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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:
   
333-64449-02
    
333-64449-01
    
333-64449
 
 
Coaxial LLC
Coaxial Financing Corp.
Insight Communications of Central Ohio, LLC
(Exact name of registrants as specified in their charters)
 
 
Delaware
  
13-4080422
Delaware
  
13-4061992
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 LLC
  
Not Applicable
Coaxial Financing Corp.
  
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 LLC
CONSOLIDATED BALANCE SHEETS
(in thousands)
 
    
June 30,
2002
     
December 31, 2001
  
    
(unaudited)
         
Assets
                  
Investments
   
$
9,384
 
   
$
19,328
 
Dividends receivable
   
 
5,250
 
   
 
5,250
 
    
  
Total current assets
   
 
14,634
 
   
 
24,578
 
Deferred financing costs, net
   
 
3,432
 
   
 
3,814
 
Investment in affiliate
   
 
188,670
 
   
 
185,713
 
Note receivable – Coaxial DJM LLC
   
 
6,750
 
   
 
6,750
 
Note receivable – Coaxial DSM LLC
   
 
3,000
 
   
 
3,000
 
Interest receivable on notes
   
 
6,265
 
   
 
5,272
 
    
  
Total assets
   
$
222,751
 
   
$
229,127
 
    
  
Liabilities and members’ equity
                  
Accrued interest
   
$
5,250
 
   
$
5,250
 
    
  
Total current liabilities
   
 
5,250
 
   
 
5,250
 
Senior discount notes
   
 
48,670
 
   
 
45,713
 
Senior notes, including $105.6 million to be paid by Phoenix Associates
   
 
140,000
 
   
 
140,000
 
    
  
Total liabilities
   
 
193,920
 
   
 
190,963
 
Commitments and contingencies
                  
Members’ equity:
                  
In-substance allocation of proceeds related to senior notes to be paid by Phoenix Associates
   
 
(64,985
)
   
 
(70,263
)
Members’ accumulated equity
   
 
101,932
 
   
 
106,599
 
Accumulated other comprehensive income (loss)
   
 
(8,116
)
   
 
1,828
 
    
  
Total members’ equity
   
 
28,831
 
   
 
38,164
 
    
  
Total liabilities and members’ equity
   
$
222,751
 
   
$
229,127
 
    
  
 
See accompanying notes

2

 
COAXIAL LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands)
 
    
Three months
ended June 30,
     
Six months
ended June 30,
  
    
2002
     
2001
     
2002
     
2001
  
Expenses:
                                    
Amortization
   
$
191
 
   
$
191
 
   
$
382
 
   
$
382
 
Other income (expense):
                                    
Interest income — related parties
   
 
505
 
   
 
442
 
   
 
993
 
   
 
872
 
Interest expense
   
 
(5,002
)
   
 
(4,806
)
   
 
(9,957
)
   
 
(9,572
)
Dividend on preferred interests
   
 
5,002
 
   
 
4,806
 
   
 
9,957
 
   
 
9,572
 
    
  
  
  
Total other income, net
   
 
505
 
   
 
442
 
   
 
993
 
   
 
872
 
Net income
   
$
314
 
   
$
251
 
   
$
611
 
   
$
490
 
    
  
  
  
 
See accompanying notes

3

COAXIAL LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
 
    
Six months
ended June 30,
  
    
2002
     
2001
  
Operating activities:
                  
Net income
   
$
611
 
   
$
490
 
Adjustments to reconcile net income to net cash used in operating activities:
                  
Amortization
   
 
382
 
   
 
382
 
Interest expense assumed by affiliate
   
 
5,278
 
   
 
5,278
 
Dividend on preferred interest
   
 
(9,957
)
   
 
(9,572
)
Accretion of original issue discount on Senior Discount Notes
   
 
2,957
 
   
 
2,572
 
Changes in operating assets and liabilities:
                  
Due from related parties
   
 
(993
)
   
 
(872
)
    
  
Net cash used in operating activities
   
 
(1,722
)
   
 
(1,722
)
    
  
Financing activities:
                  
Capital distributions
   
 
(5,278
)
   
 
(5,278
)
Proceeds from dividend on preferred interests
   
 
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
   
$
—  
 
   
$
—  
 
    
  
 
See accompanying notes

4

COAXIAL LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 
1.    Organization and Basis of Presentation
 
Coaxial LLC (the “Company”), a Delaware limited liability company, was formed on July 24, 1998 in order to own and hold 67½% of the common stock of Coaxial Communications of Central Ohio, Inc. (“Coaxial Inc.”). The Company has one individual as its sole member.
 
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.
 
In connection with the contribution of Coaxial Inc.’s cable system (“the System”) described below and with the issuance of the Senior Notes and Senior Discount Notes by Coaxial Inc. and the Company during 1998, the three individuals who previously owned the outstanding stock of Coaxial Inc. contributed their stock to three separate limited liability companies. Accordingly, Coaxial Inc. is a subsidiary of the Company, which owns 67½% of Coaxial Inc.’s outstanding stock.
 
Other related entities affiliated with the Company in addition to Coaxial Inc., 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 Coaxial Financing Corp. are co-issuers of the Senior Discount Notes. Coaxial Inc. and Phoenix are co-issuers of the Senior Notes. The ability of Coaxial Financing Corp., the Company, Coaxial Inc. and Phoenix to make scheduled payments with respect to the Senior Discount Notes and Senior Notes is dependent on the financial and operating performance of Insight Ohio. The required distributions on the Series A preferred equity interest and Series B preferred equity interest to Coaxial Inc. are designed to provide the cash flow necessary to service the debt requirements on the Senior Notes and Senior Discount Notes, respectively.
 
2.    Responsibility for Interim Financial Statements
 
The accompanying unaudited consolidated 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 consolidated financial statements reflect all adjustments considered necessary for a fair statement of the consolidated results of operations and financial position for the interim periods presented. All such adjustments are of a normal recurring nature. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated

5

COAXIAL LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
 
2.    Responsibility for Interim Financial Statements (continued)
 
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.
 
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 ($7.1) million and ($9.3) million for the three and six months ended June 30, 2002 and ($189,000) and $2.5 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

COAXIAL FINANCING CORP.
BALANCE SHEETS
(in thousands)
 
    
June 30,
     
December 31,
  
    
2002
     
2001
  
    
(unaudited)
         
Assets
                  
Cash
   
$
1
 
   
$
1
 
Deferred financing costs, net
   
 
830
 
   
 
898
 
    
  
Total assets
   
$
831
 
   
$
899
 
    
  
Liabilities and shareholders’ deficit
                  
Senior discount notes, to be paid by Coaxial LLC
   
$
48,670
 
   
$
45,713
 
Shareholders’ deficit:
                  
Common stock; $.01 par value; 1,000 shares authorized, issued and outstanding
   
 
—  
 
   
 
—  
 
Paid-in-capital
   
 
1
 
   
 
1
 
In-substance allocation of proceeds related to senior discount notes to be paid by Coaxial LLC
   
 
(28,646
)
   
 
(28,646
)
Accumulated deficit
   
 
(19,194
)
   
 
(16,169
)
    
  
Total shareholders’ deficit
   
 
(47,839
)
   
 
(44,814
)
    
  
Total liabilities and shareholders’ deficit
   
$
831
 
   
$
899
 
    
  
 
See accompanying notes

7

COAXIAL FINANCING CORP.
STATEMENTS OF OPERATIONS
(unaudited)
(in thousands)
 
 
    
Three months
ended June 30,
     
Six months
ended June 30,
  
    
2002
     
2001
     
2002
     
2001
  
Expenses:
                                    
Amortization
   
$
(34
)
   
$
(34
)
   
$
(68
)
   
$
(68
)
Interest expense
   
 
(1,502
)
   
 
(1,306
)
   
 
(2,957
)
   
 
(2,572
)
    
  
  
  
Net loss
   
$
  (1,536
)
   
$
  (1,340
)
   
$
  (3,025
)
   
$
  (2,640
)
    
  
  
  
 
See accompanying notes

8

COAXIAL FINANCING CORP.
STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
 
 
    
Six months
ended June 30,
  
    
2002
     
2001
  
Cash flows from operating activities:
                  
Net loss
   
$
  (3,025
)
   
$
  (2,640
)
Adjustments to reconcile net loss to net cash provided by operating activities:
                  
Amortization of deferred financing costs
   
 
68
 
   
 
68
 
Accretion of original issue discount on senior discount notes assumed by affiliate
   
 
2,957
 
   
 
2,572
 
    
  
Net cash provided by operating activities
   
 
—  
 
   
 
—  
 
    
  
Net increase in cash
   
 
—  
 
   
 
—  
 
Cash, beginning of period
   
 
1