UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

xFOR ANNUAL REPORTAND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 20012003

OR

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

¨    TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period fromto

Commission file number: 000-30110

SBA COMMUNICATIONS CORPORATION

(Exact name of Registrant as specified in its charter)

Florida 
65-0716501

(State or other jurisdiction
of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

5900 Broken Sound Parkway NW

Boca Raton, Florida

 
33487
(Address of principal executive offices)
 
(Zip Code)

Registrant’s telephone number, including area code:

(561) 995-7670

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Class A common stock $.01 par value

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yesx  No¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.¨

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).    Yesx  No¨

The aggregate market value of the voting stock held by non-affiliates of the Registrant was approximately $173.7$132.2 million as of March 19, 2002.

June 30, 2003.

The number of shares outstanding of the Registrant’s common stock (as of March 19, 2002)10, 2004):

Class A Common Stock—44,166,395common stock—56,017,207 shares

Class B Common Stock—5,455,595 shares

Documents Incorporated By Reference

Portions of the Registrant’s definitive proxy statement for its 20022004 annual meeting of shareholders, which proxy statement will be filed no later than 120 days after the close of the Registrant’s fiscal year ended December 31, 2001,2003, are hereby incorporated by reference in Part III of this Annual Report on Form 10-K.

PART I

ITEM I.    BUSINESS

ITEM 1.BUSINESS

General

We are a leading independent owner and operator of over 3,000 wireless communications towers in the eastern third of the United States and Puerto Rico.States. We generate revenues from our two primary businesses, site leasing and site development. In our site leasing business, we lease antenna space to wireless service providers on towers and other structures that we own or manage for or lease from others. The towers that we own have either been builtconstructed by us at the request of a wireless carrier, or built or acquiredconstructed based on our own initiative.initiative or acquired. We have built approximately 60% of our currently owned towers. As of December 31, 2001,2003, we owned or controlled 3,734 towers. We expect to build or acquire approximately 250 to 3503,093 towers during 2002.of which 3,032 are in continuing operations. In our site development business, we offer wireless service providers assistance in developing and maintaining their own networks, including designing a network with signal coverage, identifying and acquiring locations to place their antennas and transmission equipment, obtaining zoning approvals, building towers when necessary and installing their antennas and transmission equipment.wireless service networks. Since our founding in 1989, we have participated in the development of more than 15,00025,000 antenna sites in 49 of the 51 major wireless markets in the United States.

Company Services
We provide our services on a local basis, through regional offices, territory offices and project offices, which are opened and closed on a project by project basis. Operationally, we are divided into regions throughout the United States, run by regional vice presidents. Each region is divided into sub-regions run by general managers and we have further divided each sub-region into geographic territories run by territory managers. Within each territory manager’s geographic area of responsibility he or she is responsible for all operations, including hiring employees and opening or closing project offices, and a substantial portion of the sales in such area.
Our executive, corporate development, accounting, finance, human resources, legal and regulatory, information technology departments, site administration personnel, and our network operations center are located in our headquarters in Boca Raton, Florida. We also have in our Boca Raton office certain sales, new tower build support, and tower maintenance personnel.

Site Leasing Services

In 1997 we began aggressively expanding our site leasing business by capitalizing on our nationally recognized site development experience and strong relationships with wireless service providers to take advantage of the trends toward co-location, which is the placement of multiple antennas on one tower or other structure, and independent tower ownership. We believe our towers have significant capacity to accommodate additional tenants with minimal incremental costs. Additionally, due to the relatively young age and mix of our tower portfolio we believe future expenditures required to maintain these towers will be minimal.
The following chart shows the number of towers we built for our own account, the number of towers we acquired and the number of tenants at year end on our towers, for the periods indicated:
   
Year ended December 31,
   
1997
  
1998
  
1999
  
2000
  
2001
Towers owned at the beginning of period  —    51  494  1,163  2,390
Towers built  15  310  438  779  667
Towers acquired  36  133  231  448  677
   
  
  
  
  
Towers owned at the end of period  51  494  1,163  2,390  3,734
   
  
  
  
  
Number of tenants at the end of period(1)  135  601  1,794  4,904  7,693
(1)
Periods for 1997 to 2000 have been adjusted from amounts previously reported to reflect as one tenant, multiple leases with the same user on a tower regardless of the amount of equipment, additional equipment, microwave, etc.
We expect the rate of tower additions to the portfolio to decline in 2002 compared to prior periods.

2

The following table indicates the number of our acquired and built towers based on location as of December 31, 2001:
Location of Towers
  
Total Built
  
Total Acquired
  
Grand Total
  
% of Total
 
Alabama  59  78  137  3.7%
Arizona  49  1  50  1.3%
Arkansas  36  182  218  5.8%
California  28  11  39  1.0%
Colorado  9  12  21  0.6%
Connecticut  60  10  70  1.9%
Delaware  16  5  21  0.6%
Florida  62  81  144  3.8%
Georgia  227  48  275  7.4%
Idaho  8  4  12  0.3%
Illinois  24  29  53  1.4%
Indiana  107  15  122  3.3%
Iowa  35  8  43  1.2%
Kansas  9  27  36  1.0%
Kentucky  21  34  55  1.5%
Louisiana  37  159  196  5.2%
Maine  10  14  24  0.6%
Maryland  10  20  30  0.8%
Massachusetts  31  27  58  1.6%
Michigan  45  6  51  1.4%
Minnesota  6  20  26  0.7%
Mississippi  51  71  122  3.3%
Missouri  47  29  76  2.0%
North Carolina  217  4  221  5.9%
North Dakota  —    6  6  0.2%
Nebraska  6  1  7  0.2%
Nevada  1  1  2  0.1%
New Hampshire  38  13  51  1.4%
New Jersey  6  1  7  0.2%
New Mexico  5  9  14  0.4%
New York  81  49  130  3.5%
Ohio  111  66  177  4.7%
Oklahoma  38  29  67  1.8%
Oregon  31  4  35  0.9%
Pennsylvania  111  63  174  4.7%
Puerto Rico  18  32  50  1.3%
Rhode Island  3  2  4  0.1%
South Carolina  133  5  138  3.7%
South Dakota  2  5  7  0.2%
Tennessee  150  88  238  6.4%
Texas  52  172  224  6.0%
US Virgin Islands  4  —    4  0.1%
Utah  2  3  5  0.1%
Vermont  —    9  9  0.2%
Virginia  67  24  91  2.4%
Washington  12  4  16  0.4%
West Virginia  12  34  46  1.2%
Wisconsin  115  9  124  3.3%
Wyoming  7  1  8  0.2%
   
  
  
  
Total Towers  2,209  1,525  3,734  100.0%
   
  
  
  

3

We believe our history and experience in providing site development services gives us a competitive advantage in choosing the most attractive locations on which to build new towers or buy existing towers, as measured by our success in increasing tower revenues and cash flows. Our same tower revenue growth and same tower cash flow growth at December 31, 2001, on the 2,390 towers we owned as of December 31, 2000, was 24%, and 29% respectively, based on tenant leases signed and revenues annualized as of December 31, 2001 and 2000.
Our site leasing revenue comes from a variety of wireless carriers, including AT&T Wireless, Cingular, Nextel, Sprint PCS, Verizon and VoiceStream. Site leasing revenue was $103.2 million for the year ended December 31, 2001 and $52.0 million for the year ended December 31, 2000. We believe that our site leasing revenues will continue to grow as wireless service providers continue to lease antenna space on our towers.
Our primary focus is the leasing of antenna space on our multi-tenant towers to a variety of wireless service providers under long-term lease contracts. We believe that over the long term our site leasing revenues will continue to grow as wireless service providers lease additional antenna space on our towers due to increasing minutes of use and network coverage requirements. We lease antenna space on:
•
on the towers we have constructed through carrier directives under build-to-suit programs;
•
existing towers we have acquired;
•
the towers we have built on locations we have selected which we call “strategic” new tower builds; and
•
towers we lease, sublease and/or manage for third parties.
A significant number of our towers were built under our build-to-suit program, through which we builthave constructed, the towers for a wireless service provider on a location of their direction. We retained ownership of the towerwe have acquired, and the exclusive right to co-locate additional tenants on the tower. Many wireless service providers chose the build-to-suit option as an alternative to owning the towers themselves.we lease, sublease and/or manage for third parties. Our build-to-suit sites camesite leasing revenue comes from a variety of wireless carriers,carrier tenants, including Alamosa PCS, AT&T Wireless, Cingular Horizon PCS,Wireless, Nextel, Sprint PCS, TeleCorp PCS, Triton PCST-Mobile, and VoiceStream.
Verizon Wireless, and we believe our current tower portfolio positions us to take advantage of wireless carriers’ antenna and equipment deployment. We believe our site leasing business is characterized by stable and long-term recurring revenues, predictable operating costs and minimal capital expenditures. We expect to grow our cash flows by adding tenants to our towers at minimal incremental costs by using existing tower capacity or requiring carriers to bear the cost of tower modifications. Because our towers are strategically positioned and our customers typically do not re-locate, we have historically experienced low customer churn as a percentage of revenue. Our lease contracts typically have terms of five years or more with multiple term tenant renewal options and provide for annual rent escalators. We are focusing our leasing activities in the eastern third of the United States where substantially all of our towers are located. Additionally, due to the relatively young age and mix of our tower portfolio, we expect future expenditures required to maintain these towers will be low.

The following chart shows the number of towers we built for our own account, the number of towers we acquired, the number of towers we reclassified or disposed of, the number of towers held for sale and the number of towers owned for the periods indicated, before discontinued operations treatment:

   For the years ended December 31,
   2003
  2002
  2001
  2000
  1999

Towers owned at the beginning of period

  3,877  3,734  2,390  1,163  494

Towers built

  13  141  667  779  438

Towers acquired

  —    53  677  448  231

Towers reclassified/disposed of (1)

  (797) (51) —    —    —  

Towers held for sale

  (61) —    —    —    —  
   
 
 
  
  

Towers owned at the end of period

  3,032  3,877  3,734  2,390  1,163
   
 
 
  
  

(1)Reclassifications reflect the combination for reporting purposes of multiple acquired tower structures on a single parcel of real estate, which we market and customers view as a single location, into a single owned tower site. Dispositions reflect the sale, conveyance or other legal transfer of owned tower sites.

The following chart shows the number of towers owned for the periods indicated, after discontinued operations treatment:

   For the years ended December 31,
   2003
  2002
  2001
  2000
  1999

Towers owned at the end of the period

  3,032  3,030  2,910  1,830  902

As of December 31, 2003, we had 6,847 tenants on our 3,032 towers.

At December 31, 2003, our same tower revenue growth was 9.3% and our same tower site leasing gross profit growth was 16.1% on the 3,020 towers we owned as of December 31, 2002.

The following chart includes details regarding our site leasing revenues and gross profit percentage:

   For the years ended December 31,
 
   2003
  2002
  2001
 
   (dollars in thousands) 

Site leasing revenue

  $127,842  $115,081  $85,487 

Percentage of total revenue

   60.3%  47.9%  38.0%

Site leasing gross profit percentage contribution of total gross profit

   93.1%  76.7%  63.7%

To help maximize the revenue and profit we earn from our capital investment in theour towers, we own, we have begun to provide services at our tower locations beyond the leasing of antenna space. TheseThe services which we provide, or may provide in the future, include generator provisioning, antenna installation, equipment installation, maintenance, and backhaul, which is the transport of the wireless signals transmitted or received by an antenna to a carrier’s network. Some of these services are part of our site leasing services (e.g., the generator provisioning) and are recurring in nature, and are contracted for by a wireless carrier or other user in a manner similar to the way they lease antenna space.

Site Development Services

Our site development business consists of two segments, site development consulting and site development construction, through which we provide wireless service providers a full range of end-to-end services. In the consulting segment of our site development business, we offer clients the following services: (1) network pre-design; (2) site audits; (3) identification of potential locations for towers and antennas; (4) support in buying or leasing of the location; and (5) assistance in obtaining zoning approvals and permits. In the construction segment of our site development business we provide a number of services, including, but not limited to the following: (1) tower and related site construction; (2) switch building construction; (3) antenna installation; and (4)(3) radio equipment installation, commissioning and service. We will continue to usemaintenance. Currently our largest site development expertiseproject is the network development contract we were awarded by Sprint Spectrum L.P. We estimate that this contract will generate approximately $70 to complement our site leasing business. We have capitalized on our leadership position$90 million in the site development business and our strong relationships with wireless service providers to build and acquire towers in locations that we believe are attractive to wireless service providers.

construction revenue over the next two years.

Our site development customers currently comprise manyinclude most of the major wireless communications and services companies, including AT&T Wireless, Bechtel Corporation, Cingular Wireless, General Dynamics, Nextel, Sprint PCS, T-Mobile and Verizon and VoiceStream.Wireless. Site development revenue was $139.7$84.2 million and $125.0 million for the years ended December 31, 2003 and 2002, respectively.

Our site development revenues and profit margins decreased significantly during the year ended December 31, 2001 and $115.9 million for2003 compared to the year ended December 31, 2000.

2002. This decrease was primarily attributable to a decline in capital expenditures by wireless carriers, particularly for our site development construction services, and increased competition, which adversely affected our volume of activity and the pricing for our services.

4

Business Strategy

Our primary strategy is to capture the maximum benefits from our position as a leading owner and operator of wireless communications towers and expand our position as a leading provider of site development services.towers. Key elements of our strategy include:

Focusing on Site Leasing Business with Stable, Recurring Revenues. We intend to continue to focus on and allocate substantially all of our capital resources to our site leasing business due to its attractive characteristics such as long-term contracts, built-in price escalators, high operating margins and low customer churn. The long-term nature of the revenue stream of our site leasing business makes it less volatile than our site development business which is more reactive to changes in industry conditions. By focusing on our site leasing business, we believe that we can maintain a stable, recurring cash flow stream and reduce our exposure to cyclical changes in customer spending.

Maximizing Use of Tower Capacity.    We believe that many of our towers have significant capacity available for additional antennae and that increased use of our owned towers can be achieved at a low incremental cost. We generally have constructed our towers to accommodate multiple tenants in addition to the anchor tenant, and a substantial majority of our towers are high capacity lattice or guyed towers. Most of our towers have significant capacity available for additional antennas and we believe that increased use of our towers can be achieved at a low incremental cost. We actively market space on our own towers through our internal sales force.

Geographically Focusing our Tower Ownership.We have decided to focus our tower ownership geographically in the eastern third of the United States. We believe that focusing our site leasing activities in this smaller geographic area, where we have a higher concentration of towers, will improve our operating efficiencies, reduce our overhead expenses and produce higher revenue per tower.

Maintaining Low Cost Structure with Reduced Capital Expenditures. We believe we have a low cost structure and we intend to proactively manage our cost structure to reflect the size and stage of our business and changes in the business environment. In addition, we have significantly reduced our capital expenditures since 2001 and intend to maintain lower levels (compared to 1999 to 2001) of annual capital expenditures for the foreseeable future.

Using our Local Presence to Build Strong Relationships with Major Wireless Service Providers. Given the nature of towers as location specific communications facilities, we believe that substantially all of what we do is best done locally. Consequently, we have a broad field organization that allows us to develop and capitalize on our experience, expertise and relationships in each of our local markets, which in turn enhances our customer relationships. Due to our presence in local markets, we believe we are well positioned to capture additional site leasing business in our markets and identify and participate in site development projects across our markets.

Capturing Other Revenues That Flow From our Tower Ownership. Tenants who leaseTo help maximize the revenue and profit we earn from our capital investment in our towers, we provide services at our tower locations beyond the leasing of antenna space, on our towers need a variety of additional services in connection with their operations at the tower site. These services includeincluding antenna installation maintenance and upgrading of radio transmission equipment antennas, cabling and other connection equipment, electricity, backhaul (which is provided generally by telephone lines or a microwave antenna network), equipment shelters, data collection and network monitoring. Tenants often outsource the performance of some or all of these required services to third parties, including us.installation. Because of our ownership of the tower, our control of the tower site and our experience and capabilities in providing these types ofinstallation services, we believe that we are well positioned and intend, to perform more of these services and capture the related revenue.

Maintaining our Expertise in Site Development Services.    We continue to perform an array of site development services for wireless service and other telecommunications providers across the United States. We have a broad national field organization that allows us to identify and participate in site development projects across the country and that gives us a knowledge of local markets and strong customer relationships with wireless service and other telecommunications providers. We believe our site development experience provides us with a competitive advantage in selecting the best locations for tower ownership.
Executing on a Local Basis.    We believe that substantially all of what we do is best done locally, given the nature of towers as location specific communications facilities. We believe our customers make decisions locally. We believe that to be successful in tower building, acquisition and leasing, and site acquisition, zoning and construction, we must have a strong local presence in the markets we serve.

Capitalizing on our Management Experience.Our management team has extensive experience in site leasing and site development services. Management believes that its industry expertise and strong relationships with wireless carriers will allow us to expand our position as a leading provider of site leasing and site development services.

BuildingCompany Services

We provide our services on Strong Relationships with Major Wireless Service Providers.    Wea local basis, through regional offices, territory offices and project offices, some of which are well-positioned to beopened and closed on a preferred partner inproject-by-project basis. Operationally, we are divided into three regions throughout the United States, run by vice presidents. Each region is divided into sub-regions run by general managers and we have further divided each sub-region into geographic territories run by local managers. Within each manager’s geographic area of responsibility, he or she is responsible for all site development projectsoperations, including hiring employees and opening or closing project offices, and a substantial portion of the sales in such area.

Our executive, corporate development, accounting, finance, human resources, legal and regulatory, information technology and site administration personnel, and our network operations center are located in our headquarters in Boca Raton, Florida. Certain sales, new tower build support and tower space leasing because ofmaintenance personnel are also located in our strong relationships with wireless service and other telecommunications providers and our proven operating experience.

Boca Raton office.

Customers

Since commencing operations, we have performed site leasing and site development services for manymost of the largest wireless service providers. The majority of our contracts have been for PCS, broadband,enhanced specialized mobile radio, or ESMR, and cellular customers.providers of wireless telephony services. We also serve wireless data and Internet, paging, PCS narrowband, SMR,specialized mobile radio, multi-channel multi-point distribution service, or MMDS, and multi-point distribution service, or MDS, wireless providers. In both our site development and site leasing businesses, we work with large national providers and smaller local, regional or private operators. ForWe depend on a relatively small number of customers for our site leasing and site development revenues. Of our total revenues for the year ended December 31, 2001, Nextel provided 11.6%, Sprint PCS provided 11.5% and Bechtel Corporation (contractor for AT&T Wireless) provided 10.9%2003, the following three customers represented at least 10% of our site development revenues. In 2000, Sprint PCS provided 10.8% and Alamosa provided 11.0%total revenues:

Percentage of Revenue

Bechtel Corporation

14.3%

AT&T Wireless

10.8%

Cingular Wireless

10.2%

Of our site development revenue. Fortotal revenues for the year ended December 31, 2001, Nextel provided 10.4% of our site leasing revenues. In 2000, Nextel provided 10.6% and Sprint PCS provided 10.3% of our site leasing revenues. No other customer2002, the following three customers represented more thanat least 10% of our site leasing or site development revenues.

5
total revenues:

Percentage of Revenue

Bechtel Corporation

15.3%

Cingular Wireless

12.6%

AT&T Wireless

10.1%

During the past two years, we provided services for a number of customers, including:

Aerial CommunicationsMediaOne Group
Airgate PCS Nextel
Alamosa PCS Nextel Partners
ALLTEL Powertel
Arch/PageNetQwestPAC 17/A.F.L.
AT&T Wireless ServicesSiemens
Bechtel Corporation Sprint PCS
Bechtel CorporationCingular Wireless TeleCorp PCST-Mobile
CingularTritel PCS
Devon MobileDobson Cellular Systems Triton PCS
Dobson CellularGeneral Dynamics UbiqueTel, Inc.
Georgia PCSUSU.S. Cellular
Horizon PCS US Unwired
IWOM/A – COMM Verizon
LEAP WirelessVoiceStream

Sales and Marketing

Our sales and marketing goals are:are to:

use existing relationships and develop new relationships with wireless service providers to lease antenna space on and purchase related services with respect to our owned or managed towers, enabling us to grow our site leasing business;

establish relationships with select communications systems vendors and large program management firms who use end-to-end services, including those provided by us, which will enable us to market our services and product offerings through additional channels of distribution; and
•
to use existing relationships and develop new relationships with wireless service providers to lease antenna space on and purchase related services with respect to our owned or managed towers, enabling us to grow our site leasing business;

further cultivate customers to sell site development services.
•
to form affiliations with select communications systems vendors who use end-to-end services, including those provided by us, which will enable us to market our services and product offerings through additional channels of distribution;
•
to further cultivate existing customers to sell site development services; and
•
to continue to grow and sustain a market leadership position in the site development business.

We approach sales on a company-wide basis, involving many of our employees. We have a dedicated sales force that is supplemented by members of our executive management team. Our dedicated salespeople are based regionally as well as in the corporate office. We also rely on our regional vice presidents, general managers territory managers and other operations personnel to sell our services and cultivate customers. Our strategy is to delegate sales efforts to those employees of ours who have the best relationships with the wireless service providers.our customers. Most wireless service providers have national corporate headquarters with regional and local offices. We believe that providers at the regional and local levels make most decisions for site development and site leasing services at the regional and local levels with input from their corporate headquarters. Our sales representatives work with provider representatives at the regional and local levels and at the national level when appropriate. Our sales staff compensation is heavily weighted to incentive-based goals and measurements. A substantial number of our operations personnel have sales-basedrevenue and gross profit-based incentive components in their compensation plans.

In addition to our marketing and sales staff, we rely upon our executive and operations personnel onat the regional and territory office levels to identify sales opportunities within existing customer accounts.

Our primary marketing and sales support is centralized and directed from our headquarters office in Boca Raton, Florida and is supplemented by our regional and territory offices. We have a full-time staff dedicated to our marketing efforts. The marketing and sales support staff areis charged with implementing our marketing strategies, prospecting and producing sales presentation materials and proposals.

6

Competition

We compete with:

site development companies that acquire antenna space on existing towers for wireless service providers, manage new tower construction and provide site development services;

program management firms that operate in the wireless arena;
•
wireless service providers that own and operate their own tower footprints and lease, or may in the future decide to lease, antenna space to other providers;

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;
•
site development companies that acquire antenna space on existing towers for wireless service providers, manage new tower construction and provide site development services;

other large independent tower companies; and
•
other large independent tower companies; and

smaller local independent tower operators.
•
smaller local independent tower operators.

Wireless service providers that own and operate their own tower networks and several of the other tower companies generally are substantially larger and have greater financial resources than we do. We believe that tower location and capacity, quality of service, density within a geographic market and, to a lesser extent, price historically have been and will continue to be the most significant competitive factors affecting the site leasing business.

Our primary competitors for our site leasing activities are the fourfive large publicindependent tower companies, American Tower Corporation, Crown Castle International Corp., Pinnacle Holdings,Global Signal, Inc., SpectraSite, Inc., and SpectraSite Holdings, Inc.AAT Communications Corp., and a large number of smaller independent tower owners. In addition, we compete with AT&T Wireless, ServicesSprint PCS and with Sprint PCSother wireless service providers who currently market excess space on their owned towers to other wireless service providers.

We believe that the majority of our competitors in the site development business operate within local market areas exclusively, while some firms appear to offer their services nationally, including American Tower Corporation, Alcoa Fujikura Ltd., Bechtel Corporation, Black & Veach Corporation, General Dynamics Mastec, Mericom,Corporation, LCC International, Inc. and SpectraSite Holdings,Wireless Facilities, Inc. The market includes participants from a variety of market segments offering individual, or combinations of, competing services. The field of competitors includes site development consultants, zoning consultants, real estate firms, right-of-way consulting firms, construction companies, tower owners/managers, radio frequency engineering consultants, telecommunications equipment vendors, which provide end-to-end site development services through multiple subcontractors, and providers’ internal staff. We believe that providers base their decisions for site development services on a number of criteria, including a company’s experience, track record, local reputation, price and time for completion of a project. We believe that we compete favorably in these areas.

Employees

As of December 31, 2001,2003, we had approximately 1,350600 employees, none of whom is represented by a collective bargaining agreement. We consider our employee relations to be good. In February 2002, we announced that, in connection with our plan to significantly reduce our tower acquisition and new build programs, we would be closing certain offices and reducing personnel. As of March 1, 2002 we had approximately 1,100 employees as a result of this reduction and the number is expected to be further reduced through the remainder of 2002.

Regulatory and Environmental Matters

Federal Regulations.Both the Federal Communications Commission (“FCC”)FCC and the Federal Aviation Administration (“FAA”)FAA regulate antenna towers used forand structures that support wireless communications.communications and radio or television antennas. Many FAA requirements are implemented in FCC regulations. These regulations govern the construction, and markinglighting and painting or other marking of towers and structures and may, depending on the characteristics of particular towers or structures, require prior approval and registration of towers.towers or structures. Wireless communications devicesequipment and radio or television stations operating on towers or structures are separately regulated and independently licensed basedmay require independent licensing depending upon the particular frequency or frequency band used.

7

Pursuant to the requirements of the Communications Act of 1934, as amended, the FCC, in conjunction with the FAA, has developed standards to consider proposals forinvolving new or modified towers.antenna towers or structures. These standards mandate that the FCC and the FAA consider the height of the proposed tower structures,or structure, the relationship of the tower or structure to existing natural or man-made obstructions and the proximity of the towerstower or structure to runways and airports. Proposals to construct or to modify existing towers or structures above certain heights must be reviewed by the FAA to ensure the structure will not present a hazard to air navigation. The FAA may condition its issuance of a no-hazard determination upon compliance with specified lighting marking and/or painting requirements. TowersAntenna towers that meet certain height and location criteria must also be registered with the FCC. A tower or structure that

requires FAA clearance will not be registered by the FCC until it is cleared by the FAA. Upon registration, the FCC may also require special lighting marking and/or painting requirements.painting. Owners of wireless transmissioncommunications antenna towers and structures may have an obligation to maintain marking, painting and lighting to conform toor other marking in conformance with FAA and FCC standards. TowerAntenna tower and structure owners also bear the responsibility of monitoring any lighting systems and notifying the FAA of any tower lighting outage or malfunction. In addition, any applicant for an FCC antenna tower or structure registration must certify that, consistent with the Anti-Drug Abuse Act of 1988, neither the applicant nor its principals are subject to a denial of Federal benefits because of a conviction for the possession or distribution of a controlled substance. We generally indemnify our customers against any failure to comply with applicable regulatory standards. Failure to comply with the applicable requirements may lead to civil penalties.

The Telecommunications Act of 1996 amended the Communications Act of 1934 by preserving state and local zoning authoritiesauthorities’ jurisdiction over the construction, modification and placement of towers. The new law, however, limits local zoning authority by prohibiting any action that would (1) discriminate betweenamong different providers of personal wireless services or (2) ban altogether the construction, modification or placement of radio communication towers. Finally, the Telecommunications Act of 1996 requires the federal government to help licensees for 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.

Owners and operators of antenna towers and structures may be subject to, and therefore must comply with, environmental laws. Any licensed radio facility on aan antenna tower or structure is subject to environmental review pursuant to the National Environmental Policy Act of 1969, among other statutes, which requires federal agencies to evaluate the environmental impactsimpact of their decisions under certain circumstances. The FCC has issued regulations implementing the National Environmental Policy Act. These regulations place responsibility on each applicantapplicants to investigate any potential environmental effects of their operations and to disclose any potential significant effects on the environment in an environmental assessment prior to constructing a tower.or modifying an antenna tower or structure and prior to commencing operation of wireless communications or radio or television stations from the tower or structure. In the event the FCC determines the proposed towerstructure or operation would have a significant environmental impact based on the standards the FCC has developed, the FCC would be required to prepare an environmental assessment,impact statement, which will be subject to public comment. This process could significantly delay the registration of a particular tower.

tower or structure.

As an owner and operator of real property, we are subject to certain environmental laws that impose strict, joint and several liability for the cleanup of on-site or off-site contamination and related personal or property damage. We are also subject to certain environmental laws that govern tower or structure placement, including pre-construction environmental studies. Operators of towers or structures must also take into consideration certain RFradio frequency (“RF”) emissions regulations that impose a variety of procedural and operating requirements. Certain proposals to operate wireless communications and radio or television stations from antenna towers and structures are also reviewed by the FCC to ensure compliance with requirements relating to human exposure to RF emissions. Exposure to high levels of RF energy can produce negative health effects. The potential connection between low-level RF emissionsenergy and certain negative health effects, including some forms of cancer, has been the subject of substantial study by the scientific community in recent years. We believe that we are in substantial compliance with and we have no material liability under any applicable environmental laws. These costs of compliance with existing or future environmental laws and liability related thereto may have a material adverse effect on our prospects, financial condition or results of operations.

State and Local Regulations.Most states regulate certain aspects of real estate acquisition, and leasing activities and construction activities. Where required, we conduct the site acquisition portions of our site development services business through licensed real estate brokersbrokers’ agents, who may be our employees or hired as independent contractors, and conduct the construction portions of our site development services

through licensed contractors, who may be our employees or independent contractors. Local regulations include city and other local

8

ordinances, zoning restrictions and restrictive covenants imposed by community developers. These regulations vary greatly, but typically require tower and structure owners to obtain approval from local officials or community standards organizations prior to tower construction.or structure construction and establish regulations regarding maintenance and removal of towers or structures. In addition, many local zoning authorities require tower and structure owners to post bonds or cash collateral to secure their removal obligations. Local zoning authorities generally have been unreceptive to construction of new transmissionantenna towers and structures in their communities because of the height and visibility of the towers or structures, and have, in some instances, instituted moratoria.

Recent DevelopmentsBacklog

In August 2001, we announced that we were adjusting

Our backlog of pending leases for antenna space on our new tower build construction plantowers varies from time to time and operationreflects the relatively short-cycle of three to produce 100 to 150 new towers per quarter commencing with the third quarter of 2001, insteadsix months of the 200antenna space leasing process. Leasing backlogs vary widely within a fiscal quarter, and are generally lowest on the last day of a quarter as our customers strive to 250 new towers per quarter previously built or capable of being built by us. At that time we expected to build a total of approximately 600 to 700 new towers in 2001 and approximately 400 to 600 in 2002. In connection with this adjustment, we recorded a $24.4 million charge in the third quarter of 2001. Included in this charge was a write-off of costs previously reflected on our balance sheet as construction-in-process for certain new tower build sites for which development activity had been abandoned, costs of employee separation for certain employees and costs associated with the closing and consolidation of selected offices that were previously utilized primarily in our new tower development activities.

In February 2002, we announced that as a result of capital market conditions we were further reducing our planned capital expenditures for new tower development activities in 2002 and subsequently suspending any material new investment for additional towers. We have reduced the number of towers expected to be built or acquired in 2002 to approximately 250 to 350 towers. We expect approximately 90 to 110 new towers to be built or acquired in the first quarter of 2002, and the remainder of our obligations to build or acquire towers to be satisfied later in 2002. Under current capital markets conditions, we do not anticipate building or buying a material number of new towers beyond those we are currently contractually obligated to build or buy. In connection with this restructuring plan we anticipate incurring charges of between $30.0 million and $65.0 million related to the disposal of new tower build and acquisition construction-in-process, costs of employee separation, costs associated with the closing of offices and other items. The amount of the charge related to asset disposals will be determined primarily by the fair value of costs of construction-in-process with respect to those new builds we choose to dispose of. Most of this charge is expected to be incurred in the first quarter of 2002 with the remainder incurred in the second quarter of 2002.
In the first quarter of 2002 we are required to adopt Statement of Financial Accounting Standards No. 142,Goodwill and Other Intangible Assets, (“SFAS 142”). With the adoption of SFAS 142 we will assess the impairment, if any, on goodwill and certain other intangible assets, in lieu of amortization against earnings. We are currently performing that assessment and have not yet determined the impact that the adoption of SFAS 142 will have on our consolidated financial statements, however, we believe the impact may be material.meet their own quarterly antenna site deployment goals. As of December 31, 20012003 we had unamortized goodwill136 new leases and covenants15 amendments which had been executed with customers but which had not to competebegun generating revenue. These leases contractually provided for approximately $2.8 million of $86.2 million.annual revenues. As of December 31, 2002 we had150 new leases and 9 amendments which had been executed with customers but which had not begun generating revenue. These leases contractually provided for approximately $3.3 million of annual revenues.
Backlog

Our backlog for site development services was $58.8approximately $80 million as of December 31, 20012003 as compared to $61.0approximately $29 million as of December 31, 2000. Our2002. The increase in 2003 is attributable to a contract received from Sprint for site development work which is expected to result in revenues of $70 million to $90 million over a two year period of which approximately $60 million is reflected in backlog as of December 31, 2003. We had no backlog for pending tower acquisitions was 145 towers as of December 31, 2001 as compared2003.

Risks Related to 677 towers as of December 31, 2000. We were pursuing build-to-suit mandates for approximately 400 towers as of December 31, 2001 as compared to 600 as of December 31, 2000. As a result of actions we have taken in connection with our announced reduction of capital expenditures for new tower assets, our backlog of tower acquisitions and towers under build-to-suit mandates has been materially reduced. During the first quarter of 2002 we expect to acquire 40 to 50 towers. We do not anticipate having any material amount of pending tower acquisitions in our backlog as of March 31, 2002. We expect to build 60 to 70 towers during the first quarter of 2002 and to have build-to-suit mandates for approximately 160 towers in our backlog as of March 31, 2002. We anticipate that we will perform all of these services and complete the pending tower acquisitions during the current fiscal year.

9
Our Business

RISK FACTORS

We may not be able to service our substantial indebtedness.

As indicated below, we have and will continue to have a significant amount of indebtedness relative to our equity size.

     
At December 31, 2001
    
At December 31, 2000
     
(in thousands)
Total indebtedness    $845,453    $284,273
Stockholders’ equity    $450,644    $538,160
Our substantial indebtedness could have important consequences to you. For example, it could:
equity.

   As of December 31,
   2003
  2002
   (in thousands)

Total indebtedness*

  $866,199  $1,019,046

Shareholders’ equity

  $43,877  $203,490

*Excludes•
limit our ability to repay our borrowings under our senior credit facility, our 10¼% senior notes and our 12% senior discount notes;
•
limit our ability to fund future working capital, capital expenditures and development costs;
•
limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
•
subject us todeferred gain on interest rate risk;swap of $4,559 at December 31, 2003 and $5,236 at December 31, 2002.
•
place us at a competitive disadvantage to our competitors that are less leveraged;
•
require us to sell debt or equity securities or sell some of our core assets, possibly on unfavorable terms, to meet payment obligations; and
•
limit our ability to borrow additional funds.

Our ability to service our debt obligations will depend on our future operating performance. Based onOur earnings were insufficient to cover our outstanding debt as offixed charges for the year ended December 31, 2001,2003 by $162 million and $184 million for the year ended December 31, 2002. Subsequent to December 31, 2003 we obtained a new senior credit facility. A portion of the proceeds from this facility were used to repay the then existing credit facility, to purchase 12% senior discount notes in the open market, to redeem all 12% senior discount notes outstanding on March 1, 2004, and to repurchase 10¼% senior notes in the open market. As adjusted for these transactions, we would require approximately $56.8$53.5 million of cash flow from operating activities (before net cash interest expenses) to discharge our cash interest and principal obligations for the year ending December 31, 2004. By comparison, for the year ended December 31, 2003, we generated $56.7 million of cash flow from operations (before net cash interest expenses) to discharge our cash interest obligations for the twelve months ending December 31, 2002. By comparison, for the twelve months ended December 31, 2001, we generated $53.7 million of cash flow from operations (before net cash interest expenses). As we borrow under our senior credit facility, the amount of cash flow needed to fund our cash interest obligations will increase. This amount will increase materially in September 2003 once we begin to pay cash interest on our 12% senior discount notes and begin to amortize our $100.0 million term loan under our senior credit facility, $5.0 million of which is required to be repaid in 2003. If we do not materially increase our cash flow by then, we will not be able to meet our obligations. In order to manage our substantial amount of indebtedness, we may from time to time sell assets, issue equity, or

repurchase, restructure or refinance some or all of our debt. We may not be able to effecteffectuate any of these alternative strategies on satisfactory terms, if at all. The implementation of any of these alternative strategies may dilute our current shareholders or subject us to additional costs or restrictions on our ability to manage our business and as a result could have a material adverse effect on our financial condition and growth strategy.

We pay interestmay not have sufficient liquidity or cash flow from operations to repay the remaining amount of our outstanding senior credit facility, our 10¼% senior notes and our 9¾% senior discount notes upon their respective maturities in 2008, 2009 and 2011. Therefore, prior to the maturity of our outstanding debt we may be required to refinance and/or restructure some or all of this debt. There can be no assurance that we will be able to refinance or restructure this debt on amounts outstandingacceptable terms or at all. If we were unable to refinance, restructure or otherwise repay the principal amount of this debt upon its maturity, we may need to sell assets, cease operations and/or file for protection under the bankruptcy laws.

As of December 31, 2003, adjusted for the transactions discussed above, we would have had approximately $21 million of additional borrowing capacity under our senior credit facility, at variable interest rates. subject to maintenance covenants, borrowing base limitations and other conditions. Furthermore, we and our subsidiaries may be able to incur significant additional indebtedness in the future, subject to the restrictions contained in our debt instruments, some of which may be secured debt.

We are dependent on the financial stability of our customers and any deterioration in their financial condition may reduce the demand for our services which would adversely affect our growth strategy, revenues and financial condition.

Our business depends on the financial stability of our customers. The economic 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, certain of which operate with substantial leverage and certain of which have filed or may file for bankruptcy. 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. This could affect our ability to satisfy our obligations.

In addition, we have enteredmay be negatively impacted by our customers’ limited access to debt and mayequity capital. Recently when capital market conditions were difficult for the telecommunications industry, wireless service providers conserved capital by not spending as much as originally anticipated to finance expansion activities. This decrease adversely impacted demand for our services and consequently our financial condition. As a result, we adjusted our business during 2002 and early 2003 to significantly reduce and subsequently suspend any material investment for new towers and our site development activities. If our customers are not able to access the capital markets in the future, enter into interest rate swaps to effectively convert a portion of our debt from fixed to variable rates. Therefore, if interest rates were to increase, the amount of interest that we would have to pay would increase.

growth strategy, revenues and financial condition may again be adversely affected.

Our cash flow is negative and we need to access external sources of liquidity to fund tower development activities.

During 2001, we did not generate sufficient cash flow from our operations to fund our cash expenditures and we expect this situation to continue until early 2003. Thereforesubstantial indebtedness may negatively impact our ability to continue operatingimplement our business plan.

Our substantial indebtedness may negatively impact our ability to implement our business plan. For example, it could:

limit our ability to fund future working capital, capital expenditures and development costs;

limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

increase our vulnerability to general economic and industry conditions;

subject us to interest rate risk;

place us at a competitive disadvantage to our current level of activity is contingent upon receiving external sources of funding. Based on current capital market

10competitors that are less leveraged;

conditions, we may not be ablerequire us to access either thesell debt or equity marketssecurities or sell some of our core assets, possibly on commercially reasonableunfavorable terms, or at all. Consequently, we believe that the only likely material source of liquidity to fundmeet payment obligations; and

limit our cash flow gap in 2002 and through early 2003 will be availability under our senior credit facility. At December 31, 2001, we had approximately $190.0 million of funds available to us under our senior credit facility. In September 2003, we begin paying cash interest on our 12% senior discount notes and begin making principal payments on our term loan under our senior credit facility. To make such payments we may rely in part on availability under our senior credit facility, even assuming that we have materially increased our cash flow from operations by that time. If we are unableability to borrow sufficient funds under our senior credit facility, and we are unable to access other sources of funding, we may not be able to satisfy our obligations and may be required to reduce our levels of business activity, sell assets, and/or restructure or refinance our debt. Availability under our senior credit facility is subject to various risks including our compliance with the covenants specified in the senior credit facility agreement and compliance by the lenders with their financial commitment.additional funds.

Our debt instruments contain restrictive covenants that could adversely affect our business.

Our senior credit facility and the indentures governing our 10¼% senior notes and our 12% senior discountoutstanding notes each contain certain restrictive covenants. Among other things, these covenants restrict our ability to to:

incur additional indebtedness, indebtedness;

sell assets for less than fair market value, assets;

pay dividends, redeem outstanding debt or dividends;

make certain investments; and

engage in other restricted payments.

If we fail to comply with these covenants, it could result in an event of default under one or all of these debt instruments.

The acceleration of amounts due under one of our debt instruments would also cause a cross-default under our other debt instruments.

SBA Telecommunications,Senior Finance Inc. (“SBA Senior Finance”), our principal subsidiary which owns, directly or indirectly, all of the common stock of our otheroperating subsidiaries, is the borrower under our senior credit facility. The senior credit facility requires SBA TelecommunicationsSenior Finance to maintain specified financial ratios, including ratios regarding SBA Telecommunications’ consolidatedSenior Finance’s debt coverage,to annualized operating cash flow, debt service, cash interest expense and fixed charges for each quarterquarter. In addition, the senior credit facility contains additional negative covenants that, among other things, restrict our ability to commit to capital expenditures and satisfy certain financial condition tests including maintaining a minimum consolidated EBITDA (Earnings before interest, taxes, depreciation, amortization, non-cash charges and unusual or non-recurring expenses).build towers without anchor tenants. Our ability to meet these financial ratios and tests and comply with these covenants can be affected by events beyond our control, and we may not be able to meet these tests.do so. A breach of any of these covenants, if not remedied within the specified period, could result in an event of default under the senior credit facility. If an event

Upon the occurrence of any default, occurs, our senior credit facility lenders can prevent us from borrowing any additional amounts.amounts under the senior credit facility. In addition, upon the occurrence of any event of default, other than certain bankruptcy events, our senior credit facility lenders, by a majority vote, can elect to declare all amounts of principal outstanding under the senior credit facility, together with all accrued interest, to be immediately due and payable. Upon the occurrenceThe acceleration of certain bankruptcy events, the outstanding principal, together with all accrued interest, will automatically become immediatelyamounts due and payable. The occurrence of any event of default under our senior credit facility maywould cause a cross-default inunder our 10¼% senior notes, our 12% senior discount notes and/or any of our other indebtedness and may permitindentures, thereby permitting the acceleration of some or all of oursuch indebtedness. If the indebtedness under the senior credit facility and/or indebtedness under our 10¼% senior notes or 12% senior discountoutstanding notes were to be accelerated, our current assets maywould not be sufficient to repay in full the indebtedness. If we were unable to repay amounts that become due under the senior credit facility, ourthe senior credit lenders could proceed against the collateral granted to them to secure that indebtedness. Substantially all of our assets are pledged as security under the senior credit facility.

We may not secure as many site leasing tenants as planned.
If tenant demand for tower space decreases, we In such an event of default, our assets may not be ablesufficient to successfully growsatisfy our site leasing business. This may haveobligations under the notes.

If our wireless service provider customers combine their operations to a material adverse effect onsignificant degree, our strategy,growth, our revenue growth and our ability to satisfy our obligations. Our plan for the growth of our site leasing business largely depends on our management’s expectations and assumptions concerning future tenant demand for independently-owned towers. Tenant demand includes both the number of tenants and the lease rates they are willing to pay.

Wireless service providers that own and operate their own towers and several of the independent tower companies generally are substantially larger and have greater financial resources than we do. We believe that

11
generate positive cash flow could be adversely affected.

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 the site leasing business.

Demand for antennae space on communication sitesour services may be adversely affected bydecline if there is significant consolidation ofamong our wireless service provider customers.customers as they may then reduce capital expenditures in the aggregate because many of their existing networks and expansion plans overlap. In January 2003, the spectrum cap, which previously prohibited wireless carriers from owning more than 45 MHz of spectrum in any given geographical area, expired. Some wireless carriers may be encouraged to consolidate with each other as a result of this regulatory change and as a means to strengthen their financial condition. Economic conditions have resulted in the consolidation of several wireless service providers and this trend is likely to continue. To the

extent that our customers consolidate, they may terminatenot renew any duplicative leases that they have on our towers and/or may not lease as many spaces on our towers in the future. This would adversely affect our growth, our revenue and our ability to generate positive cash flow.

In February 2004, Cingular Wireless and AT&T Wireless entered into an agreement by which Cingular would acquire AT&T in a transaction anticipated to close in late 2004 or 2005. As of December 31, 2003 Cingular and AT&T were both tenants on 287 of our 3,032 towers. The contractual revenue generated by both of these tenants on these 287 towers at December 31, 2003 was approximately $12 million. If, as a result of this transaction, Cingular were not to renew duplicate leases, we could lose up to 50% of such revenue. The average remaining contractual life of such duplicate leases was approximately 3 years.

Similar consequences may occur if wireless service providers engage in extensive sharing or roaming or resale arrangements as an alternative to leasing our antenna space. Wireless voice service providers frequently enter into roaming agreements with competitors allowing them to use another’s wireless communications facilities to accommodate customers who are out of range of their home provider’s services. Wireless voice service providers may view these roaming agreements as a superior alternative to leasing antenna space on communications sites owned or controlled by us.us or others. The proliferation of these roaming agreements could have a material adverse effect on our revenue.

We may be adversely affected by an economic slowdown.
The significant general slowdown in the U.S. economy has negatively affected (1) the financial condition of wireless service providers, (2) the availability of capital, and the willingness of wireless service providers to utilize capital, to expand their networks and (3) may negatively affect the growth rate of consumer demand for wireless services. As a result of the economic slowdown, and the negative impact of such slowdown on the debt and equity markets, we have adjusted our business to significantly reduce the number of new towers added to our portfolio. In August 2001, we announced that we were adjusting our new tower build construction plan and operation to produce 100 to 150 new towers per quarter commencing with the third quarter of 2001, instead of the 200 to 250 new towers per quarter previously built or capable of being built by us. In February 2002, we announced that we were further reducing our capital expenditures for new tower development activities in 2002 and subsequently suspending any material new investment for additional towers. If the U.S. economy continues to suffer from the economic slowdown or if the economy worsens, these factors could result in a material decrease in the demand for our tower space and our site development services.
We are not profitable and expect to continue to incur losses.
We are not profitable. The following chart shows the net losses we incurred for the periods indicated:
   
Years ended December 31,
   
2001
  
2000
  
1999
   
(in thousands)
Net losses  $125,145  $28,915  $33,858
Our losses are principally due to significant interest expense, depreciation, amortization and in the year 2001, a restructuring and other charge of $24.4 million. We expect to continue to have significant interest expense and depreciation charges in 2002. In addition, during 2002 we will incur a restructuring charge of $30.0 million to $65.0 million. We have not achieved profitability and expect to continue to incur losses for the foreseeable future.
If demand for wireless communication services decreases, our revenue will be adversely affected.
Substantially all of our customers to date have been providers of wireless communications services. If demand for wireless communication services decreases, our revenue growth will be, and our revenue may be, adversely affected. This could affect our ability to satisfy our obligations. Demand for both our site leasing and site development services is dependent on demand for communication sites from wireless service providers, which, in turn, is dependent on the demand for wireless services. A slowdown in the growth of, or reduction in

12

demand in, a particular wireless communication segment could adversely affect the demand for communication sites. Most types of wireless services currently require ground-based network facilities, including communication sites for transmission and reception. The extent to which wireless service providers lease these communication sites depends on a number of factors beyond our control, including:
•
the level of demand for wireless services;
•
the financial condition and access to capital of wireless service providers;
•
the strategy of wireless service providers with respect to owning or leasing communication sites;
•
government licensing of broadcast rights; and
•
changes in telecommunications regulations and general economic conditions.

We depend on a relatively small number of customers for most of our revenue.

We derive a significant portion of our revenue from a small number of customers, that vary at any given time, particularly in theour site development services side of our business. The loss of any significant customer could have a material adverse effect on our revenue.

Following

The following is a list of significant customers and the percentage of our total revenues for the specified time periods derived from suchthese customers:

   
Years ended December 31,
   
2001
  
2000
   
(% of revenue)
Sprint PCS  10.3  10.7
Nextel  11.1  Less than 10.0

   Percentage of Total Revenues
for the years ended
December 31,
 
   2003
  2002
 

Bechtel Corporation

  14.3% 15.3%

AT&T Wireless

  10.8% 10.1%

Cingular Wireless

  10.2% 12.6%

We also have client concentrations with respect to revenues in each of our financial reporting segments:

   

Percentage of Site Leasing
Revenue for the years

ended December 31,

 
   2003
  2002
 

AT&T Wireless

  16.9% 15.5%

Cingular Wireless

  11.1% 10.8%

   

Percentage of Site

Development Consulting

Revenue for the years
ended December 31,

 
   2003
  2002
 

Bechtel Corporation

  30.5% 34.2%

Cingular Wireless

  24.0% 29.6%

Verizon Wireless

  14.5% 3.9%

   

Percentage of Site
Development Construction

Revenue

for the years ended
December 31,

 
   2003
  2002
 

Bechtel Corporation

  37.7% 28.1%

Sprint PCS

  12.9% 3.0%

Revenues from these clients are derived from numerous different site leasing contracts and site development contracts. Each site leasing contract relates to the lease of space at an individual tower site and is generally for an initial term of 5five years withrenewable for five 5-year renewable options.five-year periods at the option of the tenant. Our site development customers engage us on a project-by-project basis, and a customer can generally terminate an assignment at any time without penalty. In addition, a customer’s need for site development services can decrease, and we may not be successful in establishing relationships with new customers. Moreover,Furthermore, our existing customers may not continue to engage us for additional projects.

We may not secure as many site leasing tenants as planned or our lease rates may decline.

If tenant demand for tower space or our lease rates for new tenants decrease, we may not be able to successfully grow our site leasing business. This may have a material adverse effect on our strategy, revenue growth and our ability to satisfy our financial and other contractual obligations. Our plan for the growth of our site leasing business largely depends on our management’s expectations and assumptions concerning future tenant demand and potential lease rates for independently owned towers.

Due to the long-term expectations of revenue from our tenant leases, the tower industry iswe are very sensitive to the creditworthiness of itsour tenants.

Due to the long-term nature of our tenant leases, we, like others in the tower industry, are dependent on the continued financial strength of our tenants. Wireless service providers often operate with substantial leverage, and financial problems for our customers could result in uncollected accounts receivable, in the loss of customers and the associatedlower than anticipated lease revenues, or in a reduced ability of these customers to finance expansion activities.revenues. During the past twothree years, a number of our site leasing customers have filed for bankruptcy including almost all of our paging customers. Although these bankruptcies have not yet had a material adverse effect on our business or revenues, pending bankruptcies and any future bankruptcies may have a material adverse effect on our business, revenues, and/or revenues.

New technologies may have a material adverse effect on our growth rate and results of operations.
The emergence of new technologies could reduce the demand for space on our towers. This could have a material adverse effect on our growth rate and results of operations. For example, the FCC has granted license applications for several low-earth orbiting satellite systems that are intended to provide mobile voice and data services. Although these systems are highly capital intensive and have only begun to be tested, mobile satellite

13

systems could compete with land-based wireless communications systems. In addition, products are currently being developed which may permit multiple wireless carriers to use a single antenna, to share networks, or to increase the range and capacity of an antenna, which, if successful, could reduce the number of antenna needed by our customers.
We may not be able to materially increase our tower assets without additional financing.
Our ability to materially increase the sizecollectability of our tower portfolio through cash expenditures depends on the availability of additional financing as we do not expect to generate material amounts of excess cash flow from our operations for at least the next two years. Based on current capital market conditions, we have announced our intent to significantly scale back our tower acquisitions, build-to-suit program and strategic siting programs. We do not expect to recommence these programs until such time, if ever, that capital is available to us on terms we find acceptable. If we are not able to increase the size of our tower portfolio it may materially adversely affect our long-term growth rates.
accounts receivable.

Our quarterly operating results for our site development services fluctuate and therefore should not be considered indicative of our long-term results.

The number of towers we build or acquire, the number of tenants we add to our towers and the demand for our site development services fluctuatefluctuates from quarter to quarter and should not be considered as indicative of long-term results. Numerous factors cause these fluctuations, including:

the timing and amount of our customers’ capital expenditures;

the size and scope of assignments;
•
the timing and amount of our customers’ capital expenditures;

the business practices of customers, such as deferring commitments on new projects until after the end of the calendar year or the customers’ fiscal year;
•
the business practices of customers, such as deferring commitments on new projects until after the end of the calendar year or the customers’ fiscal year;

the number and significance of active projects during a quarter;
•
the number and significance of active customer engagements during a quarter;

delays relating to a project or tenant installation of equipment;
•
delays relating to a project or tenant installation of equipment;

seasonal factors, such as weather, vacation days and total business days in a quarter;
•
seasonal factors, such as weather, vacation days and total business days in a quarter;

the use of third party providers by our customers;
•
employee hiring;

the rate and volume of wireless service providers’ network development; and
•
the use of vendors by our customers; and

general economic conditions.
•
the rate and volume of wireless service providers’ network development.

Although the demand for our site development services fluctuates, we incur significant fixed costs, such as maintaining a staff and office space in anticipation of future contracts. TheIn addition, the timing of revenues is difficult to forecast because our sales cycle may be relatively longlong. Therefore, we may not be able to adjust our cost structure in a timely basis to adjust to market slowdowns.

We are not profitable and may dependexpect to continue to incur losses.

We are not profitable. The following chart shows the net losses we incurred for the periods indicated:

   For the years ended December 31,
   2003
  2002
  2001
   (in thousands)

Net losses

  $172,171  $248,996  $125,792

Our losses are principally due to significant interest expense and depreciation and amortization in each of the periods presented above. We recorded an asset impairment charge of $17.0 million, a charge associated with the write-off of deferred financing fees and loss on factors such asextinguishment of debt of $24.2 million, and a restructuring charge of $2.5 million during the sizeyear ended December 31, 2003. Additionally, we recognized a loss, net of taxes, of approximately $7.7 million for the year ended December 31, 2003 in connection with discontinued operations. We recorded restructuring and scopeother charges of assignments, budgetary cycles$47.8 million, a $60.7 million charge related to the cumulative effect of a change in accounting principle related to the adoption of SFAS No. 142, and pressuresan asset impairment charge of $25.5 million in the year ended December 31, 2002. We recorded restructuring and general economic conditions. other charges of $24.4 million in the year ended December 31, 2001.

In addition, under lease terms typical2004, we expect to incur material additional charges for the write-off of deferred financing fees and extinguishment of debt associated with the senior credit facility refinancing, 10¼% senior note repurchases and 12% senior discount note repurchases and redemptions which occurred subsequent to December 31, 2003. Interest expense and depreciation charges will continue to be substantial in the future.

Increasing competition in the tower industry revenue generated bymay adversely affect us.

Our industry is highly competitive, particularly with respect to securing quality tower assets and adequate capital to support tower networks. Competitive pressures for tenants on their towers from these competitors could adversely affect our lease rates and services income. In addition, the loss of existing customers or the failure to attract new tenant leases usually commences upon installationcustomers would lead to an accompanying adverse effect on our revenues, margins and financial condition. Increasing competition could also make the acquisition of quality tower assets more costly.

We compete 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;

site development companies that acquire antenna space on existing towers for wireless service providers, manage new tower construction and provide site development services;

other large independent tower companies; and

smaller local independent tower operators.

Wireless service providers that own and operate their own tower networks and several of the tenant’s equipment onother tower companies generally are substantially larger and have greater financial resources than we do. We believe that tower location and capacity, quality of service, density within a geographic market and, to a lesser extent, price historically have been and will continue to be the tower rather than upon executionmost significant competitive factors affecting the site leasing business.

The site development market includes participants from a variety of market segments offering individual, or combinations of, competing services. We believe that a company’s experience, track record, local reputation, price and time for completion of a project have been and will continue to be the most significant competitive factors affecting the site development business.

The loss of the lease,services of certain of our key personnel or a significant number of our employees may negatively affect our business.

Our success depends to a significant extent upon performance and active participation of our key personnel. We cannot guarantee that we will be successful in retaining the services of these key personnel. We have employment agreements with Jeffrey A. Stoops, our President and Chief Executive Officer, Kurt L. Bagwell, our Senior Vice President and Chief Operating Officer, and Thomas P. Hunt, our Senior Vice President and General Counsel. We do not have employment agreements with any of our other key personnel. If we were to lose any key personnel, we may not be able to find an appropriate replacement on a timely basis and our results of operations could be negatively affected. We do not currently have a permanent Chief Financial Officer, and if we are unable to timely hire one, our business may be negatively impacted. Further, the loss of a significant number of employees or our inability to hire a sufficient number of qualified employees could have a material adverse effect on our business.

New technologies and their use by carriers may have a material adverse effect on our growth rate and results of operations.

The emergence of new technologies could reduce the demand for space on our towers. For example, the development of and use of products that would permit multiple wireless carriers to use a single antenna, share networks or increase the range and capacity of an antenna could reduce the number of antennas needed by our customers. This could have a material adverse effect on our growth rate and results of operations.

Our costs could increase and our revenues could decrease due to perceived health risks from radio frequency (“RF”) energy.

The government imposes requirements and other guidelines on our towers relating to RF energy. Exposure to high levels of RF energy can cause negative health effects.

The potential connection between exposure to low levels of RF energy and certain negative health effects, including some forms of cancer, has been the subject of substantial study by the scientific community in recent years. According to the Federal Communications Commission (“FCC”), the results of these studies to date have been inconclusive. However, public perception of possible health risks associated with cellular and other wireless communications media could slow the growth of wireless companies, which cancould in turn slow our growth. In particular, negative public perception of, and regulations regarding, health risks could cause a decrease in the demand for wireless communications services. Moreover, if a connection between exposure to low levels of RF energy and possible negative health effects, including cancer, were demonstrated, we could be 90 days or more after the execution of the lease.

subject to numerous claims. If we were subject to claims relating to RF energy, even if such claims were not ultimately found to have merit, our financial condition would be materially and adversely affected.

Our business is subject to government regulations and changes in current or future regulations could harm our business.

We are subject to federal, state and local regulation of our business. BothIn particular, both the FCCFederal Communications Commission (“FCC”) and the FAAFederal Aviation Administration (“FAA”) regulate the construction and maintenance of antenna towers used forand structures that support wireless communications and radio and television antennae.antennas. In addition, the FCC separately licenses and regulates wireless communication devicescommunications equipment and television and radio stations operating from towers. Suchsuch towers and structures. FAA and FCC regulations controlgovern construction, lighting, painting and marking of towers and structures and may, depending on the characteristics of the tower or structure, require registration of the tower facilities.or structure. Certain proposals to construct new towers or structures or to modify existing towers or structures are reviewed by the FAA to ensure that the tower or structure will not present a hazard to air navigation. Tower

Antenna tower owners

14

and antenna structure owners may have an obligation to mark or paint towers or structures or install lighting to conform to FAA standards and to maintain such marking, painting and lighting. TowerAntenna tower owners and antenna structure owners may also bear the responsibility of notifying the FAA of any tower lighting failures.outages. Certain proposals to operate wireless communications and radio or television stations from antenna towers and structures are also reviewed by the FCC to ensure compliance with environmental impact requirements. Failure to comply with existing or future applicable requirements may lead to civil penalties or other liabilities and may subject us to significant indemnification liability to our customers against any such failure to comply. In addition, new regulations may impose additional costly burdens on us, which may affect our revenues and cause delays in our growth.

Local regulations, including municipal or local ordinances, zoning restrictions and restrictive covenants imposed by community developers, vary greatly, but typically require antenna tower owners and antenna structure owners to obtain approval from local officials or community standards organizations prior to tower construction.or structure construction or modification. Local regulations can delay, prevent, or preventincrease the cost of new tower construction, co-locations, or site upgrade projects, thereby limiting our ability to respond to customer demand. In addition, suchnew regulations increase costs associated with new tower construction or upgrade projects at our existing tower sites. We cannot assure you that existing regulatory policies will not adversely affect the timing or cost of new tower construction or upgrades or that additional regulations will notmay be adopted that increase such delays or result in additional costs to us. SuchThese factors could have a material adverse effect on our future growth.

growth and operations.

Our towers are subject to damage from natural disasters.

Our towers are subject to risks associated with natural disasters such as tornadoes hurricanes and earthquakes.hurricanes. We maintain insurance to cover the estimated cost of replacing damaged towers, but these insurance policies are subject to capsloss limits and deductibles. We also maintain third party liability insurance, subject to deductibles, to protect us in the event of an accident involving a tower. A tower accident for which we are uninsured or underinsured, or damage to a tower or groupsignificant number of our towers, could require us to make significant capital expenditures and may have a material adverse effect on our operations or financial condition.

Steven E. Bernstein controls the outcome of shareholder votes and therefore disinterested shareholders will not control many corporate governance matters.

Steven E. Bernstein, our Chairman of the Board, controls 100% of the outstanding shares of Class B common stock. Our Class B common stock has the right to 10 votes for each share provided that the outstanding shares of Class B common stock represent more than 10% of the aggregate amount of Class A and Class B common stock outstanding. As of March 15, 2002, the Class B common stock represented 11.2% of the aggregate amount of common stock outstanding. As of March 15, 2002, Mr. Bernstein controlled approximately 57% of the total voting power of both classes of our common stock. As a result, Mr. Bernstein has the ability to control the outcome of all matters determined by a majority vote of our common shareholders when voting together as a single class. Consequently, disinterested shareholders will not be able to determine who is elected as a director nor the outcome of other corporate governance matters subject to approval by the majority of the outstanding shares.
The loss of the services of certain of our executive officers may negatively affect our business.
Our success depends to a significant extent upon performance and active participation of our key senior executives. We cannot guaranteecould have liability under environmental laws that we will be successful in retaining the services of these key senior executives. Although we have an employment agreement with Jeffrey A. Stoops, our President and Chief Executive Officer, we do not have employment agreements with many of our other key senior executives. If we were to lose any of the key senior executives we may not be able to find appropriate replacements on a timely basis and our results of operations could be negatively affected.
If we are unable to attract, retain or manage skilled employees it could have a material adverse effect on our business.business, financial condition and results of operations.

Our business, particularly site development services, involvesoperations, like those of other companies engaged in similar businesses, are subject to the deliveryrequirements of professional servicesvarious federal, state, local and foreign environmental and occupational safety and health laws and regulations, including those relating to the management, use, storage, disposal, emission and remediation of, and exposure to, hazardous and non-hazardous substances, materials, and wastes. As owner, lessee or operator of numerous tower sites, we may be liable for substantial costs of remediating soil and groundwater contaminated by hazardous materials, without regard to whether we, as the owner, lessee or operator, knew of or were responsible for the contamination. We may be subject to potentially significant fines or penalties if we fail to comply with any of these requirements. The current cost of complying with these laws is labor-intensive. The lossnot material to our financial condition or results of operations. However, the requirements of these laws and regulations are complex, change frequently, and could become more stringent in the future. It is possible that these requirements will change or that liabilities will arise in the future in a significant number of employees, our inability to hire a sufficient number of

15

qualified employees or adequately develop and motivate the skilled employees we have hiredmanner that could have a material adverse effect on our business. We compete with other wireless communications firmsbusiness, financial condition and other enterprises for employees with the skills required to perform our services. We cannot assure you that we will be able to attract and retain a sufficient numberresults of highly-skilled employees in the future or that we will continue to be successful in training, retaining and motivating employees.
operations.

Our dependence on our subsidiaries for cash flow may negatively affect our business.

We are a holding company with no business operations of our own. Our dependence on our subsidiaries for cash flow may have a material adverse effect on our operations. Our only significant asset is and is expected to be the outstanding capital stock of our subsidiaries. We conduct, and expect to conduct, all of our business operations through our subsidiaries. Accordingly, our only source of cashability to pay our obligations, including the principal and interest, premium, if any, and additional interest, if any, on our outstanding 10¼% senior notes and our 9¾% senior discount notes, is distributionsdependent upon dividends and other distribution from our subsidiaries of their net earningsto us. Other than amounts required to make interest and cash flow. Weprincipal payments on the notes, we currently expect that the earnings and cash flow of our subsidiaries will be retained and used by

them in their operations, including servicing their debt obligations, except as necessaryobligations. Our operating subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise to be distributedpay the principal, interest and other amounts on the notes or make any funds available to us for payment. The ability of our operating subsidiaries to cover holding company expenses including interest payments on our 10¼% senior notes and 12% senior discount notes. Even if our subsidiaries determined to make a distributionpay dividends or transfer assets to us may be restricted by applicable state law and contractual restrictions, including dividend covenants contained in ourthe terms of the senior credit facility, may restrict or prohibit these dividends or distributions.

We may experience volatility in our stock price that could affectfacility. Although the value of your investment.
The stock market has from time to time experienced significant price and volume fluctuations that have affectedindenture governing the market price for the common stock of companies. In the past, certain broad market fluctuations have been unrelated or disproportionate to the operating performance of these companies. Any significant fluctuations in the future might result in a material decline in the market price of our Class A common stock.
We have adopted anti-takeover provisions that could make it more difficult for a third party to acquire us.
Provisions of our articles of incorporation, our bylaws and Florida law could make it more difficult for a third party to acquire us, even if doing so would be beneficial to our shareholders. We recently adopted a shareholder rights agreement, which could make it considerably more difficult or costly for a person or group to acquire control of us in a transaction that our board of directors opposes. These provisions, alone or in combination with each other, may discourage transactions involving actual or potential changes of control, including transactions that otherwise could involve payment of a premium over prevailing market prices to holders of our Class A common stock, or couldnotes will limit the ability of our shareholdersoperating subsidiaries to approve transactions that they may deementer into consensual restrictions on their ability to pay dividends to us, these limitations are subject to a number of significant qualifications and exceptions.

As a company whose common stock is publicly traded, we are subject to the rules and regulations of federal, state and financial market exchange entities.

In response to recent laws enacted by Congress (most notably the Sarbanes-Oxley Act of 2002), some of these entities have recently issued new requirements and some are continuing to develop additional requirements (most notably, the requirements associated with Section 404 of the Sarbanes-Oxley Act). Our material internal control systems, processes and procedures will have to be in their best interests.

Our costs could increase and our revenues could decrease due to perceived health risks from radio emissions, especially if such emissions are demonstrated to cause negative health effects.
The government imposescompliance with the new requirements and other guidelinessuch compliance may require the commitment of significant financial and managerial resources and significant changes to such controls, systems, processes and procedures.

Availability of Reports and Other Information

Our corporate website iswww.sbasite.com. We make available, free of charge, access to our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statement on Schedule 14A and amendments to those materials filed or furnished pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934 on our towers relatingwebsite under “Investor Relations—SEC Filings,” as soon as reasonably practicable after we file electronically such material with, or furnish it to, radio emissions.the United States Securities and Exchange Commission (the “Commission”). In addition, the Commission’s website iswww.sec.gov. The potential connection between radio emissionsCommission makes available on this website, free of charge, reports, proxy and certain negative health effects, including some forms of cancer, has been the subject of substantial study by the scientific community in recent years. To date, the results of these studies have been inconclusive. However, public perception of possible health risks associated with cellularinformation statements, and other wireless communications media could slowinformation regarding issuers, such as us, that file electronically with the growth of wireless companies, which could in turn slowCommission. Additionally, our growth. In particular, negative public perception of,reports, proxy and regulations regarding, these perceived health risks could slow the market acceptance of wireless communications services.

If a connection between radio emissions and possible negative health effects, including cancer, were demonstrated, we could be subject to numerous claims. If we were subject to numerous claims relating to radio emissions, even if such claims were not ultimately found to have merit, our operations, costs and revenues would be materially and adversely affected.

16

Future issuances of our stock may cause dilution.
In connection with our financing and tower acquisition programs, we have agreed and in the future may agree to issue material amounts of our Class A common stock which could cause dilution to our current shareholders. As of December 31, 2001, we had the obligation to issue shares of Class A common stock for an amount up to $5.0 million if the towers that we have acquired meet or exceed certain earnings or new tower targets identified in the various acquisition agreements. In addition, we may have up to an aggregate of $21.4 million in additional earn-out obligations thatinformation statements may be paid in cashread and copied at the Commission’s public reference room at 450 Fifth Street, NW, Washington, DC 20549. Information on our website or sharesthe Commission’s website is not part of Class A common stock, at our option, if the businesses acquired meet or exceed the agreed earnings or new tower targets.
this document.

ITEM 2.    PROPERTIES
ITEM 2.PROPERTIES

We are headquartered in Boca Raton, Florida, where we currently lease approximately 73,000 square feet of space. We have entered into long-term leases for regional and certain site development office locations where we expect our activities to be longer-term. We open and close project offices from time to time in connection with our site development business, and offices for new tower build projects are generally leased for periods not to exceed 18 months.

Our interests in towers are comprised of a variety of fee interests, leasehold interests created by long-term lease agreements, private easements, easements and licenses or rights-of-way granted by government entities. Please referOf the 3,032 towers in our portfolio, approximately 16% are located on parcels of land that we own and approximately 84% are located on parcels of land that have leasehold interests created by long-term lease agreements, private easements and easements, licenses or right-of-way granted by government entities. In rural areas, a wireless communications site typically consists of up to “Site Leasing Services”a 10,000 square foot tract, which supports towers, equipment shelters and guy wires to stabilize the structure. Less than 2,500 square feet is required for a listingmonopole or self-supporting tower structure of the locationskind typically used in metropolitan areas for wireless communication tower sites. Land leases generally have an initial term of towers.

five years with five or more additional automatic renewal periods of five years, for a total of thirty years or more. In some instances, we have entered into 99 year ground leases.

ITEM 3.    LEGAL PROCEEDINGS
From time to time, we
ITEM 3.LEGAL PROCEEDINGS

We are involved in various legal proceedings relating to claims arising in the ordinary course of business. We aredo not a party to any legal proceeding,believe that the adverse outcomeultimate resolution of which, individually or taken together with all other legal proceedings, is expected tothese matters will have a material adverse effect on our prospects,business, financial condition, or results of operations.

operations or liquidity.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to the vote of security holders during the fourth quarter of fiscal 2001.

17
2003.

PART II

ITEM 5.    MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Class A common stock commenced trading under the symbol “SBAC” on The Nasdaq National Market System (“Nasdaq”) on June 16, 1999. The following table presents trading information for the Class A common stock for the periods indicated on the Nasdaq:

   
High
  
Low
Quarter ended March 31, 2000  $54.75  $16.50
Quarter ended June 30, 2000  $57.00  $31.50
Quarter ended September 30, 2000  $55.88  $37.00
Quarter ended December 31, 2000  $55.25  $30.88
Quarter ended March 31, 2001  $47.13  $15.44
Quarter ended June 30, 2001  $34.31  $12.69
Quarter ended September 30, 2001  $24.48  $10.48
Quarter ended December 31, 2001  $16.60  $5.91

   High
  Low

Quarter ended March 31, 2003

  $1.45  $0.40

Quarter ended June 30, 2003

  $3.49  $1.11

Quarter ended September 30, 2003

  $4.13  $2.47

Quarter ended December 31, 2003

  $4.35  $3.10

Quarter ended March 31, 2002

  $14.05  $1.59

Quarter ended June 30, 2002

  $3.40  $1.14

Quarter ended September 30, 2002

  $1.92  $1.04

Quarter ended December 31, 2002

  $1.03  $0.19

As of March 15, 2002,10, 2004, there were 223194 record holders of our Class A common stock, and 3 record holders of our Class B common stock. There is no established public trading market for our Class B common stock.

We have notnever paid a dividend on any class of common stock and anticipate that we will retain future earnings, if any, to fund the development and growth of our business. Consequently, we do not anticipate paying cash dividends on any of our common stock in the foreseeable future. In addition, we are restricted under ourthe senior credit facility, the 10¼9¾% senior discount notes and the 12%10¼% senior discount notes from paying dividends or making distributions and repurchasing, redeeming or otherwise acquiring any shares of common stock except under certain circumstances.

(continued on

The following page)

18
table gives information about our common stock that may be issued upon the exercise of options, warrants, and rights under all existing equity compensation plans as of December 31, 2003.

ITEM 6.    SELECTED FINANCIAL DATA

   Equity Compensation Plan Information
   (in thousands except exercise price)
   Number of Securities to be
Issued Upon Exercise of
Outstanding Options,
Warrants and Rights
  

Weighted Average

Exercise Price of

Outstanding Options,

Warrants and Rights

  Number of Securities
Remaining Available for
Future Issuance Under Equity
Compensation Plans
(excluding securities reflected
in column)

Equity compensation plans approved by security holders

  3,788  $7.79  8,159

Equity compensation plans not approved by security holders

  —     —    —  

Total

  3,788  $7.79  8,159

ITEM 6.SELECTED HISTORICAL FINANCIAL DATA

The following table sets forth selected historical financial data as of and otherfor each of the five years ended December 31, 2003. The financial data for the fiscal years ended 2003, 2002 and 2001 have been derived from, and are qualified by reference to, our restated audited consolidated financial statements. The financial data as of and for the fiscal years ended 2000 and 1999, have been derived from our unaudited consolidated financial statements. The unaudited financial data as of and for the years ended December 31, 2001, 2000 and 1999, 1998 and 1997. The historical financial data hashave been derived from our books and is qualified by referencerecords without audit and, in the opinion of management, include all adjustments, (consisting only of normal, recurring adjustments) that management considers necessary for a fair statement of results for these periods. The following consolidated financial statements have been reclassified to our audited financial statements. Thereflect the discontinued operations treatment of the disposition, or intended disposition of 848 towers. You should read the information set forth below should be read in conjunction with our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the Consolidated Financial Statements and related notes theretoto those consolidated financial statements included elsewhere in this report.

   
Years ended December 31,
 
   
2001
   
2000
   
1999
   
1998
   
1997
 
   
(in thousands, except per share and tower data)
 
OPERATING DATA:
                         
Revenues:                         
Site development  $139,735   $115,892   $60,570   $46,705   $48,241 
Site leasing   103,159    52,014    26,423    12,396    6,759 
   
  
  
  
  
Total revenues   242,894    167,906    86,993    59,101    55,000 
Cost of revenues (exclusive of depreciation and amortization shown below):                         
Cost of site development   107,932    88,892    45,804    36,500    31,470 
Cost of site leasing   36,722    19,502    12,134    7,281    5,356 
   
  
  
  
  
Total cost of revenues   144,654    108,394    57,938    43,781    36,826 
   
  
  
  
  
Gross profit   98,240    59,512    29,055    15,320    18,174 
Selling, general and administrative(a)   41,342    27,799    19,784    18,302    12,033 
Restructuring and other charge   24,399    —      —      —      —   
Depreciation and amortization   80,465    34,831    16,557    5,802    514 
   
  
  
  
  
Operating income (loss)   (47,966)   (3,118)   (7,286)   (8,784)   5,627 
Interest and other (expense) income, net   (70,456)   (24,564)   (26,378)   (12,641)   236 
(Provision) benefit for income taxes(b)   (1,654)   (1,233)   223    1,524    (5,596)
Extraordinary item   (5,069)   —      (1,150)   —      —   
   
  
  
  
  
Net income (loss)   (125,145)   (28,915)   (34,591)   (19,901)   267 
Dividends on preferred stock   —      —      733    (2,575)   (983)
   
  
  
  
  
Net loss available to common shareholders  $(125,145)  $(28,915)  $(33,858)  $(22,476)  $(716)
   
  
  
  
  
Basic and diluted loss per common share before extraordinary item  $(2.53)  $(0.70)  $(1.71)  $(2.64)  $(0.09)
Extraordinary item   (0.11)   —      (0.06)   —      —   
   
  
  
  
  
Basic and diluted loss per common share  $(2.64)  $(0.70)  $(1.77)  $(2.64)  $(0.09)
   
  
  
  
  
Basic and diluted weighted average number of shares of common stock   47,437    41,156    19,156    8,526    8,075 
   
  
  
  
  
OTHER DATA:
                         
EBITDA(c)  $60,224   $32,026   $9,582   $(2,377)  $7,155 
Annualized tower cash flow(d)   78,756    31,056    18,692    8,088    1,946 
Capital expenditures(e)   561,326    494,053    226,570    138,124    17,676 
Cash provided by (used in):                         
Operating activities   13,000    47,516    23,134    7,471    7,829 
Investing activities   (530,273)   (445,280)   (208,870)   (138,124)   (17,676)
Financing activities   516,197    409,613    162,124    151,286    15,645 
BALANCE SHEET DATA:
                         
Cash and cash equivalents  $13,904   $14,980   $3,131   $26,743   $6,109 
Property and equipment, net   1,198,559    765,815    338,892    150,946    17,829 
Total assets   1,429,011    948,818    429,823    214,573    44,797 
Total debt   845,453    284,273    320,767    182,573    10,184 
Redeemable preferred stock   —      —      —      33,558    30,983 
Common shareholders’ equity (deficit)   450,644    538,160    48,582    (26,095)   (4,344)

19
Form 10-K.

   
Years ended December 31,
   
2001
  
2000
  
1999
  
1998
  
1997
TOWER DATA:
               
Towers owned at the beginning of period  2,390  1,163  494  51  —  
Towers constructed  667  779  438  310  15
Towers acquired  677  448  231  133  36
   
  
  
  
  
Towers owned at the end of period  3,734  2,390  1,163  494  51
   
  
  
  
  
Tenants at the end of period (f)  7,693  4,904  1,794  601  135
   
  
  
  
  

   For the years ended December 31,
 
   2003
  2002
  2001
  2000
  1999
 
   (audited)  (audited)  (audited)  (unaudited) 
   (in thousands) 

Operating Data:

                     

Revenues:

                     

Site leasing

  $127,842  $115,081  $85,487  $44,332  $23,176 

Site development

   84,218   125,041   139,735   115,892   60,570 
   
 
 
 
 

Total revenues

   212,060   240,122   225,222   160,224   83,746 
   
 
 
 
 

Cost of revenues (exclusive of depreciation, accretion and amortization shown below):

                     

Cost of site leasing

   42,021   40,650   30,657   16,904   10,742 

Cost of site development

   77,810   102,473   108,532   88,892   45,804 
   
 
 
 
 

Total cost of revenues

   119,831   143,123   139,189   105,796   56,546 
   
 
 
 
 

Gross profit

   92,229   96,999   86,033   54,428   27,200 

Operating expenses:

                     

Selling, general and administrative

   31,244   34,352   42,103   27,404   19,659 

Restructuring and other charges

   2,505   47,762   24,399   —     —   

Asset impairment charges

   16,965   25,545   —     —     —   

Depreciation, accretion and amortization

   84,380   85,728   66,104   27,921   13,275 
   
 
 
 
 

Total operating expenses

   135,094   193,387   132,606   55,325   32,934 
   
 
 
 
 

Operating loss from continuing operations

   (42,865)  (96,388)  (46,573)  (897)  (5,734)

Other income (expense):

                     

Interest income

   692   601   7,059   6,253   881 

Interest expense, net of amounts capitalized

   (81,501)  (54,822)  (47,709)  (4,879)  (5,244)

Non-cash interest expense

   (9,277)  (29,038)  (25,843)  (23,000)  (20,467)

Amortization of debt issuance costs

   (5,115)  (4,480)  (3,887)  (3,006)  (1,596)

Write-off of deferred financing fees and loss on extinguishment of debt

   (24,219)  —     (5,069)  —     (1,150)

Other

   169   (169)  (76)  68   48 
   
 
 
 
 

Total other expense

   (119,251)  (87,908)  (75,525)  (24,564)  (27,528)
   
 
 
 
 

Loss from continuing operations before provision for income taxes and cumulative effect of changes in accounting principles

   (162,116)  (184,296)  (122,098)  (25,461)  (33,262)

Benefit from (provision for) income taxes

   (1,820)  (309)  (1,493)  (1,195)  196 
   
 
 
 
 

Loss from continuing operations before cumulative effect of changes in accounting principles

   (163,936)  (184,605)  (123,591)  (26,656)  (33,066)

Loss from discontinued operations, net of income taxes

   (7,690)  (3,717)  (2,201)  (2,259)  (1,525)
   
 
 
 
 

Loss before cumulative effect of changes in accounting principles

   (171,626)  (188,322)  (125,792)  (28,915)  (34,591)

Cumulative effect of changes in accounting principles

   (545)  (60,674)  —     —     —   
   
 
 
 
 

Net loss

   (172,171)  (248,996)  (125,792)  (28,915)  (34,591)

Dividends on preferred stock

   —     —     —     —     733 
   
 
 
 
 

Net loss applicable to shareholders

  $(172,171) $(248,996) $(125,792) $(28,915) $(33,858)
   
 
 
 
 

   As of December 31,
 
   2003
  2002
  2001
  2000
  1999
 
   (audited)  (audited)  (audited)  (unaudited) 
   (in thousands) 

Balance Sheet Data:

                     

Cash and cash equivalents(1)

  $8,338  $61,141  $13,904  $14,980  $3,131 

Short-term investments

   15,200   —     —     —     —   

Restricted cash(2)

   10,344   —     —     —     —   

Property and equipment (net)

   856,213   940,961   987,053   766,221   339,079 

Total assets

   982,982   1,303,365   1,407,543   948,818   429,823 

Total debt(3)

   870,758   1,024,282   845,453   248,273   320,767 

Total shareholders’ equity

   43,877   203,490   448,744   538,160   48,582 
   For the years ended December 31,
 
   2003
  2002
  2001
  2000
  1999
 
   (audited)  (audited)  (audited)  (unaudited) 
   (in thousands) 

Other Data:

                     

Cash provided by (used in):

                     

Operating activities

  $(29,808) $17,807  $28,753  $47,516  $23,134 

Investing activities

   155,456   (102,716)  (554,700)  (445,280)  (208,870)

Financing activities

   (178,451)  132,146   524,871   409,613   162,124 
   For the years ended December 31,
 
   2003
  2002
  2001
  2000
  1999
 
   (unaudited) 

Tower Data (Before Discontinued Operations Treatment):

                     

Towers owned at the beginning of period

   3,877   3,734   2,390   1,163   494 

Towers constructed

   13   141   667   779   438 

Towers acquired

   —     53   677   448   231 

Towers reclassified/disposed of(4)

   (797)  (51)  —     —     —   

Towers held for sale

   (61)  —     —     —     —   
   
 
 
 
 

Total towers owned at the end of period

   3,032   3,877   3,734   2,390   1,163 
   
 
 
 
 

Tower Data (After Discontinued Operations Treatment):

                     

Total towers owned at the end of period

   3,032   3,030   2,910   1,830   902 
   
 
 
 
 

(a)(1)
For the year endedIncludes cash and cash equivalents of Telecommunications and its subsidiaries of $8.2 million, $60.9 million, $13.7 million, $13.6 million, $2.9 million, as of December 31, 2003, 2002, 2001, selling, general2000 and administrative expense includes non-cash compensation expense1999, respectively.

(2)Restricted cash of $3.3$10.3 million in connection with stock option grants, restricted stock grants and the issuanceas of Class A common stock. For the year ended December 31, 2000, selling, general and administrative expense included non-cash compensation expense2003, consists of $0.3$7.3 million in connection with stock option and restricted stock activity. For the year ended December 31, 1999, selling, general and administrative expenses included non-cash compensation expense of $0.3 million incurred in connection with the issuance of stock options and Class A common stock. For the year ended December 31, 1998, selling, general and administrative expense included non-cash compensation expense of $0.6 million incurred in connection with stock option activity.
(b)
Provision for income taxes for the year ended December 31, 1997 included the tax effect of our conversion to a C corporation.
(c)
EBITDA represents earnings (loss) before interest, taxes, depreciation, amortization, non-cash charges (including those referred to in footnote (a) above) and unusual or non-recurring expenses. EBITDA is commonly used in the telecommunications industry to analyze companies on the basis of operating performance, leverage and liquidity. EBITDA is not intended to represent cash flows for the periods presented, nor has it been presented as an alternative to operating income or as an indicator of operating performance and should not be considered in isolation or as a substitute for measures of performance preparedheld by escrow agent in accordance with accounting principles generally accepted incertain provisions of the United States. Companies calculate EBITDA differentlyWestern tower sale agreement and therefore, EBITDA$3.0 million related to surety bonds issued for our benefit.

(3)Includes deferred gain on interest rate swap of $4.6 million and $5.2 million as presented by us may not be comparable to EBITDA reported by other companies. See our Consolidated Statements of Cash Flows in our Consolidated Financial Statements included in this filing.December 31, 2003 and December 31, 2002, respectively.

(d)(4)
We define “tower cash flow” as site leasing revenue less costReclassifications reflect the combination for reporting purposes of site leasing revenue (exclusive of depreciation). We believemultiple acquired tower cash flow is useful because it allows you to compare tower performance before the effect of expenses (selling, general and administrative) that do not relate directly to tower performance. We define ‘‘annualized tower cash flow’’ as tower cash flow for the last calendar quarter attributable to our site leasing business multiplied by four.
(e)
Includes the value of Class A common stock issued in connection with acquisitions.
(f)
Periods for 1997 to 2000 have been adjusted from amounts previously reported to reflect as one tenant, multiple leases with the same userstructures on a single parcel of real estate, which we market and customers view as a single location, into a single owned tower regardlesssite. Dispositions reflect the sale, conveyance or other legal transfer of the amount of equipment, additional equipment, microwave, etc.owned tower sites.

ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

We are a leading independent owner and operator of over 3,7003,000 wireless communications towers in the eastern third of the United States and Puerto Rico.States. We generate revenues from our two primary businesses, site leasing and site development. In our site leasing business, we lease antenna space to wireless service providers on towers and other structures that we own or manage for or lease from others. The towers that we own have either

been constructed by us at the request of a carrier, built or constructed based on our own initiative or acquired. In our site development business, we offer wireless service providers assistance in developing and maintaining their own wireless service networks.

We are continuing to shift our revenue stream from project driven

The percentage of revenues more to recurring revenues throughderived from the leasing of antenna space at, or on, communications facilities. We intendcommunication towers continued to emphasizeincrease as a result of our emphasis on our site leasing business through the leasing and management of tower sites and we believesites. Subsequent to the sale of 784 towers to AAT Communications Corp. during 2003 (“Western tower sale”) we have well positioned ourselves to perform manyfocused our leasing activities in the eastern third of the other typesUnited States where substantially all of servicesour remaining towers are located.

Operating results in prior periods may not be meaningful predictors of future results. You should be aware of the significant changes in the nature and scope of our business when reviewing the ensuing discussion of comparative historical results. The 784 towers sold in the Western tower sale during 2003 have been accounted for as discontinued operations in accordance with generally accepted accounting principles. Additionally, 64 towers located in the Western two-thirds of the United States that wireless service providers needwe had previously decided to sell have also been accounted for as discontinued operations in connectionaccordance with generally accepted accounting principles. As of December 31, 2003, 61 of these towers remain as held for sale. All discussion related to the operationConsolidated Statements of Operations for the periods discussed in this “Management’s Discussion and maintenanceAnalysis of a wireless telecommunications network. Those services include installation, maintenanceFinancial Condition and

20
Results of Operations” have been adjusted to reflect these towers as discontinued operations.

upgrading of radio transmission equipment, antennas, cabling and other connection equipment, electricity, backhaul, equipment shelters, data collection and network monitoring.

Site Leasing Services

Site leasing revenues are received primarily from wireless communications companies. Revenues from these clients are derived from numerous different site leasing contracts. Each site leasing contract relates to the lease or use of space at an individual tower site and is generally for an initial term of 5five years, withrenewable for five 5-year renewable options.five-year periods at the option of the tenant. Almost all of our leasessite leasing contracts contain specifiedspecific rent escalators, which average 4%3-4% per year, including the renewal option periods. LeasesSite leasing contracts are generally paid on a monthly basis and revenue from site leasing is recorded monthly on a straight-line basis over the term of the related lease agreements. Rental amounts received in advance are recorded in other liabilities (current and long-term).

deferred revenue.

Cost of site leasing revenue consistprimarily consists of:

payments for rental on ground and other underlying property;
•
payments for rental on ground and other underlying property;
•
repairs and maintenance;
•
utilities;
•
insurance; and
•
property taxes.

repairs and maintenance (exclusive of employee related costs);

utilities;

insurance; and

property taxes.

For any given tower, such costs are relatively fixed over a monthly or an annual time period.generally unrelated to the number of tenants on such tower. As such, operating costs for owned towers do not generally increase significantly as a result of adding additional customers are added.

Our sameto the tower.

Site leasing revenues comprised 60.3% of total revenues for the year ended December 31, 2003, and 47.9% of total revenues for the year ended December 31, 2002. Site leasing contributed 93.1% of total gross profit for the year ended December 31, 2003 and 76.7% of total gross profit for the year ended December 31, 2002.

As a result of the Western tower revenue growth and samesale, we reduced our tower cash flow growthportfolio by 784 towers. During 2003, to further improve efficiencies in our portfolio, we decided to sell an additional 64 towers remaining in the western two-thirds of the United States, which were not part of the Western tower sale. Three of these towers were sold during the fourth quarter of 2003, leaving 61 towers held for sale at December 31, 2001,2003.

Gross profit margins on the 2,390towers sold in the Western tower sale were relatively comparable to the gross profit margins on the towers we owned asretained. Therefore, the sale of these towers is not expected to have a material impact on our site leasing gross profit margin. We do not anticipate making any other material changes to our tower portfolio in 2004.

As of December 31, 2000 was 24% and 29%, respectively, based on tenant leases signed and revenues annualized as2003, we owned 3,032 towers, substantially all of which are in the eastern third of the United States. This number excludes the 61 towers held for sale at December 31, 2001 and 2000.

2003.

Site Development Services

Our site development business consists of two segments, site development consulting and site development construction, through which we provide wireless service providers a full range of end-to-end services. In the consulting segment of our site development business, we offer clients the following services: (1) network pre-design; (2) site audits; (3) identification of potential locations for towers and antennas; (4) support in buying or leasing of the location; and (5) assistance in obtaining zoning approvals and permits. In the construction segment of our site development business, we provide a number of services, including, but not limited to the following: (1) tower and related site construction; (2) antenna installation; and (3) radio equipment installation, commissioning and maintenance.

Site development services revenues are also received primarily from wireless communications companies or companies providing development or project management services to wireless communications companies. Our site development customers engage us on a project-by-project basis, and a customer can generally terminate an assignment at any time without penalty. Site development projects, in which we performboth consulting servicesand construction, include contracts on a time and materials basis or a fixed price or milestone,basis. The majority of our site development services are billed on a fixed price basis. Time and materials based site development contracts are billed and revenue is recognized at contractual rates as the services are rendered. Our site development projects generally take from 3 to 12 months to complete. For those site development consulting contracts in which we perform work on a fixed price basis, we bill the client, and recognize revenue, based on the completion of agreed upon phases or milestones of the project on a per site basis. Upon the completion of each phase on a per site basis, we recognize the revenue related to that phase. The majority of our site development services are billed on a fixed basis. Our site development projects generally take from 3 to 12 months to complete.

Our revenue from construction projects is recognized on the percentage-of-completion method of accounting, determined by the percentage of cost incurred to date compared to management’s estimated total anticipated cost for each contract. This method is used because management considers total cost to be the best available measure of progress on the contracts. These amounts are based on estimates, and the uncertainty inherent in the estimates initially is reduced as work on the contracts nears completion. The average site development contract for consulting was approximately $233,000 per contract in 2001 and for construction was approximately $45,000 per contract in 2001.

Revenue from our site development construction business may fluctuate from period to period depending on construction activities, which are a function of the timing and amount of our clients’ capital expenditures, the number and significance of active customer engagements during a period, weather and other factors.

Cost of site development projectconsulting revenue and construction revenue include all material costs of materials, salaries and labor, costs, including payroll taxes, subcontract labor, vehicle expense and other costs directly and indirectly related to the projects. All costs related to site development consulting projects and construction projects are recognized as incurred.

21

Our site development revenues and profit margins decreased significantly during 2002 and 2003. This decrease was primarily attributable to a decline in capital expenditures by wireless carriers and vigorous competition, particularly for our site development construction services, which adversely affected our volume of activity and the pricing for our services.

   

Percentage of Revenues
For the years ended

December 31,

  

Gross Profit Contribution
For the years ended

December 31,

 
   2003
  2002
  2003
  2002
 

Site development consulting

  8.5% 11.3% 1.5% 6.8%

Site development construction

  31.2% 40.8% 5.5% 16.5%

Critical Accounting Policies and Estimates

We have focusedidentified the policies and significant estimation processes below as critical to our capital expenditures on building new towersbusiness operations and acquiring existing towers and related businesses. Our average construction costthe understanding of our results of operations. The listing is not intended to be a comprehensive list. In many cases, the accounting treatment of a new towerparticular transaction is currently approximately $275,000 while we believespecifically dictated by accounting principles generally accepted in the industry’s average acquisition costUnited States, with no need for management’s judgment in their application. In other cases, management is required to exercise judgment in the application of accounting principles with respect to particular transactions. The impact and any associated risks related to these policies on our business operations is discussed throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations” where such policies affect reported and expected financial results. For a tower overdetailed discussion on the last two years has been approximately $350,000. As a resultapplication of these favorable economics, we have historically elected to build the majority (59%) of our towers. However, this trend changed somewhat in 2001 as the average acquisition price per tower declined. We acquired more towers than we builtand other accounting policies, see Note 2 in the year 2001.

While we have focused primarily on building new towersNotes to Consolidated Financial Statements for growth, we have also acquired 1,525 towers as of December 31, 2001. Our acquisition strategy has focused on smaller acquisition opportunities from non-carriers and small carrier transactions. We seek to acquire towers where we can increase cash flow to substantially reduce the tower cash flow multiple paid at acquisition through additional tenant lease up. During the year ended December 31, 20012003, included herein. Note that our preparation of our financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses during the reporting periods. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. There can be no assurance that actual results will not differ from those estimates and such differences could be significant.

Construction Revenue

Revenue from construction projects is recognized on the percentage-of-completion method of accounting, determined by the percentage of cost incurred to date compared to management’s estimated total anticipated cost for each contract. This method is used because we acquired 677 towers.consider total cost to be the best available measure of progress on each contract. These amounts are based on estimates, and the uncertainty inherent in the estimates initially is reduced as work on each contract nears completion. The 677 tower acquisitions were completed atasset “Costs and estimated earnings in excess of billings on uncompleted contracts” represents expenses incurred and revenues recognized in excess of amounts billed. The liability “Billings in excess of costs and estimated earnings on uncompleted contracts” represents billings in excess of revenues recognized. See Note 11 to the Consolidated Financial Statements.

Allowance for Doubtful Accounts

We perform periodic credit evaluations of our customers. We continuously monitor collections and payments from our customers and maintain an aggregate purchase price of $222.5 million (exclusive of acquisition costs), an average price of approximately $329,000 per tower.

In August 2001, we announcedallowance for estimated credit losses based upon our historical experience and any specific customer collection issues that we were adjustinghave identified. Establishing reserves against specific accounts receivable and the overall adequacy of our newallowance is a matter of judgment. See the Consolidated Balance Sheet.

Asset Impairment

We evaluate the potential impairment of individual long-lived assets, principally the tower build construction plansites. We record an impairment charge when we believe an investment in towers has been impaired, such that future undiscounted cash flows would not recover the then current carrying value of the investment in the tower site. We consider many factors and operationmake certain assumptions when making this assessment, including but not limited to; general market and economic conditions, historical operating results, geographic location, lease-up potential, and expected timing of lease-up. In addition, we make certain assumptions in determining an asset’s fair value less costs to produce fewer towers per quarter. In connection with this adjustment, we recordedsell for purposes of calculating the amount of an impairment

charge. Changes in those assumptions or market conditions may result in a $24.4 millionfair value less costs to sell which is different from management’s estimates. Future adverse changes in market conditions could result in losses or an inability to recover the carrying value, thereby possibly requiring an impairment charge in the third quarter of 2001. Included in thisfuture. In addition, if our assumptions regarding future undiscounted cash flows and related assumptions are incorrect, a future impairment charge was a write-off of costs previously reflected on our balance sheet as construction-in-process for certain new tower build sites for which development activity had been abandoned, costs of employee separation for certain employees and costs associated with the closing and consolidation of selected offices that were previously utilized primarily in our new asset development activities.

In February 2002, we announced that as a result of capital market conditions we were further reducing our planned capital expenditures for new tower development activities in 2002 and subsequently suspending any material new investment for additional towers. We have reduced the number of towers expected tomay be built or acquired in 2002 to approximately 250 to 350 towers. Under current capital market conditions we do not anticipate building or buying a material number of new towers beyond those we are currently contractually obligated to build or buy. In connection with this restructuring plan we anticipate incurring charges of between $30.0 million and $65.0 million relatedrequired. See Note 18 to the disposalConsolidated Financial Statements.

Asset Retirement Obligations

Effective January 1, 2003, we adopted the provisions of SFAS 143. Under the new tower buildaccounting principle, we recognize asset retirement obligations in the period in which they are incurred if a reasonable estimate of a fair value can be made and acquisition construction-in-process,we accrete such liability through the obligation’s estimated settlement date. The associated asset retirement costs are capitalized as part of employee separation, costs associated with the closing of offices and other items. Thecarrying amount of the charge related to asset disposals will be determined primarily bytower fixed assets and depreciated over its estimated useful life.

Significant management estimates and assumptions are required in determining the scope and fair value of costsour obligations to restore leaseholds to their original condition upon termination of construction-in-processground leases. In determining the scope and fair value of our obligations, assumptions were made with respect to those new buildsthe : historical retirement experience as an indicator of future restoration probabilities, intent in renewing existing ground leases through lease termination dates, current and future value and timing of estimated restoration costs, and the credit adjusted risk-free rate used to discount future obligations. While we choosefeel the assumptions were appropriate, there can be no assurances that actual costs and the probability of incurring obligations will not differ from estimates. We will review these assumptions periodically and we may need to dispose of. Most of the charge is expected to be incurred in the first quarter of 2002 with the remainder incurred in the second quarter of 2002.

We believe that if the capital markets conditions remain difficult for the telecommunications industry, wireless service providers will choose to conserve capital and may not spendadjust them as many dollars as currently anticipated. We believe our revenues and gross profit from the site development consulting and construction segments of our business may vary in responsenecessary. See Note 5a to the capital markets. Short term, variable capital markets conditions may impact carrier demand for our tower space. We believe that, over the longer term however, site leasing revenues will continue to increase as carriers continue to deploy new antenna sites to address issues of network capacity and quality, increasing the recurring revenue stream we enjoy from existing tenants.
Consolidated Financial Statements.

RESULTS OF OPERATIONS

As we continue to shift our revenuegross profit mix shifts more towards site leasing, operating results in prior periods may not be meaningful predictors of future results. You should be aware of the dramatic changes in the nature and scope of our business when reviewing the ensuing discussion of comparative historical results. We expect that the acquisitions consummated to date and any future acquisitions, as well as our new tower builds, will have a material impact on future revenues, expenses and net loss. Revenues, cost of revenues, selling, general and administrative expenses, depreciation and amortization, interest income and interest expense each increased significantly in the year ended December 31, 2001 as compared to 2000, and some or all of those items may continue to increase significantly in future periods.

22

Year Ended 20012003 Compared to Year Ended 20002002

Total revenues increased 44.7% to $242.9 million for 2001 from $167.9 million for 2000. Total site development revenue increased 20.6% to $139.7 million in 2001 from $115.9 million in 2000 due to an increase in site development construction revenue. Site development construction revenue increased 26.0% to $115.5 million for 2001 from $91.6 million for 2000, due primarily to revenues from companies acquired during 2000 and 2001. Revenues of $34.3 million were contributed by these acquired entities in 2001. Our decision to reduce our level of new tower development activity may have a material adverse effect on our site development revenue in 2002 since, as a result, we do not expect to perform equipment installation work for as many first tenants as we did in 2001. Site development consulting revenues were $24.3 million for 2001 and 2000.

Revenues:

   For the years ended December 31,
 
   2003
  Percentage
of Revenues
  2002
  Percentage
of Revenues
  

Percentage
Increase

(Decrease)

 
   (dollars in thousands) 

Site leasing

  $127,842  60.3% $115,081  47.9% 11.1%

Site development consulting

   18,092  8.5%  27,204  11.3% (33.5)%

Site development construction

   66,126  31.2%  97,837  40.8% (32.4)%
   
  
 
  
 

Total revenues

  $212,060  100.0% $240,122  100.0% (11.7)%
   
  
 
  
 

Site leasing revenue increased 98.3% to $103.2 million for 2001 from $52.0 million for 2000, due to tenants added to our towers and the substantially greater number of towers in our portfolio during 2001 as compared to 2000.

Total cost of revenues increased 33.5% to $144.7 million for 2001 from $108.4 million for 2000. Site development cost of revenue increased 21.4% to $107.9 million in 2001 from $88.9 million in 2000 due to higher site development revenues. Site development consulting cost of revenue increased 9.4% to $17.1 million for 2001 from $15.6 million for 2000, reflecting increased human resources costs. Site development construction cost of revenue increased 24.0% to $90.8 million for 2001 from $73.3 million for 2000, due to higher site development construction revenues. Site leasing cost of revenue increased 88.3% to $36.7 million for 2001 from $19.5 million for 2000, due primarily to the increased number of towers owned.
Gross profit increasedtenants and the amount of equipment added to $98.2 million for 2001our towers. As of December 31, 2003 we had 6,847 tenants as compared to 6,389 tenants at December 31, 2002. During the year ended 2003, 88.7% of contractual revenues from $59.5 million for 2000, duenew leases and amendments executed in 2003 were related to increased site developmentnew tenant installation and site leasing revenues. Gross profit11.3% were related to additional equipment being added by existing tenants. During the year ended 2002, 86.7% of contractual revenues from site development increased 17.8%new leases and amendments executed in 2002 were related to $31.8 million in 2001 from $27.0 million in 2000new tenant installation and 13.3% were related to additional equipment being added by existing tenants. Additionally, we have experienced, on average, higher rents per tenant due to higher site development revenues. Gross profit margins for site development decreased in 2001 to 22.8%rents from 23.3% in 2000 due to a greater relative amount of lower margin site development construction business. Gross profit margin onnew tenants, higher rents upon renewal by existing tenants and additional equipment added by existing tenants. Both site development consulting and construction revenue decreased to 29.5%primarily as a result of the decline in capital expenditures by wireless

carriers for 2001 from 35.6%additional antenna sites and vigorous competition, which adversely affected our volume of activity and the pricing for 2000. This decrease is attributable to higher costs and our inability to timely reduce those costs as projects ended. Gross profit margin onservices.

Cost of Revenues:

   For the years ended
December 31,
  

Percentage

Increase

(Decrease)

 
   2003
  2002
  
   (in thousands)    

Site leasing

  $42,021  $40,650  3.4%

Site development consulting

   16,723   20,594  (18.8)%

Site development construction

   61,087   81,879  (25.4)%
   
  
    

Total cost of revenues

  $119,831  $143,123  (16.3)%
   
  
    

Both site development consulting and construction increased slightlycost of revenues decreased due primarily to 21.3% for 2001 from 20.1% in 2000. With the expected losslower levels of installation revenues discussed above and increased competition, we cannot be certain that we will be able to maintain gross profit margins in this range, and we expect site development gross profit margins to settle in the 16% to 19% range as we move through 2002. activity.

Gross Profit:

   For the years ended
December 31,
  

Percentage

Increase

(Decrease)

 
   2003
  2002
  
   (in thousands)    

Site leasing

  $85,821  $74,431  15.4%

Site development consulting

   1,369   6,610  (79.3)%

Site development construction

   5,039   15,958  (68.4)%
   
  
    

Total gross profit

  $92,229  $96,999  (4.9)%
   
  
    

Gross profit for the site leasing business increased 104.3% to $66.4 million in 2001 from $32.5 million in 2000. The increased gross profit was due to the substantially greater numberas a result of towers owned and the greater average revenuehigher revenues per tower and tower operating cost reduction initiatives. Gross profit from both site development consulting and construction decreased as a result of the lower volumes and lower pricing without a commensurate reduction in the 2001 period. The gross profit margins on site leasing increased to 64.4% for 2001 from 62.5% in 2000. The increase in gross margin was due to additional tenants added to our towers and the resulting increase in average revenue per tower, which was greater than the increase in average expenses. As a percentage of total revenues, gross profit increased to 40.4% of total revenues in 2001 from 35.4% in 2000 due primarily to increased levels of higher margin site leasing gross profit.

cost.

Gross Profit Margin Percentages:

   

Percentage of revenue
For the years ended

December 31,

 
   2003
  2002
 

Site leasing

  67.1% 64.6%

Site development consulting

  7.6% 24.3%

Site development construction

  7.6% 16.3%

Gross profit margin

  43.5% 40.4%

Operating Expenses:

   For the years ended
December 31,
  

Percentage

(Decrease)

 
   2003
  2002
  
   (in thousands)    

Selling, general and administrative

  $31,244  $34,352  (9.0)%

Restructuring and other charges

   2,505   47,762  (94.8)%

Asset impairment charges

   16,965   25,545  (33.6)%

Depreciation, accretion and amortization

   84,380   85,728  (1.6)%
   
  
    

Total operating expenses

  $135,094  $193,387  (30.1)%
   
  
    

Selling, general and administrative expenses increased 48.7% to $41.3 million for 2001 from $27.8 million for 2000. The increasedecreased primarily as a result of reductions in selling, general and administrative expenses represents the additionnumber of offices, elimination of personnel and elimination of other infrastructure necessaryinfrastructure. As of December 31, 2003, we had approximately 600 employees whereas as of December 2002, we had approximately 750 employees.

In 2003, we recognized approximately $17.0 million in asset impairment charges related to support70 towers. By comparison, in 2002 we recognized approximately $16.4 million of asset impairment charges related to 144 towers. The impairment of operational tower assets resulted primarily from our growth,evaluations of the fair

value of our operating tower portfolio through a discounted cash flow analysis. Towers determined to be impaired were primarily towers with no tenants and/or with little or deteriorating prospects for future lease-up. In addition, the 2002 asset impairment charge included $9.2 million of goodwill that was recorded during the first two quarters of 2002, which was determined to be impaired during June 2002 when the transitional impairment test of goodwill was performed under SFAS 142.

In February 2002, as well as increased developmental expenses associated witha result of the deterioration of capital market conditions for wireless carriers, we reduced our higher levelscapital expenditures for new tower development and acquisition activities, suspended any new investment for additional towers, reduced our workforce and closed or consolidated offices. Of the $47.3 million charge recorded during the year ended December 31, 2002, approximately $40.4 million related to the abandonment of new tower buildsbuild and acquisition activitieswork in progress and an increase in non-cash compensation expenses in 2001. Included in selling, general and administrative expense is non-cash compensation expense of $3.3 million for 2001 and $0.3 million for 2000. The increase in 2001 is attributable primarily to the use of stock and options as payment for certain bonuses. As a percentage of total revenue, excluding non-cash compensation expenses, selling, general and administrative expenses decreased to 15.7% for 2001 from 16.4% in 2000.

During the twelve months ended December 31, 2001, we recorded a $24.4 million charge relating to a reduction in the scale of our new towerrelated construction operations. Approximately $24.1 million of this charge related to costs that were previously reflected in our balance sheet as construction-in-process.materials on approximately 764 sites. The remaining $0.3$6.9 million related primarily to the costs of employee separation for 102approximately 470 employees and theexit costs associated with the closing and consolidation of selectedapproximately 40 offices. During 2003, in response to a decline in expenditures by wireless service providers, particularly with respect to site development activities, we committed to new plans of restructuring associated with further downsizing activities. Of the $2.5 million charge recorded for the year ended December 31, 2003, approximately $0.6 million related to the abandonment of new tower build work in process and trailing costs associated with previously abandoned new tower build work in process. The remaining $1.9 million related primarily to the costs of employee separation for approximately 165 employees and exit costs associated with the closing or consolidation of 17 offices. Annualized aggregate lease costs associated with the 17 offices closed or consolidated during 2003 were $0.7 million.

Operating Loss From Continuing Operations:

   For the years ended
December 31,
  

Percentage

(Decrease)

 
   2003
  2002
  
   (in thousands)    

Operating loss from continuing operations

  $(42,865) $(96,388) (55.5%)

This decrease in operating loss from continuing operations primarily was a result of lower restructuring and other charges and lower asset impairment charges in 2003 as compared to 2002.

Other Expense:

   For the years ended
December 31,
  

Percentage

Increase

 
   2003
  2002
  
   (in thousands)    

Interest income

  $692  $601  15.1%

Interest expense, net of amounts capitalized

   (90,778)  (83,860) 8.2%

Amortization of debt issue costs

   (5,115)  (4,480) 14.2%

Write-off of deferred financial fees and loss on extinguishment of debt

   (24,219)  —    100.0%

Other

   169   (169) 200.0%
   
 
   
   $(119,251) $(87,908) 35.7%
   
 
   

Interest expense increased as a result of higher borrowings and higher weighted average interest rates. Additionally, interest expense in 2002 was reduced as a result of our interest rate swap agreement that wereexisted during most of 2002. The write-off of deferred financing fees and loss on extinguishment of debt is attributable to a write-off of $4.4 million of deferred financing fees associated with the termination of the prior senior credit facility and $19.8 million associated with the early retirement of a portion of our 12% senior discount notes and our 10¼% senior notes. We expect to incur additional material charges in 2004 from the write-off of deferred financing fees and extinguishment of debt associated with the senior credit refinancing, the 10¼% senior note repurchases and the 12% senior discount note repurchases and redemptions which occurred subsequent to December 31, 2003.

Discontinued Operations:

   For the years ended
December 31,
  Percentage 
   

2003

  2002
  Increase
 
   (in thousands) 

Loss from discontinued operations, net of income taxes

  $(7,690) $(3,717) 106.9%

As previously discussed a total of 848 towers (784 towers sold in the Western tower sale and 64 additional towers held for sale) meet the criteria for discontinued operations treatment. The increase in loss from discontinued operations resulted primarily utilizedfrom a loss on sale of $2.1 million related to the Western tower sale.

Cumulative Effect of Changes In Accounting Principle:

   For the years ended
December 31,
  Percentage 
   2003
  2002
  (Decrease)
 
   (in thousands) 

Cumulative effect of changes in accounting principle

  $(545) $(60,674) (99.1%)

Effective January 1, 2003, we adopted a method of accounting for asset retirement obligations in accordance with SFAS 143. Under the new accounting principle, we recognize asset retirement obligations in the period in which they are incurred if a reasonable estimate of a fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of our new asset development activities.

23
tower fixed assets. The cumulative effect of the change on prior years resulted in a cumulative effect adjustment of approximately $0.5 million that is included in net loss for the year ended December 31, 2003.

During 2002, we approvedcompleted the transitional impairment test of goodwill required under SFAS 142, which was adopted effective January 1, 2002. As a restructuring plan and anticipate incurring chargesresult of between $30.0completing the required transitional test, we recorded a charge retroactive to the adoption date for the cumulative effect of accounting change in the amount of $60.7 million and $65.0representing the excess of the carrying value of certain assets as compared to their estimated fair value. Of the total $60.7 million relating to a further reduction in our new tower development activities. This charge will be comprised of costscumulative effect adjustment, $58.5 million related to the disposalsite development construction reporting segment and $2.2 million related to the site leasing reporting segment.

Net Loss:

   

For the years ended

December 31,

  Percentage 
   2003
  2002
  

(Decrease)

 
   (in thousands) 

Net loss

  $(172,171) $(248,996) (30.9%)

This decrease in net loss is primarily a result of lower restructuring and other charges, lower asset impairment charges, and lower amounts resulting from a cumulative effect in change in accounting principle offset by an increase in interest expense and write offs associated with the extinguishment of debt. We expect to incur additional net losses in 2004.

Year Ended 2002 Compared to Year Ended 2001

Revenues:

   For the years ended December 31,
 
   2002
  Percentage of
Revenues
  2001
  Percentage of
Revenues
  

Percentage
Increase

(Decrease)

 
   (dollars in thousands)    

Site leasing

  $115,081  47.9% $85,487  38.0% 34.6%

Site development consulting

   27,204  11.3%  24,251  10.8% 12.2%

Site development construction

   97,837  40.8%  115,484  51.2% (15.3%)
   
  
 
  
   

Total revenues

  $240,122  100% $225,222  100% 6.6%
   
  
 
  
   

Site leasing revenue increased due to the increased number of tenants added to our towers, higher average rents received and the increase in the number of towers in our portfolio. As of December 31, 2002 we had 6,389 tenants as compared to 5,558 tenants at December 31, 2001. Site development consulting revenues increased due to several new contracts for site acquisition and zoning services from wireless communications carriers. Site development construction revenue decreased due primarily to reduced carrier activity and price competition resulting from lower capital expenditures by wireless carriers on or around cell sites.

Cost of Revenues:

   For the years ended
December 31,
  

Percentage

Increase

 
   2002
  2001
  (Decrease)
 
   (in thousands) 

Site leasing

  $40,650  $30,657  32.6%

Site development consulting

   20,594   17,097  20.5%

Site development construction

   81,879   91,435  (10.5%)
   
  
    

Total cost of revenues

  $143,123  $139,189  2.8%
   
  
    

Site leasing cost of revenue increased due to the increased number of towers owned resulting in an increased amount of lease payments to site owners and related site costs as well as increases in operating costs of certain sites, maintenance and property taxes. Site development consulting cost of revenue increased, reflecting higher levels of activity and increased personnel costs. Site development construction cost of revenue decreased, due primarily to lower levels of activity.

Gross Profit:

   For the years ended
December 31,
  

Percentage

Increase

 
   2002
  2001
  (Decrease)
 
   (in thousands) 

Site leasing

  $74,431  $54,830  35.7%

Site development consulting

   6,610   7,154  (7.6%)

Site development construction

   15,958   24,049  (33.6%)
   
  
    

Total gross profit

  $96,999  $86,033  12.7%
   
  
    

Gross profit for the site leasing business increased as a result of the increased number of tenants added to our towers, and to a lesser extent, additional towers added to our portfolio. Gross profit decreased for both site development consulting and construction. This decrease primarily resulted from lower pricing for our services due to competition.

Gross Profit Margin Percentages:

   Percentage of revenue 
  For the years ended December 31,
 
  2002
  2001
 

Site leasing

  64.7% 64.1%

Site development consulting

  24.3% 29.5%

Site development construction

  16.3% 20.8%

Gross profit margin

  40.4% 38.2%

Operating Expenses:

   For the years ended
December 31,
  

Percentage

Increase

 
   2002
  2001
  (Decrease)
 
   (in thousands) 

Selling, general and administrative

  $34,352  $42,103  (18.4%)

Restructuring and other charges

   47,762   24,399  95.8%

Asset impairment charges

   25,545   —    100.0%

Depreciation and amortization

   85,728   66,104  29.7%
   
  
    

Total operating expenses

  $193,387  $132,606  45.8%
   
  
    

The decrease in selling, general and administrative expense primarily resulted from a decrease in tower developmental expenses as well as the reduction of offices, elimination of personnel and elimination of other infrastructure that had previously been necessary to support our prior level of new asset growth but was no longer required as a result of the restructurings previously discussed. Included within selling, general and administrative expenses is a provision for doubtful accounts. The provision for doubtful accounts increased to $3.4 million for the year ended December 31, 2002 from $2.6 million for the year ended December 31, 2001, reflecting our assessment of a more challenging financial environment for our customers.

During the year ended December 31, 2002 we incurred restructuring charges in the amount of $47.3 million. Of the $47.3 million charge, approximately $40.4 million related to the abandonment of new tower build and acquisition construction-in-process,work in process and related construction materials on approximately 764 sites. The remaining $6.9 million of restructuring expense related primarily to the costs related toof employee separation for approximately 470 employees and exit costs associated with the closing and consolidation of approximately 40 offices. Exit costs associated with the closing and consolidation of offices primarily represented our estimate of future lease obligations after considering sublease opportunities.

In the first quarter of 2002, certain tower sites held and other items.used in operations were considered to be impaired resulting in a $16.4 million impairment charge. Towers determined to be impaired were primarily towers with no tenants and little or no prospects for future lease-up. In addition, during the first six months of 2002, we recorded additional goodwill totaling approximately $9.2 million resulting from the achievement of certain earn-out obligations under various construction acquisition agreements entered into prior to July 1, 2001, which was determined to be impaired and written off. The amount$16.4 million and the $9.2 million are included within asset impairment charges in the year ended December 31, 2002 Consolidated Statement of the charge related to asset disposals will be determined primarily by the fair value of new tower backlogOperations.

The increase in depreciation, amortization and construction-in-process with respect to those new builds we choose to dispose of.

Depreciation and amortization increased to $80.5 million for 2001 as compared to $34.8 million for 2000. This increase wasaccretion is directly related to the increased amount of fixed assets, primarily towers, we owned in 20012002 as compared to 2000. As2001, offset by a decrease in amortization resulting from the write-off of goodwill which was recorded in connection with the implementation of SFAS No. 142.

Operating Loss From Continuing Operations:

   For the years ended
December 31,
  

Percentage

Increase

 
   

2002

  2001
  

(Decrease)

 
   (in thousands) 

Operating loss from continuing operations

  $(96,388) $(46,573) 107.0%

This increase in operating loss was a result of increased restructuring and other charges and the asset impairment charges recorded in the year ended December 31, 2002.

Other Expenses:

   For the years ended
December 31,
  

Percentage

Increase

 
   2002
  2001
  (Decrease)
 
   (in thousands) 

Interest income

  $601  $7,059  (91.5%)

Interest expense

   (83,860)  (73,552) 14.0%

Amortization of debt issue costs

   (4,480)  (3,887) 15.3%

Write-off of deferred financing fees and loss on extinguishment of debt

   —     (5,069) (100.0%)

Other

   (169)  (76) 122.4%
   
 
   

Total other expenses

  $(87,908) $(75,525) 16.4%
   
 
   

Total other expenses increased primarily as a result of a reduction in interest income, increased interest expense, and increased non-cash amortization of original issue discount and debt issuance costs. The decrease in interest income was due to lower cash balances during 2002. The increase in interest expense was primarily due to higher principal amounts outstanding under the senior credit facility in 2002 as compared to 2001 and to a full quarter of interest expense on our fixed assets begin$500.0 million 10¼% senior notes in the first quarter of 2002 compared to maturea partial quarter of interest expense on these senior notes in the first quarter of 2001. Although the aggregate principal amount of total debt increased from the prior year, the resulting increase in interest expense associated with the higher principal in 2002 was offset in part by the interest rate reduction we will be continuingrecognized in connection with our interest rate swap agreement. The increase in non-cash amortization was primarily due to evaluate the useful lives of the assets and may decide to change these useful lives basedhigher accretion on the circumstances. If the useful lives of assets are reduced, depreciation may be accelerated12% senior discount notes.

Discontinued Operations:

   For the years ended
December 31,		  Percentage 
  2002
  2001
  Increase
 
  (in thousands) 

Loss from discontinued operations, net of income taxes

  $(3,717) $(2,201) 68.9%

The increase in future years. Beginningloss is primarily attributable to interest expense allocated to discontinued operations in 2002,2002. No interest expense was allocated to discontinued operations in 2001 as a result of the implementationlower debt balances in 2001 as compared to 2002.

Cumulative Effect of Changes in Accounting Principle:

   

For the years ended

December 31,

  Percentage
 
   2002
  2001
  Increase
 
   (in thousands) 

Cumulative effect of change in accounting principle

  $(60,674) —    100.0%

During the period ended June 30, 2002, we completed the transitional impairment test of goodwill required under SFAS 142, the amortization of goodwill and certain other intangible assets against earnings will no longer occur. Amortization of goodwill and other intangible assets during 2001which was $6.9 million.

Operating loss increased to $(48.0) million for the year ended 2001 from $(3.1) million in 2000 asadopted effective January 1, 2002. As a result of increased depreciation andcompleting the restructuring and otherrequired transitional test, we recorded a charge in 2001. Other expense, net, increasedretroactive to $(70.5) millionthe adoption date for the year ended 2001 from $(24.6)cumulative effect of the accounting change in the amount of $60.7 million, forrepresenting the year ended 2000. This increase is a resultexcess of an increase in interest expense duethe carrying value of certain assets as compared to interest associated withtheir estimated fair value at January 1, 2002. Of the 10¼% senior notes as well as increases in other debt balances.
Earnings (loss) before interest, taxes, depreciation, amortization, non-cash charges and unusual or non-recurring expenses (“EBITDA”) increased 88.0%total $60.7 million cumulative effect adjustment, $58.5 million related to $60.2 million for the year ended 2001 from $32.0 million for the year ended 2000. The following table provides a reconciliation of EBITDA to net loss available to common shareholders:
   
Years ended December 31,
 
   
2001
     
2000
 
   
(in thousands)
 
EBITDA  $60,224     $32,026 
Interest expense, net of amount capitalized   (77,439)     (30,885)
Interest income   7,059      6,253 
Provision for income taxes   (1,654)     (1,233)
Depreciation and amortization   (80,465)     (34,831)
Other income   (76)     68 
Non-cash compensation expense   (3,326)     (313)
Restructuring and other charge   (24,399)     —   
Extraordinary item   (5,069)     —   
   
    
Net loss available to common shareholders  $(125,145)    $(28,915)
   
    
Year Ended 2000 Compared to Year Ended 1999
Total revenues increased 93.0% to $167.9 million for 2000 from $87.0 million for 1999. Total site development revenue increased 91.3% to $115.9 million in 2000 from $60.6 million in 1999 due to an increase in both site development construction revenuereporting segment and site development consulting revenue. Site development construction revenue increased 115.1%$2.2 million related to $91.6 million for 2000 from $42.6 million for 1999, due to the inclusion of Network Services for an entire year, as well as higher levels of activity. Site development consulting revenue increased 35.0% to $24.3 million for 2000 from $18.0 million for 1999, due to the increased demand for site acquisition and zoning services from wireless communications carriers. Site leasing revenue increased 96.8% to $52.0 million for 2000 from $26.4 million for 1999, due to tenants added to our towers and the substantially greater number of towers in our portfolio during 2000 as compared to 1999.

24

Total cost of revenues increased 86.9% to $108.4 million for 2000 from $57.9 million for 1999. Site development cost of revenue increased 93.9% to $88.9 million in 2000 from $45.8 million in 1999 due to higher site development revenues. Site development consulting cost of revenue increased 25.8% to $15.6 million for 2000 from $12.4 million for 1999, reflecting higher site development consulting revenues. Site development construction cost of revenue increased 119.2% to $73.2 million for 2000 from $33.4 million for 1999, due to higher site development construction revenues which resulted primarily from the inclusion of Network Services for an entire year. Site leasing cost of revenue increased 60.7% to $19.5 million for 2000 from $12.1 million for 1999, due primarily to the increased number of towers owned.
Gross profit increased to $59.5 million for 2000 from $29.1 million for 1999, due to increased site development and site leasing revenues. Gross profit from site development increased 82.9% to $27.0 million in 2000 from $14.8 million in 1999 due to higher site development revenues. Gross profit margins for site development decreased in 2000 to 23.3% from 24.4% in 1999 due to a greater relative amount of lower margin site development construction business. Gross profit margin on site development consulting increased to 35.6% for 2000 from 30.9% for 1999. This increase is attributable to a change in the mix of our business to include more multi-purpose projects producing both site development revenue and build-to-suit towers. Gross profit margin on site development construction decreased to 20.1% for 2000 from 21.6% in 1999 due to an increase in the use of subcontractor labor. Gross profit for the site leasing business increased 127.5% in 2000 from 54.1% in 1999. The increased gross profit was due to the substantially greater number of towers owned and the greater average revenue per tower in the 2000 period. The increase in gross margin was due to additional tenants added to our towers and the resulting increase in average revenue per tower, which was greater than the increase in average expenses. reporting segment.

Net Loss:

   

For the years ended

December 31,

  Percentage 
   

2002

  2003
  

Increase

 
   (in thousands) 

Net loss

  $(248,996)  $(125,792) 97.9%

As a percentage of total revenues, gross profit increased to 35.4% of total revenues in 2000 from 33.4% in 1999 due primarily to increased levels of higher margin site leasing gross profit.

Selling, general and administrative expenses increased 40.5% to $27.8 million for 2000 from $19.8 million for 1999. The increase in selling, general and administrative expenses represents the addition of offices, personnel and other infrastructure necessary to support our continued growth, as well as increased developmental expenses associated with our higher levels of new tower builds and acquisition activities. As a percentage of total revenue, selling, general and administrative expenses decreased to 16.6% for 2000 from 22.7% in 1999.
Depreciation and amortization increased to $34.8 million for 2000 as compared to $16.6 million for 1999. This increase was directly related to the increased amount of fixed assets, primarily towers, we owned in 2000 as compared to 1999.
Operating loss decreased to $(3.1) million for the year ended 2000 from $(7.3) million in 1999 as a result of the increased gross profit in 2000. Other expense, net, decreased to $(24.6) million for the year ended 2000 from $(26.4) million for the year ended 1999. The decrease is attributable to higher interest income on increased cash balances which more than offset an increase in interest expense. The increase in interest expense is due to increased interest associated with the senior credit facility, amortization of deferred financing charges and original issue discount, partially offset by increased interest capitalization as a result of increased construction activity. The extraordinary item in 1999 of $(1.1) million relates to the write-off of deferred financing fees associated with a prior bank credit agreement. Net loss was $(28.9) million for the year ended 2000 as compared tofactors discussed above, net loss of $(33.9) million for the year ended 1999.
Earnings (loss) before interest, taxes, depreciation, amortization, non-cash charges and unusual or non-recurring expenses (“EBITDA”)significantly increased 234.2%from 2001 to $32.0 million for the year ended 2000 from $9.6 million for the year ended 1999. The following table provides a reconciliation of EBITDA to net loss to common shareholders:
   
Years ended December 31,
 
   
2000
     
1999
 
   
(in thousands)
 
EBITDA  $32,026     $9,582 
Interest expense, net of amount capitalized   (30,885)     (27,307)
Interest income   6,253      881 

25
2002.

   
Years ended December 31,
 
   
2000
     
1999
 
   
(in thousands)
 
(Provision) benefit for income taxes  $(1,233)    $223 
Depreciation and amortization   (34,831)     (16,557)
Other income   68     ��48 
Non-cash compensation expense   (313)     (311)
Extraordinary item   —        (1,150)
Preferred stock dividend reversal   —        733 
   
    
Net loss available to common shareholders  $(28,915)    $(33,858)
   
    

LIQUIDITY AND CAPITAL RESOURCES

SBA Communications Corporation (“SBA Communications”) is a holding company with no business operations of its own. Our only significant asset is the outstanding capital stock of SBA Telecommunications, Inc. (“Telecommunications”) which is also a holding company that owns the outstanding capital stock of SBA Senior Finance. SBA Senior Finance owns directly or indirectly, the capital stock of our subsidiaries. We conduct all of our business operations through our subsidiaries.

Accordingly, our only source of cash to pay our obligations, other than financings, is distributions with respect to our ownership interest in our subsidiaries from the net earnings and cash flow generated by these subsidiaries. Even if we decided to pay a dividend on or make a distribution of the capital stock of our subsidiaries, we cannot assure you that our subsidiaries will generate sufficient cash flow to pay a dividend. OurThe ability of our subsidiaries to pay cash or stock dividends is restricted under the terms of our current senior credit facility.

A summary of our cash flows is as follows:

   

For the year ended

December 31, 2003

 
   (in thousands) 

Summary Cash Flow Information:

     

Cash used in operations

  $(29,808)

Cash provided by investing activities

   155,456 

Cash used in financing activities

   (178,451)
   

Decrease in cash and cash equivalents

   (52,803)

Cash and cash equivalents, December 31, 2002

   61,141 
   

Cash and cash equivalents, December 31, 2003

  $8,338 
   

Sources of Liquidity:

During 2003, we sold 784 sites, representing substantially all of our towers in the western two-thirds of the United States, in exchange for gross cash proceeds of approximately $196.7 million. As a result of this transaction, we produced cash from investing activities. The purchase and sale agreement contained a number of provisions providing for adjustments to the purchase price. We anticipate that the final gross cash proceeds to be realized from the Western tower sale, after all potential purchase price adjustments, will be approximately $194.1 million.

In December 2003, SBA Communications and Telecommunications co-issued $402.0 million of its 9¾% senior discount notes, which produced net proceeds of approximately $267.1 million after deducting offering expenses. Proceeds from the senior discount notes were used to tender for approximately $153.3 million of our 12% senior discount notes and for general working capital purposes.

During January 2004, SBA Senior Finance closed on a new senior credit facility in the amount of $400.0 million. This facility consists of a $275.0 million term loan which was funded at closing, a $50.0 million delayed draw term loan and a $75.0 million revolving line of credit. SBA Senior Finance used the proceeds from the funding of the $275.0 million term loan under the new senior credit facility to, in part, repay the old credit facility in full, consisting of $144.2 million outstanding. In addition to the amounts outstanding, we were required to pay $8.0 million to the lenders under the old facility to facilitate the assignment of the old facility to the new lenders. SBA Senior Finance has recorded additional deferred financing fees of approximately $5.4 million associated with this new facility. See Note 14 of Notes to Consolidated Financial Statements for further details relating to the financial impact of this refinancing.

In addition to our capital restructuring activities completed in 2003 and the indentures relatedfirst quarter of 2004, in order to manage our significant levels of indebtedness and to ensure continued compliance with our financial covenants, we may explore a number of alternatives, including selling certain assets or lines of business, issuing equity, repurchasing, restructuring or refinancing or exchanging for equity some or all of our debt or pursuing other financial alternatives, and we may from time to time implement one or more of these alternatives. One or more of the alternatives may include the possibility of issuing additional shares of common stock or securities convertible into shares of common stock or converting our existing indebtedness into shares of common stock or securities convertible into shares of common stock, any of which would dilute our existing shareholders. We cannot assure you that any of these strategies can be consummated, or if consummated, would effectively address the risks associated with our significant level of indebtedness.

Uses of Liquidity:

We used the proceeds from the May 2003 credit facility discussed in this report, cash on hand and a portion of the proceeds from the Western tower sale to repay in full the prior credit facility, which had $255.0 million outstanding immediately prior to repayment. As discussed above, subsequent to December 31, 2003 we used a portion of the proceeds from the January 2004 credit facility to repay the May 2003 credit facility, to repurchase 12% senior discount notes and 10¼% senior notes in the open market and to redeem all outstanding 12% senior discount notes.

Netnotes on March 1, 2004. As a result primarily of the repayment of $255 million under a prior credit facility, we used $178.5 million of cash provided by operations duringin financing activities.

Our cash capital expenditures for the year ended December 31, 2001 was $13.02003 were $15.1 million as compared to $47.5 million in 2000. This decrease was primarily attributable to increased interest expense. Net cash used in investing activities for year ended December 31, 2001 was $530.3 million compared to $445.3$86.4 million for the year ended December 31, 2000.2002. This increase was primarily attributable todecrease is a higher levelresult of lower investment in new tower acquisitions in 2001 versus 2000. Net cash provided by financing activities for the year ended December 31, 2001 was $516.2 millionassets. During 2003, we built 13 new towers as compared to $409.62002 when we built 141 new towers and bought 53 existing towers. We currently plan to make total cash capital expenditures during 2004 of $5.0 million to $8.0 million. Due to the relatively young age of our towers and remaining capacity available to accommodate new tenants, it is not necessary for us to spend a significant amount of dollars for capital improvements or modifications to our towers to accommodate new tenants. We estimate we will incur approximately $1,000 per tower per year on these type of capital expenditures. All of these planned capital expenditures are expected to be funded by cash on hand and cash flow from operations. The exact amount of our future capital expenditures will depend on a number of factors including amounts necessary to support our tower portfolio and to complete pending build-to-suit obligations.

Cash used in operations was $29.8 million for the year ended December 31, 2000. The2003. Of this amount $15.2 million was related to an increase in netshort-term investments and approximately $6.0 million was related to the reduction in accounts payable. During 2003, we focused our efforts on improving our outstanding receivables balances. As a result of these efforts, our accounts receivable balance, after allowances and write-offs, was improved by approximately $17.0 million. Additionally, during 2003 approximately $84.8 million of cash provided by financingwas paid for interest on our various debt instruments. As a result of our refinancing activities discussed above, our cash interest requirements for 2004 are expected to be significantly lower than the requirements in 2001 was attributable to our offering2003.

Debt Service Requirements:

At December 31, 2003 we had $406.4 million outstanding of our 10¼% senior notes closed in February 2001 and borrowings undernotes. As of the date of this filing we had $355.4 million outstanding of our 10¼% senior credit facility.

Our balance sheet reflected negative working capital of $(21.4) million as of December 31, 2001 and negative working capital of $(27.5) million as of December 31, 2000. Our negative working capital balances are primarily due to the timing of receipts for accounts receivable, payment of accounts payable, accrued expenses and interest payable related to our business operations.
In February 2001, we issued $500.0 million ofnotes. The 10¼% senior notes due 2009, which produced net proceeds of approximately $484.3 million after deducting offering expenses.mature February 1, 2009. Interest on these notes is payable on February 1 and August 1 of each year,year. Based on amounts outstanding at the time of this filing, annual debt service requirements are approximately $36.4 million.

At December 31, 2003 we had $275.8 million outstanding of our 9¾% senior discount notes. The 9¾% notes accrete in value until December 15, 2007 at which time the notes will have a balance of $402.0 million. These notes mature December 15, 2011. Interest on these notes is payable June 15 and December 15 beginning AugustJune 15, 2008.

At December 31, 2003 we had $65.7 million outstanding of our 12% senior discount notes. The 12% senior discount notes were originally scheduled to mature on March 1, 2001. 2008. These notes were redeemed on March 1, 2004 at the call price of 107.5% of the aggregate principal amount.

As of December 31, 2003 we had $118.2 million outstanding under the senior credit facility in existence at that time. As of March 10, 2003, we had $275.0 million outstanding under the new senior credit facility. Based on the outstanding amount of $275.0 million and rates in effect at such time, we estimate our annual debt service including amortization to be approximately $13.9 million related to our senior credit facility.

The issuance of our 9¾% senior discount notes and the new senior credit facility coupled with the retirement of the 12% senior discount notes, open market purchases and exchanges of our 10¼% senior notes and the repayment of our prior senior credit facility will result in a cash savings of approximately $50.0 million in debt service and amortization payments in 2004.

Capital Instruments:

Senior Notes and Senior Discount Notes:

The10¼% senior notes were issued by SBA Communications, are unsecured and arepari passu in right of payment with our other existing and future senior indebtedness. The 9¾% senior discount notes were co-issued by SBA Communications and Telecommunications in December 2003, are unsecured, rankpari passu with the senior indebtedness and are structurally senior to all indebtedness of SBA Communications. Both, the 10¼% senior notes and the 9¾% senior discount notes place certain restrictions on, among other things, the incurrence of debt and liens, issuance of preferred stock, payment of dividends or other distributions, sale of assets, transactions with affiliates, sale and leaseback transactions, certain investments and our ability to merge or consolidate with other entities.

At December 31, 2001 we had $500.0 million outstanding

May 2003 Senior Credit Facility:

On May 9, 2003, Telecommunications closed on a senior credit facility with the senior credit lenders in the amount of $195.0 million. In November, 2003, in connection with the offering of our 10¼9¾% senior notes. The 10¼% seniordiscount notes mature February 1, 2009. Additionally, at December 31, 2001, we had $234.9 millionand our tender offer for 70% of our outstanding on our 12% senior discount notes, netSBA Senior Finance, a newly formed wholly-owned subsidiary of unamortized original issue discountTelecommunications, assumed all rights and obligations of $34.1 million. The 12% senior discount notes mature on March 1, 2008.

In June 2001, SBA Telecommunications Inc., our principal subsidiary, entered into a $300.0 million senior secured credit facility. The facility provides for a $100.0 million term loan and a $200.0 million revolving loan, the availability of which is based on compliance with certain covenants. SBA Telecommunications drew the full $100.0 million of the term loan during 2001 as well as $10.0 million of the revolver. The term loan and the

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revolving loan mature June 15, 2007 and repayment of the term loan begins in September 2003. Borrowings under the senior credit facility accruepursuant to an amended and restated credit agreement with the senior credit lenders. Telecommunications was released from any obligation to repay the indebtedness under the senior credit facility. Simultaneously with this assumption, Telecommunications contributed substantially all of its assets, consisting primarily of stock in our various operating subsidiaries, to SBA Senior Finance. SBA Senior Finance refinanced this credit facility in January 2004 and used the proceeds from the new facility to repay this facility in full.

This prior senior credit facility, as amended, provided for $95.0 million in term loans and $100.0 million in revolving lines of credit, which could be borrowed, repaid and redrawn and which would have converted to a term loan January 28, 2004. Amortization of amounts borrowed under this facility was to commence in 2004, at an annual rate of 10% in 2004 and 15% in each of 2005, 2006 and 2007. All remaining amounts were to be due and payable at maturity on December 31, 2007. Amounts borrowed under this facility accrued interest at the euro dollar rate plus a margin or a base rate, plus a margin, as defined in the agreement. The senior credit facility is secured by substantially allagreement plus 300 basis points or the Euro dollar rate plus 400 basis points. Additional interest of the assets of SBA Telecommunications and its subsidiaries. The facility3.5% per annum also places certain restrictions on, among other things, the incurrence of debt and liens, the sale of assets, capital expenditures, transactions with affiliates, sale and lease-back transactions and the number of towers that canaccrued, but was not due to be built without anchor tenants.paid until maturity. As of December 31, 20012003, $3.2 million of this additional interest was converted to a term loan. As a result, at December 31, 2003, we were in full compliance with the covenants contained in the senior credit facility and the remaining $190.0had $98.2 million outstanding under the senior credit facility was available to us. At December 31, 2001, we had the $100.0 million term loan outstanding underof the senior credit facility at variable cash rates of 4.76%5.16% to 4.87%5.17% (excluding the 3.5% of additional interest) and $10.0we had $20.0 million outstanding under the revolving credit facility at a 6.5% variable rate.

Our cash capital expenditures for the year ended December 31, 2001 were $530.3 million which was principally used for the construction and acquisitionrate of new towers in our portfolio and the acquisition of two site development construction companies. We currently plan to make total cash capital expenditures during the year ending December 31, 2002 of $85.0 million to $135.0 million. All of these planned capital expenditures are expected to be funded by cash on hand, cash flow from operations and borrowings under our senior credit facility. The exact amount of our future capital expenditures will depend on a number of factors including amounts necessary to support or increase our tower portfolio.
In order to manage our indebtedness we may from time to time sell assets, issue equity, or repurchase, restructure or refinance some or all of our debt. Our ability to make scheduled payments of principal, or to pay interest on, our debt obligations, and our ability to refinance any such debt obligations (including the 10¼% senior notes or the 12% senior discount notes), or to fund planned capital expenditures, will depend on our future performance, which, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.
We have on file with the Securities and Exchange Commission (“SEC”) shelf registration statements on Form S-4 registering up to a total of 8.0 million shares of Class A common stock that we may issue in connection with the acquisition of wireless communication towers or companies that provide related services at various locations in the United States. During the year ended December 31, 2001, we issued 1.6 million shares of Class A common stock under these registration statements in connection with six acquisitions and certain earn-outs.5.15%. As of December 31, 2001, we had 5.72003 the remaining $80.0 million sharesunder the revolver was fully available to us. The credit facility was pre-payable at our option. Amounts borrowed under the credit facility were secured by a first lien on substantially all of Class ASBA Senior Finance’s assets. In addition, each of SBA Senior Finance’s domestic subsidiaries guaranteed the obligations of SBA Senior Finance under the senior credit facility and pledged substantially all of its assets to secure such guarantee. In addition, SBA Communications and Telecommunications pledged, on a non-recourse basis, all of the common stock remaining availableof Telecommunications and SBA Senior Finance, respectively, to secure SBA Senior Finance’s obligations under these shelf registration statements. Subsequentthis senior credit facility.

This prior senior credit facility, as amended, required SBA Senior Finance to maintain specified financial ratios, including ratios regarding its leverage, debt service, cash interest expense and fixed charges

for each quarter. The senior credit facility contained affirmative and negative covenants that, among other things, restricted SBA Senior Finance’s and its subsidiaries’ ability to incur debt and liens, sell assets, make or commit to make capital expenditures, enter into affiliate transactions or sale-leaseback transactions, and/or build towers without anchor tenants. Additionally, as of December 31, 20012003, we issued 587,260 shareswere in full compliance with all of the financial covenants of this facility.

January 2004 Senior Credit Facility:

On January 29, 2004, SBA Senior Finance closed on a new senior credit facility in the amount of $400.0 million. This facility consists of a $275.0 million term loan which was funded at closing, a $50.0 million delayed draw term loan which we have until November 15, 2004 to draw, and a $75.0 million revolving line of credit. The revolving lines of credit may be borrowed, repaid and redrawn. Amortization of the term loans commence September 2004 at an annual rate of 1% in each of 2004, 2005, 2006 and 2007. All remaining amounts under these shelf registration statementsthe term loan are due October 31, 2008. There is no amortization of the revolving loans and all amounts outstanding under the revolving facility are due on August 31, 2008. Amounts borrowed under this facility accrue interest at either the base rate, as defined in connectionthe agreement, plus 250 basis points or a Euro dollar rate plus 350 basis points. This facility may be prepaid at any time with certain earn-outs.

Weno prepayment penalty. Amounts borrowed under this facility are secured by a first lien on substantially all of SBA Senior Finance’s assets. In addition, each of SBA Senior Finances’s domestic subsidiaries has guaranteed the obligations of SBA Senior Finance under the senior credit facility and has pledged substantially all of their respective assets to secure such guarantee. In addition, SBA Communications and Telecommunications have pledged, on filea non-recourse basis, all of the common stock of Telecommunications and SBA Senior Finance to secure SBA Senior Finance’s obligations under this senior credit facility.

This new senior credit facility requires SBA Senior Finance to maintain specified financial ratios, including ratios regarding its debt to annualized operating cash flow, debt service, cash interest expense and fixed charges for each quarter. This new senior credit facility contains affirmative and negative covenants that, among other things, restricts its ability to incur debt and liens, sell assets, commit to capital expenditures, enter into affiliate transactions or sale-leaseback transactions, and/or build towers without anchor tenants. Additionally, this facility permits distributions by SBA Senior Finance to Telecommunications and SBA Communications to service their debt, pay consolidated taxes, pay holding company expenses and for the repurchase of senior notes or senior discount notes subject to compliance with the SEC a universal shelf registration statement registeringcovenants discussed above. SBA Senior Finance’s ability in the sale of upfuture to $252.7comply with the covenants and access the available funds under the senior credit facility in the future will depend on its future financial performance. Had this facility been in place on December 31, 2003, we would have had the ability to draw an additional approximately $21 million of any combination ofover the following securities: Class A common stock, preferred stock, debt securities, depositary shares or warrants.

$275 million drawn at closing.

INFLATIONInflation

The impact of inflation on our operations has not been significant to date. However, we cannot assure you that a high rate of inflation in the future will not adversely affect our operating results.

CRITICAL ACCOUNTING POLICIESAccounting Pronouncements Adopted in 2003

We have identified

In October 2001, the policies below as criticalFASB issued SFAS No. 143,Accounting for Asset Retirement Obligations (“SFAS 143”). This standard requires companies to our business operations andrecord the understanding of our results of operations. The listing is not intended to be a comprehensive list of all of our accounting policies. In many cases, the accounting treatmentfair value of a particular transaction is specifically dictated by accounting principles generally accepted in the United States, with no needliability for management’s judgement in their application. In other cases, management is required to exercise judgment in the application of accounting principles with respect to particular transactions. The impact and any associated risks related to these policies on our business operations is discussed throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations” where such policies affect our reported and expected financial results. For a detailed discussion on

27

the application of these and other accounting policies, see Note 2 in the Notes to Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K, beginning on page F-7. Note that our preparation of this Annual Report on Form 10-K requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates.
Revenue Recognition and Accounts Receivable
Revenue from site leasing is recorded monthly on a straight-line basis over the term of the related lease agreements. Rental amounts received in advance are recorded in other liabilities.
Site development projects in which the Company performs consulting services include contracts on a time and materials basis or a fixed price basis. Time and materials based contracts are billed at contractual rates as the services are rendered. For those site development contracts in which the Company performs work on a fixed price basis, site development billing (and revenue recognition) is based on the completion of agreed upon phases of the project on a per site basis. Upon the completion of each phase on a per site basis, the Company recognizes the revenue related to that phase. Revenue related to services performed on uncompleted phases of site development projects was not recorded by the Company at the end of the reporting periods presented as it was not material to the Company’s results of operations. Any estimated losses on a particular phase of completion are recognizedan asset retirement obligation in the period in which it is incurred. When the loss becomes evident. Site development projects generally take from 3liability is initially recorded, a company capitalizes a cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to 12 months to complete.
Revenue from construction projects is recognized on the percentage-of-completion method of accounting, determined by the percentage of cost incurred to date compared to management’s estimated total anticipated cost forits present value each contract. This method is used because management considers total cost to be the best available measure of progress on the contracts. These amounts are based on estimates,period, and the uncertainty inherent in the estimates initiallycapitalized cost is reduced as work on the contracts nears completion. The asset “Costs and estimated earnings in excess of billings on uncompleted contracts” represents expenses incurred and revenues recognized in excess of amounts billed. The liability “Billings in excess of costs and estimated earnings on uncompleted contracts” represents billings in excess of revenues recognized.
Cost of site development project revenue and construction revenue include all material costs, salaries and labor costs, including payroll taxes, subcontract labor, vehicle expense and other costs directly related to the projects. All costs related to site development projects and construction projects are recognized as incurred. Cost of site leasing revenue include rent, maintenance and other tower expenses. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined to be probable.
We perform periodic credit evaluations of our customers. We continuously monitor collections and payments from our customers and maintain a provision for estimated credit losses based upon our historical experience and any specific customer collection issues that we have identified. While such credit losses have historically been within our expectations and the provisions established, we cannot guarantee that we will continue to experience the same credit loss rates that we have in the past. Our accounts receivable balance was $56.8 million, net of allowance for doubtful accounts of $4.6 million as of December 31, 2001.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided using the straight-line methoddepreciated over the estimated useful lives. Leasehold improvements are amortized on a straight-line basis over the shorter of the useful life of the improvement or the termrelated asset. Upon settlement of the lease.liability, a company either settles the obligation for its recorded amount or incurs a gain or loss upon settlement. We perform ongoing evaluationsadopted this standard effective January 1, 2003. As a result of our obligation to restore leaseholds to their original condition upon termination of ground leases

underlying a majority of our towers and our estimate as to the probability of incurring these obligations, we recorded a cumulative effect adjustment of approximately $0.5 million during the first quarter of 2003. The adoption of SFAS 143 resulted in an increase in tower fixed assets of approximately $0.9 million and the recording of an asset retirement obligation liability of approximately $1.4 million.

In April 2002, the FASB issued SFAS No. 145,Rescission of FASB Statements Nos. 4, 44 and 62, Amendment of SFAS No. 13 and Technical Corrections (“SFAS 145”). SFAS 145 requires gains and losses on extinguishments of debt to be classified as income or loss from continuing operations rather than as extraordinary items as previously required under SFAS 4. Extraordinary treatment is required for certain extinguishments as provided in APB Opinion No. 30. The statement also amended SFAS 13 for certain sale-leaseback and sublease accounting. We adopted the provisions of SFAS 145 effective January 1, 2003. Pursuant to SFAS 145, our previously reported extraordinary item of $5.1 million, related to the early extinguishment of debt, was reclassified to operating expense in the accompanying December 31, 2001 Consolidated Statement of Operations.

In July 2002, the FASB issued SFAS No. 146,Accounting for Costs Associated with Exit or Disposal Activities (“SFAS 146”) and nullified EITF Issue No. 94-3. SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred, whereas EITF No. 94-3 had recognized the liability at the commitment date to an exit plan. SFAS 146 requires that the initial measurement of a liability be at fair value. We adopted the provisions of SFAS 146 effective January 1, 2003. The adoption of SFAS 146 did not have a material effect on our consolidated financial statements.

In December 2002, the FASB issued 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. This statement also amends the disclosure requirements of SFAS 123 to require disclosures in both annual and interim financial statements regarding the method of accounting for stock-based employee compensation and the effect of the estimated useful livesmethod used on reported results. The standard is effective for fiscal years beginning after December 15, 2002. We adopted the disclosure-only provisions of SFAS 148 as of December 31, 2002. We will continue to account for stock-based compensation in accordance with APB 25. As such, we do not expect this standard will have a material impact on our propertyconsolidated financial position or results of operations.

In April 2003, the FASB issued Statement of Financial Accounting Standards No. 149 (“SFAS 149”),Amendment of Statement 133 on Derivative Instruments and equipmentHedging Activities. This Statement amends and clarifies financial accounting and reporting for depreciation purposes. derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under Statement of Financial Accounting Standards No. 133 (“SFAS 133”),Accounting for Derivative Instruments and Hedging Activities.The estimated useful lives are determined and continually evaluated based on the period over which services are expected to be rendered by the asset, industry practice and asset maintenance policies. Maintenance and repair items are expensed as incurred.

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Asset classes and related estimated useful lives are as follows:
Towers and related components2 – 15 years
Furniture, equipment and vehicles2 –   7 years
Buildings and improvements5 – 26 years
Capitalized costs incurred subsequent to when an asset is originally placed in service are depreciated over the remaining estimated useful lifestatement was effective for contracts entered into or modified after June 30, 2003. The adoption of the respective asset. Changes in an asset’s estimated useful life are accounted for prospectively, with the book value of the asset at the time of the change being depreciated over the revised remaining useful life term. We reduced the useful lives on 134 towers. This change in useful livesthis standard did not have a material impact in 2001.
Goodwill
We continually evaluate whether events and changes in circumstances warrant revised estimateson our financial position or results of useful lives or recognition of an impairment loss of unamortized goodwill. The conditions that would trigger an impairment assessment of unamortized goodwill include a significant negative trend in our operating results or cash flows, a decrease in demand for our services, a change inoperations.

In May 2003, the competitive environment and other industry and economic factors. We measure impairment of unamortized goodwill utilizing the undiscounted cash flow method over the remaining estimated life. Any impairment loss would be calculated as the amount which the carrying amount of the unamortized balance exceeds its fair value. As of December 31, 2001, we determined that there has been no impairment of goodwill.

We expect to adoptFASB issued Statement of Financial Accounting Standards No. 142,150 (“SFAS 150”),GoodwillAccounting for Certain Financial Instruments with Characteristics of Both Liabilities and Other Intangible AssetsEquity (“SFAS 142”). This Statement 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). This standard was effective at the beginning of the first quarterinterim period beginning after June 15, 2003, except for mandatorily redeemable financial instruments of 2002. Withnonpublic entities that are subject to the provisions of this Statement for the first fiscal period beginning after December 15, 2003. The adoption of SFAS 142, we will assessthis standard did not have a material impact on our financial position or results of operations.

In November 2002, the impact basedFASB issued FASB Interpretation No. 45 (“FIN 45”),Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.

Fin 45 elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. FIN 45 also clarifies requirements for the recognition of guarantees at the onset of an arrangement. The initial recognition and measurement provisions of FIN 45 are applicable on a two-step approachprospective basis to assess goodwill based on applicable reporting units and will reassess any intangible assets, including goodwill, recorded in connection with our previous acquisitions.guarantees used or modified after December 31, 2002. The disclosure requirements of FIN 45 are effective for interim or annual financial statements after December 15, 2002. We had recorded approximately $6.9 millionimplemented the disclosure requirements of amortization on these amounts during 2001 and would have recorded approximately $10.0 millionFIN 45 as of amortization during 2002. In lieu of amortization, we are required to perform an initial impairment review of our goodwill inDecember 31, 2002 and an annual impairment review thereafter. We are currently assessing, but have not yet determined thethere was no material impact adoption of SFAS 142 will have on our consolidated financial statements however, we believe it mayas a result of this implementation.

In January 2003, the FASB issued Interpretation No. 46,Consolidation for Variable Interest Entities, an Interpretation of ARB No. 51 which requires all variable interest entities (“VIES”) to be material. As of December 31, 2001, we had unamortized goodwill and covenants not to compete of $86.2 million.

Accounting for Income Taxes
As partconsolidated by the primary beneficiary. The primary beneficiary is the entity that holds the majority of the processbeneficial interest in the VIE. In addition, the interpretation expands the disclosure requirements for both variable interest entities that are consolidated as well as VIEs from which the entity is the holder of preparing oura significant amount of beneficial interests, but not the majority. FIN 46 is effective immediately for all VIEs and for all special purpose entities created or acquired after January 31, 2003. For VIEs created or acquired prior to February 1, 2003, the provisions of FIN 46 must be applied for the first quarter ended March 31, 2004. The adoption of FIN 46 did not have, nor is it expected to have, a material impact on the consolidated financial statements we are required to estimatestatements.

Commitments and Contractual Obligations

The following table summarizes our income taxes in each of the jurisdictions in which we operate. This process involves us estimating our actual current tax exposure 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, which are included within our consolidated balance sheet. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and to the extent we believe that recovery is not likely, we must establish a valuation allowance. To the extent we establish a valuation allowance or increase this allowance in a period, we must include an expense within the tax provision in the statement of operations.

Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. We have recorded a valuation allowance of $72.0 millionscheduled contractual commitments as of December 31, 2001, due to uncertainties related to our ability to utilize some of our deferred tax assets, primarily consisting of net operating losses carried forward before they expire. The valuation allowance is based on our estimates of taxable income and the period over which our deferred tax assets will be recoverable. In the event that actual results differ from these estimates or we adjust these estimates2003:

Contractual Obligations

  Total
  Less than 1
year
  1 – 3 Years
  4 – 5 Years
  More than 5
Years

Short-term and long-term debt

  $992,365  $11,500  $34,500  $137,900  $808,465

Capital leases

   38   38   —     —     —  

Operating leases

   124,980   26,195   33,758   18,407   46,620

Employment agreements

   1,378   948   430   —     —  

Purchase obligations

   13,067   13,067   —     —     —  

Asset retirement obligations

   1,195   —     —     —     1,195
   
  
  
  
  

Total

  $1,133,023  $51,748  $68,688  $156,307  $856,280
   
  
  
  
  

Off-Balance Sheet Arrangements

We are not involved in future periods we may need to establish an additional valuation allowance which could impact our financial position and results of operations. The net deferred tax liability as of December 31, 2001 was $18.4 million.

any off-balance sheet arrangements.

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Item 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to certain market risks that are inherent in our financial instruments. These instruments arise from transactions entered into in the normal course of business. During the year ended December 31, 2001 we wereWe are subject to interest rate risk on our senior credit facility. At December 31, 2001facility and any future financing requirements. We attempt to limit our exposure to interest rate risk by managing the mix of our long-term fixed rate debt consisted primarily of the balance on the 10¼% senior notes and the accreted balance of the 12% senior discount notes. In the future, we may be subject to increased rate risk onour borrowings under our senior credit facility,facility. As of December 31, 2003, long-term fixed rate borrowings represented approximately 86% of our total borrowings. Assuming a 100 basis-point change in LIBOR, our annual interest rate swap or any other further financing we may enter into.

cost would change by approximately $2.8 million, based on outstanding balances as of the date of this report.

The following table presents the future principal payment obligations and weighted average interest rates associated with our existing long-term debt instruments assuming our actual level of long-term indebtedness:

   
2002
  
2003
  
2004
  
2005
  
2006
  
Thereafter
   
(in thousands)
Long-term debt:                        
Fixed rate (10¼%)   —     —     —     —     —    $500,000
Fixed rate (12.0%)   —     —     —     —     —    $269,000
Term loan, $100.0 million, variable rates (4.76% to 4.87% at December 31, 2001)   —    $5,000  $15,000  $25,000  $25,000  $30,000
Revolving loan, variable rate (6.5% at December 31, 2001)   —     —     —     —     —    $10,000
Notes payable, variable rates (2.9% to 11.4% at December 31, 2001)  $365  $134  $69   —     —     —  
In January 2002, we entered into an interest rate swap agreement to manage our exposure to interest rate movements and to take advantagedebt indebtedness as of a favorable interest rate environment by effectively converting a portion of our debt from fixed to variable rates. The notional principal amount of the interest rate swap is $100.0 million. The maturity date of the interest rate swap matches the principal maturity date of the 10¼% senior notes, the underlying debt (February 2009). This swap involves the exchange of fixed rate payments for variable rate payments without the exchange of the underlying principal amount. The variable rates are based on six-month EURO rate plus 4.47% and are reset on a semi-annual basis.
December 31, 2003:

   2004
  2005
  2006
  2007
  2008
  Thereafter
  

Fair

Value

   (in thousands)

Long-term debt:

                            

Fixed rate (12.0%)

   —     —     —     —    $65,673   —    $71,584

Fixed rate (10¼%)

   —     —     —     —     —    $406,441  $398,312

Fixed rate (9¾%)

   —     —     —     —     —    $402,024  $279,929

Term loan, $98.2 million, variable cash rates (8.66% to 8.67% at December 31, 2003)

  $9,500  $14,250  $14,250  $60,227   —     —    $98,227

Revolving loans, variable cash rate (8.65% at December 31, 2003)

  $2,000  $3,000  $3,000  $12,000   —     —    $20,000

Notes payable, variable rates (2.9% to 11.4% at December 31, 2003)

  $38   —     —     —    $—     —    $38

Our primary market risk exposure relates to (1) the interest rate risk on variable-rate long-term and short-term borrowings, and on our interest rate swap agreement, (2) our ability to refinance our 10¼9¾% senior discount notes and our 12%10¼% senior discount notes, at maturity at market rates, and (3) the impact of interest rate movements on our ability to meet interest expense requirements and exceed financial covenants. We manage the interest rate risk on our outstanding long-term and short-term debt through our use of fixed and variable rate debt. While we cannot predict or manage our ability to refinance existing debt or the impact interest rate movements will have on our existing debt, we continue to evaluate our financial position on an ongoing basis.

Senior Note and Senior Discount Note Disclosure Requirements

The indentures governing our 10¼% senior notes and our 12%9¾% senior discount notes require certain financial disclosures for restricted subsidiaries separate from unrestricted subsidiaries and the disclosuresubsidiaries. As of December 31, 2003 we had no unrestricted subsidiaries. Additionally, we are required to be made ofdisclose(i) Tower Cash Flow, as defined in the indentures, for the most recent fiscal quarter and (ii) Adjusted Consolidated Cash Flow, as defined in the indentures, for the most recently completed four-quarter period. AsThis information is presented solely as a requirement of December 31, 2001 we had no unrestricted subsidiaries. the indentures. Such information is not intended as an alternative measure of financial position, operating results or cash flows from operations (as determined in accordance with generally accepted accounting principles). Furthermore, our measure of the following information may not be comparable to similarly titled measures of other companies.

Tower Cash Flow and Adjusted Consolidated Cash Flow as defined in theour senior note and senior discount note indentures for the quarter ended December 31, 2001 was $15.7 million. Adjusted Consolidated Cash Flow for the year ended December 31, 2001 was $73.3 million.

are as follows:

   

10¼% Senior

Notes

  

9¾% Senior

Discount Notes

   (in thousands)

HoldCo Tower Cash Flow for the three months ended December 31, 2003(1)

  $18,249  $22,676

OpCo Tower Cash Flow for the three months ended December 31, 2003(2)

   n/a  $22,676

HoldCo Adjusted Consolidated Cash Flow for the twelve months ended December 31, 2003

  $67,324  $68,679

OpCo Adjusted Consolidated Cash Flow for the twelve months ended December 31, 2003

   n/a  $73,340

(1)In the indenture for the 9¾% senior discount notes HoldCo is referred to as the “Co-Issuer” or SBA Communications Corporation.
(2)In the indenture for the 9¾% senior discount notes OpCo is referred to as the “Company” or SBA Telecommunications, Inc.

Special Note Regarding Forward Looking Statements

This annual report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act. Discussions containing forward-looking statements may be found in the material set forth in this section and under “Management’s Discussion and AnalysisAct of Financial Condition and Results of Operations” and “Business,” as well as in the annual report generally.

30

1934. These statements concern expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. Specifically, this annual report contains forward-looking statements regarding:

our estimates regarding our liquidity, capital expenditures and sources of both, and our ability to fund operations and meet our obligations as they become due for the foreseeable future;

our expectations regarding our incurrence of additional net losses in 2004;
•
our ability to continue to access availability under our senior credit facility and comply with the covenants contained in our senior credit facility;

our expectations regarding the final aggregate gross cash proceeds to be generated by the Western tower sale;
•
our estimate that our operations will be positive free cash flow by early 2003;

our ability to sell the 61 towers remaining in the Western two-thirds of the United States;
•
our estimate of the number of towers that will be built or acquired in 2002 and 2003;

our estimates of the amount and timing of site development revenue to be generated from the network development contract with Sprint Spectrum L.P.;
•
the impact of the capital expenditure reduction plan on our future financial performance, long-term growth rates, liquidity and free cash flow position;

our strategy to focus our business on the site leasing business, and the consequential shift in our revenue stream and gross profits from project driven revenues to recurring revenues, predictable operating costs and minimal capital expenditures;
•
our strategy to transition the primary focus of our business from site development services toward the site leasing business;

our belief that our towers have significant capacity to accommodate additional tenants;
•
anticipated trends in the site development industry and its effect on our revenue and profits;

our estimates regarding the future development of the site leasing industry and site development industry and its effect on our revenues and profits;
•
our belief that our towers have significant capacity to accommodate additional tenants;

our estimate that we will not make any additional material change to our tower portfolio in 2004;
•
our estimates regarding the future development of the site leasing industry and its effect on our site leasing revenues;

our belief that the Western tower sale will not have a material impact on our site leasing gross profit margin;
•
our estimate of the amount of capital expenditures, and the funding sources, for the twelve months ending December 31, 2002; and

our intent to focus our tower ownership activities in the eastern third of the United States;
•
our estimate of the charges related to our 2002 restructuring plan that are expected to be recorded in the first and second quarters of 2002.

our belief regarding our position to capture additional site leasing business in our markets and identify and participate in site development projects across our markets;

our expectations regarding the incurrence of material additional charges in 2004 for the write-off of deferred financing fees and extinguishment of debt;

our estimates that interest expense and depreciation charges will continue to be substantial in the future;

our belief regarding the financial impact of certain accounting pronouncements; and

our estimates regarding non-cash compensation expense in each year from 2004 through 2006.

These forward-looking statements reflect our current views about future events and are subject to risks, uncertainties and assumptions. We wish to caution readers that certain important factors may have affected and could in the future affect our actual results and could cause actual results to differ significantly from those expressed in any forward-looking statement. The most important factors that could prevent us from achieving our goals, and cause the assumptions underlying forward-looking statements and the actual results to differ materially from those expressed in or implied by those forward-looking statements include, but are not limited to, the following:

•
our ability to access sufficient capital to fund our operations;
•
our inability to sufficiently increase our revenues and maintain or decrease expenses and cash capital expenditures sufficiently to permit us to be positive free cash flow by early 2003;
•
the inability of our clients to access sufficient capital or their unwillingness to expend capital to fund network expansion or enhancements;
•
our ability to secure as many site leasing tenants as planned;
•
our ability to expand our site leasing business and maintain or expand our site development business;
•
our ability to complete construction of new towers on a timely and cost-efficient basis, including our ability to successfully address zoning issues, carrier design changes, changing local market conditions and the impact of adverse weather conditions;
•
our ability to retain current lessees on newly acquired towers;
•
our ability to realize economies of scale for newly acquired towers;
•
the continued use of towers and dependence on outsourced site development services by the wireless communications industry;
•
our ability to successfully and effectively implement our announced restructuring plan; and
•
our ability to continue to comply with covenants and the terms of our senior credit facility.

31our inability to sufficiently increase our revenues and maintain or decrease expenses and cash capital expenditures to permit us to fund operations and meet our obligations as they become due;

our potential adjustments to the purchase price of the Western tower sale;

our ability to identify suitable purchasers for the additional 61 towers held for sale and enter into agreements on mutually acceptable terms;

the inability of our clients to access sufficient capital or their unwillingness to expend capital to fund network expansion or enhancements;

our ability to continue to comply with covenants and the terms of our senior credit facility and to access sufficient capital to fund our operations;

our ability to secure as many site leasing tenants as planned;

our ability to expand our site leasing business and maintain or expand our site development business;

our ability to successfully address zoning issues;

our ability to retain current lessees on our towers;

the actual amount and timing of services rendered and revenues received under ourcontract with Sprint Spectrum L.P.;

our ability to realize economies of scale from our tower portfolio;

the impact of our lack of a permanent Chief Financial Officer and our inability totimely hire a permanent Chief Financial Officer; and

the continued use of towers and dependence on outsourced site development servicesby the wireless communications industry.

We assume no responsibility for updating forward-looking statements contained in this Annual Report on Form 10-K.

ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial statements and supplementary data for the Company are on pages F-1 through F-27.
F-35.

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.CONTROLS AND PROCEDURES

In order to ensure that the information we must disclose in our filings with the Securities and Exchange Commission is recorded, processed, summarized and reported on a timely basis, we have formalized our disclosure controls and procedures. Our principal executive officer and principal financial officer have reviewed and evaluated the effectiveness of our disclosure controls and procedures, as defined in Exchange Act Rules 13a-15(e) and 15d-15(e), as of December 31, 2003. Based on such evaluation, such officers have concluded that, as of December 31, 2003, our disclosure controls and procedures were effective in timely

alerting them to material information relating to us (and our consolidated subsidiaries) required to be included in our periodic SEC filings.

As previously discussed, in performing the audits of our consolidated financial statements for the years ended December 31, 2001 and 2002 and the interim reviews of our consolidated financial statements for the three and six month periods ended June 30, 2003, our independent auditors, Ernst & Young, LLP (“E&Y”), noted a matter involving internal control and its operation that E&Y considered to be a material weakness. Specifically, E&Y, noted that we did not have an adequate process in place to ensure that the appropriate personnel, with adequate understanding of the relevant generally accepted accounting principles and financial reporting implications, thoroughly assessed and applied the proper accounting and reporting principles to certain significant asset or business acquisition and disposition transactions.

To address the matter identified, we have established a process to ensure that our Chief Financial Officer and Chief Accounting Officer are involved throughout each significant asset or business acquisition or disposition and that such officers have the appropriate knowledge of generally accepted accounting principles and consult the applicable accounting literature and outside professionals as appropriate. In performing the audit of our consolidated financial statements for the year ended December 31, 2003, E&Y, noted no matters involving internal control and its operation that it considered to be a material weakness. As of the date of the filing of this report, we do not have a Chief Financial Officer. We have continued to actively pursue our search for a qualified individual to fill the vacancy in our Chief Financial Officer position by engaging an executive search firm who has identified several possible candidates.

PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 10.DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The items required by Part III, Item 10 are incorporated herein by reference from the Registrant’s Proxy Statement for its 20022004 Annual Meeting of Shareholders to be filed on or before April 30, 2002.

29, 2004.

ITEM 11.    EXECUTIVE COMPENSATION
ITEM 11.EXECUTIVE COMPENSATION

The items required by Part III, Item 11 are incorporated herein by reference from the Registrant’s Proxy Statement for its 20022004 Annual Meeting of Shareholders to be filed on or before April 30, 2002.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED SHAREHOLDER MATTERS
29, 2004.

ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The items required by Part III, Item 12 are incorporated herein by reference from the Registrant’s Proxy Statement for its 20022004 Annual Meeting of Shareholders to be filed on or before April 30, 2002.

29, 2004.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The items required by Part III, Item 13 are incorporated herein by reference from the Registrant’s Proxy Statement for its 20022004 Annual Meeting of Shareholders to be filed on or before April 30, 2002.

29, 2004.

ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES

The items required by Part III, Item 14 are incorporated herein by reference from the Registrant’s Proxy Statement for its 2004 Annual Meeting of Shareholders to be filed on or before April 29, 2004.

PART IV

ITEM 14.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
ITEM 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)
Documents filed as part of this report:

 (1)
Financial Statements

See “Item 8. Financial Statements and Supplementary Data” for Financial Statements included with this Annual Report on Form 10-K.

 (2)
Financial Statement Schedules
Report of Independent Certified Public Accountants on Schedule
Schedule II—Valuation and Qualifying Accounts

See “Item 8. Financial Statements and Supplementary Data” for Financial Statements Schedules included with this Annual Report on Form 10-K.

All other schedules have been omitted because they are not required, not applicable, or the information is otherwise set forth in the financial statements or notes thereto.

32

 (3)
Exhibits

Exhibit

No.

  

Description of Exhibits

3.4  —Fourth Amended and Restated Articles of Incorporation of SBA Communications Corporation.(1)
3.5  —Amended and Revised By-Laws of SBA Communications Corporation.(1)
4.1  

—Indenture, dated as of March 2, 1998, between SBA Communications Corporation and State Street Bank and Trust Company, as trustee, relating to $269,000,000 in aggregate principal amount at maturity of 12% Senior Discount Notes due 2008.(2)

4.3  —Specimen Certificate of 12% Senior Discount Note due 2008 (included in Exhibit 4.1)
4.4  

—Indenture, dated as of February 2, 2001, between SBA Communications Corporation and State Street Bank and Trust Company, as trustee, relating to $500,000,000 in aggregate principal amount and maturity of 10¼% senior notes due 2009.(3)

4.5  —Form of 10¼% senior note due February 1, 2009.(3)
4.6  —Rights Agreement, dated as of January 11, 2002, between the Company and the Rights Agent.(4)
  5.14.7

—Indenture, dated as of December 19, 2003, among SBA Communications Corporation, SBA Telecommunications, Inc. and U.S. Bank National Association, as trustee, relating to the $402,024,000 in aggregate principal amount at maturity of 9¾% senior discount notes due 2011.*

4.8  —OpinionForm of Akerman, Senterfitt & Eidson, P.A.9¾% senior discount note due 2011.*
10.1  

—SBA Communications Corporation Registration Rights Agreement dated as of March 5, 1997, among the Company, Steven E. Bernstein, Ronald G. Bizick, II and Robert Grobstein.(2)

10.8  10.3  

—AgreementPurchase and Plan of Merger, dated as of March 31, 1999, between the Company, Com-Net Construction Services, Inc., Daniel J. Eldridge and Eldridge Family Limited Partnership.(1)

10.81—First Amendment to Agreement and Plan of Merger, dated as of April 30, 1999 between the Company, Com-Net Construction Services Inc., Daniel J. Eldridge and Eldridge Family Limited Partnership.(1)
10.9  —PurchaseSale Agreement, dated as of March 31, 1999, between the Company, Com-Net Development Group, LLC.17, 2003, by and among SBA Properties, Inc.*, Daniel J. EldridgeSBA Towers, Inc., SBA Properties Louisiana LLC and Tammy W. Eldridge.(1)AAT Communications Corp.(8)

10.91—First Amendment to Purchase Agreement, dated as of April 30, 1999, between the Company, —Com-Net Development Group, LLC., Daniel J. Eldridge and Tammy W. Eldridge.(1)
10.10—Employment Agreement dated as of January 1, 1997, between the Company and Ronald G. Bizick, II.(2)
10.12—Employment Agreement dated as of March 14, 1997, between the Company and Jeffrey A. Stoops.(2)
10.23  —1996 Stock Option Plan.(1)
10.24  —1999 Equity Participation Plan.(1)

10.25  

—1999 Stock Purchase Plan.(1)

10.27  

—Incentive Stock Option Agreement, dated as of September 5, 2000, between SBA Communications Corporation and Thomas P. Hunt.(5)

10.28  

—Restricted Stock Agreement, dated as of September 5, 2000, between SBA Communications Corporation and Thomas P. Hunt.(5)

10.2910.33  —2001 Equity Participation Plan.(6)
10.35—Employment Agreement, dated as of September 5, 2000,February 28, 2003, between the CompanySBA Properties Inc. and Jeffrey A. Stoops.(7)
10.36—Employment Agreement, dated as of February 28, 2003, between SBA Properties Inc. and Kurt L. Bagwell.(7)
10.37—Employment Agreement, dated as of February 28, 2003, between SBA Properties Inc. and Thomas P. Hunt.(5)(7)
10.3010.39  

—Purchase Agreement, dated as of September 15, 2000, by$195,000,000 Amended and among TeleCorp Realty, LLC, TeleCorp Puerto Rico Realty, Inc., TeleCorp Communications, Inc., SBA Towers, Inc. and SBA Telecommunications, Inc.(5)

33

Exhibit No.
Description of Exhibits
10.31—Asset Purchase Agreement, dated as of December 18, 2000, by and between Louisiana Unwired L.L.C. and SBA Properties, Inc.(5)
10.32—$300,000,000Restated Credit Agreement, dated as of June 15, 2001,November 21, 2003, among SBA Senior Finance, Inc., as borrower, the lenders from time to time parties thereto, General Electric Capital Corporation as Administrative Agent and GECC Capital Markets Group, Inc. as Lead Arranger and Bookrunner.(9)

10.41

—$400,000,000 Amended and Restated Credit Agreement, dated as of January 30, 2004, among SBA Senior Finance, Inc., as borrower, the lenders from time to time parties thereto, Lehman Brothers Inc. and Deutsche Bank Securities Inc., as Joint Lead Arrangers and Bookrunners, Lehman Commercial Paper Inc., as Administrative Agent, General Electric Capital Corporation as Co-Lead Arranger and Co-Syndication Agent, and TD Securities (USA) Inc., as Documentation Agent.*

10.42

—Guarantee and Collateral Agreement dated January 30, 2004 among SBA Communications Corporation, SBA Telecommunications, Inc., the several lenders from time to time parties to the Credit Agreement, Lehman Brothers,SBA Senior Finance, Inc., Barclays Capital, Barclays Bank PLC and certain of their subsidiaries in favor of Lehman Commercial Paper, Inc.(6)*

10.33—2001 Equity Participation Plan.(7)
21  —Subsidiaries.*
23.1  —Consent of Arthur AndersenErnst & Young LLP.*
31.1—Certification by Jeffrey A. Stoops, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2—Certification by John F. Fiedor, Chief Accounting Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1—Certification by Jeffrey A. Stoops, Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2—Certification by John F. Fiedor, Chief Accounting Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

(1)*
Filed herewith
(1)Incorporated by reference to the Registration Statement on Form S-1 previously filed by the Registrant (Registration No. 333-76547).
(2)
Incorporated by reference to the Registration Statement on Form S-4 previously filed by the Registrant (Registration No. 333-50219).
(3)
Incorporated by reference to the Registration Statement on Form S-4 previously filed by the Registrant (Registration No. 333-58128).

(4)
Incorporated by reference to the Form 8-K, dated January 11, 2002, previously filed by the Registrant.
(5)
Incorporated by reference to the Form 10-K for the year ended December 31, 2000, previously filed by the Registrant.
(6)
Incorporated by reference to the Form 10-Q for the quarter ended June 30, 2001, previously filed by the Registrant.
(7)
Incorporated by reference to the Registration Statement on Form S-8, previously filed by the Registrant (Registration No. 333-69236).

(b)(7)
Incorporated by reference to the Form 10-K for the year ended December 31, 2002, previously filed by the Registrant.
(8)Incorporated by reference to Form 8-K, dated May 9, 2003, previously filed by Registrant.
(9)Incorporated by reference to the Form 8-K, dated November 21, 2003, previously filed by the Registrant.
(b)Reports on Form 8-K:

The Company filed a report on Form 8-K dated October 1, 2003. In the report, the Company reported under Items 5 and 7 that its re-audit had been substantially completed and announced its plans to restate its fiscal year 2001, fiscal year 2002, first and second quarter 2003 financial statements and discussed the anticipated impact of the restatement.

The Company filed a report on Form 8-K dated November 6, 2001.10, 2003. In the report, the Company reported,furnished under Item 5, certain operational information12, the Company’s financial results for the third quarter of 2001. Under Item 7, the Company included the related press release.

ended September 30, 2003.

The Company filed a report on Form 8-K dated November 13, 2001.10, 2003. In the report, under Items 5 and 12, the Company reported under Item 5, additional operational information.

announced its plans to restate its financial statements for fiscal year 2002, fiscal year 2001 and the three and six months ended June 30, 2003 and 2002, and discussed the anticipated impact of the restatement.

The Company filed a report on Form 8-K dated November 13, 2001.14, 2003. In the report, the Company reporteddisclosed under ItemItems 5 certainand 12, the effect of the financial resultsstatement restatements for fiscal year 2002, fiscal year fiscal year 2001 and the third quartersix months ended June 30, 2003 and 2002, and the restated audited financial statements for fiscal years 2002 and 2001 and the amended Management’s Discussion and Analysis of Financial Condition and Results of Operations for Fiscal Years 2002 and 2001. Under Item 7, the Company included the related press release.

The Company filed a report on Form 8-K dated November 16, 2001.21, 2003. In the report, the Company reported under Item 5, that SBA Senior Finance, Inc., a newly formed wholly-owned subsidiary of SBA Telecommunications, Inc., assumed all rights and obligations of SBA Telecommunications, Inc., under the appointment of Steven E. Nielsen, Chairman, Presidentexisting $195.0 million senior credit facility pursuant to an amended and Chief Executive Officer of Dycom Industries, Inc. to SBA’s Board of Directors.restated credit agreement. Under Item 7, the Company included the Amended and Restated Credit Agreement dated as of November 21, 2003.

The Company filed a report on Form 8-K dated December 1, 2003. In the report under Item 7, the Company included a press release announcing its intent to issue approximately $200 million in gross proceeds of senior discount notes due 2011. Under Items 9 and 12, the Company released selected historical financial data for the years ended December 31, 2000, 1999, and 1998, and other financial and operations data.

The Company filed a report for Form 8-K dated December 10, 2003. In the report under Items 5 and 7, the Company reported that on December 8, 2003, it priced an offering by the Company and SBA Telecommunications, Inc., of $402.0 million aggregate principal amount at maturity ($275 million in gross proceeds) of 9¾% senior discount notes due 2011.

The Company filed a report on Form 8-K on December 23, 2003. In the report under Items 5 and 7, the Company announced the expiration of a tender offer and its related press release.

34
consent solicitation with respect to its 12% senior discount notes due 2008 and its use of net proceeds from its recent issue of $275 million of 9¾% senior discount notes due 2011. Additionally, the Company reported that 5.5 million shares of Class B common stock held by Steven E. Bernstein, SBA’s Chairman, converted into 5.5 million shares of Class A common stock. As a result, the Class A common stock now held by Mr. Bernstein no longer have the super-voting rights that the Class B common stock held by Mr. Bernstein had.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SBA COMMUNICATIONS CORPORATION

By: 
/s/    STEVEN E. BERNSTEIN        
  

Steven E. Bernstein

Chairman of the Board of Directors

Date:Date 
March 20, 2002         
11, 2004

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature

  

Title

 

Date

/s/    STEVENSTEVEN E. BERNSTEIN

BERNSTEIN        

Steven E. Bernstein

  

Chairman of the Board of Directors

 March 20, 200211, 2004

/s/    JEFFREYJEFFREY A. STOOPSSTOOPS        

Jeffrey A. Stoops

  

Chief Executive Officer and President (Principal Executive Officer)

 March 20, 200211, 2004

/s/    JOHN MARINOJOHN F. FIEDOR        

John Marino

F. Fiedor

  

Chief FinancialAccounting Officer
(Principal Financial (Principal Accounting Officer)

 March 20, 200211, 2004

/s/    JOHN F. FIEDORDONALD B. HEBB, JR.        

John F. Fiedor

Donald B. Hebb, Jr.

  Chief Accounting Officer
(Principal Accounting Officer)

Director

 March 20, 200211, 2004

/s/    DONALD B. HEBB, JR.RICHARD W. MILLER        

Donald B. Hebb, Jr.

Richard W. Miller

  

Director

 March 20, 200211, 2004

/s/    C. KEVIN LANDRYSTEVEN E. NIELSEN        

C. Kevin Landry

Steven E. Nielsen

  

Director

 March 20, 2002
/s/    RICHARD W. MILLER
Richard W. Miller
DirectorMarch 20, 2002
/s/    STEVEN E. NIELSEN
Steven E. Nielsen
DirectorMarch 20, 200211, 2004

35

SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

Report
Reports of Independent Certified Public Accountants  F-1F-2
Consolidated Balance Sheets as of December 31, 20012003 and 20002002  F-2F-3
Consolidated Statements of Operations for the years ended December 31, 2001, 2000,2003, 2002, and 19992001  F-3F-4
Consolidated Statements of Shareholders’ Equity (Deficit) for the years ended December 31, 1999,
2000,2003, 2002 and 2001		  F-4F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000,2003, 2002, and 19992001  F-5F-6
Notes to Consolidated Financial Statements  F-7F-8
Report of Independent Certified Public Accountants on ScheduleF-26
Valuation and Qualifying Accounts  F-27F-35

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To

The Board of Directors

SBA Communications Corporation:

Corporation and Subsidiaries

We have audited the accompanying consolidated balance sheets of SBA Communications Corporation (a Florida corporation) and subsidiariesSubsidiaries as of December 31, 20012003 and 2000,2002, and the related consolidated statements of operations, shareholders’ equity, (deficit) and cash flows for each of the three years in the period ended December 31, 2001.2003. Our audits also included the financial statement schedule listed in the Index at Item 15(a). 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 SBA Communications Corporation and subsidiariesSubsidiaries as of December 31, 20012003 and 2000,2002, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 20012003, in conformity with accounting principles generally accepted in the United States.

ARTHUR ANDERSEN Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Note 5 to the consolidated financial statements, effective January 1, 2003, the Company adopted Statement of Financial Accounting Standards No. 143, “Accounting for Asset Retirement Obligations.” As also discussed in Note 5, effective January 1, 2002, the Company changed its method of accounting for goodwill and other intangible assets to conform to Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.”

/s/    ERNST & YOUNG LLP

West Palm Beach, Florida

February 22, 2002.

F-1

March 5, 2004

SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

   
December 31, 2001
     
December 31, 2000
 
   
(in thousands, except par values)
 
ASSETS
            
Current assets:            
Cash and cash equivalents  $13,904     $14,980 
Accounts receivable, net of allowances of $4,641 and $2,117 in 2001 and 2000, respectively   56,796      47,704 
Prepaid and other current assets   10,254      5,968 
Costs and estimated earnings in excess of billings on uncompleted contracts   11,333      13,584 
   
    
Total current assets   92,287      82,236 
Property and equipment, net   1,198,559      765,815 
Intangible assets, net   117,087      83,387 
Other assets   21,078      17,380 
   
    
Total assets  $1,429,011     $948,818 
   
    
LIABILITIES AND SHAREHOLDERS’ EQUITY
            
Current liabilities:            
Accounts payable  $56,293     $76,944 
Accrued expenses   13,046      13,504 
Current portion—notes payable   365      2,606 
Interest payable   21,815      49 
Billings in excess of costs and estimated earnings on uncompleted contracts   6,302      5,942 
Other current liabilities   15,880      10,665 
   
    
Total current liabilities   113,701      109,710 
   
    
Long-term liabilities:            
Senior notes payable   500,000      —   
Senior discount notes payable   234,885      209,042 
Notes payable   110,203      72,625 
Deferred tax liabilities, net   18,429      18,445 
Other long-term liabilities   1,149      836 
   
    
Total long-term liabilities   864,666      300,948 
   
    
Commitments and contingencies (see Note 12)            
Shareholders’ equity:            
Common stock-Class A par value $.01 (100,000 shares authorized), 43,233 and 40,989 shares issued and outstanding in 2001 and 2000, respectively   432      410 
Common stock-Class B par value $.01 (8,100 shares authorized), 5,456 shares issued and outstanding in 2001 and 2000   55      55 
Additional paid-in capital   664,977      627,370 
Accumulated deficit   (214,820)     (89,675)
   
    
Total shareholders’ equity   450,644      538,160 
   
    
Total liabilities and shareholders’ equity  $1,429,011     $948,818 
   
    

(in thousands, except par values)

   

December 31,

2003

  

December 31,

2002

 
ASSETS         

Current assets:

         

Cash and cash equivalents

  $8,338  $61,141 

Short-term investments

   15,200   —   

Restricted cash

   10,344   —   

Accounts receivable, net of allowances of $1,400 and $5,572 in 2003 and 2002, respectively

   19,414   36,292 

Costs and estimated earnings in excess of billings on uncompleted contracts

   10,227   10,425 

Prepaid and other current assets

   5,009   5,129 

Assets held for sale

   395   202,409 
   
 

Total current assets

   68,927   315,396 

Property and equipment, net

   856,213   940,961 

Deferred financing fees, net

   24,253   24,517 

Other assets

   31,181   18,787 

Intangible assets, net

   2,408   3,704 
   
 

Total assets

  $982,982  $1,303,365 
   
 
LIABILITIES AND SHAREHOLDERS’ EQUITY         

Current liabilities:

         

Accounts payable

  $11,352  $16,810 

Accrued expenses

   17,709   13,943 

Deferred revenue

   11,137   11,142 

Interest payable

   20,319   22,919 

Long-term debt, current portion

   11,538   60,083 

Billings in excess of costs and estimated earnings on uncompleted contracts

   1,577   2,362 

Other current liabilities

   1,807   3,595 

Liabilities held for sale

   608   2,685 
   
 

Total current liabilities

   76,047   133,539 
   
 

Long-term liabilities:

         

Long-term debt

   859,220   964,199 

Deferred revenue

   511   703 

Other long-term liabilities

   3,327   1,434 
   
 

Total long-term liabilities

   863,058   966,336 
   
 

Commitments and contingencies

         

Shareholders’ equity:

         

Preferred stock-$.01 par value, 30,000 shares authorized, none issued or outstanding

   —     —   

Common stock-Class A par value $.01 (200,000 and 100,000 shares authorized, 55,016 and 45,674 shares issued and outstanding in 2003 and 2002, respectively)

   550   457 

Common stock-Class B par value $.01 (8,100 shares authorized, 0 and 5,456 shares issued and outstanding in 2003 and 2002, respectively)

   —     55 

Additional paid-in capital

   679,961   667,441 

Accumulated deficit

   (636,634)  (464,463)
   
 

Total shareholders’ equity

   43,877   203,490 
   
 

Total liabilities and shareholders’ equity

  $982,982  $1,303,365 
   
 

The accompanying notes to consolidated financial statements are an integral part of these

consolidated balance sheets.

financial statements.

F-2

SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

   
For the years ended December 31,
 
   
2001
   
2000
   
1999
 
Revenues:               
Site development  $139,735   $115,892   $60,570 
Site leasing   103,159    52,014    26,423 
   
  
  
Total revenues   242,894    167,906    86,993 
Cost of revenues (exclusive of depreciation and amortization shown below):               
Cost of site development   107,932    88,892    45,804 
Cost of site leasing   36,722    19,502    12,134 
   
  
  
Total cost of revenues   144,654    108,394    57,938 
   
  
  
Gross profit   98,240    59,512    29,055 
Operating expenses:               
Selling, general and administrative   41,342    27,799    19,784 
Restructuring and other charge   24,399    —      —   
Depreciation and amortization   80,465    34,831    16,557 
   
  
  
Total operating expenses   146,206    62,630    36,341 
   
  
  
Operating loss   (47,966)   (3,118)   (7,286)
Other income (expense):               
Interest income   7,059    6,253    881 
Interest expense, net of capitalized interest   (47,709)   (4,879)   (5,244)
Non-cash amortization of original issue discount and debt issuance costs   (29,730)   (26,006)   (22,063)
Other   (76)   68    48 
   
  
  
Total other expense   (70,456)   (24,564)   (26,378)
   
  
  
Loss before (provision) benefit for income taxes and extraordinary item   (118,422)   (27,682)   (33,664)
(Provision) benefit for income taxes   (1,654)   (1,233)   223 
   
  
  
Net loss before extraordinary item   (120,076)   (28,915)   (33,441)
Extraordinary item, write-off of deferred financing fees   (5,069)   —      (1,150)
   
  
  
Net loss   (125,145)   (28,915)   (34,591)
Dividends on preferred stock   —      —      733 
   
  
  
Net loss available to common shareholders  $(125,145)  $(28,915)  $(33,858)
   
  
  
Basic and diluted loss per common share before extraordinary item  $(2.53)  $(0.70)  $(1.71)
Extraordinary item   (0.11)   —      (0.06)
   
  
  
Basic and diluted loss per common share  $(2.64)  $(0.70)  $(1.77)
   
  
  
Basic and diluted weighted average number of shares of common stock   47,437    41,156    19,156 
   
  
  
The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements.

F-3

SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001
(in thousands, except share amounts)
   
Common Stock
   
Additional
Paid-In
Capital
   
Accumulated
Deficit
   
Total
 
   
Class A
  
Class B
       
   
Number
  
Amount
  
Number
   
Amount
       
BALANCE, December 31, 1998  881  $9  8,075   $81   $715   $(26,902)  $(26,097)
Initial public offering of common stock, net of issuance costs  11,300   113  —      —      93,520    —      93,633 
Non-cash compensation adjustment  —     —    —      —      311    —      311 
Preferred stock dividends  —     —    —      —      —      (1,346)   (1,346)
Preferred stock conversion/redemption  8,050   80  —      —      (80)   2,079    2,079 
Shares received for repayment of shareholder loan  —     —    (430)   (4)   (3,872)   —      (3,876)
Common stock issued in connection with acquisitions  1,100   11  —      —      17,689    —      17,700 
Common stock issued in connection with employee stock purchase/option plans  216   2  —      —      766    —      768 
Net loss  —     —    —      —      —      (34,591)   (34,591)
   
  
  
  
  
  
  
BALANCE, December 31, 1999  21,547   215  7,645    77    109,049    (60,760)   48,581 
Offering of common stock, net of issuance costs  14,750   148  —      —      464,896    —      465,044 
Common stock issued in connection with acquisitions  1,123   11  —      —      48,762    —      48,773 
Non-cash compensation adjustment  —     —    —      —      313    —      313 
Common stock issued in connection with employee stock purchase/option plans  1,003   10  —      —      4,354    —      4,364 
Issuance of restricted stock  20   —    —      —      —      —      —   
Conversion of Class B to Class A  2,189   22  (2,189)   (22)   —      —      —   
Exercise of warrants  357   4  —      —      (4)   —      —   
Net loss  —     —    —      —      —      (28,915)   (28,915)
   
  
  
  
  
  
  
BALANCE, December 31, 2000  40,989   410  5,456    55    627,370    (89,675)   538,160 
Common stock issued in connection with acquisitions  1,575   16  —      —      31,037    —      31,053 
Non-cash compensation adjustment  —     —    —      —      3,326    —      3,326 
Common stock issued in connection with employee stock purchase/option plans  669   6  —      —      3,244    —      3,250 
Net loss  —     —    —      —      —      (125,145)   (125,145)
   
  
  
  
  
  
  
BALANCE, December 31, 2001  43,233  $432  5,456   $55   $664,977   $(214,820)  $450,644 
   
  
  
  
  
  
  

   For the years ended December 31,
 
   2003
  2002
  2001
 

Revenues:

             

Site leasing

  $127,842  $115,081  $85,487 

Site development

   84,218   125,041   139,735 
   
 
 

Total revenues

   212,060   240,122   225,222 
   
 
 

Cost of revenues (exclusive of depreciation, accretion and amortization shown below):

             

Cost of site leasing

   42,021   40,650   30,657 

Cost of site development

   77,810   102,473   108,532 
   
 
 

Total cost of revenues

   119,831   143,123   139,189 
   
 
 

Gross profit

   92,229   96,999   86,033 

Operating expenses:

             

Selling, general and administrative

   31,244   34,352   42,103 

Restructuring and other charges

   2,505   47,762   24,399 

Asset impairment charges

   16,965   25,545   —   

Depreciation, accretion and amortization

   84,380   85,728   66,104 
   
 
 

Total operating expenses

   135,094   193,387   132,606 
   
 
 

Operating loss from continuing operations

   (42,865)  (96,388)  (46,573)

Other income (expense):

             

Interest income

   692   601   7,059 

Interest expense, net of amounts capitalized

   (81,501)  (54,822)  (47,709)

Non-cash interest expense

   (9,277)  (29,038)  (25,843)

Amortization of debt issuance costs

   (5,115)  (4,480)  (3,887)

Write-off of deferred financing fees and loss on extinguishment of debt

   (24,219)  —     (5,069)

Other

   169   (169)  (76)
   
 
 

Total other expense

   (119,251)  (87,908)  (75,525)
   
 
 

Loss from continuing operations before provision for income taxes and cumulative effect of changes in accounting principle

   (162,116)  (184,296)  (122,098)

Provision for income taxes

   (1,820)  (309)  (1,493)
   
 
 

Loss from continuing operations before cumulative effect of changes in accounting principle

   (163,936)  (184,605)  (123,591)

Loss from discontinued operations, net of income taxes

   (7,690)  (3,717)  (2,201)
   
 
 

Loss before cumulative effect of changes in accounting principle

   (171,626)  (188,322)  (125,792)

Cumulative effect of changes in accounting principle

   (545)  (60,674)  —   
   
 
 

Net loss

  $(172,171) $(248,996) $(125,792)
   
 
 

Basic and diluted loss per common share amounts:

             

Loss from continuing operations before cumulative effect of changes in accounting principle

  $(3.14) $(3.66) $(2.61)

Loss from discontinued operations

   (0.15)  (0.07)  (0.05)

Cumulative effect of changes in accounting principle

   (0.01)  (1.20)  —   
   
 
 

Net loss per common share

  $(3.30) $(4.93) $(2.66)
   
 
 

Weighted average number of common shares

   52,204   50,491   47,321 
   
 
 

The accompanying notes to consolidated financial statements are an integral part of

these consolidated financial statements.

F-4

SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWSSHAREHOLDERS’ EQUITY

   
For the years ended December 31,
 
   
2001
   
2000
   
1999
 
   
(in thousands)
 
CASH FLOWS FROM OPERATING ACTIVITIES:               
Net loss  $(125,145)  $(28,915)  $(34,591)
Adjustments to reconcile net loss to net cash provided by operating activities:               
Depreciation and amortization   80,465    34,831    16,557 
Restructuring and other charge   24,399    —      —   
Provision for doubtful accounts   1,361    1,663    492 
Non-cash amortization of original issue discount and debt issuance costs   29,730    26,006    22,063 
Non-cash compensation expense   3,326    313    311 
Interest on shareholder notes     —      —      (92)
Write-off of deferred financing fees   5,069    —      1,150 
Changes in operating assets and liabilities:               
(Increase) decrease in:               
Accounts receivable   (2,692)   (25,193)   (3,624)
Prepaid and other current assets   (4,271)   (929)   1,531 
Costs and estimated earnings in excess of billings on uncompleted contracts   3,201    (10,029)   (1,422)
Other assets   (5,212)   (14,480)   (4,168)
Increase (decrease) in:               
Accounts payable   (22,290)   35,342    22,314 
Accrued expenses   (1,334)   7,055    1,237 
Interest payable   21,766    —      —   
Deferred tax liabilities   (16)   10,494    (37)
Other liabilities   4,487    7,378    604 
Billings in excess of costs and estimated earnings on uncompleted contracts   156    3,980    809 
   
  
  
Total adjustments   138,145    76,431    57,725 
   
  
  
Net cash provided by operating activities   13,000    47,516    23,134 
   
  
  
CASH FLOWS FROM INVESTING ACTIVITIES:               
Tower acquisitions and other capital expenditures   (530,273)   (445,280)   (208,870)
   
  
  
Net cash used in investing activities   (530,273)   (445,280)   (208,870)
   
  
  
CASH FLOWS FROM FINANCING ACTIVITIES:               
Proceeds of common stock offerings, net of issuance costs   —      465,044    93,633 
Borrowings under senior credit facility, net of financing fees   134,320    11,000    173,574 
Proceeds from senior notes payable, net of financing fees   484,261    —      —   
Repayment of senior credit facility and notes payable   (105,634)   (70,795)   (73,026)
Proceeds from exercise of stock options and employee stock purchase plan   3,250    4,364    768 
Redemption of Series A redeemable preferred stock   —      —      (32,825)
   
  
  
Net cash provided by financing activities   516,197    409,613    162,124 
   
  
  
Net increase (decrease) in cash and cash equivalents   (1,076)   11,849    (23,612)
CASH AND CASH EQUIVALENTS:               
Beginning of year   14,980    3,131    26,743 
   
  
  
End of year  $13,904   $14,980   $3,131 
   
  
  
(continued)

F-5

SBA COMMUNICATIONS CORPORATIONFOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND SUBSIDIARIES2001

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)(in thousands)

   
For the years ended December 31,
 
   
2001
   
2000
   
1999
 
   
(in thousands)
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:		               
Cash paid during the year for:               
Interest, including amounts capitalized  $29,418   $8,411   $5,940 
   
  
  
Taxes  $2,215   $1,996   $666 
   
  
  
NON-CASH ACTIVITIES:               
Reversal of dividends on Series A redeemable preferred stock  $—     $—     $(733)
   
  
  
Note receivable—shareholder  $—     $—     $3,877 
   
  
  
Exchange of Series B preferred stock for common stock  $—     $—     $80 
   
  
  
ACQUISITION SUMMARY:               
Assets acquired  $58,088   $63,049   $32,281 
   
  
  
Liabilities assumed  $(4,655)  $(2,197)  $(6,667)
   
  
  
Common stock issued  $(31,053)  $(48,773)  $(17,700)
   
  
  

   Common Stock
  

Additional

Paid-In

Capital

  

Accumulated

Deficit

  Total
 
   Class A
  Class B
    
   Number
  Amount
  

Number

  Amount
    

BALANCE, December 31, 2000

  40,989  $410  5,456  $55  $627,370  $(89,675) $538,160 

Common stock issued in connection with acquisitions

  1,575   16  —     —     29,784   —     29,800 

Non-cash compensation

  —     —    —     —     3,326   —     3,326 

Common stock issued in connection with employee stock purchase/ option plans

  669   6  —     —     3,244   —     3,250 

Net loss

  —     —    —     —     —     (125,792)  (125,792)
   
  
  
 
 
 
 

BALANCE, December 31, 2001

  43,233   432  5,456   55   663,724   (215,467)  448,744 

Common stock issued in connection with acquisitions

  1,316   13  —     —     1,383   —     1,396 

Non-cash compensation

  —     —    —     —     2,017   —     2,017 

Common stock issued in connection with employee stock purchase/ option/severance plans

  1,125   12  —     —     317   —     329 

Net loss

  —     —    —     —     —     (248,996)  (248,996)
   
  
  
 
 
 
 

BALANCE, December 31, 2002

  45,674   457  5,456   55   667,441   (464,463)  203,490 

Conversion of Class B common stock into Class A common stock

  5,456   55  (5,456)  (55)  —     —     —   

Non-cash compensation

  —     —    —     —     832   —     832 

Payment of restricted stock guarantee

  —     —    —     —     (936)  —     (936)

Common stock issued in exchange for 10¼% senior notes

  3,853   38  —     —     12,593   —     12,631 

Common stock issued in connection with employee stock option plans

  33   —    —     —     31   —     31 

Net loss

  —     —    —     —     —     (172,171)  (172,171)
   
  
  
 
 
 
 

BALANCE, December 31, 2003

  55,016  $550  —    $—    $679,961  $(636,634) $43,877 
   
  
  
 
 
 
 

The accompanying notes to consolidated financial statements are an integral part of

these consolidated financial statements.

F-6

SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

   For the years ended December 31,
 
   2003
  2002
  2001
 

CASH FLOWS FROM OPERATING ACTIVITIES:

             

Net loss

  $(172,171) $(248,996) $(125,792)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

             

Depreciation, accretion and amortization

   84,380   85,728   66,104 

Non-cash restructuring and other charges

   1,327   43,438   24,119 

Asset impairment charges

   16,965   25,545   —   

Non-cash items reported in discontinued operations (primarily depreciation, asset impairment charges and loss on sale of towers)

   9,837   16,600   12,604 

Non-cash compensation expense

   832   2,017   3,326 

Provision for doubtful accounts

   3,554   3,371   2,641 

Amortization of original issue discount and debt issuance costs

   11,011   33,518   29,730 

Write-off of deferred financing fees and loss on extinguishment of debt

   24,219   —     5,069 

Amortization of deferred gain from derivative

   (676)  (133)  —   

Interest converted to term loan

   3,227   —     —   

Cumulative effect of changes in accounting principles

   545   60,674   —   

Changes in operating assets and liabilities, net of effect of acquisitions:

             

Short-term investments

   (15,200)  —     —   

Accounts receivable

   13,129   17,133   (3,972)

Costs and estimated earnings in excess of billings on uncompleted contracts

   198   908   3,201 

Prepaid and other current assets

   (343)  1,356   (3,849)

Other assets

   (4,176)  (5,674)  2,721 

Accounts payable

   (5,758)  (15,229)  (12,183)

Accrued expenses

   (54)  (144)  (2,417)

Deferred revenue

   1,466   761   6,113 

Interest payable

   (2,387)  1,104   21,766 

Other liabilities

   1,052   (230)  (584)

Billings in excess of costs and estimated earnings on uncompleted contracts

   (785)  (3,940)  156 
   
 
 

Total adjustments

   142,363   266,803   154,545 
   
 
 

Net cash provided by (used in) operating activities

   (29,808)  17,807   28,753 
   
 
 

CASH FLOWS FROM INVESTING ACTIVITIES:

             

Proceeds from termination of interest rate swap agreement

   —     5,369   —   

Capital expenditures

   (15,136)  (86,361)  (307,557)

Acquisitions and related earn-outs

   (3,126)  (29,724)  (239,143)

Proceeds from sale of towers

   192,450   —     —   

Receipt (payment) of restricted cash

   (18,732)  8,000   (8,000)
   
 
 

Net cash provided by (used in) investing activities

   155,456   (102,716)  (554,700)
   
 
 

CASH FLOWS FROM FINANCING ACTIVITIES:

             

Proceeds from employee stock purchase/option plans

   31   329   3,250 

Proceeds from 9¾% senior discount notes payable, net of financing fees

   267,109   —     —   

Proceeds from 10¼% senior notes, net of financing fees

   —     —     484,223 

Borrowings under senior credit facility, net of financing fees

   356,955   143,809   134,430 

Repayment of senior credit facility and notes payable

   (505,085)  (445)  (105,634)

Repurchase of senior discount notes and senior notes

   (296,925)  —     —   

Payment of restricted stock guarantee

   (936)  —     —   

SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(in thousands)

   For the years ended December 31,
 
   2003
  2002
  2001
 

Bank overdraft borrowings (repayments)

   400   (11,547)  8,602 
   
 
 

Net cash provided by (used in) financing activities

   (178,451)  132,146   524,871 
   
 
 

Net increase (decrease) in cash and cash equivalents

   (52,803)  47,237   (1,076)

CASH AND CASH EQUIVALENTS:

             

Beginning of year

   61,141   13,904   14,980 
   
 
 

End of year

  $8,338  $61,141  $13,904 
   
 
 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

             

Cash paid during the year for:

             

Interest, net of amounts capitalized

  $84,847  $58,261  $25,943 
   
 
 

Taxes

  $1,852  $1,502  $2,215 
   
 
 

NON-CASH ACTIVITIES:

             

Assets acquired in connection with acquisitions

  $—    $3,396  $4,835 
   
 
 

Liabilities assumed in connection with acquisitions

  $—    $(2,000) $(3,685)
   
 
 

Common stock issued in connection with acquisitions

  $—    $(1,396) $(29,800)
   
 
 

Class A common stock issued in exchange for 10¼% senior notes and accrued interest

  $12,631  $—    $—   
   
 
 

10¼% senior notes and accrued interest redeemed for Class A common stock

  $(13,713) $—    $—   
   
 
 

The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements.

SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL

SBA Communications Corporation (the “Company” or “SBA”) was incorporated in the State of Florida in March 1997. The Company holds all of the outstanding capital stock of SBA Telecommunications, Inc. (“Telecommunications”). Telecommunications holds all of the capital stock of SBA Network Services,Senior Finance, Inc. (“Network Services”Senior Finance”), SBA Leasing, Inc., (“Leasing”),. Senior Finance holds all of the capital stock of SBA Towers, Inc., SBA Properties, Inc., SBA Sites, Inc., and certain other tower companies (collectively “Tower Companies”)., SBA Leasing, Inc. (“Leasing”) and SBA Network Services, Inc. SBA Network Services, Inc. holds all of the capital stock of other companies engaged in similar businesses.

businesses (collectively “Network Services”).

The Tower Companies own and operate transmission towers in the eastern third of the United States, Puerto Rico and the U.S. Virgin Islands. Space on these towers is leased primarily to wireless communications carriers.

Leasing leases antenna tower sites from owners and then subleases such sites to wireless telecommunications providers.

Network Services provides comprehensive turn-keyturnkey services for the telecommunications industry in the areas of site development services for wireless carriers and the construction and repair of transmission towers. Site development services provided by Network Services include network pre-design, site audits, site identification and acquisition, contract and title administration, zoning and land use permitting, construction management, microwave relocation and the construction and repair of transmission towers, including the hanging of antennae,antennas, cabling and associated tower components. In addition to providing turn-keyturnkey services to the telecommunications industry, Network Services constructs manyhistorically has constructed, or has overseen the construction of, approximately 60% of the newly-built towers that the Company owns.

The Tower Companies own and operate transmission towers in various parts of the United States and Puerto Rico. Space on these towers is leased primarily to wireless communications carriers.
Leasing leases antenna tower sites from owners and then subleases such sites to wireless telecommunications providers.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies applied in the preparation of the accompanying consolidated financial statements is as follows:

a.
Basis of Consolidation

a. Basis of Consolidation

The consolidated financial statements include the accounts of the Company and all of its wholly-owned subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation.

b.
Use of Estimates

b. Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the datedates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The more significant estimates made by management includerelate to the allowance for doubtful accounts, receivable, the costs and revenue relating to the Company’s site development and construction contracts, valuation allowance on deferred tax assets, andcarrying value of long-lived assets, the economic useful lives of towers.towers and asset retirement obligations. Actual results couldwill differ from those estimates.

c.
Cash and Cash Equivalents
estimates and such differences could be material.

c. Cash and Cash Equivalents

The Company classifies as cash and cash equivalents all interest-bearing deposits or investments with original maturities of three months or less, and highly liquid short-term commercial paper.

d.
Property and Equipment

d. Short Term Investments

The Company’s short-term investments consist of debt securities which are acquired and held for a short period of time. Trading securities are recorded at fair value. Investment income and unrealized holding gains and losses are included in earnings.

e. Property and Equipment

Property and equipment are recorded at cost.cost, adjusted for asset impairment and estimated asset retirement obligations. Costs associated with the acquisition, development and construction of towers are capitalized as a cost of the towers. Costs for self-constructed towers include direct materials and labor, indirect costs and capitalized interest. Depreciation is provided using the straight-line method over the estimated useful lives. Leasehold improvements are amortized on a straight-line basis over the shorter of the useful life of the improvement or the term of the lease. We performThe Company performs ongoing evaluations of the estimated useful lives of ourits property and equipment for depreciation purposes. The estimated useful lives are determined and continually evaluated based on the period over which services are expected to be rendered by the asset, industry practice and asset maintenance policies.asset. If the useful lives of assets are reduced, depreciation may be accelerated in future years. Maintenance and repair items are expensed as incurred.

F-7

SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Asset classes and related estimated useful lives are as follows:

Towers and related components

  2 –15- 15 years

Furniture, equipment and vehicles

  2 –- 7 years

Buildings and improvements

  5 –26- 39 years

Capitalized costs incurred subsequent to when an asset is originally placed in service are depreciated over the remaining estimated useful life of the respective asset. Changes in an asset’s estimated useful life are accounted for prospectively, with the book value of the asset at the time of the change being depreciated over the revised remaining useful life. There has been no material impact for changes in estimated useful lives for any years presented.

Interest is capitalized in connection with the self constructionself-construction of Company ownedCompany-owned towers. The capitalizedCapitalized interest is recorded as part of the asset to which it relates and is amortized over the asset’s estimated useful life. Approximately $3.5$0.1 million, $1.7 million and $3.9 million of interest cost was capitalized in both2003, 2002 and 2001, and 2000.

e.
Intangible Assets
Intangible assets are comprisedrespectively. Approximately $1.9 million of costs paidcapitalized interest was reclassified to discontinued operations in excess of the fair value of assets acquired (“Goodwill”) and amounts paid related to covenants not to compete, deferred financing fees and deferred lease costs. Goodwill is being amortized over periods that range from 7 to 40 years. The covenants not to compete are being amortized over the terms of the contracts, which range from 5 to 10 years. Amortization expense2002. No capitalized interest was $6.9 million, $3.6 million and $1.1 million for the years ended December 31, 2001, 2000 and 1999, respectively. As of December 31, 2001 and 2000, unamortized goodwill and covenants not to compete were $86.2 million and $66.2 million, respectively, and are includedreclassified in intangible assets. Accumulated amortization totaled $11.2 million and $5.0 million at December 31, 2001 and 2000, respectively.
f.
Deferred Financing Fees
2003.

f. Deferred Financing Fees

Financing fees related to the issuance of the senior credit facility, the 10¼% senior notes, the 12% senior discount notes, and the related original issue discount on the 12% senior discount notes,debt have been deferred and are being amortized using a method that approximates the effective interest rate method over the length of indebtedness to which they relate. As of December 31, 2001 and 2000, unamortized deferred financing fees were $27.8 million and $15.4 million, respectively, and are included in intangible assets.

g.
Deferred Lease Costs

g. Deferred Lease Costs

The Company defers certain initial direct costs associated with lease originations and lease amendments and amortizes these costs over the initial lease term, generally five years. TotalSuch costs deferred were approximately $1.9$2.0 million, $1.7 million and $1.1$1.6 million in 2003, 2002, and 2001, respectively. Amortization expense was $1.3 million, $0.8 million and 2000, respectively.$0.5 million for the years ended December 31, 2003, 2002 and 2001, respectively, and is included in cost of site leasing in the accompanying Consolidated Statements of Operations. As of December 31, 20012003 and 2000,2002, unamortized deferred lease costs were $3.1$4.1 million and $1.8$3.4 million, respectively, and are included in intangibleother assets. Accumulated amortization totaled $0.9$3.2 million and $0.4$1.6 million at December 31, 20012003 and 2000,2002, respectively.

h.
Impairment

h. Intangible Assets

Intangible assets are comprised of costs paid related to covenants not to compete. These finite-lived intangibles are being amortized over the terms of the contracts, which range from 3 to 5 years.

i. Goodwill

There was no goodwill at December 31, 2003 or 2002 or amortization of goodwill during 2003 and 2002, as a result of adopting the provisions of Long-Lived Assets

Statement of Financial Accounting Standards (“SFAS”) No. 121142,Goodwill and Other Intangible Assets (“SFAS 121”142”), in 2002.

Accounting for thej. Impairment of Long-Lived Assets and

In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144,Accounting for the Impairment of Disposal of Long-Lived Assets to be Disposed of,requires that (“SFAS 144”), long-lived assets including certain identifiable intangibles, and the goodwill related to those assets, beare reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of thean asset in question may not be recoverable. Management has reviewedIf an asset is determined to be impaired, the Company’s long-lived assets and has determined that there are no events requiring impairment loss recognition asis measured by the excess of December 31, 2001.

F-8

SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company periodically evaluates whether events and circumstances have occurred that may warrant revision of the estimated useful life of intangible assets or whether the remaining balance of intangible assets should be evaluated for possible impairment. The Company uses an estimate of the related undiscounted cash flows over the remaining life of the intangible assets in assessing whether an impairment occurred. The Company measures impairment loss as the amount by which the carrying amount of the asset exceeds theover its fair value as determined by an estimate of discounted future cash flows. Estimates and assumptions inherent in the assets.
i.
Fair Value of Financial Instruments
impairment evaluation include, but are not limited to, general market conditions, historical operating results, tower lease-up potential and expected timing of lease-up.

k. Fair Value of Financial Instruments

The carrying valuevalues of the Company’s financial instruments, which primarily includes cash and cash equivalents, short-term investments, restricted cash, accounts receivable, prepaid expenses, notes receivable, accounts payable, accrued expenses and notes payable, approximates fair value due to the short maturity of those instruments. The senior credit facility has a floating rate of interest and is carried at an amount which approximates fair value.

The Company’s 12% senior discount notes are publicly traded and were trading based on a 14.4% yield at December 31, 2001, indicating a fair value of the notes of approximately $209.8 million. The carrying value of the discount notes is approximately $234.9 million at December 31, 2001. The Company’s 10¼% senior notes are publicly tradedtraded. The 9¾% senior discount notes were sold in December 2003 pursuant to Rule 144A of the Securities and were trading basedExchange Commission. Since the 9¾% senior discount notes are not registered, they are subject to certain restrictions on a 13.1% yield atresale. The following table reflects yields, fair values as determined by quoted market prices and carrying values of these notes as of December 31, 2001, indicating a fair value of the notes of approximately $435.0 million. The carrying value of the notes is $500.0 million at December 31, 2001.

j.
Revenue Recognition
2003 and 2002:

   As of December 31, 2003
  

As of December 31, 2002

   Yield
  Fair
Value
  Carrying
Value
  Yield
  Fair
Value
  Carrying
Value
   (dollars in millions)  (dollars in millions)

12% Senior Discount Notes

  2.8% $71.6  $65.7  28.5% $145.1  $263.9

10¼% Senior Notes

  10.8% $398.3  $406.4  25.0% $275.0  $500.0

9¾% Senior Discount Notes

  8.8% $279.9  $275.8  —     —     —  

l. Revenue Recognition and Accounts Receivable

Revenue from site leasing is recorded monthly and recognized on a straight-line basis over the term of the related lease agreements. Receivables recorded related to the straight-lining of site leases is reflected in prepaid and other current assets and other assets in the consolidated balance sheets. Rental amounts received in advance are recorded as deferred and recordedrevenue in other liabilities (current and long-term). Deferred revenues of $13.2 million and $7.3 million are included in other current liabilities as of December 31, 2001 and 2000, respectively. Deferred revenues of $0.4 million and $0.2 million are included in other long-term liabilities as of December 31, 2001 and 2000, respectively.

the consolidated balance sheets.

Site development projects in which the Company performs consulting services include contracts on a time and materials basis or a fixed price or milestone basis. Time and materials based contracts are billed at contractual rates as the services are rendered. For those site development contracts in which the Company performs work on a fixed price basis, site development billing (and revenue recognition) is based on the completion of agreed upon phases or milestones of the project on a per site basis. Upon the completion of each phase on a per site basis, the Company recognizes the revenue related to that phase. Revenue related to services performed on

uncompleted phases of site development projects was not recorded by the Company at the end of the reporting periods presented as it was not material to the Company’s results of operations. Any estimated losses on a particular phase of completion are recognized in the period in which the loss becomes evident. Site development projects generally take from 3 to 12 months to complete.

Revenue from construction projects is recognized on the percentage-of-completion method of accounting, determined by the percentage of cost incurred to date compared to management’s estimated total anticipated cost for each contract. This method is used because management considers total cost to be the best available measure of progress on the contracts. These amounts are based on estimates, and the uncertainty inherent in the estimates initially is reduced as work on the contracts nears completion. The asset “Costs and estimated earnings in excess of billings on uncompleted contracts” represents expenses incurred and revenues recognized in excess of amounts billed. The liability “Billings in excess of costs and estimated earnings on uncompleted contracts” represents billings in excess of revenues recognized.

In December, 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101 (“SAB 101”),Revenue Recognition in Financial Statements. SAB 101 provides guidance on the recognition, presentation and disclosure of revenue in financial statements. The Company’s revenue recognition policy is in accordance with the provisions of SAB 101. Adoption of the provisions of SAB 101 did not have a material impact on the Company’s consolidated financial position.

F-9

SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Cost of site development project revenue and construction revenue include all material costs, salaries and labor costs, including payroll taxes, subcontract labor, vehicle expense and other costs directly related to the projects. All costs related to site development projects and construction projects are recognized as incurred. Cost of site leasing revenue include rent, maintenance and other tower expenses. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined to be probable.
k.
Selling, General and Administrative Expenses

Cost of site leasing revenue includes rent, property taxes, maintenance (exclusive of employee related costs) and other tower expenses. Cost of site development revenue includes all materials costs, salaries and labor costs, including payroll taxes, subcontract labor, vehicle expense and other costs directly and indirectly related to the projects. All costs related to site development projects are recognized as incurred.

The Company performs periodic credit evaluations of its customers. The Company continuously monitors collections and payments from its customers and maintains a provision for estimated credit losses based upon historical experience, specific customer collection issues identified and past due balances as determined based on contractual terms. Amounts determined to be uncollectible are written off against the allowance for doubtful accounts in the period in which uncollectability is determined to be probable. If the capital markets and the ability of wireless carriers to access capital were to deteriorate, the ultimate collectability of accounts receivable may be negatively impacted.

m. Selling, General and Administrative Expenses

Selling, general and administrative expenses represent those costs incurred which are related to the administration or management of the Company. Also included in this category are corporate development expenses incurred in the normal course of business that represent costs incurred in connection with proposed acquisitions which have not bebeen consummated, and new build activities where a capital asset is not produced, and expansion of the customer base. The above costs are expensed as incurred. There were no corporate development expenses in 2003 or 2002. Development expenses ofincluded in selling, general and administrative were $4.2 million $2.6 million, and $1.0 million were incurred for the yearsyear ended December 31, 2001, 2000 and 1999, respectively.

l.
Restructuring and Other Charge
During 2001, the Company implemented a plan to restructure and reduce its new build construction plan. The plan included the abandonment of certain acquisition and new tower build sites resulting in a noncash pre-tax charge of approximately $24.1 million.The plan also eliminated 102 operational positions and closed and/or consolidated selected offices. Payments made related to employee separation and office closings were approximately $0.3 million. All amounts related to the plan for the termination of employees and office closings were paid during 2001.
m.
Income Taxes

n.Income Taxes

The Company accounts for income taxes in accordance with the provisions of Statement of Financial Accounting StandardsSFAS No. 109,Accounting for Income Taxes(“ (“SFAS 109”). SFAS 109 requires the Company to recognize deferred tax liabilities and assets for the expected future income tax consequences of events that have been recognized in the Company’s consolidated financial statements. Deferred tax liabilities and assets are determined based on the temporary differences between the consolidated financial statements carrying amounts and the tax bases of assets and liabilities, using enacted tax rates in the years in which the temporary differences are expected to reverse. In assessing the likelihood of utilization of existing deferred tax assets, management has considered historical results of operations and the current operating environment.

n.
Reclassifications
Certain reclassifications have been made

o. Stock-Based Compensation

In December 2002, the FASB issued SFAS 148,Accounting for Stock-Based Compensation—Transition and Disclosure—an Amendment of SFAS 123 (“SFAS 148”) which provides alternative methods for a voluntary change to the 2000fair value method of accounting for stock-based employee compensation and 1999 consolidated financial statementsamends the disclosure requirements of SFAS 123,Accounting for Stock-Based Compensation. The Company has

elected to conformcontinue to account for its stock-based employee compensation plans under APB 25,Accounting for Stock Issued to Employees (“APB 25”), and related interpretations and adopt the 2001 presentation.

o.
Loss Per Share
disclosure provisions of SFAS 148.

p. Loss Per Share

Basic and diluted loss per share are calculated in accordance with Statement of Financial Accounting StandardsSFAS No. 128,Earnings per Share. Weighted average shares outstanding include the effect of shares issuable under acquisition earn-out obligations. The Company has potential common stock equivalents related to its outstanding stock options. These potential common stock equivalents were not included in diluted loss per share because the effect would have been anti-dilutive. Accordingly, basic and diluted loss per common share and the weighted average number of shares used in the computations are the same for all periods presented. There were

F-10

SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.8 million, 3.12.8 million and 3.23.8 million options outstanding at December 31, 2003, 2002, and 2001, 2000 and 1999, respectively. The computation of basic and fully diluted loss per share is as follows:
   
For the years ended December 31,
 
   
2001
   
2000
   
1999
 
   
(in thousands except per share information)
 
Net loss before extraordinary item  $(120,076)  $(28,915)  $(33,441)
Extraordinary item   (5,069)   —      (1,150)
Preferred stock dividend   —      —      733 
   
  
  
Loss to common stockholders  $(125,145)  $(28,915)  $(33,858)
   
  
  
Weighted average number of shares outstanding   47,437    41,156    19,156 
Loss per share before extraordinary item  $(2.53)  $(0.70)  $(1.71)
Extraordinary item   (0.11)   —      (0.06)
   
  
  
Loss per share  $(2.64)  $(0.70)  $(1.77)
   
  
  
p.
Comprehensive Income (Loss)

q. Comprehensive Loss

During the years ended December 31, 2001, 20002003, 2002, and 1999,2001, the Company did not have any changes in its equity resulting from non-owner sources and, accordingly, comprehensive income (loss)loss was equal to the net loss amounts presented for the respective periods in the accompanying Consolidated Statements of Operations.

r. Reclassifications

Certain reclassifications have been made to the 2002 and 2001 consolidated financial statements to conform to the 2003 presentation.

3. CURRENTDISCONTINUED OPERATIONS

In March 2003 certain of the Company’s subsidiaries entered into a definitive agreement (the “Western tower sale”) to sell up to an aggregate of 801 towers, which represented substantially all of the Company’s towers in the Western two-thirds of the United States. The Company ultimately sold 784 of the 801 towers. Gross proceeds realized during 2003 from the sale of the 784 towers was $196.7 million, subject to certain remaining potential adjustments. At December 31, 2003, approximately $7.3 million of the proceeds were held by an escrow agent in accordance with adjustment provisions of the agreement. At December 31, 2003, the Company had recorded a liability of approximately $2.6 million for the estimated remaining potential adjustments associated with the Western tower sale which is reflected in accrued expenses in the December 31, 2003 Consolidated Balance Sheet. Accordingly, we estimate that the final gross cash proceeds to be realized from the Western tower sale, after all potential remaining purchase price adjustments, will be approximately $194.1 million.

In consideration of the Company’s recent Western tower sale, the Company evaluated the scope and operating plan with respect to its 64 remaining towers in the same U.S. geographic market as the 784 towers sold. This evaluation resulted in the Company’s decision to sell all tower operations in this geographic market. The Company has begun to market these towers for sale on its own and believes that the activities necessary to sell the towers will be completed within one year. As a result of this decision, the Company has accounted for the remaining 64 towers as discontinued operations, which includes the 17 towers subsequently excluded from the original 801 Western tower sale. During 2003, the Company sold 3 of the 64 towers held for sale leaving 61 towers held for sale as of December 31, 2003.

The Company evaluated these 61 towers for impairment. The December 31, 2003 loss from discontinued operations includes a $4.5 million asset impairment charge associated with the write-down of the carrying value of these towers to their fair value less estimated costs to sell.

In accordance with SFAS No. 144, the Company has classified the operating results of the 784 towers sold in the Western tower sale and 64 remaining western

towers as discontinued operations in the accompanying Consolidated Financial Statements. All prior periods have been reclassified to conform to the current year presentation.

The discontinued operations affect only the Company’s site leasing segment. The following is a summary of the operating results of the discontinued operations:

   For the years ended December 31,
 
   2003
  2002
  2001
 
   (in thousands) 

Revenues

  $11,198  $24,542  $17,672 
   
 
 

Site leasing gross profit

  $7,049  $15,564  $11,607 
   
 
 

Loss from discontinued operations, net of income taxes

  $(5,605) $(3,717) $(2,201)

Loss on disposal of discontinued operations, net of income taxes

   (2,085)  —     —   
   
 
 

Loss from discontinued operations, net of income taxes

  $(7,690) $(3,717) $(2,201)
   
 
 

A portion of the Company’s interest expense has been allocated to discontinued operations based upon the debt balance attributable to those operations. Interest expense allocated to discontinued operations was $0.8 million and $1.4 million for the years ended December 31, 2003 and 2002, respectively. No interest expense was allocated to discontinued operations in 2001 as there was no associated debt outstanding during 2001.

The following is a summarized balance sheet presenting the carrying amounts of the major classes of assets and liabilities related to the towers held for sale and classified as discontinued operations as of December 31, 2003 and 2002, respectively:

   As of December 31,
   2003
  2002
   (in thousands)

Property and equipment, net

  $148  $198,259

Other assets

   247   4,150
   
  

Assets held for sale

  $395  $202,409
   
  

Liabilities held for sale

  $608  $2,685
   
  

The notes to the consolidated financial statements for all years presented have been adjusted for the discontinued operations described above.

4. ACCOUNTING PRONOUNCEMENTS

In June 2000,October 2001, the Financial FASB issued SFAS No. 143,Accounting Standards Boardfor Asset Retirement Obligations (“FASB”SFAS 143”). This standard requires companies to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, we capitalize a cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, we either settle the obligation for its recorded amount or incur a gain or loss upon settlement. We adopted this standard effective January 1, 2003. As a result of our obligation to restore leaseholds to their original condition upon termination of ground leases underlying a majority of our towers and our estimate as to the probability of incurring these obligations, we recorded a cumulative effect adjustment of approximately $0.5 million during the first quarter of 2003. The adoption of SFAS 143 resulted in an increase in tower fixed assets of approximately $0.9 million and the recording of an asset retirement obligation liability of approximately $1.4 million.

In April 2002, the FASB issued SFAS No. 145,Rescission of FASB Statements Nos. 4, 44 and 62, Amendment of SFAS No. 13 and Technical Corrections (“SFAS 145”). SFAS 145 requires gains and losses on extinguishments of debt to be classified as income or loss from continuing operations rather than as extraordinary items as previously required under SFAS 4. Extraordinary treatment is required for certain extinguishments as provided in APB Opinion No. 30. The statement also amended SFAS 13 for certain sale-

leaseback and sublease accounting. We adopted the provisions of SFAS 145 effective January 1, 2003. Pursuant to SFAS 145, our previously reported extraordinary item of $5.1 million, related to the early extinguishment of debt, was reclassified to operating expense in the accompanying December 31, 2001 Consolidated Statement of Financial Accounting Standards (“SFAS”)Operations.

In July 2002, the FASB issued SFAS No. 138,146,Accounting for CertainCosts Associated with Exit or Disposal Activities (“SFAS 146”) and nullified EITF Issue No. 94-3. SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred, whereas EITF No. 94-3 had recognized the liability at the commitment date to an exit plan. SFAS 146 requires that the initial measurement of a liability be at fair value. We adopted the provisions of SFAS 146 effective January 1, 2003. The adoption of SFAS 146 did not have a material effect on our consolidated financial statements.

In December 2002, the FASB issued SFAS No. 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. This statement also amends the disclosure requirements of SFAS 123 to require disclosures in both annual and interim financial statements regarding the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The standard is effective for fiscal years beginning after December 15, 2002. We adopted the disclosure-only provisions of SFAS 148 as of December 31, 2002. We will continue to account for stock-based compensation in accordance with APB 25. As such, we do not expect this standard will have a material impact on our consolidated financial position or results of operations.

In April 2003, the FASB issued SFAS No. 149 (“SFAS 149”),Amendment of Statement 133 on Derivative Instruments and Certain Hedging Activities an Amendment of SFAS 133.SFAS 133 established. This Statement amends and clarifies financial accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities. activities under Statement of Financial Accounting Standards No. 133 (“SFAS 138 addresses133”),Accounting for Derivative Instruments and Hedging Activities.The statement was effective for contracts entered into or modified after June 30, 2003. The adoption of this standard did not have a limited numbermaterial impact on our financial position or results of issues causing implementation difficulties for numerous entities that apply SFAS 133 and amends the accounting and reporting standards of SFAS 133 for certain derivative instruments and certain hedging activities. The Company adopted SFAS 138 on January 1, 2001 and there was not a significant impact from the adoption.operations.

In June 2001,May 2003, the FASB issued SFAS No. 141,Business Combinations(“150 (“SFAS 141”150”). SFAS 141 addresses financial accounting and reporting for business combinations and supercedes Accounting Principles Board Opinion (“APB”) No. 16,Business Combinations and SFAS 38,Accounting for Preacquisition ContingenciesCertain Financial Instruments with Characteristics of Purchased EnterprisesBoth Liabilities and Equity. All business combinationsThis Statement 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). This standard was effective at the scopebeginning of SFAS 141the first interim period beginning after June 15, 2003, except for mandatorily redeemable financial instruments of nonpublic entities that are subject to be accountedthe provisions of this Statement for under the purchase method. SFAS 141 became effective June 30, 2001.first fiscal period beginning after December 15, 2003. The adoption of SFAS 141this standard did not have a material impact on our financial position or results of operations.

In November 2002, the FASB issued FASB Interpretation No. 45 (“FIN 45”),Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.FIN 45 elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. FIN 45 also clarifies requirements for the recognition of guarantees at the onset of an arrangement. The initial recognition and measurement provisions of FIN 45 are applicable on a prospective basis to guarantees used or modified after December 31, 2002. The disclosure requirements of FIN 45 are effective for interim or annual financial statements after December 15, 2002. We implemented the disclosure requirements of FIN 45 as of December 31, 2002 and there was no material impact on our consolidated financial statements as a result of this implementation.

In January 2003, the FASB issued Interpretation No. 46,Consolidation for Variable Interest Entities, an Interpretation of ARB No. 51 which requires all variable interest entities (“VIES”) to be consolidated by the primary beneficiary. The primary beneficiary is the entity that holds the majority of the beneficial interest in the VIE. In addition, the interpretation expands the disclosure requirements for both variable interest entities that are consolidated as well as VIEs from which the entity is the holder of a significant amount of beneficial

interests, but not the majority. FIN 46 is effective immediately for all VIEs and for all special purpose entities created or acquired after January 31, 2003. For VIEs created or acquired prior to February 1, 2003, the provisions of FIN 46 must be applied for the first quarter ended March 31, 2004. The adoption of FIN 46 did not have, nor is it expected to have, a material impact on the Company’s consolidated financial statements.

5. CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES

In June 2001,a. SFAS 143

Effective January 1, 2003, the FASB issuedCompany adopted the provisions of SFAS No. 142,Goodwill and Other Intangible Assets (“SFAS 142”). This standard eliminates143. Under the amortization of goodwill and certain intangible assets against earnings. Instead, goodwill will be subject to at least an annual assessment for impairment by applying a fair-value-based test. Goodwill and certain intangible assets will be written-down against earnings onlynew accounting principle, the Company recognizes asset retirement obligations in the periodsperiod in which they are incurred, if a reasonable estimate of a fair value can be made, and accretes such liability through the recordedobligation’s estimated settlement date. The associated asset retirement costs are capitalized as part of the carrying amount of the related tower fixed assets and depreciated over the estimated useful life.

The Company has entered into ground leases for the land underlying the majority of the Company’s towers. A majority of these leases require the Company to restore leaseholds to their original condition upon termination of the ground lease. SFAS 143 requires that the net present value of future restoration obligations be recorded as a liability as of the assetdate the legal obligation arises and this amount be capitalized to the related operating asset. At January 1, 2003, the effective date of adoption, the cumulative effect of the change on prior years resulted in a charge of approximately $0.5 million ($0.01 per share), which is more than its fair value. Goodwill that existed at June 30, 2001 continued to be amortized through December 31, 2001. Goodwill acquired subsequent to June 30, 2001 was not amortized duringincluded in net loss for the year ended December 31, 2001.2003. In addition, at the date of adoption, the Company recorded an increase in tower assets of approximately $0.9 million and recorded an asset retirement obligation liability of approximately $1.4 million. The asset retirement obligation at December 31, 2003 of $1.2 million is included in other long-term liabilities in the December 31, 2003 Consolidated Balance Sheet. In determining the impact of SFAS 143, the Company considered the nature and scope of legal restoration obligation provisions contained in its third party ground leases, the historical retirement experience as an indicator of future restoration probabilities, intent in renewing existing ground leases through lease termination dates, current and future value and timing of estimated restoration costs, and the credit adjusted risk-free rate used to discount future obligations.

The following pro-forma summary presents the Company’s loss from continuing operations, net loss and related loss per share information as if the Company had been accounting for asset retirement obligations under SFAS 143 for the periods presented:

   For the years ended
December 31,
 
   2002
  2001
 
   (in thousands, except per
share data)		 

Loss from continuing operations before cumulative effect of changes in accounting principles

  $(184,794) $(123,748)

Per share loss from continuing operations before cumulative effect of changes in accounting principles

  $(3.66) $(2.62)

Net loss

  $(249,206) $(125,970)

Per share net loss

  $(4.94) $(2.66)

The following summarizes the activity of the asset retirement obligation liability:

   For the years ended
December 31,
 
   2003
  2002
 
   (in thousands) 

Asset retirement obligation at January 1

  $—    $957 

Liability recorded in transition

   1,140   —   

Accretion expense

   119   130 

Revision in estimates

   (64)  (38)
   
 

Asset retirement obligation at December 31

  $1,195  $1,049 
   
 

b. SFAS 142

During 2002, the Company completed the transitional impairment test of goodwill required under SFAS 142,Goodwill and other Intangible Assets(“SFAS 142”), which was adopted effective January 1, 2002. As a result of completing the required transitional test, the Company recorded a charge retroactive to the adoption date for the cumulative effect of the accounting change in the amount of $60.7 million, representing the excess of the carrying value of certain assets as compared to their estimated fair value. Of the total $60.7 million cumulative effect adjustment, $58.5 million related to the site development construction reporting segment and $2.2 million related to the site leasing reporting segment. In addition, during 2002, the Company recorded additional goodwill totaling approximately $9.2 million resulting from the achievement of certain earn-out obligations under various construction acquisition agreements entered into prior to July 1, 2001, which was determined to be impaired during 2002 and written off (See Note 18). The Company will adoptcurrently does not have any remaining goodwill or other intangible assets subject to SFAS 142.

The following unaudited pro forma summary presents the Company’s net loss and per share information as if the Company had been accounting for its goodwill under SFAS 142 for all periods presented:

   For the years ended
December 31,
 
   2002
  2001
 
   (in thousands, except per
share data)		 

Reported net loss

  $(248,996) $(125,792)

Cumulative effect of change in accounting principle

   60,674   —   
   
 

Loss excluding cumulative effect of change in accounting principle

   (188,322)  (125,792)

Add back goodwill amortization

   —     3,802 
   
 

Adjusted net loss

  $(188,322) $(121,990)

Reported basic and diluted loss per share

  $(4.93) $(2.66)

Cumulative effect of change in accounting principle

   1.20   —   
   
 

Loss per share excluding cumulative effect of change in accounting principle

   (3.73)  (2.66)

Add back goodwill amortization

   —     .08 
   
 

Adjusted net loss per share

  $(3.73) $(2.58)
   
 

6. SHORT-TERM INVESTMENTS

The carrying value of short-term investments of $15.2 million equaled the fair value of these investments at December 31, 2003. In January 2004 these investments were sold for their face value plus accrued interest.

7. RESTRICTED CASH

Restricted cash at December 31, 2003 was $18.7 million. This balance includes $11.4 million of cash pledged as collateral to secure certain obligations of the Company and certain of its affiliates related to surety bonds issued for the benefit of the Company or its affiliates in the first quarterordinary course of 2002. With the adoption of SFAS 142, management will assess the impact based on a two-step approach to assess goodwill based on applicable reporting units and will reassess any intangible assets, including goodwill, recorded in connection with its previous acquisitions. The Company had recorded approximately $6.9business. Approximately $8.4 million of amortization on goodwillthe collateral relates to tower removal obligations, is long-term in nature, and is included in other assets in the December 31, 2003 Consolidated Balance Sheet. Approximately $3.0 million of the collateral relates to payment and performance bonds, which are shorter term in nature and are included in restricted cash and reflected as a current asset. The remaining $7.3 million of restricted cash relates to funds being held by an escrow agent in accordance with certain potential purchase price adjustments to the Western tower purchase and sale agreement. These funds are classified as current as they are expected to be released, net of any required obligations, to the Company during the next twelve months.

8. INTANGIBLE ASSETS, NET

Amortization expense was $1.3 million, $1.1 million and $1.2 million for the years ended December 31, 2003, 2002 and 2001, respectively. As of December 31, 2003 and 2002, total costs of covenants not to compete during 2001. Management is currently assessing, but has not yet determined the impact

F-11
were $6.3 million and $6.4 million, respectively, and accumulated amortization totaled $3.9 million and $2.7 million, respectively.

SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

adoption of SFAS 142 will haveEstimated amortization expense on the Company’s consolidated financial statements, however, management believes it may be material. As of December 31, 2001, the Company had unamortized goodwill and covenants not to compete is as follows:

   Year ending December 31,
   (in thousands)

2004

  $1,051

2005

   976

2006

   375

2007

   6
   

Total

  $2,408
   

9. ACQUISITIONS

During 2003, the Company did not acquire any towers or businesses. However, during 2003, the Company paid approximately $3.1 in settlement of $86.2 million.

contingent purchase price amounts payable as a result of towers or businesses it acquired having met or exceeded earnings or new tower targets.

During 2002, the Company acquired 53 towers and related assets from various sellers. The aggregate consideration paid was $15.5 million in cash and 330,736 shares of Class A common stock. In Juneaddition, the Company issued 397,773 shares of Class A common stock in settlement of contingent purchase price amounts payable as a result of towers or businesses it acquired having met or exceeded certain earnings or new tower targets.

During 2001, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued an exposure draft of a proposed Statement of Position (“SOP”) entitledAccounting for Certain Costs and Activities Related to Property, Plant and Equipment. The proposed SOP may limit the ability of companies to capitalize certain costs as part of property, plant and equipment (“PP&E”). The proposed SOP would also require that each significant separately identifiable part of PP&E with a useful life different from the useful life of the PP&E to which it relates be accounted for separately and depreciated over the individual component’s expected useful life. The proposed SOP would be effective for fiscal years beginning after June 15, 2002. Management has not determined the effect this SOP, if issued as proposed, would have on the consolidated financial statements, but believes it may be material.

In October 2001, the FASB issued SFAS No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS 144”). SFAS 144 supercedes SFAS 121,Accounting for the Impairment of Long-Lived Assets and for Long Lived Assets to Be Disposed of. SFAS 144 applies to all long-lived assets (including discontinued operations) and consequently amends APB No. 30,Reporting Results of Operations—Reporting the Effects of Disposal of a Segment of a Business. SFAS 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001. Management has not determined the effect, if any, this standard will have on the Company’s consolidated financial statements.
4.    ACQUISITIONS
During the year, the Company purchased two site development construction companies. On January 1, 2001, the Company acquired all of the issued and outstanding stock of Atlantic Telecom Services, Inc. (“Atlantic Telecom”). The Company paid $2.4$14.5 million in cash and issued 213,524413,631 shares of its Class A common stock to the shareholderssellers. During 2002 the Company paid $7.0 million in cash and issued 587,260 shares of Atlantic Telecom.Class A common stock to the former owners of these two companies as a result of certain earnings targets having been met. In addition, as of December 31, 2001,2002, certain of the former shareholders of Atlantic Telecomowners were entitled to receive up to $5.0an additional $2.0 million as a result of certain 2001 and 2002 earnings targets being met. The excessCompany accrued the $2.0 million within other current liabilities in the Consolidated Balance Sheet as of December 31, 2002. The $12.2 million in original goodwill plus the purchase price over the estimated fair value of the net assets acquired, or approximately $9.7$12.0 million that was recorded as goodwill, which is being amortized on a straight-line basis over a period of 15 years.
On June 1, 2001, the Company acquired allresult of the issued and outstanding stockearn-out targets having been met were written off during 2002 in connection with the implementation of Total Tower Service, Inc. (“Total Tower”)SFAS 142 (See Note 5). The Company paid $12.1During 2003, the $2.0 million in cash and issued 200,107 shares of its Class A common stock to the shareholders of Total Tower. This consideration includes the purchase of real property where the construction company is located, as well as an adjacent tract of land. In addition, the former shareholders of Total Tower may receive additional shares of Class A common stock valued between $2.5 million and $7.0 million per year based upon varying net income targets being met during the first and second year after the closing date. At the Company’s option, this amount may beaccrued at December 31, 2002 was paid in cash or Class A common stock. The excess of the purchase price over the estimated fair value of the net assets acquired, or approximately $10.1 million was recorded as goodwill, which is being amortized on a straight-line basis over a period of 15 years.
cash.

Additionally, during 2001, the Company acquired 677 towers and related assets from various sellers. The aggregate purchase priceconsideration paid to the sellers for these acquisitions for the year ended December 31, 2001 was $214.4$218.7 million in cash and 370,502 shares of its Class A common stock. In addition, the Company issued 790,495 shares of its Class A Common Stockcommon stock as a result of towers or businesses it acquired having met or exceeded certain earnings or new tower targets identified in the various acquisition agreements.

The Company accounted for all the above acquisitions using the purchase method of accounting. The results of operations of the acquired assets and companies are included with those of the Company from the dates of the respective acquisitions. None of the individual acquisitions consummated during the year was deemedwere significant

F-12

SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

to the Company and, accordingly, pro forma financial information has not been presented for 2001. The acquisitions were paid for from the issuance of Class A common stock, proceeds from debt offerings, cash provided from operations, cash on hand and borrowings under the senior credit facility.
During 2000, the Company acquired 448 towers and related assets from various sellers, all of which were individually insignificant to the Company. The aggregate purchase price for these acquisitions for the year ended December 31, 2000 was $174.5 million, which was paid from proceeds from borrowings, equity offerings, cash provided from operations and cash on hand. The historical results of operations of the assets acquired are not material in relation to the Company’s consolidated financial statements; accordingly, pro forma financial information has not been presented for 2000.
During 1999, the Company completed 40 acquisitions consisting of 231 towers and related assets from various sellers, all of which were individually insignificant to the Company. The aggregate purchase price for these acquisitions for the year ended December 31, 1999 was $80.9 million, which was paid from cash on hand.
On April 30, 1999, the Company acquired all of the issued and outstanding stock of Network Services and issued 780,000 shares of its Class A common stock to the former shareholders of Network Services. The former shareholders of Network Services received $2.5 million in cash and 320,000 additional shares of the Company’s Class A common stock in 1999 and an additional 400,000 shares of the Company’s Class A common stock in 2000, as certain targets were met. The excess of the purchase price over the estimated fair value of the net assets acquired was recorded as goodwill and is being amortized on a straight-line basis over a period of 15 years.
presented.

5.10. CONCENTRATION OF CREDIT RISK

The Company’s credit risks consist primarily of accounts receivable with national and local wireless communications providers and federal and state governmentgovernmental agencies. The Company performs periodic credit evaluations of its customers’ financial condition and provides allowances for doubtful accounts as

required based upon factors surrounding the credit risk of specific customers, historical trends and other information. FollowingThe Company generally does not require collateral. The following is a list of significant customers and the percentage of total revenue derived from such customers:

   
For the years ended December 31,
   
2001
  
2000
  
1999
   
(% of revenue)
Sprint PCS  10.3  10.7  17.3
Nextel  11.1  less than 10.0  less than 10.0
Cingular  less than 10.0  less than 10.0  12.3

For the year ended
December 31, 2003
(% of revenue)

Bechtel Corporation

14.3%

AT&T Wireless

10.8%

Cingular Wireless

10.2%
For the year ended
December 31, 2002
(% of revenue)

Bechtel Corporation

15.3%

Cingular Wireless

12.6%

AT&T Wireless

10.1%
For the year ended
December 31, 2001
(% of revenue)

Bright/Horizon

11.3%

Nextel

10.9%

AT&T Wireless

10.5%

The Company’s site development consulting, site development construction and site leasing segments derive revenue from these customers.

6.11. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS

Costs and estimated earnings on uncompleted contracts consist of the following:

   As of December 31,
 
   2003
  2002
 
   (in thousands) 

Costs incurred on uncompleted contracts

  $43,738  $74,506 

Estimated earnings

   3,809   17,148 

Billings to date

   (38,897)  (83,591)
   
 
   $8,650  $8,063 
   
 

These amounts are included in the accompanying consolidated balance sheets under the following captions:

   As of December 31,
 
   2003
  2002
 
   (in thousands) 

Costs and estimated earnings in excess of billings on uncompleted contracts

  $10,227  $10,425 

Billings in excess of costs and estimated earnings on uncompleted contracts

   (1,577)  (2,362)
   
 
   $8,650  $8,063 
   
 

12. PROPERTY AND EQUIPMENT

Property and equipment, excluding assets held for sale, consists of the following:

   
As of December 31,
 
   
2001
   
2000
 
   
(in thousands)
 
Towers and related components  $1,224,891   $721,361 
Construction-in-process   48,998    69,012 
Furniture, equipment and vehicles   38,148    19,497 
Buildings and improvements   2,406    625 
Land   12,275    10,014 
   
  
    1,326,718    820,509 
Less: accumulated depreciation and amortization   (128,159)   (54,694)
   
  
Property and equipment, net  $1,198,559   $765,815 
   
  

F-13

   As of December 31,
 
   2003
  2002
 
   (in thousands) 

Towers and related components

  $1,055,912  $1,058,805 

Construction-in-process

   498   4,595 

Furniture, equipment and vehicles

   38,403   40,883 

Land, buildings and improvements

   16,160   16,500 
   
 
    1,110,973   1,120,783 

Less: accumulated depreciation and amortization

   (254,760)  (179,822)
   
 

Property and equipment, net

  $856,213  $940,961 
   
 

SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Construction-in-process represents costs incurred related to towers that are under development and will be used in the Company’s operations. (See Note 15)
7.    COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Costs

Depreciation expense was $83.0 million, $84.5 million and estimated earnings on uncompleted contracts consist$61.0 million for the years ended December 31, 2003, 2002 and 2001, respectively.

13. ACCRUED EXPENSES

The Company’s accrued expenses are comprised of the following:

   
As of December 31,
 
   
2001
   
2000
 
   
(in thousands)
 
Costs incurred on uncompleted contracts  $64,400   $48,060 
Estimated earnings   14,200    9,941 
Billings to date   (73,569)   (50,359)
   
  
   $5,031   $7,642 
   
  
These amounts are included in the accompanying consolidated balance sheet under the following captions:
   
As of December 31,
 
   
2001
   
2000
 
   
(in thousands)
 
Costs and estimated earnings in excess of billings
on uncompleted contracts		  $11,333   $13,584 
Billings in excess of costs and estimated earnings
on uncompleted contracts		   (6,302)   (5,942)
   
  
   $5,031   $7,642 
   
  

   As of December 31,
   2003
  2002
   (in thousands)

Salaries and benefits

  $2,421  $1,791

Real estate and property taxes

   6,084   5,289

Restructuring and other charges

   1,040   1,706

Insurance

   1,234   3,738

Tower sale purchase price adjustment

   2,573   —  

Other

   4,357   1,419
   
  
   $17,709  $13,943
   
  

8.14. CURRENT AND LONG-TERM DEBT

   
As of December 31,
 
   
2001
   
2000
 
   
(in thousands)
 
10¼% senior notes, unsecured, interest payable semi-annually, balloon principal payment of $500,000 due at maturity on February 1, 2009.  $500,000   $—   
12% senior discount notes, net of unamortized original issue discount of $34,115 at December 31, 2001, and $59,958 at December 31, 2000, unsecured, cash interest payable semi-annually in arrears beginning September 1, 2003, balloon principal payment of $269,000 due at maturity on March 1, 2008.   234,885    209,042 
Senior secured credit facility loans, interest at varying rates (4.76% to 6.50% at December 31, 2001) quarterly installments based on reduced availability beginning September 30, 2003, maturing June 15, 2007.   110,000    —   
Notes payable, interest at varying rates (2.9% to 11.4% at December 31, 2001).   568    231 
Senior credit facility term loan, repaid in February 2001.   —      50,000 
Senior credit facility revolving loan, repaid in March 2001.   —      25,000 
   
  
    845,453    284,273 
Less: current maturities   (365)   (2,606)
   
  
Long-term debt  $845,088   $281,667 
   
  

F-14

   As of December 31,
 
   2003
  2002
 
   (in thousands) 
10¼% senior notes, unsecured, interest payable semi-annually, balloon principal payment of $406,441 due at maturity on February 1, 2009, including deferred gain related to termination of derivative of $4,559 and $5,236 at December 31, 2003, and 2002, respectively. See Note 20.  $411,000  $505,236 
9¾% senior discount notes, net of unamortized original issue discount of $126,204 at December 31, 2003, unsecured, cash interest payable semi-annually in arrears beginning June 15, 2008, balloon principal payment of $402,024 due at maturity on December 15, 2011.   275,820   —   
12% senior discount notes, net of unamortized original issue discount of $5,077 at December 31, 2002, unsecured, cash interest payable semi-annually in arrears beginning September 1, 2003, balloon principal payment of $65,673 due at maturity on March 1, 2008. See Note 24.   65,673   263,923 
Senior secured credit facility loans, interest at varying cash rates (5.15% to 5.17% at December 31, 2003). Additional interest accrues at 3.5% and is payable at maturity. See Note 24.   118,227   —   

Senior secured credit facility loans. This facility was paid in full in May 2003.

   —     255,000 
Notes payable, interest at varying rates (2.9% to 11.4% at December 31, 2003 maturing at various dates through 2004).   38   123 
   
 
    870,758   1,024,282 

Less: current maturities

   (11,538)  (60,083)
   
 

Long-term debt

  $859,220  $964,199 
   
 

SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10¼% Senior Notes

In February 2001, the Company issued $500.0 million of its 10¼% senior notes due 2009, which produced net proceeds of approximately $484.2$484.3 million after deducting offering expenses. Interest accrues on the notes and will beis payable in cash semi-annually in arrears on February 1 and August 1, commencing August 1, 2001. Proceeds from the senior notes were used to acquire and construct telecommunications towers, repay borrowings under the senior credit facility, and for general working capital purposes.

Approximately $105.0$105.6 million of the proceeds waswere used to repay all borrowingborrowings under the Company’s former senior credit facility, and the senior credit agreement in existence at that time was terminated.facility. The Company wrote off the deferred financing fees relating to the former senior credit facility and recorded a $5.1 million extraordinary losscharge in the first quarter of 2001 in connection with the termination of this facility.

During the year ended December 31, 2003, the Company exchanged $13.5 million in principal amount of its 10¼% senior notes for 3.85 million shares of Class A common stock. Additionally, the Company repurchased $80.1 million in principal amount of its 10¼% senior notes in the open market for $79.5 million in cash. During 2003, the Company recognized a gain on extinguishment of debt of $1.5 million and wrote-off deferred financing fees of $1.9 million in connection with the 10¼% senior note retirement transactions. See Note 24 for further discussion of repurchase activity subsequent to December 31, 2003.

The 10¼% senior notes contain numerous restrictive covenants, including but not limited to covenants that restrictare unsecured and are pari passu in right of payment with the Company’s other existing and future senior indebtedness. The 10¼% senior notes place certain restrictions on, among other things, the incurrence of debt and liens, issuance of preferred stock, payment of dividends or other distributions, sales of assets, transactions with affiliates, sale and leaseback transactions, certain investments and the Company’s ability to incur indebtedness, pay dividends, create liens, sell assets and engage in certain mergers and acquisitions.merge or consolidate with other entities. The ability of the Company to comply with the covenants and other terms of the 10¼% senior notes and to satisfy its respective debt obligations will depend on the future operating performance of the Company. In the event the Company fails to comply with the various covenants contained in the 10¼% senior notes, it would be in default thereunder, and in any such case, the maturity of a portion or all of its long-term indebtedness could be accelerated.

In addition, the acceleration of amounts due under the senior credit facility would also cause a cross-default under the indenture for the 10¼% senior notes.

9¾% Senior Discount Notes

In December 2003, the Company and Telecommunications co-issued $402.0 million of its 9¾% senior discount notes due 2011, which produced net proceeds of approximately $267.1 million after deducting offering expenses. The senior discount notes accrete in value until December 15, 2007 at which time they will have an aggregate principal amount of $402.0 million. Thereafter, interest accrues on the senior discount notes and will be payable in cash semi-annually in arrears on June 15 and December 15, commencing June 15, 2008. Proceeds from the senior discount notes were used to tender for approximately $153.3 million of the Company’s 12% senior discount notes and for general working capital purposes.

The 9¾% senior discount notes are unsecured and are pari passu in right of payment with the Company’s other existing and future senior indebtedness. The 9¾% senior discount notes place certain restrictions on, among other things, the incurrence of debt and liens, issuance of preferred stock, payment of dividends or other distributions, sales of assets, transaction with affiliates, sale and leaseback transactions, certain investments and the Company’s ability to merge or consolidate with other entities. The ability of the Company to comply with the covenants and other terms of the 9¾% senior discount notes and to satisfy its respective debt obligations will depend on the future operating performance of the Company. In the event the Company fails to comply with the various covenants contained in the 9¾% senior discount notes, it would be in default thereunder, and in any such case, the maturity of a portion or all of its long-term indebtedness could be accelerated. In addition, the acceleration of amounts due under the senior credit facility would also cause a cross-default under the indenture for the 9¾% senior discount notes.

12% Senior Discount Notes

In March 1998, the Company issued $269.0 million of its 12% senior discount notes due March 1, 2008. The issuance2008, which produced net proceeds of the senior discount notes netted approximately $150.2 million in proceeds to the Company.million. The senior discount notes accreteaccreted in value until March 1, 2003 at which time they will havehad an aggregate principal amount of $269.0 million. Thereafter, interest will accrueaccrues on the senior discount notes and will beis payable in cash semi-annually in arrears on March 1 and September 1, commencing September 1, 2003. Proceeds from the senior discount notes were used to acquire and construct telecommunications towers as well as for general working capital purposes.

During the year ended December 31, 2003, the Company repurchased $50.0 million in principal amount of its 12% senior discount notes in the open market for $50.3 million in cash. Additionally, during 2003, the Company

completed a tender for 70% of its outstanding 12% senior discount notes and retired $153.3 million face value of its 12% senior discount notes for $167.1 million. During 2003, the Company recognized a loss on extinguishment of $14.6 million and wrote-off deferred financing fees of $4.8 million in connection with the 12% senior discount note retirement transactions. See Note 24 for a discussion of repurchase activity subsequent to December 31, 2003.

The 12% senior discount notes contain numerous restrictive covenants, including but not limited to covenants that restrictwere unsecured and were pari passu in right of payment with the Company’s other existing and future senior indebtedness. The 12% senior discount notes placed certain restrictions on, among other things, the incurrence of debt and liens, issuance of preferred stock, payment of dividends or other distributions, sales of assets, transactions with affiliates, sale and leaseback transactions, certain investments and the Company’s ability to merge or consolidate with other entities.

Senior Secured Credit Facility (put in place January 2004)

During January 2004, SBA Senior Finance closed on a new senior credit facility in the amount of $400.0 million. This facility consists of a $275.0 million term loan which was funded at closing, a $50.0 million delayed draw term loan which the Company has until November 15, 2004 to draw and a $75.0 million revolving line of credit. The revolving lines of credit may be borrowed, repaid and redrawn. Amortization of the term loans commence September 2004 at an annual rate of 1% in each of 2004, 2005, 2006 and 2007. All remaining amounts under the term loan are due in 2008. There is no amortization of the revolving loans and all amounts outstanding are due on August 31, 2008. Amounts borrowed under this facility accrue interest at either the base rate, as defined in the agreement, plus 250 basis points or the Euro dollar rate plus 350 basis points. Had this facility been in place on December 31, 2003, the borrowing rate under this facility would have been 4.6%. This facility may be prepaid at any time with no prepayment penalty. Amounts borrowed under this facility are secured by a first lien on substantially all of SBA Senior Finance’s assets. In addition, each of SBA Senior Finance’s domestic subsidiaries has guaranteed the obligations of SBA Senior Finance under the senior credit facility and has pledged substantially all of their respective assets to secure such guarantee, and the Company and Telecommunications have pledged substantially all of their assets to secure SBA Senior Finance’s obligations under this senior credit facility.

This new credit facility requires SBA Senior Finance to maintain specified financial ratios, including ratios regarding its debt to annualized operating cash flow, debt service, cash interest expense and fixed charges for each quarter. This new senior credit facility contains affirmative and negative covenants that, among other things, restricts SBA Senior Finance’s ability to incur indebtedness, pay dividends, createdebt and liens, sell assets, commit to capital expenditures, enter into affiliate transactions or sale-leaseback transactions, and/or build towers without anchor tenants. Additionally, this facility permits distributions by SBA Senior Finance to Telecommunications and engageSBA Communications to service their debt, pay consolidated taxes, pay holding company expenses and for the repurchase of senior notes and senior discount notes subject to compliance with the covenants discussed above. SBA Senior Finance’s ability in certain mergers and acquisitions. The ability of the Companyfuture to comply with the covenants and other termsaccess the available funds under the senior credit facility will depend on its future financial performance.

On January 30, 2004, SBA Senior Finance used the proceeds from funding of the $275.0 million term loan under the new senior credit facility to repay the old credit facility in full, consisting of $144.2 million outstanding. In addition to the amounts outstanding, the Company was required to pay $8.0 million to the lenders under the old facility to facilitate the assignment of the old facility to the new lenders. As a result of this prepayment, SBA Senior Finance has written off deferred financing fees associated with the old facility of $5.4 million in addition to the $8.0 million fee paid to facilitate the assignment during the first quarter of 2004. Additionally, SBA Senior Finance has recorded deferred financing fees of approximately $5.4 million associated with this new facility in the first quarter of 2004.

Senior Secured Credit Facility (paid in full January 2004)

On May 9, 2003, Telecommunications closed on a senior credit facility in the amount of $195.0 million from General Electric Capital Corporation (“GECC”) and affiliates of Oak Hill Advisors, Inc. (“Affiliates of Oak Hill”). The facility consisted of $95.0 million of term loans and a $100.0 million revolving line of credit. In November, 2003, in connection with the offering of the Company’s 9¾% senior discount notes and the Company’s tender offer for 70% of its outstanding 12% senior discount notes, SBA Senior Finance, a newly formed wholly-owned subsidiary of Telecommunications, assumed all rights and obligations of Telecommunications under the senior credit facility pursuant to satisfy its respective debt obligations will depend on the future operating performance of the Company. In the event the Company fails to complyan amended and restated credit agreement with the various covenants contained insenior credit lenders. Telecommunications was released from any obligation to repay the 12%indebtedness under the senior discount notes it would be in default thereunder, and in any such case, the maturity of a portion orcredit facility. Simultaneously with this assumption, Telecommunications contributed substantially all of its long-term indebtedness could be accelerated.

assets, consisting primarily of stock in our various operating subsidiaries,

to SBA Senior Finance. As of December 31, 2003, the Company had $98.2 million outstanding under the term loan and $20.0 million outstanding under the revolving line of credit. The Company refinanced this credit facility in January 2004 and used the proceeds from the new facility to repay this facility in full. See senior credit facility discussion above.

Senior Secured Credit Facility (paid in full May 2003)

In June 2001, Telecommunications entered into a $300.0 million senior secured credit facility. The facility providesprovided for a $100.0 million term loan and a $200.0 million revolving loan, the availabilityline of which is based on compliance with certain convenants.credit. As of December 31, 20012002, the Company had $100.0 million outstanding under the term loan and $10.0$155.0 million outstanding under the revolving loan.line of credit. In addition, the Company had $14.5 million of letters of credit issued on its behalf to serve as collateral to secure certain obligations in the ordinary course of business. The term loanCompany refinanced this credit facility in May 2003 and used the revolving loan mature June 15, 2007proceeds from the new credit facility, cash on hand and amortizationa portion of the term loan beginsproceeds from the Western tower sale to repay this credit facility in Septemberfull. As a result of this prepayment, the Company has written off deferred financing fees associated with this facility of approximately $4.4 million during 2003. Borrowings under

At December 31, 2002 the current portion of long-term debt in the amount of $60.0 million had been reclassified to reflect the amount by which the senior secured credit facility accrue interestborrowings were reduced through the May 2003 refinancing. The portion of this debt reflected as long-term at December 31, 2002, $195.0 million, represents the euro dollar rate plus a margin or a base rate plus a margin, as defined in the agreement. The senior secured credit facility is secured by substantially allamount of the assets of Telecommunications and its subsidiaries. The facility also places certain restrictions on, among other things,which was replaced by the incurrance of debt and liens, the sale of assets, capital expenditures, transactions with affiliates, sale and lease-back transactions and the number of towers that can be built without anchor tenants.

F-15
new facility.

SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of December 31, 2001,2003, the Company was in compliance with the covenants of each of the above agreements.
agreements, as applicable.

The Company’s long-term debt, excluding the deferred interest rate swap discussed below, at December 31, 2001 matures2003, would have matured as follows:

   
(in thousands)
2002  $365
2003   5,134
2004   15,069
2005   25,000
2006   25,000
Thereafter   774,885
   
Total  $845,453
   
9.    SHAREHOLDERS’ EQUITY
a.
Offerings of Common Stock
On June 21, 1999, the Company completed an initial public offering of 10.0 million shares of its Class A common stock. The Company raised gross proceeds of $90.0 million that produced net proceeds, after deduction of the underwriting discount and offering expenses, of $82.8 million. The Company used approximately $32.8 million of these net proceeds to pay all outstanding dividends on all outstanding shares of the Company’s Series A preferred stock and to redeem all shares of the Company’s Series B preferred stock. The Company also used $46.0 million to repay all revolving credit loans underfollows had the senior credit facility. Remaining proceeds were used forfacility not been refinanced:

   (in thousands)

2004

  $11,538

2005

   17,250

2006

   17,250

2007

   72,227

2008

   65,673

Thereafter

   682,261
   

Total

  $866,199
   

The Company previously entered into an interest rate swap agreement to manage its exposure to interest rate movements by effectively converting a portion of its $500.0 million senior notes from fixed interest rate to variable rate notes. During October 2002, the constructioncounter-party to this agreement terminated the agreement. This termination resulted in a $5.4 million deferred gain which is recorded in long-term debt and acquisition of towers and for general working capital purposes. On July 19, 1999,is being recognized as a reduction to interest expense over the managing underwritersremaining term of the Company’s initial public offering exercisednotes to which the swap related. Amortization during 2003 and closed on their over-allotment option to purchase 1.32002 was approximately $0.7 million shares of Class A common stock.and $0.2 million, respectively. The Company received net proceeds of approximately $10.9 million from the sales of shares, which were sold at the initial public offering price of $9.00 per share. These net proceeds were also used for the construction and acquisition of towers and for general working capital purposes.

In February 2000, the Company completed an equity offering of 9.0 million shares of its Class A common stock. The Company raised gross proceeds of $243.0 million, which produced net proceeds of approximately $229.5 million, after deductionamortization of the underwriting discount and offering expenses. The Company used $70.5 millionremaining deferred gain as of these net proceeds to repay all revolving credit loans underDecember 31, 2003 is as follows:

   (in thousands)

2004

  $740

2005

   810

2006

   886

2007

   969

2008

   1,061

2009

   93
   

Total

  $4,559
   

See Note 20 for further discussion regarding the senior credit facility. Remaining proceeds were used for the construction and acquisitioninterest rate swap agreement.

15. SHAREHOLDERS’ EQUITY

a. Offerings of towers and for general working capital purposes. In February 2000, the managing underwriters of the equity offering exercised and closed on their over-allotment option to purchase an additional 1.4 million shares of the Company’s Class A common stock. Certain shareholders along with the Company had granted this option to the underwriters in connection with the equity offering. These certain shareholders satisfied from their shareholdings the exercise of the over-allotment option in full, resulting in no proceeds to the Company as a result of this exercise.

Common Stock

In July 2000, the Company filed a universal shelf registration statement on Form S-3 with the Securities and Exchange Commission registering the sale of up to $500.0 million of any combination of the following securities: Class A common stock, preferred stock, debt securities, depositary shares, or warrants. In August 2000, the Company drew down $247.3 million under this universal shelf in connection with an offering

b. Registration of 5.8 million shares of its Class A common stock, including 750,000 shares issued upon the exercise of the managing

F-16
Additional Shares

SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

underwriter’s over-allotment option. From this offering, the Company raised gross proceeds of $247.3 million, which produced net proceeds of approximately $236.0 million, after deduction of the underwriting discount and offering expenses. The Company used $25.0 million of these net proceeds to repay a portion of the term loans under the senior credit facility. Remaining proceeds were used for the construction and acquisition of towers and general working capital purposes. As of December 31, 2001, the Company may issue under this universal shelf registration statement, any combination of the registered securities, with an aggregate offering price of up to $252.7 million.
b.
Registration of Additional Shares
During 2001, the Company filed a shelf registration statement on Form S-4 with the Securities and Exchange Commission registering an aggregate 5.0 million shares of its Class A common stock. These 5.0 million shares are in addition to 3.0 million shares registered during 2000. These shares may be issued in connection with acquisitions of wireless communication towers or companies that provide related services. During the yearyears ended December 31, 2003, 2002 and 2001, the Company issued zero shares, 1.3 million and 1.6 million shares, respectively, of its Class A common stock pursuant to these registration statements in connection with six acquisitions and certain earn-outs. acquisitions.

c. Other Common Stock Transactions

During the year ended December 31, 2000,2003, the Company issued 1.0exchanged $13.5 million of its 10¼% senior notes for 3.85 million shares pursuant to these registration statements in connection with ten acquisitions. Subsequent to December 31, 2001, the Company issued 587,260 shares under these registration statements for certain earn-outs.

c.
Issuance of Restricted Stock
In September 2000, the Company granted 20,000 shares of its Class A common stock.

The issuance of these shares triggered an event whereby the 5.5 million of Class B common stock pursuantoutstanding automatically converted to the Company’s 1999 Equity Participation Plan. These restricted shares have a three year vesting period. Deferred compensation representing the fair value of the shares on the date of grant was recorded as an adjustment to additional paid-in capital and compensation expense is being recognized over the vesting period.

On September 30, 2000, the Company issued 400,000 restricted shares of Class A common stock to the former shareholders of Network Services in accordance with the terms of the acquisition.
d.
Employee Stock Purchase Plan
stock.

d. Employee Stock Purchase Plan

In 1999, the Board of Directors of the Company adopted the 1999 Stock Purchase Plan (the “Purchase Plan”). A total of 500,000 shares of Class A common stock arewere reserved for purchase under the Purchase Plan. During 2003, an amendment to the Purchase Plan was adopted which increased the number of shares reserved for purchase from 500,000 to 1,500,000 shares. The Purchase Plan permits eligible employee participants to purchase Class A common stock at a price per share which is equal to the lesser of 85% of the fair market value of the Class A common stock on the first or the last day of an offering period. As of December 31, 2001,2003, employees had purchased 110,491271,038 shares under the Purchase Plan.

e.
Redeemable Preferred Stock
In 1997, the Company sold 8,050,000 shares of 4% Series A preferred stock, convertible initially into one share of the Company’s Class A common stock and one share of the Company’s 4% Series B redeemable preferred stock,

e. Non-cash Compensation

From time to a syndicate of institutional investors. The Series A preferred stock had a conversion price of $3.73 and net proceeds received by the Company from the sale of the shares was approximately $27.0 million (net of approximately $2.4 million of issuance costs charged to retained earnings). Each holder of Series A preferred stock had the right to convert these shares at any time, into one share of Class A common stock, subject to certain anti-dilution protection provisions, and one share of Series B preferred stock. The Series A preferred stock automatically converted into Class A common stock and Series B preferred stock upon initial public offering.

F-17

SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The holders of outstanding shares of Series A preferred stock were entitled, in preference to the holders of any and all other classes of capital stock of the Company, to receive, out of funds legally available therefore, cumulative dividends on the Series A preferred stock in cash, at a rate per annum of 4% of the Series A subject to pro-ration for partial years. The liquidation amount equals the sum of $3.73 and any accumulated and unpaid dividends on the Series A preferred stock. Accrued but unpaid dividends on the Series A preferred stock were paid upon the conversion of the Series A preferred stock into Class A common dividends on the Series A preferred stock were paid upon the conversion of the Series A preferred stock into Class A common stock and Series B preferred stock. On June 21, 1999, the date of the conversion, accrued dividends of approximately $2.8 million were paid to the holders of the Series A preferred stock. The Company had accrued the preferred stock dividends on the effective interest method over the period from issuance until the scheduled redemption. As a result, in 1999 the Company recorded a reduction in the amount of dividends payable of $0.7 million as a result of the early conversion and redemption prior to the originally scheduled redemption date.
f.
Exercise of Warrants
In February 2000, the holders of warrants exercised, pursuant to a cashless option, warrants issued in 1997 to purchase 402,500 shares of SBA’s Class A common stock at an exercise price of $3.73 per share. Pursuant to the cashless exercise option, the Company issued 357,387restricted shares of Class A common stock and the holders surrendered warrants to purchase 45,113 additional shares as consideration.
10.    STOCK OPTIONS AND WARRANTS
In 1996, certain of the Company’s senior executives terminated existing employment, incentive and option agreements in exchange for new employment agreements and immediately exercisable options to purchase 1,425,000 shares of Class A common stock. All of the options are exercisable at $.05 per share. As of December 31, 2001, 84,764 of the initial options remain outstanding.
The Company has three stock option plans (the 1996 Stock Option Plan, the 1999 Equity Participation Plan and the 2001 Equity Participation Plan), whereby options (both non-qualified and incentive stock options), stock appreciation rights and restricted stock may be granted to directors, employees and consultants. Upon adoption of the 2001 Equity Participation Plan, all unissued options under the 1996 Stock Option Plan and the 1999 Equity Participation Plan were cancelled. A total of 5,000,000 shares of Class A common stock were reserved for issuance under the 2001 Equity Participation Plan. A summary of shares reserved for future issuance under these plans is as follows:
Reserved for 1996 Stock Option Plan259,383
Reserved for 1999 Equity Participation Plan2,625,239
Reserved for 2001 Equity Participation Plan4,969,395
7,854,017
These options generally vest between three and six year periods from the date of grant. The Company accounts for these plans under APB Opinion No. 25Accounting for Stock Issued to Employees under which compensation cost is not recognized on those issuances where the exercise price equals or exceeds the market price of the underlying stock on the grant date. From time to time options to purchase Class A common stock have been granted under the 1999 Equity Participation Plan and the 2001 Equity Participation Plan which the Company believed wereCompany’s equity participation plans at prices below market value at the time of grant. TheAs a result, the Company recordedexpects to record approximately $0.5 million in non-cash compensation expense of $3.3 million, $0.3 million and $0.3 million for the years ended December 31, 2001, 2000 and 1999, respectively.

F-18

SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As required by FASB Statement No. 123Accounting for Stock-Based Compensation(“SFAS 123”), for those options whichin each year from 2004 through 2006. In addition, the Company granted at or above fair market value, the Company has determined the pro-forma effect of the options granted had the Company accounted for stock options granted under the fair value method of SFAS 123. The Black-Scholes option pricing model was used with the following assumptions:
   
2001
   
2000
   
1999
 
Risk free interest rate  10%  10%  12%
Dividend yield  0%  0%  0%
Expected volatility  99.3%  86%  .001%
Expected lives  4 years   3 years   3 years 
Had compensation cost for the stock option plan been determined based on fair value at the date of grant in accordance with SFAS 123, the Company’s pro-forma net loss would have totaled $(134.1) million, $(38.3) million, and $(40.2) million and pro-forma loss per share would have been $(2.83), $(0.93), and $(2.10) for the years ended December 31, 2001, 2000 and 1999, respectively. The effect of applying SFAS 123 in this pro-forma disclosure is not necessarily indicative of future results.
A summary of the status of the Company’s stock option plans including their weighted average exercise price is as follows:
   
2001
  
2000
  
1999
   
Shares
   
Price
  
Shares
   
Price
  
Shares
   
Price
Outstanding at beginning of year  3,089,656   $16.97  3,177,194   $7.11  1,660,016   $2.12
Granted  1,748,195    23.34  1,001,493    36.87  1,740,935    11.12
Exercised/redeemed  (587,560)   4.26  (973,569)   3.95  (183,520)   2.63
Forfeited/cancelled  (426,380)   27.65  (115,462)   24.99  (40,237)   3.90
   
      
      
    
Outstanding at end of year  3,823,911   $20.57  3,089,656   $16.97  3,177,194   $7.11
   
  
  
  
  
  
Options exercisable at end of year  1,616,968   $14.12  1,172,564   $6.29  1,211,829   $3.24
   
  
  
  
  
  
Weighted average fair value of options granted during the year      $27.37      $36.91      $11.12
       
      
      
Option groups outstanding at December 31, 2001 and related weighted average exercise price and remaining life, in years, information are as follows:
OPTIONS OUTSTANDING
 
OPTIONS EXERCISABLE
Range
    
Outstanding
    
Average Contractual Life
  
Average Exercise Price
 
Exercisable
    
Weighted
Average Exercise Price
$  0.00—$  0.05    276,340    7.5  $0.05 113,086    $0.05
$  2.63—$  4.00    259,383    10.9  $2.64 259,383    $2.64
$  8.00—$  9.75    564,054    3.4  $8.18 497,498    $8.13
$10.17—$14.45    158,135    5.8  $11.97 4,712    $11.22
$15.25—$19.71    649,101    8.0  $15.36 417,016    $15.26
$20.04—$24.75    593,582    4.6  $21.83 —       —  
$25.42—$29.10    200,701    7.8  $26.97 73,110    $27.00
$30.25—$34.88    413,479    4.5  $34.51 96,928    $34.57
$35.88—$39.75    193,403    8.8  $37.70 38,656    $37.48
$40.00—$44.63    479,622    8.7  $41.35 105,509    $41.49
$45.00—$51.94    36,111    8.7  $47.22 11,070    $47.87
     
          
      
     3,823,911    7.2  $20.57 1,616,968    $14.12
     
          
      

F-19

SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11.    INCOME TAXES
The provision (benefit) for income taxes in the consolidated statements of operations consists of the following components:
   
For the years ended December 31,
 
   
2001
   
2000
   
1999
 
   
(in thousands)
 
Current provision (benefit) for taxes:               
Federal income tax  $—     $—     $(1,255)
Foreign income tax   —      —      231 
State income tax   1,654    1,233    801 
   
  
  
Total   1,654    1,233    (223)
Deferred provision (benefit) for taxes:               
Federal income tax   (39,799)   (8,156)   (9,461)
State income tax   (1,528)   (1,173)   (1,598)
Increase in valuation allowance   41,327    9,329    11,059 
   
  
  
Total  $1,654   $1,233   $(223)
   
  
  
A reconciliation of the provision (benefit) for income taxes at the statutory U.S. Federal tax rate (34%) and the effective income tax rate is as follows:
   
For the years ended December 31,
 
   
2001
   
2000
   
1999
 
   
(in thousands)
 
Statutory Federal benefit  $(41,987)  $(9,401)  $(11,837)
State income tax   83    40    (526)
Foreign tax   —      —      541 
Other   367    235    540 
Goodwill amortization   1,864    1,029    —   
Valuation allowance   41,327    9,330    11,059 
   
  
  
   $1,654   $1,233   $(223)
   
  
  

F-20

SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The components of the net deferred income tax asset (liability) accounts are as follows:
   
As of December 31,
 
   
2001
   
2000
 
   
(in thousands)
 
Allowance for doubtful accounts  $1,876   $868 
Deferred revenue   5,818    2,958 
Accrued liabilities   2,220    —   
Other   87    208 
Valuation allowance   (10,001)   (4,034)
   
  
Current deferred tax liabilities  $—      —   
   
  
Original issue discount  $33,176   $22,596 
Net operating loss   51,096    15,938 
Book vs. tax depreciation   (39,090)   (26,869)
Straight-line rents   (3,392)   — 
Other   1,813    1,058 
Valuation allowance   (62,032)   (31,168)
   
  
Non-current deferred tax liabilities  $(18,429)  $(18,445)
   
  
In connection with the acquisition of certain towers during 2001, the Company recorded deferred tax liabilities of $4.6 million related to book/tax basis difference in the acquired towers. In connection with the acquisition of certain towers during 2000, the Company recorded deferred tax liabilities and goodwill of $10.5 million related to the book/tax basis differences in the acquired towers.
The Company has recorded a valuation allowance for deferred tax assets as management believes that it is not “more likely than not” that the Company will be able to generate sufficient taxable income in future periods to recognize the assets.
The Company has available at December 31, 2001, a net operating tax loss carry-forward of approximately $150.2 million. Approximately $12.0 million, $35.8 million and $102.4 million of the net operating tax loss carry-forwards will expire in 2019, 2020 and 2021, respectively.
12.    COMMITMENTS AND CONTINGENCIES
a.    Operating Leases
The Company is obligated under various non-cancelable operating leases for land, office space, vehicles and equipment, and site leases that expire at various times through September 2093. The annual minimum lease payments under non-cancelable operating leases as of December 31, 2001 are as follows:
   
(in thousands)
2002  $30,555
2003   28,324
2004   23,808
2005   18,224
2006   11,441
Thereafter   62,199
   
Total  $174,551
   

F-21

SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Principally, all of the leases provide for renewal at varying escalations. Leases providing for fixed rate escalations have been reflected above.
Rent expense for operating leases was $26.3 million, $17.0 million, and $12.8 million for the years ended December 31, 2001, 2000 and 1999, respectively.
b. Tenant Leases
The annual minimum tower space income to be received for tower space and antenna rental under non-cancelable operating leases as of December 31, 2001 are as follows:
   
(in thousands)
2002  $116,270
2003   113,494
2004   103,343
2005   78,904
2006   41,629
Thereafter   72,431
   
Total  $526,071
   
Principally, all of the leases provide for renewal at varying escalations. Leases providing for fixed rate escalations have been reflected above.
c.    Employment Agreements
The Company has employmentbonus agreements with certain officers of the Company which grant theseexecutives and employees the right to receive their base salary and continuation of certain benefits in the event of a termination (as defined by the agreement of such employees).
d.    Litigation
The Company is involved in various claims, lawsuits and proceedings arising in the ordinary course of business. While there are uncertainties inherent in the ultimate outcome of such matters and it is impossible to presently determine the ultimate costs that may be incurred, management believes the resolution of such uncertainties and the incurrence of such costs will not have a material adverse effect on the Company’s consolidated financial position or results of operations.

F-22

SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13.    SEGMENT DATA
The Company operates principally in three business segments: site development consulting, site development construction, and site leasing. The Company’s reportable segments are strategic business units that offer different services. They are managed separately based on the fundamental differences in their operations. Revenues, gross profit, capital expenditures (including assets acquired through the issuanceissue shares of the Company’s Class A common stock)stock in lieu of cash payments. The Company recorded approximately $0.8 million and identifiable assets pertaining$2.0 million of non-cash compensation expense during the years ended December 31, 2003 and 2002, respectively.

In connection with an employment agreement with one of the officers of the Company, the Company was obligated to pay an amount equal to the segmentsdifference between $1.0 million and the value of all vested options and restricted stock belonging to this officer on September 19, 2003. The Company had the option of settling the obligation in whichcash or shares of Class A common stock. This obligation was settled in September 2003 in cash for $0.9 million. This amount had been expensed over the Company operates are presented below:

   
For the years ended December 31,
   
2001
  
2000
  
1999
   
(in thousands)
Revenues:            
Site development—consulting  $24,251  $24,251  $17,964
Site development—construction   115,484   91,641   42,606
Site leasing   103,159   52,014   26,423
   
  
  
   $242,894  $167,906  $86,993
   
  
  
Gross profit:            
Site development—consulting  $7,154  $8,625  $5,547
Site development—construction   24,649   18,375   9,219
Site leasing   66,437   32,512   14,289
   
  
  
   $98,240  $59,512  $29,055
   
  
  
Capital expenditures:            
Site development—consulting  $2,458  $1,489  $6,971
Site development—construction   36,959   25,570   28,185
Site leasing   516,859   465,400   189,779
Assets not identified by segment   5,050   1,594   1,635
   
  
  
   $   561,326  $494,053  $226,570
   
  
  
   
As of December 31,
   
2001
  
2000
   
(in thousands)
Assets:        
Site development—consulting  $24,850  $14,248
Site development—construction   177,322   99,962
Site leasing   1,198,051   815,660
Assets not identified by segment   28,788   18,948
   
  
   $1,429,011  $948,818
   
  

F-23

SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14.    QUARTERLY FINANCIAL DATA (unaudited)
     
Quarters Ended
 
     
December 31, 2001
     
September 30, 2001
   
June 30, 2001
   
March 31, 2001
 
     
(in thousands except per share)
 
Revenues    $69,150     $63,033   $57,755   $52,956 
Gross profit     28,075      25,924    23,431    20,810 
Net loss     (29,710)     (49,118)   (23,321)   (22,996)
Basic and diluted loss per common share    $(0.62)    $(1.03)  $(0.50)  $(0.49)
     
Quarters Ended
 
     
December 31, 2000
     
September 30, 2000
   
June 30, 2000
     
March 31, 2000
 
     
(in thousands except per share)
 
Revenues    $53,579     $45,395   $38,503     $30,429 
Gross profit     18,563      16,560    13,395      10,994 
Net loss     (5,379)     (5,905)   (7,908)     (9,723)
Basic and diluted loss per common share    $(0.12)    $(0.14)  $(0.20)    $(0.27)
During the third quarter of 2001, the Company incurred a restructuring and other charge of $24.4 million.
15.    SUBSEQUENT EVENTS
a.
Interest Rate Swap
In January 2002, the Company entered into an interest rate swap agreement to manage its exposure to interest rate movements by effectively converting a portion of its debt from fixed to variable rates. The notional principal amountthree-year period of the interest rate swap is $100.0 million. The maturity date of the interest rate swap matches that of the underlying debt. Thisoriginal agreement which matures in seven years, involves the exchange of fixed rate payments for variable rate payments without the exchange of the underlying principal amount. The variable rates are based on six-month EURO plus 4.47%as non-cash compensation expense.

f. Shareholder Rights Plan and are reset on a semi-annual basis. The differential between fixed and variable rates to be paid or received is accrued as interest rates change in accordance with the agreements and recognized over the life of the agreements as an adjustment to interest expense.

b.
Shareholder Rights Plan
Preferred Stock

During January 2002, the Company’s Board of Directors adopted a Shareholder Rights Planshareholder rights plan and declared a dividend of one preferred stock purchase right for each outstanding share of the Company’s common stock. Each of these rights which are currently not exercisable, will entitle the holder to purchase one one-thousandth (1/1000) of a share of the Company’s newly designated Series E Junior Participating Preferred Stock. In the event that any person or group acquires beneficial ownership of 15% or more of the outstanding shares of the Company’s common stock or commences or announces an intention to commence a tender offer that would result in such person or group owning 15% or more of the Company’s common stock, each holder of a right (other than the acquirer) will be entitled to receive, upon payment of the exercise price, a number of shares of common stock having a market value equal to two times the exercise price of the right. In order to retain flexibility and the ability to maximize stockholdershareholder value in the event of transactions that may arise in the future, the Board retains the power to redeem the Rightsrights for a set amount. The Rightsrights were distributed on January 25, 2002 and expire on January 10, 2012, unless earlier redeemed or exchanged or terminated in accordance with the Rights Agreement.

F-24

SBA COMMUNICATIONS CORPORATION16. STOCK OPTIONS AND SUBSIDIARIESWARRANTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company has three stock option plans (the 1996 Stock Option Plan, the 1999 Equity Participation Plan and the 2001 Equity Participation Plan) whereby options (both non-qualified and incentive stock options), stock appreciation rights and restricted stock may be granted to directors, employees and consultants. Upon adoption of the 2001 Equity Participation Plan, all unissued options under the 1996 Stock Option Plan and the 1999 Equity Participation Plan were cancelled. The 2001 Equity Participation Plan provides for a maximum issuance of shares, together with all outstanding options and unvested shares of restricted stock under all three of the plans, equal to 15% of the Company’s common stock outstanding, adjusted for certain shares issued pursuant to the exercise of certain options. A summary of shares reserved for future issuance under these plans as of December 31, 2003 is as follows:

c.
Reduction (in Tower Development Activitiesthousands)

Reserved for 1996 Stock Option Plan

186

Reserved for 1999 Equity Participation Plan

758

Reserved for 2001 Equity Participation Plan

7,215
8,159

These options generally vest between three and six years from the date of grant on a straight-line basis and generally have a ten year life. The Company accounts for these plans under APB 25, under which compensation cost is not recognized on those issuances where the exercise price equals or exceeds the market price of the underlying stock on the grant date. From time to time, options to purchase shares of Class A common stock have been granted under the 1999 Equity Participation Plan and the 2001 Equity Participation Plan at prices which were below market value at the time of grant. As a result, the Company recorded non-cash compensation expense of $0.8 million, $2.0 million and $3.3 million for the years ended December 31, 2003, 2002 and 2001, respectively.

As required by SFAS 123, the Company has determined the pro-forma effect of the options granted had the Company accounted for stock options granted under the fair value method of SFAS 123.

A summary of the status of the Company’s stock option plans including their weighted average exercise price is as follows:

   2003
  2002
  2001
   Shares
  Price
  Shares
  Price
  Shares
  Price
   (shares in thousands)

Outstanding at beginning of year

  2,848  $11.37  3,824  $20.57  3,090  $16.97

Granted

  1,630  $2.20  2,445  $10.17  1,748  $23.34

Exercised/redeemed

  (34) $1.26  (145) $0.93  (588) $4.26

Forfeited/canceled

  (656) $9.78  (3,276) $21.59  (426) $27.65
   
     
     
   

Outstanding at end of year

  3,788  $7.79  2,848  $11.37  3,824  $20.57
   
     
     
   

Options exercisable at end of year

  1,235  $12.66  993  $12.63  1,617  $14.12

Weighted average fair value of options granted during the year

     $2.20     $6.63     $27.37

Option groups outstanding at December 31, 2003 and related weighted average exercise price and remaining life, in years, information are as follows:

Options Outstanding

 

Options Exercisable

Range

 

Outstanding

(in thousands)

 

Weighted Average

Contractual Life

 

Weighted Average
Exercise Price

 

Exercisable

( in thousands)

 

Weighted Average
Exercise Price

$  0.05 –   $  4.00

 1,890 8.7 $  2.13 249 $  2.19

$  5.37 –   $  9.75

 1,060 5.3 $  8.03 464 $  8.06

$10.17 –   $13.35

 311 7.0 $12.40 92 $12.14

$15.25 –   $24.75

 303 4.9 $17.31 262 $16.62

$26.63 –   $51.94

 224 2.5 $35.12 168 $35.03
  
     
  
  3,788   $  7.79 1,235 $12.66
  
     
  

The Company has various stock-based employee compensation plans. From time to time, options to purchase Class A common stock have been granted under the Company’s 1999 Equity Participation Plan and the 2001 Equity Participation Plan which were below market value at the time of the grant. The Company recorded non-cash compensation expense of $0.8 million, $2.0 million and $3.3 million for the years ended December 31, 2003, 2002 and 2001, respectively. Except for the amount of non-cash compensation recognized, no other stock-based employee compensation cost is reflected in net loss, as all other options granted under the Company’s stock-based employee compensation plans had an exercise price equal to, or in excess of, the market value of the underlying common stock on the date of grant.

The Black-Scholes option-pricing model was used with the following assumptions:

   For the years ended December 31,
 
   2003
  2002
  2001
 

Risk free interest rate

  2.0% 3.25% 4.5%

Dividend yield

  0% 0% 0%

Expected volatility

  90% 171% 99%

Expected lives

  4 years  4 years  4 years 

The following table illustrates the effect on net loss and loss per share as if the Company had applied the fair value recognition provisions of SFAS 123, to stock-based employee compensation:

   For the years ended December 31,
 
   2003
  2002
  2001
 
   (in millions) 

Net loss, as reported

  $(172.2) $(249.0) $(125.8)

Non-cash compensation charges included in net loss

   0.8   2.0   3.3 

Incremental stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects

   (4.2)  (6.2)  (19.9)
   
 
 

Pro forma net loss

  $(175.6) $(253.2) $(142.4)
   
 
 

Loss per shares

             

Basic and diluted – as reported

  $(3.30) $(4.93) $(2.66)

Basic and diluted – pro forma

  $(3.36) $(5.01) $(3.01)

The effect of applying SFAS 123 in the pro-forma disclosure is not necessarily indicative of future results.

17. RESTRUCTURING AND OTHER CHARGES

In response to capital market conditions in the telecommunications industry during the past three years, the Company has implemented various restructuring plans discussed below.

Restructuring expense consisted of the following during these three years:

   For the years ended December 31,
   2003
  2002
  2001
   (in thousands)

Abandonment of new tower build and acquisition work-in-process and related construction materials

  $635  $40,380  $24,088

Employee separation and exit costs

   1,870   6,907   311
   
  
  
   $2,505  $47,287  $24,399
   
  
  

In August 2001, in response to deteriorating capital market conditions within the telecommunications industry, the Company implemented a plan of restructuring primarily associated with the downsizing of its new tower build construction activities. The plan included the abandonment of certain acquisition and new tower build sites resulting in a non-cash charge of approximately $24.1 million. The plan also included the elimination of 102 employee positions and closing and/or consolidation of selected offices. Payments made related to employee separation and office closings were approximately $0.3 million.

In February 2002, as a result of the continuing deterioration of capital market conditions for wireless carriers, the Company announced that it was further reducingreduced its capital expenditures for new tower development and acquisition activities, in 2002 and suspendingsuspended any material new investment for additional towers. The Company anticipates reducing the number of towers, expected to be builtreduced its workforce and closed or acquired in 2002 from 400 to 600 to approximately 250 to 300.consolidated offices. Under currentthen existing capital marketsmarket conditions, the Company doesdid not anticipate building or buying a material number of new towers beyond those it iswas currently contractually obligated to build or buy. The Company expects approximately 90 to 110 new towers to be built or acquiredbuy, thereby resulting in the first quarterabandonment of 2002, and the remaindera majority of its obligations toexisting new tower build or buy towers to be satisfied laterand acquisition work in process during 2002. AIn connection with this restructuring, a portion of itsthe Company’s workforce will bewas reduced and certain offices will bewere closed, substantially all of which were primarily dedicated to new tower development activities. TheAs a result of the implementation of its plans, the Company anticipates incurring charges relatedrecorded a restructuring charge of $47.3 million in accordance with SFAS 144, and Emerging Issues Task Force 94-3,Liability Recognition for Certain Employee Termination Benefits and Other Costs to thisExit an Activity, including Certain Costs Incurred in a Restructuring. Of the $47.3 million restructuring plan of $30.0charge recorded during the year ended December 31, 2002, approximately $40.4 million and $65.0 million for costs related to the disposalabandonment of new tower build and acquisition construction-in-process,work in process and related construction materials on approximately 764 sites. The remaining $6.9 million of restructuring expense related primarily to the costs of employee separation costfor approximately 470 employees and exit costs associated with the closing and consolidation of approximately 40 offices. The accrual of approximately $1.0 million remaining at December 31, 2003, with respect to the 2002 plan, relates primarily to remaining obligations through the year 2012 associated with offices exited or downsized as part of this plan.

The following summarizes the activity during the year ended December 31, 2003, related to the 2002 and other items.2001 restructuring plans:

   Accrued as of
January 1,
2003
  

Restructuring

Charges

  

Payments/

Adjustments

  Payments Related to
January 1, 2003
Accrual
  

Accrual as of

December 31,

2003

       Cash
  Non-Cash
   
   (in thousands)

Abandonment of new tower build work in process

  $—    $59  $   $(59) $—    $—  

Employee separation and exit costs

   1,706   122   (167)  45   (666)  1,040
   
  
  
 
 
 
   $1,706  $181  $(167) $(14) $(666) $1,040
   
  
  
 
 
 

In 2003, in response to the continued deterioration in expenditures by wireless service providers, particularly with respect to site development activities, the Company committed to new plans of restructuring associated with further downsizing activities, including reduction in workforce and closing or consolidation of offices. As a result of the implementation of its plans, the Company recorded a restructuring charge of $2.5 million during the year ended December 31, 2003, in accordance with SFAS 146. Of the $2.5 million charge recorded during the year ended December 31, 2003, approximately $0.6 million related to the abandonment of new tower build work in process. The remaining $1.9 million related primarily to the costs of employee separation for approximately 165 employees and exit costs associated with the closing or consolidation of approximately 17 offices. In connection with employee separation costs, the Company paid approximately $0.7 million in one-time termination benefits. Of the $2.5 million in expense recorded during the year ended December 30, 2003, $2.4 million pertains to the Company’s site development segment and $0.1 million pertains to the Company’s site leasing segment.

The following summarizes the activity related to the 2003 restructuring plan for the year ended December 31, 2003:

   

Restructuring

Charges

  

Payments/

Adjustments

   Accrual as of
December 31,
2003
     Cash
  Non-Cash
   
   (in thousands)

Abandonment of new tower build work in process

  $576  $—    $(576)  $—  

Employee separation and exit costs

   1,748   (1,012)  (736)   —  
   
  
 
  
   $2,324  $(1,012) $(1,312)  $—  
   
  
 
  

18. ASSET IMPAIRMENT CHARGES

In accordance with SFAS 144, long-lived assets consisting primarily of tower assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If an asset is determined to be impaired, the loss is measured by the excess of the carrying amount of the charge relatedasset over its fair value as determined by an estimate of discounted future cash flows. Estimates and assumptions inherent in the impairment evaluation include, but are not limited to, asset disposals will be determined primarily bygeneral market conditions, historical operating results, lease-up potential and expected timing of lease-up. During the second and fourth quarters of 2003, the Company modified its future tower lease-up assumptions for certain tower assets that had not achieved expected lease-up results. The changes to the future cash flow expectations and the resulting change in the fair value of newthese towers, as determined using a discounted cash flow analysis, resulted in an impairment charge of $10.3 million during the second quarter of 2003 related to approximately 40 operating towers and an impairment charge of $6.2 million during the fourth quarter of 2003 related to approximately 30 additional operating towers. These amounts are included in asset impairment charges in the Consolidated Statement of Operations for the year ended December 31, 2003.

During the first quarter of 2003, tower backlogassets previously impaired in 2002 were evaluated under the provisions of recently adopted SFAS 143 as to the existence of asset retirement obligations. In connection with the adoption of SFAS 143, effective January 1, 2003, approximately $0.5 million of additional tower costs were capitalized to the previously impaired assets effective January 1, 2003. The recoverability of the capitalized tower costs were evaluated in accordance with the provisions of SFAS 144 and construction-in-processdetermined to be impaired. As discussed above, during the second and fourth quarters of 2003, the Company identified approximately 70 operating towers that were determined to be impaired.

During the first and second quarters of 2002, the Company recorded goodwill totaling approximately $9.2 million resulting from the achievement of certain earn-out obligations under various construction acquisition agreements entered into prior to July 1, 2001. In accordance with SFAS 142, goodwill is subject to an impairment assessment at least annually, or at any time that indicators of impairment are present. The Company determined that as of June 30, 2002, indicators of impairment were present, thereby requiring an impairment analysis be completed. The indicators of impairment during the quarter ended June 30, 2002 giving rise to this analysis included significant deterioration of overall Company value, continued negative trends with respect to those locations the Company chooses to dispose of. Mostwireless carrier capital expenditure plans and related demand for wireless construction services, and perceived reduction in value of similar site development construction services businesses. As a result of this charge is expectedanalysis, using a discounted cash flow valuation method for estimating fair value, $9.2 million of goodwill within the site development construction reporting segment was determined to be incurred inimpaired as of June 30, 2002 and was written off.

In the first quarter of 2002, certain tower sites held and used in operations were considered to be impaired. Towers determined to be impaired were primarily towers with no tenants and little or no prospects for future lease-up. An asset impairment charge of approximately $16.4 million was recorded during the remainder incurred in the secondfirst quarter of 2002.

F-25

19. INCOME TAXES

The provision (benefit) for income taxes from continuing operations consists of the following components:

   For the years ended December 31,
 
   2003
  2002
  2001
 
   (in thousands) 

Current provision (benefit) for taxes:

             

Federal income tax

  $125  $(1,382) $—   

State and local taxes

   1,695   1,691   1,493 
   
 
 

Total current

   1,820   309   1,493 
   
 
 

Deferred provision (benefit) for taxes:

             

Federal income tax

   (58,122)  (57,000)  (39,868)

State and local taxes

   7,728   (3,767)  (1,528)

Increase in valuation allowance

   50,394   60,767   41,396 
   
 
 

Total deferred

   —     —     —   
   
 
 

Total

  $1,820  $309  $1,493 
   
 
 

A reconciliation of the provision (benefit) for income taxes from continuing operations at the statutory U.S. Federal tax rate (34%) and the effective income tax rate is as follows:

   For the years ended December 31,
 
   2003
  2002
  2001
 
   (in thousands) 

Statutory Federal benefit

  $(55,119) $(62,653) $(41,513)

State and local taxes

   6,219   (1,371)  (23)

Cumulative effect of changes in accounting principle

   —     3,018   —   

Other

   326   395   367 

Goodwill amortization

   —     153   1,266 

Valuation allowance

   50,394   60,767   41,396 
   
 
 
   $1,820  $309  $1,493 
   
 
 

The components of the net deferred income tax asset (liability) accounts are as follows:

   As of December 31,
 
   2003
  2002
 
   (in thousands) 

Allowance for doubtful accounts

  $759  $1,922 

Deferred revenue

   4,465   8,555 

Accrued liabilities

   5,654   4,612 

Other

   48   106 

Valuation allowance

   (10,926)  (15,195)
   
 

Current net deferred taxes

  $—    $—   
   
 

Original issue discount

  $13,028  $44,559 

Net operating loss

   198,385   96,731 

Book vs. tax depreciation

   (34,566)  (38,726)

Straight-line rents

   (6,152)  (4,930)

Other

   2,323   5,720 

Valuation allowance

   (173,018)  (103,354)
   
 

Non-current net deferred taxes

  $—    $—   
   
 

The Company has recorded a valuation allowance for deferred tax assets as management believes that it is not “more likely than not” that the Company will be able to generate sufficient taxable income in future periods to recognize the assets.

The Company has available at December 31, 2003, a net operating tax loss carry-forward of approximately $583.5 million. Approximately $8.6 million, $35.8 million, $105.7 million, $140.0 million and $293.4 million of the net operating tax loss carry-forwards will expire in 2019, 2020, 2021 2022, and 2023, respectively. The Internal Revenue Code places limitations upon the future availability of net operating losses based upon changes in the equity of the Company. If these occur, the ability for the Company to offset future income with existing net operating losses may be limited.

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULE20. DERIVATIVE FINANCIAL INSTRUMENT

We have audited

The Company previously had an interest rate swap agreement to manage its exposure to interest rate movements by effectively converting a portion of its fixed rate senior notes to variable rates. The swap qualified as a fair value hedge.

The notional principal amount of the swap was $100.0 million and the maturity date and payment provisions matched that of the underlying senior notes. The swap was to mature in seven years and provided for the exchange of fixed rate payments for variable rate payments without the exchange of the underlying notional amount. The variable rates were based on six-month EURO plus 4.47% and were reset on a semi-annual basis. The differential between fixed and variable rates to be paid or received was accrued as interest rates changed in accordance with auditing standards generally acceptedthe agreement and were recognized as an adjustment to interest expense. The Company recorded a reduction of approximately $3.1 million to interest expense during the year ended December 31, 2002 as a result of the differential between fixed and variable rates.

The counter-party to the interest rate swap agreement terminated the swap agreement in October 2002. In connection with this termination, the counter-party paid the Company $6.2 million, which included approximately $0.8 million in accrued interest. The remaining approximately $5.4 million received was deferred and is being recognized as a reduction to interest expense over the remaining term of the senior notes using the effective interest method. Amortization of the deferred gain during 2003 and 2002 was approximately $0.7 million and $0.2 million, respectively. The remaining deferred gain balance at December 31, 2003 and 2002 of $4.5 million and $5.2 million, respectively is included in long-term debt in the United States,Consolidated Balance Sheets.

21. COMMITMENTS AND CONTINGENCIES

a. Operating Leases

The Company is obligated under various non-cancelable operating leases for land, office space, vehicles and equipment, and site leases that expire at various times through May 2100. The annual minimum lease payments under non-cancelable operating leases in effect as of December 31, 2003 are as follows:

   (in thousands)

2004

  $26,195

2005

   20,162

2006

   13,596

2007

   10,477

2008

   7,930

Thereafter

   46,620
   

Total

  $124,980
   

Principally, all of the consolidated financial statements of SBA Communications Corporation,leases provide for renewal at varying escalations. Fixed rate escalations have been included in the table disclosed above.

Rent expense for operating leases was $29.5 million, $29.3 million and have issued our reports thereon dated February 22, 2002. Our audits were made$23.3 million for the purposeyears ended December 31, 2003, 2002, and 2001, respectively. The rent expense of forming an opinion on those consolidated financial statements taken as a whole. The schedule listed$29.5 million and $29.3 million for the years ended December 31, 2003 and 2002, respectively, excludes $0.8 million and $2.4 million, respectively, which is included in the index of consolidated financial statements is the responsibilityrestructuring and other charges. In addition, certain of the Company’s leases include contingent rent provisions which provide for the lessor to receive additional rent upon the attainment of certain tower operating results and/or lease-up. Contingent rent expense for the years ended December 31, 2003, 2002 and 2001 was $1.4 million, $1.6 million and $0.8 million, respectively.

b.Tenant Leases

The annual minimum tower lease income to be received for tower space and antenna rental under non-cancelable operating leases in effect as of December 31, 2003 are as follows:

   (in thousands)

2004

  $129,114

2005

   108,744

2006

   79,291

2007

   50,669

2008

   30,840

Thereafter

   44,850
   

Total

  $443,508
   

Principally, all of the leases provide for renewal, generally at the tenant’s option, at varying escalations. Fixed rate escalations have been included in the table disclosed above.

c.Employment Agreements

The Company has employment agreements with certain officers of the Company that grant these employees the right to receive their base salary and continuation of certain benefits, for a defined period of time, in the event of a termination, as defined by the agreement of such employees. In connection with one of these agreements, the Company was obligated to pay an amount equal to the difference between $1.0 million and the value of all vested options and restricted stock belonging to a particular officer on September 19, 2003. The Company had the option of settling the obligation in cash or shares of Class A common stock. This obligation was settled in September 2003 in cash for $0.9 million. This amount had been expensed over the three year period of the original agreement which ended in September 2003 as non cash compensation expense.

d.Litigation

The Company is involved in various claims, lawsuits and proceedings arising in the ordinary course of business. While there are uncertainties inherent in the ultimate outcome of such matters and it is impossible to presently determine the ultimate costs that may be incurred, management believes the resolution of such uncertainties and the incurrence of such costs will not have a material adverse effect on the Company’s consolidated financial position, results of operations or liquidity.

e.Contingent Purchase Obligations

The Company sometimes agrees to pay additional acquisition purchase price consideration if the towers or businesses that are acquired meet or exceed certain earnings or new tower targets in the 1-3 years after they have been acquired. As of December 31, 2003, the Company had an obligation to pay up to an additional $1.4 million in consideration if the earnings targets contained in various acquisition agreements are met. This obligation was associated with acquisitions within the Company’s site leasing segment. At the Company’s option, a majority of the additional consideration may be paid in cash or shares of Class A common stock. The Company records such obligations as additional consideration when it becomes probable that the earnings targets will be met. As of December 31, 2002, certain earnings targets associated with an acquisition within the site development construction segment were achieved, and therefore, the Company accrued approximately $2.0 million, within other current liabilities on the December 31, 2002 Consolidated Balance Sheet. This amount was paid in cash in February 2003. In addition, approximately $1.1 million in cash was paid during the year ended December 31, 2003 associated with acquired towers meeting or exceeding new tower targets during 2003.

22. DEFINED CONTRIBUTION PLAN

The Company has a defined contribution profit sharing plan under Section 401 (k) of the Internal Revenue Code that provides for voluntary employee contributions of 1% to 14% of compensation. Employees have the opportunity to participate following completion of three months of employment and must be 21 years of age. Employer matching begins after completion of one year of service. For the years ended December 31, 2003 and 2002, the Company made a discretionary matching contribution of 50% of an employee’s contributions up to a maximum of $3,000. For the year ended December 31, 2001, the Company made a discretionary matching contribution of 50% of an employee’s contributions up to a maximum of $1,000. Company matching contributions were approximately $0.4 million, $0.8 million and $0.6 million for the years ended December 31, 2003, 2002 and 2001, respectively.

23. SEGMENT DATA

The Company operates principally in three business segments: site development consulting, site development construction, and site leasing. The Company’s reportable segments are strategic business units that offer different services. They are managed separately based on the fundamental differences in their operations. Revenues, gross profit, capital expenditures (including assets acquired through the issuance of shares of the Company’s Class A common stock) and identifiable assets pertaining to the segments in which the Company continues to operate are presented below:

   Site
Leasing
  Site
Development
Consulting
  Site
Development
Construction
  Assets Not
Identified
by Segment
  Total

For the year ended

December 31, 2003

               

Revenues

  $127,842  $18,092  $66,126  $—    $212,060

Cost of revenues

   42,021   16,723   61,087   —     119,831

Gross profit

   85,821   1,369   5,039   —     92,229

Capital expenditures

   15,105   124   2,458   575   18,262

For the year ended

December 31, 2002

               

Revenues

  $115,081  $27,204  $97,837  $—    $240,122

Cost of revenues

   40,650   20,594   81,879   —     143,123

Gross profit

   74,431   6,610   15,958   —     96,999

Capital expenditures

   93,999   430   21,487   1,565   117,481

For the year ended

December 31, 2001

               

Revenues

  $85,487  $24,251  $115,484  $—    $225,222

Cost of revenues

   30,657   17,097   91,435   —     139,189

Gross profit

   54,830   7,154   24,049   —     86,033

Capital expenditures

   536,151   1,794   34,125   4,430   576,500

Assets

               

As of December 31, 2003

  $897,880  $9,511  $46,807  $28,784  $982,982

As of December 31, 2002

   958,684   13,294   54,755   276,632   1,303,365

Assets not identified by segment consist primarily of assets held for sale and general corporate assets.

The Company has client concentrations with respect to revenues in each of its financial reporting segments as follows:

   Percentage of Site
Leasing Revenue
for the years ended
December 31,
 
   2003
  2002
 

AT&T Wireless

  16.9% 15.5%

Cingular Wireless

  11.1% 10.8%

   Percentage of Site
Development
Consulting
Revenue for the
years ended
December 31,
 
   2003
  2002
 

Bechtel Corporation

  30.5% 34.2%

Cingular Wireless

  24.0% 29.6%

Verizon Wireless

  14.5% 3.9%

   Percentage of Site
Development
Construction
Revenue for
the years ended
December 31,
 
   2003
  2002
 

Bechtel Corporation

  37.7% 28.1%

Sprint PCS

  12.9% 3.0%

24. SUBSEQUENT EVENTS

During January 2004, SBA Senior Finance closed on a new senior credit facility in the amount of $400.0 million. This facility consists of a $275.0 million term loan which was funded at closing, a $50.0 million delayed draw term loan which the Company has until November 15, 2004 to draw and a $75.0 million revolving line of credit. The revolving line of credit may be borrowed, repaid and redrawn. Amortization of the term loans commence September 2004 at an annual rate of 1% in each of 2004, 2005, 2006 and 2007. All remaining amounts under the term loan are due in 2008. There is presentedno amortization of the revolving loans and all amounts outstanding are due on August 31, 2008. This facility will require amortization payments of approximately $1.6 million in 2004, as compared to $11.5 million which would have been required under the facility which was in existence at December 31, 2003. Amounts borrowed under this facility accrue interest at either the base rate, as defined in the agreement, plus 250 basis points or the Euro dollar rate plus 350 basis points. This facility may be prepaid at any time with no prepayment penalty. Amounts borrowed under this facility are secured by a first lien on substantially all of SBA Senior Finance’s assets. In addition, each of SBA Senior Finance’s domestic subsidiaries has guaranteed the obligations of SBA Senior Finance under the senior credit facility and has pledged substantially all of their respective assets to secure such guarantee, and the Company and Telecommunications have pledged substantially all of their assets to secure SBA Senior Finance’s obligations under this senior credit facility.

This new credit facility requires SBA Senior Finance to maintain specified financial ratios, including ratios regarding its debt to annualized operating cash flow, debt service, cash interest expense and fixed charges for purposes of complyingeach quarter. This new senior credit facility contains affirmative and negative covenants that, among other things, restricts its ability to incur debt and liens, sell assets, commit to capital expenditures, enter into affiliate transactions or sale-leaseback transactions, and/or build towers without anchor tenants. SBA Senior Finance’s ability in the future to comply with the Securitiescovenants and Exchange Commission rules and is not partaccess the available funds under the senior credit facility will depend on its future financial performance.

On January 30, 2004, SBA Senior Finance used the proceeds from the funding of the basic consolidated financial statements. This schedule has been subjected$275.0 million term loan under the new senior credit facility to repay the old credit facility in full, consisting of $144.2 million outstanding. In addition to the auditing procedures applied inamounts outstanding, the auditsCompany was required to pay $8.0 million associated with the assignment to the new lenders of the basic consolidated financial statements and,old facility. As a result of this prepayment, SBA Senior Finance has written off deferred financing fees associated with the old facility of $5.4 million in our opinion, fairly states in all material respects the financial data required to be set forth therein in relationaddition to the basic consolidated financial statements taken as$8.0 million fee paid to facilitate the assignment during the first quarter of 2004. Additionally, SBA Senior Finance has recorded additional deferred financing fees of approximately $5.4 million associated with this new facility.

Subsequent to December 31, 2003, the Company repurchased $19.3 million of its 12% senior discount notes in open market transactions. The Company paid $20.9 million plus accrued interest in cash and recognized a whole.

ARTHUR ANDERSEN LLP
West Palm Beach, Florida,
February 22, 2002.

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loss of $1.6 million related to these debt repurchases and write-off $0.4 million of deferred financing fees. Additionally, on March 1, 2004, the Company, pursuant to the indentures for the 12% senior discount notes, called and retired all remaining outstanding 12% notes. These notes were callable at a price of 107.5% of the principal balances outstanding. In accordance with this transaction, the Company recorded a loss of $3.5 million associated with the premium paid and wrote off $1.0 million of deferred financing fees associated with this debt issue.

Subsequent to December 31, 2003, the Company repurchased $51.1 million of it’s 10¼% senior notes in open market transactions. The Company paid $51.9 million plus accrued interest in cash and issued 1.0 million shares of its Class A Common Stock. The Company recognized a loss of $0.8 million related to these repurchases and wrote off $1.0 million of deferred financing fees associated with this debt retirement.

25. QUARTERLY FINANCIAL DATA (unaudited)

   Quarters Ended
 
   December 31,
2003
  September 30,
2003
  

June 30,

2003

  

March 31,

2003

 
   (in thousands, except per share amounts) 

Revenues

  $57,588  $52,386  $50,390  $51,696 

Gross profit

   24,507   22,566   22,879   22,277 

Restructuring and other charges

   (68)  (1,065)  (396)  (976)

Asset impairment charges

   (6,199)  (50)  (10,265)  (451)

Write-off of deferred financing fees and loss on extinguishment of debt

   (18,968)  (409)  (4,842)  —   

Loss from continuing operations before cumulative effect of changes in accounting principle

   (53,149)  (32,584)  (45,448)  (32,755)

Loss from discontinued operations

   1,981   12,918   (22,134)  (455)

Cumulative effect of changes in accounting principle

   —     —     —     (545)
   
 
 
 

Net loss

  $(51,168) $(19,666) $(67,582) $(33,755)
   
 
 
 

Per common share – basic and diluted:

                 

Loss from continuing operations before cumulative effect of changes in accounting principle

  $(0.98) $(0.62) $(0.89) $(0.64)

Loss from discontinued operations

   0.03   0.24   (0.43)  (0.01)

Cumulative effect of changes in accounting principle

   —     —     —     (0.01)
   
 
 
 

Net loss

  $(0.95) $(0.38) $(1.32) $(0.66)
   
 
 
 
   Quarters Ended
 
   December 31,
2002
  September 30,
2002
  

June 30,

2002

  

March 31,

2002

 
   (in thousands, except per share amounts) 

Revenues

  $57,425  $60,811  $63,627  $58,259 

Gross profit

   23,216   23,892   25,556   24,335 

Restructuring and other charges

   (1,132)  (1,225)  (7,667)  (37,738)

Asset impairment charges

   —     —     (9,165)  (16,380)

Loss from continuing operations before cumulative effect of changes in accounting principle

   (29,354)  (30,526)  (42,257)  (82,468)

Loss from discontinued operations

   (983)  (1,147)  (826)  (761)

Cumulative effect of changes in accounting principle

   —     —     —     (60,674)
   
 
 
 

Net loss

  $(30,337) $(31,673) $(43,083) $(143,903)
   
 
 
 

Per common share – basic and diluted:

                 

Loss from continuing operations before cumulative effect of changes in accounting principle

  $(0.57) $(0.60) $(0.84) $(1.66)

Loss from discontinued operations

   (0.02)  (0.02)  (0.01)  (0.01)

Cumulative effect of changes in accounting principle

   —     —     —     (1.22)
   
 
 
 

Net loss

  $(0.59) $(0.62) $(0.85) $(2.89)
   
 
 
 

The reported amounts for 2002 and the quarter ended March 31, 2003 above have been restated to reflect the Company’s discontinued operations discussed in Note 3.

Because loss per share amounts are calculated using the weighted average number of common and dilutive common shares outstanding during each quarter, the sum of the per share amounts for the four quarters may not equal the total loss per share amounts for the year.

SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS

   
Balance at Beginning of Period
  
Additions Charged to Costs and Expenses(1)
   
Deduction From Reserves(3)
  
Balance at End of Period
   
(in thousands)
Allowance for Doubtful Accounts For the Years Ended:                 
December 31, 2001  $2,117  $2,661(2)  $137  $4,641
December 31, 2000  $785  $1,663   $331  $2,117
December 31, 1999  $437  $492   $144  $785
Tax Valuation Account For the Years Ended:                 
December 31, 2001  $35,202  $36,831   $—  $72,033
December 31, 2000  $17,450  $17,752   $—  $35,202
December 31, 1999  $6,323  $11,127   $—  $17,450

   Balance at
Beginning
of Period
  Additions
Charged to
Costs and
Expenses (1)
  Deduction
From
Reserves(3)
  Balance at
End of
Period
   (in thousands)

Allowance for Doubtful Accounts For the Years Ended:

                

December 31, 2003

  $5,572  $3,554  $7,726  $1,400

December 31, 2002

  $5,921  $3,371  $3,720  $5,572

December 31, 2001

  $2,117  $3,941(2) $137  $5,921

Tax Valuation Account For the Years Ended:

                

December 31, 2003

  $118,549  $65,395  $—    $183,944

December 31, 2002

  $54,422  $64,127  $—    $118,549

December 31, 2001

  $35,202  $19,219  $—    $54,422

(1)
For tax valuation account, amounts include adjustments for stock option compensation.
(2)
Includes additions of $1,300 to allowance for doubtful accounts from acquired companies.
(3)
Represents accounts written off.

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