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UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from__________ to __________
Commission File No.: 000-09881
https://cdn.kscope.io/0e1d1ad933dc09a6f6dd63e8bba36836-shen-20210630_g1.jpg
SHENANDOAH TELECOMMUNICATIONS COMPANY
(Exact name of registrant as specified in its charter)
Virginia 54-1162807
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

500 Shentel Way, Edinburg, Virginia    22824
(Address of principal executive offices)  (Zip Code)

(540) 984-4141 
(Registrant's telephone number, including area code) 
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
 
Common Stock (No Par Value)SHENNASDAQ Global Select Market49,965,151
(Title of Class)(Trading Symbol)(Name of Exchange on which Registered)(The number of shares of the registrant's common stock outstanding on July 23, 2021)

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, 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 filerAccelerated filer Non-accelerated filerSmaller reporting companyEmerging 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes   No 




SHENANDOAH TELECOMMUNICATIONS COMPANY
INDEX

  Page
Numbers
PART I.FINANCIAL INFORMATION 
   
Item 1.Financial Statements 
   
 Unaudited Condensed Consolidated Balance Sheets
  
 Unaudited Condensed Consolidated Statements of Comprehensive Income
  
 Unaudited Condensed Consolidated Statements of Shareholders’ Equity
  
 Unaudited Condensed Consolidated Statements of Cash Flows
  
 Notes to Unaudited Condensed Consolidated Financial Statements
  
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
  
Item 3.Quantitative and Qualitative Disclosures about Market Risk
  
Item 4.Controls and Procedures
  
PART II.OTHER INFORMATION
  
Item 1A.Risk Factors
  
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
  
Item 6.Exhibits
  
 Signatures
  
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SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)June 30,
2021
December 31,
2020
ASSETS
Current assets:
Cash and cash equivalents$248,789 $195,397 
Accounts receivable, net of allowance for doubtful accounts of $502 and $614, respectively
63,182 70,393 
Income taxes receivable2,795  
Prepaid expenses and other13,185 9,631 
Current assets held for sale1,101,193 1,133,294 
Total current assets1,429,144 1,408,715 
Investments13,793 13,769 
Property, plant and equipment, net495,599 440,427 
Goodwill and Intangible assets, net106,345 106,759 
Operating lease right-of-use assets54,254 50,387 
Deferred charges and other assets16,097 11,650 
Total assets$2,115,232 $2,031,707 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt, net of unamortized loan fees$672,601 $688,463 
Accounts payable23,538 19,599 
Advanced billings and customer deposits9,081 8,594 
Accrued compensation12,102 16,413 
Income taxes payable 6,951 
Current operating lease liabilities2,272 1,970 
Accrued liabilities and other13,936 13,869 
Current liabilities held for sale423,008 452,202 
Total current liabilities1,156,538 1,208,061 
Other long-term liabilities:
Deferred income taxes179,416 150,652 
Asset retirement obligations5,490 4,955 
Benefit plan obligations12,763 14,645 
Non-current operating lease liabilities49,249 46,095 
Other liabilities23,989 24,905 
Total other long-term liabilities270,907 241,252 
Commitments and contingencies (Note 13)
Shareholders’ equity:
Common stock, no par value, authorized 96,000; 49,950 and 49,868 issued and outstanding at June 30, 2021 and December 31, 2020, respectively
  
Additional paid in capital46,681 47,317 
Retained earnings644,726 539,783 
Accumulated other comprehensive loss, net of taxes(3,620)(4,706)
Total shareholders’ equity687,787 582,394 
Total liabilities and shareholders’ equity$2,115,232 $2,031,707 

See accompanying notes to unaudited condensed consolidated financial statements.
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SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, except per share amounts)Three Months Ended
June 30,
Six Months Ended
June 30,
2021202020212020
Service revenue and other$60,700 $54,336 $120,391 $107,470 
Operating expenses:
Cost of services24,335 22,181 47,618 42,498 
Selling, general and administrative20,320 22,092 40,473 44,188 
Restructuring expense43  661  
Depreciation and amortization13,299 11,930 26,565 24,015 
Total operating expenses57,997 56,203 115,317 110,701 
Operating income (loss)2,703 (1,867)5,074 (3,231)
Other income:
Other income, net1,338 1,271 2,938 2,020 
Income (loss) before income taxes4,041 (596)8,012 (1,211)
Income tax expense (benefit) 2,185 (60)3,107 (825)
Income (loss) from continuing operations1,856 (536)4,905 (386)
Income from discontinued operations, net of tax51,566 29,783 100,038 42,913 
Net income53,422 29,247 104,943 42,527 
Other comprehensive income:
Unrealized income (loss) on interest rate hedge, net of tax313 59 1,086 (6,047)
Comprehensive income$53,735 $29,306 $106,029 $36,480 
Net income per share, basic and diluted:
Basic - Income (loss) from continuing operations$0.04 $(0.01)$0.10 $(0.01)
Basic - Income from discontinued operations, net of tax$1.03 $0.59 $2.00 $0.86 
Basic net income per share$1.07 $0.58 $2.10 $0.85 
Diluted - Income (loss) from continuing operations$0.04 $(0.01)$0.10 $(0.01)
Diluted - Income from discontinued operations, net of tax$1.03 $0.59 $2.00 $0.86 
Diluted net income per share$1.07 $0.58 $2.10 $0.85 
Weighted average shares outstanding, basic49,945 49,902 49,945 49,878 
Weighted average shares outstanding, diluted50,075 49,902 50,067 49,878 

See accompanying notes to unaudited condensed consolidated financial statements.

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SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands)
Shares of Common Stock (no par value)Additional Paid in CapitalRetained EarningsAccumulated Other Comprehensive (Loss) IncomeTotal
Balance, March 31, 202149,943 $46,583 $591,304 $(3,933)$633,954 
Net income (loss)— — 53,422 — 53,422 
Other comprehensive gain (loss), net of tax— — — 313 313 
Stock based compensation9 234 — — 234 
Common stock issued— 5 — — 5 
Shares retired for settlement of employee taxes upon issuance of vested equity awards(2)(141)— — (141)
Balance, June 30, 202149,950 $46,681 $644,726 $(3,620)$687,787 
Shares of Common Stock (no par value)Additional Paid in CapitalRetained EarningsAccumulated Other Comprehensive (Loss) Income Total
Balance, December 31, 202049,868 $47,317 $539,783 $(4,706)$582,394 
Net income (loss)— — 104,943 — 104,943 
Other comprehensive gain (loss), net of tax— — — 1,086 1,086 
Stock based compensation118 980 — — 980 
Common stock issued— 11 — — 11 
Shares retired for settlement of employee taxes upon issuance of vested equity awards(36)(1,627)— — (1,627)
Balance, June 30, 202149,950 $46,681 $644,726 $(3,620)$687,787 
Shares of Common Stock (no par value)Additional Paid in CapitalRetained EarningsAccumulated Other Comprehensive (Loss) IncomeTotal
Balance, March 31, 202049,842 $43,158 $443,290 $(5,798)$480,650 
Net income (loss)— — 29,247 — 29,247 
Other comprehensive gain (loss), net of tax— — — 59 59 
Stock based compensation15 1,731 — — 1,731 
Common stock issued— 7 — — 7 
Shares retired for settlement of employee taxes upon issuance of vested equity awards(5)(237)— — (237)
Balance, June 30, 202049,852 $44,659 $472,537 $(5,739)$511,457 
Shares of Common Stock (no par value)Additional Paid in CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Total
Balance, December 31, 201949,671 $42,110 $430,010 $308 $472,428 
Net income (loss)— — 42,527 — 42,527 
Other comprehensive loss, net of tax— — — (6,047)(6,047)
Stock-based compensation152 4,716 — — 4,716 
Common stock issued— 15 — — 15 
Shares retired for settlement of employee taxes upon issuance of vested equity awards(47)(2,182)— — (2,182)
Common stock issued to acquire non-controlling interest in nTelos76 — — — — 
Balance, June 30, 202049,852 $44,659 $472,537 $(5,739)$511,457 

See accompanying notes to unaudited condensed consolidated financial statements.
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SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)Six Months Ended
June 30,
20212020
Cash flows from operating activities:
Net income$104,943 $42,527 
Income from discontinued operations, net of tax100,038 42,913 
Income (loss) from continuing operations4,905 (386)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation26,144 23,694 
Amortization421 321 
Accretion of asset retirement obligations184 163 
Bad debt expense448 436 
Stock based compensation expense, net of amount capitalized834 4,169 
Deferred income taxes3,251 (499)
Gain from patronage and investments(833)(236)
Changes in assets and liabilities:
Accounts receivable4,369 278 
Current income taxes(1,305)(335)
Operating lease right-of-use assets1,870 (3,621)
Other assets(6,524)(2,300)
Accounts payable560 (359)
Lease liabilities(2,298)(1,069)
Other deferrals and accruals(3,852)9,047 
Net cash provided by operating activities - continuing operations28,174 29,303 
Net cash provided by operating activities - discontinued operations125,011 99,636 
Net cash provided by operating activities153,185 128,939 
Cash flows from investing activities:
Capital expenditures(79,562)(52,888)
Cash disbursed for deposit on FCC spectrum leases (1,200)
Proceeds from sale of assets and other189 264 
Net cash used in investing activities - continuing operations(79,373)(53,824)
Net cash used in investing activities - discontinued operations(928)(13,716)
Net cash used in investing activities(80,301)(67,540)
Cash flows from financing activities:
Payments for debt issuance costs(53) 
Taxes paid for equity award issuances(1,627)(2,182)
Payments for financing arrangements and other(751)(95)
Net cash used in financing activities - continuing operations(2,431)(2,277)
Net cash used in financing activities - discontinued operations(17,061)(17,061)
Net cash used in financing activities(19,492)(19,338)
Net increase in cash and cash equivalents53,392 42,061 
Cash and cash equivalents, beginning of period195,397 101,651 
Cash and cash equivalents, end of period$248,789 $143,712 

See accompanying notes to unaudited condensed consolidated financial statements.
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SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1.  Basis of Presentation and Other Information

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X for interim financial information. All normal recurring adjustments considered necessary for a fair presentation have been included. Certain disclosures normally included in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) have been omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2020.

The preparation of the unaudited interim consolidated financial statements requires management of the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingencies at the date of the unaudited interim condensed consolidated financial statements. These estimates are inherently subject to judgment and actual results could differ.

Adoption of New Accounting Principles

There have been no material developments related to recently issued accounting standards, including the expected dates of adoption and estimated effects on the Company's unaudited condensed consolidated financial statements and note disclosures, from those disclosed in the Company's 2020 Annual Report on Form 10-K, that would be expected to impact the Company.

Note 2. Discontinued Operations

On August 26, 2020, Sprint Corporation ("Sprint"), an indirect subsidiary of T-Mobile US, Inc., ("T-Mobile"), on behalf of and as the direct or indirect owner of Sprint PCS, delivered notice to the Company exercising its option to purchase the assets and operations of our Wireless operations for 90% of the “Entire Business Value” (as defined under our affiliate agreement and determined pursuant to the appraisal process set forth therein). Shortly thereafter, the Company committed to a plan to sell the discontinued Wireless operations.

On July 1, 2021, pursuant to the previously announced Asset Purchase Agreement (the “Purchase Agreement”), dated May 28, 2021, between Shentel and T-Mobile, Shentel completed the sale to T-Mobile of its Wireless assets and operations for cash consideration of approximately $1.94 billion, inclusive of the approximately $60 million settlement of the waived management fees by Sprint, and net of certain transaction expenses (the “Transaction”). The Company’s Wireless assets and operations were classified as discontinued operations after Sprint delivered notice to the Company exercising its option to purchase the Wireless assets and operations on August 26, 2020.

The assets and liabilities that transferred in the sale were presented as held for sale within our unaudited condensed consolidated balance sheets, and discontinued operations within our unaudited condensed consolidated statements of comprehensive income. This disposal group excludes the accounts receivable and certain current liabilities generated by our Wireless operations because they are expected to be settled separately from the sale. Such accounts receivable totaled $49.1 million and $51.7 million at June 30, 2021 and December 31, 2020, respectively, and such current liabilities totaled $8.0 million and $6.1 million at June 30, 2021 and December 31, 2020, respectively.

The transaction is structured as an asset sale for income tax purposes. As a result, no current or deferred tax assets or liabilities are included within the disposal group. While our long-term debt does not transfer in the sale, its provisions required us to repay all of the debt upon consummation of the sale. Our debt is therefore presented outside of the disposal group as a current liability. Our related interest rate swap liabilities are also presented outside of the disposal group as a current liability, because management terminated them at consummation. Because repayment of the debt is contractually triggered by the sale, the related interest expense is presented within discontinued operations under the relevant authoritative guidance.
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The carrying amounts of the major classes of assets and liabilities, which are classified as held for sale in the consolidated balance sheets, are as follows:
(in thousands)June 30,
2021
December 31,
2020
ASSETS
Inventory$1,823 $5,746 
Prepaid expenses and other42,562 47,003 
Property, plant and equipment, net298,471 299,647 
Intangible assets, net155,748 176,459 
Goodwill146,383 146,383 
Operating lease right-of-use assets417,754 421,586 
Deferred charges and other assets38,452 36,470 
Current assets held for sale$1,101,193 $1,133,294 
LIABILITIES
Current operating lease liabilities$383,633 $409,887 
Accrued liabilities and other5,202 8,770 
Asset retirement obligations34,173 33,545 
Current liabilities held for sale$423,008 $452,202 

Income from discontinued operations, net of tax in the consolidated statements of comprehensive income consist of the following:
(in thousands)Three Months Ended
June 30,
Six Months Ended
June 30,
Revenue:2021202020212020
Service revenue and other$100,402 $110,138 $201,076 $201,526 
Equipment revenue5,854 9,610 12,253 22,360 
Total revenue106,256 119,748 213,329 223,886 
Operating expenses:
Cost of services18,717 33,192 38,144 66,631 
Cost of goods sold5,743 9,437 11,964 21,965 
Selling, general and administrative6,812 9,348 17,514 18,278 
Restructuring expense254  465  
Depreciation and amortization 22,901  47,727 
Total operating expenses31,526 74,878 68,087 154,601 
Operating income74,730 44,870 145,242 69,285 
Other (expense) income:
Interest expense(4,317)(4,742)(8,701)(10,970)
Income before income taxes70,413 40,128 136,541 58,315 
Income tax expense18,847 10,345 36,503 15,402 
Income from discontinued operations, net of tax$51,566 $29,783 $100,038 $42,913 

Under the relevant authoritative guidance, consummation of the sale will trigger or accelerate the recognition of certain expense related to contingent deal advisory fees, severance costs, recognition of our interest rate swap losses in net income, and loss on debt extinguishment. We estimate these expenses to be approximately $34 million.

Note 3. Revenue from Contracts with Customers
Our Broadband segment provides broadband data, video and voice services to residential and commercial customers in portions of Virginia, West Virginia, Maryland, Pennsylvania and Kentucky, via fiber optic, hybrid fiber coaxial cable, and fixed wireless
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networks. The Broadband segment also provides voice and DSL telephone services to customers in Virginia’s Shenandoah County and portions of adjacent counties as a Rural Local Exchange Carrier (“RLEC”).

These contracts are generally cancellable at the customer’s discretion without penalty at any time. We allocate the total transaction price in these transactions based upon the standalone selling price of each distinct good or service. We generally recognize these revenues over time as customers simultaneously receive and consume the benefits of the service, with the exception of equipment sales and home wiring, which are recognized as revenue at a point in time when control transfers and when installation is complete, respectively. Installation fees, charged upfront without transfer of commensurate goods or services to the customer, are allocated to services and are recognized ratably over the longer of the contract term or the period in which the unrecognized fee remains material to the contract, which we estimate to be about one year. Additionally, the Company incurs commission and installation costs related to in-house and third-party vendors which are capitalized and amortized over the expected weighted average customer life which is approximately six years.

Our Broadband segment also provides Ethernet and Wavelength fiber optic services to commercial fiber customers under capacity agreements, and the related revenue is recognized over time. In some cases, non-refundable upfront fees are charged for connecting commercial fiber customers to our fiber network. Those amounts are recognized ratably over the longer of the contract term or the period in which the unrecognized fee remains material to the respective contract. A related contract liability of $3.7 million at June 30, 2021, is expected to be recognized into revenue at the rate of approximately $0.2 million per year.

The Broadband segment also leases dedicated fiber optic strands to customers as part of “dark fiber” agreements, which are accounted for as leases under Accounting Standards Codification 842, Leases, ("ASC 842").

Our Tower segment leases space on owned cell towers to our Wireless and Broadband segments, and to other wireless carriers. Revenue from these leases is accounted for under ASC 842.

Refer to Note 14, Segment Reporting, for a summary of these revenue streams.

Below is a summary of the Broadband segment's capitalized contract acquisition and fulfillment costs:
Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands)2021202020212020
Beginning Balance$15,215 $11,663 $14,669 $11,005 
Contract payments1,410 2,248 3,215 3,933 
Contract amortization(1,335)(1,131)(2,594)(2,158)
Ending Balance$15,290 $12,780 $15,290 $12,780 

Note 4.  Investments

Investments consist of the following:
(in thousands)June 30,
2021
December 31,
2020
SERP Investments at fair value$2,228 $2,687 
Cost method investments11,025 10,536 
Equity method investments540 546 
Total investments$13,793 $13,769 

SERP Investments at Fair Value: The Supplemental Executive Retirement Plan (“SERP”) is a benefit plan that provides deferred compensation to certain employees. The Company holds the related investments in a rabbi trust as a source of funding for future payments under the plan. The SERP’s investments were designated as trading securities and will be liquidated and paid out to the participants upon retirement. The benefit obligation to participants is always equal to the value of the SERP assets under ASC 710, Compensation. Changes to the investments' fair value are presented in Other income (expense), while the reciprocal changes in the liability are presented in selling, general and administrative expense. At June 30, 2021, an additional $0.8 million of SERP investments were presented as prepaid expenses and other (current assets) as we intend to liquidate certain investments to pay the current portion of our SERP obligation.
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Cost Method Investments: Our investment in CoBank ACB’s Class A common stock represented substantially all of our cost method investments with a balance of $10.3 million and $9.8 million at June 30, 2021 and December 31, 2020, respectively. We recognized approximately $1.0 million of patronage income in Other income (expense) during both of the three months ended June 30, 2021 and 2020, respectively, and approximately $2.0 million during both of the six months ended June 30, 2021 and 2020, respectively. Historically, approximately 75% of the patronage distributions were collected in cash and 25% in equity.

Equity Method Investments: At June 30, 2021, the Company had a 20.0% ownership interest in Valley Network Partnership (“ValleyNet”). The Company and ValleyNet purchase capacity on one another’s fiber network. We recognized revenue of $0.2 million and $0.3 million from providing service to ValleyNet during the three months ended June 30, 2021 and 2020, respectively, and $0.4 million and $0.5 million during the six months ended June 30, 2021 and 2020, respectively. We recognized cost of service of $0.6 million for the use of ValleyNet’s network during both of the three months ended June 30, 2021 and 2020, and $1.1 million and $1.4 million during the six months ended June 30, 2021 and 2020, respectively.

Note 5.  Property, Plant and Equipment

Property, plant and equipment consisted of the following:
 
($ in thousands)Estimated Useful LivesJune 30,
2021
December 31,
2020
Land$3,771 $3,909 
Land improvements
10 years
3,141 2,910 
Buildings and structures
10 - 40 years
93,912 91,335 
Cable and fiber
15 - 30 years
414,599 390,209 
Equipment and software
4 - 8 years
351,556 331,047 
Plant in service 866,979 819,410 
Plant under construction 80,023 49,417 
Total property, plant and equipment 947,002 868,827 
Less: accumulated amortization and depreciation451,403 428,400 
Property, plant and equipment, net $495,599 $440,427 

Property, plant and equipment net, increased due primarily to capital expenditures in the Broadband segment driven by our Glo Fiber and Beam market expansions.
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Note 6. Goodwill and Intangible Assets

Other intangible assets consisted of the following:
 June 30, 2021December 31, 2020
(in thousands)Gross
Carrying
Amount
Accumulated Amortization and OtherNetGross
Carrying
Amount
Accumulated Amortization and OtherNet
Goodwill - Broadband$3,244 $— $3,244 $3,244 $— $3,244 
Indefinite-lived intangibles:
Cable franchise rights$64,334 $— $64,334 $64,334 $— $64,334 
FCC spectrum licenses29,958 — 29,958 29,958 — 29,958 
Railroad crossing rights141 — 141 141 — 141 
Total indefinite-lived intangibles94,433 — 94,433 94,433 — 94,433 
Finite-lived intangibles:
FCC spectrum licenses6,811 (515)6,296 6,811 (340)6,471 
Subscriber relationships28,425 (26,226)2,199 28,425 (26,000)2,425 
Other intangibles463 (290)173 463 (277)186 
Total finite-lived intangibles35,699 (27,031)8,668 35,699 (26,617)9,082 
Total goodwill and intangible assets$133,376 $(27,031)$106,345 $133,376 $(26,617)$106,759 

For the six months ended June 30, 2021 and 2020, amortization expense was approximately $0.4 million and $0.3 million, respectively.

Note 7.     Other Assets and Accrued Liabilities

Prepaid expenses and other, classified as current assets, included the following:
(in thousands)June 30,
2021
December 31,
2020
Prepaid maintenance expenses$6,913 $4,018 
Broadband contract acquisition and fulfillment costs4,100 4,417 
SERP investments844  
Other1,328 1,196 
Prepaid expenses and other$13,185 $9,631 

Deferred charges and other assets, classified as long-term assets, included the following:
(in thousands)June 30,
2021
December 31,
2020
Broadband contract acquisition and fulfillment costs$11,189 $10,252 
Prepaid expenses and other4,908 1,398 
Deferred charges and other assets$16,097 $11,650 
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Accrued liabilities and other, classified as current liabilities, included the following:
(in thousands)June 30,
2021
December 31,
2020
Interest rate swaps$2,601 $4,048 
Accrued programming costs3,102 2,868 
Sales and property taxes payable1,990 1,072 
Restructuring accrual608  
Other current liabilities5,635 5,881 
Accrued liabilities and other$13,936 $13,869 


Other liabilities, classified as long-term liabilities, included the following:
(in thousands)June 30,
2021
December 31,
2020
Noncurrent portion of deferred lease revenue$18,374 $18,687 
FCC spectrum license obligations3,826 3,845 
Noncurrent portion of financing leases1,586 1,492 
Other203 881 
Other liabilities$23,989 $24,905 

During the three months ended March 31, 2021, we implemented a restructuring plan whereby certain employees will leave the Company by 2022. At the onset of the plan we recognized a restructuring accrual for severance benefits payable to impacted employees totaling $0.8 million. During the three months ended June 30, 2021, we paid approximately $0.6 million of severance benefits and we recognized additional expenses of $0.04 million and $0.3 million, presented in continuing and discontinued operations, respectively. For the six months ended June 30, 2021, $0.7 million and $0.5 million of expense is presented in continuing and discontinued operations, respectively.

Note 8. Leases

We lease various telecommunications sites, fiber optic cable routes, warehouses, retail stores, and office facilities for use in our business. These agreements include fixed rental payments as well as variable rental payments, such as those based on relevant inflation indices. The accounting lease term includes optional renewal periods that we are reasonably certain to exercise based on our assessment of relevant contractual and economic factors. The related lease payments are discounted at lease commencement using the Company's incremental borrowing rate in order to measure the lease liability and right of use asset.

The incremental borrowing rate is determined using a portfolio approach based on the rate of interest that the Company would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. The Company uses the observable unsecured borrowing rate and risk-adjusts that rate to approximate a collateralized rate. At June 30, 2021, our operating leases had a weighted average remaining lease term of 21.0 years and a weighted average discount rate of 4.5%. Our finance leases had a weighted average remaining lease term of 13.8 years and a weighted average discount rate of 5.2%.

During each of the three months ended June 30, 2021 and 2020, we recognized $2.0 million and $1.4 million of operating lease expense, respectively. We recognized $0.1 million and $0.1 million of interest and depreciation expense on finance leases during the three months ended June 30, 2021 and 2020, respectively. Operating lease expense is presented in cost of service or selling, general and administrative expense based on the use of the relevant facility. Variable lease payments and short-term lease expense were both immaterial. We remitted $1.3 million and $1.0 million of operating lease payments during the three months ended June 30, 2021 and 2020, respectively. We also obtained $2.4 million and $1.5 million of leased assets in exchange for new operating lease liabilities recognized during the three months ended June 30, 2021 and 2020, respectively.

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The following table summarizes the expected maturity of lease liabilities at June 30, 2021:
(in thousands)Operating LeasesFinance LeasesTotal
2021$2,625 $93 $2,718 
20224,981 175 5,156 
20234,517 176 4,693 
20244,177 179 4,356 
20253,966 181 4,147 
2026 and thereafter66,543 1,551 68,094 
Total lease payments86,809 2,355 89,164 
Less: Interest35,288 675 35,963 
Present value of lease liabilities$51,521 $1,680 $53,201 

We recognized $2.3 million and $2.1 million of operating lease revenue during the three months ended June 30, 2021 and 2020, respectively, related to the cell site colocation space and dedicated fiber optic strands that we lease to our customers, which is included in Service revenue and other in the consolidated statements of comprehensive income. Substantially all of our lease revenue relates to fixed lease payments.

Below is a summary of our minimum rental receipts under the lease agreements in place at June 30, 2021:
(in thousands)Operating Leases
2021$4,195 
20227,741 
20236,202 
20245,021 
20253,934 
2026 and thereafter7,417 
Total $34,510 

Note 9.  Debt

The prior Credit Agreement included a $75 million, five-year undrawn revolving credit facility, as well as the following term loans:
(in thousands)June 30,
2021
December 31,
2020
Term loan A-1$214,870 $229,437 
Term loan A-2465,987 468,481 
680,857 697,918 
Less: unamortized loan fees8,256 9,455 
Total debt, net of unamortized loan fees$672,601 $688,463 

Term Loan A-1 bore interest at one-month LIBOR plus a margin of 1.50%, while Term Loan A-2 bore interest at one-month LIBOR plus a margin of 1.75%. LIBOR resets monthly. Our cash payments for interest were $7.7 million and $10.3 million during the six months ended June 30, 2021 and 2020, respectively.

As of June 30, 2021, the Company was in compliance with the financial covenants in its credit agreements.

As discussed in Note 2, Discontinued Operations, upon consummation of the Transaction, the Company used approximately $681 million of the proceeds received from the sale to fully repay all outstanding principal amounts under, and terminate, the Credit Agreement.

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New Credit Agreement: On July 1, 2021, we entered into a new Credit Agreement (the “New Credit Agreement”) with various financial institutions party thereto (the “Lenders”). The New Credit Agreement provides for three credit facilities (collectively, the “Facilities”), in an aggregate amount equal to $400 million: (i) a $100 million five-year revolving credit facility (the “Revolver”), (ii) a $150 million five-year delay draw amortizing term loan (the “Term Loan A-1”) and (iii) a $150 million seven-year delay draw amortizing term loan (the “Term Loan A-2” and, together with the Term Loan A-1, the “Term Loans”). The New Credit Agreement includes a provision under which the Company may request that additional term loans be made to it in an amount not to exceed the sum of (1) the greater of (a) $75 million and (b) 100% of Consolidated EBITDA (as defined in the New Credit Agreement), calculated on a pro forma basis in accordance with the New Credit Agreement, plus (2) an additional unlimited amount subject to a maximum Total Net Leverage Ratio (as defined in the New Credit Agreement) of 4.00:1.00, calculated on a pro forma basis in accordance with the New Credit Agreement, subject to the receipt of commitments from one or more lenders for any such additional term loans and other customary conditions.

The availability of the Facilities to the Company is subject to the satisfaction or waiver of certain customary conditions set forth in the New Credit Agreement. The Company may use the proceeds from the Revolver and the Term Loans to finance capital expenditures, provide working capital, and for other general corporate purposes of the Company and its subsidiaries, including the payment of fees and expenses in connection with the foregoing.

Rate quotations provided by a group of banks that sustain LIBOR will no longer be required after 2021. As a result, it is uncertain whether LIBOR will continue to be quoted after 2021. Our term loans and revolver identify LIBOR as a reference rate and mature after 2021. Alternative reference rates that replace LIBOR may not yield the same or similar economic results over the terms of the financial instruments. The transition from LIBOR could result in us paying higher or lower interest rates on our current LIBOR-indexed term loans. Our New Credit Agreement includes provisions that provide for the identification of a LIBOR replacement rate. Due to the uncertainty regarding the transition from LIBOR-indexed financial instruments, including when it will happen, and the manner in which an alternative reference rate will apply, we cannot yet reasonably estimate the expected financial impact of the LIBOR transition.

Note 10. Derivatives and Hedging
The Company's interest rate swaps are pay-fixed (1.16%), receive-variable (one month LIBOR) that hedged approximately 27% of outstanding debt with outstanding notional amounts totaling $180.4 million and $289.4 million as of June 30, 2021 and December 31, 2020, respectively.

The fair value of these instruments was estimated using an income approach and observable market inputs. The hedge was determined to be highly effective and therefore all of the change in its fair value was recognized through other comprehensive income.

As discussed in Note 2, Discontinued Operations, upon consummation of the Transaction, the Company used approximately $3 million of the proceeds received from the sale to fully satisfy its obligations under, and terminate, the interest rate swaps.

The table below summarizes changes in accumulated other comprehensive income (loss) by component:
(in thousands)Gains (Losses) on
Cash Flow
Hedges
Income Tax
(Expense)
Benefit
Accumulated
Other
Comprehensive
Income (Loss), net of taxes
Balance as of December 31, 2020$(4,048)$(658)$(4,706)
Net change in unrealized (loss) gain(314)(361)(675)
Amounts reclassified from accumulated other comprehensive income (loss) to interest expense1,761  1,761 
Net current period other comprehensive (loss) income1,447 (361)1,086 
Balance as of June 30, 2021$(2,601)$(1,019)$(3,620)

Note 11.  Income Taxes

The Company files U.S. federal income tax returns and various state income tax returns. The Company is not subject to any state or federal income tax audits as of June 30, 2021. The Company's returns are generally open to examination from 2017 forward and the net operating losses acquired in the acquisition of nTelos are open to examination from 2002 forward.

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The effective tax rates for the three months ended June 30, 2021 and 2020, differ from the statutory U.S. federal income tax rate of 21% primarily due to the state income taxes, excess tax benefits and other discrete items.
 Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands)2021202020212020
Expected tax expense (benefit) at federal statutory$849 $(125)$1,683 $(254)
State income taxes, net of federal tax effect154 (27)469 (55)
Revaluation of deferred tax liabilities1,046  1,046  
Excess tax benefit from share based compensation and other expense, net136 92 (91)(516)
Income tax (benefit) expense $2,185 $(60)$3,107 $(