-----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, JpYSoKDnmoSOZ7DHhaHTEezy8Nu2NouFCpWVMxvrObzmg3OHI3vIO7sTaGUmy5ci 3bs4wDt5S7D88+Q8rhcbYA== 0001157523-07-002396.txt : 20070306 0001157523-07-002396.hdr.sgml : 20070306 20070306095529 ACCESSION NUMBER: 0001157523-07-002396 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20070306 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20070306 DATE AS OF CHANGE: 20070306 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: 07673531 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 a5348674.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 6, 2007 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 6, 2007, the Registrant issued a press release announcing its financial results for the quarter and year ended December 31, 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 March 6, 2007 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 6, 2007 By: /s/ Elliot Brecher ---------------------------------------- Elliot Brecher Senior Vice President and General Counsel EX-99.1 2 a5348674ex991.txt EXHIBIT 99.1 Exhibit 99.1 Insight Announces Fourth Quarter and Year-End 2006 Results NEW YORK--(BUSINESS WIRE)--March 6, 2007--Insight Communications Company today announced financial results for the quarter and year ended December 31, 2006. 2006 Highlights -- Revenue of $1.3 billion, an increase of 13% over 2005 -- Adjusted Operating Income before Depreciation and Amortization* of $490.2 million. Excluding the effect of $62.0 million of going-private transaction-related costs recorded in 2005, Adjusted Operating Income before Depreciation and Amortization increased 5% from $468.0 million. -- Capital expenditures of $286.4 million -- Free Cash Flow* of ($22.4) million -- Total Customer Relationships of 1,401,800 at year end, an increase of 54,300 compared to 1,347,500 at year end 2005 -- Total Revenue Generating Units ("RGUs") of 2,679,000 at year end, an increase of 13% from year end 2005 -- High-speed Internet ("HSI") customer net gain of 140,800, compared to net additions in 2005 of 139,900. Total HSI customers at year end were 611,200, a penetration of 25% of HSI homes passed. -- Basic customer net gain of 41,200, an improvement of 32,100 from 2005 net gains of 9,100, resulting in 1,322,800 basic customers at year end, representing a 3.2% growth rate in basic customers -- Digital customer net gain of 102,800, compared to net additions in 2005 of 67,500. Total digital customers at year end were 621,600, a penetration of 49% of the company's digital universe. -- Telephone customer net gain of 33,500, an increase over net additions in 2005 of 25,600. Total telephone customers at year end were 123,400, a penetration of 9% of the company's telephone universe. -- As of December 31, 2006, 98% 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, 2006 Compared to the Year Ended December 31, 2005 Revenue for the year ended December 31, 2006, totaled $1.3 billion, an increase of 13% over the prior year, due primarily to customer gains in all services, as well as video rate increases. High-speed Internet service revenue increased 26% 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 140,800 high-speed Internet customers during the year to end at 611,200 customers. * See explanation of these Non-GAAP measures on page 5. 1 Basic cable service revenue increased 7% due to an increased customer base and video rate increases, partially offset by promotional discounts. Insight added a net 41,200 basic customers during the year to end at 1,322,800 customers. In addition, digital service revenue increased 24% over the prior year primarily due to an increased customer base. Insight added a net 102,800 digital customers during the year to end at 621,600 customers. 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. To increase its bundling opportunities and extend its growth potential in future years, the company, during the second half of 2006 and in January 2007, successfully rolled out its telephone product in eight previously unserved districts. 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 year ended December 31 (dollars in thousands): Revenue by Service Offering ----------------------------------------- -------- % of % of % Change Total Total in 2006 Revenue 2005 Revenue Revenue ----------- -------- ----------- -------- -------- Basic $640,474 50.7% $596,321 53.4% 7.4% High-Speed Internet 240,717 19.1% 190,820 17.1% 26.1% Digital 138,172 10.9% 111,202 9.9% 24.3% Advertising 83,729 6.6% 76,004 6.8% 10.2% Premium 55,160 4.4% 54,414 4.9% 1.4% Telephone 50,893 4.0% 35,502 3.2% 43.4% Franchise fees 29,817 2.4% 30,721 2.7% -2.9% Other 23,595 1.9% 22,697 2.0% 4.0% ----------- -------- ----------- -------- -------- Total $1,262,557 100.0% $1,117,681 100.0% 13.0% =========== ======== =========== ======== ======== Total Customer Relationships were 1,401,800 as of December 31, 2006, an increase of 54,300 from 1,347,500 as of December 31, 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 year ended December 31, 2006, Insight added 318,300 RGUs, which represent the sum of basic, digital, high-speed Internet and telephone customers, and as of December 31, 2006, had 2,679,000 RGUs, an increase of 13% from December 31, 2005. 2 RGUs by category were as follows (in thousands): December 31, 2006 December 31, 2005 ----------------- ----------------- Basic 1,322.8 1,281.6 Digital 621.6 518.8 High-Speed Internet 611.2 470.4 Telephone 123.4 89.9 ----------------- ----------------- Total RGUs 2,679.0 2,360.7 ================= ================= Average monthly revenue per basic customer was $80.53 for the year ended December 31, 2006, compared to $73.30 for the year ended December 31, 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 $68.2 million, or 18%. Increases in programming rates, customers and the addition of new programming content were significant drivers of the cost increase for the year ended December 31, 2006. For the year ended December 31, 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 year ended December 31, 2006 were significantly lower, causing overall programming cost increases to be greater. Direct operating costs increased due to an increase in telephone cost of sales as we continue to invest and roll out this product partially offset by decreases in our high-speed Internet services costs as the company, in 2006, transitioned its Internet services in-house and realized both cost savings and operational benefits from this investment. 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 $38.5 million, or 13%, 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 sales and marketing, customer care and information technology personnel to continue to upgrade and enhance our product offerings, manage our increasingly complex network and increase customer satisfaction. A portion of the 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 primarily due to the increase in our customer base. Depreciation and amortization expense increased $23.2 million, or 9%, primarily as a result of an increased level of capital expenditures through December 31, 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 December 31, 2005. 3 As a result of the factors discussed above, Adjusted Operating Income before Depreciation and Amortization increased $84.2 million to $490.2 million, an increase of 21%. After adjusting for the going-private transaction-related costs of $62.0 million in 2005, Adjusted Operating Income before Depreciation and Amortization increased $22.2 million, an increase of 5% over 2005. Interest expense increased $24.4 million, or 11%, because of: -- higher interest rates, which averaged 9.0% for the year ended December 31, 2006, as compared to 8.2% for the year ended December 31, 2005; -- the termination of an interest rate swap agreement during the year ended December 31, 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 provision of new services and the construction, expansion and maintenance of its broadband networks. 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 customer premise equipment (e.g., set-top boxes), installation and deployment of new product and service offerings, capitalized payroll, network capacity, bandwidth increases, network extensions, 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 years ended December 31, 2006 and 2005 was $263.9 million and $233.6 million. The increase was primarily attributable to the decrease in our net loss due to the affect of the transaction-related costs in 2005 and the timing of cash receipts and payments related to our working capital accounts. This increase was partially offset by the decrease in amortization of note discount because cash interest payments on the 12 1/4% notes commenced in February 2006. Cash used in investing activities for the years ended December 31, 2006 and 2005 was $286.6 million and $218.7 million. For the years ended December 31, 2006 and 2005, Insight spent $286.4 million and $220.1 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 The increase in capital expenditures was driven primarily by increases in: -- Customer premise equipment required to support our digital customer growth; and -- Network capacity and bandwidth equipment for the transition of our Internet services in-house in 2006. Cash provided by financing activities for the year ended December 31, 2006 was $36.5 million compared to $85.2 million of cash used in financing activities for the year ended December 31, 2005. This source of cash was due to the financing of our $2.445 billion senior secured credit facility during the fourth quarter of 2006. Free Cash Flow for the year ended December 31, 2006 totaled ($22.4) million, compared to $13.5 million for the year ended December 31, 2005. This decrease in Free Cash Flow from the year ended December 31, 2005, to the year ended December 31, 2006, of $35.9 million was primarily driven by the following: -- A $66.3 million increase in capital expenditures; -- A $26.8 million decrease in the generation of Free Cash Flow over the same period in the prior year from changes in working capital accounts; and -- A $26.5 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 $84.2 million increase in Adjusted Operating Income before Depreciation and Amortization. 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 entered into new $2.445 billion senior secured credit facilities. The facilities are comprised of 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. The purpose of this financing was to reduce Insight's interest expense and near term debt amortizations. As of December 31, 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. On February 12, 2007, Insight Midwest Holdings amended its $2.445 billion senior secured facility to reduce the applicable margin with respect to its $1.8 billion B Term Loan facility by 25 basis points, or 0.25%. 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 Ended Year Ended December 31, December 31, ----------------------- ------------------- 2006 2005 2006 2005 ----------- ----------- --------- --------- (in thousands) Net loss $(36,566) $(84,929) $(9,124) $(68,484) Provision for income taxes 159 500 93 125 ----------- ----------- --------- --------- Loss before income taxes (36,407) (84,429) (9,031) (68,359) Minority interest (income) expense (5,377) 5,488 1,077 (581) ----------- ----------- --------- --------- Loss before minority interest and income taxes (41,784) (78,941) (7,954) (68,940) Other (income) expense: Other 10,719 (3,541) 10,641 (2,036) Interest income (1,787) (2,895) (540) (1,019) Interest expense 251,404 226,956 63,311 58,175 ----------- ----------- --------- --------- Total other expense, net 260,336 220,520 73,412 55,120 ----------- ----------- --------- --------- Operating income 218,552 141,579 65,458 (13,820) Depreciation and amortization 270,231 247,039 69,833 63,765 Stock-based compensation 1,413 17,368 194 10,043 ----------- ----------- --------- --------- Adjusted Operating Income before Depreciation and Amortization $490,196 $405,986 $135,485 $59,988 =========== =========== ========= ========= 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). Three Months Ended Year Ended December 31, December 31, ----------------------- ------------------ 2006 2005 2006 2005 ----------- ----------- -------- --------- (in thousands) Operating income (loss) $218,552 $141,579 $65,458 $(13,820) Depreciation and amortization 270,231 247,039 69,833 63,765 Stock-based compensation 1,413 17,368 194 10,043 ----------- ----------- -------- --------- Adjusted Operating Income before Depreciation and Amortization 490,196 405,986 135,485 59,988 Changes in working capital accounts (1) (10,718) 16,069 (7,472) 24,205 Cash paid for interest (214,702) (188,216) (64,628) (75,618) Cash paid for taxes (827) (266) (72) (14) ----------- ----------- -------- --------- Net cash provided by operating activities 263,949 233,573 63,313 8,561 Capital expenditures (286,389) (220,102) (73,080) (75,480) ----------- ----------- -------- --------- Free Cash Flow $(22,440) $13,471 $(9,767) $(66,919) =========== =========== ======== ========= (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 ninth largest cable operator in the United States with approximately 1.4 million customer relationships in the four contiguous states of Illinois, Kentucky, Indiana and Ohio. Insight offers bundled, state-of-the-art analog and digital video, high-speed Internet and voice telephony services 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) December 31, December 31, 2006 2005 ------------ ------------ Assets Cash and cash equivalents $43,573 $29,782 Investments 7,000 5,901 Trade accounts receivable, net of allowance for doubtful accounts of $1,148 and $1,079 as of December 31, 2006 and December 31, 2005 31,060 27,261 Launch funds receivable 355 974 Prepaid expenses and other current assets 8,473 9,645 ------------ ------------ Total current assets 90,461 73,563 Fixed assets, net $1,151,260 $1,130,705 Goodwill 72,430 72,430 Franchise costs 2,361,959 2,361,959 Deferred financing costs, net of accumulated amortization of $29,473 and $24,302 as of December 31, 2006 and December 31, 2005 19,053 24,220 Other non-current assets 2,941 2,287 ------------ ------------ Total assets $3,698,104 $3,665,164 ============ ============ 9 Insight Communications Company, Inc. Consolidated Balance Sheets (dollars in thousands, except share and per share amounts) December 31, December 31, 2006 2005 ------------ ------------ Liabilities and stockholders' equity Accounts payable $43,772 $42,333 Accrued expenses and other current liabilities 45,521 45,413 Accrued property taxes 13,595 12,921 Accrued programming costs (inclusive of $30,677 and $29,878 due to related parties as of December 31, 2006 and December 31, 2005) 45,880 43,705 Deferred revenue 2,076 4,978 Interest payable 49,518 20,459 Debt - current portion - 83,500 ------------ ------------ Total current liabilities 200,362 253,309 Deferred revenue 683 1,499 Debt 2,805,722 2,676,418 Other non-current liabilities - 2,382 Minority interest 245,634 251,011 Stockholders' equity: Voting preferred stock, $.01 par value: Series A - 1,000,000 shares authorized; 848,945 shares issued and outstanding as of December 31, 2006 and 2005 8 8 Series B - 1,000,000 shares authorized; 517,836 shares issued and outstanding as of December 31, 2006 and 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 December 31, 2006 and 2005 134 134 Series D - 50,000,000 shares authorized; 47,015,659 shares issued and outstanding as of December 31, 2006 and 2005 470 470 Non-voting common stock, $.01 par value: Series E - 5,000,000 shares authorized; 3,536,247 and 0 shares issued and outstanding as of December 31, 2006 and 2005 35 - Series F - 100,000 shares authorized; 93,250 and 0 shares issued and outstanding as of December 31, 2006 and 2005 1 - Voting common stock, $.01 par value: Series G - 10,000,000 shares authorized; 0 shares issued and outstanding as of December 31, 2006 and 2005 - - Additional paid-in-capital 826,509 829,337 Accumulated deficit (381,765) (345,199) Accumulated other comprehensive income 306 - Deferred stock compensation - (4,210) ------------ ------------ Total stockholders' equity 445,703 480,545 ------------ ------------ Total liabilities and stockholders' equity $3,698,104 $3,665,164 ============ ============ 10 Insight Communications Company, Inc. Consolidated Statements of Operations (dollars in thousands) Year Ended December 31, 2006 2005 2004 ----------- ----------- ----------- Revenue $1,262,557 $1,117,681 $1,002,456 Operating costs and expenses: Programming and other operating costs (exclusive of depreciation and amortization) (inclusive of $181,560, $157,643 and $150,956 of programming expense incurred through related parties during 2006, 2005 and 2004) 447,060 378,878 342,636 Selling, general and administrative (inclusive of $1,413, $17,368 and $4,438 of stock-based compensation for the years ended December 31, 2006, 2005 and 2004) 326,714 288,213 232,212 Transaction-related costs - 61,972 - Depreciation and amortization 270,231 247,039 239,123 ----------- ----------- ----------- Total operating costs and expenses 1,044,005 976,102 813,971 ----------- ----------- ----------- Operating income 218,552 141,579 188,485 Other income (expense): Interest expense (251,404) (226,956) (201,450) Interest income 1,787 2,895 749 Other income (expense) (10,719) 3,541 (3,388) ----------- ----------- ----------- Total other expense, net (260,336) (220,520) (204,089) Loss before minority interest and income taxes (41,784) (78,941) (15,604) Minority interest income (expense) 5,377 (5,488) (14,023) ----------- ----------- ----------- Loss before income taxes (36,407) (84,429) (29,627) Benefit (provision) for income taxes (159) (500) 201 ----------------------- ----------- Loss before extraordinary item (36,566) (84,929) (29,426) Extraordinary item, net of tax - - 15,627 ----------- ----------- ----------- Net loss $(36,566) $(84,929) $(13,799) =========== =========== =========== 11 Insight Communications Company, Inc. Consolidated Statement of Cash Flows (dollars in thousands) Year Ended December 31, 2006 2005 2004 ----------- --------- --------- Operating activities: Net loss $(36,566) $(84,929) $(13,799) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 270,231 247,039 239,123 Stock-based compensation 1,413 17,368 4,438 Non-cash consulting expense - 45 60 Gain on sale of investments - (448) (386) Gain on interest rate swaps - (2,078) (36) Loss on early extinguishments of debt - - 127 Minority interest (5,377) 5,488 14,023 Provision for losses on trade accounts receivable 18,554 17,619 18,301 Contribution of stock to 401(k) Plan - 2,565 1,309 Amortization of note discount 6,950 38,755 34,931 Deferred income taxes - - (701) Changes in operating assets and liabilities: Trade accounts receivable (22,353) (13,525) (20,343) Launch funds receivable 619 1,775 6,672 Prepaid expenses and other assets 745 2,238 6,011 Accounts payable 1,439 10,447 1,469 Interest payable 29,059 (184) (2,672) Accrued expenses and other liabilities (765) (8,602) 1,387 ----------- --------- --------- Net cash provided by operating activities 263,949 233,573 289,914 ----------- --------- --------- Investing activities: Purchase of fixed assets (286,389) (220,102) (174,096) Sale of fixed assets 857 2,113 1,913 Purchase of intangible assets - - (107) Purchase of investments (1,099) (1,801) (1,856) Sale of investments - 1,079 602 ----------- --------- --------- Net cash used in investing activities (286,631) (218,711) (173,544) ----------- --------- --------- Financing activities: Repayment of old credit facilities (1,489,250) (83,500) (68,250) Repayment of notes (815,000) - (8,134) Proceeds from borrowings under new credit facilities 2,286,000 - - Debt refinancing costs (30,282) (1,733) (14) Proceeds from borrowings under old credit facilities 85,000 - - Other 5 9 - ----------- --------- --------- Net cash provided by (used in) financing activities 36,473 (85,224) (76,398) ----------- --------- --------- Net increase (decrease) in cash and cash equivalents 13,791 (70,362) 39,972 Cash and cash equivalents, beginning of year 29,782 100,144 60,172 ----------- --------- --------- Cash and cash equivalents, end of year $43,573 $29,782 $100,144 =========== ========= ========= 12 Insight Communications Company, Inc. Operating Statistics (in thousands, except per customer and penetration data) FY FY Q4 Q4 2006 2005 2006 2005 --------- --------- ------------------ Customer Relationships 1,401.8 1,347.5 1,401.8 1,347.5 Total Average Monthly Revenue per Basic Customer $80.53 $73.30 $83.65 $75.75 Basic Cable - -------------------------------- Homes Passed 2,465.2 2,420.6 2,465.2 2,420.6 Basic Cable Customers 1,322.8 1,281.6 1,322.8 1,281.6 Basic Cable Penetration 53.7% 52.9% 53.7% 52.9% Cable Revenue $640,474 $596,321 $162,262 $150,225 Average Monthly Cable Revenue per Basic Customer $40.85 $39.11 $40.95 $39.23 High-Speed Internet ("HSI") - -------------------------------- HSI Homes Passed 2,439.6 2,378.9 2,439.6 2,378.9 HSI Customers 611.2 470.4 611.2 470.4 HSI Penetration 25.1% 19.8% 25.1% 19.8% HSI Revenue $240,717 $190,820 $65,202 $52,712 Average Monthly HSI Revenue per Basic Customer $15.35 $12.51 $16.46 $13.77 Average Monthly HSI Revenue per HSI Customer $37.01 $39.77 $36.51 $38.64 Digital Cable - -------------------------------- Digital Universe 1,259.6 1,238.6 1,259.6 1,238.6 Digital Customers 621.6 518.8 621.6 518.8 Digital Cable Penetration 49.3% 41.9% 49.3% 41.9% Digital Revenue $138,172 $111,202 $37,163 $29,303 Average Monthly Digital Revenue per Basic Customer $8.81 $7.29 $9.38 $7.65 Average Monthly Digital Revenue per Digital Customer $20.05 $19.47 $20.32 $19.37 Telephone - -------------------------------- Telephone Universe (marketable homes) 1,392.7 832.0 1,392.7 832.0 Telephone Customers 123.4 89.9 123.4 89.9 Telephone Penetration (to marketable homes) 8.9% 10.8% 8.9% 10.8% Telephone Revenue $50,893 $35,502 $13,761 $10,363 Average Monthly Telephone Revenue per Basic Customer $3.25 $2.33 $3.47 $2.71 Average Monthly Telephone Revenue per Telephone Customer $39.78 $39.22 $38.83 $40.46 Advertising Revenue - -------------------------------- Advertising Revenue $83,729 $76,004 $25,988 $20,851 Average Monthly Advertising Revenue per Basic Customer $5.34 $4.98 $6.56 $5.45 Other Revenue - -------------------------------- Other Revenue $108,572 $107,832 $27,078 $26,603 Average Monthly Other Revenue per Basic Customer $6.93 $7.08 $6.83 $6.94 13 Insight Communications Company, Inc. NCTA Standard Reporting Categories Capital Expenditures (unaudited) (in thousands) Three Months Ended December 31, Year Ended December 31, Insight Consolidated 2006 2006 2005 - ---------------------------------------------- ----------- ----------- Customer Premise Equipment $35,430 $158,769 $114,846 Scaleable Infrastructure 9,705 37,820 20,694 Line Extensions 9,023 29,208 26,813 Upgrade/Rebuild 5,157 16,709 24,704 Support Capital 13,765 43,883 33,045 ------------ ----------- ----------- Total Insight Consolidated $73,080 $286,389 $220,102 ------------ ----------- ----------- Insight Communications Company, Inc. Financial Information Three months ended December 31, ----------------------- 2006 2005 ----------- ----------- (unaudited) Insight Consolidated - --------------------------------------------- Revenue $331,454 $290,057 Adjusted Operating Income before Depreciation and Amortization 135,485 59,988 Operating Income (Loss) 65,458 (13,820) Capital Expenditures 73,080 75,480 Interest Expense 63,311 58,175 Free Cash Flow (9,767) (66,919) Year ended December 31, ----------------------- 2006 2005 ----------- ----------- Insight Consolidated - --------------------------------------------- Revenue $1,262,557 $1,117,681 Adjusted Operating Income before Depreciation and Amortization 490,196 405,986 Operating Income 218,552 141,579 Capital Expenditures 286,389 220,102 Interest Expense 251,404 226,956 Free Cash Flow (22,440) 13,471 14 CONTACT: Insight Communications Sandy Colony, 917-286-2300 SVP, Communications -----END PRIVACY-ENHANCED MESSAGE-----