Exhibit 99.1
Insight Communications Announces First Quarter 2005 Results
NEW YORK--(BUSINESS WIRE)--April 28, 2005--Insight Communications
Company (NASDAQ: ICCI) today announced financial results for the
quarter ended March 31, 2005.
First Quarter Highlights
-- Revenue of $269.3 million, an increase of 13% over Q1 2004
-- Operating Income before Depreciation and Amortization* of
$107.6 million, an increase of 7% over Q1 2004
-- Capital expenditures of $38.7 million
-- Free Cash Flow* of $37.4 million
-- Total Customer Relationships of 1,327,100, compared to
1,336,300 for Q1 2004
-- Total RGUs of 2,166,800, an increase of 7% from Q1 2004,
comprised of:
-- High-speed Internet customer net gain of 37,300, an
increase of 33% over Q1 2004 net additions. Total HSI
customers at quarter end were 367,800, a penetration of
16% of HSI homes passed.
-- Basic customer net loss of 1,100, resulting in 1,271,400
basic customers at quarter end
-- Digital customer net gain of 7,700, increasing digital
customers to 459,000 at quarter end. Digital penetration
was 38% of the company's Digital Universe.
-- Telephone customer net gain of 4,300, bringing total
telephone customers to 68,600 at quarter end and
penetration to 9% of marketable homes passed
-- As of March 31, 2005, 97% of the company's customers were
passed by two-way, 750 MHz or higher capacity upgraded
network.
* See explanation of this Non-GAAP measure below.
Operating Results for the Three Months Ended March 31, 2005
Compared to Three Months Ended March 31, 2004
Revenue for the three months ended March 31, 2005 totaled $269.3
million, an increase of 13% over the prior year, due primarily to
customer gains in high-speed Internet and digital services, as well as
basic rate increases. High-speed Internet service revenue increased
46% over the prior year, primarily due to an increased customer base.
We added a net 37,300 high-speed Internet customers during the quarter
to end at 367,800 customers. Basic cable service revenue increased 6%,
due to basic rate increases partially offset by customer losses. Our
loss in basic customers resulted primarily from greater competitive
pressures by DBS service providers, including the effects of recent
"local-to-local" launches and bundled offers with DSL providers. To
reverse this trend, we are increasing our customer retention efforts
by emphasizing bundling, enhancing and differentiating our video
services and providing video-on-demand, high definition television and
digital video recorders. We are also continuing our focus on improving
customer service through quicker response times, increased education
of our product offerings and increased spending on marketing and sales
efforts. In addition, digital service revenue increased 13% over the
prior year, primarily due to an increased customer base. We added a
net 7,700 digital customers during the quarter to end at 459,000
customers.
-1-
Revenue by service offering were as follows for the three months
ended March 31 (dollars in thousands):
Revenue by Service Offering
------------------------------------- --------
Three Three
Months Months
Ended % of Ended % of % Change
March 31, Total March 31, Total in
2005 Revenue 2004 Revenue Revenue
--------- -------- --------- -------- --------
Basic $147,632 54.8% $139,005 58.2% 6.2%
High-Speed Internet 42,113 15.6% 28,940 9.9% 45.5%
Digital 26,761 9.9% 23,721 12.1% 12.8%
Advertising 16,988 6.3% 13,987 5.8% 21.5%
Premium 14,344 5.3% 14,906 6.3% (3.8)%
Telephone 7,732 2.9% 3,758 1.6% 105.7%
Franchise fees 7,420 2.8% 7,008 2.9% 5.9%
Other 6,337 2.4% 7,431 3.1% (14.7)%
--------- -------- --------- -------- --------
Total $269,327 100.0% $238,756 100.0% 12.8%
========= ======== ========= ======== ========
Total Customer Relationships were approximately 1,327,100 as of
March 31, 2005, compared to 1,336,300 as of March 31, 2004. 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. Revenue
Generating Units ("RGUs"), which represent the sum of basic, digital,
high-speed Internet and telephone customers, as of March 31, 2005
increased 7% as compared to March 31, 2004. RGUs by category were as
follows (in thousands):
March 31, 2005 March 31, 2004
------------------- -------------------
Basic 1,271.4 1,297.9
Digital 459.0 418.4
High-speed Internet 367.8 258.0
Telephone 68.6 60.1
------------------- -------------------
Total RGUs 2,166.8 2,034.4
=================== ===================
Average monthly revenue per basic customer was $70.58 for the
three months ended March 31, 2005, compared to $61.42 for the three
months ended March 31, 2004, primarily reflecting the continued growth
of our high-speed Internet and digital product offerings in all
markets as well as basic rate increases. In addition, telephone
revenues for the three months ended March 31, 2005, reflect service
revenues earned from our customers, compared to the three months ended
March 31, 2004, which reflected revenues billed to Comcast under our
previous contractual arrangement that was terminated effective
December 31, 2004. Also included in telephone revenues for the three
months ended March 31, 2005, is the continued amortization of
installation revenues under our previous arrangement with Comcast in
the amount of $834,000.
-2-
Programming and other operating costs increased $10.9 million, or
12%. Programming costs increased primarily as a result of increases in
programming rates. Other operating costs increased primarily as a
result of increases in technical salaries and benefits for new and
existing employees, in addition to decreased capitalized labor costs
due to the continued transition from upgrade and new connect
activities to maintenance and reconnect activities. Other operating
costs increased as a result of costs of sales associated with
telephone that were previously paid by Comcast. Despite an increase of
approximately 110,000 high-speed Internet customers, high-speed
Internet service provider costs decreased due to more favorable per
customer charges under a new agreement with our Internet service
provider. However, as we continue to add high-speed Internet
customers, we expect our Internet service provider costs to increase.
Selling, general and administrative expenses increased $12.7
million, or 25%, primarily due to increased payroll and payroll
related costs, including salary increases for existing employees,
increased headcount and increases in health insurance costs. Marketing
expenses increased to support the continued rollout of high-speed
Internet, digital and telephone products, and to maintain our core
video customer base. Marketing support funds (recorded as a reduction
to selling, general and administrative expenses) decreased over the
prior year's quarter. A decrease in expenses previously allocated to
Comcast, under our prior agreement to manage certain Comcast systems,
also contributed to the increase in selling, general and
administrative expenses. As this agreement was terminated effective
July 31, 2004, the period ended March 31, 2005 does not include any of
these expense allocations. Some cost savings have been realized upon
termination of the management agreement, and the impact of certain of
these savings is reflected in programming and other operating costs.
Depreciation and amortization expense increased $3.7 million, or
6%, primarily as a result of additional capital expenditures through
March 31, 2005. These expenditures chiefly constituted network
extensions, capitalized payroll, upgrades to our headends and
purchases of customer premise equipment, 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 March 31, 2004.
As a result of the factors discussed above, Operating Income
before Depreciation and Amortization increased $7.0 million, or 7%.
Interest expense increased $4.5 million, or 9%, primarily due to
higher interest rates, which averaged 7.82% for the three months ended
March 31, 2005 as compared to 7.04% for the three months ended March
31, 2004.
-3-
Liquidity and Capital Resources
Our business requires cash for operations, debt service, capital
expenditures and acquisitions. 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 our existing cable network, and in
the future will be made for network extensions, installation of new
services, converters 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 three months ended March 31,
2005 and 2004 was $76.1 million and $95.1 million. The decrease was
primarily attributable to the timing of cash receipts and payments
related to our working capital accounts.
Cash used in investing activities for the three months ended March
31, 2005 and 2004 was $38.9 million and $43.6 million. The decrease
was attributable to a reduction in amounts spent on capital
expenditures.
Cash used in financing activities for the three months ended March
31, 2005 and 2004 was $20.9 million and $15.6 million. The increase
was attributable to an increase in amortization payments of our credit
facility.
For the three months ended March 31, 2005 and 2004 we spent $38.7
million and $44.2 million in capital expenditures. These expenditures
principally constituted network extensions, upgrades to our headends,
purchases of customer premise equipment and capitalized labor, all of
which is considered necessary in order to maintain our existing
network, to grow our customer base and expand our service offerings.
Free Cash Flow for the three months ended March 31, 2005 totaled
$37.4 million, compared to $50.9 million for the three months ended
March 31, 2004. The decrease was primarily driven by the following:
-- A $21.2 million increase in cash interest expense primarily
driven by a bond interest payment made in the first quarter of
2005 that, for 2004, was made in the second quarter; and
-- A $6.7 million source of Free Cash Flow for the three months
ended March 31, 2005, compared to an $11.6 million source for
the three months ended March 31, 2004 from changes in working
capital accounts.
The decrease was partially offset by an increase in operating
income before depreciation and amortization of $7.0 million and a
decrease in capital expenditures of $5.5 million.
While we expect to continue to use Free Cash Flow to repay our
indebtedness, interest rates have begun to increase, which will likely
result in higher interest costs in the near future.
-4-
Use of Operating Income before Depreciation and Amortization and
Free Cash Flow
Insight utilizes Operating Income before Depreciation and
Amortization, among other measures, to evaluate the performance of its
businesses. Operating Income before Depreciation and Amortization is
considered an important indicator of the operational strength of
Insight's businesses and is a component of its annual compensation
programs. In addition, Insight's debt agreements use Operating Income
before Depreciation and Amortization, adjusted for certain
non-recurring items, in their leverage and other covenant
calculations. Insight also uses this measure to determine how it will
allocate resources and capital. Insight's management finds this
measure helpful because it captures all of the revenue and ongoing
operating expenses of its businesses and therefore provides a means to
directly evaluate the ability of the business operations to generate
returns and to compare operating capabilities across its businesses.
This measure is also used by equity and fixed income research analysts
in their reports to investors evaluating Insight's businesses and
other companies in the cable television industry. Insight believes
Operating Income before Depreciation and Amortization is useful to
investors because it enables them to assess its performance in a
manner similar to the methods used by Insight's 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 and amortization policies.
A limitation of 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 Insight's 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 Operating Income before
Depreciation and Amortization is that it does not reflect income net
of interest expense, which is a significant expense for the company
because of the substantial debt it has incurred to acquire cable
television systems and finance capital expenditures to upgrade its
cable network. Management evaluates the impact of interest expense
through other measures including interest expense itself, Free Cash
Flow, the returns analysis discussed above and debt service covenant
ratios under Insight's credit facility.
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 Insight's liquidity, including its ability
to repay indebtedness. Insight believes Free Cash Flow is useful for
investors because it enables them to assess Insight's ability to
service its debt and to fund continued growth with internally
generated funds in a manner similar to the methods used by Insight's
management, and provides a measure that can be used to analyze, value
and compare companies in the cable television industry.
Both 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.
-5-
Reconciliation of Net Income (Loss) to Operating Income before
Depreciation and Amortization
The following table reconciles Net Loss to Operating Income before
Depreciation and Amortization. In addition, the table provides the
components from Net Loss to Operating Income for purposes of the
previous discussions.
Three Months
Ended March 31,
-------------------
2005 2004
--------- ---------
(in thousands)
Net loss $8,342 $6,817
Income tax benefit (provision) (125) 144
--------- ---------
Loss before income taxes 8,217 6,961
Minority interest income (expense) 1,400 (121)
--------- ---------
Loss before minority interest and income
taxes 9,617 6,840
Other income (expense):
Other (128) (1,828)
Interest income (262) (140)
Interest expense 54,717 50,202
--------- ---------
Total other expense, net 54,327 48,234
--------- ---------
Operating income 44,710 41,394
Depreciation and amortization 62,860 59,159
--------- ---------
Operating Income before Depreciation and
Amortization $107,570 $100,553
========= =========
-6-
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 for purposes of the previous
discussions.
Three Months
Ended March 31,
-----------------
2005 2004
-------- --------
(in thousands)
Operating Income $44,710 $41,394
Depreciation and amortization 62,860 59,159
-------- --------
Operating income before Depreciation and
Amortization 107,570 100,553
Changes in working capital accounts(1) 6,728 11,567
Cash paid for interest(2) (38,082) (16,864)
Cash paid for taxes (137) (122)
-------- --------
Net cash provided by operating activities 76,079 95,134
Capital expenditures (38,725) (44,189)
-------- --------
Free Cash Flow $37,354 $50,945
======== ========
(1) Changes in working capital accounts are based on the net cash
changes in current assets and current liabilities, excluding
changes related to interest and taxes and other non-cash
expenses.
(2) Includes 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 March 31, 2005
would have been $56,123. Second quarter 2005 cash interest
will be lower than second quarter 2004 because it will not
include this interest payment.
About Insight Communications
Insight Communications (NASDAQ: ICCI) is the 9th largest cable
operator in the United States, serving approximately 1.3 million
customers in the four contiguous states of Illinois, Kentucky, Indiana
and Ohio. Insight specializes in offering bundled, state-of-the-art
services in mid-sized communities, delivering basic and digital video,
high-speed Internet and voice telephony in selected markets to its
customers.
Any statements in this press release that are not historical facts
are forward-looking statements within the meaning of Section 21E of
the Securities Exchange Act of 1934, as amended. The words "estimate,"
"expect," "anticipate" and other expressions that indicate future
events and trends identify forward-looking statements. The above
forward-looking statements are subject to risks and uncertainties and
are subject to change based upon a variety of factors that could cause
actual results to differ materially from those Insight Communications
anticipates. Factors that could have a material and adverse impact on
actual results include history and expectation of future net losses,
competition, increasing programming costs, changes in laws and
regulations, the substantial debt and the other risk factors described
in Insight Communications' annual report on Form 10-K and other
periodic filings. All forward-looking statements in this press release
are qualified by reference to the cautionary statements included in
Insight Communications' Form 10-K and such filings.
-7-
INSIGHT COMMUNICATIONS COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
March 31, Dec. 31,
2005 2004
----------- -----------
Assets unaudited
Cash and cash equivalents $116,460 $100,144
Investments 5,313 5,053
Trade accounts receivable, net of
allowance for doubtful accounts of
$1,026 and $1,050 as of March 31,
2005 and December 31, 2004 18,915 31,355
Launch funds receivable 593 2,749
Prepaid expenses and other assets 16,730 11,343
----------- -----------
Total current assets 158,011 150,644
Fixed assets, net 1,133,334 1,154,251
Goodwill 72,430 72,430
Franchise costs 2,361,959 2,361,959
Deferred financing costs, net of
accumulated amortization of
$20,178 and $18,892 as of
March 31, 2005 and
December 31, 2004 26,611 27,896
Other non-current assets 2,132 2,692
----------- -----------
Total assets $3,754,477 $3,769,872
=========== ===========
Liabilities and stockholders' equity
Accounts payable $25,070 $31,886
Accrued expenses and other
liabilities 36,780 40,838
Accrued property taxes 16,512 13,049
Accrued programming costs (inclusive
of $40,200 and $36,838 due to
related parties as of
March 31, 2005 and
December 31, 2004) 55,763 51,329
Deferred revenue 7,491 8,996
Interest payable 28,018 20,643
Debt - current portion 83,500 83,500
----------- -----------
Total current liabilities 253,134 250,241
Deferred revenue 2,537 2,904
Debt 2,709,779 2,724,063
Other non-current liabilities 4,461 1,331
Minority interest 244,123 245,523
Stockholders' equity:
Preferred stock; $.01 par value;
100,000,000 shares authorized; no
shares issued and
outstanding as of March 31, 2005
and December 31, 2004 - -
Common stock; $.01 par value:
Class A - 300,000,000 shares
authorized; 50,830,270 and
50,912,910 shares issued and
outstanding as of March 31, 2005 and
December 31, 2004 508 509
Class B - 100,000,000 shares
authorized; 8,489,454 shares issued
and outstanding as of March 31, 2005
and December 31, 2004 85 85
Additional paid-in-capital 817,491 813,853
Accumulated deficit (268,612) (260,270)
Deferred stock compensation (9,448) (8,689)
Accumulated other comprehensive
income (loss) 419 322
----------- -----------
Total stockholders' equity 538,655 545,810
----------- -----------
Total liabilities and stockholders'
equity $3,754,477 $3,769,872
=========== ===========
-8-
INSIGHT COMMUNICATIONS COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share amounts)
Three months ended
March 31,
-----------------------
2005 2004
----------- -----------
Revenue $269,327 $238,756
Operating costs and expenses:
Programming and other operating costs
(exclusive of depreciation and
amortization) (inclusive of $41,499
and $36,744 of programming expense
incurred through related parties
during March 31, 2005 and 2004) 98,809 87,911
Selling, general and administrative 62,948 50,292
Depreciation and amortization 62,860 59,159
----------- -----------
Total operating costs and expenses 224,617 197,362
----------- -----------
Operating income 44,710 41,394
Other income (expense):
Interest expense (54,717) (50,202)
Interest income 262 140
Other income (expense) 128 1,828
----------- -----------
Total other expense, net (54,327) (48,234)
Loss before minority interest and
income taxes (9,617) (6,840)
Minority interest expense 1,400 (121)
----------- -----------
Loss before income taxes (8,217) (6,961)
Benefit (provision) for income taxes (125) 144
----------- -----------
Net loss applicable to common
stockholders $(8,342) $(6,817)
=======================
Basic and diluted loss per share
attributable to common stockholders $(.14) $(.11)
Basic and diluted weighted-average
shares outstanding 59,429 59,661
-9-
INSIGHT COMMUNICATIONS COMPANY, INC.
FINANCIAL INFORMATION
(in thousands)
Q1 Q4 Q1
2005 2004 2004
----------- ----------- ---------
Customer Relationships 1,327.1 1,322.7 1,336.3
Total Average Monthly Revenue per
Customer $70.58 $68.48 $61.42
Basic Cable
- -----------
Homes Passed 2,384.4 2,375.3 2,335.4
Basic Cable Customers 1,271.4 1,272.5 1,297.9
Basic Cable Penetration 53.3% 53.6% 55.6%
Cable Revenue $147,632 $145,280 $139,005
Average Monthly Cable Revenue per
Customer $38.69 $37.89 $35.76
High-Speed Internet ("HSI")
- ---------------------------
HSI Homes Passed 2,329.5 2,320.4 2,245.6
HSI Customers 367.8 330.5 258.0
HSI Penetration 15.8% 14.2% 11.5%
HSI Revenue $42,113 $38,021 $28,940
Average Monthly HSI Revenue per
Customer $11.04 $9.92 $7.44
Average Monthly HSI Revenue per HSI
Customer $40.21 $39.48 $39.53
Digital Cable
- -------------
Digital Universe 1,224.5 1,224.1 1,247.1
Digital Customers 459.0 451.3 418.4
Digital Cable Penetration 37.5% 36.9% 33.5%
Digital Revenue $26,761 $25,525 $23,721
Average Monthly Digital Revenue per
Customer $7.01 $6.66 $6.10
Average Monthly Digital Revenue per
Digital Customer $19.60 $19.10 $19.26
Telephone
- ---------
Telephone Universe (marketable homes) 761.1 768.8 714.9
Telephone Customers 68.6 64.3 60.1
Telephone Penetration (to marketable
homes) 9.0% 8.4% 8.4%
Telephone Revenue $7,732 $3,865 $3,758
Average Monthly Telephone Revenue per
Customer $2.03 $1.01 $.97
Average Monthly Telephone Revenue per
Telephone $38.79 NM NM
Customer
Advertising Revenue
- -------------------
Advertising Revenue $16,988 $21,820 $13,987
Average Monthly Advertising Revenue
per Customer $4.45 $5.69 $3.60
Other Revenue
- -------------
Other Revenue $28,101 $28,036 $29,345
Average Monthly Other Revenue per
Customer $7.36 $7.31 $7.55
NM = Not Meaningful
-10-
NCTA STANDARD REPORTING CATEGORIES
CAPITAL EXPENDITURES
(unaudited)
(in thousands)
Q1 2005 2004 FY
Insight Consolidated
- ------------------------------------------------ -----------
Customer Premise Equipment $18,248 $95,311
Scaleable Infrastructure 4,223 14,920
Line Extensions 5,449 25,168
Upgrade/Rebuild 3,740 13,616
Support Capital 7,065 25,081
----------- -----------
Total Insight Consolidated $38,725 $174,096
-----------------------
-11-
CONTACT: Insight Communications
Sandy Colony, Senior Vice President,
Corporate Communications, 917/286-2300