Consolidated Communications Holdings Reports Second Quarter 2006 Results

Consolidated Communications Holdings Reports Second Quarter 2006 Results

- DSL Subscribers Grow 39 percent Year-over-Year to 45,900 -

- IPTV: Ready to Launch in Texas and Subscribers Grow to Over 4,500 in Illinois -

- Adjusted EBITDA of $34.5 Million and Net Cash from Operations of $19.0 Million -

MATTOON, Ill., Aug. 9 /PRNewswire-FirstCall/ -- Consolidated Communications Holdings, Inc. (NASDAQ:CNSL) today announced results for the second quarter and six months ended June 30, 2006. The company reported revenues of $79.3 million for the quarter and $158.8 million for the six-month period. Adjusted EBITDA and net cash provided by operating activities for the quarter were $34.5 million and $19.0 million, respectively, and were $69.3 million and $33.4 million for the six-month period, respectively.

"We had another strong quarter and we continue to execute against our business plan while generating strong cash flow to support both our dividend and growth initiatives," said Bob Currey, Consolidated's president and chief executive officer. "We also continue to improve our competitive position and secure customer relationships by offering a superior bundle of voice and broadband products, at the right price and supported by our outstanding customer service."

"Our focus remains on being the telecommunications provider of choice in the markets we serve and to continue to grow total connections. We have demonstrated consistent quarter-over-quarter connection growth in the past, and this quarter is no exception. We grew total connections by approximately 1,200 in the quarter and we are up over 6,000 for the year, now surpassing 289,000 total connections. Additionally, monthly telephone operations average revenue per access line (ARPU) increased to $96.74."

"Digital Subscriber Lines (DSL) and Internet protocol television (IPTV), our strategic growth products, accounted for almost 17,000 new connections for the twelve months ended June 30, 2006. DSL is up 39 percent year-over-year and we just completed the strongest first half in our history. We added 2,235 DSL subscribers in the quarter and have added over 12,000 new DSL subscribers in the last twelve months. DSL penetration now exceeds 26.5 percent of primary residential lines and 19.2 percent of total lines."

"Our IPTV product continues to be well received in Illinois and we continue to improve the offering based on customer feedback. We added six new channels to the programming lineup, bringing the total to over 200 channels. In the quarter, we began rolling out our new universal remote and significantly upgraded our video on demand content. IPTV subscribers increased to over 4,500, an increase of 29 percent from the prior quarter, and we passed approximately 27,000 homes, representing a 16 percent penetration rate. We expect to achieve our plan and pass 36,000 homes by the end of August," commented Currey.

Currey added, "Both DSL and IPTV are significant drivers of the approximately 23 percent year-over-year increase in service bundles. To date, 89 percent of our customers that have signed up for IPTV have taken our triple play offering, which includes voice, data and video services. Customers continue to recognize both the overall value of the bundle and proven services of Consolidated, while we benefit from efficiencies from multiple product delivery, higher overall ARPU and stronger customer relationships."

Steve Childers, Consolidated's chief financial officer, said, "I am pleased with our financial results for the quarter and the progress we are making on improving our cost structure. Compared to a year ago, we have reduced our headcount, lowered our benefit costs and consolidated our facilities. Total company Adjusted EBITDA margin, the ratio of Adjusted EBITDA to total revenue, was 43.5 percent for the quarter. Excluding the effect of a one-time $2.8 million life insurance payout in 2005, our Adjusted EBITDA margin increased by 170 basis points over the second quarter of 2005. In addition, with the anticipated completion of Phase II of our billing integration project, we will consolidate our Texas call centers. As a result, we recorded approximately $1.5 million in severance expense in the second quarter and will reduce headcount by an additional net 24 in the third quarter. We anticipate realizing approximately $1.0 million in annual wage cost savings from these headcount reductions going forward."

Childers continued, "As anticipated, during the quarter, we received proceeds of $5.9 million in cash from the redemption of our Rural Telephone Bank (RTB) class C stock. In part, due to the timing of the RTB proceeds, we elected to begin making estimated federal income tax payments for 2006. In the quarter, we made $2.7 million in estimated federal payments and $1.0 million in state payments relating to our 2005 Texas state returns. In total, our dividend payout ratio for the quarter was 61.8 percent and we ended the quarter with approximately $17.0 million of cumulative available cash as defined by our credit agreement."

Currey added, "I am pleased to announce that we will launch our IPTV product in Texas in the next thirty to sixty days. We recently completed the IP backbone in Texas, the video headend is deployed, the statewide franchise application is approved, the network is tested, and the workforce is trained and ready to go. The product offering in Texas will be very similar to our offering in Illinois and we plan to pass approximately 37,000 homes at launch, which will more than double our current total number of homes passed."

Operating Statistics at June 30, 2006, Compared to March 31, 2006
-- Total connections were 289,368, an increase of 1,182, or 0.4 percent.
-- Total local access lines were 238,904, a decrease of 2,055, or
0.9 percent.
-- DSL subscribers were 45,948, an increase of 2,235, or 5.1 percent.
-- IPTV subscribers were 4,516, an increase of 1,002, or 28.5 percent.
-- Long distance lines were 146,117, an increase of 322, or 0.2 percent.
-- Total service bundles were 40,901, an increase of 1,865, or
4.8 percent.
-- Total Telephone Operations ARPU was $96.74 for the three month period
ended June 30th, an increase of $0.86, or 0.9 percent.

Cash Available to Pay Dividends

For the quarter, cash available to pay dividends, or CAPD, was $18.6 million and our dividend payout ratio was 61.8 percent. As of June 30, 2006, cumulative available cash, as defined in our credit facility, was approximately $17.0 million. At June 30, 2006, cash and cash equivalents were $30.4 million. Consolidated made capital expenditures of $8.7 million during the second quarter, bringing the year-to-date total to $17.2 million.

Stock Repurchase

On July 28th, the company completed its previously announced share repurchase of approximately 3.8 million shares of common stock from Providence Equity for approximately $56.7 million, or $15.00 per share. This transaction removed the market overhang related to this large position, improved cash flow by decreasing our annual dividend obligation by 12.8 percent and improved the company's dividend payout ratio. The transaction was financed with $17.7 million of cash from the balance sheet and $39.0 million in additional term loan borrowings. After accounting for the additional after-tax interest charges, this transaction will generate a $3.0 million annual net increase in our cash and cash equivalents.

In conjunction with the share repurchase, the company's credit facility was amended to permit Consolidated to add back certain expenses in fiscal years 2006 and 2007, including severance, billing integration and start-up costs associated with the implementation of Sarbanes-Oxley section 404 compliance, when computing Adjusted EBITDA. This revised definition is used in all of the second quarter 2006 reporting.

Financial Highlights for the Second Quarter Ended June 30, 2006
-- Revenues were $79.3 million, compared to $78.3 million in the second
quarter of 2005. The improvement was driven by a $1.5 million increase
in Network Access Services revenue associated with the increased demand
for special access circuits and an additional $1.1 million in Data and
Internet Services revenue attributable to the growth in both the DSL
and IPTV products. These increases were partially offset by
reductions in Local Calling Service revenue of $1.0 million, Long
Distance Services revenue of $0.4 million, and Subsidies revenue of
$0.3 million.
-- Income from operations was $13.9 million, compared to $19.9 million in
the second quarter of 2005. The second quarter of 2005 included a
$7.9 million reduction in SG&A expense relating to a one-time non-cash
curtailment gain associated with the restructuring of our Texas pension
plan.
-- Interest expense, net was $10.1 million, compared to $11.6 million in
the same quarter last year. This improvement was primarily due to the
redemption of $70.0 million of our senior notes in 2005.
-- Income tax expense/(benefit) was $(3.1) million, compared to
$4.4 million in the second quarter of 2005. The second quarter of this
year reflects a one-time, non-cash benefit of $5.2 million associated
with the enactment of new tax legislation in Texas. The most
significant impact of this legislation was the modification of the
current franchise tax calculation to a new "margin tax" calculation.
This resulted in a reduction in the effective state tax rate used to
calculate deferred taxes. Excluding this benefit, income tax expense
would have decreased by $2.3 million primarily due to the change in
pre-tax book income.
-- Net income was $8.2 million, compared to $7.2 million in the second
quarter of 2005.
-- Net income per common share was $0.28. Adjusted net income per common
share, which is calculated after excluding the effect of non-cash
compensation charges incurred as a result of the modification of our
restricted share plan in connection with the IPO, the aforementioned
tax benefit and the after-tax impact of severance, billing integration
and Sarbanes-Oxley costs, would have been $0.17.
-- Adjusted EBITDA was $34.5 million and net cash provided by operating
activities was $19.0 million compared to $35.5 million and $14.7
million, respectively, for the second quarter of 2005. The decrease in
Adjusted EBITDA was primarily driven by the aforementioned receipt of
$2.8 million in life insurance proceeds in second quarter of 2005,
partially offset by operating efficiencies and increased cash
distributions from cellular partnership investments. Total net debt to
last twelve month Adjusted EBITDA coverage ratio remained steady with
last quarter at 3.80 times to one.

Financial Highlights for the Six Months Ended June 30, 2006
-- Revenues were $158.8 million, compared to $158.0 million for the prior
year period. The year-over-year change reflects increases in Network
Access Services revenue associated with increased demand for special
access circuits, increased Data and Internet Services revenue driven by
growth in both DSL and IPTV revenue, and increased Other Operations
revenue. These increases were partially offset by decreases in Local
Calling Services revenue and Subsidies revenue.
-- Net income was $11.8 million, compared to $7.9 million for the prior
year period. The year-over-year increase was due to the aforementioned
tax benefit, lower interest expense, net and other charges.
-- Net income per common share was $0.40. Adjusted net income per common
share, which is calculated after excluding the effect of non-cash
compensation charges incurred as a result of the modification of our
restricted share plan in connection with the IPO, the aforementioned
tax benefit and the after-tax impact of severance, billing integration
and Sarbanes-Oxley costs, would have been $0.31.
-- Adjusted EBITDA was $69.3 million and net cash provided by operating
activities was $33.4 million, compared to $68.1 million and
$29.3 million, respectively. The increase in Adjusted EBITDA was
primarily due to operating efficiencies and increased cash
distributions from cellular partnership investments, partially offset
by the receipt of a one-time $2.8 million life insurance payout in the
second quarter of 2005.

Financial Guidance

The company provides the following guidance: Capital expenditures are not expected to exceed $33 million for 2006; after giving effect for the impact of the Providence share repurchase, full year 2006 cash interest expense is expected to be in the range of $40.0 to $41.0 million; and full year 2006 cash income taxes are expected to be in the range of $7.0 to $8.0 million.

We believe that our adjusted dividend payout ratio of 78.4 percent (see six month 2006 Cash Available to Pay Dividends schedule) for the six months ended June 30, 2006, which excludes the effect of the proceeds received from the RTB redemption, more accurately reflects what we expect our dividend payout ratio to be for the remainder of 2006 than our actual payout ratio for the same period. However, our actual dividend payout ratio could increase in the third quarter due to the timing of the Providence share repurchase described elsewhere in this release. Because the share repurchase closed on July 28th, after the record date for the third quarter dividend, we will not recognize the 12.8 percent on-going reduction in our dividend obligation from the share repurchase until the fourth quarter while our cash interest expense in the third quarter will increase due to the additional term debt used to fund a portion of the share repurchase.

Dividend Payments

The company paid its latest quarterly dividend of $0.38738 per common share on August 1, 2006 to stockholders of record on July 15, 2006. In addition, on August 8, 2006, the company's board of directors declared its next quarterly dividend of $0.38738 per common share, which is payable on November 1, 2006 to stockholders of record at the close of business on October 15, 2006.

Conference Call Information

The company will host a conference call today at 11:00 a.m. Eastern Time / 10:00 a.m. Central Time. The call is being webcast and can be accessed from the "Investor Relations" section of the company's website at http://www.consolidated.com/ . The webcast will also be archived on the company's website. If you do not have internet access, the conference call dial-in number is 1-800-642-1783. International parties can access the call by dialing 1-706-679-5600. A telephonic replay of the conference call will also be available starting two hours after completion of the call until August 11, 2006 at midnight ET. To hear the replay, parties in the United States and Canada should call 1-800-642-1687 and international parties should call 1-706-645-9291 and enter pass code 2613076.

Use of Non-GAAP Financial Measures

This press release, as well as the conference call, includes disclosures regarding "Adjusted EBITDA", "Adjusted EBITDA margin", "cash available to pay dividends", "total net debt to last twelve month Adjusted EBITDA coverage ratio", and "adjusted net income per share", all of which are non-GAAP financial measures. Accordingly, they should not be construed as alternatives to net cash from operating or investing activities, cash flows from operations or net income (loss) as defined by GAAP and are not, on their own, necessarily indicative of cash available to fund our cash needs as determined in accordance with GAAP. In addition, not all companies use identical calculations, and these non-GAAP financial measures may not be comparable to other similarly titled measures of other companies. A reconciliation of the differences between these non-GAAP financial measures and the most directly comparable financial measures presented in accordance with GAAP is included in the tables that follow.

Adjusted EBITDA, which corresponds to pro forma Bank EBITDA as used and defined in the prospectus dated July 21, 2005 filed in connection with the IPO, is comprised of historical EBITDA, as adjusted for certain adjustments permitted and contemplated by our credit facility.

EBITDA is defined as net earnings (loss) before interest expenses, income taxes, depreciation and amortization on an historical basis. We believe net cash provided by operating activities is the most directly comparable financial measure to EBITDA under GAAP. EBITDA is a non-GAAP financial measure.

Cash available to pay dividends represents Adjusted EBITDA plus cash interest income less (1) cash interest expense (after giving pro forma effect to the IPO as if it had been completed on July 1, 2005), (2) capital expenditures and (3) cash taxes.

We present Adjusted EBITDA and cash available to pay dividends for several reasons. Management believes Adjusted EBITDA and cash available to pay dividends are useful as a means to evaluate our ability to fund our estimated uses of cash (including interest on our debt) and pay dividends. In addition, we have presented Adjusted EBITDA and cash available to pay dividends to investors in the past because they are frequently used by investors, securities analysts and other interested parties in the evaluation of companies in our industry, and management believes presenting them here provides a measure of consistency in our financial reporting. Adjusted EBITDA and cash available to pay dividends, referred to as Available Cash in our credit agreement, are also components of the restrictive covenants and financial ratios contained in the agreements governing our debt that require us to maintain compliance with these covenants and limit certain activities, such as our ability to incur debt and to pay dividends. The definitions in these covenants and ratios are based on Adjusted EBITDA and cash available to pay dividends after giving effect to specified charges. As a result, management believes the presentation of Adjusted EBITDA and cash available to pay dividends, as supplemented by these other items, provide important additional information to investors. In addition, Adjusted EBITDA and cash available to pay dividends provide our board of directors with meaningful information to determine, with other data, assumptions and considerations, our dividend policy and our ability to pay dividends under the restrictive covenants in the agreements governing our debt and to measure our ability to service and repay debt.

While we use Adjusted EBITDA and cash available to pay dividends in managing and analyzing our business and financial condition and believe they are useful to our management and investors for the reasons described above, these non-GAAP financial measures have certain shortcomings. In particular, Adjusted EBITDA does not represent the residual cash flows available for discretionary expenditures, since items such as debt repayment and interest payments are not deducted from such measure. Similarly, while we may generate cash available to pay dividends, we are not required to use any such cash to pay dividends, and the payment of any dividends is subject to declaration by our board of directors, compliance with applicable law and the terms of our credit agreement and the indenture governing our senior notes.

Because Adjusted EBITDA is a component of Dividend Payout Ratio, EBITDA Margin and the ratio of total net debt to last twelve-month Adjusted EBITDA, they are subject to the material limitations discussed above. In addition, the ratio of total net debt to last twelve month Adjusted EBITDA is also subject to the risk that we may not be able to use the cash on the balance sheet to reduce our debt on a dollar-for-dollar basis. Management believes these ratios are useful as a means to evaluate our ability to incur additional indebtedness in the future and, together with adjusted net income per share, assist investors, securities analysts and other interested parties in evaluating the companies in our industry.

For a more detailed discussion of these and other limitations on the use of these non-GAAP financial measures, please see the section entitled "Dividend Policy and Restrictions" in our prospectus dated July 21, 2005. The prospectus is not incorporated by reference in this release.

About Consolidated

Consolidated Communications Holdings, Inc. is an established rural local exchange company (RLEC) providing voice, data and video services to residential and business customers in Illinois and Texas. Each of the operating companies has been operating in their local markets for over 100 years. With approximately 239,000 local access lines and 46,000 digital subscriber lines (DSL), Consolidated Communications offers a wide range of telecommunications services, including local and long distance service, custom calling features, private line services, dial-up and high-speed Internet access, digital TV, carrier access services, and directory publishing. Consolidated Communications is the 17th largest local telephone company in the United States.

Safe Harbor

Any statements contained in this press release that are not statements of historical fact, including statements about management's beliefs and expectations, are forward-looking statements and should be evaluated as such. The words "anticipates", "believes", "expects", "intends", "plans", "estimates", "targets", "projects", "should", "may", "will" and similar words and expressions are intended to identify forward-looking statements. Such forward-looking statements reflect, among other things, the company's current expectations, plans, strategies and anticipated financial results and involve a number of known and unknown risks, uncertainties and factors that may cause the actual results to differ materially from those expressed or implied by these forward-looking statements. These risks include, but are not limited to the following: various risks to stockholders of not receiving dividends and risks to the company's ability to pursue growth opportunities if the company continues to pay dividends according to the current dividend policy; various risks to the price and volatility of the common stock; the substantial amount of debt and the company's ability to incur additional debt in the future; the company's need for a significant amount of cash to service and repay the debt and to pay dividends on the common stock; restrictions contained in the debt agreements that limit the discretion of management in operating the business; the ability to refinance the existing debt as necessary; regulatory changes, rapid development and introduction of new technologies and intense competition in the telecommunications industry; risks associated with the company's possible pursuit of acquisitions; economic conditions in the company's service areas in Illinois and Texas; system failures; losses of large customers or government contracts; risks associated with the rights-of-way for the network; disruptions in the relationship with third party vendors; losses 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; telecommunications carriers disputing and/or avoiding their obligations to pay network access charges for use of the company's 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 other risks identified in the section entitled "Risk Factors" in the company's Annual Report on Form 10-K for the year ended December 31, 2005, as well as in the other documents that we file from time to time with the Securities and Exchange Commission.

Many of these risks are beyond management's ability to control or predict. All forward-looking statements attributable to the company or persons acting on the company's behalf are expressly qualified in their entirety by the cautionary statements and risk factors contained in this press release and the company's filings with the Securities and Exchange Commission. Because of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. Furthermore, forward-looking statements speak only as of the date they are made. Except as required under the federal securities laws or the rules and regulations of the SEC, the company does not undertake any obligation to update or review any forward- looking information, whether as a result of new information, future events or otherwise.

Consolidated Communications
Condensed Consolidated Balance Sheets
(Dollars in thousands)

June 30, December 31,
2006 2005
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $30,442 $31,409
Accounts receivable, net 33,010 35,503
Prepaid expenses and other current assets 15,291 12,123
Total current assets 78,743 79,035

Property, plant and equipment, net 325,337 335,088
Intangibles and other assets 524,497 531,827
Total assets $928,577 $945,950

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $7,085 $11,743
Accrued expenses and other current liabilities 50,251 56,116
Total current liabilities 57,336 67,859

Long-term debt 555,000 555,000
Other long-term liabilities 119,594 120,889
Total liabilities 731,930 743,748

Minority interests 3,269 2,974
Stockholders' equity:
Common stock, $0.01 par value 297 297
Paid in capital 255,412 254,162
Accumulated deficit (68,806) (57,533)
Accumulated other comprehensive income 6,475 2,302
Total stockholders' equity 193,378 199,228
Total liabilities and stockholders' equity $928,577 $945,950

Consolidated Communications
Condensed Consolidated Statements of Operations
(Dollars in thousands)
(Unaudited)

Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005

Revenues $79,340 $78,264 $158,766 $158,036
Operating expenses:
Cost of services
and products 23,951 24,353 48,624 48,770
Selling, general and
administrative
expenses 24,671 16,902 47,183 43,098
Depreciation and
amortization 16,844 17,114 33,915 33,932
Income from operations 13,874 19,895 29,044 32,236
Other income (expense):
Interest expense, net (10,124) (11,557) (20,166) (22,998)
Other income, net 1,386 3,206 2,734 3,593
Income before income
taxes 5,136 11,544 11,612 12,831
Income tax (benefit)
expense (3,089) 4,385 (161) 4,971

Net income 8,225 7,159 11,773 7,860
Dividends on redeemable
preferred shares - (4,498) - (9,121)
Net income (loss)
applicable to common
stockholders $8,225 $2,661 $11,773 $(1,261)

Net income (loss) per
common share $0.28 $0.27 $0.40 $(0.14)

Consolidated Communications
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)

Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
OPERATING ACTIVITIES
Net Income $8,225 $7,159 $11,773 $7,860
Adjustments to reconcile
net income to cash
provided by operating
activities:
Depreciation and
amortization 16,844 17,114 33,915 33,932
Non-cash stock
compensation 625 - 1,250 -
Other adjustments,
net (5,116) (3,064) (101) 634
Changes in operating
assets and liabilities,
net (1,560) (6,554) (13,458) (13,159)
Net cash provided by
operating activities 19,018 14,655 33,379 29,267
INVESTING ACTIVITIES
Proceeds from sale of
investments 5,921 - 5,921 -
Capital expenditures (8,698) (9,297) (17,221) (14,830)
Net cash used in
investing activities (2,777) (9,297) (11,300) (14,830)
FINANCING ACTIVITIES
Payments made on
long-term obligations - (5,597) - (10,109)
Payment of deferred
financing costs - (642) - (755)
Purchase of treasury
shares - (12) - (12)
Distribution to
preferred shareholders - (37,500) - (37,500)
Dividends on common
stock (11,506) - (23,046) -
Net cash used in
financing activities (11,506) (43,751) (23,046) (48,376)
Net increase (decrease)
in cash and cash
equivalents 4,735 (38,393) (967) (33,939)
Cash and cash
equivalents at
beginning of period 25,707 52,084 31,409 52,084
Cash and cash equivalents
at end of period $30,442 $13,691 $30,442 $18,145

Consolidated Communications
Consolidated Revenue by Category
(Dollars in thousands)
(Unaudited)

Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
Total Revenues
Telephone Operations
Local calling services $21,485 $22,449 $42,849 $45,037
Network access services 16,880 15,346 33,950 31,674
Subsidies 11,768 12,067 23,950 25,791
Long distance services 3,777 4,202 7,524 8,158
Data and Internet
services 7,424 6,278 14,638 12,806
Other services 8,338 8,202 16,119 16,097
Total Telephone
Operations 69,672 68,544 139,030 139,563
Other Operations 9,668 9,720 19,736 18,473
Total operating
revenues $79,340 $78,264 $158,766 $158,036

Consolidated Communications
Schedule of ARPU Calculations
(Dollars in thousands)
(Unaudited)

Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005

Ending Access Lines 239,346 247,258 238,904 247,258
Average Access Lines 240,055 249,276 240,592 251,565

Telephone Operations
Revenue $69,672 $68,544 $139,030 $139,563
Prior period subsidy
settlements $(383) $(769) $(580) $159

Telephone Operations,
excluding prior
period subsidy
settlements $70,055 $69,313 $139,610 $139,404

Monthly Telephone
Operations ARPU $96.74 $91.66 $96.31 $92.46
Monthly Telephone
Operations ARPU,
excluding prior
period subsidy
settlements $97.28 $92.69 $96.71 $92.36

Consolidated Communications
Schedule of Adjusted EBITDA Calculation
(Dollars in thousands)
(Unaudited)

Three Months Ended Six Months Ended
June 30, June 30,
2006 (1) 2005 (1) 2006 (1) 2005 (1)
Historical EBITDA:
Net cash provided by operating
activities $19,018 $14,655 $33,379 $29,267
Adjustments:
Compensation from restricted share
plan (625) - (1,250) -
Pension curtailment gain - 7,880 - 7,880
Other adjustments, net 5,116 (4,816) 101 (8,514)
Changes in operating assets and
liabilities 1,560 6,554 13,458 13,159
Interest expense, net 10,124 11,557 20,166 22,998
Income taxes (3,089) 4,385 (161) 4,971
Historical EBITDA (2) 32,104 40,215 65,693 69,761

Adjustments to EBITDA:
Integration, restructuring and
Sarbanes Oxley (3) 2,223 2,325 2,689 4,575
Professional service fees (4) - 1,250 - 2,500
Other, net (5) (1,386) (426) (2,734) (813)
Investment distributions (6) 953 - 2,404 -
Pension curtailment gain (7) - (7,880) - (7,880)
Non-cash compensation (8) 625 - 1,250 -

Adjusted EBITDA $34,519 $35,484 $69,302 $68,143

Last Twelve
Months Ended Three Months
June 30, Ended March 31,
2006 (1) 2006 (1)
Historical EBITDA:
Net cash provided by operating
activities $76,587 $14,361
Adjustments:
Compensation from restricted share
plan (9,840)
Pension curtailment gain - (625)
Other adjustments, net (10,453) (5,015)
Changes in operating assets and
liabilities 10,519 11,898
Interest expense, net 50,611 10,042
Income taxes 5,803 2,928
Historical EBITDA (2) 123,227 33,589

Adjustments to EBITDA:
Integration, restructuring and
Sarbanes Oxley (3) 5,514 466
Professional service fees (4) 367 -
Other, net (5) (4,957) (1,348)
Investment distributions (6) 3,994 1,451
Pension curtailment gain (7) -
Non-cash compensation (8) 9,840 625

Adjusted EBITDA $137,985 $34,783

Footnotes for Adjusted EBITDA:
(1) On July 28, 2006, the Company's credit facility was amended to
permit it to add back certain non-recurring expenses incurred or to be
incurred in fiscal years 2006 and 2007, including severance, billing
integration and start-up costs associated with the implementation of
Sarbanes-Oxley section 404 compliance. Accordingly, for all periods
subsequent to December 31, 2005, the calculations of Adjusted EBITDA
give effect to these permitted adjustments.
(2) Historical EBITDA is defined as net earnings (loss) before interest
expense, income taxes, depreciation and amortization on an historical
basis.
(3) Represents certain expenses associated with integrating and
restructuring the Texas and Illinois businesses and Sarbanes-Oxley
start-up costs. For the second quarter 2006, this is comprised of
$1.5M in severance, $0.4M in Sarbanes-Oxley start-up costs and $0.3M
in billing integration costs. For YTD 2006, this is comprised of
$1.6M in severance, $0.6M in Sarbanes-Oxley start-up costs and $0.5M
in billing integration costs.
(4) Represents the aggregate professional service fees paid to certain
large equity investors prior to our initial public offering. Upon
closing of the initial public offering, these agreements terminated.
(5) Other, net includes the equity earnings from our investments,
dividend income and certain other miscellaneous non-operating items.
Key man life insurance proceeds of $2.8 million received in June 2005
are not deducted to arrive at Adjusted EBITDA.
(6) For purposes of calculating Adjusted EBITDA, we include all cash
dividends and other cash distributions received from our investments.
(7) Represents a one-time $7.9 million curtailment gain associated with
the amendment of our Texas pension plan. The gain was recorded in
general and administrative expenses. However, because the gain is
non-cash and non-recurring, it is excluded from Adjusted EBITDA.
(8) Represents compensation expenses in connection with our Restricted
Share Plan, which because of the non-cash nature of the expenses are
being excluded from Adjusted EBITDA. In connection with the IPO and
related transactions, the Plan was modified.

Consolidated Communications
Schedule of Second Quarter 2005
Adjusted EBITDA Calculation
(Dollars in thousands)
(Unaudited)

Three Months
Ended June 30,
2005

Adjusted EBITDA $35,484
Life Insurance Proceeds (2,780)
Net Total $32,704

Consolidated Communications
Total Net Debt to LTM Adjusted EBITDA Ratio
(Dollars in thousands)
(Unaudited)

Summary of Outstanding Debt
Senior Notes $130,000
Term loan D 425,000
Total debt as of June 30, 2006 $555,000
Less cash on hand (30,442)
Total net debt as of June 30, 2006 $524,558

Adjusted EBITDA for the last twelve
months ended June 30, 2006 $137,985

Total Net Debt to last twelve months
Adjusted EBITDA 3.80

Consolidated Communications
Pro Forma Total Net Debt to LTM Adjusted EBITDA Ratio
(Dollars in thousands)
(Unaudited)

Summary of Outstanding Debt
Senior Notes $130,000
Term loan D 464,000
Total debt as of June 30, 2006 $594,000
Less cash on hand (9,122)
Total net debt as of June 30, 2006 $584,878

Adjusted EBITDA for the last twelve
months ended June 30, 2006 $137,985

Total Net Debt to last twelve months
Adjusted EBITDA (1) 4.24

(1) Reflects pro forma impact of the Providence share buyback.

Consolidated Communications
Cash Available to Pay Dividends
(Dollars in thousands)
(Unaudited)

Three Months Ended Three Months Ended
June 30, 2006 March 31, 2006

Adjusted EBITDA $34,519 $34,783

- Cash interest expense (9,685) (9,477)
- Capital Expenditures (8,698) (8,523)
+ Proceeds from asset sales (1) 5,921 83
- Cash income taxes (3,737) (337)
+ Cash interest income 290 186

Cash available to pay dividends $18,610 $16,715

Quarterly Dividend $(11,506) $(11,540)
Payout Ratio 61.8% 69.0%

(1) Represents $5,921 of proceeds from the redemption of class C shares of
RTB stock in the three months ended June 30, 2006 and $83 from the
sale of excess property during the three months ended March 31, 2006.

Consolidated Communications
Six Month 2006 Cash Available to Pay Dividends
(Dollars in thousands)
(Unaudited)

Six Months Ended
June 30, 2006
Adjusted EBITDA $69,302

- Cash interest expense (19,162)
- Capital Expenditures (17,221)
+ Proceeds from asset sales (1) 6,004
- Cash income taxes (4,074)
+ Cash interest income 476

Cash available to pay dividends $35,325

Dividends $(23,046)
Payout Ratio 65.2%

Payout Ratio without RTB Proceeds 78.4%

(1) Represents $5,921 of proceeds from the redemption of class C shares of
RTB stock in the three months ended June 30, 2006 and $83 from the
sale of excess property during the three months ended March 31, 2006.

Consolidated Communications
Adjusted Net Income Per Share
(Dollars in thousands)
(Unaudited)

Three Months Ended Six Months Ended
June 30, 2006 June 30, 2006
Reported net income applicable to
common stockholders $8,225 $11,773
Deferred tax adjustment (5,182) (5,182)
Severance, net of tax 894 891
Billing integration, net of tax 166 286
Sarbanes Oxley start-up costs, net of
tax 251 355
Non-cash compensation 625 1,250
Adjusted income applicable to common
stockholders $4,979 $9,373

Weighted average number of shares
outstanding 29,788,851 29,788,685
Adjusted net income per share $0.17 $0.31

Consolidated Communications
Key Operating Statistics

June 30, March 31, December 31, June 30,
2006 2006 2005 2005
Local access lines in service
Residential 159,295 161,322 162,231 165,501
Business (1) 79,609 79,637 79,793 81,757
Total local access lines (1) 238,904 240,959 242,024 247,258
DVS subscribers 4,516 3,514 2,146 585
DSL subscribers 45,948 43,713 39,192 33,058
Total connections (1) 289,368 288,186 283,362 280,901

Long distance lines 146,117 145,795 143,882 141,080
Dial-up subscribers 13,731 14,623 15,971 18,028
Service bundles 40,901 39,036 36,627 33,324

(1) Reflects cumulative line loss associated with MCIMetro's ISP
regrooming of 1,534, 4,708, 5,332 and 5,380, for quarters ended
3/31/05, 6/30/05, 12/31/05 and 3/31/06,
respectively.

Source: Consolidated Communications Holdings, Inc.

CONTACT: Stephen Jones, Vice President - Investor Relations of
Consolidated Communications, +1-217-258-9522,
investor.relations@consolidated.com; or Investor Relations: Kirsten Chapman of
Lippert \ Heilshorn & Associates, +1-415-433-3777, Kirsten@lhai-sf.com

Web site: http://www.consolidated.com/

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