美國電塔 (AMT) 2002 Q4 法說會逐字稿

Good morning, ladies and gentlemen, my name is Paul and I will be your conference facilitator. At this time I welcome everyone to the fourth quarter 2002 earnings results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer period. If you would like to ask a question during this time, simply press star, then the number 1 on your telephone keypad. If you would like to withdraw your question, a star, then the number 2 on your telephone keypad. Thank you.

I would now like to turn the conference over to Miss Anne Alter, Vice President of Finance and Investor Relations. Ms. Alter, you may proceed.

Good morning, thanks for you for joining American Tower Corporation conference call, regarding our fourth quarter earnings. We will begin with comments from Brad Singer, Chief Financial Officer, James Taiclet, President and Chief Operating Officer, and Steve Dodge, Chairman and Chief Executive Officer.

We would like to remind you this call will contain forward-looking statements that involve a number of risks and uncertainties. Forward looking statements include discussions about our quarterly and full-year 2003 out look, statements regarding our goals, beliefs, strategies, objectives, plans, or current expectations and other statements regarding matters that are not historical fact. You should be aware that certain factors may affect us in the future and could cause actual results to differ materially from those expressed into these forward-looking statements. Such factors include the risk factors set forth in the press release this morning and those set forth in the form 10-K for quarter ended September 30th, 2002, filed with the FCC and other FCC filings. We urge you to consider the factors and remind you we under take no obligation to update the information contained in the call, including forward looking statements, to reflect subsequently occurring events or circumstances.

Now I'd like to turn things over to Brad Singer.

Thanks, Anne. We continued solid execution of the operational, strategic and financial initiatives we discussed on the last several earnings calls. Tower revenues and operating cash flow were $104.9 and $95.5 million respectively. The tower revenues and cash flows included approximately a net $4 million non-recurring revenue in cash-flow increase related primarily to the buy-out of forty leases. Excluding the positive one-time effect of the lease buy out, our tower revenues and cash flow increased 17 percent and 31% respectively from the fourth quarter of 2001.

Tower revenues grew sequentially $5.8 million from the third quarter, 2002, excluding net non-recurring positive items and adjusting for discontinued rental operations. While the total tower expenses decreased slightly during the quarter, producing a sequential cash flow increase of $6.3 million. We converted 107% of our quarterly incremental revenue added to our towers into cash flows and improved margin sequentially by 190 basis points to 63.3%.

Our rental and management revenue and cash flow growth on a same tower basis for the 12,199 towers owned as of September 30th, 2001 were 15% and 22% respectively, excluding positive one-time items. We added .22 net annual BBE on the 13,007 wireless towers owned during the fourth quarter of 2002, excluding the net effect of the lease buyout and agreed upon contractual step-downs in certain paging contracts. We ended the quarter with an average of approximately 2 BB tenants across our entire portfolio of North American Wireless Towers.

Looking back a year, we grew rental and management revenues over $80 million, excluding non-recurring items and reducing expensive items before $5 million on a basis between the fourth quarter of 2002 and the fourth quarter of 2001. Enabling us to convert the entire tower revenue increases into cash flow and increase tower margins by 690 basis points over the last 12 months.

Our first quarter and full-year 2003 Tower guidance reflects our fourth quarter revenue run rate. The impact of approximately $2.5 million of annual agreed-upon paging contract reductions, and $800,000 reduction in annual revenue related to the lease buy-out. Our 2003 Tower guidance maintains our previously-forecasted revenue growth of 10% to 14%.

Our Tower cash flow continues to anticipate capturing the vast majority of the incremental revenue as we control our tower cost structure successfully. As a result of the modifications, we have tightened our 2003 tower revenue guidance to $620 to $640 million and our cash flow out look to $400 to $420 million.

The services division reported revenues of $59 million and cash flow for less than $5 million were reported for the fourth quarter. They were above our expectations, as we had a higher level of zero and low-margin cash flow costs than anticipated. Our service margin decreased sequentially, reflecting the high level of past expenses and challenging environment for services.

We remain cautious with the service out look. As in prior years, the first quarter has started slowly, but we have shown more positive momentum during the last several weeks.

Our first quarter outlook reflects our caution, but we do expect service revenues and cash to built over the year, reflecting carrier sight deployment and modification activities. We anticipate our service revenues to range from $160-200 million for the year and service cash flow to range from $13 to $21 million. We continue to work hard on reducing in corporate overhead as we slightly reduced expenses sequentially from the third quarter and by over $2 million from the fourth quarter of 2001. However, we do expect to see a modest increase from our current fourth quarter run rate in our corporate expenses in early 2003 as we initiate the last module of our ERP system and higher insurance-related costs.

Capital expenditures continue to decrease sequentially to $21 million for the quarter and $29 million in the third quarter. We have provided a break-out of Cap Ex spending as a supplemental information in our press release. Our capital spending was lower than previously anticipated as a result of fewer towers built than expected and increasingly tighter controls. We maintain our expectation of building 100 to 150 high-quality towers in 2003 and overall capital spending between $50 and $75 million, including $3 million related to Verastar.

As a result of our strong operating performance and tight spending controls, we generate $6 million of free cash flow in the fourth quarter, excluding non-recurring positive items. We defined free cash flow as EBITDA before restructuring, less incurred Cap Ex and interest. We believe the achievement of free cash flow positive demonstrates the significant and consistent progress we have made through 2002. As we improved from a negative $35 million of free cash flow in the first quarter of this year to positive $6 million in the fourth quarter of 2002. We stated during 2002 we would become a free cash flow generator by early 2003. We achieved free cash flow positive ahead of this outlook.

From a strategic perspective, we close the sale of our headquarters building for $68 million in December. Our remaining components division Flash, for $41 million in January, and signed a definitive agreement to sell another office property for approximately $10 1/2 million, which had been under letter of intent. We previously incorporated the effect of the transactions in our outlook.

In the fourth quarter we also announced our plan to divest our Verastar division. We successfully completed the first part of our strategic initiative with the sale of one of Verastar's subsidiaries, MTN, for $26 million in early February. The remaining core operations of Verastar are currently performing as anticipated in an uneven telecommunications market and we continue to believe we will complete the structural separation of Verastar within the next six to nine months. Based on our plan, our financial statements reflect the result of Verastar's discontinued operations.

Our company continues to actively manage its financial position. In January we completed a $420 million financing, consisting of $12.25 senior-subordinated discount notes and warrants to purchase 11.4 million common shares. In connection with the financing, we successfully amended our credit facilities in February. At the end of the term of the bank facility, we can utilize up to $270 million to repay the 2 1/4 convertible note holders. If we issue shares in the convertible notes or they are not put to us, we have the ability to use remaining funds to repurchase other debt securities. We will also pre-pay of $2 million of term loans under the credit facility and reduce our revolving loan commitment by $225 million, from $650 million to $425 million. As a result of the financing and the amendment to our credit facilities, we have strengthened our entire capital structure by resolving the up-coming convertible note put, improving our liquidity, reducing our bank borrowing and near-term amortization, and increasing our financial flexibility.

As of the end of December, we had $127 million in cash, $60 million sequential increase from the third quarter, due to solid operations, timing of working capital and active balancing sheet management. As of the end of the fourth quarter, our drawings under the revolving loaner made it $166 million. As previously stated, we have, and continue to expect to reduce our leverage sequentially in the future.

Our total debts last quarter, annual, and EBITDA before restructuring radio, decreased over a full turn to 9.3 times from the third quarter, excluding the impact of positive non-recurring items. The substantial leverage decrease is a combination of increasing EBITDA and the reduction of total leverage. Most notably the placement of Verastar and its non-recourse capital leases in the discontinued operations. Based on our guidance, we anticipate further reducing leverage to below eight times by year-end 2003.

Based on our performance in relation to the bank covenants and pro-forma for a recently completed amendment, we have the ability to withdraw on the $265 million remaining under the revolving loan, less $9 million of letters of credit outstanding as of the end of the fourth quarter. Our total liquidity, pro forma for the bank amendment, but excluding the recent transactions subsequent to year end was $373 million as of the end of the fourth quarter. Given we expect minimal incremental borrowings, we believe we have more than enough to execute our current plan based on the current financial position.

With that, American Tower's President and CEO, Jim take will provide several brief comments in regard to our operation.

Thanks, Brad. I'd like up to date you on the five operational themes that contributed to the strong financial performance as Brad described.

First, customer focus. By increasing the amount of time spent with customers at every level of our management, and maintaining a fully-deployed field sales organization, we have gained increasingly-detailed interaction with our customers, regarding their build plan. The result has been $5.4 million of gross monthly new business booked in 2002. And the increase in same tower revenue you heard of 15% in 2002.

Our second theme is operational excellence. Through that, we've been improving quality and speed. We've done that by reducing the variation of the in-puts into the core processes, standardizing those processes, and eliminating re-work. The benefits come in increased customer satisfaction and loyalty and in cost reduction. For example, in the past year we've consolidated our tenant lease processing operations from five locations to one, defined a single process, and consistently trained our employees in that process. We've also enhanced the quality of our data bases that these employees use to process leases and scan thousands of documents to make them accessible on-line. The result has been a reduction by 2/3 in processing cost release and the reduction of processing time of 2/3 as well.

Our third theme is teamwork. By combining our formally separate tower operations and construction units, we expect to reduce construction services overhead by 40% year-over-year in 2003. At the same time, we've increased our line in antenna installation success rate from below 50% at the beginning of the year of 2002 to over 80% by the end of the year.

Our fourth theme, Accountability. By introducing a more rigorous individual performance assessment process, we've implemented a leaner and a more effective management structure. And a result, we expect operating unit overhead expenses to be reduced by almost 20% in 2003.

And finally, Innovation. We're continuously implementing creative ideas to enhance the value of our tower assets. For example, we're replacing expensive bag phones on the remote towers that don't have telco service available, with a much more efficient satellite-based system. On average, monthly communication expenses will be reduced by 85% per tower converted, and at the same time, the reliability of our monitoring will be increased.

You can be sure that we'll continue to drive these five operational themes forward throughout 2003. I'd like to hand it over to Steve.

Thanks. Nice job, we should all be so brief.

You know, even to those of you who may remain fundamentally skeptical, it should be clear by now our company has made real progress on a number of fronts. It's much simpler and much leaner. We've stripped of those elements that have reduced un-even operating results until the past and we are now in essence a pure tower company. This means that the pattern of predictability and consistent growth that has been in evidence in 2002 should continue.

We are also rapidly delevering, and we have removed the pressure of the convert. Our various maturities, covenants, and financial obligations are highly manageable for at least three to four years, by which team time we believe our leverage will be below five times all in. While we take nothing for granted, we believe we have taken most of the financial risk out of our company. This may be an uncommon place for a telecom company today, but that is where we believe we are.

I'd like to give Jim, Brad, Steven Moskowitz, Micheal Gieran and Hal Hess, and the many people who support them a ton of credit. They have helped engineer the conditions that have rapidly transitioned us from being a presumed train wreck to a viable and growing company that is a net generator of cash. Some of you may still cling to the train-wrecked theory as evidence by the nature of your position in our securities. This is of course your call to make, but we expect you'll become increasingly uncomfortable as our trend lines continue, which they will.

Becoming a pure tower company begs a question of whether the business is any good or not. In a sense, it has been somewhat the victim of near-impossible expectations that were placed upon it several years ago. But that was then and this is now. Today we believe it is a business whose top line can grow organically at 10% to 14% or so for a number of years.

As we are demonstrating, virtually all of that revenue growth can be converted to cash flow. This suggests a cash flow growth in the very high teens or higher is sustainable. Required Cap Ex, at least in our scheme of things, should be below 3% of revenues. And base revenues are very sticky. So, there's no reason that we can see why free cash flow, which is now emerging, should not ultimately become very substantial.

These statements are made under the twin assumptions that the capital markets will continue to be very choppy for our customers for a period of time and that there will be some consolidation between our customers. There could be some upside to these scenarios, but we do not assume it in planning our business.

In summary, We believe our business motto's a very good one and we're hard-pressed frankly to find a better one out there, at least in Telecom.

Still, there are some important issues that we need to address. The way we relate to our customers is one of them. Our customers don't like it when we are less flexible than they would like us to be on price. We must do a better job of convincing them that we need to achieve certain returns in order to continue investing in the infrastructure that they need to extend and upgrade their networks. Shared infrastructure, which is our business, makes more sense today than it ever has. What we do improves the capital efficiency of our customers. If we are to do more of it, and we would like to, then our fundamental health and our access to capital should be of interest to our customers. We need to be more effective at getting these essential points across.

Second, the tower industry itself can and should become much more efficient. Right now there are four or five more if you count the carriers who manage their own portfolios -- national or quasi-international management infrastructures. The right combinations of tower companies can create efficiencies that would improve our industry, improve its access to capital, and improve our collective ability to deliver on behalf of customers. So we are strong advocates of consolidation among tower companies and we'll continue to be.

There's another topic we'd like to touch on, which is a growth metric called BBE, which you are all familiar with. As most of you will recall, this unit of measurement was created in an effort to capture organic growth on portfolios that were doubling in size each year. With annual tower count now in low single digits on a percentage basis, this rationale no longer applies. Simple year to year comparisons of revenues on same towers therefore capture virtually all of our organic growth.

Further, since no firm standards have ever been developed for the determination of BBE, calculation of the figure itself has been given to varying approaches among the companies that have been using it, making it somewhat misleading as a comparative metric. In addition, we manage our companies through sales quotas of new revenue and revenue growth, not BBE. If the metric is not relevant internally, it makes it difficult for us to believe it should be relevant externally.

Finally, and this is not unimportant, we believe our customers have been advantaging the tower companies' desire to squeeze in a few more leases by the end of the quarter in order to achieve a certain quarrel BBE result.

For all these reasons, from this point forward we will be reporting only actual, year-over-year organic revenue gains on our towers. This is the way normal businesses measure organic revenue growth and we believe this is the soundest and most accurate way to mature and interpret a tower company's organic growth. We will of course supply what we believe is complete financial data overall and we don't think you'll have any difficulty understanding what's going on inside our company in the absence of this flawed metric.

We've established a decent track record lately, delivering on promises. We're going to make a few more today.

The first relates to free cash flow. The lines have crossed and we are there. We will remain there from here on in, and the amount may be greater than you expect. So while we are taking away BBE, we are giving you free cash flow. It is much more telling, much more important, because it confirms our company's ability to generate real money, which is what good businesses are supposed to do.

The second is consolidation. We don't know which companies may combine, and we don't know when. But we believe there will be some combinations. And they should not be levering events, but the opposite, as in most combinations, expenses come out, while revenues do not. This will help our industry and this will help the industry of our customers. With that, I think we'll open it up for questions, thanks very much.

At this time, I remind all participants if you would like to ask a question, press star, then number 1 on your keypad. Your first question is from Mr. Rick Prentice with Raymond James.

Good morning, guys. First, nice to see positive free cash flow, I think you're right, Steve, investors are focused on that, not just for you, but for your customers as well. It's something important to focus on. Questions I've got, first with the bank amendments now approved, what do you all forecast as far as the speed with which you can then merge and then start addressing the put, over what time-frame should we expect the put to be put to bed, as you said.

Rick, it's Brad. We plan on completing the merger with the [Escar] corporation as of the course of the next week or two, so that will be complete and the cash will be into it proceeds account. We will utilize it to buy on the convert. I think the way we're viewing this is that as you know from the bank amendment, we think the ability to use cash, we also have the ability to use equity. If we do not use all the cash on the 2 1/4 convert, we can use the cash up to the $217 million on the other debt securities on our balance sheet. I think we'll take a common sense approach over the next several months and look how all of our securities trade and see what makes the most sense and what's logical here. And how we can get the best return on ultimately our funds and how we do this. So, that's really gonna be our approach. The put date, as you know also is in October. So we are gonna -- we will be judicious from this point forward on the best way to bring this end.

With the bank amendment, were there any significant changes to the credit facility terms or covenants?

There was only one covenant added, just meant to -- since now we have Opco, to have a leverage ratio, we will be filing an 8-K with the specifics of the amendment, taking into account -- it doesn't increase the tightness of our ratios, but just takes that into account to put another operating company leverage ratio in it.

And the paging step-down. I missed that in your remarks. You talked about your 2003 guidance is based on your fourth quarter actuals and then the lease buy-out, I think you said $0.8 million, as far as on a annual basis, but what was the number on the paging step-down and can you give us more color what that's related to?

The paging step-down is we have with certain paging companies an annual step-down. In terms of each year, what we reduce are the paging revenues. So it happened in December of this year, and the amount annualized a little under $2 1/2 million, and that's in our churn numbers and how we view and guide for 2003.

Is that an annual event that takes place in December then?

Yes, it is.

Okay, and the final question is, on your supplemental information, first thanks for breaking up the Cap Ex and other items. That definitely helps us. You mentioned on there also, on your tower count, reduction of towers you sold, I guess 147 towers within the fourth quarter and also two broadcast towers. Anymore color on what we should look going forward there? And are there more assets swaps maybe in the future?

Rick, I think we've gotten rid of what we would consider to be the low-hanging fruit, the towers that are easier to dispose of that have a greater impact on our financial statements. However, we are still engaged in -- and we always will be frankly -- in the business of looking critically and objectively hopefully at our portfolio to try to when we can, opportunisticly get rid of those towers, which for reasons we think we understand, do not fit our profile or may not satisfy the growth objectives we had overall for the portfolio. I would kinda' look at a portfolio of 14,000 towers and from time to time we'll get rid of those which we would consider sort of at the bottom of the litter.

At the same time, in terms of swapping, I think that we have continued to maintain a dialogue on that front, but I think that it becomes a more complicated thing to think about. If at the same time you think you might have an opportunity to combine companies some time in the next 12 or 18 months or something, I think we need to kinda' get through that phase of the industry if in fact we can, and I think we can, and then look around and see what we can do incrementally to further improve what would then be a larger portfolio.

Okay, well, good luck working out the rest of the items on your check list. A good job so far.

Thanks, Rick.

Your next question is from Jim Ballen with Bear Stearns.

Thanks. A few questions for you. We've been hearing recently that AWE has been -- is planning on being particularly active in building out this year, and I guess -- it seems that could mean more lease-up and more services than we had been previously anticipating. I know you've done a lot of work on both sides of your business with AWE in the past. Do you think this could mean that you could get more of -- more than your share of that business on the services side? And do you think it also could mean that you could be doing more builds or build to suits than currently anticipated?

Two other things -- one is I just want to confirm the only commitment you have to build right now is with NII holdings, and also, maybe talk a little bit about you know, what would cause you to change your mind in terms of your capital spending to increase it if you think -- if you were planning on doing that, what would have to change?

Jim, it's James Taiclet, first of all, we've enjoyed, as you know and we mentioned here, an excellent relationship with AT&T Wireless on both the lease upside and the construction services, and other services sides. And we anticipate that will continue into 2003. We've got a strong foundation to do that contractually, we have good business relationships locally and nationally to do that. So you can assume that AWE's trend will affect us in a beneficial way, and you know, if we expect that too. Now overall, if you take all our carrier customers, we anticipate that the growth rate in our leases this year to be at or modestly above the new business rate that we generated in 2002. And sure, AWE will be a big part of that.

On your second point, you're correct, our only build commitment at this time to any carrier is NII in Mexico, and in international, so you're correct, and third point, we're really not gonna anticipate changing our build criteria for new towers this year, and the build criteria's a return on investment standard that we have that we do not go under. The ways we obtain that standard is getting two customers at market lease rates out the gate. Another way is to get a capital contribution from a customer along with our own to make that tower make sense. And so those are the kinds of things we'll continue to assess. We won't change our criteria this year, I don't expect.

Jim, another way to comment the question is to say we are -- tilting heavily toward debt reduction as opposed to portfolio expansion, I think that's an appropriate bias at this point, however, there are outstanding tower projects out there, and when they meet the criteria Jim described, we think we should do them because in part it keeps us in the game with our customers, and I think that's an important way for us to view the business, but we're very free cash flow focused, as you can tell, and that will continue to -- for a period of time.

Terrific, thanks, gentlemen.

Okay.

Your next question is from Steven Angeli with Wellington Management.

Hi, did you -- can you detail what the non-cash interest expense you would expect to be for 2003?

Sure, it's in the guidance -- in the outlook page we gave your x it actually has it broken out, the non-cash -- it's the accretive amount and deferred financing piece, and cost amortization.

On mine it says interest expense including incretion and deferred is blank on my -- which I printed off of bridge, so I don't know what the numbers are.

We can -- I mean, it is public information, we can read them to you afterwards if you want to call in.

I can fax you a new one if you leave me a message.

Okay, and what's your best guess at a share count for 2003?

Shares are -- as of the end of the year are on the supplemental information page, 195.5 million.

And add 11.4 million for the warrant.

11.4?

Yes.

Okay, so if you assume somewhere in your guidance you know, somewhere close to the higher end of the range, I don't know how much non-cash interest expense is gonna be, but is a range of free cash flow of $70 to $100 million reasonable, considering the Cap Ex and the EBITDA you put out there?

How are you defining free cash flow?

I'm also subtracting -- well, I'm taking EBITDA, subtracting the cash interest expense, less Cap Ex.

If you take the mid-point of that, it's approximately $115 million.

Okay. All right, thank you very much.

Your next question is from Bob Curtive with Credit Suisse First Boston.

Good morning, a couple quick questions. Can you give us on a revenue basis what your exposure to paging is now and also give us an update on what percentage of the land leases you guys are owning, and also the third part would just if you guys are starting to see any pressure from municipalities on the tax side?

Let me walk through each of those. From a revenue side, paging represents a little under 6% of tower revenues currently in the fourth quarter. So that will be stepping down slightly. Land leases we own a little under 30%, either through actual straight-out ownership or capital leases, 50 to 99 years, and from the real estate taxes we do see pressure -- we have a team we've been doing this early, we organized probably about a year and a half ago and all they do is look into assessments and the fairness and making sure we minimize or mitigate the tax issues related to our towers or the personal property aspects to the towers themselves. So we've actually seen our real estate taxes be flattish to slightly down rather than going up because we have been aggressively going through this process.

Great, thanks.

Bobby, I would just to be clear too, to everyone out there, that the revenue numbers that we're projecting and planning our business on contemplate reductions, in the paging segment, that's built into our thinking and planning and has been for some time. So.

Thanks.

Your next question is from Jonathan Atkin with RBC Capital Markets .

Just to clarify quickly on the free cash discussion. That excludes proceeds from asset sales and any acquisition-related expenditures?

Jonathon, that's correct.

Looking at your 1-Q guidance for tower leasing revenues and EBITDA. It's a decline to 4-Q. That's in relation to the paging down?

It's not a decline. We came in -- if you net out the $4 million one-time event, we're at $145 and the revenue guidance is $146 to $150, and that has the impact of everything we talked about.

Okay, and then just on your 2003 outlook, what's the approximate mix of new business coming from cellular and PCS, versus say government sources, sources say broadcasting, and are you seeing any shift in that mix versus last year?

Sure. Let's break it down just in our overall tower rental and management, not just U.S. versus -- or international, but what we're seeing is from the new business perspective, about 60% comes from the big seven, and in the U.S., if the total U.S. business, it's closer to 80%. So most of the growth has been coming from cellular and the PCS provides. Government has not been incrementally more than it had been in the past. It's been fairly stable and a nice added benefit of the new business. But we haven't seen any uptake in that.

Okay, then just finally on expenses, is there anything going on with respect to your ERP initiatives that would case expenses to tick up during this year?

The only reason we highlight that in the first quarter, if you notice, we had a guidance of $5 million to $6 million in corporate. We bumped it up to $6 million because we feel we'll be closer there for the first quarter as we implement it. We're not talking multi-millions of expenses, we're talking in the neighborhood of something that might have an incremental quarter to half a million dollar expense.

Right.

We trying for specificity.

Thanks very much.

I wanted to add color to the revenue question. And these are directional comments, I don't think until the year's out we'll know exactly what the new business flow is going to be, but the way we see the marketplace, AWE, which has -- everyone knows has been particularly active in 2003, we see -- see a steady and strong in 2003. We see Nextel up some, Cingular up some. We see little change with Sprint, we see Verizon steady, and we see Altel strong and steady. That's the way the marketplace looks to us right now. Those companies would represent probably 60 percent or 70% of our business, maybe more that this year.

While capital markets will have a clearly bearing on the actual amounts spent by the companies, those are sort of the directional thoughts that they have and we have with regard to business flow this year, and I think for that reason, we feel pretty good about the year we're about to have. Thank you.

Your next question is from Roy Astrogen with Camden Asset Management.

Hey, guys. I was hoping you could give more detail on the leases that were bought out, what they were, how much revenue you might expect to give up on those and whether they're gonna -- whether you expect to see more in the future.

No, Roy, this was clearly a one-time event. It was $800,000 of annual revenue for 40 specific leases that were never fully functional for one of our carrier customers, and so we negotiated a buy-out, which is nothing more than an NPV calculation of the life of the lease and what the payments they were obligated to pay, and under the county rules, you recognize that up front, so it came through this quarter. And so this was something that we haven't really experienced in the past in any type of size. It might have happened in immaterial amounts, so this is something that just as we put it, it is a non-recurring one-time event.

I think it does confirm at the same time the validity of our leases. They have really in a sense financial instruments, and that's the way we treat them.

Great, thanks.

Your next question is from Seth Potter with Punk Ziegel.

Hi, good morning. Just a question on the debt amortization for your credit facilities in 2003. Is that going to be changing with your amendments? I believe it was about $14 million a quarter. Thanks.

The bank amendment we just did, does not have any change to the 2003 bank amortizations. It has 2004, 2005, and 2006. $60 million is the difference in 2004, a reduction in the amortization, in other words it's pre-paid. In 2005 it's $45 million, in 2006 it's $20 million and the rest goes to 2007 with a $200 million dollar pay-down. Hopefully that's helpful.

Yes, thank you.

Those are annual numbers too, not quarterly.

Your next question is from Greg Gorbatenko with Loop Capital Markets.

Yes, good morning. It's good to see from free cash flow numbers, that was good. I commend you guys on that. My question is regarding the AT&T, PCS co-build-out. How is that gonna affect your business, specifically as you can, and also, what's the kind of the dropoff in affiliates from IPS's announcements today -- how big of a factor will that be on your business? Thanks.

Yeah, Greg, it's Jim, on the AT&T and PCS announcement, we view that as a limited impact on our company because the announcement discussed really the two companies getting together, planning stats to look at new tower bills, and frankly they come up with a tower they're willing to put themselves on together, we would certainly be in that conversation. So it's kind of an interesting dynamic that you know that we'll build a two-carrier tower and if two carriers get together and plan well enough to say I have a go on a tower, if it was there then we expressed interest in being in that conversation, so we don't think it's gonna affect our lease-up business very much, if not at all.

Okay, then the affiliates?

Sure, the affiliates have not been affective very much in 2002, minimal lease activities. From the Sprint affiliate, revenue exposure, and we have not lost leases; below 4% of total tower revenue, so it is not a large, insignificant amount, and they have been good customers and they have been paying and we believe that these are viable entities, and that's kind of you know, the thoughts on the affiliates.

Maybe you could refresh for everybody, you've been kind of through the bankruptcy proceedings with the paging companies, I would imagine, how does that continue to work? Do they continue to pay the leases and does it trail off or become a bad debt expense?

They continue to pay the leases. The only way we don't get the payment is if a company goes chapter 7 typically. If they are in a reorganization, chapter 11, they pay us through -- we keep pretty current, so there's no pre-petition money, but post-petition, we pay us currently to operate the network, just like they pay the phone company for the back call. As an integral part of the network, we stand in a pretty good creditor position from an on-going business.

Are there concessions?

Are there concessions? Typically there are not concessions. We have a good, valid lease. It is integral to their network, so you know, I'm trying think, why I hesitate for a second to say have we made concessions in the past. I am not aware of concessions we have made.

The simple answer is no, and one way to show our position is they are than a senior creditor. We're the first bill along with the backhold that gets paid.

You guys got the bolt-cutters, that's good. Okay, thanks!

Your next question is from Michael Winer with Banc of America.

You answered most of the questions on amortization a moment ago, but to clarify, what is the 2003 amortization on the bank agreement?

Approximately $60 million.

Have you talked about -- I got on late, have you talked about the 147 towers sold, have you talked about what you sold those for?

We don't disclose what we sell the towers for. We sold a grouping of them over the past year for about $25 million total.

Keep in mind, these are the towers, most of them, are the residue of the AT&T deal we did a long time ago, where we had towers that we said then and still say now we will dispose of. We've gotten through most of them, but on a per-tower basis, those towers, which are generally way off the beaten path of wireless, do not bring in huge sums of money. Occasionally they do because of real estate underneath them that happens to be worth something, but for the most part, these are anomaly kind of towers that have been part of a liquidation process we've been engaged in for a couple years.

You can expect 2 percent to 3 percent of our own portfolio will go through a did I vester process in the given year?

Last year was a little more active year. Going forward 2% to 3 percent%.

Operator, we'd like one more question please.

Your last question is from Steve Tuckowitz with CIBC World Markets.

Thank you. Just quickly here, in terms of your 2003 estimates for revenue and cash flow projection, what kind of non-cash working capital usage are you forecasting?

We have not guided working capital usage, but this year we actually, as a source of fund --

I see that --

If you want to be conservative, you could -- I mean, you could internally budgeting from zero to $3 million a quarter as a use of cash, but what we have is a quarterly big swing of working capital when we have large interest payments. Because the interest payments are semi-annual, not quarterly, but in terms of the non-financing-related ones, we've actually been a net beneficiary of working capital.

Yeah, I guess what I'm getting is getting -- going through the balance, it's not classified for year-in. It seems as though approximately a source much funds was your ability to cut your receivables and push out your payables almost for $370 million, if I'm correct in 2002. Am I correct?

I don't know which numbers you're looking at. I mean, I know what our payables went down. Some of that's a function of selling businesses.

Well, actually --

Payables -- our foreseeables dropped off as a effect of selling --

That's been classified in the release, liabilities held for sale I assume and assets held for sale. I was taking the net of those, but I can call back and get those.

We can walk through the calculations. Looking at the statement of cash flows, it shows you the decrease and increase in assets and the numbers are below -- $55 million for the assets, $32 million for liability.

Right, just be helpful for our purposes, that a little bit more in terms of what the actual you know, short-term assets and liabilities are, but we can talk after the call. Thank you.

Okay.

Thanks, everybody, appreciate your time today. Anne?

That's all. There will be a replay in the operator will announce a replay information. Thank you.

Thank you for participating in our conference call. This will be available for recall at 1:00 P.M. Eastern Time today through 12:00 p.m. on February the 28th. This conference I.D.number for the replay is 7743718. Again, that's 7743718. To access the replay please dial 1-800-603-0809.