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UNITED STATES
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, 2022
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/5ab72b3b22c6a97653efbfbebd49ad98-shen-20220630_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 Market50,076,666
(Title of Class)(Trading Symbol)(Name of Exchange on which Registered)(The number of shares of the registrant's common stock outstanding on July 28, 2022)

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 (Loss) 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 1.Legal Proceedings
Item 1A.Risk Factors
  
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
  
Item 6.Exhibits
  
 Signatures
  
2

Table of Contents

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)June 30,
2022
December 31,
2021
ASSETS
Current assets:
Cash and cash equivalents$33,335 $84,344 
Accounts receivable, net of allowance for doubtful accounts of $365 and $352, respectively
16,856 22,005 
Income taxes receivable30,188 30,188 
Prepaid expenses and other29,612 29,830 
Current assets held for sale19,821  
Total current assets129,812 166,367 
Investments12,897 13,661 
Property, plant and equipment, net609,785 554,162 
Intangible assets, net and goodwill69,612 69,853 
Operating lease right-of-use assets55,872 56,414 
Deferred charges and other assets13,439 10,298 
Non-current assets held for sale 19,978 
Total assets$891,417 $890,733 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable$30,056 $28,542 
Advanced billings and customer deposits11,375 11,128 
Accrued compensation7,799 9,653 
Current operating lease liabilities3,047 3,318 
Accrued liabilities and other14,934 14,611 
Current liabilities held for sale3,843 38 
Total current liabilities71,054 67,290 
Other long-term liabilities:
Deferred income taxes85,622 86,014 
Asset retirement obligations9,720 9,615 
Benefit plan obligations7,760 8,216 
Non-current operating lease liabilities51,835 51,692 
Other liabilities22,056 21,824 
Non-current liabilities held for sale 3,807 
Total other long-term liabilities176,993 181,168 
Commitments and contingencies (Note 11)
Shareholders’ equity:
Common stock, no par value, authorized 96,000; 50,077 and 49,965 issued and outstanding at June 30, 2022 and December 31, 2021, respectively
  
Additional paid in capital54,274 49,351 
Retained earnings589,096 592,924 
Total shareholders’ equity643,370 642,275 
Total liabilities and shareholders’ equity$891,417 $890,733 

See accompanying notes to unaudited condensed consolidated financial statements.
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SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(in thousands, except per share amounts)Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Service revenue and other$66,021 $60,700 $130,435 $120,391 
Operating expenses:
Cost of services exclusive of depreciation and amortization26,756 24,648 53,095 48,072 
Selling, general and administrative23,090 20,320 46,925 40,473 
Restructuring expense454 43 390 661 
Impairment expense4,068  4,407 99 
Depreciation and amortization14,790 13,299 29,135 26,466 
Total operating expenses69,158 58,310 133,952 115,771 
Operating (loss) income (3,137)2,390 (3,517)4,620 
Other (expense) income:
Other (expense) income, net(589)1,338 (759)2,938 
 (Loss) income from continuing operations before income taxes(3,726)3,728 (4,276)7,558 
Income tax (benefit) expense(501)2,103 (448)2,988 
(Loss) income from continuing operations(3,225)1,625 (3,828)4,570 
Income from discontinued operations, net of tax 51,566  100,038 
Net (loss) income(3,225)53,191 (3,828)104,608 
Other comprehensive income:
Unrealized income on interest rate hedge, net of tax 313  1,086 
Comprehensive (loss) income $(3,225)$53,504 $(3,828)$105,694 
Net (loss) income per share, basic and diluted:
Basic - (Loss) income from continuing operations$(0.06)$0.03 $(0.08)$0.09 
Basic - Income from discontinued operations, net of tax$ $1.03 $ $2.00 
Basic net (loss) income per share$(0.06)$1.06 $(0.08)$2.09 
Diluted - (Loss) income from continuing operations$(0.06)$0.03 $(0.08)$0.09 
Diluted - Income from discontinued operations, net of tax$ $1.03 $ $2.00 
Diluted net (loss) income per share$(0.06)$1.06 $(0.08)$2.09 
Weighted average shares outstanding, basic50,157 49,945 50,133 49,945 
Weighted average shares outstanding, diluted50,157 50,075 50,133 50,067 

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 Income (Loss)Total
Balance, March 31, 202250,049 $52,008 $592,321 $ $644,329 
Net loss— — (3,225)— (3,225)
Stock-based compensation41 2,557 — — 2,557 
Common stock issued— 8 — — 8 
Shares surrendered for settlement of employee taxes upon issuance of vested equity awards(13)(299)— — (299)
Balance, June 30, 202250,077 $54,274 $589,096 $ $643,370 
Shares of Common Stock (no par value)Additional Paid in CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Total
Balance, December 31, 202149,965 $49,351 $592,924 $ $642,275 
Net loss— — (3,828)— (3,828)
Stock-based compensation151 5,809 — — 5,809 
Common stock issued1 16 — — 16 
Shares surrendered for settlement of employee taxes upon issuance of vested equity awards(40)(902)— — (902)
Balance, June 30, 202250,077 $54,274 $589,096 $ $643,370 
Shares of Common Stock (no par value)Additional Paid in CapitalRetained EarningsAccumulated Other Comprehensive (Loss) Income Total
Balance, March 31, 202149,943 $46,583 $585,857 $(3,933)$628,507 
Net income— — 53,191 — 53,191 
Unrealized income on interest rate hedge, net of tax
— — — 313 313 
Stock-based compensation9 234 — — 234 
Common stock issued— 5 — — 5 
Shares surrendered for settlement of employee taxes upon issuance of vested equity awards(2)(141)— — (141)
Balance, June 30, 202149,950 $46,681 $639,048 $(3,620)$682,109 
Shares of Common Stock (no par value)Additional Paid in CapitalRetained EarningsAccumulated Other Comprehensive (Loss) Income Total
Balance, December 31, 202049,868 $47,317 $534,440 $(4,706)$577,051 
Net income— — 104,608 — 104,608 
Unrealized income on interest rate hedge, net of tax
— — — 1,086 1,086 
Stock-based compensation118 980 — — 980 
Common stock issued— 11 — — 11 
Shares surrendered for settlement of employee taxes upon issuance of vested equity awards(36)(1,627)— — (1,627)
Balance, June 30, 202149,950 $46,681 $639,048 $(3,620)$682,109 

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,
20222021
Cash flows from operating activities:
Net (loss) income $(3,828)$104,608 
Income from discontinued operations, net of tax 100,038 
(Loss) income from continuing operations(3,828)4,570 
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization29,135 26,466 
Stock-based compensation expense5,528 834 
Impairment expense4,407 99 
Deferred income taxes(392)3,132 
Other, net1,985 (201)
Changes in assets and liabilities:
Accounts receivable4,430 4,369 
Current income taxes (1,305)
Operating lease assets and liabilities, net414 (428)
Other assets(1,902)(6,070)
Accounts payable127 560 
Other deferrals and accruals(1,180)(3,852)
Net cash provided by operating activities - continuing operations38,724 28,174 
Net cash provided by operating activities - discontinued operations 125,011 
Net cash provided by operating activities38,724 153,185 
Cash flows from investing activities:
Capital expenditures(88,706)(79,562)
Proceeds from sale of assets and other279 189 
Net cash used in investing activities - continuing operations(88,427)(79,373)
Net cash used in investing activities - discontinued operations (928)
Net cash used in investing activities(88,427)(80,301)
Cash flows from financing activities:
Taxes paid for equity award issuances(835)(1,627)
Payments for debt issuance costs (53)
Payments for financing arrangements and other(471)(751)
Net cash used in financing activities - continuing operations(1,306)(2,431)
Net cash used in financing activities - discontinued operations (17,061)
Net cash used in financing activities(1,306)(19,492)
Net (decrease) increase in cash and cash equivalents(51,009)53,392 
Cash and cash equivalents, beginning of period84,344 195,397 
Cash and cash equivalents, end of period$33,335 $248,789 
Supplemental Disclosures of Cash Flow Information
Interest paid$ $(7,740)
Income taxes paid$ $(20,954)

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, 2021. As discussed in Notes 1 and 16 to the audited consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2021, (the "2021 Form 10-K"), the Company determined that an immaterial error existed in our previously issued financial statements. As such, the Company revised its historical unaudited condensed consolidated financial statements as of and for the three and six months ended June 30, 2021. Refer to the table below for a summary of these revisions.

Three Months Ended
June 30, 2021
Six Months Ended
June 30, 2021
($ in thousands)Pre-AdjustmentError CorrectionPost-AdjustmentPre-AdjustmentError CorrectionPost-Adjustment
Unaudited Condensed Consolidated Statement of Comprehensive Income:
Cost of services$24,335 $313 $24,648 $47,618 $454 $48,072 
Income (loss) from continuing operations before income taxes4,041 (313)3,728 8,012 (454)7,558 
Income tax expense (benefit)2,185 (82)2,103 3,107 (119)2,988 
Income (loss) from continuing operations1,856 (231)1,625 4,905 (335)4,570 
Net income (loss)53,422 (231)53,191 104,943 (335)104,608 
Comprehensive income (loss)53,735 (231)53,504 106,029 (335)105,694 
Net income per share, basic and diluted:
Basic - Income from continuing operations$0.04 $(0.01)$0.03 $0.10 $(0.01)$0.09 
Basic - Net income per share$1.07 $(0.01)$1.06 $2.10 $(0.01)$2.09 
Diluted - Income from continuing operations$0.04 $(0.01)$0.03 $0.10 $(0.01)$0.09 
Diluted - Net income per share$1.07 $(0.01)$1.06 $2.10 $(0.01)$2.09 

The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts of assets, liabilities, revenues and expenses and related disclosures. On an on-going basis we evaluate significant estimates and assumptions, including, but not limited to, revenue recognition, stock-based compensation, estimated useful lives of assets, intangible assets subject to amortization, and the computation of income taxes. Future events and their effects cannot be predicted with certainty; accordingly, the Company’s accounting estimates require the exercise of judgment. The accounting estimates used in the preparation of the financial statements will change as new events occur, as more experience is acquired, as additional information is obtained, and as the Company’s operating environment changes. Management evaluates and updates assumptions and estimates on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions.

Adoption of New Accounting Principles

In November 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2021-10, “Government Assistance (Topic 832), Disclosures by Business Entities About Government Assistance,” which requires entities to provide disclosures on material government assistance transactions for annual reporting periods. The disclosures include information about the nature of the assistance, the related accounting policies used to account for
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government assistance, the effect of government assistance on the entity’s financial statements and any significant terms and conditions of the agreements, including commitments and contingencies. On July 1, 2022, we adopted ASU 2021-10 and have included the new disclosure requirements in Note 10, Government Grants.

Other than the matter described above, 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 2021 Form 10-K, that would be expected to impact the Company.

Note 2. 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 one year. Additionally, the Company incurs commission expenses 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. Amortization of capitalized commission expenses is recorded in selling, general and administrative expenses in the Company's unaudited condensed consolidated statements of comprehensive (loss) income.

Below is a summary of the Broadband segment's capitalized contract acquisition costs:
Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands)2022202120222021
Beginning Balance$8,303 $7,763 $8,147 $7,358 
Contract payments1,309 711 1,647 1,825 
Contract amortization(1,185)(950)(1,367)(1,659)
Ending Balance$8,427 $7,524 $8,427 $7,524 

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 June 30, 2022, 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 12, Segment Reporting, for a summary of these revenue streams.

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Note 3. Investments

Investments consist of the following:
(in thousands)June 30,
2022
December 31,
2021
SERP investments at fair value$1,812 $2,317 
Cost method investments10,772 11,004 
Equity method investments313 340 
Total investments$12,897 $13,661 

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. The fair value of the SERP investments are based on unadjusted quoted prices in active markets and are classified as Level 1 of the fair value hierarchy. 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, 2022 and December 31, 2021, $0.8 million of SERP investments were presented as prepaid expenses and other (current assets) as we intended to liquidate certain investments to pay the current portion of our SERP obligation. The obligation was paid on July 1, 2022.

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 $10.0 million and $10.3 million at June 30, 2022 and December 31, 2021, respectively. We recognized approximately $0.1 million and $1.0 million of patronage income in other income for the three months ended June 30, 2022 and 2021, respectively, and approximately $0.2 million and $2.0 million during the six months ended June 30, 2022 and 2021, respectively. Historically, approximately 75% of the patronage distributions were collected in cash and 25% in equity.

Equity Method Investments: At June 30, 2022 and December 31, 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, through related party transactions. We recognized revenue of $0.2 million during both of the three months ended June 30, 2022 and 2021 and $0.4 million during both of the six months ended June 30, 2022 and 2021, respectively. We recognized cost of service of $26.2 thousand and $0.6 million for the three months ended June 30, 2022 and 2021, respectively, and $54.4 thousand and $1.1 million for the six months ended June 30, 2022 and 2021, respectively.

Note 4. Property, Plant and Equipment

Property, plant and equipment consist of the following:
 
($ in thousands)Estimated Useful LivesJune 30,
2022
December 31,
2021
Land$3,771 $3,771 
Land improvements
10 years
3,483 3,478 
Buildings and structures
10 - 45 years
96,287 96,323 
Cable and fiber
15 - 30 years
528,352 453,405 
Equipment and software
4 - 8 years
361,290 391,293 
Plant in service 993,183 948,270 
Plant under construction 116,225 79,963 
Total property, plant and equipment 1,109,408 1,028,233 
Less: accumulated depreciation and amortization499,623 474,071 
Property, plant and equipment, net $609,785 $554,162 

Property, plant and equipment net, increases were primarily attributable to capital expenditures in the Broadband segment due to expansion of Glo Fiber assets and market expansion. Depreciation expense was $14.6 million and $13.1 million during the
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three months ended June 30, 2022 and 2021, respectively, and $28.7 million and $26.1 million for the six months ended June 30, 2022 and 2021, respectively.

In the fourth quarter of 2021, due to the availability of grants awarded under various governmental initiatives, and in support of rural fiber to the home ("FTTH") broadband network expansion projects, we decided to cease further expansion of our “Beam” branded fixed wireless edge-out strategy. During the second quarter of 2022, the Company permanently ceased operating 20 of our 55 Beam fixed wireless sites and expects these sites to be completely decommissioned by December 31, 2022. Consequently, Shentel recorded an impairment charge of $4.1 million. The Company also began, during the second quarter of 2022, exploration of strategic alternatives concerning the remaining Beam branded fixed wireless assets and operations.

Note 5. Goodwill and Intangible Assets

Goodwill and intangible assets consist of the following:
 June 30, 2022December 31, 2021
(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 rights64,334 — 64,334 64,334 — 64,334 
Railroad crossing rights141 — 141 141 — 141 
Total indefinite-lived intangibles64,475 — 64,475 64,475 — 64,475 
Finite-lived intangibles:
Subscriber relationships28,425 (26,679)1,746 28,425 (26,451)1,974 
Other intangibles463 (316)147 463 (303)160 
Total finite-lived intangibles28,888 (26,995)1,893 28,888 (26,754)2,134 
Total goodwill and intangible assets$96,607 $(26,995)$69,612 $96,607 $(26,754)$69,853 

Amortization expense was $0.2 million for both of the three months ended June 30, 2022 and 2021, and $0.4 million for both of the six months ended June 30, 2022 and 2021.

On June 30, 2022, the Company determined that certain of our FCC spectrum licenses met the held-for-sale criteria; accordingly, $13.8 million of indefinite-lived licenses and $6.0 million of finite-lived licenses are presented as held for sale, along with the corresponding $3.8 million of liabilities related to the finite-lived licenses. The corresponding amounts related to these assets and liabilities were reclassified on the unaudited condensed consolidated balance sheet as of December 31, 2021 for comparability. Management evaluated the events described here and in Note 4, Property, Plant and Equipment and determined that these events do not represent a strategic shift in the Company's business.

Note 6. Other Assets and Accrued Liabilities

Prepaid expenses and other, classified as current assets, included the following:
(in thousands)June 30,
2022
December 31,
2021
Deposit for FCC spectrum licenses$16,118 $16,118 
Prepaid maintenance and software expenses8,053 8,391 
Broadband contract acquisition costs2,628 2,502 
SERP investments801 801 
Other2,012 2,018 
Prepaid expenses and other$29,612 $29,830 

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Deferred charges and other assets, classified as long-term assets, included the following:
(in thousands)June 30,
2022
December 31,
2021
Broadband contract acquisition costs$5,799 $5,645 
Prepaid maintenance and software expenses7,640 4,653 
Deferred charges and other assets$13,439 $10,298 

Accrued liabilities and other, classified as current liabilities, included the following:
(in thousands)June 30,
2022
December 31,
2021
Accrued programming costs$3,590 $3,084 
Sales and property taxes payable1,329 1,065 
Restructuring accrual467 1,761 
Other current liabilities9,548 8,701 
Accrued liabilities and other$14,934 $14,611 

Other liabilities, classified as long-term liabilities, included the following:
(in thousands)June 30,
2022
December 31,
2021
Noncurrent portion of deferred lease revenue$20,127 $19,749 
Noncurrent portion of financing leases1,515 1,614 
Other414 461 
Other liabilities$22,056 $21,824 

During the third quarter of 2020, the Company was awarded certain indefinite-lived Citizens Broadband Radio Service ("CBRS") spectrum licenses to be used within the Broadband segment. The Company paid an aggregate deposit of $16.1 million with respect to the licenses subject to final approval and issuance by the FCC. The licenses will provide us priority access rights over general access users other than incumbents, in that specific band, in accordance with the FCC’s three-tier CBRS band spectrum sharing framework. As of June 30, 2022, the FCC was still reviewing the Company’s final application for the licenses. The entire deposit of $16.1 million is classified within prepaid expenses and other in the Company’s consolidated balance sheets as of June 30, 2022 and December 31, 2021. In July 2022, the FCC completed its review resulting in the determination that the Company will be issued licenses with a deposit value of $12.1 million and a cash refund for $4.0 million for licenses which were deemed not issuable. The licenses and cash refund are expected to be received in the third quarter of 2022.

In 2021, as a result of the sale of our Wireless assets and operations, we implemented a restructuring plan whereby certain employees were notified of their pending dismissal under the workforce reduction program. We made $1.3 million in severance payments related to the workforce reduction program for the six months ended June 30, 2022. We made $0.5 million in severance payments related to the workforce reduction program for the three months ended June 30, 2022. 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 7. Leases

We lease various broadband network and telecommunications sites, fiber optic cable routes, warehouses, retail stores, and office facilities for use in our business.

At June 30, 2022, our operating leases had a weighted average remaining lease term of twenty years and a weighted average discount rate of 4.4%. Our finance leases had a weighted average remaining lease term of fourteen years and a weighted average discount rate of 5.2%.

We recognized $3.0 million and $2.0 million of operating lease expense for the three months ended June 30, 2022 and 2021, respectively, and $5.7 million and $3.4 million of operating lease expense for the six months ended June 30, 2022 and 2021,
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respectively. We recognized $0.1 million of interest and depreciation expense on finance leases for both of the three months ended June 30, 2022 and 2021, and $0.3 million of interest and depreciation expense on finance leases for both of the six months ended June 30, 2022 and 2021. 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 $1.5 million and $1.3 million of operating lease payments for the three months ended June 30, 2022 and 2021, respectively. We remitted $3.1 million and $2.8 million of operating lease payments for the six months ended June 30, 2022 and 2021, respectively. We obtained $0.5 million and $2.4 million of leased assets in exchange for new operating lease liabilities recognized for the three months ended June 30, 2022 and 2021, respectively. We obtained $2.1 million and $5.1 million of leased assets in exchange for new operating lease liabilities recognized for the six months ended June 30, 2022 and 2021, respectively.

The following table summarizes the expected maturity of lease liabilities at June 30, 2022:
(in thousands)Operating LeasesFinance LeasesTotal
2022$2,522 $54 $2,576 
20235,236 176 5,412 
20244,899 178 5,077 
20254,688 180 4,868 
20264,133 153 4,286 
2027 and thereafter68,458 1,514 69,972 
Total lease payments89,936 2,255 92,191 
Less: Interest35,054 645 35,699 
Present value of lease liabilities$54,882 $1,610 $56,492 

We recognized $4.4 million and $2.3 million of operating lease revenue for the three months ended June 30, 2022 and 2021, respectively, and $9.8 million and $4.7 million of operating lease revenue for the six months ended June 30, 2022 and 2021, 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 unaudited condensed consolidated statements of comprehensive income (loss). 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, 2022:
(in thousands)Operating Leases
2022$7,725 
202314,276 
202413,255 
202512,351 
20269,338 
2027 and thereafter30,069 
Total $87,014 

Note 8. 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, 2022. The Company's income tax returns are generally open to examination from 2018 forward and the net operating losses acquired in the acquisition of nTelos are open to examination from 2002 forward.

The effective tax rates for the three and six months ended June 30, 2022 and 2021, 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.
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 Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands)2022202120222021
Expected tax (benefit) expense at federal statutory$(783)$783 $(898)$1,587 
State income tax (benefit) expense, net of federal tax effect(181)154 (213)469 
Revaluation of deferred tax liabilities 1,046  1,046 
Excess tax deficiency (benefit) from share-based compensation and other expense, net463 120 663 (114)
Income tax (benefit) expense $(501)$2,103 $(448)$2,988 

The Company made no cash payments and received no cash refunds for income taxes for the six months ended June 30, 2022. The Company's cash payments for income taxes were approximately $21.0 million for the six months ended June 30, 2021.

Note 9. Stock Compensation and (Loss) Earnings per Share

The Company granted approximately 283,000 restricted stock units ("RSUs") at market prices ranging from $21.57 to $25.07 to employees and members of the board of directors during the six months ended June 30, 2022. Additionally, approximately 100,000 Relative Total Shareholder Return (“RTSR”) awards were granted to employees at a value of $23.83 per award during the six months ended June 30, 2022. The Company incurred $2.4 million and $0.2 million in stock-based compensation expense for the three months ended June 30, 2022 and 2021 and $5.5 million and $0.8 million in stock-based compensation expense for the six months ended June 30, 2022 and 2021, respectively. Stock-based compensation expense is presented in selling, general and administrative costs in our unaudited condensed consolidated statements of comprehensive income (loss).
We utilize the treasury stock method to calculate the impact on diluted earnings per share that potentially dilutive stock-based compensation awards have. The following table indicates the computation of basic and diluted earnings per share:
Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands, except per share amounts)2022202120222021
Calculation of net (loss) income per share:
(Loss) income from continuing operations$(3,225)$1,625 $(3,828)$4,570 
Total income from discontinued operations, net of tax 51,566  100,038 
Net (loss) income$(3,225)$53,191 $(3,828)$104,608 
Basic weighted average shares outstanding50,157 49,945 50,133 49,945 
Basic net (loss) income per share - continuing operations$(0.06)$0.03 $(0.08)$0.09 
Basic net income per share - discontinued operations 1.03  2.00 
Basic net (loss) income per share$(0.06)$1.06 $(0.08)$2.09 
Effect of stock-based compensation awards outstanding:
Basic weighted average shares outstanding50,157 49,945 50,133 49,945 
Effect from dilutive shares and options outstanding 130  122 
Diluted weighted average shares outstanding50,157 50,075 50,133 50,067 
Diluted net (loss) income per share - continuing operations$(0.06)$0.03 $(0.08)$0.09 
Diluted net income per share - discontinued operations 1.03  2.00 
Diluted net (loss) income per share$(0.06)$1.06 $(0.08)$2.09 
There were approximately 212,000 and 155,000 potentially dilutive equity awards for the three and six months ended June 30, 2022; however, these securities were excluded from the calculation of diluted weighted average shares outstanding due to the fact that they were anti-dilutive as a result of the Company's net loss for the period. There were fewer than 200,000 anti-dilutive equity awards outstanding for the three and six months ended June 30, 2021.

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Note 10. Government Grants

During the fourth quarter of 2021, the Virginia Department of Housing and Community Development ("VA DHCD"), in partnership with five counties in Virginia, awarded the Company up to approximately $57.8 million in grants under the Virginia Telecommunication Initiative ("VATI") to strategically expand the Company's broadband network in order to provide fiber-to-the-home broadband services to unserved residences in the partnering counties in Virginia. In July 2022, the Maryland Department of Housing and Community Development ("MD DHCD"), in partnership with Frederick County, Maryland, awarded the Company up to approximately $10.2 million in grants to expand the Company's broadband network to homes and businesses in Frederick County.

To receive such grant distributions, we are required to enter into agreements with each partnering county and meet certain build-out milestones. The network is required to meet certain performance conditions for a subsequent five year period to ensure that minimum download and upload speeds are able to be provided to the underserved residences.

The Company recognizes grant receivables at the time it becomes probable that the Company will be eligible to receive the grant, which is estimated to correspond with the date when specified build-out milestones are achieved. The grant is treated as a reduction to the corresponding property, plant and equipment asset balance and is recognized through depreciation expense over the life of the corresponding asset. Reimbursable amounts are dependent upon the actual construction costs. The Company has not recognized any amounts under these programs as of June 30, 2022.

Note 11. Commitments and Contingencies

We are committed to make payments to satisfy our lease liabilities. The scheduled payments under those obligations are summarized in Note 7, Leases. We also have outstanding unconditional purchase commitments to procure marketing services and IT software licenses through 2026 and commitments for FCC spectrum licenses to access Educational Broadband Service (“EBS”) spectrum channels through 2039 (which have been classified as held for sale).

From time to time the Company is involved in various litigation matters arising out of the normal course of business. The Company consults with legal counsel on those issues related to litigation and seeks input from other experts and advisors with respect to such matters. Estimating the probable losses or a range of probable losses resulting from litigation, government actions and other legal proceedings is inherently difficult and requires an extensive degree of judgment, particularly where the matters involve indeterminate claims for monetary damages, may involve discretionary amounts, present novel legal theories, are in the early stages of the proceedings, or are subject to appeal. Whether any losses, damages or remedies ultimately resulting from such matters could reasonably have a material effect on the Company’s business, financial condition, results of operations, or cash flows will depend on a number of variables, including, for example, the timing and amount of such losses or damages (if any) and the structure and type of any such remedies. The Company’s management does not presently expect any litigation matters to have a material adverse impact on the consolidated financial statements of the Company.

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Note 12.