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As Of Filer Filing As/For/On Docs:Pgs Issuer Agent
8/14/06 Insight Midwest LP 10-Q 6/30/06 7:91 Merrill Corp-MD/FA
Insight Capital Inc
Document/Exhibit Description Pages Size 1: 10-Q Quarterly Report Pursuant to Sections 13 or 15(D) HTML 374K 2: EX-31.1 Certification per Sarbanes-Oxley Act (Section 302) HTML 11K 3: EX-31.2 Certification per Sarbanes-Oxley Act (Section 302) HTML 11K 4: EX-31.3 Certification per Sarbanes-Oxley Act (Section 302) HTML 11K 5: EX-31.4 Certification per Sarbanes-Oxley Act (Section 302) HTML 11K 6: EX-32.1 Certification per Sarbanes-Oxley Act (Section 906) HTML 9K 7: EX-32.2 Certification per Sarbanes-Oxley Act (Section 906) HTML 9K
UNITED STATES
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, 2006
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Commission file numbers |
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INSIGHT MIDWEST, L.P.
INSIGHT CAPITAL, INC.
(Exact name of registrants as specified in their charters)
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13-4079232 |
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Delaware |
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13-4079679 |
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(State or other jurisdiction of |
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(I.R.S. Employer |
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incorporation or organization) |
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Identification No.) |
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810 7th Avenue |
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New York, New York |
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10019 |
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(Address of principal executive offices) |
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(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 by check mark whether each registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer o |
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Accelerated filer o |
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Non-accelerated filer x |
Indicate by check mark whether the registrants are a shell company (as defined in Exchange Act Rule 12b-2). Yes o No x
Indicate the number of shares outstanding of each of the registrants’ classes of common stock, as of the latest practicable date.
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Insight Midwest, L.P. |
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—Not Applicable |
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Insight Capital, Inc. |
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—Not Applicable |
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, 2005.
1
INSIGHT
MIDWEST, LP
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
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June 30, |
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2005 |
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(unaudited) |
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Assets |
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Cash and cash equivalents |
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$ |
2,426 |
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$ |
24,853 |
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Investments |
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5,219 |
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4,701 |
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Trade accounts receivable, net of allowance for doubtful accounts of $813 and $1,079 as of June 30, 2006 and December 31, 2005 |
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24,824 |
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27,233 |
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Launch funds receivable |
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470 |
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974 |
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Prepaid expenses and other current assets |
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11,677 |
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8,860 |
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Total current assets |
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44,616 |
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66,621 |
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Fixed assets, net |
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1,121,244 |
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1,107,571 |
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Goodwill |
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14,684 |
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14,684 |
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Franchise costs |
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2,357,535 |
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2,357,535 |
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Deferred financing costs, net of accumulated amortization of $22,181 and $19,769 as of June 30, 2006 and December 31, 2005 |
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17,502 |
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19,910 |
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Other non-current assets |
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2,145 |
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1,582 |
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Total assets |
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$ |
3,557,726 |
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$ |
3,567,903 |
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Liabilities and partners’ capital |
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Accounts payable |
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$ |
42,003 |
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$ |
40,843 |
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Accrued expenses and other current liabilities |
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39,560 |
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38,535 |
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Accrued property taxes |
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13,287 |
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12,792 |
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Accrued programming costs (inclusive of $30,245 and $29,878 due to related parties as of June 30, 2006 and December 31, 2005) |
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46,654 |
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43,705 |
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Deferred revenue |
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2,804 |
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4,978 |
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Interest payable |
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20,601 |
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20,459 |
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Debt—current portion |
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83,500 |
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83,500 |
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Due to affiliates |
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58,398 |
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46,013 |
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Total current liabilities |
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306,807 |
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290,825 |
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Deferred revenue |
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1,066 |
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1,499 |
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Debt |
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2,413,414 |
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2,432,811 |
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Other non-current liabilities |
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5,207 |
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2,382 |
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Partners’ capital: |
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Deferred stock compensation |
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(459 |
) |
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(535 |
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Partners’ accumulated capital |
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831,691 |
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840,921 |
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Total partners’ capital |
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831,232 |
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840,386 |
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Total liabilities and partners’ capital |
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$ |
3,557,726 |
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$ |
3,567,903 |
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See accompanying notes
2
INSIGHT
MIDWEST, LP
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(dollars in thousands)
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Three months ended June 30, |
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Six months ended June 30, |
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2005 |
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2006 |
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2005 |
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Revenue |
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$ |
311,717 |
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$ |
279,278 |
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$ |
612,998 |
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$ |
548,605 |
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Operating costs and expenses: |
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Programming and other operating costs (exclusive of depreciation and amortization) (inclusive of $44,257 and $87,338, and $39,176 and $80,675 of programming expense incurred through related parties for the three and six months ended June 30, 2006 and 2005) |
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112,483 |
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92,325 |
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222,738 |
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191,098 |
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Selling, general and administrative (inclusive of $38 and $76, and $0 and $0 of stock-based compensation for the three and six months ended June 30, 2006 and 2005) |
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74,647 |
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59,588 |
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146,783 |
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117,016 |
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Management fees |
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9,345 |
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8,361 |
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18,383 |
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16,459 |
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Depreciation and amortization |
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66,016 |
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59,952 |
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128,969 |
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119,636 |
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Total operating costs and expenses |
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262,491 |
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220,226 |
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516,873 |
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444,209 |
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Operating income |
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49,226 |
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59,052 |
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96,125 |
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104,396 |
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Other income (expense): |
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Interest expense |
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(53,689 |
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(49,763 |
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(106,052 |
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(98,104 |
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Interest income |
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154 |
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565 |
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667 |
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670 |
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Other income |
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89 |
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599 |
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30 |
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691 |
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Total other expense, net |
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(53,446 |
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(48,599 |
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(105,355 |
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(96,743 |
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Net income (loss) |
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$ |
(4,220 |
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$ |
10,453 |
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$ |
(9,230 |
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$ |
7,653 |
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See accompanying notes
3
INSIGHT MIDWEST, LP
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Six Months Ended June 30, |
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2005 |
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Operating activities: |
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Net income (loss) |
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$ |
(9,230 |
) |
$ |
7,653 |
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Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
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Depreciation and amortization |
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128,969 |
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119,636 |
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Stock-based compensation |
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76 |
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— |
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Provision for losses on trade accounts receivable |
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7,026 |
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8,220 |
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Amortization of note discount |
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178 |
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162 |
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Gain on interest rate swaps |
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— |
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(812 |
) |
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Changes in operating assets and liabilities: |
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Trade accounts receivable |
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(4,617 |
) |
(1,065 |
) |
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Launch funds receivable |
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504 |
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2,194 |
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Prepaid expenses and other assets |
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(3,426 |
) |
(6,351 |
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Accounts payable |
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1,160 |
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11,608 |
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Interest payable |
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142 |
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42 |
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Accrued expenses and other liabilities |
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14,247 |
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(6,114 |
) |
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Net cash provided by operating activities |
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135,029 |
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135,173 |
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Investing activities: |
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Purchase of fixed assets |
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(140,687 |
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(90,112 |
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Sale of fixed assets |
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503 |
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957 |
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Purchase of investments |
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(518 |
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(1,307 |
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Net cash used in investing activities |
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(140,702 |
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(90,462 |
) |
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Financing activities: |
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Repayment of credit facilities |
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(41,750 |
) |
(41,750 |
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Net proceeds from borrowings under credit facility |
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25,000 |
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— |
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Other |
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(4 |
) |
— |
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Net cash used in financing activities |
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(16,754 |
) |
(41,750 |
) |
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Net increase (decrease) in cash and cash equivalents |
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(22,427 |
) |
2,961 |
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Cash and cash equivalents, beginning of period |
|
24,853 |
|
72,476 |
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Cash and cash equivalents, end of period |
|
$ |
2,426 |
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$ |
75,437 |
|
See accompanying notes
4
INSIGHT MIDWEST, LP
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.’s (“Insight Inc.”) cable television system joint venture with AT&T Broadband, LLC (now known as Comcast Cable Holdings, LLC (“Comcast Cable”)). We are owned 50% by Insight Communications Company, L.P. (“Insight LP”), which is wholly owned by Insight Inc., and 50% by an indirect subsidiary of Comcast Cable. Insight LP serves as our general partner and manages and operates our systems.
Through our wholly owned operating subsidiaries, Insight Communications Midwest, LLC (“Insight Communications Midwest”), Insight Communications of Central Ohio, LLC (“Insight Ohio”) and Insight Kentucky Partners II, L.P. (“Insight Kentucky”), we own and operate cable television systems in Indiana, Kentucky, Ohio, and Illinois which passed approximately 2.4 million homes and served approximately 1.3 million customers as of June 30, 2006.
The accompanying consolidated financial statements include the accounts of Insight Midwest Holdings, LLC, our wholly-owned subsidiary which owns 100% of the outstanding equity of our operating subsidiaries, and Insight Capital, Inc., our wholly-owned subsidiary formed for the sole purpose of being the co-issuer of our senior notes, which allows certain investors the ability to be holders of the debt.
Reclassifications have been made to the prior year’s financial statements to conform to those classifications used in 2006.
2. Responsibility for Interim Financial Statements
The accompanying unaudited consolidated financial statements 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 presentation 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 financial statements and notes to consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2005.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us 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, 2006 are not necessarily indicative of the results to be expected for the year ending December 31, 2006 or any other interim period.
5
INSIGHT MIDWEST, LP
NOTES TO CONSOLIDATED FINANCIAL