Cox Communications Announces Second Quarter Financial Results for 2002.Business Editors ATLANTA--(BUSINESS WIRE)--July 31, 2002 Strong basic customer growth spurs increased 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. guidance for 2002 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, 2002. "We had a terrific second quarter, fueled by strong basic subscriber growth of 1.6% from the second quarter of 2001," commented 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 Chief Executive Officer. "Despite the seasonal nature of the second quarter, we also delivered over 277,000 new service revenue generating units and are on track to meet our guidance of 1.15 million new service net additions for the full year 2002." Robbins continued: "Our outlook for the year continues to be positive, as we achieved pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma 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. (OCF (1) (Open Container Format) See OPS. (2) (OpenCard Framework) A smart card specification from the OpenCard Consortium. ) growth of 16% and pro forma revenue growth of 16% in the second quarter and expect to meet our previously stated guidance of 13% to 14% operating cash flow growth, 14% to 15% revenue growth and capital expenditures of $2 billion for the full year. "We are frustrated frus·trate tr.v. frus·trat·ed, frus·trat·ing, frus·trates 1. a. To prevent from accomplishing a purpose or fulfilling a desire; thwart: with the volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the in the stock market," Robbins added. "However, I want to reiterate re·it·er·ate tr.v. re·it·er·at·ed, re·it·er·at·ing, re·it·er·ates To say or do again or repeatedly. See Synonyms at repeat. re·it that we continue to fire on all eight cylinders and to deliver excellent operating results. In fact, the strong basic subscriber growth in the first half of 2002 has led us to increase basic subscriber guidance to a range of 1.3% to 1.5% for the full year 2002. We have strong business fundamentals business fundamentals The general background within which an economy operates including earnings, sales, wage rates, taxes, and inflation. Improving business fundamentals are generally viewed as bullish for stocks, although stock prices at any given point and our balance sheet is solid. I am confident that Cox is well-positioned for the future and I believe we are the leading 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). company in our industry," Robbins added. PRO FORMA OPERATING RESULTS Cox provides pro forma information as an alternative for understanding our operating results. The pro forma operating results are not necessarily indicative indicative: see mood. of operating results that would have occurred if the circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or summarized below had not occurred, and may be different from pro forma measures used by other companies. In addition, the pro forma operating results are not necessarily indicative of the results of our future operations. The pro forma operating results for the six months ended June 30, 2002 exclude a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. non-recurring charge of $9.8 million related to the portion of Cox's December December: see month. 2001 payment of $160.0 million to Excite@Home for the continuation continuation - continuation passing style of high-speed Internet See broadband. services through February February: see month. 2002. The pro forma operating results for the three and six months ended June 30, 2001 reflect reclassifications of $19.8 million and $37.0 million, respectively, in costs associated with Excite@Home high-speed Internet service which had previously been netted against data revenue and $1.5 million and $2.6 million, respectively, of such costs which had previously been netted against commercial revenue to selling, general and administrative expenses in order to conform to Verb 1. conform to - satisfy a condition or restriction; "Does this paper meet the requirements for the degree?" fit, meet coordinate - be co-ordinated; "These activities coordinate well" the manner in which the costs associated with 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 service have been presented for the three and six months ended June 30, 2002. Pro forma three months ended June 30, 2002 compared with pro forma three months ended June 30, 2001 Total pro forma revenues for the second quarter of 2002 increased 16% over the second quarter of 2001, and include the effects of: -- the repurchase of $329.1 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 $232.8 million, which represented the accreted value of the repurchased notes; -- the repayment of approximately $727.4 million of commercial paper borrowings; and -- capital expenditures of approximately $1.0 billion to upgrade and rebuild Cox's broadband network. Basic customers were 6,250,036 at June 30, 2002, a 1.6% increase over the prior year. Cox Digital Cable had net additions of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 101,800 customers in the second quarter of 2002, and is now available in 96% of the homes in Cox's service areas with penetration The successful unauthorized breach of a security perimeter. See penetration test. of total-basic customers of 26%. High-speed Internet and Cox Digital Telephone customers increased by approximately 113,700 and 61,900, respectively, in the second quarter of 2002, and by approximately 447,000 and 233,700, respectively, as compared to June 30, 2001. Pro forma programming costs were $270.2 million for the second quarter of 2002, an increase of 13% over the same period in 2001, primarily due to programming rate increases implemented over the past twelve months, basic and digital customer growth and channel additions. Pro forma selling, general and administrative expenses for the second quarter of 2002 increased 19% to $532.6 million due to: -- the repurchase of $329.1 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 $232.8 million, which represented the accreted value of the repurchased notes; -- the repayment of approximately $727.4 million of commercial paper borrowings; and -- capital expenditures of approximately $1.0 billion to upgrade and rebuild Cox's broadband network. Pro forma operating cash flow increased 16% to $441.9 million for the second quarter of 2002. The pro forma operating cash flow margin (pro forma operating cash flow as a percentage of revenues) for the second quarter of 2002 was 35.5%. Pro forma six months ended June 30, 2002 compared with pro forma six months ended June 30, 2001 Total pro forma revenues for the six months ended June 30, 2002 increased 17% over the same period in 2001, and include the effects of: -- the repurchase of $329.1 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 $232.8 million, which represented the accreted value of the repurchased notes; -- the repayment of approximately $727.4 million of commercial paper borrowings; and -- capital expenditures of approximately $1.0 billion to upgrade and rebuild Cox's broadband network. Pro forma programming costs were $534.1 million for the six months ended June 30, 2002, an increase of 13% over the same period in 2001, primarily due to programming rate increases implemented over the past twelve months, basic and digital customer growth and channel additions. Pro forma selling, general and administrative expenses for the six months ended June 30, 2002 increased 21% to $1,044.9 million due to: -- the repurchase of $329.1 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 $232.8 million, which represented the accreted value of the repurchased notes; -- the repayment of approximately $727.4 million of commercial paper borrowings; and -- capital expenditures of approximately $1.0 billion to upgrade and rebuild Cox's broadband network. Pro forma operating cash flow increased 14% to $843.7 million for the six months ended June 30, 2002. The pro forma operating cash flow margin (pro forma operating cash flow as a percentage of revenues) for the six months ended June 30, 2002 was 34.8%. HISTORICAL OPERATING RESULTS Historical three months ended June 30, 2002 compared with historical three months ended June 30, 2001 Total revenues for the second quarter of 2002 were $1,244.6 million, a 19% increase over revenues of $1,048.0 million for the second quarter of 2001. Operating cash flow increased 16% to $441.9 million for the second quarter of 2002. Depreciation and amortization decreased to $337.7 million from $355.8 million in the second quarter of 2001 due to a reduction in amortization of intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. determined to have an indefinite INDEFINITE. That which is undefined; uncertain. INDEFINITE, NUMBER. A number which may be increased or diminished at pleasure. 2. When a corporation is composed of an indefinite number of persons, any number of them consisting of a majority of those life, offset by an increase in depreciation from Cox's continuing investments in its broadband network in order to deliver additional programming and services. During the second quarter of 2002, Cox sold certain cable systems and recognized a pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta loss of $3.9 million. Interest expense decreased to $128.4 million, primarily due to decreased interest rates on floating rate debt, interest savings as a result of Cox's interest rate swap Interest Rate Swap A deal between banks or companies where borrowers switch floating-rate loans for fixed rate loans in another country. These can be either the same or different currencies. agreements and repayment Repayment The act of paying back a debt. Notes: Everyone has to repay their debts eventually. See also: Debt, Defeasance, Loan of all commercial paper borrowings. For the second quarter of 2002, Cox recorded a $47.9 million pre-tax gain on derivative instruments Derivative instruments Contracts such as options and futures whose price is derived from the price of an underlying financial asset. due to the following: -- the repurchase of $329.1 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 $232.8 million, which represented the accreted value of the repurchased notes; -- the repayment of approximately $727.4 million of commercial paper borrowings; and -- capital expenditures of approximately $1.0 billion to upgrade and rebuild Cox's broadband network. Net loss on investments of $813.8 million is 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 (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 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. Included in net gain on investments for the comparable period in 2001 are a pre-tax gain related to the exercise of Cox's Excite@Home right, a pre-tax gain related to the change in market value of Cox's investment in Sprint PCS common stock classified as trading and a pre-tax gain from the sale of 3.0 million shares of Sprint PCS common stock. Minority interest of $11.6 million primarily represents distributions on Cox's obligated ob·li·gate tr.v. ob·li·gat·ed, ob·li·gat·ing, ob·li·gates 1. To bind, compel, or constrain by a social, legal, or moral tie. See Synonyms at force. 2. To cause to be grateful or indebted; oblige. capital and preferred securities of subsidiary trusts, referred to as FELINE feline of, or pertaining to, members of the family Felidae. See also cat. feline agranulocytosis see feline panleukopenia (below). feline actinic dermatitis see solar dermatitis. PRIDES and RHINOS. Net loss for the current quarter was $516.2 million compared to net income of $30.7 million for the second quarter of 2001. Historical six months ended June 30, 2002 compared with historical six months ended June 30, 2001 Total revenues for the six months ended June 30, 2002 were $2,422.7 million, a 19% increase over revenues of $2,039.5 million for the six months ended June 30, 2001. Operating cash flow increased 13% to $833.9 million for the first six months of 2002. Depreciation and amortization decreased to $663.5 million from $708.0 million in the six months ended June 30, 2001 due to a reduction in amortization of intangible assets determined to have an indefinite life, offset by an increase in depreciation from Cox's continuing investments in its broadband network in order to deliver additional programming and services. During the second quarter of 2002, Cox sold certain cable systems and recognized a pre-tax loss of $3.9 million. Interest expense decreased to $256.0 million, primarily due to decreased interest rates on floating rate debt, interest savings as a result of Cox's interest rate swap agreements and repayment of all commercial paper borrowings. For the six months ended June 30, 2002, Cox recorded a $767.6 million pre-tax gain on derivative instruments due to the following: -- the repurchase of $329.1 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 $232.8 million, which represented the accreted value of the repurchased notes; -- the repayment of approximately $727.4 million of commercial paper borrowings; and -- capital expenditures of approximately $1.0 billion to upgrade and rebuild Cox's broadband network. Net loss on investments of $1.2 billion is primarily due to: -- the repurchase of $329.1 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 $232.8 million, which represented the accreted value of the repurchased notes; -- the repayment of approximately $727.4 million of commercial paper borrowings; and -- capital expenditures of approximately $1.0 billion to upgrade and rebuild Cox's broadband network. Included in net gain on investments for the comparable period in 2001 are a pre-tax gain related to the exercise of Cox's Excite@Home right, a pre-tax gain associated with a one-time reclassification Reclassification The process of changing the class of mutual funds once certain requirements have been met. These requirements are generally placed on load mutual funds. Reclassification is not considered to be a taxable event. of 19.5 million shares of Cox's investment in Sprint PCS common stock from available-for-sale securities to trading securities upon adoption of 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. 133, and a pre-tax gain from these shares as a result of the change in market value of Sprint PCS common stock. Minority interest of $23.6 million primarily represents distributions on the FELINE PRIDES and RHINOS. Net loss for the six months ended June 30, 2002 was $380.6 million compared to net income of $717.3 million for the comparable period in 2001. NEW ACCOUNTING STANDARDS On January January: see month. 1, 2002, Cox adopted SFAS No. 142, which requires that goodwill and certain intangible assets, including those recorded in past business combinations, no longer be amortized through the statement of operations See Income statement. , but instead be tested for 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. at least annually. The adoption and subsequent application of SFAS No. 142 have not resulted in an impairment charge. Also on January 1, 2002, Cox began applying the guidance prescribed pre·scribe v. pre·scribed, pre·scrib·ing, pre·scribes v.tr. 1. To set down as a rule or guide; enjoin. See Synonyms at dictate. 2. To order the use of (a medicine or other treatment). in Emerging Issues Task Force Issue No. 01-14, whereby the collection and payment of certain fees must be presented on a gross basis, as revenue and expense, rather than on a net basis. Retroactive Having reference to things that happened in the past, prior to the occurrence of the act in question. A retroactive or retrospective law is one that takes away or impairs vested rights acquired under existing laws, creates new obligations, imposes new duties, or attaches a application of this announcement is required. Accordingly, collection and payment of fees, primarily franchise fees, have been reclassified on a gross basis for all historical and pro forma periods presented herein to conform to this new guidance. 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, 2002 and 2001 as a means of providing more details 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 an additional measure of liquidity that Cox believes will be useful to investors in evaluating Cox's financial performance. Free cash flow is not a measure of performance calculated 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 generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting . For further details, please refer to the Summary of Operating Statistics. Significant sources of cash for the first six months of 2002 consisted of the following: -- the repurchase of $329.1 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 $232.8 million, which represented the accreted value of the repurchased notes; -- the repayment of approximately $727.4 million of commercial paper borrowings; and -- capital expenditures of approximately $1.0 billion to upgrade and rebuild Cox's broadband network. As a result of Cox's first quarter sales described above, Cox no longer owns any shares of AT&T common stock or AT&T Wireless common stock. Significant uses of cash for the first six months of 2002 consisted of the following: -- the repurchase of $329.1 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 $232.8 million, which represented the accreted value of the repurchased notes; -- the repayment of approximately $727.4 million of commercial paper borrowings; and -- capital expenditures of approximately $1.0 billion to upgrade and rebuild Cox's broadband network. At June 30, 2002, 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. (net of 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 $1.1 billion) and $1.2 billion of Cox-obligated capital and preferred securities of subsidiary trusts. TRANSACTIONS WITH AFFILIATED COMPANIES Affiliated Companies A situation that occurs when one company owns a minority interest (less than 50%) in another company. Also refers to companies that are related to each other in some way. Notes: An affiliated company is sometimes referred to as a subsidiary. For the last several years, Cox has had a number of local partnerships with Cox Interactive Media (CIM (1) (Computer-Integrated Manufacturing) Integrating office/accounting functions with automated factory systems. Point of sale, billing, machine tool scheduling and supply ordering are part of CIM. ), an indirect wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. of Cox Enterprises Cox Enterprises is the successor to the publishing company founded in Dayton, Ohio, by James Middleton Cox, who began with the Dayton Daily News. The company is private, 98% controlled by the octogenarian daughter of Cox, Anne Cox Chambers, and the two children of her late , Inc., for the development and maintenance of Internet sites based on local advertising and content. While Cox believes local content is important, this Internet city site business has not developed as planned. Cox has entered into an agreement pursuant to which CIM will continue to develop and operate these local content city sites for Cox through the remainder of 2002. The previously formed partnerships will be dissolved dis·solve v. dis·solved, dis·solv·ing, dis·solves v.tr. 1. To cause to pass into solution: dissolve salt in water. 2. . This transition time provides Cox the opportunity to assess and then implement a more cost effective strategy for Cox's home page. The charge to Cox for the local content services is not significant. 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. serving approximately 6.3 million customers nationwide. Cox is the nation's fifth-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 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. 31, 2002, 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 conference call will remain on the company's website following the conclusion of the call. A document containing highlights from the first quarter can be found in the press room on our website at www.cox.com. 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 for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. " statements, which are statements that 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 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 31, 2001. Cox assumes no responsibility to update any forward-looking statements as a result of new information, future events or otherwise.
Cox Communications, Inc.
Pro Forma Operating Results
(Unaudited)
(Thousands of Dollars)
Three Months Ended Six Months Ended
June 30 June 30
------------------------- --------------------------
2002 2001(a) Change 2002 2001(a) Change
---------- ---------- --- ---------- ---------- ---
Revenues
Residential
Video $ 856,470 $ 793,724 8% $1,689,582 $1,566,625 8%
Data 134,863 82,100 64% 256,428 155,879 65%
Telephony 83,122 49,066 69% 156,621 90,314 73%
Other 20,446 20,683 (1%) 41,547 41,106 1%
---------- ---------- --- ---------- ---------- ---
Total
residential
revenues 1,094,901 945,573 16% 2,144,178 1,853,924 16%
Commercial 51,612 36,785 40% 100,851 68,480 47%
Advertising 98,116 86,986 13% 177,642 156,673 13%
---------- ---------- --- ---------- ---------- ---
Total revenues 1,244,629 1,069,344 16% 2,422,671 2,079,077 17%
Costs and expenses
Programming costs 270,198 239,080 13% 534,076 474,211 13%
Selling, general
and
administrative 532,556 448,150 19% 1,044,894(b) 864,620 21%
---------- ---------- --- ---------- ---------- ---
Total costs and
expenses 802,754 687,230 17% 1,578,970 1,338,831 18%
---------- ---------- --- ---------- ---------- ---
Operating cash
flow $ 441,875 $ 382,114 16% $ 843,701 $ 740,246 14%
========== ========== === ========== ========== ===
(a) The pro forma operating results for the three and six months
ended June 30, 2001 reflect reclassifications of Cox's Excite@Home
high-speed Internet costs of $19.8 million and $37.0 million,
respectively, from data revenue and $1.5 million and $2.6 million,
respectively, from commercial revenue to selling, general and
administrative expenses to conform to the presentation for the three
and six months ended June 30, 2002.
(b) Pro forma selling, general and administrative expenses for the
six months ended June 30, 2002 exclude a one-time non-recurring charge
of $9.8 million related to the portion of Cox's December 2001 payment
of $160.0 million to Excite@Home for the continuation of high-speed
Internet services through February 2002.
NOTE: Certain amounts in the 2001 financial statements have been
reclassified for comparison purposes.
Cox Communications, Inc.
Consolidated Historical Statements of Operations
(Unaudited)
(Thousands of Dollars, excluding per share data)
Three Months Ended
June 30
------------------------------------
2002 2001 Change
------------ ------------ --------
Revenues
Residential
Video $ 856,470 $ 793,724 8%
Data 134,863 62,308 116%
Telephony 83,122 49,066 69%
Other 20,446 20,683 (1%)
------------ ------------ --------
Total residential revenues 1,094,901 925,781 18%
Commercial 51,612 35,278 46%
Advertising 98,116 86,986 13%
------------ ------------ --------
Total revenues 1,244,629 1,048,045 19%
Costs and expenses
Programming costs 270,198 239,080 13%
Selling, general and
administrative 532,556 426,851 25%
------------ ------------ --------
Total costs and expenses 802,754 665,931 21%
------------ ------------ --------
Operating cash flow 441,875 382,114 16%
Depreciation and amortization 337,728 355,762 (5%)
Loss on sale of cable systems 3,916 - 100%
------------ ------------ --------
Operating income 100,231 26,352 -
Interest expense (128,367) (143,158) (10%)
Gain (loss) on derivative
instruments, net 47,860 (250,566) (119%)
Gain (loss) on investments, net (813,807) 444,936 -
Other, net 275 (1,530) (118%)
------------ ------------ --------
Income (loss) before income taxes,
minority interest and cumulative
effect of change in accounting
principle (793,808) 76,034 -
Income tax expense (benefit) (289,178) 30,669 -
------------ ------------ --------
Income (loss) before minority
interest and cumulative effect of
change in accounting principle (504,630) 45,365 -
Minority interest, net of tax (11,564) (14,694) (21%)
------------ ------------ --------
Income (loss) before cumulative
effect of change in accounting
principle (516,194) 30,671 -
------------ ------------ --------
Cumulative effect of change in
accounting principle, net of tax - - -
------------ ------------ --------
Net income (loss) $ (516,194) $ 30,671 -
============ ============ ========
Historical basic net income
(loss) per share $ (0.86) $ 0.05
Historical diluted net income
(loss) per share (0.86) 0.05
Six Months Ended
June 30
------------------------------------
2002 2001 Change
------------ ------------ --------
Revenues
Residential
Video $ 1,689,582 $ 1,566,625 8%
Data 256,428 118,874 116%
Telephony 156,621 90,314 73%
Other 41,547 41,106 1%
------------ ------------ --------
Total residential revenues 2,144,178 1,816,919 18%
Commercial 100,851 65,872 53%
Advertising 177,642 156,673 13%
------------ ------------ --------
Total revenues 2,422,671 2,039,464 19%
Costs and expenses
Programming costs 534,076 474,211 13%
Selling, general and
administrative 1,054,655 825,007 28%
------------ ------------ --------
Total costs and expenses 1,588,731 1,299,218 22%
------------ ------------ --------
Operating cash flow 833,940 740,246 13%
Depreciation and amortization 663,520 707,987 (6%)
Loss on sale of cable systems 3,916 - 100%
------------ ------------ --------
Operating income 166,504 32,259 -
Interest expense (255,984) (297,011) (14%)
Gain (loss) on derivative
instruments, net 767,623 (257,578) -
Gain (loss) on investments, net (1,225,350) 598,012 -
Other, net 1,010 (1,928) (152%)
------------ ------------ --------
Income (loss) before income taxes,
minority interest and cumulative
effect of change in accounting
principle (546,197) 73,754 -
Income tax expense (benefit) (189,208) 42,476 -
------------ ------------ --------
Income (loss) before minority
interest and cumulative effect of
change in accounting principle (356,989) 31,278 -
Minority interest, net of tax (23,633) (31,093) (24%)
------------ ------------ --------
Income (loss) before cumulative
effect of change in accounting
principle (380,622) 185 -
------------ ------------ --------
Cumulative effect of change in
accounting principle, net of tax - 717,090 (100%)
------------ ------------ --------
Net income (loss) $ (380,622) $ 717,275 (153%)
============ ============ ========
Historical basic net income
(loss) per share $ (0.63) $ 1.20
Historical diluted net income
(loss) per share (0.63) 1.18
NOTE: Certain amounts in the 2001 financial statements have been
reclassified for comparison purposes.
Cox Communications, Inc.
Consolidated Balance Sheets
(Unaudited)
(Thousands of Dollars)
June 30 December 31
2002 2001
-------------- --------------
Assets
Cash $ 193,728 $ 86,860
Accounts and notes receivable,
less allowance for doubtful accounts
of $34,965 and $33,514 408,357 421,111
Net plant and equipment 7,504,382 7,127,908
Investments 377,303 3,515,233
Intangible assets 13,511,098 13,510,894
Amounts due from Cox Enterprises, Inc.
(CEI) - 13,245
Other assets 404,377 386,185
-------------- --------------
Total assets $ 22,399,245 $ 25,061,436
============== ==============
Liabilities and shareholders' equity
Accounts payable and accrued expenses $ 695,841 $ 674,426
Deferred income taxes 4,173,774 4,538,288
Other liabilities 415,221 470,397
Debt 6,961,605 8,417,675
Amounts due to CEI 22,554 -
-------------- --------------
Total liabilities 12,268,995 14,100,786
-------------- --------------
Minority interest in equity of
consolidated subsidiaries 131,153 129,121
Cox-obligated capital and preferred
securities of subsidiary trusts 1,157,696 1,155,738
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: 579,256,998 and 578,493,107;
shares outstanding: 573,747,861 and
572,994,707 579,257 578,493
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 3,914,834 3,891,157
Retained earnings 4,531,839 4,912,461
Accumulated other comprehensive
income (loss) (4,626) 473,135
Class A common stock in treasury,
at cost: 5,509,137 and 5,498,400
shares (212,337) (211,889)
-------------- --------------
Total shareholders' equity 8,841,401 9,675,791
-------------- --------------
Total liabilities and shareholders'
equity $ 22,399,245 $ 25,061,436
============== ==============
Cox Communications, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(Thousands of Dollars)
Six Months
Ended June 30
------------------------------
2002 2001
-------------- --------------
Cash flows from operating activities
Net income (loss) $ (380,622) $ 717,275
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 663,520 707,987
Loss on sale of cable systems 3,916 -
(Gain) loss on derivative instruments,
net (767,623) 257,578
Deferred income taxes (65,874) (430,778)
(Gain) loss on investments, net 1,225,350 (598,012)
Minority interest, net of tax 23,633 31,093
Cumulative effect of change in
accounting principle, net of tax - (717,090)
Decrease in accounts and
notes receivable 21,682 25,606
Increase in prepaid expenses (6,364) (15,008)
Increase (decrease) in accounts payable
and accrued expenses 8,094 (43,622)
Increase (decrease) in taxes payable (24,484) 763,496
Other, net 48,959 14,214
-------------- --------------
Net cash provided by operating
activities 750,187 712,739
-------------- --------------
Cash flows from investing activities
Capital expenditures (1,013,664) (1,060,058)
Investments in affiliated companies (9,793) (16,896)
Proceeds from the sale of investments 1,320,271 604,580
(Increase) decrease in amounts due
from CEI, net 13,245 (63,569)
Proceeds from the sale of cable systems 12,574 -
Other, net (4,295) (5,245)
-------------- --------------
Net cash provided by (used in)
investing activities 318,338 (541,188)
-------------- --------------
Cash flows from financing activities
Commercial paper repayments, net (727,384) (1,529,807)
Proceeds from issuance of debt, net of
debt issuance costs - 1,428,852
Repayment of debt (266,576) (28,268)
Proceeds from exercise of stock options 23,110 8,376
Increase (decrease) in book overdrafts 16,577 (13,487)
Increase in amounts due to CEI, net 22,554 -
Distributions paid on capital and
preferred securities of subsidiary
trusts (29,938) (40,430)
-------------- --------------
Net cash used in financing
activities (961,657) (174,764)
-------------- --------------
Net increase (decrease) in cash 106,868 (3,213)
Cash at beginning of period 86,860 78,442
Cash at end of period $ 193,728 $ 75,229
============= ==============
Cox Communications, Inc.
Summary of Operating Statistics
-----------------------------------------------------------------------
Core Video
June 30 March 31 June 30
2001(a) 2002(a) 2002
----------- ------------ ------------
Revenue Generating Units
Basic Customers 6,149,206 6,275,390 6,250,036
New Services 2,082,576 3,056,868 3,334,326
----------- ------------ ------------
Total Revenue Generating
Units 8,231,782 9,332,258 9,584,362
Homes Passed 9,836,629 10,021,979 10,075,782
Basic Penetration 62.5% 62.6% 62.0%
-----------------------------------------------------------------------
Cox Digital Cable
June 30 March 31 June 30
2001(a) 2002(a) 2002
----------- ------------ ------------
Digital Cable Ready Homes Passed 8,590,488 9,517,070 9,636,773
Customers 1,070,014 1,539,256 1,641,095
Penetration of Customers to
Basic Customers 17.4% 24.5% 26.3%
Average Weekly Run Rate 8,524 11,965 7,901
-----------------------------------------------------------------------
High-Speed Internet Access
June 30 March 31 June 30
2001 2002 2002
----------- ------------ ------------
High-Speed Internet Access Ready
Homes Passed 8,384,737 9,347,583 9,485,336
Customers 668,038 1,001,311 1,115,000
Penetration of Customers to
Homes Passed 8.0% 10.7% 11.8%
Average Weekly Run Rate 6,221 9,058 8,745
-----------------------------------------------------------------------
Cox Digital Telephone
June 30 March 31 June 30
2001 2002 2002
----------- ------------ ------------
Telephony Ready Homes Passed 2,816,649 3,569,212 3,708,135
Customers 344,524 516,301 578,231
Penetration of Customers to
Homes Passed 12.2% 14.5% 15.6%
Average Weekly Run Rate 4,023 4,825 4,764
-----------------------------------------------------------------------
Bundled Customers
June 30 March 31 June 30
2001 2002 2002
----------- ------------ ------------
Customers subscribing to two
or more services 828,829 1,214,962 1,339,740
Penetration of Bundled Customers
to Basic Customers 13.5% 19.4% 21.4%
=======================================================================
Comparative Quarterly Operating Statistics
Three Months Ended Six Months Ended
------------------------- -------------------------
June 30 June 30 June 30 June 30
2001 2002 2001 2002
------------ ------------ ------------ ------------
Pro Forma Operating
Cash Flow Margin(b) 35.7% 35.5% 35.6% 34.8%
Capital Expenditures
(thousands of
dollars) $ 536,744 $ 498,266 $ 1,060,058 $ 1,013,664
Pro Forma Operating
Cash Flow per
Basic Customer
(b)(c) $ 62.14 $ 70.70 $ 120.38 $ 134.99
Capital
Expenditures per
Basic Customer $ 87.29 $ 79.72 $ 172.39 $ 162.19
-----------------------------------------------------------------------
(a) Operating statistics as of June 30, 2001 and March 31, 2002
have been adjusted for the sale of certain cable systems in the second
quarter of 2002.
(b) Please refer to the Pro Forma Operating Results for details
related to the nature of the pro forma adjustments.
(c) Pro forma operating cash flow per basic customer is calculated
by dividing operating cash flow for the respective period by basic
customers as of the end of the period.
Cox Communications, Inc.
Summary of Operating Statistics - Continued
Free Cash Flow Calculation
Three Months Ended Six Months Ended
June 30 June 30 June 30 June 30
2001 2002 2001 2002
------------ ------------ ------------ ------------
Historical
operating
cash flow $ 382,114 $ 441,875 $ 740,246 $ 833,940
Less capital
expenditures (536,744) (498,266) (1,060,058) (1,013,664)
Less cash change
in working
capital(d) (23,001) (27,731) (60,233) 23,871
------------ ------------ ------------ ------------
Operating free
cash flow(e) (177,631) (84,122) (380,045) (155,853)
Less cash paid
for interest (103,789) (86,100) (250,400) (205,937)
Plus cash
refunded for
taxes 10,710 1,407 283,126 98,313
------------ ------------ ------------ ------------
Free cash flow(e) $ (270,710) $ (168,815) $ (347,319) $ (263,477)
============ ============ ============ ============
(d) 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.
(e) Operating free cash flow and free cash flow are not measures
of performance calculated in accordance with generally accepted
accounting principles. However, Cox believes that operating free cash
flow and free cash flow are useful to investors in evaluating its
performance based on liquidity, operating performance and leverage.
Operating free cash flow and free cash flow should not be considered
as alternatives to net income as an indicator of Cox's performance and
may not be comparable to similarly titled measures used by other
companies.
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