-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E1V+0BB7kZJr//nLs0Rd3ZD41hwTOPSUjIYnA+8qDm3A4uhbBNTY9+rybO+QPSMq 25HeI+sMo6TWUe9DzRBDjg== 0001157523-06-002401.txt : 20060307 0001157523-06-002401.hdr.sgml : 20060307 20060307094420 ACCESSION NUMBER: 0001157523-06-002401 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20060307 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060307 DATE AS OF CHANGE: 20060307 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INSIGHT COMMUNICATIONS CO INC CENTRAL INDEX KEY: 0001084421 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 134053502 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-26677 FILM NUMBER: 06668849 BUSINESS ADDRESS: STREET 1: 126 EAST 56TH STREET CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2123712266 MAIL ADDRESS: STREET 1: INSIGHT COMMUNICATIONS CO INC STREET 2: 126 EAST 56TH STREET CITY: NEW YORK STATE: NY ZIP: 10022 8-K 1 a5096444.txt INSIGHT COMMUNICATIONS COMPANY, INC. 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): March 7, 2006 Insight Communications Company, Inc. (Exact name of Registrant as specified in its charter) Delaware 0-26677 13-4053502 (State of incorporation) (Commission File No.) (IRS Employer Identification No.) 810 7th Avenue New York, New York 10019 (Address of principal executive offices) Registrant's telephone number: (917) 286-2300 Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions: |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 2.02 Results of Operations and Financial Condition. On March 7, 2006, the Registrant issued a press release announcing its financial results for the quarter and year ended December 31, 2005. A copy of the press release is being furnished as Exhibit 99.1 to this report and incorporated herein by reference. This press release contains disclosure of operating income before depreciation and amortization 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"). Disclosure regarding management's reasons for presenting these non-GAAP measures, as well as tabular reconciliation of these non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP, are presented in the press release under the caption "Use of Operating Income before Depreciation and Amortization and Free Cash Flow." Item 9.01. Financial Statements and Exhibits. (a) Financial Statements of Businesses Acquired - None (b) Pro Forma Financial Information - None (c) Exhibits: Exhibit No. Description ----------- ----------- 99.1 Press release issued on March 7, 2006 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Insight Communications Company, Inc. Dated: March 7, 2006 By: /s/ Elliot Brecher ----------------------------------- Elliot Brecher Senior Vice President and General Counsel EX-99.1 2 a5096444ex99-1.txt EXHIBIT 99.1 Exhibit 99.1 Insight Communications Announces Fourth Quarter and Year-End 2005 Results NEW YORK--(BUSINESS WIRE)--March 7, 2006--Insight Communications Company today announced financial results for the quarter and year ended December 31, 2005. 2005 Highlights -- Revenue of $1.1 billion, an increase of 12% over 2004 -- Operating Income before Depreciation and Amortization* of $406.0 million. After adjusting for going-private transaction-related costs of $62.0 million, Operating Income before Depreciation and Amortization was $468.0, an increase of 8% over 2004. -- Capital expenditures of $220.1 million -- Total Customer Relationships of 1,347,500 at year end, an increase of 24,800 compared to 1,322,700 at year end 2004 -- Total RGUs of 2,360,700 at year end, an increase of 11% from year end 2004, comprised of: -- High-speed Internet ("HSI") customer net gain of 139,900, an increase of 39% over 2004 net additions. Total HSI customers at year end were 470,400, a penetration of 20% of HSI homes passed. -- Basic customer net gain of 9,100, an increase of 30,200 customers over 2004 net losses, resulting in 1,281,600 basic customers at year end -- Digital customer net gain of 67,500, an increase of 39% over 2004 net additions, increasing digital customers to 518,800 at year end. Digital penetration was 42% of the company's Digital Universe. -- Telephone customer net gain of 25,600, an increase of 16,700 customers over 2004 net additions, bringing total telephone customers to 89,900 at year end and penetration to 11% of marketable homes passed -- As of December 31, 2005, 97% of the company's customers were passed by two-way, 750 MHz or higher capacity upgraded network. Operating Results for the Year Ended December 31, 2005 Compared to Year Ended December 31, 2004 Revenue for the year ended December 31, 2005 totaled $1.1 billion, an increase of 12% over the prior year, due primarily to customer gains in all services, as well as basic and classic video rate increases. High-speed Internet service revenue increased 45% over the prior year, which is mainly attributable to an increased customer base. Insight added a net 139,900 high-speed Internet customers during the year to end the year at 470,400 customers. In addition, digital service revenue increased 13% over the prior year primarily due to an increased customer base. Insight added a net 67,500 digital customers during the year to end the year at 518,800 customers. (1) * See explanation of this Non-GAAP measure on Page 5. Basic cable service revenue increased 4% due to basic and classic video rate increases, partially offset by promotional discounts. Although the number of basic video customers was higher at December 31, 2005 than December 31, 2004, the average number of customers during the year declined slightly. Insight is increasing its customer retention efforts by emphasizing bundling, enhancing and differentiating its video services and providing video-on-demand, high definition television and digital video recorders. The company is also continuing to focus on improving customer satisfaction through higher service levels, increased education of product offerings and increased spending on sales and marketing efforts. Revenue by service offering was as follows for the year ended December 31 (dollars in thousands): Revenue by Service Offering ------------------------------------------- ---------- % of Total % of Total % Change 2005 Revenue 2004 Revenue in Revenue ----------- -------- ----------- ---------- ---------- Basic $596,321 53.4% $573,650 57.2% 4.0% High-speed Internet 190,820 17.1% 132,011 13.2% 44.5% Digital 111,202 9.9% 98,797 9.9% 12.6% Advertising 76,004 6.8% 68,415 6.8% 11.1% Premium 54,414 4.9% 57,054 5.7% (4.6)% Telephone 35,502 3.2% 15,254 1.5% 132.7% Franchise fees 30,721 2.7% 28,721 2.9% 7.0% Other 22,697 2.0% 28,554 2.8% (20.5)% ----------- -------- ----------- ---------- ---------- Total $1,117,681 100.0% $1,002,456 100.0% 11.5% =========== ======== =========== ========== ========== Total Customer Relationships were 1,347,500 as of December 31, 2005, an increase of 24,800 from 1,322,700 as of December 31, 2004. Total Customer Relationships represent the number of customers who receive one or more of Insight's products (i.e., basic cable, high-speed Internet or telephone) without regard to which product they purchase. Revenue Generating Units ("RGUs"), which represent the sum of basic, digital, high-speed Internet and telephone customers, as of December 31, 2005 increased 11% as compared to December 31, 2004. RGUs by category were as follows (in thousands): (2) RGUs by Category ---------------------- December 31, December 31, 2005 2004 ------------ ------------ Basic 1,281.6 1,272.5 Digital 518.8 451.3 High-speed Internet 470.4 330.5 Telephone 89.9 64.3 ------------ ------------ Total RGUs 2,360.7 2,118.6 ============ ============ Average monthly revenue per basic customer was $73.30 for the year ended December 31, 2005 compared to $64.96 for the year ended December 31, 2004. This primarily reflects the continued growth of high-speed Internet and digital product offerings in all markets, as well as basic and classic video rate increases. In addition, telephone revenues for the year ended December 31, 2005 reflect service revenues earned directly from customers, compared to telephone revenues in the year ended December 31, 2004 which reflected revenues billed to Comcast under a previous contractual arrangement that was terminated effective December 31, 2004. Also included in telephone revenue for the year ended December 31, 2005 is the continued amortization of installation revenue under the previous arrangement with Comcast in the amount of $3.3 million. Programming and other operating costs increased $37.6 million, or 11%. Total programming costs for Insight's video products decreased for the year ended December 31, 2005 compared to the year ended December 31, 2004. The substantial increases in programming rates were offset by programming credits. The credits resulted from favorable resolution of pricing negotiations related to certain prior period programming costs that were accrued at a higher rate than the amount actually paid, as well as a settlement of disputed claims with a vendor. In addition, direct operating costs increased due to an increased volume of modems sold and cost of sales associated with telephone that were previously paid by Comcast. Other operating costs increased primarily as a result of increases in technical salaries for new and existing employees, in addition to decreased capitalized labor costs due to the continued transition from upgrade and new connect activities to maintenance and reconnect activities. Other operating costs also increased as a result of increases in repairs and maintenance costs due to increased repair costs for customer premise equipment, an increase in drop materials due to customer growth and increased property taxes due to a favorable reversal of accrued property taxes recorded in 2004. Selling, general and administrative expenses increased $41.7 million, or 18%, primarily due to increased payroll and payroll related costs, including an increase in the number of employees and salary increases for existing employees. Marketing support funds (recorded as a reduction to selling, general and administrative expenses) decreased over the prior year. Marketing expenses increased over the prior year to support the continued rollout of high-speed Internet, digital and telephone products, and to maintain the company's core video customer base. A decrease in expenses previously allocated to Comcast, under Insight's prior agreement to manage certain Comcast systems, also contributed to the increase in selling, general and administrative expenses. As this agreement was terminated effective July 31, 2004, the year ended December 31, 2005 does not include any of these expense allocations, and the year ended December 31, 2004 includes seven months of these expense allocations. Some cost savings have been realized upon termination of the management agreement, and the impact of certain of these savings is reflected in programming and other operating costs. (3) Transaction-related costs of $62.0 million were recorded for the year ended December 31, 2005. These costs were comprised of sponsor and investment fees, legal and accounting fees, financial advisor fees, the cancellation of in-the-money stock options, printing and mailing and other miscellaneous expenses related to the going-private transaction. Stock-based compensation expense increased $12.9 million due to the expense associated with the accelerated vesting of certain restricted shares in connection with the going-private transaction and in connection with the granting of restricted and deferred shares during the year ended December 31, 2005. Depreciation and amortization expense increased $7.9 million, or 3%, primarily as a result of additional capital expenditures through December 31, 2005. These expenditures were primarily for telephone equipment, purchases of customer premise equipment and drop materials and network extensions, all of which Insight considers necessary in order to continue to maintain and grow its customer base and expand its service offerings. Partially offsetting this increase was a decrease in depreciation expense related to certain assets that have become fully depreciated since December 31, 2004. As a result of the factors discussed above, Operating Income before Depreciation and Amortization decreased $26.0 million. After adjusting for going-private transaction-related costs of $62.0 million, Operating Income before Depreciation and Amortization increased $36.0 million to $468.0 million, an increase of 8% over 2004. Interest expense increased $25.5 million, or 13%, due to higher interest rates, which averaged 8.2% for the year ended December 31, 2005, as compared to 7.1% for the year ended December 31, 2004, and an increase in the accreted value of the 12 1/4% Senior Discount Notes. Liquidity and Capital Resources Insight's business requires cash for operations, debt service and capital expenditures. The cable television business has substantial ongoing capital requirements for the construction, expansion and maintenance of its broadband networks and provision of new services. In the past, expenditures have been made for various purposes, including the upgrade of the existing cable network, and in the future will be made for network extensions, installation of new services, customer premise equipment (e.g., set-top boxes), deployment of new product and service offerings, and, to a lesser extent, network upgrades. Historically, Insight has been able to meet its cash requirements with cash flow from operations, borrowings under its credit facilities and issuances of private and public debt and equity. (4) Cash provided by operations for the years ended December 31, 2005 and 2004 was $233.6 million and $289.9 million. The decrease was primarily attributable to an increase in net loss due to costs incurred in connection with the going-private transaction and partially offset by the effect of non-cash items. Cash used in investing activities for the years ended December 31, 2005 and 2004 was $218.7 million and $173.5 million. The increase primarily was due to capital expenditures to launch Insight's telephone product in additional markets and for customer premise equipment and drop materials. Cash used in financing activities for the years ended December 31, 2005 and 2004 was $85.2 million and $76.4 million. The increase was primarily due to increased amortization payments on the credit facility in 2005. For the years ended December 31, 2005 and 2004, Insight spent $220.1 million and $174.1 million in capital expenditures. These expenditures principally constituted purchases of customer premise equipment, telephone equipment, capitalized labor, drop materials, headend equipment and system upgrades and rebuilds, all of which are necessary to maintain Insight's existing network, grow its customer base and expand its service offerings. Free Cash Flow for the year ended December 31, 2005 totaled $13.5 million compared to $115.8 million for the year ended December 31, 2004. The decrease was primarily driven by the following: -- A $46.0 million increase in capital expenditures; -- A $26.0 million decrease in Operating Income before Depreciation and Amortization (including the impact of $62.0 million of going-private transaction-related costs); -- A $20.6 million increase in cash interest expense paid driven by an increase in interest rates; and -- A $16.0 million source of Free Cash Flow for the year ended December 31, 2005 compared to a $25.7 million source for the year ended December 31, 2004 from changes in working capital accounts. The above changes resulted in an overall decrease in Free Cash Flow from 2004 to 2005 of $102.3 million. While Insight expects to continue to use Free Cash Flow to repay its indebtedness, as interest rates continue to increase, it expects interest costs will also be higher. Use of Operating Income before Depreciation and Amortization and Free Cash Flow Insight utilizes Operating Income before Depreciation and Amortization, among other measures, to evaluate the performance of its businesses. Operating Income before Depreciation and Amortization is considered an important indicator of the operational strength of Insight's businesses and is a component of its annual compensation programs. In addition, Insight's debt agreements use Operating Income before Depreciation and Amortization, adjusted for certain non-recurring items, in their leverage and other covenant calculations. Insight also uses this measure to determine how it will allocate resources and capital. Insight's management finds this measure helpful because it captures all of the revenue and ongoing operating expenses of its businesses and therefore provides a means to directly evaluate the ability of the business operations to generate returns and to compare operating capabilities across its businesses. This measure is also used by equity and fixed income research analysts in their reports to investors evaluating Insight's businesses and other companies in the cable television industry. Insight believes Operating Income before Depreciation and Amortization is useful to investors because it enables them to assess its performance in a manner similar to the methods used by Insight's management and provides a measure that can be used to analyze, value and compare companies in the cable television industry that may have different depreciation and amortization policies. (5) A limitation of Operating Income before Depreciation and Amortization, however, is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in Insight's businesses. Management evaluates the costs of such tangible and intangible assets through other financial measures such as capital expenditures, investment spending and Free Cash Flow. Management also evaluates the costs of capitalized tangible and intangible assets by analyzing returns provided on the capital dollars deployed. Another limitation of Operating Income before Depreciation and Amortization is that it does not reflect income net of interest expense, which is a significant expense for the company because of the substantial debt it has incurred to acquire cable television systems and finance capital expenditures to upgrade its cable network. Management evaluates the impact of interest expense through other measures including interest expense itself, Free Cash Flow, the returns analysis discussed above and debt service covenant ratios under Insight's credit facility. Free Cash Flow is net cash provided by operating activities (as defined by accounting principles generally accepted in the United States) less capital expenditures. Free Cash Flow is considered to be an important indicator of Insight's liquidity, including its ability to repay indebtedness. Insight believes Free Cash Flow is useful for investors because it enables them to assess Insight's ability to service its debt and to fund continued growth with internally generated funds in a manner similar to the methods used by Insight's management, and provides a measure that can be used to analyze, value and compare companies in the cable television industry. Both Operating Income before Depreciation and Amortization and Free Cash Flow should be considered in addition to, not as a substitute for, Operating Income, Net Income and various cash flow measures (e.g., Net Cash Provided by Operating Activities), as well as other measures of financial performance and liquidity reported in accordance with accounting principles generally accepted in the United States. (6) Reconciliation of Net Income (Loss) to Operating Income before Depreciation and Amortization The following table reconciles Net Income (Loss) to Operating Income before Depreciation and Amortization. In addition, the table provides the components from Net Income (Loss) to Operating Income (Loss) for purposes of the previous discussions. Year Ended Three Months Ended December 31, December 31, ------------------- ------------------- 2005 2004 2005 2004 --------------------------------------- (in thousands) (in thousands) (unaudited) Net income (loss) $(84,929) $(13,799) $(68,484) $5,992 (Benefit) provision for income taxes 500 (201) 125 125 --------------------------------------- Income (loss) before income taxes (84,429) (14,000) (68,359) 6,117 Extraordinary item, net of tax - (15,627) - (15,627) --------------------------------------- Loss before income taxes and extraordinary item (84,429) (29,627) (68,359) (9,510) Minority interest (income) expense 5,488 14,023 (581) 13,146 --------------------------------------- Income (loss) before minority interest, income taxes and extraordinary item (78,941) (15,604) (68,940) 3,636 Other (income) expense: Other (3,541) 3,388 (2,036) 1,687 Interest income (2,895) (749) (1,019) (326) Interest expense 226,956 201,450 58,175 51,285 --------------------------------------- Total other expenses 220,520 204,089 55,120 52,646 --------------------------------------- Operating income (loss) 141,579 188,485 (13,820) 56,282 Depreciation and amortization 247,039 239,123 63,765 61,910 Stock-based compensation 17,368 4,438 10,043 1,270 --------------------------------------- Operating Income before Depreciation and Amortization $405,986 $432,046 $59,988 $119,462 ======================================= (7) Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow The following table provides a reconciliation from net cash provided by operating activities to Free Cash Flow. In addition, the table provides the components from net cash provided by operating activities to operating income (loss) for purposes of the previous discussions. Year Ended Three Months Ended December 31, December 31, ------------------- ------------------ 2005 2004 2005 2004 --------------------------------------- (in thousands) (in thousands) (unaudited) Operating income (loss) $141,579 $188,485 $(13,820) $56,282 Depreciation and amortization 247,039 239,123 63,765 61,910 Stock-based compensation 17,368 4,438 10,043 1,270 --------------------------------------- Operating Income before Depreciation and Amortization 405,986 432,046 59,988 119,462 Changes in working capital accounts (1) 16,069 25,741 24,205 12,271 Cash paid for interest (188,216) (167,602) (75,618) (69,509) Cash paid for taxes (266) (271) (14) (29) --------------------------------------- Net cash provided by operating activities 233,573 289,914 8,561 62,195 Capital expenditures (220,102) (174,096) (75,480) (43,201) --------------------------------------- Free Cash Flow $13,471 $115,818 $(66,919) $18,994 ======================================= (1) Changes in working capital accounts are based on the net cash changes in current assets and current liabilities, excluding changes related to interest and taxes and other non-cash expenses. About Insight Communications Insight Communications is the 9th largest cable operator in the United States, serving approximately 1.3 million customers in the four contiguous states of Illinois, Kentucky, Indiana and Ohio. Insight offers bundled, state-of-the-art services in mid-sized communities, delivering analog and digital video, high-speed Internet and, in selected markets, voice telephony 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. 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 anticipates. Factors that could have a material and adverse impact on actual results include: all of the services offered by Insight face a wide range of competition; Insight has substantial debt and has significant interest payment requirements; there is uncertainty surrounding the potential dissolution of Insight's joint venture with a subsidiary of Comcast Corporation; the terms of Insight Midwest's indebtedness limits Insight's ability to access the cash flow of Insight Midwest's subsidiaries; Insight has a history of net losses; Insight's programming costs are substantial; general business conditions, economic uncertainty or slowdown, and the effects of governmental regulation; and the other risk factors described in Insight's annual report on Form 10-K and other periodic filings. Insight does not undertake any obligation to publicly update or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events, except as required by law. (8) INSIGHT COMMUNICATIONS COMPANY, INC. CONSOLIDATED BALANCE SHEETS (dollars in thousands) December 31, December 31, 2005 2004 ------------- ------------ Assets Cash and cash equivalents $29,782 $100,144 Investments 5,901 5,053 Trade accounts receivable, net of allowance for doubtful accounts of $1,079 and $1,050 as of December 31, 2005 and 2004 27,261 31,355 Launch funds receivable 974 2,749 Prepaid expenses and other assets 9,645 11,343 ------------- ------------ Total current assets 73,563 150,644 Fixed assets, net 1,130,705 1,154,251 Goodwill 72,430 72,430 Franchise costs 2,361,959 2,361,959 Deferred financing costs, net of accumulated amortization of $24,302 and $18,892 as of December 31, 2005 and 2004 24,220 27,896 Other non-current assets 2,287 2,692 ------------- ------------ Total assets $3,665,164 $3,769,872 ============= ============ Liabilities and stockholders' equity Accounts payable $42,333 $31,886 Accrued expenses and other current liabilities 45,411 40,838 Accrued property taxes 12,921 13,049 Accrued programming costs (inclusive of $29,878 and $36,838 due to related parties as of December 31, 2005 and 2004) 43,705 51,329 Deferred revenue 4,978 8,996 Interest payable 20,459 20,643 Debt - current portion 83,500 83,500 ------------- ------------ Total current liabilities 253,307 250,241 Deferred revenue 1,499 2,904 Debt 2,676,418 2,724,063 Other non-current liabilities 2,384 1,331 Minority interest 251,011 245,523 Stockholders' equity: Common stock, $.01 par value: Class A - 300,000,000 shares authorized; 0 and 50,912,910 shares issued and outstanding as of December 31, 2005 and 2004 - 509 Class B - 100,000,000 shares authorized; 0 and 8,489,454 shares issued and outstanding as of December 31, 2005 and 2004 - 85 Voting preferred stock, $.01 par value: Series A - 1,000,000 shares authorized; 848,945 and 0 shares issued and outstanding as of December 31, 2005 and 2004 8 - Series B - 1,000,000 shares authorized; 517,836 and 0 shares issued and outstanding as of December 31, 2005 and 2004 5 - Non-voting preferred stock, $.01 par value: (9) December 31, December 31, 2005 2004 ------------- ------------ Series C - 15,000,000 shares authorized; 13,364,693 and 0 shares issued and outstanding as of December 31, 2005 and 2004 134 - Series D - 50,000,000 shares authorized; 47,015,659 and 0 shares issued and outstanding as of December 31, 2005 and 2004 470 - Non-voting common stock, $.01 par value: Series E - 5,000,000 shares authorized; 0 and 0 shares issued and outstanding as of December 31, 2005 and 2004 - - Series F - 100,000 shares authorized; 0 and 0 shares issued and outstanding as of December 31, 2005 and 2004 - - Voting common stock, $.01 par value: Series G - 10,000,000 shares authorized; 0 and 0 shares issued and outstanding as of December 31, 2005 and 2004 - - Additional paid-in-capital 829,337 813,853 Accumulated deficit (345,199) (260,270) Deferred stock compensation (4,210) (8,689) Accumulated other comprehensive loss - 322 ------------- ------------ Total stockholders' equity 480,545 545,810 ------------- ------------ Total liabilities and stockholders' equity $3,665,164 $3,769,872 ============= ============ (10) INSIGHT COMMUNICATIONS COMPANY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (dollars in thousands) Year Ended December 31, 2005 2004 2003 ----------- ----------- --------- Revenue $1,117,681 $1,002,456 $902,592 Operating costs and expenses: Programming and other operating costs (exclusive of depreciation and amortization) (inclusive of $157,643, $150,956 and $142,387 of programming expense incurred through related parties during December 2005, 2004 and 2003) 380,277 342,636 327,505 Selling, general and administrative 269,446 227,774 187,983 Transaction-related costs 61,972 - - Stock-based compensation 17,368 4,438 1,729 Depreciation and amortization 247,039 239,123 230,031 ----------- ----------- --------- Total operating costs and expenses 976,102 813,971 747,248 ----------- ----------- --------- Operating income 141,579 188,485 155,344 Other income (expense): Gain on cable system exchange - - 27,134 Interest expense (226,956) (201,450) (206,031) Interest income 2,895 749 1,433 Other 3,541 (3,388) (31) ----------- ----------- --------- Total other expense, net (220,520) (204,089) (177,495) Loss before minority interest, investment activity, extinguishments of obligations, gain on contract settlement, income taxes and extraordinary item (78,941) (15,604) (22,151) Minority interest expense (5,488) (14,023) (7,936) Loss from early extinguishments of debt - - (10,879) Loss on settlement of put obligation - - (12,169) Gain on settlement of programming contract - - 37,742 Impairment write-down of investments - - (1,500) ----------- ----------- --------- Loss before income taxes and extraordinary item (84,429) (29,627) (16,893) Benefit (provision) for income taxes (500) 201 2,702 ----------- ----------- --------- Loss before extraordinary item (84,929) (29,426) (14,191) Extraordinary item, net of tax - 15,627 - ----------- ----------- --------- Loss before preferred interests (84,929) (13,799) (14,191) Accrual of preferred interests - - (10,353) ----------- ----------- --------- Net loss $(84,929) $(13,799) $(24,544) =========== =========== ========= (11) INSIGHT COMMUNICATIONS COMPANY, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (dollars in thousands) Year Ended December 31, 2005 2004 2003 ----------- ----------- --------- Operating activities: Net loss $(84,929) $(13,799) $(14,191) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 247,039 239,123 230,031 Stock-based compensation 17,368 4,438 1,729 Non-cash consulting expense 45 60 60 Impairment of investments - - 1,500 Gain on sale of investments (448) (386) (578) Loss (gain) on interest rate swaps (2,078) (36) 2,114 Loss on early extinguishments of debt - 127 2,616 Settlement of put obligation - - (7,100) Gain on settlement of programming contract - - (34,819) Gain on cable systems exchange - - (27,134) Minority interest 5,488 14,023 7,936 Provision for losses on trade accounts receivable 17,619 18,301 13,366 Contribution of stock to 401(k) Plan 2,565 1,309 1,678 Amortization of note discount 38,755 34,931 33,118 Deferred income taxes - (701) (2,952) Changes in operating assets and liabilities, net of acquisitions: Trade accounts receivable (13,525) (20,343) (16,954) Launch funds receivable 1,775 6,672 (4,224) Prepaid expenses and other assets 2,238 6,011 (1,219) Accounts payable 10,447 1,469 (16,803) Accrued expenses and other liabilities (8,786) (1,285) 29,614 ----------- ----------- --------- Net cash provided by operating activities 233,573 289,914 197,788 ----------- ----------- --------- Investing activities: Purchase of fixed assets (220,102) (174,096) (196,658) Sale of fixed assets 2,113 1,913 - Purchase of intangible assets - (107) (889) Purchase of investments (1,801) (1,856) (1,347) Sale of investments 1,079 602 999 Purchase of Coaxial interests - - (10,321) Purchase of cable television systems, net - - (26,475) ----------- ----------- --------- Net cash used in investing activities (218,711) (173,544) (234,691) ----------- ----------- --------- Financing activities: Distributions of preferred interests - - (11,554) Net proceeds from borrowings under credit facility - - 118,000 Repayment of credit facilities (83,500) (68,250) (25,000) Repayment of debt - (8,134) (195,869) Proceeds from issuance of notes - - 141,375 Debt issuance costs (1,733) (14) (4,842) Proceeds from the cancellation and conversion of common stock 9 - - Proceeds from exercise of stock options - - 115 ----------- ----------- --------- Net cash provided by (used in) financing activities (85,224) (76,398) 22,225 ----------- ----------- --------- Net change in cash and cash equivalents (70,362) 39,972 (14,678) Cash and cash equivalents, beginning of year 100,144 60,172 74,850 ----------- ----------- --------- Cash and cash equivalents, end of year $29,782 $100,144 $60,172 =========== =========== ========= (12) INSIGHT COMMUNICATIONS COMPANY, INC. OPERATING STATISTICS (in thousands, except per customer and penetration data) FY FY Q4 Q4 2005 2004 2005 2004 --------- --------- --------- --------- Customer Relationships 1,347.5 1,322.7 1,347.5 1,322.7 Total Average Monthly Revenue per Customer $73.30 $64.96 $75.75 $68.48 Basic Cable - ----------- Homes Passed 2,420.6 2,375.3 2,420.6 2,375.3 Basic Cable Customers 1,281.6 1,272.5 1,281.6 1,272.5 Basic Cable Penetration 52.9% 53.6% 52.9% 53.6% Cable Revenue $596,321 $573,650 $150,225 $145,280 Average Monthly Cable Revenue per Customer $39.11 $37.17 $39.23 $37.89 High-Speed Internet ("HSI") - --------------------------- HSI Homes Passed 2,378.9 2,320.4 2,378.9 2,320.4 HSI Customers 470.4 330.5 470.4 330.5 HSI Penetration 19.8% 14.2% 19.8% 14.2% HSI Revenue $190,820 $132,011 $52,712 $38,021 Average Monthly HSI Revenue per Customer $12.51 $8.55 $13.77 $9.92 Average Monthly HSI Revenue per HSI Customer $39.77 $39.18 $38.64 $39.48 Digital Cable - ------------- Digital Universe 1,238.6 1,224.1 1,238.6 1,224.1 Digital Customers 518.8 451.3 518.8 451.3 Digital Cable Penetration 41.9% 36.9% 41.9% 36.9% Digital Revenue $111,202 $98,797 $29,303 $25,525 Average Monthly Digital Revenue per Customer $7.29 $6.40 $7.65 $6.66 Average Monthly Digital Revenue per Digital Customer $19.47 $19.32 $19.37 $19.10 Telephone - --------- Telephone Universe (marketable homes) 832.0 768.8 832.0 768.8 Telephone Customers 89.9 64.3 89.9 64.3 Telephone Penetration (to marketable homes) 10.8% 8.4% 10.8% 8.4% Telephone Revenue $35,502 $15,254 $10,363 $3,865 Average Monthly Telephone Revenue per Customer $2.33 $.99 $2.71 $1.01 Average Monthly Telephone Revenue per Telephone Customer $39.22 NM $40.46 NM Advertising Revenue - ------------------- Advertising Revenue $76,004 $68,415 $20,851 $21,820 Average Monthly Advertising Revenue per Customer $4.98 $4.43 $5.45 $5.69 Other Revenue - ------------- Other Revenue $107,832 $114,331 $26,603 $28,036 Average Monthly Other Revenue per Customer $7.08 $7.42 $6.94 $7.31 NM = Not meaningful (13) INSIGHT COMMUNICATIONS COMPANY, INC. FINANCIAL INFORMATION Three months ended December 31, ----------------------- 2005 2004 ----------- ----------- (unaudited) Insight Consolidated - -------------------- Revenue $290,057 $262,546 Operating Income before Depreciation and Amortization 59,988 119,462 Operating Income (Loss) (13,820) 56,282 Capital Expenditures 75,480 43,201 Interest Expense 58,175 51,285 Free Cash Flow (66,919) 18,994 Year ended December 31, ----------------------- 2005 2004 ----------- ----------- Insight Consolidated - -------------------- Revenue $1,117,681 $1,002,456 Operating Income before Depreciation and Amortization 405,986 432,046 Operating Income 141,579 188,485 Capital Expenditures 220,102 174,096 Interest Expense 226,956 201,450 Free Cash Flow 13,471 115,818 INSIGHT COMMUNICATIONS COMPANY, INC. NCTA STANDARD REPORTING CATEGORIES CAPITAL EXPENDITURES (unaudited) (in thousands) Three Months Ended Year Ended December 31, Insight Consolidated December 31, 2005 2005 2004 - -------------------- ------------------ -------------- -------- Customer Premise Equipment $39,607 $114,846 $95,311 Scaleable Infrastructure 6,244 20,694 14,920 Line Extensions 7,829 26,813 25,168 Upgrade/Rebuild 10,750 24,704 13,616 Support Capital 11,050 33,045 25,081 ------------------ ------------- --------- Total Insight Consolidated $75,480 $220,102 $174,096 ================== ============= ========= (14) CONTACT: Insight Communications Sandy Colony, 917-286-2300 -----END PRIVACY-ENHANCED MESSAGE-----