ATLANTA--(BUSINESS WIRE)--Aug. 6, 1997--Cox Communications, Inc. (NYSE:COX) today reported financial results for the three months ended June 30, 1997.
"Cox's core business continued to perform well in the second quarter, with operating cash flow growth of 10% and customer growth of 2.1% over the same period in 1996," said Jim Robbins, President and CEO. "We continue our commitment to our network upgrades and have made significant progress in the deployment of new services. Cox@Home, our high-speed Internet access service, is now available in four markets, and we've launched our first commercial residential phone service. We look forward to continued progress in our deployment of new services during the remainder of the year."
QUARTERLY RESULTS FROM OPERATIONS
Revenues for the three months ended June 30, 1997 were $401.1 million, a 12% increase over revenues of $357.3 million for the three months ended June 30, 1996. Basic customers were 3,272,380, a 2.1% increase over customers at June 30, 1996 after adjusting for the trades of cable systems during the first quarter of 1997.
Complete basic revenues for the second quarter of 1997 increased 8% over the same period in 1996 to $265.8 million due to customer growth and average rate increases implemented generally in the fourth quarter of 1996 of $1.50 per month per customer. These increases are the result of new channel additions and pass-through of inflation adjustments. New-product tier revenues grew 42% to $4.9 million as a result of launching these channel offerings in additional systems.
Premium service revenues for the quarter were $47.0 million, down $0.8 million compared to the second quarter of 1996. In the current quarter, the average revenue per premium unit increased, resulting in a 3% increase in premium service revenues compared to the first quarter of 1997, and premium units decreased to 1,907,238 at June 30, 1997 due to the completion of the spring 1996 three-for-one promotion.
Pay-per-view revenues for the quarter increased 59% over the same period in 1996 to $15.7 million due to the June 1997 Tyson/Holyfield boxing event. Advertising revenues increased 17% to $25.8 million as a result of strong growth in local and national ad sales and Cox's telecasts of the San Diego Padres major league baseball games.
Revenues from satellite operations were $29.9 million for the current quarter, a 55% increase over revenues of $19.2 million for the same quarter in 1996 as PrimeStar customers increased to 150,168 at June 30, 1997 from 88,163 at June 30, 1996.
Programming costs were $92.2 million for the second quarter of 1997, an increase of 16% over the same period in 1996 due primarily to Cox's customer growth, January 1997 programming rate increases, new channel additions and the Tyson/Holyfield boxing event. Plant operations expenses increased 11% to $38.2 million due to 1997 annual salary increases and additional repair and maintenance costs related to systems acquired in the trades during the first quarter of 1997. Marketing costs decreased 9% to $18.0 million for the second quarter due in part to costs associated with the spring 1996 marketing campaigns. General and administrative expenses for the second quarter of 1997 increased 10% to $77.2 million due to annual salary increases and the increase in direct costs associated with developing and providing high-speed data and telephony services.
Consolidated operating cash flow increased 9% to $147.2 million for the second quarter of 1997. Operating cash flow for the core video business, which excludes satellite and Fibernet operations and $4.0 million of direct costs associated with data and telephony services, grew 10% to $148.4 million compared to the second quarter of 1996.
The consolidated operating cash flow margin (operating cash flow as a percentage of revenues) for the current quarter was 36.7%, a decrease from 38.0% for the second quarter of 1996, due to the increased data and telephony direct costs. The core video business operating cash flow margin was 40.4% for the quarter, a slight increase over the second quarter of 1996 and in line with Cox's expectations for the year.
Depreciation was $85.3 million for the second quarter of 1997, a 35% increase compared to the same period in 1996 due to the continued upgrade and rebuild of the broadband network. Amortization increased 8% to $19.0 million for the current quarter as a result of additional goodwill resulting from the trades of cable systems during the first quarter of 1997. Operating income for the second quarter of 1997 was $43.0 million, a decrease of 22% compared to the same period in 1996. Interest expense increased $15.9 million to $50.2 million for the second quarter of 1997 due to the discontinuance of capitalizing interest resulting from the launch of services by Cox's PCS investments. Equity in net losses of affiliated companies was $81.8 million, a $53.0 million increase over the prior year due to the losses associated with Sprint PCS, Cox PCS and Teleport.
A pre-tax gain of $190.8 million was recognized in the second quarter of 1997 primarily as a result of the transfer of Cox's interest in UK Gold and UK Living to Flextech plc, for which Cox received shares representing a 12.6% interest of Flextech plc.
Net income for the current quarter was $61.2 million as compared to net income of $27.0 million for the second quarter of 1996.
YEAR-TO-DATE RESULTS FROM OPERATIONS
Revenues for the six months ended June 30, 1997 were $784.2 million, a 10% increase over revenues of $714.8 million for the comparable period of 1996. Operating cash flow for the first six months of 1997 was $286.8 million, a 5% increase as compared to $272.0 million for the first six months of 1996. Operating income for the six months ended June 30, 1997 was $92.6 million, a 21% decrease from the comparable period of 1996. Interest expense increased $28.2 million to $97.0 million due to the discontinuance of capitalizing interest resulting from the launch of services by Cox's PCS investments. Equity in net losses of affiliated companies increased $115.0 million due to the losses associated with Sprint PCS, Cox PCS and Teleport. A pre-tax gain on sale of affiliated companies of $190.8 was recognized in the second quarter of 1997 primarily as a result of the transfer of Cox's interest in UK Gold and UK Living to Flextech plc. Net income for the six months ended June 30, 1997 was $23.3 million as compared to net income of $34.3 million for the six months ended June 30, 1996.
INVESTING ACTIVITIES
Cash flows used in investing activities were $663.9 million for the first six months of 1997. Capital expenditures of $361.9 million included the continued upgrade and rebuild of Cox's broadband network and the purchase of PrimeStar customer equipment. Investments made in affiliated companies of $251.5 million included additional equity funding of $230.6 million to Sprint PCS, Cox PCS and other telephony investments and $20.9 million to PrimeStar Partners, Outdoor Life, Speedvision and other interests. Payments for exchanges of cable systems of $53.4 million were made for the trades closed during the first quarter of 1997.
Cox Communications, Inc. is among the nation's largest cable television operators, serving some 3.3 million customers. As a full service provider of telecommunications products, Cox has interests in wired telecommunications, including cable television and telephone services; wireless telecommunications, including personal communications services (PCS) via Sprint PCS, direct-to-home (DTH) satellite television via PrimeStar, and programming networks including The Discovery Channel.
Cox was distinguished for achieving the highest overall customer satisfaction among cable television users in the first study of the cable industry by J.D. Power and Associates.
More information on Cox Communications can be found on the Internet at www.cox.com . -0-
Cox Communications, Inc. Consolidated Statements of Operations (Unaudited) (Thousands of Dollars) Three Months Ended Six Months Ended June 30 June 30 ------------------- ------------------ 1997 1996 % 1997 1996 % Revenues: Complete basic $265,837 $ 246,489 8% $528,915 $494,120 7% New product tier 4,852 3,405 42% 9,637 6,609 46% Premium service 47,036 47,827 (2%) 92,755 95,458 (3%) Pay-per-view 15,703 9,860 59% 26,675 22,780 17% Advertising 25,815 22,061 17% 47,088 42,578 11% Satellite 29,884 19,247 55% 55,750 36,895 51% Other 11,971 8,446 42% 23,388 16,393 43% Total revenues 401,098 357,335 12% 784,208 714,833 10% Costs and expenses: Programming costs 92,209 79,392 16% 180,732 162,139 11% Plant operations 38,190 34,467 11% 76,301 69,278 10% Marketing 17,989 19,873 (9%) 35,809 38,141 (6%) General and administrative 77,205 70,403 10% 151,952 140,089 8% Satellite operating and administrative 28,265 17,551 61% 52,612 33,206 58% Operating cash flow 147,240 135,649 9% 286,802 271,980 5% Depreciation 85,296 63,220 35% 158,143 119,082 33% Amortization 18,978 17,592 8% 36,027 36,092 - Operating income 42,966 54,837 (22%) 92,632 116,806 (21%) Interest expense (50,170) (34,301) 46% (96,986) (68,806) 41% Equity in net losses of affiliated companies (81,827) (28,811) 184% (163,108) (48,068) - Gain on exchanges of cable systems -- -- -- 24,642 -- - Gain on issuance of stock by affiliated companies -- 50,100 (100%) -- 50,100(100%) Gain on sale of affiliated companies 190,844 -- -- 193,780 4,640 -- Other, net (907) 5,124 (118%) 3,093 9,881 -- Income before income taxes 100,906 46,949 115% 54,053 64,553 (16%) Income taxes 39,742 19,985 99% 30,711 30,232 2% Net income $ 61,164 $ 26,964 127% $ 23,342 $ 34,321 (32%) Net income per share $ 0.23 $ 0.10 $ 0.09 $ 0.13 NOTE: Certain amounts in the 1996 financial statements have been reclassified for comparison purposes. Cox Communications, Inc. Consolidated Balance Sheets (Unaudited) (Thousands of Dollars) June 30 Dec. 31 1997 1996 -------- -------- Assets Cash $78,444 $42,349 Accounts and notes receivable, less allowance for doubtful accounts of $7,904 and $7,778 123,162 122,574 Net plant and equipment 1,789,658 1,531,811 Investments 1,411,880 1,219,082 Intangible assets 2,560,554 2,728,955 Other assets 129,815 139,819 Total assets $6,093,513 $5,784,590 Liabilities and shareholders' equity Accounts payable and accrued expenses $211,485 $220,859 Deferred income 31,012 29,440 Deferred income taxes 337,048 294,453 Other liabilities 157,672 97,526 Debt 3,100,688 2,823,853 Amounts due to Cox Enterprises, Inc. -- 57,147 Total liabilities 3,837,905 3,523,278 Shareholders' equity: Preferred stock, $1 par value; 5,000,000 shares authorized; none issued -- -- Class A Common stock, $1 par value; 286,000,000 shares authorized; shares issued and outstanding: 256,541,556 and 256,463,651 256,541 256,464 Class C Common stock, $1 par value; 14,000,000 shares authorized; shares issued and outstanding: 13,798,896 13,799 13,799 Additional paid-in capital 1,781,976 1,742,121 Retained earnings 239,439 216,097 Foreign currency translation adjustment 16,311 23,424 Net unrealized gain (loss) on securities (52,458) 9,407 Total shareholders' equity 2,255,608 2,261,312 Total liabilities and shareholders' equity $6,093,513 $5,784,590 Cox Communications, Inc. Consolidated Statements of Cash Flows (Unaudited) (Thousands of Dollars) Six Months Ended June 30 ----------------- 1997 1996 -------- ------- Cash flows from operating activities Net income $ 23,342 $ 34,321 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 158,143 119,082 Amortization 36,027 36,092 Equity in net losses of affiliated companies 163,108 48,068 Deferred income taxes (19,219) (61,987) Gain on issuance of stock by affiliated companies -- (50,100) Gain on exchange of cable systems (24,642) -- Gain on sale of affiliated companies (193,780) (4,640) (Increase) decrease in accounts and notes receivable (1,672) 11,192 Decrease in accounts payable and accrued expenses (36,811) (44,580) Increase in taxes payable 85,032 36,378 Other, net (11,249) (3,832) Net cash provided by operating activities 178,279 119,994 Cash flows from investing activities Capital expenditures (361,855) (256,809) Investments in affiliated companies (251,494) (148,750) Proceeds from sale of affiliated companies 6,983 -- Payments for exchanges of cable systems (53,442) -- Proceeds from sale of businesses -- 201,791 Other, net (4,059) 353 Net cash used in investing activities (663,867) (203,415) Cash flows from financing activities Short-term debt borrowings, net 400,000 209,221 Commercial paper repayments, net (20,239) -- Proceeds from issuance of debt 150,000 -- Repayment of debt (7,113) (3,190) Proceeds from exercise of stock options 1,312 907 Increase (decrease) in amounts due to Cox Enterprises, Inc. (35,120) (91,496) Increase (decrease) in book overdrafts 32,843 (27,797) Net cash provided by financing activities 521,683 87,645 Net increase in cash 36,095 4,224 Cash at beginning of period 42,349 39,166 Cash at end of period $ 78,444 $ 43,390 Cox Communications, Inc. Summary of Operating Statistics and Investments Operating Statistics - U.S. Broadband Distribution June 30 March 31 June 30 1996 1997 1997 Homes Passed 4,976,494 5,051,963 5,085,167 Basic Customers (Pro Forma)(a) 3,204,188 3,275,267 3,272,380 Basic Customers 3,216,993 3,275,267 3,272,380 Basic Penetration 64.6% 64.8% 64.4% Premium Service Units 2,149,196 1,999,568 1,907,238 Premium Penetration 66.8% 61.1% 58.3% PrimeStar Customers 88,163 145,040 150,168 Operating Cash Flow Margins (for the quarter ended): Consolidated 38.0% 36.4% 36.7% Core Video Operations(b) 39.6% 39.6% 40.4% Ratio of Debt to Annualized Operating Cash Flow 5.0x 5.2x 5.2x (a) Reflects the trades of cable systems in the first quarter of 1997. (b) Excludes satellite, Fibernet and direct costs of telephony & data services. U.S. Broadband International Broadband Distribution Investments Distribution Investments 3.3 million customers 100.0% TeleWest Communications plc 14.6% 168,361 customers in TWC Cable Partners 50.0% Telecommunications and Technology Investments Cox Communications PCS, L.P. 40.0% At Home Corporation 12.4% PhillieCo, L.P. 17.6% Gemstar International 2.8% Sprint Spectrum 15.0% National Cable Teleport Communications Group, Communications 12.5% Inc. 24.4% PrimeStar Partners 10.4% Syntellect 8.5% U.S. Programming International Programming Investments Investments Digital Cable Radio 13.6% European Channel Discovery Communications 24.6% Management 10.0% E! Entertainment 10.4% Flextech plc 12.6% Outdoor Life Network 41.0% GEMS 50.0% Product Information Network 45.0% Speedvision Network 39.0% The Sunshine Network 5.3% Viewer's Choice 20.0%
CONTACT: Cox Communications, Inc., Atlanta
Analysts and Investors:
Dallas Clement, Treasurer
(404) 843-5677
or
Financial and Trade Press:
Anthony Surratt
Manager of Communications
(404) 843-5124
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