<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
Current Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report (Date of earliest event reported): May 12, 1999
Cox Communications, Inc.
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(Exact name of Registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation or organization)
1-6590 58-2112288
----------------------------- ---------------------------------------------
(Commission File Number) (I.R.S. Employer Identification Number)
1400 Lake Hearn Drive
Atlanta, Georgia 30319
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(Address of principal executive offices) (Zip Code)
(404) 843-5000
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(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 5. OTHER EVENTS.
On May 11, 1999, Cox Communications, Inc. entered into an agreement and
plan of merger with TCA Cable TV, Inc. Under this agreement, TCA shareholders
will receive $31.25 in cash and 0.7418 of a share of Cox's Class A common stock
in exchange for each share of TCA common stock. Alternatively, TCA shareholders
can elect to receive either $62.50 in cash or 1.486 shares of Cox's Class A
common stock for each TCA share, subject in each case to proration in the event
that such elections would result in the payment of more than $1.6 billion in
cash or the issuance of more than approximately 39.6 million shares of Class A
common stock.
The proposed merger requires the approval of holders of two-thirds of
the outstanding TCA stock, and holders of approximately 20.8% of TCA outstanding
stock have agreed to vote in favor of the merger. TCA has scheduled a special
meeting of the TCA shareholders on August 12, 1999 to vote on the merger. TCA
proxy materials for the special meeting were first mailed to TCA shareholders on
or about July 9, 1999.
Cox originally filed this current report on Form 8-K to report entering
into the TCA merger agreement, and the disclosure under Item 5 in the original
report is hereby incorporated by reference into this amended report. This
amended report is being filed to provide certain historical financial statements
of TCA and pro forma financial information reflecting Cox's acquisition of TCA.
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of business acquired:
Unaudited financial statements for the six months ended April
30, 1999 and 1998 and audited financial statements for the
fiscal year ended October 31, 1998 of TCA Cable TV, Inc.
("TCA"). These historical financial statements are included in
this report beginning on page F-1.
(b) Pro forma financial information:
Pro forma financial statements reflecting the acquisition of
TCA are included in this amended report beginning on page P-1.
(c) Exhibits:
23.1 Consent of KPMG LLP
<PAGE> 4
TCA CABLE TV, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGES
-----
<S> <C>
INDEPENDENT AUDITORS' REPORT F-2
CONSOLIDATED BALANCE SHEETS AS OF APRIL 30, 1999 (UNAUDITED) AND
OCTOBER 31, 1998 F-3
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL
30, 1999 AND 1998(UNAUDITED) AND THE YEAR ENDED OCTOBER 31, 1998 F-4
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE SIX
MONTHS APRIL 30, 1999 (UNAUDITED) AND THE YEAR ENDED OCTOBER 31, 1998 F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED APRIL
30, 1999 AND 1998(UNAUDITED) AND THE YEAR ENDED OCTOBER 31, 1998 F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-7
</TABLE>
F-1
<PAGE> 5
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
TCA Cable TV, Inc.
We have audited the consolidated balance sheet of TCA Cable TV, Inc.
and Subsidiaries as of October 31, 1998 and the related consolidated statements
of operations, shareholders' equity and cash flows for the year then ended.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of TCA Cable TV, Inc. and Subsidiaries as of October 31, 1998 and the
results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
KPMG LLP
Dallas, Texas
December 18, 1998
F-2
<PAGE> 6
TCA CABLE TV, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
APRIL 30, OCTOBER 31,
1999 1998
--------------- ---------------
(Unaudited)
<S> <C> <C>
Cash .......................................................... $ 3,559,866 $ 5,763,140
Accounts receivable, customers ................................ 21,913,825 18,929,089
Accounts receivable, other .................................... 1,865,495 1,737,397
Income tax receivable ......................................... 1,354,826
Property, plant and equipment, at cost:
Land ........................................................ 5,329,731 5,241,470
Distribution systems ........................................ 481,146,219 444,642,934
Transportation equipment .................................... 18,087,210 16,992,631
Other ....................................................... 55,264,839 49,611,572
--------------- ---------------
559,827,999 516,488,607
Less accumulated depreciation ............................... (237,695,426) (217,293,618)
--------------- ---------------
322,132,573 299,194,989
--------------- ---------------
Other assets:
Intangibles, net of accumulated amortization of
$128,160,421 and $117,552,728, respectively .............. 722,438,917 731,796,648
Prepaid expenses and other assets ........................... 15,100,358 13,351,150
--------------- ---------------
737,539,275 745,147,798
--------------- ---------------
$ 1,088,365,860 $ 1,070,772,413
=============== ===============
LIABILITIES
Accounts payable .............................................. $ 26,784,008 $ 15,030,913
Accrued expenses .............................................. 28,484,249 30,639,397
Subscriber advance payments ................................... 2,267,449 2,530,559
Income tax payable ............................................ 1,225,506
Deferred income taxes ......................................... 89,580,000 83,180,000
Debt .......................................................... 529,011,352 552,016,193
--------------- ---------------
676,127,058 684,622,568
--------------- ---------------
Redeemable minority interest .................................. 196,134,029 192,687,542
Contingencies and commitments
SHAREHOLDERS' EQUITY
Preferred stock, $1.00 par value, 5,000,000 shares
authorized; none issued
Common stock, $.10 par value, 120,000,000 and
60,000,000 shares authorized; 50,172,114 and 50,101,543 ...... 5,017,211 5,010,154
shares issued, respectively
Additional paid-in capital .................................... 58,089,026 54,823,338
Retained earnings ............................................. 158,887,063 143,138,112
Accumulated other comprehensive income ........................ 1,518,750
--------------- ---------------
223,512,050 202,971,604
Less treasury stock at cost, 314,516 and 482,516 shares issued,
respectively .................................................. (7,407,277) (9,509,301)
--------------- ---------------
216,104,773 193,462,303
--------------- ---------------
$ 1,088,365,860 $ 1,070,772,413
=============== ===============
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
F-3
<PAGE> 7
TCA CABLE TV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, OCTOBER 31,
1999 1998 1998
------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Revenues .................................... $ 211,635,722 $ 177,454,243 $ 385,736,783
Operating Expenses:
Salaries, Wages and Benefits .............. 38,045,250 31,687,907 69,205,030
Programming and Non-cable Direct Costs .... 58,301,503 47,709,777 103,720,764
Other Operating Expenses .................. 6,815,867 6,333,569 13,415,570
Selling, General and Administrative ....... 15,390,349 13,698,666 30,716,703
Depreciation and Amortization ............. 31,117,652 25,629,836 56,386,834
------------- ------------- -------------
149,670,621 125,059,755 273,444,901
------------- ------------- -------------
Operating Income .......................... 61,965,101 52,394,488 112,291,882
Other Income ................................ 107,379 1,128,364 1,001,868
Interest Expense ............................ (18,021,138) (14,896,656) (34,052,395)
Minority Interest ........................... (5,346,487) (4,540,236) (9,550,664)
------------- ------------- -------------
Income Before Income Taxes ................ 38,704,855 34,085,960 69,690,691
------------- ------------- -------------
Provision for Income Taxes:
Current ................................... 8,600,000 7,000,000 15,600,000
Deferred .................................. 6,400,000 6,500,000 11,600,000
------------- ------------- -------------
15,000,000 13,500,000 27,200,000
------------- ------------- -------------
Net Income .................................. $ 23,704,855 $ 20,585,960 $ 42,490,691
============= ============= =============
Basic Earnings Per Common Share ............. $ 0.48 $ 0.41 $ 0.85
============= ============= =============
Diluted Earnings Per Common Share ........... $ 0.47 $ 0.41 $ 0.84
============= ============= =============
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
F-4
<PAGE> 8
TCA CABLE TV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ISSUED ADDITIONAL ACCUMLATED OTHER
----------------------- PAID-IN RETAINED TREASURY COMPREHENSIVE
SHARES AMOUNT CAPITAL EARNINGS STOCK INCOME
---------- ----------- ----------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Balance, October 31, 1997 .................. 49,982,096 $2,499,105 $51,845,522 $119,108,443 $(2,786,375)
Net income ............................... 42,490,691
Purchase of treasury
stock ................................. (7,146,250)
Issuance of treasury stock
in connection with an
acquisition ........................... 538,776 423,324
Other issuances of common
stock ................................. 55,927 3,431 1,457,464
Stock options exercised .................. 63,520 3,226 793,776
Amortization of warrants
(Note 5) .............................. 187,800
Cash dividends at $.32 per
share ................................. (15,956,630)
Common stock split effected
in the form of a
dividend .............................. 2,504,392 (2,504,392)
---------- ---------- ----------- ------------ ----------- ----------
Balance, October 31, 1998 .................. 50,101,543 $5,010,154 $54,823,338 $143,138,112 $(9,509,301)
---------- ---------- ----------- ------------ ----------- ----------
Net income (unaudited) ................... 23,704,855
Issuance of common
stock (unaudited) ...................... 28,518 2,852 949,901
Issuance of treasury stock in
connection with an acquisition
(unaudited) ............................ 2,097,976 2,102,024
Stock options exercised
(unaudited) ............................ 42,053 4,205 123,911
Amortization of warrants
(unaudited) ............................ 93,900
Cash dividends at $.16 per
share (unaudited) ..................... (7,955,904)
Net unrealized gain on
available-for-sale securities
(unaudited) ........................... $1,518,750
---------- ---------- ----------- ------------ ----------- ----------
Balance, April 30, 1999
(unaudited) .............................. 50,172,114 $5,017,211 $58,089,026 $158,887,063 $(7,407,277) $1,518,750
========== ========== =========== ============ =========== ==========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
F-5
<PAGE> 9
TCA CABLE TV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, OCTOBER 31,
1999 1998 1998
------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net Income ............................................ $ 23,704,855 $ 20,585,960 $ 42,490,691
Adjustments to reconcile net income to net cash
Provided by operating activities:
Depreciation expense ............................... 20,440,964 16,669,636 36,503,898
Amortization expense ............................... 10,676,688 8,960,200 19,882,936
Deferred income taxes .............................. 6,400,000 6,500,000 11,600,000
Gain on sale of assets ............................. (85,246) (1,062,268) (1,001,868)
Minority interest in earnings ...................... 5,346,487 4,540,236 9,550,664
Employee stock bonus ............................... 276,875 270,313 270,312
Stock warrant amortization ......................... 93,900 93,900 187,800
Contribution of common stock to retirement plan .... 675,879 554,804 1,190,583
Changes in operating assets and liabilities:
Prepaid expenses and other assets ............... (222,658) (1,234,266) 6,135,050
Accounts receivable, customers .................. (2,984,736) (2,469,601) (3,076,332)
Accounts receivable, other ...................... (128,098) (1,376,575) (720,327)
Income tax receivable ........................... (1,354,826) (1,364,960)
Income tax payable .............................. (1,225,506) 3,927
Subscriber advance payments ..................... (263,110) 1,837,302 (991,681)
Accrued expenses ................................ (2,155,148) 7,997,802 6,985,852
Accounts payable ................................ 11,753,095 1,480,909 2,983,132
------------- ------------- -------------
Net cash provided by operating activities ....... 70,949,415 61,983,392 131,994,637
------------- ------------- -------------
Cash flows from investing activities:
Cash paid for acquisitions ............................ (249,890,220) (253,494,896)
Capital expenditures .................................. (43,216,915) (26,540,283) (75,714,408)
Other ................................................. (500,000)
Proceeds from sales of assets ......................... 2,804,654 3,884,104 4,327,295
------------- ------------- -------------
Net cash used in investing activities ............. (40,412,261) (272,546,399) (325,382,009)
------------- ------------- -------------
Cash flows from financing activities:
Borrowings of debt .................................... 40,500,000 605,599,999 673,699,999
Repayments of debt .................................... (63,504,841) (373,604,382) (438,708,987)
Debt issuance costs ................................... (7,800) (10,195,447) (10,204,812)
Treasury stock purchased .............................. (7,146,250)
Proceeds from stock options exercised ................. 128,117 747,216 797,002
Partnership contributions ............................. 1,400,000
Partnership distributions ............................. (3,300,000) (3,300,000) (6,600,000)
Dividends paid ........................................ (7,955,904) (7,972,259) (15,956,630)
------------- ------------- -------------
Net cash provided by (used in) financing activities (32,740,428) 211,275,127 195,880,322
------------- ------------- -------------
Net increase (decrease) in cash ......................... (2,203,274) 712,120 2,492,950
Cash at beginning of year ............................... 5,763,140 3,270,190 3,270,190
------------- ------------- -------------
Cash at end of year ..................................... $ 3,559,866 $ 3,982,310 $ 5,763,140
============= ============= =============
Supplemental Cash Flow Information:
Interest paid ......................................... $ 17,957,126 $ 10,326,989 $ 28,348,634
============= ============= =============
Income taxes paid ..................................... $ 11,180,332 $ 8,364,960 $ 14,267,450
============= ============= =============
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
F-6
<PAGE> 10
TCA CABLE TV, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL INFORMATION WITH RESPECT TO INTERIM PERIODS ENDED
JANUARY 31, 1999 AND 1998 ARE UNAUDITED)
1. BASIS OF FINANCIAL STATEMENT PRESENTATION
TCA Cable TV, Inc. (the "Company" or "TCA") owns and operates cable
television ("CATV") systems in non-urban areas in Arkansas, Idaho, Louisiana,
Mississippi, New Mexico, Oklahoma and Texas. TCA is also a cable advertising
insertion provider serving the cable television industry throughout the United
States and has begun offering high-speed Internet access in Texas during the
year ended October 31, 1998.
The consolidated financial statements include the accounts of all
wholly-owned subsidiaries of the Company. Beginning May 1996, the consolidated
financial statements also include the accounts of TCA Cable Partners, a
partnership that is owned 75% by TCA and 25% by DR Partners, a division of
Stephens Group, Inc. Effective February 1998, the consolidated financial
statements include the accounts of TCA Cable Partners II, a partnership that is
owned 80% by TCA and 20% by TCI American Cable Holdings IV, L.P., an affiliate
of Tele-Communications, Inc.
All significant intercompany transactions have been eliminated in
consolidation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Property, Plant and Equipment
Depreciation of property, plant and equipment is computed using the
straight-line method over the estimated useful lives of the related assets as
follows:
<TABLE>
<S> <C>
Distribution systems....... 5-15 years
Transportation equipment... 5 years
Buildings and other........ 5-32 years
</TABLE>
Maintenance and repair costs are charged to expense as incurred. Major
replacements and betterments are capitalized. Upon sale or retirement, the cost
and accumulated depreciation applicable to the asset is written off and the
resulting gain or loss is reflected in income.
Intangibles
Intangible assets including franchises, non-compete agreements and
goodwill are recorded at cost. Intangible assets are amortized on a
straight-line basis over the expected useful lives of the assets, which range
from 5 to 40 years.
Goodwill represents the excess of the cost of the acquisition over the
fair value of the net assets acquired and is being amortized on a straight-line
basis over 40 years. At each balance sheet date, management assesses whether
there has been a permanent impairment in the value of goodwill by considering
current operating results, estimated non discounted future cash flows, trends
and prospects.
Other Assets
Debt issuance costs are amortized to interest expense using the
interest method over the terms of the related debt. Net debt issuance costs are
approximately $10.5 million at October 31, 1998.
Revenue Recognition
The Company recognizes cable television revenue as services are
provided to subscribers. Advertising revenues are recognized when commercials
are broadcast.
F-7
<PAGE> 11
Income Taxes
The Company and its subsidiaries file a consolidated federal income
tax return. The Company utilizes an asset and liability approach for financial
accounting and reporting for income taxes in accordance with Statement on
Financial Accounting Standards No. 109, "Accounting for Income Taxes."
Earnings Per Share
During fiscal 1998, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"). SFAS No. 128
requires the presentation of basic and diluted earnings per share. Basic
earnings per share is computed by dividing net income by the weighted average
number of common shares outstanding during the period. The weighted average
number of common shares outstanding was 49,832,928 shares, 49,682,205 shares
and 49,794,130 shares for the year ended October 31, 1998 and the six months
ended April 30, 1999 and 1998, respectively. Diluted earnings per share is
computed by dividing net income by the weighted average number of common shares
and common stock equivalents for stock options outstanding during the period.
The weighted average number of common shares and common stock equivalents
outstanding was 50,272,847 shares, 50,449,711 shares and 50,218,578 shares for
the year ended October 31, 1998 and the six months ended April 30, 1999 and
1998, respectively. Common stock equivalents are comprised of warrants to
purchase 252,523 common stock equivalent shares during the year ended October
31, 1998 and 358,416 and 226,171 common stock equivalent shares during the six
months ended April 30, 1999 and 1998, respectively, and options to purchase
187,396 common stock equivalent shares during the year ended October 31, 1998
and 409,090 and 198,277 common stock equivalent shares during the six months
ended April 30, 1999 and 1998, respectively.
All share and per share data included in the accompanying statements
and related notes have been adjusted retroactively for a two-for-one stock
split effective July 15, 1998.
Treasury Stock
During fiscal year 1998, pursuant to authorization by the Board of
Directors and in accordance with applicable securities regulations, the Company
repurchased 295,000 shares of its common stock at a cost of $7.1 million. The
repurchased common stock will be used for acquisitions and other corporate
purposes. The repurchased common stock is reflected as a reduction of
shareholders' equity.
Stock Compensation
The Company accounts for employee stock options under the provisions
of APB Opinion No. 25 "Accounting for Stock Issued to Employees" ("APB 25") and
related interpretations and has adopted the "disclosure only" alternative
described in Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" ("SFAS 123"), which requires pro forma disclosure
of compensation expense using a fair value based method of accounting for stock
based compensation plans.
Use of Estimates
The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Concentration of Credit Risk
The Company maintains cash balances at several financial institutions.
During the year, these balances may exceed federally insured amounts.
F-8
<PAGE> 12
Comprehensive Income
In June 1997, the Financial Accounting Standards Board issued
Statement of Accounting Standards No. 130 ("SFAS 130"), "Reporting
Comprehensive Income." SFAS 130 establishes standards for reporting
comprehensive income and its components in a full set of financial statements.
Comprehensive income as defined includes all changes in equity (net assets)
during a period from non-owner sources. Examples of items to be included in
comprehensive income, which are excluded from net income, include foreign
currency translation adjustment and unrealized gain/loss on available for sale
securities. For the six month period ended April 30, 1999, the difference
between net income, as reported, and comprehensive income of $25,223,605
relates solely to the change in unrealized gain on the available for sale
securities of $1,518,750. There were no differences between comprehensive
income and net income, as reported, during the year ended October 31, 1998 and
six months ended April 30, 1998.
Interim Financial Data (unaudited)
The interim financial data for the six month periods ended April 30,
1999 and 1998 has been prepared by the Company and is unaudited; however, in
the opinion of the Company, the interim data includes all adjustments,
consisting only of normal recurring adjustments, necessary for a fair statement
of the results of operations and cash flows for the interim periods. Results
for interim periods are not necessarily indicative of the results to be
achieved for the full year.
3. INTANGIBLE ASSETS
Intangible assets consists of the following at October 31, 1998:
<TABLE>
<S> <C>
Covenants not to compete ..... $ 38,221,062
Franchises ................... 146,207,406
Goodwill ..................... 664,920,908
-------------
849,349,376
Less: Accumulated amortization (117,552,728)
-------------
$ 731,796,648
=============
</TABLE>
4. DEBT
Debt consists of the following at October 31, 1998:
<TABLE>
<S> <C>
Notes payable to three companies payable in semiannual
installments beginning February 1993, due August 1999,
bearing interest at 9.0% ...................................... $ 12,000,000
Notes payable to five insurance companies payable in
annual installments beginning June 1999, due June
2005, bearing interest at 7.26% ............................... 100,000,000
Bonds due February 1, 2028. Interest payable semiannually
on February 1 and August 1 each year beginning August
1, 1998, bearing interest at 6.53% ............................ 200,000,000
Revolving bank credit, terminating June 1999, with
interest at prime or LIBOR plus an applicable margin,
unused portion of $2,000,000 as of October 31, 1998,
with no commitment fees(a) .................................... 38,000,000
Revolving bank credit, terminating January 31, 2003, with
interest at prime or LIBOR plus an applicable margin,
unused portion of $148,000,000 as of October 31, 1998,
with a commitment fee of .20% per annum on the unused
portion(a) .................................................... 202,000,000
Other............................................................ 16,193
------------
$552,016,193
============
</TABLE>
F-9
<PAGE> 13
(a) The weighted average interest rate on the Company's revolving bank credit
agreements at October 31, 1998 was 6.14%.
The Company's revolving bank credit agreements and the term loan
agreements contain restrictive covenants including minimum cash flow ratios.
Under these covenants, the Company's dividends, capital expenditures and fixed
principal payments could also be limited. The Company has obtained a waiver of
non-compliance as of October 31, 1998 relating to the fixed charges coverage
covenant on its notes payable due August 1999 and June 2005. The Company may be
in noncompliance under these notes in future periods. The Company believes it
can obtain waivers of noncompliance as needed.
Scheduled maturities of debt at October 31, 1998, are as follows:
<TABLE>
<S> <C>
1999 ................. $ 64,295,643
2000 ................. 14,291,978
2001 ................. 14,285,714
2002 ................. 14,285,714
2003 ................. 216,285,714
Thereafter ........... 228,571,430
------------
$552,016,193
============
</TABLE>
On July 24, 1997, the Company filed a shelf registration with the SEC
for a public debt offering of up to $300 million. On February 2, 1998, the
Company issued $200 million in bonds due February 1, 2028 with a coupon of
6.53% to finance the TCI Transaction (Note 8). In connection with this debt
offering, the Company entered into treasury lock transactions with a notional
amount totaling $100 million in August 1997 (the "Treasury Locks"). The
Treasury Locks were designated as a hedge against interest rate changes prior
to the closing of the debt offering. In January 1998, the Treasury Locks were
terminated at a cost of $7.9 million. The cost, which is classified as a debt
issuance cost in other assets in the accompanying balance sheet, is being
amortized over the term of the public debt as an interest rate yield
adjustment.
5. TRANSACTIONS WITH AFFILIATES
TCA Management Company performs all accounting and management services
for two CATV systems owned by affiliated companies (the "affiliated
companies"). Revenues received by TCA Management Company from the affiliated
companies (which equal an expense reimbursement plus a profit) are included in
revenues and related expenses are included in operating expenses. These amounts
are not material.
The Company leases its headquarters building from a company partially
owned by an officer and director of TCA. The annual lease expense was $318,515
for fiscal year 1998.
6. CONTINGENCIES AND COMMITMENTS
Annual rental expense for utility poles and tower sites for the year
ended October 31, 1998 was approximately $3.3 million.
Rental expense for all other rental agreements for office equipment
and buildings for the year ended October 31, 1998 was approximately $1.8
million.
Various lawsuits are pending against the Company and its subsidiaries.
The Company intends to vigorously contest the liability in all matters brought
against the Company. While no assurance can be given as to the ultimate
outcome, management believes the litigation will not have a material adverse
effect on the results of operations or financial position of the Company.
The Telecommunications Act of 1996 was signed into law on February 8,
1996. This law alters the regulatory structure governing the nation's
telecommunications providers. It removes barriers to competition in both the
cable television market and the local telephone market. Among other things, it
reduces the scope of cable regulation. The Company's management believes this
legislation may have a significant impact on its future operations and its
competitive environment.
F-10
<PAGE> 14
7. INCOME TAXES
The following is a reconciliation of taxes computed at the statutory
federal income tax rate with the provision for income taxes in the consolidated
financial statements for the year ended October 31, 1998:
<TABLE>
<S> <C>
Income before taxes ......................... $ 69,690,691
============
Statutory federal rate ...................... 35.0%
Provision for federal income taxes at
the statutory federal rate ............... $ 24,391,742
State income taxes, net of federal
benefit .................................. 1,851,853
Amortization of goodwill .................... 236,605
Other ....................................... 719,800
------------
Provision for income taxes .................. $ 27,200,000
============
</TABLE>
The deferred income taxes liability balance of $83,180,000 at October
31, 1998, is the tax effect of temporary differences between the tax bases of
the Company's property, plant and equipment and intangibles and their bases for
financial reporting purposes. Other temporary differences are not significant.
8. ACQUISITIONS AND DISPOSITIONS
On September 1, 1998, the Company acquired the assets of the cable
television system serving approximately 2,500 subscribers in Sallisaw,
Oklahoma. The acquisition was made through TCA Cable Partners, the TCA managed
partnership with DR Partners ("Donrey"), a division of Stephens Group, Inc. The
system was acquired from Tele-Communications, Inc. ("TCI"). The cost of the
acquisition was approximately $3.5 million, $3.1 million of which related to
acquired intangibles. The acquisition was funded by the Company's bank line of
credit.
On June 15, 1998, the Company closed on a transaction to exchange the
assets of selected systems owned by TCA Cable Partners for the assets of
certain systems owned by Cable One, Inc. ("Cable One"), a subsidiary of The
Washington Post Company. The Company exchanged its operations in Bartlesville
and Tonkawa, Oklahoma for Cable One's operations in Lufkin, Texas and
surrounding areas. The exchange in total affects approximately 28,000 TCA and
Cable One subscribers. The Company also agreed to manage Cable One's Livingston
and Corrigan, Texas operations.
On April 1, 1998, the Company acquired Web International, Inc., doing
business as Internet Tyler, an Internet service provider serving the Tyler,
Texas area. The Company issued 19,242 shares of common stock valued at $962,100
and paid approximately $260,000 in cash for this acquisition.
On February 2, 1998 the Company formed a partnership, TCA Cable
Partners II ( the "TCI Transaction") with TCI American Cable Holdings IV, L.P.
(the "TCI Affiliate"), an affiliate of TCI. The Company contributed certain
cable systems in Texas and New Mexico serving approximately 155,000 subscribers
and $46.6 million in unsecured debt and the TCI Affiliate contributed its
systems in North Texas and Western Louisiana serving approximately 150,000
subscribers and $249.7 million in unsecured debt, in exchange for an 80% and
20% partnership interest, respectively, in TCA Cable Partners II. The cable
systems contributed by the Company and the TCI Affiliate are each valued at
approximately $315 million. The Company financed the TCI Transaction with a
portion of the proceeds from a $150 million increase in the Company's primary
credit facility and the issuance of $200 million in public debt. Upon closing
The TCI Transaction, the Company extended a loan to TCA Cable Partners II in
the aggregate amount of the unsecured debt of TCA Cable Partners II. TCA Cable
Partners II in turn used the proceeds of the loan to retire such debt. TCA
Cable Partners II is consolidated in the financial statements of TCA and 20% of
the estimated fair value of TCA Cable Partners II net assets were recorded by
the Company as a redeemable minority interest at the acquisition date. The TCI
Affiliate has the right to require the Company to purchase the TCI Affiliate's
20% partnership interest at fair market value beginning in February 2003
through February 2023 (the "Put and Call Period"), the termination
F-11
<PAGE> 15
date of the partnership agreement. The Company has a corresponding right to
require the TCI Affiliate to sell its 20% partnership interest in TCA Cable
Partners II to the Company at fair market value during the Put and Call Period.
TCA Cable Partners II is managed by the Company.
On December 15, 1997, the Company sold the assets of its long distance
business to NTS Communications, Inc. The sales price was $4.1 million resulting
in a gain of approximately $0.7 million.
The pro forma operating results for the fiscal year 1998 acquisitions
as though the acquisitions had been made at the beginning of fiscal year 1998
are as follows:
<TABLE>
<S> <C>
Revenues............... $ 401,029,855
Net income............. 42,519,896
Basic earnings per share 0.85
Diluted earnings per share 0.84
</TABLE>
The pro forma results are not necessarily indicative of what actually
would have occurred if the acquisitions had been in effect for the entire
periods presented. In addition, they are not intended to be a projection of
future results and do not reflect any synergies that might be achieved from
combined operations.
9. SHAREHOLDER RIGHTS PLAN
On January 15, 1998, the Company's Board of Directors adopted a
Shareholder Rights Plan (the "Rights Plan"). In connection with the adoption of
the Rights Plan, the Board declared a dividend of one preferred share purchase
right for each outstanding share of Company common stock. Each Right, which is
not presently exercisable, entitles the holder to purchase one one-thousandth
of a share of Series A Junior Participating Preferred Stock at an exercise
price of $85. In the event that any person acquires 15 percent or more of the
outstanding shares of common stock, each holder of a Right (other than the
acquiring person or group) will be entitled to receive, upon payment of the
exercise price, that number of common stock shares having a market value equal
to two times the exercise price. The distribution of the Rights was made on
January 28, 1998, payable to shareholders of record at the close of business on
that date. The Rights will expire on January 15, 2008.
10. INCENTIVE STOCK OPTION PLAN
The Company, in fiscal year 1998 granted stock options and issued
shares of common stock under the TCA Cable TV, Inc. Amended and Restated
Incentive Stock Option Plan and the 1996 Non-Employee Directors' Stock Option
Plan (collectively the "Plans") to employees and directors.
All of the options granted to the employees and directors have an
exercise price equal to or greater than the fair market value of the stock at
grant date and become exercisable beginning on the first anniversary of the
date of grant. The options granted to non-employee directors have a contractual
term of 10 years and vest immediately on the date of grant. The options granted
to employees have a contractual term of 7 years and vest over four years at the
rate of 25% per year beginning on the first anniversary date of the grant.
A summary of the Company's stock options as of October 31, 1998 and
the changes during the year then ended is presented below:
<TABLE>
<CAPTION>
WEIGHTED
# OF SHARES AVERAGE
UNDERLYING EXERCISE
OPTIONS PRICES
----------- --------
<S> <C> <C>
Outstanding at beginning of
the year ................... 489,644 $13.44
Granted ...................... 776,000 29.23
Exercised .................... (70,490) 14.03
Forfeited .................... (31,250) 14.66
Expired ...................... -- --
---------- ------
Outstanding at end of year ... 1,163,904 $23.63
========== ======
Exercisable at end of year ... 323,754 15.15
========== ======
Weighted-average fair value of
options granted ............ -- $ 8.02
========== ======
</TABLE>
F-12
<PAGE> 16
Pursuant to SFAS 123, the fair value of each stock option granted is
estimated on the date of grant using the Black-Scholes option-pricing model
with the following weighted-average assumptions for grants in fiscal year 1998:
dividend yield of 1.07%; risk free interest rate 5.28%; expected life of 4.9
years; and a volatility of 23.0%.
The following table summarizes information about stock options
outstanding at October 31, 1998:
<TABLE>
<CAPTION>
TOTAL OPTIONS OUTSTANDING TOTAL OPTIONS EXERCISABLE
------------------------- ------------------------------
WEIGHTED AVERAGE WEIGHTED WEIGHTED
RANGE OF NUMBER REMAINING AVERAGE NUMBER AVERAGE
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
--------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$ 9.08-12.11 43,724 1.4 years $10.58 43,724 10.58
12.11-15.14 299,180 3.7 years 13.28 180,030 12.98
15.14-30.28 821,000 6.8 years 28.28 100,000 21.39
--------- -------
1,163,904 323,754
========= =======
</TABLE>
Had the compensation cost for the Company's stock-based compensation
plans been determined consistent with the requirements of SFAS 123, the
Company's net income and earnings per common share for the year ended October
31, 1998 would approximate the pro forma amounts below:
<TABLE>
<CAPTION>
AS REPORTED PRO FORMA
<S> <C> <C>
SFAS 123 Charge .... $ 1,082,196
APB 25 Charge ......
Net income ......... $42,490,691 $41,833,798
Basic earnings per
common share ..... $ 0.85 $ 0.84
Diluted earnings per
common share ..... $ 0.84 $ 0.83
</TABLE>
The effects of applying SFAS 123 in this pro forma disclosure are not
indicative of future amounts.
11. DEFERRED SAVINGS AND RETIREMENT PLAN
Effective September 1, 1983, the Company and several of its affiliates
adopted a deferred savings and retirement plan covering all employees with at
least one year of service.
Employees may elect to contribute a portion of their compensation to
the plan. The Company may contribute up to an amount equal to the employees'
contributions but not in excess of three percent of the employees' earnings.
The Company anticipates that all or substantially all of their discretionary
and matching contributions will consist of registered shares of common stock of
the Company. The Company's contribution for the year ended October 31, 1998 was
$1,190,583.
12. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, 1998
---------------------------------------------------------
THREE MONTHS ENDED
---------------------------------------------------------
JANUARY 31 APRIL 30 JULY 31 OCTOBER 31
----------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
TOTAL REVENUE: $80,874,131 $96,580,112 $101,541,500 $ 106,741,040
OPERATING INCOME: 23,621,527 28,772,961 28,044,483 31,852,911
NET INCOME: 10,665,203 9,920,757 9,730,282 12,174,449
BASIC EARNINGS PER COMMON SHARE: $ 0.21 $ 0.20 $ 0.20 $ 0.24
DILUTED EARNINGS PER COMMON SHARE: $ 0.21 $ 0.20 $ 0.19 $ 0.24
</TABLE>
F-13
<PAGE> 17
13. SEGMENT INFORMATION
The Company operates primarily in the cable television industry. The
Company's wholly-owned subsidiary, VPI Communications, Inc. d/b/a CableTime,
provides cable advertising sales for the Company and third parties.
<TABLE>
<CAPTION>
Advertising
Cable Insertion Consolidated
-------------- ------------ --------------
<S> <C> <C> <C>
YEAR ENDED OCTOBER 31, 1998:
Revenues............................. $ 316,535,922 $ 69,200,861 $ 385,736,783
Operating income..................... 102,157,851 10,134,031 112,291,882
Depreciation and amortization........ 53,797,113 2,589,721 56,386,834
Capital expenditures, including acquisition 102,062,235 7,510,876 109,573,111
Identifiable assets.................. 1,032,977,765 37,794,648 1,070,772,413
</TABLE>
14. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of accounts receivable and accounts payable
reported in the accompanying consolidated financial statements approximate fair
value due to their short maturities.
The carrying amount of borrowings under the revolving bank credit
facilities approximate fair value as the outstanding borrowings bear interest
at market rates.
The fair value of the bonds is approximately $202 million at October
31, 1998 based on quoted market rates. The fair value, based on a discounted
cash flow analysis, of amounts due under the notes payable is approximately
$114.5 million at October 31, 1998.
15. SUBSEQUENT EVENT
At the December 9, 1998 Board of Directors' Meeting, a cash dividend
of $0.08 was declared. This dividend is to holders of record on January 7,
1999, and payable on January 21, 1999.
16. PROPOSED MERGER (UNAUDITED)
On May 11, 1999, the Company and Cox Communications, Inc. ("Cox")
entered into an agreement and plan of merger, whereby the Company will be
merged into a subsidiary of Cox. As a result of the merger, each outstanding
share of Company common stock will be converted into the right to receive cash
and/or Class A common stock of Cox. The closing of the merger is subject to
certain conditions, including the approval of the common stockholders of the
Company and the receipt of all necessary regulatory approvals.
F-14
<PAGE> 18
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma combined condensed financial information
has been derived from the historical financial statements of Cox, Prime South
Diversified, Inc. and TCA Cable TV, Inc. The unaudited pro forma combined
condensed balance sheet as of March 31, 1999 has been presented as if the
pending acquisition of TCA had been consummated on that date. The unaudited pro
forma combined condensed statements of operations for the year ended December
31, 1998 and for the three months ended March 31, 1999 have been presented as if
the pending acquisition of TCA and the acquisition of Prime South had been
consummated on January 1, 1998. Cox acquired Prime South on October 1, 1998.
The unaudited pro forma combined condensed financial information gives
effect to the acquisition of Prime South and the pending acquisition of TCA
under the purchase method of accounting for business combinations and is based
upon the assumptions and adjustments described in the accompanying notes to the
unaudited pro forma combined condensed financial information presented on the
following pages. A final determination of required purchase accounting
adjustments, including the allocation of the purchase price to the assets
acquired and liabilities assumed based on their respective fair values, has not
yet been made. Accordingly, the purchase accounting adjustments made in
connection with the development of the unaudited pro forma combined condensed
financial information are preliminary and have been made solely for purposes of
developing such unaudited pro forma combined condensed financial information.
Upon determination of the final fair values of certain Prime South and TCA
assets and liabilities, assuming completion of the TCA acquisition, the actual
financial position and results of operations will differ, perhaps significantly,
from the pro forma amounts reflected herein because of a variety of factors,
including availability of additional information, changes in values not
currently identified and changes in operating results between the dates of the
unaudited pro forma combined condensed financial information and the date on
which the acquisitions are consummated and such final fair values are
determined.
The pro forma adjustments do not reflect any operating efficiencies and
cost savings that Cox may achieve with respect to the combined companies. The
pro forma adjustments do not include any adjustments to historical revenues for
any future price changes nor any adjustments to programming, operating,
marketing and general and administrative expenses for any future operating
changes.
The unaudited pro forma combined condensed results are not necessarily
indicative of the financial position or operating results that would have
occurred had the transactions been consummated on the date, or at the beginning
of the period, for which such transactions have been given effect. In addition,
the unaudited pro forma combined condensed results are not necessarily
indicative of the combined results of future operations.
All per share amounts reflected in the unaudited pro forma combined
condensed financial information below have been restated to reflect Cox's
two-for-one stock split which became effective May 21, 1999.
P-1
<PAGE> 19
COX COMMUNICATIONS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
MARCH 31, 1999
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
TCA
PRO FORMA
COX TCA ADJUSTMENTS COX PRO
(A) (A) (B) FORMA
--------- -------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Cash........................................................ $ 90.4 $ 4.5 $ 94.9
Accounts and notes receivable, less allowance for doubtful
accounts.................................................. 174.1 22.3 196.4
Net plant and equipment..................................... 2,782.4 309.4 $ 102.4 3,194.2
Investments................................................. 7,659.3 2.0 9.5 7,670.8
Intangible assets........................................... 3,944.2 724.2 (724.2) 8,934.6
3,796.0
1,194.4
Other assets................................................ 76.6 13.2 (9.8) 80.0
--------- -------- -------- ---------
Total assets........................................ $14,727.0 $1,075.6 $4,368.3 $20,170.9
========= ======== ======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable & accrued expenses......................... $ 287.5 $ 52.8 $ (10.0) $ 330.3
Deferred income............................................. 46.3 2.7 49.0
Deferred income taxes....................................... 3,668.3 86.4 40.4 4,989.5
1,194.4
Other liabilities........................................... 372.4 4.2 376.6
Debt........................................................ 3,383.1 532.0 1,637.1 5,562.2
10.0
Amounts due to Cox Enterprises, Inc......................... 112.7 112.7
--------- -------- -------- ---------
Total liabilities................................... 7,870.3 678.1 2,871.9 11,420.3
--------- -------- -------- ---------
Minority interest in equity of consolidated subsidiary...... 193.8 193.8
Shareholders' equity
Preferred stock........................................... 4.8 4.8
Class A common stock...................................... 527.5 5.0 (5.0) 567.1
39.6
Class C common stock...................................... 27.6 27.6
Additional paid-in capital................................ 1,879.8 55.5 (55.5) 3,540.3
1,660.5
Retained earnings......................................... 1,601.5 151.2 (151.2) 1,601.5
Accumulated other comprehensive income.................... 2,815.5 1.5 (1.5) 2,815.5
Less: treasury stock...................................... (9.5) 9.5
--------- -------- -------- ---------
Total shareholders' equity.......................... 6,856.7 203.7 1,496.4 8,556.8
--------- -------- -------- ---------
Total liabilities and shareholders' equity.......... $14,727.0 $1,075.6 $4,368.3 $20,170.9
========= ======== ======== =========
</TABLE>
P-2
<PAGE> 20
COX COMMUNICATIONS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
BALANCE SHEET
MARCH 31, 1999
(a) Represents historical amounts for Cox as of March 31, 1999 and TCA as of
January 31, 1999.
(b) Represents the net effect of Cox's acquisition of TCA and the preliminary
adjustments to the historical balance sheet of TCA recorded in conjunction
with applying purchase accounting. A summary of the assumptions for these
adjustments is as follows:
<TABLE>
<CAPTION>
(MILLIONS OF DOLLARS)
-----------------------
<S> <C>
Purchase price plus net liabilities assumed:
Cox Class A common stock to be issued to TCA shareholders
(see below)............................................ $1,700.1
Cash to be paid to TCA shareholders (funded through new
borrowings)............................................ 1,613.6
Assumption of TCA debt and accrued interest............... 542.0
Cox acquisition related costs (funded through new
borrowings)............................................ 23.5
--------
Total purchase price.............................. $3,879.2
--------
Allocation of purchase price to tangible assets:
Preliminary estimate to record acquired plant and
equipment at fair value................................ $ 411.8
Preliminary estimate of deferred taxes related to property
and equipment write-up................................. (40.4)
Preliminary estimate to record investments at fair
value.................................................. 11.5
Net working capital deficit and other assets/liabilities
of TCA assumed or acquired by Cox...................... (105.9)
Minority interest in TCA consolidating entity............. (193.8)
--------
Total allocation to tangible assets............... 83.2
--------
Excess of purchase price over tangible assets............... $3,796.0
========
</TABLE>
Cox anticipates the issuance of approximately 39.6 million shares of Cox
Class A common stock, which assumes TCA director options will be converted
into Cox Class A common stock, to TCA shareholders upon consummation of the
TCA acquisition.
In addition, the pro forma adjustments reflect:
- the elimination of TCA's equity accounts, certain intangible assets
(comprised primarily of goodwill which arose from previous acquisitions
by TCA)and $9.8 million of deferred debt issuance costs;
- the reclassification of accrued interest to debt which will be refinanced
subsequent to the consummation of the TCA acquisition; and
- deferred taxes and corresponding goodwill related to the excess purchase
price over net tangible assets acquired.
P-3
<PAGE> 21
COX COMMUNICATIONS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRIME
SOUTH TCA
PRO FORMA PRO FORMA
COX PRIME SOUTH TCA ADJUSTMENTS ADJUSTMENTS COX
(A) (A) (A) (B) (C) PRO FORMA
------------ ----------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Revenues................ $ 1,716.8 $ 138.2 $ 385.7 $ 2,240.7
Costs and expenses
Programming costs..... 406.8 40.9 103.7 551.4
Plant operations...... 132.8 5.8 76.7 215.3
Marketing............. 99.5 5.7 2.5 107.7
General and
administrative..... 389.2 24.9 34.1 448.2
Satellite operating
and
administrative..... 29.4 29.4
Depreciation.......... 373.5 29.7 36.5 $ (5.6) $ 15.0 449.1
Amortization.......... 84.2 10.6 19.9 8.9 75.0 234.9
6.4 29.9
------------ --------- -------- -------- --------- ------------
Operating income........ 201.4 20.6 112.3 (9.7) (119.9) 204.7
Interest expense........ (223.3) (106.6) (34.1) 60.4 (104.2) (407.8)
Equity in net losses of
affiliated
companies............. (547.2) (1.6) (548.8)
Gain on investments,
net................... 2,484.2 2,484.2
Gain on issuance of
stock by affiliated
company............... 165.3 165.3
Dividend income......... 12.2 12.2
Other, net.............. 0.9 (8.5) (7.6)
------------ --------- -------- -------- --------- ------------
Income (loss) before
taxes................. 2,093.5 (87.6) 69.7 50.7 (224.1) 1,902.2
Income taxes............ 822.8 27.2 (10.7) (76.5) 762.8
------------ --------- -------- -------- --------- ------------
Net income (loss)....... $ 1,270.7 $ (87.6) $ 42.5 $ 61.4 $ (147.6) $ 1,139.4
============ ========= ======== ======== ========= ============
Per share data:
Basic income per share
of Class A common
stock.............. $ 2.33 $ 1.92
============ ============
Diluted income per
share of Class A
common stock....... 2.30 1.90
============ ============
Basic weighted-average
shares of Class A
common stock
outstanding........ 545,626,528 593,676,957
============ ============
Diluted
weighted-average
shares of Class A
common stock
outstanding........ 552,421,730 600,472,159
============ ============
</TABLE>
P-4
<PAGE> 22
COX COMMUNICATIONS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(a) Represents historical amounts for the years ended December 31, 1998 for Cox
and October 31, 1998 for TCA and for the nine months ended September 30,
1998 for Prime South.
(b) Represents the effects of:
1. elimination of certain interest expense accrued by Prime South offset by
the incremental interest expense from new borrowings to fund the Prime
South acquisition with interest calculated using Cox's average cost of
funds rate of 6.4%;
2. depreciation expense on the preliminary estimated fair value of acquired
plant and equipment over the estimated average remaining useful life of
eight years;
3. amortization expense on the excess purchase price over net tangible
assets acquired based on preliminary asset allocations, primarily
franchise value, over 40 years;
4. amortization expense on goodwill arising from the impact on deferred
taxes as a result of this acquisition to be amortized over 40 years;
5. the effects on Cox's income tax provision, using a statutory rate of
35%, on the adjustments reflected in items 1., 2. and 3. above and Prime
South current year operating losses for the nine months ended September
30, 1998; and
(c) Represents the effects of:
1. incremental interest expense from new borrowings to fund the TCA
acquisition and assumed debt with interest calculated using Cox's
average cost of funds rate of 6.4%;
2. depreciation expense on the preliminary estimated fair value of acquired
plant and equipment over the estimated average remaining useful life of
eight years;
3. amortization expense on the excess purchase price over net tangible
assets acquired based on preliminary asset allocations, primarily
franchise value, over 40 years;
4. amortization expense on goodwill arising from the impact on deferred
taxes as a result of this acquisition to be amortized over 40 years; and
5. the effects on Cox's income tax provision, using a statutory rate of
39.4%, on the adjustments reflected in items 1., 2. and 3. above.
P-5
<PAGE> 23
COX COMMUNICATIONS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999
(MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
TCA
PRO FORMA
COX TCA ADJUSTMENTS COX
(A) (A) (B) PRO FORMA
------------ ------ ----------- ------------
<S> <C> <C> <C> <C>
Revenues........................................ $ 498.5 $105.4 $ 603.9
Costs and expenses
Programming costs............................. 128.8 28.5 157.3
Plant operations.............................. 39.1 20.8 59.9
Marketing..................................... 26.6 0.4 27.0
General and administrative.................... 115.5 8.9 124.4
Depreciation.................................. 96.6 9.9 $ 3.0 109.5
Amortization.................................. 26.7 5.4 18.4 58.0
7.5
------------ ------ ------ ------------
Operating income................................ 65.2 31.5 (28.9) 67.8
Interest expense................................ (54.0) (9.2) (24.5) (87.7)
Equity in net losses of affiliated companies.... (46.5) (46.5)
Gain on investments, net........................ 419.5 419.5
Dividend income................................. 11.1 11.1
Other, net...................................... (0.1) (2.7) (2.8)
------------ ------ ------ ------------
Income (loss) before taxes...................... 395.2 19.6 (53.4) 361.4
Income taxes.................................... 144.0 7.6 (18.1) 133.5
------------ ------ ------ ------------
Net income (loss)............................... $ 251.2 $ 12.0 $(35.3) $ 227.9
============ ====== ====== ============
Per share data:
Basic income per share of Class A common
stock...................................... $ 0.45 $ 0.38
============ ============
Diluted income per share of Class A common
stock...................................... 0.45 0.38
============ ============
Basic weighted-average shares of Class A
common stock outstanding................... 554,896,354 594,497,283
============ ============
Diluted weighted-average shares of Class A
common stock outstanding................... 562,837,952 602,438,881
============ ============
</TABLE>
P-6
<PAGE> 24
COX COMMUNICATIONS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999
(a) Represents historical amounts for the three months ended March 31, 1999 for
Cox and January 31, 1999 for TCA.
(b) Represents the effects of:
1. the incremental interest expense from new borrowings to fund the TCA
acquisition and assumed debt with interest calculated using Cox's
average cost of funds rate of 6.2%;
2. depreciation expense on the preliminary estimated fair value of acquired
plant and equipment over the estimated average remaining useful life of
eight years;
3. amortization expense on the excess purchase price over net tangible
assets acquired based on preliminary asset allocations, primarily
franchise value, over 40 years;
4. amortization expense on goodwill arising from the impact on deferred
taxes as a result of this acquisition to be amortized over 40 years; and
5. the effects on Cox's income tax provision, using a statutory rate of
39.4%, on the adjustments reflected in items 1., 2. and 3. above.
P-7
<PAGE> 25
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 hereunto duly authorized.
COX COMMUNICATIONS, INC.
Dated: July 19, 1999 By: /s/ Andrew A. Merdek
--------------------------------
Andrew A. Merdek
Corporate Secretary
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
TCA Cable TV, Inc.;
We consent to the incorporation by reference in the registration statements on
Form S-8 (Nos. 33-80993, 33-80995, 33-91506, 33-93148 and 333-44399) and on Form
S-3 (Nos. 333-03351, 333-03766, 333-76235 and 333-82575) of Cox Communications,
Inc. of our report dated December 18, 1998, with respect to the consolidated
balance sheet of TCA Cable TV, Inc. and Subsidiaries as of October 31, 1998 and
the related consolidated statements of operations, shareholders' equity, and
cash flows for the year then ended, which report appears in the Form 8-K/A of
Cox Communications, Inc. dated May 12, 1999.
KPMG LLP
Dallas, Texas
July 16, 1999
