Table of Contents                     

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2016
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number: 000-51798  
 
NTELOS Holdings Corp.
(Exact name of registrant as specified in its charter)
 
Delaware
 
36-4573125
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
1154 Shenandoah Village Drive, Waynesboro, Virginia 22980
(Address of principal executive offices) (Zip Code)
(540) 946-3500
(Registrant’s telephone number, including area code)
 
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.     ý   Yes     ¨   No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).     ý   Yes     ¨   No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
 
  
Accelerated filer
 
ý
Non-accelerated filer
¨
  (Do not check if a smaller reporting company)
  
Smaller reporting company
 
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     ¨   Yes     ý   No
There were 22,260,023 shares of the registrant’s common stock outstanding as of the close of business on May 2, 2016 .

Table of Contents                     

NTELOS HOLDINGS CORP.
TABLE OF CONTENTS
 
Page Number
 

1
Table of Contents                     

PART I – FINANCIAL INFORMATION
 
Item 1. Financial Statements.
NTELOS Holdings Corp.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except per share amounts)
March 31,
2016
 
December 31,
2015
ASSETS
 
 
 
Current Assets
 
 
 
Cash
$
74,287

 
$
72,687

Accounts receivable, net
53,154

 
53,021

Inventories and supplies, net
8,259

 
13,345

Prepaid expenses
11,409

 
9,350

Tax refund receivable
2,637

 
24,986

Other current assets
284

 
1,132

Other current assets from discontinued operations
937

 
2,121

 
150,967

 
176,642

Assets Held for Sale
62

 
62

Restricted Cash
2,167

 
2,167

Securities and Investments
1,522

 
1,522

Property, Plant and Equipment, net
327,975

 
326,260

Intangible Assets
 
 
 
Goodwill
63,700

 
63,700

Radio spectrum licenses
44,933

 
44,933

Customer relationships and trademarks, net
4,095

 
4,292

Deferred Charges and Other Assets
11,857

 
11,639

Deferred Income Taxes
2,841

 
2,737

Other Noncurrent Assets from Discontinued Operations
985

 
1,733

TOTAL ASSETS
$
611,104

 
$
635,687

LIABILITIES AND EQUITY (DEFICIT)
 
 
 
Current Liabilities
 
 
 
Current portion of long-term debt
$
5,586

 
$
5,605

Accounts payable
4,666

 
20,532

Advance billings and customer deposits
13,522

 
12,772

Accrued expenses and other current liabilities
17,133

 
18,003

Other current liabilities from discontinued operations
5,184

 
13,054

 
46,091

 
69,966

Long-Term Debt
506,560

 
507,332

Retirement Benefits
22,784

 
22,448

Deferred Income Taxes
10,364

 
12,272

Other Long-Term Liabilities
62,974

 
61,860

Other Noncurrent Liabilities from Discontinued Operations
2,273

 
835

 
651,046

 
674,713

Commitments and Contingencies


 


Equity (Deficit)


 


Preferred stock, par value $.01 per share, authorized 100 shares, none issued
—

 
—

Common stock, par value $.01 per share, authorized 55,000 shares; 22,304 shares issued and 22,262 shares outstanding (22,290 shares issued and 22,264 shares outstanding at December 31, 2015)
214

 
214

Additional paid in capital
33,012

 
32,500

Treasury stock, at cost, 43 shares (27 shares at December 31, 2015)
(475
)
 
(330
)
Accumulated deficit
(67,141
)
 
(65,840
)
Accumulated other comprehensive loss
(7,287
)
 
(7,142
)
Total NTELOS Holdings Corp. Stockholders’ Equity (Deficit)
(41,677
)
 
(40,598
)
Noncontrolling interests
1,735

 
1,572

 
(39,942
)
 
(39,026
)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
$
611,104

 
$
635,687

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

2
Table of Contents                     

NTELOS Holdings Corp.
Condensed Consolidated Statements of Operations
(Unaudited)
 
 
Three Months Ended March 31,
(In thousands, except per share amounts)
2016
 
2015
Operating Revenues
 
 
 
Retail revenue
$
39,647

 
$
43,011

Wholesale and other revenue
32,418

 
35,597

Equipment sales
13,142

 
16,703

Operating Revenues
85,207

 
95,311

 
 
 
 
Operating Expenses
 
 
 
Cost of services
23,221

 
20,821

Cost of equipment sold
17,299

 
22,998

Customer operations
15,303

 
19,553

Corporate operations
9,482

 
8,624

Restructuring
82

 
1,605

Depreciation and amortization
13,486

 
12,917

Gain on sale of assets
—

 
(11,009
)
 
78,873

 
75,509

Operating Income
6,334

 
19,802

Other Expense
 
 
 
Interest expense, net
(7,210
)
 
(7,947
)
Other expense, net
(6
)
 
(3
)
 
(7,216
)
 
(7,950
)
Income (Loss) before Income Taxes
(882
)
 
11,852

Income Tax Expense (Benefit)
(211
)
 
4,814

Income (Loss) from Continuing Operations
(671
)
 
7,038

Income (Loss) from Discontinued Operations, Net of Tax
(390
)
 
8,249

Net Income (Loss)
(1,061
)
 
15,287

Net Income Attributable to Noncontrolling Interests
(240
)
 
(491
)
Net Income (Loss) Attributable to NTELOS Holdings Corp.
$
(1,301
)
 
$
14,796

Earnings (Loss) per Share Attributable to NTELOS Holdings Corp.
 
 
 
Basic earnings (loss) per common share from continuing operations
$
(0.04
)
 
$
0.29

Basic earnings (loss) per common share from discontinued operations
(0.02
)
 
0.39

Basic earnings (loss) per common share
$
(0.06
)
 
$
0.68

Weighted average shares outstanding - basic
21,311

 
21,193

Diluted earnings (loss) per common share from continuing operations
$
(0.04
)
 
$
0.28

Diluted earnings (loss) per common share from discontinued operations
(0.02
)
 
0.37

Diluted earnings (loss) per common share
$
(0.06
)
 
$
0.65

Weighted average shares outstanding - diluted
21,311

 
22,161

Cash Dividends Declared per Share - Common Stock
$
—

 
$
—

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

3
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NTELOS Holdings Corp.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
 
 
Three Months Ended March 31,
(In thousands)
2016
 
2015
Net Income (Loss) Attributable to NTELOS Holdings Corp.
$
(1,301
)
 
$
14,796

Other Comprehensive Income:
 
 
 
Amortization of unrealized (gain) loss from defined benefit plans, net of $93 and $75 of deferred income taxes in 2016 and 2015, respectively
(145
)
 
117

Comprehensive Income (Loss) Attributable to NTELOS Holdings Corp.
(1,446
)
 
14,913

Comprehensive Income Attributable to Noncontrolling Interests
240

 
491

Comprehensive Income (Loss)
$
(1,206
)
 
$
15,404

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

4
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NTELOS Holdings Corp.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
 
Three Months Ended March 31,
(In thousands)
2016
 
2015
Cash flows from operating activities
 
 
 
Net income (loss)
$
(1,061
)
 
$
15,287

Adjustments to reconcile net income (loss) to net cash provided by operating activities
 
 
 
Depreciation and amortization
14,238

 
13,874

Gain on sale of assets
(418
)
 
(15,947
)
Deferred income taxes
(462
)
 
7,348

Bad debt expense
3,911

 
5,536

Equity-based compensation
786

 
859

Amortization of loan origination costs
619

 
590

Retirement benefits and other
219

 
784

Changes in operating assets and liabilities
 
 
 
Accounts receivable
(3,726
)
 
(12,115
)
Inventories and supplies
5,086

 
(2,080
)
Income taxes
22,350

 
2,661

Prepaid expenses and other assets
(586
)
 
2,733

Accounts payable
(16,513
)
 
(2,874
)
Accrued expenses and other liabilities
(1,464
)
 
(1,422
)
Other
(55
)
 
204

Net cash provided by operating activities
22,924

 
15,438

Cash flows from investing activities
 
 
 
Purchases of property, plant and equipment
(20,963
)
 
(22,941
)
Proceeds from sale of assets
1,145

 
38,796

Net cash provided by (used in) investing activities
(19,818
)
 
15,855

Cash flows from financing activities
 
 
 
Repayments on senior secured term loans
(1,351
)
 
(1,351
)
Cash distributions to noncontrolling interests
(77
)
 
—

Other, net
(78
)
 
(70
)
Net cash used in financing activities
(1,506
)
 
(1,421
)
Increase in cash
1,600

 
29,872

Cash, beginning of period
72,687

 
73,546

Cash, end of period
$
74,287

 
$
103,418

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

5
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NTELOS Holdings Corp.
Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit)
(Unaudited)
 
(In thousands)
Common
Shares
 
Treasury
Shares
 
Common
Stock
 
Additional
Paid In
Capital
 
Treasury
Stock
 
Accumulated Deficit
 
Accumulated
Other
Comprehensive
Loss
 
Total
NTELOS
Holdings
Corp.
Stockholders’
Equity (Deficit)
 
Noncontrolling
Interests
 
Total
Equity (Deficit)
Balance, December 31, 2015
22,264

 
27

 
$
214

 
$
32,500

 
$
(330
)
 
$
(65,840
)
 
$
(7,142
)
 
$
(40,598
)
 
$
1,572

 
$
(39,026
)
Equity-based compensation *
(2
)
 
16

 


 
512

 
(145
)
 

 

 
367

 

 
367

Capital distribution to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 
—

 
(77
)
 
(77
)
Net loss attributable to NTELOS Holdings Corp.

 

 

 

 

 
(1,301
)
 

 
(1,301
)
 

 
(1,301
)
Amortization of unrealized gain from defined benefit plans, net of $93 of deferred income taxes

 

 

 

 

 

 
(145
)
 
(145
)
 

 
(145
)
Comprehensive income attributable to noncontrolling interests

 

 

 

 

 

 

 
—

 
240

 
240

Balance, March 31, 2016
22,262

 
43

 
$
214

 
$
33,012

 
$
(475
)
 
$
(67,141
)
 
$
(7,287
)
 
$
(41,677
)
 
$
1,735

 
$
(39,942
)
 
*
Includes restricted shares issued, employee stock purchase plan issuances, shares issued through 401(k) matching contributions, stock options exercised and other activity.
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

6
Table of Contents                     

NTELOS Holdings Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
 
Note 1. Organization
NTELOS Holdings Corp. (hereafter referred to as “Holdings Corp.” or the “Company”), through NTELOS Inc., its wholly-owned subsidiary (“NTELOS Inc.”) and its subsidiaries, is a regional provider of digital wireless communications services to consumers and businesses primarily in Virginia, West Virginia and certain portions of surrounding states. The Company’s primary services are wireless voice and data digital personal communications services (“PCS”) provided through NTELOS-branded retail operations and on a wholesale basis to other PCS providers, most notably through an arrangement with Sprint Spectrum L.P. (“Sprint Spectrum”), and Sprint Spectrum on behalf of and as an agent for SprintCom, Inc. (“SprintCom”) (Sprint Spectrum and SprintCom collectively, “Sprint”), which arrangement is referred to herein as the “Strategic Network Alliance” or "SNA." See Note 14 for additional information regarding this arrangement. The Company does not have any independent operations.
On August 10, 2015, the Company entered into an Agreement and Plan of Merger (“Merger Agreement”) with Shenandoah Telecommunications Company, a Virginia corporation (“Shentel”), and Gridiron Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Shentel (“Merger Sub”), pursuant to which, at the effective time of the merger (“Effective Time”), Merger Sub will merge with and into the Company, with the Company surviving the merger as a wholly-owned subsidiary of Shentel (“Merger”).
Subject to the terms and conditions set forth in the Merger Agreement, at the Effective Time, each share of common stock, par value $0.01 per share, of the Company (“Common Stock”) issued and outstanding immediately prior to the Effective Time (excluding (i) any shares of Common Stock that are owned by the Company, Shentel or any of their respective subsidiaries and (ii) any shares of Common Stock that are owned by any Company stockholders who are entitled to exercise, and properly exercise, appraisal rights with respect to such shares of Common Stock pursuant to the General Corporation Law of the State of Delaware) will be canceled and converted automatically into the right to receive $9.25 in cash, without interest.
The Merger Agreement contains certain termination rights for Shentel and the Company, including termination by either party if the Merger is not consummated by June 28, 2016 (as mutually extended). The Merger Agreement further provides that, upon termination of the Merger Agreement under specified circumstances, including in connection with a change of recommendation of the Company board of directors (the “Board”) or the acceptance of a superior proposal by the Board, the Company will pay Shentel a termination fee equal to $8.8 million plus reimbursement of up to $2.5 million in fees, costs and expenses incurred by Shentel in connection with the Merger. The Merger Agreement also provides that, upon termination of the Merger Agreement under specified circumstances, Shentel will pay the Company a termination fee of $25 million or $8.8 million , depending on the specific circumstances, plus reimbursement of up to $2.5 million in fees, costs and expenses incurred by the Company in connection with the Merger.
The completion of the Merger is not subject to a financing condition. On December 18, 2015, Shentel entered into a credit agreement with various lenders and CoBank, ACB, as administrative agent (collectively, the “Lenders”), that provides Shentel with senior secured credit facilities, including a revolving credit facility and two term loan facilities. The availability of the credit facilities under the credit agreement is subject to various conditions, including the consummation of the Sprint Transactions and the consummation of the Merger in accordance with the terms and conditions set forth in the Merger Agreement. In addition, the commitments of the Lenders will terminate if the consummation of the Merger does not occur on or prior to June 28, 2016. Under certain conditions, if the Merger Agreement is terminated because of the failure of Shentel to obtain financing, Shentel will pay the Company the termination fee of $25 million plus reimbursement of up to $2.5 million in fees, costs and expenses referenced above.
The completion of the Merger is subject to the satisfaction or waiver of certain conditions, including (i) the approval of the transaction by the Federal Communications Commission (the “FCC”) and applicable state public utility commissions, (ii) the provision of all required notices to applicable state public utility commissions, (iii) the expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Act”), as amended, (iv) the absence of any proceeding, order or law enjoining or prohibiting the Merger or the other transactions contemplated by the Merger Agreement, (v) each party’s material performance of its obligations and compliance with its covenants, (vi) the accuracy of each party’s representations and warranties, subject to customary materiality qualifiers, (vii) the absence of a material adverse effect on the Company and (xiii) the consummation of the transactions contemplated by the Master Agreement, dated as of August 10, 2015, between SprintCom, Inc., an affiliate of Sprint Corporation, and Shenandoah Personal Communications, LLC, a wholly-owned subsidiary of Shentel (“Sprint Transactions”). All conditions were satisfied and the merger closed on May 6, 2016.

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On December 1, 2014, the Company entered into an agreement to sell its wireless spectrum licenses in its eastern Virginia and Outer Banks of North Carolina markets (“Eastern Markets”) valued at approximately $56.0 million . The transaction closed on April 15, 2015. The Company entered into lease agreements to continue using the Eastern Markets spectrum licenses for varying terms ranging from the closing date through November 15, 2015. Effective November 15, 2015, the Company ceased commercial operations and all subscribers had been migrated off our network. As a result of no longer providing service in the Eastern Markets, certain assets, liabilities and results of operations associated with this market are now being reported as discontinued operations. Accordingly, we have recast the prior period results to be comparable with the current discontinued operations presentation. See Note 3 for additional information regarding these charges.

Note 2. Basis of Presentation and Other Information
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of only normal recurring adjustments) considered necessary to present fairly the financial position have been included.
The results of operations for the periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. The accompanying condensed consolidated balance sheet as of December 31, 2015 has been derived from the audited financial statements included in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. These financial statements should be read in conjunction with the Company’s 2015 Form 10-K.
Reclassifications
Certain amounts in prior periods have been reclassified to conform to the current period presentation.
Cash
The Company’s cash was held in market rate savings accounts and non-interest bearing deposit accounts. The total held in market rate savings accounts at March 31, 2016 and December 31, 2015 was $19.7 million and $39.7 million , respectively. The remaining $54.6 million and $33.0 million of cash at March 31, 2016 and December 31, 2015 , respectively, was held in non-interest bearing deposit accounts.

Restricted Cash
The Company is eligible to receive up to $5.0 million in connection with its winning bid in the Connect America Fund's Mobility Fund Phase I Auction ("Auction 901"). Pursuant to the terms of Auction 901, the Company was required to obtain a Letter of Credit (“LOC”) for the benefit of the Universal Service Administrative Company (“USAC”) to cover each disbursement plus the amount of the performance default penalty ( 10% of the total eligible award). USAC may draw upon the LOC in the event the Company fails to demonstrate the required coverage by the applicable deadline in 2016. The Company obtained the LOC in the amount of $2.2 million , representing the first disbursement of $1.7 million received in September 2013, plus the performance default penalty of $0.5 million . In accordance with the terms of the LOC, the Company deposited $2.2 million into a separate account at the issuing bank to serve as cash collateral. Such funds will be released when the LOC is terminated without being drawn upon by USAC.

Allowance for Doubtful Accounts
The Company includes bad debt expense in customer operations expense in the unaudited condensed consolidated statements of operations. Bad debt expense for the three months ended March 31, 2016 and 2015 was $3.9 million and $2.8 million , respectively. The Company’s allowance for doubtful accounts was $7.3 million and $6.8 million at March 31, 2016 and December 31, 2015 , respectively. In addition to these amounts, the Company has recognized $2.7 million in bad debt expense for the three months ended March 31, 2015, and allowance for doubtful accounts of $0.7 million and $1.5 million recorded as part of discontinued operations at March 31, 2016 and December 31, 2015, respectively. At March 31, 2016 and December 31, 2015, the allowance for doubtful accounts included $2.5 million and $2.3 million, respectively, related to unbilled equipment receivables. See Note 5 for additional information related to EIP.


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Accrued Expenses and Other Current Liabilities

(In thousands)
March 31, 2016
 
December 31, 2015
Accrued payroll
$
2,797

 
$
5,010

Accrued taxes
4,006

 
4,321

Other
10,330

 
8,672

Total
$
17,133

 
$
18,003


Other Long-Term Liabilities

(In thousands)
March 31, 2016
 
December 31, 2015
Asset retirement obligation
$
21,140

 
$
20,785

Deferred gain on sale leaseback
15,956

 
16,511

Deferred SNA revenue
20,748

 
19,183

Other
5,130

 
5,381

Total
$
62,974

 
$
61,860


Pension Benefits and Retirement Benefits Other Than Pensions
The total expense recognized for the Company’s defined benefit and nonqualified pension plans was $0.1 million for both the three months ended March 31, 2016 and 2015 .
The total amount reclassified out of accumulated other comprehensive loss related to actuarial (gains)/losses from the defined benefit plans was $(0.1) million and $0.1 million for the three months ended March 31, 2016 and 2015 , respectively, all of which has been reclassified to cost of services, customer operations, and corporate operations on the unaudited condensed consolidated statements of operations for the respective periods.
Defined benefit pension plan assets were valued at $22.9 million at March 31, 2016 .
The Company also sponsors a contributory defined contribution plan under Internal Revenue Code (“IRC”) Section 401(k) for substantially all employees. The Company’s current policy is to make matching contributions in cash.

Equity-Based Compensation
The Company accounts for equity-based compensation plans under FASB Accounting Standards Codification (“ASC”) 718, Stock Compensation . Equity-based compensation expense from stock-based awards is recorded with an offsetting increase to additional paid in capital on the unaudited condensed consolidated balance sheet. The Company recognizes compensation cost on a straight-line basis over the requisite service period for the entire award and credits compensation for any forfeitures in the reporting period in which the forfeiture occurs.
Total equity-based compensation expense related to all of the Company’s stock-based equity awards for the three months ended March 31, 2016 and 2015 and the Company’s 401(k) matching contributions was allocated as follows:
 
 
Three Months Ended March 31,
(In thousands)
2016
 
2015
Cost of services
$
182

 
$
161

Customer operations
133

 
178

Corporate operations
471

 
520

Equity-based compensation expense
$
786

 
$
859

Future charges for equity-based compensation related to securities outstanding at March 31, 2016 for the remainder of 2016 and for the years 2017 through 2019 are estimated to be $1.9 million , $1.7 million , $1.0 million and $0.1 million , respectively.

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Recent Accounting Pronouncements

In May 2014, FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) . This ASU provides a framework that replaces the existing revenue recognition guidance and is intended to improve the financial reporting requirements. The guidance is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those years, with early adoption being prohibited. The Company is currently in the process of evaluating the impact of adoption of the ASU on its financial statements.
In April 2015, FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which changes the presentation of debt issuance costs in the financial statements. ASU 2015-03 requires an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. The guidance was effective for annual reporting periods beginning after December 15, 2015. The Company has adopted the guidance effective March 31, 2016 and it was applied retrospectively to each period presented. The Condensed Consolidated Balance Sheet for the year ended December 31, 2015 has been restated to reflect this change in accounting principle and a reclass of $7.3 million of "Debt Issuance Costs" from Deferred Charges and Other Assets to Long-Term Debt.
In February 2016, the FASB issued ASU No. 2016-02, Leases , which requires lessees to recognize assets and liabilities for most leases and would change certain aspects of current lease accounting, among other things. The guidance is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. The Company is currently in the process of evaluating the impact of adoption of the ASU on its financial statements.
In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, w hich simplifies the accounting for the taxes related to stock based compensation, including adjustments to how excess tax benefits and a company's payments for tax withholdings should be classified. The guidance is effective for fiscal years beginning after December 15, 2016. The Company is currently in the process of evaluating the impact of adoption of the ASU on its financial statements.

Note 3. Discontinued Operations
On December 1, 2014, the Company entered into an agreement to sell its wireless spectrum licenses in its eastern Virginia and Outer Banks of North Carolina markets (“Eastern Markets”) for approximately $56.0 million . The transaction closed on April 15, 2015. The Company entered into lease agreements to continue using the Eastern Markets spectrum licenses for varying terms ranging from the closing date through November 15, 2015. Effective November 16, 2015, we ceased commercial operations and all subscribers had been migrated off our network. As a result of no longer providing service in the Eastern Markets, certain assets, liabilities and results of operations associated with this market are now being reported as discontinued operations. Accordingly, we have recast the prior period results to be comparable with the current discontinued operations presentation.
In 2015, restructuring liabilities were established for employee separations, lease abandonments, operating lease terminations, and other related costs. During the three months ended March 31, 2016, the Company recorded $0.3 million in additional restructuring costs and made payments for restructuring costs of $1.2 million . At March 31, 2016, there was a restructuring accrual of $1.7 million , which is expected to be paid through 2019 absent settlements with vendors.


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Financial results for the three-month periods ended March 31, 2016 and 2015 reported as Income (loss) from discontinued operations, net of tax on the Condensed Consolidated Statements of Operations are as follows:

 
Three Months Ended March 31,
(In thousands)
2016
 
2015
Operating Revenues
 
 
 
Retail revenue
$
—

 
$
23,523

Wholesale and other revenue
100

 
686

Equipment sales
—

 
686

Operating Revenues
100

 
24,895

Operating Expenses
 
 
 
Cost of services
289

 
8,836

Cost of equipment sold
—

 
637

Customer operations
36

 
4,797

Corporate operations
(225
)
 
788

Restructuring
302

 
403

Depreciation and amortization
752

 
957

Gain on sale of assets
(418
)
 
(4,938
)
 
736

 
11,480

Operating Income (Loss)
(636
)
 
13,415

Other Income (Expense), net
(1
)
 
30

Income (loss) before Income Taxes
(637
)
 
13,445

Income Tax Expense (Benefit)
(247
)
 
5,196

Income (Loss) from Discontinued Operations
$
(390
)
 
$
8,249


Assets and liabilities presented as discontinued operations as of March 31, 2016 and December 31, 2015 are as follows:
(In thousands)
March 31, 2016
 
December 31, 2015
Current Assets
 
 
 
Accounts receivable, net
$
783

 
$
1,101

Prepaid expenses
154

 
1,002

Other current assets
—

 
18

Total current assets from discontinued operations
937

 
2,121

Assets held for sale
985

 
1,733

Total assets from discontinued operations
$
1,922

 
$
3,854

Current Liabilities
 
 
 
Current portion of long-term debt
$
46

 
$
55

Accounts payable
6

 
6,003

Advance billings and customer deposits
92

 
115

Accrued expenses and other current liabilities
5,040

 
6,881

Total current liabilities from discontinued operations
5,184

 
13,054

Long-Term Debt
36

 
46

Other Long-Term Liabilities
2,237

 
789

Total liabilities from discontinued operations
$
7,457

 
$
13,889



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Table of Contents                     

Following is selected operating and investing cash flow activity from discontinued operations included in Condensed Consolidated Statements of Cash Flows:
 
Three Months Ended March 31,
(In thousands)
2016
 
2015
Depreciation and amortization
$
752

 
$
957

Purchases of property, plant, and equipment
—

 
335



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Table of Contents                     

Note 4. Supplemental Cash Flow Information
The following information is presented as supplementary disclosures for the unaudited condensed consolidated statements of cash flows for the three months ended March 31, 2016 and 2015 :
 
 
Three Months Ended March 31,
(In thousands)
2016

2015
Cash payments for:



Interest (net of amounts capitalized)
$
7,271


$
7,494

Cash received from income tax refunds
22,339


3,883

Supplemental investing and financing activities:
 
 
 
Additions to property, plant and equipment included in accounts payable
2,858

 
7,979

Borrowings under capital leases
—

 
35


The amount of interest capitalized was $0.3 million and $0.1 million for the three months ended March 31, 2016 and 2015 , respectively.

Note 5. Equipment Installment Plan Receivables
EIP subscribers pay for their devices in installments over a 24-month period. At the time of an installment sale, the Company imputes interest on the installment receivable using current market interest rate estimates along with other inputs such as historical and expected credit losses and credit quality of its EIP base. The imputed interest is recorded as a reduction to equipment revenue and as a reduction to the face amount of the related receivable. Interest income is recognized over the term of the installment contract and presented net of interest expense. The Company's imputed interest rate has ranged from approximately 5% to 10% . Additionally, the customer has the right to trade in their original device after a specified period of time for a new device and have the remaining unpaid balance satisfied. This trade-in right is measured at the estimated fair value of the device being traded in based on current trade-in values and the timing of the trade-in. The trade-in right is recorded as a reduction to the equipment revenue at the time of sale with a corresponding increase in liabilities. As of March 31, 2016 and December 31, 2015, the liability associated with this trade-in right was $5.2 million and $4.7 million , respectively, and is reflected in Advanced billings and customer deposits and Other Long-Term Liabilities on the unaudited condensed consolidated balance sheets.
There was $5.2 million and $4.4 million of billed EIP receivables included in the Company's subscriber accounts receivable as of March 31, 2016 and December 31, 2015, respectively. The following table summarizes the remaining unbilled EIP receivables at March 31, 2016 and December 31, 2015:
 
(In thousands)
March 31, 2016
 
December 31, 2015
EIP receivables, gross
$
39,898

 
$
37,898

Deferred interest
(3,266
)
 
(2,764
)
EIP receivables, net of deferred interest
36,632

 
35,134

Allowance for credit losses
(2,485
)
 
(2,324
)
EIP receivables, net
$
34,147

 
$
32,810

Classified on the unaudited Condensed Consolidated Balance Sheets as:


 


Accounts receivable, net
$
23,549

 
$
22,291

Deferred charges and other assets
10,598

 
10,519

EIP receivables, net

$
34,147

 
$
32,810




13
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Note 6. Property, Plant and Equipment
The components of property, plant and equipment, and the related accumulated depreciation, were as follows:
 
(In thousands)
Estimated Useful
Life
 
March 31, 2016
 
December 31, 2015
Land and buildings *
39 to 50 years
 
$
27,420

 
$
27,406

Network plant and equipment
5 to 17 years
 
465,094

 
451,996

Furniture, fixtures and other equipment
2 to 18 years
 
96,229

 
95,095

 
 
 
588,743

 
574,497

Under construction
 
 
29,181

 
27,577

 
 
 
617,924

 
602,074

Less: accumulated depreciation
 
 
289,949

 
275,814

Property, plant and equipment, net
 
 
$
327,975

 
$
326,260

* Leasehold improvements, which are categorized in land and buildings, are depreciated over the shorter of the estimated useful lives or the remaining lease terms.
Depreciation expense from continuing operations for the three months ended March 31, 2016 and 2015 was $13.3 million and $12.7 million , respectively.

Note 7. Intangible Assets
Indefinite-Lived Intangible Assets
Goodwill and radio spectrum licenses are considered indefinite-lived intangible assets. Indefinite-lived intangible assets are not subject to amortization but instead are tested for impairment annually, on October 1, or more frequently if an event indicates that the asset might be impaired. The Company believes that no impairment indicators existed as of March 31, 2016 that would require it to perform impairment testing.
Intangible Assets Subject to Amortization
Customer relationships and trademarks are considered amortizable intangible assets. At March 31, 2016 and December 31, 2015 , customer relationships and trademarks were comprised of the following:
 
 
 

March 31, 2016

December 31, 2015
(In thousands)
Estimated
Useful Life

Gross Amount

Accumulated
Amortization

Net

Gross Amount

Accumulated
Amortization

Net
Customer relationships
17.5 years

$
36,900


$
(34,711
)

$
2,189


$
36,900


$
(34,630
)

$
2,270

Trademarks
15 years

7,000


(5,094
)

1,906


7,000


(4,978
)

2,022

Total


$
43,900


$
(39,805
)

$
4,095


$
43,900


$
(39,608
)

$
4,292

The Company amortizes its amortizable intangible assets using the straight-line method. Amortization expense was $0.2 million for both the three months ended March 31, 2016 and 2015 .
Future Amortization expense is expected to be as follows:
(In thousands)
Customer
Relationships
 
Trademarks
 
Total
Remainder of 2016
$
243

 
$
351

 
$
594

2017
324

 
467

 
791

2018
324

 
467

 
791

2019
324

 
467

 
791

2020
324

 
154

 
478

2021
324

 
—

 
324

Thereafter
326

 
—

 
326

 
$
2,189

 
$
1,906

 
$
4,095


14
Table of Contents                     



Note 8. Long-Term Debt
At March 31, 2016 and December 31, 2015 , the Company’s outstanding long-term debt consisted of the following:
 
(In thousands)
March 31, 2016
 
December 31, 2015
Senior secured term loans, net of unamortized debt discount and issuance costs
$
511,785

 
$
512,518

Capital lease obligations
361

 
419

 
512,146

 
512,937

Less: current portion of long-term debt
5,586

 
5,605

Long-term debt
$
506,560

 
$
507,332

Long-Term Debt, Excluding Capital Lease Obligations
On November 9, 2012, NTELOS Inc. entered into an Amended and Restated Credit Agreement (the “Amended and Restated Credit Agreement”), which amended and restated, in its entirety, that certain Credit Agreement dated August 7, 2009 (the “Original Credit Agreement”). The Amended and Restated Credit Agreement provided for (1) a term loan A in the aggregate amount of $150.0 million (the “Term Loan A”); and (2) a term loan B in the aggregate amount of $350.0 million (the “Term Loan B” and, together with the Term Loan A, the “Term Loans”).
On January 31, 2014, the Company completed the refinancing of Term Loan A, which converted the outstanding principal balance of $148.1 million of Term Loan A into Term Loan B, and borrowed an additional $40.0 million under Term Loan B. The additional Term Loan B borrowings bear the same interest rate, maturity and other terms as the Company’s existing Term Loan B borrowings.
The aggregate maturities of long-term debt outstanding at March 31, 2016 , excluding capital lease obligations, based on the contractual terms of the instruments were as follows:
 
(In thousands)
Term Loan
Remainder of 2016
$
4,054

2017
5,405

2018
5,405

2019
506,725

Total
$
521,589

The Company’s blended average effective interest rate on its long-term debt was approximately 6.3% for the three months ended March 31, 2016 and 2015 .
The Amended and Restated Credit Agreement has a Restricted Payments basket, which can be used to make Restricted Payments (as defined in the Amended and Restated Credit Agreement), including the ability to pay dividends, repurchase stock or advance funds to the Company. NTELOS Inc. may not make Restricted Payments if its Leverage Ratio (calculated on a pro forma basis) is greater than 4.25 :1.00. This Restricted Payments basket increases by $6.5 million per quarter and decreases by any actual Restricted Payments and by certain investments and any mandatory prepayments on the Term Loans, to the extent the lenders decline to receive such prepayment. In addition, on a quarterly basis the Restricted Payments basket increases by the positive amount, if any, of the Excess Cash Flow (as defined in the Amended and Restated Credit Agreement). For the three months ended March 31, 2016 there was no Excess Cash Flow. The balance of the Restricted Payments basket as of March 31, 2016 was $92.6 million and the Leverage Ratio for the Company was 9.33 :1.00.

15
Table of Contents                     

Capital Lease Obligations
In addition to the long-term debt discussed above, the Company has entered into capital leases on vehicles with original lease terms of four to five years. At March 31, 2016 , the carrying value and accumulated depreciation of these assets were $1.9 million and $1.4 million , respectively. The total net present value of the Company’s future minimum lease payments is $0.4 million . At March 31, 2016 , the principal portion of these capital lease obligations was payable as follows: $0.1 million for the remainder of 2016 , $0.1 million in 2017 , and less than $0.1 million in 2018 and 2019 .

Note 9. Restructuring Charges
In 2014, the Company initiated a plan to reduce operating expenses. In conjunction, the Company established restructuring liabilities for employee separations, operating lease terminations, and other related costs, which are recorded in accrued expenses and other current liabilities in the unaudited consolidated balance sheets. A summary of the restructuring liabilities is presented below:


(In thousands)
Employee Separation

Contract Terminations

Other

Total
Cumulative charges incurred as of March 31, 2016
$
3,126
 
 
$
346
 
 
$
79
 
 
$
3,551
 
 
 
 
 
 
 
 
 
Balance as of December 31, 2015
$
360
 
 
$
251
 
 
$
—
 
 
$
611
 
Charges
63
 
 
19
 
 
—
 
 
82
 
Utilization
(307
)
 
(218
)
 
—
 
 
(525
)
Balance as of March 31, 2016
$
116
 
 
$
52
 
 
$
—
 
 
$
168
 

Employee separation costs for certain corporate employees consist of severance to be paid in accordance with the Company’s written severance plan and certain management contracts. Severance payments are expected to be paid through 2016. Contract termination costs include lease abandonment costs and other termination costs for contractual obligations. Lease abandonment costs represent future minimum lease obligations, net of estimated sublease income. Other costs include legal and advisory fees paid during 2015. The Company does not anticipate any additional significant costs to be incurred as part of this restructuring plan.

Note 10. Financial Instruments
The Company is exposed to market risks with respect to certain of the financial instruments that it holds. Cash, accounts receivable, accounts payable and accrued liabilities are reflected in the unaudited condensed consolidated financial statements at cost, which approximates fair value because of the short-term nature of these instruments. At March 31, 2016 and December 31, 2015, the Company had an investment in CoBank, ACB (“CoBank”) of $1.5 million . This investment is primarily related to a required investment under the Original Credit Agreement and declared and unpaid patronage distributions of restricted equity related to the portion of the term loans previously held by CoBank. This investment is carried under the cost method as it is not practicable to estimate fair value. This investment is subject to redemption in accordance with CoBank’s capital recovery plans. The fair values of other financial instruments are determined using observable market prices or using a valuation model, which is based on a conventional discounted cash flow methodology and utilizes assumptions of current market conditions.


16
Table of Contents                     

The following table indicates the difference between face amount, carrying amount and fair value of the Company’s financial instruments at March 31, 2016 and December 31, 2015 .
 
 
Face
 
 
 
Carrying
 
Fair
(In thousands)
Amount
 
 
 
Amount
 
Value
March 31, 2016
 
 
 
 
 
 
 
Nonderivatives:
 
 
 
 
 
 
 
Financial assets:
 
 
 
 
 
 
 
Long-term investments for which it is not practicable to estimate fair value
N/A

 
  
 
$
1,522

 
N/A

Financial liabilities:
 
 
 
 
 
 
 
Term loans
$
521,589

 
  
 
$
511,785

 
$
517,677

Capital lease obligations
$
361

 
  
 
$
361

 
$
361

December 31, 2015
 
 
 
 
 
 
 
Nonderivatives:
 
 
 
 
 
 
 
Financial assets:
 
 
 
 
 
 
 
Long-term investments for which it is not practicable to estimate fair value

N/A

 
  
 
$
1,522

 
N/A

Financial liabilities:
 
 
 
 
 
 
 
Term loans
$
522,940

 
  
 
$
512,518

 
$
517,710

Capital lease obligations
$
419

 
  
 
$
419

 
$
419


The fair value of the Term Loans under the Amended and Restated Credit Agreement were derived based on bid prices at March 31, 2016 and December 31, 2015 , respectively. These instruments are classified within Level 2 of the fair value hierarchy described in FASB ASC 820, Fair Value Measurements and Disclosures .
 

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Table of Contents                     

Note 11. Equity and Earnings Per Share
The computations of basic and diluted earnings per share for the three months ended March 31, 2016 and 2015 were as follows:
 
Three Months Ended March 31, 2016
(In thousands)
Continuing Operations
 
Discontinued Operations
 
Total
Numerator:
 
 
 
 
 
Net loss
$
(911
)
 
$
(390
)
 
$
(1,301
)
Net loss applicable to participating securities
—

 
—

 
—

Net loss applicable to common shares
$
(911
)
 
$
(390
)
 
$
(1,301
)
Denominator:
 
 
 
 
 
Total shares outstanding
22,262

 
22,262

 
22,262

Less: unvested shares
(946
)
 
(946
)
 
(946
)
Less: effect of calculating weighted average shares
(5
)
 
(5
)
 
(5
)
Denominator for basic earnings per common share – weighted average shares outstanding
21,311

 
21,311

 
21,311

Plus: weighted average unvested shares
—

 
—

 
—

Plus: common stock equivalents of stock options
—

 
—

 
—

Plus: performance stock units
—

 
—

 
—

Denominator for diluted earnings per common share – weighted average shares outstanding
21,311

 
21,311

 
21,311

Basic earnings (loss) per common share
$
(0.04
)
 
$
(0.02
)
 
$
(0.06
)
Diluted earnings (loss) per common share
$
(0.04
)
 
$
(0.02
)
 
$
(0.06
)

 
Three Months Ended March 31, 2015
(In thousands)
Continuing Operations
 
Discontinued Operations
 
Total
Numerator:
 
 
 
 
 
Net income
$
6,547

 
$
8,249

 
$
14,796

Net income applicable to participating securities
459

 
—

 
459

Net income applicable to common shares
$
6,088

 
$
8,249

 
$
14,337

Denominator:
 
 
 
 
 
Total shares outstanding
22,196

 
22,196

 
22,196

Less: unvested shares
(965
)
 
(965
)
 
(965
)
Less: effect of calculating weighted average shares
(38
)
 
(38
)
 
(38
)
Denominator for basic earnings per common share – weighted average shares outstanding
21,193

 
21,193

 
21,193

Plus: weighted average unvested shares
781

 
781

 
781

Plus: common stock equivalents of stock options
187

 
187

 
187

Plus: performance stock units
—

 
—

 
—

Denominator for diluted earnings per common share – weighted average shares outstanding
22,161

 
22,161

 
22,161

Basic earnings (loss) per common share
$
0.29

 
$
0.39

 
$
0.68

Diluted earnings (loss) per common share
$
0.28

 
$
0.37

 
$
0.65



18
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In accordance with FASB ASC 260, Earnings Per Share , unvested share-based payment awards that contain rights to receive non-forfeitable dividends or dividend equivalents, whether paid or unpaid, are considered a “participating security” for purposes of computing earnings or loss per common share pursuant to the two-class method. T he Company's unvested restricted stock awards have rights to receive non-forfeitable dividends.

For the three months ended March 31, 2016 and 2015 , the denominator for diluted earnings per common share excludes approximately 1.3 million and 1.6 million shares, respectively, which were related to stock options that were antidilutive for the respective periods presented. In addition, the performance-based portion of the performance stock units ("PSUs") is excluded from diluted earnings per share until the performance criteria are satisfied.
 
Note 12. Stock Plans
The Company has employee equity incentive plans (referred to as the “Employee Equity Incentive Plans”) administered by the Compensation Committee of the Company’s board of directors (the “Committee”), which permits the grant of long-term incentives to employees, including stock options, stock appreciation rights, restricted stock awards, restricted stock units, incentive awards, other stock-based awards and dividend equivalents. The Company also has a non-employee director equity plan (the “Non-Employee Director Equity Plan”). The Non-Employee Director Equity Plan together with the Employee Equity Incentive Plans are referred to as the “Equity Incentive Plans.” Awards under these plans are issuable to employees or non-employee directors as applicable.
During the three months ended March 31, 2016 , the Committee approved phantom stock award grants under the Equity Incentive Plans, which vest ratably over a three-year period for employees or a one-year period for non-employee directors through the closing of the Merger, or, in the event of a termination of the proposed Merger, in three years or one year from the grant date, subject to certain accelerated vesting provisions, payable, at the Company's option, in either shares of the Company's common stock or cash equal to the then market value of such shares. During the three months ended March 31, 2016, the Company issued 294,601 phantom stock award grants. At March 31, 2016, there was $2.5 million of total unrecognized compensation cost related to these award grants which is expected to be recognized over a weighted average period of 2.6 years , however, the compensation expense could fluctuate with the change in market value of common stock. These qualify as liability awards under FASB ASC 718, Stock Compensation, and the fair value of the phantom stock award grants is equal to the market value of common stock at March 31, 2016.
The summary of the activity and status of the Company’s stock option awards for the three months ended March 31, 2016 is as follows:
 
(In thousands, except per share amounts)
Options
 
Weighted
Average
Exercise
Price per
Share
 
Weighted
Average
Remaining
Contractual
Term
 
Aggregate
Intrinsic
Value
Stock options outstanding at January 1, 2016
1,547

 
$
16.50

 
 
 
 
Granted during the period
—

 
—

 
 
 
 
Exercised during the period
—

 
—

 
 
 
 
Forfeited during the period
(25
)
 
17.79

 
 
 
 
Stock options outstanding at March 31, 2016
1,522

 
$
16.48

 
6.3 years
 
$
—

Exercisable at March 31, 2016
1,153

 
$
18.77

 
5.7 years
 
$
—

Total expected to vest after March 31, 2016
332

 
$
10.35

 
 
 
 
No options were granted or exercised during the three months ended March 31, 2016 . The fair value of each common stock option award granted is estimated on the respective grant date using a generally accepted valuation model with assumptions related to risk-free interest rate, expected volatility, expected dividend yield and expected terms. The total intrinsic value of options exercised during the three months ended March 31, 2015 was less than $0.1 million . The total fair value of options that vested during the three months ended March 31, 2016 and 2015 was $0.4 million and $0.5 million , respectively. As of March 31, 2016 , there was $0.4 million of total unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted average period of 2.6 years .

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Table of Contents                     

The summary of the activity and status of the Company’s restricted stock awards for the three months ended March 31, 2016 is as follows:
(In thousands, except per share amounts)
Shares
 
Weighted Average  Grant
Date Fair Value per
Share
Restricted stock awards outstanding at January 1, 2016
591

 
$
7.30

Granted during the period
—

 
—

Vested during the period
(164
)
 
7.97

Forfeited during the period
(2
)
 
8.26

Restricted stock awards outstanding at March 31, 2016
425

 
$
7.03


At March 31, 2016 , there was $1.6 million of total unrecognized compensation cost related to unvested restricted stock awards, which is expected to be recognized over a weighted average period of 1.8 years. The fair value of the restricted stock award is equal to the market value of common stock on the date of grant.
The summary of the activity and status of the Company’s performance stock unit awards for the three months ended March 31, 2016 is as follows:
(In thousands, except per share amounts)
Units
 
Weighted Average  Grant
Date Fair Value per
PSU
Performance stock units outstanding at January 1, 2016
70

 
$
8.62

Granted during the period
—

 
—

Vested during the period
—

 
—

Forfeited during the period
(8
)
 
8.62

Performance stock units outstanding at March 31, 2016
62

 
$
8.62

At March 31, 2016 , there was $0.2 million of total unrecognized compensation cost related to unvested PSUs, which is expected to be recognized over a weighted average period of 1.3 years . The fair value of the PSU is estimated at the grant date using a Monte Carlo simulation model.
In addition to the Equity Incentive Plans discussed above, the Company has an employee stock purchase plan, which commenced in July 2006 with 100,000 shares available. Shares are priced at 85% of the closing price on the last trading day of the month before settlement and settlement is done semi-annually. During the three months ended March 31, 2015 , 3,785 shares were issued under the employee stock purchase plan. Compensation expense associated with the employee stock purchase plan for the three months ended March 31, 2015 was immaterial.
 
Note 13. Income Taxes
Income tax expense (benefit) for the three months ended March 31, 2016 was $(0.2) million , representing the statutory tax rate applied to pre-tax income and the effects of certain non-deductible acquisition related expenses, compensation, and non-controlling interest. The Company expects its recurring non-deductible expenses to relate primarily to certain non-cash equity-based compensation and other non-deductible compensation. The Company has provided for income taxes using a year to date calculation as it is unable to reliably estimate the annual effective income tax rate.
 
Note 14. Strategic Network Alliance
The Company provides PCS services and has contracted to provide LTE Services on a wholesale basis to other wireless communication providers, most notably through the Strategic Network Alliance ("SNA") with Sprint in which the Company is the exclusive PCS/LTE service provider in the Company’s western Virginia and West Virginia service area (“SNA service area”) for all Sprint Code Division Multiple Access (“CDMA”) and LTE wireless customers. In May 2014, the parties entered into an amended agreement to extend the SNA. Pursuant to the terms of the SNA, the Company is required to upgrade its network in the SNA service area to provide LTE Services. As part of the amendment, the Company leases spectrum, on a non-cash basis, from Sprint in order to enhance the PCS/LTE services. The non-cash consideration attributable to the leased spectrum is approximately $4.9 million per year. The lease expense is recognized over the term of the lease and recorded

20
Table of Contents                     

within cost of sales and services, with the offsetting consideration recorded within wholesale and other revenue. Additionally, the amended SNA provides the Company access to Sprint’s nationwide 3G and 4G LTE network at rates that are reciprocal to rates paid by Sprint under the amended SNA. The amended SNA provides that a portion of the amount paid by Sprint thereunder is fixed. The fixed fee element of the amended SNA is subject to contractual reductions on August 1, 2015 and annually thereafter starting on January 1, 2016 that will result in a decrease of payments for the fixed fee element. The Company accounts for this fixed fee portion of the revenue earned from the SNA revenue on a straight-line basis over the term of the agreement. In addition, these reductions are subject to further upward or downward resets in the fixed fee element. These resets, if any, will be recognized in the period in which it occurs.
The Company generated 37.4% and 36.5% of its revenue from the SNA for the three months ended March 31, 2016 and 2015 , respectively.

Note 15. Commitments and Contingencies
On occasion, the Company makes claims or receives disputes related to its billings to other carriers, including billings under the SNA agreement, for access to the Company’s network. These disputes may involve amounts which, if resolved unfavorably to the Company, could have a material effect on the Company’s financial statements. The Company does not recognize revenue related to such matters until the period that it is reasonably assured of the collection of these claims. In the event that a claim is made related to revenues previously recognized, the Company assesses the validity of the claim and adjusts the amount of revenue recognized to the extent that the claim adjustment is considered probable and reasonably estimable.

The Company is involved in disputes, claims, either asserted or unasserted, and legal and tax proceedings and filings arising from normal business activities. While the outcome of such matters is currently not determinable, management believes that adequate provision for any probable and reasonably estimable losses has been made in the Company’s unaudited condensed consolidated financial statements.

In addition, on August 24, 2015, Mr. Marvin Westen and Mr. Paul Sekerak, each filed a purported class action complaint relating to the Merger in the Court of Chancery of the State of Delaware. These complaints were dismissed.

Note 16. Subsequent Event
Pursuant to the Merger Agreement, dated as of August 10, 2015, with Shentel, Merger Sub and the Company, Merger Sub merged with and into the Company, with the Company surviving the merger as a wholly-owned subsidiary of Shentel. The Merger became effective on May 6, 2016. See Note 1 for additional information related to the Merger.
In connection with the consummation of the Merger, on May 6, 2016, the Company terminated the Amended and Restated Credit Agreement and repaid all of the outstanding obligations in respect of principal, interest and fees under the Amended and Restated Credit Agreement. See Note 8 for additional information related to the Amended and Restated Credit Agreement.
Upon completion of the Merger, the Company notified the Nasdaq Global Select Market (“NASDAQ”) that each issued and outstanding share of Company Common Stock (excluding (i) any shares of Company Common Stock owned by the Company, Parent or any of their respective subsidiaries and (ii) any shares of Company Common Stock owned by any Company stockholders who were entitled to exercise, and properly exercised, appraisal rights with respect to such shares of Company Common Stock pursuant to the General Corporation Law of the State of Delaware) automatically converted into the right to receive $9.25 in cash and requested that trading in Company Common Stock be suspended following the close of trading on May 6, 2016. Also on May 6, 2016, the Company requested that NASDAQ file with the SEC a notification on Form 25 to effect the delisting of Company Common Stock on NASDAQ and the deregistration of Company Common Stock under Section 12(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company intends to file with the SEC a certification on Form 15 under the Exchange Act requesting the suspension of the Company’s reporting obligations under Sections 13 and 15(d) of the Exchange Act.





Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Cautionary Note Regarding Forward-Looking Statements

This document may contain statements, estimates or projections that constitute “forward-looking statements” as defined under U.S. federal securities laws. Generally, the words “believe,” “expect,” “intend,” “plan,” “estimate,” “anticipate,” “project,” “will,” “may” “should,” and similar expressions identify forward-looking statements, which generally are not historical in nature.
Forward-looking statements are based on current beliefs and assumptions that are subject to risks and uncertainties. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update any of them publicly in light of new information or future events. The forward-looking statements are or may be based on a series of projections and estimates and involve risks and uncertainties. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the statements. These risks and uncertainties include, but are not limited to, those described in Part II, "Item 1A, Risk Factors" and elsewhere in this quarterly report and in our Annual Report on Form 10-K for the year ended December 31, 2015 and those described from time to time in our future reports filed with the Securities and Exchange Commission ("SEC").


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Additionally, there are risks and uncertainties associated with the proposed acquisition by Shentel such as: (1) conditions to the closing of the Merger, including, without limitation, the consummation of certain transactions between Shentel and Sprint, may not be satisfied and required regulatory approvals may not be obtained; (2) the Merger may involve unexpected costs, liabilities or delays; (3) the risks related to disruption of management’s attention from the Company’s ongoing business operations due to the Merger, (4) the effect of pendency of the Merger on the ability of the Company to retain and hire key personnel and maintain relationships with its customers, suppliers and others with whom it does business, or on its operating results and business generally, (5) the outcome of any legal proceedings related to the Merger; (6) the Company may be adversely affected by other economic, business, and/or competitive factors; (7) the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement; (8) changes in the legal or regulatory environment; and (9) other risks to consummation of the Merger, including the risk that the Merger will not be consummated within the expected time period or at all. If the Merger is consummated, the Company stockholders will cease to have any equity interest in the Company and will have no right to participate in its earnings and future growth.

OVERVIEW
General
We are a regional provider of digital wireless communications services to consumers and businesses primarily in Virginia, West Virginia, and certain portions of surrounding states. We offer wireless voice and digital data PCS products and services to retail and business customers under the “NTELOS Wireless” and “FRAWG Wireless” brand names. We conduct our business through NTELOS-branded retail operations, which sell our products and services via direct and indirect distribution channels, and provide network access to other telecommunications carriers, most notably through an arrangement with Sprint Spectrum L.P. (“Sprint Spectrum”), and Sprint Spectrum on behalf of and as an agent for SprintCom, Inc. (“SprintCom”) (Sprint Spectrum and SprintCom collectively, “Sprint”), which arrangement is referred to herein as the “Strategic Network Alliance” or the “SNA”.
Agreement and Plan of Merger with Shenandoah Telecommunications Company ("Shentel")
On August 10, 2015, we announced that we entered into a definitive agreement to be acquired by Shentel in an all-cash transaction valued at approximately $640 million, including net debt. Our stockholders will receive approximately $208 million in cash, or $9.25 per share and Shentel will assume our debt at closing.
Concurrent with the signing of the merger agreement, Shentel entered into a series of agreements with Sprint, including the expansion of Shentel’s “affiliate” relationship with Sprint. This will result in the “nTelos” brand eventually being discontinued after closing and NTELOS’s approximately 293,800 wireless retail customers eventually becoming Sprint-branded customers. Additionally, NTELOS’s retail stores will convert into Sprint-branded stores.
The Company has received all necessary approvals, including approval from the FCC. The Merger closed on May 6, 2016.

For additional information, see Notes 1 and 16 of the Notes to the Unaudited Condensed Consolidated Financial Statements.
Sale of Virginia East Spectrum and Wind Down of Eastern Markets
On December 1, 2014, the Company entered into an agreement to sell its wireless spectrum licenses in its eastern Virginia and Outer Banks of North Carolina markets (“Eastern Markets”) for approximately $56.0 million. The transaction closed on April 15, 2015. The Company entered into lease agreements to continue using the Eastern Markets spectrum licenses for varying terms ranging from the closing date through November 15, 2015. Effective November 15, 2015, we ceased commercial operations. As a result of no longer providing service in the Eastern Markets, certain assets, liabilities and results of operations associated with this market are now being reported as discontinued operations.
For additional information, see Note 3 of the Notes to the Unaudited Condensed Consolidated Financial Statements.
Towers Sale
As part of a definitive agreement announced in January 2015 to sell up to 103 towers, we closed on 96 towers for approximately $41.0 million in 2015. We closed on one tower in early 2016 with an additional tower expected to close this year. The agreement provides that we enter into long-term lease agreements on the towers in our operating footprint.
Our Business
We operate a 100% CDMA digital PCS network and are actively deploying fourth generation mobile communications standards / Long Term Evolution wireless technology (“4G LTE”) across our footprint in Virginia, West Virginia, and certain

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portions of surrounding states with covered POPs of approximately 3.1 million. We believe our strategic focus in the markets we serve, our commitment to personalized local service, contiguous service area and leveraged use of our network via our wholesale contracts provide us with a differentiated competitive position relative to our primary wireless competitors, most of whom are national providers.
At March 31, 2016 , our wireless retail business had approximately 293,800 subscribers, representing a penetration of approximately 9.4% of our total covered population. Our postpay subscriber base of 227,800 has increased by 5.7% from March 31, 2015 to March 31, 2016 and our prepay subscriber base of 66,000 has increased by 7.0% during the same time period. The retail market for wireless broadband mobile services continues to be highly competitive. Our competitors are generally nationwide in scope and have significantly greater resources than us and can be extremely aggressive in product and service pricing as well as promotional initiatives to existing and potential customers.
Equipment Installment Plan (“EIP”) allow subscribers to pay for their devices over 24 months and features service plan discounts and no service contracts. This offering allows the customer to purchase a device with zero down, provides discounts on service plans and provides the ability to upgrade more frequently, with a new agreement, than traditional plans. We have seen significant adoption rates by new and existing customers under the EIP program.
We continue the deployment of our 4G LTE network. At March 31, 2016 , we had approximately 2.3 million LTE Covered POPs, or 74%, of our total 3.1 million covered POPs in our Western Markets.
Strategic Network Alliance
We provide PCS services and have contracted to provide LTE Services on a wholesale basis to other wireless communication providers, most notably through the Strategic Network Alliance ("SNA") with Sprint in which the Company is the exclusive PCS/LTE service provider in the Company’s western Virginia and West Virginia service area (“SNA service area”) for all Sprint Code Division Multiple Access (“CDMA”) and LTE wireless customers. In May 2014 the parties entered into an amended agreement to extend the SNA. Pursuant to the terms of the SNA, the Company is required to upgrade its network in the SNA service area to provide LTE Services. As part of the amendment, the Company leases spectrum, on a non-cash basis, from Sprint in order to enhance the PCS/LTE services. The non-cash consideration attributable to the leased spectrum is approximately $4.9 million per year. The lease expense is recognized over the term of the lease and recorded within cost of services, with the offsetting consideration recorded within wholesale and other revenue. Additionally, the amended SNA provides the Company access to Sprint’s nationwide 3G and 4G LTE network at rates that are reciprocal to rates paid by Sprint under the amended SNA. The amended SNA provides that a portion of the amount paid by Sprint thereunder is fixed. The billable fixed fee element of the agreement was reduced pursuant to the amended SNA on August 1, 2015 and again on January 1, 2016. Additional annual reductions will occur on January 1 of each year. The Company accounts for this fixed fee portion of the revenue earned from the SNA revenue on a straight-line basis over the term of the agreement. In addition, these reductions are subject to further upward or downward resets in the fixed fee element.
For the three months ended March 31, 2016 and 2015 , we realized wholesale revenues of $32.2 million and $35.2 million , respectively, of which $31.9 million and $34.8 million , respectively, related to the SNA.


RESULTS OF OPERATIONS – OVERVIEW

Three-Month Results
Operating revenues decreased $10.1 million, or 10.6%, to $85.2 million for the three months ended March 31, 2016 compared to $95.3 million for the three month period ended March 31, 2015. Operating income decreased $13.5 million, or 68.2%, to $6.3 million for the three month period ended March 31, 2016 compared to $19.8 million for the three month period ended March 31, 2015. Other expense decreased $0.8 million, or 10.0%, to $7.2 million for the three months ended March 31, 2016 compared to $8.0 million for the three months ended March 31, 2015. Income from continuing operations before income taxes decreased $12.8 million to a loss of $0.9 million for the three months ended March 31, 2016 compared to income of $11.9 million for the three months ended March 31, 2015.
For further detail regarding our operating results, see the Other Overview Discussion and discussions of Results of Operations – Comparison of Three months ended March 31, 2016 and 2015 below.

Other Overview Discussion
To supplement our financial statements presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”), we reference the non-GAAP measure Average Billings per User ("ABPU") to measure our

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postpay wireless performance. We use this measure, along with other performance metrics such as subscribers and churn, to gauge operating performance for which our operating managers are responsible and upon which we evaluate their performance.

We believe ABPU provides management useful information concerning the appeal of our rate plans and service offerings and our performance in attracting and retaining high-value customers. ABPU as calculated below may not be similar to ABPU measures of other wireless companies, is not a measurement under GAAP and should be considered in addition to, but not as a substitute for, the information contained in our unaudited condensed consolidated statements of income.
The tables below provide a reconciliation of retail revenues to postpay subscriber revenues used to calculate Total ABPU for the three months ended March 31, 2016 and 2015 :

Total ABPU
Three Months Ended March 31,
(Dollars in thousands, except ABPU)
2016
 
2015
Retail revenue
$
39,647

 
$
43,011

Add: EIP billings
6,377

 
1,996

Less: prepay service revenues and other
(5,861
)
 
(6,250
)
Total postpay billings
$
40,163

 
$
38,757



 

Average number of postpay subscribers
229,800

 
222,600

Postpay ABPU
$
58.26

 
$
58.04



Operating Revenues
Our revenues are generated from the following sources:
•
Retail – subscriber revenues from network access, data services, and feature services;
•
Wholesale and other – primarily wholesale revenue from the SNA and roaming revenue from other telecommunications carriers. Other revenues relate to rent from leasing excess tower and building space; and
•
Equipment sales – sales from devices and accessories to new and existing customers.
Operating Expenses
Our operating expenses are categorized as follows:
•
Cost of services – includes usage-based access charges, including long distance, roaming charges, and other direct costs incurred in accessing other telecommunications providers’ networks in order to provide telecommunication services to our end-user customers; leased facility expenses for connection to other carriers, leased spectrum, cell sites and switch locations; and engineering and repairs and maintenance expenses related to property, plant and equipment;
•
Cost of equipment sold – includes device and accessory costs to new and existing customers,
•
Customer operations – includes marketing, product management, product advertising, selling, billing, customer care, customer retention and bad debt expenses;
•
Corporate operations – includes taxes other than income, executive, accounting, legal, purchasing, information technology, human resources and other general and administrative expenses, including bonuses and equity-based compensation expense related to stock and option instruments held by certain members of corporate management, and accretion of asset retirement obligations;
•
Restructuring – includes employee separations, contract terminations, and other costs related to the reduction of corporate and other operating expenses;
•
Depreciation and amortization – includes depreciation of long-lived property, plant and equipment and amortization of intangible assets where applicable; and
•
Gain on sale of assets - includes the gain from the sale of towers.

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Other Expense
Other expense includes interest expense on debt instruments, corporate financing costs and debt discounts associated with the repricing and refinancing of our debt instruments and, as appropriate, related charges or amortization of such costs and discounts, changes in the fair value of our interest rate cap and other items such as interest income, interest income from EIP receivables, and fees.
Income Taxes
Income tax expense and effective tax rate increase or decrease based upon changes in a number of factors, including our pre-tax income or loss, non-controlling interest, and non-deductible expenses.
Noncontrolling Interests in Earnings of Subsidiaries
We own 97% of Virginia PCS Alliance, L.C. (the “VA Alliance”), which provides PCS services to an estimated two million populated area in central and western Virginia. In accordance with the noncontrolling interest requirements in FASB ASC 810, Consolidations , we attribute approximately 3% of VA Alliance net income to these noncontrolling interests. No capital contributions from the minority owners were made during the three months ended March 31, 2016 and 2015 . The VA Alliance made $0.1 million in distributions to the minority owners during the three months ended March 31, 2016 and no distributions during the three months ended March 31, 2015 .
Loss from Discontinued Operations
Loss from Discontinued Operations includes the financial results, net of taxes, for the Eastern Markets.

RESULTS OF OPERATIONS – COMPARISON OF THREE MONTHS ENDED MARCH 31, 2016 AND 2015
OPERATING REVENUES
The following table identifies our operating revenues for the three months ended March 31, 2016 and 2015 :
 
 
Three Months Ended March 31,
 
 
 
 
(In thousands)
2016
 
2015
 
$ Variance
 
% Variance
Retail revenue
$
39,647

 
$
43,011

 
$
(3,364
)
 
(7.8
)%
Wholesale and other revenue
32,418

 
35,597

 
(3,179
)
 
(8.9
)%
Equipment sales
13,142

 
16,703

 
(3,561
)
 
(21.3
)%
Total operating revenues
$
85,207

 
$
95,311

 
$
(10,104
)
 
(10.6
)%

Retail Revenue
Retail revenue declined $3.4 million, or 7.8%, to $39.6 million for the three months ended March 31, 2016 as compared to the three months ended March 31, 2015 . Postpay service revenue decreased as a result of higher adoption rates of lower rate plans as a result of competitive pricing pressures and service plan discounts offered with EIP, partially offset by a higher average subscriber base.
Wholesale and Other Revenue
Wholesale and roaming revenues decreased $3.2 million, or 8.9%, for the three months ended March 31, 2016 as compared to the three months ended March 31, 2015 , primarily reflecting a $2.9 million decrease in revenue from the SNA. This decrease is the result of the amended terms of the SNA that took effect in May 2014.
Equipment Sales
Equipment revenues decreased $3.6 million, or 21.3%, for the three months ended March 31, 2016 as compared to the three months ended March 31, 2015 , reflecting a decrease in equipment sales to new and existing customers.
OPERATING EXPENSES
The following table identifies our operating expenses for the three months ended March 31, 2016 and 2015 :
 
 
Three Months Ended March 31,
 
 
 
 
(In thousands)
2016
 
2015
 
$ Variance
 
% Variance
Cost of services
$
23,221

 
$
20,821

 
$
2,400

 
11.5
 %
Cost of equipment sold
17,299

 
22,998

 
(5,699
)
 
(24.8
)%
Customer operations
15,303

 
19,553

 
(4,250
)
 
(21.7
)%
Corporate operations
9,482

 
8,624

 
858

 
9.9
 %
Restructuring
82

 
1,605

 
(1,523
)
 
(94.9
)%
Depreciation and amortization
13,486

 
12,917

 
569

 
4.4
 %
Gain on sale of assets
—

 
(11,009
)
 
11,009

 
(100.0
)%
Total operating expenses
$
78,873

 
$
75,509

 
$
3,364

 
4.5
 %
Cost of Services – Cost of services increased $2.4 million, or 11.5%, for the three months ended March 31, 2016 compared to the three months ended March 31, 2015 primarily due to a $2.2 million increase in cell site expense to support additional capacity for our 4G LTE expansion.

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Cost of Equipment Sold – Cost of equipment sold decreased $5.7 million, or 24.8%, for the three months ended March 31, 2016 compared to the three months ended March 31, 2015 due to a decrease in equipment sales to new and existing customers.
Customer Operations – Customer operations expense decreased $4.3 million, or 21.7%, for the three months ended March 31, 2016 compared to the three months ended March 31, 2015 due primarily to cost reductions in advertising and salaries, offset by increased bad debt expense primarily associated with the increase in EIP receivables.
Corporate Operations – Corporate operations expense increased $0.9 million, or 9.9%, for the three months ended March 31, 2016 compared to the three months ended March 31, 2015 driven by costs related to the Merger.
Restructuring – Restructuring expense decreased $1.5 million for the three months ended March 31, 2016 due primarily to a decrease in severance charges, contract termination fees and professional fees associated with the reduction of corporate expenses.
Depreciation and Amortization – Depreciation and amortization expenses increased $0.6 million, or 4.4%, for the three months ended March 31, 2016 compared to the three months ended March 31, 2015 .
Gain on Sale of Assets - Gain on sale of assets was $11.0 million for the three months ended March 31, 2015 related to the sale of tower assets.
OTHER EXPENSE
Interest expense, net decreased $0.7 million, or 8.9%, for the three months ended March 31, 2016 compared to the three months ended March 31, 2015 . The decrease was attributable to an increase in interest costs capitalized that were associated with our 4G LTE expansion and an increase in interest income recognized on our EIP receivables.

INCOME TAXES
Income tax expense (benefit) for the three months ended March 31, 2016 and 2015 was $(0.2) million and $4.8 million , respectively, representing the statutory tax rate applied to pre-tax income and the effects of certain non-deductible acquisition related expenses, compensation, and non-controlling interest. We have provided for income taxes using a year to date calculation as we are unable to reliably estimate the annual effective income tax rate.
LOSS FROM DISCONTINUED OPERATIONS
Loss from Discontinued Operations includes the financial results, net of taxes, for the Eastern Markets.


LIQUIDITY AND CAPITAL RESOURCES
Overview
We historically have funded our working capital requirements, capital expenditures and other payments from cash on-hand and net cash provided from operating activities.
As of March 31, 2016 , we had $74.3 million of cash, compared to $72.7 million as of December 31, 2015 , of which $19.7 million was held in market rate savings accounts (including $9.6 million held by the Company which is not restricted for certain payments by the Amended and Restated Credit Agreement). The remaining balance of $54.6 million was held in non-interest bearing accounts. The commercial bank that held substantially all of our cash at March 31, 2016 has a rating of Aa1 on long-term deposits by Moody’s. Our working capital (current assets minus current liabilities) was $104.9 million as of March 31, 2016 compared to $106.7 million as of December 31, 2015 .
As of March 31, 2016 , we had $605.0 million in aggregate long-term liabilities, compared to $604.7 million as of December 31, 2015 , consisting of $506.6 million in long-term debt, including capital lease obligations, and approximately $96.1 million in other long-term liabilities consisting primarily of retirement benefits, deferred income taxes, asset retirement obligations and deferred gains on tower sales. Further information regarding long-term debt obligations at March 31, 2016 is provided in Note 8 of the Notes to Unaudited Condensed Consolidated Financial Statements.
We have a Restricted Payments basket under the terms of the Amended and Restated Credit Agreement, which can be used to make Restricted Payments, including dividends and stock repurchases. The Restricted Payments basket increases by $6.5 million per quarter plus an additional quarterly amount for Excess Cash Flow, if any (as defined in the Amended and Restated

26
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Credit Agreement) and decreases by any actual Restricted Payments and by certain investments and debt prepayments made after the date of the Amended and Restated Credit Agreement. For the quarter ended March 31, 2016 there was no excess cash flow. The balance of the Restricted Payments basket as of March 31, 2016 was $92.6 million .
The Amended and Restated Credit Agreement also permits incremental commitments of up to $125.0 million (the “Incremental Commitments”) of which up to $35.0 million can be in the form of a revolving credit facility. The ability to incur the Incremental Commitments is subject to various restrictions and conditions, including having a Leverage Ratio (as defined in the Amended and Restated Credit Agreement) not in excess of 4.50:1.00 at the time of incurrence (calculated on a pro forma basis). As of March 31, 2016 , there were no commitments associated with the Incremental Commitments and the leverage ratio for the Company was 9.33:1.00 .
We are a holding company that does not operate any business of our own. As a result, we are dependent on cash dividends and distributions and other transfers from our subsidiaries in order to make dividend payments or to make other distributions to our stockholders, including by means of a stock repurchase. Amounts that can be made available to us to pay cash dividends or repurchase stock are restricted by the Amended and Restated Credit Agreement.
Cash Flows from Operations
The following table summarizes our cash flows from operations for the three months ended March 31, 2016 and 2015, respectively:  
 
Three Months Ended March 31,
(In thousands)
2016
 
2015
Net cash provided by operating activities
$
22,924

 
$
15,438

Net cash provided by/(used in) investing activities
(19,818
)
 
15,855

Net cash used in financing activities
(1,506
)
 
(1,421
)

Operating Activities
Our cash flows from operating activities for the three months ended March 31, 2016 of $22.9 million increased $7.5 million , or 48.5% , compared to the cash flows from operating activities of $15.4 million for the three months ended March 31, 2015 . Our operating income, exclusive of non-cash items such as depreciation and amortization and gain on sale of assets, decreased compared to the prior year. This decrease was offset by net changes in working capital which increased cash provided by operating activities. This increase is primarily due to cash received from income tax refund and a decrease in inventory, offset by a decrease in accounts payable due to the timing of cash paid to vendors.
Investing Activities
As we continue to upgrade our network, we invested $21.0 million in capital expenditures for the three months ended March 31, 2016 . This was a decrease of $1.9 million compared to the $22.9 million of capital expenditures for the same period last year. Included in the capital spending for the three months ended March 31, 2016 was $14.9 million of expenditures for additional capacity to support projected growth and incremental 4G LTE expansion, and $6.0 million to maintain our existing networks and other business needs. These capital expenditures were partially offset by net proceeds of $1.1 million primarily from the sale of assets related to our discontinued operations.
Financing Activities
Net cash used in financing activities for the three months ended March 31, 2016 was $1.5 million compared to net cash used in financing activities of $1.4 million for the three months ended March 31, 2015 , which reflected $1.4 million of principal payments on the long term debt.
We believe that our current cash balances of $74.3 million , our cash flows from operations and other capital resources will be sufficient to satisfy our working capital requirements, capital expenditures, interest costs, required debt principal payments prior to maturity, and stock repurchases, if any, through our stock repurchase plan, for the foreseeable future.
OFF BALANCE SHEET ARRANGEMENTS
We do not have any off balance sheet arrangements or financing activities with special purpose entities.




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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risks primarily related to interest rates. Aggregate maturities of long-term debt outstanding under the Amended and Restated Credit Agreement, based on the contractual terms of the instruments, were $521.6 million at March 31, 2016 . Under this facility the Term Loan bears interest at a rate equal to either 4.75% above the Eurodollar Rate (as defined in the Amended and Restated Credit Agreement) or 3.75% above the Base Rate (as defined in the Amended and Restated Credit Agreement). The Amended and Restated Credit Agreement provides that the Eurodollar Rate shall never be less than 1.00% per annum and the Base Rate shall never be less than 2.00% per annum. We also have other fixed rate, long-term debt in the form of capital leases totaling $0.4 million as of March 31, 2016 .
At March 31, 2016 , our financial assets included cash of $74.3 million and restricted cash of $2.2 million . Securities and investments totaled $1.5 million at March 31, 2016 .

The following sensitivity analysis estimates the impact on the fair value of certain financial instruments, which are potentially subject to material market risks, at March 31, 2016 , assuming a ten percent increase and a ten percent decrease in the levels of our interest rates:
 
(In thousands)
Book Value
 
Fair Value
 
Estimated fair
value  assuming
noted decrease
in  market
pricing
 
Estimated fair
value  assuming
noted increase
in  market
pricing
Senior secured term loan, net of unamortized debt discount and issuance cost
$
511,785

 
$
517,677

 
$
527,974

 
$
507,610

Capital lease obligations
443

 
443

 
488

 
399

Our Amended and Restated Credit Agreement accrues interest based on the Eurodollar Rate plus an applicable margin (currently 475 bps). LIBOR for purposes of this facility floats when it exceeds the floor of 1.00%. At March 31, 2016 , an immediate 10% increase or decrease to LIBOR would not have an effect on our interest expense as the variable LIBOR component would remain below the floor. In addition, at March 31, 2016 we had approximately $19.7 million of cash held in a market rate savings account. An immediate 10% increase or decrease to the market interest rate would not have a material effect on our cash flows.
 

Item 4. Controls and Procedures.
Disclosure Controls and Procedures
We have established disclosure controls and procedures to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and made known to the officers who certify the Company’s financial reports and to other members of senior management and the Board of Directors as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation as of the end of the period covered by this quarterly report of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934). Based on this evaluation, our principal executive officer and our principal financial officer have concluded that the Company’s disclosure controls and procedures are effective as of the end of the period covered by this quarterly report.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal controls over financial reporting during the three months ended March 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION
 
Item 1. Legal Proceedings.
We are involved in routine litigation in the ordinary course of our business. We do not believe that any pending or threatened litigation of which we are aware would have a material adverse effect on our financial condition, results of operations or cash flows. In addition, on August 24, 2015, Mr. Marvin Westen and Mr. Paul Sekerak, each filed a purported class action complaint relating to the Merger in the Court of Chancery of the State of Delaware. These complaints were dismissed.
Item 1A. Risk Factors.
In addition to the other information set forth in this quarterly report, including the updated risk factors below, as well as other information in our subsequent filings with the SEC, you should carefully consider the risks discussed in Part I, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2015, which could materially affect our business, financial condition or future results. The risks described in this quarterly report and in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may have a material adverse affect on our business, financial condition and/or future results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
In August 2009, the Company’s board of directors authorized management to repurchase up to $40.0 million of the Company’s common stock. The Company did not purchase any shares of its common stock during the three months ended March 31, 2016 under the authorization. The approximate dollar value of shares that may yet be purchased under the plan was $23.1 million at March 31, 2016 . Amounts available to the Company to repurchase stock are restricted by the Amended and Restated Credit Agreement. The authorization does not have an expiration date. A summary of our repurchases of common stock during the first quarter of 2016 is as follows:

Period
Total Number of Shares Purchased 1
 
Average Price Paid per Share
 
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
 
Maximum Number of Shares that May be Purchased Under the Plans or Programs
February 1 - 29, 2016
13,638

 
9.19

 
—

 
—

March 1 - 31, 2016
2,109

 
9.19

 
—

 
—

Total
15,747

 
9.19

 
—

 
—

1

 
During the three months ended March 31, 2016, the Company repurchased restricted common stock in order to satisfy minimum tax withholding obligations in connection with the vesting of restricted stock.




Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.

29
Table of Contents                     

Item 6.
Exhibits.
 
Exhibit
No.
  
Description
 
 
31.1*
  
Certification of Christopher E. French , President and Chief Executive Officer, Pursuant to Rule 13a-14(a).
 
 
31.2*
  
Certification of John Turtora , Vice President and Chief Accounting Officer, Pursuant to Rule 13a-14(a).
 
 
32.1*
  
Certification of Christopher E. French , President and Chief Executive Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
32.2*
  
Certification of John Turtora , Vice President and Chief Accounting Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
101.INS*
  
XBRL Instance Document.
 
 
101.SCH*
  
XBRL Taxonomy Extension Schema Document.
 
 
101.CAL*
  
XBRL Taxonomy Extension Calculation Linkbase Document.
 
 
101.DEF*
  
XBRL Taxonomy Extension Definition Linkbase Document.
 
 
101.LAB*
  
XBRL Taxonomy Extension Label Linkbase Document.
 
 
101.PRE*
  
XBRL Taxonomy Extension Presentation Linkbase Document.
*
Filed herewith.

30
Table of Contents                     

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
NTELOS HOLDINGS CORP.
 
 
 
Dated: May 16, 2016
By:
/s/ Christopher E. French
 
 
Christopher E. French
 
 
President and Chief Executive Officer
 
 
 
 
 
 
Dated: May 16, 2016
By:
/s/ Adele M. Skolits
 
 
Adele M. Skolits
 
 
Vice President - Finance and Chief Financial Officer
 
 
 
 
 
 
Dated: May 16, 2016
By:
/s/ John Turtora
 
 
John Turtora
 
 
Vice President and Chief Accounting Officer
 
 
 

31
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