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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[ X ]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

or

[ ]    TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 000-51446

Graphic

CONSOLIDATED COMMUNICATIONS HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware

02-0636095

(State or other jurisdiction

(I.R.S. Employer

of incorporation or organization)

Identification No.)

121 South 17th Street, MattoonIllinois

61938-3987

(Address of principal executive offices)

(Zip Code)

  (217) 235-3311   

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock - $0.01 par value

CNSL

The NASDAQ Global Select Market

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 X 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 X 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 X

On October 27, 2020, the registrant had 79,410,525 shares of Common Stock outstanding.

Table of Contents

TABLE OF CONTENTS

Page

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

1

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

31

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

49

Item 4.

Controls and Procedures

49

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

50

Item 1A.

Risk Factors

50

Item 6.

Exhibits

51

SIGNATURES

52

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; Amounts in thousands except per share amounts)

Quarter Ended

Nine Months Ended

September 30,

September 30,

    

2020

    

2019

    

2020

    

2019

 

Net revenues

$

327,066

$

333,326

$

977,904

$

1,005,507

Operating expense:

Cost of services and products (exclusive of depreciation and amortization)

 

144,428

 

146,636

 

421,717

 

438,735

Selling, general and administrative expenses

 

65,066

 

70,100

 

197,679

 

222,615

Depreciation and amortization

 

80,220

 

93,048

 

244,024

 

289,595

Income from operations

 

37,352

 

23,542

 

114,484

 

54,562

Other income (expense):

Interest expense, net of interest income

 

(31,661)

 

(34,250)

 

(95,215)

 

(103,270)

Gain on extinguishment of debt

 

 

1,121

 

234

 

1,370

Investment income

 

11,510

 

11,254

 

31,269

 

30,605

Other, net

 

1,957

 

(74)

 

7,260

 

(3,095)

Income (loss) before income taxes

 

19,158

 

1,593

 

58,032

 

(19,828)

Income tax expense (benefit)

 

4,576

 

1,204

 

13,892

 

(5,719)

Net income (loss)

 

14,582

 

389

 

44,140

 

(14,109)

Less: net income attributable to noncontrolling interest

 

72

 

132

 

243

 

286

Net income (loss) attributable to common shareholders

$

14,510

$

257

$

43,897

$

(14,395)

Net income (loss) per basic and diluted common shares attributable to common shareholders

$

0.20

$

$

0.60

$

(0.21)

Dividends declared per common share

$

$

$

$

0.39

See accompanying notes.

1

Table of Contents

CONSOLIDATED COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited; Amounts in thousands)

Quarter Ended

Nine Months Ended

September 30,

September 30,

    

2020

    

2019

    

2020

    

2019

 

Net income (loss)

$

14,582

$

389

$

44,140

$

(14,109)

Pension and post-retirement obligations:

Amortization of actuarial losses (gains) and prior service cost to earnings, net of tax

 

(344)

 

194

 

327

 

2,246

Derivative instruments designated as cash flow hedges:

Change in fair value of derivatives, net of tax

 

(533)

 

(2,110)

 

(13,498)

 

(20,945)

Cumulative adjustment upon adoption of ASU 2017-12

(576)

Reclassification of realized loss (gain) to earnings, net of tax

 

3,400

 

130

 

8,143

 

(517)

Comprehensive income (loss)

 

17,105

 

(1,397)

 

39,112

 

(33,901)

Less: comprehensive income attributable to noncontrolling interest

 

72

 

132

 

243

 

286

Total comprehensive income (loss) attributable to common shareholders

$

17,033

$

(1,529)

$

38,869

$

(34,187)

See accompanying notes.

2

Table of Contents

CONSOLIDATED COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited; Amounts in thousands except share and per share amounts)

September 30,

December 31,

   

2020

    

2019

 

ASSETS

Current assets:

Cash and cash equivalents

$

99,719

$

12,395

Accounts receivable, net of allowance for credit losses

 

119,076

 

120,016

Income tax receivable

 

5,175

 

2,669

Prepaid expenses and other current assets

 

42,473

 

41,787

Total current assets

 

266,443

 

176,867

Property, plant and equipment, net

 

1,782,183

 

1,835,878

Investments

 

111,555

 

112,717

Goodwill

 

1,035,274

 

1,035,274

Customer relationships, net

 

126,081

 

164,069

Other intangible assets

 

10,557

 

10,557

Other assets

 

51,735

 

54,915

Total assets

$

3,383,828

$

3,390,277

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

22,385

$

30,936

Advance billings and customer deposits

 

50,045

 

45,710

Accrued compensation

 

61,804

 

57,069

Accrued interest

15,195

7,874

Accrued expense

 

89,871

 

75,406

Current portion of long-term debt and finance lease obligations

 

23,827

 

27,301

Total current liabilities

 

263,127

 

244,296

Long-term debt and finance lease obligations

 

2,193,828

 

2,250,677

Deferred income taxes

 

185,017

 

173,027

Pension and other post-retirement obligations

 

272,023

 

302,296

Other long-term liabilities

 

78,257

 

72,730

Total liabilities

 

2,992,252

 

3,043,026

Commitments and contingencies (Note 12)

Shareholders’ equity:

Common stock, par value $0.01 per share; 100,000,000 shares authorized, 73,057,683 and 71,961,045 shares outstanding as of September 30, 2020 and December 31, 2019, respectively

 

731

 

720

Additional paid-in capital

 

497,722

 

492,246

Accumulated deficit

 

(27,594)

 

(71,217)

Accumulated other comprehensive loss, net

 

(85,896)

 

(80,868)

Noncontrolling interest

 

6,613

 

6,370

Total shareholders’ equity

 

391,576

 

347,251

Total liabilities and shareholders’ equity

$

3,383,828

    

$

3,390,277

See accompanying notes.

3

Table of Contents

CONSOLIDATED COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited; Amounts in thousands)

Accumulated

 

    

    

    

Additional 

Retained 

    

Other 

    

Non-

    

 

Common Stock

Paid-in 

Earnings

Comprehensive

controlling 

 

Shares

Amount

Capital

(Deficit)

Loss, net

Interest

Total

 

Balance at December 31, 2018

 

71,187

$

712

$

513,070

$

(50,834)

$

(53,212)

$

5,918

$

415,654

Cash dividends on common stock

 

 

 

(27,356)

 

(576)

 

 

(27,932)

Shares issued under employee plan, net of forfeitures

 

923

 

9

 

(9)

 

 

 

Non-cash, share-based compensation

 

 

 

1,498

 

 

 

1,498

Other comprehensive income (loss)

 

 

 

 

 

(6,446)

 

(6,446)

Cumulative adjustment: adoption of ASU 2017-12

576

576

Net income (loss)

 

 

 

 

(7,265)

 

79

 

(7,186)

Balance at March 31, 2019

 

72,110

$

721

$

487,203

$

(58,099)

$

(59,658)

$

5,997

$

376,164

Cash dividends on common stock

 

 

 

67

 

 

 

67

Shares issued under employee plan, net of forfeitures

 

(34)

 

 

 

 

 

Non-cash, share-based compensation

 

 

 

1,814

 

 

 

1,814

Other comprehensive income (loss)

 

 

 

 

 

(11,560)

 

(11,560)

Net income (loss)

 

 

 

 

(7,387)

 

75

 

(7,312)

Balance at June 30, 2019

 

72,076

$

721

$

489,084

$

(65,486)

$

(71,218)

$

6,072

$

359,173

Non-cash, share-based compensation

 

 

 

1,928

 

 

 

1,928

Other comprehensive income (loss)

 

 

 

 

 

(1,786)

 

(1,786)

Net income (loss)

 

 

 

 

257

 

132

 

389

Balance at September 30, 2019

 

72,076

$

721

$

491,012

$

(65,229)

$

(73,004)

$

6,204

$

359,704

Balance at December 31, 2019

 

71,961

$

720

$

492,246

$

(71,217)

$

(80,868)

$

6,370

$

347,251

Shares issued under employee plan, net of forfeitures

 

1,081

11

 

(11)

 

 

 

Non-cash, share-based compensation

 

 

 

890

 

 

 

890

Other comprehensive income (loss)

 

 

 

 

 

(10,000)

 

(10,000)

Cumulative adjustment: adoption of ASU 2016-13

(105)

(105)

Net income (loss)

 

 

 

 

15,547

 

76

 

15,623

Balance at March 31, 2020

 

73,042

$

731

$

493,125

$

(55,775)

$

(90,868)

$

6,446

$

353,659

Shares issued under employee plan, net of forfeitures

 

16

 

 

 

 

 

Non-cash, share-based compensation

 

 

 

2,334

 

 

 

2,334

Other comprehensive income (loss)

 

 

 

 

 

2,449

 

2,449

Cumulative adjustment: adoption of ASU 2016-13

(169)

(169)

Net income (loss)

 

 

 

 

13,840

 

95

 

13,935

Balance at June 30, 2020

 

73,058

$

731

$

495,459

$

(42,104)

$

(88,419)

$

6,541

$

372,208

Non-cash, share-based compensation

 

 

 

2,263

 

 

 

2,263

Other comprehensive income (loss)

 

 

 

 

 

2,523

 

2,523

Net income (loss)

 

 

 

 

14,510

 

72

 

14,582

Balance at September 30, 2020

 

73,058

$

731

$

497,722

$

(27,594)

$

(85,896)

$

6,613

$

391,576

See accompanying notes.

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CONSOLIDATED COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; Amounts in thousands)

Nine Months Ended September 30,

    

2020

    

2019

 

Cash flows from operating activities:

Net income (loss)

$

44,140

$

(14,109)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization

 

244,024

 

289,595

Deferred income taxes

 

 

639

Cash distributions from wireless partnerships in excess of (less than) current earnings

 

1,001

 

(1,561)

Pension and post-retirement contributions in excess of expense

(29,666)

(24,261)

Stock-based compensation expense

 

5,487

 

5,240

Amortization of deferred financing costs

 

3,628

 

3,679

Gain on extinguishment of debt

 

(234)

 

(1,370)

Other, net

 

(4,485)

 

791

Changes in operating assets and liabilities:

Accounts receivable, net

 

796

 

7,228

Income tax receivable

 

12,857

 

(6,979)

Prepaid expenses and other assets

 

(2,733)

 

1,508

Accounts payable

 

(8,551)

 

(261)

Accrued expenses and other liabilities

 

31,086

 

(11,502)

Net cash provided by operating activities

297,350

248,637

Cash flows from investing activities:

Purchases of property, plant and equipment, net

 

(152,215)

 

(184,343)

Proceeds from sale of assets

 

6,977

 

14,343

Proceeds from sale of investments

426

329

Other

(450)

Net cash used in investing activities

 

(144,812)

 

(170,121)

Cash flows from financing activities:

Proceeds from issuance of long-term debt

 

40,000

 

152,000

Payment of finance lease obligations

 

(7,243)

 

(9,743)

Payment on long-term debt

 

(93,763)

 

(142,763)

Repurchase of senior notes

(4,208)

(25,986)

Dividends on common stock

 

 

(55,445)

Net cash used in financing activities

 

(65,214)

 

(81,937)

Change in cash and cash equivalents

 

87,324

 

(3,421)

Cash and cash equivalents at beginning of period

 

12,395

 

9,599

Cash and cash equivalents at end of period

$

99,719

$

6,178

See accompanying notes.

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CONSOLIDATED COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business and Basis of Accounting

Consolidated Communications Holdings, Inc. (the “Company,” “we,” “our” or “us”) is a holding company with operating subsidiaries (collectively “Consolidated”) that provide communication solutions to consumer, commercial and carrier customers across a 23-state service area.

Leveraging our advanced fiber network spanning more than 46,000 fiber route miles, we offer residential high-speed Internet, video, phone and home security services as well as multi-service residential and small business bundles.  Our business product suite includes data and Internet solutions, voice, data center services, security services, managed and IT services, and an expanded suite of cloud services.  As of September 30, 2020, we had approximately 794,000 voice connections, 792,000 data connections and 78,000 video connections.

In the opinion of management, the accompanying unaudited condensed consolidated balance sheets and related condensed consolidated statements of operations, comprehensive income (loss), shareholders’ equity and cash flows include all adjustments, consisting only of normal recurring items, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States (“US GAAP” or “GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).  Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to such SEC rules and regulations and accounting principles applicable for interim periods.  Events subsequent to the balance sheet date have been evaluated for inclusion in the accompanying condensed consolidated financial statements through the date of issuance.  Management believes that the disclosures made are adequate to make the information presented not misleading.  Interim results are not necessarily indicative of results for a full year.  The information presented in this Form 10-Q should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and the accompanying notes to the financial statements (“Notes”) thereto included in our 2019 Annual Report on Form 10-K filed with the SEC.

Recent Developments

Searchlight Investment

On September 13, 2020, we entered into an investment agreement (the “Investment Agreement”) with an affiliate of Searchlight Capital Partners, L.P. (“Searchlight”).  In connection with the Investment Agreement, affiliates of Searchlight have committed to invest up to an aggregate of $425.0 million in the Company. The investment commitment is structured in two stages.  In the first stage of the transaction, which was completed on October 2, 2020, Searchlight invested $350.0 million in the Company in exchange for 6,352,842 shares, or approximately 8%, of the Company’s common stock and a contingent payment right (“CPR”) that is convertible, upon the receipt of certain regulatory and shareholder approvals, into an additional 17,870,012 shares, or 16.9% of the Company’s common stock.  In addition, Searchlight will receive the right to an unsecured subordinated note with an aggregate principal amount of approximately $395.5 million (the “Note”).  

In the second stage of the transaction, Searchlight will invest an additional $75.0 million and will be issued the Note, which will be convertible into shares of a new series of perpetual preferred stock of the Company with an aggregate liquidation preference equal to the principal amount of the Note plus accrued interest as of the date of conversion. The Note may be issued to Searchlight prior to the closing of the second stage of the transaction upon the occurrence of certain events. The Note bears interest at 9.0% per annum from the date of the closing of the first stage of the transaction and is payable semi-annually in arrears.  Upon conversion of the Note, dividends on the preferred stock will accrue daily on the liquidation preference at a rate of 9.0% per annum, payable semi-annually in arrears. In addition, following shareholder approval, if received, the CPR will be convertible into an additional 15,115,899 shares, or an additional 10.1%, of the Company’s common stock.  Upon completion of both stages, the common stock and CPR issued to Searchlight will represent approximately 35% of the Company’s common stock on an as-converted basis.  The closing of the second stage

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of the transaction is subject to the receipt of FCC and Hart Scott Rodino approvals and the satisfaction of certain other customary closing conditions. We expect the closing of the second stage to be completed in mid-2021.

Refinancing of Long-term Debt

On October 2, 2020, the Company and certain of its wholly-own subsidiaries completed a refinancing of our long-term debt through the issuance of $2,250.0 million in new secured debt and retired all of our existing then outstanding debt obligations. As described in Note 6, we entered into a new credit agreement which consists of term loans in the aggregate amount of $1,250.0 million and a $250.0 million revolving credit facility. On October 2, 2020, we also issued $750.0 million aggregate principal amount of 6.50% senior secured notes due 2028. For a more complete discussion of the refinancing, refer to Note 6.

COVID-19

We are closely monitoring the impact on our business of the current outbreak of a novel strain of coronavirus (“COVID-19”).  We are taking precautions to ensure the safety of our employees, customers and business partners, while assuring business continuity and reliable service and support to our customers.  While we have not seen a significant adverse impact to our financial results from COVID-19 to date, if the pandemic continues to cause significant negative impacts to economic conditions, our results of operations, financial condition and liquidity could be materially and adversely impacted.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted by the U.S. government as an emergency economic stimulus package that includes spending and tax breaks to strengthen the US economy and fund a nationwide effort to curtail the economic effects of COVID-19.  The CARES Act includes, among other things, deferral of certain employer payroll tax payments, the delay in payment of minimum required pension contributions due in 2020 until January 1, 2021 and certain income tax law changes including modifications to the net interest deduction limitations.  In April 2020, we began deferring the payment of the employer portion of Social Security taxes and estimate that approximately $12.0 million for employer payroll tax payments otherwise due in 2020 will be deferred with 50% due by December 31, 2021 and the remaining 50% by December 31, 2022.  We elected not to delay the payment of our minimum required pension contributions due in 2020 and have made all scheduled quarterly pension contributions during 2020. The CARES Act is not expected to have a material impact on our consolidated financial statements.

Accounts Receivable and Allowance for Credit Losses

Effective January 1, 2020, we adopted Accounting Standards Update (“ASU”) No. 2016-13 (“ASU 2016-13”), Measurement of Credit Losses on Financial Instruments, using the modified retrospective method.  The adoption of the new standard did not result in a material impact to the Company.  As part of the adoption, we recorded a cumulative effect adjustment of $0.3 million, net of tax, which decreased retained earnings during the nine months ended September 30, 2020.  Of this amount, $0.2 million was related to the decrease in the value of our partnership interests as a result of the adoption of ASU 2016-13 by our equity method partnerships.  The following disclosures have been made in accordance with ASU 2016-13.

Accounts receivable (“AR”) consists primarily of amounts due to the Company from normal business activities.  We maintain an allowance for credit losses (“ACL”) based on our historical loss experience, current conditions and forecasted changes including but not limited to changes related to the economy, our industry and business.  Uncollectible accounts are written-off (removed from AR and charged against the ACL) when internal collection efforts have been unsuccessful.  Subsequently, if payment is received from the customer, the recovery is credited to the ACL.

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The following table summarizes the activity in ACL for the nine months ended September 30, 2020 and 2019:

Nine Months Ended September 30,

(In thousands)

    

2020

    

2019

Balance at beginning of year

$

4,549

$

4,421

Cumulative adjustment upon adoption of ASU 2016-13

144

Provision charged to expense

 

6,812

7,425

Write-offs, less recoveries

 

(4,731)

(6,111)

Balance at end of year

$

6,774

$

5,735

Recent Accounting Pronouncements

Effective January 1, 2020, we adopted ASU 2016-13, Measurement of Credit Losses on Financial Instruments, using the modified retrospective method.  ASU 2016-13 establishes the new “current expected credit loss” model for measuring and recognizing credit losses on financial assets based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts.  For additional information on the adoption of the new standard and the impact to our condensed consolidated financial statements and related disclosures, refer to the Accounts Receivable and Allowance for Credit Losses section above.

Effective January 1, 2020, we adopted ASU No. 2018-15 (“ASU 2018-15”), Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. ASU 2018-15 provides guidance on accounting for costs of implementation activities in a cloud computing arrangement that is a service contract. The new guidance will be applied prospectively. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements and related disclosures.

In August 2020, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2020-06 (“ASU 2020-06”), Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 simplifies guidance on accounting for convertible instruments and contracts in an entity’s own equity including calculating diluted earnings per share. The new guidance is effective for annual periods beginning after December 15, 2021. We are currently evaluating the impact this update will have on our condensed consolidated financial statements and related disclosures.

In March 2020, the FASB issued ASU No. 2020-04 (“ASU 2020-04”), Reference Rate Reform – Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The new guidance is effective upon issuance through December 31, 2022. We are currently evaluating the impact this update will have on our condensed consolidated financial statements and related disclosures.

In November 2019, the FASB issued ASU No. 2019-12 (“ASU 2019-12”), Income Taxes.  ASU 2019-12 simplifies the accounting for income taxes by eliminating certain exceptions and adding certain requirements to the general framework in ASC 740, Income Taxes. The new guidance is effective for annual periods beginning after December 15, 2020 with early adoption permitted. We are currently evaluating the impact this update will have on our condensed consolidated financial statements and related disclosures.

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In August 2018, the FASB issued ASU No. 2018-14 (“ASU 2018-14”), Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans. ASU 2018-14 modifies disclosure requirements for defined benefit pension and other postretirement plans by removing disclosures that no longer are considered cost beneficial, clarifying the specific requirement of disclosures and adding disclosure requirements identified as relevant. The new guidance is effective retrospectively for annual periods beginning after December 15, 2020 with early adoption permitted. We are currently evaluating the impact this update will have on our condensed consolidated financial statements and related disclosures.  

2.  REVENUE

Nature of Contracts with Customers

Our revenue contracts with customers may include a promise or promises to deliver goods such as equipment and/or services such as broadband, video or voice services.  Promised goods and services are considered distinct as the customer can benefit from the goods or services either on their own or together with other resources that are readily available to the customer and the Company’s promise to transfer a good or service to the customer is separately identifiable from other promises in the contract.  The Company accounts for goods and services as separate performance obligations.  Each service is considered a single performance obligation as it is providing a series of distinct services that are substantially the same and have the same pattern of transfer.

The transaction price is determined at contract inception and reflects the amount of consideration to which we expect to be entitled in exchange for transferring a good or service to the customer.  This amount is generally equal to the market price of the goods and/or services promised in the contract and may include promotional discounts.  The transaction price excludes amounts collected on behalf of third parties such as sales taxes and regulatory fees.  Conversely, nonrefundable upfront fees, such as service activation and set-up fees, are included in the transaction price.  In determining the transaction price, we consider our enforceable rights and obligations within the contract.  We do not consider the possibility of a contract being cancelled, renewed or modified.

The transaction price is allocated to each performance obligation based on the standalone selling price of the good or service, net of the related discount, as applicable.

Revenue is recognized when or as performance obligations are satisfied by transferring control of the good or service to the customer.

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Disaggregation of Revenue

The following table summarizes revenue from contracts with customers for the quarters and nine months ended September 30, 2020 and 2019:

Quarter Ended

Nine Months Ended

September 30,

September 30,

(In thousands)

    

2020

    

2019

    

2020

    

2019

 

Operating Revenues

Commercial and carrier:

 

 

 

 

Data and transport services (includes VoIP)

$

90,153

$

88,756

$

269,297

$

265,420

Voice services

 

45,343

 

46,606

 

136,838

 

141,812

Other

10,909

11,828

33,027

40,394

146,405

147,190

439,162

447,626

Consumer:

Broadband (VoIP and Data)

67,163

65,456

196,806

192,609

Video services

18,452

20,463

56,796

61,540

Voice services

42,775

45,487

129,072

136,601

128,390

131,406

382,674

390,750

Subsidies

18,064

18,025

54,587

54,318

Network access

32,009

34,211

93,947

105,000

Other products and services

2,198

2,494

7,534

7,813

Total operating revenues

$

327,066

$

333,326

$

977,904

$

1,005,507

Contract Assets and Liabilities

The following table provides information about receivables, contract assets and contract liabilities from our revenue contracts with customers: