PRO FORMA FINANCIAL STATEMENTS
The following table sets forth selected pro forma financial information and
other data of the Indiana and Kentucky systems and pro forma adjusted financial
information for the Indiana and Kentucky systems which have been adjusted to
illustrate the estimated effects of the following transactions as if they had
occurred on January 1, 1998:
o the formation of Insight Indiana and related contributions of systems by
affiliates of AT&T Broadband & Internet Services and Insight
Communications on October 31, 1998;
o the acquisition by Insight Midwest of the Kentucky systems;
o our receipt of the net proceeds from the sale of the notes; and
o the application of the net proceeds from this offering to repay the
subordinated term loans of Insight Kentucky.
The pro forma statement of operations does not purport to be indicative of
what our results of operations would actually have been had the above
transactions been completed on the dates indicated or to project our results of
operations for any future date. When you read the pro forma statement of
operations, it is important that you read along with it our combined historical
financial statements and related notes, and the historical financial statements
and related notes of the TCI Insight Systems, which are the systems contributed
to Insight Indiana by affiliates of AT&T Broadband & Internet Services, TCI IPVI
Systems, which are the Kentucky systems prior to April 30, 1998, and InterMedia
Capital Partners VI, L.P., which are the Kentucky systems subsequent to
April 30, 1998, which are included elsewhere in this offering memorandum.
The data included in the pro forma statement of operations for the six
months ended June 30, 1999 under the column heading "Indiana (as reported)"
represents the operating results of Insight Indiana for the six months ended
June 30, 1999. The data included in the pro forma statement of operations for
the six months ended June 30, 1999 under the column heading "Kentucky (as
reported)" represents the operating results of InterMedia Capital Partners VI,
L.P. for the six months ended June 30, 1999.
The data included in the pro forma statement of operations for the year
ended December 31, 1998 under the column headings "Noblesville, Jeffersonville,
Lafayette Systems 1/1/98 through 10/31/98," "TCI Insight Systems 1/1/98 through
10/31/98," "Insight Indiana Systems 11/1/98 through 12/31/98" and "Kentucky (as
reported)" represent:
o Noblesville, Jeffersonville, Lafayette Systems 1/1/98 through 10/31/98:
o ten months of operating results of the Insight Systems contributed
to Insight Indiana.
o TCI Insight Systems 1/1/98 through 10/31/98:
o ten months of operating results of the TCI Insight Systems
contributed to Insight Indiana which includes ten months of the
Evansville and Jasper systems acquired by Insight Communications
from affiliates of AT&T Broadband & Internet Services and
contributed to Insight Indiana.
o Insight Indiana Systems 11/1/98 through 12/31/98:
o two months of operating results of the Insight Indiana Systems from
the date of the LLC's inception (November 1, 1998) through
December 31, 1998, which includes the Noblesville, Jeffersonville
and Lafayette systems and the TCI Insight systems.
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o Kentucky (as reported):
o the operating results of the TCI IPVI Systems for the period from
January 1, 1998 through April 30, 1998 and the operating results of
InterMedia Capital Partners VI, L.P. for the period from April 30,
1998 through December 31, 1998.
The data included in the pro forma balance sheet as of June 30, 1999 under
the column heading "Kentucky (as reported)" represents the assets and
liabilities of InterMedia Capital Partners VI, L.P.
The financial data of the Kentucky systems represents the combination of
the results of TCI IPVI Systems from January 1, 1998 through April 30, 1998 and
InterMedia Capital Partners VI, L.P. from April 30, 1998 through December 31,
1998. The combination of the two periods is not necessarily indicative of what
the results of InterMedia Capital Partners VI, L.P. or TCI IPVI would have been
for the 1998 calendar year.
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INSIGHT MIDWEST, L.P.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(IN THOUSANDS)
INDIANA INDIANA KENTUCKY
(AS REPORTED) ADJUSTMENTS (AS ADJUSTED) (AS REPORTED) ADJUSTMENTS
------------- ----------- ------------- ------------- -----------
Revenues..................................... $ 71,744 $ -- $ 71,744 $ 103,532 $ --
Costs & expenses:
Programming and other operating costs...... 20,177 -- 20,177 34,260 --
Selling, general and administrative........ 15,865 -- 15,865 23,286 --
Depreciation and amortization.............. 43,440 -- 43,440 60,314 9,382 (A)
--------- ------- --------- --------- ---------
Operating loss............................... (7,738) -- (7,738) (14,328) (9,382)
Other income (expenses):
Gain on cable system exchange.............. 3,900 (3,900)(B) -- 5,013 (5,013)(B)
Interest income (expense).................. (16,767) -- (16,767) (28,306) --
Other income (expense)..................... 21 -- 21 233 --
--------- ------- --------- --------- ---------
Income (loss) from continuing operations..... $ (20,584) $(3,900) $ (24,484) $ (37,388) $ (14,395)
--------- ------- --------- --------- ---------
--------- ------- --------- --------- ---------
KENTUCKY OTHER
(AS ADJUSTED) SUB TOTAL ADJUSTMENTS TOTAL
------------- --------- ----------- --------
Revenues..................................... $ 103,532 $175,276 $ -- $175,276
Costs & expenses:
Programming and other operating costs...... 34,260 54,437 -- 54,437
Selling, general and administrative........ 23,286 39,151 -- 39,151
Depreciation and amortization.............. 69,696 113,136 -- 113,136
--------- --------- ------- --------
Operating loss............................... (23,710) (31,448) -- (31,448)
Other income (expenses):
Gain on cable system exchange.............. -- -- -- --
Interest income (expense).................. (28,306) (45,073) (2,584)(C) (47,895)
(238)(D)
Other income (expense)..................... 233 254 -- 254
--------- --------- ------- --------
Income (loss) from continuing operations..... $ (51,783) $(76,267) $(2,822) $(79,089)
--------- --------- ------- --------
--------- --------- ------- --------
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NOTES TO PRO FORMA STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30,
1999
(A) Includes additional amortization related to step-up in value of the
intangible assets of the Kentucky systems of $281.4 million over a period
of fifteen years. Such amortization schedule is applied based upon the
recently rebuilt system plant coupled with the remaining attractive terms
of the franchises, in addition to the lack of competition. The preliminary
purchase price has been allocated to franchise rights. The purchase price
allocation will be finalized upon completion of our acquisition of the
Kentucky systems and receipt of appraisal reports. However, we do not
believe that any adjustment resulting from the final allocation of purchase
price will be material.
(B) Eliminates gains from cable system exchanges.
(C) Reflects the net increase in interest expense related to the retirement of
approximately $178.0 million of the subordinated term loans of Insight
Kentucky and the issuance of the notes.
(D) Includes the elimination of amortization of deferred financing costs from
the retirement of the subordinated term loans of Insight Kentucky and the
recording of amortization of the estimated financing costs for the notes.
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INSIGHT MIDWEST, L.P.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
NOBLESVILLE,
JEFFERSONVILLE, INSIGHT INDIANA
LAFAYETTE TCI INSIGHT SYSTEMS
SYSTEMS 1/1/98 SYSTEMS 11/1/98
THROUGH 1/1/98 THROUGH THROUGH KENTUCKY
10/31/98 10/31/98 12/31/98 ADJUSTMENTS SUBTOTAL (AS REPORTED)*
-------------- -------------- -------------- ----------- -------- --------------
Revenues.................. $ 33,486 $ 80,357 $ 23,925 $ -- $137,768 $195,507
Costs & expenses:
Programming and other
operating costs....... 9,028 24,375 6,206 -- 39,609 65,328
Selling, general and
administrative........ 5,203 14,892 4,653 -- 24,748 44,416
Depreciation and
amortization.......... 10,790 12,223 13,998 41,158 (A) 78,169 103,514
-------- -------- -------- --------- -------- --------
Operating loss............ 8,465 28,867 (932) (41,158) (4,758) (17,751)
Other income (expenses):
Interest income
(expense)............. -- -- (5,824) (25,671)(B) (31,495) (45,038)
Other income (expense).. (27) (159) (64) -- (250) 1,370
-------- -------- -------- --------- -------- --------
Income (loss) before
income taxes............ 8,438 28,708 (6,820) (66,829) (36,503) (61,419)
Income taxes.............. -- (9,969) -- 9,969 (C) -- (1,971)
-------- -------- -------- --------- -------- --------
Income (loss) from
continuing operations... $ 8,438 $ 18,739 $ (6,820) $ (56,860) $(36,503) $(63,390)
-------- -------- -------- --------- -------- --------
-------- -------- -------- --------- -------- --------
KENTUCKY OTHER
ADJUSTMENTS (AS ADJUSTED) SUBTOTAL ADJUSTMENTS TOTAL
----------- ------------- --------- ----------- ---------
Revenues.................. $ -- $ 195,507 $ 333,275 $ -- $ 333,275
Costs & expenses:
Programming and other
operating costs....... -- 65,328 104,937 -- 104,937
Selling, general and
administrative........ -- 44,416 69,164 -- 69,164
Depreciation and
amortization.......... 18,764 (D) 122,278 200,447 -- 200,447
--------- --------- --------- --------- ---------
Operating loss............ (18,764) (36,515) (41,273) -- (41,273)
Other income (expenses):
Interest income
(expense)............. -- (45,038) (76,533) (5,519 )(E) (82,595)
(543 )(F)
Other income (expense).. -- 1,370 1,120 -- 1,120
--------- --------- --------- --------- ---------
Income (loss) before
income taxes............ (18,764) (80,183) (116,686) (6,062) (122,748)
Income taxes.............. 1,971 (C) -- -- -- --
--------- --------- --------- --------- ---------
Income (loss) from
continuing operations... $ (16,793) $ (80,183) $(116,686) $ (6,062) $(122,748)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
- ------------------
* The financial data of Kentucky represents the combination of the results of
the TCI IPVI Systems from January 1, 1998 through April 30, 1998 and
Intermedia Capital Partners VI, L.P. from April 30, 1998 through December 31,
1998. The combination of the two periods is not necessarily indicative of what
the results of Intermedia Capital Partners VI, L.P. or TCI IPVI would have
been for the full year.
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NOTES TO PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED
DECEMBER 31, 1998
(A) Includes additional depreciation and amortization related to step-up in
value of the Insight Indiana systems for ten months which is based upon
the purchase price allocation and is calculated as follows: Step
up--$245.2 million divided by five year average remaining useful life of
assets multiplied by ten-twelfths. Such amortization schedule is applied
based upon the relative age of the system plant, the need to invest to
provide new services, the need to renew franchises, and as part of the
renewals, the need to commit to invest in the system plant and for some
franchises, the presence of other franchises.
(B) Adjusts interest expense related to the following: (1) $214.5 million of
contributed debt of AT&T Broadband and Internet Services at an annual
interest rate of 8.2%, which is the effective interest rate of Indiana's
credit facility, as if such contribution had occurred on January 1, 1998;
and (2) allocated interest expense from Insight Communications Company,
L.P. of approximately $8.1 million related to the Noblesville,
Jeffersonville, and Lafayette systems.
(C) No provision has been made in the accompanying financial statements for
federal, state or local income taxes since income or losses of the
partnership are reportable by the individual partners in their respective
tax returns.
(D) Includes additional amortization related to step-up in value of intangible
assets pertaining to the Kentucky systems of $281.4 million over a period
of fifteen years based upon a preliminary purchase price allocation. Such
amortization schedule is applied based upon the recently rebuilt system
plant coupled with the remaining attractive terms of the franchises, in
addition to the lack of competition. The purchase allocation will be
finalized upon completion of our acquisition of the Kentucky systems and
receipt of appraisal reports. However, we do not believe that any
adjustment resulting from the final allocation of purchase price will be
material.
(E) Reflects the net increase in interest expense related to the retirement of
approximately $178.0 million of the subordinated term loans of Insight
Kentucky and the issuance of the notes.
(F) Includes the elimination of amortization of deferred financing costs from
the retirement of the subordinated term loans of Insight Kentucky and the
recording of amortization of the estimated financing costs for the notes.
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INSIGHT MIDWEST, L.P.
PRO FORMA BALANCE SHEET
JUNE 30, 1999
(IN THOUSANDS)
INDIANA KENTUCKY KENTUCKY
(AS REPORTED) (AS REPORTED) ADJUSTMENTS(A) (AS ADJUSTED)
------------- ------------- -------------- -------------
ASSETS
Cash and cash equivalents................................... $ 19,998 $ 4,422 $ -- $ 4,422
Trade accounts receivable, net of allowance................. 4,299 13,438 -- 13,438
Due from affiliates......................................... 2,900 8,143 -- 8,143
Prepaid expenses & other current assets..................... 1,707 1,084 -- 1,084
Fixed assets, net........................................... 135,714 250,149 -- 250,149
Intangible assets, net...................................... 360,593 596,441 281,441 877,882
Other Assets................................................ -- 2,861 -- 2,861
--------- --------- -------- -----------
Total assets................................................ $ 525,211 $ 876,538 $281,441 $ 1,157,979
--------- --------- -------- -----------
--------- --------- -------- -----------
LIABILITIES & PARTNERS' CAPITAL
Accounts payable............................................ $ 22,506 $ 19,814 $ -- $ 19,814
Accrued expenses and other liabilities...................... 4,764 -- -- --
Due to affiliates........................................... 2,859 3,212 -- 3,212
Interest payable............................................ 5,471 -- -- --
Accrued interest............................................ -- 5,879 -- 5,879
Deferred revenue............................................ -- 18,876 -- 18,876
Other....................................................... -- 1,206 -- 1,206
Credit facilities........................................... 466,000 738,039 -- 738,039
Notes offered hereby........................................ -- -- -- --
--------- --------- -------- -----------
Total liabilities........................................... 501,600 787,026 -- 787,026
Partners' (deficiency)/equity............................... 23,611 89,512 281,441 370,953
--------- --------- -------- -----------
$ 525,211 $ 876,538 $281,441 $ 1,157,979
--------- --------- -------- -----------
--------- --------- -------- -----------
SUB OTHER
TOTAL ADJUSTMENTS(B) TOTAL
---------- -------------- ----------
ASSETS
Cash and cash equivalents................................... $ 24,420 $ 15,000 $ 39,420
Trade accounts receivable, net of allowance................. 17,737 -- 17,737
Due from affiliates......................................... 11,043 -- 11,043
Prepaid expenses & other current assets..................... 2,791 -- 2,791
Fixed assets, net........................................... 385,863 -- 385,863
Intangible assets, net...................................... 1,238,475 7,000 1,243,975
(1,500)
Other Assets................................................ 2,861 -- 2,861
---------- ---------- ----------
Total assets................................................ $1,683,190 $ 20,500 $1,703,690
---------- ---------- ----------
---------- ---------- ----------
LIABILITIES & PARTNERS' CAPITAL
Accounts payable............................................ $ 42,320 $ -- $ 42,320
Accrued expenses and other liabilities...................... 4,764 -- 4,764
Due to affiliates........................................... 6,071 -- 6,071
Interest payable............................................ 5,471 -- 5,471
Accrued interest............................................ 5,879 -- 5,879
Deferred revenue............................................ 18,876 -- 18,876
Other....................................................... 1,206 -- 1,206
Credit facilities........................................... 1,204,039 (178,000) 1,026,039
Notes offered hereby........................................ -- 200,000 200,000
---------- ---------- ----------
Total liabilities........................................... 1,288,626 22,000 1,310,626
Partners' (deficiency)/equity............................... 394,564 (1,500) 393,064
---------- ---------- ----------
$1,683,190 $ 20,500 $1,703,690
---------- ---------- ----------
---------- ---------- ----------
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NOTES TO PRO FORMA BALANCE SHEET
(A) Reflects step up in value of intangible assets of the Kentucky acquisition.
The preliminary purchase price has been allocated to franchise rights. The
purchase price allocation will be finalized upon completion of our
acquisition of the Kentucky systems and receipt of appraisal reports.
However, we do not believe that any adjustment resulting from the final
allocation of purchase price will be material.
(B) Reflects the following assumptions:
o receipt of estimated net proceeds from the notes of approximately
$193.0 million;
o repayment of the subordinated term loans of Insight Kentucky of
approximately $178.0 million;
o write-off of deferred financing costs of approximately $1.5 million
associated with the retirement of the subordinated term loans of Insight
Kentucky; and
o recording of estimated deferred financing costs of approximately
$7.0 million associated with the offering of the notes.
8