Cox Communications Announces Second Quarter Financial Results for 2003.Business Editors ATLANTA--(BUSINESS WIRE)--July 30, 2003 Cox achieves 20% operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. growth and 68% operating income growth, increases 2003 operating cash flow guidance Cox Communications Cox Communications is a privately owned subsidiary of Cox Enterprises providing digital cable television and telecommunications services in the United States. It is the third-largest[2] cable television provider in the United States, serving more than 6. , Inc. (NYSE NYSE See: New York Stock Exchange : COX) today reported financial results for the three months ended June June: see month. 30, 2003. "Cox Communications is pleased to share results from another outstanding quarter, marked by operating cash flow (OCF (1) (Open Container Format) See OPS. (2) (OpenCard Framework) A smart card specification from the OpenCard Consortium. ) growth of 20%, operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. growth of 68% and revenue growth of 14%," said Jim Robbins Rob·bins , Frederick Chapman 1916-2003. American microbiologist. He shared a 1954 Nobel Prize for work on the cultivation of the polio virus. , President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Cox Communications. "Due to our consistent OCF growth year to date, which has been positively impacted by the success we have had with our innovative productivity initiatives, we have increased historical OCF guidance to 17% to 18% growth for the full year 2003." Robbins continued: "Despite the traditionally seasonal nature of the second quarter, we delivered 237,722 advanced service revenue generating units (RGUs) and are on track to achieve our guidance of 1.0 to 1.1 million new service net additions for the year. A driving factor in our success continues to be our bundling bundling, courtship custom, thought to have originated in Holland and the British Isles. It was extended to America, particularly to New England, and most widely practiced in the years prior to the Revolution of 1776. strategy. Today nearly one third of our customers buy multiple services from Cox, further demonstrating the value of our superior bundle To sell hardware and software as a combined product or to combine several software packages for sale as a single unit. Contrast with unbundle. See bundled software and bundling. of digital services, which was confirmed last week when Cox received the highest honor As a verb, to accept a bill of exchange, or to pay a note, check, or accepted bill, at maturity. To pay or to accept and pay, or, where a credit so engages, to purchase or discount a draft complying with the terms of the draft. in J.D. Power and Associates' 2003 Residential Local Telephone Customer Satisfaction Study," Robbins added. "Cox's local telephone service ranked the highest in overall customer satisfaction in the Western Region - strong evidence of our success in bringing choice in local and long distance telephone service at a great value to Cox communities." SECOND QUARTER HIGHLIGHTS During the second quarter of 2003, Cox: -- Ended the quarter with just under 6.3 million basic video customers, up 0.5% from June 30, 2002. -- Ended the quarter with 10.7 million total RGUs, up 2% for the quarter, driven by 6% growth in advanced-service RGUs for the quarter. Total RGUs and advanced-service RGUs were up 12% and 34%, respectively, compared to June 30, 2002. -- Added 112,452 high-speed Internet See broadband. customers, ending the quarter with 1.7 million high-speed Internet customers, representing year-over-year growth of 50%. -- Added 56,170 Cox Digital Telephone customers, ending the quarter with 0.8 million telephone customers, representing year-over-year growth of 45%. -- Achieved Cox Digital Cable net additions of 69,100 customers, ending the quarter with 1.9 million digital cable customers. Cox Digital Cable is now available to 98% of the homes in Cox's service areas with penetration The successful unauthorized breach of a security perimeter. See penetration test. of our basic video customer base exceeding 30%. -- Generated $463.0 million in cash flows from operating activities and $125.8 million in free cash flow (cash flows from operating activities less capital expenditures). -- Reduced capital expenditures to $337.2 million for the quarter, down 32% from the second quarter of 2002. 2003 OUTLOOK For the full year 2003, Cox expects year-over-year growth in basic video subscribers of just under 1%. The company expects to add 1.0 million to 1.1 million advanced-service RGUs in 2003 driven by bundled bun·dle n. 1. A group of objects held together, as by tying or wrapping. 2. Something wrapped or tied up for carrying; a package. 3. Biology A cluster or strand of closely bound muscle or nerve fibers. offerings, excellent customer service and increased product availability. Cox expects to achieve revenue growth of 14% to 15%. Cox is increasing its guidance on operating cash flow (operating income before depreciation and amortization and gains or losses on the sale of cable systems) growth to 17% to 18% (16% to 17% excluding the impact of the $9.8 million one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. charge taken in 2002 related to the continuation continuation - continuation passing style of Excite@Home high-speed Internet service). Capital expenditures for the full year are now anticipated to be $1.5 billion, which is below the previously announced expectation of $1.6 billion. In addition, Cox expects to be free cash flow positive for the full year 2003. OPERATING RESULTS Three months ended June 30, 2003 compared with three months ended June 30, 2002 Total revenues for the second quarter of 2003 were $1.4 billion, an increase of 14% over the second quarter of 2002. This was primarily due to increased customers for advanced services (including digital cable, high-speed Internet access and telephony Meaning "sound over distance," it refers to electronically transmitting the human voice. In the beginning, telephony dealt only with analog signals in the circuit-switched networks of the telephone companies. ), higher basic cable rates and a $5 price increase on monthly high-speed Internet access adopted in certain markets in the fourth quarter of 2002 and in most of Cox's remaining markets in the first quarter of 2003. Also contributing to the increase was an increase in commercial broadband broadband Term describing the radiation from a source that produces a broad, continuous spectrum of frequencies (contrasted with a laser, which produces a single frequency or very narrow range of frequencies). customers. Cost of services, which includes programming costs, other direct costs and field service costs, was $594.9 million for the second quarter of 2003, an increase of 14% over the same period in 2002. Programming costs increased 10% to $291.5 million, reflecting rate increases and customer growth. Other cost of services increased 17% to $303.4 million, reflecting 1.2 million in net additions of basic and advanced-service RGUs over the last twelve months, as well as increased labor costs due to the transition from upgrade construction and new product launches to maintenance and related customer costs directly associated with the growth of new customers. Selling, general and administrative expenses were $296.9 million for the second quarter of 2003, an increase of 6% over the comparable period in 2002. This was due to an 8% increase in general and administrative expenses primarily related to increased salaries and benefits and increased headcount head count or head·count n. 1. The act of counting people in a particular group. 2. The number of people counted in this way. Noun 1. and a 1% net increase in marketing expense primarily due to an increase related to the promotion of new services and bundling alternatives, partially offset by a decrease in costs associated with Cox Media, Cox's advertising business. Operating income increased 68% to $168.3 million for the second quarter of 2003, and operating cash flow increased 20% to $532.1 million. Operating income margin (operating income as a percentage of revenues) for the second quarter of 2003 was 12%, and operating cash flow margin (operating cash flow as a percentage of revenues) for the second quarter of 2003 was 37%. Depreciation and amortization increased to $364.3 million from $337.7 million in the second quarter of 2002. This was due to an increase in depreciation from Cox's continuing investment in its broadband network in order to deliver additional programming and services. For the second quarter of 2003, Cox recorded a $24.2 million pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta loss on derivative instruments Derivative instruments Contracts such as options and futures whose price is derived from the price of an underlying financial asset. primarily resulting from the change in the fair value of certain derivative instruments embedded Inserted into. See embedded system. in Cox's zero-coupon ze·ro-cou·pon adj. Paying no interest to the holder until maturity or sale: a zero-coupon bond. debt that is indexed to shares of Sprint PCS (1) (Personal Communications Services) Refers to wireless services that emerged after the U.S. government auctioned commercial licenses in 1994 and 1995. This radio spectrum in the 1. common stock that Cox owns. Net gain on investments of $124.1 million for the second quarter of 2003 was primarily due to a $97.2 million pre-tax gain on the sale of 32.9 million shares of Sprint PCS common stock and a $27.1 million pre-tax gain as a result of the change in market value of Cox's investment in Sprint PCS common stock classified as trading. The net loss on investments for the comparable period in 2002 was primarily due to a $113.5 million pre-tax loss as a result of the change in market value of Cox's investment in Sprint PCS common stock classified as trading and a $677.4 million decline in the fair value of certain investments, primarily Sprint PCS, considered to be other than temporary. Net income for the current quarter was $117.7 million compared to a net loss of $516.2 million for the second quarter of 2002. Six months ended June 30, 2003 compared with six months ended June 30, 2002 Total revenues for the six months ended June 30, 2003 were $2.8 billion, an increase of 15% over the six months ended June 30, 2002. This was primarily due to increased customers for advanced services (including digital cable, high-speed Internet access and telephony), higher basic cable rates and a $5 price increase on monthly high-speed Internet access adopted in certain markets in the fourth quarter of 2002 and in most of Cox's remaining markets in the first quarter of 2003. Also contributing to the increase was an increase in commercial broadband customers. Cost of services was $1.2 billion for the six months ended June 30, 2003, an increase of 14% over the same period in 2002. Programming costs increased 12% to $586.1 million, reflecting rate increases and customer growth. Other cost of services increased 17% to $592.5 million, reflecting 1.2 million in net additions of basic and advanced-service RGUs over the last twelve months, as well as increased labor costs due to the transition from upgrade construction and new product launches to maintenance and related customer costs directly associated with the growth of new customers. Selling, general and administrative expenses were $600.1 million for the six months ended June 30, 2003, an increase of 8% over the comparable period in 2002. This was due to an 11% increase in general and administrative expenses primarily related to increased salaries and benefits and increased headcount, partially offset by a 2% decrease in marketing expense primarily due to a decrease in costs associated with Cox Media, Cox's advertising business. Operating income increased 58% to $263.4 million for the six months ended June 30, 2003, and operating cash flow increased 21% to $1.0 billion, reflecting the one-time non-recurring charge of $9.8 million in the first quarter of 2002 related to the continuation of Excite@Home high-speed Internet service. Excluding this charge, operating cash flow increased 20% compared to the six months ended June 30, 2002. Operating income margin (operating income as a percentage of revenues) for the six months ended June 30, 2003 was 9%, and operating cash flow margin (operating cash flow as a percentage of revenues) for the six months ended June 30, 2003 was 36%. Depreciation and amortization increased to $748.6 million from $663.5 million in the six months ended June 30, 2002. This was due to an increase in amortization resulting from a non-cash impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charge of $25.0 million recognized in the first quarter, upon completion of Cox's annual impairment test of franchise value in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Statement of Financial Accounting Standards (SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System ) No. 142, and an increase in depreciation from Cox's continuing investment in its broadband network in order to deliver additional programming and services. For the six months ended June 30, 2003, Cox recorded a $26.7 million pre-tax loss on derivative instruments primarily due to a $4.4 million pre-tax loss resulting from the change in the fair value of Cox's net settleable warrants and a $22.9 million pre-tax loss resulting from the change in the fair value of certain derivative instruments embedded in Cox's zero-coupon debt that is indexed to shares of Sprint PCS common stock that Cox owns. Net gain on investments of $122.4 million for the six months ended June 30, 2003 was primarily due to a $97.2 million pre-tax gain on the sale of 32.9 million shares of Sprint PCS common stock and a $27.1 million pre-tax gain as a result of the change in market value of Cox's investment in Sprint PCS common stock classified as trading. The net loss on investments for the comparable period in 2002 was primarily due to a $170.4 million pre-tax loss related to the sale of 23.9 million shares of AT&T Wireless common stock, a $388.8 million pre-tax loss as a result of the change in market value of Cox's investment in Sprint PCS common stock classified as trading and a $677.4 million decline in the fair value of certain investments, primarily Sprint PCS, considered to be other than temporary. Net income for the six months ended June 30, 2003 was $88.5 million compared to a net loss of $380.6 million for the six months ended June 30, 2002. LIQUIDITY AND CAPITAL RESOURCES Cox has included Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: Statements of Cash Flows for the six months ended June 30, 2003 and 2002 as a means of providing more detail regarding the liquidity and capital resources discussion below. In addition, Cox has included a calculation of free cash flow in the Summary of Operating Statistics to provide additional detail regarding a measure of liquidity that Cox believes will be useful to investors in evaluating Cox's financial performance. For further details, please refer to the Summary of Operating Statistics and discussion under the heading of Use of Operating Cash Flow and Free Cash Flow. Significant sources of cash for the six months ended June 30, 2003 consisted of the following: -- the sale of 32.9 million shares of Sprint PCS common stock for net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $161.7 million; -- the net issuance of approximately $110.0 million of commercial paper; -- the issuance of 4.625% senior notes, which mature in June 2013, for net proceeds of approximately $596.2 million; and -- the generation of net cash provided by operating activities of approximately $818.9 million. Significant uses of cash for the six months ended June 30, 2003 consisted of the following: -- the repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. of $422.7 million aggregate principal amount at maturity of Cox's convertible senior notes due 2021 that had been properly tendered and not withdrawn, for aggregate cash consideration of $304.2 million, which represented the accreted value accreted value The current value of an original-issue discount bond, taking into account imputed interest that has accumulated. of the repurchased notes; -- the repurchase of $1.3 billion aggregate principal amount of Cox's exchangeable subordinated debentures subordinated debenture An unsecured bond with a claim to assets that is subordinate to all existing and future debt. Thus, in the event that the issuer encounters financial difficulties and must be liquidated, all other claims must be satisfied before due 2029 (the PRIZES) and $274.9 million aggregate principal amount of Cox's exchangeable subordinated debentures due 2030 (the Premium PHONES) that had been properly tendered and not withdrawn pursuant to Cox's offer to purchase any and all PRIZES and Premium PHONES, for aggregate cash consideration of $751.9 million; and -- capital expenditures of $662.9 million. Please refer to the Summary of Operating Statistics for a break out of capital expenditures in accordance with industry guidelines guidelines, n.pl a set of standards, criteria, or specifications to be used or followed in the performance of certain tasks. . At June 30 2003, Cox had approximately $7.0 billion of outstanding indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. (including cumulative derivative derivative: see calculus. derivative In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. adjustments made in accordance with SFAS No. 133 which reduced reported indebtedness by approximately $611.2 million). In June 2003, Cox renewed re·new v. re·newed, re·new·ing, re·news v.tr. 1. To make new or as if new again; restore: renewed the antique chair. 2. its 364-day revolving bank credit facility for a reduced capacity of $900.0 million. USE OF OPERATING CASH FLOW AND FREE CASH FLOW Operating cash flow and free cash flow are not measures of performance calculated in accordance with accounting principles generally accepted in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ). Operating cash flow is defined as operating income before depreciation and amortization and gain (loss) on the sale of cable systems. Free cash flow is defined as cash provided by operating activities less capital expenditures. Cox's management believes that presentation of these measures provides useful information to investors regarding Cox's financial condition and results of operations. Cox believes that operating cash flow, operating cash flow margin and free cash flow are useful to investors in evaluating its performance because they are commonly used financial analysis tools for measuring and comparing media companies in several areas of liquidity, operating performance and leverage. Both operating cash flow and free cash flow are used to gauge gauge In manufacturing and engineering, a device used to determine whether a dimension is larger or smaller than a reference standard. A snap gauge, for example, is formed like the letter C, with outer “go” and inner “not go” jaws, and is used to Cox's ability to service long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. and other fixed obligations and to fund continued growth with internally generated funds. In addition, management uses operating cash flow to monitor compliance with certain financial covenants in Cox's credit agreements, and it is used as a factor in determining executive compensation. Operating cash flow and free cash flow should not be considered as alternatives to net income as indicators of Cox's aggregate performance or as alternatives to net cash provided by operating activities as measures of liquidity and may not be comparable to similarly titled measures used by other companies. Reconciliations of these non-GAAP measures to the most comparable GAAP measures on a historical basis are presented under the headings "Reconciliation of Operating Cash Flow to Operating Income" and "Reconciliation of Free Cash Flow to Cash Provided by Operating Activities" in the attached financial tables. Cox is unable to reconcile these non-GAAP measures on a forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. basis primarily because it is impractical im·prac·ti·cal adj. 1. Unwise to implement or maintain in practice: Refloating the sunken ship proved impractical because of the great expense. 2. to project the timing of certain transactions and the initiation initiation, the transition and attendant ceremonies, such as ordeals and rites, involved in passing from one state or status to another, often from childhood to adulthood. It was among the most important social institutions of early humans. of depreciation relative to network construction projects. About Cox Communications Cox Communications (NYSE: COX), a Fortune 500 company, is a multi-service broadband communications company Communications Company is a communications unit of the United States Marine Corps. They are part of Combat Logistics Regiment 37 , 3rd Marine Logistics Group (3MLG) and III Marine Expeditionary Force (III MEF). The unit is based out of the Marine Corps Base Camp Smedley D. with approximately 6.5 million total customers, including 6.3 basic cable subscribers. Cox is the nation's fourth-largest cable television provider, and offers both traditional analog video The original video recording method that stores continuous waves of red, green and blue intensities. In analog video, the number of rows is fixed. There are no real columns, and the maximum detail is determined by the frequency response of the analog system. programming under the Cox Cable brand as well as advanced digital video programming under the Cox Digital Cable brand. Cox provides an array of other communications and entertainment services, including local and long distance telephone under the Cox Digital Telephone brand; high-speed Internet access under the brands Cox High Speed Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the and Cox Express; and commercial voice and data services via Cox Business Services. Cox is an investor in programming networks including Discovery Channel. More information about Cox Communications can be accessed on the Internet at www.cox.com. Conference Call and Webcast Details The Cox Communications earnings call will be held Wednesday Wednesday: see week. , July July: see month. 30, 2003, at 10:30 a.m. Eastern Time. A live webcast of the conference call will be available on the Cox Communications website at www.cox.com/investor. A recording of the second quarter conference call, as well as a document containing highlights, will be available on Cox's website following the conclusion of the call. Caution Concerning Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. Statements in this release, including statements relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc growth opportunities, revenue and cash flow projections A Cash Flow Projection is an attempt to forecast the cash flows that will be generated by an asset, often a company, over a specified time frame. Methodology Projections can be made with varying levels of detail, but any cash flow projection for a business entails and introduction of new products and services, are "forward-looking statements", as defined by the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These statements relate to Cox's future plans, earnings, objectives, expectations, performance and similar projections, as well as any facts or assumptions underlying these statements or projections. Actual results may differ materially from the results expressed or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. in these forward-looking statements, due to various risks, uncertainties or other factors. These factors include competition within the broadband communications industry communications industry, broadly defined, the business of conveying information. Although communication by means of symbols and gestures dates to the beginning of human history, the term generally refers to mass communications. , our ability to achieve anticipated subscriber subscriber, n the person, usually the employee, who represents the family unit in relation to the prepayment plan. Other family members are dependents. Also called certificate holders or enrollees. and revenue growth, our success in implementing new services and other operating initiatives, our ability to generate sufficient cash flow to meet our debt service obligations and finance operations The execution of the joint finance mission to provide financial advice and guidance, support of the procurement process, providing pay support, and providing disbursing support.See also financial management. , and other risk factors described from time to time in Cox's filings with the Securities and Exchange Commission, including Cox's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. , as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. , for the year ended December December: see month. 31, 2002. Cox assumes no responsibility to update any forward-looking statements as a result of new information, future events or otherwise. (See attached financial information)
Cox Communications, Inc.
Consolidated Statements of Operations
(Unaudited)
(Thousands of Dollars, excluding per share data)
Three Months Ended
June 30
--------------------------------
2003 2002 Change
------------ ------------ ------
Revenues
Residential
Video $ 907,902 $ 857,197 6%
Data 210,699 134,863 56%
Telephony 116,450 82,395 41%
Other 22,478 20,001 12%
------------ ------------ ------
Total residential revenues 1,257,529 1,094,456 15%
Commercial 68,137 52,057 31%
Advertising 98,273 98,116 -
------------ ------------ ------
Total revenues 1,423,939 1,244,629 14%
Costs and expenses
Cost of services 594,939 523,947 14%
Selling, general and
administrative expenses 296,885 278,807 6%
------------ ------------ ------
Total costs and expenses 891,824 802,754 11%
------------ ------------ ------
Operating cash flow 532,115 441,875 20%
Depreciation and amortization 364,274 337,728 8%
(Gain) loss on sale of cable
systems (469) 3,916 (112%)
------------ ------------ ------
Operating income 168,310 100,231 68%
Interest expense (130,498) (128,367) 2%
Gain (loss) on derivative
instruments, net (24,197) 47,860 (151%)
Gain (loss) on investments, net 124,147 (792,900) (116%)
Equity in net losses of affiliated
companies (4,354) (20,907) (79%)
Other, net (617) 275 -
------------ ------------ ------
Income (loss) before income taxes
and minority
interest 132,791 (793,808) (117%)
Income tax expense (benefit) 13,402 (289,178) (105%)
------------ ------------ ------
Income (loss) before minority interest 119,389 (504,630) (124%)
Minority interest, net of tax (1,644) (11,564) (86%)
------------ ------------ ------
Net income (loss) $ 117,745 $ (516,194) (123%)
============ ============
Basic weighted-average shares
outstanding 620,256,065 601,318,335
Basic net income (loss) per share $ 0.19 $ (0.86)
Diluted weighted-average shares
outstanding 629,728,659 601,318,335
Diluted net income (loss) per share $ 0.19 $ (0.86)
NOTE: Certain amounts in the 2002 financial statements have been
reclassified for comparison purposes.
Six Months Ended
June 30
--------------------------------
2003 2002 Change
------------ ------------ ------
Revenues
Residential
Video $ 1,806,843 $ 1,691,056 7%
Data 404,918 256,428 58%
Telephony 223,543 155,147 44%
Other 44,630 40,545 10%
------------ ------------ ------
Total residential revenues 2,479,934 2,143,176 16%
Commercial 131,506 101,853 29%
Advertising 178,781 177,642 1%
------------ ------------ ------
Total revenues 2,790,221 2,422,671 15%
Costs and expenses
Cost of services 1,178,558 1,031,330 14%
Selling, general and
administrative expenses 600,094 557,401 8%
------------ ------------ ------
Total costs and expenses 1,778,652 1,588,731 12%
------------ ------------ ------
Operating cash flow 1,011,569 833,940 21%
Depreciation and amortization 748,594 663,520 13%
(Gain) loss on sale of cable
systems (469) 3,916 (112%)
------------ ------------ ------
Operating income 263,444 166,504 58%
Interest expense (260,322) (255,984) 2%
Gain (loss) on derivative
instruments, net (26,700) 767,623 (103%)
Gain (loss) on investments, net 122,395 (1,201,630) (110%)
Equity in net losses of affiliated
companies (6,518) (23,720) (73%)
Other, net (957) 1,010 (195%)
------------ ------------ ------
Income (loss) before income taxes and
minority interest 91,342 (546,197) (117%)
Income tax expense (benefit) (1,096) (189,208) (99%)
------------ ------------ ------
Income (loss) before minority
interest 92,438 (356,989) (126%)
Minority interest, net of tax (3,914) (23,633) (83%)
------------ ------------ ------
Net income (loss) $ 88,524 $ (380,622) (123%)
============ ============
Basic weighted-average shares
outstanding 620,239,661 601,024,267
Basic net income (loss) per share $ 0.14 $ (0.63)
Diluted weighted-average shares
outstanding 629,693,126 601,024,267
Diluted net income (loss) per share $ 0.14 $ (0.63)
NOTE: Certain amounts in the 2002 financial statements have been
reclassified for comparison purposes.
Cox Communications, Inc.
Consolidated Balance Sheets
(Unaudited)
(Thousands of Dollars)
June 30 December 31
2003 2002
----------- -----------
Assets
Current assets
Cash $ 148,436 $ 228,704
Accounts and notes receivable, less allowance
for doubtful accounts of $29,722 and $33,607 334,665 354,928
Amounts due from Cox Enterprises, Inc. (CEI) - 21,109
Other current assets 123,374 267,341
----------- -----------
Total current assets 606,475 872,082
----------- -----------
Net plant and equipment 7,739,245 7,793,178
Investments 370,198 397,435
Intangible assets 15,696,884 15,724,288
Other noncurrent assets 204,003 218,166
----------- -----------
Total assets $24,616,805 $25,005,149
=========== ===========
Liabilities and shareholders' equity
Current liabilities
Accounts payable and accrued expenses $ 661,028 $ 727,877
Other current liabilities 336,191 216,235
Current portion of long-term debt 90,797 393,040
Amounts due to CEI 8,489 -
----------- -----------
Total current liabilities 1,096,505 1,337,152
----------- -----------
Deferred income taxes 6,523,730 6,750,635
Other noncurrent liabilities 181,314 175,912
Long-term debt, less current portion 6,892,084 6,922,957
----------- -----------
Total liabilities 14,693,633 15,186,656
----------- -----------
Minority interest in equity of consolidated
subsidiaries 137,317 133,403
Shareholders' equity
Series A preferred stock -
liquidation preference of
$22.1375 per share, $1 par value;
10,000,000 shares of preferred stock
authorized; shares issued and
outstanding: 4,836,372 4,836 4,836
Class A common stock, $1 par value;
671,000,000 shares authorized;
shares issued: 598,216,349
and 598,076,894; shares
outstanding: 592,693,329 and 592,567,757 598,216 598,077
Class C common stock, $1 par value;
62,000,000 shares authorized;
shares issued and outstanding: 27,597,792 27,598 27,598
Additional paid-in capital 4,552,559 4,549,029
Retained earnings 4,726,946 4,638,422
Accumulated other comprehensive income 88,444 79,465
Class A common stock in treasury, at cost:
5,523,020 and 5,509,137 shares (212,744) (212,337)
----------- -----------
Total shareholders' equity 9,785,855 9,685,090
----------- -----------
Total liabilities and shareholders'
equity $24,616,805 $25,005,149
=========== ===========
Cox Communications, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(Thousands of Dollars)
Six Months
Ended June 30
-----------------------
2003 2002
----------- -----------
Cash flows from operating activities
Net income (loss) $ 88,524 $ (380,622)
Adjustments to reconcile net income (loss) to
net cash provided by
operating activities:
Depreciation and amortization 748,594 663,520
(Gain) loss on sale of cable systems (469) 3,916
(Gain) loss on derivative instruments, net 26,700 (767,623)
Write off of debt issuance costs 36,063 -
Deferred income taxes (232,527) (65,874)
(Gain) loss on investments, net (122,395) 1,201,630
Equity in net losses of affiliated companies 6,518 23,720
Minority interest, net of tax 3,914 23,633
Decrease in accounts and notes receivable 20,245 21,682
Decrease (increase) in other assets 33,829 (6,364)
Increase (decrease) in accounts payable and
accrued expenses (91,874) 8,094
Increase (decrease) in taxes payable 231,290 (24,484)
Other, net 70,456 48,959
----------- -----------
Net cash provided by operating
activities 818,868 750,187
----------- -----------
Cash flows from investing activities
Capital expenditures (662,892) (1,013,664)
Investments in affiliated companies (8,412) (9,793)
Proceeds from the sale of investments 161,739 1,320,271
Decrease in amounts due from CEI, net 21,109 13,245
Proceeds from the sale of cable systems 822 12,574
Other, net (5,234) (4,295)
----------- -----------
Net cash provided by (used in)
investing activities (492,868) 318,338
----------- -----------
Cash flows from financing activities
Commercial paper issuance (repayments), net 110,000 (727,384)
Proceeds from issuance of debt, net of debt
issuance costs 596,154 -
Repayment of debt (1,124,971) (266,576)
Proceeds from exercise of stock options 2,535 23,110
Increase in amounts due to CEI, net 8,489 22,554
Distributions paid on capital and preferred
securities of
subsidiary trusts - (29,938)
Premium paid on debt extinguishment (19,483) -
Other, net 21,008 16,577
----------- -----------
Net cash used in financing activities (406,268) (961,657)
Net increase (decrease) in cash (80,268) 106,868
Cash at beginning of period 228,704 86,860
----------- -----------
Cash at end of period $ 148,436 $ 193,728
=========== ===========
Cox Communications, Inc.
Reconciliation of Operating Cash Flow to Operating Income
(Unaudited)
(Thousands of Dollars)
Three Months Ended Six Months Ended
June 30 June 30
------------------- --------------------
2003 2002 2003 2002
--------- --------- ---------- ---------
Operating cash flow $ 532,115 $ 441,875 $1,011,569 $ 833,940
Depreciation and amortization (364,274) (337,728) (748,594) (663,520)
Gain (loss) on sale of cable
system 469 (3,916) 469 (3,916)
--------- --------- ---------- ---------
Operating income $ 168,310 $ 100,231 $ 263,444 $ 166,504
========= ========= ========== =========
Cox Communications, Inc.
Reconciliation of Free Cash Flow to Cash Provided by Operating
Activities
(Unaudited)
(Thousands of Dollars)
Three Months Ended Six Months Ended
June 30 June 30
------------------- --------------------
2003 2002 2003 2002
--------- --------- --------- ----------
Free cash flow $ 125,794 $(168,815)$ 155,976 $ (263,477)
Capital expenditures 337,208 498,266 662,892 1,013,664
--------- --------- --------- ----------
Net cash provided by
operating activities $ 463,002 $ 329,451 $ 818,868 $ 750,187
========= ========= ========= ==========
Cox Communications, Inc.
Summary of Operating Statistics
----------------------------------------------------------------------
Core Video
----------------------------------
June 30 March 31 June 30
2003 2003 2002
----------- ----------- -----------
Customer Relationships
Basic Video Customers (a) 6,278,458 6,315,950 6,250,036
Non-Video Customers (b) 244,662 221,359 155,365
----------- ----------- -----------
Total Customer Relationships (c) 6,523,120 6,537,309 6,405,401
Revenue Generating Units
Basic Video Customers (a) 6,278,458 6,315,950 6,250,036
Advanced Services 4,456,823 4,219,101 3,334,326
----------- ----------- -----------
Total Revenue Generating Units 10,735,281 10,535,051 9,584,362
Video Homes Passed 10,311,010 10,268,146 10,075,782
Basic Video Penetration 60.9% 61.5% 62.0%
----------------------------------------------------------------------
Cox Digital Cable
----------------------------------
June 30 March 31 June 30
2003 2003 2002
----------- ----------- -----------
Digital Cable Ready Homes Passed 10,077,459 9,959,627 9,636,773
Customers 1,943,272 1,874,172 1,641,095
Penetration of Customers to Basic
Video Customers 31.0% 29.7% 26.3%
Average Weekly Run Rate 5,315 5,908 7,901
----------------------------------------------------------------------
High-Speed Internet Access
----------------------------------
June 30 March 31 June 30
2003 2003 2002
----------- ----------- -----------
High-Speed Internet Access Ready
Homes Passed 9,974,461 9,877,700 9,485,336
Customers 1,674,835 1,562,383 1,115,000
Penetration of Customers to High-
Speed Internet Access
Ready Homes Passed 16.8% 15.8% 11.8%
Average Weekly Run Rate 8,650 11,879 8,745
----------------------------------------------------------------------
Cox Digital Telephone
----------------------------------
June 30 March 31 June 30
2003 2003 2002
----------- ----------- -----------
Telephony Ready Homes Passed 4,569,431 4,230,497 3,708,135
Customers 838,716 782,546 578,231
Penetration of Customers to
Telephony Ready Homes Passed 18.4% 18.5% 15.6%
Average Weekly Run Rate 4,321 4,933 4,764
----------------------------------------------------------------------
Bundled Customers
----------------------------------
June 30 March 31 June 30
2003 2003 2002
----------- ----------- -----------
Customers subscribing to two or
more services 1,918,314 1,803,241 1,339,740
Penetration of Bundled Customers to
Basic Video Customers 30.6% 28.6% 21.4%
----------------------------------------------------------------------
(a) The number of customers who receive primary analog or digital
video service. Additional outlets are not counted.
(b) The number of customers who receive high-speed Internet access or
telephony service, but do not subscribe to video service.
(c) The number of customers who receive at least one level of service,
encompassing video, data and telephony services, without regard to
which service(s) customers purchase.
Cox Communications, Inc.
Summary of Operating Statistics - Continued
----------------------------------------------------------------------
Comparative Operating
Statistics
---------------------------
Three Months Ended Six Months Ended
-------------------------------------------
June 30 June 30 June 30 June 30
2003 2002 2003 2002
--------- --------- ---------- -----------
Operating Cash Flow Margin 37.4% 35.5% 36.3% 34.4%
Capital Expenditures
(thousands of dollars) $ 337,208 $ 498,266 $ 662,892 $ 1,013,664
Operating Cash Flow per
Basic Video Customer (d) 84.75 70.70 161.12 133.43
Capital Expenditures per
Basic Video Customer 53.71 79.72 105.58 162.19
----------------------------------------------------------------------
Capital Expenditures
---------------------------
Three Months Ended Six Months Ended
-------------------------------------------
(Thousands of Dollars)
June 30 June 30 June 30 June 30
2003 2002 2003 2002
--------- --------- ---------- -----------
Customer premise equipment $ 128,255 $ 192,771 $ 272,528 $ 426,518
Commercial spending 19,765 27,401 39,331 51,277
Scalable infrastructure 32,570 76,899 59,174 155,204
Line extensions 42,702 43,399 81,450 88,493
Upgrade/Rebuild 58,085 89,045 109,896 164,232
Support capital 55,831 68,751 100,513 127,940
--------- --------- ---------- -----------
Total capital expenditures $ 337,208 $ 498,266 $ 662,892 $ 1,013,664
========= ========= ========== ===========
----------------------------------------------------------------------
Free Cash Flow Calculation(f)
---------------------------
Three Months Ended Six Months Ended
-------------------------------------------
(Thousands of Dollars)
June 30 June 30 June 30 June 30
2003 2002 2003 2002
--------- --------- ---------- -----------
Operating cash flow $ 532,115 $ 441,875 $1,011,569 $ 833,940
Less capital expenditures (337,208) (498,266) (662,892) (1,013,664)
Plus cash (decrease)
increase in working
capital (e) 28,903 (27,731) 1,390 23,871
--------- --------- ---------- -----------
Operating free cash flow 223,810 (84,122) 350,067 (155,853)
Less cash paid for
interest (99,377) (86,100) (192,975) (205,937)
Plus cash refunded (paid)
for taxes 1,361 1,407 (1,116) 98,313
--------- --------- ---------- -----------
Free cash flow $ 125,794 $(168,815)$ 155,976 $ (263,477)
========= ========= ========== ===========
----------------------------------------------------------------------
(d) Operating cash flow per basic video customer is calculated by
dividing operating cash flow for the respective period by basic video
customers as of the end of the period.
(e) Cash change in working capital is calculated based on the cash
flow changes in current assets and liabilities, excluding changes
related to interest and taxes.
(f) Operating cash flow and free cash flow are not measures of
performance calculated in accordance with GAAP. For a reconciliation
of these non-GAAP measures to the most comparable GAAP measures, see
the information presented under "Reconciliation of Operating Cash
Flow to Operating Income" and "Reconciliation of Free Cash Flow to
Cash Flow Provided by Operating Activities" in these financial
tables.
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