2004 Highlights
* Net income of $6.9 million, or $0.14 per diluted common share
* Adjusted EBITDA increased 25.4% to $102.4 million, or $2.06 per diluted
common share
* Adjusted FFO increased 19.4% to $71.8 million, or $1.44 per diluted
common share
* Increased quarterly dividend by 28% to $0.40 per common share
* Since the beginning of our acquisition program to March 11, 2005,
acquired or under contract to acquire 1,006 wireless communications
sites for a total purchase price of $410.8 million
Fourth Quarter 2004 Highlights
* Net income of $4.1 million, or $0.08 per diluted common share
* Adjusted EBITDA increased 48.3% from the fourth quarter of 2003 to
$29.5 million, or $0.55 per diluted common share
* Adjusted FFO increased 31.8% from the fourth quarter of 2003 to $20.5
million, or $0.38 per diluted common share
* Acquired 688 wireless communications sites during the fourth quarter
for a total purchase price of $269.2 million
* Completed our second tower securitization raising $293.8 million with a
fixed average coupon of 4.74%
SARASOTA, Fla., March 17 /PRNewswire-FirstCall/ -- Global Signal Inc.
(NYSE: GSL) today reported that net income for the quarter ended December 31,
2004, increased 34.4% to $4.1 million, or a total of $0.08 per diluted common
share, compared with $3.1 million or $0.07 per diluted common share for the
fourth quarter of 2003. Net income for the year ended December 31, 2004 was
$6.9 million, or $0.14 per diluted common share.
For the quarter ended December 31, 2004, Adjusted EBITDA (net income
before interest, income tax, depreciation, amortization and accretion, non-
cash stock-based compensation expense and loss on early extinguishment of
debt) increased 48.3% to $29.5 million or $0.55 per diluted common share from
the fourth quarter of 2003 Adjusted EBITDA of $19.9 million or $0.48 per
diluted common share. On a sequential basis, the fourth quarter 2004 Adjusted
EBITDA is up 13.6% from our third quarter 2004 Adjusted EBITDA of $26.0
million or $0.49 per diluted common share. Adjusted EBITDA for the year ended
December 31, 2004 was $102.4 million, or $2.06 per diluted common share.
Adjusted FFO for the quarter ended December 31, 2004 increased 31.8% to
$20.5 million, or $0.38 per diluted common share from the fourth quarter of
2003 Adjusted FFO of $15.6 million or $0.38 per diluted common share. On a
sequential basis, the fourth quarter 2004 Adjusted FFO is up 12.0% from our
third quarter 2004 Adjusted FFO of $18.3 million or $0.34 per diluted common
share. Adjusted FFO for the year ended December 31, 2004 was $71.8 million, or
$1.44 per diluted common share.
For the quarter ended December 31, 2004, we declared a dividend of $0.40
per share of common stock. This represents a 6.7% increase over the dividend
of $0.375 per share of common stock we paid for the third quarter of 2004 and
a 28% increase over the dividend per share we paid for the fourth quarter of
2003 of $0.3125 per share of common stock.
All prior period financial information discussed above has been restated
to correct our prior accounting for ground leases and leasehold improvements
on leased land. A discussion of these prior period restatements is included
below. Adjusted EBITDA and Adjusted FFO are not GAAP terms. For a
reconciliation and discussion of GAAP net income to Adjusted EBITDA and
Adjusted FFO, refer to the tables following the presentation of GAAP results.
Investment Activity
Since the beginning of our acquisition program in December 2003 through
March 11, 2005, we have acquired or entered into definitive agreements to
acquire 1,006 towers and communications sites for an aggregate purchase price
of approximately $410.8 million, including fees and expenses. Additionally, as
of March 11 2005, we have signed non-binding letters of intent to purchase an
additional 416 towers for approximately $127.8 million, including estimated
fees and expenses. These communications sites generate a substantial amount
of their revenue from wireless telephony and investment-grade tenants, and we
believe they are located in high-growth areas.
On February 14, 2005, we signed a definitive agreement with Sprint
Corporation and certain of its subsidiaries ("Sprint") pursuant to which we
agreed to lease or, if certain consents are not obtained, operate for a period
of 32 years more than 6,600 wireless communication sites and the related
towers and assets for which Global Signal will make a one-time upfront payment
of $1.202 billion as prepaid rent, subject to certain conditions and
adjustments. For a more complete description of the Sprint transaction see our
Current Report on Form 8-K filed with the SEC on February 17, 2005.
As of December 31, 2004, Global Signal had over 4,000 wireless
communications sites, which generated over 51% of their revenues for the month
of December 2004 from wireless telephony tenants. After the closing of the
Sprint transaction, we will own, lease or manage over 10,600 wireless
communications towers and other communications sites. In addition, pro forma
for the Sprint transaction, the percentage of our revenue from wireless
telephony tenants as of December 2004, would have been approximately 75%.
Capital Markets Activity
On December 7, 2004, we completed our second tower securitization and
issued a mortgage loan for $293.8 million to partially fund $450 million of
tower acquisitions, representing a weighted average loan-to-aggregate
acquisition price ratio of approximately 65.3%. The December 2004 mortgage
loan has a weighted average fixed interest rate of 4.74% until its anticipated
maturity in December 2009. The proceeds were used primarily to repay $181.7
million of then outstanding borrowings under our acquisition credit facility,
which was then terminated, and to partially fund a $120.7 million site
acquisition reserve account to be used to acquire additional qualifying
wireless communications sites over the following six-month period.
In January 2005, in anticipation of the acquisition of additional
communications sites during 2005 and a third tower securitization, we also
entered into interest rate swaps to hedge the variability of future interest
rates on the acquisition financing. Under these interest rate swaps, we
agreed to pay the counterparty a weighted average fixed interest rate of 4.4%
on a total notional amount of $300 million beginning on various dates starting
July 31, 2005 to November 30, 2005 through September 2010 in exchange for
receiving three-month LIBOR on the same notional amount for the same period.
Financial Statement Restatement
As previously announced, we have performed a review of our accounting for
leases in consultation with our independent registered public accounting firm,
Ernst & Young LLP. As a result, we have made revisions in our determination
of the minimum ground lease term, as required by U.S. generally accepted
accounting principles to consider certain of the future renewal periods within
the leases. Additionally, we have corrected the depreciation period for tower
assets on leased ground, to depreciate these over the shorter of the minimum
lease term, or the estimated economic life of the tower asset. Generally,
these corrections of errors resulted in longer lease terms over which to
consider future escalations for most of the ground leases, but also in shorter
depreciable lives for a small number of towers on short-term ground leases.
As a result, our ground lease expense and depreciation both increased.
Accordingly, we will restate our financial statements for the two-month period
ended December 31, 2002, for the year ended December 31, 2003 and for the
first three quarters of 2004.
The net impact of correcting our straight-line rent expense accrual to
consider future renewal period and the related escalation provisions was to
increase rent expense by $2.4 million, $2.4 million, $0.5 million and $0.8
million for the years ended December 31, 2003 and 2004 and the three months
ended December 31, 2003 and 2004 respectively. The net impact of accelerating
depreciation expense on assets located on leased land with ground leases
having shorter remaining terms than the assets estimated depreciable lives was
to increase depreciation expense by $2.5 million. $1.9 million, $0.5 million
and $0.4 million for the years ended December 31, 2003 and 2004 and the three
months ended December 31, 2003 and 2004 respectively.
These corrections of the accounting errors are non-cash adjustments and
will not impact:
* historical or future cash flow provided by operating activities;
* compliance with any of the Company's borrowing facilities;
* the timing or amount of payments under related ground leases; or
* the economic value of the Company's tower assets.
Business Strategy
Our business strategy is to grow our dividend, adjusted EBITDA and
adjusted FFO by:
(1) organically adding additional tenants to our towers;
(2) acquiring towers with existing telephony tenants in locations where we
believe there are opportunities for organic growth; and
(3) financing these newly acquired towers on a long term basis using
equity combined with low-cost fixed-rate debt obtained through the
issuance of mortgage-backed securities.
Conference Call
Management will conduct a conference call on March 17, 2005 to review the
financial results for the year-end and three months ended December 31, 2004.
The conference call is scheduled for (4:00 p.m.) Eastern standard time. A
copy of this earnings release and quarterly financial supplement is posted on
the Investors section of the Global Signal website provided below. All
interested parties are welcome to participate in the live call. The
conference call can be accessed by dialing (877) 616-4483 ten minutes prior to
the scheduled start and referencing the Global Signal Fourth Quarter 2004
Earnings Call.
A web cast of the conference call will be available to the public on a
listen-only basis on our website at http://www.gsignal.com. Please allow extra
time prior to the call to visit the site and download the necessary software
required to listen to the internet broadcast. A replay of the web cast will be
available for seven days following the call.
For those who are not available to listen to the live call, a replay will
be available until 11:59 p.m. eastern standard time on March 22, 2005 by
dialing (800) 642-1687; please reference access code "4867785."
About Global Signal
Global Signal owns or manages over 4,000 wireless communications towers
and other communications sites. Global Signal is organized and conducts its
operations to qualify as a real estate investment trust (REIT) for federal
income tax purposes. For more information on Global Signal and to be added to
our e-mail distribution list, please visit http://www.gsignal.com.
Safe Harbor
Certain items in this press release and associated earnings conference
call may constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 including, but not
necessarily limited to, statements relating to our ability to deploy capital,
source and close accretive acquisitions, close acquisitions under letters of
intent, close the Sprint transaction, the timing of the closing of the Sprint
transaction, the timing of the full investment of the cash remaining in the
site acquisition reserve account, the closing and definitive terms (including
the amount and use of proceeds) of the Sprint bridge loan financing, the
closing and final amount of the Sprint transaction equity financing, pay or
grow dividends, generate growth organically or through acquisitions, secure
financing (including for the Sprint transaction), increase revenues, earnings,
Adjusted EBITDA and/or Adjusted FFO, our restatement of our financial
statements, availability and maturity of mortgage loans, and add telephony
tenants. Words such as "anticipate(s)," "expect(s)," "intend(s)," "plan(s),"
"target(s)," "project(s)," "will," "believe(s)," "seek(s)," "estimate(s)" and
similar expressions are intended to identify such forward-looking statements.
These statements are based on management's current expectations and beliefs
and are subject to a number of factors that could lead to actual results
materially different from those described in the forward-looking statements;
Global Signal can give no assurance that its expectations will be attained.
Factors that could cause actual results to differ materially from Global
Signal's expectations include, but are not limited to, our continued ability
to acquire new towers and communications sites at attractive prices which will
generate returns consistent with expectations; the possibility that the towers
and communications sites that we have acquired and will acquire may not
generate sufficient additional income to justify their acquisition;
possibilities that conditions to closing of transactions (including the Sprint
transaction) will not be satisfied; our ability to close on towers under non-
binding letters of intent which is generally less probable than closing on
towers under definitive agreements; possibilities that changes in the capital
markets, including changes in interest rates and/or credit spreads, or other
factors could make financing more expensive or unavailable to us, conclusions
reached by our independent registered public accounting firm, pronouncements
by applicable regulatory bodies, and other risks detailed from time to time in
Global Signal's SEC reports including its Form S-11 filed December 23, 2004.
Such forward-looking statements speak only as of the date of this press
release. Global Signal expressly disclaims any obligation to release publicly
any updates or revisions to any forward-looking statements contained herein to
reflect any change in the Company's expectations with regard thereto or change
in events, conditions or circumstances on which any statement is based.
GLOBAL SIGNAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands except per share data)
Three Months Ended December 31,
2003 2004
(Restated)
Revenues $42,498 $49,551
Direct site operating expenses
(excluding depreciation,
amortization and accretion) 14,330 15,339
Gross margin 28,168 34,212
Other expenses:
Selling, general and administrative
(excluding non-cash stock-based compensation) 7,189 5,375
State franchise, excise and minimum taxes 223 (431)
Depreciation, amortization and accretion 11,625 15,712
Non-cash stock-based compensation expense 887 795
19,924 21,451
Operating income 8,244 12,761
Interest expense, net 4,646 8,235
Loss on early extinguishment of debt - 569
Other expense (income) (87) (43)
Income (loss) from continuing operations
before income tax benefit (expense) 3,685 4,000
Income tax benefit (expense) 339 (17)
Income (loss) from continuing operations 4,024 3,983
Income (loss) from discontinued operations (365) 150
Income (loss) before gain (loss) on
sale of properties 3,659 4,133
Gain (loss) on sale of properties (581) 5
Net income $3,078 $4,138
Basic income per common share:
Income (loss) from continuing operations $0.10 $0.08
Income (loss) from discontinued operations (0.01) 0.00
Gain (loss) on sale of properties (0.01) 0.00
Net income $0.08 $0.08
Diluted income per common share:
Income (loss) from continuing operations $0.10 $0.08
Income (loss) from discontinued operations (0.01) 0.00
Gain (loss) on sale of properties (0.02) 0.00
Net income $0.07 $0.08
Weighted average number of common
shares outstanding
Basic 41,000 51,107
Diluted 41,449 53,661
GLOBAL SIGNAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
Twelve Months Ended December 31,
2003 2004
(Restated)
Revenues $166,670 $182,865
Direct site operating expenses
(excluding depreciation,
amortization and accretion) 56,572 57,462
Gross margin 110,098 125,403
Other expenses:
Selling, general and administrative
(excluding non-cash stock-based
compensation) 26,914 23,410
State franchise, excise and minimum taxes 848 69
Depreciation, amortization and accretion 47,137 54,288
Non-cash stock-based compensation expense 1,479 4,235
76,378 82,002
Operating income 33,720 43,401
Interest expense, net 20,477 27,529
Loss on early extinguishment of debt - 9,018
Other expense (income) (110) (124)
Income (loss) from continuing operations
before income tax benefit (expense) 13,353 6,978
Income tax benefit (expense) 665 (341)
Income (loss) from continuing operations 14,018 6,637
Income (loss) from discontinued operations (131) 111
Income (loss) before gain (loss) on
sale of properties 13,887 6,748
Gain (loss) on sale of properties (726) 124
Net income $13,161 $6,872
Basic income per common share:
Income (loss) from continuing operations $0.34 $0.14
Income (loss) from discontinued operations (0.00) $0.00
Gain (loss) on sale of properties (0.02) $0.01
Net income $0.32 $0.15
Diluted income per common share:
Income (loss) from continuing operations $0.34 $0.13
Income (loss) from discontinued operations (0.00) 0.00
Gain (loss) on sale of properties (0.02) 0.01
Net income $0.32 $0.14
Weighted average number of common
shares outstanding
Basic 41,000 46,831
Diluted 41,112 49,683
GLOBAL SIGNAL INC.
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
2004 2003
($000's) (Restated)
Assets
Current assets:
Cash and cash equivalents $5,991 $9,661
Accounts receivable, net 533 987
Prepaid expenses and other current assets 9,772 6,927
Total current assets 16,296 17,575
Long-term assets:
Cash and cash equivalents - Restricted 72,854 -
Fixed assets, net 636,200 357,158
Intangible assets, net
Goodwill 9,770 -
Lease absorption value 149,625 114,049
Leasehold interests 7,791 12,916
Other 4,461 2,485
Deferred debt issue costs, net 18,911 11,227
Other assets 7,461 4,557
Total long-term assets 907,073 502,392
Total assets $923,369 $519,967
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $1,960 $2,086
Accrued expenses 14,437 14,170
Deferred revenue 13,410 10,857
Dividends payable 20,491 -
Interest rate swap liability - 1,970
Current portion of long-term debt 8,268 6,534
Total current liabilities 58,566 35,617
Long-term debt 698,652 257,716
Other liabilities 12,954 8,286
Total Liabilities 770,172 301,619
Minority interest in subsidiary - 817
Stockholders' equity:
Common stock:
Common Stock 512 410
Additional paid-in capital 155,918 206,089
Unearned compensation (2,014) -
Other comprehensive loss (1,219) (1,133)
Retained earnings - 12,165
Total stockholders' equity 153,197 217,531
Total liabilities & stockholders' equity $923,369 $519,967
We define Adjusted EBITDA as net income before interest, income tax
expense (benefit), depreciation, amortization, accretion, loss on early
extinguishment of debt and non-cash stock-based compensation expense. Adjusted
EBITDA 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 for the following reasons:
* it is one of the primary measures 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 revenues under our tenant leases, our ability to
obtain and maintain our customers and our ability to operate our leasing
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.
Three Months Ended Year Ended
December 31, December 31,
2003 2004 2003 2004
Net income $3,078 $4,138 $13,161 $6,872
Depreciation, amortization and
accretion(1) 11,629 15,752 47,173 54,370
Interest, net 4,646 8,235 20,477 27,529
Income tax expense (benefit) (339) 17 (665) 341
Loss on early extinguishment of debt - 569 - 9,018
Non-cash stock based compensation
expense 887 795 1,479 4,235
Adjusted EBITDA $19,901 $29,506 $81,625 $102,365
(1) Depreciation, amortization and accretion includes $11.6 million, $15.7
million, $47.1 million, and $54.3 million for the three months ended
December 31, 2003, and 2004, and the years ended December 31, 2003 and
2004, respectively related to continuing operations; and $0, $0, $0 and
$0.1 million for the three months ended December 31, 2003, and 2004, and
the years ended December 31, 2003 and 2004, respectively related to
discontinued operations.
Our management uses Adjusted EBITDA:
* 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 as the basis for annual incentive
bonuses for certain employees;
* as a valuation measure in strategic analyses in connection with the
purchase and sale of assets;
* with respect to compliance with our credit facility, which requires us
to maintain certain financial ratios based on Consolidated EBITDA which
is equivalent to Adjusted EBITDA except that Consolidated EBITDA (i)
annualizes the Adjusted EBITDA contributed from newly acquired towers
until such towers have been owned for twelve months and (ii) excludes
asset impairment charges, gains or losses on the disposition of fixed
assets, extraordinary gains or losses, gains or losses on foreign
currency exchange and certain other non-cash charges; and
* 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.
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, which directly affect our net income or
loss. We compensate for these limitations by considering the economic effect
of the excluded expense items independently as well as in connection with our
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.
We believe Adjusted Funds From Operations, or Adjusted FFO, is an
appropriate measure of the performance of REITs because it provides investors
with an understanding of our ability to incur and service debt and make
capital expenditures. Adjusted FFO, for our purposes, represents net income
available for common stockholders (computed in accordance with GAAP),
excluding gains (or losses) on the disposition of real estate assets, real
estate depreciation amortization and accretion, loss on early extinguishment
of debt and non-cash stock-based compensation expense.
Three Months Ended Year Ended
December 31, December 31,
2003 2004 2003 2004
Net income $3,078 $4,138 $13,161 $6,872
Real estate depreciation, amortization
and accretion(1) 11,025 15,359 44,764 52,286
(Gain) loss on sale of properties(2) 581 (339) 726 (631)
Loss on early extinguishment of debt - 569 - 9,018
Non-cash stock-based compensation
expense 887 795 1,479 4,235
Adjusted funds from operations $15,571 $20,522 $60,130 $71,780
(1) Real estate depreciation, amortization and accretion includes $11.0
million, $15.3 million, $44.7 million, and $52.2 million for the three
months ended December 31, 2003, and 2004, and the years ended December 31,
2003 and 2004, respectively related to continuing operations; and $0, $0,
$0, and $0.1 million for the three months ended December 31, 2003, and
2004, and the years ended December 31, 2003 and 2004, respectively related
to discontinued operations.
(2) (Gain) loss on sale of properties includes $0.6 million, $0, $0.7
million, and $(0.1) million for the three months ended December 31, 2003,
and 2004, and the years ended December 31, 2003 and 2004, respectively
related to continuing operations; and $0, $(0.3) million, $0, and $(0.5)
million for the three months ended December 31, 2003, and 2004, and the
years ended December 31, 2003 and 2004, respectively related to
discontinued operations.
Adjusted FFO does not represent cash generated from operating activities
in accordance with GAAP and therefore should not be considered an alternative
to net income as an indicator of our operating performance or as an
alternative to cash flow provided by operations as a measure of liquidity and
is not necessarily indicative of funds available to fund our cash needs
including our ability to pay dividends. In addition, Adjusted FFO may not be
comparable to similarly titled measurements employed by other companies.
Our management uses Adjusted FFO:
* in monthly management reports;
* to provide a measure of our REIT operating performance that can be
compared to other companies using an accepted REIT industry-wide
measurement; and
* as an important supplemental measure of operating performance.
Supplemental Unaudited Financial Information
For the months of December 2003 and December 2004 our revenue mix for the
primary technology categories was as follows:
Revenue Percentage by Tenant Technology Type
(Unaudited)
Percent of Revenues for the
Technology Type Month of Month of
December 2003 December 2004
Telephony 41.0% 51.1%
Mobile radio 25.5 21.9
Paging 21.5 17.8
Broadcast 7.1 6.5
Wireless data and other 4.9 2.7
Total 100.0% 100.0%
Capital expenditures, excluding acquisitions of towers, for the three and
twelve months ended December 31, 2003 and 2004 were as follows:
Three Months Ended Year Ended
December 31, December 31,
2003 2004 2003 2004
Maintenance $172 $847 2,450 $2,660
EBITDA enhancing(1) 1,484 902 4,640 3,892
Corporate(2) 936 762 1,454 3,909
Total capital expenditures $2,592 $2,511 $8,544 $10,461
(1) EBITDA enhancing capital expenditures generally represent tower
improvements to accommodate additional tenants or equipment.
(2) Corporate capital expenditures in 2004 include $3.2 million for the
implementation of new software systems, of which $1.5 million was financed
through a capital lease.
Tower portfolio activity from December 31, 2003 and 2004 was as follows:
Tower Portfolio Activity*
(Unaudited)
No. of Communication Sites Owned Managed Total
As of December 31, 2003 2,457 819 3,276
Acquisitions 805 57 862
Dispositions and Transfers to
Held for Sale (9) (69) (78)
As of December 31, 2004 3,253 807 4,060
* Excludes 69 and 45 sites held for disposal by sale at December 31, 2003
and December 31, 2004, respectively.
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