Insight Communications (ICCI) 10-Q 2006 Q2 Quarterly report

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

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	(I.R.S. Employer
incorporation or organization)	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 o

Indicate by check mark whether the 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): 

Large accelerated filer   o   Accelerated filer   x   Non-accelerated filer    o

Indicate by check mark whether the registrant is 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 issuer’s classes of common stock, as of the latest practicable date.    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, 2005.

1

INSIGHT COMMUNICATIONS COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share and per share amounts)

	June 30,		December 31,
	2006		2005
	unaudited
Assets
Cash and cash equivalents	$	4,586		$	29,782
Investments	6,419			5,901
Trade accounts receivable, net of allowance for doubtful accounts of $813 and $1,079 as of June 30, 2006 and December 31, 2005	24,839			27,261
Launch funds receivable	470			974
Prepaid expenses and other current assets	12,252			9,645
Total current assets	48,566			73,563
Fixed assets, net	1,143,174			1,130,705
Goodwill	72,430			72,430
Franchise costs	2,361,959			2,361,959
Deferred financing costs, net of accumulated amortization of $27,119 and $24,302 as of June 30, 2006 and December 31, 2005	21,406			24,220
Other non-current assets	2,836			2,287
Total assets	$	3,650,371		$	3,665,164
Liabilities and stockholders’ equity
Accounts payable	$	42,370		$	42,333
Accrued expenses and other current liabilities	47,132			45,413
Accrued property taxes	13,428			12,921
Accrued programming costs (inclusive of $30,245 and $29,878 due to related parties as of June 30, 2006 and December 31, 2005)	46,654			43,705
Deferred revenue	2,804			4,978
Interest payable	36,679			20,459
Debt—current portion	83,500			83,500
Total current liabilities	272,567			253,309
Deferred revenue	1,067			1,499
Debt	2,663,414			2,676,418
Other non-current liabilities	5,207			2,382
Minority interest	246,396			251,011

See accompanying notes

2

INSIGHT COMMUNICATIONS COMPANY, INC.
CONSOLIDATED BALANCE SHEETS (Continued)
(dollars in thousands, except share and per share amounts)

	June 30,			December 31,
	2006			2005
	unaudited
Stockholders’ equity:
Voting preferred stock, $.01 par value:
Series A—1,000,000 shares authorized; 848,945 shares issued and outstanding as of June 30, 2006 and December 31, 2005	8				8
Series B—1,000,000 shares authorized; 517,836 shares issued and outstanding as of June 30, 2006 and December 31, 2005	5				5
Non-voting preferred stock, $.01 par value:
Series C—15,000,000 shares authorized; 13,364,693 shares issued and outstanding as of June 30, 2006 and December 31, 2005	134				134
Series D—50,000,000 shares authorized; 47,015,659 shares issued and outstanding as of June 30, 2006 and December 31, 2005	470				470
Non-voting common stock, $.01 par value:
Series E—5,000,000 shares authorized; 3,665,747 and 0 shares issued and outstanding as of June 30, 2006 and December 31, 2005	37				—
Series F—100,000 shares authorized; 92,470 and 0 shares issued and outstanding as of June 30, 2006 and December 31, 2005	1				—
Voting common stock, $.01 par value:
Series G—10,000,000 shares authorized; 0 shares issued and outstanding as of June 30, 2006 and December 31, 2005	—				—
Additional paid-in-capital	829,342				829,337
Accumulated deficit	(364,913		)		(345,199		)
Deferred stock compensation	(3,364		)		(4,210		)
Total stockholders’ equity	461,720				480,545
Total liabilities and stockholders’ equity	$	3,650,371			$	3,665,164

See accompanying notes

3

INSIGHT COMMUNICATIONS COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(dollars in thousands)

	Three months ended June 30,								Six months ended June 30,
	2006				2005				2006			2005
Revenue		$	311,717			$	279,311		$	612,998		$	548,638
Operating costs and expenses:
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)		112,660				92,172			222,245			190,755
Selling, general and administrative (inclusive of $334 and $884, and $1,543 and $3,450 of stock-based compensation for the three and six months ended June 30, 2006 and 2005)		81,820				66,262			161,815			131,343
Depreciation and amortization		67,343				61,266			131,655			122,219
Total operating costs and expenses		261,823				219,700			515,715			444,317
Operating income		49,894				59,611			97,283			104,321
Other income (expense):
Interest expense		(61,208		)		(56,291		)	(122,283		)	(111,008		)
Interest income		369				761			881			1,023
Other income (expense)		20				543			(50		)	671
Total other expense, net		(60,819		)		(54,987		)	(121,452		)	(109,314		)
Income (loss) before minority interest and income taxes		(10,925		)		4,624			(24,169		)	(4,993		)
Minority interest income (expense)		2,110				(5,227		)	4,615			(3,827		)
Loss before income taxes		(8,815		)		(603		)	(19,554		)	(8,820		)
Provision for income taxes		(80		)		(125		)	(160		)	(250		)
Net loss		$	(8,895	)		$	(728	)	$	(19,714	)	$	(9,070	)

See accompanying notes

4

INSIGHT COMMUNICATIONS COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)

	Six months ended June 30,
	2006			2005
Operating activities:
Net loss	$	(19,714	)	$	(9,070	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	131,655			122,219
Stock-based compensation	884			3,450
Non-cash consulting expense	—			30
Gain on interest rate swaps	—			(812		)
Minority interest	(4,615		)	3,827
Provision for losses on trade accounts receivable	7,026			8,221
Contribution of stock to 401(k) Plan	—			1,434
Amortization of note discount	6,571			18,801
Changes in operating assets and liabilities:
Trade accounts receivable	(4,604		)	(1,065		)
Launch funds receivable	504			2,194
Prepaid expenses and other assets	(3,201		)	(8,206		)
Accounts payable	37			7,889
Interest payable	16,220			42
Accrued expenses and other liabilities	2,569			(5,727		)
Net cash provided by operating activities	133,332			143,227
Investing activities:
Purchase of fixed assets	(141,765		)	(93,513		)
Sale of fixed assets	504			957
Purchase of investments	(518		)	(1,307		)
Sale of investments	—			926
Net cash used in investing activities	(141,779		)	(92,937		)
Financing activities:
Repayment of credit facilities	(41,750		)	(41,750		)
Net proceeds from borrowings under credit facility	25,000			—
Other	1			—
Net cash used in financing activities	(16,749		)	(41,750		)
Net increase (decrease) in cash and cash equivalents	(25,196		)	8,540
Cash and cash equivalents, beginning of period	29,782			100,144
Cash and cash equivalents, end of period	$	4,586		$	108,684

See accompanying notes

5

INSIGHT COMMUNICATIONS COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Basis of Presentation

Through our wholly owned subsidiary, Insight Communications Company, L.P. (“Insight LP”), we own a 50% interest in Insight Midwest, L.P. (“Insight Midwest”), which through its operating subsidiaries, Insight Communications Midwest, LLC (“Insight Communications Midwest”), Insight Kentucky Partners II, L.P. (“Insight Kentucky”) and Insight Communications of Central Ohio, LLC (“Insight Ohio”), owns and operates 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.

Insight LP is the general partner of Insight Midwest. Through Insight LP, we manage all of Insight Midwest’s systems.

The accompanying consolidated financial statements include our accounts and those of our wholly owned subsidiaries, Insight LP and Insight Cable Services, LLC. 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

Our 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 our 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.

3. Recent Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment, (“SFAS 123R”). SFAS 123R establishes the accounting for transactions in which an entity pays for employee services in share-based payment transactions. SFAS 123R requires companies to recognize the cost of employee services received in exchange for awards of equity instruments, based on the grant date fair value of those awards, in the financial statements. The Company adopted SFAS 123R effective January 1, 2006 using the modified-prospective transition method. Under this method stock-based compensation is recognized for

6

INSIGHT COMMUNICATIONS COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. Recent Accounting Pronouncements (Continued)

awards granted in the period after adoption. Prior year financial statements are not restated. The adoption of this standard did not have a material impact on our consolidated financial statements.

In May 2005, FASB issued SFAS No. 154, Accounting Changes and Error Corrections. SFAS No. 154 replaces APB Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements and changes the requirements for the accounting for and reporting of a change in accounting principles. SFAS No. 154 applies to all voluntary changes in an accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. When a pronouncement includes specific provisions, those provisions should be followed. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning in 2006.

In July 2006, FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109, (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company is required to adopt the provisions of FIN 48 during the first fiscal year beginning after December 15, 2006. The Company is currently evaluating the impact of FIN 48 on our consolidated financial statements.

4. Stock-Based Compensation

For the three months ended June 30, 2006, the Company recorded $334,000 of stock-based compensation expense for the vesting of deferred shares.  For the six months ended June 30, 2006, the Company recorded $884,000 of stock-based compensation expense for the vesting of deferred shares and the issuance of Series E and F non-voting common stock. These expenses are included in selling, general and administrative expense on our consolidated statements of operations.

For the three and six months ended June 30, 2005, the Company accounted for stock-based compensation under Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees. Compensation cost related to stock awards issued to employees was recorded only if the grant-date market price of the underlying stock exceeded the exercise price. The following table summarizes relevant information as to our reported results under the intrinsic value method of accounting for stock awards, with supplemental information, as if a fair value method had been applied to all awards.

	Three Months Ended June 30,				Six Months Ended June 30,
	2005				2005
	(in thousands)
Net loss		$	(728	)		$	(9,070	)
Stock-based compensation as reported		1,543				3,450
Stock-based compensation determined under fair value based method for all awards, net of tax		(3,434		)		(7,210		)
Adjusted net loss		$	(2,619	)		$	(12,830	)

7

INSIGHT COMMUNICATIONS COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. Investments

Promptu

Promptu (formerly AgileTV Corporation) is a privately owned company that develops voice navigation services for television and mobile devices. On May 11, 2005, we made an additional investment in Promptu by purchasing shares of Promptu’s Series B1 preferred stock and common stock for an aggregate purchase price of (i) approximately $900,000 in cash and (ii) approximately $300,000 in the form of conversion of an outstanding promissory note. We are accounting for our investment in Promptu under the cost method. As of June 30, 2006 and December 31, 2005, our carrying value in this investment was $1.2 million.

Oxygen Cable, LLC

Oxygen Cable, LLC (“Oxygen”) is an independent cable television network with programming tailored to the interests of women. On July 9, 2002 we entered into a carriage agreement with Oxygen, whereby we agreed to carry programming content from Oxygen. The term of the carriage agreement expires on December 31, 2006.

Concurrently with the carriage agreement, we entered into an equity issuance agreement with Oxygen. The agreement calls for Oxygen to deliver to us shares having an aggregate fair market value as of December 31, 2005 of $3.8 million, and by December 1, 2006 deliver to us additional shares having an aggregate fair market value as of the December 31, 2005 valuation of $2.0 million. Pursuant to the equity issuance agreement, a portion of the monthly programming fees represent our equity investment in Oxygen. As of June 30, 2006 and December 31, 2005, our carrying value in this investment was $5.2 million and $4.7 million. We and Oxygen are currently in the process of negotiating the fair market value of Oxygen which will be used to determine the number of shares we will receive. As of June 30, 2006, no shares have been delivered to us.

6. Fixed Assets

	June 30,			December 31,
	2006			2005
	(in thousands)
Land, buildings and improvements	$	42,674		$	41,042
Cable system equipment	2,536,449			2,398,364
Furniture, fixtures and office equipment	22,698			21,352
	2,601,821			2,460,758
Less: accumulated depreciation and amortization	(1,458,647		)	(1,330,053		)
Total fixed assets, net	$	1,143,174		$	1,130,705

We recorded depreciation expense of $65.9 million and $128.8 million for the three and six months ended June 30, 2006 and $59.9 million and $119.6 million for the three and six months ended June 30, 2005.

8

INSIGHT COMMUNICATIONS COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. Debt

	June 30,			December 31,
	2006			2005
	(in thousands)
Insight Midwest Holdings Credit Facility	$	1,387,500			$	1,404,250
Insight Midwest 9¾% Senior Notes	385,000				385,000
Insight Midwest 10½% Senior Notes	630,000				630,000
Insight Inc. 12¼% Senior Discount Notes	350,000				350,000
	2,752,500				2,769,250
Net unamortized discount/premium on notes	(379		)		(6,950		)
Market value of interest rate swaps	(5,207		)		(2,382		)
Total debt	$	2,746,914			$	2,759,918

Insight Midwest Holdings Credit Facility

Insight Midwest Holdings, LLC, a wholly owned subsidiary of Insight Midwest, holds all of the outstanding equity of each of our operating subsidiaries and serves as borrower under a credit facility. On March 28, 2002, we loaned $100.0 million to Insight Midwest. The loan to Insight Midwest bears annual interest of 9%, compounded semi-annually, has a scheduled maturity date of January 31, 2011 and permits prepayments.  Insight Midwest Holdings is permitted under the credit facility to make distributions to Insight Midwest for the purpose of repaying our loan, including accrued interest, provided that there are no defaults existing under the credit facility. As of June 30, 2006 and December 31, 2005, the balance of the $100.0 million loan, including accrued interest, was $145.4 million and $139.1 million.

Insight Inc. 121¤4 % Senior Discount Notes

No cash interest on the discount notes accrued prior to February 15, 2006. Thereafter, cash interest on the discount notes began to accrue and is payable on February 15 and August 15 of each year, commencing August 15, 2006. The initial accreted value of the discount notes increased until February 15, 2006 such that the accreted value equaled the revised outstanding principal amount of $350.0 million on February 15, 2006.

Debt Principal Payments

As of June 30, 2006, the remaining principal payments required on our debt were as follows (in thousands):

2006	$	41,750
2007	83,500
2008	104,750
2009	1,542,500
2010	630,000
Thereafter	350,000
Total	$	2,752,500

9

INSIGHT COMMUNICATIONS COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. Derivative Instruments

We enter into derivative instruments, typically interest-rate swap agreements, to modify the interest characteristics of our outstanding debt to either a floating or fixed rate basis. These agreements involve fixed rate interest payments in exchange for floating rate interest receipts, known as cash flow hedges, and floating rate interest payments in exchange for fixed rate interest receipts, known as fair value hedges, over the life of the agreement without an exchange of the underlying principal amount. The differential to be paid or received is accrued as interest rates change and is recognized as an adjustment to interest expense related to the debt. The related amount payable or receivable is included in other non-current liabilities or assets.

Gains and losses related to fair value hedges that are determined to be effective hedges are recorded in the consolidated statements of operations as an adjustment to the swap instrument and an offsetting adjustment to the carrying value of the underlying debt. Gains and losses related to interest rate swaps that are determined not to be effective hedges and do not qualify for hedge accounting are recorded in our consolidated statements of operations as other income or expense.

Fair Value Hedges

In July 2003, we entered into three interest rate swap agreements whereby we swapped fixed rates under a tranche of our 10½% senior notes due in December 2010 for variable rates equal to six-month LIBOR, plus the applicable margin of approximately 8.3%, on $185.0 million notional value of debt. These agreements expired on November 1, 2005. We recorded a gain on these swaps of $1.1 million and $812,000 for the three and six months ended June 30, 2005, which is included in other income (expense).

In December 2003, we entered into an interest rate swap agreement whereby we swapped fixed rates under a different tranche of our 10½% senior notes due in December 2010 for variable rates equal to six-month LIBOR, plus the applicable margin of approximately 5.9%, on $130.0 million notional value of debt. This agreement expires November 1, 2010. This swap has been determined to be perfectly effective in hedging against fluctuations in the fair value of the underlying debt. As such, changes in the fair value of the underlying debt equally offset changes in the value of the interest rate swap in our consolidated balance sheets. The cost, if terminated, of this swap as of June 30, 2006 and December 31, 2005 was $5.2 million and $2.4 million and has been recorded in other non-current liabilities and as an adjustment to the carrying value of debt.

9. Minority Interest

As of June 30, 2006 and December 31, 2005 we had $246.4 million and $251.0 million of minority interest recorded in our consolidated balance sheets as temporary equity related to Insight Midwest.

The Insight Midwest partnership was formed in September 1999 to serve as the holding company and a financing vehicle for our cable television system 50/50 joint venture with an indirect subsidiary of AT&T Broadband (now known as Comcast Cable). The results of the partnership are included in our consolidated financial statements since we as general partner effectively control Insight Midwest’s operating and financial decisions. The partnership will continue until October 1, 2011 unless extended or terminated earlier in accordance with the provisions of the Insight Midwest partnership agreement.

Depending on the nature of a dissolution of the partnership, Insight Midwest will be required, in accordance with the partnership agreement, to either distribute to Comcast Cable some of its cable systems and liabilities equal to 50% of the net market value of the partnership or, in the event of a liquidation, an amount in cash equal to 50% of the net proceeds received.

10

INSIGHT COMMUNICATIONS COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10. Related Party Transactions

We purchase the majority of our programming through affiliates of Comcast Cable. Charges for such programming, including a 1½% administrative fee, were $44.3 million and $87.3 million for the three and six months ended June 30, 2006 and $39.2 million and $80.7 for the three and six months ended June 30, 2005. As of June 30, 2006 and December 31, 2005, $30.2 million and $29.9 million of accrued programming costs were due to affiliates of Comcast Cable. We believe that the programming rates charged through these affiliates are lower than those available from independent parties.

11. Commitments and Contingencies

Programming Contracts

We enter into long-term contracts with third parties who provide us with programming for distribution over our cable television systems. These programming contracts are a significant part of our business and represent a substantial portion of our operating costs. Since future fees under such contracts are based on numerous variables, including number and type of customers, we have not recorded any liabilities with respect to such contracts.

Litigation

Between March 7 and March 15, 2005, five purported class action lawsuits were filed in the Delaware Court of Chancery naming Insight Communications Company, Inc. and each of its directors as defendants. Three of the lawsuits also named The Carlyle Group as a defendant. The cases were subsequently consolidated under the caption In Re Insight Communications Company, Inc. Shareholders Litigation (Civil Action No. 1154-N), and, on April 11, 2005, a Consolidated Amended Complaint (“Complaint”) was filed against each director and The Carlyle Group. The Complaint alleges, among other things, that the defendant directors breached their fiduciary duties to our stockholders in connection with a proposal from Sidney R. Knafel, Michael Willner, together with certain related and other parties, and The Carlyle Group to acquire all of our outstanding, publicly-held Class A common stock. The Complaint also alleges that the proposed transaction violated our Charter and that The Carlyle Group aided and abetted the alleged fiduciary duty breaches. The Complaint seeks the certification of a class of our stockholders; a declaration that the proposed transaction violates our Charter; an injunction prohibiting the defendants from proceeding with the proposed transaction; rescission or other damages in the event the proposed transaction is consummated; an award of costs and disbursements including attorneys’ fees; and other relief.

On July 28, 2005, the parties to the action entered into a memorandum of understanding setting forth the terms of a proposed settlement of the litigation which, among other things, provides that the buyers shall proceed with the merger, subject to the terms and conditions of the merger agreement including the “majority of the minority” stockholder voting condition, and under which the defendants admit to no wrongdoing or fault. The memorandum of understanding contemplates certification of a plaintiff class consisting of all record and beneficial owners of our Class A common stock, other than the buyers, during the period beginning on and including March 6, 2005, through and including the date of the consummation of the merger, a dismissal of all claims with prejudice, and a release in favor of all defendants of any and all claims related to the merger. The proposed settlement is subject to a number of conditions, including consummation of the merger which closed on December 16, 2005, the plaintiffs’ approval of a definitive settlement agreement and final court approval of the settlement.

11

INSIGHT COMMUNICATIONS COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11. Commitments and Contingencies (Continued)

On May 11, 2006, the parties to the action filed a stipulation of settlement with the court. On May 19, 2006, the court entered a scheduling order setting a hearing on the proposed settlement for July 13, 2006. On or before June 6, 2006, the Notice of Pendency of Class Action, Proposed Settlement of Class Action and Settlement Hearing was mailed to our stockholders. On June 28, 2006, Kim D. Kelly, a former employee and officer, filed an objection to the proposed settlement. On July 13, 2006, the court convened the settlement hearing, and with the agreement of all of the parties to the action, the court adjourned the settlement hearing until September 25, 2006 to permit Ms. Kelly to review the existing discovery materials and conduct additional analysis.

In April 2005, Acacia Media Technologies Corporation filed a lawsuit against us and others in the United States District Court for the Southern District of New York. The complaint alleges, among other things, infringement of certain United States patents that allegedly relate to systems and methods for transmitting and/or receiving digital audio and video content. The complaint seeks injunctive relief and damages in an unspecified amount. In the event that a court ultimately determines that we infringe on any of the patents, we may be subject to substantial damages, which may include treble damages and/or an injunction that could require us to materially modify certain products and services that we currently offer to subscribers. We believe that the claims are without merit and intend to defend the action vigorously. The final disposition of this claim is not expected to have a material adverse effect on our consolidated financial position but could possibly be material to our consolidated results of operations of any one period. Further, at this time the outcome of the litigation is impossible to predict, and no assurance can be given that any adverse outcome would not be material to our consolidated financial position.

We are subject to various legal proceedings that arise in the ordinary course of business. While it is impossible to determine with certainty the ultimate outcome of these matters, it is our opinion that the resolution of these matters will not have a material adverse affect on our consolidated financial condition.

12

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement Regarding Forward-Looking Information

This quarterly report on Form 10-Q contains certain forward-looking statements with respect to the financial condition, results of operations, plans, objectives, future performance and business of our company, including, without limitation, statements preceded by, followed by or that include the words “believes,” “expects,” “anticipates,” “estimates” or similar expressions. We believe it is important to communicate management’s expectations to our investors. However, there may be events in the future that we are not able to accurately predict or over which we have no control. The risk factors listed in our Annual Report on Form 10-K for the year ended December 31, 2005, as well as any other cautionary language in this quarterly report, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. You should be aware that the occurrence of the events described in these risk factors and elsewhere in this quarterly report could have a material adverse effect on our business, operating results and financial condition. Examples of these risks include:

·All of the services offered by our company face a wide range of competition that could adversely affect our future results of operations;

·We have substantial debt and have significant interest payment requirements, which may adversely affect our ability to obtain financing in the future to finance our operations and our ability to react to changes in our business;

·There is uncertainty surrounding the potential dissolution of our joint venture with a subsidiary of Comcast Corporation;

·The terms of Insight Midwest’s indebtedness limits our ability to access the cash flow of Insight Midwest’s subsidiaries for debt service and any other purpose;

·We have a history of net losses and may not be profitable in the future;

·Our programming costs are substantial, and they are expected to increase; and

·General business conditions, economic uncertainty or slowdown, and the effects of governmental regulation could adversely affect our future results of operations.

We do not undertake any obligation to publicly update or release any revisions to these forward-looking statements to reflect events or circumstances after the date that this quarterly report is filed with the SEC or to reflect the occurrence of unanticipated events, except as required by law.

Overview

Our revenues are earned from customer fees for cable television video services including basic, premium, digital and pay-per-view services and ancillary services, such as rental of converters and remote control devices and installations. In addition, we earn revenues from providing high-speed Internet services, selling advertising, providing telephone services and commissions for products sold through home shopping networks.

Some of the principal reasons for our net losses through June 30, 2006 include i) depreciation and amortization associated with capital expenditures for the construction, expansion and maintenance of our systems, and, ii) interest costs on borrowed money. We expect to continue to report net losses for the foreseeable future. We cannot predict what impact, if any, continued losses will have on our ability to finance our operations in the future.

13

The following table is derived from our consolidated financial statements that are included in this report and sets forth certain statement of operations data for our consolidated operations:

	Three Months Ended June 30,						Six Months Ended June 30,
	2006			2005			2006			2005
	(in thousands)
Revenue	$	311,717		$	279,311		$	612,998		$	548,638
Operating costs and expenses:
Programming and other operating costs	112,660			92,172			222,245			190,755
Selling, general and administrative	81,820			66,262			161,815			131,343
Depreciation and amortization	67,343			61,266			131,655			122,219
Total operating costs and expenses	261,823			219,700			515,715			444,317
Operating income	49,894			59,611			97,283			104,321
Interest expense	61,208			56,291		��	122,283			111,008
Minority interest income (expense)	2,110			(5,227		)	4,615			(3,827		)
Net loss	(8,895		)	(728		)	(19,714		)	(9,070		)
Net cash provided by operating activities	46,807			67,148			133,332			143,227
Net cash used in investing activities	84,229			54,049			141,779			92,937
Net cash used in (provided by) financing activities	(4,125		)	20,875			16,749			41,750
Capital expenditures	84,136			54,788			141,765			93,513

Use of Adjusted Operating Income before Depreciation and Amortization and Free Cash Flow

We utilize Adjusted Operating Income before Depreciation and Amortization, (defined as operating income before depreciation, amortization and non-cash stock-based compensation) among other measures, to evaluate the performance of our businesses. Adjusted Operating Income before Depreciation and Amortization is considered an important indicator of the operational strength of our businesses and is a component of our annual compensation programs. In addition, our debt agreements use Adjusted Operating Income before Depreciation and Amortization, adjusted for certain non-recurring items, in our leverage and other covenant calculations. We also use this measure to determine how we will allocate resources and capital. Our management finds this measure helpful because it captures all of the revenue and ongoing operating expenses of our businesses and therefore provides a means to directly evaluate the ability of our business operations to generate returns and to compare operating capabilities across our businesses. This measure is also used by equity and fixed income research analysts in their reports to investors evaluating our businesses and other companies in the cable television industry. We believe Adjusted Operating Income before Depreciation and Amortization is useful to investors because it enables them to assess our performance in a manner similar to the methods used by our management and provides a measure that can be used to analyze, value and compare companies in the cable television industry, which may have different depreciation, amortization and stock-based compensation policies.

A limitation of Adjusted Operating Income before Depreciation and Amortization, however, is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in our businesses. Management evaluates the costs of such tangible and intangible assets through other financial measures such as capital expenditures, investment spending and Free Cash Flow. Management also evaluates the costs of capitalized tangible and intangible assets by analyzing returns provided on the capital dollars deployed. Another limitation of Adjusted Operating Income before Depreciation and Amortization is that it does not reflect income net of interest expense, which is a significant expense for us because of the substantial debt we incurred to acquire cable television systems and finance capital expenditures to upgrade our cable network. Management evaluates the impact of interest expense through measures including interest expense, Free Cash Flow, the returns analysis discussed above and debt service covenant ratios under our credit facility.

14

Free Cash Flow is net cash provided by operating activities (as defined by accounting principles generally accepted in the United States) less capital expenditures. Free Cash Flow is considered to be an important indicator of our liquidity, including our ability to repay indebtedness. We believe Free Cash Flow is useful for investors because it enables them to assess our ability to service our debt and to fund continued growth with internally generated funds in a manner similar to the methods used by our management, and provides a measure that can be used to analyze, value and compare companies in the cable television industry.

Both Adjusted Operating Income before Depreciation and Amortization and Free Cash Flow should be considered in addition to, not as a substitute for, Operating Income, Net Income and various cash flow measures (e.g., Net Cash Provided by Operating Activities), as well as other measures of financial performance and liquidity reported in accordance with accounting principles generally accepted in the United States.

Reconciliation of Net Loss to Adjusted Operating Income before Depreciation and Amortization

The following table reconciles Net Loss to Adjusted Operating Income before Depreciation and Amortization. In addition, the table provides the components from Net Loss to Operating Income.

	Three Months Ended June 30,						Six Months Ended June 30,
	2006			2005			2006			2005
	(in thousands)
Net loss	$	(8,895	)	$	(728	)	$	(19,714	)	$	(9,070	)
Provision for income taxes	80			125			160			250
Loss before income taxes	(8,815		)	(603		)	(19,554		)	(8,820		)
Minority interest income (expense)	(2,110		)	5,227			(4,615		)	3,827
Income (loss) before minority interest and income taxes	(10,925		)	4,624			(24,169		)	(4,993		)
Other (income) expense:
Other	(20		)	(543		)	50			(671		)
Interest income	(369		)	(761		)	(881		)	(1,023		)
Interest expense	61,208			56,291			122,283			111,008
Total other expense, net	60,819			54,987			121,452			109,314
Operating income	49,894			59,611			97,283			104,321
Depreciation and amortization	67,343			61,266			131,655			122,219
Stock-based compensation	334			1,543			884			3,450
Adjusted Operating Income before Depreciation and Amortization	$	117,571		$	122,420		$	229,822		$	229,990

15

Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow

The following table provides a reconciliation from net cash provided by operating activities to Free Cash Flow. In addition, the table provides the components from net cash provided by operating activities to operating income.

	Three Months Ended June 30,							Six Months Ended June 30,
	2006				2005			2006			2005
	(in thousands)
Operating income		$	49,894		$	59,611		$	97,283		$	104,321
Depreciation and amortization		67,343			61,266			131,655			122,219
Stock-based compensation		334			1,543			884			3,450
Adjusted Operating Income before Depreciation and Amortization		117,571			122,420			229,822			229,990
Changes in working capital accounts(1)		5,758			(1,151		)	3,672			5,577
Cash paid for interest		(76,384		)	(54,036		)(2)	(99,471		)	(92,118		)
Cash paid for taxes		(138		)	(85		)	(691		)	(222		)
Net cash provided by operating activities		46,807			67,148			133,332			143,227
Capital expenditures		(84,136		)	(54,788		)	(141,765		)	(93,513		)
Free Cash Flow		$	(37,329	)	$	12,360		$	(8,433	)	$	49,714

(1)Changes in working capital accounts are based on the net cash changes in current assets and current liabilities, excluding charges related to interest and taxes and other non-cash expenses.

(2)Excludes bond interest payments due April 1, 2005 that were made on March 31, 2005. Had the payments been made on April 1, 2005, Free Cash Flow for the three months ended June 30, 2005 would have been ($6,409).

Results of Operations

Three Months Ended June 30, 2006 Compared to Three Months Ended June 30, 2005

Revenue for the three months ended June 30, 2006 totaled $311.7 million, an increase of 12% over the prior year, due primarily to customer gains in all services, as well as video rate increases. High-speed Internet service revenue increased 27% over the prior year, which was attributable to an increased customer base and was partially offset by lower average revenue per customer due to promotional discounts. We added a net 19,700 high-speed Internet customers during the quarter to end at 534,500 customers.

Basic cable service revenue increased 7% due to an increased customer base and video rate increases, partially offset by promotional discounts. Historically, we have experienced a seasonal decline in basic customers during the second quarter primarily as a result of students leaving the university communities we serve. In addition, digital service revenue increased 23% over the prior year due to an increased customer base. We added a net 11,700 digital customers during the quarter to end at 572,200 customers.

We are increasing our customer growth and retention efforts by increasing spending on sales and marketing efforts, emphasizing bundling and enhancing and differentiating our video services by providing video-on-demand, high definition television and digital video recorders. We are also continuing to focus on improving customer satisfaction through higher service levels and increased education of product offerings.

16

Revenue by service offering was as follows for the three months ended June 30 (dollars in thousands):

	Revenue by Service Offering
	Three Months Ended June 30, 2006			% of Total Revenue			Three Months Ended June 30, 2005			% of Total Revenue			% Change in Revenue
Basic		$	160,328		51.5	%		$	150,071		53.7	%		6.8	%
High-Speed Internet		58,616			18.8	%		46,318			16.6	%		26.6	%
Digital		34,307			11.0	%		27,838			10.0	%		23.2	%
Advertising		20,020			6.4	%		19,749			7.1	%		1.4	%
Premium		13,852			4.4	%		13,746			4.9	%		0.8	%
Telephone		12,528			4.0	%		8,387			3.0	%		49.4	%
Franchise fees		7,384			2.4	%		7,782			2.8	%		-5.1	%
Other		4,682			1.5	%		5,420			1.9	%		-13.6	%
Total		$	311,717		100.0	%		$	279,311		100.0	%		11.6	%

Total Customer Relationships were 1,375,100 as of June 30, 2006, an increase of 59,700 from 1,315,400 as of June 30, 2005. Total Customer Relationships represent the number of customers who receive one or more of our products (i.e., basic cable, high-speed Internet or telephone) without regard to which product they purchase. Total Revenue Generating Units (“RGUs”) which represent the sum of basic, digital, high-speed Internet and telephone customers, as of June 30, 2006 increased 15% as compared to June 30, 2005. RGUs by category were as follows (in thousands):

	June 30, 2006		June 30, 2005
Basic		1,302.4		1,257.2
Digital		572.2		460.8
High-Speed Internet		534.5		391.3
Telephone		107.2		73.5
Total RGUs		2,516.3		2,182.8

Average monthly revenue per basic customer was $79.65 for the three months ended June 30, 2006 compared to $73.64 for the three months ended June 30, 2005. This primarily reflects the continued growth of high-speed Internet and digital product offerings in all markets, as well as video rate increases.

Programming and other operating costs increased $20.5 million, or 22%. Increases in customers and substantial increases in programming rates were significant drivers of the cost increase for the three months ended June 30, 2006. For the three months ended June 30, 2005 our programming costs reflected certain programming credits. These credits resulted from favorable resolution of pricing negotiations related to certain prior period programming costs that were accrued at a higher rate than the amount actually paid. Programming credits for the three months ended June 30, 2006, were significantly lower, causing our overall programming cost increases to be greater. In addition, direct operating costs increased due to an increase in our high-speed Internet service costs as we continued to transition our Internet services in-house. Other operating costs increased primarily as a result of increases in repair, maintenance and warranty costs; an increase in taxes due to a change in the tax law in Kentucky; and an increase in installation labor due to increased customer activity.

Selling, general and administrative expenses increased $15.6 million, or 23%, primarily due to increased payroll, payroll related costs and temporary help associated with an increase in the number of employees and salary increases for existing employees. Marketing expenses increased over the prior year to support the continued rollout of high-speed Internet, digital and telephone products, and to grow our core video customer base. Customer billing and collection fees increased due to the increase in our customer

17

base. Professional fees also increased due to increased legal activity for the three months ended June 30, 2006.

Depreciation and amortization expense increased $6.1 million, or 10%, primarily as a result of additional capital expenditures through June 30, 2006. These expenditures were primarily for purchases of customer premise equipment, installation materials, capitalized labor, headend equipment and network extensions, all of which we consider necessary in order to continue to maintain and grow our customer base and expand our service offerings. Partially offsetting this increase was a decrease in depreciation expense related to certain assets that have become fully depreciated since June 30, 2005.

As a result of the factors discussed above, Adjusted Operating Income before Depreciation and Amortization decreased $4.8 million to $117.6 million, a decrease of 4% over the prior year’s second quarter.

Interest expense increased $4.9 million, or 9%, due to i) higher interest rates, which averaged 8.9% for the three months ended June 30, 2006, as compared to 8.1% for the three months ended June 30, 2005, and ii) additional interest expense on the now fully accreted 12¼% Senior Discount Notes.

Six Months Ended June 30, 2006 Compared to Six Months Ended June 30, 2005

Revenue for the six months ended June 30, 2006 totaled $613.0 million, an increase of 12% over the prior year, due primarily to customer gains in all services, as well as video rate increases. High-speed Internet service revenue increased 30% over the prior year, which was attributable to an increased customer base and was partially offset by lower average revenue per customer due to promotional discounts. We added a net 64,100 high-speed Internet customers during the six months ended June 30, 2006 to end at 534,500 customers.

Basic cable service revenue increased 7% due to an increased customer base and video rate increases, partially offset by promotional discounts. In addition, digital service revenue increased 21% over the prior year due to an increased customer base. We added a net 53,400 digital customers during the six months ended June 30, 2006 to end at 572,200 customers.

Revenue by service offering was as follows for the six months ended June 30 (dollars in thousands):

	Revenue by Service Offering
	Six Months						Six Months
	Ended						Ended
	June 30,			% of Total			June 30,			% of Total			% Change
	2006			Revenue			2005			Revenue			in Revenue
Basic		$	318,535		52.0	%		$	297,703		54.3	%		7.0	%
High-Speed Internet		115,113			18.8	%		88,431			16.1	%		30.2	%
Digital		66,030			10.8	%		54,599			10.0	%		20.9	%
Advertising		37,717			6.2	%		36,737			6.7	%		2.7	%
Premium		27,246			4.4	%		28,090			5.1	%		-3.0	%
Telephone		23,883			3.9	%		16,119			2.9	%		48.2	%
Franchise fees		14,738			2.4	%		15,202			2.8	%		-3.1	%
Other		9,736			1.5	%		11,757			2.1	%		-17.2	%
Total		$	612,998		100.0	%		$	548,638		100.0	%		11.7	%

Average monthly revenue per basic customer was $78.77 for the six months ended June 30, 2006 compared to $72.17 for the six months ended June 30, 2005. This primarily reflects the continued growth of high-speed Internet and digital product offerings in all markets, as well as video rate increases.

18

Programming and other operating costs increased $31.5 million, or 17%. Increases in customers and substantial increases in programming rates were significant drivers of the cost increase for the six months ended June 30, 2006. In addition, direct operating costs increased due to an increase in our high-speed Internet service costs. This increase is primarily attributable to the growth in our high-speed Internet customer base and the payment of contractually obligated and other one-time transition costs to bring Internet services in-house. Other operating costs increased primarily as a result of increases in repair, maintenance and warranty costs; an increase in taxes due to a change in the tax law in Kentucky; an increase in utility related expenses; and an increase in installation labor due to increased customer activity.

Selling, general and administrative expenses increased $30.5 million, or 23%, primarily due to increased payroll, payroll related costs, temporary help and travel and entertainment expenses associated with an increase in the number of employees and salary increases for existing employees. Marketing expenses increased over the prior year to support the continued rollout of high-speed Internet, digital and telephone products, and to grow our core video customer base. Customer billing and collection fees increased due to the increase in our customer base. Professional fees also increased due to increased legal activity for the six months ended June 30, 2006.

Depreciation and amortization expense increased $9.4 million, or 8.0%, primarily as a result of additional capital expenditures through June 30, 2006. These expenditures were primarily for purchases of customer premise equipment, installation materials, capitalized labor, headend equipment and network extensions, all of which we consider necessary in order to continue to maintain and grow our customer base and expand our service offerings. Partially offsetting this increase was a decrease in depreciation expense related to certain assets that have become fully depreciated since June 30, 2005.

As a result of the factors discussed above, Adjusted Operating Income before Depreciation and Amortization decreased $200,000 to $229.8 million.

Interest expense increased $11.3 million, or 10%, due to i) higher interest rates, which averaged 8.9% for the six months ended June 30, 2006, as compared to 7.9% for the six months ended June 30, 2005, and ii) additional interest expense on the now fully accreted 12 ¼% Senior Discount Notes.

Liquidity and Capital Resources

Our business requires cash for operations, debt service and capital expenditures. The cable television business has substantial ongoing capital requirements for the construction, expansion and maintenance of its broadband networks and provision of new services. In the past, expenditures have been made for various purposes, including the upgrade of the existing cable network, and will continue to be made for network extensions, installation of new services, customer premise equipment (e.g., set-top boxes), deployment of new product and service offerings, and, to a lesser extent, network upgrades. Historically, we have been able to meet our cash requirements with cash flow from operations, borrowings under our credit facilities and issuances of private and public debt and equity.

Cash provided by operations for the six months ended June 30, 2006 and 2005 was $133.3 million and $143.2 million. The decrease was primarily attributable to an increase in our net loss partially offset by the timing of cash receipts and payments related to our working capital accounts.

Cash used in investing activities for the six months ended June 30, 2006 and 2005 was $141.8 million and $92.9 million. The increase primarily was due to increases in capital expenditures. For the six months ended June 30, 2006 and 2005, Insight spent $141.8 million and $93.5 million in capital expenditures. These expenditures principally constituted purchases of customer premise equipment, capitalized labor, installation materials, headend equipment and system upgrades and rebuilds, all of which are necessary to maintain Insight’s existing network, grow its customer base and expand its service offerings.

19

Cash used in financing activities for the six months ended June 30, 2006 and 2005 was $16.7 million and $41.8 million. The decrease was due to $25.0 million in net proceeds from borrowings under our credit facility for the three months ended June 30, 2006.

Free Cash Flow for the six months ended June 30, 2006 totaled ($8.4) million, compared to $49.7 million for the six months ended June 30, 2005. This decrease in Free Cash Flow of $58.1 million was primarily driven by the following:

·A $48.3 million increase in capital expenditures;

·A $7.4 million increase in cash interest expense paid primarily driven by an increase in interest rates;

·A $3.7 million source of Free Cash Flow for the six months ended June 30, 2006 compared to a $5.6 million source for the six months ended June 30, 2005 from changes in working capital accounts; and

·A $500,000 increase in cash taxes paid.

We believe that the Insight Midwest Holdings credit facility, cash on-hand and our cash flow from operations are sufficient to support our current operating plan. We had the ability to draw upon $231.4 million of unused availability under the Insight Midwest Holdings credit facility as of June 30, 2006 to fund any shortfall resulting from the inability of Insight Midwest’s cash from operations to fund its capital expenditures, meet its debt service requirements, including mandatory redemptions, or otherwise fund its operations. We expect to use any available Free Cash Flow to repay our indebtedness.

We have a substantial amount of debt. Our high level of debt could have important consequences for you. Our investments in our operating subsidiaries, including Insight Midwest, constitute substantially all of our operating assets. Consequently, our subsidiaries conduct all of our consolidated operations and own substantially all of our operating assets. Our principal source of cash we need to pay our obligations and to repay the principal amount of our debt obligations is the cash that our subsidiaries generate from their operations and their borrowings. Our subsidiaries are not obligated to make funds available to us and are restricted by the terms of their indebtedness from doing so. Because of such restrictions, our ability to access the cash flow of our subsidiaries may be contingent upon our ability to refinance the debt of our subsidiaries. As of June 30, 2006 we were in compliance with all covenants under our credit agreement.

The following table summarizes our contractual obligations and commitments, excluding interest and commitments for programming, as of June 30, 2006 (in thousands):

	Contractual Obligations
	Long-Term		Operating
	Debt		Leases			Total
2006	$	41,750		$	2,592	$	44,342
2007	83,500			3,976		87,476
2008	104,750			3,364		108,114
2009	1,542,500			2,407		1,544,907
2010	630,000			621		630,621
Thereafter	350,000			1,408		351,408
Total cash obligations	$	2,752,500		$	14,368	$	2,766,868

Item 3.Quantitative and Qualitative Disclosure About Market Risk

Our revolving credit and term loan agreements bear interest at floating rates. Accordingly, we are exposed to potential losses related to changes in interest rates. In order to manage our exposure to interest rate risk, we enter into derivative financial instruments, typically interest rate swaps. The counter-parties to our

20

swap agreements are major financial institutions. We do not enter into derivatives or other financial instruments for trading or speculative purposes.

The aggregate fair market value and aggregate carrying value of our 9¾% and 10½% senior notes and 12¼% senior discount notes was $1.4 billion as of June 30, 2006. The fair market value of our credit facility borrowings approximates its carrying value as the credit facility borrowings bear interest at floating rates of interest. As of June 30, 2006 and December 31, 2005, the cost, if terminated, of our interest rate swap agreement was $5.2 million and $2.4 million and is reflected in our financial statements as an other non-current liability.

Item 4.Controls and Procedures

Our management carried out an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of June 30, 2006. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that (i) our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission, and (ii) our disclosure controls and procedures were designed to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

There has not been any change in our internal control over financial reporting in connection with the evaluation required by Rule 13a-15(d) or 15d-15(d) under the Exchange Act that occurred during the quarter ended June 30, 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

21

PART II.    OTHER INFORMATION

Item 1.Legal Proceedings

See Note 11 in Item 1 of PART I, Notes to Consolidated Financial Statements.

Item 1A.Risk Factors

There have been no material changes in our risk factors from those disclosed in our annual report on Form 10-K for the year ended December 31, 2005.

Item 4.Submission of Matters of a Vote of Security Holders

On May 2, 2006, the holders of all of the outstanding shares of our Series A voting preferred stock and Series B voting preferred stock took action by written consent to elect Michael S. Willner, Dinni Jain and James A. Atwood, Jr. as Class I directors to serve for a term that will expire upon the annual election of directors in 2009.

Item 6.Exhibits

Exhibits:

31.1	Rule 13a-14(a)/15d-14(a) Certifications of the Chief Executive Officer of Insight Communications Company, Inc.
31.2	Rule 13a-14(a)/15d-14(a) Certifications of the Chief Financial Officer of Insight Communications Company, Inc.
32	Section 1350 Certifications

22

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date:    August 9, 2006	INSIGHT COMMUNICATIONS COMPANY, INC.
	By:	/s/ JOHN ABBOT
		John Abbot
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)

23