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Dynamic quotes 
OFFON

CONSOLIDATED COMMUNICATIONS HOLDINGS, INC.

(CNSL)
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CONSOLIDATED COMMUNICATIONS : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (form 10-Q)

04/30/2021 | 12:11pm EDT

The Securities and Exchange Commission ("SEC") encourages companies to disclose forward-looking information so that investors can better understand a company's future prospects and make informed investment decisions. Certain statements in this Quarterly Report on Form 10-Q, including those which relate to the impact on future revenue sources, pending and future regulatory orders, continued expansion of the telecommunications network and expected changes in the sources of our revenue and cost structure resulting from our entrance into new communications markets, are forward-looking statements and are made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995.

These forward-looking statements reflect, among other things, our current expectations, plans, strategies and anticipated financial results. There are a number of risks, uncertainties and conditions that may cause our actual results to differ materially from those expressed or implied by these forward-looking statements including the impact of the ongoing novel coronavirus ("COVID-19") pandemic and our response to it. Many of these circumstances are beyond our ability to control or predict. Moreover, forward-looking statements necessarily involve assumptions on our part. These forward-looking statements generally are identified by the words "believe," "expect," "anticipate," "estimate," "project," "intend," "plan," "should," "may," "will," "would," "will be," "will continue" or similar expressions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of Consolidated Communications Holdings, Inc. and its subsidiaries ("Consolidated," the "Company," "we" or "our") to be different from those expressed or implied in the forward-looking statements. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements that appear throughout this report. A detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in our 2020 Annual Report on Form 10-K filed with the SEC and in Item 1A - "Risk Factors" of this report. Furthermore, undue reliance should not be placed on forward-looking statements, which speak only as of the date they are made.

Except as required under federal securities laws or the rules and regulations of the SEC, we disclaim any intention or obligation to update or revise publicly any forward-looking statements. Management's Discussion and Analysis ("MD&A") should be read in conjunction with our unaudited condensed consolidated financial statements and accompanying notes to the financial statements ("Notes") as of and for the quarter ended March 31, 2021 included in Item 1 of Part I of this Quarterly Report on Form 10-Q.

Throughout this MD&A, we refer to certain measures that are not measures of financial performance in accordance with accounting principles generally accepted in the United States ("US GAAP" or "GAAP"). We believe the use of these non-GAAP measures on a consolidated basis provides the reader with additional information that is useful in understanding our operating results and trends. These measures should be viewed in addition to, rather than as a substitute for, those measures prepared in accordance with GAAP. See the "Non-GAAP Measures" section below for a more detailed discussion on the use and calculation of these measures.



Overview


Consolidated is a broadband and business communications provider offering a wide range of communication solutions to consumer, commercial and carrier customers across a 23-state service area. We operate an advanced fiber network spanning approximately 47,400 fiber route miles across many rural areas and metro communities. 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. We provide wholesale solutions to wireless and wireline carriers and other service providers including data, voice, network connections and custom fiber builds and last mile connections. We offer residential high-speed Internet, video, phone and home security services as well as multi-service residential and small business bundles.

We generate the majority of our consolidated operating revenues primarily from monthly subscriptions to our broadband, data and transport services (collectively "broadband services") marketed to business and residential customers. Commercial and carrier services represent the largest source of our operating revenues and are expected to be key growth areas in the future. We are focused on expanding our broadband and commercial product suite and are continually enhancing our commercial product offerings to meet the needs of our business customers. We leverage our advanced fiber network and tailor our services for business customers by developing solutions to fit their specific


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needs. Additionally, we are continuously enhancing our suite of managed and cloud services, which increases efficiency and enables greater scalability and reliability for businesses. We anticipate future momentum in commercial and carrier services as these products gain traction as well as from the demand from customers for additional bandwidth and data-based services.

We market our residential services by leading with a competitive broadband service. As consumer demands for bandwidth continue to increase, our focus is on significantly enhancing our broadband services and upgrading data speeds. We offer data speeds of up to 1 Gbps in select markets, and up to 100 Mbps in markets where 1 Gbps is not yet available, depending on the geographical region. As of March 31, 2021, approximately 59% of the homes we serve on our legacy Consolidated network had availability to broadband speeds of up to 100 Mbps or greater. The majority of the homes in our northern New England service areas have availability to broadband speeds of 20 Mbps or less. As we continue to increase broadband speeds, we are also able to simultaneously expand the array of services and content offerings that the network provides.

Our investment in more competitive broadband speeds is critical to our long-term success. The strategic investment with Searchlight Capital Partners L.P. ("Searchlight") combined with the refinancing of our capital structure, as described below, provides us additional capital to accelerate our fiber expansion plans and provide significant benefits to our consumer, commercial and carrier customers. With the strategic investment, we intend to enhance our fiber infrastructure and accelerate our investments in high-growth and competitive areas. By leveraging our existing dense core fiber network and an accelerated build plan, we will be able to significantly increase data speeds, expand our multi-Gig coverage and strategically extend our network across our strong existing commercial and carrier footprint to attract more on-net and near-net opportunities. As part of our fiber expansion plan, we plan to upgrade approximately 1.6 million passings over the next five years across select service areas to enable multi-Gig capable services to these homes and small businesses including more than 1 million passings within our northern New England service areas. Our fiber build plan includes the upgrade of approximately 300,000 homes and small businesses in 2021. During the quarter ended March 31, 2021, we upgraded 45,800 passings.

Our competitive broadband speeds enable us to meet the need for higher bandwidth from the growing consumer demand for streaming live programming or in-demand content on any device. The consumers demand for streaming services, either to augment their current video subscription plan or to entirely replace their video subscription may impact our future video subscriber base and, accordingly, reduce our video revenue as well as our video programing costs. Total video connections decreased 10% as of March 31, 2021 compared to 2020. We believe the trend in changing consumer viewing habits will continue to impact our business results and complement our strategy of providing consumers with higher broadband speeds to facilitate streaming content. In 2019, we launched in our northern New England markets, CCiTV, which is a customizable, cloud-enabled video service that supports a wide variety of viewing habits. Content can be delivered in high-definition quality to a big-screen TV, as well as to tablets and mobile devices. CCiTV helps align our product offering with consumer habits using an app-based approach to video as well as reduce our operating costs. We expanded CCiTV to customers in our Texas markets in June 2020 and in our California and Illinois markets in October 2020.

Operating revenues also continue to be impacted by the anticipated industry-wide trend of declines in voice services, access lines and related network access revenue. Many customers are choosing to subscribe to alternative communication services and competition for these subscribers continues to increase. Total voice connections decreased 6% as of March 31, 2021 compared to 2020. Competition from wireless providers, Competitive Local Exchange Carriers and cable television providers has increased in recent years in the markets we serve. We have been able to mitigate some of the access line losses through marketing initiatives and product offerings, such as our VoIP service.

As discussed in the "Regulatory Matters" section below, our operating revenues are impacted by legislative or regulatory changes at the federal and state levels, which could reduce or eliminate the current subsidies revenue we receive. A number of proceedings and recent orders relate to universal service reform, intercarrier compensation ("ICC") and network access charges. There are various ongoing legal challenges to the orders that have been issued. As a result, it is not yet possible to fully determine the impact of the regulatory changes on our operations.

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Recent Developments



Searchlight Investment


On September 13, 2020, we entered into an investment agreement (the "Investment Agreement") with 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 and the receipt of applicable regulatory approvals, 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 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 have received approval under the Hart-Scott-Rodino Act and on April 26, 2021, the Company's shareholders approved the issuance to Searchlight of the additional shares of common stock equal to 20% or more of the Company's outstanding common stock. We expect the closing of the second stage to be completed in the third quarter of 2021. The strategic investment with Searchlight provides us a valued partner with significant experience deploying broadband infrastructure as we continue to execute our fiber-focused strategy and grow broadband services.



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 the "Liquidity and Capital Resources" section, we entered into a new credit agreement and issued $750.0 million aggregate principal amount of 6.50% senior secured notes due 2028. On January 15, 2021, the Company issued an additional $150.0 million aggregate principal amount of incremental term loans under the credit agreement. On March 18, 2021, we issued $400.0 million aggregate principal amount 5.00% Senior Notes and used the net proceeds from the issuance of notes to repay $397.0 million of the Term Loans outstanding under the Credit Agreement. The recent refinancings extended the maturities of our debt obligations and improved our liquidity, which, combined with the strategic investment with Searchlight, provides us the immediate flexibility to support our planned expansion of our fiber network and revenue growth plan.



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COVID-19 Pandemic



We are closely monitoring the impact on our business of the outbreak of the COVID-19 pandemic. 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. Health and safety measures implemented include transitioning to remote work-from-home policies, providing our field technicians with personal protective equipment and additional safety training, practicing social distancing and adding call aheads for work that must be performed inside customer premises. We are proactively monitoring and augmenting our network capacity, to meet the higher demands for data usage during the pandemic as a result of increased usage from work from home and remote learning applications. As a result of the pandemic, the demand for bandwidth upgrades has increased for our consumer, commercial and carrier customers. Our existing network enables us to efficiently respond and adapt to the increase in internet traffic during this time.

While we have not seen a significant adverse impact to our financial results from COVID-19 to date, the extent of the future impact of the COVID-19 pandemic on our business is highly uncertain and difficult to predict. Capital markets and the US economy have also been significantly impacted by the pandemic and an economic recession. Adverse economic and market conditions as a result of COVID-19 could also adversely affect the demand for our products and services and may also impact the ability of our customers to satisfy their obligations to us. 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 included, among other things, the deferral of certain employer payroll tax payments and certain income tax law changes. In 2020, we deferred the payment of approximately $12.0 million for the employer portion of Social Security taxes otherwise due in 2020 will be deferred with 50% due by December 31, 2021 and the remaining 50% by December 31, 2022. On March 11, 2021, the American Rescue Plan Act of 2021 was enacted and provides further economic relief to address the continued economic impact of COVID-19. These Acts are not expected to have a material impact on our consolidated financial statements and we will continue to monitor the impact of any effects from these Acts and other future legislation.

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Results of Operations


The following tables reflect our financial results on a consolidated basis and key operating metrics as of and for the quarters ended March 31, 2021 and 2020.



                                 Financial Data




                                                          Quarter Ended March 31,
                                                                             $           %
(In millions, except for percentages)            2021         2020        Change      Change
Operating Revenues
Commercial and carrier:
Data and transport services (includes VoIP)    $    90.3    $    89.6    $     0.7          1 %
Voice services                                      44.3         45.7        (1.4)        (3)
Other                                                9.7         11.7        (2.0)       (17)
                                                   144.3        147.0        (2.7)        (2)
Consumer:
Broadband (Data and VoIP)                           65.8         64.1          1.7          3
Video services                                      16.8         19.1        (2.3)       (12)
Voice services                                      40.4         43.2        (2.8)        (6)
                                                   123.0        126.4        (3.4)        (3)
Subsidies                                           17.4         18.4        (1.0)        (5)
Network access                                      31.6         31.5          0.1          0
Other products and services                          8.5          2.4          6.1        254
Total operating revenues                           324.8        325.7        (0.9)        (0)

Operating Expenses
Cost of services and products (exclusive of
depreciation and amortization)                     144.0        137.8          6.2          4
Selling, general and administrative costs           66.9         67.8        (0.9)        (1)
Depreciation and amortization                       75.6         82.7        (7.1)        (9)
Total operating expenses                           286.5        288.3        (1.8)        (1)
Income from operations                              38.3         37.4          0.9          2
Interest expense, net                             (48.4)       (32.1)         16.3         51
Gain (loss) on extinguishment of debt             (12.0)          0.2       (12.2)    (6,100)
Change in fair value of contingent payment
rights                                            (57.6)            -       (57.6)        100
Other income, net                                   12.3         15.2        (2.9)       (19)
Income tax expense (benefit)                       (5.3)          5.1       (10.4)      (204)
Net income (loss)                                 (62.1)         15.6       (77.7)      (498)
Net income attributable to noncontrolling
interest                                               -          0.1        (0.1)      (100)
Net income (loss) attributable to common
shareholders                                   $  (62.1)    $    15.5    $  (77.6)      (501)

Adjusted EBITDA (1)                            $   126.6    $   131.6    $   (5.0)        (4) %




(1) A non-GAAP measure.  See the "Non-GAAP Measures" section below for additional
    information and reconciliation to the most directly comparable GAAP measure.




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                            Key Operating Statistics




                                     As of March 31,
                        2021         2020        Change     % Change
Consumer customers      545,061      574,597    (29,536)         (5) %

Voice connections       768,083      820,620    (52,537)         (6)
Data connections        794,224      786,125       8,099           1
Video connections        73,986       82,633     (8,647)        (10)
Total connections     1,636,293    1,689,378    (53,085)         (3) %




Operating Revenues



Commercial and Carrier



Data and Transport Services



We provide a variety of business communication services to business customers of all sizes, including many services over our advanced fiber network. The services we offer include scalable high-speed broadband Internet access and VoIP phone services, which range from basic service plans to virtual hosted systems. In addition to Internet and VoIP services, we also offer a variety of commercial data connectivity services in select markets including Ethernet services; private line data services; software defined wide area network and multi-protocol label switching. Our networking services include point-to-point and multi-point deployments from 2.5 Mbps to 10 Gbps to accommodate the growth patterns of our business customers. We offer a suite of cloud-based services, which includes a hosted unified communications solution that replaces the customer's on-site phone systems and data networks, managed network security services and data protection services. Data center and disaster recovery solutions provide a reliable and local colocation option for commercial customers. We also offer wholesale services to regional and national interexchange and wireless carriers, including cellular backhaul and other fiber transport solutions.

Data and transport services revenues increased $0.7 million during the quarter ended March 31, 2021 compared to the same period in 2020 primarily due to continued growth in Metro Ethernet and VoIP services.



Voice Services


Voice services include basic local phone and long-distance service packages for business customers. The plans include options for voicemail, conference calling, linking multiple office locations and other custom calling features such as caller ID, call forwarding, speed dialing and call waiting. Services can be charged at a fixed monthly rate, a measured rate or can be bundled with selected services at a discounted rate. Voice services revenues decreased $1.4 million during the quarter ended March 31, 2021 compared to the same period in 2020 primarily due to a 7% decline in access lines as commercial customers are increasingly choosing alternative technologies, including our own VoIP product, and the broad range of features that Internet based voice services can offer.



Other


Other services include business equipment sales and related hardware and maintenance support, video services and other miscellaneous revenues, including 9-1-1 service revenues. We are a full service 9-1-1 provider and have installed and maintained two turn-key, state of the art statewide next-generation emergency 9-1-1 systems. These systems, located in Maine and Vermont, have processed several million calls relying on the caller's location information for routing. As of October 29, 2020, we were no longer the 9-1-1 service provider in Vermont. Next-generation emergency 9-1-1 systems are an improvement over traditional 9-1-1 and are expected to provide the foundation to handle future communication modes such as texting and video.



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Other services revenues decreased $2.0 million during the quarter ended March 31, 2021 compared to the same period in 2020 primarily due the expiration of our 9-1-1 service contract in Vermont as well as declines in custom construction projects and business system sales.



Consumer



Broadband Services


Broadband services include revenues from residential customers for subscriptions to our VoIP and data products. We offer high-speed Internet access at speeds of up to 1 Gbps, depending on the nature of the network facilities that are available, the level of service selected and the location. Our VoIP digital phone service is also available in certain markets as an alternative to the traditional telephone line. CCiTV, which is a customizable, cloud-enabled video service, supports a wide variety of viewing habits and provides an app-based approach to video services. Content can be delivered in high-definition quality to a big-screen TV, as well as to tablets and mobile devices.

Broadband services revenues increased $1.7 million during the quarter ended March 31, 2021 compared to the same period in 2020 despite a decrease in data and VoIP connections of 4% and 16%, respectively, primarily as a result of price increases implemented during 2020 and the first quarter of 2021 as well as growth in revenue for CCiTV, which was launched in additional markets during 2020.




Video Services



Depending on geographic market availability, our video services range from limited basic service to advanced digital television, which includes several plans, each with hundreds of local, national and music channels including premium and Pay-Per-View channels as well as video On-Demand service. Certain customers may also subscribe to our advanced video services, which consist of high-definition television, digital video recorders ("DVR") and/or a whole home DVR. Our TV Everywhere service allows our video subscribers to watch their favorite shows, movies and livestreams on any device. In addition, we offer other in-demand streaming content including: ATT TV, fuboTV, Philo and HBO NOW®.

Video services revenues decreased $2.3 million during the quarter ended March 31, 2021 compared to the same period in 2020 primarily due to an 11% decrease in connections as consumers are choosing to subscribe to alternative video services such as over-the-top streaming services.



Voice Services


We offer several different basic local phone service packages and long-distance calling plans, including unlimited flat-rate calling plans. The plans include options for voicemail and other custom calling features such as caller ID, call forwarding and call waiting. Voice services revenues decreased $2.8 million during the quarter ended March 31, 2021 compared to the same period in 2020 primarily due to an 8% decline in access lines. The number of local access lines in service directly affects the recurring revenues we generate from end users and continues to be impacted by the industry-wide decline in access lines.

We expect to continue to experience erosion in voice connections due to competition from alternative technologies, including our own competing VoIP product.




Subsidies



Subsidies consist of both federal and state subsidies, which are designed to promote widely available, quality broadband services at affordable prices with higher data speeds in rural areas. Subsidies revenues decreased $1.0 million during the quarter ended March 31, 2021 compared to the same period in 2020 primarily due to a reduction in state subsidies support.



Network Access Services


Network access services include interstate and intrastate switched access, network special access and end user access. Switched access revenues include access services to other communications carriers to terminate or originate long-distance calls on our network. Special access circuits provide dedicated lines and trunks to business customers and


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interexchange carriers. Network access services revenues increased $0.1 million during the quarter ended March 31, 2021 compared to the same period in 2020 primarily due to an increase in the Federal Universal Service Fund Contribution Factor during the first quarter of 2021, offset by the continuing decline in interstate rates, minutes of use, voice connections and carrier circuits.



Other Products and Services


Other products and services include revenues from telephone directory publishing, video advertising, billing and support services and other miscellaneous revenues. We have entered into multiple Public Private Partnership agreements with several towns in New Hampshire to build new FTTP Internet networks. When complete, the new town networks will provide broadband speeds of up to 1 Gbps to a number of homes and businesses. Public Private Partnerships are a key component of Consolidated's commitment to expand rural broadband access.

Other products and services revenues increased $6.1 million during the quarter ended March 31, 2021 compared to the same period in 2020 primarily due to revenue recognition of Public Private Partnership construction projects during the first quarter of 2021.



Operating Expenses


Cost of Services and Products

Cost of services and products increased $6.2 million during the quarter ended March 31, 2021 compared to the same period in 2020 primarily due to an increase in access expense related to fiber costs for the Public Private Partnership agreements, as described above. Required contributions to the Federal Universal Service Fund ("USF") increased in 2021 as a result of an increase in the annual funding rate. Video programming costs also increased as a result of annual rate increases and the addition of costs for CCiTV, which was expanded to certain markets in 2020. These increases in cost of services and products were reduced in part by a decline in employee labor costs due to an increase in capitalized costs for the fiber network expansion in 2021. In addition, contract labor costs and repair and maintenance expense decreased as a result of operating efficiency improvements.

Selling, General and Administrative Costs

Selling, general and administrative costs decreased $0.9 million during the quarter ended March 31, 2021 compared to the same period in 2020 primarily due to a decline in employee salaries and benefits as a result of a reduction in headcount in the current year. However, advertising expense increased from additional radio and television advertising in the current year to promote our new fiber broadband speeds. Customer acquisition costs also increased related to the amortization of sales commissions.

Depreciation and Amortization

Depreciation and amortization expense decreased $7.1 million during the quarter ended March 31, 2021 compared to the same period in 2020 primarily due to certain acquired assets becoming fully depreciated or amortized. Amortization expense declined for customer relationships, which are amortized under the accelerated method. Depreciation expense also declined due to the sale of utility poles located in the state of New Hampshire in 2020. These declines in depreciation and amortization expense were offset in part by ongoing capital expenditures related to success-based capital projects for consumer and commercial services as well as the fiber network expansion and customer service improvements.




Regulatory Matters



Our revenues are subject to broad federal and/or state regulations, which include such telecommunications services as local telephone service, network access service and toll service. The telecommunications industry is subject to extensive federal, state and local regulation. Under the Telecommunications Act of 1996, federal and state regulators share responsibility for implementing and enforcing statutes and regulations designed to encourage competition and to preserve and advance widely available, quality telephone service at affordable prices.

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At the federal level, the FCC generally exercises jurisdiction over facilities and services of local exchange carriers, such as our rural telephone companies, to the extent they are used to provide, originate or terminate interstate or international communications. The FCC has the authority to condition, modify, cancel, terminate or revoke our operating authority for failure to comply with applicable federal laws or FCC rules, regulations and policies. Fines or penalties also may be imposed for any of these violations.

State regulatory commissions generally exercise jurisdiction over carriers' facilities and services to the extent they are used to provide, originate or terminate intrastate communications. In particular, state regulatory agencies have substantial oversight over interconnection and network access by competitors of our rural telephone companies. In addition, municipalities and other local government agencies regulate the public rights-of-way necessary to install and operate networks. State regulators can sanction our rural telephone companies or revoke our certifications if we violate relevant laws or regulations.




FCC Matters



In general, telecommunications service in rural areas is costlier to provide than service in urban areas. The lower customer density means that switching and other facilities serve fewer customers and loops are typically longer, requiring greater expenditures per customer to build and maintain. By supporting the high-cost of operations in rural markets, USF subsidies promote widely available, quality telephone service at affordable prices in rural areas.

Our current annual support through the FCC's Connect America Fund ("CAF") Phase II funding is $48.1 million through 2021, as described below. The specific obligations associated with CAF Phase II funding included the obligation to serve approximately 124,500 locations by December 31, 2020 (with interim milestones of 40%, 60% and 80% completion by December 2017, 2018 and 2019, respectively); to provide broadband service to those locations with speeds of 10 Mbps downstream and 1 Mbps upstream; to achieve latency of less than 100 milliseconds; to provide data of at least 100 gigabytes per month; and to offer pricing reasonably comparable to pricing in urban areas. The Company met the milestones for 2017 through 2020 for all states where it operates.

We accepted CAF Phase II support in all of our operating states except Colorado and Kansas where we declined the offered CAF Phase II support. We continued to receive annual frozen CAF Phase I support of $1.0 million in Colorado and Kansas until April 2019, when the FCC CAF Phase II auction assigned support to another provider.

The annual FCC price cap filing was made on June 15, 2020 and became effective on July 1, 2020. This filing reflects the final phase down of end office switching rates for our rate of return companies. The net impact is a decrease of approximately $2.0 million in network access and CAF ICC support funding for the July 2020 through June 2021 tariff period.

In April 2019, the FCC announced plans for the Rural Digital Opportunity Fund ("RDOF"), the next phase of the CAF program. The RDOF is a $20.4 billion fund to bring speeds of 25 Mbps downstream and 3 Mbps upstream to unserved and underserved areas of America. The FCC issued a Notice of Proposed Rulemaking at their August 2019 Open Commission Meeting. The order prioritizes terrestrial broadband as a bridge to rural 5G networks by providing a significant weight advantage to traditional broadband providers. Funding will occur in two phases with the first phase auctioning $16.0 billion and the second phase auctioning $4.4 billion, each to be distributed over 10 years. The minimum speed required to receive funding is 25 Mbps downstream and 3 Mbps upstream. CAF Phase II funding has been extended through December 31, 2021 for price cap holding companies. The FCC issued the final census block groups with locations and reserve price. We filed the RDOF short form application on July 14, 2020 and were listed as a qualified bidder by the FCC on October 13, 2020 and participated in the auction. The auction began on October 29, 2020 and ended on November 24, 2020. Consolidated won 246 census block groups serving in seven states. The bids we won are at the 1 Gbps downstream and 500 Mbps upstream speed tier to approximately 27,000 locations at a funding level of $5.9 million annually over 10 years. Consolidated filed its long form application with supporting documents on January 29, 2021 and we expect to receive approval during the third quarter of 2021.



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State Matters



Texas


The Texas Universal Service Fund ("TUSF") is administered by the National Exchange Carrier Association ("NECA"). The Texas Public Utilities Regulatory Act directs the Public Utilities Commission of Texas ("PUCT") to adopt and enforce rules requiring local exchange carriers to contribute to a state universal service fund that helps telecommunications providers offer basic local telecommunications service at reasonable rates in high-cost rural areas. The TUSF is also used to reimburse telecommunications providers for revenues lost by providing lifeline service. Our Texas rural telephone companies receive disbursements from this fund.

Our Texas Incumbent Local Exchange Carriers ("ILECs") have historically received support from two state funds, the small and rural incumbent local exchange company plan High Cost Fund ("HCF") and the High Cost Assistance Fund ("HCAF").

In December 2020, the PUCT announced a TUSF funding shortfall and would be reducing all funded carriers support by 64% beginning January 15, 2021. The Texas Telephone Association, which Consolidated is a member, filed a lawsuit seeking to overturn the PUCT decision as well as a temporary injunction on the funding reduction. We expect a court decision to be made during the second quarter of 2021. The potential impact is a reduction in support of approximately $4.0 million annually.



CARES Act Funding


States are reviewing opportunities to use federal CARES Act funding to assist in the deployment of broadband to unserved and underserved areas within their respective states. In 2020, New Hampshire allocated $50.0 million of CARES Act funding to fund broadband expansion to unserved and underserved locations throughout the state. Consolidated was granted up to $3.5 million to build high-speed Internet networks for homes and businesses in New Hampshire for the towns of Danbury, Springfield and Mason. The state funded 10% upfront with the remainder received upon completion of projects in December 2020.



COVID-19


On March 13, 2020, the FCC issued a pledge to Keep America Connected through May 13, 2020, which was later extended to June 30, 2020. The pledge asked all communications providers to not terminate service to any residential or small business customers because of their inability to pay their bills due to the disruptions caused by the coronavirus pandemic; to waive any late fees that any residential or small business customers incur because of their economic circumstances related to the coronavirus pandemic; and to open their Wi-Fi hotspots to any American who needs them. Consolidated signed on to the pledge through June 30, 2020. Several states took the FCC pledge a step further by not allowing any carrier to disconnect service within their state during the Governors' declared state of emergency, which Consolidated also supported. Most state moratoriums on disconnections have expired; however, certain states including Massachusetts, New York and Washington were extended into the third quarter of 2021.




Other Regulatory Matters



We are also subject to a number of regulatory proceedings occurring at the federal and state levels that may have a material impact on our operations. The FCC and state commissions have authority to issue rules and regulations related to our business. A number of proceedings are pending or anticipated that are related to such telecommunications issues as competition, interconnection, access charges, ICC, broadband deployment, consumer protection and universal service reform. Some proceedings may authorize new services to compete with our existing services. Proceedings that relate to our cable television operations include rulemakings on set top boxes, carriage of programming, industry consolidation and ways to promote additional competition. There are various on-going legal challenges to the scope or validity of FCC orders that have been issued. As a result, it is not yet possible to fully determine the impact of the related FCC rules and regulations on our operations.



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Non-Operating Items



Interest Expense, Net


Interest expense, net of interest income, increased $16.3 million during the quarter ended March 31, 2021 compared to the same period in 2020. During the quarter ended March 31, 2021, we recognized interest expense, including amortized costs, of $10.2 million on the Note issued to Searchlight as part of the investment agreement entered into in October 2020. Interest expense on our outstanding senior notes also increased during the quarter ended March 31, 2021 as part of the refinancing of our long-term debt in October 2020 as described in the "Liquidity and Capital Resources" section below.

Gain on Extinguishment of Debt

As described in the "Liquidity and Capital Resources" section below, we incurred a loss on the extinguishment of debt of $12.0 million in connection with the repayment of $397.0 million of outstanding term loans under our credit agreement during the quarter ended March 31, 2021.

During the quarter ended March 31, 2020, we repurchased $4.5 million of the aggregate principal amount of our 6.50% Senior Notes due 2022 and recognized a gain on extinguishment of debt of $0.2 million in connection with the partial repurchase of the notes.

Change in Fair Value of Contingent Payment Rights

We are required to measure our contingent payment rights at fair value until they are converted into shares of the Company's common stock. During the quarter ended March 31, 2021, we recognized a loss of $57.6 million on the increase in the fair value of the contingent payment rights issued to Searchlight.



  Other Income


Other income decreased $2.9 million during the quarter ended March 31, 2021 compared to the same period in 2020. Investment income decreased $1.0 million during the quarter ended March 31, 2021 from our wireless partnership interests. In addition, during the quarter ended March 31, 2020, we recognized a gain of $3.7 million on the sale of our 39 GHz wireless spectrum licenses as part of the FCC's efforts to reclaim broadcast TV spectrum for wireless use. However, pension and post-retirement expense decreased $1.9 million. See Note 11 to the condensed consolidated financial statements for a more detailed discussion regarding our pension and post-retirement plans.



Income Taxes


Income taxes decreased $10.4 million during the quarter ended March 31, 2021 compared to the same period in 2020. Our effective tax rate was 7.9% and 24.4% for the quarters ended March 31, 2021 and 2020, respectively. The effective tax rate differed from the federal and state statutory rates primarily due to various permanent income tax differences related to the Searchlight transaction, other various permanent differences, and differences in allocable income for the Company's state tax filings. Exclusive of these adjustments, our effective tax rate for the quarters ended March 31, 2021 and 2020 would have been approximately 26.0% and 24.4%, respectively.



Non-GAAP Measures


In addition to the results reported in accordance with US GAAP, we also use certain non-GAAP measures such as EBITDA and adjusted EBITDA to evaluate operating performance and to facilitate the comparison of our historical results and trends. These financial measures are not measures of financial performance under US GAAP and should not be considered in isolation or as a substitute for net income as a measure of performance and net cash provided by operating activities as a measure of liquidity. They are not, on their own, necessarily indicative of cash available to fund cash needs as determined in accordance with GAAP. The calculation of these non-GAAP measures may not be comparable to similarly titled measures used by other companies. Reconciliations of these non-GAAP measures to the most directly comparable financial measures presented in accordance with GAAP are provided below.



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EBITDA is defined as net earnings before interest expense, income taxes and depreciation and amortization. Adjusted EBITDA is comprised of EBITDA, adjusted for certain items as permitted or required under our credit facility as described in the reconciliations below. These measures are a common measure of operating performance in the telecommunications industry and are useful, with other data, as a means to evaluate our ability to fund our estimated uses of cash.

The following table is a reconciliation of net income (loss) to adjusted EBITDA for the quarters ended March 31, 2021 and 2020:




                                                          Quarter Ended
                                                            March 31,
(In thousands, unaudited)                               2021          2020
Net income (loss)                                    $ (62,083)    $   15,623
Add (subtract):
Interest expense, net of interest income                 48,415        32,095
Income tax expense (benefit)                            (5,300)         5,041
Depreciation and amortization                            75,611        82,738
EBITDA                                                   56,643       135,497

Adjustments to EBITDA:
Other, net (1)                                         (10,409)      (14,639)
Investment distributions (2)                              9,377        10,064
(Gain) loss on extinguishment of debt                    11,980         (234)
Change in fair value of contingent payment rights        57,588             -
Non-cash, stock-based compensation                        1,450           890
Adjusted EBITDA                                      $  126,629    $  131,578



Includes the equity earnings from our investments, dividend income, income (1) attributable to noncontrolling interests in subsidiaries, acquisition and

    transaction related costs including integration and severance, non-cash
    pension and post-retirement benefits and certain other miscellaneous items.



(2) Includes all cash dividends and other cash distributions received from our

    investments.



Liquidity and Capital Resources



Outlook and Overview


Our operating requirements have historically been funded from cash flows generated from our business and borrowings under our credit facilities. We expect that our future operating requirements will continue to be funded from cash flows from operating activities, existing cash and cash equivalents and, if needed, borrowings under our revolving credit facility and our ability to obtain future external financing. We anticipate that we will continue to use a substantial portion of our cash flow to fund capital expenditures for our accelerated fiber network expansion and growth plan and invest in future business opportunities.

The following table summarizes our cash flows:




                                          Three Months Ended March 31,
(In thousands)                              2021                2020
Cash flows provided by (used in):
Operating activities                   $        98,490     $        84,990
Investing activities                          (74,738)            (39,776)
Financing activities                           145,829            (43,470)

Change in cash and cash equivalents $ 169,581 $ 1,744




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Cash Flows Provided by Operating Activities

Net cash provided by operating activities was $98.5 million during the three-month period ended March 31, 2021, an increase of $13.5 million compared to the same period in 2020. The increase in primarily as a result of changes in working capital and the timing of expenditures and cash receipts. Cash contributions to our defined benefit pension plan also decreased $1.8 million during the quarter ended March 31, 2021 compared to the same period in 2020.

Cash Flows Used In Investing Activities

Net cash used in investing activities was $74.7 million during the three-month period ended March 31, 2021 and consisted primarily of cash used for capital expenditures. Capital expenditures continue to be our primary recurring investing activity and were $76.0 million and $42.4 million during the three-month periods ended March 31, 2021 and 2020, respectively. Capital expenditures for 2021 are expected to be $400.0 million to $420.0 million, which will be used to support success-based capital projects for commercial, carrier and consumer initiatives and for our planned fiber projects and broadband network expansion, which will include the upgrade in 2021 of more than 300,000 passings with multi-Gig data speeds. We expect to continue to invest in the enhancement and expansion of our fiber network in order to retain and acquire more customers through a broader set of products and an expanded network footprint.

Cash Flows Used In Financing Activities

Net cash used in financing activities consists primarily of our proceeds from and principal payments on long-term borrowings, and repurchases of debt.



Long-term Debt



Credit Agreement


On October 2, 2020, the Company, through certain of its wholly-owned subsidiaries, entered into a Credit Agreement with various financial institutions (as amended, the "Credit Agreement") to replace the Company's previous credit agreement in its entirety. The Credit Agreement consisted of term loans in an original aggregate amount of $1,250.0 million (the "Initial Term Loans") and a revolving loan facility of $250.0 million. The Credit Agreement also includes an incremental loan facility which provides the ability to borrow, subject to certain terms and conditions, incremental loans in an aggregate amount of up to the greater of (a) $300.0 million plus (b) an amount which would not cause its senior secured leverage ratio not to exceed 3.70:1.00 (the "Incremental Facility"). Borrowings under the Credit Agreement are secured by substantially all of the assets of the Company and its subsidiaries, subject to certain exceptions.

The Initial Term Loans were issued in an original aggregate principal amount of $1,250.0 million with a maturity date of October 2, 2027 and contained an original issuance discount of 1.5% or $18.8 million, which is being amortized over the term of the loan. The Initial Term Loans required quarterly principal payments of $3.1 million, which commenced December 31, 2020, and bore interest at a rate of 4.75% plus the London Interbank Offered Rate ("LIBOR") subject to a 1.00% LIBOR floor.

On January 15, 2021, the Company entered into Amendment No. 1 to the Credit Agreement in which we borrowed an additional $150.0 million aggregate principal amount of incremental term loans (the "Incremental Term Loans"). The Incremental Term Loans have terms and conditions identical to the Initial Term Loans including the same maturity date and interest rate. The Initial Term Loans and Incremental Term Loans, collectively (the "Term Loans") will comprise a single class of term loans under the Credit Agreement.

On March 18, 2021, the Company repaid $397.0 million of the outstanding Term Loans with the net proceeds received from the issuance of $400.0 million aggregate principal amount of 5.00% senior secured notes due 2028 (the "5.00% Senior Notes"), as described below. The repayment of the Term Loans was applied to the remaining principal payments in direct order of maturity, thereby eliminating the required quarterly principal payments through the remaining term of the loan. In connection with the repayment of the Term Loans, we recognized a loss on extinguishment of debt of $12.0 million during the quarter ended March 31, 2021.

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The revolving credit facility has a maturity date of October 2, 2025 and an applicable margin (at our election) of 4.00% for LIBOR-based borrowings or 3.00% for alternate base rate borrowings, with a 0.25% reduction in each case if the consolidated first lien leverage ratio, as defined in the Credit Agreement, does not exceed 3.20 to 1.00. At March 31, 2021 and December 31, 2020, there were no borrowings outstanding under the revolving credit facility. Stand-by letters of credit of $18.1 million were outstanding under our revolving credit facility as of March 31, 2021. The stand-by letters of credit are renewable annually and reduce the borrowing availability under the revolving credit facility. As of March 31, 2021, $231.9 million was available for borrowing under the revolving credit facility.

The weighted-average interest rate on outstanding borrowings under our credit facility was 5.75% as of March 31, 2021 and December 31, 2020. Interest is payable at least quarterly.

Credit Agreement Covenant Compliance

The Credit Agreement contains various provisions and covenants, including, among other items, restrictions on the ability to pay dividends, incur additional indebtedness, and issue certain capital stock. We have agreed to maintain certain financial ratios, including a maximum consolidated first lien leverage ratio, as defined in the Credit Agreement. Among other things, it will be an event of default, with respect to the revolving credit facility only, if our consolidated first lien leverage ratio as of the end of any fiscal quarter is greater than 5.85:1.00. As of March 31, 2021, our consolidated first lien leverage ratio under the Credit Agreement was 3.90:1.00. As of March 31, 2021, we were in compliance with the Credit Agreement covenants.

Refinancing of Credit Agreement

On April 5, 2021, the Company, entered into a second amendment to the Credit Agreement (the "Second Amendment") to refinance the outstanding Term Loans of $999.9 million. The terms and conditions of the Credit Agreement remain substantially similar and unchanged except with respect to the interest rate applicable to the Term Loans and certain other provisions. As a result of the Second Amendment, the interest rate of the Term Loans was reduced to 3.50% plus LIBOR subject to a 0.75% LIBOR floor. The maturity date of the Term Loans of October 2, 2027 remains unchanged. In connection with entering into the Second Amendment, we expect to recognize a loss on the extinguishment of debt, which could range from approximately $3.0 million to $6.0 million, during the quarter ended June 30, 2021.



Senior Notes


On October 2, 2020, we completed an offering of $750.0 million aggregate principal amount of 6.50% unsubordinated secured notes due 2028 (the "6.50% Senior Notes"). The 6.50% Senior Notes were priced at par and bear interest at a rate of 6.50%, payable semi-annually on April 1 and October 1 of each year, beginning on April 1, 2021. The 6.50% Senior Notes will mature on October 1, 2028. The net proceeds from the issuance of the 6.50% Senior Notes were used to redeem our then outstanding $440.5 million aggregate principal amount of 6.50% Senior Notes due in October 2022 at a price equal to 100% of the aggregate principal amount plus accrued and unpaid interest through the redemption date, to repay a portion of the outstanding borrowings under the previous credit agreement as part of the refinancing in October 2020 and to pay related fees and expenses.

On March 18, 2021, we issued $400.0 million aggregate principal amount 5.00% Senior Notes, together with the 6.50% Senior Notes (the "Senior Notes"). The 5.00% Senior Notes were priced at par and bear interest at a rate of 5.00% per year, payable semi-annually on April 1 and October 1 of each year, beginning on October 1, 2021. The 5.00% Senior Notes will mature on October 1, 2028.

Deferred debt issuance costs of $3.8 million incurred in connection with the issuance of the 5.00% Senior Notes are being amortized using the effective interest method over the term of the Senior Notes. The net proceeds from the issuance of the 5.00% Senior Notes were used to repay $397.0 million of the Term Loans outstanding under the Credit Agreement.

The Senior Notes are unsubordinated secured obligations of the Company, secured by a first priority lien on the collateral that secures the Company's obligations under the Credit Agreement. The Senior Notes are fully and unconditionally guaranteed on a first priority secured basis by the Company and the majority of our wholly-owned subsidiaries. The


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offerings of the Senior Notes have not been registered under the Securities Act of 1933, as amended or any state securities laws.

Senior Notes Covenant Compliance

Subject to certain exceptions and qualifications, the indentures governing the Senior Notes contains customary covenants that, among other things, limits the Company and its restricted subsidiaries' ability to: incur additional debt or issue certain preferred stock; pay dividends or make other distributions on capital stock or prepay subordinated indebtedness; purchase or redeem any equity interests; make investments; create liens; sell assets; enter into agreements that restrict dividends or other payments by restricted subsidiaries; consolidate, merge or transfer all or substantially all of its assets; engage in transactions with its affiliates; or enter into any sale and leaseback transactions. The indentures also contain customary events of default. As of March 31, 2021, the Company was in compliance with all terms, conditions and covenants under the indentures governing the Senior Notes.

Repurchase of Senior Notes due 2022

During the quarter ended March 31, 2020, we repurchased $4.5 million of the aggregate principal amount of our then outstanding 6.50% Senior Notes due in October 2022 (the "2022 Notes") for $4.2 million and recognized a gain on extinguishment of debt of $0.2 million



Finance Leases


We lease certain facilities and equipment under various finance leases which expire between 2021 and 2040. As of March 31, 2021, the present value of the minimum remaining lease commitments was approximately $16.7 million, of which $5.0 million was due and payable within the next twelve months. The leases require total remaining rental payments of $19.6 million as of March 31, 2021.



Searchlight Investment


On October 2, 2020, we closed on the first stage of the strategic investment of $350.0 million with Searchlight. Searchlight will invest up to a total of $425.0 million in Consolidated and, assuming satisfaction of certain conditions set forth in the Investment Agreement will hold a combination of perpetual Series A preferred stock and up to 35% of the Company's outstanding common stock. The Searchlight investment will enable us to accelerate investment in our network over a multi-year period. The Investment is structured to maximize the proceeds to the Company in the near term so that we can invest in our network immediately, and then the Investment converts into an equity-like structure upon receipt of certain required regulatory approvals. We expect the closing of the second stage of the investment to be completed in the third quarter of 2021 at which time, we will receive the additional investment of $75.0 million from Searchlight.

Sufficiency of Cash Resources

The following table sets forth selected information regarding our financial condition.





                                    March 31,      December 31,
(In thousands, except for ratio)       2021            2020
Cash and cash equivalents           $  325,142    $      155,561
Working capital                        225,741            70,191
Current ratio                             1.82              1.26



Our net working capital improved $155.6 million as of March 31, 2021 compared to December 31, 2020 primarily as a result of an increase in cash and cash equivalents of $169.6 million. As described above, on January 15, 2021, we borrowed an additional $150.0 million aggregate principal amount of incremental term loans under our Credit Agreement. Working capital also improved from a decline in the current portion of long-term debt and finance lease obligations of $12.5 million as a result of the prepayment in March 2021 of $397.0 million of the outstanding Term Loans, which eliminated the required quarterly principal payments through the remaining term of the loan. However, working capital was reduced by


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an increase in accrued interest of $20.2 million related to the timing of the semi-annual interest payments for our Senior Notes and additional accrued interest on the Searchlight Note of $7.9 million during the quarter ended March 31, 2021.

Our most significant use of funds for the remainder of 2021 is expected to be for: (i) interest payments on our indebtedness of between $101.0 million and $106.0 million; and (ii) capital expenditures of between $324.0 million and $344.0 million. The recent refinancing of our capital structure combined with the Searchlight investment provides us the capital and financial flexibility to fund our accelerated fiber network expansion and growth plans. In the future, our ability to use cash may be limited by our other expected uses of cash and our ability to incur additional debt will be limited by our existing and future debt agreements.

We believe that cash flows from operating activities, together with our existing cash and borrowings available under our revolving credit facility, will be sufficient for at least the next twelve months to fund our current anticipated uses of cash. After that, our ability to fund expected uses of cash and to comply with the financial covenants under our debt agreements will depend on the results of future operations, performance and cash flow. Our ability to fund expected uses from the results of future operations will be subject to prevailing economic conditions and to financial, business, regulatory, legislative and other factors, many of which are beyond our control. Due to the uncertainty and unpredictability related to the potential impacts of the COVID-19 pandemic on our business, we will continue to closely manage our cash and monitor liquidity.

To the extent that our business plans or projections change or prove to be inaccurate, we may require additional financing or require financing sooner than we currently anticipate. Sources of additional financing may include commercial bank borrowings, other strategic debt financing, sales of nonstrategic assets, vendor financing or the private or public sales of equity and debt securities.

There can be no assurance that we will be able to generate sufficient cash flows from operations in the future, that anticipated revenue growth will be realized or that future borrowings or equity issuances will be available in amounts sufficient to provide adequate sources of cash to fund our expected uses of cash. Failure to obtain adequate financing, if necessary, could require us to significantly reduce our operations or level of capital expenditures which could have a material adverse effect on our financial condition and the results of operations. In addition, the COVID-19 pandemic has caused a disruption in the capital markets, which could make obtaining additional financing more difficult and we may not be able to obtain financing on favorable terms or at all.

We may be unable to access the cash flows of our subsidiaries since certain of our subsidiaries are parties to credit or other borrowing agreements, or are subject to statutory or regulatory restrictions, that restrict the payment of dividends or making intercompany loans and investments, and those subsidiaries are likely to continue to be subject to such restrictions and prohibitions for the foreseeable future. In addition, future agreements that our subsidiaries may enter into governing the terms of indebtedness may restrict our subsidiaries' ability to pay dividends or advance cash in any other manner to us.




Surety Bonds



In the ordinary course of business, we enter into surety, performance and similar bonds as required by certain jurisdictions in which we provide services.

As of March 31, 2021, we had approximately $6.1 million of these bonds outstanding.

Defined Benefit Pension Plans

As required, we contribute to qualified defined pension plans and non-qualified supplemental retirement plans (collectively the "Pension Plans") and other post-retirement benefit plans, which provide retirement benefits to certain eligible employees as described in the Note 11 to the Condensed Consolidated Financial Statements, included in this report in Part I - Item 1 "Financial Statements". Contributions are intended to provide for benefits attributed to service to date. Our funding policy is to contribute annually an actuarially determined amount consistent with applicable federal income tax regulations.

The cost to maintain our Pension Plans and future funding requirements are affected by several factors including the expected return on investment of the assets held by the Pension Plans, changes in the discount rate used to calculate pension expense and the amortization of unrecognized gains and losses. Returns generated on the Pension Plans assets have historically funded a significant portion of the benefits paid under the Pension Plans. We estimate the long-term rate of


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return on assets will be 6.00%. The Pension Plans invest in marketable equity securities which are exposed to changes in the financial markets. COVID-19 has also negatively impacted the financial markets, which could significantly impact the returns on our plan assets. If the financial markets experience a sustained downturn and returns fall below our estimate, we could be required to make material contributions to the Pension Plans, which could adversely affect our cash flows from operations.

In 2021, we expect to make contributions totaling approximately $20.7 million to our Pension Plans and $8.8 million to our other post-retirement benefit plans. As of March 31, 2021, we have contributed $4.2 million and $2.0 million to our Pension Plans and our other post-retirement benefit plans, respectively. Our contribution amounts meet the minimum funding requirements as set forth in employee benefit and tax laws.



Income Taxes


The timing of cash payments for income taxes, which is governed by the Internal Revenue Service and other taxing jurisdictions, will differ from the timing of recording tax expense and deferred income taxes, which are reported in accordance with GAAP. For example, tax laws in effect regarding accelerated or "bonus" depreciation for tax reporting resulted in less cash payments than the GAAP tax expense. Acceleration of tax deductions could eventually result in situations where cash payments will exceed GAAP tax expense.

Critical Accounting Estimates

Our condensed consolidated financial statements and accompanying notes are prepared in accordance with US GAAP. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. These estimates and assumptions are affected by management's application of accounting policies. Our judgments are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making estimates about the carrying values of assets and liabilities that are not readily apparent from other sources. For a full discussion of our accounting estimates and assumptions that we have identified as critical in the preparation of our condensed consolidated financial statements, refer to our 2020 Annual Report on Form 10-K filed with the SEC.

Recent Accounting Pronouncements

For information regarding the impact of certain recent accounting pronouncements, see Note 1 "Summary of Significant Accounting Policies" to the Condensed Consolidated Financial Statements, included in this report in Part I - Item 1 "Financial Statements".

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Financials (USD)
Sales 2021 1 289 M - -
Net income 2021 -10,4 M - -
Net Debt 2021 - - -
P/E ratio 2021 -
Yield 2021 -
Capitalization 713 M 713 M -
Capi. / Sales 2021 0,55x
Capi. / Sales 2022 0,57x
Nbr of Employees 3 200
Free-Float 97,4%
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NameTitle
C. Robert Udell President, Chief Executive Officer & Director
Steven L. Childers Chief Financial Officer
Robert J. Currey Chairman
Tom White Chief Technology Officer
John Joseph Lunny Chief Information Officer
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