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 Principal 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, 2021. Our certifying officers concluded that, as a result of the material weaknesses in internal control over financial reporting described below, our disclosure controls and procedures were not effective as of December 31, 2021. 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, and that such information 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 year ended December 31, 2020, the Company is pursuing a multi-year, phased approach to remediate its material weaknesses. There have been no changes in the Company’s internal control over financial reporting that occurred during the quarter ended December 31, 2021 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, 2021 due to a material weakness in our control environment. Unusually high employee turnover and multiple priorities, including the need to recalibrate control activities for our smaller continuing operations, upgrade our lease accounting and enterprise resource planning (ERP) systems, and continue our remediation efforts placed strain on our resources. As a result, the Company did not have effective information and communication processes and did not have effective control activities related to i) the design and operation of process-level controls over the accounting for purchases (current liabilities and operating expenses), property, plant, and equipment and related depreciation expense, and leases, and ii) reaching and documenting appropriate historical accounting conclusions related to capitalization of fulfillment costs, fees associated with leases, and cable replacement. 42 Table of Contents As a result of the deficiencies described above, there were immaterial misstatements, some of which were corrected during 2021, and an immaterial error restatement of the 2020 and 2019 consolidated financial statements. The 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, 2021. 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 completing its remediation efforts during 2022. Our 2021 accomplishments and 2022 plans are summarized below. • We designed and began to configure new ERP and lease accounting systems that are scheduled to be implemented during 2022 along with newly designed controls and processes over purchasing (current liabilities and operating expenses), property, plant, and equipment and related depreciation expense, and leases. • We will continue to re-evaluate previously adopted accounting policies to ensure they remain appropriate in light of our smaller continuing operations, and • We will hire, 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 to ensure we meet our remediation goals. We will 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 ITEM 9B. OTHER INFORMATION None 43 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 2022 Annual Meeting of Shareholders, referred to as the “2022 proxy statement,” which we will file with the SEC on or before 120 days after our 2021 fiscal year end, and which appears in the 2022 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 2022 proxy statement, including the information in the 2022 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 2022 proxy statement appearing under the caption “Security Ownership.” The Company awards stock options to its employees meeting certain eligibility requirements under its shareholder-approved Company Stock Incentive Plan, referred to as the 2014 Equity Incentive Plan. The 2014 Equity Incentive Plan authorizes grants of up to an additional 3.0 million shares over a ten-year period beginning in 2014. Outstanding awards and the number of shares available for future issuance as of December 31, 2021 were as follows: Number of securities to be issued upon exercise of outstanding options and RSUs Weighted average exercise price of outstanding options Number of securities remaining available for future issuance 2014 Equity Incentive Plan 482,673 $ — 1,599,094 ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE Information required by Item 13 is incorporated herein by reference to the 2022 proxy statement, including the information in the 2022 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 2022 proxy statement, including the information in the 2022 proxy statement appearing under the caption “Shareholder Ratification of Independent Registered Public Accounting Firm.” 44 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. 45 Table of Contents SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES Index to the Consolidated 2021 Financial Statements Page Reports of Independent Registered Public Accounting Firm F- 2 Consolidated Financial Statements Consolidated Balance Shee ts as of December 31, 2021 and 2020 F- 6 Consolidated Statements of Comprehensive Income for the years ended December 31, 2021, 2020 and 2019 F- 7 Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2021, 2020 and 2019 F- 8 Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019 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, 2021 and 2020, 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, 2021, 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, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, 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, 2021, 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 28, 2022 expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting. 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 relates. Determination of costs capitalized into property, plant, and equipment As discussed in Notes 2 and 6 to the consolidated financial statements, the property, plant, and equipment, net balance as of December 31, 2021 was $554.2 million. The determination to capitalize, rather than expense, costs increases operating income and net income. 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. F-2 Table of Contents 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 28, 2022 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, 2021, 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, 2021, 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, 2021 and 2020, 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, 2021, and the related notes and financial statement schedule II - Valuation and Qualifying Accounts (collectively, the consolidated financial statements), and our report dated February 28, 2022 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 did not have an effective control environment due to insufficient resources. As a result, the Company was unable to maintain effective information and communication processes and did not have effective control activities related to: i) the design and operation of process-level controls over the accounting for purchases (current liabilities and operating expenses), property, plant, and equipment and related depreciation expense, and leases, and ii) reaching and documenting appropriate historical accounting conclusions related to the capitalization of contract fulfillment costs, upfront fees associated with lease arrangements, and cable repairs and maintenance. The material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2021 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 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 F-4 Table of Contents 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 28, 2022 F-5 Table of Contents SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 2021 and 2020 (in thousands) 2021 2020 ASSETS Current assets: Cash and cash equivalents $ 84,344 $ 195,397 Accounts receivable, net of allowance for doubtful accounts of $ 352 and $ 614 , respectively 22,005 70,393 Income taxes receivable 30,188 — Prepaid expenses and other 29,830 7,522 Current assets held for sale — 1,133,294 Total current assets 166,367 1,406,606 Investments 13,661 13,769 Property, plant and equipment, net 554,162 440,427 Goodwill and Intangible assets, net 89,831 106,759 Operating lease right-of-use assets 56,414 50,387 Deferred charges and other assets 10,298 6,448 Total assets 890,733 2,024,396 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Current maturities of long-term debt, net of unamortized loan fees $ — $ 688,463 Accounts payable 28,542 19,599 Advanced billings and customer deposits 11,128 8,594 Accrued compensation 9,653 16,413 Income taxes payable — 6,951 Current operating lease liabilities 3,318 1,970 Accrued liabilities and other 14,649 13,869 Current liabilities held for sale — 452,202 Total current liabilities 67,290 1,208,061 Other long-term liabilities: Deferred income taxes 86,014 148,684 Asset retirement obligations 9,615 4,955 Benefit plan obligations 8,216 14,645 Non-current operating lease liabilities 51,692 46,095 Other liabilities 25,631 24,905 Total other long-term liabilities 181,168 239,284 Commitments and contingencies (Note 14) Shareholders’ equity: Common stock, no par value, authorized 96,000 ; 49,965 and 49,868 issued and outstanding at December 31, 2021 and 2020, respectively — — Additional paid in capital 49,351 47,317 Retained earnings 592,924 534,440 Accumulated other comprehensive loss, net of taxes — ( 4,706 ) Total shareholders’ equity 642,275 577,051 Total liabilities and shareholders’ equity $ 890,733 $ 2,024,396 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, 2021, 2020 and 2019 (in thousands, except per share amounts) 2021 2020 2019 Service revenue and other $ 245,239 $ 220,775 $ 206,862 Operating expenses: Cost of services 102,299 89,657 83,572 Selling, general and administrative 82,451 85,016 77,846 Restructuring expense 1,727 — — Impairment expense 5,986 — — Depreciation and amortization 55,206 48,703 46,786 Total operating expenses 247,669 223,376 208,204 Operating loss ( 2,430 ) ( 2,601 ) ( 1,342 ) Other income, net 8,665 3,187 3,280 Income before income taxes 6,235 586 1,938 Income tax (benefit) expense ( 1,694 ) ( 990 ) 6 Income from continuing operations 7,929 1,576 1,932 Discontinued operations: Income from discontinued operations, net of tax 94,667 124,097 53,568 Gain on the sale of discontinued operations, net of tax 896,235 — — Total income from discontinued operations, net of tax 990,902 124,097 53,568 Net income 998,831 125,673 55,500 Other comprehensive income: Net gains (losses) on interest rate swaps, net of tax 4,706 ( 5,014 ) ( 7,972 ) Comprehensive income $ 1,003,537 $ 120,659 $ 47,528 Net income per share, basic and diluted: Basic - Income from continuing operations $ 0.16 $ 0.03 $ 0.04 Basic - Income from discontinued operations, net of tax $ 19.81 $ 2.49 $ 1.07 Basic net income per share $ 19.97 $ 2.52 $ 1.11 Diluted - Income from continuing operations $ 0.16 $ 0.03 $ 0.04 Diluted - Income from discontinued operations, net of tax $ 19.76 $ 2.48 $ 1.07 Diluted net income per share $ 19.92 $ 2.51 $ 1.11 Weighted average shares outstanding, basic 50,026 49,901 49,811 Weighted average shares outstanding, diluted 50,149 50,024 50,101 Cash dividends declared per share $ 18.82 $ 0.34 $ 0.29 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, 2021, 2020 and 2019 (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, 2018 49,630 47,456 388,496 8,280 444,232 Immaterial correction of accumulated error (Note 1) ( 3,838 ) ( 3,838 ) Balance, December 31, 2018 (adjusted) 49,630 47,456 384,658 8,280 440,394 Net income — — 55,500 — 55,500 Net loss on interest rate swaps, net of tax — — — ( 7,972 ) ( 7,972 ) Dividends declared — — ( 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 42,110 425,716 308 468,134 Net income — — 125,673 — 125,673 Net loss on interest rate swaps, net of tax — — — ( 5,014 ) ( 5,014 ) Dividends declared — — ( 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 47,317 534,440 ( 4,706 ) 577,051 Net income — — 998,831 — 998,831 Net gain on interest rate swaps, net of tax — — — 4,706 4,706 Dividends declared — — ( 940,347 ) — ( 940,347 ) Stock based compensation 133 3,661 — — 3,661 Shares retired for settlement of employee taxes upon issuance of vested equity awards ( 36 ) ( 1,627 ) — — ( 1,627 ) Balance, December 31, 2021 49,965 $ 49,351 $ 592,924 $ — $ 642,275 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, 2021, 2020 and 2019 (in thousands) 2021 2020 2019 Cash flows from operating activities: Net income $ 998,831 $ 125,673 $ 55,500 Income from discontinued operations, net of tax 990,902 124,097 53,568 Income from continuing operations 7,929 1,576 1,932 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 54,389 47,964 46,313 Amortization 817 739 473 Accretion of asset retirement obligations 421 333 410 Bad debt expense 1,028 1,220 1,743 Stock based compensation expense, net of amount capitalized 3,408 5,907 3,367 Deferred income taxes 22,263 14,906 16,681 Restructuring expense 1,727 — — Impairment expense 5,986 — — Gain from patronage and investments and other 481 ( 1,311 ) ( 4,769 ) Changes in assets and liabilities: Accounts receivable 163 ( 7,318 ) ( 74 ) Current income taxes ( 25,149 ) ( 15,896 ) ( 16,675 ) Operating lease right-of-use assets 4,779 3,980 7,593 Other assets ( 7,005 ) ( 2,505 ) 785 Accounts payable 2,976 ( 663 ) ( 8,426 ) Lease liabilities ( 4,333 ) ( 3,067 ) ( 4,987 ) Other deferrals and accruals ( 6,427 ) 7,494 ( 2,037 ) Net cash provided by operating activities - continuing operations 63,453 53,359 42,329 Net cash (used) provided by operating activities - discontinued operations ( 314,387 ) 249,508 216,816 Net cash (used) provided by operating activities ( 250,934 ) 302,867 259,145 Cash flows from investing activities: Capital expenditures ( 160,101 ) ( 120,450 ) ( 67,048 ) 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 366 370 112 Net cash used in investing activities - continuing operations ( 159,735 ) ( 138,088 ) ( 93,678 ) Net cash provided (used) in investing activities - discontinued operations 1,944,089 ( 17,500 ) ( 71,656 ) Net cash provided (used) in investing activities 1,784,354 ( 155,588 ) ( 165,334 ) Cash flows from financing activities: Payments for debt issuance costs ( 841 ) — — Dividends paid, net of dividends reinvested ( 940,256 ) ( 16,424 ) ( 13,943 ) Share repurchases — — ( 7,231 ) Taxes paid for equity award issuances ( 1,627 ) ( 2,217 ) ( 2,910 ) Payments for financing arrangements and other ( 1,193 ) ( 769 ) 36 Net cash used in financing activities - continuing operations ( 943,917 ) ( 19,410 ) ( 24,048 ) Net cash used in financing activities - discontinued operations ( 700,556 ) ( 34,123 ) ( 53,198 ) Net cash used in financing activities ( 1,644,473 ) ( 53,533 ) ( 77,246 ) Net (decrease) increase in cash and cash equivalents ( 111,053 ) 93,746 16,565 Cash and cash equivalents, beginning of period 195,397 101,651 85,086 Cash and cash equivalents, end of period $ 84,344 $ 195,397 $ 101,651 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, refer to Note 15, Segment Reporting , for additional information. Revision of Prior Period Financial Statements Immaterial correction of accumulated error During 2021, the Company determined that an error existed in our previously issued financial statements related to the capitalization of labor costs associated with customer installation activities at existing service locations for the Broadband segment. These activities were incorrectly recognized as capitalized contract fulfillment costs since the adoption of Accounting Standards Codification 606, Revenue from contracts with customers, (“ASC 606”) on January 1, 2018. The costs should have been expensed according to application of historical accounting policy in place prior to the adoption of ASC 606, and pursuant to industry specific guidance ASC 922 Entertainment – Cable Television. The error was evaluated 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 the Company’s financial statements. Although the Company has determined such error to be immaterial to its prior annual and interim financial statements, the cumulative effect of the error would be material if corrected in the current year. Therefore, the Company revised its historical financial statements to properly reflect the historical accounting policy elected pursuant to ASC 922. The cumulative impact of such error, relative to earnings, for the period prior to 2019 was insignificant. As of and for the Year Ended December 31, 2020 ($ in thousands) Pre-Adjustment Error Correction Post-Adjustment Consolidated Balance Sheet: Prepaid expenses and other $ 9,631 $ ( 2,109 ) $ 7,522 Deferred charges and other assets 11,650 ( 5,202 ) 6,448 Deferred income taxes 150,652 ( 1,968 ) 148,684 Retained earnings 539,783 ( 5,343 ) 534,440 Consolidated Statement of Comprehensive Income: Cost of services 88,203 1,454 89,657 Income before income taxes 2,040 ( 1,454 ) 586 Income tax (benefit) expense ( 586 ) ( 404 ) ( 990 ) Income from continuing operations 2,626 ( 1,050 ) 1,576 Net income 126,723 ( 1,050 ) 125,673 Comprehensive income 121,709 ( 1,050 ) 120,659 Net income per share, basic and diluted: Basic - Income from continuing operations $ 0.05 $ ( 0.02 ) $ 0.03 Basic - Net income per share $ 2.54 $ ( 0.02 ) $ 2.52 Diluted - Income from continuing operations $ 0.05 $ ( 0.02 ) $ 0.03 Diluted - Net income per share $ 2.53 $ ( 0.02 ) $ 2.51 F-10 Table of Contents As of and for the Year Ended December 31, 2019 ($ in thousands) Pre-Adjustment Error Correction Post-Adjustment Consolidated Balance Sheet: Prepaid expenses and other $ 11,178 $ ( 2,510 ) $ 8,668 Deferred charges and other assets 9,267 ( 3,349 ) 5,918 Deferred income taxes 137,567 ( 1,565 ) 136,002 Retained earnings, beginning of year 388,496 ( 3,838 ) 384,658 Retained earnings, end of year 430,010 ( 4,294 ) 425,716 Consolidated Statement of Comprehensive Income: Cost of services 82,949 623 83,572 Income before income taxes 2,561 ( 623 ) 1,938 Income tax (benefit) expense 173 ( 167 ) 6 Income from continuing operations 2,388 ( 456 ) 1,932 Net income 55,956 ( 456 ) 55,500 Comprehensive income 47,984 ( 456 ) 47,528 Net income per share, basic and diluted: Basic - Income from continuing operations $ 0.05 $ ( 0.01 ) $ 0.04 Basic - Net income per share $ 1.12 $ ( 0.01 ) $ 1.11 Diluted - Income from continuing operations $ 0.05 $ ( 0.01 ) $ 0.04 Diluted - Net income per share $ 1.12 $ ( 0.01 ) $ 1.11 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 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. Labor costs associated with customer installation activities at existing service locations are expensed as incurred under industry specific guidance. 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 F-11 Table of Contents 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 2021, 2020 and 2019, 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, 2021, 2020, or 2019. 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 notes below. These assets are evaluated for impairment based on the identification of asset groups. Our asset groups align with our reportable segments. We evaluated our asset groups for impairment during the fourth quarter of 2021. We concluded that there were no indicators that an asset group impairment was more likely than not during the years ended December 31, 2021, 2020, or 2019. 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, 2021, 2020 and 2019 was $ 4.4 million, $ 2.7 million and $ 3.5 million, respectively. Benefit Plan Obligations: The Benefit Plan Obligations caption includes the following: ($ in thousands) December 31, 2021 December 31, 2020 Pension Plan $ 2,393 $ 7,961 Postretirement Medical Benefits Plan 3,506 3,997 Supplemental executive retirement plan ("SERP") 2,317 2,687 Total $ 8,216 $ 14,645 The pension plan is a frozen defined benefit plan. 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, 2021 and 2020, the fair value of our Pension Plan assets were $ 31.1 million and $ 27.0 million, respectively. These investments are held in mutual funds, and are valued based on the net asset value per share. Our Pension Plan's projected benefit obligation was $ 33.5 million and $ 34.9 million, at December 31, 2021 and 2020, respectively. The Pension Plan liability was discounted at 2.74 % and 2.41 % at December 31, 2021 and 2020, respectively. On October 13, 2021, the Company adopted a resolution to terminate its pension plan effective December 31, 2021. Following adoption of the resolution, on October 28, 2021, the Company provided notice of intent to terminate the pension plan to participants. The Company expects to complete the termination of the plan, and settle all obligations thereunder, in 2022. The postretirement medical benefits plan is a frozen, unfunded, defined benefit plan. The postretirement plan liability was discounted at 2.70 % and 2.32 % at December 31, 2021 and 2020, respectively. 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 components of benefit plan expense are presented in Other income, net and our policy is to immediately recognize actuarial gains and losses into earnings. The 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, net, while the reciprocal changes in the liability representative of compensatory expense, are presented in selling, general and administrative expense. F-12 Table of Contents New Accounting Standards 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 has LIBOR as a reference rate. We plan to apply the accounting relief as any relevant contract modifications are made to our Credit Agreement 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 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. In November 2021, the FASB issued ASU 2021-10, “ Government Assistance (Topic 832), Disclosures by Business Entities About Government Assistance, ” which requires entities to provide disclosures on material government assistance transactions for annual reporting periods. The disclosures include information about the nature of the assistance, the related accounting policies used to account for government assistance, the effect of government assistance on the entity’s financial statements and any significant terms and conditions of the agreements, including commitments and contingencies. The new standard is effective for the Corporation on January 1, 2022 and only impacts annual financial statement disclosures. The adoption is not expected to have a material effect on our consolidated financial statements. 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. On July 1, 2021, pursuant to the previously announced Asset Purchase Agreement (the “Purchase Agreement”), dated May 28, 2021, between Shentel and T-Mobile, Shentel completed the sale to T-Mobile of its Wireless assets and operations for cash consideration of approximately $ 1.94 billion, inclusive of the approximately $ 60 million settlement of the waived management fees by Sprint, and net of certain transaction expenses (the “Transaction”). The assets and liabilities that transferred in the sale (the "disposal group") were presented as held for sale within our historical consolidated balance sheets, and discontinued operations within our historical consolidated statements of comprehensive income. The transaction was structured as an asset sale for income tax purposes. As a result, no current or deferred tax assets or liabilities were included within the disposal group. While the Company’s long-term debt did not transfer in the sale, its provisions required full repayment of all outstanding amounts, concurrent with the consummation of the sale. Accordingly, all debt balances and related interest rate swap liabilities were therefore presented outside of the disposal group as a current liability as of December 31, 2020, and. the related interest expense and debt extinguishment costs were presented within discontinued operations under the relevant authoritative guidance. F-13 Table of Contents The carrying amounts of the major classes of assets and liabilities, classified as held for sale in the consolidated balance sheets, were as follows: (in thousands) December 31, 2020 ASSETS Inventory $ 5,746 Prepaid expenses and other 47,003 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 LIABILITIES Current operating lease liabilities $ 409,887 Accrued liabilities and other 8,770 Asset retirement obligations 33,545 Current liabilities held for sale $ 452,202 Income from discontinued operations, net of tax in the consolidated statements of comprehensive income consist of the following for the years ended December 31, 2021, 2020 and 2019: (in thousands) Revenue: 2021 2020 2019 Service revenue and other $ 201,076 $ 401,035 $ 375,730 Equipment revenue 12,253 41,338 67,659 Total revenue 213,329 442,373 443,389 Operating expenses: Cost of services 38,144 116,394 128,482 Cost of goods sold 11,964 40,642 65,148 Selling, general and administrative 17,514 34,011 39,128 Severance expense 465 — — Depreciation and amortization — 62,930 111,467 Total operating expenses 68,087 253,977 344,225 Operating income 145,242 188,396 99,164 Other (expense) income: Debt extinguishment ( 11,032 ) — — Interest expense and other, net ( 9,178 ) ( 20,455 ) ( 29,286 ) Gain on sale of disposition of Wireless assets and operations 1,227,531 — — Income before income taxes 1,352,563 167,941 69,878 Income tax expense 361,661 43,844 16,310 Income from discontinued operations, net of tax $ 990,902 $ 124,097 $ 53,568 Consummation of the sale triggered the recognition of approximately $ 21.2 million of incremental selling costs during 2021, for contingent deal advisory fees and severance expenses, which are netted against the gain on sale of disposition of Wireless assets and operations. In addition, also triggered by the disposition event, we recognized an $ 11.0 million loss on debt extinguishment and incurred interest expense of approximately $ 2.6 million on the termination of our interest rate swaps in connection with the Wireless sale. F-14 Table of Contents The Company generated $ 10.2 million in revenue from T-Mobile throughout the remainder of 2021 after the consummation of the sale. 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 costs related to in-house and third-party vendors which are capitalized and amortized over the expected weighted average customer life which is approximately six years . Below is a summary of the Broadband segment's capitalized contract acquisition costs: (in thousands) 2021 2020 Beginning Balance $ 7,358 $ 5,147 Commission payments 3,229 4,399 Contract amortization ( 2,440 ) ( 2,188 ) Ending Balance $ 8,147 $ 7,358 Our Broadband segment also provides Ethernet and Wavelength fiber optic services to commercial fiber customers under capacity agreements, and the related revenue is recognized over time. In some cases, non-refundable upfront fees are charged for connecting commercial fiber customers to our fiber network. Those amounts are recognized ratably over the longer of the contract term or the period in which the unrecognized fee remains material to the respective contract. A related contract liability of $ 3.5 million at December 31, 2021, is expected to be recognized into revenue at the rate of approximately $ 0.2 million per year. The Broadband segment also leases dedicated fiber optic strands to customers as part of “dark fiber” agreements, which are accounted for as leases under ASC 842. Our Tower segment leases space on owned cell towers to our Broadband segment, and to other wireless carriers. Revenue from these leases is accounted for under ASC 842. Refer to Note 15, Segment Reporting , for a summary of these revenue streams. No customers accounted for more than 10% of revenue for the years ended December 31, 2021, 2020 and 2019 and no customer made up more than 10% of accounts receivable at December 31, 2021 and December 31, 2020. Note 5. Investments Investments consist of the following: (in thousands) December 31, 2021 December 31, 2020 SERP Investments at fair value $ 2,317 $ 2,687 Cost method investments 11,004 10,536 Equity method investments 340 546 Total investments $ 13,661 $ 13,769 F-15 Table of Contents SERP Investments at fair value: The Company holds the SERP 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 six months after retirement. The benefit obligation to participants is always equal to the value of the SERP assets under ASC 710, Compensation . Cost Method Investments : Our investment in CoBank’s Class A common stock, derived from the CoBank patronage program, represented substantially all of our cost method investments with a balance of $ 10.3 million and $ 9.8 million at December 31, 2021 and 2020, respectively. We recognized approximately $ 2.0 million, $ 4.2 million and $ 4.2 million of patronage income in Other income (expense) in 2021, 2020 and 2019, respectively. Historically, approximately 75 % of the patronage distributions were collected in cash and 25 % in equity. Equity Method Investments: At December 31, 2021, the Company had a 20.0 % ownership interest in Valley Network Partnership (“ValleyNet”). The Company and ValleyNet purchase capacity on one another’s fiber network. We recognized revenue of $ 0.7 million, $ 0.9 million, and $ 1.0 million from providing service to ValleyNet during 2021, 2020, and 2019, respectively. We recognized cost of service of $ 1.2 million, $ 2.7 million, and $ 3.0 million for the use of ValleyNet’s network during 2021, 2020, and 2019, respectively. Note 6. Property, Plant and Equipment Property, plant and equipment consisted of the following: ($ in thousands) Estimated Useful Lives December 31, 2021 December 31, 2020 Land $ 3,771 $ 3,909 Land improvements 10 years 3,478 2,910 Buildings and structures 10 - 45 years 96,323 91,335 Cable and fiber 15 - 30 years 453,405 390,209 Equipment and software 4 - 8 years 391,293 331,047 Plant in service 948,270 819,410 Plant under construction 79,963 49,417 Total property, plant and equipment 1,028,233 868,827 Less: accumulated amortization and depreciation 474,071 428,400 Property, plant and equipment, net $ 554,162 $ 440,427 Property, plant and equipment net, increased due primarily to capital expenditures in the Broadband segment driven by our Glo Fiber market expansion. In Q4 2021, the Company ceased expansion of its Beam network, resulting in abandonment of related property, plant and equipment. Consequently, the Company recorded $ 6.0 million of impairment charges related to abandonment of Beam property, plant and equipment after estimating the salvage value based on quoted prices for the assets. F-16 Table of Contents Note 7. Goodwill and Intangible Assets The Company's intangible assets consisted of the following: December 31, 2021 December 31, 2020 (in thousands) Gross Carrying Amount Accumulated Amortization and Other Net Gross Carrying Amount Accumulated Amortization and Other Net Goodwill - Broadband $ 3,244 $ — $ 3,244 $ 3,244 $ — $ 3,244 Indefinite-lived intangibles: Cable franchise rights $ 64,334 $ — $ 64,334 $ 64,334 $ — $ 64,334 FCC spectrum licenses 13,839 — 13,839 29,958 — 29,958 Railroad crossing rights 141 — 141 141 — 141 Total indefinite-lived intangibles 78,314 — 78,314 94,433 — 94,433 Finite-lived intangibles: FCC spectrum licenses 6,811 ( 672 ) 6,139 6,811 ( 340 ) 6,471 Subscriber relationships 28,425 ( 26,451 ) 1,974 28,425 ( 26,000 ) 2,425 Other intangibles 463 ( 303 ) 160 463 ( 277 ) 186 Total finite-lived intangibles 35,699 ( 27,426 ) 8,273 35,699 ( 26,617 ) 9,082 Total goodwill and intangible assets $ 117,257 $ ( 27,426 ) $ 89,831 $ 133,376 $ ( 26,617 ) $ 106,759 During the third quarter of 2020, the Company was awarded certain indefinite-lived Citizens Broadband Radio Service ("CBRS") spectrum licenses to be used within the Broadband segment. The Company paid an aggregate deposit of $ 16.1 million with the licenses subject to final approval and issuance by the Federal Communications Commission (“FCC”). The licenses will provide us priority access rights over general access users other than incumbents, in that specific band, in accordance with the FCC’s three-tier CBRS band spectrum sharing framework to utilize designated radio frequency spectrum within specific geographic service areas to provide wireless communication services. The FCC has delayed the issuance of the licenses because the allowable spectrum ownership levels for certain of our investors would be exceeded should the licenses be issued. The Company is currently in discussions with the FCC and is considering to forego the issuance of certain licenses included in this transaction covering 15 markets with a cost basis of approximately $ 4.5 million in exchange for a refund and expects resolution in early 2022. The entire deposit of $ 16.1 million is classified within prepaid expenses and other in the Company's consolidated balance sheet as of December 31, 2021. For the years ended December 31, 2021, 2020 and 2019, amortization expense was approximately $ 0.8 million, $ 0.7 million and $ 0.5 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 F-17 Table of Contents The following table summarizes expected amortization of intangible assets at December 31, 2021: (in thousands) Amortization of Intangible Assets 2022 $ 772 2023 772 2024 772 2025 768 2026 427 Thereafter 4,762 Total $ 8,273 Note 8. Other Assets and Accrued Liabilities Prepaid expenses and other, classified as current assets, included the following: (in thousands) December 31, 2021 December 31, 2020 Deposit for FCC spectrum licenses $ 16,118 $ — Prepaid maintenance expenses 8,391 4,018 Broadband contract acquisition costs 2,502 2,308 SERP investments 801 — Other 2,018 1,196 Prepaid expenses and other $ 29,830 $ 7,522 Deferred charges and other assets, classified as long-term assets, included the following: (in thousands) December 31, 2021 December 31, 2020 Broadband contract acquisition costs $ 5,645 $ 5,050 Prepaid expenses and other 4,653 1,398 Deferred charges and other assets $ 10,298 $ 6,448 Accrued liabilities and other, classified as current liabilities, included the following: (in thousands) December 31, 2021 December 31, 2020 Interest rate swaps $ — $ 4,048 Accrued programming costs 3,084 2,868 Sales and property taxes payable 1,065 1,072 Restructuring accrual 1,761 — Other current liabilities 8,739 5,881 Accrued liabilities and other $ 14,649 $ 13,869 F-18 Table of Contents Other liabilities, classified as long-term liabilities, included the following: (in thousands) December 31, 2021 December 31, 2020 Noncurrent portion of deferred lease revenue $ 19,749 $ 18,687 FCC spectrum license obligations 3,807 3,845 Noncurrent portion of financing leases 1,614 1,492 Other 461 881 Other liabilities $ 25,631 $ 24,905 Restructuring activities During 2021, in connection with the disposition of our Wireless segment, we implemented a restructuring plan whereby certain employees were notified of their pending dismissal under the workforce reduction program. The following table identifies severance activity that has occurred as a result of the plan: (in thousands) Year Ended December 31, 2021 Beginning Balance January 1, 2021 $ — Expense (1) 3,862 Payments (2) ( 2,101 ) Ending Balance - December 31, 2021 $ 1,761 _______________________________________________________ (1) For the year ended December 31, 2021, approximately $ 2.2 million of expense was recognized within discontinued operations and $ 1.7 million in continuing operations. (2) For the year ended December 31, 2021, approximately $ 1.4 million of payments were attributable to discontinued operations and $ 0.7 million in continued operations. Asset Retirement Obligations: Our asset retirement obligations ("ARO") arise from certain of our leases and generally require us to remove our towers from ground leases. The Company's estimates related to ARO were revised during 2021 resulting in recognition of an additional obligation of $ 4.3 million. Below is a summary of our current and non-current asset retirement obligations: Years Ended December 31, (in thousands) 2021 2020 2019 Balance at beginning of year $ 5,113 $ 6,152 $ 8,808 Additional liabilities accrued 4,334 262 593 Changes to prior estimates ( 44 ) ( 1,633 ) ( 3,659 ) Payments — — — Accretion expense 421 332 410 Balance at end of year $ 9,824 $ 5,113 $ 6,152 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. F-19 Table of Contents 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, 2021, our operating leases had a weighted average remaining lease term of twenty years and a weighted average discount rate of 4.4 %. Our finance leases had a weighted average remaining lease term of fourteen years and a weighted average discount rate of 5.2 %. During 2021, we recognized $ 7.1 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 $ 5.6 million of operating lease payments during 2021. We also obtained $ 11.1 million and $ 6.8 million of leased assets in exchange for new operating lease liabilities recognized during 2021 and 2020, respectively. The following table summarizes the expected maturity of lease liabilities at December 31, 2021: (in thousands) Operating Leases Finance Leases Total 2022 $ 5,546 $ 180 $ 5,726 2023 5,159 182 5,341 2024 4,815 184 4,999 2025 4,636 186 4,822 2026 4,150 159 4,309 2027 and thereafter 65,909 1,503 67,412 Total lease payments 90,215 2,394 92,609 Less: Interest 35,205 696 35,901 Present value of lease liabilities $ 55,010 $ 1,698 $ 56,708 We recognized $ 11.1 million of operating lease revenue during 2021 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 contractual minimum rental receipts expected under the lease agreements in place at December 31, 2021: (in thousands) Operating Leases 2022 $ 14,460 2023 12,947 2024 12,083 2025 11,134 2026 8,198 2027 and thereafter 28,915 Total $ 87,737 Note 10. Debt Our cash payments for interest were $ 10.4 million and $ 18.6 million during 2021 and 2020, respectively. As discussed in Note 3, Discontinued Operations , upon consummation of the Transaction, the Company used approximately $ 681 million of the proceeds received from the sale to fully repay all outstanding principal amounts under, and terminate the Credit Agreement existing as of June 30, 2021 ("Prior Credit Agreement"). On July 1, 2021, the Company entered into a Credit Agreement (the “Credit Agreement”) with various financial institutions thereto (the “Lenders”) and CoBank, ACB, as administrative agent for the Lenders (in such capacity, the “Administrative Agent”). The Credit Agreement provides for three credit facilities (collectively, the “Facilities”), in an aggregate amount equal to $ 400 million: (i) a $ 100 million five-year revolving credit facility (the “Revolver”), (ii) a $ 150 million five-year delay draw F-20 Table of Contents amortizing term loan (the “Term Loan A-1”) and (iii) a $ 150 million seven-year delay draw amortizing term loan (the “Term Loan A-2” and, together with the Term Loan A-1, the “Term Loans”). The Credit Agreement includes a provision under which the Company may request that additional term loans be made to it in an amount not to exceed the sum of (1) the greater of (a) $ 75 million and (b) 100% of Consolidated EBIDTA (as defined in the Credit Agreement), calculated on a pro forma basis in accordance with the Credit Agreement, plus (2) an additional unlimited amount subject to a maximum Total Net Leverage Ratio (as defined in the Credit Agreement) of 4.00 :1.00, calculated on a pro forma basis in accordance with the Credit Agreement, subject to the receipt of commitments from one or more lenders for any such additional term loans and other customary conditions. The Company may use the proceeds from the Revolver and the Term Loans to finance capital expenditures, provide working capital, and for other general corporate purposes of the Company and its subsidiaries, including the payment of fees and expenses in connection with the foregoing. The Term Loans, when drawn upon, are to be repaid in quarterly principal installments commencing on September 30, 2023, with the unpaid balance of the Term Loans due at maturity, as set forth in the Credit Agreement. Interest payments on outstanding loans are required monthly, beginning in the period of the initial and any subsequent draws. Rates for borrowing under the Credit Agreement are based, at the Company’s election, upon whether the borrowing is a LIBOR loan or a base rate loan. LIBOR loans will bear interest at an adjusted LIBOR rate (which shall be no less than 0.00 %) plus an applicable margin ranging from 1.50 % to 2.75 % for the Term Loan A-1 and the Revolver and from 1.50 % to 3.00 % for the Term Loan A-2, depending on the Company’s Total Net Leverage Ratio. Base rate loans will bear interest at a base rate plus an applicable margin ranging from 0.50 % to 1.75 % for the Term Loan A-1 and the Revolver and from 0.50 % to 2.00 % for the Term Loan A-2, depending on the Company’s Total Net Leverage Ratio. In addition, under the terms of the Credit Agreement, the Company agrees to pay the Lenders a fee on undrawn portions of the Term Loans and Revolver from time to time. This fee rate is dependent on the Company’s Total Net Leverage Ratio and ranges from a rate per annum equal to 0.200 % to 0.375 %. The Credit Agreement contains representations and warranties, and affirmative and negative financial covenants usual and customary for similar secured credit facilities, each of which are applicable to the Company and its subsidiaries, including covenants governing the ability of the Company and its subsidiaries, subject to negotiated exceptions, to incur additional indebtedness and additional liens on their assets, engage in mergers or acquisitions or dispose of assets, pay dividends or make other distributions, enter into transactions with affiliated persons, make investments or change the nature of the Company’s and its subsidiaries’ businesses. The Company is also subject to certain financial covenants to be measured on a trailing twelve month basis on the last day of each calendar quarter. These covenants include: • maintaining a Total Net Leverage Ratio (as defined in the Credit Agreement) not greater than 4.25 to 1.00 (subject to customary increased leverage periods following certain qualifying acquisitions); and • maintaining a Debt Service Coverage Ratio (as defined in the Credit Agreement) not less than 2.00 to 1.00. Indebtedness outstanding under any of the Facilities may be accelerated upon the occurrence of an Event of Default (as defined in the Credit Agreement). As of December 31, 2021, the Company had not drawn on the Term Loans or the Revolver and was in compliance with the financial covenants in its credit agreements. The International Exchange (ICE) Benchmark Administration (the “IBA”) ceased the publication of one-week and two-month LIBOR on December 31, 2021 and expects to phase-out the remaining tenors (overnight, one-month, three-month, six-month and 12-month) on June 30, 2023. Our term loans and revolver identify LIBOR as a reference rate for tenors ceasing on June 30, 2023 and mature after 2023. Alternative reference rates that replace LIBOR may not yield the same or similar economic results over the terms of the financial instruments. The transition from LIBOR could result in us paying higher or lower interest rates on our current LIBOR-indexed Term Loans. Our Credit Agreement includes provisions that provide for the identification of a LIBOR replacement rate. Due to the uncertainty regarding the transition from LIBOR-indexed financial instruments and the manner in which an alternative reference rate will apply, we cannot yet reasonably estimate the expected financial impact of the LIBOR transition. Any changes to the reference rate will be agreed through an amendment to the Credit Agreement and are expected to reference the Secured Overnight Financing Rate, though the timing of such amendment and applicability to any future amounts owed under the Credit Agreement are not certain at this time. Note 11. Derivatives and Hedging As discussed in Note 3, Discontinued Operations , upon consummation of the Transaction, the Company used approximately $ 2.6 million of the proceeds received from the sale to fully satisfy its obligations under, and terminate, the interest rate swaps. Amounts reclassified from accumulated other comprehensive income (loss) are presented as part of income from discontinued operations. F-21 Table of Contents The table below summarizes changes in accumulated other comprehensive income (loss) by component, including the reclassification from accumulated other comprehensive income (loss) into earnings following the swap termination: (in thousands) (Losses) Gains on Cash Flow Hedges Income Tax (Expense) Benefit Accumulated Other Comprehensive (Loss) Income, net of taxes Balance as of December 31, 2020 $ ( 4,048 ) $ ( 658 ) $ ( 4,706 ) Other comprehensive income (loss) before reclassifications 1,447 ( 361 ) 1,086 Amounts reclassified from accumulated other comprehensive income (loss) to interest expense 2,601 1,019 3,620 Net current period other comprehensive (loss) income 4,048 658 4,706 Balance as of December 31, 2021 $ — $ — $ — 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) 2021 2020 2019 Current (benefit) expense Federal taxes $ ( 21,392 ) $ ( 13,748 ) $ ( 16,393 ) State taxes ( 2,565 ) ( 2,148 ) ( 282 ) Total current provision ( 23,957 ) ( 15,896 ) ( 16,675 ) Deferred expense (benefit) Federal taxes 25,518 13,325 16,286 State taxes ( 3,255 ) 1,581 395 Total deferred provision 22,263 14,906 16,681 Income tax (benefit) expense $ ( 1,694 ) $ ( 990 ) $ 6 Effective tax rate ( 27.2 ) % ( 168.9 ) % 0.3 % A reconciliation of income tax expense (benefit) determined by applying the federal and state tax rates to income before income taxes is as follows: Years Ended December 31, (in thousands) 2021 2020 2019 Expected tax expense at federal statutory $ 1,310 $ 24 $ 371 State income taxes, net of federal tax effect 438 54 15 Revaluation of deferred tax liabilities ( 5,206 ) — — Stranded tax effects reclassified from other comprehensive income 1,620 — — Excess tax benefit from share based compensation and other expense, net 144 ( 1,068 ) ( 380 ) Income tax (benefit) expense $ ( 1,694 ) $ ( 990 ) $ 6 The effective tax rate in 2021 decreased from 2020, primarily as a result of recognition of non-cash deferred tax benefits triggered by the disposition of Wireless assets and operations, (see Note 3 – Discontinued Operations ), which drove a reduction in the Company’s future estimated tax rate, as apportionable income and expenses for higher tax rate jurisdictions was reduced, resulting in a revaluation of deferred tax liabilities during the year ended December 31, 2021. The Company's net cash payments for income taxes were $ 459.1 million in the year ended December 31, 2021, which included $ 434.3 million of payments related to the taxable gain from the sale of the Wireless business. The Company's cash payments for income taxes were $ 11.2 million in the year ended December 31, 2020. F-22 Table of Contents 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, 2021 December 31, 2020 Deferred tax assets: Leases $ 15,483 $ 123,129 Asset retirement obligations 2,581 10,403 Net operating loss carry-forwards 5,878 7,723 Pension liabilities 2,148 3,868 Accruals and stock based compensation 2,572 3,093 Other 6,300 5,002 Total gross deferred tax assets 34,962 153,218 Less valuation allowance — — Net deferred tax assets 34,962 153,218 Deferred tax liabilities: Property, plant and equipment 92,449 127,602 Leases 15,410 126,458 Intangible assets 10,710 25,722 Prepaid assets and other 2,407 22,120 Total gross deferred tax liabilities 120,976 301,902 Net deferred tax liabilities $ 86,014 $ 148,684 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, projections for future taxable income over the periods for which the deferred tax assets are deductible, and the option to elect out of bonus depreciation on in-serviced fixed assets, 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 $ 5.9 million related to federal and various state net operating losses. As of December 31, 2021, the Company had approximately $ 27.8 million of federal net operating losses expiring through 2027. The Company also had approximately $ 0.3 million of state net operating losses expiring through 2036. As of December 31, 2021 and 2020, the Company had no unrecognized tax benefits. The Company is not currently subject to state or federal income tax audits as of December 31, 2021. The Company's returns are generally open to examination from 2018 forward and the net operating losses acquired from nTelos are open to examination from 2002 forward. Note 13. Stock Compensation, Earnings per Share, and Dividends The Company's 2014 Stock Incentive Plan ("the Plan") allows for the grant of equity based incentive compensation to all employees. The Plan authorizes grants of up to an additional 3,000,000 shares over a ten-year period beginning in 2014. Under the Plan, 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 200 thousand restricted stock units (RSUs) to employees and directors during 2021 at an average market price of $ 28.99 . The Company also granted, approximately 59 thousand performance-based Relative Total Shareholder Return (“RTSR”) awards to employees at an average value of $ 34.05 during 2020. F-23 Table of Contents On July 2, 2021, the Company’s Board of Directors declared a special dividend of $ 18.75 per share on the issued and outstanding shares of the Company’s common stock (the “Special Dividend”). On August 4, 2021, in accordance with the Plan, the Company's Board of Directors adopted a resolution to modify the outstanding equity awards to offset the grantees’ loss in intrinsic value caused by the disposition of wireless and the decline in the Company's share price following the Special Dividend. Approximately 81 thousand awards were issued, split between RSUs and RTSRs, as a result of this modification. No other terms or conditions of the outstanding equity awards were modified, no incremental expense was required to be recognized, and there was no significant impact to dilutive securities. The Company's RSUs 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 generally vest over an approximate three year period. 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 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) 2021 2020 2019 Stock compensation expense $ 3,552 $ 6,227 $ 3,732 Capitalized stock compensation 144 320 365 Stock compensation expense, net $ 3,408 $ 5,907 $ 3,367 As of December 31, 2021, there was $ 5.9 million of total unrecognized compensation cost related to non-vested incentive awards that are expected to be recognized over weighted average period of 1.8 years. 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) 2021 2020 2019 Calculation of net income per share: Income from continuing operations $ 7,929 $ 1,576 $ 1,932 Income from discontinued operations, net of tax $ 990,902 $ 124,097 $ 53,568 Net income $ 998,831 $ 125,673 $ 55,500 Basic weighted average shares outstanding 50,026 49,901 49,811 Basic net income per share - continuing operations $ 0.16 $ 0.03 $ 0.04 Basic net income per share - discontinued operations $ 19.81 $ 2.49 $ 1.07 Basic net income per share $ 19.97 $ 2.52 $ 1.11 Effect of stock-based compensation awards outstanding: Basic weighted average shares outstanding 50,026 49,901 49,811 Effect from dilutive shares and options outstanding 123 123 290 Diluted weighted average shares outstanding 50,149 50,024 50,101 Diluted net income per share - continuing operations $ 0.16 $ 0.03 $ 0.04 Diluted net income per share - discontinued operations $ 19.76 $ 2.48 $ 1.07 Diluted net income per share $ 19.92 $ 2.51 $ 1.11 There were approximately 259 thousand anti-dilutive awards outstanding during 2021 and fewer than 110 thousand anti-dilutive awards outstanding during 2020 and 2019. The Special Dividend was paid on August 2, 2021. The total payout to Shentel shareholders, including amounts reinvested in the Company’s stock via the Company’s Dividend Reinvestment Plan, was approximately $ 937 million. In addition to the Special Dividend, on October 27, 2021, the Company Board of Directors declared the annual dividend of $ 0.07 per share on the F-24 Table of Contents issued and outstanding shares of the Company's common stock (the "Annual Dividend"). The Annual Dividend was paid on December 1, 2021. The total payout to Shentel shareholders, including amounts reinvested in the Company’s stock via the Company’s Dividend Reinvestment Plan, was approximately $ 3 million. Note 14. Commitments and Contingencies We are committed to make payments to satisfy our lease liabilities. The scheduled payments under those obligations are summarized in Note 9, Leases. We also have outstanding unconditional purchase commitments to procure marketing services and IT software licenses through 2026 and commitments for licenses to access Educational Broadband Service (“EBS”) spectrum channels through 2039. For the years ended December 31, 2021, 2020 and 2019 we paid $ 3.4 million, $ 1.4 million and $ 0.5 million, respectively, for the marketing services and IT software license purchase commitments. For each of the years ended December 31, 2021, 2020 and 2019, we paid approximately $ 0.1 million for access to certain EBS spectrum channels. The Company is obligated to make the following future minimum payments under the non-cancelable terms of these commitments as of December 31, 2021: (in thousands) Purchase Commitments 2022 $ 3,658 2023 2,410 2024 1,385 2025 840 2026 190 2027 and thereafter 109 Total $ 8,592 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 divestiture of our Wireless operations on July 1, 2021 represented a strategic shift in the Company’s business which therefore qualified the segment as a discontinued operation. As a result, for all periods presented, the operating results and cash flows related to the Wireless segment were reflected as a discontinued operation in our Consolidated Statements of Comprehensive Income and the Consolidated Statements of Cash Flows. 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. Intercompany revenue is primarily derived from services provided to the discontinued operation, for periods prior to the divestiture. F-25 Table of Contents Year ended December 31, 2021: (in thousands) Broadband Tower Corporate & Eliminations Consolidated External revenue Residential & SMB $ 177,530 $ — $ — $ 177,530 Commercial Fiber 30,842 — — 30,842 RLEC & Other 15,249 — — 15,249 Tower lease — 12,393 — 12,393 Service revenue and other 223,621 12,393 — 236,014 Revenue for service provided to the discontinued Wireless operations 4,459 5,311 ( 545 ) 9,225 Total revenue 228,080 17,704 ( 545 ) 245,239 Operating expenses Cost of services 97,283 5,438 ( 422 ) 102,299 Selling, general and administrative 47,840 1,197 33,414 82,451 Restructuring expense 202 — 1,525 1,727 Impairment expense 5,986 — — 5,986 Depreciation and amortization 47,937 2,053 5,216 55,206 Total operating expenses 199,248 8,688 39,733 247,669 Operating income (loss) $ 28,832 $ 9,016 $ ( 40,278 ) $ ( 2,430 ) Capital expenditures $ 156,131 $ 977 $ 2,993 $ 160,101 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 84,893 4,896 ( 132 ) 89,657 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 165,441 8,232 49,703 223,376 Operating income (loss) $ 38,906 $ 8,823 $ ( 50,330 ) $ ( 2,601 ) Capital expenditures $ 117,246 $ 2,001 $ 1,203 $ 120,450 F-26 Table of Contents 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 79,858 3,777 ( 63 ) 83,572 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 151,969 6,690 49,545 208,204 Operating income (loss) $ 41,974 $ 6,295 $ ( 49,611 ) $ ( 1,342 ) Capital expenditures $ 60,627 $ 921 $ 5,500 $ 67,048 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) 2021 2020 2019 Total consolidated operating loss $ ( 2,430 ) $ ( 2,601 ) $ ( 1,342 ) Other income, net 8,665 3,187 3,280 Income from continuing operations before income taxes $ 6,235 $ 586 $ 1,938 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 applicable. F-27 Table of Contents Note 16. Quarterly Results (unaudited) The following table reflects selected quarterly results for the Company. Amounts were adjusted from their previous presentation as a result of the error correction discussed in Note 1. Three Months Ended (in thousands, except per share data) March 31, 2021 June 30, 2021 September 30, 2021 December 31, 2021 Revenue $ 59,691 $ 60,700 $ 62,244 $ 62,604 Operating income (loss) 2,230 2,390 851 ( 7,901 ) Income (loss) from continuing operations 2,945 1,626 6,495 ( 3,137 ) Income (loss) from discontinued operations, net of tax 48,472 51,566 ( 406 ) ( 4,965 ) Gain on the sale of discontinued operations, net of tax — — 886,732 9,503 Net income 51,417 53,192 892,821 1,401 Basic - Income (loss) from continuing operations $ 0.06 $ 0.03 $ 0.13 $ ( 0.06 ) Basic - Income from discontinued operations, net of tax $ 0.97 $ 1.04 $ 17.73 $ 0.09 Basic net income per share $ 1.03 $ 1.07 $ 17.86 $ 0.03 Diluted - Income (loss) from continuing operations $ 0.06 $ 0.03 $ 0.13 $ ( 0.06 ) Diluted - Income from discontinued operations, net of tax $ 0.97 $ 1.03 $ 17.68 $ 0.09 Diluted net income per share $ 1.03 $ 1.06 $ 17.81 $ 0.03 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 income (loss) ( 1,648 ) ( 2,361 ) ( 121 ) 1,529 Income (loss) from continuing operations ( 55 ) ( 893 ) 985 1,539 Income from discontinued operations, net of tax 13,129 29,784 33,509 47,675 Net income 13,074 28,891 34,494 49,214 Basic - Income (loss) from continuing operations $ — $ ( 0.02 ) $ 0.02 $ 0.03 Basic - Income from discontinued operations, net of tax $ 0.26 $ 0.60 $ 0.67 $ 0.96 Basic net income per share $ 0.26 $ 0.58 $ 0.69 $ 0.99 Diluted - Income (loss) from continuing operations $ — $ ( 0.02 ) $ 0.02 $ 0.03 Diluted - Income from discontinued operations, net of tax $ 0.26 $ 0.60 $ 0.67 $ 0.95 Diluted net income per share $ 0.26 $ 0.58 $ 0.69 $ 0.98 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, 2021, 2020 and 2019 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, 2021 Allowance for doubtful accounts $ 614 $ 530 $ 1,028 $ ( 1,820 ) $ 352 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 F-29 Table of Contents ITEM 16. FORM 10-K SUMMARY None Exhibits Index Exhibit Number Exhibit Description 2.1 Asset Purchase Agreement, dated May 28, 2021, between Shenandoah Telecommunications Company and T-Mobile USA, Inc. (incorporated by reference from Exhibit 2.1 to the Company's Current Report on Form 8-K filed on June 1, 2021). 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 February 22, 2022 , filed as exhibit 3. 1 to the Company's Current Report on Form 8-K filed o n February 2 8 , 2 022 . 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 Credit Agreement, dated July 1, 2021, by and among Shenandoah Telecommunications Company, certain of its subsidiaries as guarantors, CoBank ACB, as administrative agent, and the other lenders party thereto (incorporated by reference from Exhibit 10.1 to the Company's Current Report on Form 8-K filed on July 1, 2021). 10.3 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. 10.4 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. 10.5 2005 Stock Incentive Plan filed as Exhibit 10.1 to the Company’s Registration Statement on Form S-8 (No. 333-127342). 10.6 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. 10.7 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. 10.8 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. 10.9 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. 10.10 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. F-30 Table of Contents 10.11 2014 Equity Incentive Plan filed as Appendix A to the Company’s Definitive Proxy Statement filed on March 13, 2014 (No. 333-196990). 10.12 Form of Stock Option Awards for Executives under the 2014 Equity Incentive Plan. 10.13 Form of Restricted Stock Unit Award for Executives under the 2014 Equity Incentive Plan. 10.14 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) 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 28, 2022 /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 28, 2022 Director (Principal Executive Officer) Christopher E. French /s/JAMES J. VOLK Senior Vice President – Chief Financial Officer February 28, 2022 (Principal Financial Officer) James J. Volk /s/DENNIS A. ROMPS Vice President - Chief Accounting Officer February 28, 2022 (Principal Accounting Officer) Dennis A. Romps /s/THOMAS A. BECKETT Director February 28, 2022 Thomas A. Beckett /s/TRACY FITZSIMMONS Director February 28, 2022 Tracy Fitzsimmons /s/JOHN W. FLORA Director February 28, 2022 John W. Flora /s/ RICHARD L. KOONTZ, JR. Director February 28, 2022 Richard L. Koontz, Jr. /s/DALE S. LAM Director February 28, 2022 Dale S. Lam /s/KENNETH L. QUAGLIO Director February 28, 2022 Kenneth L. Quaglio /s/LEIGH ANN SCHULTZ Director February 28, 2022 Leigh Ann Schultz /s/VICTOR C. BARNES Director February 28, 2022 Victor C. Barnes F-32