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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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

SECURITIES EXCHANGE
ACT OF 1934



For the Quarterly Period Ended March 31,
2004



Commission file number 0-26677



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INSIGHT COMMUNICATIONS COMPANY, INC.

(Exact name of registrant as specified
in its charter)



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|                                                              |  |                                    
|------------------------------------------------------------- |  | -----------------------------------
|Delaware                                                      |  | 13-4053502                         
|(State or other jurisdiction ofincorporation or organization) |  | (I.R.S. EmployerIdentification No.)



|                                         |  |           
|---------------------------------------- |  | ----------
|810 7thAvenue                            |  |           
|New York, New York                       |  | 10019     
|(Address of principal executive offices) |  | (Zip code)



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



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



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



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



|                                     |  |                              
|------------------------------------ |  | -----------------------------
|Class                                |  | Outstanding at April 22, 2004
|Class A Common Stock, $.01 Par Value |  | 50,805,718                   
|Class B Common Stock, $.01 Par Value |  | 8,879,468                    



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PART I. FINANCIAL INFORMATION



Item 1. Financial Statements



The accompanying unaudited consolidated financial statements have been prepared in accordance with the requirements of Form 10-Q and, therefore, do not include all
information and footnotes required by accounting principles generally accepted in the United States. However, in our opinion, all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results of operations
for the relevant periods have been made. Results for the interim periods are not necessarily indicative of the results to be expected for the year. These financial statements should be read in conjunction with the summary of significant accounting
policies and the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2003.



1



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INSIGHT COMMUNICATIONS COMPANY, INC.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands)



|                                                                                                                                            |  |               |           |   |                  |   |           |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | --------- | - | ---------------- | - | --------- | -
|                                                                                                                                            |  | March 31,2004 |           |   | December 31,2003 |  
|                                                                                                                                            |  | unaudited     |           |   |                  |  
|Assets                                                                                                                                      |  |               |           |   |                  |   |           |  
|Cash and cash equivalents                                                                                                                   |  | $             | 96,133    |   |                  | $ | 60,172    |  
|Investments                                                                                                                                 |  |               | 4,039     |   |                  |   | 4,078     |  
|Trade accounts receivable, net of allowance for doubtful accounts of $1,180 and $1,123 as of March 31, 2004 and December 31,
2003           |  |               | 17,733    |   |                  |   | 29,313    |  
|Launch funds receivable                                                                                                                     |  |               | 1,879     |   |                  |   | 9,421     |  
|Prepaid expenses and other assets                                                                                                           |  |               | 16,341    |   |                  |   | 17,446    |  
|                                                                                                                                            |  |               |           |   |                  |   |           |  
|Total current assets                                                                                                                        |  |               | 136,125   |   |                  |   | 120,430   |  
|                                                                                                                                            |  |              
|Fixed assets, net                                                                                                                           |  |               | 1,204,361 |   |                  |   | 1,216,304 |  
|Goodwill                                                                                                                                    |  |               | 72,430    |   |                  |   | 72,430    |  
|Franchise costs                                                                                                                             |  |               | 2,361,959 |   |                  |   | 2,361,959 |  
|Deferred financing costs, net of accumulated amortization of $14,997 and $13,676 as of March 31, 2004 and December 31, 2003                 |  |               | 31,967    |   |                  |   | 33,288    |  
|Other non-current assets                                                                                                                    |  |               | 8,448     |   |                  |   | 5,244     |  
|                                                                                                                                            |  |               |           |   |                  |   |           |  
|Total assets                                                                                                                                |  | $             | 3,815,290 |   |                  | $ | 3,809,655 |  
|                                                                                                                                            |  |               |           |   |                  |   |           |  
|Liabilities and stockholders equity                                                                                                        |  |               |           |   |                  |   |           |  
|Accounts payable                                                                                                                            |  | $             | 25,295    |   |                  | $ | 30,417    |  
|Accrued expenses and other liabilities                                                                                                      |  |               | 30,273    |   |                  |   | 34,182    |  
|Accrued property taxes                                                                                                                      |  |               | 22,870    |   |                  |   | 22,954    |  
|Accrued programming costs                                                                                                                   |  |               | 47,036    |   |                  |   | 43,261    |  
|Deferred revenue                                                                                                                            |  |               | 8,763     |   |                  |   | 10,061    |  
|Interest payable                                                                                                                            |  |               | 47,140    |   |                  |   | 23,315    |  
|Debt  current portion                                                                                                                      |  |               | 67,563    |   |                  |   | 62,250    |  
|                                                                                                                                            |  |               |           |   |                  |   |           |  
|Total current liabilities                                                                                                                   |  |               | 248,940   |   |                  |   | 226,440   |  
|                                                                                                                                            |  |              
|Deferred revenue                                                                                                                            |  |               | 4,114     |   |                  |   | 4,523     |  
|Debt                                                                                                                                        |  |               | 2,777,070 |   |                  |   | 2,786,041 |  
|Other non-current liabilities                                                                                                               |  |               | 2,414     |   |                  |   | 5,742     |  
|                                                                                                                                            |  |              
|Minority interest                                                                                                                           |  |               | 230,584   |   |                  |   | 229,790   |  
|                                                                                                                                            |  |              
|Stockholders equity:                                                                                                                       |  |               |           |   |                  |   |           |  
|Preferred stock; $.01 par value; 100,000,000 shares authorized; no shares issued and outstanding as of March 31, 2004 and December 31,
2003 |  |               |          |   |                  |   |          |  
|Common stock; $.01 par value:                                                                                                               |  |               |           |   |                  |   |           |  
|Class A - 300,000,000 shares authorized; 50,805,718 and 50,685,317 shares issued and outstanding as of March 31, 2004 and December 31,
2003 |  |               | 509       |   |                  |   | 507       |  
|Class B - 100,000,000 shares authorized; 8,879,468 shares issued and outstanding as of March 31, 2004 and December 31, 2003                 |  |               | 88        |   |                  |   | 88        |  
|Additional paid-in-capital                                                                                                                  |  |               | 817,558   |   |                  |   | 816,600   |  
|Accumulated deficit                                                                                                                         |  |               | (253,288  | ) |                  |   | (246,471  | )
|Deferred stock compensation                                                                                                                 |  |               | (12,851   | ) |                  |   | (13,582   | )
|Accumulated other comprehensive income (loss)                                                                                               |  |               | 152       |   |                  |   | (23       | )
|                                                                                                                                            |  |               |           |   |                  |   |           |  
|Total stockholders equity                                                                                                                  |  |               | 552,168   |   |                  |   | 557,119   |  
|                                                                                                                                            |  |               |           |   |                  |   |           |  
|Total liabilities and stockholders equity                                                                                                  |  | $             | 3,815,290 |   |                  | $ | 3,809,655 |  
|                                                                                                                                            |  |               |           |   |                  |   |           |  



See accompanying
notes



2



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INSIGHT COMMUNICATIONS COMPANY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except per share amounts)



|                                                                              |  |                              |         |   |          |   |         |  
|----------------------------------------------------------------------------- |  | ---------------------------- | ------- | - | -------- | - | ------- | -
|                                                                              |  | Three months ended March 31, |        
|                                                                              |  | 2004                         |         |   | 2003     |  
|                                                                              |  |                              |         |   | restated |  
|Revenue                                                                       |  | $                            | 238,756 |   |          | $ | 215,045 |  
|                                                                              |  |                             
|Operating costs and expenses:                                                 |  |                              |         |   |          |   |         |  
|Programming and other operating costs                                         |  |                              | 87,911  |   |          |   | 79,868  |  
|Selling, general and administrative                                           |  |                              | 50,292  |   |          |   | 45,094  |  
|Depreciation and amortization                                                 |  |                              | 59,159  |   |          |   | 54,994  |  
|                                                                              |  |                              |         |   |          |   |         |  
|Total operating costs and expenses                                            |  |                              | 197,362 |   |          |   | 179,956 |  
|                                                                              |  |                              |         |   |          |   |         |  
|Operating income                                                              |  |                              | 41,394  |   |          |   | 35,089  |  
|                                                                              |  |                             
|Other income (expense):                                                       |  |                              |         |   |          |   |         |  
|Gain on cable system exchange                                                 |  |                              |        |   |          |   | 26,992  |  
|Interest expense                                                              |  |                              | (50,202 | ) |          |   | (51,446 | )
|Interest income                                                               |  |                              | 140     |   |          |   | 234     |  
|Other income (expense)                                                        |  |                              | 1,828   |   |          |   | (5      | )
|                                                                              |  |                              |         |   |          |   |         |  
|Total other expense, net                                                      |  |                              | (48,234 | ) |          |   | (24,225 | )
|                                                                              |  |                             
|Income (loss) before minority interest and income taxes                       |  |                              | (6,840  | ) |          |   | 10,864  |  
|Minority interest expense                                                     |  |                              | (121    | ) |          |   | (6,478  | )
|                                                                              |  |                              |         |   |          |   |         |  
|Income (loss) before income taxes                                             |  |                              | (6,961  | ) |          |   | 4,386   |  
|Benefit for income taxes                                                      |  |                              | 144     |   |          |   | 1,257   |  
|                                                                              |  |                              |         |   |          |   |         |  
|Net income (loss)                                                             |  |                              | (6,817  | ) |          |   | 5,643   |  
|Accrual of preferred interests                                                |  |                              |        |   |          |   | (5,150  | )
|                                                                              |  |                              |         |   |          |   |         |  
|Net income (loss) applicable to common stockholders                           |  | $                            | (6,817  | ) |          | $ | 493     |  
|                                                                              |  |                              |         |   |          |   |         |  
|Basic and diluted income (loss) per share attributable to common stockholders |  | $                            | (.11    | ) |          | $ | .01     |  
|Basic and diluted weighted-average shares outstanding                         |  |                              | 59,661  |   |          |   | 60,077  |  



See accompanying
notes



3



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INSIGHT COMMUNICATIONS COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)



|                                                                                         |  |                             |         |   |          |   |         |  
|---------------------------------------------------------------------------------------- |  | --------------------------- | ------- | - | -------- | - | ------- | -
|                                                                                         |  | Three months endedMarch 31, |        
|                                                                                         |  | 2004                        |         |   | 2003     |  
|                                                                                         |  |                             |         |   | restated |  
|Operating activities:                                                                    |  |                             |         |   |          |   |         |  
|Net income (loss)                                                                        |  | $                           | (6,817  | ) |          | $ | 5,643   |  
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                             |         |   |          |   |         |  
|Depreciation and amortization                                                            |  |                             | 59,159  |   |          |   | 54,994  |  
|Non-cash consulting expense                                                              |  |                             | 15      |   |          |   |        |  
|Gain on interest rate swaps                                                              |  |                             | (1,777  | ) |          |   |        |  
|Gain on cable systems exchange                                                           |  |                             |        |   |          |   | (26,992 | )
|Gain on sale of investments                                                              |  |                             | (386    | ) |          |   |        |  
|Minority interest                                                                        |  |                             | 121     |   |          |   | 6,478   |  
|Provision for losses on trade accounts receivable                                        |  |                             | 3,750   |   |          |   | 2,399   |  
|Contribution of stock to 401(k) Plan                                                     |  |                             | 470     |   |          |   | 447     |  
|Amortization of note discount                                                            |  |                             | 8,459   |   |          |   | 8,069   |  
|Benefit for income taxes                                                                 |  |                             | (144    | ) |          |   | (1,257  | )
|Changes in operating assets and liabilities, net of the effect of acquisitions:          |  |                             |         |   |          |   |         |  
|Trade accounts receivable                                                                |  |                             | 7,830   |   |          |   | 455     |  
|Launch fund receivable                                                                   |  |                             | 7,542   |   |          |   | 3,677   |  
|Prepaid expenses and other assets                                                        |  |                             | 260     |   |          |   | (4,880  | )
|Accounts payable                                                                         |  |                             | (5,122  | ) |          |   | (25,791 | )
|Accrued expenses and other liabilities                                                   |  |                             | 21,774  |   |          |   | 39,964  |  
|                                                                                         |  |                             |         |   |          |   |         |  
|Net cash provided by operating activities                                                |  |                             | 95,134  |   |          |   | 63,206  |  
|                                                                                         |  |                             |         |   |          |   |         |  
|Investing activities:                                                                    |  |                             |         |   |          |   |         |  
|Purchase of fixed assets                                                                 |  |                             | (44,189 | ) |          |   | (40,545 | )
|Sale of fixed assets                                                                     |  |                             | 381     |   |          |   |        |  
|Purchase of intangible assets                                                            |  |                             |        |   |          |   | (621    | )
|Purchase of investments                                                                  |  |                             | (404    | ) |          |   | (137    | )
|Sale of investments                                                                      |  |                             | 602     |   |          |   |        |  
|Purchase of cable television systems, net                                                |  |                             |        |   |          |   | (26,475 | )
|                                                                                         |  |                             |         |   |          |   |         |  
|Net cash used in investing activities                                                    |  |                             | (43,610 | ) |          |   | (67,778 | )
|                                                                                         |  |                             |         |   |          |   |         |  
|Financing activities:                                                                    |  |                             |         |   |          |   |         |  
|Distributions of preferred interests                                                     |  |                             |        |   |          |   | (7,000  | )
|Net borrowings (repayment) of credit facilities                                          |  |                             | (15,563 | ) |          |   | 27,750  |  
|                                                                                         |  |                             |         |   |          |   |         |  
|Net cash provided by (used in) financing activities                                      |  |                             | (15,563 | ) |          |   | 20,750  |  
|                                                                                         |  |                             |         |   |          |   |         |  
|Net increase in cash and cash equivalents                                                |  |                             | 35,951  |   |          |   | 16,178  |  
|Cash and cash equivalents, beginning of period                                           |  |                             | 60,172  |   |          |   | 74,850  |  
|                                                                                         |  |                             |         |   |          |   |         |  
|Cash and cash equivalents, end of period                                                 |  | $                           | 96,133  |   |          | $ | 91,028  |  
|                                                                                         |  |                             |         |   |          |   |         |  



See accompanying
notes



4



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INSIGHT COMMUNICATIONS COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1. Organization and Basis of Presentation



Through our wholly owned subsidiary, Insight Communications Company, L.P. (Insight LP), we own a 50% interest in Insight Midwest, L.P. (Insight Midwest), which through its operating subsidiaries, Insight
Communications Midwest, LLC (Insight Communications Midwest), Insight Kentucky Partners II, L.P. (Insight Kentucky) and Insight Communications of Central Ohio, LLC (Insight Ohio), owns and operates cable
television systems in Indiana, Kentucky, Ohio, and Illinois which passed approximately 2.3 million homes and served approximately 1.3 million customers as of March 31, 2004. In addition, we also owned and operated a cable television system in
Griffin, Georgia through February 28, 2003.



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



Our other wholly owned
subsidiary, Insight Interactive LLC, owns a 100% equity interest in SourceSuite, LLC.



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



Certain prior period amounts have been reclassified to conform to the current period presentation.



2. Responsibility for Interim Financial Statements



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



In our opinion, the consolidated financial statements reflect all adjustments considered necessary for a fair presentation of the consolidated results of operations and
financial position for the interim periods presented. All such adjustments are of a normal recurring nature. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements
and notes to consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2003.



The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. The results of operations for the three months ended March 31,



5



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INSIGHT COMMUNICATIONS COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



2. Responsibility for Interim Financial Statements (continued)



2004 are not necessarily indicative of the results to be expected for the year ending December 31, 2004 or any other
interim period.



3. Income (Loss) Per Share



Basic income (loss) per share is computed using the average shares outstanding during the
period. Diluted loss per share is equal to basic loss per share as we generated a net loss for the three months ended March 31, 2004, thereby making the potential effects of dilutive securities anti-dilutive. Diluted income per share is equal to
basic income per share as other securities, primarily stock options, had no dilutive effect. Securities that could potentially dilute basic earnings per share in the future include stock options and restricted stock units.



4. Restatement



During the fourth quarter of 2003, we determined that we had incorrectly accounted for the impact of minority interests related to our
interest rate swap agreements which convert the interest on a portion of our variable rate senior credit facility to a fixed rate. In addition, we had not reduced our deferred tax asset and related valuation allowance related to such swaps through
other comprehensive income for subsequent changes in our deferred tax position. We have therefore restated our financial statements for the first quarter of 2003. The restatement does not impact our revenue, operating income or income before income
taxes. The following table summarizes the impact of the restatement on our consolidated statement of operations for the three months ended March 31, 2003:



|                                                                              |  |                                          |       |   |          |   |      
|----------------------------------------------------------------------------- |  | ---------------------------------------- | ----- | - | -------- | - | -----
|                                                                              |  | March 31, 2003                          
|                                                                              |  | As Reported                              |       |   | Restated
|                                                                              |  | (in thousands, except per share amounts)
|Benefit (provision) for income taxes                                          |  | $                                        | (125  | ) |          | $ | 1,257
|Net income                                                                    |  |                                          | 4,261 |   |          |   | 5,643
|Net income (loss) applicable to common stockholders                           |  |                                          | (889  | ) |          |   | 493  
|Basic and diluted income (loss) per share attributable to common stockholders |  |                                          | (.01  | ) |          |   | .01  



5. Recent Accounting Pronouncements



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



6



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INSIGHT COMMUNICATIONS COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



5. Recent Accounting Pronouncements (continued)



The following table summarizes relevant information as to our reported results under the intrinsic value method of
accounting for stock awards, with supplemental information, as if the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation, had been applied to each of the three month periods ended March 31, 2004
and 2003 (in thousands, except per share data):



|                                                                                                            |  |                             |        |   |          |   |        |  
|----------------------------------------------------------------------------------------------------------- |  | --------------------------- | ------ | - | -------- | - | ------ | -
|                                                                                                            |  | Three months endedMarch 31, |       
|                                                                                                            |  | 2004                        |        |   | 2003     |  
|                                                                                                            |  |                             |        |   | restated |  
|Net income (loss) attributable to common stockholders                                                       |  | $                           | (6,817 | ) |          | $ | 493    |  
|Stock-based compensation as reported, net of tax                                                            |  |                             | 1,558  |   |          |   | 313    |  
|Stock-based compensation determined under fair value based method for all awards (SFAS No. 123), net of tax |  |                             | (2,569 | ) |          |   | (1,821 | )
|                                                                                                            |  |                             |        |   |          |   |        |  
|Adjusted net loss attributable to common stockholders                                                       |  | $                           | (7,828 | ) |          | $ | (1,015 | )
|                                                                                                            |  |                             |        |   |          |   |        |  
|Basic and diluted net income (loss) per share, as reported                                                  |  | $                           | (.11   | ) |          | $ | .01    |  
|                                                                                                            |  |                             |        |   |          |   |        |  
|Basic and diluted net loss per share, SFAS 123 adjusted                                                     |  | $                           | (.13   | ) |          | $ | (.02   | )
|                                                                                                            |  |                             |        |   |          |   |        |  



In May 2003, the FASB issued SFAS No.
150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of
both liabilities and equity. Financial instruments that fall within the scope of SFAS No. 150 that were previously classified as equity are now required to be classified as liabilities or, in some circumstances, assets.



As of July 1, 2003, we had $195.2 million of preferred interests recorded in our balance
sheet as temporary equity. These preferred interests were fully accreted to their maturity value of $195.9 million as of August 15, 2003 and were subsequently converted to common interests in connection with our refinancing of the obligations of
Insight Ohio. In connection with the adoption of SFAS No. 150, we recorded a $5.0 million accrual of preferred interests for the three months ended September 30, 2003, which have been included in interest expense in our consolidated statements of
operations.



As of March 31, 2004 we had $231.0 million of minority interests
recorded in our balance sheet as temporary equity related to Insight Midwest. On October 29, 2003, the FASB announced that it had deferred indefinitely the application of SFAS No. 150 as it applies to minority interests related to limited life
entities consolidated in parent company financial statements. Although this application was deferred, the disclosure requirements of SFAS No. 150 still apply and, therefore, companies are required to disclose the estimated settlement value of these
non-controlling interests. If we were to adopt this aspect of the standard under its current provisions, it would be expected to have a material impact on our financial statements.



7



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INSIGHT COMMUNICATIONS COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



5. Recent Accounting Pronouncements (continued)



The Insight Midwest partnership was formed in September 1999 to serve as the holding company and a financing vehicle
for our cable television system 50/50 joint venture with an indirect subsidiary of AT&T Broadband (now known as Comcast Cable). The results of the partnership are included in our consolidated financial statements since we as general partner
effectively control Insight Midwests operating and financial decisions. The partnership will continue until October 1, 2011 unless terminated earlier in accordance with the provisions of the Insight Midwest partnership agreement.



Depending on the nature of a dissolution of the partnership, Insight Midwest will be
required to either distribute to Comcast Cable some of its cable systems and liabilities, to be determined in accordance with the partnership agreement, equal to 50% of the net market value of the partnership or, upon liquidation, an amount in cash
equal to 50% of the net proceeds received. As of March 31, 2004, we estimated the settlement value of these minority interests to be between $945.6 million and $1.4 billion.



6. Investments



During the three months ended March 31, 2004 we sold 150,000 shares of Liberate common stock. We received net proceeds of $595,000 and recorded a gain on the sale of
$381,000 that has been included in other income in our consolidated statements of operations. As of March 31, 2004, we had 441,000 shares available for sale with a carrying value of $1.4 million.



7. Fixed Assets



Fixed assets consisted of:



|                                               |  |                |           |   |                  |   |           |  
|---------------------------------------------- |  | -------------- | --------- | - | ---------------- | - | --------- | -
|                                               |  | March 31,2004  |           |   | December 31,2003 |  
|                                               |  | (in thousands) |          
|Land, buildings and improvements               |  | $              | 40,677    |   |                  | $ | 40,196    |  
|Cable system equipment                         |  |                | 2,088,409 |   |                  |   | 2,051,559 |  
|Furniture, fixtures and office equipment       |  |                | 17,730    |   |                  |   | 17,862    |  
|                                               |  |                |           |   |                  |   |           |  
|                                               |  |                | 2,146,816 |   |                  |   | 2,190,617 |  
|Less accumulated depreciation and amortization |  |                | (942,455  | ) |                  |   | (893,313  | )
|                                               |  |                |           |   |                  |   |           |  
|Total fixed assets, net                        |  | $              | 1,204,361 |   |                  | $ | 1,216,304 |  
|                                               |  |                |           |   |                  |   |           |  



We recorded depreciation expense of
$56.6 million and $53.5 million for the three months ended March 31, 2004 and 2003.



8



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INSIGHT COMMUNICATIONS COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



8. Debt



|                                          |  |                |           |   |                  |   |           |  
|----------------------------------------- |  | -------------- | --------- | - | ---------------- | - | --------- | -
|                                          |  | March 31,2004  |           |   | December 31,2003 |  
|                                          |  | (in thousands) |          
|Insight Midwest Holdings Credit Facility  |  | $              | 1,540,437 |   |                  | $ | 1,556,000 |  
|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 |  |                | 360,000   |   |                  |   | 360,000   |  
|                                          |  |                |           |   |                  |   |           |  
|                                          |  |                | 2,915,437 |   |                  |   | 2,931,000 |  
|Net unamortized discount/premium on notes |  |                | (74,044   | ) |                  |   | (82,503   | )
|Market value of interest rate swaps       |  |                | 3,240     |   |                  |   | (206      | )
|                                          |  |                |           |   |                  |   |           |  
|Total debt                                |  | $              | 2,844,633 |   |                  | $ | 2,848,291 |  
|                                          |  |                |           |   |                  |   |           |  



Insight Midwest Holdings $1.975
Billion Credit Facility



Insight Midwest Holdings, LLC is a wholly
owned subsidiary of Insight Midwest, holds all of the outstanding equity of each of our operating subsidiaries and serves as borrower under a $1.975 billion credit facility. On March 28, 2002, we loaned $100.0 million to Insight Midwest, $97.0
million of which was contributed to Insight Midwest Holdings in April 2002 for use in paying down the credit facility balance and in funding financing costs associated with the amendments, and $3.0 million of which was contributed to Insight Ohio as
of March 28, 2002. Insight Midwest Holdings is permitted under the credit facility to make distributions to Insight Midwest for the purpose of repaying our loan, including accrued interest, provided that there are no defaults existing under the
credit facility. The loan to Insight Midwest bears annual interest of 9%, compounded semi-annually, has a scheduled maturity date of January 31, 2011 and permits prepayments.



On August 26, 2003 we amended the Insight Midwest Holdings Credit Facility in connection with our refinancing of all the obligations and
conditionally guaranteed obligations of Insight Ohio. The amendment increased the Term B loan portion of the credit facility from $900.0 million to $1.125 billion which increased the total facility size to $1.975 billion from $1.750 billion. We
recorded $2.2 million of deferred financing costs associated with this amendment that is being amortized over the remaining term of the credit facility.



On August 29, 2003, Insight Midwest Holdings distributed $22.0 million to Insight Midwest which, in turn, contributed this amount to Insight Ohio for the purpose of
repaying the Insight Ohio Credit Facility. Simultaneously, Insight Ohio used these proceeds plus cash on hand to repay the then outstanding balance of the Insight Ohio Credit Facility of $22.5 million plus accrued interest.



9



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INSIGHT COMMUNICATIONS COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



8. Debt (continued)





Debt Principal Payments



As of March 31, 2004, principal payments required on our debt were as
follows (in thousands):



|           |  |   |          
|---------- |  | - | ---------
|2004       |  | $ | 46,687   
|2005       |  |   | 83,500   
|2006       |  |   | 83,500   
|2007       |  |   | 83,500   
|2008       |  |   | 104,750  
|Thereafter |  |   | 2,513,500
|           |  |   |          
|Total      |  | $ | 2,915,437
|           |  |   |          



9. Derivative Instruments



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



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



Cash
Flow Hedges



As of March 31, 2004 and December 31, 2003, we had one
interest rate swap agreement outstanding that effectively fixed interest rates at 5% on $150.0 million notional value of debt. This agreement expires in August 2004. We recorded $834,000 and $826,000 of accrued interest related to this agreement as
of March 31, 2004 and December 31, 2003. As of March 31, 2004 and December 31, 2003, the estimated fair value (cost if terminated) of this interest rate swap agreement was approximately $(2.1) million and $(3.4) million.



10



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INSIGHT COMMUNICATIONS COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



9. Derivative Instruments (continued)



Fair Value Hedges



In February 2003, we entered into two interest rate swap agreements whereby we swapped fixed rates under our 101/2% senior notes due in December 2010 for variable rates equal to six-month LIBOR, plus the applicable margin of
approximately 7.7%, on $185.0 million notional value of debt. Six-month LIBOR ranged between 1.26% and 1.34% for February and March 2003. In May 2003, we settled these swaps and received proceeds of $1.8 million and recorded a gain in this amount,
which is included in other income (expense).



In July 2003, we entered
into three interest rate swap agreements whereby we swapped fixed rates under our 101/2% senior notes due in
December 2010 for variable rates equal to six-month LIBOR, plus the applicable margin of approximately 8.3%, on $185.0 million notional value of debt. These agreements expire November 1, 2005. We recorded a gain on these swaps of $1.8 million for
the three months ended March 31, 2004, which is included in other income. As of March 31, 2004 and December 31, 2003, we recorded $770,000 and $275,000 of interest receivable related to these agreements. The fair market value (cost if terminated) of
these agreements was $(337,000) and $(2.1) million as of March 31, 2004 and December 31, 2003.



In December 2003, we entered into an interest rate swap agreement whereby we swapped fixed rates under our 101/2% senior notes due in December 2010 for variable rates equal to six-month LIBOR, plus the applicable margin of approximately 5.9%, on $130.0 million notional value of debt. This agreement expires
November 1, 2010. This swap has been determined to be perfectly effective in hedging against fluctuations in the fair value of the underlying debt. As such, changes in the fair value of the underlying debt equally offset changes in the value of the
interest rate swap in our consolidated statements of operations. The fair value (cost if terminated) of this swap as of March 31, 2004 and December 31, 2003 was $3.2 million and $(206,000) and has been recorded in other non-current assets
(liabilities) and as an adjustment to the carrying value of debt.



10. Comprehensive Income (Loss)



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



11



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INSIGHT COMMUNICATIONS COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



10. Comprehensive Income (Loss) (continued)



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



|                                                   |  |                             |        |   |          |   |      
|-------------------------------------------------- |  | --------------------------- | ------ | - | -------- | - | -----
|                                                   |  | Three months endedMarch 31,
|                                                   |  | 2004                        |        |   | 2003    
|                                                   |  |                             |        |   | restated
|Net income (loss)                                  |  | $                           | (6,817 | ) |          | $ | 5,643
|Unrealized gain on securities available-for-sale   |  |                             | 158    |   |          |   | 584  
|Realized gain on securities available-for-sale     |  |                             | (386   | ) |          |   |     
|Unrealized gain on interest rate swaps, net of tax |  |                             | 403    |   |          |   | 3,370
|                                                   |  |                             |        |   |          |   |      
|Comprehensive income (loss)                        |  | $                           | (6,642 | ) |          | $ | 9,597
|                                                   |  |                             |        |   |          |   |      



11. Related Party Transactions



Managed Systems



On March 17, 2000, we entered into a two-year management agreement with Comcast of
Montana/Indiana/Kentucky/Ohio (formerly known as InterMedia Partners Southeast), an affiliate of Comcast Cable, to provide management services to cable television systems owned by Comcast. The management agreement, which had been extended, was set
to expire on June 30, 2003. On June 27, 2003, the management agreement was further extended with the provision that either party may terminate the agreement at any time on 30 days notice. As of March 31, 2004, these systems served approximately
89,000 customers in the state of Indiana. We recognized management fees in connection with this agreement of $590,000 and $658,000 for the three months ended March 31, 2004 and 2003.



On February 28, 2003, Insight Communications Midwest exchanged with Comcast of Montana/Indiana/Kentucky/Ohio the system we then owned in
Griffin, Georgia, serving approximately 11,800 customers, plus $25.0 million, for the managed systems located in New Albany, Indiana and Shelbyville, Kentucky, together serving approximately 23,400 customers. Additionally, pursuant to the agreement,
Insight Communications Midwest paid approximately $1.5 million as a closing adjustment to Comcast of Montana/Indiana/Kentucky/Ohio to complete the rebuild and upgrade of the Griffin, Georgia system.



This system exchange was accounted for on that date as a sale of the Griffin, Georgia system
and a purchase of the New Albany, Indiana and Shelbyville, Kentucky systems. In connection with this system exchange, we recorded a gain of approximately $27.1 million equal to the difference between the fair value and carrying value of the Griffin,
Georgia system as of the closing date. Of the $64.5 million purchase price of the New Albany, Indiana and Shelbyville, Kentucky systems $31.9 million was allocated to such cable television systems assets acquired in relation to their fair
values and $32.6 million was allocated to franchise costs.



12



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INSIGHT COMMUNICATIONS COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



11. Related Party Transactions (continued)



Programming



We purchase the majority of our programming through affiliates of Comcast Cable. Charges for such programming, including a 11/2% administrative fee, were $36.7 million and $35.6 million for the three months ended March 31, 2004 and 2003. As
of March 31, 2004 and December 31, 2003, $30.7 million and $28.3 million of accrued programming costs were due to affiliates of Comcast Cable. We believe that the programming rates charged through these affiliates are lower than those available from
independent parties.



Telephone Agreements



In July 2000, to facilitate delivery of telephone services we entered into a ten-year
agreement with AT&T Broadband (now known as Comcast Cable) that allows Insight Midwest to deliver local telephone service. Under the terms of the agreement, Insight Midwest leases certain capacity on our local network to Comcast Cable. Revenue
earned from leased network capacity used in the provision of telephone services was $2.1 million and $1.1 million for the three months ended March 31, 2004 and 2003.



In addition, Insight Midwest provides certain services and support for which it receives additional payments related to installations,
marketing and billing support. Fee revenue earned in connection with installations is deferred and amortized over the expected term a telephone customer maintains their telephone service, currently estimated to be three years. Marketing and billing
support revenue is recognized in the period such services are performed.



Advertising Services



In October 1999, to facilitate
the administration of our advertising services in our Kentucky Systems, we entered into an agreement with an affiliate of AT&T Broadband (now known as Comcast Cable), which provides for this affiliate to perform all of our Kentucky advertising
sales and related administrative services. The agreement has been extended beyond its scheduled December 31, 2003 expiration date and may thereafter be terminated by either party upon 30 days notice. We, through our Kentucky Systems, earned
advertising revenues through this affiliate of $4.0 million and $3.9 million for the three months ended March 31, 2004 and 2003. As of March 31, 2004 and December 31, 2003, we had $6.6 million and $9.3 million as a receivable due from this affiliate
included in other current assets. We pay this affiliate a fixed and variable fee for providing this service based on advertising sales cash flow growth. As of March 31, 2004 and December 31, 2003, we had $409,000 and $102,000 recorded as payables to
this affiliate related to such services.



13



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INSIGHT COMMUNICATIONS COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



12. Commitments and Contingencies



Programming Contracts



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



Litigation



In November 2000, we filed a state court action against the City of Louisville for its
grant, in September 2000, of a more favorable franchise to Knology of Louisville, Inc. Upon commencement of this action, the City, pursuant to a provision in its franchise agreement with Knology, automatically suspended Knologys franchise
pending a final, non-appealable court determination as to whether Knologys franchise was more favorable than the franchise under which we operated. In November 2000, Knology filed a federal court action against us seeking monetary damages and
other relief for alleged violations of federal laws arising out of our having filed, pursuant to the provisions of our own franchise agreement with the City, the state court action. In March 2001, the federal court preliminarily set aside the
suspension of Knologys franchise. In March 2002, a state circuit court ruled against our claim that Knologys franchise was more favorable. We appealed the circuit courts order to the state court of appeals which, in June 2003,
upheld the lower court ruling. We have filed a motion for discretionary review of the appeals courts ruling which is now pending before the Kentucky Supreme Court. In May 2003, the federal court granted us summary judgment and dismissed six of
Knologys 11 claims. The court granted summary judgment to Knology on three claims, two of which resulted in permanently enjoining enforcement of the automatic suspension provision of Knologys franchise agreement and do not involve
damages. The third such claim is for violation of Knologys first amendment rights, which will proceed to trial solely on the issue of damages, and would result in an award of legal fees and court costs specific to such claim if upheld. The
remaining undecided claims relate to allegations of anticompetitive conduct and are to proceed to trial on the merits. The federal court has stayed any trial pending final resolution of the state court action. In August 2003, the court agreed, in
part, with our Motion for Reconsideration, that the stay provision provides no justification for an injunction since the language was severed. Further, the court granted our Motion to Certify Questions for an Immediate Appeal to the Sixth Circuit
Court of Appeals. The Sixth Circuit Court of Appeals granted our Motion to Certify, and we are currently briefing the issues. The trial will remain stayed pending the Sixth Circuits action. We continue to believe that we have substantial and
meritorious defenses to the remaining asserted federal claims and intend to defend them vigorously. Consequently, we have not recorded any loss reserves in the accompanying financial statements.



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



14



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



Forward-Looking Statements



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



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



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



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



We believe it is important to communicate our expectations to our investors. However, there may be events in the future that we are not able to accurately predict or over
which we have no control. The risk factors listed in our Annual Report on Form 10-K for the year ended December 31, 2003, as well as any cautionary language in this quarterly report, provide examples of risks, uncertainties and events that may cause
our actual results to differ materially from the expectations we describe in our forward-looking statements. Examples of these risks include our history and expectation of future net losses, our substantial debt, changes in laws and regulations,
increasing programming costs and competition. You should be aware that the occurrence of the events described in these risk factors and elsewhere in this quarterly report could have a material adverse effect on our business, operating results and
financial condition. We assume no responsibility to update any forward-looking statements as a result of new information, future events or otherwise.



Results of Operations



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



Some of the principal
reasons for our net losses through March 31, 2004 include depreciation and amortization associated with our acquisitions and capital expenditures for the construction and upgrading of our systems, and interest costs on borrowed money. We expect to
continue to report net losses for the foreseeable future. We cannot predict what impact, if any, continued losses will have on our ability to finance our operations in the future.



During the fourth quarter of 2003, we determined that we had incorrectly accounted for the impact of minority interests related to our
interest rate swap agreements which convert the interest on a portion of our variable rate senior credit facility to a fixed rate. In addition, we had not reduced our deferred tax asset and related valuation allowance related to such swaps through
other comprehensive income for subsequent changes in our deferred tax position. We have therefore restated our financial statements for the first quarter of 2003. The restatement does not impact our revenue, operating income or our income before
income taxes.



15



---

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



|                                                    |  |                              |         |   |               |   |        
|--------------------------------------------------- |  | ---------------------------- | ------- | - | ------------- | - | -------
|                                                    |  | Three Months Ended March 31,
|                                                    |  | 2004                         |         |   | 2003 Restated
|                                                    |  | (in thousands)              
|Revenue                                             |  | $                            | 238,756 |   |               | $ | 215,045
|Operating costs and expenses:                       |  |                              |         |   |               |   |        
|Programming and other operating costs               |  |                              | 87,911  |   |               |   | 79,868 
|Selling, general and administrative                 |  |                              | 50,292  |   |               |   | 45,094 
|Depreciation and amortization                       |  |                              | 59,159  |   |               |   | 54,994 
|                                                    |  |                              |         |   |               |   |        
|Total operating costs and expenses                  |  |                              | 197,362 |   |               |   | 179,956
|                                                    |  |                              |         |   |               |   |        
|Operating income                                    |  |                              | 41,394  |   |               |   | 35,089 
|Operating cash flow                                 |  |                              | 100,553 |   |               |   | 90,083 
|Interest expense                                    |  |                              | 50,202  |   |               |   | 51,446 
|Minority interest expense                           |  |                              | 121     |   |               |   | 6,478  
|Net income (loss)                                   |  |                              | (6,817  | ) |               |   | 5,643  
|Net cash provided by operating activities           |  |                              | 95,134  |   |               |   | 63,206 
|Net cash used in investing activities               |  |                              | 43,610  |   |               |   | 67,778 
|Net cash provided by (used in) financing activities |  |                              | (15,563 | ) |               |   | 20,750 
|Capital expenditures                                |  |                              | 44,189  |   |               |   | 40,545 



Operating cash flow is a financial
measure that is not calculated and presented in accordance with accounting principles generally accepted in the United States. We define operating cash flow as operating income or loss before depreciation and amortization. Operating cash flow is
useful to management in measuring the overall operational strength and performance of our company. A limitation of this measure, however, is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in
generating our revenues. Management evaluates the costs of such tangible and intangible assets through other financial measures such as capital expenditures and investment spending. Another limitation of operating cash flow is that it does not
reflect income net of interest expense, which is a significant expense of our company because of the substantial debt we incurred to acquire our cable television systems and finance the capital expenditures for the upgrade of our cable network.



Despite the limitations of operating cash flow, management believes that the
presentation of this financial measure is relevant and useful for investors because it allows investors to evaluate our performance in a manner similar to the method used by management. In addition, operating cash flow is commonly used in the cable
television industry to analyze and compare cable television companies on the basis of liquidity, operating performance and leverage, although our measure of operating cash flow may not be directly comparable to similar measures used by other
companies. Operating cash flow should not be regarded as an alternative to, or more meaningful than, either operating income or net income as an indicator of operating performance or cash flows as a measure of liquidity, as well as other measures of
financial performance reported in accordance with accounting principles generally accepted in the United States. The following is a reconciliation of operating income to operating cash flow:



|                              |  |                              |         |      |   |       
|----------------------------- |  | ---------------------------- | ------- | ---- | - | ------
|                              |  | Three Months Ended March 31,
|                              |  | 2004                         |         | 2003
|                              |  | (in thousands)              
|Operating income              |  | $                            | 41,394  |      | $ | 35,089
|Adjustment:                   |  |                              |         |      |   |       
|Depreciation and amortization |  |                              | 59,159  |      |   | 54,994
|                              |  |                              |         |      |   |       
|Operating cash flow           |  | $                            | 100,553 |      | $ | 90,083
|                              |  |                              |         |      |   |       



16



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Three Months Ended March 31, 2004 Compared to Three Months Ended March 31, 2003



The $23.7 million or 11% increase in revenue was primarily a result of gains in our
high-speed Internet and digital video revenues, which increased 43% and 24% over the prior years quarter, driven by an increased customer base. In addition, basic cable service revenue increased 6%, primarily due to basic rate increases in
2003.



Revenue by service offering were as follows for the three months ended
March 31 (in thousands):



|                              |  |                               |         |                  |       |   |                               |   |                  |  |       |                    |  |       |   
|----------------------------- |  | ----------------------------- | ------- | ---------------- | ----- | - | ----------------------------- | - | ---------------- |  | ----- | ------------------ |  | ----- | --
|                              |  | 2004Revenue byServiceOffering |         | % ofTotalRevenue |       |   | 2003Revenue byServiceOffering |   | % ofTotalRevenue |  |       | % Changein Revenue | 
|Basic                         |  | $                             | 139,005 |                  | 58.2  | % |                               | $ | 130,851          |  | 60.9  | %                  |  | 6.2   | % 
|Digital                       |  |                               | 23,721  |                  | 9.9   | % |                               |   | 19,132           |  | 8.9   | %                  |  | 24.0  | % 
|High-speed Internet           |  |                               | 28,940  |                  | 12.1  | % |                               |   | 20,262           |  | 9.4   | %                  |  | 42.8  | % 
|Premium / analog pay-per-view |  |                               | 14,906  |                  | 6.3   | % |                               |   | 14,704           |  | 6.8   | %                  |  | 1.4   | % 
|Telephone                     |  |                               | 3,758   |                  | 1.6   | % |                               |   | 2,568            |  | 1.2   | %                  |  | 46.3  | % 
|Advertising                   |  |                               | 13,987  |                  | 5.9   | % |                               |   | 12,535           |  | 5.8   | %                  |  | 11.6  | % 
|Franchise fees                |  |                               | 7,008   |                  | 2.9   | % |                               |   | 6,702            |  | 3.1   | %                  |  | 4.6   | % 
|Other                         |  |                               | 7,431   |                  | 3.1   | % |                               |   | 8,291            |  | 3.9   | %                  |  | (10.4 | )%
|                              |  |                               |         |                  |       |   |                               |   |                  |  |       |                    |  |       |   
|Total                         |  | $                             | 238,756 |                  | 100.0 | % |                               | $ | 215,045          |  | 100.0 | %                  |  | 11.0  | % 
|                              |  |                               |         |                  |       |   |                               |   |                  |  |       |                    |  |       |   



Revenue Generating Units
(RGUs) as of March 31, 2004, which represent the sum of basic, digital, high-speed Internet, and telephone customers, increased approximately 9% as compared to March 31, 2003. RGUs by type were as follows as of March 31 (in thousands):



|                    |  |         |  |        
|------------------- |  | ------- |  | -------
|                    |  | 2004    |  | 2003   
|Basic               |  | 1,297.9 |  | 1,308.7
|Digital             |  | 418.4   |  | 355.4  
|High-speed Internet |  | 258.0   |  | 168.3  
|Telephone           |  | 60.1    |  | 37.7   
|                    |  |         |  |        
|Total RGUs         |  | 2,034.4 |  | 1,870.1
|                    |  |         |  |        



17



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Average monthly revenue per basic customer, including management fee revenue and SourceSuite revenue, was $61.42 for the
three months ended March 31, 2004, compared to $55.34 for the three months ended March 31, 2003 primarily reflecting the continued growth of our high-speed Internet and digital product offerings in all markets.



Programming and other operating costs increased $8.0 million or 10%. Programming costs
increased primarily as a result of increased programming rates. Other operating costs increased primarily due to increased high-speed Internet service provider costs driven by the net addition of approximately 89,700 high-speed Internet customers
since March 31, 2003. In addition, other operating costs increased as a result of technical salaries and related benefits for new and existing employees, an increased volume of modems sold and other labor costs, which increased due to the continued
transition from upgrade activities to maintenance activities.



Selling, general
and administrative expenses increased $5.2 million or 12%, primarily because of payroll and related costs due to annual salary increases for existing and new employees and increases in health insurance costs. Marketing expenses increased to support
the continued roll-out of high-speed Internet and digital products and also to maintain our core video customer base. Professional fees also increased due to the one-time write-off of shelf registration fees we no longer anticipate will be utilized.
In addition, due to the net impact of the swap of our Griffin, Georgia system, effective February 28, 2003, for the then managed Shelbyville, Kentucky and New Albany, Indiana systems, we incurred incremental selling, general and administrative costs
and are no longer receiving reimbursements from Comcast for these costs. Partially offsetting these increases was an increase in marketing support funds (recorded as a reduction to selling, general and administrative expenses) for the promotion of
new channel launches.



Depreciation and amortization expense increased $4.2
million or 8% primarily as a result of additional capital expenditures through March 31, 2004 to support the continued rebuild of our Illinois systems, extend our plant and continue the rollout of digital, high-speed Internet and telephone services
to existing and new service areas.



Operating cash flow increased $10.5 million
or 12% primarily due to increased basic, digital and high-speed Internet revenue, offset by increases in programming and other operating costs and selling, general and administrative costs.



Interest expense remained relatively flat quarter over quarter. The decrease of $1.2 million
or 2% is primarily due to lower interest rates, which averaged 7.05% for the three months ended March 31, 2004, as compared to 7.79% for the three months ended March 31, 2003 and partially offset by higher outstanding debt, which averaged $2.85
billion for the three months ended March 31, 2004, as compared to $2.60 billion for the three months ended March 31, 2003.



Minority interest, equal to 50% of Insight Midwests net income or loss attributable to common interests, decreased $6.4 million or 98% as a direct result of the
decrease in net income recorded by Insight Midwest quarter over quarter. This decrease is primarily due to the gain recorded by Insight Midwest on the swap of the Griffin, Georgia system during the three months ended March 31, 2003.



18



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Liquidity and Capital Resources



Our business requires cash for operations, debt service, capital expenditures and acquisitions. The cable television business has
substantial on-going capital requirements for the construction, expansion and maintenance of its broadband networks. Expenditures have primarily been used to upgrade our existing cable network, and in the future will be used for network extensions,
new services, converters and network upgrades. Historically, we have been able to meet our cash requirements with cash flow from operations, borrowings under our credit facilities and issuances of private and public debt and equity.



Cash provided by operations for the three months ended March 31, 2004 and 2003 was $95.1
million and $63.2 million. The increase was primarily attributable to the timing of cash receipts and payments related to our working capital accounts.



Cash used in investing activities for the three months ended March 31, 2004 and 2003 was $43.6 million and $67.8 million. The decrease was attributable to the swap of our
Griffin, Georgia system for the New Albany, Indiana and Shelbyville, Kentucky systems in the first quarter of 2003.



Cash provided by (used in) financing activities for the three months ended March 31, 2004 and 2003 was $(15.6) million and $20.8 million. During the three months ended
March 31, 2004, we commenced debt amortization payments related to the A and B Term Loan portions of our credit facility, which totaled $15.6 million. In addition, we did not need to borrow under our credit facility due to increased cash flows from
operations. During the three months ended March 31, 2003, we borrowed $27.8 million under our credit facilities to support our operations and capital spending. Partially offsetting these borrowings were preferred interest distribution payments which
ceased with the refinancing of debt of Insight Ohio, discussed below, during the third quarter of 2003.



For the three months ended March 31, 2004 and 2003, we spent $44.2 million and $40.5 million largely in success-based capital, including capital for interactive digital and high-speed Internet growth as well as the
continued buildout of our distribution systems.



On August 26, 2003 we amended
the Insight Midwest Holdings Credit Facility in connection with our plan to refinance all of the obligations and conditionally guaranteed obligations of Insight Ohio. The amendment increased the Term B loan portion of the credit facility from $900.0
million to $1.125 billion which increased the total facility size to $1.975 billion from $1.750 billion. We recorded $2.2 million of deferred financing costs associated with this amendment that will be amortized over the remaining term of the credit
facility.



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



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We believe that the Insight Midwest Holdings credit facility, cash on-hand and our cash flow from operations are
sufficient to support our current operating plan. We have the ability to draw upon $350.4 million of unused availability under the Insight Midwest Holdings credit facility as of March 31, 2004 to fund any shortfall resulting from the inability of
Insight Midwests cash from operations to fund its capital expenditures, meet its debt service requirements or otherwise fund its operations.



The following table summarizes our contractual obligations and commitments, excluding interest and commitments for programming, as of March 31, 2004, including periods in
which the related payments are due (in thousands):



|                       |  |                         |           |                 |   |        |  |   |          
|---------------------- |  | ----------------------- | --------- | --------------- | - | ------ |  | - | ---------
|                       |  | Contractual Obligations
|                       |  | Long-TermDebt           |           | OperatingLeases |   | Total 
|2004                   |  | $                       | 46,687    |                 | $ | 2,903  |  | $ | 49,590   
|2005                   |  |                         | 83,500    |                 |   | 3,218  |  |   | 86,718   
|2006                   |  |                         | 83,500    |                 |   | 2,823  |  |   | 86,323   
|2007                   |  |                         | 83,500    |                 |   | 2,157  |  |   | 85,657   
|2008                   |  |                         | 104,750   |                 |   | 1,925  |  |   | 106,675  
|Thereafter             |  |                         | 2,513,500 |                 |   | 2,409  |  |   | 2,515,909
|                       |  |                         |           |                 |   |        |  |   |          
|Total cash obligations |  | $                       | 2,915,437 |                 | $ | 15,435 |  | $ | 2,930,872
|                       |  |                         |           |                 |   |        |  |   |          



Item 3. Quantitative and
Qualitative Disclosure About Market Risk



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



As of March 31, 2004, we had entered into $150.0 million notional amount of floating to fixed
rate interest rate swaps that approximated 10% of our borrowings under our credit facility, which expire in August 2004. A hypothetical 100 basis point increase in interest rates along the entire interest rate yield curve would increase our annual
interest expense, for the unhedged portion of our credit facility, by approximately $13.9 million.



In July 2003, we entered into three interest rate swap agreements whereby we swapped fixed rates under our 101/2% senior notes due in December 2010 for variable rates equal to six-month LIBOR, plus the applicable margin of approximately 8.4%, on $185.0 million notional value of debt. These agreements expire
November 1, 2005. We recorded a gain on these swaps of $1.8 million for the three months ended March 31, 2004, which is included in other income. A hypothetical 100 basis point increase in interest rates along the entire interest rate yield curve
would increase our annual interest expense for these three swaps by approximately $1.9 million.



In December 2003, we entered into an interest rate swap agreement whereby we swapped fixed rates under our 101/2% senior notes due in December 2010 for variable rates equal to six-month LIBOR, plus



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the applicable margin of approximately 5.9%, on $130.0 million notional value of debt. This agreement expires November 1,
2010. This swap has been determined to be perfectly effective in hedging against fluctuations in the fair value of the underlying debt. As such, changes in the fair value of the underlying debt equally offset changes in the value of the interest
rate swap in our consolidated statements of operations. The fair value (cost if terminated) of this swap as of March 31, 2004 and December 31, 2003 was $3.2 million and $(206,000) and has been recorded in other non-current assets (liabilities) and
as an adjustment to the carrying value of debt. A hypothetical 100 basis point increase in interest rates along the entire interest rate yield curve would increase our annual interest expense by approximately $1.3 million.



The aggregate fair market value and aggregate carrying value of our 93/4% and 101/2% senior notes and 121/4% senior discount notes was $1.4 billion
and $1.3 billion as of March 31, 2004. The fair market value of our credit facility borrowings approximates its carrying value as the credit facility borrowings bear interest at floating rates of interest. As of March 31, 2004, the estimated fair
value of our interest rate swap agreements was approximately $826,000 and is reflected in our financial statements as either other non-current assets or liabilities. Changes in the fair value of our swaps are either recognized in income or in
stockholders equity as a component of other comprehensive income (loss) depending upon the type of swap and whether it qualifies for hedge accounting.



Item 4. Controls and Procedures



Our management carried out an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure
controls and procedures as of March 31, 2004. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective to ensure that information required to be
disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission.



There has not been any change in our internal control over financial reporting
in connection with the evaluation required by Rule 13a-15(d) under the Exchange Act that occurred during the quarter ended March 31, 2004 that has materially affected, or is reasonably likely to materially affect, our internal control over financial
reporting.



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PART II. OTHER INFORMATION



Item 1. Legal Proceedings



See Note 12 to Notes to Consolidated Financial Statements.



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



During the three months ended March 31, 2004, we issued 45,401 shares of Class A common stock in connection with our matching contributions
to our 401(k) plan, we issued 75,000 shares of restricted Class A common stock in connection with an employment agreement and granted stock options to certain of our employees, directors and external consultants to purchase an aggregate of 346,708
shares of Class A common stock. The issuances of common stock and grants of stock options were not registered under the Securities Act of 1933 because such issuances and grants either did not involve an offer or sale for purposes of Section 2(a)(3)
of the Securities Act of 1933, in reliance on the fact that the matching contributions and stock options were issued and granted for no consideration, or were offered and sold in transactions not involving a public offering, exempt from registration
under the Securities Act of 1933 pursuant to Section 4(2).



Item 6. Exhibits
and Reports on Form 8-K



(a) 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                                                                                   



(b) Reports on Form 8-K:



We furnished to the Securities and Exchange Commission the following
report on Form 8-K during the three months ended March 31, 2004:



| |  | On February 26, 2004, relating to and attaching our press release announcing our financial results for the quarter and year ended December 31, 2003 (Item 12).
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------



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SIGNATURES



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



|                  |  |                                                  
|----------------- |  | -------------------------------------------------
|Date: May 3, 2004 |  | INSIGHT COMMUNICATIONS COMPANY, INC.             
|                  | 
|                  |  | /s/ John Abbot                                   
|                  |  | John Abbot                                       
|                  |  | Senior Vice President and Chief Financial Officer
|                  |  | May 3, 2004                                      
|                  |  | (Principal Financial Officer)                    



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