-----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, GjkNvwF4rE+aEpXAIWKRDlm/MAOsv3KhxN7AhwoEtNHYRE/vO+kMuf+f/Jx6XI0/ VBXVafqaZyOrfy10JMqGiw== 0001157523-06-011021.txt : 20061108 0001157523-06-011021.hdr.sgml : 20061108 20061108091844 ACCESSION NUMBER: 0001157523-06-011021 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20061108 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20061108 DATE AS OF CHANGE: 20061108 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: 061195699 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 a5269310.txt INSIGHT COMMUNICATIONS 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): November 8, 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 November 8, 2006, the Registrant issued a press release announcing its financial results for the quarter ended September 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 November 8, 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: November 8, 2006 By:/s/ Elliot Brecher ------------------------------------- Elliot Brecher Senior Vice President and General Counsel 2 EX-99.1 2 a5269310ex991.txt INSIGHT COMMUNICATIONS EXHIBIT 99.1 Exhibit 99.1 Insight Announces Third Quarter 2006 Results NEW YORK--(BUSINESS WIRE)--Nov. 8, 2006--Insight Communications Company today announced financial results for the quarter ended September 30, 2006. Third Quarter Highlights - -- Revenue of $318.1 million, an increase of 14% over Q3 2005 - -- Adjusted Operating Income before Depreciation and Amortization* of $124.9 million, an increase of 8% over Q3 2005 - -- Capital expenditures of $71.5 million - -- Free Cash Flow* of ($4.2) million - -- Total Customer Relationships of 1,395,400 at Q3 2006, an increase of 61,200 compared to 1,334,200 at Q3 2005 - -- Total Revenue Generating Units ("RGUs") of 2,608,700 at Q3 2006, an increase of 14% from Q3 2005 -- High-speed Internet ("HSI") customer net gain of 44,800, compared to net additions in Q3 2005 of 47,900. Total HSI customers at quarter end were 579,300, a penetration of 24% of HSI homes passed. -- Basic customer net gain of 16,400, an improvement of 2,600 from Q3 2005 net gains of 13,800, resulting in 1,318,800 basic customers at quarter end, representing a 3.8% growth rate in basic customers -- Digital customer net gain of 25,500, compared to net additions in Q3 2005 of 29,100. Total digital customers at quarter end were 597,700, a penetration of 48% of the company's Digital Universe. -- Telephone customer net gain of 5,700, compared to net additions in Q3 2005 of 7,400. Total telephone customers at quarter end were 112,900, a penetration of 11% of marketable homes passed. - -- As of September 30, 2006, 98% of the company's customers were passed by two-way, 750 MHz or higher capacity upgraded network. Operating Results for the Three Months Ended September 30, 2006 Compared to the Three Months Ended September 30, 2005 Revenue for the three months ended September 30, 2006, totaled $318.1 million, an increase of 14% over the prior year, due primarily to customer gains in all services, as well as video rate increases. High-speed Internet service revenue increased 22% 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 44,800 high-speed Internet customers during the quarter to end at 579,300 customers. * See explanation of these Non-GAAP measures on page 5. 1 Basic cable service revenue increased 8% due to an increased customer base and video rate increases, partially offset by promotional discounts. In addition, digital service revenue increased 28% over the prior year primarily due to an increased customer base. Insight added a net 25,500 digital customers during the quarter to end at 597,700 customers. Other revenue also increased as a result of a settlement of a fiber lease dispute. Insight has been 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 customer education of product offerings. Revenue by service offering was as follows for the three months ended September 30 (dollars in thousands): Revenue by Service Offering ------------------------------------------------- -------- Three Months Three Months % Ended Ended Change September 30, % of Total September 30, % of Total in 2006 Revenue 2005 Revenue Revenue ------------- ---------- ------------- ---------- -------- Basic $ 159,677 50.2% $ 148,393 53.2% 7.6% High-Speed Internet 60,402 19.0% 49,677 17.8% 21.6% Digital 34,979 11.0% 27,300 9.8% 28.1% Advertising 20,024 6.3% 18,416 6.6% 8.7% Premium 13,891 4.4% 13,215 4.7% 5.1% Telephone 13,249 4.2% 9,020 3.2% 46.9% Franchise fees 7,496 2.3% 7,681 2.8% -2.4% Other 8,387 2.6% 5,284 1.9% 58.7% ------------- ---------- ------------- ---------- -------- Total $ 318,105 100.0% $ 278,986 100.0% 14.0% ============= ========== ============= ========== ======== Total Customer Relationships were 1,395,400 as of September 30, 2006, an increase of 61,200 from 1,334,200 as of September 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. In the three months ending September 30, 2006, Insight added 92,400 RGUs, which represent the sum of basic, digital, high-speed Internet and telephone customers, and as of September 30, 2006, had 2,608,700 RGUs, an increase of 14% from September 30, 2005. 2 RGUs by category were as follows (in thousands): September 30, 2006 September 30, 2005 ------------------ ------------------ Basic 1,318.8 1,271.0 Digital 597.7 489.9 High-Speed Internet 579.3 439.2 Telephone 112.9 80.9 ------------------ ------------------ Total RGUs 2,608.7 2,281.0 ================== ================== Average monthly revenue per basic customer was $80.90 for the three months ended September 30, 2006, compared to $73.57 for the three months ended September 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 and one-time revenue from the settlement of a fiber lease dispute. Programming and other operating costs increased $17.9 million, or 19%. Increases in customers, the addition of new programming content and substantial increases in programming rates were significant drivers of the cost increase for the three months ended September 30, 2006. For the three months ended September 30, 2005, programming costs reflected certain programming credits and a one-time settlement for a disputed claim with a vendor. 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 September 30, 2006, were significantly lower, causing overall programming cost increases to be greater. Direct operating costs decreased due to a decrease in our high-speed Internet service costs as the company finalized the transition of its Internet services in-house and realized both the cost savings and operational benefits of this investment partially offset by increases in telephone cost of sales as we continue to invest and roll out this product. Other operating costs increased primarily as a result of increases in technical salaries for new and existing employees; 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. Selling, general and administrative expenses increased $8.8 million, or 12%, 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. The increase in the number of employees represents investments in direct sales, customer care and information technology personnel to continue to upgrade and enhance our product offerings and increase customer satisfaction. A portion of these information technology personnel increases were directly related to the transition of our Internet services in-house. 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, collection fees and bad debt expense increased due to the increase in our customer base. 3 Depreciation and amortization expense increased $7.7 million, or 13%, primarily as a result of an increased level of capital expenditures through September 30, 2006. These expenditures were primarily for purchases of customer premise equipment, installation materials, capitalized labor, headend equipment, network extensions and network capacity and bandwidth increases, 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 September 30, 2005. As a result of the factors discussed above, Adjusted Operating Income before Depreciation and Amortization increased $8.9 million to $124.9 million, an increase of 8% over Q3 2005. Interest expense increased $8.0 million, or 14%, because of: -- higher interest rates, which averaged 9.1% for the three months ended September 30, 2006, as compared to 8.3% for the three months ended September 30, 2005; -- the termination of our interest rate swap agreement during the three months ended September 30, 2006; and -- 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, network capacity and bandwidth increases, 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. Cash provided by operations for the nine months ended September 30, 2006 and 2005 was $200.6 million and $225.0 million. The decrease was primarily attributable to the effect of the initial cash interest payment on the 12 1/4% Senior Discount Notes, partially offset by the timing of cash receipts and payments related to our working capital accounts. Cash used in investing activities for the nine months ended September 30, 2006 and 2005 was $213.5 million and $143.0 million. The increase primarily was due to increases in capital expenditures. For the nine months ended September 30, 2006 and 2005, Insight spent $213.3 million and $144.6 million in capital expenditures. These expenditures principally constituted purchases of customer premise equipment, capitalized labor, installation materials, headend equipment, network capacity and bandwidth increases 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. 4 Cash provided by financing activities for the nine months ended September 30, 2006 was $2.4 million compared to $64.3 million of cash used in financing activities for the nine months ended September 30, 2005. The decrease was due to $65.0 million in net proceeds from borrowings under Insight's credit facility for the nine months ended September 30, 2006. Free Cash Flow for the nine months ended September 30, 2006 totaled ($12.7) million, compared to $80.4 million for the nine months ended September 30, 2005. The decrease in Free Cash Flow from the nine months ended September 30, 2005, to the nine months ended September 30, 2006, of $93.1 million was primarily driven by the following: -- A $68.7 million increase in capital expenditures; and -- A $37.5 million increase in cash interest expense paid primarily driven by the initial cash interest payment on the 12 1/4% Senior Discount Notes and an increase in interest rates. These uses of cash were offset by: -- An $8.7 million increase in Adjusted Operating Income before Depreciation and Amortization; and -- A $4.9 million decrease in the use of Free Cash Flow over the same period in the prior year from changes in working capital accounts. 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. On October 6, 2006, Insight Midwest Holdings completed the financing of $2.445 billion of senior secured credit facilities. The facilities comprise term loans in the amount of $2.185 billion and a $260.0 million revolving credit facility. The proceeds were used to refinance Insight Midwest Holdings' existing senior credit facilities and to redeem all of Insight Midwest's 10 1/2% Senior Notes due November 1, 2010 and $185.0 million principal amount of Insight Midwest's 9 3/4% Senior Notes due October 1, 2009. This financing will reduce Insight's interest expense and near term debt amortizations. As of November 8, 2006, $110.3 million of the $260.0 million revolving credit facility was drawn (including $9.3 million in letters of credit), and Insight had the ability to draw upon $149.7 million of unused availability to fund any shortfall resulting from the inability of Insight Midwest's cash from operations to fund its capital expenditures, meet its debt service requirement 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 Nine Months Ended September 30, Ended September 30, ------------------- ------------------- 2006 2005 2006 2005 --------- --------- --------- --------- (in thousands) Net loss $ (7,728) $ (7,375) $(27,442) $(16,445) (Benefit) provision for income taxes (94) 125 66 375 --------- --------- --------- --------- Loss before income taxes (7,822) (7,250) (27,376) (16,070) Minority interest income (expense) (1,839) 2,242 (6,454) 6,069 --------- --------- --------- --------- Loss before minority interest and income taxes (9,661) (5,008) (33,830) (10,001) Other (income) expense: Other 28 (834) 78 (1,505) Interest income (366) (853) (1,247) (1,876) Interest expense 65,810 57,773 188,093 168,781 --------- --------- --------- --------- Total other expense, net 65,472 56,086 186,924 165,400 --------- --------- --------- --------- Operating income 55,811 51,078 153,094 155,399 Depreciation and amortization 68,743 61,054 200,398 183,274 Stock-based compensation 335 3,876 1,219 7,325 --------- --------- --------- --------- Adjusted Operating Income before Depreciation and Amortization $124,889 $116,008 $354,711 $345,998 ========= ========= ========= ========= 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 Nine Months Ended September 30, Ended September 30, --------------------- --------------------- 2006 2005 2006 2005 ---------- ---------- ---------- ---------- (in thousands) Operating income $ 55,811 $ 51,078 $ 153,094 $ 155,399 Depreciation and amortization 68,743 61,054 200,398 183,274 Stock-based compensation 335 3,876 1,219 7,325 ---------- ---------- ---------- ---------- Adjusted Operating Income before Depreciation and Amortization 124,889 116,008 354,711 345,998 Changes in working capital accounts (1) (6,918) (13,713) (3,246) (8,136) Cash paid for interest (50,603) (20,480) (150,074) (112,598) Cash paid for taxes (64) (30) (755) (252) ---------- ---------- ---------- ---------- Net cash provided by operating activities 67,304 81,785 200,636 225,012 Capital expenditures (71,544) (51,109) (213,309) (144,622) ---------- ---------- ---------- ---------- Free Cash Flow $ (4,240) $ 30,676 $ (12,673) $ 80,390 ========== ========== ========== ========== (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. 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 share and per share amounts) September 30, December 31, 2006 2005 ------------- ------------- unaudited Assets Cash and cash equivalents $ 19,279 $ 29,782 Investments 6,679 5,901 Trade accounts receivable, net of allowance for doubtful accounts of $1,169 and $1,079 as of September 30, 2006 and December 31, 2005 26,395 27,261 Launch funds receivable 516 974 Prepaid expenses and other current assets 11,350 9,645 ------------- ------------- Total current assets 64,219 73,563 Fixed assets, net 1,147,333 1,130,705 Goodwill 72,430 72,430 Franchise costs 2,361,959 2,361,959 Deferred financing costs, net of accumulated amortization of $28,527 and $24,302 as of September 30, 2006 and December 31, 2005 19,998 24,220 Other non-current assets 2,785 2,287 ------------- ------------- Total assets $ 3,668,724 $ 3,665,164 ============= ============= 9 INSIGHT COMMUNICATIONS COMPANY, INC. CONSOLIDATED BALANCE SHEETS (dollars in thousands, except share and per share amounts) September 30, December 31, 2006 2005 ------------- ------------- unaudited Liabilities and stockholders' equity Accounts payable $ 39,097 $ 42,333 Accrued expenses and other current liabilities 43,641 45,413 Accrued property taxes 13,947 12,921 Accrued programming costs (inclusive of $32,316 and $29,878 due to related parties as of September 30, 2006 and December 31, 2005) 47,008 43,705 Deferred revenue 2,152 4,978 Interest payable 51,783 20,459 Debt - current portion 83,500 83,500 ------------- ------------- Total current liabilities 281,128 253,309 Deferred revenue 874 1,499 Debt 2,687,838 2,676,418 Other non-current liabilities - 2,382 Minority interest 244,557 251,011 Stockholders' equity: Voting preferred stock, $.01 par value: Series A - 1,000,000 shares authorized; 848,945 shares issued and outstanding as of September 30, 2006 and December 31, 2005 8 8 Series B - 1,000,000 shares authorized; 517,836 shares issued and outstanding as of September 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 September 30, 2006 and December 31, 2005 134 134 Series D - 50,000,000 shares authorized; 47,015,659 shares issued and outstanding as of September 30, 2006 and December 31, 2005 470 470 Non-voting common stock, $.01 par value: Series E - 5,000,000 shares authorized; 3,475,629 and 0 shares issued and outstanding as of September 30, 2006 and December 31, 2005 37 - Series F - 100,000 shares authorized; 93,250 and 0 shares issued and outstanding as of September 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 September 30, 2006 and December 31, 2005 - - Additional paid-in-capital 829,249 829,337 Accumulated deficit (372,641) (345,199) Deferred stock compensation (2,936) (4,210) ------------- ------------- Total stockholders' equity 454,327 480,545 ------------- ------------- Total liabilities and stockholders' equity $ 3,668,724 $ 3,665,164 ============= ============= 10 INSIGHT COMMUNICATIONS COMPANY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (dollars in thousands) Three months ended Nine months ended September 30, September 30, ------------------------------------------- 2006 2005* 2006 2005* ---------- ---------- ---------- ---------- Revenue $ 318,105 $ 278,986 $ 931,103 $ 827,624 Operating costs and expenses: Programming and other operating costs (exclusive of depreciation and amortization) (inclusive of $47,772 and $135,110, and $39,438 and $120,114 of programming expense incurred through related parties for the three and nine months ended September 30, 2006 and 2005) 111,431 93,514 333,676 284,269 Selling, general and administrative (inclusive of $335 and $1,219, and $3,876 and $7,325 of stock-based compensation for the three and nine months ended September 30, 2006 and 2005) 82,120 73,340 243,935 204,682 Depreciation and amortization 68,743 61,054 200,398 183,274 ---------- ---------- ---------- ---------- Total operating costs and expenses 262,294 227,908 778,009 672,225 ---------- ---------- ---------- ---------- Operating income 55,811 51,078 153,094 155,399 Other income (expense): Interest expense (65,810) (57,773) (188,093) (168,781) Interest income 366 853 1,247 1,876 Other income (expense) (28) 834 (78) 1,505 ---------- ---------- ---------- ---------- Total other expense, net (65,472) (56,086) (186,924) (165,400) Loss before minority interest and income taxes (9,661) (5,008) (33,830) (10,001) Minority interest income (expense) 1,839 (2,242) 6,454 (6,069) ---------- ---------- ---------- ---------- Loss before income taxes (7,822) (7,250) (27,376) (16,070) Benefit (provision) for income taxes 94 (125) (66) (375) ---------- ---------- ---------- ---------- Net loss $ (7,728) $ (7,375) $(27,442)$ (16,445) =========================================== * 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) ------------------------------- Nine months ended September 30, ------------------------------- 2006 2005 --------------- --------------- Operating activities: Net loss $ (27,442) $ (16,445) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 200,398 183,274 Stock-based compensation 1,219 7,325 Non-cash consulting expense - 45 Gain on interest rate swaps - (1,684) Minority interest (6,454) 6,069 Provision for losses on trade accounts receivable 13,959 13,196 Contribution of stock to 401(k) Plan - 1,990 Amortization of note discount 6,663 28,630 Changes in operating assets and liabilities: Trade accounts receivable (13,093) (4,470) Launch funds receivable 458 2,232 Prepaid expenses and other assets (2,266) (7,392) Accounts payable (3,236) (9,241) Interest payable 31,324 27,488 Accrued expenses and other liabilities (894) (6,005) --------------- --------------- Net cash provided by operating activities 200,636 225,012 --------------- --------------- Investing activities: Purchase of fixed assets (213,309) (144,622) Sale of fixed assets 572 2,145 Purchase of investments (778) (1,551) Sale of investments - 991 --------------- --------------- Net cash used in investing activities (213,515) (143,037) --------------- --------------- Financing activities: Repayment of credit facilities (62,625) (62,625) Debt issuance costs - (1,712) Net proceeds from borrowings under credit facility 65,000 - Other 1 - --------------- --------------- Net cash provided by (used in) financing activities 2,376 (64,337) --------------- --------------- Net increase (decrease) in cash and cash equivalents (10,503) 17,638 Cash and cash equivalents, beginning of period 29,782 100,144 --------------- --------------- Cash and cash equivalents, end of period $ 19,279 $ 117,782 =============== =============== 12 INSIGHT COMMUNICATIONS COMPANY, INC. OPERATING STATISTICS (in thousands, except per customer and penetration data) Q3 Q2 Q3 2006 2006 2005 --------- --------- --------- Customer Relationships 1,395.4 1,375.1 1,334.2 Total Average Monthly Revenue per Basic Customer $80.90 $79.65 $73.57 Basic Cable - ---------------------------------------- Homes Passed 2,456.0 2,445.9 2,417.6 Basic Cable Customers 1,318.8 1,302.4 1,271.0 Basic Cable Penetration 53.7% 53.2% 52.6% Cable Revenue $159,677 $160,328 $148,393 Average Monthly Cable Revenue per Basic Customer $40.61 $40.97 $39.13 High-Speed Internet ("HSI") - ---------------------------------------- HSI Homes Passed 2,418.5 2,398.2 2,364.6 HSI Customers 579.3 534.5 439.2 HSI Penetration 24.0% 22.3% 18.6% HSI Revenue $60,402 $58,616 $49,677 Average Monthly HSI Revenue per Basic Customer $15.36 $14.98 $13.10 Average Monthly HSI Revenue per HSI Customer $36.15 $37.24 $39.88 Digital Cable - ---------------------------------------- Digital Universe 1,255.2 1,243.9 1,222.0 Digital Customers 597.7 572.2 489.9 Digital Cable Penetration 47.6% 46.0% 40.1% Digital Revenue $34,979 $34,307 $27,300 Average Monthly Digital Revenue per Basic Customer $8.90 $8.77 $7.20 Average Monthly Digital Revenue per Digital Customer $19.93 $20.19 $19.14 Telephone - ---------------------------------------- Telephone Universe (marketable homes) 1,008.1 871.8 801.1 Telephone Customers 112.9 107.2 80.9 Telephone Penetration (to marketable homes) 11.2% 12.3% 10.1% Telephone Revenue $13,249 $12,528 $9,020 Average Monthly Telephone Revenue per Basic Customer $3.37 $3.20 $2.38 Average Monthly Telephone Revenue per Telephone Customer $40.13 $40.37 $38.96 Advertising Revenue - ---------------------------------------- Advertising Revenue $20,024 $20,020 $18,416 Average Monthly Advertising Revenue per Basic Customer $5.09 $5.12 $4.86 Other Revenue - ---------------------------------------- Other Revenue $29,774 $25,918 $26,180 Average Monthly Other Revenue per Basic Customer $7.57 $6.61 $6.90 13 INSIGHT COMMUNICATIONS COMPANY, INC. NCTA STANDARD REPORTING CATEGORIES CAPITAL EXPENDITURES (unaudited) (in thousands) Three Months Nine Months Twelve Months Ended Ended Ended September 30, September 30, December 31, 2005 Insight Consolidated 2006 2006 - ---------------------------------------------------------------------- Customer Premise Equipment $ 37,661 $ 123,339 $ 114,846 Scaleable Infrastructure 15,454 28,115 20,694 Line Extensions 7,022 20,185 26,813 Upgrade/Rebuild 3,096 11,552 24,704 Support Capital 8,311 30,118 33,045 --------------------------------------------- Total Insight Consolidated $ 71,544 $ 213,309 $ 220,102 --------------------------------------------- 14 CONTACT: Insight Communications Sandy Colony, 917-286-2300 SVP, Communications -----END PRIVACY-ENHANCED MESSAGE-----