##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the Quarterly Period Ended March 31, 2009
 or
 o
    
    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 000-51446
 CONSOLIDATED COMMUNICATIONS HOLDINGS, INC.
  Delaware
    
    02-0636095(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)
 121 South 17 th Street  Mattoon, Illinois 61938-3987
   Yes þ No o
 Yes o No o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 Yes o No þ




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##### 



PART I. FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    3Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    18Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    32Item 4. Controls and Procedures
    
    
    33PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    34Item 6. Exhibits
    
    
    34Signatures
    
    
    35Exhibit Index
    
    
    36Exhibit 31.1Exhibit 31.2Exhibit 32.1
   2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 Consolidated Communications Holdings, Inc.
Condensed Consolidated Statements of Income  (Dollars in thousands, except per share amounts)
(Unaudited)
 Three Months EndedMarch 31,2009
    
    
    2008Revenues
    
    $
    101,710
    
    
    $
    105,414Operating expenses:Cost of services and products
(exclusive of depreciation and
amortization shown separately below)
    
    
    36,100
    
    
    
    33,863Selling, general and administrative expenses
    
    
    27,877
    
    
    
    28,144Depreciation and amortization
    
    
    21,677
    
    
    
    22,871Income from operations
    
    
    16,056
    
    
    
    20,536Other income (expense):Interest income
    
    
    22
    
    
    
    224Interest expense
    
    
    (14,492
    )
    
    
    (18,278
    )Investment income
    
    
    5,048
    
    
    
    4,362Other, net
    
    
    (551
    )
    
    
    15Income before income taxes
    
    
    6,083
    
    
    
    6,859Income tax expense
    
    
    2,386
    
    
    
    2,878Net income
    
    
    3,697
    
    
    
    3,981Less: Net income attributable to noncontrolling interest
    
    
    407
    
    
    
    272Net income attributable to Consolidated Communications
Holdings, Inc.
    
    $
    3,290
    
    
    $
    3,709Net income
per share attributable to Consolidated Communications Holdings, Inc.
common stockholders Basic and Diluted
    
    $
    0.11
    
    
    $
    0.13Cash dividends declared per common share
    
    $
    0.39
    
    
    $
    0.39
   3




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##### Table of Contents



Consolidated Communications Holdings, Inc.
Condensed Consolidated Balance Sheets  (Dollars in thousands, except share and per share amounts)
 March 31,
    
    
    December 31,2009
    
    
    2008(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    13,347
    
    
    $
    15,471Accounts receivable, net of allowance of $1,724
and $1,908, respectively
    
    
    45,589
    
    
    
    45,092Inventories
    
    
    7,373
    
    
    
    7,482Deferred income taxes
    
    
    3,600
    
    
    
    3,600Prepaid expenses and other current assets
    
    
    6,926
    
    
    
    6,931Total current assets
    
    
    76,835
    
    
    
    78,576Property, plant and equipment, net
    
    
    393,377
    
    
    
    400,286Intangibles and other assets:Investments
    
    
    95,417
    
    
    
    95,657Goodwill
    
    
    520,562
    
    
    
    520,562Customer lists, net
    
    
    118,707
    
    
    
    124,249Tradenames
    
    
    14,291
    
    
    
    14,291Deferred financing costs and other assets
    
    
    7,609
    
    
    
    8,005Total assets
    
    $
    1,226,798
    
    
    $
    1,241,626LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of capital lease obligations
    
    $
    939
    
    
    $
    922Current portion of pension and postretirement benefit obligations
    
    
    2,960
    
    
    
    2,960Accounts payable
    
    
    10,153
    
    
    
    12,336Advance billings and customer deposits
    
    
    22,278
    
    
    
    19,102Dividends payable
    
    
    11,394
    
    
    
    11,388Accrued expenses
    
    
    25,900
    
    
    
    24,584Total current liabilities
    
    
    73,624
    
    
    
    71,292Capital lease obligations less current portion
    
    
    103
    
    
    
    344Long-term debt
    
    
    880,000
    
    
    
    880,000Deferred income taxes
    
    
    56,190
    
    
    
    58,134Pension and postretirement benefit obligations
    
    
    100,471
    
    
    
    107,741Other liabilities
    
    
    46,994
    
    
    
    48,830Total liabilities
    
    
    1,157,382
    
    
    
    1,166,341Equity:Consolidated Communications Holdings, Inc. stockholders equity:Common stock, $0.01 par value, 100,000,000 shares,
authorized, 29,645,467 and 29,488,408 issued and
outstanding, respectively
    
    
    295
    
    
    
    295Paid in capital
    
    
    121,507
    
    
    
    129,284Accumulated deficit
    
    
    
    
    
    
    Accumulated other comprehensive loss
    
    
    (57,978
    )
    
    
    (59,479
    )Total Consolidated Communications Holdings, Inc. stockholders equity
    
    
    63,824
    
    
    
    70,100Noncontrolling interest
    
    
    5,592
    
    
    
    5,185Total equity
    
    
    69,416
    
    
    
    75,285Total liabilities and stockholders equity
    
    $
    1,226,798
    
    
    $
    1,241,626
   4




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##### Table of Contents



Consolidated Communications Holdings, Inc.
Consolidated Statements of Cash Flows  (Dollars in thousands)
(Unaudited)
 Three
Months Ended March 31,2009
    
    
    2008OPERATING ACTIVITIESNet income
    
    $
    3,697
    
    
    $
    3,981Adjustments to reconcile net income to cash
provided by operating activities:Depreciation and amortization
    
    
    21,677
    
    
    
    22,871Deferred income tax
    
    
    (1,944
    )
    
    
    (2,878
    )Partnership income
    
    
    169
    
    
    
    293Non-cash stock compensation
    
    
    433
    
    
    
    384Amortization of deferred financing costs
    
    
    332
    
    
    
    493Changes in operating assets and liabilities:Accounts receivable
    
    
    (797
    )
    
    
    (3,249
    )Inventories
    
    
    109
    
    
    
    (238
    )Other assets
    
    
    974
    
    
    
    2,314Accounts payable
    
    
    (2,183
    )
    
    
    (1,252
    )Accrued expenses and other liabilities
    
    
    (3,113
    )
    
    
    2,314Net cash provided by operating activities
    
    
    19,354
    
    
    
    25,033INVESTING ACTIVITIESProceeds from sale of assets
    
    
    300
    
    
    
    Capital expenditures
    
    
    (10,157
    )
    
    
    (13,285
    )Net cash used in investing activities
    
    
    (9,857
    )
    
    
    (13,285
    )FINANCING ACTIVITIESPayment of deferred financing costs
    
    
    
    
    
    
    (181
    )Payment of capital lease obligation
    
    
    (224
    )
    
    
    (246
    )Purchase and retirement of common stock
    
    
    (9
    )
    
    
    (8
    )Dividends on common stock
    
    
    (11,388
    )
    
    
    (11,359
    )Net cash used in financing activities
    
    
    (11,621
    )
    
    
    (11,794
    )Net decrease in cash and cash equivalents
    
    
    (2,124
    )
    
    
    (46
    )Cash and cash equivalents at beginning of period
    
    
    15,471
    
    
    
    34,341Cash and cash equivalents at end of period
    
    $
    13,347
    
    
    $
    34,295
   5




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##### Table of Contents



Consolidated Communications Holdings, Inc.
Condensed Consolidated Statement of Changes in Stockholders Equity
Three Months Ended March 31, 2009  (Dollars in thousands)
(Unaudited)
 Consolidated Communications Holdings, Inc. Stockholders EquityAccumulatedOtherCommon Stock
    
    
    
    
    
    
    Accumulated
    
    
    Comprehensive
    
    
    NoncontrollingShares
    
    
    Amount
    
    
    Paid in Capital
    
    
    Deficit
    
    
    Loss
    
    
    Interest
    
    
    TotalBalance, January 1, 2009
    
    
    29,488,408
    
    
    $
    295
    
    
    $
    129,284
    
    
    $
    
    
    
    $
    (59,479
    )
    
    $
    5,185
    
    
    $
    75,285Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,290
    
    
    
    
    
    
    
    407
    
    
    
    3,697Dividends on common stock
    
    
    
    
    
    
    
    
    
    
    (8,104
    )
    
    
    (3,290
    )
    
    
    
    
    
    
    
    
    
    
    (11,394
    )Shares issued under employee
plan, net of forfeitures
    
    
    157,991
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-cash stock compensation
    
    
    
    
    
    
    
    
    
    
    433
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    433Purchase and retirement of common stock
    
    
    (932
    )
    
    
    
    
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9
    )Pension tax adjustment
    
    
    
    
    
    
    
    
    
    
    (97
    )
    
    
    
    
    
    
    97
    
    
    
    
    
    
    
    Change in prior service cost and net loss, net of $159 of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    260
    
    
    
    
    
    
    
    260Change in
fair value of cash flow hedges, net of $659 of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,144
    
    
    
    
    
    
    
    1,144Balance, March 31, 2009
    
    
    29,645,467
    
    
    $
    295
    
    
    $
    121,507
    
    
    $
    
    
    
    $
    (57,978
    )
    
    $
    5,592
    
    
    $
    69,416
   6




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CONSOLIDATED COMMUNICATIONS HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three months ended March 31, 2009 and 2008  (Dollars in thousands, except share and per share amounts)
 1. Description of Business
  2. Presentation of Interim Financial Statements
   3. Recent Accounting Pronouncements
    7




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4. Goodwill and Customer Lists
  March 31,
    
    
    December 31,2009
    
    
    2008Telephone Operations
    
    $
    519,428
    
    
    $
    519,428Other Operations
    
    
    1,134
    
    
    
    1,134$
    520,562
    
    
    $
    520,562
  8




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March 31,
    
    
    December 31,2009
    
    
    2008Gross carrying amount
    
    $
    205,648
    
    
    $
    205,648Less: accumulated amortization
    
    
    (86,941
    )
    
    
    (81,399
    )Net carrying amount
    
    $
    118,707
    
    
    $
    124,249
   5. Summarized Financial Information for Significant Investments
  Three Months EndedMarch 31,2009
    
    
    2008Total revenues
    
    $
    27,707
    
    
    $
    25,162Income from operations
    
    $
    6,384
    
    
    $
    5,471Income before income taxes
    
    $
    6,520
    
    
    $
    5,572Net income
    
    $
    6,520
    
    
    $
    5,572
 6. Pension Costs and Other Postretirement Benefits
     9




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Pension Benefits
    
    
    Other Benefits2009
    
    
    2008
    
    
    2009
    
    
    2008Three months ended March 31,Service cost
    
    $
    528
    
    
    $
    546
    
    
    $
    217
    
    
    $
    253Interest cost
    
    
    2,789
    
    
    
    2,805
    
    
    
    579
    
    
    
    631Expected return on plan assets
    
    
    (2,355
    )
    
    
    (3,255
    )
    
    
    
    
    
    
    Amortization prior service costs
    
    
    (11
    )
    
    
    (3
    )
    
    
    (241
    )
    
    
    (159
    )Amortization net (gain) loss
    
    
    676
    
    
    
    8
    
    
    
    (5
    )
    
    
    13Net periodic benefit cost
    
    $
    1,627
    
    
    $
    101
    
    
    $
    550
    
    
    $
    738
   7. Long-Term Debt
  March 31,
    
    
    December 31,2009
    
    
    2008Senior Secured Credit FacilityRevolving loan
    
    $
    
    
    
    $
    Term loan
    
    
    880,000
    
    
    
    880,000Obligations under capital lease
    
    
    1,042
    
    
    
    1,266881,042
    
    
    
    881,266Less: current portion
    
    
    (939
    )
    
    
    (922
    )$
    880,103
    
    
    $
    880,344
   10




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8. Derivative Instruments
 Accounting for Derivative
Instruments and Hedging Activities
   11




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Classification as of
    
    
    
    
    
    Classification as ofMarch 31, 2009
    
    Fair Value
    
    
    December 31, 2008
    
    Fair ValueOther Liabilities
    
    $
    46,083
    
    
    Other Liabilities
    
    $
    47,908
   For the three months endedMarch 31, 2009
    
    
    March 31, 2008Gain (loss) recognized in OCI on the
effective portion of the derivatives,
net of tax
    
    $
    1,144
    
    
    $
    (13,220
    )Loss reclassified from Accumulated OCI
into Interest Expense (Effective
Portion)
    
    
    2,855
    
    
    
    Gain recognized in Interest Expense on
the ineffective portion of the
derivatives
    
    
    22
    
    
    
    
   9. Fair Value Measurements
   12




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Fair Value Measurements at Reporting Date UsingQuoted Prices
    
    
    Significantin Active
    
    
    Other
    
    
    SignificantMarkets for
    
    
    Observable
    
    
    UnobservableMarch 31,
    
    
    Identical Assets
    
    
    Inputs
    
    
    InputsDescription
    
    2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Interest Rate Derivatives
    
    $
    46,083
    
    
    
    
    
    
    
    
    
    
    $
    46,083
  MeasurementsUsing SignificantUnobservableInputs (Level 3)Interest RateDerivativesBalance at December 31, 2008
    
    $
    47,908Settlements
    
    
    (7,355
    )Total gains or losses (realized/unrealized)Unrealized gain included in earnings
    
    
    (22
    )Unrealized loss included in other
comprehensive loss
    
    
    5,552Balance at March 31, 2009
    
    $
    46,083The amount of total gain for
the period included in earnings
as a component of interest expense
    
    $
    22
 10. Restricted Share Plan
  Restricted shares outstanding, December 31, 2008
    
    
    105,528Shares granted
    
    
    157,991Shares vested
    
    
    (7,202
    )Shares forfeited or retired
    
    
    Restricted shares outstanding, March 31, 2009
    
    
    256,317
  13




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11. Contingencies
    12. Income Taxes
    14




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13. Net Income per Common Share
  Three Months EndedMarch 31,2009
    
    
    2008Basic:Net income attributable to Consolidated
Communications Holdings, Inc.
    
    $
    3,290
    
    
    $
    3,709Weighted average number of common
shares outstanding
    
    
    29,386,386
    
    
    
    29,314,511Net income per common share
    
    $
    0.11
    
    
    $
    0.13Diluted:Net income attributable to Consolidated
Communications Holdings, Inc.
    
    $
    3,290
    
    
    $
    3,709Weighted average number of common
shares outstanding
    
    
    29,565,311
    
    
    
    29,499,849Net income per common share
    
    $
    0.11
    
    
    $
    0.13
   15




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14. Comprehensive Income
  Three Months EndedMarch 31,2009
    
    
    2008Net income
    
    $
    3,697
    
    
    $
    3,981Other comprehensive income (loss):Prior service cost and net loss, net of tax
    
    
    260
    
    
    
    (90
    )Change in fair value of cash flow hedges,
net of tax
    
    
    1,144
    
    
    
    (13,220
    )Total other comprehensive income (loss), net of
tax
    
    
    1,404
    
    
    
    (13,310
    )Comprehensive income (loss)
    
    
    5,101
    
    
    
    (9,329
    )Less: Comprehensive income attributable to
noncontrolling interest
    
    
    407
    
    
    
    272Comprehensive income (loss) attributable to
Consolidated Communications Holdings, Inc.
    
    $
    4,694
    
    
    $
    (9,601
    )
 15. Discontinuance of the application of SFAS No. 71, Accounting for the Effects of Certain
Types of Regulation
    16




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16. Business Segments
  Three Months EndedMarch 31,2009
    
    
    2008Operating revenuesTelephone Operations
    
    $
    91,695
    
    
    $
    94,974Other Operations
    
    
    10,015
    
    
    
    10,440Total
    
    $
    101,710
    
    
    $
    105,414Operating income (loss)Telephone Operations
    
    $
    16,028
    
    
    $
    20,853Other Operations
    
    
    28
    
    
    
    (317
    )Total
    
    
    16,056
    
    
    
    20,536Interest income
    
    
    22
    
    
    
    224Interest expense
    
    
    (14,492
    )
    
    
    (18,278
    )Investment income
    
    
    5,048
    
    
    
    4,362Other, net
    
    
    (551
    )
    
    
    15Income before income taxes
    
    $
    6,083
    
    
    $
    6,859
  17




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 We present below Managements Discussion and Analysis of Financial Condition and Results of
Operations of Consolidated Communications Holdings, Inc. and its subsidiaries on a consolidated
basis. The following discussion should be read in conjunction with our historical financial
statements and related notes contained elsewhere in this Report.
 Consolidated Communications or the Company refers to Consolidated Communications Holdings,
Inc. alone or with its wholly owned subsidiaries, as the context requires. When this report uses
the words we, our, or us, they refer to the Company and its subsidiaries.
 Forward-Looking Statements
  
    
    various risks to stockholders of not receiving dividends and risks to our ability to
pursue growth opportunities if we continue to pay dividends according to our current
dividend policy;
 
    
    the current volatility in economic conditions and the financial markets;
 
    
    adverse changes in the value of assets or obligations associated with our employee
benefit plans;
 
    
    various risks to the price and volatility of our common stock;
 
    
    our substantial amount of debt and our ability to incur additional debt in the future;
 
    
    our need for a significant amount of cash to service and repay our debt and to pay
dividends on our common stock;
 
    
    restrictions contained in our debt agreements that limit the discretion of our
management in operating our business;
 
    
    the ability to refinance our existing debt as necessary;
 
    
    rapid development and introduction of new technologies and intense competition in the
telecommunications industry;
 
    
    risks associated with our possible pursuit of future acquisitions;
 
    
    the integration of the Company and North Pittsburgh;
 
    
    the length and severity of weakened economic conditions in our service areas in
Illinois, Texas and Pennsylvania;
 
    
    system failures;
 
    
    loss of large customers or government contracts;
 
    
    risks associated with the rights-of-way for our network;
 
    
    disruptions in our relationship with third party vendors;
  18




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##### Table of Contents




    
    loss of key management personnel and the inability to attract and retain highly
qualified management and personnel in the future;
 
    
    changes in the extensive governmental legislation and regulations governing
telecommunications providers, the provision of telecommunications services and access
charges and subsidies, which are a material part of our revenues;
 
    
    telecommunications carriers disputing and/or avoiding their obligations to pay network
access charges for use of our network;
 
    
    high costs of regulatory compliance;
 
    
    the competitive impact of legislation and regulatory changes in the telecommunications
industry;
 
    
    liability and compliance costs regarding environmental regulations; and
 
    
    the additional risk factors outlined in Part I  Item 1A  Risk Factors incorporated
by reference from our Annual Report on Form 10-K for the fiscal year ended December 31,
2008, and the other documents that we file with the SEC from time to time that could cause
our actual results to differ from our current expectations and from the forward-looking
statements discussed in this Report.
  Overview
  Acquisition of North Pittsburgh and new credit facility
    19




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Redemption of senior notes
  Discontinuance of the application of SFAS No. 71, Accounting for the Effects of Certain Types of
Regulation
   Factors affecting results of operations
 Revenues
 Telephone Operations and Other Operations.
 Local access lines and bundled services.
  20




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
    
    aggressively promoting DSL service, including selling DSL as a stand-alone offering;
 
    
    bundling value-adding services, such as DSL or IPTV, with a combination of local
service and custom calling features;
    
    maintaining excellent customer service standards; and
    
    keeping a strong local presence in the communities we serve.
   
    
    hosted digital telephone service in certain Texas and Pennsylvania markets to meet the
needs of small- to medium-sized business customers that want robust function without
having to purchase a traditional key or PBX phone system;
 
    
    Digital telephone service for residential customers, which is being offered to our
Texas, Illinois and Pennsylvania customers as a growth opportunity and as an alternative
to the traditional phone line for customers who are considering a switch to a cable
competitor;
 
    
    DSL serviceeven to users who do not have our access linewhich expands our customer
base and creates additional revenue-generating opportunities;
    
    a DSL product with speeds up to 10 Mbps for those customers desiring greater Internet speed; and
    
    High definition video service and digital video recorders in all of our IPTV markets.
    21




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March 31,
    
    
    December 31,
    
    
    March 31,2009
    
    
    2008
    
    
    2008Local access lines in service:Residential
    
    
    156,935
    
    
    
    162,067
    
    
    
    179,864Business
    
    
    102,852
    
    
    
    102,256
    
    
    
    102,777Total local access lines
    
    
    259,787
    
    
    
    264,323
    
    
    
    282,641Digital telephone subscribers
    
    
    7,141
    
    
    
    6,510
    
    
    
    2,938IPTV subscribers
    
    
    18,207
    
    
    
    16,666
    
    
    
    13,026ILEC DSL subscribers
    
    
    94,554
    
    
    
    91,817
    
    
    
    84,313Broadband Connections
    
    
    119,902
    
    
    
    114,993
    
    
    
    100,277CLEC Access Line Equivalents (1)
    
    
    73,737
    
    
    
    74,687
    
    
    
    72,827Total connections
    
    
    453,426
    
    
    
    454,003
    
    
    
    455,745Long distance lines (2)
    
    
    165,892
    
    
    
    165,953
    
    
    
    167,360Dial-up subscribers
    
    
    3,612
    
    
    
    3,957
    
    
    
    6,042
 (1)
    
    CLEC access line equivalents represent a combination of voice services and data circuits.
The calculations represent a conversion of data circuits to an access
line basis. Equivalents are calculated by converting data circuits (basic rate interface, primary rate
interface, DSL, DS-1, DS-3 and Ethernet) and SONET-based
(optical) services (OC-3 and OC-48) to the equivalent of an access line.(2)
    
    Reflects the inclusion of long distance service provided as part of our VOIP offering while
excluding CLEC long distance subscribers. Network Access and Subsidy Revenues.
  Expenses
  Cost of services and products
 
    
    operating expenses relating to plant costs, including those related to the network and
general support costs, central office switching and transmission costs, and cable and wire
facilities;
 
    
    general plant costs, such as testing, provisioning, network, administration, power, and
engineering; and
 
    
    the cost of transport and termination of long distance and private lines outside our
rural telephone companies service area.
  22




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Selling, general and administrative expenses
    Depreciation and amortization expenses.
  YearsBuildings
    
    
    18-40Network and outside plant facilities
    
    
    3-50Furniture, fixtures and equipment
    
    
    3-15Capital Leases
    
    
    11
   23




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##### Table of Contents



Three Months Ended March 31,2009
    
    
    2008% of Total
    
    
    
    
    
    
    % of Total$ (millions)
    
    
    Revenues
    
    
    $ (millions)
    
    
    RevenuesRevenuesTelephone OperationsLocal calling services
    
    $
    24.7
    
    
    
    24.3
    %
    
    $
    27.0
    
    
    
    25.6
    %Network access services
    
    
    22.0
    
    
    
    21.6
    
    
    
    24.5
    
    
    
    23.2Subsidies
    
    
    14.1
    
    
    
    13.9
    
    
    
    13.8
    
    
    
    13.1Long distance services
    
    
    5.5
    
    
    
    5.4
    
    
    
    6.2
    
    
    
    5.9Data and internet services
    
    
    16.4
    
    
    
    16.1
    
    
    
    14.4
    
    
    
    13.7Other services
    
    
    9.0
    
    
    
    8.9
    
    
    
    9.1
    
    
    
    8.6Total Telephone Operations
    
    
    91.7
    
    
    
    90.2
    
    
    
    95.0
    
    
    
    90.1Other Operations
    
    
    10.0
    
    
    
    9.8
    
    
    
    10.4
    
    
    
    9.9Total operating revenues
    
    
    101.7
    
    
    
    100.0
    
    
    
    105.4
    
    
    
    100.0ExpensesOperating expensesTelephone Operations
    
    
    54.3
    
    
    
    53.4
    
    
    
    51.6
    
    
    
    49.0Other Operations
    
    
    9.7
    
    
    
    9.5
    
    
    
    10.4
    
    
    
    9.9Depreciation and amortization
    
    
    21.6
    
    
    
    21.3
    
    
    
    22.9
    
    
    
    21.7Total operating expenses
    
    
    85.6
    
    
    
    84.2
    
    
    
    84.9
    
    
    
    80.6Income from operations
    
    
    16.1
    
    
    
    15.8
    
    
    
    20.5
    
    
    
    19.4Interest expense, net
    
    
    (14.5
    )
    
    
    (14.2
    )
    
    
    (18.0
    )
    
    
    (17.1
    )Other income, net
    
    
    4.5
    
    
    
    4.4
    
    
    
    4.4
    
    
    
    4.2Income tax expense
    
    
    (2.4
    )
    
    
    (2.4
    )
    
    
    (2.9
    )
    
    
    (2.7
    )Net income
    
    
    3.7
    
    
    
    3.6
    
    
    
    4.0
    
    
    
    3.8Less: Net income attributable to noncontrolling interest
    
    
    (0.4
    )
    
    
    (0.4
    )
    
    
    (0.3
    )
    
    
    (0.3
    )Net income attributable to Consolidated Communications
Holdings, Inc.
    
    $
    3.3
    
    
    
    3.2
    %
    
    $
    3.7
    
    
    
    3.5
    %
 Segments
 Disclosure about Segments of an
Enterprise and Related Information
  24




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Results of Operations
 For the Three Months Ended March 31, 2009 Compared to March 31, 2008
 Revenues
  Telephone Operations Revenues
 Local calling services
 Network access services
 Subsidies
 Long distance services
 Data and Internet
 Other Services
 Other Operations Revenue
  Operating Expenses
  Telephone Operations Operating Expense
   25




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Other Operations Operating Expenses
  Depreciation and Amortization
  Non-Operating Income
 Interest Expense, Net
  Other Income
  Income Taxes
  Noncontrolling interest
   26




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Liquidity and Capital Resources
 General
        27




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Three Months EndedMarch 31,2009
    
    
    2008(In millions)Net Cash Provided by (Used for):Operating activities
    
    $
    19.4
    
    
    $
    25.0Investing activities
    
    
    (9.9
    )
    
    
    (13.3
    )Financing activities
    
    
    (11.6
    )
    
    
    (11.8
    )
 Operating Activities
   Investing Activities
  Financing Activities
  Debt
  Debt and Capital Leases as of March 31, 2009
(In Millions)
 Balance
    
    
    Maturity Date
    
    
    Rate (1)Capital lease
    
    $
    1.0
    
    
    April 12, 2010
    
    
    
    7.40
    %Revolving credit facility
    
    
    
    
    
    December 31, 2013
    
    
    LIBOR + 2.75%Term loan
    
    
    880.0
    
    
    December 31, 2014
    
    LIBOR + 2.50%
 
 (1)
    
    As of March 31, 2009, the 1-month LIBOR rate in effect on our borrowings was 0.52%.  28




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Credit Facilities
    Derivative Instruments
  Covenant Compliance
   29




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Dividends
   Surety Bonds
  Recent Accounting Pronouncements
    30




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31




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Item 3. Quantitative and Qualitative Disclosures about Market Risk
     32




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Item 4. Controls and Procedures
   33




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PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
    
 Item 6. Exhibits
   34




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SIGNATURES
  Consolidated Communications Holdings, Inc.
(Registrant)Date: May 7, 2009
    By:
    /s/ Robert J. CurreyRobert J. CurreyPresident and Chief Executive Officer
(Principal Executive Officer)Date: May 7, 2009
    By:
    /s/ Steven L. ChildersSteven L. ChildersChief Financial Officer
(Principal Financial Officer and
Chief Accounting Officer)  35




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EXHIBIT INDEX
 Exhibit 
Number
    
    Description31.1
    
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.31.2
    
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.32.1
    
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
  36