts)Reported net income
    
    $
    11,882
    
    
    $
    652Add: Total stock-based employee compensation expense
included in reported net income, net of
related tax effect
    
    
    48
    
    
    
    Deduct: Total stock-based employee compensation
expense determined under the fair value based
method for all awards, net of related tax
effect
    
    
    (1,451
    )
    
    
    (846
    )Pro forma net income
    
    $
    10,479
    
    
    $
    (194
    )Basic earnings per share:Reported net income per share
    
    $
    0.25
    
    
    $
    0.01Pro forma net income per share
    
    $
    0.22
    
    
    $
    Diluted earnings per share:Reported net income per share
    
    $
    0.13
    
    
    $
    0.01Pro forma net income per share
    
    $
    0.10
    
    
    $
    
 In addition, in connection with commencement of service on the Companys Board of Directors,
on July 28, 2004, each of the five new non-employee Directors received for nominal consideration
1,500 shares of restricted common stock of the Company for a total of 7,500 shares of restricted
common stock. These shares were issued under the Companys 2003 Equity Incentive Plan and are
restricted until June 30, 2005, when they become fully vested. The Company will recognize an
expense of $0.3 million on a straight-line basis over the restricted period. For the year ended
December 31, 2004 and the three months ended March 31, 2005, $159,000 and $79,000 was charged to
expense, respectively. Share Repurchase Plan On July 28, 2004, the Board of Directors authorized the repurchase of shares of the Companys
common stock up to an aggregate amount of $175.0 million. On November 22, 2004, the Board of
Directors authorized an increase 17




---



##### 



of $125.0 million for a total repurchase authorization of $300.0 million. On November 22, 2004, the Company announced the repurchase of approximately $150.0 million of
its outstanding common stock, or approximately 2.7 million shares, under the ASB with Goldman,
Sachs & Co. Under the ASB, the repurchased shares are subject to a market price adjustment
provision which requires that we make a payment in either cash or stock based on the volume
weighted average market trading price of our shares from November 19, 2004, through March 18, 2005.
The Company elected to settle the obligation with payment in cash and, on April 29, 2005, pursuant
to the market price adjustment provision in the ASB, the Company paid approximately $9.4 million to
Goldman, Sachs & Co. As of March 31, 2005, the Company had repurchased 3,679,881 shares at an average price of
$55.75 per share including commissions and the ASB market price adjustment provision. Including
legal costs of $0.3 million, the Companys cost basis for these shares was an average price of
$55.83 per share. No shares were purchased in the three months ended March 31, 2005. The Company
holds all repurchased shares as treasury stock. Treasury Stock The Company records treasury stock purchases under the cost method whereby the purchase price,
including legal costs and commissions, is charged to a contra equity account (treasury stock). The
equity accounts from which the shares were originally issued are not adjusted for treasury stock
purchases. In the event that treasury shares are reissued, proceeds in excess of cost will be
accounted for as additional paid-in-capital. Any deficiency will be charged to retained earnings,
unless paid-in-capital from previous share transactions exists, in which case the deficiency will
be charged to that account, with any excess charged to retained earnings. The first-in, first-out
(FIFO) method will be used to compute excesses and deficiencies upon subsequent share reissuances. Asset Retirement Obligations Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement
Obligations(SFAS 143) requires that the fair value of legal obligations associated with the
retirement of long-lived assets be recognized in the period in which the obligation is incurred if
a reasonable estimate of fair value can be made. The associated asset retirement costs are
capitalized as part of the carrying amount of the related long-lived asset and allocated to expense
over the useful life of the asset. The Company records asset retirement obligations related to
certain ground leases that require removal of the tower asset upon expiration. These obligations
are included in Other long term liabilities in the consolidated balance sheets. The following table
displays activity related to the asset retirement obligations: Balance
    
    
    
    
    
    
    
    
    
    
    Revisions in
    
    
    BalanceJanuary 1,
    
    
    Additions/
    
    
    Accretion
    
    
    Estimated
    
    
    March 31,2004
    
    
    (Reductions)
    
    
    Expense
    
    
    Cash Flows
    
    
    2004(In thousands)Asset retirement obligations
    
    $
    37,521
    
    
    $
     ̄
    
    
    $
    559
    
    
    $
    (4
    )
    
    $
    38,076
 Balance
    
    
    
    
    
    
    
    
    
    
    Revisions in
    
    
    BalanceJanuary 1,
    
    
    Additions/
    
    
    Accretion
    
    
    Estimated
    
    
    March 31,2005
    
    
    (Reductions)
    
    
    Expense
    
    
    Cash Flows
    
    
    2005(In thousands)Asset retirement obligations
    
    $
    41,549
    
    
    $
    (85
    )
    
    $
    1,079
    
    
    $
    (234
    )
    
    $
    42,309
 18




---



##### 



Commitments and Contingencies The Company is subject to various lawsuits and other legal proceedings, including regulatory,
judicial and administrative matters, all of which have arisen in the ordinary course of business.
Management accrues an estimate of expense for any matters that are considered probable of occurring
based on the facts and circumstances. Management believes that the ultimate resolution of these
matters will not have a material adverse effect on the financial condition, results of operations or cash flows of the Company. Reclassifications Certain reclassifications have been made to the 2004 consolidated financial statements to
conform to the 2005 presentation. These reclassifications had no effect on net income or
stockholders equity as previously reported. 2. Property and Equipment Property and equipment consist of the following: March 31,
    
    
    December 31,2005
    
    
    2004(In thousands)Towers
    
    $
    1,244,682
    
    
    $
    1,243,258Equipment
    
    
    36,282
    
    
    
    32,158Land
    
    
    26,662
    
    
    
    21,078Buildings
    
    
    26,278
    
    
    
    26,292Other
    
    
    13,114
    
    
    
    11,6271,347,018
    
    
    
    1,334,413Less accumulated depreciation
    
    
    (216,033
    )
    
    
    (189,643
    )1,130,985
    
    
    
    1,144,770Construction in progress
    
    
    18,083
    
    
    
    21,626Property and equipment, net
    
    $
    1,149,068
    
    
    $
    1,166,396
 3. Recently Issued Accounting Pronouncements In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (revised
2004), Share Based Payment(SFAS 123(R)). SFAS 123(R) replaces Statement of Financial Standards
No. 123, Accounting for Stock-Based Compensation,and supersedes APB Opinion No. 25, Accounting for
Stock Issued to Employees.SFAS 123(R) requires that the cost resulting from all share-based
payment transactions be recognized in the financial statements using the fair value method. The
provisions of SFAS 123(R) are effective for public entities that do not file as small business
issuers as of the beginning of the first interim or annual reporting period of the first fiscal
year that begins on or after June 15, 2005. Accordingly, the adoption of the SFAS 123(R) fair value
method will have a significant impact on our results of operations, although it will have no impact
on our overall financial position. The impact of adoption of SFAS 123(R) cannot be predicted at
this time because it will depend on levels of share-based payments granted in the future. However,
had we adopted SFAS 123(R) in prior periods, the impact of the standard would have approximated the
impact of SFAS 123 as described in the disclosure of pro forma net income (loss) and earnings
(loss) per share in Note 1 to our consolidated financial statements. SFAS 123(R) also requires the
benefits of tax deductions in excess of recognized compensation cost to be reported as a financing
cash flow, rather than as an operating cash flow as required under Financial Accounting Standards
No. 95, Statement of Cash Flows.We will recognize excess tax benefits when those benefits reduce
current income taxes payable. SFAS 123(R) permits public companies to adopt its requirements using
one of two methods:  
    A modified prospective method in which compensation cost is recognized beginning with
the effective date (a) based on the requirements of SFAS 123(R) for all share-based
payments granted after the effective date and (b) based on the requirements of SFAS 123 for
all awards granted to employees and directors prior to that effective date of SFAS 123(R)
that remain unvested on the effective date.
    A modified retrospective method which includes the requirements of the modified
prospective method described above, but also permits entities to restate based on the
amounts previously recognized under SFAS 123 for purposes of pro forma disclosures either
(a) all prior periods presented or (b) prior interim periods of the year of adoption. 19




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##### 



The Company has not made a determination as to the method that will be utilized. 4. Acquisition and Disposition Activities General Acquisition activity, asset acquisitions and business combinations are accounted for
using the purchase method of accounting. For business combinations, the purchase prices have been
allocated to the net assets acquired, principally tangible and intangible assets, and the
liabilities assumed based on their estimated fair values at the date of acquisition. The excess of
the purchase price over the estimated fair value of the net assets acquired has been recorded as
goodwill and other intangible assets. The operating results of these acquisitions have been
included in the Companys consolidated results of operations from the date of acquisition. For
asset acquisitions, the cost was assigned to the assets acquired. 2005 Acquisitions SpectraSite Outdoor Distributed Antenna System Networks On January 12,
2005, we acquired the outstanding common stock of Green Mountain Wireless, Inc., a New Hampshire
corporation (Green Mountain), for cash consideration of $2.8 million after certain working
capital adjustments. Green Mountain, which operates under SpectraSite Outdoor DAS Networks, Inc., a
Delaware corporation (SODN), specializes in the construction and operation of outdoor shared
distributed antenna systems within the New England region. The excess purchase price over the net
asset value on the date of the acquisition is attributable to our assessment of future business
opportunities in the distributed antenna systems industry. The SODN purchase was accounted for as a purchase business combination and the purchase price
was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed
based on their respective fair values on the acquisition date. The results of SODN are included in
our consolidated results from and after January 12, 2005. The following table summarizes the preliminary allocation of the purchase price to the assets
acquired and liabilities assumed at the date of acquisition: Fair Value as ofJanuary 12, 2005(In thousands)Current assets
    
    $
    13Property and equipment, net
    
    
    4Goodwill
    
    
    2,827Total assets acquired
    
    $
    2,844Current liabilities
    
    $
    (73
    )Total liabilities assumed
    
    $
    (73
    )Net assets acquired
    
    $
    2,771
 The $2.8 million of goodwill was assigned to our wireless segment. The allocated goodwill is
not deductible for income tax purposes. 2004 Acquisitions SBC transaction Pursuant to an agreement with SBC, the Company leased or
subleased approximately 2,500 towers from SBC between December 2000 and August 2004. During the
three months ended March 31, 2004, the Company leased or subleased 6 towers from SBC under this
agreement. The average term of the lease or sublease for all sites at the inception of the
agreement was approximately 27 years, assuming renewals or extensions of the underlying ground
leases for the sites. The Company has the option to purchase the sites subject to the lease or sublease upon the
expiration of the lease or sublease as to those sites. The purchase price for each site was a fixed
amount stated in the sublease for that site plus the fair market value of certain alterations made
to the related tower by SBC. The aggregate purchase option price for the towers leased and
subleased to date was approximately $262.8 million as of March 31, 2005, and will accrete at a rate
of 10% per year to the applicable expiration of the lease or sublease of a site. For all such sites 20




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##### 



purchased by the Company, SBC has the right to continue to lease the reserved space for successive
one year terms
at a rent equal to the lesser of the agreed upon market rate and the then current monthly fee,
which is subject to an annual increase based on changes in the consumer price index. 5. Financing Transactions Credit Facility SpectraSite Communications, Inc. (Communications), a wholly-owned subsidiary of SpectraSite,
entered into a $900.0 million senior secured credit facility on November 19, 2004, with a syndicate
of lenders led by Toronto Dominion Securities (USA) LLC (TD), and Citigroup Global Markets Inc.
The credit facility replaces Communications previous facility of $638.2 million, of which $438.2
million was drawn as of the closing of this facility. Proceeds from borrowings of $450.0 million
made at closing under the new facility were used to repay Communications previous senior secured
credit facility including all related fees and expenses. SpectraSite anticipates using the facility
for general corporate purposes, including acquisitions and financing distributions to its
stockholders. On November 29, 2004, Communications borrowed an additional $100.0 million under its
multiple draw term loan. As of March 31, 2005, the credit facility includes:  
    a $200.0 million undrawn revolving credit facility, against which $4.9 million of
letters of credit are outstanding, maturing on November 19, 2011;
    a $300.0 million multiple draw term loan that has $150.0 million outstanding and which
must be repaid in quarterly installments which begin on December 31, 2006 and end on
November 19, 2011; and
    a $399.0 million term loan that is fully drawn and which must be repaid in quarterly
installments which began on March 31, 2005 and end on May 19, 2012. As of March 31, 2005 and December 31, 2004, Communications has $549.0 million and $550.0
million outstanding under the credit facility, respectively. In addition, under the terms of the
credit facility, Communications could borrow approximately $195.1 million under the revolving
credit facility and $150.0 million under the multiple draw term loan while remaining in compliance
with the applicable covenants as of March 31, 2005. At March 31, 2005, amounts due under the credit facility are: Maturities(In thousands)2005
    
    $
    3,0002006
    
    
    7,7502007
    
    
    20,8752008
    
    
    28,3752009
    
    
    34,000Thereafter
    
    
    455,000Total
    
    $
    549,000
 The revolving credit loan and the multiple draw term loan bear interest, at Communications
option, at either TDs base rate plus an applicable margin ranging from 0.00% to 1.00% per annum or
the Eurodollar rate plus an applicable margin ranging from 1.00% to 2.00% per annum, depending on
Communications leverage ratio at the end of the preceding fiscal quarter. The term loan bears
interest, at Communications option, at either TDs base rate plus 0.50% per annum or the
Eurodollar rate plus 1.50% per annum. The weighted average interest rate on outstanding borrowings
under the credit facility as of March 31, 2005 was 4.60%. In February 2003, Communications entered into an interest rate cap agreement in order to limit
exposure to fluctuations in interest rates on its variable rate credit facility. This transaction
is not designated as a fair value hedge. Accordingly, gains and losses from the change in the fair
value of this instrument are recognized in other income and expense. The carrying amount and fair
value of this instrument was negligible as of March 31, 2005 and December 31, 2004 and is included
in Other assets in the accompanying consolidated balance sheets. 21




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##### 



In December 2004, Communications entered into an interest rate swap agreement in order to
limit exposure to fluctuations in interest rates on its variable rate credit facility. This
transaction is not designated as a fair value hedge. Accordingly, gains and losses from the change
in the fair value of this instrument are recognized in other income and expense. As of March 31,
2005 and December 31, 2004, the carrying amount and fair value of this instrument was $7.9 million
and $0.6 million and is included in Other assets in the consolidated balance sheet. Including the
effect of the interest rate swap, the weighted average interest rate on outstanding borrowings
under the credit facility was 5.07% and 4.83% as of March 31, 2005 and December 31, 2004,
respectively. Communications is required to pay a commitment fee of between 0.375% and 0.500% per annum in
respect to the undrawn portions of the revolving credit facility and multiple draw term loan,
depending on the undrawn amount. Communications may be required to prepay the credit facility in
part upon the occurrence of certain events, such as a sale of assets or the incurrence of certain
additional indebtedness. SpectraSite and each of Communications domestic subsidiaries have guaranteed the obligations
under the credit facility. The credit facility is further secured by substantially all the tangible
and intangible assets of Communications and its domestic subsidiaries, a pledge of all of the
capital stock of Communications and its domestic subsidiaries and 66% of the capital stock of
Communications foreign subsidiaries. The credit facility contains a number of covenants that,
among other things, restrict Communications ability to incur additional indebtedness; create liens
on assets; make investments or acquisitions or engage in mergers or consolidations; dispose of
assets; enter into new lines of business; engage in certain transactions with affiliates; and pay
dividends or make capital distributions. In addition, the credit facility requires compliance with
certain financial covenants, including a requirement that Communications and its subsidiaries, on a
consolidated basis, maintain a maximum ratio of total debt to annualized EBITDA (as defined in the
credit facility agreement), a minimum interest coverage ratio and a minimum fixed charge coverage
ratio. The following table summarizes activity with respect to Communications credit facility from
December 31, 2004 through March 31, 2005: Amount Drawn
    
    
    UndrawnMultiple
    
    
    
    
    
    
    
    
    
    
    RevolvingDraw
    
    
    
    
    
    
    
    
    
    
    Credit FacilityTerm Loan
    
    
    Term Loan
    
    
    Total
    
    
    Commitment(In thousands)Balance, December 31, 2004
    
    $
    150,000
    
    
    $
    400,000
    
    
    $
    550,000
    
    
    $
    200,000Repayments
    
    
    
    
    
    
    (1,000
    )
    
    
    (1,000
    )
    
    
    Balance, March 31, 2005
    
    $
    150,000
    
    
    $
    399,000
    
    
    $
    549,000
    
    
    $
    200,000
 Previous Credit Facility On November 19, 2004, Communications repaid $187.0 million of the multiple draw term loan and
$251.2 million of the term loan of its previous credit facility with the proceeds associated with
its new credit facility. In connection with these repayments, Communications wrote off
approximately $9.8 million in debt issuance costs. The following table summarizes activity with respect to Communications previous credit
facility from January 1, 2004 through November 19, 2004: Amount Drawn
    
    
    UndrawnMultiple
    
    
    
    
    
    
    
    
    
    
    RevolvingDraw Term
    
    
    
    
    
    
    
    
    
    
    Credit FacilityLoan
    
    
    Term Loan
    
    
    Total
    
    
    Commitment(In thousands)Balance, January 1, 2004
    
    $
    187,581
    
    
    $
    251,974
    
    
    $
    439,555
    
    
    $
    200,000Repayments
    
    
    (187,581
    )
    
    
    (251,974
    )
    
    
    (439,555
    )
    
    
    Balance, November 19, 2004
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 22




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##### 



8 1/4% Senior Notes Due 2010 (8 1/4% Senior Notes) On May 21, 2003, SpectraSite issued $200.0 million aggregate principal amount of 8 1/4% Senior
Notes due 2010 for proceeds of $194.5 million, net of debt issuance costs. Semi-annual interest
payments for the 8 1/4% Senior Notes are due on each May 15 and November 15 beginning on November
15, 2003. The Company is required to comply with certain covenants under the terms of the 8 1/4%
Senior Notes that restrict the Companys ability to incur additional indebtedness and make certain
payments, among other covenants. Letters of Credit and Performance Bonds In
addition, the Company had standby letters of credit of $5.0 million, consisting of $4.9 million
under our new credit facility and $0.1 million under our previous credit facility, and performance
bonds of $2.7 million outstanding at March 31, 2005, most of which expire within one year. 6. Business Segments The Company operates in two business segments: wireless and broadcast. Our operations are
segmented and managed along our product and service lines. The wireless segment provides for
leasing and licensing of antenna sites on multi-tenant towers and distributed antenna systems for a
diverse range of wireless communication services. The broadcast segment offers leasing, subleasing
and licensing of antenna sites for broadcast communication services. Prior to its decision to sell
its broadcast services division, the Company also offered a broad range of broadcast development
services, including broadcast tower design and construction and antenna installation. These
services were included in the broadcast segment. Prior period information has been restated to
conform to the current organization. The measurement of profit or loss used by management to evaluate the results of operations of
the Company and its operating segments is Adjusted EBITDA. Adjusted EBITDA consists of net income
(loss) before depreciation, amortization and accretion, interest, income tax expense (benefit) and,
if applicable, before discontinued operations and cumulative effect of change in accounting
principle. Adjusted EBITDA, as defined above, may not be comparable to a similarly titled measure
employed by other companies and is not a measure of performance calculated in accordance with GAAP. Summarized financial information concerning the reportable segments is shown in the following
table. The Other column represents amounts excluded from specific segments, such as income taxes,
corporate general and administrative expenses and interest. In addition, Other also includes
corporate assets such as cash and cash equivalents, tangible and intangible assets and income tax
accounts that have not been allocated to a specific segment. Virtually all reported segment
revenues are generated from external customers as intersegment revenues are not significant. Wireless
    
    
    Broadcast
    
    
    Other
    
    
    Total(In thousands)Three months ended March 31, 2005Revenues
    
    $
    87,955
    
    
    $
    5,861
    
    
    $
    
    
    
    $
    93,816Adjusted EBITDA
    
    $
    51,825
    
    
    $
    11,139
    
    
    $
    (1,813
    )
    
    $
    61,151Assets
    
    $
    1,254,806
    
    
    $
    102,500
    
    
    $
    93,167
    
    
    $
    1,450,473Goodwill
    
    $
    2,827
    
    
    $
    
    
    
    $
    
    
    
    $
    2,827Additions to property and equipment
    
    $
    8,088
    
    
    $
    340
    
    
    $
    1,060
    
    
    $
    9,488Three months ended March 31, 2004Revenues
    
    $
    79,090
    
    
    $
    5,650
    
    
    $
    
    
    
    $
    84,740Adjusted EBITDA
    
    $
    43,056
    
    
    $
    4,825
    
    
    $
    (7,160
    )
    
    $
    40,721Assets
    
    $
    1,310,771
    
    
    $
    91,068
    
    
    $
    101,365
    
    
    $
    1,503,204Additions to property and equipment
    
    $
    4,942
    
    
    $
    1,182
    
    
    $
    1,031
    
    
    $
    7,155
 23




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##### 



The following table shows a breakdown of the significant components included in the Other
column in the segment disclosure above: Three Months
    
    
    Three MonthsEnded
    
    
    EndedMarch 31, 2005
    
    
    March 31, 2004(In thousands)Adjusted EBITDA:Corporate selling, general and
administrative expenses, excluding
corporate non-cash compensation
charges
    
    $
    (8,989
    )
    
    $
    (6,047
    )Corporate non-cash compensation
charges
    
    
    (79
    )
    
    
    Corporate other income (expense)
    
    
    7,255
    
    
    
    (1,113
    )Total Adjusted EBITDA
    
    $
    (1,813
    )
    
    $
    (7,160
    )Three Months
    
    
    Three MonthsEnded
    
    
    EndedMarch 31, 2005
    
    
    March 31, 2004Assets:Cash and cash equivalents
    
    $
    69,709
    
    
    $
    84,329Debt issuance costs
    
    
    15,509
    
    
    
    17,036Derivative financial instruments
    
    
    7,949
    
    
    
    Total assets
    
    $
    93,167
    
    
    $
    101,365
 A reconciliation of income from continuing operations before income taxes is as follows: Three Months
    
    
    Three MonthsEnded
    
    
    EndedMarch 31, 2005
    
    
    March 31, 2004(In thousands)Income from continuing operations before income taxes
    
    $
    19,226
    
    
    $
    1,856Add: Depreciation, amortization and accretion expenses
    
    
    30,587
    
    
    
    29,188Less: Interest income
    
    
    (266
    )
    
    
    (214
    )Add: Interest expense
    
    
    11,604
    
    
    
    9,891Adjusted EBITDA
    
    $
    61,151
    
    
    $
    40,721
 7. Subsequent Events On April 29, 2005, the Company paid Goldman, Sachs & Co. approximately $9.4 million in cash in
settlement of its obligations under the ASB. For a discussion of the Companys settlement of the
ASB, see Note 1 under Earnings Per Share and Share Repurchase Plan. On May 3, 2005, the Company entered into an Agreement and Plan of Merger with American Tower
Corporation providing for, among other things, the merger of SpectraSite with a
wholly owned subsidiary of American Tower. For a discussion of the proposed merger, see
Managements Discussion and Analysis of Financial Condition and Results of Operations  Proposed
Merger with American Tower. 24




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##### 



ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion in conjunction with Risk Factors and our unaudited
condensed consolidated financial statements included elsewhere in this report. Some of the
statements in the following discussion are forward-looking statements. See Special Note Regarding
Forward-Looking Statements. Executive Overview We are one of the largest, in terms of number of towers, and fastest growing, in terms of
revenue growth, wireless tower operators in the United States. Our business is owning, leasing and
licensing antenna sites on wireless and broadcast towers, owning and licensing in-building shared
infrastructure systems and managing rooftop telecommunications access on commercial real estate. We
owned or operated 7,826 towers and in-building systems as of March 31, 2005, located primarily in
the top 100 BTA markets in the United States. Our business consists of our wireless and broadcast segments. For the three months ended March
31, 2005, approximately 94% of our revenues came from our wireless segment and approximately 6% of
our revenues came from our broadcast segment. The majority of our revenue growth during the first
quarter of 2005 was attributable to incremental revenue derived from new and amended site leasing
and licensing agreements, rent escalations included in existing site leasing and licensing
agreements, and new sites acquired or built during the year. Factors affecting the growth in our
revenues include, among other things, the rate at which wireless carriers deploy capital to improve
and expand their wireless networks and variable contractual escalation clauses associated with
existing site leasing and licensing agreements. The economic and industry-wide factors relevant to our business fall into two broad
categories: growth of wireless communication services and growth of the physical network elements
that support wireless communication. Historically, wireless networks primarily have supported voice
communications. More recently, a variety of data applications have been introduced and are being
supported on wireless networks. Some of the key performance indicators that we regularly monitor to
evaluate growth trends affecting wireless network usage include gross wireless subscriber
additions, wireless subscriber churn and minutes of use per wireless subscriber. Growth of the
wireless network infrastructure is required to provide broader geographical wireless coverage and
additional capacity for existing subscribers within coverage areas. To support this growth, the
wireless service providers regularly deploy capital to improve and expand their networks. These
wireless service providers comprise a large percentage of our customer base. In addition to
tracking the capital expenditure activities and plans of our customers and other wireless
providers, we monitor the financial performance of our largest customers and the state of the
financial markets on which all of our customers depend for access to new capital. The material opportunities, challenges and risks of our business have changed significantly
over the past three years. We have reshaped our business operations and reduced our debt levels in
order to minimize the impact of short-term variability in market demand. Specifically, we
discontinued a major program of building new towers in mid-2002, we completed the sale of our
network services division in late 2002, we restructured our balance sheet through a bankruptcy
process completed in early 2003 and sold the operations of our broadcast services division in
March 2004. Today, all of our revenues come from site leasing and licensing operations. Generally, our leasing and licensing agreements are specific to each site for an initial term
of five to ten years and are renewable for additional pre-determined periods at the option of the
customer. Payments under leasing and licensing agreements are generally made on a monthly basis,
and revenue from each agreement is recorded monthly. Rate increases based on fixed escalation
clauses included in certain lease and licensing agreements are recognized on a straight-line basis
over the initial term of the agreement. We also generate revenue by providing engineering and site
inspection services to our customers for a fee. Revenues from fees originate at the time the
customer applies for space on our towers or we provide certain services required in order to
process the customers application. Additionally, we generate revenues related to the management of
sites on rooftops. Under each site management agreement, we are entitled to a fee based on a
percentage of the gross revenue derived from the rooftop site subject to the agreement. We
recognize these recurring fees as revenue when earned. 25




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##### 



Costs of operations consist primarily of ground rent, maintenance, utilities and taxes.
Because our tower operating expenses generally do not increase significantly as we add additional
customers, once a tower has an anchor customer, additional customers provide significant
incremental cash flow. Fluctuations in our profit margin are therefore directly related to the
incremental number of customers on each site and the amount of fees generated in a particular
period. Selling, general and administrative expenses have two major components. The first component
consists of expenses necessary to support our site leasing and licensing operations such as sales,
marketing and property management functions. The second component includes expenses that are
incurred to support all of our business segments, such as legal, finance, human resources and other
administrative support. Proposed Merger with American Tower Corporation On May 3, 2005, SpectraSite entered into an Agreement and Plan of Merger with American Tower
Corporation providing for, among other things, the merger of SpectraSite with a wholly owned
subsidiary of American Tower. Under the terms of the merger agreement, each share of our common
stock will be converted into the right to receive 3.575 shares of American Towers Class A common
stock. Our stockholders will receive approximately 181.0 million
shares in the transaction. The transaction is expected to be tax free for U.S. federal income tax
purposes for stockholders of both companies. Consummation of the merger is subject to certain
conditions, including approval by our stockholders, approval by American Towers stockholders,
receipt of regulatory approvals and other customary closing conditions. While there can be no
assurances that the merger will be completed or as to the timing thereof, the transaction is
expected to close in the second half of 2005. The merger agreement contains certain termination
rights for SpectraSite and American Tower and further provides for the payment of a termination fee
of $110 million upon termination of the merger agreement under specified circumstances involving an
alternative transaction. The combined companys board of directors will consist of 10 directors, six from American
Tower and four from our Board of Directors. Two of the directors of
the Board of Directors of the combined company shall be
Stephen H. Clark, our Chief Executive Officer, and
Timothy G. Biltz, our Chief Operating Officer. The combined company will have its corporate
headquarters in Boston, Massachusetts, the current headquarters of American Tower. The current
Chief Executive Officer and Chairman of the board of directors of American Tower will continue to
serve as Chief Executive Officer and Chairman of the combined company. Discontinued Operations On December 16, 2003, we decided to sell our broadcast services division and on March 1, 2004,
the division was sold. In connection with the sale, we recorded promissory notes receivable from
the buyer. At the time of sale, the notes receivable were recorded at their estimated fair value
by recording a valuation allowance against the notes. During the three months ended March 31,
2004, we recorded a loss on disposal of the division of $0.3 million. The valuation allowance is
periodically evaluated against actual collection experience and estimates of future collectibility.
In the three months ended March 31, 2005, we recorded a gain on the disposal of the division
relating to the partial collection and re-evaluation of the collectibility of the notes receivable
as of March 31, 2005. The results of the broadcast services operations have been reported
separately as discontinued operations in the Statements of Operations. Tower Acquisitions and Dispositions Our portfolio has grown from 106 towers as of December 31, 1998, to 7,826 towers and
in-building systems as of March 31, 2005. We have accomplished this growth through acquisitions and
new construction (principally pursuant to build-to-suit arrangements). The majority of our towers
were acquired from (or built under agreements with) affiliates of SBC and Nextel. Our original agreement with SBC called for us to acquire leasehold and sub-leasehold interests
in approximately 3,900 towers over approximately two years and to commit to build towers for
Cingular, an affiliate of SBC. 26




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##### 



Subsequent amendments to these agreements have resulted in a reduction in the number of towers
to be leased or subleased to a maximum of 3,301 towers and in the termination of the build-to-suit
arrangement. We reduced our acquisition program and terminated our build-to-suit program in order
to limit our required capital expenditures and to achieve additional financial flexibility. On
February 10, 2003, we sold our interest in 545 SBC towers in California and Nevada to Cingular for
an aggregate purchase price of $81.0 million and paid SBC a fee of $7.5 million related to the last
of the reductions in the maximum number of towers that we will lease or sublease. In connection
with these transactions, we received a net cash payment of $73.5 million, which we used to repay a
portion of the indebtedness outstanding under our previous credit facility, significantly reduced
our capital expenditure commitments, extended the timeline to meet our remaining commitments and
maintained a mutually profitable commercial relationship with a significant customer. The 545
towers sold represented approximately 7% of our owned and operated tower portfolio at December 31,
2002 and generally were characterized by lower revenues per tower than other towers in our
portfolio. The sale of our interest in the 545 towers did not materially impact our future
operating performance. In connection with the Plan of Reorganization and the implementation of fresh start accounting
on January 31, 2003, we recorded liabilities in the amount of $60.5 million related to our
obligation to complete the lease or sublease of the remaining 600 towers under the SBC agreement as
discussed in Note 1 to our unaudited consolidated financial statements. This amount was determined
as the difference between the estimated purchase price for the remaining 600 towers, including
direct costs to place the towers in service, and the estimated fair value of the towers based on an
independent valuation. At each closing, the liability was reduced by a portion of the purchase
price of each tower. In addition, the liability was reduced by the amount of costs incurred to
place the acquired towers in service. From January 31, 2003 through February 16, 2004, we leased or subleased 121 towers, for which
we paid $32.0 million reducing our commitment to 479 towers to be leased or subleased under the SBC
agreement. On February 17, 2004, the parties agreed to reduce our remaining commitment by five
towers, down to 474. In connection with this reduction, the associated liability was reduced by
$0.5 million and was recorded as Other income. From February 18, 2004 through August 15, 2004, we
leased or subleased 7 towers, for which we paid $1.9 million reducing our commitment to 467 towers
to be leased or subleased under the SBC agreement. On August 16, 2004, we completed our last
closing under our agreement with SBC consisting of 191 towers for total cash consideration of $50.0
million. This acquisition was 276 towers less than the potential maximum number of towers
contemplated to be leased or subleased under our agreement with SBC. As a result of not acquiring
these 276 towers, we recognized $29.2 million as Other income through the reversal of liabilities
originally recorded for these towers. As of March 31, 2005, we
have no further obligations to lease or
sublease any towers under the SBC acquisition agreement. Our federal income tax obligation was not
impacted by the recording or reversal of the liabilities related to our obligation under the SBC
agreement. Share Repurchase Plan On July 28, 2004, the Board of Directors authorized the repurchase of shares of the Companys
common stock up to an aggregate amount of $175.0 million. On November 22, 2004, the Board of
Directors authorized an increase of $125.0 million for a total repurchase authorization of $300.0
million. On
November 22, 2004, we announced the repurchase of approximately $150.0 million of
our outstanding common stock, or approximately 2.7 million shares, under the ASB with Goldman,
Sachs & Co. Under the ASB, the repurchased shares are subject to a market price adjustment
provision which requires that we make a payment in either cash or stock based on the volume
weighted average market trading price of our shares from November 19, 2004, through March 18, 2005.
We elected to settle the obligation with payment in cash and, on April 29, 2005, pursuant
to the market price adjustment provision in the ASB, we paid approximately $9.4 million to
Goldman, Sachs & Co. As of March 31, 2005, we had repurchased 3,679,881 shares at an average price of $55.75 per
share including commission. Including legal costs of $0.3 million, the Companys cost basis for
these shares was an average price of $55.83 per share. We did not repurchase any shares during the
three months ended March 31, 2005. We hold all repurchased shares as treasury stock. For more
information about these repurchases, reference Part II,
Item 2 of this report. 27




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##### 



Results of Operations Three Months Ended March 31, 2005 and the Three Months Ended March 31, 2004 The following table provides a comparison of the results of our operations and Adjusted EBITDA
for the periods presented: Three Months Ended%
    
    
    
    
    
    
    %of
    
    
    
    
    
    
    ofMarch 31,
    
    
    Total
    
    
    March 31,
    
    
    Total
    
    
    $
    
    
    %2005
    
    
    Revenues
    
    
    2004
    
    
    Revenues
    
    
    Change
    
    
    Change(Dollars in thousands)Revenues:Wireless
    
    $
    87,955
    
    
    
    94
    
    
    $
    79,090
    
    
    
    93
    
    
    $
    8,865
    
    
    
    11Broadcast
    
    
    5,861
    
    
    
    6
    
    
    
    5,650
    
    
    
    7
    
    
    
    211
    
    
    
    4Total revenues
    
    
    93,816
    
    
    
    100
    
    
    
    84,740
    
    
    
    100
    
    
    
    9,076
    
    
    
    11Operating expenses:Cost of operations, excluding depreciation,
amortization and accretion expenses:Wireless
    
    
    30,821
    
    
    
    33
    
    
    
    29,797
    
    
    
    35
    
    
    
    1,024
    
    
    
    3Broadcast
    
    
    687
    
    
    
    1
    
    
    
    596
    
    
    
    1
    
    
    
    91
    
    
    
    15Total cost of operations, excluding
depreciation, amortization and
accretion expenses
    
    
    31,508
    
    
    
    34
    
    
    
    30,393
    
    
    
    36
    
    
    
    1,115
    
    
    
    4Selling, general and administrative expenses:Wireless
    
    
    5,848
    
    
    
    6
    
    
    
    5,766
    
    
    
    7
    
    
    
    82
    
    
    
    1Broadcast
    
    
    254
    
    
    
    
    
    
    
    229
    
    
    
    
    
    
    
    25
    
    
    
    11Other
    
    
    9,068
    
    
    
    10
    
    
    
    6,047
    
    
    
    7
    
    
    
    3,021
    
    
    
    50Total selling, general and
administrative expenses
    
    
    15,170
    
    
    
    16
    
    
    
    12,042
    
    
    
    14
    
    
    
    3,128
    
    
    
    26Depreciation, amortization and accretion
expenses:Wireless
    
    
    29,485
    
    
    
    31
    
    
    
    28,569
    
    
    
    34
    
    
    
    916
    
    
    
    3Broadcast
    
    
    1,102
    
    
    
    1
    
    
    
    619
    
    
    
    1
    
    
    
    483
    
    
    
    78Total depreciation, amortization and
accretion expenses
    
    
    30,587
    
    
    
    33
    
    
    
    29,188
    
    
    
    34
    
    
    
    1,399
    
    
    
    5Total operating expenses
    
    
    77,265
    
    
    
    82
    
    
    
    71,623
    
    
    
    85
    
    
    
    5,642
    
    
    
    8Operating income
    
    
    16,551
    
    
    
    18
    
    
    
    13,117
    
    
    
    15
    
    
    
    3,434
    
    
    
    26Other income (expense):Interest income
    
    
    266
    
    
    
    
    
    
    
    214
    
    
    
    
    
    
    
    52
    
    
    
    24Interest expense
    
    
    (11,604
    )
    
    
    (12
    )
    
    
    (9,891
    )
    
    
    (12
    )
    
    
    (1,713
    )
    
    
    17Other income
    
    
    14,013
    
    
    
    15
    
    
    
    (1,584
    )
    
    
    (2
    )
    
    
    15,597
    
    
    
    (985
    )Total other income (expense)
    
    
    2,675
    
    
    
    3
    
    
    
    (11,261
    )
    
    
    (13
    )
    
    
    13,936
    
    
    
    (124
    )Income from continuing operations before
income taxes
    
    
    19,226
    
    
    
    20
    
    
    
    1,856
    
    
    
    2
    
    
    
    17,370
    
    
    
    936Income tax expense:Income tax  current
    
    
    287
    
    
    
    
    
    
    
    337
    
    
    
    
    
    
    
    (50
    )
    
    
    (15
    )Income tax  deferred
    
    
    7,307
    
    
    
    8
    
    
    
    400
    
    
    
    
    
    
    
    6,907
    
    
    
    1,727Total income tax expense
    
    
    7,594
    
    
    
    8
    
    
    
    737
    
    
    
    1
    
    
    
    6,857
    
    
    
    930Income from continuing operations
    
    
    11,632
    
    
    
    12
    
    
    
    1,119
    
    
    
    1
    
    
    
    10,513
    
    
    
    939Discontinued operations (net of income
taxes):Loss from operations of discontinued
broadcast services division, net of income
tax expense
    
    
    
    
    
    
    
    
    
    
    (124
    )
    
    
    
    
    
    
    124
    
    
    
    (100
    )Income (loss) from disposal of discontinued
segment, net of income tax expense
    
    
    250
    
    
    
    
    
    
    
    (343
    )
    
    
    
    
    
    
    593
    
    
    
    (173
    )Net income
    
    $
    11,882
    
    
    
    13
    
    
    $
    652
    
    
    
    1
    
    
    $
    11,230
    
    
    
    1,722Adjusted EBITDA:
 28




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##### 



Three Months Ended%
    
    
    
    
    
    
    %of
    
    
    
    
    
    
    ofMarch 31,
    
    
    Total
    
    
    March 31,
    
    
    Total
    
    
    $
    
    
    %2005
    
    
    Revenues
    
    
    2004
    
    
    Revenues
    
    
    Change
    
    
    Change(Dollars in thousands)Wireless
    
    
    51,825
    
    
    
    55
    
    
    
    43,056
    
    
    
    51
    
    
    
    8,769
    
    
    
    20Broadcast
    
    
    11,139
    
    
    
    12
    
    
    
    4,825
    
    
    
    6
    
    
    
    6,314
    
    
    
    131Other:Corporate selling, general and
administrative expenses, non-cash
compensation charges and other expenses
    
    
    (1,813
    )
    
    
    (2
    )
    
    
    (7,160
    )
    
    
    (8
    )
    
    
    5,347
    
    
    
    (75
    )Total Adjusted EBITDA
    
    $
    61,151
    
    
    
    65
    
    
    $
    40,721
    
    
    
    48
    
    
    $
    20,430
    
    
    
    50
 Customers representing 10% or more of the Companys consolidated revenues are presented below
for all applicable periods: Three Months
    
    
    Three MonthsEnded
    
    
    EndedMarch 31, 2005
    
    
    March 31, 2004(Dollars in thousands)Significant Customer RevenueCingular Wireless*
    
    $
    30,520
    
    
    $
    26,332% Total Consolidated Revenue
    
    
    33
    %
    
    
    31
    %Nextel and affiliates**
    
    $
    25,853
    
    
    $
    23,974% Total Consolidated Revenue
    
    
    28
    %
    
    
    28
    %Sprint**
    
    $
    5,231
    
    
    $
    3,773% Total Consolidated Revenue
    
    
    6
    %
    
    
    4
    %Total Consolidated Revenue
    
    $
    93,816
    
    
    $
    84,740
   *
    
    As of October 27, 2004, Cingular Wireless merged with AT&T Wireless. As of March 31, 2005, we have
511 wireless sites where Cingular Wireless and AT&T Wireless are both located pursuant to separate
licensing agreements. Revenues shown above include both Cingular
Wireless and AT&T Wireless.**
    
    As of December 16, 2004, Sprint and Nextel entered into a merger agreement which has not yet
closed.
Revenues from Sprint are included above for informational purposes. As of March 31, 2005, we have
619 wireless sites where Sprint and Nextel are both located pursuant to separate licensing
agreements. Revenues.Revenues increased $9.1 million or 11% in the first quarter of 2005 as compared to
the first quarter of 2004. A significant portion of this increase is attributable to growth in the
wireless segment. The primary drivers of the growth experienced in both the wireless and broadcast
segments include incremental revenue derived from new and amended site leasing agreements, rent
escalations included in existing site leasing and licensing agreements, new sites acquired or built
during the period, and increases in fee revenues. For the quarter ended March 31, 2005, revenues
on the 198 SBC sites acquired since April 1, 2004 were $2.1 million. Revenues from fees for the
first quarter of 2005 were $2.9 million, compared to $1.4 million for the first quarter of 2004.
Same site year over year revenue growth was 7% for the first quarter of 2005. In determining same
site revenue growth, only sites owned and operated during the entire first quarter of 2005 and 2004
were included. We owned or operated 7,826 towers and in-building systems at March 31, 2005, as
compared to 7,582 towers and in-building systems at March 31, 2004. Accounts receivable, net of allowance, increased by $1.2 million from December 31, 2004 to
March 31, 2005. This increase in accounts receivable is primarily due to the timing of cash
collections on account. Our allowance declined by $0.9 million during the first quarter of 2005
due to write-offs of accounts receivable, partially offset by recoveries of amounts previously
reserved and additional provision recorded in the first quarter of
2005. We analyze the adequacy of our accounts receivable allowance on a periodic basis to
ensure that we appropriately reflect the amount we expect to collect. The economic factors
affecting the wireless communications industry as a whole, our customers ability to meet their
financial obligations and the age of our outstanding accounts receivable are all factors we take
into consideration when evaluating the adequacy of our estimate for the allowance for doubtful
accounts. 29




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##### 



Costs of Operations, Excluding Depreciation, Amortization and Accretion Expenses.Costs of
operations, excluding depreciation, amortization and accretion expenses for the first quarter of
2005 were $31.5 million, compared to $30.4 million for the first quarter of 2004. Costs of
operations, excluding depreciation, amortization and accretion expenses as a percentage of total
revenues was 34% for the first quarter of 2005, compared to 36% for the first quarter of 2004. The
percentage decrease in the first quarter of 2005 compared to the first quarter of 2004 is largely a
function of revenue growth, mostly fees, outpacing direct operating costs. In general, as our
wireless and broadcast leasing operations mature, we expect that additional customers on towers
will generate increases in our margins for wireless and broadcast leasing operations and in cash
flow since a significant percentage of tower operating costs are fixed and do not increase with
additional customers. Selling, General and Administrative Expenses.For the first quarter of 2005, selling, general
and administrative expenses were $15.2 million or 16% of total revenues, compared to $12.0 million
or 14% of total revenues for the first quarter of 2004. The increase was primarily due to a $2.0
million increase in costs incurred for consulting, auditing and Sarbanes-Oxley compliance
activities. Also contributing to the increase were incremental costs of approximately $1.1 million
associated with payroll taxes related to option exercises, health insurance costs, board of
director fees and legal expenses. Selling, general and administrative expenses for our wireless segment were 7% of wireless
revenues for each of the three months ended March 31, 2005 and 2004. Selling, general and
administrative expenses for our broadcast segment as a percentage of broadcast revenues were 4% for
the each of three months ended March 31, 2005 and 2004. Selling, general and administrative
expenses not specific to the above business segments were 10% and 7% of total revenues for the
three months ended March 31, 2005 and 2004, respectively. Depreciation, Amortization and Accretion Expenses.Depreciation, amortization and accretion
expenses were $30.6 million for the three months ended March 31, 2005, representing an increase of
$1.4 million from the three months ended March 31, 2004. The net increase is primarily due to
capital expenditures (i.e., towers, site equipment and information technology systems and software)
made between April 1, 2004 and March 31, 2005 and the subsequent depreciation expense taken on
these capital expenditures. Other Income (Expense).Other income (expense), net totaled income of $14.0 million in the
three months ended March 31, 2005. Other income of $6.2 million is attributable to the broadcast
segment and consists primarily of the recognition of deferred revenue associated with the Pegasus
early lease termination agreement of $5.3 million and $1.0 million in gains on the sale of fixed
assets. Other income specific to the wireless segment consists primarily of $0.5 million in gains
on the disposal of fixed assets. Other income (expense), net not specific to any business segment
totaled $7.3 million of income and consists primarily of gains recognized on derivative instruments
associated with marking these instruments to fair value. Other income (expense), net was an expense of $1.6 million in the three months ended March 31,
2004. The three months ended March 31, 2004 included net other expense of $0.5 million in the
wireless segment, consisting primarily of $0.6 million of write-offs of customer contracts relating
to communications towers that were sold. Other expense not specific to any business segment was
$1.1 million, consisting primarily of $0.9 million of expenses related to the public offering of
shares of our common stock and $0.1 million related to the write-down of our interest rate cap to
fair value. Interest Expense.Interest expense in 2005 was primarily affected by increased borrowings
under our credit facility and entrance into an interest rate swap agreement. Interest expense for
the three months ended March 31, 2005 consisted primarily of $7.1 million of interest on our
current senior secured credit facility, $4.1 million of interest on our Senior Notes, and
amortization of debt issuance costs of $0.6 million, offset by $0.3 million of capitalized
interest. Interest expense for the three months ended March 31, 2004 consisted primarily of $4.6
million of interest on our previous credit facility, $4.1 million of interest on our Senior Notes
and amortization of debt issuance costs of $1.1 million, offset
by $0.2 million of capitalized interest. Income Tax Expense.Income tax expense totaled $7.6 million for the three months ended March
31, 2005, representing an increase of $6.9 million from the three months ended March 31, 2004. The
increase in income tax expense results from the recognition of deferred income tax expense. To the
extent we believe our deferred tax assets will be recovered from future taxable income, we have
recognized deferred income tax expense. In the three 30




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##### 



months ended March 31, 2005, we have recognized deferred income tax expense and reduced our
intangible assets by $7.3 million. Liquidity and Capital Resources We are a holding company whose only significant asset is the outstanding capital stock of our
subsidiary, Communications. Our only source of cash to pay our obligations is distributions from
Communications. Cash Flows Cash provided by operating activities was $35.4 million and $27.8 million for the three months
ended March 31, 2005 and 2004, respectively. The increase in cash provided by operating activities
in 2005 is primarily attributable to increased operating income as discussed more fully above under
Results of Operations. Net cash provided by operating activities is also affected by the timing
of collection of accounts receivable and payment of expenses. Cash used in investing activities was $9.2 million and $7.8 million for the three months ended
March 31, 2005 and 2004, respectively. Investing activities for the three months ended March 31,
2005 consisted primarily of $9.2 million for the purchases of property and equipment and $2.8
million for the purchase of Green Mountain Wireless, partially offset by $1.7 million provided by
proceeds from the disposition of assets and $1.1 million provided by the collection of notes
receivable. Cash used in investing activities for the three months ended March 31, 2004 consisted
primarily of $6.3 million for the purchases of property and equipment and $1.7 million used in the
acquisition of towers and customer contracts, partially offset by $0.7 million provided by proceeds
from the disposition of assets. Cash provided by financing activities was $8.9 million and $3.9 million for the three months
ended March 31, 2005 and 2004, respectively. The cash provided by financing activities for the
three months ended March 31, 2005 consisted primarily of $10.1 million in proceeds from the
issuance of common stock partially offset by $1.1 million used for the repayment of debt and
capital leases. Cash provided by financing activities for the three months ended March 31, 2004
consisted primarily of $4.5 million in proceeds from the issuance of common stock. Financing Transactions On November 22, 2004, the Company announced the repurchase of approximately $150.0 million of
its outstanding common stock, or approximately 2.7 million shares, under the ASB with Goldman,
Sachs & Co. Under the ASB, the repurchased shares are subject to a market price adjustment
provision which requires that we make a payment in either cash or stock based on the volume
weighted average market trading price of our shares from November 19, 2004, through March 18, 2005.
The Company elected to settle the obligation with payment in cash and, on April 29, 2005, pursuant
to the market price adjustment provision in the ASB, the Company paid approximately $9.4 million to
Goldman, Sachs & Co. Credit Facility SpectraSite Communications, Inc., a wholly-owned subsidiary of SpectraSite, entered into a
$900.0 million senior secured credit facility on November 19, 2004, with a syndicate of lenders led
by TD and Citigroup Global Markets Inc. The new credit facility replaces Communications previous
facility of $638.2 million, of which $438.2 million was drawn. Proceeds from borrowings of $450.0
million made at closing under the new facility were used to repay Communications previous senior
secured credit facility including all related fees and expenses. SpectraSite anticipates using the
facility for general corporate purposes, including acquisitions and financing distributions to its
stockholders. On November 29, 2004, Communications borrowed an additional $100.0 million under its
multiple draw term loan. As of March 31, 2005, the credit facility includes:  
    a $200.0 million undrawn revolving credit facility, against which $4.9 million of
letters of credit are outstanding, maturing on November 19, 2011;
    a $300.0 million multiple draw term loan that has $150.0 million outstanding and which
must be repaid in quarterly installments which begin on December 31, 2006 and end on
November 19, 2011; and 31




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##### 




    a $399.0 million term loan that is fully drawn and which must be repaid in quarterly
installments which began on March 31, 2005 and end on May 19, 2012. As of March 31, 2005 and December 31, 2004, Communications has $549.0 million and $550.0
million outstanding under the credit facility, respectively. In addition, under the terms of the
credit facility, Communications could borrow approximately $195.1 million under the revolving
credit facility and $150.0 million under the multiple draw term loan while remaining in compliance
with the applicable covenants as of March 31, 2005. At March 31, 2005, amounts due under the credit facility are: Maturities(In thousands)2005
    
    $
    3,0002006
    
    
    7,7502007
    
    
    20,8752008
    
    
    28,3752009
    
    
    34,000Thereafter
    
    
    455,000Total
    
    $
    549,000
 The revolving credit loan and the multiple draw term loan bear interest, at Communications
option, at either TDs base rate plus an applicable margin ranging from 0.00% to 1.00% per annum or
the Eurodollar rate plus an applicable margin ranging from 1.00% to 2.00% per annum, depending on
Communications leverage ratio at the end of the preceding fiscal quarter. The term loan bears
interest, at Communications option, at either TDs base rate plus 0.50% per annum or the
Eurodollar rate plus 1.50% per annum. The weighted average interest rate on outstanding borrowings
under the credit facility as of March 31, 2005 was 4.60%. In February 2003, Communications entered into an interest rate cap agreement in order to limit
exposure to fluctuations in interest rates on its variable rate credit facility. This transaction
is not designated as a fair value hedge. Accordingly, gains and losses from the change in the fair
value of this instrument are recognized in Other income and expense. The carrying amount and fair
value of this instrument was negligible as of March 31, 2005 and December 31, 2004 and is included
in Other assets in the accompanying consolidated balance sheets. In December 2004, Communications entered into an interest rate swap agreement in order to
limit exposure to fluctuations in interest rates on its variable rate credit facility. This
transaction is not designated as a fair value hedge. Accordingly, gains and losses from the change
in the fair value of this instrument are recognized in Other income and expense. As of March 31,
2005 and December 31, 2004, the carrying amount and fair value of this instrument was $7.9 million
and $0.6 million and is included in Other assets in the consolidated balance sheet. Including the
effect of the interest rate swap, the weighted average interest rate on outstanding borrowings
under the credit facility was 5.07% and 4.83% as of March 31, 2005 and December 31, 2004,
respectively. Communications is required to pay a commitment fee of between 0.375% and 0.500% per annum in
respect to the undrawn portions of the revolving credit facility and multiple draw term loan,
depending on the undrawn amount. Communications may be required to prepay the credit facility in
part upon the occurrence of certain events, such as a sale of assets or the incurrence of certain
additional indebtedness. SpectraSite and each of Communications domestic subsidiaries have guaranteed the obligations
under the credit facility. The credit facility is further secured by substantially all the tangible
and intangible assets of Communications and its domestic subsidiaries, a pledge of all of the
capital stock of Communications and its domestic subsidiaries and 66% of the capital stock of
Communications foreign subsidiaries. The credit facility contains a number of covenants that,
among other things, restrict Communications ability to incur additional indebtedness; create liens
on assets; make investments or acquisitions or engage in mergers or consolidations; dispose of
assets; enter into new lines of business; engage in certain transactions with affiliates; and pay
dividends or make capital distributions. In addition, the credit facility requires compliance with
certain financial covenants, 32




---



##### 



including a requirement that Communications and its subsidiaries, on a consolidated basis,
maintain a maximum ratio of total debt to annualized EBITDA (as defined in the credit facility
agreement), a minimum interest coverage ratio and a minimum fixed charge coverage ratio. The following table summarizes activity with respect to Communications credit facility from
December 31, 2004 through March 31, 2005: Amount Drawn
    
    
    UndrawnMultiple
    
    
    
    
    
    
    
    
    
    
    RevolvingDraw
    
    
    
    
    
    
    
    
    
    
    Credit FacilityTerm Loan
    
    
    Term Loan
    
    
    Total
    
    
    Commitment(In thousands)Balance, December 31, 2004
    
    $
    150,000
    
    
    $
    400,000
    
    
    $
    550,000
    
    
    $
    200,000Repayments
    
    
    
    
    
    
    (1,000
    )
    
    
    (1,000
    )
    
    
    Balance, March 31, 2005
    
    $
    150,000
    
    
    $
    399,000
    
    
    $
    549,000
    
    
    $
    200,000
 Previous Credit Facility On November 19, 2004, Communications repaid $187.0 million of the multiple draw term loan and
$251.2 million of the term loan of its previous credit facility with the proceeds associated with
its new credit facility. In connection with these repayments, Communications wrote off
approximately $9.8 million in debt issuance costs. The following table summarizes activity with respect to Communications previous credit
facility from January 1, 2004 through November 19, 2004: Amount Drawn
    
    
    UndrawnMultiple
    
    
    
    
    
    
    
    
    
    
    RevolvingDraw Term
    
    
    
    
    
    
    
    
    
    
    Credit FacilityLoan
    
    
    Term Loan
    
    
    Total
    
    
    Commitment(In thousands)Balance, January 1, 2004
    
    $
    187,581
    
    
    $
    251,974
    
    
    $
    439,555
    
    
    $
    200,000Repayments
    
    
    (187,581
    )
    
    
    (251,974
    )
    
    
    (439,555
    )
    
    
    Balance, November 19, 2004
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 Liquidity and Commitments We emerged from bankruptcy in February 2003. As a result, $1.76 billion of previously
outstanding indebtedness was cancelled. Communications, the borrower under our previous credit
facility, and our other subsidiaries were not part of the bankruptcy. The previous credit facility
remained in place during the reorganization. We had cash and cash equivalents of $69.7 million at March 31, 2005 and $34.6 million at
December 31, 2004. We also had $549.0 million and $550.0 million outstanding under our credit
facility at March 31, 2005 and December 31, 2004, respectively. The revolving portion of our credit
facility was undrawn. Our ability to borrow under the revolving credit facility is limited by the
financial covenants regarding the total debt to Annualized EBITDA (as defined in the credit
agreement) and interest and fixed charge coverage ratios of Communications and its subsidiaries.
Communications could borrow an additional $195.1 million under the revolving credit facility as of
March 31, 2005 and still remain in compliance with the financial covenants. Our ability to borrow
under the credit facilitys financial covenants will increase or decrease as our Annualized EBITDA
(as defined in the credit facility) increases or decreases. The weighted average interest rate on
outstanding borrowings under the credit facility was 33




---



##### 



4.60% as of March 31, 2005 and 4.09% as of December 31, 2004. In December 2004, Communications entered into an interest rate swap agreement in order to
limit exposure to fluctuations in interest rates on its variable rate credit facility. This
transaction has not been designated as a fair value hedge. Accordingly, gains and losses from the
change in the fair value of this instrument are recognized in other income and expense. As of March
31, 2005 and December 31, 2004, the carrying amount and fair value of this instrument was $7.9
million and $0.6 million, respectively, and is included in Other assets in the consolidated
financial statements. Including the effect of the interest rate swap, the weighted average interest
rate on outstanding borrowings under the credit facility was 5.07% and 4.83% as of March 31, 2005
and December 31, 2004, respectively. We will continue to make capital expenditures to improve our existing towers, to install new
in-building neutral host distributed antenna systems and to repurchase ground rights. We believe
that cash flow from operations and available cash on hand will be sufficient to fund our capital
expenditures and other currently anticipated cash needs for the next three years. Our ability to
meet these needs from cash provided by operating activities will depend on the demand for wireless
services, developments in competing technologies and our ability to add new customers, as well as
general economic, financial, competitive, legislative, regulatory and other factors, many of which
are beyond our control. In addition, if we make additional acquisitions or pursue other
opportunities or if our estimates prove inaccurate, we may seek additional sources of debt or
equity capital. The following table provides a summary of our material debt, lease and other contractual
commitments as of March 31, 2005: Payments Due by PeriodLess thanContractual Obligations
    
    Total
    
    
    1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    After 5 Years(In thousands)Credit Facility
    
    $
    549,000
    
    
    $
    4,000
    
    
    $
    34,250
    
    
    $
    64,250
    
    
    $
    446,500Senior Notes
    
    
    200,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200,000Capital Lease Payments
    
    
    1,110
    
    
    
    543
    
    
    
    550
    
    
    
    17
    
    
    
    Operating Lease Payments
    
    
    1,543,764
    
    
    
    73,127
    
    
    
    142,252
    
    
    
    140,333
    
    
    
    1,188,052Asset Retirement Obligations
    
    
    42,309
    
    
    
    290
    
    
    
    1,861
    
    
    
    2,220
    
    
    
    37,938Total Contractual Cash Obligations
    
    $
    2,336,183
    
    
    $
    77,960
    
    
    $
    178,913
    
    
    $
    206,820
    
    
    $
    1,872,490
 In addition, we had standby letters of credit of $5.0 million, $4.9 million under our new
credit facility and $0.1 million under our previous credit facility, and performance bonds of $2.7
million outstanding at March 31, 2005 most of which expire within one year. Non-GAAP Financial Measures Adjusted EBITDA Adjusted EBITDA consists of net income (loss) before depreciation, amortization and accretion,
interest, income tax expense (benefit) and, if applicable, before discontinued operations and
cumulative effect of change in accounting principle. Adjusted EBITDA may not be comparable to a
similarly titled measure employed by other companies and is not a measure of performance calculated
in accordance with accounting principles generally accepted in the United States, or GAAP. We use
Adjusted EBITDA as a measure of operating performance. Adjusted EBITDA should not be considered in
isolation or as a substitute for operating income, net income or loss, cash flows provided by
operating, investing and financing activities or other income statement or cash flow statement data
prepared in accordance with GAAP. We believe Adjusted EBITDA is useful to an investor in evaluating our operating performance
because:  it is the primary measure used by our management to evaluate the economic productivity
of our operations, including the efficiency of our employees and the profitability
associated with their performance, the realization of contract revenue under our long-term
contracts, our ability to obtain and maintain our customers and our ability to operate our
leasing and licensing business effectively; 34




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 it is widely used in the wireless tower industry to measure operating performance
without regard to items such as depreciation and amortization, which can vary depending
upon accounting methods and the book value of assets; and  we believe it helps investors meaningfully evaluate and compare the results of our
operations from period to period by removing the impact of our capital structure (primarily
interest charges from our outstanding debt) and asset base (primarily depreciation and
amortization) from our operating results. Our management uses Adjusted EBITDA:  as a measurement of operating performance because it assists us in comparing our
operating performance on a consistent basis as it removes the impact of our capital
structure (primarily interest charges from our outstanding debt) and asset base (primarily
depreciation and amortization) from our operating results;  in presentations to our Board of Directors to enable it to have the same measurement of
operating performance used by management;  for planning purposes, including the preparation of our annual operating budget;  for compensation purposes, including the basis for incentive quarterly and annual
bonuses for certain employees, including our sales force;  as a valuation measure in strategic analyses in connection with the purchase and sale
of assets; and  with respect to compliance with our credit facility, which requires us to maintain
certain financial ratios based on Annualized EBITDA (as defined in our credit agreement). There are material limitations to using a measure such as Adjusted EBITDA, including the
difficulty associated with comparing results among more than one company and the inability to
analyze certain significant items, including depreciation and interest expense, that directly
affect our net income or loss. Management compensates for these limitations by considering the
economic effect of the excluded expense items independently as well as in connection with its
analysis of net income. Adjusted EBITDA should be considered in addition to, but not as a
substitute for, other measures of financial performance reported in accordance with GAAP. Adjusted EBITDA for the three months ended March 31, 2005 and 2004 was calculated as follows: Three Months
    
    
    Three MonthsEnded
    
    
    EndedMarch 31, 2005
    
    
    March 31, 2004(In thousands)Net income
    
    $
    11,882
    
    
    $
    652Depreciation, amortization and accretion expenses
    
    
    30,587
    
    
    
    29,188Interest income
    
    
    (266
    )
    
    
    (214
    )Interest expense
    
    
    11,604
    
    
    
    9,891Income tax expense
    
    
    7,594
    
    
    
    737Loss from operations of discontinued
segment, net of income tax expense
    
    
    
    
    
    
    124Loss (income) on disposal of discontinued segment
    
    
    (250
    )
    
    
    343Adjusted EBITDA
    
    $
    61,151
    
    
    $
    40,721
 Free Cash Flow Free cash flow (deficit), as we have defined it, is calculated as the cash provided by (used
in) operating activities less purchases of property and equipment. We believe free cash flow to be
relevant and useful information to our 35




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investors as this measure is used by our management in evaluating our liquidity and the cash
generated by our consolidated operating businesses. Our definition of free cash flow does not take
into consideration cash provided by or used for acquisitions or sales of tower assets or cash used
to acquire other businesses. Additionally, our definition of free cash flow does not reflect cash
used to make mandatory repayments of our debt obligations. The limitations of using this measure
include the difficulty in analyzing the impact on our operating cash flow of certain discretionary
expenditures such as purchases of property and equipment and our mandatory debt service
requirements. Management compensates for these limitations by analyzing the economic effect of
these expenditures and asset dispositions independently as well as in connection with the analysis
of our cash flow. Free cash flow reflects cash available for financing activities, to strengthen
our balance sheet, or cash available for strategic investments, including acquisitions of tower
assets or businesses, stock repurchases or other transactions that create value for our
stockholders. We believe free cash flow should be considered in addition to, but not as a
substitute for, other measures of liquidity reported in accordance with generally accepted
accounting principles. Free cash flow, as we have defined it, may not be comparable to similarly
titled measures reported by other companies. Free cash flow for the three months ended March 31,
2005 and 2004 was calculated as follows: Three Months
    
    
    Three MonthsEnded
    
    
    EndedMarch 31, 2005
    
    
    March 31, 2004(In thousands)Net cash provided by operating activities
    
    $
    35,422
    
    
    $
    27,840Less: Purchases of property and equipment
    
    
    (9,203
    )
    
    
    (6,309
    )Free cash flow
    
    $
    26,219
    
    
    $
    21,531
 Cash flow used in investing activities and cash flows provided by financing activities for the
periods presented are as follows: Three Months
    
    
    Three MonthsEnded
    
    
    EndedMarch 31, 2005
    
    
    March 31, 2004(In thousands)Net cash used in investing activities
    
    $
    (9,212
    )
    
    $
    (7,817
    )Net cash provided by financing activities
    
    $
    8,850
    
    
    $
    3,896
 Description of Critical Accounting Policies The preparation of our financial statements in conformity with accounting principles generally
accepted in the United States requires us to make estimates and judgments that affect our reported
amounts of assets and liabilities, revenues and expenses. We have identified the following critical
accounting policies that affect the more significant estimates and judgments used in the
preparation of our consolidated financial statements. On an on-going basis, we evaluate our
estimates, including those related to the matters described below. These estimates are based on the
information that is currently available to us and on various other assumptions that we believe to
be reasonable under the circumstances. Actual results could vary from those estimates under
different assumptions or conditions. Allowance for Uncollectible Accounts We evaluate the collectibility of our accounts receivable based on a combination of factors.
In circumstances where we are aware that a specific customers ability to meet its financial
obligations to us is in question (e.g., bankruptcy filings, substantial down-grading of credit
ratings), we record a specific allowance against amounts due to reduce the net recognized
receivable from that customer to the amount we reasonably believe will be collected. For all other
customers, we reserve a percentage of the remaining outstanding accounts receivable balance based
on a review of the aging of customer balances, industry experience and the current economic
environment. If circumstances change (e.g., higher than expected defaults or an unexpected material
adverse change in one or more significant customers ability to meet its financial obligations to
us), our estimates of the recoverability of amounts due us could be reduced by a material amount. 36




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Property and Equipment Property and equipment built, purchased or leased under long-term leasehold agreements are
recorded at cost. Self-constructed assets include both direct and indirect costs associated with
construction as well as capitalized interest. Approximately $0.3 and $0.2 million of interest was
capitalized for the three months ended March 31, 2005 and 2004, respectively. In addition, upon
initial recognition of a liability for the retirement of a purchased or constructed asset under
Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations,
the cost of that liability is capitalized as part of the cost basis of the related asset and
depreciated over the related life of the asset. Depreciation is recorded using the straight-line method over the estimated useful lives of the
related assets. Property and equipment acquired through capitalized leases and leasehold
improvements (primarily wireless and broadcast towers) are amortized over the shorter of the lease
term or the estimated useful life of the related asset. Lease terms include cancelable option
periods where failure to exercise such options would result in an economic penalty such that at
lease inception the renewal option is reasonably assured of being exercised. The estimated useful
lives of our significant property and equipment classifications are as follows: YearsWireless towers
    
    
    15Broadcast towers and tower components
    
    
    10-30Equipment
    
    
    3-15Buildings
    
    
    39
 Accounting for Asset Retirement Obligations In June 2001, the FASB issued Statement of Financial Accounting Standards No. 143, Accounting
for Asset Retirement Obligations(SFAS 143). SFAS 143 requires that the fair value of legal
obligations associated with the retirement of long-lived assets be recognized in the period in
which the obligation is incurred if a reasonable estimate of fair value can be made. The associated
asset retirement costs are capitalized as part of the carrying amount of the related long-lived
asset and allocated to expense over the useful life of the asset. The Company adopted SFAS 143 on
January 1, 2003 in connection with certain ground leases that require removal of the tower asset
upon expiration. For additional information about asset retirement obligations, refer to Note 1 to
the unaudited consolidated financial statements. Impairment of Long-lived Assets Long-lived assets, such as property and equipment, goodwill and purchased intangible assets,
are evaluated for impairment whenever events or changes in circumstances indicate the carrying
value of an asset may not be recoverable. An impairment loss is recognized when estimated
undiscounted future cash flows expected to result from the use of the asset plus net proceeds
expected from disposition of the asset (if any) are less than the carrying value of the asset. When
an impairment is identified, the carrying amount of the asset is reduced to its estimated fair
value. Accounting for Income Taxes As part of the process of preparing our consolidated financial statements, we are required to
estimate income taxes in each of the jurisdictions in which we operate. This process involves
estimating the actual current tax liability together with assessing temporary differences resulting
from differing treatment of items for tax and accounting purposes. These differences result in
deferred tax assets and liabilities. We must then assess the likelihood that our deferred tax
assets will be recovered from future taxable income. To the extent that we believe that recovery is
not likely, we must establish a valuation allowance. Significant management judgment is required in
determining the provision for income taxes, deferred tax assets and liabilities and any valuation
allowance recorded against net deferred tax assets. We have recorded a valuation allowance of
$523.5 million and $530.8 million as of 37




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March 31, 2005 and December 31, 2004, respectively, due to uncertainties related to
utilization of deferred tax assets, primarily consisting of net operating loss carryforwards and
tax basis in fixed assets. In accordance with SOP 90-7, we adopted fresh start accounting on January 31, 2003. Under
SOP 90-7, deferred tax benefits related to federal and state net operating loss carry-forwards and
tax basis differences generated prior to our emergence from bankruptcy that are realized by us will
be first utilized to reduce intangible assets until such intangible assets are reduced to zero and
thereafter will be reported as additions to paid-in-capital. During the three months ended March
31, 2005 and 2004, we recognized deferred income tax expense and reduced our intangible assets by
$7.3 million and $0.4 million, respectively. Inflation Some of our expenses, such as those for marketing, wages and benefits, generally increase with
inflation. However, we do not believe that our financial results have been, or will be, adversely
affected by inflation in a material way. Special Note Regarding Forward-Looking Statements This report, and other oral statements made from time to time by our representatives, contain
forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of
the Securities Exchange Act of 1934, as amended and the Private Securities Litigation Reform Act of
1995 that are subject to risks and uncertainties. You should not place undue reliance on those
statements because they are subject to numerous uncertainties and factors relating to our
operations and business environment, all of which are difficult to predict and many of which are
beyond our control. Forward-looking statements include information concerning our possible or
assumed future results of operations, including descriptions of our business strategy. These
statements often include words such as may, believe, expect, anticipate, intend, plan,
estimate or similar expressions. These statements are based on assumptions that we have made in
light of our industry experience as well as our perceptions of historical trends, current
conditions, expected future developments and other factors we believe are appropriate under the
circumstances. As you read and consider this report, you should understand that these statements
are not guarantees of performance or results. They involve risks, uncertainties and assumptions.
Although we believe that these forward-looking statements are based on reasonable assumptions, you
should be aware that many factors could affect our actual financial results or results of
operations and could cause actual results to differ materially from those in the forward-looking
statements. These factors include but are not limited to:  
    our ability to consummate our merger with American Tower;
    company consolidations affecting the wireless industry;
    dependence on demand for wireless communications and related infrastructure;
    our ability to add customers on our towers;
    loss of existing customers on our towers;
    market conditions;
    material adverse changes in economic conditions in the markets we serve;
    dependence upon a small number of significant customers;
    competition from others in the communications tower industry, including the impact of
technological developments; 38




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
    future regulatory actions and conditions in our operating areas;
    technological innovation;
    the integration of our operations with those of towers or businesses we have acquired
or may acquire in the future and the realization of the expected benefits;
    disputes with our current and prospective customers and lessors;
    our leveraged capital structure and capital requirements;
    the need for additional financing to provide operating and growth capital; and
    other risks and uncertainties as may be detailed from time to time in our public
announcements and SEC filings. You should keep in mind that any forward-looking statement made by us in this report, or
elsewhere, speaks only as of the date on which we make it. New risks and uncertainties come up from
time to time, and it is impossible for us to predict these events or how they may affect us. We
have no duty to, and do not intend to, update or revise the forward-looking statements in this
report after the date of this report. In light of these risks and uncertainties, you should keep in
mind that any forward-looking statement made in this report or elsewhere might not occur. Risk Factors The following risk factors should be read carefully in connection with evaluating our business
and the forward-looking statements contained in this report and other statements we make or our
representatives make from time to time. Any of the following risks could materially adversely
affect our business, our operating results, our financial condition and the actual outcome of
matters as to which forward-looking statements are made in this report. SpectraSite
stockholders cannot be certain of the market value of the shares of
American Tower Corporations Class A common stock that will
be issued in the merger. Upon
the completion of the merger, each SpectraSite common share
outstanding immediately prior to the merger will be converted into
the right to receive 3.575 shares of American Tower
Corporations Class A common stock. Because the exchange
ratio is fixed at 3.575 shares of American Tower Corporations
Class A common stock for each SpectraSite common share, the
market value of the American Tower Corporation Class A common
stock issued in the merger will depend upon the market price of such
shares upon completion of the merger. The market value of American
Tower Corporations Class A common stock will fluctuate
prior to the completion of the merger and therefore may be different
at the time the merger is consummated than it was at the time the
merger agreement was signed. Stock price changes may result from a
variety of factors, including general market and economic conditions
and changes in business prospects.  Accordingly, SpectraSite
stockholders cannot be certain of the market value of the American
Tower Corporations Class A common stock that will be
issued in the merger. Failure to complete the merger could negatively impact our future business or financial results. Completion of our proposed merger with American Tower is subject to the satisfaction or waiver
of various certain customary conditions, including the receipt of approvals from the SpectraSite
and American Tower stockholders, receipt of various regulatory approvals and authorizations, and
the absence of any order, injunction or decree preventing the completion of the proposed merger.
There is no assurance that all of the various conditions will be satisfied or waived. If the
proposed merger is not completed for any reason:  
    Managements attention from our day-to-day business may
be diverted;
    We may lose key employees;
    Our relationships with vendors may be disrupted as a result
of uncertainties with regard to our business and prospects;
    We may be required to pay significant transaction costs
related to the proposed merger, such as a transaction termination
(break-up) fee of $110 million as well as legal, accounting,
financial advisory and other fees; and
    The market price of our common stock may decline to the
extent that the current market price of those shares reflects a
market assumption that the proposed merger will be completed. In addition, we would not realize any of the expected benefits of having completed the
proposed merger. If the proposed merger is not completed, we cannot assure our stockholders that
these risks will not materialize or materially adversely affect our business or financial results. Our business could be adversely impacted by uncertainty related to the proposed merger. Uncertainty about whether and when the proposed merger with American Tower will be completed
and how our business will be operated after the proposed merger could adversely affect our
business. Any increase in our rate of 39




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customer churn or employee
turnover or other adverse factors arising out of such uncertainty could have a negative impact on the growth, revenue and
the results of operations of SpectraSite and the combined company if the merger is completed. Consolidation among wireless service providers could decrease the demand for our sites and may lead to
reductions in our revenues. Various wireless service providers, which are our primary existing and potential customers,
have entered, and could in the immediate future enter, into mergers, acquisitions or joint ventures
with each other (such as the merger between Cingular Wireless LLC and AT&T Wireless Services, Inc.
and the announced proposed merger between Sprint Corporation and Nextel Communications, Inc.).
These consolidations could reduce the size of our customer base, make it more difficult for us to
compete and have a negative impact on the demand for our services. Recent regulatory developments
have made consolidation in the wireless industry easier and more likely. For example, the Federal
Communications Commission (FCC) has recently eliminated the spectrum aggregation cap in a
geographic area in favor of a case-by-case review of spectrum transactions, enabled the ownership
by a single entity of interests in both cellular carriers in an overlapping cellular service area
and authorized spectrum leasing for a variety of wireless radio services. It is possible that at
least some wireless service providers may take advantage of this relaxation of spectrum and
ownership limitations and consolidate their businesses. Any industry consolidation could decrease
the demand for our sites and increase competition, which may lead to a lack of revenue growth or
reductions in our revenues. A decrease in the demand for our wireless communications sites and our ability to secure additional customers
could negatively impact our ability to maintain profitability. Our business depends on demand for communications sites from wireless service providers, which
in turn depends on consumer demand for wireless services. A reduction in demand for our
communications sites or increased competition for additional customers could have an adverse effect
on our business. Our wireless service provider customers lease and license communications sites on
our towers based on a number of factors, including the level of demand by consumers for wireless
services, the financial condition and access to capital of those providers, the strategy of
providers with respect to owning, leasing or sharing communications sites, available spectrum and
related infrastructure, competitive pricing, consolidation among our customers and potential
customers, government regulation of communications licenses, changes in telecommunications
regulations, the characteristics of each companys technology and geographic terrain. Any decrease
in the demand for our communications sites from current levels or in our ability to secure
additional customers could decrease our ability to remain profitable and could decrease the value
of an investment in our company. The financial and operating difficulties in the wireless telecommunications sector, which have negatively
affected some of our customers, could adversely impact our revenues and profitability. The slowdown and intense competition in the wireless and telecommunications industries over
the past several years have impaired the financial condition of some of our customers. The
financial uncertainties facing our customers could reduce demand for our communications sites,
increase our bad debt expense and reduce prices on new customer contracts. In addition, we may be
negatively impacted by our customers limited access to debt and equity capital, which may
constrain their ability to conduct business with us. As a result, our growth strategy, revenues and
profitability may be adversely affected. An increase in the spectrum available for wireless services may impact the demand for our communication
towers, which may negatively impact our operating results. It is expected that additional spectrum for the provision of wireless services will be made
available over the next few years. For example, the FCC is required to make available for
commercial use a portion of the frequency spectrum currently reserved for government use. Some
portion of this spectrum may be used to create new land 40




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mobile services or to expand existing offerings. Further, the FCC has auctioned, and announced
plans to auction, large blocks of spectrum that will in the future be used to expand existing
wireless networks and to create new or advanced wireless services. This additional spectrum could
be used to replace existing spectrum and could be deployed in a manner that reduces the need for
communications towers to transmit signals over existing spectrum. Any increased spectrum could have
an adverse impact on our business and may impair our operating results. Because a significant portion of our revenue depends on a small number of customers, the loss of any of these
customers could decrease our revenues. A significant portion of our revenue is derived from a small number of customers. For example,
Cingular Wireless and Nextel (including its affiliates) represented approximately 33% and 28%,
respectively, of our revenues for the three months ended
March 31, 2005. Cingular Wireless and Nextel
(including its affiliates) each represented approximately 31% and 28%, respectively, of our
revenues for the three months ended March 31, 2004. If Cingular Wireless, Nextel (including its
affiliates), or any of our other customers suffer financial difficulties or are unwilling or unable
to perform its obligations under its agreements with us, our revenues could be adversely affected. Any disputes with our key customers or lessors may hurt our operating results. From time to time in the ordinary course of our business, we have experienced conflicts or
disputes with some of our customers and lessors. Most of these disputes relate to the
interpretation of terms in our contracts. While we seek to resolve conflicts amicably and have
generally resolved customer and lessor disputes on commercially reasonable terms, these disputes
could lead to increased tensions and damaged relationships with these entities. In some cases, a
dispute could result in a termination of our contracts with customers or lessors, some of whom are
key to our business. In addition, if we are unable to resolve these differences amicably, we may be
forced to litigate these disputes in order to enforce or defend our rights. Damaged or terminated
relationships with any of our key customers or lessors, or any related litigation, could hurt our
business and lead to decreased revenues (including as a result of losing a customer or lessor) or
increased costs, any of which may have a negative impact on our operating results. If we are unable to successfully compete, our business will suffer.
 We believe that tower location and capacity, price, quality of service and density within a
geographic market historically have been, and will continue to be, the most significant competitive
factors affecting our site operations business. We compete for customers with:  
    wireless service providers that own and operate their own towers and lease, or may in the future decide to lease,
antenna space to other providers;
    other independent tower operators; and
    owners of non-tower antenna sites, including rooftops, water towers and other alternate structures. Some of our competitors have significantly more financial resources than we do. The intense
competition in our industry may make it more difficult for us to attract new customers, increase
our gross margins or maintain or increase our market share. Competing technologies and other service options offer alternatives to ground-based antenna systems and allow
our customers to increase wireless capacity without increased use of ground-based facilities, both of which could
reduce the demand for our sites. 41




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Most types of wireless and broadcast services currently require ground-based network
facilities, including communications sites for transmission and reception. The development and
growth of communications and other new technologies that do not require ground-based sites could
reduce the demand for space on our towers. For example, the growth in delivery of video, voice and
data services by satellites, which allow communication directly to users terminals without the use
of ground-based facilities, could lessen demand for our sites. Moreover, the FCC has issued
licenses for several additional satellite systems (including low earth orbit systems) that are
intended to provide more advanced, high-speed data services directly to consumers. These satellite
systems compete with land-based wireless communications systems, thereby reducing the demand for
the services that we provide. Technological developments are also making it possible for carriers
to expand their use of existing facilities to provide service without additional tower facilities.
The increased use by carriers of signal combining and related technologies, which allow two or more
carriers to provide services on different transmission frequencies using the communications antenna
and other facilities normally used by only one carrier, could reduce the demand for tower-based
broadcast transmissions and antenna space. In addition to sharing transmitters, carriers are
sharing (or considering the sharing of) telecommunications infrastructure in ways that might
adversely impact the growth of our business. Furthermore, wireless service providers frequently
enter into agreements with competitors allowing them to utilize one anothers wireless
communications facilities to accommodate customers who are out of range of their home providers
services, so that the home providers do not need to lease space for their own antennas on
communications sites we own. Any of the conditions and developments described above could reduce
demand for our ground-based antenna sites and may have an adverse effect on our business and
revenues. We may be unable to modify towers and add new customers, which could negatively impact our growth strategy
and our business. Our business depends on our ability to modify towers and add new customers as they expand
their tower network infrastructure. Regulatory and other barriers could adversely affect our
ability to modify towers in accordance with the requirements of our customers, and, as a result, we
may not be able to meet our customers requirements. Our ability to modify towers and add new
customers to towers may be affected by a number of factors beyond our control, including zoning and
local permitting requirements, Federal Aviation Administration (FAA) considerations, FCC tower
registration procedures, availability of tower components and construction equipment, availability
of skilled construction personnel, weather conditions and environmental compliance issues. In
addition, because public concern over tower proliferation has grown in recent years, many
communities now restrict tower modifications or delay granting permits required for adding new
customers. We may not be able to overcome the barriers to modifying towers or adding new customers.
Our failure to complete the necessary modifications could have an adverse effect on our growth
strategy and our business. We may encounter difficulties in integrating acquisitions with our operations, which could limit our revenue
growth and our ability to sustain profitability. From December 2000 through August 2004, we leased or subleased a net total of 2,474 towers
under the terms of certain acquisition agreements, as amended, from affiliates of SBC. The process
of integrating acquired operations into our existing operations may result in unforeseen operating
difficulties, divert managerial attention or require significant financial resources. These leases
or subleases and other future acquisitions may require us to incur additional indebtedness and
contingent liabilities, which may limit our revenue growth and our ability to achieve or sustain
profitability. Alternatively, future acquisitions may be financed through the issuance of
additional equity, which would dilute the equity interests of our stockholders. Moreover, any
future acquisitions may not generate any additional income for us or provide any benefit to our
business. We emerged from a chapter 11 bankruptcy reorganization in February 2003, have a history of losses and may
not maintain profitability. Because we emerged from bankruptcy in February 2003 and have a history of losses, we cannot
assure you that we will maintain profitability in the near future. We emerged from our chapter 11
bankruptcy reorganization as a 42




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new reporting entity on February 10, 2003, approximately three months after filing a voluntary
petition for bankruptcy reorganization. Prior to our reorganization, we incurred net losses of
approximately $654.8 million in 2001 and $775.0 million in 2002. In connection with our
reorganization, we adopted fresh start accounting as of January 31, 2003. The net effect of all
fresh start accounting adjustments resulted in a charge of $644.7 million, which is reflected in
the statement of operations for the one month ended January 31, 2003. After our reorganization, we
incurred net losses of approximately $49.1 million for the eleven months ended December 31, 2003
and earned net income of $24.7 million and $11.9 million in the twelve months ended December 31,
2004 and the three months ended March 31, 2005, respectively. If we cannot maintain profitability,
the value of an investment in our company may decline. You are not able to compare our historical financial information to our current financial information, which
will make it more difficult to evaluate an investment in our company. As a result of our emergence from bankruptcy in February 2003, we are operating our business
with a new capital structure and are subject to the fresh start accounting prescribed by generally
accepted accounting principles. Accordingly, unlike other companies that have not previously filed
for bankruptcy protection, our financial condition and results of operations are not comparable to
the financial condition and results of operations reflected in our historical financial statements.
Without historical financial statements to compare to our current performance, it may be more
difficult for you to assess our future prospects when evaluating an investment in our company. Any loss of senior executive officers could adversely affect our ability to effectively manage our business. Our future performance depends largely on the continued services of senior executive officers.
This dependence is particular to our business because the skills, knowledge, technical experience
and customer relationships of our senior executive officers are essential to obtaining and
maintaining these relationships and executing our business plan. Although our Chief Executive
Officer, Chief Operating Officer and Chief Financial Officer have employment agreements with the
Company, the loss of any of these officers or any other key employee may have a detrimental effect
on our ability to manage our business effectively. Our failure to comply with federal, state and local laws and regulations could result in our being fined, being
held liable for damages and, in some cases, losing our right to conduct some of our business. We are subject to a variety of regulations, including those at the federal, state and local
levels. Both the FCC and the FAA regulate towers and other sites used for wireless communications
transmitters and receivers. In addition, under the FCCs rules, we are fully liable for the acts or
omissions of our contractors. We generally indemnify our customers against any failure by us to
comply with applicable laws. Our failure to comply with any applicable laws (including as a result
of acts or omissions of our contractors, which may be beyond our control) may lead to monetary
forfeitures or other enforcement actions, as well as civil penalties, contractual liability and
tort liability and, in some cases, losing our right to conduct some of our business, any of which
could have an adverse impact on our business. We also are subject to local regulations and restrictions that typically require tower owners
to obtain a permit or other approval from local officials or community standards organizations
prior to tower construction or modification. Local regulations could delay or prevent new tower
construction or modifications, as well as increase our costs, any of which could adversely impact
our ability to implement or achieve our business objectives. Because we generally lease, sublease, or license the land under our towers, our business may be adversely
affected if we fail to protect our rights under our contracts. Our real property interests relating to towers primarily consist of leasehold and
sub-leasehold interests, private easements and licenses, and easements and rights-of-way granted by
governmental entities. A loss of these interests for any reason, including losses arising from the
bankruptcy of a significant number of our lessors, from the default 43




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##### 



by a significant number of our lessors under their mortgage financing or from a challenge to our
interest in the real property, would interfere with our ability to conduct our business and
generate revenues. Our ability to protect our rights against persons claiming superior rights in
towers or real property depends on our ability to:  
    recover under title insurance policies, the policy limits of which may be less than the purchase price of a particular tower;
    in the absence of title insurance coverage, recover under title warranties given by tower sellers, which
warranties often terminate after the expiration of a specific period, typically one to three years;
    recover from landlords under title covenants contained in lease agreements; and
    obtain so-called non-disturbance agreements from mortgagees and superior lien holders of the land under our towers. Our inability to protect our rights to the land under our towers could have a material adverse
affect on our business and operating results. Our failure to comply with environmental laws could result in liability and claims for damages. We are subject to environmental laws and regulations that impose liability without regard to
fault. These laws and regulations place responsibility on us to investigate potential environmental
and other effects of operations and to disclose any significant effects in an environmental
assessment prior to constructing a tower or adding a new customer on a tower. These effects may
include any adverse impact on historically or culturally significant sites. In the event the FCC
determines that one of our towers would have a significant environmental impact, the FCC would be
required to prepare an environmental impact statement. This regulatory process could be costly to
us and could significantly delay our registration of a particular tower. In addition, we are
subject to environmental laws that may require investigation and clean up of any contamination at
facilities we own or operate or at third-party waste disposal sites. These laws could impose
liability even if we did not know of, or were not responsible for, the contamination. Although we
believe that we currently have no material liability under applicable environmental laws, the costs
of complying with existing or future environmental laws, responding to petitions filed by
environmental protection groups, investigating and remediating any contaminated real property and
resolving any related liability could have a material adverse effect on our business. Our towers may be damaged by disaster and other unforeseen damage for which our self-insurance may not
provide adequate coverage. Our towers are subject to risks associated with natural disasters, such as ice and wind
storms, tornadoes, floods, hurricanes and earthquakes, as well as other unforeseen damage. We
self-insure almost all of our towers against these risks. Since our inception, two of our towers
have been destroyed by high wind, one has collapsed due to unknown causes, resulting in fatalities,
and several tower sites have suffered minor damage due to flooding. In addition, we own, lease and
license a large number of towers in geographic areas, including Texas, California, Illinois,
Florida, Alabama and Ohio, that have historically been subject to natural disasters, such as high
winds, floods, earthquakes and severe weather. A tower accident for which we do not have adequate
insurance reserves or have no insurance, or a large amount of damage to a group of towers, could
decrease the value of our assets and have an adverse effect on our operating results. If radio frequency emissions from our towers are demonstrated, or perceived, to cause negative health effects,
our business and revenues may be adversely affected. The safety guidelines for radio frequency emissions from our sites require us to undertake
safety measures to protect workers whose activities bring them into proximity with the emitters and
to restrict access to our sites by 44




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##### 



others. If radio frequency emissions are found, or perceived, to be harmful, our customers and
possibly our company could face lawsuits claiming damages from these emissions, and demand for
wireless services and new towers, and thus our business and revenues could be adversely affected.
Although we have not been subject to any claims relating to radio frequency emissions, we cannot
assure you that these claims will not arise in the future or that they will not negatively impact
our business. Our indebtedness could impair our financial condition and make it more difficult for us to fund our operations. We are, and may continue to be, leveraged. As of March 31, 2005, we had $749.0 million of
consolidated indebtedness. Our indebtedness could have important negative consequences for us. For
example, it could:  
    increase our vulnerability to general adverse economic and industry conditions;
    limit our ability to obtain additional financing;
    require the dedication of a substantial portion of our cash flow from operations to the payment of principal of,
and interest on our indebtedness, reducing available cash flow to fund other projects;
    limit our flexibility in planning for, or reacting to, changes in our business and the industry; and
    place us at a competitive disadvantage relative to certain competitors. Our ability to generate sufficient cash flow from operations to pay the principal and interest
on our indebtedness is uncertain. In particular, we may not meet our anticipated revenue growth and
operating expense targets, and, as a result, our future debt service obligations, including our
obligations on our senior notes, could exceed cash available to us. Further, we may not be able to
refinance any of our indebtedness on commercially reasonable terms or at all. In addition, we may be able to incur significant additional indebtedness in the future. To the
extent new debt is added to our current debt levels, the risks described above would increase,
which could have a material adverse effect on our operations and our ability to run our business. Repayment of the principal of our outstanding indebtedness, including our senior notes, may require additional
financing that we cannot assure you will be available to us. We have historically financed our operations primarily with indebtedness. Our ability to
generate sufficient cash flow from operations to make scheduled payments on our debt obligations,
including our senior notes, will continue to depend on our future financial performance. In
addition, we currently anticipate that, in order to pay the principal of our outstanding
indebtedness, including our senior notes, or to repay such indebtedness upon a change of control as
defined in the instruments governing our indebtedness, we may be required to adopt one or more
alternatives, such as refinancing our indebtedness or selling our equity securities or the equity
securities or assets of our subsidiaries. We cannot assure you that we could effect any of the
foregoing alternatives on terms satisfactory to us, that any of the foregoing alternatives would
enable us to pay the interest or principal of our indebtedness or that any of such alternatives
would be permitted by the terms of our credit facility and other indebtedness then in effect. The terms of our credit facility and the indenture relating to our senior notes may restrict our current and future
operations, which could adversely affect our ability to respond to changes in our business and to manage our
operations. Our credit facility and the indenture relating to our senior notes contain, and any future
indebtedness of ours would likely contain, a number of restrictive covenants that impose
significant operating and financial restrictions on us, including restrictions on our ability to,
among other things: 45




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
    incur additional debt;
    pay dividends and make other restricted payments;
    create liens;
    make investments;
    engage in sales of assets and subsidiary stock;
    enter into sale-leaseback transactions;
    enter into transactions with affiliates;
    transfer all or substantially all of our assets or enter into merger or consolidation transactions; and
    make capital expenditures. The credit facility also requires us to maintain certain financial ratios. A failure by us to
comply with the covenants or financial ratios contained in our credit facility could result in an
event of default under the facility which could adversely affect our ability to respond to changes
in our business and manage our operations. In the event of any default under our credit facility,
the lenders under our credit facility will not be required to lend any additional amounts to us.
Our lenders also could elect to declare all amounts outstanding to be due and payable, require us
to apply all of our available cash to repay these amounts or prevent us from making debt service
payments on our senior notes, any of which could result in an event of default under our senior
notes. If the indebtedness under our credit facility or our senior notes were to be accelerated,
there can be no assurance that our assets would be sufficient to repay this indebtedness in full. If Communications is unable to distribute cash to us, we may be unable to satisfy our outstanding debt obligations. Communications credit facility imposes restrictions on our subsidiaries ability to
distribute cash to us. As a holding company, we are dependent on our subsidiaries, including
primarily Communications, for our cash flow. If Communications is unable to distribute cash to us
for any reason, including due to restrictions in the credit facility, we would be unable to pay
dividends or possibly to satisfy our obligations under our debt instruments. Sales of our common stock could adversely affect our stock price and could impair our future ability to raise capital. Sales of a substantial number of shares of our common stock into the public market, or the
perception that these sales could occur, could adversely affect our stock price and could impair
our future ability to raise capital through an offering of our equity securities. As of March 31,
2005, we had 46,873,082 shares of common stock outstanding and we have reserved an additional
3,457,652 shares of common stock for issuance under our stock option plan and 1,996,835 shares of
common stock for issuance upon the exercise of warrants. All of our outstanding shares of common
stock, as well as the shares of common stock issuable upon exercise of outstanding stock options
and warrants, are or will be freely tradable without restriction or further registration under the
federal securities laws, except to the extent they are held by one of our affiliates, as that term
is defined in Rule 144 under the Securities Act of 1933, as amended (the Securities Act). 46




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In the event that we do not exercise our rights to purchase towers under our sublease with SBC or thereafter
acquire an interest that would allow us to operate such towers, our
cash flows derived from such towers would be eliminated. We leased or subleased approximately 2,500 towers pursuant to our agreements with SBC. Under
these agreements, we have a purchase option that we may exercise at the end of our sublease rights.
Each of these towers is assigned into an annual tranche, ranging from 2013 to 2032, which
represents the outside expiration date for our sublease rights to that tower. For example, during
2021 the aggregate number of towers for which the sublease terms will have expired is approximately
400, or approximately 5% of our current total tower portfolio. We may not have the required
available capital (or choose to allocate capital if it is available) in 2013 and thereafter through
2032 to exercise our right to purchase the towers in each or any of the tranches. In the event that
we do not exercise these purchase rights or are otherwise unable to acquire an interest that would
allow us to operate these towers beyond the expiration date, we will lose the cash flows derived
from such towers, which may have a material adverse effect on our business. If we fail to maintain an effective system of internal controls, we may not be
able to accurately report our financial results or prevent fraud. As a result,
current and potential stockholders could lose confidence in our financial
reporting, which would harm our business and the trading price of our stock. On February 7, 2005, the Office of the Chief Accountant of the Securities and Exchange
Commission (SEC) issued a letter to the American Institute of Certified Public Accountants
expressing its views regarding certain existing accounting literature applicable to leases and
leasehold improvements. In light of this letter, our management initiated a review of its
lease-related accounting and determined that its then-current method of accounting for certain
operating leases and leasehold improvements was not in accordance with generally accepted
accounting principles in the U.S. Accordingly, in our Annual Report on Form 10-K for the year ended
December 31, 2004, filed on March 16, 2005, we restated our financial statements for the eleven
months ended December 31, 2003, for the two months ended March 31, 2003, for the second and third
quarters of 2003, and for the first, second and third quarters of 2004. While we believe that we currently have adequate internal controls, our management has
determined that internal controls were ineffective as of December 31, 2004, because a material
weakness existed in our internal control over financial reporting as of such date. While we have
taken remediation measures to correct this material weakness, we cannot assure you that we will not
have material weaknesses or significant deficiencies in our internal controls in the future.
Although we believe that our remediation efforts have strengthened our internal controls and have
addressed the concerns that gave rise to the material weakness that resulted in the restatement of
our financial statements, we are continuing to improve our internal controls. We cannot be certain
that these measures will ensure that we maintain adequate controls over our financial processes and
reporting in the future. Any failure to implement required new or improved controls, or
difficulties encountered in their implementation, could harm our operating results or cause us to
fail to meet our reporting obligations. Inferior internal controls could also cause investors to
lose confidence in our reported financial information, which could have a negative effect on the
trading price of our common stock. 47




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ITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We use financial instruments, including fixed and variable rate debt, to finance our
operations. The information below summarizes our market risks associated with debt obligations
outstanding as of March 31, 2005 and December 31, 2004. The following table presents principal cash
flows and related weighted average interest rates by fiscal year of maturity of our fixed rate debt
as of March 31, 2005: Expected Maturity Date2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    Thereafter
    
    
    Total(Dollars in thousands)Long-term obligations:Fixed rate
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    200,000
    
    
    $
    200,000Average interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8.25
    %
    
    
    8.25
    %
 As of March 31, 2005 and December 31, 2004, we had $549.0 million and $550.0 million,
respectively, of variable rate debt outstanding under our credit facility at a weighted average
interest rate of 4.60% and 4.09%, respectively. We have attempted to reduce our exposure to LIBOR
increases by using derivative financial instruments consisting of interest rate caps and interest
rate swaps. These instruments are for purposes other than trading. Due to the creditworthiness of
the counterparties to our derivative financial instruments, we do not believe we have any
significant credit risk exposure related to these agreements. Any potential credit exposure is
limited to the current value of a contract at the time a counterparty fails to perform. As of March 31, 2005, we have an interest rate swap agreement in connection with amounts
borrowed under our credit facility. This interest rate swap agreement has a $300.0 million notional
amount until its termination on December 16, 2009. We pay a fixed rate of 3.876% on the notional
amount and receive a floating rate based on LIBOR. Including the effect of our interest rate swap,
the weighted average interest rate on outstanding borrowings under the credit facility as of March
31, 2005, was 5.07%. As of March 31, 2005 and December 31, 2004, the carrying amount and fair value
of our interest rate swap was $7.9 million and $0.6 million, respectively. As of March 31, 2005, we have an interest rate cap on $375.0 million of the variable rate debt
outstanding under our credit facility, which caps our LIBOR risk at 7.0% through February 10, 2006.
As of March 31, 2005 and December 31, 2004, the carrying amount and fair value of this instrument
was negligible. A 1% increase in the underlying LIBOR rate on the $249.0 million of variable rate debt that is
not hedged by our interest rate swap as of March 31, 2005 would increase our interest expense by
$2.5 million on an annual basis. 
 ITEM 4  CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures We have conducted an evaluation, under the supervision of and participation by our management,
including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our
disclosure controls and procedures as of the end of the period covered by this report. Based on
this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our
disclosure controls and procedures are effective to ensure that the information required to be
filed in the reports that we file or submit under the Securities Exchange Act of 1934 (the
Exchange Act), as amended, is recorded, processed, summarized and reported within the time
periods specified in the Commissions rules and forms. Changes in Internal Controls In connection with the preparation of the Companys Annual Report on Form 10-K for the fiscal
year ended December 31, 2004, an evaluation was performed under the supervision and with the
participation of our management, including our CEO and CFO, of the effectiveness of the design and
operation of the Companys internal control over financial reporting (as defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act). In making our assessment of internal control over financial
reporting, our management used the criteria set forth by the Committee of Sponsoring Organizations
of the Treadway Commission in Internal Control-Integrated Framework. 48




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Our management also reviewed the Companys lease accounting and leasehold depreciation
practices, partially in light of the recent attention and focus on such practices by the SEC and
other companies in the tower, restaurant and retail industries. As a result of this review, we
concluded that our previously established lease accounting and leasehold depreciation accounting
policies were not in compliance with GAAP, that our rent expenses and depreciation expenses since
February 1, 2003 had been understated and that these misstatements were material to the Companys
financial statements for periods since that date. Accordingly, our management recommended, and our
Audit Committee and independent registered public accounting firm concurred, that the Company
should restate its financial statements for the eleven months ended December 31, 2003, for the two
months ended March 31, 2003, for the second and third fiscal quarters of 2003, and for the first,
second and third fiscal quarters of 2004. Our management evaluated the impact of this restatement on the Companys assessment of its
system of internal control and has concluded that the Companys controls over the selection and
monitoring of appropriate assumptions and factors affecting lease accounting and leasehold
depreciation practices were insufficient and that this control deficiency represented a material
weakness. A material weakness in internal control over financial reporting is a control deficiency
(within the meaning of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard
No. 2), or combination of control deficiencies, that results in there being more than a remote
likelihood that a material misstatement of the annual or interim financial statements will not be
prevented or detected. PCAOB Auditing Standard No. 2 identifies a number of circumstances that,
because of their likely significant negative effect on internal control over financial reporting,
are to be regarded as at least significant deficiencies as well as strong indicators that a
material weakness exists, including the restatement of previously issued financial statements to
reflect the correction of a misstatement. As a result of this material weakness in the Companys
internal control over financial reporting, management concluded that, as of December 31, 2004, the
Companys internal control over financial reporting was not effective. The Company believes that it has remediated the material weakness in internal control over
financial reporting by conducting a review of its accounting related to leases, correcting its
method of accounting for leases and leasehold improvements, and changing its internal controls to
specifically identify the procedures to follow to ensure that the Companys lease accounting
complies with GAAP. Other than as set forth above, there were no significant changes that occurred during our most
recent fiscal quarter that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting. 49




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PART II  OTHER INFORMATION 
 ITEM 1  LEGAL PROCEEDINGS On April 23, 2004, Winstar Communications, LLC and Winstar of New York, LLC (collectively,
Winstar) filed a class action lawsuit in the United States District Court for the Southern
District of New York against owners and managers of commercial real estate properties that have
entered into leases or other arrangements with Winstar. The defendants include real estate
investment trusts, privately held commercial real estate companies, the Building Owners and
Managers Association of New York (BOMA) and SpectraSite Building Group, Inc., one of our
subsidiaries. The suit asserts claims for violations of federal and state antitrust law, and
federal telecommunications law, and seeks an unspecified amount of monetary damages and specific
performance. The claims are premised upon the allegations, among others, that the defendants,
through BOMA and other rooftop telecommunications managers, including SpectraSite Building Group,
Inc., conspired to fix rental prices of building access for telecommunications services by
disseminating non-public pricing information among the defendants that stabilized building access
rates for competitive telecommunications providers such as Winstar. On August 13, 2004, the defendants filed a motion to dismiss the action. On January 14, 2005,
Winstar voluntarily dismissed its claims regarding violations of federal telecommunications law and
its claims for relief for specific performance, leaving the antitrust claims for further
adjudication. On January 21, 2005, the Court granted the defendants motion to dismiss, dismissing
all of Winstars claims including its antitrust claims, and directed the Clerk of Court to close
the case. On February 18, 2005, Winstar filed a notice of appeal of the Courts dismissal order
with the United States Court of Appeals, Second Circuit. We believe the appeal is without merit
and, while we are unable to predict the outcome of this appeal, we do not expect this matter to
have a material adverse effect on our business or financial condition. From time to time, we are involved in various legal proceedings relating to claims arising in
the ordinary course of business. We are not currently a party to any such legal proceedings, the
adverse outcome of which, individually or in the aggregate, is expected to have a material adverse
effect on our business, financial condition or results of operations. 
 ITEM 2  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS On July 28, 2004, the Board of Directors authorized the repurchase of shares of the Companys
common stock up to an aggregate amount of $175.0 million. On November 22, 2004, the Board of
Directors authorized an increase of $125.0 million for a total repurchase authorization of $300.0
million. On November 22, 2004, the Company announced the repurchase of approximately $150.0 million of
its outstanding common stock, or approximately 2.7 million shares, under the ASB with Goldman,
Sachs & Co. Under the ASB, the repurchased shares are subject to a market price adjustment
provision which requires that we make a payment in either cash or stock based on the volume
weighted average market trading price of our shares from November 19, 2004, through March 18, 2005.
The Company elected to settle the obligation with payment in cash and, on April 29, 2005, pursuant
to the market price adjustment provision in the ASB, the Company paid approximately $9.4 million to
Goldman, Sachs & Co. As of March 31, 2005, the Company had repurchased 3,679,881 shares at an average price of
$55.75 per share including commissions and the ASB market price adjustment provision. Including
legal costs of $0.3 million, the Companys cost basis for these shares was an average price of
$55.83 per share. No shares were purchased in the three months ended March 31, 2005. The Company
holds all repurchased shares as treasury stock. 50




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The table below sets forth information with respect to our repurchases of our common stock
during the three months ended March 31, 2005: Maximum Number ofTotal Number of
    
    
    Remaining Shares thatShares Purchased as
    
    
    May YetPart of Publicly
    
    
    Be Purchased UnderTotal Number of
    
    
    Average Price Paid
    
    
    Announced Plans or
    
    
    the Plans orPeriod
    
    Shares Purchased
    
    
    Per Share (1)
    
    
    Programs (2)
    
    
    Programs (2)(1/1/05-
1/31/05)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,778,713
    (3)(2/1/05  2/28/05)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,686,611
    (4)(3/1/05  3/31/05)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,712,923
    (5)Total:
    
    
    
    
    
    
    
    
    
    
    
   (1)
    
    Includes applicable commission.(2)
    
    The repurchase program is being effected by our management from time to time, depending on market conditions and other factors, through open market purchases or privately negotiated
transactions. Our Board of Directors authorized us to engage one or more financial institutions to assist us with managing the repurchase of our shares of common stock under this repurchase
program. The Company has selected a financial institution to manage the repurchase of the Companys shares. This repurchase program has no expiration or termination date.(3)
    
    Based on a closing price of SpectraSite common stock of $58.60 per share on January 31, 2005.(4)
    
    Based on a closing price of SpectraSite common stock of $61.80 per share on February 28, 2005.(5)
    
    Based on a closing price of SpectraSite common stock of $57.97 per share on March 31, 2005. 
 ITEM 3 DEFAULTS UPON SENIOR SECURITIES None. 
 ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 
 ITEM 5 OTHER INFORMATION None. 
 ITEM 6  EXHIBITS ExhibitNumber
    
    Description2.1
    
    Agreement to Sublease, dated as of August 25, 2000, by and among SBC Wireless,
Inc. and certain of its affiliates, the Registrant, and Southern Towers, Inc.
(the SBC Agreement). Incorporated by reference to exhibit no. 10.1 to the
Registrants Form 8-K dated August 25, 2000 and filed August 31, 2000.
 51




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##### 



ExhibitNumber
    
    Description2.2
    
    Amendment No. 1 to the SBC Agreement, dated December 14, 2000. Incorporated by
reference to exhibit no. 2.8 to the registration statement on Form S-3 of the
Registrant, file no. 333-45728.2.3
    
    Amendment No. 2 to the SBC Agreement, dated November 14, 2001. Incorporated by
reference to exhibit no. 2.5 to the Registrants Form 10-K for the year ended
December 31, 2001.2.4
    
    Amendment No. 3 to the SBC Agreement, dated January 31, 2002. Incorporated by
reference to exhibit no. 2.6 to the Registrants Form 10-K for the year ended
December 31, 2001.2.5
    
    Amendment No. 4 to the SBC Agreement, dated February 25, 2002. Incorporated by
reference to exhibit no. 2.7 to the Registrants Form 10-K for the year ended
December 31, 2001.2.6
    
    Agreement and Plan of Merger, dated
as of May 3, 2005, by and among
American Tower Corporation, a
Delaware corporation, Asteroid Merger
Sub, LLC, a Delaware limited
liability company and a directly
wholly owned subsidiary of American
Tower Corporation, and SpectraSite,
Inc., a Delaware corporation. Incorporated by reference to exhibit
no. 2.1 to the Registrants Form 8-K filed May 5,
2005.3.1
    
    Third Amended and Restated Certificate of Incorporation of the Registrant.
Incorporated by reference to exhibit no. 2.1 to the Registrants Form 8-K dated
February 11, 2003.3.2
    
    Third Amended and Restated Bylaws of the Registrant. Incorporated by reference
to exhibit no. 3.2 to the Registrants Form 10-K for the year ended December 31,
2003.10.1*
    
    SpectraSite, Inc. 2005 Incentive Plan.31.1*
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of
the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of
the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1*
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2*
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   *
    
    Filed herewith 52




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##### 



SIGNATURES Pursuant to the requirements of the Securities Exchange Act of the 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SPECTRASITE, INC./s/ STEPHEN H. CLARKStephen H. ClarkPresident and Chief Executive Officer/s/ MARK A. SLAVENMark A. SlavenChief Financial Officer
 Date: May 9, 2005 53




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##### 



EXHIBIT INDEX ExhibitNumber
    
    Description2.1
    
    Agreement to Sublease, dated as of August 25, 2000, by and among
SBC Wireless, Inc. and certain of its affiliates, the
Registrant, and Southern Towers, Inc. (the SBC Agreement).
Incorporated by reference to exhibit no. 10.1 to the
Registrants Form 8-K dated August 25, 2000 and filed August 31,
2000.2.2
    
    Amendment No. 1 to the SBC Agreement, dated December 14, 2000.
Incorporated by reference to exhibit no. 2.8 to the registration
statement on Form S-3 of the Registrant, file no. 333-45728.2.3
    
    Amendment No. 2 to the SBC Agreement, dated November 14, 2001.
Incorporated by reference to exhibit no. 2.5 to the Registrants
Form 10-K for the year ended December 31, 2001.2.4
    
    Amendment No. 3 to the SBC Agreement, dated January 31, 2002.
Incorporated by reference to exhibit no. 2.6 to the Registrants
Form 10-K for the year ended December 31, 2001.2.5
    
    Amendment No. 4 to the SBC Agreement, dated February 25, 2002.
Incorporated by reference to exhibit no. 2.7 to the Registrants
Form 10-K for the year ended December 31, 2001.2.6
    
    Agreement and Plan of Merger, dated as of May 3, 2005, by and
among American Tower Corporation, a Delaware corporation,
Asteroid Merger Sub, LLC, a Delaware limited liability company
and a directly wholly owned subsidiary of American Tower
Corporation, and SpectraSite, Inc., a Delaware corporation. Incorporated by reference to exhibit
no. 2.1 to the Registrants Form 8-K filed May 5,
2005.3.1
    
    Third Amended and Restated Certificate of Incorporation of the
Registrant. Incorporated by reference to exhibit no. 2.1 to the
Registrants Form 8-K dated February 11, 2003.3.2
    
    Third Amended and Restated Bylaws of the Registrant.
Incorporated by reference to exhibit no. 3.2 to the Registrants
Form 10-K for the year ended December 31, 2003.10.1*
    
    SpectraSite, Inc. 2005 Incentive Plan.31.1*
    
    Certification of Chief Executive Officer pursuant to Rule
13a-14(a)/15d-14(a) of the Securities and Exchange Act of 1934,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.31.2*
    
    Certification of Chief Financial Officer pursuant to Rule
13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.32.1*
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2*
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
   
    
    Filed herewith 54