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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2004

INSIGHT MIDWEST, L.P.

INSIGHT CAPITAL, INC.

(Exact name of registrants as specified in their charters)

Registrants’ telephone number, including area code: 917-286-2300

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.

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

INSIGHT MIDWEST, LP

CONSOLIDATED BALANCE SHEETS

(in thousands)

See accompanying notes

2

INSIGHT MIDWEST, LP

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands)

See accompanying notes

3

INSIGHT MIDWEST, LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

See accompanying notes

4

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 2.4 million homes and served approximately 1.3 million customers as of September 30, 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 and nine months ended September 30, 2004 are not necessarily indicative of the results to be expected for the year ending December 31, 2004 or any other interim period.

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INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. Fixed Assets

We recorded depreciation expense of $57.2 million and $170.9 million for the three and nine months ended September 30, 2004 and $53.7 million and $164 million for the three and nine months ended September 30, 2003.

4. Debt

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 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.

6

INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. Debt (continued)

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.

Ohio Refinancing

On August 21, 1998, Insight LP and Coaxial Communications of Central Ohio, Inc. (“Coaxial”) entered into a contribution agreement pursuant to which Coaxial contributed to Insight Ohio substantially all of the assets and liabilities of its cable television systems located in Columbus, Ohio and Insight LP contributed $10.0 million in cash to Insight Ohio. As a result of the contribution, Coaxial owned 25% of the non-voting common equity and Insight LP, through its subsidiary Insight Holdings of Ohio, LLC, owned 75% of the non-voting common equity of Insight Ohio. In addition, Coaxial also received two separate series of voting preferred equity (Series A Preferred Interest—$140 million and Series B Preferred Interest—$30 million) of Insight Ohio.

The Voting Preferred Interests provided for cash distributions to Coaxial and certain of its affiliates in amounts equal to the payments required on the 10% Senior Notes and the 12 ⁷/8% Senior Discount Notes. Insight Ohio was required to redeem the Series A Preferred Interests in August 2006 and the Series B Preferred Interest in August 2008. The Senior Notes and Senior Discount Notes were conditionally guaranteed by Insight Ohio.

On August 8, 2000, Insight Ohio purchased Coaxial’s 25% non-voting common equity interest. The purchase price was 800,000 shares of Insight Inc.’s common stock and cash in the amount of $2.6 million. In connection with the purchase, Insight Ohio’s operating agreement was amended to, among other things, remove certain participating rights of the principals of Coaxial and certain of its affiliates. Additionally, the agreement was amended to incorporate 70% of Insight Ohio’s total voting power into the common equity interests of Insight Ohio and 30% of Insight Ohio’s total voting power into the Preferred Interests of Insight Ohio.

Although the financial results of Insight Ohio have been consolidated in our financials since January 1, 2001, for financing purposes, until September 29, 2003, Insight Ohio was an unrestricted subsidiary of ours and was prohibited by the terms of its indebtedness from making distributions to us.

On September 25, 2003, Insight Inc. purchased all the outstanding equity of the owners of Coaxial, which held the preferred interests of Insight Ohio and 800,000 shares of Insight Inc.’s stock, for $29.4 million. The purchase was financed through Insight Inc.’s existing cash on hand. Additionally, the Purchase and Option Agreement, between Coaxial and Insight Inc., dated August 8, 2000, was terminated.

In connection with these transactions, Insight Inc. retired the 800,000 shares of its stock held by Coaxial and, immediately thereafter, contributed the purchased interests and our interests in Insight Ohio to Insight Midwest Holdings. Additionally, the Series A and Series B preferred interests were converted to common interests.

7

INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. Debt (continued)

On September 29, 2003, we retired the remaining Ohio obligations, comprised of the Senior Notes and Senior Discount Notes, through our refinancing of the Insight Midwest Holdings Credit Facility. Insight Ohio is now a restricted subsidiary under the terms of our indentures. We recorded a loss of $10.9 million on the extinguishment of these obligations as a result of call premiums and the write-off of deferred financing costs.

Senior Notes

In July 2004, we completed an exchange offer pursuant to which the $130.0 million 10½% Senior Notes issued in December 2003 were exchanged for substantially identical notes registered under the Securities Act of 1933.

Debt Principal Payments

As of September 30, 2004, principal payments required on our debt were as follows (in thousands):

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. 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.

8

INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. Derivative Instruments (continued)

Cash Flow Hedges

As of 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 expired in August 2004. We recorded $826,000 of accrued interest related to this agreement as December 31, 2003. As of December 31, 2003, the estimated fair value (cost if terminated) of this interest rate swap agreement was approximately $(3.4) million.

Fair Value Hedges

In February 2003, we entered into two interest rate swap agreements whereby we swapped fixed rates under our 10½% 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 10½% 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 $1.5 million and $250,000 for the three and nine months ended September 30, 2004, which is included in other income (expense). As of September 30, 2004 and December 31, 2003, we recorded $(83,000) and $275,000 of interest receivable (payable) related to these agreements. The fair market value (cost if terminated) of these agreements was $(1.9) million and $(2.1) million as of September 30, 2004 and December 31, 2003.

In December 2003, we entered into an interest rate swap agreement whereby we swapped fixed rates under our 10½% 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 September 30, 2004 and December 31, 2003 was $968,000 and $(206,000) and has been recorded in other non-current assets (liabilities) and as an adjustment to the carrying value of debt.

9

INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. Comprehensive Income (Loss)

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 (loss) to comprehensive income (loss) (in thousands):

7. Related Party Transactions

Managed Systems

On March 17, 2000, Insight LP entered into a management agreement with Comcast of Montana/Indiana/Kentucky/Ohio (“Comcast”) (formerly known as InterMedia Partners Southeast), an affiliate of Comcast Cable, to provide management services to cable television systems owned by Comcast. These systems served approximately 89,400 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. Effective July 31, 2004, the management agreement was terminated by mutual agreement.

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, we 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.

Programming

We purchase the majority of our programming through affiliates of Comcast Cable. Charges for such programming, including a 1½% administrative fee, were $37.5 million and $111.0 million for the three and nine months ended September 30, 2004 and $36.7 million and $107.5 million for the three and nine months ended September 30, 2003.

10

INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. Related Party Transactions (continued)

As of September 30, 2004 and December 31, 2003, $34.2 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.

In 2001, in connection with the purchase and contribution of our systems primarily located in Illinois, we acquired, through affiliates of Comcast Cable, an above-market programming contract. The above-market portion of the contract was recorded as an adjustment to the purchase price of the Illinois systems of $36.5 million with a long-term programming liability recorded in other non-current liabilities. This contract, under litigation between affiliates of Comcast Cable and the programmer, was renegotiated during the third quarter of 2003 and indirectly resulted in more favorable programming rates for us. As such, we recorded an adjustment to programming expense of $3.1 million and recorded a gain on the extinguishment of the liability for $37.1 million, both of which have been recorded in our consolidated statements of operations during the three months ended September 30, 2003.

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 to our residential customers, in certain of our service areas, local telephone service provided by Comcast Cable. 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 $6.4 million for the three and nine months ended September 30, 2004 and $1.7 million and $4.2 million for the three and nine months ended September 30, 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.

On July 2, 2004, we entered into an agreement with Comcast Cable to acquire the telephone business of Comcast Cable relating to the markets served under our agreement. The transfer of ownership and operational control of Comcast Cable’s telephone business to us will take place after a transition period and is subject to customary closing conditions, including regulatory approvals. The closing is expected to occur during the first half of 2005.

Advertising Services

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

We, through our Kentucky Systems, earned advertising revenues through this affiliate of $4.6 million and $13.7 million for the period from July 1, 2004 through September 26, 2004 and January 1, 2004 through September 26, 2004 and $4.5 million and $13.7 million for the three and nine months ended September 30, 2003. As of September 30, 2004 and December 31, 2003, we had $8.9 million and $9.3 million as a receivable due from this affiliate included in other current assets.

11

INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. Related Party Transactions (continued)

Through September 26, 2004, we paid this affiliate a fixed and variable fee for providing this service based on advertising sales cash flow growth. As of September 30, 2004 and December 31, 2003, we had $174,000 and $102,000 recorded as payables to this affiliate related to such services.

Due To Affiliates

As of September 30, 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.

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 filed a motion for discretionary review of the appeals court’s ruling which was denied by 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. In August 2003,

12

INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. Commitments and Contingencies (continued)

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 have briefed the issues. The trial will remain stayed pending the Sixth Circuit’s action. Oral arguments were held on October 26, 2004. 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.

13

INSIGHT CAPITAL, INC.

BALANCE SHEETS

(in thousands)

See accompanying notes

14

INSIGHT CAPITAL, INC.

STATEMENTS OF OPERATIONS

(unaudited)

(in thousands)

See accompanying notes

15

INSIGHT CAPITAL, INC.

STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

See accompanying notes

16

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 that 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.

17

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

Forward-Looking Statements

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

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.

Recent Developments

Acquisition of Telephone Business

On July 2, 2004, we entered into an agreement with Comcast Cable to acquire its telephone business as it relates to the markets served under our existing telephone joint operating agreement. Under our current agreement, we lease certain capacity on our local network to Comcast Cable for which we receive a fee and also provide certain services and support for which we receive additional payments related to installations, marketing and billing. By acquiring ownership of the telephone business from Comcast Cable, we will gain operational and strategic control over the business. Comcast Cable has agreed to pay us, upon the closing of the transaction, an amount equal to $20.0 million less the cumulative negative free cash flow incurred by Comcast Cable in operating this telephone business between June 1, 2004 and the closing. Additionally, as part of the agreement, Comcast Cable will provide to us certain fixed assets related to the telephone business. The transfer of ownership and operational control of Comcast Cable’s telephone business to us will take place after a transition period and is subject to customary closing conditions, including regulatory approvals. The closing is expected to occur during the first half of 2005. At this time, we are unable to predict, with certainty, the actual closing date or the amount of cumulative negative free cash flow that will be incurred by Comcast Cable prior to the closing.

18

Termination of Managed Systems Arrangement

On March 17, 2000, Insight LP entered into a management agreement with an affiliate of Comcast to provide management services to cable television systems owned by Comcast. These systems served approximately 89,400 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. Effective July 31, 2004, the management agreement was terminated by mutual agreement.

Termination of Kentucky Advertising Sales Arrangement

In October 1999, we entered into an agreement with an affiliate of Comcast Cable whereby the Comcast Cable affiliate performs all of our Kentucky advertising sales and related administrative services. Effective September 26, 2004, this agreement was terminated by mutual agreement. We believe that the assumption of the advertising sales responsibilities in Kentucky offers us the opportunity to continue to grow this business and align the Kentucky operating strategy with our other markets.

For additional information regarding the termination of each of these related party arrangements see Note 7 to Notes to Consolidated Financial Statements.

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.

Typically, we have historically recorded net losses. 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.

19

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:

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.

20

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

Three Months Ended September 30, 2004 Compared to Three Months Ended September 30, 2003

The $22.5 million or 10% increase in revenue was primarily a result of gains in high-speed Internet revenues, which increased 40% over the prior year’s quarter due to an increased customer base; increases in basic cable service revenue of 6% due to basic rate increases; and a 16% increase in digital video revenues also due to an increase in digital customers.

Revenue by service offering was as follows (in thousands):

Revenue Generating Units (“RGUs”) as of September 30, 2004, which represent the sum of basic, digital, high-speed Internet, and telephone customers, increased approximately 8.4% as compared to September 30, 2003. RGUs by type were as follows (in thousands):

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Average monthly revenue per basic customer was $65.01 for the three months ended September 30, 2004, compared to $58.63 for the three months ended September 30, 2003 primarily reflecting the continued growth of our high-speed Internet and digital product offerings in all markets as well as basic rate increases.

Programming and other operating costs increased $6.0 million or 7%. Programming costs increased primarily as a result of increased programming rates and increased digital customers. Other operating costs increased primarily due to increased high-speed Internet service provider costs driven by the net addition of approximately 103,000 high-speed Internet customers since September 30, 2003. This increase in operating costs was partially offset by more favorable per customer charges under a new agreement with our Internet service provider. In addition, other operating costs increased as a result of an increased volume of modems provided to customers under certain marketing campaigns. A favorable reversal of accrued property taxes also contributed to partially offsetting these increases.

Selling, general and administrative expenses increased $10.2 million or 24%, primarily due to increased marketing expenses to support the continued roll out of high-speed Internet and digital products, and to maintain the core video customer base. Marketing support funds (recorded as a reduction to selling, general and administrative expenses) decreased over the prior year’s quarter. A decrease in expenses previously allocated to Comcast in connection with the managed properties also contributed to the increase in selling, general and administrative expenses. As this agreement was terminated effective July 31, 2004, the period ending September 30, 2004 contains only one month of expense allocations versus three months recorded for the period ending September 30, 2003. While cost savings have been realized upon termination of the agreement, the impact of some of these savings is reflected in programming and other operating costs. In addition, payroll and related costs increased due to salary increases for existing employees and increases in health insurance costs.

Management fees increased $701,000 or 11% to $7.4 million for the three months ended September 30, 2004 from $6.7 million for the three months ended September 30, 2003. Management fees, equal to approximately 3% of revenues, are paid to Insight LP.

Depreciation and amortization expense increased $3.7 million or 7% primarily as a result of additional capital expenditures through September 30, 2004. These expenditures chiefly constituted network extensions, upgrades to our headends and purchases of customer premise equipment, all of which we consider necessary in order to continue to grow our customer base and expand our service offerings. Partially offsetting this increase was a decrease in depreciation expense related to certain assets that have become fully depreciated since September 30, 2003.

Operating cash flow (Non-GAAP measure) increased $5.7 million or 6% primarily due to increased high-speed Internet revenue, basic, and digital revenue, and was partially offset by increases in programming and other operating costs, as well as selling, general and administrative costs.

Interest expense decreased $5.6 million or 11% primarily due to lower interest rates, which averaged 7% for the three months ended September 30, 2004 as compared to 8% for the three months ended September 30, 2003.

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Nine Months Ended September 30, 2004 Compared to Nine Months Ended September 30, 2003

The $73.9 million or 11% increase in revenue was primarily a result of increases in basic cable service revenue of 7% due to basic rate increases and gains in our high-speed Internet and digital video revenues, which increased 40% and 21% over the prior year period, driven by an increased customer base for those services and

Revenue by service offering was as follows (in thousands):

Average monthly revenue per basic customer was $63.62 for the nine months ended September 30, 2004, compared to $56.90 for the nine months ended September 30, 2003 primarily reflecting basic rate increases and the continued growth of our high-speed Internet and digital product offerings in all markets.

Programming and other operating costs increased $21.1 million or 9%. Programming costs increased primarily as a result of increased programming rates. Additionally, programming costs increased as a result of increased video-on-demand purchases period over period. Other operating costs increased primarily due to increased high-speed Internet service provider costs driven by the net addition of approximately 103,000 high-speed Internet customers since September 30, 2003 and was partially offset by more favorable per customer charges under a new agreement with our Internet service provider. In addition, other operating costs increased as a result of technical salaries and related benefits for new and existing employees and an increased volume of modems provided to customers under certain marketing campaigns.

Selling, general and administrative expenses increased $21.2 million or 17%, primarily because of payroll and related costs due to the addition of new employees, salary increases for existing employees and increases in health insurance costs. Marketing expenses increased to support the continued roll-out of high-speed Internet and digital products and also to maintain our core video customer base. Professional fees also increased due to the one-time write-off of shelf registration fees we no longer anticipate will be utilized and due to additional costs incurred in connection with additional Sarbanes-Oxley compliance measures relating to internal controls. Also increasing selling, general and administrative expenses was a decrease in expenses previously allocated to Comcast in connection with the managed properties. As this agreement was terminated effective July 31, 2004, the period ending September 30, 2004 contains only seven months of expense allocations versus nine months recorded for the period ending September 30, 2003. While cost savings have been realized upon termination of

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the agreement, the impact of some of these savings is reflected in programming and other operating costs. In addition, bad debts increased reflecting an increase in the number of accounts written off combined with a higher balance per average account written off reflecting the increased volume of activity. 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 $2.2 million or 11% to $21.7 million for the nine months ended September 30, 2004 from $19.5 million for the nine months ended September 30, 2003. Management fees, equal to approximately 3% of revenues, are paid to Insight LP.

Depreciation and amortization expense increased $7.4 million or 4% primarily as a result of additional capital expenditures through September 30, 2004. These expenditures were primarily for network extensions, upgrades to our headends and purchases of customer premise equipment, all of which we consider necessary in order to continue to grow our customer base and expand our service offerings. Partially offsetting this increase was a decrease in depreciation expense related to certain assets that have become fully depreciated since September 30, 2003.

Operating cash flow increased $29.4 million or 11% 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 decreased $8.1 million or 6% primarily due to lower interest rates, which averaged 7% for the nine months ended September 30, 2004 as compared to 8% for the nine months ended September 30, 2003.

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. Capital expenditures have primarily been made to expand our service offerings to include digital video, high-speed Internet and telephone services. These services require certain upgrades to our cable infrastructure and typically include upgrades at our headends and throughout our distribution network. Additionally, these new services require us to purchase additional types customer premise equipment, including digital converters, cable modems and network interface units. 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 nine months ended September 30, 2004 and 2003 was $224.6 million and $186.0 million. The increase was primarily attributable to increased operating income and the timing of cash receipts and payments related to our working capital accounts.

Cash used in investing activities for the nine months ended September 30, 2004 and 2003 was $127.3 million and $156.2 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 used in financing activities for the nine months ended September 30, 2004 and 2003 was $52.7 million and $22.6 million. During the nine months ended September 30, 2004, we:

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During the nine months ended September 30, 2003, we:

For the nine months ended September 30, 2004 and 2003, we spent $128.2 million and $128.9 million in capital expenditures. These expenditures were primarily for network extensions, upgrades to our headends and purchases of customer premise equipment, all of which we consider necessary in order to continue to grow our customer base and expand our service offerings.

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 Insight Midwest Holdings credit facility, cash on-hand and our cash flow from operations are sufficient to support our current operating plan. On July 1, 2004 the leverage ratio covenant under the Insight Midwest Holdings credit facility reduced from 4.75x to 4.25x. We had the ability to draw upon $258.6 million of unused availability under the Insight Midwest Holdings credit facility as of September 30, 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.

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The following table summarizes our contractual obligations and commitments, excluding interest and commitments for programming, as of September 30, 2004, including periods in which the related payments are due (in thousands):

Item 3. Quantitative and Qualitative Disclosure About Market Risk

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

In July 2003, we entered into three interest rate swap agreements whereby we swapped fixed rates under our 10½% 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 $1.5 million and $250,000 for the three and nine months ended September 30, 2004, which is included in other income (expense). 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 10½% 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 September 30, 2004 and December 31, 2003 was $968,000 and $(206,000) and has been recorded in other non-current assets (liabilities) and as an adjustment to the carrying value of debt. A hypothetical 100 basis point increase in interest rates along the entire interest rate yield curve would increase our annual interest expense for this swap by approximately $1.3 million.

The aggregate fair market value and aggregate carrying value of our 9¾% and 10½% senior notes was $1.1 billion and $1.0 billion as of September 30, 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 September 30, 2004, the estimated fair value (cost if terminated) of our interest rate swap agreements was

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approximately $(896,000) and is reflected in our financial statements as other non-current 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 September 30, 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 September 30, 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 September 30, 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 September 30, 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 in Item 1 of PART I, Notes to Consolidated Financial Statements, and incorporated herein by reference.

Item 6. Exhibits

Exhibits: