ATLANTA--(BUSINESS WIRE)--April 26, 2001--Cox Communications, Inc. (NYSE: COX) today reported financial results for the three months ended March 31, 2001.
"2001 is off to a strong start," commented Jim Robbins, President and Chief Executive Officer. "We made significant gains in selling advanced communications services and achieved solid financial and operational results.
"We ended the quarter with healthy pro forma operating cash flow growth of 10%, strong pro forma revenue growth of 12% and achieved steady basic customer growth of 1.3% as compared to the first quarter of 2000."
He continued, "we also added 271,000 new-service revenue generating units (RGUs) in the first quarter, putting us on track to achieve our stated goal of adding more than 1 million new-service RGUs during 2001. These strong results were driven in part by the success of our self-installation efforts and retail sales for cable modems in a number of our markets.
"Additionally, we experienced vigorous growth in residential telephone service, adding about 4,000 customers per week by the end of March, achieving 11% penetration of telephone ready homes."
Robbins added: "Our bundling strategy is continuing to yield positive results. Company-wide, we now have 750,000 households that subscribe to at least two or three Cox products. Our bundled customers are proving to be our most loyal, as the product retention rates are higher in bundled households versus single product homes."
Based on Cox's strong RGU growth this quarter, Robbins said that the company expects to achieve operating cash flow growth of 11% to 12% for the second quarter. Additionally, he noted that Cox expects to remain on track to achieve its 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; 1.5% to 2.0% basic customer growth over 2000; capital expenditures of approximately $2 billion; and the addition of 1.0 to 1.1 million new-service RGUs over 2000.
PRO FORMA OPERATING RESULTS
The pro forma operating results discussed below 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
Pro forma three months ended March 31, 2001 compared with pro forma three months ended March 31, 2000.
Total revenues for the three months ended March 31, 2001 were $947.9 million, a 12% increase over revenues of $846.3 million for the three months ended March 31, 2000. Total residential revenues for the first quarter of 2001 increased 12% to $847.7 million compared to the same period in 2000. Basic customers were 6,213,994, a 1.3% increase over March 31, 2000.
Residential video revenues include complete basic, premium service and pay-per-view revenues. Total residential video revenues increased to $738.3 million, a 7% increase over the comparable period in 2000. Complete basic revenues for the first quarter of 2001 increased primarily due to basic and 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 first quarter of 2001 doubled to $56.6 million and $40.1 million, respectively, from $28.1 million and $19.9 million, respectively, in 2000 due to customer growth.
Commercial revenues for the first quarter of 2001 increased to $30.6 million from $18.5 million for the comparable period in 2000 due to growth in both high-speed data and telephony customers. Advertising revenues decreased 6% to $69.7 million due to a general economic softness affecting local and national advertising spending.
Programming costs were $237.8 million for the first quarter of 2001, an increase of 11% over the same period in 2000 due to basic and digital customer growth, channel additions and programming rate increases implemented in October of 2000 and January 2001. Selling, general and administrative expenses for the first quarter of 2001 increased 15% to $352.0 million due primarily to:
increased employee headcount;
other costs associated with the continued rollout of residential and commercial digital video, high-speed data and telephony services; and
integration expenses associated with the cable systems acquired during 2000;
partially offset by a revised cost component factor used to capitalize indirect costs relating to network construction activity.
Pro forma operating cash flow increased 10% to $358.1 million for the first quarter of 2001. The pro forma operating cash flow margin (pro forma operating cash flow as a percentage of revenues) for the current quarter was 37.8%, a decrease from 38.5% for the first quarter of 2000.
HISTORICAL OPERATING RESULTS
Three months ended March 31, 2001 compared with three months ended March 31, 2000.
Total revenues for the three months ended March 31, 2001 were $947.9 million, a 22% increase over revenues of $779.9 million for the three months ended March 31, 2000. Operating cash flow increased 19% to $358.1 million for the first quarter of 2001. Depreciation and amortization increased to $352.2 million from $257.8 million in first quarter 2000 due to the acquisitions of cable systems that were consummated during 2000. Interest expense increased to $153.9 million primarily due to an increase in the total debt outstanding during the first quarter 2001 as compared to the same period in 2000. Included in expense related to indexed debt for the comparable period in 2000 are the increased settlement amounts of the exchangeable subordinated debentures which are indexed to the market value of the underlying Sprint PCS common stock.
Effective January 1, 2001, Cox adopted Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, 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 gain on investments of $158.9 million is primarily due to a $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. Offsetting this gain was a pre-tax loss of $28.1 million on these shares as a result of the change in market value of Sprint PCS common stock for the three months ended March 31, 2001 and a $35.5 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 16.1 million shares of Sprint PCS common stock - Series 2, the sale of Cox's entire equity interest in Flextech plc and the exchange of Cox's 50.3 million shares of AT&T common stock for cable subsidiaries.
For the three months ended March 31, 2001, Cox recorded a $7.0 million pre-tax loss on derivative instruments due primarily to a decrease of approximately $135.4 million in the fair value of certain derivative instruments embedded in the exchangeable subordinated debentures issued by Cox and offset by an increase of approximately $128.4 million in the fair value of certain derivative instruments associated with Cox's investments in affiliated companies.
Minority interest of $16.4 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 $686.6 million as compared to net income of $1,067.5 million for the first quarter of 2000. INVESTING AND FINANCING ACTIVITIES
Significant investing and financing transactions for the three months ended March 31, 2001 consisted of 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 $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 $1.0 billion.
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. Cox and AT&T are currently in discussions to renegotiate the terms of the transaction, which may or may not result in a change to the number of shares of AT&T stock that Cox will receive, as well as the number of Excite@Home shares, if any, Cox transfers to AT&T.
In March 2001, Cox exercised its right to put its interests in Outdoor Life Network and Speedvision Network to Fox/Liberty. Both Cox and Fox/Liberty have each appointed an appraiser to determine the value of Cox's interests in both networks. Although there are no assurances, Cox expects to complete this transaction in the third quarter of 2001.
In March and April 2001, Cox entered into a series of costless collar transactions with maturity dates between 2004 and 2006 to hedge market price fluctuations of approximately 15.8 million shares of its Sprint PCS common stock in the aggregate.
In April 2001, Cox filed a 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 April 2001, Cox filed a 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.
All Sprint PCS share information reflects a two-for-one stock dividend paid by Sprint in February 2000.
Cox Communications, a Fortune 500 company, serves approximately 6.2 million customers nationwide, making it the nation's fifth largest cable television company. A full-service provider of telecommunications products, Cox offers an array of services, including 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, The Learning Channel, Outdoor Life and Speedvision. 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 the new information, future events or otherwise.
As a reminder, the Cox Communications earnings call will be held Thursday, April 26 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.
|CONTACT:||Cox Communications, Inc., Atlanta|
|Analysts and Investors|
|Frank Loomans, (404) 843-5377|
|Amy Cohn, (404) 843-5769|