Exhibit 20.1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Stockholders and Board of Directors of Global Signal, Inc.
We have audited the accompanying statement of revenue and certain expenses
of Lattice Acquisition as described in Note 1 for the year ended December 31,
2003. This statement of revenue and certain expenses is the responsibility of
Lattice Acquisition's management. Our responsibility is to express an opinion
on this statement of revenue and certain expenses based on our audit.
We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the statement of revenue and certain expenses is free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the statement of revenue and certain expenses. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the
statement of revenue and certain expenses. We believe that our audit of the
statement of revenue and certain expenses provides a reasonable basis for our
opinion.
The accompanying statement of revenue and certain expenses was prepared
for the purpose of complying with the rules and regulations of the Securities
and Exchange Commission for inclusion in a Form S-11 of Global Signal Inc. as
described in Note 1 and is not intended to be a complete presentation of
Lattice Acquisition's revenues and expenses.
In our opinion, the statement of revenue and certain expenses referred to
above presents fairly, in all material respects, the revenue and certain
expenses of Lattice Acquisition as described in Note 1 for the year ended
December 31, 2003 in conformity with U.S. generally accepted accounting
principles.
/s/ Ernst & Young LLP
Cincinnati, Ohio
October 28, 2004
LATTICE ACQUISITION
STATEMENTS OF REVENUE AND CERTAIN EXPENSES
(dollars in thousands)
Year Ended Nine Months Ended
December 31, 2003 September 30, 2004
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(Unaudited)
Revenue $ 10,255 $ 9,030
Certain Expenses:
Rent 1,270 1,156
Property taxes 378 256
Other tower operating expenses 565 535
Selling, general & administrative expenses 189 184
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Total certain expenses 2,402 2,131
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Revenue in excess of certain expenses $ 7,853 $ 6,899
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See accompanying notes to Statements of Revenue and Certain Expenses.
LATTICE ACQUISITION
NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES
Year Ended December 31, 2003 and Nine Months Ended September 30, 2004
(Unaudited)
(dollars in thousands)
1. Business and Summary of Significant Accounting Policies
Business
Lattice Communications, LLC and the company of which it is the sole
member, LB Tower Company LLC ("LB Tower"; collectively, "Lattice"), are
principally engaged in providing services to the wireless communications
industry by leasing antenna sites on multi-tenant towers. Lattice leases tower
space to a diverse range of wireless communications industries, including
microwave, personal communications services, cellular, paging, mobile
telephone, radio and television broadcasting, specialized mobile radio and
enhanced specialized mobile radio. Lattice's communications sites are located
throughout the United States.
Lattice is jointly owned by Cinergy Telecommunications Holding Company,
Inc. ("CT") - 43.5%; an investor partnership, Lattice Investors, L.P. - 43.5%;
and, Lattice Partners, Ltd. ("LP") - 13%. LP is a limited liability company
whose members include various officers and employees of Lattice. The majority
of Lattice's related party transactions are conducted with The Cincinnati Gas &
Electric Company and PSI Energy, Inc., under lease agreements assigned by their
sister company, CT, to Lattice.
On July 30, 2004, a definitive purchase agreement was signed by Pinnacle
Towers Acquisition LLC, a wholly-owned subsidiary of Global Signal Inc. (the
"Company"), to acquire from Lattice 220 owned towers and agreements relating to
15 other towers under management or lease. The purchase agreement and these
Statements of Revenues and Certain Expenses exclude towers owned by LB Tower as
well as certain assets of Lattice related to tower development. "Lattice
Acquisition" represents the assets to be acquired by the Company.
Basis of Presentation
The accompanying statements of revenue and certain expenses were prepared
for the purpose of complying with the rules and regulations of the Securities
and Exchange Commission for inclusion in a Form S-11 of the Company. The
statements, which encompass the towers and agreements to be sold to the
Company, are not representative of the actual operations of Lattice Acquisition
for the periods presented or indicative of future operations, as they exclude
the following: certain selling, general and administrative expenses; interest
expense; and depreciation and amortization.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates and such
variances could be material.
Revenue Recognition
Revenues are recognized when earned. Escalation clauses present in lease
agreements with Lattice's customers are recognized on a straight-line basis
over the term of the lease.
Concentration of Credit Risk
Lattice Acquisition derives the largest portion of its revenues from
customers who require wireless communications services. Excluding related
parties, no single customer exceeded 10% of unrelated revenues in the year
ended December 31, 2003 or the nine months ended September 30, 2004.
2. Leases
Lease Obligations
Lattice Acquisition leases land and office space under non-cancelable
operating leases. Ground leases are generally for terms of 5 or 10 years and
are renewable at the option of Lattice.
Future minimum rental payments due by Lattice Acquisition under operating
leases in effect at December 31, 2003, without giving effect to the impact of
straight-line rent adjustments, are as follows:
Related
Party Other Total
------------------- --------------------- --------------------
2004 $ 594 $ 806 $ 1,400
2005 608 640 1,248
2006 625 401 1,026
2007 657 296 953
2008 689 209 898
Thereafter 578 5,703 6,281
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Total $ 3,751 $ 8,055 $ 11,806
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Rent expense for operating leases was $1,270 ($610 related party) for the
year ended December 31, 2003 and $1,156 ($458 related party) (unaudited) for
the nine months ended September 30, 2004.
Customer Leases
Lattice Acquisition leases antenna space on communications towers to
various wireless service providers and other wireless communications users
under non-cancelable operating leases. These leases are generally for terms of
5 to 10 years, with multiple renewals at the option of the tenant. Most leases
have escalator provisions, whereby rent is increased at a fixed percentage or
in relation to increases in the consumer price index.
Future minimum rental revenues due to Lattice Acquisition under operating
leases in effect at December 31, 2003, without giving effect to the impact of
straight-line rent adjustments, are as follows:
Related
Party Other Total
-------------------- ---------------------- --------------------
2004 $ 4,325 $ 6,560 $ 10,885
2005 4,541 5,790 10,331
2006 4,768 3,660 8,428
2007 5,006 2,327 7,333
2008 5,236 1,430 6,666
Thereafter 3,628 2,905 6,533
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Total $ 27,504 $ 22,672 $ 50,176
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