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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
FORM 10-Q
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2002
 
 
Commission File Numbers:
  
333-63677-02
   
333-63677-01
   
333-63677
 
 
 
Coaxial Communications of Central Ohio, Inc.
Phoenix Associates
Insight Communications of Central Ohio, LLC
(Exact name of registrants as specified in their charters)
 
 
Ohio
  
31-0975825
Florida
  
59-1798351
Delaware
  
13-4017803
(State or other jurisdiction of
incorporation or organization)
  
(I.R.S. Employer
Identification No.)
 
c/o Insight Communications Company, Inc.
810 7th Avenue
New York, New York 10019
(Address of principal executive offices, including zip code)
 
(917) 286-2300
(Registrants’ telephone number, including area code)
 
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes    x     No    ¨        
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
Coaxial Communications of Central Ohio, Inc.
  
Not Applicable
Phoenix Associates
  
Not Applicable
Insight Communications of Central Ohio, LLC
  
Not Applicable
 

 
PART I.    FINANCIAL INFORMATION
 
Item 1.    Financial Statements
 
The accompanying unaudited consolidated financial statements have been prepared in accordance with the requirements of Form 10-Q and, therefore, do not include all information and footnotes required by accounting principles generally accepted in the United States. However, in our opinion, all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results of operations for the relevant periods have been made. Results for the interim periods are not necessarily indicative of the results to be expected for the year. These financial statements should be read in conjunction with the summary of significant accounting policies and the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2001.

1

 
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
BALANCE SHEETS
(in thousands)
 
    
June 30,
2002
     
December 31, 2001
  
    
(unaudited)
         
Assets
                  
Investments
   
$
9,384
 
   
$
19,328
 
Dividend receivable
   
 
5,250
 
   
 
5,250
 
    
  
Total current assets
   
 
14,634
 
   
 
24,578
 
Deferred financing costs, net
   
 
2,601
 
   
 
2,915
 
Investment in affiliate
   
 
188,670
 
   
 
185,713
 
    
  
Total assets
   
$
205,905
 
   
$
213,206
 
    
  
Liabilities and shareholders’ equity
                  
Accrued interest
   
$
5,250
 
   
$
5,250
 
    
  
Total current liabilities
   
 
5,250
 
   
 
5,250
 
Senior notes, including $105.6 million to be paid by Phoenix Associates
   
 
140,000
 
   
 
140,000
 
    
  
Total liabilities
   
 
145,250
 
   
 
145,250
 
Commitments and contingencies
                  
Shareholders’ equity:
                  
Common stock; $1 par value; 2,000 shares authorized; 1,080 shares issued and outstanding as of June 30, 2002 and December 31, 2001
   
 
1
 
   
 
1
 
Paid in capital
   
 
11,501
 
   
 
11,501
 
In-substance allocation of proceeds related to senior notes to be paid by Phoenix Associates
   
 
(64,985
)
   
 
(70,263
)
Retained earnings
   
 
122,254
 
   
 
124,889
 
Accumulated other comprehensive income (loss)
   
 
(8,116
)
   
 
1,828
 
    
  
Total shareholders’ equity
   
 
60,655
 
   
 
67,956
 
    
  
Total liabilities and shareholders’ equity
   
$
205,905
 
   
$
213,206
 
    
  
 
See accompanying notes

2

 
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
STATEMENTS OF OPERATIONS
(unaudited)
(in thousands)
 
    
Three months ended June 30,
     
Six months ended June 30,
  
    
2002
     
2001
     
2002
     
2001
  
Expenses:
                                    
Amortization
   
 
157
 
   
 
157
 
   
 
314
 
   
 
314
 
Other income (expense):
                                    
Interest expense
   
 
(3,500
)
   
 
(3,500
)
   
 
(7,000
)
   
 
(7,000
)
Dividend on preferred interests
   
 
5,002
 
   
 
4,806
 
   
 
9,957
 
   
 
9,572
 
    
  
  
  
Total other income (expense), net
   
 
1,502
 
   
 
1,306
 
   
 
2,957
 
   
 
2,572
 
    
  
  
  
Net income
   
$
1,345
 
   
$
1,149
 
   
$
2,643
 
   
$
2,258
 
    
  
  
  
 
See accompanying notes

3

 
 
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
 
    
Six months ended June 30,
  
    
2002
     
2001
  
Operating activities:
                  
Net income
   
$
2,643
 
   
$
2,258
 
Adjustments to reconcile net income to net cash used in operating activities:
                  
Amortization
   
 
314
 
   
 
314
 
Interest expense assumed by affiliate
   
 
5,278
 
   
 
5,278
 
Dividend on preferred interest
   
 
(9,957
)
   
 
(9,572
)
    
  
Net cash used in operating activities
   
 
(1,722
)
   
 
(1,722
)
    
  
Financing activities:
                  
Capital distributions
   
 
(5,278
)
   
 
(5,278
)
Proceeds from dividend on preferred interest
   
 
7,000
 
   
 
7,000
 
    
  
Net cash provided by financing activities
   
 
1,722
 
   
 
1,722
 
    
  
Net change in cash and cash equivalents
   
 
—
 
   
 
—
 
Cash and cash equivalents, beginning of period
   
 
—
 
   
 
—
 
    
  
Cash and cash equivalents, end of period
   
$
—
 
   
$
—
 
    
  
 

4

 
 
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
NOTES TO FINANCIAL STATEMENTS
 
1.  Organization and Basis of Presentation
 
Coaxial Communications of Central Ohio, Inc. (the “Company” or “Coaxial Inc.”), an Ohio corporation, through its ownership of preferred interests, has a 30% voting interest in Insight Communications of Central Ohio, LLC (“Insight Ohio”). Insight Ohio operates a cable television system that provides basic and expanded cable television services to homes in the eastern parts of Columbus, Ohio and surrounding areas. Prior to August 8, 2000, the Company owned 100% of the voting interest in Insight Ohio and therefore consolidated the financial statements of Insight Ohio for periods prior to such date. In connection with the contribution of the Company’s cable system (the “System”), the issuance of the Senior Notes and the issuance of the Senior Discount Notes by the Company’s majority shareholder, Coaxial LLC, during 1998 the three individuals who previously owned the outstanding stock of the Company contributed their stock to three separate limited liability companies. Accordingly, the Company is a subsidiary of Coaxial LLC, which owns 67½% of its outstanding stock.
 
Other related entities affiliated with the Company in addition to Coaxial LLC, include Coaxial DJM LLC, Coaxial DSM LLC, (collectively, the “Coaxial Entities”), Phoenix Associates (“Phoenix”), Coaxial Financing Corp., Coaxial Communications of Southern Ohio, Inc., Coaxial Associates of Columbus I, Coaxial Associates of Columbus II, Paxton Cable Television, Inc. and Paxton Communications, Inc.
 
The Company and Phoenix are co-issuers of the Senior Notes. The ability of the Company and Phoenix to make scheduled payments with respect to the Senior Notes is dependent on the financial and operating performance of Insight Ohio. The required distributions on the Series A preferred equity interest to the Company is designed to provide the cash flow necessary to service the debt requirements on the Senior Notes.
 
2.  Responsibility for Interim Financial Statements
 
The accompanying unaudited financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnote disclosures required by accounting principles generally accepted in the United States for complete financial statements.
 
In management’s opinion, the financial statements reflect all adjustments considered necessary for a fair statement of the results of operations and financial position for the interim periods presented. All such adjustments are of a normal recurring nature. These unaudited interim financial statements should be read in conjunction with the audited consolidated financial statements and notes to consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2001.

5

 
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
2.  Responsibility for Interim Financial Statements (continued)
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The results of operations for the three and six months ended June 30, 2002 are not necessarily indicative of the results to be expected for the year ending December 31, 2002 or any other interim period.
 
3.  Comprehensive Income (Loss)
 
Comprehensive income (loss) totaled ($6.0) million and ($7.3) million for the three and six months ended June 30, 2002 and $709,000 and $4.2 million for the three and six months ended June 30, 2001, respectively. The Company owns common stock that is classified as available-for-sale and reported at market value, with unrealized gains and losses recorded as accumulated other comprehensive income or loss in the accompanying balance sheets.

6

 
PHOENIX ASSOCIATES
BALANCE SHEETS
(in thousands)
 
    
June 30, 2002
     
December 31, 2001
  
    
(unaudited)
         
Assets
                  
Interest receivable
   
$
609
 
   
$
531
 
Notes receivable—related parties
   
 
550
 
   
 
550
 
    
  
Total current assets
   
 
1,159
 
   
 
1,081
 
Due from related party
   
 
406
 
   
 
406
 
Deferred financing costs, net
   
 
2,601
 
   
 
2,915
 
    
  
Total assets
   
$
4,166
 
   
$
4,402
 
    
  
Liabilities and partners’ deficit
                  
Interest payable
   
$
5,250
 
   
$
5,250
 
    
  
Total current liabilities
   
 
5,250
 
   
 
5,250
 
Senior notes, including $34.4 million to be paid by Coaxial Communications of Central Ohio, Inc.
   
 
140,000
 
   
 
140,000
 
    
  
Total liabilities
   
 
145,250
 
   
 
145,250
 
Commitments and contingencies
                  
Partners’ deficit:
                  
In-substance allocation of proceeds related to senior notes to be paid by Coaxial Communications of Central Ohio, Inc.
   
 
(21,155
)
   
 
(22,877
)
Partners’ accumulated deficit
   
 
(119,929
)
   
 
(117,971
)
    
  
Total partners’ deficit
   
 
(141,084
)
   
 
(140,848
)
    
  
Total liabilities and partners’ deficit
   
$
4,166
 
   
$
4,402
 
    
  
 
See accompanying notes

7

 
PHOENIX ASSOCIATES
STATEMENTS OF OPERATIONS
(unaudited)
(in thousands)
 
    
Three months ended
June 30,
     
Six months ended
June 30,
  
    
2002
     
2001
     
2002
     
2001
  
Expenses:
                                    
Amortization
   
$
(157
)
   
$
(157
)
   
$
(314
)
   
$
(314
)
Interest income (expense):
                                    
Interest income—related parties
   
 
39
 
   
 
39
 
   
 
78
 
   
 
78
 
Interest expense
   
 
(3,500
)
   
 
(3,500
)
   
 
(7,000
)
   
 
(7,000
)
    
  
  
  
Total interest expense, net
   
 
(3,461
)
   
 
(3,461
)
   
 
(6,922
)
   
 
(6,922
)
    
  
  
  
Net loss
   
$
(3,618
)
   
$
(3,618
)
   
$
(7,236
)
   
$
(7,236
)
    
  
  
  
 
See accompanying notes

8

 
PHOENIX ASSOCIATES
STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
 
    
Six months ended
June 30,
  
    
2002
     
2001
  
Operating activities:
                  
Net loss
   
$
(7,236
)
   
$
(7,236
)
Adjustments to reconcile net loss to net cash used in operating activities:
                  
Amortization of deferred financing fees