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, 2004
Commission file number 0-26677
INSIGHT COMMUNICATIONS COMPANY, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 13-4053502 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| 810 7th Avenue New York, New York |
10019 | |
| (Address of principal executive offices) | (Zip code) | |
Registrant’s telephone number, including area code: 917-286-2300
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 by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). 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.
| Class |
Outstanding at October 22, 2004 | |
| Class A Common Stock, $.01 Par Value |
50,893,106 | |
| Class B Common Stock, $.01 Par Value |
8,879,468 |
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, 2003.
1
INSIGHT COMMUNICATIONS COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
| September 30, 2004 |
December 31, 2003 |
|||||||
| unaudited | ||||||||
| Assets |
||||||||
| Cash and cash equivalents |
$ | 96,130 | $ | 60,172 | ||||
| Investments |
4,850 | 4,078 | ||||||
| Trade accounts receivable, net of allowance for doubtful accounts of $1,049 and $1,123 as of September 30, 2004 and December 31, 2003 |
25,806 | 29,313 | ||||||
| Launch funds receivable |
2,709 | 9,421 | ||||||
| Prepaid expenses and other assets |
13,576 | 17,446 | ||||||
| Total current assets |
143,071 | 120,430 | ||||||
| Fixed assets, net |
1,173,916 | 1,216,304 | ||||||
| Goodwill |
72,430 | 72,430 | ||||||
| Franchise costs, net of accumulated amortization of $359,229 as of September 30, 2004 and December 31, 2003 |
2,361,959 | 2,361,959 | ||||||
| Deferred financing costs, net of accumulated amortization of $17,574 and $13,676 as of September 30, 2004 and December 31, 2003 |
29,210 | 33,288 | ||||||
| Other non-current assets |
6,649 | 5,244 | ||||||
| Total assets |
$ | 3,787,235 | $ | 3,809,655 | ||||
| Liabilities and stockholders’ equity |
||||||||
| Accounts payable |
$ | 23,271 | $ | 30,417 | ||||
| Accrued expenses and other liabilities |
36,013 | 34,182 | ||||||
| Accrued property taxes |
25,605 | 22,954 | ||||||
| Accrued programming costs |
49,754 | 43,261 | ||||||
| Deferred revenue |
10,367 | 10,061 | ||||||
| Interest payable |
47,747 | 23,315 | ||||||
| Debt – current portion |
78,188 | 62,250 | ||||||
| Total current liabilities |
270,945 | 226,440 | ||||||
| Deferred revenue |
3,283 | 4,523 | ||||||
| Debt |
2,736,398 | 2,786,041 | ||||||
| Other non-current liabilities |
1,864 | 5,742 | ||||||
| Minority interest |
232,377 | 229,790 | ||||||
| Stockholders’ equity: |
||||||||
| Preferred stock; $.01 par value; 100,000,000 shares authorized; no shares issued and outstanding as of September 30, 2004 and December 31, 2003 |
— | — | ||||||
| Common stock; $.01 par value: |
||||||||
| Class A - 300,000,000 shares authorized; 50,893,106 and 50,685,317 shares issued and outstanding as of September 30, 2004 and December 31, 2003 |
509 | 507 | ||||||
| Class B - 100,000,000 shares authorized; 8,879,468 shares issued and outstanding as of September 30, 2004 and December 31, 2003 |
88 | 88 | ||||||
| Additional paid-in-capital |
817,034 | 816,600 | ||||||
| Accumulated deficit |
(266,262 | ) | (246,471 | ) | ||||
| Deferred stock compensation |
(9,495 | ) | (13,582 | ) | ||||
| Accumulated other comprehensive income (loss) |
494 | (23 | ) | |||||
| Total stockholders’ equity |
542,368 | 557,119 | ||||||
| Total liabilities and stockholders’ equity |
$ | 3,787,235 | $ | 3,809,655 | ||||
See accompanying notes
2
INSIGHT COMMUNICATIONS COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share amounts)
| Three months ended September 30, |
Nine months ended September 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| restated | restated | |||||||||||||||
| Revenue |
$ | 250,516 | $ | 228,395 | $ | 739,910 | $ | 666,487 | ||||||||
| Operating costs and expenses: |
||||||||||||||||
| Programming and other operating costs |
87,522 | 81,655 | 264,277 | 243,161 | ||||||||||||
| Selling, general and administrative |
57,920 | 48,240 | 163,049 | 140,285 | ||||||||||||
| Depreciation and amortization |
60,360 | 56,667 | 180,381 | 171,936 | ||||||||||||
| Total operating costs and expenses |
205,802 | 186,562 | 607,707 | 555,382 | ||||||||||||
| Operating income |
44,714 | 41,833 | 132,203 | 111,105 | ||||||||||||
| Other income (expense): |
||||||||||||||||
| Gain on cable system exchange |
— | — | — | 26,992 | ||||||||||||
| Interest expense |
(49,228 | ) | (54,291 | ) | (150,165 | ) | (156,307 | ) | ||||||||
| Interest income |
174 | 296 | 423 | 778 | ||||||||||||
| Other income (expense) |
475 | (1,134 | ) | (1,701 | ) | 681 | ||||||||||
| Total other expense, net |
(48,579 | ) | (55,129 | ) | (151,443 | ) | (127,856 | ) | ||||||||
| Loss before minority interest, investment activity, extinguishments of obligations, gain on contract settlement and income taxes |
(3,865 | ) | (13,296 | ) | (19,240 | ) | (16,751 | ) | ||||||||
| Minority interest expense |
(1,597 | ) | (9,792 | ) | (877 | ) | (7,778 | ) | ||||||||
| Loss from early extinguishments of debt |
— | (10,879 | ) | — | (10,879 | ) | ||||||||||
| Loss on settlement of put obligation |
— | (11,979 | ) | — | (11,979 | ) | ||||||||||
| Gain on settlement of programming contract |
— | 37,137 | — | 37,137 | ||||||||||||
| Impairment write-down of investments |
— | — | — | (1,500 | ) | |||||||||||
| Loss before income taxes |
(5,462 | ) | (8,809 | ) | (20,117 | ) | (11,750 | ) | ||||||||
| Benefit (provision) for income taxes |
15 | 521 | 326 | 2,392 | ||||||||||||
| Net loss |
(5,447 | ) | (8,288 | ) | (19,791 | ) | (9,358 | ) | ||||||||
| Accrual of preferred interests |
— | — | — | (10,353 | ) | |||||||||||
| Net loss applicable to common stockholders |
$ | (5,447 | ) | $ | (8,288 | ) | $ | (19,791 | ) | $ | (19,711 | ) | ||||
| Basic and diluted loss per share attributable to common stockholders |
$ | (.09 | ) | $ | (.14 | ) | $ | (.33 | ) | $ | (.33 | ) | ||||
| Basic and diluted weighted-average shares outstanding |
59,758 | 59,393 | 59,711 | 59,332 | ||||||||||||
See accompanying notes
3
INSIGHT COMMUNICATIONS COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
| Nine months ended September 30, |
||||||||
| 2004 |
2003 |
|||||||
| restated | ||||||||
| Operating activities: |
||||||||
| Net loss |
$ | (19,791 | ) | $ | (9,358 | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
180,381 | 171,936 | ||||||
| Impairment of investments |
— | 1,500 | ||||||
| Non-cash consulting expense |
45 | 45 | ||||||
| Loss (gain) on interest rate swaps |
(249 | ) | 1,201 | |||||
| Realized gain on sale of Liberate |
(386 | ) | — | |||||
| Loss (gain) on early extinguishments of debt |
127 | 2,616 | ||||||
| Settlement of put obligation |
— | (7,100 | ) | |||||
| Gain on settlement of programming contract |
— | (34,819 | ) | |||||
| Gain on cable systems exchange |
— | (26,992 | ) | |||||
| Minority interest |
877 | 7,778 | ||||||
| Provision for losses on trade accounts receivable |
13,803 | 9,712 | ||||||
| Contribution of stock to 401(k) Plan |
1,309 | 1,299 | ||||||
| Amortization of note discount |
25,942 | 24,624 | ||||||
| Benefit for income taxes |
(326 | ) | (2,392 | ) | ||||
| Changes in operating assets and liabilities, net of the effect of acquisitions: |
||||||||
| Trade accounts receivable |
(10,296 | ) | (7,704 | ) | ||||
| Launch fund receivable |
6,712 | (2,402 | ) | |||||
| Prepaid expenses and other assets |
2,620 | (7,673 | ) | |||||
| Accounts payable |
(7,146 | ) | 1,634 | |||||
| Accrued expenses and other liabilities |
34,097 | 47,427 | ||||||
| Net cash provided by operating activities |
227,719 | 171,332 | ||||||
| Investing activities: |
||||||||
| Purchase of fixed assets |
(130,895 | ) | (131,133 | ) | ||||
| Sale of fixed assets |
952 | — | ||||||
| Purchase of intangible assets |
(107 | ) | (815 | ) | ||||
| Purchase of investments |
(1,481 | ) | (980 | ) | ||||
| Purchase of Coaxial interests |
— | (10,321 | ) | |||||
| Sale of investments |
602 | — | ||||||
| Purchase of cable television systems, net |
— | (26,475 | ) | |||||
| Net cash used in investing activities |
(130,929 | ) | (169,724 | ) | ||||
| Financing activities: |
||||||||
| Distributions of preferred interests |
— | (11,554 | ) | |||||
| Net borrowings (repayment) of credit facilities |
(52,688 | ) | 187,000 | |||||
| Repayment of Coaxial notes |
— | (195,869 | ) | |||||
| Repurchase of senior discount notes | ||||||||