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Pinnacle Holdings Inc. Reports Third Quarter Results

Pinnacle Holdings Inc. Reports Third Quarter Results

Business Editors/Tech & Real Estate Writers

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SARASOTA, Fla.–(BUSINESS WIRE)–Nov. 9, 2000

Pinnacle Holdings Inc., (Nasdaq:BIGT) today reported significant increases in revenue, tower cash flow and EBITDA for the third quarter ended September 30th, 2000 compared to the same period last year.

For the three months ended September 30, 2000, revenues increased by over 96.5% to $45.3 million from $23.1 million during the same period in 1999. Tower cash flow increased to $28.4 million from $16.2 million last year. Earnings before interest, taxes (other than real estate), depreciation and amortization, or EBITDA, was $10.7 million for the third quarter (including nonrecurring charges totaling $10.3 million) compared to $12.5 million for the same quarter last year. The net loss attributable to common stock shareholders for the quarter was $39.0 million (including nonrecurring charges totaling $10.3 million), or $0.80 per share, compared to $15.5 million, or $0.40 per share, for the same period in 1999.

Commenting on the events and results of the third quarter, Bob Wolsey, Chief Executive Officer, said: “Obviously, this has been an eventful period for Pinnacle. Overshadowed by the existence of an unexpected investigation of our Company by the Securities and Exchange Commission (the “SEC”), we have seen our share price significantly drop and Pinnacle’s ability to raise capital substantially diminished – for the time being. In this context, we previously announced that we are not further pursuing the colocation facilities business. We will remain focused on only those tower opportunities which we believe have the highest growth potential, while reassessing pending tower acquisitions we had previously announced, and the many additional opportunities we have identified. We are recording charges this quarter as a result of our decisions not to pursue the colocation facilities business and to pass on numerous acquisition opportunities we had identified and decided not to pursue at this time in the light of near-term challenges associated with raising additional capital during the pending SEC investigation.”

Mr. Wolsey continued, “And now for the good news. In terms of gross tenant adds to our owned site portfolio, this has been the best quarter ever for Pinnacle, resulting in gross broadband equivalent tenant adds of 0.47 tenants per tower on an annualized basis. This is not surprising to us given the locations of our sites and the strong results reported for the sector as a whole this quarter. Strong tenant add activity merely reflects the strong activity on the part of our wireless telecom customers. I believe that Pinnacle continues to be well positioned to benefit from our ever increasing customer base for the same old reason – our sites are in the right locations.”

Steve Day, Pinnacle’s Chief Operating Officer added, “As stated previously, we believe that we have been unfairly embroiled in what is essentially a policy and political debate between the SEC and the Accounting Profession and that our accounting practices comply with Generally Accepted Accounting Principles. We also acknowledge that the SEC has an important role to play in protecting investors. Until the SEC investigation progresses further, we will endeavor to position our company to thereafter rebuild share value. We are fortunate. Pinnacle has substantial run rate tower level cash flow and EBITDA – we believe we can weather this storm and resume pursuing our strategy at previous levels.”

Jeff Card, Chief Financial Officer, added: “As our 3rd quarter balance sheet indicates, we have substantial cash on hand. Further, we anticipate that we may sell the colocation facility assets we now own, which would generate additional cash, after repayment of related debt. We are prudently acquiring what we believe are only the best mom and pop deals and land under our own towers. There continues to be more tower acquisition opportunities generated for our Company. We are confident that these opportunities will not vanish. This is not the first time we at Pinnacle have experienced the need to manage capital carefully. The last time around we lost very few deals. Cash reserves give us the ability to keep our acquisition machine rolling, albeit at a slower pace temporarily, and allows us the time to consider the options available to us relative to the colocation facility assets.”

Mr. Card also indicated that in addition to the financial statement schedules normally attached to Pinnacle’s quarterly earnings press release, there is also attached substantial additional operational and financial information that Pinnacle believes investors will find useful. He stated, “This information is being added in an effort to increase the amount of information available to the public and to allow for easier analysis of Pinnacle relative to the Communications Tower Sector as a whole, while maintaining compliance with the Fair Disclosure rules recently issued by the SEC. This additional information includes details with respect to the significant, nonrecurring charges recorded in the 3rd quarter. Non-cash charges of $8.7 million related to the impairment of capitalized costs related to acquiring and constructing tower assets the company has chosen not to pursue at this time and the company’s decision not to further pursue the colocation business. Other nonrecurring costs of $1.6 million related to the SEC investigation and aborted equity offering which occurred during the quarter.”

Pinnacle also announced the promotion of Mr. Gary Mattox to the role of Director of Information Systems. Steve Day commented, “Gary has won the respect and support of Pinnacle management since he joined our company. He has accomplished this by making things happen to support our operations. I look forward to the value Gary will add to Pinnacle as we go forward.”

Fourth Quarter 2000 Outlook

The Company expects fourth quarter revenues to be between $46 million and $48 million. This amount of revenue is predicated on the assumption that the Company will continue to add between 0.40 and 0.50 tenants (on an annualized basis) to its number of towers owned at the end of the quarter at an average monthly lease rate of $1,500.

The Company expects fourth quarter tower cash flow to be between $28 million and $30 million, and EBITDA to be between $19 million and $21 million.

The Company expects to incur total capital expenditures of $22 million to $24 million during the quarter including tower acquisition costs of $12 million to $14 million, relating to the closing of previously announced acquisitions.

Depreciation and amortization expenses are expected to be between $30 million and $32 million. Net interest expense is expected to be between $18 million and $20 million.

Full Year 2001 Outlook

The Company currently expects total revenues during 2001 to be between $200 million and $215 million. The Company expects total 2001 tower cash flow to be between $125 million and $140 million, and EBITDA to be between $105 million and $115 million.

The Company expects to be in a position to provide a more detailed outlook for 2001 during the first Quarter of 2001.

The company will host a conference call to discuss the results on Thursday, November 9th at 10 a.m., Eastern Standard Time. The USA Toll Free call-in number is (888) 644-9040; The International call-in number is (415) 228-4580 and the passcode for both numbers is “BIGT”. You are encouraged to call in at least 10 minutes prior to the call. A replay will be available for a limited time on the Internet and through a dial-up number. The USA Toll Free replay number is (800) 247-7732. The International replay number is (402) 220-9701. The dial-up replay will be available from November 9th to November 16, 2000. The web address for the replay is www.streetfusion.com. The Internet replay will be available for 90 days from November 9th to February 7, 2001.

Pinnacle is a leading provider of communication site rental space in the United States. Pinnacle is headquartered in Sarasota, Florida. For more information on Pinnacle visit its Web site at http://www.pinnacletowers.com. Information provided on our web-site is not incorporated into the company’s most recent SEC filings.

This press release contains forward-looking statements that involve a number of risks and uncertainties. The Company wishes to caution readers that certain important factors may have affected and could in the future affect the Company’s actual results and could cause the Company’s actual results for subsequent periods to differ materially from those expressed in any forward-looking statement made by or on behalf of the Company. Such factors include, but are not limited to (i) substantial capital requirements and leverage principally as a consequence of its ongoing acquisition and construction activities; (ii) dependence on demand for wireless communications; (iii) the success of the Company’s acquisition and construction programs; (iv) the Company’s outstanding debt and its ability to repay such debt; (v) future capital needs; (vi) risks associated with acquisitions; (vii) risks associated with retaining the Company’s significant customers; and (viii) risks associated with the disposition of the Company’s collocation facility ownership business. Information concerning the factors that could cause actual results to differ materially from those expectations and estimates are contained in the risk factors section of the Company’s Amendment to its Registration Statement on Form S-3, filed with the SEC on September 19, 2000, and the Company’s other securities filings, as to reflect events or circumstances after the date hereof.

PINNACLE HOLDINGS INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

December 31, September 30,

1999 2000

(Unaudited)

Assets

Current assets:

Cash and cash equivalents $ 94,862,918 $ 70,170,748

Accounts receivable, net 12,076,689 20,182,157

Prepaid expenses and other

current assets 5,235,972 10,142,351

Total current assets 112,175,579 100,495,256

Fixed assets, net 955,689,136 1,298,139,083

Leasehold interests, net 74,037,558 72,313,300

Deferred debt issue costs,

net 14,299,519 18,732,165

Other assets 3,232,248 6,499,447

$1,159,434,040 $1,496,179,251

Liabilities and Stockholders’

Current liabilities:

Accounts payable $ 7,297,498 $ 10,708,912

Accrued expenses 53,853,059 27,661,056

Deferred revenue 3,910,551 7,249,279

Current portion of

long-term debt 6,705,578 2,878,738

Total current liabilities 71,766,686 48,497,985

Long-term debt 712,659,042 868,416,231

Other liabilities 510,090 876,090

784,935,818 917,790,306

Minority interest in

subsidiary – 439,703

Stockholders’ equity:

Common Stock , $.001 par

value, 150,000,000 shares

authorized; 41,094,471 and

48,430,593 shares issued

and outstanding at

December 31, 1999 and

September 30, 2000,

respectively 41,094 48,431

Additional paid-in capital 489,090,451 773,244,966

Foreign currency translation (418,488) 228,977

Accumulated deficit ( 114,214,835) ( 195,573,132)

374,498,222 577,949,242

$1,159,434,040 $1,496,179,251

PINNACLE HOLDINGS INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Nine Months Ended September 30,

1999 2000

(Unaudited) (Unaudited)

Revenues $ 48,816,143 $ 129,595,725

Direct operating expenses,

excluding depreciation and

amortization 11,691,067 46,255,673

———-

————–

Gross margin, excluding

depreciation and

amortization 37,125,076 83,340,052

Other expenses:

General and administrative 2,822,760 6,444,081

Corporate development 5,731,059 23,367,177

State franchise, excise

and minimum taxes 699,836 843,298

Depreciation and amortization 35,118,413 86,790,825

44,372,068 117,445,381

Loss from operations (7,246,992) (34,105,329)

Interest expense 14,439,470 27,102,582

Amortization of original

issue discount and debt

issuance costs 17,334,738 20,210,683

Minority interest in

subsidiary 0 (60,297)

Net loss ( $ 39,021,200) ($ 81,358,297)

Payable-in-kind preferred

dividends and accretion 2,930,338 –

Net loss attributable to

common shareholders ($ 41,951,538) ($ 81,358,297)

Basic and diluted loss per

common share $ (1.41) $ (1.71)

Weighted average number of

common shares outstanding 28,721,466 47,746,133

PINNACLE HOLDINGS INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended September 30,

1999 2000

(Unaudited) (Unaudited)

Revenues $ 23,059,176 $ 45,313,138

Direct operating expenses,

excluding depreciation

and amortization 6,863,660 16,958,003

Gross margin, excluding

depreciation and

amortization 16,195,516 28,355,135

Other expenses:

General and administrative 1,210,505 2,430,954

Corporate development 2,459,995 15,219,313

State franchise, excise

and minimum taxes 295,502 100,944

Depreciation and

amortization 15,469,742 31,875,795

19,435,744 49,627,006

Loss from operations ( 3,240,228) ( 21,271,871)

Interest expense 6,199,411 10,791,905

Amortization of original

issue discount and debt

issuance costs 6,107,045 6,961,131

Minority interest in

subsidiary 0 ( 60,297)

Net loss ($ 15,546,684) ($ 38,964,610)

Basic and diluted loss

per common share $ (0.40) $ (0.80)

Weighted average number of

common shares outstanding 38,842,567 48,408,148

PINNACLE HOLDINGS INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

1999 2000

(unaudited) (unaudited)

Cash flows from

operating activities:

Net loss ($ 39,021,200) ($ 81,358,297)

Adjustments to

reconcile net loss to

net cash provided

by operating activities:

Depreciation and

amortization 35,118,413 86,790,825

Amortization of original

issue discount and

debt issuance costs 17,334,738 20,210,682

Provision for doubtful

accounts 568,000 432,272

Impairment of capitalized

acquisition and

construction costs – 8,684,012

Minority share of net

loss of subsidiary – ( 60,297)

(Increase) decrease in:

Accounts receivable,

gross ( 3,077,230) ( 7,961,227)

Prepaid expenses and

other current assets ( 758,769) ( 5,934,690)

Other assets ( 1,096,531) ( 3,267,198)

Increase (decrease) in:

Accounts payable ( 430,522) 3,411,414

Accrued expenses 4,041,112 ( 25,163,692)

Deferred revenue 296,130 3,338,728

Other liabilities 233,993 366,000

Total adjustments 52,229,334 80,846,829

Net cash provided by

operating activities 13,208,134 ( 511,468)

Cash flows from investing

activities:

Payments made in

connection with

acquisitions:

Fixed assets ( 400,214,749) ( 378,551,029)

Leasehold interests ( 83,387,340) ( 19,170,592)

Net current

liabilities acquired 36,135,378 176,573

Capital expenditures:

Fixed assets ( 29,540,167) ( 29,453,603)

Net cash used in

investing activities ( 477,006,878) ( 426,998,651)

Cash flows from financing

activities:

Borrowings under

long-term debt, net 556,080,721 319,501,206

Repayment of long-term

debt ( 317,963,299) ( 202,037,597)

Proceeds from issuance

of common stock, net 501,237,846 284,161,853

Liquidation of PIK

preferred stock and

warrants ( 93,741,617) –

Distribution of

contributed capital

and payment of

accretion on various

classes of common

stock ( 43,747,734) –

Minority interest in

subsidiary – 500,000

Net cash provided by

financing activities 601,865,917 402,125,462

Effect of exchange rate

changes on cash – 692,487

Net increase (decrease) in

cash and cash equivalents 138,067,173 ( 24,692,170)

Cash and cash equivalents,

beginning of period 13,801,190 94,862,918

Cash and cash equivalents,

end of period $ 151,868,363 $ 70,170,748

Supplemental disclosure of

cash flows:

Cash paid for interest $ 16,498,833 $ 24,157,013

Non-Cash Transactions:

Seller debt issued in

connection with

acquisitions $ 8,998,250 $ 9,929,355

Payable-in-kind preferred

dividends and accretion $ 2,930,338 —

Stock issued for

acquisitions $ 8,804,163 —

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