**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549**

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**FORM 10-Q**

**QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OFTHESECURITIES EXCHANGE ACT OF 1934**

**Forthe Quarterly Period Ended September 30, 2006**

**Commissionfile number 0-26677**

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**INSIGHTCOMMUNICATIONS COMPANY, INC.**(Exact name of registrant as specified in its charter)

 

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

Registrant’stelephone number, including area code: **917-286-2300**

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

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, or a non-accelerated filer. Seedefinition of “accelerated filer and large accelerated filer” in Rule 12b-2of the Exchange Act. (Check one):   Large accelerated filer  o    Acceleratedfiler  x    Non-acceleratedfiler  o

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

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

 

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**PART I. FINANCIALINFORMATION**

**Item 1.   FinancialStatements**

The accompanying unaudited consolidated financialstatements have been prepared in accordance with the requirements of Form 10-Qand, therefore, do not include all information and footnotes required byaccounting principles generally accepted in the United States. However, in ouropinion, all adjustments, consisting of normal recurring accruals, necessaryfor a fair presentation of the results of operations for the relevant periodshave been made. Results for the interim periods are not necessarily indicativeof the results to be expected for the year. These financial statements shouldbe read in conjunction with the summary of significant accounting policies andthe notes to the consolidated financial statements included in our AnnualReport on Form 10-K for the year ended December 31, 2005.

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**INSIGHTCOMMUNICATIONS COMPANY, INC.**

**CONSOLIDATEDBALANCE SHEETS**

***(dollars in thousands, except share and per shareamounts)***

| ** **                                                                                                                                        | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                                                                                                        | ** ** | **2006**               | ** ** | **2005**              | ** ** |
| ** **                                                                                                                                        | ** ** | **unaudited**          | ** ** | ** **            | ** ** |
| **Assets**                                                                                                                                        |       |                   |       |                  |       |   |   |   |   |
| Cash and cash  equivalents                                                                                                                        |       |                   | $          | 19,279                |       |   |   | $ | 29,782 |   |   |
| Investments                                                                                                                                       |       |                   | 6,679      |                  |       |   | 5,901 |   |   |
| Trade accounts  receivable, net of allowance for doubtful accounts of $1,169 and $1,079 as of  September 30, 2006 and December 31, 2005 |       |                   | 26,395     |                  |       |   | 27,261 |   |   |
| Launch funds  receivable                                                                                                                          |       |                   | 516        |                  |       |   | 974 |   |   |
| Prepaid expenses  and other current assets                                                                                                        |       |                   | 11,350     |                  |       |   | 9,645 |   |   |
| Total current assets                                                                                                                              |       |                   | 64,219     |                  |       |   | 73,563 |   |   |
| Fixed assets, net                                                                                                                                 |       |                   | 1,147,333  |                  |       |   | 1,130,705 |   |   |
| Goodwill                                                                                                                                          |       |                   | 72,430     |                  |       |   | 72,430 |   |   |
| Franchise costs                                                                                                                                   |       |                   | 2,361,959  |                  |       |   | 2,361,959 |   |   |
| Deferred  financing costs, net of accumulated amortization of $28,527 and $24,302 as of  September 30, 2006 and December 31, 2005       |       |                   | 19,998     |                  |       |   | 24,220 |   |   |
| Other non-current  assets                                                                                                                         |       |                   | 2,785      |                  |       |   | 2,287 |   |   |
| Total assets                                                                                                                                      |       |                   | $          | 3,668,724             |       |   |   | $ | 3,665,164 |   |   |
| **Liabilities  and stockholders’ equity**                                                                                                    | ** ** |                   |       |                  |       |   |   |   |   |
| Accounts payable                                                                                                                                  |       |                   | $          | 39,097                |       |   |   | $ | 42,333 |   |   |
| Accrued expenses  and other current liabilities                                                                                                   |       |                   | 43,641     |                  |       |   | 45,413 |   |   |
| Accrued property  taxes                                                                                                                           |       |                   | 13,947     |                  |       |   | 12,921 |   |   |
| Accrued  programming costs (inclusive of $32,316 and $29,878 due to related parties as  of September 30, 2006 and December 31, 2005)    |       |                   | 47,008     |                  |       |   | 43,705 |   |   |
| Deferred revenue                                                                                                                                  |       |                   | 2,152      |                  |       |   | 4,978 |   |   |
| Interest payable                                                                                                                                  |       |                   | 51,783     |                  |       |   | 20,459 |   |   |
| Debt—current  portion                                                                                                                        |       |                   | 83,500     |                  |       |   | 83,500 |   |   |
| Total current liabilities                                                                                                                         |       |                   | 281,128    |                  |       |   | 253,309 |   |   |
| Deferred revenue                                                                                                                                  |       |                   | 874        |                  |       |   | 1,499 |   |   |
| Debt                                                                                                                                              |       |                   | 2,687,838  |                  |       |   | 2,676,418 |   |   |
| Other non-current  liabilities                                                                                                                    |       |                   | —     |                  |       |   | 2,382 |   |   |
| Minority interest                                                                                                                                 |       |                   | 244,557    |                  |       |   | 251,011 |   |   |

 

See accompanying notes

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**INSIGHT COMMUNICATIONSCOMPANY, INC.CONSOLIDATED BALANCE SHEETS (Continued)*(dollars in thousands, except share and per shareamounts)***

| ** **                                                                                                                                            | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                                                                                                            | ** ** | **2006**               | ** ** | **2005**              | ** ** |
| ** **                                                                                                                                            | ** ** | **unaudited**          | ** ** | ** **            | ** ** |
| Stockholders’ equity:                                                                                                                            |       |                   |       |                  |       |   |   |   |   |
| Voting preferred stock,  $.01 par value:                                                                                                              |       |                   |       |                  |       |   |   |   |   |
| Series A - 1,000,000 shares authorized; 848,945  shares issued and outstanding as of September 30, 2006 and December 31,  2005         |       |                   | 8          |                  |       |   | 8 |   |   |
| Series B - 1,000,000 shares authorized; 517,836  shares issued and outstanding as of September 30, 2006 and  December 31, 2005         |       |                   | 5          |                  |       |   | 5 |   |   |
| Non-voting preferred  stock, $.01 par value:                                                                                                          |       |                   |       |                  |       |   |   |   |   |
| Series C - 15,000,000 shares authorized;  13,364,693 shares issued and outstanding as of September 30, 2006 and  December 31, 2005     |       |                   | 134        |                  |       |   | 134 |   |   |
| Series D - 50,000,000 shares authorized;  47,015,659 shares issued and outstanding as of September 30, 2006 and  December 31, 2005     |       |                   | 470        |                  |       |   | 470 |   |   |
| Non-voting common stock,  $.01 par value:                                                                                                             |       |                   |       |                  |       |   |   |   |   |
| Series E - 5,000,000 shares authorized;  3,475,629 and 0 shares issued and outstanding as of September 30, 2006  and December 31, 2005 |       |                   | 37         |                  |       |   | — |   |   |
| Series F - 100,000 shares authorized; 93,250  and 0 shares issued and outstanding as of September 30, 2006 and  December 31, 2005      |       |                   | 1          |                  |       |   | — |   |   |
| Voting common stock,  $.01 par value:                                                                                                                 |       |                   |       |                  |       |   |   |   |   |
| Series G - 10,000,000 shares authorized; 0  shares issued and outstanding as of September 30, 2006 and  December 31, 2005              |       |                   | —     |                  |       |   | — |   |   |
| Additional  paid-in-capital                                                                                                                           |       |                   | 829,249    |                  |       |   | 829,337 |   |   |
| Accumulated  deficit                                                                                                                                  |       |                   | (372,641   | )                     |       |   | (345,199 | ) |   |
| Deferred stock  compensation                                                                                                                          |       |                   | (2,936     | )                     |       |   | (4,210 | ) |   |
| Total stockholders’ equity                                                                                                                       |       |                   | 454,327    |                  |       |   | 480,545 |   |   |
| Total liabilities  and stockholders’ equity                                                                                                      |       |                   | $          | 3,668,724             |       |   |   | $ | 3,665,164 |   |   |
|                                                                                                                                                       |            |                        |            |                       |            |  |  |  |  |  |  |

 

See accompanying notes

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**INSIGHTCOMMUNICATIONS COMPANY, INC.CONSOLIDATED STATEMENTS OF OPERATIONS*(unaudited)**(dollars in thousands)***

*** ***

| ** **                                                                                                                                                                                                                                                                       | ** ** | **Three months ended  September 30,** | ** ** | **Nine months ended  September 30,** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                                                                                                                                                                                                                                       | ** ** | **2006**                                             | ** ** | **2005**                                            | ** ** | **2006** | ** ** | **2005** | ** ** |
| Revenue                                                                                                                                                                                                                                                                          |       | $                                                    | 318,105    |                                                | $          | 278,986 |   | $ | 931,103 |   | $ | 827,624 |   |
| Operating costs  and expenses:                                                                                                                                                                                                                                                   |       |                                                 |       |                                                |       |   |   |   |   |
| Programming and other operating costs (exclusive of  depreciation and amortization) (inclusive of $47,772 and $135,110, and  $39,438 and $120,114 of programming expense incurred through related parties  for the three and nine months ended September 30, 2006 and 2005) |       | 111,431                                              |       | 93,514                                              |       | 333,676 |   | 284,269 |   |
| Selling, general and administrative (inclusive of  $335 and $1,219, and $3,876 and $7,325 of stock-based compensation for the three  and nine months ended September 30, 2006 and 2005)                                                                                     |       | 82,120                                               |       | 73,340                                              |       | 243,935 |   | 204,682 |   |
| Depreciation and amortization                                                                                                                                                                                                                                                    |       | 68,743                                               |       | 61,054                                              |       | 200,398 |   | 183,274 |   |
| Total operating  costs and expenses                                                                                                                                                                                                                                              |       | 262,294                                              |       | 227,908                                             |       | 778,009 |   | 672,225 |   |
| Operating income                                                                                                                                                                                                                                                                 |       | 55,811                                               |       | 51,078                                              |       | 153,094 |   | 155,399 |   |
| Other income  (expense):                                                                                                                                                                                                                                                         |       |                                                 |       |                                                |       |   |   |   |   |
| Interest expense                                                                                                                                                                                                                                                                 |       | (65,810                                              | )          | (57,773                                             | )          | (188,093 | ) | (168,781 | ) |
| Interest income                                                                                                                                                                                                                                                                  |       | 366                                                  |       | 853                                                 |       | 1,247 |   | 1,876 |   |
| Other income  (expense)                                                                                                                                                                                                                                                          |       | (28                                                  | )          | 834                                                 |       | (78 | ) | 1,505 |   |
| Total other  expense, net                                                                                                                                                                                                                                                        |       | (65,472                                              | )          | (56,086                                             | )          | (186,924 | ) | (165,400 | ) |
| Loss before minority interest and income taxes                                                                                                                                                                                                                                   |       | (9,661                                               | )          | (5,008                                              | )          | (33,830 | ) | (10,001 | ) |
| Minority interest  income (expense)                                                                                                                                                                                                                                              |       | 1,839                                                |       | (2,242                                              | )          | 6,454 |   | (6,069 | ) |
| Loss before income taxes                                                                                                                                                                                                                                                         |       | (7,822                                               | )          | (7,250                                              | )          | (27,376 | ) | (16,070 | ) |
| Benefit  (provision) for income taxes                                                                                                                                                                                                                                            |       | 94                                                   |       | (125                                                | )          | (66 | ) | (375 | ) |
| Net loss                                                                                                                                                                                                                                                                         |       | $                                                    | (7,728     | )                                                   | $          | (7,375 | ) | $ | (27,442 | ) | $ | (16,445 | ) |

 

See accompanying notes

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**INSIGHTCOMMUNICATIONS COMPANY, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(*unaudited)(dollars in thousands)***

| ** **                                                                       | ** ** | **Nine months ended  September 30,** | ** ** |
|----------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                                       | ** ** | **2006**                                            | ** ** | **2005** | ** ** |
| **Operating activities:**                                                        | * *   | * *                                            | * *   | * * | * * |
| Net loss                                                                         |       | $                                                   | (27,442    | ) | $ | (16,445 | ) |
| Adjustments to  reconcile net loss to net cash provided by operating activities: |       |                                                |       |   |   |
| Depreciation and amortization                                                    |       | 200,398                                             |       | 183,274 |   |
| Stock-based compensation                                                         |       | 1,219                                               |       | 7,325 |   |
| Non-cash consulting expense                                                      |       | —                                              |       | 45 |   |
| Gain on interest rate swaps                                                      |       | —                                              |       | (1,684 | ) |
| Minority interest                                                                |       | (6,454                                              | )          | 6,069 |   |
| Provision for losses on trade accounts receivable                                |       | 13,959                                              |       | 13,196 |   |
| Contribution of stock to 401(k) Plan                                        |       | —                                              |       | 1,990 |   |
| Amortization of note discount                                                    |       | 6,663                                               |       | 28,630 |   |
| Changes in  operating assets and liabilities:                                    |       |                                                |       |   |   |
| Trade accounts receivable                                                        |       | (13,093                                             | )          | (4,470 | ) |
| Launch funds receivable                                                          |       | 458                                                 |       | 2,232 |   |
| Prepaid expenses and other assets                                                |       | (2,266                                              | )          | (7,392 | ) |
| Accounts payable                                                                 |       | (3,236                                              | )          | (9,241 | ) |
| Interest payable                                                                 |       | 31,324                                              |       | 27,488 |   |
| Accrued expenses and other liabilities                                           |       | (894                                                | )          | (6,005 | ) |
| Net cash provided by operating activities                                        |       | 200,636                                             |       | 225,012 |   |
| **Investing  activities:**                                                       |       |                                                |       |   |   |
| Purchase of fixed assets                                                         |       | (213,309                                            | )          | (144,622 | ) |
| Sale of fixed assets                                                             |       | 572                                                 |       | 2,145 |   |
| Purchase of investments                                                          |       | (778                                                | )          | (1,551 | ) |
| Sale of investments                                                              |       | —                                              |       | 991 |   |
| Net cash used in investing activities                                            |       | (213,515                                            | )          | (143,037 | ) |
| **Financing  activities:**                                                       |       |                                                |       |   |   |
| Repayment of credit facilities                                                   |       | (62,625                                             | )          | (62,625 | ) |
| Debt issuance costs                                                              |       | —                                              |       | (1,712 | ) |
| Net proceeds from borrowings under credit facility                               |       | 65,000                                              |       | — |   |
| Other                                                                            |       | 1                                                   |       | — |   |
| Net cash provided by (used in) financing activities                              |       | 2,376                                               |       | (64,337 | ) |
| Net increase  (decrease) in cash and cash equivalents                            |       | (10,503                                             | )          | 17,638 |   |
| Cash and cash  equivalents, beginning of period                                  |       | 29,782                                              |       | 100,144 |   |
| Cash and cash  equivalents, end of period                                        |       | $                                                   | 19,279     |   | $ | 117,782 |   |

 

See accompanying notes

5

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**INSIGHT COMMUNICATIONS COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**1. Organization and Basisof Presentation**

Through our wholly owned subsidiary, InsightCommunications Company, L.P. (“Insight LP”), we own a 50% interest in InsightMidwest, L.P. (“Insight Midwest”), which through its operating subsidiaries,Insight Communications Midwest, LLC (“Insight Communications Midwest”), InsightKentucky Partners II, L.P. (“Insight Kentucky”) and Insight Communications ofCentral Ohio, LLC (“Insight Ohio”), owns and operates cable television systemsin Indiana, Kentucky, Ohio, and Illinois which passed approximately 2.5 millionhomes and served approximately 1.3 million customers as of September 30,2006.

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

The accompanyingconsolidated financial statements include our accounts and those of our whollyowned subsidiaries, Insight LP and Insight Cable Services, LLC. Reclassificationshave been made to the prior year’s financial statements to conform to thoseclassifications used in 2006.

**2. Responsibility forInterim Financial Statements**

Our accompanying unaudited consolidated financialstatements have been prepared in accordance with accounting principlesgenerally accepted in the United States for interim financial information andwith the instructions to Form 10-Q and Article 10 of RegulationS-X. Accordingly, they do not include all of the information and footnotedisclosures required by accounting principles generally accepted in the UnitedStates for complete financial statements.

In our opinion, the consolidated financial statementsreflect all adjustments considered necessary for a fair presentation of theconsolidated results of operations and financial position for the interimperiods presented. All such adjustments are of a normal recurring nature. Theseunaudited interim consolidated financial statements should be read inconjunction with the audited consolidated financial statements and notes toconsolidated financial statements contained in our Annual Report on Form 10-Kfor the year ended December 31, 2005.

The preparation offinancial statements in conformity with accounting principles generallyaccepted in the United States requires us to make estimates and assumptionsthat affect the reported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of the financial statements andthe reported amounts of revenues and expenses during the reporting period. Actualresults could differ from those estimates. The results of operations for thethree and nine months ended September 30, 2006 are not necessarilyindicative of the results to be expected for the year ending December 31,2006 or any other interim period.

**3. RecentAccounting Pronouncements**

InDecember 2004, the Financial Accounting Standards Board (“FASB”) issuedStatement of Financial Accounting Standards No. 123 (revised 2004),*Share-Based Payment*, (“SFAS 123R”). SFAS 123Restablishes the accounting for transactions in which an entity pays foremployee services in share-based payment transactions. SFAS 123R requirescompanies to recognize the cost of employee services received in exchange forawards of equity instruments, based on the grant date fair value of thoseawards, in the financial statements. The Company adopted SFAS 123R effective January 1,2006 using the modified-prospective transition method. Under this methodstock-based compensation is recognized for 

6

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

**3. RecentAccounting Pronouncements (Continued)**

awards granted in theperiod after adoption. Prior year financial statements are not restated. Theadoption of this standard did not have a material impact on our consolidatedfinancial statements.

In July 2006, FASBissued FASB Interpretation No. 48, *Accounting for Uncertaintyin Income Taxes—an interpretation of FASB Statement No. 109,* (“FIN48”). FIN 48 clarifies the accounting for uncertainty in income taxesrecognized in financial statements in accordance with FASB Statement No. 109,*Accounting for Income Taxes*. FIN 48prescribes a recognition threshold and measurement attribute for the financialstatement recognition and measurement of a tax position taken or expected to betaken in a tax return. FIN 48 also provides guidance on derecognition,classification, interest and penalties, accounting in interim periods,disclosure, and transition. The Company is required to adopt the provisions ofFIN 48 during the first fiscal year beginning after December 15, 2006. TheCompany is currently evaluating the impact of FIN 48 on our consolidatedfinancial statements.

**4. Stock-BasedCompensation**

In accordance with SFAS 123R, during the threemonths ended September 30, 2006, the Company recorded $335,000 ofstock-based compensation expense for the vesting of deferred shares and theissuance, in connection with hiring of personnel, of Series F non-votingcommon stock. For the nine months ended September 30, 2006, the Companyrecorded $1.2 million of stock-based compensation expense for the vesting ofdeferred shares and the issuance, in connection with hiring of personnel, of Series Eand F non-voting common stock. These expenses are included in selling, generaland administrative expense on our consolidated statements of operations.

Forthe three and nine months ended September 30, 2005, the Company accountedfor stock-based compensation under Accounting Principles Board Opinion No. 25,*Accounting for Stock Issued to Employees*(“APB 25”)*.*Compensation cost related tostock awards issued to employees was recorded only if the grant-date marketprice of the underlying stock exceeded the exercise price. The following tablesummarizes relevant information as to our reported results under APB 25(the intrinsic value method of accounting for stock awards), with supplementalinformation, as if a fair value method had been applied to all awards inaccordance with SFAS 123R.

| ** **                                                                                     | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|------------------------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                                                     | ** ** | **2005**                                             | ** ** | **2005**                                            | ** ** |
| ** **                                                                                     | ** ** | **(in thousands)**                              | ** ** |
| Net loss                                                                                       |       |                                                 | $          | (7,375                                              | )          |   |   | $ | (16,445 | ) |   |
| Stock-based  compensation as reported                                                          |       |                                                 | 3,876      |                                                |       |   | 7,325 |   |   |
| Stock-based  compensation determined under fair value based method for all awards, net of  tax |       |                                                 | (5,712     | )                                                   |       |   | (12,922 | ) |   |
| Adjusted net loss                                                                              |       |                                                 | $          | (9,211                                              | )          |   |   | $ | (22,042 | ) |   |

 

**5. Investments**

***Promptu***

Promptu (formerly AgileTVCorporation) is a privately owned company that develops voice navigationservices for television and mobile devices. On May 11, 2005, we made anadditional investment in Promptu by purchasing shares of Promptu’s Series B1preferred stock and common stock for an 

7

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

**5. Investments(Continued)**

aggregatepurchase 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 accountingfor our investment in Promptu under the cost method. As of September 30, 2006 and December 31,2005, our carrying value in this investment was $1.2 million.

***Oxygen Cable, LLC***

Oxygen Cable, LLC (“Oxygen”) is an independent cabletelevision network with programming tailored to the interests of women. On July 9,2002 we entered into a carriage agreement with Oxygen, whereby we agreed tocarry programming content from Oxygen. In October 2006, we agreed toextend the term of the carriage agreement through December 31, 2008.

Concurrently with thecarriage agreement, we entered into an equity issuance agreement with Oxygen.The agreement called for Oxygen to deliver to us shares having an aggregatefair market value as of December 31, 2005 of $3.8 million, and by December 1,2006 deliver to us additional shares having an aggregate fair market value asof the December 31, 2005 valuation of $2.0 million. Pursuant to the equityissuance agreement, a portion of the monthly programming fees represent ourequity investment in Oxygen. As of September 30, 2006 and December 31,2005, our carrying value in this investment was $5.5 million and$4.7 million. In October 2006, in connection with the extension of thecarriage term, Oxygen issued to us shares of common stock representing a valueas of December 31, 2005 of $5.8 million in full satisfaction of itsobligation to issue equity to us under the equity issuance agreement.

**6. Fixed Assets**

| ** **                                       | ** ** | **September 30,**  | ** ** | **December 31,** | ** ** |
|--------------------------------------------------|------------|-------------------------|------------|-----------------------|------------|
| ** **                                       | ** ** | **2006**                | ** ** | **2005**              | ** ** |
| ** **                                       | ** ** | **(in thousands)** | ** ** |
| Land, buildings  and improvements                |       |                    | $          | 43,678                |       |   | $ | 41,042 |   |
| Cable system  equipment                          |       |                    | 2,606,275  |                  |       | 2,398,364 |   |
| Furniture,  fixtures and office equipment        |       |                    | 23,224     |                  |       | 21,352 |   |
|                                             |       |                    | 2,673,177  |                  |       | 2,460,758 |   |
| Less: accumulated  depreciation and amortization |       |                    | (1,525,844 | )                     |       | (1,330,053 | ) |
| Total fixed assets, net                          |       |                    | $          | 1,147,333             |       |   | $ | 1,130,705 |   |

 

We recorded depreciationexpense of $67.3 million and $196.1 million for the three and nine months endedSeptember 30, 2006 and $59.6 million and $179.2 million for the three andnine months ended September 30, 2005.

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

**7. Debt**

| ** **                                      | ** ** | **September 30,**  | ** ** | **December 31,** | ** ** |
|-------------------------------------------------|------------|-------------------------|------------|-----------------------|------------|
| ** **                                      | ** ** | **2006**                | ** ** | **2005**              | ** ** |
| ** **                                      | ** ** | **(in thousands)** | ** ** |
| Insight Midwest  Holdings Credit Facility       |       |                    | $          | 1,406,625             |       |   |   | $ | 1,404,250 |   |   |
| 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 |   |   |
|                                            |       |                    | 2,771,625  |                  |       |   | 2,769,250 |   |   |
| Net unamortized  discount/premium on notes      |       |                    | (287       | )                     |       |   | (6,950 | ) |   |
| Market value of  interest rate swaps            |       |                    | —     |                  |       |   | (2,382 | ) |   |
| Total debt                                      |       |                    | $          | 2,771,338             |       |   |   | $ | 2,759,918 |   |   |

 

**Insight MidwestHoldings Credit Facility**

Insight Midwest Holdings, LLC, a wholly ownedsubsidiary of Insight Midwest, holds all of the outstanding equity of each ofour operating subsidiaries and serves as borrower under a credit facility. On March 28,2002, we loaned $100.0 million to Insight Midwest. The loan to Insight Midwestbears annual interest of 9%, compounded semi-annually, has a scheduled maturitydate of January 31, 2011 and permits prepayments.  Insight Midwest Holdings is permitted underthe credit facility to make distributions to Insight Midwest for the purpose ofrepaying our loan, including accrued interest, provided that there are nodefaults existing under the credit facility. In August 2006, InsightMidwest repaid $12.6 million of the loan balance. As of September 30, 2006and December 31, 2005, the balance of the $100.0 million loan, includingaccrued interest, was $136.0 million and $139.1 million.

On September 11, 2006we announced plans to refinance certain indebtedness of Insight Midwest. Therefinancing was completed on October 6, 2006. See Subsequent Event Note12.

**Insight Inc. 12**1¤4%Senior Discount Notes

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

9

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

**7. Debt(Continued)**

***Debt Principal Payments***

As of September 30,2006, the remaining principal payments required on our debt were as follows (inthousands):

| 2006       |   | $         | 20,875    |   |
|------------|--------|-----------|-----------|--------|
| 2007       |   | 83,500    |      |
| 2008       |   | 104,750   |      |
| 2009       |   | 1,582,500 |      |
| 2010       |   | 630,000   |      |
| Thereafter |   | 350,000   |      |
| Total      |   | $         | 2,771,625 |   |

 

**8. Derivative Instruments**

We enter into derivative instruments, typicallyinterest-rate swap agreements, to modify the interest characteristics of ouroutstanding debt to either a floating or fixed rate basis. These agreementsinvolve fixed rate interest payments in exchange for floating rate interestreceipts, known as cash flow hedges, and floating rate interest payments inexchange for fixed rate interest receipts, known as fair value hedges, over thelife of the agreement without an exchange of the underlying principal amount. Thedifferential to be paid or received is accrued as interest rates change and isrecognized as an adjustment to interest expense related to the debt. Therelated amount payable or receivable is included in other non-currentliabilities or assets.

Gains and losses relatedto fair value hedges that are determined to be effective hedges are recorded inthe consolidated statements of operations as an adjustment to the swapinstrument and an offsetting adjustment to the carrying value of the underlyingdebt. Gains and losses related to interest rate swaps that are determined notto be effective hedges and do not qualify for hedge accounting are recorded inour consolidated statements of operations as other income or expense.

***Fair Value Hedges***

In July 2003, we entered into three interest rateswap agreements whereby we swapped fixed rates under a tranche of our 101⁄2%senior notes due in December 2010 for variable rates equal to six-monthLIBOR, plus the applicable margin of approximately 8.3%, on $185.0 millionnotional value of debt. These agreements expired on November 1, 2005. Werecorded a gain on these swaps of $872,000 and $1.7 million for the three andnine months ended September 30, 2005, which is included in other income(expense).

In December 2003, weentered into an interest rate swap agreement whereby we swapped fixed ratesunder a different tranche of our 101⁄2% senior notes due in December 2010for variable rates equal to six-month LIBOR, plus the applicable margin ofapproximately 5.9%, on $130.0 million notional value of debt. We terminatedthis agreement as of September 30, 2006 and the cost of termination wasincluded in interest expense. This swap was determined to be perfectlyeffective in hedging against fluctuations in the fair value of the underlyingdebt. As such, changes in the fair value of the underlying debt equally offsetchanges in the value of the interest rate swap in our consolidated balancesheets. The cost, if terminated, of 

10

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

**8. DerivativeInstruments (Continued)**

thisswap as of December 31, 2005 was $2.4 million and was recorded in othernon-current liabilities and as an adjustment to the carrying value of debt.

**9. Minority Interest**

As of September 30, 2006 and December 31,2005 we had $244.6 million and $251.0 million of minority interest recorded inour consolidated balance sheets as temporary equity related to Insight Midwest.

The Insight Midwest partnership was formed in September 1999to serve as the holding company and a financing vehicle for our cabletelevision system 50/50 joint venture with an indirect subsidiary of AT&TBroadband (now known as Comcast Cable). The results of the partnership areincluded in our consolidated financial statements since we as general partnereffectively control Insight Midwest’s operating and financial decisions. Thepartnership will continue until October 1, 2011 unless extended orterminated earlier in accordance with the provisions of the Insight Midwestpartnership agreement.

Depending on the nature ofa dissolution of the partnership, Insight Midwest may be required, inaccordance with the partnership agreement, to either distribute to ComcastCable some of its cable systems and liabilities equal to 50% of the net marketvalue of the partnership or, in the event of a liquidation, an amount in cashequal to 50% of the net proceeds received.

**10. Related PartyTransactions**

We purchase the majorityof our programming through affiliates of Comcast Cable. Charges for suchprogramming, including a 11¤2%administrative fee, were $47.8 million and $135.1 million for the three andnine months ended September 30, 2006 and $39.4 million and $120.1 millionfor the three and nine months ended September 30, 2005. As of September 30,2006 and December 31, 2005, $32.3 million and $29.9 million ofaccrued programming costs were due to affiliates of Comcast Cable. We believethat the programming rates charged through these affiliates are lower thanthose available from independent parties.

**11. Commitments andContingencies**

**Programming Contracts**

We enter into long-termcontracts with third parties who provide us with programming for distributionover our cable television systems. These programming contracts are asignificant part of our business and represent a substantial portion of ouroperating costs. Since future fees under such contracts are based on numerousvariables, including number and type of customers, we have not recorded anyliabilities with respect to such contracts.

**Litigation**

Between March 7 and March 15,2005, five purported class action lawsuits were filed in the Delaware Court ofChancery naming Insight Communications Company, Inc. and each of itsdirectors as defendants. Three of the lawsuits also named The Carlyle Group asa defendant. The cases were subsequently consolidated under the caption*In Re Insight Communications Company, Inc.Shareholders Litigation* (Civil 

11

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

**11. Commitmentsand Contingencies (Continued)**

Action No. 1154-N),and, on April 11, 2005, a Consolidated Amended Complaint (“Complaint”) wasfiled against each director and The Carlyle Group. The Complaint alleges, amongother things, that the defendant directors breached their fiduciary duties toour stockholders in connection with a proposal from Sidney R. Knafel, MichaelWillner, together with certain related and other parties, and The Carlyle Groupto acquire all of our outstanding, publicly-held Class A common stock. TheComplaint also alleges that the proposed transaction violated our Charter andthat The Carlyle Group aided and abetted the alleged fiduciary duty breaches.The Complaint seeks the certification of a class of our stockholders; adeclaration that the proposed transaction violates our Charter; an injunctionprohibiting the defendants from proceeding with the proposed transaction;rescission or other damages in the event the proposed transaction isconsummated; an award of costs and disbursements including attorneys’fees; and other relief.

On July 28, 2005, theparties to the action entered into a memorandum of understanding setting forththe terms of a proposed settlement of the litigation which, among other things,provides that the buyers shall proceed with the merger, subject to the termsand conditions of the merger agreement including the “majority of the minority”stockholder voting condition, and under which the defendants admit to nowrongdoing or fault. The memorandum of understanding contemplates certificationof a plaintiff class consisting of all record and beneficial owners of our Class Acommon stock, other than the buyers, during the period beginning on andincluding March 6, 2005, through and including the date of theconsummation of the merger, a dismissal of all claims with prejudice, and arelease in favor of all defendants of any and all claims related to the merger.The proposed settlement is subject to a number of conditions, includingconsummation of the merger which closed on December 16, 2005, theplaintiffs’ approval of a definitive settlement agreement and final court approvalof the settlement.

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

On September 1, 2006,Ms. Kelly filed a supplemental objection to the settlement. On September 25,2006, the Court convened the settlement hearing, and with the agreement of allof the parties to the action, adjourned the settlement hearing until November 9,2006. On October 12, 2006, the defendants and plaintiffs filed briefs withaccompanying affidavits in support of the settlement. On November 2, 2006,Ms. Kelly filed reply papers in support of her objection. OnNovember 9, 2006, the parties to the action agreed to seek an adjournmentof the settlement hearing until a date and time to be determined based on theavailability of the parties and the court. We intend to vigorously support thesettlement. The outcome of this matter cannot be predicted at this time.

On April 14, 2006, Ms. Kellyfiled a petition with the Court, seeking appraisal for the 180,000 shares of Class Acommon stock she held of record prior to the merger. She also purported to seekrecovery with respect to certain options, as well as certain other shares ofwhich she was not the record holder. On May 15, 2006, we filed an answerto the petition, which asserted among other things, that Ms. Kelly was not

12

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

**11. Commitmentsand Contingencies (Continued)**

entitledto the appraisal of her options under Delaware law, and that she had notproperly sought an appraisal with respect to the additional shares of thecompany’s stock that she did not hold of record. Ms. Kelly subsequentlyserved discovery requests on the company, to which the company has servedresponses and objections. We intend to defend this action vigorously. Theoutcome of this matter cannot be predicted at this time. On August 3,2006, Ms. Kelly sent our board of directors a claim letter alleging thatthe company and certain affiliated entities breached certain purportedcommitments relating to certain equity interests and options that she held. Werejected her alleged claims in a letter dated September 18, 2006.

In April 2005, AcaciaMedia Technologies Corporation filed a lawsuit against us and others in theUnited States District Court for the Southern District of New York. Thecomplaint alleges, among other things, infringement of certain United Statespatents that allegedly relate to systems and methods for transmitting and/orreceiving digital audio and video content. The complaint seeks injunctiverelief and damages in an unspecified amount. In the event that a courtultimately determines that we infringe on any of the patents, we may be subjectto substantial damages, which may include treble damages and/or an injunctionthat could require us to materially modify certain products and services thatwe currently offer to subscribers. We believe that the claims are without meritand intend to defend the action vigorously. The final disposition of this claimis not expected to have a material adverse effect on our consolidated financialposition but could possibly be material to our consolidated results of operationsof any one period. Further, at this time the outcome of the litigation isimpossible to predict, and no assurance can be given that any adverse outcomewould not be material to our consolidated financial position.

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

**12. Subsequent Event**

On October 6, 2006,we completed the financing of $2.445 billion of senior secured creditfacilities for Insight Midwest Holdings. The facilities comprise term loans inthe amount of $2.185 billion and a $260.0 million revolving credit facility. Theproceeds were used to refinance Insight Midwest Holdings’ existing seniorcredit facilities and to redeem all of Insight Midwest’s 10 1⁄2% Senior Notes dueNovember 1, 2010 and $185.0 million principal amount of Insight Midwest’s9 3⁄4% Senior Notes due October 1, 2009.

13

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**Item 2. Management’sDiscussion and Analysis of Financial Condition and Results of Operations**

**CautionaryStatement Regarding Forward-Looking Information**

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

·       Allof the services offered by our company face a wide range of competition thatcould adversely affect our future results of operations;

·       Wehave substantial debt and have significant interest payment requirements, whichmay adversely affect our ability to obtain financing in the future to financeour operations and our ability to react to changes in our business;

·       Thereis uncertainty surrounding the potential dissolution of our joint venture witha subsidiary of Comcast Corporation;

·       Theterms of Insight Midwest’s indebtedness limits our ability to access the cashflow of Insight Midwest’s subsidiaries for debt service and any other purpose;

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

·       Ourprogramming costs are substantial, and they are expected to increase; and

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

We do not undertake anyobligation to publicly update or release any revisions to these forward-lookingstatements to reflect events or circumstances after the date that thisquarterly report is filed with the SEC or to reflect the occurrence of unanticipatedevents, except as required by law.

**Overview**

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

Some of the principal reasons for our net lossesthrough September 30, 2006 include i) depreciation and amortizationassociated with capital expenditures for the construction, expansion andmaintenance of our systems, and, ii) interest costs on borrowed money. Weexpect to continue to report net losses for the foreseeable future. We cannotpredict what impact, if any, continued losses will have on our ability tofinance our operations in the future.

14

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Thefollowing table is derived from our consolidated financial statements that areincluded in this report and sets forth certain statement of operations data forour consolidated operations:

| ** **                                           | ** ** | **Three Months  Ended September 30,** | ** ** | **Nine Months  Ended September 30,** | ** ** |
|------------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                           | ** ** | **2006**                                             | ** ** | **2005**                                            | ** ** | **2006** | ** ** | **2005** | ** ** |
| ** **                                           | ** ** | **(in thousands)**                              | ** ** |
| Revenue                                              |       | $                                                    | 318,105    |                                                | $          | 278,986 |   | $ | 931,103 |   | $ | 827,624 |   |
| Operating costs and  expenses:                       |       |                                                 |       |                                                |       |   |   |   |   |
| Programming and other operating costs                |       | 111,431                                              |       | 93,514                                              |       | 333,676 |   | 284,269 |   |
| Selling, general and administrative                  |       | 82,120                                               |       | 73,340                                              |       | 243,935 |   | 204,682 |   |
| Depreciation and amortization                        |       | 68,743                                               |       | 61,054                                              |       | 200,398 |   | 183,274 |   |
| Total operating  costs and expenses                  |       | 262,294                                              |       | 227,908                                             |       | 778,009 |   | 672,225 |   |
| Operating income                                     |       | 55,811                                               |       | 51,078                                              |       | 153,094 |   | 155,399 |   |
| Interest expense                                     |       | 65,810                                               |       | 57,773                                              |       | 188,093 |   | 168,781 |   |
| Minority interest  income (expense)                  |       | 1,839                                                |       | (2,242                                              | )          | 6,454 |   | (6,069 | ) |
| Net loss                                             |       | (7,728                                               | )          | (7,375                                              | )          | (27,442 | ) | (16,445 | ) |
| Net cash provided  by operating activities           |       | 67,304                                               |       | 81,785                                              |       | 200,636 |   | 225,012 |   |
| Net cash used in  investing activities               |       | 71,736                                               |       | 50,100                                              |       | 213,515 |   | 143,037 |   |
| Net cash used in  (provided by) financing activities |       | (19,125                                              | )          | 22,587                                              |       | (2,376 | ) | 64,337 |   |
| Capital expenditures                                 |       | 71,544                                               |       | 51,109                                              |       | 213,309 |   | 144,622 |   |
|                                                      |            |                                                      |            |                                                     |            |  |  |  |  |  |  |  |  |

 

**Use of AdjustedOperating Income before Depreciation and Amortization and Free Cash Flow**

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

A limitation of Adjusted Operating Income beforeDepreciation and Amortization, however, is that it does not reflect theperiodic costs of certain capitalized tangible and intangible assets used ingenerating revenues in our businesses. Management evaluates the costs of suchtangible and intangible assets through other financial measures such as capitalexpenditures, investment spending and Free Cash Flow. Management also evaluatesthe costs of capitalized tangible and intangible assets by analyzing returnsprovided on the capital dollars deployed. Another limitation of AdjustedOperating Income before Depreciation and Amortization is that it does notreflect income net of interest expense, which is a significant expense for usbecause of the substantial debt we incurred to acquire cable television systemsand finance capital expenditures to upgrade our cable network. Managementevaluates the impact of interest expense through measures including interestexpense, Free Cash Flow, the returns analysis discussed above and debt servicecovenant ratios under our credit facility.

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Free Cash Flow is net cash provided by operatingactivities (as defined by accounting principles generally accepted in theUnited States) less capital expenditures. Free Cash Flow is considered to be animportant indicator of our liquidity, including our ability to repayindebtedness. We believe Free Cash Flow is useful for investors because itenables them to assess our ability to service our debt and to fund continuedgrowth with internally generated funds in a manner similar to the methods usedby our management, and provides a measure that can be used to analyze, valueand compare companies in the cable television industry.

Both Adjusted OperatingIncome before Depreciation and Amortization and Free Cash Flow should beconsidered in addition to, not as a substitute for, Operating Income, NetIncome and various cash flow measures (e.g., Net Cash Provided by OperatingActivities), as well as other measures of financial performance and liquidityreported in accordance with accounting principles generally accepted in theUnited States.

***Reconciliation of Net Loss to Adjusted OperatingIncome before Depreciation and Amortization***

Thefollowing table reconciles Net Loss to Adjusted Operating Income beforeDepreciation and Amortization. In addition, the table provides the componentsfrom Net Loss to Operating Income.  

| ** **                                                      | ** ** | **Three Months  Ended September 30,** | ** ** | **Nine Months  Ended September 30,** | ** ** |
|-----------------------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                      | ** ** | **2006**                                             | ** ** | **2005**                                            | ** ** | **2006** | ** ** | **2005** | ** ** |
| ** **                                                      | ** ** | **(in thousands)**                              | ** ** |
| Net loss                                                        |       | $                                                    | (7,728     | )                                                   | $          | (7,375 | ) | $ | (27,442 | ) | $ | (16,445 | ) |
| (Benefit)  provision for income taxes                           |       | (94                                                  | )          | 125                                                 |       | 66 |   | 375 |   |
| Loss before  income taxes                                       |       | (7,822                                               | )          | (7,250                                              | )          | (27,376 | ) | (16,070 | ) |
| Minority interest  income (expense)                             |       | (1,839                                               | )          | 2,242                                               |       | (6,454 | ) | 6,069 |   |
| Loss before  minority interest and income taxes                 |       | (9,661                                               | )          | (5,008                                              | )          | (33,830 | ) | (10,001 | ) |
| Other (income) expense:                                         |       |                                                 |       |                                                |       |   |   |   |   |
| Other                                                           |       | 28                                                   |       | (834                                                | )          | 78 |   | (1,505 | ) |
| Interest income                                                 |       | (366                                                 | )          | (853                                                | )          | (1,247 | ) | (1,876 | ) |
| Interest expense                                                |       | 65,810                                               |       | 57,773                                              |       | 188,093 |   | 168,781 |   |
| Total other  expense, net                                       |       | 65,472                                               |       | 56,086                                              |       | 186,924 |   | 165,400 |   |
| Operating income                                                |       | 55,811                                               |       | 51,078                                              |       | 153,094 |   | 155,399 |   |
| Depreciation and  amortization                                  |       | 68,743                                               |       | 61,054                                              |       | 200,398 |   | 183,274 |   |
| Stock-based  compensation                                       |       | 335                                                  |       | 3,876                                               |       | 1,219 |   | 7,325 |   |
| Adjusted Operating  Income before Depreciation and Amortization |       | $                                                    | 124,889    |                                                | $          | 116,008 |   | $ | 354,711 |   | $ | 345,998 |   |

 

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***Reconciliation of Net Cash Provided by OperatingActivities to Free Cash Flow***

Thefollowing table provides a reconciliation from net cash provided by operatingactivities to Free Cash Flow. In addition, the table provides the componentsfrom net cash provided by operating activities to operating income for purposesof the discussions that follow.

| ** **                                                      | ** ** | **Three Months  Ended September 30,** | ** ** | **Nine Months  Ended September 30,** | ** ** |
|-----------------------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                      | ** ** | **2006**                                             | ** ** | **2005**                                            | ** ** | **2006** | ** ** | **2005** | ** ** |
| ** **                                                      | ** ** | **(in thousands)**                              | ** ** |
| Operating income                                                |       | $                                                    | 55,811     |                                                | $          | 51,078 |   | $ | 153,094 |   | $ | 155,399 |   |
| Depreciation and  amortization                                  |       | 68,743                                               |       | 61,054                                              |       | 200,398 |   | 183,274 |   |
| Stock-based  compensation                                       |       | 335                                                  |       | 3,876                                               |       | 1,219 |   | 7,325 |   |
| Adjusted  Operating Income before Depreciation and Amortization |       | 124,889                                              |       | 116,008                                             |       | 354,711 |   | 345,998 |   |
| Changes in  working capital accounts(1)                         |       | (6,918                                               | )          | (13,713                                             | )          | (3,246 | ) | (8,136 | ) |
| Cash paid for  interest                                         |       | (50,603                                              | )          | (20,480                                             | )          | (150,074 | ) | (112,598 | ) |
| Cash paid for  taxes                                            |       | (64                                                  | )          | (30                                                 | )          | (755 | ) | (252 | ) |
| Net cash provided  by operating activities                      |       | 67,304                                               |       | 81,785                                              |       | 200,636 |   | 225,012 |   |
| Capital  expenditures                                           |       | (71,544                                              | )          | (51,109                                             | )          | (213,309 | ) | (144,622 | ) |
| Free Cash Flow                                                  |       | $                                                    | (4,240     | )                                                   | $          | 30,676 |   | $ | (12,673 | ) | $ | 80,390 |   |

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(1)          Changes in working capitalaccounts are based on the net cash changes in current assets and currentliabilities, excluding charges related to interest and taxes and other non-cashexpenses.

 

**Results ofOperations**

***ThreeMonths Ended September 30, 2006 Compared to Three Months Ended September 30,2005***

Revenue for the three months ended September 30,2006 totaled $318.1million, an increase of 14% over the prior year, dueprimarily to customer gains in all services, as well as video rate increases.High-speed Internet service revenue increased 22% over the prior year, whichwas attributable to an increased customer base and was partially offset bylower average revenue per customer due to promotional discounts. We added a net44,800 high-speed Internet customers during the quarter to end at 579,300customers.

Basic cable service revenue increased 8% due to anincreased customer base and video rate increases, partially offset bypromotional discounts. In addition, digital service revenue increased 28% overthe prior year primarily due to an increased customer base. We added a net22,500 digital customers during the quarter to end at 597,700 customers. Otherrevenue also increased as a result of a settlement of a fiber lease dispute.

We have been increasingour customer growth and retention efforts by increasing spending on sales andmarketing efforts, emphasizing bundling and enhancing and differentiating ourvideo services by providing video-on-demand, high definition television anddigital video recorders. We are also continuing to focus on improving customersatisfaction through higher service levels and increased customer education ofproduct offerings.

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Revenueby service offering was as follows for the three months ended September 30(dollars in thousands):

| ** **           | ** ** | **Revenue by Service Offering**       | ** ** |                          |
|----------------------|------------|------------------------------------------------------|------------|-------------------------------|
| ** **           | ** ** | **Three Months  Ended  September 30,2006** | ** ** | **% of  Total  Revenue** | ** ** | **Three Months  Ended  September 30,2005** | ** ** | **% of  Total  Revenue** | ** ** | ** ** | ** ** | **% Change  in Revenue** | ** ** |   |
| Basic                |       |                                                 | $          | 159,677                       |   |   |   | 50.2 | % |   |   | $ | 148,393 |   |   |   | 53.2 | % |   |   |   |   | 7.6 | % |   |
| High-Speed  Internet |       |                                                 | 60,402     |                          |   |   | 19.0 | % |   |   | 49,677 |   |   |   | 17.8 | % |   |   |   |   | 21.6 | % |   |
| Digital              |       |                                                 | 34,979     |                          |   |   | 11.0 | % |   |   | 27,300 |   |   |   | 9.8 | % |   |   |   |   | 28.1 | % |   |
| Advertising          |       |                                                 | 20,024     |                          |   |   | 6.3 | % |   |   | 18,416 |   |   |   | 6.6 | % |   |   |   |   | 8.7 | % |   |
| Premium              |       |                                                 | 13,891     |                          |   |   | 4.4 | % |   |   | 13,215 |   |   |   | 4.7 | % |   |   |   |   | 5.1 | % |   |
| Telephone            |       |                                                 | 13,249     |                          |   |   | 4.2 | % |   |   | 9,020 |   |   |   | 3.2 | % |   |   |   |   | 46.9 | % |   |
| Franchise fees       |       |                                                 | 7,496      |                          |   |   | 2.3 | % |   |   | 7,681 |   |   |   | 2.8 | % |   |   |   |   | -2.4 | % |   |
| Other                |       |                                                 | 8,387      |                          |   |   | 2.6 | % |   |   | 5,284 |   |   |   | 1.9 | % |   |   |   |   | 58.7 | % |   |
| Total                |       |                                                 | $          | 318,105                       |   |   |   | 100.0 | % |   |   | $ | 278,986 |   |   |   | 100.0 | % |   |   |   |   | 14.0 | % |   |

 

TotalCustomer Relationships were 1,395,400 as of September 30, 2006, anincrease of 61,200 from 1,334,200 as of September 30, 2005. Total CustomerRelationships represent the number of customers who receive one or more of ourproducts (i.e., basic cable, high-speed Internet or telephone) without regardto which product they purchase. In the three months ending September 30,2006, we added 92,400 total Revenue Generating Units (“RGUs”), which representthe sum of basic, digital, high-speed Internet and telephone customers, and asof September 30, 2006, had 2,608,700 RGUs, an increase of 14% from September 30,2005. RGUs by category were as follows (in thousands):

| ** **           | ** ** | **September 30, 2006** | ** ** | **September 30, 2005** | ** ** |
|----------------------|------------|----------------------------------|------------|----------------------------------|------------|
| Basic                |       |                             | 1,318.8    |                             |       |   | 1,271.0 |   |   |
| Digital              |       |                             | 597.7      |                             |       |   | 489.9 |   |   |
| High-Speed  Internet |       |                             | 579.3      |                             |       |   | 439.2 |   |   |
| Telephone            |       |                             | 112.9      |                             |       |   | 80.9 |   |   |
| Total RGUs           |       |                             | 2,608.7    |                             |       |   | 2,281.0 |   |   |

 

Average monthly revenue per basic customer was $80.90for the three months ended September 30, 2006 compared to $73.57 for thethree months ended September 30, 2005. This primarily reflects thecontinued growth of high-speed Internet and digital product offerings in allmarkets, as well as video rate increases and one-time revenue from thesettlement of a fiber lease dispute.

Programming and otheroperating costs increased $17.9 million, or 19%. Increases in customers, theaddition of new programming content and substantial increases in programmingrates were significant drivers of the cost increase for the three months ended September 30,2006. For the three months ended September 30, 2005, our programming costsreflected certain programming credits and a one-time settlement for a disputedclaim with a vendor. These credits resulted from favorable resolution ofpricing negotiations related to certain prior period programming costs thatwere accrued at a higher rate than the amount actually paid. Programmingcredits for the three months ended September 30, 2006, were significantlylower, causing our overall programming cost increases to be greater. Directoperating costs decreased due to a decrease in our high-speed Internet servicecosts as we finalized the transition of our Internet services in-house andrealized both the cost savings and operational benefits of this investmentpartially offset by increases in telephone cost of sales as we continue to investand roll out this product. Other operating costs increased primarily as aresult of increases in technical salaries for new and existing employees;increases in repair, maintenance and warranty costs; an increase in taxes dueto a change in the tax law in Kentucky; and an increase in outside installationlabor due to increased customer activity.

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Selling, general and administrative expenses increased$8.8 million, or 12%, primarily due to increased payroll, payroll related costsand temporary help associated with an increase in the number of employees andsalary increases for existing employees. The increase in the number ofemployees represents investments in direct sales, customer care and informationtechnology personnel to continue to upgrade and enhance our product offeringsand increase customer satisfaction. A portion of these information technologypersonnel increases were directly related to the transition of our Internetservices in-house. Marketing expenses increased over the prior year to support thecontinued rollout of high-speed Internet, digital and telephone products, andto grow our core video customer base. Customer billing, collection fees and baddebt expense increased due to the increase in our customer base.

Depreciation and amortization expense increased $7.7million, or 13%, primarily as a result of an increased level of capitalexpenditures through September 30,2006. These expenditures were primarily for purchases of customer premiseequipment, installation materials, capitalized labor, headend equipment,network extensions and network capacity and bandwidth increases, all of whichwe consider necessary in order to continue to maintain and grow our customerbase and expand our service offerings. Partially offsetting this increase was adecrease in depreciation expense related to certain assets that have becomefully depreciated since September 30, 2005.

As a result of the factors discussed above, AdjustedOperating Income before Depreciation and Amortization increased $8.9 million to$124.9 million, an increase of 8% over the prior year’s third quarter.

Interest expenseincreased $8.0 million, or 14%, due to:

·       higherinterest rates, which averaged 9.1% for the three months ended September 30, 2006, as compared to 8.3% for thethree months ended September 30,2005;

·       thetermination of our interest rate swap agreement during the three months ended September 30,2006; and

·       additional interest expenseon the now fully accreted 12 1⁄4% Senior Discount Notes.

***Nine Months Ended September 30, 2006 Compared toNine Months Ended September 30, 2005***

Revenue for the nine months ended September 30, 2006 totaled $931.1 million, anincrease of 13% over the prior year, due primarily to customer gains in allservices, as well as video rate increases. High-speed Internet service revenueincreased 27% over the prior year, which was attributable to an increasedcustomer base and was partially offset by lower average revenue per customerdue to promotional discounts. We added a net 108,900 high-speed Internet customersduring the nine months ended September 30, 2006 to end at 579,300customers.

Basic cable service revenue increased 7% due to anincreased customer base and video rate increases, partially offset bypromotional discounts. We added a net 37,200 basic customers during the ninemonths ended September 30, 2006 to end at 1,318,800 customers. Inaddition, digital service revenue increased 23% over the prior year primarilydue to an increased customer base. We added a net 78,900 digital customersduring the nine months ended September 30, 2006 to end at 597,700customers.

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Revenueby service offering was as follows for the nine months ended September (dollarsin thousands):

| ** **           | ** ** | **Revenue by Service  Offering**                        | ** ** | ** **                    |
|----------------------|------------|---------------------------------------------------------|------------|-------------------------------|
| ** **           | ** ** | **Nine Months Ended  September 30,2006** | ** ** | **% of  Total  Revenue** | ** ** | **Nine Months Ended  September 30,2005** | ** ** | **% of  Total  Revenue** | ** ** | **% Change  in Revenue** |
| Basic                |       |                                                    | $          | 478,212                       |   |   |   | 51.4 | % |   |   | $ | 446,096 |   |   |   | 53.9 | % |   |   | 7.2 | % |
| High-Speed  Internet |       |                                                    | 175,515    |                          |   |   | 18.9 | % |   |   | 138,108 |   |   |   | 16.7 | % |   |   | 27.1 | % |
| Digital              |       |                                                    | 101,009    |                          |   |   | 10.8 | % |   |   | 81,899 |   |   |   | 9.9 | % |   |   | 23.3 | % |
| Advertising          |       |                                                    | 57,741     |                          |   |   | 6.2 | % |   |   | 55,153 |   |   |   | 6.7 | % |   |   | 4.7 | % |
| Premium              |       |                                                    | 41,137     |                          |   |   | 4.4 | % |   |   | 41,305 |   |   |   | 5.0 | % |   |   | -0.4 | % |
| Telephone            |       |                                                    | 37,132     |                          |   |   | 4.0 | % |   |   | 25,139 |   |   |   | 3.0 | % |   |   | 47.7 | % |
| Franchise fees       |       |                                                    | 22,234     |                          |   |   | 2.4 | % |   |   | 22,884 |   |   |   | 2.8 | % |   |   | -2.8 | % |
| Other                |       |                                                    | 18,123     |                          |   |   | 1.9 | % |   |   | 17,040 |   |   |   | 2.0 | % |   |   | 6.4 | % |
| Total                |       |                                                    | $          | 931,103                       |   |   |   | 100.0 | % |   |   | $ | 827,624 |   |   |   | 100.0 | % |   |   | 12.5 | % |

 

Average monthly revenue per basic customer was $79.43for the nine months ended September 30, 2006 compared to $72.52 for thenine months ended September 30, 2005. This primarily reflects thecontinued growth of high-speed Internet and digital product offerings in allmarkets, as well as video rate increases.

Programming and other operating costs increased $49.4million, or 17%. Increases in customers, the addition of new programmingcontent and substantial increases in programming rates were significant driversof the cost increase for the nine months ended September 30, 2006. For thenine months ended September 30, 2005, our programming costs reflectedcertain programming credits and a one-time settlement for a disputed claim witha vendor. These credits resulted from favorable resolution of pricingnegotiations related to certain prior period programming costs that wereaccrued at a higher rate than the amount actually paid. Programming credits forthe nine months ended September 30, 2006, were significantly lower,causing our overall programming cost increases to be greater. In addition,direct operating costs increased due to an increase in our high-speed Internetservice costs and telephone cost of sales. These increases are primarilyattributable to the growth in our high-speed Internet and telephone customerbase and the payment of contractually obligated and other one-time transitioncosts to bring Internet services in-house. Other operating costs increasedprimarily as a result of increases in repair, maintenance and warranty costs;increases in gasoline prices for our vehicle fleet; an increase in taxes due toa change in the tax law in Kentucky; an increase in utility related expenses;and an increase in outside installation labor due to increased customerinstallation and disconnect activity.

Selling, general and administrative expenses increased$39.3 million, or 19%, primarily due to increased payroll, payroll relatedcosts and temporary help associated with an increase in the number of employeesand salary increases for existing employees. Marketing expenses increased overthe prior year to support the continued rollout of high-speed Internet, digitaland telephone products, and to grow our core video customer base. Customerbilling, collection fees and bad debt expense increased due to the increase inour customer base. Professional fees also increased due to increased legalactivity for the nine months ended September 30, 2006.

Depreciation and amortization expense increased $17.1million, or 9%, primarily as a result of an increased level of capitalexpenditures through September 30,2006. These expenditures were primarily for purchases of customer premiseequipment, installation materials, capitalized labor, headend equipment,network extensions and network capacity and bandwidth increases, all of whichwe consider necessary in order to continue to maintain and grow our customerbase and expand our service offerings. Partially offsetting this increase was adecrease in depreciation expense related to certain assets that have becomefully depreciated since September 30, 2005.

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As a result of the factors discussed above, AdjustedOperating Income before Depreciation and Amortization increased $8.7 million to$354.7 million, an increase of 3% over the nine months ended September 30,2005.

Interest expenseincreased $19.3 million, or 11%, due to:

·        higherinterest rates, which averaged 8.9% for the nine months ended September 30, 2006, as compared to 8.1% for thenine months ended September 30,2005;

·        thetermination of our interest rate swap agreement during the nine months ended September 30,2006; and

·        additional interestexpense on the now fully accreted 121⁄4% SeniorDiscount Notes.

**Liquidity andCapital Resources**

Our business requires cash for operations, debtservice and capital expenditures. The cable television business has substantialongoing capital requirements for the construction, expansion and maintenance ofits broadband networks and provision of new services. In the past, expenditureshave been made for various purposes, including the upgrade of the existingcable network, and will continue to be made for network extensions, networkcapacity and bandwidth increases, installation of new services, customerpremise equipment (e.g., set-top boxes), deployment of new product and serviceofferings, and, to a lesser extent, network upgrades. Historically, we havebeen able to meet our cash requirements with cash flow from operations,borrowings under our credit facilities and issuances of private and public debtand equity.

Cash provided by operations for the nine months ended September 30,2006 and 2005 was $200.6 million and $225.0 million. The decrease wasprimarily attributable to the effect of the initial cash interest payment onthe 121⁄4% Senior Discount Notes partially offset by the timing of cash receiptsand payments related to our working capital accounts.

Cash used in investing activities for the nine monthsended September 30, 2006 and 2005 was $213.5 million and $143.0million. The increase primarily was due to increases in capital expenditures. Forthe nine months ended September 30, 2006 and 2005, Insight spent $213.3million and $144.6 million in capital expenditures. These expendituresprincipally constituted purchases of customer premise equipment, capitalizedlabor, installation materials, headend equipment, network capacity andbandwidth increases and system upgrades and rebuilds, all of which arenecessary to maintain Insight’s existing network, grow its customer base andexpand its service offerings.

Cash provided by financing activities for the ninemonths ended September 30, 2006 was $2.4 million compared to $64.3 millionof cash used in financing activities for the nine months ended September 30,2005. The decrease was due to $65.0 million in net proceeds from borrowingsunder our credit facility for the nine months ended September 30, 2006.

Free Cash Flow forthe nine months ended September 30, 2006 totaled ($12.7) million, comparedto $80.4 million for the nine months ended September 30, 2005. This decreasein Free Cash Flow of $93.1 million was primarily driven by the following:

·       A$68.7 million increase in capital expenditures; and

·       A$37.5 million increase in cash interest expense paid primarily driven by theinitial cash interest payment on the 121⁄4% Senior Discount Notes and an increasein interest rates.

These uses of cashwere offset by:

·       An$8.7 million increase in Adjusted Operating Income and Depreciation andAmortization; and

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·       A$4.9 million decrease in the use of Free Cash Flow over the same period in theprior year from changes in working capital accounts.

We believe that the Insight Midwest Holdings credit facility,cash on-hand and our cash flow from operations are sufficient to support ourcurrent operating plan. OnOctober 6, 2006, Insight Midwest Holdings completed the financing of$2.445 billion of senior secured credit facilities. The facilities compriseterm loans in the amount of $2.185 billion and a $260.0 million revolvingcredit facility. The proceeds were used to refinance Insight Midwest Holdings’existing senior credit facilities and to redeem all of Insight Midwest’s 101⁄2%Senior Notes due November 1, 2010 and $185.0 million principal amount ofInsight Midwest’s 93⁄4% Senior Notes due October 1, 2009. This financingwill reduce Insight’s interest expense and near term debt amortizations. As of November 8, 2006, $110.3 millionof the $260.0 million revolving credit facility was drawn (including $9.3million in letters of credit) and Insight had the ability to draw upon $149.7million of unused availability to fund any shortfall resulting from theinability of Insight Midwest’s cash from operations to fund its capitalexpenditures, meet its debt service requirements or otherwise fund itsoperations. Insight expects to use any available Free Cash Flow to repay itsindebtedness.

We have a substantial amount of debt. Our high levelof debt could have important consequences for you. Our investments in ouroperating subsidiaries, including Insight Midwest, constitute substantially allof our operating assets. Consequently, our subsidiaries conduct all of ourconsolidated operations and own substantially all of our operating assets. Ourprincipal source of cash we need to pay our obligations and to repay theprincipal amount of our debt obligations is the cash that our subsidiariesgenerate from their operations and their borrowings. Our subsidiaries are not obligatedto make funds available to us and are restricted by the terms of theirindebtedness from doing so. Because of such restrictions, our ability to accessthe cash flow of our subsidiaries may be contingent upon our ability torefinance the debt of our subsidiaries. As of September 30, 2006 we werein compliance with all covenants under our credit agreement.

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

| ** **              | ** ** | **Contractual  Obligations** | ** ** |
|-------------------------|------------|------------------------------|------------|
| ** **              | ** ** | **Long-Term  Debt**          | ** ** | **Operating   Leases** | ** ** | **Total** | ** ** |
| 2006                    |       | $                            | 20,875     |   |   | $ | 1,328 |   |   | $ | 22,203 |   |
| 2007                    |       | 83,500                       |       |   | 4,176 |   |   | 87,676 |   |
| 2008                    |       | 104,750                      |       |   | 3,554 |   |   | 108,304 |   |
| 2009                    |       | 1,582,500                    |       |   | 2,546 |   |   | 1,585,046 |   |
| 2010                    |       | 630,000                      |       |   | 667 |   |   | 630,667 |   |
| Thereafter              |       | 350,000                      |       |   | 1,433 |   |   | 351,433 |   |
| Total cash  obligations |       | $                            | 2,771,625  |   |   | $ | 13,704 |   |   | $ | 2,785,329 |   |

 

**Item 3.Quantitative and Qualitative Disclosure About Market Risk**

Our revolving credit and term loan agreements bearinterest at floating rates. Accordingly, we are exposed to potential lossesrelated to changes in interest rates. In order to manage our exposure tointerest rate risk, we enter into derivative financial instruments, typicallyinterest rate swaps. The counter-parties to our swap agreements are majorfinancial institutions. We do not enter into derivatives or other financialinstruments for trading or speculative purposes.

The aggregate fair marketvalue and aggregate carrying value of our 93⁄4% and 101⁄2% senior notes and 121⁄4%senior discount notes was $1.4 billion as of September 30, 2006. The fair market value of ourcredit facility borrowings approximates its carrying value as the creditfacility borrowings bear interest at floating 

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rates ofinterest. As of December 31, 2005,the cost, if terminated, of our interest rate swap agreement was $2.4 millionand was reflected in our financial statements as an other non-currentliability.

**Item 4. Controlsand Procedures**

Our management carried out an evaluation, with theparticipation of our Chief Executive Officer and Chief Financial Officer, ofthe effectiveness of our disclosure controls and procedures as of September 30,2006. Based upon that evaluation, our Chief Executive Officer and ChiefFinancial Officer concluded that (i) our disclosure controls andprocedures were effective to ensure that information required to be disclosedby us in reports that we file or submit under the Securities Exchange Act of1934 is recorded, processed, summarized and reported, within the time periodsspecified in the rules and forms of the Securities and ExchangeCommission, and (ii) our disclosure controls and procedures were designedto ensure that information required to be disclosed by us in reports that wefile or submit under the Securities Exchange Act of 1934 is accumulated andcommunicated to our management, including our Chief Executive Officer and ChiefFinancial Officer, as appropriate, to allow timely decisions regarding requireddisclosure.

There has not been any change in our internal controlover financial reporting in connection with the evaluation required by Rule 13a-15(d) or15d-15(d) under the Exchange Act that occurred during the quarterended September 30, 2006 that has materially affected, or is reasonablylikely to materially affect, our internal control over financial reporting.

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**PART II. OTHERINFORMATION**

**Item 1. LegalProceedings**

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

**Item 1A. RiskFactors**

There have been nomaterial changes in our risk factors from those disclosed in our annual reporton Form 10-K for the year ended December 31, 2005.

**Item 2.Unregistered Sales of Equity Securities and Use of Proceeds**

During the three monthsended September 30, 2006,we issued 3,705 shares of Series F Non-voting common stock to certain ofour employees. The issuances of non-voting common stock were not registeredunder the Securities Act of 1933 because such issuances were offered and soldin transactions not involving a public offering, and therefore exempt fromregistration under the Securities Act of 1933 pursuant to Section 4(2).

**Item 5. OtherInformation**

**Termination of aMaterial Definitive Agreement**

As previously reported, on October 6, 2006,notices of redemption were delivered to the holders of the 101¤2%Senior Notes due 2010 (“101¤2%notes”) and the 93¤4%Senior Notes due 2009 (“93¤4%notes”) originally issued by Insight Midwest and Insight Capital, Inc.(together, the “Issuers”), in accordance with the terms and conditions of the 101¤2%notes and the 93¤4%notes. On November 7, 2006, in accordance with the notices of redemption,the Issuers redeemed all $630 million outstanding principal amount of the 101¤2%notes at a redemption price of 103.5% of the principal amount, plus accrued andunpaid interest, and $185 million principal amount of the 93¤4% notes at aredemption price of 101.625% of the principal amount redeemed, plus accrued andunpaid interest. The aggregate redemption price, including the redemptionpremium and accrued but unpaid interest, of $843 million was funded withInsight Midwest Holdings credit facilities and cash on hand.

As of November 7,2006, following the redemption, the 101¤2% notes ceasedto be issued and outstanding. The 93¤4%notes were redeemed on a pro rata basis, and Insight Midwest will continue tomake scheduled interest payments on the remaining outstanding $200 millionaggregate principal amount of 93¤4%notes in accordance with, and otherwise comply with, the indenture governingthe 93¤4%notes.

**Item 6. Exhibits**

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

 

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**SIGNATURES**

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

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

 

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