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 September 30, 2002
| Commission file numbers |
333-33540 |
|
|
333-33540-1 |
|
|
|
INSIGHT MIDWEST, L.P.
INSIGHT CAPITAL, INC.
(Exact name of registrants as specified in their charters)
| Delaware |
|
13-4079232 |
| Delaware |
|
13-4079679 |
| (State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification Nos.) |
|
|
|
|
| 810 7th Avenue |
|
10019 |
| (Address of principal executive offices) |
|
(Zip code) |
|
|
|
|
| Registrants’ telephone number, including area code: 917-286-2300 | ||
|
| ||
Indicate by check mark whether the registrants (1) have 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 registrants were required to file such reports) and (2) have been subject to such filing requirements for the past 90 days.
| Yes |
x |
No |
o |
Indicate the number of shares outstanding of each of the registrants’ classes of common stock, as of the latest practicable date.
|
|
Insight Midwest, L.P. |
– Not Applicable |
|
|
Insight Capital, Inc. |
– 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
INSIGHT MIDWEST L.P.
CONSOLIDATED BALANCE SHEETS
(in thousands)
|
|
|
September 30, |
|
December 31, |
| |||
|
|
|
|
|
|
| |||
|
|
|
(unaudited) |
|
|
| |||
| Assets |
|
|
|
|
|
|
| |
| Cash and cash equivalents |
|
$ |
4,019 |
|
$ |
12,146 |
| |
| Trade accounts receivable, net of allowance for doubtful accounts of $1,661 and $2,818 as of September 30, 2002 and December 31, 2001 |
|
|
17,957 |
|
|
22,918 |
| |
| Launch funds receivable |
|
|
7,173 |
|
|
12,980 |
| |
| Prepaid expenses and other assets |
|
|
10,962 |
|
|
20,647 |
| |
|
|
|
|
|
|
|
|
| |
|
|
Total current assets |
|
|
40,111 |
|
|
68,691 |
|
| Fixed assets, net |
|
|
1,167,296 |
|
|
1,133,627 |
| |
| Goodwill |
|
|
15,198 |
|
|
15,198 |
| |
| Franchise costs |
|
|
2,325,974 |
|
|
2,319,688 |
| |
| Deferred financing costs, net of accumulated amortization of $6,093 and $3,885 as of September 30, 2002 and December 31, 2001 |
|
|
23,620 |
|
|
23,876 |
| |
|
|
|
|
|
|
|
|
| |
|
|
Total assets |
|
$ |
3,572,199 |
|
$ |
3,561,080 |
|
|
|
|
|
|
|
|
|
|
|
| Liabilities and partners’ capital |
|
|
|
|
|
|
| |
| Accounts payable |
|
$ |
21,512 |
|
$ |
66,712 |
| |
| Accrued expenses and other liabilities |
|
|
18,912 |
|
|
21,225 |
| |
| Accrued property taxes |
|
|
17,901 |
|
|
11,030 |
| |
| Accrued programming costs |
|
|
25,568 |
|
|
24,287 |
| |
| Deferred revenue |
|
|
6,713 |
|
|
8,673 |
| |
| Interest payable |
|
|
39,240 |
|
|
21,940 |
| |
| Debt – current portion |
|
|
3,750 |
|
|
— |
| |
| Preferred interest distribution payable |
|
|
1,750 |
|
|
5,250 |
| |
| Due to affiliates |
|
|
21,342 |
|
|
22,040 |
| |
|
|
|
|
|
|
|
|
| |
|
|
Total current liabilities |
|
|
156,688 |
|
|
181,157 |
|
| Deferred revenue |
|
|
7,092 |
|
|
12,262 |
| |
| Debt |
|
|
2,386,167 |
|
|
2,298,362 |
| |
| Other non-current liabilities |
|
|
59,731 |
|
|
62,964 |
| |
|
|
|
|
|
|
|
|
| |
|
|
Total liabilities |
|
|
2,609,678 |
|
|
2,554,745 |
|
| Commitments and contingencies |
|
|
|
|
|
|
| |
| Preferred interests |
|
|
190,220 |
|
|
185,713 |
| |
| Partners’ capital: |
|
|
|
|
|
|
| |
| Partners’ accumulated capital |
|
|
791,980 |
|
|
843,377 |
| |
| Accumulated other comprehensive loss |
|
|
(19,679 |
) |
|
(22,755 |
) | |
|
|
|
|
|
|
|
|
| |
|
|
Total partners’ capital |
|
|
772,301 |
|
|
820,622 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and partners’ capital |
|
$ |
3,572,199 |
|
$ |
3,561,080 |
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes
2
INSIGHT MIDWEST, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands)
|
|
|
Three months ended |
|
Nine months ended |
| |||||||||
|
|
|
|
|
|
| |||||||||
|
|
|
2002 |
|
2001 |
|
2002 |
|
2001 |
| |||||
|
|
|
|
|
|
|
|
|
|
| |||||
| Revenue |
|
$ |
203,768 |
|
$ |
182,867 |
|
$ |
593,772 |
|
$ |
537,546 |
| |
| Operating costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Programming and other operating costs |
|
|
68,927 |
|
|
65,309 |
|
|
205,898 |
|
|
192,337 |
|
|
|
Selling, general and administrative |
|
|
37,855 |
|
|
33,415 |
|
|
110,561 |
|
|
100,721 |
|
|
|
Management fees |
|
|
6,365 |
|
|
5,291 |
|
|
17,435 |
|
|
15,382 |
|
|
|
Non-recurring high-speed data service charges |
|
|
— |
|
|
— |
|
|
4,116 |
|
|
— |
|
|
|
Depreciation and amortization |
|
|
61,227 |
|
|
91,669 |
|
|
156,865 |
|
|
266,739 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total operating costs and expenses |
|
|
174,374 |
|
|
195,684 |
|
|
494,875 |
|
|
575,179 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Operating income (loss) |
|
|
29,394 |
|
|
(12,817 |
) |
|
98,897 |
|
|
(37,633 |
) | |
| Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Interest expense |
|
|
(47,636 |
) |
|
(45,666 |
) |
|
(135,481 |
) |
|
(140,310 |
) |
|
|
Interest income |
|
|
36 |
|
|
182 |
|
|
134 |
|
|
736 |
|
|
|
Other |
|
|
36 |
|
|
(52 |
) |
|
60 |
|
|
(588 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total other expense, net |
|
|
(47,564 |
) |
|
(45,536 |
) |
|
(135,287 |
) |
|
(140,162 |
) | |
| Net loss before extraordinary item |
|
|
(18,170 |
) |
|
(58,353 |
) |
|
(36,390 |
) |
|
(177,795 |
) | |
| Extraordinary loss from early extinguishment of debt |
|
|
— |
|
|
— |
|
|
— |
|
|
(10,315 |
) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Net loss |
|
|
(18,170 |
) |
|
(58,353 |
) |
|
(36,390 |
) |
|
(188,110 |
) | |
| Accrual of preferred interests |
|
|
(5,050 |
) |
|
(4,848 |
) |
|
(15,007 |
) |
|
(14,421 |
) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Net loss attributable to common interests |
|
$ |
(23,220 |
) |
$ |
(63,201 |
) |
$ |
(51,397 |
) |
$ |
(202,531 |
) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
See accompanying notes
3
INSIGHT MIDWEST, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
|
|
|
Nine months ended September 30, |
| ||||||
|
|
|
|
| ||||||
|
|
|
2002 |
|
2001 |
| ||||
|
|
|
|
|
|
| ||||
| Operating activities: |
|
|
|
|
|
|
| ||
| Net loss |
|
$ |
(36,390 |
) |
$ |
(188,110 |
) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|
| ||
|
|
Depreciation and amortization |
|
|
156,865 |
|
|
266,739 |
| |
|
|
Extraordinary loss from early extinguishments of debt |
|
|
— |
|
|
10,315 |
| |
|
|
Provision for losses on trade accounts receivable |
|
|
10,091 |
|
|
8,827 |
| |
|
|
Amortization of note discount |
|
|
555 |
|
|
554 |
| |
|
|
Changes in operating assets and liabilities, net of the effects of acquisitions: |
|
|
|
|
|
|
| |
|
|
Trade accounts receivable |
|
|
(5,021 |
) |
|
(14,168 |
) | |
|
|
Launch fund receivable |
|
|
5,807 |
|
|
8,519 |
| |
|
|
Prepaid expenses and other assets |
|
|
9,714 |
|
|
(7,805 |
) | |
|
|
Accounts payable |
|
|
(45,200 |
) |
|
4,030 |
| |
|
|
Accrued expenses and other liabilities |
|
|
15,804 |
|
|
36,098 |
| |
|
|
|
|
|
|
|
|
|
| |
| Net cash provided by operating activities |
|
|
112,225 |
|
|
124,999 |
| ||
|
|
|
|
|
|
|
|
| ||
| Investing activities: |
|
|
|
|
|
|
| ||
| Purchase of fixed assets |
|
|
(185,660 |
) |
|
(228,582 |
) | ||
| Purchase of intangible assets |
|
|
(235 |
) |
|
— |
| ||
| Purchase of cable television systems, net of cash acquired |
|
|
(8,822 |
) |
|
(61,982 |
) | ||
|
|
|
|
|
|
|
|
| ||
| Net cash used in investing activities |
|
|
(194,717 |
) |
|
(290,564 |
) | ||
|
|
|
|
|
|
|
|
| ||
| Financing activities: |
|
|
|
|
|
|
| ||
| Distributions of preferred interests |
|
|
(14,000 |
) |
|
(14,000 |
) | ||
| Proceeds from borrowings under credit facilities |
|
|
86,000 |
|
|
1,527,000 |
| ||
| Repayments of credit facilities |
|
|
(95,000 |
) |
|
(654,900 |
) | ||
| Borrowings from parent under inter-company loan |
|
|
100,000 |
|
|
— |
| ||
| Repayment of debt in connection with cable system transactions |
|
|
— |
|
|
(659,165 |
) | ||
| Principal payments on capital leases and other non-current liabilities |
|
|
(683 |
) |
|
(46 |
) | ||
| Debt issuance costs |
|
|
(1,952 |
) |
|
(11,202 |
) | ||
|
|
|
|
|
|
|
|
| ||
| Net cash provided by financing activities |
|
|
74,365 |
|
|
187,687 |
| ||
|
|
|
|
|
|
|
|
| ||
| Net increase (decrease) in cash and cash equivalents |
|
|
(8,127 |
) |
|
22,122 |
| ||
| Cash and cash equivalents, beginning of period |
|
|
12,146 |
|
|
5,735 |
| ||
|
|
|
|
|
|
|
|
| ||
| Cash and cash equivalents, end of period |
|
$ |
4,019 |
|
$ |
27,857 |
| ||
|
|
|
|
|
|
|
|
| ||
See accompanying notes
4
INSIGHT MIDWEST, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Basis of Presentation
We were formed in September 1999 to serve as the holding company and a financing vehicle for Insight Communications Company, Inc.’