ATLANTA--(BUSINESS WIRE)--March 28, 2006--Cox Communications, Inc. today reported financial results for the three months and year ended December 31, 2005.
"Cox employees delivered another year of outstanding results, including significant growth in each of our core product categories," said Patrick Esser, president. "I am particularly proud that Cox continued to demonstrate the power of the bundle, by growing total bundled customers nearly 20% and increasing 'triple play' subscribers (video, voice and internet) more than 40%."Spurred by the success of advanced video services, we succeeded in deepening our video relationships, increasing digital penetration by nearly five percentage points.
"Cox High Speed Internet (CHSI) continues to set the bar in our markets, with 7 out of 10 broadband customers using CHSI rather than DSL. In 2005, CHSI again received J.D. Power and Associates' Highest Honor in Customer Satisfaction among High-Speed Internet Service Providers and PC Magazine's Readers' Choice Award.
"Cox remains the nation's largest cable telephone company, with nearly 1.7 million Cox Digital Telephone customers. The performance and value of Cox Digital Telephone is evident in the popularity of the three-product bundle, and is key to our success with commercial services. We concluded 2005 with Cox Business Services serving more than 160,000 customers and year-over-year revenue growth of 20%."
DISCONTINUED OPERATIONS and ASSETS HELD FOR SALE
In October 2005, Cox and Cebridge Acquisition Co. LLC (Cebridge) entered into a definitive asset purchase agreement, pursuant to which Cox has agreed to sell cable television systems with approximately 940,000 basic cable subscribers for approximately $2.55 billion in cash. Cox expects to consummate this transaction during the second quarter of 2006.
The cable television systems being sold include certain of Cox's Middle America systems, primarily comprised of operations in Texas, Louisiana, Arkansas, Oklahoma, Mississippi and Missouri (Sale MAC), all of Cox's West Texas systems, all of Cox's North Carolina systems, all of Cox's Humboldt and Bakersfield, California systems and all of Cox's Greater Oklahoma systems (collectively referred to as the "Sale Systems"). Sale Systems other than Sale MAC are referred to as the "Discontinued Operations Systems."
For accounting purposes, Cox has determined that each Sale System represents a disposal group. Consistent with the provisions of Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, Cox has classified the Sale Systems' assets and liabilities that are subject to transfer under the definitive agreement with Cebridge as "held for sale" at December 31, 2005 and 2004. Additionally, Cox has determined that the Discontinued Operations Systems comprise operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of Cox. Accordingly, the results of operations for Sale MAC are included within continuing operations within the consolidated financial information presented for both the three-month and twelve-month periods ended December 31, 2005 and 2004, and the results of operations for all of the Discontinued Operations Systems have been presented as discontinued operations, net of tax, for the three-month and twelve-month periods ended December 31, 2005 and 2004. In addition, the results of operations for the Discontinued Operations Systems for 2004 presented herein have been reclassified to conform to the current year presentation. Revenues attributable to Sale MAC for the fourth quarters of 2005 and 2004 were approximately $94.2 million and $90.6 million, respectively, and for the years ended December 31, 2005 and 2004 were approximately $366.9 million and $355.3 million, respectively. As of October 31, 2005, Cox determined that the estimated fair value less costs to sell attributable to the Sale Systems was in excess of the carrying value of their related net assets held for sale.
The Consolidated Statements of Cash Flows, the Reconciliation of Free Cash Flow to Cash Provided by Operating Activities, Customer Data in the Summary of Operating Statistics and the Free Cash Flow Calculation include results of the Sale Systems and therefore, reflect the results of the whole company for the periods presented.
FOURTH QUARTER HIGHLIGHTS
For the fourth quarter of 2005, Cox:
- Ended the year with more than 13.8 million RGUs, reflecting year-over-year growth of approximately 10%.
- Ended the year with more than 3.3 million bundled customers, reflecting approximately 20% year-over-year growth in the number of customers subscribing to more than one core service from Cox.
- Ended the year with more than 3.1 million Cox High Speed Internet subscribers and increased company-wide penetration within serviceable homes to nearly 30%.
- Ended the year with nearly 1.7 million Cox Digital Telephone subscribers.
- Generated $763.8 million in net cash provided by operating activities and $312.2 million in free cash flow (net cash provided by operating activities less capital expenditures).
- Generated 9% and 10% revenue growth during the quarter and twelve months ended December 31, 2005, respectively, compared with the same periods in 2004.
- Generated operating income from continuing operations of $248.7 million, as compared to a $2.0 billion operating loss in the comparable period of 2004, and 11% operating cash flow (operating income before depreciation, amortization, impairment charges and loss on sale of cable systems) growth, during the quarter ended December 31, 2005 and operating income from continuing operations of $736.5 million and 14% operating cash flow growth during the year ended December 31, 2005, compared with the same periods in 2004.
OPERATING RESULTS
Three months ended December 31, 2005 compared with the three months ended December 31, 2004
Total revenues for the fourth quarter of 2005 were $1.7 billion, an increase of 9% over the fourth quarter of 2004. 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.
Cost of services, which includes programming costs, other direct costs and field service costs, was $678.8 million for the fourth quarter of 2005, an increase of 8% over the same period in 2004. Programming costs increased 7% to $328.6 million, primarily reflecting rate increases. Other direct costs and field service costs in the aggregate increased 9% to $350.2 million, primarily resulting from growth in total RGUs over the last twelve months, additional labor costs due to maintenance and increased fuel costs during the period.
Selling, general and administrative expenses were $399.9 million for the fourth quarter of 2005, a 7% increase over the comparable period in 2004. General and administrative expenses increased 8% to $311.9 million, primarily due to increased compensation expense from certain long-term compensation plans adopted during 2005. Marketing costs increased 5% primarily due to the launch of new services.
Operating income increased to $248.7 million for the fourth quarter of 2005 from an operating loss in 2004, and operating cash flow increased 11% to $654.2 million compared to the same period in 2004. Operating income (loss) margin (operating income as a percentage of revenues) for the fourth quarter of 2005 was 14% compared to (130%) for the fourth quarter of 2004. Operating cash flow margin (operating cash flow as a percentage of revenues) was 38% for the fourth quarter of 2005 and 37% for the fourth quarter 2004.
Depreciation and amortization decreased to $405.5 million from $417.5 million for the fourth quarter of 2005. The decrease in depreciation and amortization expense is due to the discontinuation of depreciation and amortization of the property, plant and equipment and finite-lived intangible assets of Sale MAC based on their designation as assets held for sale effective as of the date of the definitive asset purchase agreement with Cebridge.
In September 2004, the SEC announced, through EITF Topic No. D-108, Use of the Residual Method to Value Acquired Assets Other Than Goodwill, that a direct value method should be used to determine the fair value of all intangible assets required to be recognized under SFAS No. 141, and that registrants should apply a direct value method to such assets acquired in business combinations completed after September 29, 2004. Further, registrants who had applied the residual method to the valuation of indefinite-lived intangible assets for purposes of impairment testing were required to perform a transitional impairment test using a direct value method on all indefinite-lived intangible assets that had been previously valued using the residual method under SFAS No. 142, Goodwill and Other Intangible Assets, no later than the beginning of their first fiscal year beginning after December 15, 2004. Impairments of intangible assets recognized upon application of a direct value method by entities that had previously applied the residual method, including the related deferred tax effects, were required to be reported as a cumulative effect of a change in accounting principle.
Consistent with EITF Topic No. D-108, Cox began applying a direct value method to determine the fair value of its indefinite-lived intangible assets comprised of cable franchise rights, acquired prior to September 29, 2004. During the fourth quarter of 2004, Cox performed a transitional impairment test, which resulted in a charge to franchise value of approximately $2.0 billion ($1.2 billion, net of tax), which is reported within Cumulative effect of change in accounting principle, net of tax, in the accompanying consolidated statements of operations.
Also during the fourth quarter 2004, Cox revised its marketplace assumption surrounding its estimated cost of capital as a result of the going-private transaction. Accordingly, in accordance with SFAS No. 142 and SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, respectively, Cox performed an impairment test of its long-lived assets and indefinite-lived intangible assets. The interim impairment test was necessary due to the revised estimated cost of capital as well as a revision in Cox's long-range operating forecast. As a result of the impairment test, Cox recognized a pre-tax impairment charge of approximately $2.4 billion related to its franchise value, as calculated using a direct value method. Approximately $2.2 billion of this impairment charge is reflected as Impairment of intangible assets within the accompanying consolidated statements of operations and approximately $179.9 million is reflected within Discontinued operations, net of tax, within the accompanying consolidated statements of operations.
Interest expense increased 33% to $185.1 million primarily due to increased outstanding indebtedness inucrred to consummate the December 2004 going-private transaction.
Discontinued operations, net of tax, was $13.3 million compared to $(102.8) million for the comparable period of 2004. The net loss in 2004 was primarily due to the pretax, noncash impairment charge of $179.9 million related to impairments of Cox's indefinite-lived cable franchise value intangible asset, as determined in accordance with SFAS No. 142.
Twelve months ended December 31, 2005 compared with the twelve months ended December 31, 2004
Total revenues for the year ended December 31, 2005 were $6.7 billion, an increase of 10% over the year ended December 31, 2004. 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 also contributed to overall revenue growth.
Cost of services was $2.7 billion for the year ended December 31, 2005, an increase of 8% over the same period in 2004. Programming costs increased 9% to $1.3 billion, primarily reflecting rate increases. Other direct costs and field service costs in the aggregate increased 7% to $1.4 billion, primarily resulting from growth in total RGUs over the last twelve months, additional labor costs due to maintenance, and increased fuel costs during the third and fourth quarters of 2005.
Selling, general and administrative expenses were $1.5 billion for the year ended December 31, 2005, an increase of 8% over the comparable period in 2004. General and administrative expenses increased 7% to $1.1 billion, primarily due to increased compensation expense from certain long-term compensation plans adopted during 2005. Marketing costs increased 8% to $348.0 million, primarily related to the launch of new services, coupled with a 9% increase in costs associated with Cox Media, Cox's advertising sales business.
Operating income increased to $736.5 million for the year ended December, 2005, and operating cash flow increased 14% to $2.6 billion, compared to the same period in 2004. Operating income margin for the year ended December 31, 2005 was 11%, compared to (25%) for the same period in 2004. Operating cash flow margin for the year ended December 31, 2005 was 38%, compared to 37% for the same period in 2004.
Depreciation and amortization increased to $1.7 billion from $1.5 billion for the year ended December 31, 2005. This was primarily due to the amortization of finite-lived intangible assets that resulted from the push-down basis accounting applied pursuant to the December 2004 going-private transaction.
In August 2005, Cox completed its annual impairment test of its indefinite-lived intangible assets and goodwill in accordance with SFAS No. 142. The test resulted in a pre-tax non-cash impairment charge of franchise value for certain cable systems of approximately $104.2 million, which is classified within Discontinued operations, net of tax, in the accompanying consolidated statements of operations.
As a result of entering into the definitive agreement with Cebridge to sell the Sale Systems, as discussed under Discontinued Operations and Assets Held for Sale above, Cox performed an interim impairment test of the Systems' long-lived assets, indefinite-lived intangible assets and goodwill based on the anticipated selling price of approximately $2.55 billion, as prescribed by SFAS No. 142 and SFAS No. 144. This interim impairment test resulted in a pre-tax impairment charge of franchise value for certain cable systems of approximately $509.9 million. Approximately $181.9 million of this impairment charge is reflected as Impairment of intangible assets within the accompanying consolidated statements of operations and approximately $328.0 million is reflected within Discontinued operations, net of tax within the accompanying consolidated statements of operations.
During the year ended December 31, 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.
Interest expense increased 63% to $697.4 million primarily due to increased outstanding indebtedness to consummate the December 2004 going-private transaction.
Net loss on investments of $9.5 million for the year ended December 31, 2005 was due to pre-tax declines considered to be other than temporary in the fair value of certain investments.
Net gain on investments for the comparable period in 2004 of $28.4 million was primarily due to:
- $19.5 million pre-tax gain on the sale of 0.1 million shares of Sprint PCS preferred stock;
- $7.3 million pre-tax gain on the sale of certain other non-strategic investments; and
- $2.3 million pre-tax gain on the sale of all remaining shares of Sprint stock then held by Cox.
During the year ended December 31, 2005, Cox recorded a $13.0 million pre-tax loss on extinguishment of debt due to the redemption of $62.3 million original principal amount at maturity of its exchangeable subordinated discount debentures due 2020 (Discount Debentures) for aggregate cash consideration of $32.5 million, which represented all remaining outstanding Discount Debentures. During the year ended December 31, 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. As a result of these redemptions, Cox no longer has any outstanding exchangeable subordinated debentures.
Income tax expense from continuing operations was $13.5 million for the year ended December 31, 2005 compared to an income tax benefit of $866.3 million for the comparable period in 2004. This change was primarily due to the change in pre-tax income, varying effective state tax rates across Cox's operations between 2004 and 2005, and the effect of on-going income tax audits. The effective tax rate for 2005 was 67.3% compared to 44.5% for 2004. The tax expense in 2005 reflects an effective income tax rate significantly higher than the federal statutory rate due in part to the impact of adjustments and settlements and the relatively nominal pre-tax income.
Discontinued operations, net of tax, was a loss of $230.6 million and $80.0 million for the year ended December 31, 2005 and 2004, respectively. The increased net loss was primarily due to the 2005 pre-tax, noncash impairment charges of $432.2 million related to impairments of Cox's indefinite-lived cable franchise value intangible asset, as determined in accordance with SFAS No. 142.
LIQUIDITY AND CAPITAL RESOURCES
Cox has included Consolidated Statements of Cash Flows for the twelve months ended December 31, 2005 and 2004 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 twelve months ended December 31, 2005 consisted primarily of the following:
- the generation of net cash provided by operating activities of approximately $2.0 billion;
- net credit facility borrowings of $350.0 million; and
- net commercial paper borrowings of $119.3 million.
Significant uses of cash for the twelve months ended December 31, 2005 consisted of the following:
- capital expenditures of $1.5 billion;
- contributions of $45.0 million to TV Works, LLC (formerly known as Double C Technologies, LLC), an entity in which Cox holds a 33% ownership interest;
- the repayment of Cox's $375.0 million aggregate principal amount 6.9% notes due June 15, 2005 upon their maturity;
- the purchase of $62.3 million original principal amount at maturity of Discount Debentures, which represented all remaining outstanding Discount Debentures, for aggregate cash consideration of $32.5 million; and
- payments to acquire Cox's former public stock that was converted into the right to receive cash as part of the December 2004 going-private transaction of approximately $474.5 million, with such payments being made as holders of the former public stock surrendered their certificates and otherwise claimed their going-private merger consideration.
USE OF OPERATING CASH FLOW AND FREE CASH FLOW
Operating cash flow and free cash flow are not measures of performance calculated in accordance with accounting principles generally accepted in the United States (GAAP). Operating cash flow is defined as operating income (loss) before depreciation, amortization, impairment charges and loss on sale of cable systems. Free cash flow is defined as cash flows provided by operating activities less capital expenditures.
Cox's management believes that presentation of these measures provides useful information to investors regarding Cox's financial 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, and it is used as a factor in determining executive compensation.
Operating cash flow and free cash flow should not be considered as alternatives to net income as indicators of Cox's aggregate performance, or as alternatives to net cash provided by operating activities as measures of liquidity, and may not be comparable to similarly titled measures used by other companies. Reconciliations of these non-GAAP measures to the most comparable GAAP measures on an 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.
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 our ability to collect on insurance policies covering our New Orleans systems and the ability to rebuild our cable plant and subscriber base in the impacted areas, competition within the broadband communications industry, our ability to achieve continued 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 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, 2005. Cox no longer has any securities registered under the Securities Exchange Act of 1934 and has suspended filing periodic reports with the Securities and Exchange Commission. Cox assumes no responsibility to update any forward-looking statements as a result of new information, future events or otherwise.
Acerca de Cox Communications
Cox Communications, a Fortune 500 company, is a multi-service broadband communications and entertainment company with more than 6.7 million total customers. Cox is the nation's third-largest cable television provider and offers an array of advanced digital video, high-speed Internet and telephony services over its own nationwide IP network. Cox Communications is a full-service, facilities-based provider of communications solutions for commercial customers, providing high-speed Internet, voice and long-distance services, as well as data and video transport services for small to large-sized businesses via Cox Business Services. Cox Media offers national and local cable advertising in traditional spot and new media formats, along with promotional opportunities and production services. More information about the services of Cox Communications, a wholly owned subsidiary of Cox Enterprises, is available at www.cox.com/espanol, www.coxbusiness.com y www.coxmedia.com.
Cox Communications, Inc.
Consolidated Statements of Operations
(Unaudited)
(Thousands of Dollars)
Three Months Ended
December 31
--------------------------------
2005 2004 Change
------------ ------------ ------
Revenues $ 1,732,927 1,589,507 9%
Costs and expenses
Cost of services (excluding
depreciation and amortization) 678,788 629,361 8%
Selling, general and
administrative expenses
(excluding depreciation and
amortization) 399,934 372,684 7%
--------------------------------
Total costs and expenses 1,078,722 1,002,045 8%
--------------------------------
Operating cash flow 654,205 587,462 11%
Depreciation and amortization 405,536 417,503 (3%)
Impairment of intangible assets - 2,235,973 (100%)
--------------------------------
Operating income (loss) 248,669 (2,066,014) 112%
Interest expense (185,101) (139,674) 33%
Loss on derivative instruments, net - (30) (100%)
(Loss) gain on investments, net (420) (567) (26%)
Other, net 518 (5,715) (109%)
--------------------------------
Income (loss) from continuing
operations before income taxes,
minority interest and equity in net
losses of affiliated companies 63,666 (2,212,000) 103%
Income tax (expense) benefit (300) 989,494 (100%)
Equity in net losses of affiliated
companies, net of tax of $1,252 and
$1,632, respectively (2,431) (2,184) 11%
--------------------------------
Income (loss) from continuing
operations 60,935 (1,224,690) 105%
Income (loss) from discontinued
operations 21,626 (167,224) 113%
Income tax (expense) benefit (8,336) 64,454 (113%)
--------------------------------
Discontinued operations, net of
tax 13,290 (102,770) 113%
--------------------------------
Income (loss) before cumulative
effect of change in accounting
principle 74,225 (1,327,460) 106%
Cumulative effect of change in
accounting principle, net of tax of
$813,130 - (1,210,190) 100%
--------------------------------
Net (loss) income $ 74,225 $ (2,537,650) 103%
================================
Twelve Months Ended
December 31
--------------------------------
2005 2004 Change
------------ ------------ ------
Revenues $ 6,722,293 $ 6,106,105 10%
Costs and expenses
Cost of services (excluding
depreciation and amortization) 2,672,873 2,482,149 8%
Selling, general and
administrative expenses
(excluding depreciation and
amortization) 1,467,982 1,365,256 8%
---------------------------------
Total costs and expenses 4,140,855 3,847,405 8%
---------------------------------
Operating cash flow 2,581,438 2,258,700 14%
Depreciation and amortization 1,663,037 1,548,160 7%
Impairment of intangible assets 181,896 2,235,973 (92%)
Loss on sale of cable systems - 5,021 (100%)
---------------------------------
Operating income (loss) 736,505 (1,530,454) 148%
Interest expense (697,436) (428,556) 63%
Loss on derivative instruments, net (74) (127) (42%)
(Loss) gain on investments, net (9,547) 28,364 (134%)
Loss on extinguishment of debt (13,019) (7,006) 86%
Other, net 3,631 (8,903) (141%)
---------------------------------
Income (loss) from continuing
operations before income taxes,
minority interest and equity in net
losses of affiliated companies 20,060 (1,946,682) 101%
Income tax (expense) benefit (13,492) 866,316 (102%)
Minority interest, net of tax - (1,203) (100%)
Equity in net losses of affiliated
companies, net of tax of
$4,349 and $2,073, respectively (6,689) (3,509) 91%
---------------------------------
Income (loss) from continuing
operations (121) (1,085,078) 100%
Income (loss) from discontinued
operations (375,248) (130,231) (188%)
Income tax (expense) benefit 144,693 50,194 188%
---------------------------------
Discontinued operations, net of
tax (230,555) (80,037) (188%)
---------------------------------
Income (loss) before cumulative
effect of change in accounting
principle (230,676) (1,165,115) 80%
Cumulative effect of change in
accounting principle, net of tax of
$813,130 - (1,210,190) 100%
---------------------------------
Net (loss) income $ (230,676)$ (2,375,305) 90%
=================================
Cox Communications, Inc.
Consolidated Balance Sheets
(Unaudited)
(Thousands of Dollars)
December 31 December 31
2005 2004
----------- -----------
Assets
Current assets
Cash $ 81,132 $ 76,339
Accounts and notes receivable, less allowance
for doubtful accounts of $23,675 and $24,461 417,407 363,310
Amounts due from CEI 18,784 -
Other current assets 192,835 127,010
Assets held for sale 2,474,872 2,965,787
----------- -----------
Total current assets 3,185,030 3,532,446
----------- -----------
Net plant and equipment 6,739,624 7,043,401
Investments 1,273,054 1,171,647
Intangible assets 17,044,193 17,315,361
Goodwill 75,621 96,657
Other noncurrent assets 60,213 94,229
----------- -----------
Total assets $28,377,735 $29,253,741
=========== ===========
Liabilities and shareholders' equity
Current liabilities
Accounts payable and accrued expenses $ 906,341 $ 759,374
Other current liabilities 348,291 319,275
Cash obligation to untendered shareholders 9,152 483,603
Current portion of long-term debt 45,453 51,581
Amounts due to CEI - 5,573
Liabilities related to assets held for sale 107,573 95,017
----------- -----------
Total current liabilities 1,416,810 1,714,423
----------- -----------
Deferred income taxes 7,900,343 8,326,574
Other noncurrent liabilities 187,610 148,050
Long-term debt, less current portion 12,971,821 12,938,466
----------- -----------
Total liabilities 22,476,584 23,127,513
----------- -----------
Shareholders' equity
Class A common stock, $0.01 par value;
671,000,000 shares authorized; shares
issued and
outstanding: 556,170,238 5,562 5,562
Class C common stock, $0.01 par value;
62,000,000 shares authorized; shares
issued and outstanding: 27,597,792 276 276
Additional paid-in capital 4,807,720 4,802,117
Retained earnings 1,087,542 1,318,218
Accumulated other comprehensive income 51 55
----------- -----------
Total shareholders' equity 5,901,151 6,126,228
----------- -----------
Total liabilities and shareholders'
equity $28,377,735 $29,253,741
=========== ===========
Cox Communications, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(Thousands of Dollars)
For The Year
Ended December 31,
-----------------------
2005 2004
----------- -----------
Cash flows from operating activities
Net loss $ (230,676)$(2,375,305)
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Depreciation and amortization 1,741,380 1,627,064
Impairment of intangible assets 614,111 2,415,889
Loss on sale of cable system - 5,021
Deferred income taxes (241,226) (827,650)
Loss on derivative instruments, net 74 127
Loss on extinguishment of debt 13,019 7,006
Loss (gain) on investments, net 9,547 (28,364)
Minority interest, net of tax - 1,203
Equity in net losses of affiliated
companies, net of tax 6,689 3,509
Other, net (3,363) (994)
Cumulative effect of change in accounting
principle - 1,210,190
Increase in accounts and notes receivable (56,761) (14,661)
(Increase) decrease in other assets (47,627) 532
Increase in accounts payable and accrued
expenses 201,727 54,247
Increase (decrease) in taxes payable 39,419 (68,729)
Decrease in other liabilities (47,497) (30,569)
----------- -----------
Net cash provided by operating
activities 1,998,816 1,978,516
----------- -----------
Cash flows from investing activities
Capital expenditures (1,478,617) (1,389,931)
Investments in affiliated companies (45,932) (17,805)
Proceeds from the sale and exchange of
investments - 70,230
Increase in amounts due to CEI (18,784) -
Proceeds from the sale of cable systems - 53,076
Acquisition of minority interest - (153,016)
Other, net 47,548 43,813
----------- -----------
Net cash used in investing activities (1,495,785) (1,393,633)
----------- -----------
Cash flows from financing activities
Revolving credit facilities borrowings, net 350,000 1,650,000
Commercial paper borrowings, net 119,348 (209,228)
Proceeds from issuance of debt, net of debt
issuance costs - 7,968,724
Repayment of debt (491,593) (3,566,148)
Payments to acquire Cox's former public stock (474,451) (6,422,908)
Proceeds from exercise of stock options - 5,219
(Decrease) increase in amounts due to CEI (5,573) 1,593
Other, net 4,031 (19,637)
----------- -----------
Net cash used in financing activities (498,238) (592,385)
----------- -----------
Net increase (decrease) in cash 4,793 (7,502)
Cash at beginning of period 76,339 83,841
----------- -----------
Cash at end of period $ 81,132 $ 76,339
=========== ===========
Cox Communications, Inc.
Reconciliation of Operating Cash Flow to Operating
Income
(Unaudited)
(Thousands of Dollars)
Three Months Ended Twelve Months Ended
December 31 December 31
--------------------- -----------------------
2005 2004 2005 2004
--------- ----------- ----------- -----------
Operating cash flow $ 654,205 $ 587,462 $ 2,581,438 $ 2,258,700
Depreciation and
amortization (405,536) (417,503) (1,663,037) (1,548,160)
Impairment of intangible
assets -- (2,235,973) (181,896) (2,235,973)
Loss on sale of cable
system -- -- -- (5,021)
--------- ----------- ----------- -----------
Operating income (loss) $ 248,669 $(2,066,014)$ 736,505 $(1,530,454)
========= =========== =========== ===========
Cox Communications, Inc.
Reconciliation of Free Cash Flow to Cash
Provided by Operating Activities
(Unaudited)
(Thousands of Dollars)
Three Months Ended Twelve Months Ended
December 31 December 31
--------------------- -----------------------
2005 2004 2005 2004
--------- ----------- ----------- -----------
Free cash flow $ 312,189 173,596 $ 520,199 $ 588,585
Capital expenditures 451,616 381,186 1,478,617 1,389,931
--------- ----------- ----------- -----------
Net cash provided by
operating activities $ 763,805 554,782 $ 1,998,816 $ 1,978,516
========= =========== =========== ===========
Cox Communications, Inc.
Summary of Operating Statistics
----------------------------------------------------------------------
Customer Data
---------------------------
December December
2005 (a) (b) 2004
------------ -----------
Customer Relationships
Basic Video Customers (c) 6,300,432 6,287,395
Non-Video Customers (d) 446,573 348,825
------------ -----------
Total Customer Relationships (e) 6,747,005 6,636,220
Revenue Generating Units
Basic Video Customers (c) 6,300,432 6,287,395
Advanced Services 7,531,110 6,286,827
------------ -----------
Total Revenue Generating Units 13,831,542 12,574,222
Video Homes Passed 10,788,522 10,567,166
Basic Video Penetration 58.4% 59.5%
------------------------------------------------ -----------
Cox Digital Cable
---------------------------
December December
2005 (a) (b) 2004
------------ -----------
Digital Cable Ready Homes Passed 10,715,294 10,494,634
Customers 2,704,161 2,410,216
Penetration of Customers to Basic
Video Customers 42.9% 38.3%
------------------------------------------------ -----------
High-Speed Internet Access
---------------------------
December December
2005 (a) (b) 2004
------------ -----------
High-Speed Internet Access Ready
Homes Passed 10,697,174 10,466,947
Customers 3,143,313 2,571,246
Penetration of Customers to
High-Speed Internet Access
Ready Homes Passed 29.4% 24.6%
------------------------------------------------ -----------
Cox Digital Telephone
---------------------------
December December
2005 (a) (b) 2004
------------ -----------
Telephony Ready Homes Passed 7,875,402 6,537,968
Customers 1,683,636 1,305,365
Penetration of Customers to
Telephony Ready Homes Passed 21.4% 20.0%
------------------------------------------------ -----------
Bundled Customers
---------------------------
December December
2005 (a) (b) 2004
------------ -----------
Customers subscribing to two or more
services 3,325,306 2,777,588
Penetration of Bundled Customers to
Basic Video Customers 52.8% 44.2%
----------------------------------------------------------------------
Cox Communications, Inc.
Summary of Operating
Statistics - Continued
----------------------------------------------------------------------
Comparative Operating
Statistics
---------------------------
Three Months Ended Twelve Months Ended
-------------------------------------------
December December December December
2005 2004 2005 2004
-------------------------------------------
Operating Cash Flow Margin 37.8% 37.0% 38.4% 37.0%
Capital Expenditures
(thousands of dollars) $451,616 $381,186 $1,478,617 $1,389,931
Operating Cash Flow per
Basic Video Customer (f) 103.83 93.43 409.72 359.24
Capital Expenditures per
Basic Video Customer (g) 71.68 60.63 234.69 221.07
----------------------------------------------------------------------
Free Cash Flow Calculation (h)
---------------------------
Three Months Ended Twelve Months Ended
-------------------------------------------
December December December December
2005 2004 2005 2004
-------------------------------------------
(Thousands of Dollars)
Operating cash flow (h) $690,384 $619,858 $2,717,487 $2,387,811
Less capital
expenditures (451,616) (381,186)(1,478,617)(1,389,931)
Plus cash increase (decrease)
in working capital (i) 180,592 2,183 14,614 (49,868)
-------------------------------------------
Operating free cash flow 419,360 240,855 1,253,484 948,012
Less cash paid for
interest (206,431) (120,075) (661,023) (379,090)
Less cash paid for taxes 99,261 52,816 (72,262) 19,663
-------------------------------------------
Free cash flow (h) $312,190 $173,596 $520,199 $588,585
===========================================
----------------------------------------------------------------------
(a) Operating statistics for 2005 and 2004 include the Sales
Systems, which at December 31, 2005 had approximately 963,000 total
customer relationships, 1,501,000 total Revenue Generating Units,
1,612,000 video homes passed, 1,592,000 digital cable ready homes
passed, 1,564,000 high-speed Internet access ready homes passed,
364,000 telephone ready homes passed and 274,000 customers subscribing
to two or more services.
(b) Cox is continuing to assess the impact of Hurricane Katrina on
its cable systems in New Orleans, and although all of Cox's New
Orleans network where commerical power has been restored is serving
customers, the precise and long-term impact of Hurricane Katrina on
the population of New Orleans and, therefore, Cox's cable systems in
New Orleans, remains uncertain.
(c) The number of customers who receive primary analog or digital
video service. Additional outlets are not counted.
(d) The number of customers who receive high-speed Internet access
or telephony service, but do not subscribe to video service.
(e) 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.
(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.
Contact:
Cox Communications, Atlanta Susan Coker, 678-645-0810 susan.coker@cox.com or David Grabert, 404-269-7054 david.grabert@cox.com
Source: Cox Communications
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