UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
or
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction | (IRS Employer | |||||
of incorporation or organization) | Identification No.) | |||||
(Address of principal executive offices) | (Zip Code) |
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol | Name of each exchange on which registered | ||
The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer___
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ____
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
On May 2, 2022, the registrant had
TABLE OF CONTENTS
Page | |||
1 | |||
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 23 | ||
40 | |||
41 | |||
42 | |||
42 | |||
43 | |||
44 |
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; Amounts in thousands except per share amounts)
Quarter Ended | |||||||
March 31, | |||||||
| 2022 |
| 2021 |
| |||
Net revenues | $ | | $ | | |||
Operating expense: | |||||||
Cost of services and products (exclusive of depreciation and amortization) |
| |
| | |||
Selling, general and administrative expenses |
| |
| | |||
Loss on impairment of assets held for sale |
| |
| — | |||
Depreciation and amortization |
| |
| | |||
Income (loss) from operations |
| ( |
| | |||
Other income (expense): | |||||||
Interest expense, net of interest income |
| ( |
| ( | |||
Loss on extinguishment of debt |
| — |
| ( | |||
Investment income |
| |
| | |||
Change in fair value of contingent payment rights | — | ( | |||||
Other, net |
| |
| | |||
Loss before income taxes |
| ( |
| ( | |||
Income tax benefit |
| ( |
| ( | |||
Net loss |
| ( |
| ( | |||
Less: dividends on Series A preferred stock | | — | |||||
Less: net income attributable to noncontrolling interest |
| |
| | |||
Net loss attributable to common shareholders | $ | ( | $ | ( | |||
Net loss per basic and diluted common shares attributable to common shareholders | ( | ( | |||||
See accompanying notes
1
CONSOLIDATED COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited; Amounts in thousands)
Quarter Ended | |||||||
March 31, | |||||||
| 2022 |
| 2021 |
| |||
Net loss | $ | ( | $ | ( | |||
Pension and post-retirement obligations: | |||||||
Amortization of actuarial loss (gain) and prior service cost (credit) to earnings, net of tax |
| ( |
| | |||
Derivative instruments designated as cash flow hedges: | |||||||
Change in fair value of derivatives, net of tax |
| |
| | |||
Reclassification of realized loss to earnings, net of tax |
| |
| | |||
Comprehensive loss |
| ( |
| ( | |||
Less: comprehensive income attributable to noncontrolling interest |
| |
| | |||
Total comprehensive loss attributable to common shareholders | $ | ( | $ | ( |
See accompanying notes
2
CONSOLIDATED COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; Amounts in thousands except share and per share amounts)
March 31, | December 31, | ||||||
| 2022 |
| 2021 |
| |||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | | $ | | |||
Short-term investments |
| |
| | |||
Accounts receivable, net of allowance for credit losses |
| |
| | |||
Income tax receivable |
| |
| | |||
Prepaid expenses and other current assets |
| |
| | |||
Assets held for sale |
| |
| | |||
Total current assets |
| |
| | |||
Property, plant and equipment, net |
| |
| | |||
Investments |
| |
| | |||
Goodwill |
| |
| | |||
Customer relationships, net |
| |
| | |||
Other intangible assets |
| |
| | |||
Other assets |
| |
| | |||
Total assets | $ | | $ | | |||
LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | | $ | | |||
Advance billings and customer deposits |
| |
| | |||
Accrued compensation |
| |
| | |||
Accrued interest | | | |||||
Accrued expense |
| |
| | |||
Current portion of long-term debt and finance lease obligations |
| |
| | |||
Liabilities held for sale |
| |
| | |||
Total current liabilities |
| |
| | |||
Long-term debt and finance lease obligations |
| |
| | |||
Deferred income taxes |
| |
| | |||
Pension and other post-retirement obligations |
| |
| | |||
Other long-term liabilities |
| |
| | |||
Total liabilities |
| |
| | |||
Commitments and contingencies (Note 15) | |||||||
Series A preferred stock, par value $ | | | |||||
Shareholders’ equity: | |||||||
Common stock, par value $ |
| |
| | |||
Additional paid-in capital |
| |
| | |||
Accumulated deficit |
| ( |
| ( | |||
Accumulated other comprehensive loss, net |
| ( |
| ( | |||
Noncontrolling interest |
| |
| | |||
Total shareholders’ equity |
| |
| | |||
Total liabilities, mezzanine equity and shareholders’ equity | $ | |
| $ | |
See accompanying notes
3
CONSOLIDATED COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited; Amounts in thousands)
Mezzanine Equity | Shareholders' Equity | |||||||||||||||||||||||||
Accumulated |
| |||||||||||||||||||||||||
Additional | Retained | Other | Non- | |||||||||||||||||||||||
Preferred Stock | Common Stock | Paid-in | Earnings | Comprehensive | controlling |
| ||||||||||||||||||||
Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| (Deficit) |
| Loss, net |
| Interest |
| Total |
| |||||||||
Balance at December 31, 2020 |
| — | $ | — | | $ | | $ | | $ | ( | $ | ( | $ | | $ | | |||||||||
Shares issued under employee plan, net of forfeitures |
| — | — | | |
| ( |
| — |
| — | — |
| — | ||||||||||||
Non-cash, share-based compensation |
| — |
| — | — |
| — |
| |
| — |
| — | — |
| | ||||||||||
Other comprehensive income (loss) |
| — |
| — | — |
| — |
| — |
| — |
| | — |
| | ||||||||||
Net income (loss) |
| — |
| — | — |
| — |
| — |
| ( |
| — | |
| ( | ||||||||||
Balance at March 31, 2021 |
| — | $ | — | | $ | | $ | | $ | ( | $ | ( | $ | | $ | | |||||||||
Balance at December 31, 2021 |
| | $ | | | $ | | $ | | $ | ( | $ | ( | $ | | $ | | |||||||||
Shares issued under employee plan, net of forfeitures |
| — | — | | |
| ( |
| — |
| — | — |
| — | ||||||||||||
Series A preferred stock issued | | — | — | — | — | — | — | — | — | |||||||||||||||||
Dividends on Series A preferred stock accrued |
| — | | — | — | ( | — | — | — |
| ( | |||||||||||||||
Non-cash, share-based compensation |
| — |
| — | — |
| — |
| |
| — |
| — | — |
| | ||||||||||
Purchase and retirement of common stock |
| — | — | ( |
| — |
| ( |
| — |
| — | — |
| ( | |||||||||||
Other comprehensive income (loss) |
| — |
| — | — |
| — |
| — |
| — |
| | — |
| | ||||||||||
Net income (loss) |
| — |
| — | — |
| — |
| — |
| ( |
| — | |
| ( | ||||||||||
Balance at March 31, 2022 |
| | $ | | | $ | | $ | | $ | ( | $ | ( | $ | | $ | |
See accompanying notes
4
CONSOLIDATED COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; Amounts in thousands)
Three Months Ended March 31, | |||||||
| 2022 |
| 2021 |
| |||
Cash flows from operating activities: | |||||||
Net loss | $ | ( | $ | ( | |||
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Depreciation and amortization |
| |
| | |||
Cash distributions from wireless partnerships in excess of current earnings |
| |
| | |||
Pension and post-retirement contributions in excess of expense | ( | ( | |||||
Stock-based compensation expense |
| |
| | |||
Amortization of deferred financing costs and discounts |
| |
| | |||
Noncash interest expense on convertible security interest | — | | |||||
Loss on extinguishment of debt |
| — |
| | |||
Loss on change in fair value of contingent payment rights | — | | |||||
Loss on impairment of assets held for sale | | — | |||||
Other, net |
| ( |
| ( | |||
Changes in operating assets and liabilities: | |||||||
Accounts receivable, net |
| |
| | |||
Income tax receivable |
| ( |
| ( | |||
Prepaid expenses and other assets |
| ( |
| ( | |||
Accounts payable |
| ( |
| | |||
Accrued expenses and other liabilities |
| |
| | |||
Net cash provided by operating activities | | | |||||
Cash flows from investing activities: | |||||||
Purchases of property, plant and equipment, net |
| ( |
| ( | |||
Purchase of investments |
| ( |
| — | |||
Proceeds from sale and maturity of investments | | | |||||
Proceeds from sale of assets |
| |
| | |||
Proceeds from business dispositions |
| |
| — | |||
Net cash used in investing activities |
| ( |
| ( | |||
Cash flows from financing activities: | |||||||
Proceeds from bond offering |
| — |
| | |||
Proceeds from issuance of long-term debt |
| — |
| | |||
Payment of finance lease obligations |
| ( |
| ( | |||
Payment on long-term debt |
| — |
| ( | |||
Payment of financing costs |
| — |
| ( | |||
Share repurchases for minimum tax withholding |
| ( |
| — | |||
Net cash provided by (used in) financing activities |
| ( |
| | |||
Change in cash and cash equivalents |
| ( |
| | |||
Cash and cash equivalents at beginning of period |
| |
| | |||
Cash and cash equivalents at end of period | $ | | $ | |
See accompanying notes
5
CONSOLIDATED COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business and Basis of Accounting
Consolidated Communications Holdings, Inc. (the “Company,” “we,” “our” or “us”) is a holding company with operating subsidiaries (collectively “Consolidated”) that provide communication solutions to consumer, commercial and carrier customers across a
Leveraging our advanced fiber network spanning approximately
In the opinion of management, the accompanying unaudited condensed consolidated balance sheets and related condensed consolidated statements of operations, comprehensive income (loss), shareholders’ equity and cash flows include all adjustments, consisting only of normal recurring items, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States (“US GAAP” or “GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to such SEC rules and regulations and accounting principles applicable for interim periods. Events subsequent to the balance sheet date have been evaluated for inclusion in the accompanying condensed consolidated financial statements through the date of issuance. Management believes that the disclosures made are adequate to make the information presented not misleading. Interim results are not necessarily indicative of results for a full year. The information presented in this Form 10-Q should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and the accompanying notes to the financial statements (“Notes”) thereto included in our 2021 Annual Report on Form 10-K filed with the SEC.
Recent Developments
Searchlight Investment
On December 7, 2021, we closed on the final stage of the investment agreement (the “Investment Agreement”) entered into on September 13, 2020 with an affiliate of Searchlight Capital Partners, L.P. (“Searchlight”). In connection with the Investment Agreement, affiliates of Searchlight have invested an aggregate of $
Accounts Receivable and Allowance for Credit Losses
Accounts receivable (“AR”) consists primarily of amounts due to the Company from normal business activities. We maintain an allowance for credit losses (“ACL”) based on our historical loss experience, current conditions and forecasted changes including but not limited to changes related to the economy, our industry and business. Uncollectible accounts are written-off (removed from AR and charged against the ACL) when internal collection efforts have been unsuccessful. Subsequently, if payment is received from the customer, the recovery is credited to the ACL.
6
The following table summarizes the activity in ACL for the quarters ended March 31, 2022 and 2021:
Three Months Ended | |||||||
March 31, | |||||||
(In thousands) |
| 2022 |
| 2021 |
| ||
Balance at beginning of year | $ | $ | |||||
Provision charged to expense |
| | |||||
Write-offs, less recoveries |
| ( | ( | ||||
Balance at end of year | $ | $ |
Recent Accounting Pronouncements
Effective January 1, 2022, we adopted the Accounting Standards Update No. 2021-10 (“ASU 2021-10”), Disclosures by Business Entities about Government Assistance. ASU 2021-10 requires disclosure by business entities of the types of government assistance received, the method of accounting for such assistance and the effects of the assistance on its financial statements. The adoption of this guidance did not have a material impact on our related disclosures.
In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2020-04 (“ASU 2020-04”), Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. In January 2021, the FASB issued ASU No. 2021-01 (“ASU 2021-01”), Reference Rate Reform (Topic 848): Scope. ASU 2021-01 clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. ASU 2020-04 and ASU 2021-01 are both elective and are effective upon issuance through December 31, 2022. We are currently evaluating the impact these updates will have on our condensed consolidated financial statements and related disclosures.
2. REVENUE
Nature of Contracts with Customers
Our revenue contracts with customers may include a promise or promises to deliver goods such as equipment and/or services such as broadband, video or voice services. Promised goods and services are considered distinct as the customer can benefit from the goods or services either on their own or together with other resources that are readily available to the customer and the Company’s promise to transfer a good or service to the customer is separately identifiable from other promises in the contract. The Company accounts for goods and services as separate performance obligations. Each service is considered a single performance obligation as it is providing a series of distinct services that are substantially the same and have the same pattern of transfer.
The transaction price is determined at contract inception and reflects the amount of consideration to which we expect to be entitled in exchange for transferring a good or service to the customer. This amount is generally equal to the market price of the goods and/or services promised in the contract and may include promotional discounts. The transaction price excludes amounts collected on behalf of third parties such as sales taxes and regulatory fees. Conversely, nonrefundable upfront fees, such as service activation and set-up fees, are included in the transaction price. In determining the transaction price, we consider our enforceable rights and obligations within the contract. We do not consider the possibility of a contract being cancelled, renewed or modified.
The transaction price is allocated to each performance obligation based on the standalone selling price of the good or service, net of the related discount, as applicable.
Revenue is recognized when or as performance obligations are satisfied by transferring control of the good or service to the customer.
7
Disaggregation of Revenue
The following table summarizes revenue from contracts with customers for the quarters ended March 31, 2022 and 2021:
Quarter Ended | |||||||
March 31, | |||||||
(In thousands) |
| 2022 |
| 2021 |
| ||
Operating Revenues | |||||||
Consumer: |
|
| |||||
Broadband (Data and VoIP) | $ | | $ | | |||
Voice services |
| |
| | |||
Video services | | | |||||
| | ||||||
Commercial: |
|
| |||||
Data services (includes VoIP) | | | |||||
Voice services |
| |
| | |||
Other | | | |||||
| | ||||||
Carrier: | |||||||
Data and transport services | | | |||||
Voice services | | | |||||
Other | | | |||||
| | ||||||
Subsidies | | | |||||
Network access | | | |||||
Other products and services | | | |||||
Total operating revenues | $ | | $ | |
Contract Assets and Liabilities
The following table provides information about receivables, contract assets and contract liabilities from our revenue contracts with customers:
March 31, | |||||||
(In thousands) |
| 2022 |
| 2021 | |||
Accounts receivable, net | $ | | $ | | |||
Contract assets |
| |
| | |||
Contract liabilities |
| |
| |
Contract assets include costs that are incremental to the acquisition of a contract. Incremental costs are those that result directly from obtaining a contract or costs that would not have been incurred if the contract had not been obtained, which primarily relate to sales commissions. These costs are deferred and amortized over the expected customer life. We determined that the expected customer life is the expected period of benefit as the commission on the renewal contract is not commensurate with the commission on the initial contract. During the quarters ended March 31, 2022 and 2021, the Company recognized expense of $
Contract liabilities include deferred revenues related to advanced payments for services and nonrefundable, upfront service activation and set-up fees, which are generally deferred and amortized over the expected customer life as the option to renew without paying an upfront fee provides the customer with a material right. During the quarters ended March 31, 2022 and 2021, the Company recognized previously deferred revenues of $
A receivable is recognized in the period the Company provides goods or services when the Company’s right to consideration is unconditional. Payment terms on invoiced amounts are generally
8
Performance Obligations
ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), requires that the Company disclose the aggregate amount of the transaction price that is allocated to remaining performance obligations that are unsatisfied as of March 31, 2022. The guidance provides certain practical expedients that limit this requirement. The service revenue contracts of the Company meet the following practical expedients provided by ASC 606:
1. | The performance obligation is part of a contract that has an original expected duration of |
2. | Revenue is recognized from the satisfaction of the performance obligations in the amount billable to the customer in accordance with ASC 606-10-55-18. |
The Company has elected these practical expedients. Performance obligations related to our service revenue contracts are generally satisfied over time. For services transferred over time, revenue is recognized based on amounts invoiced to the customer as the Company has concluded that the invoice amount directly corresponds with the value of services provided to the customer. Management considers this a faithful depiction of the transfer of control as services are substantially the same and have the same pattern of transfer over the life of the contract. As such, revenue related to unsatisfied performance obligations that will be billed in future periods has not been disclosed.
3. EARNINGS (LOSS) PER SHARE
Basic and diluted earnings (loss) per common share (“EPS”) are computed using the two-class method, which is an earnings allocation method that determines EPS for each class of common stock and participating securities considering dividends declared and participation rights in undistributed earnings. Common stock related to certain of the Company’s restricted stock awards are considered participating securities because holders are entitled to receive non-forfeitable dividends, if declared, during the vesting term.
The potentially dilutive impact of the Company’s restricted stock awards is determined using the treasury stock method. Under the treasury stock method, if the average market price during the period exceeds the exercise price, these instruments are treated as if they had been exercised with the proceeds of exercise used to repurchase common stock at the average market price during the period. Any incremental difference between the assumed number of shares issued and repurchased is included in the diluted share computation.
Diluted EPS includes securities that could potentially dilute basic EPS during a reporting period. Dilutive securities are not included in the computation of loss per share when a company reports a net loss from continuing operations as the impact would be anti-dilutive.
9
The computation of basic and diluted EPS attributable to common shareholders computed using the two-class method is as follows:
Quarter Ended | |||||||
March 31, | |||||||
(In thousands, except per share amounts) |
| 2022 |
| 2021 |
| ||
Net loss | $ | ( | $ | ( | |||
Less: dividends on Series A preferred stock | | — | |||||
Less: net income attributable to noncontrolling interest |
| |
| | |||
Loss attributable to common shareholders before allocation of earnings to participating securities |
| ( |
| ( | |||
Less: earnings allocated to participating securities |
| — |
| — | |||
Net loss attributable to common shareholders, after earnings allocated to participating securities | $ | ( | $ | ( | |||
Weighted-average number of common shares outstanding |
| |
| | |||
Net loss per common share attributable to common shareholders - basic and diluted | $ | ( | $ | ( |
Diluted EPS attributable to common shareholders for the quarter ended March 31, 2022 excludes
4. SEARCHLIGHT INVESTMENT
In connection with the Investment Agreement entered into on September 13, 2020, affiliates of Searchlight committed to invest up to an aggregate of $
On July 15, 2021, the Company received all required state public utility commission regulatory approvals necessary for the conversion of the CPR into
In the second stage of the transaction, which was completed on December 7, 2021 following the receipt of Federal Communications Commission (“FCC”) and certain regulatory approvals and the satisfaction of certain other customary closing conditions, Searchlight invested an additional $
Prior to conversion, the CPR was reported at its estimated fair value within long-term liabilities in the consolidated balance sheets. Subsequent changes in fair value were reflected in earnings within other income and expense in the condensed consolidated statements of operations. During the quarter ended March 31, 2021, we recognized a loss of $
10
The Note bore interest at
5. DIVESTITURES
On September 22, 2021, we entered into a definitive agreement to sell substantially all of the assets of our non-core, rural ILEC business located in Ohio, Consolidated Communications of Ohio Company (“CCOC”). CCOC provides telecommunications and data services to residential and business customers in
The major classes of assets and liabilities sold consisted of the following:
(In thousands) |
| |||
Current assets | $ | | ||
Property, plant and equipment | | |||
Goodwill | | |||
Total assets | $ | | ||
Current liabilities | $ | | ||
Other long-term liabilities | | |||
Total liabilities | $ | |
In September 2021, in connection with the expected sale, the carrying value of the net assets were reduced to their estimated fair value and we recognized an impairment loss of $
On March 2, 2022, we entered into a definitive agreement to sell substantially all the assets of our business located in the Kansas City market (the “Kansas City operations”) for estimated cash consideration of approximately $
11
At March 31, 2022, the major classes of assets and liabilities to be sold were classified as held for sale in the condensed consolidated balance sheet and consisted of the following:
(In thousands) |
| |||
Current assets | $ | | ||
Property, plant and equipment | | |||
Goodwill | | |||
Other long-term assets | | |||
Impairment to net realizable value | ( | |||
Total assets | $ | | ||
Current liabilities | $ | | ||
Other long-term liabilities | | |||
Total liabilities | $ | |
In connection with the classification as assets held for sale, the carrying value of the net assets were reduced to their estimated fair value of approximately $
6. INVESTMENTS
Our investments are as follows:
March 31, | December 31, | ||||||
(In thousands) |
| 2022 |
| 2021 |
| ||
Short-term investments: | |||||||
Held-to-maturity debt securities | $ | | $ | | |||
Long-term investments: | |||||||
Cash surrender value of life insurance policies | $ | | $ | | |||
Investments at cost: | |||||||
GTE Mobilnet of South Texas Limited Partnership ( |
| |
| | |||
Pittsburgh SMSA Limited Partnership ( |
| |
| | |||
CoBank, ACB Stock |
| |
| | |||
Other |
| |
| | |||
Equity method investments: | |||||||
GTE Mobilnet of Texas RSA #17 Limited Partnership ( |
| |
| | |||
Pennsylvania RSA 6(I) Limited Partnership ( |
| |
| | |||
Pennsylvania RSA 6(II) Limited Partnership ( |
| |
| | |||
Totals | $ | | $ | |
Held-to-Maturity Debt Securities
Investments in debt securities that we have the positive intent and ability to hold until maturity are classified as held-to-maturity. We consider all highly liquid investments with original maturities of three months or less to be cash equivalents. Investments with original maturities of more than three months and less than one year are classified as short-term investments. Held-to maturity debt securities are recorded at amortized cost, which approximates fair value, and realized gains or losses are recognized in earnings. Our held-to-maturity debt securities consist of investments in commercial paper and certificate of deposits. At March 31, 2022, we had $
12
of investments in commercial paper included in cash and cash equivalents and $
Investments at Cost
We own
CoBank, ACB (“CoBank”) is a cooperative bank owned by its customers. On an annual basis, CoBank distributes patronage in the form of cash and stock in the cooperative based on the Company’s outstanding loan balance with CoBank, which has traditionally been a significant lender in the Company’s credit facility. The investment in CoBank represents the accumulation of the equity patronage paid by CoBank to the Company.
Equity Method
We own
7. FAIR VALUE MEASUREMENTS
Our derivative instruments related to interest rate swap agreements are required to be measured at fair value on a recurring basis. The fair values of the interest rate swaps are determined using valuation models and are categorized within Level 2 of the fair value hierarchy as the valuation inputs are based on quoted prices and observable market data of similar instruments. See Note 9 for further discussion regarding our interest rate swap agreements.
Our interest rate swap agreements measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021 were as follows:
As of March 31, 2022 |
| ||||||||||||
|
| Quoted Prices |
| Significant |
|
| |||||||
In Active | Other | Significant |
| ||||||||||
Markets for | Observable | Unobservable |
| ||||||||||
Identical Assets | Inputs | Inputs |
| ||||||||||
(In thousands) | Total | (Level 1) | (Level 2) | (Level 3) |
| ||||||||
Long-term interest rate swap liabilities | $ | ( |
| $ | — | $ | ( |
| $ | — |
13
As of December 31, 2021 |
| ||||||||||||
|
| Quoted Prices |
| Significant |
|
| |||||||
In Active | Other | Significant |
| ||||||||||
Markets for | Observable | Unobservable |
| ||||||||||
Identical Assets | Inputs | Inputs |
| ||||||||||
(In thousands) | Total | (Level 1) | (Level 2) | (Level 3) |
| ||||||||
Long-term interest rate swap liabilities | $ | ( |
| $ | — | $ | ( |
| $ | — |
We have not elected the fair value option for any of our other assets or liabilities. The carrying value of other financial instruments, including cash and cash equivalents, short-term investments, accounts receivable, accounts payable and accrued liabilities approximate fair value due to their short maturities. The following table presents the other financial instruments that are not carried at fair value but which require fair value disclosure as of March 31, 2022 and December 31, 2021.
As of March 31, 2022 | As of December 31, 2021 |
| |||||||||||
(In thousands) |
| Carrying Value |
| Fair Value |
| Carrying Value |
| Fair Value |
| ||||
Long-term debt, excluding finance leases | $ | $ | $ | $ |
Cost & Equity Method Investments
Our investments as of March 31, 2022 and December 31, 2021 accounted for at cost and under the equity method consisted primarily of minority positions in various cellular telephone limited partnerships and our investment in CoBank. It is impracticable to determine the fair value of these investments.
Long-term Debt
The fair value of our senior notes was based on quoted market prices, and the fair value of borrowings under our credit facility was determined using current market rates for similar types of borrowing arrangements. We have categorized the long-term debt as Level 2 within the fair value hierarchy.