ATLANTA, Feb 12, 2002 (BUSINESS WIRE) -- Cox Communications, Inc. (NYSE: COX) today reported financial results for the three months ended December 31, 2001.

"We were very pleased with the solid growth we achieved with our advanced services in 2001," said Jim Robbins, President and Chief Executive Officer. "We added approximately 317,000 new-service revenue generating units (RGUs) in the fourth quarter, and ended the year with more than 2.7 million RGUs, for a total addition of more than 1.15 million new-service RGUs for the year. This exceeds our earlier guidance of between 1.0 and 1.1 million RGU additions for 2001."

Robbins continued: "We achieved pro forma operating cash flow growth of 12% for both the fourth quarter and the year. We also surpassed a significant milestone in the fourth quarter with our bundled services. Now more than one million customers, or 17% of our total customers, are taking at least two Cox products, which further confirms that our customers appreciate the simplicity of our bundling strategy.

"At the end of the third quarter we announced plans to move away from our relationship with Excite@Home and to offer our Cox High Speed Internet product. In the fourth quarter we began the transition of customers to our own IP network, a process that is now virtually complete. By creating our own network and managing it ourselves, we are in a better position to control the quality of and evolve our broadband services to meet the changing needs of our customers."

Robbins added: "Cox Digital Telephone continues to be a tremendous success, demonstrating the strength of its value offering. We ended 2001 with nearly half a million telephone customers, adding nearly 55,000 in the fourth quarter alone.

"The company expects to continue its 2001 momentum in 2002. Management forecasts 2002 revenue and OCF growth to be in the 14% to 15% and 13% to 14% ranges, respectively. The company added 1.15 million new-service RGUs in 2001 and expects to meet or exceed these results in 2002. Management does not expect a slowdown in 2002 in net additions versus 2001 in its Digital Video offering, High-Speed Internet Service, or its Digital Telephone product. Basic subscriber growth is expected to maintain pace with the 2001 performance. Capital expenditures in 2002 will be $2.0 billion as Cox continues its network upgrade and expands its rollout of new services."

    PRO FORMA OPERATING RESULTS

Cox provides pro forma information as an alternative for understanding our operating results. The pro forma operating results are not necessarily indicative of operating results that would have occurred if the transactions 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 discussed below exclude a one-time non-recurring net charge of $155.7 million related to the continuation of Excite@Home high-speed Internet services and the transition to Cox High Speed Internet service. Please refer to the attached Reconciliation of Pro Forma Operating Results schedule for additional details on these non-recurring items.

The pro forma operating results for the twelve months ended December 31, 2000 give effect to the January 2000 acquisition of cable systems from Multimedia Cablevision, Inc. and the March 2000 acquisition of cable subsidiaries from AT&T Corp. as though they had occurred on January 1, 2000.

Pro forma three months ended December 31, 2001 compared with historical three months ended December 31, 2000

Total pro forma revenues for the three months ended December 31, 2001 were $1,083.0 million, a 14% increase over revenues of $945.9 million for the three months ended December 31, 2000. Total pro forma residential revenues for the fourth quarter of 2001 increased 17% to $950.5 million compared to the same period in 2000. Basic customers were 6,237,888, a 0.7% increase over December 31, 2000.

Pro forma residential video revenues increased to $778.6 million, an 8% increase over the comparable period in 2000, primarily due to digital customer growth and rate increases implemented in the first quarter of 2001. Pro forma residential data and residential telephony revenues for the fourth quarter of 2001 increased to $91.7 million and $64.0 million, respectively, from $44.3 million and $34.1 million, respectively, in 2000 primarily due to customer growth.

Pro forma commercial revenues for the fourth quarter of 2001 increased to $40.3 million from $29.2 million in 2000 due to growth in both high-speed data and telephony customers. Pro forma advertising revenues decreased 11% to $92.3 million reflecting a general economic slowdown affecting local and national advertising sales. Also contributing to the decrease is unusually high advertising revenues in the fourth quarter of 2000 due to non-recurring political campaign advertising.

Pro forma programming costs were $249.4 million for the fourth quarter of 2001, an increase of 10% over the same period in 2000 due to programming rate increases implemented in January 2001, digital customer growth and channel additions. Pro forma selling, general and administrative expenses for the fourth quarter of 2001 increased 20% to $401.2 million due primarily to marketing costs related to campaigns aimed at enhancing customer awareness of new services and bundling alternatives and other costs, including increased employee headcount, associated with the continued rollout of residential and commercial digital video, high-speed data and telephony services.

Pro forma operating cash flow increased 12% to $432.5 million for the fourth quarter of 2001. The pro forma operating cash flow margin (pro forma operating cash flow as a percentage of revenues) for the fourth quarter of 2001 was 39.9%, a slight decrease from 40.9% for the fourth quarter of 2000.

Pro forma twelve months ended December 31, 2001 compared with pro forma twelve months ended December 31, 2000

Total revenues for the twelve months ended December 31, 2001 were $4,064.7 million, a 14% increase over revenues of $3,573.3 million for the twelve months ended December 31, 2000. Total residential revenues for the twelve months ended December 31, 2001 increased 15% to $3,582.9 million compared to the same period in 2000. Basic customers were 6,237,888, a 0.7% increase over December 31, 2000.

Residential video revenues increased to $3,036.8 million, an 8% increase over the comparable period in 2000, primarily due to basic and digital customer growth and rate increases implemented in the first quarter of 2001. Residential data and telephony revenues for the twelve months ended December 31, 2001 increased to $285.7 million and $207.9 million, respectively, from $138.4 million and $106.1 million, respectively, in 2000 primarily due to customer growth.

Commercial revenues for the twelve months ended December 31, 2001 increased to $144.3 million from $97.8 million due to growth in both high-speed data and telephony customers. Advertising revenues decreased 4% to $337.6 million reflecting a general economic slowdown affecting local and national advertising sales.

Programming costs were $971.1 million for the twelve months ended December 31, 2001, an increase of 11% over the same period in 2000 due to programming rate increases implemented in January 2001, digital customer growth and channel additions. Selling, general and administrative expenses for the twelve months ended December 31, 2001 increased 18% to $1,524.7 million due primarily to marketing costs related to campaigns aimed at enhancing customer awareness of new services and bundling alternatives and other costs, including increased employee headcount, associated with the continued rollout of residential and commercial digital video, high-speed data and telephony services.

Operating cash flow increased 12% to $1,569.0 million for 2001. The operating cash flow margin for the twelve months ended December 31, 2001 was 38.6%, a slight decrease from 39.3% for the comparable period in 2000.

    HISTORICAL OPERATING RESULTS

Historical three months ended December 31, 2001 compared with historical three months ended December 31, 2000

Total revenues for the three months ended December 31, 2001 were $1,077.5 million, a 14% increase over revenues of $945.9 million for the three months ended December 31, 2000. Operating cash flow decreased 28% to $276.7 million for the fourth quarter of 2001, reflecting a one-time non-recurring net charge of $155.7 million related to the continuation of Excite@Home high-speed Internet services and the transition to Cox High Speed Internet service.

Depreciation and amortization increased to $462.6 million from $355.5 million in the fourth quarter of 2000 due to Cox continuing to invest significantly in its broadband network in order to deliver additional programming and services. Interest expense decreased slightly to $132.6 million primarily due to decreased interest rates on floating rate debt and interest savings as a result of Cox's interest rate swap agreements.

For the three months ended December 31, 2001, Cox recorded a $135.9 million pre-tax gain on derivative instruments due to an increase of approximately $66.7 million in the fair value of certain derivative instruments embedded in the exchangeable subordinated debentures issued by Cox and related to shares of Sprint PCS common stock Cox owns, and an increase of approximately $69.2 million in the fair value of certain derivative instruments associated with Cox's investments, including Sprint PCS, AT&T and AT&T Wireless.

Net gain on investments of $71.4 million is primarily due to a $141.1 million pre-tax gain related to the sale of 8.6 million shares of Sprint PCS common stock - Series 2, offset by a $36.7 million pre-tax loss 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 $22.6 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 4.2 million shares of Sprint PCS - Series 2, partially offset by a decline in the fair value of certain investments considered to be other than temporary.

Minority interest of $26.0 million primarily represents distributions on Cox's obligated capital and preferred securities of subsidiary trusts, referred to as FELINE PRIDES and RHINOS. Net loss for the current quarter was $110.1 million, as compared to a net loss of $71.6 million for the fourth quarter of 2000.

Historical twelve months ended December 31, 2001 compared with historical twelve months ended December 31, 2000

Total revenues for the twelve months ended December 31, 2001 were $4,059.2 million, a 16% increase over revenues of $3,506.9 million for the twelve months ended December 31, 2000. Operating cash flow increased 3% to $1,413.2 million for the twelve months ended December 31, 2001, reflecting a one-time non-recurring net charge of $155.7 million related to the continuation of Excite@Home high-speed Internet services and the transition to Cox High Speed Internet service.

Depreciation and amortization increased to $1,539.2 million from $1,236.5 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 $565.9 million primarily due to the issuance of notes and debentures in the first quarter of 2001.

For the twelve months ended December 31, 2001, Cox recorded a $212.0 million pre-tax loss on derivative instruments due to a decrease of approximately $279.8 million in the fair value of certain derivative instruments embedded in the exchangeable subordinated debentures issued by Cox and related to shares of Sprint PCS common stock Cox owns, offset by an increase of approximately $67.8 million in the fair value of certain derivative instruments associated with Cox's investments, including Sprint PCS, AT&T and AT&T Wireless.

Net gain on investments of $1,151.2 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;
    --  $77.4 million pre-tax gain on these shares as a result of the
        change in market value of Sprint PCS common stock for the
        twelve months ended December 31, 2001;
    --  $307.4 million pre-tax gain associated with the satisfaction
        of Cox's Excite@Home right;
    --  $213.5 million pre-tax gain related to the sale of 12.8
        million shares of Sprint PCS common stock - Series 2; and
    --  $436.1 million pre-tax gain related to the sale of Cox's
        interests in Outdoor Life, Speedvision and Cable Network
        Services to Fox Sports; partially offset by
    --  $73.5 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 28.1 million shares of Sprint PCS common stock - Series 2, the sale of Cox's entire equity interest in Flextech plc and the transaction whereby Cox received a right to sell its Excite@Home shares to AT&T, partially offset by a decline in the fair value of certain investments considered to be other than temporary.

Minority interest of $71.1 million primarily represents distributions on the FELINE PRIDES and RHINOS. On 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 income for the twelve months ended December 31, 2001 was $750.1 million, as compared to net income of $1,925.3 million for the comparable period in 2000.

    INVESTING AND FINANCING ACTIVITIES

Significant investing transactions for the twelve months ended December 31, 2001 consisted of the following:

    --  the sale of 12.8 million shares of Sprint PCS common stock -
        Series 2 for net proceeds of approximately $318.2 million;
    --  the sale of 25.0 million shares of AT&T common stock for net
        proceeds of approximately $525.5 million;
    --  the sale of 5.0 million shares of AT&T Wireless stock for net
        proceeds of approximately $83.1 million; and
    --  the sale of Cox's interests in Outdoor Life, Speedvision and
        Cable Network Services to Fox Sports for aggregate net
        proceeds of approximately $439.7 million.

Significant financing transactions for the twelve months ended December 31, 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; and
    --  the issuances of convertible senior notes, which mature in
        February 2021 and are convertible into shares of Cox's Class A
        common stock or, at Cox's option, cash, and 6.75% senior
        notes, which mature in March 2011, for aggregate net proceeds
        of approximately $1.0 billion.

All Sprint PCS share information reflects a two-for-one stock dividend paid by Sprint in February 2000. 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 television company. A full-service provider of telecommunications products, Cox offers an array of services, including Cox Cable; advanced digital video programming services under the Cox Digital Cable brand; local and long distance telephone services under the Cox Digital Telephone brand; high-speed Internet access under the brands Cox High Speed Internet, Road Runner 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.

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 Tuesday, February 12, 2002, at 11:00 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.

(a) The operating cash flow margin for the quarter ended December 31, 2001 excludes a one-time non-recurring net charge of $155.7 million related to the continuation of Excite@Home high-speed Internet services and the transition to Cox High Speed Internet service. Please refer to the attached Reconciliation of Pro Forma Operating Results schedule for additional details on these non-recurring items.

CONTACT: Cox Communications, Inc. Investor Relations Frank Loomans, 404/843-5377 or Media Laura Oberhelman, 404/269-7562