-----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, WykRT3Oba6jPSlYAILcWckthW7qhQ2AlQjCd+13uRKbr5EgCI2enoor5UK6O38Gz CvU7oJ7EPedIFIIzdn6Sqw== 0001157523-06-007881.txt : 20060803 0001157523-06-007881.hdr.sgml : 20060803 20060803094433 ACCESSION NUMBER: 0001157523-06-007881 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20060803 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060803 DATE AS OF CHANGE: 20060803 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: 061000297 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 a5202192.txt INSIGHT COMMUNICATIONS CO. 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): August 3, 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 August 3, 2006, the Registrant issued a press release announcing its financial results for the quarter ended June 30, 2006. 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 adjusted 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 Adjusted 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) Shell Company Transactions - None (d) Exhibits: Exhibit No. Description ----------- ----------- 99.1 Press release issued on August 3, 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: August 3, 2006 By: /s/ Elliot Brecher ----------------------------------- Elliot Brecher Senior Vice President and General Counsel EX-99.1 2 a5202192ex99-1.txt EXHIBIT 99.1 Exhibit 99.1 Insight Communications Announces Second Quarter 2006 Results NEW YORK--(BUSINESS WIRE)--Aug. 3, 2006--Insight Communications Company today announced financial results for the quarter ended June 30, 2006. Second Quarter Highlights -- Revenue of $311.7 million, an increase of 12% over Q2 2005 -- Adjusted Operating Income before Depreciation and Amortization* of $117.6 million, a decrease of 4% over Q2 2005 -- Capital expenditures of $84.1 million -- Free Cash Flow* of ($37.3) million -- Total Customer Relationships of 1,375,100 at Q2 2006, an increase of 59,700 compared to 1,315,400 at Q2 2005 -- Total Revenue Generating Units ("RGUs") of 2,516,300 at Q2 2006, an increase of 15% from Q2 2005 -- High-speed Internet ("HSI") customer net gain of 19,700, compared to net additions in Q2 2005 of 23,500. Total HSI customers at quarter end were 534,500, a penetration of 22% of HSI homes passed. -- Basic customer net loss of 4,300, an improvement of 9,900 from Q2 2005 net losses of 14,200, resulting in 1,302,400 basic customers at quarter end -- Digital customer net gain of 11,700, an increase of 9,900 customers over Q2 2005 net additions, increasing digital customers to 572,200 at quarter end. Digital penetration was 46% of the company's Digital Universe. -- Telephone customer net gain of 7,500, an increase of 2,600 customers over Q2 2005 net additions, bringing total telephone customers to 107,200 at quarter end and penetration to 12% of marketable homes passed -- As of June 30, 2006, 98% of the company's customers were passed by two-way, 750 MHz or higher capacity upgraded network. * See explanation of these Non-GAAP measures on page 5. 1 "Our double-digit revenue growth and record second quarter RGU growth are a reflection of the successful investments we've been making in our sales, marketing and growth capabilities, " said Michael Willner, CEO. "Although our expenses and operating cash flow might seem to be out of line with our top-line growth, they indeed are right in line with our Q2 budget. We had some one-time credits last year, which resulted in OIBDA growth of 15% in Q2 2005, making a difficult year-over-year comparison. In addition, since the third quarter of last year, we have been building up our growth capability and operations in anticipation of an aggressive IP telephony launch, slated to begin next month. As a result, we are very comfortable that we will resume quarterly OIBDA growth in Q3 and will continue our strong RGU growth as telephony launches commence." Operating Results for the Three Months Ended June 30, 2006 Compared to the Three Months Ended June 30, 2005 Revenue for the three months ended June 30, 2006, totaled $311.7 million, an increase of 12% over the prior year, due primarily to customer gains in all services, as well as video rate increases. High-speed Internet service revenue increased 27% over the prior year, which was attributable to an increased customer base and was partially offset by lower average revenue per customer due to promotional discounts. Insight added a net 19,700 high-speed Internet customers during the quarter to end at 534,500 customers. Basic cable service revenue increased 7% due to an increased customer base and video rate increases, partially offset by promotional discounts. Historically, Insight has experienced a seasonal decline in basic customers during the second quarter primarily as a result of students leaving the university communities Insight serves. In addition, digital service revenue increased 23% over the prior year due to an increased customer base. Insight added a net 11,700 digital customers during the quarter to end at 572,200 customers. Insight is increasing its customer growth and retention efforts by increasing spending on sales and marketing efforts, emphasizing bundling and enhancing and differentiating its video services with 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 and increased education of product offerings. 2 Revenue by service offering was as follows for the three months ended June 30 (dollars in thousands): Revenue by Service Offering ------------------------------------------ -------- Three Three Months Months Ended Ended % of % Change June 30, % of Total June 30, Total in 2006 Revenue 2005 Revenue Revenue ---------- ---------- ---------- --------- -------- Basic $160,328 51.5% $150,071 53.7% 6.8% High-Speed Internet 58,616 18.8% 46,318 16.6% 26.6% Digital 34,307 11.0% 27,838 10.0% 23.2% Advertising 20,020 6.4% 19,749 7.1% 1.4% Premium 13,852 4.4% 13,746 4.9% 0.8% Telephone 12,528 4.0% 8,387 3.0% 49.4% Franchise fees 7,384 2.4% 7,782 2.8% -5.1% Other 4,682 1.5% 5,420 1.9% -13.6% ---------- ---------- ---------- --------- -------- Total $311,717 100.0% $279,311 100.0% 11.6% ---------- ---------- ---------- --------- -------- Total Customer Relationships were 1,375,100 as of June 30, 2006, an increase of 59,700 from 1,315,400 as of June 30, 2005. 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. RGUs, which represent the sum of basic, digital, high-speed Internet and telephone customers, as of June 30, 2006, increased 15% as compared to June 30, 2005. RGUs by category were as follows (in thousands): June 30, 2006 June 30, 2005 ------------------- ------------------- Basic 1,302.4 1,257.2 Digital 572.2 460.8 High-Speed Internet 534.5 391.3 Telephone 107.2 73.5 ------------------- ------------------- Total RGUs 2,516.3 2,182.8 ------------------- ------------------- Average monthly revenue per basic customer was $79.65 for the three months ended June 30, 2006, compared to $73.64 for the three months ended June 30, 2005. This primarily reflects the continued growth of high-speed Internet and digital product offerings in all markets, as well as video rate increases. Programming and other operating costs increased $20.5 million, or 22%. Increases in customers and substantial increases in programming rates were significant drivers of the cost increase for the three months ended June 30, 2006. For the three months ended June 30, 2005, programming costs reflected certain programming credits. These 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. Programming credits for the three months ended June 30, 2006, were significantly lower, causing overall programming cost increases to be greater. In addition, direct operating costs increased due to an increase in high-speed Internet service costs as the company continued to transition its Internet services in-house to make additional one-time investments. Other operating costs increased primarily as a result of increases in repair, maintenance and warranty costs; an increase in taxes due to a change in the tax law in Kentucky; and an increase in installation labor due to increased customer activity. 3 Selling, general and administrative expenses increased $15.6 million, or 23%, primarily due to increased payroll, payroll related costs and temporary help associated with an increase in the number of employees and salary increases for existing employees. Marketing expenses increased over the prior year to support the continued rollout of high-speed Internet, digital and telephone products, and to grow the company's core video customer base. Customer billing and collection fees increased due to the increase in our customer base. Professional fees also increased due to increased legal activity for the three months ended June 30, 2006. Depreciation and amortization expense increased $6.1 million, or 10%, primarily as a result of additional capital expenditures through June 30, 2006. These expenditures were primarily for purchases of customer premise equipment, installation materials, capitalized labor, headend equipment 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 June 30, 2005. As a result of the factors discussed above, Adjusted Operating Income before Depreciation and Amortization decreased $4.8 million to $117.6 million, a decrease of 4% over Q2 2005. Interest expense increased $4.9 million, or 9%, because of i) higher interest rates, which averaged 8.9% for the three months ended June 30, 2006, as compared to 8.1% for the three months ended June 30, 2005, and ii) additional interest expense on the now fully accreted 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 will continue to 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 six months ended June 30, 2006 and 2005 was $133.3 million and $143.2 million. The decrease was primarily attributable to an increase in our net loss partially offset by the timing of cash receipts and payments related to our working capital accounts. Cash used in investing activities for the six months ended June 30, 2006 and 2005 was $141.8 million and $92.9 million. The increase primarily was due to increases in capital expenditures. For the six months ended June 30, 2006 and 2005, Insight spent $141.8 million and $93.5 million in capital expenditures. These expenditures principally constituted purchases of customer premise equipment, capitalized labor, installation 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. Cash used in financing activities for the six months ended June 31, 2006 and 2005 was $16.7 million and $41.8 million. The decrease was due to $25.0 million in net proceeds from borrowings under Insight's credit facility for the three months ended June 30, 2006. Free Cash Flow for the six months ended June 30, 2006 totaled ($8.4) million, compared to $49.7 million for the six months ended June 30, 2005. The decrease in Free Cash Flow from the six months ended June 30, 2005, to the six months ended June 30, 2006, of $58.1 million was primarily driven by the following: -- A $48.3 million increase in capital expenditures; -- A $7.4 million increase in cash interest expense paid primarily driven by an increase in interest rates; -- A $3.7 million source of Free Cash Flow for the six months ended June 30, 2006, compared to a $5.6 million source for the six months ended June 30, 2005, from changes in working capital accounts; and -- A $500,000 increase in cash taxes paid. Insight believes that the Insight Midwest Holdings credit facility, cash on-hand and cash flow from operations are sufficient to support the company's current operating plan. Insight had the ability to draw upon $231.4 million of unused availability under the Insight Midwest Holdings credit facility as of June 30, 2006, to fund any shortfall resulting from the inability of Insight Midwest's cash from operations to fund its capital expenditures, meet its debt service requirements, including mandatory redemptions, or otherwise fund its operations. Insight expects to use any available Free Cash Flow to repay its indebtedness. Use of Adjusted Operating Income before Depreciation and Amortization and Free Cash Flow Insight utilizes Adjusted Operating Income before Depreciation and Amortization (defined as operating income before depreciation, amortization and non-cash stock-based compensation), among other measures, to evaluate the performance of its businesses. Adjusted 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 Adjusted 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 Adjusted 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, amortization and stock-based compensation policies. 5 A limitation of Adjusted 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 Adjusted 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 Adjusted 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 Loss to Adjusted Operating Income before Depreciation and Amortization The following table reconciles Net Loss to Adjusted Operating Income before Depreciation and Amortization. In addition, the table provides the components from Net Loss to Operating Income. Three Months Six Months Ended June 30, Ended June 30, ------------------- ------------------- 2006 2005 2006 2005 --------- --------- --------- --------- (in thousands) Net loss $ (8,895) $ (728) $(19,714) $ (9,070) Provision for income taxes 80 125 160 250 -------- -------- -------- -------- Loss before income taxes (8,815) (603) (19,554) (8,820) Minority interest income (expense) (2,110) 5,227 (4,615) 3,827 -------- -------- -------- -------- Income (loss) before minority interest and income taxes (10,925) 4,624 (24,169) (4,993) Other (income) expense: Other (20) (543) 50 (671) Interest income (369) (761) (881) (1,023) Interest expense 61,208 56,291 122,283 111,008 -------- -------- -------- -------- Total other expense, net 60,819 54,987 121,452 109,314 -------- -------- -------- -------- Operating income 49,894 59,611 97,283 104,321 Depreciation and amortization 67,343 61,266 131,655 122,219 Stock-based compensation 334 1,543 884 3,450 -------- -------- -------- -------- Adjusted Operating Income before Depreciation and Amortization $117,571 $122,420 $229,822 $229,990 -------- -------- -------- -------- 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. Three Months Six Months Ended June 30, Ended June 30, ------------------- -------------------- 2006 2005 2006 2005 ------------------------------------------- (in thousands) Operating income $ 49,894 $ 59,611 $ 97,283 $104,321 Depreciation and amortization 67,343 61,266 131,655 122,219 Stock-based compensation 334 1,543 884 3,450 -------- -------- --------- -------- Adjusted Operating Income before Depreciation and Amortization 117,571 122,420 229,822 229,990 Changes in working capital accounts (1) 5,758 (1,151) 3,672 5,577 Cash paid for interest (76,384) (54,036)(2) (99,471) (92,118) Cash paid for taxes (138) (85) (691) (222) -------- -------- --------- -------- Net cash provided by operating activities 46,807 67,148 133,332 143,227 Capital expenditures (84,136) (54,788) (141,765) (93,513) -------- -------- --------- -------- Free Cash Flow $(37,329) $ 12,360 $ (8,433) $ 49,714 -------- -------- --------- -------- (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. (2) Excludes bond interest payments due April 1, 2005 that were made on March 31, 2005. Had the payments been made on April 1, 2005, Free Cash Flow for the three months ended June 30, 2005 would have been ($6,409). 7 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, except per share amounts) June 30, December 31, 2006 2005 ------------ ------------ unaudited Assets Cash and cash equivalents $ 4,586 $ 29,782 Investments 6,419 5,901 Trade accounts receivable, net of allowance for doubtful accounts of $813 and $1,079 as of June 30, 2006 and December 31, 2005 24,839 27,261 Launch funds receivable 470 974 Prepaid expenses and other current assets 12,252 9,645 ------------ ------------ Total current assets 48,566 73,563 Fixed assets, net 1,143,174 1,130,705 Goodwill 72,430 72,430 Franchise costs 2,361,959 2,361,959 Deferred financing costs, net of accumulated amortization of $27,119 and $24,302 as of June 30, 2006 and December 31, 2005 21,406 24,220 Other non-current assets 2,836 2,287 ------------ ------------ Total assets $ 3,650,371 $ 3,665,164 ============ ============ 9 INSIGHT COMMUNICATIONS COMPANY, INC. CONSOLIDATED BALANCE SHEETS (dollars in thousands, except per share amounts) June 30, December 31, 2006 2005 ----------- ----------- unaudited Liabilities and stockholders' equity Accounts payable $ 42,370 $ 42,333 Accrued expenses and other current liabilities 47,132 45,413 Accrued property taxes 13,428 12,921 Accrued programming costs (inclusive of $30,245 and $29,878 due to related parties as of June 30, 2006 and December 31, 2005) 46,654 43,705 Deferred revenue 2,804 4,978 Interest payable 36,679 20,459 Debt - current portion 83,500 83,500 ----------- ----------- Total current liabilities 272,567 253,309 Deferred revenue 1,067 1,499 Debt 2,663,414 2,676,418 Other non-current liabilities 5,207 2,382 Minority interest 246,396 251,011 Stockholders' equity: Voting preferred stock, $.01 par value: Series A - 1,000,000 shares authorized; 848,945 shares issued and outstanding as of June 30, 2006 and December 31, 2005 8 8 Series B - 1,000,000 shares authorized; 517,836 shares issued and outstanding as of June 30, 2006 and December 31, 2005 5 5 Non-voting preferred stock, $.01 par value: Series C - 15,000,000 shares authorized; 13,364,693 shares issued and outstanding as of June 30, 2006 and December 31, 2005 134 134 Series D - 50,000,000 shares authorized; 47,015,659 shares issued and outstanding as of June 30, 2006 and December 31, 2005 470 470 Non-voting common stock, $.01 par value: Series E - 5,000,000 shares authorized; 3,665,747 and 0 shares issued and outstanding as of June 30, 2006 and December 31, 2005 37 - Series F - 100,000 shares authorized; 92,470 and 0 shares issued and outstanding as of June 30, 2006 and December 31, 2005 1 - Voting common stock, $.01 par value: Series G - 10,000,000 shares authorized; 0 shares issued and outstanding as of June 30, 2006 and December 31, 2005 - - Additional paid-in-capital 829,342 829,337 Accumulated deficit (364,913) (345,199) Deferred stock compensation (3,364) (4,210) ----------- ----------- Total stockholders' equity 461,720 480,545 ----------- ----------- Total liabilities and stockholders' equity $ 3,650,371 $ 3,665,164 =========== =========== 10 INSIGHT COMMUNICATIONS COMPANY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (dollars in thousands) Three months ended Six months ended June 30, June 30, ------------------- --------------------- 2006 2005* 2006 2005* -------- --------- --------- ---------- Revenue $311,717 $279,311 $ 612,998 $ 548,638 Operating costs and expenses: Programming and other operating costs (exclusive of depreciation and amortization) (inclusive of $44,257 and $87,338, and $39,176 and $80,675 of programming expense incurred through related parties for the three and six months ended June 30, 2006 and 2005) 112,660 92,172 222,245 190,755 Selling, general and administrative (inclusive of $334 and $884, and $1,543 and $3,450 of stock-based compensation for the three and six months ended June 30, 2006 and 2005) 81,820 66,262 161,815 131,343 Depreciation and amortization 67,343 61,266 131,655 122,219 -------- -------- --------- --------- Total operating costs and expenses 261,823 219,700 515,715 444,317 -------- -------- --------- --------- Operating income 49,894 59,611 97,283 104,321 Other income (expense): Interest expense (61,208) (56,291) (122,283) (111,008) Interest income 369 761 881 1,023 Other income (expense) 20 543 (50) 671 -------- -------- --------- --------- Total other expense, net (60,819) (54,987) (121,452) (109,314) Income (loss) before minority interest and income taxes (10,925) 4,624 (24,169) (4,993) Minority interest income (expense) 2,110 (5,227) 4,615 (3,827) -------- -------- --------- --------- Loss before income taxes (8,815) (603) (19,554) (8,820) Provision for income taxes (80) (125) (160) (250) -------- -------- --------- --------- Net loss $ (8,895) $ (728) $ (19,714) $ (9,070) ======== ======== ========= ========= * Reclassifications have been made to the prior year's financial statements to conform to those used in 2006. 11 INSIGHT COMMUNICATIONS COMPANY, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited) (dollars in thousands) ------------------------- Six months ended June 30, ------------------------- 2006 2005 ----------- ----------- Operating activities: Net loss $ (19,714) $ (9,070) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 131,655 122,219 Stock-based compensation 884 3,450 Non-cash consulting expense - 30 Gain on interest rate swaps - (812) Minority interest (4,615) 3,827 Provision for losses on trade accounts receivable 7,026 8,221 Contribution of stock to 401(k) Plan - 1,434 Amortization of note discount 6,571 18,801 Changes in operating assets and liabilities: Trade accounts receivable (4,604) (1,065) Launch funds receivable 504 2,194 Prepaid expenses and other assets (3,201) (8,206) Accounts payable 37 7,889 Interest payable 16,220 42 Accrued expenses and other liabilities 2,569 (5,727) ----------- ----------- Net cash provided by operating activities 133,332 143,227 ----------- ----------- Investing activities: Purchase of fixed assets (141,765) (93,513) Sale of fixed assets 504 957 Purchase of investments (518) (1,307) Sale of investments - 926 ----------- ----------- Net cash used in investing activities (141,779) (92,937) ----------- ----------- Financing activities: Repayment of credit facilities (41,750) (41,750) Net proceeds from borrowings under credit facility 25,000 - Other 1 - ----------- ----------- Net cash used in financing activities (16,749) (41,750) ----------- ----------- Net increase (decrease) in cash and cash equivalents (25,196) 8,540 Cash and cash equivalents, beginning of period 29,782 100,144 ----------- ----------- Cash and cash equivalents, end of period $ 4,586 $ 108,684 =========== =========== 12 INSIGHT COMMUNICATIONS COMPANY, INC. OPERATING STATISTICS (in thousands, except per customer and penetration data) Q2 Q1 Q2 2006 2006 2005 --------- --------- --------- Customer Relationships 1,375.1 1,376.8 1,315.4 Total Average Monthly Revenue per Basic Customer $79.65 $77.60 $73.64 Basic Cable - ----------- Homes Passed 2,445.9 2,434.9 2,396.4 Basic Cable Customers 1,302.4 1,306.7 1,257.2 Basic Cable Penetration 53.2% 53.7% 52.5% Cable Revenue $160,328 $158,207 $150,071 Average Monthly Cable Revenue per Basic Customer $40.97 $40.75 $39.57 High-Speed Internet ("HSI") - --------------------------- HSI Homes Passed 2,398.2 2,387.0 2,338.7 HSI Customers 534.5 514.8 391.3 HSI Penetration 22.3% 21.6% 16.7% HSI Revenue $58,616 $56,497 $46,318 Average Monthly HSI Revenue per Basic Customer $14.98 $14.55 $12.21 Average Monthly HSI Revenue per HSI Customer $37.24 $38.23 $40.68 Digital Cable - ------------- Digital Universe 1,243.9 1,245.4 1,210.5 Digital Customers 572.2 560.5 460.8 Digital Cable Penetration 46.0% 45.0% 38.1% Digital Revenue $34,307 $31,723 $27,838 Average Monthly Digital Revenue per Basic Customer $8.77 $8.17 $7.34 Average Monthly Digital Revenue per Digital Customer $20.19 $19.59 $20.18 Telephone - --------- Telephone Universe (marketable homes) 871.8 858.3 763.7 Telephone Customers 107.2 99.7 73.5 Telephone Penetration (to marketable homes) 12.3% 11.6% 9.6% Telephone Revenue $12,528 $11,355 $8,387 Average Monthly Telephone Revenue per Basic Customer $3.20 $2.92 $2.21 Average Monthly Telephone Revenue per Telephone Customer $40.37 $39.93 $39.35 Advertising Revenue - ------------------- Advertising Revenue $20,020 $17,697 $19,749 Average Monthly Advertising Revenue per Basic Customer $5.12 $4.56 $5.21 Other Revenue - ------------- Other Revenue $25,918 $25,802 $26,948 Average Monthly Other Revenue per Basic Customer $6.61 $6.65 $7.10 13 INSIGHT COMMUNICATIONS COMPANY, INC. NCTA STANDARD REPORTING CATEGORIES CAPITAL EXPENDITURES (unaudited) (in thousands) Three Six Twelve Months Months Months Ended Ended Ended June 30, June 30, December 31, Insight Consolidated 2006 2006 2005 - ---------------------------------------------------------------------- Customer Premise Equipment $ 49,036 $ 85,678 $ 114,846 Scaleable Infrastructure 8,170 12,661 20,694 Line Extensions 6,830 13,163 26,813 Upgrade/Rebuild 4,737 8,456 24,704 Support Capital 15,363 21,807 33,045 -------------------------------------- Total Insight Consolidated $ 84,136 $ 141,765 $ 220,102 -------------------------------------- CONTACT: Insight Communications Sandy Colony, 917-286-2300 -----END PRIVACY-ENHANCED MESSAGE-----