Cox Communications Announces Second Quarter Financial Results for 2001
Business Wire
Atlanta, GA
NYSE:COX

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