EX-99.1 2 a4629582ex991.txt PRESS RELEASE Exhibit 99.1 Insight Announces First Quarter 2004 Results NEW YORK--(BUSINESS WIRE)--April 30, 2004--Insight Communications Company (NASDAQ: ICCI) today announced financial results for the quarter ended March 31, 2004. "We are pleased to report that Insight has started 2004 with outstanding results. With revenue growth of 11% and operating cash flow growth of 12%, the first quarter showed a meaningful acceleration of the positive trends we saw in the fourth quarter of 2003," said Michael S. Willner, president and chief executive officer of Insight Communications Company. "In the first quarter we delivered 52,600 net RGU additions, including 4,300 basic customers, 15,500 digital customers, 28,000 high-speed Internet customers, and 4,700 telephone customers. This represents RGU growth of 9% over the first quarter of 2003, demonstrating our ability to roll out new services to our customer base at a healthy rate." "As of March 31, 2004, 96% of our homes passed were upgraded for HSI, 96% of our customers were upgraded for digital, 93% of our digital customers were VOD-enabled, and 98% of our digital customers were HDTV-enabled. We are proud of the high quality systems we have built and continue to believe that these systems will fuel our growth into 2004 and beyond." First Quarter Highlights First quarter 2004 highlights for Insight Communications Company included: -- Revenue of $238.8 million, an increase of 11% over Q1 2003 -- Operating cash flow (operating income before depreciation and amortization) of $100.6 million, an increase of 12% over Q1 2003 -- Capital expenditures of $44.2 million -- Free cash flow (net cash provided by operating activities less capital expenditures) of $50.9 million -- Total RGUs of 2,034,400 at quarter-end, a growth of 9% over Q1 2003 -- Basic customer net additions of 4,300, for a total of 1,297,900 customers at quarter-end -- Digital customer net additions of 15,500, increasing customers to 418,400 at quarter-end and penetration to 33.5% of the Digital Universe 1 -- High-speed Internet customer net additions of 28,000, an increase of 20% over Q1 2003 net additions. Total HSI customers at quarter-end were 258,000, a penetration of 11.5% of HSI homes passed -- Telephone customer net additions of 4,700, bringing total telephone customers to 60,100 at quarter-end and penetration to 8.4% of marketable homes passed -- As of March 31, 2004, 96% of the Company's customers were passed by two-way, 750 MHz or higher capacity upgraded network Three Months Ended March 31, 2004 Compared to Three Months Ended March 31, 2003 The $23.7 million, or 11%, increase in revenue was primarily a result of gains in Insight's high-speed Internet and digital video revenues, which increased 43% and 24% over the prior year's quarter, driven by an increased customer base. In addition, basic cable service revenue increased 6%, primarily due to basic rate increases in 2003. Revenue by service offering was as follows for the three months ended March 31 (in thousands): 2004 2003 Revenue Revenue by % of by % of % Change Service Total Service Total in Offering Revenue Offering Revenue Revenue --------- -------- --------- -------- -------- Basic $139,005 58.2% $130,851 60.9% 6.2% Digital 23,721 9.9% 19,132 8.9% 24.0% High-speed Internet 28,940 12.1% 20,262 9.4% 42.8% Premium / analog pay- per-view 14,906 6.3% 14,704 6.8% 1.4% Telephone 3,758 1.6% 2,568 1.2% 46.3% Advertising 13,987 5.9% 12,535 5.8% 11.6% Franchise fees 7,008 2.9% 6,702 3.1% 4.6% Other 7,431 3.1% 8,291 3.9% (10.4)% --------- -------- --------- -------- Total $238,756 100.0% $215,045 100.0% 11.0% ========= ======== ========= ======== Revenue Generating Units ("RGUs") as of March 31, 2004, which represent the sum of basic, digital, high-speed Internet, and telephone customers, increased approximately 9% as compared to March 31, 2003. RGUs by type were as follows as of March 31 (in thousands): 2004 2003 -------------- -------------- Basic 1,297.9 1,308.7 Digital 418.4 355.4 High-speed Internet 258.0 168.3 Telephone 60.1 37.7 -------------- -------------- Total RGUs 2,034.4 1,870.1 ============== ============== 2 Average monthly revenue per basic customer, including management fee revenue and SourceSuite revenue, was $61.42 for the three months ended March 31, 2004, compared to $55.34 for the three months ended March 31, 2003, which reflects the continued growth of the company's high-speed Internet and digital product offerings in all markets. Programming and other operating costs increased $8.0 million, or 10%. Programming costs increased primarily as a result of increased programming rates. Other operating costs increased primarily due to increased high-speed Internet service provider costs, driven by the net addition of approximately 89,700 high-speed Internet customers since March 31, 2003. In addition, other operating costs increased as a result of technical salaries and related benefits for new and existing employees, an increased volume of modems sold and other labor costs, which increased due to the continued transition from upgrade activities to maintenance activities. Selling, general and administrative expenses increased $5.2 million, or 12%, primarily because of payroll and related costs due to annual salary increases for existing and new employees and increases in health insurance costs. Marketing expenses increased to support the continued rollout of high-speed Internet and digital products and to maintain Insight's core video customer base. Professional fees also increased due to the one-time write-off of shelf registration fees the company no longer anticipates will be utilized. In addition, due to the net impact of the swap of Insight's Griffin, Ga. system for the then managed Shelbyville, Ky. and New Albany, Ind. systems, the company incurred incremental selling, general and administrative costs and is no longer receiving reimbursements from Comcast for these costs. 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 increased $4.2 million, or 8%, primarily as a result of additional capital expenditures through March 31, 2004 to support the continued rebuild of Insight's Illinois systems, extend its plant and continue the rollout of digital, high-speed Internet and telephone services to existing and new service areas. Operating cash flow increased $10.5 million, or 12%, 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. See page 9 for a reconciliation of operating income to operating cash flow. Interest expense remained relatively flat quarter over quarter. The decrease of $1.2 million, or 2%, is primarily due to lower interest rates, which averaged 7.05% for the three months ended March 31, 2004, as compared to 7.79% for the three months ended March 31, 2003, and partially offset by higher outstanding debt, which averaged $2.85 billion for the three months ended March 31, 2004, as compared to $2.60 billion for the three months ended March 31, 2003. 3 Minority interest, equal to 50% of Insight Midwest's net income or loss attributable to common interests, decreased $6.4 million, or 98%, as a direct result of the decrease in net income recorded by Insight Midwest quarter over quarter. This decrease is primarily due to the gain recorded by Insight Midwest on the swap of the Griffin, Ga. system during the three months ended March 31, 2003. Liquidity and Capital Resources Cash provided by operations for the three months ended March 31, 2004 and 2003 was $95.1 million and $63.2 million, respectively. The increase was primarily attributable to the timing of cash receipts and payments related to Insight's working capital accounts. Cash used in investing activities for the three months ended March 31, 2004 and 2003 was $43.6 million and $67.8 million, respectively. The decrease was attributable to the swap of the Griffin, Ga. system for the New Albany, Ind. and Shelbyville, Ky. systems in the first quarter of 2003. Cash provided by (used in) financing activities for the three months ended March 31, 2004 and 2003 was $(15.6) million and $20.8 million, respectively. During the three months ended March 31, 2004, Insight commenced debt amortization payments related to the A and B Term Loan portions of its credit facility, which totaled $15.6 million. In addition, Insight did not need to borrow under its credit facility due to increased cash flows from operations. During the three months ended March 31, 2003, the company borrowed $27.8 million under its credit facilities to support operations and capital spending. Partially offsetting these borrowings were preferred interest distribution payments, which ceased with the refinancing of debt of Insight Ohio, discussed below, during the third quarter of 2003. For the three months ended March 31, 2004 and 2003, Insight spent $44.2 million and $40.5 million in capital expenditures largely in success-based capital, including capital for interactive digital and high-speed Internet growth, as well as the continued build out of the company's distribution systems. Use of Non-GAAP Measures This press release contains disclosure of operating cash flow, system cash flow and free cash flow, each of which is a financial measure that is not calculated and presented in accordance with accounting principles generally accepted in the United States ("GAAP"). This release includes tabular reconciliation of operating income, Insight's most directly comparable financial measure calculated and presented in accordance with GAAP, to operating cash flow and system cash flow. This release also includes a reconciliation of net cash provided by operating activities, Insight's most directly comparable financial measure calculated and presented in accordance with GAAP, to free cash flow. 4 Insight defines operating cash flow as operating income or loss before depreciation and amortization. Insight defines free cash flow as net cash provided by operating activities less capital expenditures and distribution of preferred interests. Operating cash flow and free cash flow are useful to management in measuring the overall operational strength and performance of the company. A limitation of operating cash flow, however, is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating the company's revenues. Management evaluates the costs of such tangible and intangible assets through other financial measures such as capital expenditures and investment spending. Another limitation of operating cash flow is that it does not reflect income net of interest expense, which is a significant expense of the company because of the substantial debt it incurred to acquire cable television systems and finance the capital expenditures for the upgrade of the cable network. System cash flow is another non-GAAP financial measure, which Insight uses to evaluate the underlying operating performance of its cable systems. Insight defines system cash flow as operating cash flow excluding management fees payable by the company's operating subsidiaries to Insight Communications, and excluding the corporate overhead of Insight Communications. Such management fees are equal to 3% of system revenues and are eliminated in consolidation. Corporate overhead is a component of Insight's selling, general and administrative expenses. System cash flow is subject to the same limitations as described above for operating cash flow. Despite the limitations of operating cash flow, system cash flow and free cash flow, management believes that the presentation of each financial measure is relevant and useful for investors because it allows investors to evaluate Insight's performance in a manner similar to the methods used by management. In addition, operating cash flow, system cash flow and free cash flow are commonly used in the cable television industry to analyze and compare cable television companies on the basis of liquidity, operating performance and leverage, although Insight's measures of operating cash flow, system cash flow and free cash flow may not be directly comparable to similar measures used by other companies. Operating cash flow, system cash flow and free cash flow should not be regarded as an alternative to, or more meaningful than, either operating income or net income as an indicator of operating performance or cash flows as a measure of liquidity, as well as other measures of financial performance reported in accordance with GAAP. 5 About Insight Communications 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 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 history and expectation of future net losses, competition, increasing programming costs, changes in laws and regulations, the substantial debt and the other risk factors described in Insight Communications' annual report on Form 10-K for the year ended December 31, 2003. All forward-looking statements in this press release are qualified by reference to the cautionary statements included in Insight Communications' Form 10-K. 6 INSIGHT COMMUNICATIONS COMPANY, INC. CONSOLIDATED BALANCE SHEETS (dollars in thousands) March 31, Dec. 31, 2004 2003 ----------- ----------- unaudited Assets Cash and cash equivalents $96,133 $60,172 Investments 4,039 4,078 Trade accounts receivable, net of allowance for doubtful accounts of $1,180 and $1,123 as of March 31, 2004 and December 31, 2003 17,733 29,313 Launch funds receivable 1,879 9,421 Prepaid expenses and other assets 16,341 17,446 Total current assets 136,125 120,430 Fixed assets, net 1,204,361 1,216,304 Goodwill 72,430 72,430 Franchise costs 2,361,959 2,361,959 Deferred financing costs, net of accumulated amortization of $14,997 and $13,676 as of March 31, 2004 and December 31, 2003 31,967 33,288 Other non-current assets 8,448 5,244 ----------- ----------- Total assets $3,815,290 $3,809,655 =========== =========== Liabilities and stockholders' equity Accounts payable $25,295 $30,417 Accrued expenses and other liabilities 30,273 34,182 Accrued property taxes 22,870 22,954 Accrued programming costs 47,036 43,261 Deferred revenue 8,763 10,061 Interest payable 47,140 23,315 Debt - current portion 67,563 62,250 ----------------------- Total current liabilities 248,940 226,440 Deferred revenue 4,114 4,523 Debt 2,777,070 2,786,041 Other non-current liabilities 2,414 5,742 Minority interest 230,584 229,790 Stockholders' equity: Preferred stock; $.01 par value; 100,000,000 shares authorized; no shares issued and outstanding as of March 31, 2004 and December 31, 2003 - - Common stock; $.01 par value: Class A - 300,000,000 shares authorized; 50,805,718 and 50,685,317 shares issued and outstanding as of March 31, 2004 and December 31, 2003 509 507 Class B - 100,000,000 shares authorized; 8,879,468 shares issued and outstanding as of March 31, 2004 and December 31, 2003 88 88 Additional paid-in-capital 817,558 816,600 Accumulated deficit (253,288) (246,471) Deferred stock compensation (12,851) (13,582) Accumulated other comprehensive income (loss) 152 (23) ----------- ----------- Total stockholders' equity 552,168 557,119 ----------- ----------- Total liabilities and stockholders' equity $3,815,290 $3,809,655 =========== =========== Certain prior period amounts have been reclassified to conform to the current period presentation. 7 INSIGHT COMMUNICATIONS COMPANY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (in thousands, except per share amounts) Three months ended March 31, 2004 2003 --------- --------- Revenue $238,756 $215,045 Operating costs and expenses: Programming and other operating costs 87,911 79,868 Selling, general and administrative 50,292 45,094 Depreciation and amortization 59,159 54,994 --------- --------- Total operating costs and expenses 197,362 179,956 --------- --------- Operating income 41,394 35,089 Other income (expense): Gain on cable system exchange - 26,992 Interest expense (50,202) (51,446) Interest income 140 234 Other income (expense) 1,828 (5) --------- --------- Total other expense, net (48,234) (24,225) Income (loss) before minority interest and income taxes (6,840) 10,864 Minority interest expense (121) (6,478) --------- --------- Income (loss) before income taxes (6,961) 4,386 Benefit for income taxes(1) 144 1,257 --------- --------- Net income (loss)(1) (6,817) 5,643 Accrual of preferred interests - (5,150) --------- --------- Net income (loss) applicable to common stockholders(1) $(6,817) $493 ========= ========= Basic and diluted income (loss) per share attributable to common stockholders $(.11) $.01 Basic and diluted weighted-average shares outstanding 59,661 60,077 Certain prior period amounts have been reclassified to conform to the current period presentation. (1) 2003 amounts have been restated due to an accounting change related to the tax impact of interest rate swaps. See Insight's 2003 Form 10-K for a complete discussion of those changes. 8 INSIGHT COMMUNICATIONS COMPANY, INC. FINANCIAL INFORMATION (in thousands) Three months ended March 31, 2004 2003 ---------- ---------- (unaudited) Insight Consolidated -------------------- Revenues $238,756 $215,045 System Cash Flow 106,549 94,770 System Cash Flow Margin 44.6% 44.1% Corporate Overhead (6,586) (5,345) Management Fee Income 590 658 Operating Cash Flow 100,553 90,083 Operating Cash Flow Margin 42.1% 41.9% Capital Expenditures 44,189 40,545 Total Debt, including Preferred Interests (at end of period)(*) 2,844,633 2,810,293 Reconciliation of Operating Income to Operating Cash Flow & System Cash Flow -------------------------------------- Operating income $41,394 $35,089 Adjustment: Depreciation and amortization 59,159 54,994 ---------- ---------- Operating Cash Flow $100,553 $90,083 ---------- ---------- Adjustments: Corporate Overhead 6,586 5,345 Management Fee Income (590) (658) ---------- ---------- System Cash Flow $106,549 $94,770 ========== ========== (*) As of March 31, 2004, there were no preferred interests outstanding. Certain prior period amounts have been reclassified to conform to the current period presentation. 9 INSIGHT COMMUNICATIONS COMPANY, INC. OPERATING STATISTICS (in thousands, except per customer and penetration data) Q1 Q4 Q1 2004 2003 2003 --------- --------- --------- Customer Relationships 1,336.3 1,327.2 1,334.3 Total Average Monthly Revenue per Customer $61.42 $60.84 $55.34 Basic Cable ----------- Homes Passed 2,335.4 2,325.7 2,296.4 Basic Cable Customers 1,297.9 1,293.6 1,308.7 Basic Cable Penetration 55.6% 55.6% 57.0% Cable Revenue $139,005 $136,720 $130,851 Average Monthly Cable Revenue per Customer $35.76 $35.23 $33.67 High-Speed Internet ("HSI") --------------------------- HSI Homes Passed 2,245.6 2,236.3 2,096.7 HSI Customers 258.0 230.0 168.3 HSI Penetration 11.5% 10.3% 8.0% HSI Revenue $28,940 $26,979 $20,262 Average Monthly HSI Revenue per Customer $7.44 $6.95 $5.21 Average Monthly HSI Revenue per HSI Customer $39.53 $41.02 $43.17 Digital Cable ------------- Digital Universe 1,247.1 1,242.2 1,259.0 Digital Customers 418.4 402.9 355.4 Digital Cable Penetration 33.5% 32.4% 28.2% Digital Revenue $23,721 $22,899 $19,132 Average Monthly Digital Revenue per Customer $6.10 $5.90 $4.92 Average Monthly Digital Revenue per Digital Customer $19.26 $19.41 $18.59 Telephone --------- Telephone Universe (marketable homes) 714.9 648.0 559.4 Telephone Customers 60.1 55.4 37.7 Telephone Penetration (to marketable homes) 8.4% 8.5% 6.7% Telephone Revenue $3,758 $3,737 $2,568 Average Monthly Telephone Revenue per Customer $.97 $.96 $.66 Advertising Revenue ------------------- Advertising Revenue $13,987 $16,567 $12,535 Average Monthly Advertising Revenue per Customer $3.60 $4.27 $3.23 Other Revenue ------------- Other Revenue $29,345 $29,203 $29,697 Average Monthly Other Revenue per Customer $7.55 $7.53 $7.65 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. 10 INSIGHT COMMUNICATIONS COMPANY, INC. NCTA STANDARD REPORTING CATEGORIES CAPITAL EXPENDITURES (unaudited) (in thousands) -------------------------- Q1 2004 2004 FY 2003 FY Insight Consolidated Actual Guidance Actual ---------------------------------------------------------------------- Customer Premise Equipment $26,854 $104,700 $99,347 Scaleable Infrastructure 3,731 16,051 14,707 Line Extensions 5,153 27,357 23,299 Upgrade/Rebuild 4,251 16,918 33,692 Support Capital 4,200 19,974 25,613 -------------------------- Total Insight Consolidated $44,189 $185,000 $196,658 -------------------------- INSIGHT COMMUNICATIONS COMPANY, INC. RECONCILIATION OF OPERATING INCOME TO FREE CASH FLOW (unaudited) (in thousands) Three Months Ended March 31, 2004 2003 -------- -------- Operating income $41,394 $35,089 Depreciation and amortization 59,159 54,994 -------- -------- Operating Cash Flow 100,553 90,083 Changes in working capital accounts (1) 11,567 (5,892) Cash paid for interest (16,864) (20,862) Cash paid for taxes (122) (123) -------- -------- Net cash provided by operating activities 95,134 63,206 Capital expenditures (44,189) (40,545) Distribution of preferred interests - (7,000) -------- -------- Free cash flow $50,945 $15,661 ======== ======== (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. 11 CONTACT: Insight Communications John Abbot, 917-286-2300