ATLANTA--(BUSINESS WIRE)--July 23, 2001-- Cox Communications, Inc. (NYSE: COX) today reported financial results for the three months ended June 30, 2001.
''We had a solid second quarter, fueled by strong operating cash flow (OCF) growth of 13%, exceeding our publicly stated guidance of 11 to 12% OCF growth,'' commented Jim Robbins, President and Chief Executive Officer.
''We also achieved healthy revenue growth of 14% and added 244,000 new-service revenue generating units (RGUs) in the second quarter, putting us on track to achieve our stated goal of adding more than one million new-service RGUs during 2001. Growth in residential telephone sales was particularly vigorous this quarter, with more than 4,000 new telephony customers receiving service each week.''
Robbins added: ''Basic customer and overall RGU growth lagged this quarter as compared to last year. We believe this can be attributed to the fact that we didn't duplicate the aggressive promotional campaign, offering a free month's service, which occurred this time last year. However, bundling remains an effective tool for attracting and retaining customers, and we now proudly have 826,000 households connected to at least two Cox services.'']
Robbins said that the company expects to achieve operating cash flow growth of 12% to 13% for the third quarter. Additionally, he reiterated Cox's previously stated year-end 2001 financial guidance of operating cash flow growth of 12% to 13% over 2000; total revenue growth of 14% to 16% over 2000; capital expenditures of approximately $2 billion; and the addition of 1.0 to 1.1 million new-service RGUs over 2000. Cox revised its anticipated basic subscriber growth from 1.5% to 2.0% to 1% for the full-year 2001.
Historical three months ended June 30, 2001 compared with historical three months ended June 30, 2000
Total revenues for the three months ended June 30, 2001 were $1,001.8 million, a 14% increase over revenues of $879.0 million for the three months ended June 30, 2000. Total residential revenues for the second quarter of 2001 increased 14% to $879.5 million compared to the same period in 2000. Basic customers were 6,166,614, a .5% increase over June 30, 2000.
Residential video revenues increased to $757.4 million, an 8% increase over the comparable period in 2000, primarily due to digital customer growth and rate increases implemented in the fourth quarter of 2000 and the first quarter of 2001. Residential data and residential telephony revenues for the second quarter of 2001 nearly doubled to $62.3 million and $47.8 million, respectively, from $29.7 million and $24.4 million, respectively, in 2000 due to customer growth.
Commercial revenues for the second quarter of 2001 increased to $35.3 million from $22.5 million for the comparable period in 2000 due to growth in both high-speed data and telephony customers. Advertising revenues decreased slightly to $87.0 million reflecting a general economic slowdown affecting local and national advertising spending.
Programming costs were $241.6 million for the three months ended June 30, 2001, an increase of 11% over the same period in 2000 due to programming rate increases implemented in October 2000 and January 2001, digital customer growth and channel additions. Selling, general and administrative expenses for the second quarter of 2001 increased 17% to $378.0 million due primarily to increased employee headcount and other costs associated with the continued rollout of residential and commercial digital video, high-speed data and telephony services, partially offset by a revised cost component factor used to capitalize indirect costs relating to network construction activity.
Operating cash flow increased 13% to $382.1 million for the second quarter of 2001. The operating cash flow margin (operating cash flow as a percentage of revenues) for the current quarter was 38.1%, a decrease from 38.3% for the second quarter of 2000.
Depreciation and amortization increased to $355.8 million from $303.9 million in second quarter 2000 due to Cox continuing to invest significantly in its broadband network in order to deliver additional programming and services. Interest expense increased to $143.2 million primarily due to the issuance of notes and debentures in the fourth quarter of 2000 and the first quarter of 2001.
Income related to indexed debt of $119.6 million for the second quarter of 2000 represents the net change in the contingent settlement amount of the exchangeable subordinated debentures which are indexed to the market value of the underlying Sprint PCS common stock. Upon adoption of Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, on January 1, 2001 income or expense related to indexed debt is classified as a component of loss on derivative instruments, net. For the three months ended June 30, 2001, Cox recorded a $250.6 million pre-tax loss on derivative instruments due to a decrease of approximately $149.3 million in the fair value of certain derivative instruments embedded in the exchangeable subordinated debentures issued by Cox and a decrease of approximately $101.3 million in the fair value of certain derivative instruments associated with Cox's investments.
Net gain on investments of $450.8 million is primarily due to a $307.4 million pre-tax gain associated with the exercise of Cox's Excite@Home right, as further described below in ''Investing and Financing Activities'', a $100.4 million pre-tax gain as a result of the change in market value of Cox's investment in Sprint PCS common stock - Series 2 classified as trading and a $50.7 million pre-tax gain related to the sale of 3.0 million shares of Sprint PCS common stock - Series 2. Included in net gain on investments for the comparable period in 2000 are pre-tax gains related to the sale of 3.2 million shares of Sprint PCS common stock - Series 2.
Minority interest of $14.7 million primarily represents distributions on Cox's obligated capital and preferred securities of subsidiary trusts, referred to as FELINE PRIDES and RHINOS. Net income for the current quarter was $30.7 million, as compared to net income of $91.2 million for the second quarter of 2000.
Historical six months ended June 30, 2001 compared with pro forma six months ended June 30, 2000
The pro forma operating results for the six months ended June 30, 2000 give effect to the following transactions as though they had occurred on January 1, 2000:
-- the January 2000 acquisition of cable systems from Multimedia
Cablevision, Inc., a subsidiary of Gannett Co., Inc.; and
-- the March 2000 acquisition of cable subsidiaries from AT&T
Corp. serving customers in Oklahoma and Louisiana, which also
included the acquisition of Peak Cablevision, LLC and the
remaining 20% ownership interest in a partnership in which Cox
initially acquired an 80% interest through the TCA Cable TV,
Inc. merger in August 1999.
Total revenues for the six months ended June 30, 2001 were $1,949.7 million, a 13% increase over revenues of $1,725.2 million for the six months ended June 30, 2000. Operating cash flow increased 12% to $740.2 million for the first six months of 2001. Depreciation and amortization increased to $708.0 million from $586.2 million for the comparable period in 2000 due to Cox continuing to invest significantly in its broadband network in order to deliver additional programming and services. Interest expense increased to $297.0 million primarily due to the issuance of notes and debentures in the fourth quarter of 2000 and first quarter of 2001.
Expense related to indexed debt of $249.9 million for the six months ended June 30, 2000 represents the net change in the contingent settlement amount of the exchangeable subordinated debentures which are indexed to the market value of the underlying Sprint PCS common stock. Upon adoption of SFAS No. 133, income or expense related to indexed debt is classified as a component of loss on derivative instruments, net. For the six months ended June 30, 2001, Cox recorded a $257.6 million pre-tax loss on derivative instruments due to a decrease of approximately $284.8 million in the fair value of certain derivative instruments embedded in the exchangeable subordinated debentures issued by Cox, offset by an increase of approximately $27.2 million in the fair value of certain derivative instruments associated with Cox's investments.
Net gain on investments of $609.7 million is primarily due to the following:
-- $239.3 million pre-tax gain associated with a one-time
reclassification of 19.5 million shares of Cox's investment in
Sprint PCS common stock - Series 2 from available-for-sale
securities to trading securities upon adoption of SFAS No.
133;
-- $72.3 million pre-tax gain on these shares as a result of the
change in market value of Sprint PCS common stock for the six
months ended June 30, 2001;
-- $307.4 million pre-tax gain associated with the exercise of
Cox's Excite@Home right, as further described below in
"Investing and Financing Activities"; and
-- $50.7 pre-tax gain related to the sale of 3.0 million shares
of Sprint PCS common stock - Series 2;
-- partially offset by a $49.3 million decline in the fair value
of certain other investments considered to be other than
temporary.
Included in net gain on investments for the comparable period in 2000 are pre-tax gains related to the sale of 19.3 million shares of Sprint PCS common stock - Series 2 and the sale of Cox's entire equity interest in Flextech plc.
Minority interest of $31.1 million primarily represents distributions on the FELINE PRIDES and RHINOS. On January 1, 2001, Cox adopted SFAS No. 133, as amended, resulting in an after-tax cumulative effect of change in accounting principle which increased earnings by $717.1 million and reduced accumulated other comprehensive income by $194.0 million. Net income for the six months ended June 30, 2001 was $717.3 million, as compared to net income of $386.8 million for the comparable period in 2000.
INVESTING AND FINANCING ACTIVITIES
Significant investing and financing transactions for the six months ended June 30, 2001 consisted of the following:
-- a series of prepaid forward contracts with maturity dates
between 2004 and 2006 to sell up to 19.5 million shares of
Cox's Sprint PCS common stock for net proceeds of
approximately $389.4 million;
-- the issuances of convertible senior notes, which are
convertible into shares of Cox's Class A common stock or, at
Cox's option, cash and mature in February 2021, and 6.75%
senior notes, which mature in March 2011, for aggregate net
proceeds of approximately $1.0 billion;
-- the sale of 3.0 million shares of Sprint PCS common stock -
Series 2 for proceeds of approximately $75.2 million; and
-- the sale of 25.0 million shares of AT&T common stock for
proceeds of approximately $525.5 million.
In January 2001, Cox exercised its right to transfer ownership of its interest in Excite@Home to AT&T for shares of AT&T common stock. Subsequently, Cox and AT&T agreed to restructure Cox's right to provide a more favorable tax structure for AT&T. In May 2001, AT&T issued 75.0 million shares of AT&T common stock to Cox @Home, and Cox retained its ownership interest in Excite@Home common stock. AT&T also granted Cox @Home certain registration rights with respect to the AT&T shares it received in the transaction.
In March 2001, Cox exercised its right to put its interests in Outdoor Life Network and Speedvision Network to Fox/Liberty. The value of Cox's interests in both networks is to be determined by appraisers selected by the parties and is subject to finalization. Although there are no assurances, Cox expects to complete this transaction in the third quarter of 2001.
In May 2001, Cox completed the private placement of 25.0 million shares of the AT&T common stock for proceeds of approximately $525.5 million. In addition, Cox tendered 15.0 million shares of AT&T common stock for approximately 17.6 million shares of AT&T Wireless common stock. In June and July 2001, Cox sold 5.0 million shares of AT&T Wireless common stock in open-market transactions for aggregate net proceeds of approximately $83.1 million.
In June 2001, Cox entered into a costless collar arrangement to hedge market price fluctuations of 10.0 million shares of its AT&T Wireless common stock. In June and July 2001, Cox entered into costless collar arrangements to hedge market price fluctuations of 22.5 million shares of its AT&T common stock.
In July 2001, Cox and Cox Trust I, a wholly-owned Cox financing trust, filed a Form S-3 Registration Statement with the Securities and Exchange Commission under which Cox may issue various debt and equity instruments for a maximum aggregate amount up to $2.0 billion. The registration includes $1.5 billion of previously registered unsold securities.
In July 2001, Cox amended its registration statement on Form S-3 to register the resale of its convertible senior notes due 2021 and the shares of Class A common stock issuable upon conversion thereof. Also in July 2001, Cox amended its separate registration statement on Form S-3 to register shares of its Class A common stock deliverable by Cox Enterprises upon exchange of 2% exchangeable senior notes due 2021 issued by Cox Enterprises. Both registration statements were declared effective by the Securities and Exchange Commission on July 16, 2001.
All Sprint PCS share information reflects a two-for-one stock dividend paid by Sprint in February 2000. All AT&T Wireless share information reflects the redemption and exchange of AT&T Wireless Group tracking stock for AT&T Wireless common stock as part of the AT&T Wireless split off from AT&T Corp. in July 2001.
Cox Communications, a Fortune 500 company, serves approximately 6.2 million customers nationwide, making it the nation's fifth largest cable company. As a full-service provider of telecommunications products, Cox offers an array of services: Cox Cable; local and long distance telephone services under the Cox Digital Telephone brand; high-speed Internet access under the brands Cox@Home, Road Runner and Cox Express; advanced digital video programming services under the Cox Digital Cable brand; and commercial voice and data services via Cox Business Services. Cox is an investor in telecommunications companies including Sprint PCS and Excite@Home, as well as programming networks including Discovery Channel and The Learning Channel. More information about Cox Communications can be accessed on the Internet at www.cox.com.
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, 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 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, 2000. Cox assumes no responsibility to update any forward-looking statements as a result of new information, future events or otherwise.
As a reminder, the Cox Communications earnings call will be held Monday, July 23 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 for two weeks following the conclusion of the call. (See attached financial information)
Cox Communications, Inc.
Consolidated Historical and Pro Forma Statements of Operations
(Unaudited)
(Thousands of Dollars, excluding per share data)
Three Months Ended Six Months Ended
June 30 June 30
------------------------ ------------------------
Pro Forma (a)
2001 2000 Change 2001 2000 Change
---- ---- ------ ---- ---- ------
Revenues
Residential
Video $757,378 $702,013 8% $1,495,654 $1,392,267 7%
Data 62,308 29,667 110% 118,874 57,813 106%
Telephony 47,837 24,363 96% 87,986 44,292 99%
Other 12,013 12,196 (2%) 24,683 27,596 (11%)
---------- --------- ----- ---------- ---------- -----
Total
residential
revenues 879,536 768,239 14% 1,727,197 1,521,968 13%
Commercial 35,278 22,501 57% 65,872 40,984 61%
Advertising 86,986 88,232 (1%) 156,673 162,279 (3%)
---------- --------- ----- ---------- ---------- -----
Total
revenues 1,001,800 878,972 14% 1,949,742 1,725,231 13%
Costs and expenses
Programming
costs 241,646 217,624 11% 479,417 431,848 11%
Selling,
general and
administrative 378,040 324,325 17% 730,079 630,822 16%
---------- --------- ----- ---------- ---------- -----
Total costs and
expenses 619,686 541,949 14% 1,209,496 1,062,670 14%
---------- --------- ----- ---------- ---------- -----
Operating cash
flow 382,114 337,023 13% 740,246 662,561 12%
Depreciation 270,030 211,415 28% 529,641 401,788 32%
Amortization 85,732 92,465 (7%) 178,346 184,461 (3%)
---------- --------- ----- ---------- ---------- -----
Operating income 26,352 33,143 (20%) 32,259 76,312 (58%)
Interest expense (143,158) (131,453) 9% (297,011) (268,511) 11%
Income (expense)
related to
indexed debt - 119,611 (100%) - (249,887)(100%)
Loss on derivative
instruments,
net (250,566) - - (257,578) - -
Equity in net
income (losses)
of affiliated
companies (5,898) 605 - (11,717) (5,888) 99%
Gain on
investments, net 450,834 173,725 160% 609,729 1,167,659 (48%)
Dividend income 415 415 - 830 830 -
Other, net (1,945) (643) - (2,758) (450) -
---------- --------- ----- ---------- ---------- -----
Income before
income taxes,
minority interest
and cumulative effect
of change in
accounting
principle 76,034 195,403 (61%) 73,754 720,065 (90%)
Income tax expense 30,669 87,703 (65%) 42,476 297,552 (86%)
---------- --------- ----- ---------- ---------- -----
Income before
minority interest
and cumulative
effect of change
in accounting
principle 45,365 107,700 (58%) 31,278 422,513 (93%)
Minority interest,
net of tax (14,694) (16,471) (11%) (31,093) (35,673) (13%)
---------- --------- ----- ---------- ---------- -----
Income before
cumulative effect
of change in
accounting
principle 30,671 91,229 (66%) 185 386,840 (100%)
Cumulative effect
of change in
accounting
principle, net
of tax - - - 717,090 - -
---------- --------- ----- ---------- ---------- -----
Net income $30,671 $91,229 (66%) $717,275 $386,840 85%
========== ========= ===== ========== ========== =====
Historical and
pro forma basic
net income per
share $0.05 $0.15 $1.20 $0.64
Historical and
pro forma diluted
net income per
share 0.05 0.15 1.18 0.63
(a) The pro forma operating results for the six months ended June 30,
2000 give effect to both the Multimedia and AT&T transactions as
though they had occurred on January 1, 2000. The pro forma
operating results exclude the March 2000 pre-tax gain of $775.9
million recognized in connection with the AT&T transaction.
NOTE: Certain amounts in the 2000 financial statements have been
reclassified for comparison purposes.
Cox Communications, Inc.
Consolidated Balance Sheets
(Unaudited)
(Thousands of Dollars)
June 30 December 31
2001 2000
----------- -----------
Assets
Cash $75,229 $78,442
Accounts and notes receivable,
less allowance for doubtful
accounts of $28,167 and $25,636 359,218 358,348
Net plant and equipment 6,489,863 5,916,425
Investments 3,910,896 3,896,412
Intangible assets 13,780,709 13,951,246
Amounts due from Cox Enterprises, Inc. 69,377 5,808
Other assets 296,912 514,143
----------- -----------
Total assets $24,982,204 $24,720,824
----------- -----------
Liabilities and shareholders' equity
Accounts payable and accrued expenses $630,330 $714,191
Deferred income taxes 4,484,653 4,592,655
Other liabilities 876,710 372,085
Debt 7,958,393 8,543,762
----------- -----------
Total liabilities 13,950,086 14,222,693
=========== ===========
Minority interest in equity of
consolidated subsidiaries 130,572 126,447
Cox-obligated capital and preferred
securities of subsidiary trusts 1,155,657 1,155,411
Shareholders' equity
Series A preferred stock -
liquidation preference of $22.1375 per
share, $1 par value; 10,000,000 shares
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: 578,321,405 and 577,725,528;
shares outstanding: 572,823,005 and
572,227,128 578,321 577,726
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 3,886,328 3,872,726
Retained earnings 4,874,735 4,157,460
Accumulated other comprehensive income 585,960 787,816
Class A common stock in treasury,
at cost: 5,498,400 shares (211,889) (211,889)
----------- -----------
Total shareholders' equity 9,745,889 9,216,273
----------- -----------
Total liabilities and
shareholders' equity $24,982,204 $24,720,824
=========== ===========
Cox Communications, Inc.
Summary of Operating Statistics
Core Video
June 30 March 31 June 30
2000 2001 2001
--------- --------- ---------
Revenue Generating Units
Basic Customers 6,137,518 6,213,994 6,166,614
New Services 1,046,893 1,839,907 2,083,884
--------- --------- ---------
Total Revenue Generating
Units 7,184,411 8,053,901 8,250,498
Homes Passed 9,640,317 9,843,052 9,866,948
Basic Penetration 63.7% 63.1% 62.5%
Cox Digital Cable
June 30 March 31 June 30
2000 2001 2001
--------- --------- ---------
Digital Cable Ready Homes
Passed 6,220,965 8,119,305 8,590,488
Customers 559,962 960,507 1,071,322
Penetration 9.0% 11.8% 12.5%
Average Weekly Run Rate 8,671 9,135 8,524
High-Speed Internet Access
June 30 March 31 June 30
2000 2001 2001
--------- --------- ---------
High-Speed Internet Access
Ready
Homes Passed 5,646,472 7,756,393 8,384,737
Customers 320,349 587,170 668,038
Penetration 5.7% 7.6% 8.0%
Average Weekly Run Rate 4,660 8,094 6,221
Cox Digital Telephone
June 30 March 31 June 30
2000 2001 2001
--------- --------- ---------
Telephony Ready Homes
Passed 1,749,863 2,644,390 2,816,649
Customers 166,582 292,230 344,524
Penetration 9.5% 11.1% 12.2%
Average Weekly Run Rate 2,481 3,660 4,023
Lines 239,561 393,705 456,084
Lines Per Customer 1.44 1.35 1.32
Cox Business Services
June 30 March 31 June 30
2000 2001 2001
--------- --------- ---------
Voice Grade Equivalent
Circuits 854,221 1,249,232 1,375,701
Other Operating Statistics
June 30 March 31 June 30
2000 2001 2001
--------- --------- ---------
Operating Cash Flow Margins
(for the quarter ended) 38.3% 37.8% 38.1%
Capital Expenditures
(for the quarter ended) $ 536,262 $ 523,314 $ 536,744
Contact:
Cox Communications, Atlanta
Analysts and Investors
Frank Loomans, 404/843-5377
or Media Amy Cohn, 404/843-5769
Home page contact
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