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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 September 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/1fb08576db7ffeebae952c4393c9ed59-shen-20220930_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 Market50,098,304
(Title of Class)(Trading Symbol)(Name of Exchange on which Registered)(The number of shares of the registrant's common stock outstanding on October 26, 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. ☐

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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
  
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SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)September 30,
2022
December 31,
2021
ASSETS
Current assets:
Cash and cash equivalents$33,033 $84,344 
Accounts receivable, net of allowance for doubtful accounts of $371 and $352, respectively
23,592 22,005 
Income taxes receivable29,457 30,188 
Prepaid expenses and other11,915 29,830 
Current assets held for sale19,742  
Total current assets117,739 166,367 
Investments12,784 13,661 
Property, plant and equipment, net641,407 554,162 
Intangible assets, net and goodwill81,612 69,853 
Operating lease right-of-use assets55,749 56,414 
Deferred charges and other assets13,167 10,298 
Non-current assets held for sale 19,978 
Total assets$922,458 $890,733 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt, net of unamortized loan fees$105 $ 
Accounts payable35,836 28,542 
Advanced billings and customer deposits11,443 11,128 
Accrued compensation10,721 9,653 
Current operating lease liabilities2,962 3,318 
Accrued liabilities and other14,040 14,611 
Current liabilities held for sale3,834 38 
Total current liabilities78,941 67,290 
Long-term debt, less current maturities, net of unamortized loan fees24,869  
Other long-term liabilities:
Deferred income taxes84,639 86,014 
Asset retirement obligations9,727 9,615 
Benefit plan obligations7,711 8,216 
Non-current operating lease liabilities52,001 51,692 
Other liabilities22,059 21,824 
Non-current liabilities held for sale 3,807 
Total other long-term liabilities176,137 181,168 
Commitments and contingencies (Note 12)
Shareholders’ equity:
Common stock, no par value, authorized 96,000; 50,098 and 49,965 issued and outstanding at September 30, 2022 and December 31, 2021, respectively
  
Additional paid in capital56,143 49,351 
Retained earnings586,368 592,924 
Total shareholders’ equity642,511 642,275 
Total liabilities and shareholders’ equity$922,458 $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
September 30,
Nine Months Ended
September 30,
2022202120222021
Service revenue and other$66,924 $62,244 $197,359 $182,635 
Operating expenses:
Cost of services exclusive of depreciation and amortization27,477 25,747 80,572 73,819 
Selling, general and administrative22,227 20,238 69,152 60,711 
Restructuring expense641 1,160 1,031 1,821 
Impairment expense477  4,884 99 
Depreciation and amortization17,873 14,248 47,008 40,714 
Total operating expenses68,695 61,393 202,647 177,164 
Operating (loss) income (1,771)851 (5,288)5,471 
Other (expense) income:
Other (expense) income, net(1,208)138 (1,967)3,076 
 (Loss) income from continuing operations before income taxes(2,979)989 (7,255)8,547 
Income tax benefit(251)(5,506)(699)(2,519)
(Loss) income from continuing operations(2,728)6,495 (6,556)11,066 
Discontinued operations:
(Loss) income from discontinued operations, net of tax (406) 99,632 
Gain on the sale of discontinued operations, net of tax 886,732  886,732 
Total income from discontinued operations, net of tax 886,326  986,364 
Net (loss) income(2,728)892,821 (6,556)997,430 
Other comprehensive income:
Unrealized income on interest rate hedge, net of tax 3,620  4,706 
Comprehensive (loss) income $(2,728)$896,441 $(6,556)$1,002,136 
Net (loss) income per share, basic and diluted:
Basic - (Loss) income from continuing operations$(0.05)$0.13 $(0.13)$0.22 
Basic - Income from discontinued operations, net of tax$ $17.73 $ $19.73 
Basic net (loss) income per share$(0.05)$17.86 $(0.13)$19.95 
Diluted - (Loss) income from continuing operations$(0.05)$0.13 $(0.13)$0.22 
Diluted - Income from discontinued operations, net of tax$ $17.68 $ $19.67 
Diluted net (loss) income per share$(0.05)$17.81 $(0.13)$19.89 
Weighted average shares outstanding, basic50,183 49,984 50,153 49,984 
Weighted average shares outstanding, diluted50,183 50,120 50,153 50,136 

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, June 30, 202250,077 $54,274 $589,096 $ $643,370 
Net loss— — (2,728)— (2,728)
Stock-based compensation25 1,942 — — 1,942 
Common stock issued— 11 — — 11 
Shares surrendered for settlement of employee taxes upon issuance of vested equity awards(4)(84)— — (84)
Balance, September 30, 202250,098 $56,143 $586,368 $ $642,511 
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— — (6,556)— (6,556)
Stock-based compensation176 7,751 — — 7,751 
Common stock issued1 27 — — 27 
Shares surrendered for settlement of employee taxes upon issuance of vested equity awards(44)(986)— — (986)
Balance, September 30, 202250,098 $56,143 $586,368 $ $642,511 
Shares of Common Stock (no par value)Additional Paid in CapitalRetained EarningsAccumulated Other Comprehensive (Loss) Income Total
Balance, June 30, 202149,950 $46,681 $639,049 $(3,620)$682,110 
Net income— — 892,821 — 892,821 
Unrealized income on interest rate hedge, net of tax
— — — 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 $595,020 $ $642,852 
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— — 997,430 — 997,430 
Unrealized income on interest rate hedge, net of tax
— — — 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 surrendered for settlement of employee taxes upon issuance of vested equity awards(36)(1,627)— — (1,627)
Balance, September 30, 202149,965 $47,832 $595,020 $ $642,852 

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,
20222021
Cash flows from operating activities:
Net (loss) income $(6,556)$997,430 
Income from discontinued operations, net of tax 986,364 
(Loss) income from continuing operations(6,556)11,066 
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization47,008 40,714 
Stock-based compensation expense7,299 1,953 
Impairment expense4,884 99 
Deferred income taxes(1,374)4,180 
Bad debt expense1,252 755 
Other, net1,638 (31)
Changes in assets and liabilities:
Accounts receivable1,157 (1,195)
Current income taxes731 (6,870)
Operating lease assets and liabilities, net618 (214)
Other assets(1,056)(8,066)
Accounts payable(608)(5,626)
Other deferrals and accruals1,212 (5,193)
Net cash provided by operating activities - continuing operations56,205 31,572 
Net cash provided by operating activities - discontinued operations 121,067 
Net cash provided by operating activities56,205 152,639 
Cash flows from investing activities:
Capital expenditures(132,357)(118,800)
Proceeds from sale of investments793 90 
Proceeds from sale of assets and other922 110 
Net cash used in investing activities - continuing operations(130,642)(118,600)
Net cash provided by investing activities - discontinued operations 1,944,063 
Net cash (used in) provided by investing activities(130,642)1,825,463 
Cash flows from financing activities:
Proceeds from credit facility borrowings25,000  
Taxes paid for equity award issuances(986)(1,627)
Dividends paid, net of dividends reinvested (936,850)
Payments for debt issuance costs (841)
Payments for financing arrangements and other(888)(1,081)
Net cash provided by (used in) financing activities - continuing operations23,126 (940,399)
Net cash used in financing activities - discontinued operations (700,556)
Net cash provided by (used in) financing activities23,126 (1,640,955)
Net (decrease) increase in cash and cash equivalents(51,311)337,147 
Cash and cash equivalents, beginning of period84,344 195,397 
Cash and cash equivalents, end of period$33,033 $532,544 
Supplemental Disclosures of Cash Flow Information
Interest paid$243 $10,397 
Income taxes paid$ $24,900 

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

Shenandoah Telecommunications Company (“Shentel”, “we”, “our”, “us”, or the “Company”) is a provider of a comprehensive
range of broadband communication services and cell tower colocation space in the Mid-Atlantic portion of the United States.

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 nine months ended September 30, 2021. Refer to the table below for a summary of these revisions.

Three Months Ended
September 30, 2021
Nine Months Ended
September 30, 2021
(in thousands, except per share amounts)Pre-AdjustmentError CorrectionPost-AdjustmentPre-AdjustmentError CorrectionPost-Adjustment
Unaudited Condensed Consolidated Statement of Comprehensive Income:
Cost of services$25,426 $321 $25,747 $73,044 $775 $73,819 
Income (loss) from continuing operations before income taxes1,310 (321)989 9,322 (775)8,547 
Income tax benefit(5,422)(84)(5,506)(2,315)(204)(2,519)
Income (loss) from continuing operations6,732 (237)6,495 11,637 (571)11,066 
Net income (loss)893,058 (237)892,821 998,001 (571)997,430 
Comprehensive income (loss)896,678 (237)896,441 1,002,707 (571)1,002,136 
Net income per share, basic and diluted:
Basic - Income from continuing operations$0.13 $ $0.13 $0.23 $(0.01)$0.22 
Basic - Net income per share$17.86 $ $17.86 $19.96 $(0.01)$19.95 
Diluted - Income from continuing operations$0.13 $ $0.13 $0.23 $(0.01)$0.22 
Diluted - Net income per share$17.81 $ $17.81 $19.90 $(0.01)$19.89 

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

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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,” ("ASU 2021-10") 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 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 11, 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
September 30,
Nine Months Ended
September 30,
(in thousands)2022202120222021
Beginning Balance$8,427 $7,524 $8,147 $7,358 
Contract payments983 710 2,630 2,535 
Contract amortization(729)(223)(2,096)(1,882)
Ending Balance$8,681 $8,011 $8,681 $8,011 

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 $4.1 million at September 30, 2022 is recorded in other liabilities on the Company's unaudited condensed consolidated balance sheet and 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 ("ASC") 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 13, Segment Reporting, for a summary of these revenue streams.

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Note 3. Investments

Investments consist of the following:
(in thousands)September 30,
2022
December 31,
2021
SERP investments at fair value$1,739 $2,317 
Cost method investments10,742 11,004 
Equity method investments303 340 
Total investments$12,784 $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 December 31, 2021, $0.8 million of SERP investments were presented as prepaid expenses and other (current assets). Those investments were liquidated in July 2022 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 $10.0 million and $10.3 million at September 30, 2022 and December 31, 2021, respectively. We recognized approximately $13.7 thousand and $0.5 million of patronage income in other income for the three months ended September 30, 2022 and 2021, respectively, and approximately $40.5 thousand and $1.5 million during the nine months ended September 30, 2022 and 2021, respectively. Historically, approximately 75% of the patronage distributions were received in cash and 25% in equity.

Equity Method Investments: At September 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 $0.1 million and $0.2 million during the three months ended September 30, 2022 and 2021, respectively, and $0.5 million and $0.5 million during the nine months ended September 30, 2022 and 2021, respectively. We recognized cost of service of $19.2 thousand and $30 thousand for the three months ended September 30, 2022 and 2021, respectively, and $73.6 thousand and $1.1 million for the nine months ended September 30, 2022 and 2021, respectively.

Note 4. Property, Plant and Equipment

Property, plant and equipment consist of the following:
 
($ in thousands)Estimated Useful LivesSeptember 30,
2022
December 31,
2021
Land$3,771 $3,771 
Land improvements
10 years
3,483 3,478 
Buildings and structures
10 - 45 years
97,321 96,323 
Cable and fiber
15 - 30 years
558,340 453,405 
Equipment and software
4 - 8 years
370,620 391,293 
Plant in service 1,033,535 948,270 
Plant under construction 124,921 79,963 
Total property, plant and equipment 1,158,456 1,028,233 
Less: accumulated depreciation and amortization517,049 474,071 
Property, plant and equipment, net $641,407 $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 $17.7 million and $14.1 million during the
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three months ended September 30, 2022 and 2021, respectively, and $46.4 million and $40.2 million for the nine months ended September 30, 2022 and 2021, respectively.

In the fourth quarter of 2021, due to the availability of grants awarded under various governmental initiatives 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, which is offered under our Broadband segment. During the second quarter of 2022, the Company permanently ceased operating 20 of our 55 Beam fixed wireless sites. Consequently, Shentel recorded an impairment charge of $4.1 million. On August 23, 2022, the Company entered into a definitive asset purchase agreement (the "Spectrum Purchase Agreement") with a wireless carrier pursuant to which the Company agreed to sell certain Federal Communications Commission ("FCC") spectrum licenses and leases utilized in the Company's Beam branded fixed wireless service for total consideration of approximately $21.1 million, composed of $17.3 million cash and approximately $3.8 million of liabilities to be assumed by the wireless carrier (the "Spectrum Transaction"). The Spectrum Transaction is expected to close in the first half of 2023, subject to the receipt of regulatory approvals and other customary closing conditions. As a result of the Spectrum Transaction, the Company plans to cease its Beam operations at the remaining Beam fixed wireless sites upon or prior to the closing of the Spectrum Transaction. As a result of the expected decommissioning of the remaining Beam fixed wireless sites after they cease operations, the Company has revised the useful lives for these sites to reflect operation through the cease of operations date.

Note 5. Goodwill and Intangible Assets

Goodwill and intangible assets consist of the following:
 September 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 
FCC Spectrum licenses12,122 — 12,122  —  
Railroad crossing rights141 — 141 141 — 141 
Total indefinite-lived intangibles76,597 — 76,597 64,475 — 64,475 
Finite-lived intangibles:
Subscriber relationships28,425 (26,794)1,631 28,425 (26,451)1,974 
Other intangibles463 (323)140 463 (303)160 
Total finite-lived intangibles28,888 (27,117)1,771 28,888 (26,754)2,134 
Total goodwill and intangible assets$108,729 $(27,117)$81,612 $96,607 $(26,754)$69,853 

Amortization expense was $0.2 million for both the three months ended September 30, 2022 and 2021 and $0.6 million for both the nine months ended September 30, 2022 and 2021, respectively.

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. The FCC approved the Company’s final application for the licenses in the third quarter of 2022, resulting in the issuance of licenses with a deposit value of $12.1 million. The Company recorded these licenses as indefinite-lived intangible assets on the Company's unaudited condensed consolidated balance sheet. These licenses are not subject to the Spectrum Transaction described above. The remaining $4.0 million of the deposit is expected to be returned to the Company in the form of a cash refund in November 2022. The refund amount was recorded in accounts receivable on the Company's unaudited condensed consolidated balance sheet as of September 30, 2022.

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As described in Note 4, Property, Plant and Equipment, the Company entered into the Spectrum Purchase Agreement to sell FCC spectrum licenses associated with Beam. As a result of the expected sale, the Company concluded that the FCC spectrum licenses met the held-for-sale criteria; accordingly, $13.8 million of indefinite-lived licenses and $5.9 million of finite-lived licenses are presented as held for sale, along with the corresponding $3.8 million of operating lease 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. The Company 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)September 30,
2022
December 31,
2021
Deposit for FCC spectrum licenses$ $16,118 
Prepaid maintenance and software expenses7,756 8,391 
Broadband contract acquisition costs2,747 2,502 
SERP investments 801 
Other1,412 2,018 
Prepaid expenses and other$11,915 $29,830 

Deferred charges and other assets, classified as long-term assets, included the following:
(in thousands)September 30,
2022
December 31,
2021
Broadband contract acquisition costs$5,934 $5,645 
Prepaid maintenance and software expenses7,233 4,653 
Deferred charges and other assets$13,167 $10,298 

Accrued liabilities and other, classified as current liabilities, included the following:
(in thousands)September 30,
2022
December 31,
2021
Accrued programming costs$2,960 $3,084 
Sales and property taxes payable1,564 1,065 
Restructuring accrual414 1,761 
Other current liabilities9,102 8,701 
Accrued liabilities and other$14,040 $14,611 

Other liabilities, classified as long-term liabilities, included the following:
(in thousands)September 30,
2022
December 31,
2021
Noncurrent portion of deferred lease revenue$20,528 $19,749 
Noncurrent portion of financing leases1,501 1,614 
Other30 461 
Other liabilities$22,059 $21,824 

During 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 $1.4 million and $2.0 million in severance payments for the nine months ended September 30, 2022 and 2021, respectively. During the three months ended September 30, 2021, we recognized expenses of $1.2 million and $2.0 million, presented in continuing and discontinued operations, respectively. For the nine months ended September 30, 2021, we recognized expenses of $1.8 million and $2.5 million, presented in continuing and discontinued operations, respectively.

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Restructuring charges for the three and nine months ended September 30, 2022 were primarily related to contract termination costs associated with the Spectrum Transaction.

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 September 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 thirteen years and a weighted average discount rate of 5.2%.

We recognized $2.6 million and $2.3 million of operating lease expense for the three months ended September 30, 2022 and 2021, respectively, and $8.3 million and $5.7 million of operating lease expense for the nine months ended September 30, 2022 and 2021, respectively. We recognized $0.1 million of interest and depreciation expense on finance leases for both of the three months ended September 30, 2022 and 2021, and $0.4 million of interest and depreciation expense on finance leases for both of the nine months ended September 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 $4.6 million and $4.2 million of operating lease payments for the nine months ended September 30, 2022 and 2021, respectively. We obtained $3.3 million and $7.3 million of leased assets in exchange for new operating lease liabilities recognized for the nine months ended September 30, 2022 and 2021, respectively.

The following table summarizes the expected maturity of lease liabilities at September 30, 2022:
(in thousands)Operating LeasesFinance LeasesTotal
2022$964 $20 $984 
20235,478 176 5,654 
20245,130 178 5,308 
20254,918 180 5,098 
20264,420 153 4,573 
2027 and thereafter68,958 1,514 70,472 
Total lease payments89,868 2,221 92,089 
Less: Interest34,905 624 35,529 
Present value of lease liabilities$54,963 $1,597 $56,560 

We recognized $4.0 million and $2.4 million of operating lease revenue for the three months ended September 30, 2022 and 2021, respectively, and $13.8 million and $7.1 million of operating lease revenue for the nine months ended September 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 (loss) 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, 2022:
(in thousands)Operating Leases
2022$5,181 
202314,941 
202413,805 
202512,895 
20269,877 
2027 and thereafter30,338 
Total $87,037 

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Note 8. Debt

Our Credit Agreement, dated July 1, 2021 (the "Credit Agreement") contains (i) a $100 million, five-year undrawn revolving credit facility, (ii) a $150 million five-year delayed draw amortizing term loan ("Term Loan A-1") and (iii) a $150 million seven-year delayed draw amortizing term loan ("Term Loan A-2"). The following loans were outstanding under the Credit Agreement:

(in thousands)September 30,
2022
December 31,
2021
Term loan A-1$12,500 $ 
Term loan A-212,500  
Total debt25,000  
Less: unamortized loan fees26  
Total debt, net of unamortized loan fees$24,974 $ 

On July 1, 2022, the Company borrowed $12.5 million against both Term Loan A-1 and Term Loan A-2 for a total of $25.0 million.

Both Term Loan A-1 and Term Loan A-2 bear interest at one-month LIBOR plus a margin of 1.50%. The interest rate was 4.64% at September 30, 2022. Our cash payments for interest were $0.2 million and $10.4 million during the nine months ended September 30, 2022 and 2021, respectively.

The Credit Agreement includes various covenants, including total net leverage ratio and debt service coverage ratio financial covenants.

The International Exchange (ICE) Benchmark Administration ceased the publication of one-week and two-month LIBOR on December 31, 2021 and expects to phase-out the remaining tenors (overnight, one-month, three-month, six-month and 12-month) on June 30, 2023. Our term loans and revolver identify LIBOR as a reference rate for tenors ceasing on June 30, 2023 and maturing after 2023. 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 and the manner in which an alternative reference rate will apply, we cannot yet reasonably estimate the expected financial impact of the LIBOR transition. Any changes to the reference rate will be agreed through an amendment to the Credit Agreement and are expected to reference the Secured Overnight Financing Rate, though the timing of such amendment and applicability to any future amounts owed under the Credit Agreement are not certain at this time.

Note 9. 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 September 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 nine months ended September 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
September 30,
Nine Months Ended
September 30,
(in thousands)2022202120222021
Expected tax (benefit) expense at federal statutory$(626)$208 $(1,524)$1,795 
State income tax (benefit) expense, net of federal tax effect(148)82 (361)551 
Revaluation of deferred tax liabilities(108)(7,675)(108)(6,629)
Stranded tax effects reclassified from other comprehensive income 1,620  1,620 
Excess tax deficiency (benefit) from share-based compensation and other expense, net631 259