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Insight Communications Announces Fourth Quarter And Year-end 2001 Results

New York – March 07, 2002 –

Insight Communications Company (Nasdaq: ICCI) today announced financial results for the three months and year ended December 31, 2001. Revenue for the year ended December 31, 2001 totaled $704.4 million, an increase of 47.9% over the prior year, due primarily to the inclusion of the Illinois systems acquired from AT&T Broadband, effective January 1, 2001. Operating cash flow, excluding a one-time, non-recurring charge of $3.8 million related to Excite@Home, totaled $316.4 million for the year.

For the three months ended December 31, 2001, revenue and operating cash flow totaled $183.1 million and $84.2 million, respectively, excluding the one-time non-recurring Excite@Home charge, representing increases of 48.7% and 48.5% over the prior year.

On a pro-forma basis, Insight added over 150,000 Revenue Generating Units (RGUs - sum of basic and digital video, high-speed data, and telephone customers) during the year, a 47.4% increase over the prior year activity. Excluding the recently acquired Illinois systems, which are still in the process of being rebuilt, RGU growth was 146,000, doubling last year's net increases. Insight's signature product, Insight Digital Gateway, drove RGU growth with 105,800 customers added during the year. At year-end, digital penetration exceeded 22.5%.

For the quarter, RGU gains totaled 42,600, which is slightly lower than the pace achieved in the third quarter of 47,000, resulting from the temporary halt in high-speed broadband installations. On September 28, 2001, Excite@Home filed for bankruptcy protection and, for a two-week period, ceased provisioning new customers. Thereafter, new installations were severely limited by the company's decision not to market a product that was scheduled to terminate and was subject to @Home's limited operating functions. @Home net additions totaled 3,200 for the quarter, less than one third of previous quarterly gains.

Telephone net additions doubled during the quarter. At year-end, telephone customers totaled nearly 6,000.

"We are very pleased with our 2001 results and had a good growth year with 150,000 new RGUs. This is especially good news considering that 95% of that growth came from our systems where we have concluded rebuilds," said Michael S. Willner, President and CEO. "We began the year with the successful acquisition of 355,000 customers in Illinois and then expeditiously undertook the rebuild process for these systems. We also started the year with approximately 145,000 customers able to receive the fully interactive digital product, including interactive video-on-demand, and ended the year with over 950,000 customers able to purchase these advanced services. Indeed, most of this deployment occurred during the fourth quarter. Now that the platform is installed and we are nearly rebuilt in Illinois, we are well poised for a great 2002."

Reflecting year-end roll-outs of advanced services, fourth quarter average revenue per customer totaled approximately $48.64, a 8.4% increase (excluding the Illinois systems) over the fourth quarter ended 2000. New services drove average revenue per customer increases as basic rates were increased by only 2.5% on average. Including the Illinois systems, average revenue per customer for the fourth quarter 2001 increased 6.6% to $47.71 as compared to the fourth quarter for the prior year.

"We are on target with our strategy of building a long-term brand, selling multiple services, and driving superior customer satisfaction while yielding high returns for our shareholders," added Kim Kelly, Executive Vice President and Chief Operating Officer. "We have extremely low capital per home at $148 for the year and the largest percent of upgraded plant with advanced services. We believe that we have the highest customer satisfaction rating in the industry as we concluded 2001. The first two months of 2002 already provide the evidence that the strategy succeeds."

Capital expenditures for the year totaled $325.6 million, including $55 million for the deployment of telephony. Capital was funded through cash flow from operations as well as through bank financings. At year-end, total debt net of cash was $2.5 billion, including the preferred interests issued by Insight Ohio, resulting in year-end leverage of 7.5x. Based upon our current plans, the company expects to spend approximately $300 million during 2002, which will be funded through existing sources including available bank debt.

Additionally, Insight reiterated its 2002 guidance for cash flow growth range of 14-16%.

Operating data results

Revenue increased $228.2 million or 47.9% to $704.4 million for the year ended December 31, 2001, from $476.2 million for the year ended December 31, 2000. The increase in revenue was primarily the result of the Illinois cable systems acquired from AT&T in the AT&T transactions (the "AT&T Illinois Systems"). The incremental revenue generated by the acquisition of the AT&T Illinois Systems approximated $181.2 million, which represents 79.4% of the increase in consolidated revenue. Excluding the AT&T Illinois Systems, revenue increased 9.9%, largely due to the sale of new services. Revenue for digital and high-speed data in the existing systems increased by $34.6 million, a combined 132.5% growth rate.

On a pro forma basis including the AT&T Illinois Systems, RGUs (Revenue Generating Units) were approximately 1,635,300 as of December 31, 2001 compared to approximately 1,485,200 as of December 31, 2000. This represents an annualized growth rate of 10.1%. RGUs represent the sum of basic and digital video, high-speed data and telephone customers.

Average monthly revenue per basic customer, including management fee income, was $45.93 for the year ended December 31, 2001 compared to $42.92 for the year ended December 31, 2000, primarily reflecting the continued successful rollout of new product offerings in the Indiana, Kentucky and Ohio markets. Average monthly revenue per basic customer for high-speed data and interactive digital video increased to $5.41 for the year ended December 31, 2001 from $2.36 for the year ended December 31, 2000. Excluding the AT&T Illinois Systems, the number of high-speed data service customers increased to approximately 62,900 as of December 31, 2001 from approximately 30,300 as of December 31, 2000, while digital customers increased to approximately 208,000 as of December 31, 2001 from approximately 103,300 as of December 31, 2000.

Programming and other operating costs increased $88.9 million or 52.3% to $258.9 million for the year ended December 31, 2001, from $170.1 million for the year ended December 31, 2000. The increase in programming and other operating costs was primarily the result of the acquisition of the AT&T Illinois Systems. The incremental expense resulting from the AT&T Illinois Systems approximated $62.8 million, which represents 70.7% of the increase in programming and other operating costs. Excluding these systems, programming and other operating costs increased by approximately $26.1 million or 15.3%, primarily as a result of increased programming rates and additional programming channels.

Selling, general and administrative expenses increased $37.0 million or 40.2% to $129.0 million for the year ended December 31, 2001, from $92.0 million for the year ended December 31, 2000. The increase in selling, general and administrative expenses was primarily the result of the acquisition of the AT&T Illinois Systems. The incremental expense resulting from the AT&T Illinois systems approximated $27.5 million, which represents 74.4% of the increase. Excluding these systems, selling, general and administrative costs increased by approximately $9.5 million or 10.3%, primarily reflecting increased marketing activity and corporate expenses associated with new service introductions.

Non-recurring high-speed data service charges were incurred in the year ended December 31, 2001 as a result of payments made to At Home Corporation ("@Home"), the former provider of high-speed data services for all of our systems, except for those located in Ohio. On September 28, 2001, @Home filed for protection under Chapter 11 of the Bankruptcy Code. For the purpose of continuing service to existing customers and to resume the provisioning of service to new customers, we entered into an interim agreement with @Home to extend service through November 30, 2001. Further, in December 2001, we entered into an additional interim service arrangement whereby we paid $10.0 million to @Home for three months through February 28, 2002. As a result of these interim arrangements, we incurred approximately $2.8 million in excess of our original agreed-to cost for such services rendered during the year ended December 31, 2001. Additionally, we have recorded a reserve of $1.0 million for a net receivable from @Home in connection with monies @Home collected from our high-speed data customers on our behalf prior to September 28, 2001. These additional costs are included in non-recurring high-speed data service charges in our statement of operations.

Depreciation and amortization expense increased $147.2 million or 62.3% to $383.4 million for the year ended December 31, 2001, from $236.2 million for the year ended December 31, 2000. The increase in depreciation and amortization expense was primarily the result of the acquisition of the AT&T Illinois Systems. The incremental expense resulting from the AT&T Illinois Systems approximated $96.4 million, which represents 65.5% of the increase. Excluding these systems, depreciation and amortization expense increased by approximately $50.8 million or 21.5%, primarily due to capital expenditures made to rebuild our existing cable equipment, roll-out new product offerings and add telephony capabilities to our network.

Operating cash flow, excluding the one-time non-recurring charge of $3.8 million related to @Home, increased by $102.3 million to $316.4 million, primarily as a result of the acquisition of the AT&T Illinois Systems, which generated approximately $90.9 million or 88.8% of the increase. Excluding these systems, the increase in operating cash flow is due to revenue gains from increased digital and modem penetration, and basic rate increases offset primarily by higher programming costs as mentioned above.

Interest expense increased $97.5 million or 84.4% to $213.0 million for the year ended December 31, 2001 from $115.5 million for the year ended December 31, 2000. The increase in interest expense was primarily the result of higher outstanding debt resulting from the acquisition of the AT&T Illinois Systems and funding of capital expenditures during the past year.

The benefit for income taxes was $46.6 million and $33.8 million for the year ended December 31, 2001 and 2000, representing effective tax rates of 40.4% and 44.0%.

For the year ended December 31, 2001, the net loss was $74.8 million primarily for the reasons set forth above.

Investment Activity

For the year ended December 31, 2001, we spent $325.6 million in capital expenditures, largely to support our network rebuild, digital converter purchases and to a lesser extent, telephony.

It is anticipated that during 2002, we will spend approximately $300 million in capital expenditures, which includes capital for rebuilds in Illinois, telephone deployment, and continued interactive digital expansion. We will be able to fund these capital expenditures through existing sources and borrowings under our credit facility.

2002 Guidance

In 2002, we expect revenues and operating cash flow to grow by approximately 14-16%. Additionally, we expect to spend approximately $300 million on capital expenditures.

Insight Communications (NASDAQ: ICCI) is the 9th largest cable operator in the United States, serving approximately 1.4 million customers. The company is highly concentrated in the four contiguous states of Illinois, Kentucky, Indiana and Ohio. Named "2001 Cable Operator of the Year" by Cablevision Magazine, Insight specializes in offering bundled, state-of-the-art services in mid-sized communities, delivering analog and digital video, high-speed data and the recent deployment of voice telephony in selected markets to its customers.

Any statements in this press release that are not historical facts are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from historical results or those the Company anticipates. Factors that could have a material and adverse impact on actual results are described in Insight's Registration Statement on form S-1 declared effective by the Securities and Exchange Commission on July 21, 1999. All forward-looking statements in this press release are qualified by reference to the cautionary statements included in Insight's Registration Statement.

Supplemental Information & Quarterly Operating Statistics (MS Word)