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Cox swings to profit

Tue, 10/26/2004 - 8:00pm
George Mannes

Copyright 2004 TheStreet.com, Inc.

TheStreet.com

October 27, 2004 Wednesday 10:08 AM Eastern Time

Cox Communications (COX:NYSE) swung to a third-quarter profit Wednesday and reaffirmed financial targets.

The Atlanta-based cable operator posted the solid quarter as it prepares to be taken private by its majority holder, closely held Cox Enterprises. Cox Enterprises surprised Wall Street with an Aug. 1 bid to buy out Cox Communications' public shareholders, and reached a take-private deal after sweetening the offer last week.

For its third quarter ended Sept. 30, Cox Communications earned $42 million, or 7 cents a share. That reverses the year-ago loss of $215 million, or 35 cents a share. Revenue rose 11% from a year earlier to $1.62 billion.

Cox attributed the top-line expansion to growth in advanced-service subscriptions (which include digital cable, high-speed Internet access and telephony) and higher basic cable rates. An increase in Cox Business Services customers, as well as an increase in advertising sales, also contributed to overall revenue growth, the company said.

Operating income rose 14% to $183.8 million, while operating cash flow jumped 8% to $584.7 million. Operating margin was flat at 11%, while operating cash flow margin slipped a point to 36%.

Cox said it still expects revenue growth of 11.5% to 12.5% over 2003. Operating cash flow growth will be at the low end of the previously stated range of 14% to 15% as a result of the costs associated with the Florida hurricanes and the accrual related to a verdict against the company in a Texas lawsuit. Without these two events, Cox would expect to end the year at the high end of the 14% to 15% operating cash flow growth range. Capital expenditures for 2004 are expected to be $1.4 billion.

The company also trimmed its basic video customer growth target to 0.3% from just under 1.0% previously. Advanced-service revenue-generating unit net additions are expected to be between 1.1 million and 1.2 million, an increase in previously stated guidance of 1.0 million to 1.1 million. In addition, Cox continues to expect to be free cash flow positive for the full-year 2004.

Early Wednesday, Cox was flat at $34.44.

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