<PAGE> 1
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, 2000
[ ] 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
[COX COMMUNICATIONS LOGO]
COX COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 58-2112281
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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 [ ]
---------------
There were 577,268,120 shares of Class A Common Stock and 27,597,792
shares of Class C Common Stock outstanding as of May 1, 2000.
<PAGE> 2
COX COMMUNICATIONS, INC.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2000
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PART I - FINANCIAL INFORMATION
<S> <C>
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS................................ 2
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS..................................... 14
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK....... 17
PART II - OTHER INFORMATION
ITEM 1. LEGAL
PROCEEDINGS...................................................... 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................. 20
SIGNATURES......................................................................... 21
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
COX COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
2000 1999
----------- -----------
(UNAUDITED)
(THOUSANDS OF DOLLARS)
<S> <C> <C>
ASSETS
Cash .............................................................. $ 52,001 $ 33,313
Accounts and notes receivable, less allowance for doubtful
accounts of $18,352 and $14,783 ................................. 233,241 260,518
Net plant and equipment ........................................... 4,902,180 4,038,236
Investments ....................................................... 9,453,940 11,769,610
Intangible assets ................................................. 13,953,948 10,174,034
Amounts due from Cox Enterprises, Inc. (CEI) ...................... -- 114,821
Other assets ...................................................... 210,572 223,965
----------- -----------
Total assets ................................................. $28,805,882 $26,614,497
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses ............................. $ 529,269 $ 477,134
Deferred income taxes ............................................. 6,442,970 6,670,521
Other liabilities ................................................. 589,777 209,211
Debt .............................................................. 7,336,083 6,375,795
Amounts due to CEI ................................................ 80,007 --
----------- -----------
Total liabilities ............................................ 14,978,106 13,732,661
----------- -----------
Commitments and contingencies (Note 9)
Minority interest in equity of consolidated subsidiaries .......... 126,414 195,616
Cox-obligated capital and preferred securities of subsidiary trust 1,150,561 1,150,636
Shareholders' equity
Series A preferred stock - liquidation preference of $22.1375 per
share, $1 par value; 10,000,000 shares authorized; shares
issued and outstanding: 4,836,372 ............................ 4,836 4,836
Class A common stock, $1 par value; 650,000,000 shares
authorized; shares issued and outstanding: 577,251,379
and 576,168,914 .............................................. 577,251 576,169
Class C common stock, $1 par value; 60,000,000 shares
authorized; shares issued and outstanding: 27,597,792 ........ 27,598 27,598
Additional paid-in capital ...................................... 3,852,259 3,835,639
Retained earnings ............................................... 3,299,721 2,232,205
Accumulated other comprehensive income .......................... 4,789,136 4,859,137
----------- -----------
Total shareholders' equity ................................... 12,550,801 11,535,584
----------- -----------
Total liabilities and shareholders' equity ................... $28,805,882 $26,614,497
=========== ===========
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 4
COX COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31
---------------------------------
2000 1999
------------- -------------
(UNAUDITED)
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<S> <C> <C>
REVENUES .............................................. $ 779,851 $ 498,546
COSTS AND EXPENSES
Programming costs .................................. 195,592 128,761
Plant operations ................................... 62,883 39,133
Marketing .......................................... 44,313 26,630
General and administrative ......................... 177,314 115,492
Depreciation ....................................... 178,815 96,646
Amortization ....................................... 78,953 26,654
------------- -------------
OPERATING INCOME ...................................... 41,981 65,230
Interest expense ...................................... (133,252) (53,964)
Expense related to indexed debentures ................. (369,498) --
Equity in net losses of affiliated companies .......... (6,493) (46,453)
Gain on investments, net .............................. 1,769,839 419,452
Dividend income ....................................... 11,488 11,073
Other, net ............................................ 193 (102)
------------- -------------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST ............................ 1,314,258 395,236
Income tax expense .................................... 225,404 144,057
------------- -------------
INCOME BEFORE MINORITY INTEREST ....................... 1,088,854 251,179
Minority interest ..................................... (21,338) --
------------- -------------
NET INCOME ............................................ $ 1,067,516 $ 251,179
============= =============
PER SHARE DATA
Basic net income per share .......................... $ 1.77 $ 0.45
Diluted net income per share ........................ 1.74 0.45
Basic weighted-average shares outstanding ........... 604,204,208 554,896,354
Diluted weighted-average shares outstanding.......... 613,476,356 562,837,952
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 5
COX COMMUNICATIONS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
SERIES A COMMON STOCK ADDITIONAL OTHER
PREFERRED ------------------------ PAID-IN RETAINED COMPREHENSIVE COMPREHENSIVE
STOCK CLASS A CLASS C CAPITAL EARNINGS INCOME TOTAL INCOME
----------- ----------- ----------- ---------- ---------- ---------- ----------- ------------
(UNAUDITED) (UNAUDITED)
(THOUSANDS OF DOLLARS) (THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT
DECEMBER 31, 1999... $ 4,836 $ 576,169 $ 27,598 $3,835,639 $2,232,205 $4,859,137 $11,535,584
Net income.......... 1,067,516 1,067,516 $ 1,067,516
------------
Issuance of
stock related to
stock compensation
plans (including
tax benefit on
stock options
exercised)........ 1,082 16,620 17,702
Change in net
unrealized loss
on securities..... (70,001)
Other comprehensive ------------
loss.............. (70,001) (70,001) (70,001)
------------
Comprehensive
loss.............. $ 997,515
----------- ---------- ---------- ---------- ---------- ---------- ----------- ============
BALANCE AT
MARCH 31, 2000 $ 4,836 $ 577,251 $ 27,598 $3,852,259 $3,299,721 $4,789,136 $12,550,801
=========== ========== ========== ========== ========== ========== ===========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 6
COX COMMUNICATIONS, INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31
---------------------------------
2000 1999
---------------------------------
(UNAUDITED)
(THOUSANDS OF DOLLARS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ...................................................... $ 1,067,516 $ 251,179
Adjustments to reconcile net income to net cash provided by
operating activities, net of effects of acquisitions:
Depreciation .................................................. 178,815 96,646
Amortization .................................................. 78,953 26,654
Expense related to indexed debentures ......................... 369,498 --
Equity in net losses of affiliated companies .................. 6,493 46,453
Deferred income taxes ......................................... (183,729) 25,939
Gain on investments, net ...................................... (1,769,839) (419,452)
Minority interest, net of dividends paid ...................... 19,688 --
Increase in accounts and notes receivable ....................... (11,358) (7,225)
Decrease in prepaid expenses .................................... 15,074 7,470
Increase in accounts payable and accrued expenses ............... 18,195 (16,741)
Increase in other liabilities ................................... 2,034 42,075
Increase in taxes payable ....................................... 360,646 107,125
Other, net ...................................................... (7,637) 15,778
----------- -----------
Net cash provided by operating activities ................ 144,349 175,901
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures ............................................ (378,122) (224,752)
Investments in affiliated companies ............................. (19,064) (6,225)
Proceeds from the sale of investments ........................... 1,388,449 742,611
Proceeds from the exchange of investments ....................... 812,291 --
Cash paid for purchases of cable systems ........................ (2,714,362) --
Decrease in amounts due from CEI, net ........................... 114,821 --
Other, net ...................................................... (1,192) 3,225
----------- -----------
Net cash provided by (used in) investing activities ...... (797,179) 514,859
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Revolving credit repayments, net ................................ -- (349,998)
Commercial paper borrowings (repayments), net ................... 845,987 (205,948)
Proceeds from issuance of debt .................................. 775,000 --
Repayment of debt ............................................... (1,032,497) (7,913)
Payment of debt issuance costs and discounts .................... (2,355) --
Proceeds from exercise of stock options ......................... 14,593 5,262
Increase (decrease) in amounts due to CEI, net .................. 80,007 (57,911)
Increase (decrease) in book overdrafts .......................... 12,086 (14,427)
Distributions paid on capital and preferred securities of .......
subsidiary trusts .......................................... (21,303) --
----------- -----------
Net cash provided by (used in) financing activities ...... 671,518 (630,935)
----------- -----------
Net increase in cash ............................................ 18,688 59,825
Cash at beginning of period ..................................... 33,313 30,604
----------- -----------
Cash at end of period ........................................... $ 52,001 $ 90,429
=========== ===========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 7
COX COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31
------------------------------
2000 1999
---------- -----------
(UNAUDITED)
(THOUSANDS OF DOLLARS)
<S> <C> <C>
SIGNIFICANT NONCASH TRANSACTIONS
AT&T cable system exchange ................................. $ 2,658,233 $ --
Capital lease obligations .................................. 4,741 8,759
ADDITIONAL CASH FLOW INFORMATION
Cash paid for interest ..................................... $ 156,429 $ 48,089
Cash paid for income taxes ................................. 48,487 10,994
</TABLE>
See notes to consolidated financial statements.
6
<PAGE> 8
COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2000
1. BASIS OF PRESENTATION AND OTHER INFORMATION
The accompanying unaudited consolidated financial statements of Cox
Communications, Inc. (Cox), a 67.3% majority-owned subsidiary of Cox
Enterprises, Inc. (CEI), 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 consolidated financial statements reflect all
adjustments considered necessary for a fair statement of the consolidated
results of operations and financial position for the interim periods presented.
All such adjustments are of a normal recurring nature. These unaudited interim
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto contained in Cox's Annual
Report on Form 10-K for the year ended December 31, 1999.
The preparation of 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 financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The results
of operations for the three months ended March 31, 2000 are not necessarily
indicative of the results to be expected for the year ending December 31, 2000
or any other interim period.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investments
Investments in publicly traded entities are classified as available-for-sale
under Statement of Financial Accounting Standards (SFAS) No. 115, Accounting
for Certain Investments in Debt and Equity Securities, and are recorded at their
fair value, with unrealized gains and losses resulting from changes in fair
value between measurement dates recorded as a component of accumulated other
comprehensive income. Cox recognizes realized losses for any decline in market
value considered to be other than temporary. Investments in privately held
entities are stated at cost, adjusted for any known diminution in value
determined to be other than temporary in nature.
Recently Issued Accounting Pronouncements
In 1998, SFAS No. 133, Accounting for Derivative Financial Instruments and
Hedging Activities, was issued. This statement requires that all derivatives
be recognized in the statement of financial position as either assets or
liabilities and measured at fair value. In addition, all hedging relationships
must be designated, reassessed and documented pursuant to the provisions of SFAS
No. 133. SFAS No. 133, as amended by SFAS No. 137, is effective for fiscal
quarters of fiscal years beginning after June 15, 2000. Management is in the
process of assessing the impact of SFAS No. 133 on the consolidated financial
statements.
Reclassifications
Certain amounts in the 1999 quarterly financial statements have been
reclassified for comparative purposes.
7
<PAGE> 9
3. ACQUISITIONS AND EXCHANGES OF BUSINESSES
In January 2000, Cox completed its acquisition of cable systems serving
522,000 customers in Kansas, Oklahoma and North Carolina from Multimedia
Cablevision, Inc., a subsidiary of Gannett Co., Inc., in a cash transaction
valued at $2.7 billion, and has accounted for this acquisition as a purchase in
accordance with APB Opinion No. 16 (APB 16), Business Combinations.
In March 2000, Cox and AT&T Corp. (AT&T) exchanged Cox's 50.3 million
shares of AT&T common stock valued at approximately $2.7 billion for the stock
of AT&T subsidiaries that own cable systems serving approximately 495,000
customers and certain other assets and liabilities, including cash. Cox
received: cable systems serving Tulsa, Oklahoma (160,000 customers) and Baton
Rouge, Louisiana (156,000 customers); the remaining 20% ownership interest in a
partnership in which Cox acquired an 80% interest through its merger with TCA
Cable TV, Inc.; Peak Cablevision LLC, which has 117,000 customers in Oklahoma,
Arkansas, Utah and Nevada; and approximately $798.0 million in other assets and
liabilities, including cash. Cox recognized a pre-tax gain of $775.9 million in
connection with this transaction and has accounted for this acquisition as a
purchase in accordance with APB 16.
The following summarized unaudited pro forma consolidated financial
information for the three months ended March 31, 2000 and 1999 assumes the
acquisitions of cable systems from Multimedia and AT&T occurred on January 1 of
each year. In addition, the following summarized unaudited pro forma
consolidated financial information for the three months ended March 31, 1999
assumes the TCA merger, which was completed in August 1999, and the acquisition
of cable systems from Media General, Inc., which was completed in October 1999,
occurred on January 1, 1999.
The purchase price of each of the above acquisitions was allocated to the
assets purchased and liabilities assumed based on their estimated fair market
value at the date of acquisition. The purchase price allocations are expected to
be finalized within twelve months from the acquisition dates upon receipt of
independent appraisals of the tangible and intangible assets acquired. No
material adjustments to the initial purchase price allocations are expected. The
excess of purchase price over the fair value of net assets acquired has been
recorded as franchise and license acquisition costs and is being amortized on a
straight-line basis over 40 years.
<TABLE>
<CAPTION>
PRO FORMA
THREE MONTHS ENDED
MARCH 31
------------------------------------------------
2000 1999
----------------------- ---------------------
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<S> <C> <C>
Revenues .................................. $ 846,259 $ 759,781
Operating income .......................... 43,169 60,628
Net income ................................ 295,611 205,782
Earnings per share:
Basic net income per share ............. $ 0.49 $ 0.34
Diluted net income per share ........... 0.48 0.34
</TABLE>
8
<PAGE> 10
4. INVESTMENTS
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
2000 1999
------------------ -----------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Equity method investments.................... $ 71,502 $ 77,945
Fair value method investments................ 9,370,244 11,685,786
Cost method investments...................... 12,194 5,879
-- --------------- -- --------------
Total investments............................ $ 9,453,940 $ 11,769,610
================= =================
</TABLE>
FAIR VALUE METHOD INVESTMENTS
The aggregate cost of fair value method investments in unrestricted
publicly traded entities at March 31, 2000 and December 31, 1999 was $1,583.0
million and $3,784.8 million, respectively.
Sprint PCS. In January and February 2000, Cox sold a total of 16.1 million
shares of its Sprint PCS common stock - Series 2 and recognized a pre-tax gain
of $667.6 million. At March 31, 2000, Cox's investment in Sprint PCS was
comprised of 116.7 million shares of Sprint PCS common stock - Series 2 and
warrants and convertible preferred stock which are exercisable or convertible
into 10.3 million shares of Sprint PCS common stock - Series 2 and had an
aggregate fair value of $8.3 billion. Unrealized gains of $4.2 billion at March
31, 2000 have been reported in Cox's consolidated balance sheet as a component
of accumulated other comprehensive income, net of deferred income taxes.
Flextech plc. In March 2000, Cox sold its entire equity interest in
Flextech plc, a publicly held satellite television programming company based in
the United Kingdom, for proceeds of $522.3 million and recognized a pre-tax gain
of $318.9 million.
AT&T Corp. In March 2000, Cox and AT&T completed the exchange of Cox's 50.3
million shares of AT&T common stock for cable systems. See Note 3.
Excite@Home. In March 2000, Excite@Home and its principal cable partners,
including Cox, agreed to extend its distribution of certain Excite@Home services
through June 2006. Under the reorganization, Cox will relinquish its veto rights
and representation on the Excite@Home board. Under this agreement, Cox will
receive new warrants to purchase two Series A shares for each home its system
passes. These warrants will vest in installments every six months beginning in
June 2001, and will be fully vested in June 2006, subject to certain adjustment
and forfeiture provisions. Also as part of this agreement, AT&T has agreed to
give Cox the right to sell its shares in Excite@Home to AT&T for a price equal
to the higher of $48 per share or the 30-day average trading price, to a maximum
total aggregate value of $1.4 billion, any time between January 1, 2001 and June
4, 2002. The foregoing agreement is subject to Excite@Home shareholder approval.
9
<PAGE> 11
5. DEBT
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
2000 1999
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Revolving credit facilities ........................... $ -- $ --
Commercial paper ...................................... 1,357,295 514,516
Medium-term notes ..................................... 445,040 445,014
Reset put securities .................................. 248,217 248,203
Notes and debentures .................................. 3,280,414 3,804,698
Indexed debentures .................................... 1,916,686 1,272,188
Capitalized lease obligations ......................... 88,431 91,176
----------- -----------
Total debt............................................. $ 7,336,083 $ 6,375,795
=========== ===========
</TABLE>
Revolving Credit Facilities
In May 2000, Cox amended its 364-day credit agreement and its 5-year credit
agreement to exclude expense related to Cox's indexed debentures as well as
any contingent principal on these debentures from the calculation of certain
financial covenant ratios.
Indexed Debentures
Indexed debentures at March 31, 2000 are comprised of $1.3
billion aggregate original principal amount of debentures, referred to as
PRIZES, which were issued in November 1999 and are due November 2029, and $275.0
million aggregate original principal amount of debentures, referred to as
Premium PHONES, which were issued in March 2000 and are due March 2030.
The PRIZES and the Premium PHONES are unsecured, subordinated obligations,
ranking junior in right of payment to all of Cox's existing and future senior
indebtedness. The PRIZES pay interest at a rate of 7.75% per year through
November 15, 2002, and thereafter at a rate of 2.0% per year. The Premium PHONES
pay interest at a rate of 3% per year. In addition, the original principal
amount of the PRIZES and Premium PHONES are indexed to the trading price of
Sprint PCS common stock - Series 1. Accordingly, if the market value of the
Sprint PCS common stock - Series 1 increases, Cox may be obligated to pay an
additional amount of contingent principal, at maturity or upon the holders'
exchange of the PRIZES and Premium PHONES.
The PRIZES and Premium PHONES have been accounted for as indexed debt
instruments in accordance with Emerging Issues Task Force Issue No. 86-28 (EITF
86-28), Accounting Implications of Indexed Debt Instruments, since the payment
obligation at maturity or on exchange of the PRIZES and Premium PHONES is
dependent upon the market value of the Sprint PCS common stock. Therefore, as of
March 31, 2000, the carrying value of the PRIZES and Premium PHONES increased by
$351.2 million and $18.2 million, respectively, reflecting the increase in fair
value of the underlying Sprint PCS common stock. This increase is presented as
expense related to indexed debentures in Cox's consolidated statement of
operations for the three-month period ended March 31, 2000.
The above description of certain material terms of the PRIZES and Premium
PHONES are summaries and not intended to be comprehensive descriptions of these
securities. Additional terms of the PRIZES and Premium PHONES can be found in
Cox's audited consolidated financial statements for the year ended December 31,
1999, included in the 1999 Annual Report filed on Form 10-K, or a complete
description of the PRIZES and Premium PHONES can be found in Cox's prospectus
supplement dated November 22, 1999 with respect to the PRIZES and Cox's
prospectus supplement dated March 8, 2000 with respect to the Premium PHONES.
10
<PAGE> 12
Exchangeable Subordinated Discount Debentures Due 2020
In April 2000, Cox issued $1.6 billion aggregate original principal amount
of exchangeable subordinated discount debentures due 2020 (the Discount
Debentures) under the July 1999 shelf registration, for aggregate proceeds of
approximately $700.0 million, less underwriting commissions of approximately
$16.6 million. The Discount Debentures had an aggregate original issue discount
of approximately $943.6 million and are unsecured, subordinated obligations,
ranking ratably with the PRIZES and Premium PHONES and junior in right of
payment to all of Cox's existing and future senior indebtedness.
Upon issuance, the Discount Debentures had an original principal amount of
$1,000 per Discount Debenture. The original principal amount of each Discount
Debenture is indexed to 7.5908 shares of Sprint PCS common stock - Series 1 with
an initial issue price of $425.89 per Discount Debenture. The last reported
sales price for the Sprint PCS common stock - Series 1 on April 13, 2000 was
$47.75 per share. The original issue price of each Discount Debenture plus
accrued and unpaid original issue discount is referred to as the adjusted
principal amount. The original principal amount may be reduced by special cash
payments or cash reorganization event distributions, but will never be less than
zero.
Interest on the Discount Debentures is payable semi-annually at a rate of
1% per year on the adjusted principal amount of the Discount Debentures. The
accrual of the original issue discount amount and cash interest payments
represents an annualized yield to maturity of 5%, computed using an effective
interest method.
Prior to April 19, 2002, the Discount Debentures are exchangeable at the
holders' option solely for cash based on the market value of the reference
shares underlying each Discount Debenture, plus any accumulated and unpaid
distributions. On or after April 19, 2002, the Discount Debentures may be
exchanged by the holders for underlying shares, cash, or a combination of both.
Accordingly, if the market value of the Sprint PCS common stock - Series 1
increases, Cox may be obligated to pay an additional amount of contingent
principal upon the holders' exchange of the Discount Debentures. Alternatively,
on April 19, 2005, April 19, 2010 and April 19, 2015, holders may require Cox to
repurchase the Discount Debentures at a purchase price equal to the adjusted
principal amount plus any accrued and unpaid interest.
In addition, on or after April 19, 2005, Cox may redeem the Discount
Debentures for cash based on the then adjusted principal amount, plus any
accumulated and unpaid distributions. At maturity, holders of the Discount
Debentures are entitled to receive cash equal to the then adjusted principal
amount plus any accumulated and unpaid distributions.
The Discount Debentures will be accounted for as an indexed debt instrument
in accordance with EITF 86-28 since the exchange value of the Discount
Debentures is dependent upon the market value of the Sprint PCS common stock.
Therefore, the carrying value of the Discount Debentures will be adjusted
through earnings in Cox's consolidated statement of operations as the market
value of the Sprint PCS common stock increases or decreases such that Cox would
be required to pay an amount of contingent principal in excess of the original
principal amount of the Discount Debentures. The Discount Debentures are listed
on the NYSE under the symbol "COX DC20."
The above description of certain material terms of the Discount Debentures
is a summary and not intended to be a comprehensive description of the security.
A complete description of the Discount Debentures can be found in Cox's
prospectus supplement dated April 13, 2000.
11
<PAGE> 13
Interest Rate Swap
In March 2000, Cox entered into an interest rate swap agreement expiring on
August 15, 2004 with a notional principal amount of $375.0 million to convert
fixed rates on 7.5% senior debt securities due August 15, 2004 with an aggregate
principal amount of $375.0 million to a variable rate. The variable rate is
adjusted quarterly based on London Interbank Offered Rates (LIBOR). The notional
amount does not quantify risk or represent assets or liabilities of Cox, but is
used in the determination of cash settlements under the interest rate swap
agreement. Cox is exposed to a credit loss in the event of nonperformance by the
counterparty. However, Cox does not anticipate nonperformance by the
counterparty, and no material loss would be expected in the event of the
counterparty's nonperformance.
At March 31, 2000, Cox was receiving a fixed interest rate of 7.16% and
paying a variable interest rate of 6.139% calculated on the notional amount. The
differential paid or received upon settlement of the interest rate swap
agreement is recognized as an adjustment to interest expense. Interest expense
was reduced by an immaterial amount for the three months ended March 31, 2000
resulting from settlements under this agreement.
Other
In March 2000, Cox called and redeemed all $525.0 million aggregate
principal amount of Floating Rate Notes due August 15, 2000, and repaid
$500.0 million borrowed under a floating rate bridge loan.
6. SHAREHOLDERS' EQUITY
The following table reconciles the numerator and the denominator of the
basic and diluted per-share computations for income from operations for the
three months ended March 31, 2000 and 1999:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 2000
----------------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
-------------- ------------- ---------
<S> <C> <C> <C>
Net income ......................... $1,067,516,000
--------------
Basic EPS .......................... 1,067,516,000 604,204,208 $ 1.77
=========
Effect of Dilutive Securities:
Options ......................... -- 3,182,627
Preferred common stock equivalent -- 4,208,455
Forward purchase contracts
forming a part of the FELINE
PRIDES .......................... -- 1,881,066
-------------- -----------
Diluted EPS ........................ $1,067,516,000 613,476,356 $ 1.74
============== =========== =========
</TABLE>
12
<PAGE> 14
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1999
------------------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
-------------- ------------- -----------
<S> <C> <C> <C>
Net income ......................... $ 251,179,000
--------------
Basic EPS .......................... 251,179,000 554,896,354 $ 0.45
===========
Effect of Dilutive Securities:
Options ......................... -- 2,893,122
ESPP ............................ 926,282
Preferred common stock equivalent -- 4,122,194
-------------- -----------
Diluted EPS ........................ $ 251,179,000 562,837,952 $ 0.45
============== =========== ===========
</TABLE>
In April 2000, Cox's Board of Directors authorized the purchase of up to
$500.0 million of Cox's outstanding Class A common stock on the open market or
through private transactions in compliance with SEC Rule 10b-18, subject to
market conditions, applicable legal requirements, and other factors.
All historical weighted-average share, per share and historical balance
sheet amounts have been restated to reflect Cox's two-for-one stock split which
became effective May 21, 1999.
7. COX-OBLIGATED CAPITAL AND PREFERRED SECURITIES OF SUBSIDIARY TRUSTS
Cox-Obligated Capital and Preferred Securities of Subsidiary Trusts are
comprised of 13 million FELINE PRIDES and 1.3 million trust capital securities
with an aggregate principal amount of $650.0 million and 500,000 RHINOS with an
aggregate principal amount of $500.0 million.
The FELINE PRIDES and trust capital securities were issued by Cox Trust II
(the trust), a wholly-owned consolidated subsidiary of Cox, in August 1999.
The sole assets of the trust are senior debentures issued by Cox and the
obligations of the trust are guaranteed by Cox. The guarantee, when taken
together with Cox's other obligations with respect to the FELINE PRIDES,
provides a full and unconditional guarantee of the trust's obligations.
Upon issuance, the FELINE PRIDES consisted of 11.7 million Income PRIDES
and 1.3 million Growth PRIDES. Each Income PRIDES consists of a capital security
of the trust and a forward purchase contract under which the holder is required
to purchase common stock from Cox on August 16, 2002. The capital security
forming a part of the Income PRIDES and the stand alone trust capital securities
bear interest, in the form of distributions, at an annual rate of 7% payable in
cash on a quarterly basis. Each Growth PRIDES consists of a 5% undivided
beneficial ownership in a zero-coupon U.S. Treasury security, having a principal
amount at maturity equal to $1,000, and a forward purchase contract under which
the holder is required to purchase common stock from Cox on August 16, 2002. The
forward contract forming a part of the Growth PRIDES entitles the holders to a
contract adjustment payment of .25% of $50 per year payable in cash on a
quarterly basis.
The RHINOS were issued by Cox RHINOS trust (the RHINOS trust), a
wholly-owned consolidated subsidiary of Cox, in October 1999. The obligations of
the RHINOS trust are unconditionally guaranteed by Cox. The RHINOS are long-term
auction rate reset preferred securities, representing undivided beneficial
interests in the assets of the RHINOS trust, and pay distributions at a floating
rate based on LIBOR plus 75 basis points per year payable in cash on a quarterly
basis.
The FELINE PRIDES and the RHINOS are presented as mezzanine equity in Cox's
consolidated balance sheet and the distributions paid by the trusts, as well as
the contract adjustment payments on the Growth PRIDES described above, are
presented as minority interest in Cox's consolidated statement of operations.
13
<PAGE> 15
The above description of certain material terms of the FELINE PRIDES and
RHINOS are summaries and not intended to be comprehensive descriptions of these
securities. Additional terms of the FELINE PRIDES and RHINOS can be found in
Cox's audited consolidated financial statements for the year ended December 31,
1999, included in the 1999 Annual Report filed on Form 10-K, or a complete
description of the FELINE PRIDES can be found in Cox's prospectus supplement
dated August 9, 1999.
8. 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. Outstanding
amounts due to CEI bear interest at a rate of 6.7% at March 31, 2000.
Included in the amounts due from (to) CEI are the following transactions:
<TABLE>
<CAPTION>
(THOUSANDS OF DOLLARS)
---------------------
<S> <C>
Balance, December 31, 1999.................. $ 114,821
Cash transferred from CEI................... (186,829)
Net operating expense reimbursements........ (7,999)
---------------
Balance, March 31, 2000..................... $ (80,007)
===============
</TABLE>
9. COMMITMENTS AND CONTINGENCIES
Cox is a party to various legal proceedings that are ordinary and
incidental to its business. Management does not expect that any legal
proceedings currently pending, will have a material adverse impact on Cox's
consolidated financial position, consolidated results of operations or
consolidated cash flows. See "-- Part II -- Other Information -- Item 1. Legal
Proceedings."
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 unaudited consolidated financial statements for the three-month
periods ended March 31, 2000 and 1999.
The forward looking statements included in Management's Discussion and
Analysis of Financial Condition and Results of Operations and other parts of
this report, which reflect management's best judgement based on factors
currently known, involve risks, uncertainties and other factors which may cause
the actual performance of Cox to be materially different from the performance
indicated or implied by such statements. Such factors include, among others:
competitive pressures within the broadband communications industry; terms and
availability of capital; the level of success of Cox's operating initiatives;
changes in business strategy and development plans; the ability of Cox to
mitigate the impact of the Year 2000 issue; the impact from Cox's pending
acquisitions; and other factors included in the discussion below. Cox claims the
protection of the safe harbor for forward looking statements contained in
Section 21E of the Securities Exchange Act of 1934, as amended, for all forward
looking statements included in this report.
14
<PAGE> 16
RECENT ACQUISITIONS AND EXCHANGES
For a complete description of recent acquisitions and exchanges of
businesses, see Note 3 in the notes to consolidated financial statements in Item
1 of this report.
RESULTS OF OPERATIONS
The results of operations discussed below include the effects of the
following as of their transaction dates:
- the March 2000 exchange of AT&T common stock for: cable
systems from AT&T serving customers in Tulsa, Oklahoma and
Baton Rouge, Louisiana; Peak Cablevision, LLC; and the
remaining 20% interest in a partnership in which Cox initially
acquired an 80% interest through the TCA merger;
- the January 2000 acquisition of cable systems from Multimedia;
- the October 1999 acquisition of cable systems from Media
General;
- the October 1999 reorganization of Cox's partnership with
Time Warner, under which Cox obtained control of the cable
system serving Ft. Walton Beach, Florida;
- the August 1999 TCA merger; and
- the August 1999 exchange of selected cable systems with
MediaOne;
These transactions are collectively referred to in the discussion below as the
2000 and 1999 transactions.
THREE MONTHS ENDED MARCH 31, 2000 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1999
Total revenues for the three months ended March 31, 2000 were $779.9
million, a 56% increase over revenues of $498.5 million for the three months
ended March 31, 1999. Of this increase, 41% relates to increased revenues from
the 2000 and 1999 transactions. The remaining 15% increase includes the effects
of:
- basic and digital customer growth at existing cable systems;
- rate increases implemented primarily in the fourth quarter of
1999 and first quarter of 2000 resulting from increased
programming costs and inflation as well as increased channel
availability;
- continued growth in local and national advertising sales; and
- growth in data, commercial telephony and residential telephony
product subscriptions;
- offset by a decrease in pay-per-view revenues due to the lack
of national boxing events during 2000.
Programming costs were $196.0 million for the first quarter of 2000, an
increase of 52% over the same period in 1999. Of this increase, 42% relates to
the 2000 and 1999 transactions. The remaining 10% increase is due to basic and
digital customer growth at existing cable systems and January 2000 programming
rate increases and channel additions. Plant operations expenses increased 61% to
$62.9 million. Of this increase, 43% relates to the 2000 and 1999 transactions.
The remaining 18% increase relates to increased plant maintenance and costs
related to significant growth of new services at existing cable systems.
Marketing costs increased 66% to $44.3 million. Of this increase, 52%
relates to the 2000 and 1999 transactions. The remaining 14% increase relates to
costs associated with the continued rollout of digital video, high-speed data
and telephony services. General and administrative expenses for the three months
ended March 31, 2000 increased 54% to $177.3 million due to costs associated
with the continued rollout of digital video, high-speed data and telephony
services, and incremental and non-recurring integration expenses associated with
the 2000 and 1999 transactions.
15
<PAGE> 17
Depreciation and amortization increased to $257.8 million from $123.3
million in first quarter 1999 due to the 2000 and 1999 transactions. Interest
expense increased to $133.3 million primarily due to an increase in the total
debt outstanding as discussed below in "Liquidity and Capital Resources."
Expense related to indexed debentures of $369.5 million reflects the
increased contingent settlement amount of the exchangeable subordinated
debentures, referred to as PRIZES and Premium PHONES, which are indexed to the
market value of Sprint PCS common stock - Series 1.
Net gain on investments of $1,769.8 million primarily includes:
- $667.6 million pre-tax gain on the January and February 2000
sale of 16.1 million shares of Sprint PCS common stock -
Series 2;
- $318.9 million pre-tax gain on the sale of Cox's entire equity
interest in Flextech plc in March 2000; and
- $775.9 million pre-tax gain in connection with the March 2000
exchange with AT&T.
Minority interest of $21.3 million primarily represents distributions on
Cox's obligated capital and preferred securities of subsidiary trusts, referred
to as FELINE PRIDES and RHINOS. Net income for the current quarter was $1,067.5
million as compared to $251.2 million for the first quarter of 1999.
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 network in preparation for the offering of new
services and to make investments in affiliated companies primarily focused on
telephony, programming and communications-related activities.
During the three months ended March 31, 2000, Cox had capital expenditures
of $378.1 million. These expenditures were primarily directed at upgrading and
rebuilding its broadband network to allow for the delivery of advanced broadband
services including digital video, high-speed Internet access, telephony, video
on demand and Internet to the television. Capital expenditures for 2000 are
expected to range between $1.5 billion and $1.7 billion.
Cash paid for purchases of cable systems of $2.7 billion primarily
represents payments in connection with Cox's acquisition of cable systems
serving 522,000 customers from Multimedia.
During the three months ended March 31, 2000, Cox repaid $1,032.5 million
of debt, which primarily consisted of:
- $525.0 million aggregate principal amount of Floating Rate
Notes due August 15, 2000; and
- $500.0 million borrowed under a floating rate bridge loan
during January 2000.
Distributions paid on capital and preferred securities of subsidiary trusts
of $21.3 million consists of quarterly interest payments on the FELINE PRIDES
and RHINOS.
SOURCES OF CASH
Cox generated $144.3 million from operating activities during the three
months ended March 31, 2000.
Proceeds from the sale of investments of $1,388.4 million primarily
include:
16
<PAGE> 18
- $799.1 million from the sale of 16.1 million shares of Sprint
PCS common stock - Series 2; and
- $522.3 million from the sale of Cox's entire investment in
Flextech plc.
Proceeds from exchange of investments of $812.3 million primarily consists
of $798.0 million received in connection with the AT&T exchange. Net commercial
paper borrowings were $846.0 million.
Proceeds from issuance of debt during the three months ended March 31, 2000
of $775.0 million consists of the following:
- the January 2000 issuance of a floating rate bridge loan for
aggregate proceeds of $500.0 million; and
- the March 2000 issuance of $275.0 million aggregate principal
amount of exchangeable subordinated debentures due 2030,
referred to as Premium PHONES, for proceeds of $269.5 million,
net of underwriting commissions.
For a more detailed description of debt financings in the first quarter and
April 2000, see Note 5 to the consolidated financial statements in Item 1 of
this report.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In 1998, SFAS No. 133, Accounting for Derivative Financial Instruments and
Hedging Activities, was issued. This statement requires that all derivatives be
recognized in the statement of financial position as either assets or
liabilities and measured at fair value. In addition, all hedging relationships
must be designated, reassessed and documented pursuant to the provisions of SFAS
No. 133. SFAS No. 133, as amended by SFAS No. 137, is effective for fiscal
quarters of fiscal years beginning after June 15, 2000. Management is in the
process of assessing the impact of SFAS No. 133 on the consolidated financial
statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the risk that Cox will incur losses due to adverse changes in
equity, interest, commodity or currency exchange rate and prices. Cox's primary
market risk exposure pertains to changes in interest rates.
With respect to financial instruments, Cox has estimated the fair values of
such instruments using available market information and appropriate valuation
methodologies. Considerable judgment, however, is required in interpreting
market data to develop the estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts that Cox would
realize in a current market exchange.
The carrying amounts of cash, accounts receivable, other assets, accounts
payable, deferred income, fixed rate debt converted to variable rate debt
through interest rate swap agreements and amounts due to/from CEI are reasonable
estimates of their fair value at March 31, 2000 and December 31, 1999.
The estimated fair value of debt instruments is based on discounted cash
flow analyses using Cox's incremental borrowing rate for similar types of
borrowing arrangements and dealer quotations. The commercial paper at March 31,
2000 and the commercial paper and the floating rate notes at December 31, 1999
bear interest at current market rates and, thus, approximate fair value. In
addition, the RHINOS at March 31, 2000 and December 31, 1999 bear interest at
current market rates and, thus, approximate fair value. Cox is exposed to
interest rate volatility with respect to the foregoing variable rate debt
instruments.
17
<PAGE> 19
The estimated fair value of Cox's remaining debt instruments at March 31,
2000 was $3,555.6 million compared to a carrying amount of $3,780.1 million. The
estimated fair value of the remaining debt instruments at December 31, 1999 was
$3,858.3 million compared to a carrying amount of $4,064.1 million. In addition,
the effect of a hypothetical one percentage point decrease in interest rates
would change the estimated fair value of the remaining debt instruments with a
carrying amount of $3,780.1 million to $3,747.5 million at March 31, 2000 and
$4,064.1 million to $4,065.3 million at December 31, 1999.
The estimated fair value of the FELINE PRIDES at March 31, 2000 was $826.0
million compared to a carrying amount of $643.6 million. The estimated fair
value of the FELINE PRIDES at December 31, 1999 was $884.0 million compared to a
carrying amount of $642.3 million. In addition, the effect of a hypothetical one
percentage point decrease in interest rates would increase the estimated fair
value of the remaining debt instruments with a carrying amount of $643.6 million
to $828.0 million at March 31, 2000 and $642.3 million to $886.0 million at
December 31, 1999.
The estimated fair value of the PRIZES at March 31, 2000 was $1,739.0
million compared to a carrying amount of $1,623.4 million. The estimated fair
value of the PRIZES at December 31, 1999 was $1,400.0 million compared to a
carrying amount of $1,272.2 million. In addition, the effect of a hypothetical
percentage point decrease in interest rates would increase the estimated fair
value of the PRIZES with a carrying amount of $1,623.4 million to $1,787.0
million at March 31, 2000 and $1,272.2 million to $1,417.0 million at December
31, 1999.
The estimated fair value of the Premium PHONES at March 31, 2000 was $309.0
million compared to a carrying amount of $293.2 million. In addition, the effect
of a hypothetical percentage point decrease in interest rates would increase the
estimated fair value of the Premium PHONES with a carrying amount of $293.2
million to $322.0 million at March 31, 2000.
The fair values of some of Cox's investments are estimated based on quoted
market prices for those or similar investments. For cost method investments for
which there are no quoted market prices, a reasonable estimate of fair value was
not practicable as such estimate could not be made without incurring excessive
costs.
Also in March 2000, Cox entered into an interest rate swap agreement
expiring on August 15, 2004 with a notional principal amount of $375.0 million
to convert fixed rates on 7.5% senior debt securities due August 15, 2004 with
an aggregate principal amount of $375.0 million to a variable rate. The variable
rate is adjusted quarterly based on LIBOR. The notional amount does not quantify
risk or represent assets or liabilities of Cox, but is used in the determination
of cash settlements under the interest rate swap agreement. Cox is exposed to a
credit loss in the event of nonperformance by the counterparty. However, Cox
does not anticipate nonperformance by the counterparty, and no material loss
would be expected in the event of the counterparty's nonperformance.
At March 31, 2000, Cox was receiving a fixed interest rate of 7.16% and
paying a variable interest rate of 6.139% calculated on the notional amount. The
differential paid or received upon settlement of the interest rate swap
agreement is recognized as an adjustment to interest expense. Interest expense
was reduced by an immaterial amount for the three-months ended March 31, 2000
resulting from settlements under this agreement. The fair value of Cox's
interest rate swap agreement at March 31, 2000 approximated its carrying value.
18
<PAGE> 20
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On October 9, 1997, three individual subscribers filed a putative class
action suit in Superior Court of the State of California, County of San Diego
against Cox and its cable system subsidiaries in California arising out of the
manner in which such systems sell premium channel cable services. The suit
alleges that Cox's California Systems unlawfully require limited basic cable
customers to purchase the expanded basic services tier in order to purchase
premium channels, i.e., channels sold on an a-la-carte basis such as Home Box
Office and Showtime. The suit asserts causes of action under California
antitrust and consumer protection laws. The suit seeks injunctive relief as well
as an order awarding the class members compensatory damages, plus statutory
damages, punitive damages, interest and attorney's fees. Cox moved to dismiss
the suit on dispositive substantive grounds or in the alternative to stay the
suit on primary jurisdiction grounds. On February 13, 1998, the Court stayed the
suit and referred it on grounds of primary jurisdiction to the FCC for
consideration of issues best addressed by the FCC's expertise should the
plaintiffs elect to file a complaint with the FCC. On October 1, 1998, the
plaintiffs filed a Petition with the FCC which alleged that the Cox California
Systems violated the "buy-through" prohibition of the FCC's rules. Under the
"buy-through" prohibition, cable systems may not require subscribers to purchase
intermediate tiers of cable service as a prerequisite to receiving per-channel
and per-program cable service unless such systems can demonstrate that they are
not technically capable of complying with the buy-through requirement. In July
1999, the FCC dismissed the Petition. The FCC concluded that Cox's San Diego
system is complying with the buy-through rule and that the named plaintiffs lack
standing to raise this issue with regard to Cox's other California systems. The
suit is now proceeding in state court. The court granted Cox and the plaintiffs
an extension of time during which the parties may explore the possibility of a
resolution to the suit. If no resolution is reached, the plaintiffs may file an
amended complaint and Cox may renew its motion to dismiss the suit based on the
grounds raised in its earlier motion and the additional grounds of the FCC's
dismissal of the Petition and the plaintiffs' lack of standing to pursue claims
against Cox's other California systems. The outcome of this matter cannot be
predicted at this time.
Cox and certain subsidiaries are defendants in four putative subscriber
class action suits in state courts in Louisiana, Indiana, Texas and Nevada
initiated between October 17, 1997 and December 17, 1998. The suits all
challenge the propriety of late fees charged by the subsidiaries to customers
who fail to pay for services in a timely manner. The suits seek injunctive
relief and various formulations of damages under certain claimed causes of
action under various bodies of state law. These actions are in various stages of
defense. Settlement in Nevada is pending final court approval. The remaining
actions are being defended vigorously. The outcome of these matters cannot be
predicted at this time. Three additional suits that have been pending in Arizona
and Florida have been settled; one additional suit that had been pending in
Nebraska was dismissed.
On November 10, 1999, Fred and Roberta Lipschutz, Arthur Simon and John
Galley III, on behalf of themselves and all persons similarly situated, filed a
putative class action suit against Cox and thirteen other defendants in the
United States District Court for the Central District of California. The action
alleges that a putative class defined as all persons who since November 10,
1995, have purchased broadband Internet data transmission services from a "cable
company defendant" has been injured because alleged agreements among the "cable
company defendants" and/or the "cable company defendants" and defendants @Home
Corporation and RoadRunner have required the putative class to purchase both
Internet data transmission services and interface/content services from @Home or
RoadRunner. The complaint asserts claims under Section 1 of the Sherman
Antitrust Act, the California Cartwright Act, and California unfair competition
law and seeks injunctive relief and compensatory and treble damages. An amended
complaint adding additional named plaintiffs was filed on December 30, 1999 and
Cox filed its answer to the amended complaint on January 19, 2000. Cox intends
to defend this action vigorously. The outcome of this matter cannot be predicted
at this time.
Cox is a party to various other legal proceedings which are ordinary and
incidental to its business. Management does not expect that any of these other
legal proceedings currently pending will have a material adverse impact on Cox's
consolidated financial position, results of operations or cash flows.
19
<PAGE> 21
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 -- Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K filed during the quarter ended March 31, 2000:
None.
20
<PAGE> 22
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.
Date: May 12, 2000 /s/ Jimmy W. Hayes
------------------------------------------------
Jimmy W. Hayes
Executive Vice President,
Finance and Administration
Chief Financial Officer
(principal financial officer)
21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q OF
COX COMMUNICATIONS INC. FOR THE THREE MONTHS ENDED MARCH 31, 2000 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-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 52,001
<SECURITIES> 0
<RECEIVABLES> 251,593
<ALLOWANCES> (18,352)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 6,570,973
<DEPRECIATION> (1,668,793)
<TOTAL-ASSETS> 28,805,882
<CURRENT-LIABILITIES> 0
<BONDS> 0
1,150,561
4,836
<COMMON> 604,849
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> (28,805,882)
<SALES> 0
<TOTAL-REVENUES> (779,851)
<CGS> 0
<TOTAL-COSTS> 258,475
<OTHER-EXPENSES> 257,768
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 133,252
<INCOME-PRETAX> 1,314,258
<INCOME-TAX> 225,404
<INCOME-CONTINUING> 1,088,854
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,067,516
<EPS-BASIC> 1.77<F1>
<EPS-DILUTED> 1.74<F1>
<FN>
<F1>EPS BASIC AND EPS DILUTED HAVE BEEN RESTATED TO REFLECT A TWO-FOR-ONE STOCK
SPLIT ON MAY 21, 1999. INTERIM FILINGS SUBSEQUENT TO THE STOCK SPLIT HAVE BEEN
ADJUSTED TO REFLECT THE STOCK SPLIT.
</FN>
</TABLE>
