UNITI GROUP INC. 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 for the three and nine months endedSeptember 30, 2022 . This discussion should be read in conjunction with the accompanying Condensed Consolidated Financial Statements, and the notes thereto set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K filed with theU.S. Securities and Exchange Commission ("SEC") onFebruary 25, 2022 , as amended by Amendment No. 1 thereto filed on Form 10-K/A with theSEC onMarch 22, 2022 (the "Annual Report"). Overview Company Description
OnApril 24, 2015 , we were separated and spun-off (the "Spin-Off") from Windstream Holdings, Inc. ("Windstream Holdings " and together withWindstream 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 emergence from bankruptcy, 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. 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 CLEC operations. Uniti operates as a REIT forU.S. federal income tax purposes. As a REIT, the Company is generally not subject toU.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 leasing business,Uniti Leasing , certain aspects of our former towers business, andTalk 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 toU.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 , aDelaware 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 theOperating Partnership as a tax-efficient acquisition currency. As ofSeptember 30, 2022 , we are the sole general partner of theOperating Partnership and own approximately 99.96% of the partnership interests in theOperating Partnership . In addition, we have undertaken a series of transactions to permit us to hold certain assets through subsidiaries that are taxed as REITs, which may also 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 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 32
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and acquisition transactions as a capital partner, including through operating company-property company ("OpCo-PropCo") structures.
Segments
We manage our operations as the two reportable business segments, in addition to our corporate operations, which include:
Leasing Segment: Represents the operations of our leasing business,Uniti Leasing , which is engaged in the acquisition and construction of mission-critical communications assets and leasing them to anchor customers on either an exclusive or shared-tenant basis, in addition to the leasing of dark fiber on our existing fiber network assets that we either constructed or acquired. While the Leasing segment represents our REIT operations, certain aspects of the Leasing segment are also operated through TRSs. 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.
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, costs associated with the implementation of our enterprise
resource planning system, executive severance costs, costs related to the
settlement with Windstream, amortization of non-cash rights-of-use assets, the
write off of unamortized deferred financing costs, costs incurred as a result of
the early repayment of debt, including early tender and redemption premiums and
costs associated with the termination of related hedging activities, gains or
losses on dispositions, changes in the fair value of contingent consideration
and financial instruments, and other similar or infrequent items (although we
may not have had such charges in the periods presented). Adjusted EBITDA
includes adjustments to reflect the Company's share of Adjusted EBITDA from
unconsolidated entities. For more information on Adjusted EBITDA, see "Non-GAAP
Financial Measures." Detailed information about our segments can be found in
Note 12 to our accompanying Condensed Consolidated Financial Statements
contained in Part I, Item 1 of this Quarterly Report on Form 10-Q.
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Results of Operations
Comparison of the three months ended
The following table sets forth our results of operations expressed as dollars and as a percentage of total revenues for the periods indicated:
Three Months Ended
2022 2021
(Thousands) Amount % of Revenues Amount % of Revenues
Revenues:
Leasing $ 208,623 73.7% $ 199,485 74.8%
Fiber Infrastructure 74,480 26.3% 67,262 25.2%
Total revenues 283,103 100.0% 266,747 100.0%
Costs and Expenses:
Interest expense, net 97,731 34.5% 94,793 35.6%
Depreciation and amortization 73,516 26.1% 70,530 26.4%
General and administrative expense 26,863 9.5% 25,077 9.4%
Operating expense (exclusive of
depreciation and amortization) 36,291 12.8% 34,167 12.8%
Goodwill impairment 216,000 76.3% - -%
Transaction related and other costs 2,375 0.8% 1,063 0.4%
Gain on sale of real estate (94) 0.0% - -%
Gain on sale of operations (176) (0.1%) - -%
Other (income) expense, net 74 0.0% 283 0.1%
Total costs and expenses 452,580 159.9% 225,913 84.7%
(Loss) income before income taxes and
equity in earnings from unconsolidated
entities (169,477) (59.8)% 40,834 15.3%
Income tax (benefit) expense (13,056) (4.6%) (2,244) (0.9%)
Equity in earnings from unconsolidated
entities (672) (0.2%) (604) (0.2%)
Net (loss) income (155,749) (55.0%) 43,682 16.4%
Net (loss) income attributable to
noncontrolling interests (70) 0.0% 316 0.1%
Net (loss) income attributable to
shareholders (155,679) (55.0)% 43,366 16.3%
Participating securities' share in
earnings (226) (0.1%) (283) (0.1%)
Dividends declared on convertible
preferred stock (5) 0.0% (3) 0.0%
Net (loss) income attributable to common
shareholders $ (155,910) (55.1)% $ 43,080 16.2%
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The following tables set forth revenues, Adjusted EBITDA and net income of our
reportable segments for the three months ended
Three Months Ended
Subtotal of
Reportable
(Thousands) Leasing Fiber Infrastructure Corporate Segments
Revenues $ 208,623 $ 74,480 $ - $ 283,103
Adjusted EBITDA $ 203,209 $ 28,586 $ (6,742) $ 225,053
Less:
Interest expense 97,731
Depreciation and amortization 43,121 30,370 25 73,516
Gain on sale of real estate (94)
Gain on sale of operations (176)
Goodwill impairment 216,000
Other, net 600
Transaction related and other costs 2,375
Stock-based compensation 3,151
Income tax benefit (13,056)
Adjustments for equity in earnings from
unconsolidated entities 755
Net loss $ (155,749) Three Months Ended
Subtotal of
Reportable
(Thousands) Leasing Fiber Infrastructure Corporate Segments
Revenues $ 199,485 $ 67,262 $ - $ 266,747
Adjusted EBITDA $ 194,303 $ 27,556 $ (4,632) $ 217,227
Less:
Interest expense 94,793
Depreciation and amortization 41,432 29,036 62 70,530
Other, net 4,472
Transaction related and other costs 1,063
Gain on sale of real estate -
Gain on sale of operations -
Stock-based compensation 4,166
Income tax benefit (2,244)
Adjustments for equity in earnings from
unconsolidated entities 765
Net income $ 43,682
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Summary of Operating Metrics
Operating Metrics
September 30,
2022 2021 % Increase / (Decrease)
Operating metrics:
Leasing:
Fiber strand miles 5,140,000 4,890,000 5.1%
Copper strand miles 230,000 230,000 0.0%
Fiber Infrastructure:
Fiber strand miles 2,840,000 2,590,000 9.7%
Customer connections 27,615 25,897 6.6%
Revenues
Three Months Ended September 30,
2022 2021
(Thousands) Amount % of Consolidated Revenues Amount % of Consolidated Revenues
Revenues:
Leasing $ 208,623 73.7% $ 199,485 74.8%
Fiber Infrastructure 74,480 26.3% 67,262 25.2%
Total revenues $ 283,103 100.0% $ 266,747 100.0%
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 expires on April 30, 2030 . Annual rent under the
Windstream Leases for the full year 2022 is $668.9 million and is subject to
annual escalation at a rate of 0.5%. For a description of the Windstream Leases,
see "Liquidity and Capital Resources-Windstream Master Lease and Windstream
Leases" below.
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 value
accretive 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" or "GCIs"). Uniti's total annual reimbursement commitments
to Windstream for the Growth Capital Improvements is discussed below in
"Liquidity and Capital Resources-Windstream Master Lease and Windstream Leases."
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
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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).
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.
Three Months Ended September 30,
2022 2021
(Thousands) Amount % of Segment Revenues Amount % of Segment Revenues
Leasing revenues:
Windstream Leases:
Cash revenue
Cash rent $ 167,500 80.3% $ 166,666 83.5%
GCI revenue 3,914 1.9% - -%
Total cash revenue 171,414 82.2% 166,666 83.5%
Non-cash revenue
TCI revenue 10,939 5.2% 9,929 5.0%
GCI revenue 3,624 1.7% 3,505 1.8%
Other straight-line revenue 2,241 1.1% 3,085 1.5%
Total non-cash revenue 16,804 8.0% 16,519 8.3%
Total Windstream revenue 188,218 90.2% 183,185 91.8%
Other services 20,405 9.8% 16,300 8.2%
Total Leasing revenues $ 208,623 100.0% $ 199,485 100.0%
The increase in TCI revenue is attributable to continued investment by
Windstream. As of September 30, 2022 and 2021, the total amount invested in TCIs
by Windstream since the inception of the Windstream Leases and Master Lease was
$1.1 billion and $986.7 million , respectively.
The increase in GCI revenue is attributable to Uniti's continued reimbursement
of Growth Capital Improvements. During the three months ended September 30,
2022 , Uniti reimbursed $66.4 million of Growth Capital Improvements. Subsequent
to September 30, 2022 , Windstream requested, and we reimbursed $27.4 million of
qualifying Growth Capital Improvements. As of the date of this Quarterly Report
on Form 10-Q, we have reimbursed a total of $491.7 million of Growth Capital
Improvements.
We recognized $20.4 million and $16.3 million of revenues from other services
including non-Windstream triple-net leasing and dark fiber indefeasible rights
of use ("IRU") arrangements for the three months ended September 30, 2022 and
2021, respectively.
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. Additionally, the
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Windstream audited financial statements as ofDecember 31, 2021 , and for the year endedDecember 31, 2021 , as ofDecember 31, 2020 and for the period fromSeptember 22, 2020 toDecember 31, 2020 and for the period fromJanuary 1, 2020 toSeptember 21, 2020 and for the year endedDecember 31, 2019 are included as an exhibit to our Annual Report. OnSeptember 22, 2020 , Windstream filed a Form 15 to terminate all filing obligations under Section 12(g) and 15(d) under the Exchange Act. Windstream filings are not incorporated by reference in this Quarterly Report on Form 10-Q. 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 news 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 Quarterly Report on Form 10-Q, Windstream is current on all lease payments. We note that inAugust 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. Both ratings remain current as of the date of this filing. In order to assist us in our continuing assessment of Windstream's creditworthiness, we periodically receive certain confidential financial information and metrics from Windstream.
Fiber Infrastructure - Fiber Infrastructure revenues for the three months ended
Three Months Ended
2022 2021
(Thousands) Amount % of Segment Revenues Amount % of Segment Revenues
Fiber Infrastructure revenues:
Lit backhaul services $ 19,969 26.8% $ 19,381 28.8%
Enterprise and wholesale 21,423 28.8% 20,863 31.1%
E-Rate and government 15,245 20.5% 13,505 20.1%
Dark fiber and small cells 17,140 23.0% 12,674 18.8%
Other services 703 0.9% 839 1.2%
Total Fiber Infrastructure revenues $ 74,480 100.0% $ 67,262 100.0%
For the three months ended September 30, 2022 , Fiber Infrastructure revenues
totaled $74.5 million as compared to $67.3 million for the three months ended
September 30, 2021 . Fiber Infrastructure revenues increased $7.2 million ,
primarily due to an increase in one-time early termination revenues of $4.0
million within dark fiber and small cells revenues and an increase of $2.4
million within Enterprise and Wholesale revenues primarily due to increased
customer connections.
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Interest Expense, net
Three Months Ended September 30,
% Increase /
(Thousands) 2022 2021 (Decrease)
Interest expense, net:
Cash:
Senior secured notes $ 51,066 $ 49,691 1,375
Senior unsecured notes 31,988 32,176 (188)Senior secured revolving credit facility - variable rate
3,539 2,210 1,329
Tender premium payment - - -
Interest rate swap termination 2,829 2,829 -
Other 985 366 619
Total cash interest 90,407 87,272 3,135
Non-cash:
Amortization of deferred financing costs and debt
discount 4,495 4,352 143
Write off of deferred financing costs and debt
discount - - -
Accretion of settlement payable 2,946 4,117 (1,171)
Capitalized interest (117) (948) 831
Total non-cash interest 7,324 7,521 (197)
Total interest expense, net $ 97,731 $ 94,793 $ 2,938
Interest expense for the three months ended September 30, 2022 increased $2.9
million compared to the three months ended September 30, 2021 . The increase is
primarily attributable to higher cash interest expense of $3.1 million , a $1.2
million decrease in accretion expense associated with the settlement payable,
and a $0.8 million decrease in capitalized interest during the three months
ended September 30, 2022 .
Depreciation and Amortization Expense
Three Months Ended
% Increase /
(Thousands) 2022 2021 (Decrease)
Depreciation and amortization expense by segment:
Depreciation expense
Leasing $ 41,392 $ 42,376 $ (984)
Fiber Infrastructure 24,653 23,318 1,335
Corporate 25 62 (37)
Total depreciation expense 66,070 65,756 314
Amortization expense
Leasing 1,729 (944) 2,673
Fiber Infrastructure 5,717 5,718 (1)
Total amortization expense 7,446 4,774 2,672
Total depreciation and amortization expense $ 73,516 Leasing - Leasing depreciation expense decreased$1.0 million for the three months endedSeptember 30, 2022 compared to the three months endedSeptember 30, 2021 . The decrease is primarily attributable to an increase in fully depreciated Windstream Distribution System assets of$1.1 million , partially offset by a$0.2 million increase related to asset additions sinceSeptember 30, 2021 . During the three months endedSeptember 30, 2021 ,$2.7 million was recorded as a benefit to amortization expense, and subsequently reclassified to revenue during the fourth quarter of 2021. 39
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Fiber Infrastructure - Fiber Infrastructure depreciation expense increased
General and Administrative Expense
General and administrative expenses include compensation costs, including stock-based compensation awards, professional and legal services, corporate office costs and other costs associated with administrative activities of our segments.
Three Months Ended
2022 2021
(Thousands) Amount % of Consolidated Revenues Amount % of Consolidated Revenues
General and administrative expense by
segment:
Leasing $ 3,368 1.2% $ 2,254 0.8%
Fiber Infrastructure 14,820 5.2% 13,427 5.1%
Corporate 8,675 3.1% 9,396 3.5%
Total general and administrative expenses $ 26,863 9.5% $ 25,077 9.4%
Leasing - Leasing general and administrative expense increased $1.1 million for
the three months ended September 30, 2022 compared to the three months ended
September 30, 2021 . The increase is primarily attributable to a $0.7 million
increase in personnel expenses driven by incremental customer growth, a $0.1
million increase in legal fees, and a $0.3 million increase in other operating
expenses.
Fiber Infrastructure - Fiber Infrastructure general and administrative expense
increased $1.4 million for the three months ended September 30, 2022 compared to
the three months ended September 30, 2021 . This increase is primarily
attributable to a $0.5 million increase in advertising expenses, a $0.4 million
increase in regulatory and professional fees, a $0.2 million increase in
personnel expenses driven by incremental customer growth, and a $0.3 million
increase in other operating expenses.
Corporate - Corporate general and administrative expense decreased $0.7 million
for the three months ended September 30, 2022 compared to the three months ended
September 30, 2021 . The decrease is primarily attributable to a $1.2 million
decrease in personnel expenses, partially offset by a $0.2 million increase in
computer software and maintenance expenses and a $0.1 increase in facility
expenses.
Operating Expense
Operating expense for the three months endedSeptember 30, 2022 increased by$2.1 million from the three months endedSeptember 30, 2021 . Operating expense for our reportable segments for the three months endedSeptember 30, 2022 and 2021 consisted of the following: Three Months Ended September 30, 2022 2021 (Thousands) Amount % of Consolidated Revenues Amount % of Consolidated Revenues Operating expense by segment: Leasing$ 4,679 1.7%$ 5,184 1.9% Fiber Infrastructure 31,612 11.1% 28,983 10.9% Total operating expenses$ 36,291 12.8%$ 34,167 12.8% 40
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Leasing - Leasing operating expense decreased$0.5 million for the three months endedSeptember 30, 2022 and as compared to the three months endedSeptember 30, 2021 . The decrease is primarily driven by lower network related expenses of$0.6 million . Fiber Infrastructure - Fiber Infrastructure operating expenses increased$2.6 million for the three months endedSeptember 30, 2022 compared to the three months endedSeptember 30, 2021 . Operating expense consists of network related costs, such as dark fiber and tower rents, lit service and maintenance expense and costs associated with our construction activities. The increase in operating expenses is primarily attributable to increases in personnel expense of$1.2 million , dark fiber early termination fees of$0.6 million , property taxes of$0.4 million , and unsplicing expenses of$0.4 million .
Goodwill Impairment
As a result of macroeconomic and financial market factors, specifically increased interest rates impacting our discount rate, 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$216.0 million goodwill impairment in the Fiber Infrastructure reporting unit during the three months endedSeptember 30, 2022 . See Note 2 of Notes to Condensed Consolidated Financial Statements in Part I Item 1 of this Quarterly Report on Form 10-Q.
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 three months endedSeptember 30, 2022 , we incurred$2.4 million of transaction related and other costs, compared to$1.1 million of such costs during the three months endedSeptember 30, 2021 .
Income Tax Benefit
The income tax benefit recorded for the three months ended
Three Months Ended September 30,
(Thousands) 2022 2021
Income tax (benefit) expense
Pre-tax loss (Fiber Infrastructure) $ (14,555) $ (3,476)
Gain on sale of operations - -
Gain on sale of unconsolidated entity - -
Other undistributed REIT taxable income 963 778
REIT state and local taxes 516 352
Other 20 102
Total income tax (benefit) expense $
(13,056)
Comparison of the nine months ended
The following table sets forth our results of operations expressed as dollars and as a percentage of total revenues for the periods indicated:
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Nine Months Ended
2022 2021
(Thousands) Amount % of Revenues Amount % of Revenues
Revenues:
Leasing $ 618,878 73.2% $ 590,478 73.1%
Fiber Infrastructure 226,234 26.8% 217,035 26.9%
Total revenues 845,112 100.0% 807,513 100.0%
Costs and Expenses:
Interest expense, net 290,280 34.3% 341,762 42.3%
Depreciation and amortization 217,276 25.7% 211,165 26.2%
General and administrative expense 75,818 8.9% 75,800 9.4%
Operating expense (exclusive of
depreciation and amortization) 108,184 12.8% 105,436 13.1%
Goodwill impairment 216,000 25.6% - -%
Transaction related and other costs 7,324 0.9% 5,624 0.7%
Gain on sale of real estate (344) 0.0% (442) (0.1)%
Gain on sale of operations (176) 0.0% (28,143) (3.5)%
Other (income) expense, net (8,254) (1.0%) 8,758 1.1%
Total costs and expenses 906,108 107.2% 719,960 89.2%
(Loss) income before income taxes and
equity in earnings from unconsolidated
entities (60,996) (7.2)% 87,553 10.8%
Income tax (benefit) expense (10,183) (1.2%) 283 0.0%
Equity in earnings from unconsolidated
entities (1,696) (0.2%) (1,549) (0.2%)
Net (loss) income (49,117) (5.8%) 88,819 11.0%
Net (loss) income attributable to
noncontrolling interests 135 0.0% 984 0.1%
Net (loss) income attributable to
shareholders (49,252) (5.8)% 87,835 10.9%
Participating securities' share in
earnings (897) (0.1%) (864) (0.1%)
Dividends declared on convertible
preferred stock (15) 0.0% (8) 0.0%
Net (loss) income attributable to common
shareholders $ (50,164) (5.9)% $ 86,963 10.8%
The following tables set forth revenues, Adjusted EBITDA and net income of our
reportable segments for the nine months ended
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Nine Months Ended
Subtotal of
Reportable
(Thousands) Leasing Fiber Infrastructure Corporate Segments
Revenues $ 618,878 $ 226,234 $ - $ 845,112
Adjusted EBITDA $ 602,531 $ 93,628 $ (19,153) $ 677,006
Less:
Interest expense 290,280
Depreciation and amortization 127,738 89,440 98 217,276
Gain on sale of real estate (344)
Gain on sale of operations (176)
Goodwill impairment 216,000
Other, net (6,534)
Transaction related and other costs 7,324
Stock-based compensation 9,664
Income tax benefit (10,183)
Adjustments for equity in earnings from
unconsolidated entities 2,816
Net loss $ (49,117) Nine Months Ended
Subtotal of
Reportable
(Thousands) Leasing Fiber Infrastructure Corporate Segments
Revenues $ 590,478 $ 217,035 $ - $ 807,513
Adjusted EBITDA $ 577,937 $ 86,716 $ (17,444) $ 647,209
Less:
Interest expense 341,762
Depreciation and amortization 124,132 86,838 195 211,165
Other, net 14,569
Transaction related and other costs 5,624
Gain on sale of real estate (442)
Gain on sale of operations (28,143)
Stock-based compensation 10,963
Income tax expense 283
Adjustments for equity in earnings from
unconsolidated entities 2,609
Net income $ 88,819
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Revenues
Nine Months Ended September 30,
2022 2021
(Thousands) Amount % of Consolidated Revenues Amount % of Consolidated Revenues
Revenues:
Leasing $ 618,878 73.2% $ 590,478 73.1%
Fiber Infrastructure 226,234 26.8% 217,035 26.9%
Total revenues $ 845,112 100.0% $ 807,513 100.0%
Leasing - Leasing revenues for the nine months ended
Nine Months Ended September 30,
2022 2021
(Thousands) Amount % of Segment Revenues Amount % of Segment Revenues
Leasing revenues:
Windstream Leases:
Cash revenue
Cash rent $ 501,390 81.0% $ 498,896 84.5%
GCI revenue 8,734 1.4% - -%
Total cash revenue 510,124 82.4% 498,896 84.5%
Non-cash revenue
TCI revenue 32,010 5.2% 28,761 4.8%
GCI revenue 11,073 1.7% 7,730 1.3%
Other straight-line revenue 7,851 1.3% 10,394 1.8%
Total non-cash revenue 50,934 8.2% 46,885 7.9%
Total Windstream revenue 561,057 90.7% 545,780 92.4%
Other services 57,821 9.3% 44,697 7.6%
Total Leasing revenues $ 618,878 100.0% $ 590,478 100.0%
The increase in TCI revenue is attributable to continued investment by
Windstream. As of September 30, 2022 and 2021, the total amount invested in TCIs
by Windstream since the inception of the Windstream Leases and Master Lease was
$1.1 billion and $986.7 million , respectively.
The increase in GCI revenue is attributable to Uniti's continued reimbursement
of Growth Capital Improvements. During the nine months ended September 30, 2022 ,
Uniti reimbursed $158.1 million of Growth Capital Improvements. Subsequent to
September 30, 2022 , Windstream requested, and we reimbursed $27.4 million of
qualifying Growth Capital Improvements. As of the date of this Quarterly Report
on Form 10-Q, we have reimbursed a total of $491.7 million of Growth Capital
Improvements.
We recognized $57.8 million and $44.7 million of revenues from non-Windstream
triple-net leasing, dark fiber IRU arrangements, and other services for the nine
months ended September 30, 2022 and 2021, respectively. The increase is
primarily related to continued lease-up of our network to new customers.
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Fiber Infrastructure - Fiber Infrastructure revenues for the nine months ended
Nine Months Ended
2022 2021
(Thousands) Amount % of Segment Revenues Amount % of Segment Revenues
Fiber Infrastructure revenues:
Lit backhaul services $ 59,344 26.3% $ 67,404 31.0%
Enterprise and wholesale 63,359 28.0% 63,190 29.1%
E-Rate and government 48,026 21.2% 48,795 22.5%
Dark fiber and small cells 53,429 23.6% 35,167 16.2%
Other services 2,076 0.9% 2,479 1.1%
Total Fiber Infrastructure revenues $ 226,234 100.0% $ 217,035 100.0%
For the nine months ended September 30, 2022 , Fiber Infrastructure revenues
totaled $226.2 million as compared to $217.0 million for the nine months ended
September 30, 2021 . Fiber Infrastructure revenues increased $9.2 million ,
primarily due to an increase in one-time early termination revenues of $16.3
million within dark fiber and small cells revenues, partially offset by an $8.1
million decrease in Lit backhaul service revenues, primarily driven by the sale
of our Uniti Fiber Northeast operations on May 28, 2021 and lit-to-dark fiber
conversions.
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Interest Expense, net
Nine Months Ended September 30,
% Increase /
(Thousands) 2022 2021 (Decrease)
Interest expense, net:
Cash:
Senior secured notes $ 153,198 $ 156,550 (3,352)
Senior unsecured notes 95,963 99,438 (3,475)Senior secured revolving credit facility - variable rate
9,018 7,095 1,923
Tender premium payment - 20,541 (20,541)
Interest rate swap termination 8,488 8,488 -
Other 1,664 2,070 (406)
Total cash interest 268,331 294,182 (25,851)
Non-cash:
Amortization of deferred financing costs and debt
discount 13,510 13,723 (213)
Write off of deferred financing costs and debt
discount - 22,828 (22,828)
Accretion of settlement payable 8,733 13,006 (4,273)
Capitalized interest (294) (1,977) 1,683
Total non-cash interest 21,949 47,580 (25,631)
Total interest expense, net $ 290,280 $ 341,762 $ (51,482)
Interest expense for the nine months ended September 30, 2022 decreased $51.5
million compared to the nine months ended September 30, 2021 . The decrease is
primarily attributable to (i) the 2021 issuance of the 2029 Notes used to fund
the redemption of the 2023 Notes and the 2021 issuance of the 2028 Secured Notes
used to fund the redemption of the 2023 Secured Notes, which collectively
resulted in $20.5 million of tender premium payments and the write off of $22.8
million of deferred financing costs, during the nine months ended September 30,
2021 and (ii) lower cash interest expense of $5.3 million , primarily associated
with the 2029 Notes and 2028 Notes financing transactions, and a $4.3 million
decrease in accretion expense associated with the settlement payable during the
nine months ended September 30, 2022 .
Depreciation and Amortization Expense
Nine Months Ended
% Increase /
(Thousands) 2022 2021 (Decrease)
Depreciation and amortization expense by segment:
Depreciation expense
Leasing $ 122,550 $ 126,965 $ (4,415)
Fiber Infrastructure 72,290 69,684 2,606
Corporate 98 195 (97)
Total depreciation expense 194,938 196,844 (1,906)
Amortization expense
Leasing 5,188 (2,833) 8,021
Fiber Infrastructure 17,150 17,154 (4)
Total amortization expense 22,338 14,321 8,017
Total depreciation and amortization expense $ 217,276 Leasing - Leasing depreciation expense decreased$4.4 million for the nine months endedSeptember 30, 2022 as compared to the nine months endedSeptember 30, 2021 . The decrease is primarily attributable to an increase in fully depreciated Windstream Distribution System assets of$5.2 million , partially offset by a$0.9 million increase in depreciation related to asset additions sinceSeptember 30, 2021 . During the nine months endedSeptember 30, 2021 ,$8.0 46
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million was recorded as a benefit to amortization expense, and subsequently reclassified to revenue during the fourth quarter of 2021.
Fiber Infrastructure - Fiber Infrastructure depreciation expense increased$2.6 million for the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 . The increase in depreciation expense is primarily attributable to asset additions sinceSeptember 30, 2021 .
General and Administrative Expense
General and administrative expenses include compensation costs, including stock-based compensation awards, professional and legal services, corporate office costs and other costs associated with administrative activities of our segments.
Nine Months Ended
2022 2021
(Thousands) Amount % of Consolidated Revenues Amount % of Consolidated Revenues
General and administrative expense by
segment:
Leasing $ 9,907 1.1% $ 7,436 0.9%
Fiber Infrastructure 40,603 4.9% 41,190 5.1%
Corporate 25,308 3.0% 27,174 3.4%
Total general and administrative expenses $ 75,818 9.0% $ 75,800 9.4%
Leasing - Leasing general and administrative expense increased $2.5 million for
the nine months ended September 30, 2022 compared to the nine months ended
September 30, 2021 . The increase is primarily attributable to a $1.7 million
increase in personnel expenses and a $0.8 million increase in other operating
expense.
Fiber Infrastructure - Fiber Infrastructure general and administrative expense
decreased $0.6 million for the nine months ended September 30, 2022 compared to
the nine months ended September 30, 2021 . This decrease is primarily
attributable to a $0.2 million decrease in personnel expenses, a $0.2 million
decrease in facility expenses, and a $0.1 million decrease in other operating
expenses.
Corporate - Corporate general and administrative expense decreased $1.9 million
for the nine months ended September 30, 2022 compared to the nine months ended
September 30, 2021 . The decrease is attributable to reductions in personnel
expenses of $2.4 million and insurance expenses of $1.7 million , partially
offset by increases in professional and legal expenses of $1.5 million , computer
software and maintenance of $0.4 million , and facility expense of $0.3 million .
Operating Expense
Operating expense for the nine months endedSeptember 30, 2022 increased by$2.7 million from the nine months endedSeptember 30, 2021 , which was primarily attributable to a$2.3 million increase in Leasing operating expenses and a$0.4 million increase in Fiber Infrastructure operating expenses discussed below. Operating expense for our reportable segments for the nine months endedSeptember 30, 2022 and 2021 consisted of the following: Nine Months Ended September 30, 2022 2021 (Thousands) Amount % of Consolidated Revenues Amount % of Consolidated
Revenues
Operating expense by segment: Leasing$ 14,385 1.7%$ 12,026 1.5% Fiber Infrastructure 93,799 11.1% 93,410 11.6% Total operating expenses$ 108,184 12.8%$ 105,436 13.1% 47
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Leasing - Leasing operating expense increased$2.3 million for the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 . The increase is primarily driven by a$1.9 million increase in other operating expense resulting from incremental customer growth and increased network related expense of$0.5 million . Fiber Infrastructure - Fiber Infrastructure operating expenses increased$0.4 million for the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 . Operating expense consists of network related costs, such as dark fiber and tower rents, lit service and maintenance expense, and costs associated with our construction activities. The increase in operating expenses is primarily attributable to to increases in dark fiber early termination fees of$2.4 million , property taxes of$1.6 million , personnel expense of$1.4 million , and unsplicing expenses of$1.4 million , partially offset by decreases in construction expenses of$2.0 million , non-recurring equipment and installation expenses of$1.6 million , and expenses related to the Uniti Fiber Northeast operations sold onMay 28, 2021 of$1.5 million , right of way expense of$0.9 million , and network maintenance and repair expenses of$0.5 million reduction. Goodwill Impairment As a result of macroeconomic and financial market factors, specifically increased interest rates impacting our discount rate, 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$216.0 million goodwill impairment in the Fiber Infrastructure reporting unit during the nine months endedSeptember 30, 2022 . See Note 2 of Notes to Condensed Consolidated Financial Statements in Part I Item 1 of this Quarterly Report on Form 10-Q.
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 nine months endedSeptember 30, 2022 , we incurred$7.3 million of transaction related and other costs, compared to$5.6 million of such costs during the nine months endedSeptember 30, 2021 .
Income Tax (Benefit) Expense
The income tax (benefit) expense recorded for the nine months endedSeptember 30, 2022 and 2021, respectively, is related to the tax impact of the following: Nine Months Ended September 30, (Thousands) 2022 2021 Income tax (benefit) expense Pre-tax loss (Fiber Infrastructure) $ (21,798)
Gain on sale of operations -
7,041
Gain on sale of unconsolidated entity 6,711 - Other undistributed REIT taxable income 3,229 1,310 REIT state and local taxes 1,594 1,291 Other 81 125 Total income tax (benefit) expense $ (10,183)$ 283 Non-GAAP Financial Measures We refer to EBITDA, Adjusted EBITDA, Funds From Operations ("FFO") (as defined by theNational 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 inthe 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. 48
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We define "EBITDA" as net income, as defined by GAAP, before interest expense,
provision for income taxes and depreciation and amortization. We define
"Adjusted EBITDA" as EBITDA before stock-based compensation expense and the
impact, which may be recurring in nature, of transaction and integration related
costs, costs associated with Windstream's bankruptcy, costs associated with
litigation claims made against us, and costs associated with the implementation
of our enterprise resource planning system, (collectively, "Transaction Related
and Other Costs"), costs related to the settlement with Windstream, goodwill
impairment charges, executive severance costs, amortization of non-cash
rights-of-use assets, the write off of unamortized deferred financing costs,
costs incurred as a result of the early repayment of debt, including early
tender and redemption premiums and costs associated with the termination of
related hedging activities, gains or losses on dispositions, changes in the fair
value of contingent consideration and financial instruments, and other similar
or infrequent items (although we may not have had such charges in the periods
presented). Adjusted EBITDA includes adjustments to reflect the Company's share
of Adjusted EBITDA from unconsolidated entities. We believe EBITDA and Adjusted
EBITDA are important supplemental measures to net income because they provide
additional information to evaluate our operating performance on an unleveraged
basis. In addition, Adjusted EBITDA is calculated similar to defined terms in
our material debt agreements used to determine compliance with specific
financial covenants. Since EBITDA and Adjusted EBITDA are not measures
calculated in accordance with GAAP, they should not be considered as
alternatives to net income determined in accordance with GAAP.
Because the historical cost accounting convention used for real estate assets
requires the recognition of depreciation expense except on land, such accounting
presentation implies that the value of real estate assets diminishes predictably
over time. However, since real estate values have historically risen or fallen
with market and other conditions, presentations of operating results for a REIT
that uses historical cost accounting for depreciation could be less informative.
Thus, NAREIT created FFO as a supplemental measure of operating performance for
REITs that excludes historical cost depreciation and amortization, among other
items, from net income, as defined by GAAP. FFO is defined by NAREIT as net
income attributable to common shareholders computed in accordance with GAAP,
excluding gains or losses from real estate dispositions, plus real estate
depreciation and amortization and impairment charges, and includes adjustments
to reflect the Company's share of FFO from unconsolidated entities. We compute
FFO in accordance with NAREIT's definition.
The Company defines AFFO, as FFO excluding (i) Transaction Related and Other
Costs; (ii) costs related to the litigation settlement with Windstream,
accretion on our settlement obligation, and gains on prepayment of 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
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 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 and redemption premiums and costs associated with the termination
of related hedging activities, executive severance costs, taxes associated with
tax basis cancellation of debt, gains or losses on dispositions, changes in the
fair value of contingent consideration and financial instruments and similar or
infrequent items less maintenance capital expenditures. AFFO includes
adjustments to reflect the Company's share of AFFO from unconsolidated entities.
We believe that the use of FFO and AFFO, and their respective per share amounts,
combined with the required GAAP presentations, improves the understanding of
operating results of REITs among investors and analysts, and makes comparisons
of operating results among such companies more meaningful. We consider FFO and
AFFO to be useful measures for reviewing comparative operating performance. In
particular, we believe AFFO, by excluding certain revenue and expense items, can
help investors compare our operating performance between periods and to other
REITs on a consistent basis without having to account for differences caused by
unanticipated items and events, such as transaction and integration related
costs. The Company uses FFO and AFFO, and their respective per share amounts,
only as performance measures, and FFO and AFFO do not purport to be indicative
of cash available to fund our future cash requirements. While FFO and AFFO are
relevant and widely used measures of operating performance of REITs, they do not
represent cash flows from operations or net income as defined by GAAP and should
not be considered an alternative to those measures in evaluating our liquidity
or operating performance.
Further, our computations of EBITDA, Adjusted EBITDA, FFO and AFFO may not be
comparable to that reported by other REITs or companies that do not define FFO
in accordance with the current NAREIT definition or that interpret the current
NAREIT definition or define EBITDA, Adjusted EBITDA and AFFO differently than we
do.
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The reconciliation of our net (loss) income to EBITDA and Adjusted EBITDA and of our net (loss) income attributable to common shareholders to FFO and AFFO for the three and nine months endedSeptember 30, 2022 and 2021 is as follows: Three Months Ended September 30, Nine Months Ended September 30, (Thousands) 2022 2021 2022 2021 Net (loss) income$ (155,749) $ 43,682 $ (49,117) $ 88,819 Depreciation and amortization 73,516 70,530 217,276 211,165 Interest expense, net 97,731 94,793 290,280 341,762 Income tax (benefit) expense (13,056) (2,244) (10,183) 283 EBITDA$ 2,442 $ 206,761 $ 448,256 $ 642,029 Stock based compensation 3,151 4,166 9,664 10,963 Transaction related and other costs 2,375 1,063 7,324 5,624 Gain on sale of operations (176) - (176) (28,143) Gain on sale of real estate (94) - (344) (442) Goodwill impairment 216,000 - 216,000 - Other, net 600 4,472 (6,534) 14,569 Adjustments for equity in earnings from unconsolidated entities 755 765 2,816 2,609 Adjusted EBITDA$ 225,053 $ 217,227 $ 677,006 $ 647,209 50
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Three Months Ended September 30, Nine Months Ended September 30,
(Thousands) 2022 2021 2022 2021
Net (loss) income attributable to common
shareholders $ (155,910) $ 43,080 $ (50,164) $ 86,963
Real estate depreciation and amortization 53,118 53,620 157,436 159,175
Gain on sale of real estate assets, net of
tax (94) - (344) (442)
Participating securities share in earnings 226 283 897 864
Participating securities share in FFO (226) (635) (1,788) (1,660)
Real estate depreciation and amortization
from unconsolidated entities 436 646 1,931 1,876
Adjustments for noncontrolling interests (24) (412) (235) (1,979)
FFO attributable to common shareholders
$ 107,733 $ 244,797 Transaction related and other costs 2,375 1,063 7,324 5,624 Change in fair value of contingent consideration - - - 21 Amortization of deferred financing costs and debt discount 4,495 4,352 13,510 13,723 Write off of deferred financing costs and debt discount - - - 22,828 Costs related to the early repayment of debt - - - 28,485 Stock based compensation 3,151 4,166 9,664 10,963 Gain on sale of unconsolidated entity, net of tax - - (1,212) - Gain on sale of operations (176) - (176) (28,143) Non-real estate depreciation and amortization 20,398 16,910 59,840 51,990 Goodwill impairment 216,000 - 216,000 - Straight-line revenues and amortization of below-market lease intangibles (9,918) (8,240) (31,066) (22,455) Maintenance capital expenditures (2,314) (1,938) (7,136) (6,322) Other, net (19,182) (2,949) (35,412) (4,958) Adjustments for equity in earnings from unconsolidated entities 319 119 887 733 Adjustments for noncontrolling interests (96) (120) (137) (990)
AFFO attributable to common shareholders
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 agreement with Windstream, including entry into the Windstream Leases, we are obligated (i) to make$490.1 million of cash payments to Windstream in equal installments over 20 consecutive quarters beginning inOctober 2020 and (ii) to reimburse Windstream for up to an aggregate of$1.75 billion for Growth Capital Improvements in long-term value accretive fiber and related assets made by Windstream through 2029. To date, we have paid$215.4 million of the$490.1 million due to Windstream under the settlement agreement, including$92.9 million that we pre-paid onOctober 14, 2021 ,$78.0 million of which was funded from a portion of the proceeds of the 2030 Notes. 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) were limited to$125 million in 2020 and$225 million in 2021, and are limited to$225 million per year in 2022 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 the Windstream Leases), available borrowings under our credit agreement by and among theOperating Partnership ,CSL Capital, LLC and Uniti Group Finance 2019 Inc., the guarantors and lenders party thereto andBank of America, N.A ., 51
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as administrative agent and collateral agent (the "Credit Agreement"), and proceeds from the issuance of debt and equity securities.
As ofSeptember 30, 2022 , we had cash and cash equivalents of$43.4 million and approximately$225.0 million of borrowing availability under our Revolving Credit Facility under the Credit Agreement. Subsequent toSeptember 30, 2022 , other than$27.4 million of Growth Capital Improvements (see "Result of Operations-Revenues" above), 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 Revolving Credit Facility would impose significant restrictions on our ability to pay dividends. See "-Dividends."
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