SHENANDOAH TELECOMMUNICATIONS COVA

Note 1. Nature of Operations

Shenandoah Telecommunications Company and its subsidiaries (collectively, “Shentel”, “we”, “our”, “us”, or 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 and hybrid fiber coaxial cable 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 219 macro cellular towers and leases colocation space on those towers to wireless communications providers. See Note 15, Segment Reporting, for additional information.

Pending Acquisition of Horizon Acquisition Parent LLC

On October 24, 2023, Shentel entered into a definitive agreement to acquire 100% of the equity interests in Horizon Acquisition Parent LLC (“Horizon”) for $385 million (the “Horizon Transaction”). Consideration will consist of $305 million in cash and $80 million of Shentel common stock.

Horizon is a leading commercial fiber provider in Ohio and adjacent states serving national wireless providers, carriers, enterprises, and government, education and healthcare customers. Based in Chillicothe, Ohio, Horizon was founded in 1895 as the incumbent local exchange carrier in Ross County, Ohio and rapidly expanded its fiber network over the past 14 years. Most recently, Horizon has pursued a strategy of investing in Fiber-to-the-Home (“FTTH”) in tier 3 & 4 markets in Ohio.

Financing

•Shentel intends to fund the Horizon Transaction with a combination of existing cash resources, revolving credit facility capacity and an amended and upsized credit facility. The Company has received $275 million in financing commitments from CoBank, Bank of America, Citizens Bank, N.A., and Fifth Third Bank, N.A.. This financing is expected to close in conjunction with the Horizon Transaction.

•GCM Grosvenor (“GCM”), a selling unit holder of Horizon, will exchange its equity interest in Horizon for 4.08 million shares of Shentel common stock with an aggregate value of $80 million based on a reference price of $19.60 resulting in GCM owning approximately 7% of Shentel’s fully diluted common shares after the transaction is closed.

•Shentel has entered into a 7% Participating Exchangeable Perpetual Preferred Stock (“Preferred Stock”) investment agreement with Energy Capital Partners (“ECP”), an existing Shentel shareholder and long-time infrastructure investor, to provide $81 million of growth capital to fund the FTTH network expansion, the government grant projects and general corporate purposes. The dividend on the Preferred Stock can be paid in cash or in-kind at the option of the Company. The Preferred Stock can be exchanged for Shentel common stock at an exchange price of $24.50, a 25% premium to the reference price of $19.60, under certain conditions as outlined in the investment agreement. This financing is expected to close in conjunction with the Horizon Transaction.

The closing of the Horizon Transaction remains subject to certain regulatory approvals and other customary closing conditions and is expected to close in the first half of 2024.

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, requires us to make estimates and assumptions that affect reported amounts of assets, liabilities, revenues and expenses and related disclosures. Due to the inherent uncertainty involved in making estimates, actual results to be reported in future periods could differ from our estimates.

Revenue recognition: The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from contracts with customers (“ASC 606”).

Our Broadband segment provides broadband data, video and voice services to residential, small and midsize businesses (“SMB”) and commercial customers in portions of Virginia, West Virginia, Maryland, Pennsylvania and Kentucky, via fiber optic and hybrid fiber coaxial cable networks. The Broadband segment also provides voice and DSL telephone services to customers in Virginia’s Shenandoah County and portions of adjacent counties as an RLEC.

Transaction price is measured as the amount billed, which is generally determined by list prices for goods and services less discounts offered. 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. A significant portion of the Company’s revenues are derived from customers who may cancel their subscriptions at any time without penalty. As such, the amount of deferred revenue related to unsatisfied performance obligations is not necessarily indicative of the future revenue to be recognized from the Company’s existing customers. 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 approximatelyone year. Additionally, the Company incurs commission expenses related to in-house and third-party vendors which are capitalized and amortized over the expected customer benefit period.

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 initial contract term.

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, Leases (“ASC 842”).

Our Tower segment leases space on owned cell towers to our Broadband segment, and to other wireless carriers. Revenue from these leases is accounted for under ASC 842.

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, 2023, 2022 and 2021 was $11.4 million, $6.8 million and $4.4 million, respectively.

Fair value measurements: The Company measures certain assets and liabilities at fair value. Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company uses the fair value hierarchy to evaluate inputs used in determining the fair value of its assets and liabilities. The three levels of inputs used to measure fair value are (i) observable inputs, such as quoted prices in active markets (level 1); (ii) inputs other than quoted prices in active markets that are observable either directly or indirectly (level 2); and (iii) unobservable inputs that require the Company to use present value and other valuation techniques in the determination of fair value (level 3).

The Company remeasures long-lived assets such as property, plant and equipment, intangible assets and goodwill at fair value when they are deemed to be impaired. The fair value of these assets is determined with valuation techniques using the best information available and may include quoted market prices, market comparables or discounted cash flow models.

The carrying amounts reported in the Company’s consolidated financial statements for cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value because of the short-term nature of these financial instruments. The carrying amount of the Company’s long-term debt, which have a floating interest rate, approximates fair value. The Company’s interest rate swaps are marked to market on a quarterly basis and are presented on the consolidated balance sheets at fair value.

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.

Allowance for credit losses: Accounts receivable have been reduced by an allowance for amounts that may be uncollectible in the future. This estimated allowance is based primarily on the aging category, historical collection experience and management’s evaluation of the financial condition of the customer. The Company writes off accounts receivable balances deemed uncollectible against the allowance for credit losses generally when the account is turned over for collection to an outside collection agency.

Investments: The Company investments measured at fair value primarily consist of supplemental executive retirement plan (“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. 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 in the Company’s consolidated statements of comprehensive income (loss).

The Company’s investments measured at cost primarily consist of CoBank’s Class A common stock derived from the CoBank patronage program. The investment is recognized as the Company’s initial investment in CoBank plus subsequent patronage distributions received from CoBank.

Property, plant and equipment: Property, plant and equipment is stated at cost less accumulated depreciation and amortization. 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. Shentel capitalized $5.4 million and $0.7 million of interest costs for the years ended December 31, 2023 and 2022, respectively. 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 amortized over the lesser of their useful lives or respective lease terms. Land is not depreciated. Refer to Note 5, 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 (generallyten years and up tofifteen years, respectively), renewals have been granted routinely and at nominal costs. The Company believes it will be able to meet all requirements necessary to secure renewal of its cable franchise rights and spectrum licenses. Moreover, the Company has determined that there are currently no legal, regulatory, contractual, competitive, economic or other factors that limit the useful lives of our cable franchises or spectrum licenses and, as a result, we account for cable franchise rights and spectrum licenses as indefinite-lived intangible assets.

Indefinite-lived intangible assets are not amortized but rather, are subject to impairment testing annually, in the fourth quarter, or whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable. Goodwill is evaluated for impairment based on the identification of reporting units. Our reporting units align with our reportable segments. We evaluated goodwill in each of our reporting units for impairment on October 1, 2023 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.

We evaluated our cable franchise rights and spectrum licenses for impairment on October 1, 2023 utilizing a qualitative assessment. 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 an impairment of these indefinite-lived intangible assets was more likely than not.

Long-lived assets: Finite-lived intangible assets, property, plant, and equipment, and other long-lived assets held for use 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 2023 and concluded that there were no indicators that an asset group impairment was more likely than not, with the exception of those described in Note 5, Property, Plant and Equipment.

Asset retirement obligations: Certain of the Company’s lease agreements contain provisions requiring the Company to restore facilities or remove property in the event that the lease agreement is not renewed. The Company records an estimate for the cost to comply with these provisions based on what a willing third party would charge for the retirement activity on the date of recognizing the asset retirement obligation. Upon retirement of the related asset and performance of the asset retirement activities, the Company derecognizes the asset retirement obligation and records a gain or loss to reflect the difference between the Company’s estimate and the actual cost to retire the asset. Current ARO liabilities are recorded in accrued liabilities and other in the Company’s consolidated balance sheets and noncurrent ARO liabilities are presented in the consolidated balance sheets as “Asset retirement obligations.”

Benefit plan obligations: The Benefit Plan Obligations caption includes the following:

Prior to December 31, 2023, Shentel maintained 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.

On October 13, 2021, Shentel’s Board of Directors adopted a resolution to terminate its pension plan. The Company terminated the pension plan and all benefits were distributed in June 2023 through the combination of lump sum payments and the purchase of non-participating annuity contracts at the option of the pension plan participants. The Company made an additional $2.9 million contribution from its cash balance as a result of the settlement and recognized a settlement gain of $0.7 million in other income (expense) for the year ended December 31, 2023.

As of December 31, 2022, the fair value of our pension plan assets were $21.3 million. These investments were held in mutual funds and were valued based on the net asset value per share. Our pension plan’s projected benefit obligation was $24.7 million, at December 31, 2022, determined using a discount rate of 4.90%. The net benefit plan obligation for the pension plan, with a balance of approximately $3.4 million, is presented in accrued liabilities and other in the Company’s consolidated balance sheet at December 31, 2022.

The postretirement medical benefits plan is a frozen, unfunded, defined benefit plan. The postretirement plan liability was discounted at 4.9% and 5.0% at December 31, 2023 and 2022, respectively.

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 in the Company’s consolidated statements of comprehensive income (loss).

Leases: The Company leases 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 right-of-use asset.

The incremental borrowing rate is determined using a portfolio approach based on the rate of interest that the Company would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. The Company uses the observable unsecured borrowing rate and risk-adjusts that rate to approximate a collateralized rate.

Income taxes: The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

In assessing the ability to realize deferred tax assets, the Company 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. The Company 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 recognizes a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. The Company records a liability for the difference between the benefit recognized and measured for financial statement purposes and the tax position taken or expected to be taken on the tax return. Changes in the estimate are recorded in the period in which such determination is made.

Stock-based compensation: 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 over the recipient’s respective service period. The fair value for the Company’s restricted stock units (“RSUs”) are determined using the Company’s stock price and the fair value for the Company’s Relative Total Shareholder Return (“RTSR”) awards are determined using a Monte Carlo simulation. The Company records forfeitures for its RSUs and RTSRs as they occur. Certain of the Company’s share-based awards contain retirement clauses which state that awards will continue to vest without the requirement of continuous employment after a participant achieves certain service- and age-based requirements (“Retirement Eligibility”). The Company accelerates expense associated with eligible awards for employees who have achieved Retirement Eligibility on the later of the grant date or the date in which Retirement Eligibility is achieved.

Government grants: Shentel receives grants from the U.S. Government and its agencies, as well as various state governments under various programs designed to fund telecommunications operations and broadband infrastructure expansion into rural or underserved areas. The grant programs are evaluated to determine if they represent grants related to revenue or capital expenditures. Grants for revenue and operating activities are recorded as other revenue in the Company’s consolidated statements of comprehensive income (loss) as the services are provided. Grants for capital expenditures are recorded as a reduction to the corresponding property, plant and equipment asset balance and are recognized through a reduction in depreciation expense over the life of the corresponding asset in the Company’s consolidated statements of operating income (loss). Government grants related to revenue and operations are classified as operating cash inflows and grants for capital expenditures are classified as investing cash inflows.

The Company monitors government grants for requirements to ensure that conditions related to grants have been met and there is reasonable assurance that the Company will be able to retain the grant proceeds and to ensure that any contingencies that may arise from not meeting the conditions are appropriately recognized. See Note 13, Government Grants for additional information.

Segments: The Company’s chief operating decision maker (“CODM”) regularly reviews the Company’s results to assess performance and allocates resources at the level of the Company’stwo operating segments, Broadband and Tower. Given the differences in the characteristics of the Company’s operating segments, management has determined that the operating segments cannot be combined into one reportable segment. As such, the Company hastwo reportable segments, Broadband and Tower.

New Accounting Standards

In October 2023, the FASB issued ASU 2023-06, “Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative,” (“ASU 2023-06”) which aligns the disclosure and presentation requirements of a variety of the FASB’s ASC Topics with the requirements described in the SEC’s Disclosure Update and Simplification Initiative. ASU 2023-06 will become effective for each amendment on the effective date of the SEC’s corresponding disclosure rule changes. The Company is currently assessing the impact of adopting ASU 2023-06 on the consolidated financial statements and related disclosures.

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” (“ASU 2023-07”). The amendments in ASU 2023-07 improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. These enhanced disclosures requirements also include, but are not limited to, the requirement to disclose other segment items by reportable segment, the title and the position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently assessing the impact of adopting ASU 2023-07 on the consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” (“ASU 2023-09”). ASU 2023-09 is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 address investor requests for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information. The amendments in ASU 2023-09 are effective for annual periods beginning after December 15, 2024. The Company is currently assessing the impact of adopting ASU 2023-09 on the consolidated financial statements and related disclosures.

Note 3. Revenue from Contracts with Customers

Contract Assets

The Company’s contract assets primarily include commissions incurred to acquire contracts with customers. The Company incurs commission expenses related to in-house and third-party vendors which are capitalized and amortized over the expected customer benefit period which is approximatelysix years. The Company’s current contract assets are included in prepaid expenses and other and the Company’s non-current contract assets are included in deferred charges and other assets in its consolidated balance sheets. Amortization of capitalized commission expenses is recorded in selling, general and administrative expenses in the Company’s consolidated statements of comprehensive income (loss).

The following tables present the activity of current and non-current contract assets:

Contract Liabilities

The Company’s contract liabilities include services that are billed in advance and recorded as deferred revenue, as well as installation fees that are charged upfront without transfer of commensurate goods or services to the customer. The Company’s current contract liabilities are included in advanced billings and customer deposits in its consolidated balance sheets and the Company’s non-current contract liabilities are included in other liabilities in its consolidated balance sheets. Shentel’s current contract liability balances were $10.0 million and $9.5 million as of December 31, 2023 and 2022, respectively. Shentel’s non-current contract liability balances were $1.0 million and $1.9 million as of December 31, 2023 and 2022, respectively. Shentel expects its current contract liability balances to be recognized as revenues during the twelve-month periods following the respective balance sheet dates and its non-current contract liability balances to be recognized as revenues after the twelve-month periods following the respective balance sheet dates.

No customer accounted for more than 10% of revenue for the years ended December 31, 2023, 2022, and 2021 and no customer made up more than 10% of accounts receivable at December 31, 2023 and 2022.

See Note 15, Segment Reporting, for a summary of the Company’s revenue streams.

Note 4. Investments

Investments consist of the following:

SERP investments at fair value: The fair value of the SERP investments are based on unadjusted quoted prices in active markets and are classified as Level 1 of the fair value hierarchy.

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 $10.1 million and $10.0 million at December 31, 2023 and 2022, respectively. We recognized approximately $0.5 million, $0.1 million and $2.0 million of patronage income in other income (expense) in 2023, 2022 and 2021, respectively. The Company expects that approximately 88% of the patronage distributions will be collected in cash and 12% in equity in 2024.

Equity method investments: At December 31, 2022, the Company had a 20.0% ownership interest in Valley Network Partnership (“ValleyNet”). During 2023, ValleyNet ceased operations and was dissolved. In April 2023, Shentel received a payment of $0.1 million, representing Shentel’s remaining capital in the partnership, and the investment balance was derecognized from Shentel’s consolidated balance sheets. Prior to the commencement of dissolution proceedings, the Company and ValleyNet purchased capacity on one another’s fiber network, through related party transactions.

Note 5. Property, Plant and Equipment

Property, plant and equipment consist of the following:

Property, plant and equipment, net increased due primarily to capital expenditures in the Broadband segment driven by our Glo Fiber market expansion. The Company’s accounts payable as of December 31, 2023 and 2022 included amounts associated with capital expenditures of approximately $51.1 million and $43.8 million, respectively. Depreciation and amortization expense was $65.0 million, $68.2 million, and $54.4 million for the years ended December 31, 2023, 2022, and 2021, respectively. During year ended December 31, 2023, the Company disposed of fully depreciated property, plant and equipment assets, which reduced plant in service by approximately $26.0 million, with a corresponding offset to accumulated depreciation and amortization. The majority of disposals related to Beam assets as a result of the cessation of Beam assets described in the following paragraph.

In the fourth quarter of 2021, due to the availability of grants awarded under various governmental initiatives in support of rural FTTH broadband network expansion projects, we decided to cease further expansion of our Beam branded fixed wireless edge-out strategy, which is offered under our Broadband segment. During the second quarter of 2022, the Company permanently ceased operating 20 of our 55 Beam fixed wireless sites. Consequently, Shentel recorded an impairment charge of $4.1 million. The Company ceased its remaining Beam operations in the fourth quarter of 2022 and accelerated depreciation for remaining Beam network assets, which were expected to have limited use through 2023. Shentel recorded $7.4 million in accelerated depreciation during the year ended December 31, 2022 and impaired the remaining $1.5 million of Beam property, plant and equipment assets during the year ended December 31, 2023. Shentel also recorded $1.3 million in restructuring costs related to severance and other exit costs associated with the cessation of Beam operations during the year ended December 31, 2022. No restructuring costs related to Beam were recorded during the year ended December 31, 2023.

Note 6. Goodwill and Intangible Assets

The Company’s goodwill and intangible assets consist of the following:

Amortization expense was $0.5 million, $0.7 million and $0.8 million for the years ended December 31, 2023, 2022 and 2021, respectively.

On August 23, 2022, the Company entered into a definitive asset purchase agreement (the “Spectrum Purchase Agreement”) with a wireless carrier pursuant to which the Company agreed to sell certain FCC spectrum licenses and leases utilized in the Company’s Beam branded fixed wireless service for total consideration of approximately $21.1 million, composed of $17.3 million cash and approximately $3.8 million of liabilities to be assumed by the wireless carrier (the “Spectrum Transaction”).

As a result of the expected sale, the Company concluded that the FCC spectrum licenses met the held for sale criteria. Accordingly, $13.8 million of indefinite-lived licenses and $5.9 million of finite-lived licenses are presented as held for sale, along with the corresponding $3.8 million of operating lease liabilities related to the finite-lived licenses, as of December 31, 2022. Upon the closing of the Spectrum Transaction on July 6, 2023, the respective balances were derecognized, resulting in a gain of $1.3 million recorded inother income (expense). The Company evaluated these events and determined that the Spectrum Transaction does not represent a strategic shift in the Company’s business.

Our finite-lived intangible assets are amortized over the following estimated useful lives:

The following table summarizes expected amortization of intangible assets at December 31, 2023:

Note 7. Other Assets and Accrued Liabilities

Prepaid expenses and other, classified as current assets, included the following:

Deferred charges and other assets, classified as long-term assets, included the following:

Accrued liabilities and other, classified as current liabilities, included the following:

Other liabilities, classified as long-term liabilities, included the following:

Restructuring Activities

During 2021, as a result of the sale of our Wireless assets and operations, we implemented a restructuring plan whereby certain employees were notified of their pending dismissal under the workforce reduction program. We made $1.7 million and $2.1 million in severance payments for the years ended December 31, 2022 and 2021, respectively. For the year ended December 31, 2021, we recognized expenses of $1.7 million and $2.2 million, presented in continuing and discontinued operations, respectively. No restructuring expenses were incurred during the year ended December 31, 2023.

Asset Retirement Obligations:

Below is a summary of our current and non-current asset retirement obligations:

Note 8. Leases

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

The components of lease costs were as follows:

(1)Operating lease expense is presented in cost of service or selling, general and administrative expense based on the use of the relevant facility.

The following table summarizes the expected maturity of lease liabilities at December 31, 2023:

The Company recognized $18.5 million, $18.4 million and $11.1 million of operating lease revenue for the years ended December 31, 2023, 2022 and 2021, respectively, related to the cell site colocation space and dedicated fiber optic strands that we lease to our customers, which is included in service revenue and other in the consolidated statements of comprehensive income (loss). 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, 2023:

Note 9. Debt

On May 17, 2023, Shentel entered into Amendment No. 1 to Credit Agreement (the “Amendment”) to its existing Credit Agreement, dated as of July 1, 2021, with various financial institutions party thereto (the “Lenders”) and CoBank, ACB, as administrative agent for the Lenders (as amended, the “Credit Agreement”), which contains (i) a $100 million, five-year undrawn revolving credit facility (the “Revolver”), (ii) a $150 million five-year delayed draw amortizing term loan (“Term Loan A-1”) and (iii) a $150 million seven-year delayed draw amortizing term loan (“Term Loan A-2” and collectively with Term Loan A-1, the “Term Loans”). The following loans were outstanding under the Credit Agreement:

The Amendment extended the period during which the Company could borrow under the Term Loans from July 1, 2023 to December 31, 2023. The Amendment also extended the date on which the Term Loans must begin to be repaid in quarterly principal installments from September 30, 2023 to March 31, 2024. In addition, the Amendment amended the Credit Agreement to update the benchmark interest rate from the one-month term London Inter-Bank Offered Rate (“LIBOR”) to a rate based on the one-month term Secured Overnight Financing Rate (“SOFR”), added a 10 bps credit spread adjustment for loans that bear interest based on Term SOFR and made certain other conforming changes. All other material terms and conditions of the Credit Agreement were unchanged. Management evaluated the amendment and concluded that the amendment was a modification of the existing Credit Agreement and, therefore, modification accounting was applied.

Both Term Loan A-1 and Term Loan A-2 bore interest at one-month LIBOR plus a margin of 1.60% until May 2023 and now bears interest at one-month term SOFR plus a margin of 1.60%. The margin of 1.60% is variable and determined by the Company’s net leverage ratio. Interest is paid monthly. The interest rate was 6.95% and 5.89% at December 31, 2023 and December 31, 2022, respectively. Our cash payments for interest were $8.4 million, $0.6 million and $10.4 million for the years ended December 31, 2023, 2022 and 2021, respectively. Interest paid in 2021 was incurred and paid under a prior credit agreement which was repaid in connection with the sale of the Wireless business in 2021. See Note 16, Discontinued Operations, for details concerning the sale of the Wireless business. Shentel is charged commitment fees on unutilized portions of its Revolver and Term Loans. The Company recorded $0.5 million, $0.7 million and $0.5 million related to these fees for the year ended December 31, 2023, 2022 and 2021, respectively, which are included in other (expense) income, net in the consolidated statements of comprehensive income (loss).

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

Shentel’s Term Loans require quarterly payments based on a percentage of the outstanding balance. Based on the outstanding balance as of December 31, 2023, Term Loan A-1 requires quarterly principal repayments of $0.9 million from March 31, 2024 through June 30, 2024; then increasing to $1.9 million quarterly from September 30, 2024 through March 31, 2026, with the remaining balance due June 30, 2026. Based on the outstanding balance as of December 31, 2023, Term Loan A-2 requires quarterly principal repayments of $0.4 million through March 31, 2028, with the remaining balance due June 30, 2028.

The following table summarizes the expected payments of Shentel’s outstanding borrowings as of December 31, 2023:

Shentel has not made any borrowings under its Revolver as of December 31, 2023. In the event borrowings are made in the future, the entire outstanding principal amount borrowed is due June 30, 2026.

The Credit Agreement is fully secured by a pledge and unconditional guarantee from the Company and all of its subsidiaries, except Shenandoah Telephone Company. This provides the lenders a security interest in substantially all of the assets of the Company.

Note 10. Derivatives and Hedging

During the second quarter of 2023, Shentel entered into pay fixed (2.90%), receive variable (one-month term SOFR) interest rate swaps totaling $150.0 million of notional principal (the “Swaps”). The Swaps contain monthly payment terms beginning in May 2024, which extend through their maturity dates in June 2026. The Swaps are designated as cash flow hedges, representing 50% of the Company’s expected outstanding debt. The Company uses the Swaps to manage its exposure to interest rate risk for its long-term variable-rate Term Loans.

The table below presents the fair value of the Swaps as well as their classification in the consolidated balance sheets. The fair value of these instruments was estimated using an income approach and observable market inputs (Level 2):

The Swaps were determined to be highly effective hedges and therefore all change in the fair value of the Swaps was recognized in other comprehensive income. The Company recognized $1.7 million of unrealized gains net of deferred taxes totaling $0.6 million for 2023. Since the Company did not have outstanding interest rate swaps in the prior year period, there wereno gains or losses recorded for 2022. Shentel expects to begin reclassifying amounts related to the Swaps from accumulated other comprehensive income to interest expense in May 2024, when the payment periods of the Swaps begin.

The Company previously held interest rate swaps that were designated as cash flow hedges related to variable-rate long-term debt that were settled in connection with the sale the Company’s Wireless assets and operations described in Note 16, Discontinued Operations. Similar to the Company’s current Swaps, these interest rate swaps were used to manage its exposure to interest rate risk. These interest rate swaps were determined to be highly effective hedges their through the settlement dates in 2021. Upon settlement in 2021, the Company reclassified the remaining balance from accumulated other comprehensive income to the Company’s consolidated statements of comprehensive income (loss), resulting in a net gain on interest rate swaps of $4.7 million.

Note 11. 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:

A reconciliation of income tax expense (benefit) determined by applying the federal and state tax rates to income before income taxes is as follows:

The change in effective tax rate between 2023 and 2022 was primarily a result of higher pre-tax income in 2023.

The Company received $25.6 million in cash refunds for income taxes for the year ended December 31, 2023. The Company’s cash payments for income taxes were $0.1 million, $0.1 million, and $11.2 million for the years ended December 31, 2023, 2022 and 2021, respectively.

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:

The Company has a deferred tax asset of $59.8 million related to federal and various state net operating losses. As of December 31, 2023, the Company had approximately $261.8 million of federal net operating losses, including approximately $236.9 million of federal net operating losses generated after 2017. Federal net operating losses generated prior to 2018 expire through 2027. The Company also had approximately $97.2 million of state net operating losses, which can be carried forward indefinitely. The Company’s income tax expense (benefit) for the years ended December 31, 2023 and 2022 included tax expense of $0.5 million and $0.6 million, respectively, for the valuation allowance on deferred tax assets related to federal net operating losses expected to expire unused. The Company recorded no valuation allowances prior to December 31, 2022.

As of December 31, 2023 and 2022, the Company hadno unrecognized tax benefits.

The Company’s returns are generally open to examination from 2020 forward and the net operating losses acquired from nTelos are open to examination from 2004 forward. The Company is currently involved in one state income tax audit and no federal income tax audits as of December 31, 2023.

Note 12. Stock Compensation, Earnings per Share, and Dividends

The Company’s 2014 Equity Incentive Plan (the “2014 Plan”) allows for the grant of equity based incentive compensation to all employees. The 2014 Plan authorized grants of up to an additional 4,200,000 shares over aten-year period beginning in 2014. As of December 31, 2023, approximately 1,521,963 shares remained available for future issuance under the 2014 Plan. The 2014 Plan expired on February 18, 2024 and the Company’s Board of Directors approved the resolution to adopt the 2024 Equity Incentive Plan (the “2024 Plan”) on February 13, 2024. The Board of Directors has recommend the plan to be presented to the shareholders of the Company at the April 30, 2024 Annual Shareholder Meeting to vote for the approval of the 2024 Plan. The 2024 Plan will authorize grants of up to an additional 3,000,000 shares over aten-year period beginning no sooner than the effective date of March 1, 2024. Under the 2014 Plan and the 2024 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. As of December 31, 2023, the only forms of stock awards outstanding are RSUs and RTSRs.

The Company granted approximately 385,000 RSUs at a weighted average grant price of $19.05 to employees and directors during the year ended December 31, 2023. Approximately 200,000 RSUs with a weighted average grant price of $25.01 vested and 9,000 RSUs with a weighted average grant price of $21.67 were forfeited during the year ended December 31, 2023. The total fair value of RSUs vested was $5.0 million during the year ended December 31, 2023. Approximately 825,000 RSUs with a weighted average grant price of $21.16 remained outstanding as of December 31, 2023.

The Company granted approximately 134,000 RTSRs at a weighted average grant price of $23.64 to employees during the year ended December 31, 2023. Approximately 30,000 RTSRs with a weighted average grant price of $36.27 vested and no RTSRs were forfeited during the year ended December 31, 2023. The total fair value of RTSRs vested was $1.1 million during the year ended December 31, 2023. Approximately 293,000 RTSRs with a weighted average grant price of $25.80 remained outstanding as of December 31, 2023. As described above, the amount of RTSRs issued are adjusted on the vesting date. The vested amounts above exclude the vesting date adjustment and issuance of RTSRs based on actual performance, which totaled approximately 13,000 RTSRs, resulting in lower shares issued upon vesting of the RTSRs than originally granted.

The Company’s RSUs generally have service conditions only or performance and service conditions with vesting periods ranging fromone year for directors tofive years for employees. RTSR awards vest approximately three years from the grant date. The performance condition 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.

Stock-based compensation expense was as follows:

As of December 31, 2023, there was $8.4 million of total unrecognized compensation cost related to non-vested incentive awards which is expected to be recognized over weighted average period of 2.1 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:

There were approximately 117,000 and 259,000 anti-dilutive awards outstanding for the years ended December 31, 2023 and 2021, respectively. There were approximately 365,000 potentially dilutive equity awards for the year ended December 31, 2022; however, these securities were excluded from the calculation of diluted weighted average shares outstanding due to the fact that they were anti-dilutive as a result of the Company’s net loss for the year ended December 31, 2022.

The Company paid a special dividend of $18.75 per share on August 2, 2021 (the “Special Dividend”). The total amount paid pursuant to the Special Dividend to Shentel shareholders, including amounts reinvested in the Company’s stock via the Company’s Dividend Reinvestment Plan, was approximately $937 million.

Note 13. Government Grants

In 2021, Shentel commenced negotiations with various governmental entities to receive awards under broadband infrastructure grant programs to strategically expand the Company’s broadband network in order to provide broadband services to unserved residences in the partnering counties in Virginia, Maryland and West Virginia. Throughout 2021, 2022 and 2023, in partnership with counties in the respective states, Shentel has been awarded grants under the Virginia Telecommunication Initiative (“VATI”) and the Rural Digital Opportunity Fund (“RDOF”) in Virginia, the Connect Maryland Network Infrastructure Grant Program (“Connect MD”) in Maryland, and the Major Broadband Projects Strategies (“MBPS”) and Line Extension Advancement and Development (“LEAD”) programs in West Virginia.

The following table summarizes the awards under each program:

To receive such grant distributions, the Company entered into agreements with each partnering county in Virginia, Maryland and West Virginia. These agreements outline certain build-out milestones. The network is required to meet certain performance conditions to ensure that minimum download and upload speeds are able to be provided to the unserved residences.

As discussed in Note 2, Summary of Significant Accounting Policies, government assistance that is used to fund capital expenditures is recorded as a reduction to property, plant and equipment. Given the primary purpose of the programs listed above is to fund build-out of the Company’s broadband network, amounts recognized under these programs are recorded as a reduction to the related property, plant and equipment and cash receipts are presented as cash flows from investing activities in the Company’s consolidated statements of cash flows. The Company recognizes grant receivables at the time it becomes probable that the Company will be eligible to receive the grant, which is estimated to correspond with the date when specified build-out milestones are achieved. As a result of these programs, the Company received $1.9 million in cash reimbursements during the year ended December 31, 2023 and has recorded approximately $1.9 million in accounts receivable as of December 31, 2023. The Company did not recognize any amounts under these programs during the years ended December 31, 2022 and 2021 or as of December 31, 2022.

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 8, Leases. We also have outstanding unconditional purchase commitments to procure programming, marketing services and IT software licenses through 2026. For the years ended December 31, 2023, 2022 and 2021 we paid $4.6 million, $5.2 million and $3.4 million, respectively, for the programming, marketing and IT software license purchase commitments. The Company is obligated to make the following future minimum payments under the non-cancelable terms of these commitments as of December 31, 2023:

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

Shentel has presented Residential & SMB - Cable Markets and Residential & SMB - Glo Fiber Markets separately for 2023. These revenues were previously reported in one line under the description “Residential & SMB”. Shentel has amended the presentation for 2022 and 2021.

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 (loss) 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.

Year ended December 31, 2023:

Year ended December 31, 2022:

Year ended December 31, 2021:

A reconciliation of the total of the reportable segments’ operating income (loss) to consolidated income (loss) from continuing operations before income taxes is as follows:

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 As a result, total assets by reportable segment have not been presented.

Note 16. Discontinued Operations

On July 1, 2021, pursuant to the 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 Transaction (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 (loss).

Income from discontinued operations, net of tax in the consolidated statements of comprehensive income (loss) consist of the following for December 31, 2021:

There was no material income from discontinued operations for the years ended December 31, 2023 and 2022.

Schedule II

Valuation and Qualifying Accounts

Changes in the Company’s allowance for credit losses for accounts receivable for the years ended December 31, 2023, 2022 and 2021 are summarized below:

Exhibits Index

• 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.

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.

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.