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UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)

☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

| For the quarterly period ended | June 30, 2019

☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

| For the transition period from__________ to __________

Commission File No.: 000-09881
SHENANDOAH TELECOMMUNICATIONS COMPANY
(Exact name of registrant as specified in its charter)

Virginia |  | 54-1162807
(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

500 Shentel Way, Edinburg, Virginia 22824
(Address of principal executive offices) (Zip Code)
(540) 984-4141
(Registrant's telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

Common Stock (No Par Value) | SHEN | NASDAQ Global Select Market | 49,856,914
(Title of Class) | (Trading Symbol) | (Name of Exchange on which Registered) | (The number of shares of the registrant's common stock outstanding on July 31, 2019)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer | ☑ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | ☐ | Emerging growth company | ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☑

SHENANDOAH TELECOMMUNICATIONS COMPANY
INDEX

|  | Page Numbers
PART I. | FINANCIAL INFORMATION |  |  |
Item 1. | Financial Statements |  |  |
| Unaudited Condensed Consolidated Balance Sheets | 3
| Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income | 4
| Unaudited Condensed Consolidated Statements of Shareholders’ Equity | 5
| Unaudited Condensed Consolidated Statements of Cash Flows | 6
| Notes to Unaudited Condensed Consolidated Financial Statements | 7
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 20
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 34
Item 4. | Controls and Procedures | 35
PART II. | OTHER INFORMATION |  |  |
Item 1A. | Risk Factors | 36
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 36
Item 6. | Exhibits | 37
| Signatures | 39

Index

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES |  |  |  |
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS |  |  |  |
(in thousands) |  |  |  |
|  | June 30, 2019 |  | December 31, 2018
ASSETS |  |  |  |
Current assets: |  |  |  |
Cash and cash equivalents |  | $ | 98,091 |  |  | $ | 85,086 |
Accounts receivable, net of allowance for doubtful accounts of $516 and $534, respectively |  | 59,561 |  |  | 54,407 |
Income taxes receivable |  | 4,144 |  |  | 5,282 |
Inventory, net of allowances of $69 and $113, respectively |  | 6,566 |  |  | 5,265 |
Prepaid expenses and other |  | 53,786 |  |  | 60,162 |
Total current assets |  | 222,148 |  |  | 210,202 |
Investments |  | 11,563 |  |  | 10,788 |
Property, plant and equipment, net |  | 695,725 |  |  | 701,359 |
Intangible assets, net |  | 324,890 |  |  | 366,029 |
Goodwill |  | 149,070 |  |  | 146,497 |
Operating lease right-of-use assets |  | 369,715 |  |  | — |
Deferred charges and other assets |  | 48,929 |  |  | 49,891 |
Total assets |  | $ | 1,822,040 |  |  | $ | 1,484,766 |
LIABILITIES AND SHAREHOLDERS’ EQUITY |  |  |  |
Current liabilities: |  |  |  |
Current maturities of long-term debt, net of unamortized loan fees |  | $ | 27,939 |  |  | $ | 20,618 |
Accounts payable |  | 27,657 |  |  | 35,987 |
Advanced billings and customer deposits |  | 7,914 |  |  | 7,919 |
Accrued compensation |  | 6,817 |  |  | 9,452 |
Current operating lease liabilities |  | 42,941 |  |  | — |
Accrued liabilities and other |  | 14,513 |  |  | 14,563 |
Total current liabilities |  | 127,781 |  |  | 88,539 |
Long-term debt, less current maturities, net of unamortized loan fees |  | 719,067 |  |  | 749,624 |
Other long-term liabilities: |  |  |  |
Deferred income taxes |  | 128,582 |  |  | 127,453 |
Deferred lease |  | — |  |  | 22,436 |
Asset retirement obligations |  | 30,779 |  |  | 28,584 |
Retirement plan obligations |  | 10,355 |  |  | 11,519 |
Noncurrent operating lease liabilities |  | 327,868 |  |  | — |
Other liabilities |  | 15,559 |  |  | 14,364 |
Total other long-term liabilities |  | 513,143 |  |  | 204,356 |
Shareholders’ equity: |  |  |  |
Common stock, no par value, authorized 96,000; 49,857 and 49,630 issued and outstanding at June 30, 2019 and December 31, 2018, respectively |  | — |  |  | — |
Additional paid in capital |  | 47,138 |  |  | 47,456 |
Retained earnings |  | 413,571 |  |  | 386,511 |
Accumulated other comprehensive income, net of taxes |  | 1,340 |  |  | 8,280 |
Total shareholders’ equity |  | 462,049 |  |  | 442,247 |
Total liabilities and shareholders’ equity |  | $ | 1,822,040 |  |  | $ | 1,484,766 |

See accompanying notes to unaudited condensed consolidated financial statements.
3

Index

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES |  |  |  |
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(in thousands, except per share amounts) |  |  |  |
| Three Months Ended June 30, |  | Six Months Ended June 30,
Operating revenue: | 2019 |  | 2018 |  | 2019 |  | 2018
Service revenue and other | $ | 142,059 |  |  | $ | 140,492 |  |  | $ | 285,290 |  |  | $ | 277,051 |
Equipment revenue | 16,855 |  |  | 16,009 |  |  | 32,467 |  |  | 33,588 |
Total operating revenue | 158,914 |  |  | 156,501 |  |  | 317,757 |  |  | 310,639 |
Operating expenses: |  |  |  |  |  |  |
Cost of services | 49,497 |  |  | 49,134 |  |  | 99,015 |  |  | 98,476 |
Cost of goods sold | 15,874 |  |  | 15,166 |  |  | 30,511 |  |  | 30,971 |
Selling, general and administrative | 27,170 |  |  | 29,915 |  |  | 55,892 |  |  | 58,665 |
Depreciation and amortization | 42,353 |  |  | 41,117 |  |  | 83,532 |  |  | 84,604 |
Total operating expenses | 134,894 |  |  | 135,332 |  |  | 268,950 |  |  | 272,716 |
Operating income | 24,020 |  |  | 21,169 |  |  | 48,807 |  |  | 37,923 |
Other income (expense): |  |  |  |  |  |  |
Interest expense | (7,522 | ) |  | (8,851 | ) |  | (15,476 | ) |  | (18,183 | )
Other | 1,176 |  |  | 839 |  |  | 2,463 |  |  | 1,828 |
Income before income taxes | 17,674 |  |  | 13,157 |  |  | 35,794 |  |  | 21,568 |
Income tax expense | 4,524 |  |  | 3,531 |  |  | 8,734 |  |  | 5,359 |
Net income | 13,150 |  |  | 9,626 |  |  | 27,060 |  |  | 16,209 |
Other comprehensive income (loss): |  |  |  |  |  |  |
Unrealized gain (loss) on interest rate hedge, net of tax | (4,212 | ) |  | 833 |  |  | (6,940 | ) |  | 3,895 |
Comprehensive income | $ | 8,938 |  |  | $ | 10,459 |  |  | $ | 20,120 |  |  | $ | 20,104 |
Net income per share, basic and diluted: |  |  |  |  |  |  |
Basic net income per share | $ | 0.26 |  |  | $ | 0.19 |  |  | $ | 0.54 |  |  | $ | 0.33 |
Diluted net income per share | $ | 0.26 |  |  | $ | 0.19 |  |  | $ | 0.54 |  |  | $ | 0.32 |
Weighted average shares outstanding, basic | 49,848 |  |  | 49,547 |  |  | 49,812 |  |  | 49,511 |
Weighted average shares outstanding, diluted | 50,142 |  |  | 50,070 |  |  | 50,118 |  |  | 50,029 |

See accompanying notes to unaudited condensed consolidated financial statements.
4

Index

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(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, March 31, 2019 |  | 49,844 |  |  | $ | 46,641 |  |  | $ | 400,421 |  |  | $ | 5,552 |  |  | $ | 452,614 |
Net income |  | — |  |  | — |  |  | 13,150 |  |  | — |  |  | 13,150 |
Other comprehensive loss, net of tax |  | — |  |  | — |  |  | — |  |  | (4,212 | ) |  | (4,212 | )
Stock based compensation |  | 17 |  |  | 695 |  |  | — |  |  | — |  |  | 695 |
Stock options exercised |  | 1 |  |  | (94 | ) |  | — |  |  | — |  |  | (94 | )
Common stock issued |  | — |  |  | 8 |  |  | — |  |  | — |  |  | 8 |
Shares retired for settlement of employee taxes upon issuance of vested equity awards |  | (5 | ) |  | (112 | ) |  | — |  |  | — |  |  | (112 | )
Balance, June 30, 2019 |  | 49,857 |  |  | $ | 47,138 |  |  | $ | 413,571 |  |  | $ | 1,340 |  |  | $ | 462,049 |
|  | 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 |  |  | $ | 386,511 |  |  | $ | 8,280 |  |  | $ | 442,247 |
Net income |  | — |  |  | — |  |  | 27,060 |  |  | — |  |  | 27,060 |
Other comprehensive loss, net of tax |  | — |  |  | — |  |  | — |  |  | (6,940 | ) |  | (6,940 | )
Stock based compensation |  | 184 |  |  | 2,497 |  |  | — |  |  | — |  |  | 2,497 |
Stock options exercised |  | 29 |  |  | 81 |  |  | — |  |  | — |  |  | 81 |
Common stock issued |  | — |  |  | 16 |  |  | — |  |  | — |  |  | 16 |
Shares retired for settlement of employee taxes upon issuance of vested equity awards |  | (62 | ) |  | (2,912 | ) |  | — |  |  | — |  |  | (2,912 | )
Common stock issued to acquire non-controlling interest in nTelos |  | 76 |  |  | — |  |  | — |  |  | — |  |  | — |
Balance, June 30, 2019 |  | 49,857 |  |  | $ | 47,138 |  |  | $ | 413,571 |  |  | $ | 1,340 |  |  | $ | 462,049 |
|  | Shares of Common Stock (no par value) |  | Additional Paid in Capital |  | Retained Earnings |  | Accumulated Other Comprehensive Income |  | Total
Balance, March 31, 2018 |  | 49,539 |  |  | $ | 45,075 |  |  | $ | 359,885 |  |  | $ | 11,292 |  |  | $ | 416,252 |
Net income |  | — |  |  | — |  |  | 9,626 |  |  | — |  |  | 9,626 |
Other comprehensive gain, net of tax |  | — |  |  | — |  |  | — |  |  | 833 |  |  | 833 |
Stock based compensation |  | 28 |  |  | 1,370 |  |  | — |  |  | — |  |  | 1,370 |
Common stock issued |  | — |  |  | 5 |  |  | — |  |  | — |  |  | 5 |
Shares retired for settlement of employee taxes upon issuance of vested equity awards |  | (9 | ) |  | (278 | ) |  | — |  |  | — |  |  | (278 | )
Balance, June 30, 2018 |  | 49,558 |  |  | $ | 46,172 |  |  | $ | 369,511 |  |  | $ | 12,125 |  |  | $ | 427,808 |
|  | Shares of Common Stock (no par value) |  | Additional Paid in Capital |  | Retained Earnings |  | Accumulated Other Comprehensive Income |  | Total
Balance, December 31, 2017 |  | 49,328 |  |  | $ | 44,787 |  |  | $ | 297,205 |  |  | $ | 8,230 |  |  | $ | 350,222 |
Change in Accounting Principle - Adoption of ASU 2014-09 |  | — |  |  | — |  |  | 56,097 |  |  | — |  |  | 56,097 |
Net income |  | — |  |  | — |  |  | 16,209 |  |  | — |  |  | 16,209 |
Other comprehensive gain, net of tax |  | — |  |  | — |  |  | — |  |  | 3,895 |  |  | 3,895 |
Stock based compensation |  | 205 |  |  | 3,407 |  |  | — |  |  | — |  |  | 3,407 |
Stock options exercised |  | 15 |  |  | 104 |  |  | — |  |  | — |  |  | 104 |
Common stock issued |  | — |  |  | 10 |  |  | — |  |  | — |  |  | 10 |
Shares retired for settlement of employee taxes upon issuance of vested equity awards |  | (66 | ) |  | (2,136 | ) |  | — |  |  | — |  |  | (2,136 | )
Common stock issued to acquire non-controlling interest in nTelos |  | 76 |  |  | — |  |  | — |  |  | — |  |  | — |
Balance, June 30, 2018 |  | 49,558 |  |  | $ | 46,172 |  |  | $ | 369,511 |  |  | $ | 12,125 |  |  | $ | 427,808 |

See accompanying notes to unaudited condensed consolidated financial statements.
5

Index

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES |  |  |  |
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |  |  |  |
(in thousands) |  |  |  |
|  | Six Months Ended June 30,
|  | 2019 |  | 2018
Cash flows from operating activities: |  |  |  |
Net income |  | $ | 27,060 |  |  | $ | 16,209 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |
Depreciation |  | 72,737 |  |  | 71,637 |
Amortization |  | 10,795 |  |  | 12,967 |
Accretion of asset retirement obligations |  | 708 |  |  | 471 |
Bad debt expense |  | 764 |  |  | 758 |
Stock based compensation expense, net of amount capitalized |  | 2,307 |  |  | 3,407 |
Deferred income taxes |  | 3,434 |  |  | (8,004 | )
Net gain from patronage and investments |  | (2,081 | ) |  | (1,576 | )
Amortization of long-term debt issuance costs |  | 1,648 |  |  | 2,365 |
Changes in assets and liabilities: |  |  |  |
Accounts receivable |  | (4,561 | ) |  | (11,060 | )
Inventory, net |  | (1,301 | ) |  | (503 | )
Current income taxes |  | 1,138 |  |  | 16,722 |
Operating lease right-of-use assets |  | 25,389 |  |  | — |
Waived management fee |  | 19,320 |  |  | 18,606 |
Other assets |  | (8,679 | ) |  | (968 | )
Accounts payable |  | 6,311 |  |  | 2,486 |
Lease liabilities |  | (21,880 | ) |  | — |
Deferred lease |  | — |  |  | 1,353 |
Other deferrals and accruals |  | (3,477 | ) |  | 2,274 |
Net cash provided by operating activities |  | 129,632 |  |  | 127,144 |
Cash flows from investing activities: |  |  |  |
Capital expenditures |  | (79,124 | ) |  | (62,322 | )
Cash disbursed for acquisitions |  | (10,000 | ) |  | (52,000 | )
Proceeds from sale of assets |  | 108 |  |  | 447 |
Other |  | (3 | ) |  | (3 | )
Net cash used in investing activities |  | (89,019 | ) |  | (113,878 | )
Cash flows from financing activities: |  |  |  |
Principal payments on long-term debt |  | (24,777 | ) |  | (24,250 | )
Proceeds from revolving credit facility borrowings |  | — |  |  | 15,000 |
Principal payments on revolving credit facility |  | — |  |  | (15,000 | )
Proceeds from exercises of stock options |  | 81 |  |  | — |
Taxes paid for equity award issuances |  | (2,912 | ) |  | (2,032 | )
Net cash used in financing activities |  | (27,608 | ) |  | (26,282 | )
Net increase (decrease) in cash and cash equivalents |  | 13,005 |  |  | (13,016 | )
Cash and cash equivalents, beginning of period |  | 85,086 |  |  | 78,585 |
Cash and cash equivalents, end of period |  | $ | 98,091 |  |  | $ | 65,569 |

See accompanying notes to unaudited condensed consolidated financial statements.
6

Index
SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The interim condensed consolidated financial statements of Shenandoah Telecommunications Company and Subsidiaries (collectively, the “Company”) are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the interim results have been reflected therein in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial reporting and as required by Rule 10-01 of Regulation S-X. Accordingly, the unaudited condensed consolidated financial statements may not include all of the information and notes required by GAAP for audited financial statements. The information contained herein should be read in conjunction with the audited financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2018.
Adoption of New Accounting Principles
There have been no developments related to recently issued accounting standards, including the expected dates of adoption and estimated effects on the Company's unaudited condensed consolidated financial statements and note disclosures, from those disclosed in the Company's 2018 Annual Report on Form 10-K, that would be expected to impact the Company except for the following:
The Company adopted ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220), as of January 1, 2019. The Company elected not to reclassify stranded income tax effects from accumulated other comprehensive income (OCI) to retained earnings and has implemented this election as its accounting policy as of January 1, 2019. The Company utilizes the portfolio approach as its policy to release the income tax effects from accumulated OCI as the entire portfolio is liquidated, sold, or extinguished.
The Company adopted ASU No. 2016-02, Leases (“Topic 842” or “the new lease standard”) on January 1, 2019. Topic 842 replaces previous leasing guidance with a comprehensive lease measurement and recognition standard and expanded disclosure requirements. Topic 842 requires lessees to recognize most leases on their balance sheet as liabilities, with corresponding right-of-use, or ROU assets. The Company adopted the new lease standard utilizing the modified retrospective approach. As a result, comparable period information has not been retrospectively updated. The modified retrospective approach includes a package of optional practical expedients that we elected to apply. As a result, the Company 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 have 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 under Topic 842.
Note 2. Leases
The Company leases various cell sites, warehouses, retail stores, and office facilities for use in our business. These agreements include fixed rental payments as well as variable rental payments, such as those based on relevant inflation indices. The accounting lease term includes optional renewal periods that we are reasonably certain to exercise based on our assessment of relevant contractual and economic factors. The related lease payments are discounted at lease commencement using the Company's incremental borrowing rate in order to measure the lease liability and ROU asset.
The incremental borrowing rate is determined using a portfolio approach based on the rate of interest that the Company would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. The Company uses the observable unsecured borrowing rate and risk-adjusts that rate to approximate a collateralized rate. Under the new lease standard, leases are remeasured upon the occurrence of certain events or modifications.
Adoption of the new lease standard did not materially impact the Company's consolidated net earnings, cash flows, liquidity, or loan covenants.
7

Index
The cumulative effect of the changes made to the consolidated January 1, 2019 balance sheet for the adoption of the new lease standard were as follows:

(in thousands) |  | December 31, 2018 As Previously Reported |  | Effect of the Adoption of ASC Topic 842 (Leases) |  | January 1, 2019 As Adjusted
Assets |  |  |  |  |  |
Prepaid expenses and other |  | $ | 60,162 |  |  | $ | (11,580 | ) |  | $ | 48,582 |
Property, plant and equipment, net |  | 701,359 |  |  | 1,789 |  |  | 703,148 |
Operating lease right-of-use assets |  | — |  |  | 369,344 |  |  | 369,344 |
Intangible assets, net |  | 366,029 |  |  | (13,828 | ) |  | 352,201 |
Liabilities |  |  |  |  |  |
Current operating lease liabilities |  | — |  |  | 38,773 |  |  | 38,773 |
Accrued liabilities and other |  | 14,563 |  |  | (412 | ) |  | 14,151 |
Deferred Lease |  | 22,436 |  |  | (22,436 | ) |  | — |
Noncurrent operating lease liabilities |  | — |  |  | 328,156 |  |  | 328,156 |
Other liabilities |  | 14,364 |  |  | 1,644 |  |  | 16,008 |

In addition to recognizing the operating lease liabilities and right-of-use assets, Topic 842 also reclassified prepaid and deferred rent balances, off-market leases, and lease incentives into the right-of-use assets.
The following table shows the components of lease income and costs:

(in thousands) |  | Three Months Ended June 30, 2019 |  | Six Months Ended June 30, 2019
Lease income from operating leases - fixed |  | $ | 2,042 |  |  | $ | 4,070 |
Operating lease expense |  | 16,752 |  |  | 33,660 |
Amortization of finance lease assets |  | 123 |  |  | 241 |
Interest on finance lease liabilities |  | 23 |  |  | 45 |
Subtotal finance lease cost |  | 146 |  |  | 286 |
Total lease expense |  | $ | 16,898 |  |  | $ | 33,946 |

Substantially all of the Company's sublease income from operating leases relates to fixed lease payments.
All operating lease expenses, including short-term and variable lease expenses, are split between cost of service and selling, general and administrative expense in the condensed consolidated statements of operations based on the use of the facility that the rent is being paid on. Operating lease expense includes variable lease payments and short-term lease expense, both of which are immaterial. Variable lease expenses represent payments that are dependent on a rate or index, or on usage of the asset.
The following table summarizes other information related to operating and finance leases:

(in thousands) |  | Three Months Ended June 30, 2019 |  | Six Months Ended June 30, 2019
Operating cash flows used by leases |  | $ | 15,873 |  |  | $ | 30,544 |
Leased assets obtained in exchange for new operating lease liabilities |  | 21,172 |  |  | 25,760 |

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Index
The following table summarizes the lease terms and discount rates:

|  | June 30, 2019
Weighted-average remaining lease term (years) |  |
Operating leases |  | 8 |
Finance leases |  | 16 |
Weighted-average discount rate |  |
Operating leases |  | 4.8 | %
Finance leases |  | 5.2 | %

The following table summarizes the expected maturity of lease liabilities at June 30, 2019:

(in thousands) |  | Operating Leases |  | Finance Leases |  | Total
2019 |  | $ | 27,397 |  |  | $ | 92 |  |  | $ | 27,489 |
2020 |  | 62,536 |  |  | 174 |  |  | 62,710 |
2021 |  | 61,151 |  |  | 174 |  |  | 61,325 |
2022 |  | 58,134 |  |  | 174 |  |  | 58,308 |
2023 |  | 54,491 |  |  | 174 |  |  | 54,665 |
2024 and thereafter |  | 184,800 |  |  | 1,699 |  |  | 186,499 |
Total lease payments |  | 448,509 |  |  | 2,487 |  |  | 450,996 |
Less: Interest |  | 77,700 |  |  | 771 |  |  | 78,471 |
Present value of lease liabilities |  | $ | 370,809 |  |  | $ | 1,716 |  |  | $ | 372,525 |

The Company's finance lease liabilities are presented in the accrued liabilities and other and the other liabilities lines of the unaudited condensed consolidated balance sheets. The related finance lease assets are included in the property, plant and equipment line.
Our commitments under leases existing as of December 31, 2018 were approximately $55.1 million for the year ending December 31, 2019, $104.4 million in total for the years ending December 31, 2020 and 2021, $97.6 million in total for the years ending December 31, 2022 and 2023 and $168.5 million in total for years thereafter.
The Company is also the lessor on agreements to lease assets such as collocation space at cell sites and dedicated fiber-optic strands to third parties. These agreements were accounted for as operating leases both before and after adoption of the new lease standard. The new lease standard did not have a significant impact on the recognition of lease revenue associated with these agreements. The following table summarizes the total minimum rental receipts under lease agreements at June 30, 2019:

(in thousands) |  | Operating Leases
2019 |  | $ | 3,635 |
2020 |  | 6,453 |
2021 |  | 4,377 |
2022 |  | 3,280 |
2023 |  | 1,653 |
2024 and thereafter |  | 4,520 |
Total lease income |  | $ | 23,918 |

Note 3. Revenue from Contracts with Customers
The Company earns revenue primarily through the sale of its wireless service. Additional revenue is earned from the sale of wireless equipment; from business, residential and enterprise services which provide video, broadband, voice and data services; and from tower and other services. Refer to Note 14, Segment Reporting, for a tabular summary of revenue for the three and six months ended June 30, 2019.
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Index
Wireless service
The Company earns revenue primarily through the sale of its wireless service by providing network access to Sprint under the affiliate agreement. Wireless service revenue is variable based on billed revenue to Sprint’s subscribers that originated in the Company's affiliate area, less applicable fees retained by Sprint.
The Company's revenue related to Sprint’s postpaid customers is the amount that Sprint bills its postpaid subscribers, reduced by customer credits, write-offs of receivables, and 8% management and 8.6% service fees. The Company is also charged for the costs of subsidized handsets sold through Sprint’s national channels as well as commissions paid by Sprint to third-party resellers in the Company's service territory.
The Company's revenue related to Sprint’s prepaid customers is the amount that Sprint bills its prepaid subscribers, reduced by costs to acquire and support the customers, based on national averages for Sprint’s prepaid programs, and a 6% management fee.
The Company considers Sprint, rather than Sprint's subscribers, to be the customer and the Company's performance obligation is to provide Sprint a series of continuous network access services within the Sprint Affiliate Area. The Company determined that reimbursements to Sprint including the cost of prepaid handsets and commissions, and postpaid commissions paid by Sprint to third-party resellers, represent consideration payable to a customer. These reimbursements are initially recorded as a contract asset and are subsequently recognized as a reduction of revenue over the expected benefit period between 21 and 53 months. Contract asset balances and activity for 2019 were as follows:

(in millions) |  | Three Months Ended June 30, 2019 |  | Six Months Ended June 30, 2019
Beginning balance |  | $ | 70.4 |  |  | $ | 65.7 |
Contract payments |  | 17.5 |  |  | 35.7 |
Contract amortization |  | (14.1 | ) |  | (27.6 | )
Ending balance |  | $ | 73.8 |  |  | $ | 73.8 |

Wireless equipment
The Company also earns revenue through the sale of wireless equipment. The Company owns and operates Sprint-branded retail stores within the Sprint Affiliate Area from which the Company sells equipment, primarily wireless handsets, and service to Sprint subscribers. The Company's equipment is predominantly sold to subscribers through Sprint's equipment financing plans. Under the equipment financing plans, Sprint purchases the equipment from the Company and resells the equipment to its subscribers. The Company is the principal in these equipment financing transactions, as it controls and bears the risk of ownership of the inventory prior to sale, and accordingly, revenue and handset costs are recorded on a gross basis, and the corresponding cost of the equipment is recorded separately to cost of goods sold.
Business, residential and enterprise
The Company also earns revenue in the Cable and Wireline segments from the sale of business, residential, and enterprise services to customers where the performance obligations are to provide cable, broadband, and telephone network services, sell and lease equipment and wiring services, and lease fiber-optic cable. The Company's arrangements for residential services are generally composed of contracts that are cancellable at the customer’s discretion without penalty at any time. As there are multiple performance obligations in these arrangements, the Company recognizes revenue based on the standalone selling price of each distinct good or service. The Company generally recognizes this revenue 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 are allocated to services and are recognized ratably over the longer of the contract term or the period the unrecognized portion of the fee remains material to the contract, typically 10 and 11 months for Cable and Wireline customers, respectively. Additionally, the Company incurs commission and installation costs related to in-house employees and third-party vendors which are capitalized and amortized over the expected benefit period which is approximately 44 months and 72 months for Cable and Wireline, respectively.
Tower and Other
The Company also earns revenue from tower and other services. Tower revenue consists primarily of tower collocation space on cell towers owned by the Company accounted for under Topic 842, Leases. Other revenue includes network access-related charges for service provided to customers across the segments.
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Index
Future performance obligations
On June 30, 2019, the Company had approximately $3.4 million allocated to unsatisfied performance obligations, which excludes contracts with original expected duration of one year or less. The following table summarizes the approximate amounts expected to be recognized as revenue after June 30, 2019.

|  | Amount Expected to be Recognized as Revenue:
(in millions) |  |
2019 |  | $ | 0.4 |
2020 |  | 0.7 |
2021 |  | 0.7 |
2022 and thereafter |  | 1.6 |
Total |  | $ | 3.4 |

Contract acquisition costs and costs to fulfill contracts
Capitalized contract costs represent contract fulfillment costs and contract acquisition costs which include commissions and installation costs in our Cable and Wireline segments. Capitalized contract costs are amortized on a straight-line basis over the average customer life. The Company elected to apply the practical expedient to expense contract acquisition costs when incurred, if the amortization period would be twelve months or less. The amortization of these costs is included in cost of services, and selling, general and administrative expenses. Amortized and capitalized costs for Cable and Wireline contracts were as follows:

(in millions) |  | Three Months Ended June 30, 2019 |  | Six Months Ended June 30, 2019
Beginning Balance |  | $ | 10.4 |  |  | $ | 10.1 |
Contract payments |  | 1.5 |  |  | 3.2 |
Contract amortization |  | (1.4 | ) |  | (2.8 | )
Ending Balance |  | $ | 10.5 |  |  | $ | 10.5 |

Note 4. Acquisitions
Big Sandy
On February 28, 2019, the Company completed its preliminary valuation for the acquisition of the assets of Big Sandy Broadband, Inc. ("Big Sandy") for $10 million and recorded $4.6 million of property, plant and equipment; $2.8 million of subscriber relationships; and $2.6 million of goodwill which is reported in the Cable segment and was accounted for as a business combination under ASC 805, Business Combinations. The estimated remaining useful lives of the acquired property, plant and equipment were approximately 2.5 years to 12.5 years and the estimated useful lives for subscriber relationships were 7 years at the time of the acquisition. Big Sandy was a provider of cable television, telephone and high speed internet services. Our preliminary allocation of the acquisition price is based on our preliminary estimate of fair value for each of the acquired assets and liabilities. These estimates may be revised during the one year measurement period provided by the authoritative guidance applicable to business combinations.
Note 5. Customer Concentration
Significant Contractual Relationship
In 1999, the Company executed a Management Agreement (the “Agreement”) with Sprint whereby the Company committed to construct and operate a PCS network using CDMA air interface technology. The Agreement has been amended numerous times. Under the amended Agreement, the Company is the exclusive PCS Affiliate of Sprint providing wireless mobility communications network products and services on the 800 MHz, 1900 MHz and 2.5 GHz spectrum ranges in its territory across a multi-state area covering large portions of central and western Virginia, south-central Pennsylvania, West Virginia, and portions of Maryland, North Carolina, Kentucky, and Ohio. Effective February 1, 2018, the Company amended its Agreement with Sprint to expand its wireless service area to include certain areas in Kentucky, Pennsylvania, Virginia and West Virginia.
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Index
As an exclusive PCS Affiliate of Sprint, the Company has the exclusive right to build, own and maintain its portion of Sprint’s nationwide PCS network, in the aforementioned areas, to Sprint’s specifications. The initial term of the Agreement extends through November 2029, with two successive 10-year renewal periods, unless terminated by either party under provisions outlined in the Agreement. Upon non-renewal by either party, the Company may cause Sprint to buy or Sprint may cause the Company to sell the business, at 90% of Entire Business Value ("EBV") as defined in the Agreement. EBV is defined as i) the fair market value of a going concern paid by a willing buyer to a willing seller; ii) valued as if the business will continue to utilize existing brands and operate under existing agreements; and, iii) valued as if Shentel has continued access to the spectrum. Determination of EBV is made by an independent appraisal process.
Note 6. Earnings Per Share ("EPS")
Basic EPS was computed by dividing net income by the weighted average number of shares of common stock outstanding. Diluted EPS was computed under the treasury stock method by dividing net income by the sum of the weighted average number of shares of common stock outstanding and potentially dilutive securities outstanding during the period under the treasury stock method. Potentially dilutive securities include unvested equity awards that are expected to vest and shares that the Company is contractually obligated to issue in the future.
The following table indicates the computation of basic and diluted earnings per share:

|  | Three Months Ended June 30, |  | Six Months Ended June 30,
(in thousands, except per share amounts) |  | 2019 |  | 2018 |  | 2019 |  | 2018
Calculation of net income per share: |  |  |  |  |  |  |  |
Net income |  | $ | 13,150 |  |  | $ | 9,626 |  |  | $ | 27,060 |  |  | $ | 16,209 |
Basic weighted average shares outstanding |  | 49,848 |  |  | 49,547 |  |  | 49,812 |  |  | 49,511 |
Basic net income per share |  | $ | 0.26 |  |  | $ | 0.19 |  |  | $ | 0.54 |  |  | $ | 0.33 |
Effect of stock options outstanding: |  |  |  |  |  |  |  |
Basic weighted average shares outstanding |  | 49,848 |  |  | 49,547 |  |  | 49,812 |  |  | 49,511 |
Effect from dilutive shares and options outstanding |  | 294 |  |  | 523 |  |  | 306 |  |  | 518 |
Diluted weighted average shares outstanding |  | 50,142 |  |  | 50,070 |  |  | 50,118 |  |  | 50,029 |
Diluted net income per share |  | $ | 0.26 |  |  | $ | 0.19 |  |  | $ | 0.54 |  |  | $ | 0.32 |

The computation of diluted EPS does not include certain unvested awards, on a weighted average basis, because their inclusion would have an anti-dilutive effect on EPS. The awards excluded because of their anti-dilutive effect were as follows:

|  | Three Months Ended June 30, |  | Six Months Ended June 30,
(in thousands) |  | 2019 |  | 2018 |  | 2019 |  | 2018
Awards excluded from the computation of diluted net income per share because their inclusion would have been anti-dilutive |  | 85 |  |  | 23 |  |  | 108 |  |  | 115 |

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Index
Note 7. Investments
Investments consist of the following:

(in thousands) | June 30, 2019 |  | December 31, 2018
Domestic equity funds | $ | 1,690 |  |  | $ | 1,409 |
International equity funds | 417 |  |  | 370 |
Total investments carried at fair value | 2,107 |  |  | 1,779 |
CoBank | 8,147 |  |  | 7,705 |
Equity in other telecommunications partners | 777 |  |  | 782 |
Total investments carried at cost | 8,924 |  |  | 8,487 |
Other | 532 |  |  | 522 |
Total equity method investments | 532 |  |  | 522 |
Total investments | $ | 11,563 |  |  | $ | 10,788 |

The Company determines classification for investments at the date individual investments are acquired. The appropriateness of such classification is periodically reassessed. The Company monitors the value of all investments, and based on factors such as market conditions, financial information and industry conditions, the Company reflects impairments in values when warranted. The domestic and international equity funds are carried at their fair value as determined by using the net asset value expedient.
Note 8. Property, Plant and Equipment
Property, plant and equipment consisted of the following:

(in thousands) |  | Estimated Useful Lives |  | June 30, 2019 |  | December 31, 2018
Land |  |  |  | $ | 6,936 |  |  | $ | 6,723 |
Buildings and structures |  | 10 - 40 years |  | 227,825 |  |  | 213,657 |
Cable and fiber |  | 4 - 40 years |  | 319,750 |  |  | 309,928 |
Equipment and software |  | 2 - 17 years |  | 813,393 |  |  | 791,401 |
Plant in service |  |  |  | 1,367,904 |  |  | 1,321,709 |
Plant under construction |  |  |  | 81,191 |  |  | 81,409 |
Total property, plant and equipment |  |  |  | 1,449,095 |  |  | 1,403,118 |
Less: accumulated amortization and depreciation |  |  |  | 753,370 |  |  | 701,759 |
Property, plant and equipment, net |  |  |  | $ | 695,725 |  |  | $ | 701,359 |

Note 9. Goodwill and Other Intangible Assets
Goodwill by segment consisted of the following:

(in thousands) | June 30, 2019 |  | December 31, 2018
Wireless | $ | 146,383 |  |  | $ | 146,383 |
Cable | 2,677 |  |  | 104 |
Wireline | 10 |  |  | 10 |
Total Goodwill | $ | 149,070 |  |  | $ | 146,497 |

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Index
Intangible assets consisted of the following:

| June 30, 2019 |  | December 31, 2018
(in thousands) | Gross Carrying Amount |  | Accumulated Amortization and Other |  | Net |  | Gross Carrying Amount |  | Accumulated Amortization and Other |  | Net
Non-amortizing intangibles: |  |  |  |  |  |  |  |  |  |  |
Cable franchise rights | $ | 64,334 |  |  | $ | — |  |  | $ | 64,334 |  |  | $ | 64,334 |  |  | $ | — |  |  | $ | 64,334 |
Railroad crossing rights | 141 |  |  | — |  |  | 141 |  |  | 141 |  |  | — |  |  | 141 |
Total non-amortizing intangibles | 64,475 |  |  | — |  |  | 64,475 |  |  | 64,475 |  |  | — |  |  | 64,475 |
Finite-lived intangibles:
Sprint affiliate contract expansion - Wireless | 455,305 |  |  | (197,783 | ) |  | 257,522 |  |  | 455,305 |  |  | (167,830 | ) |  | 287,475 |
Favorable leases - Wireless | — |  |  | — |  |  | — |  |  | 15,743 |  |  | (1,919 | ) |  | 13,824 |
Acquired subscribers - Cable | 28,065 |  |  | (25,399 | ) |  | 2,666 |  |  | 25,265 |  |  | (25,250 | ) |  | 15 |
Other intangibles | 463 |  |  | (236 | ) |  | 227 |  |  | 463 |  |  | (223 | ) |  | 240 |
Total finite-lived intangibles | 483,833 |  |  | (223,418 | ) |  | 260,415 |  |  | 496,776 |  |  | (195,222 | ) |  | 301,554 |
Total intangible assets | $ | 548,308 |  |  | $ | (223,418 | ) |  | $ | 324,890 |  |  | $ | 561,251 |  |  | $ | (195,222 | ) |  | $ | 366,029 |

Affiliate contract expansion is amortized over the expected benefit period and is further reduced by the amount of waived management fees received from Sprint which were $9.7 million and $19.3 million for the three and six months ended June 30, 2019, respectively. Since May 6, 2016, the date of the non-monetary exchange, waived management fees received from Sprint have totaled $117.7 million, and we expect to collect another $137.9 million through 2022.
Note 10. Derivatives and Hedging
The Company uses derivative financial instruments to manage its exposure to interest rate risk for its long-term variable-rate debt through interest rate swaps. The Company's interest rate swaps are all designated as cash flow hedges, and involve the receipt of variable-rate amounts from counterparties in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.
The outstanding notional amounts of the cash flow hedge which is composed of interest rate swap contracts were $361.9 million and $384.0 million as of June 30, 2019 and December 31, 2018, respectively.
The table below presents the fair value of the Company’s derivative financial instruments as well as their classification in the condensed consolidated balance sheets. The fair value of these instruments was estimated using an income approach and observable market inputs (Level II):

(in thousands) |  | June 30, 2019 |  | December 31, 2018
Balance sheet location of derivative financial instruments: |  |  |  |
Prepaid expenses and other |  | $ | 2,275 |  |  | $ | 4,930 |
Deferred charges and other assets, net |  | 1,733 |  |  | 8,323 |
Total derivatives designated as hedging instruments |  | $ | 4,008 |  |  | $ | 13,253 |

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Index
The table below summarizes changes in accumulated other comprehensive income (loss) by component:

| Six Months Ended June 30, 2019
(in thousands) | Gains (Losses) on Cash Flow Hedges |  | Income Tax (Expense) Benefit |  | Accumulated Other Comprehensive Income (Loss), net of taxes
Balance as of December 31, 2018 | $ | 13,253 |  |  | $ | (4,973 | ) |  | $ | 8,280 |
Net change in unrealized gain (loss) | (6,771 | ) |  | 1,688 |  |  | (5,083 | )
Amounts reclassified from accumulated other comprehensive income to interest expense | (2,474 | ) |  | 617 |  |  | (1,857 | )
Net current period other comprehensive income (loss) | (9,245 | ) |  | 2,305 |  |  | (6,940 | )
Balance as of June 30, 2019 | $ | 4,008 |  |  | $ | (2,668 | ) |  | $ | 1,340 |

Note 11. Other Assets and Accrued Liabilities
Prepaid expenses and other, classified as current assets, included the following:

(in thousands) |  | June 30, 2019 |  | December 31, 2018
Prepaid rent |  | $ | — |  |  | $ | 11,245 |
Prepaid maintenance expenses |  | 3,499 |  |  | 3,981 |
Interest rate swaps |  | 2,275 |  |  | 4,930 |
Contract asset |  | 43,879 |  |  | 37,957 |
Other |  | 4,133 |  |  | 2,049 |
Prepaid expenses and other |  | $ | 53,786 |  |  | $ | 60,162 |

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

(in thousands) |  | June 30, 2019 |  | December 31, 2018
Interest rate swaps |  | $ | 1,733 |  |  | $ | 8,323 |
Contract asset |  | 40,438 |  |  | 37,848 |
Other |  | 6,758 |  |  | 3,720 |
Deferred charges and other assets |  | $ | 48,929 |  |  | $ | 49,891 |

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

(in thousands) |  | June 30, 2019 |  | December 31, 2018
Sales and property taxes payable |  | $ | 5,171 |  |  | $ | 4,281 |
Asset retirement obligations |  | 478 |  |  | 582 |
Accrued programming costs |  | 3,021 |  |  | 2,886 |
Financing leases |  | 88 |  |  | — |
Other current liabilities |  | 5,755 |  |  | 6,814 |
Accrued liabilities and other |  | $ | 14,513 |  |  | $ | 14,563 |

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

(in thousands) |  | June 30, 2019 |  | December 31, 2018
Noncurrent portion of deferred lease revenue |  | $ | 12,327 |  |  | $ | 12,593 |
Noncurrent portion of financing leases |  | 1,629 |  |  | — |
Other |  | 1,603 |  |  | 1,771 |
Other liabilities |  | $ | 15,559 |  |  | $ | 14,364 |

Topic 842 requires the Company to include fixed payments for maintenance activities in its measurement of lease liabilities since the Company elected not to separate lease and non-lease components. Liabilities for the Company's financing leases were established with the adoption of Topic 842, as of January 1, 2019, to reflect the present value of fixed payments for maintenance activities. Refer to Note 2, Leases, for additional information.
Note 12. Long-Term Debt
Total debt consisted of the following:

(in thousands) |  | June 30, 2019 |  | December 31, 2018
Term loan A-1 |  | $ | 274,919 |  |  | $ | 287,699 |
Term loan A-2 |  | 485,540 |  |  | 497,537 |
|  | 760,459 |  |  | 785,236 |
Less: unamortized loan fees |  | 13,453 |  |  | 14,994 |
Total debt, net of unamortized loan fees |  | $ | 747,006 |  |  | $ | 770,242 |
Current maturities of long-term debt, net of current unamortized loan fees |  | $ | 27,939 |  |  | $ | 20,618 |
Long-term debt, less current maturities, net of unamortized loan fees |  | $ | 719,067 |  |  | $ | 749,624 |

As of June 30, 2019, the Company's indebtedness totaled approximately $747.0 million, net of unamortized loan fees of $13.5 million, with an annualized overall weighted average interest rate of approximately 3.79%. As of June 30, 2019, the Term Loan A-1 bears interest at one-month London Interbank Offered Rate ("LIBOR") plus a base rate of 1.75%, while the Term Loan A-2 bears interest at one-month LIBOR plus a base rate of 2.00%. LIBOR resets monthly.
The amended Term Loan A-1 requires quarterly principal repayments of $3.6 million, which began on December 31, 2018 and continue through September 30, 2019, increasing to $7.3 million quarterly from December 31, 2019 through September 30, 2022; then increasing to $10.9 million quarterly from December 31, 2022 through September 30, 2023, with the remaining balance due November 8, 2023. The amended Term Loan A-2 requires quarterly principal repayments of $1.2 million which began on December 31, 2018 and continue through September 30, 2025, with the remaining balance due November 8, 2025. In addition to its required quarterly repayments, the Company paid an additional $15.0 million in the first quarter of 2019 with no prepayment penalties.
The Company paid cash for interest, net of amounts capitalized, of $14.5 million and $16.9 million during the six months ended June 30, 2019 and 2018, respectively.
As shown below, as of June 30, 2019, the Company was in compliance with the covenants in its credit agreement.

|  | Actual |  | Covenant Requirement
Total leverage ratio |  | 2.41 |  |  | 3.50 or Lower
Debt service coverage ratio |  | 4.61 |  |  | 2.00 or Higher
Minimum liquidity balance (in millions) |  | $ | 172.9 |  |  | $25.0 or Higher

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Index
Note 13. Income Taxes
The Company files U.S. federal income tax returns and various state income tax returns. The Company is not subject to any state or federal income tax audits as of June 30, 2019. The Company's returns are generally open to examination from 2015 forward and the net operating losses acquired in the acquisition of nTelos are open to examination from 2002 forward.
The Company’s effective tax rate for the three months ended June 30, 2019 was approximately 25.6%, as compared with approximately 26.8% for the three months ended June 30, 2018. The Company’s effective tax rate for the six months ended June 30, 2019 was approximately 24.4%, which was consistent with approximately 24.8% for the six months ended June 30, 2018. The effective tax rate has fluctuated in recent periods due to share based compensation tax benefits that are recognized as incurred. The Company paid cash income taxes of $4.2 million in the six months ended June 30, 2019. The Company received cash income tax refunds of $3.4 million in the six months ended June 30, 2018.
Note 14. Segment Reporting
The Company's reportable segments, which the Company operates and manages as strategic business units that are organized according to major product and service offerings, include: Wireless, Cable, Wireline and Other. A general description of the products and services offered and the customers served by each of these segments is as follows:

• | Wireless provides digital wireless service as a Sprint PCS Affiliate to a portion of a multi-state area covering large portions of central and western Virginia, south-central Pennsylvania, West Virginia, and portions of Maryland, North Carolina, Kentucky, and Ohio. In these areas, we are the exclusive provider of Sprint-branded wireless mobility communications network products and services on the 800 MHz, 1900 MHz and 2.5 GHz spectrum bands.

• | Cable provides video, broadband and voice services in franchise areas in portions of Virginia, West Virginia, western Maryland, and eastern Kentucky, and leases fiber optic facilities throughout its service area. It does not include video, broadband and voice services provided to customers in Shenandoah County, Virginia.

• | Wireline provides regulated and unregulated voice services, video, broadband, long distance access services, and leases fiber optic facilities throughout portions of Virginia, West Virginia, Maryland and Pennsylvania.

• | Other operations are represented by Shenandoah Telecommunications Company, the parent holding company that provides investing and management services to its subsidiaries.

Three Months Ended June 30, 2019

(in thousands) |  | Wireless |  | Cable |  | Wireline |  | Other |  | Eliminations |  | Consolidated
External revenue |  |  |  |  |  |  |  |  |  |  |  |
Service revenue |  | $ | 94,350 |  |  | $ | 30,716 |  |  | $ | 5,558 |  |  | $ | — |  |  | $ | — |  |  | $ | 130,624 |
Equipment revenue |  | 16,548 |  |  | 255 |  |  | 52 |  |  | — |  |  | — |  |  | 16,855 |
Tower revenue |  | 1,654 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,654 |
Other revenue |  | 318 |  |  | 2,238 |  |  | 7,225 |  |  | — |  |  | — |  |  | 9,781 |
Total external revenue |  | 112,870 |  |  | 33,209 |  |  | 12,835 |  |  | — |  |  | — |  |  | 158,914 |
Internal revenue |  | 1,270 |  |  | 1,481 |  |  | 6,692 |  |  | — |  |  | (9,443 | ) |  | — |
Total operating revenue |  | 114,140 |  |  | 34,690 |  |  | 19,527 |  |  | — |  |  | (9,443 | ) |  | 158,914 |
Operating expenses |  |  |  |  |  |  |  |  |  |  |  |
Cost of services |  | 33,563 |  |  | 15,701 |  |  | 8,979 |  |  | — |  |  | (8,746 | ) |  | 49,497 |
Cost of goods sold |  | 15,742 |  |  | 112 |  |  | 19 |  |  | — |  |  | 1 |  |  | 15,874 |
Selling, general and administrative |  | 10,592 |  |  | 5,536 |  |  | 1,988 |  |  | 9,752 |  |  | (698 | ) |  | 27,170 |
Depreciation and amortization |  | 32,219 |  |  | 6,555 |  |  | 3,447 |  |  | 132 |  |  | — |  |  | 42,353 |
Total operating expenses |  | 92,116 |  |  | 27,904 |  |  | 14,433 |  |  | 9,884 |  |  | (9,443 | ) |  | 134,894 |
Operating income (loss) |  | $ | 22,024 |  |  | $ | 6,786 |  |  | $ | 5,094 |  |  | $ | (9,884 | ) |  | $ | — |  |  | $ | 24,020 |

17

Index
Three Months Ended June 30, 2018

(in thousands) |  | Wireless |  | Cable |  | Wireline |  | Other |  | Eliminations |  | Consolidated
External revenue |  |  |  |  |  |  |  |  |  |  |  |
Service revenue |  | $ | 95,690 |  |  | $ | 28,748 |  |  | $ | 5,301 |  |  | $ | — |  |  | $ | — |  |  | $ | 129,739 |
Equipment revenue |  | 15,819 |  |  | 144 |  |  | 46 |  |  | — |  |  | — |  |  | 16,009 |
Tower revenue |  | 1,636 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,636 |
Other revenue |  | 364 |  |  | 2,122 |  |  | 6,631 |  |  | — |  |  | — |  |  | 9,117 |
Total external revenue |  | 113,509 |  |  | 31,014 |  |  | 11,978 |  |  | — |  |  | — |  |  | 156,501 |
Internal revenue |  | 1,244 |  |  | 1,097 |  |  | 7,134 |  |  | — |  |  | (9,475 | ) |  | — |
Total operating revenue |  | 114,753 |  |  | 32,111 |  |  | 19,112 |  |  | — |  |  | (9,475 | ) |  | 156,501 |
Operating expenses |  |  |  |  |  |  |  |  |  |  |  |
Cost of services |  | 33,488 |  |  | 15,125 |  |  | 9,373 |  |  | 12 |  |  | (8,864 | ) |  | 49,134 |
Cost of goods sold |  | 15,082 |  |  | 63 |  |  | 20 |  |  | 1 |  |  | — |  |  | 15,166 |
Selling, general and administrative |  | 12,367 |  |  | 4,661 |  |  | 1,686 |  |  | 11,812 |  |  | (611 | ) |  | 29,915 |
Depreciation and amortization |  | 31,565 |  |  | 6,179 |  |  | 3,240 |  |  | 133 |  |  | — |  |  | 41,117 |
Total operating expenses |  | 92,502 |  |  | 26,028 |  |  | 14,319 |  |  | 11,958 |  |  | (9,475 | ) |  | 135,332 |
Operating income (loss) |  | $ | 22,251 |  |  | $ | 6,083 |  |  | $ | 4,793 |  |  | $ | (11,958 | ) |  | $ | — |  |  | $ | 21,169 |

Six Months Ended June 30, 2019

(in thousands) |  | Wireless |  | Cable |  | Wireline |  | Other |  | Eliminations |  | Consolidated
External revenue |  |  |  |  |  |  |  |  |  |  |  |
Service revenue |  | $ | 191,425 |  |  | $ | 60,421 |  |  | $ | 11,043 |  |  | $ | — |  |  | $ | — |  |  | $ | 262,889 |
Equipment revenue |  | 31,839 |  |  | 525 |  |  | 103 |  |  | — |  |  | — |  |  | 32,467 |
Tower revenue |  | 3,325 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 3,325 |
Other revenue |  | 665 |  |  | 4,503 |  |  | 13,908 |  |  | — |  |  | — |  |  | 19,076 |
Total external revenue |  | 227,254 |  |  | 65,449 |  |  | 25,054 |  |  | — |  |  | — |  |  | 317,757 |
Internal revenue |  | 2,540 |  |  | 2,950 |  |  | 13,382 |  |  | — |  |  | (18,872 | ) |  | — |
Total operating revenue |  | 229,794 |  |  | 68,399 |  |  | 38,436 |  |  | — |  |  | (18,872 | ) |  | 317,757 |
Operating expenses |  |  |  |  |  |  |  |  |  |  |  |
Cost of services |  | 67,041 |  |  | 31,348 |  |  | 18,130 |  |  | — |  |  | (17,504 | ) |  | 99,015 |
Cost of goods sold |  | 30,169 |  |  | 287 |  |  | 55 |  |  | — |  |  | — |  |  | 30,511 |
Selling, general and administrative |  | 21,954 |  |  | 11,262 |  |  | 3,831 |  |  | 20,213 |  |  | (1,368 | ) |  | 55,892 |
Depreciation and amortization |  | 63,269 |  |  | 13,013 |  |  | 6,980 |  |  | 270 |  |  | — |  |  | 83,532 |
Total operating expenses |  | 182,433 |  |  | 55,910 |  |  | 28,996 |  |  | 20,483 |  |  | (18,872 | ) |  | 268,950 |
Operating income (loss) |  | $ | 47,361 |  |  | $ | 12,489 |  |  | $ | 9,440 |  |  | $ | (20,483 | ) |  | $ | — |  |  | $ | 48,807 |

18

Index
Six Months Ended June 30, 2018

(in thousands) |  | Wireless |  | Cable |  | Wireline |  | Other |  | Eliminations |  | Consolidated
External revenue |  |  |  |  |  |  |  |  |  |  |  |
Service revenue |  | $ | 187,855 |  |  | $ | 57,219 |  |  | $ | 10,609 |  |  | $ | — |  |  | $ | — |  |  | $ | 255,683 |
Equipment revenue |  | 33,193 |  |  | 303 |  |  | 92 |  |  | — |  |  | — |  |  | 33,588 |
Tower revenue |  | 3,294 |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 3,294 |
Other revenue |  | 732 |  |  | 4,172 |  |  | 13,170 |  |  | — |  |  | — |  |  | 18,074 |
Total external revenue |  | 225,074 |  |  | 61,694 |  |  | 23,871 |  |  | — |  |  | — |  |  | 310,639 |
Internal revenue |  | 2,483 |  |  | 2,128 |  |  | 14,948 |  |  | — |  |  | (19,559 | ) |  | — |
Total operating revenue |  | 227,557 |  |  | 63,822 |  |  | 38,819 |  |  | — |  |  | (19,559 | ) |  | 310,639 |
Operating expenses |  |  |  |  |  |  |  |  |  |  |  |
Cost of services |  | 67,238 |  |  | 30,281 |  |  | 19,175 |  |  | 12 |  |  | (18,230 | ) |  | 98,476 |
Cost of goods sold |  | 30,809 |  |  | 119 |  |  | 42 |  |  | 1 |  |  | — |  |  | 30,971 |
Selling, general and administrative |  | 24,502 |  |  | 9,609 |  |  | 3,403 |  |  | 22,480 |  |  | (1,329 | ) |  | 58,665 |
Depreciation and amortization |  | 65,490 |  |  | 12,203 |  |  | 6,634 |  |  | 277 |  |  | — |  |  | 84,604 |
Total operating expenses |  | 188,039 |  |  | 52,212 |  |  | 29,254 |  |  | 22,770 |  |  | (19,559 | ) |  | 272,716 |
Operating income (loss) |  | $ | 39,518 |  |  | $ | 11,610 |  |  | $ | 9,565 |  |  | $ | (22,770 | ) |  | $ | — |  |  | $ | 37,923 |

Note 15. Subsequent Events
During the second quarter of 2019, the Company agreed to purchase certain indefinite-lived FCC spectrum licenses and to assume the leases for certain other FCC spectrum licenses covering portions of Virginia and West Virginia. We plan to use these licenses in our Cable segment to provide fixed wireless broadband coverage. The Company agreed to pay $17.0 million at close of these agreements and approximately $4.0 million over the remaining lease terms of approximately 20 years. On July 9, 2019, we closed on the purchase of the indefinite-lived licenses and remitted $13.8 million to the seller. Assumption of the leased licenses is expected to close at various dates during the third quarter of 2019, following customary regulatory approvals.
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Index

ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This management’s discussion and analysis includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. When used in this report, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan” and similar expressions as they relate to Shenandoah Telecommunications Company or its management are intended to identify these forward-looking statements. All statements regarding Shenandoah Telecommunications Company’s expected future financial position and operating results, business strategy, financing plans, forecasted trends relating to the markets in which Shenandoah Telecommunications Company operates and similar matters are forward-looking statements. We cannot assure you that the Company’s expectations expressed or implied in these forward-looking statements will turn out to be correct. The Company’s actual results could be materially different from its expectations because of various factors, including those discussed below and under the caption “Risk Factors” in the Company’s Annual Report on Form 10-K for its fiscal year ended December 31, 2018. The following management’s discussion and analysis should be read in conjunction with the Company’s Annual Report on Form 10-K for its fiscal year ended December 31, 2018, including the consolidated financial statements and related notes included therein.
Overview
Shenandoah Telecommunications Company (Shentel) provides a broad range of diversified communications services through its high speed, state-of-the-art network to customers in the Mid-Atlantic United States. The Company’s services include: wireless voice and data; cable video, internet and digital voice; fiber network and services; and regulated local and long distance telephone. Shentel is the exclusive personal communications service (“PCS”) Affiliate of Sprint in a multi-state area covering large portions of central and western Virginia, south-central Pennsylvania, West Virginia, and portions of Maryland, North Carolina, Kentucky, and Ohio. For more information, please visit www.shentel.com.
2019 Developments
Big Sandy Broadband, Inc. Acquisition: On February 28, 2019, the Company acquired the assets of Big Sandy Broadband, Inc., ("Big Sandy”), a provider of cable television, telephone and high speed internet services in eastern Kentucky. The Company's investment will allow the Cable segment to expand its footprint into the adjacent markets of eastern Kentucky. See Note 4, Acquisitions, for additional information.
Fiber to the Home (FTTH): As of June 30, 2019, we are in the initial stage of deploying our new FTTH product, in our Cable segment, which leverages our existing robust fiber network and commercial customer base to target certain residential areas in three initial markets within our wireless service territory. We incurred $0.8 million and $1.0 million of FTTH expenses in the three and six months ending June 30, 2019, respectively. We expect to continue to incur expenses related to the initiation of FTTH in the select markets, in advance of generating revenue from this new product.
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Index
Results of Operations
Three Months Ended June 30, 2019 Compared with the Three Months Ended June 30, 2018
The Company's consolidated results from operations are summarized as follows:

|  | Three Months Ended June 30, |  | Change
($ in thousands) |  | 2019 | % of Revenue |  | 2018 | % of Revenue |  | $ |  | %
Operating revenue |  | $ | 158,914 |  | 100.0 | % |  | $ | 156,501 |  | 100.0 | % |  | 2,413 |  |  | 1.5 | %
Operating expenses |  | 134,894 |  | 84.9 | % |  | 135,332 |  | 86.5 | % |  | (438 | ) |  | (0.3 | )%
Operating income |  | 24,020 |  | 15.1 | % |  | 21,169 |  | 13.5 | % |  | 2,851 |  |  | 13.5 | %
Interest expense |  | (7,522 | ) | (4.7 | )% |  | (8,851 | ) | (5.7 | )% |  | (1,329 | ) |  | (15.0 | )%
Other income, net |  | 1,176 |  | 0.7 | % |  | 839 |  | 0.5 | % |  | 337 |  |  | 40.2 | %
Income before taxes |  | 17,674 |  | 11.1 | % |  | 13,157 |  | 8.4 | % |  | 4,517 |  |  | 34.3 | %
Income tax expense |  | 4,524 |  | 2.8 | % |  | 3,531 |  | 2.3 | % |  | 993 |  |  | 28.1 | %
Net income |  | $ | 13,150 |  | 8.3 | % |  | $ | 9,626 |  | 6.2 | % |  | 3,524 |  |  | 36.6 | %

Operating revenue
During the three months ended June 30, 2019, operating revenue increased approximately $2.4 million, or 1.5%, compared with the three months ended June 30, 2018, driven by growth in the Cable and Wireline segments.
Operating expenses
During the three months ended June 30, 2019, operating expenses decreased approximately $0.4 million, or 0.3%, compared with the three months ended June 30, 2018. The decrease was primarily due to a decline in selling, general and administrative expenses in our Wireless and Other segments.
Interest expense
During the three months ended June 30, 2019, interest expense decreased approximately $1.3 million, or 15.0%, compared with the three months ended June 30, 2018. The decrease in interest expense was primarily attributable to the 2018 amendments to the Credit Facility Agreement that reduced the applicable base interest rate by 75 basis points, and scheduled reductions of principal, partially offset by the effect of increases in LIBOR.
Other income, net
During the three months ended June 30, 2019, other income, net increased approximately $0.3 million, or 40.2%, compared with the three months ended June 30, 2018. The increase in other income, net was primarily attributable to the growth in the value of our investments.
Income tax expense
During the three months ended June 30, 2019, income tax expense increased approximately $1.0 million, or 28.1%, compared with the three months ended June 30, 2018. The increase was consistent with the growth in our income before taxes.
Our effective tax rate for the three months ended June 30, 2019 was approximately 25.6%, as compared with approximately 26.8% for the three months ended June 30, 2018.
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Index
Six Months Ended June 30, 2019 Compared with the Six Months Ended June 30, 2018
The Company's consolidated results from operations are summarized as follows:

|  | Six Months Ended June 30, |  | Change
($ in thousands) |  | 2019 | % of Revenue |  | 2018 | % of Revenue |  | $ |  | %
Operating revenue |  | $ | 317,757 |  | 100.0 | % |  | $ | 310,639 |  | 100.0 | % |  | 7,118 |  |  | 2.3 | %
Operating expenses |  | 268,950 |  | 84.6 | % |  | 272,716 |  | 87.8 | % |  | (3,766 | ) |  | (1.4 | )%
Operating income |  | 48,807 |  | 15.4 | % |  | 37,923 |  | 12.2 | % |  | 10,884 |  |  | 28.7 | %
Interest expense |  | (15,476 | ) | (4.9 | )% |  | (18,183 | ) | (5.9 | )% |  | (2,707 | ) |  | 14.9 | %
Other income, net |  | 2,463 |  | 0.8 | % |  | 1,828 |  | 0.6 | % |  | 635 |  |  | 34.7 | %
Income before taxes |  | 35,794 |  | 11.3 | % |  | 21,568 |  | 6.9 | % |  | 14,226 |  |  | 66.0 | %
Income tax expense |  | 8,734 |  | 2.7 | % |  | 5,359 |  | 1.7 | % |  | 3,375 |  |  | 63.0 | %
Net income |  | $ | 27,060 |  | 8.5 | % |  | $ | 16,209 |  | 5.2 | % |  | 10,851 |  |  | 66.9 | %

Operating revenue
During the six months ended June 30, 2019, operating revenue increased approximately $7.1 million, or 2.3%, compared with the six months ended June 30, 2018, driven by subscriber growth in the Wireless and Cable segments. Refer to the discussion of the results of operations for the Wireless and Cable segments, included within this quarterly report, for additional information.
Operating expenses
During the six months ended June 30, 2019, operating expenses decreased approximately $3.8 million, or 1.4%, compared with the six months ended June 30, 2018. The decrease was primarily due to a $2.2 million decline in Wireless amortization expense primarily from lower amortization expense on our affiliate contract expansion rights, which is recognized on an accelerated method that declines over time, and a $2.8 million decline in selling, general and administrative expenses driven by the Wireless and Other segments.
Interest expense
During the six months ended June 30, 2019, interest expense decreased approximately $2.7 million, or 14.9%, compared with the six months ended June 30, 2018. The decrease in interest expense was primarily attributable to the 2018 amendments to the Credit Facility Agreement that reduced the applicable base interest rate by 75 basis points and principal repayments.
Other income, net
During the six months ended June 30, 2019, other income, net increased approximately $0.6 million, or 34.7%, compared with the six months ended June 30, 2018. The increase in other income, net was primarily attributable to growth in the value of our investments.
Income tax expense
During the six months ended June 30, 2019, income tax expense increased approximately $3.4 million, or 63.0%, compared with the six months ended June 30, 2018. The increase was consistent with the growth in our income before taxes.
Our effective tax rate for the six months ended June 30, 2019 was approximately 24.4%, which was consistent with approximately 24.8% for six months ended June 30, 2018.
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Index
Wireless
The following tables indicate selected operating statistics of Wireless, including Sprint subscribers:

|  | June 30, 2019 (4) |  | June 30, 2018 (4)
Retail PCS subscribers - postpaid |  | 811,719 |  |  | 780,658 |
Retail PCS subscribers - prepaid |  | 269,039 |  |  | 252,054 |
PCS market POPS (000) (1) |  | 7,227 |  |  | 7,023 |
PCS covered POPS (000) (1) |  | 6,285 |  |  | 5,908 |
CDMA base stations (sites) |  | 1,910 |  |  | 1,770 |
Towers owned |  | 217 |  |  | 193 |
Cell site leases |  | 200 |  |  | 192 |

|  | Three Months Ended June 30, |  | Six Months Ended June 30,
|  | 2019 |  | 2018 |  | 2019 (4) |  | 2018 (4)
Gross PCS subscriber additions - postpaid |  | 52,799 |  |  | 44,629 |  |  | 103,646 |  |  | 87,706 |
Net PCS subscriber additions - postpaid (2) |  | 10,767 |  |  | 5,797 |  |  | 16,543 |  |  | 44,061 |
Gross PCS subscriber additions - prepaid |  | 33,753 |  |  | 33,840 |  |  | 74,732 |  |  | 73,951 |
Net PCS subscriber additions - prepaid (3) |  | 1,819 |  |  | 1,863 |  |  | 10,335 |  |  | 26,232 |
PCS average monthly retail churn % - postpaid |  | 1.74 | % |  | 1.67 | % |  | 1.81 | % |  | 1.78 | %
PCS average monthly retail churn % - prepaid |  | 3.97 | % |  | 4.25 | % |  | 4.06 | % |  | 4.32 | %

_______________________________________________________

(1) | "POPS" refers to the estimated population of a given geographic area. Market POPS are those within a market area which we are authorized to serve under our Sprint PCS affiliate agreement, and Covered POPS are those covered by our network. The data source for POPS is U.S. census data.

(2) | For the six months ended June 30, 2018 Net PCS subscriber additions - postpaid were 5,718 excluding the acquisition of the expansion area on February 1, 2018.

(3) | For the six months ended June 30, 2018 Net PCS subscriber additions - prepaid were 10,541 excluding the acquisition of the expansion area on February 1, 2018.

(4) | Beginning February 1, 2018 includes Richmond Expansion Area except for gross PCS subscriber additions.

The subscriber statistics above, excluding gross additions, include the Richmond Expansion Area as follows:

|  | February 1, 2018
|  | Expansion Area
PCS subscribers - postpaid |  | 38,343 |
PCS subscribers - prepaid |  | 15,691 |
Acquired PCS market POPS (000) |  | 1,082 |
Acquired PCS covered POPS (000) |  | 602 |
Acquired CDMA base stations (sites) |  | 105 |

23

Index
Three Months Ended June 30, 2019 Compared with the Three Months Ended June 30, 2018

|  | Three Months Ended June 30, |  | Change
($ in thousands) |  | 2019 | % of Revenue |  | 2018 | % of Revenue |  | $ |  | %
Wireless operating revenue |  |  |  |  |  |  |  |  |  |
Wireless service revenue |  | $ | 94,350 |  | 82.7 | % |  | $ | 95,690 |  | 83.4 | % |  | (1,340 | ) |  | (1.4 | )%
Tower lease revenue |  | 2,921 |  | 2.6 | % |  | 2,878 |  | 2.5 | % |  | 43 |  |  | 1.5 | %
Equipment revenue |  | 16,548 |  | 14.5 | % |  | 15,819 |  | 13.8 | % |  | 729 |  |  | 4.6 | %
Other revenue |  | 321 |  | 0.2 | % |  | 366 |  | 0.3 | % |  | (45 | ) |  | (12.3 | )%
Total Wireless operating revenue |  | 114,140 |  | 100.0 | % |  | 114,753 |  | 100.0 | % |  | (613 | ) |  | (0.5 | )%
Wireless operating expenses |  |  |  |  |  |  |  |  |  |
Cost of services |  | 33,563 |  | 29.4 | % |  | 33,488 |  | 29.2 | % |  | 75 |  |  | 0.2 | %
Cost of goods sold |  | 15,742 |  | 13.8 | % |  | 15,082 |  | 13.1 | % |  | 660 |  |  | 4.4 | %
Selling, general and administrative |  | 10,592 |  | 9.3 | % |  | 12,367 |  | 10.8 | % |  | (1,775 | ) |  | (14.4 | )%
Depreciation and amortization |  | 32,219 |  | 28.2 | % |  | 31,565 |  | 27.5 | % |  | 654 |  |  | 2.1 | %
Total Wireless operating expenses |  | 92,116 |  | 80.7 | % |  | 92,502 |  | 80.6 | % |  | (386 | ) |  | (0.4 | )%
Wireless operating income |  | $ | 22,024 |  | 19.3 | % |  | $ | 22,251 |  | 19.4 | % |  | (227 | ) |  | (1.0 | )%

Operating Revenue
Under our affiliate agreement with Sprint, we have historically earned and recognized monthly revenue of $1.5 million for providing service to Sprint customers who pass through our network area ("Travel Revenue"). While we continue to provide these services to Sprint, the agreed upon payments were suspended by Sprint on April 30, 2019. Accordingly, we have ceased recognizing revenue for the services provided after that date until a new prospective fee can be agreed. We expect to resolve the new travel fees in the third quarter 2019.
Wireless operating revenue decreased slightly to $114.1 million for the three months ended June 30, 2019, compared with $114.8 million for the three months ended June 30, 2018. Travel Revenue declined $3.0 million from second quarter 2018 due to the suspension by Sprint of Travel Revenue payments in April 2019 and the cessation of recognizing Travel Revenue until the parties finalize travel fees. The Travel Revenue decline was substantially offset by increases in subscriber service revenue of $0.9 million, in equipment revenue of $0.7 million, and in roaming revenue of $0.5 million.
The table below provides additional detail for Wireless service revenue.

|  | Three Months Ended June 30, |  | Change
($ in thousands) |  | 2019 |  | 2018 |  | $ |  | %
Wireless service revenue: |  |  |  |  |  |  |  |
Postpaid billings (1) |  | $ | 97,779 |  |  | $ | 96,127 |  |  | 1,652 |  |  | 1.7 | %
Amortization of deferred contract and other costs |  | (5,636 | ) |  | (4,615 | ) |  | (1,021 | ) |  | (22.1 | )%
Sprint management fee |  | (7,781 | ) |  | (7,803 | ) |  | 22 |  |  | 0.3 | %
Net service fee |  | (8,365 | ) |  | (8,303 | ) |  | (62 | ) |  | (0.7 | )%
Total postpaid service revenue |  | 75,997 |  |  | 75,406 |  |  | 591 |  |  | 0.8 | %
Prepaid billings |  | 30,328 |  |  | 27,915 |  |  | 2,413 |  |  | 8.6 | %
Amortization of deferred contract and other costs |  | (14,814 | ) |  | (12,876 | ) |  | (1,938 | ) |  | (15.1 | )%
Sprint management fee |  | (1,911 | ) |  | (1,754 | ) |  | (157 | ) |  | (9.0 | )%
Total prepaid service revenue |  | 13,603 |  |  | 13,285 |  |  | 318 |  |  | 2.4 | %
Travel and other revenue |  | 4,750 |  |  | 6,999 |  |  | (2,249 | ) |  | (32.1 | )%
Total service revenue |  | $ | 94,350 |  |  | $ | 95,690 |  |  | (1,340 | ) |  | (1.4 | )%

_______________________________________________________

(1) | Postpaid net billings are defined under the terms of the affiliate contract with Sprint to be the gross billings to customers within our wireless network coverage area less billing credits and adjustments and allocated write-offs of uncollectible accounts.

24

Index
The increase in postpaid service revenue during the three months ended June 30, 2019, was primarily attributable to the addition of 31,061 postpaid PCS retail subscribers.
The increase in prepaid service revenue during the three months ended June 30, 2019, was primarily attributable to the addition 16,985 prepaid PCS retail subscribers.
Cost of services
During the three months ended June 30, 2019, cost of services increased approximately $0.1 million or 0.2%, compared with the three months ended June 30, 2018 due to lower backhaul circuit costs.
Cost of goods sold
During the three months ended June 30, 2019, cost of goods sold increased approximately $0.7 million, or 4.4%, compared with the three months ended June 30, 2018. Higher cost of goods sold reflect an increase in sales due to a larger percentage of activations originating from Shentel-owned stores.
Selling, general and administrative
During the three months ended June 30, 2019, selling, general and administrative costs decreased approximately $1.8 million, or 14.4%, compared with the three months ended June 30, 2018 primarily due to reductions in transactional tax expenses.
Depreciation and amortization
During the three months ended June 30, 2019, depreciation and amortization increased approximately $0.7 million, or 2.1%, compared with the three months ended June 30, 2018 primarily from the continued deployment of property, plant and equipment necessary to support the expansion of our wireless service territory.
Six Months Ended June 30, 2019 Compared with the Six Months Ended June 30, 2018

|  | Six Months Ended June 30, |  | Change
($ in thousands) |  | 2019 | % of Revenue |  | 2018 | % of Revenue |  | $ |  | %
Wireless operating revenue |  |  |  |  |  |  |  |  |  |
Wireless service revenue |  | $ | 191,425 |  | 83.3 | % |  | $ | 187,855 |  | 82.6 | % |  | 3,570 |  |  | 1.9 | %
Tower lease revenue |  | 5,860 |  | 2.6 | % |  | 5,774 |  | 2.5 | % |  | 86 |  |  | 1.5 | %
Equipment revenue |  | 31,839 |  | 13.9 | % |  | 33,193 |  | 14.6 | % |  | (1,354 | ) |  | (4.1 | )%
Other revenue |  | 670 |  | 0.2 | % |  | 735 |  | 0.3 | % |  | (65 | ) |  | (8.8 | )%
Total Wireless operating revenue |  | 229,794 |  | 100.0 | % |  | 227,557 |  | 100.0 | % |  | 2,237 |  |  | 1.0 | %
Wireless operating expenses |  |  |  |  |  |  |  |  |  |
Cost of services |  | 67,041 |  | 29.2 | % |  | 67,238 |  | 29.5 | % |  | (197 | ) |  | (0.3 | )%
Cost of goods sold |  | 30,169 |  | 13.1 | % |  | 30,809 |  | 13.5 | % |  | (640 | ) |  | (2.1 | )%
Selling, general and administrative |  | 21,954 |  | 9.6 | % |  | 24,502 |  | 10.8 | % |  | (2,548 | ) |  | (10.4 | )%
Depreciation and amortization |  | 63,269 |  | 27.5 | % |  | 65,490 |  | 28.8 | % |  | (2,221 | ) |  | (3.4 | )%
Total Wireless operating expenses |  | 182,433 |  | 79.4 | % |  | 188,039 |  | 82.6 | % |  | (5,606 | ) |  | (3.0 | )%
Wireless operating income |  | $ | 47,361 |  | 20.6 | % |  | $ | 39,518 |  | 17.4 | % |  | 7,843 |  |  | 19.8 | %

Operating Revenue
Under our affiliate agreement with Sprint, we have historically earned and recognized monthly revenue of $1.5 million for providing service to Sprint customers who pass through our network area. While we continue to provide these services to Sprint, the agreed upon fee was suspended on April 30, 2019. Accordingly, we have ceased recognizing revenue for the services provided after that date until a new prospective fee can be agreed.
During the six months ended June 30, 2019, operating revenue increased approximately $2.2 million, or 1.0%, compared with the six months ended June 30, 2018. This increase in operating revenue was driven by a 4.0% increase in postpaid subscribers and a 6.7% increase in prepaid PCS subscribers, and was partially offset by a reduction in travel and other revenue. Refer to the detailed Wireless service revenue chart provided below for additional information.
25

Index
The table below provides additional detail for Wireless service revenue.

|  | Six Months Ended June 30, |  | Change
($ in thousands) |  | 2019 |  | 2018 |  | $ |  | %
Wireless service revenue: |  |  |  |  |  |  |  |
Postpaid billings (1) |  | $ | 195,255 |  |  | $ | 189,417 |  |  | 5,838 |  |  | 3.1 | %
Amortization of deferred contract and other costs |  | (10,824 | ) |  | (9,080 | ) |  | (1,744 | ) |  | 19.2 | %
Sprint management fee |  | (15,543 | ) |  | (15,203 | ) |  | (340 | ) |  | 2.2 | %
Net service fee |  | (16,709 | ) |  | (16,258 | ) |  | (451 | ) |  | 2.8 | %
Total postpaid service revenue |  | 152,179 |  |  | 148,876 |  |  | 3,303 |  |  | 2.2 | %
Prepaid billings |  | 59,861 |  |  | 54,256 |  |  | 5,605 |  |  | 10.3 | %
Amortization of deferred contract and other costs |  | (29,351 | ) |  | (25,664 | ) |  | (3,687 | ) |  | 14.4 | %
Sprint management fee |  | (3,777 | ) |  | (3,403 | ) |  | (374 | ) |  | 11.0 | %
Total prepaid service revenue |  | 26,733 |  |  | 25,189 |  |  | 1,544 |  |  | 6.1 | %
Travel and other revenue |  | 12,513 |  |  | 13,790 |  |  | (1,277 | ) |  | (9.3 | )%
Total service revenue |  | $ | 191,425 |  |  | $ | 187,855 |  |  | 3,570 |  |  | 1.9 | %

_______________________________________________________

(1) | Postpaid net billings are defined under the terms of the affiliate contract with Sprint to be the gross billings to customers within our wireless network coverage area less billing credits and adjustments and allocated write-offs of uncollectible accounts.

The increase in postpaid service revenue during the six months ended June 30, 2019, was primarily attributable to the addition of 31,061 postpaid PCS retail subscribers.
The increase in prepaid service revenue during the six months ended June 30, 2019, was primarily attributable to the addition of 16,985 prepaid PCS retail subscribers.
Cost of services
During the six months ended June 30, 2019, cost of services decreased approximately $0.2 million or 0.3%, compared with the six months ended June 30, 2018 primarily from a $3.3 million reduction in backhaul circuit costs, partially offset by a $2.5 million increase in net rent expense driven by the addition of new cell sites.
Cost of goods sold
During the six months ended June 30, 2019, cost of goods sold decreased approximately $0.6 million, or 2.1%, compared with the six months ended June 30, 2018. Lower cost of goods sold reflects a reduction in sales in Shentel-owned stores.
Selling, general and administrative
During the six months ended June 30, 2019, selling, general and administrative costs decreased approximately $2.5 million, or 10.4%, compared with the six months ended June 30, 2018 primarily due to reductions in transactional tax expenses.
Depreciation and amortization
During the six months ended June 30, 2019, depreciation and amortization decreased approximately $2.2 million, or 3.4%, compared with the six months ended June 30, 2018 primarily from lower amortization expense on our affiliate contract expansion rights, which is recognized on an accelerated method that declines over time.
26

Index
Cable
The following table indicates selected operating statistics of Cable:

|  | June 30, 2019 |  | June 30, 2018
Homes passed (1) |  | 189,762 |  |  | 185,016 |
Customer relationships (2) |  |  |  |
Video users |  | 40,497 |  |  | 42,483 |
Non-video customers |  | 43,024 |  |  | 35,773 |
Total customer relationships |  | 83,521 |  |  | 78,256 |
Video |  |  |  |
Customers (3) |  | 42,874 |  |  | 44,800 |
Penetration (4) |  | 22.6 | % |  | 24.2 | %
Digital video penetration (5) |  | 90.3 | % |  | 76.9 | %
Broadband |  |  |  |
Users (3) |  | 71,893 |  |  | 65,466 |
Penetration (4) |  | 37.9 | % |  | 35.4 | %
Voice |  |  |  |
Users (3) |  | 23,805 |  |  | 22,882 |
Penetration (4) |  | 12.5 | % |  | 12.4 | %
Total revenue generating units (6) |  | 138,572 |  |  | 133,148 |
Fiber route miles |  | 3,657 |  |  | 3,426 |
Total fiber miles (7) |  | 143,762 |  |  | 133,702 |
Average revenue generating units |  | 138,016 |  |  | 132,287 |

_______________________________________________________

(1) | Homes and businesses are considered passed (“homes passed”) if we can connect them to our distribution system without further extending the transmission lines. Homes passed is an estimate based upon the best available information. Homes passed have access to video, broadband and voice services.

(2) | Customer relationships represent the number of billed customers who receive at least one of our services.

(3) | Generally, a dwelling or commercial unit with one or more television sets connected to our distribution system counts as one video customer. Where services are provided on a bulk basis for video, broadband, or voice services, such as to hotels and some multi-dwelling units, the revenue charged to the customer is divided by the rate for comparable service in the local market to determine the number of customer equivalents included in the customer counts shown above.

(4) | Penetration is calculated by dividing the number of users by the number of homes passed or available homes, as appropriate.

(5) | Digital video penetration is calculated by dividing the number of digital video users by total video users. Digital video users are video customers who receive any level of video service via digital transmission. A dwelling with one or more digital set-top boxes or digital adapters counts as one digital video user.

(6) | Revenue generating units are the sum of video, voice and broadband users.

(7) | Total fiber miles are measured by taking the number of fiber strands in a cable and multiplying that number by the route distance. For example, a 10 mile route with 144 fiber strands would equal 1,440 fiber miles.

27

Index
Three Months Ended June 30, 2019 Compared with the Three Months Ended June 30, 2018

|  | Three Months Ended June 30, |  | Change
($ in thousands) |  | 2019 | % of Revenue |  | 2018 | % of Revenue |  | $ |  | %
Cable operating revenue |  |  |  |  |  |  |  |  |  |
Service revenue |  | $ | 30,716 |  | 88.5 | % |  | $ | 28,748 |  | 89.5 | % |  | 1,968 |  |  | 6.8 | %
Equipment revenue |  | 255 |  | 0.7 | % |  | 144 |  | 0.4 | % |  | 111 |  |  | 77.1 | %
Other revenue |  | 3,719 |  | 10.8 | % |  | 3,219 |  | 10.1 | % |  | 500 |  |  | 15.5 | %
Total Cable operating revenue |  | 34,690 |  | 100.0 | % |  | 32,111 |  | 100.0 | % |  | 2,579 |  |  | 8.0 | %
Cable operating expenses |  |  |  |  |  |  |  |  |  |
Cost of services |  | 15,701 |  | 45.3 | % |  | 15,125 |  | 47.1 | % |  | 576 |  |  | 3.8 | %
Cost of goods sold |  | 112 |  | 0.3 | % |  | 63 |  | 0.2 | % |  | 49 |  |  | 77.8 | %
Selling, general and administrative |  | 5,536 |  | 16.0 | % |  | 4,661 |  | 14.5 | % |  | 875 |  |  | 18.8 | %
Depreciation and amortization |  | 6,555 |  | 18.8 | % |  | 6,179 |  | 19.3 | % |  | 376 |  |  | 6.1 | %
Total Cable operating expenses |  | 27,904 |  | 80.4 | % |  | 26,028 |  | 81.1 | % |  | 1,876 |  |  | 7.2 | %
Cable operating income |  | $ | 6,786 |  | 19.6 | % |  | $ | 6,083 |  | 18.9 | % |  | 703 |  |  | 11.6 | %

Service revenue
During the three months ended June 30, 2019, service revenue increased approximately $2.0 million, or 6.8%, compared with the three months ended June 30, 2018. The increase was primarily attributable to a full quarter of Big Sandy results, increases in broadband subscribers and higher average revenue per customer ("ARPU") related to broadband customers upgrading to higher-speed data access packages and increases in video rates.
Other revenue
Other revenue is mainly comprised of fiber services and installation services. During the three months ended June 30, 2019, other revenue increased approximately $0.5 million, or 15.5%, compared with the three months ended June 30, 2018 primarily attributable to expansion of the Company's fiber network and increased demand for fiber services.
Operating expenses
During the three months ended June 30, 2019, operating expenses increased approximately $1.9 million, or 7.2%, compared with the three months ended June 30, 2018 primarily due to professional fees associated with starting our FTTH product offering and higher repair and maintenance expense associated with maintaining our growing network. We expect to continue to incur expenses related to the initiation of FTTH in select markets, in advance of generating revenue from this new product.
28

Index
Six Months Ended June 30, 2019 Compared with the Six Months Ended June 30, 2018

|  | Six Months Ended June 30, |  | Change
($ in thousands) |  | 2019 | % of Revenue |  | 2018 | % of Revenue |  | $ |  | %
Cable operating revenue |  |  |  |  |  |  |  |  |  |
Service revenue |  | $ | 60,421 |  | 88.3 | % |  | $ | 57,219 |  | 89.7 | % |  | 3,202 |  |  | 5.6 | %
Equipment revenue |  | 525 |  | 0.8 | % |  | 303 |  | 0.5 | % |  | 222 |  |  | 73.3 | %
Other revenue |  | 7,453 |  | 10.9 | % |  | 6,300 |  | 9.8 | % |  | 1,153 |  |  | 18.3 | %
Total Cable operating revenue |  | 68,399 |  | 100.0 | % |  | 63,822 |  | 100.0 | % |  | 4,577 |  |  | 7.2 | %
Cable operating expenses |  |  |  |  |  |  |  |  |  |
Cost of services |  | 31,348 |  | 45.8 | % |  | 30,281 |  | 47.4 | % |  | 1,067 |  |  | 3.5 | %
Cost of goods sold |  | 287 |  | 0.4 | % |  | 119 |  | 0.2 | % |  | 168 |  |  | 141.2 | %
Selling, general and administrative |  | 11,262 |  | 16.5 | % |  | 9,609 |  | 15.1 | % |  | 1,653 |  |  | 17.2 | %
Depreciation and amortization |  | 13,013 |  | 19.0 | % |  | 12,203 |  | 19.1 | % |  | 810 |  |  | 6.6 | %
Total Cable operating expenses |  | 55,910 |  | 81.7 | % |  | 52,212 |  | 81.8 | % |  | 3,698 |  |  | 7.1 | %
Cable operating income |  | $ | 12,489 |  | 18.3 | % |  | $ | 11,610 |  | 18.2 | % |  | 879 |  |  | 7.6 | %

Service revenue
During the six months ended June 30, 2019, service revenue increased approximately $3.2 million, or 5.6%, compared with the six months ended June 30, 2018. The increase in service revenue was primarily attributable to the addition of 5,265 customer relationships, of which approximately 2,000 were acquired from Big Sandy, as well as broadband customers upgrade to higher-speed data access packages and increases in video rates.
Other revenue
Other revenue is mainly comprised of fiber services and installation services. During the six months ended June 30, 2019, other revenue increased approximately $1.2 million, or 18.3%, compared with the six months ended June 30, 2018 primarily attributable to expansion of the Company's fiber network and increased demand for fiber services.
Operating expenses
During the six months ended June 30, 2019, operating expenses increased approximately $3.7 million, or 7.1%, compared with the six months ended June 30, 2018 primarily due to professional fees associated with starting our FTTH product offering and higher repair and maintenance expense associated with maintaining our growing network. We expect to continue to incur expenses related to the initiation of FTTH in select markets, in advance of generating revenue from this new product.
29

Index
Wireline
The following table includes selected operating statistics of the Wireline operations:

|  | June 30, 2019 |  | June 30, 2018
Long distance subscribers |  | 9,461 |  |  | 8,930 |
Video customers (1) |  | 4,520 |  |  | 4,850 |
Broadband customers |  | 14,643 |  |  | 14,694 |
Fiber route miles |  | 2,176 |  |  | 2,099 |
Total fiber miles (2) |  | 163,363 |  |  | 157,008 |

_______________________________________________________

(1) | Wireline’s video service passes approximately 16,500 homes.

(2) | Fiber miles are measured by taking the number of fiber strands in a cable and multiplying that number by the route distance. For example, a 10 mile route with 144 fiber strands would equal 1,440 fiber miles.

Three Months Ended June 30, 2019 Compared with the Three Months Ended June 30, 2018

|  | Three Months Ended June 30, |  | Change
($ in thousands) |  | 2019 | % of Revenue |  | 2018 | % of Revenue |  | $ |  | %
Wireline operating revenue |  |  |  |  |  |  |  |  |  |
Service revenue |  | $ | 5,955 |  | 30.5 | % |  | $ | 5,725 |  | 30.0 | % |  | 230 |  |  | 4.0 | %
Carrier access and fiber revenue |  | 12,835 |  | 65.7 | % |  | 12,468 |  | 65.2 | % |  | 367 |  |  | 2.9 | %
Equipment revenue |  | 52 |  | 0.3 | % |  | 46 |  | 0.2 | % |  | 6 |  |  | 13.0 | %
Other revenue |  | 685 |  | 3.5 | % |  | 873 |  | 4.6 | % |  | (188 | ) |  | (21.5 | )%
Total Wireline operating revenue |  | 19,527 |  | 100.0 | % |  | 19,112 |  | 100.0 | % |  | 415 |  |  | 2.2 | %
Wireline operating expenses |  |  |  |  |  |  |  |  |  |
Cost of services |  | 8,979 |  | 46.0 | % |  | 9,373 |  | 49.0 | % |  | (394 | ) |  | (4.2 | )%
Costs of goods sold |  | 19 |  | 0.1 | % |  | 20 |  | 0.1 | % |  | (1 | ) |  | (5.0 | )%
Selling, general and administrative |  | 1,988 |  | 10.2 | % |  | 1,686 |  | 8.8 | % |  | 302 |  |  | 17.9 | %
Depreciation and amortization |  | 3,447 |  | 17.6 | % |  | 3,240 |  | 17.0 | % |  | 207 |  |  | 6.4 | %
Total Wireline operating expenses |  | 14,433 |  | 73.9 | % |  | 14,319 |  | 74.9 | % |  | 114 |  |  | 0.8 | %
Wireline operating income |  | $ | 5,094 |  | 26.1 | % |  | $ | 4,793 |  | 25.1 | % |  | 301 |  |  | 6.3 | %

Operating revenue
During the three months ended June 30, 2019, total operating revenue increased approximately $0.4 million compared with the three months ended June 30, 2018. The increase in operating revenue was primarily attributable to the timing of receiving regulatory support funds.
Operating expenses
During the three months ended June 30, 2019, total operating expenses were comparable to the three months ended June 30, 2018.
30

Index
Six Months Ended June 30, 2019 Compared with the Six Months Ended June 30, 2018

|  | Six Months Ended June 30, |  | Change
($ in thousands) |  | 2019 | % of Revenue |  | 2018 | % of Revenue |  | $ |  | %
Wireline operating revenue |  |  |  |  |  |  |  |  |  |
Service revenue |  | $ | 11,808 |  | 30.7 | % |  | $ | 11,615 |  | 29.9 | % |  | 193 |  |  | 1.7 | %
Carrier access and fiber revenue |  | 25,164 |  | 65.5 | % |  | 25,322 |  | 65.2 | % |  | (158 | ) |  | (0.6 | )%
Equipment revenue |  | 103 |  | 0.3 | % |  | 92 |  | 0.2 | % |  | 11 |  |  | 12.0 | %
Other revenue |  | 1,361 |  | 3.5 | % |  | 1,790 |  | 4.7 | % |  | (429 | ) |  | (24.0 | )%
Total Wireline operating revenue |  | 38,436 |  | 100.0 | % |  | 38,819 |  | 100.0 | % |  | (383 | ) |  | (1.0 | )%
Wireline operating expenses |  |  |  |  |  |  |  |  |  |
Cost of services |  | 18,130 |  | 47.2 | % |  | 19,175 |  | 49.4 | % |  | (1,045 | ) |  | (5.4 | )%
Costs of goods sold |  | 55 |  | 0.1 | % |  | 42 |  | 0.1 | % |  | 13 |  |  | 31.0 | %
Selling, general and administrative |  | 3,831 |  | 10.0 | % |  | 3,403 |  | 8.8 | % |  | 428 |  |  | 12.6 | %
Depreciation and amortization |  | 6,980 |  | 18.1 | % |  | 6,634 |  | 17.1 | % |  | 346 |  |  | 5.2 | %
Total Wireline operating expenses |  | 28,996 |  | 75.4 | % |  | 29,254 |  | 75.4 | % |  | (258 | ) |  | (0.9 | )%
Wireline operating income |  | $ | 9,440 |  | 24.6 | % |  | $ | 9,565 |  | 24.6 | % |  | (125 | ) |  | (1.3 | )%

Operating revenue
During the six months ended June 30, 2019, total operating revenue was consistent with the six months ended June 30, 2018.
Operating expenses
During the six months ended June 30, 2019, total operating expenses were consistent with the six months ended June 30, 2018.
Non-GAAP Financial Measures
Adjusted OIBDA
Adjusted OIBDA represents Operating income before depreciation, amortization, stock-based compensation and certain other items of revenue, expense, gain or loss not reflective of our operating performance, which may or may not be recurring in nature.
Adjusted OIBDA is a non-GAAP financial measure that we use to evaluate our operating performance in comparison to our competitors. Management believes that analysts and investors use Adjusted OIBDA as a supplemental measure of operating performance to facilitate comparisons with other telecommunications companies. This measure isolates and evaluates operating performance by excluding the cost of financing (e.g., interest expense), as well as the non-cash depreciation and amortization of past capital investments, non-cash share-based compensation expense, and certain other items of revenue, expense, gain or loss not reflective of our operating performance, which may or may not be recurring in nature.
During Q2 2019, we modified our definition of Adjusted OIBDA to exclude the benefit received from the waived management fee and non-cash amortization of deferred contract costs, as well as certain other immaterial items. This change enhances the comparability of our non-GAAP performance measure with similar performance measures reported by comparable companies in our industry. We have applied this change consistently to all comparable periods presented below.
Adjusted OBIDA has limitations as an analytical tool and should not be considered in isolation or as a substitute for income from operations, net income or any other measure of financial performance reported in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”).
31

Index
The following tables reconcile Adjusted OIBDA to operating income, which we consider to be the most directly comparable GAAP financial measure:

Three Months Ended June 30, 2019 |  |  |  |  |  |  |  |  |  |
(in thousands) |  | Wireless |  | Cable |  | Wireline |  | Other |  | Consolidated
Operating income |  | $ | 22,024 |  |  | $ | 6,786 |  |  | $ | 5,094 |  |  | $ | (9,884 | ) |  | $ | 24,020 |
Depreciation and amortization |  | 32,219 |  |  | 6,555 |  |  | 3,447 |  |  | 132 |  |  | 42,353 |
OIBDA |  | 54,243 |  |  | 13,341 |  |  | 8,541 |  |  | (9,752 | ) |  | 66,373 |
Share-based compensation expense |  | — |  |  | — |  |  | — |  |  | 593 |  |  | 593 |
Adjusted OIBDA |  | $ | 54,243 |  |  | $ | 13,341 |  |  | $ | 8,541 |  |  | $ | (9,159 | ) |  | $ | 66,966 |

Additionally, we realized cash savings of $9.7 million during the period from the waiver of Sprint's Management Fee. These cash savings are accounted for as a reduction of the affiliate contract enhancement asset, which was recognized in conjunction with the 2016 nTelos acquisition. The remaining waived management fee balance at June 30, 2019 was $137.9 million, which we expect to realize through 2022.

Three Months Ended June 30, 2018 |  |  |  |  |  |  |  |  |  |
(in thousands) |  | Wireless |  | Cable |  | Wireline |  | Other |  | Consolidated
Operating income |  | $ | 22,251 |  |  | $ | 6,083 |  |  | $ | 4,793 |  |  | $ | (11,958 | ) |  | $ | 21,169 |
Depreciation and amortization |  | 31,565 |  |  | 6,179 |  |  | 3,240 |  |  | 133 |  |  | 41,117 |
OIBDA |  | 53,816 |  |  | 12,262 |  |  | 8,033 |  |  | (11,825 | ) |  | 62,286 |
Share-based compensation expense |  | — |  |  | — |  |  | — |  |  | 1,370 |  |  | 1,370 |
Adjusted OIBDA |  | $ | 53,816 |  |  | $ | 12,262 |  |  | $ | 8,033 |  |  | $ | (10,455 | ) |  | $ | 63,656 |

Additionally, we realized cash savings of $9.6 million during the period from the waiver of Sprint's Management Fee, as discussed above.

Six Months Ended June 30, 2019 |  |  |  |  |  |  |  |  |  |
(in thousands) |  | Wireless |  | Cable |  | Wireline |  | Other |  | Consolidated
Operating income |  | $ | 47,361 |  |  | $ | 12,489 |  |  | $ | 9,440 |  |  | $ | (20,483 | ) |  | $ | 48,807 |
Depreciation and amortization |  | 63,269 |  |  | 13,013 |  |  | 6,980 |  |  | 270 |  |  | 83,532 |
OIBDA |  | 110,630 |  |  | 25,502 |  |  | 16,420 |  |  | (20,213 | ) |  | 132,339 |
Share-based compensation expense |  | — |  |  | — |  |  | — |  |  | 2,307 |  |  | 2,307 |
Adjusted OIBDA |  | $ | 110,630 |  |  | $ | 25,502 |  |  | $ | 16,420 |  |  | $ | (17,906 | ) |  | $ | 134,646 |

Additionally, we realized cash savings of $19.3 million during the period from the waiver of Sprint's Management Fee, as discussed above.

Six Months Ended June 30, 2018 |  |  |  |  |  |  |  |  |  |
(in thousands) |  | Wireless |  | Cable |  | Wireline |  | Other |  | Consolidated
Operating income |  | $ | 39,518 |  |  | $ | 11,610 |  |  | $ | 9,565 |  |  | $ | (22,770 | ) |  | $ | 37,923 |
Depreciation and amortization |  | 65,490 |  |  | 12,203 |  |  | 6,634 |  |  | 277 |  |  | 84,604 |
OIBDA |  | 105,008 |  |  | 23,813 |  |  | 16,199 |  |  | (22,493 | ) |  | 122,527 |
Share-based compensation expense |  | — |  |  | — |  |  | — |  |  | 3,407 |  |  | 3,407 |
Adjusted OIBDA |  | $ | 105,008 |  |  | $ | 23,813 |  |  | $ | 16,199 |  |  | $ | (19,086 | ) |  | $ | 125,934 |

Additionally, we realized cash savings of $18.6 million during the period from the waiver of Sprint's Management Fee, as discussed above.
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Index
Liquidity and Capital Resources
As of June 30, 2019 our Cash and cash equivalents totaled $98.1 million and the availability under our revolving line of credit was $75.0 million, for a total available liquidity of $173.1 million.
Sources and Uses of Cash.
Our principal sources of liquidity are our cash and cash equivalents, cash generated from operations, and proceeds available under our Credit Facility.
The Company generated approximately $129.6 million of net cash from operations in the first six months of 2019, representing an increase of $2.5 million or 2.0%, compared with the first six months of 2018, driven by:

• | a $10.9 million increase in net income, and was partially offset by

• | $7.6 million increase in net cash outflows from income taxes, and

• | $0.8 million as the result of a change in working capital.

Net cash used in investing activities decreased $24.9 million, or 21.8%, for the six months ended June 30, 2019. Cash used in investing activities for the six months ended June 30, 2019, was primarily for:

• | $79.1 million for capital expenditures primarily driven by capacity upgrades and network expansion across our Wireless and Cable segments; and

• | investments in our wireless, cable and fiber networks, other infrastructure investments, made on a recurring basis. In 2018, we acquired the Sprint Territory Expansion Area for $52.0 million and in 2019 we acquired Big Sandy for $10.0 million which was integrated into our Cable segment.

We expect our investments in our networks and infrastructure to expand in support of our continued growth.
Net cash used in financing activities increased $1.3 million, or 5.0%, for the six months ended June 30, 2019. The use of cash for the six months ended June 30, 2019, was primarily from increased principal payments on our long-term debt.
Borrowing Capacity. As of June 30, 2019, the Company’s outstanding debt, under the Credit Facility, totaled $760.5 million, with an estimated annualized effective interest rate of 3.79% after considering the impact of the interest rate swap contracts and unamortized loan costs.
As of June 30, 2019, the Company was in compliance with the financial covenants in its Credit Facility agreement.
We believe that cash on hand, cash flow from operations and borrowings expected to be available under our existing credit facilities will provide sufficient cash to enable us to fund planned capital expenditures, make scheduled principal and interest payments, meet our other cash requirements and maintain compliance with the terms of our financing agreements for at least the next twelve months. There can be no assurance that we will continue to generate cash flows at or above current levels or that we will be able to maintain our ability to borrow under our credit facilities. Thereafter, capital expenditures will likely be required to continue planned capital upgrades to the acquired wireless network and provide increased capacity to meet our expected growth in demand for our products and services. The actual amount and timing of our future capital requirements may differ materially from our estimate depending on the demand for our products, new market developments and expansion opportunities.
Our cash flows from operations could be adversely affected by events outside our control, including, without limitation, changes in overall economic conditions, regulatory requirements, changes in technologies, demand for our products, availability of labor resources and capital, changes in our relationship with Sprint, and other conditions. The Wireless segment’s operations are dependent upon Sprint’s ability to execute certain functions such as billing, customer care, and collections; our ability to develop and implement successful marketing programs and new products and services; and our ability to effectively and economically manage other operating activities under our agreements with Sprint. Our ability to attract and maintain a sufficient customer base, particularly in our cable markets, is also critical to our ability to maintain a positive cash flow from operations. The foregoing events individually or collectively could affect our results.
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Critical Accounting Policies
Critical accounting policies are those policies that affect our more significant judgments and estimates used in the preparation of our unaudited condensed consolidated financial statements. For a more detailed discussion of our critical accounting policies, please refer to our 2018 Form 10-K.

ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s market risks relate primarily to changes in interest rates. The Company’s interest rate risk generally involves two components. The first component is outstanding debt with variable rates. As of June 30, 2019, the Company had $760.5 million of gross variable rate debt outstanding bearing interest at a weighted average rate of 3.79% as determined on a quarterly basis. An increase in market interest rates of 1.00% would add approximately $7.5 million to annual interest expense, excluding the effect of the interest rate swap. The swaps cover notional principal equal to approximately 50% or $361.9 million as of June 30, 2019 of the outstanding variable rate debt through maturity in 2023. The Company is required to pay a combined fixed rate of approximately 1.16% and receive a variable rate based on one month LIBOR (2.44% for June 2019), to manage a portion of its interest rate risk. Changes in the net interest paid or received under the swaps would offset approximately 50% of the change in interest expense on the variable rate debt outstanding. The swap agreements currently reduce annual interest expense by approximately $2.3 million, based on the spread between the fixed rate and the variable rate currently in effect on our debt.
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ITEM 4. | CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures
Management, with the participation of our President and Chief Executive Officer, who is the Principal Executive Officer, and the Senior Vice President - Finance and Chief Financial Officer, who is the Principal Financial Officer, and the Vice President and Chief Accounting Officer, who is the Principal Accounting Officer, conducted an evaluation of our disclosure controls and procedures, (as defined by Rule 13a-15(e) under the Securities Exchange Act of 1934), as of the end of the period covered by this Quarterly report on Form 10-Q.
As disclosed in our Annual Report on Form 10-K for our fiscal year ended December 31, 2018, we identified material weaknesses in internal control over financial reporting. The material weaknesses will not be considered remediated until the applicable enhanced controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. As remediation has not yet been completed, our President and Chief Executive Officer and our Senior Vice President - Finance and Chief Financial Officer, and our Vice President - Chief Accounting Officer, have concluded that our disclosure controls and procedures continued to be ineffective as of June 30, 2019.
Notwithstanding the material weaknesses, management has concluded that the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q fairly state, in all material respects, our financial position, results of operations and cash flows for the periods presented.
Changes in Internal Control Over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) as of June 30, 2019, that have materially affected or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Remediation Efforts
Management is continuing to implement the material weakness remediation plans as disclosed in our Annual Report on Form 10-K for our fiscal year ended December 31, 2018. We believe that these actions and the improvements we expect to achieve will effectively remediate the material weaknesses. However, these material weaknesses will not be considered remediated until the enhanced controls operate for a sufficient period of time and management has concluded that these controls are operating effectively.
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PART II. | OTHER INFORMATION

ITEM 1A. | Risk Factors

We discuss in our Annual Report on Form 10-K various risks that may materially affect our business. We use this section to update this discussion to reflect material developments since our Form 10-K was filed. As of June 30, 2019, the Company has not identified any needed updates to the risk factors included in our most recent Form 10-K.

ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities
None.
Use of Proceeds from Registered Securities
None.
Purchases of Equity Securities by the Issuer or Affiliated Purchasers
The following table provides information about shares repurchased to settle employee tax withholding related to the vesting of stock awards during the three months ended June 30, 2019:

| Number of Shares Surrendered | Average Price Paid per Share
April 1 to April 30 | 402 |  | $ | 41.50 |
May 1 to May 31 | 1,864 |  | 42.62 |
June 1 to June 30 | 3,104 |  | 38.18 |
Total | 5,370 |  | $ | 39.97 |

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ITEM 6. | Exhibits

(a) | The following exhibits are filed with this Quarterly Report on Form 10-Q:

3.1 | Amended and Restated Bylaws of Shenandoah Telecommunications Company, as amended effective April 16, 2019
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 file 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

* 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.

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EXHIBIT INDEX

Exhibit No. | Exhibit
3.1 | Amended and Restated Bylaws of Shenandoah Telecommunications Company, as amended effective April 16, 2019
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 file 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

* 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.

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SIGNATURES
Pursuant to the requirements 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

| /s/James J. Volk
| James J. Volk
| Senior Vice President - Chief Financial Officer (Principal Financial Officer)
| Date: August 6, 2019

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