UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March 1, 2018

 

Uniti Group Inc.

(Exact name of registrant as specified in its charter)

 

Registrant’s telephone number, including area code: (501) 850-0820

Not Applicable

(Former name or former address, if changed since last report.)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

 

 

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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. ☐

---

Item 2.02 Results of Operations and Financial Condition

On March 1, 2018, Uniti Group Inc. (the “Company”) issued a press release announcing the Company’s results for its fiscal quarter and year ended December 31, 2017. A copy of the Company’s press release is attached to this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein solely for purposes of this Item 2.02 disclosure.

The information contained in this Item 2.02, including the exhibit attached hereto, is being “furnished” and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of Section 18 of the Exchange Act. The information in this Item 2.02 shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, or into any filing or other document pursuant to the Exchange Act, except as otherwise expressly stated in any such filing.

 

Item 9.01 Financial Statements and Exhibits

 

(d) Exhibits

 

 

---

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

 

 

 

 

Exhibit 99.1

 

Uniti Group Inc. Reports Fourth Quarter and Full Year 2017 Results

Announces Sale-Leaseback and Fiber Acquisition with TPx

 

LITTLE ROCK, Ark., March 1, 2018 (GLOBE NEWSWIRE) – Uniti Group Inc. ("Uniti" or the “Company”) (Nasdaq: UNIT) today announced its results for the fourth quarter and full-year 2017.

“We deployed over $1 billion of capital during 2017 with the acquisitions of Hunt, Southern Light, and NMS and investments in our organic growth initiatives.  We expanded our customer relationships, successfully executed on our integration strategies, converted to an UpREIT structure, and favorably repriced our term loans. We continue to expect a multi-year investment cycle for communication infrastructure.  Deployments of infrastructure for 5G technologies, the FirstNet network in the U.S., and continuing expansion of the Red Compartida wholesale network in Mexico provide tremendous opportunities for our businesses,” commented Kenny Gunderman, President and Chief Executive Officer.  

Mr. Gunderman continued, “The announcement today of our TPx sale-leaseback transactions demonstrate the momentum we are gaining at Uniti Leasing, and the attractive economics of this vertical.  We expect Uniti Leasing will be an important contributor to our future growth as shared communication infrastructure is increasingly accepted within our industry.  With Uniti Leasing, Uniti Fiber and Uniti Towers, we now have three established businesses with attractive organic growth to supplement our acquisition strategy and further diversify our asset and customer base.”

QUARTERLY RESULTS

Revenues for the fourth quarter of 2017 were $246.3 million.  Net income and Adjusted EBITDA was $22.8 million and $198.0 million, respectively, for the same period.  Net income attributable to common shares was $20.5 million for the period, and included a $28.2 million income tax benefit related to the impact of tax reform under the Tax Cut and Jobs Act of 2017, and the release of tax related valuation allowances.  Adjusted Funds From Operations (“AFFO”) attributable to common shares was $112.4 million, or $0.64 per diluted common share.  

Uniti Fiber contributed $66.6 million of revenues and $31.5 million of Adjusted EBITDA for the fourth quarter of 2017.  Uniti Fiber’s net success based capital expenditures during the quarter were $39.0 million.  Maintenance capital expenditures were $1.0 million.

1

 

---

 

 

 

 

FULL YEAR 2017 RESULTS

Revenues for the year ended December 31, 2017 were $916.0 million.  Net loss and Adjusted EBITDA was $8.8 million and $749.5 million, respectively, for the same period.  Net loss attributable to common shares was $16.6 million for the period, and included $38.0 million of transaction and integration costs, a $10.7 million charge for changes in the fair value of contingent consideration, partially offset by a $36.2 million income tax benefit related to the impact of tax reform and the release of tax related valuation allowances.  AFFO attributable to common shares was $424.8 million, or $2.51 per diluted common share.

Uniti Fiber contributed $202.8 million of revenues and $84.0 million of Adjusted EBITDA for the year ended December 31, 2017, and includes in the results of Hunt and Southern Light from their July 3, 2017 closing date.  Uniti Fiber’s net success based capital expenditures during the year were $127.0 million.  Maintenance capital expenditures were $4.4 million.

TPX SALE-LEASEBACK AND FIBER ACQUISITION

The Company has entered into agreements to acquire fiber assets from U.S. TelePacific Holding Corp. (“TPx”) for all-cash consideration of $95 million.  In the transactions, Uniti will acquire and leaseback to TPx, on a triple-net basis, 38,000 fiber strand miles located across California, Nevada, Texas, and Massachusetts.  In addition, Uniti will acquire and have exclusive use of 7,000 fiber strand miles located in Texas, which are adjacent to Uniti Fiber’s southern network footprint.  Uniti will also have non-exclusive rights to market, on behalf of TPx, certain of the fiber assets in California and Massachusetts.  

The transactions are subject to customary closing conditions and are expected to close in two tranches, with the non-California assets expected to close in the second quarter and the remaining California assets to close in the third quarter of this year.  The initial lease term will be 15 years with five 5-year renewal options at TPx’s discretion. Upon closing of both transactions, annual cash rent will initially be $8.8 million with a fixed annual escalator of 1.5%. The Company expects to fund the transactions through borrowings on its revolving credit facility.

LIQUIDITY AND FINANCING TRANSACTIONS

At quarter-end, the Company had approximately $59.8 million of unrestricted cash and cash equivalents, and $470 million of undrawn borrowing availability under its revolving credit agreement.  The Company’s leverage ratio at quarter end was 5.8x based on Net Debt to Annualized Adjusted EBITDA.  

As previously reported, on February 7, 2018, the Company’s Board of Directors declared a quarterly cash dividend of $0.60 per common share, payable on April 13, 2018 to stockholders of record on March 30, 2018.

FULL YEAR 2018 OUTLOOK

Our current outlook excludes any future acquisitions, capital market transactions, transaction costs, and the impact of the TPx transaction.  Furthermore, our outlook is subject to adjustment based on the finalization of purchase price allocations related to acquisitions and other factors.  Actual results could differ materially from these forward-looking statements.

 

 

2

 

---

 

 

 

The Company’s consolidated outlook for 2018 is as follows (in millions):

CONFERENCE CALL

Uniti will hold a conference call today to discuss this earnings release at 4:15 PM Eastern Time (3:15 PM Central Time).  The dial-in number for the conference call is (844) 513-7153 (or (508) 637-5603 for international callers) and the conference ID 4379417.  The conference call will be webcast live and can be accessed on the Company’s website at www.uniti.com.  A replay of the webcast will be available following the call on the Company’s website, beginning today at approximately 8:00 PM Eastern Time and will remain available for 14 days.

ABOUT UNITI

Uniti, an internally managed real estate investment trust, is engaged in the acquisition and construction of mission critical communications infrastructure, and is a leading provider of wireless infrastructure solutions for the communications industry.  As of December 31, 2017, Uniti owns 4.9 million fiber strand miles, approximately 700 wireless towers, and other communications real estate throughout the United States and Latin America. Additional information about Uniti can be found on its website at www.uniti.com.

FORWARD-LOOKING STATEMENTS

Certain statements in this press release and today’s conference call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended from time to time. Those forward-looking statements include all statements that are not historical statements of fact, including, without limitation, those regarding our business strategies, growth prospects, industry trends, sales opportunities, operating and financial performance, closing of the TPx transaction and our 2018 financial results.

 

Words such as "anticipate(s)," "expect(s)," "intend(s)," “estimate(s),” “foresee(s),” "plan(s)," "believe(s)," "may," "will," "would," "could," "should," "seek(s)" and similar expressions, or the negative of these terms, are intended to identify such forward-looking statements. These statements are based on management's current expectations and beliefs and are subject to a number of risks and uncertainties that could lead to actual results differing materially from those projected, forecasted or expected. Although we believe that the assumptions underlying the forward-looking statements are reasonable, we can give no assurance that our expectations will be attained. Factors which could materially alter our expectations include, but are not limited to, the ability and willingness of our customers to meet and/or perform their obligations

3

 

---

 

 

 

under any contractual arrangements entered into with us; the ability and willingness of our customers to renew their leases with us upon their expiration, and the ability to reposition our properties on the same or better terms in the event of nonrenewal or in the event we replace an existing tenant; the adverse impact of litigation affecting us or our customers; our ability to renew, extend or obtain contracts with significant customers (including customers of the businesses we acquire); the availability of and our ability to identify suitable acquisition opportunities and our ability to acquire and lease the respective properties on favorable terms; the risk that we fail to fully realize the potential benefits of acquisitions or have difficulty integrating acquired companies; our ability to generate sufficient cash flows to service our outstanding indebtedness; our ability to access debt and equity capital markets; the impact on our business or the business of our customers as a result of credit rating downgrades and fluctuating interest rates; our ability to retain our key management personnel; our ability to qualify or maintain our status as a real estate investment trust (“REIT”); changes in the U.S. tax law and other state, federal or local laws, whether or not specific to REITs; covenants in our debt agreements that may limit our operational flexibility; 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; the risk that the TPx transaction agreements may be modified or terminated prior to expiration; risks related to satisfying the conditions to the TPx transaction; and additional factors described in our reports filed with the SEC.

 

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

 

NON-GAAP PRESENTATION

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

4

 

---

 

 

 

Uniti Group Inc.

Consolidated Balance Sheets

(In thousands, except per share data)

 

 

5

 

---

 

 

 

Uniti Group Inc.

Consolidated Statements of Operations

(In thousands, except per share data)

 

 

6

 

---

 

 

 

Uniti Group Inc.

Consolidated Statements of Cash Flows

(In thousands)

 

7

 

---

 

 

 

Uniti Group Inc.

Reconciliation of Net Income to FFO and AFFO

(In thousands, except per share data)

 

 

 

 

8

 

---

 

 

 

Uniti Group Inc.

Reconciliation of EBITDA and Adjusted EBITDA

(In thousands)

 

 

 

 

9

 

---

 

 

 

Uniti Group Inc.

Projected Future Results ⁽¹⁾

(In millions)

      

 

10

 

---

 

 

 

Uniti Group Inc.

Projected Future Results ⁽¹⁾

(Per Diluted Share)

      

Components of Interest Expense ⁽¹⁾

(In millions)

      

11

 

---

 

 

 

NON-GAAP FINANCIAL MEASURES

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

We define “EBITDA” as net income, as defined by GAAP, before interest expense, provision for income taxes and depreciation and amortization. We define “Adjusted EBITDA” as EBITDA before stock-based compensation expense and the impact, which may be recurring in nature, of transaction and integration related costs, collectively “Transaction Related Costs”, the write off of unamortized deferred financing costs, costs incurred as a result of the early repayment of debt, changes in the fair value of contingent consideration and financial instruments, and other similar items. 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 use 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. We compute FFO in accordance with NAREIT’s definition.

The Company defines AFFO, as FFO excluding (i) transaction and integration costs; (ii) 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, straight line revenues, non-cash income taxes, and the amortization of other non-cash revenues to the extent that cash has not been received, such as revenue associated with the amortization of tenant capital improvements; (iii) the impact, which may be recurring in nature, of the write-off of unamortized deferred financing fees, additional costs incurred as a result of early repayment of debt, changes in the fair value of contingent consideration and financial instruments and similar items less maintenance capital expenditures. 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

12

 

---

 

 

 

unanticipated items and events, such as transaction and integration related costs. The Company uses FFO and AFFO, and their respective per share amounts, only as performance measures, and FFO and AFFO do not purport to be indicative of cash available to fund our future cash requirements. While FFO and AFFO are relevant and widely used measures of operating performance of REITs, they do not represent cash flows from operations or net income as defined by GAAP and should not be considered an alternative to those measures in evaluating our liquidity or operating performance.

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

INVESTOR AND MEDIA CONTACTS:

 

Mark A. Wallace, 501-850-0866

Executive Vice President, Chief Financial Officer & Treasurer

mark.wallace@uniti.com

Jim Volk, 501-850-0872

Vice President, Finance & Investor Relations

jim.volk@uniti.com

13