Operating Segments and Concentrations of Credit Risk

12 Months Ended

Dec. 31, 2016

Segment Reporting Information [Line Items]

Operating Segments and Concentrations of Credit Risks

Operating Segments and Concentrations of Credit Risk

Operating Segments

During the first quarter of 2016, the Company changed its operating segments to consist of (1) towers and (2) small cells. This change was a result of growth in small cells from a combination of organic growth, capital expenditures, and acquisitions, as well as the continued progression of the integration of Sunesys, which led to changes in how the Company's chief operating decision maker ("CODM") reviews financial information.

The Company's operating segment change aligns with how the CODM views and evaluates the Company's operations, including how the CODM allocates capital and assesses segment performance. The Company has recast its prior period presentation to conform to its current reporting presentation.

The towers segment provides access, including space or capacity, to the Company's approximately 40,000 towers geographically dispersed throughout the U.S. The tower segment also reflects certain network services relating to the Company's towers, consisting of site development services and installation services. The small cells segment provides access, including space or capacity, to the Company's approximately 17,000 route miles of fiber primarily supporting small cell networks. To a lesser extent, the small cells segment also offers fiber based solutions.

The measurement of profit or loss used by the CODM to evaluate the results of operations of its operating segments are (1) segment site rental gross margin, (2) segment network services and other gross margin, and (3) segment operating profit. The Company defines segment site rental gross margin as segment site rental revenues less segment site rental cost of operations, which excludes stock-based compensation expense and prepaid lease purchase price adjustments recorded in consolidated cost of operations. The Company defines segment network services and other gross margin as segment network services and other revenues less segment network services and other cost of operations, which excludes stock-based compensation expense recorded in consolidated cost of operations. The Company defines segment operating profit as segment site rental gross margin plus segment network services and other gross margin, less general and administrative expenses attributable to the respective segment.

Costs that are directly attributable to towers and small cells are assigned to those respective segments. The "Other" column (1) represents amounts excluded from specific segments, such as restructuring charges (credits), asset write-down charges, acquisition and integration costs, depreciation, amortization and accretion, amortization of prepaid lease purchase price adjustments, interest expense and amortization of deferred financing costs, gains (losses) on retirement of long-term obligations, net gain (loss) on interest rate swaps, gains (losses) on foreign currency swaps, impairment of available-for-sale securities, interest income, other income (expense), cumulative effect of a change in accounting principle, income (loss) from discontinued operations, and stock-based compensation expense, and (2) reconciles segment operating profit to income (loss) before income taxes, as the amounts are not utilized in assessing each segment’s performance. The "Other" total assets balance includes corporate assets such as cash and cash equivalents which have not been allocated to specific segments. There are no significant revenues resulting from transactions between the Company's operating segments.

	Year Ending December 31, 2016
	Towers		Small Cells		Other			Consolidated Total
Segment site rental revenues	$	2,830,708	$	402,599				$	3,233,307
Segment network services and other revenues	603,689		84,229					687,918
Segment revenues	3,434,397		486,828					3,921,225
Segment site rental cost of operations	840,209		147,459					987,668
Segment network services and other cost of operations	344,595		64,859					409,454
Segment cost of operations (a)	1,184,804		212,318					1,397,122
Segment site rental gross margin	1,990,499		255,140					2,245,639
Segment network services and other gross margin	259,094		19,370					278,464
Segment general and administrative expenses (a)	92,903		60,676		143,001			296,580
Segment operating profit	2,156,690		213,834		(143,001		)	2,227,523
Stock-based compensation expense					96,538			96,538
Depreciation, amortization and accretion					1,108,551			1,108,551
Interest expense and amortization of deferred financing costs					515,032			515,032
Other income (expenses) to reconcile to income (loss) from continuing operations before income taxes(b)					133,548			133,548
Income (loss) from continuing operations before income taxes								$	373,854
Capital expenditures	$	429,526	$	409,710	$	34,647		$	873,883
Total assets (at period end)	$	18,394,572	$	3,440,600	$	839,920		$	22,675,092
Total goodwill (at period end)	$	5,114,639	$	643,037	$	—		$	5,757,676

(a) Segment cost of operations exclude (1) stock-based compensation expense of $22.1 million for the year ended December 31, 2016 and (2) prepaid lease purchase price adjustments of $21.3 million for the year ended December 31, 2016. Segment general and administrative expenses exclude stock-based compensation expense of $74.5 million for the year ended December 31, 2016.

(b) See consolidated statement of operations for further information.

	Year Ending December 31, 2015
	Towers		Small Cells		Other			Consolidated Total
Segment site rental revenues	$	2,734,045	$	284,368				$	3,018,413
Segment network services and other revenues	591,655		53,783					645,438
Segment revenues	3,325,700		338,151					3,663,851
Segment site rental cost of operations	827,175		107,195					934,370
Segment network services and other cost of operations	309,025		43,162					352,187
Segment cost of operations (a)	1,136,200		150,357					1,286,557
Segment site rental gross margin	1,906,870		177,173					2,084,043
Segment network services and other gross margin	282,630		10,621					293,251
Segment general and administrative expenses (a)	91,899		38,379		127,833			258,111
Segment operating profit	2,097,601		149,415		(127,833		)	2,119,183
Stock-based compensation expense					67,148			67,148
Depreciation, amortization and accretion					1,036,178			1,036,178
Interest expense and amortization of deferred financing costs					527,128			527,128
Other income (expenses) to reconcile to income (loss) from continuing operations before income taxes(b)					14,900			14,900
Income (loss) from continuing operations before income taxes								$	473,829
Capital expenditures	$	564,753	$	314,882	$	29,257		$	908,892
Total assets (at period end)	$	17,974,847	$	3,511,956	$	450,163		$	21,936,966
Total goodwill (at period end)	$	4,863,847	$	649,704	$	—		$	5,513,551

(a) Segment cost of operations exclude (1) stock-based compensation expense of $14.3 million for the year ended December 31, 2015 and (2) prepaid lease purchase price adjustments of $20.5 million for the year ended December 31, 2015. Segment general and administrative expenses exclude stock-based compensation expense of $52.8 million for the year ended December 31, 2015.

(b) See consolidated statement of operations for further information.

	Year Ending December 31, 2014
	Towers		Small Cells		Other		Consolidated Total
Segment site rental revenues	$	2,677,932	$	188,681			$	2,866,613
Segment network services and other revenues	631,787		40,356				672,143
Segment revenues	3,309,719		229,037				3,538,756
Segment site rental cost of operations	814,332		65,282				879,614
Segment network services and other cost of operations	359,901		35,663				395,564
Segment cost of operations (a)	1,174,233		100,945				1,275,178
Segment site rental gross margin	1,863,600		123,399				1,986,999
Segment network services and other gross margin	271,886		4,693				276,579
Segment general and administrative expenses (a)	78,523		25,869		107,929		212,321
Segment operating profit	2,056,963		102,223		(107,929	)	2,051,257
Stock-based compensation expense					56,432		56,432
Depreciation, amortization and accretion					985,781		985,781
Interest expense and amortization of deferred financing costs					573,291		573,291
Other income (expenses) to reconcile to income (loss) from continuing operations before income taxes(b)					100,683		100,683
Income (loss) from continuing operations before income taxes							$	335,070

(a) Segment cost of operations exclude (1) stock-based compensation expense of $11.5 million for the year ended December 31, 2014 and (2) prepaid lease purchase price adjustments of $20.0 million for the year ended December 31, 2014. Segment general and administrative expenses exclude stock-based compensation expense of $44.9 million for the year ended December 31, 2014.

(b) See consolidated statement of operations for further information.

Major Customers

The following table summarizes the percentage of the consolidated revenues for those customers accounting for more than 10% of the consolidated revenues.

	Years Ended December 31,
	2016		2015		2014
AT&T	27	%	27	%	26	%
T-Mobile	23	%	22	%	21	%
Verizon Wireless	22	%	21	%	18	%
Sprint	16	%	19	%	25	%
Total	88	%	89	%	90	%

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash and cash equivalents, restricted cash 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. The Company's restricted cash is predominately held and directed by a trustee (see note 2).

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, T-Mobile, Verizon Wireless, and Sprint or their agents 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 leases with contractually determinable payment terms, or proactive management of past due balances.