Edgar Filing: SPECTRASITE INC

FILED PURSUANT RULE 424(B)(3)


	Filed Pursuant to Rule 424(b)(3)
	Registration No. 333-112154
	and 333- 112540


		9,000,000 Shares SpectraSite, Inc. Common Stock

This is a public offering of shares of common stock of SpectraSite, Inc. All of the 9,000,000 shares of common stock are being sold by the selling stockholders. We will not receive any of the proceeds from the shares being sold by these selling stockholders.

On February 5, 2004, the last reported sale price of our common stock, which is quoted on the New York Stock Exchange under the ticker symbol “SSI,” was $35.50 per share. See “Price Range of Common Stock.”

See “Risk Factors” on page 10 to read about factors you should consider before buying shares of the common stock.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.


	Per Share		Total

Initial price to public	$	35.00	$	315,000,000
Underwriting discount	$	1.40	$	12,600,000
Proceeds to the selling stockholders	$	33.60	$	302,400,000

To the extent that the underwriters sell more than 9,000,000 shares of common stock, the underwriters have the option to purchase up to an additional 1,350,000 shares from the selling stockholders at the public offering price less the underwriting discount.

The underwriters expect to deliver the shares against payment in New York, New York on February 11, 2004.

Goldman, Sachs & Co.


	Bear, Stearns & Co. Inc.


	Citigroup


	Lehman Brothers


	Raymond James

Prospectus dated February 5, 2004.

PROSPECTUS SUMMARY

You should read this entire prospectus carefully, especially the “Risk Factors” section and the consolidated financial statements.

SpectraSite

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 access to rooftop telecommunications on commercial real estate. For the nine months ended September 30, 2003, 100% of our revenues came from our leasing and licensing operations.

We have a portfolio of over 7,500 towers, primarily located in the top 100 basic trading area, or “BTA,” markets in the United States. We believe that the growing use of wireless communications services together with capacity constraints in the top 100 BTA markets will continue to increase the demand for tower assets located in these markets and drive the growth of our business.

We emerged from bankruptcy on February 10, 2003. Under our Plan of Reorganization, we extinguished $1.76 billion of indebtedness. Our reorganization is discussed in greater detail in other sections of this prospectus.

Our business is characterized by stable and recurring revenues, predictable operating costs and a low level of capital expenditures. We expect to continue to increase our revenues by adding new customers to our towers and by providing additional space to our existing customers. Revenues from our existing customers are expected to grow because of contractual provisions that increase our customers’ payments to us on an annual basis. We also experience minimal customer turnover due to long-term customer contracts, the quality of our assets and the significant relocation costs for our existing customers. Approximately 83% of our revenues from our site leasing and licensing operations are derived from the six largest wireless service providers and their affiliates. For the nine months ended September 30, 2003, two of these wireless service providers and their affiliates were responsible for 51% of our revenues from our site leasing and licensing operations. In addition, we currently operate with the lowest levels of debt and leverage among publicly traded tower companies.

We incurred a net loss of approximately $6.1 million in the eight months ended September 30, 2003 and generated net income of $345.0 million in the one month ended January 31, 2003. Our net income for the one month ended January 31, 2003 includes non-recurring amounts related to our reorganization, including a gain on debt discharge of approximately $1.03 billion and reorganization expense items of $668.6 million. We incurred net losses of approximately $775.0 million in 2002, $654.8 million in 2001 and $157.6 million in 2000. As of December 31, 2002, prior to our emergence from bankruptcy, we had an accumulated deficit of $1.7 billion and a stockholders’ deficit of $75.1 million.

Our Business

Our business consists of site leasing and licensing operations. As of September 30, 2003, we owned or operated 7,437 wireless towers and in-building systems and 72 broadcast towers. We have major metropolitan market clusters in Los Angeles, Chicago, San Francisco, Philadelphia, Detroit and Dallas. Our principal business is the leasing of space on our antenna sites to wireless carriers, which represents more than 93% of our monthly revenues. Additionally, we have the exclusive rights to provide in-building systems to wireless carriers in over 300 retail

shopping malls, casino/hotel resorts and office buildings. We are also the exclusive site manager for over 10,000 rooftop real estate properties in the United States. Because the costs of operating a tower are largely fixed, we believe that our highest returns will be achieved by leasing and licensing additional space on our existing sites.

Recent Developments

Unaudited Fourth Quarter 2003 Results. On February 2, 2004, we reported unaudited results for the fourth quarter ended December 31, 2003. As a result of the implementation of fresh start accounting as of January 31, 2003, our financial statements after that date are not comparable to our financial statements for prior periods because of the differences in the bases of accounting and the capital structure for the predecessor company and the reorganized company.

Total revenues for the fourth quarter of 2003 were $81.6 million, compared to $74.9 million for the fourth quarter of 2002, representing an increase of 8.9%. Net of the revenues contributed by the 545 SBC towers that we sold in February, 2003, revenues increased 16.6% from the fourth quarter of 2002 to the fourth quarter of 2003. Operating income for the fourth quarter of 2003 was $16.6 million, an increase from an operating loss of $11.8 million for the same period in 2002.

Other expense during the fourth quarter of 2003 was $0.8 million as compared to $1.7 million during the fourth quarter of 2002. Other expense items during the fourth quarter of 2003 primarily related to losses incurred on disposal of property, plant and equipment.

Our net loss was $13.6 million for the fourth quarter of 2003 versus a net loss of $60.3 million during the fourth quarter of 2002. Basic net loss per share was $0.29 during the fourth quarter of 2003 as compared to a basic net loss of $0.39 per share during the fourth quarter of 2002.

Adjusted EBITDA increased 29.6% to $41.5 million during the fourth quarter of 2003 from $32.0 million during the same period in the prior year. Net of the contribution from 545 SBC towers sold by us in February 2003, Adjusted EBITDA increased 45.2% from the fourth quarter of 2002 to the fourth quarter of 2003. Other expense items in the amount of $0.8 million during the fourth quarter of 2003 and $1.7 million during the fourth quarter of 2002 are included in the Adjusted EBITDA calculations.

Net cash provided by operating activities decreased to $29.5 million during the fourth quarter of 2003 as compared to net cash provided by operating activities of $34.8 million during the fourth quarter of 2002, primarily due to normal fluctuations in working capital. Purchases of property and equipment during the fourth quarter of 2003 were $11.6 million, an increase from $8.8 million for the same period in 2002. Free cash flow, defined as net cash provided by operating activities less purchases of property and equipment, during the fourth quarter of 2003 was $18.0 million as compared to free cash flow of $26.0 during the prior year’s period. At December 31, 2003, we had $60.4 million of cash on hand and $639.6 million of long term debt. During the fourth quarter of 2003, we leased or subleased 56 SBC towers, for which we paid approximately $15.6 million in cash.

Adjusted EBITDA for periods after January 31, 2003 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. For periods prior to January 31, 2003, Adjusted EBITDA also excludes gain on debt discharge, reorganization items, and write-offs of investments in and loans to affiliates. We use a different definition of Adjusted EBITDA for the fiscal periods prior to our reorganization to enable investors to view our operating performance on a consistent basis before the impact of the items discussed above on the predecessor company. Each of these historical items was incurred prior

to, or in connection with, our reorganization and is excluded from Adjusted EBITDA to reflect the results of our core operations. 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. For a discussion of non-GAAP financial measures, including their usefulness to investors and material limitations, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measures.”

Adjusted EBITDA for the three months ended December 31, 2002 and 2003, was calculated as follows:


	Predecessor			Reorganized
	Company			Company
	Three Months			Three Months
	Ended			Ended
	December 31,			December 31,
	2002			2003


	(in thousands)
Net loss	$	(60,293	)	$	(13,634	)
Depreciation, amortization and accretion expense		45,580			25,794
Interest income		(330	)		(177	)
Interest expense		39,026			10,435
Reorganization expense		2,475			—
Income tax expense		637			1,486
Loss from operations of discontinued segment, net of income tax expense		3,578			643
Loss on disposal of discontinued segment		1,357			16,977

Adjusted EBITDA	$	32,030		$	41,524

Free cash flow for the three months ended December 31, 2002 and 2003, was calculated as follows:


	Predecessor			Reorganized
	Company			Company
	Three Months			Three Months
	Ended			Ended
	December 31,			December 31,
	2002			2003


	(in thousands)
Net cash provided by operating activities	$	34,753		$	29,540
Less: Purchases of property and equipment		(8,750	)		(11,569	)

Free cash flow	$	26,003		$	17,971

Amendments to Credit Facility. Effective October 24, 2003, we completed an amendment to our credit facility to replace the existing term loan with a new term loan that is substantially the same as the existing term loan, except that the interest rate was reduced from, at our option, Canadian Imperial Bank of Commerce’s base rate plus 2.75% per annum or the Eurodollar rate plus 4.00% per annum to Canadian Imperial Bank of Commerce’s base rate plus 1.75% per annum or the Eurodollar rate plus 3.00% per annum.

plus 1% per annum or the Eurodollar rate plus 2.25% per annum. The proposed amendment would also provide that the interest rate margins would automatically be further reduced if our credit ratings improve. There can be no assurance that the lenders will agree to complete the amendment.

Secondary Offering and NYSE Listing. On October 8, 2003, we completed an underwritten public offering of our common stock, whereby 10.35 million shares of common stock were sold by four of our existing stockholders, including an over-allotment option exercised by the underwriters. The selling stockholders received net proceeds of $292.0 million from the offering. In connection with this offering, we incurred costs of approximately $1.2 million in the three months ended September 30, 2003, which are included in Other income (expense). In connection with the offering, on October 3, 2003, our common stock began trading on the New York Stock Exchange under the symbol “SSI”.

Discontinuation of Broadcast Services Division. On December 16, 2003, we decided to discontinue our broadcast services division, after evaluating the broadcast services sector and the continuing trend of declining sales and profitability. The assets and liabilities associated with this division have been classified as held for sale. The results of broadcast services operations have been reported separately as discontinued operations in the balance sheets and statements of operations. Prior period financial statements have been restated to present the operations of the division as a discontinued operation.

Reorganization. The financial difficulties experienced by the telecommunications and broadcast industries in recent years have severely impacted capital availability within the wireless telecommunications and broadcast sectors. Many of our customers were forced to reduce scheduled capital expenditures, which in turn impeded our revenue and earnings growth and, therefore, our ability to service our long-term debt. In November 2002, after a review of our business and our prospects, we concluded that recoveries to creditors and equity holders would be maximized by a consensual restructuring implemented under chapter 11 of the Bankruptcy Code. In connection with this restructuring, we extinguished $1.76 billion of indebtedness in return for issuing approximately 47.5 million shares of our common stock. Also, in connection with this restructuring, all of our common stock outstanding prior to our bankruptcy was cancelled in exchange for warrants to purchase an aggregate of approximately 2.5 million shares of our common stock.

Our operating subsidiaries, including SpectraSite Communications, Inc., or “Communications,” were not part of the bankruptcy reorganization. Our senior management team remained with us through the reorganization. After our emergence from bankruptcy, our largest stockholders are affiliates of Apollo Management V, L.P. and certain funds managed by Oaktree Capital Management, LLC.

The Offering


Common stock offered by the selling stockholders		9,000,000 shares

Common stock outstanding before and after this offering		47,750,453 shares

Dividend policy		We have not paid any cash dividends on our common stock in the past and currently do not expect to pay dividends or make any other distributions on our common stock in the immediate future.

Use of proceeds		We will not receive any proceeds from the sale of shares by the selling stockholders.

New York Stock Exchange symbol		“SSI”

All of the shares of common stock in this offering are being sold by the selling stockholders.

The number of shares of common stock outstanding before and after this offering excludes 5,222,799 shares of common stock issuable upon exercise of outstanding stock options, an additional 393,978 shares of common stock available for future awards under our equity incentive plan, 2,496,854 shares of common stock issuable upon exercise of outstanding warrants and 135,866 shares of common stock issuable in connection with further distributions pursuant to our Plan of Reorganization.

Except as otherwise indicated, information regarding the number of shares of our common stock reflects amounts outstanding as of December 31, 2003 and gives effect to our two-for-one stock split that was effected on August 21, 2003.

As of December 31, 2003, the selling stockholders held approximately 47.0% of our outstanding common stock. After giving effect to this offering and assuming the full exercise of the underwriters’ option to purchase 1,350,000 additional shares, the selling stockholders will own approximately 25.2% of our outstanding common stock as of February 5, 2004.

Unless otherwise indicated, the information in this prospectus assumes that the underwriters will not exercise the over-allotment option granted to them by the selling stockholders.

Risk Factors

See “Risk Factors” following this summary for a discussion of some of the risks relating to investing in our common stock.

Information About SpectraSite

We were incorporated in Delaware in 1997. Our principal executive offices are located at 400 Regency Forest Drive, Cary, North Carolina 27511, and our telephone number at that address is (919) 468-0112. Our World Wide Web site address is www.spectrasite.com. The information in our website is not part of this prospectus.

Summary Consolidated Financial and Other Data

The following table sets forth summary historical consolidated financial and other data. We refer to the periods prior to our emergence from chapter 11 as “predecessor company” and to the periods subsequent to that date as “reorganized company.” The balance sheet data as of December 31, 2000, 2001 and 2002 and the statement of operations data for the years ended December 31, 2000, 2001 and 2002 are derived from our audited consolidated financial statements. The balance sheet data as of September 30, 2002, January 31, 2003 and September 30, 2003 and the statement of operations data for the nine months ended September 30, 2002 and for the one month ended January 31, 2003 for the predecessor company and for the eight months ended September 30, 2003 for the reorganized company are derived from our unaudited financial statements. In our opinion, the unaudited financial data include all adjustments (consisting only of normal recurring adjustments for the predecessor company for the nine months ended September 30, 2002 and normal recurring adjustments and fresh start accounting adjustments for the predecessor company for the one month period ended January 31, 2003 and for the reorganized company for the eight months ended September 30, 2003) necessary to present fairly the information set forth therein.

On December 31, 2002, we sold our network services division. On December 16, 2003, we decided to discontinue our broadcast services division. The results of the network and broadcast services divisions’ operations have been reported separately as discontinued operations in the balance sheets and statements of operations. Prior period information has been restated to present the operations of the network and broadcast services divisions as discontinued operations.

As a result of the implementation of fresh start accounting as of January 31, 2003, our financial statements after that date are not comparable to our financial statements for prior periods because of the differences in the bases of accounting and the capital structure for the predecessor company and the reorganized company. Operating results for the one month ended January 31, 2003 for the predecessor company and for the eight months ended September 30, 2003 for the reorganized company are not necessarily indicative of the results that may be expected for the year ending December 31, 2003.

The information set forth below should be read in conjunction with “Use of Proceeds,” “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.


																		Reorganized
			Predecessor Company(1)															Company(1)

												Nine Months			One Month			Eight Months
			Year Ended December 31,									Ended			Ended			Ended
												September 30,			January 31,			September 30,
			2000			2001			2002			2002(2)			2003(2)			2003(2)


			(dollars in thousands)
Statement of Operations Data:
Revenues			$	117,970		$	221,735		$	282,525		$	207,615		$	25,626		$	208,173

Operating expenses:
	Costs of operations (excluding depreciation, amortization and accretion expense)		$	46,667		$	91,694		$	108,540		$	79,675		$	8,901		$	68,859
	Selling, general and administrative expenses			42,977			65,540			54,812			42,543			4,003			33,027
	Depreciation, amortization and accretion expense(3)			76,986			163,628			188,176			142,596			15,930			67,404
	Restructuring and non-recurring charges			—			140,871			27,394			27,394			—			—

		Total operating expenses		166,630			461,733			378,922			292,208			28,834			169,290

Operating income (loss)			$	(48,660	)	$	(239,998	)	$	(96,397	)	$	(84,593	)	$	(3,208	)	$	38,883

Gain on debt discharge				—			—			—			—			1,034,764			—
Income (loss) from continuing operations			$	(163,812	)	$	(658,935	)	$	(338,558	)	$	(283,200	)	$	1,026,474		$	(4,112	)
Statement of Cash Flows Data:
Net cash provided by (used in) operating activities			$	11,365		$	(12,133	)	$	36,286		$	1,533		$	5,892		$	67,422
Net cash provided by (used in) investing activities				(1,108,690	)		(984,724	)		(69,966	)		(54,465	)		(2,737	)		63,543
Net cash provided by (used in) financing activities				1,612,200			475,751			83,094			85,631			(10,884	)		(148,347	)
Purchases of property and equipment				658,283			958,945			71,248			52,431			2,737			10,143
Balance Sheet Data (at end of period):
Cash and cash equivalents			$	552,653		$	31,547		$	80,961		$	64,246		$	73,442		$	55,850
Total assets				3,054,105			3,203,425			2,578,456			2,622,633			2,577,575			1,527,471
Total long-term obligations				1,708,273			2,326,012			791,992			796,110			849,240			677,516
Liabilities subject to compromise				—			—			1,763,286			—			1,763,286			—
	Total stockholders’ equity (deficit)			1,224,800			719,345			(75,127	)		(16,450	)		(96,678	)		682,092
Selected Operating Data:
Adjusted EBITDA(4)			$	19,752		$	(143,227	)	$	80,959		$	48,929		$	12,229		$	104,351
Number of owned or operated towers (at end of period)				5,030			7,925			8,036			7,999			8,036			7,509

(1)

On February 10, 2003, we emerged from chapter 11. In accordance with AICPA Statement of Position 90-7 Financial Reporting by Entities in Reorganization Under the Bankruptcy Code (“SOP 90-7”), we adopted fresh start accounting as of January 31, 2003 and our emergence from chapter 11 resulted in a new reporting entity. Under fresh start accounting, the reorganization value of the entity is allocated to the entity’s assets based on fair values, and liabilities are stated at the present value of amounts to be paid determined at appropriate current interest rates. The 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. The effective date is considered to be the close of business on January 31, 2003 for financial reporting purposes. The periods presented prior to January 31, 2003 have been designated “predecessor company” and the periods subsequent to January 31, 2003 have been designated “reorganized company.” As a result


	of the implementation of fresh start accounting as of January 31, 2003, our financial statements after the effective date are not comparable to our financial statements for prior periods because of differences in the bases of accounting and the capital structure for the predecessor company and the reorganized company.

(2)	On February 10, 2003, we sold 545 SBC towers to Cingular. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Tower Acquisitions and Dispositions” for a discussion of the impact of the sale of these towers on our results of operations and financial position.

(3)	Depreciation, amortization and accretion expense for the one-month and eight-month periods are not proportional because the predecessor company and the reorganized company used different bases of accounting.

(4)	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. For the periods prior to January 31, 2003, Adjusted EBITDA also excludes gain on debt discharge, reorganization items and writeoffs of investments in and loans to affiliates. We use a different definition of Adjusted EBITDA for the fiscal periods prior to our reorganization to enable investors to view our operating performance on a consistent basis before the impact of the items discussed above on the predecessor company. Each of these historical items was incurred prior to, or in connection with, our bankruptcy and is excluded from Adjusted EBITDA to reflect, as accurately as possible, the results of our core operations. Management does not expect any of our pre-reorganization items to have a material financial impact on our operations on a going-forward basis because none of these pre-reorganization items is expected to occur in the foreseeable future. Investors may use both of these definitions of Adjusted EBITDA to evaluate and compare the results of our operations from period to period before the impact of our capital structure (primarily interest charges from our outstanding debt) and asset base (primarily depreciation and amortization) on our operating results. We more fully discuss Adjusted EBITDA and the limitations of this financial measure under “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measures — Adjusted EBITDA.”

Adjusted EBITDA was calculated as follows for the periods indicated:


																	Reorganized
		Predecessor Company															Company

											Nine Months			One Month			Eight Months
		Year Ended December 31,									Ended			Ended			Ended
											September 30,			January 31,			September 30,
		2000			2001			2002			2002			2003			2003


		(in thousands)
Net income (loss)		$	(157,616	)	$	(654,769	)	$	(774,984	)	$	(714,691	)	$	344,970		$	(6,052	)
Depreciation, amortization and accretion expense			76,986			163,628			188,176			142,596			15,930			67,404
Interest income			(28,391	)		(17,037	)		(855	)		(525	)		(137	)		(639	)
Interest expense			134,664			212,174			226,536			187,510			4,721			40,428
Gain on debt discharge			—			—			—			—			(1,034,764	)		—
Reorganization expense			—			—			4,329			1,854			—			—
Writeoff of investments in affiliates			—			129,404			—			—			—			—
Writeoff of loans to affiliates			—			26,980			—			—			—			—
Income tax expense			305			559			1,331			694			5			1,270
Reorganization items:
	Adjust accounts to fair value		—			—			—			—			644,688			—
	Professional and other fees		—			—			—			—			23,894			—
Loss (income) from operations of discontinued divisions, net of income taxes			(6,196	)		(4,166	)		12,689			9,111			686			1,344
Loss on disposal of discontinued divisions			—			—			46,984			45,627			—			596
Cumulative effect of change in accounting principle			—			—			376,753			376,753			12,236			—

Adjusted EBITDA		$	19,752		$	(143,227	)	$	80,959		$	48,929		$	12,229		$	104,351

RISK FACTORS

Investing in our common stock involves substantial risks. In addition to the other information in this prospectus, you should carefully consider the following factors before investing in our common stock.

We recently emerged from a chapter 11 bankruptcy reorganization, have a history of losses and may not achieve and maintain profitability.

Because we recently emerged from bankruptcy and have a history of losses, we cannot assure you that we will achieve and maintain profitability in the future. We emerged from our chapter 11 bankruptcy reorganization as a 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 $157.6 million in 2000, $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. If we cannot achieve and maintain profitability, the value of your investment in our company may decline.

You may not be 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, 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 contained in this prospectus. 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 common stock.

Consolidation in the wireless industry 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, could enter into mergers, acquisitions or joint ventures with each other over time. These consolidations could reduce the size of our customer base 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, or “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. See “Business — Regulatory and Environmental Matters.” 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, which may lead to 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 achieve and 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 become and remain profitable and could decrease the value of your investment.

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 mobile services or to expand existing offerings. Further, the FCC has auctioned or 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 revenues depends on a small number of customers, the loss of any of these customers could decrease our revenues.

A significant portion of our revenues is derived from a small number of customers. For example, Nextel (including its affiliates) and Cingular represented approximately 31% and 22%, respectively, of our revenues for the year ended December 31, 2002 and 30% and 20%, respectively, of our revenues for the eight months ended September 30, 2003. If Nextel, Cingular or any of our other customers were to suffer financial difficulties or were unwilling or unable to perform their obligations under their agreements with us, our revenues could be adversely affected.

In addition, 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 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 our key customers, 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.

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, or “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. In addition, we may not be able to overcome the barriers to modifying towers or adding new customers. Our failure to complete the necessary modifications 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 achieve or sustain profitability.

We have agreed to complete the lease or sublease of up to 485 towers from affiliates of SBC Communications (“SBC”) through August 2004. 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, these acquisitions may be financed through the issuance of additional equity, which would dilute your interest as a stockholder. Moreover, any future acquisitions may not generate any additional income for us or provide any benefit to our business.

Your ability to influence corporate matters may be limited because a small number of stockholders beneficially own a substantial amount of our common stock.

After giving effect to the offering, affiliates of Apollo Management V, L.P. will own approximately 4.7 million shares, or 9.8%, of our common stock and certain funds managed by Oaktree Capital Management, LLC will own approximately 4.0 million shares, or 8.5%, of our common stock. Two of our directors are associated with these stockholders. As a result, Apollo and Oaktree could exert significant influence over our management and policies and may have interests that are different from yours.

We may be unable to attract and retain key personnel, which would adversely affect our ability to effectively manage our business.

Our future performance depends largely on the continued services of senior executive officers, including, but not limited to, our Chief Executive Officer, Stephen H. Clark, our Chief Operating Officer, Timothy G. Biltz, and our Chief Financial Officer, David P. Tomick. 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 Messrs. Clark, Biltz and Tomick each has an employment agreement with SpectraSite, the loss of any of these key employees would likely have a detrimental effect on our ability to effectively manage our business.

Our failure to comply with federal, state and local laws and regulations could result in our being fined, liable for damages and, in some cases, 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. See “Business — Regulatory and Environmental Matters.” In addition, under the FCC’s rules, we are fully liable for the acts or omissions of our contractors. We generally indemnify our customers against any failure by us to comply with applicable standards. Our failure to comply with any applicable laws and regulations (including as a result of acts or omissions of our contractors, which may be beyond our control) may lead to monetary forfeitures or other enforcement actions, as well as civil penalties, contractual liability and tort liability and, in some cases, losing our right to conduct some of our business, any of which could have an adverse impact on our business.

We also are subject to local regulations and restrictions that typically require tower owners to obtain a permit or other approval from local officials or community standards organizations prior to tower construction or modification. Local regulations could delay or prevent new tower construction or modifications, as well as increase our 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 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 lienholders 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. 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 approximately 25 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 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 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 substantial indebtedness could impair our financial condition and make it more difficult for us to fund our operations.

Even after our recent restructuring, we are, and may continue to be, highly leveraged. As of September 30, 2003, we had $640.2 million of consolidated indebtedness. Our high level of 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 less leveraged competitors.

Our ability to generate sufficient cash flow from operations to pay the principal of, 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 make a material adverse effect on our operations and our ability to run our business more likely.

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 affect 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 would 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:


	•	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 the 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 pay dividends or satisfy our outstanding debt obligations.

We have never declared or paid any cash dividends on our common stock. We currently intend to retain any earnings to finance the development and expansion of our business, and we do not anticipate paying any cash dividends on our common stock in the immediate future. In addition, our credit facility and the indenture governing our senior notes restrict our ability to pay dividends. Any future determination to pay dividends will be at the discretion of our Board of Directors and will be dependent upon then existing conditions, including our financial condition and results of operations, capital requirements, contractual restrictions, business prospects and other factors that our Board of Directors considers relevant. Furthermore, 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 December 31, 2003, we had 47,750,453 shares of common stock outstanding. We have reserved an additional 135,866 shares of common stock for further distribution in connection with our Plan of Reorganization. We have also reserved an additional 5,616,777 shares of common stock for issuance under our stock option plan and 2,496,854 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 in connection with our emergence from bankruptcy and 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. Upon the completion of this offering, the selling stockholders will together hold approximately 28.1% of the outstanding shares of our common stock, or approximately 25.2% if the underwriters’ over-allotment option is exercised in full.

We, the selling stockholders and our current directors and executive officers have agreed with the underwriters not to dispose of or hedge any of their common stock or securities convertible into or exchangeable for shares of common stock during the period from the date of this prospectus continuing through the date 90 days after the date of this prospectus, except sales to us by the selling stockholders and sales pursuant to certain pre-arranged trading plans adopted by certain of our executive officers under Rule 10b5-1 promulgated by the Securities and Exchange Commission, or with the prior written consent of Goldman, Sachs & Co.

After the expiration of the 90 day “lock-up” period set forth in the agreement pursuant to which all of the selling stockholders and our directors and executive officers are parties, and subject to certain exceptions set forth therein, these individuals and entities will be entitled to dispose of their remaining shares, although the shares of common stock held by our affiliates will continue to be subject to the volume and other restrictions of Rule 144 under the Securities Act. In addition, Goldman, Sachs & Co. may, in its sole discretion and at any time without notice,

release all or a portion of the shares subject to the lock-up. The shares that are released from the lock-up 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.

After giving effect to the sale of common stock in this offering (and assuming that the underwriters do not exercise the over-allotment option granted to them by the selling stockholders), three stockholders holding an aggregate of approximately 11.5 million shares of our common stock (including shares issuable upon the exercise of outstanding options) have the right (subject to limited conditions) to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. Sales by these stockholders in a registered public offering would not be subject to the limitations of Rule 144 under the Securities Act. In addition, in October 2003, certain of our executive officers entered into Rule 10b5-1 trading plans with respect to their anticipated sales of our common stock upon the exercise of stock options held by such officers. These sales are expected to begin in February 2004. Assuming that sales are made at $35.50, the closing price of our common stock on February 5, 2004, these officers will sell not more than 190,000 shares in the aggregate pursuant to such plans during the 90 day “lock-up” period.

FORWARD-LOOKING STATEMENTS

This prospectus contains 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 prospectus, 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:


	•	substantial leverage and capital requirements, even after our emergence from chapter 11;

	•	market conditions;

	•	dependence on demand for wireless communications and related infrastructure;

	•	our ability to add customers on our towers;

	•	consolidation in the wireless industry;

	•	material adverse changes in economic conditions in the markets we serve;

	•	future regulatory actions and conditions in our operating areas;

	•	competition from others in the communications tower industry, including the impact of technological developments;

	•	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;

	•	dependence upon a small number of significant customers;

	•	disputes with our current and prospective customers and lessors;

	•	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 prospectus, 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 prospectus after the date of this prospectus. In light of these risks and uncertainties, you should keep in mind that any forward-looking statement made in this prospectus or elsewhere might not occur.

USE OF PROCEEDS

We will not receive any proceeds from the sale of shares by the selling stockholders.

PRICE RANGE OF COMMON STOCK

On October 3, 2003, our common stock began trading on the New York Stock Exchange under the symbol “SSI.” Our common stock previously traded on the Pink Sheets and on the OTC Bulletin Board.

The following table sets forth on a per share basis the high and low sales for consolidated trading in our common stock as reported on the New York Stock Exchange, OTC Bulletin Board or Pink Sheets, as applicable, through February 5, 2004. Historical prices are adjusted to give effect to our two-for-one stock split effected August 21, 2003.



	Common Stock

	High		Low

2003
First quarter (beginning February 11, 2003)	$	16.00	$	12.25
Second quarter	$	27.05	$	14.00
Third quarter	$	34.50	$	24.88
Fourth quarter	$	39.30	$	30.00
2004
First quarter (through February 5, 2004)	$	39.80	$	34.05

As of February 5, 2004, there were approximately 15 holders of record of our common stock, including record holders on behalf of an indeterminate number of beneficial owners. On February 5, 2004, the last reported sale price of our common stock price was $35.50.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our common stock. For the foreseeable future, we intend to retain any earnings and we do not anticipate paying any cash dividends on our common stock. In addition, our credit facility and the indenture governing our senior notes restrict our ability to pay dividends. Any future determination to pay dividends will be at the discretion of our Board of Directors and will be dependent upon then existing conditions, including our financial condition and results of operations, capital requirements, contractual restrictions, business prospects and other factors that our Board of Directors considers relevant. Furthermore, as a holding company, we depend on the cash flow of our subsidiaries. Our credit facility imposes restrictions on our subsidiaries’ ability to distribute cash to us.

CAPITALIZATION

The following table sets forth our cash and capitalization as of September 30, 2003.

The information set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.


				As of September 30,
				2003(1)

				(in thousands)
Cash and cash equivalents				$	55,850

Long-term debt:
		Credit facility(2)		$	439,955
		8 1/4% senior notes due 2010			200,000
		Other debt			191

			Total long-term debt		640,146
Stockholders’ equity:
	Common Stock, $0.01 par value, 250,000,000 shares authorized, 47,548,475 issued and outstanding(3)				475
	Additional paid-in-capital				687,669
	Accumulated deficit				(6,052	)

			Total stockholders’ equity	$	682,092

Total capitalization				$	1,322,238


(1)	Our capitalization as of September 30, 2003 does not give effect to the estimated expenses of $875,000 payable by us in connection with this offering.

(2)	The credit facility includes a revolving credit facility, a multiple draw term loan and a term loan. As of September 30, 2003, the revolving credit facility was undrawn, and the term loans were fully drawn with outstanding balances of $187.8 million under the multiple draw term loan and $252.2 million under the term loan. The weighted average interest rate on outstanding borrowings under the credit facility was 4.55% as of September 30, 2003. After giving effect to the October 24, 2003 amendment to the credit facility, the weighted average interest rate on outstanding borrowings under the credit facility as of September 30, 2003 would have been 3.97%.

(3)	As of September 30, 2003, we had 47,548,475 shares outstanding. An additional 135,866 shares are reserved for issuance pursuant to further distributions under our Plan of Reorganization. In addition, as of September 30, 2003, we had 2,498,476 million shares of common stock reserved for issuance upon exercise of warrants at an exercise price of $16.00 per share. As of September 30, 2003, options to purchase 5,423,155 shares of our common stock were outstanding and 393,978 shares were available for future awards under our equity incentive plan.

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

The following table sets forth selected historical consolidated financial and other data. We refer to the periods prior to our emergence from chapter 11 as “predecessor company” and to the periods subsequent to that date as “reorganized company.” The balance sheet data as of December 31, 1998, 1999, 2000, 2001 and 2002 and the statement of operations data for the years ended December 31, 1998, 1999, 2000, 2001 and 2002 are derived from our audited consolidated financial statements. The balance sheet data as of September 30, 2002, January 31, 2003 and September 30, 2003 and the statement of operations data for the nine months ended September 30, 2002 and for the one month ended January 31, 2003 for the predecessor company and for the eight months ended September 30, 2003 for the reorganized company are derived from our unaudited financial statements. In our opinion, the unaudited financial data include all adjustments (consisting only of normal recurring adjustments for the predecessor company for the nine months ended September 30, 2002 and normal recurring adjustments and fresh start accounting adjustments for the predecessor company for the one month period ended January 31, 2003 and for the reorganized company for the eight months ended September 30, 2003) necessary to present fairly the information set forth therein.

Net loss per share (basic and diluted) and weighted average common shares outstanding (basic and diluted) of the reorganized company for the eight months ended September 30, 2003, gives effect to our two-for-one stock split, effected August 21, 2003. Net loss per share (basic and diluted) and weighted average common shares outstanding (basic and diluted) of the predecessor company reflect share amounts of our Old Common Stock and do not reflect the stock split.


																								Reorganized
			Predecessor Company(1)																					Company(1)

																		Nine Months			One Month			Eight Months
			Year Ended December 31,															Ended			Ended			Ended
																		September 30,			January 31,			September 30,
			1998			1999			2000			2001			2002			2002(2)			2003(2)			2003(2)


			(dollars in thousands)
Statement of Operations Data:
Revenues				8,798			59,139		$	117,970		$	221,735		$	282,525		$	207,615		$	25,626		$	208,173

Operating expenses:
	Costs of operations (excluding depreciation, amortization and accretion expense)		$	2,791		$	23,397		$	46,667		$	91,694		$	108,540		$	79,675		$	8,901		$	68,859
	Selling, general and administrative expenses			9,690			31,243			42,977			65,540			54,812			42,543			4,003			33,027
	Depreciation, amortization and accretion expense(3)			1,268			32,038			76,986			163,628			188,176			142,596			15,930			67,404
	Restructuring and non-recurring charges			—			7,727			—			140,871			27,394			27,394			—			—

		Total operating expenses		13,749			94,405			166,630			461,733			378,922			292,208			28,834			169,290

Operating income (loss)			$	(4,951	)	$	(35,266	)	$	(48,660	)	$	(239,998	)	$	(96,397	)	$	(84,593	)	$	(3,208	)	$	38,883

Gain on debt discharge				—			—			—			—			—			—			1,034,764			—
Income (loss) from continuing operations			$	(9,079	)	$	(94,282	)	$	(163,812	)	$	(658,935	)	$	(338,558	)	$	(283,200	)	$	1,026,474		$	(4,112	)
Reorganization items:
	Adjust accounts to fair value			—			—			—			—			—			—			(644,688	)		—
	Professional and other fees			—			—			—			—			—			—			(23,894	)		—
Income (loss) from discontinued operations				—			(3,386	)		6,196			4,166			(59,673	)		(54,738	)		(686	)		(1,940	)
Cumulative effect of change in accounting principle				—			—			—			—			(376,753	)		(376,753	)		(12,236	)		—
Net income (loss)			$	(9,079	)	$	(97,668	)	$	(157,616	)	$	(654,769	)	$	(774,984	)	$	(714,691	)	$	344,970		$	(6,052	)
Net income (loss) applicable to common stockholders			$	(11,235	)	$	(98,428	)	$	(157,616	)	$	(654,769	)	$	(774,984	)	$	(714,691	)	$	344,970		$	(6,052	)
Net income (loss) per share (basic and diluted)			$	(11.98	)	$	(12.48	)	$	(1.31	)	$	(4.36	)	$	(5.03	)	$	(4.64	)	$	2.24		$	(0.13	)
Weighted average common shares outstanding (basic and diluted)				938			7,886			120,731			150,223			153,924			153,894			154,014			47,325
Statement of Cash Flows Data:
Net cash provided by (used in) operating activities			$	(2,347	)	$	17,555		$	11,365		$	(12,133	)	$	36,286		$	1,533		$	5,892		$	67,422
Net cash provided by (used in) investing activities				(45,002	)		(813,225	)		(1,108,690	)		(984,724	)		(69,966	)		(54,465	)		(2,737	)		63,543
Net cash provided by (used in) financing activities				144,663			733,900			1,612,200			475,751			83,094			85,631			(10,884	)		(148,347	)
Purchases of property and equipment				26,598			644,778			658,283			958,945			71,248			52,431			2,737			10,143
Balance Sheet Data (at end of period):
Cash and cash equivalents			$	114,962		$	37,778		$	552,653		$	31,547		$	80,961		$	64,246		$	73,442		$	55,850
Total assets				161,946			1,219,953			3,054,105			3,203,425			2,578,456			2,622,633			2,577,575			1,527,471
Total long-term obligations				132,913			716,639			1,708,273			2,326,012			791,992			796,110			849,240			677,516
Liabilities subject to compromise				—			—			—			—			1,763,286			—			1,763,286			—
Redeemable convertible preferred stock				40,656			—			—			—			—			—			—			—
Total stockholders’ equity (deficit)				(14,067	)		457,756			1,224,800			719,345			(75,127	)		(16,450	)		(96,678	)		682,092
Selected Operating Data:
Adjusted EBITDA(4)			$	(3,210	)	$	(3,682	)	$	19,752		$	(143,227	)	$	80,959		$	48,929		$	12,229		$	104,351
Number of owned or operated towers (at end of period)				106			2,765			5,030			7,925			8,036			7,999			8,036			7,509


(1)	On February 10, 2003, we emerged from chapter 11. In accordance with AICPA Statement of Position 90-7 Financial Reporting by Entities in Reorganization Under the Bankruptcy Code (“SOP 90-7”), we adopted fresh start accounting as of January 31, 2003, and our emergence from chapter 11 resulted in a new reporting entity. Under fresh start accounting, the reorganization value of the entity is allocated to the entity’s assets based on fair values, and liabilities are stated at the present value of amounts to be paid determined at appropriate current interest rates. The 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. The effective date is considered to be the close of business on January 31, 2003 for financial reporting purposes. The periods presented prior to January 31, 2003 have been designated “predecessor company,” and the periods subsequent to January 31, 2003 have been designated “reorganized company.” As a result of the implementation of fresh start accounting as of January 31, 2003, our financial statements after the effective date are not comparable to our financial statements for prior periods because of differences in the bases of accounting and the capital structure for the predecessor company and the reorganized company.

(2)	On February 10, 2003, we sold 545 SBC towers to Cingular. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Tower Acquisitions and Dispositions” for a discussion of the impact of the sale of these towers on our results of operations and financial position.

(3)	Depreciation, amortization and accretion expense for the one-month and eight-month periods are not proportional because the predecessor company and the reorganized company used different bases of accounting.

(4)	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. For the periods prior to January 31, 2003, Adjusted EBITDA also excludes gain on debt discharge, reorganization items and writeoffs of investments in and loans to affiliates. We use a different definition of Adjusted EBITDA for the fiscal periods prior to our reorganization to enable investors to view our operating performance on a consistent basis before the impact of the items discussed above on the predecessor company. Each of these historical items was incurred prior to, or in connection with, our bankruptcy and is excluded from Adjusted EBITDA to reflect, as accurately as possible, the results of our core operations. Management does not expect any of our pre-reorganization items to have a material financial impact on our operations on a going-forward basis because none of these pre-reorganization items is expected to occur in the foreseeable future. Investors may use both of these definitions of Adjusted EBITDA to evaluate and compare the results of our operations from period to period before the impact of our capital structure (primarily interest charges from our outstanding debt) and asset base (primarily depreciation and amortization) on our operating results. We more fully discuss Adjusted EBITDA and the limitations of this financial measure under “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measures — Adjusted EBITDA.”

Adjusted EBITDA was calculated as follows for the periods indicated:


																							Reorganized
		Predecessor Company																					Company

																	Nine Months			One Month			Eight Months
		Year Ended December 31,															Ended			Ended			Ended
																	September 30,			January 31,			September 30,
		1998			1999			2000			2001			2002			2002			2003			2003


		(in thousands)
Net income (loss)		$	(9,079	)	$	(97,668	)	$	(157,616	)	$	(654,769	)	$	(774,984	)	$	(714,691	)	$	344,970		$	(6,052	)
Depreciation, amortization and accretion expense			1,268			32,038			76,986			163,628			188,176			142,596			15,930			67,404
Interest income			(3,569	)		(8,951	)		(28,391	)		(17,037	)		(855	)		(525	)		(137	)		(639	)
Interest expense			8,170			67,513			134,664			212,174			226,536			187,510			4,721			40,428
Gain on debt discharge			—			—			—			—			—			—			(1,034,764	)
Reorganization Expense			—			—			—			—			4,329			1,854			—			—
Writeoff of investments in affiliates			—			—			—			129,404			—			—			—			—
Writeoff of loans to affiliates			—			—			—			26,980			—			—			—			—
Income tax expense			—			—			305			559			1,331			694			5			1,270
Reorganization items:
	Adjust accounts to fair value		—			—			—			—			—			—			644,688			—
	Professional and other fees		—			—			—			—			—			—			23,894			—
Loss (income) from operations of discontinued divisions, net of income taxes			—			3,386			(6,196	)		(4,166	)		12,689			9,111			686			1,344
Loss on disposal of discontinued divisions			—			—			—			—			46,984			45,627			—			596
Cumulative effect of change in accounting principle			—			—			—			—			376,753			376,753			12,236			—

Adjusted EBITDA		$	(3,210	)	$	(3,682	)	$	19,752		$	(143,227	)	$	80,959		$	48,929		$	12,229		$	104,351

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion in conjunction with “Selected Consolidated Financial and Other Data,” “Risk Factors” and our consolidated financial statements included elsewhere in this prospectus. Some of the statements in the following discussion are forward-looking statements. See “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 7,509 towers and in-building systems as of September 30, 2003, located primarily in the top 100 basic trading area markets in the United States.

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 largely comprise our customer base. In addition to tracking the capital expenditure activities and plans of our customers and other wireless providers, we monitor financial performance of each customer and the state of the financial markets on which our customers depend for access to new capital.

Our business consists of our wireless and broadcast segments. For the eight months ended September 30, 2003, all of our revenues came from our leasing and licensing operations within these segments. Factors affecting the growth in our site operations revenues include, among other things, the rate at which wireless carriers choose to deploy capital to improve and expand their wireless networks and variable contractual escalation clauses associated with existing site leasing and licensing agreements.

The material opportunities, challenges and risks of our business have changed significantly over the past two years. We have reshaped our business operations and reduced our debt levels in order to minimize the impact of short-term variabilities 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 we made a decision to discontinue operations of our broadcast services division in late 2003. Today, all of our revenues come from site leasing and licensing operations. Our growth opportunities are primarily linked to organic revenue growth on our existing portfolio of assets. We also see potential opportunities on a more limited basis with the development of new in-building neutral host assets.

Generally, our leasing and licensing agreements are specific to each site and are 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 terms 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 this fee as revenue when earned.

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 is built for 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.

Discontinued Operations

We anticipate that, in the foreseeable future, the delay and uncertainty regarding the requirements of digital television multicasting will continue to restrict the amount of capital that broadcasters will invest in tower modification and construction. As a result of the trend of declining sales and profitability in our broadcast services division, we evaluated our alternatives to maximize stockholder value. On December 16, 2003, we decided to discontinue the operations of this division. The related assets and liabilities were reclassified as held for sale and recorded at estimated fair market value. The division is currently being marketed for sale. Broadcast services revenues were $4.4 million and $11.2 million for the three and eight months ended September 30, 2003, respectively. Revenues for broadcast services were $1.2 million for the month ended January 31, 2003.

On December 31, 2002, we completed the sale of our network services division. Network services’ revenues were $30.2 million and $107.8 million for the three and nine months ended September 30, 2002, respectively. In conjunction with the sale, we recorded a loss on disposal of the network services division of $47.0 million in the year ended December 31, 2002.

The results of operations for the broadcast and network services divisions have been reported separately as discontinued operations in the balance sheets and statements of operations. Prior period financial statements have been restated to present the operations of the divisions as discontinued operations.

Plan of Reorganization

The financial difficulties experienced by the telecommunications and broadcast industries in recent years have severely impacted capital availability within the wireless telecommunications and broadcast sectors. Many of our customers were forced to reduce capital expenditures, which in turn impeded our revenue and earnings growth and, therefore, our ability to service our long-term debt. We incurred net losses of approximately $157.6 million in 2000, $654.8 million in 2001 and $775.0 million in 2002. After a review of our business and our prospects, we concluded that recoveries to creditors and equity holders would be maximized by a consensual restructuring.

On November 15, 2002, we filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of North

Carolina, Raleigh Division. On November 18, 2002, we filed a Proposed Plan of Reorganization with the Bankruptcy Court. A plan confirmation hearing was held on January 28, 2003, and the Proposed Plan of Reorganization, as modified on that date (the “Plan of Reorganization”), was confirmed by the Bankruptcy Court. All conditions precedent to the effectiveness of the Plan of Reorganization were met by February 10, 2003, thereby allowing us to emerge from bankruptcy. Our emergence from bankruptcy and adoption of fresh start accounting resulted in the extinguishment of $1.76 billion of indebtedness and significantly reduced our interest expense and our depreciation, amortization, and accretion expense. In addition to our reorganization, we have taken a number of other measures to minimize the potential net losses in the future, including the sale of non-performing assets and the reduction of overhead and capital expenditures.

As a result of our reorganization, we expect to achieve profitability sooner than if we had not filed a voluntary petition for bankruptcy. We expect the portion of our significant customers’ capital expenditures related to network improvements and coverage enhancements to remain at current levels for the foreseeable future. As customers continue to add antenna sites to our towers, we expect revenues associated with our tower assets to increase. Because a significant percentage of tower operating costs are fixed and do not increase with additional customers, we expect that our earnings will increase as we add additional customers on towers.

Our Plan of Reorganization provided for the distribution of 47.5 million shares of our common stock to our general unsecured creditors, including former noteholders, and new warrants to purchase an aggregate of 2.5 million shares of common stock at an exercise price of $16.00 per share to the holders of our old common stock, par value $0.001 per share (the “Old Common Stock”). These warrants expire on February 10, 2010. In addition, pursuant to the Plan of Reorganization, all outstanding shares of Old Common Stock and all outstanding options and warrants to purchase Old Common Stock that were outstanding on February 10, 2003 were cancelled. New options representing an aggregate of 10.0% of our fully diluted common stock were issued to our management.

Tower Acquisitions and Dispositions

Our portfolio has grown from 106 towers as of December 31, 1998, to 7,509 towers and in-building systems as of September 30, 2003. 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 subleasehold interests in approximately 3,900 towers over approximately two years and to commit to build towers for Cingular, an affiliate of SBC. Subsequent amendments to these agreements have resulted in a reduction in the number of towers to be leased or subleased to approximately 3,306 towers and in the termination of the build-to-suit arrangement. See Note 5 to our unaudited consolidated financial statements, “Acquisition Activities — SBC Transaction.” 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. In November 2001, we paid a fee of $35 million in connection with the first of these amendments. 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 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. We do not expect the sale of our interest in the 545 towers to materially impact our future operating performance.

For the one month ended January 31, 2003, these towers represented $1.2 million of a total of $25.6 million of revenues and $0.5 million of a total of $8.9 million of costs of operations, excluding depreciation, amortization and accretion expense. For the eight months ended September 30, 2003, these towers represented $0.4 million of a total of $208.2 million of revenues and $0.2 million of a total of $68.9 million in costs of operations, excluding depreciation, amortization and accretion expense. For the nine months ended September 30, 2002 the same towers represented $8.1 million of a total of $207.6 million of revenues and $4.3 million of a total of $79.7 million in costs of operations, excluding depreciation, amortization and accretion expense.

The following table presents a comparison of the revenues and costs of operations (excluding depreciation, amortization and accretion expense) for the 545 SBC towers for the periods shown.


	Eight			One			Nine
	Months			Month			Months
	Ended			Ended			Ended
	September 30,			January 31,			September 30,
	2003			2003			2002


	(dollars in thousands)
Revenues attributed to 545 SBC Towers	$	368		$	1,202		$	8,123
Total Revenues		208,173			25,626			207,615
Percent of Total Revenues		0.2	%		4.7	%		3.9	%

Costs of Operations (excluding depreciation, amortization and accretion expenses)	$	195		$	465		$	4,339
Total Cost of Operations (excluding depreciation, amortization and accretion expenses)		68,859			8,901			79,675
Percent of Total Cost of Operations (excluding depreciation, amortization and accretion expenses)		0.3	%		5.2	%		5.4	%

We remain contractually obligated to acquire leasehold and subleasehold interests in up to an additional 485 towers from SBC through August 2004 for an aggregate purchase price of approximately $126.1 million.

Unaudited Fourth Quarter 2003 Results

On February 2, 2004, we reported unaudited results for the fourth quarter ended December 31, 2003. Total revenues for the fourth quarter of 2003 were $81.6 million, compared to $74.9 million for the fourth quarter of 2002, representing an increase of 8.9%. Net of the revenues contributed by the 545 SBC towers that we sold in February, 2003, revenues increased 16.6% from the fourth quarter of 2002 to the fourth quarter of 2003. Operating income for the fourth quarter of 2003 was $16.6 million, an increase from an operating loss of $11.8 million for the same period in 2002.

Adjusted EBITDA increased 29.6% to $41.5 million during the fourth quarter of 2003 from $32.0 million during the same period in the prior year. Net of the contribution of 545 SBC towers sold by us in February 2003, Adjusted EBITDA increased 45.2% from the fourth quarter of 2002 to the fourth quarter of 2003. Other expense items in the amount of $0.8 million during the fourth quarter of 2003 and $1.7 million during the fourth quarter of 2002 are included in the Adjusted EBITDA calculations.

Results of Operations

Eight Months Ended September 30, 2003, One Month Ended January 31, 2003 and the Nine Months Ended September 30, 2002

On January 28, 2003, our Plan of Reorganization was confirmed by the Bankruptcy Court, and we emerged from bankruptcy on February 10, 2003. As a result of the implementation of fresh start accounting as of January 31, 2003, our results of operations after that date are not comparable to results reported in prior periods because of differences in the bases of accounting and the capital structure for the Predecessor Company and the Reorganized Company. See Note 2 to the unaudited condensed consolidated financial statements for additional information on the consummation of the Plan of Reorganization and implementation of fresh start accounting.

The following table provides a comparison of our revenues and expenses for the periods presented:


					Eight Months Ended			One Month Ended			Nine Months Ended
					September 30,			January 31,			September 30,
					2003			2003			2002


					(in thousands)
Revenues:
	Wireless				$	193,188		$	23,913		$	192,253
	Broadcast					14,985			1,713			15,362

			Total revenues			208,173			25,626			207,615

Operating expenses:
	Cost of operations, excluding depreciation, amortization and accretion expenses:
		Wireless				67,437			8,719			76,123
		Broadcast				1,422			182			3,552

			Total cost of operations, excluding depreciation, amortization and accretion expenses			68,859			8,901			79,675

	Selling, general and administrative expenses:
		Wireless				15,669			2,115			19,697
		Broadcast				1,400			111			1,327
		Other				15,958			1,777			21,519

			Total selling, general and administrative expenses			33,027			4,003			42,543

	Depreciation, amortization and accretion expenses:
		Wireless				64,733			15,516			139,085
		Broadcast				2,671			414			3,511

			Total depreciation, amortization and accretion expenses			67,404			15,930			142,596

	Restructuring and non-recurring charges					—			—			27,394

			Total operating expenses		$	169,290		$	28,834		$	292,208

Operating income (loss)					$	38,883		$	(3,208	)	$	(84,593	)

Other income (expense):
	Interest income				$	639		$	137		$	525
	Interest expense					(40,428	)		(4,721	)		(187,510	)
	Gain on debt discharge					—			1,034,764			—
	Reorganization expense					—			—			(1,854	)
	Other income (expense)					(1,936	)		(493	)		(9,074	)

			Total other income (expense)		$	(41,725	)	$	1,029,687		$	(197,913	)

Income (loss) from continuing operations before income taxes					$	(2,842	)	$	1,026,479		$	(282,506	)
Income tax expense						1,270			5			694

Income (loss) from continuing operations						(4,112	)		1,026,474			283,200
Reorganization items:
	Adjust accounts to fair value					—			(644,688	)		—
	Professional and other fees					—			(23,894	)		—

			Total reorganization items		$	—		$	(668,582	)	$	—

Income (loss) before discontinued operations					$	(4,112	)	$	357,892		$	(283,200	)
Discontinued operations (net of income taxes):
	Income (loss) from operations of discontinued network services division					—			—			(8,305	)
	Loss on disposal of discontinued network services division					(596	)		—			(45,627	)
	Loss from operations of discontinued broadcast services division					(1,344	)		(686	)		(806	)

Loss before cumulative effect of change in accounting principle					$	(6,052	)	$	357,206		$	(337,938	)
Cumulative effect of change in accounting principle						—			(12,236	)		(376,753	)

Net income (loss)					$	(6,052	)	$	344,970		$	(714,691	)

Adjusted EBITDA:
	Wireless					110,707			12,586			73,084
	Broadcast					9,602			1,420			7,730
	Other:
		Corporate selling, general and administrative expenses, excluding corporate non-cash compensation charges				(15,958	)		(1,777	)		(20,881	)
		Corporate non-cash compensation charges				—			—			(638	)
		Corporate other expense				—			—			(10,366	)

			Total other			(15,958	)		(1,777	)		(31,885	)

				Total Adjusted EBITDA	$	104,351		$	12,229		$	48,929

Revenues. Revenues in 2003 were primarily affected by incremental revenue in 2003 from new customers on sites that were part of our portfolio on September 30, 2002, revenues derived from sites acquired or built subsequent to September 30, 2002 and increases in fee revenues, offset by reductions in revenues relating to the 545 SBC towers sold in February 2003. Based on trailing twelve-months revenue on the towers that we owned or operated as of September 30, 2002 and September 30, 2003, same tower revenue growth was 14%. After the sale of 545 towers to Cingular and the sale of WesTower Leasing Canada, Inc., we owned or operated 7,509 towers and in-building systems at September 30, 2003, as compared to 7,999 towers and in-building systems at September 30, 2002.

Accounts receivable, net of allowance, decreased by $7.5 million from December 31, 2002 to September 30, 2003. The decrease in accounts receivable is primarily due to cash collections on account, offset by a decrease in the allowance for doubtful accounts, which decreased by $1.7 million for the same period. We analyze the adequacy of our accounts receivable 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. During 2002, numerous wireless carriers experienced financial difficulties and their balances owed to us continued to age; these circumstances caused us to increase our allowance at December 31, 2002. During 2003, due to increased collection efforts, we were able to recover receivable amounts which had previously been reserved and as a result, we decreased our allowance as of September 30, 2003.

Costs of Operations, Excluding Depreciation, Amortization and Accretion Expenses. Costs of operations, excluding depreciation, amortization and accretion expenses as a percentage of revenues were 33% for the eight months ended September 30, 2003, 35% for the one month ended January 31, 2003 and 38% for the nine months ended September 30, 2002. Costs of operations, excluding depreciation, amortization and accretion expenses, for the wireless segment as a percentage of wireless segment revenues were 35% for the eight months ended September 30, 2003, 36% for the one month ended January 31, 2003 and 40% for the nine months ended September 30, 2002. Broadcast leasing costs of operations, excluding depreciation, amortization and accretion expenses, as a percentage of broadcast leasing revenues were 9% for the eight months ended September 30, 2003, 11% for the one month ended January 31, 2003 and 23% for the nine months ended September 30, 2002. Costs of operations, excluding depreciation, amortization and accretion expenses, for the wireless and broadcast segments in 2003 were primarily affected by increased revenues generated from new customers on existing towers. 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 because a significant percentage of tower operating costs are fixed and do not increase with additional customers.

Selling, General and Administrative Expenses. A significant portion of our selling, general and administrative expenses does not increase when we add incremental revenues to our sites. Selling, general and administrative expenses were 16% of total revenues for both the eight months ended September 30, 2003 and the one-month ended January 31, 2003. Selling, general and administrative expenses were 21% of total revenues for the nine months ended September 30, 2002. Selling, general and administrative expenses declined during 2003 as a percentage of revenues primarily due to increases in revenues generated from new customers on existing sites and as a result of cost cutting measures that we implemented in late 2002.

Selling, general and administrative expenses for our wireless segment were 8% and 9% of wireless revenues for the eight months ended September 30, 2003 and the one-month ended January 31, 2003, respectively. Selling, general and administrative expenses for this segment were 10% of wireless revenues for the nine months ended September 30, 2002. Selling, general

and administrative expenses for our broadcast segment as a percentage of broadcast leasing revenues were 9% and 6% for the eight months ended September 30, 2003 and the one-month ended January 31, 2003, respectively. Selling, general and administrative expenses for this segment as a percentage of broadcast leasing revenues were 9% for the nine months ended September 30, 2002.

Selling, general and administrative expenses not specific to the above business segments were 8% of total revenues for the eight months ended September 30, 2003 and 7% for the one-month ended January 31, 2003. Selling, general and administrative expenses not specific to the above business segments were 10% of total revenues for the nine months ended September 30, 2002.

Restructuring and Non-Recurring Charges. In May 2002, we announced that we would terminate our build-to-suit programs with Cingular and other carriers and implement other cost-cutting measures as a part of the curtailment of tower development activities. As a result of these actions, we recorded restructuring charges of $23.1 million in the nine months ended September 30, 2002, consisting of $20.3 million in our wireless segment and $2.8 million in our broadcast segment. The restructuring charge for our wireless segment consisted of $13.6 million related to the write-off of work in progress related to wireless sites in development that were terminated, $3.2 million related to the costs of closing offices and $3.5 million related to the costs of employee severance. The restructuring charge for the broadcast segment related to the write-off of work in progress related to broadcast sites in development that were terminated.

In addition, we recorded a non-recurring impairment charge in the wireless segment of our site leasing business of $4.3 million in the nine months ended September 30, 2002 to write-down the carrying value of 21 towers that were not marketable. The charge was based on the difference between the carrying value and the estimated discounted cash flows of the towers.

Other Income (Expense). Other income (expense), net was an expense of $1.9 million and $0.5 million in the eight months ended September 30, 2003 and the one month ended January 31, 2003, respectively. The eight months ended September 30, 2003 included $0.6 million of other income recorded in the wireless segment. This amount consisted primarily of $3.8 million of gain on the sale of available-for-sale securities, $0.4 million of gain on sale of subsidiary, $1.4 million of loss on sale of assets, $1.2 million of expenses related to the public offering of shares of our common stock and $0.4 million related to the writedown of our interest rate cap to fair value. In addition, we recorded $2.5 million of other expense in the broadcast segment related to the loss on disposal of a broadcast tower. For the one month ended January 31, 2003, this amount consisted of $0.6 million related to losses from investments in affiliates accounted for under the equity method offset by a gain on sale of assets of $0.1 million.

Other income (expense), net was an expense of $9.1 million in the nine months ended September 30, 2002. Of this amount, other income related to the wireless segment was $1.2 million for the nine months ended September 30, 2002, consisting of $1.3 million related to gains from investments in affiliates accounted for under the equity method and $0.1 million related to losses on sales of assets. Other expense not specific to any business segment for the nine months ended September 30, 2002 was $10.3 million and was related to expenses associated with our proposed debt tender and exchange offers.

Adjusted EBITDA. As a result of the factors discussed above, Adjusted EBITDA was $104.4 million and $12.2 million for the eight months ended September 30, 2003 and the one month ended January 31, 2003, respectively. Adjusted EBITDA was $48.9 million for the nine months ended September 30, 2002.

Depreciation, Amortization and Accretion Expenses. Depreciation, amortization and accretion expenses for 2003 were affected primarily by the implementation of fresh start accounting, which reduced the depreciable basis of property and equipment by $957.2 million,

resulting in decreased depreciation expense, offset by an increase in amortization expense relating to customer contracts and an increase in accretion of the asset retirement obligation.

Interest Income. Interest income for 2003 was affected by higher cash balances on hand and lower interest rates. Interest expense in 2003 was affected by the extinguishment of indebtedness pursuant to our Plan of Reorganization and a reduction of amounts outstanding under our credit facility, offset by increases in interest expense as a result of the issuance of the 8 1/4% Senior Notes due 2010 and writeoffs of $8.2 million of debt issuance costs resulting from prepayments of amounts outstanding under our credit facility.

Interest Expense. Interest expense for the eight months ended September 30, 2003 consisted of $28.0 million of interest on our credit facility and our Senior Notes, amortization of debt issuance costs of $3.5 million and writeoff of debt issuance costs of $8.9 million. Interest expense for the one month ended January 31, 2003 consisted of $4.3 million of interest on our credit facility and amortization of debt issuance costs of $0.4 million. Interest expense for the nine months ended September 30, 2002 consisted of $83.5 million of interest on our credit facility and our Senior Notes, amortization of senior discount notes of $92.9 million, amortization of debt issuance costs of $12.3 million less capitalized interest of $1.2 million.

Gain on Debt Discharge. On February 10, 2003, we emerged from bankruptcy, and the holders of the indebtedness extinguished pursuant to our Plan of Reorganization received their pro rata share of 47.5 million shares of common stock in exchange for their notes. The excess of the carrying value of the extinguished indebtedness, net of the related debt issuance costs, over the reorganization value used in adopting fresh start accounting was recorded as a gain on debt discharge of $1.03 billion in the one month ended January 31, 2003.

Reorganization Expense. Reorganization expense for the nine months ended September 30, 2002 was $1.9 million and related to costs incurred in connection with our Plan of Reorganization.

Reorganization Items. In accordance with AICPA Statement of Position 90-7 Financial Reporting by Entities in Reorganization Under the Bankruptcy Code (“SOP 90-7”), we adopted fresh start accounting as of January 31, 2003, and our emergence from bankruptcy resulted in a new reporting entity. Under fresh start accounting, the reorganization value of the entity is allocated to the entity’s assets based on fair values, and liabilities are stated at the present value of amounts to be paid determined at appropriate current interest rates. The net effect of all fresh start accounting adjustments resulted in a charge of $644.7 million, which is recorded in the one month ended January 31, 2003. In addition, we incurred costs directly associated with the chapter 11 proceedings of $23.9 million in the one month ended January 31, 2003. These costs are included in reorganization items in the unaudited condensed consolidated statement of operations.

Discontinued Operations. On December 31, 2002, we sold our network services division. Loss from operations of this discontinued division was $8.3 million for the nine months ended September 30, 2002. Loss on disposal of our discontinued network services division was $45.6 million in the nine months ended September 30, 2002. Loss on disposal of our discontinued network services division was $0.6 million in the eight months ended September 30, 2003. This amount consisted of the settlement of a disputed item related to the sale of the network services division.

On December 16, 2003, we decided to discontinue our broadcast services division. Losses from operations of this division were $1.3 million, $0.7 million and $0.8 million for the eight months ended September 30, 2003, the one month ended January 31, 2003 and the nine months ended September 30, 2002, respectively.

Net Income (Loss). As a result of the factors discussed above, net loss for the eight months ended September 30, 2003 was $6.1 million, and net income for the one month ended January 31, 2003 was $345.0 million. Net loss for the nine months ended September 30, 2002 was $714.7 million.

Year Ended December 31, 2002 Compared to the Year Ended December 31, 2001

The following table provides a comparison of our revenues and expenses for the periods presented:


					Year Ended			Year Ended
					December 31,			December 31,
					2001			2002			$ Change			% Change


					(dollars in thousands)
Revenues:
	Wireless				$	210,308		$	261,189		$	50,881			24	%
	Broadcast					11,427			21,336			9,909			87

			Total Revenues			221,735			282,525			60,790			27

Operating expenses:
	Cost of operations, excluding depreciation, amortization and accretion expenses:
		Wireless				89,339			103,635			14,296			16
		Broadcast				2,355			4,905			2,550			108

			Total cost of operations, excluding depreciation, amortization and accretion expenses			91,694			108,540			16,846			18

	Selling, general and administrative expenses:
		Wireless				33,035			24,691			(8,344	)		(25	)
		Broadcast				637			1,683			1,046			164
		Other				31,868			28,438			(3,430	)		(11	)

			Total selling, general and administrative expenses			65,540			54,812			(10,728	)		(16	)

	Depreciation, amortization and accretion expenses:
		Wireless				159,463			182,023			22,560			14
		Broadcast				4,165			6,153			1,988			48

			Total depreciation, amortization and accretion expenses			163,628			188,176			24,548			15

	Restructuring and non-recurring charges					140,871			27,394			(113,477	)		(81	)

			Total operating expenses			461,733			378,922			(82,811	)		(18	)

Operating loss						(239,998	)		(96,397	)		143,601			60

Other income (expense):
	Interest income					17,037			855			(16,182	)		(95	)
	Interest expense					(212,174	)		(226,536	)		(14,362	)		(7	)
	Reorganization expense					—			(4,329	)		(4,329	)		(100	)
	Other expense					(223,241	)		(10,820	)		212,421			95

			Total other expense			(418,378	)		(240,830	)		177,548			42

Loss from continuing operations before income taxes						(658,376	)		(337,227	)		321,149			49
Income tax expense						559			1,331			772			138

Loss from continuing operations						(658,935	)		(338,558	)		320,377			49
Discontinued operations (net of income taxes):
	Income (loss) from operations of discontinued network services division					5,858			(12,268	)		(18,126	)		(309	)
	Loss on disposal of discontinued network services division					—			(46,984	)		(46,984	)		(100	)
	Loss from operations of discontinued broadcast services division					(1,692	)		(421	)		1,271			75

Loss before cumulative effect of change in accounting principle						(654,769	)		(398,231	)		256,538			39
Cumulative effect of change in accounting principle						—			(376,753	)		(376,753	)		(100	)

Net loss					$	(654,769	)	$	(774,984	)	$	(120,215	)		(18	)%

Adjusted EBITDA:
	Wireless				$	(53,044	)	$	107,004		$	160,048			302	%
	Broadcast					8,537			11,993			3,456			40
	Other:
		Corporate selling, general and administrative expenses, excluding corporate non-cash compensation charges				(29,743	)		(27,743	)		2,000			7
		Corporate non-cash compensation charges				(2,125	)		(695	)		1,430			67
		Corporate other expenses				(66,852	)		(9,600	)		57,252			86

			Total Other			(98,720	)		(38,038	)		60,682			61

				Total adjusted EBITDA	$	(143,227	)	$	80,959		$	224,186			156	%

Revenues. The increase in revenues from 2001 to 2002 was primarily a result of incremental revenue in 2002 from new customers on towers that were part of our portfolio on December 31, 2001 and revenues derived from towers acquired in 2001 and 2002. Based on trailing twelve-months revenue on the towers that we owned or operated as of December 31, 2001, same tower revenue growth was 18%. We owned or operated 8,036 towers at December 31, 2002, as compared to 7,925 towers at December 31, 2001.

For the year ended December 31, 2002, one wireless customer, which was a significant stockholder at the time, and its affiliates accounted for $88.0 million or 31% of our revenues. For the year ended December 31, 2001, this customer and its affiliates accounted for $78.5 million or 35% of our revenues. In addition, another wireless customer, which was an affiliate of a significant stockholder at the time, accounted for $63.2 million or 22% of our revenues in the year ended December 31, 2002 and $33.9 million or 15% of our revenues in the year ended December 31, 2001. Both of these customers remain significant customers, but neither they nor their affiliates are significant stockholders following our reorganization and thus are no longer considered to be our related parties.

Accounts receivable, net of allowance, decreased by $5.7 million from December 31, 2001 to December 31, 2002. This decrease is primarily due to an increase in the allowance for doubtful accounts, which grew by $6.6 million for the same period. We analyze the adequacy of our accounts receivable 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. During 2002, numerous wireless carriers experienced financial difficulties and their balances owed to us continued to age; these circumstances caused us to increase our allowance.

Costs of Operations, Excluding Depreciation, Amortization and Accretion Expenses. Costs of operations, excluding depreciation, amortization and accretion expenses, increased primarily due to towers acquired or constructed during 2001 and 2002. Costs of operations, excluding depreciation, amortization and accretion expenses, for wireless operations as a percentage of wireless revenues decreased to 40% for the year ended December 31, 2002 from 42% for the year ended December 31, 2001. Costs of operations, excluding depreciation, amortization and accretion expenses, for broadcast leasing as a percentage of broadcast leasing revenues increased to 23% for the year ended December 31, 2002 from 21% for the year ended December 31, 2001. Overall, costs of operations, excluding depreciation, amortization and accretion expenses, as a percentage of revenues decreased to 38% for the year ended December 31, 2002 from 41% for the year ended December 31, 2001. The decrease was primarily due to increased revenues generated from new customers on existing towers. As our operations mature, we expect that additional customers on towers will generate increases in our margins and in cash flow because a significant percentage of tower operating costs are fixed and do not increase with additional customers.

Selling, General and Administrative Expenses. Selling, general and administrative expenses as a percentage of revenues decreased to 19% for the year ended December 31, 2002 from 30% for the year ended December 31, 2001. Selling, general and administrative expenses decreased in amount and as a percentage of revenues as a result of significant cost cutting measures implemented in the second half of 2001 and early 2002. In addition, for the year ended December 31, 2002, we recorded non-cash compensation charges of $0.7 million related to the issuance of stock options and restricted shares of common stock to employees compared to $2.1 million in the year ended December 31, 2001.

Selling, general and administrative expenses for wireless operations as a percentage of wireless revenues decreased to 9% for the year ended December 31, 2002 from 16% for the year

ended December 31, 2001. Selling, general and administrative expenses for broadcast leasing as a percentage of broadcast leasing revenues increased to 8% for the year ended December 31, 2002 from 6% for the year ended December 31, 2001. This increase is due to the additional integration cost of recent tower purchases.

Selling, general and administrative expenses not specific to the above business segments as a percentage of total revenues decreased to 10% for the year ended December 31, 2002 from 14% for the year ended December 31, 2001.

Restructuring and Non-Recurring Charges. In the years ended December 31, 2002 and 2001, we recorded restructuring and non-recurring charges of $27.4 and $140.9 million, respectively. The details of these charges are discussed below:


	•	In May 2002, we announced the termination of our build-to-suit programs with Cingular and other carriers and recorded restructuring charges of $23.1 million;

	•	In December 2002, we wrote-down 21 wireless towers that were deemed not marketable and therefore impaired. We recorded a non-recurring charge based on the carrying value and the estimated discounted cashflow of the towers of $4.3 million;

	•	In May 2001, we announced the consolidation of our rooftop management operations and recorded non-recurring charges of $35.8 million;

	•	In June 2001, we announced that we would divest our operations in Mexico and recorded non-recurring charges of $32.2 million;

	•	In June 2001, we announced that we would close the Vertical Properties operations and recorded non-recurring charges of $4.3 million all relating to the broadcast division; and

	•	In November 2001, we announced that we would reduce our planned new tower construction and acquisition programs for 2002 and recorded restructuring charges of $68.6 million. These charges include $35.0 million in fees paid to SBC in considerations for modification to our agreement.

The following tables summarize the restructuring and non-recurring charges for the years ended December 31, 2002 and 2001.


	Writeoff of		Writedown		Employee
	goodwill		of assets		severance		Other		Total


	(in thousands)
Termination of build-to-suit Cingular contract—May 2002	$	—	$	16,400	$	3,500	$	3,200	$	23,100
Impairment of 21 towers—December 2002				4,300						4,300

Total 2002 restructuring and non-recurring charges	$	—	$	20,700	$	3,500	$	3,200	$	27,400

Rooftop consolidation—May 2001	$	29,600	$	5,100	$	1,100	$	—	$	35,800
Mexico divesture—June 2001		10,700		17,600		3,900				32,200
Vertical Properties closing—June 2001		4,200				100				4,300
Reduction of new tower construction and acquisition program—November 2001				26,000		2,800		39,800		68,600

Total 2001 restructuring and non-recurring charges	$	44,500	$	48,700	$	7,900	$	39,800	$	140,900

Other Income (Expense). Other income (expense) was an expense of $10.8 million in the year ended December 31, 2002. Other income (expense) for our wireless segment was an

expense of $1.4 million in the year ended December 31, 2002, primarily due to loss on sale of assets. Other income (expense) not specific to any business segment was an expense of $9.4 million in the year ended December 31, 2002, primarily due to expenses associated with our proposed debt tender and exchange offers.

Other income (expense) not specific to any business segment was a net expense of $223.2 million in the year ended December 31, 2001. Of this amount, $61.8 million related to losses from investments in former affiliates accounted for under the equity method, primarily our investment in SpectraSite-Transco Communications, Ltd., $121.9 million related to the write-down of our investment in SpectraSite-Transco and $20.0 million related to the write-off of a loan to SpectraSite-Transco. We completed the sale of our interest in SpectraSite-Transco in October 2001. In addition, $7.5 million related to a write-off of our investment in Evolution Holdings, Inc., a network services company that ceased operations in the second quarter. Other income (expense) for 2001 also includes $7.0 million related to the write-down of a loan to Concourse Communications, Inc., a former affiliate that provides in-building antenna sites primarily in airports and other public sites in New York City.

Adjusted EBITDA. As a result of the factors discussed above, Adjusted EBITDA increased to $80.9 million for the year ended December 31, 2002 from ($143.2) million for the year ended December 31, 2001. Wireless Adjusted EBITDA increased to $107.0 million for the year ended December 31, 2002 from ($53.0) million for the year ended December 31, 2001. Adjusted EBITDA for our broadcast segment increased to $12.0 million for the year ended December 31, 2002 from $8.5 million for the year ended December 31, 2001.

Depreciation, Amortization and Accretion Expenses. Depreciation and amortization expense increased primarily as a result of the increased depreciation from the towers we have acquired or constructed, partially offset by the $35.5 million reduction in goodwill amortization as a result of the adoption of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (“SFAS 142”). See “ — Description of Critical Accounting Policies — Goodwill.”

As a result of the factors discussed above, our operating loss was $96.4 million for the year ended December 31, 2002, compared to a loss of $240.0 million for the year ended December 31, 2001.

Interest Expense. Net interest expense increased due to increased accreted value of the senior discount notes and increased amounts outstanding under our credit facility, as well as the write-off of $4.5 million of debt issuance costs related to the decrease in the maximum availability of the credit facility. This increase was partially offset by not incurring interest expense of $24.4 million on the senior notes, senior discount notes and senior convertible notes for the period from the date of the chapter 11 filing (November 15, 2002) through December 31, 2002.

Discontinued Operations. Loss from operations of the discontinued network services division was $12.3 million in the year ended December 31, 2002 compared to income from operations of the discontinued network services division of $5.9 million in the year ended December 31, 2001. The loss from operations in 2002 was primarily due to lower revenues, fixed costs that did not decline with revenues and a more competitive environment for these services that led to lower pricing and restructuring charges. On December 31, 2002, we completed the sale of the network services division, resulting in a loss on disposal of $47.0 million. Loss from operations of the discontinued broadcast services division was $0.4 million in the year ended December 31, 2002 compared to a loss of $1.7 million in the year ended December 31, 2001. These losses were due to the uncertainties regarding the requirements and timing for multicasting of digital television. These uncertainties have caused broadcasters to delay their capital expenditures for new construction and make minimum modifications to their towers.

Cumulative Effect of Change in Accounting Principle. We performed the first of the impairment tests of goodwill required by SFAS 142 by comparing the fair value of each of our reporting units with its carrying value. Fair value was determined using a discounted cash flow methodology. Based on our impairment tests, we recognized an adjustment of $376.8 million to reduce the carrying value of goodwill in our wireless services, broadcast tower, broadcast services and building units to its implied fair value. The impairment adjustment recognized at adoption of the new rules was reflected as a cumulative effect of accounting change in our first quarter 2002 statement of operations.

Net Income (Loss). As a result of the factors discussed above, net loss was $775.0 million for the year ended December 31, 2002, compared to a net loss of $654.8 million for the year ended December 31, 2001.

Year Ended December 31, 2001 Compared to the Year Ended December 31, 2000

The following table provides a comparison of our revenues and expenses for the periods presented:


						Year Ended			Year Ended
						December 31,			December 31,
						2000			2001			$ Change			% Change


						(dollars in thousands)
Revenues:
	Wireless					$	114,224		$	210,308		$	96,084			84	%
	Broadcast						3,746			11,427			7,681			205

			Total revenues				117,970			221,735			103,765			88

Operating expenses:
	Cost of operations, excluding depreciation, amortization and accretion expenses:
		Wireless					45,808			89,339			43,531			95
		Broadcast					859			2,355			1,496			174

			Total cost of operations, excluding depreciation, amortization and accretion expenses				46,667			91,694			45,027			96

	Selling, general and administrative expenses:
		Wireless					22,509			33,035			10,526			47
		Broadcast					414			637			223			54
		Other					20,054			31,868			11,814			59

			Total selling, general and administrative expenses				42,977			65,540			22,563			52

	Depreciation, amortization and accretion expenses:
		Wireless					75,424			159,463			84,039			11
		Broadcast					1,562			4,165			2,603			167

			Total depreciation, amortization and accretion expenses				76,986			163,628			86,642			112

	Restructuring and non-recurring charges						—			140,871			140,871			100

			Total operating expenses				166,630			461,733			295,103			177

Operating loss							(48,660	)		(239,998	)		(191,338	)		(393	)

Operating income (expense):
	Interest income						28,391			17,037			(11,354	)		(40	)
	Interest expense						(134,664	)		(212,174	)		(77,510	)		(58	)
	Other expense						(8,574	)		(223,241	)		(214,667	)		(2,504	)

			Total other expense				(114,847	)		(418,378	)		(303,531	)		(264	)

Loss from continuing operations before income taxes							(163,507	)		(658,376	)		(494,869	)		(303	)
Income tax expense							305			559			254			83

Loss from continuing operations							(163,812	)		(658,935	)		(495,123	)		(302	)
Discontinued operations (net of income taxes):
	Income from operations of discontinued network services division						5,443			5,858			415			8
	Income (loss) from operations of discontinued broadcast services division						753			(1,692	)		(2,445	)		(325	)

	Net loss					$	(157,616	)	$	(654,769	)	$	(497,153	)		(315	)%

Adjusted EBITDA:
	Wireless					$	45,101		$	(53,044	)	$	(98,145	)		(218	)%
	Broadcast						3,483			8,537			5,054			145
	Other:
		Corporate selling, general and administrative expenses, excluding corporate non-cash compensation charges					(17,482	)		(29,743	)		(12,261	)		(70	)
		Corporate non-cash compensation charges					(2,572	)		(2,125	)		447			17
		Corporate other expense					(8,778	)		(66,852	)		(58,074	)		(662	)

				Total Other			(28,832	)		(98,720	)		(69,888	)		(242	)

					Total adjusted EBITDA	$	19,752		$	(143,227	)	$	(162,979	)		(825	)%

Revenues. Revenues increased primarily as a result of revenues derived from towers which we acquired or constructed during 2000 and 2001. We owned or operated 7,925 towers at December 31, 2001, as compared to 5,030 towers at December 31, 2000. The remaining factor contributing to the increase is incremental revenue in 2001 for towers that existed as of December 31, 2000 from new customers.

For the year ended December 31, 2001, one wireless customer, which was a significant stockholder of ours at the time, and its affiliates accounted for $78.5 million or 35% of our revenues. For the year ended December 31, 2000, this customer and its affiliates accounted for $75.4 million or 64% of our revenues. In addition, another wireless customer, which was an affiliate of a significant stockholder of ours at the time, accounted for $33.9 million or 15% of our revenues in the year ended December 31, 2001. Both of these customers remain significant customers, but neither they nor their affiliates are significant stockholders following our reorganization and thus are no longer considered to be our related parties.

Costs of Operations, Excluding Depreciation, Amortization and Accretion Expenses. The increase in costs of operations was primarily attributable to operating costs of the communications towers acquired or constructed during 2000 and 2001, acquisitions in 2000 and 2001 and overall growth in operating activities. Costs of operations, excluding depreciation, amortization and accretion expenses, for wireless operations as a percentage of wireless revenues increased to 42% for the year ended December 31, 2001 from 40% for the year ended December 31, 2000. Costs of operations for broadcast leasing as a percentage of broadcast leasing revenues decreased to 21% for the year ended December 31, 2001 from 23% for the year ended December 31, 2000. Overall, costs of operations, excluding depreciation, amortization and accretion expenses, as a percentage of site operations revenues increased to 41% for the year ended December 31, 2001 from 40% for the year ended December 31, 2000. These increases were primarily due to the addition of new towers and higher tower operating expenses partially offset by increased revenues generated from new customers on existing towers. As our operations mature, we expect that additional customers on a tower will generate increases in our margins and in cash flow because a significant percentage of tower operating costs are fixed and do not increase with additional customers.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased as a result of expenses related to additional corporate overhead and field operations required to manage and operate the growth of our ongoing operations and acquisition activities. For the year ended December 31, 2001, we recorded non-cash compensation charges of $2.1 million related to the issuance of stock options and restricted shares of common stock to employees. We recorded non-cash compensation charges of $2.6 million in the year ended December 31, 2000 related to stock options and restricted shares of common stock issued to employees. Selling, general and administrative expenses as a percentage of revenues decreased to 30% for the year ended December 31, 2001 from 36% for the year ended December 31, 2000 primarily due to cost reduction efforts implemented in the second quarter of 2001.

Selling, general and administrative expenses for the wireless segment as a percentage of wireless revenues decreased to 16% for the year ended December 31, 2001 from 20% for the year ended December 31, 2000. Selling, general and administrative expenses for broadcast leasing as a percentage of broadcast leasing revenues decreased to 6% for the year ended December 31, 2001 from 11% for the year ended December 31, 2000.

Selling, general and administrative expenses not specific to the above business segments as a percentage of total revenues decreased to 14% for the year ended December 31, 2001 from 17% for the year ended December 31, 2000.

Restructuring and Non-Recurring Charges. In the year ended December 31, 2001, we recorded restructuring and non-recurring charges of $140.9 million, all relating to the wireless segment. The details of these charges are discussed below.


	•	In May 2001, we announced the consolidation of our rooftop management operations and recorded a non-recurring charge of $35.8 million;

	•	In June 2001, we announced that we would divest our operations in Mexico and recorded non-recurring charges of $32.2 million;

	•	In June 2001, we announced that we would close the Vertical Properties operations and recorded non-recurring charges of $4.3 million all relating to the broadcast division; and

	•	In November 2001, we announced that we would reduce our planned new tower construction and acquisition programs for 2002 and recorded restructuring charges of $68.6 million. These charges include $35.0 million in fees paid to SBC in considerations for modification to our agreement.

The following table summarizes the restructuring and non-recurring charges for the year ended December 31, 2001:


	Writeoff
	of		Writedown		Employee
	goodwill		of assets		severance		Other		Total


	(in thousands)
Rooftop consolidation—May 2001	$	29,600	$	5,100	$	1,100	$	—	$	35,800
Mexico divesture—June 2001		10,700		17,600		3,900		—		32,200
Vertical Properties closing—June 2001		4,200		—		100		—		4,300
Reduction of new tower construction and acquisition program—November 2001		—		26,000		2,800		39,800		68,600

Total restructuring and non-recurring charges	$	44,500	$	48,700	$	7,900	$	39,800	$	140,900

Other Income (Expense) Other income (expense) not specific to any business segment was a net expense of $223.2 million in the year ended December 31, 2001. Of this amount, $61.8 million related to losses from investments in affiliates accounted for under the equity method, primarily our investment in SpectraSite-Transco Communications, Ltd., $121.9 million related to the write-down of our investment in SpectraSite-Transco and $20.0 million related to the write-off of a loan to SpectraSite-Transco. We completed the sale of our interest in SpectraSite-Transco in October 2001. In addition, $7.5 million related to a write-off of our investment in Evolution Holdings, Inc., a network services company that ceased operations in the second quarter. Other income (expense) for 2001 also includes $7.0 million related to the write-down of a loan to Concourse Communications, Inc., a former affiliate that provides in-building antenna sites primarily in airports and other public sites in New York City.

Other income (expense) not specific to any business segment was an expense of $8.6 million in the year ended December 31, 2000, primarily due to a loss from an investment in SpectraSite-Transco accounted for under the equity method.

Adjusted EBITDA As a result of the factors discussed above, Adjusted EBITDA was ($143.3) million for the year ended December 31, 2001 compared to $19.8 million for the year ended December 31, 2000. Wireless Adjusted EBITDA was ($53.0) million for the year ended December 31, 2001 compared to $45.1 million for the year ended December 31, 2000. Adjusted EBITDA for the broadcast leasing component of our broadcast segment increased to $8.5 million for the year ended December 31, 2001 from $3.5 million for the year ended December 31, 2000.

Depreciation, Amortization and Accretion Expenses. Depreciation and amortization expense increased for the year ended December 31, 2001 from the year ended December 31, 2000,

primarily as a result of the increased depreciation from towers we have acquired or constructed and amortization of goodwill related to acquisitions.

Income (Loss) from Continuing Operations. As a result of the factors discussed above, our loss from operations was $240.0 million for the year ended December 31, 2001, compared to a loss of $48.7 million for the year ended December 31, 2000.

Interest Expense Net interest expense increased during the year ended December 31, 2001 from the year ended December 31, 2000 due to the issuance of our 12 7/8% senior discount notes due 2010 in March 2000, our 10 3/4% senior notes due 2010 in March 2000, our 6 3/4% senior convertible notes due 2010 in November 2000 and our 12 1/2% senior notes due 2010 in December 2000, as well as additional borrowings under our credit facility in 2001.

Discontinued Operations. Income from operations of the discontinued network services division increased to $5.9 million in the year ended December 31, 2001 compared to income from operations of discontinued division of $5.4 million in the year ended December 31, 2000 primarily as a result of increased revenues. Loss from operations of the discontinued broadcast services division was $1.7 million for the year ended December 31, 2001 compared to income of $0.8 million for the year ended December 31, 2000. The increase in losses was primarily due to the uncertainties regarding the requirements and timing for multicasting of digital television. These uncertainties have caused broadcasters to delay their capital expenditures for new construction and make minimum modifications to their towers.

Net Income (Loss). As a result of the factors discussed above, net loss was $654.8 million for the year ended December 31, 2001, compared to a net loss of $157.6 million for the year ended December 31, 2000.

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.

As a result of the reorganization and implementation of fresh start accounting, our results of operations after January 31, 2003 are not comparable to results reported in prior periods because of differences in the bases of accounting and the capital structure for the predecessor company and the reorganized company.

Cash Flows

Cash provided by operating activities was $36.3 million for the year ended December 31, 2002 as compared to cash used in operating activities of $12.1 million for the year ended December 31, 2001. The change is primarily attributable to the $35.0 million fee paid in 2001 to SBC to amend our agreement to acquire leasehold and sub-leasehold interests in wireless communications towers and by improved operating performance.

Cash provided by operating activities was $67.4 million for the eight months ended September 30, 2003 and $5.9 million for the one month ended January 31, 2003. Cash provided by operating activities was $1.5 million for the nine months ended September 30, 2002. The increase in cash provided by operating activities in 2003 is primarily attributable to increased operating income, decreased interest payments following our reorganization and decreased accounts receivable due to increased collections.

Cash used in investing activities was $70.0 million for the year ended December 31, 2002 compared to $984.7 million for the year ended December 31, 2001. The decrease in cash used in investing activities is primarily attributable to the reduction in the number of towers purchased

under the SBC agreement in 2002 as compared to 2001, the termination of our build-to-suit agreement with Cingular on May 15, 2002 and other tower purchases that occurred in 2001.

Cash provided by investing activities was $63.5 million for the eight months ended September 30, 2003. Cash used in investing activities was $2.7 million for the one month ended January 31, 2003 and $54.5 million for the nine months ended September 30, 2002. Investing activities for the eight months ended September 30, 2003 consisted primarily of proceeds received from the sale of the 545 SBC towers of $81.0 million, proceeds from the sale of an investment in available-for-sale securities of $5.0 million and proceeds from the sale of our Canadian leasing operations of $2.1 million. In addition, we invested $24.8 million, $2.7 million and $62.5 million in purchases of property and equipment and acquisitions of towers, primarily related to the acquisition and construction of communications towers, in the eight months ended September 30, 2003, the one month ended January 31, 2003 and the nine months ended September 30, 2002, respectively.

Cash provided by financing activities was $83.1 million in the year ended December 31, 2002 as compared to $475.8 million in the year ended December 31, 2001. The cash provided by financing activities in 2001 and 2002 was primarily attributable to draws on our credit facility.

Cash used in financing activities was $148.3 million in the eight months ended September 30, 2003 and $10.9 million in the one month ended January 31, 2003. Cash provided by financing activities was $85.6 million in the nine months ended September 30, 2002. Cash used in financing activities for the eight months ended September 30, 2003 consisted primarily of $200.0 million in proceeds from the issuance of our 8 1/4% Senior Notes Due 2010 and $2.4 million in proceeds from the issuance of common stock, offset by $343.0 million of payments on our credit facility, payments on capital leases of $0.4 million and $7.4 million in debt issuance costs related to the Senior Notes. Cash used in financing activities for the one month ended January 31, 2003 consisted of payments on capital leases of $10.9 million, which includes the prepayment of a capital lease in connection with the exercise of our purchase option on our corporate headquarters. The cash provided by financing activities in the nine months ended September 30, 2002 was primarily attributable to $90.0 million of draws on our credit facility.

Senior Notes

On May 21, 2003, we 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. Subsequently, on December 12, 2003, we exchanged the $200.0 million aggregate principal amount of 8 1/4% Senior Notes due 2010 for a like amount of 8 1/4% Senior Notes due 2010, which were registered under the Securities Act. 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. We are required to comply with certain covenants under the terms of the 8 1/4% Senior Notes that restrict our ability to incur additional indebtedness and make certain payments, among other things.

Credit Facility

Our principal operating subsidiary, Communications, is party to an amended and restated credit facility with lending commitments totaling approximately $640.0 million. The credit facility includes a revolving credit facility with a borrowing limit of $200.0 million, subject to compliance with covenants and the satisfaction of certain conditions precedent. As of September 30, 2003, Communications could borrow up to approximately $193.8 million of the $200.0 million under the revolving credit facility. The maximum amount available will be reduced (and, if necessary, the amounts outstanding must be repaid) in quarterly installments beginning on September 30, 2005 and ending on June 30, 2007. The credit facility also includes a multiple draw term loan that is fully drawn and which must be repaid in quarterly installments beginning on March 31, 2006 and ending on June 30, 2007, and a term loan that is fully drawn and which must be repaid in quarterly installments beginning on

September 30, 2007 and ending on December 31, 2007. As of September 30, 2003, $187.8 million was outstanding under the multiple draw term loan and $252.2 million was outstanding under the term loan.

The revolving credit loans and the multiple draw term loans bear interest, at Communications’ option, at either Canadian Imperial Bank of Commerce’s base rate plus an applicable margin ranging from 2.00% to 1.00% per annum or the Eurodollar rate plus an applicable margin ranging from 3.25% to 2.25% 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 Canadian Imperial Bank of Commerce’s base rate plus 2.75% per annum or the Eurodollar rate plus 4.00% per annum. After giving effect to the amendment to our credit facility discussed below, the term loan will bear interest, at Communications’ option, at either the Canadian Imperial Bank of Commerce’s base rate plus 1.75% per annum or the Eurodollar rate plus 3.00% per annum.

In February 2003, we entered into an interest rate cap agreement in order to limit exposure to fluctuations in interest rates on our variable rate credit facility. This transaction is 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 September 30, 2003, the carrying amount and fair value of this instrument was $0.3 million and is included in Other Assets in the unaudited condensed consolidated financial statements.

Communications is required to pay a commitment fee of between 1.375% and 0.500% per annum in respect of the undrawn portions of the revolving credit facility, 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, the incurrence of certain additional indebtedness, certain changes to the SBC transaction or the generation of excess cash flow (as defined in the credit facility).

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 any 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 agreement), a minimum interest coverage ratio and a minimum fixed charge coverage ratio.

With the proceeds of the sale of 545 SBC towers to Cingular, Communications repaid $31.4 million of the multiple draw term loan and $42.1 million of the term loan on February 11, 2003. In addition, Communications repaid $1.1 million of the multiple draw term loan and $1.4 million of the term loan on February 19, 2003. In connection with these repayments, Communications wrote off $1.6 million in debt issuance costs. This charge is included in interest expense in the unaudited condensed consolidated statement of operations.

On May 14, 2003, Communications amended its credit facility to reduce the unused $300 million commitment under the revolving credit facility by $100 million in exchange for moderately increasing the ratios in its leverage covenant in future periods. In connection with this reduction, Communications wrote off $2.0 million in debt issuance costs. This charge is included in interest expense in the unaudited condensed consolidated statement of operations.

With the proceeds from the issuance of the 8 1/4% Senior Notes Due 2010, Communications repaid $83.0 million of the multiple draw term loan and $111.5 million of the term loan on May 21, 2003. In addition, Communications repaid $1.1 million of the multiple draw term loan and $1.4 million of the term loan on June 24, 2003 and voluntarily repaid $12.8 million of the multiple draw term loan and $17.2 million of the term loan on June 30, 2003. In connection with these repayments, Communications wrote off $4.6 million in debt issuance costs. This charge is included in interest expense in the unaudited condensed consolidated statement of operations.

On September 29, 2003, Communications repaid $0.8 million of the multiple draw term loan and $1.0 million of the term loan. In addition, Communications voluntarily repaid $16.3 million of the multiple draw term loan and $21.9 million of the term loan on September 30, 2003. In connection with these repayments, Communications wrote off $0.7 million in debt issuance costs. This charge is included in interest expense in the unaudited condensed consolidated statement of operations.

The following table summarizes activity with respect to our credit facility from January 1, 2003 through September 30, 2003:



	Amount Owed
										Undrawn
	Multiple									Revolving
	Draw									Credit Facility
	Term Loan			Term Loan			Total			Commitment


	(in thousands)
Balance, January 1, 2003	$	334,127		$	448,828		$	782,955		$	300,000
Sale of 545 SBC towers		(31,366	)		(42,134	)		(73,500	)		—
Amendment to credit facility		—			—			—			(100,000	)
Proceeds from issuance of Senior Notes		(83,003	)		(111,497	)		(194,500	)		—
Other repayments		(32,007	)		(42,993	)		(75,000	)		—

Balance, September 30, 2003	$	187,751		$	252,204		$	439,955		$	200,000

On October 24, 2003, we completed an amendment to our credit facility which reduced the interest rate on our term loan from, at Communications’ option, Canadian Imperial Bank of Commerce’s base rate plus 2.75% per annum or the Eurodollar rate plus 4.00% per annum to Canadian Imperial Bank of Commerce’s base rate plus 1.75% per annum or the Eurodollar rate plus 3.00% per annum.

We have asked our lenders to approve an amendment to our credit facility which, if completed, would replace the term loan portion of our credit facility with a new term loan that is substantially the same as the existing term loan, except that the interest rate will be reduced from, at our option, Canadian Imperial Bank of Commerce’s base rate plus 1.75% per annum or the Eurodollar rate plus 3.00% per annum to Canadian Imperial Bank of Commerce’s base rate plus 1% per annum or the Eurodollar rate plus 2.25% per annum. The proposed amendment would also provide that the interest rate margins would automatically be further reduced if our credit ratings improve. There can be no assurance that the lenders will agree to complete the amendment.

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 the credit facility, and our other subsidiaries were not part of the bankruptcy. The credit facility has remained in place during, and since, the reorganization.

We had cash and cash equivalents of $81.0 million at December 31, 2002 and $55.9 million at September 30, 2003. We also had $783.0 million outstanding under our credit facility at December 31, 2002 and $440.0 million outstanding at September 30, 2003. As of September 30,

2003, 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 approximately $193.8 million under the revolving credit facility as of September 30, 2003. 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 5.94% as of December 31, 2002 and 4.55% as of September 30, 2003. After giving effect to the October 24, 2003, amendment to our credit facility, the weighted average interest rate on outstanding borrowings under the credit facility as of September 30, 2003 would have been 3.97%.

While we have taken steps to reduce our capital commitments, as of September 30, 2003, we are contractually obligated to purchase up to an additional 541 towers from SBC from November 2003 through August 2004. These commitments will require approximately $26 million in 2003 and $115 million in 2004. In addition, we will continue to make capital expenditures to improve our existing towers and to install new in-building neutral host distributed antenna systems. 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 or reduce the scope of tower construction and acquisition activity.

The following table provides a summary of our material debt, lease and other contractual commitments as of September 30, 2003:



	Payments Due by Period

			Less than
Contractual Obligations	Total		1 Year		1-3 Years		4-5 Years		After 5 Years


	(in thousands)
Credit Facility	$	439,955	$	—	$	54,313	$	385,642	$	—
Senior Notes		200,000		—		—		—		200,000
Capital Lease Payments		765		576		189		—		—
Operating Leases Payments		313,526		63,911		95,099		49,564		104,952
Asset Retirement Obligations		37,370		437		414		1,227		35,292
SBC Tower Purchase Commitment(1)		140,660		140,660		—		—		—

Total Contractual Cash Obligations	$	1,132,276	$	205,584	$	150,015	$	436,433	$	340,244


(1)	Based on the estimated average purchase price of towers to be acquired from SBC.

In addition, we had standby letters of credit of $6.3 million and performance bonds of $5.5 million outstanding at September 30, 2003, 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. For the periods prior to January 31, 2003, Adjusted EBITDA also excludes gain on debt discharge, reorganization items, and writeoffs of investments in and loans to affiliates. We use a different definition of Adjusted EBITDA for the fiscal periods prior to our reorganization to enable investors to view our operating performance on a consistent basis before the impact of the items discussed above on the predecessor company. Each of these historical items was incurred prior to, or in connection with, our bankruptcy and is excluded from Adjusted EBITDA to reflect, as accurately as possible, the results of our core operations. Management does not expect any of these items to have a material financial impact on our operations on a going-forward basis because none of these pre-reorganization items is expected to occur in the foreseeable future.

Adjusted EBITDA may not be comparable to a similarly titled measure employed by other companies, including companies in the tower sector, 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;

	•	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 years ended December 31, 2001 and 2002, the nine months ended September 30, 2002, the one month ended January 31, 2003, the eight months ended September 30, 2003 and the three months ended December 31, 2002 and 2003 was calculated as follows:


								Predecessor			Predecessor			Reorganized			Predecessor			Reorganized
		Predecessor			Predecessor			Company			Company			Company			Company			Company
		Company			Company			Nine Months			One Month			Eight Months			Three Months			Three Months
		Year Ended			Year Ended			Ended			Ended			Ended			Ended			Ended
		December 31,			December 31,			September 30,			January 31,			September 30,			December 31,			December 31,
		2001			2002			2002			2003			2003			2002			2003


		(in thousands)
Net income (loss)		$	(654,769	)	$	(774,984	)	$	(714,691	)	$	344,970		$	(6,052	)	$	(60,293	)	$	(13,634	)
Depreciation, amortization and accretion expense			163,628			188,176			142,596			15,930			67,404			45,580			25,794
Interest income			(17,037	)		(855	)		(525	)		(137	)		(639	)		(330	)		(177	)
Interest expense			212,174			226,536			187,510			4,721			40,428			39,026			10,435
Gain on debt discharge			—			—			—			(1,034,764	)		—			—			—
Reorganization expense			—			4,329			1,854			—			—			2,475			—
Writeoff of investments in affiliates			129,404			—			—			—			—			—			—
Writeoff of loans to affiliates			26,980			—			—			—			—			—			—
Income tax expense			559			1,331			694			5			1,270			637			1,486
Reorganization items:
	Adjust accounts to fair value		—			—			—			644,688			—			—			—
	Professional and other fees		—			—			—			23,894			—			—			—
Loss (income) from operations of discontinued divisions, net of income taxes			(4,166	)		12,689			9,111			686			1,344			3,578			643
Loss on disposal of discontinued divisions, net of income taxes			—			46,984			45,627			—			596			1,357			16,977
Cumulative effect of change in accounting
	Principle		—			376,753			376,753			12,236			—			—			—

Adjusted EBITDA		$	(143,227	)	$	80,959		$	48,929		$	12,229		$	104,351		$	32,030		$	41,524

Free Cash Flow

Free cash flow (deficit), as we have defined it, is calculated as 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 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. 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 GAAP. Free cash flow, as we have defined it, may not be comparable to similarly titled measures reported by other companies. Free cash flow (deficit) for the years ended December 31, 2001 and 2002, the nine months ended September 30, 2002, the one month ended January 31, 2003, the eight months ended September 30, 2003 and the three months ended December 31, 2002 and 2003 was calculated as follows:


							Predecessor			Predecessor			Reorganized			Predecessor			Reorganized
	Predecessor			Predecessor			Company			Company			Company			Company			Company
	Company			Company			Nine Months			One Month			Eight Months			Three Months			Three Months
	Year Ended			Year Ended			Ended			Ended			Ended			Ended			Ended
	December 31,			December 31,			September 30,			January 31,			September 30,			December 31,			December 31,
	2001			2002			2002			2003			2003			2002			2003


	(in thousands)
Net cash provided by (used in) operating activities	$	(12,133	)	$	36,286		$	1,533		$	5,892		$	67,422		$	34,753		$	29,540
Less: Purchases of property and equipment		(374,245	)		(61,181	)		(52,431	)		(2,737	)		(10,143	)		(8,750	)		(11,569	)

Free cash flow (deficit)	$	(386,378	)	$	(24,895	)	$	(50,898	)	$	3,155		$	57,279		$	26,003		$	17,971

Cash flow provided by (used in) investing activities and cash flows provided by (used in) financing activities for the years ended December 31, 2001 and 2002, the nine months ended September 30, 2002, the one month ended January 31, 2003, the eight months ended September 30, 2003 and the three months ended December 31, 2002 and 2003 are as follows:


							Predecessor			Predecessor			Reorganized			Predecessor			Reorganized
	Predecessor			Predecessor			Company			Company			Company			Company			Company
	Company			Company			Nine Months			One Month			Eight Months			Three Months			Three Months
	Year Ended			Year Ended			Ended			Ended			Ended			Ended			Ended
	December 31,			December 31,			September 30,			January 31,			September 30,			December 31,			December 31,
	2001			2002			2002			2003			2003			2002			2003


	(in thousands)
Net cash provided by (used in) investing activities	$	(984,724	)	$	(69,966	)	$	(54,465	)	$	(2,737	)	$	63,543		$	(15,501	)	$	(26,252	)

Net cash provided by (used in) financing activities	$	475,751		$	83,094		$	85,631		$	(10,884	)	$	(148,347	)	$	(2,537	)	$	1,272

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.

Revenue Recognition

Revenues from leasing and licensing activities are recognized when earned based on lease and license agreements. Rate increases based on fixed escalation clauses that are included in certain lease and license agreements are recognized on a straight-line basis over the term of the

lease or license. Revenues from fees, such as engineering and site inspection fees, are recognized upon delivery of the related products and services to the customer. 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 this fee as revenue when earned.

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.

Property and Equipment

Property and equipment built, purchased, leased or licensed under long-term leasehold or license agreements are recorded at cost and depreciated over their estimated useful lives. We capitalize costs incurred in bringing property and equipment to an operational state. Costs clearly associated with the acquisition, development and construction of property and equipment are capitalized as a cost of the assets. Indirect costs that relate to several assets are capitalized and allocated to the assets to which the costs relate. Indirect costs that do not clearly relate to projects under development or construction are charged to expense as incurred. Estimates and cost allocations are reviewed at the end of each financial reporting period. Costs are revised and reallocated as necessary for material changes on the basis of current estimates. 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 on property and equipment excluding towers is computed using the straight-line method over the estimated useful lives of the assets ranging from three to fifteen years. Depreciation on towers is computed using the straight-line method over the estimated useful lives of 15 years for wireless towers and 30 years for broadcast towers. Amortization of assets recorded under capital leases is included in depreciation.

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. On an ongoing basis, we assess the recoverability of goodwill by determining the ability of the specific assets acquired to generate future cash flows sufficient to recover the unamortized goodwill over the remaining useful life. We estimate future cash flows based on the current performance of the acquired assets and our business plan for those assets. Changes in business conditions, major customers or other factors could result in changes in those estimates. Goodwill determined to be unrecoverable based on future cash flows is written-off in the period in which such determination is made.

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. Effective January 1, 2002, potential impairment of long-lived assets other than goodwill and purchased intangible assets with indefinite useful lives is evaluated using the guidance provided by Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-lived Assets.

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 $464.7 million as of December 31, 2002, due to uncertainties related to utilization of deferred tax assets, primarily consisting of net operating losses carryforwards, before they expire.

Derivative Financial Instruments

Derivative financial instruments are accounted for 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. All derivative financial instruments are recorded in the consolidated financial statements at fair value. Changes in the fair values of derivative financial instruments are either recognized in earnings or in stockholders’ equity as a component of other comprehensive income 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.

Recently Issued Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations (“SFAS 143”) which is effective for fiscal years beginning after June 15, 2002. SFAS 143 requires legal obligations associated with the retirement of long-lived assets to be recognized at their fair value at the time that the obligations are incurred. Upon initial recognition of a liability, that cost should be capitalized as part of the related long-lived asset and allocated to expense over the useful life of the asset. We adopted the new rules on asset retirement obligations on January 1, 2003. Application of the new rules resulted in an increase in net property, plant and equipment of $23.2 million, recognition of an asset retirement obligation of $35.4 million, and a cumulative effect of change in accounting principle that reduced net income and stockholders’

equity (deficit) by $12.2 million. Had we adopted SFAS 143 as of January 1, 2000, the asset retirement obligation would have been as follows (in thousands):


January 1, 2000	$	22,653
December 31, 2000	$	29,447
December 31, 2001	$	32,122
December 31, 2002	$	35,442

These pro forma amounts are measured using information and assumptions as of the adoption date of this statement.

In April 2002, the FASB issued Statement of Financial Accounting Standards No. 145, Rescission of FASB Statement Nos. 4, 44, and 64, Amendment of FASB Statement No. 13 and Technical Corrections (“SFAS 145”). SFAS 145 amends or rescinds a number of authoritative pronouncements, including Statement of Financial Accounting Standards No. 4, Reporting Gains and Losses from Extinguishment of Debt (“SFAS 4”). SFAS 4 required that gains and losses from extinguishment of debt that were included in the determination of net income or loss be aggregated and, if material, classified as an extraordinary item, net of the related income tax effect. Upon adoption of SFAS 145, gains and losses from extinguishment of debt will no longer be classified as extraordinary items, but rather will generally be classified as part of other income (expense) on our consolidated statement of operations. The provisions of SFAS 145 are effective for fiscal years beginning after May 15, 2002. We adopted the provisions of SFAS 145 on January 1, 2003. The adoption of this statement did not have a material impact on our consolidated financial position, results of operations or cash flows.

In July 2002, the FASB issued Statement of Financial Accounting Standards No. 146, Accounting For Costs Associated with Exit or Disposal Activities (“SFAS 146”). The statement requires costs associated with exit or disposal activities to be recognized when they are incurred rather than at the date of a commitment to an exit or disposal plan. The requirements of SFAS 146 are effective for exit or disposal activities initiated after January 1, 2003. We adopted the provisions of SFAS 146 on January 1, 2003. The adoption of this statement did not have a material impact on our consolidated financial position, results of operations or cash flows.

In November 2002, the FASB issued Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees on Indebtedness of Others (“FIN 45”). FIN 45 clarifies significant new disclosures to be made by a guarantor in its financial statements and requires certain guarantees to be recorded at fair value, which is different from current practice, which is generally to record a liability only when a loss is probable and reasonably estimable, as those terms are defined in FASB Statement of Financial Accounting Standards No. 5, Accounting for Contingencies. The adoption of FIN 45 did not have a material impact on our financial position, results of operations or liquidity for the current reporting periods.

In December 2002, the FASB issued Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation, Transition and Disclosure (“SFAS 148”). SFAS 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. SFAS 148 also requires that disclosures of the pro forma effect of using the fair value method of accounting for stock-based employee compensation be displayed more prominently and in a tabular format. Additionally, SFAS 148 requires disclosure of the pro forma effect in interim financial statements. The transition disclosure requirements of SFAS 148 are effective for fiscal year 2002. The interim and annual disclosure requirements are effective for the first quarter of 2003. The adoption of SFAS 148 did not have a material effect on our consolidated financial position, results of operations or cash flows.

In April 2003, the FASB issued Statement of Financial Accounting Standards No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities (“SFAS 149”).

SFAS 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS 133, as previously amended by SFAS 138. SFAS 149 clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative as discussed in SFAS 133. In addition, it clarifies when a derivative contains a financing component that warrants special reporting in the statement of cash flows. SFAS 149 amends certain other existing pronouncements. SFAS 149 is effective for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003 and should be applied prospectively. The adoption of SFAS 149 did not have a material effect on our consolidated financial position, results of operations or cash flows.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities (“FIN 46”). FIN 46 requires an investor with a majority of the voting interests in a variable interest entity (“VIE”) to consolidate the entity and also requires majority and significant variable interest investors to provide certain disclosures. A VIE is an entity in which the equity investors do not have a controlling interest, or the equity investment at risk is insufficient to finance the entity’s activities without receiving additional subordinated financial support from the other parties. For entities that have interests in special purpose entities the provisions of FIN 46 are required to be adopted in periods ending after December 15, 2003. For all other types of variable interest entities, application is required in financial statements for periods ending after March 15, 2004. We have reviewed our investments and other arrangements and determined that none of our investee companies are VIEs. We have not invested in any new VIEs created after January 31, 2003.

In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (“SFAS 150”). SFAS 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). SFAS 150 amends certain other existing pronouncements. SFAS 150 is effective for mandatorily redeemable financial instruments of nonpublic entities for the first fiscal period beginning after December 15, 2004. For mandatorily redeemable financial instruments of public entities, the requirements of SFAS 150 must be applied in the first fiscal period beginning after June 15, 2003.

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.

Quantitative and Qualitative Disclosures About Market Risks

We use financial instruments, including fixed and variable rate debt, to finance our operations. The information below summarizes our market risks associated with debt obligations outstanding as of September 30, 2003 and December 31, 2002. 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 September 30, 2003:



		Expected Maturity Date

		2003		2004		2005		2006		2007		Thereafter			Total


		(dollars in thousands)
Long-term obligations:
	Fixed rate	$	—	$	—	$	—	$	—	$	—	$	200,000		$	200,000
	Average interest rate		—		—		—		—		—		8.25	%		8.25	%

As of December 31, 2002, we had $1.76 billion of liabilities subject to compromise, which were converted to common stock on February 10, 2003 pursuant to our Plan of Reorganization. Prior to our chapter 11 filing, these obligations had an average fixed interest rate of 11.30%.

In addition, as of September 30, 2003 and December 31, 2002, we had $440.0 million and $783.0 million, respectively, of variable rate debt outstanding under our credit facility at a weighted average interest rate of 4.55% and 5.94%, respectively. A 1% increase in the interest rate on our variable rate debt would have increased interest expense by approximately $1.2 million, $4.0 million, $0.7 million and $7.8 million in the three months ended September 30, 2003, the eight months ended September 30, 2003, the one month ended January 31, 2003 and the year ended December 31, 2002, respectively.

In addition, as of September 30, 2003, we have an interest rate cap on $375.0 million of the variable rate debt outstanding under our credit facility, which caps LIBOR at 7.0% for the next three years. As of September 30, 2003, the carrying amount and fair value of this instrument was $0.3 million.

BUSINESS

Introduction

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 primary business is owning, leasing and licensing antenna sites on wireless and broadcast towers, owning and licensing in-building shared infrastructure systems and managing access to rooftop telecommunications on commercial real estate. For the nine months ended September 30, 2003, 100% of our revenues came from our site operations.

We have a portfolio of over 7,500 towers, primarily located in the top 100 BTA markets in the United States. We believe that the growing use of wireless communication services together with capacity constraints in the top 100 BTA markets will continue to increase the demand for tower assets located in these markets and drive the growth of our business.

Our business is characterized by stable and recurring revenues, predictable operating costs and a low level of capital expenditures. We expect to continue to increase our revenues by adding new customers to our towers and by providing additional space to our existing customers. Revenues from our existing customers are expected to grow because of contractual provisions that increase our customers’ payments to us on an annual basis. In addition, we experience minimal customer turnover due to long-term customer contracts, the quality of our assets and the significant relocation costs for our existing customers. Approximately 83% of our revenues are derived from the six largest wireless service providers, two of which were responsible for 53% and 51% of our revenues in 2002 and for the nine months ended September 30, 2003, respectively.

Products and Services

Our business consists of site leasing and licensing operations. As of September 30, 2003, we owned or operated 7,437 wireless towers and in-building systems and 72 broadcast towers primarily located in the top 100 BTA markets in the United States. We have major metropolitan market clusters in Los Angeles, Chicago, San Francisco, Philadelphia, Detroit and Dallas. Our principal business is the leasing of space on our antenna sites to wireless carriers, which represents more than 93% of our monthly revenues.

Wireless Tower Ownership, Leasing, Licensing and Management. We are one of the largest independent owners and operators of wireless communications towers in the United States. We provide antenna site services, which primarily involve the leasing and licensing of antenna space on our towers, to wireless carriers. In leasing and licensing antenna space, we generally receive monthly fees from customers. Our customer leases and licenses typically have original terms of five to ten years, with four or five renewal periods of five years each, and usually provide for periodic rate increases ranging from two percent to five percent per year. Monthly pricing varies with the tower location and the number and type of antennas installed on a given site. Our wireless leasing customers are leading wireless service providers, including AT&T Wireless, Cingular, Nextel, Sprint PCS, T-Mobile, Verizon Wireless and their affiliates.

Over the last two years, we have taken steps to reduce our capital commitments, particularly with respect to the acquisition and construction of wireless towers. For example, in November 2001, we paid $35 million to SBC to reduce the number of towers to be leased or subleased from SBC. In 2002, we implemented a plan to reduce the number of new tower constructions and acquisitions, and, in February 2003, we sold 545 wireless communications towers to Cingular and further reduced the number of towers to be leased or subleased from SBC.

In-Building Shared Infrastructure Solutions. We are a leading provider in the rapidly growing business of in-building neutral host distributed antenna systems serving

telecommunications carriers in the United States. We have the exclusive rights to provide in-building systems to wireless carriers in over 300 retail shopping malls, casino/hotel resorts and office buildings in the United States. Our leases with property owners for the rights to install and operate the in-building systems are generally for an initial period of ten years. Some of these leases contain automatic extension provisions and continue after the initial period unless terminated by us. Under these leases, we are the exclusive operator of in-building neutral host distributed antenna systems for the term of the lease. We are also responsible for marketing the property as part of our portfolio of telecommunications sites and for installing, operating and maintaining the distributed antenna system at the properties. We grant rights to wireless service providers to attach their equipment to our in-building system for a fee under licenses with the providers that typically have an initial term of ten years. We typically share a portion of the collected fees with the property owners.

Broadcast Tower Ownership, Leasing, Licensing and Management. We are one of the largest independent owners and operators of broadcast towers in the United States. Broadcast towers generally are taller and structurally more complex than wireless towers, require unique engineering skills and are more costly to build. The anchor customers on our broadcast towers are mostly television broadcasting companies. We provide antenna site services, which involve the leasing and licensing of antenna space on our broadcast towers to broadcasters and wireless carriers. In leasing and licensing antenna space, we generally receive monthly fees from customers, with contracts typically initially ranging from ten to 20 years.

The following chart shows the locations of our wireless towers, broadcast towers and in-building systems as of September 30, 2003:


State	Number

Texas		1,017
California		841
Illinois		740
Ohio		556
Michigan		397
Florida		333
Missouri		325
Georgia		226
Pennsylvania		226
Alabama		206
Oklahoma		202
New York		197
Louisiana		180
North Carolina		177
Washington		148
Indiana		129
Wisconsin		123
Maryland		120
Other		1,366

Total		7,509

Rooftop Management. We also provide rooftop management services to telecommunications carriers in the United States. We are the exclusive site manager for over

10,000 real estate properties, with significant access clusters in major metropolitan areas. Wireless carriers utilize our managed rooftop sites as transmitting locations, often where there are no existing towers or where new towers are difficult to build. Our rooftop management contracts are generally for an initial period of three to five years. These contracts contain automatic extension provisions and continue after the initial period unless terminated by either party. Under these contracts, we are engaged as the exclusive site manager for rooftop management. For these services, we receive a percentage of occupancy or license fees.

We formerly provided design, fabrication, construction, modification and maintenance services for the broadcast tower industry. As of December 31, 2003, due to the reduced demand from our primary customers in the radio and television broadcast industries, we discontinued the operations of our broadcast services division. This business is currently being marketed for sale. We anticipate a sale to be substantially complete within the first half of 2004.

Competitive Strengths

We believe that we are distinguished by the following competitive strengths which will allow us to continue to grow our revenues and increase our operating margins:

High Quality Assets. We believe that the quality of our portfolio of tower assets, including our tower clusters in major metropolitan markets, makes us a preferred provider for the largest carriers in the wireless industry. In addition, because our tower portfolio was predominantly built over the last four years and we acquired primarily single-tenant towers from wireless carriers, we have fewer customers per tower than the other publicly traded tower companies. Therefore, we expect that as we add new customers our revenue per tower will grow at a faster rate than revenue per tower of other publicly traded tower companies. Over the last two years, we have been a leader in the tower industry in terms of key operating performance measures such as same tower revenue.

Stable and Growing Core Business. Our focus on the leasing and licensing of antenna space on communications towers pursuant to long-term contracts provides us with a recurring, stable cash flow stream. Significant relocation costs also tend to deter existing customers from switching to other towers. Our leases and licenses generally provide for regular annual rate increases. Because our tower operating expenses generally do not increase significantly as we add additional customers, once a tower is built for an anchor customer, additional customers provide significant incremental cash flow.

Low Levels of Debt in our Capital Structure. We currently operate with the lowest levels of total debt and debt leverage among the publicly traded tower companies. We also have substantially completed the build-out of our wireless tower portfolio and terminated our build-to-suit contracts with wireless carriers. These measures have reduced our capital expense commitments and our future funding requirements. We believe our lower level of total debt and funding requirements will increase our financial flexibility relative to the other publicly traded tower companies and will enhance our cash flow generating capability.

Disciplined Approach to Operations. Over the last ten quarters, we have aggressively focused on operating cost controls. During that time, we reduced our quarterly sales, general and administrative expenses as a percentage of revenue from 34% to 16%. In addition, as a result of initiatives by our management team over the past two years, we believe that our accounts receivable as a percentage of revenues is the lowest among the publicly traded tower companies. By reducing the amount of working capital required to operate our business we have improved our operating flexibility.

Experienced Management. Our senior management team has been in place for four years and its members have an average of over 11 years of experience in the wireless industry. Our

chief operating officer and the presidents of our leasing and broadcast divisions, for example, have a combined 38 years of experience in management positions at wireless carriers.

Business Strategy

We intend to capitalize on the continued growth in demand for wireless services and the related infrastructure required to support that growth. The principal features of our business strategy are to:

Maximize Use of Our Tower Portfolio. We believe that our highest returns will be achieved by leasing and licensing additional space on our existing towers. Because the costs of operating a tower are largely fixed, increasing utilization will significantly improve our operating margins. For example, based on trailing twelve-months revenue on the towers that we owned or operated as of September 30, 2002 and September 30, 2003, same tower revenue growth was 14%, while same tower costs of operations, excluding depreciation, amortization and accretion expenses, increased 5%.

Take Advantage of Our Major Market Presence. Approximately 58% of our wireless antenna sites are located in the top 50 BTA markets and approximately 71% of our wireless antenna sites are located in the top 100 BTA markets in the United States, which are the highest percentages among the publicly traded tower companies. Approximately 60% of the U.S. population is located in the top 50 BTA markets and approximately 74% of the U.S. population is located in the top 100 BTA markets. We believe the increase in peak minutes of use, together with capacity constraints, in these markets will lead carriers to deploy more capital to expand their network capacity in these markets than in other markets.

Leverage Existing Relationships with Wireless Service Providers and Their Program Management Companies. Maintaining and cultivating relationships with wireless service providers is a critical focus of our sales and marketing program. We have a dedicated group of sales representatives that focuses on establishing and maintaining relationships with customers at both local and regional levels. In addition, we employ an experienced national accounts team that works closely with each wireless service provider’s corporate headquarters and senior management team to cultivate and ensure long-term relationships.

Capitalize on Our Industry-Leading Position in Providing In-Building Shared Infrastructure Solutions to Wireless Carriers. We have the largest operational base of distributed antenna systems providing in-building wireless coverage in the tower industry. We also have a leading position in distributed radio frequency transport. We believe wireless carriers will continue to commit greater financial resources to these areas as they seek to improve network quality and provide additional high quality network coverage.

Customers

Our customers include several of the largest wireless service providers in the United States, including AT&T Wireless, Cingular, Nextel, Sprint, T-Mobile and Verizon Wireless. Our largest customers currently are Nextel (and its affiliates) and Cingular, which represented approximately 31% and 22%, respectively, of our revenue for the year ended December 31, 2002, and approximately 30% and 20%, respectively, of our revenues for the eight months ended September 30, 2003. For the year ended December 31, 2001, Nextel (and its affiliates) and Cingular accounted for 35% and 15% of our revenues, respectively. For the year ended December 31, 2000, Nextel (and its affiliates) accounted for 64% of our revenues.

Sales and Marketing

We believe that our quality portfolio of tower assets, our strong customer relationships and our operational excellence make us a preferred provider for the wireless industry. Our sales and marketing goals are to:


	•	Leverage existing relationships and develop new relationships with wireless service providers to lease and license antenna space on our tower, in-building and rooftop assets; and

	•	Form relationships with wireless service providers’ program management companies to further broaden our channels of distribution.

Maintaining and cultivating relationships with wireless service providers is a critical focus of our sales and marketing program. We have a dedicated group of sales representatives that focuses on establishing and maintaining relationships with customers at both local and regional levels. In addition, we employ an experienced national accounts team that works closely with each wireless service provider’s corporate headquarters and senior management team to cultivate and ensure long-term relationships.

Our sales staff is compensated on new customer revenue generation, relocation/reconfiguration revenue, fee revenue and customer satisfaction. In addition, our sales teams rely on the complementary functions of our field support services and project management teams to further identify revenue opportunities and enhance customer satisfaction.

Competition

Our principal competitors include American Tower Corp., Crown Castle International Corp., Global Signal, Inc., SBA Communications Corp., Sprint Sites USA, numerous independent tower operators and the many owners of non-tower antenna sites, including rooftops, water towers and other alternate structures. Wireless service providers, such as AT&T Wireless, Sprint PCS and T-Mobile, own and operate their own tower networks and lease (or may in the future decide to lease) antenna sites to other providers. We compete principally on the basis of tower location and capacity, price, quality of service and density of service within a geographic market.

Technological developments are also making it possible for wireless 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, through joint ventures and other arrangements (such as Cingular’s infrastructure joint ventures with T-Mobile and AT&T Wireless), sharing (or considering the sharing of) telecommunications infrastructure in ways that might adversely impact the growth of our business.

In addition, 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. These roaming agreements may be viewed by wireless service providers as a superior alternative to leasing space for their own antennas on communications sites we own.

Employees

As of September 30, 2003, we had 528 employees, including 77 employees in our discontinued broadcast services division. None of our employees is represented by a collective bargaining agreement, and we consider our employee relations to be good.

International

During 2001, we ceased development efforts in Europe and Mexico. In 2002, we sold our network services operations in Canada. As a result of the sale of our remaining towers located in Canada in September 2003, we no longer have international operations.

Regulatory and Environmental Matters

Federal Regulations

Both the FCC and the FAA regulate towers used for communications transmitters and receivers. These regulations control the siting, marking and lighting of towers and generally, based on the characteristics of the tower, require registration of tower facilities with the FCC. Wireless and broadcast communications antennas operating on towers are separately regulated and independently authorized by the FCC based upon the particular frequency used and the service provided. In addition to these regulations, SpectraSite must comply with certain environmental laws and regulations.

Under the requirements of the Communications Act of 1934, as amended, the FCC, in conjunction with the FAA, has developed standards for review of proposals for new or modified antenna structures. These standards mandate that the FCC and the FAA consider the height of the proposed antenna structure, the relationship of the structure to existing natural or man-made obstructions and the proximity of the structure to runways and airports. Proposals to construct new communications sites or modify existing communications sites that could affect air traffic must be filed with and reviewed by the FAA to ensure the proposals will not present a hazard to aviation. The FAA may condition its issuance of no-hazard determinations upon compliance with specified lighting and marking requirements. The FCC will not authorize the operation of communications antennas on towers unless the tower has been registered with the FCC or a determination has been made that such registration is not necessary. The FCC will not register a tower unless it has received all necessary clearances from the FAA. The FCC also enforces special lighting and marking requirements. Owners of towers on which communications antennas are located have an obligation to maintain marking and lighting to conform to FCC standards. Tower owners also bear the responsibility of notifying the FAA of any tower lighting failures. We generally outsource the monitoring of the lighting of our towers to contractors that specialize in those services. However, under the FCC’s rules, we remain fully liable for the acts and omissions of those contractors. We generally indemnify our customers against any failure to comply with applicable standards. Failure to comply with the applicable requirements (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/or tort liability.

The Telecommunications Act of 1996 amended the Communications Act of 1934 by limiting state and local zoning authorities’ jurisdiction over the construction, modification and placement of wireless communications towers. The law preserves local zoning authority but prohibits any action that would discriminate between different providers of wireless services or ban altogether the construction, modification or placement of communications towers. It also prohibits state or local restrictions based on the environmental effects of radio frequency emissions to the extent the facilities comply with the FCC regulations. The 1996 Act also requires the federal government to help licensees of wireless communications services gain access to preferred sites for their facilities. This may require that federal agencies and departments work directly with licensees to make federal property available for tower facilities.

In October 2000, the FCC adopted rules and policies related to telecommunications service providers’ access to rooftops, other rights-of-way and conduits in multi-tenant buildings. The FCC prohibited telecommunications carriers in commercial settings from entering into new

exclusive contracts with building owners, including contracts that effectively restrict premises owners or their agents from permitting access to other telecommunications service providers. The FCC also established procedures to ensure that the demarcation point in buildings, which marks the end of the incumbent local exchange carrier’s control over on-premises wiring and the beginning of the customer’s or building owner’s control, will, at the premises owner’s request, be at the “minimum point of entry” to the structure rather than further inside the premises. In addition, the FCC determined that, under the Communications Act, utilities, including local exchange carriers, will be required to afford telecommunications carriers and cable service providers reasonable and nondiscriminatory access to conduits and rights-of-way in customer buildings, to the extent such conduits and rights-of-way are owned or controlled by the utility. Finally, the FCC amended its existing rules to give building tenants the same ability to place on their leased or owned property small satellite dishes for receiving telecommunications and other fixed wireless signals that they currently have for receiving video services.

In the same October 2000 action, the FCC sought comment on a number of related issues, including whether the prohibition on exclusive contracts should be extended to residential buildings; whether it should be broadened to prohibit preferences other than exclusive access, such as exclusive marketing or landlord bonuses for tenants; whether the FCC should prohibit carriers from enforcing exclusive access provisions in existing contracts for commercial or residential multi-tenant buildings; and whether the agency has authority to prohibit local exchange carriers from providing services to multi-tenant buildings where the owners maintain policies unreasonably preventing competing carriers from gaining access to potential customers within the building. This proceeding remains open, and the FCC could act on it at any time.

In June 2003, the FCC issued a Notice of Proposed Rulemaking seeking comment on a draft agreement between the FCC, the Advisory Council on Historic Preservation and the National Conference of State Historic Preservation Officers that would tailor and streamline procedures for review of towers and other FCC licensed communications facilities under the National Historic Preservation Act of 1966, or “NHPA”, and on related revisions to the FCC’s rules. The FCC has indicated that the intent of the agreement and the proposed rule revisions is to improve compliance with the NHPA and streamline the review process for construction of towers and other FCC licensed communications facilities. We cannot predict with certainty whether, and if so when, the FCC’s proposals will be adopted, and, if they are, the effect they will have on our business.

In October 2003, the FCC released a Notice of Apparent Liability in which the agency proposed to impose a $120,500 forfeiture for an alleged failure to comply with the provisions of the Communications Act and the FCC’s rules relating to the registration and lighting of two towers. The proposed fine is the statutory maximum for such violations, resulting in part from the FCC’s determination that we had several similar forfeitures in the past three years. The FCC also required that we submit a report concerning our compliance with the laws and regulations applicable to towers, and directed the FCC’s Enforcement Bureau to review that report and conduct a broader investigation if appropriate. At this time, we have replied to the proposed forfeiture, stating that the majority of the FCC’s claim is meritless. The FCC has taken no further adverse action, and the recommended forfeiture in the Notice of Apparent Liability has not yet been imposed. We have completed our compliance report to the FCC. Any failure to comply with the Communications Act or the FCC rules could have a material adverse effect on our business, financial condition or results of operations.

In 1996, the FCC mandated the conversion of analog television signals to digital. As a result of several subsequent rulings by the FCC, each commercial television station in the United States was required to complete construction of new digital broadcasting facilities by May 1, 2002. Non-commercial stations were given until May 1, 2003, to complete digital construction. By April 21, 2003, all television stations were required to be simulcasting at least 50% of their programming on both their analog and digital facilities and must convert to 100% simulcasting within two years. The simulcasting transition is scheduled to end in 2006, when television broadcasters will be

required to terminate analog service, unless that date has been extended based on satisfaction of statutory standards demonstrating that significant portions of the viewing public do not have the ability to receive digital television signals.

Although these deadlines have resulted from past extensions by the FCC of previous deadlines, various broadcasters have requested that the FCC further extend the current conversion deadlines. In December 2001, the FCC declined to issue a blanket extension of the current deadlines, however, and instead agreed to continue to consider extension requests by particular broadcasters on a case-by-case basis, and made it easier for broadcasters to qualify for such extensions. As of October 2003, more than 80% of the nation’s commercial TV stations are broadcasting a digital television signal. Of the remaining commercial stations, most have been granted an additional extension to comply with their digital broadcast requirements, while a few have been denied such extensions and received letters of admonishment from the FCC. In April 2003, the FCC granted a six-month waiver on digital television simulcast requirements for all public television stations.

We believe that, although the planned conversion to digital might continue to be delayed through FCC extensions or the failure of various broadcasters to achieve the conversion in accordance with the established deadlines, if and when the conversion occurs, it will create significant potential for increased demand for space on broadcast towers, including our towers.

In August 2002, the FCC adopted a rule requiring all TV receivers manufactured in the United States with screen sizes greater than 13 inches, and all TV receiving equipment, such as VCRs and digital television recorders, be capable of receiving digital television signals over the air no later than July 1, 2007. We believe that this increased penetration of digital television capability among the general broadcast audience may also hasten the digital conversion and add to the demand for digital television broadcast towers.

State and Local Regulations

Most states regulate certain aspects of real estate acquisition and leasing activities. Where required, we outsource site acquisition to licensed real estate brokers or agents. Local regulations and restrictions include building codes and other local ordinances, zoning restrictions and restrictive covenants imposed by community developers. These regulations and restrictions vary greatly, but typically require tower owners to obtain a permit or other approval from local officials or community standards organizations prior to tower construction and prior to modifications of towers, including installation of equipment for new customers. Local zoning authorities generally have been hostile to construction of new transmission towers in their communities because of the height and visibility of the towers. Companies owning or seeking to build or modify towers have encountered an array of obstacles arising from state and local regulation of tower site construction and modification, including environmental assessments, fall radius assessments, marking and lighting requirements, and concerns with interference with other electronic devices. The delays resulting from the administration of such restrictions can last for several months and, when appeals are involved, can take several years.

Environmental and Related Regulations

Owners and operators of communications towers are subject to environmental laws. The FCC’s decision to register a proposed tower may be subject to environmental review under the National Environmental Policy Act of 1969, which requires federal agencies to evaluate the environmental impacts of their decisions under certain circumstances. The FCC has issued regulations implementing the National Environmental Policy Act, as well as the National Historic Preservation Act, the Endangered Species Act and the American Indian Religious Freedom Act. These regulations place responsibility on each applicant to investigate potential environmental and other effects of operations and to disclose any significant effects in an environmental

assessment prior to constructing a tower or adding a new customer on a tower. In the event the FCC determines that a proposed tower would have a significant environmental impact based on the standards the FCC has developed, the FCC would be required to prepare an environmental impact statement. In addition, various environmental groups routinely petition the FCC to deny applications to register new towers. This regulatory process can be costly and could significantly delay the registration of a particular tower. In addition, we are subject to environmental laws that may require investigation and remediation 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, financial condition or results of operations.

In August 2003, the FCC adopted a Notice of Inquiry to gather information on the impact of communications towers on migratory birds. The Notice of Inquiry is part of the FCC’s comprehensive action plan on environmental and historic preservation matters that Chairman Michael Powell announced in May 2003. This Notice of Inquiry marks the most significant action to date taken by the FCC on this subject and may lead to changes in the FCC’s environmental rules. In September 2003, the FCC announced a memorandum of agreement with the State of Michigan to conduct a study on the impact of communications towers on migratory birds. The results of this study and/or any rule changes resulting from the Notice of Inquiry could have a material adverse effect on our business, financial condition or results of operations.

Properties

We are headquartered in Cary, North Carolina, where we currently occupy an owned 109,570 square foot office facility on 20.0 acres of land and lease 74,923 square feet of office space. We own a 38,000 square foot broadcast tower manufacturing facility located on 10 acres of land in Pine Forge, Pennsylvania. We also own 9.5 acres of land in Visalia, California, on which a 57,000 square foot broadcast tower manufacturing facility is located and 161.7 acres of land in Mobile, Alabama, on which a 1,944 foot broadcast tower is located. Our Pine Forge and Visalia facilities are part of our broadcast services division and are currently classified as assets held for sale.

Our interests in communications sites are comprised of a variety of fee interests, leasehold and sub-leasehold interests created by long-term lease or sublease agreements, private easements, and easements and licenses or rights-of-way granted by government entities. In rural areas, a communications site typically consists of a three-to-five acre tract that supports towers, equipment shelters and guy wires to stabilize the structure. Less than 2,500 square feet are required for a self-supporting tower structure of the kind typically used in metropolitan areas. Land leases generally have an initial term of five years, with five additional five-year renewal periods. See “— Products and Services” for a list of the locations of our wireless towers.

Legal Proceedings

We emerged from bankruptcy on February 10, 2003. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Business Overview” for a discussion of our bankruptcy proceedings. Our subsidiaries, including Communications, were not part of the bankruptcy reorganization.

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 proceeding, the adverse outcome of which, individually or in the aggregate, is expected to have a material adverse effect on our business, financial condition or results of operations.

MANAGEMENT

Directors and Executive Officers

The following table sets forth information regarding our directors and executive officers:


Name	Age		Position

Stephen H. Clark		59	President, Chief Executive Officer, Chairman and Director
Timothy G. Biltz		45	Chief Operating Officer
David P. Tomick		52	Executive Vice President and Chief Financial Officer
Dale A. Carey		38	President, Leasing Division
Thomas A. Prestwood, Jr.		51	President, Broadcasting Division
Gabriela Gonzalez		42	Senior Vice President and Controller
John H. Lynch		46	Vice President, General Counsel and Secretary
Paul M. Albert, Jr.		61	Director
Gary S. Howard		52	Director
Robert Katz		36	Director
Richard Masson		45	Director

Stephen H. Clark is President, Chief Executive Officer and Chairman of the Board of Directors of SpectraSite. He has been a director of SpectraSite since its formation in May 1997 and Chairman since September 2002. Mr. Clark has 23 years of general management experience in high growth companies in the communications, technology and manufacturing sectors.

Timothy G. Biltz is Chief Operating Officer. Prior to joining SpectraSite in August 1999, Mr. Biltz spent 10 years at Vanguard Cellular Systems, Inc., most recently as Executive Vice President and Chief Operating Officer. He joined Vanguard in 1989 as Vice President of Marketing and Operations and was Executive Vice President and President of U.S. Wireless Operations from November 1996 until May 1998 when he became Chief Operating Officer. Mr. Biltz was instrumental in Vanguard’s development from an initial start-up to an enterprise with over 800,000 subscribers.

David P. Tomick is Executive Vice President and Chief Financial Officer. Mr. Tomick joined SpectraSite in 1997. From 1994 to 1997, Mr. Tomick was Chief Financial Officer of Masada Security, Inc., a company engaged in the security monitoring business. From 1988 to 1994, he was Vice President — Finance of Falcon Cable TV where he was responsible for debt management, mergers and acquisitions, equity origination and investor relations. Prior to 1988, he managed a team of corporate finance professionals focusing on the communications industry for The First National Bank of Chicago.

Dale A. Carey is President of SpectraSite’s Wireless Division. Mr. Carey joined SpectraSite as Senior Vice President of Services and Operations in February 2000, was elected President of SpectraSite Building Group, Inc. in October 2003 and assumed his current position in May 2002. Prior to joining SpectraSite, Mr. Carey served in various capacities for the Pennsylvania Super System of Vanguard Cellular Systems since 1989, most recently as the Regional Vice President and General Manager.

Thomas A. Prestwood, Jr. is President of SpectraSite’s Broadcast Division. Mr. Prestwood joined SpectraSite in November 2001. Mr. Prestwood has over 15 years of senior management experience and executive level work in the telecommunications industry, most recently as Regional Vice President for Telecorp PCS. Prior to joining Telecorp, Mr. Prestwood served as an Executive Vice President for Highland Holdings and a Market Director for AT&T Wireless Services. For Vanguard Cellular Systems, Inc., Mr. Prestwood served as Vice President from

1990 to 1995 and as a Senior Vice President from 1995 until the company was acquired by AT&T Wireless in 1999.

Gabriela Gonzalez is Senior Vice President and Controller. Prior to joining SpectraSite in April 2000, Ms. Gonzalez served as Controller for Commercial Operations for GlaxoWellcome (now GlaxoSmithKline). Before joining GlaxoWellcome in 1998, Ms. Gonzalez served as Controller for Alyeska Pipeline, the operator of the TransAlaskan Pipeline. Ms. Gonzalez is a Certified Public Accountant in Alaska and North Carolina.

John H. Lynch is Vice President, General Counsel and Secretary. Prior to joining SpectraSite in August 1999, Mr. Lynch served as General Counsel for Qualex Inc., the wholly owned photofinishing subsidiary of Eastman Kodak Company. Before joining Qualex in 1989, Mr. Lynch practiced corporate and real estate law in the Atlanta, Georgia offices of Wildman, Harrold, Allen, Dixon and Branch.

Paul M. Albert, Jr. has been a director of SpectraSite since February 2003. Mr. Albert is a corporate director, a finance and capital markets consultant primarily engaged in educating bankers at global financial institutions, and a private investor. He has been a director of DigitalGlobe, Inc. since April 1999 and prior to the sale of the companies was a director of CAI Wireless Systems from December 1998 to August 1999 and Teletrac Inc. from December 1999 to April 2001. In his capacity as a corporate director he has served on audit, compensation, finance, and governance committees, often as committee chairman, and is a director of the New York Chapter of the National Association of Corporate Directors. From 1970 to 1996 he was an investment banker, holding senior officer positions at Morgan Stanley & Co. and Prudential Securities.

Gary S. Howard has been a director of SpectraSite since February 2003. Mr. Howard served as Executive Vice President and Chief Operating Officer of Liberty Media, Inc. from July 1998 to January 2004. Mr. Howard served as Chief Executive Officer of Liberty Satellite & Technology, Inc. from December 1996 to April 2000. Mr. Howard also served as Executive Vice President of TCI from December 1997 to March 1999. Previously, Mr. Howard served as Chief Executive Officer, Chairman of the Board and a director of TV Guide, Inc., President and Chief Executive Officer of TCI Ventures Group, LLC and President of Liberty Satellite and Technology. Mr. Howard is also a director of Liberty Satellite & Technology, Inc., Liberty Media, Inc., UnitedGlobalCom, Inc., and Intelsat, Ltd. Mr. Howard serves as Chairman of the Board of Liberty Satellite & Technology, Inc.

Robert Katz has been a director of SpectraSite since February 2003. Mr. Katz has been associated with Apollo Management, L.P. since 1990. Mr. Katz is also a director of Vail Resorts, Inc.

Richard Masson has been a director of SpectraSite since February 2003. Mr. Masson is a Principal and co-founder of Oaktree Capital Management, LLC, an investment advisory firm with over $25 billion of assets under management. Until January 2004, he served as co-Head of Research for their distressed debt funds. Prior to that, Mr. Masson was the head of the Special Credits analytic group at The TCW Group, Inc.

Directors’ Compensation

Directors who are not executive officers receive an annual fee of $25,000 and $1,000 for each board meeting they attend. In addition, each Audit Committee member receives an annual fee of $20,000 and the chairman of the Audit Committee receives an additional annual fee of $5,000. Each member of the Compensation Committee and the Governance Committee receives an annual fee of $2,000 and the chairman of the Compensation Committee receives an additional annual fee of $5,000. Directors will be reimbursed for out-of-pocket expenses incurred in connection with attending meetings of the board and its committees. We also have granted

10,000 stock options with an exercise price of $13.08, which vest over a period of approximately three years, to each of our non-employee directors as compensation for their services as members of our board.

Executive Compensation

Summary Compensation Table

The following table sets forth the cash and non-cash compensation earned by SpectraSite’s Chief Executive Officer and four other most highly compensated executive officers during the years ended December 31, 2001, 2002 and 2003.



									Long Term Compensation
				Annual Compensation					Awards

									Number of
									Securities
									Underlying		All Other
									Options/		Compensation
Name and Principal Position		Year		Salary($)		Bonus($)			SARs(#)(1)		($)(2)

Stephen H. Clark			2003		375,000		2,800,000	(3)(4)		1,527,778		6,000
	Chief Executive Officer		2002		375,000		367,500			—		5,500
			2001		375,000		300,000			245,250		4,884
Timothy G. Biltz			2003		300,000		—	(4)		972,222		6,000
	Chief Operating Officer		2002		300,000		294,000			—		5,500
			2001		300,284		270,000			140,000		5,100
David P. Tomick			2003		235,000		1,120,000	(3)(4)		555,556		6,000
	Chief Financial Officer		2002		235,000		230,300			—		5,500
			2001		228,654		89,725			113,973		5,250
Dale A. Carey(5)			2003		225,500		41,938	(6)		316,666		6,000
	President, Leasing		2002		209,423		102,255			—		5,500
			2001		202,500		90,839			75,000		3,175
Thomas A. Prestwood, Jr.(7)			2003		199,875		38,172	(6)		150,000		—
	President, Broadcast		2002		195,000		97,500			—		5,000
			2001		15,000		50,000			150,000		—


(1)	All options granted in 2001 were terminated on February 10, 2003 under the Plan of Reorganization without consideration.

(2)	Amounts reported are SpectraSite’s contribution under its 401(k) plan.

(3)	Each of Messrs. Clark and Tomick received bonuses in connection with our emergence from bankruptcy in February 2003. These amounts were approved as part of our Plan of Reorganization.

(4)	Each of Messrs. Clark, Biltz and Tomick earned an annual performance bonus for fiscal 2003. This bonus amount will be determined in February 2004. The aggregate annual target bonus amount is 100% of the executive’s annual salary.

(5)	Mr. Carey’s annual salary was increased to $231,000 in July 2003.

(6)	Consisting of a bonus amount for the first three fiscal quarters of 2003. The fourth fiscal quarter and the annual bonus awards will be determined in February 2004. The aggregate annual target bonus is 50% of the executive’s annual salary.


(7)	Mr. Prestwood joined SpectraSite in November 2001. Mr. Prestwood’s annual salary was increased to $204,750 in July 2003.

Option/SAR Grants in Fiscal 2003

The table below shows the option grants to the executive officers named in the Summary Compensation Table above during the fiscal year ended December 31, 2003:



									Potential Realizable Value
									At Assumed Annual
									Rates of Stock
									Price Appreciation
	Individual Grants								For Option Term(1)

			Percent of
	Number of		Total
	Securities		Options/
	Underlying		SARs Granted		Exercise of
	Options/SARs		to Employees		Base Price		Expiration
Name	Granted (#)		in Fiscal Year(2)		($/Sh)		Date		5% ($)		10% ($)

Stephen H. Clark		1,527,778		27.04		14.91 (3)		3/12/2013		9,759,136		29,032,644
Timothy G. Biltz		972,222		17.04		13.075		3/12/2013		7,994,384		20,259,340
David P. Tomick		555,556		10.0		15.09 (3)		3/12/2013		3,448,779		10,457,332
Dale A. Carey		316,666		5.07		13.075		3/12/2013		2,603,880		6,598,744
Thomas A. Prestwood, Jr.		150,000		2.7		13.075		3/12/2013		1,233,420		3,125,727


(1)	The potential realizable values at 5% and 10% appreciation are calculated by assuming that the price of our common stock appreciates at the indicated rate for the entire term of the option, and that the option is exercised at the exercise price and sold on the last day of its term at the appreciated price. There is no assurance that the value realized by the optionee will be at or near the assumed appreciation rates, or that the optionee will remain an employee of SpectraSite during the entire term of the option.

(2)	A total of 5,573,378 options were granted to our executive officers and employees during fiscal year 2003 under our 2003 Equity Incentive Plan. Under this plan, the option exercise price is not less than 100% of the fair market value of our common stock on the effective date of the grant. The options included in this table become exercisable as follows: 20% vested on March 12, 2003; and, subject to the optionee’s continued employment, 50% vest ratably on a monthly basis over the 36 months beginning April 12, 2003, and 30% will vest on March 12, 2009, or earlier if we achieve certain annual financial targets.

(3)	The exercise price of the executive’s options was set at an amount above the fair market value of our common stock on the effective date of the grant. The amount by which the aggregate exercise price of these options, granted in connection with the Plan of Reorganization, exceeded the aggregate fair market value of the common stock subject to such options on the date of grant equals the amount of the emergence bonus paid to Messrs. Clark and Tomick, respectively. See “— Summary Compensation Table.”

Aggregated Options/SAR Exercises and Value in Fiscal 2003

The table below provides the number and value of unexercised options held by the executive officers named in the Summary Compensation Table above as of December 31, 2003. None of the executive officers exercised any options in 2003.

Aggregated Option/SAR Exercises in Fiscal 2003

and Year-End Option/SAR Values



	Number of Securities
	Underlying Unexercised				Value of Unexercised In-the-
	Options/SARs at Fiscal				Money Options/SARs at
	Year-End(#)				Fiscal Year-End($)(1)

Name	Exercisable		Unexercisable		Exercisable		Unexercisable

Stephen H. Clark		496,528		1,031,250		9,851,116		20,460,000
Timothy G. Biltz		315,973		656,249		6,848,715		14,224,197
David P. Tomick		180,557		374,999		3,549,751		7,372,480
Dale A. Carey		102,917		213,749		2,230,726		4,633,010
Thomas A. Prestwood, Jr.		48,750		101,250		1,056,656		2,194,594


(1)	Based on the closing price of our common stock on the New York Stock Exchange on December 31, 2003 of $34.75 per share.

Employment Agreements

We have entered into employment agreements with each of Messrs. Clark, Tomick and Biltz, effective as of February 10, 2003. The initial term of the employment agreements is three years, with automatic one-year renewals unless either party gives written notice of nonrenewal at least six months prior to the end of the term. The annual base salaries for Messrs. Clark, Tomick and Biltz are determined pursuant to their respective employment agreements, and they are each eligible to receive annual bonuses in amounts to be determined based on our achievement of annual financial targets established by our Board of Directors. In connection with our emergence from chapter 11 bankruptcy, Messrs. Clark and Tomick also received cash bonuses on February 10, 2003, in the amounts of $2,800,000 and $1,120,000, respectively. If their employment is terminated as a result of their death or disability or is terminated by us without cause, or if they resign without good reason during the thirteenth month following a change in control (as defined in the employment agreements), Messrs. Clark, Tomick and Biltz will be entitled to receive continued salary, average annual bonus and benefits for a period of 24 months following the termination, provided that this period shall be extended to 36 months if they are terminated by us without cause or if they resign with good reason during the 24-month period following a change in control.

Messrs. Clark, Tomick and Biltz have agreed that for a period of 24 months following the termination of their employment with us they generally will not:


	•	engage in, or own any interest in or perform any services for any business which engages in, competition with us;

	•	solicit our management employees or otherwise interfere with the employment relationship between us and our employees; or

	•	hire, engage or in any manner be associated with any supplier, contractor or entity with a business relationship with us, if such action would have a material adverse effect on us.

In connection with their employment agreements, Messrs. Clark, Tomick and Biltz were granted options under our Equity Incentive Plan to purchase 1,527,778, 555,556 and 972,222 shares of common stock, respectively. The exercise prices of these options are $14.91, $15.09 and $13.08, respectively. Twenty percent of the options vested on March 12, 2003 and, subject to the optionee’s continued employment, 50% vest ratably on a monthly basis during the 36 months beginning April 12, 2003, and 30% will vest on March 12, 2009, or earlier if we achieve certain annual financial targets.

Severance Plans

Messrs. Carey and Prestwood participate in our Executive Severance Plan B. This plan generally provides that, upon termination of a participant’s employment by us other than for cause or by the participant for good reason (which includes any termination by a participant during the thirteenth month following a change in control), the participant will be entitled to continued payments of base salary and target bonus, as well as continued benefits, during the 18 months following termination if the participant then has five or more years experience in current or equivalent employment positions, and 12 months following termination if the participant has less than five years of such experience. In the event of termination resulting from a change in control or in the two-year period following a change in control, the periods referred to above shall be increased to 24 months. For this purpose, a change of control occurs upon (i) the acquisition, other than by our principal stockholders, of more than 35% of the total combined voting power of our outstanding securities and such principal stockholders own a lesser percentage of the voting power of our outstanding securities than such acquiring person and cease to have the ability to elect or designate for election a majority of our Board of Directors; (ii) a change in the composition of our Board of Directors during any two-year period that results in the current directors (or those directors approved by the Board of Directors) ceasing to constitute a majority of the directors; (iii) our merger or consolidation with another entity unless our outstanding voting securities are exchanged for consideration including securities representing a majority of the voting power of the surviving corporation; or (iv) a sale of all or substantially all of our assets other than to our principal stockholders or persons controlled by such stockholders.

Equity Compensation Plans

In connection with the Plan of Reorganization, all outstanding awards under our compensation plans were terminated without consideration. The following table sets forth information with respect to compensation plans under which the common stock is authorized for issuance as of December 31, 2003.

Equity Compensation Plan Information

Number of Securities

Number of

Remaining Available

Securities to be

for Future Issuance

Issued upon

Weighted-average

under Equity

Exercise of

Exercise Price of

Compensation Plans

Outstanding

(excluding

Options, Warrants

securities reflected

Plan Category

and Rights

in column)(1)

Equity compensation plans approved by security holders(2)

5,222,799

14.03

393,978

Equity compensation plans not approved by security holders

—

Total

5,222,799

14.03

393,978


(1)	Includes 7,306 options cancelled during 2003 that are available for reissuance under the 2003 Equity Incentive Plan.

(2)	Consists of our 2003 Equity Incentive Plan. The 2003 Equity Incentive Plan was approved as part of our Plan of Reorganization by the bankruptcy court and by claim holders who received common stock in connection with the Plan of Reorganization.

2003 Equity Incentive Plan

In 2003, subject to execution of definitive documentation, options for 5,613,328 shares of common stock were issued under the Equity Incentive Plan, each having an exercise price of $13.08 per share, except for the options granted to Messrs. Clark and Tomick, whose options have an exercise price of $14.91 and $15.09, respectively. Approximately 393,978 shares of common stock were available for future grants.

The following is a discussion of other features of the plan.

Purpose of Plan. The nature and purpose of the plan is to use performance-based grants of long-term, equity-based incentives in the form of stock options and other equity based awards in order to link total compensation for management and key employees to our performance and stock price appreciation and to allow us to remain competitive and to retain top performing employees over time. The plan also permits awards to directors.

Plan Administration. The plan is administered by the Compensation Committee of our Board of Directors. The Compensation Committee has sole discretion, subject to the terms of the plan, to determine the amounts and types of awards to be made, set the terms, conditions and limitations applicable to each award, and prescribe the form of the instruments embodying any award. The Board of Directors or the Compensation Committee may delegate to another committee of the Board of Directors the authority to grant awards to certain persons and the Compensation Committee may generally delegate the authority to act on its behalf to certain of our officers.

Eligibility. Awards may be granted under the plan to any of our directors, officers or other employees and any individual providing services as our consultant, advisor or otherwise as an independent contractor.

Vesting and Exercise of Options. Options become exercisable as set forth in a participant’s award agreement.

Payment for Options. The exercise price of any stock option awarded under the plan is determined by the Compensation Committee prior to the grant date. Participants may exercise an option by making payment in any manner specified by the Compensation Committee.

Restricted Stock. The Compensation Committee may authorize awards of restricted stock, including performance-based restricted stock. Awards of restricted stock may be made for no consideration, or for an amount as is determined by the Compensation Committee. Restricted stock is common stock that generally is non-transferable and is subject to other restrictions determined by the Compensation Committee for a specified period. Unless the Compensation Committee determines otherwise, or specifies otherwise in an award agreement, if the participant terminates employment during the restricted period, then any unvested restricted stock will be forfeited. To date, no shares of restricted stock have been awarded under the plan.

Other Awards Under the Plan. The Compensation Committee may grant other types of equity-based awards such as stock appreciation rights, deferred stock, dividend equivalents and performance-based awards. Such awards and awards of restricted stock may be subject to attainment of preestablished performance goals based on, Adjusted EBITDA, revenue, net income, operating income, cash plan, return on assets, return on equity, return on capital or total stockholder return.

Federal Income Tax Consequences of Options. The grant of a stock option under the plan will generally not have any immediate effect on the federal income tax liability of SpectraSite or the participant. If the Compensation Committee grants a non-qualified stock option, then the participant will recognize ordinary income at the time he or she exercises the option in an amount equal to the difference between the fair market value of the common stock at the time of its exercise and the exercise price, and we will receive a deduction for the same amount.

If the Compensation Committee grants an incentive stock option, the participant generally will not recognize any taxable income at the time he or she exercises the incentive stock option, but will recognize income at the time he or she sells the common stock acquired by exercise of the incentive stock option. Upon sale of the common stock acquired upon exercise of the incentive stock option, the employee will recognize income equal to the difference between the exercise price and the amount received upon sale, and such income generally will be eligible for capital gain treatment. We generally are not entitled to an income tax deduction in connection with an incentive stock option. However, if the employee sells the common stock either within two years of the date of the grant, or within one year of the date of the exercise of the incentive stock option, then the option is treated for federal income tax purposes as if it were a non-qualified stock option; the income recognized by the employee will not be eligible for capital gain treatment and we will be entitled to a federal income tax deduction equal to the amount of income recognized by the employee.

PRINCIPAL AND SELLING STOCKHOLDERS

The table below sets forth, as of February 5, 2004, information with respect to the beneficial ownership of SpectraSite’s common stock by:


	•	each of our directors and each of the executive officers named in the Summary Compensation Table under “Management — Executive Compensation;”

	•	each person who is known to be the beneficial owner of more than 5% of any class or series of our capital stock;

	•	all of our directors and executive officers as a group; and

	•	each other selling stockholder participating in the offering.

The amounts and percentages of common stock beneficially owned are reported on the basis of regulations of the SEC governing the determination of beneficial ownership of securities. Under these rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or to direct the voting of such security, or investment power, which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days. Under these rules, more than one person may be deemed to be a beneficial owner of the same securities.



	Shares of Common Stock						Shares of Common Stock
	Beneficially Owned Before						Beneficially Owned After
	This Offering						This Offering

	Number		Percentage		Shares		Number		Percentage
Name of Beneficial Owner	of Shares		of Class		Offered		of Shares		of Class

Stephen H. Clark(1)		538,230		*		—		538,230		*
Timothy G. Biltz(2)		356,481		*		—		356,481		*
David P. Tomick(3)		207,619		*		—		207,619		*
Dale A. Carey(4)		116,111		*		—		116,111		*
Thomas A. Prestwood, Jr.(5)		24,999		*		—		24,999		*
Paul M. Albert, Jr.(6)		4,668		*		—		4,668		*
Gary S. Howard(6)		4,668		*		—		4,668		*
Robert Katz(6)(7)		4,668		*		—		4,668		*
Richard Masson(8)		4,668		*		—		4,668		*
Funds affiliated with Apollo Management V, L.P.(7)(9)		7,882,765		16.5		3,218,220		4,664,545		9.8
Funds managed by Oaktree Capital Management, LLC(8)(9)(10)		6,831,905		14.3		2,789,195		4,042,710		8.5
Funds managed by Capital Research and Management Company(9)(11)		4,694,612		9.8		1,916,623		2,777,989		5.8
Funds affiliated with SPO Partners & Co.(12)		3,029,800		6.3		—		3,029,800		6.3
Franklin Mutual Advisers, LLC(9)(13)		3,016,108		6.3		1,075,962		1,940,146		4.1
All current directors and executive officers as a group (11 persons)(14)		1,317,322		2.7		—		1,317,322		2.7


	*	Less than 1%.


	(1)	Includes 536,236 shares of common stock issuable upon the exercise of outstanding options exercisable within 60 days. Also includes 1,994 shares of common stock issuable upon the exercise of outstanding warrants exercisable within 60 days.

	(2)	Includes 356,481 shares of common stock issuable upon the exercise of outstanding options exercisable within 60 days.

	(3)	Includes 203,705 shares of common stock issuable upon the exercise of outstanding options exercisable within 60 days. Also includes 3,914 shares of common stock issuable upon the exercise of outstanding warrants exercisable within 60 days, of which 1,204 are held by the Tomick Family Trust.

	(4)	Includes 116,111 shares of common stock issuable upon the exercise of outstanding options exercisable within 60 days.

	(5)	Includes 24,999 shares of common stock issuable upon the exercise of outstanding options exercisable within 60 days.

	(6)	Includes 4,668 shares of common stock issuable upon the exercise of outstanding options exercisable within 60 days.


	(7)	With respect to Apollo Management V, L.P. (“Apollo Management”), includes 7,882,765 shares of common stock held by AP Towers LLC (“AP Towers”). The members of AP Towers are Apollo Investment Fund V, L.P., Apollo Overseas Partners V, L.P. and other affiliated investment partnerships (collectively, the “Apollo Funds”). Apollo Management serves as manager of each of AP Towers and each of the Apollo Funds and as such may be deemed to have voting and investment control over the shares held by AP Towers. Mr. Katz, a director of SpectraSite, is associated with Apollo Management but does not beneficially own any of the shares held by AP Towers or the Apollo Funds. The business address of AP Towers and each of the Apollo Funds is c/o Apollo Management, 1301 Avenue of the Americas, New York, NY 10019.

	(8)	Includes for Mr. Masson, but excludes for funds managed by Oaktree Capital Management, LLC, 4,668 shares of common stock issuable upon the exercise of outstanding options exercisable within 60 days. Mr. Masson, a director of SpectraSite, is a principal of Oaktree Capital Management, LLC but does not beneficially own any of the shares held by the funds managed by Oaktree Capital Management LLC. Pursuant to the policies of Oaktree Capital Management, LLC, Mr. Masson cannot retain the reported options or the underlying common shares and has assigned such options to Oaktree Capital Management, LLC. Mr. Masson disclaims beneficial ownership of such options and the underlying common shares.

	(9)	If the underwriters exercise their option to purchase 1,350,000 additional shares in full, funds affiliated with Apollo Management V, L.P. will sell an additional 482,733 shares; funds managed by Oaktree Capital Management, LLC will sell an additional 418,379 shares; funds managed by Capital Research and Management Company will sell an additional 287,494 shares; and Franklin Mutual Advisors, LLC will sell an additional 161,394 shares.


(10)	Includes 4,517,587 shares of common stock held by OCM Opportunities Fund IV, L.P. and 2,314,318 shares held by OCM Opportunities Fund IVb, L.P. Oaktree Capital Management, LLC is the general partner of each of the funds and as such may be deemed to have voting and investment control over the shares held by the funds. Oaktree Capital Management, LLC disclaims beneficial ownership of the shares except to the extent of its pecuniary interest in the shares. The business address for the Oaktree funds is 333 S. Grand Avenue, 28th Floor, Los Angeles, California 90071.

(11)	Capital Research and Management Company is the beneficial owner of common stock, arising from the beneficial ownership by certain investment companies and other managed accounts, including investment companies registered under the Investment Company Act of 1940, which are advised by Capital Research and Management, a registered investment adviser. Such shares are beneficially held by the funds in their capacity as investment companies and are beneficially held by Capital Research and Management as an investment adviser. Capital Research and Management has sole voting power and sole dispositive power over the shares but has no pecuniary interest in and disclaims beneficial ownership of such shares. The business address for Capital Research and Management is 333 S. Hope St., 55th Floor, Los Angeles, California 90071.

(12)	Pursuant to a Schedule 13D filed on October 14, 2003, SPO Partners & Co. is the beneficial owner of common stock, arising from the beneficial ownership by certain investment partnerships and other accounts, which are advised by SPO and its principals. As such, SPO and its principals may be deemed to have shared voting and investment power over the shares. The business address for SPO and its principals is 591 Redwood Highway, Suite 3215, Mill Valley, California 94941.

(13)	Franklin Mutual Advisers, LLC is the beneficial owner of common stock, arising from the beneficial ownership by certain investment companies and other managed accounts, including investment companies registered under the Investment Company Act of 1940, which are advised by Franklin Mutual Advisers, LLC. Such shares are beneficially held by funds in their capacity as investment companies and are beneficially held by Franklin Mutual Advisers, LLC as an investment advisor. Franklin Mutual Advisers, LLC has sole voting power and sole dispositive power over the shares but has no pecuniary interest in and disclaims beneficial ownership of such shares. The business address for Franklin Mutual Advisers, LLC is 51 John F. Kennedy Parkway, Short Hills, New Jersey 07078.

(14)	Includes 1,311,386 shares of common stock issuable upon the exercise of outstanding options exercisable within 60 days and 5,936 shares of common stock issuable upon the exercise of outstanding warrants exercisable within 60 days.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Registration Rights Agreement

Pursuant to the Plan of Reorganization, we entered into a registration rights agreement with Oaktree Capital Management, LLC, as general partner and/or investment manager of certain funds and accounts it manages, AP Towers LLC, an affiliate of Apollo Management V, L.P., and Capital Research Management Company as investment adviser for certain funds it manages, providing for the registration of the common stock. The following is a summary of the material terms of that registration rights agreement.

Under the registration rights agreement, the holders of our common stock that are party to the agreement may require us to register all or some of their shares under the Securities Act of 1933, as amended. The first two times each holder that is a party to the agreement makes such request, we are obligated to register the shares set forth in such request. If a holder that is party to the agreement makes more than two such requests, then the following conditions must be met to trigger a registration obligation:


	•	we must receive a request for registration from holders of at least 5% of its outstanding stock covered by the registration rights agreement; and

	•	the request must specify the number of shares to be disposed of and the proposed plan of distribution therefor.

We are only obligated to effect six such registrations except to the extent necessary to ensure that each of the holders that are party to the agreement may cause at least two such registrations during the term of the agreement. We have the right to include our shares in any registration statement required by the registration rights agreement.

In addition to the registration obligations discussed above, if we register any of our common stock under the Securities Act for sale to the public for our own account or for the account of others or both, the registration rights agreement requires that we use commercially reasonable efforts to include in the registration statement common stock held by stockholders that are party to the agreement who wish to participate in the offering. Registrations on Form S-4, Form S-8 or an offering to our existing security holders pursuant to rights distributed to our existing security holders or pursuant to a dividend reinvestment plan will not trigger this registration obligation.

Transactions with Executive Officers

In August 1999, we loaned David P. Tomick $325,000 in connection with the exercise of stock options to acquire Old Common Stock. The loan bears interest at the applicable federal rate under the Internal Revenue Code, 5.36% per annum, and matures in August 2004.

In September 1999, we loaned Timothy G. Biltz $500,000 to purchase a home as a relocation incentive. This loan is secured by any shares of common stock issued to Mr. Biltz upon his exercise of options or otherwise acquired by Mr. Biltz and bears interest at 5.82% per annum and matures in September 2004.

In January 2000, we loaned Stephen H. Clark $1,100,000 in connection with the exercise of stock options to acquire 512,500 shares of Old Common Stock. The loan bears interest at 5.80% per annum and matures in December 2004.

Mr. Clark’s son is our employee and received the following compensation during 2003: $84,312 in aggregate annual salary and bonuses; stock options to buy 10,000 shares of our common stock with an exercise price of $13.075 per share; and SpectraSite’s contribution of $3,140 to its 401(k) plan on his behalf. The compensation received by Mr. Clark’s son was commensurate in amount to the compensation received by our employees in comparable positions.

Predecessor Company Transactions

During the years ended December 31, 2002 and 2001, we entered into various transactions with parties that either were, or as a result of the transactions became, beneficial owners of 5% or more of our Old Common Stock. Following our reorganization, none of these parties owned more than 1% of our common stock. These transactions are described briefly below. Additional information regarding these transactions can be found in notes 9 and 11 to our consolidated financial statements.

On August 25, 2000, we entered into an agreement, which was subsequently amended, to acquire leasehold and sub-leasehold interests in approximately 3,900 wireless communications towers from affiliates of SBC Communications. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Tower Acquisitions and Dispositions,” Note 11, Acquisition Activity — 2002 Acquisitions — SBC Transaction, to our audited consolidated financial statements and Note 5, Acquisition and Disposition Activities — SBC Transaction, to our unaudited condensed consolidated financial statements.

Canadian Imperial Bank of Commerce and some of its affiliates (“CIBC”) have, together with other unrelated financial institutions, acted as agent and lender under Communications’ credit facility, for which CIBC received customary fees. In addition, prior to our reorganization, CIBC World Markets Corp, was an initial purchaser of our 12% Senior Discount Notes due 2008, our 11 1/4% Senior Discount Notes due 2009, our 10 3/4% Senior Notes due 2010 and our 12 7/8% Senior Discount Notes due 2012 and an underwriter of our February 2000 public offering of common stock. CIBC World Markets Corp. received customary fees for these investment banking activities.

On May 15, 2002, we entered into an agreement to issue up to $350 million aggregate principal amount of secured convertible term notes to affiliates of Welsh, Carson, Anderson and Stowe (“WCAS”). Pursuant to the agreement, we paid WCAS a fee of approximately $2.6 million, equal to 0.75% of the aggregate WCAS $350 million commitment, and approximately $2.6 million to reimburse WCAS for its expenses. In connection with our emergence from bankruptcy, we settled a claim made by WCAS relating to the agreement by distributing to them approximately 190,000 shares of common stock pursuant to our Plan of Reorganization and paying them approximately $0.2 million in cash.

DESCRIPTION OF CAPITAL STOCK

The following is a summary of the material terms and provisions of our capital stock. SpectraSite’s third amended and restated certificate of incorporation authorizes the issuance of 290,000,000 shares of capital stock, divided into 250,000,000 shares of common stock, $0.01 par value per share, and 40,000,000 shares of preferred stock, $0.01 par value per share. As of December 31, 2003, we had 47,750,453 shares of common stock outstanding. We have reserved an additional 135,866 shares of common stock for further distribution in connection with our emergence from bankruptcy. We have also reserved an additional 5,616,777 shares of common stock for issuance under our stock option plan and 2,496,854 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 in connection with our emergence from bankruptcy and 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.

Common Stock

The common stock is entitled to one vote per share. The holders of common stock have no preemptive rights, cumulative rights, subscription, redemption, sinking fund or conversion rights and preferences. The holders of common stock will be entitled to receive such dividends as our Board of Directors may declare out of funds legally available for that purpose. Upon our liquidation or dissolution, the holders of common stock will be entitled to share ratably in our assets legally available for the distribution to stockholders after payment of liabilities and subject to the prior rights of any holders of preferred stock then outstanding. All outstanding shares of common stock are validly issued, fully paid and nonassessable.

Warrants

As of December 31, 2003, we had reserved 2,496,854 shares of common stock for issuance upon the exercise of warrants issued in connection with our Plan of Reorganization. Under the Plan of Reorganization, all of our common stock outstanding prior to the effective date of the reorganization was cancelled in exchange for the warrants. The warrants are exercisable at a per share exercise price of $16.00, subject to anti-dilution adjustment in the event of certain distributions and other corporate events. The warrants expire on February 10, 2010.

Preferred Stock

We have 40,000,000 authorized, but unissued, shares of preferred stock, $0.01 par value per share. Although the rights and designations of the preferred stock are currently undefined, our Board of Directors is authorized to establish the voting powers, if any, of the shares of such series, and the preferences and relative participating, optional and other special rights of each series of preferred stock, provided, however, the Board of Directors shall not have the authority to issue any series of preferred stock if the purpose of such issuance is to implement, or to facilitate the implementation of, a “poison pill” or other similar stockholder rights plan or other plan whose primary intent is to impede an acquisition of us or an acquisition of substantially all of our subsidiaries or assets, unless any such issuance is approved by the affirmative vote of the holders of at least a majority of the voting power of the shares of our then outstanding voting stock, voting together as a single class.

Delaware Anti-Takeover Law

Section 203 of the Delaware General Corporation Law prohibits us from engaging in a “business combination” with an “interested stockholder.” This restriction applies for three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. A “business combination” includes (1) mergers, (2) asset sales and (3) other transactions resulting in a financial benefit to an interested stockholder. Generally, an “interested stockholder” is a person who, together with affiliates and associates, owns, or within three years did own, 15% or more of our voting stock. Section 203 could delay, defer or prevent a change in control. It might also reduce the price that investors might be willing to pay in the future for shares of common stock.

Limitation of Liability and Indemnification Matters

The third amended and restated certificate of incorporation provides that our directors will not be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except for liability:


	(1)	for any breach of the director’s duty of loyalty to us or our stockholders;
	(2)	for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
	(3)	under provision of Delaware law relating to unlawful payment of dividends or unlawful stock purchases or redemptions of stock; or
	(4)	for any transaction from which the director derives an improper personal benefit.

As a result of this provision, we and our stockholders may be unable to obtain monetary damages from a director for breach of his or her duty of care.

The third amended and restated certificate of incorporation provides for the indemnification of our directors and officers and any person who is or was serving at our request as a director, officer, partner, trustee, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise and any person who was or is serving at our request as a trustee or administrator under an employee benefit plan to the fullest extent authorized by, and subject to, the conditions set forth, in the Delaware General Corporation Law, against all expenses and liabilities. The indemnification provided under the third amended and restated certificate of incorporation includes the right to be paid by us, the expenses in advance of any proceeding for which indemnification may be had in advance of its final disposition.

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is EquiServe Trust Company, N.A.

SHARES AVAILABLE FOR FUTURE SALE

As of December 31, 2003, we had 47,750,453 shares outstanding, all of which were issued pursuant to our Plan of Reorganization. An additional 135,866 shares will be distributed pursuant to our Plan of Reorganization. In addition, as of December 31, 2003, warrants to purchase 2,496,854 shares of common stock at an exercise price of $16.00 per share were outstanding. As of December 31, 2003, we have 5,222,799 options outstanding and 393,978 shares available for future awards under our equity incentive plan. All of our outstanding shares of common stock, as well as the shares of common stock issuable in connection with our emergence from bankruptcy and 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.

In general, under Rule 144 as currently in effect, sales by an “affiliate” of ours are limited within any three month period to a number of shares that does not exceed the greater of (i) 1% of the then outstanding shares of our common stock or (ii) the average weekly trading volume of our common stock during the four calendar weeks preceding the date on which a notice of sale is filed with the SEC. As currently defined in Rule 144, an “affiliate” of an issuer is a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such issuer. Sales by affiliates under Rule 144 are also subject to certain other restrictions relating to manner of sale, notice and the availability of current public information about us.

We, the selling stockholders and our current directors and executive officers have agreed with the underwriters, subject to certain exceptions, not to dispose of or hedge any of their common stock or securities convertible into or exchangeable for shares of common stock during the period from the date of this prospectus continuing through the date 90 days after the date of this prospectus, except sales to us by the selling stockholders and sales pursuant to certain pre-arranged trading plans established by certain of our senior executive officers under Rule 10b5-1, promulgated by the SEC, in order to make periodic sales of common stock upon the exercise of stock options held by such officers or with the prior written consent of Goldman, Sachs & Co. These sales are expected to begin in February 2004. Assuming that sales are made at $35.50, the closing price of our common stock on February 5, 2004, these officers will sell not more than 190,000 shares in the aggregate pursuant to such plans during the 90 day “lock-up” period.

Upon the completion of this offering the selling stockholders will hold approximately 28.1% of the outstanding shares of our common stock, or approximately 25.2% if the underwriters’ over-allotment option is exercised in full. After the expiration of the 90 day “lock-up” period included in the agreement pursuant to which all of the selling stockholders and our directors and executive officers are subject, these individuals and entities will be entitled to dispose of their remaining shares, although the shares of common stock held by our affiliates will continue to be subject to the volume and other restrictions of Rule 144 under the Securities Act. In addition, Goldman, Sachs & Co. may, in its sole discretion and at any time without notice, release all or a portion of the shares subject to the lock-up. The shares that are released from the lock-up 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.

Prior to the offering, there has been a limited public market for our common stock and no prediction can be made as to the effect, if any, that this offering will have on the market price of the common stock. Nevertheless, sales of significant amounts of such shares in the public market or the availability of large amounts of shares for sale could adversely affect the market price of our common stock and could impair our future ability to raise capital through an offering of our equity securities. See “Risk Factors — Sales of our common stock could adversely affect our stock price.”

UNDERWRITING

We, the selling stockholders and the underwriters named below have entered into an underwriting agreement with respect to the shares being offered. Subject to certain conditions, the selling stockholders have agreed to sell to the underwriters, and each underwriter has severally agreed to purchase the number of shares indicated in the following table. Goldman, Sachs & Co. is the representative of the underwriters.


		Number of
Underwriters		Shares

Goldman, Sachs & Co.			4,050,000
Bear, Stearns & Co. Inc.			1,237,500
Citigroup Global Markets Inc.			1,237,500
Lehman Brothers Inc.			1,237,500
Raymond James & Associates, Inc.			1,237,500

	Total		9,000,000

The underwriters are committed to take and pay for all of the shares being offered, if any are taken, other than the shares covered by the option described below unless and until this option is exercised.

If the underwriters sell more shares than the total number set forth in the table above, the underwriters have an option to buy up to an additional 1,350,000 shares from the selling stockholders to cover such sales. They may exercise that option for 30 days. If any shares are purchased pursuant to this option, the underwriters will severally purchase shares in approximately the same proportion as set forth in the table above.

The following table shows the per share and total underwriting discounts and commissions to be paid to the underwriters by the selling stockholders. Such amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase 1,350,000 additional shares.



Paid by the Selling Stockholders

	No Exercise		Full Exercise

Per Share	$	1.40	$	1.40
Total	$	12,600,000	$	14,490,000

Shares sold by the underwriters to the public will initially be offered at the public offering price set forth on the cover of this prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to $0.84 per share from the public offering price. Any such securities dealers may resell any shares purchased from the underwriters to certain other brokers or dealers at a discount of up to $0.10 per share from the public offering price. If all the shares are not sold at the public offering price, the representative may change the offering price and the other selling terms.

We, the selling stockholders and our current directors and executive officers have agreed with the underwriters, subject to certain exceptions, not to dispose of or hedge any of their common stock or securities convertible into or exchangeable for shares of common stock during the period from the date of this prospectus continuing through the date 90 days after the date of this prospectus, except with the prior written consent of the representative. This agreement does not apply to any existing employee benefit plans, sales to us by the selling stockholders or to sales of our common stock by certain of our executive officers under pre-arranged Rule 10b5-1 trading plans. See “Shares Available for Future Sale” for a discussion of certain transfer restrictions.

Our common stock is listed on the New York Stock Exchange under the symbol “SSI.”

A prospectus in electronic format may be made available on the websites maintained by one or more of the representatives of the underwriters of this offering and may also be made

available on websites maintained by other underwriters. The underwriters may agree to allocate a number of shares to underwriters for sale to their online brokerage account holders. Internet distributions will be allocated by the lead managers to underwriters that may make Internet distributions on the same basis as other allocations.

In connection with the offering, the underwriters may purchase and sell shares of common stock in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in the offering. “Covered” short sales are sales made in an amount not greater than the underwriters’ option to purchase additional shares from the selling stockholders in the offering. The underwriters may close out any covered short position by either exercising their option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase additional shares pursuant to the option granted to them. “Naked” short sales are any sales in excess of such option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of common stock made by the underwriters in the open market prior to the completion of the offering.

The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representative has repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.

Purchases to cover a short position and stabilizing transactions may have the effect of preventing or retarding a decline in the market price of our stock, and together with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of the common stock. As a result, the price of the common stock may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued at any time. These transactions may be effected on the New York Stock Exchange, in the over-the-counter market or otherwise.

Each underwriter has agreed that (i) it has not offered or sold, and prior to the six months after the date of the offering of the common stock will not offer or sell any securities to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; (ii) it has complied, and will comply with, all applicable provisions of the Financial Services and Markets Act 2000 of Great Britain (“FSMA”) with respect to anything done by it in relation to the securities in, from or otherwise involving the United Kingdom, and (iii) it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the FSMA) received by it in connection with the issue or sale of any securities in circumstances in which section 21(1) of the FSMA does not apply to the issuer.

The common stock may not be offered, sold, transferred or delivered in or from The Netherlands, as part of their initial distribution or as part of any re-offering, and neither this prospectus nor any other document in respect of the offering may be distributed or circulated in The Netherlands, other than to individuals or legal entities which include, but are not limited to, banks, brokers, dealers, institutional investors and undertakings with a treasury department, who or which trade or invest in securities in the conduct of a business or profession.

The common stock has not been and will not be registered under the Securities and Exchange Law of Japan. Each underwriter has represented and agreed that it has not offered or sold, and it will not offer or sell, directly or indirectly, any common stock in Japan or to, or for the account or benefit of, any resident of Japan or to, or for the account or benefit, of any resident for reoffering or resale, directly or indirectly, in Japan or to, or for the account or benefit of, any resident of Japan except (i) pursuant to an exemption from the registration requirements of, or otherwise in compliance with, the Securities and Exchange Law of Japan and (ii) in compliance with the other relevant laws and regulations of Japan.

No offer to sell the common stock has been or will be made in the Hong Kong Special Administrative Region of the People’s Republic of China (“Hong Kong”), by means of any document, other than to persons whose ordinary business is to buy or sell shares or debentures, whether as principal or agent, except in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32) of Hong Kong, and unless permitted to do so under the securities laws of Hong Kong, no person has issued or had in its possession for the purposes of issue, and will not issue or have in its possession for the purpose of issue, any advertisement, document or invitation relating to the common stock in Hong Kong other than with respect to the common stock intended to be disposed of to persons outside Hong Kong or only to persons whose business involves the acquisition, disposal or holding of securities whether as principal or agent.

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation or subscription or purchase, of the common stock may not be circulated or distributed, nor may the common stock be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than under circumstances in which such offer, sale or invitation does not constitute an offer or sale, or invitation for subscription or purchase, of the common stock to the public in Singapore.

This prospectus has not been, and will not be, lodged with the Australian Securities and Investments Commission (“ASIC”) as a disclosure document for the purpose of the Australian Corporations Act 2001 (Cwlth) (the “Corporations Act”). The common stock may not be offered for sale (or transferred, assigned or otherwise alienated) to investors in Australia for 12 months after their issue, except in circumstances where disclosure to investors is not required under Chapter 6D of the Corporations Act or unless a compliant disclosure document is prepared and lodged with ASIC.

The selling stockholders are responsible for underwriting discounts and commissions. We estimate that our share of the total expenses of the offering will be approximately $875,000.

We and the selling stockholders have agreed to indemnify the several underwriters against certain liabilities, including liabilities under the Securities Act.

In the ordinary course of their respective businesses, the underwriters and certain of their respective affiliates have engaged, and may in the future engage, in commercial banking and/or investment banking transactions with us and our affiliates. They have received and will receive customary fees and commissions for these transactions. Goldman, Sachs & Co. was an underwriter in connection with the public offering of our common stock in October 2003.

LEGAL MATTERS

Paul, Weiss, Rifkind, Wharton & Garrison LLP, New York, New York, will pass on the validity of the common stock offered by this prospectus for us. Cahill Gordon & Reindel LLP will pass upon certain matters for the underwriters.

EXPERTS

The consolidated financial statements of SpectraSite, Inc. at December 31, 2002 and 2001, and for each of the three years in the period ended December 31, 2002, appearing in this prospectus and Registration Statement have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon appearing elsewhere herein and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and file reports, proxy statements and other information with the SEC. We have also filed with the SEC a registration statement on Form S-1 to register our common stock. This prospectus, which forms part of the registration statement, does not contain all of the information included in that registration statement. For further information about us and our common stock offered in this prospectus, you should refer to the registration statement and its exhibits. You may read and copy the registration statement and any other document we file with the SEC at the SEC’s Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the Public Reference Room. In addition, the SEC maintains a web site that contains registration statements, reports, proxy statements and other information regarding registrants, such as us, that file electronically with the SEC. The address of the web site is www.sec.gov.

INDEX TO FINANCIAL STATEMENTS

I. SPECTRASITE, INC. ANNUAL FINANCIAL STATEMENTS


	Page

Report of Independent Auditors		F-2
Consolidated Balance Sheets as of December 31, 2001 and 2002		F-3
Consolidated Statements of Operations for the years ended December 31, 2000, 2001 and 2002		F-4
Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the years ended December 31, 2000, 2001 and 2002		F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2000, 2001 and 2002		F-6
Notes to Consolidated Financial Statements		F-7

II. SPECTRASITE, INC. INTERIM FINANCIAL STATEMENTS


	Page

Condensed Consolidated Balance Sheets at September 30, 2003 (unaudited; Reorganized Company) and December 31, 2002 (Predecessor Company)		F-42
Unaudited Condensed Consolidated Statements of Operations for the three months ended September 30, 2003 (Reorganized Company), the three months ended September 30, 2002 (Predecessor Company), the eight months ended September 30, 2003 (Reorganized Company), the month ended January 31, 2003 (Predecessor Company) and the nine months ended September 30, 2002 (Predecessor Company)		F-43
Unaudited Condensed Consolidated Statements of Cash Flows for the eight months ended September 30, 2003 (Reorganized Company), the month ended January 31, 2003 (Predecessor Company) and the nine months ended September 30, 2002 (Predecessor Company)		F-44
Notes to the Unaudited Condensed Consolidated Financial Statements		F-45

F-1

REPORT OF INDEPENDENT AUDITORS

Board of Directors

SpectraSite, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of SpectraSite, Inc. (formerly known as SpectraSite Holdings, Inc.) and subsidiaries as of December 31, 2001 and 2002 and the related consolidated statements of operations, convertible preferred stock and stockholders’ equity (deficit) and cash flows for each of the three years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of SpectraSite, Inc. and subsidiaries at December 31, 2001 and 2002, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2002 in conformity with accounting principles generally accepted in the United States.

As discussed in Note 2 to the consolidated financial statements, the Company emerged from Chapter 11 bankruptcy on February 10, 2003. Effective February 1, 2003, the Company will change its basis of financial statement presentation to reflect the adoption of fresh start accounting in accordance with the American Institute of Certified Public Accountants’ Statement of Position 90-7, “Financial Reporting for Entities in Reorganization Under the Bankruptcy Code”.

As discussed in Note 3 to the consolidated financial statements, in 2002 the Company adopted Statement of Financial Accounting Standard No. 142, Goodwill and Other Intangible Assets and changed its method of accounting for goodwill.


	/S/ ERNST & YOUNG LLP

Raleigh, North Carolina

February 11, 2003, except for Note 15,

as to which the date is December 16, 2003

F-2

SPECTRASITE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS



			As of December 31,

			2001			2002


			(dollars in thousands)
ASSETS
Current assets:
	Cash and cash equivalents		$	31,547		$	80,961
	Accounts receivable, net of allowance of $4,457 and $11,088, respectively			16,618			10,929
	Prepaid expenses and other			11,366			16,461
	Assets held for sale			416,206			24,555

		Total current assets		475,737			132,906
Property and equipment, net				2,431,487			2,282,948
Goodwill, net				161,977			60,626
Other assets				134,224			101,976

		Total assets	$	3,203,425		$	2,578,456

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
	Accounts payable		$	33,689		$	11,666
	Accrued and other expenses			65,632			63,913
	Current portion of credit facility			—			2,244
	Liabilities held for sale			45,390			4,523

		Total current liabilities		144,711			82,346

Long-term portion of credit facility				695,000			780,711
Senior notes				400,000			—
Senior convertible notes				200,000			—
Senior discount notes				1,020,332			—
Other long-term liabilities				24,037			27,240

		Total long-term liabilities		2,339,369			807,951

Liabilities subject to compromise (Note 2)				—			1,763,286

Commitments and Contingencies
Stockholders’ equity (deficit):
	Common stock, $0.001 par value, 300,000,000 shares authorized, 153,424,509 and 154,013,917 issued and outstanding, respectively			153			154
	Additional paid-in-capital			1,622,089			1,624,939
	Accumulated other comprehensive income (loss)			21,984			(355	)
	Accumulated deficit			(924,881	)		(1,699,865	)

		Total stockholders’ equity (deficit)		719,345			(75,127	)

		Total liabilities and stockholders’ equity (deficit)	$	3,203,425		$	2,578,456

See accompanying notes.

F-3

SPECTRASITE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS


			Year Ended			Year Ended			Year Ended
			December 31,			December 31,			December 31,
			2000			2001			2002


			(in thousands, except per share amounts)
Revenues			$	117,970		$	221,735		$	282,525

Operating expenses:
	Cost of operations, excluding depreciation, amortization and accretion expense			46,667			91,694			108,540
	Selling, general and administrative expenses			42,977			65,540			54,812
	Depreciation and amortization expense			76,986			163,628			188,176
	Restructuring and non-recurring charges			—			140,871			27,394

		Total operating expenses		166,630			461,733			378,922

Operating loss				(48,660	)		(239,998	)		(96,397	)

Other income (expense):
	Interest income			28,391			17,037			855
	Interest expense			(134,664	)		(212,174	)		(226,536	)
	Reorganization expense			—			—			(4,329	)
	Other income (expense)			(8,574	)		(223,241	)		(10,820	)

		Total other income (expense)		(114,847	)		(418,378	)		(240,830	)

Loss from continuing operations before income taxes				(163,507	)		(658,376	)		(337,227	)
Income tax expense				305			559			1,331

Loss from continuing operations				(163,812	)		(658,935	)		(338,558	)
Discontinued operations (net of income taxes):
	Income (loss) from operations of discontinued divisions			6,196			4,166			(12,689	)
	Loss on disposal of discontinued divisions			—			—			(46,984	)

Loss before cumulative effect of change in accounting principle				(157,616	)		(654,769	)		(398,231	)
Cumulative effect of change in accounting for goodwill (Note 3)				—			—			(376,753	)

Net loss			$	(157,616	)	$	(654,769	)	$	(774,984	)

Basic and diluted earnings per share:
	Loss from continuing operations		$	(1.36	)	$	(4.39	)	$	(2.20	)
	Discontinued operations			0.05			0.03			(0.38	)
	Cumulative effect of change in accounting for goodwill			—			—			(2.45	)

	Net loss		$	(1.31	)	$	(4.36	)	$	(5.03	)

Weighted average common shares outstanding:
	Basic and diluted			120,731			150,223			153,924

See accompanying notes.

F-4

SPECTRASITE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF

CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)



	Stockholders’ Equity (Deficit)

	Convertible			Convertible			Convertible												Accumulated
	Preferred			Preferred			Preferred			Common Stock				Additional					Other
	Stock			Stock			Stock							Paid-in		Comprehensive			Comprehensive			Accumulated
	Series A			Series B			Series C			Shares		Amount		Capital		Income (Loss)			Income (Loss)			Deficit			Total


	(dollars in thousands)
Balance at December 31, 1999	$	10,000		$	28,000		$	301,494			20,191,604	$	20	$	230,546				$	192		$	(112,496	)	$	457,756
Net loss		—			—			—			—		—		—	$	(157,616	)		—			(157,616	)		(157,616	)
Foreign currency translation adjustment		—			—			—			—		—		—		(14,946	)		(14,946	)		—			(14,946	)
Unrealized holding gains arising during period		—			—			—			—		—		—		16,676			16,676			—			16,676

Total comprehensive loss																$	(155,886	)

Issuance of common stock, net of stock issuance costs of $37,150		—			—			—			53,973,255		54		906,584					—			—			906,638
Issuance of warrants		—			—			—			—		—		13,720					—			—			13,720
Non-cash compensation charges		—			—			—			—		—		2,572											2,572
Conversion of preferred stock to common stock		(10,000	)		(28,000	)		(301,494	)		70,749,625		71		339,423					—			—			—

Balance at December 31, 2000		—			—			—			144,914,484		145		1,492,845					1,922			(270,112	)		1,224,800
Net loss		—			—			—			—		—		—	$	(654,769	)		—			(654,769	)		(654,769	)
Foreign currency translation adjustment		—			—			—			—		—		—		13,558			13,558			—			13,558
Unrealized holding gains arising during period		—			—			—			—		—		—		6,504			6,504			—			6,504

Total comprehensive loss																$	(634,707	)

Issuance of common stock, net of stock issuance costs of $296		—			—			—			8,510,025		8		127,119					—			—			127,127
Non-cash compensation charges		—			—			—			—		—		2,125					—			—			2,125

Balance at December 31, 2001		—			—			—			153,424,509		153		1,622,089					21,984			(924,881	)		719,345
Net loss		—			—			—			—		—		—	$	(774,984	)		—			(774,984	)		(774,984	)
Foreign currency translation adjustment		—			—			—			—		—		—		1,173			1,173			—			1,173
Unrealized holding losses arising during period		—			—			—			—		—		—		(23,512	)		(23,512	)		—			(23,512	)

Total comprehensive loss																$	(797,323	)

Issuance of common stock, net of stock issuance costs of $6		—			—			—			589,408		1		2,155					—			—			2,156
Non-cash compensation charges		—			—			—			—		—		695					—			—			695

Balance at December 31, 2002	$	—		$	—		$	—			154,013,917	$	154	$	1,624,939				$	(355	)	$	(1,699,865	)	$	(75,127	)

See accompanying notes.

F-5

SPECTRASITE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


				Year Ended			Year Ended			Year Ended
				December 31,			December 31,			December 31,
				2000			2001			2002


				(dollars in thousands)
Operating activities
Net loss				$	(157,616	)	$	(654,769	)	$	(774,984	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
	Depreciation				65,368			149,371			186,706
	Amortization of goodwill and other intangibles				31,366			36,853			3,218
	Amortization of debt issuance costs				5,507			10,113			14,321
	Amortization of senior discount notes				92,018			112,089			109,371
	Non-cash compensation charges				2,572			2,125			695
	Write-off of goodwill				—			44,476			376,753
	Loss on disposal of assets				—			53,379			83,683
	Gain on sale of affiliate				—			—			(1,364	)
	Write-off of loan to and investments in affiliates				—			156,433			—
	Equity in net loss of an affiliate				8,748			62,402			59
	Changes in operating assets and liabilities, net of acquisitions:
		Accounts receivable			(57,738	)		665			47,345
		Costs and estimated earnings in excess of billings, net			(13,608	)		408			325
		Inventories			(3,759	)		(5,396	)		241
		Prepaid expenses and other			(8,179	)		(8,316	)		(8,370	)
		Accounts payable			27,721			21			(32,017	)
		Other liabilities			18,965			28,013			30,304

			Net cash provided by (used in) operating activities		11,365			(12,133	)		36,286

Investing activities
Purchases of property and equipment					(658,283	)		(958,945	)		(71,248	)
Acquisitions, net of cash acquired					(224,518	)		(7,600	)		—
Disposal of discontinued division, net of cash sold					—			—			(6,751	)
Proceeds from the sale of assets					—			—			1,283
Investment in affiliates					(198,039	)		(6,626	)		—
Loans to affiliates					(4,850	)		(27,400	)		(750	)
Proceeds from repayment of loan to affiliate					—			5,000			—
Proceeds from sale of investment in affiliate					—			4,000			7,500
Refunds of (deposits on) acquisitions					(23,000	)		6,847			—

			Net cash used in investing activities		(1,108,690	)		(984,724	)		(69,966	)

Financing activities
Proceeds from issuance of common stock					790,397			4,617			483
Stock issuance costs					(37,150	)		(296	)		(6	)
Proceeds from issuance of long-term debt and credit facility					895,900			495,000			90,000
Debt issuance costs					(35,526	)		(23,065	)		(2,648	)
Repayment of debt					(1,421	)		(505	)		(4,735	)

			Net cash provided by financing activities		1,612,200			475,751			83,094

Net increase (decrease) in cash and cash equivalents					514,875			(521,106	)		49,414
Cash and cash equivalents at beginning of period					37,778			552,653			31,547

Cash and cash equivalents at end of period				$	552,653		$	31,547		$	80,961

Supplemental disclosures of cash flow information:
Cash paid for interest				$	35,372		$	99,908		$	85,536
Cash paid for income taxes					1,106			2,207			1,661
Supplemental disclosures of non-cash investing and financing activities:
Common stock issued for acquisitions and property and equipment				$	167,004		$	122,806		$	1,679
Capital lease obligations incurred for the purchase of property and equipment					—			16,893			1,304

See accompanying notes.

F-6

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Description of Business and Significant Accounting Policies

SpectraSite, Inc. (“SpectraSite”), formerly known as SpectraSite Holdings, Inc., and its wholly owned subsidiaries (collectively referred to as the “Company”) are principally engaged in providing services to companies operating in the telecommunications and broadcast industries, including leasing and licensing antenna sites on multi-tenant towers, licensing of distributed antenna systems within buildings and managing, leasing and licensing rooftop telecommunications access on commercial real estate.

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 Note 15, on December 16, 2003, the Company decided to discontinue its broadcast services division. In addition, the Company sold its network services division on December 31, 2002. The assets and liabilities of these divisions have been classified as held for sale in the accompanying consolidated balance sheets. The results of the operations of these divisions have been presented as discontinued operations in the consolidated statements of operations for all periods presented.

The consolidated financial statements have been prepared assuming SpectraSite, Inc. will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. SpectraSite, Inc. has incurred recurring operating losses, and it has working capital and stockholders’ deficits as of December 31, 2002. On November 15, 2002 (the “Petition Date”), SpectraSite filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Eastern District of North Carolina, Raleigh Division (the “Bankruptcy Court”). On November 18, 2002, SpectraSite filed a Proposed Plan of Reorganization and a Proposed Disclosure Statement with the Bankruptcy Court. A plan confirmation hearing was held on January 28, 2003 and the Proposed Plan of Reorganization, as modified on that date, (the “Plan of Reorganization”) was confirmed by the Bankruptcy Court. All conditions precedent to the effectiveness of the Plan of Reorganization were met by February 10, 2003 (the “Effective Date”), thereby allowing SpectraSite to emerge from bankruptcy. From the Petition Date until the Effective Date, SpectraSite operated as a debtor-in-possession under the Bankruptcy Code. The restructuring plan involves SpectraSite, Inc. and not SpectraSite Communications, Inc. (“Communications”) or any of Communications’ subsidiaries. The restructuring plan also did not constitute an event of default under or otherwise adversely affect Communications’ credit facility, which will continue to be serviced from operating cash flow by Communications.

The consolidated financial statements are presented on a going concern basis and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that might be necessary should SpectraSite, Inc. be unable to continue as a going concern. See Note 2, “Plan of Reorganization” for a presentation of the unaudited pro forma balance sheet illustrating the effect of the Company’s Plan of Reorganization and the effect of implementing certain fresh start accounting adjustments.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that

F-7

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

Revenue Recognition

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 term of the lease or license. Revenues from fees, such as engineering and site inspection fees, are recognized upon delivery of the related product or service. Additionally, the Company generates revenues related to the management of sites on rooftops. Under each site management agreement, the Company is entitled to a fee based on a percentage of the gross revenue derived from the rooftop site subject to the agreement. The Company recognizes this fee as revenue when earned.

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 us 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. Activity in the allowance for uncollectible accounts consisted of the following.



	Year Ended December 31,

	2000			2001			2002


	(in thousands)
Beginning allowance	$	1,053		$	1,403		$	4,457
Charges to revenues		771			5,585			12,122
Write-offs of uncollectible accounts		(421	)		(2,531	)		(5,491	)

Ending allowance	$	1,403		$	4,457		$	11,088

The Company analyzes the adequacy of its accounts receivable on a periodic basis to ensure that the Company appropriately reflects the amount it expects to collect. The economic factors affecting the wireless communications industry as a whole, the Company’s customers’ ability to meet their financial obligations and the age of the Company’s outstanding accounts receivable are all factors it takes into consideration when evaluating the adequacy of the Company’s estimate for the allowance for doubtful accounts.

Investments in Affiliates

An investment in an entity of which the Company owns more than 20% and up to 50% and on which the Company has the ability to exercise significant influence is accounted for using the

F-8

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

equity method. Under the equity method, the investment is stated at cost adjusted for the Company’s equity in net income (loss) of the entity since acquisition. The equity in net income (loss) of such entity is recorded in “Other income (expense)” in the accompanying consolidated statements of operations. An investment in an entity in which the Company owns less than 20% and on which the Company does not have the ability to exercise significant influence is accounted for using the cost method. Other-than-temporary impairments of investments in affiliates are recognized if the fair value of the investment is below its cost basis for an extended period.

Available-for-Sale Securities

Available-for-sale securities are classified as “Other assets” and are stated at fair value, with the unrealized gains and losses reported in other comprehensive income. Realized gains and losses and declines in value judged to be other-than-temporary on available-for-sale securities are included in “Other income (expense).” Unrealized holding gains (losses) related to these securities were $6.5 million and $(23.5 million) for the years ended December 31, 2001 and 2002, respectively. The fair value of the Company’s available-for-sale securities was $24.8 million and $1.3 million at December 31, 2001 and 2002, respectively.

Property and Equipment

Towers built, purchased or leased under long-term leasehold agreements are recorded at cost and depreciated over their estimated useful lives. The Company capitalizes costs incurred in bringing towers to an operational state. Costs clearly associated with the acquisition, development and construction of towers are capitalized as a cost of the towers. Indirect costs that relate to several towers are capitalized and allocated to the towers to which the costs relate. Indirect costs that do not clearly relate to projects under development or construction are charged to expense as incurred. Approximately $16.9 million and $1.2 million of interest was capitalized into the cost of property and equipment for the years ended December 31, 2001 and 2002, respectively. Depreciation on property and equipment excluding towers is computed using the straight-line method over the estimated useful lives of the assets ranging from three to fifteen years. Depreciation on towers is computed using the straight-line method over the estimated useful lives of 15 years for wireless towers and 30 years for broadcast towers. Amortization of assets recorded under capital leases is included in depreciation.

Goodwill

The Company has classified as goodwill the excess of purchase price over the fair value of net assets acquired in business combinations. Through December 31, 2001, goodwill was amortized on a straight-line basis over fifteen years for purchase business combinations consummated prior to June 30, 2001. For purchase business combinations consummated subsequent to June 30, 2001, goodwill is not amortized but is evaluated for impairment on an annual basis or as impairment indicators are identified, in accordance with SFAS No. 142, Goodwill and Other Intangible Assets. For each entity acquired, the Company is able to monitor cash flows at the entity level, which is the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of the other groups of assets. On an ongoing basis, the Company assesses the recoverability of its goodwill by determining the ability of the specific entity acquired to generate future cash flows sufficient to recover the unamortized cost of the assets and related goodwill. Goodwill determined to be unrecoverable based on future cash flows is written-off in the period in which such determination is made.

F-9

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Debt Issuance Costs

The Company capitalized costs relating to the issuance of long-term debt, senior notes, senior convertible notes and senior discount notes. The costs are amortized using the straight-line method over the term of the related debt.

Impairment of Long-lived Assets

Accounting for Income Taxes

As part of the process of preparing our 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 the Company believes that recovery is not likely, it 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. The Company has recorded a valuation allowance of $464.7 million as of December 31, 2002, due to uncertainties related to utilization of deferred tax assets, primarily consisting of net operating losses carryforwards, before they expire.

Discontinued Operations — Network Services Division

On December 31, 2002, the Company sold its network services division. Network services revenues for the years ended December 31, 2000, 2001 and 2002 were $191.8 million, $213.1 million and $136.2 million, respectively. Network services income (loss) before taxes for the years ended December 31, 2000, 2001 and 2002 were $7.2 million, $7.9 million and $(11.0) million, respectively. The Company recorded a loss on disposal of the network services division of $47.0 million in 2002. The results of the network services division’s operations have been reported separately as discontinued operations in the Statements of Operations. Prior period financial statements have been restated to present the operations of the division as a discontinued operation.

F-10

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Assets and liabilities held for sale related to the network services division consist of the following:


		December 31,
		2001

		(in thousands)
Accounts receivable		$	68,401
Costs and estimated earnings in excess of billings			18,464
Inventories			6,036
Prepaid expenses and other			264
Property and equipment, net			19,057
Goodwill, net			211,929
Other assets			793

	Assets held for sale	$	324,944

Accounts payable		$	17,977
Accrued and other expenses			7,575
Billings in excess of costs and estimated earnings			7,737
Other long-term liabilities			2,813

	Liabilities held for sale	$	36,102

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.

Financial Instruments

The carrying amount of cash and cash equivalents approximates fair value for these instruments. The estimated fair values of the credit facility, senior notes, senior convertible notes and senior discount notes are based on the quoted market prices. The estimated fair values of the Company’s financial instruments, along with the carrying amounts of the related assets (liabilities), are as follows:



	December 31, 2001						December 31, 2002

	Carrying			Fair			Carrying			Fair
	Amount			Value			Amount			Value


	(in thousands)
Cash and cash equivalents	$	31,547		$	31,547		$	80,961		$	80,961
Credit Facility		(695,000	)		(695,000	)		(782,955	)		(665,512	)
Senior Notes		(400,000	)		(200,000	)		(400,000	)(1)		(147,750	)
Senior Convertible Notes		(200,000	)		(83,250	)		(200,000	)(1)		(44,000	)
Senior Discount Notes		(1,020,332	)		(351,416	)		(1,129,703	)(1)		(392,807	)


(1)	This amount is included in Liabilities Subject to Compromise.

F-11

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Loss Per Share

Basic and diluted loss per share are calculated in accordance with Statement of Financial Accounting Standards No. 128, Earnings per Share. The Company has potential common stock equivalents related to its convertible notes, warrants and outstanding stock options and had potential common stock equivalents related to its convertible preferred stock until all such preferred stock converted into common stock in February 2000. These potential common stock equivalents were not included in diluted loss per share for all periods because the effect would have been antidilutive. Accordingly, basic and diluted net loss per share are the same for all periods presented.

Costs of Operations

Costs of operations consist of direct costs incurred to provide the related services including ground lease cost, tower maintenance and related real estate taxes. Costs of operations does not include depreciation and amortization expense on the related assets.

Significant Customers

The Company’s customer base consists of businesses operating in the wireless telecommunications and broadcast industries, primarily in the United States. The Company’s exposure to credit risk consists primarily of unsecured accounts receivable from these customers.

For the years ended December 31, 2000, 2001 and 2002, one wireless customer, which is a significant stockholder of the Company, accounted for $75.4 million, $78.5 million and $88.0 million of the Company’s revenues, respectively, representing 64%, 35% and 31% of the Company’s revenues, respectively. This customer also accounted for $3.3 million and 16% of accounts receivable at December 31, 2001. In addition, another wireless customer, which is an affiliate of a significant stockholder of the Company, accounted for $33.9 million and $63.2 million, respectively, of the Company’s revenues in 2001 and 2002, representing 15% and 22% of the Company’s revenues, respectively. This customer also accounted for $3.0 million and 14% of accounts receivable at December 31, 2001 and $5.5 million and 25% of accounts receivable at December 31, 2002.

Other Income (Expense)

Other income (expense) consists of the following:



	Year Ended December 31,

	2000			2001			2002

Write-down of investments in affiliates	$	—		$	(129,404	)	$	—
Expenses related to proposed tender offers		—			—			(10,905	)
Equity in net loss of affiliates		(8,748	)		(62,402	)		(59	)
Write-off of loans to affiliates		—			(26,980	)		—
Other		174			(4,455	)		144

	$	(8,574	)	$	(223,241	)	$	(10,820	)

F-12

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Stock Options

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 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”). Companies that account for stock based compensation arrangements for their employees under APB 25 are required by SFAS 123 to disclose the pro forma effect on net income (loss) as if the fair value based method prescribed by SFAS 123 had been applied. The Company plans to continue to account for stock based compensation using the provisions of APB 25 and has adopted the disclosure requirements of SFAS 123 and SFAS 148.

Employee Benefit Plan

The Company provides a 401(k) plan for the benefit of all its employees meeting specified eligibility requirements. The Company’s contributions to the plan are discretionary and totaled approximately $0.9 million, $2.1 million and $1.1 million for the years ended December 31, 2000, 2001 and 2002, respectively.

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 2000 and 2001 consolidated financial statements to conform to the 2002 presentation. These reclassifications had no effect on net loss or stockholders’ equity as previously reported.

2. Plan of Reorganization

On November 15, 2002 (the “Petition Date”), SpectraSite filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Eastern District of North Carolina, Raleigh Division (the “Bankruptcy Court”). On November 18, 2002, SpectraSite filed a Proposed Plan of Reorganization and a Proposed Disclosure Statement with the Bankruptcy Court. A plan confirmation hearing was held on January 28, 2003 and the Proposed Plan of Reorganization, as modified on that date (the “Plan”), was confirmed by the Bankruptcy Court. The Plan of Reorganization became effective on February 10, 2003 (the “Effective Date”), thereby allowing SpectraSite to emerge from bankruptcy.

The Plan provides that, among other things, (i) in exchange for their notes, the holders of the 12 1/2% Senior Notes due 2010, the 6 3/4% Senior Convertible Notes due 2010, the 10 3/4% Senior Notes due 2010, the 11 1/4% Senior Discount Notes due 2009, the 12 7/8% Senior Discount Notes due 2010 and the 12% Senior Discount Notes due 2008 will receive their pro rata share of 23.75 million shares of common stock, par value $0.01 per share (“New Common Stock”); (ii) the holders of 166,158,298 shares of common stock, par value $0.001 per share, outstanding

F-13

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as of the Effective Date (the “Old Common Stock”) will receive warrants immediately exercisable into 1.25 million shares of New Common Stock at a price of $32.00 per share; and (iii) all other equity interests at the Effective Date, including outstanding warrants and options, will be cancelled.

The consolidated financial statements include adjustments and reclassifications to reflect affected liabilities as “Liabilities Subject to Compromise.” These liabilities will be settled in accordance with the Plan. The liabilities subject to compromise as of December 31, 2002 were as follows:


10 3/4% Senior Notes Due 2010	$	200,000
12 1/2% Senior Notes Due 2010		200,000
6 3/4% Senior Convertible Notes Due 2010		200,000
12% Senior Discount Notes Due 2008, net of discount		208,479
11 1/4% Senior Discount Notes Due 2009, net of discount		502,644
12 7/8% Senior Discount Notes Due 2010, net of discount		418,580
Accrued interest		33,583

Total liabilities subject to compromise	$	1,763,286

SpectraSite incurred costs directly associated with the chapter 11 proceedings of $4.3 million in the year ended December 31, 2002. These costs are included in reorganization expense in the statement of operations.

In accordance with AICPA Statement of Position 90-7 Financial Reporting by Entities in Reorganization Under the Bankruptcy Code (“SOP 90-7”), the Company will adopt “fresh start accounting” as of February 1, 2003 and the Company’s emergence from chapter 11 will result in a new reporting entity. The financial statements prepared as of December 31, 2002 do not give effect to any adjustments to the carrying value of assets or amounts and classifications of liabilities that will be necessary when adopting fresh start accounting. Upon the adoption of fresh start accounting, all assets and liabilities will be recorded at their estimated fair values and the Company’s accumulated deficit will be eliminated.

The following unaudited pro forma balance sheet illustrates the effect of the Company’s Plan and the effect of implementing certain fresh start accounting adjustments as if the Plan had been effective on December 31, 2002. The adjustments are limited to presenting (i) the Company’s reorganized capital structure; (ii) the effect of discharging the Senior Notes, Senior Discount Notes and Senior Convertible Notes; (iii) the reduction in property and equipment due to the net assets of the Company exceeding the reorganization value; (iv) the elimination of rent receivables recognized on leases with fixed rental increases; (v) the adoption of SFAS 143; (vi) the reduction of goodwill, other assets and the credit facility to fair market value and (vii) the elimination of the Company’s accumulated deficit. The reorganization value used in preparing the unaudited pro forma balance sheet was $690.4 million based on the fair market value of the senior notes, senior discount notes and senior convertible notes at the Effective Date, the date these instruments were exchanged for New Common Stock and the value of warrants issued on that date based on the Black-Scholes option pricing model.

F-14

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


						Confirmation
			Actual			Adjustments			Ref		Pro Forma

						(unaudited)					(unaudited)

			(in thousands)
ASSETS
Current assets:
	Cash and cash equivalents		$	80,961		$	(16,802	)		(2)	$	64,159
	Accounts receivable			10,929			—					10,929
	Prepaid expenses and other			16,461			—					16,461
	Assets held for sale			24,555			(3,050	)		(3)		21,505

		Total current assets		132,906			(19,852	)				113,054
Property and equipment, net				2,282,948			(935,321	)		(3)		1,347,627
Goodwill, net				60,626			(60,626	)		(4)		—
Other assets				101,976			122,182			(1),(4)		224,158

		Total assets	$	2,578,456		$	(893,617	)			$	1,684,839

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
	Accounts payable		$	11,666		$	—				$	11,666
	Accrued and other expenses			63,913			38,456			(5)		102,369
	Current portion of credit facility			2,244			—					2,244
	Liabilities held for sale			4,523			—					4,523

		Total current liabilities		82,346			38,456					120,802

Long-term portion of credit facility				780,711			—					780,711
Other long-term liabilities				27,240			65,694			(5),(6)		92,934

		Total long-term liabilities		807,951			65,694					873,645

Liabilities subject to compromise				1,763,286			(1,763,286	)		(1)		—

Stockholders’ equity (deficit):
	Common stock, $0.001 par value, 300,000,000 shares authorized 154,013,917 issued and outstanding actual at December 31, 2002; $0.01 par value, 250,000,000 shares authorized 23,500,000 issued and outstanding pro forma at December 31, 2002			154			84			(1)		238
	Additional paid-in-capital and warrants			1,624,939			(934,785	)		(1)		690,154
	Accumulated other comprehensive income			(355	)		355			(7)		—
	Accumulated deficit			(1,699,865	)		1,699,865			(7)		—

		Total stockholders’ equity (deficit)		(75,127	)		765,519					690,392

		Total liabilities and stockholders’ equity (deficit)	$	2,578,456		$	(893,617	)			$	1,684,839


	References:


(1)	To reflect the discharge of the Senior Notes, Senior Discount Notes and Senior Convertible Notes including the related debt issuance costs included in other assets; the cancellation of

F-15

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	Old Common Stock and warrants; and the issuance of the New Common Stock and warrants.

(2)	To reflect estimated cash requirements for reorganization costs.

(3)	To record property and equipment at fair value.

(4)	To record goodwill and other assets at fair value.

(5)	To record liabilities associated with unfavorable contracts at fair value.

(6)	To record an asset retirement obligation upon adoption of SFAS 143.

(7)	To reflect the elimination of the accumulated other comprehensive income and accumulated deficit as of December 31, 2002.

3. Recently Issued Accounting Pronouncements

On June 29, 2001, the Financial Accounting Standards Board (“FASB”) issued Statements of Financial Accounting Standards No. 141, Business Combinations (“SFAS 141”) and No. 142, Goodwill and Other Intangible Assets (“SFAS 142”). SFAS 141 eliminates the pooling-of-interests method of accounting for business combinations except for qualifying business combinations that were initiated prior to July 1, 2001. SFAS 141 also includes new criteria to recognize intangible assets separately from goodwill. The requirements of SFAS 141 are effective for any business combination accounted for by the purchase method that is completed after June 30, 2001. The application of SFAS 141 did not affect any of our previously reported amounts included in goodwill or other intangible assets.

Effective January 1, 2002, the Company adopted SFAS 142 that establishes new accounting and reporting requirements for goodwill and other intangible assets. Under SFAS 142, goodwill and intangible assets with indefinite lives are no longer amortized but are reviewed annually, or more frequently if impairment indicators arise, for impairment. Separable intangible assets that are not deemed to have an indefinite life will continue to be amortized over their estimated useful lives. The nonamortization provisions of SFAS 142 apply to goodwill and indefinite lived intangible assets acquired after June 30, 2001. With respect to goodwill and intangible assets acquired prior to July 1, 2001, we ceased amortization on January 1, 2002.

The Company performed the first of the required impairment tests of goodwill by comparing the fair value of each of our reporting units with its carrying value. The reporting units evaluated were as follows: Wireless Towers, Wireless Services, Broadcast Towers, Broadcast Services, and Building Group. Fair value was determined using a discounted cash flow methodology. Based on our impairment tests, the Company recorded a charge of $376.8 million, or $2.45 per share, to reduce the carrying value of goodwill in our wireless services, broadcast tower, broadcast services and building units to its implied fair value. In accordance with SFAS 142, the impairment adjustment recognized at adoption of the new rules was reflected as a cumulative effect of accounting change in our first quarter 2002 statement of operations. Impairment adjustments recognized after adoption, if any, generally are required to be recognized as an operating expense.

F-16

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Actual results of operations and pro forma results of operations for the years ended December 31, 2000, 2001 and 2002 had we applied the nonamortization provisions of SFAS 142 in that period are as follows:



	Year Ended December 31,

	2000			2001			2002


	(in thousands)
Reported net loss	$	(157,616	)	$	(654,769	)	$	(774,984	)
Goodwill amortization		30,883			35,515			—

Adjusted net loss	$	(126,733	)	$	(619,254	)	$	(774,984	)

Basic and diluted loss per share:
Reported net loss	$	(1.31	)	$	(4.36	)	$	(5.03	)
Goodwill amortization		0.26			0.24			—

Adjusted net loss	$	(1.05	)	$	(4.12	)	$	(5.03	)

In June 2001, the FASB issued Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations (“SFAS 143”) which is effective for fiscal years beginning after June 15, 2002. SFAS 143 requires legal obligations associated with the retirement of long-lived assets to be recognized at their fair value at the time that the obligations are incurred. Upon initial recognition of a liability, that cost should be capitalized as part of the related long-lived asset and allocated to expense over the useful life of the asset. The Company will adopt the new rules on asset retirement obligations on January 1, 2003. Application of the new rules is expected to result in an increase in net property, plant and equipment of $23.2 million, recognition of an asset retirement obligation of $35.4 million, and a cumulative effect of adoption that will reduce net income and stockholders’ equity (deficit) by $12.2 million. Had the Company adopted SFAS 143 as of January 1, 2000, the asset retirement obligation would have been as follows (in thousands):


January 1, 2000	$	22,653
December 31, 2000	$	29,447
December 31, 2001	$	32,122
December 31, 2002	$	35,442

These pro forma amounts are measured using information and assumptions as of the adoption date of this statement.

F-17

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Pro forma results of operations for the years ended December 31, 2000, 2001 and 2002 had the Company adopted SFAS 143 on January 1, 2000 are as follows:



	Year Ended December 31,

	2000			2001			2002


	(in thousands, except per share amounts)
Reported net loss	$	(157,616	)	$	(654,769	)	$	(774,984	)
Additional depreciation of property and equipment		(1,318	)		(1,686	)		(1,862	)
Accretion of asset retirement obligation		(1,625	)		(2,260	)		(2,456	)

Adjusted net loss	$	(160,559	)	$	(658,715	)	$	(779,302	)

Basic and diluted earnings per share:
Reported net loss per share	$	(1.31	)	$	(4.36	)	$	(5.03	)
Additional depreciation of property and equipment	$	(0.01	)	$	(0.01	)	$	(0.01	)
Accretion of asset retirement obligation	$	(0.01	)	$	(0.01	)	$	(0.02	)

Adjusted net loss per share	$	(1.33	)	$	(4.38	)	$	(5.06	)

In April 2002, the FASB issued Statement of Financial Accounting Standards No. 145, Rescission of FASB Statement Nos. 4, 44, and 64, Amendment of FASB Statement No. 13 and Technical Corrections (“SFAS 145”). SFAS 145 amends or rescinds a number of authoritative pronouncements, including Statement of Financial Accounting Standards No. 4, Reporting Gains and Losses from Extinguishment of Debt (“SFAS 4”). SFAS 4 required that gains and losses from extinguishment of debt included in the determination of net income or loss be aggregated and, if material, classified as an extraordinary item, net of the related income tax effect. Upon adoption of SFAS 145, gains and losses from extinguishment of debt will no longer be classified as extraordinary items, but rather will generally be classified as part of other income (expense) on the Company’s consolidated statement of operations. The provisions of SFAS 145 are effective for fiscal years beginning after May 15, 2002. The Company adopted the provisions of SFAS 145 on January 1, 2003. The adoption of this statement did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

In July 2002, the FASB issued Statement of Financial Accounting Standards No. 146, Accounting For Costs Associated with Exit or Disposal Activities (“SFAS 146”). The statement requires costs associated with exit or disposal activities to be recognized when incurred rather than at the date of a commitment to an exit or disposal plan. The requirements of SFAS 146 are effective for exit or disposal activities initiated after January 1, 2003. The Company adopted the provisions of SFAS 146 on January 1, 2003. The adoption of this statement did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

In November 2002, the FASB issued Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees on Indebtedness of Others (“FIN 45”). FIN 45 clarifies significant new disclosures to be made by a guarantor in its financial statements and requires certain guarantees to be recorded at fair value, which is different from current practice, which is generally to record a liability only when a loss is probable and reasonably estimable, as those terms are defined in FASB Statement of Financial Accounting Standards No. 5, Accounting for Contingencies. The adoption of FIN 45 did not have a material impact on the Company’s financial position, results of operations or liquidity for the current reporting periods.

F-18

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation, Transition and Disclosure (“SFAS 148”). SFAS 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. SFAS 148 also requires that disclosures of the pro forma effect of using the fair value method of accounting for stock-based employee compensation be displayed more prominently and in a tabular format. Additionally, SFAS 148 requires disclosure of the pro forma effect in interim financial statements. The transition disclosure requirements of SFAS 148 are effective for fiscal year 2002. The interim and annual disclosure requirements are effective for the first quarter of 2003. The adoption of SFAS 148 did not have a material effect on the Company’s financial condition, results of operations or cash flows.

4. Long-lived Assets

Property and equipment consist of the following:



	December 31,

	2001			2002


	(in thousands)
Towers	$	2,480,069		$	2,545,707
Equipment		22,955			31,425
Land		16,021			17,719
Buildings		30,833			30,678
Other		34,813			34,694

		2,584,691			2,660,223
Less accumulated depreciation		(215,694	)		(395,272	)

		2,368,997			2,264,951
Construction in progress		62,490			17,997

Property and equipment, net	$	2,431,487		$	2,282,948

Other assets consist of the following:



	December 31,

	2001			2002


	(in thousands)
Debt issuance costs	$	96,816		$	94,982
Less: accumulated amortization		(18,951	)		(28,790	)

Debt issuance costs, net		77,865			66,192
Other		56,359			35,784

	$	134,224		$	101,976

Amortization of debt issuance costs was $5.5 million, $10.1 million and $14.3 million in the years ended December 31, 2000, 2001, and 2002, respectively.

F-19

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

5. Debt

Debt not classified as subject to compromise consists of the following:



	December 31,

	2001		2002


	(in thousands)
Credit facility	$	695,000	$	782,955
10 3/4% Senior Notes Due 2010		200,000		—
12 1/2% Senior Notes Due 2010		200,000		—
6 3/4% Senior Convertible Notes Due 2010		200,000		—
12% Senior Discount Notes Due 2008, net of discount		188,222		—
11 1/4% Senior Discount Notes Due 2009, net of discount		456,810		—
12 7/8% Senior Discount Notes Due 2010, net of discount		375,300		—

Total debt		2,315,332		782,955
Less current portion		—		2,244

Long-term debt	$	2,315,332	$	780,711

Credit Facility

SpectraSite Communications, Inc. (“Communications”), a wholly-owned subsidiary of SpectraSite, is party to an amended and restated credit facility. In August 2002, Communications amended its credit facility to provide, among other things, for a reduction in the aggregate borrowing capacity from $1.3 billion to $1.085 billion. The August 2002 amendment also provided for an overall loosening of certain of the credit facility’s financial covenants and an increase in the interest rates under the credit facility by 50 basis points per annum until the completion of SpectraSite’s restructuring of its high yield indebtedness on February 10, 2003. The credit facility includes a $300.0 million revolving credit facility, which may be drawn at any time, subject to the satisfaction of certain conditions precedent (including the absence of a materially adverse effect, as defined in the credit agreement, and the absence of any defaults). The amount available will be reduced (and, if necessary, the amounts outstanding must be repaid) in quarterly installments beginning on June 30, 2004 and ending on June 30, 2007. The credit facility also includes a $335.0 million multiple draw term loan that is fully drawn and which must be repaid in quarterly installments beginning on June 30, 2005 and ending on June 30, 2007 and a $450.0 million term loan that is fully drawn and which will, from September 30, 2003 through June 30, 2007, amortize at a rate of 0.25% per quarter and be payable in quarterly installments and, from July 1, 2007 through December 31, 2007, amortize at a rate of 48% per quarter and be payable on September 30, 2007 and December 31, 2007. Communications repaid $0.9 million of the multiple draw term loan and $1.1 million of the term loan on December 31, 2002. Communications has $783.0 million outstanding under the credit facility at December 31, 2002. The remaining $300.0 million under the credit facility was undrawn. Under the terms of the credit facility, the Company could borrow approximately $230 million of available funds under the revolving credit facility as of December 31, 2002 while remaining in compliance with the credit agreement’s covenants. With the proceeds of the sale of towers to Cingular discussed in Note 11, Communications repaid $31.4 million of the multiple draw term loan and $42.1 million of the term loan on February 11, 2003 leaving a total of $709.5 million outstanding under the credit facility. In addition, the overall loosening of covenants under the August 2002 amendment to the credit facility terminated when SpectraSite emerged from chapter 11 on February 10, 2003. As a result, Communications could borrow approximately $33 million of available funds under the revolving

F-20

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

credit facility as of February 11, 2003 while remaining in compliance with the credit agreement’s covenants.

At December 31, 2002, amounts due under the credit facility are as follows:


	Maturities

	(in thousands)
2003	$	2,244
2004		4,488
2005		89,052
2006		129,270
2007		557,901

Total	$	782,955

Prior to February 10, 2003, the revolving credit loans and the multiple draw term loan bear interest, at Communications’ option, at either Canadian Imperial Bank of Commerce’s base rate plus an applicable margin of 2.50% per annum or the Eurodollar rate plus an applicable margin of 3.75% per annum. After February 10, 2003, the revolving credit loans and the multiple draw term loans bear interest, at Communications’ option, at either Canadian Imperial Bank of Commerce’s base rate plus an applicable margin ranging from 2.00% to 1.00% per annum or the Eurodollar rate plus an applicable margin ranging from 3.25% to 2.25% per annum, depending on Communications’ leverage ratio at the end of the preceding fiscal quarter.

The weighted average interest rate on outstanding borrowings under the credit facility as of December 31, 2002 was 5.94%. Prior to February 10, 2003, the term loan bears interest, at Communications’ option, at either Canadian Imperial Bank of Commerce’s base rate plus 3.25% per annum or the Eurodollar rate plus 4.50% per annum. After February 10, 2003, the term loan bears interest, at Communications’ option, at either Canadian Imperial Bank of Commerce’s base rate plus 2.75% per annum or the Eurodollar rate plus 4.00% per annum.

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, a minimum interest coverage ratio and a minimum fixed charge coverage ratio.

F-21

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

12 7/8% Senior Discount Notes Due 2010 (the “12 7/8% Discount Notes”) and 10 3/4% Senior Notes Due 2010 (the “10 3/4% Senior Notes”)

On March 15, 2000, SpectraSite issued $559.8 million aggregate principal amount at maturity of its 12 7/8% Discount Notes for gross proceeds of $300.0 million and $200.0 million aggregate principal amount of its 10 3/4% Senior Notes. The 12 7/8% Discount Notes will not pay any interest until March 15, 2005, at which time semi-annual interest payments will commence and become due on each March 15 and September 15 thereafter. Semi-annual interest payments for the 10 3/4% Senior Notes are due on each March 15 and September 15. The Company is required to comply with certain covenants under the terms of the 12 7/8% Discount Notes and the 10 3/4% Senior Notes that restrict the Company’s ability to incur additional indebtedness, make certain payments and issue preferred stock, among other things.

12 1/2% Senior Notes Due 2010 (the “12 1/2% Senior Notes”)

On December 20, 2000, SpectraSite issued $200.0 million aggregate principal amount at maturity of 12 1/2% Senior Notes for proceeds of $195.9 million, net of original issue discount of $4.1 million. Semi-annual interest payments for the 12 1/2% Senior Notes are due on each May 15 and November 15. The Company is required to comply with certain covenants under the terms of the 12 1/2% Senior Notes that restrict the Company’s ability to incur additional indebtedness, make certain payments, and issue preferred stock, among other things.

6 3/4% Senior Convertible Notes Due 2010 (the “6 3/4% Convertible Notes”)

On November 20, 2000, SpectraSite issued $200.0 million aggregate principal amount of 6 3/4% Convertible Notes. Semi-annual interest payments for these notes are due on each May 15 and November 15. The 6 3/4% Convertible Notes may be converted into common stock at any time on or before November 15, 2010 at a conversion price of $21.5625 per share, subject to adjustment. The trading price of the Company’s common stock on the commitment date was $15.00 per share.

12% Senior Discount Notes Due 2008 (the “12% Discount Notes”)

On June 26, 1998, the Company issued $225.2 million aggregate principal amount at maturity of 12% Discount Notes for gross proceeds of $125.0 million. The 12% Discount Notes will not pay any interest until July 15, 2003, at which time semi-annual interest payments will commence and become due on each January 15 and July 15 thereafter. The Company is required to comply with certain covenants under the terms of the 12% Discount Notes that restrict the Company’s ability to incur indebtedness, make certain payments and issue preferred stock, among other things.

11 1/4% Senior Discount Notes Due 2009 (the “11 1/4% Discount Notes”)

On April 20, 1999, the Company issued $586.8 million aggregate principal amount at maturity of 11 1/4% Discount Notes for gross proceeds of $340.0 million. The 11 1/4% Discount Notes will not pay any interest until April 15, 2004, at which time semi-annual interest payments will commence and become due on each April 15 and October 15 thereafter. The Company is required to comply with certain covenants under the terms of the 11 1/4% Discount Notes that restrict the Company’s ability to incur additional indebtedness, make certain payments and issue preferred stock, among other things.

F-22

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The 10 3/4% Senior Notes Due 2010, the 12 1/2% Senior Notes Due 2010 and the 6 3/4% Senior Convertible Notes Due 2010 have been recorded at their stated values of $200 million, each with interest expense recognized when incurred. The 12% Senior Discount Notes Due 2008, the 11 1/4% Senior Discount Notes Due 2009 and the 12 7/8% Senior Discount Notes Due 2010 were recorded at the amount of the original proceeds of $125 million, $340 million and $300 million, respectively, with interest accreted each month and added to the principal balance, based on the stated interest rate. Debt issuance costs related to each note have been capitalized and are being amortized to interest expense over the term of each note.

SpectraSite did not pay $10.8 million of interest due September 15, 2002 on its 10 3/4% senior notes. On October 15, 2002, the 30-day grace period for such non-payment expired, creating an event of default that is continuing. On November 15, 2002, SpectraSite did not pay $12.5 million of interest due on its 12 1/2% senior notes and $6.75 million due on its 6 3/4% senior convertible notes. On December 14, 2002, the 30-day grace period for such non-payment expired, creating an event of default that is continuing. In addition, SpectraSite announced that it has reached agreements with beneficial holders of approximately 66% of the SpectraSite Notes to support a restructuring plan as discussed in Note 2. As a result, $400 million principal amount of Senior Notes, $1.1 billion accreted value of Senior Discount Notes, $200 million of Senior Convertible Notes and accrued interest of $33.6 million have been classified as liabilities subject to compromise in the balance sheet as of December 31, 2002.

In addition, we had standby letters of credit of $6.3 million and performance bonds of $14.6 million outstanding at December 31, 2002, most of which expire within one year.

6. Convertible Voting Preferred Stock and Stockholders’ Equity

Convertible Voting Preferred Stock

At December 31, 1998, SpectraSite had mandatorily redeemable convertible preferred stock consisting of Series A and Series B cumulative redeemable preferred stock, each with a $0.001 par value, 10.5 million shares authorized in the aggregate and 3.5 million and 7.0 million shares issued and outstanding, respectively. In connection with closing the Nextel tower acquisition in April 1999, provisions for dividends and redemption were eliminated with respect to the Series A and Series B preferred stock. Previously accrued dividends have been eliminated, and the outstanding balances have been reclassified as convertible preferred stock in stockholders’ equity in the balance sheet as of December 31, 1999. In connection with closing the Nextel tower acquisition, SpectraSite sold 46.3 million shares of Series C preferred stock at a price of $5.00 per share. In addition, Nextel received 14.0 million shares of Series C preferred stock. At December 31, 1999, SpectraSite had 60.3 million of $0.001 par value Series C shares authorized, issued and outstanding. Each share of Series A, B and C preferred stock was convertible into one share of common stock and entitled the holder to vote on an as-converted basis with holders of common stock. Contemporaneously with the closing of an underwritten public offering of common stock, the outstanding shares of Series A, B and C preferred stock automatically converted to common stock on February 4, 2000.

On November 16, 2000, SpectraSite’s stockholders authorized the issuance of 40.0 million shares of preferred stock for such times, for such purposes and for such consideration as the Board of Directors may determine. No preferred stock had been issued at December 31, 2002.

Common Stock and Warrants. On February 4, 2000, SpectraSite completed an underwritten public offering of 25.6 million shares of common stock for net proceeds of approximately

F-23

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

$411.3 million. As a result of the offering, all outstanding shares of Series A, B and C preferred stock automatically converted to common stock on a share-for-share basis.

On July 28, 2000, SpectraSite completed an underwritten public offering of 11.0 million shares of common stock for net proceeds of approximately $220.2 million. On August 2, 2000, the underwriters purchased an additional 1.65 million shares of common stock pursuant to the exercise of their overallotment option for net proceeds of $33.2 million.

On November 20, 2000, SpectraSite completed a private placement of 4.0 million shares of common stock for proceeds of $75.0 million. In addition, the purchasing stockholders received warrants to purchase an additional 1.5 million shares of common stock. The warrants were immediately exercisable; the exercise price for 0.6 million shares was $21.56 per share, the exercise price for 0.45 million shares was $23.86 per share and the exercise price for the remaining 0.45 million shares was $28.00 per share. All outstanding warrants were cancelled without consideration upon emergence from chapter 11 on February 10, 2003.

Stock Options. During 1997, the Company adopted a stock option plan that provides for the purchase of common stock by key employees, directors, advisors and consultants of the Company. The maximum number of shares, which may be issued under the plan, as amended, may not exceed 20.0 million shares. Stock options are granted under various stock option agreements. Each stock option agreement contains specific terms.

The options without a performance acceleration feature, which were granted under the terms of the incentive stock option agreement, and options granted under the terms of the non-qualified stock option agreement vest and become exercisable ratably over a four or five-year period, commencing one year after date of grant. The options with a performance acceleration feature, which were granted under the terms of the incentive stock option agreement, and the non-qualified stock option agreement vest and become exercisable upon the seventh anniversary of the grant date. Vesting, however, can be accelerated upon the achievement of certain milestones defined in each agreement.

In accordance with SFAS 123, the fair value of each option grant was determined using the Black-Scholes option pricing model with the following weighted average assumptions for the years ended December 31, 2000, 2001 and 2002: dividend yield of 0.0%; volatility of .70; risk free interest rate of 5.0%; and expected option lives of 7 years. Had compensation cost for the Company’s stock options been determined based on the fair value at the date of grant consistent with the provisions of SFAS 123, the Company’s net loss and net loss per share would have been as follows.

F-24

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)



	Year Ended December 31,

	2000			2001			2002


	(in thousands)
Reported net loss	$	(157,616	)	$	(654,769	)	$	(774,984	)
Non-cash compensation charges included in net loss		2,572			2,125			695
Stock-based employee compensation cost that would have been included in net loss under the fair value method		(14,119	)		(19,412	)		(11,113	)

Adjusted net loss	$	(169,163	)	$	(672,056	)	$	(785,402	)

Basic and diluted loss per share:
Reported net loss	$	(1.31	)	$	(4.36	)	$	(5.03	)
Non-cash compensation charges included in net loss		0.02			0.02			—
Stock-based employee compensation cost that would have been included in net loss under the fair value method		(0.11	)		(0.13	)		(0.07	)

Adjusted net loss	$	(1.40	)	$	(4.47	)	$	(5.10	)

Option activity under the Company’s plans is summarized below:


				Weighted
				Average
				Exercise Price
	Shares			per Share

Outstanding at December 31, 1999.		5,723,791		$	6.02
Granted		7,962,616			12.56
Exercised		(2,182,968	)		5.74
Cancelled		(791,227	)		10.35
Options assumed in Apex acquisition		191,359			3.58

Outstanding at December 31, 2000.		10,903,571			10.48
Granted		4,011,485			4.86
Exercised		(379,927	)		9.85
Cancelled		(1,411,894	)		12.61

Outstanding at December 31, 2001.		13,123,235			8.56
Granted		553,680			0.35
Exercised		—			—
Cancelled		(4,035,801	)		9.37

Outstanding at December 31, 2002.		9,641,114		$	7.74

F-25

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

There were 1.7 million, 4.0 million, and 6.1 million options exercisable under the stock option plan at December 31, 2000, 2001 and 2002, respectively.



	Options Outstanding						Options Exercisable

			Weighted		Weighted				Weighted
	Number		Average		Average		Number		Average
	Outstanding		Remaining		Exercise		Exercisable		Exercise
	As of		Contractual		Price		As of		Price
Exercise Prices	12/31/02		Life		per Share		12/31/02		per Share

$ 0.17 — 4.00		2,885,881		6.86	$	2.51		1,573,802	$	2.16
$ 4.10 — 7.37		2,168,385		6.42		5.07		1,558,938		4.96
$ 7.40 — 11.51		2,339,942		7.10		10.33		1,657,990		10.38
$11.81 — 22.22.		2,246,906		7.61		14.35		1,344,147		14.37

$ 0.42 — 22.22		9,641,114		6.99	$	7.74		6,134,877	$	7.77

The weighted average remaining contractual life of the stock options outstanding was 8.97 years, 8.41 years and 6.99 years at December 31, 2000, 2001 and 2002, respectively. All outstanding options were cancelled without consideration upon emergence from chapter 11 bankruptcy on February 10, 2003, and the Company adopted the 2003 Equity Incentive Plan to grant equity based incentives in New Common Stock to employees and directors. The Company plans to issue approximately 2.7 million options to purchase New Common Stock under this plan in March 2003.

Employee Stock Purchase Plan

In August 1999, SpectraSite adopted the SpectraSite, Inc. Employee Stock Purchase Plan. The Board of Directors reserved and authorized one million shares of common stock for issuance under the plan. Eligible employees may purchase a number of shares of common stock equal to the total dollar amount contributed by the employee to a payroll deduction account during each six-month offering period divided by the purchase price per share. The price of the shares offered to employees under the plan will be 85% of the lesser of the fair market value at the beginning or end of each six-month offering period. SpectraSite initiated the first offering period on September 1, 2000 and issued 0.3 million shares under the plan in 2001 and 0.4 million shares under the plan in 2002. The Employee Stock Purchase Plan was terminated upon the Company’s emergence from chapter 11 bankruptcy on February 10, 2003.

Stock Reserved for Future Issuance. The Company has reserved shares of its authorized shares of Old Common Stock for future issuance as follows:


		As of
		December 31,
		2002

Reserved for issuance in SBC transaction			15,198,049
Outstanding stock options			9,641,114
Outstanding senior convertible notes			9,275,362
Possible future issuance under stock option plans			7,345,985
Outstanding warrants			1,500,000
Employee stock purchase plan			293,567

	Total		43,254,077

F-26

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

7. Leases

As Lessee

The Company leases communications towers, land (“ground leases”), office space and equipment under noncancelable operating and capital leases. Ground leases are generally for terms of five years and are renewable at the option of the Company. Rent expense was approximately $32.7 million, $64.6 million and $75.2 million for the years ended December 31, 2000, 2001 and 2002 respectively. Lease payments for the Company’s tower capital lease assets are made upon inception of the lease, and, accordingly, no capital lease obligation exists for those assets as of December 31, 2002. Obligations related to other capital leases total $12.2 million and are included in accrued and other expenses and other long-term liabilities in the accompanying balance sheets. As of December 31, 2002, the future minimum lease payments for these leases are as follows:


		Capital			Operating
		Leases			Leases

		(in thousands)			(in thousands)
2003		$	1,911		$	66,098
2004			1,881			62,557
2005			1,571			46,357
2006			1,568			31,372
2007			1,615			19,443
Thereafter			10,600			92,007

	Total		19,146		$	317,834

Less amount representing imputed interest			(6,937	)

Present value of net minimum lease payments under capital leases		$	12,209

Assets recorded under capital leases, which are included in property and equipment in the accompanying balance sheets, consist of:


	2001			2002


	(in thousands)
Towers	$	1,001,161		$	1,024,934
Other		12,888			13,674

		1,014,049			1,038,608
Less accumulated depreciation		(51,226	)		(121,193	)

	$	962,823		$	917,415

As Lessor

The Company currently leases or licenses antenna space on multi-tenant towers to a variety of wireless service providers and broadcasters under non-cancelable operating leases. The customer leases or licenses are generally for initial terms of five to ten years and include options

F-27

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

for renewal. The approximate future minimum rental receipts under operating leases that have initial or remaining non-cancelable terms in excess of one year are as follows:


		As of
		December 31,
		2002

		(in thousands)
2003		$	283,309
2004			274,125
2005			232,453
2006			182,701
2007			137,165
Thereafter			478,098

	Total	$	1,587,851

Approximately 53% of these future minimum rental receipts are due from two significant stockholders and their affiliates.

8. Income Taxes

The provision for income taxes is comprised of the following:



		Year Ended
		December 31,

		2000		2001		2002


		(in thousands)
Current:
State		$	305	$	559	$	1,331
Federal			—		—		—

	Total provision for income taxes	$	305	$	559	$	1,331

The reconciliation of income taxes computed at the U.S. federal statutory rate to income tax expense is as follows:



	Year Ended December 31,

	2000			2001			2002

Federal income tax benefit at statutory rate		(35.0	)%		(35.0	)%		(35.0	)%
Non-deductible reorganization expenses		—			—			0.4
Non-deductible goodwill amortization		3.4			2.1			—
Non-deductible interest expense		0.1			0.1			—
State taxes		0.2			0.1			0.4
Non-cash compensation charges		0.6			0.1			0.1
Change in valuation allowance		30.9			32.7			34.5

Effective income tax rate		0.2	%		0.1	%		0.4	%

F-28

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The components of net deferred taxes are as follows:



		As of December 31,

		2000			2001			2002


		(in thousands)
Deferred tax assets:
Tax loss carryforwards		$	39,326		$	188,031		$	205,276
Accreted interest on senior discount notes			56,077			92,486			162,959
Capital loss carryforwards			—			71,890			75,302
Accrued liabilities			1,920			179			23,856
Goodwill			—			—			10,065
Bad debt reserves			1,416			3,417			4,886

Total deferred tax assets			98,739			356,003			482,344

Deferred tax liabilities:
Tax deferred revenue			—			(5,570	)		(4,225	)
Depreciation			—			(13,068	)		(13,435	)

Total deferred tax liabilities			—			(18,638	)		(17,660	)

	Net deferred tax assets before valuation allowance		98,739			337,365			464,684
Valuation allowance			(98,739	)		(337,365	)		(464,684	)

	Net deferred tax assets	$	—		$	—		$	—

The Company has a federal net operating loss carryforward of approximately $521 million that begins to expire in 2012. Also, the Company has state tax loss carryforwards of approximately $515 million that expire beginning in 2003. The Internal Revenue Code places limitations upon the future availability of net operating losses based upon the changes in the equity in the Company. If these changes occur, the ability for the Company to offset future income with existing net operating losses may be limited. In addition, the Company anticipates that its emergence from bankruptcy will reduce the net operating loss carryforwards by approximately $159 million. Based on the Company’s history of losses to date, management has provided a valuation allowance to fully offset the Company’s deferred tax assets.

The Company receives an income tax deduction related to stock options calculated as the difference between the fair market value of the stock issued at the time of exercise and the option price, tax effected. The amount of these benefits generated during 2001 was approximately $0.7 million. There was no benefit generated in 2002. The Company has provided a 100% valuation reserve against this asset as of December 31, 2002. The benefits resulting from these deductions will be credited directly to stockholders’ equity if and when realized.

9. Other Related Party Transactions

Affiliates of a financial institution that owns 7% of the Company’s common stock, have provided, and may continue to provide, investment banking services to the Company. One affiliate of the financial institution is acting as agent and lender under the Company’s credit facility and receives customary fees for the performance of these activities. In addition, the affiliate was an initial purchaser of the 12% Discount Notes, the 11 1/4% Discount Notes, the 10 3/4% Senior Notes, the 12 7/8% Discount Notes and the 12 1/2% Senior Notes and was an underwriter of the Company’s public offerings of common stock in February and July 2000. The Company has $783.0 million outstanding under the credit facility at December 31, 2002.

F-29

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Certain investors participating in an investment group are also affiliates of the financial institution discussed above. In November 2000, this investment group purchased 4.0 million shares of the Company’s common stock in a private placement at a purchase price of $18.75 per share and received warrants to purchase 1.5 million shares of common stock at exercise prices ranging from $21.56 per share to $28.00 per share.

The Company has loans to officers totaling $1.9 million at December 31, 2001 and 2002. Of these amounts, $0.5 million was loaned to an officer to purchase a home as a relocation incentive. The remaining loans were made to officers in connection with the exercise of stock options. These loans have been recorded as a reduction of stockholders’ equity. The loans bear interest at the applicable federal rate under the Internal Revenue Code ranging from 5.36% to 5.82% and have maturities ranging from August 2004 to December 2004. The Company had interest income of $0.1 million from amounts outstanding under the loans in 2000, 2001 and 2002.

10. Investments in Affiliates

On April 7, 2000, the Company acquired Ample Design, Ltd. for approximately $20.2 million. Ample Design provides wireless network development services in the United Kingdom. On June 8, 2000, the Company completed a joint venture with Lattice Group, the former arm of BG Group plc, which runs Britain’s natural gas network. The Company and Lattice Group each owned 50% of the joint venture. Lattice Group transferred existing operational communications towers and industrial land suitable for construction of new towers into the joint venture, and the Company provided intellectual property and wireless network development skills. The Company contributed $164.1 million in cash to be used for future developments and possible acquisitions. The Company also contributed Ample Design to the joint venture. In May 2001, the Company loaned the joint venture $25.0 million to fund acquisitions. In October 2001, the Company sold its ownership interest in the joint venture to Lattice Group for $4.0 million and agreed to accept $5.0 million as payment in full for the loan. As a result, the Company recorded a loss on the investment in the joint venture of $121.9 million and a loss in the loan to the joint venture of $20.0 million in other expense in 2001. In addition, the Company recorded $7.7 million and $61.1 million in other expense related to its equity in the net loss of the joint venture in 2000 and 2001, respectively. As of December 31, 2002, the Company had no remaining investment in the joint venture and no remaining outstanding loan balance.

The Company had a revolving loan arrangement with an affiliate under which the affiliate may borrow up to $14.4 million. The loan accrues interest at 12% and is collateralized by property, equipment, investments, contracts and other assets of the affiliate. The affiliate owed $12.0 million, including accrued interest, to the Company under the loan at December 31, 2001. The Company had interest income of $0.6 million and $1.2 million from amounts outstanding under the loan in 2000 and 2001, respectively. The affiliate primarily provides wireless communications access to facilities owned by the New York Port Authority. The affiliate’s business plan was negatively impacted by the attack on the World Trade Center in September 2001. As a result, the Company recorded a $7.0 million charge in other income (expense) to reduce the book value of the loan to its estimated net realizable value in the year ended December 31, 2001. In July 2002, the Company sold all its interests in the affiliate and recorded a gain of $1.4 million. As of December 31, 2002, the Company had no remaining investment in the affiliate and no remaining outstanding loan balance or commitment.

F-30

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

11. Acquisition Activity

General

Acquisition activity, asset acquisitions and business combinations were 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 and, prior to the adoption of SFAS 142 as discussed in Note 2, was being amortized on a straight-line basis over 15 years. 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.

2002 Acquisitions

SBC Transaction. On August 25, 2000, the Company entered into an agreement to acquire leasehold and sub-leasehold interests in approximately 3,900 wireless communications towers from affiliates of SBC Communications (collectively, “SBC”) in exchange for $982.7 million in cash and $325.0 million in common stock. Under the agreement, and assuming the sublease of all 3,900 towers, the stock portion of the consideration was initially approximately 14.3 million shares valued at $22.74 per share. The stock consideration was subject to an adjustment payment to the extent the average closing price of SpectraSite’s common stock during the 60-day period immediately preceding December 14, 2003 (the third anniversary of the initial closing) decreased from $22.74 down to a floor of $12.96. The adjustment payment would be accelerated if there were a change of control of SpectraSite or upon the occurrence of certain specified liquidity events. In any case, the adjustment payment was payable, at the Company’s option, in the form of cash or shares of common stock. The maximum amount potentially payable to satisfy the adjustment payment was approximately 10.8 million shares of common stock or $139.8 million in cash. The Company and SBC entered into a Lease and Sublease Agreement pursuant to which the Company manages, maintains, leases and subleases available space on the SBC towers and has the right to add customers on the towers. 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. SBC is an anchor customer on all of the towers and pays a monthly fee per tower of $1,544, subject to an annual adjustment. In addition, the Company had agreed to build towers for Cingular, an affiliate of SBC, through 2005 under an exclusive build-to-suit agreement, but this agreement was terminated on May 15, 2002.

Subject to the conditions described in the Lease and Sublease Agreement, SBC also has the right to substitute other available space on the tower for the reserved space, and a right of first refusal as to available space that the Company intends to sublease to a third party. For the first 300 times SBC exercises its right of first refusal, SBC is required to pay the Company rent for the applicable space equal to the lesser of the rent that would have been charged to the proposed third-party and a rent that is proportional to the monthly fee under the sublease. After the first 300 times that SBC exercises its right of first refusal, SBC is required to pay the Company rent for the applicable space equal to the rent that would have been charged to the third-party.

The Company will have the option to purchase the sites subject to the Lease and Sublease Agreement upon the expiration of the lease or sublease as to those sites. The purchase price for each site will be a fixed amount stated in the lease or 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 or subleased to date was approximately $219.3 million as of

F-31

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2002 and will accrete at a rate of 10% per year to the applicable expiration of the lease or sublease of a site. In the event that the Company purchases such sites, SBC shall have 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 monthly fee shall be subject to an annual increase based on changes in the consumer price index.

From the initial closing on December 14, 2000 through a closing on February 25, 2002, the Company leased or subleased a total of 2,706 towers under the terms of the amended agreement. The parties agreed to complete the lease or sublease of the remaining 600 towers during the period beginning May 2003 and ending August 2004. The total purchase price for the 600 towers is expected to be approximately $156 million.

In 2002, the Company leased or subleased 41 towers, for which it paid $10.1 million in cash and issued 146,569 shares of common stock valued at $1.7 million.

As of December 31, 2002, the Company had issued approximately 9.9 million shares of common stock to SBC pursuant to the SBC acquisition agreements. As part of the Plan of Reorganization discussed in Note 2, on February 10, 2003, the Company issued to SBC 12.1 million shares of Old Common Stock in full satisfaction of any obligation to issue SBC further stock or make any further adjustment payment. Of the 12.1 million shares, the Company issued 7.5 million shares of Old Common Stock in connection with the adjustment payment described above and 4.7 million shares of Old Common Stock as an advance payment on the purchase of the remaining 600 towers. All of these shares of Old Common Stock were exchanged for new warrants under the Plan of Reorganization. As a result, at all future closings with SBC, the stock portion of the payment for each site has been paid in full.

2001 Acquisitions

During the year ended December 31, 2001, the Company consummated transactions involving the acquisition of various communications sites and two service providers for an aggregate purchase price of $722.8 million, including the issuance of approximately 7.9 million shares of common stock valued at $122.8 million. The principal transactions were as follows:

AirTouch Transaction. On February 16, 2000, the Company entered into an agreement with AirTouch Communications (now Verizon Wireless) and several of its affiliates, under which the Company agreed to lease or sublease up to 430 communications towers located throughout southern California for $155.0 million. As partial security for obligations under the agreement to

F-32

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

sublease, the Company deposited $23.0 million into escrow. Under the terms of the agreement, the Company will manage, maintain and lease the available space on the AirTouch towers covered by the agreement. AirTouch will pay a monthly fee per site for its cellular, microwave and paging facilities. The Company also has the right to lease available tower space to additional customers in specified situations. In addition, the Company entered into a three-year exclusive build-to-suit agreement with AirTouch in southern California. Under the terms of the build-to-suit agreement, the Company will develop and construct locations for wireless communications towers on real property designated by AirTouch.

The AirTouch transaction closed in stages with the initial closing occurring on August 15, 2000 and the final closing under the original agreement occurring on February 15, 2001. At each respective closing, the Company made its lease or sublease payments for towers included in that closing according to a formula contained in the master sublease. The final closing of 69 towers occurred on February 15, 2001 for aggregate cash consideration of $24.8 million, including $3.7 million released from the deposit escrow. The leases for the remaining 128 towers contemplated in the original agreement were not closed. As a result, the remaining $6.8 million escrow deposit was returned to the Company. In March 2001, the Company agreed to amend the agreement with AirTouch and extend the opportunity to sublease the remaining 128 towers through the second quarter of 2001. On June 29, 2001, the Company subleased 6 towers for aggregate consideration of $2.0 million.

SBC Transaction. As discussed above, in 2000, the Company entered into an agreement to acquire lease or sublease interests in communications towers from SBC and several of its affiliates. In the year ended December 31, 2001, the Company leased or subleased 1,926 towers, for which it paid $493.9 million in cash and issued 7.2 million shares of common stock valued at $121.2 million.

Paxson. On December 19, 2001, the Company acquired 21 broadcast towers and management rights to 15 broadcast towers from Paxson for $34.0 million in cash.

Nextel Acquisitions. During 1999, the Company acquired 2,000 communications towers from affiliates of Nextel and also entered into a master site commitment agreement with these affiliates. Under the terms of this agreement, Nextel offered SpectraSite exclusive opportunities relating to the purchase or construction of up to 2,111 communications sites. During 2001, the Company acquired 192 wireless communications towers from Nextel and its affiliates under this agreement for a total purchase price of $33.7 million in cash. In 2002, the number of sites purchased or constructed or made available for co-location under the master site commitment agreement reached 2,111, and the agreement terminated.

Pursuant to the tower acquisitions and entering into the master site commitment agreement in 1999, SpectraSite and Nextel and SpectraSite and Nextel Partners entered into master site lease agreements. Under these agreements, SpectraSite has agreed to lease to Nextel and Nextel Partners space on wireless communications towers or other transmission space. These lease agreements provide for a monthly rental payment of $1,600 per month. On each annual anniversary of a given lease’s commencement, the rent owed under the lease will increase by 3%.

The term of each lease contracted under the agreement is at least five years, with a right to extend for five successive five-year periods. In some cases, the initial lease term will be six, seven or eight years. The lease is automatically renewed unless the customer submits notification of its intent to terminate the lease, when its current term expires, prior to such expiration.

F-33

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

SpectraSite and Nextel also entered into a security and subordination agreement under which SpectraSite granted to Nextel a continuing security interest in the assets acquired in the Nextel tower acquisition or acquired or constructed under the master site commitment agreement. This interest secures SpectraSite’s obligations under the Nextel master site lease agreement and the Nextel Partners master site lease agreement. The terms of an intercreditor agreement render Nextel’s lien and the other rights and remedies of Nextel under the security and subordination agreement subordinate and subject to the rights and remedies of the lenders under Communications’ credit facility.

2000 Acquisitions

During the year ended December 31, 2000, the Company consummated transactions involving the acquisition of various communications sites and service providers for an estimated purchase price of $765.1 million, including the issuance of approximately 9.2 million shares of the Company’s common stock valued at $165.0 million. The purchase price also includes the issuance of 191,465 options to purchase the Company’s common stock at a price of $3.58 per share. These options were valued at $2.0 million using the Black-Scholes option-pricing model. The principal transactions were as follows:

Apex Transaction. On January 5, 2000, the Company acquired Apex Site Management Holdings, Inc. in a merger transaction for 4.5 million shares of SpectraSite’s common stock valued at $55.8 million and 191,465 options to purchase common stock at an exercise price of $3.58 per share. SpectraSite also used approximately $6.2 million in cash to repay outstanding indebtedness and other obligations of Apex in connection with the merger. Apex provides rooftop and in-building access to wireless carriers.

ITI Transaction. On January 28, 2000, the Company acquired substantially all of the assets of International Towers Inc. and its subsidiaries (“ITI”), including S&W Communications Inc. ITI owned a broadcast tower manufacturing facility and, through S&W Communications, provided integrated services for the erection of broadcast towers, foundations and multi-tenant transmitter buildings. The Company paid $5.4 million and issued 350,000 shares of SpectraSite’s common stock, valued at $7.1 million, in connection with this acquisition.

AirTouch Transaction. As discussed above, in 2000 the Company entered into an agreement to lease or sublease communications towers from AirTouch and several of its affiliates. During 2000, the Company subleased 233 towers for aggregate cash consideration of $83.9 million, including $12.5 million released from the deposit escrow.

Lodestar Transaction. On May 18, 2000, the Company acquired Lodestar Towers, Inc. for approximately $178.6 million in cash. As of May 18, 2000, Lodestar owned 110 wireless towers and 11 broadcast towers, and managed an additional 120 wireless towers and 10 broadcast towers.

Pegasus Acquisition. On July 17, 2000, the Company acquired 11 broadcast towers from Pegasus Communications for approximately 1.4 million shares of common stock valued at $37.5 million.

GOCOM Acquisition. On August 24, 2000, the Company acquired 12 broadcast towers and 14 other communications towers from GOCOM Holdings, LLC and its subsidiaries for $28.2 million in cash.

SBC Transaction. As discussed above, in 2000 the Company entered into an agreement to acquire leasehold and sub-leasehold interests in communications towers from affiliates of SBC.

F-34

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The initial closing occurred on December 14, 2000 and involved 739 towers, for which the company paid $175.0 million in cash and issued 2.5 million shares of common stock valued at $57.9 million.

Nextel Acquisitions. During 1999, the Company entered into a master site commitment agreement with certain of Nextel’s subsidiaries. During 2000, the Company acquired 479 wireless communications towers from Nextel and its affiliates under this agreement for a total purchase price of $86.9 million in cash.

U.S. RealTel Transaction. On December 8, 2000, the Company purchased substantially all of the United States assets and operations of U.S. RealTel, Inc. for a purchase price of $16.5 million in cash. U.S. RealTel is an international provider of rooftop and in-building telecommunications access.

12. Restructuring and Non-recurring Charges

In May 2002, the Company announced that it would terminate its build-to-suit programs with Cingular (the “Cingular BTS Termination”) and other carriers and implement other cost-cutting measures as a part of the curtailment of tower development activities. As a result of these actions, the Company recorded restructuring charges of $23.1 million. Of this amount, $16.4 million was related to the write-off of work in progress related to sites in development that were terminated, $3.2 million was related to the costs of closing offices and $3.5 million was related to the costs of severance for 155 employees. In addition, we recorded a non-recurring impairment charge of $4.3 million to write-down the carrying value of 21 towers that are not marketable. The charge was based on the estimated discounted cash flows of the towers.

In May 2001, the Company announced that it would consolidate its rooftop management operations (the “Rooftop Management Consolidation”) and recorded a non-recurring charge of $35.8 million. Of this amount, $29.6 million related to the write-off of goodwill, determined using the present value of estimated cash flows, $5.1 million related to the write-down of long-term assets and $1.1 million related to the costs of severance of 80 employees and other costs related to the consolidation of these operations.

In June 2001, the Company announced that it would divest its site leasing operations in Mexico (the “Mexico Divestiture”). As a result, the Company recorded non-recurring charges of $32.2 million of which $10.7 million related to the write-off of goodwill, $17.6 million related to the write-down of long-term assets and $3.9 million related to the costs severance of 21 employees and other costs related to the divestiture.

Also in June 2001, the Company announced that it would close operations from the purchase of Vertical Properties (“Vertical Properties”). As a result, the Company recorded non-recurring charges of $4.3 million of which $4.2 million was related to the write-off of goodwill and $0.1 million was related to the costs of severance of 2 employees and other costs related to the closing.

In November 2001, the Company announced that it would reduce its planned new tower acquisition and construction programs for 2002 (the “Reduced Tower Acquisition and Development”). As a result of the reduced new tower activity, the Company recorded restructuring charges of $68.6 million. Of this amount, $26.0 million was related to the write-off of work in progress related to sites in development that the Company terminated, $4.8 million was related to the costs of closing certain offices and $2.8 million was related to the costs of severance of 201 employees. The Company also completed an amendment to modify its agreement to acquire leasehold and sub-leasehold interests in approximately 3,900

F-35

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

communications towers from affiliates of SBC Communications. This amendment provides for the number of towers to be leased or subleased to be reduced by 300 and for the lease or sublease date on at least 850 towers to be postponed to 2003 and January 2004. In exchange for these modifications, the Company paid a contract amendment fee of $35.0 million that has been included in the restructuring charge in 2001.

The following tables display activity related to the accrued restructuring liability. Such liability is reflected in accrued and other expenses in the accompanying condensed consolidated balance sheets.


			Liability							Liability
			as of		Additional					as of
			December 31,		Restructuring		Cash			December 31,
			2000		Charges		Payments			2001

Accrued restructuring liabilities:
	Rooftop management consolidation —
		Employee severance, lease termination and related costs	$	—	$	1,100	$	(1,100	)	$	—
	Mexico divestiture —
		Employee severance, lease terminations and related costs		—		3,900		(3,900	)		—
	Vertical properties —
		Employee severance, lease terminations and related costs		—		100		(100	)		—
	Reduced tower acquisition and development —
		Employee severance		—		2,800		(369	)		2,431
		Lease termination and office closing		—		4,800		(2,381	)		2,419

		Total reduced tower acquisition and development		—		7,600		(2,750	)		4,850

	Total accrued restructuring liabilities		$	—	$	12,700	$	(7,850	)	$	4,850

F-36

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


			Liability							Liability
			as of		Additional					as of
			December 31,		Restructuring		Cash			December 31,
			2001		Charges		Payments			2002

Accrued restructuring liabilities:
	Reduced tower acquisition and development —
		Employee severance	$	2,431	$	—	$	(481	)	$	1,950
		Lease termination and office closing		2,419		—		(923	)		1,496

		Total reduced tower acquisition and development		4,850		—		(1,404	)		3,446
	Cingular BTS termination —
		Employee severance		—		3,491		(2,726	)		765
		Lease termination and office closing		—		3,245		(1,180	)		2,065

		Total Cingular BTS termination		—		6,736		(3,906	)		2,830

Total accrued restructuring liabilities			$	4,850	$	6,736	$	(5,310	)	$	6,276

13. Business Segments

Prior to its decision to sell its network services and broadcast services divisions, the Company operated in two business segments: site leasing and network services. As a result of the decision to sell these divisions, the Company has changed its internal organization so that it now operates in two different business segments: wireless and broadcast. Our operations are segmented and managed along our product and service lines. Prior period information has been restated to conform to the current organization. The wireless segment provides for leasing and subleasing of antenna sites on multi-tenant towers for a diverse range of wireless communication services. The broadcast segment offers leasing and licensing of antenna sites for broadcast communication services.

The measurement of profit or loss currently used by management to evaluate the results of operations of the Company and its operating segments is Adjusted EBITDA. For the periods prior to January 31, 2003, Adjusted EBITDA consists of net income (loss) before depreciation, amortization and accretion expenses, interest, gain on debt discharge, income tax expense (benefit), reorganization items, discontinued operations, cumulative effect of change in accounting principle and writeoffs of investments in and loans to affiliates. For the periods subsequent to January 31, 2003, 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. The Company uses a different definition of Adjusted EBITDA for the fiscal periods prior to its reorganization to enable investors to view its operating performance on a consistent basis before the impact of the items discussed above on the predecessor company. Each of these historical items was incurred prior to, or in connection with, its bankruptcy. The Company discusses Adjusted EBITDA and the limitations of this financial measure more fully under “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measures — Adjusted EBITDA.” 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.

F-37

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Summarized financial information concerning each reportable segment is shown in the following table. The “Other” column represents amounts excluded from specific segments, such as income taxes, corporate general and administrative expenses, depreciation and amortization, restructuring and non-recurring charges and interest. In addition, “Other” also includes corporate assets such as cash and cash equivalents, certain tangible and intangible assets and income tax accounts that have not been allocated to a specific segment.



	Wireless			Broadcast		Other			Total


	(in thousands)
Year ended December 31, 2002
Total revenues	$	261,189		$	21,336	$	—		$	282,525
Adjusted EBITDA		107,004			11,993		(38,038	)		80,959
Assets		2,235,117			171,631		171,708			2,578,456
Goodwill		60,626			—		—			60,626
Additions to property and equipment		52,020			13,526		8,685			74,231
Year ended December 31, 2001
Total revenues	$	210,308		$	11,427	$	—		$	221,735
Adjusted EBITDA		(53,044	)		8,537		(98,720	)		(143,227	)
Assets		2,424,886			225,947		552,592			3,203,425
Goodwill		102,976			59,001		—			161,977
Additions to property and equipment		966,087			51,856		80,701			1,098,644
Year ended December 31, 2000
Total revenues	$	114,224		$	3,746	$	—		$	117,970
Adjusted EBITDA		45,101			3,483		(28,832	)		19,752
Assets		1,645,963			173,565		1,234,577			3,054,105
Goodwill		150,855			63,423		—			214,278
Additions to property and equipment		700,877			86,797		37,613			825,287

F-38

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table shows a breakdown of the significant components included in the “other” column in the segment disclosure above (in thousands):



	Year Ended December 31,

	2000		2001		2002

Adjusted EBITDA:
Corporate selling, general and administrative expenses, excluding corporate non-cash compensation charges	$	17,482	$	29,743	$	27,743
Corporate other expenses		8,778		66,852		9,600
Corporate non-cash compensation charges		2,572		2,125		695

Total Adjusted EBITDA	$	28,832	$	98,720	$	38,038

Assets:
Cash and cash equivalents	$	552,653	$	31,547	$	80,961
Debt issuance costs		64,915		77,865		66,192
Investments in affiliates		195,693		26,974		—
Assets held for sale		421,316		416,206		24,555

Total assets	$	1,234,577	$	552,592	$	171,708

Additions to property and equipment:
Corporate additions to property and equipment	$	27,230	$	77,782	$	7,816
Additions to property and equipment related to assets held for sale		10,383		2,919		869

Total additions to property and equipment	$	37,613	$	80,701	$	8,685

A reconciliation of income (loss) from continuing operations before income taxes to Adjusted EBITDA is as follows (in thousands):



	Year Ended December 31,

	2000			2001			2002

Loss from continuing operations before income taxes	$	(163,507	)	$	(658,376	)	$	(337,227	)
Add: Depreciation, amortization and accretion expenses		76,986			163,628			188,176
Less: Interest income		(28,391	)		(17,037	)		(855	)
Add: Interest expense		134,664			212,174			226,536
Add: Reorganization expense		—			—			4,329
Writeoff of investments in affiliates		—			129,404			—
Writeoff of loans to affiliates		—			26,980			—

Adjusted EBITDA	$	19,752		$	(143,227	)	$	80,959

Net revenues were located in geographic areas as follows:



	Year Ended December 31,

	2000		2001		2002


	(in thousands)
United States	$	117,147	$	220,459	$	281,866
Canada		823		1,139		659
Mexico		—		137		—

Consolidated net revenues	$	117,970	$	221,735	$	282,525

F-39

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Long-lived assets were located in geographic areas as follows:



	Year Ended
	December 31,

	2001		2002


	(in thousands)
United States	$	2,724,744	$	2,442,547
Canada		2,944		3,003

Consolidated long-lived assets	$	2,727,688	$	2,445,550

14. Selected Quarterly Financial Data (Unaudited)

Selected quarterly financial data for the years ended December 31, 2001 and 2002 is as follows:



	Three Months Ended

	March 31			June 30			September 30			December 31


	(in thousands, except per share amounts)
2002
Revenues	$	65,955		$	69,640		$	72,020		$	74,910
Operating loss before restructuring and non-recurring charges(1)		(18,205	)		(21,822	)		(17,172	)		(11,804	)
Restructuring and non-recurring charges		—			(27,394	)		—			—
Income (loss) from discontinued operations		1,487			(5,924	)		(50,301	)		(4,935	)
Net loss(2)		(452,531	)		(127,568	)		(134,592	)		(60,293	)
Net loss per common share, basic and diluted	$	(2.95	)	$	(0.83	)	$	(0.87	)	$	(0.39	)
2001
Revenues	$	46,269		$	52,637		$	58,807		$	64,022
Operating loss before restructuring and non-recurring charges(1)		(19,088	)		(24,718	)		(26,098	)		(29,223	)
Restructuring and non-recurring charges		—			(72,323	)		—			(68,548	)
Income from discontinued operations		195			1,195			3,272			(496	)
Net loss		(63,898	)		(187,033	)		(241,140	)		(162,698	)
Net loss per common share, basic and diluted	$	(0.44	)	$	(1.24	)	$	(1.59	)	$	(1.06	)


(1)	Represents revenues less operating expenses excluding restructuring and non-recurring charges.

(2)	Includes a charge in the quarter ended March 31, 2002 of $376,753, or $2.45 per share, for the cumulative effect of a change in accounting for goodwill related to the adoption of SFAS 142.

15. Subsequent Events

On December 16, 2003, the Company decided to discontinue its broadcast services division and the related assets and liabilities have been classified as held for sale. Broadcast services

F-40

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

revenues for the years ended December 31, 2000, 2001 and 2002 were $37.1 million, $38.1 million and $26.8 million, respectively. The results of the broadcast services division’s operations have been reported separately as discontinued operations in the balance sheets and statements of operations. Prior period financial statements have been restated to present the operations of the division as a discontinued operation.

In August 2003, the Company retained Lazard Frères & Co. LLC (“Lazard”) to assist in the sale of its broadcast services division. Lazard conducted an auction process with several participants to determine the net realizable value of the division. We estimate that the resulting loss could be as much as $20.0 million, depending on the nature of the disposition. The assets and liabilities of the discontinued broadcast services division have been recorded at their estimated net realizable value in the accompanying balance sheets based on tentative sale negotiations; however, there can be no assurance that a transaction will be completed on that basis. Assets and liabilities held for sale related to the broadcast services division consist of the following (in thousands):


		December 31,		December 31,
		2001		2002


		(in thousands)
Accounts receivable		$	5,757	$	4,251
Costs and estimated earnings in excess of billings			1,940		2,169
Inventories			8,355		7,878
Prepaid expenses and other			139		235
Property and equipment, net			11,559		9,997
Goodwill, net			63,444		—
Other assets			68		25

	Assets held for sale	$	91,262	$	24,555

Accounts payable		$	2,919	$	1,363
Accrued and other expenses			3,435		2,367
Billings in excess of costs and estimated earnings			2,763		703
Other long-term liabilities			171		90

	Liabilities held for sale	$	9,288	$	4,523

F-41

SPECTRASITE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

At September 30, 2003 and December 31, 2002


			Reorganized			Predecessor
			Company			Company
			September 30, 2003			December 31, 2002

			(unaudited)

			(dollars in thousands)
ASSETS
Current assets:
	Cash and cash equivalents		$	55,850		$	80,961
	Accounts receivable, net of allowance of $9,391 and $11,088, respectively			3,438			10,929
	Prepaid expenses and other			11,751			16,461
	Assets held for sale			22,856			24,555

		Total current assets		93,895			132,906
Property and equipment, net				1,216,600			2,282,948
Goodwill, net				—			60,626
Other assets				216,976			101,976

		Total assets	$	1,527,471		$	2,578,456

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
	Accounts payable		$	7,276		$	11,666
	Accrued and other expenses			85,865			63,913
	Liabilities under SBC agreement			55,660			—
	Current portion of credit facility			—			2,244
	Liabilities held for sale			2,948			4,523

		Total current liabilities		151,749			82,346

Long-term portion of credit facility				439,955			780,711
Senior notes				200,000			—
Other long-term liabilities				53,675			27,240

		Total long-term liabilities		693,630			807,951

Liabilities subject to compromise (Note 2)				—			1,763,286

Stockholders’ equity (deficit):
	Common stock, $0.001 par value, 300,000,000 shares authorized, 154,013,917 issued and outstanding at December 31, 2002			—			154
	Common stock, $0.01 par value, 250,000,000 shares authorized, 47,548,475 issued and outstanding at September 30, 2003			475			—
	Additional paid-in-capital			687,669			1,624,939
	Accumulated other comprehensive income (loss)			—			(355	)
	Accumulated deficit			(6,052	)		(1,699,865	)

		Total stockholders’ equity (deficit)		682,092			(75,127	)

		Total liabilities and stockholders’ equity (deficit)	$	1,527,471		$	2,578,456

See accompanying notes to the unaudited condensed consolidated financial statements.

F-42

SPECTRASITE, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


			Reorganized			Predecessor			Reorganized			Predecessor			Predecessor
			Company			Company			Company			Company			Company
			Three Months			Three Months			Eight Months			One Month			Nine Months
			Ended			Ended			Ended			Ended			Ended
			September 30,			September 30,			September 30,			January 31,			September 30,
			2003			2002			2003			2003			2002


			(in thousands, except per share amounts)
Revenues			$	79,499		$	72,020		$	208,173		$	25,626		$	207,615
Operating expenses:
	Costs of operations, excluding depreciation, amortization and accretion expense		$	26,044		$	27,460		$	68,859		$	8,901		$	79,675
	Selling, general and administrative expenses			12,717			13,488			33,027			4,003			42,543
	Depreciation, amortization and accretion expenses			25,393			48,244			67,404			15,930			142,596
	Restructuring and non-recurring charges			—			—			—			—			27,394

		Total operating expenses	$	64,154		$	89,192		$	169,290		$	28,834		$	292,208

Operating income (loss)			$	15,345		$	(17,172	)	$	38,883		$	(3,208	)	$	(84,593	)

Other income (expense):
	Interest income		$	143		$	148		$	639		$	137		$	525
	Interest expense			(12,563	)		(67,018	)		(40,428	)		(4,721	)		(187,510	)
	Gain on debt discharge			—			—			—			1,034,764			—
	Reorganization expense			—			(1,854	)		—			—			(1,854	)
	Other income (expense)			1,134			2,118			(1,936	)		(493	)		(9,074	)

		Total other income (expense)	$	(11,286	)	$	(66,606	)	$	(41,725	)	$	1,029,687		$	(197,913	)

Income (loss) from continuing operations before income taxes			$	4,059		$	(83,778	)	$	(2,842	)	$	1,026,479		$	(282,506	)
Income tax expense				597			513			1,270			5			694

Income (loss) from continuing operations				3,462			(84,291	)		(4,112	)		1,026,474			(283,200	)
Reorganization items:
	Adjust accounts to fair value			—			—			—			(644,688	)		—
	Professional and other fees			—			—			—			(23,894	)		—

		Total reorganization items	$	—		$	—		$	—		$	(668,582	)	$	—

Income (loss) before discontinued operations			$	3,462		$	(84,291	)	$	(4,112	)	$	357,892		$	(283,200	)
Discontinued operations (net of income taxes):
	Loss from operations of discontinued divisions			(248	)		(4,674	)		(1,344	)		(686	)		(9,111	)
	Loss on disposal of discontinued divisions			—			(45,627	)		(596	)		—			(45,627	)

Income (loss) before cumulative effect of change in accounting principle			$	3,214		$	(134,592	)	$	(6,052	)	$	357,206		$	(337,938	)
Cumulative effect of change in accounting principle (Note 4)				—			—			—			(12,236	)		(376,753	)

Net income (loss)			$	3,214		$	(134,592	)	$	(6,052	)	$	344,970		$	(714,691	)

Basic earnings per share:
	Income (loss) from continuing operations		$	0.07		$	(0.55	)	$	(0.09	)	$	6.66		$	(1.84	)
	Reorganization items			—			—			—			(4.34	)		—
	Discontinued operations			—			(0.32	)		(0.04	)		—			(0.35	)
	Cumulative effect of change in accounting principle			—			—			—			(0.08	)		(2.45	)

	Net income (loss)		$	0.07		$	(0.87	)	$	(0.13	)	$	2.24		$	(4.64	)

Diluted earnings per share:
	Income (loss) from continuing operations		$	0.06		$	(0.55	)	$	(0.09	)	$	6.66		$	(1.84	)
	Reorganization items			—			—			—			(4.34	)		—
	Discontinued operations			—			(0.32	)		(0.04	)		—			(0.35	)
	Cumulative effect of change in accounting principle			—			—			—			(0.08	)		(2.45	)

	Net income (loss)		$	0.06		$	(0.87	)	$	(0.13	)	$	2.24		$	(4.64	)

Weighted average common shares outstanding (basic)				47,507			154,014			47,325			154,014			153,894

Weighted average common shares outstanding (diluted)				51,617			154,014			47,325			154,014			153,894

See accompanying notes to the unaudited condensed consolidated financial statements.

F-43

SPECTRASITE, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


				Reorganized Company			Predecessor Company			Predecessor Company
				Eight Months			One Month			Nine Months
				Ended			Ended			Ended
				September 30, 2003			January 31, 2003			September 30, 2002


				(in thousands)
Operating activities
Net income (loss)				$	(6,052	)	$	344,970		$	(714,691	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
	Depreciation				56,330			15,609			145,639
	Cumulative effect of change in accounting principle				—			12,236			376,753
	Amortization of intangible assets				10,041			252			2,507
	Amortization of debt issuance costs				3,480			425			12,325
	Amortization of asset retirement obligation				1,756			214			—
	Amortization of senior discount notes				—			—			92,900
	Writeoff of debt issuance costs				8,938			—			—
	Non-cash compensation charges				—			—			638
	(Gain) loss on disposal of assets				3,898			(84	)		80,883
	Gain on sale of available-for-sale securities				(3,837	)		—			—
	Gain on sale of investments in affiliates				—			—			(1,364	)
	Gain on sale of subsidiary				(394	)		—			—
	Gain on debt discharge				—			(1,034,764	)		—
	Adjust accounts to fair value				—			644,688			—
	Equity in net loss of affiliates				—			—			59
	Changes in operating assets and liabilities, net of acquisitions:
		Accounts receivable			1,666			5,045			34,786
		Costs and estimated earnings in excess of billings, net			305			(272	)		(4,127	)
		Inventories			318			(2	)		(227	)
		Prepaid expenses and other			(4,679	)		(2,238	)		(4,534	)
		Accounts payable			(17,845	)		13,549			(36,997	)
		Other liabilities			13,497			6,264			16,983

			Net cash provided by operating activities	$	67,422		$	5,892		$	1,533

Investing activities
Purchases of property and equipment				$	(10,143	)	$	(2,737	)	$	(52,431	)
Acquisitions of towers					(14,686	)		—			(10,067	)
Loans to affiliates					—			—			(750	)
Proceeds from the sale of assets					81,349			—			1,283
Proceeds from sale of available-for-sale securities					4,970			—			—
Proceeds from sale of subsidiary					2,053			—			—
Proceeds from the sale of investments in affiliates					—			—			7,500

			Net cash provided by (used in) investing activities	$	63,543		$	(2,737	)	$	(54,465	)

Financing activities
Proceeds from issuance of common stock, net of issuance costs				$	2,415		$	—		$	477
Proceeds from issuance of long-term debt					200,000			—			90,000
Repayments of debt and capital leases					(343,389	)		(10,884	)		(2,234	)
Debt issuance costs					(7,373	)		—			(2,612	)

			Net cash provided by (used in) financing activities	$	(148,347	)	$	(10,884	)	$	85,631

			Net increase (decrease) in cash and cash equivalents	$	(17,382	)	$	(7,729	)	$	32,699
Cash and cash equivalents at beginning of period					73,232			80,961			31,547

Cash and cash equivalents at end of period				$	55,850		$	73,232		$	64,246

Supplemental disclosures of cash flow information:
Cash paid during the period for interest				$	19,718		$	4,265		$	72,696
Cash paid during the period for income taxes					1,915			5			1,471
Supplemental disclosures of noncash investing and financing activities:
Common stock issued for deposits				$	—		$	408		$	—
Common stock issued for acquisitions					—			—			1,678
Capital lease obligations incurred for purchases of property and equipment					162			—			908

See accompanying notes to the unaudited condensed consolidated financial statements.

F-44

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1.	Description of Business, Basis of Presentation and Significant Accounting Policies

SpectraSite, Inc. (“SpectraSite”), formerly known as SpectraSite Holdings, Inc., and its wholly owned subsidiaries (collectively referred to as the “Company”) are principally 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.

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 Note 7, on December 16, 2003, the Company decided to discontinue its broadcast services division. The assets and liabilities of that division have been classified as held for sale in the accompanying condensed consolidated balance sheets. In addition, the results of the operations of the division have been presented as discontinued operations in the unaudited condensed consolidated statements of operations for all periods presented.

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 as of January 31, 2003, and the Company’s emergence from chapter 11 resulted in a new reporting entity. Under fresh start accounting, the reorganization value of the entity is allocated to the entity’s assets based on fair values, and liabilities are stated at the present value of amounts to be paid determined using appropriate current interest rates. The effective date is considered to be the close of business on January 31, 2003 for financial reporting purposes. The periods presented prior to January 31, 2003 have been designated “Predecessor Company” and the periods subsequent to January 31, 2003 have been designated “Reorganized Company.” As a result of the implementation of fresh start accounting, the financial statements of the Company after the effective date are not comparable to the Company’s financial statements for prior periods.

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. Estimates that are susceptible to change include the Company’s estimate of the allowance for uncollectible accounts.

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 term of the lease or license. Revenues from fees, such as structural analysis fees and site inspection fees, are recognized upon delivery of the related product or service. Additionally, the Company generates revenues related to the management of sites on rooftops. Under each site management agreement, the Company is entitled to a fee based on a percentage of the gross

F-45

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

revenue derived from the rooftop site subject to the agreement. The Company recognizes this fee as revenue when earned.

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 us 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 $11.1 million and $9.4 million as of December 31, 2002 and September 30, 2003, respectively.

Significant Customers

The Company’s customer base consists of businesses operating in the wireless telecommunications and broadcast industries in the United States. The Company’s exposure to credit risk consists primarily of unsecured accounts receivable from these customers.

One customer and its affiliates accounted for $22.1 million and $23.6 million, or 31% and 30% of revenues for the three months ended September 30, 2002 and 2003, respectively, and $65.6 million, $7.4 million and $62.8 million, or 32%, 29% and 30% of revenues in the nine months ended September 30, 2002, the one month ended January 31, 2003 and the eight months ended September 30, 2003, respectively. This customer was a significant stockholder of the Predecessor Company’s common stock. In addition, another customer, which is an affiliate of a former significant stockholder of the Predecessor Company’s common stock, accounted for $16.0 million and $16.5 million, or 22% and 21% of revenues for the three months ended September 30, 2002 and 2003, respectively, and $44.8 million, $5.9 million and $42.1 million, or 22%, 23% and 20% of the Company’s revenues in the nine months ended September 30, 2002, the one month ended January 31, 2003 and the eight months ended September 30, 2003, respectively. This customer also accounted for $5.5 million or 25% of accounts receivable at December 31, 2002.

Property and Equipment

Property and equipment built, purchased or leased under long-term leasehold agreements are recorded at cost and depreciated over their estimated useful lives. The Company capitalizes costs incurred in bringing property and equipment to an operational state. Costs clearly associated with the acquisition, development and construction of property and equipment are capitalized as a cost of the assets. Indirect costs that relate to several assets are capitalized and allocated to the assets to which the costs relate. Indirect costs that do not clearly relate to projects under development or construction are charged to expense as incurred. In addition, upon initial recognition of a liability for the retirement of a purchased or constructed long-lived asset as required by Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations (“SFAS 143”), 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 on property and equipment excluding towers is computed using the straight-line method over the estimated useful lives of the assets ranging from three to fifteen years. Depreciation on towers is

F-46

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

computed using the straight-line method over the estimated useful lives of 15 years for wireless towers and 30 years for broadcast towers. Amortization of assets recorded under capital leases is included in depreciation.

Available-for-Sale Securities

Available-for-sale securities are classified as other assets in the condensed consolidated balance sheets and are stated at fair value, with any unrealized gains and losses reported in other comprehensive income. Realized gains and losses and declines in value judged to be other-than-temporary on available-for-sale securities are included in other income (expense). During the three and eight months ended September 30, 2003, the Company sold its available-for-sale securities for proceeds of $5.0 million and recognized a gain on the sale of $3.8 million. This gain is included in Other income (expense) in the unaudited condensed consolidated statements of operations.

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 unamortized goodwill over the remaining useful life. The Company estimates future cash flows based on the current performance of the acquired assets and our business plan for those assets. Changes in business conditions, major customers or other factors could result in changes in those estimates. Goodwill determined to be unrecoverable based on future cash flows is written-off in the period in which such determination is made.

On January 1, 2002, the Company performed the first of the required impairment tests of goodwill by comparing the fair value of each of our reporting units with its carrying value. Fair value was determined using a discounted cash flow methodology. Based on our impairment tests, we recognized an adjustment of $376.8 million, or $2.45 per share, to reduce the carrying value of goodwill in our wireless services, broadcast tower, broadcast services and building units to its implied value. In accordance with SFAS 142, the impairment adjustment recognized at adoption of the new rules was reflected as a cumulative effect of accounting change in our first quarter 2002 statement of operations. In connection with the Company’s adoption of fresh start accounting on January 31, 2003, impairment tests of goodwill were performed. As a result, the remaining $60.6 million of goodwill related to our wireless tower unit was written off. This charge is included in Reorganization items in the consolidated financial statements.

Customer Contracts

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 or the remaining life of the related tower asset, not to exceed 15 years for wireless towers and 30 years for broadcast towers. Customer contracts, less accumulated amortization, were $182.5 million as of September 30,

F-47

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2003 and are classified as Other assets in the unaudited condensed consolidated financial statements.

Liabilities under SBC Agreement

In connection with the Plan of Reorganization and the implementation of fresh start accounting 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 SBC agreement as discussed in Note 5. 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 is reduced by a portion of the purchase price of each tower. In addition, the liability is reduced by the amount of costs incurred to place the acquired towers in service. In the eight months ended September 30, 2003, $4.5 million of the purchase price of 59 towers acquired and $0.3 million of acquisition costs were applied against the liability. As of September 30, 2003, the remaining liability was $55.7 million.

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. The Company records derivative financial instruments in the consolidated financial statements at fair value. Changes in the fair values of derivative financial instruments are either recognized in earnings or in stockholders’ equity as a component of other comprehensive income 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 in order to limit exposure to fluctuations in interest rates on its variable rate credit facility. This transaction is 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 September 30, 2003, the carrying amount and fair value of this instrument was $0.3 million and is included in Other assets in the unaudited condensed consolidated balance sheets.

Restructuring and Non-recurring Charges

In May 2002, the Company announced that it would terminate its build-to-suit programs with Cingular (the “Cingular BTS Termination”) and other carriers and implement other cost-cutting measures as a part of the curtailment of tower development activities. As a result of these actions, the Company recorded restructuring charges of $23.1 million. Of this amount, $16.4 million was related to the write-off of work in progress related to sites in development that are to be terminated, $3.2 million was related to the costs of closing offices and $3.5 million was related to the costs of employee severance. In addition, the Company recorded a non-recurring impairment charge of $4.3 million to write-down the carrying value of 21 towers that are not marketable. The charge was based on the estimated discounted cash flows of the towers.

F-48

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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.



		Predecessor Company					Reorganized Company

				Cash			Cash
				Payments for			Payments for
				the One			the Eight
				Month			Months
		Liability as of		Ended			Ended			Liability as of
		December 31,		January 31,			September 30,			September 30,
		2002		2003			2003			2003


		(in thousands)
Accrued restructuring liabilities:
Reduced tower acquisition and development
	Employee severance	$	1,950	$	(81	)	$	(635	)	$	1,234
	Lease termination and office closing		1,496		(12	)		(779	)		705

	Total		3,446		(93	)		(1,414	)		1,939
Cingular BTS termination
	Employee severance		765		(101	)		(547	)		117
	Lease termination and office closing		2,065		(410	)		(1,059	)		596

			2,830		(511	)		(1,606	)		713

	Total	$	6,276	$	(604	)	$	(3,020	)	$	2,652

Income Taxes

The liability method is used in accounting for income taxes and deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities. The Company assesses the likelihood that deferred tax assets will be from future taxable income and, to the extent that recovery is not likely, establishes a valuation allowance against such assets. As of September 30, 2003 and December 31, 2002, the Company has established a 100% valuation allowance against its deferred tax assets.

Earnings Per Share

On July 31, 2003, the Company’s Board of Directors approved a two-for-one forward stock split of Spectrasite, Inc.’s common stock, effected in the form of a common stock dividend to stockholders of record on August 14, 2003. The additional shares of common stock were mailed or delivered on or about August 21, 2003, by the Company’s transfer agent. All share and per share information for the reorganized company has been presented to reflect the stock split.

Basic and diluted earnings (loss) per share are calculated in accordance with Statement of Financial Accounting Standards No. 128 Earnings per Share (“SFAS 128”). During the three and nine months ended September 30, 2002 and the one month ended January 31, 2003, the Company had potential common stock equivalents related to its convertible notes, warrants and outstanding stock options. Upon completion of the Company’s reorganization, the convertible notes were exchanged for shares of common stock, par value $0.01 per share and all outstanding warrants and stock options were cancelled. These potential common stock equivalents were not included in diluted earnings (loss) per share for the three and nine months ended September 30, 2002 and the one month ended January 31, 2003 because the effect would

F-49

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

have been antidilutive. Accordingly, basic and diluted net income (loss) per share are the same for the three and nine months ended September 30, 2002 and for the one month ended January 31, 2003.

As discussed in Note 2, under the Plan of Reorganization, the holders of 166,158,298 shares of common stock, par value $0.001 per share, outstanding as of February 10, 2003 (the “Old Common Stock”) received new warrants which were immediately exercisable into 2.5 million shares of common stock, par value $0.01 per share at a price of $16.00 per share. In addition, on February 10, 2003, the Company adopted the 2003 Equity Incentive Plan to grant equity based incentives in common stock to employees and directors. Approximately 5.4 million options to purchase common stock were granted under this plan in March 2003. During the three and eight months ended September 30, 2003, the Company had potential common stock equivalents related to its new warrants and outstanding stock options on common stock. These potential common stock equivalents were not included in diluted earnings (loss) per share for the eight months ended September 30, 2003 because the effect would have been antidilutive. Accordingly, basic and diluted net loss per share are the same for the eight months ended September 30, 2003. For the three months ended September 30, 2003, there were

approximately 5.4 million options to purchase common stock and warrants exercisable into 2.5 million shares of common stock outstanding which were included in the calculation of diluted earnings per share. No options or warrants were excluded from the calculation of diluted earnings per share for the three months ended September 30, 2003 as all such options and warrants were dilutive. The shares used in the computation of the Company’s basic and diluted earnings per share are reconciled as follows:

Reorganized

Predecessor

Reorganized

Predecessor

Company

Three Months

Eight Months

One Month

Nine Months

Ended

September 30,

January 31,

September 30,

2003

2002

2003

2002

(in thousands)

Weighted average common shares outstanding (basic)

47,507

154,014

47,325

154,014

153,894

Effect of dilutive options

2,934

—

Effect of dilutive warrants

1,176

—

Weighted average common shares outstanding (diluted)

51,617

154,014

47,325

154,014

153,894

F-50

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Comprehensive Income (Loss)

Other comprehensive income (loss) consists of foreign currency translation adjustments and unrealized holding gains (losses) on available-for-sale securities as follows (in thousands):



	Reorganized			Predecessor			Reorganized			Predecessor Company
	Company			Company			Company
	Three Months			Three Months			Eight Months			One Month			Nine Months
	Ended			Ended			Ended			Ended			Ended
	September 30,			September 30,			September 30,			January 31,			September 30,
	2003			2002			2003			2003			2002

Reported net income (loss)	$	3,214		$	(134,592	)	$	(6,052	)	$	344,970		$	(714,691	)
Foreign currency translation Adjustment		(189	)		(432	)		—			(123	)		115
Unrealized holding gains (losses) arising during the period		(3,335	)		(1,467	)		—			(200	)		(24,012	)

Comprehensive income (loss)	$	(310	)	$	(136,491	)	$	(6,052	)	$	344,647		$	(738,588	)

Stock Options

The Company accounts for stock based employee compensation under APB Opinion No. 25, Accounting for Stock Issued to Employees and has not adopted the fair value method of accounting for stock based employee compensation. During 1997, the Company adopted a stock option plan that provided for the purchase of Old Common Stock by key employees, directors, advisors and consultants of the Company. In connection with the Plan of Reorganization discussed in Note 2, all options issued under this plan were cancelled on February 10, 2003. Had compensation cost for the Company’s stock options been determined based on the fair value at the date of grant consistent with the provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (“SFAS 123”), the Company’s net income (loss) and net income (loss) per share for the three months ended September 30, 2002, the one month ended January 31, 2003 and the nine months ended September 30, 2002 would have been as follows (in thousands):


	Predecessor			Predecessor			Predecessor
	Company			Company			Company
	Three Months			One Month			Nine Months
	Ended			Ended			Ended
	September 30,			January 31,			September 30,
	2002			2003			2002

Reported net income (loss)	$	(134,592	)	$	344,970		$	(714,691	)
Non-cash compensation charges included in net income (loss)		58			—			638
Stock-based employee compensation cost that would have been included in net loss under the fair value method		(2,484	)		(694	)		(9,807	)

Adjusted net income (loss)	$	(137,018	)	$	344,276		$	(723,860	)

F-51

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	Predecessor			Predecessor		Predecessor
	Company			Company		Company
	Three Months			One Month		Nine Months
	Ended			Ended		Ended
	September 30, 2002			January 31, 2003		September 30, 2002

Basic and diluted income (loss) per share:
Reported net income (loss)	$	(0.87	)	$	2.24	$	(4.64	)
Non-cash compensation charges included in net income (loss)		—			—		—
Stock-based employee compensation cost that would have been included in net loss under the fair value method		(0.02	)		—		(0.06	)

Adjusted net income (loss)	$	(0.89	)	$	2.24	$	(4.70	)

Also, on February 10, 2003, the Company adopted the 2003 Equity Incentive Plan to grant equity-based incentives in common stock to employees and directors. In March 2003, the Company granted approximately 5.4 million options to purchase common stock under this plan. 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 loss and net loss per share for the three and eight months ended September 30, 2003 would have been as follows (in thousands):


	Reorganized			Reorganized
	Company			Company
	Three Months			Eight Months
	Ended			Ended
	September 30, 2003			September 30, 2003

Reported net income (loss)	$	3,214		$	(6,052	)
Stock-based employee compensation cost that would have been included in net income (loss) under the fair value method		(1,757	)		(3,787	)

Adjusted net income (loss)	$	1,457		$	(9,839	)

Basic income (loss) per share:
Reported net income (loss)	$	0.07		$	(0.13	)
Stock-based employee compensation cost that would have been included in net income (loss) under the fair value method		(0.04	)		(0.08	)

Adjusted net income (loss)	$	0.03		$	(0.21	)

F-52

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	Reorganized			Reorganized
	Company			Company
	Three Months			Eight Months
	Ended			Ended
	September 30, 2003			September 30, 2003

Diluted income (loss) per share:
Reported net income (loss)	$	0.06		$	(0.13	)
Stock-based employee compensation cost that would have been included in net income (loss) under the fair value method		(0.03	)		(0.08	)

Adjusted net income (loss)	$	0.03		$	(0.21	)

Contingencies

The Company is involved in certain legal actions arising in the normal course of business. In the opinion of management, based on a review of such legal proceedings, the ultimate outcome of these actions will not have a material effect on the consolidated financial statements.

Reclassifications

Certain reclassifications have been made to the 2002 condensed consolidated financial statements to conform to the 2003 presentation. These reclassifications had no effect on previously reported net loss or stockholders’ equity (deficit).

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 for the Predecessor Company for the three and nine months ended September 30, 2002 and normal recurring adjustments and fresh start accounting adjustments for the Predecessor Company for the one month ended January 31, 2003, and normal recurring adjustments for the Reorganized Company for the three and eight months ended September 30, 2003), which are, in the opinion of management, necessary for a fair presentation of results for interim periods. As a result of the implementation of fresh start accounting as of January 31, 2003, the financial statements after that date are not comparable to the financial statements for prior periods because of the differences in the bases of accounting and the capital structure for the Predecessor Company and the Reorganized Company. Results of interim periods are not necessarily indicative of the results to be expected for a full year.

2. Plan of Reorganization

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Court”). On November 18, 2002, SpectraSite filed a Proposed Plan of Reorganization and a Proposed Disclosure Statement with the Bankruptcy Court. A plan confirmation hearing was held on January 28, 2003 and the Proposed Plan of Reorganization, as modified on that date (the “Plan of Reorganization”), was confirmed by the Bankruptcy Court. The Plan of Reorganization became effective on February 10, 2003 (the “Effective Date”), thereby allowing SpectraSite to emerge from bankruptcy.

The Plan of Reorganization provided that, among other things, (i) in exchange for their notes, the holders of the 12 1/2% Senior Notes due 2010, the 6 3/4% Senior Convertible Notes due 2010, the 10 3/4% Senior Notes due 2010, the 11 1/4% Senior Discount Notes due 2009, the 12 7/8% Senior Discount Notes due 2010 and the 12% Senior Discount Notes due 2008 received their pro rata share of 47.5 million shares of common stock; (ii) the holders of 166,158,298 shares of Old Common Stock outstanding as of the Effective Date received warrants immediately exercisable into 2.5 million shares of common stock, at a price of $16.00 per share; and (iii) all other equity interests at the Effective Date, including outstanding warrants and options, were cancelled.

The consolidated financial statements as of December 31, 2002 include adjustments and reclassifications to reflect affected liabilities as “Liabilities Subject to Compromise.” These liabilities were settled in accordance with the Plan of Reorganization. The liabilities subject to compromise as of December 31, 2002 were as follows (in thousands):


10 3/4% Senior Notes Due 2010	$	200,000
12 1/2% Senior Notes Due 2010		200,000
6 3/4% Senior Convertible Notes Due 2010		200,000
12% Senior Discount Notes Due 2008, net of discount		208,479
11 1/4% Senior Discount Notes Due 2009, net of discount		502,644
12 7/8% Senior Discount Notes Due 2010, net of discount		418,580
Accrued interest		33,583

Total liabilities subject to compromise	$	1,763,286

SpectraSite incurred costs directly associated with the chapter 11 proceedings of $23.9 million in the one month ended January 31, 2003. These costs are included in reorganization expense in the unaudited condensed consolidated statement of operations.

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 as of January 31, 2003 and the Company’s emergence from bankruptcy resulted in a new reporting entity. Under fresh start accounting, the reorganization value of the entity is allocated to the entity’s assets based on fair values, and liabilities are stated at the present value of amounts to be paid determined at appropriate current interest rates. The net effect of all fresh start accounting adjustments resulted in a charge of $644.7 million, which is reflected in the unaudited condensed consolidated statement of operations for the one month ended January 31, 2003. The effective date is considered to be the close of business on January 31, 2003 for financial reporting purposes. The periods presented prior to January 31, 2003 have been designated “Predecessor Company” and the periods subsequent to January 31, 2003 have been designated “Reorganized Company.” As a result of the implementation of fresh start accounting, the financial statements of the Company after January 31, 2003 are not comparable to the Company’s financial statements for prior periods.

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SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The reorganization value used in adopting fresh start accounting was $685.7 million based on the fair market value of the senior notes, senior discount notes and senior convertible notes at the Effective Date, the date these instruments were exchanged for common stock and the value of warrants issued on that date based on the Black-Scholes option pricing model. The reorganization and the adoption of fresh start accounting resulted in the following adjustments to the Company’s Unaudited Condensed Consolidated Balance Sheet as of January 31, 2003:


			Predecessor							Reorganized
			Company		Reorganization					Company
			January 31,		and Fresh Start					January 31,
			2003		Adjustments			Ref.		2003


			(in thousands)
ASSETS
Current assets:
	Cash and cash equivalents		$	73,442	$	(210	)		(1)	$	73,232
	Accounts receivable			6,564		—					6,564
	Prepaid expenses and other			16,904		(531	)		(2)		16,373
	Assets held for sale			24,518		(3,050	)		(3)		21,468

		Total current assets		121,428		(3,791	)				117,637
Property and equipment, net				2,293,522		(954,160	)		(3)		1,339,362
Goodwill, net				60,626		(60,626	)		(2)		—
Other assets				101,999		122,181			(2),(4)		224,180

		Total assets	$	2,577,575	$	(896,396	)			$	1,681,179

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
	Accounts payable		$	9,508	$	16,184			(1)	$	25,692
	Accrued and other expenses			62,702		7,796			(1)		70,498
	Current portion of liabilities under SBC contract			—		30,251			(5)		30,251
	Current portion of credit facility			2,244		—					2,244
	Liabilities held for sale			3,804		—					3,804

		Total current liabilities		78,258		54,231					132,489

Long-term portion of credit facility				780,711		—					780,711
Long-term portion of liabilities under SBC contract				—		30,251			(5)		30,251
Other long-term liabilities				51,998		—					51,998

		Total long-term liabilities		832,709		30,251					862,960

Liabilities subject to compromise				1,763,286		(1,763,286	)		(4)		—

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SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


			Predecessor								Reorganized
			Company			Reorganization					Company
			January 31,			and Fresh Start					January 31,
			2003			Adjustments			Ref.		2003


			(in thousands)
Stockholders’ equity (deficit):
	Common stock, $0.001 par value, 300,000,000 shares authorized, 154,013,917 issued and outstanding at January 31, 2003 (Predecessor Company); $0.01 par value, 250,000,000 shares authorized, 47,174,170 issued and outstanding at January 31, 2003 (Reorganized Company)			154			318			(4)		472
Additional paid-in-capital and warrants				1,624,939			(939,681	)		(4)		685,258
Accumulated other comprehensive income				(684	)		684			(6)		—
Accumulated deficit				(1,721,087	)		1,721,087			(6)		—

		Total stockholders’ equity (deficit)		(96,678	)		782,408					685,730

		Total liabilities and stockholders’ equity (deficit)	$	2,577,575		$	(896,396	)			$	1,681,179


	References:


(1)	To reflect cash requirements for reorganization costs paid in January 2003 and accrual for remaining reorganization costs.

(2)	To record prepaid expenses and other, goodwill, and other assets at fair value.

(3)	To record property and equipment at fair value.

(4)	To reflect the discharge of the Senior Notes, Senior Discount Notes and Senior Convertible Notes including the related debt issuance costs included in other assets; the cancellation of Old Common Stock and warrants; and the issuance of the common stock and warrants.

(5)	To record liabilities related to the Company’s commitment to purchase certain assets at prices in excess of fair value.

(6)	To reflect the elimination of the accumulated other comprehensive income and accumulated deficit as of January 31, 2003.

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SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

3. Property and Equipment

Property and equipment consist of the following:


	Reorganized			Predecessor
	Company			Company
	September 30, 2003			December 31, 2002


	(in thousands)
Towers	$	1,204,627		$	2,545,707
Equipment		17,397			31,425
Land		15,911			17,719
Buildings		26,101			30,678
Other		5,942			34,694

		1,269,978			2,660,223
Less accumulated depreciation		(55,438	)		(395,272	)

		1,214,540			2,264,951
Construction in progress		2,060			17,997

Property and equipment, net	$	1,216,600		$	2,282,948

4. Recent Accounting Pronouncements

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 a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. The Company adopted SFAS 143 on January 1, 2003 in connection with certain ground leases that require removal of the tower upon expiration. Application of the new rules resulted in an increase in net property, plant and equipment of $23.2 million, recognition of an asset retirement obligation of $35.4 million, and a cumulative effect of change in accounting principle of $12.2 million. This obligation is included in Other long term liabilities in the condensed consolidated balance sheets. The following table displays activity related to the asset retirement obligation:

Liability

Revisions

as of

Liability as of

January 1,

Accretion

Estimated

September 30,

2003

Expense

Cash Flows

2003

(in thousands)

Asset retirement obligation

35,442

1,970

(42

)

37,370

Had the Company adopted SFAS 143 as of January 1, 2002 the following asset retirement obligation would have been recorded (in thousands):


January 1, 2002	$	32,122
December 31, 2002	$	35,442

These pro forma amounts are measured using information and assumptions as of the adoption date of this statement.

F-57

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Pro forma results of operations for the three and nine months ended September 30, 2002 had the Company adopted SFAS 143 on January 1, 2002 are as follows:


	Predecessor			Predecessor
	Company Three			Company Nine
	Months Ended			Months Ended
	September 30, 2002			September 30, 2002

	(in thousands, except			(in thousands, except
	per share amounts)			per share amounts)
Reported net loss	$	(134,592	)	$	(714,691	)
Additional depreciation of property and equipment		(465	)		(1,393	)
Accretion of asset retirement obligation		(623	)		(1,825	)

Adjusted net loss	$	(135,680	)	$	(717,909	)

Basic and diluted earnings per share:
Reported net loss per share	$	(0.87	)	$	(4.64	)
Additional depreciation of property and equipment		—			(0.01	)
Accretion of asset retirement obligation		(0.01	)		(0.01	)

Adjusted net loss per share	$	(0.88	)	$	(4.66	)

In April 2002, the FASB issued Statement of Financial Accounting Standards No. 145, Rescission of FASB Statement Nos. 4, 44, and 64, Amendment of FASB Statement No. 13 and Technical Corrections (“SFAS 145”). SFAS 145 amends or rescinds a number of authoritative pronouncements, including Statement of Financial Accounting Standards No. 4, Reporting Gains and Losses from Extinguishment of Debt (“SFAS 4”). SFAS 4 required that gains and losses from extinguishment of debt included in the determination of net income or loss be aggregated and, if material, classified as an extraordinary item, net of the related income tax effect. Upon adoption of SFAS 145, gains and losses from extinguishment of debt will no longer be classified as extraordinary items, but rather will generally be classified as part of other income (expense) on the Company’s consolidated statement of operations. The Company adopted the provisions of SFAS 145 on January 1, 2003. The adoption of this statement did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

In July 2002, the FASB issued Statement of Financial Accounting Standards No. 146, Accounting For Costs Associated with Exit or Disposal Activities(“SFAS 146”). The statement requires costs associated with exit or disposal activities to be recognized when incurred rather than at the date of a commitment to an exit or disposal plan. The requirements of SFAS 146 are effective for exit or disposal activities initiated after January 1, 2003. The Company adopted the provisions of SFAS 146 on January 1, 2003. The adoption of this statement did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

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SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

reasonably estimable, as those terms are defined in FASB Statement of Financial Accounting Standards No. 5, Accounting for Contingencies. The adoption of FIN 45 did not have a material impact on the Company’s financial position, results of operations or liquidity for the current reporting periods.

In December 2002, the FASB issued Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation, Transition and Disclosure (“SFAS 148”). SFAS 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. SFAS 148 also requires that disclosures of the pro forma effect of using the fair value method of accounting for stock-based employee compensation be displayed more prominently and in a tabular format. Additionally, SFAS 148 requires disclosure of the pro forma effect in interim financial statements. The transition disclosure requirements of SFAS 148 were effective for fiscal year 2002. The interim and annual disclosure requirements are effective for the first quarter of 2003. The adoption of SFAS 148 did not have a material effect on the Company’s consolidated financial position, results of operations or cash flows.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities (“FIN 46”). FIN 46 requires an investor with a majority of the variable interests in a variable interest entity (“VIE”) to consolidate the entity and also requires majority and significant variable interest investors to provide certain disclosures. A VIE is an entity in which the equity investors do not have a controlling interest, or the equity investment at risk is insufficient to finance the entity’s activities without receiving additional subordinated financial support from the other parties. For arrangements entered into with VIEs created prior to January 31, 2003, the provisions of FIN 46 are required to be adopted at the beginning of the first interim or annual period ending after December 15, 2003. The Company has reviewed its investments and other arrangements and determined that none of its investee companies are VIEs. The Company has not invested in any new VIEs created after January 31, 2003.

In April 2003, the FASB issued Statement of Financial Accounting Standards No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities (“SFAS 149”). SFAS 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS 133, as previously amended by SFAS 138. SFAS 149 clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative as discussed in SFAS 133. In addition, it clarifies when a derivative contains a financing component that warrants special reporting in the statement of cash flows. SFAS 149 amends certain other existing pronouncements. SFAS 149 is effective for contracts entered into or modified after June 30, 2003, with certain exceptions and for hedging relationships designated after June 30, 2003 and should be applied prospectively. The adoption of SFAS 149 did not have a material impact on the Company’s consolidated financial position, results of operations, or cash flows.

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SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

entities, the requirements of SFAS 150 must be applied in the first fiscal period beginning after June 15, 2003.


5.	Acquisition and Disposition Activities

SBC Transaction

On August 25, 2000, the Company entered into an agreement to acquire leasehold and sub-leasehold interests in approximately 3,900 wireless communications towers from affiliates of SBC Communications (collectively, “SBC”) in exchange for $982.7 million in cash and $325.0 million in Old Common Stock. Under the agreement, and assuming the lease or sublease of all 3,900 towers, the stock portion of the consideration was initially approximately 14.3 million shares valued at $22.74 per share. The stock consideration was subject to an adjustment payment to the extent the average closing price of the Old Common Stock during the 60-day period immediately preceding December 14, 2003 (the third anniversary of the initial closing) decreased from $22.74 to a floor of $12.96. The adjustment payment would be accelerated if there were a change of control of SpectraSite or upon the occurrence of certain specified liquidity events. In any case, the adjustment payment was payable, at the Company’s option, in the form of cash or shares of Old Common Stock. The maximum amount potentially payable to satisfy the adjustment payment was approximately 10.8 million shares of Old Common Stock or $139.8 million in cash. The Company and SBC entered into a Lease and Sublease Agreement pursuant to which the Company manages, maintains and leases available space on the SBC towers and has the right to add customers to the towers. 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. SBC is an anchor customer on all of the towers and pays a monthly fee per tower of $1,544, subject to an annual adjustment. In addition, the Company had agreed to build towers for Cingular, an affiliate of SBC, through 2005 under an exclusive build-to-suit agreement, but this agreement was terminated on May 15, 2002.

Subject to the conditions described in the Lease and Sublease Agreement, SBC also has the right to substitute other available space on the tower for the reserved space, and a right of first refusal as to available space that the Company intends to sublease to a third party. For the first 300 times SBC exercises its right of first refusal, SBC is required to pay the Company a recurring fee for the applicable space equal to the lesser of the fee that would have been charged to the proposed third-party and a fee that is proportional to the monthly fee under the sublease. After the first 300 times that SBC exercises its right of first refusal, SBC is required to pay the Company a recurring fee for the applicable space equal to the recurring fee that would have been charged to the third party.

The Company will have 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 will be 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 $204.3 million as of September 30, 2003 and will accrete at a rate of 10% per year to the applicable expiration of the lease or sublease of a site. In the event that the Company purchases such sites, SBC shall have 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 shall be subject to an annual increase based on changes in the consumer price index.

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SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

On November 14, 2001, the Company completed an amendment to the SBC acquisition agreements. This amendment reduced the maximum number of towers that the Company is committed to lease or sublease by 300 towers, from 3,900 in the original agreement to 3,600 towers in the agreement as amended. In addition, pursuant to the amendment, the Company receives all new revenue on the towers remaining to be leased or subleased after February 25, 2002. As consideration for entering into the amendment, the Company paid SBC a fee of $35.0 million that was expensed. On November 14, 2002, the Company completed a further amendment to the SBC acquisition agreements. This amendment further reduced the maximum number of towers that the Company is committed to lease or sublease by 294 towers, from 3,600 in the amended agreement to 3,306 towers in the agreement as further amended. In addition, on February 10, 2003, in connection with the Plan of Reorganization, the Company sold its rights to 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 294 reduction in the maximum number of towers that it is committed to lease or sublease. This fee is included in Reorganization Items — Professional and Other Fees in the Condensed Consolidated Financial Statements. Because these 545 towers were adjusted to fair value as part of fresh start accounting, no gain or loss was recognized on the sale. In the one month ended January 31, 2003, revenues and costs of site leasing operations, excluding depreciation, amortization and accretion expense, related to the 545 towers, were $1.2 million and $0.5 million, respectively. In the eight months ended September 30, 2003, comparable revenues and costs of site leasing operations, excluding depreciation, amortization and accretion expense, related to the 545 towers, were $0.4 million and $0.2 million, respectively. In the three months ended September 30, 2002, comparable revenues and costs of site leasing operations, excluding depreciation, amortization and accretion expense, related to the 545 towers, were $2.8 million and $1.4 million, respectively. In the nine months ended September 30, 2002, comparable revenues and costs of site leasing operations, excluding depreciation, amortization and accretion expense, related to the 545 towers, were $8.1 million and $4.3 million, respectively.

As of December 31, 2002, the Company had issued approximately 9.9 million shares of Old Common Stock to SBC pursuant to the SBC acquisition agreements. As part of the Plan of Reorganization discussed in Note 2, on February 10, 2003 the Company issued to SBC 12.1 million shares of Old Common Stock in full satisfaction of any obligation to issue SBC further stock or make any further adjustment payment. Of the 12.1 million shares, the Company issued 7.5 million shares of Old Common Stock in connection with the adjustment payment described above and 4.7 million shares of Old Common Stock as an advance payment on the purchase of the remaining 600 towers. All of these shares of Old Common Stock were exchanged for new warrants under the Plan of Reorganization. As a result, at all future closings with SBC, the stock portion of the payment for each site has been paid in full.

From the initial closing on December 14, 2000 through a closing on February 25, 2002, the Company leased or subleased a total of 2,706 towers under the terms of the amended agreement. The parties agreed to complete the lease or sublease of the remaining 600 towers during the period beginning May 2003 and ending August 2004. The total consideration paid for the rights to the 600 towers is expected to be approximately $156 million.

F-61

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

subleased 59 towers, for which it paid $14.7 million in cash. Of this amount, $4.5 million was charged against the liability and $10.2 million was capitalized as property and equipment.

In the nine months ended September 30, 2002, the Company subleased 41 towers, for which it paid $10.1 million in cash and issued 146,569 shares of Old Common Stock valued at $1.7 million.

WesTower Leasing Canada, Inc.

On September 30, 2003, the Company completed the sale of WesTower Leasing Canada, Inc., a wholly-owned subsidiary of the Company consisting primarily of 39 wireless communications towers located in Canada for net cash proceeds totaling $2.1 million. In connection with the sale, the Company recognized a gain of $0.4 million in the eight months ended September 30, 2003, which is included in other income (expense).


6.	Financing Transactions

Credit Facility

SpectraSite Communications, Inc. (“Communications”), a wholly-owned subsidiary of SpectraSite, is party to an amended and restated credit facility (the “credit facility”) totaling $640.0 million. The credit facility includes a $200.0 million revolving credit facility, which may be drawn at any time, subject to the satisfaction of certain conditions precedent. The amount available will be reduced (and, if necessary, any amounts outstanding must be repaid) in quarterly installments beginning on September 30, 2005 and ending on June 30, 2007. The credit facility also includes a $187.8 million multiple draw term loan that is fully drawn and which must be repaid in quarterly installments beginning on March 31, 2006 and ending on June 30, 2007 and a $252.2 million term loan that is fully drawn and which must be repaid in quarterly installments beginning on September 30, 2007 and ending on December 31, 2007.

With the proceeds of the sale of towers to Cingular discussed in Note 5, Communications repaid $31.4 million of the multiple draw term loan and $42.1 million of the term loan on February 11, 2003. In addition, Communications repaid $1.1 million of the multiple draw term loan and $1.4 million of the term loan on February 19, 2003. In connection with these repayments, Communications wrote off $1.6 million in debt issuance costs. This charge is included in interest expense in the unaudited condensed consolidated statement of operations.

With the proceeds from the issuance of the 8 1/4% Senior Notes Due 2010 discussed below, Communications repaid $83.0 million of the multiple draw term loan and $111.5 million of the term loan on May 21, 2003. In addition, Communications repaid $1.1 million of the multiple draw term loan and $1.4 million of the term loan on June 24, 2003 and voluntarily repaid $12.8 million of the multiple draw term loan and $17.2 of the term loan on June 30, 2003. In connection with these repayments, Communications wrote off $4.6 million in debt issuance costs. This charge is included in interest expense in the unaudited condensed consolidated statement of operations.

F-62

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of September 30, 2003, Communications has $440.0 million outstanding under the restated credit facility. The remaining $200.0 million under the restated credit facility was undrawn. Under the terms of the credit facility, the Company could borrow approximately $193.8 million under the revolving credit facility as of September 30, 2003 while remaining in compliance with the applicable covenants.

At September 30, 2003, amounts due under the credit facility are as follows:


	Maturities

	(in thousands)
2003	$	—
2004		—
2005		—
2006		81,001
2007	$	358,954

Total	$	439,955

The term loan bears interest, at Communications’ option, at either Canadian Imperial Bank of Commerce’s base rate plus 2.75% per annum or the Eurodollar rate plus 4.00% per annum. The weighted average interest rate on outstanding borrowings under the credit facility as of September 30, 2003 was 4.55%. After giving effect to the amendment to the credit facility discussed in Note 9, the term loan will bear interest, at Communications’ option, at either the Canadian Imperial Bank of Commerce’s base rate plus 1.75% per annum or the Eurodollar rate plus 3.00% per annum. Giving effect to the amendment, the weighted average interest rate on outstanding borrowings under the credit facility as of September 30, 2003 would have been 3.97%.

SpectraSite and each of Communications’ domestic subsidiaries have guaranteed the obligations under the restated credit facility. The restated 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

F-63

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

and 66% of the capital stock of Communications’ foreign subsidiaries. The restated 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 restated 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), a minimum interest coverage ratio and a minimum fixed charge coverage ratio.

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.

7. Discontinued Operations

On December 31, 2002, the Company sold its network services division. Network services revenues for the three and nine months ended September 30, 2002 were $30.2 million and $107.8 million, respectively. Network services loss before taxes for the three and nine months ended September 30, 2002 were $5.6 million and $8.3 million, respectively. The Company recorded a loss on disposal of the network services division of $47.0 million in 2002. In the eight months ended September 30, 2003, the Company recorded an additional loss on disposal of the network services division of $0.6 million related to the settlement of a disputed item. The results of the network services division’s operations have been reported separately as discontinued operations in the statements of operations. Prior period financial statements have been restated to present the operations of the division as a discontinued operation.

8. 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 discontinue the operations of its broadcast services division, the Company also offered a broad range of broadcast development services, including broadcast tower design, fabrication, maintenance, construction and antenna installation. These services were included in the broadcast segment. Prior period information has been restated to conform to the current organization.

F-64

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

subsequent to January 31, 2003, 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. The Company uses a different definition of Adjusted EBITDA for the fiscal periods prior to its reorganization to enable investors to view its operating performance on a consistent basis before the impact of the items discussed above on the predecessor company. Each of these historical items was incurred prior to, or in connection with, its bankruptcy. The Company more fully discusses Adjusted EBITDA and the limitations of this financial measure under “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measures — Adjusted EBITDA.” 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 as of and for the three months ended September 30, 2003 and 2002, the eight months ended September 30, 2003, the one month ended January 31, 2003 and the nine months ended September 30, 2002 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.

F-65

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 September 30, 2003 (Reorganized Company)
Total revenues	$	73,644	$	5,855	$	—		$	79,499
Adjusted EBITDA		45,442		2,158		(5,728	)		41,872
Assets		1,342,517		88,319		96,635			1,527,471
Additions to property and equipment		2,280		760		1,016			4,056
Three months ended September 30, 2002 (Predecessor Company)
Total revenues	$	66,186	$	5,834	$	—		$	72,020
Adjusted EBITDA		37,250		4,056		(8,116	)		33,190
Assets		2,272,271		163,799		186,563			2,622,633
Goodwill		60,626		—		—			60,626
Additions to property and equipment		787		2,197		792			3,776
Eight months ended September 30, 2003 (Reorganized Company)
Total revenues	$	193,188	$	14,985	$	—		$	208,173
Adjusted EBITDA		110,707		9,602		(15,958	)		104,351
Assets		1,342,517		88,319		96,635			1,527,471
Additions to property and equipment		5,544		2,286		2,475			10,305
One month ended January 31, 2003 (Predecessor Company)
Total revenues	$	23,913	$	1,713	$	—		$	25,626
Adjusted EBITDA		12,586		1,420		(1,777	)		12,229
Assets		1,407,710		155,795		117,674			1,681,179
Additions to property and equipment		257		861		1,619			2,737
Nine months ended September 30, 2002 (Predecessor Company)
Total revenues	$	192,253	$	15,362	$	—		$	207,615
Adjusted EBITDA		73,084		7,730		(31,885	)		48,929
Assets		2,272,271		163,799		186,563			2,622,633
Goodwill		60,626		—		—			60,626
Additions to property and equipment		38,191		11,676		5,150			55,017

F-66

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table shows a breakdown of the significant components included in the “other” column in the segment disclosure above (in thousands):


		Reorganized			Predecessor			Reorganized			Predecessor			Predecessor
		Company			Company			Company			Company			Company
		Three Months			Three Months			Eight Months			One Month			Nine Months
		Ended			Ended			Ended			Ended			Ended
		September 30,			September 30,			September 30,			January 31,			September 30,
		2003			2002			2003			2003			2002

Adjusted EBITDA:
Corporate selling, general and administrative expenses, excluding corporate non-cash compensation charges		$	(5,728	)	$	(7,069	)	$	(15,958	)	$	(1,777	)	$	(20,881	)
Corporate non-cash compensation charges			—			(58	)		—			—			(638	)
Corporate other expense			—			(989	)		—			—			(10,366	)

	Total Adjusted EBITDA	$	(5,728	)	$	(8,116	)	$	(15,958	)	$	(1,777	)	$	(31,885	)

Assets:
Cash and cash equivalents		$	55,850		$	64,246		$	55,850		$	73,232		$	64,246
Debt issuance costs			17,929			68,152			17,929			22,974			68,152
Investments			—			2,843			—			—			2,843
Assets held for sale			22,856			51,322			22,856			21,468			51,322

	Total assets	$	96,635		$	186,563		$	96,635		$	117,674		$	186,563

Additions to property and equipment:
Corporate additions to property and equipment		$	750		$	710		$	1,657		$	1,610		$	4,617
Additions to property and equipment related to assets held for sale			266			82			818			9			533

Total additions to property and equipment		$	1,016		$	792		$	2,475		$	1,619		$	5,150

A reconciliation of income (loss) from continuing operations before income taxes to Adjusted EBITDA is as follows (in thousands):


	Reorganized			Predecessor			Reorganized			Predecessor			Predecessor
	Company			Company			Company			Company			Company
	Three Months			Three Months			Eight Months			One Month			Nine Months
	Ended			Ended			Ended			Ended			Ended
	September 30,			September 30,			September 30,			January 31,			September 30,
	2003			2002			2003			2003			2002

Income (loss) from continuing operations before income taxes	$	4,059		$	(83,778	)	$	(2,842	)	$	1,026,479		$	(282,506	)
Add: Depreciation, amortization and accretion expenses		25,393			48,244			67,404			15,930			142,596
Less: Interest income		(143	)		(148	)		(639	)		(137	)		(525	)
Add: Interest expense		12,563			67,018			40,428			4,721			187,510
Add: Reorganization expense		—			1,854			—			—			1,854
Less: Gain on debt discharge		—			—			—			(1,034,764	)		—

Adjusted EBITDA	$	41,872		$	33,190		$	104,351		$	12,229		$	48,929

F-67

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

9. Subsequent Events

On October 8, 2003, the Company completed an underwritten public offering of its common stock, whereby 10.35 million shares of common stock were sold by four of the Company’s existing stockholders, including an over-allotment option exercised by the underwriters. The selling stockholders received net proceeds of $292.0 million from the offering. In connection with this offering, the Company incurred costs of approximately $1.2 million in the three months ended September 30, 2003, which are included in Other income (expense). In connection with the offering, on October 3, 2003, the Company’s common stock began trading on the New York Stock Exchange under the symbol “SSI.”

Effective October 24, 2003, the Company completed an amendment to the credit facility to replace the existing term loan with a new term loan that is substantially the same as the existing term loan, except that the interest rate was reduced from, at the Company’s option, Canadian Imperial Bank of Commerce’s base rate plus 2.75% per annum or the Eurodollar rate plus 4.00% per annum to Canadian Imperial Bank of Commerce’s base rate plus 1.75% per annum or the Eurodollar rate plus 3.00% per annum.

On December 16, 2003, the Company decided to discontinue its broadcast services division and the related assets and liabilities have been classified as held for sale. Broadcast services revenues for the three months ended September 30, 2002 and 2003 were $7.3 million and $4.4 million, respectively. Broadcast services revenues for the nine months ended September 30, 2002, the one month ended January 31, 2003 and the eight months ended September 30, 2003 were $20.0 million, $1.2 million, and $11.2 million, respectively. The results of the broadcast services division’s operations have been reported separately as discontinued operations in the statements of operations. Prior period financial statements have been restated to present the operations of the division as a discontinued operation.

The Company retained Lazard to assist in the sale of the broadcast services division. Lazard conducted an auction process with several participants to determine the net realizable value of the division. We estimate that the resulting loss could be as much as $20.0 million, depending on the nature of the disposition. The assets and liabilities of the discontinued broadcast services operations have been recorded at their estimated net realizable value in the accompanying balance sheets based on tentative sale negotiations; however, there can be no assurance that a transaction will be completed on that basis. Assets and liabilities held for sale consist of the following (in thousands):


		Reorganized		Predecessor
		Company		Company
		September 30,		December 31,
		2003		2002


		(in thousands)
Accounts receivable		$	5,013	$	4,251
Costs and estimated earnings in excess of billings			1,814		2,169
Inventories			7,561		7,878
Prepaid expenses and other			1,618		235
Property and equipment, net			6,824		9,997
Other assets			26		25

	Assets held for sale	$	22,856	$	24,555

F-68

SPECTRASITE, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


		Reorganized		Predecessor
		Company		Company
		September 30,		December 31,
		2003		2002


		(in thousands)
Accounts payable		$	1,450	$	1,363
Accrued and other expenses			1,049		2,367
Billings in excess of costs and estimated earnings			380		703
Other long-term liabilities			69		90

	Liabilities held for sale	$	2,948	$	4,523

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.

F-69

No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus. You must not rely on any unauthorized information or representations. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.

TABLE OF CONTENTS


	Page

Prospectus Summary		1
Risk Factors		10
Forward-Looking Statements		19
Use of Proceeds		20
Price Range of Common Stock		20
Dividend Policy		20
Capitalization		21
Selected Consolidated Financial and Other Data		22
Management’s Discussion and Analysis of Financial Condition and Results of Operations		26
Business		56
Management		65
Principal and Selling Stockholders		73
Certain Relationships and Related Transactions		75
Description of Capital Stock		77
Shares Available For Future Sale		79
Underwriting		80
Legal Matters		83
Experts		83
Where You Can Find More Information		83
Index to Consolidated Financial Statements		F-1

9,000,000 Shares

SpectraSite, Inc.

Common Stock

(SPECTRASITE LOGO)

Goldman, Sachs & Co.

Bear, Stearns & Co. Inc.

Citigroup

Lehman Brothers

Raymond James