ANNUAL REPORT
MY FELLOW
STOCKHOLDERS:
2020 was a transformational and exciting year for Uniti. First, our largest customer successfully emerged from bankruptcy,
deleveraging by $4 billion, with Uniti simultaneously entering into a value enhancing settlement which revalidated and
strengthened our lease agreement. Secondly, the fiber we acquired the rights to as part of that settlement grew our national
network by 90%, and within a short period of time, we have already demonstrated lease-up success of those assets by
doubling the total contract value of our sales funnel to $1 billion. Next, we extended our debt maturities and significantly
improved our liquidity profile. Lastly, we completed the divestiture of non-core operations from our real estate portfolio that
now position us with 95% recurring, high margin revenue with industry leading 0.2% monthly churn and a focus on fiber.
Despite the tremendous volatility we witnessed to our stock, we were successful in accomplishing the priorities we set out
in 2020, and the true mission critical nature and value of our national fiber network was validated, setting up Uniti for further
future success.
Fiber is the mission critical connective tissue for virtually all current and future broadband delivery. As one of the largest
independent wholesale fiber providers in the country, we are agnostic to the on-ramps that feed traffic into our network
and are enabling a virtualization of our culture. 5G mobile broadband, Fiber-to-the-Home, fixed wireless, satellite and other
technologies are enabling greater usage of video conferencing, e-learning, telemedicine, and remote work environments, as
well as a general continued explosion of broadband traffic. In the past 4 years alone, our Southeast fiber network has seen
a roughly 10x increase in peak daily traffic from approximately 16Gps to 160Gbps, and we expect that trajectory to continue.
As further proof of the durability of our model, the COVID-19 pandemic not only brought little disruption to our business, but
has actually accelerated many of the virtualization trends that have been critical to staying connected. Demand from critical
industries, such as healthcare, education and government continue to drive the need for high bandwidth usage technologies,
which in turn, is increasing the data traffic we are seeing on our networks.
Uniti is addressing these incredible industry tailwinds with the 8th largest fiber network in the country and a growing
portfolio of small cells, connected buildings and homes. We have amassed this valuable and hard to replicate portfolio in only
5 years through our proprietary M&A efforts and unique sales strategy that provide us with anchor customer relationships to
build new fiber economically. In the past 3 years alone, we have built 6,650 route miles and 674,000 strand miles of new fiber
with stable, long term anchor economics and shared infrastructure lease-up possibilities.
We continue to see significant demand for access to our national fiber network and our strategy is proving to be successful.
At Uniti Leasing, as a national wholesale provider across 42 states, we are driving highly profitable, passively managed,
lease-up revenue on our long haul and metro routes and opportunistically growing our portfolio through proprietary M&A.
At Uniti Fiber, we are targeting less competitive Tier II and III markets, largely in the Southeastern U.S., and providing actively
managed fiber solutions to wireless, enterprise, schools and government customers. Our strategy of targeting these
underserved markets along with our national scale and customer relationships is driving unique demand.
As an example, in our recently announced agreement with DISH, we were named as one of four national fiber providers to
provide solutions to DISH in its efforts to build out its 5G network across the United States. Within a few months of making
this announcement, we have already begun leveraging our existing dense fiber infrastructure for DISH in our Southeast
markets, which has given us a speed to market and a cost advantage over our competitors.
Our priorities for 2021 will be a continued focus on driving high margin recurring revenue through lease-up, while selectively
expanding our network with attractive anchor economic driven new builds. We will also continue to opportunistically look to
expand our network reach and passive revenue base by executing on our proprietary M&A funnel.
Lastly, we are also committed to operating and growing our business in an environmentally and socially responsible
manner. Along those lines, I am proud to report that Uniti recently published its first ESG report that summarizes these
efforts, including the true mission critical nature of our network, our unrivaled ability to respond to natural disasters, such
as the COVID-19 pandemic and hurricanes, and the essential nature of our workforce. We hope you find this report to be
informative and reflective of the goals we are committing to.
In closing, I would like to thank our investors and customers for their continued support of Uniti. I would especially like to
thank our world-class employees for their tireless efforts over the past year. I was truly impressed and grateful for the way
you adapted and dealt with the pandemic, as well as with other obstacles encountered along the way. We look forward to
successfully executing on our priorities in 2021, while continuing to provide long-term returns for our stockholders.
Sincerely,
Sincerely,
Kenny A. Gunderman
President and Chief Executive Officer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from _____ to _____
For the fiscal year ended December 31, 2020
OR
Commission File Number 001-36708
Uniti Group Inc.
(Exact name of Registrant as specified in its Charter)
Maryland
(State or other jurisdiction of
incorporation or organization)
10802 Executive Center Drive
Benton Building Suite 300
Little Rock, Arkansas
(Address of principal executive offices)
46-5230630
(I.R.S. Employer
Identification No.)
72211
(Zip Code)
Registrant’s telephone number, including area code: (501) 850-0820
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.0001 Par Value
Trading Symbol
UNIT
Name of each exchange
on which registered
The NASDAQ Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. YES ☒ NO ☐
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES ☐ NO ☒
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant
was required to submit such files). YES ☒ NO ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒
Non-accelerated filer ☐
Accelerated filer
☐
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of
the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by
the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ☐ NO ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, based on the closing
price of the shares of common stock on The NASDAQ Global Select Market on June 30, 2020 was $1,135,058,547
The number of shares of the Registrant’s common stock outstanding as of February 26, 2021 was 232,897,213.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s definitive proxy statement relating to the 2021 annual meeting of stockholders are incorporated by reference
into Part III of this Annual Report on Form 10-K.
Table of Contents
PART I
Item 1. Business ..............................................................................................................................................
Item 1A. Risk Factors ........................................................................................................................................
Item 1B. Unresolved Staff Comments...............................................................................................................
Item 2.
Properties ............................................................................................................................................
Item 3. Legal Proceedings...............................................................................................................................
Item 4. Mine Safety Disclosures .....................................................................................................................
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.................................................................................................................................
Selected Financial Data ......................................................................................................................
Item 6.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.............
1. Overview ........................................................................................................................
2. Results of Operations .....................................................................................................
3. Non-GAAP Financial Measures.....................................................................................
4. Liquidity and Capital Resources ....................................................................................
Item 7A. Quantitative and Qualitative Disclosures About Market Risk ...........................................................
Item 8.
Financial Statements and Supplementary Data ..................................................................................
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure ...........
Item 9A. Controls and Procedures .....................................................................................................................
Item 9B. Other Information ...............................................................................................................................
PART III
Item 10. Directors, Executive Officers and Corporate Governance .................................................................
Item 11. Executive Compensation ....................................................................................................................
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters ................................................................................................................................................
Item 13. Certain Relationships and Related Transactions, and Director Independence ...................................
Item 14. Principal Accounting Fees and Services.............................................................................................
Page
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PART IV
Item 15. Exhibits, Financial Statement Schedules............................................................................................
Item 16. Form 10-K Summary..........................................................................................................................
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134
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K includes forward-looking statements as defined under U.S. federal securities
law. Forward looking statements include all statements that are not historical statements of fact and those regarding
our intent, belief or expectations, including, but not limited to, statements regarding: our expectations regarding the
settlement we have entered into with Windstream Holdings, Inc. (together with Windstream Holdings II, LLC, its
successor in interest, and its subsidiaries, “Windstream”); the future prospects and financial health of Windstream;
our ability to delever and achieve the ‘covenant reversion date’ under our 7.875% senior secured notes due 2025,
which would permit us to pay additional dividends to shareholders; our expectations about our ability to maintain
our status as a real estate investment trust (a “REIT”); our expectations regarding filing an amendment to this Form
10-K to include Windstream’s audited financial statements as of and for the year ended December 31, 2020; our
expectations regarding the effect of the COVID-19 pandemic on our results of operations and financial condition,
including the potential need to perform an interim goodwill analysis and report an impairment charge related
thereto; our expectations regarding the effect of the Coronavirus Aid, Relief and Economic Security Act (the
“CARES Act”), the Consolidated Appropriations Act of 2021 (the “2021 Appropriations Act”) and other tax-related
legislation on our tax position; our expectations regarding the future growth and demand of the telecommunication
industry, future financing plans, business strategies, growth prospects, operating and financial performance, and our
future liquidity needs and access to capital; expectations regarding future deployment of fiber strand miles and
small cell networks and recognition of revenue related thereto; expectations regarding levels of capital expenditures;
expectations regarding the deductibility of goodwill for tax purposes; expectations regarding reclassification of
accumulated other comprehensive income (loss) related to derivatives to interest expense; expectations regarding the
amortization of intangible assets; our expectations regarding remediation of the material weakness in our internal
control over financial reporting as discussed in Part II, Item 9A of this Annual Report on Form 10-K; our
expectations regarding the wind down of the Consumer CLEC business; and expectations regarding the payment of
dividends.
Words such as “anticipate(s),” “expect(s),” “intend(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 have a material adverse effect on our
operations and future prospects or which could cause actual results to differ materially from our expectations include,
but are not limited to:
•
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the future prospects of our largest customer, Windstream following its emergence from bankruptcy;
adverse impacts of the COVID-19 pandemic on our employees, our business, the business of our
customers and other business partners and the global financial markets;
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;
our ability to renew, extend or retain our contracts or to obtain new contracts with significant customers
(including customers of the businesses that 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 or operate and integrate the acquired businesses;
3
•
•
•
•
•
•
•
•
•
•
•
•
•
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;
adverse impacts of changes to our business, economic trends or key assumptions regarding our
estimates of fair value, including potential impacts of recent developments surrounding Windstream that
could result in an impairment charge in the future, which could have a significant impact to our reported
earnings;
the impact on our business or the business of our customers as a result of credit rating downgrades, and
fluctuating interest rates;
adverse impacts of litigation or disputes involving us or our customers;
our ability to retain our key management personnel;
our ability to maintain our status as a REIT;
changes in the U.S. tax law and other federal, state or local laws, whether or not specific to REITs,
including the impact of the 2017 U.S. tax reform legislation, the CARES Act, the Families First
Coronavirus Response Act and the 2021 Appropriations Act;
covenants in our debt agreements that may limit our operational flexibility;
the possibility that we may experience equipment failures, natural disasters, cyber attacks or terrorist
attacks for which our insurance may not provide adequate coverage;
the risk that we fail to fully realize the potential benefits of or have difficulty in integrating the
companies we acquire;
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 discussed in Part I, Item 1A “Risk Factors” and Part II, Item 7 “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on
Form 10-K, as well as those described from time to time in our future reports filed with the U.S.
Securities and Exchange Commission (the “SEC”).
Forward-looking statements speak only as of the date of this Annual Report. Except in the normal course of our public
disclosure obligations, we expressly disclaim any obligation to release publicly any updates or revisions to any
forward-looking statements to reflect any change in our expectations or any change in events, conditions or
circumstances on which any such statement is based.
4
Item 1. Business.
Overview
PART I
Uniti Group Inc. (the “Company”, “Uniti”, “we”, “us” or “our”) is an independent, internally managed real estate
investment trust (“REIT”) engaged in the acquisition and construction of mission critical infrastructure in the
communications industry. We are principally focused on acquiring and constructing fiber optic, copper and coaxial
broadband networks and data centers.
As of December 31, 2020, Uniti and its subsidiaries own over 123,000 fiber network route miles, representing
approximately 6.9 million fiber strand miles, approximately 230,000 route miles of copper cable lines, central office
land and buildings across 44 states and beneficial rights to permits, pole agreements and easements. Refer to Part I,
Item 2 Properties of this Annual Report for a more detailed breakdown of our telecommunications properties.
For the year ended December 31, 2020, we had revenues of $1.1 billion, net loss attributable to common
shareholders of $707.4 million, Funds From Operations (“FFO”) loss of $548.2 million and Adjusted Funds From
Operations (“AFFO”) of $389.5 million. Both FFO and AFFO are non-GAAP financial measures, which we use to
analyze our results. Refer to Part II, Item 7 Managements Discussion and Analysis of Financial Condition and
Results of Operations, of this Annual Report for additional information regarding these non-GAAP measures. We
have historically managed our operations as four reportable business segments (in addition to our corporate
operations), but due to the sale of our towers business and wind down of the Consumer CLEC Business, starting in
2021, we will manage our operations focused on our two primary businesses, Leasing and Fiber Infrastructure,
which are described in more detail in Note 16 to our consolidated financial statements contained in Part II, Item 8
Financial Statements and Supplementary Data.
Refer to Part II, Item 7 Managements Discussion and Analysis of Financial Condition and Results of Operations
OverviewSignificant Business Developments, of this Annual Report for information regarding significant
developments in our business in 2020.
Industry
The current communications infrastructure industry is marked by the growing demand for and use of bandwidth-
intensive devices and applications, such as smart devices, real-time and online streaming video, cloud-based
applications, social media and mobile broadband. This growth in consumption requires the support of robust
communications infrastructure, of which fiber networks and communications towers are critical components.
Substantial investments have been made in recent years in fiber networks, lit services and colocation facilities to
keep pace with the increased bandwidth use of both enterprise- and consumer-end users. As companies attempt to
keep pace with this rapidly evolving business sector, communications infrastructure continues to increase in priority
and economic importance. We believe this considerable demand creates significant opportunities for us as an
operator and as a funding source for operators seeking to capitalize on these trends through build outs and
acquisitions of infrastructure assets.
The wireless communications industry is a prime example of the growing importance of the bandwidth
infrastructure industry. As wireless traffic and mobile data consumption continue to grow worldwide, participants in
the wireless communications industry are increasing their network capacity through the development of new
wireless cell sites and the addition of bandwidth capacity. Consumers are demanding network quality and coverage,
and as a result, wireless carriers are making significant capital investments to improve quality, expand their
coverage and remain relevant in a highly competitive industry. We expect this continued growth in capital
expenditures to generate high demands for bandwidth infrastructure services.
Strategy
Our primary goal is to create long-term stockholder value by (i) generating reliable and growing cash flows,
(ii) diversifying our tenant and asset base, (iii) paying a dividend, and (iv) maintaining our financial strength and
5
liquidity. To achieve this goal, we employ a business strategy that leverages our first mover advantages in the sector
and our strong access to the capital markets. The key components of our business strategy are:
Acquire Additional Infrastructure Assets Through Sale Leaseback Transactions
We actively seek to acquire communications infrastructure assets from communication service providers and lease
these assets back to the communication service providers on a long-term basis. We believe this type of transaction
benefits the communication service providers with incremental liquidity which can be used to reduce indebtedness
or for other investments, while they continue to focus on their existing business. We will employ a disciplined,
opportunistic acquisition strategy and seek to price transactions appropriately based on, among other things, growth
opportunities, the mix of assets acquired, length and terms of the lease, and credit worthiness of the tenant.
This strategy also is designed to expand our mix of tenants and other real property and will reduce our revenue
concentration with Windstream Holdings, Inc. (“Windstream Holdings” together with Windstream Holdings II,
LLC, its successor in interest, and subsidiaries, “Windstream”), our anchor tenant. We expect that this objective will
be achieved over time as part of our overall strategy to acquire new distribution systems and other real property
within the communications infrastructure industry to further diversify our overall portfolio.
Capitalize on the Market Demand for Increased Bandwidth Infrastructure and Performance
Bandwidth intensive devices and applications are rapidly fueling worldwide consumption of bandwidth, which in
turn fuels a continuously growing demand for stable and secure bandwidth options. Communications service
providers and other enterprises whose services and businesses require substantial amounts of bandwidth are
increasingly looking to infrastructure providers to support their bandwidth needs and to expand the reach,
performance and security of their networks. We believe Uniti Fiber is well positioned to capitalize on this ongoing
demand for bandwidth infrastructure solutions.
Fund Capital Extensions to Existing and New Tenants for Improvements of Infrastructure Assets
We believe the communications infrastructure industry in the United States is currently going through an upgrade
cycle driven by consumers’ general desire for greater bandwidth and wireless services. These upgrades require
significant capital expenditures, and we believe Uniti provides a non-competitive funding source for communication
service providers to help accelerate the improvement and expansion of their networks.
We intend to support our tenant operators and other communication service providers by providing capital to them
for a variety of purposes, including capacity augmentation projects, tower construction and network expansions. We
expect to structure these investments as lease arrangements that produce attractive returns for Uniti. For example,
under the leases with our anchor tenant, Windstream, we have agreed to fund up to $1.75 billion in value accretive
upgrades to the network we lease to Windstream in exchange for an 8% return and future rental rate increases. For
more information on this program with Windstream, refer to Part II, Item 7 Managements Discussion and Analysis
of Financial Condition and Results of Operations, of this Annual Report.
Facilitate M&A Transactions in the Communication Service Sector as a Capital Partner
We believe Uniti can provide cost efficient funds to potential acquirers in the communication service sector, and
thereby facilitate M&A transactions as a capital partner, including by partnering with operators through use of
“OpCo-PropCo” structures, pursuant to which we acquire the underlying network and other assets and the operator
acquires the operations.
The highly fragmented nature of the communication service sector is expected to result in more consolidation, which
we believe will provide us ample opportunity to pursue these types of transactions.
6
Maintain Balance Sheet Strength and Liquidity
We seek to maintain a capital structure that provides the resources and financial flexibility to position us to
capitalize on strategic growth opportunities. Our access to, and cost of, external capital is dependent on various
factors, including general market conditions, credit ratings on our securities, interest rates and expectations of our
future business performance. We intend to maintain a strong balance sheet through disciplined use of leverage,
aiming to lower our relative cost of capital over time, and continuing to have access to multiple sources of capital
and liquidity. As of December 31, 2020, we had $77.5 million of unrestricted cash and cash equivalents. As of
December 31, 2020, with the exception of our revolving credit facility, all of our debt is fixed-rate debt.
Competition
We compete for investments in the communications industry with telecommunications companies, investment
companies, private equity funds, hedge fund investors, sovereign funds and other REITs who focus primarily on
specific segments of the communications infrastructure industry. The communications infrastructure industry is
characterized by a high degree of competition among a large number of participants, including many local, regional
and global corporations. Some of our competitors are significantly larger and have greater financial resources and
lower costs of capital than we have. In addition, revenues from our network properties are dependent, to an extent,
on the ability of our operating partners, like Windstream, to compete with other communication service providers.
However, we believe we are positioned to identify and successfully capitalize on acquisition opportunities that meet
our investment objectives and that we have significant competitive advantages that support our leadership position
in owning, funding the construction of and leasing communications infrastructure, including:
First-Mover Advantage; Uniquely Positioned to Capitalize on Expansion Opportunities
We are the first REIT primarily focused on the acquisition and construction of mission critical infrastructure in the
communications industry. We believe this provides us with a significant first-mover competitive advantage to
capitalize on the large and fragmented communications infrastructure industry. Additionally, we believe our
position, scale and national reach will help us achieve operational efficiencies and support future growth
opportunities.
Large Scale Anchor Tenant
Windstream, as our anchor tenant, provides us with a base of rent revenues as an initial platform for us to grow and
diversify our portfolio and tenant base.
Windstream provides advanced network communications and technology solutions for businesses across the United
States. Windstream also offers broadband, entertainment and security solutions to consumers and small businesses
primarily in rural areas. Windstream continues to operate the telecommunications network assets, including fiber
and copper networks and other real estate (the “Distribution Systems”) which were contributed to us in our spin-off
from Windstream in 2015 (the “Spin-off”), hold the associated regulatory licenses and own and operate other assets,
including distribution systems in select states not included in the Spin-Off.
Windstream has a diverse customer base, encompassing enterprise and small business customers, carriers and
consumers. The Distribution Systems we lease to Windstream are located in 37 different states across the continental
United States. The fiber assets in any one state do not account for more than 20% of the total route miles in our
network. We believe this geographic diversification will limit the effect of changes in any one market on our overall
performance.
For a more detailed discussion of Windstream’s emergence from bankruptcy and our settlement with Windstream
refer to Part II, Item 7 Managements Discussion and Analysis of Financial Condition and Results of Operations
OverviewSignificant Business Developments, of this Annual Report.
7
Strong Relationships with Communication Service Providers
Members of our management team have developed an extensive network of relationships with qualified local,
regional and national communication service providers across the United States. This extensive network has been
built by our management team through decades of operating experience, involvement in industry trade organizations
and the development of banking relationships and investor relations within the communications infrastructure
industry. We believe these strong relationships will allow us to effectively source investment opportunities from
communication service providers other than Windstream. We intend to work collaboratively with our operating
partners in providing expansion capital at attractive rates to help them achieve their growth and business objectives.
We will seek to partner with communication service providers who possess local market knowledge, demonstrate
hands-on management and have proven track records.
Experienced and Committed Management Team
Our senior management team is comprised of veteran leaders with strong backgrounds in their respective
disciplines. Our senior management team has extensive experience managing telecommunications operations,
consummating mergers and acquisitions and accessing both debt and equity capital markets to fund growth and
maintain a flexible capital structure.
Our Business
Our primary lines of business are Uniti Leasing and Uniti Fiber, which are described in further detail below. For a
more detailed discussion of our other reportable segments, including our former business lines Uniti Towers and the
Consumer Competitive Local Exchange Carrier (“CLEC”) Business (the “Consumer CLEC Business”), and other
recent business developments related thereto see refer to Part II, Item 7 Managements Discussion and Analysis of
Financial Condition and Results of OperationsOverviewSignificant Business Developments, of this Annual
Report.
Uniti Leasing
Uniti Leasing is engaged in acquiring mission-critical communications assets, such as fiber, data centers, next-
generation consumer broadband, coaxial and upgradeable copper, and leasing them back to anchor customers on
either an exclusive or shared-tenant basis. Presently, a substantial portion of Uniti Leasing’s revenue is rental
revenues from leasing the Distribution Systems to Windstream as described below in the section titled “Significant
Customers”. We believe our attractive cost of capital and advantageous REIT structure will enable Uniti Leasing to
provide creative and tax-efficient solutions to additional customers, including (i) sale leaseback transactions,
whereby Uniti Leasing acquires existing infrastructure assets from communications service providers and leases
them back on a long-term basis; (ii) capital investment financing, whereby Uniti Leasing offers communications
service providers a cost-efficient method of raising funds for discrete capital investments to upgrade or expand their
network; and (iii) mergers and acquisitions financing, whereby Uniti Leasing facilitates mergers and acquisition
transactions as a capital partner. Results for Uniti Leasing are reported in our consolidated financial statements in
our Leasing business segment.
Uniti Fiber
Uniti Fiber is a leading provider of infrastructure solutions, including cell site backhaul and small cell for wireless
operators and ethernet, wavelengths and dark fiber for telecommunications carriers and enterprises. With Uniti
Fiber, our goal is to capitalize on the rising demand by carriers and enterprises for dark fiber, establish ourselves as a
proven small-cell systems provider and leverage wholesale enterprise opportunities as well as opportunities through
the School and Libraries Program (commonly referred to as E-Rate) administered by the Universal Service
Administrative Company. We believe fiber is the mission-critical focal point in the modern communications
infrastructure industry and that Uniti Fiber will accelerate our growth and diversification strategy and expand our
relationships with high quality national and international wireless carriers.
8
At December 31, 2020, Uniti Fiber’s revenues under contract were over $1.1 billion, with a network consisting of
approximately 2.4 million strand miles of fiber and approximately 26,300 customer connections. Results for Uniti
Fiber are reported in our consolidated financial statements in our Fiber Infrastructure business segment.
The Company
Uniti Group Inc. was incorporated in the state of Maryland on September 4, 2014 and was separated and spun-off
from Windstream on April 24, 2015.
Uniti operates as a REIT for U.S. federal income tax purposes. As a REIT, the Company is generally not subject to
U.S. federal income taxes on income generated by its REIT operations. We have elected to treat the subsidiaries
through which we operate our fiber business, Uniti Fiber, certain aspects of our former towers business, Uniti
Towers, and Talk America Services, LLC, which operated the Consumer CLEC Business (“Talk America”), as
taxable REIT subsidiaries (“TRSs”). TRSs enable us to engage in activities that result in income that does not
constitute qualifying income for a REIT. Our TRSs are subject to U.S. federal, state and local corporate income
taxes.
The Company operates through a customary up-REIT structure, pursuant to which we hold substantially all of our
assets through a partnership, Uniti Group LP, a Delaware limited partnership (the “Operating Partnership”), that we
control as general partner. This structure is intended to facilitate future acquisition opportunities by providing the
Company with the ability to use common units of the Operating Partnership as a tax-efficient acquisition currency.
As of December 31, 2020, we are the sole general partner of the Operating Partnership and own approximately
98.5% of the partnership interests in the Operating Partnership. In addition, beginning on December 31, 2019, we
undertook a series of transactions, including the issuance by one of our subsidiaries of convertible preferred stock to
third parties with an aggregate liquidation value of $125,000, to permit us to hold certain of our assets indirectly
through one of our subsidiaries taxed as a REIT, which is also expected to facilitate future acquisition opportunities.
Human Capital Management
On December 31, 2020, we employed 787 people, of whom 492 work directly developing and maintaining network
operations, 83 in sales and sales support, 74 in shared services, 71 accounting and finance related positions and 67 in
operations support roles. None of our employees are subject to a collective bargaining agreement.
Our employees are our most important resources and their success ultimately creates our own. We fuel their success
by offering career growth, recognition and appreciation programs, fulfilling work relationships, empowerment,
mentoring, and training and development opportunities. We demonstrate the value we place in our employees
financial, physical and emotional health by providing our employees with competitive salaries, health benefits,
investment opportunities, vacation options and a generous paid volunteer program, among other benefits.
For the last three years Uniti has been certified as a Great Place to Work®. Our management team strives to
embody and promote our company values of united, necessary, innovative, tenacious, and integrity. As a certified
Great Place to Work®, 94% of our employees say they are proud to work at Uniti and 88% of them agree that Uniti
is a great place to work. We believe our energetic and collaborative work environment are contributing factors to
our limited employee turnover and high levels of engagement.
Within our organization, we believe in unity and know that it can only be generated through connection,
collaboration and respect. We are committed to fostering these ideals by hiring, developing and supporting a diverse
and inclusive workplace that encourages, supports and celebrates the diverse voices of our team members. Two
women sit on our board of directors and women represent approximately 22% of leadership positions across our
company. Current key initiatives include our Diversity and Inclusion Groups (“DIGs”) which support employees
with diverse backgrounds, experiences or characteristics who share a common interest in various topics. Each DIG
is sponsored and supported by senior leaders across the organization.
We value our strong ethical foundation and have instituted policies and procedures designed to preserve and
prioritize corporate integrity. To actively promote honest, ethical and respectful conduct, we engage in a top-down
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approach by requiring our directors and executives to set high standards of integrity, responsibility and transparency.
We insist all employees adhere to a code of conduct that sets standards for appropriate behavior and includes
information on preventing, identifying, reporting and stopping any type of discrimination or unethical behavior.
As a result of the COVID-19 pandemic, we implemented safety protocols to protect our employees, customers and
communities during the pandemic. These protocols include health and safety training and compliance with social
distancing and other health and safety standards as required by federal, state and local government agencies, taking
into consideration guidelines of the Centers for Disease Control and Prevention and other public health authorities.
Many of our administrative and operational functions during this time have required modification, including some of
our workforce working remotely. Our experienced teams adapted to the changes in our work environment and have
managed our business successfully during this challenging time. To further support the mental health needs of our
employees, we added an employer-paid virtual mental health benefit in addition to our already available Employee
Assistance Program (EAP). Our EAP offers free, confidential assessments and short-term counseling to employees.
Together, with our additional virtual mental health benefit, employees have the opportunity to seek in person or
virtual assistance with personal and/or work-related problems.
Uniti will continue to seek opportunities to support the overall health and well-being of our employees as we
continue to realize significant value for our stockholders, customers and communities.
Significant Customers
For the years ended December 31, 2020, 2019 and 2018, 65.8%, 65.0% and 68.2% of our revenues, respectively,
were derived from leasing our Distribution Systems to Windstream Holdings.
On April 24, 2015, we were separated and spun-off from Windstream pursuant to which Windstream contributed the
Distribution Systems and the Consumer CLEC Business to Uniti and Uniti issued common stock and indebtedness
and paid cash obtained from borrowings under Uniti’s senior credit facilities to Windstream. In connection with the
Spin-Off, we entered into a long-term exclusive triple-net lease (the “Master Lease”) with Windstream, pursuant to
which a substantial portion of our real property is leased to Windstream and from which a substantial portion of our
leasing revenues are currently derived. In connection with Windstream’s recent emergence from bankruptcy and the
implementation of our settlement with Windstream, Uniti and Windstream bifurcated the Master Lease and entered
into two structurally similar master leases (collectively, the “Windstream Leases”), which amended and restated the
Master Lease in its entirety. For a more detailed discussion of Windstream’s emergence from bankruptcy and our
settlement with Windstream refer to Part II, Item 7 Managements Discussion and Analysis of Financial Condition
and Results of OperationsOverviewSignificant Business Developments, of this Annual Report.
Prior to its emergence from bankruptcy on September 21, 2020, Windstream was a publicly traded company subject
to the periodic filing requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Windstream historic filings through their quarter ended June 30, 2020 can be found at www.sec.gov. On September
22, 2020, Windstream filed a Form 15 to terminate all filing obligations under Sections 12(g) and 15(d) under the
Exchange Act. Windstream has posted certain information regarding its fourth quarter and full year 2020 results on
the investor relations page of its website, which can be found at https://investor.windstream.com. Neither
Windstream filings nor the information available on the investor relations page of its website are incorporated by
reference in this Annual Report on Form 10-K.
We monitor the credit quality of Windstream through numerous methods, including by (i) reviewing credit ratings of
Windstream by nationally recognized credit agencies, (ii) reviewing the financial statements of Windstream that are
required to be delivered to us pursuant to the Windstream Leases, (iii) monitoring new reports regarding
Windstream and its business, (iv) conducting research to ascertain industry trends potentially affecting Windstream,
(v) monitoring Windstream’s compliance with the terms of the Windstream Leases and (vi) monitoring the
timeliness of its payments under the Windstream Leases.
As of the date of this Annual Report on Form 10-K, Windstream is current on all lease payments. We note that in
August 2020, Moody’s Investor Service assigned a B3 corporate family rating with a stable outlook to Windstream
in connection with its post-emergence exit financing. At the same time, S&P Global Ratings assigned Windstream a
B- issuer rating with a stable outlook. These ratings were both upgrades from Windstream’s pre-bankruptcy ratings.
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In addition, in order to assist us in our continuing assessment of Windstream’s creditworthiness, we periodically
receive certain confidential financial information and metrics from Windstream. Refer to Part II, Item 7
Managements Discussion and Analysis of Financial Condition and Results of Operations, of this Annual Report for
additional information regarding this assessment.
Government Regulation, Licensing and Enforcement
U.S. Telecommunications Regulatory Overview
Our subsidiaries and our tenants operate in a regulated market. As operators of telecommunications facilities and
services, both we and the current and future tenants of our telecommunications assets are typically subject to
extensive and complex federal, state and local telecommunications laws and regulations. The Federal
Communications Commission (“FCC”) regulates the provision of interstate and international telecommunications
services, and state public utility commissions (“PUCs”) regulate intrastate telecommunications services. Federal and
state telecommunications laws and regulations are wide-ranging, and violations of them can subject us and our
tenants to civil, criminal and administrative sanctions. We expect that the telecommunications industry, in general,
will continue to face increased regulation. Changes in laws and regulations and violations of federal or state laws or
regulations by us or our tenants could have a significant direct or indirect effect on our operations and financial
condition, as detailed below and set forth under “Risk Factors—Risks Related to Our Business.”
Our operations require that certain of our subsidiaries across all segments hold licenses or other forms of
authorization from the FCC and state PUCs in those states where we operate, and in some jurisdictions our
subsidiaries must file tariffs or other price lists describing their rates, terms and conditions of the services they
provide. The FCC and PUCs can modify or terminate a service provider’s license or other authority to provide
telecommunications services for failure to comply with applicable laws and regulations. The FCC and PUCs may
also investigate our subsidiaries’ operations and may impose fines or other penalties for violations of the same. In
addition, our subsidiaries are required to submit periodic reports to the FCC and PUCs documenting their revenues
and other data. Some of this information is used as the basis for the imposition of various regulatory fees and other
assessments. In order to engage in certain transactions in some jurisdictions, including changes of control, the
encumbrance of certain assets, the issuance of securities, the incurrence of indebtedness, the guarantee of
indebtedness of other entities, including subsidiaries of ours, and the transfer of assets, we may be required to
provide notice and/or obtain prior approval from certain governmental agencies. Failure to obtain required
approvals could subject us to fines or other penalties.
Our subsidiaries are subject to a number of federal and state regulations that govern the way we can conduct our
business. Such regulations also impose certain operating costs on our businesses. These regulations can include
restrictions on pricing flexibility for certain products, minimum service quality standards, service reporting,
intercarrier compensation, contributions to universal service, and other obligations. Further, the relaxation of
regulatory requirements on our competitors, such as those granting us access to incumbent local exchange carrier
facilities and/or services or the prices that such carriers may charge for such services or access to their facilities, may
also have a detrimental effect on the businesses of our subsidiaries and/or tenants.
We have sought to structure the operations for our core real estate business in a manner to minimize the likelihood
that we may be required to become regulated as a public utility or common carrier by the FCC or PUCs, but a
number of our business operations are nonetheless subject to federal, state, and local regulation, and we cannot
guarantee that our core real estate business will not become further subject to federal, state, and local regulation in
the future.
With respect to the broadband Internet services that we provide, traditionally, the FCC has recognized that
broadband Internet access services are “information services” subject to limited regulation. In 2015, the FCC issued
a “network neutrality” decision that declared broadband Internet access services to be subject to certain
“telecommunications services” regulation under Title II of the Communications Act of 1934. These regulations
would have limited the ways that broadband Internet access service providers could structure business arrangements
and manage their networks and spurred additional restrictions, including rate regulation, which could adversely
affect broadband investment and innovation. In 2017, the FCC voted to return broadband Internet access service to
its prior classification as “information services.” As a result of these decisions, state legislators and governors have
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introduced, and in some cases passed, state laws and executive orders requiring different levels of adherence to
“network neutrality” principles for broadband Internet access service providers active in the applicable states. As a
result of these laws and regulations, it is unclear at this time how broadband services will be regulated in the future,
and the potential impact those regulations may have on our broadband Internet service business.
Communications towers owned by our subsidiaries are subject to federal, state and local regulatory requirements
with respect to the registration, siting, construction, lighting, marking and maintenance. In the United States, the
construction of new towers or modifications to existing towers may require pre-approval by the FCC and the Federal
Aviation Administration (“FAA”), depending on factors such as tower height and proximity to public airfields.
Towers requiring pre-approval must be registered with the FCC and maintained in accordance with FCC and FAA
standards. Non-compliance with applicable tower-related requirements may lead to monetary penalties or site
deconstruction orders.
Towers are also subject to zoning restrictions and restrictive covenants imposed by local authorities or community
organizations. While these regulations vary, they typically require approval from local authorities or community
standards organizations prior to tower construction or the addition of a new antenna to an existing tower. Opposition
by local zoning authorities and community residents can delay or prevent new tower construction or site upgrade
projects, thereby increasing the costs and timing of new tower construction and modifications or site upgrades.
The failure to properly maintain towers pursuant to applicable regulatory requirements, such as but not limited to,
lighting, painting, and other safety standards, can subject us to significant enforcement actions, including monetary
penalties both within the United States and abroad.
Uniti Fiber
Our subsidiaries that compose Uniti Fiber own and operate significant fiber and other communications backhaul
facilities throughout various regions of the United States. The provision of such services is often subject to FCC and
PUC licensure in many jurisdictions, and the companies are typically licensed as CLECs and/or interexchange
carriers in those states where they operate. The companies also hold various FCC wireless licenses in order to
provide microwave backhaul and other wireless services. Because of the nature of the licenses that these companies
hold, and the nature of the services that they provide, they are subject to various federal and state regulatory
requirements, including, but not limited to, revenue and other reporting requirements and tariffing requirements.
The companies must also maintain their wireless licenses with the FCC, which requires construction and notification
reporting and other regulatory requirements. New fiber network construction is also subject to certain state and
local governmental permitting and licensing requirements. Delays in the local and state permitting process can
delay the construction of new facilities. Failure to abide by permit requirements can subject the company to fines
and other penalties.
In some cases, our subsidiaries that compose Uniti Fiber utilize services or facilities of incumbent local exchange
carriers through arrangements established under the Telecommunications Act of 1996 and FCC regulations. The
FCC has recently issued orders allowing incumbent local exchange carriers to stop offering such elements and/or to
increase the rates that they may charge competitive providers for access to such elements. The loss of these
elements, or significant price increases associated with our use of such elements, may increase our costs to maintain
and construct new network facilities to replace those we may no longer access, or have other negative effects on our
business such as a loss of ability to continue to provide services to certain customers.
Regulatory Changes
Future revenues, costs, and capital investment in the communication businesses of our tenants, Uniti Fiber, and other
related entities could be adversely affected by material changes to, or decisions regarding applicability of,
government requirements, including, but not limited to, changes in rules governing inter-carrier compensation,
interconnection access to network facilities, state and federal universal service fund (“USF”) support, rules
governing the prices that can be charged for business data services, infrastructure location and siting rules, access to
unbundled network elements, and other requirements. Federal and state communications laws and regulations may
be amended in the future, and other new laws and regulations may affect our business. In addition, certain laws and
regulations applicable to us and our competitors may be, and have been, challenged in the courts and could be
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vacated or modified at any time. We cannot predict future developments or changes to the regulatory environment or
the impact such developments or changes would have on our business.
In addition, regulations could create significant compliance costs for us. Delays in obtaining FCC and PUC
certifications and regulatory approvals could cause us to incur substantial legal and administrative expenses, and
conditions imposed in connection with such approvals could adversely affect the rates that we are able to charge our
customers. Both our subsidiaries and our tenants may also be affected by legislation and/or regulation imposing new
or additional obligations related to, for example, law enforcement assistance, cyber-security protection, intellectual
property rights protections, environmental protections, consumer privacy, tax, or other areas. We cannot predict
how any such future changes may impact our business, or the business of our tenants.
Environmental Matters
A wide variety of federal, state and local environmental and occupational health and safety laws and regulations
affect telecommunications operations and facilities. These laws and regulations, and their enforcement, involve
complex and varied requirements, and many such laws and regulations impose strict liability for violations. Some of
these federal, state and local laws may directly impact us. Under various federal, state and local environmental laws,
ordinances and regulations, an owner of real property, such as us, may be liable for the costs of removal or
remediation of hazardous or toxic substances at, under or disposed of in connection with such property, as well as
other potential costs relating to hazardous or toxic substances (including government fines and damages for injuries
to persons and adjacent property). The cost of any required remediation, removal, fines or personal property
damages and the owner’s liability therefore could exceed or impair the value of the property and/or the assets of the
owner. In addition, the presence of such substances, or the failure to properly dispose of or remediate such
substances, may adversely affect the owner’s ability to sell or rent such property or to borrow using such property as
collateral, which, in turn, could reduce revenues.
Insurance
We maintain, or will require in our leases (including the Windstream Leases) that our tenants maintain, applicable
lines of insurance on our properties and their operations. Under the Windstream Leases, Windstream has the right to
self-insure or use a captive provider with respect to its insurance obligations. We believe that the amount and scope
of insurance coverage provided by our policies and the policies maintained by our tenants are customary for
similarly situated companies in the telecommunications industry. However, our tenants may elect not to, or be able
to, maintain the required insurance coverages, and the failure by any of them to do so could have a material adverse
effect on us. We may not continue to require the same levels of insurance coverage under our leases, including the
Windstream Leases, and such insurance may not be available at a reasonable cost in the future or fully cover all
losses on our properties upon the occurrence of a catastrophic event. Moreover, we cannot guarantee the future
financial viability of the insurers.
Available Information
Our principal executive offices are located at 10802 Executive Center Drive, Benton Building Suite 300, Little
Rock, AR 72211 and our telephone number is (501) 850-0820. We maintain a website at www.uniti.com. Our
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any
amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934 (the “Exchange Act”) are available on our website, free of charge, as soon as reasonably practicable after we
electronically file such materials with, or furnish them to, the SEC. Our Exchange Act filings can also be found at
www.sec.gov.
Current copies of our Code of Business Conduct and Ethics & Whistleblower Policy, Corporate Governance
Guidelines, and the charters for our Audit, Compensation and Governance Committees are posted in the Corporate
Governance section of the About Us page of our website at www.uniti.com.
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Item 1A. Risk Factors.
Risks Related to Our Business
The COVID-19 pandemic, and the future outbreak of other highly infectious or contagious diseases, could
disrupt the operation of our business resulting in adverse impacts to our financial condition, results of
operations, and cash flow.
The COVID-19 pandemic has, and another pandemic in the future could, negatively impacted the global economy,
disrupted global supply chains and created significant volatility and disruption of financial markets. Given the
ongoing and dynamic nature of the circumstances, it is difficult to predict the impact of COVID-19 on us, and there
is no guarantee that efforts by us, designed to address adverse impacts of COVID-19, will be effective.
The local governments in some of the markets in which we operate mandated residents to stay at home and
temporarily closed businesses that are not considered essential. While some of these measures have been loosened,
the ongoing pandemic and COVID-19 outbreaks has resulted in, and may continue to result in, reinstating these
measures or implementing new or additional measures. Although our businesses are considered essential, the current
COVID-19 pandemic, or a future pandemic, could have material and adverse effects on our ability to successfully
operate and on our financial condition, results of operations and cash flows due to, among other factors:
•
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significant disruptions or delays in our operations or network performance, as well as network
maintenance and construction, testing, supervisory and customer support activities, and inventory and
supply procurement;
increases in operating costs, inventory shortages and/or a decrease in productivity related to travel bans
and social distancing efforts that may delay construction activities or require our vendor and contractors
to incur additional costs that may be passed onto us;
delays in permitting activities due to the shutdown of local permitting authorities;
a deterioration in our ability to operate in affected areas or delays in the supply of products or services to
us from vendors that are needed for our efficient operations could adversely affect our operations;
the impact on our contracts with customers and suppliers, including potential disputes over whether
COVID-19 constitutes a force majeure event;
adverse impact on the timing of installs in our enterprise and wholesale customer segments at Uniti Fiber;
a general reduction in business and economic activity may severely impact our clients’ financial
condition and liquidity and may cause them to be unable to meet their obligations to us in full, or at all,
or to otherwise seek modifications of such obligations;
difficulty accessing debt and equity capital on attractive terms, or at all, and a severe disruption and
instability in the global financial markets or deteriorations in credit and financing conditions may affect
our access to capital necessary to fund business operations or address existing and anticipated liabilities
on a timely basis; and
the potential negative impact on the health of our personnel, particularly if a significant number of them
are impacted, could result in a deterioration in our ability to ensure business continuity during a
disruption.
We have implemented policies and procedures designed to mitigate the risk of adverse impacts of the COVID-19
pandemic, or a future pandemic, on our operations, but we may incur additional costs to ensure continuity of
business operations caused by COVID-19, or other future pandemics, which could adversely affect our financial
condition and results of operations. However, the extent of such impacts will depend on future developments, which
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are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity
of COVID-19 and actions taken to contain COVID-19 or its impact, among others.
We expect the settlement with Windstream will require us to raise significant additional capital.
We expect to raise capital to fund obligations to Windstream, including (i) $490 million of settlement payments
payable over time and (ii) an aggregate of up to $1.75 billion for certain growth capital improvements in long-term
fiber and related assets made by Windstream (or the applicable tenant under the Windstream Lease) to certain ILEC
and CLEC properties (the “Growth Capital Improvements”) subject to the master lease (although such investments
will lead to higher rent payments). We will closely monitor capital markets and will seek to access them promptly
when we determine market conditions are appropriate. The amount, nature and timing of any capital markets
transactions will depend on: our operating performance and other circumstances; any limitations imposed by our
current credit arrangements; and overall market conditions. If we are unable to access the capital markets as we
anticipate (including because our cost of capital is higher than the returns we will get on our investment in
Windstream), we would be subject to a shortfall in liquidity in the future which could lead to a reduction in our
capital expenditures and/or dividends and, in an extreme case, our ability to pay our debt service obligations. If this
shortfall occurs rapidly and with little or no notice, it could limit our ability to address the shortfall on a timely basis.
We are dependent on Windstream to make payments to us under the Windstream Leases, and an event that
materially and adversely affects Windstreams business, financial position or results of operations could
materially and adversely affect our business, financial position or results of operations.
Windstream is the lessee of the Distribution Systems pursuant to the Windstream Leases and, therefore, is presently
the source of a substantial portion of our revenues. There can be no assurance that Windstream will have sufficient
assets, income and access to financing to enable it to satisfy its payment and other obligations under the Windstream
Leases. In recent years, Windstream has experienced annual declines in its total revenue, sales and cash flow and
has undergone a restructuring under Chapter 11 of the U.S. Bankruptcy Code.
The inability or unwillingness of Windstream to meet its rent obligations under the Windstream Leases could
materially adversely affect our business, financial position or results of operations, including our ability to pay
dividends to our stockholders as required to maintain our status as a REIT. The inability of Windstream to satisfy its
other obligations under the Windstream Leases, such as the payment of insurance, taxes and utilities, could
materially and adversely affect the condition of the Distribution Systems as well as the business, financial position
and results of operations of Windstream. In addition, Windstream will be dependent on distributions from its
subsidiaries in order to satisfy the payment obligations under the Windstream Leases, as such, if its subsidiaries
were to experience a material and adverse effect on their business, financial position or results of operations, our
business, financial position or results of operations could also be materially and adversely affected.
Failure by Windstream to comply with the terms of the Windstream Leases or to comply with the regulations to
which the Distribution Systems are subject could require us to find another lessee for such Distribution Systems, or a
portion thereof, and there could be a decrease or cessation of rental payments by Windstream.
There is no assurance that we would be able to lease the Distribution Systems to another lessee on substantially
equivalent or better terms than the Windstream Leases, or at all, successfully reposition the Distribution Systems for
other uses or sell the Distribution Systems on terms that are favorable to us. It may be more difficult to find a
replacement tenant for a telecommunications property than it would be to find a replacement tenant for a general
commercial property due to the specialized nature of the business. Even if we are able to find a suitable replacement
tenant for the Distribution Systems, transfers of operations of communication distribution systems are subject to
regulatory approvals not required for transfers of other types of commercial operations, which may affect our ability
to successfully transition the Distribution Systems.
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If the Spin-Off, together with certain related transactions, fails to qualify as a tax-free transaction for U.S.
federal income tax purposes, both we and Windstream could be subject to significant tax liabilities and, in certain
circumstances, we could be required to indemnify Windstream for material taxes pursuant to indemnification
obligations under the tax matters agreement entered into in connection with the Spin-Off.
Windstream received a private letter ruling (the “IRS Ruling”) from the Internal Revenue Service (the “IRS”) to the
effect that, on the basis of certain facts presented and representations and assumptions set forth in the request
submitted to the IRS, the Spin-Off will qualify as tax-free under Sections 355 and 368(a)(1)(D) of the Internal
Revenue Code of 1986, as amended (the “Code”). Although a private letter ruling from the IRS generally is binding
on the IRS, if the factual representations and assumptions made in the letter ruling request are untrue or incomplete
in any material respect, then Windstream will not be able to rely on the IRS Ruling. In addition, the IRS Ruling does
not address certain requirements for tax-free treatment of the Spin-Off under Sections 355 and 368(a)(1)(D) of the
Code and Windstream’s use of Uniti indebtedness and common stock to retire certain of Windstream’s indebtedness
(the “debt exchanges”). Accordingly, the Spin-Off was conditioned upon the receipt by Windstream of a tax opinion
from its counsel with respect to the requirements on which the IRS did not rule, which concluded that such
requirements also should be satisfied. The tax opinion was based on, among other things, the IRS Ruling, then
current law and certain representations and assumptions as to factual matters made by Windstream and us. Any
change in currently applicable law, which may or may not be retroactive, or the failure of any factual representation
or assumption to be true, correct and complete in all material respects, could adversely affect the conclusions
reached in the tax opinion. In addition, the tax opinion is not binding on the IRS or the courts, and the IRS or the
courts may not agree with the tax opinion.
If the Spin-Off were determined to be taxable, Windstream would recognize taxable gain. Under the terms of the tax
matters agreement entered into with Windstream in connection with the Spin-Off (the “Tax Matters Agreement”),
we are generally responsible for any taxes imposed on Windstream that arise from the failure of the Spin-Off and the
debt exchanges to qualify as tax-free for U.S. federal income tax purposes, within the meaning of Section 355 and
Section 368(a)(1)(D) of the Code, as applicable, to the extent such failure to qualify is attributable to certain actions,
events or transactions relating to our stock, indebtedness, assets or business, or a breach of the relevant
representations or any covenants made by us in the Tax Matters Agreement, the materials submitted to the IRS in
connection with the request for the IRS Ruling or the representations provided in connection with the tax opinion.
Our indemnification obligations to Windstream are not limited by any maximum amount and such amounts could be
substantial. If we are required to indemnify Windstream under the circumstances set forth in the Tax Matters
Agreement, we may also be subject to substantial tax liabilities.
In addition, if the Spin-Off or the debt exchanges failed to qualify as tax free for U.S. federal income tax purposes,
Windstream may incur significant tax liabilities that could materially affect Windstream’s ability to make payments
under the Windstream Leases.
Our level of indebtedness could materially and adversely affect our financial position, including reducing funds
available for other business purposes and reducing our operational flexibility.
As of December 31, 2020, we had outstanding long term indebtedness of approximately $4.97 billion consisting of
senior notes and a revolving credit facility provided by a syndicate of banks and other financial institutions, which,
as of December 31, 2020, provided for an aggregate committed amount of borrowings up to approximately $560.5
million. Subject to the restrictions set forth in our debt agreements, our board of directors may establish and change
our leverage policy at any time without stockholder approval. Any significant additional indebtedness could require
a substantial portion of our cash flow to make interest and principal payments due on our indebtedness. Greater
demands on our cash resources may reduce funds available to us to pay dividends, make capital expenditures and
acquisitions, or carry out other aspects of our business strategy. Increased indebtedness can also limit our ability to
adjust rapidly to changing market conditions, make us more vulnerable to general adverse economic and industry
conditions and create competitive disadvantages for us compared to other companies with relatively lower debt
levels. Increased future debt service obligations may limit our operational flexibility, including our ability to acquire
assets, finance or refinance our assets or sell assets as needed, and our ability to pay dividends. Please see
“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital
Resources—Credit Agreement” for information about the terms of the limited waiver we received from the lenders
to our Credit Agreement.
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In February 2021, the Operating Partnership and certain of its subsidiaries issued $1.11 billion aggregate principal
amount of 6.50% senior notes due 2029 and used the proceeds from the offering to fund the tender offer of
substantially all outstanding 8.25% senior notes due 2023, of which $58.8 million remain outstanding. On February
16, 2021, we issued a notice of redemption to redeem all remaining principal amount of our outstanding 8.25%
senior notes due 2023 on April 15, 2021.
We anticipate that we will have sufficient access to liquidity to fund our cash needs; if we are unable to do so, we
would need to reduce our spending and it could have an adverse effect on us.
We anticipate continuing to invest in our network infrastructure across our Uniti Leasing and Uniti Fiber portfolios.
We anticipate declaring dividends for the 2021 tax year to comply with our REIT distribution requirements. We
also expect the need to raise capital to finance the Settlement, which includes growth capital investments, with
Windstream. We anticipate that we will partially finance these needs, together with operating expenses (including
our debt service obligations) from our cash on hand, cash flows provided by operating activities, together with funds
anticipated from announced divestures. However, we may need to access the capital markets to generate additional
funds in an amount sufficient to fund our business operations, announced investment activities, capital expenditures,
debt service and distributions to our shareholders. We are closely monitoring the equity and debt markets and will
seek to access them promptly when we determine market conditions are appropriate. The amount, nature and timing
of any capital markets transactions will depend on: our operating performance and other circumstances; our then-
current commitments and obligations; the amount, nature and timing of our capital requirements; any limitations
imposed by our current credit arrangements; and overall market conditions. These expectations are forward-looking
and subject to a number of uncertainties and assumptions. If our expectations about our liquidity prove to be
incorrect or we are unable to access the capital markets as we anticipate, we would be subject to a shortfall in
liquidity in the future which could lead to a reduction in our capital expenditures and/or dividends and, in an
extreme case, our ability to pay our debt service obligations. If this shortfall occurs rapidly and with little or no
notice, it could limit our ability to address the shortfall on a timely basis.
We intend to pursue acquisitions of additional properties and seek other strategic opportunities, which may result
in the use of a significant amount of management resources or significant costs, and we may not fully realize the
potential benefits of such transactions.
We intend to pursue acquisitions of additional properties and seek acquisitions and other strategic opportunities.
Accordingly, we currently are, and expect in the future to be, engaged in evaluating potential transactions and
other strategic alternatives. Although there is uncertainty that any of these discussions will result in definitive
agreements or the completion of any transaction, we may devote a significant amount of our management resources
to such a transaction, which could negatively impact our operations. We may incur significant costs in connection
with seeking acquisitions or other strategic opportunities regardless of whether the transaction is completed. In the
event that we consummate an acquisition or strategic alternative in the future, there is no assurance that we would
fully realize the potential benefits of such a transaction. Integration may be difficult and unpredictable, and
acquisition-related integration costs, including certain non-recurring charges, could materially and adversely affect
our results of operations. Moreover, integrating assets and businesses may significantly burden management and
internal resources, including the potential loss or unavailability of key personnel. If we fail to successfully integrate
the assets and businesses we acquire, we may not fully realize the potential benefits we expect, and our operating
results could be adversely affected.
We are dependent on the communications industry and may be susceptible to the risks associated with it, which
could materially adversely affect our business, financial position or results of operations.
As the owner, lessor and provider of communications services and distribution systems serving the communications
industry, we are impacted by the risks associated with the communications industry. Therefore, our success is to
some degree dependent on the communications industry, which could be adversely affected by economic conditions
in general, changes in consumer trends and preferences, changes in communications technology designed to enhance
the efficiency of communications distribution systems (including lit fiber networks and wireless equipment), and
other factors over which we and our tenants have no control. As we are subject to risks inherent in substantial
investments in a single industry, a decrease in the communications business or development and implementation of
any such new technologies would likely have an adverse effect on our revenues.
17
Our business is subject to government regulations and changes in current or future laws or regulations could
restrict our ability to operate our business in the manner currently contemplated.
Our business, and that of our tenants, is subject to federal, state and local regulation. In certain jurisdictions these
regulations could be applied or enforced retroactively. Local zoning authorities and community organizations are
often opposed to construction in their communities and these regulations can delay, prevent or increase the cost of
new distribution system construction and modifications, thereby limiting our ability to respond to customer demands
and requirements. Existing regulatory policies may materially and adversely affect the associated timing or cost of
such projects and additional regulations may be adopted which increase delays or result in additional costs to us, or
that prevent such projects in certain locations. These factors could materially and adversely affect our business,
results of operations or financial condition. For more information regarding the regulations we are subject to,
please see the section entitled “Business – Government Regulation, Licensing and Enforcement.”
We have identified a material weakness in our internal control over financial reporting which could, if not
remediated, result in material misstatements in our financial statements.
As further described in Item 9A of this Annual Report, in the course of completing our assessment of internal
control over financial reporting as of December 31, 2020, management identified a material weakness in our internal
control over financial reporting related to controls over the annual goodwill impairment assessment, specifically, the
control activities over the determination of the carrying value to be used in the assessment of goodwill impairment.
A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting,
such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements
would not be prevented or detected on a timely basis. As a result, management has concluded that, because of this
material weakness, our internal control over financial reporting and our disclosure controls and procedures were not
effective as of December 31, 2020. If we fail to complete the remediation of this material weakness, or after having
remediated such material weakness, thereafter fail to maintain the effectiveness of our internal control over financial
reporting or our disclosure controls and procedures, we could be subjected to regulatory scrutiny, civil or criminal
penalties or shareholder litigation, the defense of any of which could cause the diversion of management’s attention
and resources, we could incur significant legal and other expenses, and we could be required to pay damages to
settle such actions if any such actions were not resolved in our favor. Continued or future failure to
maintain effective internal control over financial reporting could also result in financial statements that do not
accurately reflect our financial condition or results of operations. There can be no assurance that we will not
conclude in the future that this material weakness continues to exist or that we will not identify any significant
deficiencies or other material weaknesses that will impair our ability to report our financial condition and results of
operations accurately or on a timely basis.
Any further impairment of our goodwill would negatively impact our financial condition and operating results.
Goodwill represents the excess of cost over the fair value of net assets acquired in business combinations.
Impairment may result from significant changes in the manner of use of the acquired assets, negative industry or
economic trends and/or any changes in key assumptions regarding our fair value. In 2020, the COVID-19 pandemic
and the precautionary measures instituted by governments and businesses to mitigate its spread, including travel
restrictions and “shelter-in-place orders,” have contributed to a significant financial market volatility and a general
slowdown of the global economy. The extent to which the fair value of net assets acquired in business combinations
is ultimately impacted will depend on numerous evolving factors that are presently uncertain and which we may not
be able to predict. Although we assess potential impairment of our goodwill on an annual basis, the impact of the
COVID-19 pandemic may cause us to perform an interim analysis of our goodwill and cause us to report an
impairment charge in the future, which could have a significant adverse impact on our reported earnings. At
December 31, 2020, we had $601.9 million of goodwill on our consolidated balance sheet after recognizing a $71
million goodwill impairment charge for the Fiber Infrastructure reporting unit during the fourth quarter of 2020. For
a discussion of our goodwill impairment testing, see “Note 3. Summary of Significant Accounting Policies-
Goodwill” in the notes to the Condensed Consolidated Financial Statements set forth in Part II, Item 8 and “Critical
Accounting Policies-Evaluation of Goodwill Impairment” in Part II, Item 7A-Management’s Discussion and
Analysis of Financial Condition and Results of Operations of this Annual Report on Form 10-K.
18
We or our tenants may experience uninsured or underinsured losses, which could result in a significant loss of
the capital we have invested in a property, decrease anticipated future revenues or cause us to incur
unanticipated expenses.
The Windstream Leases require, and we expect that additional lease agreements that we enter into will require, that
the tenant maintain comprehensive insurance and hazard insurance or self-insure its insurance obligations. However,
there are certain types of losses, generally of a catastrophic nature, such as earthquakes, hurricanes and floods that
may be uninsurable or not economically insurable. Insurance coverage may not be sufficient to pay the full current
market value or current replacement cost of a loss. Inflation, changes in ordinances, environmental considerations,
and other factors also might make it infeasible to use insurance proceeds to replace the property after such property
has been damaged or destroyed. Under such circumstances, the insurance proceeds received might not be adequate
to restore the economic position with respect to such property.
In addition, even if damage to our properties is covered by insurance, a disruption of business caused by a casualty
event may result in loss of revenue for our tenants or us. Any business interruption insurance may not fully
compensate them or us for such loss of revenue. If one of our tenants experiences such a loss, it may be unable to
satisfy its payment obligations to us under its lease with us.
We rely on information technology in our operations, and any material failure, inadequacy, interruption or
security failure of that technology could harm our business.
We rely on information technology networks and systems, including the Internet, to process, transmit and store
electronic information and to manage or support a variety of our business processes, including financial transactions
and maintenance of records. We rely on commercially available systems, software, tools and monitoring to provide
security for processing, transmitting and storing confidential information. Although we have taken steps to protect
the security of the data maintained in our information systems, it is possible that our security measures will not be
able to prevent the systems’ improper functioning, or the improper disclosure of information in the event of cyber-
attacks. Physical or electronic break-ins, computer viruses, attacks by hackers and similar security breaches, can
create system disruptions, shutdowns or unauthorized disclosure of confidential information. Any failure to maintain
proper function, security and availability of our information systems could interrupt our operations, damage our
reputation, subject us to liability claims or regulatory penalties and could materially and adversely affect us.
Additionally, due to the ongoing COVID-19 pandemic, large numbers of our employees are working remotely from
their homes, which could have the effect of exacerbating any of the foregoing risks. While we have taken steps to
ensure the security of our data and to prevent security breaches, many of these measures are being deployed for the
first time on a widespread and sustained basis, and there is no guarantee the data security and privacy safeguards we
have put in place will be completely effective or that we will not encounter some of the common risks associated
with employees accessing Company data and systems remotely. As a result, we may be required to expend
significant capital and other resources to protect against security breaches or to alleviate problems caused by
security breaches.
Any failure of Uniti Fibers physical infrastructure or services could lead to significant costs and disruptions.
Uniti Fiber’s business depends on providing customers with highly reliable service. The services provided are
subject to failure resulting from numerous factors, including human error, power loss, improper maintenance,
physical or electronic security breaches, fire, earthquake, hurricane, flood and other natural disasters, water damage,
the effect of war, terrorism and any related conflicts or similar events worldwide, and sabotage and vandalism.
Problems within Uniti Fiber’s networks or facilities, whether within our control or the control of third-party
providers, could result in service interruptions or equipment damage. We may not be able to efficiently upgrade or
change Uniti Fiber’s networks or facilities to meet new demands without incurring significant costs that we may not
be able to pass on to customers. Given the service guarantees that may be included in Uniti Fiber’s agreements with
customers, such disruptions could result in customer credits; however, we cannot assume that customers will accept
these credits as compensation in the future, and we may face additional liability or loss of customers.
19
Risks Related to the Status of Uniti as a REIT
If we do not qualify as a REIT, or fail to remain qualified as a REIT, we will be subject to U.S. federal income
tax as a regular corporation and could face a substantial tax liability, which could reduce the amount of cash
available for distribution to our stockholders and to service debt.
We operate as a REIT for U.S. federal income tax purposes, as does one of our principal operating subsidiaries. Our
qualification as a REIT will depend on our satisfaction of certain highly technical and complex asset, income,
organizational, distribution, stockholder ownership and other requirements, including at the level of our subsidiary
REIT, on a continuing basis. Our ability to satisfy the asset tests depends upon our analysis of the characterization
and fair market values of our assets, some of which are not susceptible to a precise determination and for which we
may not obtain independent appraisals.
If we or our subsidiary REIT were to fail to qualify as a REIT in any taxable year, unless certain relief provisions
apply, we would be subject to U.S. federal income tax on all of our taxable income at regular corporate rates and
dividends paid to our stockholders would not be deductible by us in computing our taxable income. As a result, we
would no longer be required to pay dividends in order to qualify to be taxed as a REIT, and we could decide to
reduce the amount of dividends we pay to our stockholders. Any resulting corporate liability could be substantial
and could reduce the amount of cash available for distribution to our stockholders, which in turn could have an
adverse impact on the value of our common stock and to service debt. Unless we were entitled to relief under certain
Code provisions, we also would be disqualified from re-electing to be taxed as a REIT for the four taxable years
following the year in which we failed to qualify as a REIT.
In addition, our 7.875% senior secured notes due 2025 presently limit our ability to make cash distributions to our
shareholders in amounts exceeding 90% of our good faith estimate, as of the date on which the first quarterly
dividend for the relevant year is declared, of our REIT taxable income for such year, determined without regard to
the dividends paid deduction and excluding any capital gains, until we reduce our net leverage ratio. As a result, we
may be required to record a provision in our Consolidated Financial Statements for U.S. federal income taxes related
to the activities of the REIT and its passthrough subsidiaries for any undistributed income. We are subject to the
statutory requirements of the locations in which we conduct business, and state and local income taxes are accrued
as deemed required in the best judgment of management based on analysis and interpretation of respective tax laws.
Legislative or other actions affecting REITs could have a negative effect on us.
The rules dealing with federal income taxation are constantly under review by persons involved in the legislative
process and by the IRS and the U.S. Department of the Treasury (“Treasury”). Changes to the tax laws affecting
REITs or TRSs, which may have retroactive application, could adversely affect our stockholders or us. We cannot
predict how changes in the tax laws might affect our stockholders or us. Accordingly, we cannot provide assurance
that new legislation, Treasury regulations, administrative interpretations or court decisions will not significantly
affect our ability to remain qualified as a REIT, the federal income tax consequences of such qualification, the
determination of the amount of REIT taxable income or the amount of tax paid by our taxable REIT subsidiaries
(“TRSs”).
We could fail to qualify as a REIT if income we receive from lease transactions, such as income from
Windstream pursuant to the Windstream Leases, is not treated as qualifying income.
Under applicable provisions of the Code, we will not be treated as a REIT unless we satisfy various requirements,
including requirements relating to the sources of our gross income. Rents received or accrued by us from
Windstream or other lessees will not be treated as qualifying rent for purposes of these requirements if the relevant
lease is not respected as a “true lease” for U.S. federal income tax purposes and is instead treated as a service
contract, joint venture or some other type of arrangement. If any of our leases, including the Windstream Leases, is
not respected as a true lease for U.S. federal income tax purposes, we may fail to qualify as a REIT.
20
REIT distribution requirements could adversely affect our ability to execute our business plan.
We generally must qualify as a REIT and distribute annually at least 90% of our REIT taxable income, determined
without regard to the dividends paid deduction and excluding any net capital gains, for the U.S. federal corporate
income tax not to apply to earnings that we distribute (assuming that certain other requirements are also satisfied).
To the extent that we satisfy this distribution requirement and qualify for taxation as a REIT but distribute less than
100% of our REIT taxable income, determined without regard to the dividends paid deduction and including any net
capital gains, we will be subject to U.S. federal corporate income tax on our undistributed net taxable income. In
addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we distribute to our
stockholders in a calendar year is less than a minimum amount specified for REITs under U.S. federal income tax
laws. The same rules apply to our REIT subsidiary. We currently intend to make distributions to our stockholders,
and to cause our REIT subsidiary to make distributions, to comply with the REIT requirements of the Code.
Our FFO is currently generated largely by rents paid under the Windstream Leases. From time to time, we may
generate taxable income greater than our cash flow as a result of differences in timing between the recognition of
taxable income and the actual receipt of cash or the effect of nondeductible capital expenditures, the creation of
reserves or required debt or amortization payments. If we do not have other funds available in these situations, we
could be required to borrow funds on unfavorable terms, sell assets at disadvantageous prices or distribute amounts
that would otherwise be invested in future acquisitions in order to make distributions sufficient to enable us to pay
out enough of our taxable income to satisfy the REIT distribution requirement and to avoid corporate income tax
and the 4% excise tax in a particular year. These alternatives could increase our costs or reduce our equity. Thus,
compliance with the REIT requirements may hinder our ability to grow, which could adversely affect the value of
our common stock and decrease cash available to service debt.
A deterioration in Windstreams financial condition could adversely affect our ability to continue to qualify as a
REIT.
In addition to satisfying the distribution requirement described above in the immediately preceding risk factor, we
and our subsidiary REIT must each satisfy a number of other requirements in order to qualify as a REIT. A
deterioration in Windstream’s financial condition could adversely affect our ability to satisfy several of these
requirements and thus our ability to continue to qualify as a REIT.
For example, in order to qualify as a REIT for any year, at the end of each calendar quarter, at least 75% of the value
of our assets must consist of cash, cash items, government securities and “real estate assets” (as defined in the
Code), and no more than 20% of the value of our total assets can be represented by securities (other than qualified
real estate assets) of one or more TRSs. If we fail to comply with either of these requirements at the end of any
calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for
certain statutory relief provisions to avoid losing our REIT qualification. These same rules apply to our REIT
subsidiary. Our ability to satisfy these requirements depends in substantial part on the value of the assets that are the
subject of the Windstream Leases with Windstream, and any diminution in the value of such assets, including as a
result of any diminution in the implied value of the Windstream Leases as a result of changes in the financial
condition or creditworthiness of Windstream or Windstream’s inability or unwillingness to meet its rent and other
obligations under the Windstream Leases, could adversely affect our ability to satisfy these requirements at the end
of any calendar quarter, and there can be no assurance that we would be able to timely correct any such failure or
otherwise qualify for any statutory relief provision. See “—Risks Related to Our Business—We are dependent on
Windstream Holdings to make payments to us under the Windstream Leases, and an event that materially and
adversely affects Windstream’s business, financial position or results of operations could materially and adversely
affect our business, financial position or results of operations.” In addition, under applicable provisions of the Code,
we will not be treated as a REIT for any year unless we satisfy various requirements, including requirements relating
to the sources of our gross income in such year. These same rules apply to our REIT subsidiary. Our ability to
satisfy these gross income tests depends in substantial part on our receipt of rents paid under the Windstream Leases.
Windstream’s inability or unwillingness to meet its rent and other obligations under the Windstream Leases, or any
suspension, delay or other reduction in the amount of rent that we receive under the Windstream Leases could
adversely affect our ability to qualify as a REIT.
21
Even if we remain qualified as a REIT, we may face other tax liabilities that reduce our cash flow.
Even if we remain qualified for taxation as a REIT, we may be subject to certain U.S. federal, state and local taxes
on our income and assets, including taxes on any undistributed income and state or local income, property and
transfer taxes. For example, we hold some of our assets and conduct certain of our activities through a TRS that is
subject to U.S. federal, state and local corporate-level income taxes as a regular C corporation. In addition, we may
incur a 100% excise tax on transactions with a TRS if they are not conducted on an arm’s-length basis. Any of these
taxes could decrease cash available for distribution to our stockholders and servicing our debt.
Complying with the REIT requirements may cause us to forego otherwise attractive acquisition opportunities.
To qualify as a REIT for U.S. federal income tax purposes, we must ensure that, at the end of each calendar quarter,
at least 75% of the value of our assets consists of cash, cash items, government securities and “real estate assets” (as
defined in the Code). The remainder of our investments (other than government securities, qualified real estate
assets and securities issued by a TRS) generally cannot include more than 10% of the outstanding voting securities
of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in
general, no more than 5% of the value of our total assets (other than government securities, qualified real estate
assets and securities issued by a TRS) can consist of the securities of any one issuer, no more than 20% of the value
of our total assets can be represented by securities (other than qualified real estate assets) of one or more TRSs, and
no more than 25% of the value of our total assets can be represented by nonqualified publicly offered REIT
debt instruments (as defined in the Code). If we fail to comply with these requirements at the end of any calendar
quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain
statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result
of such asset limitations, we may be required to forego otherwise attractive investments. These actions could have
the effect of reducing our income and amounts available for distribution to our stockholders and servicing our debt.
Risks Related to Our Common Stock
We cannot guarantee our ability to pay dividends in the future, and we could elect to pay dividends substantially
in the form of additional shares of our common stock.
To qualify as a REIT, our annual dividend must not be less than 90% of our REIT taxable income on an annual
basis, determined without regard to the dividends paid deduction and excluding any net capital gains. Our ability to
pay dividends may be adversely affected by a number of factors, including the risk factors herein. Dividends will be
authorized by our board of directors and declared by us based upon a number of factors, including actual results of
operations, restrictions under Maryland law or applicable debt covenants, our financial condition, our taxable
income, the annual distribution requirements under the REIT provisions of the Code, our operating expenses and
other factors our directors deem relevant. We cannot ensure that we will achieve investment results that will allow
us to make a specified level of cash dividends or year-to-year increases in cash dividends in the future. Accordingly,
because we are required to make distributions in certain amounts to our shareholders in order to maintain our REIT
status and avoid incurring entity-level income and excise tax, we may elect to pay one or more dividends to our
shareholders substantially in the form of additional shares of common stock. If we do so, the common stock that we
distribute would be taxable dividend income to our shareholders, in whole or in part, based on the fair market value
of our common stock at the time the dividend is paid.
Furthermore, while we are required to pay dividends in order to maintain our REIT status (as described above under
“Risks Related to the Status of Uniti as a REIT—REIT distribution requirements could adversely affect our ability
to execute our business plan”), we may elect not to maintain our REIT status, in which case we would no longer be
required to pay such dividends. Moreover, even if we do maintain our REIT status, after completing various
procedural steps, we may elect to comply with the applicable distribution requirements by distributing, under certain
circumstances, shares of our common stock in lieu of cash, which may result in holders of our common stock
incurring tax liability without the receipt of a corresponding amount of cash. If we elect not to maintain our REIT
status or to satisfy any required distributions in shares of common stock in lieu of cash, such action could negatively
affect our business and financial condition as well as the market price of our common stock. No assurance can be
given that we will pay any dividends on shares of our common stock in the future.
22
The market price and trading volume of our common stock may fluctuate widely.
We cannot predict the prices at which our common stock may trade. The market price of our common stock has
fluctuated significantly since February 15, 2019 and may continue to fluctuate significantly, depending upon many
factors, some of which may be beyond our control. In addition, under the settlement with Windstream, we issued
38,633,470 shares, equal to 19.99% of our currently outstanding common stock, to certain investors at a purchase
price of $6.33 per share. These investors will be able to resell their shares into the market over time, which could
lead to volatility and lower declines in the price of our common stock.
Our charter restricts the ownership and transfer of our outstanding stock, which may have the effect of delaying,
deferring or preventing a transaction or change of control of our company.
In order for us to qualify as a REIT, not more than 50% in value of our outstanding shares of stock may be owned,
beneficially or constructively, by five or fewer individuals at any time during the last half of each taxable year after
the first year for which we elect to be taxed and qualify as a REIT. Additionally, at least 100 persons must
beneficially own our stock during at least 335 days of a taxable year (other than the first taxable year for which we
elect to be taxed and qualify as a REIT). Our charter, with certain exceptions, authorizes our board of directors to
take such actions as are necessary or advisable to preserve our qualification as a REIT. Our charter also provides
that, unless exempted by the board of directors, no person may own more than 9.8% in value or in number,
whichever is more restrictive, of the outstanding shares of our common stock or more than 9.8% in value of the
aggregate of the outstanding shares of all classes and series of our stock. The constructive ownership rules are
complex and may cause shares of stock owned directly or constructively by a group of related individuals or entities
to be constructively owned by one individual or entity. These ownership limits could delay or prevent a transaction
or a change in control of us that might involve a premium price for shares of our stock or otherwise be in the best
interests of our stockholders.
Item 1B. Unresolved Staff Comments.
None
23
Item 2. Properties.
Uniti and its subsidiaries own or lease over 123,000 fiber network route miles, representing approximately
6.9 million fiber strand miles, approximately 230,000 route miles of copper cable lines, wireless communication
towers, central office land and buildings across 44 states and beneficial rights to permits, pole agreements and
easements.
Leasing Segment
Uniti Leasing’s network properties include its fiber route miles and copper route miles. Below is a geographic
distribution summary as of December 31, 2020:
Location
GA
TX
KY
IA
NC
OH
AR
IL
FL
IN
WI
MI
OK
CA
MO
NY
PA
TN
NM
AL
VA
Other(1)
Total
(1) Includes 21 states.
Fiber Route Miles
10,800
10,800
8,900
8,600
5,200
4,100
3,900
3,600
3,000
2,500
2,100
2,000
2,000
1,800
1,600
1,400
1,400
1,300
1,200
1,100
1,100
7,400
85,800
Copper Route
Miles
45,000
39,000
32,100
31,500
18,100
10,400
13,400
—
8,300
—
—
—
12,000
—
10,800
—
—
—
5,100
2,400
—
1,700
229,800
Total Route Miles
55,800
49,800
41,000
40,100
23,300
14,500
17,300
3,600
11,300
2,500
2,100
2,000
14,000
1,800
12,400
1,400
1,400
1,300
6,300
3,500
1,100
9,100
315,600
24
Fiber Segment
Uniti Fiber’s network properties include its fiber route miles and wireless communications towers. Below is a
geographic distribution summary as of December 31, 2020:
Location
FL
GA
LA
AL
PA
MS
VA
NY
TX
NJ
Other(1)
Total
(1) Includes 10 states.
Location
LA
NM
TX
AR
NE
Other(1)
Total
(1) Includes 10 states.
Fiber Route Miles
6,900
6,000
5,900
4,500
4,500
2,900
1,600
1,500
1,300
800
1,600
37,500
Towers
105
19
18
13
10
20
185
Item 3. Legal Proceedings.
A description of legal proceedings can be found in Note 17 - Commitments and Contingencies to our Consolidated
Financial Statements, included in this report at Part II, Item 8-Financial Statements and Supplementary Data, and is
incorporated by reference into this Item 3.
Item 4. Mine Safety Disclosures.
None
25
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
Market Information
Our common stock is traded on the NASDAQ Global Select Market under the symbol “UNIT.”
Holders
As of February 26, 2021, the closing price of our common stock was $11.91 per share as reported on the NASDAQ
Global Select Market. As of February 26, 2021, we had 232,897,213 outstanding shares of common stock, and there
were approximately 18,932 registered holders of record of Uniti’s common stock. A substantially greater number of
holders of Uniti common stock are “street name” or beneficial holders, whose shares of record are held by banks,
brokers, and other financial institutions.
Dividends (Distributions)
Distributions with respect to our common stock are characterized for federal income tax purposes as taxable
ordinary dividends, capital gains dividends, non-dividend distributions or a combination thereof. It has been our
policy to declare dividends to common shareholders so as to comply with the provisions of the Internal Revenue
Code governing REITs.
Any dividends must be declared by our Board of Directors, which will take into account various factors including
our current and anticipated operating results, our financial position, REIT requirements, conditions prevailing in the
market, restrictions in our debt documents and additional factors they deem appropriate. Dividend payments are not
guaranteed and our Board of Directors may decide, in its absolute discretion, at any time and for any reason, not to
pay dividends or to change the amount paid as dividends. In addition, our 7.875% senior secured notes due 2025
presently limit our ability to make cash distributions to our shareholders in amounts exceeding 90% of our good
faith estimate, as of the date on which the first quarterly dividend for the relevant year is declared, of our REIT
taxable income for such year, determined without regard to the dividends paid deduction and excluding any capital
gains, until we reduce our net leverage ratio.
As a result, we may be required to record a provision in our Consolidated Financial Statements for U.S. federal
income taxes related to the activities of the REIT and its passthrough subsidiaries for any undistributed income. We
are subject to the statutory requirements of the locations in which we conduct business, and state and local income
taxes are accrued as deemed required in the best judgment of management based on analysis and interpretation of
respective tax laws.
Stock Performance
The following graph shows a comparison from December 31, 2015 through December 31, 2020 on the NASDAQ
Global Select Market of the cumulative total return for our common stock, the Standard & Poor's 400 Stock Index
(S&P 400 Index), and the MSCI US REIT Index. The graph assumes that $100 was invested at the market open on
December 31, 2015 and that all dividends were reinvested in the common stock of Uniti, the S&P 400 Index and the
MSCI US REIT Index. The stock price performance of the following graph is not necessarily indicative of future
stock price performance.
26
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(cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:21)(cid:19)(cid:21)(cid:19)
(cid:21)(cid:19)(cid:19)(cid:17)(cid:19)(cid:19)
(cid:20)(cid:27)(cid:19)(cid:17)(cid:19)(cid:19)
(cid:20)(cid:25)(cid:19)(cid:17)(cid:19)(cid:19)
(cid:20)(cid:23)(cid:19)(cid:17)(cid:19)(cid:19)
(cid:20)(cid:21)(cid:19)(cid:17)(cid:19)(cid:19)
(cid:20)(cid:19)(cid:19)(cid:17)(cid:19)(cid:19)
(cid:27)(cid:19)(cid:17)(cid:19)(cid:19)
(cid:25)(cid:19)(cid:17)(cid:19)(cid:19)
(cid:23)(cid:19)(cid:17)(cid:19)(cid:19)
(cid:21)(cid:19)(cid:17)(cid:19)(cid:19)
(cid:19)(cid:17)(cid:19)(cid:19)
(cid:20)(cid:21)(cid:18)(cid:22)(cid:20)(cid:18)(cid:21)(cid:19)(cid:20)(cid:24)
(cid:20)(cid:21)(cid:18)(cid:22)(cid:20)(cid:18)(cid:21)(cid:19)(cid:20)(cid:25)
(cid:20)(cid:21)(cid:18)(cid:22)(cid:20)(cid:18)(cid:21)(cid:19)(cid:20)(cid:26)
(cid:20)(cid:21)(cid:18)(cid:22)(cid:20)(cid:18)(cid:21)(cid:19)(cid:20)(cid:27)
(cid:20)(cid:21)(cid:18)(cid:22)(cid:20)(cid:18)(cid:21)(cid:19)(cid:20)(cid:28)
(cid:20)(cid:21)(cid:18)(cid:22)(cid:20)(cid:18)(cid:21)(cid:19)(cid:21)(cid:19)
(cid:56)(cid:81)(cid:76)(cid:87)(cid:76)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)(cid:44)(cid:81)(cid:70)(cid:17)
(cid:54)(cid:9)(cid:51)(cid:3)(cid:23)(cid:19)(cid:19)(cid:3)(cid:44)(cid:81)(cid:71)(cid:72)(cid:91)(cid:3)(cid:16)(cid:3)(cid:55)(cid:82)(cid:87)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:87)(cid:88)(cid:85)(cid:81)
(cid:48)(cid:54)(cid:38)(cid:44)(cid:3)(cid:56)(cid:54)(cid:3)(cid:53)(cid:40)(cid:44)(cid:55)(cid:3)(cid:44)(cid:49)(cid:39)(cid:40)(cid:59)
Cumulative Total Stockholder Returns
Based on Investment of $100.00 Beginning on December 31, 2015
Uniti Group Inc.
S&P 400 Index
MSCI US REIT Index
Issuer Purchases of Equity Securities
12/31/2015 12/31/2016 12/31/2017 12/31/2018 12/31/2019 12/31/2020
99.14
$
179.00
126.88
64.64 $
157.49
137.27
117.43 $
140.35
114.19
117.42 $
124.80
109.04
148.84 $
120.74
108.62
100.00 $
100.00
100.00
The table below provides information regarding shares withheld from Uniti employees to satisfy minimum statutory
tax withholding obligations arising from the vesting of restricted stock granted under the Uniti Group Inc. 2015
Equity Incentive Plan. The shares of common stock withheld to satisfy tax withholding obligations may be
deemed purchases of such shares required to be disclosed pursuant to this Item 5.
Period
October 1, 2020 to October 31, 2020
NNovember 1, 2020 to November 30, 2020
December 1, 2020 to December 31, 2020
Total
Total
Number of
Shares
Purchased
Average Price
Paid per
Share(1)
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans or
Programs
3,427 $
—
—
3,427 $
10.58
-
—
10.58
—
—
—
—
—
—
—
—
27
(1) The average price paid per share is the weighted-average of the fair market prices at which we calculated the
number of shares withheld to cover tax withholdings for the employees.
Item 6. Selected Financial Data.
On November 19, 2020, the SEC adopted certain amendments to Regulation S-K, including the elimination of Item
301 thereof. The final rules became effective on February 10, 2021. The Company has chosen to adopt the recent
amendments and omit the disclosure formerly required by Item 301 of Regulation S-K.
28
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following management’s discussion and analysis of financial condition and results of operations describes the
principal factors affecting the results of our operations, financial condition, and changes in financial condition, as
well as our critical accounting estimates.
This section generally discusses 2020 and 2019 items and year-to-year comparisons between 2020 and 2019.
Discussions of 2018 items and year-to-year comparisons between 2019 and 2018 that are not included in this Annual
Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2019 filed
with the Securities and Exchange Commission on March 12, 2020.
Overview
Company Description
Uniti Group Inc. (the “Company”, “Uniti”, “we”, “us” or “our”) is an independent, internally managed real estate
investment trust (“REIT”) engaged in the acquisition and construction of mission critical infrastructure in the
communications industry. We are principally focused on acquiring and constructing fiber optic, copper and coaxial
broadband networks and data centers.
On April 24, 2015, we were separated and spun-off (the “Spin-Off”) from Windstream Holdings, Inc. (“Windstream
Holdings” and together with Windstream Holdings II, LLC, its successor in interest, and its subsidiaries,
“Windstream”) pursuant to which Windstream contributed certain telecommunications network assets, including
fiber and copper networks and other real estate (the “Distribution Systems”) and a small consumer competitive local
exchange carrier (“CLEC”) business (the “Consumer CLEC Business”) to Uniti and Uniti issued common stock and
indebtedness and paid cash obtained from borrowings under Uniti’s senior credit facilities to Windstream. In
connection with the Spin-Off, we entered into a long-term exclusive triple-net lease (the “Master Lease”) with
Windstream, pursuant to which a substantial portion of our real property is leased to Windstream and from which a
substantial portion of our leasing revenues are currently derived. In connection with Windstream’s recent
emergence from bankruptcy and the implementation of the Settlement (as defined below) with Windstream, Uniti
and Windstream bifurcated the Master Lease and entered into two structurally similar master leases (collectively, the
“Windstream Leases”), which amended and restated the Master Lease in its entirety. (See “Significant Business
Developments” below).
Uniti operates as a REIT for U.S. federal income tax purposes. As a REIT, the Company is generally not subject to
U.S. federal income taxes on income generated by its REIT operations, which includes income derived from the
Windstream Leases. We have elected to treat the subsidiaries through which we operate our fiber business, Uniti
Fiber, certain aspects of our former towers business, and Talk America Services, LLC, which operated the
Consumer CLEC Business (“Talk America”), as TRSs. TRSs enable us to engage in activities that result in income
that does not constitute qualifying income for a REIT. Our TRSs are subject to U.S. federal, state and local corporate
income taxes.
The Company operates through a customary up-REIT structure, pursuant to which we hold substantially all of our
assets through a partnership, Uniti Group LP, a Delaware limited partnership (the “Operating Partnership”), that we
control as general partner. This structure is intended to facilitate future acquisition opportunities by providing the
Company with the ability to use common units of the Operating Partnership as a tax-efficient acquisition currency.
As of December 31, 2020, we are the sole general partner of the Operating Partnership and own approximately
98.5% of the partnership interests in the Operating Partnership. In addition, beginning on December 31, 2019, we
undertook a series of transactions, including the issuance by one of our subsidiaries of convertible preferred stock to
third parties with an aggregate liquidation value of $125,000, to permit us to hold certain of our assets indirectly
through one of our subsidiaries taxed as a REIT, which is also expected to facilitate future acquisition opportunities.
We aim to grow and diversify our portfolio and tenant base by pursuing a range of transaction structures with
communication service providers, including (i) sale-leaseback transactions, whereby we acquire existing
29
infrastructure assets from third parties, including communication service providers, and lease them back on a long-
term triple-net basis; (ii) leasing of dark fiber and selling of lit services on our existing fiber network assets that we
either constructed or acquired; (iii) whole company acquisitions, which may include the use of one or more TRSs
that are permitted under the tax laws to acquire and operate non-REIT businesses and assets subject to certain
limitations; (iv) capital investment financing, whereby we offer communication service providers a cost efficient
method of raising funds for discrete capital investments to upgrade or expand their network; and (v) mergers and
acquisitions financing, whereby we facilitate mergers and acquisition transactions as a capital partner, including
through operating company-property company (“OpCo-PropCo”) structures.
We have historically managed our operations as the four reportable business segments listed below (in addition to
our corporate operations), but due to the sale of our towers business and wind down of the Consumer CLEC
Business, starting in 2021, we will manage our operations focused on our two primary businesses, Leasing and Fiber
Infrastructure:
Leasing Segment: Represents the results from our leasing business, Uniti Leasing, which is engaged in the
acquisition of mission-critical communications assets and leasing them to anchor customers on either an exclusive or
shared-tenant basis. Uniti Leasing is a component of our REIT operations.
Fiber Infrastructure Segment: Represents the operations of our fiber business, Uniti Fiber, which is a leading
provider of infrastructure solutions, including cell site backhaul and dark fiber, to the telecommunications industry.
Towers Segment: Represents the operations of our former towers business, Uniti Towers, through which we acquired
and constructed tower and tower-related real estate and leased space on communications towers to wireless service
providers and other tenants in the United States. Starting in 2019, the Company completed a series of transactions to
largely divest of its towers business: on April 2, 2019, May 23, 2019 and June 1, 2020, the Company completed the
sales of its Latin American business, substantially all of its U.S. ground lease business, and its U.S. tower business
(see Significant Business DevelopmentsSale of U.S. Towers Business below), respectively. Portions of our
former towers business were a component of our REIT operations, while the remainder were owned and operated by
our TRSs.
Consumer CLEC Segment: Represents the operations of Talk America through which we operated the Consumer
CLEC Business that, prior to the Spin-Off, was reported as an integrated operation within Windstream. Talk
America provided local telephone, high-speed internet and long-distance services to customers in the eastern and
central United States. As of the end of the second quarter of 2020, we have substantially completed a wind down of
our Consumer CLEC business.
Corporate Operations: Represents our corporate office and shared service functions. Certain costs and expenses,
primarily related to headcount, information technology systems, insurance, professional fees and similar charges,
that are directly attributable to operations of our business segments are allocated to the respective segments.
We evaluate the performance of each segment based on Adjusted EBITDA, which is a segment performance
measure we define as net income determined in accordance with GAAP, before interest expense, provision for
income taxes, depreciation and amortization, 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, costs related to the settlement with Windstream, 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 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.
For more information on Adjusted EBITDA, see “Non-GAAP Financial Measures.” Detailed information about our
segments can be found in Note 16 to our consolidated financial statements contained in Part II, Item 8 Financial
Statements and Supplementary Data.
30
Significant Business Developments
Windstream Emergence and Settlement. On July 25, 2019, in connection with Windstream’s bankruptcy,
Windstream Holdings and Windstream Services, LLC (“Windstream Services”) filed a complaint with the
Bankruptcy Court in an adversary proceeding against Uniti and certain of its affiliates, alleging, among other things,
that the Master Lease should be recharacterized as a financing arrangement, that certain rent payments and TCIs
made by Windstream under the Master Lease constitute constructive fraudulent transfers, that the Master Lease is a
lease of personal property and that Uniti breached certain of its obligations under the Master Lease.
On September 21, 2020, Windstream emerged from bankruptcy. In connection with Windstream’s emergence from
bankruptcy, Uniti entered into several agreements and consummated the transactions, each as described below, to
implement its settlement of the above-mentioned litigation (the “Settlement”) with Windstream pursuant to the
settlement agreement (the “Settlement Agreement”) dated as of May 12, 2020 between Uniti and Windstream. The
Settlement resolves any and all claims and causes of action that have been or may be asserted in the future by Uniti
and Windstream regarding the Spin-off of Uniti and related sale-leaseback transaction, including all litigation
brought against Uniti by Windstream and certain of its creditors during Windstream’s bankruptcy proceedings. The
release from claims applies to any Windstream successor and is binding going forward, including in any future
Windstream bankruptcy. We estimated fair value of the litigation settlement to be $650.0 million and we recorded a
corresponding charge in the second quarter of 2020.
Under the Settlement Agreement, in addition to completing the transactions and executing the Windstream Leases
described below, Uniti is required to make $490.1 million in cash payments to Windstream in equal installments
over 20 consecutive quarters beginning October 2020, and Uniti may prepay any installments falling due on or after
the first anniversary of the Settlement’s effective date (discounted at a 9% rate). As of the date of this Annual
Report on Form 10-K, the Company made the first two quarterly payments totaling $49.0 million.
Windstream Leases
On September 18, 2020, in connection with Windstream’s emergence from bankruptcy and the implementation of
the Settlement with Windstream described in Note 17 to our accompanying Consolidated Financial Statements,
Uniti and Windstream bifurcated the Master Lease and entered into two structurally similar master leases that each
expire on April 30, 2030 (collectively, the “Windstream Leases”), which amended and restated the Master Lease in
its entirety. The Windstream Leases consist of (a) a master lease (the “ILEC MLA”) that governs Uniti owned assets
used for Windstream’s incumbent local exchange carrier (“ILEC”) operations and (b) a master lease (the “CLEC
MLA”) that governs Uniti owned assets used for Windstream’s competitive local exchange carrier (“CLEC”)
operations. The aggregate initial annual rent under the Windstream Leases is equal to the annual rent under the
Master Lease previously in effect. The tenants under the ILEC MLA are Windstream Holdings II, LLC
(“Windstream Holdings II,” successor in interest to Windstream Holdings) Windstream Services II, LLC
(“Windstream Services II,” successor in interest to Windstream Services), and certain subsidiaries and/or newly
formed affiliated entities operating Windstream’s ILEC operations and the landlords under the ILEC MLA are the
Uniti entities that own the applicable ILEC assets. Similarly, the tenants under the CLEC MLA are Windstream
Holdings II, Windstream Services II, and certain subsidiaries and/or newly formed affiliated entities operating
Windstream’s CLEC operations, and the landlords under the CLEC MLA are the Uniti entities that own the CLEC
assets. The Windstream Leases contain cross-guarantees and cross-default provisions, which will remain effective as
long as Windstream or an affiliate is the tenant under both of the Windstream Leases and unless and until the
landlords under the ILEC MLA are different from the landlords under the CLEC MLA. The Windstream Leases
permit Uniti to transfer its rights and obligations and otherwise monetize or encumber the Windstream Leases,
together or separately, so long as Uniti does not transfer interests in either Windstream Lease to a Windstream
competitor. In addition, the Windstream Leases impose certain financial restrictions on Windstream if Windstream
fails to maintain certain financial covenants. See Note 5 to our consolidated financial statements contained in Part
II, Item 8 Financial Statements and Supplementary Data.
Stock Purchase Agreements
On September 9, 2020, Uniti entered into stock purchase agreements (each, a “Stock Purchase Agreement”) with
certain first lien creditors of Windstream to replace and codify the terms set forth in the previously-filed binding
31
letters of intent, pursuant to which on September 18, 2020 Uniti sold an aggregate of 38,633,470 shares of Uniti
common stock, par value $0.0001 per share (the “Settlement Common Stock”), at $6.33 per share, which represents
the closing price of Uniti common stock on the date when an agreement in principle of the basic outline of the
Settlement was first reached. Uniti transferred the proceeds from the sale of the Settlement Common Stock to
Windstream as consideration relating to the Asset Purchase Agreement, further described below.
Asset Purchase Agreement
On September 18, 2020, and in furtherance of the Settlement Agreement, Uniti and Windstream closed an asset
purchase agreement (the “Asset Purchase Agreement”), pursuant to which:
(a) Uniti paid to Windstream approximately $284.6 million; and
(b) Windstream granted or transferred to Uniti (i) exclusive rights to use 1.8 million fiber strand miles leased by
Windstream under the CLEC MLA, which fiber strands are either unutilized or utilized under certain dark
fiber indefeasible rights of use (“IRUs”) that were simultaneously transferred to Uniti, (ii) fiber assets (and
underlying rights) consisting of 0.4 million fiber strand miles (covering 4,000 route miles) owned by
Windstream, and (iii) dark fiber IRUs relating to (x) the fiber strand miles granted to Uniti under the CLEC
MLA (and described in clause (i)) and (y) the fiber assets (and underlying rights) for the 0.4 million fiber
strand miles conveyed to Uniti (and described in clause (ii)), which IRUs generated $28.9 million of annual
EBITDA in the aggregate as of closing of the Asset Purchase Agreement.
In addition, upon the transfer of the Windstream-owned fiber assets (described in clause (b)(ii) above), Uniti granted
to Windstream a 20-year IRU for certain strands included in the transferred fiber assets.
Uniti used the proceeds from the sale of Settlement Common Stock as a portion of the consideration paid to
Windstream in connection with the closing of the Asset Purchase Agreement and Settlement described above.
Everstream Solutions LLC Operating Company-Property Company Transaction. On November 9, 2020, the
Company announced that it has entered into an OpCo-PropCo transaction with Everstream Solutions LLC
(“Everstream”). As part of the transaction, Uniti will enter into two 20-year IRU lease agreements with Everstream
on Uniti owned fiber. Concurrently, Uniti has agreed to sell its Uniti Fiber Northeast operations and certain dark
fiber IRU contracts generating approximately $24 million of annualized revenue, which were acquired as part of the
Windstream settlement to Everstream. Total cash consideration, including upfront IRU payments, is approximately
$135 million. In addition to the upfront proceeds, Uniti will receive fees of approximately $3 million annually from
Everstream over the initial 20-year term of the IRU lease agreements, subject to an annual escalator of 2%. The
transaction is subject to regulatory approval and other customary closing conditions and is expected to close in the
second quarter of 2021.
Sale of Midwest Fiber Network. On July 1, 2020, the Company completed the sale of an ownership stake in the
entity that controls the Company’s Midwest fiber network assets (the “Propco”) to Macquarie Infrastructure Partners
(“MIP”) for total cash consideration of approximately $168 million. Uniti retained an investment in
the Propco through an affiliate of MIP and is eligible to receive an additional earnout payment in 2023 of up
to approximately $20.0 million upon the achievement of certain operational milestones.
At-the-Market Common Stock Offering Program. On June 22, 2020, we established an at-the-market common stock
offering program (the “ATM Program”) to sell shares of our common stock, par value $0.0001 per share, having an
aggregate offering price of up to $250 million. This program is intended to provide additional financial flexibility
and an alternative mechanism to access the capital markets at an efficient cost as and when we need financing,
including for acquisitions. During the year ended December 31, 2020, we did not make any sales under the
refreshed ATM Program. This offering supersedes and replaces the $250 million program we commenced on
September 2, 2016, which had approximately $117.1 million available for issuance under such program.
Sale of U.S. Tower Business. On June 1, 2020, the Company completed the sale of its U.S. tower business to
Melody Investment Advisors LP (“Melody”) for total cash consideration of $225.8 million. The Company
32
retained a 10% investment interest in the tower business, having a fair value of $26.0 million, through a newly
formed limited partnership with Melody, and will receive $1.6 million of incremental earn-out payments related to
towers completed in 2020. We recorded a gain of $63.4 million related to this transaction.
Consumer CLEC Business. On April 23, 2019, Windstream provided notice to Uniti of its termination of (i) the
Wholesale Master Services Agreement between Windstream Communications, Inc. and Talk America, (ii) the
Master Services Agreement between Windstream Services and Talk America, and (iii) the Billing and Remittance
Agreement between Windstream Services and CSL National, LP, each dated April 24, 2015 (collectively the
“Agreements”). Under the Agreements, Windstream provided us transport, provisioning, repair and billing and
collection services necessary to operate our Consumer CLEC Business. We currently do not have the infrastructure
necessary to perform these services in the absence of the Agreements. We evaluated the costs of building out the
required infrastructure and have determined that incurring such costs would not be economically
feasible. Furthermore, we have evaluated potential strategic alternatives with respect to the Consumer CLEC
Business, including retaining other vendors to perform the services currently provided under the Agreements, and an
outright sale of all or parts of the business, but have not identified viable alternatives. As a result, starting in 2019,
we commenced a wind down of our Consumer CLEC Business, which included customer notifications and
terminations, and the winddown was substantially completed by the end of the second quarter of 2020. The
termination of the Agreements was effective April 20, 2020; however, we entered into a short-term arrangement
with Windstream to provide the necessary services until the business was completely wound down. The subsidiaries
comprising our Consumer CLEC Business are direct subsidiaries of Uniti Group Inc. and are not subsidiaries of the
Operating Partnership, which is a primary obligor and/or guarantor under our Credit Agreement and our outstanding
notes, and do not guarantee such debt. Other than the assets and liabilities and results related to the Consumer CLEC
Business, which are immaterial, the financial condition and results of operations of the Operating Partnership and
Uniti Group Inc. are identical in all material respects.
COVID-19 Pandemic. The COVID-19 pandemic has negatively impacted the global economy, disrupted global
supply chains and created significant volatility and disruption of financial markets. We continue to monitor
developments associated with the COVID-19 pandemic and its related impact on our business and results of
operations.
On March 19, 2020, the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency
(“CISA”) issued its Memorandum on Identification of Essential Critical Infrastructure Workers During COVID-19
Response (the “Memorandum”). The Memorandum categorizes the communications and information technology
sectors, sectors in which Uniti operates, as part of 16 critical infrastructure sectors that must remain operational
during the COVID-19 pandemic.
Our first priority remains the health and safety of our employees, customers and other business partners. We have
been actively monitoring and following government recommendations as we adjust business practices and standard
operating procedures to ensure the protection of team members and ensure the continuity of our business. As of the
date of this Annual Report, we have not experienced significant disruptions in our operations or network
performance, nor have we received significant requests for payment relief from our customers. However, there can
be no assurance that circumstances will not change in light of the COVID-19 pandemic or that the pandemic will not
have a material adverse impact on our business. We may incur increases in operating costs and/or a decrease in
productivity as a result of travel bans and social distancing efforts. Such efforts may also delay construction
activities and/or require our vendors and contractors to incur additional costs that may be passed onto us. In
addition, we may experience delays in permitting activities due to the shutdown of local permitting
authorities. Furthermore, if there is a prolonged closure of businesses, we may experience an adverse impact on the
timing of installations in our enterprise and wholesale customer segments at Uniti Fiber, or we may receive requests
for payment relief from our customers, both of which would impact our ability to recognize revenue.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into
law. The CARES Act is a stimulus bill that includes lending facilities to large and small business, expands
unemployment benefits and implements individual and business tax changes. We expect the CARES Act will
reduce the limitation on deduction of business interest at certain of our taxable subsidiaries for 2019 and 2020,
which will increase net operating loss. Otherwise, we do not currently expect the CARES Act to have a material
impact on our tax position. In addition, certain of our customers may benefit from the relief provided by the
33
CARES Act, and we have directed those customers to consider utilizing such relief as they weather the impact from
COVID-19.
On December 27, 2020, the President signed into law the Consolidated Appropriations Act of 2021 (the “2021
Appropriations Act”). Among other things, the 2021 Appropriations Act will enhance various support features of
the previously enacted CARES Act, increase unemployment payments and extend the time frame for unemployment
benefits, and re-implement a modified version of the Paycheck Protection Program for small businesses and eligible
non-profits. The 2021 Appropriations Act contains various forms of relief for individuals, businesses and sectors of
the U.S. economy severely impacted by the coronavirus pandemic. As with the CARES Act, the Company has
disseminated information about the 2021 Appropriations Act to our customers. We continue to monitor any effects
that may result from these Acts and other similar legislation or actions in jurisdictions in which our business
operates.
Unsecured Notes Offering and Tender. On February 2, 2021, the Operating Partnership, Uniti Group Finance 2019
Inc. and CSL Capital, LLC, as co-issuers, issued $1.11 billion aggregate principal amount of 6.50% Senior Notes
due 2029. The co-issuers used the net proceeds from the offering to fund the tender offer of substantially all $1.11
billion principal amount of our 8.25% Senior Notes due 2023, of which $58.8 million remain outstanding. On
February 16, 2021, we issued a notice of redemption to redeem all remaining principal amount of our 8.25% senior
notes due 2023 on April 15, 2021.
Secured Notes Offering. On February 10, 2020, the Operating Partnership, CSL Capital, LLC, Uniti Group Finance
2019 Inc. and Uniti Fiber, as co-issuers, issued $2.25 billion aggregate principal amount of 7.875% senior secured
notes due 2025 at an issue price of 100% of par value. The co-issuers used the net proceeds from the offering to
repay all $2.05 billion of outstanding term loans under our senior secured credit facilities and to repay
approximately $156.7 million of revolving loans (and terminated related commitments of approximately $157.6
million).
Amendments to Credit Agreement. On December 10, 2020, we entered into an amendment (the “Seventh
Amendment”) to our Credit Agreement. Pursuant to the Seventh Amendment, commitments from new and existing
lenders under the Credit Agreement’s revolving credit facility (the “Revolving Credit Facility”) have increased to
$500 million and, subject to certain conditions, the maturity date of such commitments has been extended to
December 10, 2024. See “—Liquidity and Capital Resources—Credit Agreement.” As amended, the Revolving
Credit Facility provides that (i) upon receipt of routine regulatory approvals, which are expected by the end of the
first quarter of 2021, new and extended commitments under the Revolving Credit Facility will bear interest at a rate
of LIBOR plus 375 to 450 basis points, with 0% LIBOR floor, depending on the Company’s secured leverage ratio,
and (ii) certain limitations that were included in previous amendments to our credit agreement have been modified
or removed, including restrictions relating to debt incurrence, restricted payments, and permitted investments.
The Revolving Credit Facility will be subject to an earlier maturity date of 91 days prior to the maturity of any
outstanding debt with a principal amount of at least $200 million, unless the Company's unrestricted cash balance
plus remaining revolving credit facility commitments exceeds the principal amount of such debt at all times
following such 91st day until the maturity of such indebtedness. Certain non-extending lender commitments of
$60.5 million will mature on April 24, 2022 and will continue to bear interest at rates previously in effect. Prior to
the expiration of these commitments, the aggregate size of the Revolving Credit Facility will be $560.5 million from
all lenders.
Change in Auditor. Following the conclusion of a process managed by the Company’s Audit Committee, on March
16, 2020, the Company dismissed PwC as the Company’s independent registered public accounting firm and
appointed KPMG LLP as the Company’s independent registered public accounting firm beginning with the year
ending December 31, 2020.
34
Comparison of the years ended December 31, 2020 and 2019
The following tables sets forth, for the periods indicated, our results of operations expressed as dollars and as a
percentage of total revenues:
(Thousands)
Revenues:
Leasing
Fiber Infrastructure
Tower
Consumer CLEC
Total revenues
Costs and Expenses:
Interest expense, net
Depreciation and amortization
General and administrative expense
Operating expense (exclusive of depreciation and amortization)
Settlement expense
Goodwill impairment
Transaction related and other costs
Gain on sale of real estate
Other income, net
Total costs and expenses
(Loss) income before income taxes and equity in earnings (loss)
from unconsolidated entities
Income tax (benefit) expense
Equity in earnings from unconsolidated entities
Net (loss) income
Net (loss) income attributable to noncontrolling interests
Net (loss) income attributable to shareholders
Participating securities' share in earnings
Dividends declared on convertible preferred stock
Amortization of discount on convertible preferred stock
Net (loss) income attributable to common shareholders
Year Ended
December 31, 2020
% of
Revenues
Year Ended
December 31, 2019
% of
Revenues
$
745,915
314,363
6,112
651
69.9% $
29.5%
0.5%
0.1%
1,067,041 100.0%
46.6%
497,128
30.9%
329,403
9.8%
104,975
14.9%
159,337
60.9%
650,000
6.7%
71,000
63,875
6.0%
(86,267) (8.1%)
1.1%
11,703
1,801,154 168.8%
(734,113) (68.8%)
(15,203) (1.4%)
0.0%
98
(718,812) (67.4%)
(12,511) (1.2%)
(706,301) (66.2%)
(1,078) (0.1%)
(9) (0.0%)
0.0%
-
$
(707,388) (66.3%) $
716,640
315,605
14,693
10,673
67.8%
29.8%
1.4%
1.0%
1,057,611 100.0%
36.9%
390,112
38.4%
405,754
9.7%
102,900
15.1%
160,024
0.0%
-
0.0%
-
43,708
4.1%
(28,995) (2.7%)
(31,463) (3.0%)
98.5%
1,042,040
15,571
4,663
-
10,908
326
10,582
1.5%
0.5%
0.0%
1.0%
0.0%
1.0%
(549) 0.0%
(656) (0.1%)
(993) (0.1%)
0.8%
8,384
35
The following table sets forth, for the years ended December 31, 2020 and 2019, revenues and Adjusted EBITDA of
our reportable segments:
(Thousands)
Revenues
Adjusted EBITDA
Less:
Interest expense, net
Depreciation and amortization
Other expense
Settlement expense
Goodwill impairment
Transaction related and other costs
Gain on sale of real estate
Stock-based compensation
Income tax benefit
Adjustments or equity in earnings from
unconsolidated entities
Net loss
(Thousands)
Revenues
Adjusted EBITDA
Less:
Interest expense, net
Depreciation and amortization
Other income
Transaction related and other costs
Gain on sale of real estate
Stock-based compensation
Income tax expense
Net income
Year Ended December 31, 2020
Leasing
Fiber
Infrastructure
Towers
Consumer
CLEC
Corporate
Total of
Reportable
Segments
$745,915 $
314,363 $
6,112 $
651 $
- $1,067,041
$737,337 $
112,289 $
77 $
(545) $ (30,323) $ 818,835
201,321
126,211
783
791
297
Year Ended December 31, 2019
Leasing
Fiber
Infrastructure
Towers
Consumer
CLEC
Corporate
497,128
329,403
11,703
650,000
71,000
63,875
(86,267)
13,721
(15,203)
2,287
$ (718,812)
Total of
Reportable
Segments
$716,640 $
315,605 $ 14,693 $ 10,673 $
- $1,057,611
$711,119 $
126,754 $
(595) $
1,955 $ (26,494) $ 812,739
282,107
114,566
6,474
1,879
728
390,112
405,754
(24,219)
43,708
(28,995)
10,808
4,663
10,908
$
36
Operating metrics:
Leasing:
Fiber strand miles
Copper strand miles
Fiber Infrastructure:
Fiber strand miles
Customer connections
Towers:
United States towers
Consumer CLEC:
Customer connections
Revenues
Operating Metrics
As of December 31,
2020
2019
% Increase
/ (Decrease)
4,510,000
230,000
2,380,000
26,300
4,430,000
229,000
2,080,000
20,900
1.8%
0.4%
14.4%
25.8%
-
-
672
(100.0%)
10,800
(100.0%)
Leasing – Leasing revenues are primarily attributable to rental revenue from leasing our Distribution Systems to
Windstream pursuant to the Windstream Leases (and historically, the Master Lease). Under the Windstream Leases,
Windstream is responsible for the costs related to operating the Distribution Systems, including property taxes,
insurance, and maintenance and repair costs. As a result, we do not record an obligation related to the payment of
property taxes, as Windstream makes direct payments to the taxing authorities. The initial term of the Windstream
Leases expire on April 30, 2030. The aggregate initial annual rent under the Windstream Leases is $663 million,
equal to the annual rent under the Master Lease previously in effect, and is subject to annual escalation at a rate of
0.5%.
The rent for the first year of each renewal term will be an amount agreed to by us and Windstream. While the
agreement requires that the renewal rent be “Fair Market Rent,” if we are unable to agree, the renewal Fair Market
Rent will be determined by an independent appraisal process. Commencing with the second year of each renewal
term, the renewal rent will increase at an escalation rate of 0.5%.
Pursuant to the Windstream Leases, Windstream (or any successor tenant under a Windstream Lease) has the right
to cause Uniti to reimburse up to an aggregate $1.75 billion for certain growth capital improvements in long-term
fiber and related assets made by Windstream (or the applicable tenant under the Windstream Lease) to certain ILEC
and CLEC properties (the “Growth Capital Improvements”). Uniti’s reimbursement commitment for Growth Capital
Improvements does not require Uniti to reimburse Windstream for maintenance or repair expenditures (except for
costs incurred for fiber replacements to the CLEC MLA leased property, up to $70 million during the term), and
each such reimbursement is subject to underwriting standards. Uniti’s total annual reimbursement commitments for
the Growth Capital Improvements under both Windstream Leases (and under separate equipment loan facilities) are
limited to $125 million in 2020; $225 million per year in 2021 through 2024; $175 million per year in 2025 and
2026; and $125 million per year in 2027 through 2029. If the cost incurred by Windstream (or the successor tenant
under a Windstream Lease) for Growth Capital Improvements in any calendar year exceeds the annual limit for such
calendar year, Windstream (or such tenant, as the case may be) may submit such excess costs for reimbursement in
any subsequent year and such excess costs shall be funded from the annual commitment amounts in such subsequent
period. In addition, to the extent that reimbursements for Growth Capital Improvements funded in any calendar year
during the term is less than the annual limit for such calendar year, the unfunded amount in any calendar year will
carry-over and may be added to the annual limits for subsequent calendar years, subject to an annual limit of $250
million in any calendar year, except that, during calendar year 2021, Uniti’s combined total obligation to fund
Growth Capital Improvements may exceed $250 million to the extent of any unfunded excess amounts from
calendar year 2020.
Starting on the first anniversary of each installment of reimbursement for a Growth Capital Improvement, the rent
payable by Windstream under the applicable Windstream Lease will increase by an amount equal to 8.0% (the “Rent
37
Rate”) of such installment of reimbursement. The Rent Rate will thereafter increase to 100.5% of the prior Rent
Rate on each anniversary of each reimbursement. In the event that the tenant’s interest in either Windstream Lease is
transferred by Windstream under the terms thereof (unless transferred to the same transferee), or if Uniti transfers its
interests as landlord under either Windstream Lease (unless to the same transferee), the reimbursement rights and
obligations will be allocated between the ILEC MLA and the CLEC MLA by Windstream, provided that the
maximum that may be allocated to the CLEC MLA following such transfer is $20 million per year. If Uniti fails to
reimburse any Growth Capital Improvement reimbursement payment or equipment loan funding request as and
when it is required to do so under the terms of the Windstream Leases, and such failure continues for thirty (30)
days, then such unreimbursed amounts may be applied as an offset against the rent owed by Windstream under the
Windstream Leases (and such amounts will thereafter be treated as if Uniti had reimbursed them).
Uniti and Windstream have entered into separate ILEC and CLEC Equipment Loan and Security Agreements
(collectively “Equipment Loan Agreement”) in which Unit will provide up to $125 million (limited to $25 million in
any calendar year) of the $1.75 billion of Growth Capital Improvements commitments discussed above in the form
of loans for Windstream to purchase equipment related to network upgrades or to be used in connection with the
Windstream Leases. Interest on these loans will accrue at 8% from the date of the borrowing. All equipment
financed through the Equipment Loan Agreement is the sole property of Windstream; however, Uniti will receive a
first-lien security interest in the equipment purchased with the loans. No such loans were made to Windstream
during 2020.
The Windstream Leases provide that tenant funded capital improvements (“TCIs”), defined as maintenance, repair,
overbuild, upgrade or replacement to the Distribution Systems, including without limitation, the replacement of
copper distribution systems with fiber distribution systems, automatically become property of Uniti upon their
construction by Windstream. We receive non-monetary consideration related to TCIs as they automatically become
our property, and we recognize the cost basis of TCIs that are capital in nature as real estate investments and
deferred revenue. We depreciate the real estate investments over their estimated useful lives and amortize the
deferred revenue as additional leasing revenues over the same depreciable life of the TCI assets. TCIs exclude
Growth Capital Improvements as and when reimbursed by Uniti.
During the year ended December 31, 2020, Uniti reimbursed $84.7 million of Growth Capital Improvements, which,
as allowed for under the Settlement, represented the reimbursement of capital improvements completed in 2020 that
were previously classified as TCIs. Upon reimbursement, the Company reduced the unamortized portion of deferred
revenue related to these capital improvements and capitalized the difference between the cash provided to
Windstream and the unamortized deferred revenue as a lease incentive. This lease incentive, which is $1.0 million
and reported within other assets on our Consolidated Balance Sheet as of December 31, 2020, will be amortized
against revenue over the initial term of the Windstream Leases. Subsequent to December 31, 2020, Windstream
requested and we reimbursed $26.2 million of qualifying Growth Capital Improvements that were reported as TCIs
as of December 31, 2020. As of the date of this Annual Report on Form 10-K, we have reimbursed a total of $110.9
million of Growth Capital Improvements, and all amounts represent the reimbursement of qualifying Growth Capital
Improvements that were previously reported as TCIs in 2020.
38
(Thousands)
Leasing revenues:
Windstream Leases:
Cash rent
Non-cash revenue
TCI revenue
Straight-line revenue
Total non-cash revenue
Total Windstream revenue
Other triple-net leasing and dark fiber IRU
Total Leasing revenues
Year Ended December 31,
2020
2019
Amount
% of Segment
Revenues
Amount
% of Segment
Revenues
$
662.3
88.8%
$
658.9
92.0%
35.1
5.2
40.3
702.6
43.3
745.9
$
4.7%
0.7%
5.4%
94.2%
5.8%
100.0%
29.0
-
29.0
687.9
28.7
716.6
$
4.0%
0.0%
4.0%
96.0%
4.0%
100.0%
The increase in TCI revenue is attributable to continued investment by Windstream, where Windstream invested
$102.4 million of TCIs during the year ended December 31, 2020. The total amount invested in TCIs by
Windstream since the inception of the Master Lease was $874.2 million as of December 31, 2020. As of December
31, 2019, Windstream had invested a total of $771.8 million in such improvements. For the year ended December
31, 2020, we recognized $43.3 million of leasing revenues from non-Windstream triple-net leasing and dark fiber
indefeasible rights of use (“IRU”) arrangements, compared to $28.7 million for the year ended December 31, 2019.
Because a substantial portion of our revenue and cash flows are derived from lease payments by Windstream
pursuant to the Windstream Leases, there could be a material adverse impact on our consolidated results of
operations, liquidity, financial condition and/or ability to maintain our status as a REIT and service debt if
Windstream were to become unable to generate sufficient cash to make payments to us.
Prior to its emergence from bankruptcy on September 21, 2020, Windstream was a publicly traded company and
was subject to the periodic filing requirements of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”). Windstream’s historic filings through their quarter ended June 30, 2020 can be found at www.sec.gov. On
September 22, 2020, Windstream filed a Form 15 to terminate all filing obligations under Section 12(g) and 15(d)
under the Exchange Act. Windstream has posted certain information regarding its fourth quarter and full year 2020
results on the investor relations page of its website, which can be found at https://investor.windstream.com. Neither
Windstream filings nor the information available on the investor page of its website are incorporated by reference in
the Annual Report on Form 10-K.
We monitor the credit quality of Windstream through numerous methods, including by (i) reviewing credit ratings of
Windstream by nationally recognized credit agencies, (ii) reviewing the financial statements of Windstream that are
required to be delivered to us pursuant to the Windstream Leases, (iii) monitoring new reports regarding
Windstream and its business, (iv) conducting research to ascertain industry trends potentially affecting Windstream,
(v) monitoring Windstream’s compliance with the terms of the Windstream Leases and (vi) monitoring the
timeliness of its payments under the Windstream Leases.
We note that in August 2020, Moody’s Investor Service assigned a B3 corporate family rating with a stable outlook
to Windstream in connection with its post-emergence exit financing. At the same time, S&P Global Ratings
assigned Windstream a B- issuer rating with a stable outlook. These ratings were both upgrades from Windstream’s
pre-bankruptcy ratings. In order to assist us in our continuing assessment of Windstream’s creditworthiness, we
receive certain confidential financial information and metrics from Windstream.
Under the terms of the Windstream Leases, Windstream is required to provide us audited financial statements as of
and for the year ended December 31, 2020 (the “2020 Financial Statements”) no later than 90-days after its fiscal
year-end. After receipt of the 2020 Financial Statements, Uniti expects to file a Form 10-K/A to include the 2020
Financial Statements in our annual report. As of the date of this Annual Report on Form 10-K, Windstream is
current on all lease payments required under the Windstream Leases.
39
Fiber Infrastructure – For the years ended December 31, 2020 and 2019, we recognized $314.4 million and $315.6
million of revenue, respectively, in our Fiber Infrastructure segment. The decrease is primarily attributable to a $4.1
decrease in non-recurring construction revenues reported within E-Rate and government revenues, partially offset by
increased installation services and equipment sales. Revenue components for the Fiber Infrastructure segment for
the years ended December 31, 2020 and 2019 consisted of the following:
(Thousands)
Fiber Infrastructure revenues:
Lit backhaul services
Enterprise and wholesale
E-Rate and government
Dark fiber and small cells
Other services
Total Fiber Infrastructure revenues
Year Ended December 31,
2020
2019
Amount
% of
Segment
Revenues
Amount
$
$
106,125
78,702
80,428
44,767
4,341
314,363
33.8% $
25.0%
25.6%
14.2%
1.4%
100.0% $
125,983
66,545
89,430
31,245
2,402
315,605
% of
Segment
Revenues
39.9%
21.1%
28.3%
9.9%
0.8%
100.0%
Towers – Towers revenues for the years ended December 31, 2020 and 2019 consisted of the following:
(Thousands)
Towers revenues:
United States
Latin America
Total
Year Ended December 31,
2019
2020
% of
Segment
Revenues
Amount
% of
Segment
Revenues
Amount
$
$
6,112 100.0% $
-
0.0%
6,112 100.0% $
82.6%
12,141
2,552
17.4%
14,693 100.0%
The decrease in Towers revenues is driven by the April 2, 2019 sale of the Latin America operations which
contributed $2.6 million of revenue for the year ended December 31, 2019 and the completed sale of the U.S. tower
business on June 1, 2020.
Consumer CLEC – For the year ended December 31, 2020, we recognized $0.7 million of revenue from the
Consumer CLEC Business, compared to $10.7 million for the year ended December 31, 2019. The decrease is
attributable to the substantially completed wind down of the business during the second quarter of 2020, which
included credits to disconnected customers.
40
Interest Expense, net
(Thousands)
Interest expense, net:
Cash:
Senior secured term loan B - variable rate (1)
Senior secured notes - 6.00% and 7.875%
Senior unsecured notes - 4.00%, 7.125%, and 8.25%
Senior secured revolving credit facility - variable rate
Other
Total cash interest
Non-cash:
Amortization of deferred financing costs and debt discount
Write off of deferred financing costs and debt discount
Accretion of settlement payable
Capitalized Interest
Year Ended December 31,
2020
2019
Increase /
(Decrease)
$
25,864
190,992
148,125
14,691
3,986
383,658
36,955
73,952
4,768
(2,205)
113,470
497,128
$
$
139,383
33,000
141,340
34,463
2,221
350,407
42,779
-
-
(3,074)
39,705
390,112
$
$
(113,519)
157,992
6,785
(19,772)
1,765
33,251
(5,824)
73,952
4,768
869
73,765
107,016
Total non-cash interest
Total interest expense, net
(1) Swapped to fixed rate. See Note 11 to our Consolidated Financial Statements
$
Interest expense for the year ended December 31, 2020 increased $107.0 million compared to the year ended
December 31, 2019. The increase is due to (i) the write-off of unamortized deferred financing costs and debt
discount related to the repayment of the senior secured term loan B and terminated commitments of the revolving
loans of $72.5 million and $1.4 million, respectively, and (ii) cash interest expense of $158.0 million related to the
7.875% senior secured notes, partially offset by a decrease of $113.5 million in cash interest expense related to the
repayment of senior secured term loan B in February 2020.
Depreciation and Amortization Expense
We incur depreciation and amortization expense related to our property, plant and equipment, corporate assets and
intangible assets. Depreciation and amortization expense for our reportable segments for the years ended December
31, 2020 and 2019 consisted of the following:
(Thousands)
Depreciation and amortization expense by segment:
Depreciation expense
Leasing
Fiber Infrastructure
Towers
Consumer CLEC
Corporate
Total depreciation expense
Amortization expense
Leasing
Fiber Infrastructure
Towers
Consumer CLEC
Corporate
Total amortization expense
Total depreciation and amortization expense
41
Year Ended December 31,
2020
2019
Increase /
(Decrease)
$
$
198,805
101,332
783
-
297
301,217
2,516
24,879
-
791
-
28,186
329,403
$
$
279,901
91,658
6,276
-
728
378,563
2,206
22,908
198
1,879
-
27,191
405,754
$
$
(81,096)
9,674
(5,493)
-
(431)
(77,346)
310
1,971
(198)
(1,088)
-
995
(76,351)
Leasing – Depreciation expense decreased $81.1 million for the year ended December 31, 2020 as compared to the
year ended December 31, 2019. The decrease is attributable to (i) $86.5 million decrease related to the natural
decrease in remaining useful life of the Windstream Distribution System assets which utilize the group composite
depreciation method, and (ii) partially offset by $4.3 million increase in depreciation expense related to the assets
acquired from Windstream under the Asset Purchase Agreement. Amortization expense increased $0.3 million for
the year ended December 31, 2020 as compared to the year ended December 31, 2019.
Fiber Infrastructure – The increase in Fiber Infrastructure depreciation expense for the year ended December 31,
2020 as compared to the year ended December 31, 2019 is attributable to capital expenditures of $197.0 million
during the year ended December 31, 2020. The increase in amortization expense for ended December 31, 2020 as
compared to the year ended December 31, 2019 is attributable to the amortization of the trade name intangible asset
associated with our construction business, which was reclassified from an indefinite-life to finite-life during fiscal
year 2020.
Towers – The decrease in Towers depreciation for the year ended December 31, 2020 as compared to the year ended
December 31, 2019 is attributable the April 2, 2019 sale of the Latin America operations and the completed sale of
the U.S. tower business on June 1, 2020.
General and Administrative Expense
(Thousands)
General and administrative expense by segment:
Leasing
Fiber Infrastructure
Towers
Consumer CLEC
Corporate
Total general and administrative expenses
Year Ended December 31,
2020
% of
Consolidated
Revenues
0.7%
5.1%
0.2%
0.0%
3.8%
9.8%
Amount
$
7,022
54,529
2,607
230
40,587
$ 104,975
Amount
$
3,940
57,362
6,237
25
35,336
$ 102,900
2019
% of
Consolidated
Revenues
0.4%
5.4%
0.6%
0.0%
3.3%
9.7%
General and administrative expenses include compensation costs, including stock-based compensation awards,
professional and legal services, corporate office costs and other costs associated with the administrative activities of
our segments.
Leasing – Leasing general and administrative expense increased $3.1 million for the year ended December 31, 2020
as compared to the year ended December 31, 2019. The increase is attributable to (i) increased personnel expense of
$1.6 million and (ii) increased legal fees of $0.5 million.
Fiber Infrastructure – Fiber Infrastructure general and administrative expense decreased $2.8 million for the year
ended December 31, 2020 as compared to the year ended December 31, 2019. The decrease is attributable to (i)
decreased personnel expense of $0.9 million and (ii) decreased professional and legal expenses of $2.0 million.
Towers- The decrease in Towers general and administrative expense for the year ended December 31, 2020 as
compared to the year ended December 31, 2019 is attributable to the April 2, 2019 sale of the Latin America
operations and the completed sale of the U.S. tower business on June 1, 2020.
Corporate – Corporate general and administrative expense increased $5.3 million for the year ended December 31,
2020 as compared to the year ended December 31, 2019. The increase is attributable to (i) increased personnel
expense related to stock-based compensation of $2.8 million, (ii) increased insurance expense of $5.9 million, offset
by (iii) a decrease of $2.2 million in legal expenses.
42
Operating Expense
Operating expense for the year ended December 31, 2020, totaled $159.3 million compared to $160.0 million for the
year ended December 31, 2019. Operating expense for our reportable segments for the years ended December 31,
2020 and 2019 consisted of the following:
(Thousands)
Operating expense by segment:
Leasing
Fiber Infrastructure
Towers
CLEC
Total operating expenses
Year Ended December 31,
2020
2019
% of
Consolidated
Revenues
Amount
Amount
% of
Consolidated
Revenues
$
$
4,438
150,241
3,692
966
159,337
0.4%
14.1%
0.3%
0.1%
14.9%
$
$
2,053
139,460
9,819
8,692
160,024
0.2%
13.2%
0.9%
0.8%
15.1%
Leasing – Leasing operating expense was $4.4 million and $2.1 million for the years ended December 31, 2020 and
2019, respectively. The increase is primarily driven by a $2.2 million increase in network expenses due to (i) $1.0
million in expenses related to new dark fiber arrangements, (ii) $1.0 million related to the Asset Purchase
Agreement and (iii) $0.2 million related to the Bluebird acquisition, completed August 30, 2019.
Fiber Infrastructure – For the year ended December 31, 2020, Fiber Infrastructure operating expenses totaled
$150.2 million as compared to $139.5 million for the year ended December 31, 2019. Operating expense consists of
network related costs, such as dark fiber and tower rents, and lit service and maintenance expense. In addition, costs
associated with our construction activities are presented within operating expenses. The increase in operating
expenses is primarily attributable to (i) increased personnel expenses of $5.1 million, (ii) increased Information
Transport Solutions, Inc. (“ITS”) expenses of $7.0 million, and (iii) increased network and facilities expenses of
$1.3 million, offset by a decrease of $7.0 million in construction expenses.
Towers – Our Towers segment operating expense primarily consists of ground rent, some or all of which may be
passed to our tenants, as well as property taxes, regulatory fees and maintenance and repairs expenses. For the years
ended December 31, 2020 and 2019, Towers operating expense was $3.7 million and $9.8 million, respectively.
The decrease in operating expense is primarily attributable to the April 2, 2019 sale of the Latin American business
and the completed sale of our U.S. towers business of June 1, 2020.
Consumer CLEC – The Consumer CLEC Business operating expense was $1.0 and $8.7 million for the years ended
December 31, 2020 and 2019, respectively. The decrease is due to the substantially completed wind down of our
Consumer CLEC business.
Settlement Expense
As described in “Overview—Significant Business Developments—Windstream Emergence and Settlement” of this
Part II, Item 7 above, on July 25, 2019, in connection with Windstream’s bankruptcy, Windstream Holdings and
Windstream Services filed a complaint with the Bankruptcy Court in an adversary proceeding against Uniti and
certain of its affiliates. During the second quarter of 2020, we estimated that $650.0 million of the consideration
paid to Windstream should be classified as settlement of litigation, and therefore, recorded a $650.0 million charge.
The charge represented our estimated fair value of the litigation settlement component of the Settlement.
Goodwill Impairment
We performed our goodwill impairment analysis during the fourth quarter of 2020. As a result of increased capital
expenditure investments in dark fiber and small cell projects and less than anticipated cash flow growth, we
concluded that it was more likely than not that the fair value of the Fiber Infrastructure reporting unit, estimated
43
using a combination of the income approach and market approach, is less that its carrying amount. (See “Critical
Accounting Policies and Estimates” below). Accordingly, we recorded a $71 million goodwill impairment in the
Fiber Infrastructure reporting unit.
Transaction Related and Other Costs
Transaction related and other costs included incremental acquisition, pursuit, transaction and integration costs
(including unsuccessful acquisition pursuit costs), costs incurred as a result of Windstream’s bankruptcy filing, costs
associated with Windstream’s claims against us and costs associated with the implementation of our enterprise
resource planning system. For the year ended December 31, 2020, we incurred $63.9 million of transaction related
and other costs, compared to $43.7 million of such costs during the year ended December 31, 2019. The increase is
primarily related to incurring $43.4 million of total costs related to the Windstream bankruptcy for the year ended
December 31, 2020, as compared to $23.2 million for year ended December 31, 2019.
Gain on Sale of Real Estate
For the year ended December 31, 2020, we recognized realized gains of $63.4 million and $22.9 million related to
the sale of Uniti Towers’ U.S tower portfolio and the Company’s Midwest fiber network assets, respectively. For
the year ended December 31, 2019, we recognized realized gains of $23.8 million and $5.1 million related to the
sale of Uniti Towers’ Latin American business and sale of our U.S. ground lease business, respectively.
Other Expense (Income), net
We recognized $11.7 million of other expense for the year ended December 31, 2020, which included a $7.2 million
unrealized loss for mark-to-market adjustments on our contingent consideration arrangements. Other income for the
year ended December 31, 2019, totaled $31.5 million, which included a $28.5 million unrealized gain for mark-to-
market adjustments on our contingent consideration arrangements.
Income Tax (Benefit) Expense
The recorded income tax (benefit) expense recorded for the years ended December 31, 2020 and 2019, respectively,
is related to the tax impact of the following:
(Thousands)
Income tax (benefit) expense
Pre-tax loss (Fiber Infrastructure)
Cancellation of debt income (REIT)
Other undistributed REIT taxable income
Gain from sale of Uniti Towers' Latin American business
Uniti Towers' Latin American business unrecognized tax benefit
Return to provision adjustments
Other
Total income tax (benefit) expense
Non-GAAP Financial Measures
Year Ended December 31,
2020
2019
$
$
(12,758) $
-
-
-
-
(2,839)
394
(15,203) $
(10,900)
4,600
3,200
4,600
2,900
-
263
4,663
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.
44
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, 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 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 TCIs; 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 premium and costs associated with the termination of related
hedging activities, 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.
45
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.
The reconciliation of our net (loss) income to EBITDA and Adjusted EBITDA and of our net income attributable to
common shareholders to FFO and AFFO for the years ended December 31, 2020 and 2019 is as follows:
$
$
$
$
$
(Thousands)
Net (loss) income
Depreciation and amortization
Interest expense, net
Income tax (benefit) expense
EBITDA
Stock-based compensation
Transaction related and other costs
Settlement expense
Goodwill impairment
Gain on sale of real estate
Other (income) expense
Adjustments for equity in earnings from unconsolidated entities
Adjusted EBITDA
(Thousands)
Net (loss) income attributable to common shareholders
Real estate depreciation and amortization
Gain on sale of real estate, net of tax
Participating securities' share in earnings
Participating securities' share in FFO
Real estate depreciation and amortization from unconsolidated
entities
Adjustments for noncontrolling interests
FFO attributable to common shareholders
Transaction related and other costs
Change in fair value of contingent consideration
Amortization of deferred financing costs and debt discount
Write off deferred financing costs and debt discount
Stock-based compensation
Non-real estate depreciation and amortization
Settlement expense
Goodwill impairment
Straight-line revenue
Maintenance capital expenditures
Amortization of discount on convertible preferred stock
Cash taxes on tax basis cancellation of debt
Other, net
Adjustments for equity earnings from unconsolidated entities
Adjustments for noncontrolling interests
AFFO attributable to common shareholders
$
46
Year Ended December 31,
2020
2019
$
(718,812) $
329,403
497,128
(15,203)
92,516
13,721
63,875
650,000
71,000
(86,267)
11,703
2,287
818,835
$
Year Ended December 31,
2020
2019
(707,388) $
246,713
(85,860)
1,078
(1,162)
1,048
(2,622)
(548,193) $
63,875
7,163
36,955
73,952
13,721
82,690
650,000
71,000
(6,872)
(7,149)
-
-
(32,374)
1,238
(16,496)
389,510
$
10,908
405,754
390,112
4,663
811,437
10,808
43,708
-
-
(28,995)
(24,219)
-
812,739
8,384
323,527
(24,420)
549
(1,246)
-
(5,857)
300,937
43,708
(28,463)
42,779
-
10,808
82,227
-
-
(208)
(7,992)
993
4,590
(34,799)
-
(2,122)
412,458
Critical Accounting Policies and Estimates
We make certain judgments and use certain estimates and assumptions when applying accounting principles in the
preparation of our financial statements. The nature of the estimates and assumptions are material due to the levels of
subjectivity and judgment necessary to account for highly uncertain factors or the susceptibility of such factors to
change. We have identified the following critical accounting estimates, as they are the most important to our
financial statement presentation and require difficult, subjective and complex judgments.
We believe the current assumptions and other considerations used to estimate amounts reflected in our financial
statements are appropriate. However, if actual experience differs from the assumptions and other considerations
used in estimating amounts reflected in our financial statements, the resulting changes could have a material adverse
effect on our results of operations and, in certain situations, could have a material adverse effect on our financial
condition.
Income Taxes
We elected on our initial U.S. federal income tax return to be treated as a REIT under the Internal Revenue Code of
1986, as amended (the “Code”). To qualify as a REIT, we must distribute at least 90% of our annual REIT taxable
income to shareholders, and meet certain organizational and operational requirements, including asset holding
requirements. As a REIT, we will generally not be subject to U.S. federal income tax on income that we distribute as
dividends to our shareholders. If we fail to qualify as a REIT in any taxable year, we will be subject to U.S. federal
income tax, including any applicable alternative minimum tax for open taxable years through 2017, on our taxable
income at regular corporate income tax rates, and we could not deduct dividends paid to our shareholders in
computing taxable income. Any resulting corporate liability could be substantial and could materially and adversely
affect our net income and net cash available for distribution to shareholders. Unless we were entitled to relief under
certain Code provisions, we also would be disqualified from reelecting to be taxed as a REIT for the four taxable
years following the year in which we failed to qualify as a REIT.
Subject to the restrictions imposed by our 7.875% senior secured notes due 2025 (as discussed below), our ability to
make cash distributions to our shareholders in amounts exceeding 90% of our good faith estimate, as of the date on
which the first quarterly dividend for the relevant year is declared, of our REIT taxable income for such year,
determined without regard to the dividends paid deduction and excluding any capital gains, until we reduce our net
leverage ratio. As a result, we may be required to record a provision in our Consolidated Financial Statements for
U.S. federal income taxes related to the activities of the REIT and its passthrough subsidiaries for any undistributed
income. We are subject to the statutory requirements of the locations in which we conduct business, and state and
local income taxes are accrued as deemed required in the best judgment of management based on analysis and
interpretation of respective tax laws.
We have elected to treat the subsidiaries through which we operate Uniti Fiber and Talk America, as well as certain
portions of Uniti Towers, as TRSs. TRSs enable us to engage in activities that result in income that does not
constitute qualifying income for a REIT. Our TRSs are subject to U.S. federal, state and local corporate income
taxes.
Deferred tax assets and liabilities are recognized under the asset and liability method for the estimated future tax
consequences attributable to differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax balances are adjusted to reflect tax rates based on currently
enacted tax laws, which will be in effect in the years in which the temporary differences are expected to reverse. The
effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the
period of the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax
assets unless it is more likely than not that such assets will be realized.
The Company is subject to restrictions on distributions to its shareholders based on our 7.875% senior secured notes
due 2025. The restrictions permit the Company to make the minimum required distribution to maintain its status as a
REIT, which is limited to 90% of our REIT taxable income. The restrictions will remain in place until Company’s
net leverage ratio (as defined) is below 5.75 : 1.00.
47
We recognize the benefit of tax positions that are "more likely than not" to be sustained upon examination based on
their technical merit. The benefit of a tax position is measured at the largest amount that has a greater than 50
percent likelihood of being realized upon ultimate settlement. If applicable, we will report tax-related penalties and
interest expense as a component of income tax expense.
The Company will be subject to a federal corporate level tax on any gain recognized from the sale of assets
occurring within a five year recognition period after the Spin-Off up to the amount of the built in gain that existed on
April 24, 2015, which is based on the fair market value of the assets in excess of the Company’s tax basis as of such
date.
Revenue Recognition
Leasing revenues are primarily derived from providing access to or usage of leased networks and facilities. Leasing
revenues are recognized on a straight-line basis over the initial lease term. Revenues derived from other
telecommunications services, including broadband, long distance and enhanced service revenues are recognized
monthly as services are provided. Sales of customer premise equipment are recognized when products are delivered
to and accepted by customers.
Service revenues are primarily derived from providing broadband transport and backhaul communications services
and are recognized when (i) persuasive evidence of an arrangement exists, (ii) the services have been provided to the
customer, (iii) the sales price is fixed or determinable, and (iv) the collection of the sales price is reasonably assured.
Services provided to the Company’s customers are pursuant to contractual fee-based arrangements, which generally
provide for recurring fees charged for the use of designated portions of the Company’s network and typically range
for a period of three to ten years. The Company’s revenue arrangements often include upfront fees charged to the
customer for the cost of establishing the necessary components of the Company’s network prior to the
commencement of use by the customer. Fees charged to customers for the recurring use of the Company’s network
are recognized during the related periods of service. Upfront fees that are billed in advance of providing services are
deferred until such time the customer accepts the Company’s network and then are recognized as service revenues
ratably over a period in which substantive services required under the revenue arrangement are expected to be
performed, which is the initial term of the arrangement.
Impairment of Property, Plant and Equipment
We continually monitor events and changes in circumstances that could indicate that the carrying amount of our
property, plant and equipment may not be recoverable or realized. When indicators of potential impairment suggest
that the carrying value may not be recoverable, we assess the recoverability by estimating whether we will recover
the carrying value of those assets through its undiscounted future cash flows and the eventual disposition of the
asset. If, based on this analysis, we do not believe that we will be able to recover the carrying value of our property,
plant and equipment, we would record an impairment loss to the extent that the carrying value exceeds the estimated
fair value of the related assets. During the years ended December 31, 2020 and 2019, no impairment losses were
recognized.
Business Combinations and Asset Acquisitions
We apply the acquisition method of accounting for acquisitions meeting the definition of a business combination or
asset acquisition, where assets acquired and liabilities assumed are recorded at fair value at the date of each
acquisition, and the results of operations are included with those of the Company from the dates of the respective
acquisitions. The fair value of the acquired assets and liabilities are estimated using the income, market and/or cost
approach. The income approach utilizes the present value of estimated future cash flows that a business or asset can
be expected to generate, while under the market approach, the fair value of an asset or business reflects the price at
which comparable assets are purchased under similar circumstances. Inherent in our preparation of cash flow
projections are significant assumptions and estimates derived from a review of operating results, business plans,
expected growth rates, capital expenditure plans, cost of capital and tax rates. We also make certain forecasts about
future economic conditions, interest rates and other market data. Many of the factors used in assessing fair value are
outside the control of management. Small changes in these assumptions or estimates could materially affect the cash
flow projections, and therefore could affect the estimated fair value. Impact these assumptions or estimates include
48
customer retention, execution of our business plans, which impact growth, cost escalation impacting margin, the
level of capital expenditures required to sustain our growth and market factors, including stock price fluctuations
and increased rates, impacting our cost of capital.
For acquisitions meeting the definition of a business combination, any excess of the purchase price paid by the
Company over the amounts recognized for assets acquired and liabilities assumed is recorded as goodwill.
Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”), also requires acquirers to,
among other things, estimate the acquisition date fair value of any contingent consideration and recognize any
subsequent changes in the fair value of contingent consideration in earnings. When provisional amounts are initially
recorded, the Company continues to evaluate acquisitions for a period not to exceed one year after the applicable
acquisition date of each transaction to determine whether any additional adjustments are needed to the allocation of
the purchase price paid for the assets acquired and liabilities assumed.
For acquisitions meeting the definition of an asset acquisition, the fair value of the consideration transferred,
including transaction costs, is allocated to the assets acquired and liabilities assumed based on their relative fair
values. There are significant judgments and estimates used in determining the fair values of the assets acquired and
liabilities assumed, which include assumptions with respect to items such as replacement cost, land value,
assemblage factor, discount rate, lease-up period, implied rents per strand mile, and useful life. No goodwill is
recognized in an asset acquisition.
Windstream Settlement
Windstream Settlement Agreement–Pursuant to the Settlement Agreement (see “Significant Business
Developments”), Uniti is required to make quarterly cash payments of $24.5 million to Windstream for 20
consecutive quarters beginning the first month after Windstream’s emergence. Uniti may prepay any installments
falling due on or after the first anniversary of the Settlement’s effective date (discounted at a 9% rate). This
obligation has been recorded at its initial fair value of $438.6 million and is reported as settlement payable on our
Consolidated Balance Sheet at December 31, 2020. In determining the initial fair value, the Company performed a
yield analysis for use in selecting the rate at which the obligation should be discounted. The yield analysis was
performed using the notching and recovery rate methods and were impacted by assumptions with regard to the
duration and secured nature of the obligation and estimates with respect to the Company’s credit ratings. The
difference between the initial fair value of the obligation and total undiscounted cash payments, $490.1 million, will
be recognized as interest expense within our Consolidated Statements of (Loss) Income at an effective rate of 4.7%,
over 20 quarters beginning October 1, 2020.
The Settlement Agreement resolves any and all claims and causes of action that have been or may be asserted in the
future by Uniti and Windstream regarding the Spin-off of Uniti and related sale-leaseback transaction, including all
litigation brought against Uniti by Windstream and certain of its creditors during Windstream’s bankruptcy
proceedings. The release from claims applies to any Windstream successor and is binding going forward, including
in any future Windstream bankruptcy. The Company evaluated whether the release of claims is a distinct
identifiable benefit, which should be recognized separate from the other elements of the Settlement, concluding that
the release of claims was a distinct benefit. We estimated the fair value of the litigation settlement by analyzing the
probability-weighted expected values derived from an estimate of various potential economic impacts on Uniti in
relation to the different possible paths the litigation may have taken had it gone to trial. We analyzed scenarios that
could have occurred if a settlement was not reached; the probability weighted financial damages of a hypothetical
trial indicate the amount a party would be willing to pay to avoid a trial.
Fair Value of Windstream Leases–In connection with Windstream’s emergence from bankruptcy and the
implementation of the Settlement with Windstream, Uniti and Windstream entered into the Windstream Leases. The
Company evaluated the classification of the Windstream Leases in accordance with the ASC 842, Leases,
concluding that the Windstream Leases are operating leases. Furthermore, the Company concluded the Windstream
Leases reflect fair market rental rates and terms. In reaching these conclusions, the Company estimated that fair
value of the leased assets using the cost approach, and determined the rents under the Windstream Leases are fair
market rents. The Company calculated the implied lease rate in the Windstream Leases, concluding that the lease
rates represent fair market lease rates when compared to benchmark rates.
49
Windstream Asset Purchase Agreement–We apply the acquisition method of accounting for acquisitions meeting the
definition of a business combination or asset acquisition, where assets acquired and liabilities assumed are recorded
at fair value at the date of each acquisition, and the results of operations are included with those of the Company
from the dates of the respective acquisitions. The Asset Purchase Agreement (see “Significant Business
Developments”) meets the definition of an asset acquisition under ASC 805, where the fair value of the
consideration transferred, including transaction costs, is allocated to the assets acquired and liabilities assumed
based on their relative fair values. No goodwill is recognized in an asset acquisition.
The fair value of the acquired assets and liabilities have been estimated using a combination of the income and cost
approach. The income approach utilizes the present value of future cash flows that the assets can be expected to
generate, while under the cost approach, the fair value of the assets reflects the cost to acquire or construct a
substitute asset of comparable utility in its current condition. Inherent in our preparation of cash flow projections
are significant assumptions and estimates derived from a review of operating results, business plans, expected
growth rates, capital expenditure plans, cost of capital and tax rates. We also make certain forecasts about future
economic conditions, interest rates and other market data. Many of the factors used in assessing fair value are
outside the control of management. Small changes in these assumptions or estimates could materially affect the cash
flow projections, and therefore could affect the estimated fair value. Impacting these assumptions or estimates
include customer retention, execution of our business plans, which impact growth, cost escalation impacting margin,
the level of capital expenditures required to sustain our growth and market factors, including stock price fluctuations
and increased rates, impacting our cost of capital.
Goodwill
As of December 31, 2020 and 2019, all of our goodwill is included in our Fiber Infrastructure segment. Goodwill is
recognized for the excess of purchase price over the fair value of net assets of businesses acquired. Goodwill is
reviewed for impairment at least annually. In accordance with ASC 350-20, Intangibles-Goodwill and Other, we
evaluate goodwill for impairment between annual impairment tests if an event occurs or circumstances change that
would more likely than not reduce the fair value of a reporting unit below its carrying amount. Unless circumstances
otherwise dictate, the annual impairment test is performed in the fourth quarter. Application of the goodwill
impairment test requires significant judgment, including: the identification of reporting units; assignment of assets
and liabilities to reporting units; and assignment of goodwill to reporting units. As a result of our 2019 annual
goodwill impairment test, we concluded the implied fair value of our Fiber Infrastructure reporting unit was in
excess of its carrying value by less than 2%.
We estimate the fair value of our reporting units (which are our segments) using a combination of an income
approach based on the present value of estimated future cash flows and a market approach based on market data of
comparable businesses and acquisition multiples paid in recent transactions. We evaluate the appropriateness of
each valuation methodology in determining the weighting applied to each methodology in the determination of the
concluded fair value. If the carrying value of a reporting unit's net assets is less than its fair value, no indication of
impairment exists. If the carrying amount of the reporting unit is greater than the fair value of the reporting unit, an
impairment loss must be recognized for the excess and recorded in the Consolidated Statements of Income not to
exceed the carrying value of goodwill.
We performed our goodwill impairment analysis during the fourth quarter of 2020. As a result of increased capital
expenditure investments in dark fiber and small cell projects and less than anticipated cash flow growth, we
concluded that it was more likely than not that the fair value of the Fiber Infrastructure reporting unit, estimated
using a combination of the income approach and market approach, is less that its carrying amount. Accordingly, we
recorded a $71 million goodwill impairment in the Fiber Infrastructure reporting unit. During the years ended
December 31, 2019 and 2018, no impairment losses were recognized.
Inherent in our preparation of cash flow projections are significant assumptions and estimates derived from a review
of our operating results and business plans, which includes expected revenue and expense growth rates, capital
expenditure plans and cost of capital. In determining these assumptions, we consider our ability to execute on our
plans, future economic conditions, interest rates and other market data. Many of the factors used in assessing fair
value are outside the control of management, and these assumptions and estimates may change in future periods.
Small changes in these assumptions or estimates could materially affect our cash flow projections, and therefore
50
could affect the likelihood and amount of potential impairment in future periods. Potential events that could
negatively impact these assumptions or estimates may include customer losses or poor execution of our business
plans, which impact revenue growth, cost escalation impacting margin, the level of capital expenditures required to
sustain our growth and market factors, including stock price fluctuations and increased rates, impacting our cost of
capital. For example, if we were to experience a significant delay in our permitting process in the construction of
our fiber networks, the timing of effected cash flows could impact long term growth rates and negatively impact the
income approach, leading to potential impairment. As a result, should our expectations of average projected revenue
growth percentage, average projected EBITDA margin percentage and/or average projected capital expenditures as a
percentage of revenue change, we may experience future impairment to goodwill (while other assumptions remain
constant). Furthermore, a deterioration in market factors such as stock prices or increased interest rates, and/or
declines in acquisition multiples utilized in the market approach could affect the likelihood and amount of potential
impairment.
Liquidity and Capital Resources
Our principal liquidity needs are to fund operating expenses, meet debt service obligations, fund investment
activities, including capital expenditures, and make dividend distributions. Furthermore, following consummation
of our Settlement with Windstream, including entry into the Windstream Leases, we are obligated to make $490.1
million in cash payments to Windstream in equal installments over 20 consecutive quarters beginning the first
month after Windstream’s emergence in accordance with the terms of the Settlement Agreement, and we have
committed to reimburse Windstream for up to an aggregate of $1.75 billion for Growth Capital Improvements in
long-term fiber and related assets made by Windstream through 2029. Uniti’s reimbursement commitment for
Growth Capital Improvements does not require Uniti to reimburse Windstream for maintenance or repair
expenditures (except for costs incurred for fiber replacements to the CLEC MLA leased property, up to $70 million
during the term), and each such reimbursement is subject to underwriting standards. Uniti’s total annual
reimbursement commitments for the Growth Capital Improvements under both Windstream Leases (and under
separate equipment loan facilities) are limited to $125 million in 2020; $225 million per year in 2021 through 2024;
$175 million per year in 2025 and 2026; and $125 million per year in 2027 through 2029.
Our primary sources of liquidity and capital resources are cash on hand, cash provided by operating activities
(primarily from Windstream), available borrowings under our credit agreement by and among the Operating
Partnership, CSL Capital, LLC and Uniti Group Finance 2019 Inc., the guarantors and lenders party thereto and
Bank of America, N.A., as administrative agent and collateral agent (the “Credit Agreement”), and proceeds from
the issuance of debt and equity securities.
As of December 31, 2020, we had cash and cash equivalents of $77.5 million and approximately $450.0 million of
borrowing availability under our Revolving Credit Facility. Subsequent to December 31, 2020, other than the
issuance of the 2029 Notes and repayment of a substantial portion of the 2023 Notes as described below, there have
been no material outlays of funds outside of our scheduled interest and dividend payments. Availability under our
Revolving Credit Facility is subject to various conditions, including a maximum secured leverage ratio of 5.0:1. In
addition, if we incur debt under our Revolving Credit Facility or otherwise such that our total leverage ratio exceeds
6.5:1, our debt instruments would impose restrictions on our ability to pay dividends.
(Thousands)
Cash flow from operating activities:
Net cash provided by operating activities
Year Ended December 31,
2020
2019
$
157,233
$
616,982
Cash provided by operating activities totaled $157.2 million and $617.0 million for the years ended December 31,
2020 and 2019, respectively. Cash provided by operating activities is primarily attributable to our leasing activities,
substantial portion of which is derived from the Windstream Leases.
51
(Thousands)
Cash flow from investing activities:
Acquisition of businesses, net of cash acquired
Bluebird asset acquisition
Proceeds from sale of Uniti Fiber Midwest operations
Windstream asset acquisition
Other capital expenditures
Proceeds from sale of real estate, net of cash
Net cash provided by (used in) investing activities
Year Ended December 31,
2020
2019
$
$
-
-
-
(73,407)
(317,084)
391,885
1,394
$
$
(10,312)
(320,818)
6,400
-
(350,480)
130,429
(544,781)
Cash provided by investing activities for the year ended December 31, 2020 was $1.4 million, which was driven by
proceeds from the sale of our U.S. tower business ($225.1 million), proceeds from the sale of our Midwest fiber
network ($166.9 million), partially offset by capital expenditures ($317.1 million), which primarily related to our
Uniti Fiber and Uniti Leasing businesses for the deployment of network assets but also includes $84.7 million of
Growth Capital Improvements, and expenditures of $73.4 million in connection with the Asset Purchase Agreement.
Cash used in investing activities was $544.8 million for the year ended December 31, 2019, which was driven by
capital expenditures ($350.5 million) and the acquisition of Bluebird fiber network assets ($320.8 million), partially
offset by proceeds related to the sale of Uniti Towers’ Latin American and ground lease businesses and sale of Uniti
Fiber’s Midwest operations ($136.8 million).
(Thousands)
Cash flow from financing activities:
Repayment of senior secured term loan B
Principal payments on debt
Dividends paid
Payments of contingent consideration
Distributions paid to noncontrolling interests
Borrowings under revolving credit facility
Payments under revolving credit facility
Finance lease payments
Payments for financing costs
Settlement Common Stock
Common stock issuance, net of costs
Proceeds from issuance of notes
Proceeds from sale of warrants
Payment for bond hedge option
Employee stock purchase program
Net share settlement
Year Ended December 31,
2020
2019
$
(2,044,728) $
-
(135,676)
(15,713)
(2,322)
170,000
(635,019)
(3,702)
(50,875)
244,550
-
2,250,000
-
-
676
(1,097)
(223,906) $
-
(21,080)
(138,731)
(32,253)
(3,046)
139,000
(203,981)
(4,257)
(49,497)
-
21,641
345,000
50,819
(70,035)
883
(1,834)
32,629
Net cash (used in) provided by financing activities
$
Cash used in financing activities was $223.9 million for the year ended December 31, 2020, which was primarily
driven by the repayment of senior secured term loan B ($2.04 billion), net payments under the Revolving Credit
Facility ($465.0 million), dividend payments ($135.7 million) and payments for financing costs ($50.9 million),
contingent consideration payments ($15.7 million), partially offset by the proceeds from the issuance of the 2025
Secured Notes ($2.25 billion) and the issuance of the Settlement Common Stock ($244.6 million). Cash provided by
financing activities was $32.6 million for the year ended December 31, 2019, which primarily represents the
proceeds from issuance of notes ($345.0 million), proceeds from sale of the Warrants ($50.8 million) and net
proceeds under our ATM Program ($21.6 million). This was mostly offset by dividend payments ($138.7 million),
payment for bond hedge option ($70.0 million), net repayments under the Revolving Credit Facility ($65.0 million),
payments for financing costs ($49.5 million), contingent consideration payments ($32.3 million), principal payments
52
related to the senior secured term loan ($21.1 million) and distributions paid to noncontrolling interests ($3.0
million).
Windstream Master Lease and Windstream Leases
As described in “Overview—Significant Business Developments—Windstream Leases” of this Part II, Item 7
above, on September 18, 2020, in connection with Windstream’s emergence from bankruptcy and the
implementation of the Settlement, Uniti and Windstream bifurcated the Master Lease and entered into the
Windstream Leases that each expire on April 30, 2030. The aggregate initial annual rent under the Windstream
Leases is equal to the annual rent under the Master Lease previously in effect. The Windstream Leases contain
cross-guarantees and cross-default provisions, which will remain effective as long as Windstream or an affiliate is
the tenant under both of the Windstream Leases and unless and until the landlords under the ILEC MLA are
different from the landlords under the CLEC MLA. The Windstream Leases permit Uniti to transfer its rights and
obligations and otherwise monetize or encumber the Windstream Leases, together or separately, so long as Uniti
does not transfer interests in either Windstream Lease to a Windstream competitor.
Pursuant to the Windstream Leases, Windstream (or any successor tenant under a Windstream Lease) has the right
to cause Uniti to reimburse up to an aggregate $1.75 billion for certain growth capital improvements in long-term
fiber and related assets made by Windstream (or the applicable tenant under the Windstream Lease) to certain ILEC
and CLEC properties (the “Growth Capital Improvements”). Uniti’s reimbursement commitment for Growth Capital
Improvements does not require Uniti to reimburse Windstream for maintenance or repair expenditures (except for
costs incurred for fiber replacements to the CLEC MLA leased property, up to $70 million during the term), and
each such reimbursement is subject to underwriting standards. Uniti’s total annual reimbursement commitments for
the Growth Capital Improvements under both Windstream Leases (and under separate equipment loan facilities) are
limited to $125 million in 2020; $225 million per year in 2021 through 2024; $175 million per year in 2025 and
2026; and $125 million per year in 2027 through 2029.
Starting on the first anniversary of each installment of reimbursement for a Growth Capital Improvement, the rent
payable by Windstream under the applicable Windstream Lease will increase by an amount equal to 8.0% (the “Rent
Rate”) of such installment of reimbursement. The Rent Rate will thereafter increase to 100.5% of the prior Rent
Rate on each anniversary of each reimbursement. In the event that the tenant’s interest in either Windstream Lease is
transferred by Windstream under the terms thereof (unless transferred to the same transferee), or if Uniti transfers its
interests as landlord under either Windstream Lease (unless to the same transferee), the reimbursement rights and
obligations will be allocated between the ILEC MLA and the CLEC MLA by Windstream, provided that the
maximum that may be allocated to the CLEC MLA following such transfer is $20 million per year. If Uniti fails to
reimburse any Growth Capital Improvement reimbursement payment or equipment loan funding request as and
when it is required to do so under the terms of the Windstream Leases, and such failure continues for thirty (30)
days, then such unreimbursed amounts may be applied as an offset against the rent owed by Windstream under the
Windstream Leases (and such amounts will thereafter be treated as if Uniti had reimbursed them).
Uniti and Windstream have entered into separate ILEC and CLEC Equipment Loan and Security Agreements
(collectively “Equipment Loan Agreement”) in which Unit will provide up to $125 million (limited to $25 million in
any calendar year) of the $1.75 billion of Growth Capital Improvements commitments discussed above in the form
of loans for Windstream to purchase equipment related to network upgrades or to be used in connection with the
Windstream Leases. Interest on these loans will accrue at 8% from the date of the borrowing. All equipment
financed through the Equipment Loan Agreement is the sole property of Windstream; however, Uniti will receive a
first-lien security interest in the equipment purchased with the loans. If the cost incurred by Windstream (or the
successor tenant under a Windstream Lease) for Growth Capital Improvements in any calendar year exceeds the
annual limit for such calendar year, Windstream (or such tenant, as the case may be) may submit such excess costs
for reimbursement in any subsequent year and such excess costs shall be funded from the annual commitment
amounts in such subsequent period. In addition, to the extent that reimbursements for Growth Capital
Improvements funded in any calendar year during the term is less than the annual limit for such calendar year, the
unfunded amount in any calendar year will carry-over and may be added to the annual limits for subsequent calendar
years, subject to an annual limit of $250 million in any calendar year, except that, during calendar year 2021, Uniti’s
combined total obligation to fund Growth Capital Improvements may exceed $250 million to the extent of any
unfunded excess amounts from calendar year 2020.
53
At-the-Market Common Stock Offering Program
We have an effective shelf registration statement on file with the SEC (the “Registration Statement”) to offer and
sell various securities from time to time. Under the registration statement, we have established the ATM Program to
sell shares of common stock having an aggregate offering price of up to $250 million. The ATM Program
supersedes and replaces the $250 million program we commenced on September 2, 2016, which had approximately
$117.1 million available for issuance upon termination. During the year ended December 31, 2020, we did not
make any sales under the refreshed ATM Program. This program is intended to provide additional financial
flexibility and an alternative mechanism to access the capital markets at an efficient cost as and when we need
financing, including for acquisitions.
UPREIT Operating Partnership Units
During 2017, the Company completed its reorganization (the “up-REIT Reorganization”) to operate through a
customary “up-REIT” structure. Under this structure, the Operating Partnership now holds substantially all of the
Company’s assets and is the direct or indirect parent company of, among others, CSL Capital, LLC, Uniti Group
Finance 2019 Inc. and Uniti Fiber Holdings Inc.
Our UPREIT structure, enables us to acquire properties by issuing to sellers, as a form of consideration, limited
partnership interests in our operating partnership, (commonly called “OP Units”). The limited partner equity
interests in the Operating Partnership are exchangeable on a one-for-one basis for shares of our common stock or, at
our election, cash of equivalent value. We believe that this structure will facilitate our ability to acquire individual
properties and portfolios of properties by enabling us to structure transactions which will defer taxes payable by a
seller while preserving our available cash for other purposes, including the possible payment of dividends. We
issued limited partnership interests as part of the acquisition consideration for the 2017 acquisitions of Hunt
Telecommunications, LLC and Southern Light, LLC.
Senior Notes
At December 31, 2020, the Operating Partnership and certain of its subsidiaries had outstanding $550.0 million
aggregate principal amount of 6.00% Senior Secured Notes due April 15, 2023 (the “2023 Secured Notes”), $2.25
billion aggregate principal amount of 7.875% Senior Secured Notes due February 15, 2025 (the “2025 Secured
Notes” and, together with the 2023 Secured Notes, the “Secured Notes”), $1.11 billion aggregate principal amount
of 8.25% Senior Notes due October 15, 2023 (the “2023 Notes”) and $600 million aggregate principal amount of
7.125% Senior Unsecured Notes due December 15, 2024 (the “2024 Notes”).
The 2025 Secured Notes presently limit our ability to our ability to make cash distributions to our shareholders in
amounts exceeding 90% of our REIT taxable income, determined without regard to the dividends paid deduction
and excluding any capital gains. See “—Dividends” below for additional information.
On February 2, 2021, the Operating Partnership and certain of its subsidiaries issued $1.11 billion aggregate
principal amount of 6.50% Senior Notes due 2029. The net proceeds from the offering were used to fund the tender
offer of substantially all outstanding 2023 Notes, of which $58.8 million remain outstanding. On February 16, 2021,
we issued a notice of redemption to redeem all remaining principal amount of the 2023 Notes on April 15, 2021.
In connection with the up-REIT Reorganization, the Operating Partnership replaced the Company and assumed its
obligations as an obligor under the 2023 Secured Notes, 2023 Notes and the 2024 Notes and Facilities. The
Company subsequently became a guarantor of these series of notes and under the Credit Agreement. The Company
also guarantees the Exchangeable Notes and the 2025 Secured Notes. Separate financial statements of the Operating
Partnership have not been included since the Operating Partnership is not a registrant.
Exchangeable Notes
On June 28, 2019, Uniti Fiber issued $345 million aggregate principal amount of 4.00% Exchangeable Senior Notes
due June 15, 2024. The Exchangeable Notes bear interest at a fixed rate of 4.00% per year, payable semiannually in
54
arrears on June 15 and December 15 of each year, beginning on December 15, 2019. The Exchangeable Notes are
exchangeable into cash, shares of the Company’s common stock, or a combination thereof, at Uniti Fiber’s election.
Credit Agreement
Uniti Group LP, Uniti Group Finance 2019 Inc. and CSL Capital, LLC (the “Borrowers”) are party to the Credit
Agreement, which as of December 31, 2020, provided for a $60.5 million non-extended revolving credit facility that
matures on April 24, 2022 (the “Non-Extended Revolving Credit Facility”) and a $500 million revolving credit facility
extended that, upon receipt of routine regulatory approvals, will mature on December 10, 2024 (the “Extended
Revolving Credit Facility” and together with Non-Extended Revolving Credit facility, the “Revolving Credit Facility”),
which provide us with the ability to obtain revolving loans as well as swingline loans and letters of credit from time to
time. All obligations under the Credit Agreement are guaranteed by (i) the Company and (ii) certain of the Operating
Partnership’s subsidiaries (the “Subsidiary Guarantors”) and are secured by substantially all of the assets of the
Borrowers and the Subsidiary Guarantors.
The Credit Agreement previously provided for a term loan facility, of which all $2.05 billion of outstanding loans was
repaid in full in connection with the issuance of the 2025 Secured Notes in February 2020.
The Borrowers are subject to customary covenants under the Credit Agreement, including an obligation to maintain
a consolidated secured leverage ratio, as defined in the Credit Agreement, not to exceed 5.00 to 1.00. We are
permitted, subject to customary conditions, to incur other indebtedness, so long as, on a pro forma basis after giving
effect to any such indebtedness, our consolidated total leverage ratio, as defined in the Credit Agreement, does not
exceed 6.50 to 1.00 and, if such debt is secured, our consolidated secured leverage ratio, as defined in the Credit
Agreement, does not exceed 4.00 to 1.00. In addition, the Credit Agreement contains customary events of default,
including a cross default provision whereby the failure of the Borrowers or certain of their subsidiaries to make
payments under other debt obligations, or the occurrence of certain events affecting those other borrowing
arrangements, could trigger an obligation to repay any amounts outstanding under the Credit Agreement. In
particular, a repayment obligation could be triggered if (i) the Borrowers or certain of their subsidiaries fail to make
a payment when due of any principal or interest on any other indebtedness aggregating $75.0 million or more, or (ii)
an event occurs that causes, or would permit the holders of any other indebtedness aggregating $75.0 million or
more to cause, such indebtedness to become due prior to its stated maturity. As of December 31, 2020, the
Borrowers were in compliance with all of the covenants under the Credit Agreement.
Borrowings under (a) the Non-Extended Revolving Credit Facility bear interest at a rate equal to either a base rate
plus an applicable margin ranging from 3.75% to 4.25% or a eurodollar rate plus an applicable margin ranging from
4.75% to 5.25% and (b) the Extended Revolving Credit Facility, upon receipt of routine regulatory approvals, will
bear interest at a rate equal to either a base rate plus an applicable margin ranging from 2.75% to 3.50% or a
eurodollar rate plus an applicable margin ranging from 3.75% to 4.50%, in each case, calculated in a customary
manner and determined based on our consolidated secured leverage ratio. We are required to pay a quarterly
commitment fee under the Revolving Credit Facility equal to 0.50% of the average amount of unused commitments
during the applicable quarter (subject to a step-down to 0.40% per annum of the average amount of unused
commitments during the applicable quarter upon achievement of a consolidated secured leverage ratio not to exceed
a certain level), as well as quarterly letter of credit fees equal to the product of (A) the applicable margin with
respect to eurodollar borrowings and (B) the average amount available to be drawn under outstanding letters of
credit during such quarter.
Interest Rate Swaps
We are party to interest rate swap agreements that we entered into to mitigate interest rate risk associated with our
now repaid variable rate term loan facility under the Credit Agreement. These interest rate swaps are designated as
cash flow hedges and have a notional value of $2.02 billion and mature on October 24, 2022. The weighted average
fixed rate paid is 2.105%, and the variable rate received resets monthly to the one-month LIBOR subject to a
minimum rate of 1.0%.
As result of the repayment of the term loan facility in February of 2020 (discussed above), the Company entered into
receive-fixed interest rate swaps (the “Replacement Swaps”) to offset its existing pay-fixed interest rate swaps (the
55
“Existing Swaps”) that were designated as cash flow hedges of interest payments initially associated with the term
loan facility. On February 10, 2020, the Company discontinued hedge accounting on its Existing Swaps as the
hedge accounting requirements were no longer met. Amounts in accumulated other comprehensive (loss) income
associated with the Existing Swaps as of the date of dedesignation, will be reclassified to interest expense as the
hedged interest payments impact earnings. The net effect of these offsetting interest rate swaps will result in a
monthly cash outflow of approximately $1.1 million through October 2022.
Outlook
We anticipate continuing to invest in our network infrastructure across our Uniti Leasing and Uniti Fiber portfolios.
We anticipate declaring dividends for the 2021 tax year to comply with our REIT distribution requirements. We
anticipate that we will partially finance these needs, as well as operating expenses (including our debt service
obligations), from our cash on hand and cash flows provided by operating activities. In December 2020, we amended
the Credit Agreement to increase the commitments under our Revolving Credit Facility that mature on December 10,
2024 from $418 million to $500 million and extended the maturity date to December 10, 2024. We refinanced and
extended the maturity of our 2023 Notes through the issuance of our 2029 Notes. We expect to access the capital
markets to fund Growth Capital Improvements over the term of the Windstream Leases, business operations,
announced investment activities, capital expenditures, debt service and distributions to our shareholders. We are
closely monitoring the equity and debt markets and will seek to access them again promptly when we determine
market conditions are appropriate. Our debt covenants currently do not permit us to incur material additional debt.
The amount, nature and timing of any capital markets transactions will depend on: our operating performance and
other circumstances; our then-current commitments and obligations; the amount, nature and timing of our capital
requirements; any limitations imposed by our current credit arrangements; and overall market conditions. These
expectations are forward-looking and subject to a number of uncertainties and assumptions. If our expectations
about our liquidity prove to be incorrect or we are unable to access the capital markets as we anticipate, we would be
subject to a shortfall in liquidity in the future which could lead to a reduction in our capital expenditures and/or
dividends and, in an extreme case, our ability to pay our debt service obligations. If this shortfall occurs rapidly and
with little or no notice, it could limit our ability to address the shortfall on a timely basis.
In addition to exploring potential capital markets transactions, the Company regularly evaluates market conditions,
its liquidity profile, and various financing alternatives for opportunities to enhance its capital structure. If
opportunities are favorable, the Company may refinance or repurchase existing debt. However, there can be no
assurances that any debt refinancing would be on similar or more favorable terms than our existing arrangements.
This would include the risk that interest rates could increase and/or there may be changes to our existing covenants.
Contractual Obligations
As of December 31, 2020, we had contractual obligations and commitments as follows:
(Millions)
Long-term debt(a)
Interest payments on long-term debt
obligations
Operating leases
Finance leases
Network deployment(b)
Growth capital improvements
Settlement payable
Contingent consideration(c)
Total projected obligations and
commitments
Payments Due by Period
Less than 1
Year
1-3
Years
3-5
Years
More than
5 Years
$
-
$
1,770
$
3,195
$
Total
- $4,965
358
20
7
14
265
98
3
701
32
13
3
450
196
-
311
17
11
-
400
172
-
-
37
46
-
550
-
1,370
106
77
17
1,665
466
3
$
765
$
3,165
$
4,106
$
633 $8,669
56
(a)
Excludes $148.5 million of unamortized discounts on long-term debt and deferred financing costs.
(b) Network deployment purchase commitments are for success-based projects for which we have a signed
customer contract before we commit resources to expand our network.
Cash settled contingent consideration related to the August 31, 2016 acquisition of Tower Cloud, Inc.
(c)
Dividends
We have elected to be taxed as a REIT for U.S. federal income tax purposes. U.S. federal income tax law generally
requires that a REIT distribute annually at least 90% of its REIT taxable income, without regard to the deduction for
dividends paid and excluding net capital gains, and that it pay tax at regular corporate rates to the extent that it
annually distributes less than 100% of its taxable income. Subject to the restrictions imposed by our 7.875% senior
secured notes due 2025, in order to maintain our REIT status, we intend to make dividend payments of all or
substantially all of our taxable income to holders of our common stock out of assets legally available for this
purpose, if and to the extent authorized by our board of directors. Before we make any dividend payments, whether
for U.S. federal income tax purposes or otherwise, we must first meet both our operating requirements and debt
service obligations. If our cash available for distribution is less than our taxable income, we could be required to sell
assets or borrow funds to make cash dividends or we may make a portion of the required dividend in the form of a
taxable distribution of stock or debt securities.
The following table below sets out details regarding our cash dividends on our common stock:
Period
October 1, 2019 - December 31, 2019
January 1, 2020 - March 31, 2020
April 1, 2020 - June 30, 2020
July 1, 2020 - September 30, 2020
October 1, 2020 - December 31, 2020
Payment Date
January 15, 2020
April 15, 2020
July 10, 2020
October 2, 2020
January 4, 2021
$
$
$
$
$
Cash Dividend Per
Share
0.22
0.15
0.15
0.15
0.15
Record Date
December 31, 2019
March 31, 2020
June 26, 2020
September 18, 2020
December 15, 2020
Any dividends must be declared by our Board of Directors, which will take into account various factors including
our current and anticipated operating results, our financial position, REIT requirements, conditions prevailing in the
market, restrictions in our debt documents and additional factors they deem appropriate. Dividend payments are not
guaranteed, and our Board of Directors may decide, in its absolute discretion, at any time and for any reason, not to
pay dividends or to change the amount paid as dividends. In light of the ongoing COVID-19 pandemic,
we may take further measures to conserve cash, which may include a suspension, delay or reduction in our
dividend. In addition, until such time our consolidated net leverage ratio (as defined in the indenture governing the
2025 Secured Notes) is no greater than 5.75 to 1.0, our 2025 Secured Notes generally limit our ability to pay cash
dividends in excess of 90% of our REIT taxable income, determined without regard to the dividends paid deduction
and excluding any net capital gains.
Capital Expenditures
(Thousands)
Capital expenditures:
Leasing(1)
Growth capital improvements
Fiber Infrastructure
Towers
Total capital expenditures
Success
Based Maintenance Integration
Year Ended December 31, 2020
Non-
Network
Total
$ 84,606 $
84,700
184,944
24,156
$378,406 $
- $
-
7,143
6
7,149 $
- $
-
2,840
-
2,840 $
- $
-
2,096
-
84,606
84,700
197,023
24,162
2,096 $ 390,491
(1)
Includes $73.4 million Windstream Asset Purchase Agreement.
We categorize our capital expenditures as either (i) success-based, (ii) maintenance, (iii) integration or (iv) corporate
and non-network. We define success-based capital expenditures as those related to installing existing or anticipated
57
contractual customer service orders. Maintenance capital expenditures are those necessary to keep existing network
elements fully operational. Integration capital expenditures are those made specifically with respect to recent
acquisitions that are essential to integrating acquired companies in our business. We anticipate continuing to invest
in our network infrastructure across our Uniti Leasing and Uniti Fiber businesses and expect that cash on hand and
cash flows provided by operating activities will be sufficient to support these investments. We have the right, but
not the obligation (except for Growth Capital Improvements under the terms of the Windstream Leases),
to reimburse growth capital expenditures in certain of our lease arrangements where we are the lessor.
Uniti’s total annual reimbursement commitments to Windstream for the Growth Capital Improvements under both
Windstream Leases (and under separate equipment loan facilities) are limited to $125 million in 2020; $225 million
per year in 2021 through 2024; $175 million per year in 2025 and 2026; and $125 million per year in 2027 through
2029. If the cost incurred by Windstream (or the successor tenant under a Windstream Lease) for Growth Capital
Improvements in any calendar year exceeds the annual limit for such calendar year, Windstream (or such tenant, as
the case may be) may submit such excess costs for reimbursement in any subsequent year and such excess costs
shall be funded from the annual commitment amounts in such subsequent period. In addition, to the extent that
reimbursements for Growth Capital Improvements funded in any calendar year during the term is less than the
annual limit for such calendar year, the unfunded amount in any calendar year will carry-over and may be added to
the annual limits for subsequent calendar years, subject to an annual limit of $250 million in any calendar year,
except that, during calendar year 2021, Uniti’s combined total obligation to fund Growth Capital Improvements may
exceed $250 million to the extent of any unfunded excess amounts from calendar year 2020. Growth Capital
Improvements are treated as success-based capital improvements based on the rents paid with respect to such
amounts.
If circumstances warrant, we may need to take measures to conserve cash, which may include a suspension, delay or
reduction in success-based capital expenditures. We continually assess our capital expenditure plans in light of
developments the impact COVID-19 has on our business and that of our tenants and customers.
Off Balance-Sheet Arrangements
As of the date of this Annual Report on Form 10-K, we do not have any off-balance sheet arrangements.
Windstream Unaudited Financial Information
The following table presents Windstream’s preliminary estimated unaudited pro forma adjusted results provided to
us by Windstream as of and for the quarters and years ended December 31, 2020 and December 31, 2019, based
upon information available to Windstream. This data is not a comprehensive statement of Windstream’s financial or
operating results as of and for the years ended December 31, 2020 and December 31, 2019, and Windstream's actual
results may differ materially from this preliminary estimated data. Windstream has not yet completed closing its
accounting records for the year ended December 31, 2020, and the audit of its financial statements for such period
has not been completed. During the course of the financial close, the preparation of financial statements and related
notes for the year ended December 31, 2020, additional adjustments to the preliminary estimated financial
information presented below may be necessary, including to present the information in accordance with GAAP. Any
such adjustments may be material. Additionally, Windstream’s financial results remain subject to the finalization of
their fresh start accounting adjustments. Therefore, this data represents estimates that are subject to risks and
uncertainties.
Windstream has provided the below preliminary estimated unaudited pro forma adjusted results, which excludes
revenues from customers contracts and sales of fiber assets transferred to Uniti in conjunction with Windstream’s
emergence from bankruptcy. Accordingly, Windstream revised for all periods presented their historical revenues
and the computations of Adjusted EBITDAR to exclude the effects of revenues and sales transferred to Uniti.
Windstream’s adjusted pro forma results also exclude depreciation and amortization, goodwill impairment charges,
straight-line expense under the Windstream Leases, share-based compensation expense, restructuring and other
charges, and certain other costs.
58
(Millions)
Windstream preliminary unaudited pro forma
financial information
Revenues and sales:
Kinetic
Enterprise
Wholesale
Segment service revenues
Product sales
Total revenues and sales
Contribution margin:
Kinetic
Enterprise
Wholesale
Segment contribution margin
Share expenses (A)
Adjusted EBITDAR (B)
Adjusted capital expenditures (C)
Cash paid for interest on long-term debt obligations
Gross debt (total principal outstanding)
Cash and cash equivalents
Three Months Ended
December 31,
Year Ended December 31,
2020
2019
2020
2019
$
504.8
538.1
75.7
1,118.6
15.4
$ 1,134.0
$
$
$
$
295.7
102.3
54.6
452.6
48.7
403.9
274.9
14.1
$
$
$
$
$
$
503.3
622.9
76.0
1,202.2
20.6
1,222.8
290.4
121.4
51.9
463.7
56.6
407.1
$ 2,018.3
2,262.8
310.2
4,591.3
73.7
$ 4,665.0
$ 1,176.5
435.8
217.7
1,830.0
208.5
$ 1,621.5
249.6
$ 1,001.1
79.6
$
224.1
$ 2,144.2
$
141.9
$
$
$
$
$
$
$
$
2,031.8
2,642.2
320.7
4,994.7
79.2
5,073.9
1,189.1
519.4
219.3
1,927.8
226.3
1,701.5
878.5
349.9
6,099.3
191.8
(A) Shared expenses are not allocated to the segments and primarily consist of accounting and finance, information
technology, engineering, network optimization, legal, human resources, investor relations, and outsourcing
activities that are centrally managed and not monitored by management at a segment level.
(B) Adjusted EBITDAR is earnings before interest expense, income taxes and depreciation and amortization, and
excludes goodwill impairment charges, straight-line expense under the Windstream Leases, share-based
compensation expense, restructuring and other charges, and certain other costs.
(C) For the year ended December 31, 2020, adjusted capital expenditures excludes $20.3 million of claims
settlements at emergence.
On September 21, 2020, Windstream emerged from bankruptcy pursuant to a court approved plan of reorganization.
Although generally accepted accounting principles in the United States of America (“U.S. GAAP”) requires
Windstream to present their operating results for periods prior to September 21, 2020 separate and apart from their
operating results for periods subsequent to September 21, 2020, Windstream has provided Uniti with combined
quarterly and year-to-date operating results in the presentation above. Windstream believes that this combined
presentation provides more meaningful comparisons to historical periods for each of their key performance metrics
of revenues and sales, contribution margin, Adjusted EBITDAR and Adjusted capital expenditures and is useful in
identifying current business trends.
59
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Interest Rate Risk
In fiscal 2020, our primary market risk exposure was interest rate risk with respect to our variable rate indebtedness
under our now repaid term loan facility and our Revolving Credit Facility, which had an aggregate principal amount
of $560.5 million as of December 31, 2020. We entered into interest rate swap agreements in order to mitigate the
interest rate risk inherent in the variable rate term loan facility. As result of the full repayment of the Company’s
term loan facility in February of 2020 (discussed above), the Company entered into receive-fixed interest rate swaps
(the “Replacement Swaps”) to offset its existing pay-fixed interest rate swaps (the “Existing Swaps”) that were
designated as cash flow hedges of interest payments initially associated with the term loan facility. On February 10,
2020, the Company discontinued hedge accounting on its Existing Swaps as the hedge accounting requirements
were no longer met. Amounts in accumulated other comprehensive (loss) income associated with the Existing
Swaps as of the date of dedesignation, will be reclassified to interest expense as the hedged interest payments impact
earnings. The net effect of these offsetting interest rate swaps will result in a monthly cash outflow of
approximately $1.1 million through October 2022. A hypothetical 10% change in interest rates effective at
December 31, 2020, would have had a $1.5 million impact on Uniti’s results of operations for the year ended
December 31, 2020.
An increase in interest rates could make the financing of any acquisition by us more costly. Rising interest rates
could also limit our ability to refinance our debt when it matures or cause us to pay higher interest rates upon
refinancing and increase interest expense on refinanced indebtedness.
60
Item 8. Financial Statements and Supplementary Data.
Uniti Group Inc.
Consolidated Financial Statements
Index to Financial Statements
Report of Independent Registered Public Accounting Firm.............................................................................
62
Page
Uniti Group Inc.
Consolidated Balance Sheets............................................................................................................................
Consolidated Statements of Income .................................................................................................................
Consolidated Statements of Comprehensive Income (Loss) ............................................................................
Consolidated Statements of Shareholders’ Deficit ...........................................................................................
Consolidated Statements of Cash Flows...........................................................................................................
Notes to Consolidated Financial Statements ....................................................................................................
1. Organization and Description of Business .........................................................................................
2. Basis of Presentation ..........................................................................................................................
3. Summary of Significant Accounting Policies ....................................................................................
4. Revenues.............................................................................................................................................
5. Leases .................................................................................................................................................
6. Business Combinations, Asset Acquisitions and Dispositions...........................................................
7. Assets and Liabilities Held for Sale ...................................................................................................
8.
Investment in Unconsolidated Entities...............................................................................................
9. Fair Value of Financial Instruments ...................................................................................................
10. Property, Plant and Equipment.........................................................................................................
11. Derivative Instruments and Hedging Activities ...............................................................................
12. Goodwill and Intangible Assets........................................................................................................
13. Notes and Other Debt .......................................................................................................................
14. Stock-Based Compensation..............................................................................................................
15. Earnings Per Share ...........................................................................................................................
16. Segment Information ........................................................................................................................
17. Commitments and Contingencies.....................................................................................................
18. Accumulated Other Comprehensive Income....................................................................................
19.
Income Taxes....................................................................................................................................
20. Supplemental Cash Flow Information..............................................................................................
21. Capital Stock ....................................................................................................................................
22. Dividends (Distributions) .................................................................................................................
23. Employee Benefit Plan .....................................................................................................................
24. Subsequent Events............................................................................................................................
69
70
71
72
73
74
74
74
75
85
88
93
97
97
98
100
101
102
103
108
110
112
115
118
118
121
121
122
122
123
61
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Uniti Group Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of Uniti Group Inc. and subsidiaries (the Company)
as of December 31, 2020, the related consolidated statements of income, comprehensive income (loss),
shareholders’ deficit, and cash flows for the year ended December 31, 2020, and the related notes and financial
statement schedules I to III (collectively, 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,
2020, and the results of its operations and its cash flows for the year ended December 31, 2020, in conformity with
U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on
criteria established in Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission, and our report dated March 5, 2021 expressed an adverse opinion on
the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is
to express an opinion on these consolidated financial statements based on our audit. We are a public accounting firm
registered with the 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 audit in accordance with the standards of the PCAOB. 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 audit included performing procedures to assess the risks of
material misstatement of the consolidated 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 audit 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 audit provides a reasonable basis for our opinion.
62
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated
financial statements that were communicated or required to be communicated to the audit committee and that: (1)
relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our
especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter
in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the
accounts or disclosures to which they relate.
Fair value of the Fiber Infrastructure reporting unit
As discussed in Notes 3 and 12 to the consolidated financial statements, the Company’s consolidated goodwill
balance was $601.9 million as of December 31, 2020, all of which is associated with the Fiber Infrastructure
segment. The Company performs goodwill impairment testing on an annual basis and whenever events or changes in
circumstances occur that would more likely than not reduce the fair value of the reporting unit below its carrying
amount. The Company estimated the fair value of the Fiber Infrastructure reporting unit using a combination of an
income approach based on the present value of estimated future cash flows and a market approach based on
acquisition multiples paid for fiber companies in recent market transactions. The Company recorded impairment of
goodwill for the Fiber Infrastructure reporting unit of $71.0 million during the year ended December 31, 2020 to
reduce the carrying amount of the reporting unit to estimated fair value.
We identified the evaluation of the fair value of the Fiber Infrastructure reporting unit as a critical audit matter. We
performed a sensitivity analysis to determine the significant assumptions used to estimate the fair value of the
reporting unit, which required challenging auditor judgment. Specifically, forecasted revenue, profit margin, and
capital expenditures were challenging to test as they represent subjective estimates of future operations in uncertain
market and economic conditions. The discount rate and acquisition multiple were also challenging to test as they
represent subjective judgments about the investment market for infrastructure operations and assets. Minor changes
to these assumptions, either individually or in aggregate, could have a significant effect on the Company’s
assessment of the fair value of the reporting unit and the amount of goodwill impairment. Additionally, the audit
effort associated with the evaluation of the fair value of the reporting unit required specialized skills and knowledge.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the
design and tested the operating effectiveness of certain internal controls related to the Company’s reporting unit fair
value determination. This included controls related to forecasted revenue, profit margin, capital expenditures,
discount rate, and acquisition multiple. We evaluated the forecasted revenue and profit margins by comparing them
to peer company analyst reports. We also obtained an understanding of the Company’s intent to carry out particular
courses of action by inspecting their written plans and other relevant documentation, and assessed how the Company
incorporated those planned actions into forecasted revenue, profit margins and capital expenditures. We compared
the Company’s historical revenue, profit margin and capital expenditure forecasts to actual results to assess the
Company’s ability to accurately forecast. We also compared historical actual revenue, profit margin, and capital
expenditures to the forecasted revenue, profit margin, and capital expenditures. We also evaluated whether the
information used in the determination of the fair value of the reporting unit was consistent with other information
used internally, presented to the Board of Directors, and used to develop other externally presented financial
information. In addition, we involved a valuation professional with specialized skills and knowledge, who assisted
in:
•
•
evaluating the Company’s discount rate by comparing it to a discount rate range that was developed using
publicly available market data for comparable entities
assessing the comparable transactions used by management to develop the acquisition multiple, and the
selection of the acquisition multiple used to determine the fair value of the Fiber Infrastructure reporting
unit.
63
Windstream settlement agreement
As discussed in Notes 3, 5, 6 and 17 to the consolidated financial statements, the Company settled its litigation with
Windstream Holdings and Windstream Services, LLC (Windstream) and certain of their creditors effective
September 21, 2020 pursuant to an agreement (the Settlement Agreement), which included modifying and
bifurcating the Master Lease Agreement with Windstream into two separate leases (New Leases). The Settlement
Agreement also included an Asset Purchase Agreement, in which the Company acquired property, plant and
equipment, intangible assets related to contracts and underlying rights agreements, an intangible liability related to a
below market lease, and other assets. Management allocated the total consideration in the arrangement to the
components of the lease modification, litigation settlement, and asset purchase based on their estimated fair values.
The Company determined that a separately identifiable benefit existed for the litigation settlement as it can be
valued independently from the other components of the arrangement. The Company recognized a $650.0 million
settlement expense in the Consolidated Statement of Income for the year ended December 31, 2020 and recognized
property plant and equipment of $170.8 million, intangible assets related to contracts of $59.3 million, and a liability
related to a below-market lease of $195.1 million. Management determined that the terms of the New Leases were at
market terms. This background paragraph relates to the following three critical audit matters.
Separately identifiable benefit of settlement of litigation
We identified the evaluation of whether the settlement of litigation pursuant to the Settlement Agreement is a
separately identifiable benefit, which is distinct from the assets acquired and future lease payments to be made under
the New Leases, as a critical audit matter. Challenging auditor judgment, including specialized skills and
knowledge, was required to evaluate the appropriateness of the methodology and significant assumptions used in
determining that the settlement of litigation is a separately identifiable benefit and should be allocated a portion of
the Settlement Agreement consideration. Specifically, management valued the litigation settlement using an
expected value model with unobservable assumptions regarding potential litigation outcomes.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the
design and tested the operating effectiveness of certain internal controls over the Company’s process to develop and
review the expected value model, including those related to the development of the key assumptions for the potential
litigation outcomes. We evaluated the potential litigation outcomes through discussion with management and
management’s specialists, and inspection of supporting documents. In addition, we involved valuation professionals
with specialized skills and knowledge, who assisted in evaluating the reasonableness of valuation methodology used
by management.
Valuation of assets and liability acquired in the Asset Purchase Agreement
We identified the evaluation of the fair value of property, plant and equipment, intangible assets related to contracts,
and the liability related to a below-market lease assumed in the Asset Purchase Agreement as a critical audit matter.
Subjective auditor judgment was required to evaluate the significant assumptions regarding (1) the replacement cost
assumptions used to value the property, plant and equipment, and (2) the discount rate assumptions used to value the
contracts intangible asset and below-market lease liability, due to limited observable market information. In
addition, the fair value of these assets and the liability were sensitive to possible changes to the significant
assumptions noted above.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the
design and tested the operating effectiveness of certain internal controls over the Company’s acquisition-date
valuation process, including those related to the development of the significant assumptions noted above. We
evaluated the Company’s replacement cost estimate by comparing it to relevant supporting documentation
including, where applicable, engineering records to validate relevant attributes of the assets. We also compared
attributes used in the valuation models to the underlying contracts. In addition, we involved valuation professionals
with specialized skills and knowledge, who assisted in:
64
•
•
comparing the cost estimates used in the valuation to available market data for comparable assets
evaluating the Company’s discount rates by comparing them to a discount rate range that was developed
using publicly available market data for comparable entities.
Fair value of leased assets
We identified the evaluation of the fair value of assets leased to Windstream, including whether the New Leases
were on market terms, as a critical audit matter. Challenging auditor judgment, including specialized skills and
knowledge, was required to evaluate whether the fair value of the assets leased to Windstream used in determining
the lease classification test for the New Leases were reasonable and whether the New Leases reflected fair market
rental rates and terms. Specifically, the replacement cost assumption used to value the assets underlying the New
Leases and for determining whether the terms were at market was challenging to test given its subjectivity and
sensitivity to variation.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the
design and tested the operating effectiveness of certain internal controls over the Company’s leased assets valuation
process, including those related to the development of the replacement cost. We evaluated the Company’s
replacement cost by comparing to relevant support including, where applicable, engineering records to validate
relevant attributes of the assets and to evaluate whether the leases were at market terms. In addition, we involved
valuation professionals with specialized skills and knowledge, who assisted in:
•
•
comparing the cost estimates used in the valuation to available market data for comparable assets
evaluating the implied lease rates of the New Leases by comparing them to a discount rate range that was
developed using publicly available market data for comparable entities.
We have served as the Company’s auditor since 2020.
/s/ KPMG LLP
Dallas, Texas
March 5, 2021
65
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Uniti Group Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited Uniti Group Inc. and subsidiaries’ (the Company) internal control over financial reporting as of
December 31, 2020, based on criteria established in Internal Control Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, because of the effect of the
material weakness, described below, on the achievement of the objectives of the control criteria, the Company has
not maintained effective internal control over financial reporting as of December 31, 2020, based on criteria
established in Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2020, the related consolidated
statements of income, comprehensive income (loss), shareholders’ deficit, and cash flows for the year ended
December 31, 2020, and the related notes and financial statement schedules I to III (collectively, the consolidated
financial statements), and our report dated March 5, 2021 expressed an unqualified opinion on those consolidated
financial statements.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting,
such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial
statements will not be prevented or detected on a timely basis. A material weakness related to ineffective controls
over the annual goodwill impairment assessment, specifically, the control activities over the calculation of the
carrying value to be used in the assessment of goodwill impairment did not operate effectively due to an insufficient
complement of qualified personnel, has been identified and included in management’s assessment. The material
weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2020
consolidated financial statements, and this report does not affect our report on those consolidated financial
statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Managements Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an
opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting
firm registered with the 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit
also included performing such other procedures as we considered necessary in the circumstances. We believe that
our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
66
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
/s/ KPMG LLP
Dallas, Texas
March 5, 2021
67
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Uniti Group Inc.
Opinion on the Financial Statements
We have audited the consolidated balance sheet of Uniti Group Inc. and its subsidiaries (the “Company”) as of
December 31, 2019, and the related consolidated statements of income, of comprehensive income (loss), of
shareholders’ deficit and of cash flows for each of the two years in the period ended December 31, 2019, including
the related notes and schedule of condensed financial information of the Registrant as of December 31, 2019 and for
each of the two years in the period ended December 31, 2019, schedule of valuation and qualifying accounts for
each of the two years in the period ended December 31, 2019, and schedule of real estate investments and
accumulated depreciation for the year ended December 31, 2019 listed in the index appearing under Item 15
(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, 2019,
and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2019
in conformity with accounting principles generally accepted in the United States of America.
Substantial Doubt About the Companys Ability to Continue as a Going Concern
The consolidated financial statements have been prepared assuming that the Company will continue as a going
concern. As discussed in Note 2 (not presented herein) to the consolidated financial statements, the Company’s most
significant customer, Windstream Holdings, Inc., which accounts for approximately 65.0% of consolidated total
revenues for the year ended December 31, 2019, filed a voluntary petition for relief under Chapter 11 of the
Bankruptcy Code, and uncertainties surrounding potential impacts to the Company resulting from Windstream
Holdings, Inc.’s bankruptcy filing raise substantial doubt about the Company’s ability to continue as a going
concern. Management's plans in regard to these matters are also described in Note 2 (not presented herein). The
consolidated financial statements do not include any adjustments that might result from the outcome of this
uncertainty.
Change in Accounting Principle
As discussed in Note 3 to the consolidated financial statements, the Company changed the manner in which it
accounts for leases in 2019.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is
to express an opinion on the Company’s consolidated 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 these consolidated financial statements in accordance with the standards of the PCAOB.
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 the consolidated 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
Little Rock, Arkansas
March 12, 2020
We served as the Company’s auditor from 2014 to 2020.
68
Uniti Group Inc.
Consolidated Balance Sheets
(Thousands, except par value)
Assets:
Property, plant and equipment, net
Cash and cash equivalents
Accounts receivable, net
Goodwill
Intangible assets, net
Straight-line revenue receivable
Other assets, net
Investments in unconsolidated entities
Assets held for sale
Total Assets
Liabilities and Shareholders' Deficit:
Liabilities:
Accounts payable, accrued expenses and other liabilities, net
Settlement payable (Note 17)
Intangible liabilities, net
Accrued interest payable
Deferred revenue
Derivative liability, net
Dividends payable
Deferred income taxes
Finance lease obligations
Contingent consideration
Notes and other debt, net
Liabilities held for sale
Total liabilities
Commitments and contingencies (Note 17)
Shareholders' Deficit:
December 31, 2020
December 31, 2019
$
$
$
$
$
$
3,273,353
77,534
62,952
601,878
390,725
13,107
152,883
66,043
93,343
4,731,818
146,144
418,840
187,886
95,338
995,123
22,897
36,725
10,540
15,468
2,957
4,816,524
55,752
6,804,194
3,409,945
142,813
77,623
690,672
531,979
2,408
161,560
-
-
5,017,000
227,121
-
-
28,800
1,070,671
23,679
43,282
24,431
52,994
11,507
5,017,679
-
6,500,164
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: 231,262 shares at December 31, 2020 and 192,142 at
December 31, 2019
Additional paid-in capital
Accumulated other comprehensive loss
Distributions in excess of accumulated earnings
Total Uniti shareholders' deficit
Noncontrolling interests:
Operating partnership units
Cumulative non-voting convertible preferred stock, $0.01 par value, 3
shares authorized, 1 issued and outstanding
Total shareholders' deficit
Total Liabilities and Shareholders' Deficit
-
-
23
1,209,141
(20,367)
(3,330,455)
(2,141,658)
19
951,295
(23,442)
(2,494,740)
(1,566,868)
69,157
83,704
125
(2,072,376)
4,731,818
$
-
(1,483,164)
5,017,000
$
The accompanying notes are an integral part of these consolidated financial statements.
69
Uniti Group Inc.
Consolidated Statements of Income
Year Ended December 31,
2020
2019
2018
(Thousands, except per share data)
Revenues:
Leasing
Fiber Infrastructure
Tower
Consumer CLEC
Total revenues
Costs and Expenses:
Interest expense, net
Depreciation and amortization
General and administrative expense
Operating expense (exclusive of depreciation,
accretion and amortization)
Settlement expense (Note 17)
Goodwill impairment (Note 3)
Transaction related and other costs
Gain on sale of real estate (Note 6)
Other (income) expense
Total costs and expenses
(Loss) income before income taxes and equity in
earnings (loss) from unconsolidated entities
Income tax (benefit) expense
Equity in earnings (loss) from unconsolidated
entities
Net (loss) income
Net (loss) income attributable to noncontrolling
interests
Net (loss) income attributable to shareholders
Participating securities' share in earnings
Dividends declared on convertible preferred
stock
Amortization of discount on convertible
preferred stock
Net (loss) income attributable to common
shareholders
(Loss) earnings per common share (Note 15):
Basic
Diluted
Weighted-average number of common shares
outstanding
Basic
Diluted
$
$
$
$
$
745,915
314,363
6,112
651
1,067,041
$
716,640
315,605
14,693
10,673
1,057,611
497,128
329,403
104,975
159,337
650,000
71,000
63,875
(86,267)
11,703
1,801,154
(734,113)
(15,203)
98
(718,812)
(12,511)
(706,301)
(1,078)
(9)
-
390,112
405,754
102,900
160,024
-
-
43,708
(28,995)
(31,463)
1,042,040
15,571
4,663
-
10,908
326
10,582
(549)
(656)
(993)
699,847
289,239
14,617
13,931
1,017,634
319,591
451,750
85,198
137,065
-
-
17,410
-
(4,504)
1,006,510
11,124
(5,421)
-
16,545
358
16,187
(2,594)
(2,624)
(2,980)
(707,388) $
8,384
$
7,989
(3.47) $
(3.47) $
0.04
0.04
$
$
0.05
0.04
203,600
203,600
187,358
187,358
176,169
177,071
The accompanying notes are an integral part of these consolidated financial statements.
70
Uniti Group Inc.
Consolidated Statements of Comprehensive Income (Loss)
(Thousands)
Net (loss) income
Other comprehensive income (loss):
Unrealized (loss) gain on derivative
contracts
Changes in foreign currency translation
Interest rate swap termination
Other comprehensive income (loss)
Comprehensive (loss) income
Comprehensive (loss) income attributable to
noncontrolling interest
Comprehensive (loss) income attributable
to common shareholders
Year Ended December 31,
2020
2019
2018
$
(718,812) $
10,908
$
16,545
(7,036)
-
10,155
3,119
(715,693)
(12,467)
(54,612)
(63)
-
(54,675)
(43,767)
(1,128)
24,251
(1,440)
-
22,811
39,356
884
$
(703,226) $
(42,639) $
38,472
The accompanying notes are an integral part of these consolidated financial statements.
71
Uniti Group Inc.
Consolidated Statements of Shareholders’ Deficit
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
(Loss) Income
Distributions
in Excess of
Accumulated
Earnings
Noncontrolling
Interest - OP
Units
Noncontrolling
Interest - Non-
voting
Preferred
Shares
Total
Shareholders'
Deficit
Preferred Stock
Shares Amount
- $
Common Stock
Shares
- 174,851,514 $
Amount
17 $ 644,328 $
7,821 $ (1,960,715 ) $
101,407 $
-
-
-
-
-
-
-
-
-
-
- $
-
-
-
-
-
5,496,763
-
-
-
-
-
-
187,694
-
-
-
-
-
-
-
- 180,535,971 $
-
-
1
-
-
-
-
-
-
-
-
-
109,441
(2,980 )
-
-
-
-
(1,336 )
8,064
-
-
-
-
22,284
-
-
-
-
-
1,859
16,187
-
-
-
(427,656 )
-
(2,624 )
(269 )
-
-
358
-
-
527
-
(9,917 )
-
-
-
18 $ 757,517 $
30,105 $ (2,373,218 ) $
92,375 $
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,176,186
-
-
-
-
666,576
-
8,677,163
-
357,066
645,385
83,287
-
-
-
-
-
-
-
-
-
-
-
-
-
1
-
-
-
-
-
-
-
-
-
-
21,641
-
-
-
(993 )
-
-
(53,547 )
-
-
6,540
-
87,499
(1,834 )
10,808
11,178
884
80,770
(3,499 )
50,819
(70,035 )
-
-
-
-
-
-
-
-
-
-
-
-
-
(61,826 )
10,582
-
-
-
(69,403 )
-
-
(875 )
-
-
-
-
-
-
-
-
-
-
326
-
-
(1,128 )
-
(1,329 )
(6,540 )
-
-
-
-
-
-
-
-
-
-
192,141,634
$
19
$ 951,295
$ (23,442 ) $ (2,494,740 ) $ 83,704
$
-
-
-
-
-
-
390,066
-
-
-
-
-
-
-
-
-
-
3,075
(706,301 )
-
(12,511 )
44
-
-
-
(1,097 )
13,721
-
-
-
-
-
(129,414 )
-
-
-
-
-
(2,080 )
-
-
-
-
-
125
-
-
96,788
38,633,470
231,261,958
$
-
4
23
676
244,546
$ 1,209,141
-
-
-
-
-
$ (20,367 ) $ (3,330,455 ) $ 69,157
-
125
$
676
244,550
$ (2,072,376 )
- $ (1,207,142 )
-
$
-
-
-
1,859
16,545
109,442
(2,980 )
-
22,811
-
(427,656 )
-
(9,917 )
-
(2,624 )
-
(1,605 )
-
8,064
-
- $ (1,493,203 )
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(61,826 )
10,908
21,641
(993 )
(54,675 )
(69,403 )
(1,329 )
-
(875 )
87,500
(1,834 )
10,808
11,178
884
80,770
(3,499 )
50,819
(70,035 )
$ (1,483,164 )
(718,812 )
3,119
(129,414 )
(2,080 )
125
(1,097 )
13,721
(Thousands, except share data)
Balance at December 31, 2017
2018 Activity:
Cumulative effect adjustment for adoption of
new accounting standard
Net income
At-the-market issuance of common stock,
net of offering costs
Amortization of discount on convertible
preferred stock
Other comprehensive income
Common stock dividends
Distributions to noncontrolling interest
Convertible preferred stock dividends
Net share settlement
Stock-based compensation
Balance at December 31, 2018
2019 Activity:
Cumulative effect adjustment for adoption of new
accounting standard
Net income
At-the-market issuance of common stock, net of
offering costs
Amortization of discount on convertible preferred
stock
Other comprehensive income
Common stock dividends declared ($0.37 per
share)
Distributions to noncontrolling interest
Exchange of noncontrolling interest
Convertible preferred stock dividends
Equity settlement convertible preferred stock
Net share settlement
Stock-based compensation
Equity settlement contingent consideration
Issuance of common stock - employee stock
purchase plan
Equity component value of exchangeable note
issuance, net
Deferred tax liability related to exchangeable note
issuance
Sale of common stock warrant
Payment for bond hedge option
Balance at December 31, 2019
2020 Activity:
Net loss
Other comprehensive income
Common stock dividends declared ($0.60 per
share)
Distributions to noncontrolling interest
Cumulative non-voting convertible preferred stock
Net share settlement
Stock-based compensation
Issuance of common stock - employee stock
purchase plan
Settlement Common Stock (Note 17)
Balance at December 31, 2020
The accompanying notes are an integral part of these consolidated financial statements.
72
Uniti Group Inc.
Consolidated Statements of Cash Flows
(Thousands)
Cash flow from operating activities
Net (loss) income
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation and amortization
Amortization of deferred financing costs and debt discount
Write off of deferred financing costs and debt discount
Interest rate swap termination
Deferred income taxes
Equity in (earnings) loss of unconsolidated entities
Distributions of cumulative earnings from unconsolidated entities
Cash paid for interest rate swap settlement
Straight-line rental revenues
Stock-based compensation
Change in fair value of contingent consideration
Goodwill impairment (Note 3)
Gain on sale of real estate
Loss on sale of Uniti Fiber Midwest operations
Loss on asset disposal
Other
Changes in assets and liabilities, net of acquisitions:
Accounts receivable
Other assets
Accounts payable, accrued expenses and other liabilities
Deferred revenue from prepaid rent - Bluebird/Uniti Fiber Midwest
networks (Note 6)
Settlement payable (Note 17)
Net cash provided by operating activities
Cash flow from investing activities
Acquisition of businesses, net of cash acquired
Bluebird asset acquisition
Proceeds from sale of Uniti Fiber Midwest operations
Windstream asset acquisition (Note 6)
NMS asset acquisition
Proceeds from sale of real estate, net of cash
Capital expenditures - other
Net cash provided by (used in) investing activities
Cash flow from financing activities
Repayment of Senior Secured Term Loan B
Principal payment on debt
Dividends paid
Payments of contingent consideration
Proceeds from issuance of Notes
Borrowings under revolving credit facility
Payments under revolving credit facility
Finance lease payments
Payments for financing costs
Settlement Common Stock issuance (Note 17)
Common stock issuance, net of costs
Proceeds from sale of warrants
Payment for bond hedge option
Purchase of noncontrolling interest
Distributions paid to noncontrolling interest
Employee stock purchase plan
Net share settlement
Net cash (used in) provided by financing activities
Effect of exchange rates on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Non-cash investing and financing activities:
Property and equipment acquired but not yet paid
Tenant capital improvements
Receipt of equity method investment value in exchange for assets
Settlement of convertible preferred stock, Series A Shares
Settlement of contingent consideration through non-cash consideration
Exchange of noncontrolling interest through non-cash consideration
2020
Year Ended December 31,
2019
2018
$
(718,812 )
$
10,908
$
16,545
329,403
36,955
73,952
10,155
(13,891 )
(98 )
1,960
(7,818 )
(6,872 )
13,721
7,163
71,000
(86,267 )
-
1,796
(297 )
12,634
(24,141 )
37,850
-
418,840
157,233
-
-
-
(73,407 )
-
391,885
(317,084 )
1,394
(2,044,728 )
-
(135,676 )
(15,713 )
2,250,000
170,000
(635,019 )
(3,702 )
(50,875 )
244,550
-
-
-
-
(2,322 )
676
(1,097 )
(223,906 )
-
(65,279 )
142,813
77,534
15,230
102,396
67,904
-
-
-
$
$
$
$
$
$
$
$
$
$
$
$
$
$
405,754
42,779
-
-
(11,428 )
-
-
-
(208 )
10,808
(28,463 )
-
(28,995 )
2,242
6,891
(435 )
25,592
10,297
(3,260 )
174,500
-
616,982
(10,312 )
(320,818 )
6,400
-
-
130,429
(350,480 )
(544,781 )
-
(21,080 )
(138,731 )
(32,253 )
345,000
139,000
(203,981 )
(4,257 )
(49,497 )
-
21,641
50,819
(70,035 )
-
(3,046 )
883
(1,834 )
32,629
(43 )
104,787
38,026
142,813
17,032
164,742
-
87,500
11,178
6,540
$
$
$
$
$
$
$
451,750
24,614
-
-
(7,385 )
-
-
-
(15,048 )
8,064
(3,721 )
-
-
-
-
7,818
(52,792 )
1,755
41,218
-
-
472,818
(53,669 )
-
-
-
(3,299 )
-
(423,575 )
(480,543 )
-
(21,080 )
(426,094 )
(18,640 )
-
500,000
(140,000 )
(5,946 )
-
-
109,441
-
-
-
(9,917 )
-
(1,605 )
(13,841 )
(173 )
(21,739 )
59,765
38,026
17,901
153,615
-
-
-
-
The accompanying notes are an integral part of these consolidated financial statements.
73
Uniti Group Inc.
Notes to the Consolidated Financial Statements
Note 1. Organization and Description of Business
Uniti Group Inc. (the “Company,” “Uniti,” “we,” “us,” or “our”) was incorporated in the state of Maryland on
September 4, 2014. We are an independent, internally managed real estate investment trust (“REIT”) engaged in the
acquisition and construction of mission critical infrastructure in the communications industry. We are principally
focused on acquiring and constructing fiber, copper and coaxial broadband networks and data centers. We manage
our operations in four separate lines of business: Uniti Fiber, Uniti Towers, Uniti Leasing, and the Consumer CLEC
Business. On June 1, 2020, the Company completed the sale of its Uniti Towers business (see Note 6), and as of the
end of the second quarter of 2020, the Company had substantially completed the wind down of its Consumer CLEC
business. Starting in 2021, we will manage our operations focused on our two primary businesses, Leasing and Fiber
Infrastructure (see Note 16).
The Company operates through a customary “up-REIT” structure, pursuant to which we hold substantially all of our
assets through a partnership, Uniti Group LP, a Delaware limited partnership (the “Operating Partnership”), that we
control as general partner, with the only significant difference between the financial position and results of
operations of the Operating Partnership and its subsidiaries compared to the consolidated financial position and
consolidated results of operations of Uniti is that the results for the Operating Partnership and its subsidiaries do not
include Uniti’s Consumer CLEC segment, which consisted of Talk America Services. The up-REIT structure is
intended to facilitate future acquisition opportunities by providing the Company with the ability to use common
units of the Operating Partnership as a tax-efficient acquisition currency. As of December 31, 2020, we are the sole
general partner of the Operating Partnership and own approximately 98.5% of the partnership interests in the
Operating Partnership.
Note 2. Basis of Presentation and Consolidation
The accompanying Consolidated Financial Statements include all accounts of the Company and, its wholly-owned
and/or controlled subsidiaries, which includes the Operating Partnership. Under the Accounting Standards
Codification 810, Consolidation (“ASC 810”), the Operating Partnership is considered a variable interest entity and
is consolidated in the Consolidated Financial Statements of Uniti Group Inc. as the Company has determined to be
the primary beneficiary. All material intercompany balances and transactions have been eliminated.
ASC 810 provides guidance on the identification of entities for which control is achieved through means other than
voting rights (“variable interest entities” or “VIEs”) and the determination of which business enterprise, if any,
should consolidate the VIEs. Generally, the consideration of whether an entity is a VIE applies when either: (1) the
equity investors (if any) lack (i) the ability to make decisions about the entity’s activities through voting or similar
rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual
returns of the entity; (2) the equity investment at risk is insufficient to finance that entity’s activities without
additional subordinated financial support; or (3) the equity investors have voting rights that are not proportionate to
their economic interests and substantially all of the activities of the entity involve or are conducted on behalf of an
investor with a disproportionately small voting interest. The Company consolidates VIEs in which it is considered
to be the primary beneficiary. The primary beneficiary is defined as the entity having both of the following
characteristics: (1) the power to direct the activities that, when taken together, most significantly impact the VIE’s
performance; and (2) the obligation to absorb losses and right to receive the returns from the VIE that would be
significant to the VIE.
The accompanying Consolidated Financial Statements have been prepared in accordance with U.S. generally
accepted accounting principles (“GAAP”) for financial information set forth in the Accounting Standards
Codification (“ASC”), as published by the Financial Accounting Standards Board (“FASB”), and with the
applicable rules and regulations of the Securities and Exchange Commission (“SEC”).
74
Going Concern
In accordance with Accounting Standards Update ("ASU") 2014-15, Disclosure of Uncertainties about an Entity's
Ability to Continue as a Going Concern (Subtopic 205-40), the Company’s management has evaluated whether there
are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to
continue as a going concern within one year after the accompanying Consolidated Financial Statements are issued,
concluding there are no such conditions or events. The accompanying Consolidated Financial Statements have been
prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the
ordinary course of business.
On September 21, 2020, Windstream Holdings, Inc. (together with Windstream Holdings II, LLC, its successor in
interest, and subsidiaries, “Windstream”) emerged from bankruptcy following its voluntary petition for relief under
Chapter 11 of the Bankruptcy Code. In connection with Windstream’s emergence from bankruptcy, Uniti entered
into several agreements and consummated the transactions, each as described herein, to implement its settlement
(the “Settlement”) with Windstream pursuant to the settlement agreement (the “Settlement Agreement”) dated as of
May 12, 2020 between Uniti and Windstream. Pursuant to the Settlement, Uniti and Windstream agreed to mutual
releases with respect to any and all liability related to any claims and causes of action between them, including those
brought by Windstream and certain of its creditors relating to Windstream’s Chapter 11 proceedings and the master
lease dated as of April 24, 2015 (the “Master Lease”). See Note 17.
Note 3. Summary of Significant Accounting Policies
Use of Estimates—The preparation of financial statements, in accordance with GAAP, requires management to
make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and
disclosure of contingent assets and liabilities. The estimates and assumptions used in the accompanying financial
statements are based upon management’s evaluation of the relevant facts and circumstances as of the date of the
financial statements. Actual results may differ from the estimates and assumptions used in preparing the
accompanying financial statements, and such differences could be material.
Property, Plant and Equipment—Property, plant and equipment is stated at original cost, net of accumulated
depreciation. The Company capitalizes costs incurred in bringing property, plant and equipment to an operational
state, including all activities directly associated with the acquisition, construction, and installation of the related
assets it owns. The Company capitalizes a portion of the interest costs it incurs for assets that require a period of
time to get them ready for their intended use. The amount of interest that is capitalized is based on the average
accumulated expenditures made during the period involved in bringing the assets comprising a network to an
operational state at the Company’s weighted average interest rate during the respective accounting period.
The Company also enters into leasing arrangements providing for the long-term use of constructed fiber that is then
integrated into the Company’s network infrastructure. For each lease that qualifies as a finance lease, the present
value of the lease payments, which may include both periodic lease payments over the term of the lease as well as
upfront payments to the lessor, is capitalized at the inception of the lease and included in property and equipment.
As of December 31, 2020 and 2019, the accumulated amortization of our finance lease assets was $16.8 million and
$24.3 million, respectively. The decrease is primarily attributable to our finance lease assets reclassified to held for
sale. See Note 7.
Certain property, plant and equipment acquired as part of our spin-off from Windstream is depreciated using a group
composite depreciation method. Under this method, when property is retired, the original cost, net of salvage value,
is charged against accumulated depreciation and no immediate gain or loss is recognized on the disposition of the
property. For all other property, which includes amortization of finance lease assets, depreciation is computed using
the straight-line method over the estimated useful life of the respective property. When the property is retired or
otherwise disposed of, the related cost and accumulated depreciation are written-off, with the corresponding gain or
loss reflected in operating results. Construction in progress includes direct materials and labor related to fixed assets
during the construction period. Depreciation begins once the construction period has ceased and the related asset is
placed into service, and the asset will be depreciated over its useful life.
75
Costs of maintenance and repairs to property, plant and equipment subject triple-net leasing arrangements are the
responsibility of our tenant. Costs of maintenance and repairs to property, plant and equipment not subject to triple-
net leasing arrangements are expensed as incurred.
We acquire real property interests from third parties who own land where communications infrastructure assets are
located and desire to monetize the underlying real property. These real property interests entitle us to receive rental
payments from leases on our sites. The financial results of the acquired real property interests are included in the
Leasing segment from the date of acquisition and were not material, individually or in the aggregate, to our results
of operations. Real property interests are recorded in property, plant and equipment on our Consolidated Balance
Sheet.
Tenant Capital Improvements—Our leases with Windstream provides that tenant funded capital improvements
(“TCIs”), defined as maintenance, repair, overbuild, upgrade or replacements to the leased network, including,
without limitation, the replacement of copper distribution systems with fiber distribution systems, automatically
become property of Uniti upon their construction by Windstream. We receive non-monetary consideration related to
the TCIs as they automatically become our property, and we recognize the cost basis of TCIs that are capital in
nature as real estate investments and deferred revenue. We depreciate the real estate investments over their estimated
useful lives and amortize the deferred revenue as additional leasing revenues over the same depreciable life of the
TCI assets. At December 31, 2020 and 2019, the net book value of TCIs recorded as a component of property, plant
and equipment on our Consolidated Balance Sheet was $767.2 million and $698.8 million, respectively. For the
years ended December 31, 2020, 2019 and 2018, we recognized $35.1 million, $29.0 million, and $23.1 million of
revenue and depreciation expense related to TCIs, respectively.
Impairment of Long-Lived Assets—We review long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset group may not be recoverable from future undiscounted
net cash flows we expect the asset group to generate. If the asset group is not fully recoverable, an impairment loss
would be recognized for the difference between the carrying value of the asset group and its estimated fair value
based on discounted net future cash flows. Assets held for sale, if any, are reported at the lower of the carrying
amount or fair value less cost to sell. During the years ended December 31, 2020, 2019 and 2018, there were no
events or changes in circumstances indicating that the carrying amount of any of our assets groups to not be
recoverable from future undiscounted net cash flows we expect the asset groups to generate, and no impairment
losses were recognized.
Asset Retirement Obligations—The Company records obligations to perform asset retirement activities, primarily
including requirements to remove equipment from leased space or customer sites as required under the terms of the
related lease and customer agreements. The fair value of the liability for asset retirement obligations, which
represents the net present value of the estimated expected future cash outlay, is recognized in the period in which it
is incurred and the fair value of the liability can reasonably be estimated. The liability accretes as a result of the
passage of time and related accretion expense is recognized in the Consolidated Statements of Income. The
associated asset retirement costs are capitalized as an additional carrying amount of the related long-lived asset and
depreciated on a straight-line basis over the asset’s useful life. As of December 31, 2020 and 2019, our aggregate
carrying amount of asset retirement obligations totaled $10.7 million and $9.5 million, respectively. During the
years ended December 31, 2020 and 2019, we incurred liabilities of $0.2 million and $0.6 million related to asset
retirement obligations, respectively. During the years ended December 31, 2020, 2019, and 2018, we recognized
$1.3 million, $1.3 million, and $0.9 million of accretion expense related to asset retirement obligations, respectively.
Cash and Cash Equivalents—Cash and cash equivalents include all non-restricted cash held at financial institutions
and other non-restricted highly liquid short-term investments with original maturities of three months or less.
76
Derivative Instruments and Hedging Activities—We account for our derivatives in accordance with FASB ASC
815, Derivatives and Hedging, in which we reflect all derivative instruments at fair value as either assets or
liabilities on our Consolidated Balance Sheet. For derivative instruments that are designated and qualify as hedging
instruments, we record the effective portion of the gain or loss on the hedged instruments as a component of
accumulated other comprehensive income or loss. Any ineffective portion of a derivative’s change in fair value is
immediately recognized within net income. For derivatives that do not meet the criteria for hedge accounting,
changes in fair value are immediately recognized within net income. See Note 9 and Note 11.
Exchangeable Notes and Related Transactions—On June 28, 2019, Uniti Fiber Holdings, Inc. (“Uniti Fiber”), a
subsidiary of the Company, issued $345 million aggregate principal amount of 4.00% Exchangeable Senior Notes
due June 15, 2024 (the “Exchangeable Notes”). The Exchangeable Notes bear interest at a fixed rate of 4.00% per
year, payable semiannually in arrears on June 15 and December 15 of each year, beginning on December 15, 2019.
The Exchangeable Notes are exchangeable into cash, shares of the Company’s common stock, or a combination
thereof, at Uniti Fiber’s election. In accordance with ASC 470-20, Debt Debt with Conversion and Other Options,
because the conversion feature in the Exchangeable Notes is not bifurcated pursuant to ASC 815, Derivatives and
Hedging, and because the conversion can be settled in cash, shares, or a combination thereof, the Exchangeable
Notes were separated into a liability component and an equity component in a manner that reflects Uniti Fiber’s
non-convertible debt borrowing rate. The carrying amount of the liability component was calculated by measuring
the fair value of a similar liability that does not have an associated conversion feature. See Note 13.
In connection with the offering of the Exchangeable Notes, Uniti Fiber entered into exchangeable note hedge
transactions with respect to the Company’s common stock (the “Note Hedge Transactions”) with certain of the
Initial Purchasers (as defined in Note 13) or their respective affiliates (collectively, the “Counterparties”). In
addition, the Company entered into warrant transactions to sell to the Counterparties warrants (the “Warrants”) to
acquire, subject to anti-dilution adjustments, up to approximately 27.8 million shares of the Company’s common
stock in the aggregate at an exercise price of $16.42 per share. The warrant transactions may have a dilutive effect
with respect to the Company’s common stock to the extent the market price per share of the Company’s common
stock exceeds the strike price of the Warrants. While the Note Hedge Transactions and the Warrants meet the
definition of a derivative in ASC 815-10-15-83, they each meet the equity scope exception specified in ASC 815-10-
15-74(a); as such, the Warrants and the Notes Hedge Transactions are not accounted for as derivatives that must
be remeasured each reporting period and instead, are recorded in stockholders’ deficit. See Note 11.
Intangible Assets—Intangible assets are presented in the financial statements at cost less accumulated amortization
and are amortized using the straight-line method over their estimated useful lives.
Foreign Currency Translation—The financial statements of our international subsidiaries whose functional currency
is the local currency, and includes the Mexican Peso and Colombian Peso, are translated into U.S. dollars using the
exchange rate at the balance sheet date for assets and liabilities and the weighted average exchange rate for the
applicable period for revenues, expenses, gains and losses. Translation adjustments are recorded as a separate
component of comprehensive income in stockholders’ deficit. On April 2, 2019, the Company ceased transactions
involving foreign currencies with the completed sale of the Uniti Towers’ Latin America business (see Note 6),
which included our international subsidiaries.
Transaction Related and Other Costs—The Company expenses non-capitalizable transaction related and other costs
in the period in which they are incurred and services are received. Transaction related costs include incremental
acquisition pursuit, transaction and integration costs, including unsuccessful acquisition pursuit costs. Pursuit and
transaction costs include professional services (legal, accounting, advisory, regulatory, etc.), finder’s fees, travel
expenses, and other direct expenses associated with a business acquisition. Integration costs include direct costs
necessary to integrate an acquired business, including professional services, systems and data conversion, severance
and retention bonuses payable to employees of an acquired business. In addition, other costs, such as costs incurred
as a result of Windstream’s bankruptcy filing, costs associated with Windstream’s claims against us (see Note 17),
and costs associated with the implementation of our new enterprise resource planning system are included within
this line item on the Consolidated Statements of Income.
Settlement Expense—As described in Note 17, on July 25, 2019, in connection with Windstream’s bankruptcy,
Windstream Holdings and Windstream Services filed a complaint with the U.S. Bankruptcy Court for the Southern
77
District of New York (the “Bankruptcy Court”) in an adversary proceeding against Uniti and certain of its affiliates.
During the second quarter of 2020, we estimated that $650.0 million of the consideration paid to Windstream should
be classified as settlement of litigation, and therefore, recorded a $650.0 million charge. The charge represented our
estimated fair value of the litigation settlement component of the Settlement.
Debt Issuance Costs—The Company recognizes debt issuance costs related to a recognized debt liability as a direct
deduction from the carrying amount of the debt liability, consistent with debt discounts. The costs, which include
underwriting, legal, and other direct costs related to the issuance of debt, are amortized over the contractual term of
the debt using the effective interest method.
Revenue Recognition— As discussed in “Leases” in this Note 3, the Company adopted ASU No. 2016-02, Leases
(“ASC 842”) on January 1, 2019. Prior to the adoption of ASC 842, the Company recognized leasing revenues on a
straight-line basis over the applicable lease term when collectability is reasonably assured. Recognizing leasing
income on a straight-line basis generally results in recognized revenues during the first half of the lease term in
excess of cash amounts contractually due from our tenants, creating a straight-line rent receivable.
We lease certain assets to Windstream under a triple-net leases, whereby Windstream is responsible for the costs
related to operating the Distribution Systems, including property taxes, insurance and maintenance and repair costs.
As a result, we do not record an obligation related to the payment of property taxes or insurance, as Windstream
makes direct payments to the taxing authorities and insurance carriers, respectively.
The Company adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“Topic 606”) on
January 1, 2018. See Note 4 for the Company’s accounting policy on recognizing revenue accounted for inside the
scope of Topic 606.
We are exposed to credit losses primarily through our trade receivables. We assess ability to pay for certain
customers by considering a variety of factors, such as the customer’s established credit rating, if available, and our
assessment of creditworthiness. We determine the allowance for credit losses on accounts receivable using a
combination of specific reserves for accounts that are deemed to exhibit credit loss indicators and general reserves
that are determined using loss rates based on historical experience and economic expectations. We update our
estimate of credit loss reserves quarterly, considering recent write-offs, collections information and underlying
economic expectations. The allowance for credit losses is recorded in accounts receivable, net on our Consolidated
Balance Sheets. At December 31, 2020 and 2019, our allowance for credit losses was $2.9 million and $2.7
million, respectively. Credit losses for the years ended December 31, 2020, 2019 and 2018 were $1.8 million, $1.6
million and $1.5 million, respectively.
Straight-Line Revenue Receivable—We have evaluated the collectability of our straight-line revenue receivables in
accordance with the provisions of ASC 842. The adoption of ASC 842 on January 1, 2019 superseded prior
guidance regarding the evaluation of collectability of lease receivables, including straight-line revenue receivables.
At the date of adoption, due to uncertainties surrounding Windstream’s operations and liquidity, including
uncertainties surrounding the outcome of Windstream’s pending litigation, we concluded that it was not probable
that we would collect all future payments due to the Company over the initial term of the Master Lease. As a result,
we reflected the write off of the straight-line revenue balance as of January 1, 2019 as a $61.5 million adjustment to
equity resulting from the change in accounting standard. Upon Windstream’s emergence from bankruptcy in
September 2020, we re-evaluated the collectability of the Windstream Leases (as described in Note 5), determining
that it was probable that we would collect all future payments due to the company over the initial term of the
Windstream Leases; therefore, we account for the Windstream Leases on a straight-line basis.
Leases—Effective January 1, 2019, we account for leases in accordance with ASC 842. The standard requires
lessees to apply a dual approach, classify leases as either finance or operating leases based on the principle of
whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether
lease expense is comprised of amortization on the right-of-use (“ROU”) asset and interest expense recognized based
on an effective interest method, or as a single lease cost recognized on a straight-line basis over the term of the lease,
respectively. A lessee is also required to record an ROU asset and a lease liability for all leases with a term of
greater than 12 months regardless of their classification. The accounting for lessors remains largely unchanged,
with exception of how collectability of future lease payments is evaluated and the impact on revenue recognition.
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Leases with a term of 12 months or less will be accounted for consistent with existing guidance for operating leases
today.
We determine if an arrangement is a lease at contract inception. A lease exists when a contract conveys to the
customer the right to control the use of identified property, plant, or equipment for a period of time in exchange for
consideration.
We enter into lease contracts including ground, towers, equipment, office, colocation and fiber lease arrangements,
in which we are the lessee, and service contracts that may include embedded leases. Operating leases where we are
the lessor are included in Leasing, Fiber Infrastructure and Tower revenues on our Consolidated Statements of
Income.
From time to time we may enter into direct financing lease arrangements that include (i) a lessee obligation to
purchase the leased equipment at the end of the lease term, (ii) a bargain purchase option, (iii) a lease term having a
duration that is for the major part of the remaining economic life of the leased equipment or (iv) provides for
minimum lease payments with a present value amounting to substantially all of the fair value of the leased asset at
the date of lease inception.
ROU assets and lease liabilities related to operating leases where we are the lessee are included in other assets and
accounts payable, accrued expenses and other liabilities, respectively, on our Consolidated Balance Sheets. The
lease liabilities are initially and subsequently measured at the present value of the unpaid lease payments at the lease
commencement date.
ROU assets and lease liabilities related to finance leases where we are the lessee are included in property, plant and
equipment, net and finance lease obligations, respectively, on our Consolidated Balance Sheets. The lease liabilities
are initially measured in the same manner as operating leases and are subsequently measured at amortized cost using
the effective interest method. ROU assets for finance leases are amortized on a straight-line basis over the
remaining lease term.
Key estimates and judgments include how we determined (i) the discount rate we use to discount the unpaid lease
payments to present value, (ii) lease term and (iii) lease payments.
i.
ii.
iii.
ASC 842 requires a lessor to discount its unpaid lease payments using the interest rate implicit in the lease
and a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate
cannot be readily determined, its incremental borrowing rate. As we generally do not know the implicit rate
for our leases where we are the lessee, we use our incremental borrowing rate based on the information
available at commencement date in determining the present value of lease payments. Our incremental
borrowing rate for a lease is the rate of interest we would have to pay on a collateralized basis to borrow an
amount equal to the lease payments under similar terms.
The lease term for all of our leases includes the noncancellable period of the lease plus any additional
periods covered by either a lessee option to extend (or not to terminate) the lease that the lessee is
reasonably certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor.
Lease payments included in the measurement of the lease asset or liability comprise the following: (i) fixed
payments (including in-substance fixed payments), (ii) variable payments that depend on index or rate
based on the index or rate at lease commencement, and (iii) the exercise price of a lessee option to purchase
the underlying asset if the lessee is reasonably certain to exercise.
For operating leases where we are the lessor, we continue recognizing the underlying asset and depreciating it over
its estimated useful life. Lease income is recognized on a straight-line basis over the lease term. Leasing revenue is
not recognized when collection of all contractual rents over the term of the agreement is not probable. When
collection is not probable, the lessee is placed on non-accrual status and Leasing revenue is recognized when cash
payments are received.
79
Where we are the lessee, the ROU asset is initially measured at the initial amount of the lease liability adjusted for
lease payments made at or before the lease commencement date, plus any initial direct costs incurred less any lease
incentives received.
For operating leases, the ROU asset is subsequently measured throughout the lease term at the carrying amount of
the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized
balance of lease incentives received. Lease expense for lease payments is recognized on a straight-line basis over the
lease term.
For finance leases, the ROU asset is subsequently amortized using the straight-line method from the lease
commencement date to the earlier of the end of its useful life or the end of the lease term unless the lease transfers
ownership of the underlying asset to us, or we are reasonably certain to exercise an option to purchase the
underlying asset. In those cases, the ROU asset is amortized over the useful life of the underlying asset.
Amortization of the ROU asset is recognized and presented separately from interest expense on the lease liability.
Variable lease payments associated with our leases are recognized when the event, activity, or circumstance in the
lease agreement on which those payments are assessed occurs. Variable lease payments are presented within
Leasing, Fiber Infrastructure and Tower revenues and general and administrative expense and operating expense in
our Consolidated Statements of Income in the same line item as revenue arising from fixed lease payments
(operating leases where we are the lessor) and expense arising from fixed lease payments (operating leases where we
are the lessee) or amortization of the ROU asset (finance leases), respectively.
We monitor for events or changes in circumstances that require a reassessment of a lease. When a reassessment
results in the remeasurement of a lease liability, a corresponding adjustment is made to the carrying amount of the
corresponding ROU asset unless doing so would reduce the carrying amount of the ROU asset to an amount less
than zero. In that case, the amount of the adjustment that would result in a negative ROU asset balance is recorded in
general and administrative and operating expense in our Consolidated Statements of Income.
We have lease agreements which include lease and nonlease components. For both leases where we are a lessor and
leases where we are a lessee, we have elected to combine lease and nonlease components for all lease contracts.
Nonlease components that are combined with lease components are primarily maintenance services related to the
leased asset. Where we are the lessor, we determine whether the lease or nonlease component is the predominant
component on a case-by-case basis. For all existing leases where we are the lessor, the practical expedient in ASC
Topic 842 has been applied to all combined components.
We have elected not to recognize ROU assets and lease liabilities for all short-term leases that have a lease term of
12 months or less. We recognize the lease payments associated with our short-term leases as an expense on a
straight-line basis over the lease term.
We have elected to exclude sales taxes from lease payments in arrangements where we are a lessor.
We adopted ASC 842 using a modified retrospective transition approach as of the effective date as permitted by the
amendments in ASU 2018-11, Leases (Topic 842): Target Improvements, which provides an alternative modified
retrospective transition method. As a result, we were not required to adjust our comparative period financial
information for effects of the standard or make the new required lease disclosures for periods before the date of
adoption (i.e. January 1, 2019). We have elected to adopt the package of transition practical expedients and,
therefore, have not reassessed (i) whether existing or expired contracts contain a lease, (ii) lease classification for
existing or expired leases or (iii) the accounting for initial direct costs that were previously capitalized. We
elected the practical expedient to use hindsight for leases existing at the adoption date. Further, we elected to
adopt the amendments in ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842, which
permits an entity to elect an optional transaction practical expedient to not evaluate land easements that exist or
expire before the Company’s adoption of ASC 842 and that were not previously accounted for as leases under ASC
840, Leases (“ASC 840”).
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In connection with the adoption of ASC 842, we have recorded an adjustment to equity of $63.2 million, net of tax
for the cumulative effect from a change in accounting standard. Of this amount, $61.5 million related to the write-
off of the Master Lease straight-line revenue receivable, and $1.7 million relates to the establishment of the ROU
assets and lease liabilities.
Stock-Based Compensation—We account for stock-based compensation using the fair value method of accounting.
We have determined that our stock-based payment awards granted in exchange for employee services qualify as
equity classified awards, which are measured based on the fair value of the award on the date of the grant. The fair
value of restricted stock-based payments is based on the market value of our common stock on the date of grant. The
fair value of performance-based awards, which have performance conditions, is based on a Monte Carlo simulation.
The fair value of all stock-based compensation is recognized over the period during which an employee is required
to provide services in exchange for the award. See Note 14.
Income Taxes—We elected on our initial U.S. federal income tax return to be treated as a REIT under the Internal
Revenue Code of 1986, as amended (the “Code”). To qualify as a REIT, we must distribute at least 90% of our
annual REIT taxable income, determined without regard to the dividends paid deduction and excluding any capital
gains, to shareholders, and meet certain organizational and operational requirements, including asset holding
requirements. As a REIT, we will generally not be subject to U.S. federal income tax on income that we distribute as
dividends to our shareholders. If we fail to qualify as a REIT in any taxable year, we will be subject to U.S. federal
income tax, including any applicable alternative minimum tax for open taxable years through 2017, on our taxable
income at regular corporate income tax rates, and we could not deduct dividends paid to our shareholders in
computing taxable income. Any resulting corporate liability could be substantial and could materially and adversely
affect our net income and net cash available for distribution to shareholders. Unless we were entitled to relief under
certain Code provisions, we also would be disqualified from reelecting to be taxed as a REIT for the four taxable
years following the year in which we failed to qualify as a REIT.
Subject to the restrictions imposed by our 7.875% senior secured notes due 2025 (see Note 13), our ability to make
cash distributions to our shareholders in amounts exceeding 90% of our good faith estimate, as of the date on which
the first quarterly dividend for the relevant year is declared, of our REIT taxable income for such year, determined
without regard to the dividends paid deduction and excluding any capital gains, until we reduce our net leverage
ratio. As a result, we may be required to record a provision in our Consolidated Financial Statements for U.S.
federal income taxes related to the activities of the REIT and its passthrough subsidiaries for any undistributed
income. We are subject to the statutory requirements of the locations in which we conduct business, and state and
local income taxes are accrued as deemed required in the best judgment of management based on analysis and
interpretation of respective tax laws.
We have elected to treat the subsidiaries through which we operate Uniti Fiber and Talk America, as well as certain
portions of Uniti Towers, as taxable REIT subsidiaries (“TRSs”). TRSs enable us to engage in activities that result
in income that does not constitute qualifying income for a REIT. Our TRSs are subject to U.S. federal, state and
local corporate income taxes.
Deferred tax assets and liabilities are recognized under the asset and liability method for the estimated future tax
consequences attributable to differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax balances are adjusted to reflect tax rates based on currently
enacted tax laws, which will be in effect in the years in which the temporary differences are expected to reverse. The
effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the
period of the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax
assets unless it is more likely than not that such assets will be realized.
The Company is subject to restrictions on distributions to its shareholders based on our 7.875% senior secured notes
due 2025. The restrictions permit the Company to make the minimum required distribution to maintain its status as a
REIT, which is limited to 90% of our REIT taxable income. The restrictions will remain in place until the
Company’s net leverage ratio (as defined) is below 5.75 : 1.00.
We recognize the benefit of tax positions that are "more likely than not" to be sustained upon examination based on
their technical merit. The benefit of a tax position is measured at the largest amount that has a greater than 50
81
percent likelihood of being realized upon ultimate settlement. If applicable, we will report tax-related penalties and
interest expense as a component of income tax expense. We currently have unrecognized tax benefits of $1.7 million
recorded in deferred income taxes on our Consolidated Balance Sheet.
The Company will be subject to a federal corporate level tax on any gain recognized from the sale of assets
occurring within a five year recognition period after the Spin-Off up to the amount of the built in gain that existed on
April 24, 2015, which is based on the fair market value of the assets in excess of the Company’s tax basis as of such
date.
Business Combinations and Asset Acquisitions—In accordance with ASC 805, Business Combinations, we apply
the acquisition method of accounting for acquisitions meeting the definition of a business combination or asset
acquisition, where assets acquired and liabilities assumed are recorded at fair value at the date of each acquisition,
and the results of operations are included with those of the Company from the dates of the respective acquisitions.
The fair value of the acquired assets and liabilities are estimated using the income, market and/or cost approach.
The income approach utilizes the present value of estimated future cash flows that a business or asset can be
expected to generate, while under the market approach, the fair value of an asset or business reflects the price at
which comparable assets are purchased under similar circumstances. Inherent in our preparation of cash flow
projections are significant assumptions and estimates derived from a review of operating results, business plans,
expected growth rates, capital expenditure plans, cost of capital and tax rates. We also make certain forecasts about
future economic conditions, interest rates and other market data. Many of the factors used in assessing fair value are
outside the control of management. Small changes in these assumptions or estimates could materially affect the cash
flow projections, and therefore could affect the estimated fair value. Impacts of these assumptions or estimates
include customer retention, execution of our business plans, which impact growth, cost escalation impacting margin,
the level of capital expenditures required to sustain our growth and market factors, including interest rate and stock
price fluctuations, impacting our cost of capital.
For acquisitions meeting the definition of a business combination, any excess of the purchase price paid by the
Company over the amounts recognized for assets acquired and liabilities assumed is recorded as goodwill. ASC 805
also requires acquirers to, among other things, estimate the acquisition date fair value of any contingent
consideration and recognize any subsequent changes in the fair value of contingent consideration in earnings. When
provisional amounts are initially recorded, the Company continues to evaluate acquisitions for a period not to exceed
one year after the applicable acquisition date of each transaction to determine whether any additional adjustments
are needed to the allocation of the purchase price paid for the assets acquired and liabilities assumed.
For acquisitions meeting the definition of an asset acquisition, the fair value of the consideration transferred,
including transaction costs, is allocated to the assets acquired and liabilities assumed based on their relative fair
values. There are significant judgments and estimates used in determining the fair values of the assets acquired and
liabilities assumed, which include assumptions with respect to items such as replacement cost, land value,
assemblage factor, discount rate, lease-up period, implied rents per strand mile, and useful life. No goodwill is
recognized in an asset acquisition.
Noncontrolling Interest—The limited partner equity interests in our operating partnership are exchangeable on a
one-for-one basis for shares of our common stock or, at our election, cash of equivalent value. All of the limited
partner equity interests in our operating partnership not held by the Company are reflected as noncontrolling
interests. In the Consolidated Statements of Income, we allocate net income (loss) attributable to noncontrolling
interests to arrive at net income (loss) attributable to shareholders based on their proportionate share.
For transactions that result in changes to the Company's ownership interest in our operating partnership, the carrying
amount of noncontrolling interests is adjusted to reflect such changes. The difference between the fair value of the
consideration received or paid and the amount by which the noncontrolling interest is adjusted is reflected as an
adjustment to additional paid-in capital on the Consolidated Balance Sheets.
Investments in Unconsolidated Entities—We report our investments in unconsolidated entities under the equity
method of accounting. We adjust our investments in unconsolidated entities for additional contributions made,
distributions received as well as our share of the investees’ earnings or losses, which are reported on a 30-day lag for
the investment in BB Fiber Holdings LLC (“Fiber Holdings”) and on a 90-day lag for the investment in Harmoni
82
Towers LP (“Harmoni”), and are included in equity in earnings from unconsolidated entities in our Consolidated
Statements of Income (Loss). See Note 8.
Goodwill—As of December 31, 2020 and 2019, all of our goodwill is included in our Fiber Infrastructure segment.
Goodwill is recognized for the excess of purchase price over the fair value of net assets of businesses acquired.
Goodwill is reviewed for impairment at least annually. In accordance with ASC 350-20, Intangibles-Goodwill and
Other, we evaluate goodwill for impairment between annual impairment tests if an event occurs or circumstances
change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Unless
circumstances otherwise dictate, the annual impairment test is performed in the fourth quarter. Application of
the goodwill impairment test requires significant judgment, including: the identification of reporting units;
assignment of assets and liabilities to reporting units; and assignment of goodwill to reporting units. As a result of
our 2019 annual goodwill impairment test, we concluded the implied fair value of our Fiber Infrastructure reporting
unit was in excess of its carrying value by less than 2%.
We estimate the fair value of our reporting units (which are our segments) using a combination of an income
approach based on the present value of estimated future cash flows and a market approach based on market data of
comparable businesses and acquisition multiples paid in recent transactions. We evaluate the appropriateness of
each valuation methodology in determining the weighting applied to each methodology in the determination of the
concluded fair value. If the carrying value of a reporting unit's net assets is less than its fair value, no indication of
impairment exists. If the carrying amount of the reporting unit is greater than the fair value of the reporting unit, an
impairment loss must be recognized for the excess and recorded in the Consolidated Statements of Income not to
exceed the carrying value of goodwill.
We performed our goodwill impairment analysis during the fourth quarter of 2020. As a result of increased capital
expenditure investments in dark fiber and small cell projects and less than anticipated cash flow growth, we
concluded that it was more likely than not that the fair value of the Fiber Infrastructure reporting unit, estimated
using a combination of the income approach and market approach, is less that its carrying amount. Accordingly, we
recorded a $71 million goodwill impairment in the Fiber Infrastructure reporting unit. During the years ended
December 31, 2019 and 2018, no impairment losses were recognized.
Inherent in our preparation of cash flow projections are significant assumptions and estimates derived from a review
of our operating results and business plans, which includes expected revenue and expense growth rates, capital
expenditure plans and cost of capital. In determining these assumptions, we consider our ability to execute on our
plans, future economic conditions, interest rates and other market data. Many of the factors used in assessing fair
value are outside the control of management, and these assumptions and estimates may change in future periods.
Small changes in these assumptions or estimates could materially affect our cash flow projections, and therefore
could affect the likelihood and amount of potential impairment in future periods. Potential events that could
negatively impact these assumptions or estimates may include customer losses or poor execution of our business
plans, which impact revenue growth, cost escalation impacting margin, the level of capital expenditures required to
sustain our growth and market factors, including stock price fluctuations and increased rates, impacting our cost of
capital. For example, if we were to experience a significant delay in our permitting process in the construction of
our fiber networks, the timing of effected cash flows could impact long term growth rates and negatively impact the
income approach, leading to potential impairment. As a result, should our expectations of average projected revenue
growth percentage, average projected EBITDA margin percentage and/or average projected capital expenditures as a
percentage of revenue change, we may experience future impairment to goodwill (while other assumptions remain
constant). Furthermore, a deterioration in market factors such as stock prices or increased interest rates, and/or
declines in acquisition multiples utilized in the market approach could affect the likelihood and amount of potential
impairment.
Earnings per Share—Outstanding restricted stock awards that contain rights to non-forfeitable dividends are deemed
to be participating securities, requiring the application of the two-class method of computing basic and dilutive
earnings per share.
Basic earnings per share includes only the weighted average number of common shares outstanding during the
period. Dilutive earnings per share includes the weighted average number of common shares and the dilutive effect
83
of restricted stock and performance-based awards outstanding during the period, when such awards are dilutive. See
Note 15.
Concentration of Credit Risks—Revenue under the Master Lease and the Windstream Leases provided 65.8% of our
revenue for the year ended December 31, 2020, 65.0% of our revenue for the year ended December 31, 2019, and
68.2% of our revenue for the year ended December 31, 2018. Because a substantial portion of our revenue and cash
flows are derived from lease payments by Windstream pursuant to the Windstream Leases, there could be a material
adverse impact on our consolidated results of operations, liquidity, financial condition and/or ability to pay
dividends and service debt if Windstream were to default under the Windstream Leases or otherwise experiences
operating or liquidity difficulties and becomes unable to generate sufficient cash to make payments to us.
Prior to its emergence from bankruptcy on September 21, 2020, Windstream was a publicly traded company subject
to the periodic filing requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Windstream historic filings through their quarter ended June 30, 2020 can be found at www.sec.gov. On September
22, 2020, Windstream filed a Form 15 to terminate all filing obligations under Sections 12(g) and 15(d) under the
Exchange Act. Windstream has posted certain information regarding its fourth quarter and full year 2020 results on
the investor relations page of its website, which can be found at https://investor.windstream.com. Neither
Windstream filings nor the information available on the investor relations page of its website are incorporated by
reference in this Annual Report on Form 10-K.
We monitor the credit quality of Windstream through numerous methods, including by (i) reviewing credit ratings of
Windstream by nationally recognized credit agencies, (ii) reviewing the financial statements of Windstream that are
required to be delivered to us pursuant to the Windstream Leases, (iii) monitoring new reports regarding
Windstream and its business, (iv) conducting research to ascertain industry trends potentially affecting Windstream,
(v) monitoring Windstream’s compliance with the terms of the Windstream Leases and (vi) monitoring the
timeliness of its payments under the Windstream Leases.
As of the date of this Annual Report on Form 10-K, Windstream is current on all lease payments. We note that in
August 2020, Moody’s Investor Service assigned a B3 corporate family rating with a stable outlook to Windstream
in connection with its post-emergence exit financing. At the same time, S&P Global Ratings assigned Windstream a
B- issuer rating with a stable outlook. These ratings were both upgrades from Windstream’s pre-bankruptcy
ratings. In order to assist us in our continuing assessment of Windstream’s creditworthiness, we periodically receive
certain confidential financial information and metrics from Windstream.
Reclassifications—Certain prior year asset categories and related amounts in Note 5 have been reclassified to
conform with current year presentation.
Recently Issued Accounting Pronouncements
On June 16, 2016, the FASB issued ASU 2016-13, Financial Instruments Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which amends the accounting for credit
losses affecting loans, debt securities, trade receivables, net investments in leases, and any other financial asset not
excluded from the scope that have the contractual right to receive cash. We adopted ASU 2016-13 effective January
1, 2020, and there was no material impact on our financial statements and related disclosures.
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-
20) and Derivatives and Hedging - Contracts in Entitys Own Equity (Subtopic 815-40): Accounting for Convertible
Instruments and Contracts in an Entitys Own Equity (“ASU 2020-06”), which simplifies the accounting for certain
financial instruments with characteristics of liabilities and equity. ASU 2020-06 (1) simplifies the accounting for
convertible debt instruments and convertible preferred stock by removing the existing guidance in ASC 470-20,
Debt: Debt with Conversion and Other Options, that requires entities to account for beneficial conversion features
and cash conversion features in equity, separately from the host convertible debt or preferred stock; (2) revises the
scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded
features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain
criteria required for equity classification; and (3) revises the guidance in ASC 260, Earnings Per Share, to require
entities to calculate diluted earnings per share (“EPS”) for convertible instruments by using the if-converted method.
84
In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may
be settled in cash or shares. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, and
interim periods within those fiscal years, with early adoption permitted. We adopted ASU 2020-06 effective January
1, 2021, using the modified retrospective method, whereby the cumulative effect of applying ASU 2020-06 is
recognized as an adjustment to the opening balance of equity at January 1, 2021. We recorded a net decrease to
opening additional paid in capital of $59.4 million as of January 1, 2021 due to the cumulative impact of adopting
ASU 2020-06, with the impact primarily related to the reclassification of Exchangeable Notes’ conversion feature’s
fair value from additional paid in capital to notes and other debt, net. Additionally, we recorded an increase to
opening retained earnings of $14.6 million as of January 1, 2021 due to the cumulative impact of adopting ASU
2020-06, with the impact related to the reclassification of the previously amortized discount and deferred financing
costs.
Note 4. Revenues
Nature of goods and services
The following is a description of principal activities, separated by reportable segments (see Note 16), from which the
Company generates its revenues.
Leasing
Leasing revenue represents the results from our leasing program, Uniti Leasing, which is engaged in the acquisition
of mission-critical communications assets and leasing them to anchor customers on either an exclusive or shared-
tenant basis. See Note 3 and Note 5.
Fiber Infrastructure
The Fiber Infrastructure segment represents the operations of our fiber business, Uniti Fiber, which provides:
i.
ii.
iii.
iv.
Consumer, enterprise, wholesale, and backhaul lit fiber revenue is recognized over the life of the
contracts in a pattern that reflects the satisfaction of Uniti’s stand-ready obligation to provide lit fiber
services. The transaction price is equal to the monthly-recurring charge multiplied by the contract term,
plus any non-recurring or variable charges. For each contract, the customer is invoiced monthly.
E-rate contracts involve providing lit fiber services to schools and libraries, and revenue is recognized
over the life of the contract in a pattern that reflects the satisfaction of Uniti’s stand-ready obligation to
provide lit fiber services. The transaction price is equal to the monthly-recurring charge multiplied by
the contract term, plus any non-recurring or variable charges. For each contract, the customer is
invoiced monthly.
Small cell contracts provide improved network connection to areas that may not require or
accommodate a tower. Small cell arrangements typically contain five streams of revenue: site
development, radio frequency (“RF”) design, dark fiber lease, construction services, and maintenance
services. Site development, RF design and construction are each separate services and are considered
distinct performance obligations. Dark fiber and associated maintenance services constitute a lease,
and as such, revenue is recognized under the leasing guidance.
Construction revenue is generated from contracts to provide various construction services such as
equipment installation or the laying of fiber. Construction revenue is recognized over time as
construction activities occur as we are either enhancing a customer’s owned asset or constructing an
asset with no alternative use to us and we would be entitled to our costs plus a reasonable profit margin
if the contract was terminated early by the customer. We are utilizing our costs incurred as the
measure of progress of satisfying our performance obligation.
85
Dark fiber arrangements represent operating leases and revenue is recognized under the leasing
guidance. When (i) a customer makes an advance payment or (ii) a customer is contractually obligated
to pay any amounts in advance, which is not deemed a separate performance obligation, deferred
leasing revenue is recorded. This leasing revenue is recognized ratably over the expected term of the
contract, unless the pattern of service suggests otherwise.
The Company generates revenues from other services, such as consultation services and equipment
sales. Revenue from the sale of customer premise equipment and modems that are not provided as an
essential part of the telecommunications services, including broadband, long distance, and enhanced
services is recognized when products are delivered to and accepted by the customer. Revenue from
customer premise equipment and modems provided as an essential part of the telecommunications
services, including broadband, long distance, and enhanced services are recognized over time in a
pattern that reflects the satisfaction of the service performance obligation.
v.
vi.
Towers
The Towers segment represents the operations of our former towers business, Uniti Towers, through which we
acquired and constructed tower and tower-related real estate, which we then leased to our customers in the United
States. Revenue from our towers business revenue is recognized under the leasing guidance. On June 1, 2020, the
Company completed the sale of its U.S. tower business to Melody Investment Advisors LP (“Melody”) for total cash
consideration of $225.8 million. The Company retained a 10% investment interest in the tower business through a
newly formed limited partnership with Melody. See Note 6.
Consumer CLEC
The Consumer CLEC segment represents the operations of Talk America Services (“Talk America”), which
provided local telephone, high-speed internet and long-distance services to customers in the eastern and central
United States. Customers were billed monthly for services rendered based on actual usage or contracted amounts.
The transaction price is equal to the monthly-recurring charge multiplied by the initial contract term (typically 12
months), plus any non-recurring or variable charges. In 2019, we commenced a wind down of our Consumer CLEC
business, which we substantially completed during the second quarter of 2020.
Disaggregation of Revenue
The following table presents our revenues disaggregated by revenue stream.
(Thousands)
Revenue disaggregated by revenue stream
Revenue from contracts with customers
Fiber Infrastructure
Lit backhaul
Enterprise and wholesale
E-Rate and government
Other
Fiber Infrastructure
Leasing
Consumer CLEC
Total revenue from contracts with customers
Revenue accounted for under leasing guidance
Total revenue
Year Ended December 31,
2019
2018
2020
$
$
$
106,125
78,702
80,428
4,341
269,596
1,420
651
271,667
795,374
1,067,041
$
$
$
125,983
66,545
89,430
2,402
284,360
-
10,673
295,033
762,578
1,057,611
$
$
$
132,361
63,519
74,752
4,492
275,124
-
13,931
289,055
728,579
1,017,634
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At December 31, 2020 and 2019, lease receivables were $17.5 million and $28.8 million, respectively, and
receivables from contracts with customers were $45.1 million and $48.6 million, respectively.
Contract Assets (Unbilled Revenue) and Liabilities (Deferred Revenue)
Contract assets primarily consist of unbilled construction revenue where we are utilizing our costs incurred as the
measure of progress of satisfying our performance obligation. When the contract price is invoiced, the related
unbilled receivable is reclassified to trade accounts receivable, where the balance will be settled upon the collection
of the invoiced amount. Contract liabilities are generally comprised of upfront fees charged to the customer for the
cost of establishing the necessary components of the Company’s network prior to the commencement of use by the
customer. Fees charged to customers for the recurring use of the Company’s network are recognized during the
related periods of service. Upfront fees that are billed in advance of providing services are deferred until such time
the customer accepts the Company’s network and then are recognized as service revenues ratably over a period in
which substantive services required under the revenue arrangement are expected to be performed, which is the initial
term of the arrangement. During the years ended December 31, 2020, 2019, and 2018, we recognized revenues of
$5.4, $4.7, and $14.7 million, respectively that was included in the December 31, 2019, December 31, 2018, and
January 1, 2018 contract liabilities balance, respectively.
The following table provides information about contract assets and contract liabilities accounted for under Topic
606.
(Thousands)
Balance at December 31, 2019
Balance at December 31, 2020
Contract Assets
Contract
Liabilities
$
$
11,535
3,462
$
$
12,717
18,601
Transaction Price Allocated to Remaining Performance Obligations
Performance obligations within contracts to stand ready to provide services are typically satisfied over time or as
those services are provided. Contract assets primarily relate to costs incremental to obtaining contracts and contract
liabilities primarily relate to deferred revenue from non-recurring charges. The deferred revenue is recognized, and
the liability reduced, over the contract term as the Company completes the performance obligation. As of December
31, 2020, our future revenues (i.e. transaction price related to remaining performance obligations) under contract
accounted for under Topic 606 totaled $476.6 million, of which $406.0 million is related to contracts that are
currently being invoiced and have an average remaining contract term of 1.8 years, while $70.6 million represents
our backlog for sales bookings which have yet to be installed and have an average remaining contract term of 6.9
years.
Commissions
Under Topic 606 and Topic 340, Other Assets and Deferred Costs, we capitalize commission fees as costs of
obtaining a contract when those commissions are incremental and expected to be recovered from the revenue
contract and we amortize those capitalized costs consistent with the pattern of transfer of the product or service to
which the capitalized costs relate. The amortization of these costs are included in general and administrative expense
on the Consolidated Statements of (Loss) Income.
Practical Expedients and Exemptions
We do not disclose the value of unsatisfied performance obligations for contracts that have an original expected
duration of one year or less.
We exclude from the transaction price any amounts collected from customers for sales taxes and therefore, they are
not included in revenue.
87
Note 5. Leases
Lessor Accounting
We lease communications towers, ground, communications equipment, and dark fiber to tenants under operating
leases. Our leases have initial lease terms ranging from less than one year to 35 years, most of which include options
to extend or renew the leases for less than one year to 20 years (based on the satisfaction of certain conditions as
defined in the lease agreements), and some of which may include options to terminate the leases within one to six
months. Certain lease agreements contain provisions for future rent increases. Payments due under the lease
contracts include fixed payments plus, for some of our leases, variable payments.
The components of lease income for the years ended December 31, 2020 and 2019 are as follows:
(Thousands)
Lease income - operating leases
Year Ended
December 31, 2020
Year Ended
December 31, 2019
$
795,374
$
762,578
Lease payments to be received under non-cancellable operating leases where we are the lessor for the remainder of
the lease terms are as of December 31, 2020 are as follows:
(Thousands)
2021
2022
2023
2024
2025
Thereafter
Total lease receivables
(1) Total future minimum lease payments to be received include $6.3 billion relating to the Master Lease with
Windstream.
$
$
737,233
745,132
746,151
746,448
747,257
3,625,031
7,347,252
December 31, 2020 (1)
The underlying assets under operating leases where we are the lessor as of December 31, 2020 and 2019 are
summarized as follows:
$
(Thousands)
Land
Building and improvements
Real property interest
Poles
Fiber
Equipment
Copper
Conduit
Tower assets
Finance lease assets(1)
Other assets
December 31, 2020
December 31, 2019
26,596
335,495
-
266,758
2,994,465
421
3,850,988
89,773
1,397
32,660
10,425
7,608,978
(5,222,731)
2,386,247
$
$
27,392
341,096
-
258,535
2,836,939
419
3,792,366
89,770
168,453
32,660
10,279
7,557,909
(5,033,080)
2,524,829
Less: accumulated depreciation
Underlying assets under operating leases, net
(1) Includes $4.5 million assets under operating leases in Held for Sale as of December 31, 2020
$
Depreciation expense for the underlying assets under operating leases where we are the lessor for the years ended
December 31, 2020 and 2019 is summarized as follows:
88
(Thousands)
Depreciation expense for underlying assets under operating leases
Year Ended
December 31, 2020
Year Ended
December 31, 2019
$
209,946
$
293,899
Lessee Accounting
We have commitments under operating leases for communications towers, ground, colocation and dark fiber lease
arrangements. We also have finance leases for dark fiber lease arrangements and other communications equipment.
Our leases have initial lease terms ranging from less than one year to 30 years, most of which includes options to
extend or renew the leases for less than one year to 20 years, and some of which may include options to terminate
the leases within one to six months. Certain lease agreements contain provisions for future rent increases. Payments
due under the lease contracts include fixed payments plus, for some of our leases, variable payments.
As of December 31, 2020, we have short term lease commitments amounting to approximately $2.0 million, for
colocation and dark fiber arrangements.
The components of lease cost are presented within general and administrative expense and operating expense, while
sublease income is presented within revenues in our Consolidated Statements of Income for the years ended
December 31, 2020 and 2019 are as follows:
(Thousands)
Finance lease cost
Amortization of ROU assets
Interest on lease liabilities
Total finance lease cost
Operating lease cost
Short-term lease cost
Variable lease cost
Less sublease income
Total lease cost
Year Ended
December 31, 2020
Year Ended
December 31, 2019
$
$
3,702
3,807
7,509
24,080
2,029
679
(12,273)
22,024
$
$
4,257
4,209
8,466
26,446
1,894
316
(12,354)
24,768
Amounts reported in the Consolidated Balance Sheets for leases where we are the lessee as of December 31, 2020
and 2019 were as follows:
89
(Thousands)
Operating leases
ROU asset, net(1)
ROU liability(2)
Finance leases
ROU asset, gross(3)
ROU liability(4)
Weighted-average remaining lease
term
Operating leases
Finance leases
Location on Consolidated Balance
Sheets
December 31, 2020
December 31, 2019
Other assets, net
Accounts payable, accrued
expenses and other liabilities, net
$
97,850
$
71,483
127,490
127,879
Property, plant and equipment, net $
Finance lease obligations
128,098
48,724
$
129,900
52,994
12.2 years
13.3 years
11.8 years
13.9 years
Weighted-average discount rate
Operating leases
Finance leases
(1) Includes $20.7 million ROU assets in Held for Sale as of December 31, 2020
(2) Includes $17.6 million lease liabilities in Held for Sale as of December 31, 2020
(3) Includes $54.0 million finance lease assets in Held for Sale as of December 31, 2020
(4) Includes $33.3 million finance lease obligations in Held for Sale as of December 31, 2020
9.9%
8.0%
Other information related to leases as of December 31, 2020 and 2019 are as follows:
9.7%
8.0%
(Thousands)
Cash paid for amounts included in the measurement of lease liabilities
Year Ended
December 31, 2020
Year Ended
December 31, 2019
Operating cash flows from finance leases
Operating cash flows from operating leases
Financing cash flows from finance leases
Non-cash items:
New operating leases and remeasurements, net
New finance leases
$
$
3,807
28,485
3,702
2,681
31
Future lease payments under non-cancellable leases as of December 31, 2020 are as follows:
$
Operating Leases(1)
(Thousands)
2021
2022
2023
2024
2025
Thereafter
Total undiscounted lease payments
Less: imputed interest
Total lease liabilities
(1) Includes $17.6 million ROU liabilities in Held for Sale as of December 31, 2020
(2) Includes $33.3 million finance lease obligations in Held for Sale as of December 31, 2020
20,106
17,512
14,890
10,698
6,712
35,740
105,658
(34,175)
71,483
$
$
$
$
$
$
$
4,209
27,835
4,257
43,593
3,432
Finance Leases(2)
6,733
6,602
6,581
6,216
5,164
45,495
76,791
(28,067)
48,724
90
Future sublease rentals as of December 31, 2020 are as follows:
(Thousands)
2021
2022
2023
2024
2025
Thereafter
Total
Windstream Leases
Sublease Rentals
8,703
8,753
8,806
8,858
8,913
124,813
168,846
$
$
On September 18, 2020, in connection with Windstream’s emergence from bankruptcy and the implementation of
the Settlement with Windstream described in Note 14 below, Uniti and Windstream bifurcated the Master Lease and
entered into two structurally similar master leases that each expire on April 30, 2030 (collectively, the “Windstream
Leases”), which Windstream Leases amended and restated the Master Lease in its entirety. The Windstream Leases
consist of two leases: (a) a master lease (the “ILEC MLA”) that governs Uniti owned assets used for Windstream’s
incumbent local exchange carrier (“ILEC”) operations and (b) a master lease (the “CLEC MLA”) that governs Uniti
owned assets used for Windstream’s competitive local exchange carrier (“CLEC”) operations. The aggregate initial
annual rent under the Windstream Leases is equal to the annual rent under the Master Lease previously in effect.
The tenants under the ILEC MLA are Windstream Holdings II, LLC (“Windstream Holdings II,” successor in
interest to Windstream Holdings, Inc.), Windstream Services II, LLC (“Windstream Services II,” successor in
interest to Windstream Services LLC), and certain subsidiaries and/or newly formed affiliated entities operating the
ILECs, and the landlords under the ILEC MLA are the Uniti entities that own the applicable ILEC assets. Similarly,
the tenants under the CLEC MLA are Windstream Holdings II, Windstream Services II, and certain subsidiaries
and/or newly formed affiliated entities operating CLECs, and the landlords under the CLEC MLA are the Uniti
entities that own the CLEC assets. The Windstream Leases contain cross-guarantees and cross-default provisions,
which will remain effective as long as Windstream or an affiliate is the tenant under both of the Windstream Leases
and unless and until the landlords under the ILEC MLA are different from the landlords under the CLEC MLA. The
Windstream Leases permit Uniti to transfer its rights and obligations and otherwise monetize or encumber the
Windstream Leases, together or separately, so long as Uniti does not transfer interests in either Windstream Lease to
a Windstream competitor.
In addition, the Windstream Leases impose certain financial restrictions on Windstream if Windstream fails to
maintain certain financial covenants. Windstream covenants not to incur certain indebtedness (other than certain
refinancing in a principal amount that does not exceed the sum of the principal amount of the indebtedness
refinanced, the accrued and unpaid interest on such indebtedness refinanced and any other amounts owing thereon
and any customary costs incurred in connection with such refinancing or drawings under its third party syndicated
revolving credit facility, in an amount not to exceed $750 million) if its total leverage ratio, pro forma for the
incurrence of such indebtedness, would exceed 3.00:1:00. Further, Windstream covenants not to incur certain
additional indebtedness, pay dividends, repurchase stock or prepay unsecured debt, or enter into a transaction with
an entity controlled by a member of the board without Uniti’s consent if Windstream’s total leverage ratio
exceeds 3.50:1.00. Notwithstanding the foregoing, the financial covenants described herein shall not apply at any
time in which Windstream maintains a corporate family rating of not less than “B2” by Moody’s and either “B” by
Standard & Poor’s or “B” by Fitch Ratings.
Pursuant to the Windstream Leases, Windstream (or any successor tenant under a Windstream Lease) has the right
to cause Uniti to reimburse up to an aggregate $1.75 billion for certain growth capital improvements in long-term
fiber and related assets made by Windstream (or the applicable tenant under the Windstream Lease) to certain ILEC
and CLEC properties (the “Growth Capital Improvements”). Uniti’s reimbursement commitment for Growth Capital
Improvements does not require Uniti to reimburse Windstream for maintenance or repair expenditures (except for
costs incurred for fiber replacements to the CLEC MLA leased property, up to $70 million during the term), and
each such reimbursement is subject to underwriting standards. Uniti’s total annual reimbursement commitments for
the Growth Capital Improvements under both Windstream Leases (and under separate equipment loan facilities) are
91
limited to $225 million per year in 2021 through 2024; $175 million per year in 2025 and 2026; and $125 million
per year in 2027 through 2029.
If the cost incurred by Windstream (or the successor tenant under a Windstream Lease) for Growth Capital
Improvements in any calendar year exceeds the annual limit for such calendar year, Windstream (or such tenant, as
the case may be) may submit such excess costs for reimbursement in any subsequent year and such excess costs
shall be funded from the annual commitment amounts in such subsequent period. In addition, to the extent that
reimbursements for Growth Capital Improvements funded in any calendar year during the term is less than the
annual limit for such calendar year, the unfunded amount in any calendar year will carry-over and may be added to
the annual limits for subsequent calendar years, subject to an annual limit of $250 million in any calendar year,
except that, during calendar year 2021, Uniti’s combined total obligation to fund Growth Capital Improvements may
exceed $250 million to the extent of any unfunded excess amounts from calendar year 2020. Starting on the first
anniversary of each installment of reimbursement for a Growth Capital Improvement, the rent payable by
Windstream under the applicable Windstream Lease will increase by an amount equal to 8.0% (the “Rent Rate”) of
such installment of reimbursement. The Rent Rate will thereafter increase to 100.5% of the prior Rent Rate on each
anniversary of each reimbursement. In the event that the tenant’s interest in either Windstream Lease is transferred
by Windstream under the terms thereof (unless transferred to the same transferee), or if Uniti transfers its interests as
landlord under either Windstream Lease (unless to the same transferee), the reimbursement rights and obligations
will be allocated between the ILEC MLA and the CLEC MLA by Windstream, provided that the maximum that may
be allocated to the CLEC MLA following such transfer is $20 million per year. If Uniti fails to reimburse any
Growth Capital Improvement payment or equipment loan funding request as and when it is required to do so under
the terms of the Windstream Leases, and such failure continues for thirty (30) days, then such
unreimbursed amounts may be applied as an offset against the rent owed by Windstream under the Windstream
Leases (and such amounts will thereafter be treated as if Uniti had reimbursed them).
Uniti and Windstream have entered into separate ILEC and CLEC Equipment Loan and Security Agreements
(collectively “Equipment Loan Agreement”) in which Uniti will provide up to $125 million (limited to $25 million
in any calendar year) of the $1.75 billion of GCI commitments discussed above in the form of loans for Windstream
to purchase equipment related to network upgrades or to be used in connection with the Windstream
Leases. Interest on these loans will accrue at 8% from the date of the borrowing. All equipment financed through
the Equipment Loan Agreement is the sole property of Windstream; however, Uniti will receive a first-lien security
interest in the equipment purchased with the loans. No such loans were made to Windstream during 2020.
The Windstream Leases provide, and the Master Lease provided, that tenant funded capital improvements (“TCIs”),
defined as maintenance, repair, overbuild, upgrade or replacement to the Distribution Systems, including without
limitation, the replacement of copper distribution systems with fiber distribution systems, automatically become
property of Uniti upon their construction by Windstream. We receive non-monetary consideration related to TCIs as
they automatically become our property, and we recognize the cost basis of TCIs that are capital in nature as real
estate investments and deferred revenue. We depreciate the real estate investments over their estimated useful lives
and amortize the deferred revenue as additional leasing revenues over the same depreciable life of the TCI assets.
TCIs exclude Growth Capital Improvements as an when reimbursed by Uniti.
During the year ended December 31, 2020, Uniti reimbursed $84.7 million of Growth Capital Improvements, which,
as allowed for under the Settlement, represented the reimbursement of capital improvements completed in 2020 that
were previously classified as TCIs. Upon reimbursement, the Company reduced the unamortized portion of deferred
revenue related to these capital improvements and capitalized the difference between the cash provided to
Windstream and the unamortized deferred revenue as a lease incentive. This lease incentive, which is $1.0 million
and reported within other assets on our Consolidated Balance Sheet as of December 31, 2020, will be amortized
against revenue over the initial term of the Windstream Leases. Subsequent to December 31, 2020, Windstream
requested and we reimbursed $26.2 million of qualifying Growth Capital Improvements that were reported as TCIs
as of December 31, 2020. As of the date of this Annual Report on Form 10-K, we have reimbursed a total of
$110.9 million of Growth Capital Improvements, and all amounts represent the reimbursement of qualifying Growth
Capital Improvements that were previously reported as TCIs in 2020.
92
Note 6. Business Combinations, Asset Acquisitions and Dispositions
2020 Transactions
Windstream Settlement Agreement
On September 18, 2020, and in furtherance of the Settlement Agreement (see Note 17), Uniti and Windstream
closed an asset purchase agreement, as amended by a letter agreement (collectively, the “Asset Purchase
Agreement”), pursuant to which (a) Uniti paid to Windstream approximately $284.6 million and (b) Windstream (i)
granted to Uniti exclusive rights to use 1.8 million fiber strand miles leased by Windstream under the CLEC MLA,
which fiber strands are either unutilized or utilized under certain dark fiber indefeasible rights of use (“IRUs”) that
were simultaneously transferred to Uniti, (ii) conveyed to Uniti fiber assets (and underlying rights) consisting
of 0.4 million fiber strand miles (covering 4,000 route miles) owned by Windstream, and (iii) transferred and
assigned to subsidiaries of Uniti dark fiber IRUs relating to (x) the fiber strand miles granted to Uniti under the
CLEC MLA (and described in clause (i)) and (y) the fiber assets (and underlying rights) for the 0.4 million fiber
strand miles conveyed to Uniti (and described in clause (ii)), which IRUs generated $28.9 million of annual
EBITDA in the aggregate as of the closing of the Asset Purchase Agreement. In addition, upon the transfer of the
Windstream owned fiber assets (described in clause (ii) above), Uniti granted to Windstream a 20-year IRU for
certain strands included in the transferred fiber assets.
The Company concluded that the Asset Purchase Agreement, and the obligation for Uniti to make cash payments to
Windstream in accordance with the terms of the Settlement Agreement (see Note 17), should be combined for
the accounting purpose of ASC 842. As such, total consideration provided to Windstream under the Settlement has
been allocated as follows:
(Thousands)
Consideration:
Asset Purchase Agreement
Fair value of settlement obligation
Total consideration
Fair values of the assets acquired and liabilities assumed as of the acquisition date:
Property, plant and equipment
Intangible assets, net
Other assets
Intangible liabilities
Total assets acquired, net
Settlement expense
Total
$
$
$
$
284,550
438,577
723,127
170,754
69,832
27,632
(195,091)
73,127
650,000
723,127
Of the $69.8 million of intangible assets acquired, $59.3 million is related to contracts (8-year weighted-average
life) and $10.5 million is related to underlying rights agreements (30-year life). The Company determined the useful
life of the contract intangible assets using the weighted-average remaining term and the rights of way intangible
asset by aligning the useful life of the intangible with that of the underlying fiber assets acquired. The intangible
liabilities represents below market leases, where we are the lessor, and has a weighted-average useful life
of 19 years, which aligns with the terms of the agreements. Acquired right of use assets $27.6 million are recorded
within other assets on our Consolidated Balance Sheets.
Sale of Midwest Fiber Network
On July 1, 2020, the Company completed the sale of the entity that controlled the Company’s Midwest fiber
network assets (the “Propco”) to Macquarie Infrastructure Partners (“MIP”), selling net assets having a book value
of $186.5 million for total cash consideration of $167.6 million. The Company retained a 20% investment interest
93
in the Propco, having a fair value of $41.9 million, through a newly-formed limited liability company with MIP (see
Note 8). During the third quarter, we recorded a gain of $23.0 million related to this transaction.
Sale of U.S. Tower Portfolio
On June 1, 2020, the Company completed the sale of its U.S. tower business to Melody, selling net assets having a
book value of $190.0 million for total cash consideration of $225.8 million. The Company retained a 10%
investment interest in the tower business, having a fair value of $26.0 million, through a newly-formed limited
partnership with Melody (see Note 8), and will receive incremental earn-out payments, estimated to be $1.6 million,
which is included in other assets on the Consolidated Balance Sheet as of December 31, 2020. During the second
quarter, we recorded a gain of $63.4 million related to this transaction.
2019 Transactions
Bluebird Network, LLC
On August 30, 2019, the Company closed on its operating company/property company (“OpCo-PropCo”)
transaction with MIP to acquire Bluebird Network, LLC (“Bluebird”). MIP operates within the Macquarie
Infrastructure and Real Assets division of Macquarie Group. Bluebird’s network consists of approximately 178,000
fiber strand miles in the Midwest across Missouri, Kansas, Illinois and Oklahoma. In the transaction, Uniti
purchased the Bluebird fiber network and MIP purchased the Bluebird operations. In addition, Uniti sold Uniti
Fiber’s Midwest operations to MIP, while Uniti retains its existing Midwest fiber network. Uniti acquired the fiber
network of Bluebird for $320.8 million, which included transaction costs of $1.8 million. Uniti funded $175 million
in cash and $144 million from pre-paid rent received from MIP at closing. The pre-paid rent is recorded within
deferred revenue on our Consolidated Balance Sheet. In connection with the sale of the Company’s Midwest
operations, we received total upfront cash of approximately $37 million, including related pre-paid rent received
from MIP at closing. Concurrently with the closing of these transactions, Uniti has leased the Bluebird fiber network
and its Midwest fiber network on a combined basis to MIP, under a long-term triple net lease (the “Bluebird
Lease”). The Bluebird Lease is reported within the results of our Leasing segment. The Midwest operations that
was sold to MIP was previously reported in our Fiber Infrastructure segment.
The acquisition of the Bluebird network was accounted for as an asset acquisition. The following is a summary of
the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date:
Property, plant and equipment
Intangible assets
Other assets
Accounts payable, accrued expenses and other liabilities
Total purchase consideration
(thousands)
139,566
175,401
8,946
(3,095)
320,818
$
$
Acquired right of use assets and liabilities of $8.9 million and $3.1 million are recorded within other assets, net and
accounts payable, accrued expenses and other liabilities, net on our Consolidated Balance Sheets, respectively. Of
the $175.4 million of intangible assets acquired, $124.7 million is related to rights of way (30 year life) and $50.7
million is related to an in-place lease (20 year life). The Company determined the useful life of the rights of way
intangible asset by aligning the useful life of the intangible with that of the underlying fiber assets acquired. The in-
place lease will be amortized over the initial 20-year lease term.
Upon the sale of our Midwest operations, we recognized an approximately $2.2 million net loss, which is recorded
within other (income) expense on the Consolidated Statements of Income. This loss included the allocation of
approximately $2.2 million of goodwill. See Note 12.
94
Sale of Ground Lease Portfolio
On May 23, 2019, the Company completed the sale of substantially all of its U.S. ground lease business. During
second quarter, we received cash consideration of $30.7 million resulting in a pre-tax gain of $5.0 million. We sold
an additional ground lease during the third quarter, receiving cash consideration of $2.9 million.
Sale of Latin American Tower Portfolio
On April 2, 2019, the Company completed the sale of the Uniti Towers’ Latin America business (“LATAM”) to an
entity controlled by Phoenix Towers International for cash consideration of $101.6 million resulting in a pre-tax gain
of $23.8 million.
JKM Consulting Inc. (M2 Connections)
On March 25, 2019, we acquired 100% of the outstanding equity of JKM Consulting Inc. d/b/a M2 Connections
(“M2”) for cash consideration of $5.5 million. M2 is a dark fiber and internet access provider primarily to educational
institutions in Alabama. This acquisition strengthens Uniti Fiber’s relationships with new E-Rate customers. The
acquisition was recorded by allocating the costs of the assets acquired based on their estimated fair values at the
acquisition date. The excess of the cost of the acquisition over the fair value of the assets acquired is recorded as
goodwill of $1.7 million within our Fiber Infrastructure segment. See Note 16. For federal income tax purposes, the
transaction was treated as a taxable acquisition. Thus, all of the goodwill is expected to be deductible for tax
purposes. The financial results of M2 are included in the Fiber Infrastructure segment from the date of acquisition
and were not material, individually or in the aggregate, to our results of operations and therefore, pro forma financial
information has not been presented.
2018 Transactions
Information Transport Solutions, Inc.
On October 19, 2018, we acquired 100% of the outstanding equity of Information Transport Solutions, Inc. (“ITS”)
for cash consideration of $58.3 million. ITS is a full-service managed services provider of technology solutions,
primarily to educational institutions in Alabama and Florida. This acquisition expands Uniti Fiber’s product
offerings and strengthens relationships with new and existing E-Rate customers. The acquisition was recorded by
allocating the costs of the assets acquired based on their estimated fair values at the acquisition date. The excess of
the cost of the acquisition over the fair value of the assets acquired is recorded as goodwill within our Fiber
Infrastructure segment. See Note 16. During the first quarter of 2019, certain contractual working capital
adjustments resulted in a $1.3 million reduction of the purchase price and goodwill. The following is a summary of
the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date:
Property, plant and equipment
Cash and cash equivalents
Accounts receivable
Other assets
Goodwill
Intangible assets
Accounts payable, accrued expenses and other liabilities
Deferred revenue
Total purchase consideration
(thousands)
4,270
5,931
3,909
7,238
9,941
30,254
(2,645)
(567)
58,331
$
$
95
The goodwill arising from the transaction is primarily attributable to strategic opportunities that arose from the
acquisition of ITS, including strengthening relationships with new and existing E-Rate customers and anticipated
incremental sales and cost savings. For federal income tax purposes, the transaction was treated as a taxable
acquisition. Thus, all of the goodwill is expected to be deductible for tax purposes.
We acquired an intangible asset that was assigned to customer relationships of $30.3 million (14 year life). The
Company determined the useful life for the customer relationship by applying an income approach (using the multi-
period excess earnings method with a discount rate commensurate to the risk of the asset) and resulted from two key
considerations: attrition rate and cumulative present value of cash flows, including assessing the period over which
the asset is expected to contribute to the Company’s future cash flows.
The acquired business contributed revenue of $9.0 million and an operating income of $0.5 million, which excludes
transaction related costs, to our consolidated results from the date of acquisition through December 31, 2018. We
recorded transaction related costs related to the acquisition of ITS for the year ended December 31, 2018 of $0.3
million within transaction related and other costs on the Consolidated Statement of Income.
The following table presents the unaudited pro forma summary of our financial results as if the ITS acquisition had
occurred on January 1, 2017. The pro forma results include additional amortization resulting from purchase
accounting adjustments related to the intangible asset. The pro forma results do not include any synergies or other
benefits of the acquisition. The pro forma results are not indicative of future results of operations, or results that
might have been achieved had the acquisition been consummated on January 1, 2017.
(Thousands, except per share data)
Pro forma revenue
Pro forma net income (loss)
Year Ended
December 31, 2018
$
1,054,192
17,727
96
Note 7. Assets and Liabilities Held for Sale
In October 2020, the Company entered into an OpCo-PropCo transaction with Everstream Solutions LLC
(“Everstream”). As part of the transaction, Uniti will enter into two 20-year IRU lease agreements with Everstream
on Uniti owned fiber. Concurrently, Uniti has agreed to sell its Uniti Fiber Northeast operations and certain dark
fiber IRU contracts acquired as part of the Windstream settlement to Everstream. Total cash consideration,
including upfront IRU payments, is approximately $135 million. In addition to the upfront proceeds, Uniti will
receive fees of approximately $3 million annually from Everstream over the initial 20-year term of the IRU lease
agreements, subject to an annual escalator of 2%. The transaction is subject to regulatory approval and other
customary closing conditions and is expected to close in the second quarter of 2021.
The following table presents the assets and liabilities associated with the Opco-Propco transaction with Everstream
classified as held for sale as of December 31, 2020:
(Thousands)
Assets:
Property, plant and equipment, net
Goodwill
Intangible assets, net
Right of use assets, net
Total Assets
Liabilities:
Lease liabilities
Intangible liabilities, net
Finance lease obligations
Total Liabilities
December 31, 2020
44,150
17,794
10,720
20,679
93,343
17,647
4,849
33,256
55,752
$
$
$
$
The assets and liabilities associated with the Everstream transaction are included in the results of the Fiber
Infrastructure segment. The sale does not represent a strategic shift that will have a major effect on operations and
financial results and, therefore, did not qualify for presentation as a discontinued operation.
Note 8. Investment in Unconsolidated Entities
As of December 31, 2020, the Company had an aggregate investment of $66.0 million in its equity method
unconsolidated entities, which included a 42% interest in Fiber Holdings and approximately a 10% interest in
Harmoni.
Fiber Holdings
Fiber Holdings was primarily established to develop fiber networks as real estate property for long-term
investment. Fiber Holdings has a 47.5% ownership in the Propco that is under a long-term, triple net lease with our
joint venture partner. Our ownership interest in Fiber Holdings represents approximately a 20% economic interest
in the Propco. The Company’s current investment and maximum exposure to loss as a result of its involvement
with Fiber Holdings was approximately $41.1 million as of December 31, 2020. The Company has not provided
financial support to Fiber Holdings.
Harmoni
Harmoni was primarily established to develop wireless communication towers as real estate property for long-term
investment. We concluded that Harmoni is a VIE; however, the Company determined that it was not the primary
beneficiary of Harmoni because the Company lacks the power to direct the activities that most significantly impact
its economic performance. The Company’s current investment and maximum exposure to loss as a result of its
97
involvement with Harmoni was approximately $24.9 million as of December 31, 2020. The Company has not
provided financial support to Harmoni.
We provide transition services to Harmoni in exchange for fees and reimbursements. Total transition service fees
earned in connection with Harmoni were $0.7 million for the year ended December 31, 2020, which is included in
operating expense on a net basis in our Consolidated Statements of Income (Loss).
Note 9. Fair Value of Financial Instruments
FASB ASC 820, Fair Value Measurements, establishes a hierarchy of valuation techniques based on the
observability of inputs utilized in measuring assets and liabilities at fair values. This hierarchy establishes market-
based or observable inputs as the preferred source of values, followed by valuation models using management
assumptions in the absence of market inputs. The three levels of the hierarchy are as follows:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can
access at the assessment date
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly or indirectly
Level 3 – Unobservable inputs for the asset or liability
Our financial instruments consist of cash and cash equivalents, accounts and other receivables, derivative
instruments, contingent consideration, our outstanding notes and other debt, and accounts, interest and dividends
payable.
The following table summarizes the fair value of our financial instruments at December 31, 2020 and 2019:
Quoted Prices in
Active Markets
(Level 1)
Prices with Other
Observable Inputs
(Level 2)
Total
Prices with
Unobservable
Inputs
(Level 3)
$ 2,410,313 $
561,000
— $
—
2,410,313 $
561,000
—
—
—
—
—
—
—
— $
1,112,775
601,500
426,058
110,000
22,897
418,840
—
5,663,383 $
—
—
—
—
—
—
—
—
2,957
2,957
(Thousands)
At December 31, 2020
Liabilities
Senior secured notes - 7.875%, due February 15,
2025
Senior secured notes - 6.00%, due April 15, 2023
Senior unsecured notes - 8.25%, due October 15,
2023
Senior unsecured notes - 7.125%, due December 15,
2024
Exchangeable senior unsecured notes - 4.00%, due
June 15, 2024
Senior secured revolving credit facility, variable rate,
due April 24, 2022
Derivative liability, net
Settlement payable
Contingent consideration
1,112,775
601,500
426,058
110,000
22,897
418,840
2,957
Total
$ 5,666,340 $
98
(Thousands)
At December 31, 2019
Liabilities
Senior secured term loan B - variable rate, due
October 24, 2022
Senior secured notes - 6.00% , due April 15, 2023
Senior unsecured notes - 8.25%, due October 15,
2023
Senior unsecured notes - 7.125%, due December 15,
2024
Exchangeable senior unsecured notes - 4.00%, due
June 15, 2024
Senior secured revolving credit facility, variable rate,
due April 24, 2022
Derivative liability, net
Contingent consideration
971,250
511,500
309,638
574,961
23,679
11,507
Total
$ 4,929,256 $
Quoted Prices in
Active Markets
(Level 1)
Prices with Other
Observable Inputs
(Level 2)
Total
Prices with
Unobservable
Inputs
(Level 3)
$ 1,998,721 $
528,000
— $
—
1,998,721 $
528,000
—
—
—
—
—
—
—
11,507
11,507
—
—
—
—
—
—
— $
971,250
511,500
309,638
574,961
23,679
—
4,917,749 $
The carrying value of cash and cash equivalents, accounts and other receivables, and accounts, interest and
dividends payable approximate fair values due to the short-term nature of these financial instruments.
The total principal balance of our Notes and other debt was $4.97 billion at December 31, 2020, with a fair value of
$5.22 billion. The estimated fair value of the Notes and other debt was based on available external pricing data and
current market rates for similar debt instruments, among other factors, which are classified as Level 2 inputs within
the fair value hierarchy. Derivative instruments are carried at fair value. See Note 11. The fair value of our interest
rate swap is determined based on the present value of expected future cash flows using observable, quoted LIBOR
swap rates for the full term of the swap and also incorporate credit valuation adjustments to appropriately reflect
both Uniti 's own non-performance risk and non-performance risk of the respective counterparties. The Company
has determined that the majority of the inputs used to value its derivative instruments fall within Level 2 of the fair
value hierarchy; however, the associated credit valuation adjustments utilized Level 3 inputs, such as estimates of
credit spreads, to evaluate the likelihood of default by the Company and its counterparties. As of December 31,
2020, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall
valuation of its derivative positions and has determined that the credit valuation adjustment is not significant to the
overall value of the derivatives. As such, the Company classifies its derivative instruments valuation in Level 2 of
the fair value hierarchy.
Given the limited trade activity of the Exchangeable Notes, the fair value of the Exchangeable Notes (see Note 13)
is determined based on inputs that are observable in the market and have been classified as Level 2 in the fair value
hierarchy. Specifically, we estimated the fair value of the Exchangeable Notes based on readily available external
pricing information, quoted market prices, and current market rates for similar convertible debt instruments.
Uniti is required to make a $490.1 million cash payment to Windstream in equal installments over 20 consecutive
quarters beginning the first month after Windstream’s emergence (the “Settlement Payable”) (see Note 17). The
Settlement Payable was initially recorded at its fair value, which was determined using the present value of required
future cash payments and is classified in Level 2 of the fair value hierarchy. The fair value of the Settlement
Payable is $418.8 million and is reported as settlement payable on our Consolidated Balance Sheet at December 31,
2020.
As part of the acquisition of Tower Cloud on August 31, 2016, we may be obligated to pay contingent consideration
upon achievement of certain defined operational and financial milestones; therefore, we recorded the estimated fair
value of future contingent consideration of $3.0 million as of December 31, 2020. The fair value of the contingent
99
consideration as of December 31, 2020, was determined using a discounted cash flow model and probability
adjusted estimates of the operational milestones and is classified as Level 3. During the years ended December 31,
2020 and 2019, we paid $15.7 million and $29.6 million, respectively, for the achievement of certain milestones in
accordance with the Tower Cloud merger agreement.
Changes in the fair value of contingent consideration will be recorded in our Consolidated Statement of Income in
the period in which the change occurs. For the year ended December 31, 2020, there was a $7.2 million increase in
the fair value of the contingent consideration that was recorded in Other (income) expense on the Consolidated
Statements of Income.
The following is a roll forward of our liability measured at fair value on a recurring basis using unobservable inputs
(Level 3):
(Thousands)
Contingent consideration
Note 10. Property, Plant and Equipment
December 31,
2019
11,507 $
$
Transfers into
Level 3
(Gain)/Loss
included in
earnings
Settlements
December 31,
2020
— $
7,163 $ (15,713) $
2,957
The carrying value of property, plant and equipment is as follows:
(Thousands)
Land
Building and improvements
Real property interests
Poles
Fiber
Equipment
Copper
Conduit
Tower assets
Finance lease assets
Construction in progress
Other assets
Corporate assets
Less accumulated depreciation
Property, plant and equipment, net
Depreciable Lives
Indefinite $
3 - 40 years
See Note 3
30 years
30 years
5 - 7 years
20 years
30 years
20 years
See Note 3
See Note 3
15 - 20 years
3 - 7 years
December 31, 2020
27,945
351,305
-
266,758
3,737,372
298,912
3,850,987
89,773
8,571
74,103
47,086
10,553
13,475
8,776,840
(5,503,487)
3,273,353
$
December 31, 2019
28,337
$
355,225
3,308
258,535
3,456,398
293,427
3,792,366
89,770
170,063
129,900
89,007
11,591
5,552
8,683,479
(5,273,534)
3,409,945
$
Finance lease assets above represent fiber leases, where we have the exclusive, unrestricted, and indefeasible right to
use one, a pair, or more strands of fiber of a fiber cable.
Depreciation expense for the years ended December 31, 2020, 2019, and 2018 was $301.2 million, $377.3 million
and $425.2 million, respectively.
100
Note 11. Derivative Instruments and Hedging Activities
The Company uses derivative instruments to mitigate the effects of interest rate volatility inherent in our variable
rate debt, which could unfavorably impact our future earnings and forecasted cash flows. The Company does not use
derivative instruments for speculative or trading purposes.
On April 27, 2015, we entered into fixed for floating interest rate swap agreements to mitigate the interest rate risk
inherent in our variable rate term loan facility. These interest rate swaps were designated as cash flow hedges and
have a notional value of $2.02 billion and mature on October 24, 2022. As result of the repayment of the
Company’s term loan facility in February of 2020 (see Note 13), the Company entered into receive-fixed interest
rate swaps to offset its existing pay-fixed interest rate swaps. As a result, the Company discontinued hedge
accounting as the hedge accounting requirements were no longer met. Amounts in accumulated other
comprehensive (loss) income as of the date of de-designation, will be reclassified to interest expense as the hedged
transactions impact earnings. Prospectively, changes in fair value of all interest rate swaps will be recorded directly
to earnings.
The Company has elected to offset derivative positions that are subject to master netting arrangements with the same
counterparty in our Consolidated Balance Sheets. The gross amounts of our derivative instruments subject to master
netting arrangements with the same counterparty as of December 31, 2020 were as follows:
Offsetting of Derivative Assets and
Liabilities (Thousands)
Assets
Interest rate swaps
Total
Liabilities
Interest rate swaps
Total
Gross Amounts of
Recognized Assets or
Liabilities
Gross Amounts Offset in
the Consolidated
Balance
Sheets
Net Amounts of Assets
or
Liabilities presented in
the
Consolidated
Balance Sheets
$
$
$
$
27,869
27,869
50,766
50,766
$
$
$
$
(27,869) $
(27,869) $
-
-
(27,869) $
(27,869) $
22,897
22,897
The following table summarizes the fair value and the presentation in our Consolidated Balance Sheet:
(Thousands)
Interest rate swaps
Location on Consolidated
Balance Sheet
Derivative liability,
net
$
December 31, 2020
December 31, 2019
22,897
$
23,679
As of December 31, 2020, all of the interest rate swaps were valued in net unrealized loss positions and recognized
as a liability balance within the derivative liability, net on the Consolidated Balance Sheets. As hedge accounting is
no longer applied beginning in February 2020, the unrealized loss amounts are now being recorded directly to
earnings. For the year ended December 31, 2020, the amount recorded in other comprehensive income related to the
unrealized loss on derivative instruments prior to the February 2020 discontinuance of hedge accounting was
$7.7 million. The amount reclassified out of other comprehensive income into interest expense on our Consolidated
Statements of Income (Loss) for the year ended December 31, 2020 was $10.8 million.
As of December 31, 2019, all of the interest rate swaps were valued in net unrealized loss positions and recognized
as a liability balance within the derivative liability, net on the Consolidated Balance Sheets. For the years ended
December 31, 2019 and 2018, the amount recorded in other comprehensive income related to the derivative
instruments was $51.3 million unrealized loss and $21.6 million unrealized gain, respectively. The amount
reclassified out of other comprehensive income into interest expense on our Consolidated Statement of Income for
101
the years ended December 31, 2019 and 2018 was $3.3 million interest benefit and $2.6 million interest expense,
respectively. For the years ended December 31, 2019 and 2018, there were no ineffective portions of the change in
fair value derivatives.
During the next twelve months, beginning January 1, 2021, we estimate that $11.3 million will be reclassified as an
increase to interest expense.
Exchangeable Notes Hedge Transactions
On June 25, 2019, concurrently with the pricing of the Exchangeable Notes (see Note 13), and on June 27, 2019,
concurrently with the exercise by the Initial Purchasers (as defined below) of their option to purchase additional
Exchangeable Notes, Uniti Fiber, the issuer of the Exchangeable Notes, entered into the Note Hedge Transactions
with certain of the Counterparties. The Note Hedge Transactions cover, subject to anti-dilution adjustments
substantially similar to those applicable to the Exchangeable Notes, the same number of shares of the Company’s
common stock that initially underlie the Exchangeable Notes in the aggregate and are exercisable upon exchange of
the Exchangeable Notes. The Note Hedge Transactions have an initial strike price that corresponds to the initial
exchange price of the Exchangeable Notes, subject to anti-dilution adjustments substantially similar to those
applicable to the Exchangeable Notes. The Note Hedge Transactions will expire upon the maturity of the
Exchangeable Notes, if not earlier exercised. The Note Hedge Transactions are intended to reduce potential dilution
to the Company’s common stock upon any exchange of the Exchangeable Notes and/or offset any cash payments
Uniti Fiber is required to make in excess of the principal amount of exchanged Exchangeable Notes, as the case may
be, in the event that the market value per share of the Company’s common stock, as measured under the Note Hedge
Transactions, at the time of exercise is greater than the strike price of the Note Hedge Transactions.
The Note Hedge Transactions are separate transactions, entered into by Uniti Fiber with the Counterparties, and are
not part of the terms of the Exchangeable Notes. Holders of the Exchangeable Notes will not have any rights with
respect to the Note Hedge Transactions. Uniti Fiber used approximately $70.0 million of the net proceeds from the
offering of the Exchangeable Notes to pay the cost of the Note Hedge Transactions. The Note Hedge Transactions
meet certain accounting criteria under GAAP and are recorded in additional paid-in capital on our Consolidated
Balance Sheets, are not accounted for as derivatives that are remeasured each reporting period.
Warrant Transactions
On June 25, 2019, concurrently with the pricing of the Exchangeable Notes, and on June 27, 2019 concurrently with
the exercise by the Initial Purchasers of their option to purchase additional Exchangeable Notes, the Company
entered into warrant transactions to sell to the Counterparties Warrants to acquire, subject to anti-dilution
adjustments, up to approximately 27.8 million shares of the Company’s common stock in the aggregate at an
exercise price of approximately $16.42 per share. The maximum number of shares of the Company’s common stock
that could be issued pursuant to the Warrants is approximately 55.5 million. The Company offered and sold the
Warrants in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as
amended (the “Securities Act”). If the market value per share of the Company’s common stock, as measured under
the Warrants, at the time of exercise exceeds the strike price of the Warrants, the Warrants will have a dilutive effect
on the Company’s common stock unless, subject to the terms of the Warrants, the Company elects to cash settle the
Warrants. The Warrants will expire over a period beginning in September 2024.
The Warrants are separate transactions, entered into by the Company with the Counterparties, and are not part of the
terms of the Exchangeable Notes. Holders of the Exchangeable Notes will not have any rights with respect to the
Warrants. The Company received approximately $50.8 million from the offering and sale of the Warrants. The
Warrants meet certain accounting criteria under GAAP, and are recorded in additional paid-in capital on our
Consolidated Balance Sheets, are not accounted for as derivatives that are remeasured each reporting period.
Note 12. Goodwill and Intangible Assets
As part of the transaction with Everstream (see Note 7), we reclassified the associated assets and liabilities held for
sale, including $17.8 million of goodwill and $10.7 million of intangible assets.
102
Changes in the carrying amount of goodwill occurring during the year ended December 31, 2020 and 2019, are as
follows:
(Thousands)
Goodwill at December 31, 2018
Goodwill purchase accounting adjustments
Goodwill associated with 2019 acquisitions
Goodwill at December 31, 2019
Goodwill impairment (Note 3)
Goodwill reclassified to held for sale
Goodwill at December 31, 2020
The carrying value of our other intangible assets is as follows:
Fiber Infrastructure
Total
$
$
692,385
(1,269)
(444)
690,672
(71,000)
(17,794)
601,878
$
$
692,385
(1,269)
(444)
690,672
(71,000)
(17,794)
601,878
(Thousands)
Indefinite life intangible assets:
Trade name
Finite life intangible assets:
Customer lists
Contracts (Note 6)
In-place lease (1)
Underlying rights (1)
Total intangible assets
Less: accumulated amortization
Total intangible assets, net
Finite life intangible liabilities:
Acquired below-market leases
Total intangible liabilities
Less: accumulated amortization
Total intangible liabilities, net
December 31, 2020
December 31, 2019
Cost
Accumulated
Amortization
Cost
Accumulated
Amortization
$
-
$
-
$
2,000
$
-
416,104
48,269
-
10,497
474,870
(84,145)
390,725
(82,989)
(1,068)
-
(87)
450,603
(93,794)
(845)
(1,386)
50,705
124,696
628,004
(96,025)
531,979
$
190,086
$
(2,200) $
190,086
(2,200)
187,886
$
-
-
-
-
$
-
$
$
$
(1) The Propco's intangible assets were sold on July 1, 2020. See Note 6.
As of December 31, 2020, the remaining weighted average amortization period of the Company’s intangible assets
and liabilities was 15.8 years and 18.9 years, respectively. Amortization expense for the years ended December 31,
2020, 2019 and 2018 was $28.2 million, $27.2 million and $25.5 million, respectively. Amortization expense is
estimated to be $18.7 million in 2021, $18.7 million in 2022, $18.7 million in 2023, $18.6 million in 2024 and $18.6
million in 2025.
Note 13. Notes and Other Debt
All debt, including the senior secured credit facility and notes described below, are obligations of the Operating
Partnership and certain of its subsidiaries as discussed below. The Company is, however, a guarantor of such debt.
103
Notes and other debt is as follows:
(Thousands)
Principal amount
Less unamortized discount, premium and debt issuance costs
Notes and other debt less unamortized discount and debt issuance costs
December 31, 2020
4,965,000
$
(148,476)
4,816,524
$
December 31, 2019
5,224,747
$
(207,068)
5,017,679
$
Notes and other debt at December 31, 2020 and 2019 consisted of the following:
(Thousands)
Senior secured term loan B - variable rate, due October
24, 2022
(discount is based on imputed interest rate of 5.66%)
Senior secured notes - 7.875%, due February 15, 2025
(discount is based on imputed interest rate of 8.38%)
Senior secured notes - 6.00%, due April 15, 2023
(discount is based on imputed interest rate of 6.49%)
Senior unsecured notes - 8.25%, due October 15, 2023
(discount is based on imputed interest rate of 9.06%)
Senior unsecured notes - 7.125%, due December 15, 2024
(discount is based on imputed interest rate of 7.38%)
Exchangeable senior unsecured notes - 4.00%, due June
15, 2024
(discount is based on imputed interest rate of 11.1%)
Senior secured revolving credit facility, variable rate, due
April 24, 2022
Total
December 31, 2020
December 31, 2019
Unamortized
Discount,
Premium and
Debt Issuance
Costs
Principal
Unamortized
Discount,
Premium and
Debt
Issuance
Costs
Principal
$
-
$
-
$ 2,044,728
$
(74,523)
2,250,000
(39,852)
550,000
(4,053)
550,000
(5,633)
1,110,000
(22,024)
1,110,000
(28,808)
600,000
(5,316)
600,000
(6,304)
345,000
(69,608)
345,000
(85,272)
110,000
$ 4,965,000
(7,623)
575,019
(148,476) $ 5,224,747
(6,528)
$ (207,068)
At December 31, 2020, notes and other debt included the following: (i) $110.0 million under the Revolving Credit
Facility (as defined below) pursuant to the credit agreement by and among the Borrowers (as defined below), the
guarantors and lenders party thereto and Bank of America, N.A., as administrative agent and collateral agent (the
“Credit Agreement”); (ii) $550.0 million aggregate principal amount of 6.00% Senior Secured Notes due April 15,
2023 (the “2023 Secured Notes”); (iii) $1.11 billion aggregate principal amount of 8.25% Senior Unsecured Notes
due October 15, 2023 (the “2023 Notes”); (iv) $600.0 million aggregate principal amount of 7.125% Senior
Unsecured Notes due December 15, 2024 (the “2024 Notes”); (v) $345 million aggregate principal amount of
4.00% Exchangeable Senior Notes due June 15, 2024 (the “Exchangeable Notes”). On February 10, 2020, the
Operating Partnership and certain of its subsidiaries issued $2.25 billion aggregate principal amount of 7.875%
senior secured notes due 2025 (the “2025 Secured Notes”) and used the proceeds from the offering to repay all
$2.05 billion of outstanding term loans under our senior secured credit facilities and to repay approximately $156.7
million of revolving loans (and terminated related commitments of approximately $157.6 million).
Credit Agreement
Uniti Group LP, Uniti Group Finance 2019 Inc. and CSL Capital, LLC (the “Borrowers”) are party to the Credit
Agreement, which after the Seventh Amendment (as defined below) as of December 31, 2020, provided for a $60.5
million non-extended revolving credit facility that matures on April 24, 2022 (the “Non-Extended Revolving Credit
Facility”) and a $500 million revolving credit facility extended that, upon receipt of routine regulatory approvals, will
mature on December 10, 2024 (the “Extended Revolving Credit Facility” and together with Non-Extended Revolving
Credit facility, the “Revolving Credit Facility”), which provide us with the ability to obtain revolving loans as well as
104
swingline loans and letters of credit from time to time. All obligations under the Credit Agreement are guaranteed by (i)
the Company and (ii) certain of the Operating Partnership’s subsidiaries (the “Subsidiary Guarantors”) and are secured
by substantially all of the assets of the Borrowers and the Subsidiary Guarantors.
The Credit Agreement previously provided for a term loan facility, of which all $2.05 billion of outstanding loans was
repaid in full in connection with the issuance of the 2025 Secured Notes in February 2020.
The Borrowers are subject to customary covenants under the Credit Agreement, including an obligation to maintain
a consolidated secured leverage ratio, as defined in the Credit Agreement, not to exceed 5.00 to 1.00. We are
permitted, subject to customary conditions, to incur other indebtedness, so long as, on a pro forma basis after giving
effect to any such indebtedness, our consolidated total leverage ratio, as defined in the Credit Agreement, does not
exceed 6.50 to 1.00 and, if such debt is secured, our consolidated secured leverage ratio, as defined in the Credit
Agreement, does not exceed 4.00 to 1.00. In addition, the Credit Agreement contains customary events of default,
including a cross default provision whereby the failure of the Borrowers or certain of their subsidiaries to make
payments under other debt obligations, or the occurrence of certain events affecting those other borrowing
arrangements, could trigger an obligation to repay any amounts outstanding under the Credit Agreement. In
particular, a repayment obligation could be triggered if (i) the Borrowers or certain of their subsidiaries fail to make
a payment when due of any principal or interest on any other indebtedness aggregating $75.0 million or more, or (ii)
an event occurs that causes, or would permit the holders of any other indebtedness aggregating $75.0 million or
more to cause, such indebtedness to become due prior to its stated maturity. As of December 31, 2020, the
Borrowers were in compliance with all of the covenants under the Credit Agreement.
A termination of either Windstream Lease would result in an “event of default” under the Credit Agreement if a
replacement lease is not entered into within ninety (90) calendar days and we do not maintain pro forma compliance
with a consolidated secured leverage ratio, as defined in the Credit Agreement, of 5.00 to 1.00.
On March 18, 2019, we received a limited waiver from our lenders under our Credit Agreement, waiving an event of
default related solely to the receipt of a going concern opinion from our auditors for our 2018 audited financial
statements. The limited waiver was issued in connection with the fourth amendment (the “Fourth Amendment”) to
our Credit Agreement. During the pendency of Windstream’s bankruptcy, the Fourth Amendment generally limited
our ability under the Credit Agreement to (i) prepay unsecured indebtedness and (ii) pay cash dividends in excess of
90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net
capital gains.
On June 24, 2019, we entered into an amendment (the “Fifth Amendment”) to our Credit Agreement to extend the
maturity date of $575.9 million of commitments under the Revolving Credit Facility to April 24, 2022 and to pay
down approximately $101.6 million of outstanding revolving loans and terminate the related commitments. The
maturity date of approximately $72.4 million of other commitments was not extended. On June 28, 2019, the
Company repaid approximately $174.0 million in total borrowings, which consisted of the $101.6 million required
repayment pursuant to the Fifth Amendment and $72.4 million of non-extended borrowings, thereby terminating the
non-extended commitments. As a result, all remaining $575.9 million of commitments will terminate on April 24,
2022, at which time all outstanding borrowings must be repaid. The Company used a portion of the net proceeds
from the offering of Exchangeable Notes described below to fund the repayments.
On February 10, 2020, we received a limited waiver from our lenders under our Credit Agreement, waiving an event
of default related solely to the receipt of a going concern opinion from our auditors for our 2019 audited financial
statements. The limited waiver was issued in connection with an amendment (the “Sixth Amendment”) to our Credit
Agreement.
On December 10, 2020, we entered into an amendment (the “Seventh Amendment”) to our Credit Agreement.
Pursuant to the Seventh Amendment, commitments from new and existing lenders under the Revolving Credit
Facility have increased to $500 million and, subject to certain conditions, the maturity date of such commitments has
been extended to December 10, 2024. Certain non-extending lender commitments of $60.5 million will mature on
April 24, 2022 and will continue to bear interest at rates previously in effect. Prior to the expiration of these
commitments, the aggregate size of the Revolving Credit Facility will be $560.5 million from all lenders.
105
Borrowings under (a) the Non-Extended Revolving Credit Facility bear interest at a rate equal to either a base rate
plus an applicable margin ranging from 3.75% to 4.25% or a eurodollar rate plus an applicable margin ranging from
4.75% to 5.25% and (b) the Extended Revolving Credit Facility, upon receipt of routine regulatory approvals, which
are expected by the end of the first quarter of 2021, will bear interest at a rate equal to either a base rate plus an
applicable margin ranging from 2.75% to 3.50% or a eurodollar rate plus an applicable margin ranging from 3.75%
to 4.50%, in each case, calculated in a customary manner and determined based on our consolidated secured
leverage ratio. We are required to pay a quarterly commitment fee under the Revolving Credit Facility equal to
0.50% of the average amount of unused commitments during the applicable quarter (subject to a step-down to 0.40%
per annum of the average amount of unused commitments during the applicable quarter upon achievement of a
consolidated secured leverage ratio not to exceed a certain level), as well as quarterly letter of credit fees equal to the
product of (A) the applicable margin with respect to eurodollar borrowings and (B) the average amount available to
be drawn under outstanding letters of credit during such quarter.
The Notes
The Borrowers, as co-issuers, have outstanding $550 million aggregate principal amount of the 2023 Secured Notes,
of which $400 million was originally issued on April 24, 2015 at an issue price of 100% of par value and the
remaining $150 million was issued on June 9, 2016 at an issue price of 99.25% of the par value as an add-on to the
existing Secured Notes. The Borrowers, as co-issuers, also have outstanding $1.11 billion aggregate principal
amount of the 2023 Notes that were originally issued on April 24, 2015 at an issue price of 97.055% of par value.
The 2023 Secured Notes and the 2023 Notes are guaranteed by the Company and the Subsidiary Guarantors.
The Operating Partnership and its subsidiaries CSL Capital, LLC and Uniti Fiber, as co-issuers, have outstanding
$600 million aggregate principal amount of the 2024 Notes, of which $400 million was originally issued on
December 15, 2016 at an issue price of 100% of par value and the remaining $200 million of which was issued on
May 8, 2017 at an issue price of 100.50% of par value under a separate indenture and was mandatorily exchanged
on August 11, 2017 for 2024 Notes issued as “additional notes” under the indenture governing the 2024 Notes. The
2024 Notes are guaranteed by the Company, Uniti Group Finance 2019 Inc. and the Subsidiary Guarantors.
The Operating Partnership, CSL Capital, LLC, Uniti Group Finance 2019 Inc. and Uniti Fiber, as co-issuers, have
outstanding $2.25 billion aggregate principal amount of the 2025 Secured Notes, which was issued on February 10,
2020 at an issue price of 100% of par value.
On February 2, 2021, the Borrowers, as co-issuers, issued $1.11 billion aggregate principal amount of 6.50% Senior
Notes due 2029. The Borrowers used the net proceeds to fund the tender offer of substantially all outstanding 2023
Notes, of which $58.8 million remain outstanding. On February 16, 2021, we issued a notice of redemption to
redeem all remaining principal amount of the 2023 Notes on April 15, 2021.
The Exchangeable Notes
On June 28, 2019, Uniti Fiber, a subsidiary of the Company, issued $345 million aggregate principal amount of the
Exchangeable Notes. The Exchangeable Notes are senior unsecured notes and are guaranteed by the Company and
each of the Company’s subsidiaries (other than Uniti Fiber) that is an issuer, obligor or guarantor under the
Company’s Notes. The Exchangeable Notes bear interest at a fixed rate of 4.00% per year, payable semiannually in
arrears on June 15 and December 15 of each year, beginning on December 15, 2019. The Exchangeable Notes are
exchangeable into cash, shares of the Company’s common stock, or a combination thereof, at Uniti Fiber’s election,
subject to limitations under the Company's Credit Agreement. The Exchangeable Notes will mature on June 15,
2024, unless earlier exchanged, redeemed or repurchased.
Uniti Fiber issued the Exchangeable Notes pursuant to an indenture, dated as of June 28, 2019 (the “Indenture”),
among Uniti Fiber, the Company, the other guarantors party thereto and Deutsche Bank Trust Company Americas,
as trustee. Prior to the close of business on the business day immediately preceding March 15, 2024, the
Exchangeable Notes are exchangeable only upon satisfaction of certain conditions and during certain periods
described in the Indenture, and thereafter, the Exchangeable Notes are exchangeable at any time until the close of
business on the second scheduled trading day immediately preceding the maturity date. The Exchangeable Notes are
exchangeable on the terms set forth in the Indenture into cash, shares of the Company’s common stock, or a
106
combination thereof, at Uniti Fiber’s election, subject to limitations under the Company's Credit Agreement. The
exchange rate is initially 80.4602 shares of the Company’s common stock per $1,000 principal amount of
Exchangeable Notes (equivalent to an initial exchange price of approximately $12.43 per share of the Company’s
common stock). The exchange rate is subject to adjustment in some circumstances as described in the Indenture. In
addition, following certain corporate events that occur prior to the maturity date or Uniti Fiber’s delivery of a notice
of redemption, Uniti Fiber will increase, in certain circumstances, the exchange rate for a holder who elects to
exchange its Exchangeable Notes in connection with such corporate event or notice of redemption, as the case may
be.
If Uniti Fiber or the Company undergoes a fundamental change (as defined in the Indenture), subject to certain
conditions, holders may require Uniti Fiber to repurchase for cash all or part of their Exchangeable Notes at a
repurchase price equal to 100% of the principal amount of the Exchangeable Notes to be repurchased, plus accrued
and unpaid interest, if any, to, but not including, the fundamental change repurchase date.
Uniti Fiber may redeem all or a portion of the Exchangeable Notes, at any time, at a cash redemption price equal
to 100% of the principal amount of the Exchangeable Notes to be redeemed, plus accrued and unpaid interest to, but
not including, the redemption date, if the Company’s board of directors determines such redemption is necessary to
preserve the Company's status as a real estate investment trust for U.S. federal income tax purposes. Uniti Fiber may
not otherwise redeem the Exchangeable Notes prior to June 20, 2022. On or after June 20, 2022 and prior to the
42nd scheduled trading day immediately preceding the maturity date, if the last reported sale price per share of the
Company’s common stock has been at least 130% of the exchange price for the Exchangeable Notes for certain
specified periods, Uniti Fiber may redeem all or a portion of the Exchangeable Notes at a cash redemption price
equal to 100% of the principal amount of the Exchangeable Notes to be redeemed plus accrued and unpaid interest
to, but not including, the redemption date.
On June 28, 2019, Uniti Fiber, the Company and Barclays Capital Inc., on behalf of the initial purchasers involved
in the offering of the Exchangeable Notes (the “Initial Purchasers”), entered into a registration rights agreement with
respect to the Company’s common stock deliverable upon exchange of the Exchangeable Notes (the “Registration
Rights Agreement”). Under the Registration Rights Agreement, the Company has agreed to file a shelf registration
statement to register the resale of the common stock of the Company deliverable upon exchange of the
Exchangeable Notes. The Company agreed to use its commercially reasonable efforts to cause such shelf
registration statement to become effective on or prior to the 365th day after the issue date of the Exchangeable
Notes.
Under GAAP, certain convertible debt instruments that may be settled in cash upon conversion are required to be
separately accounted for as liability and equity components of the instrument in a manner that reflects the issuer’s
non-convertible debt borrowing rate. Accordingly, in accounting for the issuance of the Exchangeable Notes, the
Company separated the Exchangeable Notes into liability and equity components. The carrying amount of the
liability component was calculated by measuring the fair value of a similar liability that does not have an associated
convertible feature.
The carrying amount of the equity component, which is recognized as a debt discount, represents the difference
between the proceeds from the issuance of the Exchangeable Notes and the fair value of the liability component of
the Exchangeable Notes. The excess of the principal amount of the liability component over its carrying amount will
be amortized to interest expense using an effective interest rate of 11.1% over the term of the Exchangeable Notes.
The equity component is not remeasured as long as it continues to meet the conditions for equity classification.
Debt issuance costs related to the Exchangeable Notes were comprised of commissions payable to the Initial
Purchasers of $10.4 million and third-party costs of approximately $1.4 million.
In accounting for the debt issuance costs related to the issuance of the Exchangeable Notes, the Company allocated
the total amount incurred to the liability and equity components based on their relative values. Debt issuance costs
attributable to the liability component were recorded as a contra-liability and are presented net against the
Exchangeable Notes balance on our Consolidated Balance Sheets. These costs are amortized to interest expense
using the effective interest method over the term of the Exchangeable Notes. Debt issuance costs of $2.9 million
107
attributable to the equity component are netted with the equity component in stockholders’ equity, which netted to
$80.8 million.
Deferred Financing Cost
Deferred financing costs were incurred in connection with the issuance of the Notes and the Facilities. These costs
are amortized using the effective interest method over the term of the related indebtedness, and are included in
interest expense in our Consolidated Statements of Income. For the year ended December 31, 2020, 2019 and 2018,
we recognized $15.3 million, $16.2 million and $14.7 million of non-cash interest expense, respectively, related to
the amortization of deferred financing costs.
Aggregate annual maturities of our long-term obligations at December 31, 2020 are as follows:
(Thousands)
2021
2022
2023
2024
2025
Thereafter
Total
$
$
-
110,000
1,660,000
945,000
2,250,000
-
4,965,000
Note 14. Stock-Based Compensation
The Company’s Board of Directors adopted the Uniti Group Inc. 2015 Equity Incentive Plan (the “Equity Plan”),
which is administered by the Compensation Committee of the Board of Directors. Awards issuable under the Equity
Plan include incentive stock options, “non-qualified” stock options, stock appreciation rights, performance units and
performance shares, restricted shares, and restricted stock units.
Restricted Awards
During the year ended December 31, 2020, the Company granted 996,037 shares of restricted stock to employees,
which had a fair value of $10.4 million as of the date of grant. We calculate the grant date fair value of non-vested
shares of restricted stock awards using the closing sale prices on the trading day on the grant date. The restricted
stock awards are amortized on a straight-line basis to expense over the vesting period, which is generally three
years. As of December 31, 2020, there were 3,137,412 shares available for future issuance under the Equity Plan.
The following table sets forth the number of unvested restricted stock awards and the weighted-average fair value of
these awards at the date of grant:
Restricted Awards
Weighted Average Fair Value at
Grant Date
Aggregate Intrinsic
Value(1) ($000s)
Unvested balance December 31, 2019
Granted
Forfeited
Vested
Unvested balance, December 31, 2020
1,122,085 $
996,037 $
(32,257) $
(524,450) $
1,561,415 $
16.09
10.39
11.18
16.43
12.33 $
18,315
(1) The aggregate intrinsic value is calculated as the market value of our common stock as of December 31, 2020.
The market value as of December 31, 2020 was $11.73 per share, which was the closing price of our common
stock reported for transactions effected on the NASDAQ Global Select Market on December 31, 2020, the final
trading day of 2020.
108
During the year ended December 31, 2019, there were 833,448 shares of restricted stock granted with a weighted-
average fair value of $11.62 per share. During the year ended December 31, 2018, there were 396,705 shares of
restricted stock granted with a weighted-average fair value of $14.02 per share.
The total fair value of shares vested for the years ended December 31, 2020, 2019 and 2018 was $8.6 million, $6.4
million and $6.9 million, respectively.
As of December 31, 2020, total unrecognized compensation expense on restricted awards was approximately $11.7
million, and the expense is expected to be recognized over a weighted average vesting period of 1.0 years.
Performance Awards
The Company grants long-term incentives to members of management in the form of performance-based restricted
stock units (“PSUs”) under the Equity Plan. The number of PSUs earned is based on the Company’s achievement of
specified performance goals, over a specified performance period, and may range from 0% to 200% of the target
shares. The PSUs have a service condition that will expire at the end of the three-year performance period provided
that the holder continues to be employed by the Company at the end of the performance period. Holders of PSUs are
entitled to dividend equivalents, which will be accrued and paid in cash upon the vesting of a PSU. Dividend
equivalents are forfeited to the extent that the underlying PSU is forfeited.
On March 4, 2020, we issued 322,209 PSUs equal to 100% of the target amount, with an aggregate fair value of
$5.0 million on the grant date. The PSUs, in addition to a service condition, are subject to the Company’s
performance versus the total return of the MSCI US REIT Index and a triple-net lease peer group, as defined by the
Compensation Committee. Upon evaluating the results of the market conditions, the final number of shares is
determined, and such shares vest based on satisfaction of the service condition. The PSUs are amortized on a
straight-line basis over the vesting period. During the year ended December 31, 2020, no PSUs were forfeited due to
termination of service. The following table sets forth the number of unvested PSUs and the weighted-average fair
value of these awards at the date of grant:
Unvested balance December 31, 2019
Granted
Forfeited
Vested
Unvested balance, December 31, 2020
Performance Awards
$
517,061
322,209
$
(132,700) $
— $
$
706,570
Weighted Average Fair
Value at Grant Date
Aggregate Intrinsic
Value(1) ($000s)
$
8,288
21.72
15.45
28.20
—
17.64
(1) The aggregate intrinsic value is calculated as the market value of our common stock as of December 31, 2020.
The market value as of December 31, 2020 was $11.73 per share, which was the closing price of our common
stock reported for transactions effected on the NASDAQ Global Select Market on December 31, 2020, the final
trading day of 2020.
During the year ended December 31, 2019, there were 255,517 PSUs granted with a weighted-average fair value of
$18.99 per share. During the year ended December 31, 2018, there were 169,549 PSUs granted with a weighted-
average fair value of $19.30 per share.
109
As of December 31, 2020, total unrecognized compensation expense related to PSUs was approximately $5.5
million, and the weighted-average vesting period was 1.4 years. The fair value of each PSU award is estimated at the
date of grant using a Monte Carlo simulation. The simulation requires assumptions for expected volatility, risk-free
return, and dividend yield. Our assumptions include a 0% dividend yield, which is the mathematical equivalent to
reinvesting the dividends over the three-year performance period as is consistent with the terms of the PSUs. The
following table summarizes the assumptions used to value the PSUs granted during the years ended December 31,
2020, 2019 and 2018:
Expected term (years)
Expected volatility
Expected annual dividend
Risk free rate
Employee Stock Purchase Plan
Year Ended December 31,
2020
2019
2018
3.0
63.0%
0.0%
0.7%
3.0
57.5%
0.0%
2.3%
3.0
48.5%
0.0%
2.3%
On May 17, 2018, our stockholders approved and adopted the Uniti Group Inc. Employee Stock Purchase Plan (the
“ESPP”). The ESPP authorizes us to issue up to 2,000,000 shares of our common stock to any of our employees so
long as the employee is employed on the first day of the applicable offering period. Under the ESPP, there are two
six-month plan periods during each calendar year, one beginning January 1 and ending on June 30, and one
beginning on July 1 and ending on December 31. Under the terms of the ESPP, employees can choose each plan
period to have up to 15% of their annual base earnings, limited to $25,000 withheld to purchase our common stock.
The purchase price of the stock is 85% of the lower of its beginning-of-period or end-of-period market price. Under
the ESPP the Company issued 96,788 and 83,287 shares during the years ended December 31, 2020 and 2019,
respectively. Under the ESPP, no shares were sold to employees during the year ended 2018. As of December 31,
2020, there were 1,819,925 shares available for future issuance under the ESPP. The following table summarizes
the assumptions used to value the purchase rights granted under the ESPP during the years ended December 31,
2020, 2019 and 2018:
Expected term (years)
Expected volatility
Expected annual dividend
Risk free rate
Year Ended December 31,
2020
2019
2018
0.5
72.0%
3.9%
0.2%
0.5
24.0%
2.1%
2.1%
0.5
37.0%
11.3%
2.1%
For the years ended December 31, 2020, 2019 and 2018, we recognized $13.7 million, $10.8 million and $8.1
million, respectively, of compensation expense related to restricted stock awards, performance-based awards and the
ESPP, which is recorded in general and administrative expense on our Consolidated Statement of Income.
Note 15. Earnings Per Share
Our restricted stock awards are considered participating securities as they receive non-forfeitable rights to dividends
at the same rate as common stock. As participating securities, we included these instruments in the computation of
earnings per share under the two-class method described in FASB ASC 260, Earnings per Share.
We also issue PSUs that contain forfeitable rights to receive dividends and are therefore considered non-
participating restrictive shares and are not dilutive under the two-class method until performance conditions are met.
During the year ended December 31, 2020, approximately 707,000 PSUs were excluded from the computation of
diluted net loss per share because their effect is anti-dilutive as a result of our net loss for the period. During the year
ended December 31, 2019, approximately 517,000 PSUs were excluded from the computation of diluted earnings
per share because the performance conditions had not been met.
110
Prior to the second quarter of 2019, the earnings-per-share impact of the Company’s 3% Series A Convertible
Preferred Stock, $0.0001 par value (the “Series A Shares”) (See Note 21), issued in connection with the May 2,
2016 acquisition of PEG Bandwidth, LLC, was calculated using the net share settlement method, whereby the
redemption value of the instrument is assumed to be settled in cash and only the conversion premium, if any, is
assumed to be settled in shares. The Series A Shares provided Uniti the option to settle the instrument in cash or
shares. During the second quarter of 2019, the Company received notice from the holder of the Series A Shares of
its election to convert all its shares, and the Company made an election to issue shares upon conversion, which
occurred on July 2, 2019. As a result, the earnings-per-share impact for the year ended December 31, 2019 is
calculated based on the shares outstanding from the issuance date through December 31, 2019.
The dilutive effect of the Exchangeable Notes (see Note 13) is calculated by using the “if-converted” method. This
assumes an add-back of interest, net of income taxes, to net income attributable to shareholders as if the securities
were converted at the beginning of the reporting period (or at time of issuance, if later) and the resulting common
shares included in the number of weighted average shares. The dilutive effect of the Warrants (see Note 8) is
calculated using the treasury-stock method. During the years ended December 31, 2020 and 2019, the Warrants
were excluded from diluted shares outstanding because the exercise price exceeded the average market price of our
common stock for the reporting period.
As part of the acquisition of Tower Cloud on August 31, 2016, we may be obligated to pay contingent consideration
upon achievement of certain defined operational milestones. See Note 9. At the Company’s discretion, a
combination of cash and Uniti common shares may be used to satisfy the contingent consideration payments,
provided that at least 50% of the aggregate amount of payments is satisfied in cash. The arrangement provides Uniti
the option to cash settle, and it is our policy to settle 100% of the obligation in cash upon the achievement of the
defined milestones. As such, there is no impact to our share count for the purposes of the earnings per share
calculation.
111
The following sets forth the computation of basic and diluted earnings per share under the two-class method:
(Thousands, except per share data)
Basic earnings per share:
Numerator:
Net (loss) income attributable to shareholders
Less: Income allocated to participating
securities
Dividends declared on convertible preferred
stock
Amortization of discount on convertible
preferred stock
Net (loss) income attributable to common
shares
Denominator:
Basic weighted-average common shares
outstanding
Basic (loss) earnings per common share
$
$
Year Ended December 31,
2020
2019
2018
$
(706,301) $
10,582
$
16,187
(1,078)
(9)
-
(549)
(656)
(993)
(707,388) $
8,384
$
(2,594)
(2,624)
(2,980)
7,989
203,600
(3.47) $
187,358
0.04
$
176,169
0.05
Year Ended December 31,
2020
2019
2018
$
(706,301) $
10,582
$
16,187
(Thousands, except per share data)
Diluted earnings per share:
Numerator:
Net (loss) income attributable to shareholders
Less: Income allocated to participating
securities
Dividends declared on convertible preferred
stock
Amortization of discount on convertible
preferred stock
Impact on if-converted dilutive securities
Mark-to-market gain on share settled
contingent consideration arrangements
Net (loss) income attributable to common
shares
Denominator:
Basic weighted-average common shares
outstanding
Contingent consideration (See Note 9)
Impact on if-converted dilutive securities
Effect of dilutive non-participating
securities
(1,078)
(9)
—
—
—
(549)
(656)
(993)
—
—
$
(707,388) $
8,384
$
203,600
—
—
—
187,358
—
—
—
Weighted-average shares for dilutive earnings
per common share
Dilutive (loss) earnings per common share
$
203,600
(3.47) $
187,358
0.04
$
Note 16. Segment Information
Historically our management, including our chief executive officer, who is our chief operating decision maker,
managed our operations as four operating business segments in addition to our corporate operations, as described
112
(1,665)
(2,624)
(2,980)
—
(1,433)
7,485
176,169
645
—
257
177,071
0.04
below. Due to the sale of our towers business and wind down of the Consumer CLEC Business, starting in 2021, we
will manage our operations focused on our two primary businesses, Leasing and Fiber Infrastructure.
Leasing: Represents a component of our REIT operations and includes the results from our leasing business, Uniti
Leasing, which is engaged in the acquisition of mission-critical communications assets and leasing them back to
anchor customers on either an exclusive or shared-tenant basis.
Fiber Infrastructure: Represents the operations of our fiber business, Uniti Fiber, which is a leading provider of
infrastructure solutions, including cell site backhaul and dark fiber, to the telecommunications industry.
Towers: Represents the operations of our former towers business, Uniti Towers, through which we acquired and
constructed tower and tower-related real estate and leased space on communications towers to wireless service
providers and other tenants in the United States. On April 2, 2019, the Company completed the sale of LATAM,
and on May 23, 2019, the Company completed the sale of substantially all of its ground lease business located
across the United States. On June 1, 2020, the Company completed the sale of its U.S. tower business to Melody for
total cash consideration of $225.8 million. The Company retained a 10% investment interest in the U.S. tower
business through a newly formed limited partnership with Melody. See Note 6.
Consumer CLEC: Represents the operations of Talk America Services (“Talk America”) through which we operated
the Consumer CLEC Business, which prior to Uniti’s separation and spin-off from Windstream (the “Spin-Off”)
was reported as an integrated operation within Windstream. Talk America provided local telephone, high-speed
internet and long distance services to customers in the eastern and central United States. In 2019, we commenced a
wind down of our Consumer CLEC business, which we substantially completed during the second quarter of 2020.
Corporate: Represents our corporate office and shared service functions. Certain costs and expenses, primarily
related to headcount, insurance, professional fees and similar charges, that are directly attributable to operations of
our business segments are allocated to the respective segments.
Management evaluates the performance of each segment using Adjusted EBITDA, which is a segment performance
measure we define as net income determined in accordance with GAAP, before interest expense, provision for
income taxes, depreciation and amortization, 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, costs related to the settlement with Windstream, 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 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. The Company believes that net income, as defined by GAAP, is the most appropriate earnings metric;
however, we believe that Adjusted EBITDA serves as a useful supplement to net income because it allows investors,
analysts and management to evaluate the performance of our segments in a manner that is comparable period over
period. Adjusted EBITDA should not be considered as an alternative to net income as determined in accordance
with GAAP.
113
Selected financial data related to our segments is presented below for the years ended December 31, 2020, 2019 and
2018:
(Thousands)
Revenues
Adjusted EBITDA
Less:
Interest expense, net
Depreciation and amortization
Other expense
Settlement expense
Goodwill impairment
Transaction related and other costs
Gain on sale of real estate
Stock-based compensation
Income tax benefit
Adjustments or equity in earnings from
unconsolidated entities
Net loss
Year Ended December 31, 2020
Leasing
Fiber
Infrastructure
Towers
Consumer
CLEC
Corporate
Total of
Reportable
Segments
$745,915 $
314,363 $
6,112 $
651 $
- $1,067,041
$737,337 $
112,289 $
77 $
(545) $ (30,323) $ 818,835
201,321
126,211
783
791
297
497,128
329,403
11,703
650,000
71,000
63,875
(86,267)
13,721
(15,203)
2,287
$ (718,812)
Capital expenditures (1)
$169,306 $
197,023 $ 24,162 $
- $
- $ 390,491
(Thousands)
Revenues
Adjusted EBITDA
Less:
Interest expense, net
Depreciation and amortization
Other income
Transaction related and other costs
Gain on sale of real estate
Stock-based compensation
Income tax expense
Net income
Year Ended December 31, 2019
Leasing
Fiber
Infrastructure
Towers
Consumer
CLEC
Corporate
Total of
Reportable
Segments
$716,640 $
315,605 $ 14,693 $ 10,673 $
- $1,057,611
$711,119 $
126,754 $
(595) $
1,955 $ (26,494) $ 812,739
282,107
114,566
6,474
1,879
728
390,112
405,754
(24,219)
43,708
(28,995)
10,808
4,663
10,908
$
Capital expenditures (1)
$338,543 $
233,506 $ 99,234 $
- $
15 $ 671,298
114
(Thousands)
Revenues
Adjusted EBITDA
Less:
Interest expense, net
Depreciation and amortization
Other income
Transaction related and other costs
Stock-based compensation
Income tax benefit
Other
Net loss
Year Ended December 31, 2018
Leasing
Fiber
Infrastructure
Towers
Consumer
CLEC
Corporate
Total of
Reportable
Segments
$699,847 $
289,239 $ 14,617 $ 13,931 $
- $1,017,634
$697,545 $
123,389 $
355 $
3,353 $ (21,759) $ 802,883
337,126
105,651
6,704
1,994
275
319,591
451,750
(4,504)
17,410
8,064
(5,421)
(552)
16,545
$
Capital expenditures (1)
$152,140 $
199,689 $ 74,932 $
- $
114 $ 426,875
(1) Segment capital expenditures represents capital expenditures, the Windstream Asset Purchase Agreement,
Bluebird and NMS asset acquisitions (see Note 6) and ground lease investments as reported in the investing
activities section of the Consolidated Statement of Cash Flows.
Total assets by business segment as of December 31, 2020 and December 31, 2019 are as follows:
(Thousands)
Leasing
Fiber Infrastructure
Towers
Consumer CLEC
Corporate
Total of reportable segments
Note 17. Commitments and Contingencies
Litigation
December 31,
2020
2,295,289
2,354,569
-
8,707
73,253
4,731,818
$
$
2019
2,341,734
2,362,267
235,888
10,687
66,424
5,017,000
$
$
In the ordinary course of our business, we are subject to claims and administrative proceedings, none of which we
believe are material or would be expected to have, individually or in the aggregate, a material adverse effect on our
business, financial condition, cash flows or results of operations.
Pursuant to the Separation and Distribution Agreement entered into with Windstream in connection with the Spin-
Off, Windstream has agreed to indemnify us (including our subsidiaries, directors, officers, employees and agents
and certain other related parties) for any liability arising from or relating to legal proceedings involving
Windstream's telecommunications business prior to the Spin-Off, and, pursuant to the Master Lease, and the
successor Windstream Leases, Windstream has agreed to indemnify us for, among other things, any use, misuse,
maintenance or repair by Windstream with respect to the Distribution Systems. Windstream is currently a party to
various legal actions and administrative proceedings, including various claims arising in the ordinary course of its
telecommunications business, which are subject to the indemnities provided to us by Windstream.
115
On July 25, 2019, in connection with Windstream’s bankruptcy, Windstream Holdings and Windstream Services,
LLC (“Windstream Services”) filed a complaint with the U.S. Bankruptcy Court for the Southern District of New
York (the “Bankruptcy Court”) in an adversary proceeding against Uniti and certain of its affiliates, alleging, among
other things, that the Master Lease should be recharacterized as a financing arrangement, that certain rent payments
and TCIs made by Windstream under the Master Lease constitute constructive fraudulent transfers, that the Master
Lease is a lease of personal property and that Uniti breached certain of its obligations under the Master Lease. On
March 2, 2020, Uniti and Windstream jointly announced that they agreed to the Settlement to resolve any and all
claims and causes of action that have been or may be asserted against Uniti by Windstream, including all litigation
brought by Windstream and certain of its creditors in the context of Windstream’s bankruptcy, and on May 12,
2020, the Bankruptcy Court entered an order approving Windstream’s assumption of the Master Lease as part of the
Settlement. As a result, during the second quarter of 2020, we estimated that $650.0 million of the consideration
paid to Windstream should be classified as settlement of litigation, and therefore, recorded a $650.0 million charge.
The charge represented our estimated fair value of the litigation settlement component of the Settlement.
On September 21, 2020, Windstream emerged from bankruptcy. In connection with Windstream’s emergence from
bankruptcy, Uniti and Windstream implemented the Settlement, pursuant to which Uniti and Windstream agreed to
mutual releases with respect to any and all liability related to any claims and causes of action between them,
including those brought by Windstream and certain of its creditors relating to Windstream’s Chapter 11 proceedings
and the Master Lease.
On May 26, 2020, UMB Bank, National Association and U.S. Bank National Association, in their respective
capacities as indenture trustees of Windstream’s bonds filed a notice of appeal in the United States District Court for
the Southern District of New York from the bankruptcy court’s May 12, 2020 order approving the settlement. The
appeal was fully briefed on September 10, 2020. The district court has not yet issued a ruling on the appeal.
Under the Settlement Agreement, in addition to completing the transactions and executing the Windstream
Leases (see Note 5), Uniti is required to make quarterly cash payments of $24.5 million to Windstream
for 20 consecutive quarters beginning the first month after Windstream’s emergence. Uniti may prepay any
installments falling due on or after the first anniversary of the Settlement’s effective date (discounted at a 9%
rate). This obligation has been recorded at its initial fair value of $438.6 million and is reported as settlement
payable on our Consolidated Balance Sheet at December 31, 2020. The difference between the initial fair value of
the obligation and total undiscounted cash payments, $490.1 million, will be recognized as interest expense within
our Consolidated Statements of Income (Loss) at an effective rate of 4.7%, over 20 quarters beginning October 1,
2020.
Stock Purchase Agreements
On September 9, 2020, Uniti entered into stock purchase agreements (each, a “Stock Purchase Agreement”) with
certain first lien creditors of Windstream to replace and codify the terms set forth in the previously-filed binding
letters of intent, pursuant to which on September 18, 2020 Uniti sold an aggregate of 38,633,470 shares of Uniti
common stock, par value $0.0001 per share (the “Settlement Common Stock”), at $6.33 per share, which represents
the closing price of Uniti common stock on the date when an agreement in principle of the basic outline of the
Settlement was first reached. Uniti transferred the proceeds from the sale of the Settlement Common Stock to
Windstream as consideration relating to the Asset Purchase Agreement and in partial settlement of the litigation with
Windstream.
Asset Purchase Agreement (see Note 6)
On September 18, 2020, and in furtherance of the Settlement Agreement, Uniti and Windstream closed an asset
purchase agreement, as amended by a letter agreement (collectively, the “Asset Purchase Agreement”), pursuant to
which (a) Uniti paid to Windstream approximately $284.6 million and (b) Windstream (i) granted to Uniti exclusive
rights to use 1.8 million fiber strand miles leased by Windstream under the CLEC MLA, which fiber strands are
either unutilized or utilized under certain dark fiber indefeasible rights of use (“IRUs”) that were simultaneously
transferred to Uniti, (ii) conveyed to Uniti fiber assets (and underlying rights) consisting of 0.4 million fiber strand
miles (covering 4,000 route miles) owned by Windstream, and (iii) transferred and assigned to subsidiaries of Uniti
dark fiber IRUs relating to (x) the fiber strand miles granted to Uniti under the CLEC MLA (and described in clause
116
(i)) and (y) the fiber assets (and underlying rights) for the 0.4 million fiber strand miles conveyed to Uniti (and
described in clause (ii)), which IRUs generated $28.9 million of annual EBITDA in the aggregate as of closing of
the Asset Purchase Agreement. In addition, upon the transfer of the Windstream owned fiber assets (described in
clause (ii) above), Uniti granted to Windstream a 20-year IRU for certain strands included in the transferred fiber
assets.
Other Litigation
On July 3, 2019, SLF Holdings, LLC (“SLF”) filed a complaint against the Company, Uniti Fiber, and certain
current and former officers of the Company (collectively, the “Defendants”) in the United States District Court for
the Southern District of Alabama, in connection with Uniti Fiber’s purchase of Southern Light, LLC from SLF in
July 2017. The complaint asserted claims for fraud and conspiracy, as well as claims under federal and Alabama
securities laws, alleging that Defendants improperly failed to disclose to SLF the risk that the Spin-Off and entry
into the Master Lease violated certain debt covenants of Windstream. On September 26, 2019, the action was
transferred to United States District Court for the District of Delaware. On November 18, 2019, SLF filed an
amended complaint, adding allegations that Defendants also failed to fully disclose the risk that the Master Lease
purportedly could be recharacterized as a financing instead of “true lease.” The amended complaint seeks
compensatory and punitive damages, as well as reformation of the purchase agreement for the sale. On December
18, 2019, Defendants moved to dismiss the amended complaint in its entirety. That motion was fully briefed as of
February 7, 2020, and a hearing on the motion was heard on May 12, 2020. On November 4, 2020, the court granted
the Defendants’ motion and dismissed SLF’s amended complaint, in its entirety, with prejudice. On December 1,
2020, SLF filed a notice of appeal to the United States Court of Appeals for the Third Circuit from the district
court’s dismissal order. On January 26, 2021, the Third Circuit assigned the case for mediation, which is scheduled
for March 8, 2021. As of the date of this Annual Report on Form 10-K, we are unable to estimate a reasonably
possible range of loss and therefore have not recorded any liabilities associated with these claims in our
Consolidated Balance Sheet.
Beginning on October 25, 2019, several purported shareholders filed separate putative class actions in the U.S.
District Court for the Eastern District of Arkansas against the Company and certain of our officers, alleging
violations of the federal securities laws (the “Shareholder Actions”), based on claims similar to those asserted in the
SLF Action. On March 12, 2020, the U.S. District Court for the Eastern District of Arkansas consolidated the
Shareholder Actions and appointed lead plaintiffs and lead counsel in the consolidated cases under the caption In re
Uniti Group Inc. Securities Litigation. On May 11, 2020, lead plaintiffs filed a consolidated amended complaint in
the consolidated Shareholder Actions. The consolidated amended complaint seeks to represent investors who
acquired the Company’s securities between April 20, 2015 and February 15, 2019. The Shareholder Actions assert
claims under Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder, alleging that
the Company made materially false and misleading statements by allegedly failing to disclose, among other things,
the risk that the Spin-Off and entry into the Master Lease violated certain debt covenants of Windstream and/or the
risk that the Master Lease purportedly could be recharacterized as a financing instead of “true lease.” The
Shareholder Actions seek class certification, unspecified monetary damages, costs and attorneys’ fees and other
relief. On July 10, 2020, defendants moved to dismiss the consolidated amended complaint. Briefing on that
motion is complete, but no decision has been issued. We intend to defend this matter vigorously, and, because it is
still in its preliminary stages, we have not yet determined what effect this lawsuit will have, if any, on our financial
position or results of operations. As of the date of this Annual Report on Form 10-K, we are unable to estimate a
reasonably possible range of loss and therefore have not recorded any liabilities associated with these claims in our
Consolidated Balance Sheet.
Under the terms of the tax matters agreement entered into on April 24, 2015 by the Company, Windstream Services,
LLC and Windstream (the “Tax Matters Agreement”), in connection with the Spin-Off, we are generally responsible
for any taxes imposed on Windstream that arise from the failure of the Spin-Off and the debt exchanges to qualify as
tax-free for U.S. federal income tax purposes, within the meaning of Section 355 and Section 368(a)(1)(D) of the
Code, as applicable, to the extent such failure to qualify is attributable to certain actions, events or transactions
relating to our stock, indebtedness, assets or business, or a breach of the relevant representations or any covenants
made by us in the Tax Matters Agreement, the materials submitted to the IRS in connection with the request for the
private letter ruling or the representations provided in connection with the tax opinion. We believe that the
117
probability of us incurring obligations under the Tax Matters Agreement are remote; and therefore, we have
recorded no such liabilities in our Consolidated Balance Sheet as of December 31, 2020.
Note 18. Accumulated Other Comprehensive Income
Changes in accumulated other comprehensive income (loss) by component is as follows for the years ended
December 31, 2020, 2019 and 2018:
(Thousands)
Cash flow hedge changes in fair value gain (loss):
Balance at beginning of period
Other comprehensive income (loss) before reclassifications
Amounts reclassified from accumulated other
comprehensive income
Net other comprehensive income (loss)
Less: Other comprehensive income (loss) attributable to
noncontrolling interest
Balance at end of period
Interest rate swap termination:
Balance at beginning of period attributable to common
shareholders
Amounts reclassified from accumulated other
comprehensive income
Balance at end of period
Less: Other comprehensive income (loss) attributable to
noncontrolling interest
Balance at end of period attributable to common
shareholders
Foreign currency translation gain (loss):
Balance at beginning of period
Translation adjustments
Amounts reclassified from accumulated other
comprehensive income
Net other comprehensive income (loss)
Less: Other comprehensive income (loss) attributable to
noncontrolling interest
Balance at end of period
Accumulated other comprehensive income (loss) at end of
period
Note 19. Income Taxes
2020
2019
2018
$
(23,442) $
(7,713)
30,042
(51,288)
$
677
(30,478)
(125)
(30,353)
—
10,155
10,155
169
9,986
—
—
—
—
—
—
(3,324)
(24,570)
(1,128)
(23,442)
—
—
—
—
—
63
—
(63)
—
—
—
6,351
21,626
2,624
30,601
559
30,042
—
—
—
—
—
1,470
(1,440)
—
30
(33)
63
$
(20,367) $
(23,442) $
30,105
We elected on our initial U.S. federal income tax return to be treated as a REIT under the Internal Revenue Code of
1986, as amended (the “Code”). To qualify as a REIT, we must distribute at least 90% of our annual REIT taxable
income, determined without regard to the dividends paid deduction and excluding any capital gains, to shareholders,
and meet certain organizational and operational requirements, including asset holding requirements. As a REIT, we
will generally not be subject to U.S. federal income tax on income that we distribute as dividends to our
shareholders. If we fail to qualify as a REIT in any taxable year unless certain relief provisions apply, we will be
subject to U.S. federal income tax, including any applicable alternative minimum tax for open taxable years through
2017, on our taxable income at regular corporate income tax rates, and we could not deduct dividends paid to our
shareholders in computing taxable income. Any resulting corporate liability could be substantial and could
materially and adversely affect our net income and net cash available for distribution to shareholders. Unless we
118
were entitled to relief under certain Code provisions, we also would be disqualified from reelecting to be taxed as a
REIT for the four taxable years following the year in which we failed to qualify as a REIT.
Subject to the restrictions imposed by our 7.875% senior secured notes due 2025 (see Note 13), our ability to make
cash distributions to our shareholders in amounts exceeding 90% of our good faith estimate, as of the date on which
the first quarterly dividend for the relevant year is declared, of our REIT taxable income for such year, determined
without regard to the dividends paid deduction and excluding any capital gains, until we reduce our net leverage
ratio. As a result, we may be required to record a provision in our Consolidated Financial Statements for U.S.
federal income taxes related to the activities of the REIT and its passthrough subsidiaries for any undistributed
income. We are subject to the statutory requirements of the locations in which we conduct business, and state and
local income taxes are accrued as deemed required in the best judgment of management based on analysis and
interpretation of respective tax laws.
We have elected to treat the subsidiaries through which we operate Uniti Fiber and Talk America, as well as certain
portions of Uniti Towers, as TRSs. TRSs enable us to engage in activities that result in income that does not
constitute qualifying income for a REIT. Our TRSs are subject to U.S. federal, state and local corporate income
taxes.
Income tax expense (benefit) for the years ended December 31, 2020, 2019 and 2018 as reported in the
accompanying Consolidated Statements of Income was comprised of the following:
(Thousands)
Current
Federal
State
Foreign
Total current expense
Deferred
Federal
State
Foreign
Total deferred expense
Total income tax (benefit) expense
Year Ended December 31,
2020
2019
2018
$
$
(901) $
(498)
87
(1,312)
(7,665)
(6,226)
-
(13,891)
(15,203) $
10,401 $
2,742
2,948
16,091
(9,378)
(2,050)
-
(11,428)
4,663 $
674
1,290
-
1,964
(5,451)
(1,770)
(164)
(7,385)
(5,421)
An income tax expense reconciliation between the U.S. statutory tax rate and the effective tax rate is as follows:
(Thousands)
Income from continuing operations, before tax
Income tax at U.S. statutory federal rate
Increases (decreases) resulting from:
State taxes, net of federal benefit
Benefit of REIT status
Goodwill impairment
Return to accrual
Permanent differences
Foreign taxes
Rate differential
Year Ended December 31,
2020
2019
2018
$
(734,015) $
(154,143)
15,571
3,270
$
(3,452)
129,742
14,910
(2,795)
448
87
-
407
(2,188)
-
104
122
2,948
-
4,663
$
11,124
2,336
(655)
(5,687)
-
(26)
41
(111)
(1,319)
(5,421)
Income tax (benefit) expense
$
(15,203) $
119
The effective tax rate on income from continuing operations differs from tax at the statutory rate primarily due to
our status as a REIT.
Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
The components of the Company's deferred tax assets and liabilities are as follows:
(Thousands)
Deferred tax assets:
Deferred revenue
Accrued bonuses
Stock-based compensation
Accrued expenses and other
Asset retirement obligation
Inventory reserve
Excess business interest expense
Lease asset liability
Settlement obligation
Other
Net operating loss carryforwards
Deferred tax assets
Valuation allowance
Deferred tax assets, net of valuation allowance
Deferred tax liabilities:
Property, plant and equipment
Customer list intangible
Other intangible amortization
Right of use asset
Deferred or prepaid costs
Debt discount and interest expense
Other
Deferred tax liabilities
Deferred tax liability, net
December 31, 2020
December 31, 2019
34,207 $
3
801
270
1,429
241
17
16,842
883
3,032
126,464
184,189
-
184,189
(103,441) $
(42,898)
(24,852)
(18,443)
(3,041)
(2,034)
(20)
(194,729) $
25,507
4
1,123
75
1,068
322
2,111
19,264
-
1,387
116,736
167,597
-
167,597
(106,716)
(46,164)
(15,486)
(18,012)
(2,121)
(2,890)
(639)
(192,028)
(10,540) $
(24,431)
$
$
$
$
As of December 31, 2020, the Company’s deferred tax assets were primarily the result of U.S. federal and state
NOL carryforwards.
As of each reporting date, the Company’s management considers new evidence, both positive and negative, that
could impact management’s view with regard to future realization of deferred tax assets. Given the Company has
significant deferred tax liabilities, management determined that sufficient positive evidence exists as of December
31, 2020, to conclude that it is more likely than not that all of its deferred tax assets are realizable, and therefore, no
valuation allowance has been recorded.
On August 31, 2016, we acquired 100% of the outstanding equity of Tower Cloud, Inc., which had federal NOL
carryforwards of approximately $81.2 million at the date of the acquisition. As a result of the change in ownership,
the utilization of Tower Cloud, Inc. NOL carryforwards is subject to limitations imposed by the Code.
Approximately $18.3 million of the Tower Cloud, Inc. NOL carryforward was utilized in 2017. The remaining
Tower Cloud, Inc. NOL carryforwards will expire between 2026 and 2036.
120
We have total federal NOL carryforwards as of December 31, 2020 of approximately $165.2 million which will
expire between 2026 and 2037, and approximately $321.0 million which will not expire but the utilization of which
will be limited to 80% of taxable income annually under provisions enacted in the Tax Cut and Jobs Act.
With the exception of Tower Cloud, Inc. and Uniti Fiber Holdings Inc., our 2017 returns remain open to
examination. As Tower Cloud, Inc. and Uniti Fiber Holdings Inc. have NOLs available to carry forward, the
applicable tax years will generally remain open to examination several years after the applicable loss carryforwards
have been utilized or expire.
The Company or its subsidiaries file tax returns in the U.S. federal jurisdiction, various state and local jurisdictions,
and certain foreign jurisdictions. A reconciliation of the Company’s beginning and ending liability for unrecognized
tax benefits is as follows:
(Thousands)
Balance at January 1
Additions related to acquisitions
Additions for tax positions for the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Settlements
Balance at December 31
$
$
2020
2019
1,734
-
-
-
-
-
1,734
$
$
3,036
-
1,734
-
(3,036)
-
1,734
The Company’s entire liability for unrecognized tax benefit would affect the annual effective tax rate if recognized.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as additional tax
expense. The Company recorded $0.1 million of interest expense and penalties for the period ending December 31,
2020. The Company’s balance of accrued interest and penalties related to unrecognized tax benefits as of December
31, 2020 was $1.3 million.
Note 20. Supplemental Cash Flow Information
Cash paid for interest expense and income taxes is as follows:
(Thousands)
Cash payments for:
Year Ended December 31,
2020
2019
2018
Interest (net of capitalized interest)
Income Taxes
$
$
314,276
1,155
$
$
344,464
16,073
$
$
281,364
1,688
Note 21. Capital Stock
On September 9, 2020, Uniti entered into stock purchase agreements (see Note 17) with certain first lien creditors of
Windstream to replace and codify the terms set forth in the previously-filed binding letters of intent, pursuant to which
on September 18, 2020 Uniti sold an aggregate of 38,633,470 shares of Uniti common stock, par value $0.0001 per
share (the “Settlement Common Stock”), at $6.33 per share, which represents the closing price of Uniti common stock
on the date when an agreement in principle of the basic outline of the Settlement was first reached. Uniti transferred the
proceeds from the sale of the Settlement Common Stock to Windstream as consideration relating to the Asset Purchase
Agreement and settlement of the litigation with Windstream. The issuance and sale of the Settlement Common Stock
was made in reliance upon the exemption from registration requirements pursuant to Section 4(a)(2) of the Securities
Act of 1933, as amended. Certain recipients of the Settlement Common Stock are subject to a one-year lock up, and all
recipients are subject to a customary standstill agreement. No recipient will receive any governance rights in connection
with the issuance. The binding letters of intent and the Stock Purchase Agreements also provide for customary
registration rights.
121
On June 22, 2020, we established an at-the-market common stock offering program (the “ATM Program”) to sell
shares of our common stock, par value $0.0001 per share, having an aggregate offering price of up to $250 million.
This offering supersedes and replaces the $250 million program we commenced on September 2, 2016, which had
approximately $117.1 million available for issuance under such program. We have not made any sales under the
refreshed ATM Program. This program is intended to provide additional financial flexibility and an alternative
mechanism to access the capital markets at an efficient cost as and when we need financing, including for
acquisitions.
On July 2, 2019, the Company issued 8,677,163 shares of its commons stock in connection with the conversion by
PEG Bandwidth Holdings, LLC of 87,500 shares of the Series A Shares. The Company issued common stock with
a total value of $87.5 million, with the total number of shares calculated based on the five-day volume weighted
average price of its common stock ending on June 27, 2019. Upon conversion, all outstanding Series A Shares were
cancelled and no longer remain outstanding. The issuance by the Company of the common stock was made in
reliance upon the exception from registration requirements pursuant to Section 3(a)(9) of the Securities Act.
We are authorized to issue up to 500,000,000 shares of voting common stock and 50,000,000 shares of preferred
stock, of which 231,261,958 and 0 shares, respectively, were outstanding at December 31, 2020. We had
268,738,042 shares of voting common stock available for issuance at December 31, 2020.
Note 22. Dividends (Distributions)
Distributions with respect to our common stock is characterized for federal income tax purposes as taxable ordinary
dividends, capital gains dividends, non-dividend distribution or a combination thereof. For the years ended
December 31, 2020, 2019, and 2018, our common stock distribution per share was $0.60, $0.97 and $2.40,
respectively, characterized as follows:
Year Ended December 31,
2020 (1)
2019 (2)
2018
Ordinary dividends
Capital gain distribution
Non-dividend distributions
Total
$
$
$
0.52
0.08
-
0.60
$
$
$
0.97
-
-
0.97
$
$
$
1.53
-
0.87
2.40
(1) Pursuant to Internal Revenue Code Section 857(b)(9), if you were a stockholder of record as of December 15,
2020, your dividend payment of $0.1500 per share received in January 2021 was reported on Form 1099-DIV
for the 2020 taxable year for federal income tax purposes.
(2) Pursuant to Internal Revenue Code Section 857(b)(9), if you were a stockholder of record as of December 31,
2019, your dividend payment of $0.2200 per share received in January 2020 was reported on Form 1099-DIV
for the 2019 taxable year for federal income tax purposes.
Note 23. Employee Benefit Plan
We sponsor a defined contribution plan under section 401(k) of the Internal Revenue Code, which covers employees
who are 21 years of age and over. Under this plan, we match voluntary employee contributions at a rate of 100% for
the first 3% of an employee’s annual compensation and at a rate of 50% for the next 2% of an employee’s annual
compensation. Employees vest in our contribution immediately. Our expense related to the plan recognized for the
years ended December 31, 2020, 2019 and 2018 was $2.2 million, $1.7 million and $1.2 million, respectively.
We sponsor a deferred compensation plan. The plan is established and maintained by the Company primarily to
permit certain management or highly compensated employees of the Company and its subsidiaries, within the
meaning of Section 301(a) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), to
defer a percentage of their compensation. The plan is an unfunded deferred compensation plan intended to qualify
for the exemptions provided in, and shall be administered in a manner consistent with Section 201, 301 and 401 of
ERISA and Section 409A of the Internal Revenue Code of 1986, as amended.
122
Note 24. Subsequent Events
On February 2, 2021, the Operating Partnership, Uniti Group Finance 2019 Inc. and CSL Capital, LLC issued $1.11
billion aggregate principal amount of 6.50% Senior Notes due 2029. The net proceeds from the offering were used
to fund the tender offer of substantially all outstanding 2023 Notes, of which $58.8 million remain outstanding. On
February 16, 2021, we issued a notice of redemption to redeem all remaining principal amount of the 2023 Notes on
April 15, 2021.
123
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We have established disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the
Exchange Act, that are designed to ensure that information required to be disclosed by us in the reports that we file
or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods
specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit
under the Exchange Act is accumulated and communicated to management, including our principal executive and
principal financial officers as appropriate, to allow timely decisions regarding required disclosure.
Our management, with the participation of our principal executive officer and principal financial officer, evaluated
the effectiveness of our disclosure controls and procedures as of December 31, 2020. Based on this evaluation, our
principal executive officer and principal financial officer concluded that our disclosure controls and procedures were
not effective as of December 31, 2020, due to the material weakness in our internal control over financial reporting,
as described below.
Managements Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as
defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial
reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles, and includes those policies and procedures that:
•
•
•
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions
and dispositions of the assets of the Company;
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures
of the Company are being made only in accordance with authorizations of management and directors of the
Company; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may
deteriorate.
Our management, with the participation of our principal executive officer and principal financial officer, assessed
the effectiveness of our internal control over financial reporting as of December 31, 2020. In making this
assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control - Integrated Framework (2013).
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting,
such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements
will not be prevented or detected on a timely basis.
Based on this assessment, management concluded that the Company did not maintain effective internal control over
financial reporting as of December 31, 2020 due to the following material weakness. The Company had ineffective
controls over the annual goodwill impairment assessment, specifically, the control activities over the determination
124
of the carrying value to be used in the assessment of goodwill impairment did not operate effectively due to an
insufficient complement of qualified personnel. The control deficiency described above created a reasonable
possibility that a material misstatement to the consolidated financial statements would not be prevented or detected
on a timely basis. Therefore, we concluded that the deficiency represents a material weakness in the Company’s
internal control over financial reporting and our internal control over financial reporting was not effective as of
December 31, 2020.
This material weakness resulted in a material adjustment to the goodwill balance on the consolidated balance sheet
and a goodwill impairment charge on the consolidated income statement, which were corrected prior to issuance of
the consolidated financial statements as of and for the year ended December 31, 2020.
The Company’s independent registered public accounting firm, KPMG LLP, who audited the consolidated financial
statements included in this Annual Report on Form 10-K, issued an adverse opinion on the effectiveness of the
Company’s internal control over financial reporting. KPMG LLP’s report appears in Part II, Item 8 of this Annual
Report on Form 10-K.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting, as such term is defined in Rule 13a-
15(f) under the Exchange Act, during the quarter ended December 31, 2020 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
Remediation Plan
Management is implementing remedial actions to ensure that the material weakness is remediated such that the
existing controls will operate effectively. The remedial actions we are taking, and expect to take, include educating
and re-training control owners regarding the accounting standards related to goodwill and the associated impairment
determination and hiring or contracting with appropriate resources to enable adequate time and knowledge to
effectively operate associated controls.
We believe that these actions, and the improvements we expect to achieve as a result, will effectively remediate the
material weakness. However, the material weakness in our internal control over financial reporting will not be
considered remediated until the operation of the remediated control is sufficiently tested. We expect that the
remediation of this material weakness will be completed in fiscal 2021.
Item 9B. Other Information.
None.
125
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Except as set forth below, the information required by this item is incorporated by reference from the definitive
proxy statement to be filed within 120 days after December 31, 2020, pursuant to Regulation 14A under the
Exchange Act in connection with our 2021 annual meeting of stockholders.
We have a code of ethics as defined in Item 406 of Regulation S-K, which code applies to all of our directors and
employees, including our principal executive officer, principal financial officer, principal accounting officer or
controller, and persons performing similar functions. A copy of this code of ethics, titled “Code of Business Conduct
and Ethics and Whistleblower Policy,” is available free of charge in the Corporate Governance section of the About
Us page on our website at www.uniti.com. We intend to satisfy the disclosure requirements of Form 8-K regarding
any amendment to, or a waiver from, any provision of our code of ethics by posting such amendment or waiver on
our website.
Item 11. Executive Compensation.
The information required by this item is incorporated by reference from the definitive proxy statement to be filed
within 120 days after December 31, 2020, pursuant to Regulation 14A under the Exchange Act in connection with
our 2021 annual meeting of stockholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
Except as set forth below, the information required by this item is incorporated by reference from the definitive
proxy statement to be filed within 120 days after December 31, 2020, pursuant to Regulation 14A under the
Exchange Act in connection with our 2021 annual meeting of stockholders.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table contains information about our equity compensation plan as of December 31, 2020:
EQUITY COMPENSATION PLAN INFORMATION
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
(a)
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
Number of securities
available for future issuance
under equity compensation
plans (excluding securities
reflected in column (a))
(c)
-
-
-
-
-
-
4,957,3371
-
4,957,337
Plan category
Equity compensation
plans approved by
security holders
Equity compensation
plans not approved by
security holders
Total
1
Amount includes 3,137,412 shares available for issuance under the Uniti Group Inc. 2015 Equity Incentive
Plan and 1,819,925 shares under the Uniti Group Inc. Employee Stock Purchase Plan.
126
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this item is incorporated by reference from the definitive proxy statement to be filed
within 120 days after December 31, 2020, pursuant to Regulation 14A under the Exchange Act in connection with
our 2021 annual meeting of stockholders.
Item 14. Principal Accounting Fees and Services.
The information required by this item is incorporated by reference from the definitive proxy statement to be filed
within 120 days after December 31, 2020, pursuant to Regulation 14A under the Exchange Act in connection with
our 2021 annual meeting of stockholders.
127
Item 15. Exhibits, Financial Statement Schedules.
Financial Statements
PART IV
See Index to Consolidated Financial Statements in “Financial Statements and Supplementary Data.”
Financial Statement Schedules
Uniti Group Inc. Schedule I – Condensed Financial Information of the Registrant (Parent Company) Condensed
Balance Sheets as of December 31, 2020 and 2019, and the related Condensed Statements of Comprehensive
Income and Cash Flows for each of the three years in the period ended December 31, 2020, including the related
notes, appearing on pages S-1, S-2, S-3, and S-4 of this report.
Uniti Group Inc. Schedule II – Valuation and Qualifying Accounts for each of the three years in the period ended
December 31, 2020 appearing on page S-5 of this report.
Uniti Group Inc. Schedule III – Schedule of Real Estate Investments and Accumulated Depreciation as of December
31, 2020 appearing on page S-6 of this report.
Index to Exhibits
Exhibit No.
Description
2.1
2.2
2.3**
2.4
2.5
2.6
Separation and Distribution Agreement, dated as of March 26, 2015, by and among Windstream
Holdings, Inc., Windstream Services, LLC and Communications Sales & Leasing, Inc.
(incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K dated and
filed with the SEC as of March 26, 2015 (File No. 001-36708))
Agreement and Plan of Merger, dated as of January 7, 2016, by and among Communications Sales
& Leasing, Inc., CSL Bandwidth Inc., Penn Merger Sub, LLC, PEG Bandwidth, LLC, PEG
Bandwidth Holdings, LLC, and PEG Bandwidth Holdings, LLC, as Unitholders’ Representative
(incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K dated and
filed with the SEC as of January 12, 2016 (File No. 001-36708))
Agreement and Plan of Merger, dated as of June 20, 2016, by and among Communications Sales &
Leasing, Inc., CSL Fiber Holdings LLC, Thor Merger Sub, Inc., Tower Cloud, Inc. and Shareholder
Representative Services LLC, as representative of the equityholders of Tower Cloud, Inc.
(incorporated by reference to Exhibit 2.1 to the Company’s Quarterly Report on Form 10-Q dated
and filed with the SEC as of August 11, 2016 (File No. 001-36708))
First Amendment, dated as of August 11, 2016, to the Agreement and Plan of Merger, dated as of
June 20, 2016, by and among Communications Sales & Leasing, Inc., CSL Fiber Holdings LLC,
Thor Merger Sub, Inc., Tower Cloud, Inc. and Shareholder Representative Services LLC, as
representative of the equityholders of Tower Cloud, Inc. (incorporated by reference to Exhibit 2.2 to
the Company’s Quarterly Report on Form 10-Q dated and filed with the SEC as of August 11, 2016
(File No. 001-36708))
Membership Interests Purchase Agreement, dated as of April 7, 2017, by and among Uniti Group
Inc., Uniti Fiber Holdings Inc. and SLF Holdings, LLC (incorporated by reference to Exhibit 2.1 to
the Company’s Current Report on Form 8-K dated and filed with the SEC as of April 11, 2017 (File
No. 001-36708))
Amended and Restated Agreement of Limited Partnership of Uniti Group LP, dated July 3, 2017, by
and between Uniti Group Inc. and Uniti Group LP LLC (incorporated by reference to Exhibit 2.1 to
the Company’s Current Report on Form 8-K dated and filed with the SEC as of July 3, 2017 (File
No. 001-36708))
128
Exhibit No.
3.1
3.2
3.3
3.4
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
Description
Articles of Amendment and Restatement of Communications Sales & Leasing, Inc. (incorporated by
reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated and filed with the
SEC as of April 10, 2015 (File No. 001-36708))
Articles of Amendment of Communications Sales & Leasing, Inc. (incorporated by reference to
Exhibit 3.1 to the Company’s Current Report on Form 8-K dated and filed with the SEC as of
February 28, 2017 (File No. 001-36708))
Articles of Amendment of Uniti Group Inc. (incorporated by reference to Exhibit 3.1 to the
Company’s Current Report on Form 8-K dated and filed with the SEC as of May 18, 2018 (File No.
001-36708))
Amended and Restated Bylaws of Uniti Group Inc. (incorporated by reference to Exhibit 3.1 to the
Company’s Current Report on Form 8-K dated as of May 1, 2017 and filed with the SEC as of May
2, 2017 (File No. 001-36708))
Indenture, dated as of April 24, 2015, among Communications Sales & Leasing, Inc. and CSL
Capital, LLC, as Issuers, the guarantors named therein, and Wells Fargo Bank, National
Association, as trustee, governing the 8.25% Senior Notes due 2023 (incorporated by reference to
Exhibit 4.2 to the Company’s Current Report on Form 8-K dated and filed with the SEC as of April
27, 2015 (File No. 001-36708))
Form of 8.25% Senior Note due 2023 (included in Exhibit 4.1 above) (incorporated by reference to
Exhibit 4.4 to the Company’s Current Report on Form 8-K dated and filed with the SEC as of April
27, 2015 (File No. 001-36708))
Second Supplemental Indenture (8.25% Senior Notes due 2023), dated as of October 19, 2016,
among Communications Sales & Leasing, Inc. and CSL Capital, LLC, as Issuers, the guarantors
thereto and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit
4.3 to the Company’s Annual Report on Form 10-K dated and filed with the SEC as of February 23,
2017 (File No. 001-36708))
Fifth Supplemental Indenture, dated as of May 9, 2017, to the indenture dated as of April 24, 2015,
among Uniti Group LP, Uniti Group Finance Inc., CSL Capital, LLC, Uniti Group Inc., the
guarantors named therein and Wells Fargo Bank, National Association, as trustee, governing the
8.25% Senior Notes due 2023 (incorporated by reference to Exhibit 4.1 to the Company’s Current
Report on Form 8-K dated and filed with the SEC as of May 9, 2017 (File No. 001-36708))
Sixth Supplemental Indenture, dated as of May 9, 2017, to the indenture dated as of April 24, 2015,
among Uniti Group LP, Uniti Group Finance Inc., CSL Capital, LLC, Uniti Group Inc., the
guarantors named therein and Wells Fargo Bank, National Association, as trustee, governing the
8.25% Senior Notes due 2023 (incorporated by reference to Exhibit 4.2 to the Company’s Current
Report on Form 8-K dated and filed with the SEC as of May 9, 2017 (File No. 001-36708))
Fifteenth Supplemental Indenture, dated February 2, 2021, to the Indenture dated April 24, 2015 by
and among Uniti Group LP, Uniti Group Finance 2019 Inc. and CSL Capital, LLC, as Issuers, the
guarantors party thereto and Deutsche Bank Trust Company Americas, as trustee, governing the
8.25% Senior Notes due 2023 (incorporated by reference to Exhibit 4.3 to the Company’s Current
Report on Form 8-K dated and filed with the SEC as of February 2, 2021 (File No. 001-36708))
Indenture, dated as of April 24, 2015, among Communications Sales & Leasing, Inc. and CSL
Capital, LLC, as Issuers, the guarantors named therein, and Wells Fargo Bank, National
Association, as trustee and as collateral agent, governing the 6.00% Senior Secured Notes due 2023
(incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated and
filed with the SEC as of April 27, 2015 (File No. 001-36708))
Form of 6.00% Senior Secured Note due 2023 (included in Exhibit 4.6 above) (incorporated by
reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K dated and filed with the
SEC as of April 27, 2015 (File No. 001-36708))
129
Exhibit No.
4.9
4.10
4.11
4.12
4.13
4.14
4.15
4.16
4.17
4.18
Description
Second Supplemental Indenture (6.00% Senior Secured Notes due 2023), dated as of June 14, 2016,
among Communications Sales & Leasing, Inc. and CSL Capital, LLC, as Issuers, the guarantors
thereto and Wells Fargo Bank, National Association, as trustee and collateral agent (incorporated by
reference to Exhibit 4.6 to the Company’s Annual Report on Form 10-K dated and filed with the
SEC as of February 23, 2017 (File No. 001-36708))
Third Supplemental Indenture (6.00% Senior Secured Notes due 2023), dated as of October 19,
2016, among Communications Sales & Leasing, Inc. and CSL Capital, LLC, as Issuers, the
guarantors thereto and Wells Fargo Bank, National Association, as trustee and collateral agent
(incorporated by reference to Exhibit 4.7 to the Company’s Annual Report on Form 10-K dated and
filed with the SEC as of February 23, 2017 (File No. 001-36708))
Sixth Supplemental Indenture, dated as of May 9, 2017, to the indenture dated as of April 24, 2015,
among Uniti Group LP, Uniti Group Finance Inc., CSL Capital, LLC, Uniti Group Inc., the
guarantors named therein and Wells Fargo Bank, National Association, as trustee and collateral
agent, governing the 6.00% Senior Secured Notes due 2023 (incorporated by reference to Exhibit
4.3 to the Company’s Current Report on Form 8-K dated and filed with the SEC as of May 9, 2017
(File No. 001-36708))
Seventh Supplemental Indenture, dated as of May 9, 2017, to the indenture dated as of April 24,
2015, among Uniti Group LP, Uniti Group Finance Inc., CSL Capital, LLC, Uniti Group Inc., the
guarantors named therein and Wells Fargo Bank, National Association, as trustee and collateral
agent, governing the 6.00% Senior Secured Notes due 2023 (incorporated by reference to Exhibit
4.4 to the Company’s Current Report on Form 8-K dated and filed with the SEC as of May 9, 2017
(File No. 001-36708))
Indenture, dated as of December 15, 2016, among Communications Sales & Leasing, Inc. and CSL
Capital, LLC, as Issuers, the guarantors named therein, and Wells Fargo Bank, National
Association, as trustee, governing the 7.125% Senior Notes due 2024 (incorporated by reference to
Exhibit 4.1 of the Company’s Current Report on Form 8-K dated and filed with the SEC as of
December 15, 2016 (File No. 001-36708))
Form of 7.125% Senior Note due 2024 (included in Exhibit 4.14 above) (incorporated by reference
to Exhibit 4.2 of the Company’s Current Report on Form 8-K dated and filed with the SEC as of
December 15, 2016 (File No. 001-36708))
First Supplemental Indenture, dated as of February 22, 2017, to the Indenture, dated as of December
15, 2016, among Communications Sales & Leasing, Inc. and CSL Capital, LLC, as Issuers, the
guarantors named therein, and Wells Fargo Bank, National Association, as trustee, governing the
7.125% Senior Notes due 2024 (incorporated by reference to Exhibit 4.11 to the Company’s Annual
Report on Form 10-K dated and filed with the SEC as of February 23, 2017 (File No. 001-36708))
Third Supplemental Indenture, dated as of May 9, 2017, to the indenture dated as of December 15,
2016, among Uniti Group LP, Uniti Fiber Holdings Inc., CSL Capital, LLC, Uniti Group Inc., the
guarantors named therein and Wells Fargo Bank, National Association, as trustee, governing the
7.125% Senior Notes due 2024 (incorporated by reference to Exhibit 4.5 to the Company’s Current
Report on Form 8-K dated and filed with the SEC as of May 9, 2017 (File No. 001-36708))
Fourth Supplemental Indenture, dated as of May 9, 2017, to the indenture dated as of December 15,
2016, among Uniti Group LP, Uniti Fiber Holdings Inc., CSL Capital, LLC, Uniti Group Inc., the
guarantors named therein and Wells Fargo Bank, National Association, as trustee, governing the
7.125% Senior Notes due 2024 (incorporated by reference to Exhibit 4.6 to the Company’s Current
Report on Form 8-K dated and filed with the SEC as of May 9, 2017 (File No. 001-36708))
Fifth Supplemental Indenture, dated as of August 11, 2017, among Uniti Group LP, Uniti Fiber
Holdings Inc., and CSL Capital, LLC, as Issuers, the guarantors named therein, and Wells Fargo
Bank, National Association, as trustee, relating to the 7.125% Senior Notes due 2024 (incorporated
by reference to Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q dated and filed with
the SEC as of November 2, 2017 (File No. 001-36708))
130
Exhibit No.
4.19
4.20
4.21
4.22
4.23
4.24
4.25
10.1
10.2
10.3
10.4
10.5
Description
Indenture, dated as of June 28, 2019, among Uniti Fiber Holdings, Inc., as issuer, Uniti Group Inc.
and the other guarantors named therein, as guarantors, and Deutsche Bank Trust Company
Americas, as trustee, governing the 4.00% Exchangeable Senior Notes due 2024 (incorporated by
reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated June 25, 2019 and
filed with the SEC as of June 28, 2019 (File No. 001-36708))
Form of 4.00% Exchangeable Senior Notes due 2024 (included in Exhibit 4.20 above) (incorporated
by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K dated June 25, 2019 and
filed with the SEC as of June 28, 2019 (File No. 001-36708))
Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities
Exchange Act of 1934 (incorporated by reference to Exhibit 4.22 to the Company’s Annual Report
on Form 10-K filed with the SEC as of March 12, 2020 (File No. 001-36708))
Indenture, dated as of February 10, 2020, among Uniti Group LP, Uniti Fiber Holdings Inc., Uniti
Group Finance 2019 Inc., CSL Capital, LLC, the guarantors named therein, and Deutsche Bank
Trust Company Americas, as trustee and collateral agent, governing the 7.875% Senior Secured
Notes due 2025 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form
8-K filed with the SEC on February 10, 2020 (File No. 001-36708))
Form of 7.875% Senior Secured Notes due 2025 (included in Exhibit 4.23 above) (incorporated by
reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the SEC on
February 10, 2020 (File No. 001-36708))
Indenture, dated February 2, 2021, by and among Uniti Group LP, Uniti Group Finance 2019 Inc.
and CSL Capital, LLC, as Issuers, the guarantors party thereto and Deutsche Bank Trust Company
Americas, as trustee, governing the 6.500% Senior Notes due 2029 (incorporated by reference to
Exhibit 4.1 to the Company’s Current Report on Form 8-K dated and filed with the SEC as of
February 2, 2021 (File No. 001-36708))
Form of 6.500% Senior Notes due 2029 (included in Exhibit 4.24) (incorporated by reference to
Exhibit 4.2 to the Company’s Current Report on Form 8-K dated and filed with the SEC as of
February 2, 2021 (File No. 001-36708))
Settlement Agreement, dated as of May 12, 2020 by and among Windstream Holdings, Inc.,
Windstream Services, LLC and certain of their subsidiaries, and Uniti Group Inc. and certain of its
subsidiaries (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-
K filed with the SEC on May 15, 2020 (File No. 001-36708))
Amended and Restated ILEC Master Lease, entered into as of September 18, 2020, by and between
CSL National, LP and the other entities listed therein, as Landlord, and Windstream Holdings II,
LLC (as successor in interest to Windstream Holdings, Inc.), Windstream Services II, LLC (as
successor in interest to Windstream Services, LLC) and the other entities listed therein, as Tenant
(incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed
with the SEC on November 9, 2020 (File No. 001-36708))
Amended and Restated CLEC Master Lease, entered into as of September 18, 2020, by and between
CSL National, LP and the other entities listed therein, as Landlord, and Windstream Holdings II,
LLC (as successor in interest to Windstream Holdings, Inc.), Windstream Services II, LLC (as
successor in interest to Windstream Services, LLC) and the other entities listed therein, as Tenant
(incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed
with the SEC on November 9, 2020 (File No. 001-36708))
Tax Matters Agreement, entered into as of April 24, 2015, by and among Windstream Holdings,
Inc., Windstream Services, LLC and Communications Sales & Leasing, Inc. (incorporated by
reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated and filed with the
SEC as of April 27, 2015 (File No. 001-36708))
Credit Agreement, dated as of April 24, 2015, by and among Communications Sales & Leasing, Inc.
and CSL Capital, LLC, as Borrowers, the guarantors party thereto, the lenders party thereto from
time to time and Bank of America, N.A., as administrative agent, collateral agent, swing line lender
and L/C issuer (incorporated by reference to Exhibit 10.10 to the Company’s Current Report on
Form 8-K dated and filed with the SEC as of April 27, 2015 (File No. 001-36708))
131
Exhibit No.
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
Description
Amendment No. 1 to the Credit Agreement, dated as of October 21, 2016 by and among
Communications Sales & Leasing, Inc. and CSL Capital, LLC, as borrowers, the guarantors party
thereto, the lenders party thereto, and Bank of America, N.A., as administrative agent and collateral
agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
dated and filed with the SEC as of October 21, 2016 (File No. 001-36708))
Amendment No. 2 to the Credit Agreement, dated as of February 9, 2017 by and among
Communications Sales & Leasing, Inc. and CSL Capital, LLC, as borrowers, the guarantors party
thereto, the lenders party thereto, and Bank of America, N.A., as administrative agent and collateral
agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
dated and filed with the SEC as of February 9, 2017 (File No. 001-36708))
Amendment No. 3 (Incremental Amendment) to the Credit Agreement, dated as of April 28, 2017
by and among Uniti Group Inc. and CSL Capital, LLC, as borrowers, the guarantors party thereto,
the lenders party thereto, and Bank of America, N.A., as administrative agent and collateral agent
(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated as
of May 1, 2017 and filed with the SEC as of May 2, 2017 (File No. 001-36708))
Amendment No. 4 and Limited Waiver to the Credit Agreement, dated as of March 18, 2019,
among Uniti Group Inc., as parent guarantor, Uniti Group LP, Uniti Group Finance Inc. and CSL
Capital, LLC, as borrowers, the guarantors party thereto, the lenders party thereto, and Bank of
America, N.A., as administrative agent and collateral agent (incorporated by reference to Exhibit
10.1 to the Company’s Annual Report on Form 10-K dated and filed with the SEC as of March 18,
2019 (File No. 001-36708))
Amendment No. 5 to the Credit Agreement, dated as of June 24, 2019, among Uniti Group Inc., as
parent guarantor, Uniti Group LP, Uniti Group Finance Inc., and CSL Capital, LLC, as borrowers,
the guarantors party thereto, the lenders party thereto, and Bank of America, N.A., as administrative
agent and collateral agent (incorporated by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K dated and filed with the SEC as of June 24, 2019 (File No. 001-36708))
Amendment No. 6 and Limited Waiver to the Credit Agreement, dated as of February 10, 2020,
among Uniti Group LP, Uniti Group Finance 2019 Inc. and CSL Capital, LLC, as borrowers, the
guarantor party thereto, the lenders party thereto, and Bank of America, N.A., as administrative
agent and collateral agent (incorporated by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K filed with the SEC on February 10, 2020 (File No. 001-36708))
Amendment No. 7 to the Credit Agreement, dated as of December 10, 2020, by and among Uniti
Group Inc., as parent guarantor, Uniti Group LP, Uniti Group Finance Inc., and CSL Capital, LLC,
as borrowers, the guarantors party thereto, the lenders party thereto, and Bank of America, N.A., as
administrative agent and collateral agent (incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K dated and filed with the SEC as of December 10, 2020
(File No. 001-36708))
Agreement of Resignation, Appointment and Acceptance, dated as of June 26, 2019, by and among
Uniti Group LP, CSL Capital, LLC, Uniti Group Finance, Inc., and Unifi Fiber Holdings, Inc., as
Issuers, and Deutsche Bank Trust Company Americas, as successor trustee, and Wells Fargo Bank,
N.A., as resigning trustee (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly
Report on Form 10-Q dated and filed with the SEC as of August 8, 2019 (File No. 001-36708))
Borrower Assumption Agreement and Joinder, dated as of May 9, 2017 by and among Uniti Group
Inc., as initial borrower, Uniti Group LP and Uniti Group Finance Inc., as borrowers, the guarantors
party thereto, the lenders party thereto, and Bank of America, N.A., as administrative agent and
collateral agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K dated and filed with the SEC as of May 9, 2017 (File No. 001-36708))
132
Exhibit No.
10.15
10.16+
10.17+
10.18+
10.19+
10.20+
10.21+
10.22+
10.23+
10.24+
10.25+
10.26+
10.27+
10.28+
Description
Recognition Agreement, dated April 24, 2015, by and among CSL National, LP and the other
entities listed therein, as Landlord, and Windstream Holdings, Inc., as Tenant, and JPMorgan Chase
Bank, N.A., as administrative agent and collateral agent (incorporated by reference to Exhibit 10.11
to the Company’s Current Report on Form 8-K dated and filed with the SEC as of April 27, 2015
(File No. 001-36708))
Employment Agreement between Uniti Group Inc. and Kenneth Gunderman, effective as of
December 14, 2018 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K dated and filed with the SEC as of December 14, 2018 (File No. 001-36708))
Severance Agreement, dated as of December 30, 2020, by and between Uniti Group Inc. and Mark
A. Wallace (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-
K dated and filed with the SEC as of December 30, 2020 (File No. 001-36708))
Severance Agreement, dated as of December 30, 2020, by and between Uniti Group Inc. and Daniel
L. Heard (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
dated and filed with the SEC as of December 30, 2020 (File No. 001-36708))
Uniti Group Inc. 2015 Equity Incentive Plan, as amended and restated effective March 28, 2018
(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated and
filed with the SEC as of March 29, 2018 (File No. 001-36708))
Form of Restricted Shares Agreement for employees (incorporated by reference to Exhibit 10.3 to
the Company’s Current Report on Form 8-K dated and filed with the SEC as of June 3, 2015 (File
No. 001-36708))
Form of Restricted Shares Agreement for employees (incorporated by reference to Exhibit 10.19 to
the Company’s Annual Report on Form 10-K dated and filed with the SEC as of March 18, 2019
(File No. 001-36708))
Form of Performance-Based Restricted Stock Unit Agreement (incorporated by reference to Exhibit
10.4 to the Company’s Current Report on Form 8-K dated and filed with the SEC as of June 3, 2015
(File No. 001-36708))
Form of Performance-Based Restricted Stock Unit Agreement (incorporated by reference to Exhibit
10.21 to the Company’s Annual Report on Form 10-K dated and filed with the SEC as of March 18,
2019 (File No. 001-36708))
Form of Restricted Shares Agreement for non-employee directors (incorporated by reference to
Exhibit 10.5 to the Company’s Current Report on Form 8-K dated and filed with the SEC as of June
3, 2015 (File No. 001-36708))
Form of Indemnity Agreement (incorporated by reference to Exhibit 10.20 to the Company’s
Registration Statement on Form S-4 dated and filed with the SEC as of July 2, 2015 (File No. 333-
205450))
Communications Sales & Leasing, Inc. Deferred Compensation Plan, effective August 10, 2015
(incorporated by reference to Exhibit 10.20 to the Company’s Quarterly Report on Form 10-Q dated
and filed with the SEC as of August 13, 2015 (File No. 001-36708))
Uniti Group Inc. Amended and Restated Employee Stock Purchase Plan (incorporated by reference
to Exhibit 99.1 to the Company’s Registration Statement on Form S-8 dated and filed with the SEC
as of June 7, 2018 (File No. 333-225501))
Uniti Group Inc. Annual Short-Term Incentive Plan (incorporated by reference to Exhibit 10.2 to
the Company’s Quarterly Report on Form 10-Q dated and filed with the SEC as of May 11, 2020
(File No. 001-36708))
133
Exhibit No.
10.29
Description
Form of binding Letter of Intent to purchase Settlement Common Stock (incorporated by reference
to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated and filed with the SEC as of
March 2, 2020 (File No. 001-36708))
21.1*
23.1*
23.2*
31.1*
31.2*
32.1*
32.2*
List of Subsidiaries of Uniti Group Inc.
Consent of KPMG LLP, independent registered public accounting firm
Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the
Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the
Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data
File because XBRL tags are embedded within the Inline XBRL document.
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (embedded within the Inline XBRL document)
*
**
+
Filed herewith
Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment granted by,
and have been filed separately with, the Securities and Exchange Commission. Also, certain exhibits and
schedules to this exhibit have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company
agrees to furnish a supplemental copy of any such omitted exhibit or schedule to the Securities and Exchange
Commission upon request but may request confidential treatment for any exhibit or schedule so furnished.
Constitutes a management contract or compensation plan or arrangement.
ITEM 16. FORM 10-K SUMMARY
None.
134
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: March 5, 2021
UNITI GROUP INC.
By:
/s/ Kenneth A. Gunderman
Kenneth A. Gunderman
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant in the capacities and on the dates indicated.
Name
Title
Date
/s/ Kenneth A. Gunderman
Kenneth A. Gunderman
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Mark A. Wallace
Mark A. Wallace
Executive Vice President – Chief Financial Officer and
Treasurer
(Principal Financial Officer)
/s/ Blake Schuhmacher
Blake Schuhmacher
Senior Vice President – Chief Accounting Officer
(Principal Accounting Officer)
March 5, 2021
March 5, 2021
March 5, 2021
Chairman and Director
March 5, 2021
/s/ Francis X. Frantz
Francis X. Frantz
/s/ Jennifer S. Banner
Jennifer S. Banner
/s/ Scott G. Bruce
Scott G. Bruce
Director
Director
/s/ Carmen Perez-Carlton
Carmen Perez-Carlton
Director
/s/ David L. Solomon
David L. Solomon
Director
135
March 5, 2021
March 5, 2021
March 5, 2021
March 5, 2021
Table of Contents
(Thousands, except par value)
Assets:
Cash and cash equivalents
Other assets
Total Assets
Liabilities:
Uniti Group Inc.
Schedule I – Condensed Financial Information of
The Registrant (Parent Company)
Condensed Balance Sheets
Accrued other liabilities
Dividends payable
Cash distributions and losses in excess of investments in
consolidated subsidiaries
Total liabilities
Shareholders' 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: 231,262 shares at December 31, 2020
and 192,142 at December 31, 2019
Additional paid-in capital
Accumulated other comprehensive (loss) income
Distributions in excess of accumulated earnings
Total Uniti shareholders' deficit
December 31, 2020
December 31, 2019
$
$
$
2,284
37,894
40,178
1,145
36,205
$
$
$
43,423
291
43,714
564
42,519
2,144,486
2,181,836
1,567,499
1,610,582
-
-
23
1,209,141
(20,367)
(3,330,455)
(2,141,658)
19
951,295
(23,442)
(2,494,740)
(1,566,868)
Total Liabilities, Convertible Preferred Stock, and Shareholders'
Deficit
$
40,178
$
43,714
See notes to Consolidated Financial Statements of Uniti Group Inc. included in Financial Statements and
Supplementary Data.
S-1
Table of Contents
Uniti Group Inc.
Schedule I – Condensed Financial Information of
The Registrant (Parent Company)
Condensed Statements of Comprehensive Income
(Thousands)
Costs and Expenses:
Interest expense
General and administrative expense
Transaction related costs
Other expense
Total costs and expenses
Operating loss
(Loss) Earnings from consolidated subsidiaries
(Loss) income before income taxes
Income tax (benefit) expense
Net (loss) income attributable to shareholders
Comprehensive (loss) income attributable to
shareholders
Year Ended December 31,
2020
2019
2018
$
- $
- $
42
101
-
143
(143)
(708,139)
(708,282)
(1,981)
(706,301)
36
2,138
-
2,174
(2,174)
24,730
22,556
11,974
10,582
-
22
-
-
22
(22)
16,209
16,187
-
16,187
$
(703,226) $
(42,639) $
38,472
See notes to Consolidated Financial Statements of Uniti Group Inc. included in Financial Statements and
Supplementary Data.
S-2
Table of Contents
Uniti Group Inc.
Schedule I – Condensed Financial Information of
The Registrant (Parent Company)
Condensed Statements of Cash Flows
(Thousands)
Cash flow from operating activities
Net cash provided by (used in) operating activities
Cash flow from investing activities
Proceeds from sale of real estate, net of cash
Net cash provided by (used in) investing activities
Cash flow from financing activities
Settlement Common Stock issuance (Note 17)
Dividends paid
Proceeds from issuance of Notes
Payments for financing costs
Common stock issuance, net of costs
Net share settlement
Proceeds from sale of warrants
Payment for bond hedge option
Intercompany transactions, net
Employee stock purchase plan
Net cash (used in) provided by financing activities
Effect of exchange rates on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Non-cash investing and financing activities:
Year Ended December 31,
2020
2019
2018
$
94,533 $
199,572 $
425,771
-
-
2,488
2,488
-
-
244,550
(135,676)
-
-
-
(1,097)
-
-
(244,125)
676
(135,672)
-
(41,139)
43,423
2,284
-
(138,731)
83,665
(2,895)
21,641
(1,834)
50,819
(70,035)
(102,411)
883
(158,898)
-
43,162
261
43,423
-
(426,094)
-
-
109,441
(1,604)
-
-
(109,441)
-
(427,698)
-
(1,927)
2,188
261
-
-
Settlement of convertible preferred stock, Series A Shares
Settlement of contingent consideration through non-cash
consideration
$
$
-
-
$
$
87,500
11,178
$
$
See notes to Consolidated Financial Statements of Uniti Group Inc. included in Financial Statements and
Supplementary Data.
S-3
Table of Contents
Uniti Group Inc.
Schedule I – Condensed Financial Information of
The Registrant (Parent Company)
Notes to Condensed Financial Statements
Note 1. Background and Basis of Presentation
Uniti Group Inc.’s parent company financial information has been derived from its consolidated financial statements
and should be read in conjunction with the consolidated financial statements and notes of Uniti and its subsidiaries
included in Item 8 Financial Statements and Supplementary Data in this Annual Report on Form 10-K.
Note 2. Subsidiary Transactions
Investment in Subsidiaries
During 2017, the parent company completed its reorganization (the “up-REIT Reorganization”) to operate through a
customary “up-REIT” structure, pursuant to which we hold substantially all of our assets through a partnership,
Uniti Group LP, a Delaware limited partnership (the “Operating Partnership”), that we control as general partner,
with the only significant difference between the financial position and results of operations of the Operating
Partnership and its subsidiaries compared to the consolidated financial position and consolidated results of
operations of Uniti is that the results for the Operating Partnership and its subsidiaries do not include Uniti’s
Consumer CLEC segment, which consists of Talk America Services. The up-REIT structure is intended to facilitate
future acquisition opportunities by providing the Company with the ability to use common units of the Operating
Partnership as a tax-efficient acquisition currency. As of December 31, 2020, we are the sole general partner of the
Operating Partnership and own approximately 98.5% of the partnership interests in the Operating Partnership.
Dividends
Cash dividends received from subsidiaries and recorded in Cash Flow from Operating Activities in the Condensed
Statement of Cash Flows were $134.7 million, $136.2 million and $426.1 million for the year ended December 31,
2020, 2019 and 2018, respectively.
S-4
Table of Contents
Uniti Group Inc.
Schedule II – Valuation and Qualifying Accounts
(dollars in thousands)
Column A
Column B
Column C
Additions
Column D
Column E
Description
Allowance for Doubtful Accounts
Year Ended December 31, 2020
Year Ended December 31, 2019
Year Ended December 31, 2018
Balance at
Beginning of Period
Charged to
Cost
and Expenses
Charged to
Other Accounts
Deductions
Balance at
End of Period
$
$
$
2,743 $
2,288 $
1,011 $
1,783 $
1,140 $
1,333 $
472 $
- $
- $
(2,058) $
(685) $
(56) $
2,940
2,743
2,288
S-5
Table of Contents
Uniti Group Inc.
Schedule III – Real Estate Investments and Accumulated Depreciation
As of December 31, 2020
(dollars in thousands)
Col. A
Col. B
Col. C
Col. D
Col. E
Col. F
Col. G
Col. H
Col. I
Cost capitalized
subsequent to
acquisition(1) (3)
Initial cost
to
company(1
)
Improveme
nts
Carry
Costs
Gross
Amount
Carried at
Close of
Period(6)
Accumulat
ed
Depreciati
on
Date of
Construction
(2)
Date
Acquired(
2)
(1)
(1)
(1) $ 26,596
$
—
(2)
(2)
Encumbra
nces
$ —
Life on whic
h
Depreciation
in Latest
Income
Statements
is Computed
Indefinite
—
—
—
—
—
—
—
—
—
—
—
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
335,495
266,758
2,776,57
6
—
3,850,98
8
89,773
1,397
184,02
1
189,48
7
1,326,9
36
—
3,432,8
94
65,319
813
(2)
(2)
(2)
(2)
(2)
(2)
(2)
(2)
3 - 40
years
(2)
30 years
(2)
30 years
(2) 5 -7 years
(2)
(2)
(2)
20 years
30 years
20 years
(1)
(1)
25,511
2,771
(2)
(2)
(1)
(1)
(1)
(1)
—
—
10,425
3,154
(2)
(2)
(2)
(2)
(1)
(1)
4,397
—
(2)
(2)
See Note
3
See Note
3
15 - 20
years
See Note
3
Descriptio
n
Land
Buildin
g and
improve
ments
Poles
Fiber
Equipm
ent
Copper
Conduit
Towers
Finance
lease
assets
Real
property
interest
Other
assets
Constru
ction in
progress
(1) Given the voluminous nature and variety of our real estate investment assets, this schedule omits columns C and
D from the schedule III presentation.
(2) Because additions and improvements to our real estate investment assets are ongoing, construction and acquisition
dates are not applicable.
(3) For the year ended December 31, 2020, the amount of capitalized costs related to the Distribution Systems is as
follows (millions):
Tenant capital improvements(4)
Growth capital improvements(5)
$
$
102.4
84.7
(4) Tenant capital improvements represent, maintenance, repair, overbuild, upgrade or replacements to the leased
network, including, without limitation, the replacement of copper distribution systems with fiber distribution
systems. We receive non-monetary consideration related to the TCIs as they automatically become our property,
and we recognize the cost basis of TCIs that are capital in nature.
S-6
Table of Contents
(5) Pursuant to the Windstream Leases, Windstream (or any successor tenant under a Windstream Lease) has the
right to cause Uniti to reimburse up to an aggregate $1.75 billion for certain growth capital improvements in long-
term fiber and related assets made by Windstream (or the applicable tenant under the Windstream Lease) to
certain ILEC and CLEC properties (the “Growth Capital Improvements”).
(6) Aggregate cost for Federal income tax purposes related to our real estate investment assets is $6.9 billion.
Uniti Group Inc.
Schedule III – Real Estate Investments and Accumulated Depreciation
As of December 31, 2020
(dollars in thousands)
Gross amount at beginning
Additions during period:
Tenant capital improvements
Growth capital improvements
Acquisitions
Other
Total additions
Deductions during period:
Cost of real estate sold or disposed
Other
Total deductions
Balance at end
Gross amount of accumulated depreciation at beginning
Additions during period:
Depreciation
Other
Total additions
Deductions during period:
Amount of accumulated depreciation for assets sold or disposed
Other
Total deductions
Balance at end
2020
$ 7,394,951
2019
$ 7,000,099
102,396
84,700
220,674
170
407,940
414,976
-
414,976
164,742
-
293,562
26,736
485,040
90,188
-
90,188
$ 7,387,915
$ 7,394,951
2020
$ 5,022,929
2019
$ 4,739,126
202,877
-
202,877
20,411
-
20,411
291,398
1,767
293,165
9,362
-
9,362
$ 5,205,395
$ 5,022,929
S-7
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from _____ to _____
For the fiscal year ended December 31, 2020
OR
Commission File Number 001-36708
Uniti Group Inc.
(Exact name of Registrant as specified in its Charter)
Maryland
(State or other jurisdiction of
incorporation or organization)
10802 Executive Center Drive
Benton Building Suite 300
Little Rock, Arkansas
(Address of principal executive offices)
46-5230630
(I.R.S. Employer
Identification No.)
72211
(Zip Code)
Registrant’s telephone number, including area code: (501) 850-0820
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.0001 Par Value
Trading Symbol
UNIT
Securities registered pursuant to Section 12(g) of the Act: None
Name of each exchange
on which registered
The NASDAQ Global Select Market
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☒ NO ☐
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES ☐ NO ☒
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. YES ☒ NO ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-
T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). YES ☒ NO ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of
the Exchange Act.
Large accelerated filer
Non-accelerated filer
☒
☐
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of
the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public
accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ☐ NO ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, based on the closing price of the shares of common
stock on The NASDAQ Global Select Market on June 30, 2020 was $1,135,058,547
The number of shares of the Registrant’s common stock outstanding as of February 26, 2021 was 232,897,213.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s definitive proxy statement relating to the 2021 annual meeting of stockholders are incorporated by reference into Part III of this Annual
Report on Form 10-K.
Explanatory Note
Uniti Group Inc. (the “Company”) is filing this Amendment No. 1 on Form 10-K/A (the “Amended 10-K”) to its
Annual Report for the year ended December 31, 2020 (the “Original 10-K”) filed with the U.S. Securities and
Exchange Commission on March 5, 2021 to include financial statements and related notes of Windstream Holdings,
Inc., Windstream Holdings II, LLC, its successor in interest, and consolidated subsidiaries (collectively,
“Windstream”), the Company’s most significant customer. For the years ended December 31, 2020, 2019 and 2018,
65.8%, 65.0% and 68.2% of our revenues, respectively, were derived from leasing the Company’s fiber and copper
networks and other real estate to Windstream.
The Original 10-K is being amended by this Amended 10-K to include as exhibits: (i) the Windstream audited
financial statements as of December 31, 2020 and for the period from September 22, 2020 to December 31, 2020
and as of December 31, 2019 and for the period from January 1, 2020 to September 21, 2020 and for each of the two
years in the period ended December 31, 2019, prepared in accordance with generally accepted accounting principles
in the United States, (ii) the consent of the independent registered public accounting firm of Windstream and (iii)
certifications by our Chief Executive Officer and Chief Financial Officer. This Amended 10-K does not otherwise
update any exhibits as originally filed and does not otherwise reflect events that occurred after the filing date of the
Original 10-K.
Item 15. Exhibits, Financial Statement Schedules.
Financial Statements
PART IV
See Index to Consolidated Financial Statements in “Financial Statements and Supplementary Data” of the Original
10-K.
Financial Statement Schedules
Uniti Group Inc. Schedule I – Condensed Financial Information of the Registrant (Parent Company) Condensed
Balance Sheets as of December 31, 2020 and 2019, and the related Condensed Statements of Comprehensive
Income and Cash Flows for each of the three years in the period ended December 31, 2020, including the related
notes, appearing on pages S-1, S-2, S-3, and S-4 of the Original 10-K.
Uniti Group Inc. Schedule II – Valuation and Qualifying Accounts for each of the three years in the period ended
December 31, 2020 appearing on page S-5 of the Original 10-K.
Uniti Group Inc. Schedule III – Schedule of Real Estate Investments and Accumulated Depreciation as of December
31, 2020 appearing on page S-6 of the Original 10-K.
Index to Exhibits
Exhibit No.
2.1
2.2
2.3**
2.4
2.5
2.6
Description
Separation and Distribution Agreement, dated as of March 26, 2015, by and among Windstream
Holdings, Inc., Windstream Services, LLC and Communications Sales & Leasing, Inc.
(incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K dated and
filed with the SEC as of March 26, 2015 (File No. 001-36708))
Agreement and Plan of Merger, dated as of January 7, 2016, by and among Communications Sales
& Leasing, Inc., CSL Bandwidth Inc., Penn Merger Sub, LLC, PEG Bandwidth, LLC, PEG
Bandwidth Holdings, LLC, and PEG Bandwidth Holdings, LLC, as Unitholders’ Representative
(incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K dated and
filed with the SEC as of January 12, 2016 (File No. 001-36708))
Agreement and Plan of Merger, dated as of June 20, 2016, by and among Communications Sales &
Leasing, Inc., CSL Fiber Holdings LLC, Thor Merger Sub, Inc., Tower Cloud, Inc. and Shareholder
Representative Services LLC, as representative of the equityholders of Tower Cloud, Inc.
(incorporated by reference to Exhibit 2.1 to the Company’s Quarterly Report on Form 10-Q dated
and filed with the SEC as of August 11, 2016 (File No. 001-36708))
First Amendment, dated as of August 11, 2016, to the Agreement and Plan of Merger, dated as of
June 20, 2016, by and among Communications Sales & Leasing, Inc., CSL Fiber Holdings LLC,
Thor Merger Sub, Inc., Tower Cloud, Inc. and Shareholder Representative Services LLC, as
representative of the equityholders of Tower Cloud, Inc. (incorporated by reference to Exhibit 2.2 to
the Company’s Quarterly Report on Form 10-Q dated and filed with the SEC as of August 11, 2016
(File No. 001-36708))
Membership Interests Purchase Agreement, dated as of April 7, 2017, by and among Uniti Group
Inc., Uniti Fiber Holdings Inc. and SLF Holdings, LLC (incorporated by reference to Exhibit 2.1 to
the Company’s Current Report on Form 8-K dated and filed with the SEC as of April 11, 2017 (File
No. 001-36708))
Amended and Restated Agreement of Limited Partnership of Uniti Group LP, dated July 3, 2017, by
and between Uniti Group Inc. and Uniti Group LP LLC (incorporated by reference to Exhibit 2.1 to
the Company’s Current Report on Form 8-K dated and filed with the SEC as of July 3, 2017 (File
No. 001-36708))
Exhibit No.
3.1
3.2
3.3
3.4
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
Description
Articles of Amendment and Restatement of Communications Sales & Leasing, Inc. (incorporated by
reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated and filed with the
SEC as of April 10, 2015 (File No. 001-36708))
Articles of Amendment of Communications Sales & Leasing, Inc. (incorporated by reference to
Exhibit 3.1 to the Company’s Current Report on Form 8-K dated and filed with the SEC as of
February 28, 2017 (File No. 001-36708))
Articles of Amendment of Uniti Group Inc. (incorporated by reference to Exhibit 3.1 to the
Company’s Current Report on Form 8-K dated and filed with the SEC as of May 18, 2018 (File No.
001-36708))
Amended and Restated Bylaws of Uniti Group Inc. (incorporated by reference to Exhibit 3.1 to the
Company’s Current Report on Form 8-K dated as of May 1, 2017 and filed with the SEC as of May
2, 2017 (File No. 001-36708))
Indenture, dated as of April 24, 2015, among Communications Sales & Leasing, Inc. and CSL
Capital, LLC, as Issuers, the guarantors named therein, and Wells Fargo Bank, National
Association, as trustee, governing the 8.25% Senior Notes due 2023 (incorporated by reference to
Exhibit 4.2 to the Company’s Current Report on Form 8-K dated and filed with the SEC as of April
27, 2015 (File No. 001-36708))
Form of 8.25% Senior Note due 2023 (included in Exhibit 4.1 above) (incorporated by reference to
Exhibit 4.4 to the Company’s Current Report on Form 8-K dated and filed with the SEC as of April
27, 2015 (File No. 001-36708))
Second Supplemental Indenture (8.25% Senior Notes due 2023), dated as of October 19, 2016,
among Communications Sales & Leasing, Inc. and CSL Capital, LLC, as Issuers, the guarantors
thereto and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit
4.3 to the Company’s Annual Report on Form 10-K dated and filed with the SEC as of February 23,
2017 (File No. 001-36708))
Fifth Supplemental Indenture, dated as of May 9, 2017, to the indenture dated as of April 24, 2015,
among Uniti Group LP, Uniti Group Finance Inc., CSL Capital, LLC, Uniti Group Inc., the
guarantors named therein and Wells Fargo Bank, National Association, as trustee, governing the
8.25% Senior Notes due 2023 (incorporated by reference to Exhibit 4.1 to the Company’s Current
Report on Form 8-K dated and filed with the SEC as of May 9, 2017 (File No. 001-36708))
Sixth Supplemental Indenture, dated as of May 9, 2017, to the indenture dated as of April 24, 2015,
among Uniti Group LP, Uniti Group Finance Inc., CSL Capital, LLC, Uniti Group Inc., the
guarantors named therein and Wells Fargo Bank, National Association, as trustee, governing the
8.25% Senior Notes due 2023 (incorporated by reference to Exhibit 4.2 to the Company’s Current
Report on Form 8-K dated and filed with the SEC as of May 9, 2017 (File No. 001-36708))
Fifteenth Supplemental Indenture, dated February 2, 2021, to the Indenture dated April 24, 2015 by
and among Uniti Group LP, Uniti Group Finance 2019 Inc. and CSL Capital, LLC, as Issuers, the
guarantors party thereto and Deutsche Bank Trust Company Americas, as trustee, governing the
8.25% Senior Notes due 2023 (incorporated by reference to Exhibit 4.3 to the Company’s Current
Report on Form 8-K dated and filed with the SEC as of February 2, 2021 (File No. 001-36708))
Indenture, dated as of April 24, 2015, among Communications Sales & Leasing, Inc. and CSL
Capital, LLC, as Issuers, the guarantors named therein, and Wells Fargo Bank, National
Association, as trustee and as collateral agent, governing the 6.00% Senior Secured Notes due 2023
(incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated and
filed with the SEC as of April 27, 2015 (File No. 001-36708))
Form of 6.00% Senior Secured Note due 2023 (included in Exhibit 4.6 above) (incorporated by
reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K dated and filed with the
SEC as of April 27, 2015 (File No. 001-36708))
Exhibit No.
4.9
4.10
4.11
4.12
4.13
4.14
4.15
4.16
4.17
4.18
Description
Second Supplemental Indenture (6.00% Senior Secured Notes due 2023), dated as of June 14, 2016,
among Communications Sales & Leasing, Inc. and CSL Capital, LLC, as Issuers, the guarantors
thereto and Wells Fargo Bank, National Association, as trustee and collateral agent (incorporated by
reference to Exhibit 4.6 to the Company’s Annual Report on Form 10-K dated and filed with the
SEC as of February 23, 2017 (File No. 001-36708))
Third Supplemental Indenture (6.00% Senior Secured Notes due 2023), dated as of October 19,
2016, among Communications Sales & Leasing, Inc. and CSL Capital, LLC, as Issuers, the
guarantors thereto and Wells Fargo Bank, National Association, as trustee and collateral agent
(incorporated by reference to Exhibit 4.7 to the Company’s Annual Report on Form 10-K dated and
filed with the SEC as of February 23, 2017 (File No. 001-36708))
Sixth Supplemental Indenture, dated as of May 9, 2017, to the indenture dated as of April 24, 2015,
among Uniti Group LP, Uniti Group Finance Inc., CSL Capital, LLC, Uniti Group Inc., the
guarantors named therein and Wells Fargo Bank, National Association, as trustee and collateral
agent, governing the 6.00% Senior Secured Notes due 2023 (incorporated by reference to Exhibit
4.3 to the Company’s Current Report on Form 8-K dated and filed with the SEC as of May 9, 2017
(File No. 001-36708))
Seventh Supplemental Indenture, dated as of May 9, 2017, to the indenture dated as of April 24,
2015, among Uniti Group LP, Uniti Group Finance Inc., CSL Capital, LLC, Uniti Group Inc., the
guarantors named therein and Wells Fargo Bank, National Association, as trustee and collateral
agent, governing the 6.00% Senior Secured Notes due 2023 (incorporated by reference to Exhibit
4.4 to the Company’s Current Report on Form 8-K dated and filed with the SEC as of May 9, 2017
(File No. 001-36708))
Indenture, dated as of December 15, 2016, among Communications Sales & Leasing, Inc. and CSL
Capital, LLC, as Issuers, the guarantors named therein, and Wells Fargo Bank, National
Association, as trustee, governing the 7.125% Senior Notes due 2024 (incorporated by reference to
Exhibit 4.1 of the Company’s Current Report on Form 8-K dated and filed with the SEC as of
December 15, 2016 (File No. 001-36708))
Form of 7.125% Senior Note due 2024 (included in Exhibit 4.14 above) (incorporated by reference
to Exhibit 4.2 of the Company’s Current Report on Form 8-K dated and filed with the SEC as of
December 15, 2016 (File No. 001-36708))
First Supplemental Indenture, dated as of February 22, 2017, to the Indenture, dated as of December
15, 2016, among Communications Sales & Leasing, Inc. and CSL Capital, LLC, as Issuers, the
guarantors named therein, and Wells Fargo Bank, National Association, as trustee, governing the
7.125% Senior Notes due 2024 (incorporated by reference to Exhibit 4.11 to the Company’s Annual
Report on Form 10-K dated and filed with the SEC as of February 23, 2017 (File No. 001-36708))
Third Supplemental Indenture, dated as of May 9, 2017, to the indenture dated as of December 15,
2016, among Uniti Group LP, Uniti Fiber Holdings Inc., CSL Capital, LLC, Uniti Group Inc., the
guarantors named therein and Wells Fargo Bank, National Association, as trustee, governing the
7.125% Senior Notes due 2024 (incorporated by reference to Exhibit 4.5 to the Company’s Current
Report on Form 8-K dated and filed with the SEC as of May 9, 2017 (File No. 001-36708))
Fourth Supplemental Indenture, dated as of May 9, 2017, to the indenture dated as of December 15,
2016, among Uniti Group LP, Uniti Fiber Holdings Inc., CSL Capital, LLC, Uniti Group Inc., the
guarantors named therein and Wells Fargo Bank, National Association, as trustee, governing the
7.125% Senior Notes due 2024 (incorporated by reference to Exhibit 4.6 to the Company’s Current
Report on Form 8-K dated and filed with the SEC as of May 9, 2017 (File No. 001-36708))
Fifth Supplemental Indenture, dated as of August 11, 2017, among Uniti Group LP, Uniti Fiber
Holdings Inc., and CSL Capital, LLC, as Issuers, the guarantors named therein, and Wells Fargo
Bank, National Association, as trustee, relating to the 7.125% Senior Notes due 2024 (incorporated
by reference to Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q dated and filed with
the SEC as of November 2, 2017 (File No. 001-36708))
Exhibit No.
4.19
4.20
4.21
4.22
4.23
4.24
4.25
10.1
10.2
10.3
10.4
10.5
Description
Indenture, dated as of June 28, 2019, among Uniti Fiber Holdings, Inc., as issuer, Uniti Group Inc.
and the other guarantors named therein, as guarantors, and Deutsche Bank Trust Company
Americas, as trustee, governing the 4.00% Exchangeable Senior Notes due 2024 (incorporated by
reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated June 25, 2019 and
filed with the SEC as of June 28, 2019 (File No. 001-36708))
Form of 4.00% Exchangeable Senior Notes due 2024 (included in Exhibit 4.20 above) (incorporated
by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K dated June 25, 2019 and
filed with the SEC as of June 28, 2019 (File No. 001-36708))
Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities
Exchange Act of 1934 (incorporated by reference to Exhibit 4.22 to the Company’s Annual Report
on Form 10-K filed with the SEC as of March 12, 2020 (File No. 001-36708))
Indenture, dated as of February 10, 2020, among Uniti Group LP, Uniti Fiber Holdings Inc., Uniti
Group Finance 2019 Inc., CSL Capital, LLC, the guarantors named therein, and Deutsche Bank
Trust Company Americas, as trustee and collateral agent, governing the 7.875% Senior Secured
Notes due 2025 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form
8-K filed with the SEC on February 10, 2020 (File No. 001-36708))
Form of 7.875% Senior Secured Notes due 2025 (included in Exhibit 4.23 above) (incorporated by
reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the SEC on
February 10, 2020 (File No. 001-36708))
Indenture, dated February 2, 2021, by and among Uniti Group LP, Uniti Group Finance 2019 Inc.
and CSL Capital, LLC, as Issuers, the guarantors party thereto and Deutsche Bank Trust Company
Americas, as trustee, governing the 6.500% Senior Notes due 2029 (incorporated by reference to
Exhibit 4.1 to the Company’s Current Report on Form 8-K dated and filed with the SEC as of
February 2, 2021 (File No. 001-36708))
Form of 6.500% Senior Notes due 2029 (included in Exhibit 4.24) (incorporated by reference to
Exhibit 4.2 to the Company’s Current Report on Form 8-K dated and filed with the SEC as of
February 2, 2021 (File No. 001-36708))
Settlement Agreement, dated as of May 12, 2020 by and among Windstream Holdings, Inc.,
Windstream Services, LLC and certain of their subsidiaries, and Uniti Group Inc. and certain of its
subsidiaries (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-
K filed with the SEC on May 15, 2020 (File No. 001-36708))
Amended and Restated ILEC Master Lease, entered into as of September 18, 2020, by and between
CSL National, LP and the other entities listed therein, as Landlord, and Windstream Holdings II,
LLC (as successor in interest to Windstream Holdings, Inc.), Windstream Services II, LLC (as
successor in interest to Windstream Services, LLC) and the other entities listed therein, as Tenant
(incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed
with the SEC on November 9, 2020 (File No. 001-36708))
Amended and Restated CLEC Master Lease, entered into as of September 18, 2020, by and between
CSL National, LP and the other entities listed therein, as Landlord, and Windstream Holdings II,
LLC (as successor in interest to Windstream Holdings, Inc.), Windstream Services II, LLC (as
successor in interest to Windstream Services, LLC) and the other entities listed therein, as Tenant
(incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed
with the SEC on November 9, 2020 (File No. 001-36708))
Tax Matters Agreement, entered into as of April 24, 2015, by and among Windstream Holdings,
Inc., Windstream Services, LLC and Communications Sales & Leasing, Inc. (incorporated by
reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated and filed with the
SEC as of April 27, 2015 (File No. 001-36708))
Credit Agreement, dated as of April 24, 2015, by and among Communications Sales & Leasing, Inc.
and CSL Capital, LLC, as Borrowers, the guarantors party thereto, the lenders party thereto from
time to time and Bank of America, N.A., as administrative agent, collateral agent, swing line lender
and L/C issuer (incorporated by reference to Exhibit 10.10 to the Company’s Current Report on
Form 8-K dated and filed with the SEC as of April 27, 2015 (File No. 001-36708))
Exhibit No.
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
Description
Amendment No. 1 to the Credit Agreement, dated as of October 21, 2016 by and among
Communications Sales & Leasing, Inc. and CSL Capital, LLC, as borrowers, the guarantors party
thereto, the lenders party thereto, and Bank of America, N.A., as administrative agent and collateral
agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
dated and filed with the SEC as of October 21, 2016 (File No. 001-36708))
Amendment No. 2 to the Credit Agreement, dated as of February 9, 2017 by and among
Communications Sales & Leasing, Inc. and CSL Capital, LLC, as borrowers, the guarantors party
thereto, the lenders party thereto, and Bank of America, N.A., as administrative agent and collateral
agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
dated and filed with the SEC as of February 9, 2017 (File No. 001-36708))
Amendment No. 3 (Incremental Amendment) to the Credit Agreement, dated as of April 28, 2017
by and among Uniti Group Inc. and CSL Capital, LLC, as borrowers, the guarantors party thereto,
the lenders party thereto, and Bank of America, N.A., as administrative agent and collateral agent
(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated as
of May 1, 2017 and filed with the SEC as of May 2, 2017 (File No. 001-36708))
Amendment No. 4 and Limited Waiver to the Credit Agreement, dated as of March 18, 2019,
among Uniti Group Inc., as parent guarantor, Uniti Group LP, Uniti Group Finance Inc. and CSL
Capital, LLC, as borrowers, the guarantors party thereto, the lenders party thereto, and Bank of
America, N.A., as administrative agent and collateral agent (incorporated by reference to Exhibit
10.1 to the Company’s Annual Report on Form 10-K dated and filed with the SEC as of March 18,
2019 (File No. 001-36708))
Amendment No. 5 to the Credit Agreement, dated as of June 24, 2019, among Uniti Group Inc., as
parent guarantor, Uniti Group LP, Uniti Group Finance Inc., and CSL Capital, LLC, as borrowers,
the guarantors party thereto, the lenders party thereto, and Bank of America, N.A., as administrative
agent and collateral agent (incorporated by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K dated and filed with the SEC as of June 24, 2019 (File No. 001-36708))
Amendment No. 6 and Limited Waiver to the Credit Agreement, dated as of February 10, 2020,
among Uniti Group LP, Uniti Group Finance 2019 Inc. and CSL Capital, LLC, as borrowers, the
guarantor party thereto, the lenders party thereto, and Bank of America, N.A., as administrative
agent and collateral agent (incorporated by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K filed with the SEC on February 10, 2020 (File No. 001-36708))
Amendment No. 7 to the Credit Agreement, dated as of December 10, 2020, by and among Uniti
Group Inc., as parent guarantor, Uniti Group LP, Uniti Group Finance Inc., and CSL Capital, LLC,
as borrowers, the guarantors party thereto, the lenders party thereto, and Bank of America, N.A., as
administrative agent and collateral agent (incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K dated and filed with the SEC as of December 10, 2020
(File No. 001-36708))
Agreement of Resignation, Appointment and Acceptance, dated as of June 26, 2019, by and among
Uniti Group LP, CSL Capital, LLC, Uniti Group Finance, Inc., and Unifi Fiber Holdings, Inc., as
Issuers, and Deutsche Bank Trust Company Americas, as successor trustee, and Wells Fargo Bank,
N.A., as resigning trustee (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly
Report on Form 10-Q dated and filed with the SEC as of August 8, 2019 (File No. 001-36708))
Borrower Assumption Agreement and Joinder, dated as of May 9, 2017 by and among Uniti Group
Inc., as initial borrower, Uniti Group LP and Uniti Group Finance Inc., as borrowers, the guarantors
party thereto, the lenders party thereto, and Bank of America, N.A., as administrative agent and
collateral agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K dated and filed with the SEC as of May 9, 2017 (File No. 001-36708))
Exhibit No.
10.15
10.16+
10.17+
10.18+
10.19+
10.20+
10.21+
10.22+
10.23+
10.24+
10.25+
10.26+
10.27+
10.28+
Description
Recognition Agreement, dated April 24, 2015, by and among CSL National, LP and the other
entities listed therein, as Landlord, and Windstream Holdings, Inc., as Tenant, and JPMorgan Chase
Bank, N.A., as administrative agent and collateral agent (incorporated by reference to Exhibit 10.11
to the Company’s Current Report on Form 8-K dated and filed with the SEC as of April 27, 2015
(File No. 001-36708))
Employment Agreement between Uniti Group Inc. and Kenneth Gunderman, effective as of
December 14, 2018 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K dated and filed with the SEC as of December 14, 2018 (File No. 001-36708))
Severance Agreement, dated as of December 30, 2020, by and between Uniti Group Inc. and Mark
A. Wallace (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-
K dated and filed with the SEC as of December 30, 2020 (File No. 001-36708))
Severance Agreement, dated as of December 30, 2020, by and between Uniti Group Inc. and Daniel
L. Heard (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
dated and filed with the SEC as of December 30, 2020 (File No. 001-36708))
Uniti Group Inc. 2015 Equity Incentive Plan, as amended and restated effective March 28, 2018
(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated and
filed with the SEC as of March 29, 2018 (File No. 001-36708))
Form of Restricted Shares Agreement for employees (incorporated by reference to Exhibit 10.3 to
the Company’s Current Report on Form 8-K dated and filed with the SEC as of June 3, 2015 (File
No. 001-36708))
Form of Restricted Shares Agreement for employees (incorporated by reference to Exhibit 10.19 to
the Company’s Annual Report on Form 10-K dated and filed with the SEC as of March 18, 2019
(File No. 001-36708))
Form of Performance-Based Restricted Stock Unit Agreement (incorporated by reference to Exhibit
10.4 to the Company’s Current Report on Form 8-K dated and filed with the SEC as of June 3, 2015
(File No. 001-36708))
Form of Performance-Based Restricted Stock Unit Agreement (incorporated by reference to Exhibit
10.21 to the Company’s Annual Report on Form 10-K dated and filed with the SEC as of March 18,
2019 (File No. 001-36708))
Form of Restricted Shares Agreement for non-employee directors (incorporated by reference to
Exhibit 10.5 to the Company’s Current Report on Form 8-K dated and filed with the SEC as of June
3, 2015 (File No. 001-36708))
Form of Indemnity Agreement (incorporated by reference to Exhibit 10.20 to the Company’s
Registration Statement on Form S-4 dated and filed with the SEC as of July 2, 2015 (File No. 333-
205450))
Communications Sales & Leasing, Inc. Deferred Compensation Plan, effective August 10, 2015
(incorporated by reference to Exhibit 10.20 to the Company’s Quarterly Report on Form 10-Q dated
and filed with the SEC as of August 13, 2015 (File No. 001-36708))
Uniti Group Inc. Amended and Restated Employee Stock Purchase Plan (incorporated by reference
to Exhibit 99.1 to the Company’s Registration Statement on Form S-8 dated and filed with the SEC
as of June 7, 2018 (File No. 333-225501))
Uniti Group Inc. Annual Short-Term Incentive Plan (incorporated by reference to Exhibit 10.2 to
the Company’s Quarterly Report on Form 10-Q dated and filed with the SEC as of May 11, 2020
(File No. 001-36708))
Exhibit No.
10.29
Description
Form of binding Letter of Intent to purchase Settlement Common Stock (incorporated by reference
to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated and filed with the SEC as of
March 2, 2020 (File No. 001-36708))
21.1#
23.1#
23.2#
23.3*
31.1#
31.2#
31.3*
31.4*
32.1#
32.2#
32.3*
32.4*
99.1*
101.INS#
List of Subsidiaries of Uniti Group Inc.
Consent of KPMG LLP, independent registered public accounting firm
Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm
Consents of PricewaterhouseCoopers LLP, independent registered public accounting firm of
Windstream
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the
Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the
Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the
Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the
Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Financial Statements of Windstream Holdings, Inc., Windstream Holdings II, LLC, its successor in
interest, and consolidated subsidiaries
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data
File because XBRL tags are embedded within the Inline XBRL document.
101.SCH#
Inline XBRL Taxonomy Extension Schema Document
101.CAL#
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF#
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB#
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE#
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (embedded within the Inline XBRL document)
*
Filed herewith
**
+
#
Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment granted by,
and have been filed separately with, the Securities and Exchange Commission. Also, certain exhibits and
schedules to this exhibit have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company
agrees to furnish a supplemental copy of any such omitted exhibit or schedule to the Securities and Exchange
Commission upon request but may request confidential treatment for any exhibit or schedule so furnished.
Constitutes a management contract or compensation plan or arrangement.
Incorporated by reference to the corresponding exhibit to the Original 10-K.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: March 30, 2021
UNITI GROUP INC.
By:
/s/ Kenneth A. Gunderman
Kenneth A. Gunderman
President and Chief Executive Officer
DIRECTORS:
Francis X. Frantz – Chairman of the Board of Uniti Group Inc.
Kenneth A. Gunderman – President and Chief Executive Officer, Uniti Group Inc.
Jennifer S. Banner – Executive Director of the University of Tennessee Haslam College
of Business Forum for Emerging Enterprises and Private Business
David L. Solomon – Founder and Managing Director, Meritage Funds
Scott G. Bruce – President of Radius Global Infrastructure, Inc.
Carmen Perez-Carlton – Former President, FPL Fibernet, LLC
CORPORATE OFFICERS:
Kenneth A. Gunderman – President and Chief Executive Officer
Mark A. Wallace – Executive Vice President, Chief Financial Officer and Treasurer
Daniel L. Heard – Executive Vice President, General Counsel and Secretary
Blake Schuhmacher – Senior Vice President, Chief Accounting Officer
TRANSFER AGENT AND REGISTRAR
EQ Shareowner Services
P.O. Box 64874
St. Paul, MN 55164-0874
INDEPENDENT AUDITORS
KPMG LLP
Dallas, Texas
CORPORATE HEADQUARTERS
10802 Executive Center Drive
Benton Building, Suite 300
Little Rock, AR 72211
INVESTOR RELATIONS
Website: www.uniti.com
Contact: investor.relations@uniti.com
LISTING
NASDAQ Global Select Market,
Ticker Symbol “UNIT”
10802 Executive Center Dr.
Benton Building, Suite 300
Little Rock, AR 72211
501-850-0820
www.uniti.com