-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UX/QmCSA8LfYWhqJatK2SYeExmIbysHF5u9KORgY0BcbxD3nNhZfC9k6SISe9bmp HkghHYSGQ86k2zCmxLJGGg== 0000950144-04-007426.txt : 20040729 0000950144-04-007426.hdr.sgml : 20040729 20040729101305 ACCESSION NUMBER: 0000950144-04-007426 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040729 ITEM INFORMATION: ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040729 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COX COMMUNICATIONS INC /DE/ CENTRAL INDEX KEY: 0000025305 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 582112281 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06590 FILM NUMBER: 04937665 BUSINESS ADDRESS: STREET 1: 1400 LAKE HEARN DR NE CITY: ATLANTA STATE: GA ZIP: 30319 BUSINESS PHONE: 4048435000 MAIL ADDRESS: STREET 1: 1400 LAKE HEARN DRIVE CITY: ATLANTA STATE: GA ZIP: 30319 FORMER COMPANY: FORMER CONFORMED NAME: COX COMMUNICATIONS INC/DE DATE OF NAME CHANGE: 19941123 FORMER COMPANY: FORMER CONFORMED NAME: COX CABLE COMMUNICATIONS INC DATE OF NAME CHANGE: 19940614 8-K 1 g90158e8vk.htm COX COMMUNICATIONS, INC. COX COMMUNICATIONS, INC.
 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 29, 2004

Cox Communications, Inc.

(Exact name of registrant as specified in its charter)
         
Delaware   1-6590   58-2112281
  		 
  		 
 
(State or other
jurisdiction of
incorporation) 		  (Commission
File Number) 		  (I.R.S. Employer
Identification No.)
     
1400 Lake Hearn Drive
Atlanta, Georgia 		  30319
  		 
 
(Address of principal executive offices)   (Zip Code)

(404) 843-5000

(Registrant’s telephone number, including area code)

 

 

Item 7. Financial Statements and Exhibits

  (a)   Not applicable.
 
  (b)   Not applicable.
 
  (c)   Exhibits:

  99.1   Press Release dated July 29, 2004, announcing financial results for the quarter and six months ended June 30, 2004 (furnished pursuant to Item 12 of Form 8-K).

Item 12. Results of Operations and Financial Condition.

Cox Communications, Inc. will issue a press release announcing its financial results for the quarter and six months ended June 30, 2004, and a copy of this press release is being furnished as an exhibit to this report. The press release contains disclosure of operating cash flow and free cash flow, each of which is not a measure of performance calculated in accordance with accounting principles generally accepted in the United States (GAAP). Page 11 of the press release contains a tabular reconciliation of operating income and cash provided by operating activities, the most directly comparable financial measures calculated and presented in accordance with GAAP, to operating cash flow and free cash flow, respectively, on a historical basis. Disclosure regarding management’s uses for such measures appears on pages 6 of the press release. 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.

The information required to be furnished pursuant to Item 12 and Exhibit 99.1 of this report shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liability of that section, except if Cox specifically incorporates it by reference into a filing under the Securities Act of 1933 or the Exchange Act.

 

 

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
         
  COX COMMUNICATIONS, INC.
 		  
Date:  July 29, 2004  By:   /s/ Jimmy W. Hayes    
    Jimmy W. Hayes   
    Executive Vice President, Finance
and Chief Financial Officer 		  
 

 

EX-99.1 2 g90158exv99w1.txt EX-99.1 PRESS RELEASE DATED JULY 29, 2004 EXHIBIT 99.1 [Cox Letterhead] FOR IMMEDIATE RELEASE, JULY 29, 2004 COX COMMUNICATIONS ANNOUNCES SECOND QUARTER AND YEAR-TO-DATE FINANCIAL RESULTS FOR 2004 FOCUS ON PROFITABILITY BOOSTS COX'S FINANCIAL PERFORMANCE ATLANTA - Cox Communications, Inc. (NYSE: COX) today reported financial results for the three and six months ended June 30, 2004. "Cox's continued commitment to customer growth and improving profitability resulted in strong revenue growth of 12%, operating income growth of 27%, operating cash flow growth of 16% and the company's 6th consecutive quarter of year-over-year operating cash flow margin improvement," said Jim Robbins, Cox Communications' President and CEO. "This quarter we achieved record sell-in of digital video, high-speed Internet and digital telephone to new basic customers. Our year-over-year growth in customer relationships and advanced-service RGUs is a testament to strong consumer demand for quality customer care and the overall value of our product offerings." "During the second quarter, sell-in of our bundled offering of video, telephone and high-speed Internet service hit a record high of 21% in our telephone markets. Customers further validated their satisfaction with Cox digital telephone this quarter when Cox received top honors in two J.D. Power and Associates telephone satisfaction surveys." "We're on track to deliver excellent operating performance in 2004, including positive free cash flow for the second consecutive year, as we successfully continue to execute Cox's triple play bundle strategy." SECOND QUARTER HIGHLIGHTS For the second quarter of 2004, Cox: - Ended the quarter with approximately 6.3 million basic video customers, up 0.6% from June 30, 2003. - Ended the quarter with approximately 6.6 million total customer relationships, up 1.8% from June 30, 2003. - Ended the quarter with over 11.9 million total RGUs, up 12% from June 30, 2003, driven by 27% growth in advanced-service RGUs. - Added 60,351 Cox Digital Cable customers, ending the quarter with approximately 2.3 million digital cable customers, representing year-over-year customer growth of 18%. Cox Digital Cable is now available to 99% of the homes in Cox's service areas with 36% penetration of our basic video customer base. - Added 97,517 high-speed Internet customers, ending the quarter with over 2.2 million high-speed Internet customers, representing year-over-year customer growth of 34%. - Added 66,265 Cox Digital Telephone customers, ending the quarter with over 1.1 million telephone customers, representing year-over-year customer growth of 35%. - Generated $478.6 million in cash flows provided by operating activities and $155.3 million in free cash flow (cash flows provided by operating activities less capital expenditures). - Reduced capital expenditures to $323.3 million for the quarter, down 4% from the second quarter of 2003. - Generated 12% revenue growth during the quarter and six months ended June 30, 2004, compared with the same periods in 2003. - Generated 27% operating income growth and 16% operating cash flow growth (operating income before depreciation and amortization and gains or losses on the sale of cable systems) during the quarter ended June 30, 2004 and 48% operating income growth and 17% operating cash flow growth during the six months ended June 30, 2004, compared with the same periods in 2003. 2004 OUTLOOK Cox continues to expect revenue growth of 11.5% to 12.5% over 2003, operating cash flow growth of 14% to 15% over 2003, and capital expenditures of approximately $1.35 billion to $1.40 billion, which is consistent with its previously stated 2004 financial guidance. Basic video customer growth over 2003 is expected to be just under 1% and advanced-service RGU net additions are expected to be between 1.0 and 1.1 million. In addition, Cox expects to be free cash flow positive for the full year 2004. Operating cash flow and free cash flow are not financial measures calculated in accordance with accounting principles generally accepted in the United States (GAAP). For more information regarding these non-GAAP financial measures, please refer to the discussion under the heading USE OF OPERATING CASH FLOW AND FREE CASH FLOW. OPERATING RESULTS THREE MONTHS ENDED JUNE 30, 2004 COMPARED WITH THREE MONTHS ENDED JUNE 30, 2003 Total revenues for the second quarter of 2004 were $1.6 billion, an increase of 12% over the second quarter of 2003. This was primarily due to growth in advanced-service subscriptions (which include digital cable, high-speed Internet access and telephony) and higher basic cable rates. An increase in Cox Business Services customers, as well as an increase in advertising sales, also contributed to overall revenue growth. Cost of services, which includes programming costs, other direct costs and field service costs, was $644.6 million for the second quarter of 2004, an increase of 9% over the same period in 2003. Programming costs increased 12% to $320.7 million, reflecting rate increases and customer growth. Other direct costs and field service costs in the aggregate increased 7% to $323.9 million, reflecting 27% growth in advanced-service RGUs over the last twelve months, partially offset by cost savings achieved through successful field service initiatives. Selling, general and administrative expenses were $334.6 million for the second quarter of 2004, an increase of 11% over the comparable period in 2003. This was due to an 11% increase in general and administrative expenses and a 12% increase in marketing expense. The increase in general and administrative expenses was primarily due to increased salaries and benefits and costs related to trials of new video and telephony products. Marketing expense increased primarily due to additional marketing related to new video products and an industry-wide campaign aimed at satellite competition, as well as a 9% increase in costs associated with Cox Media, Cox's advertising sales business. 2 Operating income increased 27% to $213.9 million for the second quarter of 2004, and operating cash flow increased 16% to $616.0 million for that same period. Operating income margin (operating income as a percentage of revenues) for the second quarter of 2004 was 13%, compared to 12% for the same period in 2003. Operating cash flow margin (operating cash flow as a percentage of revenues) was 39% for the second quarter of 2004, compared to 37% for the same period in 2003. Depreciation and amortization increased to $397.1 million from $364.3 million in the second quarter of 2003. This was mainly due to an increase in depreciation from Cox's continuing investment in its broadband network in order to deliver additional services. In the second quarter of 2004, Cox recorded a $5.0 million pre-tax loss on the sale of certain small, non-clustered cable systems in Oklahoma, Kansas, Texas and Arkansas, which in the aggregate consisted of approximately 53,000 basic cable subscribers. Certain subscriber data in the SUMMARY OF OPERATING STATISTICS table as of March 31, 2004 and June 30, 2003 has been adjusted for this disposition, as further described in footnote (a) to the table. In August 2003, Cox terminated a series of prepaid forward contracts accounted for as zero-coupon debt. While these contracts were outstanding, changes in the market value of the Sprint PCS common stock associated with the contracts impacted the gain (loss) on derivative instruments. As a result of the termination of the contracts, the pre-tax loss on derivative instruments for the second quarter of 2004 was insignificant. 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 were indexed to shares of Sprint PCS common stock that Cox owned. Net gain on investments of $2.3 million for the second quarter of 2004 was due to the sale of all remaining shares of Sprint stock held by Cox. The net gain on investments for the comparable period in 2003 of $124.1 million 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. During the second quarter of 2004, Cox recorded a $7.0 million pre-tax loss on extinguishment of debt due to the redemption of $14.6 million aggregate principal amount of Cox's exchangeable subordinated debentures due 2029 (PRIZES) and $0.1 million aggregate principal amount of Cox's 3% exchangeable subordinated debentures due 2030 (Premium PHONES), which represented all remaining outstanding PRIZES and Premium PHONES. During the comparable period in 2003, Cox recorded a $3.9 million pre-tax gain on extinguishment of debt resulting from the purchase of $1.3 billion aggregate principal amount of the PRIZES and $274.9 million aggregate principal amount of the Premium PHONES pursuant to Cox's offer to purchase any and all PRIZES and Premium PHONES. Net income for the second quarter of 2004 was $62.7 million compared to $117.7 million for the second quarter of 2003. SIX MONTHS ENDED JUNE 30, 2004 COMPARED WITH SIX MONTHS ENDED JUNE 30, 2003 Total revenues for the six months ended June 30, 2004 were $3.1 billion, an increase of 12% over the six months ended June 30, 2003. This was primarily due to growth in advanced-service subscriptions (which include digital cable, high-speed Internet access and telephony) and higher 3 basic cable rates. Also contributing to overall revenue growth was an increase in Cox Business Services customers, as well as an increase in advertising sales. Cost of services was $1.3 billion for the six months ended June 30, 2004, an increase of 9% over the same period in 2003. Programming costs increased 11% to $638.4 million, reflecting rate increases and customer growth. Other direct costs and field service costs in the aggregate increased 8% to $642.1 million, reflecting 27% growth in advanced-service RGUs over the last twelve months, partially offset by cost savings achieved through successful field service initiatives. Selling, general and administrative expenses were $671.9 million for the six months ended June 30, 2004, an increase of 10% over the comparable period in 2003. This was due to a 9% increase in general and administrative expenses and a 15% increase in marketing expense. The increase in general and administrative expenses was primarily due to increased salaries and benefits and costs related to trials of new video and telephony products. Marketing expense increased primarily due to additional marketing related to new video products and an industry-wide campaign aimed at satellite competition, as well as an 8% increase in costs associated with Cox Media, Cox's advertising sales business. Operating income increased 48% to $389.1 million for the six months ended June 30, 2004, and operating cash flow increased 17% to $1.2 billion for that same period. Operating income margin for the six months ended June 30, 2004 was 12%, compared to 9% for the same period in 2003. Operating cash flow margin for the six months ended June 30, 2004 was 38%, compared to 36% for the same period in 2003. Depreciation and amortization increased to $789.2 million from $748.6 million in the six months ended June 30, 2003. This was mainly due to an increase in depreciation from Cox's continuing investment in its broadband network in order to deliver additional services. In August 2003, Cox terminated a series of prepaid forward contracts accounted for as zero-coupon debt. While these contracts were outstanding, changes in the market value of the Sprint PCS common stock associated with the contracts impacted the gain (loss) on derivative instruments. As a result of the termination of the contracts, the pre-tax loss on derivative instruments for the six months ended June 30, 2004 was insignificant. For the six months ended June 30, 2003, Cox recorded a $26.7 million pre-tax loss on derivative instruments primarily due to 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 were indexed to shares of Sprint PCS common stock and a $4.4 million pre-tax loss resulting from the change in the fair value of Cox's net settleable warrants. Net gain on investments of $29.1 million for the six months ended June 30, 2004 was due to a $2.3 million pre-tax gain on the sale of all remaining shares of Sprint stock held by Cox, a $19.5 million pre-tax gain on the sale of 0.1 million shares of Sprint PCS preferred stock and a $7.3 million pre-tax gain on the sale of certain other non-strategic investments. Net gain on investments for the comparable period in 2003 of $122.4 million 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. Net income for the six months ended June 30, 2004 was $120.4 million compared with $88.5 million for the comparable period in 2003. 4 LIQUIDITY AND CAPITAL RESOURCES Cox has included Consolidated Statements of Cash Flows for the six months ended June 30, 2004 and 2003 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 USE OF OPERATING CASH FLOW AND FREE CASH FLOW. Significant sources of cash for the six months ended June 30, 2004 consisted primarily of the following: - the generation of net cash provided by operating activities of approximately $857.4 million; - the sale of 0.1 million shares of Sprint PCS preferred stock for net proceeds of approximately $56.9 million; - the sale of certain small, non-clustered cable systems in Oklahoma, Kansas, Texas and Arkansas for net proceeds of approximately $53.1 million; - the sale of certain other non-strategic investments for proceeds of approximately $10.3 million; and - the sale of all remaining shares of Sprint stock for net proceeds of approximately $3.0 million. Significant uses of cash for the six months ended June 30, 2004 consisted of the following: - net commercial paper repayments of approximately $266.3 million; - the purchase of $19.0 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 $13.9 million, which represented the accreted value of the purchased notes and all remaining outstanding convertible notes; - the purchase of $14.6 million aggregate principal amount of the PRIZES and $0.1 million aggregate principal amount of the Premium PHONES, which represented all remaining outstanding PRIZES and Premium PHONES, for aggregate cash consideration of $14.7 million; and - capital expenditures of $617.9 million. Please refer to the SUMMARY OF OPERATING STATISTICS for a break out of capital expenditures in accordance with industry guidelines. At June 30, 2004, Cox had approximately $6.7 billion of outstanding indebtedness. Derivative adjustments in accordance with Statement of Financial Accounting Standards (SFAS) No. 133 reduced the reported debt balance at June 30, 2003 by approximately $611.2 million to approximately $7.0 billion. As a result of Cox's purchase of its exchangeable subordinated debentures, net settlement of its zero-coupon debt and sales of Sprint PCS stock during 2003, SFAS No. 133 adjustments did not significantly impact reported indebtedness at June 30, 2004 and are not expected to be material in the future. In June 2004, Cox entered into a new five-year revolving bank credit facility with a capacity of $1.25 billion. This new credit facility replaces Cox's 364-day and five-year revolving bank credit facilities. 5 In June 2004, all 4,836,372 issued and outstanding shares of Cox's Series A preferred stock were converted into 11,212,121 shares of Cox's Class A common stock, in accordance with the terms of the Series A preferred stock. Upon conversion, all of the issued and outstanding Series A preferred shares were retired. 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 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 financial measures provides useful information to investors regarding Cox's financial position and results of operations. Cox believes that operating cash flow 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. Additionally, 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 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 6.6 million total customers, including approximately 6.3 million basic cable subscribers. The nation's third-largest cable television provider, Cox offers both analog cable television under the Cox Cable brand as well as advanced digital video service 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 Cox High Speed Internet brand; and commercial voice and data services via Cox Business Services. 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 (http://www.cox.com). 6 CONFERENCE CALL AND WEBCAST DETAILS The Cox Communications earnings call will be held Thursday, July 29, 2004, at 10:30 a.m. Eastern Time. The conference call and an accompanying slide presentation will be webcast simultaneously via the Cox Communications website at www.cox.com/investor. The webcast and accompanying slide presentation, as well as a document containing highlights, will be archived 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 Bobby Amirshahi, Director of Media Relations (404) 843-7872, bobby.amirshahi@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 for the year ended December 31, 2003. Cox assumes no responsibility to update any forward-looking statements as a result of new information, future events or otherwise. (See attached financial information) 7 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 -------------------------------------------- ------------------------------------- 2004 2003 CHANGE 2004 2003 CHANGE ------------- ------------- ------------ ------------- ----------- -------- REVENUES Residential Video .................................. $ 960,914 $ 907,901 6% $ 1,911,545 $ 1,806,843 6% Data ................................... 270,545 210,700 28% 528,228 404,918 30% Telephony .............................. 144,111 116,449 24% 278,071 223,188 25% Other .................................. 26,336 20,538 28% 52,843 39,857 33% ------------- ------------- ------------ ------------- ----------- -------- TOTAL RESIDENTIAL REVENUES .......... 1,401,906 1,255,588 2,770,687 2,474,806 Commercial ............................. 86,338 70,078 23% 169,521 136,634 24% Advertising ............................ 106,996 98,273 9% 195,389 178,781 9% ------------- ------------- ------------ ------------- ----------- -------- TOTAL REVENUES ...................... 1,595,240 1,423,939 12% 3,135,597 2,790,221 12% COSTS AND EXPENSES Cost of services (excluding depreciation and amortization) .................... 644,627 590,122 9% 1,280,443 1,169,914 9% Selling, general and administrative expenses ............................. 334,576 301,702 11% 671,884 608,738 10% ------------- ------------- ------------ ------------- ----------- -------- TOTAL COSTS AND EXPENSES ............ 979,203 891,824 10% 1,952,327 1,778,652 10% ------------- ------------- ------------ ------------- ----------- -------- OPERATING CASH FLOW ....................... 616,037 532,115 16% 1,183,270 1,011,569 17% Depreciation and amortization .......... 397,114 364,274 9% 789,180 748,594 5% Loss (gain) on sale of cable systems ... 5,021 (469) -- 5,021 (469) -- ------------- ------------- ------------ ------------- ----------- -------- OPERATING INCOME .......................... 213,902 168,310 27% 389,069 263,444 48% Interest expense .......................... (95,591) (134,394) (29%) (192,203) (264,218) (27%) Loss on derivative instruments, net ....... (15) (24,197) (100%) (54) (26,700) (100%) Gain on investments, net .................. 2,326 124,146 (98%) 29,135 122,395 (76%) Equity in net losses of affiliated companies ............................... (1,167) (4,354) (73%) (195) (6,518) (97%) (Loss) gain on extinguishment of debt ..... (7,006) 3,896 -- (7,006) 3,896 -- Other, net ................................ (258) (616) (58%) (1,767) (957) 85% ------------- ------------- ------------ ------------- ----------- -------- INCOME BEFORE INCOME TAXES AND MINORITY INTEREST ............................... 112,191 132,791 (16%) 216,979 91,342 138% Income tax expense (benefit) .............. 49,922 13,402 272% 96,022 (1,096) -- ------------- ------------- ------------ ------------- ----------- -------- INCOME BEFORE MINORITY INTEREST ........... 62,269 119,389 (48%) 120,957 92,438 31% Minority interest, net of tax ............. 413 (1,644) (125%) (572) (3,914) (85%) ------------- ------------- ------------ ------------- ----------- -------- NET INCOME ................................ $ 62,682 $ 117,745 (47%) $ 120,385 $ 88,524 36% ============= ============= ============= =========== BASIC WEIGHTED-AVERAGE SHARES OUTSTANDING ............................. 621,755,118 620,256,065 621,221,210 620,239,661 BASIC NET INCOME PER SHARE ................ $ 0.10 $ 0.19 $ 0.19 $ 0.14 DILUTED WEIGHTED-AVERAGE SHARES OUTSTANDING ............................. 622,918,744 629,728,659 622,384,836 629,693,126 DILUTED NET INCOME PER SHARE .............. $ 0.10 $ 0.19 $ 0.19 $ 0.14
NOTE: Certain amounts in the 2003 financial statements have been reclassified for comparison purposes. 8 COX COMMUNICATIONS, INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED) (THOUSANDS OF DOLLARS)
JUNE 30 DECEMBER 31 2004 2003 ------------ ----------- ASSETS Current assets Cash .................................................................. $ 75,368 $ 83,841 Accounts and notes receivable, less allowance for doubtful accounts of $23,357 and $26,175 .................................... 379,100 370,832 Amounts due from Cox Enterprises, Inc. (CEI) .......................... 10,871 -- Other current assets .................................................. 147,316 131,106 ------------ ----------- Total current assets ............................................. 612,655 585,779 ------------ ----------- Net plant and equipment ............................................... 7,729,694 7,907,561 Investments ........................................................... 58,710 109,380 Intangible assets ..................................................... 16,029,591 15,697,495 Other noncurrent assets ............................................... 76,720 117,361 ------------ ----------- Total assets ..................................................... $ 24,507,370 $24,417,576 ============ =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable and accrued expenses ................................. $ 695,807 $ 778,708 Other current liabilities ............................................. 444,773 450,553 Current portion of long-term debt ..................................... 527,211 48,344 Amounts due to CEI .................................................... -- 3,980 ------------ ----------- Total current liabilities ........................................ 1,667,791 1,281,585 ------------ ----------- Deferred income taxes ................................................. 6,568,869 6,388,970 Other noncurrent liabilities .......................................... 157,877 164,070 Long-term debt, less current portion .................................. 6,136,613 6,963,456 ------------ ----------- Total liabilities ................................................ 14,531,150 14,798,081 ------------ ----------- Minority interest in equity of consolidated subsidiaries .............. 140,091 139,519 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: 0 and 4,836,372 ...... -- 4,836 Class A common stock, $1 par value; 671,000,000 shares authorized; shares issued: 610,479,850 and 598,481,602; shares outstanding: 604,947,345 and 592,958,582 ................. 610,480 598,482 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 .......................................... 4,790,123 4,545,635 Retained earnings ................................................... 4,621,006 4,500,621 Accumulated other comprehensive (loss) income ....................... (4) 15,548 Class A common stock in treasury, at cost: 5,532,505 and 5,523,020 shares ................................................. (213,074) (212,744) ------------ ----------- Total shareholders' equity ....................................... 9,836,129 9,479,976 ------------ ----------- Total liabilities and shareholders' equity ....................... $ 24,507,370 $24,417,576 ============ ===========
9 COX COMMUNICATIONS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (THOUSANDS OF DOLLARS)
SIX MONTHS ENDED JUNE 30 ------------------------- 2004 2003 --------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net income ................................................ $ 120,385 $ 88,524 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ........................... 789,180 748,594 Loss (gain) on sale of cable system ..................... 5,021 (469) Deferred income taxes ................................... 53,333 (232,527) Loss on derivative instruments, net ..................... 54 26,700 Loss (gain) on extinguishment of debt ................... 7,006 (3,896) Write-off of debt issuance costs ........................ -- 36,063 Gain on investments, net ................................ (29,135) (122,395) Equity in net losses of affiliated companies ............ 195 6,518 Minority interest, net of tax ........................... 572 3,914 Other, net .............................................. 6,138 77,870 (Increase) decrease in accounts and notes receivable ...... (9,510) 20,245 (Increase) decrease in other assets ....................... (17,040) 33,829 Decrease in accounts payable and accrued expenses ......... (55,019) (91,874) Increase in taxes payable ................................. 18,178 231,290 Decrease in other liabilities ............................. (31,938) (3,518) --------- ----------- Net cash provided by operating activities .......... 857,420 818,868 --------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures ...................................... (617,869) (662,892) Investments in affiliated companies ....................... (15,827) (8,412) Proceeds from the sale of investments ..................... 70,230 161,739 (Increase) decrease in amounts due from CEI ............... (10,871) 21,109 Proceeds from the sale of cable systems ................... 53,076 822 Other, net ................................................ 12,312 (5,234) --------- ----------- Net cash used in investing activities .............. (508,949) (492,868) --------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Commercial paper (repayments) borrowings, net ............. (266,308) 110,000 Proceeds from issuance of debt ............................ -- 596,154 Repayment of debt ......................................... (72,549) (1,124,971) Proceeds from exercise of stock options ................... 2,154 2,535 (Decrease) increase in amounts due to CEI ................. (3,980) 8,489 Premium paid on debt extinguishment ....................... -- (19,483) Other, net ................................................ (16,261) 21,008 --------- ----------- Net cash used in financing activities .............. (356,944) (406,268) --------- ----------- Net decrease in cash ...................................... (8,473) (80,268) Cash at beginning of period ............................... 83,841 228,704 --------- ----------- Cash at end of period ..................................... $ 75,368 $ 148,436 ========= ===========
NOTE: Certain amounts in the 2003 financial statements have been reclassified for comparison purposes. 10 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 ---------------------- -------------------------- 2004 2003 2004 2003 --------- --------- ----------- ----------- Operating cash flow ....................... $ 616,037 $ 532,115 $ 1,183,270 $ 1,011,569 Depreciation and amortization ............. (397,114) (364,274) (789,180) (748,594) (Loss) gain on sale of cable system ....... (5,021) 469 (5,021) 469 --------- --------- ----------- ----------- Operating income .......................... $ 213,902 $ 168,310 $ 389,069 $ 263,444 ========= ========= =========== ===========
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 ---------------------- -------------------------- 2004 2003 2004 2003 --------- --------- ----------- ----------- Free cash flow ............................ $ 155,283 $ 125,794 $ 239,551 $ 155,976 Capital expenditures ...................... 323,315 337,208 617,869 662,892 --------- --------- ----------- ----------- Net cash provided by operating activities $ 478,598 $ 463,002 $ 857,420 $ 818,868 ========= ========= =========== ===========
11 COX COMMUNICATIONS, INC. SUMMARY OF OPERATING STATISTICS - -------------------------------------------------------------------------------- CORE VIDEO
JUNE 30 MARCH 31 JUNE 30 2004 2004 (a) 2003 (a) ---------- ---------- ---------- Customer Relationships Basic Video Customers (b) ............ 6,262,688 6,316,335 6,223,191 Non-Video Customers (c) ............. 322,152 308,427 244,662 ---------- ---------- ---------- Total Customer Relationships (d) ....... 6,584,840 6,624,762 6,467,853 Revenue Generating Units Basic Video Customers (b) ............ 6,262,688 6,316,335 6,223,191 Advanced Services .................... 5,658,282 5,434,149 4,448,952 ---------- ---------- ---------- Total Revenue Generating Units ......... 11,920,970 11,750,484 10,672,143 Video Homes Passed ..................... 10,441,754 10,376,293 10,206,019 Basic Video Penetration ................ 60.0% 60.9% 61.0% - -------------------------------------------------------------------------------------
COX DIGITAL CABLE
JUNE 30 MARCH 31 JUNE 30 2004 2004 (a) 2003 (a) ---------- ---------- --------- Digital Cable Ready Homes Passed ................... 10,381,012 10,239,378 9,983,009 Customers .......................................... 2,278,523 2,218,172 1,936,504 Penetration of Customers to Basic Video Customers .. 36.4% 35.1% 31.1% Quarterly Net Additions ............................ 60,351 76,953 69,253 - --------------------------------------------------------------------------------------------------
HIGH-SPEED INTERNET ACCESS
JUNE 30 MARCH 31 JUNE 30 2004 2004 (a) 2003 (a) ---------- ---------- --------- High-Speed Internet Access Ready Homes Passed .............. 10,343,363 10,242,078 9,962,289 Customers .................................................. 2,246,109 2,148,592 1,673,731 Penetration of Customers to High-Speed Internet Access Ready Homes Passed ....................................... 21.7% 21.0% 16.8% Quarterly Net Additions .................................... 97,517 161,355 112,400 - --------------------------------------------------------------------------------------------------------
COX DIGITAL TELEPHONE
JUNE 30 MARCH 31 JUNE 30 2004 2004 2003 --------- --------- --------- Telephony Ready Homes Passed .................................. 5,461,632 5,266,735 4,569,431 Customers ..................................................... 1,133,650 1,067,385 838,717 Penetration of Customers to Telephony Ready Homes Passed ...... 20.8% 20.3% 18.4% Quarterly Net Additions ....................................... 66,265 78,959 56,171 - --------------------------------------------------------------------------------------------------------
BUNDLED CUSTOMERS
JUNE 30 MARCH 31 JUNE 30 2004 2004 (a) 2003 (a) --------- --------- --------- Customers subscribing to two or more services ................ 2,473,373 2,405,734 1,917,210 Penetration of Bundled Customers to Basic Video Customers .... 39.5% 38.1% 30.8% =============================================================================================================
12 COX COMMUNICATIONS, INC. SUMMARY OF OPERATING STATISTICS - CONTINUED - -------------------------------------------------------------------------------- AVERAGE MONTHLY CHURN (e)
JUNE 30 JUNE 30 2004 2003 -------- ------- Basic Video ......... 2.6% 2.6% Digital Cable ....... 4.4% 4.8% High-Speed Internet . 3.0% 2.9% Telephony ........... 3.0% 3.0% ===============================================================================
COMPARATIVE OPERATING STATISTICS
THREE MONTHS ENDED SIX MONTHS ENDED ----------------------------- ----------------------------- JUNE 30 JUNE 30 JUNE 30 JUNE 30 2004 2003 2004 2003 ------------ ------------ ------------ ------------ Operating Cash Flow Margin ............................. 38.6% 37.4% 37.7% 36.3% Capital Expenditures (thousands of dollars) ............ $ 323,315 $ 337,208 $ 617,869 $ 662,892 Operating Cash Flow per Basic Video Customer (f) ....... 98.37 85.51 188.94 162.55 Capital Expenditures per Basic Video Customer (g) ...... 51.63 54.19 98.66 106.52 ===========================================================================================================================
CAPITAL EXPENDITURES
THREE MONTHS ENDED SIX MONTHS ENDED ------------------------ ------------------------ JUNE 30 JUNE 30 JUNE 30 JUNE 30 2004 2003 2004 2003 ---------- ---------- ---------- ---------- (THOUSANDS OF DOLLARS) Customer premise equipment .. $ 125,951 $ 128,255 $ 243,444 $ 272,528 Commercial spending ......... 23,418 19,765 47,069 39,331 Scalable infrastructure ..... 39,368 32,570 91,581 59,174 Line extensions ............. 44,972 42,702 83,089 81,450 Upgrade/Rebuild ............. 22,653 58,085 39,894 109,896 Support capital ............. 66,953 55,831 112,792 100,513 ---------- ---------- ---------- ---------- Total capital expenditures $ 323,315 $ 337,208 $ 617,869 $ 662,892 ========== ========== ========== ========== =====================================================================================
FREE CASH FLOW CALCULATION (h) - ---------------------------
THREE MONTHS ENDED SIX MONTHS ENDED ----------------------------- ----------------------------- JUNE 30 JUNE 30 JUNE 30 JUNE 30 2004 2003 2004 2003 ------------ ------------ ------------ ------------ (THOUSANDS OF DOLLARS) Operating cash flow (h) ................................... $ 616,037 $ 532,115 $ 1,183,270 $ 1,011,569 Less capital expenditures ................................ (323,315) (337,208) (617,869) (662,892) Plus cash (decrease) increase in working capital (i) ..... (13,046) 28,903 (112,258) 1,390 ------------ ------------ ------------ ------------ Operating free cash flow ................................... 279,676 223,810 453,143 350,067 Less cash paid for interest .............................. (119,581) (99,377) (188,611) (192,975) Plus cash (paid) refunded for taxes ...................... (4,812) 1,361 (24,981) (1,116) ------------ ------------ ------------ ------------ Free cash flow ............................................. $ 155,283 $ 125,794 $ 239,551 $ 155,976 ============ ============ ============ ============ ===============================================================================================================================
13 COX COMMUNICATIONS, INC. SUMMARY OF OPERATING STATISTICS - CONTINUED - -------------------------------------------------------------------------------- (a) Core Video, Cox Digital Cable, High-Speed Internet Access and Bundled Customers operating statistics as of March 31, 2004 and June 30, 2003 have been adjusted for the sale of certain cable systems in the second quarter of 2004. (b) The number of customers who receive primary analog or digital video service. Additional outlets are not counted. (c) The number of customers who receive high-speed Internet access or telephony service, but do not subscribe to video service. (d) 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. (e) The number of customers who disconnect a particular product in a twelve-month period divided by the sum of customers for such product category at the beginning of each month for such twelve-month period. Churn does include disconnects related to moves and transfers but does not include disconnects that do not result in an interruption of service, such as account corrections and migration between service levels. (f) 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. (g) Capital expenditures per basic video customer is calculated by dividing capital expenditures for the respective period by basic video customers as of the end of the period. (h) Free cash flow and operating 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 Provided by Operating Activities" in these financial tables. (i) 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. 14 -----END PRIVACY-ENHANCED MESSAGE-----