##### 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, 2008
 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
  þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o 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
    
    
    16Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    29Item 4. Controls and Procedures
    
    
    31PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    32Item 6. Exhibits
    
    
    32Signatures
    
    
    33Exhibit Index
    
    
    34Exhibit 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 31,2008
    
    
    2007Revenues
    
    $
    105,414
    
    
    $
    82,980Operating expenses:Cost of services and products
(exclusive of depreciation and
amortization shown separately below)
    
    
    33,863
    
    
    
    25,629Selling, general and administrative expenses
    
    
    28,144
    
    
    
    22,299Depreciation and amortization
    
    
    22,871
    
    
    
    16,629Income from operations
    
    
    20,536
    
    
    
    18,423Other income (expense):Interest income
    
    
    224
    
    
    
    214Interest expense
    
    
    (18,278
    )
    
    
    (11,614
    )Investment income
    
    
    4,362
    
    
    
    1,443Minority interest
    
    
    (272
    )
    
    
    (172
    )Other, net
    
    
    15
    
    
    
    12Income before income taxes
    
    
    6,587
    
    
    
    8,306Income tax expense
    
    
    2,878
    
    
    
    3,687Net income
    
    $
    3,709
    
    
    $
    4,619Net income
per common share Basic
    
    $
    0.13
    
    
    $
    0.18Diluted
    
    $
    0.13
    
    
    $
    0.18Cash 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 31,2008
    
    
    2007(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    34,295
    
    
    $
    34,341Accounts receivable, net of allowance of $2,283
and $2,440, respectively
    
    
    47,250
    
    
    
    44,001Inventories
    
    
    6,602
    
    
    
    6,364Deferred income taxes
    
    
    4,551
    
    
    
    4,551Prepaid expenses and other current assets
    
    
    7,969
    
    
    
    10,358Total current assets
    
    
    100,667
    
    
    
    99,615Property, plant and equipment, net
    
    
    407,732
    
    
    
    411,647Intangibles and other assets:Investments
    
    
    93,794
    
    
    
    94,142Goodwill
    
    
    526,439
    
    
    
    526,439Customer lists, net
    
    
    140,870
    
    
    
    146,411Tradenames
    
    
    14,291
    
    
    
    14,291Deferred financing costs and other assets
    
    
    11,734
    
    
    
    12,046Total assets
    
    $
    1,295,527
    
    
    $
    1,304,591LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of capital lease obligations
    
    $
    1,029
    
    
    $
    1,010Current portion of pension and post retirement
benefit obligations
    
    
    8,765
    
    
    
    8,765Accounts payable
    
    
    16,134
    
    
    
    17,386Advance billings and customer deposits
    
    
    20,872
    
    
    
    18,167Dividends payable
    
    
    11,364
    
    
    
    11,361Accrued expenses
    
    
    25,209
    
    
    
    28,254Total current liabilities
    
    
    83,373
    
    
    
    84,943Capital lease obligations less current portion
    
    
    1,371
    
    
    
    1,636Long-term debt
    
    
    890,000
    
    
    
    890,000Deferred income taxes
    
    
    89,346
    
    
    
    97,289Pension and postretirement benefit obligations
    
    
    56,977
    
    
    
    56,729Other liabilities
    
    
    35,241
    
    
    
    14,306Total liabilities
    
    
    1,156,308
    
    
    
    1,144,903Minority interest
    
    
    4,594
    
    
    
    4,322Stockholders equity:Common stock, $0.01 par value, 100,000,000 shares,
authorized, 29,511,519 and 29,440,587 issued and
outstanding, respectively
    
    
    295
    
    
    
    294Paid in capital
    
    
    278,550
    
    
    
    278,175Accumulated deficit
    
    
    (125,274
    )
    
    
    (117,452
    )Accumulated other comprehensive loss
    
    
    (18,946
    )
    
    
    (5,651
    )Total stockholders equity
    
    
    134,625
    
    
    
    155,366Total liabilities and stockholders equity
    
    $
    1,295,527
    
    
    $
    1,304,591
   4




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Consolidated Communications Holdings, Inc.
 Consolidated Statements of Cash Flows  (Dollars in thousands)
(Unaudited)
 Three Months Ended March 31,2008
    
    
    2007OPERATING ACTIVITIESNet income
    
    $
    3,709
    
    
    $
    4,619Adjustments to reconcile net income to cash
provided by operating activities:Depreciation and amortization
    
    
    22,871
    
    
    
    16,629Provision for bad debt losses
    
    
    1,452
    
    
    
    847Deferred income tax
    
    
    (2,878
    )
    
    
    (866
    )Partnership income
    
    
    (2,173
    )
    
    
    (563
    )Non-cash stock compensation
    
    
    384
    
    
    
    734Minority interest in net income of subsidiary
    
    
    272
    
    
    
    172Amortization of deferred financing costs
    
    
    493
    
    
    
    828Changes in operating assets and liabilities:Accounts receivable
    
    
    (4,701
    )
    
    
    (2,239
    )Inventories
    
    
    (238
    )
    
    
    324Other assets
    
    
    4,780
    
    
    
    (1,220
    )Accounts payable
    
    
    (1,252
    )
    
    
    (3,120
    )Accrued expenses and other liabilities
    
    
    2,314
    
    
    
    1,826Net cash provided by operating activities
    
    
    25,033
    
    
    
    17,971INVESTING ACTIVITIESCapital expenditures
    
    
    (13,285
    )
    
    
    (8,187
    )Net cash used in investing activities
    
    
    (13,285
    )
    
    
    (8,187
    )FINANCING ACTIVITIESProceeds from issuance of stock
    
    
    
    
    
    
    12Payment of deferred financing costs
    
    
    (181
    )
    
    
    (320
    )Payment of capital lease obligation
    
    
    (246
    )
    
    
    Purchase and retirement of common stock
    
    
    (8
    )
    
    
    Dividends on common stock
    
    
    (11,359
    )
    
    
    (10,045
    )Net cash used in financing activities
    
    
    (11,794
    )
    
    
    (10,353
    )Net decrease in cash and cash equivalents
    
    
    (46
    )
    
    
    (569
    )Cash and cash equivalents at beginning of period
    
    
    34,341
    
    
    
    26,672Cash and cash equivalents at end of period
    
    $
    34,295
    
    
    $
    26,103
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##### Table of Contents



Consolidated Communications Holdings, Inc.
Condensed Consolidated Statement of Changes in Stockholders Equity
Three Months Ended March 31, 2008  (Dollars in thousands)
(Unaudited)
 AccumulatedOtherCommon Stock
    
    
    Paid in
    
    
    Accumulated
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    (Loss)
    
    
    TotalBalance, January 1, 2008
    
    
    29,440,587
    
    
    $
    294
    
    
    $
    278,175
    
    
    $
    (117,452
    )
    
    $
    (5,651
    )
    
    $
    155,366Effects of accounting change regarding
postretirment plan measurement dates
pursuant to SFAS No. 158:Service cost, interest cost, and expected
return on plan assets for October 1, 2007
through December 31, 2007, net of ($88)
of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (154
    )
    
    
    
    
    
    
    (154
    )Amortization of prior service cost and
net loss for October 1, 2007 through
December 31, 2007, net of ($9) of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15
    )
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (169
    )
    
    
    15
    
    
    
    (154
    )Balance, January 1, 2008 as adjusted
    
    
    29,440,587
    
    
    
    294
    
    
    
    278,175
    
    
    
    (117,621
    )
    
    
    (5,636
    )
    
    
    155,212Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,709
    
    
    
    
    
    
    
    3,709Dividends on common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,362
    )
    
    
    
    
    
    
    (11,362
    )Shares issued under employee
plan, net of forfeitures
    
    
    71,467
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-cash stock compensation
    
    
    
    
    
    
    1
    
    
    
    383
    
    
    
    
    
    
    
    
    
    
    
    384Purchase and retirement of common stock
    
    
    (535
    )
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    
    
    
    
    (8
    )Prior service cost and net loss, net of ($52) of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (90
    )
    
    
    (90
    )Change in fair value of cash flow
hedges, net of ($7,803) of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,220
    )
    
    
    (13,220
    )Balance, March 31, 2008
    
    
    29,511,519
    
    
    $
    295
    
    
    $
    278,550
    
    
    $
    (125,274
    )
    
    $
    (18,946
    )
    
    $
    134,625
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CONSOLIDATED COMMUNICATIONS HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three months ended March 31, 2008 and 2007  (Dollars in thousands, except share and per share amounts)
 1. Description of Business
  2. Presentation of Interim Financial Statements
  3. Recent Accounting Pronouncements
 Disclosure about Derivative Instruments
and Hedging Activities  an amendment of FASB Statement No. 133.
 Noncontrolling Interests in Consolidated Financial Statements  an Amendment of ARB No.
51
  7




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Business Combinations.
 4. Acquisition
   Current assets
    
    $
    17,729Property, plant and equipment
    
    
    117,134Customer list
    
    
    49,000Goodwill
    
    
    214,389Investments and other assets
    
    
    53,360Liabilities assumed
    
    
    (105,034
    )Net purchase price
    
    $
    346,578
   8




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Total revenues
    
    $
    107,403Income from operations
    
    $
    13,810Proforma net income
    
    $
    339Income per share  basic
    
    $
    0.01Income per share  diluted
    
    $
    0.01
 5. Goodwill and Customer Lists
  March 31,
    
    
    December 31,2008
    
    
    2007Telephone Operations
    
    $
    519,255
    
    
    $
    519,255Other Operations
    
    
    7,184
    
    
    
    7,184$
    526,439
    
    
    $
    526,439
  March 31,
    
    
    December 31,2008
    
    
    2007Gross carrying amount
    
    $
    205,648
    
    
    $
    205,648Less: accumulated amortization
    
    
    (64,778
    )
    
    
    (59,237
    )Net carrying amount
    
    $
    140,870
    
    
    $
    146,411
   9




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6. Pension Costs and Other Postretirement Benefits
    Pension Benefits
    
    
    Other Benefits2008
    
    
    2007
    
    
    2008
    
    
    2007Three months ended March 31,Service cost
    
    $
    546
    
    
    $
    345
    
    
    $
    253
    
    
    $
    220Interest cost
    
    
    2,805
    
    
    
    1,172
    
    
    
    631
    
    
    
    385Expected return on plan assets
    
    
    (3,255
    )
    
    
    (1,236
    )
    
    
    
    
    
    
    Other, net
    
    
    5
    
    
    
    41
    
    
    
    (146
    )
    
    
    (247
    )Net periodic benefit cost
    
    $
    101
    
    
    $
    322
    
    
    $
    738
    
    
    $
    358
 Employers Accounting for Defined Benefit Pension and Other Postretirement Plans.
  10




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7. Long-Term Debt
  March 31,
    
    
    December 31,2008
    
    
    2007Senior Secured Credit FacilityRevolving loan
    
    $
    
    
    
    $
    Term loan
    
    
    760,000
    
    
    
    760,000Obligations under capital lease
    
    
    2,400
    
    
    
    2,646Senior notes
    
    
    130,000
    
    
    
    130,000892,400
    
    
    
    892,646Less: current portion
    
    
    (1,029
    )
    
    
    (1,010
    )$
    891,371
    
    
    $
    891,636
     8. Derivative Instruments
   11




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9. Fair Value Measurements
 Fair Value Measurements.
    Fair Value Measurements at Reporting Date UsingQuoted Prices
    
    
    Significantin Active
    
    
    Other
    
    
    SignificantMarkets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    InputsDescription
    
    March 31, 2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Interest Rate Derivatives
    
    $
    33,792
    
    
    
    
    
    
    
    
    
    
    $
    33,792
  12




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Fair Value MeasurementsUsing SignificantUnobservable Inputs(Level 3)Interest RateDerivativesBalance at December 31, 2007
    
    $
    12,769Total unrealized losses included in other
comprehensive income
    
    
    21,023Balance at March 31, 2008
    
    $
    33,792The amount of total gains or (losses) for
the period included in earnings for
the period
    
    $
    
 10. Restricted Share Plan
  Restricted shares outstanding, December 31, 2007
    
    
    129,302Shares granted
    
    
    71,467Shares vested
    
    
    (4,500
    )Shares forfeited or retired
    
    
    Restricted shares outstanding, March 31, 2008
    
    
    196,269
  11. Income Taxes
   13




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12. Net Income per Common Share
  Three Months EndedMarch 31,2008
    
    
    2007Basic:Net income
    
    $
    3,709
    
    
    $
    4,619Weighted average number of common
shares outstanding
    
    
    29,314,511
    
    
    
    25,756,643Net income per common share
    
    $
    0.13
    
    
    $
    0.18Diluted:Net income
    
    $
    3,709
    
    
    $
    4,619Weighted average number of common
shares outstanding
    
    
    29,499,849
    
    
    
    26,029,228Net income per common share
    
    $
    0.13
    
    
    $
    0.18
  13. Other Comprehensive Income
  Three Months EndedMarch 31,2008
    
    
    2007Net income
    
    $
    3,709
    
    
    $
    4,619Other comprehensive income (loss):Prior service cost and net loss, net of ($52) of tax
    
    
    (90
    )
    
    
    Change in fair value of cash flow hedges,
net of tax
    
    
    (13,220
    )
    
    
    (1,482
    )Total comprehensive income (loss)
    
    $
    (9,601
    )
    
    $
    3,137
  14




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14. Business Segments
  Telephone
    
    
    OtherOperations
    
    
    Operations
    
    
    TotalThree months ended March 31, 2008:Operating revenues
    
    $
    94,974
    
    
    $
    10,440
    
    
    $
    105,414Cost of services and products
    
    
    26,945
    
    
    
    6,918
    
    
    
    33,86368,029
    
    
    
    3,522
    
    
    
    71,551Operating expenses
    
    
    24,690
    
    
    
    3,454
    
    
    
    28,144Depreciation and amortization
    
    
    22,485
    
    
    
    386
    
    
    
    22,871Operating income (loss)
    
    $
    20,854
    
    
    $
    (318
    )
    
    $
    20,536Three months ended March 31, 2007:Operating revenues
    
    $
    72,512
    
    
    $
    10,468
    
    
    $
    82,980Cost of services and products
    
    
    18,344
    
    
    
    7,285
    
    
    
    25,62954,168
    
    
    
    3,183
    
    
    
    57,351Operating expenses
    
    
    18,938
    
    
    
    3,361
    
    
    
    22,299Depreciation and amortization
    
    
    16,012
    
    
    
    617
    
    
    
    16,629Operating income (loss)
    
    $
    19,218
    
    
    $
    (795
    )
    
    $
    18,423
  15




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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 (MD&A) 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.
 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;
    
    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 acquisitions;
    
    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;
    
    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 and the provision of telecommunications services and
subsidies;
    
    telecommunications carriers disputing and/or avoiding their obligations to pay network
access changes for use of our network;
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
    
    high costs of regulatory compliance;
    
    the competitive impact of legislation and regulatory changes in the telecommunications
industry;
    
    liability and compliance costs regarding environmental regulations;
    
    the integration of the Company and North Pittsburgh; and
    
    the additional risk factors outlined in Part II  Other Information  Item IA  Risk
Factors herein and Part I  Item 1A  Risk Factors incorporated by reference from our
Annual Report on Form 10-K for the fiscal year ended December 31, 2007, 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
   
    
    a $50.0 million revolving credit facility that is currently undrawn;
    
    a $760.0 million term loan, the proceeds of which were drawn at closing of the
acquisition; and
    
    a delayed draw term loan (DDTL) in the amount of $140.0 million which was available
to us until May 1, 2008, the proceeds of which were to be used for the sole purpose of
redeeming our $130.0 million of outstanding senior notes along with the payment of any
accrued interest and fees.
  17




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
    
    pay off the Companys previous credit facility of $464.0 million plus accrued interest;
    
    fund the cash portion of the acquisition; and
    
    pay fees and expenses related to the acquisition and new financing.
 Redemption of Senior Notes
  Factors Affecting Results of Operations
 Revenues
 Telephone Operations and Other Operations
 Local Access Lines and Bundled Services.
   
    
    aggressively promoting DSL service, including selling DSL as a stand-alone service;
    
    bundling value-adding services, such as DSL or IPTV, with a combination of local
service, custom calling features, voicemail and Internet access;
    
    maintaining excellent customer service standards, particularly as we introduce new
services to existing customers; and
    
    keeping a strong local presence in the communities we serve.
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
    
    hosted VOIP, which was launched in certain Texas markets in 2005 to meet the
needs of small to medium sized business customers who want robust function without
having to purchase a traditional key or PBX phone system;
    
    DSL service which has been made available to users who do not have our access
line. This expands our customer base and creates additional revenue generating
opportunities;
    
    a DSL tier with speeds up to 10 Mbps is now being offered for those customers
desiring greater Internet speed; and
    
    High Definition video service, which was introduced in Texas in May 2007 and
was launched in Illinois in the third quarter of 2007.
      19




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March 31,
    
    
    December 31,
    
    
    March 31,2008
    
    
    2007 (1)
    
    
    2007Local access lines in service:Residential
    
    
    179,864
    
    
    
    183,070
    
    
    
    153,640Business
    
    
    102,777
    
    
    
    103,116
    
    
    
    78,178Total local access lines
    
    
    282,641
    
    
    
    286,186
    
    
    
    231,818IPTV subscribers
    
    
    13,026
    
    
    
    12,241
    
    
    
    8,366ILEC DSL subscribers
    
    
    84,313
    
    
    
    81,337
    
    
    
    55,96197,339
    
    
    
    93,578
    
    
    
    64,327VOIP subscribers
    
    
    2,938
    
    
    
    2,465
    
    
    
    1,485CLEC Access Line Equivalents (2)
    
    
    72,827
    
    
    
    70,063
    
    
    
    Total connections
    
    
    455,745
    
    
    
    452,292
    
    
    
    297,662Long distance lines (3)
    
    
    167,360
    
    
    
    166,599
    
    
    
    149,318Dial-up subscribers
    
    
    6,042
    
    
    
    6,783
    
    
    
    11,128
 (1)
    
    In connection with the acquisition of North Pittsburgh, we acquired 36,411 residential access
lines, 25,988 business access lines, 14,713 DSL subscribers, 87 VOIP subscribers, 70,063 CLEC
access line equivalents and 18,223 long distance lines.(2)
    
    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.(3)
    
    Reflects the inclusion of long distance service provided as part of our VOIP offering
while excluding CLEC long distance subscribers.  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.
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Selling, General and Administrative Expenses
  
    
    selling and marketing expenses;
    
    expenses associated with customer care;
    
    billing and other operating support systems; and
    
    corporate expenses, including professional service fees, and non-cash stock
compensation.
    Depreciation and Amortization Expenses
  YearsBuildings
    
    15-35Network and outside plant facilities
    
    5-30Furniture, fixtures and equipment
    
    3-17Capital Leases
    
    11
 Goodwill and Other
Intangible Assets
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Three Months Ended March 31,2008
    
    
    2007% of Total
    
    
    
    
    
    
    % of Total$ (millions)
    
    
    Revenues
    
    
    $ (millions)
    
    
    RevenuesRevenuesTelephone OperationsLocal calling services
    
    $
    27.0
    
    
    
    25.6
    %
    
    $
    21.3
    
    
    
    25.7
    %Network access services
    
    
    24.5
    
    
    
    23.2
    
    
    
    18.3
    
    
    
    22.0Subsidies
    
    
    13.8
    
    
    
    13.1
    
    
    
    11.6
    
    
    
    14.0Long distance services
    
    
    6.2
    
    
    
    5.9
    
    
    
    3.6
    
    
    
    4.3Data and internet services
    
    
    14.4
    
    
    
    13.7
    
    
    
    8.6
    
    
    
    10.4Other services
    
    
    9.1
    
    
    
    8.6
    
    
    
    9.1
    
    
    
    11.0Total Telephone Operations
    
    
    95.0
    
    
    
    90.1
    
    
    
    72.5
    
    
    
    87.3Other Operations
    
    
    10.4
    
    
    
    9.9
    
    
    
    10.5
    
    
    
    12.7Total operating revenues
    
    
    105.4
    
    
    
    100.0
    
    
    
    83.0
    
    
    
    100.0ExpensesOperating expensesTelephone Operations
    
    
    51.6
    
    
    
    49.0
    
    
    
    37.4
    
    
    
    45.1Other Operations
    
    
    10.4
    
    
    
    9.9
    
    
    
    10.6
    
    
    
    12.8Depreciation and
amortization
    
    
    22.9
    
    
    
    21.7
    
    
    
    16.6
    
    
    
    20.0Total operating expenses
    
    
    84.9
    
    
    
    80.6
    
    
    
    64.6
    
    
    
    77.8Income from operations
    
    
    20.5
    
    
    
    19.4
    
    
    
    18.4
    
    
    
    22.2Interest expense, net
    
    
    (18.0
    )
    
    
    (17.1
    )
    
    
    (11.4
    )
    
    
    (13.7
    )Other income, net
    
    
    4.1
    
    
    
    3.9
    
    
    
    1.3
    
    
    
    1.6Income tax expense
    
    
    (2.9
    )
    
    
    (2.8
    )
    
    
    (3.7
    )
    
    
    (4.5
    )Net income
    
    $
    3.7
    
    
    
    3.5
    %
    
    $
    4.6
    
    
    
    5.5
    %
 Segments
 Disclosure about Segments of an
Enterprise and Related Information
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Results of Operations
 For the Three Months Ended March 31, 2008 Compared to March 31, 2007
 Revenues
  Telephone Operations Revenues
 Local calling services
 Network access services
 Subsidies
 Long distance services
 Data and Internet
 Other Services
 Other Operations Revenue
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##### Table of Contents



Operating Expenses
  Telephone Operations Operating Expense
  Other Operations Operating Expenses
  Depreciation and Amortization
  Non-Operating Income (Expense)
 Interest Expense, Net
  Other Income (Expense)
  Income Taxes
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Liquidity and Capital Resources
 General
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Three Months EndedMarch 31,2008
    
    
    2007(In millions)Net Cash Provided by (Used for):Operating activities
    
    $
    25.0
    
    
    $
    18.0Investing activities
    
    
    (13.3
    )
    
    
    (8.2
    )Financing activities
    
    
    (11.8
    )
    
    
    (10.4
    )
 Operating Activities
   Investing Activities
  Financing Activities
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Debt
  Debt and Capital Leases as of March 31, 2008
(In Millions)
 Balance
    
    
    Maturity Date
    
    
    Rate (1)Capital lease
    
    $
    2.4
    
    
    July 1, 2011
    
    
    7.40
    %Revolving credit
facility
    
    
    
    
    
    December 31, 2013
    
    LIBOR + 2.50%Term loan
    
    
    760.0
    
    
    December 31, 2014
    
    LIBOR + 2.50%Senior notes (2)
    
    
    130.0
    
    
    April 1, 2012
    
    
    9.75
    %
 
 (1)
    
    As of March 31, 2008, the 90-day LIBOR rate was 2.68%.(2)
    
    On April 1, 2008 we borrowed $120.0 million on our DDTL and redeemed all of the
outstanding notes. Credit Facilities
    Derivative Instruments
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Covenant Compliance
    Dividends
   Surety Bonds
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Recent Accounting Pronouncements
 Disclosure about Derivative Instruments
and Hedging
Activities  an amendment of FASB Statement No. 133.
 Noncontrolling Interests in Consolidated Financial Statements  an Amendment of ARB No.
51
 Business Combinations.
 
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
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Item 4. Controls and Procedures
   31




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PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
   
 Item 6. Exhibits
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SIGNATURES
  Consolidated Communications Holdings, Inc.
(Registrant)Date: May 8, 2008
    
    By:
    
    /s/ Robert J. Currey

Robert J. CurreyPresident and Chief Executive Officer(Principal Executive Officer)Date: May 8, 2008
    
    By:
    
    /s/ Steven L. Childers

Steven L. ChildersChief Financial Officer(Principal Financial Officer andChief Accounting Officer)
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EXHIBIT INDEX
 ExhibitNumber
    
    Description10.1
    
    
    Letter Agreement, dated March 31, 2008, by Wachovia Bank, National Association, and agreed to
and acknowledged by Consolidated Communications Holdings, Inc., Consolidated Communications,
Inc., Consolidated Communications Acquisition Texas, Inc. and North Pittsburgh Systems, Inc.
(formerly known as Fort Pitt Acquisition Sub Inc.) (incorporated by reference to Exhibit 10.1
to the Companys Current Report on Form 8-K dated March 31, 1998).31.1
    
    
    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.
  34