SHAREHOLDERS' EQUITY

12 Months Ended

Dec. 31, 2022

SHAREHOLDERS' EQUITY

SHAREHOLDERS' EQUITY

12.SHAREHOLDERS’ EQUITY

Common Stock Dividends

On April 25, 2019, we announced the elimination of the payment of quarterly dividends on our stock beginning in the second quarter of 2019.  Future dividend payments, if any, are at the discretion of our Board of Directors.  Changes in our dividend program will depend on our earnings, capital requirements, financial condition, debt covenant compliance, expected cash needs and other factors considered relevant by our Board of Directors.

Share-based Compensation

Our Board of Directors may grant share-based awards from our shareholder approved Consolidated Communications Holdings, Inc. Long-Term Incentive Plan, as amended and restated (the “Plan”).  The Plan permits the issuance of awards in the form of stock options, stock appreciation rights, stock grants and stock unit grants to eligible directors and employees at the discretion of the Compensation Committee of the Board of Directors.  On April 26, 2021, the shareholders approved an amendment to the Plan to increase by 5,400,000 shares the number of shares of our common stock authorized for issuance under the Plan and extend the term of the Plan through April 30, 2028.  With the amendment, approximately 10,050,000 shares of our common stock are authorized for issuance under the Plan, provided that no more than 300,000 shares may be granted in the form of stock options or stock appreciation rights to any eligible employee or director in any calendar year.  Unless terminated sooner, the Plan will continue in effect until April 30, 2028.

We measure the fair value of RSAs based on the market price of the underlying common stock on the date of grant.  We recognize the expense associated with RSAs on a straight-line basis over the requisite service period, which generally ranges from immediate vesting to a four-year vesting period.

We implemented an ongoing performance-based incentive program under the Plan. The performance-based incentive program provides for annual grants of PSAs.  PSAs are restricted stock that are issued, to the extent earned, at the end of each annual performance cycle. Under the performance-based incentive program, each participant is given a target award expressed as a number of shares, with a payout opportunity ranging from 0% to 120% of the target, depending on performance relative to predetermined goals. An estimate of the number of PSAs that are expected to vest is made, and the fair value of the PSAs is expensed utilizing the fair value on the date of grant over the requisite service period. The awards generally vest ratably over a four-year vesting period.

Pursuant to the performance-based incentive program, PSAs issued to certain senior executives entitle the executives to earn shares depending on the level of attainment of the predetermined performance goals over a three-year performance period, with payouts ranging from 0% to 150% of the target for PSAs issued in 2022 and from 0% to 120% for PSAs issued in 2021 and 2020. The earned PSAs are then subject to possible adjustment based on our total shareholder return relative to our peer group over the same performance period, which may increase or decrease the number of shares actually awarded by up to 25%. The fair value of these awards are initially measured on the grant date using estimated payout levels derived from a Monte Carlo simulation model. The awards vest in the month following the end of the of the three-year performance period.

The following table summarizes grants of RSAs and PSAs under the Plan during the years ended December 31, 2022, 2021 and 2020:

	Year Ended December 31,
		Grant Date			Grant Date			Grant Date
	2022	Fair Value		2021	Fair Value		2020	Fair Value
RSAs Granted	1,031,999	$	4.70	941,748	$	7.51	863,710	$	6.30
PSAs Granted	904,435	$	7.52	788,054	$	6.31	240,669	$	9.86
Total	1,936,434			1,729,802			1,104,379

The following table summarizes the RSA and PSA activity during the year ended December 31, 2022:

	RSAs			PSAs
		Weighted			Weighted
		Average Grant			Average Grant
	Shares	Date Fair Value		Shares	Date Fair Value
Non-vested shares outstanding - December 31, 2021	1,069,817	$	7.34	920,010	$	7.40
Shares granted	1,031,999	$	4.70	904,435	$	7.52
Shares vested	(839,609)	$	6.31	(309,387)	$	9.18
Shares forfeited, cancelled or retired	(76,227)	$	6.31	(51,000)	$	8.20
Non-vested shares outstanding - December 31, 2022	1,185,980	$	5.84	1,464,058	$	7.07

The total fair value of the RSAs and PSAs that vested during the years ended December 31, 2022, 2021 and 2020 was $8.1 million, $7.3 million and $6.4 million, respectively.

Share-based Compensation Expense

The following table summarizes total compensation costs recognized for share-based payments during the years ended December 31, 2022, 2021 and 2020:

	Year Ended December 31,
(In thousands)	2022		2021		2020
Restricted stock	$	5,296	$	5,478	$	4,597
Performance shares		5,459		4,619		2,936
Total	$	10,755	$	10,097	$	7,533

Income tax benefits related to share-based compensation of approximately $2.8 million, $2.6 million and $2.0 million were recorded for the years ended December 31, 2022, 2021 and 2020, respectively.  Share-based compensation expense is included in “selling, general and administrative expenses” in the accompanying consolidated statements of operations.

As of December 31, 2022, total unrecognized compensation cost related to non-vested RSAs and PSAs was $12.4 million and will be recognized over a weighted-average period of approximately 1.6 years.

Accumulated Other Comprehensive Income (Loss)

The following table summarizes the changes in accumulated other comprehensive income (loss), net of tax, by component during 2022 and 2021:

	Pension and
	Post-Retirement		Derivative
(In thousands)	Obligations		Instruments		Total
Balance at December 31, 2020	$	(90,887)	$	(18,531)	$	(109,418)
Other comprehensive gain before reclassifications		33,344		868		34,212
Amounts reclassified from accumulated other comprehensive loss		5,444		10,191		15,635
Net current period other comprehensive income (loss)		38,788		11,059		49,847
Balance at December 31, 2021	$	(52,099)	$	(7,472)	$	(59,571)
Other comprehensive gain before reclassifications		47,123		10,879		58,002
Amounts reclassified from accumulated other comprehensive loss		(762)		1,721		959
Net current period other comprehensive income		46,361		12,600		58,961
Balance at December 31, 2022	$	(5,738)	$	5,128	$	(610)

The following table summarizes reclassifications from accumulated other comprehensive loss during 2022 and 2021:

	Year Ended December 31,				Affected Line Item in the
(In thousands)	2022		2021		Statement of Income
Amortization of pension and post-retirement items:
Prior service credit	$	777	$	779	(a)
Actuarial gain (loss)		254		(2,309)	(a)
Settlement loss		—		(5,864)	(a)
		1,031		(7,394)	Total before tax
		(269)		1,950	Tax (expense) benefit
	$	762	$	(5,444)	Net of tax
Loss on cash flow hedges:
Interest rate derivatives	$	(2,328)	$	(13,964)	Interest expense
		607		3,773	Tax benefit
	$	(1,721)	$	(10,191)	Net of tax

(a) These items are included in the components of net periodic benefit cost for our pension and post-retirement benefit plans. See Note 13 for additional details.