Uniti Group Inc. Reports Third Quarter 2021 Results


Second Consecutive Quarter of Consolidated Bookings of ~$1 Million in Monthly Recurring Revenue

  • Net Income of $0.17 Per Diluted Common Share for the Third Quarter; Increase of $0.13 Per Diluted Common Share from the Prior Year Third Quarter
  • Adjusted EBITDA and AFFO Grew 9% and 19% in the Third Quarter, Respectively, from the Prior Year Third Quarter
  • AFFO Per Diluted Common Share of $0.43 for the Third Quarter
  • Updates 2021 Outlook

LITTLE ROCK, Ark., Nov. 04, 2021 (GLOBE NEWSWIRE) -- Uniti Group Inc. (“Uniti” or the “Company”) (Nasdaq: UNIT) today announced its results for the third quarter of 2021.

“Uniti continues to perform exceptionally well as evidenced by the second consecutive quarter of consolidated bookings of approximately $1.0 million in monthly recurring revenue, representing an increase of 90% from consolidated bookings in the third quarter of 2020. We continue to emphasize driving high margin recurring revenue while managing our capital intensity and industry leading monthly churn levels of 0.3%,” commented Kenny Gunderman, President and Chief Executive Officer.

Mr. Gunderman continued, “Given these trends along with lower than expected operational costs, and the impact of our recent unsecured notes issuance, we are revising the mid-point of our full year 2021 outlook ranges.”

QUARTERLY RESULTS

Consolidated revenues for the third quarter of 2021 were $266.7 million. Net income and Adjusted EBITDA were $43.7 million and $217.2 million, respectively, for the same period. Net income attributable to common shares was $43.1 million for the period. Adjusted Funds From Operations (“AFFO”) attributable to common shareholders was $109.9 million, or $0.43 per diluted common share, an increase of 19% when compared to the third quarter of 2020.

Uniti Fiber contributed $67.3 million of revenues and $27.6 million of Adjusted EBITDA for the third quarter of 2021, achieving Adjusted EBITDA margins of approximately 41%, up from 33% Adjusted EBITDA margins in the third quarter of 2020. Uniti Fiber’s net success-based capital expenditures during the quarter were $30.8 million.

Uniti Leasing contributed revenues of $199.5 million and Adjusted EBITDA of $194.3 million for the third quarter, representing growth of 9% and 7%, respectively, when compared to the third quarter of 2020. During the quarter, Uniti Leasing deployed capital expenditures of $61.7 million primarily related to the construction of approximately 1,300 new route miles of valuable fiber infrastructure.

FINANCING TRANSACTION

On October 13, 2021, Uniti closed on the issuance of $700 million of Senior Unsecured Notes due January 2030 (“2030 Notes”). The 2030 Notes bear interest at 6.00% and were issued at par. Proceeds from the offering will be used to redeem in full the outstanding 7.125% Senior Unsecured Notes due 2024, plus any accrued and unpaid interest, on December 15, 2021.

On October 14, 2021, the company used a portion of the proceeds from the 2030 Notes, together with cash on hand, to prepay the next four settlement obligation installment payments that were due under the settlement agreement Uniti entered into with Windstream Holdings Inc. (“Windstream”) in connection with Windstream’s emergence from bankruptcy.

LIQUIDITY

At quarter-end, the Company had approximately $450 million of unrestricted cash and cash equivalents, and undrawn borrowing availability under its revolving credit agreement. The Company’s leverage ratio at quarter-end was 5.76x based on Net Debt to Annualized Adjusted EBITDA.

On November 4, 2021, the Company’s Board of Directors declared a quarterly cash dividend of $0.15 per common share, payable on January 3, 2022, to stockholders of record on December 17, 2021.

UPDATED FULL YEAR 2021 OUTLOOK

The Company is updating its 2021 outlook primarily for the impact of our offering of the 2030 Notes and related redemption, lower than expected operational costs, and the impact of transaction-related and other costs incurred to date. Our outlook excludes future acquisitions, capital market transactions, and future transaction-related and other costs not mentioned herein.

The Company’s consolidated outlook for 2021 is as follows (in millions):

 Full Year 2021 Midpoint Growth Rate Compared to
Prior Year(1)
Revenue$1,083to$1,094 2%
Net income attributable to common shareholders (2) 111to 123  
Adjusted EBITDA (3) 854to 866 5%
Interest expense, net (4) 456to 456  
Attributable to common shareholders:       
FFO (3) 325to 337  
AFFO (3) 416to 428 8%
        
Weighted-average common shares outstanding – diluted 263to 263  
________________________       
(1)   Represents growth rate at the midpoint of 2021 full year outlook compared to 2020 full year actuals.
(2)   Includes $28 million of gain relating to the Everstream Transaction.
(3)   See “Non-GAAP Financial Measures” below.
(4)   See “Components of Interest Expense” below.
 

CONFERENCE CALL

Uniti will hold a conference call today to discuss this earnings release at 8:30 AM Eastern Time (7:30 AM Central Time). The dial-in number for the conference call is (844) 513-7153 (or (508) 637-5603 for international callers) and the conference ID is 1450846. The conference call will be webcast live and can be accessed on the Company’s website at www.uniti.com. A replay of the call will be available on the Company’s website or by telephone beginning today at approximately 12:00 PM Eastern Time. To access the telephone replay, which will be available for 14 days, please dial (855) 859-2056 and enter the conference ID number 1450846.

ABOUT UNITI

Uniti, an internally managed real estate investment trust, is engaged in the acquisition and construction of mission critical communications infrastructure, and is a leading provider of fiber and other wireless solutions for the communications industry. As of September 30, 2021, Uniti owns approximately 126,000 fiber route miles, 7.5 million fiber strand miles, and other communications real estate throughout the United States. Additional information about Uniti can be found on its website at www.uniti.com.

FORWARD-LOOKING STATEMENTS

Certain statements in this press release and today’s conference call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended from time to time. Those forward-looking statements include all statements that are not historical statements of fact, including, without limitation, our 2021 financial outlook, expectations regarding strong demand trends, our business strategies, growth prospects, industry trends, sales opportunities, potential transformative corporate transactions, and operating and financial performance.

Words such as "anticipate(s)," "expect(s)," "intend(s)," “estimate(s),” “foresee(s),” "plan(s)," "believe(s)," "may," "will," "would," "could," "should," "seek(s)" and similar expressions, or the negative of these terms, are intended to identify such forward-looking statements. These statements are based on management's current expectations and beliefs and are subject to a number of risks and uncertainties that could lead to actual results differing materially from those projected, forecasted or expected. Although we believe that the assumptions underlying the forward-looking statements are reasonable, we can give no assurance that our expectations will be attained. Factors which could materially alter our expectations include, but are not limited to, the future prospects of Windstream, our largest customer; the ability and willingness of our customers to meet and/or perform their obligations under any contractual arrangements entered into with us, including master lease arrangements; the ability of our customers to comply with laws, rules and regulations in the operation of the assets we lease to them; the ability and willingness of our customers to renew their leases with us upon their expiration, and the ability to reposition our properties on the same or better terms in the event of nonrenewal or in the event we replace an existing tenant; the adverse impact of litigation affecting us or our customers; our ability to renew, extend or obtain contracts with significant customers (including customers of the businesses we acquire); the availability of and our ability to identify suitable acquisition opportunities and our ability to acquire and lease the respective properties on favorable terms; the risk that we fail to fully realize the potential benefits of acquisitions or have difficulty integrating acquired companies; our ability to generate sufficient cash flows to service our outstanding indebtedness and fund our capital funding commitments; our ability to access debt and equity capital markets; the impact on our business or the business of our customers as a result of credit rating downgrades and fluctuating interest rates; our ability to retain our key management personnel; our ability to qualify or maintain our status as a real estate investment trust (“REIT”); changes in the U.S. tax law and other state, federal or local laws, whether or not specific to REITs; covenants in our debt agreements that may limit our operational flexibility; our expectations regarding the effect of the COVID-19 pandemic on our results of operations and financial condition; other risks inherent in the communications industry and in the ownership of communications distribution systems, including potential liability relating to environmental matters and illiquidity of real estate investments; and additional factors described in our reports filed with the SEC.

Uniti expressly disclaims any obligation to release publicly any updates or revisions to any of the forward-looking statements set forth in this press release and today’s conference call to reflect any change in its expectations or any change in events, conditions or circumstances on which any statement is based.

NON-GAAP PRESENTATION

This release and today’s conference call contain certain supplemental measures of performance that are not required by, or presented in accordance with, accounting principles generally accepted in the United States (“GAAP”). Such measures should not be considered as alternatives to GAAP. Further information with respect to and reconciliations of such measures to the nearest GAAP measure can be found herein.

Uniti Group Inc.
Consolidated Balance Sheets
(In thousands, except per share data)

  September 30,
2021
 December 31,
2020
Assets:    
Property, plant and equipment, net $3,472,642  $3,273,353 
Cash and cash equivalents  69,751   77,534 
Accounts receivable, net  39,014   62,952 
Goodwill  601,878   601,878 
Intangible assets, net  372,076   390,725 
Straight-line revenue receivable  33,839   13,107 
Other assets, net  122,901   152,883 
Investment in unconsolidated entities  64,659   66,043 
Deferred income tax assets, net  7,524   - 
Assets held for sale  -   93,343 
Total Assets $4,784,284  $4,731,818 
       
Liabilities and Shareholders’ Deficit      
Liabilities:      
Accounts payable, accrued expenses and other liabilities, net $156,428  $146,144 
Settlement payable  358,329   418,840 
Intangible liabilities, net  180,459   187,886 
Accrued interest payable  60,726   95,338 
Deferred revenue  1,143,301   995,123 
Derivative liability, net  13,606   22,897 
Dividends payable  964   36,725 
Deferred income tax liabilities, net  -   10,540 
Finance lease obligations  15,538   15,468 
Contingent consideration  -   2,957 
Notes and other debt, net  4,973,174   4,816,524 
Liabilities held for sale  -   55,752 
Total Liabilities  6,902,525   6,804,194 
       
Commitments and contingencies      
       
Shareholder’s Deficit:      
Preferred stock, $ 0.0001 par value, 50,000 shares authorized, no shares issued and outstanding  -   - 
Common stock, $ 0.0001 par value, 500,000 shares authorized, issued
and outstanding: 234,495 shares at September 30, 2021 and 231,262 shares at December 31, 2020
  23   23 
Additional paid-in capital  1,208,611   1,209,141 
Accumulated other comprehensive loss  (11,984)  (20,367)
Distributions in excess of accumulated earnings  (3,333,686)  (3,330,455)
Total Uniti shareholders’ deficit  (2,137,036)  (2,141,658)
Noncontrolling interests – operating partnership units and non-voting convertible preferred stock  18,795   69,282 
Total shareholders’ deficit  (2,118,241)  (2,072,376)
Total Liabilities and Shareholders’ Deficit $4,784,284  $4,731,818 
         

Uniti Group Inc.
Consolidated Statements of Operations
(In thousands, except per share data)

 Three Months Ended September 30,  Nine Months Ended September 30,
  2021   2020   2021   2020 
Revenues:           
Leasing$199,485  $182,370  $590,478  $552,042 
Fiber Infrastructure 67,262   76,395   217,035   232,942 
Towers -   -   -   6,112 
Consumer CLEC -   -   -   651 
Total revenues 266,747   258,765   807,513   791,747 
            
Costs and expenses:           
Interest expense, net 94,793   102,791   341,762   388,427 
Depreciation and amortization 70,530   79,880   211,165   250,970 
General and administrative expense 25,077   26,659   75,800   81,686 
Operating expense (exclusive of depreciation and amortization) 34,167   37,831   105,436   118,308 
Settlement expense -   -   -   650,000 
Transaction related and other costs 1,063   20,816   5,624   55,344 
Gain on sale of real estate -   (22,908)  (442)  (86,726)
Gain on sale of operations -   -   (28,143)  - 
Other expense, net 283   3,098   8,758   12,186 
Total costs and expenses 225,913   248,167   719,960   1,470,195 
            
Income (loss) before income taxes and equity in earnings from unconsolidated entities 40,834   10,598   87,553   (678,448)
Income tax (benefit) expense (2,244)  2,801   283   (7,650)
Equity in (earnings) from unconsolidated entities (604)  342   (1,549)  342 
Net income (loss) 43,682   7,455   88,819   (671,140)
Net income (loss) attributable to noncontrolling interests 316   190   984   (11,808)
Net income (loss) attributable to shareholders 43,366   7,265   87,835   (659,332)
Participating securities’ share in earnings (283)  (229)  (864)  (853)
Dividends declared on convertible preferred stock (3)  (2)  (8)  (6)
Net income (loss) attributable to common shareholders$43,080  $7,034  $86,963  $(660,191)
            
Net income (loss) attributable to common shareholders – Basic$43,080  $7,034  $86,963  $(660,191)
Impact of if-converted securities 2,984   -   -   - 
Net income (loss) attributable to common shareholders – Diluted$46,064  $7,034  $86,963  $(660,191)
Weighted average number of common shares outstanding:           
Basic 233,513   198,054   232,269   194,278 
Diluted 264,421   198,373   232,540   194,278 
            
Earnings (loss) per common share:           
Basic$0.18  $0.04  $0.37  $(3.40)
Diluted$0.17  $0.04  $0.37  $(3.40)
            

Uniti Group Inc.
Consolidated Statements of Cash Flows
(In thousands)

  Nine Months Ended September 30,
  2021 2020
Cash flow from operating activities:    
Net income (loss) $88,819  $(671,140)
Adjustments to reconcile net loss to net cash provided by operating activities:      
Depreciation and amortization  211,165   250,970 
Amortization of deferred financing costs and debt discount  13,723   27,703 
Loss on extinguishment of debt  43,369   73,952 
Interest rate swap termination  8,488   7,325 
Deferred income taxes  (2,270)  (8,506)
Equity in earnings of unconsolidated entities  (1,549)  342 
Distributions of cumulative earnings from unconsolidated entities  2,933   960 
Cash paid for interest rate swap settlement  (9,291)  (4,886)
Straight-line revenues  (22,455)  (1,036)
Stock-based compensation  10,963   10,446 
Change in fair value of contingent consideration  21   8,086 
Gain on sale of real estate  (442)  (86,726)
Gain on sale of operations  (28,143)  - 
(Gain) loss on asset disposals  (232)  1,483 
Accretion of settlement obligation  13,006   - 
Other  97   (300)
Changes in assets and liabilities, net of acquisitions:      
Accounts receivable  23,938   17,699 
Other assets  (150)  4,331 
Accounts payable, accrued expenses and other liabilities  1,363   43,535 
Settlement payable  -   438,577 
Net cash provided by operating activities  353,353   112,815 
       
Cash flows from investing activities:      
Other capital expenditures  (276,010)  (214,150)
Proceeds from sale of real estate, net of cash  1,034   392,011 
Proceeds from sale of operations  62,113   - 
Proceeds from sale of other equipment  1,143   - 
Windstream asset acquisition  -   (73,127)
Net cash (used in) provided by investing activities  (211,720)  104,734 
       
Cash flows from financing activities:      
Repayment of debt  (1,660,000)  (2,044,728)
Proceeds from issuance of notes  1,680,000   2,250,000 
Dividends paid  (105,941)  (100,759)
Payment of settlement obligation  (73,516)  - 
Payments of contingent consideration  (2,979)  (15,713)
Distributions paid to noncontrolling interests  (1,700)  (1,802)
Borrowings under revolving credit facility  290,000   140,000 
Payments under revolving credit facility  (220,000)  (585,019)
Finance lease payments  (1,745)  (2,890)
Settlement Common Stock issuance  -   244,550 
Payments for financing costs  (25,755)  (47,775)
Costs related to the early repayment of debt  (25,800)  - 
Employee stock purchase program  672   306 
Payments related to tax withholding for stock-based compensation  (2,652)  (962)
Net cash used in financing activities  (149,416)  (164,792)
Net (decrease) increase in cash and cash equivalents  (7,783)  52,757 
Cash and cash equivalents at beginning of period  77,534   142,813 
Cash and cash equivalents at end of period  69,751  $195,570 
       

Uniti Group Inc.
Reconciliation of Net Income to FFO and AFFO
(In thousands, except per share data)

  Three Months Ended September 30, Nine Months Ended September 30,
  2021  2020 2021 2020
Net income (loss) attributable to common shareholders $43,080  $7,034  $86,963  $(660,191)
Real estate depreciation and amortization  53,620   59,318   159,175   185,377 
Gain on sale of real estate assets, net of tax  -   (22,501)  (442)  (86,319)
Participating securities share in earnings  283   229   864   853 
Participating securities share in FFO  (635)  (331)  (1,660)  (937)
Real estate depreciation and amortization from unconsolidated entities  646   366   1,876   366 
Adjustments for noncontrolling interests  (412)  (598)  (1,979)  (1,700)
FFO attributable to common shareholders  96,582   43,517   244,797   (562,551)
Transaction related and other costs  1,063   20,816   5,624   55,344 
Change in fair value of contingent consideration  -   1,946   21   8,086 
Amortization of deferred financing costs and debt discount  4,352   9,037   13,723   27,703 
Write off of deferred financing costs and debt discount  -   -   22,828   73,952 
Stock based compensation  4,166   3,341   10,963   10,446 
Gain on sale of operations  -   -   (28,143)  - 
Non-real estate depreciation and amortization  16,910   20,562   51,990   65,593 
Settlement expense  -   -   -   650,000 
Costs related to the early repayment of debt  -   -   28,485   - 
Straight-line revenues  (8,240)  (1,747)  (22,455)  (1,036)
Maintenance capital expenditures  (1,938)  (1,617)  (6,322)  (4,978)
Other, net  (2,949)  (3,461)  (4,958)  (25,271)
Adjustments for equity in earnings from unconsolidated entities  119   921   733   921 
Adjustments for noncontrolling interests  (120)  (775)  (990)  (15,114)
Adjusted FFO attributable to common shareholders $109,945  $92,540  $316,296  $283,095 
             
Reconciliation of Diluted FFO and AFFO:            
FFO Attributable to common shareholders – Basic $96,582  $43,517  $244,797  $(562,551)
Impact of if-converted dilutive securities  2,984   5,490   8,937   - 
FFO Attributable to common shareholders – Diluted $99,566  $49,007  $253,734  $(562,551)
             
AFFO Attributable to common shareholders – Basic $109,945  $92,540  $316,296  $283,095 
Impact of if-converted dilutive securities  3,450   3,450   10,350   10,350 
AFFO Attributable to common shareholders – Diluted $113,395  $95,990  $326,646  $293,445 
             
Weighted average common shares used to calculate basic earnings (loss) per common share (1)  233,513   198,054   232,269   194,278 
Impact of dilutive non-participating securities  338   319   271   319 
Impact of if-converted dilutive securities  30,570   29,505   30,570   29,505 
Weighted average common shares used to calculate diluted FFO and AFFO per common share (1)  264,421   227,878   263,110   224,102 
             
Per diluted common share:            
EPS $0.17  $0.04  $0.37  $(3.40)
FFO $0.38  $0.22  $0.96  $(2.90)
AFFO $0.43  $0.42  $1.24  $1.31 
             

________________________
(1) For periods in which FFO or AFFO attributable to common shareholders is a loss, the weighted average common shares used to calculate diluted FFO or AFFO per common share is equal to the weighted average common shares used to calculate basic earnings (loss) per share.

Uniti Group Inc.
Reconciliation of EBITDA and Adjusted EBITDA
(In thousands)

  Three Months Ended
September 30,
 Nine Months Ended
September 30,
   2021   2020   2021   2020 

Net income (loss)
 $43,682  $7,455  $88,819  $(671,140)
Depreciation and amortization  70,530   79,880   211,165   250,970 
Interest expense, net  94,793   102,791   341,762   388,427 
Income tax (benefit) expense  (2,244)  2,801   283   (7,650)
EBITDA  206,761   192,927   642,029   (39,393)
Stock-based compensation  4,166   3,341   10,963   10,446 
Transaction related and other costs  1,063   20,816   5,624   55,344 
Settlement expense  -   -   -   650,000 
Gain on sale of real estate  -   (22,908)  (442)  (86,726)
Gain on sale of operations  -   -   (28,143)  - 
Adjustments for equity in earnings from unconsolidated entities  765   1,287   2,609   1,287 
Other expense  4,472   3,098   14,569   12,186 
Adjusted EBITDA $217,227  $198,561  $647,209  $603,144 
             
Adjusted EBITDA:            
Leasing $194,303  $181,103  $577,937  $545,792 
Fiber Infrastructure  27,556   25,419   86,716   81,453 
Towers  -   -   -   77 
Consumer CLEC  -   (186)  -   (461)
Corporate  (4,632)  (7,775)  (17,444)  (23,717)
  $217,227  $198,561  $647,209  $603,144 
             
Annualized Adjusted EBITDA (1) $868,908          
             
             
As of September 30, 2021:            
Total Debt (2) $5,070,538          
Cash and cash equivalents  69,751          
Net Debt $5,000,787          
             
Net Debt/Annualized Adjusted EBITDA  5.76x         
             

________________________
(1) Calculated as Adjusted EBITDA for the most recently reported three-month period, multiplied by four. Annualized Adjusted EBITDA has not been prepared on a pro forma basis in accordance with Article 11 of Regulation S-X.
(2) Includes $15.5 million of finance leases, but excludes $81.8 million of unamortized discounts and deferred financing costs.

Uniti Group Inc.
Projected Future Results (1)
(In millions)

  Year Ended
December 31, 2021
Net income attributable to common shareholders – Basic $ 111 to $ 123
Noncontrolling interest share in earnings 2
Participating securities’ share in earnings 1
Net income (2) 114 to 126
Interest expense, net (3) 456
Depreciation and amortization 283
Income tax benefit (2)
EBITDA (2) 851 to 863
Stock-based compensation 15
Gain on sale of operations (4) (28)
Transaction related and other costs (5) 13
Adjustment for unconsolidated entities 3
Adjusted EBITDA (2) $ 854 to $ 866
   

________________________
(1) These ranges represent management’s best estimates based on the underlying assumptions as of the date of this press release. Future acquisitions, capital market transactions, changes in market conditions, and other factors are excluded from our projections. There can be no assurance that our actual results will not differ materially from the estimates set forth above.
(2) The components of projected future results may not add due to rounding.
(3) See “Components of Interest Expense” below.
(4) Represents gain on the sale of a portion of our Northeast operations and certain dark fiber IRU contracts acquired as a part of the Windstream settlement.
(5) Future transaction related and other costs are not included in our current outlook.

Uniti Group Inc.
Projected Future Results (1)
(Per Diluted Share)

  Year Ended December 31, 2021
Net income attributable to common shareholders – Basic $ 0.48 to $ 0.53
Real estate depreciation and amortization 0.92
Participating securities share in earnings -
Participating securities share in FFO -
Adjustments for noncontrolling interests (0.01)
Adjustments for unconsolidated entities 0.01
FFO attributable to common shareholders – Basic (2) $ 1.40 to $ 1.45
Impact of if-converted securities (0.12)
FFO attributable to common shareholders – Diluted (2) $ 1.28 to $ 1.33
   
FFO attributable to common shareholders – Basic (2) $ 1.40 to $ 1.45
Transaction related and other costs (3) 0.02
Amortization of deferred financing costs and debt discount (4)  0.20
Costs related to the early repayment of debt (5) 0.20
Accretion of settlement payable (6) 0.05
Stock-based compensation 0.06
Gain on sale of operations (7) (0.12)
Non-real estate depreciation and amortization 0.30
Straight-line revenues (0.13)
Maintenance capital expenditures (0.03)
Other, net (0.15)
Adjustments for noncontrolling interests -
AFFO attributable to common shareholders – Basic (2) $ 1.80 to $ 1.85
Impact of if-converted securities (0.16)
AFFO attributable to common shareholders – Diluted (2)$ 1.64 to $ 1.68
   

________________________
(1) These ranges represent management’s best estimates based on the underlying assumptions as of the date of this press release. Future acquisitions, capital market transactions, changes in market conditions, and other factors are excluded from our projections. There can be no assurance that our actual results will not differ materially from the estimates set forth above.
(2) The components of projected future results may not add to FFO and AFFO attributable to common shareholders due to rounding.
(3) Future transaction related and other costs are not included in our current outlook.
(4) Includes the write-off of approximately $27 million of deferred financing costs related to the early repayment of our 8.25% Senior Notes due 2023, of our 6.00% Senior Notes due 2023, and of our 7.125% Senior Notes due 2024.
(5) Represents the premium paid on and related costs associated with the early repayment of our 8.25% Senior Notes due 2023, our 6.00% Senior Notes due 2023, and our 7.125% Senior Notes due 2024.
(6) Represents the accretion of the Windstream settlement payable to its stated value. At the effective date of the settlement, we recorded the payable on the balance sheet at its initial fair value, which will be accreted based on an effective interest rate of 4.7% and reduced by the scheduled quarterly payments.
(7) Represents gain on the sale of a portion of our Northeast operations and certain dark fiber IRU contracts acquired as a part of the Windstream settlement.

Components of Interest Expense (1)
(In millions)
                                       

  Year Ended
December 31, 2021
Interest expense on debt obligations $359 
Capitalized interest  (2)
Accretion of Windstream settlement payable  12 
Amortization of deferred financing cost and debt discounts (2)  45 
Premium on early repayment of debt (3)  31 
Swap termination (4)  11 
Interest expense, net (5) $456 

________________________
(1) These ranges represent management’s best estimates based on the underlying assumptions as of the date of this press release. Future acquisitions, capital market transactions, changes in market conditions, and other factors are excluded from our projections. There can be no assurance that our actual results will not differ materially from the estimates set forth above.
(2) Includes the write-off of approximately $27 million of deferred financing costs related to the early repayment of our 8.25% Senior Notes due 2023, of our 6.00% Senior Notes due 2023, and of our 7.125% Senior Notes due 2024.
(3) Represents the premium paid on the early repayment of our 8.25% Senior Notes due 2023, of our 6.00% Senior Notes due 2023, and of our 7.125% Senior Notes due 2024.
(4) Represents recognition of deferred interest expense attributable to the discontinuance of hedge accounting on interest rate swaps.

NON-GAAP FINANCIAL MEASURES

We refer to EBITDA, Adjusted EBITDA, Funds From Operations (“FFO”) (as defined by the National Association of Real Estate Investment Trusts (“NAREIT”)) and Adjusted Funds From Operations (“AFFO”) in our analysis of our results of operations, which are not required by, or presented in accordance with, accounting principles generally accepted in the United States (“GAAP”). While we believe that net income, as defined by GAAP, is the most appropriate earnings measure, we also believe that EBITDA, Adjusted EBITDA, FFO and AFFO are important non-GAAP supplemental measures of operating performance for a REIT.

We define “EBITDA” as net income, as defined by GAAP, before interest expense, provision for income taxes and depreciation and amortization. We define “Adjusted EBITDA” as EBITDA before stock-based compensation expense and the impact, which may be recurring in nature, of transaction and integration related costs, costs associated with Windstream’s bankruptcy, costs associated with litigation claims made against us, and costs associated with the implementation of our enterprise resource planning system, (collectively, “Transaction Related and Other Costs”), costs related to the settlement with Windstream, goodwill impairment charges, executive severance costs, amortization of non-cash rights-of-use, the write off of unamortized deferred financing costs, costs incurred as a result of the early repayment of debt, including early tender and redemption premiums and costs associated with the termination of related hedging activities, gains or losses on dispositions, changes in the fair value of contingent consideration and financial instruments, and other similar or infrequent items (although we may not have had such charges in the periods presented). Adjusted EBITDA includes adjustments to reflect the Company’s share of Adjusted EBITDA from unconsolidated entities. We believe EBITDA and Adjusted EBITDA are important supplemental measures to net income because they provide additional information to evaluate our operating performance on an unleveraged basis. In addition, Adjusted EBITDA is calculated similar to defined terms in our material debt agreements used to determine compliance with specific financial covenants. Since EBITDA and Adjusted EBITDA are not measures calculated in accordance with GAAP, they should not be considered as alternatives to net income determined in accordance with GAAP.

Because the historical cost accounting convention used for real estate assets requires the recognition of depreciation expense except on land, such accounting presentation implies that the value of real estate assets diminishes predictably over time. However, since real estate values have historically risen or fallen with market and other conditions, presentations of operating results for a REIT that uses historical cost accounting for depreciation could be less informative. Thus, NAREIT created FFO as a supplemental measure of operating performance for REITs that excludes historical cost depreciation and amortization, among other items, from net income, as defined by GAAP. FFO is defined by NAREIT as net income attributable to common shareholders computed in accordance with GAAP, excluding gains or losses from real estate dispositions, plus real estate depreciation and amortization and impairment charges, and includes adjustments to reflect the Company’s share of FFO from unconsolidated entities. We compute FFO in accordance with NAREIT’s definition.

The Company defines AFFO, as FFO excluding (i) Transaction Related and Other Costs; (ii) costs related to the litigation settlement with Windstream, and accretion on our settlement obligation as these items are not reflective of ongoing operating performance; (iii) goodwill impairment charges; (iv) certain non-cash revenues and expenses such as stock-based compensation expense, amortization of debt and equity discounts, amortization of deferred financing costs, depreciation and amortization of non-real estate assets, amortization of non-cash rights-of-use, straight line revenues, non-cash income taxes, and the amortization of other non-cash revenues to the extent that cash has not been received, such as revenue associated with the amortization of tenant capital improvements; and (v) the impact, which may be recurring in nature, of the write-off of unamortized deferred financing fees, additional costs incurred as a result of the early repayment of debt, including early tender and redemption premiums and costs associated with the termination of related hedging activities, executive severance costs, taxes associated with tax basis cancellation of debt, gains or losses on dispositions, changes in the fair value of contingent consideration and financial instruments and similar or infrequent items less maintenance capital expenditures. AFFO includes adjustments to reflect the Company’s share of AFFO from unconsolidated entities. We believe that the use of FFO and AFFO, and their respective per share amounts, combined with the required GAAP presentations, improves the understanding of operating results of REITs among investors and analysts, and makes comparisons of operating results among such companies more meaningful. We consider FFO and AFFO to be useful measures for reviewing comparative operating performance. In particular, we believe AFFO, by excluding certain revenue and expense items, can help investors compare our operating performance between periods and to other REITs on a consistent basis without having to account for differences caused by unanticipated items and events, such as transaction and integration related costs. The Company uses FFO and AFFO, and their respective per share amounts, only as performance measures, and FFO and AFFO do not purport to be indicative of cash available to fund our future cash requirements. While FFO and AFFO are relevant and widely used measures of operating performance of REITs, they do not represent cash flows from operations or net income as defined by GAAP and should not be considered an alternative to those measures in evaluating our liquidity or operating performance.

Further, our computations of EBITDA, Adjusted EBITDA, FFO and AFFO may not be comparable to that reported by other REITs or companies that do not define FFO in accordance with the current NAREIT definition or that interpret the current NAREIT definition or define EBITDA, Adjusted EBITDA and AFFO differently than we do.

INVESTOR AND MEDIA CONTACTS:

Paul Bullington, 251-662-1512
Senior Vice President, Chief Financial Officer & Treasurer
paul.bullington@uniti.com

Bill DiTullio, 501-850-0872
Vice President, Finance and Investor Relations
bill.ditullio@uniti.com