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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 September 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/d67f1ccd85dc9c8233a687cfe4a82321-shen-20210930_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 Market49,965,379
(Title of Class)(Trading Symbol)(Name of Exchange on which Registered)(The number of shares of the registrant's common stock outstanding on October 22, 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)September 30,
2021
December 31,
2020
ASSETS
Current assets:
Cash and cash equivalents$532,544 $195,397 
Accounts receivable, net of allowance for doubtful accounts of $565 and $614, respectively
25,026 70,393 
Prepaid expenses and other16,463 9,631 
Current assets held for sale 1,133,294 
Total current assets574,033 1,408,715 
Investments13,410 13,769 
Property, plant and equipment, net525,799 440,427 
Goodwill and Intangible assets, net106,146 106,759 
Operating lease right-of-use assets56,952 50,387 
Deferred charges and other assets16,750 11,650 
Total assets$1,293,090 $2,031,707 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt, net of unamortized loan fees$ $688,463 
Accounts payable17,433 19,599 
Advanced billings and customer deposits9,510 8,594 
Accrued compensation9,482 16,413 
Income taxes payable432,760 6,951 
Current operating lease liabilities2,648 1,970 
Accrued liabilities and other13,590 13,869 
Current liabilities held for sale 452,202 
Total current liabilities485,423 1,208,061 
Other long-term liabilities:
Deferred income taxes60,231 150,652 
Asset retirement obligations9,364 4,955 
Benefit plan obligations12,490 14,645 
Non-current operating lease liabilities51,786 46,095 
Other liabilities25,030 24,905 
Total other long-term liabilities158,901 241,252 
Commitments and contingencies (Note 13)
Shareholders’ equity:
Common stock, no par value, authorized 96,000; 49,965 and 49,868 issued and outstanding at September 30, 2021 and December 31, 2020, respectively
  
Additional paid in capital47,832 47,317 
Retained earnings600,934 539,783 
Accumulated other comprehensive loss, net of taxes (4,706)
Total shareholders’ equity648,766 582,394 
Total liabilities and shareholders’ equity$1,293,090 $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
September 30,
Nine Months Ended
September 30,
2021202020212020
Service revenue and other$62,244 $55,173 $182,635 $162,643 
Operating expenses:
Cost of services25,426 22,669 73,044 65,167 
Selling, general and administrative20,238 20,039 60,711 64,227 
Restructuring expense1,160  1,821  
Depreciation and amortization14,248 11,995 40,813 36,010 
Total operating expenses61,072 54,703 176,389 165,404 
Operating income (loss)1,172 470 6,246 (2,761)
Other income:
Other income, net138 1,083 3,076 3,103 
Income before income taxes1,310 1,553 9,322 342 
Income tax expense (benefit) (5,422)141 (2,315)(684)
Income from continuing operations6,732 1,412 11,637 1,026 
Discontinued operations:
(Loss) income from discontinued operations, net of tax(406)33,509 99,632 76,422 
Gain on the sale of discontinued operations, net of tax886,732  886,732  
Total income from discontinued operations, net of tax886,326 33,509 986,364 76,422 
Net income893,058 34,921 998,001 77,448 
Other comprehensive income:
Net gains/(losses) on interest rate swaps, net of tax3,620 539 4,706 (5,509)
Comprehensive income$896,678 $35,460 $1,002,707 $71,939 
Net income per share, basic and diluted:
Basic - Income from continuing operations$0.13 $0.03 $0.23 $0.02 
Basic - Income from discontinued operations, net of tax$17.73 $0.67 $19.73 $1.53 
Basic net income per share$17.86 $0.70 $19.96 $1.55 
Diluted - Income from continuing operations$0.13 $0.03 $0.23 $0.02 
Diluted - Income from discontinued operations, net of tax$17.68 $0.67 $19.67 $1.53 
Diluted net income per share$17.81 $0.70 $19.90 $1.55 
Weighted average shares outstanding, basic49,984 49,911 49,984 49,889 
Weighted average shares outstanding, diluted50,120 50,105 50,136 50,049 

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, June 30, 202149,950 $46,681 $644,726 $(3,620)$687,787 
Net income— — 893,058 — 893,058 
Other comprehensive gain, net of tax (Note 10)— — — 3,620 3,620 
Dividends declared ($18.75 per share)
— — (936,850)— (936,850)
Stock based compensation— 1,061 — — 1,061 
Stock options exercised15 85 — — 85 
Common stock issued— 5 — — 5 
Balance, September 30, 202149,965 $47,832 $600,934 $ $648,766 
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 — — 998,001 — 998,001 
Other comprehensive gain, net of tax (Note 10)— — — 4,706 4,706 
Dividends declared ($18.75 per share)
— — (936,850)— (936,850)
Stock based compensation118 2,041 — — 2,041 
Stock options exercised15 85 — — 85 
Common stock issued— 16 — — 16 
Shares retired for settlement of employee taxes upon issuance of vested equity awards(36)(1,627)— — (1,627)
Balance, September 30, 202149,965 $47,832 $600,934 $ $648,766 
Shares of Common Stock (no par value)Additional Paid in CapitalRetained EarningsAccumulated Other Comprehensive (Loss) IncomeTotal
Balance, June 30, 202049,852 $44,659 $472,537 $(5,739)$511,457 
Net income— — 34,921 — 34,921 
Other comprehensive gain, net of tax— — — 538 538 
Stock based compensation— 1,259 — — 1,259 
Common stock issued— 7 — — 7 
Balance, September 30, 202049,852 $45,925 $507,458 $(5,201)$548,182 
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— — 77,448 — 77,448 
Other comprehensive loss, net of tax— — — (5,509)(5,509)
Stock-based compensation152 5,974 — — 5,974 
Common stock issued— 23 — — 23 
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, September 30, 202049,852 $45,925 $507,458 $(5,201)$548,182 

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)Nine Months Ended
September 30,
20212020
Cash flows from operating activities:
Net income$998,001 $77,448 
Income from discontinued operations, net of tax986,364 76,422 
Income (loss) from continuing operations11,637 1,026 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation40,193 35,522 
Amortization620 488 
Accretion of asset retirement obligations298 247 
Bad debt expense755 514 
Stock based compensation expense, net of amount capitalized1,953 5,306 
Deferred income taxes4,384 (279)
Gain from patronage and investments(438)(596)
Amortization of long-term debt issuance costs109  
Changes in assets and liabilities:
Accounts receivable(1,195)(1,189)
Current income taxes(6,870)(261)
Operating lease right-of-use assets2,631 2,966 
Other assets(8,841)(4,122)
Accounts payable(5,626)(276)
Lease liabilities(2,845)(1,890)
Other deferrals and accruals(5,193)7,344 
Net cash provided by operating activities - continuing operations31,572 44,800 
Net cash provided by operating activities - discontinued operations121,067 182,499 
Net cash provided by operating activities152,639 227,299 
Cash flows from investing activities:
Capital expenditures(118,800)(82,740)
Cash disbursed for deposit on FCC spectrum leases (16,118)
Proceeds from sale of assets and other200 252 
Net cash used in investing activities - continuing operations(118,600)(98,606)
Net cash provided by investing activities - discontinued operations1,944,063 (17,794)
Net cash provided by (used in) investing activities1,825,463 (116,400)
Cash flows from financing activities:
Payments for debt issuance costs(841) 
Dividends paid, net of dividends reinvested(936,850) 
Taxes paid for equity award issuances(1,627)(2,182)
Payments for financing arrangements and other(1,081)(727)
Net cash used in financing activities - continuing operations(940,399)(2,909)
Net cash used in financing activities - discontinued operations(700,556)(25,591)
Net cash used in financing activities(1,640,955)(28,500)
Net increase in cash and cash equivalents337,147 82,399 
Cash and cash equivalents, beginning of period195,397 101,651 
Cash and cash equivalents, end of period$532,544 $184,050 

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 assets and liabilities that transferred in the sale (the "disposal group") were presented as held for sale within our historical unaudited condensed consolidated balance sheets, and discontinued operations within our historical unaudited condensed consolidated statements of comprehensive income.

The transaction was structured as an asset sale for income tax purposes. As a result, no current or deferred tax assets or liabilities were included within the disposal group. While our long-term debt did not transfer in the sale, its provisions required us to fully repay all of the debt concurrent with the consummation of the sale. Our debt was therefore presented outside of the disposal group as a current liability as of December 31, 2020. Our related interest rate swap liabilities were also presented outside of the disposal group as a current liability as of December 31, 2020, because management terminated them at consummation. Because repayment of the debt is contractually triggered by the sale, the related interest expense and debt extinguishment costs were presented within discontinued operations under the relevant authoritative guidance.
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The carrying amounts of the major classes of assets and liabilities, classified as held for sale in the consolidated balance sheets, were as follows:
(in thousands)December 31,
2020
ASSETS
Inventory$5,746 
Prepaid expenses and other47,003 
Property, plant and equipment, net299,647 
Intangible assets, net176,459 
Goodwill146,383 
Operating lease right-of-use assets421,586 
Deferred charges and other assets36,470 
Current assets held for sale$1,133,294 
LIABILITIES
Current operating lease liabilities$409,887 
Accrued liabilities and other8,770 
Asset retirement obligations33,545 
Current liabilities held for sale$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
September 30,
Nine Months Ended
September 30,
Revenue:2021202020212020
Service revenue and other$ $100,963 $201,076 $302,488 
Equipment revenue 9,862 12,253 32,222 
Total revenue 110,825 213,329 334,710 
Operating expenses:
Cost of services 28,567 38,144 95,242 
Cost of goods sold 9,600 11,964 31,565 
Selling, general and administrative 7,696 17,514 25,931 
Severance expense  465  
Depreciation and amortization 15,077  62,804 
Total operating expenses 60,940 68,087 215,542 
Operating income 49,885 145,242 119,168 
Other (expense) income:
Debt extinguishment(11,032) (11,032) 
Interest expense and other, net(733)(4,508)(9,434)(15,477)
Gain on sale of disposition of Wireless assets and operations1,224,815  1,224,815  
Income before income taxes1,213,050 45,377 1,349,591 103,691 
Income tax expense326,724 11,868 363,227 27,269 
Income from discontinued operations, net of tax$886,326 $33,509 $986,364 $76,422 

Consummation of the sale triggered the recognition of approximately $21 million of incremental selling costs during the three months ended September 30, 2021, for contingent deal advisory fees and severance expenses, which are netted against the gain on sale of disposition of Wireless assets and operations. Additionally, also triggered by the disposition event, we recognized an $11.0 million loss on debt extinguishment and incurred interest expense of approximately $2.6 million on the termination of our interest rate swaps.
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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 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 $3.8 million at September 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 Broadband segment, 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
September 30,
Nine Months Ended
September 30,
(in thousands)2021202020212020
Beginning Balance$15,290 $12,780 $14,669 $11,005 
Contract payments1,532 2,195 4,747 6,128 
Contract amortization(724)(1,013)(3,318)(3,171)
Ending Balance$16,098 $13,962 $16,098 $13,962 

Note 4.  Investments

Investments consist of the following:
(in thousands)September 30,
2021
December 31,
2020
SERP Investments at fair value$2,165 $2,687 
Cost method investments10,905 10,536 
Equity method investments340 546 
Total investments$13,410 $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
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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 September 30, 2021, an additional $0.9 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.

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 $10.1 million and $9.8 million at September 30, 2021 and December 31, 2020, respectively. We recognized approximately $0.5 million and $1.0 million of patronage income in Other income (expense) during the three months ended September 30, 2021 and 2020, respectively, and approximately $1.5 million and $3.0 million during the nine months ended September 30, 2021 and 2020, respectively. Historically, approximately 75% of the patronage distributions were collected in cash and 25% in equity.

Equity Method Investments: At September 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 from providing service to ValleyNet during each of the three months ended September 30, 2021, and 2020, respectively, and $0.5 million and $0.7 million during the nine months ended September 30, 2021, and 2020, respectively. We recognized cost of service of $30 thousand and $0.7 million for the use of ValleyNet’s network during the three months ended September 30, 2021, and 2020, respectively, and $1.1 million and $2.2 million during the nine months ended September 30, 2021 and 2020, respectively.

Note 5.  Property, Plant and Equipment

Property, plant and equipment consisted of the following:
 
($ in thousands)Estimated Useful LivesSeptember 30,
2021
December 31,
2020
Land$3,771 $3,909 
Land improvements
10 years
3,141 2,910 
Buildings and structures
10 - 40 years
94,539 91,335 
Cable and fiber
15 - 30 years
428,055 390,209 
Equipment and software
4 - 8 years
374,019 331,047 
Plant in service 903,525 819,410 
Plant under construction 84,731 49,417 
Total property, plant and equipment 988,256 868,827 
Less: accumulated amortization and depreciation462,457 428,400 
Property, plant and equipment, net $525,799 $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:
 September 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 (594)6,217 6,811 (340)6,471 
Subscriber relationships28,425 (26,338)2,087 28,425 (26,000)2,425 
Other intangibles463 (298)165 463 (277)186 
Total finite-lived intangibles35,699 (27,230)8,469 35,699 (26,617)9,082 
Total goodwill and intangible assets$133,376 $(27,230)$106,146 $133,376 $(26,617)$106,759 

Amortization expense was $0.2 million during both of the three months ended September 30, 2021 and 2020, and $0.6 million and $0.5 million for the nine months ended September 30, 2021 and 2020, respectively.

The Federal Communications Commission ("FCC") has delayed the issuance of Citizen Broadband Radio Service (CBRS) Priority Access Licenses acquired by the Company for $16.2 million in September 2020. The delay stems from a FCC review of the aggregate ownership of CBRS spectrum by certain shareholders of the Company. The Company is in the process of resolving this issue. The Company does not believe that it is probable or reasonably possible of a material loss.

Note 7.     Other Assets and Accrued Liabilities

Prepaid expenses and other, classified as current assets, included the following:
(in thousands)September 30,
2021
December 31,
2020
Prepaid maintenance expenses$8,665 $4,018 
Broadband contract acquisition and fulfillment costs4,426 4,417 
SERP investments862  
Other2,510 1,196 
Prepaid expenses and other$16,463 $9,631 

Deferred charges and other assets, classified as long-term assets, included the following:
(in thousands)September 30,
2021
December 31,
2020
Broadband contract acquisition and fulfillment costs$11,672 $10,252 
Prepaid expenses and other5,078 1,398 
Deferred charges and other assets$16,750 $11,650 
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Accrued liabilities and other, classified as current liabilities, included the following:
(in thousands)September 30,
2021
December 31,
2020
Interest rate swaps$ $4,048 
Accrued programming costs3,180 2,868 
Sales and property taxes payable1,769 1,072 
Restructuring accrual2,388  
Other current liabilities6,253 5,881 
Accrued liabilities and other$13,590 $13,869 


Other liabilities, classified as long-term liabilities, included the following:
(in thousands)September 30,
2021
December 31,
2020
Noncurrent portion of deferred lease revenue$19,066 $18,687 
FCC spectrum license obligations3,817 3,845 
Noncurrent portion of financing leases1,575 1,492 
Other572 881 
Other liabilities$25,030 $24,905 

During 2021, we implemented a restructuring plan whereby certain employees were notified of their pending dismissal under the workforce reduction program. The following table identifies the activity that has occurred as a result of the plan:

(in thousands)Three Months Ended
September 30, 2021
Nine Months Ended
September 30, 2021
Beginning Balance June 30, 2021 and January 1, 2021, respectively$608 $ 
Expense (1)3,213 4,340 
Payments (2)(1,433)(1,952)
Ending Balance - September 30, 2021$2,388 $2,388 
_______________________________________________________
(1)For the three and nine months ended September 30, 2021, respectively, approximately $2.2 million and $2.5 million of expense was recognized within discontinued operations.
(2)For the three and nine months ended September 30, 2021, respectively, approximately $1.1 million and $1.2 million of payments were attributable to discontinued operations.

Note 8. Leases

We lease various broadband network and 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 September 30, 2021, our operating leases had a weighted average remaining lease term of 20.2 years and a weighted average discount rate of 4.4%. Our finance leases had a weighted average remaining lease term of 13.5 years and a weighted average discount rate of 5.2%.

During each of the three months ended September 30, 2021 and 2020, we recognized $2.3 million and $2.3 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 September 30, 2021 and 2020, respectively. Operating lease expense is presented in cost of
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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 $1.4 million and $1.2 million of operating lease payments during the three months ended September 30, 2021 and 2020, respectively. We also obtained $2.2 million and $2.4 million of leased assets in exchange for new operating lease liabilities recognized during the three months ended September 30, 2021 and 2020, respectively.

The following table summarizes the expected maturity of lease liabilities at September 30, 2021:
(in thousands)Operating LeasesFinance LeasesTotal
2021$1,487 $63 $1,550 
20225,562 175 5,737 
20235,014 177 5,191 
20244,661 179 4,840 
20254,457 181 4,638 
2026 and thereafter68,634 1,551 70,185 
Total lease payments89,815 2,326 92,141 
Less: Interest35,381 654 36,035 
Present value of lease liabilities$54,434 $1,672 $56,106 

We recognized $2.4 million and $2.7 million of operating lease revenue during the three months ended September 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 September 30, 2021:
(in thousands)Operating Leases
2021$3,474 
202213,749 
202312,363 
202411,614 
202510,659 
2026 and thereafter36,957 
Total $88,816 

Note 9.  Debt

Our cash payments for interest were $10.4 million and $14.5 million during the nine months ended September 30, 2021 and 2020, respectively.

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 existing as of June 30, 2021 ("Prior Credit Agreement").

On July 1, 2021, the Company entered into a Credit Agreement (the “Credit Agreement”) with various financial institutions thereto (the “Lenders”) and CoBank, ACB, as administrative agent for the Lenders (in such capacity, the “Administrative Agent”). The 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 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 EBIDTA (as defined in the Credit Agreement), calculated on a pro forma basis in accordance with the Credit Agreement, plus (2) an additional unlimited amount subject to a maximum Total Net Leverage Ratio (as defined in the Credit Agreement) of 4.00:1.00, calculated on a pro forma basis in accordance with the Credit Agreement,
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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 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. The Term Loans will be repaid in quarterly principal installments commencing on September 30, 2023, with the unpaid balance of the Term Loans due at maturity, as set forth in the Credit Agreement.

Rates for borrowing under the Credit Agreement are based, at the Company’s election, upon whether the borrowing is a LIBOR loan or a base rate loan. LIBOR loans will bear interest at an adjusted LIBOR rate (which shall be no less than 0.00%) plus an applicable margin ranging from 1.50% to 2.75% for the Term Loan A-1 and the Revolver and from 1.50% to 3.00% for the Term Loan A-2, depending on the Company’s Total Net Leverage Ratio. Base rate loans will bear interest at a base rate plus an applicable margin ranging from 0.50% to 1.75% for the Term Loan A-1 and the Revolver and from 0.50% to 2.00% for the Term Loan A-2, depending on the Company’s Total Net Leverage Ratio. In addition, under the terms of the Credit Agreement, the Company agrees to pay the Lenders a fee on undrawn portions of the Term Loans and Revolver from time to time. This fee rate is dependent on the Company’s Total Net Leverage Ratio and ranges from a rate per annum equal to 0.200% to 0.375%.

The Credit Agreement contains representations and warranties, and affirmative and negative financial covenants usual and customary for similar secured credit facilities, each of which are applicable to the Company and its subsidiaries, including covenants governing the ability of the Company and its subsidiaries, subject to negotiated exceptions, to incur additional indebtedness and additional liens on their assets, engage in mergers or acquisitions or dispose of assets, pay dividends or make other distributions, enter into transactions with affiliated persons, make investments or change the nature of the Company’s and its subsidiaries’ businesses. The Company is also subject to certain financial covenants to be measured on a trailing twelve month basis on the last day of each calendar quarter. These covenants include:

maintaining a Total Net Leverage Ratio (as defined in the Credit Agreement) not greater than 4.25 to 1.00 (subject to customary increased leverage periods following certain qualifying acquisitions); and
maintaining a Debt Service Coverage Ratio (as defined in the Credit Agreement) not less than 2.00 to 1.00.
Indebtedness outstanding under any of the Facilities may be accelerated upon the occurrence of an Event of Default (as defined in the Credit Agreement). As of September 30, 2021, the Company had not drawn on the Term Loans or the Revolver and was in compliance with the financial covenants in its credit agreements.

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 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
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. Amounts reclassified from accumulated other comprehensive income (loss) are presented as part of income from discontinued operations.

The table below summarizes changes in accumulated other comprehensive income (loss) by component, including the reclassification from accumulated other comprehensive income (loss) into earnings following the swap termination:
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(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)$(4,706)
Amounts reclassified from accumulated other comprehensive income (loss) to earnings as a result of swap termination4,048 658 4,706 
Net current period other comprehensive (loss) income4,048 658 4,706 
Balance as of September 30, 2021$ $ $ 

Note 11.