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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 numbers |  | 333-33540   |  | 
| |  |                         |  | 333-33540-1 |  | 



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INSIGHT MIDWEST, L.P.

INSIGHT CAPITAL, INC.

(Exact name of registrants as specified in their charters)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 13-4079232                          
|Delaware                                                       |  | 13-4079679                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



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



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



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Indicate by check mark whether the registrants (1) have 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 registrants were required to file such reports) and (2) have been subject to such filing requirements for the past 90
days.    Yes  x    No ̈



Indicate by check mark whether the registrants are accelerated filers (as
defined in Exchange Act Rule 12b-2). Yes ̈No  x.



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



|                      |  |                 
|--------------------- |  | ----------------
|Insight Midwest, L.P. |  | - Not Applicable
|Insight Capital, Inc. |  | - Not Applicable



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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 MIDWEST, LP

CONSOLIDATED BALANCE SHEETS

(in thousands)



|                                                                                                                                  |  |               |           |   |                  |   |           |  
|--------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | --------- | - | ---------------- | - | --------- | -
|                                                                                                                                  |  | March 31,2004 |           |   | December 31,2003 |  
|                                                                                                                                  |  | (unaudited)   |           |   |                  |  
|Assets                                                                                                                            |  |               |           |   |                  |   |           |  
|Cash and cash equivalents                                                                                                         |  | $             | 58,917    |   |                  | $ | 22,679    |  
|Trade accounts receivable, net of allowance for doubtful accounts of $1,180 and $1,123 as of March 31, 2004 and December 31,
2003 |  |               | 17,692    |   |                  |   | 29,271    |  
|Launch funds receivable                                                                                                           |  |               | 1,879     |   |                  |   | 9,421     |  
|Prepaid expenses and other assets                                                                                                 |  |               | 15,890    |   |                  |   | 17,711    |  
|                                                                                                                                  |  |               |           |   |                  |   |           |  
|Total current assets                                                                                                              |  |               | 94,378    |   |                  |   | 79,082    |  
|                                                                                                                                  |  |              
|Fixed assets, net                                                                                                                 |  |               | 1,186,899 |   |                  |   | 1,198,830 |  
|Goodwill                                                                                                                          |  |               | 14,684    |   |                  |   | 14,684    |  
|Franchise costs                                                                                                                   |  |               | 2,357,515 |   |                  |   | 2,357,535 |  
|Deferred financing costs, net of accumulated amortization of $11,825 and $10,710 as of March 31, 2004 and December 31, 2003       |  |               | 26,108    |   |                  |   | 27,222    |  
|Other non-current assets                                                                                                          |  |               | 3,240     |   |                  |   |          |  
|                                                                                                                                  |  |               |           |   |                  |   |           |  
|Total assets                                                                                                                      |  | $             | 3,682,824 |   |                  | $ | 3,677,353 |  
|                                                                                                                                  |  |               |           |   |                  |   |           |  
|Liabilities and partners capital                                                                                                 |  |               |           |   |                  |   |           |  
|Accounts payable                                                                                                                  |  | $             | 24,363    |   |                  | $ | 29,427    |  
|Accrued expenses and other liabilities                                                                                            |  |               | 27,504    |   |                  |   | 31,932    |  
|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    |  
|Due to affiliates                                                                                                                 |  |               | 43,326    |   |                  |   | 40,386    |  
|                                                                                                                                  |  |               |           |   |                  |   |           |  
|Total current liabilities                                                                                                         |  |               | 288,565   |   |                  |   | 263,586   |  
|                                                                                                                                  |  |              
|Deferred revenue                                                                                                                  |  |               | 4,114     |   |                  |   | 4,523     |  
|Debt                                                                                                                              |  |               | 2,589,993 |   |                  |   | 2,607,350 |  
|Other non-current liabilities                                                                                                     |  |               | 2,414     |   |                  |   | 5,742     |  
|                                                                                                                                  |  |               |           |   |                  |   |           |  
|Total liabilities                                                                                                                 |  |               | 2,885,086 |   |                  |   | 2,881,201 |  
|                                                                                                                                  |  |              
|Partners capital:                                                                                                                |  |               |           |   |                  |   |           |  
|Partners accumulated capital                                                                                                     |  |               | 799,815   |   |                  |   | 799,574   |  
|Accumulated other comprehensive loss                                                                                              |  |               | (2,077    | ) |                  |   | (3,422    | )
|                                                                                                                                  |  |               |           |   |                  |   |           |  
|Total partners capital                                                                                                           |  |               | 797,738   |   |                  |   | 796,152   |  
|                                                                                                                                  |  |               |           |   |                  |   |           |  
|Total liabilities and partners capital                                                                                           |  | $             | 3,682,824 |   |                  | $ | 3,677,353 |  
|                                                                                                                                  |  |               |           |   |                  |   |           |  



See
accompanying notes



2



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INSIGHT MIDWEST, LP

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands)



|                                            |  |                              |         |   |      |   |         |  
|------------------------------------------- |  | ---------------------------- | ------- | - | ---- | - | ------- | -
|                                            |  | Three months ended March 31, |        
|                                            |  | 2004                         |         |   | 2003 |  
|Revenue                                     |  | $                            | 238,084 |   |      | $ | 214,295 |  
|                                            |  |                             
|Operating costs and expenses:               |  |                              |         |   |      |   |         |  
|Programming and other operating costs       |  |                              | 87,491  |   |      |   | 79,533  |  
|Selling, general and administrative         |  |                              | 44,074  |   |      |   | 40,005  |  
|Management fees                             |  |                              | 7,003   |   |      |   | 6,296   |  
|Depreciation and amortization               |  |                              | 56,989  |   |      |   | 53,568  |  
|                                            |  |                              |         |   |      |   |         |  
|Total operating costs and expenses          |  |                              | 195,557 |   |      |   | 179,402 |  
|                                            |  |                              |         |   |      |   |         |  
|Operating income                            |  |                              | 42,527  |   |      |   | 34,893  |  
|                                            |  |                             
|Other income (expense):                     |  |                              |         |   |      |   |         |  
|Gain on cable system exchange               |  |                              |        |   |      |   | 26,992  |  
|Interest expense                            |  |                              | (44,356 | ) |      |   | (46,292 | )
|Interest income                             |  |                              | 56      |   |      |   | 35      |  
|Other                                       |  |                              | 2,014   |   |      |   | 25      |  
|                                            |  |                              |         |   |      |   |         |  
|Total other expense, net                    |  |                              | (42,286 | ) |      |   | (19,240 | )
|                                            |  |                              |         |   |      |   |         |  
|Net income                                  |  |                              | 241     |   |      |   | 15,653  |  
|Accrual of preferred interests              |  |                              |        |   |      |   | (5,150  | )
|                                            |  |                              |         |   |      |   |         |  
|Net income attributable to common interests |  | $                            | 241     |   |      | $ | 10,503  |  
|                                            |  |                              |         |   |      |   |         |  



See
accompanying notes



3



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INSIGHT MIDWEST, LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)



|                                                                                  |  |                              |         |   |      |   |         |  
|--------------------------------------------------------------------------------- |  | ---------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                  |  | Three months ended March 31, |        
|                                                                                  |  | 2004                         |         |   | 2003 |  
|Operating activities:                                                             |  |                              |         |   |      |   |         |  
|                                                                                  |  |                             
|Net income                                                                        |  | $                            | 241     |   |      | $ | 15,653  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                              |         |   |      |   |         |  
|Depreciation and amortization                                                     |  |                              | 56,989  |   |      |   | 53,568  |  
|Provision for losses on trade accounts receivable                                 |  |                              | 3,750   |   |      |   | 2,399   |  
|Amortization of note discount                                                     |  |                              | 73      |   |      |   | 493     |  
|Gain on cable systems exchange                                                    |  |                              |        |   |      |   | (26,992 | )
|Gain on interest rate swaps                                                       |  |                              | (1,777  | ) |      |   |        |  
|Changes in operating assets and liabilities, net of the effect of acquisitions:   |  |                              |         |   |      |   |         |  
|Trade accounts receivable                                                         |  |                              | 7,829   |   |      |   | 867     |  
|Launch fund receivable                                                            |  |                              | 7,542   |   |      |   | 3,677   |  
|Prepaid expenses and other assets                                                 |  |                              | 961     |   |      |   | (3,636  | )
|Accounts payable                                                                  |  |                              | (5,064  | ) |      |   | (25,725 | )
|Accrued expenses and other liabilities                                            |  |                              | 24,321  |   |      |   | 41,549  |  
|                                                                                  |  |                              |         |   |      |   |         |  
|Net cash provided by operating activities                                         |  |                              | 94,865  |   |      |   | 61,853  |  
|                                                                                  |  |                              |         |   |      |   |         |  
|Investing activities:                                                             |  |                              |         |   |      |   |         |  
|Purchase of fixed assets                                                          |  |                              | (43,444 | ) |      |   | (39,747 | )
|Purchase of intangible assets                                                     |  |                              |        |   |      |   | (621    | )
|Sale of fixed assets                                                              |  |                              | 380     |   |      |   |        |  
|Purchase of cable television systems, net                                         |  |                              |        |   |      |   | (26,475 | )
|                                                                                  |  |                              |         |   |      |   |         |  
|Net cash used in investing activities                                             |  |                              | (43,064 | ) |      |   | (66,843 | )
|                                                                                  |  |                              |         |   |      |   |         |  
|Financing activities:                                                             |  |                              |         |   |      |   |         |  
|Distributions of preferred interests                                              |  |                              |        |   |      |   | (7,000  | )
|Net borrowings (repayments) under 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                                         |  |                              | 36,238  |   |      |   | 15,760  |  
|Cash and cash equivalents, beginning of period                                    |  |                              | 22,679  |   |      |   | 9,937   |  
|                                                                                  |  |                              |         |   |      |   |         |  
|Cash and cash equivalents, end of period                                          |  | $                            | 58,917  |   |      | $ | 25,697  |  
|                                                                                  |  |                              |         |   |      |   |         |  



See
accompanying notes



4



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INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1. Organization and Basis of Presentation



We were formed in
September 1999 to serve as the holding company and a financing vehicle for Insight Communications Company, Inc.s (Insight Inc.) cable television system joint venture with AT&T Broadband, LLC (now known as Comcast Cable
Holdings, LLC (Comcast Cable)). We are owned 50% by Insight Communications Company, L.P. (Insight LP), which is wholly owned by Insight Inc., and 50% by an indirect subsidiary of Comcast Cable. Insight LP serves as our
general partner and manages and operates our systems.



Through our wholly owned
operating subsidiaries, Insight Communications Midwest, LLC (Insight Communications Midwest), Insight Communications of Central Ohio, LLC (Insight Ohio) and Insight Kentucky Partners II, L.P. (Insight Kentucky),
we own and operate 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.



The
accompanying consolidated financial statements include the accounts of Insight Midwest Holdings, LLC, our wholly-owned subsidiary which owns 100% of the outstanding equity of our operating subsidiaries.



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 MIDWEST, LP

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. Fixed Assets



Fixed assets consisted of:



|                                               |  |                |           |   |                  |   |           |  
|---------------------------------------------- |  | -------------- | --------- | - | ---------------- | - | --------- | -
|                                               |  | March 31,2004  |           |   | December 31,2003 |  
|                                               |  | (in thousands) |          
|Land, buildings and improvements               |  | $              | 35,342    |   |                  | $ | 34,856    |  
|Cable system equipment                         |  |                | 2,069,361 |   |                  |   | 2,026,641 |  
|Furniture, fixtures and office equipment       |  |                | 15,748    |   |                  |   | 15,605    |  
|                                               |  |                |           |   |                  |   |           |  
|                                               |  |                | 2,120,451 |   |                  |   | 2,077,102 |  
|Less accumulated depreciation and amortization |  |                | (933,552  | ) |                  |   | (878,272  | )
|                                               |  |                |           |   |                  |   |           |  
|Total fixed assets, net                        |  | $              | 1,186,899 |   |                  | $ | 1,198,830 |  
|                                               |  |                |           |   |                  |   |           |  



We recorded depreciation expense of
$55.9 million and $52.6 million for the three months ended March 31, 2004 and 2003.



4. Debt



|                                          |  |                |           |   |                  |   |           |  
|----------------------------------------- |  | -------------- | --------- | - | ---------------- | - | --------- | -
|                                          |  | March 31,2004  |           |   | December 31,2003 |  
|                                          |  | (in thousands) |          
|Note payable to Insight Inc.              |  | $              | 100,000   |   |                  | $ | 100,000   |  
|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   |  
|                                          |  |                |           |   |                  |   |           |  
|                                          |  |                | 2,655,437 |   |                  |   | 2,671,000 |  
|Net unamortized discount/premium on notes |  |                | (1,121    | ) |                  |   | (1,194    | )
|Market value of interest rate swaps       |  |                | 3,240     |   |                  |   | (206      | )
|                                          |  |                |           |   |                  |   |           |  
|Total debt                                |  | $              | 2,657,556 |   |                  | $ | 2,669,600 |  
|                                          |  |                |           |   |                  |   |           |  



Insight Midwest Holdings $1.975
Billion Credit Facility



Our wholly owned subsidiary, Insight Midwest
Holdings, LLC, serves as borrower under a $1.975 billion credit facility. On March 28, 2002, we borrowed $100.0 million from Insight Inc., $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



6



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INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



4. Debt (continued)



under the credit facility to make
distributions to us for the purpose of repaying this loan, including accrued interest, provided that there are no defaults existing under the credit facility. The loan 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 us and, in turn, we 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.



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 |  |   | 2,253,500
|           |  |   |          
|Total      |  | $ | 2,655,437
|           |  |   |          



5. 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.



7



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INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



5. Derivative Instruments (continued)



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.



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 10 1/2% 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.



8



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INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



6. Comprehensive Income



We record the effective portion of
certain derivatives gains or losses as accumulated other comprehensive income or loss in the accompanying consolidated balance sheets.



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



|                                       |  |                             |       |      |   |       
|-------------------------------------- |  | --------------------------- | ----- | ---- | - | ------
|                                       |  | Three months endedMarch 31,
|                                       |  | 2004                        |       | 2003
|Net income                             |  | $                           | 241   |      | $ | 15,653
|Unrealized gain on interest rate swaps |  |                             | 1,345 |      |   | 6,740 
|                                       |  |                             |       |      |   |       
|Comprehensive income                   |  | $                           | 1,586 |      | $ | 22,393
|                                       |  |                             |       |      |   |       



7. Related Party Transactions



Managed Systems



On March 17, 2000, Insight LP 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. Certain of our employees operate these managed systems. Overhead costs we incur are allocated ratably and charged to them on a monthly basis.



On February 28, 2003, we 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.



9



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INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



7. 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 Insight LP entered into a
ten-year agreement with AT&T Broadband (now known as Comcast Cable) that allows us to deliver local telephone service. Under the terms of the agreement, we lease 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, we provide certain services and support for which we receive 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.



Due To Affiliates



As of March 31, 2004 and December 31, 2003, we owed Insight LP, certain amounts comprised
primarily of incurred but unpaid management fees, calculated as approximately 3% of revenues, and accrued interest related to our $100.0 million note payable to Insight Inc.



10



---

INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



8. 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.



11



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INSIGHT CAPITAL, INC.

BALANCE SHEETS

(in thousands)



|                                                                                                                          |  |                |            |   |                  |   |            |  
|------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ---------- | - | ---------------- | - | ---------- | -
|                                                                                                                          |  | March 31, 2004 |            |   | December 31,2003 |  
|                                                                                                                          |  | unaudited      |            |   |                  |  
|Assets                                                                                                                    |  |                |            |   |                  |   |            |  
|Cash                                                                                                                      |  | $              | 1          |   |                  | $ | 1          |  
|Deferred financing costs, net of accumulated amortization of $7,125 and $6,473 as of March 31, 2004 and December 31, 2003 |  |                | 15,655     |   |                  |   | 16,307     |  
|                                                                                                                          |  |                |            |   |                  |   |            |  
|Total assets                                                                                                              |  | $              | 15,656     |   |                  | $ | 16,308     |  
|                                                                                                                          |  |                |            |   |                  |   |            |  
|Liabilities and shareholder deficit                                                                                       |  |                |            |   |                  |   |            |  
|Accrued interest                                                                                                          |  | $              | 46,331     |   |                  | $ | 20,409     |  
|                                                                                                                          |  |                |            |   |                  |   |            |  
|Total current liabilities                                                                                                 |  |                | 46,331     |   |                  |   | 20,409     |  
|Senior notes, to be paid by Insight Midwest, LP                                                                           |  |                | 1,013,879  |   |                  |   | 1,013,806  |  
|                                                                                                                          |  |                |            |   |                  |   |            |  
|Total liabilities                                                                                                         |  |                | 1,060,210  |   |                  |   | 1,034,215  |  
|                                                                                                                          |  |               
|Shareholder deficit:                                                                                                      |  |                |            |   |                  |   |            |  
|Common stock; $.01 par value; 1,000 shares authorized, issued and outstanding                                             |  |                |           |   |                  |   |           |  
|Paid-in-capital                                                                                                           |  |                | 1          |   |                  |   | 1          |  
|In-substance allocation of proceeds related to senior notes to be paid by Insight Midwest                                 |  |                | (738,992   | ) |                  |   | (738,992   | )
|Accumulated deficit                                                                                                       |  |                | (305,563   | ) |                  |   | (278,916   | )
|                                                                                                                          |  |                |            |   |                  |   |            |  
|Total shareholder deficit                                                                                                 |  |                | (1,044,554 | ) |                  |   | (1,017,907 | )
|                                                                                                                          |  |                |            |   |                  |   |            |  
|Total liabilities and shareholder deficit                                                                                 |  | $              | 15,656     |   |                  | $ | 16,308     |  
|                                                                                                                          |  |                |            |   |                  |   |            |  



See
accompanying notes



12



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INSIGHT CAPITAL, INC.

STATEMENTS OF OPERATIONS

(unaudited)

(in thousands)



|                 |  |                             |         |   |      |   |         |  
|---------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                 |  | Three months endedMarch 31, |        
|                 |  | 2004                        |         |   | 2003 |  
|Expenses:        |  |                             |         |   |      |   |         |  
|                 |  |                            
|Amortization     |  | $                           | (652    | ) |      | $ | (556    | )
|Interest expense |  |                             | (25,995 | ) |      |   | (23,004 | )
|                 |  |                             |         |   |      |   |         |  
|Net loss         |  | $                           | (26,647 | ) |      | $ | (23,560 | )
|                 |  |                             |         |   |      |   |         |  



See accompanying notes



13



---

INSIGHT CAPITAL, INC.

STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)



|                                                                                |  |                             |         |   |      |   |         |  
|------------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                |  | Three months endedMarch 31, |        
|                                                                                |  | 2004                        |         |   | 2003 |  
|Cash flows from operating activities:                                           |  |                             |         |   |      |   |         |  
|                                                                                |  |                            
|Net loss                                                                        |  | $                           | (26,647 | ) |      | $ | (23,560 | )
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |                             |         |   |      |   |         |  
|Accretion of discount on notes                                                  |  |                             | 73      |   |      |   | 494     |  
|Amortization                                                                    |  |                             | 652     |   |      |   | 556     |  
|Interest expense assumed by affiliate                                           |  |                             | 25,922  |   |      |   | 22,510  |  
|                                                                                |  |                             |         |   |      |   |         |  
|Net cash provided by operating activities                                       |  |                             |        |   |      |   |        |  
|                                                                                |  |                             |         |   |      |   |         |  
|Net increase in cash                                                            |  |                             |        |   |      |   |        |  
|Cash, beginning of period                                                       |  |                             | 1       |   |      |   | 1       |  
|                                                                                |  |                             |         |   |      |   |         |  
|Cash, end of period                                                             |  | $                           | 1       |   |      | $ | 1       |  
|                                                                                |  |                             |         |   |      |   |         |  



See accompanying notes



14



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INSIGHT CAPITAL, INC.

NOTES TO FINANCIAL STATEMENTS



1.
Nature of Business



Insight Capital, Inc. (the Company), a
Delaware corporation, was formed on September 23, 1999, for the sole purpose of being a co-issuer with Insight Midwest, L.P. (Insight Midwest) of senior notes which allows certain investors the ability to be holders of the debt. The
Company has no operations. The outstanding shares of the Company are owned by Insight Midwest.



2. Responsibility for Interim Financial Statements



The accompanying unaudited financial statements of the Company 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 managements opinion, the financial statements reflect all adjustments
considered necessary for a fair statement of the financial position as of the interim dates presented. These unaudited interim financial statements should be read in conjunction with the audited financial statements and notes to financial statements
contained in the Companys 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 the Company 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. Actual results could differ from those estimates.



15



---

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 future 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 and from commissions for products sold through home shopping
networks.



Although we reported net income during the three months ended March
31, 2004 and 2003, we have historically recorded net losses through December 31, 2002. Some of the principle reasons for these net losses 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 and cannot predict what impact, if any, continued losses will have on our ability to finance our
operations in the future.



16



---

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 EndedMarch 31,
|                                                    |  | 2004                        |         |   | 2003
|                                                    |  | (in thousands)             
|Revenue                                             |  | $                           | 238,084 |   |      | $ | 214,295
|Operating costs and expenses:                       |  |                             |         |   |      |   |        
|Programming and other operating costs               |  |                             | 87,491  |   |      |   | 79,533 
|Selling, general and administrative                 |  |                             | 44,074  |   |      |   | 40,005 
|Management fees                                     |  |                             | 7,003   |   |      |   | 6,296  
|Depreciation and amortization                       |  |                             | 56,989  |   |      |   | 53,568 
|                                                    |  |                             |         |   |      |   |        
|Total operating costs and expenses                  |  |                             | 195,557 |   |      |   | 179,402
|                                                    |  |                             |         |   |      |   |        
|Operating income                                    |  |                             | 42,527  |   |      |   | 34,893 
|Operating cash flow                                 |  |                             | 99,516  |   |      |   | 88,461 
|Interest expense                                    |  |                             | 44,356  |   |      |   | 46,292 
|Net income                                          |  |                             | 241     |   |      |   | 15,653 
|Net cash provided by operating activities           |  |                             | 94,865  |   |      |   | 61,853 
|Net cash used in investing activities               |  |                             | 43,064  |   |      |   | 66,843 
|Net cash provided by (used in) financing activities |  |                             | (15,563 | ) |      |   | 20,750 
|Capital expenditures                                |  |                             | 43,444  |   |      |   | 39,747 



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 operating performance, 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.



17



---

The following calculations of operating cash flow are not necessarily comparable to similarly titled amounts of other
companies:



|                              |  |                             |        |      |   |       
|----------------------------- |  | --------------------------- | ------ | ---- | - | ------
|                              |  | Three Months EndedMarch 31,
|                              |  | 2004                        |        | 2003
|                              |  | (in thousands)             
|Operating income              |  | $                           | 42,527 |      | $ | 34,893
|Adjustment:                   |  |                             |        |      |   |       
|Depreciation and amortization |  |                             | 56,989 |      |   | 53,568
|                              |  |                             |        |      |   |       
|Operating cash flow           |  | $                           | 99,516 |      | $ | 88,461
|                              |  |                             |        |      |   |       



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



The $23.8 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):



|                              |  |                                |         |                  |       |   |                                |   |                  |  |       |                     |  |       |   
|----------------------------- |  | ------------------------------ | ------- | ---------------- | ----- | - | ------------------------------ | - | ---------------- |  | ----- | ------------------- |  | ----- | --
|                              |  | 2004 Revenue byServiceOffering |         | % ofTotalRevenue |       |   | 2003 Revenue byServiceOffering |   | % ofTotalRevenue |  |       | % Change in Revenue | 
|Basic                         |  | $                              | 139,005 |                  | 58.4  | % |                                | $ | 130,851          |  | 61.1  | %                   |  | 6.2   | % 
|Digital                       |  |                                | 23,721  |                  | 10.0  | % |                                |   | 19,132           |  | 8.9   | %                   |  | 24.0  | % 
|High-speed Internet           |  |                                | 28,940  |                  | 12.2  | % |                                |   | 20,262           |  | 9.5   | %                   |  | 42.8  | % 
|Premium / analog pay-per-view |  |                                | 14,906  |                  | 6.3   | % |                                |   | 14,704           |  | 6.9   | %                   |  | 1.4   | % 
|Telephone                     |  |                                | 3,758   |                  | 1.5   | % |                                |   | 2,568            |  | 1.2   | %                   |  | 46.3  | % 
|Advertising                   |  |                                | 13,987  |                  | 5.9   | % |                                |   | 12,535           |  | 5.8   | %                   |  | 11.6  | % 
|Franchise fees                |  |                                | 7,008   |                  | 2.9   | % |                                |   | 6,701            |  | 3.1   | %                   |  | 4.6   | % 
|Other                         |  |                                | 6,759   |                  | 2.8   | % |                                |   | 7,542            |  | 3.5   | %                   |  | (10.4 | )%
|                              |  |                                |         |                  |       |   |                                |   |                  |  |       |                     |  |       |   
|Total                         |  | $                              | 238,084 |                  | 100.0 | % |                                | $ | 214,295          |  | 100.0 | %                   |  | 11.1  | % 
|                              |  |                                |         |                  |       |   |                                |   |                  |  |       |                     |  |       |   



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
|                    |  |         |  |        



18



---

Average monthly revenue per basic customer was $61.25 for the three months ended March 31, 2004, compared to $55.15 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 $4.1 million or 10%, 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. 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.



Management
fees increased $707,000 or 11% to $7.0 million for the three months ended March 31, 2004 from $6.3 million for the three months ended March 31, 2003. Management fees, equal to approximately 3% of revenues, are paid to Insight LP.



Depreciation and amortization expense increased $3.4 million or 6% 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 $11.1 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 $1.9 million or 4% is primarily due to lower interest rates, which averaged 6.7% for the
three months ended March 31, 2004, as compared to 7.4% for the three months ended March 31, 2003 and partially offset by higher outstanding debt, which averaged $2.66 billion for the three months ended March 31, 2004, as compared to $2.45 billion
for the three months ended March 31, 2003.



19



---

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.



Cash provided by operations for the three months ended March 31, 2004 and 2003 was $94.9
million and $61.9 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 $43.1 million and $66.8 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 $43.4 million and $39.7 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 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. We
believe that the 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 our cash from operations to fund our capital expenditures, meet our debt service requirements or otherwise fund our operations.



20



---

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    |                 | $ | 1,735 |  | $ | 48,422   
|2005                   |  |                         | 83,500    |                 |   | 1,694 |  |   | 85,194   
|2006                   |  |                         | 83,500    |                 |   | 1,316 |  |   | 84,816   
|2007                   |  |                         | 83,500    |                 |   | 650   |  |   | 84,150   
|2008                   |  |                         | 104,750   |                 |   | 418   |  |   | 105,168  
|Thereafter             |  |                         | 2,253,500 |                 |   | 651   |  |   | 2,254,151
|                       |  |                         |           |                 |   |       |  |   |          
|Total cash obligations |  | $                       | 2,655,437 |                 | $ | 6,464 |  | $ | 2,661,901
|                       |  |                         |           |                 |   |       |  |   |          



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 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



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as an adjustment to the carrying value of debt. A hypothetical 100 basis point increase in interest rates along the
entire interest rate yield curve would increase our annual interest expense for this swap by approximately $1.3 million.



The aggregate fair market value and aggregate carrying value of our 93⁄4% and 101⁄2% senior notes was $1.1 billion and $1.0 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 interest rate swaps are either recognized in income or in partners capital as a component
of accumulated other comprehensive income (loss) depending on the type of swap and whether it qualifies for hedge accounting.



Item 4. Controls and Procedures



Insight Midwests management carried out an evaluation, with the participation of its Chief Executive Officer and Chief Financial Officer, of the effectiveness of
its disclosure controls and procedures as of March 31, 2004. Based upon that evaluation, its Chief Executive Officer and Chief Financial Officer concluded that Insight Midwests disclosure controls and procedures were effective to ensure that
information required to be disclosed by it in reports that it files or submits 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 its 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, its
internal control over financial reporting.



Insight Capitals management
carried out an evaluation, with the participation of its Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures as of March 31, 2004. Based upon that evaluation, its Chief Executive
Officer and Chief Financial Officer concluded that Insight Capitals disclosure controls and procedures were effective to ensure that information required to be disclosed by it in reports that it files or submits 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 its 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, its internal control over financial reporting.



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PART II. OTHER INFORMATION



Item 1. Legal Proceedings



See Note 8 to Notes to Consolidated Financial Statements.



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 Midwest, L.P.
|---- | -----------------------------------------------------------------------------------------------

|31.2 | Rule 13a-14(a)/15d-14(a) Certifications of the Chief Financial Officer of Insight Midwest, L.P.
|---- | -----------------------------------------------------------------------------------------------

|31.3 | Rule 13a-14(a)/15d-14(a) Certifications of the Chief Executive Officer of Insight Capital, Inc.
|---- | -----------------------------------------------------------------------------------------------

|31.4 | Rule 13a-14(a)/15d-14(a) Certifications of the Chief Financial Officer of Insight Capital, Inc.
|---- | -----------------------------------------------------------------------------------------------

|32.1 | Section 1350 Certifications of the Chief Executive Officer and Chief Financial Officer of Insight Midwest, L.P.
|---- | ---------------------------------------------------------------------------------------------------------------

|32.2 | Section 1350 Certifications of the Chief Executive Officer and Chief Financial Officer of Insight Capital, Inc.
|---- | ---------------------------------------------------------------------------------------------------------------



(b) Reports on Form 8-K:



None



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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 6, 2004 |  | INSIGHT MIDWEST, L.P.          
|                  | 
|                  |  | /s/ John Abbot                 
|                  |  | John Abbot                     
|                  |  | Senior Vice President and Chief
|                  |  | Financial Officer              
|                  |  | (Principal Financial Officer)  



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 6, 2004 |  | INSIGHT CAPITAL, INC.          
|                  | 
|                  |  | /s/ John Abbot                 
|                  |  | John Abbot                     
|                  |  | Senior Vice President and Chief
|                  |  | Financial Officer              
|                  |  | (Principal Financial Officer)  



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