ATLANTA, Feb 12, 2003 (BUSINESS WIRE) -- Cox Communications, Inc. (NYSE: COX) today reported financial results for the three months ended December 31, 2002.

"Cox Communications achieved strong growth in the fourth quarter of 2002, contributing to another year of solid financial and operating performance," said Jim Robbins, CEO and President of Cox Communications.

"We grew our total customer base more than 2% in 2002, with solid growth in basic subscribers and record growth in high-speed Internet and telephone subscriptions. With total RGUs now equal to total homes passed, we continue to prove that the digital bundle is the industry's growth engine. Our 2002 growth in bundled customers to 1.7 million, an increase of 53% over the previous year, validates our strategy of a bundled approach to selling and serving our customers."

"With this momentum, Cox Communications is well poised to achieve continued growth and realize our goal of being free cash flow positive in 2003."

FOURTH QUARTER HIGHLIGHTS

During the fourth quarter of 2002, Cox:

• Ended the quarter with 6.3 million basic customers, up 1% for the full year 2002.
• Ended the quarter with 10.2 million total RGUs, up 14% for the full year 2002, driven by a 44% growth in new-service RGUs.
• Added approximately 135,650 high-speed Internet customers, ending 2002 with 1.4 million customers, representing year-over-year growth of 59%.
• Added approximately 67,190 Cox Digital Telephone subscribers, ending 2002 with 718,420 customers, representing year-over-year growth of 58%.
• Achieved Cox Digital Cable net additions of approximately 84,410 customers, ending the year with 1.8 million digital cable customers. Cox Digital Cable is now available in 97% of the homes in Cox's service areas with penetration of our basic customer base exceeding 28%.
• Generated $85.6 million in free cash flow.
• Reduced capital expenditures to $500.8 million for the quarter, down 17% from the fourth quarter of 2001.

2003 OUTLOOK

For 2003, Cox expects revenue to increase by 14% to 15%, operating cash flow (a non-GAAP measure calculated as operating income before depreciation, amortization and loss on sale of cable systems) to increase by 14% to 15% (excluding the impact of the $9.8 million one-time charge taken in the first quarter of 2002 related to the continuation of Excite@Home), and capital expenditures to be approximately $1.6 billion. Basic video customers are expected to increase approximately 1.0% over 2002 and new-service RGU net additions are expected to be between 1.0 to 1.1 million. In addition, Cox expects to be free cash flow positive for the full year 2003.

PRO FORMA OPERATING RESULTS

Cox provides pro forma information as an alternative for understanding its operating results. The pro forma operating results are not necessarily indicative of operating results that would have occurred if the circumstances summarized below had not occurred, and may be different from pro forma measures used by other companies. In addition, the pro forma operating results are not necessarily indicative of the results of our future operations.

The pro forma operating results for the three and twelve months ended December 31, 2001 exclude a one-time non-recurring net charge of $148.0 million related to the continuation of Excite@Home high-speed Internet services. The results also reflect reclassifications of costs associated with Excite@Home high-speed Internet service (which had previously been netted against revenue) to cost of services and selling, general and administrative expenses, which have been estimated in order to conform to the manner in which the costs associated with Cox High Speed Internet service have been presented for the three and twelve months ended December 31, 2002. Please refer to the attached Reconciliation of Pro Forma Operating Results schedule for additional details.

The pro forma operating results for the twelve months ended December 31, 2002 exclude a one-time non-recurring charge of $9.8 million related to the continuation of Excite@Home high-speed Internet services.

Pro forma three months ended December 31, 2002 compared with pro forma three months ended December 31, 2001

Total pro forma revenues for the fourth quarter of 2002 increased 16% over the fourth quarter of 2001, primarily due to increased customers in new services (including digital cable, high-speed Internet access and telephony customers), higher basic cable rates and a $5 price increase on high-speed Internet access adopted in certain markets in the fourth quarter of 2002. Also contributing to the increase were an increase in commercial broadband customers and a continuing rebound in local and national advertising sales.

Pro forma cost of services, which includes programming costs, other direct costs and field service costs, was $558.7 million for the fourth quarter of 2002, an increase of 16% over the same period in 2001. This was primarily due to an 11% increase in programming costs reflecting rate increases, channel additions and customer growth. The remaining increase reflects increased labor costs due to the transition from upgrade construction and new product launches to maintenance and related customer costs directly associated with the growth of new subscribers.

Pro forma selling, general and administrative expenses was $290.4 million for the fourth quarter of 2002, an increase of 18% over the comparable period in 2001. This was due to increased salaries and benefits resulting from an increase in headcount and compensation, and increased property taxes resulting from capital expenditures.

Pro forma operating cash flow (operating income before depreciation, amortization and loss on sale of cable systems) increased 14% to $491.9 million for the fourth quarter of 2002. The pro forma operating cash flow margin (pro forma operating cash flow as a percentage of revenues) for the fourth quarter of 2002 was 36.7%.

Pro forma twelve months ended December 31, 2002 compared with pro forma twelve months ended December 31, 2001

Total pro forma revenues for the twelve months ended December 31, 2002 increased 16% over the same period in 2001, primarily due to increased customers in new services, including digital cable, high-speed Internet access and telephony customers, and higher basic cable rates. Also contributing to the increase was an increase in commercial broadband customers and a continuing rebound in local and national advertising sales.

Pro forma cost of services was $2.1 billion for the twelve months ended December 31, 2002, an increase of 18% over the same period in 2001. This was primarily due to a 12% increase in programming costs reflecting rate increases, channel additions and customer growth. Other cost of services increased 24%, reflecting increased labor costs due to the transition from upgrade construction and new product launches to maintenance and related customer costs directly associated with the growth of new subscribers.

Pro forma selling, general and administrative expenses for the twelve months ended December 31, 2002 increased 16% to $1.1 billion due to:

• a 19% increase in marketing expense relating to the promotion of new services and bundling alternatives; and
• a 15% increase in general and administrative expenses relating to increased salaries and benefits resulting from an increase in headcount, and increased property taxes resulting from capital expenditures.

Pro forma operating cash flow increased 14% to $1.8 billion for the twelve months ended December 31, 2002. The pro forma operating cash flow margin for the twelve months ended December 31, 2002 was 35.5%.

HISTORICAL OPERATING RESULTS

Historical three months ended December 31, 2002 compared with historical three months ended December 31, 2001

Total revenues for the fourth quarter of 2002 were $1.3 billion, an 18% increase over revenues of $1.1 billion for the fourth quarter of 2001. Operating cash flow increased 73% to $491.9 million for the fourth quarter of 2002, reflecting the one-time non-recurring net charge of $148.0 million in the fourth quarter of 2001 related to the continuation of Excite@Home high-speed Internet services and transition to Cox High Speed Internet service.

Depreciation and amortization decreased to $351.3 million from $462.6 million in the fourth quarter of 2001 due to a reduction in amortization of intangible assets determined to have an indefinite life, offset by an increase in depreciation from Cox's continuing investments in its broadband network in order to deliver additional programming and services. Interest expense increased to $152.8 million, primarily due to the issuance of $1.0 billion aggregate principal amount of 7.125% senior notes in September 2002. The proceeds from this offering were primarily used to redeem senior notes held by Cox RHINOS Trust, repurchase Floating Rate MOPPRS/CHEERS and repay Cox's 6.5% senior notes upon their maturity.

For the fourth quarter of 2002, Cox recorded a $255.2 million pre-tax gain on derivative instruments due to the following:

• $290.1 million pre-tax gain resulting from the change in the fair value of certain derivative instruments embedded in Cox's exchangeable subordinated debentures and indexed to shares of Sprint PCS common stock that Cox owns;
• $37.9 million pre-tax loss resulting from the change in the fair value of certain derivative instruments embedded in Cox's zero-coupon debt and indexed to shares of Sprint PCS common stock that Cox owns; and
• $3.0 million pre-tax gain resulting from the change in the fair value of Cox's net settleable warrants.

Net gain on investments of $33.9 million for the fourth quarter of 2002 was primarily due to a $47.2 million pre-tax gain as a result of the change in market value of Cox's investment in Sprint PCS common stock classified as trading.

Included in net gain on investments for the comparable period in 2001 was a pre-tax gain from the sale of 8.6 million shares of Sprint PCS common stock, offset by a pre-tax loss related to the change in market value of Cox's investment in Sprint PCS common stock classified as trading and a decline in the fair value of certain investments considered to be other than temporary.

Net income for the current quarter was $179.6 million compared to net loss of $105.2 million for the fourth quarter of 2001.

Historical twelve months ended December 31, 2002 compared with historical twelve months ended December 31, 2001

Total revenues for the twelve months ended December 31, 2002 were $5.0 billion, an 18% increase over revenues of $4.3 billion for the twelve months ended December 31, 2001. Operating cash flow increased 25% to $1.8 billion for the twelve months ended December 31, 2002, reflecting the one-time non-recurring net charge of $148.0 million in the fourth quarter of 2001 related to the continuation of Excite@Home high-speed Internet services and transition to Cox High Speed Internet service.

Depreciation and amortization decreased to $1.4 billion from $1.5 billion in the twelve months ended December 31, 2001 due to a reduction in amortization of intangible assets determined to have an indefinite life, offset by an increase in depreciation from Cox's continuing investments in its broadband network in order to deliver additional programming and services. Interest expense decreased to $550.6 million, primarily due to interest savings as a result of Cox's interest rate swap agreements and repayment of all commercial paper borrowings.
 

For the twelve months ended December 31, 2002, Cox recorded a $1.1 billion pre-tax gain on derivative instruments due to the following:

• $583.1 million pre-tax gain resulting from the change in the fair value of certain derivative instruments embedded in Cox's exchangeable subordinated debentures and indexed to shares of Sprint PCS common stock that Cox owns;
• $359.3 million pre-tax gain resulting from the change in the fair value of certain derivative instruments embedded in Cox's zero-coupon debt and indexed to shares of Sprint PCS common stock that Cox owns; and
• $183.2 million pre-tax gain resulting from the change in the fair value of certain derivative instruments associated with Cox's investments, including Sprint PCS, AT&T and AT&T Wireless.

Net loss on investments of $1.3 billion is primarily due to:

• $170.4 million pre-tax loss related to the sale of 23.9 million shares of AT&T Wireless common stock;
• $390.6 million pre-tax loss as a result of the change in market value of Cox's investment in Sprint PCS common stock classified as trading; and
• $807.9 million decline in the fair value of certain investments, primarily Sprint PCS, considered to be other than temporary.

Included in net gain on investments for the comparable period in 2001 were pre-tax gains associated with Cox's investment in Sprint PCS common stock classified as trading, a pre-tax gain from the sale of 12.8 million shares of Sprint PCS common stock, a pre-tax gain related to the sale of Cox's interests in Outdoor Life, Speedvision and Cable Network Services and a pre-tax gain related to the deemed satisfaction of Cox's Excite@Home right.

Minority interest of $37.3 million primarily represents distributions on Cox's obligated capital and preferred securities of subsidiary trusts, referred to as FELINE PRIDES and RHINOS. In the third quarter of 2002, Cox settled the FELINE PRIDES with the issuance of common stock and redeemed the RHINOS with cash. Net loss for the twelve months ended December 31, 2002 was $274.0 million compared to net income of $755.0 million for the comparable period in 2001.

NEW ACCOUNTING STANDARDS

On January 1, 2002, Cox adopted Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangibles, which requires that goodwill and certain intangible assets, including those recorded in past business combinations, no longer be amortized through the statement of operations, but instead be tested for impairment at least annually.

Also on January 1, 2002, Cox adopted the guidance prescribed in Emerging Issues Task Force Issue No. 01-14, Income Statement Characterization of Reimbursements Received for "Out-of-Pocket" Expenses Incurred, which specifies that the collection and payment of certain fees must be presented on a gross basis, as revenue and expense, rather than on a net basis. Retroactive application of this standard was required. Accordingly, collection and payment of fees by Cox, primarily franchise fees, have been reclassified on a gross basis for all periods presented herein to conform to this new guidance.

LIQUIDITY AND CAPITAL RESOURCES

Cox has included Consolidated Statements of Cash Flows for the twelve months ended December 31, 2002 and 2001 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 an additional measure of liquidity that Cox believes will be useful to investors in evaluating Cox's financial performance. Free cash flow is not a measure of performance calculated in accordance with generally accepted accounting principles. For further details, please refer to the Summary of Operating Statistics.

Significant sources of cash for the twelve months ended December 31, 2002 consisted of the following:

• the sale of 25.2 million shares of Sprint PCS common stock for net proceeds of approximately $238.7 million;
• the sale of 35.0 million shares of AT&T common stock for net proceeds of approximately $542.6 million;
• the sale of 23.9 million shares of AT&T Wireless common stock for net proceeds of approximately $248.2 million;
• the termination of all costless equity collar arrangements with respect to Sprint PCS common stock, AT&T common stock and AT&T Wireless common stock for aggregate proceeds of approximately $264.4 million;
• the issuance of 7.125% senior notes, which mature in September 2012, for net proceeds of approximately $986.1 million; and
• the generation of cash from operating activities of approximately $1.8 billion.

Significant uses of cash for the twelve months ended December 31, 2002 consisted of the following:

• the repurchase of $329.1 million aggregate principal amount at maturity of Cox's convertible senior notes due 2021 that had been properly tendered and not withdrawn, for aggregate cash consideration of $232.8 million, which represented the accreted value of the repurchased notes;
• the repayment of approximately $727.4 million of commercial paper borrowings;
• the redemption of senior notes held by Cox RHINOS Trust for approximately $502.6 million;
• the repurchase of $200.0 million aggregate principal amount of Cox's Floating Rate MOPPRS/CHEERS for cash consideration of $227.2 million;
• the repayment of $200.0 million aggregate principal amount of Cox's 6.5% senior notes upon their maturity; and
• capital expenditures of approximately $1.9 billion. Please refer to the Summary of Operating Statistics for a break out of capital expenditures in accordance with new industry guidelines.

At December 31, 2002, Cox had approximately $7.3 billion of outstanding indebtedness (including cumulative derivative adjustments made in accordance with SFAS No. 133 which reduced reported indebtedness by approximately $1.4 billion).

Acerca de Cox Communications

Cox Communications (NYSE: COX), a Fortune 500 company, is a multi-service broadband communications company serving approximately 6.3 million basic customers nationwide. Cox is the nation's fourth-largest cable television provider, and offers both traditional analog video programming under the Cox Cable brand as well as advanced digital video programming under the Cox Digital Cable brand. Cox provides an array of other communications and entertainment services, including local and long distance telephone under the Cox Digital Telephone brand; high-speed Internet access under the brands Cox High Speed Internet and Cox Express; and commercial voice and data services via Cox Business Services. Cox is an investor in programming networks including Discovery Channel. More information about Cox Communications can be accessed on the Internet at www.cox.com.

Conference Call and Webcast Details

The Cox Communications earnings call will be held Wednesday, February 12, 2003, 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 fourth quarter conference call, as well as a document containing highlights, will be available on the company's website following the conclusion of the call.

Información de contacto

Lacey Lewis, Vice President of Investor Relations
(404) 269-7608, lacey.lewis@cox.com

Bobby Amirshahi, Director of Media Relations
(404) 843-7872, bobby.amirshahi@cox.com
 

Caution Concerning Forward-Looking Statements

Statements in this release, including statements relating to growth opportunities, revenue and cash flow projections and introduction of new products and services, are "forward-looking" statements, 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, as amended, for the year ended December 31, 2001. Cox assumes no responsibility to update any forward-looking statements as a result of new information, future events or otherwise.