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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE

SECURITIES EXCHANGE
ACT OF 1934



For the Quarterly Period Ended June 30, 2005



Commission file number 0-26677



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INSIGHT COMMUNICATIONS COMPANY, INC.

(Exact name of registrant as specified
in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 13-4053502                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|810 7thAvenue New York, New York                               |  | 10019                               
|(Address of principal executive offices)                       |  | (Zip code)                          



Registrants
telephone number, including area code: 917-286-2300



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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90
days.    Yes  x    No ̈



Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).    Yes  x    No ̈



Indicate the number of shares outstanding of each of
the issuers classes of common stock, as of the latest practicable date.



|                                     |  |                             
|------------------------------------ |  | ----------------------------
|Class                                |  | Outstanding at July 19, 2005
|Class A Common Stock, $.01 Par Value |  | 51,783,591                  
|Class B Common Stock, $.01 Par Value |  | 8,489,454                   



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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, 2004.



1



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INSIGHT COMMUNICATIONS COMPANY, INC.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands)



|                                                                                                                                           |  |              |           |   |                  |   |           |  
|------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------ | --------- | - | ---------------- | - | --------- | -
|                                                                                                                                           |  | June 30,2005 |           |   | December 31,2004 |  
|                                                                                                                                           |  | unaudited    |           |   |                  |  
|Assets                                                                                                                                     |  |              |           |   |                  |   |           |  
|Cash and cash equivalents                                                                                                                  |  | $            | 108,684   |   |                  | $ | 100,144   |  
|Investments                                                                                                                                |  |              | 5,562     |   |                  |   | 5,053     |  
|Trade accounts receivable, net of allowance for doubtful accounts of $1,273 and $1,050 as of June 30, 2005 and December 31,
2004           |  |              | 24,199    |   |                  |   | 31,355    |  
|Launch funds receivable                                                                                                                    |  |              | 555       |   |                  |   | 2,749     |  
|Prepaid expenses and other current assets                                                                                                  |  |              | 20,228    |   |                  |   | 11,343    |  
|                                                                                                                                           |  |              |           |   |                  |   |           |  
|Total current assets                                                                                                                       |  |              | 159,228   |   |                  |   | 150,644   |  
|                                                                                                                                           |  |             
|Fixed assets, net                                                                                                                          |  |              | 1,127,231 |   |                  |   | 1,154,251 |  
|Goodwill                                                                                                                                   |  |              | 72,430    |   |                  |   | 72,430    |  
|Franchise costs                                                                                                                            |  |              | 2,361,959 |   |                  |   | 2,361,959 |  
|Deferred financing costs, net of accumulated amortization of $21,489 and $18,892 as of June 30, 2005 and December 31, 2004                 |  |              | 25,299    |   |                  |   | 27,896    |  
|Other non-current assets                                                                                                                   |  |              | 2,712     |   |                  |   | 2,692     |  
|                                                                                                                                           |  |              |           |   |                  |   |           |  
|Total assets                                                                                                                               |  | $            | 3,748,859 |   |                  | $ | 3,769,872 |  
|                                                                                                                                           |  |              |           |   |                  |   |           |  
|Liabilities and stockholders equity                                                                                                       |  |              |           |   |                  |   |           |  
|Accounts payable                                                                                                                           |  | $            | 39,775    |   |                  | $ | 31,886    |  
|Accrued expenses and other current liabilities                                                                                             |  |              | 35,979    |   |                  |   | 40,838    |  
|Accrued property taxes                                                                                                                     |  |              | 11,662    |   |                  |   | 13,049    |  
|Accrued programming costs (inclusive of $38,872 and $36,838 due to related parties as of June 30, 2005 and December 31, 2004)              |  |              | 55,143    |   |                  |   | 51,329    |  
|Deferred revenue                                                                                                                           |  |              | 6,293     |   |                  |   | 8,996     |  
|Interest payable                                                                                                                           |  |              | 20,685    |   |                  |   | 20,643    |  
|Debt  current portion                                                                                                                     |  |              | 83,500    |   |                  |   | 83,500    |  
|                                                                                                                                           |  |              |           |   |                  |   |           |  
|Total current liabilities                                                                                                                  |  |              | 253,037   |   |                  |   | 250,241   |  
|                                                                                                                                           |  |             
|Deferred revenue                                                                                                                           |  |              | 2,180     |   |                  |   | 2,904     |  
|Debt                                                                                                                                       |  |              | 2,701,246 |   |                  |   | 2,724,063 |  
|Other non-current liabilities                                                                                                              |  |              | 1,265     |   |                  |   | 1,331     |  
|                                                                                                                                           |  |             
|Minority interest                                                                                                                          |  |              | 249,350   |   |                  |   | 245,523   |  
|                                                                                                                                           |  |             
|Stockholders equity:                                                                                                                      |  |              |           |   |                  |   |           |  
|Preferred stock; $.01 par value; 100,000,000 shares authorized; no shares issued and outstanding as of June 30, 2005 and December 31,
2004 |  |              |          |   |                  |   |          |  
|Common stock; $.01 par value:                                                                                                              |  |              |           |   |                  |   |           |  
|Class A - 300,000,000 shares authorized; 51,783,591 and 50,912,910 shares issued and outstanding as of June 30, 2005 and December 31,
2004 |  |              | 516       |   |                  |   | 509       |  
|Class B - 100,000,000 shares authorized; 8,489,454 shares issued and outstanding as of June 30, 2005 and December 31, 2004                 |  |              | 85        |   |                  |   | 85        |  
|Additional paid-in-capital                                                                                                                 |  |              | 827,295   |   |                  |   | 813,853   |  
|Accumulated deficit                                                                                                                        |  |              | (269,340  | ) |                  |   | (260,270  | )
|Deferred stock compensation                                                                                                                |  |              | (17,225   | ) |                  |   | (8,689    | )
|Accumulated other comprehensive income                                                                                                     |  |              | 450       |   |                  |   | 322       |  
|                                                                                                                                           |  |              |           |   |                  |   |           |  
|Total stockholders equity                                                                                                                 |  |              | 541,781   |   |                  |   | 545,810   |  
|                                                                                                                                           |  |              |           |   |                  |   |           |  
|Total liabilities and stockholders equity                                                                                                 |  | $            | 3,748,859 |   |                  | $ | 3,769,872 |  
|                                                                                                                                           |  |              |           |   |                  |   |           |  



See accompanying
notes



2



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INSIGHT COMMUNICATIONS COMPANY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except share and per share amounts)



|                                                                                                                                                                                                                                                                |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ---------- | - | ------------------------- | - | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                                                                                                                                                                                                                                |  | Three months ended June 30, |            |   | Six months ended June 30, |  
|                                                                                                                                                                                                                                                                |  | 2005                        |            |   | 2004                      |   |            | 2005 |  |   | 2004       |  
|Revenue                                                                                                                                                                                                                                                         |  | $                           | 279,311    |   |                           | $ | 250,638    |      |  | $ | 548,638    |   |  | $ | 489,394    |  
|                                                                                                                                                                                                                                                                |  |                             |            |  
|Operating costs and expenses:                                                                                                                                                                                                                                   |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Programming and other operating costs (exclusive of depreciation and amortization) (inclusive of $39,176 and $80,675 and $36,734 and $73,479
of programming expense incurred through related parties for the three and six months ended June 30, 2005 and 2004) |  |                             | 93,324     |   |                           |   | 88,844     |      |  |   | 192,133    |   |  |   | 176,755    |  
|Selling, general and administrative                                                                                                                                                                                                                             |  |                             | 63,567     |   |                           |   | 54,837     |      |  |   | 126,515    |   |  |   | 105,129    |  
|Depreciation and amortization                                                                                                                                                                                                                                   |  |                             | 62,809     |   |                           |   | 60,862     |      |  |   | 125,669    |   |  |   | 120,021    |  
|                                                                                                                                                                                                                                                                |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Total operating costs and expenses                                                                                                                                                                                                                              |  |                             | 219,700    |   |                           |   | 204,543    |      |  |   | 444,317    |   |  |   | 401,905    |  
|                                                                                                                                                                                                                                                                |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Operating income                                                                                                                                                                                                                                                |  |                             | 59,611     |   |                           |   | 46,095     |      |  |   | 104,321    |   |  |   | 87,489     |  
|                                                                                                                                                                                                                                                                |  |                             |            |  
|Other income (expense):                                                                                                                                                                                                                                         |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Interest expense                                                                                                                                                                                                                                                |  |                             | (56,291    | ) |                           |   | (50,735    | )    |  |   | (111,008   | ) |  |   | (100,937   | )
|Interest income                                                                                                                                                                                                                                                 |  |                             | 761        |   |                           |   | 109        |      |  |   | 1,023      |   |  |   | 249        |  
|Other income (expense)                                                                                                                                                                                                                                          |  |                             | 543        |   |                           |   | (4,004     | )    |  |   | 671        |   |  |   | (2,176     | )
|                                                                                                                                                                                                                                                                |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Total other expense, net                                                                                                                                                                                                                                        |  |                             | (54,987    | ) |                           |   | (54,630    | )    |  |   | (109,314   | ) |  |   | (102,864   | )
|                                                                                                                                                                                                                                                                |  |                             |            |  
|Income (loss) before minority interest and income taxes                                                                                                                                                                                                         |  |                             | 4,624      |   |                           |   | (8,535     | )    |  |   | (4,993     | ) |  |   | (15,375    | )
|Minority interest income (expense)                                                                                                                                                                                                                              |  |                             | (5,227     | ) |                           |   | 841        |      |  |   | (3,827     | ) |  |   | 720        |  
|                                                                                                                                                                                                                                                                |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Loss before income taxes                                                                                                                                                                                                                                        |  |                             | (603       | ) |                           |   | (7,694     | )    |  |   | (8,820     | ) |  |   | (14,655    | )
|Benefit (provision) for income taxes                                                                                                                                                                                                                            |  |                             | (125       | ) |                           |   | 167        |      |  |   | (250       | ) |  |   | 311        |  
|                                                                                                                                                                                                                                                                |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Net loss applicable to common stockholders                                                                                                                                                                                                                      |  | $                           | (728       | ) |                           | $ | (7,527     | )    |  | $ | (9,070     | ) |  | $ | (14,344    | )
|                                                                                                                                                                                                                                                                |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Basic and diluted loss per share attributable to common stockholders                                                                                                                                                                                            |  | $                           | (.01       | ) |                           | $ | (.13       | )    |  | $ | (.15       | ) |  | $ | (.24       | )
|Basic and diluted weighted-average shares outstanding                                                                                                                                                                                                           |  |                             | 59,903,572 |   |                           |   | 59,714,013 |      |  |   | 59,709,081 |   |  |   | 59,688,141 |  



See accompanying
notes



3



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INSIGHT COMMUNICATIONS COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)



|                                                                                |  |                           |         |   |      |   |         |  
|------------------------------------------------------------------------------- |  | ------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                |  | Six months ended June 30, |        
|                                                                                |  | 2005                      |         |   | 2004 |  
|Operating activities:                                                           |  |                           |         |   |      |   |         |  
|Net loss                                                                        |  | $                         | (9,070  | ) |      | $ | (14,344 | )
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |                           |         |   |      |   |         |  
|Depreciation and amortization                                                   |  |                           | 125,669 |   |      |   | 120,021 |  
|Non-cash consulting expense                                                     |  |                           | 30      |   |      |   | 30      |  
|(Gain) loss on interest rate swaps                                              |  |                           | (812    | ) |      |   | 1,235   |  
|Loss on repurchase of senior discount notes                                     |  |                           |        |   |      |   | 127     |  
|Gain on sale of investments                                                     |  |                           |        |   |      |   | (386    | )
|Minority interest                                                               |  |                           | 3,827   |   |      |   | (720    | )
|Provision for losses on trade accounts receivable                               |  |                           | 8,221   |   |      |   | 8,070   |  
|Contribution of stock to 401(k) Plan                                            |  |                           | 1,434   |   |      |   | 869     |  
|Amortization of note discount                                                   |  |                           | 18,801  |   |      |   | 17,175  |  
|Benefit for income taxes                                                        |  |                           |        |   |      |   | (311    | )
|Changes in operating assets and liabilities, net of the effect of acquisitions: |  |                           |         |   |      |   |         |  
|Trade accounts receivable                                                       |  |                           | (1,065  | ) |      |   | (2,695  | )
|Launch funds receivable                                                         |  |                           | 2,194   |   |      |   | 4,692   |  
|Prepaid expenses and other assets                                               |  |                           | (8,206  | ) |      |   | 2,462   |  
|Accounts payable                                                                |  |                           | 7,889   |   |      |   | (9,890  | )
|Accrued expenses and other current liabilities                                  |  |                           | (5,685  | ) |      |   | 8,051   |  
|                                                                                |  |                           |         |   |      |   |         |  
|Net cash provided by operating activities                                       |  |                           | 143,227 |   |      |   | 134,386 |  
|                                                                                |  |                           |         |   |      |   |         |  
|Investing activities:                                                           |  |                           |         |   |      |   |         |  
|Purchase of fixed assets                                                        |  |                           | (93,513 | ) |      |   | (83,587 | )
|Sale of fixed assets                                                            |  |                           | 957     |   |      |   | 892     |  
|Purchase of investments                                                         |  |                           | (1,307  | ) |      |   | (790    | )
|Sale of investments                                                             |  |                           | 926     |   |      |   | 602     |  
|                                                                                |  |                           |         |   |      |   |         |  
|Net cash used in investing activities                                           |  |                           | (92,937 | ) |      |   | (82,883 | )
|                                                                                |  |                           |         |   |      |   |         |  
|Financing activities:                                                           |  |                           |         |   |      |   |         |  
|Net repayment of credit facilities                                              |  |                           | (41,750 | ) |      |   | (37,125 | )
|Repurchase of senior discount notes                                             |  |                           |        |   |      |   | (8,134  | )
|Debt issuance costs                                                             |  |                           |        |   |      |   | (10     | )
|                                                                                |  |                           |         |   |      |   |         |  
|Net cash used in financing activities                                           |  |                           | (41,750 | ) |      |   | (45,269 | )
|                                                                                |  |                           |         |   |      |   |         |  
|Net increase in cash and cash equivalents                                       |  |                           | 8,540   |   |      |   | 6,234   |  
|Cash and cash equivalents, beginning of period                                  |  |                           | 100,144 |   |      |   | 60,172  |  
|                                                                                |  |                           |         |   |      |   |         |  
|Cash and cash equivalents, end of period                                        |  | $                         | 108,684 |   |      | $ | 66,406  |  
|                                                                                |  |                           |         |   |      |   |         |  



See accompanying
notes



4



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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, 2005.



Insight LP is the general partner of Insight Midwest. Through Insight LP, we manage all of Insight Midwests systems and, through July
31, 2004, managed certain systems owned by an affiliate of Comcast Cable Holdings, LLC (Comcast Cable) (formerly known as AT&T Broadband, LLC), the owner of the remaining 50% interest in Insight Midwest.



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



On July
28, 2005, we entered into a definitive merger agreement providing for Insight Acquisition Corp. to acquire all of our publicly held shares. See Subsequent Events Note 14.



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, 2004.



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, 2005 are
not necessarily indicative of the results to be expected for the year ending December 31, 2005 or any other interim period.



5



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INSIGHT COMMUNICATIONS COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



3. Stock-Based Compensation



Pursuant
to Statement of Financial Accounting Standards (SFAS) No. 148, Accounting for Stock-Based Compensation  Transition and Disclosure, we have elected to continue to account for employee stock-based compensation under Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, using an intrinsic value approach to measure compensation expense. Accordingly, no compensation expense has been recognized for options granted to
employees under our stock option plan since all such options were granted at exercise prices equal to the fair market value on the date of grant.



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 the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation, had been applied to each of the three and six month periods ended June 30, 2005 and 2004 (in thousands, except per share data):



|                                                                                                                    |  |                            |        |   |                           |   |        |      |  |   |         |   |  |   |         |  
|------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | ------ | - | ------------------------- | - | ------ | ---- |  | - | ------- | - |  | - | ------- | -
|                                                                                                                    |  | Three months endedJune 30, |        |   | Six months ended June 30, |  
|                                                                                                                    |  | 2005                       |        |   | 2004                      |   |        | 2005 |  |   | 2004    |  
|Net loss attributable to common stockholders                                                                        |  | $                          | (728   | ) |                           | $ | (7,527 | )    |  | $ | (9,070  | ) |  | $ | (14,344 | )
|Add: Stock-based compensation as reported, net of tax                                                               |  |                            | 1,558  |   |                           |   | 1,025  |      |  |   | 3,476   |   |  |   | 2,245   |  
|Deduct: Stock-based compensation determined under fair value based method for all awards (SFAS No. 123), net of tax |  |                            | (3,434 | ) |                           |   | (2,126 | )    |  |   | (7,210  | ) |  |   | (4,357  | )
|                                                                                                                    |  |                            |        |   |                           |   |        |      |  |   |         |   |  |   |         |  
|Adjusted net loss attributable to common stockholders                                                               |  | $                          | (2,604 | ) |                           | $ | (8,628 | )    |  | $ | (12,804 | ) |  | $ | (16,456 | )
|                                                                                                                    |  |                            |        |   |                           |   |        |      |  |   |         |   |  |   |         |  
|Basic and diluted net loss per share, as reported                                                                   |  | $                          | (.01   | ) |                           | $ | (.13   | )    |  | $ | (.15    | ) |  | $ | (.24    | )
|                                                                                                                    |  |                            |        |   |                           |   |        |      |  |   |         |   |  |   |         |  
|Basic and diluted net loss per share, SFAS 123 adjusted                                                             |  | $                          | (.04   | ) |                           | $ | (.14   | )    |  | $ | (.21    | ) |  | $ | (.28    | )
|                                                                                                                    |  |                            |        |   |                           |   |        |      |  |   |         |   |  |   |         |  



4. Loss Per Share



Basic loss per share is computed using the average shares outstanding during the period.
Diluted loss per share is equal to basic loss per share as we generated net losses for the three and six months ended June 30, 2005 and 2004, thereby making the potential effects of dilutive securities anti-dilutive. Securities that could
potentially dilute basic earnings per share in the future include stock options and deferred stock units.



6



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INSIGHT COMMUNICATIONS COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



5. Recent Accounting Pronouncements



On
December 16, 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123 (revised 2004), Share-Based Payment (SFAS No. 123(R)), which is a revision of SFAS No. 123, and supersedes APB Opinion No. 25. SFAS
No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values, beginning with the next fiscal year that begins after June 15, 2005. In
addition, SFAS No. 123(R) will cause unrecognized expense related to previously issued options vesting after the date of initial adoption to be recognized as a charge to results of operations over the remaining vesting period. We are required to
adopt SFAS No. 123(R) in our first quarter of 2006. The FASB has concluded that companies may adopt the new standard in one of two ways: the modified prospective transition method and the modified retrospective transition method. The modified
prospective transition method requires recognition of compensation expense from the beginning of the fiscal period in which the recognition provisions are first applied as if the fair-value-based accounting method had been used to account for all
employee awards granted, modified, or settled after the effective date and to any awards that were not fully vested as of the effective date. The modified retrospective method requires recognition of compensation expense for periods presented prior
to the adoption of the fair value based accounting method for share-based payment; that is, an entity would recognize employee compensation cost for prior periods presented in the amounts reported in the pro forma disclosures provided in accordance
with SFAS No. 123. SFAS No. 123(R) is effective January 1, 2006. The Company is still evaluating the transition method and the impact of the adoption of this standard on its consolidated financial statements.



As permitted by SFAS 123, the company currently accounts for share-based payments to
employees using the intrinsic value method under APB Opinion No. 25 and generally does not recognize compensation expense for employee stock options. Accordingly, the adoption of SFAS 123(R)s fair value method will have a significant impact on
our result of operations. The impact of adoption of SFAS 123(R) cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had we adopted SFAS 123(R) in prior periods, the impact of that
standard would have approximated the impact of SFAS 123 as described in the disclosure of pro forma net loss and loss per share in Note 3 to our consolidated financial statements. SFAS 123(R) also requires the benefits of tax deductions on exercised
options in excess of recognized compensation expense on our books to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net operating cash flows and increase
net financing cash flows in periods after adoption.



In May 2005, FASB issued
SFAS No. 154, AccountingChanges and Error Corrections. SFAS No. 154 requires retrospective application of a voluntary change in accounting principle to prior period financial statements unless it is impracticable. This Statement also
requires that a change in method of depreciation, amortization, or depletion for long-lived, non-financial assets be accounted for as a change in accounting estimate that is affected by a change in accounting principle and requires retrospective
application to prior period financial statements. SFAS No. 154 replaces APB Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. The Company does not anticipate that the
adoption of this standard will have a material impact on its consolidated financial statements. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning in 2007.



7



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INSIGHT COMMUNICATIONS COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



6. Investments



Liberate
Technologies



In April 2005, we received a special dividend of $2.10 per
share on our 441,000 shares of Liberate Technologies (Liberate) stock. The total dividend received of $926,000 has been recorded as a decrease in our investment in Liberate. As of June 30, 2005 and December 31, 2004, we had 441,000
shares available for sale with a fair value of $154,000 and $953,000.



During
January and February 2004, we sold a total of 150,000 shares of Liberate common stock. We received net proceeds of $595,000 and recorded a net gain on the sale of $381,000 that has been included in other income in our consolidated statements of
operations for the six months ended June 30, 2004.



AgileTV



AgileTV Corporation is a privately owned company that develops voice navigation services
for television. On May 11, 2005, we made an additional investment in AgileTV by purchasing shares of AgileTV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 AgileTV under the cost method. As of June 30, 2005 and December 31, 2004, our carrying value in this investment was $1.2
million and $300,000.



7. Fixed Assets



|                                               |  |                |            |   |                  |   |            |  
|---------------------------------------------- |  | -------------- | ---------- | - | ---------------- | - | ---------- | -
|                                               |  | June 30, 2005  |            |   | December 31,2004 |  
|                                               |  | (in thousands) |           
|Land, buildings and improvements               |  | $              | 40,813     |   |                  | $ | 41,131     |  
|Cable system equipment                         |  |                | 2,274,902  |   |                  |   | 2,182,800  |  
|Furniture, fixtures and office equipment       |  |                | 20,665     |   |                  |   | 20,073     |  
|                                               |  |                |            |   |                  |   |            |  
|                                               |  |                | 2,336,380  |   |                  |   | 2,244,004  |  
|Less accumulated depreciation and amortization |  |                | (1,209,149 | ) |                  |   | (1,089,753 | )
|                                               |  |                |            |   |                  |   |            |  
|Total fixed assets, net                        |  | $              | 1,127,231  |   |                  | $ | 1,154,251  |  
|                                               |  |                |            |   |                  |   |            |  



We recorded depreciation expense of
$59.9 million and $119.6 million for the three and six months ended June 30, 2005 and $58.5 million and $115.1 million for the three and six months ended June 30, 2004.



8



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INSIGHT COMMUNICATIONS COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



8. Debt



|                                          |  |                |           |   |                  |   |           |  
|----------------------------------------- |  | -------------- | --------- | - | ---------------- | - | --------- | -
|                                          |  | June 30,2005   |           |   | December 31,2004 |  
|                                          |  | (in thousands) |          
|Insight Midwest Holdings Credit Facility  |  | $              | 1,446,000 |   |                  | $ | 1,487,750 |  
|Insight Midwest 93⁄4% Senior Notes          |  |                | 385,000   |   |                  |   | 385,000   |  
|Insight Midwest 101⁄2% Senior Notes         |  |                | 630,000   |   |                  |   | 630,000   |  
|Insight Inc. 121⁄4% Senior Discount Notes   |  |                | 350,000   |   |                  |   | 350,000   |  
|                                          |  |                |           |   |                  |   |           |  
|                                          |  |                | 2,811,000 |   |                  |   | 2,852,750 |  
|Net unamortized discount/premium on notes |  |                | (26,905   | ) |                  |   | (45,706   | )
|Market value of interest rate swaps       |  |                | 651       |   |                  |   | 519       |  
|                                          |  |                |           |   |                  |   |           |  
|Total debt                                |  | $              | 2,784,746 |   |                  | $ | 2,807,563 |  
|                                          |  |                |           |   |                  |   |           |  



Insight Midwest Holdings $1.975
Billion 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 $1.975 billion 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, 2005 and December 31, 2004, the balance of the $100.0 million loan, including accrued
interest was $133.0 million and $127.0 million.



On June 27, 2005 we announced
plans to refinance the existing $1.1 billion Term B loan under Insight Midwests credit facility. The refinancing was completed on July 21, 2005. See Subsequent Events Note 14.



Senior Notes and Senior Discount Notes



In June 2004, we repurchased $10.0 million face amount of the 121⁄4% Senior Discount Notes at the then accreted value of $8.1 million for
$8.9 million, resulting in a loss of $843,000, which includes the write-off of unamortized deferred financing costs of $127,000.



Debt Principal Payments



As of June 30, 2005, principal payments required on our debt were as follows (in thousands):



|           |  |   |          
|---------- |  | - | ---------
|2005       |  | $ | 41,750   
|2006       |  |   | 83,500   
|2007       |  |   | 83,500   
|2008       |  |   | 104,750  
|2009       |  |   | 1,517,500
|Thereafter |  |   | 980,000  
|           |  |   |          
|Total      |  | $ | 2,811,000
|           |  |   |          



9



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INSIGHT COMMUNICATIONS COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



9. 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 cash flow hedges that are determined to be
effective hedges are recorded as accumulated other comprehensive income or loss in the accompanying consolidated balance sheets. 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 equal and 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 our 101⁄2% 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 expire November 1, 2005. We recorded a gain on these swaps of approximately $1.1 million and $812,000 for the
three and six months ended June 30, 2005, which is included in other income (expense). As of June 30, 2005 and December 31, 2004, we recorded $486,000 and $364,000 of interest payable related to these agreements. The cost if terminated of these
agreements was $1.3 million and $2.1 million as of June 30, 2005 and December 31, 2004.



In December 2003, we entered into an interest rate swap agreement whereby we swapped fixed rates under our 101/2% 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 statements of operations. The fair value of this swap as of June 30, 2005 and December 31, 2004 was $650,000 and $519,000 and has been recorded in other non-current assets and as an adjustment to the carrying value of debt.



10. Comprehensive Loss



We own equity securities that are classified as available-for-sale and reported at market
value, with unrealized gains and losses recorded as accumulated other comprehensive income or loss in the accompanying consolidated balance sheets. In addition, we record the effective portion of certain derivatives gains or losses as
accumulated other comprehensive income or loss in the accompanying consolidated balance sheets.



10



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INSIGHT COMMUNICATIONS COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



10. Comprehensive Loss (continued)



The
following is a reconciliation of net loss to comprehensive loss (in thousands):



|                                                        |  |                            |      |   |                           |   |        |      |  |   |        |   |  |   |         |  
|------------------------------------------------------- |  | -------------------------- | ---- | - | ------------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------- | -
|                                                        |  | Three months endedJune 30, |      |   | Six months ended June 30, |  
|                                                        |  | 2005                       |      |   | 2004                      |   |        | 2005 |  |   | 2004   |  
|Net loss                                                |  | $                          | (728 | ) |                           | $ | (7,527 | )    |  | $ | (9,070 | ) |  | $ | (14,344 | )
|Unrealized gain (loss) on securities available-for-sale |  |                            | 31   |   |                           |   | (260   | )    |  |   | 128    |   |  |   | (102    | )
|Realized (gain) on securities available-for-sale        |  |                            |     |   |                           |   |       |      |  |   |       |   |  |   | (386    | )
|Unrealized gain on interest rate swaps, net of tax      |  |                            |     |   |                           |   | 439    |      |  |   |       |   |  |   | 842     |  
|                                                        |  |                            |      |   |                           |   |        |      |  |   |        |   |  |   |         |  
|Comprehensive loss                                      |  | $                          | (697 | ) |                           | $ | (7,348 | )    |  | $ | (8,942 | ) |  | $ | (13,990 | )
|                                                        |  |                            |      |   |                           |   |        |      |  |   |        |   |  |   |         |  



11. Minority and Preferred
Interests



As of June 30, 2005 we had $249.4 million of minority interests
recorded in our balance sheet 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 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 to either distribute to Comcast Cable some of its cable systems and liabilities, to be determined in accordance with the
partnership agreement, equal to 50% of the net market value of the partnership or, upon liquidation, an amount in cash equal to 50% of the net proceeds received.



12. Related Party Transactions



Managed Systems



On March 17, 2000, we entered into a management agreement with Comcast of Montana/Indiana/Kentucky/Ohio (Comcast) (formerly known as InterMedia Partners Southeast), an affiliate of Comcast Cable, to
provide management services to cable television systems owned by Comcast. Effective July 31, 2004, the management agreement was terminated by mutual agreement. We recognized management fees in connection with this agreement of $603,000 and $1.2
million for the three and six months ended June 30, 2004.



11



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INSIGHT COMMUNICATIONS COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



12. Related Party Transactions (continued)



Programming



We purchase the majority of our
programming through affiliates of Comcast Cable. Charges for such programming, including a 11⁄2% administrative fee, were approximately $39.2 million and $80.7 million for the three and six months ended June 30, 2005 and approximately $36.7
million and $73.5 million for the three and six months ended June 30, 2004. As of June 30, 2005 and December 31, 2004, approximately $38.9 million and $36.8 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.



Telephone Agreements



Prior to December 31, 2004, to facilitate delivery of telephone services, we were party to a joint operating agreement with Comcast Cable that allowed Insight Midwest to
deliver to its residential customers, in certain of its service areas, local telephone service provided by Comcast Cable. Under the terms of the agreement, Insight Midwest leased certain capacity on our local network to Comcast Cable. In addition,
Insight Midwest provided certain services and support for which it received additional payments related to installations, marketing and billing support. Fee revenue earned in connection with installations was deferred and amortized over the expected
term a telephone customer was expected to maintain their telephone service, then estimated to be three years. Marketing and billing support revenue was recognized in the period such services were performed.



On December 31, 2004, we acquired the telephone business conducted by Comcast Cable in the
markets served under our joint operating agreement and terminated the joint operating agreement. Subsequent to December 31, 2004, we no longer earn revenue from the services described above, but rather we record the continued amortization of
installation fee revenue and revenues earned directly from our customers for providing telephone and telephone related services.



Advertising Services



In October 1999, to facilitate the administration of our advertising services in our Kentucky Systems, we entered into an agreement with an affiliate of AT&T
Broadband (now known as Comcast Cable), which provides for this affiliate to perform all of our Kentucky advertising sales and related administrative services. Effective September 26, 2004, this agreement was terminated by mutual agreement.



We earned advertising revenues through this affiliate of approximately $5.1
million and $9.1 million for the three and six months ended June 30, 2004. Through September 26, 2004 we paid this affiliate a fixed and variable fee for providing this service based on advertising sales cash flow growth.



12



---

INSIGHT COMMUNICATIONS COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



12. Related Party Transactions (continued)



Employee Loans



In October 1999 and April 2000, we made
loans to certain of our employees that were used to satisfy their individual income tax withholding obligations resulting from their receipt of shares in connection with our initial public offering. Between December 8 and 31, 2004, we made an offer
to each of the of the individuals with a loan obligation to (i) cancel such individuals loan (including accrued interest) upon the surrender to us of such individuals pledged shares and (ii) issue restricted shares of our Class A common
stock as an incentive to surrender the pledged shares and, in the case of current employees, to encourage the employees long-term future performance, and in the case of former employees, to reward such former employees for their past services
to us.



As of December 31, 2004, each of the individuals with a loan obligation
accepted the offer and surrendered an aggregate of 395,210 shares of common stock in repayment of $3.7 million (based on the closing price of our Class A common stock on such date of $9.27 per share) of the aggregate $4.3 million of loans and
accrued interest. The remaining balance of the loans were cancelled and recorded as compensation expense during the fourth quarter of 2004. On May 3, 2005, following shareholder approval of an amendment to our 1999 Equity Incentive Plan to increase
the number of shares available thereunder for issuance, the employees and former employees were issued an aggregate of 825,641 shares of restricted stock. This restricted stock was recorded during the three months ended June 30, 2005.



13. 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



In November 2000, we
filed a state court action against the City of Louisville for its grant, in September 2000, of a more favorable franchise to Knology of Louisville, Inc. Upon commencement of this action, the City pursuant to a provision in its franchise agreement
with Knology, automatically suspended Knologys franchise pending a final, non-appealable court determination as to whether Knologys franchise was more favorable than the franchise under which we operated. In November 2000, Knology filed
a federal court action against us seeking monetary damages and other relief for alleged violations of federal laws arising out of our having filed, pursuant to the provisions of our own franchise agreement with the City, the state court action. In
March 2001, the federal court preliminarily set aside the suspension of Knologys franchise. In March 2002, a state circuit court ruled against our claim that Knologys franchise was more favorable. We appealed the circuit courts
order to the state court of appeals which, in June 2003, upheld the lower court ruling. We filed a motion for discretionary review of the appeals courts ruling which was denied by the Kentucky Supreme Court.



13



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INSIGHT COMMUNICATIONS COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



13. Commitments and Contingencies (continued)



In May 2003, the federal court granted us summary judgment and dismissed six of Knologys 11 claims. The court granted summary judgment to Knology on three claims, two of which resulted in permanently enjoining enforcement of the
automatic suspension provision of Knologys franchise agreement and did not involve damages. The third such claim was for violation of Knologys first amendment rights, which was to proceed to trial solely on the issue of damages, and
could have resulted in an award of legal fees and court costs specific to such claim if upheld. The remaining undecided claims related to allegations of anticompetitive conduct arising from the state court lawsuit and were to proceed to trial on the
merits. In August 2003, the court agreed, in part, with our Motion for Reconsideration, that the stay provision provides no justification for an injunction since the language was severed. Further, the court granted our Motion to Certify Questions
for an Immediate Appeal to the Sixth Circuit Court of Appeals. The Sixth Circuit Court of Appeals granted our Motion to Certify, and ruled in our favor overturning the trial courts rulings in favor of Knology. The Sixth Circuit found that our
right to file the state court lawsuit against the City was protected and thus we were immune from liability arising from that lawsuit. Knology filed a motion for an en banc review by the Sixth Circuit which was denied in March 2005. The matter has
returned to the trial court for final rulings consistent with the Sixth Circuit opinion.



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 captionIn 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 violates our Charter and that The Carlyle Group has 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 April 15, 2005, the plaintiffs filed a Motion for Preliminary Injunction seeking an order enjoining the defendants from taking any steps or acts in furtherance of the proposed transaction, except in compliance with the duties
set forth inRevlon v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173 (Del. 1976). On April 25, 2005, the Court refused to schedule a hearing on plaintiffs Motion for a Preliminary Injunction and entered an order denying that
motion, without prejudice to plaintiffs ability to re-file the motion, if appropriate, once the special committee makes a recommendation.



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 (See Subsequent Events Note 14) 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



14



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INSIGHT COMMUNICATIONS COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



13. Commitments and Contingencies (continued)



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, the plaintiffs approval of a definitive settlement agreement and final court approval of the settlement.



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.



14. Subsequent Events



On July 21, 2005 we completed a refinancing of the existing $1.1 billion Term B loan facility under Insight Midwests Credit Agreement
which reduced the applicable margins for LIBOR rate borrowings and raised the maximum total leverage ratio covenant.



On July 28, 2005, we entered into a definitive merger agreement providing for Insight Acquisition Corp. to acquire all of our publicly held shares. Under the terms of the
agreement, our public shareholders would receive $11.75 per share in cash.



Insight Acquisition Corp., the acquiring entity, was organized by our co-founders Sidney R. Knafel and Michael S. Willner and affiliates of The Carlyle Group in order to effect the transactions contemplated by the merger agreement.



Consummation of the transaction is subject to certain conditions, including
(i) approval of the merger agreement and merger by holders of a majority of the outstanding shares of our Class A common stock not held by Insight Acquisition Corp., its affiliates or our officers and directors and (ii) termination or expiration of
the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.





15



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



Forward-Looking Statements



Some of the information in this quarterly report contains forward-looking statements that
involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as may, will, expect, anticipate, believe, estimate,
guidance and continue or similar words. You should read statements that contain these words carefully because they:



| |  |  | discuss our future expectations;
| | - |  | --------------------------------



| |  |  | contain projections of our results of operations or financial condition; or
| | - |  | ---------------------------------------------------------------------------



| |  |  | state other forward-looking information.
| | - |  | ------------------------------------------



We believe it is important to communicate our 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, 2004, as well as any 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. Examples of these risks include our history and expectation of future net losses, our substantial debt, changes in laws and regulations,
increasing programming costs and competition. 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. We assume no responsibility to update any forward-looking statements as a result of new information, future events or otherwise.



Recent Developments



On July 28, 2005, we entered into a definitive merger agreement providing for Insight Acquisition Corp. to acquire all of our publicly held shares. Under the terms of the agreement, our public shareholders would
receive $11.75 per share in cash.



Insight Acquisition Corp., the acquiring
entity, was organized by our co-founders Sidney R. Knafel and Michael S. Willner and affiliates of The Carlyle Group in order to effect the transactions contemplated by the merger agreement.



Consummation of the transaction is subject to certain conditions, including (i) approval of
the merger agreement and merger by holders of a majority of the outstanding shares of our Class A common stock not held by Insight Acquisition Corp., its affiliates or our officers and directors and (ii) termination or expiration of the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.





16



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Overview



Our revenues are earned from customer fees for cable television video services including basic, classic, 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, commissions for products sold through
home shopping networks, and, through July 31, 2004, as management fees for managing cable systems.



Some of the principal reasons for our net losses through June 30, 2005 include depreciation and amortization associated with capital expenditures for the construction, expansion and maintenance of our systems, and
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.



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 EndedJune 30, |         |   | Six Months Ended June 30, |  
|                                          |  | 2005                       |         |   | 2004                      |   |         | 2005 |  |   | 2004    |  
|                                          |  | (in thousands)             |        
|Revenue                                   |  | $                          | 279,311 |   |                           | $ | 250,638 |      |  | $ | 548,638 |   |  | $ | 489,394 |  
|Operating costs and expenses:             |  |                            |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Programming and other operating costs     |  |                            | 93,324  |   |                           |   | 88,844  |      |  |   | 192,133 |   |  |   | 176,755 |  
|Selling, general and administrative       |  |                            | 63,567  |   |                           |   | 54,837  |      |  |   | 126,515 |   |  |   | 105,129 |  
|Depreciation and amortization             |  |                            | 62,809  |   |                           |   | 60,862  |      |  |   | 125,669 |   |  |   | 120,021 |  
|                                          |  |                            |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Total operating costs and expenses        |  |                            | 219,700 |   |                           |   | 204,543 |      |  |   | 444,317 |   |  |   | 401,905 |  
|                                          |  |                            |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Operating income                          |  |                            | 59,611  |   |                           |   | 46,095  |      |  |   | 104,321 |   |  |   | 87,489  |  
|Interest expense                          |  |                            | 56,291  |   |                           |   | 50,735  |      |  |   | 111,008 |   |  |   | 100,937 |  
|Minority interest income (expense)        |  |                            | (5,227  | ) |                           |   | 841     |      |  |   | (3,827  | ) |  |   | 720     |  
|Net loss                                  |  |                            | (728    | ) |                           |   | (7,527  | )    |  |   | (9,070  | ) |  |   | (14,344 | )
|Net cash provided by operating activities |  |                            | 67,148  |   |                           |   | 39,252  |      |  |   | 143,227 |   |  |   | 134,386 |  
|Net cash used in investing activities     |  |                            | 54,049  |   |                           |   | 39,273  |      |  |   | 92,937  |   |  |   | 82,883  |  
|Net cash used in financing activities     |  |                            | 20,875  |   |                           |   | 29,706  |      |  |   | 41,750  |   |  |   | 45,269  |  
|Capital expenditures                      |  |                            | 54,788  |   |                           |   | 39,398  |      |  |   | 93,513  |   |  |   | 83,587  |  



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



We utilize Operating
Income before Depreciation and Amortization, among other measures, to evaluate the performance of our businesses. 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 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



17



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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 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 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 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 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.



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
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.



18



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Reconciliation of Net 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 discussions that follow.



|                                                        |  |                            |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|------------------------------------------------------- |  | -------------------------- | ------- | - | ------------------------- | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                        |  | Three Months EndedJune 30, |         |   | Six Months Ended June 30, |  
|                                                        |  | 2005                       |         |   | 2004                      |   |         | 2005 |  |   | 2004    |  
|                                                        |  | (in thousands)             |        
|Net loss                                                |  | $                          | 728     |   |                           | $ | 7,527   |      |  | $ | 9,070   |   |  | $ | 14,344  |  
|Income tax benefit (provision)                          |  |                            | (125    | ) |                           |   | 167     |      |  |   | (250    | ) |  |   | 311     |  
|                                                        |  |                            |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Loss before income taxes                                |  |                            | 603     |   |                           |   | 7,694   |      |  |   | 8,820   |   |  |   | 14,655  |  
|Minority interest income (expense)                      |  |                            | (5,227  | ) |                           |   | 841     |      |  |   | (3,827  | ) |  |   | 720     |  
|                                                        |  |                            |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Income (loss) before minority interest and income taxes |  |                            | (4,624  | ) |                           |   | 8,535   |      |  |   | 4,993   |   |  |   | 15,375  |  
|Other income (expense):                                 |  |                            |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Other                                                   |  |                            | (543    | ) |                           |   | 4,004   |      |  |   | (671    | ) |  |   | 2,176   |  
|Interest income                                         |  |                            | (761    | ) |                           |   | (109    | )    |  |   | (1,023  | ) |  |   | (249    | )
|Interest expense                                        |  |                            | 56,291  |   |                           |   | 50,735  |      |  |   | 111,008 |   |  |   | 100,937 |  
|                                                        |  |                            |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Total other expense, net                                |  |                            | 54,987  |   |                           |   | 54,630  |      |  |   | 109,314 |   |  |   | 102,864 |  
|                                                        |  |                            |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Operating income                                        |  |                            | 59,611  |   |                           |   | 46,095  |      |  |   | 104,321 |   |  |   | 87,489  |  
|Depreciation and amortization                           |  |                            | 62,809  |   |                           |   | 60,862  |      |  |   | 125,669 |   |  |   | 120,021 |  
|                                                        |  |                            |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Operating Income before Depreciation and Amortization   |  | $                          | 122,420 |   |                           | $ | 106,957 |      |  | $ | 229,990 |   |  | $ | 207,510 |  
|                                                        |  |                            |         |   |                           |   |         |      |  |   |         |   |  |   |         |  



19



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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 discussions that follow.



|                                                      |  |                            |         |      |                           |   |         |      |  |   |         |   |  |   |         |  
|----------------------------------------------------- |  | -------------------------- | ------- | ---- | ------------------------- | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                      |  | Three Months EndedJune 30, |         |      | Six Months Ended June 30, |  
|                                                      |  | 2005                       |         |      | 2004                      |   |         | 2005 |  |   | 2004    |  
|                                                      |  | (in thousands)             |        
|Operating income                                      |  | $                          | 59,611  |      |                           | $ | 46,095  |      |  | $ | 104,321 |   |  | $ | 87,489  |  
|Depreciation and amortization                         |  |                            | 62,809  |      |                           |   | 60,862  |      |  |   | 125,669 |   |  |   | 120,021 |  
|                                                      |  |                            |         |      |                           |   |         |      |  |   |         |   |  |   |         |  
|Operating Income before Depreciation and Amortization |  |                            | 122,420 |      |                           |   | 106,957 |      |  |   | 229,990 |   |  |   | 207,510 |  
|Changes in working capital accounts(1)                |  |                            | (1,151  | )    |                           |   | (2,180  | )    |  |   | 5,577   |   |  |   | 9,387   |  
|Cash paid for interest                                |  |                            | (54,036 | )(2) |                           |   | (65,451 | )    |  |   | (92,118 | ) |  |   | (82,315 | )
|Cash paid for taxes                                   |  |                            | (85     | )    |                           |   | (74     | )    |  |   | (222    | ) |  |   | (196    | )
|                                                      |  |                            |         |      |                           |   |         |      |  |   |         |   |  |   |         |  
|Net cash provided by operating activities             |  |                            | 67,148  |      |                           |   | 39,252  |      |  |   | 143,227 |   |  |   | 134,386 |  
|Capital expenditures                                  |  |                            | (54,788 | )    |                           |   | (39,398 | )    |  |   | (93,513 | ) |  |   | (83,587 | )
|                                                      |  |                            |         |      |                           |   |         |      |  |   |         |   |  |   |         |  
|Free Cash Flow                                        |  | $                          | 12,360  |      |                           | $ | (146    | )    |  | $ | 49,714  |   |  | $ | 50,799  |  
|                                                      |  |                            |         |      |                           |   |         |      |  |   |         |   |  |   |         |  



Results of Operations



Three Months Ended June 30, 2005 Compared to Three Months Ended
June 30, 2004



Revenue for the three months ended June 30, 2005
totaled $279.3 million, an increase of 11% 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 49% over the prior year,
primarily due to an increased customer base. We added a net 23,500 high-speed Internet customers during the quarter to end at 391,300 customers. In addition, digital service revenue increased 13% over the prior year, primarily due to an increased
customer base. We added a net 1,800 digital customers during the quarter to end at 460,800 customers.



Basic cable service revenue increased 3%, due to basic rate increases partially offset by customer losses. Historically, we experience a seasonal decline in basic customers during the second quarter primarily as a
result of students leaving the university communities we serve at the end of the school year. Compounding this loss for

---

|(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). Cash paid for interest for the three months ended June 30, 2005 is lower than for the three months ended June 30, 2004 because it
does not include this interest payment.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



20



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the three months ended June 30, 2005, were continued competitive pressures from Direct Broadcast Satellite
(DBS) service providers, including the continuing effects of earlier local-to-local launches and bundled offers with Digital Subscriber Line (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 spending on marketing and sales efforts.



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



|                    |  |                                |         |                  |       |   |                                |   |                  |  |       |                     |  |       |   
|------------------- |  | ------------------------------ | ------- | ---------------- | ----- | - | ------------------------------ | - | ---------------- |  | ----- | ------------------- |  | ----- | --
|                    |  | Revenue by Service Offering    |         |                  |       |  
|                    |  | ThreeMonthsEnded June 30, 2005 |         | % ofTotalRevenue |       |   | ThreeMonthsEnded June 30, 2004 |   | % ofTotalRevenue |  |       | % Change in Revenue | 
|Basic               |  | $                              | 150,071 |                  | 53.7  | % |                                | $ | 145,446          |  | 58.0  | %                   |  | 3.2   | % 
|High-speed Internet |  |                                | 46,318  |                  | 16.6  | % |                                |   | 31,095           |  | 12.4  | %                   |  | 49.0  | % 
|Digital             |  |                                | 27,838  |                  | 10.0  | % |                                |   | 24,679           |  | 9.9   | %                   |  | 12.8  | % 
|Advertising         |  |                                | 19,749  |                  | 7.1   | % |                                |   | 16,883           |  | 6.8   | %                   |  | 17.0  | % 
|Premium             |  |                                | 13,746  |                  | 4.9   | % |                                |   | 14,612           |  | 5.8   | %                   |  | (5.9  | )%
|Telephone           |  |                                | 8,387   |                  | 3.0   | % |                                |   | 3,802            |  | 1.5   | %                   |  | 120.6 | % 
|Franchise fees      |  |                                | 7,782   |                  | 2.8   | % |                                |   | 7,264            |  | 2.9   | %                   |  | 7.1   | % 
|Other               |  |                                | 5,420   |                  | 1.9   | % |                                |   | 6,857            |  | 2.7   | %                   |  | (21.0 | )%
|                    |  |                                |         |                  |       |   |                                |   |                  |  |       |                     |  |       |   
|Total               |  | $                              | 279,311 |                  | 100.0 | % |                                | $ | 250,638          |  | 100.0 | %                   |  | 11.4  | % 
|                    |  |                                |         |                  |       |   |                                |   |                  |  |       |                     |  |       |   



Total Customer Relationships were
approximately 1,315,400 as of June 30, 2005 compared to 1,324,800 as of June 30, 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 June 30, 2005 increased approximately 7% as compared to June
30, 2004.



RGUs by type were as follows (in thousands):



|                    |  |               |  |              
|------------------- |  | ------------- |  | -------------
|                    |  | June 30, 2005 |  | June 30, 2004
|Basic               |  | 1,257.2       |  | 1,282.4      
|Digital             |  | 460.8         |  | 418.2        
|High-speed Internet |  | 391.3         |  | 273.9        
|Telephone           |  | 73.5          |  | 61.6         
|                    |  |               |  |              
|Total RGUs          |  | 2,182.8       |  | 2,036.1      
|                    |  |               |  |              



Average monthly revenue per basic
customer was $73.64 for the three months ended June 30, 2005, compared to $64.76 for the three months ended June 30, 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 June 30, 2005 reflect service revenues earned from our customers compared



21



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to the three months ended June 30, 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 June 30, 2005 is the continued amortization of installation revenues under our previous arrangement with Comcast in the
amount of $834,000.



Programming and other operating costs increased $4.5
million or 5%. Total programming costs for our video products decreased for the three months ended June 30, 2005 from the three months ended June 30, 2004. Annual programming rate increases were more than offset by a credit of approximately $6.0
million resulting 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. Other operating costs increased primarily as a result of
increases in technical salaries 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
also increased as a result of cost of sales associated with telephone that were previously paid by Comcast. Despite an increase of approximately 117,000 high-speed Internet customers, high-speed Internet service provider costs decreased due to more
favorable per customer charges under an agreement with our Internet service provider entered into in the third quarter of 2004. 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 $8.7 million or 16%,
primarily due to increased payroll and payroll related costs, including salary increases for existing employees and increases in health insurance costs. 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 June 30, 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 $1.9 million or 3% primarily as a result of additional capital expenditures through June 30, 2005. These expenditures were primarily for network extensions, capitalized payroll, upgrades to
our headends, telephone equipment 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 June 30, 2004.



As a result of the factors discussed above, Operating Income before Depreciation and Amortization increased $15.5 million, or 15%.



Interest expense increased $5.6 million or 11.0% primarily due to higher interest rates,
which averaged 8.1% for the three months ended June 30, 2005 as compared to 7.2% for the three months ended June 30, 2004.



Six Months Ended June 30, 2005 Compared to Six Months Ended June 30, 2004



Revenue for the six months ended June 30, 2005 totaled $548.6 million, an increase of 12% 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 47% over the prior year, primarily due to an increased customer base.



22



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We added a net 60,800 high-speed Internet customers during the six months ended June 30, 2005 to end at 391,300
customers. In addition, digital service revenue increased 13% over the prior year, primarily due to an increased customer base. We added a net 9,500 digital customers during the six months ended June 30, 2005 to end at 460,800 customers. Basic cable
service revenue increased 5%, due to basic rate increases partially offset by customer losses.



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



|                    |  |                               |         |                  |       |   |                              |   |                  |  |       |                     |  |       |   
|------------------- |  | ----------------------------- | ------- | ---------------- | ----- | - | ---------------------------- | - | ---------------- |  | ----- | ------------------- |  | ----- | --
|                    |  | Revenue by Service Offering   |         |                  |       |  
|                    |  | Six Months Ended June 30,2005 |         | % ofTotalRevenue |       |   | Six MonthsEnded June 30,2004 |   | % ofTotalRevenue |  |       | % Change in Revenue | 
|Basic               |  | $                             | 297,703 |                  | 54.3  | % |                              | $ | 284,451          |  | 58.1  | %                   |  | 4.7   | % 
|High-speed Internet |  |                               | 88,431  |                  | 16.1  | % |                              |   | 60,035           |  | 12.3  | %                   |  | 47.3  | % 
|Digital             |  |                               | 54,599  |                  | 10.0  | % |                              |   | 48,400           |  | 9.9   | %                   |  | 12.8  | % 
|Advertising         |  |                               | 36,737  |                  | 6.7   | % |                              |   | 30,870           |  | 6.3   | %                   |  | 19.0  | % 
|Premium             |  |                               | 28,090  |                  | 5.1   | % |                              |   | 29,518           |  | 6.0   | %                   |  | (4.8  | )%
|Telephone           |  |                               | 16,119  |                  | 2.9   | % |                              |   | 7,560            |  | 1.6   | %                   |  | 113.2 | % 
|Franchise fees      |  |                               | 15,202  |                  | 2.8   | % |                              |   | 14,272           |  | 2.9   | %                   |  | 6.5   | % 
|Other               |  |                               | 11,757  |                  | 2.1   | % |                              |   | 14,288           |  | 2.9   | %                   |  | (17.7 | )%
|                    |  |                               |         |                  |       |   |                              |   |                  |  |       |                     |  |       |   
|Total               |  | $                             | 548,638 |                  | 100.0 | % |                              | $ | 489,394          |  | 100.0 | %                   |  | 12.1  | % 
|                    |  |                               |         |                  |       |   |                              |   |                  |  |       |                     |  |       |   



Average monthly revenue per basic
customer was $72.17 for the six months ended June 30, 2005, compared to $63.17 for the six months ended June 30, 2004 primarily reflecting the continued growth of our high-speed Internet and digital product offerings in all markets as well as basic
rate increases.



Programming and other operating costs increased $15.4 million
or 9%. Programming costs increased primarily as a result of increased programming rates. These increased costs were partially offset by the favorable finalization of contract resolutions that were accrued at a higher rate than the amount actually
paid. Other operating costs increased primarily as a result of increases in technical salaries 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 also increased as a result of cost of sales associated with telephone that were previously paid by Comcast. Despite an increase of approximately 117,000 high-speed Internet customers,
high-speed Internet service provider costs decreased due to more favorable per customer charges under an agreement with our Internet service provider entered into in the third quarter of 2004. 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 $21.4 million or 20%, primarily due to increased payroll and payroll related costs, including salary increases for existing employees and increases in health insurance costs. Marketing support funds
(recorded as a reduction to selling, general and administrative expenses) decreased over the prior year. 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 June 30,



23



---

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 $5.6 million or 5% primarily as a result of additional capital expenditures through June 30, 2005. These expenditures were
primarily for network extensions, upgrades to our headends and purchases of customer premise equipment, all of which we consider necessary in order to continue to 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, 2004.



As a result of the factors discussed above, Operating Income before Depreciation and Amortization increased $22.5 million, or 11%.



Interest expense increased $10.1 million or 10% primarily due to higher interest rates, which
averaged 7.9% for the six months ended June 30, 2005 as compared to 7.1% for the six months ended June 30, 2004.



Liquidity and Capital



Our business requires cash for operations, debt service, capital expenditures and acquisitions. The cable television business has substantial on-going 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 six months ended
June 30, 2005 and 2004 was $143.2 million and $134.4 million. The increase was primarily attributable to increased operating income and the affect of non-cash items 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, 2005 and 2004 was $92.9 million and $82.9 million. The increase was due to amounts spent on capital expenditures primarily for the build out of our telephone product.



Cash used in financing activities for the six months ended June 30, 2005 and 2004 was $41.8 million and $45.3 million. The decrease is
primarily due to the repurchase of senior discount notes in 2004 offset by increased amortization payments of our credit facility in 2005.



For the six months ended June 30, 2005 and 2004 we spent $93.5 million and $83.6 million in capital expenditures. These expenditures principally constituted network
extensions, upgrades to our headends, telephone equipment, 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.



24



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Free Cash Flow for the six months ended June 30, 2005 totaled $49.7 million compared to $50.8 million for the six months
ended June 30, 2004. The decrease was primarily driven by the following:



| |  |  | A $5.5 million source of Free Cash Flow for the six months ended June 30, 2005 compared to a $9.4 million source for the six months ended June 30, 2004 from changes in working
capital accounts;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A $9.8 million increase in cash interest expense paid primarily driven by an increase in interest rates; and
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | A $9.9 million increase in capital expenditures.
| | - |  | ------------------------------------------------



The above fluctuations resulted in a $23.6 million decrease in Free Cash Flow and were largely offset by an increase in operating income before depreciation and
amortization of $22.5 million.



While we expect to continue to use Free Cash
Flow to repay our indebtedness, as interest rates continue to increase, we expect our interest costs will also be higher. On July 21, 2005 we completed a refinancing of the existing $1.1 billion Term B loan facility under Insight Midwests
Credit Agreement, which reduced the applicable margins for LIBOR rate borrowings and raised the maximum total leverage ratio covenant.



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 may be 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.



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. For the three and six months ended June 30, 2005 we had positive Free Cash Flow. With the completed refinancing of Insight Midwests Term B loan facility our maximum leverage
ratio covenant reset from 3.75 to 4.50 on July 1, 2005. We had the ability to draw upon $338 million of unused availability under the Insight Midwest Holdings credit facility as of June 30, 2005 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 or otherwise fund its operations.



The following table summarizes our contractual obligations and commitments, excluding interest and commitments for programming, as of June 30, 2005, including periods in
which the related payments are due (in thousands):



|                       |  |                         |           |                 |   |        |  |   |          
|---------------------- |  | ----------------------- | --------- | --------------- | - | ------ |  | - | ---------
|                       |  | Contractual Obligations
|                       |  | Long-TermDebt           |           | OperatingLeases |   | Total 
|2005                   |  | $                       | 41,750    |                 | $ | 2,431  |  | $ | 44,181   
|2006                   |  |                         | 83,500    |                 |   | 4,202  |  |   | 87,702   
|2007                   |  |                         | 83,500    |                 |   | 3,181  |  |   | 86,681   
|2008                   |  |                         | 104,750   |                 |   | 2,777  |  |   | 107,527  
|2009                   |  |                         | 1,517,500 |                 |   | 1,984  |  |   | 1,519,484
|Thereafter             |  |                         | 980,000   |                 |   | 1,403  |  |   | 981,403  
|                       |  |                         |           |                 |   |        |  |   |          
|Total cash obligations |  | $                       | 2,811,000 |                 | $ | 15,978 |  | $ | 2,826,978
|                       |  |                         |           |                 |   |        |  |   |          



25



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



In July 2003, we entered into three interest rate swap agreements whereby we swapped fixed rates under our 101⁄2% 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 expire 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). The cost if terminated of this swap as of June 30, 2005 and December 31, 2004 was $486,000 and $364,000. A hypothetical 100 basis point increase in interest rates along the
entire interest rate yield curve would increase our annual interest expense for these three swaps by approximately $1.9 million.



In December 2003, we entered into an interest rate swap agreement whereby we swapped fixed rates under our 101⁄2% 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 statements of operations. The fair value of this swap as of June 30,
2005 and December 31, 2004 was $650,000 and $519,000 and has been recorded in other non-current assets and as an adjustment to the carrying value of debt. A hypothetical 100 basis point increase in interest rates along the entire interest rate yield
curve would increase our annual interest expense for this swap by approximately $1.3 million.



The aggregate fair market value and aggregate carrying value of our 93⁄4% and 101⁄2% senior notes and 121⁄4% senior discount notes was $1.4 billion and $1.3 billion as of June 30, 2005. 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, 2005, the estimated fair value (cost if terminated) of our interest rate swap agreements
was approximately $650,000 and ($1.3) million and is reflected in our financial statements as other non-current assets or (liabilities). Changes in the fair value of our interest rate swaps are either recognized in income or in stockholders
equity as a component of other comprehensive income (loss), depending upon the type of swap and whether it qualifies for hedge accounting.



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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, 2005. 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) under the Exchange Act that
occurred during the quarter ended June 30, 2005 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



PART II. OTHER INFORMATION



Item 1. Legal Proceedings



See Note 13 in Item 1 of PART I, Notes to Consolidated Financial Statements, and incorporated herein by reference.



Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities



During the three months ended June 30, 2005, we issued 40,367 shares of
Class A common stock in connection with our matching contributions to our 401(k) plan and granted stock options to certain of our employees, directors and external consultants to purchase an aggregate of 43,852 shares of Class A common stock. The
issuances of common stock and grants of stock options were not registered under the Securities Act of 1933 because such issuances and grants either (i) did not involve an offer or sale for purposes of Section 2(a)(3) of the Securities Act of 1933,
in reliance on the fact that the matching contributions and stock options were issued and granted for no consideration, or (ii) were offered and sold in transactions not involving a public offering, and therefore exempt from registration under the
Securities Act of 1933 pursuant to Section 4(2).



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



On April 26, 2005, we held our annual meeting of stockholders to (i) elect seven directors
to serve for a term of one year and (ii) ratify the selection of our independent auditors for the year ending December 31, 2005.



The following individuals were elected to serve as directors for a term of one year:



|                       |  |             |  |              
|---------------------- |  | ----------- |  | -------------
|                       |  | Vote For    |  | Vote Withheld
|Sidney R. Knafel       |  | 113,686,337 |  | 13,543,073   
|Michael S. Willner     |  | 113,709,414 |  | 13,519,966   
|Dinni Jain             |  | 116,439,319 |  | 10,790,061   
|Thomas L. Kempner      |  | 105,493,206 |  | 21,736,174   
|Geraldine B. Laybourne |  | 115,917,052 |  | 11,312,328   
|David C. Lee           |  | 115,916,852 |  | 11,312,528   
|James S. Marcus        |  | 115,916,532 |  | 11,312,848   



With the exception of David C. Lee
these individuals constituted our entire Board of Directors and served as our directors immediately preceding the annual meeting.



The stockholders approved an amendment to our 1999 Equity Incentive Plan. The result of the vote was as follows:



|           |  |              |  |          
|---------- |  | ------------ |  | ---------
|Vote For   |  | Vote Against |  | Abstained
|90,445,919 |  | 27,734,680   |  | 553,183  



The stockholders ratified the
selection of Ernst & Young LLP as our independent auditors for the year ending December 31, 2005. The result of the vote was as follows:



|            |  |              |  |          
|----------- |  | ------------ |  | ---------
|Vote For    |  | Vote Against |  | Abstained
|126,040,122 |  | 1,140,818    |  | 48,440   



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Item 6. Exhibits



Exhibits:



|     |  |                                                                                                                                          
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------
|10   |  | Amendment No. 1 and form of Additional Term Loan Supplement to the Amended and Restated Credit Agreement of Insight Midwest Holdings, LLC
|     | 
|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                                                                                                              



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 4, 2005 |  | INSIGHT COMMUNICATIONS COMPANY, INC
|                     |  |                                    
|                     |  | By:                                 |  | /s/ John Abbot                                   
|                     |  |                                     |  | John Abbot                                       
|                     |  |                                     |  | Senior Vice President and Chief Financial Officer
|                     |  |                                     |  | (Principal Financial Officer)                    



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