<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER 1-13576
[LOGO] COX
COMMUNICATIONS
COX COMMUNICATIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 58-2112281
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
1400 LAKE HEARN DRIVE, ATLANTA, GEORGIA 30319
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (404) 843-5000
_______________
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
_______________
Indicate the number of shares outstanding of each of the issuer's
classes of Common Stock, as of the latest practicable date.
There were 256,436,754 shares of Class A Common Stock outstanding as
of May 1, 1996.
There were 13,798,896 shares of Class C Common Stock outstanding as
of May 1, 1996.
<PAGE>
COX COMMUNICATIONS, INC.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1996
TABLE OF CONTENTS
----
PAGE
----
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS............................. 3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.............. 10
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................. 13
SIGNATURES...................................................... 14
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COX COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C> <C>
MARCH 31 DECEMBER 31
1996 1995
----------- ------------
(unaudited)
(Thousand of Dollars)
ASSETS
Cash........................................................ $ 65,782 $ 39,166
Account and notes receivable, less allowance for doubtful
accounts of $7,106 and $6,804, respectively................. 106,716 117,885
Net plant and equipment..................................... 1,285,877 1,213,857
Investments................................................. 1,194,994 1,201,253
Intangible assets........................................... 2,815,210 2,775,903
Other assets................................................ 97,379 207,193
------------- -----------
Total assets............................................. $ 5,565,958 $ 5,555,257
============= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses....................... $ 221,814 $ 202,204
Deferred income............................................. 38,646 40,900
Deferred income taxes....................................... 248,903 288,039
Other liabilities........................................... 120,564 116,771
Debt........................................................ 2,576,816 2,392,725
Amount due to Cox Enterprise, Inc........................... 45,943 182,605
------------- -----------
Total liabilities........................................ 3,252,686 3,223,244
------------- -----------
Shareholders' equity:
Preferred Stock, $1 par value; 5,000,000 shares authorized;
none issued.............................................. -- --
Class A Common Stock, $1 par value; 286,000,000 shares
authorized; shares issued and outstanding: 256,435,280
in 1996 and 256,365,194 in 1995.......................... 256,435 256,365
Class C Comon Stock, $1 par value; 14,000,000 shares
authorized; shares issued and outstanding: 13,798,896
in 1996 and 1995......................................... 13,799 13,799
Additional paid-in capital.................................. 1,740,594 1,739,422
Retained earnings........................................... 275,005 267,648
Foreign currency transalation adjustment.................... (8,704) (3,413)
Net unrealized gain on securities........................... 36,143 58,192
------------- -----------
Total shareholders' equity............................... 2,313,272 2,332,013
------------- -----------
Total liabilities and shareholders' equity............... $ 5,565,958 $ 5,555,257
============= ===========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
COX COMMUNICATION, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31
------------------
1996 1995
------- -------
(unaudited)
(Thousands of Dollars)
<S> <C> <C>
REVENUES:
Regulated......................................... $ 238,226 $ 186,278
A la carte........................................ 12,666 6,558
Premium service................................... 47,575 42,487
Pay-per-view...................................... 12,920 7,071
Advertising....................................... 17,282 12,521
Satellite......................................... 17,649 8,136
Other............................................. 11,180 8,168
--------- --------
Total revenues................................... 357,498 271,219
COSTS AND EXPENSES:
Programming costs................................. 89,027 67,532
Plant operations.................................. 34,800 29,815
Marketing......................................... 10,737 7,605
General and administrative........................ 70,948 54,645
Satellite operating and adminstrative............. 15,655 8,793
Depreciation...................................... 55,862 43,780
Amortization...................................... 18,500 13,121
--------- --------
OPERATING INCOME................................... 61,969 45,928
Interest expense................................... (34,505) (28,622)
Equity in net losses of affiliated companies....... (19,257) (17,819)
Gain on sale of affiliated companies............... 4,640 --
Other, net......................................... 4,757 3,226
--------- --------
INCOME BEFORE INCOME TAXES......................... 17,604 2,713
Income taxes....................................... 10,247 947
--------- --------
NET INCOME......................................... $ 7,357 $ 1,766
========= ========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
COX COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
NET
FOREIGN UNREALIZED
COMMON STOCK ADDITIONAL CURRENCY GAIN
------------------- PAID-IN RETAINED TRANSLATION (LOSS)ON
CLASS A CLASS C CAPITAL EARNINGS ADJUSTMENT SECURITIES TOTAL
---------- --------- ---------- ---------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(unaudited)
(Thousands of Dollars)
BALANCE AT DECEMBER 31, 1995....... $ 256,365 $ 13,799 $ 1,739,422 $267,648 $ (3,413) $ 58,192 $ 2,332,013
Net income........................ 7,357 7,357
Issuance of stock related to
incentive plans................ 70 1,172 1,242
Foreign currency transalation
adjustment....................... (5,291) (5,291)
Change in net unrealized gain (loss)
on securities.................... (22,049) (22,049)
---------- --------- ---------- ---------- ----------- ---------- ---------
BALANCE AT MARCH 31, 1996 $ 256,435 $ 13,799 $ 1,740,594 $275,005 $ (8,704) $ 36,143 $ 2,313,272
========== ========= =========== ======== ======== ======== ===========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
Cox Communications, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months
Ended March 31
-----------------------
1996 1995
-----------------------
(unaudited)
(Thousands of Dollars)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income........................................................... $ 7,357 $ 1,766
Adjustments to reconcile net income to net cash provided
by operating activities, net of effect of acquisitions:
Depreciation....................................................... 55,862 43,780
Amortization....................................................... 18,500 13,121
Equity in net losses of affiliated companies....................... 19,257 17,819
Deferred income taxes.............................................. (27,108) 2,441
Decrease in accounts receivable...................................... 12,660 2,824
Increase (decrease) in accounts payable and accrued expenses......... 12,578 (18,083)
Other, net........................................................... (6,397) (3,672)
---------- ----------
Net cash provided by operating activities..................... 92,709 59,996
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures................................................. (109,068) (57,806)
Acquisitions, net of cash acquired................................... -- 26,709
Investments in affiliated companies.................................. (57,984) (139,992)
Proceeds from sale of business....................................... 52,730 --
Other, net........................................................... 178 5,439
---------- ----------
Net cash used in investing activities......................... (114,144) (165,650)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Revolving credit borrowings (repayments), net........................ 189,010 (7,199)
Repayment of debt.................................................... (1,703) --
Proceeds from exercise of options.................................... 829 --
Increase (decrease) in amounts due to CEI........................... (136,662) 94,227
Increase (decrease) in book overdrafts............................... (3,423) 21,653
---------- ----------
Net cash provided by financing activities..................... 48,051 108,681
---------- ----------
Net increase in cash................................................. 26,616 3,027
Cash at beginning of period.......................................... 39,166 3,346
---------- ----------
Cash at end of period................................................ $ 65,782 $ 6,373
========== ==========
Cash paid during the period for:
Interest (net of amounts capitalized).............................. $ 17,361 $ 26,483
Income taxes ...................................................... 31,579 2,003
Noncash activities:
Cox Common Stock issued in connection with the Times
Mirror Merger.................................................... - $ 932,000
Purchase of PCS license............................................ - 251,918
Capital contributions by CEI....................................... - 40,991
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1996
1. BASIS OF PRESENTATION AND OTHER INFORMATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnote disclosures required by generally accepted accounting principles for
complete financial statements. In the opinion of management, the financial
statements reflect all adjustments considered necessary for a fair statement of
the results of operations and financial position for the interim periods
presented. All such adjustments are of a normal recurring nature. These
unaudited interim financial statements should be read in conjunction with the
audited consolidated financial statements and notes thereto contained in Cox
Communication, Inc.'s ("Cox") Annual Report on Form 10-K for the year ended
December 31, 1995.
The results of operations for the three months ended March 31, 1996
are not necessarily indicative of the results to be expected for the year ended
December 31, 1996 or any interim period.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Recently Issued Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets to be Disposed Of," which became effective
January 1, 1996. This Statement requires that long-lived assets and certain
intangibles to be held and used be reviewed for impairment when events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable, with any impairment losses begin reported in the period in which
the recognition criteria are first applied and met. Long-lived assets and
certain intangibles to be disposed of are required to be reported at the lower
of carrying amount or fair value less cost to sell. There was no financial
impact as a result of the adoption of SFAS No. 121.
In addition, in October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation," which became effective January 1, 1996. SFAS No. 123
requires expanded disclosure of stock-based compensation arrangements with
employees and encourages but does not require compensation costs to be measured
based on the fair value of the equity instrument awarded. Companies are
permitted, however, to continue to apply APB Opinion No. 25, which recognizes
compensation costs based on the intrinsic value of the equity instrument
awarded. Cox will continue to apply APB Opinion No. 25 to its stock-based
compensation awards to employees and will disclose the required pro forma effect
on annual net income and earnings per share.
Reclassifications
Certain amounts in the 1995 financial statements have been reclassified for
comparative purposes.
7
<PAGE>
3. ACQUISITIONS AND DISPOSITIONS OF BUSINESSES
In April 1996, Cox exchanged its Williamsport, Pennsylvania cable television
system serving approximately 24,500 customers for $13 million and a cable
television system in East Providence, Rhode Island serving approximately 15,500
customers. No gain or loss resulted from this transaction.
In April 1996, Cox sold certain cable television systems in the Ashland,
Kentucky and Defiance, Ohio area for $136 million. These systems, which were
acquired as a result of the Merger, together served approximately 78,600
customers. No gain or loss resulted from this transaction.
Also, in April 1996, Cox and Continental Cablevision, Inc. ("Continental")
signed a letter of intent for Cox to trade certain cable television systems in
western Massachusetts serving approximately 47,700 customers for Continental's
cable television systems in James City and York County, Virginia and Pawtucket,
Rhode Island serving approximately 48,500 customers. Cox anticipates this
transaction will be consummated during the fourth quarter of 1996.
In March 1996, Cox and Time Warner Entertainment/Advance-Newhouse ("Time
Warner") signed a letter of intent for Cox to trade its Myrtle Beach, South
Carolina cable television system serving approximately 37,600 customers for Time
Warner's Hampton and Williamsburg, Virginia cable television systems serving
approximately 45,300 customers. The transaction also includes a Texas cable
television system serving approximately 7,000 customers to be purchased by Cox
and then immediately traded to Time Warner. Cox anticipates this transaction
will be consummated during the fourth quarter of 1996.
Effective February 1, 1995, Cox, Cox Enterprises, Inc. ("CEI"), The Times
Mirror Company ("Times Mirror") and New TMC Inc. consummated a merger (the
"Merger"), pursuant to which Times Mirror (which, at the time of the Merger, was
engaged only in the cable television business) merged with and into Cox. The
following unaudited pro forma statement of income for the three months ended
March 31, 1995 presents the consolidated results of operations as if the
acquisition had occurred on January 1, 1995 and does not purport to be
indicative of what would have occurred had the Merger been made as of that date
or of results which may occur in the future.
8
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31
-----------------------
1996 1995
ACTUAL PRO FORMA
------ ---------
(Thousands of Dollars,
except per share data)
<S> <C> <C>
REVENUES:
Regulated..................................... $ 238,226 $ 215,796
A la carte.................................... 12,666 9,126
Premium service............................... 47,575 47,877
Pay-per-view.................................. 12,920 8,612
Advertising................................... 17,282 14,516
Satellite..................................... 17,649 8,136
Other......................................... 11,180 9,032
------------ ------------
Total revenues................................ 357,498 313,095
COSTS AND EXPENSES:
Programming costs............................. 89,027 76,158
Plant operations.............................. 34,800 34,153
Marketing..................................... 10,737 8,809
General and administrative.................... 70,948 65,241
Satellite operating and administrative........ 15,655 8,802
Depreciation.................................. 55,862 51,700
Amortization.................................. 18,500 17,003
------------ ------------
OPERATING INCOME.............................. 61,969 51,229
Interest expense.............................. (34,505) (36,377)
Equity in net losses of affiliated companies.. (19,257) (17,819)
Gain on sale of affiliated companies.......... 4,640 --
Other, net.................................... 4,757 3,389
------------ ------------
INCOME BEFORE INCOME
TAXES......................................... 17,604 422
Income taxes.................................. 10,247 1,226
------------ ------------
NET INCOME (LOSS)............................. $ 7,357 $ (804)
============ ============
PER SHARE DATA:
Net income (loss)
per share..................................... $0.03 $(0.00)
Weighted average number of common
shares outstanding............................ 270,208,897 250,364,240
</TABLE>
4. INVESTMENTS
In March 1996, Syntellect, Inc. ("Syntellect") merged with the operations of
Telecorp Systems, Inc. ("Telecorp"). As a result of this merger, Cox received an
8.6% interest in Syntellect in exchange for its 24.5% interest in Telecorp. Cox
recognized a gain of $4.6 million related to this transaction.
9
<PAGE>
5. DEBT
In April 1996, Cox filed a Form S-3 Registration Statement with the
Securities and Exchange Commission under which Cox may from time to time offer
and issue debentures, notes, bonds or other evidence of indebtedness for a
maximum aggregate amount of $750 million. Cox currently intends to use the net
proceeds from the sale of these debt securities for general corporate purposes,
which may include additions to working capital, the repayment or redemption of
existing indebtedness and the financing of capital expenditures and
acquisitions.
6. TRANSACTIONS WITH AFFILIATED COMPANIES
Cash requirements are funded by internally generated funds, by various
external financing transactions and, as needed, through intercompany loans from
CEI. CEI performs day-to-day cash management services for Cox, with settlements
of credit or debit balances between Cox and CEI occurring periodically with
interest at market rates (6.636% at March 31, 1996). Included in the amounts due
to CEI are the following transactions:
<TABLE>
<CAPTION>
(Thousands of Dollars)
<S> <C>
Balance, December 31, 1995...................... $ 182,605
Cash transferred to CEI......................... (177,337)
Net operating expense allocations and
reimbursement................................... 40,675
-----------
Balance, March 31, 1996......................... $ 45,943
===========
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
accompanying historical Consolidated Statements of Income for the three-month
period ended March 31, 1996 and 1995 and the pro forma financial information
included in Note 3 to the Consolidated Financial Statements.
RECENT ACQUISITIONS, DISPOSITIONS AND INVESTMENTS
U.S. Broadband Networks
In April 1996, Cox exchanged its Williamsport, Pennsylvania cable
television system serving approximately 24,500 customers for $13 million and a
cable television system in East Providence, Rhode Island serving approximately
15,500 customers. No gain or loss resulted from this transaction.
In April 1996, Cox sold certain cable television systems in the Ashland,
Kentucky and Defiance, Ohio area for $136 million. These systems, which were
acquired as a result of the Merger, together served approximately 78,600
customers. No gain or loss resulted from this transaction.
Also, in April 1996, Cox and Continental signed a letter of intent for Cox
to trade certain cable television systems in western Massachusetts serving
approximately 47,700 customers for Continental's cable television systems in
James City and York County, Virginia and Pawtucket, Rhode Island serving
approximately 48,500 customers. Cox anticipates this transaction will be
consummated during the fourth quarter of 1996.
10
<PAGE>
In March 1996, Cox and Time Warner signed a letter of intent for Cox to
trade its Myrtle Beach, South Carolina cable television system serving
approximately 37,600 customers for Time Warner's Hampton and Williamsburg,
Virginia cable television systems serving approximately 45,300 customers. The
transaction also includes a Texas cable television system serving approximately
7,000 customers to be purchased by Cox and then immediately traded to Time
Warner. Cox anticipates this transaction will be consummated during the fourth
quarter of 1996.
THREE MONTHS ENDED MARCH 31, 1996 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1995
The historical results discussed below include financial results
attributable to Times Mirror from the February 1, 1995 date of acquisition.
Revenues for the three months ended March 31, 1996 were $357.5 million, a
32% increase over revenues of $271.2 million for the same period in 1995.
Operating, selling, general and administrative, and satellite expenses increased
31% to $221.2 million and depreciation and amortization increased 31% to $74.4
million as compared to the first quarter of 1995. Cox reported operating income
for the first quarter of 1996 of $62.0 million, a 35% increase over operating
income of $45.9 million for the same quarter in 1995. This strong growth was
partially attributable to the Merger.
Interest expense for the first quarter of 1996 was $34.5 million, a $5.9
million increase over the first quarter of 1995 primarily due to debt assumed in
connection with the Merger. Equity in net losses of affiliated companies was
$19.3 million, a $1.4 million increase over the prior year due to the increased
losses of Sprint Spectrum partially offset by the elimination of losses from SBC
CableComms as a result of the merger of SBC CableComms and TeleWest
Communications plc (the "TeleWest Merger") in October 1995. A gain on sale of
affiliated companies of $4.6 million was recognized in the first quarter of 1996
as a result of the merger of Telecorp and Syntellect, for which Cox received a
8.6% interest in Syntellect in exchange for its 24.5% interest in Telecorp. Net
income of $7.4 million was recorded for the three months ended March 31, 1996 as
compared to net income of $1.8 million for the three months ended March 31,
1995.
THREE MONTHS ENDED MARCH 31, 1996 COMPARED WITH PRO FORMA THREE MONTHS ENDED
MARCH 31, 1995
The pro forma results discussed below reflect the Merger and related
transactions as if these transactions had occurred on January 1, 1995.
Revenues for the three months ended March 31, 1996 were $357.5 million, a
14% increase over revenues of $313.1 million for the three months ended March
31, 1995. Basic customers were 3,299,983 at March 31, 1996. Adjusting for the
acquisitions and sales of cable television systems during 1995 and 1996, basic
customers grew 2.8% over customers at March 31, 1995 and 1% over customers at
December 31, 1995. Customer growth slowed during the first quarter of 1996 due
in part to a decrease in new home construction.
Regulated revenues for the first quarter of 1996 grew 10% over the first
quarter of 1995 to $238.2 million due to the larger customer base and average
rate increases of $1.80 per month per subscriber during the second half of 1995.
These rate increases reflected channel additions and the allowable pass-through
of inflation adjustments and external costs, primarily programming fee
increases. A la carte revenues increased 39% to $12.7 million reflecting
continued growth in the a la carte customer base, as additional systems offer
the a la carte tier package, and selected price adjustments during the fourth
quarter of 1995.
11
<PAGE>
Premium service revenues for the first quarter of 1996 were $47.6 million,
down 1% from the first quarter of 1995 primarily due to a decrease in the
average number of premium units during the first half of the current quarter. In
February 1996, Cox launched a two-for-one premium channel promotion which
boosted growth in premium units to 1,900,279 at March 31, 1996, a 1.7% increase
over premium units at March 31, 1995 adjusted for the cable television system
sales and acquisitions. Pay-per-view revenues for the first quarter of 1996
increased 50% to $12.9 million primarily due to the Tyson/Bruno boxing event in
March 1996 and an increase in pay-per-view movies purchased. Advertising
revenues increased 19% in the first quarter of 1996 to $17.3 million reflecting
continued gains in national account revenue and new customers such as Sprint
Corporation.
Revenues from satellite operations (Cox Satellite Programming and
PrimeStar) were $17.6 million for the first quarter of 1996, a 117% increase
over revenues of $8.1 million for the same quarter in 1995 due to strong
customer growth. PrimeStar customers increased from 23,869 at March 31, 1995 to
76,190 at March 31, 1996 as a result of increased advertising and a retail price
restructuring.
Programming costs were $89.0 million for the first quarter of 1996,
an increase of 17% over the same period in 1995 due primarily to Cox's larger
customer base for regulated, a la carte and pay-per-view services and additional
channels offered on the cable programming services tier. Marketing costs were
$10.7 million for the first quarter of 1996, a 22% increase over the first
quarter of 1995 primarily as a result of sales programs associated with the
premium channel promotion and an increase in advertising. General and
administrative expenses for the first quarter of 1996 increased 9% to $70.9
million due to the increase in salaries and benefits associated with Cox's
larger customer base and the development of new services. Operating income for
the first quarter of 1996 was $62.0 million, a 21% increase over operating
income of $51.2 million for the first quarter in 1995.
Interest expense for the first quarter was $34.5 million, a $1.9 million
decrease from the first quarter of 1995 due to the capitalization of interest
expense on debt incurred to fund Sprint Spectrum. Excluding capitalized
interest, interest expense increased due primarily to an increase in fixed rate
debt balances. Equity in net losses of affiliated companies was $19.3 million
for the first quarter of 1996, a $1.4 million increase over the prior year due
to the increased losses of Sprint Spectrum which were partially offset by the
elimination of losses from SBC CableComms as a result of the TeleWest Merger in
October 1995. A gain on sale of affiliated companies of $4.6 million was
recognized in the first quarter of 1996 as a result of the merger of Telecorp
and Syntellect, for which Cox received a 8.6% interest in Syntellect in exchange
for its 24.5% interest in Telecorp. Net income for the first quarter of 1996 was
$7.4 million as compared to net loss of $0.8 million for the first quarter of
1995.
Operating income before depreciation and amortization ("EBITDA") is a
commonly used financial analysis tool for measuring and comparing cable
television companies in several areas, such as liquidity, operating performance
and leverage. EBITDA for the first quarter of 1996 was $136.3 million, a 14%
increase over EBITDA of $119.9 million for the first quarter of 1995. Included
in EBITDA is a gain from satellite operations of $2.0 million for the first
quarter of 1996 as compared to a loss of $666,000 in the first quarter of 1995.
Excluding the satellite operations, the cable EBITDA as a percentage of revenues
("EBITDA margin") for the first quarter of 1996 was 39.5% which was consistent
with the first quarter of 1995. The 1996 EBITDA margin reflects the loss of
additional outlet revenues charged by the former Times Mirror systems as
required by the recent settlement with the FCC. The consolidated EBITDA margin
for the first quarter of 1996 was 38.1%, a slight decrease from 38.3% for the
first quarter of 1995 due to the strong growth of the satellite business which
is operating just above the breakeven point. EBITDA should not be considered as
an alternative to net income as an indicator of Cox's performance or as an
alternative to cash flows as a measure of liquidity.
12
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Uses of Cash
As part of Cox's ongoing strategic plan, Cox has invested, and will
continue to invest, significant amounts of capital to enhance the reliability
and capacity of its broadband cable network in preparation of the offering of
new services and to make investments in affiliated companies primarily focused
on telephony, programming and communications-related activities.
Capital expenditures are primarily directed at upgrading and rebuilding
broadband cable networks in preparation for the delivery of additional services.
Capital expenditures in 1996 are expected to be approximately $400 million for
cable television operations, $85 million for telephony-related upgrades and $70
million for reception equipment for PrimeStar satellite customers. During the
three months ended March 31, 1996, Cox made capital expenditures of $109.1
million.
Funding requirements in 1996 for investments in affiliated companies are
expected to be approximately $148 million for Sprint Spectrum and PhillieCo and
$47 million for programming, PrimeStar and other investments. During the three
months ended March 31, 1996, Cox funded approximately $44 million for Sprint
Spectrum and other telephony ventures and $14 million for programming, PrimeStar
and other investments.
Sources of Cash
In April 1996, Cox filed a Form S-3 Registration Statement with the
Securities and Exchange Commission under which Cox may from time to time offer
and issue debentures, notes, bonds or other evidence of indebtedness for a
maximum aggregate amount of $750 million. Cox currently intends to use the net
proceeds from the sale of these debt securities for general corporate purposes,
which may include additions to working capital, the repayment or redemption of
existing indebtedness and the financing of capital expenditures and
acquisitions.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 -- Financial Data Schedule
(b) Reports on Form 8-K filed during the quarter ended March 31, 1996:
None.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COX COMMUNICATIONS, INC.
/s/ Jimmy W. Hayes Date: May 8, 1996
- --------------------------
Jimmy W. Hayes
Senior Vice President, Finance and
Chief Financial Officer
(Principal Financial Officer)
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
PERIOD ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 65,782
<SECURITIES> 0
<RECEIVABLES> 113,822
<ALLOWANCES> (7,106)
<INVENTORY> 46,379
<CURRENT-ASSETS> 8,201
<PP&E> 2,155,508
<DEPRECIATION> (869,631)
<TOTAL-ASSETS> 5,565,958
<CURRENT-LIABILITIES> 260,460
<BONDS> 0
0
0
<COMMON> 270,234
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,565,958
<SALES> 0
<TOTAL-REVENUES> 357,498
<CGS> 0
<TOTAL-COSTS> 150,219
<OTHER-EXPENSES> 70,948
<LOSS-PROVISION> (4,870)
<INTEREST-EXPENSE> (34,505)
<INCOME-PRETAX> 17,604
<INCOME-TAX> (10,247)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,357
<EPS-PRIMARY> $0.03
<EPS-DILUTED> $0.03
</TABLE>
