KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jay A. Brown and Kenneth J. Simon and each of them, as his true and lawful attorneys-in-fact and agents with full power of substitution and re-substitution for him and in his name, place and stead, in any and all capacities, to sign any and all documents relating to the Annual Report on2020 Form 10-K, including any and all amendments and supplements thereto, for the year ended December 31, 20172020 and to file the same with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully as to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.
|
| | | | | | | | | | | | | | | | | | | |
| | | Additions | | Deletions | | |
| Balance at Beginning of Year | | Charged to Operations | | Credited to Operations | | Written Off | | Balance at End of Year |
Allowance for Doubtful Accounts Receivable: | | | | | | | | | |
2017 | $ | 1,810 |
| | $ | 662 |
| | $ | — |
| | $ | (1,172 | ) | | $ | 1,300 |
|
2016 | $ | 882 |
| | $ | 1,697 |
| | $ | — |
| | $ | (769 | ) | | $ | 1,810 |
|
2015 | $ | 1,099 |
| | $ | 284 |
| | $ | — |
| | $ | (501 | ) | | $ | 882 |
|
CC HOLDINGS GS V LLC
SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
YEARS ENDED DECEMBER 31, 2017 and 2016
(In thousands of dollars)
|
| | | | | | | | | | | | | | | | |
Description | Encumbrances | | Initial Cost to Company | Cost Capitalized Subsequent to Acquisition | Gross Amount Carried at Close of Current Period | | Accumulated Depreciation at Close of Current Period | Date of Construction | Date Acquired | Life on Which Depreciation in Latest Income Statement is Computed |
7,603 sites(1) | $ | 992,663 |
| (2) | (3) | (3) | $ | 1,960,703 |
| (4) | $ | (919,546 | ) | Various | Various | Up to 20 years |
| |
(1) | No single site exceeds 5% of the aggregate gross amounts at which the assets were carried at the close of the period set forth in the table above. |
| |
(2) | As of December 31, 2017, all of the Company's debt is secured by a pledge of the equity interests in each applicable Guarantor. |
| |
(3) | The Company has omitted this information, as it would be impracticable to compile such information on a site-by-site basis. |
| |
(4) | Does not include those sites under construction. |
|
| | | | | | |
| 2017 | 2016 |
Gross amount at beginning | $ | 1,917,553 |
| $ | 1,875,940 |
|
Additions during period: | | |
Acquisitions through foreclosure | — |
| — |
|
Other acquisitions | — |
| — |
|
Communications infrastructure construction and improvements | 40,051 |
| 43,721 |
|
Purchase of land interests | — |
| — |
|
Sustaining capital expenditures | 9,500 |
| 9,688 |
|
Other | — |
| — |
|
Total additions | 49,551 |
| 53,409 |
|
Deductions during period: | | |
Cost of real estate sold or disposed | (6,401 | ) | (11,796 | ) |
Other | — |
| — |
|
Total deductions: | (6,401 | ) | (11,796 | ) |
Balance at end | $ | 1,960,703 |
| $ | 1,917,553 |
|
|
| | | | | | |
| 2017 | 2016 |
Gross amount of accumulated depreciation at beginning | $ | (828,670 | ) | $ | (740,236 | ) |
Additions during period: | | |
Depreciation | (94,348 | ) | (93,455 | ) |
Total additions | (94,348 | ) | (93,455 | ) |
Deductions during period: | | |
Amount for assets sold or disposed | 3,472 |
| 5,021 |
|
Other | — |
| — |
|
Total deductions | 3,472 |
| 5,021 |
|
Balance at end | $ | (919,546 | ) | $ | (828,670 | ) |
Other Financial Statements of CC Holdings GS V LLC's Subsidiaries: Global Signal
Acquisitions LLC, Global Signal Acquisitions II LLC and Pinnacle Towers LLC
The following financial statements for CC Holdings GS V LLC's wholly-owned subsidiaries, Global Signal Acquisitions LLC, Global Signal Acquisitions II LLC and Pinnacle Towers LLC, are included pursuant to Regulation S-X, Rule 3-16, "Financial Statements of Affiliates Whose Securities Collateralize an Issue Registered or Being Registered."
Global Signal Acquisitions LLC
Global Signal Acquisitions LLC Financial Statements
Years Ended December 31, 2017, 2016 and 2015
|
| |
| Page |
Report of Independent Registered Public Accounting Firm | |
Balance Sheet as of December 31, 2017 and 2016 | |
Statement of Operations for each of the three years in the period ended December 31, 2017
| |
Statement of Cash Flows for each of the three years in the period ended December 31, 2017
| |
Statement of Changes in Member's Equity for each of the three years in the period ended December 31, 2017
| |
Notes to Financial Statements | |
Global Signal Acquisitions II LLC
Global Signal Acquisitions II LLC Financial Statements
Years Ended December 31, 2017, 2016 and 2015
|
| |
| Page |
Report of Independent Registered Public Accounting Firm | |
Balance Sheet as of December 31, 2017 and 2016 | |
Statement of Operations for each of the three years in the period ended December 31, 2017
| |
Statement of Cash Flows for each of the three years in the period ended December 31, 2017
| |
Statement of Changes in Member's Equity for each of the three years in the period ended December 31, 2017
| |
Notes to Financial Statements | |
Pinnacle Towers LLC
Pinnacle Towers LLC Consolidated Financial Statements
Years Ended December 31, 2017, 2016 and 2015
|
| |
| Page |
Report of Independent Registered Public Accounting Firm | |
Consolidated Balance Sheet as of December 31, 2017 and 2016
| |
Consolidated Statement of Operations for each of the three years in the period ended December 31, 2017
| |
Consolidated Statement of Cash Flows for each of the three years in the period ended December 31, 2017
| |
Consolidated Statement of Changes in Member's Equity for each of the three years in the period ended December 31, 2017
| |
Notes to Consolidated Financial Statements | |
GLOBAL SIGNAL ACQUISITIONS LLC
Financial Statements
December 31, 2017, 2016 and 2015
Report of Independent Registered Public Accounting Firm
To theBoard of Directors and Members of
CC Holdings GS V LLC
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Global Signal Acquisitions LLC as of December 31, 2017 and 2016, and the related statements of operations, cash flows and changes in member’s equity for each of the three years in the period ended December 31, 2017, including the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
Thesefinancial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’sfinancial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of thesefinancial statements in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of thefinancial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
February 26, 2018
We have served as the Company's auditor since 2011.
GLOBAL SIGNAL ACQUISITIONS LLC
BALANCE SHEET
(In thousands of dollars)
|
| | | | | | | |
| December 31, |
| 2017 | | 2016 |
ASSETS | | | |
Current assets: | | | |
Receivables, net of allowance of $82 and $74, respectively | $ | 27 |
| | $ | 254 |
|
Prepaid expenses | 364 |
| | 386 |
|
Deferred site rental receivables | 1,477 |
| | 973 |
|
Other current assets | 27 |
| | 27 |
|
Total current assets | 1,895 |
| | 1,640 |
|
Deferred site rental receivables | 18,118 |
| | 19,017 |
|
Property and equipment, net | 62,595 |
| | 65,079 |
|
Goodwill | 68,841 |
| | 68,841 |
|
Site rental contracts and customer relationships, net | 47,637 |
| | 53,209 |
|
Other intangible assets, net | 2,973 |
| | 3,098 |
|
Long-term prepaid rent and other assets, net | 1,535 |
| | 1,508 |
|
Total assets | $ | 203,594 |
| | $ | 212,392 |
|
| | | |
LIABILITIES AND EQUITY | | | |
Current liabilities: | | | |
Accounts payable | $ | 56 |
| | $ | 129 |
|
Deferred revenues | 557 |
| | 579 |
|
Other accrued liabilities | 330 |
| | 390 |
|
Total current liabilities | 943 |
| | 1,098 |
|
Deferred ground lease payable | 3,135 |
| | 3,167 |
|
Above-market leases and other liabilities | 2,822 |
| | 2,773 |
|
Total liabilities | 6,900 |
| | 7,038 |
|
Commitments and contingencies (note 8) | | | |
Member's equity: | | | |
Member's equity | 196,694 |
| | 204,889 |
|
Accumulated earnings (deficit) | — |
| | 465 |
|
Total member's equity | 196,694 |
| | 205,354 |
|
Total liabilities and equity | $ | 203,594 |
| | $ | 212,392 |
|
See accompanying notes to financial statements.
GLOBAL SIGNAL ACQUISITIONS LLC
STATEMENT OF OPERATIONS
(In thousands of dollars)
|
| | | | | | | | | | | |
| Years Ended December 31, |
| 2017 | | 2016 | | 2015 |
| | | | | |
Site rental revenues—third parties | $ | 29,143 |
| | $ | 28,497 |
| | $ | 27,875 |
|
Site rental revenues—related parties | 2,358 |
| | 2,322 |
| | 2,319 |
|
Site rental revenues—total | 31,501 |
| | 30,819 |
| | 30,194 |
|
| | | | | |
Operating expenses: | | | | | |
Site rental cost of operations—third parties(a) | 5,127 |
| | 5,454 |
| | 5,192 |
|
Site rental cost of operations—related parties(a) | 990 |
| | 901 |
| | 861 |
|
Site rental cost of operations—total(a) | 6,117 |
| | 6,355 |
| | 6,053 |
|
Management fee—related party | 2,394 |
| | 2,258 |
| | 2,115 |
|
Asset write-down charges | — |
| | 110 |
| | 369 |
|
Depreciation, amortization, and accretion | 10,435 |
| | 10,277 |
| | 10,132 |
|
Total operating expenses | 18,946 |
| | 19,000 |
| | 18,669 |
|
Operating income (loss) | 12,555 |
| | 11,819 |
| | 11,525 |
|
Other income (expense) | 16 |
| | (5 | ) | | 10 |
|
Income (loss) before income taxes | 12,571 |
| | 11,814 |
| | 11,535 |
|
Benefit (provision) for income taxes | 37 |
| | 44 |
| | 34 |
|
Net income (loss) | $ | 12,608 |
| | $ | 11,858 |
| | $ | 11,569 |
|
| |
(a)
| Exclusive of depreciation, amortization and accretion shown separately and certain indirect costs included in the management fee.
|
See accompanying notes to financial statements.
GLOBAL SIGNAL ACQUISITIONS LLC
STATEMENT OF CASH FLOWS
(In thousands of dollars)
|
| | | | | | | | | | | |
| Years Ended December 31, |
| 2017 | | 2016 | | 2015 |
Cash flows from operating activities: | | | | | |
Net income (loss) | $ | 12,608 |
| | $ | 11,858 |
| | $ | 11,569 |
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | | |
Depreciation, amortization and accretion | 10,435 |
| | 10,277 |
| | 10,132 |
|
Asset write-down charges | — |
| | 110 |
| | 369 |
|
Changes in assets and liabilities: | | | | | |
Increase (decrease) in accounts payable | (73 | ) | | 139 |
| | (117 | ) |
Increase (decrease) in deferred revenues, deferred ground lease payable and other liabilities | (219 | ) | | (82 | ) | | (631 | ) |
Decrease (increase) in receivables | 227 |
| | (25 | ) | | 63 |
|
Decrease (increase) in other current assets, deferred site rental receivable, long-term prepaid rent and other assets | 412 |
| | (677 | ) | | (1,839 | ) |
Net cash provided by (used for) operating activities | 23,390 |
| | 21,600 |
| | 19,546 |
|
Cash flows from investing activities: | | | | | |
Capital expenditures | (2,122 | ) | | (2,506 | ) | | (4,655 | ) |
Net cash provided by (used for) investing activities | (2,122 | ) | | (2,506 | ) | | (4,655 | ) |
Cash flows from financing activities: | | | | | |
Distributions to member | (21,268 | ) | | (19,094 | ) | | (14,891 | ) |
Net cash provided by (used for) financing activities | (21,268 | ) | | (19,094 | ) | | (14,891 | ) |
Net increase (decrease) in cash and cash equivalents | — |
| | — |
| | — |
|
Cash and cash equivalents at beginning of year | — |
| | — |
| | — |
|
Cash and cash equivalents at end of year | $ | — |
| | $ | — |
| | $ | — |
|
See accompanying notes to financial statements.
GLOBAL SIGNAL ACQUISITIONS LLC
STATEMENT OF CHANGES IN MEMBER'S EQUITY
(In thousands of dollars)
|
| | | | | | | | | | | | |
| | Member's Equity | | Accumulated Earnings (Deficit) | | Total |
Balance at December 31, 2014 | | $ | 204,889 |
| | $ | 11,023 |
| | $ | 215,912 |
|
Distributions to member (note 6) | | — |
| | (14,891 | ) | | (14,891 | ) |
Net income (loss) | | — |
| | 11,569 |
| | 11,569 |
|
Balance at December 31, 2015 | | $ | 204,889 |
| | $ | 7,701 |
| | $ | 212,590 |
|
Distributions to member (note 6) | | — |
| | (19,094 | ) | | (19,094 | ) |
Net income (loss) | | — |
| | 11,858 |
| | 11,858 |
|
Balance at December 31, 2016 | | $ | 204,889 |
| | $ | 465 |
| | $ | 205,354 |
|
Distributions to member (note 6) | | (8,195 | ) | | (13,073 | ) | | (21,268 | ) |
Net income (loss) | | — |
| | 12,608 |
| | 12,608 |
|
Balance at December 31, 2017 | | $ | 196,694 |
| | $ | — |
| | $ | 196,694 |
|
See accompanying notes to financial statements.
GLOBAL SIGNAL ACQUISITIONS LLC
NOTES TO FINANCIAL STATEMENTS
(Tabular dollars in thousands)
The accompanying financial statements reflect the financial position, results of operations and cash flows of Global Signal Acquisitions LLC ("Company"). The Company is a wholly-owned subsidiary of CC Holdings GS V LLC ("CCL"), which is an indirect, wholly-owned subsidiary of Crown Castle International Corp., a Delaware corporation ("CCIC" or "Crown Castle"). As used herein, the term "including," and any variation thereof means "including without limitations." The use of the word "or" herein is not exclusive.
The Company is organized specifically to own, lease and manage towers and other structures (collectively, "towers") and to a lesser extent, interests in land under third party and related party towers in various forms ("land interests") (collectively, "communications infrastructure" or "sites") that are geographically dispersed across the United States ("U.S."). The Company's core business is providing access, including space or capacity, to its sites via long-term contracts in various forms, including licenses, subleases and lease agreements (collectively, "contracts"). Management services related to communications towers and other communication sites are performed by Crown Castle USA Inc. ("CCUSA"), an affiliate of the Company, under a management agreement, as the Company has no employees.
For U.S. federal income tax purposes, CCIC operates as a real estate investment trust ("REIT"), and as its indirect subsidiary, the Company's assets and operations are included in the CCIC REIT. See notes 2 and 7.
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and use assumptions that affect the reported amounts of assets and liabilities and the disclosure for contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
| |
2.
| Summary of Significant Accounting Policies |
Receivables Allowance
An allowance for doubtful accounts is recorded as an offset to accounts receivable. The Company uses judgment in estimating this allowance and considers historical collections, current credit status or contractual provisions. Additions to the allowance for doubtful accounts are charged to "site rental cost of operations" and deductions from the allowance are recorded when specific accounts receivable are written off as uncollectible.
Lease Accounting
General. The Company classifies its leases at inception as either operating leases or capital leases. A lease is classified as a capital lease if at least one of the following criteria are met, subject to certain exceptions noted below: (1) the lease transfers ownership of the leased assets to the lessee, (2) there is a bargain purchase option, (3) the lease term is equal to 75% or more of the economic life of the leased assets, or (4) the present value of the minimum lease payments equals or exceeds 90% of the fair value of the leased assets.
Lessee. Leases for land are evaluated for capital lease treatment if at least one of the first two criteria mentioned in the immediately preceding paragraph is present relating to the leased assets. When the Company, as lessee, classifies a lease as a capital lease, it records an asset in an amount equal to the present value of the minimum lease payments under the lease at the beginning of the lease term. Applicable operating leases are recognized on a straight-line basis as discussed under "Costs of Operations" below.
Lessor. If the Company is the lessor of leased property that is part of a larger whole (including a portion of space on a tower) and for which fair value is not objectively determinable, then such lease is accounted for as an operating lease. As applicable, operating leases are recognized on a straight-line basis as discussed under "Revenue Recognition."
See also "Recent Accounting Pronouncements Not Yet Adopted" below for further discussion.
Property and Equipment
Property and equipment is stated at cost, net of accumulated depreciation. Property and equipment includes land owned in fee and perpetual easements for land, which have no definite life. When the Company purchases fee ownership or perpetual easements for the land previously subject to ground lease, the Company reduces the value recorded as land by the amount of any associated deferred ground lease payable or unamortized above-market leases. Depreciation is computed utilizing the straight-
GLOBAL SIGNAL ACQUISITIONS LLC
NOTES TO FINANCIAL STATEMENTS
(Tabular dollars in thousands)
line method at rates based upon the estimated useful lives of the various classes of assets. Depreciation of communications infrastructure is generally computed with a useful life equal to the shorter of 20 years or the term of the underlying ground lease (including optional renewal periods). Additions, renewals or improvements are capitalized, while maintenance and repairs are expensed. The carrying value of property and equipment will be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.
Abandonments and write-offs of property and equipment are recorded to "asset write-down charges" on the Company's statement of operations.
Asset Retirement Obligations
Pursuant to its ground lease and easement agreements, the Company records obligations to perform asset retirement activities, including requirements to remove communications infrastructure or remediate the land upon which the Company's communications infrastructure resides. Asset retirement obligations are included in "above-market leases and other liabilities" on the Company's balance sheet. The liability accretes as a result of the passage of time and the related accretion expense is included in "depreciation, amortization and accretion" expense on the Company's statement of operations. The associated asset retirement costs are capitalized as an additional carrying amount of the related long-lived asset and depreciated over the useful life of such asset.
Goodwill
Goodwill represents the excess of the purchase price for an acquired business over the allocated value of the related net assets. The Company tests goodwill for impairment on an annual basis, regardless of whether adverse events or changes in circumstances have occurred. The annual test begins with goodwill and all intangible assets being allocated to applicable reporting units. The Company then performs a qualitative assessment to determine whether it is "more likely than not" that the fair value of the reporting units is less than its carrying amount. If it is concluded that it is "more likely than not" that the fair value of a reporting unit is less than its carrying amount, it is necessary to perform the two-step goodwill impairment test. The two-step goodwill impairment test begins with a comparison of the estimated fair value of the reporting unit and the carrying value of the reporting unit. The first step, commonly referred to as a "step-one impairment test," is a screen for potential impairment while the second step measures the amount of any impairment if there is an indication from the first step that one exists. The Company's measurement of the fair value for goodwill is based on an estimate of discounted expected future cash flows of the reporting unit. The Company has one reporting unit for goodwill impairment testing. The Company performed its most recent annual test of goodwill as of October 1, 2017, which resulted in no impairments.
Other Intangible Assets
Intangible assets are included in "site rental contracts and customer relationships, net" and "other intangible assets, net" on the Company's balance sheet and predominately consist of the estimated fair value of site rental contracts and customer relationships recorded in conjunction with acquisitions. The site rental contracts and customer relationships intangible assets are comprised of (1) the current term of the existing contracts, (2) the expected exercise of the renewal provisions contained within the existing contracts, which automatically occur under contractual provisions, or (3) any associated relationships that are expected to generate value following the expiration of all renewal periods under existing contracts.
The useful lives of intangible assets are estimated based on the period over which the intangible asset is expected to benefit the Company, which is calculated on an individual tenant basis, considering, among other things, the contractual provisions with the tenant and gives consideration to the expected useful life of other assets to which the useful life may relate. Amortization expense for intangible assets is computed using the straight-line method over the estimated useful life of each of the intangible assets. The useful life of the site rental contracts and customer relationships intangible asset is limited by the maximum depreciable life of the tower (20 years), as a result of the interdependency of the tower and site rental contracts and customer relationships. In contrast, the site rental contracts and customer relationships are estimated to provide economic benefits for several decades because of the low rate of tenant cancellations and high rate of renewals experienced to date. Thus, while site rental contracts and customer relationships are valued based upon the fair value, which includes assumptions regarding both (1) tenants' exercise of optional renewals contained in the acquired contracts and (2) renewals of the acquired contracts past the contractual term including exercisable options, the site rental contracts and customer relationships are amortized over a period not to exceed 20 years as a result of the useful life being limited by the depreciable life of the sites.
The carrying value of other intangible assets with finite useful lives will be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company has a dual grouping policy for purposes of determining the unit of account for testing impairment of the site rental contracts and customer relationships intangible assets. First, the Company pools the site rental contracts and customer relationships with the related tower assets into
GLOBAL SIGNAL ACQUISITIONS LLC
NOTES TO FINANCIAL STATEMENTS
(Tabular dollars in thousands)
portfolio groups for purposes of determining the unit of account for impairment testing. Second and separately, the Company evaluates the site rental contracts and customer relationships by significant tenant or by tenant grouping for individually insignificant tenants, as appropriate. If the sum of the estimated future cash flows (undiscounted) expected to result from the use or eventual disposition of an asset is less than the carrying amount of the asset, an impairment loss is recognized. Measurement of an impairment loss is based on the fair value of the asset.
Above-market Leases
Above-market leases consist of the estimated fair value of above-market leases for land interests under the Company's towers. Above-market leases for land interests are amortized to costs of operations over their respective estimated remaining contract term at the acquisition date.
Revenue Recognition
Site rental revenues are recognized on a monthly basis over the fixed, non-cancelable term of the relevant contract (generally ranging from five to 15 years), regardless of whether the payments from the tenant are received in equal monthly amounts. The Company's contracts contain fixed escalation clauses (such as fixed dollar or fixed percentage increases) or inflation-based escalation clauses (such as those tied to the consumer price index ("CPI")). If the payment terms call for fixed escalations, upfront payments, or rent-free periods, the revenue is recognized on a straight-line basis over the fixed, non-cancelable term of the agreement. When calculating straight-line rental revenues, the Company considers all fixed elements of tenant contractual escalation provisions, even if such escalation provisions contain a variable element in addition to a minimum. The Company's assets related to straight-line site rental revenues are included in "deferred site rental receivables." Amounts billed or received prior to being earned are deferred and reflected in "deferred revenues" on the Company's balance sheet.
Costs of Operations
In excess of four-fifths of the Company's site rental cost of operations consists of ground lease expenses, and the remainder includes repairs and maintenance expenses, utilities, property taxes, or insurance.
Generally, the ground lease agreements are specific to each site, are for an initial term of five years and are renewable for pre-determined periods. The Company also enters into term easements and ground leases in which it prepays the entire term in advance. Ground lease expense is recognized on a monthly basis, regardless of whether the contract agreement payment terms require the Company to make payments annually, quarterly, monthly, or for the entire term in advance. The Company's ground leases contain fixed escalation clauses (such as fixed dollar or fixed percentage increases) or inflation-based escalation clauses (such as those tied to the CPI). If the payment terms include fixed escalation provisions, the effect of such increases is recognized on a straight-line basis. The Company calculates the straight-line ground lease expense using a time period that equals or exceeds the remaining depreciable life of the communications infrastructure asset. Further, when a tenant has exercisable renewal options that would compel the Company to exercise existing ground lease renewal options, the Company has straight-lined the ground lease expense over a sufficient portion of such ground lease renewals to coincide with the final termination of the tenant's renewal options. The Company's policy is to record ground lease agreements with affiliates under the same or similar economic terms as the contract agreement for the land that existed prior to the purchase of such land by the affiliate.
The Company's current liability related to straight-line ground lease expense is included in "other accrued liabilities" on the Company's consolidated balance sheet and was $0.1 million for the years ended December 31, 2017 and 2016. The Company's non-current liability related to straight-line ground lease expense is included in "deferred ground lease payable" on the Company's balance sheet. The Company's assets related to prepaid ground leases is included in "prepaid expenses" and "long-term prepaid rent and other assets, net" on the Company's balance sheet. The Company's current liability related to accrued property taxes is included in "other accrued liabilities" on the Company's balance sheet and was $0.2 million and $0.3 million for the years ended December 31, 2017 and 2016, respectively.
Management Fee
The Company is charged a management fee by CCUSA, a wholly-owned, indirect subsidiary of CCIC, relating to management services, which include those functions reasonably necessary to maintain, market, operate, manage, and administer the sites. The management fee is equal to 7.5% of the Company's revenues, excluding the revenues related to the accounting for leases with fixed escalators as required by the applicable accounting standards. See note 6.
GLOBAL SIGNAL ACQUISITIONS LLC
NOTES TO FINANCIAL STATEMENTS
(Tabular dollars in thousands)
Income Taxes
CCIC operates as a REIT for U.S. federal income tax purposes. The Company is an indirect subsidiary of CCIC and for U.S. federal income taxes purposes the Company's assets and operations are part of the CCIC REIT. As a REIT, CCIC is generally entitled to a deduction for dividends that it pays and therefore is not subject to U.S. federal corporate income tax on its taxable income that is currently distributed to its stockholders. CCIC also may be subject to certain federal, state, local, and foreign taxes on its income and assets, including (1) alternative minimum taxes (repealed effective January 1, 2018), (2) taxes on any undistributed income, (3) taxes related to the CCIC's taxable REIT subsidiaries, (4) franchise taxes, (5) property taxes, and (6) transfer taxes. In addition, CCIC could in certain circumstances be required to pay an excise or penalty tax, which could be significant in amount, in order to utilize one or more relief provisions under the Internal Revenue Code of 1986, as amended ("Code") to maintain qualification for taxation as a REIT.
The Company does not expect the Tax Cuts and Jobs Act, which was signed into law in December 2017, to have a significant impact on its financial statements.
Reporting Segments
The Company has one operating segment.
Recently Adopted Accounting Pronouncements
No new accounting pronouncements adopted during the year ended December 31, 2017 had a material impact on the Company's financial statements.
Recent Accounting Pronouncements Not Yet Adopted
In February 2016, the FASB issued new guidance on the recognition, measurement, presentation and disclosure of leases. The new guidance requires lessees to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments for all leases with a term greater than 12 months. The accounting for lessors remains largely unchanged from existing guidance. This guidance is effective for the Company as of January 1, 2019 and is required to be applied using a modified retrospective approach for all leases existing at, or entered into after, the beginning of the earliest comparative period presented. Although early adoption is permitted, the Company does not expect to early adopt the new guidance prior to January 1, 2019. The Company expects that (1) lessee arrangements will continue to be classified as operating leases under the new guidance; (2) this guidance to have a material impact on its balance sheet due to the addition of right-of-use assets and lease liabilities for all lessee arrangements with a term greater than 12 months; and (3) there will not be a material impact to its statement of operations and statement of cash flows.
In January 2017, the FASB issued new guidance to simplify the accounting for goodwill impairment by removing the second step of the existing goodwill impairment test. As a result of the guidance, goodwill impairment, if any, will be measured during the step-one impairment test as the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. Additionally, the guidance does not change the option to complete a qualitative assessment prior to performing a step-one impairment test. The guidance is effective for the Company as of January 1, 2020. Early adoption is permitted. The Company is currently evaluating the impact of the guidance, including the impact on its financial statements.
In January 2017, the FASB issued new guidance, which clarifies the definition of a business in order to assist companies in evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The guidance is effective for the Company as of January 1, 2018, and is required to be applied prospectively. Early adoption is permitted. The Company adopted this guidance effective January 1, 2018 and will apply the new guidance to prospective transactions. The adoption of this guidance will not have a material impact on the Company's financial statements.
GLOBAL SIGNAL ACQUISITIONS LLC
NOTES TO FINANCIAL STATEMENTS
(Tabular dollars in thousands)
The major classes of property and equipment are as follows:
|
| | | | | | | | | | |
| Estimated Useful Lives | | December 31, |
| | 2017 | | 2016 |
Land(a) | — |
| | $ | 15,401 |
| | $ | 15,401 |
|
Towers | 1-20 years |
| | 89,712 |
| | 87,616 |
|
Construction in progress | — |
| | 352 |
| | 326 |
|
Total gross property and equipment | | | 105,465 |
| | 103,343 |
|
Less accumulated depreciation | | | (42,870 | ) | | (38,264 | ) |
Total property and equipment, net | | | $ | 62,595 |
| | $ | 65,079 |
|
| |
(a)
| Includes land owned in fee and perpetual easements. |
Depreciation expense for the years ended December 31, 2017, 2016, and 2015 was $4.6 million, $4.5 million, and $4.3 million, respectively.
| |
4.
| Intangible Assets and Above-market Leases |
The following is a summary of the Company's intangible assets.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2017 | | As of December 31, 2016 |
| Gross Carrying Value | | Accumulated Amortization | | Net Book Value | | Gross Carrying Value | | Accumulated Amortization | | Net Book Value |
Site rental contracts and customer relationships | $ | 108,020 |
| | $ | (60,383 | ) | | $ | 47,637 |
| | $ | 108,020 |
| | $ | (54,811 | ) | | $ | 53,209 |
|
Other intangible assets | 4,350 |
| | (1,377 | ) | | 2,973 |
| | 4,350 |
| | (1,252 | ) | | 3,098 |
|
Total | $ | 112,370 |
| | $ | (61,760 | ) | | $ | 50,610 |
| | $ | 112,370 |
| | $ | (56,063 | ) | | $ | 56,307 |
|
Amortization expense related to intangible assets is classified as follows on the Company's statement of operations:
|
| | | | | | | | | | | |
| For Years Ended December 31, |
| 2017 | | 2016 | | 2015 |
Depreciation, amortization and accretion | $ | 5,674 |
| | $ | 5,674 |
| | $ | 5,674 |
|
Site rental costs of operations | 22 |
| | 22 |
| | 22 |
|
Total amortization expense | $ | 5,696 |
| | $ | 5,696 |
| | $ | 5,696 |
|
The estimated annual amortization expense related to intangible assets (inclusive of those recorded as an increase to "site rental cost of operations") for the years ending December 31, 2018 to 2022 is as follows:
|
| | | | | | | | | | | | | | | | | | | |
| Years Ending December 31, |
| 2018 | | 2019 | | 2020 | | 2021 | | 2022 |
Estimated annual amortization | $ | 5,687 |
| | $ | 5,686 |
| | $ | 5,686 |
| | $ | 5,686 |
| | $ | 5,686 |
|
See note 2 for a further discussion of above-market leases for land interests under the Company's towers recorded in connection with acquisitions. For the years ended December 31, 2017, 2016 and 2015, the Company recorded $0.1 million, $0.1 million and $0.1 million, respectively, as a decrease to "site rental cost of operations." The following is a summary of the Company's above-market leases.
GLOBAL SIGNAL ACQUISITIONS LLC
NOTES TO FINANCIAL STATEMENTS
(Tabular dollars in thousands)
|
| | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2017 | | As of December 31, 2016 |
| Gross Carrying Value | | Accumulated Amortization | | Net Book Value | | Gross Carrying Value | | Accumulated Amortization | | Net Book Value |
Above-market leases | $ | 2,303 |
| | $ | (1,305 | ) | | $ | 998 |
| | $ | 2,303 |
| | $ | (1,199 | ) | | $ | 1,104 |
|
The estimated annual amortization expense related to above-market leases for land interests under the Company's towers for the years ending December 31, 2018 to 2022 is as follows:
|
| | | | | | | | | | | | | | | | | | | |
| Years Ending December 31, |
| 2018 | | 2019 | | 2020 | | 2021 | | 2022 |
Estimated annual amortization | $ | 106 |
| | $ | 106 |
| | $ | 106 |
| | $ | 84 |
| | $ | 73 |
|
In December 2012, CCL and Crown Castle GS III Corp. (a subsidiary of CCL) issued $1.5 billion aggregate principal amount of senior secured notes ("2012 Secured Notes"), which are guaranteed by certain subsidiaries of CCL, including the Company. In addition, the 2012 Secured Notes are secured on a first-priority basis by certain subsidiaries of CCL, including a pledge of the equity interests of the Company. In September 2016, CCIC issued $700 million aggregate principal amount of 2.250% senior unsecured notes. CCIC used a portion of the net proceeds to repay $500 million of the 2012 Secured Notes.
The 2012 Secured Notes do not contain financial maintenance covenants but they do contain restrictive covenants, subject to certain exceptions, related to the Company's ability to incur indebtedness, incur liens, enter into certain mergers or change of control transactions, sell or issue equity interests, and enter into related party transactions. With respect to the restriction regarding the issuance of debt, CCL and its subsidiaries including the Company may not issue debt other than (1) certain permitted refinancings of the 2012 Secured Notes, (2) unsecured trade payables in the ordinary course of business and financing of equipment, land or other property up to an aggregate of $100.0 million, or (3) unsecured debt or additional notes under the 2012 Secured Notes indenture provided that the Debt to Adjusted Consolidated Cash Flow Ratio (as defined in the indenture governing the 2012 Secured Notes) at the time of incurrence, and after giving effect to such incurrence, would have been no greater than 3.5 to 1. As of December 31, 2017, CCL's Debt to Adjusted Consolidated Cash Flow Ratio was 2.5 to 1, and, as a result, the Company is not restricted in its ability to incur additional indebtedness. Further, the Company is not restricted in its ability to distribute cash to affiliates or issue dividends to its member.
| |
6.
| Related Party Transactions |
In December 2012, CCL, the Company, and other subsidiaries of CCL entered into a management agreement ("Management Agreement") with CCUSA, which replaced a previous management agreement among the same parties. The Company is charged a management fee by CCUSA under the Management Agreement whereby CCUSA has agreed to employ, supervise, and pay at all times a sufficient number of capable employees as may be necessary to perform services in accordance with the operation standards defined in the Management Agreement. CCUSA currently acts as the manager of the majority of the sites held by subsidiaries of CCIC. The management fee is equal to 7.5% of the Company's "Operating Revenues," as defined in the Management Agreement, which are based on the Company’s reported revenues adjusted to exclude certain items including revenues related to the accounting for leases with fixed escalators. The fee is compensation for those functions reasonably necessary to maintain, market, operate, manage, and administer the sites, other than the operating expenses, which includes but is not limited to real estate and personal property taxes, ground lease and easement payments, and insurance premiums. In addition, in connection with its role as manager, CCUSA may make certain modifications to the Company's sites. The management fee charged from CCUSA for the years ended December 31, 2017, 2016, and 2015 totaled $2.4 million, $2.3 million, and $2.1 million, respectively.
In addition, CCUSA may perform installation services on the Company's towers for which the Company is not a party to any such agreement and for which no operating results are reflected herein.
GLOBAL SIGNAL ACQUISITIONS LLC
NOTES TO FINANCIAL STATEMENTS
(Tabular dollars in thousands)
As part of CCIC's strategy to obtain long-term control of the land under its towers, affiliates of the Company have acquired rights to land interests under the Company's towers. These affiliates then lease the land to the Company. Under such circumstances, the Company's obligation typically continues with the same or similar economic terms as the contract agreement for the land that existed prior to the purchase of such land by the affiliate. As of December 31, 2017, there are approximately 20% of the Company's sites where the land under the tower is owned by an affiliate. Rent expense to affiliates totaled $1.0 million, $0.9 million, and $0.9 million for the years ended December 31, 2017, 2016, and 2015, respectively. The Company receives rent revenue from affiliates for land owned by the Company that affiliates have towers on and pays ground rent expense to affiliates for land owned by affiliates that the Company has towers on. For the years ended December 31, 2017, 2016, and 2015, rent revenue from affiliates totaled $2.4 million, $2.3 million, and $2.3 million, respectively. As of December 31, 2017, approximately 25% of the Company's sites consist of land interests under towers owned by affiliates.
The Company recorded equity distributions of $21.3 million, $19.1 million, and $14.9 million for the years ended December 31, 2017, 2016, and 2015, respectively, reflecting distributions to its member. Cash on-hand above the amount that is required by the Management Agreement has been, and is expected to continue to be, distributed to the Company's parent company, CCL. As of December 31, 2017 and 2016, the Company had no material related party assets or liabilities on its consolidated balance sheet.
For the years ended December 31, 2017 and 2016, the Company had benefits for income taxes, which consisted of the reduction of unrecognized tax benefits as a result of the lapse of the statute of limitations partially offset by state taxes. For the year ended December 31, 2015, the provision for income taxes relates to state taxes. The Company's effective tax rate for the years ended December 31, 2017, 2016 and 2015 differed from the federal statutory rate predominately due to CCIC's REIT status, including the dividends paid deduction (see notes 1 and 2), and the aforementioned impacts described above.
As of December 31, 2017, there were no unrecognized tax benefits that would impact the effective tax rate, if recognized.
From time to time, the Company is subject to examinations by various tax authorities in jurisdictions in which the Company has business operations. The Company regularly assesses the likelihood of additional assessments in each of the tax jurisdictions resulting from these examinations. At this time, CCIC is not subject to an Internal Revenue Service examination.
| |
8.
| Commitments and Contingencies |
The Company is involved in various claims, lawsuits, or 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 or losses that may be incurred, if any, management believes the resolution of such uncertainties and the incurrence of such costs should not have a material adverse effect on the Company's financial position or results of operations. See note 9 for a discussion of the operating lease commitments.
Asset Retirement Obligations
Pursuant to its ground lease and easement agreements, the Company has the obligation to perform certain asset retirement activities, including requirements upon contract or easement termination to remove communications infrastructure or remediate the land upon which communications infrastructure resides. Accretion expense related to liabilities for retirement obligations amounted to $0.2 million, $0.1 million, and $0.1 million for the years ended December 31, 2017, 2016, and 2015, respectively. As of December 31, 2017 and 2016, liabilities for retirement obligations amounted to $1.8 million and $1.7 million, respectively, representing the net present value of the estimated expected future cash outlay. As of December 31, 2017, the estimated undiscounted future cash outlay for asset retirement obligations was approximately $18 million. See note 2.
Tenant Leases
The following table is a summary of the rental cash payments owed to the Company, as a lessor, by tenants pursuant to contractual agreements in effect as of December 31, 2017. Generally, the Company's leases with its tenants provide for (1) annual escalations, (2) multiple renewal periods at the tenant's option, and (3) only limited termination rights at the applicable tenant's option through the current term. As of December 31, 2017, the weighted-average remaining term (calculated by weighting the
GLOBAL SIGNAL ACQUISITIONS LLC
NOTES TO FINANCIAL STATEMENTS
(Tabular dollars in thousands)
remaining term for each lease by the related site rental revenue) of tenant leases is approximately six years, exclusive of renewals at the tenant's option. The tenants' rental payments included in the table below are through the current terms with a maximum current term of 20 years and do not assume exercise of tenant renewal options.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ending December 31, |
| 2018 | | 2019 | | 2020 | | 2021 | | 2022 | | Thereafter | | Total |
Tenant leases | $ | 32,761 |
| | $ | 32,649 |
| | $ | 32,879 |
| | $ | 32,244 |
| | $ | 29,139 |
| | $ | 65,612 |
| | $ | 225,284 |
|
Operating Leases
The following table is a summary of rental cash payments owed by the Company, as lessee, to landlords pursuant to contractual agreements in effect as of December 31, 2017. The Company is obligated under non-cancelable operating leases for land interests under approximately 85% of its sites. The majority of these operating lease agreements have (1) certain termination rights that provide for cancellation after a notice period, (2) multiple renewal options at the Company's option, and (3) annual escalations. Lease agreements may also contain provisions for a contingent payment based on revenues or the gross margin derived from the tower located on the leased land interest. More than 95% and more than 85% the Company's sites are under the Company's control for greater than 10 and 20 years, respectively, including renewals at the Company's option. The operating lease payments included in the table below include payments for certain renewal periods at the Company's option up to the estimated tower useful life of 20 years and an estimate of contingent payments based on revenues and gross margins derived from existing tenant leases. See also note 6.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ending December 31, |
| 2018 | | 2019 | | 2020 | | 2021 | | 2022 | | Thereafter | | Total |
Operating leases | $ | 5,050 |
| | $ | 5,173 |
| | $ | 5,184 |
| | $ | 5,082 |
| | $ | 4,978 |
| | $ | 70,676 |
| | $ | 96,143 |
|
Rental expense from operating leases was $5.0 million, $4.9 million, and $4.8 million for the years ended December 31, 2017, 2016, and 2015, respectively. The rental expense was inclusive of contingent payments based on revenues or gross margin derived from the tower located on the leased land of $1.2 million, $1.1 million, and $1.1 million for the years ended December 31, 2017, 2016, and 2015, respectively.
| |
10.
| Concentration of Credit Risk |
The financial instrument that potentially subjects the Company to concentrations of credit risk is primarily trade receivables.
The Company derives the largest portion of its revenues from customers in the wireless industry. The Company also has a concentration in its volume of business with T-Mobile, AT&T, Sprint, and Verizon Wireless that accounts for a significant portion of the Company's revenues, receivables, and deferred site rental receivables. The Company mitigates its concentrations of credit risk with respect to trade receivables by actively monitoring the creditworthiness of its tenants, the use of tenant contracts with contractually determinable payment terms, and proactive management of past due balances.
Major Customers
The following table summarizes the percentage of the Company's revenues for those tenants accounting for more than 10% of the Company's revenues.
|
| | | | | | | | |
| Years Ended December 31, |
| 2017 | | 2016 | | 2015 |
T-Mobile | 31 | % | | 30 | % | | 30 | % |
AT&T | 23 | % | | 24 | % | | 26 | % |
Sprint | 16 | % | | 16 | % | | 16 | % |
Verizon Wireless | 13 | % | | 13 | % | | 12 | % |
Total | 83 | % | | 83 | % | | 84 | % |
GLOBAL SIGNAL ACQUISITIONS II LLC
Financial Statements
December 31, 2017, 2016 and 2015
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Members of
CC Holdings GS V LLC
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Global Signal Acquisitions II LLC as of December 31, 2017 and 2016, and the related statements of operations, cash flows and changes in member’s equity for each of the three years in the period ended December 31, 2017, including the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
Thesefinancial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’sfinancial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of thesefinancial statements in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of thefinancial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
February 26, 2018
We have served as the Company's auditor since 2011.
GLOBAL SIGNAL ACQUISITIONS II LLC
BALANCE SHEET
(In thousands of dollars)
|
| | | | | | | |
| December 31, |
| 2017 | | 2016 |
ASSETS | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 30,771 |
| | $ | 19,550 |
|
Receivables, net of allowance of $289 and $609, respectively | 938 |
| | 653 |
|
Prepaid expenses | 21,710 |
| | 21,583 |
|
Deferred site rental receivables | 16,951 |
| | 14,155 |
|
Other current assets | 121 |
| | 136 |
|
Total current assets | 70,491 |
| | 56,077 |
|
Deferred site rental receivables | 238,401 |
| | 248,324 |
|
Property and equipment, net | 635,135 |
| | 667,020 |
|
Goodwill | 642,545 |
| | 642,545 |
|
Site rental contracts and customer relationships, net | 419,374 |
| | 476,738 |
|
Other intangible assets, net | 14,512 |
| | 16,049 |
|
Long-term prepaid rent and other assets, net | 30,049 |
| | 27,294 |
|
Total assets | $ | 2,050,507 |
| | $ | 2,134,047 |
|
| | | |
LIABILITIES AND EQUITY | | | |
Current liabilities: | | | |
Accounts payable | $ | 1,073 |
| | $ | 1,430 |
|
Deferred revenues | 6,451 |
| | 7,072 |
|
Other accrued liabilities | 5,662 |
| | 6,098 |
|
Total current liabilities | 13,186 |
| | 14,600 |
|
Deferred ground lease payable | 96,828 |
| | 91,787 |
|
Above-market leases and other liabilities | 35,948 |
| | 35,486 |
|
Total liabilities | 145,962 |
| | 141,873 |
|
Commitments and contingencies (note 8) | | | |
Member's equity: | | | |
Member's equity | 1,904,545 |
| | 1,992,174 |
|
Accumulated earnings (deficit) | — |
| | — |
|
Total member's equity | 1,904,545 |
| | 1,992,174 |
|
Total liabilities and equity | $ | 2,050,507 |
| | $ | 2,134,047 |
|
See accompanying notes to financial statements.
GLOBAL SIGNAL ACQUISITIONS II LLC
STATEMENT OF OPERATIONS
(In thousands of dollars)
|
| | | | | | | | | | | |
| Years Ended December 31, |
| 2017 | | 2016 | | 2015 |
| | | | | |
Site rental revenues | $ | 411,669 |
| | $ | 409,102 |
| | $ | 410,057 |
|
| | | | | |
Operating expenses: | | | | | |
Site rental cost of operations—third parties(a) | 109,956 |
| | 109,227 |
| | 108,082 |
|
Site rental cost of operations—related parties(a) | 33,498 |
| | 31,080 |
| | 29,323 |
|
Site rental cost of operations—total(a) | 143,454 |
| | 140,307 |
| | 137,405 |
|
Management fee—related party | 31,438 |
| | 30,459 |
| | 29,543 |
|
Asset write-down charges | — |
| | 2,072 |
| | 2,323 |
|
Depreciation, amortization, and accretion | 122,513 |
| | 122,444 |
| | 121,237 |
|
Total operating expenses | 297,405 |
| | 295,282 |
| | 290,508 |
|
Operating income (loss) | 114,264 |
| | 113,820 |
| | 119,549 |
|
Other income (expense) | 429 |
| | (137 | ) | | (364 | ) |
Income (loss) before income taxes | 114,693 |
| | 113,683 |
| | 119,185 |
|
Benefit (provision) for income taxes | 457 |
| | 405 |
| | 767 |
|
Net income (loss) | $ | 115,150 |
| | $ | 114,088 |
| | $ | 119,952 |
|
| |
(a)
| Exclusive of depreciation, amortization and accretion shown separately and certain indirect costs included in the management fee.
|
See accompanying notes to financial statements.
GLOBAL SIGNAL ACQUISITIONS II LLC
STATEMENT OF CASH FLOWS
(In thousands of dollars)
|
| | | | | | | | | | | |
| Years Ended December 31, |
| 2017 | | 2016 | | 2015 |
Cash flows from operating activities: | | | | | |
Net income (loss) | $ | 115,150 |
| | $ | 114,088 |
| | $ | 119,952 |
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | | |
Depreciation, amortization and accretion | 122,513 |
| | 122,444 |
| | 121,237 |
|
Asset write-down charges | — |
| | 2,072 |
| | 2,323 |
|
Changes in assets and liabilities: | | | | | |
Increase (decrease) in accounts payable | (362 | ) | | 330 |
| | 246 |
|
Increase (decrease) in deferred revenues, deferred ground lease payable and other liabilities | 2,740 |
| | 4,322 |
| | 4,609 |
|
Decrease (increase) in receivables | (285 | ) | | (612 | ) | | 1,187 |
|
Decrease (increase) in other current assets, deferred site rental receivable, long-term prepaid rent and other assets | 6,219 |
| | (2,735 | ) | | (15,445 | ) |
Net cash provided by (used for) operating activities | 245,975 |
| | 239,909 |
| | 234,109 |
|
Cash flows from investing activities: | | | | | |
Capital expenditures | (31,975 | ) | | (29,364 | ) | | (54,163 | ) |
Net cash provided by (used for) investing activities | (31,975 | ) | | (29,364 | ) | | (54,163 | ) |
Cash flows from financing activities: | | | | | |
Distributions to member | (202,779 | ) | | (211,396 | ) | | (185,776 | ) |
Net cash provided by (used for) financing activities | (202,779 | ) | | (211,396 | ) | | (185,776 | ) |
Net increase (decrease) in cash and cash equivalents | 11,221 |
| | (851 | ) | | (5,830 | ) |
Cash and cash equivalents at beginning of year | 19,550 |
| | 20,401 |
| | 26,231 |
|
Cash and cash equivalents at end of year | $ | 30,771 |
| | $ | 19,550 |
| | $ | 20,401 |
|
See accompanying notes to financial statements.
GLOBAL SIGNAL ACQUISITIONS II LLC
STATEMENT OF CHANGES IN MEMBER'S EQUITY
(In thousands of dollars)
|
| | | | | | | | | | | | |
| | Member's Equity | | Accumulated Earnings (Deficit) | | Total |
Balance at December 31, 2014 | | $ | 2,083,747 |
| | $ | 71,559 |
| | $ | 2,155,306 |
|
Distributions to member (note 6) | | — |
| | (185,776 | ) | | (185,776 | ) |
Net income (loss) | | — |
| | 119,952 |
| | 119,952 |
|
Balance at December 31, 2015 | | $ | 2,083,747 |
| | $ | 5,735 |
| | $ | 2,089,482 |
|
Distributions to member (note 6) | | (91,573 | ) | | (119,823 | ) | | (211,396 | ) |
Net income (loss) | | — |
| | 114,088 |
| | 114,088 |
|
Balance at December 31, 2016 | | $ | 1,992,174 |
| | $ | — |
| | $ | 1,992,174 |
|
Distributions to member (note 6) | | (87,629 | ) | | (115,150 | ) | | (202,779 | ) |
Net income (loss) | | — |
| | 115,150 |
| | 115,150 |
|
Balance at December 31, 2017 | | $ | 1,904,545 |
| | $ | — |
| | $ | 1,904,545 |
|
See accompanying notes to financial statements.
GLOBAL SIGNAL ACQUISITIONS II LLC
NOTES TO FINANCIAL STATEMENTS
(Tabular dollars in thousands)
The accompanying financial statements reflect the financial position, results of operations, and cash flows of Global Signal Acquisitions II LLC ("Company"). The Company is a wholly-owned subsidiary of CC Holdings GS V LLC ("CCL"), which is an indirect, wholly-owned subsidiary of Crown Castle International Corp., a Delaware corporation ("CCIC" or "Crown Castle"). As used herein, the term "including," and any variation thereof means "including without limitations." The use of the word "or" herein is not exclusive.
The Company is organized specifically to own, lease, and manage towers and other structures (collectively, "towers") and to a lesser extent, interests in land under third party and related party towers in various forms ("land interests") (collectively, "communications infrastructure" or "sites") that are geographically dispersed across the United States ("U.S."). The Company's core business is providing access, including space or capacity, to its sites via long-term contracts in various forms, including licenses, subleases, and lease agreements (collectively, "contracts").
Virtually all of the Company's sites are leased or subleased or operated or managed for an initial period under master lease and sublease agreements, including the master lease and sublease agreements, and other agreements with Sprint ("Sprint Sites"). In 2037, CCIC, through its subsidiaries (including the Company), has the option to purchase all (but not less than all) of the leased and subleased Sprint towers from Sprint for approximately $2.3 billion. CCIC has no obligation to exercise the purchase option. Management services related to communications towers and other communication sites are performed by Crown Castle USA Inc. ("CCUSA"), an affiliate of the Company, under a management agreement, as the Company has no employees.
For U.S. federal income tax purposes, CCIC operates as a real estate investment trust ("REIT"), and as its indirect subsidiary, the Company's assets and operations are included in the CCIC REIT. See notes 2 and 7.
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and use assumptions that affect the reported amounts of assets and liabilities and the disclosure for contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
| |
2.
| Summary of Significant Accounting Policies |
Receivables Allowance
An allowance for doubtful accounts is recorded as an offset to accounts receivable. The Company uses judgment in estimating this allowance and considers historical collections, current credit status or contractual provisions. Additions to the allowance for doubtful accounts are charged to "site rental cost of operations" and deductions from the allowance are recorded when specific accounts receivable are written off as uncollectible.
Lease Accounting
General. The Company classifies its leases at inception as either operating leases or capital leases. A lease is classified as a capital lease if at least one of the following criteria are met, subject to certain exceptions noted below: (1) the lease transfers ownership of the leased assets to the lessee, (2) there is a bargain purchase option, (3) the lease term is equal to 75% or more of the economic life of the leased assets, or (4) the present value of the minimum lease payments equals or exceeds 90% of the fair value of the leased assets.
Lessee. Leases for land are evaluated for capital lease treatment if at least one of the first two criteria mentioned in the immediately preceding paragraph is present relating to the leased assets. When the Company, as lessee, classifies a lease as a capital lease, it records an asset in an amount equal to the present value of the minimum lease payments under the lease at the beginning of the lease term. Applicable operating leases are recognized on a straight-line basis as discussed under "Costs of Operations" below.
Lessor. If the Company is the lessor of leased property that is part of a larger whole (including with respect to a portion of space on a tower) and for which fair value is not objectively determinable, then such lease is accounted for as an operating lease. As applicable, operating leases are recognized on a straight-line basis as discussed under "Revenue Recognition."
See also "Recent Accounting Pronouncements Not Yet Adopted" below for further discussion.
GLOBAL SIGNAL ACQUISITIONS II LLC
NOTES TO FINANCIAL STATEMENTS
(Tabular dollars in thousands)
Property and Equipment
Property and equipment is stated at cost, net of accumulated depreciation. Property and equipment includes land owned in fee and perpetual easements for land, which have no definite life. When the Company purchases fee ownership or perpetual easements for the land previously subject to ground lease, the Company reduces the value recorded as land by the amount of any associated deferred ground lease payable or unamortized above-market leases. Depreciation is computed utilizing the straight-line method at rates based upon the estimated useful lives of the various classes of assets. Depreciation of communications infrastructure is generally computed with a useful life equal to the shorter of 20 years or the term of the underlying ground lease (including optional renewal periods). Additions, renewals, or improvements are capitalized, while maintenance and repairs are expensed. The carrying value of property and equipment will be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.
Abandonments and write-offs of property and equipment are recorded to "asset write-down charges" on the Company's statement of operations and were $1.9 million and $1.7 million for the years ended December 31, 2016 and 2015, respectively.
Asset Retirement Obligations
Pursuant to its ground lease and easement agreements, the Company records obligations to perform asset retirement activities, including requirements to remove communications infrastructure or remediate the land upon which the Company's communications infrastructure resides. With respect to Sprint Sites, the Company does not have retirement obligations to the extent such retirement would occur beyond the period for which it has a contract term. Asset retirement obligations are included in "above-market leases and other liabilities" on the Company's balance sheet. The liability accretes as a result of the passage of time and the related accretion expense is included in "depreciation, amortization, and accretion" expense on the Company's statement of operations. The associated asset retirement costs are capitalized as an additional carrying amount of the related long-lived asset and depreciated over the useful life of such asset.
Goodwill
Goodwill represents the excess of the purchase price for an acquired business over the allocated value of the related net assets. The Company tests goodwill for impairment on an annual basis, regardless of whether adverse events or changes in circumstances have occurred. The annual test begins with goodwill and all intangible assets being allocated to applicable reporting units. The Company then performs a qualitative assessment to determine whether it is "more likely than not" that the fair value of the reporting units is less than its carrying amount. If it is concluded that it is "more likely than not" that the fair value of a reporting unit is less than its carrying amount, it is necessary to perform the two-step goodwill impairment test. The two-step goodwill impairment test begins with a comparison of the estimated fair value of the reporting unit and the carrying value of the reporting unit. The first step, commonly referred to as a "step-one impairment test," is a screen for potential impairment while the second step measures the amount of any impairment if there is an indication from the first step that one exists. The Company's measurement of the fair value for goodwill is based on an estimate of discounted expected future cash flows of the reporting unit. The Company has one reporting unit for goodwill impairment testing. The Company performed its most recent annual goodwill impairment test as of October 1, 2017, which resulted in no impairments.
Other Intangible Assets
Intangible assets are included in "site rental contracts and customer relationships, net" and "other intangible assets, net" on the Company's balance sheet and predominately consist of the estimated fair value of the following items recorded in conjunction with acquisitions: (1) site rental contracts and customer relationships or (2) below-market leases for land interests under the acquired towers classified as "other intangible assets, net." The site rental contracts and customer relationships intangible assets are comprised of (1) the current term of the existing contracts, (2) the expected exercise of the renewal provisions contained within the existing contracts, which automatically occur under contractual provisions, or (3) any associated relationships that are expected to generate value following the expiration of all renewal periods under existing contracts.
The useful lives of intangible assets are estimated based on the period over which the intangible asset is expected to benefit the Company, which is calculated on an individual tenant basis, considering, among other things, the contractual provisions with the tenant and gives consideration to the expected useful life of other assets to which the useful life may relate. Amortization expense for intangible assets is computed using the straight-line method over the estimated useful life of each of the intangible assets. The useful life of the site rental contracts and customer relationships intangible asset is limited by the maximum depreciable life of the tower (20 years), as a result of the interdependency of the tower and site rental contracts and customer relationships. In contrast, the site rental contracts and customer relationships are estimated to provide economic benefits for several decades because of the low rate of tenant cancellations and high rate of renewals experienced to date. Thus, while site rental contracts and customer
GLOBAL SIGNAL ACQUISITIONS II LLC
NOTES TO FINANCIAL STATEMENTS
(Tabular dollars in thousands)
relationships are valued based upon the fair value, which includes assumptions regarding both (1) customers' exercise of optional renewals contained in the acquired contracts and (2) renewals of the acquired contracts past the contractual term including exercisable options, the site rental contracts, and customer relationships are amortized over a period not to exceed 20 years as a result of the useful life being limited by the depreciable life of the sites.
The carrying value of other intangible assets with finite useful lives will be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company has a dual grouping policy for purposes of determining the unit of account for testing impairment of the site rental contracts and customer relationships intangible assets. First, the Company pools the site rental contracts and customer relationships with the related tower assets into portfolio groups for purposes of determining the unit of account for impairment testing. Second and separately, the Company evaluates the site rental contracts and customer relationships by significant tenant or by tenant grouping for individually insignificant tenants, as appropriate. If the sum of the estimated future cash flows (undiscounted) expected to result from the use or eventual disposition of an asset is less than the carrying amount of the asset, an impairment loss is recognized. Measurement of an impairment loss is based on the fair value of the asset.
Above-market Leases
Above-market leases consist of the estimated fair value of above-market leases for land interests under the Company's towers. Above-market leases for land interests are amortized to costs of operations over their respective estimated remaining contract term at the acquisition date.
Revenue Recognition
Site rental revenues are recognized on a monthly basis over the fixed, non-cancelable term of the relevant contract (generally ranging from five to 15 years), regardless of whether the payments from the tenant are received in equal monthly amounts. The Company's contracts contain fixed escalation clauses (such as fixed dollar or fixed percentage increases) or inflation-based escalation clauses (such as those tied to the consumer price index ("CPI")). If the payment terms call for fixed escalations, upfront payments, or rent-free periods, the revenue is recognized on a straight-line basis over the fixed, non-cancelable term of the agreement. When calculating straight-line rental revenues, the Company considers all fixed elements of tenant contractual escalation provisions, even if such escalation provisions contain a variable element in addition to a minimum. The Company's assets related to straight-line site rental revenues are included in "deferred site rental receivables." Amounts billed or received prior to being earned are deferred and reflected in "deferred revenues" on the Company's balance sheet.
Costs of Operations
In excess of four-fifths of the Company's site rental cost of operations consists of ground lease expenses, and the remainder includes repairs and maintenance expenses, utilities, property taxes, or insurance.
Generally, the ground lease agreements are specific to each site, are for an initial term of five years and are renewable for pre-determined periods. The Company also enters into term easements and ground leases in which it prepays the entire term in advance. Ground lease expense is recognized on a monthly basis, regardless of whether the contract agreement payment terms require the Company to make payments annually, quarterly, monthly, or for the entire term in advance. The Company's ground leases contain fixed escalation clauses (such as fixed dollar or fixed percentage increases) or inflation-based escalation clauses (such as those tied to the CPI). If the payment terms include fixed escalation provisions, the effect of such increases is recognized on a straight-line basis. The Company calculates the straight-line ground lease expense using a time period that equals or exceeds the remaining depreciable life of the communications infrastructure asset. Further, when a tenant has exercisable renewal options that would compel the Company to exercise existing ground lease renewal options, the Company has straight-lined the ground lease expense over a sufficient portion of such ground lease renewals to coincide with the final termination of the tenant's renewal options. The Company's policy is to record ground lease agreements with affiliates under the same or similar economic terms as the contract agreement for the land that existed prior to the purchase of such land by the affiliate.
The Company's current liability related to straight-line ground lease expense is included in "other accrued liabilities" on the Company's consolidated balance sheet and was $1.6 million and $1.4 million for the years ended December 31, 2017 and 2016, respectively. The Company's non-current liability related to straight-line ground lease expense is included in "deferred ground lease payable" on the Company's balance sheet. The Company's assets related to prepaid ground leases is included in "prepaid expenses" and "long-term prepaid rent and other assets, net" on the Company's balance sheet. The Company's current liability related to accrued property taxes is included in "other accrued liabilities" on the Company's balance sheet and was $3.9 million and $3.5 million for the years ended December 31, 2017 and 2016, respectively.
GLOBAL SIGNAL ACQUISITIONS II LLC
NOTES TO FINANCIAL STATEMENTS
(Tabular dollars in thousands)
Management Fee
The Company is charged a management fee by CCUSA, a wholly-owned, indirect subsidiary of CCIC, relating to management services, which include those functions reasonably necessary to maintain, market, operate, manage and administer the sites. The management fee is equal to 7.5% of the Company's revenues excluding the revenues related to the accounting for leases with fixed escalators as required by the applicable accounting standards. See note 6.
Income Taxes
CCIC operates as a REIT for U.S. federal income tax purposes. The Company is an indirect subsidiary of CCIC and for U.S. federal income taxes purposes the Company's assets and operations are part of the CCIC REIT. As a REIT, CCIC is generally entitled to a deduction for dividends that it pays and therefore is not subject to U.S. federal corporate income tax on its taxable income that is currently distributed to its stockholders. CCIC also may be subject to certain federal, state, local, and foreign taxes on its income and assets, including (1) alternative minimum taxes (repealed effective January 1, 2018), (2) taxes on any undistributed income, (3) taxes related to the CCIC's taxable REIT subsidiaries, (4) franchise taxes, (5) property taxes, and (6) transfer taxes. In addition, CCIC could in certain circumstances be required to pay an excise or penalty tax, which could be significant in amount, in order to utilize one or more relief provisions under the Internal Revenue Code of 1986, as amended ("Code") to maintain qualification for taxation as a REIT.
The Company does not expect the Tax Cuts and Jobs Act, which was signed into law in December 2017, to have a significant impact on its financial statements.
Fair Values
The Company's assets and liabilities recorded at fair value are categorized based upon a fair value hierarchy that ranks the quality and reliability of the information used to determine fair value. The three levels of the fair value hierarchy are (1) Level 1 - quoted prices (unadjusted) in active and accessible markets, (2) Level 2 - observable prices that are based on inputs not quoted in active markets but corroborated by market data, and (3) Level 3 - unobservable inputs and are not corroborated by market data. The Company evaluates fair value hierarchy level classifications quarterly, and transfers between levels are effective at the end of the quarterly period.
The fair value of cash and cash equivalents approximates the carrying value. There were no changes since December 31, 2016 in the Company's valuation techniques used to measure fair values.
Reporting Segments
The Company has one operating segment.
Recently Adopted Accounting Pronouncements
No new accounting pronouncements adopted during the year ended December 31, 2017 had a material impact on the Company's financial statements.
Recent Accounting Pronouncements Not Yet Adopted
In February 2016, the FASB issued new guidance on the recognition, measurement, presentation and disclosure of leases. The new guidance requires lessees to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments for all leases with a term greater than 12 months. The accounting for lessors remains largely unchanged from existing guidance. This guidance is effective for the Company as of January 1, 2019 and is required to be applied using a modified retrospective approach for all leases existing at, or entered into after, the beginning of the earliest comparative period presented. Although early adoption is permitted, the Company does not expect to early adopt the new guidance prior to January 1, 2019. The Company expects that (1) lessee arrangements will continue to be classified as operating leases under the new guidance; (2) this guidance to have a material impact on its balance sheet due to the addition of right-of-use assets and lease liabilities for all lessee arrangements with a term greater than 12 months; and (3) there will not be a material impact to its statement of operations and statement of cash flows.
In January 2017, the FASB issued new guidance to simplify the accounting for goodwill impairment by removing the second step of the existing goodwill impairment test. As a result of the guidance, goodwill impairment, if any, will be measured during the step-one impairment test as the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. Additionally, the guidance does not change the option to complete a qualitative assessment prior to
GLOBAL SIGNAL ACQUISITIONS II LLC
NOTES TO FINANCIAL STATEMENTS
(Tabular dollars in thousands)
performing a step-one impairment test. The guidance is effective for the Company as of January 1, 2020. Early adoption is permitted. The Company is currently evaluating the impact of the guidance, including the impact on its financial statements.
In January 2017, the FASB issued new guidance, which clarifies the definition of a business in order to assist companies in evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The guidance is effective for the Company as of January 1, 2018, and is required to be applied prospectively. Early adoption is permitted. The Company adopted this guidance effective January 1, 2018 and will apply the new guidance to prospective transactions. The adoption of this guidance will not have a material impact on the Company's financial statements.
The major classes of property and equipment are as follows:
|
| | | | | | | | | | |
| Estimated Useful Lives | | December 31, |
| | 2017 | | 2016 |
Land(a) | — |
| | $ | 1,618 |
| | $ | 1,620 |
|
Towers | 1-20 years |
| | 1,251,224 |
| | 1,221,322 |
|
Construction in progress | — |
| | 7,966 |
| | 7,632 |
|
Total gross property and equipment | | | 1,260,808 |
| | 1,230,574 |
|
Less accumulated depreciation | | | (625,673 | ) | | (563,554 | ) |
Total property and equipment, net | | | $ | 635,135 |
| | $ | 667,020 |
|
| |
(a)
| Includes land owned in fee and perpetual easements. |
Depreciation expense for the years ended December 31, 2017, 2016, and 2015 was $63.3 million, $63.4 million, and $62.3 million, respectively. As discussed in notes 1 and 2, the Company has certain prepaid capital leases with Sprint, which have related gross property and equipment and accumulated depreciation of $1.0 billion and $559.7 million, respectively, as of December 31, 2017.
| |
4.
| Intangible Assets and Above-market Leases |
The following is a summary of the Company's intangible assets.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2017 | | As of December 31, 2016 |
| Gross Carrying Value | | Accumulated Amortization | | Net Book Value | | Gross Carrying Value | | Accumulated Amortization | | Net Book Value |
Site rental contracts and customer relationships | $ | 1,008,243 |
| | $ | (588,869 | ) | | $ | 419,374 |
| | $ | 1,008,243 |
| | $ | (531,505 | ) | | $ | 476,738 |
|
Other intangible assets | 31,788 |
| | (17,276 | ) | | 14,512 |
| | 32,337 |
| | (16,288 | ) | | 16,049 |
|
Total | $ | 1,040,031 |
| | $ | (606,145 | ) | | $ | 433,886 |
| | $ | 1,040,580 |
| | $ | (547,793 | ) | | $ | 492,787 |
|
Amortization expense related to intangible assets is classified as follows on the Company's statement of operations:
|
| | | | | | | | | | | |
| For Years Ended December 31, |
| 2017 | | 2016 | | 2015 |
Depreciation, amortization and accretion | $ | 57,364 |
| | $ | 57,364 |
| | $ | 57,364 |
|
Site rental costs of operations | 1,308 |
| | 1,375 |
| | 1,456 |
|
Total amortization expense | $ | 58,672 |
| | $ | 58,739 |
| | $ | 58,820 |
|
GLOBAL SIGNAL ACQUISITIONS II LLC
NOTES TO FINANCIAL STATEMENTS
(Tabular dollars in thousands)
The estimated annual amortization expense related to intangible assets (inclusive of those recorded as an increase to "site rental cost of operations") for the years ending December 31, 2018 to 2022 is as follows:
|
| | | | | | | | | | | | | | | | | | | |
| Years Ending December 31, |
| 2018 | | 2019 | | 2020 | | 2021 | | 2022 |
Estimated annual amortization | $ | 58,635 |
| | $ | 58,635 |
| | $ | 58,631 |
| | $ | 58,540 |
| | $ | 58,486 |
|
See note 2 for a further discussion of above-market leases for land interests under the Company's towers recorded in connection with acquisitions. For the years ended December 31, 2017, 2016 and 2015, the Company recorded $1.3 million, $1.4 million and $1.4 million, respectively, as a decrease to "site rental cost of operations." The following is a summary of the Company's above-market leases.
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| | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2017 | | As of December 31, 2016 |
| Gross Carrying Value | | Accumulated Amortization | | Net Book Value | | Gross Carrying Value | | Accumulated Amortization | | Net Book Value |
Above-market leases | $ | 31,180 |
| | $ | (17,631 | ) | | $ | 13,549 |
| | $ | 31,180 |
| | $ | (16,337 | ) | | $ | 14,843 |
|
The estimated annual amortization expense related to above-market leases for land interests under the Company's towers for the years ending December 31, 2018 to 2022 is as follows:
|
| | | | | | | | | | | | | | | | | | | |
| Years Ending December 31, |
| 2018 | | 2019 | | 2020 | | 2021 | | 2022 |
Estimated annual amortization | $ | 1,273 |
| | $ | 1,264 |
| | $ | 1,243 |
| | $ | 1,138 |
| | $ | 1,060 |
|
In December 2012, CCL and Crown Castle GS III Corp. (a subsidiary of CCL) issued $1.5 billion aggregate principal amount of senior secured notes ("2012 Secured Notes"), which are guaranteed by certain subsidiaries of CCL, including the Company. In addition, the 2012 Secured Notes are secured on a first-priority basis by a pledge of the equity interests of certain subsidiaries of CCL, including a pledge of the equity interests of the Company. In September 2016, CCIC issued $700 million aggregate principal amount of 2.250% senior unsecured notes. CCIC used a portion of the net proceeds to repay $500 million of the 2012 Secured Notes.
The 2012 Secured Notes do not contain financial maintenance covenants but they do contain restrictive covenants, subject to certain exceptions, related to the Company's ability to incur indebtedness, incur liens, enter into certain mergers or change of control transactions, sell or issue equity interests and enter into related party transactions. With respect to the restriction regarding the issuance of debt, CCL and its subsidiaries including the Company may not issue debt other than (1) certain permitted refinancings of the 2012 Secured Notes, (2) unsecured trade payables in the ordinary course of business and financing of equipment, land, or other property up to an aggregate of $100.0 million, and (3) unsecured debt or additional notes under the 2012 Secured Notes indenture provided that the Debt to Adjusted Consolidated Cash Flow Ratio (as defined in the indenture governing the 2012 Secured Notes) at the time of incurrence, and after giving effect to such incurrence, would have been no greater than 3.5 to 1. As of December 31, 2017, CCL's Debt to Adjusted Consolidated Cash Flow Ratio was 2.5 to 1, and, as a result, the Company is not restricted in its ability to incur additional indebtedness. Further, the Company is not restricted in its ability to distribute cash to affiliates or issue dividends to its member.
| |
6.
| Related Party Transactions |
In December 2012, CCL, the Company, and other subsidiaries of CCL entered into a management agreement (“Management Agreement”) with CCUSA, which replaced a previous management agreement among the same parties. The Company is charged a management fee by CCUSA under the Management Agreement whereby CCUSA has agreed to employ, supervise, and pay at all times a sufficient number of capable employees as may be necessary to perform services in accordance with the operation standards defined in the Management Agreement. CCUSA currently acts as the manager of the majority of the sites held by subsidiaries of CCIC. The management fee is equal to 7.5% of the Company's "Operating Revenue," as defined in the Management Agreement, which are based on the Company's reported revenues adjusted to exclude certain items including revenues related to the accounting for leases with fixed escalators. The fee is compensation for those functions reasonably necessary to maintain,
GLOBAL SIGNAL ACQUISITIONS II LLC
NOTES TO FINANCIAL STATEMENTS
(Tabular dollars in thousands)
market, operate, manage and administer the sites, other than the operating expenses, which includes but is not limited to real estate and personal property taxes, ground lease and easement payments, and insurance premiums. In addition, in connection with its role as manager, CCUSA may make certain modifications to the Company's sites. The management fee charged from CCUSA for the years ended December 31, 2017, 2016, and 2015 totaled $31.4 million, $30.5 million, and $29.5 million, respectively.
In addition, CCUSA may perform installation services on the Company's towers for which the Company is not a party to any such agreement and for which no operating results are reflected herein.
As part of CCIC's strategy to obtain long-term control of the land under its towers, affiliates of the Company have acquired rights to land interests under the Company's towers. These affiliates then lease the land to the Company. Under such circumstances, the Company's obligation typically continues with the same or similar economic terms as the contract agreement for the land that existed prior to the purchase of such land by the affiliate. As of December 31, 2017, there are approximately 30% of the Company's sites where the land under the tower is owned by an affiliate. The Company pays ground rent expense to affiliates for land owned by affiliates that the Company has towers on. Rent expense to affiliates totaled $33.5 million, $31.1 million, and $29.3 million for the years ended December 31, 2017, 2016, and 2015, respectively.
The Company recorded an equity distribution of $202.8 million, $211.4 million and $185.8 million for the years ended December 31, 2017, 2016 and 2015, respectively, reflecting distributions to its member. Cash on-hand above the amount that is required by the Management Agreement has been, and is expected to continue to be, distributed to the Company's parent company, CCL. As of December 31, 2017 and 2016, the Company had no material related party assets or liabilities on its consolidated balance sheet.
For the years ended December 31, 2017, 2016, and 2015 the Company had benefits for income taxes of $0.5 million, $0.4 million, and $0.8 million, respectively, which consisted of the reduction of unrecognized tax benefits as a result of the lapse of the statute of limitations partially offset by state taxes. The Company's effective tax rate for the years ended December 31, 2017, 2016 and 2015 differed from the federal statutory rate predominately due to CCIC's REIT status, including the dividends paid deduction (see notes 1 and 2), and the aforementioned impacts described above.
As of December 31, 2017, there were no unrecognized tax benefits that would impact the effective tax rate, if recognized.
From time to time, the Company is subject to examinations by various tax authorities in jurisdictions in which the Company has business operations. The Company regularly assesses the likelihood of additional assessments in each of the tax jurisdictions resulting from these examinations. At this time, CCIC is not subject to an Internal Revenue Service examination.
| |
8.
| Commitments and Contingencies |
The Company is involved in various claims, lawsuits, or 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 or losses that may be incurred, if any, management believes the resolution of such uncertainties and the incurrence of such costs should not have a material adverse effect on the Company's financial position or results of operations. See note 9 for a discussion of the operating lease commitments.In addition, see note 1 for a discussion of CCIC's option to purchase nearly all of the Company's towers at the end of their respective contract terms. CCIC has no obligation to exercise the purchase option.
Asset Retirement Obligations
Pursuant to its ground lease and easement agreements, the Company has the obligation to perform certain asset retirement activities, including requirements upon contract or easement termination to remove communications infrastructure or remediate the land upon which communications infrastructure resides. Accretion expense related to liabilities for retirement obligations amounted to $1.9 million, $1.7 million, and $1.5 million for the years ended December 31, 2017, 2016, and 2015, respectively. As of December 31, 2017 and 2016, liabilities for retirement obligations amounted to $22.4 million and $20.6 million, respectively, representing the net present value of the estimated expected future cash outlay. As of December 31, 2017, the estimated undiscounted future cash outlay for asset retirement obligations was approximately $49 million. See note 2.
GLOBAL SIGNAL ACQUISITIONS II LLC
NOTES TO FINANCIAL STATEMENTS
(Tabular dollars in thousands)
Tenant Leases
The following table is a summary of the rental cash payments owed to the Company, as a lessor, by tenants pursuant to contractual agreements in effect as of December 31, 2017. Generally, the Company's leases with its tenants provide for (1) annual escalations, (2) multiple renewal periods at the tenant's option, and (3) only limited termination rights at the applicable tenant's option through the current term. As of December 31, 2017, the weighted-average remaining term (calculated by weighting the remaining term for each lease by the related site rental revenue) of tenant leases is approximately six years, exclusive of renewals at the tenant's option. The tenants' rental payments included in the table below are through the current terms with a maximum current term of 20 years and do not assume exercise of tenant renewal options.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ending December 31, |
| 2018 | | 2019 | | 2020 | | 2021 | | 2022 | | Thereafter | | Total |
Tenant leases | $ | 428,799 |
| | $ | 425,254 |
| | $ | 425,237 |
| | $ | 417,436 |
| | $ | 392,251 |
| | $ | 889,064 |
| | $ | 2,978,041 |
|
Operating Leases
The following table is a summary of rental cash payments owed by the Company, as lessee, to landlords pursuant to contractual agreements in effect as of December 31, 2017. The Company is obligated under non-cancelable operating leases for land interests under nearly all of its sites. The majority of these operating lease agreements have (1) certain termination rights that provide for cancellation after a notice period, (2) multiple renewal options at the Company's option, and (3) annual escalations. Lease agreements may also contain provisions for a contingent payment based on revenues or the gross margin derived from the tower located on the leased land interest. More than 80% and more than 50% of the Company's sites are under the Company's control for greater than 10 and 20 years, respectively, including renewals at the Company's option. The operating lease payments included in the table below include payments for certain renewal periods at the Company's option up to the estimated tower useful life of 20 years and an estimate of contingent payments based on revenues and gross margins derived from existing tenant leases. See also note 6.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ending December 31, |
| 2018 | | 2019 | | 2020 | | 2021 | | 2022 | | Thereafter | | Total |
Operating leases | $ | 112,018 |
| | $ | 113,384 |
| | $ | 114,832 |
| | $ | 115,258 |
| | $ | 112,557 |
| | $ | 1,394,370 |
| | $ | 1,962,419 |
|
Rental expense from operating leases was $120.0 million, $116.0 million, and $114.0 million for the years ended December 31, 2017, 2016, and 2015, respectively. The rental expense was inclusive of contingent payments based on revenues or gross margin derived from the tower located on the leased land of $18.9 million, $18.6 million, and $17.4 million for the years ended December 31, 2017, 2016, and 2015, respectively.
| |
10.
| Concentration of Credit Risk |
Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash and cash equivalents and trade receivables. The Company mitigates its risk with respect to cash and cash equivalents by maintaining such deposits at high credit quality financial institutions and monitoring the credit ratings of those institutions. See notes 2 and 6.
The Company derives the largest portion of its revenues from customers in the wireless industry. The Company also has a concentration in its volume of business with Sprint, AT&T, T-Mobile, and Verizon Wireless that accounts for a significant portion of the Company's revenues, receivables, and deferred site rental receivables. The Company mitigates its concentrations of credit risk with respect to trade receivables by actively monitoring the creditworthiness of its tenants, the use of tenant contracts with contractually determinable payment terms and proactive management of past due balances. See note 1 for a discussion of the Sprint Sites.
GLOBAL SIGNAL ACQUISITIONS II LLC
NOTES TO FINANCIAL STATEMENTS
(Tabular dollars in thousands)
Major Customers
The following table summarizes the percentage of the Company's revenues for those tenants accounting for more than 10% of the Company's revenues.
|
| | | | | | | | |
| Years Ended December 31, |
| 2017 | | 2016 | | 2015 |
Sprint | 47 | % | | 48 | % | | 48 | % |
AT&T | 19 | % | | 20 | % | | 20 | % |
T-Mobile | 19 | % | | 18 | % | | 17 | % |
Verizon Wireless | 13 | % | | 12 | % | | 11 | % |
Total | 98 | % | | 98 | % | | 96 | % |
PINNACLE TOWERS LLC
Consolidated Financial Statements
December 31, 2017, 2016 and 2015
Report of Independent Registered Public Accounting Firm
To theBoard of Directors and Members of
CC Holdings GS V LLC
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Pinnacle Towers LLC and its subsidiaries as of December 31, 2017 and 2016, and the related consolidated statements of operations, cash flows and changes in member’s equity for each of the three years in the period ended December 31, 2017, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
Theseconsolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’sconsolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of theseconsolidated financial statements in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of theconsolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
February 26, 2018
We have served as the Company's auditor since 2011.
PINNACLE TOWERS LLC
CONSOLIDATED BALANCE SHEET
(In thousands of dollars)
|
| | | | | | | |
| December 31, |
| 2017 | | 2016 |
ASSETS | | | |
Current assets: | | | |
Receivables, net of allowance of $929 and $1,127, respectively | $ | 1,617 |
| | $ | 2,619 |
|
Prepaid expenses | 2,225 |
| | 2,081 |
|
Deferred site rental receivables | 6,210 |
| | 4,705 |
|
Other current assets | 318 |
| | 317 |
|
Total current assets | 10,370 |
| | 9,722 |
|
Deferred site rental receivables | 76,645 |
| | 79,166 |
|
Property and equipment, net | 343,426 |
| | 356,784 |
|
Goodwill | 627,345 |
| | 627,345 |
|
Site rental contracts and customer relationships, net | 435,656 |
| | 486,252 |
|
Other intangible assets, net | 2,374 |
| | 2,661 |
|
Long-term prepaid rent and other assets, net | 6,569 |
| | 6,688 |
|
Total assets | $ | 1,502,385 |
| | $ | 1,568,618 |
|
| | | |
LIABILITIES AND EQUITY | | | |
Current liabilities: | | | |
Accounts payable | $ | 658 |
| | $ | 1,832 |
|
Deferred revenues | 4,578 |
| | 4,279 |
|
Other accrued liabilities | 2,651 |
| | 3,050 |
|
Total current liabilities | 7,887 |
| | 9,161 |
|
Deferred ground lease payable | 7,710 |
| | 7,565 |
|
Above-market leases and other liabilities | 10,570 |
| | 10,458 |
|
Total liabilities | 26,167 |
| | 27,184 |
|
Commitments and contingencies (note 8) | | | |
Member's equity: | | | |
Member's equity | 1,476,218 |
| | 1,540,422 |
|
Accumulated earnings (deficit) | — |
| | 1,012 |
|
Total member's equity | 1,476,218 |
| | 1,541,434 |
|
Total liabilities and equity | $ | 1,502,385 |
| | $ | 1,568,618 |
|
See accompanying notes to consolidated financial statements.
PINNACLE TOWERS LLC
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands of dollars)
|
| | | | | | | | | | | |
| Years Ended December 31, |
| 2017 | | 2016 | | 2015 |
| | | | | |
Site rental revenues | $ | 175,942 |
| | $ | 173,896 |
| | $ | 169,200 |
|
| | | | | |
Operating expenses: | | | | | |
Site rental cost of operations—third parties(a) | 34,681 |
| | 37,129 |
| | 36,914 |
|
Site rental cost of operations—related parties(a) | 4,381 |
| | 4,100 |
| | 3,885 |
|
Site rental cost of operations—total(a) | 39,062 |
| | 41,229 |
| | 40,799 |
|
Management fee—related party | 13,280 |
| | 12,880 |
| | 12,213 |
|
Asset write-down charges | 473 |
| | 2,669 |
| | 3,329 |
|
Depreciation, amortization, and accretion | 77,659 |
| | 76,640 |
| | 76,457 |
|
Total operating expenses | 130,474 |
| | 133,418 |
| | 132,798 |
|
Operating income (loss) | 45,468 |
| | 40,478 |
| | 36,402 |
|
Other income (expense) | 134 |
| | (93 | ) | | 109 |
|
Income (loss) before income taxes | 45,602 |
| | 40,385 |
| | 36,511 |
|
Benefit (provision) for income taxes | 120 |
| | 219 |
| | (68 | ) |
Net income (loss) | $ | 45,722 |
| | $ | 40,604 |
| | $ | 36,443 |
|
| |
(a)
| Exclusive of depreciation, amortization and accretion shown separately and certain indirect costs included in the management fee.
|
See accompanying notes to consolidated financial statements.
PINNACLE TOWERS LLC
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands of dollars)
|
| | | | | | | | | | | |
| Years Ended December 31, |
| 2017 | | 2016 | | 2015 |
Cash flows from operating activities: | | | | | |
Net income (loss) | $ | 45,722 |
| | $ | 40,604 |
| | $ | 36,443 |
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | | |
Depreciation, amortization and accretion | 77,659 |
| | 76,640 |
| | 76,457 |
|
Asset write-down charges | 473 |
| | 2,669 |
| | 3,329 |
|
Changes in assets and liabilities: | | | | | |
Increase (decrease) in accounts payable | (692 | ) | | (205 | ) | | (21 | ) |
Increase (decrease) in deferred revenues, deferred ground lease payable and other liabilities | (222 | ) | | (389 | ) | | (2,209 | ) |
Decrease (increase) in receivables | 1,002 |
| | 1,082 |
| | (201 | ) |
Decrease (increase) in other current assets, deferred site rental receivable, long-term prepaid rent and other assets | 2,451 |
| | (1,667 | ) | | (6,225 | ) |
Net cash provided by (used for) operating activities | 126,393 |
| | 118,734 |
| | 107,573 |
|
Cash flows from investing activities: | | | | | |
Capital expenditures | (15,455 | ) | | (21,209 | ) | | (26,371 | ) |
Net cash provided by (used for) investing activities | (15,455 | ) | | (21,209 | ) | | (26,371 | ) |
Cash flows from financing activities: | | | | | |
Distributions to member | (110,938 | ) | | (97,525 | ) | | (81,202 | ) |
Net cash provided by (used for) financing activities | (110,938 | ) | | (97,525 | ) | | (81,202 | ) |
Net increase (decrease) in cash and cash equivalents | — |
| | — |
| | — |
|
Cash and cash equivalents at beginning of year | — |
| | — |
| | — |
|
Cash and cash equivalents at end of year | $ | — |
| | $ | — |
| | $ | — |
|
See accompanying notes to consolidated financial statements.
PINNACLE TOWERS LLC
CONSOLIDATED STATEMENT OF CHANGES IN MEMBER'S EQUITY
(In thousands of dollars)
|
| | | | | | | | | | | | |
| | Member's Equity | | Accumulated Earnings (Deficit) | | Total |
Balance at December 31, 2014 | | $ | 1,540,422 |
| | $ | 102,692 |
| | $ | 1,643,114 |
|
Distributions to member (note 6) | | — |
| | (81,202 | ) | | (81,202 | ) |
Net income (loss) | | — |
| | 36,443 |
| | 36,443 |
|
Balance at December 31, 2015 | | $ | 1,540,422 |
| | $ | 57,933 |
| | $ | 1,598,355 |
|
Distributions to member (note 6) | | — |
| | (97,525 | ) | | (97,525 | ) |
Net income (loss) | | — |
| | 40,604 |
| | 40,604 |
|
Balance at December 31, 2016 | | $ | 1,540,422 |
| | $ | 1,012 |
| | $ | 1,541,434 |
|
Distributions to member (note 6) | | (64,204 | ) | | (46,734 | ) | | (110,938 | ) |
Net income (loss) | | — |
| | 45,722 |
| | 45,722 |
|
Balance at December 31, 2017 | | $ | 1,476,218 |
| | $ | — |
| | $ | 1,476,218 |
|
See accompanying notes to consolidated financial statements.
PINNACLE TOWERS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands)
The accompanying consolidated financial statements reflect the consolidated financial position, results of operations, and cash flows of Pinnacle Towers LLC and its consolidated wholly-owned subsidiaries (collectively, "Company"). The Company is a wholly-owned subsidiary of CC Holdings GS V LLC ("CCL"), which is an indirect, wholly-owned subsidiary of Crown Castle International Corp., a Delaware corporation ("CCIC" or "Crown Castle"). All significant inter-company accounts, transactions, and profits have been eliminated. As used herein, the term "including," and any variation thereof means "including without limitations." The use of the word "or" herein is not exclusive.
The Company is organized specifically to own, lease and manage towers and other structures (collectively, "towers") and to a lesser extent, interests in land under third party and related party towers in various forms ("land interests") (collectively, "communications infrastructure" or "sites") that are geographically dispersed across the United States ("U.S.") The Company's core business is providing access, including space or capacity, to its sites via long-term contracts in various forms, including licenses, subleases, and lease agreements (collectively, "contracts"). Management services related to communications towers and other communication sites are performed by Crown Castle USA Inc. ("CCUSA"), an affiliate of the Company, under a management agreement, as the Company has no employees.
For U.S. federal income tax purposes, CCIC operates as a real estate investment trust ("REIT"), and as its indirect subsidiary, the Company's assets and operations are included in the CCIC REIT. See notes 2 and 7.
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and use assumptions that affect the reported amounts of assets and liabilities and the disclosure for contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
| |
2.
| Summary of Significant Accounting Policies |
Receivables Allowance
An allowance for doubtful accounts is recorded as an offset to accounts receivable. The Company uses judgment in estimating this allowance and considers historical collections, current credit status or contractual provisions. Additions to the allowance for doubtful accounts are charged to "site rental cost of operations" and deductions from the allowance are recorded when specific accounts receivable are written off as uncollectible.
Lease Accounting
General. The Company classifies its leases at inception as either operating leases or capital leases. A lease is classified as a capital lease if at least one of the following criteria are met, subject to certain exceptions noted below: (1) the lease transfers ownership of the leased assets to the lessee, (2) there is a bargain purchase option, (3) the lease term is equal to 75% or more of the economic life of the leased assets, or (4) the present value of the minimum lease payments equals or exceeds 90% of the fair value of the leased assets.
Lessee. Leases for land are evaluated for capital lease treatment if at least one of the first two criteria mentioned in the immediately preceding paragraph is present relating to the leased assets. When the Company, as lessee, classifies a lease as a capital lease, it records an asset in an amount equal to the present value of the minimum lease payments under the lease at the beginning of the lease term. Applicable operating leases are recognized on a straight-line basis as discussed under "Costs of Operations" below.
Lessor. If the Company is the lessor of leased property that is part of a larger whole (including with respect to a portion of space on a tower) and for which fair value is not objectively determinable, then such lease is accounted for as an operating lease. As applicable, operating leases are recognized on a straight-line basis as discussed under "Revenue Recognition."
See also "Recent Accounting Pronouncements Not Yet Adopted" below for further discussion.
PINNACLE TOWERS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands)
Property and Equipment
Property and equipment is stated at cost, net of accumulated depreciation. Property and equipment includes land owned in fee and perpetual easements for land, which have no definite life. When the Company purchases fee ownership or perpetual easements for the land previously subject to ground lease, the Company reduces the value recorded as land by the amount of any associated deferred ground lease payable or unamortized above-market leases. Depreciation is computed utilizing the straight-line method at rates based upon the estimated useful lives of the various classes of assets. Depreciation of communications infrastructure is generally computed with a useful life equal to the shorter of 20 years or the term of the underlying ground lease (including optional renewal periods). Additions, renewals, or improvements are capitalized, while maintenance and repairs are expensed. The carrying value of property and equipment will be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.
Abandonments and write-offs of property and equipment are recorded to "asset write-down charges" on the Company's consolidated statement of operations and were $0.4 million, $2.9 million, and $3.3 million for the years ended December 31, 2017, 2016, and 2015, respectively.
Asset Retirement Obligations
Pursuant to its ground lease and easement agreements, the Company records obligations to perform asset retirement activities, including requirements to remove communications infrastructure or remediate the land upon which the Company's communications infrastructure resides. Asset retirement obligations are included in "above-market leases and other liabilities" on the Company's consolidated balance sheet. The liability accretes as a result of the passage of time and the related accretion expense is included in "depreciation, amortization and accretion" expense on the Company's consolidated statement of operations. The associated asset retirement costs are capitalized as an additional carrying amount of the related long-lived asset and depreciated over the useful life of such asset.
Goodwill
Goodwill represents the excess of the purchase price for an acquired business over the allocated value of the related net assets. The Company tests goodwill for impairment on an annual basis, regardless of whether adverse events or changes in circumstances have occurred. The annual test begins with goodwill and all intangible assets being allocated to applicable reporting units. The Company then performs a qualitative assessment to determine whether it is "more likely than not" that the fair value of the reporting units is less than its carrying amount. If it is concluded that it is "more likely than not" that the fair value of a reporting unit is less than its carrying amount, it is necessary to perform the two-step goodwill impairment test. The two-step goodwill impairment test begins with a comparison of the estimated fair value of the reporting unit and the carrying value of the reporting unit. The first step, commonly referred to as a "step-one impairment test," is a screen for potential impairment while the second step measures the amount of any impairment if there is an indication from the first step that one exists. The Company's measurement of the fair value for goodwill is based on an estimate of discounted expected future cash flows of the reporting unit. The Company has one reporting unit for goodwill impairment testing. The Company performed its most recent annual test of goodwill as of October 1, 2017, which resulted in no impairments.
Other Intangible Assets
Intangible assets are included in "site rental contracts and customer relationships, net" and "other intangible assets, net" on the Company's consolidated balance sheet and predominately consist of the estimated fair value of the following items recorded in conjunction with acquisitions: (1) site rental contracts and customer relationships or (2) below-market leases for land interests under the acquired towers classified as "other intangible assets, net." The site rental contracts and customer relationships intangible assets are comprised of (1) the current term of the existing contracts, (2) the expected exercise of the renewal provisions contained within the existing contracts, which automatically occur under contractual provisions, or (3) any associated relationships that are expected to generate value following the expiration of all renewal periods under existing contracts.
The useful lives of intangible assets are estimated based on the period over which the intangible asset is expected to benefit the Company, which is calculated on an individual tenant basis, considering, among other things, the contractual provisions with the tenant and gives consideration to the expected useful life of other assets to which the useful life may relate. Amortization expense for intangible assets is computed using the straight-line method over the estimated useful life of each of the intangible assets. The useful life of the site rental contracts and customer relationships intangible asset is limited by the maximum depreciable life of the tower (20 years), as a result of the interdependency of the tower and site rental contracts and customer relationships. In contrast, the site rental contracts and customer relationships are estimated to provide economic benefits for several decades because of the low rate of tenant cancellations and high rate of renewals experienced to date. Thus, while site rental contracts and customer
PINNACLE TOWERS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands)
relationships are valued based upon the fair value, which includes assumptions regarding both (1) tenants' exercise of optional renewals contained in the acquired contracts and (2) renewals of the acquired contracts past the contractual term including exercisable options, the site rental contracts and customer relationships are amortized over a period not to exceed 20 years as a result of the useful life being limited by the depreciable life of the sites.
The carrying value of other intangible assets with finite useful lives will be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company has a dual grouping policy for purposes of determining the unit of account for testing impairment of the site rental contracts and customer relationships intangible assets. First, the Company pools the site rental contracts and customer relationships with the related tower assets into portfolio groups for purposes of determining the unit of account for impairment testing. Second and separately, the Company evaluates the site rental contracts and customer relationships by significant tenant or by tenant grouping for individually insignificant tenants, as appropriate. If the sum of the estimated future cash flows (undiscounted) expected to result from the use or eventual disposition of an asset is less than the carrying amount of the asset, an impairment loss is recognized. Measurement of an impairment loss is based on the fair value of the asset.
Above-market Leases
Above-market leases consist of the estimated fair value of above-market leases for land interests under the Company's towers. Above-market leases for land interests are amortized to costs of operations over their respective estimated remaining contract term at the acquisition date.
Revenue Recognition
Site rental revenues are recognized on a monthly basis over the fixed, non-cancelable term of the relevant contract (generally ranging from five to 15 years), regardless of whether the payments from the tenant are received in equal monthly amounts. The Company's contracts contain fixed escalation clauses (such as fixed dollar or fixed percentage increases) or inflation-based escalation clauses (such as those tied to the consumer price index ("CPI")). If the payment terms call for fixed escalations, upfront payments, or rent-free periods, the revenue is recognized on a straight-line basis over the fixed, non-cancelable term of the agreement. When calculating straight-line rental revenues, the Company considers all fixed elements of tenant contractual escalation provisions, even if such escalation provisions contain a variable element in addition to a minimum. The Company's assets related to straight-line site rental revenues are included in "deferred site rental receivables." Amounts billed or received prior to being earned are deferred and reflected in "deferred revenues" on the Company's consolidated balance sheet.
Costs of Operations
Approximately two-thirds of the Company's site rental cost of operations consists of ground lease expenses, and the remainder includes repairs and maintenance expenses, utilities, property taxes, or insurance.
Generally, the ground lease agreements are specific to each site, are for an initial term of five years and are renewable for pre-determined periods. The Company also enters into term easements and ground leases in which it prepays the entire term in advance. Ground lease expense is recognized on a monthly basis, regardless of whether the contract agreement payment terms require the Company to make payments annually, quarterly, monthly, or for the entire term in advance. The Company's ground leases contain fixed escalation clauses (such as fixed dollar or fixed percentage increases) or inflation-based escalation clauses (such as those tied to the CPI). If the payment terms include fixed escalation provisions, the effect of such increases is recognized on a straight-line basis. The Company calculates the straight-line ground lease expense using a time period that equals or exceeds the remaining depreciable life of the communications infrastructure asset. Further, when a tenant has exercisable renewal options that would compel the Company to exercise existing ground lease renewal options, the Company has straight-lined the ground lease expense over a sufficient portion of such ground lease renewals to coincide with the final termination of the tenant's renewal options. The Company's policy is to record ground lease agreements with affiliates under the same or similar economic terms as the contract agreement for the land that existed prior to the purchase of such land by the affiliate.
The Company's non-current liability related to straight-line ground lease expense is included in "deferred ground lease payable" on the Company's consolidated balance sheet. The Company's assets related to prepaid ground leases is included in "prepaid expenses" and "long-term prepaid rent and other assets, net" on the Company's consolidated balance sheet. The Company's current liability related to accrued property taxes is included in "other accrued liabilities" on the Company's consolidated balance sheet and was $1.6 million and $2.0 million for the years ended December 31, 2017 and 2016, respectively.
PINNACLE TOWERS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands)
Management Fee
The Company is charged a management fee by CCUSA, a wholly-owned, indirect subsidiary of CCIC, relating to management services, which include those functions reasonably necessary to maintain, market, operate, manage and administer the sites. The management fee is equal to 7.5% of the Company's revenues excluding the revenues related to the accounting for leases with fixed escalators as required by the applicable accounting standards. See note 6.
Income Taxes
CCIC operates as a REIT for U.S. federal income tax purposes. The Company is an indirect subsidiary of CCIC and for U.S. federal income taxes purposes the Company's assets and operations are part of the CCIC REIT. As a REIT, CCIC is generally entitled to a deduction for dividends that it pays and therefore is not subject to U.S. federal corporate income tax on its taxable income that is currently distributed to its stockholders. CCIC also may be subject to certain federal, state, local, and foreign taxes on its income and assets, including (1) alternative minimum taxes (repealed effective January 1, 2018), (2) taxes on any undistributed income, (3) taxes related to the CCIC's taxable REIT subsidiaries, (4) franchise taxes, (5) property taxes, and (6) transfer taxes. In addition, CCIC could in certain circumstances be required to pay an excise or penalty tax, which could be significant in amount, in order to utilize one or more relief provisions under the Internal Revenue Code of 1986, as amended ("Code") to maintain qualification for taxation as a REIT.
The Company does not expect the Tax Cuts and Jobs Act, which was signed into law in December 2017, to have a significant impact on its consolidated financial statements.
Reporting Segments
The Company has one operating segment.
Recently Adopted Accounting Pronouncements
No new accounting pronouncements adopted during the year ended December 31, 2017 had a material impact on the Company's consolidated financial statements.
Recent Accounting Pronouncements Not Yet Adopted
In February 2016, the FASB issued new guidance on the recognition, measurement, presentation and disclosure of leases. The new guidance requires lessees to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments for all leases with a term greater than 12 months. The accounting for lessors remains largely unchanged from existing guidance. This guidance is effective for the Company as of January 1, 2019 and is required to be applied using a modified retrospective approach for all leases existing at, or entered into after, the beginning of the earliest comparative period presented. Although early adoption is permitted, the Company does not expect to early adopt the new guidance prior to January 1, 2019. The Company expects that (1) lessee arrangements will continue to be classified as operating leases under the new guidance; (2) this guidance to have a material impact on its consolidated balance sheet due to the addition of right-of-use assets and lease liabilities for all lessee arrangements with a term greater than 12 months; and (3) there will not be a material impact to its consolidated statement of operations and consolidated statement of cash flows.
In January 2017, the FASB issued new guidance to simplify the accounting for goodwill impairment by removing the second step of the existing goodwill impairment test. As a result of the guidance, goodwill impairment, if any, will be measured during the step-one impairment test as the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. Additionally, the guidance does not change the option to complete a qualitative assessment prior to performing a step-one impairment test. The guidance is effective for the Company as of January 1, 2020. Early adoption is permitted. The Company is currently evaluating the impact of the guidance, including the impact on its consolidated financial statements.
In January 2017, the FASB issued new guidance, which clarifies the definition of a business in order to assist companies in evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The guidance is effective for the Company as of January 1, 2018, and is required to be applied prospectively. Early adoption is permitted. The Company adopted this guidance effective January 1, 2018 and will apply the new guidance to prospective transactions. The adoption of this guidance will not have a material impact on the Company's consolidated financial statements.
PINNACLE TOWERS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands)
The major classes of property and equipment are as follows:
|
| | | | | | | | | | |
| Estimated Useful Lives | | December 31, |
| | 2017 | | 2016 |
Land(a) | — |
| | $ | 56,195 |
| | $ | 56,851 |
|
Towers | 1-20 years |
| | 532,039 |
| | 518,868 |
|
Construction in progress | — |
| | 6,196 |
| | 7,917 |
|
Total gross property and equipment | | | 594,430 |
| | 583,636 |
|
Less accumulated depreciation | | | (251,004 | ) | | (226,852 | ) |
Total property and equipment, net | | | $ | 343,426 |
| | $ | 356,784 |
|
| |
(a)
| Includes land owned in fee and perpetual easements. |
Depreciation expense for the years ended December 31, 2017, 2016, and 2015 was $26.5 million, $25.6 million, and $25.5 million, respectively.
| |
4.
| Intangible Assets and Above-market Leases |
The following is a summary of the Company's intangible assets.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2017 | | As of December 31, 2016 |
| Gross Carrying Value | | Accumulated Amortization | | Net Book Value | | Gross Carrying Value | | Accumulated Amortization | | Net Book Value |
Site rental contracts and customer relationships | $ | 985,741 |
| | $ | (550,085 | ) | | $ | 435,656 |
| | $ | 985,741 |
| | $ | (499,489 | ) | | $ | 486,252 |
|
Other intangible assets | 6,463 |
| | (4,089 | ) | | 2,374 |
| | 6,510 |
| | (3,849 | ) | | 2,661 |
|
Total | $ | 992,204 |
| | $ | (554,174 | ) | | $ | 438,030 |
| | $ | 992,251 |
| | $ | (503,338 | ) | | $ | 488,913 |
|
Amortization expense related to intangible assets is classified as follows on the Company's consolidated statement of operations:
|
| | | | | | | | | | | |
| For Years Ended December 31, |
| 2017 | | 2016 | | 2015 |
Depreciation, amortization and accretion | $ | 50,597 |
| | $ | 50,583 |
| | $ | 50,532 |
|
Site rental costs of operations | 260 |
| | 279 |
| | 299 |
|
Total amortization expense | $ | 50,857 |
| | $ | 50,862 |
| | $ | 50,831 |
|
The estimated annual amortization expense related to intangible assets (inclusive of those recorded as an increase to "site rental cost of operations") for the years ending December 31, 2018 to 2022 is as follows:
|
| | | | | | | | | | | | | | | | | | | |
| Years Ending December 31, |
| 2018 | | 2019 | | 2020 | | 2021 | | 2022 |
Estimated annual amortization | $ | 50,842 |
| | $ | 50,814 |
| | $ | 50,789 |
| | $ | 50,771 |
| | $ | 50,760 |
|
PINNACLE TOWERS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands)
See note 2 for a further discussion of above-market leases for land interests under the Company's towers recorded in connection with acquisitions. For the years ended December 31, 2017, 2016 and 2015, the Company recorded $0.3 million, $0.3 million and $0.4 million, respectively, as a decrease to "site rental cost of operations." The following is a summary of the Company's above-market leases.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2017 | | December 31, 2016 |
| Gross Carrying Value | | Accumulated Amortization | | Net Book Value | | Gross Carrying Value | | Accumulated Amortization | | Net Book Value |
Above-market leases | $ | 8,056 |
| | $ | (4,327 | ) | | $ | 3,729 |
| | $ | 8,056 |
| | $ | (4,009 | ) | | $ | 4,047 |
|
The estimated annual amortization expense related to above-market leases for land interests under the Company's towers for the years ending December 31, 2018 to 2022 is as follows:
|
| | | | | | | | | | | | | | | | | | | |
| Years Ending December 31, |
| 2018 | | 2019 | | 2020 | | 2021 | | 2022 |
Estimated annual amortization | $ | 318 |
| | $ | 304 |
| | $ | 295 |
| | $ | 290 |
| | $ | 288 |
|
In December 2012, CCL and Crown Castle GS III Corp. (a subsidiary of CCL) issued $1.5 billion aggregate principal amount of senior secured notes ("2012 Secured Notes"), which are guaranteed by certain subsidiaries of CCL, including the Company. In addition, the 2012 Secured Notes are secured on a first priority basis by certain subsidiaries of CCL, including a pledge of the equity interests of the Company. In September 2016, CCIC issued $700 million aggregate principal amount of 2.250% senior unsecured notes. CCIC used a portion of the net proceeds to repay $500 million of the 2012 Secured Notes.
The 2012 Secured Notes do not contain financial maintenance covenants but they do contain restrictive covenants, subject to certain exceptions, related to the Company's ability to incur indebtedness, incur liens, enter into certain mergers or change of control transactions, sell or issue equity interests and enter into related party transactions. With respect to the restriction regarding the issuance of debt, CCL and its subsidiaries including the Company may not issue debt other than (1) certain permitted refinancings of the 2012 Secured Notes, (2) unsecured trade payables in the ordinary course of business and financing of equipment, land, or other property up to an aggregate of $100.0 million, and (3) unsecured debt or additional notes under the 2012 Secured Notes indenture provided that the Debt to Adjusted Consolidated Cash Flow Ratio (as defined in the indenture governing the 2012 Secured Notes) at the time of incurrence, and after giving effect to such incurrence, would have been no greater than 3.5 to 1. As of December 31, 2017, CCL's Debt to Adjusted Consolidated Cash Flow Ratio was 2.5 to 1, and, as a result, the Company is not restricted in its ability to incur additional indebtedness. Further, the Company is not restricted in its ability to distribute cash to affiliates or issue dividends to its member.
| |
6.
| Related Party Transactions |
PINNACLE TOWERS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands)
In December 2012, CCL, the Company, and other subsidiaries of CCL entered into a management agreement ("Management Agreement") with CCUSA, which replaced a previous management agreement among the same parties. The Company is charged a management fee by CCUSA under the Management Agreement whereby CCUSA has agreed to employ, supervise, and pay at all times a sufficient number of capable employees as may be necessary to perform services in accordance with the operation standards defined in the Management Agreement. CCUSA currently acts as the manager of the majority of the sites held by subsidiaries of CCIC. The management fee is equal to 7.5% of the Company's "Operating Revenue," as defined in the Management Agreement, which are based on the Company’s reported revenues adjusted to exclude certain items including revenues related to the accounting for leases with fixed escalators. The fee is compensation for those functions reasonably necessary to maintain, market, operate, manage and administer the sites, other than the operating expenses, which includes but is not limited to real estate and personal property taxes, ground lease and easement payments, and insurance premiums. In addition, in connection with its role as manager, CCUSA may make certain modifications to the Company's sites. The management fee charged from CCUSA for the years ended December 31, 2017, 2016, and 2015 totaled $13.3 million, $12.9 million, and $12.2 million, respectively.
In addition, CCUSA may perform installation services on the Company's towers for which the Company is not a party to any such agreement and for which no operating results are reflected herein.
As part of CCIC's strategy to obtain long-term control of the land under its towers, affiliates of the Company have acquired rights to land interests under the Company's towers. These affiliates then lease the land to the Company. Under such circumstances, the Company's obligation typically continues with the same or similar economic terms as the contract agreement for the land that existed prior to the purchase of such land by the affiliate. As of December 31, 2017, there are approximately 15% of the Company's sites where the land under the tower is owned by an affiliate. Rent expense to affiliates totaled $4.4 million, $4.1 million, and $3.9 million for the years ended December 31, 2017, 2016, and 2015, respectively. The Company receives rent revenue from affiliates for land owned by the Company that affiliates have towers on and pays ground rent expense to affiliates for land owned by affiliates that the Company has towers on. For the years ended December 31, 2017, 2016, and 2015, rent revenue from affiliates totaled $0.8 million, $0.8 million, and $0.7 million, respectively.
The Company recorded equity distributions of $110.9 million, $97.5 million, and $81.2 million for the years ended December 31, 2017, 2016, and 2015, respectively, reflecting distributions to its member. Cash on-hand above the amount that is required by the Management Agreement has been, and is expected to continue to be, distributed to the Company's parent company, CCL. See note 7 for a discussion of the equity contribution related to income taxes. As of December 31, 2017 and 2016, the Company had no material related party assets or liabilities on its consolidated balance sheet.
For the years ended December 31, 2017 and 2016, the Company had benefits for income taxes of $0.1 million and $0.2 million, respectively, which consisted of the reduction of unrecognized tax benefits as a result of the lapse of the statute of limitations. For the year ended December 31, 2015, the company had a provision for income taxes of $0.1 million, which consisted of state taxes. The Company's effective tax rate for the years ended December 31, 2017, 2016 and 2015 differed from the federal statutory rate predominately due to CCIC's REIT status, including the dividends paid deduction (see notes 1 and 2), and the aforementioned impacts described above.
As of December 31, 2017, there were no unrecognized tax benefits that would impact the effective tax rate, if recognized.
From time to time, the Company is subject to examinations by various tax authorities in jurisdictions in which the Company has business operations. The Company regularly assesses the likelihood of additional assessments in each of the tax jurisdictions resulting from these examinations. At this time, CCIC is not subject to an Internal Revenue Service examination.
| |
8.
| Commitments and Contingencies |
The Company is involved in various claims, lawsuits, or 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 or losses that may be incurred, if any, management believes the resolution of such uncertainties and the incurrence of such costs should not have a material adverse effect on the Company's consolidated financial position or results of operations. See note 9 for a discussion of the operating lease commitments.
PINNACLE TOWERS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands)
Asset Retirement Obligations
Pursuant to its ground lease and easement agreements, the Company has the obligation to perform certain asset retirement activities, including requirements upon contract or easement termination to remove communications infrastructure or remediate the land upon which its communications infrastructure resides. Accretion expense related to liabilities for retirement obligations amounted to $0.6 million, $0.5 million, and $0.4 million for the years ended December 31, 2017, 2016, and 2015, respectively. As of December 31, 2017 and 2016, liabilities for retirement obligations amounted to $6.7 million and $6.2 million, respectively, representing the net present value of the estimated expected future cash outlay. As of December 31, 2017, the estimated undiscounted future cash outlay for asset retirement obligations was approximately $65 million. See note 2.
Tenant Leases
The following table is a summary of the rental cash payments owed to the Company, as a lessor, by tenants pursuant to contractual agreements in effect as of December 31, 2017. Generally, the Company's leases with its tenants provide for (1) annual escalations, (2) multiple renewal periods at the tenant's option, and (3) only limited termination rights at the applicable tenant's option through the current term. As of December 31, 2017, the weighted-average remaining term (calculated by weighting the remaining term for each lease by the related site rental revenue) of tenant leases is approximately five years, exclusive of renewals at the tenant's option. The tenants' rental payments included in the table below are through the current terms with a maximum current term of 20 years and do not assume exercise of tenant renewal options.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ending December 31, |
| 2018 | | 2019 | | 2020 | | 2021 | | 2022 | | Thereafter | | Total |
Tenant leases | $ | 171,887 |
| | $ | 162,439 |
| | $ | 155,810 |
| | $ | 145,938 |
| | $ | 131,053 |
| | $ | 268,362 |
| | $ | 1,035,489 |
|
Operating Leases
The following table is a summary of rental cash payments owed by the Company, as lessee, to landlords pursuant to contractual agreements in effect as of December 31, 2017. The Company is obligated under non-cancelable operating leases for land interests under approximately 65% of its sites. The majority of these operating lease agreements have (1) certain termination rights that provide for cancellation after a notice period, (2) multiple renewal options at the Company's option, and (3) annual escalations. Lease agreements may also contain provisions for a contingent payment based on revenues or the gross margin derived from the tower located on the leased land interest. More than 85% and more than 65% of the Company's sites are under the Company's control for greater than 10 and 20 years, respectively, including renewals at the Company's option. The operating lease payments included in the table below include payments for certain renewal periods at the Company's option up to the estimated tower useful life of 20 years and an estimate of contingent payments based on revenues and gross margins derived from existing tenant leases. See also note 6.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ending December 31, |
| 2018 | | 2019 | | 2020 | | 2021 | | 2022 | | Thereafter | | Total |
Operating leases | $ | 24,086 |
| | $ | 24,006 |
| | $ | 23,561 |
| | $ | 22,953 |
| | $ | 22,705 |
| | $ | 281,845 |
| | $ | 399,156 |
|
Rental expense from operating leases was $25.8 million, $25.8 million, and $26.3 million for the years ended December 31, 2017, 2016, and 2015, respectively. The rental expense was inclusive of contingent payments based on revenues or gross margin derived from the tower located on the leased land of $9.5 million, $9.3 million, and $9.6 million for the years ended December 31, 2017, 2016, and 2015, respectively.
| |
10.
| Concentration of Credit Risk |
The financial instrument that potentially subjects the Company to concentrations of credit risk is primarily trade receivables.
The Company derives the largest portion of its revenues from customers in the wireless industry. The Company also has a concentration in its volume of business with AT&T, Sprint, T-Mobile, and Verizon Wireless that accounts for a significant portion
PINNACLE TOWERS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands)
of the Company's revenues, receivables and deferred site rental receivables. The Company mitigates its concentrations of credit risk with respect to trade receivables by actively monitoring the creditworthiness of its tenants, the use of tenant contracts with contractually determinable payment terms and proactive management of past due balances.
Major Customers
The following table summarizes the percentage of the Company's revenues for those tenants accounting for more than 10% of the Company's revenues.
|
| | | | | | | | |
| Years Ended December 31, |
| 2017 | | 2016 | | 2015 |
AT&T | 19 | % | | 20 | % | | 21 | % |
Sprint | 17 | % | | 17 | % | | 17 | % |
T-Mobile | 17 | % | | 16 | % | | 16 | % |
Verizon Wireless | 13 | % | | 13 | % | | 13 | % |
Total | 66 | % | | 66 | % | | 67 | % |