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Acquisition of Horizon | 6 Months Ended
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Jun. 30, 2024
Business Combinations [Abstract] |
Acquisition of Horizon | Acquisition of Horizon The Company accounted for the Horizon Transaction under the acquisition method of accounting, in accordance with Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 805, “Business Combinations”. Under the acquisition method of accounting, the total purchase price is allocated to the tangible and intangible assets acquired and liabilities assumed in connection with the acquisition based on their estimated fair values. Fair values are determined using the income approach, market approach and/or cost approach depending on the nature of the asset or liability being valued and the reliability of available information. The income approach estimates fair value by discounting associated lifetime expected future cash flows to their present value and relies on significant assumptions regarding future revenues, expenses, working capital levels and discount rates. The market approach estimates fair value by analyzing recent actual market transactions for similar assets or liabilities. The cost approach estimates fair value based on the expected cost to replace or reproduce the asset or liability and relies on assumptions regarding the occurrence and extent of any physical, functional and/or economic obsolescence. The total purchase price used to apply the acquisition method was $416.2 million, which consisted of $349.4 million of cash consideration paid and $71.8 million of common stock, representing the fair value of 4,100,375 shares of Shentel’s common stock issued to a selling shareholder of Horizon. The fair value of Shentel’s common stock issued was determined on the basis of the opening market price of the common stock on the acquisition date. The purchase price is subject to adjustment for certain working capital adjustments and post-closing indemnities. The cash consideration paid was primarily financed with proceeds from the sale of Shentel’s Tower Portfolio and cash on-hand. The allocation of the purchase price was based upon management’s preliminary valuation of the fair values of tangible and intangible assets acquired and liabilities assumed in the Horizon Transaction, with the excess recorded as goodwill. The Company expects to finalize the valuation and complete the purchase price allocation as soon as practicable, but no later than one year from the acquisition date. The fair value of acquired identifiable assets and liabilties, including but not limited to, property, plant and equipment, intangible assets, operating lease right-of-use assets, deferred tax liabilities, and non-current operating lease liabilities, and the resulting impact on goodwill recognized, are provisional pending receipt of the final valuations for these balances.
(in thousands) |  | Amount
Current and other assets |  | $ | 10,465 |
Property, plant and equipment |  | 386,045 |
Goodwill |  | 74,630 |
Intangible assets |  | 14,249 |
Operating lease right-of-use assets |  | 6,631 |
Other long-term assets |  | 1,843 |
Total assets acquired |  | 493,863 |
Current liabilities |  | $ | 15,187 |
Deferred tax liabilities |  | 32,218 |
Non-current operating lease liabilities |  | 3,778 |
Government grant liabilities |  | 16,348 |
Other long-term liabilities |  | 10,138 |
Total liabilities assumed |  | 77,669 |
Net assets acquired |  | $ | 416,194 |
Finalization of the purchase price allocations is dependent on final review and acceptance of the independent appraiser’s valuation report. Current and other assets acquired include $6.1 million of accounts receivable, net of allowance for credit losses of $0.3 million. Intangible assets acquired primarily relate to customer relationships. The customer relationships are valued using the cost approach to determine the cost that would be incurred to replace these assets. These represent finite-lived intangibles which are being amortized over the assets’ useful lives, which is estimated to be ten years. The Company has included the results of the operations of Horizon for financial reporting purposes for the period subsequent to the date of acquisition. In connection with the acquisition, Shentel incurred acquisition-related costs of $6.7 million and $7.1 million related to banking, legal, accounting, and other similar services for the three and six months ended June 30, 2024, respectively. Shentel also incurred severance costs for employees who will not be retained permanently. These costs are recorded as integration and acquisition expenses in the Company’s unaudited condensed consolidated statements of comprehensive (loss) income. Horizon’s revenue of $16.7 million and loss before income taxes of $7.4 million for the three months ended June 30, 2024 are included in Shentel’s unaudited condensed consolidated statements of comprehensive (loss) income for both the three and six months ended June 30, 2024. The unaudited pro forma results of the Company, as if the Horizon Transaction had occurred on January 1, 2023, are as follows:
| Three Months Ended June 30, |  | Six Months Ended June 30,
(in thousands) | 2024 |  | 2023 |  | 2024 |  | 2023
Operating revenues | N/A |  | $ | 83,164 |  |  | $ | 170,876 |  |  | $ | 166,740 |
Loss before income taxes | N/A |  | $ | (3,952) |  |  | $ | (26,911) |  |  | $ | (7,116) |
The pro forma disclosures shown above are based upon estimated preliminary valuations of the assets acquired and liabilities assumed as well as preliminary estimates of depreciation and amortization charges thereon, that may differ from the final fair values of the acquired assets and assumed liabilities and the resulting depreciation and amortization charges thereon. Other pro forma adjustments include the following: •historical depreciation expense was adjusted for the fair value adjustment increasing the basis of property, plant and equipment; this decrease was offset by a shorter estimated useful life to conform to the Company’s standard policy and the acceleration of depreciation on certain equipment; •incremental amortization due to the customer-based contract rights associated with acquired customers; and •removal of Horizon’s interest expense and amortization of deferred financing fees due to the repayment of the outstanding principal of Horizon’s debt.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 805 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147479907/805-20-50-5 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/805/tableOfContent + Details
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