SHENANDOAH TELECOMMUNICATIONS CO/VA/ 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Our Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer (the certifying officers) have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of December 31, 2020. Our certifying officers concluded that, as a result of the material weaknesses in internal control over financial reporting as described below, our disclosure controls and procedures were not effective as of December 31, 2020. Per Rules 13a-15(e) and 15d-15(e), the term disclosure controls and procedures means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act (15 U.S.C. 78a et seq.) is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. In light of the material weaknesses described below, management performed additional analysis and other procedures to ensure that our consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles (GAAP). Accordingly, management believes that the consolidated financial statements included in this Annual Report on Form 10-K fairly present, in all material respects, our financial position, results of operations, and cash flows as of and for the periods presented, in accordance with U.S. GAAP. Changes in Internal Control over Financial Reporting As disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, the Company is pursuing a phased approach to remediate its material weaknesses, and management believes that a remediation effort of this magnitude will most likely extend over multiple years. We implemented the following changes and improvements during 2020, including in the fourth quarter, under this phased approach: • We added resources with skills and expertise in technical accounting and internal control over financial reporting to establish a resource complement that is commensurate with our baseline accounting, reporting, and information technology maintenance requirements. • We successfully executed our remediation strategy on the treasury process, which includes cash, debt, interest expense, derivatives, and benefit obligations. • We made significant progress towards remediation of the property, plant, and equipment and depreciation expense process, including: • Completion of risk assessment procedures and initiation of control design activities over property, plant, and equipment and depreciation expense. • Implementation of a redesigned process and various software tools to account for projects under construction. We have designed and are implementing internal controls over this new process. When the sale of our Wireless segment became probable late in the third quarter of 2020, we began to revise our risk assessment process and recalibrate ongoing control activities in relation to our smaller continuing operations. The significant and incremental effort required by this recalibration, potential strategic transactions, and a volume of ongoing software development projects have led us to conclude that it is no longer feasible to complete our remediation plan by the end of 2021, as we had previously targeted. Further, we need to complete scheduled updates to our enterprise resourcing planning (ERP) system over the next two years, which also places significant demands on our available resources. While we have established a resource complement that is commensurate with our baseline accounting, reporting, and information technology maintenance requirements, such resource complement is not adequate to absorb the significant and incremental effort associated with these efforts while simultaneously continuing our phased remediation approach. Accordingly, we will prioritize the recalibration of controls over our continuing operations and our ERP upgrade as we continue our phased remediation approach. 46 Table of Contents As a result of the changes described above, management identified various immaterial errors, some of which were corrected during 2020. Other than the changes and improvements that occurred in the fourth quarter, which are included among the items discussed above, there have been no other changes in the Company’s internal control over financial reporting that occurred during the quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Management’s Report on Internal Control Over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In order to evaluate the effectiveness of internal control over financial reporting, under the direction of our certifying officers, we conducted an assessment using the criteria established in Internal Control - Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, our certifying officers concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2020 due to a material weakness in our control environment whereby the Company did not have a sufficient number of trained resources with expertise in technical accounting, internal control over financial reporting, and the design and implementation of information technology solutions to complete its remediation efforts. As a result, we were unable to maintain effective information and communication processes, and did not have effective process-level control activities over the following areas: • Property, plant, and equipment and depreciation expense • Purchasing (current liabilities and operating expenses) The control deficiencies described above created a reasonable possibility that a material misstatement to the consolidated financial statements would not be prevented or detected on a timely basis and therefore we concluded that the deficiencies represent material weaknesses in the Company’s internal control over financial reporting and our internal control over financial reporting was not effective as of December 31, 2020. Our independent registered public accounting firm, KPMG LLP, who audited the consolidated financial statements included in this Annual Report on Form 10-K, issued an adverse opinion on the effectiveness of the Company’s internal control over financial reporting. KPMG LLP’s report appears on page F-3 of this Annual Report on Form 10-K. Management’s Remediation Plan The Company is committed to making further progress in its remediation efforts during 2021. The following steps will continue to be executed until remediation of the material weaknesses is achieved: • Retain and train individuals with the appropriate skills and experience related to technical accounting, internal control over financial reporting, and the design and implementation of information technology solutions. Monitor and adjust resourcing as further assessments are completed. • Enhance information and communication processes through information technology solutions to ensure that information needed for financial reporting is accurate, complete, relevant and reliable, and communicated in a timely manner. • Strengthen project management over the design and implementation of information technology solutions to improve throughput. • Extend the successful implementation of our phased approach to remediation of control activities over property, plant, and equipment and depreciation expense and purchasing. • Report regularly to the audit committee on the progress and results of the remediation plan, including the identification, status, and resolution of internal control deficiencies. 47 Table of Contents ITEM 9B. OTHER INFORMATION None 48 Table of Contents PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE See “Executive Officers of the Registrant” in Part 1, Item 1 of this report for information about our executive officers, which is incorporated by reference in this Item 10. Other information required by this Item 10 is incorporated by reference to the Company's definitive proxy statement for its 2021 Annual Meeting of Shareholders, referred to as the “2021 proxy statement,” which we will file with the SEC on or before 120 days after our 2020 fiscal year end, and which appears in the 2021 proxy statement under the captions “Election of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance.” We have adopted a code of ethics applicable to our chief executive officer and all senior financial officers, who include our principal financial officer, principal accounting officer, and persons performing similar functions. The code of ethics, which is part of our Code of Business Conduct and Ethics, is available on our website at www.shentel.com . To the extent required by SEC rules, we intend to disclose any amendments to our code of conduct and ethics, and any waiver of a provision of the code with respect to the Company’s directors, principal executive officer, principal financial officer, principal accounting officer, or persons performing similar functions, on our website referred to above within four business days following such amendment or waiver, or within any other period that may be required under SEC rules from time to time. ITEM 11. EXECUTIVE COMPENSATION Information required by this Item 11 is incorporated herein by reference to the 2021 proxy statement, including the information in the 2021 proxy statement appearing under the captions “Election of Directors-Director Compensation” and “Executive Compensation.” ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Information required by Item 12 is incorporated herein by reference to the 2021 proxy statement appearing under the caption “Security Ownership.” The Company awards stock options to its employees meeting certain eligibility requirements under two shareholder-approved Company Stock Incentive Plans, referred to as the 2005 Stock Incentive Plan and 2014 Equity Incentive Plan. The 2014 Equity Incentive Plan authorizes grants of up to an addition 3.0 million shares over a ten-year period beginning in 2014. As a result of the adoption of the 2014 Equity Incentive Plan, additional grants will not be made under the 2005 Stock Incentive Plan, but outstanding awards will continue to vest and options may continue to be exercised. Outstanding options and the number of shares available for future issuance as of December 31, 2020 were as follows: Number of securities to be issued upon exercise of outstanding options Weighted average exercise price of outstanding options Number of securities remaining available for future issuance 2005 Stock Incentive Plan 14,874 $ 6.64 — 2014 Equity Incentive Plan 6,864 $ 31.05 1,959,519 ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE Information required by Item 13 is incorporated herein by reference to the 2021 proxy statement, including the information in the 2021 proxy statement appearing under the caption “Executive Compensation-Certain Relationships and Related Transactions.” ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Information required by Item 14 is incorporated herein by reference to the 2021 proxy statement, including the information in the 2021 proxy statement appearing under the caption “Shareholder Ratification of Independent Registered Public Accounting Firm.” 49 Table of Contents PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES The following is a list of documents filed as a part of this report: (1) Financial Statements (2) Financial Statement Schedule (3) Exhibits The exhibits required to be filed by Item 601 of Regulation S-K are listed in the Exhibit Index directly following Item 16. Form 10-K Summary, within this Annual Report on Form 10-K. 50 Table of Contents SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES Index to the Consolidated 2020 Financial Statements Page Reports of Independent Registered Public Accounting Firm F- 2 Consolidated Financial Statements Consolidated Balance Shee ts as of December 31, 2020 and 2019 F- 6 Consolidated Statements of Comprehensive Income for the years ended December 31, 2020, 2019 and 2018 F- 7 Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2020, 2019 and 2018 F- 8 Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018 F- 9 Notes to Consolidated Financial Statements F- 10 Financial Statement Schedule Valuation and Qualifying Accounts F- 29 F-1 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors Shenandoah Telecommunications Company: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Shenandoah Telecommunications Company and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of comprehensive income, shareholders’ equity, and cash flows for each of the years in the three‑year period ended December 31, 2020, and the related notes and financial statement schedule II – Valuation and Qualifying Accounts (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three‑year period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 25, 2021 expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting. Changes in Accounting Principles As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for leases as of January 1, 2019 due to the adoption of Accounting Standards Update 2016-02, Leases (Topic 842), and all related amendments. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relate s . Determination of costs capitalized into property, plant, and equipment As discussed in Notes 2, 3, and 6 to the consolidated financial statements, the property, plant, and equipment, net balance (including property, plant, and equipment held for sale) as of December 31, 2020 was $740.1 million. The determination to capitalize, rather than expense, costs increases operating income and net income. F-2 Table of Contents We identified the determination of costs capitalized into property, plant, and equipment as a critical audit matter. The nature of evidence provided, such as third-party invoices, can lack specificity of the item acquired or activity performed and required complex judgment to determine that the costs qualified for capitalization. The following are the primary procedures we performed to address this critical audit matter. For a sample of costs capitalized, we inspected the related invoice(s). For those invoices lacking specificity, we inspected additional support, such as project documentation or contracts. In certain instances, we also involved a professional with specialized skills and knowledge in the telecommunications industry, who assisted in evaluating the nature of the project and related costs. The combination of these procedures was used to independently assess the Company’s determination that such costs qualified for capitalization. /s/ KPMG LLP We have served as the Company’s auditor since 2001. McLean, Virginia February 25, 2021 F-3 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors Shenandoah Telecommunications Company: Opinion on Internal Control Over Financial Reporting We have audited Shenandoah Telecommunications Company and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, because of the effect of the material weaknesses, described below, on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes and financial statement schedule II – Valuation and Qualifying Accounts (collectively, the consolidated financial statements), and our report dated February 25, 2021 expressed an unqualified opinion on those consolidated financial statements. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in management’s assessment: The Company’s control environment was not effective, because the Company did not have a sufficient number of trained resources with expertise in technical accounting, internal control over financial reporting, and the design and implementation of information technology solutions to complete its remediation efforts. As a result, the Company was unable to maintain an effective information and communication process, and did not have effective process-level control activities over the following areas: • Property, plant, and equipment and depreciation expense • Purchasing (current liabilities and operating expenses) The material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2020 consolidated financial statements, and this report does not affect our report on those consolidated financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting . Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally F-4 Table of Contents accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP McLean, Virginia February 25, 2021 F-5 Table of Contents SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 2020 and 2019 (in thousands) 2020 2019 ASSETS Current assets: Cash and cash equivalents $ 195,397 $ 101,651 Accounts receivable, net of allowance for doubtful accounts of $ 614 and $ 533 , respectively 70,393 63,641 Income taxes receivable — 10,306 Prepaid expenses and other 9,631 11,178 Current assets held for sale 1,133,294 55,077 Total current assets 1,408,715 241,853 Investments 13,769 12,388 Property, plant and equipment, net 440,427 363,087 Goodwill and Intangible assets, net 106,759 88,241 Operating lease right-of-use assets 50,387 42,568 Deferred charges and other assets 11,650 9,267 Non-current assets held for sale — 1,141,498 Total assets 2,031,707 1,898,902 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Current maturities of long-term debt, net of unamortized loan fees $ 688,463 $ 31,650 Accounts payable 19,599 40,295 Advanced billings and customer deposits 8,594 8,358 Accrued compensation 16,413 10,075 Income taxes payable 6,951 — Current operating lease liabilities 1,970 1,731 Accrued liabilities and other 13,869 7,556 Current liabilities held for sale 452,202 53,912 Total current liabilities 1,208,061 153,577 Long-term debt, less current maturities, net of unamortized loan fees — 688,464 Other long-term liabilities: Deferred income taxes 150,652 137,567 Asset retirement obligations 4,955 6,152 Benefit plan obligations 14,645 12,675 Non-current operating lease liabilities 46,095 42,625 Other liabilities 24,905 16,991 Non-current liabilities held for sale — 368,423 Total other long-term liabilities 241,252 584,433 Commitments and contingencies (Note 14) Shareholders’ equity: Common stock, no par value, authorized 96,000 ; 49,868 and 49,671 issued and outstanding at December 31, 2020 and 2019, respectively — — Additional paid in capital 47,317 42,110 Retained earnings 539,783 430,010 Accumulated other comprehensive (loss) income, net of taxes ( 4,706 ) 308 Total shareholders’ equity 582,394 472,428 Total liabilities and shareholders’ equity $ 2,031,707 $ 1,898,902 See accompanying notes to consolidated financial statements. F-6 Table of Contents SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Years Ended December 31, 2020, 2019 and 2018 (in thousands, except per share amounts) 2020 2019 2018 Service revenue and other $ 220,775 $ 206,862 $ 192,683 Operating expenses: Cost of services 88,203 82,949 80,418 Selling, general and administrative 85,016 77,846 70,844 Depreciation and amortization 48,703 46,786 44,390 Total operating expenses 221,922 207,581 195,652 Operating loss ( 1,147 ) ( 719 ) ( 2,969 ) Other income: Other income, net 3,187 3,280 3,703 Income before income taxes 2,040 2,561 734 Income tax (benefit) expense ( 586 ) 173 ( 1,343 ) Income from continuing operations 2,626 2,388 2,077 Income from discontinued operations, net of tax 124,097 53,568 44,518 Net income 126,723 55,956 46,595 Other comprehensive income: Unrealized (loss) income on interest rate hedge, net of tax ( 5,014 ) ( 7,972 ) 50 Comprehensive income $ 121,709 $ 47,984 $ 46,645 Net income per share, basic and diluted: Basic - Income from continuing operations $ 0.05 $ 0.05 $ 0.04 Basic - Income from discontinued operations, net of tax $ 2.49 $ 1.07 $ 0.90 Basic net income per share $ 2.54 $ 1.12 $ 0.94 Diluted - Income from continuing operations $ 0.05 $ 0.05 $ 0.04 Diluted - Income from discontinued operations, net of tax $ 2.48 $ 1.07 $ 0.89 Diluted net income per share $ 2.53 $ 1.12 $ 0.93 Weighted average shares outstanding, basic 49,901 49,811 49,542 Weighted average shares outstanding, diluted 50,024 50,101 50,063 Cash dividend declared per share $ 0.34 $ 0.29 $ 0.27 See accompanying notes to consolidated financial statements. F-7 Table of Contents SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Years Ended December 31, 2020, 2019 and 2018 (in thousands, except per share amounts) Shares of Common Stock (no par value) Additional Paid in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Balance, December 31, 2017 49,328 $ 44,787 $ 299,190 $ 8,230 $ 352,207 Net income — — 46,595 — 46,595 Change in accounting principle - adoption of accounting standard — — 56,097 — 56,097 Other comprehensive gain, net of tax — — — 50 50 Dividends declared ($ 0.27 per share) — — ( 13,386 ) — ( 13,386 ) Dividends reinvested in common stock 11 520 — — 520 Stock based compensation 206 5,367 — — 5,367 Stock options exercised 113 787 — — 787 Common stock issued 1 26 — — 26 Shares retired for settlement of employee taxes upon issuance of vested equity awards ( 105 ) ( 4,031 ) — — ( 4,031 ) Common stock issued to acquire non-controlling interest in nTelos 76 — — — — Balance, December 31, 2018 49,630 47,456 388,496 8,280 444,232 Net income — — 55,956 — 55,956 Other comprehensive loss, net of tax — — — ( 7,972 ) ( 7,972 ) Dividends declared ($ 0.29 per share) — — ( 14,442 ) — ( 14,442 ) Dividends reinvested in common stock 14 499 — — 499 Share repurchases ( 200 ) ( 7,231 ) — — ( 7,231 ) Stock based compensation 184 4,182 — — 4,182 Stock options exercised 29 81 — — 81 Common stock issued — 34 — — 34 Shares retired for settlement of employee taxes upon issuance of vested equity awards ( 62 ) ( 2,911 ) — — ( 2,911 ) Common stock issued to acquire non-controlling interest in nTelos 76 — — — — Balance, December 31, 2019 49,671 42,110 430,010 308 472,428 Net income — — 126,723 — 126,723 Other comprehensive gain (loss), net of tax — — — ( 5,014 ) ( 5,014 ) Dividends declared ($ 0.34 per share) — — ( 16,950 ) — ( 16,950 ) Dividends reinvested in common stock — ( 2 ) — — ( 2 ) Stock based compensation 156 6,833 — — 6,833 Stock options exercised — 36 — — 36 Common stock issued 1 31 — — 31 Annual dividend reinvestment 12 526 — 526 Shares retired for settlement of employee taxes upon issuance of vested equity awards ( 48 ) ( 2,217 ) — — ( 2,217 ) Common stock issued to acquire non-controlling interest in nTelos 76 — — — — Balance, December 31, 2020 49,868 $ 47,317 $ 539,783 $ ( 4,706 ) $ 582,394 See accompanying notes to consolidated financial statements. F-8 Table of Contents SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, 2020, 2019 and 2018 (in thousands) 2020 2019 2018 Cash flows from operating activities: Net income $ 126,723 $ 55,956 $ 46,595 Income from discontinued operations, net of tax 124,097 53,568 44,518 Income from continuing operations 2,626 2,388 2,077 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 47,964 46,313 44,213 Amortization 739 473 176 Accretion of asset retirement obligations 333 410 319 Bad debt expense 1,220 1,743 1,983 Stock based compensation expense, net of amount capitalized 5,907 3,367 4,745 Deferred income taxes 15,310 16,848 3,857 Gain from patronage and investments ( 1,311 ) ( 4,769 ) ( 3,112 ) Changes in assets and liabilities: Accounts receivable ( 7,318 ) ( 74 ) 8 Current income taxes ( 15,896 ) ( 16,675 ) ( 5,200 ) Operating lease right-of-use assets 3,980 7,593 — Other assets ( 3,959 ) 162 ( 6,576 ) Accounts payable ( 663 ) ( 8,426 ) 12,203 Lease liabilities ( 3,067 ) ( 4,987 ) — Other deferrals and accruals 7,494 ( 2,037 ) ( 494 ) Net cash provided by operating activities - continuing operations 53,359 42,329 54,199 Net cash provided by operating activities - discontinued operations 249,508 216,816 211,448 Net cash provided by operating activities 302,867 259,145 265,647 Cash flows from investing activities: Capital expenditures ( 120,450 ) ( 67,048 ) ( 56,631 ) Cash disbursed for acquisitions ( 1,890 ) ( 10,000 ) — Cash disbursed for deposit on FCC spectrum leases ( 16,118 ) ( 16,742 ) — Proceeds from sale of assets and other 370 112 541 Net cash used in investing activities - continuing operations ( 138,088 ) ( 93,678 ) ( 56,090 ) Net cash used in investing activities - discontinued operations ( 17,500 ) ( 71,656 ) ( 131,710 ) Net cash used in investing activities ( 155,588 ) ( 165,334 ) ( 187,800 ) Cash flows from financing activities: Dividends paid, net of dividends reinvested ( 16,424 ) ( 13,943 ) ( 12,863 ) Share repurchases — ( 7,231 ) — Taxes paid for equity award issuances ( 2,217 ) ( 2,910 ) ( 3,245 ) Payments for financing arrangements and other ( 769 ) 36 ( 2 ) Net cash used in financing activities - continuing operations ( 19,410 ) ( 24,048 ) ( 16,110 ) Net cash used in financing activities - discontinued operations ( 34,123 ) ( 53,198 ) ( 55,236 ) Net cash used in financing activities ( 53,533 ) ( 77,246 ) ( 71,346 ) Net increase in cash and cash equivalents 93,746 16,565 6,501 Cash and cash equivalents, beginning of period 101,651 85,086 78,585 Cash and cash equivalents, end of period $ 195,397 $ 101,651 $ 85,086 See accompanying notes to consolidated financial statements. F-9 Table of Contents SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Nature of Operations Shenandoah Telecommunications Company and its subsidiaries (collectively, the “Company”) provide 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. We also lease dark fiber and provide Ethernet and Wavelength fiber optic services to enterprise and wholesale customers throughout the entirety of our service area. 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 integrated networks are connected by a fiber network. All of these operations are contained within our Broadband reporting segment. Our Tower segment owns 223 cell towers and leases colocation space on those towers to wireless communications providers, including our discontinued wireless operation, refer to Note 3, Discontinued Operations , and Note 15, Segment Reporting , for additional information. Revision of Prior Period Financial Statements In connection with the preparation of our unaudited condensed consolidated financial statements for the three months ended March 31, 2020, we determined that certain errors existed in our previously issued financial statements. Specifically: • Prepaid and other assets, a component of current assets held for sale, as of December 31, 2019, were understated by $ 2.7 million, deferred tax liabilities were understated by $ 0.7 million, and retained earnings were understated by $ 2.0 million as the result of a failure to properly account for handsets that were utilized as demo phones in certain wireless retail stores within our area of operation. All of the impact to retained earnings is attributable to 2017 and prior years. • Property, plant and equipment, net, classified as held for sale, and deferred income tax liabilities, as of December 31, 2019 were understated by $ 1.4 million and $ 0.4 million, respectively. Depreciation, contained within discontinued operations, was overstated by $ 1.4 million for the year and quarter ended December 31, 2019. Income tax expense and net income were understated by $ 0.4 million and $ 1.0 million, respectively, for the year and quarter ended December 31, 2019. We evaluated these errors under the U.S. Securities and Exchange Commission's ("SEC's") authoritative guidance on materiality and the quantification of the effect of prior period misstatements on financial statements, and we have determined that the impact of these errors on our prior period consolidated financial statements is immaterial. However, since the correction of these errors in the first quarter of 2020 could have become material to our results of operations for the year ending December 31, 2020, we revised our prior period financial statements to correct these errors herein. For the year and quarter ended December 31, 2019, the correction of these errors resulted in a $ 0.02 increase in both basic and diluted earnings per share from discontinued operations. Note 2. Summary of Significant Accounting Policies Principles of consolidation: The accompanying consolidated financial statements include the accounts of Shenandoah Telecommunications Company and all of its wholly owned subsidiaries. All intercompany accounts and transactions for continuing operations have been eliminated in consolidation. Use of estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States, or the U.S., requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Due to the inherent uncertainty involved in making estimates, actual results to be reported in future periods could differ from our estimates. Cash and cash equivalents: Cash equivalents include all investments with an original maturity of three months or less. The Company places its temporary cash investments with high credit quality financial institutions. Generally, such investments are in excess of FDIC or SIPC insurance limits. Property, plant and equipment: Property, plant and equipment is stated at cost less accumulated depreciation. The Company capitalizes all costs associated with the purchase, deployment and installation of property, plant and equipment, including F-10 Table of Contents interest costs and internal labor costs on major capital projects during the period of their construction. Maintenance expense is recognized as incurred when repairs are performed that do not extend the life of property, plant and equipment. Expenses for major renewals and improvements, which significantly extend the useful lives of existing property and equipment, are capitalized and depreciated. Depreciation is calculated on the straight-line method over the estimated useful lives of the assets. Leasehold improvements are depreciated over the lesser of their useful lives or respective lease terms. Land is not depreciated. Refer to Note 6, Property, Plant and Equipment , for additional information. Indefinite-lived Intangible Assets: Goodwill represents the excess of acquisition costs over the fair value of tangible net assets and identifiable intangible assets of the businesses acquired. Cable franchise rights provide us with the non-exclusive right to provide video services in a specified area. Spectrum licenses are issued by the Federal Communications Commission (“FCC”) and provide us with either an exclusive or priority access right to utilize designated radio frequency spectrum within specific geographic service areas to provide wireless communication services. While some cable franchises and spectrum licenses are issued for a fixed time (generally ten years and up to fifteen years, respectively), renewals have been granted routinely and at nominal costs. The Company believes it will be able to meet all requirements necessary to secure renewal of its cable franchise rights and spectrum licenses. Moreover, the Company has determined that there are currently no legal, regulatory, contractual, competitive, economic or other factors that limit the useful lives of our cable franchises or spectrum licenses and as a result, we account for cable franchise rights and spectrum licenses as indefinite-lived intangible assets. Indefinite-lived intangible assets are not amortized, but rather, are subject to impairment testing annually, in the fourth quarter, or whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable. These assets are evaluated for impairment based on the identification of reporting units. Our reporting units align with our reporting segments. We evaluated our reporting units for impairment during the fourth quarter of 2020, 2019 and 2018, respectively, on the basis of qualitative factors. Our consideration of qualitative factors included but was not limited to macroeconomic conditions, industry and market conditions, company specific events, changes in circumstances, after tax cash flows and market capitalization trends. We concluded that there were no indicators that a reporting unit impairment was more likely than not during the years ended December 31, 2020, 2019, or 2018. Long-lived Assets: Finite-lived intangible assets, property, plant, and equipment, and other long-lived assets are amortized or depreciated over their estimated useful lives, as summarized in the respective footnotes below. These assets are evaluated for impairment based on the identification of asset groups. Our asset groups align with our reporting segments. We evaluated our asset groups for impairment during the fourth quarter of 2020. We concluded that there were no indicators that an asset group impairment had been triggered during the years ended December 31, 2020, 2019, or 2018. Advertising Costs: The Company expenses advertising costs and marketing production costs as incurred and includes such costs within selling, general and administrative expenses in the consolidated statements of operations. Advertising expense for the years ended December 31, 2020, 2019 and 2018 was $ 2.7 million, $ 3.5 million and $ 2.6 million, respectively. Benefit Obligations: The Benefit obligations caption includes the following plans: ($ in thousands) December 31, 2020 December 31, 2019 Pension Plan $ 7,961 $ 6,824 Postretirement Plan 3,997 3,573 SERP Plan 2,687 2,278 Total $ 14,645 $ 12,675 The pension plan is frozen and covers certain employees who were employed by nTelos prior to October 1, 2003. Benefits under the plan vested after five years of plan service and were based on years of service and an average of the five highest consecutive years of compensation subject to certain reductions if the employee elects to receive the benefit prior to age 65 . This plan was amended on December 31, 2012, to freeze future benefit plan accruals for participants. As of December 31, 2020 and 2019, the fair value of our Pension Plan assets were $ 27.0 million and $ 24.1 million, respectively. These investments are held in index funds, and are valued based on the net asset value per share. Our Pension Plan's projected benefit obligation was $ 34.9 million and $ 30.9 million, at December 31, 2020 and 2019, respectively. The Pension Plan liability was discounted at 2.41 % and 3.16 % at December 31, 2020 and 2019, respectively. The postretirement benefit plan is a frozen, unfunded, defined benefit plan. It covers certain health care benefits for certain retirees who were employed by an acquiree and meet eligibility requirements. The postretirement plan liability was discounted at 2.32 % and 3.12 % at December 31, 2020 and 2019, respectively. F-11 Table of Contents The service component of defined benefit plan expense is immaterial and is included in selling, general, and administrative expense. Following our adoption of ASU 2017-17, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, on January 1, 2018, all other components of benefit plan expense are presented in Other income (expense) and our policy is to immediately recognize actuarial gains and losses into earnings. The Supplemental Executive Retirement Plan ("SERP") is a benefit plan that provides deferred compensation to certain employees. The Company holds investments in a rabbi trust as a source of funding for future payments under the plan. The SERP’s investments were designated as trading securities and will be liquidated and paid out to the participants upon retirement. The benefit obligation to participants is always equal to the value of the SERP assets under ASC 710 Compensation. Changes to the investments’ fair value are presented in Other income (expense), while the reciprocal changes in the liability are presented in selling, general and administrative expense. Share Repurchase Program : On November 4, 2019, our program to repurchase up to $ 80 million of common stock became effective and expired on the 2020 anniversary. During the fourth quarter of 2019, we repurchased 200,410 shares under the program at an average price of $ 36.08 ; there were no repurchases made during the year ended December 31, 2020. Our common shares have zero par value and our policy is to record the entire repurchase as a reduction of additional paid-in capital. Repurchased shares are canceled and revert to a status of “authorized and unissued” under Virginia law. New Accounting Standards The Company adopted ASU No. 2016-13, Financial Instruments - Credit Losses ("ASC 326"): Measurement of Credit Losses on Financial Instruments , as of January 1, 2020 using the modified retrospective transition method. ASC 326 requires the application of a current expected credit loss (“CECL”) impairment model to financial assets measured at amortized cost including trade accounts receivable, net investments in leases, and certain off-balance-sheet credit exposures. Under the CECL model, lifetime expected credit losses on such financial assets are measured and recognized at each reporting date based on historical, current, and forecasted information. Furthermore, the CECL model requires financial assets with similar risk characteristics to be analyzed on a collective basis. There was no significant impact to consolidated financial statements upon adoption. The Company adopted ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software ("ASC 350"): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract, as of January 1, 2020. This standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. Upon adoption of the standard, implementation costs were capitalized in the period incurred and will be amortized over the term of the hosting arrangement. There was no significant impact to consolidated financial statements upon adoption. In March 2020, the FASB issued ASU 2020-04 “ Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ” This accounting update provides optional accounting relief to entities with contracts, hedge accounting relationships or other transactions that reference London Interbank Offering Rate (LIBOR) or other interest rate benchmarks for which the referenced rate is expected to be discontinued or replaced. This optional relief generally allows for contract modifications solely related to the replacement of the reference rate to be accounted for as a continuation of the existing contract instead of as an extinguishment of the contract, and therefore would not require reassessment of a previous accounting determination. The Company's Credit Agreement and interest rate swaps have LIBOR as a reference rate. We plan to apply the accounting relief as relevant contract modifications are made to our Credit Agreement and interest rate swap contracts during the course of the reference rate reform transition period. The optional relief can be applied beginning January 1, 2020, and ending December 31, 2022. We implemented Accounting Standards Codification ("ASC") 842- Leases, ("ASC 842"), on January 1, 2019 using the modified retrospective method and thus did not retroactively adjust prior periods. ASC 842 replaced previous leasing guidance with a comprehensive lease measurement and recognition standard and expanded disclosure requirements. The new standard required lessees to recognize most leases on their balance sheet as liabilities, along with the corresponding right-of-use, or ROU, assets. See Note 9, Leases for more information. We adopted ASU No. 2018-02- Income Statement - Reporting Comprehensive Income, ("ASC 220"), as of January 1, 2019. We elected not to reclassify stranded income tax effects from accumulated other comprehensive income (OCI) to retained earnings. We utilize the portfolio approach as our policy to release the income tax effects from accumulated OCI as the entire portfolio is liquidated, sold, or extinguished. F-12 Table of Contents Note 3. 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. The final and binding appraisal process was completed on February 1, 2021. Expected sale proceeds are $ 1.95 billion based upon the appraisal process and other agreements between the parties. We expect to enter into a definitive asset purchase agreement with T-Mobile during the first quarter 2021 and expect that the transaction will close during the second quarter 2021, subject to customary closing conditions and required regulatory approvals. The assets and liabilities that are expected to transfer in the sale are presented as held for sale within our Consolidated Balance Sheets. This disposal group excludes the accounts receivable and certain current liabilities generated by our Wireless operations because they are expected to be settled separately from the sale. Such accounts receivable totaled $ 51.7 million and $ 51.0 million at December 31, 2020 and December 31, 2019, respectively, and such current liabilities totaled $ 6.1 million and $ 27.7 million at December 31, 2020 and December 31, 2019, respectively. During the fourth quarter of 2020 and subsequent thereto, the parties agreed that our pension and postretirement plan liabilities due to certain current and former Wireless employees would not transfer in the sale. Our identification of assets and liabilities held for sale as of December 31, 2020 and 2019 has been updated accordingly, and could change again based on the terms of the final asset purchase agreement. The transaction is structured as an asset sale for income tax purposes. As a result, no current or deferred tax assets or liabilities are included within the disposal group. While our long-term debt does not transfer in the sale, its provisions require us to repay all of the debt upon consummation of the sale. Our debt is therefore presented outside of the disposal group as a current liability at December 31, 2020. Our related interest rate swap liabilities are also presented outside of the disposal group as a current liability at December 31, 2020 because management intends to settle it at consummation. The expected divestiture of our Wireless operations represents a strategic shift in the Company’s business and qualifies as a discontinued operation. Accordingly, the operating results and cash flows from our Wireless operations have been reflected as discontinued operations in our Consolidated Statements of Comprehensive Income and the Consolidated Statements of Cash Flows. Similarly, the results of our Wireless operations are no longer presented as a reporting segment. Because repayment of the debt is contractually triggered by the sale, the related interest expense is presented within discontinued operations under the relevant authoritative guidance. Consistent with the internal reporting provided to our chief operating decision maker, we previously allocated certain corporate management overhead costs to the former Wireless segment which may no longer be allocated to discontinued operations under the relevant authoritative guidance. Accordingly, we elected to recast our segment reporting note, to reflect the reattribution of these expenses in all presented periods in a manner that is also consistent with our updated internal reporting. F-13 Table of Contents The carrying amounts of the major classes of assets and liabilities, which are classified as held for sale in the consolidated balance sheets, are as follows: (in thousands) December 31, 2020 December 31, 2019 ASSETS Inventory $ 5,746 $ 5,728 Prepaid expenses and other 47,003 49,349 Property, plant and equipment, net 299,647 — Intangible assets, net 176,459 — Goodwill 146,383 — Operating lease right-of-use assets 421,586 — Deferred charges and other assets 36,470 — Current assets held for sale $ 1,133,294 $ 55,077 Property, plant and equipment, net $ — $ 338,427 Intangible assets, net — 228,593 Goodwill — 146,383 Operating lease right-of-use assets — 384,010 Deferred charges and other assets — 44,085 Non-current assets held for sale $ — $ 1,141,498 Total assets held for sale $ 1,133,294 $ 1,196,575 LIABILITIES Current operating lease liabilities $ 409,887 $ 47,077 Accrued liabilities and other 8,770 6,835 Asset retirement obligations 33,545 — Current liabilities held for sale $ 452,202 $ 53,912 Non-current operating lease liabilities $ — $ 337,661 Asset retirement obligations — 30,762 Non-current liabilities held for sale $ — $ 368,423 Total liabilities held for sale $ 452,202 $ 422,335 F-14 Table of Contents Income from discontinued operations, net of tax in the consolidated statements of comprehensive income consist of the following for the years ended December 31, 2020, 2019 and 2018: (in thousands) Revenue: 2020 2019 2018 Service revenue and other $ 401,035 $ 375,730 $ 382,948 Equipment revenue 41,338 67,659 67,510 Total revenue 442,373 443,389 450,458 Operating expenses: Cost of services 116,394 128,482 125,082 Cost of goods sold 40,642 65,148 63,583 Selling, general and administrative 34,011 39,128 43,563 Depreciation and amortization 62,930 111,467 122,014 Total operating expenses 253,977 344,225 354,242 Operating income 188,396 99,164 96,216 Other (expense) income: Interest expense ( 20,455 ) ( 29,286 ) ( 34,838 ) Income before income taxes 167,941 69,878 61,378 Income tax expense 43,844 16,310 16,860 Income from discontinued operations, net of tax $ 124,097 $ 53,568 $ 44,518 Our Broadband and Tower segments recognize revenue for their respective provision of cell site backhaul service and leased colocation space to the discontinued Wireless operations. That revenue is earned under contracts executed at our estimate of fair market value, which will transfer upon consummation of the sale. Accordingly, we expect to have a level of continuing involvement with the discontinued operations via these pre-existing contractual arrangements. Revenue recognized within continuing operations pursuant to these agreements is disclosed in Note 15, Segment Reporting . Because the right to use space on our owned cell towers and the related lease liability will be transferred in the sale, they have been included in our disposal group under the relevant authoritative guidance. These right of use assets and lease liabilities were previously eliminated within our consolidated financial statements. Total assets and total liabilities as of December 31, 2019 therefore increased by $ 34 million as a result. Under the relevant authoritative guidance, consummation of the sale will trigger or accelerate the recognition of certain expense related to contingent deal advisory fees, severance costs, recognition of our interest rate swap losses in net income, and loss on debt extinguishment. Our estimate of the related range of reasonably possible expense extends from $ 0 if the sale is not consummated to $ 35.9 million. Note 4. 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 five years . F-15 Table of Contents 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 $ 2.8 million was recognized at December 31, 2020, which we expect to recognize into revenue at the rate of approximately $ 0.8 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 ASC 842. Our Tower segment leases space on owned cell towers to our Wireless and Broadband segments, and to other wireless carriers. Revenue from these leases is accounted for under ASC 842. Refer to Note 15, Segment Reporting , for a summary of these revenue streams. Below is a summary of the Broadband segment's capitalized contract acquisition and fulfillment costs: (in thousands) 2020 2019 Beginning Balance $ 11,005 $ 10,091 Contract payments 8,154 6,518 Contract amortization ( 4,490 ) ( 5,604 ) Ending Balance $ 14,669 $ 11,005 Note 5. Investments Investments consist of the following: (in thousands) December 31, 2020 December 31, 2019 SERP Investments at fair value $ 2,687 $ 2,278 Cost method investments 10,536 9,497 Equity method investments 546 613 Total investments $ 13,769 $ 12,388 SERP Investments at Fair Value: The Supplemental Executive Retirement Plan (“SERP”) is a benefit plan that provides deferred compensation to certain employees. The Company holds the related investments in a rabbi trust as a source of funding for future payments under the plan. The SERP’s investments were designated as trading securities and will be liquidated and paid out to the participants upon retirement. The benefit obligation to participants is always equal to the value of the SERP assets under ASC 710, Compensation . Changes to the investments' fair value are presented in Other income (expense), while the reciprocal changes in the liability are presented in selling, general and administrative expense. Cost Method Investments : Our investment in CoBank’s Class A common stock represented substantially all of our cost method investments with a balance of $ 9.8 million and $ 8.7 million at December 31, 2020 and 2019, respectively. We recognized approximately $ 4.2 million, $ 4.2 million and $ 2.8 million of patronage income in Other income (expense) in 2020, 2019 and 2018, respectively. Historically, approximately 75 % of the patronage distributions were collected in cash and 25 % in equity. Equity Method Investments: At December 31, 2020, 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 $ 0.9 million, $ 1.0 million, and $ 1.7 million from providing service to ValleyNet during 2020, 2019, and 2018, respectively. We recognized Cost of service of $ 2.7 million, $ 3.0 million, and $ 3.4 million for the use of ValleyNet’s network during 2020, 2019, and 2018, respectively. F-16 Table of Contents Note 6. Property, Plant and Equipment Property, plant and equipment consisted of the following: ($ in thousands) Estimated Useful Lives December 31, 2020 December 31, 2019 Land $ 3,909 $ 3,677 Land improvements 10 years 2,910 2,620 Buildings and structures 10 - 40 years 91,335 85,835 Cable and fiber 15 - 30 years 390,209 334,260 Equipment and software 4 - 8 years 331,047 278,873 Plant in service 819,410 705,265 Plant under construction 49,417 31,226 Total property, plant and equipment 868,827 736,491 Less: accumulated amortization and depreciation 428,400 373,404 Property, plant and equipment, net $ 440,427 $ 363,087 Note 7. Goodwill and Intangible Assets Other intangible assets consisted of the following: December 31, 2020 December 31, 2019 (in thousands) Gross Carrying Amount Accumulated Amortization and Other Net Gross Carrying Amount Accumulated Amortization and Other Net Goodwill - Broadband $ 3,244 $ — $ 3,244 $ 2,687 $ — $ 2,687 Indefinite-lived intangibles: Cable franchise rights $ 64,334 $ — $ 64,334 $ 64,334 $ — $ 64,334 FCC spectrum licenses 29,958 — 29,958 13,839 — 13,839 Railroad crossing rights 141 — 141 141 — 141 Total indefinite-lived intangibles 94,433 — 94,433 78,314 — 78,314 Finite-lived intangibles: FCC spectrum licenses 6,811 ( 340 ) 6,471 4,659 ( 97 ) 4,562 Subscriber relationships 28,425 ( 26,000 ) 2,425 28,065 ( 25,600 ) 2,465 Other intangibles 463 ( 277 ) 186 463 ( 250 ) 213 Total finite-lived intangibles 35,699 ( 26,617 ) 9,082 33,187 ( 25,947 ) 7,240 Total goodwill and intangible assets $ 133,376 $ ( 26,617 ) $ 106,759 $ 114,188 $ ( 25,947 ) $ 88,241 We acquired Canaan Cable ("Canaan") on December 31, 2020. The $ 2.1 million acquisition price was allocated as follows: $ 1.1 million of property, plant and equipment; $ 0.4 million to subscriber relationships; and $ 0.6 million of goodwill. We remitted $ 1.89 million of the acquisition price at closing. The remaining $ 210 thousand was accrued and represents a non-cash investing and financing activity. During the third quarter of 2020, the Company completed the purchase of certain indefinite-lived CBRS spectrum licenses for an aggregate cost of $ 16.1 million, within our Broadband segment. Spectrum licenses in the CBRS band are issued by the Federal Communications Commission (“FCC”) and 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 to utilize designated radio frequency spectrum within specific geographic service areas to provide wireless communication services. During the third quarter of 2019, the Company purchased certain indefinite-lived spectrum licenses for $ 13.8 million and finite-lived spectrum licenses for $ 4.7 million. F-17 Table of Contents We acquired Big Sandy Broadband, Inc. (“Big Sandy”) on February 28, 2019. The $ 10 million acquisition price was allocated as follows: $ 4.6 million of property, plant and equipment; $ 2.8 million of subscriber relationships; and $ 2.6 million of goodwill. For the years ended December 31, 2020, 2019 and 2018, amortization expense was approximately $ 0.7 million, $ 0.5 million and $ 0.2 million, respectively. Our finite-lived intangible assets are amortized over the following estimated useful lives: Estimated Useful Life FCC spectrum licenses 18 - 30 years Subscriber relationships 3 - 10 years Other intangibles 15 - 20 years The following table summarizes expected amortization of intangible assets at December 31, 2020: (in thousands) Amortization of Intangible Assets 2021 $ 782 2022 782 2023 782 2024 782 2025 778 Thereafter 5,176 Total $ 9,082 Note 8. Other Assets and Accrued Liabilities Prepaid expenses and other, classified as current assets, included the following: (in thousands) December 31, 2020 December 31, 2019 Prepaid maintenance expenses $ 4,018 $ 3,065 Broadband contract acquisition and fulfillment costs 4,417 4,898 Interest rate swaps — 1,382 Other 1,196 1,833 Prepaid expenses and other $ 9,631 $ 11,178 Deferred charges and other assets, classified as long-term assets, included the following: (in thousands) December 31, 2020 December 31, 2019 Broadband contract acquisition and fulfillment costs $ 10,252 $ 6,107 Prepaid expenses and other 1,398 1,908 Interest rate swaps — 1,252 Deferred charges and other assets $ 11,650 $ 9,267 F-18 Table of Contents Accrued liabilities and other, classified as current liabilities, included the following: (in thousands) December 31, 2020 December 31, 2019 Interest rate swaps $ 4,048 $ — Accrued programming costs 2,868 3,023 Sales and property taxes payable 1,072 919 Other current liabilities 5,881 3,614 Accrued liabilities and other $ 13,869 $ 7,556 Other liabilities, classified as long-term liabilities, included the following: (in thousands) December 31, 2020 December 31, 2019 Noncurrent portion of deferred lease revenue $ 18,687 $ 12,449 FCC spectrum license obligations 3,845 1,699 Noncurrent portion of financing leases 1,492 1,591 Other 881 1,252 Other liabilities $ 24,905 $ 16,991 Asset Retirement Obligations: Our asset retirement obligations arise from certain of our leases and generally require us to remove our towers from ground leases. Below is a summary: Years Ended December 31, (in thousands) 2020 2019 2018 Balance at beginning of year $ 6,152 $ 8,808 $ 4,619 Additional liabilities accrued 262 593 1,273 Changes to prior estimates ( 1,633 ) ( 3,659 ) 2,568 Payments — — — Accretion expense 332 410 348 Balance at end of year $ 5,113 $ 6,152 $ 8,808 Note 9. Leases We adopted ASC 842 on January 1, 2019 using the modified retrospective method. We applied the package of practical expedients and, as a result, did not reassess prior conclusions regarding lease identification, lease classification and initial direct costs under the new standard. In those circumstances where the Company is the lessee, we elected to account for non-lease components associated with our leases (e.g., maintenance costs) and lease components as a single lease component for substantially all of our asset classes. We lease various telecommunications sites, 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 ROU 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 December 31, 2020, our operating leases had a weighted average remaining lease term of twenty-three years and a weighted average discount rate of F-19 Table of Contents 4.7 %. Our finance leases had a weighted average remaining lease term of fourteen years and a weighted average discount rate of 5.2 %. During 2020, we recognized $ 6.6 million of operating lease expense and $ 0.6 million of interest and depreciation expense on finance leases. 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 $ 4.4 million of operating lease payments during 2020. We also obtained $ 6.8 million of leased assets in exchange for new operating lease liabilities recognized during 2020. The following table summarizes the expected maturity of lease liabilities at December 31, 2020: (in thousands) Operating Leases Finance Leases Total 2021 $ 4,046 $ 174 $ 4,220 2022 4,282 174 4,456 2023 3,826 174 4,000 2024 3,477 174 3,651 2025 3,250 174 3,424 2026 and thereafter 64,739 1,354 66,093 Total lease payments 83,620 2,224 85,844 Less: Interest 35,555 636 36,191 Present value of lease liabilities $ 48,065 $ 1,588 $ 49,653 We recognized $ 9.1 million of operating lease revenue during 2020 related to the cell site colocation space and dedicated fiber optic strands that we lease to our customers, which is included in Service and other revenue 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 December 31, 2020: (in thousands) Operating Leases 2021 $ 6,292 2022 5,236 2023 3,618 2024 2,410 2025 1,320 2026 and thereafter 3,805 Total $ 22,681 Note 10. Debt Our syndicated Credit Agreement includes a $ 75 million, five-year undrawn revolving credit facility, as well as the following term loans: (in thousands) December 31, 2020 December 31, 2019 Term loan A-1 $ 229,437 $ 258,571 Term loan A-2 468,481 473,469 697,918 732,040 Less: unamortized loan fees 9,455 11,926 Total debt, net of unamortized loan fees $ 688,463 $ 720,114 Term Loan A-1 bears interest at one-month LIBOR plus a margin of 1.50 %, while Term Loan A-2 bears interest at one-month LIBOR plus a margin of 1.75 %. LIBOR resets monthly. Our cash payments for interest were $ 18.6 million and $ 27.6 million during 2020 and 2019, respectively. F-20 Table of Contents The Credit Agreement is fully secured by a pledge and unconditional guarantee from the Company and all of its subsidiaries, except Shenandoah Telephone Company. This provides the lenders a security interest in substantially all of the assets of the Company. The Credit Agreement contains affirmative and negative covenants customary to secured credit facilities, including restrictions on our ability 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, voluntarily prepay other indebtedness, enter into transactions with affiliated persons, make investments, and change the nature of the Company’s businesses. Total dividends, distributions, and redemptions of capital stock generally cannot exceed the sum of $ 25 million plus 60 % of the Company's consolidated net income from January 1, 2016 to the date of declaration of such dividends, distributions or redemptions. The financial covenants of the Credit Facility include: • a limitation on the Company’s total leverage ratio, calculated as Consolidated EBITDA, as defined by the Credit Facility agreement, of less than or equal to 3.50 to 1.00 from December 31, 2018 through December 31, 2019, then 3.25 to 1.00 through December 31, 2021, and 3.00 to 1.00 thereafter; • a minimum debt service coverage ratio, calculated as Consolidated EBITDA minus certain cash tax payments divided by the sum of all scheduled principal payments on the Credit Facility plus cash payments for interest, greater than or equal to 2.00 to 1.00; • the Company must maintain a minimum liquidity balance, calculated as availability under the Revolver Facility plus unrestricted cash and cash equivalents, of greater than $ 25 million at all times. As shown below, as of December 31, 2020, the Company was in compliance with the financial covenants in its credit agreements. Actual Covenant Requirement Total leverage ratio 2.0 3.25 or Lower Debt service coverage ratio 6.6 2.0 or Higher Minimum liquidity balance (in millions) $ 270.4 $ 25.0 or Higher 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 interest rate swaps 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, affect the fair value of the derivative instruments we hold, or affect our ability to effectively use interest rate swaps to manage interest rate risk. 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. As discussed in Note 3, Discontinued Operations , the terms of our long term debt agreements require us to repay all of our debt upon consummation of the sale of our Wireless operations, which is expected to occur during the first half of 2021. Management also intends to settle the related interest rate swaps upon consummation. Both are therefore presented outside of the disposal group as a current liability at December 31, 2020. Note 11. Derivatives and Hedging The Company's interest rate swaps are pay-fixed ( 1.16 %), receive-variable (one month LIBOR) that hedged approximately 41 % of outstanding debt with outstanding notional amounts totaling $ 289.4 million and $ 339.8 million December 31, 2020 and 2019, respectively. The fair value of these instruments was estimated using an income approach and observable market inputs. The hedge was determined to be highly effective and therefore all of the change in its fair value was recognized through other comprehensive income. Derivative balances are presented as follows in our consolidated balance sheet: F-21 Table of Contents (in thousands) December 31, 2020 December 31, 2019 Balance sheet location of derivative financial instruments: Prepaid expenses and other $ — $ 1,382 Deferred charges and other assets — 1,252 Accrued liabilities and other 4,048 — Total derivatives designated as hedging instruments $ 4,048 $ 2,634 Market expectations of the projected LIBOR decreased significantly during 2020, which drove the fair value of our interest rate swaps to a liability. The table below summarizes changes in accumulated other comprehensive income (loss) by component: (in thousands) Gains (Losses) on Cash Flow Hedges Income Tax (Expense) Benefit Accumulated Other Comprehensive Income (Loss), net of taxes Balance as of December 31, 2019 $ 2,634 $ ( 2,326 ) $ 308 Net change in unrealized (loss) gain ( 8,444 ) 2,806 ( 5,638 ) Amounts reclassified from accumulated other comprehensive income (loss) to interest expense 1,762 ( 1,138 ) 624 Net current period other comprehensive (loss) income ( 6,682 ) 1,668 ( 5,014 ) Balance as of December 31, 2020 $ ( 4,048 ) $ ( 658 ) $ ( 4,706 ) As of December 31, 2020, the Company estimates that $ 3.2 million will be reclassified as a reduction of interest expense during the next twelve months. Note 12. Income Taxes The Company files a consolidated U.S. federal income tax return and various state income tax returns. The provision for the federal and state income taxes attributable to income (loss) consists of the following components: Years Ended December 31, (in thousands) 2020 2019 2018 Current (benefit) expense Federal taxes $ ( 13,748 ) $ ( 16,393 ) $ ( 6,033 ) State taxes ( 2,148 ) ( 282 ) 833 Total current provision ( 15,896 ) ( 16,675 ) ( 5,200 ) Deferred expense (benefit) Federal taxes 13,729 16,453 4,433 State taxes 1,581 395 ( 576 ) Total deferred provision 15,310 16,848 3,857 Income tax (benefit) expense $ ( 586 ) $ 173 $ ( 1,343 ) Effective tax rate ( 28.7 ) % 6.8 % ( 183.0 ) % F-22 Table of Contents A reconciliation of income taxes determined by applying the federal and state tax rates to income (loss) is as follows: Years Ended December 31, (in thousands) 2020 2019 2018 Expected tax expense at federal statutory $ 428 $ 538 $ 154 State income taxes, net of federal tax effect 54 15 ( 202 ) Revaluation of U.S. deferred income taxes — — ( 760 ) Excess tax benefit from share based compensation and other, net ( 1,068 ) ( 380 ) ( 535 ) Income tax (benefit) expense $ ( 586 ) $ 173 $ ( 1,343 ) The effective tax rate in 2020 decreased from 2019, primarily as a result of higher excess tax benefits from share based compensation. The Company's cash payments for income taxes were $ 11.2 million in the year ended December 31, 2020. The Company received cash refunds for income taxes of $ 9.5 million in the year ended December 31, 2019. Deferred tax assets and liabilities are measured using enacted tax rates that are expected to apply in the year of reversal or settlement and arise from temporary differences between the US GAAP and tax bases of the following assets and liabilities: (in thousands) December 31, 2020 December 31, 2019 Deferred tax assets: Leases $ 123,129 $ 106,564 Asset retirement obligations 10,403 9,957 Net operating loss carry-forwards 7,723 10,071 Pension liabilities 3,868 3,161 Accruals and stock based compensation 3,093 1,935 Other 5,002 1,408 Total gross deferred tax assets 153,218 133,096 Less valuation allowance — — Net deferred tax assets 153,218 133,096 Deferred tax liabilities: Property, plant and equipment 127,602 110,676 Leases 126,458 105,475 Intangible assets 25,722 27,201 Prepaid assets and other 24,088 27,311 Total gross deferred tax liabilities 303,870 270,663 Net deferred tax liabilities $ 150,652 $ 137,567 In assessing the ability to realize deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon generating future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, taxable income in prior carryback years if available and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods for which the deferred tax assets are deductible, the Company believes it more likely than not that the net deferred tax assets will be realized. The Company has a deferred tax asset of $ 7.7 million related to federal and various state net operating losses. As of December 31, 2020, the Company had approximately $ 36.7 million of federal net operating losses expiring through 2027. The Company also had approximately $ 0.1 million of state net operating losses expiring through 2036. As of December 31, 2020 and 2019, the Company had no unrecognized tax benefits. F-23 Table of Contents The Company is not currently subject to state or federal income tax audits as of December 31, 2020. The Company's returns are generally open to examination from 2017 forward and the net operating losses acquired from nTelos are open to examination from 2002 forward. Note 13. Earnings per Share & Stock Compensation The Company maintains two shareholder-approved Company Stock Incentive Plans allowing for the grant of equity based incentive compensation to essentially all employees. The 2005 Plan authorized grants of up to 2,880,000 shares over a ten-year period beginning in 2005. The term of the 2005 Plan expired in February 2014; outstanding awards will continue to vest and options may continue to be exercised, but no additional awards will be granted under the 2005 Plan. The 2014 Plan authorizes grants of up to an additional 3,000,000 shares over a ten-year period beginning in 2014. Under these Plans, grants may take the form of stock awards, awards of options to acquire stock, stock appreciation rights, and other forms of equity based compensation; both options to acquire stock and stock awards were granted. The Company granted approximately 96 thousand restricted stock units (RSUs) to employees and directors during 2020 at an average market price of $ 49.02 . The Company also granted, approximately 40 thousand Relative Total Shareholder Return (“RTSR”) awards to employees at an average value of $ 56.32 during 2020. Restricted stock units generally have service requirements only or performance and service requirements with vesting periods ranging from one year for directors to four years for employees. RTSR awards vest over three years . The performance factor applied to the RTSR awards is based upon the Company's stock performance compared to a group of peer companies. The actual number of shares to be issued and can range from 0 % to 150 % of the awards granted. The cost of employee services received in exchange for share-based awards classified as equity is measured using the estimated fair value of the award on the date of the grant, and the related expense is recorded using the straight-line method consistent with the recipient's respective service period. Stock-based compensation expense was as follows: Years Ended December 31, (in thousands) 2020 2019 2018 Stock compensation expense $ 6,227 $ 3,732 $ 5,153 Capitalized stock compensation 320 365 408 Stock compensation expense, net $ 5,907 $ 3,367 $ 4,745 As of both December 31, 2020 and 2019, there was $ 3.7 million of total unrecognized compensation cost related to non-vested incentive awards that are expected to be recognized over a weighted average period of 2.6 years. F-24 Table of Contents 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: Years Ended December 31, (in thousands, except per share amounts) 2020 2019 2018 Calculation of net income per share: Income from continuing operations $ 2,626 $ 2,388 $ 2,077 Income from discontinued operations, net of tax $ 124,097 $ 53,568 $ 44,518 Net income $ 126,723 $ 55,956 $ 46,595 Basic weighted average shares outstanding 49,901 49,811 49,542 Basic net income per share - continuing operations $ 0.05 $ 0.05 $ 0.04 Basic net income per share - discontinued operations $ 2.49 $ 1.07 $ 0.90 Basic net income per share $ 2.54 $ 1.12 $ 0.94 Effect of stock-based compensation awards outstanding: Basic weighted average shares outstanding 49,901 49,811 49,542 Effect from dilutive shares and options outstanding 123 290 521 Diluted weighted average shares outstanding 50,024 50,101 50,063 Diluted net income per share - continuing operations $ 0.05 $ 0.05 $ 0.04 Diluted net income per share - discontinued operations $ 2.48 $ 1.07 $ 0.89 Diluted net income per share $ 2.53 $ 1.12 $ 0.93 There were fewer than 110 thousand anti-dilutive awards outstanding during 2020, 2019, and 2018. Note 14. Commitments and Contingencies We are committed to make payments to satisfy our lease liabilities and long-term debt. The scheduled payments under those obligations are summarized in the respective notes above. We are also committed to make annual payments of approximately $ 108.0 thousand on our FCC spectrum license obligation through 2039. The Company is subject to claims and legal actions that may arise in the ordinary course of business. The Company does not believe that any of these pending claims or legal actions are either probable or reasonably possible of a material loss. Note 15. Segment Reporting The expected divestiture of our Wireless operations represents a strategic shift in the Company’s business and qualifies as a discontinued operation. As a result, the operating results and cash flows related to the Wireless segment have been reflected as discontinued operations in our Consolidated Statements of Comprehensive Income and the Consolidated Statements of Cash Flows. Similarly, the results of our Wireless operations are no longer presented as a reporting segment. Consistent with the internal reporting provided to our chief operating decision maker, we previously allocated certain corporate management overhead costs to the former Wireless segment which may no longer be allocated to discontinued operations under the relevant authoritative guidance. Accordingly, we have recast our reporting of the remaining segments to reflect the reattribution of these expenses in all presented periods in a manner consistent with our updated internal reporting. The tables below reflect the results of operations of the Company's reportable segments in continuing operations, consistent with internal reporting used by the Company. F-25 Table of Contents Year ended December 31, 2020: (in thousands) Broadband Tower Corporate & Eliminations Consolidated External revenue Residential & SMB $ 154,956 $ — $ — $ 154,956 Commercial Fiber 24,431 — — 24,431 RLEC & Other 15,971 — — 15,971 Tower lease — 7,402 — 7,402 Service revenue and other 195,358 7,402 — 202,760 Revenue for service provided to the discontinued Wireless operations 8,989 9,653 ( 627 ) 18,015 Total revenue 204,347 17,055 ( 627 ) 220,775 Operating expenses Cost of services 83,439 4,896 ( 132 ) 88,203 Selling, general and administrative 39,472 1,430 44,114 85,016 Depreciation and amortization 41,076 1,906 5,721 48,703 Total operating expenses 163,987 8,232 49,703 221,922 Operating income (loss) $ 40,360 $ 8,823 $ ( 50,330 ) $ ( 1,147 ) Capital expenditures $ 117,246 $ 2,001 $ 1,203 $ 120,450 Year ended December 31, 2019: (in thousands) Broadband Tower Corporate & Eliminations Consolidated External revenue Residential & SMB $ 142,290 $ — $ — $ 142,290 Commercial Fiber 23,004 — — 23,004 RLEC & Other 18,257 — — 18,257 Tower lease — 6,965 — 6,965 Service revenue and other 183,551 6,965 — 190,516 Revenue for service provided to the discontinued Wireless operations 10,392 6,020 ( 66 ) 16,346 Total revenue 193,943 12,985 ( 66 ) 206,862 Operating expenses Cost of services 79,235 3,777 ( 63 ) 82,949 Selling, general and administrative 33,545 937 43,364 77,846 Depreciation and amortization 38,566 1,976 6,244 46,786 Total operating expenses 151,346 6,690 49,545 207,581 Operating income (loss) $ 42,597 $ 6,295 $ ( 49,611 ) $ ( 719 ) Capital expenditures $ 60,627 $ 921 $ 5,500 $ 67,048 F-26 Table of Contents Year ended December 31, 2018: (in thousands) Broadband Tower Corporate & Eliminations Consolidated External revenue Residential & SMB $ 131,512 $ — $ — $ 131,512 Commercial Fiber 22,090 — — 22,090 RLEC & Other 19,612 — — 19,612 Tower lease — 7,180 — 7,180 Service revenue and other 173,214 7,180 — 180,394 Revenue for service provided to the discontinued Wireless operations 9,906 5,016 ( 2,633 ) 12,289 Total revenue 183,120 12,196 ( 2,633 ) 192,683 Operating expenses Cost of services 76,731 3,687 — 80,418 Selling, general and administrative 28,103 704 42,037 70,844 Depreciation and amortization 35,992 2,406 5,992 44,390 Total operating expenses 140,826 6,797 48,029 195,652 Operating income (loss) $ 42,294 $ 5,399 $ ( 50,662 ) $ ( 2,969 ) Capital expenditures $ 43,197 $ 6,145 $ 7,289 $ 56,631 A reconciliation of the total of the reportable segments’ operating income to consolidated income before taxes is as follows: Years Ended December 31, (in thousands) 2020 2019 2018 Total consolidated operating loss $ ( 1,147 ) $ ( 719 ) $ ( 2,969 ) Other income, net 3,187 3,280 3,703 Income from continuing operations before income taxes $ 2,040 $ 2,561 $ 734 The Company’s CODM does not currently review total assets by segment since the assets are centrally managed and some of the assets are shared by the segments, accordingly total assets by segment are not provided. F-27 Table of Contents Note 16. Quarterly Results (unaudited) The following table reflects selected quarterly results for the Company. Three Months Ended (in thousands, except per share data) March 31, 2020 June 30, 2020 September 30, 2020 December 31, 2020 Revenue $ 53,134 $ 54,336 $ 55,173 $ 58,132 Operating (loss) income ( 1,364 ) ( 1,867 ) 470 1,614 Income (loss) from continuing operations 150 ( 536 ) 1,412 1,600 Income from discontinued operations, net of tax 13,129 29,784 33,509 47,675 Net income 13,279 29,248 34,921 49,275 Basic - (Loss) income from continuing operations $ — $ ( 0.01 ) $ 0.03 $ 0.03 Basic - Income from discontinued operations, net of tax $ 0.27 $ 0.59 $ 0.67 $ 0.96 Basic net income per share $ 0.27 $ 0.58 $ 0.70 $ 0.99 Diluted - (Loss) income from continuing operations $ — $ ( 0.01 ) $ 0.03 $ 0.03 Diluted - Income from discontinued operations, net of tax $ 0.27 $ 0.59 $ 0.67 $ 0.95 Diluted net income per share $ 0.27 $ 0.58 $ 0.70 $ 0.98 Three Months Ended (in thousands except per share data) March 31, 2019 June 30, 2019 September 30, 2019 December 31, 2019 Revenue $ 49,895 $ 51,551 $ 51,814 $ 53,602 Operating (loss) income ( 1,765 ) 915 681 ( 550 ) Income (loss) from continuing operations 607 1,509 1,168 ( 896 ) Income from discontinued operations, net of tax 13,303 11,640 13,186 15,439 Net income 13,910 13,149 14,354 14,543 Basic - Income (loss) from continuing operations $ 0.01 $ 0.03 $ 0.02 $ ( 0.01 ) Basic - Income from discontinued operations, net of tax $ 0.27 $ 0.23 $ 0.27 $ 0.30 Basic net income per share $ 0.28 $ 0.26 $ 0.29 $ 0.29 Diluted - Income (loss) from continuing operations $ 0.01 $ 0.03 $ 0.02 $ ( 0.01 ) Diluted - Income from discontinued operations, net of tax $ 0.27 $ 0.23 $ 0.27 $ 0.30 Diluted net income per share $ 0.28 $ 0.26 $ 0.29 $ 0.29 F-28 Table of Contents Schedule II Valuation and Qualifying Accounts Changes in the Company’s allowance for doubtful accounts for accounts receivable for the years ended December 31, 2020, 2019 and 2018 are summarized below: (in thousands) Balance at Beginning of Year Recoveries added to allowance Bad debt expense Write-offs Balance at End of Year Year Ended December 31, 2020 Allowance for doubtful accounts $ 533 $ 758 $ 1,220 $ ( 1,897 ) $ 614 Year Ended December 31, 2019 Allowance for doubtful accounts $ 534 $ 649 $ 1,743 $ ( 2,393 ) $ 533 Year Ended December 31, 2018 Allowance for doubtful accounts $ 466 $ 631 $ 1,983 $ ( 2,546 ) $ 534 F-29 Table of Contents ITEM 16. FORM 10-K SUMMARY None Exhibits Index Exhibit Number Exhibit Description 2.1 Agreement and Plan of Merger, dated as of August 10, 2015, by and among Shenandoah Telecommunications Company, Gridiron Merger Sub, Inc. and NTELOS Holdings Corp., filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K, dated August 11, 2015. 3.1 Amended and Restated Articles of Incorporation of Shenandoah Telecommunications Company, effective August 31, 2019, filed as exhibit 3.2 to the Company's Quarterly Report on Form 10-Q dated September 30, 2019. 3.2 Amended and Restated Bylaws of Shenandoah Telecommunications Company, effective October 29, 2019, filed as exhibit 3.3 to the Company's Quarterly Report on Form 10-Q dated September 30, 2019. 4.1 Description of the Company's Common Stock Registered Under Section 12 of the Exchange Act of 1934 10.1 Shenandoah Telecommunications Company Dividend Reinvestment Plan filed as Exhibit 4.4 to the Company’s Registration Statement on Form S-3D (No. 333-74297). 10.2 Sprint PCS Management Agreement dated as of November 5, 1999 by and among Sprint Spectrum L.P., Wireless Co, L.P., APC PCS, LLC, Phillie Co, L.P., and Shenandoah Personal Communications Company filed as Exhibit 10.4 to the Company’s Report on Form 10-K for the year ended December 31, 2003. 10.3 Sprint PCS Services Agreement dated as of November 5, 1999 by and between Sprint Spectrum L.P. and Shenandoah Personal Communications Company filed as Exhibit 10.5 to the Company’s Report on Form 10-K for the year ended December 31, 2003. 10.4 Sprint Trademark and Service Mark License Agreement dated as of November 5, 1999 by and between Sprint Communications Company, L.P. and Shenandoah Personal Communications Company filed as Exhibit 10.6 to the Company’s Report on Form 10-K for the year ended December 31, 2003. 10.5 Sprint Spectrum Trademark and Service Mark License Agreement dated as of November 5, 1999 by and between Sprint Spectrum L.P. and Shenandoah Personal Communications Company filed as Exhibit 10.7 to the Company’s Report on Form 10-K for the year ended December 31, 2003. 10.6 Addendum I to Sprint PCS Management Agreement by and among Sprint Spectrum L.P., Wireless Co, L.P., APC PCS, LLC, Phillie Co, L.P., and Shenandoah Personal Communications Company filed as Exhibit 10.8 to the Company’s Report on Form 10-K for the year ended December 31, 2003. 10.7 Asset Purchase Agreement dated November 5, 1999 by and among Sprint Spectrum L.P., Sprint Spectrum Equipment Company, L. P., Sprint Spectrum Realty Company, L.P., and Shenandoah Personal Communications Company, serving as Exhibit A to Addendum I to the Sprint PCS Management Agreement and as Exhibit 2.6 to the Sprint PCS Management Agreement filed as Exhibit 10.9 to the Company’s Report on Form 10-K for the year ended December 31, 2003. F-30 Table of Contents 10.8 Addendum II dated August 31, 2000 to Sprint PCS Management Agreement by and among Sprint Spectrum L.P., Wireless Co, L.P., APC PCS, LLC, Phillie Co, L.P., and Shenandoah Personal Communications Company filed as Exhibit 10.10 to the Company’s Report on Form 10-K for the year ended December 31, 2003. 10.9 Addendum III dated September 26, 2001 to Sprint PCS Management Agreement by and among Sprint Spectrum L.P., Wireless Co, L.P., APC PCS, LLC, Phillie Co, L.P., and Shenandoah Personal Communications Company filed as Exhibit 10.11 to the Company’s Report on Form 10-K for the year ended December 31, 2003. 10.10 Addendum IV dated May 22, 2003 to Sprint PCS Management Agreement by and among Sprint Spectrum L.P., Wireless Co, L.P., APC PCS, LLC, Phillie Co, L.P., and Shenandoah Personal Communications Company filed as Exhibit 10.12 to the Company’s Report on Form 10-K for the year ended December 31, 2003. 10.11 Addendum V dated January 30, 2004 to Sprint PCS Management Agreement by and among Sprint Spectrum L.P., Wireless Co, L.P., APC PCS, LLC, Phillie Co, L.P., and Shenandoah Personal Communications Company filed as Exhibit 10.13 to the Company’s Report on Form 10-K for the year ended December 31, 2003. 10.12 Supplemental Executive Retirement Plan as amended and restated, filed as Exhibit 10.14 to the Company’s Current Report on Form 8-K dated March 23, 2007. 10.13 Addendum VI dated May 24, 2004 to Sprint PCS Management Agreement by and among Sprint Spectrum L.P., Wireless Co, L.P., APC PCS, LLC, Phillie Co, L.P., and Shenandoah Personal Communications Company filed as Exhibit 10.15 to the Company’s Report on Form 10-Q for the quarterly period ended June 30, 2004. 10.14 2005 Stock Incentive Plan filed as Exhibit 10.1 to the Company’s Registration Statement on Form S-8 (No. 333-127342). 10.15 Addendum VII dated March 13, 2007 to Sprint PCS Management Agreement by and among Sprint Spectrum L.P., Wireless Co., L.P., APC PCS, LLC, Phillie Co, L.P., and Shenandoah Personal Communications Company, filed as Exhibit 10.31 to the Company’s Report on Form 10-K for the year ended December 31, 2006. 10.16 Addendum VIII to the Sprint Management Agreement dated November 19, 2007, filed as Exhibit 10.36 to the Company’s Current Report on Form 8-K dated November 20, 2007. 10.17 Addendum IX to the Sprint Management Agreement dated as of April 14, 2009, and filed as Exhibit 10.42 to the Company’s Annual Report on Form 10-K dated March 8, 2010. 10.18 Addendum X dated March 15, 2010 to Sprint PCS Management Agreement by and among Sprint Spectrum L.P., Wireless Co, L.P., APC PCS, LLC, Phillie Co, L.P., Sprint Communications Company L.P. and Shenandoah Personal Communications Company, filed as Exhibit 10.44 to the Company’s Current Report on Form 10-Q, dated May 7, 2010. 10.19 Addendum XI dated July 7, 2010 to Sprint PCS Management Agreement by and among Sprint Spectrum L.P., Wireless Co, L.P., APC PCS, LLC, Phillie Co, L.P., Sprint Communications Company L.P. and Shenandoah Personal Communications Company, filed as Exhibit 10.45 to the Company’s Current Report on Form 8-K dated July 8, 2010. 10.20 Letter Agreement modifying section 10.2.7.2 of Addendum X dated March 15, 2010 to Sprint PCS Management Agreement by and among Sprint Spectrum L.P., Wireless Co, L.P., APC PCS, LLC, Phillie Co, L.P., Sprint Communications Company L.P. and Shenandoah Personal Communications Company, filed as Exhibit 10.49 to the Company’s Quarterly Report on Form 10-Q dated August 8, 2011. Table of Contents 10.21 Addendum XII dated February 1, 2012 to Sprint PCS Management Agreement by and among Sprint Spectrum L.P., Wireless Co, L.P., APC PCS, LLC, Phillie Co, L.P., Sprint Communications Company L.P. and Shenandoah Personal Communications Company, filed as Exhibit 10.51 to the Company’s Current Report on Form 8-K dated February 2, 2012. 10.22 Addendum XIII dated September 14, 2012 to Sprint PCS Management Agreement by and among Sprint Spectrum L.P., Wireless Co, L.P., APC PCS, LLC, Phillie Co, L.P., Sprint Communications Company L.P. and Shenandoah Personal Communications, LLC, filed as Exhibit 10.53 to the Company’s Current Report on Form 8-K dated September 17, 2012. 10.23 Addendum XIV dated as of November 19, 2012, to Sprint PCS Management Agreement by and among Sprint Spectrum L.P., Wireless Co, L.P., APC PCS, LLC, Phillie Co, L.P., Sprint Communications Company L.P. and Shenandoah Personal Communications, LLC, filed as Exhibit 10.42 to the Company’s Annual Report on Form 10-K dated March 5, 2013. 10.24 Addendum XV dated as of March 11, 2013, to Sprint PCS Management Agreement by and among Sprint Spectrum, L.P., WirelessCo, L.P., APC PCS, LLC, PhillieCo, L.P., Sprint Communications Company L.P. and Shenandoah Personal communications, LLC, filed as Exhibit 10.43 to the Company’s Quarterly Report on Form 10-Q dated May 3, 2013. 10.25 Addendum XVI dated as of December 9, 2013 to Sprint PCS Management Agreement by and among Sprint Spectrum, L.P., Wireless Co, L.P., APC PCS, LLC, Phillie Co, L.P., Sprint Communications Company L.P. and Shenandoah Personal Communications, LLC, filed as Exhibit 10.45 to the Company’s Quarterly Report on Form 10-Q dated May 2, 2014. 10.26 Addendum XVII dated as of April 11, 2014, to Sprint PCS Management Agreement by and among Sprint Spectrum, L.P., Wireless Co, L.P., APC PCS, LLC, Phillie Co, L.P., Sprint Communications Company L.P. and Shenandoah Personal Communications, LLC, filed as Exhibit 10.46 to the Company’s Quarterly Report on Form 10-Q dated May 2, 2014. 10.27 2014 Equity Incentive Plan filed as Appendix A to the Company’s Definitive Proxy Statement filed on March 13, 2014 (No. 333-196990). 10.28 Master Agreement dated as of August 10, 2015, by and among SprintCom, Inc. and Shenandoah Personal Communications, LLC, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated August 11, 2015. 10.29 Addendum XVIII dated as of August 10, 2015, to Sprint PCS Management Agreement by and among SprintCom, Inc., Phillie Co, L.P., and Shenandoah Personal Communications, LLC, filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K, dated August 11, 2015. 10.30 Amended and Restated Master Agreement, dated as of May 6, 2016, by and between Shenandoah Personal Communications, LLC and SprintCom, Inc, filed as Exhibit 10.1 to the Company's Current Report on Form 8-K, dated May 6, 2016. 10.31 Addendum XIX to Sprint PCS Management Agreement, dated as of May 6, 2016, by and among Sprint Spectrum L.P., Wireless Co, LLC, APC PCS, LLC, Phillie Co, LLC, Sprint Communications Company L.P., Shenandoah Personal Communications, LLC and SprintCom, Inc, filed as Exhibit 10.2 to the Company's Current Report on Form 8-K, dated May 6, 2016. 10.32 Consent and Agreement, dated as of May 6, 2016, by and among Sprint Spectrum L.P., Wireless Co, LLC, APC PCS, LLC, Phillie Co, LLC, Sprint Communications Company L.P., Shenandoah Personal Communications, LLC and SprintCom, Inc. and CoBank, ACB, filed as Exhibit 10.3 to the Company's Current Report on Form 8-K, dated May 6, 2016. Table of Contents 10.33 Addendum XX to Sprint PCS Management Agreement dated as of March 9, 2017 by and among Sprint Spectrum L.P.; Sprint Communications Company, L.P.; SprintCom, Inc.; Horizon Personal Communications, LLC; and Shenandoah Personal Communications, LLC filed as Exhibit 10. 1 to the Company’s Current Report on Form 8-K filed on March 15, 2017. 10.34 Addendum XXI to Sprint PCS Management Agreement dated as of February 1, 2018 by and among Sprint Spectrum L.P; Sprint Communications Company, L.P.; SprintCom, Inc.; and Shenandoah Personal Communications, LLC filed as Exhibit 10.1to the Company’s Current Report on Form 8-K filed on February 5, 2018. 10.35 Expansion Agreement dated as of February 1, 2018 by and among Sprint Spectrum L.P.; SprintCom, Inc.; and Shenandoah Personal Communications, LLC filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on February 5, 2018. 10.36 Credit Agreement dated as of November 9, 2018, by and among Shenandoah Telecommunications Company, certain of its subsidiaries, CoBank, ACB, as administrative agent, and the other lenders party thereto filed as Exhibit 10.1 to the Company's Current Report on Form 8-K, dated November 9, 2018. *10.37 Form of Stock Option Awards for Executives under the 2014 Equity Incentive Plan. *10.38 Form of Restricted Stock Unit Award for Executives under the 2014 Equity Incentive Plan. *10.39 Form of Performance Share Unit Award for Executives under the 2014 Equity Incentive Plan. *21 List of Subsidiaries. *23.1 Consent of KPMG LLP, Independent Registered Public Accounting Firm. *31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. *31.2 Certification of Principal Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. *31.3 Certification of Principal Accounting Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. **32 Certifications pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. § 1350. (101) Formatted in XBRL (Extensible Business Reporting Language) Table of Contents 101.INS XBRL Instance Document - the instance document does not appear in the interactive data filing because its XBRL tags are embedded within the Inline XBRL document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) * Filed herewith ** This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended (Securities Act), or the Exchange Act. Table of Contents SIGNATURES Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SHENANDOAH TELECOMMUNICATIONS COMPANY February 25, 2021 /S/ CHRISTOPHER E. FRENCH Christopher E. French, President & Chief Executive Officer (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/CHRISTOPHER E. FRENCH President & Chief Executive Officer, February 25, 2021 Director (Principal Executive Officer) Christopher E. French /s/JAMES J. VOLK Senior Vice President – Chief Financial Officer February 25, 2021 (Principal Financial Officer) James J. Volk /s/CHASE L. STOBBE Vice President - Chief Accounting Officer February 25, 2021 (Principal Accounting Officer) Chase L. Stobbe /s/THOMAS A. BECKETT Director February 25, 2021 Thomas A. Beckett /s/TRACY FITZSIMMONS Director February 25, 2021 Tracy Fitzsimmons /s/JOHN W. FLORA Director February 25, 2021 John W. Flora /s/ RICHARD L. KOONTZ, JR. Director February 25, 2021 Richard L. Koontz, Jr. /s/DALE S. LAM Director February 25, 2021 Dale S. Lam /s/KENNETH L. QUAGLIO Director February 25, 2021 Kenneth L. Quaglio /s/LEIGH ANN SCHULTZ Director February 25, 2021 Leigh Ann Schultz F-35