Copyright 2004

July 29, 2004 Thursday

Cox posted a drop in second-quarter profit Thursday, as programming costs rose sharply.

The Atlanta-based cable TV system operator posted second-quarter earnings of $62 million, or 10 cents a share, on sales of $1.6 billion. A year ago the company made $118 million, or 19 cents a share, on sales of $1.42 billion.

Analysts surveyed by Thomson First Call had forecast an 11-cent profit on sales of $1.59 billion.

The company said basic cable subscribers rose 0.6 percent. Cox added 60,351 Cox Digital Cable customers, 97,517 high-speed Internet customers and 66,265 Cox Digital Telephone customers. The company generated $478.6 million in cash flows provided by operating activities and $155.3 million in free cash flow, or cash flows provided by operating activities less capital expenditures.

The news comes on the heels of mostly strong reports Wednesday from rivals Comcast and Time Warner, though both those cable giants indicated they would have to spend more in the future to regain basic cable momentum.

Revenue rose 12 percent from a year ago, led by growth in advanced-service subscriptions such as digital cable, high-speed Internet access and telephony, as well as 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.

Programming costs increased 12 percent to $320.7 million, reflecting rate increases and customer growth. Overhead costs rose 11 percent, with marketing expense rising due to additional marketing related to new video products and an industry-wide campaign aimed at satellite competition, as well as a 9 percent increase in costs associated with Cox Media, Cox's advertising sales business.

The company reiterated its forecast for revenue growth of 11.5 percent to 12.5 percent over 2003, operating cash flow growth of 14 percent to 15 percent over 2003, and capital expenditures of $1.35 billion to $1.40 billion.

Early Thursday, Cox shares were at $27.98.