EX-99 3 a4506647_ex991.txt INSIGHT COMMUNICATIONS EXHIBIT 99.1 Exhibit 99.1 Insight Announces Third Quarter 2003 Results NEW YORK--(BUSINESS WIRE)--Oct. 31, 2003--Insight Communications Company (Nasdaq: ICCI) today reported financial information for the quarter ended September 30, 2003. The Company announced selected quarterly financial results on October 29, 2003. Full financial results were delayed pending the decision of the Financial Accounting Standards Board ("FASB") regarding SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity", in particular its guidance for the treatment of minority interest. All results presented in the original earnings release on October 29, 2003 are unaffected by this decision as it relates to minority interest. Attached below is a complete discussion of operating results for the three months ended September 30, 2003 and 2002, including the items discussed in the previous press release, which remain unchanged. Also included are the consolidated balance sheets, consolidated statements of operations, and other supplemental financial and operating statistics which typically accompany Insight's quarterly earnings release. Operating results for the three months ended September 30, 2003 compared to the three months ended September 30, 2002 The $22.3 million or 11% increase in revenue was primarily a result of gains in high-speed Internet and digital service revenue, which increased 57% and 30% over the prior year's quarter, primarily due to an increased customer base. In addition, basic cable service revenue increased 5%, primarily due to basic rate increases. Revenue Generating Units ("RGUs") were approximately 1,934,900 as of September 30, 2003 compared to approximately 1,753,600 as of September 30, 2002. This represents a growth rate of 10%. Giving effect to the Griffin swap, RGUs grew 10% from the prior year quarter. RGUs represent the sum of basic, digital, high-speed Internet, and telephone customers. Average monthly revenue per basic customer, including management fee revenue and SourceSuite revenue, was $58.81 for the three months ended September 30, 2003, compared to $53.24 for the three months ended September 30, 2002 primarily reflecting the continued successful rollout of new product offerings in all markets. Average monthly revenue per basic customer for high-speed Internet and digital service increased to $11.78 for the three months ended September 30, 2003, up from $8.25 for the three months ended September 30, 2002. Programming and other operating costs increased $10.8 million or 15%. Programming costs increased 5%, primarily attributable to increased programming rates, an increase in customers served, and additional programming in the newly rebuilt systems. These increases were offset by a $3.1 million credit due to the settlement of a programming contract. Excluding the settlement of the programming contract, programming costs increased 11%. Other operating costs increased 44%, primarily attributable to increased high-speed Internet costs driven by the net addition of 83,900 high-speed Internet customers, year over year. In addition, labor costs increased due to the transition from upgrade activities to maintenance activities associated with the growth of new customers. Selling, general and administrative expenses increased $5.5 million or 13%, primarily as a result of increased costs related to annual salary increases and payroll related costs for existing employees, some of which are one-time expenses, as well as the addition of new employees. In addition, marketing expenses increased to support the continued roll-out of new products; legal fees also increased related to ongoing litigation. Partially offsetting these increases was an increase in marketing support funds (recorded as a reduction to selling, general and administrative expenses) for the promotion of new channel launches. Depreciation and amortization expense decreased $5.8 million or 9%, primarily as a result of a one-time $11.1 million write-down of obsolete video on demand equipment in the three months ended September 30, 2002. Excluding this impairment charge, depreciation and amortization increased $5.3 million or 10%, primarily as a result of additional capital expenditures through September 30, 2003 to support the continued rebuild of the Illinois systems, extend the plant, and continue the rollout of digital, high-speed Internet and telephone services to existing and new service areas. Operating cash flow ("OCF") increased $6.0 million or 6%, primarily due to increased basic, digital and high-speed Internet revenue, offset by increases in programming and other operating costs and selling, general and administrative costs. The following is a reconciliation of operating income to OCF: Three months ended September 30, 2003 2002 -------------------------------- (in thousands) Operating income $41,833 $30,052 Adjustment: Depreciation and amortization 56,667 62,450 -------------------------------- Operating Cash Flow $98,500 $92,502 ================================ Interest expense remained relatively flat quarter over quarter. The increase of $3.3 million or 7% is primarily due to the inclusion of $5.0 million of accruals for preferred interests in accordance with SFAS No. 150, effective July 1, 2003. Previously, the accrual was treated as a dividend below net income or loss. Additionally, the increase is related to higher outstanding debt, which averaged $2.7 billion for the three months ended September 30, 2003, versus $2.5 billion for the three months ended September 30, 2002. These increases were partially offset by a decrease in interest expense due to lower interest rates, which averaged 7.6% for the three months ended September 30, 2003, versus 8.7% for the three months ended September 30, 2002. Minority interest decreased $21.4 million or 184% to expense of $9.8 million from income of $11.6 million. The decrease is a direct result of the increase in net income attributable to common interests recorded by Insight Midwest primarily due to the gain on settlement of a programming contract partially offset by the loss from the extinguishment of the Coaxial debt. For the three months ended September 30, 2003, the net loss was $8.8 million. Insight Communications (NASDAQ: ICCI) is the 9th largest cable operator in the United States, serving approximately 1.4 million customers in the four contiguous states of Illinois, Kentucky, Indiana and Ohio. Insight specializes in offering bundled, state-of-the-art services in mid-sized communities, delivering basic and digital video, high-speed Internet and the recent deployment of voice telephony in selected markets to its customers. Any statements in this press release that are not historical facts are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. The words "estimate," "expect," "anticipate" and other expressions that indicate future events and trends identify forward-looking statements. The above forward-looking statements are subject to risks and uncertainties and are subject to change based upon a variety of factors that could cause actual results to differ materially from those Insight Communications anticipates. Factors that could have a material and adverse impact on actual results include competition, increasing programming costs, changes in laws and regulations, our substantial debt and the other risk factors described in Insight Communications' annual report on Form 10-K, as amended, for the year ended December 31, 2002. All forward-looking statements in this press release are qualified by reference to the cautionary statements included in Insight Communications' Form 10-K. INSIGHT COMMUNICATIONS COMPANY, INC. CONSOLIDATED BALANCE SHEETS (dollars in thousands) September 30, December 31, 2003 2002 ------------- ------------ unaudited Assets Cash and cash equivalents $54,010 $74,850 Investments 4,891 3,666 Trade accounts receivable, net of allowance for doubtful accounts of $1,220 and $1,296 as of September 30, 2003 and December 31, 2002 23,717 25,725 Launch funds receivable 7,599 5,197 Prepaid expenses and other assets 24,027 16,177 --------------- -------------- Total current assets 114,244 125,615 Fixed assets, net 1,208,372 1,220,251 Goodwill 72,430 72,965 Franchise costs 2,361,959 2,331,282 Deferred financing costs, net of accumulated amortization of $12,424 and $9,030 as of September 30, 2003 and December 31, 2002 31,838 33,298 Other non-current assets 5,170 5,651 --------------- -------------- Total assets $3,794,013 $3,789,062 =============== ============== Liabilities and stockholders' equity Accounts payable $48,854 $47,220 Accrued expenses and other liabilities 32,613 23,035 Accrued property taxes 24,079 14,428 Accrued programming costs 39,729 34,922 Deferred revenue 10,801 4,132 Interest payable 44,041 24,685 Debt - current portion 46,688 5,000 Preferred interest distribution payable - 5,250 --------------- -------------- Total current liabilities 246,805 158,672 Deferred revenue 5,023 6,533 Debt 2,745,940 2,576,004 Other non-current liabilities 6,134 53,085 Minority interest 228,876 224,803 Preferred interests - 191,820 Stockholders' equity: Preferred stock; $.01 par value; 100,000,000 shares authorized; no shares issued and outstanding as of September 30, 2003 and December 31, 2002 - - Common stock; $.01 par value: Class A - 300,000,000 shares authorized; 50,495,531 and 50,704,390 shares issued and outstanding as of September 30, 2003 and December 31, 2002 505 507 Class B - 100,000,000 shares authorized; 8,879,468 and 9,354,468 shares issued and outstanding as of September 30, 2003 and December 31, 2002 88 93 Additional paid-in-capital 806,878 829,873 Accumulated deficit (249,956) (237,956) Deferred stock compensation (4,888) (5,882) Accumulated other comprehensive income (loss) 8,608 (8,490) --------------- -------------- Total stockholders' equity 561,235 578,145 --------------- -------------- Total liabilities and stockholders' equity $3,794,013 $3,789,062 =============== ============== Note: Certain prior period amounts have been reclassified to conform to the current period presentation. INSIGHT COMMUNICATIONS COMPANY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (in thousands, except per share amounts) Three months Nine months ended September 30, ended September 30, ------------------- ------------------- 2003 2002 2003 2002 --------- --------- --------- --------- Revenue $228,395 $206,046 $666,487 $599,615 Operating costs and expenses: Programming and other operating costs 81,655 70,841 243,161 210,946 Selling, general and administrative 48,240 42,703 140,285 125,117 High-speed Internet charges - - - 4,116 Depreciation and amortization 56,667 62,450 171,936 160,375 --------- --------- --------- --------- Total operating costs and expenses 186,562 175,994 555,382 500,554 --------- --------- --------- --------- Operating income 41,833 30,052 111,105 99,061 Other income (expense): Gain on cable system exchange - - 26,992 - Interest expense (54,291) (50,947) (156,307) (153,713) Interest income 296 422 778 1,760 Other (1,134) (25) 681 (50) --------- --------- --------- --------- Total other expense, net (55,129) (50,550) (127,856) (152,003) Loss before minority interest, investment activity, extinguishments of obligations, gain on contract settlement and income taxes (13,296) (20,498) (16,751) (52,942) Minority interest (9,792) 11,610 (7,778) 25,699 Loss from early extinguishments of debt (10,879) - (10,879) - Loss on settlement of put obligation (11,979) - (11,979) - Gain on settlement of programming contract 37,137 - 37,137 - Impairment write-down of investments - - (1,500) (205) --------- --------- --------- --------- Loss before income taxes (8,809) (8,888) (11,750) (27,448) Provision for income taxes - (125) (250) (375) --------- --------- --------- --------- Net loss (8,809) (9,013) (12,000) (27,823) Accrual of preferred interests - (5,050) (10,353) (15,007) --------- --------- --------- --------- Net loss applicable to common stockholders $(8,809) $(14,063) $(22,353) $(42,830) ========= ========= ========= ========= Basic and diluted loss per share attributable to common stockholders $(.15) $(.23) $(.38) $(.71) Basic and diluted weighted- average shares outstanding 59,393 60,294 59,332 60,273 Note: Certain prior period amounts have been reclassified to conform to the current period presentation. INSIGHT COMMUNICATIONS COMPANY, INC. SUPPLEMENTAL INFORMATION (unaudited) (in thousands) Three months ended September 30, 2003 2002 ---------------- ------------ Insight Consolidated -------------------- Revenues $228,395 $206,046 System Cash Flow * 104,774 96,839 System Cash Flow Margin 45.9% 47.0% Corporate Overhead (6,883) (5,055) Management Fee Income 609 718 Operating Cash Flow * 98,500 92,502 Operating Cash Flow Margin 43.1% 44.9% Capital Expenditures 47,022 66,485 Total Debt, including Preferred Interests** 2,792,628 2,746,921 Reconciliation of Operating Income to ------------------------------------- Operating & System Cash Flow ---------------------------- Operating income $41,833 $30,052 Adjustment: Depreciation and amortization 56,667 62,450 ---------------- ------------ Operating Cash Flow* $98,500 $92,502 ---------------- ------------ Adjustments: Corporate Overhead 6,883 5,055 Management Fee Income (609) (718) ---------------- ------------ System Cash Flow * $104,774 $96,839 ================ ============ Nine months ended September 30, 2003 2002 ---------------- ------------ Insight Consolidated -------------------- Revenues $666,487 $599,615 System Cash Flow * 298,827 272,296 System Cash Flow Margin 44.8% 45.4% Corporate Overhead (17,629) (14,923) Management Fee Income 1,843 2,063 Operating Cash Flow * 283,041 259,436 Operating Cash Flow Margin 42.5% 43.3% Capital Expenditures 131,133 188,104 Total Debt, including Preferred Interests** 2,792,628 2,746,921 Reconciliation of Operating Income to ------------------------------------- Operating & System Cash Flow ---------------------------- Operating income $111,105 $99,061 Adjustment: Depreciation and amortization 171,936 160,375 ---------------- ------------ Operating Cash Flow* $283,041 $259,436 ---------------- ------------ Adjustments: Corporate Overhead 17,629 14,923 Management Fee Income (1,843) (2,063) ---------------- ------------ System Cash Flow * $298,827 $272,296 ================ ============ * Operating cash flow ("OCF") represents operating income before depreciation and amortization. System cash flow represents OCF excluding management fees and, for Insight Consolidated, corporate overhead. ** As of September 30, 2003, there were no preferred interests outstanding. Certain prior period amounts have been reclassified to conform to the current period presentation. INSIGHT COMMUNICATIONS COMPANY, INC. OPERATING STATISTICS (in thousands, except per customer and penetration data) Q3 Q2 Q3 2003 * 2003 * 2002 ------------ --------- --------- Customer Relationships 1,323.5 1,321.8 1,306.8 Total Average Monthly Revenue per Customer $58.81 $57.10 $53.24 Basic Cable ----------- Homes Passed 2,313.5 2,300.2 2,248.8 Basic Cable Customers 1,293.4 1,295.7 1,289.0 Basic Cable Penetration 55.9% 56.3% 57.3% Cable Revenue $135,829 $133,625 $128,777 Average Monthly Cable Revenue per Customer 34.97 34.21 33.27 High-Speed Internet (HSI) ------------------------- "Modem Ready" Homes Passed 2,222.3 2,189.0 1,920.0 Modem Customers 208.5 179.5 124.6 "Modem Ready" Penetration 9.4% 8.2% 6.5% High-Speed Internet Revenue $24,346 $22,352 $15,488 Average Monthly HSI Revenue per Customer 6.27 5.72 4.00 Average Monthly HSI Revenue per HSI Customer 41.84 42.85 45.27 Digital Cable ------------- Digital Universe 1,243.3 1,241.7 1,213.5 Digital Customers 383.7 360.2 317.1 Digital Cable Penetration 30.9% 29.0% 26.1% Digital Revenue $21,391 $20,049 $16,466 Average Monthly Digital Revenue per Customer 5.51 5.13 4.25 Average Monthly Digital Revenue per Digital Customer 19.17 18.68 17.94 Telephone --------- Telephone Universe (marketable homes) 641.2 612.9 402.3 Telephone Customers 49.3 42.2 22.9 Telephone Penetration (to marketable homes) 7.7% 6.9% 5.7% Telephone Revenue $3,232 $2,796 $1,735 Average Monthly Telephone Revenue per Customer 0.83 0.72 0.45 Advertising Revenue ------------------- Advertising Revenue $14,550 $15,179 $13,007 Average Monthly Advertising Revenue per Customer 3.75 3.89 3.36 Other Revenue ------------- Other Revenue $29,047 $29,046 $30,573 Average Monthly Other Revenue per Customer 7.48 7.43 7.91 *2003 customer data includes effects of the swap of our Griffin, GA system for the managed New Albany, IN and Shelbyville, KY systems. Certain prior period amounts have been reclassified to conform to the current period presentation. Note: All "per customer" figures reflect revenue per Basic Cable Customers. INSIGHT COMMUNICATIONS COMPANY, INC. NCTA STANDARD REPORTING CATEGORIES CAPITAL EXPENDITURES (unaudited) (in thousands) ------------------------------------------- Q3 2003 YTD 2003 2003 FY 2002 FY Insight Consolidated Actual Actual Guidance Actual ---------------------------------------------------------------------- Customer Premise Equipment $18,489 $61,992 $107,380 $106,060 Scaleable Infrastructure 3,514 10,071 13,775 32,019 Line Extensions 6,288 14,480 21,254 29,446 Upgrade/Rebuild 7,533 26,078 31,065 87,735 Support Capital 11,198 18,512 26,503 27,744 ------------------------------------------- Total Insight Consolidated $47,022 $131,133 $199,977 $283,004 ------------------------------------------- INSIGHT COMMUNICATIONS COMPANY, INC. RECONCILIATION OF OPERATING INCOME TO FREE CASH FLOW (unaudited) (in thousands) Three Months Ended Nine Months Ended September 30, September 30, 2003 2002 2003 2002 ----------- -------- ---------- --------- Operating income $41,833 $30,052 $111,105 $99,061 Depreciation and amortization 56,667 62,450 171,936 160,375 ----------- -------- ---------- --------- Operating Cash Flow 98,500 92,502 283,041 259,436 Changes in working capital accounts (1) (7,135) (189) (3,109) (32,156) Cash paid for interest (24,516) (24,185) (108,175) (109,403) Cash paid for taxes (2) (4) (425) (313) ----------- -------- ---------- --------- Net cash provided by operating activities 66,847 68,124 171,332 117,564 Capital expenditures (47,022) (66,485) (131,133) (188,104) Distribution of preferred interests (4,554) (7,000) (11,554) (14,000) ----------- -------- ---------- --------- Free (negative) cash flow $15,271 $(5,361) $28,645 $(84,540) =========== ======== ========== ========= (1) Changes in working capital accounts is based on the net cash changes in current assets and current liabilities, excluding changes related to interest and taxes and other non-cash expenses. Additionally, the changes in working capital accounts includes the cash paid for the settlement of a put obligation and cash paid on the early extinguishment of debt. CONTACT: Insight Communications Dinesh C. Jain, 917-286-2300