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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, 2015
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 22,196,422 shares of the registrant’s common stock outstanding as of the close of business on April 23, 2015.


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,
2015
 
December 31,
2014
ASSETS
 
 
 
Current Assets
 
 
 
Cash
$
103,418

 
$
73,546

Restricted cash
2,167

 
2,167

Accounts receivable, net
50,247

 
43,668

Inventories and supplies
20,377

 
18,297

Deferred income taxes
24,923

 
24,770

Prepaid expenses
13,003

 
13,543

Other current assets
625

 
4,626

 
214,760

 
180,617

Assets Held for Sale
59,398

 
64,271

Securities and Investments
1,522

 
1,522

Property, Plant and Equipment, net
299,456

 
289,947

Intangible Assets
 
 
 
Goodwill
63,700

 
63,700

Radio spectrum licenses
44,933

 
44,933

Customer relationships and trademarks, net
4,885

 
5,084

Deferred charges and other assets
19,835

 
18,474

TOTAL ASSETS
$
708,489

 
$
668,548

LIABILITIES AND EQUITY (DEFICIT)
 
 
 
Current Liabilities
 
 
 
Current portion of long-term debt
$
5,772

 
$
5,816

Accounts payable
21,137

 
24,541

Advance billings and customer deposits
13,191

 
14,553

Accrued expenses and other current liabilities
30,408

 
27,153

 
70,508

 
72,063

Long-Term Debt
518,392

 
519,592

Retirement Benefits
25,115

 
25,209

Deferred Income Taxes
47,196

 
39,620

Other Long-Term Liabilities
63,905

 
45,016

 
654,608

 
629,437

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; 22,223 shares issued and 22,196 shares outstanding (21,634 shares issued and 21,616 shares outstanding at December 31, 2014)
214

 
214

Additional paid in capital
29,623

 
28,663

Treasury stock, at cost, 27 shares (18 shares at December 31, 2014)
(324
)
 
(285
)
Accumulated deficit
(38,838
)
 
(53,634
)
Accumulated other comprehensive loss
(8,973
)
 
(9,090
)
Total NTELOS Holdings Corp. Stockholders’ Equity (Deficit)
(18,298
)
 
(34,132
)
Noncontrolling interests
1,671

 
1,180

 
(16,627
)
 
(32,952
)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
$
708,489

 
$
668,548

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

2

Table of Contents                    

NTELOS Holdings Corp.
Condensed Consolidated Statements of Income
(Unaudited)
 
 
Three Months Ended March 31,
(In thousands, except per share amounts)
2015
 
2014
Operating Revenues
$
120,206

 
$
122,082

Operating Expenses
 
 
 
Cost of sales and services
53,293

 
51,758

Customer operations
24,349

 
27,623

Corporate operations
9,412

 
11,771

Restructuring
2,008

 

Depreciation and amortization
13,874

 
19,067

Gain on sale of assets
(15,947
)
 

 
86,989

 
110,219

Operating Income
33,217

 
11,863

Other Expense
 
 
 
Interest expense
(7,917
)
 
(7,959
)
Other expense, net
(4
)
 
(1,072
)
 
(7,921
)
 
(9,031
)
Income before Income Taxes
25,296

 
2,832

Income Taxes
10,009

 
1,110

Net Income
15,287

 
1,722

Net Income Attributable to Noncontrolling Interests
(491
)
 
(436
)
Net Income Attributable to NTELOS Holdings Corp.
$
14,796

 
$
1,286

Earnings per Share Attributable to NTELOS Holdings Corp.
 
 
 
Basic
$
0.68

 
$
0.06

Weighted average shares outstanding - basic
21,193

 
21,080

Diluted
$
0.65

 
$
0.06

Weighted average shares outstanding - diluted
22,161

 
22,023

Cash Dividends Declared per Share - Common Stock
$

 
$
0.42

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

3

Table of Contents                    

NTELOS Holdings Corp.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
 
 
Three Months Ended March 31,
(In thousands)
2015
 
2014
Net Income Attributable to NTELOS Holdings Corp.
$
14,796

 
$
1,286

Other Comprehensive Income:
 
 
 
Amortization of unrealized (gain) loss from defined benefit plans, net of $75 of deferred income taxes in 2015 ($172 in 2014)
117

 
(271
)
Comprehensive Income Attributable to NTELOS Holdings Corp.
14,913

 
1,015

Comprehensive Income Attributable to Noncontrolling Interests
491

 
436

Comprehensive Income
$
15,404

 
$
1,451

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

4

Table of Contents                    

NTELOS Holdings Corp.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
 
Three Months Ended March 31,
(In thousands)
2015
 
2014
Cash flows from operating activities
 
 
 
Net income
$
15,287

 
$
1,722

Adjustments to reconcile net income to net cash provided by operating activities
 
 
 
Depreciation and amortization
13,874

 
19,067

Gain on sale of assets
(15,947
)
 

Deferred income taxes
7,348

 
86

Equity-based compensation
859

 
1,311

Amortization of loan origination costs and debt discount
590

 
801

Write off of unamortized debt issuance costs

 
895

Retirement benefits and other
784

 
700

Changes in operating assets and liabilities
 
 
 
Accounts receivable
(6,579
)
 
1,195

Inventories and supplies
(2,080
)
 
8,299

Other assets
2,733

 
(3,609
)
Income taxes
2,661

 
313

Accounts payable
(2,874
)
 
(11,229
)
Other liabilities
(1,422
)
 
(1,230
)
Retirement benefit distributions
204

 
173

Net cash provided by operating activities
15,438

 
18,494

Cash flows from investing activities
 
 
 
Purchases of property, plant and equipment
(22,941
)
 
(13,961
)
Proceeds from sale of assets
38,796

 

Other, net

 
2,547

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

 
(11,414
)
Cash flows from financing activities
 
 
 
Proceeds from issuance of long-term debt, net of original issue discount

 
187,655

Debt issuance and refinancing costs

 
(3,551
)
Repayments on senior secured term loans
(1,351
)
 
(149,476
)
Cash dividends paid on common stock

 
(9,034
)
Other, net
(70
)
 
(77
)
Net cash provided by/(used in) financing activities
(1,421
)
 
25,517

Increase in cash
29,872

 
32,597

Cash, beginning of period
73,546

 
88,441

Cash, end of period
$
103,418

 
$
121,038

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

5

Table of Contents                    

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
 
Retained Deficit
 
Accumulated
Other
Comprehensive
Loss
 
Total
NTELOS
Holdings
Corp.
Stockholders’
Equity (Deficit)
 
Noncontrolling
Interests
 
Total
Equity (Deficit)
Balance, December 31, 2014
21,616

 
18

 
$
214

 
$
28,663

 
$
(285
)
 
$
(53,634
)
 
$
(9,090
)
 
$
(34,132
)
 
$
1,180

 
$
(32,952
)
Equity-based compensation *
580

 
9

 


 
960

 
(39
)
 

 

 
921

 

 
921

Net income attributable to NTELOS Holdings Corp.

 

 

 

 

 
14,796

 

 
14,796

 

 
14,796

Amortization of unrealized loss from defined benefit plans, net of $75 of deferred income taxes

 

 

 

 

 

 
117

 
117

 

 
117

Comprehensive income attributable to Noncontrolling Interests

 

 

 

 

 

 

 

 
491

 
491

Balance, March 31, 2015
22,196

 
27

 
$
214

 
$
29,623

 
$
(324
)
 
$
(38,838
)
 
$
(8,973
)
 
$
(18,298
)
 
$
1,671

 
$
(16,627
)
 
*
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 13 for additional information regarding this arrangement. The Company does not have any independent operations.
On December 1, 2014, we entered into an agreement to sell our wireless spectrum licenses in our eastern Virginia and Outer Banks of North Carolina markets (“Eastern Markets”) valued at approximately $56.0 million. The transaction closed on April 15, 2015. We plan to operate in our Eastern Markets until the later of November 15, 2015 or 90 days after the transfer of the spectrum. In conjunction with the agreement to sell, the Company has taken an impairment charge for wireless spectrum and fixed assets, and has incurred restructuring 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, 2015. The accompanying condensed consolidated balance sheet as of December 31, 2014 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, 2014 (the “2014 Form 10-K”). These financial statements should be read in conjunction with the Company’s 2014 Form 10-K.

Reclassifications
Certain amounts in prior periods have been reclassified to conform to the current period presentation. Effective September 30, 2014, the Company changed the classification of certain costs related to equipment incentives to retain existing customers from customer operations to cost of sales and services to better align our presentation with other wireless carriers. The reclassification resulted in an increase of $9.0 million in cost of sales and services and a corresponding decrease in customer operations expenses for the three months ended March 31, 2014. Additionally, certain information technology (“IT”) costs attributable to supporting billing and internal network and communication services were changed from cost of sales and services to customer operations and corporate operations also to align our presentation with other wireless carriers. The reclassification resulted in a decrease of $3.3 million in cost of sales and services for the three months ended March 31, 2014 and an increase in customer operations expenses of $0.7 million and an increase in corporate operations expenses of $2.6 million for the three months ended March 31, 2014. Net income has not been affected by these reclassifications.

Revenue Recognition
The Company recognizes revenue when services are rendered or when products are delivered and functional, as applicable. Certain services of the Company require payment in advance of service performance. In such cases, the Company records a service liability at the time of billing and subsequently recognizes revenue ratably over the service period. The Company bills customers certain transactional taxes on service revenues. These transactional taxes are not included in reported revenues as they are recognized as liabilities at the time customers are billed.
The Company earns retail and wholesale revenues by providing access to and usage of its networks. Retail and certain wholesale revenues are recognized as services are provided. In long term contracts certain fixed elements are required to be

7

Table of Contents                    

recognized on a straight-line basis over the term of the agreement. Revenues for equipment sales are recognized at the point of sale. Wireless handsets and other devices sold with service contracts are generally sold at prices below cost, based on the terms of the service contracts. The Company recognizes the entire cost of the handsets at the time of sale.
On August 15, 2014, the Company launched its Equipment Installment Plan (“EIP”), which offers customers the option to pay for their devices over 24 months with no service contract. Additionally, after a specified period of time, customers have the right to trade in the original device for a new device and have the remaining unpaid balance satisfied. For customers that elect the EIP option, the Company recognizes revenue at the point of sale for the full retail price of the device, net of the estimated fair value of imputed interest and the estimated loss on trade-in.
The Company evaluates related transactions to determine whether they should be viewed as multiple deliverable arrangements, which impact revenue recognition. Multiple deliverable arrangements are presumed to be bundled transactions and the total consideration is measured and allocated to the separate units based on their relative selling price with certain limitations. The Company has determined that sales of handsets with service contracts related to these sales generated from Company-operated retail stores are multiple deliverable arrangements. Accordingly, substantially all of the nonrefundable activation fee revenues (as well as the associated direct costs) are allocated to the wireless handset and are recognized at the time of the sale, based on the fact that the handsets are generally sold well below cost and thus appropriately allocated to the point of sale based on the relative selling price evaluation. However, revenue and certain associated direct costs for activations sold at third-party retail locations are deferred and amortized over the estimated life of the customer relationship as the Company is not a principal in the transaction to sell the handset and therefore any activation fees charged are fully attributable to the service revenues.
The Company recognizes revenue in the period that persuasive evidence of an arrangement exists, delivery of the product has occurred or services have been rendered, it is able to determine the amount and when the collection of such amount is considered probable.
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, 2015 and December 31, 2014 was $54.5 million and $28.5 million, respectively. The remaining $48.9 million and $45.0 million of cash at March 31, 2015 and December 31, 2014, 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, 2015 and 2014 was $5.5 million and $4.0 million, respectively. The Company’s allowance for doubtful accounts was $11.6 million and $8.7 million at March 31, 2015 and December 31, 2014, respectively. At March 31, 2015, the allowance for doubtful accounts included $5.0 million related to unbilled equipment receivables.

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, 2015 and 2014, a portion of which related to the amortization of unrealized loss.
The total amount reclassified out of accumulated other comprehensive income related to actuarial (gains)/losses from the defined benefit plans was $0.1 million and $(0.3) million for the three months ended March 31, 2015 and 2014, respectively, all of which has been reclassified to cost of sales and services, customer operations, and corporate operations on the unaudited condensed consolidated statement of income for the respective periods.

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Table of Contents                    

Defined benefit pension plan assets were valued at $23.7 million at March 31, 2015.
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 shares of the Company’s common stock.

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, 2015 and 2014 and the Company’s 401(k) matching contributions was allocated as follows:
 
 
Three Months Ended March 31,
(In thousands)
2015
 
2014
Cost of sales and services
$
161

 
$
151

Customer operations
178

 
250

Corporate operations
520

 
910

Equity-based compensation expense
$
859

 
$
1,311

Future charges for equity-based compensation related to securities outstanding at March 31, 2015 for the remainder of 2015 and for the years 2016 through 2019 are estimated to be $2.2 million, $1.6 million, $1.0 million, $0.9 million and less than $0.1 million, respectively.
Recent Accounting Pronouncements
In April 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-08, Reporting of Discontinued Operations and Disclosures of Disposals of Components of an Entity, which changes the criteria for determining which disposals can be presented as discontinued operations and modifies related disclosure requirements. The updated guidance defines discontinued operations as a disposal of a component or group of components that is disposed of or is classified as held for sale and represents a strategic shift that has, or will have, a major effect on an entity’s operations and financial results. Additionally, the disclosure requirements for discontinued operations were expanded and new disclosures for individually significant dispositions that do not qualify as discontinued operations are required. The guidance is effective prospectively for fiscal years and interim reporting periods within those years beginning after December 15, 2014, with early adoption permitted for transactions that have not been reported in financial statements previously issued or available for issuance. The standard is effective for the Company's fiscal year beginning January 1, 2015 and will be applied to relevant transactions.
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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, 2016, and interim periods within those years, with early adoption being prohibited. The impact of application of this ASU on the Company's financial statements has not been determined.
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 is effective for annual reporting periods beginning after December 15, 2016, with early adoption permitted. The guidance will be applied retrospectively to each period presented. The Company is currently in the process of evaluating the impact of adoption of the ASU on its financial statements.


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Note 3. 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, 2015 and 2014:
 
 
Three Months Ended March 31,
(In thousands)
2015

2014
Cash payments for:



Interest (net of amounts capitalized)
$
7,494


$
6,771

Income taxes


11

Cash received from income tax refunds
3,883



Supplemental investing and financing activities:
 
 
 
Additions to property, plant and equipment included in accounts payable
7,979

 
16,244

Borrowings under capital leases
35

 

Dividends declared not paid

 
9,142


The amount of interest capitalized was immaterial for each of the three months ended March 31, 2015 and 2014.

Note 4. Equipment Installment Plan Receivables
Certain subscribers have the option to pay for their devices in installments over a 24-month period. The carrying value of installment receivables approximates sales price, net of the deferred interest and estimated losses at time of trade-in. At the time of sale, we impute the interest on the installment receivable and calculate the allowance for trade-in losses, then record them 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 as operating revenue. Short-term installment receivables are recorded in "Accounts receivable, net" and long-term installment receivables are recorded in "Deferred charges and other assets" in the Condensed Consolidated Balance Sheets.
The following table summarizes the EIP receivables at March 31, 2015 and December 31, 2014:
 
(In thousands)
March 31, 2015
 
December 31, 2014
EIP receivables, gross
$
27,487

 
$
16,109

Deferred interest
(1,370
)
 
(807
)
EIP receivables, net of deferred interest
26,117

 
15,302

Allowance for credit and trade-in losses
(4,969
)
 
(2,450
)
EIP receivables, net
$
21,148

 
$
12,852

Classified on the Condensed Consolidated Balance Sheet as:


 


Accounts receivable, net
$
12,500

 
$
5,551

Deferred charges and other assets
10,018

 
8,108

Advance billings and customer deposits
(788
)
 
(807
)
Other Long-Term Liabilities
(582
)
 

EIP receivables, net

$
21,148

 
$
12,852



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Table of Contents                    

Note 5. 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, 2015
 
December 31, 2014
Land and buildings *
39 to 50 years
 
$
30,788

 
$
30,772

Network plant and equipment
5 to 17 years
 
452,441

 
445,940

Furniture, fixtures and other equipment
2 to 18 years
 
93,746

 
91,512

 
 
 
576,975

 
568,224

Under construction
 
 
31,856

 
18,213

 
 
 
608,831

 
586,437

Less: accumulated depreciation
 
 
309,375

 
296,490

Property, plant and equipment, net
 
 
$
299,456

 
$
289,947

* 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 for the three months ended March 31, 2015 and 2014 was $13.8 million and $18.3 million, respectively.
Note 6. 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, 2015 that would require it to perform impairment testing.
In conjunction with the agreement to sell the Company's wireless spectrum licenses in the Eastern Markets, the Company calculated the fair value to be $57.9 million, which includes the sales price plus the implied value of the non-cash spectrum leaseback. Accordingly, an impairment charge of $29.0 million was recorded during the fourth quarter of 2014. In addition, the Company transferred these intangible assets to assets held for sale in the Company’s Condensed Consolidated Balance Sheet.
At March 31, 2015 and December 31, 2014, goodwill and radio spectrum licenses were comprised of the following:
 

March 31, 2015

December 31, 2014
(In thousands)

Goodwill

Radio Spectrum Licenses

Goodwill

Radio Spectrum Licenses
Balance at beginning of the period

$
63,700

 
$
44,933


$
63,700

 
$
131,834

Impairment loss in the period


 



 
(28,990
)
Transferred to assets held for sale


 



 
(57,911
)
Total

$
63,700


$
44,933


$
63,700


$
44,933



Intangible Assets Subject to Amortization
Customer relationships and trademarks are considered amortizable intangible assets. At March 31, 2015 and December 31, 2014, customer relationships and trademarks were comprised of the following:
 
 
 

March 31, 2015

December 31, 2014
(In thousands)
Estimated
Useful Life

Gross Amount

Accumulated
Amortization

Net

Gross Amount

Accumulated
Amortization

Net
Customer relationships
17.5 years

$
36,900


$
(34,387
)

$
2,513


$
36,900


$
(34,305
)

$
2,595

Trademarks
15 years

7,000


(4,628
)

2,372


7,000


(4,511
)

2,489

Total


$
43,900


$
(39,015
)

$
4,885


$
43,900


$
(38,816
)

$
5,084


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The Company amortizes its amortizable intangible assets using the straight-line method. Amortization expense for the three months ended March 31, 2015 and 2014 was $0.2 million and $0.8 million, respectively.

Note 7. Long-Term Debt
At March 31, 2015 and December 31, 2014, the Company’s outstanding long-term debt consisted of the following:
 
(In thousands)
March 31, 2015
 
December 31, 2014
Senior secured term loans, net of unamortized debt discount
$
523,330

 
$
524,504

Capital lease obligations
834

 
904

 
524,164

 
525,408

Less: current portion of long-term debt
5,772

 
5,816

Long-term debt
$
518,392

 
$
519,592

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. In connection with the refinancing, the Company incurred approximately $3.8 million in creditor and third party fees, of which $3.7 million was deferred and is being amortized to interest expense over the life of the debt using the effective interest method. The Company also deferred $0.5 million in debt discounts related to the new Term Loan B borrowings, which are being accreted to the Term Loan B using the effective interest method over the life of the debt and are reflected in interest expense. Additionally, the Company wrote off a proportionate amount of the unamortized deferred fees and debt discount from the Amended and Restated Credit Agreement totaling $0.5 million and $0.2 million, respectively, which are reflected in other expenses in the condensed consolidated statements of income.
The aggregate maturities of long-term debt outstanding at March 31, 2015, excluding capital lease obligations, based on the contractual terms of the instruments were as follows:
 
(In thousands)
Term Loan
Remainder of 2015
$
4,054

2016
5,405

2017
5,405

2018
5,405

2019
506,725

Total
$
526,994

The Company’s blended average effective interest rate on its long-term debt was approximately 6.3% for both the three months ended March 31, 2015 and 2014, respectively.
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, 2015 there was no Excess Cash Flow. The balance of the Restricted Payments basket as of March 31, 2015 was $66.6 million and the Leverage Ratio for the Company was 4.32:1.00.

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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, 2015, the carrying value and accumulated depreciation of these assets was $2.5 million and $1.1 million, respectively. The total net present value of the Company’s future minimum lease payments is $0.8 million. At March 31, 2015, the principal portion of these capital lease obligations was payable as follows: $0.3 million for the remainder of 2015, $0.3 million in 2016, $0.1 million in 2017, $0.1 million in 2018 and less than $0.1 million in 2019 and 2020.

Note 8. Restructuring Charges
In December 2014, the Company announced its intention to sell its wireless spectrum and wind down its operations in the Eastern Markets, and to reduce related corporate operating expenses during fiscal year 2015. In conjunction, restructuring liabilities have been established for employee separations, lease abandonments, operating lease terminations, and other related costs, which are recorded in current liabilities in the Consolidated Balance Sheet. A summary of the restructuring liabilities is presented below:

(In thousands)
Employee Separation

Contract Terminations

Other

Total
Expected period of Recognition
2014-2015

2014-2015

2014-2015


 
Projected Range at Completion
$2,000 - $4,000

$40,000 - $45,000

$8,000 - $11,000

$50,000 - $60,000
Cumulative charges incurred as of March 31, 2015
$
3,234
 
 
$
1,312
 
 
$
1,125
 
 
$
5,671
 
 
 
 
 
 
 
 
 
Balance as of December 31, 2014
$
1,496
 

$
879
 

$
1,025
 

$
3,400
 
Charges
1,654
 

322
 

32
 

2,008
 
Utilization
(1,480
)

(634
)

(83
)

(2,197
)
Balance as of March 31, 2015
$
1,670
 

$
567
 

$
974
 

$
3,211
 

Employee separation costs for certain Eastern Market and corporate employees of $1.7 million 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 2015. Contract termination costs of $0.6 million include lease abandonment costs for retail stores in our Eastern Markets and other termination costs for contractual network services obligations. Lease abandonment costs represent future minimum lease obligations, net of estimated sublease income. Contract termination costs are expected to be paid through 2019 absent any settlements with vendors. Other costs of $1.0 million include legal and advisory fees expected to be paid during 2015.

Note 9. 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. 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. The following is a summary by balance sheet category:
Long-Term Investments
At March 31, 2015 and December 31, 2014, 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.
Interest Rate Derivatives
In February 2013, the Company purchased an interest rate cap for $0.9 million with a notional amount of $350.0 million, which caps the three month Eurodollar rate at 1.0% and expires in August 2015. The Company did not designate the interest rate cap agreement as a cash flow hedge for accounting purposes. Therefore, the change in market value of the agreement is recorded as

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a gain or loss in other expense. The Company recorded an immaterial loss for the three months ended March 31, 2015 and a loss of $0.1 million for the three months ended March 31, 2014.
The following table indicates the difference between face amount, carrying amount and fair value of the Company’s financial instruments at March 31, 2015 and December 31, 2014.
 
 
Face
 
 
 
Carrying
 
Fair
(In thousands)
Amount
 
 
 
Amount
 
Value
March 31, 2015
 
 
 
 
 
 
 
Nonderivatives:
 
 
 
 
 
 
 
Financial assets:
 
 
 
 
 
 
 
Cash
$
103,418

 
  
 
$
103,418

 
$
103,418

Restricted cash
2,167

 
 
 
2,167

 
2,167

Accounts receivable, net
50,247

 
 
 
50,247

 
50,247

Long-term investments for which it is not practicable to estimate fair value
N/A

 
  
 
1,522

 
N/A

Financial liabilities:
 
 
 
 
 
 
 
Term Loans
526,994

 
  
 
523,330

 
450,580

Capital lease obligations
834

 
  
 
834

 
834

Derivative related to debt:
 
 
 
 
 
 
 
Interest rate cap asset
350,000

 
 

 

December 31, 2014
 
 
 
 
 
 
 
Nonderivatives:
 
 
 
 
 
 
 
Financial assets:
 
 
 
 
 
 
 
Cash
$
73,546

 
  
 
$
73,546

 
$
73,546

Restricted cash
2,167

 
 
 
2,167

 
2,167

Accounts receivable, net
43,668

 
 
 
43,668

 
43,668

Long-term investments for which it is not practicable to estimate fair value

N/A

 
  
 
1,522

 
N/A

Financial liabilities:
 
 
 
 
 
 
 
Term Loans
528,345

 
  
 
525,504

 
459,660

Capital lease obligations
904

 
  
 
904

 
904

Derivative related to debt:
 
 
 
 
 
 
 
Interest rate cap asset
350,000

 
 

 

* Notional amount

The fair value of the Term Loans under the Amended and Restated Credit Agreement were derived based on bid prices at March 31, 2015 and December 31, 2014, respectively. The fair value of the derivative instrument was based on a quoted market price at March 31, 2015 and December 31, 2014, 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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Note 10. Equity and Earnings Per Share
The computations of basic and diluted earnings per share for the three and three months ended March 31, 2015 and 2014 were as follows:
 
 
Three Months Ended March 31,
(In thousands)
2015
 
2014
Numerator:
 
 
 
Net income
$
14,796

 
$
1,286

Net income applicable to participating securities
459

 

Net income applicable to common shares
$
14,337

 
$
1,286

Denominator:
 
 
 
Total shares outstanding
22,196

 
21,657

Less: unvested shares
(965
)
 
(570
)
Less: effect of calculating weighted average shares
(38
)
 
(7
)
Denominator for basic earnings per common share - weighted average shares outstanding
21,193

 
21,080

Plus: weighted average unvested shares
781

 
628

Plus: common stock equivalents of stock options
187

 
315

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

 
22,023


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. The Company's unvested restricted stock awards have rights to receive non-forfeitable dividends. For the three months ended March 31, 2014, the Company has calculated basic earnings per share using weighted average shares outstanding and the two-class method and determined there was no significant difference in the per share amounts calculated under the two methods.

For the three months ended March 31, 2015 and 2014, the denominator for diluted earnings per common share excludes approximately 1.6 million and 1.8 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 11. 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, 2015, the Company issued 261,503 stock options under the Employee Equity Incentive Plans. The options issued under the Employee Equity Incentive Plans vest one-fourth annually beginning one year after the grant date.
During the three months ended March 31, 2015, the Company issued 415,401 shares of restricted stock under the Employee Equity Incentive Plans and 87,525 shares of restricted stock under the Non-Employee Director Equity Plan. The restricted shares granted under the Employee Equity Incentive Plans cliff vest on the third anniversary of the grant date. The restricted shares granted under the Non-Employee Director Equity Plan cliff vest on the first anniversary of the grant date. Dividend and voting rights applicable to restricted stock are equivalent to the Company’s common stock.
During the three months ended March 31, 2015, the Company granted 28,031 PSUs under the Employee Equity Incentive Plans to certain key employees. These PSUs vest on December 31, 2016 and are subject to certain performance and market conditions. Each PSU represents the contingent right to receive one share (or more based on maximum achievement) of the

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Company’s common stock if vesting is satisfied. The PSUs have no voting rights. Dividends, if any, that would have been paid on the underlying shares will be paid as dividend equivalent units on PSUs that vest, on or after the vesting date. At March 31, 2015, the Company had accrued approximately $0.2 million in dividend equivalent units.
The summary of the activity and status of the Company’s stock option awards for the three months ended March 31, 2015 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, 2015
1,583

 
$
19.09

 
 
 
 
Granted during the period
261

 
6.00

 
 
 
 
Exercised during the period
(1
)
 
0.58

 
 
 
 
Forfeited during the period
(245
)
 
20.76

 
 
 
 
Stock options outstanding at March 31, 2015
1,598

 
$
16.71

 
7.1 years
 
$

Exercisable at March 31, 2015
937

 
$
20.23

 
6.0 years
 
$

Total expected to vest after March 31, 2015
595

 
$
13.01

 
 
 
 
The fair value of each common stock option award granted during the three months ended March 31, 2015 was 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 weighted average grant date fair value per share of stock options granted during the three months ended March 31, 2015 and 2014 was $1.72 and $1.02, respectively. The total intrinsic value of options exercised during the three months ended March 31, 2015 and 2014 was less than $0.1 million. The total fair value of options that vested during the three months ended March 31, 2015 and 2014 was $0.5 million and $1.1 million, respectively. As of March 31, 2015, there was $0.9 million of total unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted average period of 2.7 years.
The summary of the activity and status of the Company’s restricted stock awards for the three months ended March 31, 2015 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, 2015
245

 
$
14.93

Granted during the period
503

 
5.37

Vested during the period
(75
)
 
19.01

Forfeited during the period
(5
)
 
18.03

Restricted stock awards outstanding at March 31, 2015
668

 
$
7.25


At March 31, 2015, there was $3.5 million of total unrecognized compensation cost related to unvested restricted stock awards, which is expected to be recognized over a weighted average period of 2.3 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, 2015 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, 2015
99

 
$
11.24

Granted during the period
28

 
7.33

Vested during the period

 

Forfeited during the period
(11
)
 
11.22

Performance stock units outstanding at March 31, 2015
116

 
$
10.29


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At March 31, 2015, there was $0.6 million of total unrecognized compensation cost related to unvested PSUs, which is expected to be recognized over a weighted average period of 1.8 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 and generally settle on the second business day of the following month. During the three months ended March 31, 2015 and 2014, 3,785 shares and 2,108 shares, respectively, 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 and 2014 was immaterial.
 
Note 12. Income Taxes
Income tax expense for the three months ended March 31, 2015 was $10.0 million, representing the statutory tax rate applied to pre-tax income and the effects of certain non-deductible compensation, non-controlling interest, and state minimum taxes. 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 13. 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 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 28.9% and 32.2% of its revenue from the SNA for the three months ended March 31, 2015 and 2014, respectively.

Note 14. Tower Sale and Leaseback
During the three months ended March 31, 2015, the Company completed its sale leaseback transaction for 91 of 103 towers committed to be sold. The Company intends to sell and leaseback the remaining towers during 2015. For the towers sold during the three months ended March 31, 2015, the Company received net proceeds of $38.8 million. The Company applied the guidance under FASB ASC 840, Leases, to the sale and leaseback and recorded a gain on the sale of assets of $15.9 million and deferred gain of $17.6 million. The current gain is included in the Condensed Consolidated Statement of Income as "Gain on sale of assets." The leasebacks are generally for a term of 10 years with options to renew and are accounted for as operating leases. The deferred gain is amortized on a straight-line basis over the remaining life of the lease of approximately 10 years as of March 31, 2015 and will be included as a reduction in the "Cost of sales and services" in the Condensed Consolidated Statement of Income. At March 31, 2015, the Company recorded on the Condensed Consolidated Balance Sheet $2.2 million of deferred gain under "Accrued expenses and other current liabilities" and $15.4 million in "Other Long-Term Liabilities."


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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.
In accordance with the tower sale and leaseback transaction discussed in Note 14, the Company entered into operating leases, generally for a term of 10 years, with future minimum lease payments totaling approximately $21.0 million.

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, and it is reasonably possible that the cost to resolve such matters could be material, management believes that adequate provision for any probable and reasonably estimable losses has been made in the Company’s unaudited condensed consolidated financial statements.
 


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Cautionary Note Regarding Forward-Looking Statements
Certain statements in this report are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. We use words such as “anticipate,” “believe,” “could,” “should,” “estimate,” “expect,” “intend,” “may,” “predict,” “project,” “target,” and similar terms and phrases, including references to assumptions, to identify forward-looking statements. These forward-looking statements are based on information available to us as of the date any such statements are made, and we assume no obligation to update these forward-looking statements. 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, 2014 and those described from time to time in our future reports filed with the Securities and Exchange Commission ("SEC").
OVERVIEW
Our summary operating results presented below are before the impact of income taxes and amounts attributable to noncontrolling interests.
General
We are a leading regional provider of digital wireless communications services to consumers and businesses primarily in Virginia and West Virginia, as well as parts of Maryland, North Carolina, Pennsylvania, Ohio and Kentucky. 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”.
Sale of Virginia East Spectrum and Wind Down of Eastern Markets
On December 2, 2014, we announced that we would focus our business operations exclusively in our Western Markets, as defined by our territories primarily in western Virginia and West Virginia, where we have experienced strong operating performance, have a favorable competitive position for our branded retail offering and where we benefit operationally and financially from our SNA with Sprint. In connection with this refocus, we entered into an agreement, on December 1, 2014, to sell our 1900 MHz PCS wireless spectrum licenses in our eastern Virginia and Outer Banks of North Carolina markets (“Eastern Markets”) to T-Mobile for $56.0 million. The transaction closed on April 15, 2015.

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In conjunction with the spectrum sale, we have begun to wind down our network and retail operations in our Eastern Markets. In order to facilitate the wind down, we entered into a lease agreement with T-Mobile which allows us to continue using the Eastern Market licenses for varying terms ranging from the closing date through November 15, 2015.
Due to the sale of our spectrum and the wind down of our Eastern Markets operations, we have experienced declines in our revenue and cost of sales and services. These declines are directly related to the accelerated decline of our subscriber base and elimination of new subscriber additions. In addition, customer and corporate operations expenses are down as we aggressively focus on cost containment associated with the wind down of the Eastern Markets operations. Accordingly, current year results are not comparable to prior periods.
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 portions of Pennsylvania, Kentucky, Maryland, Ohio and North Carolina with covered POPs of approximately 6.0 million, 3.1 million in our Western Markets. We believe our strategic focus in our Western Markets, 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. Our strategic marketing differentiator is based upon an approach of offering each customer The Best Value in Wireless, which we define as a robust nationwide coverage area, simple, flexible wireless rate plans, and popular wireless devices.
At March 31, 2015, our wireless retail business, including both our Western and Eastern Markets, had approximately 414,700 subscribers, representing a penetration of approximately 6.9% of our total covered population. Of the 414,700 total retail subscribers, total postpay subscribers were 294,300 at March 31, 2015 compared to 306,800 at March 31, 2014 and total prepay subscribers were 120,400 at March 31, 2015 compared to 161,200 at March 31, 2014.
In our Western Markets, our postpay subscriber base of 224,700 has increased by 6.8% from March 31, 2014 to March 31, 2015 and our prepay subscriber base of 65,400 has decreased by 2.1% 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.
On August 15, 2014 we launched our Equipment Installment Plan (“EIP”) which offers customers the option 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 than traditional plans. We have seen significant adoption rates by new and existing customers under the EIP program.
We are continuing to make network improvements, particularly within our existing service coverage areas, which includes upgrading our network to 4G LTE. At March 31, 2015, we had approximately 1.4 million LTE Covered POPs, or 44%, of our total 3.1 million covered POPs in our Western Markets.
Strategic Network Alliance
We are the exclusive PCS service provider and have contracted to exclusively provide LTE Services in our western Virginia and West Virginia service area (“SNA service area”), which is wholly within our Western Markets, for all Sprint Code Division Multiple Access (“CDMA”) and LTE wireless customers. In May 2014 we entered into an amended agreement to extend the SNA. Pursuant to the terms of the SNA, we are required to upgrade our network in the SNA service area to provide LTE Services. As part of the amendment we lease 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 sales and services, with the offsetting consideration recorded within wholesale and other revenue. Additionally, the amended SNA provides us 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 in the fixed fee element. We account for this fixed fee portion of 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.
For the three months ended March 31, 2015 and 2014, we realized wholesale revenues of $35.3 million and $40.2 million, respectively, of which $34.8 million and $39.3 million, respectively, related to the SNA.

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Towers Sale
In January 2015, we announced that we entered into a definitive agreement to sell up to 103 towers for approximately $43.0 million. The agreement provides that we will enter into long term lease agreements on the sold towers that are located in our Western Markets. During the three months ended March 31, 2015 we closed on the sale of 91 towers with net proceeds to us of approximately $38.8 million. We intend to sell and leaseback the remaining 12 towers during 2015. For additional information, see Note 14 of the Notes to the Unaudited Condensed Consolidated Financial Statements.

RESULTS OF OPERATIONS – OVERVIEW

Three-Month Results
Operating revenues decreased $1.9 million, or 1.6%, to $120.2 million for the three months ended March 31, 2015 compared to $122.1 million for the three months ended March 31, 2014 consisting of a $2.5 million increase in retail revenues and a $4.4 million decrease in wholesale and other revenues. Operating income increased $21.3 million, or 179.0%, to $33.2 million for the three months ended March 31, 2015 compared to $11.9 million for the three months ended March 31, 2014 reflecting the gain on sale of tower assets and reduction in operating expenses related to the wind down of our Eastern Markets. Income before income taxes increased $22.5 million to $25.3 million for the three months ended March 31, 2015 compared to $2.8 million for the three months ended March 31, 2014 for the reasons discussed above and a reduction in other expenses.
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, 2015 and 2014 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 Monthly Revenue per Account ("ARPA") to measure our postpay wireless performance. We use this measure, along with other performance metrics such as average billings per subscriber, subscribers, and churn, to gauge operating performance for which our operating managers are responsible and upon which we evaluate their performance.

Our postpay service plan, nControl, is customizable for families and individuals with multiple devices and facilitates the sharing of data, minutes and SMS allowances among these devices. As our customers continue to adopt these plans and add smartphone devices, we focus on ARPA as a key metric for postpay service revenue. We closely monitor the effects of new rate plans and service offerings on ARPA in order to determine their effectiveness. We believe ARPA provides management useful information concerning the appeal of our rate plans and service offerings and our performance in attracting and retaining high-value customers. ARPA as calculated below may not be similar to ARPA 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 operations.
The tables below provide a reconciliation of operating revenues to postpay subscriber revenues used to calculate Total ARPA and Western Markets ARPA for the three months ended March 31, 2015 and 2014.
Total ARPA
Three Months Ended March 31,
(Dollars in thousands, except ARPA)
2015

2014
Operating revenues
$
120,206


$
122,082

Less: prepay service revenues
(12,365
)

(16,960
)
Less: equipment revenues
(17,389
)

(7,491
)
Less: wholesale and other adjustments
(36,866
)

(40,018
)
Postpay service revenues
$
53,586


$
57,613





Account Statistics:



Postpay ARPA
$
125.98


$
137.47

Postpay accounts (1)
138,500


138,400

Postpay subscribers per account (1)
2.1


2.2


(1) End of period

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Western Markets ARPA
Three Months Ended March 31,
(Dollars in thousands, except ARPA)
2015
 
2014
Operating revenues
$
95,311

 
$
89,166

Less: prepay service revenues
(6,235
)
 
(6,700
)
Less: equipment revenues
(16,703
)
 
(4,556
)
Less: wholesale and other adjustments
(35,612
)
 
(40,139
)
Postpay service revenues
$
36,761

 
$
37,771

 
 
 
 
Account Statistics:
 
 
 
Postpay ARPA
$
122.04

 
$
136.60

Postpay accounts (1)
101,900

 
91,400

Postpay subscribers per account (1)
2.2

 
2.3


(1) End of period

ARPA in our Western Markets decreased for the three months ended March 31, 2015 as compared to the same period in 2014 as a result of pricing declines driven by the competitive environment and service plan discounts offered with EIP. We expect ARPA to continue to be under pressure as our competition stays focused on price incentives and due to increased acceptance of EIP with its associated service plan discounts.

Operating Revenues
Our revenues are generated from the following sources:
Retail – subscriber revenues from network access, data services, feature services and equipment sales; and
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.
Operating Expenses
Our operating expenses are categorized as follows:
Cost of sales and services – includes handset equipment costs to new and existing customers, 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;
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; accretion of asset retirement obligations;
Restructuring – includes one time separation charges and contract termination fees related to the exit of our Eastern Markets;
Depreciation and amortization – includes depreciable 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 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, state minimum tax assessments, 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 810-10-45-21, 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, 2015 and 2014. The VA Alliance made no capital distributions to the minority owners during the three months ended March 31, 2015 and 2014.

RESULTS OF OPERATIONS – COMPARISON OF THREE MONTHS ENDED MARCH 31, 2015 AND 2014
OPERATING REVENUES
The following table identifies our operating revenues for the three months ended March 31, 2015 and 2014:
 
 
Three Months Ended March 31,
 
 
 
 
(In thousands)
2015
 
2014
 
$ Variance
 
% Variance
Retail revenue
$
83,923

 
$
81,367

 
$
2,556

 
3.1
 %
Wholesale and other revenue
36,283

 
40,715

 
(4,432
)
 
(10.9
)%
Total operating revenues
$
120,206

 
$
122,082

 
$
(1,876
)
 
(1.5
)%

Retail Revenue
Retail revenue in our Western Markets improved $10.8 million, or 22.0%, due to an increase in equipment revenues of $12.1 million, or 266.5%, offset by a decrease in service revenue of $1.4 million, or 3.1%. Postpay service revenue decreased as a result of higher adoption rates of promotional pricing plans as a result of competitive pricing pressures and service plan discounts offered with EIP. Prepay service revenues decreased for the three months ended March 31, 2015, as compared to the same period in 2014, as a result of a decline in subscribers and revenue per unit driven by the competitive landscape. Equipment revenues increased for the three months ended March 31, 2015 reflecting an increase in retail pricing driven by continued smartphone adoption and the launch of EIP. The improvement in retail revenue in our Western Markets was offset by the decline in retail revenues of $8.2 million, or 25.3%, in our Eastern Markets as we wind down those operations.
Wholesale and Other Revenue
Wholesale and roaming revenues in our Western Markets decreased $4.6 million, or 11.5%, for the three months ended March 31, 2015 compared to the three months ended March 31, 2014, primarily reflecting a $4.5 million decrease in revenue from the SNA. This decrease is primarily the result of the amended terms of the SNA that took effect in May 2014. We expect this year over year trend to continue. Roaming revenues from carriers other than Sprint declined $0.2 million for the three months ended March 31, 2015 compared to the three months ended March 31, 2014.

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OPERATING EXPENSES
The following table identifies our operating expenses for the three months ended March 31, 2015 and 2014:
 
 
Three Months Ended March 31,
 
 
 
 
(In thousands)
2015
 
2014
 
$ Variance
 
% Variance
Cost of sales and services
$
53,293

 
$
51,758

 
$
1,535

 
3.0
 %
Customer operations
24,349

 
27,623

 
(3,274
)
 
(11.9
)%
Corporate operations
9,412

 
11,771

 
(2,359
)
 
(20.0
)%
Restructuring
2,008

 

 
2,008

 
 %
Depreciation and amortization
13,874

 
19,067

 
(5,193
)
 
(27.2
)%
Gain on sale of assets
(15,947
)
 

 
(15,947
)
 
 %
Total operating expenses
$
86,989

 
$
110,219

 
$
(23,230
)
 
(21.1
)%
Cost of Sales and Services – Cost of sales and services in our Western Markets increased $9.3 million, or 26.8%, for the three months ended March 31, 2015 compared to the three months ended March 31, 2014 due to a $7.2 million increase in equipment costs and a $1.2 million increase in non-cash spectrum lease expenses related to the SNA agreement. These increases were offset by a decrease in cost of sales and services of $7.7 million, or 44.9%, in our Eastern Markets as we wind down those operations.
Customer Operations – Customer operations expense in our Western Market increased $3.5 million, or 22.0%, for the three months ended March 31, 2015 compared to the three months ended March 31, 2014 driven by an increase in advertising and marketing costs of $0.9 million, or 26.7%, and an increase in other general selling expenses of $2.7 million, or 20.9%. These increases were offset by a decrease in customer operations of $6.8 million, or 58.7%, in our Eastern Markets due to the cost containment and wind down of those operations.
Corporate Operations – Corporate operations expense in our Western Markets increased $0.9 million, or 11.7%, for the three months ended March 31, 2015 compared to the three months ended March 31, 2014. There was a decrease in corporate operations of $3.3 million, or 80.5%, in our Eastern Markets due to the cost containment and wind down of those operations.
Restructuring – Restructuring expense was $2.0 million for the three months ended March 31, 2015 due primarily to severance charges and contract termination fees associated with the wind down of the business in the Eastern Markets. We will continue to incur restructuring charges throughout 2015 as we continue the wind down.
Depreciation and Amortization – Depreciation and amortization expenses decreased $5.2 million, or 27.2%, for the three months ended March 31, 2015 compared to the three months ended March 31, 2014 due to the write down and abandonment of property, plant, and equipment recorded in the fourth quarter of 2014 in our Eastern Markets due to the spectrum sale.
Gain on sale of assets – Gain on sale of assets was $15.9 million, for the three months ended March 31, 2015 due to the sale of tower assets.
OTHER EXPENSE
Interest expense remained constant for the three months ended March 31, 2015 compared to the three months ended March 31, 2014.
Other expenses decreased $1.1 million primarily as a result of a $0.9 million charge related to the write off of a proportionate amount of the unamortized deferred debt issuance cost associated with the refinancing in January 2014.

INCOME TAXES
Income tax expense for the three months ended March 31, 2015 and 2014 was $10.0 million and $1.1 million, respectively, representing the statutory tax rate applied to pre-tax income and the effects of certain non-deductible compensation, non-controlling interest, and state minimum taxes. 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.


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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, 2015, we had $103.4 million of cash, compared to $73.5 million as of December 31, 2014, of which $54.5 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 $48.9 million was held in non-interest bearing accounts. The commercial bank that held substantially all of our cash at March 31, 2015 has a rating of A1 on long term deposits by Moody’s. Our working capital (current assets minus current liabilities) was $144.3 million as of March 31, 2015 compared to $108.6 million as of December 31, 2014.
As of March 31, 2015, we had $654.6 million in aggregate long-term liabilities, compared to $629.4 million as of December 31, 2014, consisting of $518.4 million in long-term debt, including capital lease obligations, and approximately $136.2 million in other long-term liabilities consisting primarily of retirement benefits, deferred income taxes and asset retirement obligations. Further information regarding long-term debt obligations at March 31, 2015 is provided in Note 7 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 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, 2015 there was no excess cash flow. The balance of the Restricted Payments basket as of March 31, 2015 was $66.6 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, 2015, there were no commitments associated with the Incremental Commitments and the leverage ratio for the Company was 4.32:1.00.
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, 2015 and 2013, respectively: 
 
Three Months Ended March 31,
(In thousands)
2015
 
2014
Net cash provided by operating activities
$
15,438

 
$
18,494

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

 
(11,414
)
Net cash provided by/(used in) financing activities
(1,421
)
 
25,517


Operating Activities
Our cash flows from operating activities for the three months ended March 31, 2015 of $15.4 million decreased $3.1 million, or 16.5%, compared to the cash flows from operating activities of $18.5 million for the three months ended March 31, 2014. Our operating income, exclusive of non-cash items such as depreciation and amortization and gain on sale of assets, decreased compared to prior year. Net changes in working capital further decreased cash provided by operating activities. The decrease is primarily due to an increase in accounts receivable resulting from EIP sales and an increase in inventory.
 

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Investing Activities
As we continue to upgrade our network, we invested $22.9 million in capital expenditures for the three months ended March 31, 2015. This was an increase of $8.9 million compared to the $14.0 million of capital expenditures for the same period last year. Included in the capital spending for the three months ended March 31, 2015 was $21.4 million of expenditures for additional capacity to support our projected growth, and $1.5 million to maintain our existing networks and other business needs. These capital expenditures were offset by net proceeds of $38.8 million from the sale of our tower assets. We currently expect capital expenditures for full year 2015 to be between $95.0 million to $105.0 million.
Financing Activities
Net cash used in financing activities for the three months ended March 31, 2015 was $1.4 million compared to net cash provided by financing activities of $25.5 million for the three months ended March 31, 2014, which reflected $1.4 million of principal payments on the long term debt. Included in the financing activity for the three months ended March 31, 2014 was $39.5 million net proceeds from the January 2014 debt refinancing, offset by $9.0 million in cash dividends, $3.6 million in debt issuance costs and $1.4 million of principal payments on the long term debt.
We believe that our current cash balances of $103.4 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.

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 $527.0 million at March 31, 2015. 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 $0.8 million as of March 31, 2015.
In February 2013, we purchased an interest rate cap for $0.9 million with a notional amount of $350.0 million. The interest rate cap reduces our exposure to changes in the three-month Eurodollar rate by capping the rate at 1.0%. The interest rate cap agreement expires in August 2015.
At March 31, 2015, our financial assets included cash of $103.4 million and restricted cash of $2.2 million. Securities and investments totaled $1.5 million at March 31, 2015.

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, 2015, 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
$
523,330

 
$
450,580

 
$
465,740

 
$
428,813

Capital lease obligations
834

 
834

 
917

 
750

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, 2015, 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, 2015 we had approximately $54.5 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.
 

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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, 2015 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.
Item 1A. Risk Factors.
In addition to the other information set forth in this quarterly report 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, 2014, 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, 2015 under the authorization. The approximate dollar value of shares that may yet be purchased under the plan was $23.1 million at March 31, 2015. 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 2015 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
January 1 - 31, 2015
3,755

 
4.19

 

 

March 1 - 31, 2015
4,299

 
5.48

 

 

Total
8,054

 
4.88

 

 

1

 
During the three months ended March 31, 2015, 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.

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Item 6.
Exhibits.
 
Exhibit
No.
  
Description
 
 
31.1*
  
Certification of Rodney D. Dir, President and Chief Executive Officer, Pursuant to Rule 13a-14(a).
 
 
31.2*
  
Certification of Stebbins B. Chandor Jr., Executive Vice President and Chief Financial Officer, Treasurer and Asst. Secretary, Pursuant to Rule 13a-14(a).
 
 
32.1*
  
Certification of Rodney D. Dir, 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 Stebbins B. Chandor Jr., Executive Vice President and Chief Financial Officer, Treasurer and Asst. Secretary, 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.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
NTELOS HOLDINGS CORP.
 
 
 
Dated: May 1, 2015
By:
/s/ Rodney D. Dir
 
 
Rodney D. Dir
 
 
President and Chief Executive Officer
 
 
(Principal Executive Officer)
 
 
 
Dated: May 1, 2015
By:
/s/ Stebbins B. Chandor Jr.
 
 
Stebbins B. Chandor Jr.
 
 
Executive Vice President and Chief Financial Officer, Treasurer and Asst. Secretary
 
 
(Principal Financial Officer)
 
 
 
Dated: May 1, 2015
By:
/s/ John Turtora
 
 
John Turtora
 
 
Vice President and Controller
 
 
(Principal Accounting Officer)

29