EX-99.1 3 g84061exv99w1.txt EX-99.1 PRESS RELEASE DATED 7-30-2003 EXHIBIT 99.1 COX COMMUNICATIONS ANNOUNCES SECOND QUARTER FINANCIAL RESULTS FOR 2003 COX ACHIEVES 20% OPERATING CASH FLOW GROWTH AND 68% OPERATING INCOME GROWTH, INCREASES 2003 OPERATING CASH FLOW GUIDANCE ATLANTA - Cox Communications, Inc. (NYSE: COX) today reported financial results for the three months ended June 30, 2003. "Cox Communications is pleased to share results from another outstanding quarter, marked by operating cash flow (OCF) growth of 20%, operating income growth of 68% and revenue growth of 14%," said Jim Robbins, President and CEO 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 strategy. Today nearly one third of our customers buy multiple services from Cox, further demonstrating the value of our superior bundle of digital services, which was confirmed last week when Cox received the highest honor 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 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 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 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 charge taken in 2002 related to the continuation 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), 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, 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 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%. 2 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 loss on derivative instruments primarily 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 $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 3 (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 charge of $25.0 million recognized in the first quarter, upon completion of Cox's annual impairment test of franchise value in accordance with Statement of Financial Accounting Standards (SFAS) 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 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 of approximately $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 4 - 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 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 of the repurchased notes; - the repurchase of $1.3 billion aggregate principal amount of Cox's exchangeable subordinated debentures 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. At June 30 2003, Cox had approximately $7.0 billion of outstanding indebtedness (including cumulative derivative adjustments made in accordance with SFAS No. 133 which reduced reported indebtedness by approximately $611.2 million). In June 2003, Cox renewed 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 (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 Cox's ability to service 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 5 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 basis primarily because it is impractical to project the timing of certain transactions, such as the initiation 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 with approximately 6.5 million total customers, including 6.3 million basic cable subscribers. Cox is the nation's fourth-largest cable television provider, and offers both traditional analog video 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 its affiliate Cox Business Services, LLC. Local cable advertising, promotional opportunities and production services are sold under the Cox Media(SM) brand. 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, July 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. CONTACT INFORMATION Lacey Lewis, Vice President of Investor Relations (404) 269-7608, lacey.lewis@cox.com Laura Oberhelman, Media Relations (404) 269-7562, laura.oberhelman@cox.com CAUTION CONCERNING FORWARD-LOOKING STATEMENTS Statements in this release, including statements relating to growth opportunities, revenue and cash flow projections and introduction of new products and services, are "forward-looking statements", as defined by the Private Securities Litigation Reform Act 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 in these forward-looking statements, due to various risks, uncertainties or other factors. These factors include competition within the broadband communications industry, 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, 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, as amended, for the year ended December 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) 6 COX COMMUNICATIONS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (THOUSANDS OF DOLLARS, EXCLUDING PER SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 -------------------------------------- ----------------------------------------- 2003 2002 CHANGE 2003 2002 CHANGE ------------- ------------- ------ ------------- ------------- ------- REVENUES Residential Video ................................. $ 907,902 $ 857,197 6% $ 1,806,843 $ 1,691,056 7% Data .................................. 210,699 134,863 56% 404,918 256,428 58% Telephony ............................. 116,450 82,395 41% 223,543 155,147 44% Other ................................. 22,478 20,001 12% 44,630 40,545 10% ------------- ------------- ----- ------------- ------------- ------- TOTAL RESIDENTIAL REVENUES .......... 1,257,529 1,094,456 15% 2,479,934 2,143,176 16% Commercial ............................. 68,137 52,057 31% 131,506 101,853 29% Advertising ............................ 98,273 98,116 0% 178,781 177,642 1% ------------- ------------- ----- ------------- ------------- ------- TOTAL REVENUES ...................... 1,423,939 1,244,629 14% 2,790,221 2,422,671 15% COSTS AND EXPENSES Cost of services ....................... 594,939 523,947 14% 1,178,558 1,031,330 14% Selling, general and administrative expenses ............... 296,885 278,807 6% 600,094 557,401 8% ------------- ------------- ----- ------------- ------------- ------- TOTAL COSTS AND EXPENSES ............ 891,824 802,754 11% 1,778,652 1,588,731 12% ------------- ------------- ----- ------------- ------------- ------- OPERATING CASH FLOW ..................... 532,115 441,875 20% 1,011,569 833,940 21% Depreciation and amortization .......... 364,274 337,728 8% 748,594 663,520 13% (Gain) loss on sale of cable systems ... (469) 3,916 (112)% (469) 3,916 (112)% ------------- ------------- ----- ------------- ------------- ------- OPERATING INCOME ........................ 168,310 100,231 68% 263,444 166,504 58% Interest expense ........................ (130,498) (128,367) 2% (260,322) (255,984) 2% Gain (loss) on derivative instruments, net ................................... (24,197) 47,860 (151)% (26,700) 767,623 (103)% Gain (loss) on investments, net ......... 124,147 (792,900) (116)% 122,395 (1,201,630) (110)% Equity in net losses of affiliated companies ............................. (4,354) (20,907) (79)% (6,518) (23,720) (73)% Other, net .............................. (617) 275 -- (957) 1,010 (195)% ------------- ------------- ----- ------------- ------------- ------- INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTEREST .................. 132,791 (793,808) (117)% 91,342 (546,197) (117)% Income tax expense (benefit) ............ 13,402 (289,178) (105)% (1,096) (189,208) (99)% ------------- ------------- ----- ------------- ------------- ------- INCOME (LOSS) BEFORE MINORITY INTEREST .............................. 119,389 (504,630) (124)% 92,438 (356,989) (126)% Minority interest, net of tax ........... (1,644) (11,564) (86)% (3,914) (23,633) (83)% ------------- ------------- ----- ------------- ------------- ------- NET INCOME (LOSS) ....................... $ 117,745 $ (516,194) (123)% $ 88,524 $ (380,622) (123)% ============= ============= ============= ============= BASIC WEIGHTED-AVERAGE SHARES OUTSTANDING ........................... 620,256,065 601,318,335 620,239,661 601,024,267 BASIC NET INCOME (LOSS) PER SHARE ....... $ 0.19 $ (0.86) $ 0.14 $ (0.63) DILUTED WEIGHTED-AVERAGE SHARES OUTSTANDING ........................... 629,728,659 601,318,335 629,693,126 601,024,267 DILUTED NET INCOME (LOSS) PER SHARE ..... $ 0.19 $ (0.86) $ 0.14 $ (0.63)
NOTE:Certain amounts in the 2002 financial statements have been reclassified for comparison purposes. 7 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 ============ ============
8 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 =========== ===========
9 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 =========== =========== =========== ===========
10 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. 11 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. 12