##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549




---

FORM 10-K

|           |  |                                                                                                 
|---------- |  | ------------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                                 
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR
    15(d) OF THE SECURITIES EXCHANGE ACT OF 1934        
|          
|           |  | For the fiscal year ended December 31,
    2003                                                 
|OR        
|          
|o          |  | 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 1-6590



---

(COX COMMUNICATIONS LOGO)

Cox Communications, Inc.

(Exact name of registrant as specified in its
charter)


|                                                                                        |  |                                                   
|--------------------------------------------------------------------------------------- |  | --------------------------------------------------
|Delaware(State or other jurisdiction of
    incorporation or organization)              |  | 58-2112281(I.R.S. Employer
    Identification No.)
|1400 Lake Hearn Drive,
    Atlanta, Georgia(Address of principal executive
    offices) |  | 30319(Zip Code)                                   

Registrants telephone number, including
area code:

(404) 843-5000


Securities registered pursuant to
Section 12(b) of the Act:

The principal exchange for the following
securities is the New York Stock Exchange:


Class A Common Stock, $1.00 par value


Exchangeable Subordinated Debentures due 2029


Exchangeable Subordinated Discount Debentures due
2020


Securities registered pursuant to
Section 12(g) of the Act:

None


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 þ         No o

Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be
contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any
amendments to this
Form 10-K.    þ

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Exchange Act
Rule 12b-2).    Yes þ         No o

As of June 30, 2003, the last business day
of the registrants most recently completed second fiscal
quarter, the aggregate market value of the shares of
Class A Common Stock held by nonaffiliates was
$6.922 billion based on the closing price on the New York
Stock Exchange on such date.

There were 593,094,656 shares of
Class A Common Stock and 27,597,792 shares of
Class C Common Stock outstanding as of January 30,
2004.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the 2003 Summary Annual Report are
incorporated by reference into Part II, and portions of the
Proxy Statement for the 2004 Annual Meeting of Stockholders are
incorporated by reference into Part III.





---










COX COMMUNICATIONS, INC.

2003 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

|                                                 |  |                                                                                                        |     |      |    | 
|------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------ | --- | ---- | -- | 
|                                                 |  |                                                                                                        |     | Page
|                                                 |  |                                                                                                        |     |     
|PART I                                          
|Item 1.                                          |  | Business                                                                                               |     |      | 2  | 
|Item 2.                                          |  | Properties                                                                                             |     |      | 25 | 
|Item 3.                                          |  | Legal Proceedings                                                                                      |     |      | 25 | 
|Item 4.                                          |  | Submission of Matters to a
    Vote of Security Holders                                                |     |      | 28 | 
|PART II                                         
|Item 5.                                          |  | Market for Registrants
    Common Equity and Related Stockholder Matters                              |     |      | 28 | 
|Item 6.                                          |  | Selected Consolidated
    Financial Data                                                               |     |      | 29 | 
|Item 7.                                          |  | Managements Discussion
    and Analysis of Financial Condition and Results of Operations              |     |      | 30 | 
|Item 7A.                                         |  | Quantitative and Qualitative
    Disclosures about Market Risk                                         |     |      | 52 | 
|Item 8.                                          |  | Consolidated Financial
    Statements and Supplementary Data                                           |     |      | 53 | 
|Item 9.                                          |  | Changes in and Disagreements
    with Accountants on Accounting and Financial Disclosure               |     |      | 97 | 
|Item 9A.                                         |  | Disclosure Controls and
    Procedures                                                                 |     |      | 97 | 
|PART III                                        
|Item 10.                                         |  | Directors and Executive
    Officers of the Registrant                                                 |     |      | 97 | 
|Item 11.                                         |  | Executive Compensation                                                                                 |     |      | 97 | 
|Item 12.                                         |  | Security Ownership of
    Certain Beneficial Owners and Management and Related Stockholder
    Matters |     |      | 97 | 
|Item 13.                                         |  | Certain Relationships and
    Related Transactions                                                     |     |      | 97 | 
|Item 14.                                         |  | Principal Accountant Fees
    and Services                                                             |     |      | 97 | 
|PART IV                                         
|Item 15.                                         |  | Exhibits, Financial
    Statement Schedules and Reports on Form 8-K                                    |     |      | 98 | 
|Signatures                                       |  |                                                                                                        | 101 |     
|EX-4.10 SECOND SUPPLEMENTAL INDENTURE           
|EX-13 PORTIONS OF THE 2003 SUMMARY ANNUAL REPORT
|EX-21 SUBSIDIARIES OF COX COMMUNICATIONS        
|EX-23 CONSENT OF DELOITTE & TOUCHE LLP          
|EX-31.1 SECTION 302 CERTIFICATION OF CEO        
|EX-31.2 SECTION 302 CERTIFICATION OF CFO        
|EX-32.1 SECTION 906 CERTIFICATION OF CEO        
|EX-32.2 SECTION 906 CERTIFICATION OF CFO        



PRELIMINARY NOTE

This Annual Report on Form10-K is for the year
ended December 31, 2003. This Annual Report modifies and
supersedes documents filed prior to this Annual Report. The SEC
allows Cox to incorporate by reference information
that Cox files with it, which means that Cox can disclose
important information to you by referring you directly to those
documents. Information incorporated by reference is considered
to be part of this Annual Report. In addition, information that
Cox files with the SEC in the future will automatically update
and supersede information contained in this Annual Report. In
this Annual Report, Cox, refers to Cox
Communications, Inc. and its subsidiaries, unless the context
requires otherwise.

1



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##### Table of Contents






PART I






|        |         
|------- | --------
|ITEM 1. | BUSINESS

Overview

Cox Communications, Inc. is a multi-service
broadband communications company serving approximately
6.6 million customers nationwide. Cox is the nations
fourth largest cable television provider and offers an array of
broadband products and services to both residential and
commercial customers in its markets. These services primarily
include analog and digital video, high-speed Internet access and
local and long-distance telephone.

Cox is an indirect 63.4% majority-owned
subsidiary of Cox Enterprises, Inc. (CEI). CEI, a privately-held
corporation headquartered in Atlanta, Georgia, is one of the
largest diversified media companies in the U.S. with
consolidated revenues in 2003 of approximately
$10.8 billion. CEI, which has a 106-year history in the
media and communications industry, also publishes 17 daily
newspapers and owns or operates 15 television stations. Through
its indirect majority-owned subsidiary, Cox Radio, Inc., CEI
owns, operates or provides sales and marketing services for 78
radio stations clustered in 18 markets. CEI is also an operator
of wholesale auto auctions through Manheim Auctions, Inc., an
indirect wholly-owned subsidiary, and holds a majority interest
in AutoTrader.com, which offers consumers an online inventory of
new and used vehicles.

Business Strategy

Coxs strategy is to leverage the capacity
and capability of its broadband network to deliver multiple
services to consumers and businesses while creating multiple
revenue streams. Cox believes that aggressive investment in the
technological capabilities of its broadband network, the
long-term advantages of clustering, the competitive value of
bundled services and its commitment to customer and community
service will enhance its ability to continue to grow its cable
operations and offer new services to existing and new customers.

Technology and Network
Infrastructure.Cox strives to
maintain the highest technological standards in the industry.
Available service offerings depend on bandwidth capacity. The
greater the bandwidth, the greater the capacity of the system.
Coxs cable systems generally have bandwidth capacities
ranging from 400 to 750 megahertz or greater. At the end of
2003, Cox had upgraded 91% of its networks to a bandwidth
capacity of 750 megahertz or greater and anticipates that
approximately 93% of its networks will have a bandwidth capacity
of 750 megahertz or greater by the end of 2004. At the end of
2003, digital cable was available to 98% of the homes passed by
Coxs broadband network, high-speed Internet was available
to 98% of homes passed and telephone was available to 48% of
homes passed.

Clustering.As an integral part of its broadband communications strategy,
Cox has continually sought the advantages and efficiencies of
operating large local and regional cable system clusters. As of
December 31, 2003, approximately 81% of Coxs basic
video customers were served by Coxs 12 largest clusters,
which averaged approximately 428,000 customers each. These
clusters, represented by location, are:

|                   |  |                   |  |              
|------------------ |  | ----------------- |  | -------------
|Hampton Roads      |  | New England       |  | Orange County
|Kansas             |  | New Orleans       |  | Phoenix      
|Las Vegas          |  | Northern Virginia |  | San Diego    
|Middle America Cox |  | Oklahoma          |  | West Texas   

Locally and regionally clustered cable systems
enable Cox to reduce expenses through the consolidation of
marketing and support functions and to put in place more
experienced management teams who are better equipped to meet the
new competitive and regulatory challenges of todays
communications industry at the system level. Local and regional
clusters also increase the speed and effectiveness of Coxs
new product and services deployment, enhancing its ability to
increase both customers and revenues.

2



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##### Table of Contents



Bundling.Bundling is a fundamental business strategy for Cox. A bundled
customer is one who subscribes to two or more of Coxs
primary services (video, high-speed Internet access and
telephone). Cox offers the full bundle of services supported by
a single, integrated back-office platform. That means customers
can make one call regarding any and all of their services, can
receive a single bill for all services and can receive multiple
services at a discount. Cox believes that the bundle increases
penetration and operating efficiencies, reduces customer churn
and provides a competitive advantage. In 2003, the number of
bundled customers grew by 37% to 2.3 million, and 36% of
Coxs basic video customers now subscribe to more than one
service.

Customer
Service.Strong customer service
is a key element of Coxs business strategy to deliver
advanced communications services to its customers. Cox has
always been committed to customer service and has been
recognized by several industry groups as a leader in providing
excellent customer service. Cox believes that its high level of
customer satisfaction helps it compete more effectively as it
delivers its wide range of broadband communications services,
including digital video, high-speed Internet access and local
and long-distance telephone, as well as future services. Cox
places special emphasis on training its customer contact
employees and has developed customer service standards and
programs that exceed national customer service standards
developed by the National Cable and Telecommunications
Association and the Federal Communications Commission (FCC).

Community
Service.A key element of
Coxs community service is enhancing education through the
use of cable technology and programming. Cox participates in a
wide range of education and community service initiatives in its
communities nationwide. Coxs major company-wide programs
include:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Cox Cable in the Classroom, which
    provides more than 6,000 schools and 3.7 million students
    with complimentary basic cable service and more than
    540 hours of commercial-free educational cable programming
    on a monthly basis.                                                                                                                                                                                                                                                                                                                
|
| |  | Cox Line to Learning, which provides
    complimentary high-speed Internet access, exclusive curricula
    and distance-learning experiences to students in more than 900
    accredited public and private schools in communities where
    high-speed digital services are available. Coxs Line to
    Learning events link students through online video conferencing
    to experts in the workplace. These distance-learning events
    demonstrate the link between classroom activities and the wider
    world, enabled by Coxs broadband technology.

In addition, to help bridge the digital divide,
Cox provides many local Boys and Girls Clubs of America with
free or discounted high-speed Internet and cable service.

Products and Services

Cox has one operating segment, broadband
communications, and offers video and high-speed Internet access
in almost all of its markets, telephone service in a growing
number of markets and new advanced services in select markets.
Cox experiences some seasonality in its business, primarily as a
result of college students returning to school in the fall and
people traveling to warmer climates for the winter. These
factors generally result in increased revenues during the third
quarter of the year.

Video

Coxs cable operations represent the primary
element of its integrated broadband communications strategy.
Video revenues represented 64%, 68% and 75% of total revenues in
2003, 2002 and 2001, respectively. Cox offers customers a full
range of video services and packages. Customers generally pay
initial connection charges and fixed monthly fees for video
service. As of December 31, 2003, Coxs cable systems
provided video service to approximately 6.3 million
customers.

3



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Coxs video service offerings consist of the
following:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Basic Cable.Basic
    cable includes, for a monthly fee, local broadcast signals
    available off-air, a limited number of broadcast signals from
    so-called superstations, and public, governmental
    and educational access channels.                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | Expanded Basic.Expanded service includes, for an additional monthly fee,
    numerous satellite-delivered non-broadcast programming (such as
    CNN, MTV, USA, ESPN, A&E, TNT, The Discovery Channel, The
    Learning Channel and Nickelodeon).                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | Premium Services.Premium services include, for an additional monthly fee,
    satellite-delivered programming that consists principally of
    feature motion pictures presented without commercial
    interruption, sports events, concerts and other entertainment
    programming (such as Home Box Office, Showtime, Starz and
    Cinemax).                                                                                                                                                                                                                                                                                                                                            
|
| |  | Pay-Per-View.Pay-per-view service allows customers to order, for a fee, a
    single showing of a recently released movie, sporting event or
    music concert without commercial interruption.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | Cox Digital Cable.Digital compression technology currently allows up to 12 digital
    channels to be inserted into the space of only one traditional
    analog channel. A set-top video terminal converts the digital
    signal into analog signals that can be viewed on a television
    set. A Cox Digital Cable customer can currently receive up to
    approximately 250 channels, including enhanced pay-per-view
    service, digital music channels, new networks grouped by genre
    and an interactive program guide. Customers pay a monthly fee
    for digital cable, which varies based on level of service and
    number of digital converters selected by the customer.

In addition, Cox has introduced new video
services to enhance its competitive position and generate
additional revenues.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Entertainment On
    Demand.Entertainment On Demand (also
    referred to as, video on demand) is an interactive service that
    provides access to hundreds of movies and other programming with
    full VCR like functionality, including the ability to pause,
    rewind and fast forward programs. Customers can also start a
    program whenever they like, stop the selection before it is
    completed and view a program repeatedly during the 24 hour
    rental period. Customers generally pay on a per-selection basis.
    Cox has already launched Entertainment On Demand in some
    markets, and is working with technology vendors and others to
    make Entertainment On Demand widely available.
|
| |  | High-Definition
    Television.High definition television
    is high-resolution digital television. A high definition
    television signal has twice the color resolution, provides a
    picture that is six times sharper than that provided by a
    traditional analog television set and provides enhanced audio,
    such as Dolby DigitalTM. Cox provides high definition
    television service in 85% of Coxs homes passed.                                                                                                                                                                                                                                                                                   
|
| |  | Digital Video
    Recorders.A digital video recorder is
    a device that allows customers to store television programming
    on a hard disk drive so that customers can access this
    programming at a later time. The digital video recorder
    functions like a VCR, except that there is no videotape and it
    offers more sophisticated recording options and playback
    features. Cox has deployed digital video recorders in eight
    markets and plans on launching additional markets in 2004.                                                                                                                                                                                                          

High-Speed Internet Access

Cox offers several packages of high-speed
Internet access services with varying speed, features and
prices. These services are marketed under the Cox High Speed
Internet and Cox Express brand names. Data revenues represented
15%, 11% and 7% of total revenues in 2003, 2002 and 2001,
respectively. These services deliver access to the Internet at
speeds of up to 100 times faster than traditional phone modems
and provide unique online content that capitalizes on the
substantial capacity of Coxs broadband network. Cox uses
its own nationwide Internet Protocol network to deliver
high-speed data and Internet services to its customers. This
network utilizes Coxs coaxial cable infrastructure to
connect subscribers to the Internet and other online services
and includes standard Internet service provider functionality,
such as web page hosting for

4



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subscribers, access to Internet news groups,
multiple e-mail accounts and remote access. Cox believes that
control of its network and service will result in better
customer service, reduced operating costs and enhanced future
services.


Cox is also offering home networking as part of
its high-speed Internet product. A home network is a group of
personal computers and other devices that communicate with each
other through a common wired or wireless technology. Cox High
Speed Internet customers can purchase a home networking product
that includes the necessary wired or wireless equipment, a
professional installation and 24-hour technical support. There
is a one-time installation charge and a monthly fee for ongoing
technical support.

Cox Digital Telephone

Cox utilizes the capacity and reliability of its
advanced broadband network by providing local telephone services
and reselling long-distance services. Telephony revenues
represented 8%, 7% and 5% of total revenues in 2003, 2002 and
2001, respectively. Cox provides traditional circuit-based
telephony in eleven markets and, in late 2003, began offering
telephony service using voice over Internet Protocol technology
in its Roanoke, Virginia market. Cox currently serves 48% of its
footprint with telephone service.

Cox Business Services

Through both its dedicated fiber optic networks
and its hybrid fiber coaxial cable networks, Cox Business
Services provides a range of advanced communications services,
including high-speed Internet access, local and long distance
telephone and advanced voice and data transport solutions for
companies of all sizes. Commercial revenues represented 5% of
total revenues in both 2003 and 2002 and 4% of total revenues in
2001.

Cox Media

Cox also derives revenues from the sale of
advertising time on satellite-delivered networks such as
Discovery, MTV and CNN through its advertising sales division,
Cox Media. Advertising revenues represented 7% of total revenues
in 2003 and 8% of total revenues in both 2002 and 2001.
Currently, Cox inserts advertising on up to 49 analog channels
in each of its cable systems and inserts advertising on digital
channels in its major markets. In addition to advertising sales
in Cox markets, Cox Media represents the advertising sales
efforts of other cable operators.

Viewership to cable networks has continued to
increase over the past 15 years showing the increasing
popularity of the medium. Cox expects continued growth of this
revenue source as a result of this audience shift. In addition,
Cox participates in the regional and national cable advertising
market through its investment in National Cable Communications,
L.L.C., a partnership that represents cable companies in
connection with the sale of advertising space to advertisers.
National Cable Communications is the nations largest
representation firm in spot cable advertising sales.

5



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##### Table of Contents



Customer Data

The following table presents operating statistics
for Coxs primary services as of December 31, 2003 and
2002:

|                                                                              |                          |             |            |           |  |  |            |           | 
|----------------------------------------------------------------------------- | ------------------------ | ----------- | ---------- | --------- |  |  | ---------- | --------- | 
|                                                                              |                          |            
|                                                                              |                          | December 31
|                                                                              |                          |            
|                                                                              |                          | 2003        |            | 2002     
|                                                                              |                          |             |            |          
|Customer relationships                                                        |                          |             |            |           |  |  |            |          
|                                                                              | Basic video customers(a) |             |            | 6,338,294 |  |  |            | 6,280,849 | 
|                                                                              | Non-video customers(b)   |             |            | 288,157   |  |  |            | 199,519   | 
|                                                                              |                          |             |            |           |  |  |            |          
|Total customer relationships(c)                                               |                          |             | 6,626,451  |           |  |  | 6,480,368  |          
|Revenue generating units                                                      |                          |             |            |           |  |  |            |          
|                                                                              | Basic video customers(a) |             |            | 6,338,294 |  |  |            | 6,280,849 | 
|                                                                              | Advanced services(d)     |             |            | 5,124,936 |  |  |            | 3,923,734 | 
|                                                                              |                          |             |            |           |  |  |            |          
|Total revenue generating units(e)                                             |                          |             | 11,463,230 |           |  |  | 10,204,583 |          
|Video homes passed(f)                                                         |                          |             | 10,426,093 |           |  |  | 10,210,091 |          
|Basic video penetration(g)                                                    |                          |             | 60.8       | %         |  |  | 61.5       | %        
|                                                                             
|Cox Digital Cable                                                             |                          |             |            |           |  |  |            |          
|Digital cable ready homes passed                                              |                          |             | 10,265,136 |           |  |  | 9,890,211  |          
|Customers                                                                     |                          |             | 2,147,983  |           |  |  | 1,797,364  |          
|Penetration of customers to basic video customers                             |                          |             | 33.9       | %         |  |  | 28.6       | %        
|                                                                             
|High-Speed Internet Access                                                    |                          |             |            |           |  |  |            |          
|High-speed Internet access ready homes passed                                 |                          |             | 10,187,277 |           |  |  | 9,759,194  |          
|Customers                                                                     |                          |             | 1,988,527  |           |  |  | 1,407,950  |          
|Penetration of customers to high-speed Internet
    access ready homes passed |                          |             | 19.5       | %         |  |  | 14.4       | %        
|                                                                             
|Cox Digital Telephone                                                         |                          |             |            |           |  |  |            |          
|Telephone ready homes passed                                                  |                          |             | 5,031,401  |           |  |  | 4,101,158  |          
|Customers                                                                     |                          |             | 988,426    |           |  |  | 718,420    |          
|Penetration of customers to telephone ready homes
    passed                  |                          |             | 19.6       | %         |  |  | 17.5       | %        
|                                                                             
|Bundled Customers                                                             |                          |             |            |           |  |  |            |          
|Customers subscribing to two or more services                                 |                          |             | 2,253,596  |           |  |  | 1,650,709  |          
|Penetration of bundled customers to basic video
    customers                 |                          |             | 35.6       | %         |  |  | 26.3       | %        



---



|    |  |                                                                                                                                                                                                                                             
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | A home with one or more television sets connected
    to a cable system is counted as one basic video customer.                                                                                                                             
|   
|(b) |  | A customer who receives high-speed Internet or
    telephone service, but does not subscribe to video service is
    counted as a non-video customer.                                                                                       
|   
|(c) |  | Total customer relationships represent the number
    of customers who receive at least one level of service,
    encompassing video, high-speed Internet and telephony services,
    without regard to which service(s) customers purchase.
|   
|(d) |  | Advanced services include Cox Digital Cable,
    high-speed Internet access and Cox Digital Telephone.                                                                                                                                      
|   
|(e) |  | Each basic video customer and each advanced
    service is a revenue generating unit. In certain locations, a
    household may purchase more than one advanced service, each of
    which is counted as a separate revenue generating unit.
|   
|(f) |  | A home is deemed to be passed if it
    can be connected to the distribution system without any further
    extension of the distribution plant.                                                                                          
|   
|(g) |  | Basic video customers as a percentage of video
    homes passed.                                                                                                                                                                            

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Franchises

Cable systems are constructed and operated under
non-exclusive franchises granted by local governmental
authorities that may choose to award additional franchises to
competing companies at any time. Franchise agreements typically
contain many requirements, such as time limitations on
commencement and completion of system construction, service
standards, including number of channels, types of programming
and the provision of free service to schools and certain other
public institutions, and the maintenance of insurance and
indemnity bonds. Local regulation of cable television operations
and franchising matters is subject to federal regulation under
the Communications Act of 1934, as amended (the Communications
Act) and the corresponding regulations of the FCC. See
Legislation and Regulation  Cable Franchising
Matters.

As of December 31, 2003, Cox held
approximately 855 cable television franchises. These franchises
generally provide for the payment of fees to the issuing
authority. The Communications Act prohibits franchising
authorities from imposing annual franchise fees in excess of 5%
of gross revenues derived from the provision of
cable services and also permits the cable system operator to
seek renegotiation and modification of franchise requirements if
warranted by changed circumstances.

Cox has never had a franchise revoked, and it has
never been denied a franchise renewal. Although franchises
historically have been renewed, renewals may include less
favorable terms and conditions than the existing franchise. The
Communications Act provides for an orderly franchise renewal
process and establishes comprehensive renewal procedures
designed to protect cable operators against denials of renewal.
A franchising authority may not unreasonably withhold the
renewal of a franchise. If a franchise renewal is denied, and
the franchise authority or a third party acquires the system,
then the franchise authority must pay the operator the
fair market value for the system covered by the
franchise, but with no value allocated to the franchise itself.
Cox believes that it has satisfactory relationships with its
franchising authorities.

Programming Suppliers

Cox has various contracts to obtain basic and
premium programming from program suppliers whose compensation is
typically based on a fixed fee per customer or a percentage of
Coxs gross receipts for the particular service. Some
program suppliers provide volume discount pricing structures or
offer marketing support to Cox. Coxs programming contracts
are generally for a fixed period of time and are subject to
negotiated renewal. Coxs programming costs have increased
in recent years and are expected to continue to increase due to
additional programming being provided to Coxs customers,
increased costs to produce or purchase programming, inflationary
increases and other factors. Increases in the cost of
programming services have been offset in part by additional
volume discounts as a result of the growth of Cox and its
success in selling such services to its customers.

Investments

Cox has certain investments in businesses focused
on cable programming, telecommunications and technology.

Discovery Communications,
Inc.Discovery provides nature,
science and technology, exploration and adventure programming,
and is distributed to customers in virtually all homes receiving
cable television in the U.S. The principal businesses of
Discovery are the advertiser-supported networks The Discovery
Channel, The Learning Channel, Animal Planet Network, The Travel
Channel and Discovery Europe, and the retail businesses of
Discovery.com. In addition, Discovery is building a documentary
programming library. At December 31, 2003, Cox owned a
25.0% interest in Discovery.

Sprint PCS.Sprint Corporation offers personal
communications services through its PCS Group.

In April 2003, Cox sold its Sprint Corporation
PCS Group (Sprint PCS) warrants, which were exercisable for
approximately 6.3 million shares of Sprint PCS common
stock, for nominal consideration. Cox recognized a pre-tax loss
of $0.4 million as a result of this sale.

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In August 2003, Cox terminated its series of
prepaid forward contracts to sell up to 19.5 million shares
of its Sprint PCS common stock. In connection with the
termination, Cox sold the 19.5 million shares of Sprint PCS
common stock, which had been pledged to secure its obligations
pursuant to these prepaid forward contracts and were classified
as trading. The prepaid forward contracts had been accounted for
as zero-coupon debt, so the termination resulted in the
elimination of $80.9 million of balance sheet debt at the
date of the termination.

In 2003, Cox sold 46.8 million shares of
Sprint PCS common stock for aggregate net proceeds of
approximately $246.4 million. Cox recognized an aggregate
pre-tax gain of $154.5 million on the sale of these shares.

At December 31, 2003, Coxs remaining
investment in Sprint PCS was comprised of 0.3 million
shares of Sprint PCS common stock and 0.1 million shares of
convertible preferred stock, which are convertible into
approximately 4.0 million shares of Sprint PCS common
stock. The estimated fair value of Coxs investment in
Sprint PCS was $59.9 million and $349.2 million at
December 31, 2003 and December 31, 2002, respectively.

Other.At
December 31, 2003, Cox also had ownership interests in
Liberate Technologies, In Demand, L.L.C. and National Cable
Communications, L.L.C., as well as certain other public and
private companies in the cable programming, telecommunications
and technology businesses.

Competition

Based on reported subscriber numbers of other
providers of multi-channel video services, Cox is the sixth
largest provider of multi-channel video services in the country.
The following providers report higher subscriber numbers than
Cox: Comcast Corporation, DirecTV (a subsidiary of Hughes
Electronics Corporation which is 34% owned by a subsidiary of
News Corporation Limited), Time Warner, Echostar Communications
Corporation, and Charter Communications.

Each of Coxs broadband services operates in
a competitive environment. Certain facilities-based competitors,
including local telephone companies and satellite program
distributors, offer cable and/or other communications services
in various areas where Cox operates its cable systems. Cox
anticipates that facilities-based competitors will develop in
other areas that Cox serves. Coxs services will likely
face competition in the future from other competitors using
additional spectrum the FCC makes available from time to time in
spectrum auctions.

Cable and Internet Access
Competition.Coxs cable
systems compete with a variety of news, information and
entertainment providers. Coxs cable systems also face
competition from all media for advertising dollars. In the
communities in which Cox operates its cable systems, Cox may
compete with one or more of the following businesses:



| |   |                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | direct broadcast satellite (commonly known as
    DBS) and direct-to-home satellite program distributors that
    transmit video programming, data and other information by
    satellite to customers receiving dishes;                   
|
| |  | multichannel multipoint distribution service
    (also known as MMDS or wireless cable) that uses low-power
    microwave frequencies to transmit video programming and other
    information over-the-air to subscribers receiving dishes;
|
| |  | local television broadcast stations providing
    free off-air programming that can be received using a roof-top
    antenna and television set;                                                                                            
|
| |  | satellite master antenna television systems (also
    known as SMATV or private cable systems) that serve
    condominiums, apartments, office complexes and private
    residential developments;                                          
|
| |  | competitive cable systems that have been
    franchised by local governments to provide cable television
    services in areas where Cox operates (commonly known as
    overbuilders);                                                     
|
| |  | distributors of home video products;                                                                                                                                                                                                        

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| |   |                                                   
| | - | --------------------------------------------------
| |  | interactive online computer and Internet services;
|
| |  | movie theaters;                                   
|
| |  | live concerts and sporting events; and            
|
| |  | books, newspapers and magazines.                  

In order to compete effectively, Cox strives to
provide, at a reasonable price to its subscribers:



| |   |                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | new products and services, including digital
    video and audio programming, high definition video programming,
    high-speed Internet access and telephone services;
|
| |  | a greater variety of optional video programming
    packages;                                                                                                          
|
| |  | superior technical performance; and                                                                                                                                    
|
| |  | superior customer service.                                                                                                                                             

In recent years the FCC has adopted regulatory
policies intended to provide a favorable operating environment
for existing and new technologies that provide, or have the
potential to provide, substantial competition to cable systems.
These technologies include direct broadcast satellite service,
among others. Direct broadcast satellite services are available
throughout the country through the installation of a small roof
top or side-mounted antenna. Direct broadcast satellite
operators are among the cable industrys largest
competitors. The two largest direct broadcast satellite
companies, EchoStar Communications Corporation and DirecTV, are
currently offering nationwide high-power direct broadcast
satellite services and are each among the four largest providers
of multichannel video programming services on the basis of
reported subscriber numbers. The recent acquisition of a de
facto controlling interest in DirecTV by News Corporation
Limited, which currently controls direct satellite broadcast
operations in Europe, Asia and Latin America, could
significantly enhance DirecTVs ability to compete with Cox.

Direct broadcast satellite service subscribership
continues to grow. According to recent government reports,
conventional, medium and high-powered satellites provide video
programming to over 20.9 million subscribers in the U.S.,
which represents an approximate 22.2% share of the national
multichannel video program distributor market. Direct broadcast
satellite providers with high-power satellites typically offer
more than 300 channels of programming, including local
television broadcast stations and other programming services
substantially similar to those provided by Coxs cable
systems. Direct broadcast satellite systems use video
compression technology to increase channel capacity and digital
technology to improve the quality and quantity of the signals
transmitted to their subscribers. Unlike cable operators, direct
broadcast satellite systems have limited ability to offer
locally produced programming in each community where service is
offered and do not have a significant local presence in most
communities. Coxs video service packages, including its
digital cable services, are competitive with the programming,
channel capacity and the digital quality of signals delivered to
subscribers by direct broadcast satellite systems.

The direct broadcast satellite industry also
provides advanced communications services. Direct broadcast
satellite providers currently offer one-way high-speed Internet
access services using a telephone return path. DirecTV also is
offering two-way high-speed Internet access services. DirecTV
and Verizon Communications, one of the worlds largest
telecommunications companies, recently announced a co-marketing
agreement to offer bundled communications services, including
local and long distance telephone, broadband Internet, mobile
telephone and satellite TV services, immediately in Rhode Island
and later this year in other parts of New England and the
mid-Atlantic states. Another satellite company called WildBlue
(formerly iSKY) reports that it plans to deliver two-way
high-speed Internet access to residential and small business
markets in the contiguous U.S. and portions of Canada in the
second half of 2004 using the Ka-band and spot beam technology.
EchoStar is offering its video programming services with the
Internet services provided by EarthLink, an Internet service
provider, using digital subscriber line technology, and it
recently announced an agreement in which it will bundle its
satellite video services with the telephone services of Sprint
Corporation. Many of Coxs cable systems offer high-speed
Internet services that compete with the Internet services offered

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by these direct broadcast satellite providers and
by existing Internet service providers (also known as ISPs) and
local and long-distance telephone companies.


Federal law allows local telephone companies to
provide, directly to subscribers, a wide variety of services
that are competitive with Coxs cable television services,
including video and Internet services, within and outside their
telephone service areas. Telephone companies and other
businesses construct and operate communications facilities using
various technologies, including fixed wireless technology, that
provide access to the Internet and distribute interactive
computer-based services, data and other non-video services to
homes and businesses. Many Internet service providers offer
access to the Internet with dial-up services over ordinary
telephone lines. The deployment of Digital Subscriber Line
technology, also known as DSL, allows Internet access to
subscribers at data transmission speeds equal to or greater than
that of modems over conventional telephone lines. Monthly
service fees for digital subscriber line services are comparable
to charges for high-speed Internet services offered over cable
systems, and dial-up Internet services often have a pricing
advantage. Numerous companies, including telephone companies,
have introduced digital subscriber line service, and certain
telephone companies are seeking regulatory changes in order to
provide high-speed broadband services without regard to present
service boundaries and other regulatory restrictions. In
Phoenix, Arizona and Omaha, Nebraska, where Cox operates cable
systems, Qwest uses very high-speed digital subscriber line
(also known as VDSL) technology to distribute video, high-speed
Internet access and telephone service over existing copper phone
lines. In 2003, BellSouth and Earthlink expanded their agreement
to provide high-speed digital subscriber line technology to
additional markets, including Baton Rouge and New Orleans.
Similarly, Verizon Communications and DirecTV recently announced
a co-marketing agreement to offer bundled communications
services immediately in Rhode Island and later this year in
other parts of New England and the mid-Atlantic states. Verizon
recently announced that it will provide broadband communications
services to EarthLink and will offer Internet telephony services
to Earthlink customers.

As in recent years, Congress may again consider
legislation that, if enacted into law, would eliminate or reduce
significantly many of the regulatory restrictions on the
offering of high-speed broadband services by local telephone
companies. The FCC also has several rulemaking proceedings
pending that may lead to a reduction or elimination of certain
regulatory restrictions currently imposed on the offering of
high-speed broadband services by local telephone companies. See
Legislation and Regulation  Cable
Television. Cox is unable to predict the outcome of these
legislative or regulatory initiatives or the likelihood of
success of competing video or cable service ventures by
telephone companies or other businesses. Although Coxs
high-speed Internet services are very competitive with the
Internet services delivered by telephone companies, Cox cannot
predict the impact these competitive ventures might have on its
business and operations.

Real-time (i.e., streaming) and
downloadable video accessible over the Internet continues to
improve in quality and is becoming more widely available,
although streaming Internet video has yet to become a
significant competitor to traditional video services. As
high-speed Internet services over cable systems become more
ubiquitous, programming suppliers, such as the major movie
studios, may bypass cable operators and market their services
directly to consumers through video streaming over the Internet.
In 2003, Yahoo Inc. introduced a video subscription service that
offers entertainment and sports content. Cox is unable to
predict the impact on its business and operations from companies
providing Internet services or companies using the Internet to
gain direct access to Coxs subscribers.

Coxs cable systems also compete for
subscribers with satellite master antenna television systems
that receive signals transmitted by satellite at receiving
facilities located on private property such as condominiums,
apartments, office complexes and other private residential
developments. These systems also are developing and/or offering
high-speed Internet access and other broadband services along
with video services. Satellite master antenna television
systems, which normally are free of many regulatory burdens
imposed on franchised cable systems, often enter into exclusive
agreements with property owners or managers that may preclude
franchised cable systems from serving their residents, although
some states have enacted laws prohibiting such exclusive
arrangements. Courts reviewing challenges to these laws have
reached varying results. The FCC has ruled that private cable
systems can distribute cable programming services across public
rights-of-way to subscribers in multiple buildings over leased
video distribution capacity acquired from local telephone

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companies without obtaining a franchise from the
local governmental authorities. Cox is unable to predict the
extent to which additional competition from these services will
materialize in the future or the impact such competition would
have on its operations. However, Cox is continuing to develop
competitive packages of services to offer residential and
commercial developments.


Cable systems also compete with multichannel
multipoint distribution service systems (also known as MMDS or
wireless cable systems), which are licensed by the FCC to serve
specific areas using low-power microwave frequencies. The
FCCs regulations allow wireless cable systems the
flexibility to employ digital technology in delivering two-way
communications services, including high-speed Internet access,
and along with the use of digital compression technology,
wireless cable systems are able to deliver more channels and
additional services, such as Internet service. Generally,
wireless cable operators are now focusing on data transmission
rather than video service. One such system in Phoenix, Arizona
has over 10,000 customers subscribing to its Internet service
and is competing with Coxs cable system. A wireless cable
operator also is authorized or has commenced service in several
California communities where Cox operates.

In addition, the FCC has awarded licenses in the
28 gigahertz band for a new multichannel wireless video service
called Local Multipoint Distribution Service (also known as
LMDS), which, like other wireless cable systems, is capable of
transmitting voice and high-speed Internet access as well as
video transmissions. The FCC recently completed an auction of a
500 megahertz block of spectrum in the 12.2 to 12.7 gigahertz
band (spectrum previously allocated for direct broadcast
satellite system use) in the Multichannel Video Distribution and
Data Service (also known as MVDDS); the FCC is expected to issue
at least 192 geographic area licenses throughout the United
States authorizing new terrestrial digital wireless video,
voice, and data transmission services. The FCC requirements for
this new terrestrial digital wireless service requires licensees
to operate on a non-harmful interference basis with
the incumbent spectrum user. Based on the reported results of
the spectrum auction, the FCC is expected to issue licenses in
several Cox markets, including Las Vegas, Phoenix and
San Diego. Cox is unable to predict whether any of these
wireless communications services will have a material impact on
its business and operations.

Cox operates its cable systems pursuant to
non-exclusive franchises that are issued by a communitys
governing body such as a city council, a county board of
supervisors or a state regulatory agency. Federal law prohibits
franchising authorities from unreasonably denying requests for
additional franchises, and it permits franchising authorities to
operate cable systems. Companies that traditionally have not
provided cable services and that have substantial financial
resources (such as public utilities that own certain of the
poles to which Coxs cables are attached) may also obtain
cable franchises and may provide competing communications
services. To date, the number of competing cable systems in
Coxs service areas has been relatively slight, and fewer
than 7% of Coxs total homes passed are overbuilt by other
cable operators at this time. While Cox believes that the
current level of overbuilding has not had a material impact on
its operations, it is unable to predict the extent to which
adverse effects may occur in the future as a result of
overbuilds. See Legislation and Regulation 
Cable Franchising Matters.

Other new technologies also compete with
Coxs cable-delivered services. The FCC has issued digital
television (also known as DTV) licenses to incumbent television
broadcast licensees. Digital television stations are capable of
delivering high-definition television pictures, multiple digital
program streams, as well as CD-quality audio programming and
advanced digital services such as data transfer or subscription
video. Digital television stations are now operating in many of
Coxs cable television markets. In the markets where Cox is
now offering high definition (HD) digital services, Cox has
reached agreements with many of these stations to carry at least
their primary digital broadcast signal on Coxs cable
systems.

Telephony
Competition.Coxs telephone
services compete with various providers of both landline and
wireless communications services, including cellular, personal
communications services (also known as PCS), specialized mobile
radio (also known as SMR) systems. The switched voice and data
telecommunications market currently is dominated by incumbent
local telephone companies (also known as incumbent local
exchange carriers or ILECs); however, wireless communications
service providers and long distance carriers also offer
competition to Cox in the delivery of both voice and Internet
services. Resellers of the incumbent

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local telephone companys voice and Internet
services also compete with Coxs communications services.
Resellers are typically low-cost aggregators that serve price
conscious market segments; and value-added resellers target
customers with special communications needs. Companies offering
telephone service via the Internet (also know as VOIP and IP
telephony) also compete with Coxs telephone services.


Subject to certain limitations for rural
telephone companies, the FCC may preempt any state or local law
or regulation that prohibits or has the effect of prohibiting
any entity from providing telecommunications services. Federal
law facilitates opening local exchange markets to competition,
which has resulted in a substantial increase in Coxs
business opportunities to deliver telecommunications services
over its cable broadband networks.

Advances in communications technology,
marketplace developments and regulatory and legislative changes
will occur in the future. For further information concerning
legislative and regulatory matters, please see
 Legislation and Regulation. New
technologies and services may develop and may compete with
services offered by Cox over its communications facilities.
Consequently, Cox is unable to predict the effect that ongoing
or future developments might have on its business and operations.

Legislation and Regulation

Cable Television

The cable industry is regulated to varying
degrees by the FCC, certain state governments and agencies and
most local governments. In addition, legislative and regulatory
proposals under consideration from time to time by Congress and
various federal, state and local agencies may materially affect
the cable industry. The following is a summary of federal laws
and regulations affecting the growth and operation of the cable
industry and a brief description of certain state and local laws.

The Communications Act of 1934, as amended by the
Cable Communications Policy Act of 1984 (the 1984 Cable Act),
the Cable Television Consumer Protection and Competition Act of
1992 (the 1992 Cable Act), and the Telecommunications Act of
1996 (the 1996 Telecommunications Act), establishes
comprehensive national standards and guidelines for the
regulation of cable television systems and allocates
responsibility for enforcing federal regulatory policies among
the FCC, state and local governmental authorities. The courts,
especially the federal courts, have an important oversight role
as the statutory and regulatory provisions and policies are
interpreted and enforced by various governmental units. Court
actions and regulatory proceedings will continue to refine the
rights and obligations of cable operators and governmental
authorities under federal law. The results of these judicial and
administrative proceedings may materially impact Coxs
business and operations.

The
Communications Act and FCC Regulations

The Communications Act and the regulations and
policies of the FCC affect significant aspects of Coxs
cable system operations, including:



| |   |                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------
| |  | subscriber rates;                                                                                                                            
|
| |  | the content of programming Cox offers to
    subscribers, as well as the manner in which Cox markets its
    program packages to subscribers;
|
| |  | the use of Coxs cable system facilities by
    local franchising authorities, the public and unrelated
    companies;                       
|
| |  | the use of utility poles and conduits;                                                                                                       
|
| |  | cable system and program ownership
    limitations; and                                                                                      
|
| |  | franchise agreements with local governmental
    authorities.                                                                                

Rate Regulation.The Communications Act and FCC
regulations authorize certified local franchising authorities to
regulate rates for basic tier cable services and associated
customer equipment and installations in

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communities where the cable system is not subject
to effective competition, as defined by federal law.
The FCC has detailed rate regulations, guidelines and rate forms
that franchising authorities must use in connection with their
regulation of Coxs basic service and equipment rates.
Where its cable system is regulated, Cox may modify its rates on
an annual basis to account for changes in the number of
regulated channels, inflation and certain external
costs such as franchise and other governmental fees, copyright
and retransmission consent fees, taxes, programming fees and
franchise-related obligations. Additionally, Cox may modify its
rates to account for significant network upgrades. If the
franchising authority determines that Coxs basic service
or equipment rates are not in compliance with the FCCs
regulations, it may require Cox to reduce those rates and to
refund to subscribers with interest any overcharges during the
prior year. Cox may appeal adverse rate decisions to the FCC and
the FCC may reverse any rate decision made by a local
franchising authority if the decision is inconsistent with the
FCCs rules and policies.


The Communications Act and the FCCs
regulations also:



| |   |                                                                                                                                                                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | prohibit regulation of rates for non-basic
    multi-channel video service packages and video programming
    offered on a per channel or per program basis, as well as
    regulation of rates by local franchising authorities for other
    non-basic services provided over the cable system;
|
| |  | require operators to establish a uniform rate
    structure for cable services throughout each franchise area that
    is not subject to effective competition, subject to certain
    exceptions allowing operators to establish reasonable categories
    of customers and services;           
|
| |  | permit operators to offer non-predatory bulk
    discount rates for subscribers in commercial and residential
    developments and to offer discounted rates to senior citizens
    and other economically disadvantaged groups; and                                                             
|
| |  | permit regulated basic equipment and installation
    rates to be computed by aggregating costs of broad categories of
    equipment at the franchise, system, regional or company level.                                                                                                        

Approximately 221 communities served by
Coxs cable systems currently regulate Coxs basic
service and equipment rates. These communities represent
approximately 25% of total communities served by Cox and
approximately 50% of the total number of equivalent basic
subscribers served by Coxs cable systems. The regulation
of Coxs basic service and equipment rates in these
communities has not materially impacted Coxs business and
operations and Cox does not believe that it will do so in the
future.

Content Requirements and Restrictions.The Communications Act and FCC
regulations permit a local commercial television broadcast
station to elect once every three years to require a cable
operator in the stations designated market area either:



| |   |                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------
| |  | to carry the station on certain designated
    channel positions on the operators cable system (subject
    to certain exceptions); or         
|
| |  | to negotiate an agreement for the stations
    retransmission consent that permits the operator to
    carry the station on the cable system.

The Communications Act requires a cable operator
to devote as much as one-third of its activated channel capacity
for the mandatory carriage of local commercial television
stations. The Communications Act also gives local non-commercial
television stations mandatory carriage rights; however, such
stations are not given the option to negotiate retransmission
consent for the carriage of their signals by cable systems.
Cable systems must negotiate retransmission consent for any
additional distant commercial television stations
(except for certain commercial satellite-delivered independent
superstations such as WGN), commercial radio
stations and certain low-power television stations.

The FCC has a pending administrative proceeding
in which it is considering various proposals for mandatory
carriage of digital television signals. In the first phase of
this proceeding, the FCC:



| |   |                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------
| |  | declined to order the carriage of both the analog
    and digital signals of television stations;  
|
| |  | implemented technical and operational standards
    for the carriage of digital television signals;

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| |   |                                                                                                                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | determined that a television broadcast station
    licensee that is operating only on its authorized digital
    channel and/or that has surrendered its analog broadcast channel
    has mandatory carriage rights for its digital broadcast channel
    on cable systems in its local service area;
|
| |  | authorized the digital-only broadcast station to
    elect whether the operators cable system will carry the
    stations signal in a digital or converted analog
    format; and                                                                                                                  
|
| |  | authorized broadcasters with both analog and
    digital signals to tie the carriage of their digital signals
    with the carriage of their analog signals as a retransmission
    consent condition.                                                                                               

The FCC continues to evaluate additional
modifications to its digital broadcast signal carriage
requirements. Cox cannot predict the ultimate outcome of this
proceeding, or the impact any new carriage requirements may have
on the operation of its cable systems.

Except in areas where Cox is subject to effective
competition, the Communications Act requires Coxs cable
systems to permit subscribers to purchase video programming
offered by Cox on a per channel or a per program basis without
the necessity of subscribing to any tier of video service, other
than basic service. All of Coxs systems are in compliance
with this requirement.

One of the underlying competitive policy goals of
the federal communications laws is to limit the ability of
vertically integrated program suppliers from favoring affiliated
cable operators over unaffiliated program distributors.
Consequently, with certain limitations, until 2007, federal law
generally:



| |   |                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | precludes any satellite video programmer
    affiliated with a cable company, or with a common carrier
    providing video programming directly to its subscribers, from
    favoring an affiliated company over competitors;
|
| |  | requires such programmers to sell their
    programming to other multichannel video distributors; and                                                                                                                        
|
| |  | limits the ability of such programmers to offer
    exclusive programming arrangements to their affiliates.                                                                                                                  

The Communications Act contains restrictions on
the transmission by cable operators of obscene programming. The
Communications Act also requires cable operators, upon the
request of a subscriber, to scramble or otherwise fully block
any channel that is not included in the programming package
purchased by the subscriber. Cable operators are also required
to provide by sale or lease a lockbox or other device that
permits a subscriber to block the viewing of specific channels
during specified periods selected by such subscriber.

The FCC actively regulates other aspects of a
cable operators programming, including:



| |   |                                                                                              
| | - | ---------------------------------------------------------------------------------------------
| |  | use of syndicated and network programs and local
    sports broadcast programming;           
|
| |  | advertising in childrens programming;                                                       
|
| |  | political advertising;                                                                       
|
| |  | programming created or controlled by the cable
    operator (i.e., origination cablecasting);
|
| |  | sponsorship identification; and                                                              
|
| |  | closed captioning of video programming.                                                      

The FCC has also initiated a regulatory
proceeding to evaluate its jurisdiction and regulatory authority
over the distribution of interactive television services,
including advanced instant messaging and interactive menu
services. A federal appellate court recently vacated the
FCCs decision to require video programmers, including
cable operators, to provide simultaneous audio description of
video activity occurring on certain programming to assist
visually impaired persons.

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Use of Coxs Cable Systems by the
Government and Unrelated Third
Parties.The Communications Act
allows local franchising authorities and unrelated third parties
to have access to cable systems channel capacity for their
own use. For example, the Communications Act:



| |   |                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | permits franchising authorities to require that
    cable operators provide channel capacity for public, educational
    and governmental access programming; and                                                            
|
| |  | requires cable systems with 36 or more activated
    channels to designate a significant portion of their channel
    capacity for programming provided by unaffiliated third parties
    under regulated lease arrangements.

The FCC regulates various aspects of third party
use of channel capacity on cable systems, including the rates
and certain terms and conditions of such commercial use.

Various consumer groups and companies, including
telephone companies and Internet service providers, have lobbied
vigorously for local, state and federal governments to mandate
that cable operators provide capacity on their systems so that
these companies and others may deliver high-speed Internet and
interactive television services directly to subscribers over
cable systems. Municipal efforts to impose unilaterally
so-called open access requirements on cable
operators have not generally been successful and have been
rejected by several federal courts, although the rationale for
each decision has varied. The FCC, in connection with its review
of the AOL-Time Warner merger, imposed, together with the
Federal Trade Commission, limited multiple access, technical
performance and other requirements related to the merged
companys Internet and Instant Messaging platforms.

In 2002, the FCC decided that the provision of
broadband Internet services over cable systems is an interstate
information service, and not a cable
service or telecommunications service. The FCC
confirmed that cable operators offering integrated high-speed
Internet services are not subject to common carrier requirements
to offer the transport functions underlying their Internet
services on a stand-alone basis to unaffiliated Internet service
providers. In October 2003, a three-judge panel for the
U.S. Court of Appeals for the Ninth Circuit concluded that
broadband Internet service delivered over a cable system is in
part a telecommunications service and therefore it vacated in
part and remanded the FCCs decision for further
proceedings at the FCC. The FCCs petition for rehearing
en banc by the Ninth Circuit in this case is pending. The
FCC has a separate rulemaking pending to assess issues
concerning the regulation of broadband Internet services
provided over cable systems, including whether the FCC can and
should exercise authority to develop a new regulatory framework
for Internet service provided over cable systems as a
facilities-based interstate information service and the role, if
any, of state and local governmental authorities in regulating
such services. Similarly, in a rulemaking proceeding involving
regulation of incumbent local exchange carriers broadband
services, the FCC has proposed to classify broadband Internet
services provided by local telephone companies over their own
wireline facilities as information services. The
outcome of the pending appeal of the FCCs regulatory
classification of high-speed Internet services provided over
cable systems and the pending FCC broadband rulemaking
proceedings may affect significantly Coxs regulatory
obligations, including whether Cox will be required to obtain
additional local authority to use the local rights-of-way for
the delivery of high-speed Internet services or to pay local
governmental franchise fees and/or federal and state universal
service fees on high-speed Internet service revenues. Cox cannot
predict the ultimate outcome of these judicial and
administrative proceedings or the impact of any new regulatory
requirements on Coxs business and operations.

In June 2000, the federal appellate court for the
Ninth Circuit, which has jurisdiction over California, Nevada
and Arizona (among other states), decided in a dispute between
AT&T Broadband and the City of Portland that the Internet
service offered by AT&T Broadband was not a cable service.
As a result, Cox determined that it could incur liability in
those states if it continued to collect and remit franchise fees
on revenue derived from its high-speed Internet services.
Additionally, because the FCC ruled in March 2002 that
high-speed Internet services provided over cable systems are not
cable services, Cox notified all of its local franchising
authorities that it no longer could collect and remit franchise
fees on its high-speed Internet service revenues. For a
discussion of certain related matters, see Item 3.
Legal Proceedings. Although various local
franchising authorities have objected to the termination of
franchise fee payments on the

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revenues from Coxs high-speed Internet
services, the only franchising authorities that have taken any
formal action against Cox are the City of Los Angeles,
California and Jefferson Parish, Louisiana. Los Angeles has
given Cox and other cable operators doing business in the City
of Los Angeles a formal notice of default of their franchise
obligations for failure to pay franchise fees on high-speed
Internet service revenues. Jefferson Parish filed a lawsuit
claiming, among other things, that Cox is obligated to pay
franchise fees on its high-speed Internet services. In July
2003, a federal district court granted Coxs motion for
partial dismissal of Jefferson Parishs complaint based in
part on the FCCs decision classifying broadband Internet
services over cable systems as an interstate information
service, and in January 2004, Cox and Jefferson Parish settled
the case in a manner which Cox believes is beneficial to its
operations. Cox cannot predict the outcome of the Los Angeles
franchise fee disputes, or the impact of any adverse result in
such dispute on its business and operations. As of
December 31, 2003, Cox had 9,183 subscribers in the City of
Los Angeles.


Legislation has been introduced previously in
Congress, which, among other things, would have required cable
operators to offer interconnection to unaffiliated Internet
service providers on terms and conditions regulated by the FCC.
Although the legislation was not enacted, Cox cannot predict if
similar proposals will be introduced or adopted in the future or
whether such proposals, administrative proceedings or litigation
will have a material impact on its business and operations.

Pole
Attachments.The Communications
Act requires public utilities to provide cable systems and
telecommunications carriers with nondiscriminatory access to any
pole, conduit or right-of-way controlled by the utility. The
Communications Act also requires the FCC to regulate the rates,
terms and conditions imposed by public utilities for use of
utility poles and conduit space unless state authorities have
certified to the FCC that they adequately regulate pole
attachment rates, as is the case in certain states where Cox
operates. In the absence of state regulation, the FCC will
regulate pole attachment rates, terms and conditions only in
response to a formal complaint. The FCCs original rate
formula governs the maximum rate certain utilities may charge
for attachments to their poles and conduit by cable operators
providing cable services and other non-telecommunications
services. The FCC also adopted a second rate formula that became
effective in February 2001 and that governs the maximum rate
certain utilities may charge for attachments to their poles and
conduit by companies providing telecommunications services,
including cable operators. Any resulting increase in attachment
rates due to the FCCs new rate formula will be phased in
over a five-year period in equal annual increments, that began
in February 2001.

The U.S. Supreme Court has upheld the
FCCs jurisdiction to regulate the rates, terms and
conditions of cable operators pole attachments that are
simultaneously used to provide high-speed Internet access and
cable services, and a federal appellate court recently confirmed
that the FCCs rate formulas, as applied in a specific
case, provide just compensation under the Federal
Constitution. Several other recent federal appellate court
decisions have also upheld various aspects of the FCCs
pole attachment regulations and policies, which decisions will
provide more certainty for Cox in its negotiations with various
utilities for the use of space on poles and in underground
conduits.

Cox is involved in two complaint proceedings
filed at the FCC by various state cable associations challenging
certain utilities rate increases and the unilateral
imposition of new contract terms. The utilities in these cases
challenged, among other things, the constitutionality of the
FCCs pole attachment rate formulas. These cases were
decided in 2003 by the FCC in favor of the cable operators;
however, the utilities involved either have requested the FCC to
reconsider its decision or have appealed the decision to a
federal appellate court. Both cases are pending further action
by the FCC or a federal court. Cox is unable to predict the
outcome of the legal challenges to the FCCs regulations or
the ultimate impact any revised FCC rate formula, any new pole
attachment regulations or any modification of the FCCs
regulatory authority might have on Coxs business and
operations

Ownership
Limitations.The Communications
Act authorizes the FCC to impose nationwide limits on the number
of subscribers under the control of a cable operator and on the
number of channels that can be

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occupied on a cable system by video programmers
in which the cable operator has an attributable ownership
interest. The FCC adopted cable ownership regulations and
established:




| |   |                                                                                                                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | subscriber ownership information reporting
    requirements; and                                                                                                                                                                                                                                                                                
|
| |  | attribution rules that identify when the
    ownership or management by Cox or third parties of other
    communications businesses, including cable systems, television
    broadcast stations and local telephone companies, may be imputed
    to Cox for purposes of determining Coxs compliance with
    the FCCs ownership restrictions.

The federal courts have rejected constitutional
challenges to the statutory ownership limitations; but a federal
appellate court recently concluded that the FCCs
nationwide cable subscriber ownership limit and its cap on the
number of affiliated programming channels an operator may carry
on its cable systems were unconstitutional and that certain of
its ownership attribution rules were unreasonable. The FCC has
initiated a rulemaking proceeding to evaluate the feasibility of
new horizontal and vertical cable ownership limitations and
revised attribution standards. Cox is unable to predict the
outcome of this FCC proceeding or the impact any new FCC
ownership restrictions or attribution rules might have on its
business and operations.

The 1996 Act eliminated the statutory prohibition
on the common ownership, operation or control of a cable system
and a television broadcast station in the same market. The FCC
eliminated its regulations precluding the cross-ownership of a
national broadcasting network and a cable system, and its
regulations prohibiting the common ownership of other
broadcasting interests and cable systems in the same
geographical areas. This broadcast-cable cross-ownership rule
prohibited Cox from owning or operating a cable system in the
same area in which CEI or one of CEIs subsidiaries owns or
operates a television broadcast station. Although the FCC
recently modified many of its media ownership restrictions, it
has not proposed to implement a new broadcast-cable
cross-ownership prohibition. With the FCCs elimination of
its cable-broadcast cross-ownership restriction, Cox may obtain
an enhanced degree of flexibility in structuring its cable
operations.

Local Telephone Company Ownership of Cable
Systems.Federal law permits
potentially strong competitors such as telephone companies to
enter into the cable business. Local telephone companies may
offer video services in their local telephone service areas, and
legal barriers to competition that exist in state and local laws
and regulations are preempted. Federal law sets basic standards
for relationships between telecommunications providers, limits
acquisitions among cable systems and telephone companies in the
same market and prohibits certain joint ventures between local
telephone companies and cable operators in the same market.

Local telephone companies and other entities may
provide video programming services as traditional cable
operators or, among other things, as open video system (also
known as OVS) operators, subject to certain conditions,
including setting aside a portion of their channel capacity for
use by unaffiliated program distributors on a non-discriminatory
basis. Open video system operators are exempt from several of
the regulatory obligations that currently apply to cable
operators. However, certain restrictions and requirements remain
applicable to open video system operators, including, without
limitation, the obligation to obtain FCC certification for open
video system operations and any necessary local operating
authority, and the obligation to comply with the FCCs
sports blackout, network non-duplication, syndicated exclusivity
and mandatory carriage rules.

Local telephone companies providing cable service
through cable systems or open video systems are not bound by
common carrier obligations, which otherwise would require a
telephone company to make capacity available on its network on a
nondiscriminatory basis for the provision of cable service
directly to subscribers by unaffiliated third parties. The FCC
has ruled that cable operators may elect to operate open video
systems, but only if they are subject to effective competition
as defined by federal law. The FCCs rules prohibit a cable
operator from terminating an existing franchise agreement to
become an open video system operator. Cox does not operate any
open video systems, and no open video systems currently operate
in any of Coxs franchise areas.

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General Ownership
Limitations.The Communications
Act generally prohibits Cox, with certain limited exceptions,
from owning and/or operating a satellite master antenna
television system or a wireless cable system in any area where
Cox provides franchised cable television service. The FCCs
rules, however, permit a cable operator to offer service through
satellite master antenna television systems in the
operators existing franchise area so long as the service
is offered according to the terms and conditions of the cable
operators local franchise agreement.

In 1998, the FCC initiated a rulemaking
proceeding, which, among other things, sought comments on
whether the FCC should implement cross-ownership restrictions
between direct broadcast satellite operators and cable
operators. That proceeding remains pending, and no FCC rule
currently prohibits cross-ownership between direct broadcast
satellite providers and cable system operators. The FCC has
stated that it would evaluate cross-ownership issues
case-by-case in the context of FCC license transfer proceedings.

Other Regulatory Requirements of the
Communications Act and the FCC.The Communications Act and the FCCs rules also include
provisions concerning, among other things:



| |   |                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | customer service;                                                                                                                                                        
|
| |  | subscriber privacy;                                                                                                                                                      
|
| |  | marketing practices;                                                                                                                                                     
|
| |  | equal employment opportunity;                                                                                                                                            
|
| |  | technical standards and equipment compatibility;                                                                                                                         
|
| |  | antenna structure notification, marking, and
    lighting;                                                                                                               
|
| |  | emergency alert system requirements; and                                                                                                                                 
|
| |  | the collection from cable operators of annual
    regulatory fees, which are calculated based on the number of
    subscribers served and the types of FCC licenses held.

The FCC adopted cable inside wiring rules to
provide specific procedures for the disposition of residential
home wiring and internal building wiring where a subscriber
terminates service or where an incumbent cable operator is
forced by a building owner to terminate service in a multiple
dwelling unit building. The FCCs inside wiring rules are
intended to facilitate the ability of competitors to access
incumbent cable operators internal building distribution
plant.

The FCC also adopted regulations regarding
compatibility between cable systems and consumer electronics
equipment. The FCCs rules assure the competitive
availability of customer premises equipment, such as set-top
converters or other navigation devices, which are used to access
services offered by cable systems and other multichannel video
programming distributors. Cable operators are required to
separate security from non-security functions in certain
customer premises equipment by making available modular security
components that would function in set-top converters purchased
or leased by subscribers from retail outlets. Effective
January 1, 2005, Cox will be prohibited from selling or
leasing new navigation devices or set-top converters that
integrate both security and non-security functions. Cox,
however, will not be required to discontinue the leasing of
older set-top converters that include integrated security
functions if those converters are provided to subscribers before
January 1, 2005.

The FCC also actively regulates other aspects of
Coxs cable operations and has adopted regulations
implementing its authority and jurisdiction under the
Communications Act. The FCC may enforce its regulations through
the imposition of substantial fines, the issuance of cease and
desist orders and the imposition of other administrative
sanctions such as the revocation of FCC licenses needed to
operate certain transmission facilities often used in cable
operations. Local franchising authorities are also permitted to
enforce the FCCs technical and consumer protection
standards. Pending FCC proceedings may change existing rules or
lead to new regulations. Cox is unable to predict the impact
that any further FCC rule changes may have on its business and
operations.

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Cable Copyright
Matters

Coxs cable systems utilize local and
distant television and radio broadcast signals in their channel
line-ups. This programming is protected by federal copyright
law. Cox, however, generally does not obtain licenses to display
this programming directly from its owners. Consequently, Cox
must comply with a federal compulsory licensing process that
covers television and radio broadcast signals. In exchange for
contributing a percentage of its revenues to a federal copyright
royalty pool and following certain other requirements, Cox
obtains blanket permission to retransmit the copyrighted
material carried on broadcast signals. The nature and amount of
future copyright payments for broadcast signal carriage cannot
be predicted at this time. Increases in such payments may be
passed through to subscribers as external costs under the
FCCs cable rate regulations.

The Copyright Office has recommended that
Congress revise both the cable and satellite compulsory
copyright licenses. Congress modified the satellite compulsory
license in a manner that permits direct broadcast satellite
operators to be more competitive with cable operators such as
Cox. The possible simplification, modification or elimination of
the compulsory copyright license is the subject of continuing
legislative review. The elimination or substantial modification
of the cable compulsory license could adversely affect
Coxs ability to obtain suitable programming and could
substantially increase the cost of programming that remains
available for distribution to Coxs subscribers. Cox cannot
predict the outcome of this legislative activity.

Cox distributes to subscribers programming that
contains music, including local advertising, local origination
programs, access channels and pay-per-view events. The cable
industry reached agreements with the three major music
performing rights organizations for a standard license covering
the performance of music in certain programming, including
advertising inserted by the cable operator in programming
produced by other parties, and Cox has executed music
performance license agreements with these organizations.
Although each of these agreements will require the payment of
music license fees for earlier time periods and for future
periods, Cox does not believe such license fees will have a
significant impact on its business and operations.

Cable
Franchising Matters

Because cable systems use local streets and
rights-of-way, they are subject to state and local regulation,
which typically is implemented through the franchising process.
Consistent with the Communications Act, state and/or local
officials are usually involved in franchisee selection and in
establishing requirements for system capabilities and
construction, insurance, basic service rates, consumer
relations, billing practices and community-related programming
and services. Upon receipt of a franchise, the cable system
owner usually assumes a broad range of obligations to the
issuing authority that directly affect the systems
business. Franchise terms and conditions vary materially from
jurisdiction to jurisdiction, and even from city to city within
the same state. Although franchising matters normally are
resolved at the local level through a franchise agreement and/or
a local ordinance, the Communications Act provides certain
guidelines and requirements that govern a cable operators
relationship with its local franchising authority. For example,
the Communications Act:



| |   |                                                                             
| | - | ----------------------------------------------------------------------------
| |  | generally prohibits a cable operator from
    operating without a franchise;
|
| |  | encourages competition with existing cable
    systems by:                  



| |   |                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | allowing municipalities to operate their own
    cable systems without franchises; and                                                                                                          
|
| |  | preventing franchising authorities from granting
    exclusive franchises or from unreasonably refusing to award
    additional franchises covering an existing cable systems
    service area;



| |   |                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------
| |  | permits local authorities, when granting or
    renewing franchises, to establish requirements for cable-related
    facilities and equipment;

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| |   |                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | permits local authorities, in granting or
    renewing a cable franchise, to require the provision of channel
    capacity for public, educational and governmental channels, and
    to require the construction of institutional networks;
|
| |  | prohibits franchising authorities from
    establishing requirements for specific video programming or
    information services other than in broad categories;                                                                             
|
| |  | permits a cable operator to seek modification of
    franchise requirements from the franchising authority or by
    judicial action if changed circumstances warrant the
    modification;                                                 
|
| |  | generally prohibits franchising authorities from:                                                                                                                                                                                           



| |   |                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | imposing requirements in the grant or renewal of
    a cable franchise that require, prohibit or restrict the
    provision of telecommunications services;
|
| |  | imposing cable franchise fees on revenues derived
    from providing telecommunications services over the cable
    system; or                             
|
| |  | restricting the use of any type of subscriber
    equipment or transmission technology;                                                                    



| |   |                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | limits franchise fees to 5% of gross revenues
    derived from providing cable services over the cable system;                                                        
|
| |  | establishes formal and informal procedures for
    renewal of cable franchises that are designed to protect cable
    operators from arbitrary denials of renewal; and
|
| |  | permits state or local franchising authorities to
    adopt certain additional conditions regarding the transfer of
    cable system ownership.                       

Coxs franchises typically require the
periodic payment of fees to franchising authorities of up to 5%
of gross revenues, as defined by each franchise
agreement. Under the Communications Act and FCC rules, these
franchise fees may be passed on to subscribers and separately
itemized on subscriber bills. The FCC has ruled that franchise
fees paid by cable operators on non-subscriber related revenue
generated from such things as cable advertising and home
shopping commissions may be passed through to subscribers and
itemized on subscriber bills regardless of the source of the
revenues on which they were assessed. Local franchising
authorities appealed this FCC decision and the U.S. Court
of Appeals for the Fifth Circuit affirmed the FCCs ruling
in 2003. In connection with its March 2002 decision classifying
high-speed Internet services provided over a cable system as
interstate information services, the FCC stated that revenues
derived from cable operators Internet services should not
be included in the revenue base from which franchise fees are
calculated. That FCC decision also was challenged in a federal
appellate court by local governmental and consumer groups, and
in October 2003, the United States Court of Appeals for the
Ninth Circuit vacated the FCCs decision classifying cable
operators Internet services as an interstate
information service and not a
telecommunications service; however, the FCC is seeking
further review of that decision which is not yet final. Because
of the FCCs decision, Cox notified all of its local
franchising authorities that it no longer could collect and
remit franchise fees on its high-speed Internet service
revenues. For a discussion of this and other related matters,
see Legislation and Regulation  Cable
Television  Use of Coxs Cable Systems by the
Government and Unrelated Third Parties. Cox is unable to
predict the ultimate resolution of these matters, but does not
expect that any additional franchise fees it may be required to
pay will be material to Coxs business and operations.

The Communications Act contains franchise renewal
procedures designed to protect cable operators against arbitrary
denials of renewal. Even if a franchise is renewed, however, the
franchising authority may seek to impose as a condition of
renewal new requirements, such as upgrades in facilities and
services or increased franchise fees. Similarly, if a
franchising authoritys consent is required for the
purchase or sale of a cable system or franchise, the franchising
authority may attempt to impose additional franchise
requirements as a condition for such consent.

Historically, cable operators providing
satisfactory services to their subscribers and complying with
the terms of their franchises typically have obtained franchise
renewals. Cox believes it generally has met the

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terms of its franchises and has provided
high-quality service. Cox therefore anticipates that its future
franchise renewal prospects generally will be favorable.
Nevertheless, although the Communications Act provides certain
franchise renewal protections, no assurance can be given that
franchise renewals will be granted or that renewals will be made
on similar terms and conditions.


The Communications Act places certain limitations
on a franchising authoritys ability to control cable
system operations, and courts have from time to time reviewed
the constitutionality of several general franchise requirements,
including franchise fees and access channel requirements, often
with inconsistent results. Federal law immunizes franchising
authorities from monetary damage awards arising from their
regulation of cable systems or decisions regarding franchise
grants, renewals, transfers and amendments.

A number of states subject cable systems to the
jurisdiction of centralized state governmental agencies, some of
which impose public utility-type regulation on cable operators.
Attempts in other states to regulate cable systems are
continuing and can be expected to increase. To date, the states
in which Cox operates that have enacted such state level
regulation are Connecticut, Massachusetts and Rhode Island.
State and local franchising jurisdiction is not unlimited,
however, and must be exercised in accordance with federal law.

Telecommunications

The telecommunications services currently offered
by Cox are subject to varying degrees of federal, state and
local regulation. The FCC exercises jurisdiction over all
aspects of interstate and international telecommunications
services and the facilities used to provide those services. The
1996 Telecommunications Act established a national policy of
promoting local exchange competition and set standards to govern
relationships among telecommunications providers, including,
among others, the interconnection of competitive carriers and
the unbundling of monopoly incumbent local telephone company
services. The statute expressly preempted legal barriers to
telecommunications competition under state and local laws. The
1996 Telecommunications Act also established new requirements
for the maintenance of universal telephone service and imposed
obligations on telecommunications providers to maintain customer
privacy. Coxs ability to offer telephone services in
competition with incumbent local telephone companies and others
will be affected by the degree and form of regulatory
flexibility ultimately afforded by the FCC to incumbent local
telephone companies and other companies, and will depend, in
part, upon FCC determinations regarding telecommunications
markets generally.

Local Telephone Competition Rules.While the current switched voice
and data market is dominated by incumbent local telephone
companies (also known as incumbent local exchange carriers or
ILECs), the 1996 Telecommunications Act created unprecedented
opportunities for newer entrants into these markets, such as
Cox. Because incumbent local telephone companies historically
had exclusive state franchises to provide telephone services,
they established monopoly relationships with their customers.
Subject to certain limited exemptions for rural telephone
companies, the FCC may preempt any state law or regulation that
prohibits or has the effect of prohibiting any entity from
providing telecommunications services.

The 1996 Telecommunications Act also imposed
access and interconnection requirements on incumbent local
telephone companies to open their networks to competitors. State
regulators generally are responsible for arbitrating
interconnection disputes that arise between incumbent local
telephone companies and new entrants and for reviewing and
approving interconnection agreements entered into between new
entrants and incumbent local telephone companies. Carriers can
appeal state commission decisions concerning interconnection
agreements to United States district courts.

The FCC adopted pricing standards and negotiation
and arbitration guidelines that the states must follow in
reviewing interconnection agreements between incumbent local
telephone companies and their competitors. Although these rules
initially were adopted in 1996, many of the rules governing the
extent to which incumbent local telephone companies must provide
unbundled elements of their networks to competitors

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never became final. Most recently, in response to
a 2002 decision by the U.S. Court of Appeals for the
District of Columbia Circuit, the FCC adopted modified
unbundling rules in February 2003. These rules:




| |   |                                                                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | limit the access of competitive carriers to new
    broadband facilities constructed by incumbent telephone
    companies;                                                                                                                                                                             
|
| |  | eliminate unbundling for the highest-capacity
    transport facilities, including connections from the customer
    location to the ILECs switch;                                                                                                                                                     
|
| |  | phase out line sharing, a mechanism
    that permits competitive providers of broadband services to
    purchase only a portion of the capacity on a telephone
    line; and                                                                                                                         
|
| |  | require state regulators to conduct proceedings
    to determine whether incumbent telephone company switching and
    transport facilities should continue to be unbundled for certain
    categories of customers. These state regulatory proceedings are
    expected to be completed by June, 2004.

Both incumbent telephone companies and
competitive local exchange carriers (known as CLECs) have
appealed aspects of this decision. The new rules are expected to
disadvantage competitive carriers, such as AT&T, WorldCom
and Covad, that make significant use of unbundled elements of
the networks of other carriers to provide local telephone
services. In the same order, the FCC adopted a notice of
proposed rulemaking on the pick and choose rule,
which permits CLECs to adopt all or any part of an existing
interconnection agreement, rather than negotiating specific
terms. If the FCC modifies the current rule, Cox and other CLECs
could have significantly less flexibility in obtaining favorable
terms for interconnection.

The FCCs pricing rules for incumbent local
telephone companies pricing of unbundled network elements and
interconnection were upheld in May 2002 by the U.S. Supreme
Court. However, the FCC is considering modifying its rules
governing intercarrier compensation and on September 15,
2003 released a notice of proposed rulemaking on the overall
pricing framework. If the FCC modifies the intercarrier
compensation rules, Coxs costs for interconnection could
decrease, but Cox also may lose revenues it now receives for
providing interconnection to other local telephone companies,
including incumbent local telephone companies. If the FCC
modifies its overall pricing rules, Coxs costs for
interconnection and for use of unbundled elements of ILEC
networks could increase.

The terms of intercarrier compensation for local
calls to Internet service providers have been the subject of
ongoing disputes between CLECs and ILECs at state commissions
and the FCC. In particular, CLECs, including Cox, have had
repeated disputes with incumbent local telephone companies
concerning the ILECs refusal to pay reciprocal
compensation for Internet-bound traffic. Although most states
have ruled otherwise, the FCC has twice held that such traffic
is not subject to the standard compensation for termination of
local calls and adopted rules that decreased compensation for
carrying such traffic. Both FCC decisions were overturned by the
U.S. Court of Appeals for the District of Columbia Circuit,
but the FCCs second order was not vacated. Instead, it was
remanded for the FCC to consider whether it could find a proper
legal basis for its authority to regulate such traffic. This
remand remains pending. Cox cannot be assured that it will
recover reciprocal compensation for traffic delivered to
Internet service providers to which Cox believes it is entitled
under its existing interconnection agreements.

Under the 1996 Telecommunications Act,
competitive wireline entrants such as Cox are subject to federal
regulatory requirements for the provision of local exchange
service in any market. All local telephone companies must
provide telephone number portability, dialing parity, reciprocal
compensation for transport and termination of local traffic,
resale, and access to rights-of-way. These requirements also
place burdens on new entrants that may benefit their
competitors. In particular, the resale requirement means that a
company could seek to resell services using the facilities of a
new entrant such as Cox without making a similar investment in
facilities. In addition to incumbent local telephone companies
and existing competitive access providers, new entrants
potentially capable of offering telecommunications services
include cable companies, electric utilities, long-distance
carriers, microwave carriers, terrestrial and satellite wireless
service providers, resellers and private networks built by large
end-users or groups of these entities in combination. On
November 10, 2003, the FCC issued an order facilitating the
transfer of telephone numbers between landline

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and wireless carriers, which will make it easier
for wireless providers to compete with Cox and other landline
carriers.


Access
Charges.The FCC has adopted an
order implementing requirements designed to cause the access
charge rates of competitive local telephone companies to
decrease over time until they reach the rates charged by
incumbent local telephone companies. This transition will be
completed in June, 2004. The FCC also held that a long distance
carriers refusal to serve the customers of a competitive
local telephone company whose access charges comply with the
FCCs benchmarks generally would constitute a violation of
the duty of all common carriers to provide service upon
reasonable request. Consequently, while the access charges
collected by competitive local telephone companies, including
Cox, have declined under the FCCs order, the order also
will ensure that the competitive local telephone companys
customers have access to a fully interconnected
telecommunications network.

Bell Company Long Distance
Service.The 1996
Telecommunications Act included provisions to allow Bell
companies to provide long distance service after meeting a
series of statutory tests. Obtaining long distance authority in
a state improves a Bell companys competitive position with
respect to other providers of local telephone service and may
reduce its incentive to continue to comply with its obligations
to open its market to local competition. During 2003, the Bell
companies completed the process of obtaining long distance
authority in every jurisdiction where they had been subject to
the prohibition on providing long distance service, including
all of the states where Cox provides local telephone service.

Universal
Service.One of the goals of the
Communications Act is to extend telephone service to all
citizens of the United States, that is, to provide universal
service. Prior to the 1996 Telecommunications Act, this goal was
achieved primarily by state commissions maintaining the rates
for basic local exchange service at an affordable level.

The 1996 Telecommunications Act required the FCC
to establish an explicit mechanism for subsidizing service to
high cost areas and low-income customers, the traditional
subjects of universal service rules, and to create programs to
subsidize service to schools, libraries and rural health care
providers. Telecommunications carriers (subject to limited
exemptions) must contribute to funding these universal service
programs. On October 27, 2003, the FCC released an order
modifying the ways in which rural and non-rural high-cost
support is calculated. The new rules could reduce the amounts
required to be contributed by carriers to the high-cost fund in
the future. Moreover, the FCCs 2002 tentative conclusion
that broadband Internet services provided by telephone companies
should be classified as information services under the
Communications Act has led to questions regarding whether
similar services provided by cable operators should be subject
to universal service fund contributions.

Under the contribution factors for 2003, Cox
contributed approximately $11.5 million of its interstate
telecommunications revenues to the federal Universal Service
Fund. In addition to the federal universal service plan, most or
all states likely will adopt their own universal service support
mechanisms.

The universal service subsidy mechanism may
provide an additional source of revenue to those local telephone
companies or other carriers (e.g., wireless providers)
willing and able to provide service to markets that are less
financially desirable either due to the high cost of providing
service or the limited revenues that might be available from
serving a particular subset of customers in an area, such as
residential customers. Cox may be a beneficiary of such
programs, but its universal service contribution obligations
also may increase to the extent that other providers obtain
subsidies. On February 7, 2003, the FCC adopted a notice of
proposed rulemaking to consider whether there should be
additional limits on the ability of wireless providers and other
competitive carriers, including Cox, to be eligible for
universal service funding.

Regulatory Forbearance.Another goal of the 1996
Telecommunications Act is to increase competition in the
telecommunications services market, thereby reducing the need
for continuing regulation of these services. To this end, the
1996 Telecommunications Act requires the FCC to streamline its
regulation of incumbent local telephone companies and permits
the FCC to refrain from regulating particular classes of
telecommunications services or providers. The FCC has
established a framework for granting certain local telephone
companies relief from the FCCs rate level, rate structure
and tariffing rules once these local

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telephone companies satisfy certain competitive
criteria. To obtain relief, an incumbent must demonstrate that
sufficient competition has developed in the incumbents
market for high-speed dedicated connections and certain related
services to warrant relaxation of the FCC rules for that market.
There continues to be activity at the FCC, state public service
commissions and the courts by incumbent local telephone
companies requesting increased pricing flexibility, local
exchange service, special access and high-capacity transport
service. While the FCC has granted requests for regulatory
forbearance from competitive local telephone companies, it has
not granted any significant requests from incumbent local
telephone companies. To the extent that ILECs and other
providers competing with Cox obtain forbearance, Cox may be
competitively disadvantaged.


Telephone Numbers.Local telephone companies must
have telephone numbers to provide service to their customers and
access to and use of telephone numbers is governed by FCC rules.
The most significant numbering rules require carriers to meet
specified number usage thresholds before they can obtain
additional telephone numbers; to share blocks of telephone
numbers, a requirement known as number pooling; and
to provide detailed reports on their number usage, which will be
subject to third-party audits. The FCC also has adopted rules
and orders that delegate to certain states a larger role in
conserving telephone numbers, including expanded rights to
ration access to numbers. Several states served by Cox,
including California, Connecticut, Louisiana and Oklahoma, have
sought number conservation authority from the FCC.

Voice over Internet Protocol Services.In 2003, regulatory issues
concerning voice services offered via Internet Protocol were
raised at both the federal and state level. Providers of these
services, such as Vonage and 8x8, argue that they are not
subject to state regulation because their offerings constitute
interstate information services, regulated only by the FCC.
State regulators in several states, including California, where
Cox provides competitive telephone service, and Minnesota have
begun inquiries into the extent to which voice over Internet
Protocol services should be regulated. Among the issues raised
by these services is the extent to which they can or should be
required to comply with state 911 laws and how to ensure
universal telephone service if voice over Internet Protocol
services are not regulated. On February 12, 2004, the FCC
adopted a notice of proposed rulemaking to address these issues
and asked for comment on a petition seeking forbearance from
regulation of voice over Internet Protocol services. In
addition, the FCC has announced that it will open a separate
proceeding on how Internet Protocol-based services will comply
with laws permitting surveillance of communications by law
enforcement agencies. While nearly all of Coxs telephone
services are provided using traditional circuit-switched
technology, Cox is offering voice over Internet Protocol
services in Roanoke, Virginia and plans to expand its use of
Internet Protocol technologies. To the extent that providers of
such services are deemed to be exempt from state regulation,
providers of circuit-switched services, including Cox, could be
disadvantaged in the marketplace.

State Telecommunications
Regulation.In addition to federal
rules and regulations that apply to Coxs telephony
operations, state commissions regulate, to varying degrees, the
intrastate services of telecommunications providers including
those provided by Cox. New entrants providing local exchange
services typically must apply for and receive state
certification and operate in accordance with state commission
pricing, terms and quality-of-service regulations. Under the
1996 Telecommunications Act, state commissions also must review
interconnection agreements entered into between incumbent local
telephone companies and new entrants, as well as enforce the
terms of disputed agreements. If a state commission refuses to
fulfill these responsibilities, carriers may seek relief from
the FCC. Cox and several other carriers have been required to
seek such relief for matters arising in Virginia because the
Virginia State Corporation Commission had determined that it
will not consider matters brought under the 1996
Telecommunications Act. The Virginia-related matters now pending
before the FCC include the arbitration of the terms of
interconnection agreements between Verizon and three competitive
local telephone companies, including Cox. The Virginia
legislature has passed legislation that requires the State
Corporation Commission to consider matters brought before it
pursuant to the 1996 Telecommunications Act.

State commissions also may choose to assess
universal service funding contributions from new carriers
provided that a states program is consistent with the
FCCs universal service rules, which could increase
Coxs costs. State commissions also are playing an
increasing role in telephone number assignment and

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number conservation policies and state numbering
policies potentially could limit access to numbers by carriers
that need additional telephone numbers, including Cox.


The foregoing summary does not purport to
describe all present and proposed federal, state and local
regulations and legislation affecting the cable or telephony
industries. Other existing federal regulations, copyright
licensing and, in many jurisdictions, state and local franchise
requirements currently are the subject of a variety of judicial
proceedings, legislative hearings, and administrative and
legislative proposals that could alter, in varying degrees, the
manner in which cable or telephony systems operate. Cox cannot
predict at this time the outcome of these proceedings or their
impact upon the cable or telecommunications industries or upon
Coxs business and operations.

Employees

At December 31, 2003, Cox had approximately
22,150 full-time-equivalent employees. Cox considers its
relations with its employees to be satisfactory.

Available Information

Coxs website address is
http://www.cox.com. You may obtain on or through this
website, free of charge, copies of Coxs annual reports on
Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and all amendments to those reports
filed or furnished pursuant to Section 13(a) or 15(d) of
the Exchange Act. These reports are available on Coxs
website as soon as reasonably possible after they are
electronically filed with the SEC.






|        |           
|------- | ----------
|ITEM 2. | PROPERTIES

Coxs principal physical assets consist of
cable operating plant and equipment, including signal receiving,
encoding and decoding devices, headends and distribution systems
and customer house drop equipment for each of its cable systems.
The signal receiving apparatus typically includes a tower,
antenna, ancillary electronic equipment and earth stations for
reception of satellite signals. Headends, consisting of
associated electronic equipment necessary for the reception,
amplification and modulation of signals, are located near the
receiving devices. Coxs distribution system consists
primarily of coaxial and fiber optic cables and related
electronic equipment. Customer premise equipment consists of
decoding converters, cable modems and telephone network
interface units. The physical components of cable systems
require maintenance and periodic upgrading to keep pace with
technological advances.

Coxs cable distribution plant and related
equipment are generally attached to utility poles under pole
rental agreements with local public utilities, although in some
areas the distribution cable is buried in underground ducts or
trenches. Cox owns or leases parcels of real property for signal
reception sites (antenna towers and headends), microwave
facilities and business offices in each of its markets and
leases most of its service vehicles. Cox believes that its
properties, both owned and leased, taken as a whole, are in good
operating condition and are suitable and adequate for Coxs
business operations.






|        |                  
|------- | -----------------
|ITEM 3. | LEGAL PROCEEDINGS

Coxs subsidiary Cox Communications
Louisiana L.L.C. (Cox Louisiana) is a defendant in a putative
subscriber class action suit in Louisiana state court filed on
November 5, 1997. The suit challenges the propriety of late
fees charged by Cox Louisiana in the greater New Orleans area to
customers who fail to pay for services in a timely manner. The
suit seeks injunctive relief and damages under certain claimed
state law causes of action. The action is being defended
vigorously. The outcome of this matter cannot be predicted at
this time.

On November 14, 2000, GTE.NET, L.L.C. d/b/a
Verizon Internet Solutions and Verizon Select Services, Inc.
filed suit against Cox in the United States District Court for
the Southern District of California. Verizon alleged that Cox
has violated various sections of the Communications Act of 1934
by allegedly refusing to provide Verizon with broadband
telecommunications service and interconnection, among other

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things. On November 29, 2000, Verizon
amended its complaint to add CoxCom, Inc., a subsidiary of Cox,
as an additional defendant. On January 8, 2002, Verizon
filed a second amended complaint, dropping its claims for
interconnections and damages. Verizon seeks various forms of
relief, including declaratory and injunctive relief. On
January 29, 2002, the Court granted defendants motion
to stay the case on primary jurisdiction grounds. Cox and CoxCom
intend to defend this action vigorously. The outcome cannot be
predicted at this time.


On August 23, 2002, plaintiff Redefining
Progress, on behalf of itself and all others similarly situated,
sued Fax.com, Inc., Cox Business Services, L.L.C. and others in
United States District Court for the Northern District of
California, alleging that Fax.com has sent numerous unsolicited
advertisements by facsimile in violation of a federal statute.
The complaint alleges that Cox Business Services, which provides
telecommunications services to Fax.com, is also liable for the
facsimiles in violation of the Telephone Consumer Protection Act
of 1991 (TCPA), Sections 206 and 207 of the
Telecommunications Act of 1996 and certain state laws. The suit
seeks an award of statutory damages in the amount of $500 for
each violation of the TCPA, treble damages, injunctive relief,
the establishment of a constructive trust and other relief. On
October 11, 2002, Cox Business Services moved to dismiss
for lack of subject matter jurisdiction, for failure to state a
claim, and based on the primary jurisdiction of the FCC. On
March 3, 2003, the court granted Cox Business
Services motion to dismiss for lack of subject matter
jurisdiction. The time for appeal has expired; therefore, the
matter is concluded. A nearly identical federal court suit was
filed in the United States District Court for the Northern
District of California on September 4, 2002 by plaintiff
Daniel David, on behalf of himself and all others similarly
situated, against Fax.com, Cox Business Services and others, but
was not served until December 4, 2002. The David suit was
reassigned to the same judge presiding over the suit filed by
Redefining Progress, and it asserts substantially the same
claims and seeks substantially the same relief. The David suit
was stayed pending the outcome of Cox Business Services
motion to dismiss the Redefining Progress suit. On May 3,
2003, the court entered an order dismissing this case in light
of its ruling in the Redefining Progress suit, and that ruling
was not appealed. The matter thus is concluded.

In addition, on September 8, 2002, plaintiff
Daniel David, on behalf of himself and all others similarly
situated, filed a nearly identical case against Fax.com, Cox
Business Services and others in the Superior Court of
California, Alameda County. The complaint asserts various causes
of action including violation of the TCPA, trespass to chattels,
violation of Section 17-200 of the California Business and
Professions Code and unjust enrichment. The suit seeks damages
and injunctive relief similar to that sought in the related
federal suits. This action was stayed until October 2003. On
October 24, 2003, Cox Business Services filed an amended
demurrer and set it for hearing on December 6, 2003. On
December 9, 2003, pursuant to a stipulation of Cox Business
Services and plaintiff, the court entered an order sustaining
the demurrer as to Cox Business Services and dismissing Cox
Business Services from the case effective as of
December 16, 2003. Thus, the matter is concluded.

Cox @Home, Inc., a wholly-owned subsidiary of
Cox, is a stockholder of At Home Corporation, also called
Excite@Home, formerly a provider of high-speed Internet access
and content services, which filed for bankruptcy protection in
September 2001. On September 24, 2002, a committee of
bondholders of Excite@Home sued Cox, Cox @Home and Comcast
Corporation, among others, in the United States District Court
for the District of Delaware. The suit alleges the realization
of short-swing profits under Section 16(b) of the
Securities Exchange Act of 1934 from purported transactions
relating to Excite@Home common stock involving Cox, Comcast and
AT&T Corp., and purported breaches of fiduciary duty. The
suit seeks disgorgement of short-swing profits allegedly
received by the Cox and Comcast defendants totaling at least
$600.0 million, damages for breaches of fiduciary duties in
an unspecified amount, attorneys fees, pre-judgment
interest and post-judgment interest. On November 12, 2002,
Cox, Cox @Home, and David Woodrow filed a motion to dismiss or
transfer the action for improper venue or, in the alternative,
to transfer the action pursuant to 28 U.S.C. Sec. 1404. On
September 30, 2003, the Delaware District Court ordered the
action transferred to the United States District Court for the
Southern District of New York. On December 22, 2003,
Cox and Cox@Home filed a motion to dismiss, or, in the
alternative, for judgment on the pleadings, with respect to the
Section 16(b) claim. That motion is pending. Cox and Cox
@Home intend to defend this action vigorously. The outcome
cannot be predicted at this time.

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Jerrold Schaffer and Kevin J. Yourman, on
May 26, 2000 and May 30, 2000, respectively, filed
class action lawsuits in the Superior Court of California,
San Mateo County, on behalf of themselves and all other
stockholders of Excite@Home as of March 28, 2000, seeking
(a) to enjoin consummation of a March 28, 2000 letter
agreement among Excite@Homes principal investors,
including Cox, and (b) unspecified compensatory damages.
Cox and David Woodrow, Coxs former Executive Vice
President, Business Development, among others, are named
defendants in both lawsuits. Mr. Woodrow formerly served on
the Excite@Home board of directors. The plaintiffs assert that
the defendants breached purported fiduciary duties of care,
candor and loyalty to the plaintiffs by entering into the letter
agreement and/or taking certain actions to facilitate the
consummation of the transactions contemplated by the letter
agreement. On February 26, 2001, the Court stayed both
actions, which had been previously consolidated, on grounds of
forum non-conveniens. A related suit styled Linda Ward,
et al. v. At Home Corporation (No. 418233) was
filed on September 6, 2001, in the same court. On
February 7, 2002, the Court consolidated the Ward action
with the Schaffer/ Yourman action, thereby also staying the Ward
action. On June 18, 2002, the court granted
plaintiffs motion to lift the stay and authorized
discovery to proceed regarding Coxs pending motion to
dismiss for lack of personal jurisdiction. On September 10,
2002, the United States Bankruptcy Court for the Northern
District of California in the Excite@Home bankruptcy proceeding
held that the claims in the suits were derivative and, thus,
constituted the exclusive property of the Excite@Home bankruptcy
estate. The Bankruptcy Court thereafter ordered the plaintiffs
to dismiss the suits. Plaintiffs subsequently appealed the
Bankruptcy Courts decision to the United States District
Court for the Northern District of California. On
September 29, 2003, the District Court affirmed the order
of the Bankruptcy Court. On October 27, 2003, plaintiffs
filed a notice of appeal of the District Courts decision
to the United States Court of Appeals for the Ninth Circuit. Cox
intends to defend this action vigorously. The outcome cannot be
predicted at this time.

On April 26, 2002, Frieda and Michael Eksler
filed an amended complaint naming Cox as a defendant in a
putative class action lawsuit in the United States District
Court for the Southern District of New York against
AT&T Corp. and certain former officers and directors of
Excite@Home, among others. Cox was served on May 10, 2002.
This case has been consolidated with a related case captioned
Semen Leykin v. AT&T Corp., et al., and another
related case, and an amended complaint in the consolidated case,
naming Cox as a defendant, was filed and served on
November 7, 2002. The putative class includes persons who
purchased and held shares of Excite@Home common stock between
the time period March 28, 2000 and September 28, 2001.
The sole count against Cox asserts a claim against Cox as an
alleged controlling person of Excite@Home under
Section 20(a) of the Securities Exchange Act for violations
of Section 10(b) of the Securities Exchange Act and
Rule 10b-5 thereunder. The suit seeks from Cox unspecified
monetary damages, statutory compensation and other relief. In
addition, a claim against Coxs former Executive Vice
President, David Woodrow, who formerly served on
Excite@Homes board of directors, is asserted for breach of
purported fiduciary duties. The suit seeks from Woodrow
unspecified monetary and punitive damages. On February 11,
2003, Cox and Woodrow filed a dispositive motion to dismiss on
various grounds, including failure to state a claim. On
September 17, 2003, the District Court granted the motion
in part and denied it in part. Specifically, the Court dismissed
several purported statements by Excite@Home as bases for
potential liability because they were merely generalized
expressions of confidence and optimism constituting
puffery, dismissed the fiduciary duty claim against
Mr. Woodrow as pre-empted by the federal securities laws,
and denied the motions as to the remaining allegations of the
complaint. On October 7, 2003, Cox and Mr. Woodrow
sought reconsideration of a portion of the Courts order.
On December 24, 2003, the plaintiffs moved to certify a
class of persons who purchased Excite@Home stock between
March 28, 2000 and September 28, 2001, or held such
stock as of April 28, 2000. Both these motions are pending.
On February 17, 2004, the Court granted plaintiffs leave to
file a motion to amend the complaint to add an additional claim
for relief against all defendants under Section 14(a) of
the Securities Exchange Act in connection with an allegedly
false or misleading proxy statement issued by Excite@Home. On
February 24, 2004, the Court granted Coxs and
Mr. Woodrows motion for reconsideration and dismissed
plaintiffs allegations that Cox and Mr. Woodrow were
control persons with respect to primary violations
of Rule 10b-5 alleged to have occurred after
August 28, 2000. Cox intends to defend this action
vigorously. The outcome cannot be predicted at this time.

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On July 3, 2003, Leo James filed a putative
class action lawsuit against Cox and David Woodrow, among
others, in the United States District Court for the Southern
District of New York. Cox was served on October 27,
2003. Mr. James is represented by the same attorneys who
represent the individuals who were previously designated lead
plaintiffs in the Leykin action described above. The complaint
in the James action asserts claims substantially similar to the
operative allegations in the Leykin action described above.
Accordingly, the sole count against Cox asserts a claim against
Cox as an alleged controlling person of Excite@Home
under Section 20(a) of the Securities Exchange Act for
violations of Section 10(b) of the Securities Exchange Act
and Rule 10b-5 thereunder and seeks from Cox unspecified
monetary damages, statutory compensation and other relief. On
November 17, 2003, Cox and certain other defendants jointly
filed a motion to dismiss the James action on the grounds that,
among other things, it was duplicative of the Leykin action.
That motion is pending. Cox intends to defend the action
vigorously. The outcome cannot be predicted at this time.

Cox and its subsidiaries are parties to various
other legal proceedings that are ordinary and incidental to
their businesses. Management does not expect that any of these
other currently pending legal proceedings will have a material
adverse impact on Coxs consolidated financial position,
results of operations or cash flows.






|        |                                                        
|------- | -------------------------------------------------------
|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY
    HOLDERS

None.




PART II






|         |                                                                          
|-------- | -------------------------------------------------------------------------
|ITEM  5. | MARKET FOR REGISTRANTS COMMON EQUITY AND
    RELATED STOCKHOLDER MATTERS

The information required by this Item is
incorporated by reference to the section entitled
Shareholder Information of Coxs 2003 Summary
Annual Report. See Exhibit 13. Portions of the 2003
Summary Annual Report.

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|         |                                     
|-------- | ------------------------------------
|ITEM  6. | SELECTED CONSOLIDATED FINANCIAL DATA

Please see Managements Discussion and
Analysis of Financial Condition and Results of Operations
in Item 7. for a discussion of events that affect the
comparability of the information reflected in the selected
consolidated financial data for each of the years in the
three-year period ended December 31, 2003.

|                             |                                                                              |                                                                              |   |          |       |      |   |          |       |      |   |          |      |  |   |          |      |  |   |          |      | 
|---------------------------- | ---------------------------------------------------------------------------- | ---------------------------------------------------------------------------- | - | -------- | ----- | ---- | - | -------- | ----- | ---- | - | -------- | ---- |  | - | -------- | ---- |  | - | -------- | ---- | 
|                             |                                                                              |                                                                             
|                             |                                                                              | Year Ended December 31                                                      
|                             |                                                                              |                                                                             
|                             |                                                                              | 2003                                                                         |   | 2002     |       | 2001 |   | 2000     |       | 1999
|                             |                                                                              |                                                                              |   |          |       |      |   |          |       |     
|                             |                                                                              |                                                                             
|                             |                                                                              | (Millions of Dollars, excluding per share data)                             
|Statement of Operations Data |                                                                              |                                                                              |   |          |       |      |   |          |       |      |   |          |      |  |   |          |      |  |   |         
|                             | Revenues                                                                     |                                                                              | $ | 5,758.9  |       |      | $ | 5,038.6  |       |      | $ | 4,253.2  |      |  | $ | 3,673.7  |      |  | $ | 2,427.4  |     
|                             | Operating income (loss)                                                      |                                                                              |   | 586.9    |       |      |   | 417.4    |       |      |   | (118.3   | )    |  |   | 140.8    |      |  |   | 262.9    |     
|                             | Interest expense                                                             |                                                                              |   | 467.8    |       |      |   | 549.9    |       |      |   | 565.9    |      |  |   | 550.8    |      |  |   | 305.7    |     
|                             | (Loss) gain on derivative instruments, net                                   |                                                                              |   | (22.6    | )     |      |   | 1,125.6  |       |      |   | (212.0   | )    |  |   |         |      |  |   |         |     
|                             | Gain (loss) on investments, net                                              |                                                                              |   | 165.2    |       |      |   | (1,317.2 | )     |      |   | 1,151.2  |      |  |   | 3,282.0  |      |  |   | 1,569.4  |     
|                             | Equity in net losses of affiliated companies                                 |                                                                              |   | 13.1     |       |      |   | 32.2     |       |      |   | 40.0     |      |  |   | 7.3      |      |  |   | 90.5     |     
|                             | Loss on extinguishment of debt                                               |                                                                              |   | 450.1    |       |      |   | 0.8      |       |      |   |         |      |  |   |         |      |  |   |         |     
|                             | (Loss) income before cumulative effect of change
    in accounting principle |                                                                              |   | (137.8   | )     |      |   | (274.0   | )     |      |   | 37.9     |      |  |   | 1,925.3  |      |  |   | 881.9    |     
|                             | Cumulative effect of change in accounting
    principle, net of tax          |                                                                              |   |         |       |      |   |         |       |      |   | 717.1    |      |  |   |         |      |  |   |         |     
|                             | Net (loss) income                                                            |                                                                              |   | (137.8   | )     |      |   | (274.0   | )     |      |   | 755.0    |      |  |   | 1,925.3  |      |  |   | 881.9    |     
|                             | Basic net (loss) income per share                                            |                                                                              |   |          |       |      |   |          |       |      |   |          |      |  |   |          |      |  |   |          |     
|                             |                                                                              | (Loss) income before cumulative effect of change
    in accounting principle |   | $        | (0.22 | )    |   | $        | (0.45 | )    |   | $        | 0.06 |  |   | $        | 3.20 |  |   | $        | 1.54 | 
|                             |                                                                              | Cumulative effect of change in accounting
    principle, net of tax          |   |          |      |      |   |          |      |      |   |          | 1.20 |  |   |          |     |  |   |          |     | 
|                             |                                                                              |                                                                              |   |          |       |      |   |          |       |      |   |          |      |  |   |          |      |  |   |         
|                             | Basic net (loss) income per share                                            |                                                                              | $ | (0.22    | )     |      | $ | (0.45    | )     |      | $ | 1.26     |      |  | $ | 3.20     |      |  | $ | 1.54     |     
|                             |                                                                              |                                                                              |   |          |       |      |   |          |       |      |   |          |      |  |   |          |      |  |   |         
|                             | Diluted net (loss) income per share                                          |                                                                              |   |          |       |      |   |          |       |      |   |          |      |  |   |          |      |  |   |          |     
|                             |                                                                              | (Loss) income before cumulative effect of change
    in accounting principle |   | $        | (0.22 | )    |   | $        | (0.45 | )    |   | $        | 0.06 |  |   | $        | 3.16 |  |   | $        | 1.51 | 
|                             |                                                                              | Cumulative effect of change in accounting
    principle, net of tax          |   |          |      |      |   |          |      |      |   |          | 1.18 |  |   |          |     |  |   |          |     | 
|                             |                                                                              |                                                                              |   |          |       |      |   |          |       |      |   |          |      |  |   |          |      |  |   |         
|                             | Diluted net (loss) income per share                                          |                                                                              | $ | (0.22    | )     |      | $ | (0.45    | )     |      | $ | 1.24     |      |  | $ | 3.16     |      |  | $ | 1.51     |     
|                             |                                                                              |                                                                              |   |          |       |      |   |          |       |      |   |          |      |  |   |          |      |  |   |         
|Balance Sheet Data           |                                                                              |                                                                              |   |          |       |      |   |          |       |      |   |          |      |  |   |          |      |  |   |         
|As of December 31            |                                                                              |                                                                              |   |          |       |      |   |          |       |      |   |          |      |  |   |          |      |  |   |         
|                             | Total assets                                                                 |                                                                              | $ | 24,417.6 |       |      | $ | 25,015.3 |       |      | $ | 25,061.4 |      |  | $ | 24,720.8 |      |  | $ | 26,614.5 |     
|                             | Debt (including amounts due to CEI)                                          |                                                                              |   | 7,015.8  |       |      |   | 7,316.0  |       |      |   | 8,417.7  |      |  |   | 8,543.8  |      |  |   | 6,375.8  |     
|                             | Cox-obligated capital and preferred securities of
    subsidiary trusts      |                                                                              |   |         |       |      |   |         |       |      |   | 1,155.7  |      |  |   | 1,155.4  |      |  |   | 1,150.6  |     
|Cash Flow Data               |                                                                              |                                                                              |   |          |       |      |   |          |       |      |   |          |      |  |   |          |      |  |   |         
|                             | Cash flows provided by operating activities                                  |                                                                              | $ | 1,868.0  |       |      | $ | 1,772.8  |       |      | $ | 798.8    |      |  | $ | 306.2    |      |  | $ | 402.0    |     
|                             | Cash flows used in investing activities                                      |                                                                              |   | (1,319.1 | )     |      |   | (608.2   | )     |      |   | (953.3   | )    |  |   | (2,077.0 | )    |  |   | (3,849.6 | )   
|                             | Cash flows (used in) provided by financing
    activities                    |                                                                              |   | (693.7   | )     |      |   | (1,022.8 | )     |      |   | 163.0    |      |  |   | 1,815.9  |      |  |   | 3,450.3  |     

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|                            |  |                   |            |      |  |         |            |         |  |      |           |   |  |  |           |   |  |  |           |  
|--------------------------- |  | ----------------- | ---------- | ---- |  | ------- | ---------- | ------- |  | ---- | --------- | - |  |  | --------- | - |  |  | --------- | -
|                            |  |                  
|                            |  | As of December 31
|                            |  |                  
|                            |  | 2003              |            | 2002 |  | 2001(b) |            | 2000(b) |  | 1999
|                            |  |                   |            |      |  |         |            |         |  |     
|Customer Data               |  |                   |            |      |  |         |            |         |  |      |           |   |  |  |           |   |  |  |           |  
|Basic video customers(a)    |  |                   | 6,338,294  |      |  |         | 6,280,849  |         |  |      | 6,237,888 |   |  |  | 6,193,317 |   |  |  | 5,136,184 |  
|Advanced-services(c)        |  |                   | 5,124,936  |      |  |         | 3,923,734  |         |  |      | 2,723,173 |   |  |  | 1,568,424 |   |  |  | 554,025   |  
|                            |  |                   |            |      |  |         |            |         |  |      |           |   |  |  |           |   |  |  |           |  
|Revenue generating units(d) |  |                   | 11,463,230 |      |  |         | 10,204,583 |         |  |      | 8,961,061 |   |  |  | 7,761,741 |   |  |  | 5,690,209 |  
|Video homes passed(e)       |  |                   | 10,426,093 |      |  |         | 10,210,091 |         |  |      | 9,979,207 |   |  |  | 9,710,963 |   |  |  | 8,031,340 |  
|Basic video penetration(f)  |  |                   | 60.8       | %    |  |         | 61.5       | %       |  |      | 62.5      | % |  |  | 63.8      | % |  |  | 64.0      | %



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                              
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | A home with one or more television sets connected
    to a cable system is counted as one basic video customer.                                                                                                                                                                                                                                                                                              
|   
|(b) |  | Cox sold certain cable systems in 2002. After
    adjusting for such sales, basic video customers were 6,221,235
    and 6,175,340, respectively, at December 31, 2001 and 2000;
    customers for advanced services were 2,721,157 and 1,567,212,
    respectively, at December 31, 2001 and 2000; and video
    homes passed were 9,947,664 and 9,680,644, respectively, at
    December 31, 2001 and 2000.
|   
|(c) |  | Advanced services include Cox Digital Cable,
    high-speed Internet access and Cox Digital Telephone.                                                                                                                                                                                                                                                                                                       
|   
|(d) |  | Each basic video customer and each advanced
    service is a revenue generating unit. In certain locations, a
    household may purchase more than one advanced service, each of
    which is counted as a separate revenue generating unit.                                                                                                                                                                 
|   
|(e) |  | A home is deemed to be passed if it
    can be connected to the distribution system without any further
    extension of the distribution plant.                                                                                                                                                                                                                                                           
|   
|(f) |  | Basic video customers as a percentage of video
    homes passed.                                                                                                                                                                                                                                                                                                                                             






|         |                                                                                          
|-------- | -----------------------------------------------------------------------------------------
|ITEM  7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Managements Discussion and
Analysis of Financial Condition and Results of Operations should
be read in conjunction with the Consolidated Financial
Statements and Supplementary Data in Item 8.

Executive Overview

Cox Communications, Inc., an indirect 63.4%
majority-owned subsidiary of Cox Enterprises, Inc. (CEI), is a
multi-service broadband communications company serving
approximately 6.6 million residential and commercial
customers nationwide. Cox is the nations fourth largest
cable television provider and offers an array of broadband
products and services including analog and digital video,
high-speed Internet access and local and long-distance telephone.

Coxs business strategy is to leverage the
capacity and capability of its broadband network to deliver
multiple services to consumers and businesses while creating
multiple revenue streams for Cox. Cox believes that its
investments in the technological capabilities of its broadband
network, the long-term advantages of clustering, the competitive
value of bundled services and its commitment to customer care
and community service will enhance its ability to increase
revenues in an increasingly competitive environment.

Coxs management primarily focuses on
continued growth and profitability of all of its lines of
business and effective execution of its bundling strategy and
other product lines in a heightened competitive landscape. Cox
concentrates on bundling, integrating, and differentiating its
products and services to compete effectively against its primary
competitors, which include direct broadcast satellite operators
and regional bell operating companies, in its large local and
regional clusters. Cox is committed to providing new and
enhanced services that cater to the evolving needs of its
customers. Cox has introduced high-definition television,
digital video recorder service, Entertainment on Demand and
several tiers of high-speed Internet service in many of its
markets to enhance its current product offerings and further
differentiate its products from its competitors.

30



---



##### Table of Contents



Cox expects that its bundling strategy and
advanced product offerings will help it maintain current
customers and attract new customer relationships. In addition,
Cox recently announced plans to rollout telephone service to
additional markets using voice over Internet Protocol. This
technology allows Cox to enhance its bundled offerings by making
Coxs digital telephone service available in its smaller
markets and allows Cox to leverage its experience and expertise
as a telephone service provider. Cox also leverages the capacity
of its broadband network and its residential experience through
its growing Cox Business Services division.


In 2003, the regional bell operating companies
announced partnerships with direct broadcast satellite operators
to add video service to their bundle of voice and Internet
services. Although these partnerships present a new competitive
challenge and signal an increased industry focus on competitive
bundled offerings, Cox believes that its experience in bundling
video, telephone and Internet services and its fully integrated
back-office and billing platform provide a competitive advantage
and position Cox to successfully execute its strategy.
Coxs management constantly monitors the competitive
landscape and carefully evaluates and adjusts its market
response accordingly.

Coxs management also continues to monitor
the regulatory landscape. The industry-wide introduction of
voice over Internet Protocol technology has raised many
regulatory questions. Cox continues to analyze new and proposed
regulatory changes and their potential impact on its products
and services.

In 2003, Cox completed several transactions to
reduce the complexity of its balance sheet and reduce its
leverage. In this regard, Cox purchased through tender offers
98% of its exchangeable subordinated debentures and terminated
its series of prepaid forward contracts. Prior to these
purchases and terminations, Cox was required to make certain
mark-to-market adjustments in accordance with accounting
guidelines to reported indebtedness because these securities
were indexed to shares of Sprint PCS common stock Cox held.
These non-cash adjustments directly caused fluctuations to, and
volatility in, net income. Cox believes that its simplified
balance sheet will enhance investors ability to compare
Coxs earnings in future periods.

Coxs management will continue to monitor
and develop new advanced service offerings and adapt to the
competitive and legal framework to deliver compelling and
competitive services to consumers and businesses.

Investments

See Investments in Part I,
Item 1. Business and Note 5.
Investments in Part II, Item 8.
Consolidated Financial Statements and Supplementary
Data.

31



---



##### Table of Contents



Results of Operations

2003 compared with 2002

The following table sets forth summarized
consolidated financial information for each of the two years in
the period ended December 31, 2003.

|                                             |  |                        |           |      |  |          |            |          |  |   |            |   |  |  |      |   
|-------------------------------------------- |  | ---------------------- | --------- | ---- |  | -------- | ---------- | -------- |  | - | ---------- | - |  |  | ---- | --
|                                             |  |                        |           |      |  |         
|                                             |  | Year Ended December 31 |           |      |  |         
|                                             |  |                        |           |      |  |         
|                                             |  | 2003                   |           | 2002 |  | $ Change |            | % Change
|                                             |  |                        |           |      |  |          |            |         
|                                             |  |                        |           |      |  |         
|                                             |  | (Thousands of Dollars) |           |      |  |         
|Revenues                                     |  | $                      | 5,758,868 |      |  | $        | 5,038,598  |          |  | $ | 720,270    |   |  |  | 14   | % 
|Cost of services                             |  |                        | 2,391,310 |      |  |          | 2,112,155  |          |  |   | 279,155    |   |  |  | 13   | % 
|Selling, general and administrative expenses |  |                        | 1,250,686 |      |  |          | 1,147,204  |          |  |   | 103,482    |   |  |  | 9    | % 
|Depreciation and amortization                |  |                        | 1,530,475 |      |  |          | 1,357,906  |          |  |   | 172,569    |   |  |  | 13   | % 
|(Gain) loss on sale of cable systems         |  |                        | (469      | )    |  |          | 3,916      |          |  |   | (4,385     | ) |  |  | (112 | )%
|                                             |  |                        |           |      |  |          |            |          |  |   |            |   |  |  |      |   
|Operating income                             |  |                        | 586,866   |      |  |          | 417,417    |          |  |   | 169,449    |   |  |  | 41   | % 
|Interest expense                             |  |                        | (467,753  | )    |  |          | (549,858   | )        |  |   | (82,105    | ) |  |  | 15   | % 
|(Loss) gain on derivative instruments, net   |  |                        | (22,567   | )    |  |          | 1,125,588  |          |  |   | (1,148,155 | ) |  |  | (102 | )%
|Gain (loss) on investments, net              |  |                        | 165,194   |      |  |          | (1,317,158 | )        |  |   | 1,482,352  |   |  |  | (113 | )%
|Equity in net losses of affiliated companies |  |                        | (13,073   | )    |  |          | (32,175    | )        |  |   | 19,102     |   |  |  | (59  | )%
|Loss on extinguishment of debt               |  |                        | (450,069  | )    |  |          | (787       | )        |  |   | (449,282   | ) |  |  | NM   |   
|Other, net                                   |  |                        | (3,557    | )    |  |          | (5,080     | )        |  |   | 1,523      |   |  |  | (30  | )%
|Income tax benefit                           |  |                        | 73,274    |      |  |          | 125,286    |          |  |   | (52,012    | ) |  |  | (42  | )%
|Minority interest, net of tax                |  |                        | (6,116    | )    |  |          | (37,272    | )        |  |   | 31,156     |   |  |  | (84  | )%
|                                             |  |                        |           |      |  |          |            |          |  |   |            |   |  |  |      |   
|Net loss                                     |  | $                      | (137,801  | )    |  | $        | (274,039   | )        |  | $ | 136,238    |   |  |  | (50  | )%
|                                             |  |                        |           |      |  |          |            |          |  |   |            |   |  |  |      |   



---

NM denotes percentage is not meaningful



| |         
| | --------
| | Revenues

The following table sets forth summarized revenue
information for each of the two years in the period ended
December 31, 2003.

|            |             |                           |   |            |           |      |  |            |     |          |   |           |           |  |  |    |     |   |   |         |         |  |  |    |    |  
|----------- | ----------- | ------------------------- | - | ---------- | --------- | ---- |  | ---------- | --- | -------- | - | --------- | --------- |  |  | -- | --- | - | - | ------- | ------- |  |  | -- | -- | -
|            |             |                           |   |            |           |     
|            |             | Year Ended December 31    |   |            |           |     
|            |             |                           |   |            |           |     
|            |             | 2003                      |   | % of Total |           | 2002 |  | % of Total |     | $ Change |   | % Change 
|            |             |                           |   |            |           |      |  |            |     |          |   |          
|            |             |                           |   |            |           |     
|            |             | (Thousands of Dollars)    |   |            |           |     
|Residential |             |                           |   |            |           |      |  |            |     |          |   |           |           |  |  |    |     |   |   |         |         |  |  |   
|            | Video       |                           | $ | 3,658,917  |           |      |  | 64         | %   |          | $ | 3,439,755 |           |  |  | 68 | %   |   | $ | 219,162 |         |  |  | 6  | % 
|            | Data        |                           |   | 870,628    |           |      |  | 15         | %   |          |   | 575,231   |           |  |  | 11 | %   |   |   | 295,397 |         |  |  | 51 | % 
|            | Telephony   |                           |   | 469,920    |           |      |  | 8          | %   |          |   | 343,227   |           |  |  | 7  | %   |   |   | 126,693 |         |  |  | 37 | % 
|            | Other       |                           |   | 86,903     |           |      |  | 1          | %   |          |   | 72,254    |           |  |  | 1  | %   |   |   | 14,649  |         |  |  | 20 | % 
|            |             |                           |   |            |           |      |  |            |     |          |   |           |           |  |  |    |     |   |   |         |         |  |  |   
|            |             | Total residential revenue |   |            | 5,086,368 |      |  |            | 88  | %        |   |           | 4,430,467 |  |  |    | 87  | % |   |         | 655,901 |  |  |    | 15 | %
|            | Commercial  |                           |   | 287,676    |           |      |  | 5          | %   |          |   | 230,067   |           |  |  | 5  | %   |   |   | 57,609  |         |  |  | 25 | % 
|            | Advertising |                           |   | 384,824    |           |      |  | 7          | %   |          |   | 378,064   |           |  |  | 8  | %   |   |   | 6,760   |         |  |  | 2  | % 
|            |             |                           |   |            |           |      |  |            |     |          |   |           |           |  |  |    |     |   |   |         |         |  |  |   
|            |             | Total revenues            |   | $          | 5,758,868 |      |  |            | 100 | %        |   | $         | 5,038,598 |  |  |    | 100 | % |   | $       | 720,270 |  |  |    | 14 | %
|            |             |                           |   |            |           |      |  |            |     |          |   |           |           |  |  |    |     |   |   |         |         |  |  |   

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The 14% increase in total revenues was primarily
attributable to:



| |   |                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a 31% increase in customers for advanced services
    (digital cable, high-speed Internet access and telephony);                                                                                      
|
| |  | an increase in basic cable rates resulting from
    increased programming costs and inflation, as well as increased
    channel availability;                                                         
|
| |  | a $5 price increase on monthly high-speed
    Internet access adopted in select markets in the fourth quarter
    of 2002 and in most of Coxs remaining markets in the first
    quarter of 2003; and
|
| |  | an increase in commercial broadband customers.                                                                                                                                                        

Cox has experienced solid growth in digital
cable, residential high-speed Internet and telephony customers.
Cox expects this trend to continue and anticipates continued
consumer demand for its existing portfolio of broadband
products, as well as for new services such as Entertainment On
Demand, Home Networking and high-definition television and
digital video recorders.



| |                                                                                            
| | -------------------------------------------------------------------------------------------
| | Costs and expenses (Costs of services and
    Selling, general and administrative expenses)

The following table sets forth summarized
operating expenses for each of the two years in the period ended
December 31, 2003.

|                                    |                            |                                           |                          |           |           |           |   |           |           |           |   |         |         |         |  |    |    |    |  
|----------------------------------- | -------------------------- | ----------------------------------------- | ------------------------ | --------- | --------- | --------- | - | --------- | --------- | --------- | - | ------- | ------- | ------- |  | -- | -- | -- | -
|                                    |                            |                                           |                          |           |           |          
|                                    |                            | Year Ended December 31                    |                          |           |           |          
|                                    |                            |                                           |                          |           |           |          
|                                    |                            | 2003                                      |                          | 2002      |           | $ Change  |   | % Change 
|                                    |                            |                                           |                          |           |           |           |   |          
|                                    |                            |                                           |                          |           |           |          
|                                    |                            | (Thousands of Dollars)                    |                          |           |           |          
|Cost of services                    |                            |                                           |                          |           |           |           |   |           |           |           |   |         |         |         |  |   
|                                    | Programming costs          |                                           | $                        | 1,158,519 |           |           | $ | 1,036,552 |           |           | $ | 121,967 |         |         |  | 12 | % 
|                                    | Other cost of services     |                                           |                          | 1,232,791 |           |           |   | 1,075,603 |           |           |   | 157,188 |         |         |  | 15 | % 
|                                    |                            |                                           |                          |           |           |           |   |           |           |           |   |         |         |         |  |   
|                                    |                            | Total cost of services                    |                          |           | 2,391,310 |           |   |           | 2,112,155 |           |   |         | 279,155 |         |  |    | 13 | % 
|Selling, general and administrative |                            |                                           |                          |           |           |           |   |           |           |           |   |         |         |         |  |   
|                                    | Marketing                  |                                           |                          | 297,945   |           |           |   | 284,651   |           |           |   | 13,294  |         |         |  | 5  | % 
|                                    | General and administrative |                                           |                          | 952,741   |           |           |   | 862,553   |           |           |   | 90,188  |         |         |  | 10 | % 
|                                    |                            |                                           |                          |           |           |           |   |           |           |           |   |         |         |         |  |   
|                                    |                            | Total selling, general and administrative |                          |           | 1,250,686 |           |   |           | 1,147,204 |           |   |         | 103,482 |         |  |    | 9  | % 
|                                    |                            |                                           |                          |           |           |           |   |           |           |           |   |         |         |         |  |   
|                                    |                            |                                           | Total costs and expenses |           | $         | 3,641,996 |   |           | $         | 3,259,359 |   |         | $       | 382,637 |  |    |    | 12 | %
|                                    |                            |                                           |                          |           |           |           |   |           |           |           |   |         |         |         |  |   

Cost of services includes cable programming
costs, which are costs paid to programmers for cable content and
are generally paid on a per-subscriber basis. Cost of services
also includes other direct costs and field service and call
center costs. Other direct costs include costs that Cox incurs
in conjunction with providing its residential, commercial and
advertising services. Field service costs include costs
associated with providing and maintaining Coxs broadband
network and customer care costs necessary to maintain its
customer base.

Cost of services increased $279.2 million
over 2002 partially due to a $122.0 million increase in
programming costs. Approximately 10% of the increase was
attributable to programming rate increases, and the remaining 2%
was related to basic and digital customer growth. Other cost of
services increased $157.2 million, primarily due to:



| |   |                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 1.2 million in net additions of
    advanced-service customers over the last twelve months; and                                                                                                             
|
| |  | increased labor costs due to the transition from
    upgrade construction and new product launches to maintenance and
    related customer costs directly associated with the growth of
    new subscribers.

Cox recorded a one-time non-recurring charge of
approximately $9.8 million in 2002 associated with the
continuation of Excite@Home high-speed Internet service
following the bankruptcy of Excite@Home, and excluding this
one-time charge, other cost of services increased 16% in 2003.

33



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##### Table of Contents



Selling, general and administrative expenses
include marketing, salaries and benefits, commissions and
bonuses, travel, facilities, insurance and other administrative
expenses. Selling, general and administrative expenses increased
$103.5 million primarily due to:



| |   |                                                                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a $90.2 million increase in general and
    administrative expenses relating to increased labor costs,
    expenses related to trials of new video and telephony products,
    and public relations expenses related to our campaign aimed at
    the rising costs of programming; and
|
| |  | a $13.3 million increase in marketing
    expense relating to the promotion of new services and bundling
    alternatives, partially offset by an 8% decrease in costs
    associated with Coxs advertising sales business, Cox Media.                                               

Cox expects continued increases in programming
costs and will continue to pass through some portion of these
increases to its customers. In addition, Cox expects continued
growth in advanced services, which include digital cable,
high-speed Internet access and telephony, both as a result of
increased penetration where these services were available in
2003 and continued roll-out of these services in new areas
during 2004. As a result of these trends, Cox expects its cost
of services and, to a lesser degree, selling, general and
administrative expenses to increase.



| |                              
| | -----------------------------
| | Depreciation and amortization

Depreciation and amortization for the year ended
December 31, 2003 increased to $1.5 billion from
$1.4 billion for the comparable period in 2002. This was
due to an increase in depreciation from Coxs continuing
investment in its broadband network in order to deliver
additional services, and an increase in amortization resulting
from a non-cash impairment charge of $25.0 million
recognized in the first quarter of 2003, upon completion of an
impairment test of franchise value in accordance with Statement
of Financial Accounting Standards (SFAS) No. 142,
Goodwill and Other Intangible Assets. Cox completed its
next impairment test in accordance with SFAS No. 142
in August 2003. The August 2003 test indicated no impairment of
franchise value. Cox will continue to invest in its broadband
network and new services, which management expects will result
in increased revenues to offset increased depreciation expense.



| |                 
| | ----------------
| | Interest expense

Interest expense decreased 15% to
$467.8 million primarily due to interest savings as a
result of Coxs interest rate swap agreements and a
reduction of outstanding indebtedness.



| |                                    
| | -----------------------------------
| | Loss on derivative instruments, net

Cox does not hold or issue derivative instruments
for trading purposes and is not a party to leveraged
instruments. From time to time, however, Cox uses derivative
instruments to manage its exposure to changes in the fair value
of certain of its assets or liabilities or to manage its
exposure to changes in interest rates or equity prices. These
derivative instruments are designated and accounted for by Cox
as hedges of the underlying exposure being managed, as
prescribed by SFAS No. 133. During 2003 and 2002, Cox
used the following derivative instruments in its hedging
activities:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | twelve interest rate swap agreements with an
    aggregate principal amount of $1.8 billion that are
    designated and accounted for as fair value hedges. Cox has
    assumed no ineffectiveness with regard to these interest rate
    swap agreements as the agreements qualify for the short-cut
    method of accounting for fair value hedges of debt
    instruments, as prescribed by SFAS No. 133. These
    interest rate swaps are designed to assist Cox in maintaining a
    mix of fixed and floating rate debt by converting a portion of
    existing fixed-rate debt into a floating-rate obligation. These
    interest rate swaps derive their value primarily based on
    changes in interest rates. Coxs expectations with respect
    to its hedging strategy underlying these interest rate swaps
    have been met since the swap agreements have resulted in Cox
    increasing its proportion of floating rate debt.

34



---



##### Table of Contents





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a series of costless equity collar arrangements
    that were designated and accounted for as fair value hedges to
    manage Coxs exposure to changes in the fair value of
    15.8 million shares of Sprint PCS common stock,
    22.5 million shares of AT&T common stock and
    17.2 million shares of AT&T Wireless common stock held
    by Cox. These equity collar arrangements derived their value
    primarily based on changes in the fair value of the underlying
    equity security. As described in Note 5.
    Investments in Part II, Item 8.
    Consolidated Financial Statements and Supplementary
    Data, Cox terminated all of these equity collar
    arrangements and sold the underlying shares of common stock
    during the first quarter of 2002. Hence, there were no active
    hedging activities with respect to Coxs investments at
    December 31, 2002, and Cox did not undertake any hedging
    activity with respect to investments in 2003.

In addition to the foregoing derivatives, upon
adoption of SFAS No. 133, certain of Coxs debt
instruments contained embedded derivatives, as defined, and
certain investments met the definition of freestanding
derivatives. Cox has not designated these embedded and
freestanding derivatives as hedges under SFAS No. 133
and, as such, changes in their fair value are being recognized
in earnings as derivative gains or losses. During 2003 and 2002,
Cox had the following embedded derivatives or freestanding
derivatives outstanding that have not been designated as hedges:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | embedded derivatives contained in Coxs
    outstanding series of three exchangeable subordinated debentures
    known as the PRIZES, the Premium PHONES and the Discount
    Debentures. These debentures are exchangeable for the cash value
    of shares of Sprint PCS common stock or, in the case of the
    Discount Debentures, at Coxs option, the related shares.
    These embedded derivatives derive their value primarily based on
    changes in the fair value of Sprint PCS common stock,
    U.S. Treasury rates and Coxs credit spreads.
|
| |  | embedded derivatives contained in Coxs
    series of prepaid variable forward contracts secured by
    19.5 million shares of Sprint PCS common stock and
    accounted for as zero-coupon debt. These embedded derivatives
    also derive their value primarily based on changes in the fair
    value of Sprint PCS common stock, U.S. Treasury rates and
    Coxs credit spreads.                                                                                                                                                                      
|
| |  | stock purchase warrants to purchase equity
    securities of certain publicly-traded or privately-held
    companies that can be exercised and settled by delivery of net
    shares, such that Cox pays no cash upon exercise. These warrants
    meet the definition of a freestanding derivative, as prescribed
    by SFAS No. 133, and derive their value primarily
    based on the change in the fair value of the underlying equity
    security.                                                                                                    

For a more detailed description of Coxs
exchangeable subordinated debentures, zero-coupon debt and their
corresponding embedded derivatives, please refer to Note 7.
Debt and Note 9. Derivative Instruments
and Hedging Activities in Part II, Item 8.
Consolidated Financial Statements and Supplementary
Data.

For the year ended December 31, 2003, Cox
recorded a $22.6 million pre-tax loss on derivative
instruments primarily due to a $4.4 million pre-tax loss
resulting from the change in the fair value of Coxs net
settleable warrants and an $18.7 million pre-tax loss
resulting from the change in the fair value of certain
derivative instruments embedded in Coxs zero-coupon debt,
as described above.

Gain on investments, net

Net gain on investments for the year ended
December 31, 2003 of $165.2 million includes:



| |   |                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $154.5 million pre-tax gain related to the
    sale of 46.8 million shares of Sprint PCS common stock;                                                                    
|
| |  | $21.8 million pre-tax gain as a result of
    the change in market value of Coxs investment in Sprint
    PCS common stock classified as trading; partially offset
    by
|
| |  | $10.5 million pre-tax decline considered to
    be other than temporary in the fair value of certain investments.                                                         

35



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In determining whether a decline in the fair
value of Coxs investments is other than temporary, Cox
considers the factors prescribed by SEC Staff Accounting
Bulletin Topic 5-M, Other Than Temporary Impairment of
Certain Investments in Debt and Equity Securities. These
factors include the length of time and extent to which the fair
market value has been less than cost, the financial condition
and near term prospects of the investee and Coxs intent
and ability to retain its investment.

Equity in net losses of affiliated
companies

Equity in net losses decreased 59% to
$13.1 million. Generally, these losses are attributable to
Coxs proportionate share of the investees income or
loss. Although Cox has various levels of ownership and rights
with respect to the companies in which it has equity
investments, Cox has little, if any, control over the financial
position of these companies. Therefore, Cox cannot predict the
impact that its equity investments will have on its future
operations.

Loss on extinguishment of debt

During the year ended December 31, 2003, Cox
recorded a $450.1 million pre-tax loss on extinguishment of
debt consisting of:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $412.8 million pre-tax loss resulting from
    the purchase of $1.8 billion aggregate principal amount at
    maturity of the Discount Debentures pursuant to Coxs offer
    to purchase any and all Discount Debentures. The pre-tax loss
    was primarily attributable to the reversal of discounts
    associated with the embedded derivatives and other costs that
    were recorded at issuance and were being amortized over the
    original term of these securities.
|
| |  | $29.5 million pre-tax loss resulting from
    the termination of Coxs series of prepaid forward
    contracts to sell up to 19.5 million shares of Sprint PCS
    common stock, described above and accounted for as zero-coupon
    debt;                                                                                                                                                                                                                                     
|
| |  | $10.2 million pre-tax loss resulting from
    the purchase of $422.7 million aggregate principal amount
    at maturity of Coxs convertible senior notes due 2021
    pursuant to the holders right to require Cox to purchase
    the convertible notes;                                                                                                                                                                                                                     
|
| |  | $1.5 million pre-tax loss resulting from the
    purchase of $250.0 million aggregate principal amount of
    its 6.15% Reset Put Securities due 2033 (REPS); partially
    offset by                                                                                                                                                                                                                                                                                           
|
| |  | $3.9 million pre-tax gain resulting from the
    purchase of $1.3 billion aggregate principal amount of the
    PRIZES and $274.9 million aggregate principal amount of the
    Premium PHONES pursuant to Coxs offer to purchase any and
    all PRIZES and Premium PHONES.                                                                                                                                                                                                   

Coxs offers to purchase outstanding
Discount Debentures, PRIZES and Premium PHONES expired pursuant
to their terms. Nothing in this report should be construed as an
offer to buy, or a solicitation of an offer to sell, any debt
securities of Cox. Cox reserves the right to purchase additional
Discount Debentures, PRIZES or Premium PHONES in the open
market, in privately negotiated transactions, through tender
offers, exchange offers or otherwise.

Income tax benefit

Income tax benefit was $73.3 million for the
year ended December 31, 2003. The effective tax rate for
2003 was 35.8% compared to 34.6% for 2002. The change in the
effective tax rate was primarily due to the impact of varying
effective state tax rates across Coxs operations, along
with the effects of current year investing and financing
transactions.

Net loss

Net loss for the year ended December 31,
2003 was $137.8 million compared to net loss of
$274.0 million for the comparable period in 2002.

36



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##### Table of Contents





| |                        
| | -----------------------
| | 2002 compared with 2001

The following table sets forth summarized
consolidated financial information for each of the two years in
the period ended December 31, 2002.

|                                                                    |  |                        |            |      |  |          |           |          |  |   |            |   |  |  |      |   
|------------------------------------------------------------------- |  | ---------------------- | ---------- | ---- |  | -------- | --------- | -------- |  | - | ---------- | - |  |  | ---- | --
|                                                                    |  |                        |            |      |  |         
|                                                                    |  | Year Ended December 31 |            |      |  |         
|                                                                    |  |                        |            |      |  |         
|                                                                    |  | 2002                   |            | 2001 |  | $ Change |           | % Change
|                                                                    |  |                        |            |      |  |          |           |         
|                                                                    |  |                        |            |      |  |         
|                                                                    |  | (Thousands of Dollars) |            |      |  |         
|Revenues                                                            |  | $                      | 5,038,598  |      |  | $        | 4,253,203 |          |  | $ | 785,395    |   |  |  | 18   | % 
|Cost of services                                                    |  |                        | 2,112,155  |      |  |          | 1,868,303 |          |  |   | 243,852    |   |  |  | 13   | % 
|Selling, general and administrative expenses                        |  |                        | 1,147,204  |      |  |          | 963,942   |          |  |   | 183,262    |   |  |  | 19   | % 
|Depreciation and amortization                                       |  |                        | 1,357,906  |      |  |          | 1,539,211 |          |  |   | (181,305   | ) |  |  | (12  | )%
|Loss on sale of cable systems                                       |  |                        | 3,916      |      |  |          |          |          |  |   | 3,916      |   |  |  | NM   |   
|                                                                    |  |                        |            |      |  |          |           |          |  |   |            |   |  |  |      |   
|Operating income (loss)                                             |  |                        | 417,417    |      |  |          | (118,253  | )        |  |   | 535,670    |   |  |  | NM   |   
|Interest expense                                                    |  |                        | (549,858   | )    |  |          | (565,934  | )        |  |   | 16,076     |   |  |  | (3   | )%
|Gain (loss) on derivative instruments, net                          |  |                        | 1,125,588  |      |  |          | (211,963  | )        |  |   | 1,337,551  |   |  |  | NM   |   
|(Loss) gain on investments, net                                     |  |                        | (1,317,158 | )    |  |          | 1,151,172 |          |  |   | (2,468,330 | ) |  |  | NM   |   
|Equity in net losses of affiliated companies                        |  |                        | (32,175    | )    |  |          | (40,043   | )        |  |   | 7,868      |   |  |  | (20  | )%
|Loss on extinguishment                                              |  |                        | (787       | )    |  |          |          |          |  |   | (787       | ) |  |  | NM   |   
|Other, net                                                          |  |                        | (5,080     | )    |  |          | (11,882   | )        |  |   | 6,802      |   |  |  | (57  | )%
|Income tax benefit (expense)                                        |  |                        | 125,286    |      |  |          | (94,039   | )        |  |   | 219,325    |   |  |  | NM   |   
|Minority interest, net of tax                                       |  |                        | (37,272    | )    |  |          | (71,147   | )        |  |   | 33,875     |   |  |  | (48  | )%
|Cumulative effect of change in accounting
    principle, net of tax |  |                        |           |      |  |          | 717,090   |          |  |   | 717,090    |   |  |  | 100  | % 
|                                                                    |  |                        |            |      |  |          |           |          |  |   |            |   |  |  |      |   
|Net (loss) income                                                   |  | $                      | (274,039   | )    |  | $        | 755,001   |          |  | $ | (1,029,040 | ) |  |  | (136 | )%
|                                                                    |  |                        |            |      |  |          |           |          |  |   |            |   |  |  |      |   

Revenues

The following table sets forth summarized revenue
information for each of the two years in the period ended
December 31, 2002.

|            |             |                           |   |           |           |      |  |       |     |          |   |           |           |  |  |    |     |   |   |         |         |  |  |     |    |  
|----------- | ----------- | ------------------------- | - | --------- | --------- | ---- |  | ----- | --- | -------- | - | --------- | --------- |  |  | -- | --- | - | - | ------- | ------- |  |  | --- | -- | -
|            |             |                           |   |           |           |      |  |      
|            |             | Year Ended December 31    |   |           |           |      |  |      
|            |             |                           |   |           |           |      |  |      
|            |             |                           |   | % of      |           |      |  | % of  |     |          |   |          
|            |             | 2002                      |   | Total     |           | 2001 |  | Total |     | $ Change |   | % Change 
|            |             |                           |   |           |           |      |  |       |     |          |   |          
|            |             |                           |   |           |           |      |  |      
|            |             | (Thousands of Dollars)    |   |           |           |      |  |      
|Residential |             |                           |   |           |           |      |  |       |     |          |   |           |           |  |  |    |     |   |   |         |         |  |  |    
|            | Video       |                           | $ | 3,439,755 |           |      |  | 68    | %   |          | $ | 3,184,786 |           |  |  | 75 | %   |   | $ | 254,969 |         |  |  | 8   | % 
|            | Data        |                           |   | 575,231   |           |      |  | 11    | %   |          |   | 277,921   |           |  |  | 7  | %   |   |   | 297,310 |         |  |  | 107 | % 
|            | Telephony   |                           |   | 343,227   |           |      |  | 7     | %   |          |   | 211,270   |           |  |  | 5  | %   |   |   | 131,957 |         |  |  | 62  | % 
|            | Other       |                           |   | 72,254    |           |      |  | 1     | %   |          |   | 89,264    |           |  |  | 1  | %   |   |   | (17,010 | )       |  |  | (19 | )%
|            |             |                           |   |           |           |      |  |       |     |          |   |           |           |  |  |    |     |   |   |         |         |  |  |    
|            |             | Total residential revenue |   |           | 4,430,467 |      |  |       | 87  | %        |   |           | 3,763,241 |  |  |    | 88  | % |   |         | 667,226 |  |  |     | 18 | %
|            | Commercial  |                           |   | 230,067   |           |      |  | 5     | %   |          |   | 152,383   |           |  |  | 4  | %   |   |   | 77,684  |         |  |  | 51  | % 
|            | Advertising |                           |   | 378,064   |           |      |  | 8     | %   |          |   | 337,579   |           |  |  | 8  | %   |   |   | 40,485  |         |  |  | 12  | % 
|            |             |                           |   |           |           |      |  |       |     |          |   |           |           |  |  |    |     |   |   |         |         |  |  |    
|            |             | Total revenues            |   | $         | 5,038,598 |      |  |       | 100 | %        |   | $         | 4,253,203 |  |  |    | 100 | % |   | $       | 785,395 |  |  |     | 18 | %
|            |             |                           |   |           |           |      |  |       |     |          |   |           |           |  |  |    |     |   |   |         |         |  |  |    

The 18% increase in total revenues was primarily
attributable to:



| |   |                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------
| |  | a 44% increase in customers for advanced services;                                                                                             
|
| |  | a 6% increase in basic cable rates resulting from
    increased programming costs and inflation, as well as increased
    channel availability;

37



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##### Table of Contents





| |   |                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | an increase in commercial broadband customers;                                                                                                                                                                                                                                                                                                    
|
| |  | a continuing rebound in local and national
    advertising sales; and                                                                                                                                                                                                                                                                             
|
| |  | an increase due to costs associated with
    Coxs high-speed Internet service of approximately
    $91.6 million, which had been netted against revenues in
    2001 under a revenue sharing agreement with Excite@Home, and
    were included in cost of services in 2002 as Cox no longer has a
    revenue sharing agreement with Excite@Home.

Costs and expenses (Cost of services and
Selling, general and administrative expenses)

The following table sets forth summarized
operating expenses for each of the two years in the period ended
December 31, 2002.

|                                    |                            |                                           |                          |           |           |           |   |          |           |           |   |         |         |         |  |    |    |    |  
|----------------------------------- | -------------------------- | ----------------------------------------- | ------------------------ | --------- | --------- | --------- | - | -------- | --------- | --------- | - | ------- | ------- | ------- |  | -- | -- | -- | -
|                                    |                            |                                           |                          |           |           |          
|                                    |                            | Year Ended December 31                    |                          |           |           |          
|                                    |                            |                                           |                          |           |           |          
|                                    |                            | 2002                                      |                          | 2001      |           | $ Change  |   | % Change
|                                    |                            |                                           |                          |           |           |           |   |         
|                                    |                            |                                           |                          |           |           |          
|                                    |                            | (Thousands of Dollars)                    |                          |           |           |          
|Cost of services                    |                            |                                           |                          |           |           |           |   |          |           |           |   |         |         |         |  |   
|                                    | Programming costs          |                                           | $                        | 1,036,552 |           |           | $ | 929,890  |           |           | $ | 106,662 |         |         |  | 11 | % 
|                                    | Other cost of services     |                                           |                          | 1,075,603 |           |           |   | 938,413  |           |           |   | 137,190 |         |         |  | 15 | % 
|                                    |                            |                                           |                          |           |           |           |   |          |           |           |   |         |         |         |  |   
|                                    |                            | Total cost of services                    |                          |           | 2,112,155 |           |   |          | 1,868,303 |           |   |         | 243,852 |         |  |    | 13 | % 
|Selling, general and administrative |                            |                                           |                          |           |           |           |   |          |           |           |   |         |         |         |  |   
|                                    | Marketing                  |                                           |                          | 284,651   |           |           |   | 233,813  |           |           |   | 50,838  |         |         |  | 22 | % 
|                                    | General and administrative |                                           |                          | 862,553   |           |           |   | 730,129  |           |           |   | 132,424 |         |         |  | 18 | % 
|                                    |                            |                                           |                          |           |           |           |   |          |           |           |   |         |         |         |  |   
|                                    |                            | Total selling, general and administrative |                          |           | 1,147,204 |           |   |          | 963,942   |           |   |         | 183,262 |         |  |    | 19 | % 
|                                    |                            |                                           | Total costs and expenses |           | $         | 3,259,359 |   |          | $         | 2,832,245 |   |         | $       | 427,114 |  |    |    | 15 | %
|                                    |                            |                                           |                          |           |           |           |   |          |           |           |   |         |         |         |  |   

Cost of services increased $243.9 million
over 2001 partially due to a $106.7 million increase in
programming costs reflecting programming rate increases and
customer growth. Approximately 9% of the increase in programming
costs was attributable to programming rate increases, and the
remaining 3% was related to digital customer growth. Other cost
of services increased $137.2 million, primarily due to:



| |   |                                                                                                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | increased labor costs due to the transition from
    upgrade construction and new product launches to maintenance and
    related customer costs directly associated with the growth of
    new subscribers;                                                                                                                       
|
| |  | costs associated with Coxs high-speed
    Internet service of approximately $91.6 million, which had
    been netted against revenues in 2001 under a revenue sharing
    agreement with Excite@Home, and were included in cost of
    services in 2002 as Cox no longer has a revenue sharing
    agreement with Excite@Home; and
|
| |  | a one-time non-recurring charge of approximately
    $9.8 million associated with the continuation of
    Excite@Home high-speed Internet service, as described below;
    partially offset by                                                                                                                                     
|
| |  | a one-time non-recurring net charge in 2001 of
    approximately $150.2 million associated with the
    continuation of Excite@Home high-speed Internet service and the
    transition to Cox High Speed Internet service following the
    bankruptcy of Excite@Home, as described below.                                         

In September 2001, Excite@Home, Coxs
primary high-speed Internet provider at that time, filed for
protection under Chapter 11 of the U.S. Bankruptcy
Code. Subsequently, Cox and Excite@Home entered into two
separate agreements so that Cox would continue to receive
high-speed Internet access services from Excite@Home for
existing and new customers through February 28, 2002 and so
that Excite@Home would provide minimal services to Cox related
to the transition of Coxs customers to Cox High Speed
Internet service. Pursuant to one of these agreements, Cox paid
Excite@Home $160.0 million. Of this amount, approximately
$9.8 million was attributable to services provided in 2002,
and approximately $150.2 million was attributable to
services provided in 2001. In February 2002, Cox completed the
transition of its customers from Excite@Homes high-speed
Internet service to Cox High Speed Internet service.

38



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##### Table of Contents



Selling, general and administrative expenses
include marketing, salaries and benefits, maintenance and
support, commissions and bonuses, travel, facilities, insurance
and other administrative expenses. Selling, general and
administrative expenses increased $183.3 million primarily
due to:



| |   |                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a $132.4 million increase in general and
    administrative expenses relating to increased salaries and
    benefits resulting from an increase in headcount, and increased
    property taxes resulting from capital expenditures; and
|
| |  | a $50.8 million increase in marketing
    expense relating to the promotion of new services and bundling
    alternatives.                                                                                                             



| |                              
| | -----------------------------
| | Depreciation and amortization

Depreciation and amortization for the year ended
December 31, 2002 decreased to $1.4 billion from
$1.5 billion for the comparable period in 2001 due to a
reduction of approximately $352.6 million in amortization
of intangible assets determined to have an indefinite life upon
adoption of SFAS No. 142, offset by an increase in
depreciation from Coxs continuing investment in its
broadband network in order to deliver additional programming and
services.



| |                        
| | -----------------------
| | Operating income (loss)

Operating income for the year ended
December 31, 2002 was $417.4 million compared to
operating loss of $118.3 million for the year ended
December 31, 2001. The operating loss in 2001 was primarily
due to a one-time non-recurring net charge of approximately
$150.2 million in the fourth quarter of 2001 associated
with the continuation of Excite@Home high-speed Internet service
and the transition to Cox High Speed Internet service following
the bankruptcy of Excite@Home. The increase in operating income,
after adjusting for the one-time charge, was primarily
attributable to the reduction in amortization of intangible
assets determined to have an indefinite life.



| |                 
| | ----------------
| | Interest expense

Interest expense decreased 3% to
$549.9 million primarily due to interest savings as a
result of Coxs interest rate swap agreements, repayment of
all commercial paper borrowings and a decrease in the interest
rate on Coxs PRIZES from 7.75% to 2% in November 2002 in
accordance with the terms of the PRIZES.



| |                                    
| | -----------------------------------
| | Gain on derivative instruments, net

As indicated above, from time to time, Cox uses
derivative instruments to manage its exposure to changes in the
fair value of certain of its assets or liabilities or to manage
its exposure to changes in interest rates or equity prices.
These derivative instruments are designated and accounted for by
Cox as hedges of the underlying exposure being managed, as
prescribed by SFAS No. 133. During 2002 and 2001, Cox used
the following derivative instruments in its hedging activities:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | four interest rate swap agreements with an
    aggregate principal amount of $1.2 billion that are
    designated and accounted for as fair value hedges. Cox assumed
    no ineffectiveness with regard to these interest rate swap
    agreements as the agreements qualify for the short-cut
    method of accounting for fair value hedges of debt
    instruments, as prescribed by SFAS No. 133. Coxs
    expectations with respect to its hedging strategy underlying
    these interest rate swaps was met since the swap agreements
    resulted in Cox increasing its proportion of floating rate debt.                                                                                                                                  
|
| |  | a series of costless equity collar arrangements
    that were designated and accounted for as fair value hedges to
    manage Coxs exposure to changes in the fair value of
    15.8 million shares of Sprint PCS common stock,
    22.5 million shares of AT&T common stock and
    17.2 million shares of AT&T Wireless common stock held
    by Cox. As described in Note 5. Investments in
    Part II, Item 8. Consolidated Financial Statements and
    Supplementary Data, Cox terminated all of these equity
    collar arrangements and sold the underlying shares of common
    stock during the first quarter of 2002. Hence, there were no
    active hedging activities with respect to Coxs investments
    at December 31, 2002.

39



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##### Table of Contents



During 2002 and 2001, Cox had the following
embedded derivatives or freestanding derivatives outstanding
that have not been designated as hedges:



| |   |                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | embedded derivatives contained in Coxs
    outstanding series of three exchangeable subordinated debentures
    known as the PRIZES, the Premium PHONES and the Discount
    Debentures;                                      
|
| |  | embedded derivatives contained in Coxs
    series of prepaid variable forward contracts covering
    19.5 million shares of Sprint PCS common stock, which Cox
    accounted for as zero-coupon debt; and                     
|
| |  | stock purchase warrants to purchase equity
    securities of certain publicly-traded or privately-held
    companies that can be exercised and settled by delivery of net
    shares, such that Cox pays no cash upon exercise.

For a more detailed description of the
exchangeable subordinated debentures, zero-coupon debt and their
corresponding embedded derivatives, please refer to Note 7.
Debt and Note 9. Derivative Instruments
and Hedging Activities in Part II, Item 8.
Consolidated Financial Statements and Supplementary
Data.

During the year ended December 31, 2002, Cox
recorded a $1.1 billion pre-tax gain on derivative
instruments, which was comprised of the following:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a $268.8 million pre-tax gain due to the
    termination of Coxs series of costless equity collar
    arrangements referred to above;                                                                                                                                                                                                                                                                 
|
| |  | a $583.1 million pre-tax gain due to a
    decrease in the fair value of the embedded derivatives contained
    in Coxs exchangeable subordinated debentures. The decrease
    in fair value of these embedded derivatives was primarily
    attributed to the decrease in the trading price of Sprint PCS
    and the change in U.S. Treasury rates and Coxs credit
    spreads during the year; and
|
| |  | a $359.3 million pre-tax gain due to a
    decrease in the fair value of the embedded derivatives contained
    in Coxs zero-coupon debt. The decrease in fair value of
    these embedded derivatives was primarily attributed to the
    decrease in the trading price of Sprint PCS and the change in
    U.S. Treasury rates and Coxs credit spreads during
    the year; partially offset by    
|
| |  | an $85.6 million pre-tax loss due to a
    decrease in the fair value of Coxs stock purchase
    warrants. The decrease in fair value of these warrants was
    primarily attributed to the decrease in the fair value of the
    underlying equity security during the year.                                                                                                                         



| |                         
| | ------------------------
| | Loss on investments, net

Net loss on investments for the year ended
December 31, 2002 of $1.3 billion includes:



| |   |                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $170.4 million pre-tax loss related to the
    sale of 23.9 million shares of AT&T Wireless common
    stock;                                          
|
| |  | $390.6 million pre-tax loss as a result of
    the change in market value of Coxs investment in Sprint
    PCS common stock classified as trading; and
|
| |  | $807.9 million decline in the fair value of
    certain investments, primarily Sprint PCS, considered to be
    other than temporary.                  

In determining whether a decline in the fair
value of Coxs investments is other than temporary, Cox
considers the factors prescribed by SEC Staff Accounting
Bulletin Topic 5-M, Other Than Temporary Impairment of
Certain Investments in Debt and Equity Securities. These
factors include the length of time and extent to which the fair
market value has been less than cost, the financial condition
and near term prospects of the investee and Coxs intent
and ability to retain its investment.



| |                                                 
| | ------------------------------------------------
| | Equity in net losses of affiliated
    companies

Equity in net losses decreased 20% to
$32.2 million, primarily due to a $23.9 million loss
in 2001 related to Coxs investment in Discovery. Partially
offsetting the decrease was increased equity in net losses in
2002 due to additional equity investments. Generally, these
losses are attributable to Coxs proportionate share of

40



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##### Table of Contents



the investees income or loss. Although Cox
has various levels of ownership and rights with respect to the
companies in which it has equity investments, Cox has little, if
any, control over the financial position of these companies.
Therefore, Cox cannot predict the impact that its equity
investments will have on its future operations.




| |                              
| | -----------------------------
| | Minority interest, net of tax

Minority interest, net of tax, of
$37.3 million primarily represents distributions on
Coxs obligated capital and preferred securities of
subsidiary trusts, referred to as FELINE PRIDES and RHINOS.
During 2002, Cox settled the FELINE PRIDES primarily with the
issuance of Class A common stock and redeemed the RHINOS
with cash. Please refer to Note 8. Cox-Obligated
Capital and Preferred Securities of Subsidiary Trusts in
Part II, Item 8. Consolidated Financial
Statements and Supplementary Data for a more detailed
description of the FELINE PRIDES and RHINOS.



| |                  
| | -----------------
| | Net (loss) income

Net loss for the year ended December 31,
2002 was $274.0 million compared to net income of
$755.0 million for the comparable period in 2001, which
included an after-tax cumulative effect of change in accounting
principle from adoption of SFAS No. 133, which
increased earnings by $717.1 million.

Liquidity and Capital Resources



| |                              
| | -----------------------------
| | 2003 Uses and Sources 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. Cox believes it will be able to meet its capital needs
for the next twelve months and the foreseeable future with
amounts available under existing revolving credit facilities and
its commercial paper program.

During 2003, Cox made capital expenditures of
$1.6 billion. These expenditures were primarily directed at
costs related to electronic equipment located on customers
premises, costs to upgrade and rebuild Coxs broadband
network to allow for the delivery of advanced broadband services
and costs associated with network equipment used to enter new
service areas.

Capital expenditures for 2004 are expected to be
approximately $1.4 billion. Although management
continuously reviews industry and economic conditions to
identify opportunities, Cox does not have any current plans to
make any material acquisitions or enter into any material cable
systems exchanges in 2004.

In addition to improvement of its own networks,
Cox has made strategic investments in businesses focused on
cable programming, technology and telecommunications.
Investments in affiliated companies of $22.3 million in
2003 included debt and equity funding. Future funding
requirements are expected to total approximately
$20.0 million over the next two years. These capital
requirements may vary significantly from the amounts stated
above and will depend on numerous factors as many of these
affiliates are growing businesses and specific financing
requirements will change depending on the evolution of these
businesses.

During 2003, Cox repaid $2.3 billion of
debt, which primarily consisted of the purchase of a portion of
its convertible senior notes, the purchase of the majority of
all three series of its exchangeable subordinated debentures,
pursuant to offers to purchase any and all PRIZES, Premium
PHONES and Discount Debentures, and the purchase of its REPS.

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Net commercial paper borrowings during 2003 were
$300.9 million. Proceeds from the issuance of other debt,
net of debt issuance costs, underwriting commissions and
discounts, included the issuances of:



| |   |                                                                                   
| | - | ----------------------------------------------------------------------------------
| |  | 4.625% senior notes due 2013 for net
    proceeds of approximately $596.2 million;
|
| |  | 3.875% senior notes due 2008 for net
    proceeds of $248.8 million; and          
|
| |  | 5.5% senior notes due 2015 for net proceeds
    of $496.5 million.                

The proceeds from these offerings were primarily
used to purchase the tendered PRIZES, Premium PHONES and
Discount Debentures and the REPS.

During 2003, Cox generated $1.9 billion from
operations. Proceeds from the sale and exchange of investments
of $246.4 million consisted of proceeds from the sale of
46.8 million shares of Sprint PCS common stock.

2002 Uses and Sources of Cash

During 2002, Cox made capital expenditures of
$1.9 billion. These expenditures were primarily directed at
costs related to electronic equipment located on customers
premises, costs to upgrade and rebuild Coxs broadband
network to allow for the delivery of advanced broadband services
and costs associated with network equipment used to enter new
service areas.

Net commercial paper repayments during 2002 were
$727.4 million. As a result, Cox had no outstanding
commercial paper borrowings at December 31, 2002. During
2002, Cox repaid $705.0 million of other debt, which
primarily consisted of the repurchase of a portion of its
convertible senior notes, the repurchase of its Floating Rate
MOPPRS/CHEERS and the repayment of its 6.5% senior notes
upon their maturity.

During 2002, Cox redeemed the senior notes held
by the Cox RHINOS Trust for approximately $502.6 million,
and the Cox RHINOS Trust, in turn, redeemed its preferred
securities, the RHINOS. Distributions paid on capital and
preferred securities of subsidiary trusts of $47.8 million
consisted of quarterly interest payments on the FELINE PRIDES
and RHINOS.

During 2002, Cox generated $1.8 billion from
operations. Proceeds from the sale and exchange of investments
of $1.3 billion primarily included:



| |   |                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the sale of 25.2 million shares of Sprint
    PCS common stock for aggregate net proceeds of approximately
    $238.7 million;                                                                                          
|
| |  | the sale of 35.0 million shares of AT&T
    common stock for aggregate net proceeds of approximately
    $542.6 million;                                                                                                
|
| |  | the sale of 23.9 million shares of AT&T
    Wireless common stock for aggregate net proceeds of
    approximately $248.2 million; and                                                                                   
|
| |  | the termination of all costless equity collar
    arrangements with respect to Sprint PCS common stock, AT&T
    common stock and AT&T Wireless common stock for aggregate
    proceeds of approximately $264.4 million.

Proceeds from the issuance of debt, net of debt
issuance costs, underwriting commissions and discounts, included
the issuance of 7.125% notes due 2012 for net proceeds of
approximately $986.1 million. The proceeds from this
offering were primarily used to redeem the senior notes held by
the Cox RHINOS Trust, repurchase the Floating Rate MOPPRS/CHEERS
and repay the 6.5% senior notes.

2001 Uses and Sources of Cash

During 2001, Cox made capital expenditures of
$2.2 billion. 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 and
video-on-demand. Investments in affiliated companies of
$54.0 million included debt and equity funding.

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Net revolving credit and commercial paper
borrowings decreased $801.4 million for the year ended
December 31, 2001 due to net repayments on Coxs
commercial paper program. During 2001, Cox repaid approximately
$386.7 million of other debt, which primarily consisted of
its $300.0 million aggregate principal amount of
7.0% notes due at their maturity and its $33.0 million
aggregate principal amount of 6.94% notes due at their
maturity.

Distributions paid on capital and preferred
securities of subsidiary trusts of $76.0 million consisted
of quarterly payments to the holders of its FELINE PRIDES and
RHINOS.

During 2001, Cox generated $798.8 million
from operations. Proceeds from the sale and exchange of
investments of $1.3 billion primarily included:



| |   |                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the sale of 12.8 million shares of Sprint
    PCS common stock for aggregate net proceeds of approximately
    $318.2 million;                                                               
|
| |  | the sale of 25.0 million shares of AT&T
    common stock for aggregate net proceeds of approximately
    $525.5 million;                                                                     
|
| |  | the sale of 5.0 million shares of AT&T
    Wireless common stock for aggregate net proceeds of
    approximately $83.1 million; and                                                          
|
| |  | the sale of Coxs interests in Outdoor Life,
    Speedvision, and Cable Network Services to Fox Sports and Fox
    Sports CNS for aggregate net proceeds of approximately
    $439.7 million.

Proceeds from the issuance of debt, net of debt
issuance costs, underwriting commissions, discounts and
premiums, of $1.4 billion primarily included:



| |   |                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the issuance of a series of prepaid forward
    contracts (accounted for as zero coupon debt) with maturity
    dates between 2004 and 2006 to sell up to 19.5 million
    shares of Coxs Sprint PCS common stock for net proceeds of
    approximately $389.4 million; and                  
|
| |  | the issuance of convertible senior notes, which
    mature in February 2021 and are convertible into shares of
    Coxs Class A common stock or, at Coxs option,
    cash, and 6.75% senior notes, which mature in March 2011,
    for aggregate net proceeds of approximately $1.0 billion.

Off-Balance Sheet
Arrangements

In the normal course of business, Cox issues
standby letters of credit to local franchise authorities. The
unused letters of credit outstanding totaled $4.3 million
at December 31, 2003. Cox does not have any other material
off-balance sheet arrangements.

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Contractual Obligations and
Commitments

The following table contains information relating
to Coxs contractual obligations and commitments for the
five years subsequent to December 31, 2003 and thereafter.
The amounts represent the maximum future contractual obligations
(some of which may be settled by delivering equity securities)
and are reported without giving effect to any related discounts,
premiums and other adjustments necessary to comply with
accounting principles generally accepted in the U.S.

|                                             |  |                        |          |           |  |       |         |       |  |         |         |  |  |   |         |  |  |   |           |     
|-------------------------------------------- |  | ---------------------- | -------- | --------- |  | ----- | ------- | ----- |  | ------- | ------- |  |  | - | ------- |  |  | - | --------- | ----
|                                             |  |                       
|                                             |  | Payments Due by Period
|                                             |  |                       
|                                             |  |                        |          | Less than |  | 1  3 |         | 4  5 |  | After 5
|                                             |  | Total                  |          | 1 Year    |  | Years |         | Years |  | Years  
|                                             |  |                        |          |           |  |       |         |       |  |        
|                                             |  |                       
|                                             |  | (Millions of dollars) 
|Debt maturities and pay-off obligations(a)   |  | $                      | 6,518.0  |           |  | $     | 490.1(b | )(c)  |  | $       | 840.0   |  |  | $ | 450.0   |  |  | $ | 4,737.9(d | )(e)
|Interest on aggregate debt(f)                |  |                        | 3,724.2  |           |  |       | 420.9   |       |  |         | 762.9   |  |  |   | 692.5   |  |  |   | 1,847.9   |     
|Capital leases                               |  |                        | 238.4    |           |  |       | 61.3    |       |  |         | 87.0    |  |  |   | 33.7    |  |  |   | 56.4      |     
|Operating leases                             |  |                        | 64.4     |           |  |       | 18.4    |       |  |         | 24.2    |  |  |   | 12.2    |  |  |   | 9.6       |     
|Nonbinding purchase and other commitments(g) |  |                        | 997.6    |           |  |       | 353.5   |       |  |         | 163.6   |  |  |   | 172.1   |  |  |   | 308.4     |     
|                                             |  |                        |          |           |  |       |         |       |  |         |         |  |  |   |         |  |  |   |           |     
|Total contractual cash obligations           |  | $                      | 11,542.6 |           |  | $     | 1,344.2 |       |  | $       | 1,877.7 |  |  | $ | 1,360.5 |  |  | $ | 6,960.2   |     
|                                             |  |                        |          |           |  |       |         |       |  |         |         |  |  |   |         |  |  |   |           |     



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Excludes $302.3 million of commercial paper
    borrowings outstanding as of December 31, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|(b) |  | In February 2004, Cox repurchased the remaining
    outstanding $19.0 million aggregate principal amount at
    maturity of its convertible notes due 2021 for aggregate cash
    consideration of $13.9 million, which represented the
    accreted value of the repurchased notes. The $13.9 million
    used to repurchase tendered convertible notes on
    February 23, 2004 is included in payments due in less than
    one year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|(c) |  | Cox has classified approximately
    $475.0 million of outstanding debt obligations scheduled to
    mature in the next twelve months in the noncurrent portion of
    long-term debt in its Consolidated Balance Sheet because it
    intends to refinance these obligations on a long-term basis. Cox
    has the ability to refinance these obligations under its
    existing revolving credit facilities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(d) |  | Includes Coxs Discount Debentures due in
    2020 representing $62.3 million aggregate principal amount
    at maturity. The holders have the right to require Cox to
    repurchase their Discount Debentures on April 19, 2005,
    April 19, 2010 and April 19, 2015 at a purchase price
    equal to the adjusted principal amount of the Discount
    Debentures, plus any accrued but unpaid cash interest. Cox may
    choose to repurchase the Discount Debentures with cash or shares
    of PCS common stock of Sprint Corporation. If all of the holders
    of the Discount Debentures were to exercise their right to
    require Cox to repurchase their Discount Debentures on
    April 19, 2005, the aggregate purchase price would be
    $32.5 million.                                                                                                                                                                                                                                                        
|   
|(e) |  | The holders of Coxs $200.0 million
    aggregate principal amount 6.53% debentures due 2028, which
    were issued by TCA Cable TV prior to Coxs acquisition of
    TCA, have the right to require the Cox subsidiary that assumed
    TCAs obligations under the debentures to repurchase the
    debentures on February 1, 2008 at a purchase price equal to
    100% of the principal amount of such debentures, plus any
    accrued but unpaid cash interest.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(f) |  | Coxs estimate of its cash requirement for
    interest payments is based on known future cash interest
    payments related to its fixed-rate debt instruments as of
    December 31, 2003, other than Coxs convertible notes
    that were repurchased in February 2004, as described in footnote
    (b) above. These estimates also assume that (i) debt
    is repaid and not refinanced at maturity, (ii) the holders
    of Coxs Discount Debentures and the holders of the former
    TCA bonds do not exercise their rights to require Cox to
    repurchase such securities as described in footnotes
    (c) and (d) above, respectively, and (iii) no
    future impact is recognized from Coxs interest rate swap
    agreements, which effectively convert $1.8 billion of
    Coxs fixed-rate debt into floating-rate obligations and
    resulted in significant interest savings in both 2003 and 2002.
    Coxs future interest payments could differ materially from
    amounts indicated in the table due

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|    |  |                                                                                                                                               
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------
|    |  | to Coxs future operational and financing
    needs, changing market conditions and other currently
    unanticipated events.                 
|   
|(g) |  | Includes unfulfilled purchase orders,
    construction commitments and various other commitments arising
    in the normal course of business.

Cox identified other cash requirements related to
the funding of pension and other postretirement benefits.
Coxs expected cash payments for 2004 are approximately
$2.4 million related to its pension and other
postretirement benefit plans. On January 7, 2004, Cox
contributed the $2.4 million to fund postretirement
benefits. Based on currently available information, there are no
known additional contributions for 2004. Cox contributed its
total planned 2003 plan year contributions for the funded
pension plans during 2003. Due to this accelerated contribution,
Cox does not anticipate additional contributions during 2004 for
the funded pension plans. The assumptions related to pension and
other postretirement benefits are described under the heading
Pension and Postretirement Benefits under
Critical Accounting Policies and Estimates. For
additional information regarding pension and other
postretirement benefits see Note 11. Retirement
Plans in Part II, Item 8. Consolidated
Financial Statements and Supplementary Data.

Other

At December 31, 2003, Cox had approximately
$7.0 billion of outstanding indebtedness. Derivative
adjustments in accordance with SFAS No. 133 have
historically had a material impact on reported indebtedness. For
example, reported indebtedness at December 31, 2002 of
approximately $7.3 billion was net of certain derivative
adjustments made in accordance with SFAS No. 133 that
reduced the reported debt balance by approximately
$1.4 billion. As a result of Coxs purchase of its
exchangeable subordinated debentures, net settlement of its
zero-coupon debt and sales of Sprint PCS stock during 2003,
SFAS No. 133 adjustments did not significantly impact
reported indebtedness at December 31, 2003 and are not
expected to be material in the future. In addition, Cox had
approximately $1.5 billion of total available financing
capacity under its revolving credit facilities and commercial
paper program at December 31, 2003.

As previously reported, in November 2002,
Moodys Investor Services confirmed Coxs senior
unsecured debt rating of Baa2 with a negative outlook. In
November 2003, Moodys changed Coxs ratings outlook
from negative to stable.

In November 2003, Cox agreed to sell certain
small, non-clustered cable systems in Oklahoma, Kansas, Texas
and Arkansas, which in the aggregate include approximately
54,000 basic cable subscribers, to Allegiance Communications,
LLC, a company formed by Buford Media Group, LLC and The Wicks
Group of Companies, L.L.C. The transaction is expected to close
in the second quarter of 2004.

Certain of Coxs debt instruments and credit
agreements contain covenants which, among other provisions,
contain certain restrictions on the payment of dividends and the
repurchase of capital stock. None of the covenants contained in
Coxs debt instruments and credit agreements contain a
covenant to maintain a specific debt rating that would impact
the maturity of the instruments and agreements in the event that
Coxs debt rating was downgraded. Certain of these
agreements contain financial covenants that require certain
leverage ratios and interest coverage (as defined in the
covenants) be maintained. Compliance with these ratios limits
Coxs ability to incur unlimited indebtedness; however,
these covenants have not posed a significant limitation on
Coxs ability to finance its capital requirements in the
past. Cox was in compliance with all financial covenants for all
periods presented. Historically, Cox has not paid dividends nor
does Cox currently intend to pay dividends in the foreseeable
future. Cox currently intends to reinvest future earnings,
consistent with its business strategy.

Transactions with Affiliated
Companies

Cox receives certain services from, and has
entered into certain transactions with, CEI. Costs of the
services that are allocated to Cox are based on actual direct
costs incurred or on CEIs estimate of expenses relative to
the services provided to other subsidiaries of CEI. Cox believes
that these allocations were made on a reasonable basis, and that
receiving these services from CEI creates cost efficiencies;
however, there has

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been no study or any attempt to obtain quotes
from third parties to determine what the cost of obtaining such
services from third parties would have been.




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Cox receives day-to-day cash management services
    from CEI, with settlements of outstanding balances between Cox
    and CEI occurring periodically at market interest rates. The
    amounts due to CEI are generally due on demand and represent the
    net balance of the intercompany transactions. Prior to
    May 2, 2003, outstanding amounts due from CEI bore interest
    equal to CEIs current commercial paper borrowing rate and
    outstanding amounts due to CEI bore interest at 50 basis
    points above CEIs current commercial borrowing rate as
    payment for the services provided. From and after May 2,
    2003, both outstanding amounts due from and to CEI bear interest
    equal to CEIs current commercial paper borrowing rate.
    Amounts due to CEI from Cox were approximately $4.0 million
    at December 31, 2003 and amounts due from CEI to Cox were
    approximately $21.1 million December 31, 2002, and the
    interest rate was 1.3% and 1.8% at December 31, 2003 and
    2002, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | Cox receives certain management services from CEI
    including legal, corporate secretarial, tax, internal audit,
    risk management, employee benefit (including pension plan)
    administration, fleet and other support services. Cox was
    allocated expenses for the years ended December 31, 2003,
    2002 and 2001 of approximately $6.0 million,
    $6.2 million and $5.3 million, respectively, related
    to these services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | In connection with these management services, Cox
    reimburses CEI for payments made to third-party vendors for
    certain goods and services provided to Cox under arrangements
    made by CEI on behalf of CEI and its affiliates, including Cox.
    Cox believes such arrangements result in Cox receiving such
    goods and services at more attractive pricing than Cox would be
    able to secure separately. Such reimbursed expenditures include
    insurance premiums for coverage through the CEI insurance
    program, which provides coverage for all of its affiliates,
    including Cox. Rather than self-insuring these risks, CEI
    purchases insurance for a fixed-premium cost from several
    insurance companies, including an insurance company indirectly
    owned by descendants of Governor James M. Cox, the founder of
    CEI, including James C. Kennedy, Chairman of Coxs Board of
    Directors, and his sister, who each own 25%. This insurance
    company is an insurer and reinsurer on various insurance
    policies purchased by CEI, and it employs an independent
    consulting actuary to calculate the annual premiums for
    general/auto liability and workers compensation insurance based
    on Coxs loss experience, consistent with insurance
    industry practice. Coxs portion of these insurance costs
    was approximately $33.0 million, $27.2 million and
    $23.7 million for 2003, 2002 and 2001, respectively.
|
| |  | Coxs employees participate in certain CEI
    employee benefit plans, and Cox made payments to CEI in 2003,
    2002 and 2001 for the costs incurred by reason of such
    participation, including self-insured employee medical insurance
    costs of approximately $86.7 million, $77.5 million
    and $48.2 million, respectively; and executive pension plan
    payments of approximately $6.4 million, $2.8 million
    and $5.1 million, respectively. In January 2003, Cox
    adopted its own post-retirement medical plan to provide benefits
    to substantially all eligible Cox retirees. Prior to January
    2003, all eligible retirees of Cox participated in the CEI
    post-retirement medical plan. Cox made payments to CEI in 2002
    and 2001 of approximately $3.9 million and
    $3.0 million, respectively, for the costs incurred by
    reason of such participation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | Cox and CEI share resources relating to aircraft
    owned by each company. Depending on need, each occasionally uses
    aircraft owned by the other, paying a cost-based hourly rate.
    CEI also operates and maintains two airplanes owned by Cox. Cox
    pays CEI on a quarterly basis for fixed and variable operations
    and maintenance costs relating to these two airplanes. During
    2003, 2002 and 2001, Cox paid approximately $1.2 million,
    $0.7 million and $0.9 million, respectively, for use
    of CEIs aircraft and maintenance of Coxs aircraft by
    CEI, net of aircraft costs paid by CEI to Cox for use of
    Coxs aircraft.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | Cox pays rent and certain other occupancy costs
    to CEI for its corporate headquarters building. CEI holds the
    long-term lease of the Cox headquarters building and prior to
    2002, Cox and CEI and its other affiliates shared occupancy of
    the headquarters building. During 2002, CEI and its other
    affiliates moved to a new facility and Cox purchased from CEI
    business equipment located in that building at its                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | depreciated net book value of approximately
    $7.2 million, which is believed to approximate fair value.
    Cox is now the sole occupant of its headquarters building. Rent
    for 2003 was approximately $11.2 million. Prior to 2003,
    related rent and occupancy expense was allocated based on
    occupied space, and for the years ended December 31, 2002
    and 2001, was approximately $7.4 million and
    $7.2 million, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | From 1997 through 2002, Cox entered into a series
    of local joint ventures with Cox Interactive Media, Inc., an
    indirect wholly owned subsidiary of CEI, to develop, operate and
    promote advertising supported local Internet content, or
    City Sites, in the markets where Cox operates cable
    television systems featuring high-speed Internet access. Cox
    contributed approximately $41.1 million in the aggregate to
    the joint ventures for the period from inception through
    May 31, 2002 to fund its share of operating costs. During
    2002, Cox and Cox Interactive Media agreed to terminate the
    relationship and entered into a transition services agreement
    under which Cox paid Cox Interactive Media approximately
    $7.0 million to continue to operate Coxs city sites
    during a transition period. The joint venture entities were
    dissolved as of December 31, 2002, and pursuant to a
    separate agreement dated December 31, 2002, Cox purchased
    certain assets used in the operation of the City Sites for
    insignificant cash consideration. Cox will use those assets to
    develop the City Sites as part of Cox High Speed Internet
    service. Cox Interactive Media agreed to reimburse Cox
    approximately $0.2 million for certain expenses incurred in
    connection with obtaining certain software licenses related to
    the City Sites.
|
| |  | In connection with CEIs sale of shares of
    Cox Class A common stock to two private investors in 2001,
    Cox entered into agreements providing the two private investors
    with certain demand and piggyback registration rights. CEI has
    agreed to pay all fees and expenses associated with Coxs
    performance under these registration rights agreements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | In September 2002, Cox and CEI amended their tax
    allocation agreement to provide that if one of CEI or Cox has
    overpaid its taxes and the other has underpaid, the underpaid
    taxpayer may apply the overpayment to its taxes if such credit
    is permitted by the respective tax authority. The underpaid
    party will be obligated to immediately repay the borrowed amount
    to the overpaid party, to pay interest from the effective date
    of the credit until repayment, and to bear any other expenses
    incurred. The underpaid party will indemnify the overpaid party
    if subsequent tax adjustments cause any detriment to the
    overpaid party as a result of use of the credit by the underpaid
    party. For the tax year 2001, Cox overpaid, and CEI underpaid,
    its estimated federal income taxes. Pursuant to the amended
    agreement, on September 3, 2002, $20.0 million of
    Coxs overpayment of its 2001 federal income taxes was
    applied to CEIs 2001 federal income taxes, and CEI
    contemporaneously paid Cox $20.0 million, plus interest.                                                                                                                                                                                                                                                                                                                           

Recent Developments

In accordance with the terms of the indenture
governing Coxs convertible senior notes due 2021, Cox
became obligated to purchase for cash convertible notes tendered
and not withdrawn before the close of business on
February 23, 2004. Cox repurchased $19.0 million
aggregate principal amount at maturity of the convertible notes
that had been properly tendered and not withdrawn, for aggregate
cash consideration of $13.9 million, which represented the
accreted value of the repurchased notes. As a result, no
convertible notes remain outstanding. Cox used commercial paper
borrowings to fund the repurchase of the tendered convertible
notes.

Critical Accounting Policies and
Estimates

The accompanying consolidated financial
statements and notes to consolidated financial statements
contain information that is pertinent to managements
discussion and analysis of financial condition and results of
operations. The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States requires management to make estimates and
assumptions that affect the reported amounts of assets,
liabilities, revenue and expenses, and the related disclosure of
contingent assets and liabilities. Estimates are evaluated based
on available information and experience. Actual results could

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differ from those estimates under different
assumptions or conditions. Cox believes that the critical
accounting policies and estimates discussed below involve
additional management judgment due to the sensitivity of the
methods and assumptions necessary in determining the related
asset, liability, revenue and expense amounts. For a detailed
description of Coxs significant accounting policies, see
Note 2. Summary of Significant Accounting Policies
and Other Items in Part II, Item 8.
Consolidated Financial Statements and Supplementary
Data.


Plant and equipment

The costs associated with the construction of
cable transmission and distribution facilities and new cable
service installations are capitalized. Capitalized costs include
all direct labor and materials as well as certain indirect
costs. The amount of indirect costs that are capitalized, which
include employee benefits, warehousing and transportation costs,
are estimated based on historical construction costs. Cox
performs semi-annual evaluations of these estimates and any
changes to the estimates, which may be significant, are included
prospectively in the period in which the evaluations are
completed.

Derivative Instruments

Cox accounts for derivative financial instruments
in accordance with SFAS No. 133, which requires that
an entity recognize all derivatives as either assets or
liabilities measured at fair value. From time to time, Cox uses
derivative instruments, such as interest rate swaps and equity
collar arrangements, to manage its exposure to changes in the
fair value of certain of its assets or liabilities or to manage
its exposure to changes in interest rates or equity prices. In
addition, upon adoption of SFAS No. 133, certain of
Coxs debt instruments and investments contained embedded
or freestanding derivatives, as defined. Assumptions are made
regarding the valuation of derivative instruments, including
U.S. Treasury rates, Coxs credit spreads, volatility
rates and other market indices. Should actual rates differ from
Coxs estimates, revisions to the fair value of Coxs
derivative financial instruments may be required.

Intangible Assets

On January 1, 2002, Cox adopted
SFAS No. 142, Goodwill and Other Intangible
Assets, which requires that goodwill and intangible assets
with indefinite useful lives no longer be amortized, but instead
be tested for impairment at least annually. Coxs
indefinite lived intangible assets are comprised of cable
franchise value, which Cox obtained through acquisitions of
cable systems.

Based on the guidance prescribed in Emerging
Issues Task Force (EITF) Issue No. 02-7, Unit of
Accounting for Testing of Impairment of Indefinite-Lived
Intangible Assets, Cox determined that the unit of
accounting for testing franchise value for impairment resides at
the cable system cluster level, consistent with Coxs
management of its business as geographic clusters. Cox assesses
franchise value for impairment under SFAS No. 142 by
utilizing a residual approach whereby Cox measures the implied
fair value of each franchise value intangible asset subject to
the same unit of accounting by deducting from the fair value of
each cable system cluster the fair value of the cable system
clusters other net assets, including previously
unrecognized intangible assets. Upon adoption of
SFAS No. 142, Cox determined that no impairment of
franchise value intangible assets existed as of January 1,
2002. In completing subsequent impairment tests in accordance
with SFAS No. 142, Cox considers the guidance in EITF
Issue No. 02-17, which was issued in October 2002. When
applying the guidance in EITF Issue No. 02-17, Cox
considers assumptions that marketplace participants would
consider, such as expectations of future contract renewals and
other benefits related to the intangible asset, when measuring
the fair value of the cable system clusters other net
assets. The January 2003 impairment test in accordance with
SFAS No. 142 resulted in a non-cash impairment charge
of approximately $25.0 million, which is classified within
amortization expense in Coxs Consolidated Statement of
Operations. Cox completed its next impairment test in accordance
with SFAS No. 142 in August 2003. The August 2003 test
indicated no impairment of franchise value.

In determining the fair value of each cable
system cluster, Cox performs discounted cash flow analyses,
which require the use of assumptions and estimates. Cox believes
that its assumptions and estimates are

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consistent with those that marketplace
participants would use in their estimates of fair value. The
determination of fair value is critical to assessing impairment
of intangible assets with indefinite useful lives under
SFAS No. 142. If these estimates or their related
assumptions change in the future, significant impairment in
value, and hence impairment charges, may result.


Income Tax Estimates

Cox evaluates its effective tax rates regularly
and adjusts rates when appropriate based on currently available
information relative to statutory rates, apportionment factors
and the applicable taxable income in the jurisdictions in which
Cox operates, among other factors. Certain of Coxs
deferred tax assets are comprised of loss carryforwards for
federal and state income tax filing purposes for which recovery
is dependent on the amount and timing of taxable income Cox will
ultimately generate in the future, as well as other factors.
Based on Coxs estimate of future taxable income there are
no potential limitations to the utilization of these deferred
tax assets, and therefore, no valuation allowance has been
recorded. Tax liabilities are recorded based on Coxs
assessment of the risk of loss in accordance with
SFAS No. 5 to address potential exposures involving
tax positions it has taken that could be challenged by taxing
authorities, based on the information available at the time of
the assessment. These potential exposures result from the
varying application of statutes, rules, regulations and
interpretations. Cox believes its estimate of tax liabilities is
a critical accounting estimate as it contains assumptions based
on past experiences and judgments about potential actions by
taxing jurisdictions. The ultimate resolution of these matters
may result in tax liabilities that may be greater or less than
the amount that Cox has currently accrued.

Pension and Postretirement
Benefits

Cox follows the guidance of
SFAS No. 87, Employers Accounting for
Pensions, and SFAS No. 106, Employers
Accounting for Postretirement Benefits Other Than Pensions,
when accounting for pension and postretirement benefits. Under
these accounting standards, assumptions are made regarding the
valuation of benefit obligations and the performance of plan
assets. Delayed recognition of differences between actual
results and expected or estimated results is a guiding principle
of these standards. This delayed recognition of actual results
allows for a smoothed recognition of changes in benefit
obligations and plan performance over the working lives of the
employees who benefit under the plans. The primary assumptions,
which are reviewed annually by Cox, include the discount rate,
expected return on plan assets, rate of compensation increase
and the rate of increase in the per capita cost of covered
health care benefits.

During 2003, Cox made changes to its assumptions
related to the discount rate and the rate of compensation
increase for salary-related plans. Cox consults with its
independent actuaries when selecting each of these assumptions.

In selecting the discount rate, Cox considers
fixed-income security yields, specifically AA-rated corporate
bonds, as rated by Moodys Investor Services. At
December 31, 2003, Cox decreased the discount rate for its
plans from 6.75% to 6.25% as a result of decreased yields for
AA-rated corporate bonds.

In projecting the rate of compensation increase,
Cox considers past experience in light of movements in inflation
rates. At December 31, 2003, Cox decreased the rate of
compensation increase from 4.5% to 4.0% for its plans.

In estimating the expected return on plan assets,
Cox considers past performance and future expectations for the
types of investments held by the plan, as well as the expected
long-term allocation of plan assets to these investments. At
December 31, 2003, Cox made no change in the expected 9.0%
return on plan assets, as historical returns continue to support
a 9.0% expected return.

In selecting the rate of increase in the per
capita cost of covered health care benefits, Cox considers past
performance and forecasts of future health care cost trends. At
December 31, 2003, Cox made no change in the expected
weighted-average annual assumed rate of increase in the per
capita cost of covered health care benefits (i.e., health care
cost trend rate) for retirees, which is 10.0% in 2004, gradually
decreasing to 5.0% by the year 2009, and remaining level
thereafter.

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A variance in the assumptions discussed above
would have an impact on the projected benefit obligations, the
accrued other postretirement benefit liabilities, and the annual
net periodic pension and other postretirement benefit cost. For
additional information regarding pension and other
postretirement benefits see Note 11. Retirement
Plans in Part II, Item 8. Consolidated
Financial Statements and Supplementary Data.

Recently Issued Accounting
Pronouncements

On January 1, 2003, Cox adopted
SFAS No. 143, Accounting for Asset Retirement
Obligations, which addresses financial accounting and
reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement
costs. The adoption of SFAS No. 143 did not have a
material impact on Coxs financial position or results of
operations.

On January 1, 2003, Cox adopted Financial
Accounting Standards Board (FASB) Interpretation
No. 45, Guarantors Accounting and Disclosure
Requirements for Guarantors, Including Indirect Guarantees of
Indebtedness of Others, which requires that upon issuance of
a guarantee, the guarantor must recognize a liability for the
fair value of the obligation that it assumes under the
guarantee. Guarantors are also required to meet expanded
disclosure obligations. The adoption of Interpretation
No. 45 did not have a material impact on Coxs
financial position or results of operations.

In January 2003, the FASB issued Interpretation
No. 46, Consolidation of Variable Interest Entities.
Interpretation No. 46 addresses consolidation by business
enterprises of variable interest entities, which are entities
that either (a) do not have equity investors with vesting
rights or (b) have equity investors that do not provide
sufficient financial resources for the entity to support its
activities. The interpretation is effective immediately for
variable interest entities created after February 1, 2003.
In December 2003, the FASB published FASB Interpretation
No. 46 (revised December 2003), Consolidation of
Variable Interest Entities (FIN 46(R)). FIN 46(R),
among other things, defers the effective date of implementation
for certain entities. The revised interpretation is effective
for the first interim or annual reporting period ending after
March 15, 2004, with the exception of structures that are
commonly referred to as special-purpose entities, for which the
statement is effective for periods ending after
December 15, 2003. The adoption of Interpretation
No. 46 is not expected to have a material impact on
Coxs results of operations or financial position.

In April 2003, the FASB issued
SFAS No. 149, Amendment of Statement No. 133
on Derivative Instruments and Hedging Activities. This
statement amends and clarifies financial accounting and
reporting for derivative instruments, including certain
derivative instruments embedded in other contracts and for
hedging activities under SFAS No. 133.
SFAS No. 149 requires that contracts with comparable
characteristics be accounted for similarly. The statement is
effective for contracts entered into or modified after
June 30, 2003 and for hedging relationships designated
after June 30, 2003. The provisions of
SFAS No. 149 generally are to be applied prospectively
only. The adoption of SFAS No. 149 did not have a
material impact on Coxs results of operations or financial
position.

In May 2003, the FASB issued
SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and
Equity. SFAS No. 150 establishes standards for
classification and measurement by an issuer of certain financial
instruments with characteristics of both liabilities and equity.
The statement requires that an issuer classify a financial
instrument that is within its scope as a liability (or asset in
some circumstances). This statement is effective for financial
instruments entered into or modified after May 31, 2003,
and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003, except as it relates
to consolidated limited-life subsidiaries. The FASB indefinitely
deferred the effective date of this statement as it relates to
certain mandatorily redeemable non-controlling interests in
consolidated limited-life subsidiaries. Cox currently
consolidates a 75% majority-owned interest in a limited-life
partnership. The estimated liquidation value of the 25% minority
interest is approximately $229.0 million as of
December 31, 2003. The adoption of the effective provisions
of SFAS No. 150 did not have a material impact on
Coxs results of operations or financial position.

In December 2003, the FASB issued
SFAS No. 132 (revised 2003), Employers
Disclosures about Pensions and Other Postretirement
Benefits. This statement revises employers disclosures
about pension plans and other postretirement benefit plans;
however it does not change the measurement or recognition of
those plans required by SFAS No. 87,
Employers Accounting for Pensions,
SFAS No. 88, Employers Accounting

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for Settlements and Curtailments of Defined
Benefit Pension Plans and for Termination
Benefits, and SFAS No. 106,
Employers Accounting for Postretirement Benefits Other
Than Pensions. The revised statement retains the disclosure
requirements contained in the original SFAS No. 132
and requires additional disclosures to those in the original
statement about the assets, obligations, cash flows, and net
periodic benefit cost of defined benefit pension plans and other
defined benefit postretirement plans. The revised statement is
effective for fiscal years ending after December 15, 2003.
The additional disclosure requirements are included in
Note 11. Retirement Plans in Part II,
Item 8. Consolidated Financial Statements and
Supplementary Data.


Inflation

Cox believes its operations are not materially
affected by inflation.

Caution Concerning Forward-Looking
Statements

This Form 10-K includes
forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as
amended. These forward-looking statements include, among others,
statements concerning Coxs outlook for the future and
information about Coxs strategic plans and objectives,
expectations as to subscriber and revenue growth, anticipated
rates of subscriber penetration, capital expenditures and other
statements of expectations, beliefs, future plans and
strategies, anticipated events or trends and similar
projections, as well as any facts or assumptions underlying
these statements or projections. Actual results may differ
materially from those in the forward-looking statements, and may
be affected by known and unknown risks, uncertainties and other
factors. Many of these risks and uncertainties have been
discussed in Coxs prior filings with the SEC. Factors to
consider in connection with any of Coxs forward-looking
statements include, but are not limited to:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Coxs ability to implement successfully
    Coxs growth strategies and the level of success of
    Coxs operating initiatives, including future expenditures
    on capital projects, terms and availability of capital, the
    actual level of revenue growth, adverse changes in the price of
    telephony interconnection or cable programming and disruptions
    in the supply of services and equipment. In addition, material
    changes in the cost of equipment or significant unanticipated
    capital expenditures could disrupt Coxs business plan and
    adversely affect Coxs business operations.                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | Trends in Coxs businesses, particularly
    trends in the market for existing and new communications
    services and changes in Coxs business strategy and
    development plans.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | Coxs ability to increase penetration in
    existing markets, as well as those Cox enters through
    acquisitions or other business combinations, including
    Coxs ability to control costs and maintain high standards
    of customer service, the extent to which consumer demand for
    video, data and telephony services increases, subscriber
    availability, retention and growth, subscriber demand and
    competition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | Coxs ability to generate sufficient cash
    flow to meet its debt service obligations and to finance ongoing
    operations. Cox operates with a significant level of
    indebtedness. Cash generated from operating activities and
    borrowing has been sufficient to fund Coxs debt service,
    working capital obligations and capital expenditure
    requirements. Cox believes that it will continue to generate
    cash and obtain financing sufficient to meet these requirements.
    However, if Cox were unable to meet these requirements, Cox
    would have to consider refinancing its indebtedness or obtaining
    new financing. Although in the past Cox has been able to
    refinance its indebtedness and obtain new financing, there can
    be no assurance that Cox will be able to do so in the future or
    that, if Cox were able to do so, the terms available would be
    acceptable to Cox. In addition, Cox must manage exposure to
    interest rate risk due to variable rate debt instruments.
|
| |  | Competition from alternative methods of receiving
    and distributing signals and from other sources of news,
    information and entertainment, such as newspapers, movie
    theaters, online computer services and home video products.
    Because Coxs franchises are generally non-exclusive, there
    is potential for competition from other operators of cable
    systems and other distribution systems capable of delivering
    programming to homes or businesses, including direct broadcast
    satellite systems and multichannel multipoint distribution
    services. In addition, Cox faces general competitive factors,
    such as the                                                                                                                                                                                                                                                                                                                                                                            

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | introduction of new technologies (such as
    Internet-based services), changes in prices or demand for
    Coxs products as a result of competitive actions or
    economic factors and competitive pressures within the broadband
    communications industry.                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | Coxs ability to obtain the necessary FCC,
    as well as state and local, authorizations for new services, and
    Coxs response to adverse regulatory changes. The cable
    industry is subject to extensive regulation by federal, local
    and, in some instances, state governmental agencies. Advances in
    communications technology as well as changes in the marketplace
    and the regulatory and legislative environment are constantly
    occurring. As a result, it is not possible to predict the effect
    that ongoing developments might have on the broadband
    communications industry or on Coxs operations.
|
| |  | Coxs ability to limit the increases in its
    programming costs and maintain successful relationships with its
    programmers. In recent years the cable industry has experienced
    a rapid escalation in the cost of programming. Coxs cable
    programming services are dependent upon its ability to procure
    programming that is attractive to Coxs customers at
    reasonable rates. Programming costs may continue to escalate and
    Cox may not be able to pass programming cost increases on to its
    customers.                                                                                                   





|          |                                                               
|--------- | --------------------------------------------------------------
|ITEM  7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK

Cox has estimated the fair value of its financial
instruments as of December 31, 2003 and 2002 using
available market information or other 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. Please refer to Note 2. Summary of
Significant Accounting Policies and Note 9.
Derivative Instruments and Hedging Activities in
Part II, Item 8. Consolidated Financial
Statements and Supplementary Data for detailed disclosures
regarding Coxs objectives, general strategy and the nature
of derivative financial instruments that Cox uses to manage its
exposure to market risk.

The carrying amount of cash, accounts and other
receivables, accounts and other payables and amounts due to/from
CEI approximates fair value because of the short maturity of
those instruments. The fair value of Coxs investments
stated at fair value are estimated and recorded based on quoted
market prices. The fair value of Coxs equity method
investments and investments stated at cost cannot be estimated
without incurring excessive costs. Cox is exposed to market
price risk volatility with respect to investments in publicly
traded and privately held entities. Additional information
pertinent to the value of the foregoing investments is discussed
in Note 5. Investments in Part II,
Item 8. Consolidated Financial Statements and
Supplementary Data.

The fair value of interest rate swaps used for
hedging purposes was approximately $61.2 million and
$112.1 million at December 31, 2003 and 2002,
respectively, and represents the estimated amount that Cox would
receive upon termination of the swap agreements on those
respective dates. Cox is exposed to interest rate volatility
with respect to these variable-rate instruments when they are
issued and outstanding.

The estimated fair value of Coxs fixed-rate
notes and debentures and exchangeable subordinated debentures at
December 31, 2003 and 2002 are based on quoted market
prices or a discounted cash flow analysis using Coxs
incremental borrowing rate for similar types of borrowing
arrangements and dealer quotations. A summary of the carrying
value, estimated fair value and the effect of a hypothetical one
percentage point decrease in interest rates on the foregoing
fixed-rate instruments at December 31, 2003 and 2002 are as
follows:

|                                     |  |                       |         |                   |  |                 |         |                |  |       |         |                 |  |   |         |  |  |   |         |  |  |  |         | 
|------------------------------------ |  | --------------------- | ------- | ----------------- |  | --------------- | ------- | -------------- |  | ----- | ------- | --------------- |  | - | ------- |  |  | - | ------- |  |  |  | ------- | 
|                                     |  |                       |         |                  
|                                     |  | December 31, 2003     |         | December 31, 2002
|                                     |  |                       |         |                  
|                                     |  |                       |         | Fair Value (1%    |  |                 |         | Fair Value (1%
|                                     |  | Carrying              |         | Fair              |  | Decrease in     |         | Carrying       |  | Fair  |         | Decrease in    
|                                     |  | Value                 |         | Value             |  | Interest Rates) |         | Value          |  | Value |         | Interest Rates)
|                                     |  |                       |         |                   |  |                 |         |                |  |       |         |                
|                                     |  |                      
|                                     |  | (Millions of Dollars)
|Fixed-rate notes and debentures      |  | $                     | 6,683.4 |                   |  | $               | 7,323.0 |                |  | $     | 7,760.8 |                 |  | $ | 5,978.6 |  |  | $ | 6,386.5 |  |  |  | 6,432.8 | 
|Exchangeable subordinated debentures |  |                       | 26.1    |                   |  |                 | 35.6    |                |  |       | 38.9    |                 |  |   | 1,296.1 |  |  |   | 1,409.1 |  |  |  | 1,637.6 | 

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|         |                                                             
|-------- | ------------------------------------------------------------
|ITEM  8. | CONSOLIDATED FINANCIAL STATEMENTS AND
    SUPPLEMENTARY DATA

COX COMMUNICATIONS, INC.

CONSOLIDATED BALANCE SHEETS

|                                                                                               |                                                                                                                                                                                              |                                            |            |            |            |   |            |            |            | 
|---------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ---------- | ---------- | ---------- | - | ---------- | ---------- | ---------- | 
|                                                                                               |                                                                                                                                                                                              |                                           
|                                                                                               |                                                                                                                                                                                              | December 31                               
|                                                                                               |                                                                                                                                                                                              |                                           
|                                                                                               |                                                                                                                                                                                              | 2003                                       |            | 2002      
|                                                                                               |                                                                                                                                                                                              |                                            |            |           
|                                                                                               |                                                                                                                                                                                              |                                           
|                                                                                               |                                                                                                                                                                                              | (Thousands of Dollars)                    
|Assets                                                                                         |                                                                                                                                                                                              |                                            |            |            |            |   |            |           
|Current assets                                                                                 |                                                                                                                                                                                              |                                            |            |            |            |   |            |           
|Cash                                                                                           |                                                                                                                                                                                              | $                                          | 83,841     |            |            | $ | 228,704    |           
|Accounts and notes receivable, less allowance for
    doubtful accounts of $26,175 and $33,607 |                                                                                                                                                                                              |                                            | 370,832    |            |            |   | 354,928    |           
|Amounts due from Cox Enterprises, Inc. (CEI)                                                   |                                                                                                                                                                                              |                                            |           |            |            |   | 21,109     |           
|Other current assets                                                                           |                                                                                                                                                                                              |                                            | 131,106    |            |            |   | 277,531    |           
|                                                                                               |                                                                                                                                                                                              |                                            |            |            |            |   |            |           
|                                                                                               | Total current assets                                                                                                                                                                         |                                            |            | 585,779    |            |   |            | 882,272    |           
|                                                                                               |                                                                                                                                                                                              |                                            |            |            |            |   |            |           
|Net plant and equipment                                                                        |                                                                                                                                                                                              |                                            | 7,907,561  |            |            |   | 7,793,178  |           
|Investments                                                                                    |                                                                                                                                                                                              |                                            | 109,380    |            |            |   | 397,435    |           
|Intangible assets                                                                              |                                                                                                                                                                                              |                                            | 15,697,495 |            |            |   | 15,724,288 |           
|Other noncurrent assets                                                                        |                                                                                                                                                                                              |                                            | 117,361    |            |            |   | 218,166    |           
|                                                                                               |                                                                                                                                                                                              |                                            |            |            |            |   |            |           
|                                                                                               | Total assets                                                                                                                                                                                 |                                            | $          | 24,417,576 |            |   | $          | 25,015,339 |           
|                                                                                               |                                                                                                                                                                                              |                                            |            |            |            |   |            |           
|Liabilities and shareholders
    equity                                                       |                                                                                                                                                                                              |                                            |            |            |            |   |            |           
|Current liabilities                                                                            |                                                                                                                                                                                              |                                            |            |            |            |   |            |           
|Accounts payable and accrued expenses                                                          |                                                                                                                                                                                              | $                                          | 778,708    |            |            | $ | 727,877    |           
|Other current liabilities                                                                      |                                                                                                                                                                                              |                                            | 450,553    |            |            |   | 226,425    |           
|Current portion of long-term debt                                                              |                                                                                                                                                                                              |                                            | 48,344     |            |            |   | 393,040    |           
|Amounts due to CEI                                                                             |                                                                                                                                                                                              |                                            | 3,980      |            |            |   |           |           
|                                                                                               |                                                                                                                                                                                              |                                            |            |            |            |   |            |           
|                                                                                               | Total current liabilities                                                                                                                                                                    |                                            |            | 1,281,585  |            |   |            | 1,347,342  |           
|                                                                                               |                                                                                                                                                                                              |                                            |            |            |            |   |            |           
|Deferred income taxes                                                                          |                                                                                                                                                                                              |                                            | 6,388,970  |            |            |   | 6,750,635  |           
|Other noncurrent liabilities                                                                   |                                                                                                                                                                                              |                                            | 164,070    |            |            |   | 175,912    |           
|Long-term debt, less current portion                                                           |                                                                                                                                                                                              |                                            | 6,963,456  |            |            |   | 6,922,957  |           
|                                                                                               |                                                                                                                                                                                              |                                            |            |            |            |   |            |           
|                                                                                               | Total liabilities                                                                                                                                                                            |                                            |            | 14,798,081 |            |   |            | 15,196,846 |           
|                                                                                               |                                                                                                                                                                                              |                                            |            |            |            |   |            |           
|Commitments and contingencies (Note 17)                                                        |                                                                                                                                                                                              |                                            |            |            |            |   |            |           
|Minority interest in equity of consolidated
    subsidiaries                                   |                                                                                                                                                                                              |                                            | 139,519    |            |            |   | 133,403    |           
|Shareholders equity                                                                           |                                                                                                                                                                                              |                                            |            |            |            |   |            |           
|                                                                                               | Series A preferred stock 
    liquidation preference of $22.1375 per share, $1 par
    value; 10,000,000 shares of preferred stock authorized;
    shares issued and outstanding: 4,836,372 |                                            |            | 4,836      |            |   |            | 4,836      |           
|                                                                                               | Class A common stock, $1 par value;
    671,000,000 shares authorized; shares issued: 598,481,602
    and 598,076,894; shares outstanding: 592,958,582 and 592,567,757                       |                                            |            | 598,482    |            |   |            | 598,077    |           
|                                                                                               | Class C common stock, $1 par value;
    62,000,000 shares authorized; shares issued and
    outstanding: 27,597,792                                                                          |                                            |            | 27,598     |            |   |            | 27,598     |           
|                                                                                               | Additional paid-in capital                                                                                                                                                                   |                                            |            | 4,545,635  |            |   |            | 4,549,029  |           
|                                                                                               | Retained earnings                                                                                                                                                                            |                                            |            | 4,500,621  |            |   |            | 4,638,422  |           
|                                                                                               | Accumulated other comprehensive income                                                                                                                                                       |                                            |            | 15,548     |            |   |            | 79,465     |           
|                                                                                               | Class A common stock in treasury, at cost:
    5,523,020 and 5,509,137 shares                                                                                                                |                                            |            | (212,744   | )          |   |            | (212,337   | )         
|                                                                                               |                                                                                                                                                                                              |                                            |            |            |            |   |            |           
|                                                                                               |                                                                                                                                                                                              | Total shareholders equity                 |            |            | 9,479,976  |   |            |            | 9,685,090  | 
|                                                                                               |                                                                                                                                                                                              |                                            |            |            |            |   |            |           
|                                                                                               |                                                                                                                                                                                              | Total liabilities and shareholders equity |            | $          | 24,417,576 |   |            | $          | 25,015,339 | 
|                                                                                               |                                                                                                                                                                                              |                                            |            |            |            |   |            |           

See notes to consolidated financial statements.

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##### Table of Contents



COX COMMUNICATIONS, INC.

CONSOLIDATED STATEMENTS OF
OPERATIONS

|                                                                                                                     |                                                                              |                                              |                            |             |           |           |             |             |           |           |             |             |           |           | 
|-------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------- | -------------------------------------------- | -------------------------- | ----------- | --------- | --------- | ----------- | ----------- | --------- | --------- | ----------- | ----------- | --------- | --------- | 
|                                                                                                                     |                                                                              |                                             
|                                                                                                                     |                                                                              | Year Ended December 31                      
|                                                                                                                     |                                                                              |                                             
|                                                                                                                     |                                                                              | 2003                                         |                            | 2002        |           | 2001     
|                                                                                                                     |                                                                              |                                              |                            |             |           |          
|                                                                                                                     |                                                                              |                                             
|                                                                                                                     |                                                                              | (Thousands of Dollars, excluding share data)
|Revenues                                                                                                             |                                                                              |                                              |                            |             |           |           |             |             |           |           |             |            
|                                                                                                                     | Residential                                                                  |                                              |                            |             |           |           |             |             |           |           |             |             |          
|                                                                                                                     |                                                                              | Video                                        |                            | $           | 3,658,917 |           |             | $           | 3,439,755 |           |             | $           | 3,184,786 |          
|                                                                                                                     |                                                                              | Data                                         |                            |             | 870,628   |           |             |             | 575,231   |           |             |             | 277,921   |          
|                                                                                                                     |                                                                              | Telephony                                    |                            |             | 469,920   |           |             |             | 343,227   |           |             |             | 211,270   |          
|                                                                                                                     |                                                                              | Other                                        |                            |             | 86,903    |           |             |             | 72,254    |           |             |             | 89,264    |          
|                                                                                                                     |                                                                              |                                              |                            |             |           |           |             |             |           |           |             |            
|                                                                                                                     |                                                                              |                                              | Total residential revenues |             |           | 5,086,368 |             |             |           | 4,430,467 |             |             |           | 3,763,241 | 
|                                                                                                                     |                                                                              | Commercial                                   |                            |             | 287,676   |           |             |             | 230,067   |           |             |             | 152,383   |          
|                                                                                                                     |                                                                              | Advertising                                  |                            |             | 384,824   |           |             |             | 378,064   |           |             |             | 337,579   |          
|                                                                                                                     |                                                                              |                                              |                            |             |           |           |             |             |           |           |             |            
|                                                                                                                     |                                                                              |                                              | Total revenues             |             |           | 5,758,868 |             |             |           | 5,038,598 |             |             |           | 4,253,203 | 
|Costs and expenses                                                                                                   |                                                                              |                                              |                            |             |           |           |             |             |           |           |             |            
|                                                                                                                     | Cost of services (excluding depreciation)                                    |                                              |                            | 2,391,310   |           |           |             | 2,112,155   |           |           |             | 1,868,303   |          
|                                                                                                                     | Selling, general and administrative expenses                                 |                                              |                            | 1,250,686   |           |           |             | 1,147,204   |           |           |             | 963,942     |          
|                                                                                                                     | Depreciation and amortization                                                |                                              |                            | 1,530,475   |           |           |             | 1,357,906   |           |           |             | 1,539,211   |          
|                                                                                                                     | (Gain) loss on sale and exchange of cable systems                            |                                              |                            | (469        | )         |           |             | 3,916       |           |           |             |            |          
|                                                                                                                     |                                                                              |                                              |                            |             |           |           |             |             |           |           |             |            
|Operating income (loss)                                                                                              |                                                                              |                                              | 586,866                    |             |           |           | 417,417     |             |           |           | (118,253    | )          
|Interest expense                                                                                                     |                                                                              |                                              | (467,753                   | )           |           |           | (549,858    | )           |           |           | (565,934    | )          
|(Loss) gain on derivative instruments, net                                                                           |                                                                              |                                              | (22,567                    | )           |           |           | 1,125,588   |             |           |           | (211,963    | )          
|Gain (loss) on investments, net                                                                                      |                                                                              |                                              | 165,194                    |             |           |           | (1,317,158  | )           |           |           | 1,151,172   |            
|Equity in net losses of affiliated companies                                                                         |                                                                              |                                              | (13,073                    | )           |           |           | (32,175     | )           |           |           | (40,043     | )          
|Loss on extinguishment of debt                                                                                       |                                                                              |                                              | (450,069                   | )           |           |           | (787        | )           |           |           |            |            
|Other, net                                                                                                           |                                                                              |                                              | (3,557                     | )           |           |           | (5,080      | )           |           |           | (11,882     | )          
|                                                                                                                     |                                                                              |                                              |                            |             |           |           |             |             |           |           |             |            
|(Loss) income before income taxes, minority
    interest and cumulative effect of change in accounting
    principle |                                                                              |                                              | (204,959                   | )           |           |           | (362,053    | )           |           |           | 203,097     |            
|Income tax (benefit) expense                                                                                         |                                                                              |                                              | (73,274                    | )           |           |           | (125,286    | )           |           |           | 94,039      |            
|                                                                                                                     |                                                                              |                                              |                            |             |           |           |             |             |           |           |             |            
|(Loss) income before minority interest and
    cumulative effect of change in accounting principle                   |                                                                              |                                              | (131,685                   | )           |           |           | (236,767    | )           |           |           | 109,058     |            
|Minority interest, net of tax                                                                                        |                                                                              |                                              | (6,116                     | )           |           |           | (37,272     | )           |           |           | (71,147     | )          
|                                                                                                                     |                                                                              |                                              |                            |             |           |           |             |             |           |           |             |            
|(Loss) income before cumulative effect of
    change in accounting principle                                         |                                                                              |                                              | (137,801                   | )           |           |           | (274,039    | )           |           |           | 37,911      |            
|Cumulative effect of change in accounting
    principle, net of tax                                                  |                                                                              |                                              |                           |             |           |           |            |             |           |           | 717,090     |            
|                                                                                                                     |                                                                              |                                              |                            |             |           |           |             |             |           |           |             |            
|Net (loss) income                                                                                                    |                                                                              | $                                            | (137,801                   | )           |           | $         | (274,039    | )           |           | $         | 755,001     |            
|                                                                                                                     |                                                                              |                                              |                            |             |           |           |             |             |           |           |             |            
|Share data                                                                                                           |                                                                              |                                              |                            |             |           |           |             |             |           |           |             |            
|Basic net (loss) income per share
    Basic weighted-average shares outstanding                                      |                                                                              |                                              | 620,327,304                |             |           |           | 608,293,490 |             |           |           | 600,365,787 |            
|                                                                                                                     | (Loss) income before cumulative effect of change
    in accounting principle |                                              | $                          | (0.22       | )         |           | $           | (0.45       | )         |           | $           | 0.06        |          
|                                                                                                                     | Cumulative effect of change in accounting
    principle, net of tax          |                                              |                            |            |           |           |             |            |           |           |             | 1.20        |          
|                                                                                                                     |                                                                              |                                              |                            |             |           |           |             |             |           |           |             |            
|Basic net (loss) income per share                                                                                    |                                                                              | $                                            | (0.22                      | )           |           | $         | (0.45       | )           |           | $         | 1.26        |            
|                                                                                                                     |                                                                              |                                              |                            |             |           |           |             |             |           |           |             |            
|Diluted net (loss) income per share                                                                                  |                                                                              |                                              |                            |             |           |           |             |             |           |           |             |            
|                                                                                                                     | Diluted weighted-average shares outstanding                                  |                                              |                            | 620,327,304 |           |           |             | 608,293,490 |           |           |             | 608,816,689 |          
|                                                                                                                     | (Loss) income before cumulative effect of change
    in accounting principle |                                              | $                          | (0.22       | )         |           | $           | (0.45       | )         |           | $           | 0.06        |          
|                                                                                                                     | Cumulative effect of change in accounting
    principle, net of tax          |                                              |                            |            |           |           |             |            |           |           |             | 1.18        |          
|                                                                                                                     |                                                                              |                                              |                            |             |           |           |             |             |           |           |             |            
|Diluted net (loss) income per share                                                                                  |                                                                              | $                                            | (0.22                      | )           |           | $         | (0.45       | )           |           | $         | 1.24        |            
|                                                                                                                     |                                                                              |                                              |                            |             |           |           |             |             |           |           |             |            

See notes to consolidated financial statements.

54



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##### Table of Contents



COX COMMUNICATIONS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS
EQUITY

|                  |                                                                                                              |                        |       |              |  |            |         |          |  |               |        |           |  |         |           |               |   |               |           |          |   |   |         |          |   |   |          |      |   |   |           |          |   |  |   |          |  
|----------------- | ------------------------------------------------------------------------------------------------------------ | ---------------------- | ----- | ------------ |  | ---------- | ------- | -------- |  | ------------- | ------ | --------- |  | ------- | --------- | ------------- | - | ------------- | --------- | -------- | - | - | ------- | -------- | - | - | -------- | ---- | - | - | --------- | -------- | - |  | - | -------- | -
|                  |                                                                                                              |                        |       |              |  |            |         |          |  |               |        |           |  | Class A |           |               |   |              
|                  |                                                                                                              |                        |       |              |  |            |         |          |  | Accumulated   |        | Common    |  |         |           |              
|                  |                                                                                                              | Series A               |       | Common Stock |  | Additional |         |          |  | Other         |        | Stock in  |  |         |           |              
|                  |                                                                                                              | Preferred              |       |              |  | Paid-in    |         | Retained |  | Comprehensive |        | Treasury, |  |         |           | Comprehensive
|                  |                                                                                                              | Stock                  |       | Class A      |  | Class C    |         | Capital  |  | Earnings      |        | Income    |  | at Cost |           | Total         |   | Income (Loss)
|                  |                                                                                                              |                        |       |              |  |            |         |          |  |               |        |           |  |         |           |               |   |              
|                  |                                                                                                              |                       
|                  |                                                                                                              | (Thousands of Dollars)
|December 31, 2000 |                                                                                                              | $                      | 4,836 |              |  | $          | 577,726 |          |  | $             | 27,598 |           |  | $       | 3,872,726 |               |   | $             | 4,157,460 |          |   | $ | 787,816 |          |   | $ | (211,889 | )    |   | $ | 9,216,273 |          |   |  |   |         
|                  | Net income                                                                                                   |                        |       |              |  |            |         |          |  |               |        |           |  |         |           |               |   |               |           | 755,001  |   |   |         |          |   |   |          |      |   |   |           | 755,001  |   |  | $ | 755,001  |  
|                  |                                                                                                              |                        |       |              |  |            |         |          |  |               |        |           |  |         |           |               |   |               |           |          |   |   |         |          |   |   |          |      |   |   |           |          |   |  |   |         
|                  | Issuance of stock related to stock compensation
    plans (including tax benefit on stock options exercised) |                        |       |              |  |            |         | 767      |  |               |        |           |  |         |           | 18,431        |   |               |           |          |   |   |         |          |   |   |          |      |   |   |           | 19,198   |   |  |   |          |  
|                  | Change in net accumulated unrealized gain on
    securities, net of tax                                      |                        |       |              |  |            |         |          |  |               |        |           |  |         |           |               |   |               |           |          |   |   |         |          |   |   |          |      |   |   |           |          |   |  |   | (120,721 | )
|                  | Cumulative effect of change in accounting
    principle, net of tax                                          |                        |       |              |  |            |         |          |  |               |        |           |  |         |           |               |   |               |           |          |   |   |         |          |   |   |          |      |   |   |           |          |   |  |   | (193,960 | )
|                  |                                                                                                              |                        |       |              |  |            |         |          |  |               |        |           |  |         |           |               |   |               |           |          |   |   |         |          |   |   |          |      |   |   |           |          |   |  |   |         
|                  | Other comprehensive loss                                                                                     |                        |       |              |  |            |         |          |  |               |        |           |  |         |           |               |   |               |           |          |   |   |         | (314,681 | ) |   |          |      |   |   |           | (314,681 | ) |  |   | (314,681 | )
|                  |                                                                                                              |                        |       |              |  |            |         |          |  |               |        |           |  |         |           |               |   |               |           |          |   |   |         |          |   |   |          |      |   |   |           |          |   |  |   |         
|                  | Comprehensive income                                                                                         |                        |       |              |  |            |         |          |  |               |        |           |  |         |           |               |   |               |           |          |   |   |         |          |   |   |          |      |   |   |           |          |   |  | $ | 440,320  |  
|                  |                                                                                                              |                        |       |              |  |            |         |          |  |               |        |           |  |         |           |               |   |               |           |          |   |   |         |          |   |   |          |      |   |   |           |          |   |  |   |         
|December 31, 2001 |                                                                                                              |                        | 4,836 |              |  |            | 578,493 |          |  |               | 27,598 |           |  |         | 3,891,157 |               |   |               | 4,912,461 |          |   |   | 473,135 |          |   |   | (211,889 | )    |   |   | 9,675,791 |          |   |  |   |         
|                  | Net loss                                                                                                     |                        |       |              |  |            |         |          |  |               |        |           |  |         |           |               |   |               |           | (274,039 | ) |   |         |          |   |   |          |      |   |   |           | (274,039 | ) |  | $ | (274,039 | )
|                  |                                                                                                              |                        |       |              |  |            |         |          |  |               |        |           |  |         |           |               |   |               |           |          |   |   |         |          |   |   |          |      |   |   |           |          |   |  |   |         
|                  | Issuance of stock related to stock compensation
    plans (including tax benefit on stock options exercised) |                        |       |              |  |            |         | 846      |  |               |        |           |  |         |           | 26,611        |   |               |           |          |   |   |         |          |   |   |          |      |   |   |           | 27,457   |   |  |   |          |  
|                  | Issuance of stock for settlement of FELINE PRIDES                                                            |                        |       |              |  |            |         | 18,738   |  |               |        |           |  |         |           | 631,261       |   |               |           |          |   |   |         |          |   |   |          |      |   |   |           | 649,999  |   |  |   |          |  
|                  | Shares surrendered in connection with vesting of
    restricted stock                                        |                        |       |              |  |            |         |          |  |               |        |           |  |         |           |               |   |               |           |          |   |   |         |          |   |   |          | (448 | ) |   |           | (448     | ) |  |   |          |  
|                  | Change in net accumulated unrealized gain on
    securities, net of tax                                      |                        |       |              |  |            |         |          |  |               |        |           |  |         |           |               |   |               |           |          |   |   |         | (393,670 | ) |   |          |      |   |   |           | (393,670 | ) |  |   | (393,670 | )
|                  |                                                                                                              |                        |       |              |  |            |         |          |  |               |        |           |  |         |           |               |   |               |           |          |   |   |         |          |   |   |          |      |   |   |           |          |   |  |   |         
|                  | Other comprehensive loss                                                                                     |                        |       |              |  |            |         |          |  |               |        |           |  |         |           |               |   |               |           |          |   |   |         |          |   |   |          |      |   |   |           |          |   |  |   | (393,670 | )
|                  |                                                                                                              |                        |       |              |  |            |         |          |  |               |        |           |  |         |           |               |   |               |           |          |   |   |         |          |   |   |          |      |   |   |           |          |   |  |   |         
|                  | Comprehensive loss                                                                                           |                        |       |              |  |            |         |          |  |               |        |           |  |         |           |               |   |               |           |          |   |   |         |          |   |   |          |      |   |   |           |          |   |  | $ | (667,709 | )
|                  |                                                                                                              |                        |       |              |  |            |         |          |  |               |        |           |  |         |           |               |   |               |           |          |   |   |         |          |   |   |          |      |   |   |           |          |   |  |   |         
|December 31, 2002 |                                                                                                              |                        | 4,836 |              |  |            | 598,077 |          |  |               | 27,598 |           |  |         | 4,549,029 |               |   |               | 4,638,422 |          |   |   | 79,465  |          |   |   | (212,337 | )    |   |   | 9,685,090 |          |   |  |   |         
|                  | Net loss                                                                                                     |                        |       |              |  |            |         |          |  |               |        |           |  |         |           |               |   |               |           | (137,801 | ) |   |         |          |   |   |          |      |   |   |           | (137,801 | ) |  | $ | (137,801 | )
|                  |                                                                                                              |                        |       |              |  |            |         |          |  |               |        |           |  |         |           |               |   |               |           |          |   |   |         |          |   |   |          |      |   |   |           |          |   |  |   |         
|                  | Issuance of stock related to stock compensation
    plans (including tax benefit on stock options exercised) |                        |       |              |  |            |         | 405      |  |               |        |           |  |         |           | 8,381         |   |               |           |          |   |   |         |          |   |   |          |      |   |   |           | 8,786    |   |  |   |          |  
|                  | Shares surrendered in connection with vesting of
    restricted stock                                        |                        |       |              |  |            |         |          |  |               |        |           |  |         |           |               |   |               |           |          |   |   |         |          |   |   |          | (407 | ) |   |           | (407     | ) |  |   |          |  
|                  | Assumption of post-retirement medical plan
    obligation from CEI, net of tax                               |                        |       |              |  |            |         |          |  |               |        |           |  |         |           | (11,775       | ) |               |           |          |   |   |         |          |   |   |          |      |   |   |           | (11,775  | ) |  |   |          |  
|                  | Change in net accumulated unrealized gain on
    securities, net of tax                                      |                        |       |              |  |            |         |          |  |               |        |           |  |         |           |               |   |               |           |          |   |   |         | (63,917  | ) |   |          |      |   |   |           | (63,917  | ) |  |   | (63,917  | )
|                  |                                                                                                              |                        |       |              |  |            |         |          |  |               |        |           |  |         |           |               |   |               |           |          |   |   |         |          |   |   |          |      |   |   |           |          |   |  |   |         
|                  | Other comprehensive loss                                                                                     |                        |       |              |  |            |         |          |  |               |        |           |  |         |           |               |   |               |           |          |   |   |         |          |   |   |          |      |   |   |           |          |   |  |   | (63,917  | )
|                  |                                                                                                              |                        |       |              |  |            |         |          |  |               |        |           |  |         |           |               |   |               |           |          |   |   |         |          |   |   |          |      |   |   |           |          |   |  |   |         
|                  | Comprehensive loss                                                                                           |                        |       |              |  |            |         |          |  |               |        |           |  |         |           |               |   |               |           |          |   |   |         |          |   |   |          |      |   |   |           |          |   |  | $ | (201,718 | )
|                  |                                                                                                              |                        |       |              |  |            |         |          |  |               |        |           |  |         |           |               |   |               |           |          |   |   |         |          |   |   |          |      |   |   |           |          |   |  |   |         
|December 31, 2003 |                                                                                                              | $                      | 4,836 |              |  | $          | 598,482 |          |  | $             | 27,598 |           |  | $       | 4,545,635 |               |   | $             | 4,500,621 |          |   | $ | 15,548  |          |   | $ | (212,744 | )    |   | $ | 9,479,976 |          |   |  |   |         
|                  |                                                                                                              |                        |       |              |  |            |         |          |  |               |        |           |  |         |           |               |   |               |           |          |   |   |         |          |   |   |          |      |   |   |           |          |   |  |   |         

See notes to consolidated financial statements.

55



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##### Table of Contents



COX COMMUNICATIONS, INC.

CONSOLIDATED STATEMENTS OF CASH
FLOWS

|                                                                                                                                 |                                                                     |                                                         |            |           |            |      |            |            |            |   |            |            |          |  
|-------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------- | ------------------------------------------------------- | ---------- | --------- | ---------- | ---- | ---------- | ---------- | ---------- | - | ---------- | ---------- | -------- | -
|                                                                                                                                 |                                                                     |                                                        
|                                                                                                                                 |                                                                     | Year Ended December 31                                 
|                                                                                                                                 |                                                                     |                                                        
|                                                                                                                                 |                                                                     | 2003                                                    |            | 2002      |            | 2001
|                                                                                                                                 |                                                                     |                                                         |            |           |            |     
|                                                                                                                                 |                                                                     |                                                        
|                                                                                                                                 |                                                                     | (Thousands of Dollars)                                 
|Cash flows from operating activities                                                                                             |                                                                     |                                                         |            |           |            |      |            |            |            |   |            |           
|Net (loss) income                                                                                                                |                                                                     | $                                                       | (137,801   | )         |            | $    | (274,039   | )          |            | $ | 755,001    |           
|Adjustments to reconcile net (loss) income to net
    cash provided by operating activities, net of effects of
    acquisitions: |                                                                     |                                                         |            |           |            |      |            |            |            |   |            |           
|                                                                                                                                 | Depreciation and amortization                                       |                                                         |            | 1,530,475 |            |      |            | 1,357,906  |            |   |            | 1,539,211  |         
|                                                                                                                                 | (Gain) loss on sale of cable systems                                |                                                         |            | (469      | )          |      |            | 3,916      |            |   |            |           |         
|                                                                                                                                 | Deferred income taxes                                               |                                                         |            | (333,379  | )          |      |            | 194,370    |            |   |            | (306,814   | )       
|                                                                                                                                 | Loss (gain) on derivative instruments, net                          |                                                         |            | 22,567    |            |      |            | (1,125,588 | )          |   |            | 211,963    |         
|                                                                                                                                 | (Gain) loss on investments, net                                     |                                                         |            | (165,194  | )          |      |            | 1,317,158  |            |   |            | (1,151,172 | )       
|                                                                                                                                 | Equity in net losses of affiliated companies                        |                                                         |            | 13,073    |            |      |            | 32,175     |            |   |            | 40,043     |         
|                                                                                                                                 | Loss on extinguishment of debt                                      |                                                         |            | 450,069   |            |      |            | 787        |            |   |            |           |         
|                                                                                                                                 | Minority interest, net of tax                                       |                                                         |            | 6,116     |            |      |            | 37,272     |            |   |            | 71,147     |         
|                                                                                                                                 | Other, net                                                          |                                                         |            | 108,698   |            |      |            | 182,321    |            |   |            | 93,229     |         
|                                                                                                                                 | Cumulative effect of change in accounting
    principle, net of tax |                                                         |            |          |            |      |            |           |            |   |            | (717,090   | )       
|(Increase) decrease in accounts and notes
    receivable                                                                         |                                                                     |                                                         | (15,922    | )         |            |      | 52,918     |            |            |   | 848        |           
|Decrease (increase) in other assets                                                                                              |                                                                     |                                                         | 41,328     |           |            |      | 60,502     |            |            |   | (78,315    | )         
|Increase (decrease) in accounts payable and
    accrued liabilities                                                              |                                                                     |                                                         | 22,650     |           |            |      | 99,805     |            |            |   | (30,363    | )         
|Increase (decrease) in taxes payable                                                                                             |                                                                     |                                                         | 332,175    |           |            |      | (161,197   | )          |            |   | 328,541    |           
|(Decrease) increase in other liabilities                                                                                         |                                                                     |                                                         | (6,415     | )         |            |      | (5,467     | )          |            |   | 42,539     |           
|                                                                                                                                 |                                                                     |                                                         |            |           |            |      |            |            |            |   |            |           
|                                                                                                                                 |                                                                     | Net cash provided by operating activities               |            |           | 1,867,971  |      |            |            | 1,772,839  |   |            |            | 798,768  |  
|                                                                                                                                 |                                                                     |                                                         |            |           |            |      |            |            |            |   |            |           
|Cash flows from investing activities                                                                                             |                                                                     |                                                         |            |           |            |      |            |            |            |   |            |           
|Capital expenditures                                                                                                             |                                                                     |                                                         | (1,561,331 | )         |            |      | (1,932,416 | )          |            |   | (2,205,451 | )         
|Investments in affiliated companies                                                                                              |                                                                     |                                                         | (22,270    | )         |            |      | (18,800    | )          |            |   | (53,991    | )         
|Proceeds from the sale and exchange of investments                                                                               |                                                                     |                                                         | 246,417    |           |            |      | 1,345,952  |            |            |   | 1,316,192  |           
|Decrease (increase) in amounts due from CEI                                                                                      |                                                                     |                                                         | 21,109     |           |            |      | (7,864     | )          |            |   | (7,437     | )         
|Proceeds (payments) for the sale
    (purchase) of cable systems                                                                 |                                                                     |                                                         | 822        |           |            |      | 12,574     |            |            |   | (1,495     | )         
|Other, net                                                                                                                       |                                                                     |                                                         | (3,883     | )         |            |      | (7,616     | )          |            |   | (1,160     | )         
|                                                                                                                                 |                                                                     |                                                         |            |           |            |      |            |            |            |   |            |           
|                                                                                                                                 |                                                                     | Net cash used in investing activities                   |            |           | (1,319,136 | )    |            |            | (608,170   | ) |            |            | (953,342 | )
|                                                                                                                                 |                                                                     |                                                         |            |           |            |      |            |            |            |   |            |           
|Cash flows from financing activities                                                                                             |                                                                     |                                                         |            |           |            |      |            |            |            |   |            |           
|Commercial paper borrowings (repayments), net                                                                                    |                                                                     |                                                         | 300,941    |           |            |      | (727,384   | )          |            |   | (801,385   | )         
|Proceeds from issuance of debt, net of debt
    issuance costs                                                                   |                                                                     |                                                         | 1,330,750  |           |            |      | 985,546    |            |            |   | 1,405,887  |           
|Repayment of debt                                                                                                                |                                                                     |                                                         | (2,310,074 | )         |            |      | (704,951   | )          |            |   | (386,728   | )         
|Redemption of preferred securities of subsidiary
    trust                                                                       |                                                                     |                                                         |           |           |            |      | (502,610   | )          |            |   |           |           
|Proceeds from the exercise of stock options                                                                                      |                                                                     |                                                         | 6,768      |           |            |      | 24,291     |            |            |   | 10,595     |           
|Increase in amounts due to CEI, net                                                                                              |                                                                     |                                                         | 3,980      |           |            |      |           |            |            |   |           |           
|Distributions paid on capital and preferred
    securities of subsidiary trusts                                                  |                                                                     |                                                         |           |           |            |      | (47,764    | )          |            |   | (75,955    | )         
|Payment to repurchase remarketing option                                                                                         |                                                                     |                                                         | (43,734    | )         |            |      | (25,951    | )          |            |   |           |           
|Other, net                                                                                                                       |                                                                     |                                                         | 17,671     |           |            |      | (24,002    | )          |            |   | 10,578     |           
|                                                                                                                                 |                                                                     |                                                         |            |           |            |      |            |            |            |   |            |           
|                                                                                                                                 |                                                                     | Net cash (used in) provided by financing
    activities |            |           | (693,698   | )    |            |            | (1,022,825 | ) |            |            | 162,992  |  
|                                                                                                                                 |                                                                     |                                                         |            |           |            |      |            |            |            |   |            |           
|Net (decrease) increase in cash                                                                                                  |                                                                     |                                                         | (144,863   | )         |            |      | 141,844    |            |            |   | 8,418      |           
|Cash at beginning of period                                                                                                      |                                                                     |                                                         | 228,704    |           |            |      | 86,860     |            |            |   | 78,442     |           
|                                                                                                                                 |                                                                     |                                                         |            |           |            |      |            |            |            |   |            |           
|Cash at end of period                                                                                                            |                                                                     | $                                                       | 83,841     |           |            | $    | 228,704    |            |            | $ | 86,860     |           
|                                                                                                                                 |                                                                     |                                                         |            |           |            |      |            |            |            |   |            |           

See notes to consolidated financial statements.

56



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##### Table of Contents



COX COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



|   |                                           
|-- | ------------------------------------------
|1. | Organization and Basis of
    Presentation

Cox Communications, Inc., an indirect 63.4%
majority-owned subsidiary of Cox Enterprises, Inc. (CEI), is a
multi-service broadband communications company serving
approximately 6.6 million customers nationwide. Cox is the
nations fourth largest cable television provider and
offers an array of broadband products and services to both
residential and commercial customers in its markets. These
services primarily include analog and digital video, high-speed
Internet access and local and long-distance telephone. Cox
operates in one operating segment, broadband communications.



|   |                                                               
|-- | --------------------------------------------------------------
|2. | Summary of Significant Accounting Policies and
    Other Items



| |                       
| | ----------------------
| | Basis of Consolidation

The consolidated financial statements include the
accounts of Cox and all wholly-owned, majority-owned or
controlled subsidiaries. All intercompany accounts and
transactions among consolidated entities have been eliminated.



| |                 
| | ----------------
| | Use of Estimates

The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States 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.



| |                                
| | -------------------------------
| | Allowance for Doubtful Accounts

The allowance for doubtful accounts represents
Coxs best estimate of probable losses in the accounts and
notes receivable balance. The allowance is based on known
troubled accounts, historical experience and other currently
available evidence. Activity in the allowance for doubtful
accounts is as follows:

|                       |  |                        |        |            |  |             |        |                |  |   |        |  |  |   |        | 
|---------------------- |  | ---------------------- | ------ | ---------- |  | ----------- | ------ | -------------- |  | - | ------ |  |  | - | ------ | 
|                       |  | Balance at             |        | Charged to |  | Write-offs, |        |               
|                       |  | Beginning of           |        | Costs and  |  | Net of      |        | Balance at End
|Year Ended December 31 |  | Period                 |        | Expenses   |  | Recoveries  |        | of Period     
|                       |  |                        |        |            |  |             |        |               
|                       |  |                       
|                       |  | (Thousands of Dollars)
|2002                   |  | $                      | 33,514 |            |  | $           | 87,447 |                |  | $ | 87,354 |  |  | $ | 33,607 | 
|2003                   |  |                        | 33,607 |            |  |             | 74,150 |                |  |   | 81,582 |  |  |   | 26,175 | 



| |                    
| | -------------------
| | Plant and Equipment

Plant and equipment are stated at cost less
accumulated depreciation. Additions to cable plant generally
include material, labor and indirect costs. Depreciation is
computed using the straight-line method over estimated useful
lives as follows: 20 years for buildings and building
improvements; three to 12 years for cable systems; and
three to 10 years for other plant and equipment.
Depreciation expense was $1.5 billion, $1.4 billion,
and $1.2 billion for the years ended December 31,
2003, 2002 and 2001, respectively. Cox evaluates the
depreciation periods of plant and equipment to determine whether
events or circumstances warrant revised estimates of useful
lives.

The costs associated with the construction of
cable transmission and distribution facilities and new cable
service installations are capitalized. Costs include all direct
labor and materials as well as certain indirect costs. The
amount of indirect costs that are capitalized, which include
employee benefits, warehousing and transportation costs, are
estimated based on historical construction costs. Cox performs
semi-annual evaluations of these estimates and any changes to
the estimates, which may be significant, are included
prospectively in the period in which the evaluations are
completed. Costs associated with subsequent installations of

57



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##### Table of Contents



COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)

additional services are capitalized to the extent
that they are incremental and directly attributable to the
installation of expanded services; costs associated with
subsequent disconnection and reconnecting services to existing
customers are charged to operating expense as incurred.

Expenditures for maintenance and repairs are
charged to operating expense as incurred. At the time of
retirements, sales or other dispositions of property, the
original cost and related accumulated depreciation are removed
from the respective accounts, and the gains and losses are
presented as a component of depreciation expense.

Investments

Investments in affiliated entities are accounted
for either under the equity method or are stated at cost
depending on Coxs ability to exercise significant
influence over the operating and financial policies of the
investee. Equity method investments are recorded at cost and
adjusted periodically to recognize Coxs proportionate
share of the investees income or loss, additional
contributions made and dividends received. When Coxs
cumulative proportionate share of loss exceeds the carrying
amount of the equity method investment, application of the
equity method is suspended and Coxs proportionate share of
the investees loss is not recognized unless Cox is
committed to provide further financial support to the investee,
including advances from Cox. Cox will resume application of the
equity method when the investee becomes profitable and
Coxs proportionate share of the investees earnings
equals its cumulative proportionate share of losses that were
not recognized during the period the application of the equity
method was suspended. Investments stated at cost are adjusted
for any known diminution in value determined to be other than
temporary.

Investments in publicly traded entities are
classified as available-for-sale or trading 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
of available-for-sale securities between measurement dates
recognized as a component of accumulated other comprehensive
income. Realized losses for any decline in market value of
available-for-sale securities considered to be other than
temporary are recognized in earnings. Realized gains and losses
on investments sold or impaired are recognized using the
first-in first-out method. Unrealized gains and losses resulting
from changes in fair value of trading securities are recognized
in earnings. See Note 5. Investments.



| |                  
| | -----------------
| | Intangible Assets

On January 1, 2002, Cox adopted
SFAS No. 142, Goodwill and Other Intangible
Assets, which requires that goodwill and intangible assets
with indefinite useful lives, including those recorded in past
business combinations, no longer be amortized through the
statement of operations, but instead be tested for impairment at
least annually. Other intangible assets continue to be amortized
over their useful lives. Cox evaluated its intangible assets and
determined certain intangible assets to have indefinite useful
lives. Accordingly, on January 1, 2002 Cox discontinued the
amortization of intangible assets with indefinite lives, which
consist primarily of franchise value. At December 31, 2003,
the weighted-average remaining useful life of intangible assets
that are being amortized is nine years. See Note 4.
Intangible Assets.



| |                               
| | ------------------------------
| | Valuation of Long-Lived Assets

On January 1, 2002, Cox adopted
SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, which addresses financial
accounting and reporting for the impairment and disposition of
long-lived assets. Cox evaluates the recoverability of
long-lived assets, other than indefinite lived intangible
assets, for impairment when events or changes in circumstances
indicate that the carrying amount of an asset may not be
recoverable. Conditions that would necessitate an impairment
assessment include a significant decline in the observable
market value of an asset, a significant change in the extent or
manner in which an asset is used, or a significant adverse
change that would indicate that the carrying amount of an asset
or group of assets is

58



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##### Table of Contents



COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)

not recoverable. For long-lived assets to be held
and used, Cox recognizes an impairment loss only if its carrying
amount is not recoverable through its undiscounted cash flows
and measures the impairment loss based on the difference between
the carrying amount and fair value. Long-lived assets held for
sale are reported at the lower of cost or fair value less costs
to sell.



| |             
| | ------------
| | Income Taxes

Cox provides for income taxes using the liability
method in accordance with SFAS No. 109, Accounting
for Income Taxes. SFAS No. 109 requires an asset
and liability based approach in accounting for income taxes.
Deferred income taxes reflect the net tax effect on future years
of temporary differences between the carrying amount of assets
and liabilities for financial statement and income tax purposes.
Valuation allowances reduce deferred tax assets to an amount
that represents managements best estimate of such deferred
tax assets that more likely than not will be realized. The
financial effect of changes in tax laws or rates is accounted
for in the period of enactment. See Note 6. Income
Taxes.



| |                    
| | -------------------
| | Debt Issuance Costs

Costs associated with the refinancing and
issuance of debt as well as debt discounts, if any, are deferred
and expensed as interest over the term of the related debt
agreement.



| |                    
| | -------------------
| | Revenue Recognition

Cox accounts for the revenue, costs and expense
related to residential cable services (i.e. video, data and
telephony) as the related services are performed in accordance
with SFAS No. 51, Financial Reporting by Cable
Television Companies. Installation revenue for residential
cable services is recognized to the extent of direct selling
costs incurred. Direct selling costs have exceeded installation
revenue in all reported periods. Credit risk is managed by
disconnecting services to customers who are delinquent.

All other revenue is accounted for in accordance
with Staff Accounting Bulletin (SAB) No. 101,
Revenue Recognition in Financial Statements. In
accordance with SAB No. 101, revenue from advertising
sales is recognized as the advertising is transmitted over
Coxs broadband network. Revenue derived from other
sources, including commercial data and telephony, is recognized
as services are provided, as persuasive evidence of an
arrangement exists, the price to the customer is fixed and
determinable and collectability is reasonably assured.



| |                 
| | ----------------
| | Cost of Services

Cost of services includes cable programming
costs, other direct costs and field service costs. Other direct
costs include costs that Cox incurs in conjunction with
providing its residential, commercial and advertising services.
Field service costs include costs associated with providing and
maintaining Coxs broadband network and customer care costs
necessary to maintain its customer base.



| |                                                        
| | -------------------------------------------------------
| | Pension, Postretirement and Postemployment
    Benefits

Cox provides defined pension benefits to
substantially all employees based on years of service and
compensation during those years. Prior to January 2003, Cox
provided certain health care and life insurance benefits to
substantially all eligible retirees through certain CEI plans.
In January 2003, Cox adopted its own post-retirement medical
plan to provide benefits to substantially all eligible Cox
retirees. No change was made to the CEI program that has
provided, and continues to provide, life insurance coverage to
eligible Cox retirees. Expense related to the CEI plans is
allocated to Cox through the intercompany account. The amount of
the allocations is based on actuarial determinations of the
effect of Cox employees participation in the plans. See
Note 11. Retirements Plans.

59



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##### Table of Contents



COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)

Stock Compensation Plans

At December 31, 2003, Cox had two
stock-based compensation plans for employees, a Long-Term
Incentive Plan (LTIP) and an Employee Stock Purchase Plan
(ESPP), which are more fully described in Note 12.
Stock Compensation Plans. Cox accounts for those
plans under the intrinsic value method, which follows the
recognition and measurement principles of Accounting Principles
Board (APB) Opinion No. 25, Accounting for Stock Issued
to Employees, and related interpretations. No stock-based
employee compensation cost is reflected in net income, as all
options granted under the LTIP had an exercise price equal to or
greater than the market value of the underlying common stock on
the grant date. Further, the ESPP qualifies as a noncompensatory
plan under APB Opinion No. 25, and, as such, no
compensation cost was recognized for ESPP awards.

The following table illustrates the effect on net
(loss) income and (loss) earnings per share if Cox had applied
the fair value recognition provisions of SFAS No. 123,
Accounting for Stock-Based Compensation, to stock-based
employee compensation:

|                                                                                                               |                                                     |                                                  |          |       |   |      |          |       |   |   |         |      | 
|-------------------------------------------------------------------------------------------------------------- | --------------------------------------------------- | ------------------------------------------------ | -------- | ----- | - | ---- | -------- | ----- | - | - | ------- | ---- | 
|                                                                                                               |                                                     |                                                 
|                                                                                                               |                                                     | Year Ended December 31                          
|                                                                                                               |                                                     |                                                 
|                                                                                                               |                                                     | 2003                                             |          | 2002  |   | 2001
|                                                                                                               |                                                     |                                                  |          |       |   |     
|                                                                                                               |                                                     |                                                 
|                                                                                                               |                                                     | (Thousands of Dollars, excluding per share data)
|Net (loss) income, as reported                                                                                 |                                                     | $                                                | (137,801 | )     |   | $    | (274,039 | )     |   | $ | 755,001 |     
|Add: Stock-based compensation, as reported                                                                     |                                                     |                                                  |         |       |   |      |         |       |   |   |        |     
|Deduct: Total stock based compensation determined
    under fair value based method for all awards, net of tax |                                                     |                                                  | (22,859  | )     |   |      | (18,902  | )     |   |   | (14,824 | )   
|                                                                                                               |                                                     |                                                  |          |       |   |      |          |       |   |   |         |     
|Pro forma net (loss) income                                                                                    |                                                     | $                                                | (160,660 | )     |   | $    | (292,941 | )     |   | $ | 740,177 |     
|(Loss) earnings per share:                                                                                     |                                                     |                                                  |          |       |   |      |          |       |   |   |         |     
|                                                                                                               | Basic (loss) earnings per share  as
    reported   |                                                  | $        | (0.22 | ) |      | $        | (0.45 | ) |   | $       | 1.26 | 
|                                                                                                               | Basic (loss) earnings per share  pro
    forma     |                                                  |          | (0.26 | ) |      |          | (0.48 | ) |   |         | 1.23 | 
|                                                                                                              
|                                                                                                               | Diluted (loss) earnings per share  as
    reported |                                                  | $        | (0.22 | ) |      | $        | (0.45 | ) |   | $       | 1.24 | 
|                                                                                                               | Diluted (loss) earnings per share  pro
    forma   |                                                  |          | (0.26 | ) |      |          | (0.48 | ) |   |         | 1.22 | 

Earnings Per Share

Cox computes earnings per share in accordance
with SFAS No. 128, Earnings per Share. Basic
earnings per share is computed by dividing income from
continuing operations by the weighted-average number of common
shares outstanding for the period. Diluted earnings per share is
computed in the same manner, but also includes the dilutive
effect of common stock equivalents and other financial
instruments that are convertible or exercisable for Cox
Class A common stock as further described in Note 13.
Shareholders Equity.

Derivative Financial Instruments

Cox accounts for derivative financial instruments
in accordance with SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended,
which became effective for Cox on January 1, 2001.
SFAS No. 133 requires that an entity recognize all
derivatives, as defined, as either assets or liabilities
measured at fair value. In addition, all derivatives used in
hedging relationships must be designated, reassessed and
documented pursuant to the provisions of SFAS No. 133.
See Note 9. Derivative Instruments and Hedging
Activities.

Cox does not hold or issue derivative instruments
for trading purposes and is not a party to leveraged
instruments. From time to time, however, Cox uses derivative
instruments to manage its exposure to changes in the fair value
of certain of its assets or liabilities or to manage its
exposure to changes in interest rates or

60



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##### Table of Contents



COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)

equity prices. These derivative instruments are
designated and accounted for by Cox as hedges of the underlying
exposure being managed, as prescribed by SFAS No. 133.
In addition, upon adoption of SFAS No. 133, certain of
Coxs debt instruments and investments contained embedded
or freestanding derivatives, as defined. Cox has not designated
these embedded and freestanding derivatives as hedges under
SFAS No. 133 and, as such, changes in their fair value
are being recognized in earnings as derivative gains or losses.

The credit risks associated with Coxs
derivative financial instruments are controlled through the
evaluation and monitoring of the creditworthiness of the
counterparties. Although Cox may be exposed to losses in the
event of nonperformance by the counterparties, Cox does not
expect such losses, if any, to be significant.

Recently Issued Accounting
Pronouncements

On January 1, 2003, Cox adopted
SFAS No. 143, Accounting for Asset Retirement
Obligations, which addresses financial accounting and
reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement
costs. The adoption of SFAS No. 143 did not have a
material impact on Coxs financial position or results of
operations.

On January 1, 2003, Cox adopted Financial
Accounting Standards Board (FASB) Interpretation
No. 45, Guarantors Accounting and Disclosure
Requirements for Guarantors, Including Indirect Guarantees of
Indebtedness of Others, which requires that upon issuance of
a guarantee, the guarantor must recognize a liability for the
fair value of the obligation that it assumes under the
guarantee. Guarantors are also required to meet expanded
disclosure obligations. The adoption of Interpretation
No. 45 did not have a material impact on Coxs
financial position or results of operations.

In January 2003, the FASB issued FASB
Interpretation No. 46, Consolidation of Variable
Interest Entities.Interpretation No. 46 addresses
consolidation by business enterprises of variable interest
entities, which are entities that either (a) do not have
equity investors with vesting rights or (b) have equity
investors that do not provide sufficient financial resources for
the entity to support its activities. The interpretation is
effective immediately for variable interest entities created
after February 1, 2003. In December 2003, the FASB
published FASB Interpretation No. 46 (revised December
2003), Consolidation of Variable Interest Entities
(FIN 46(R)). FIN 46(R), among other things, defers the
effective date of implementation for certain entities. The
revised interpretation is effective for the first interim or
annual reporting period ending after March 15, 2004, with
the exception of structures that are commonly referred to as
special-purpose entities, for which the statement is effective
for periods ending after December 15, 2003. The adoption of
Interpretation No. 46 is not expected to have a material
impact on Coxs results of operations or financial position.

In April 2003, the FASB issued
SFAS No. 149, Amendment of Statement No. 133
on Derivative Instruments and Hedging Activities.This
statement amends and clarifies financial accounting and
reporting for derivative instruments, including certain
derivative instruments embedded in other contracts, and for
hedging activities under SFAS No. 133, Accounting
for Derivative Instruments and Hedging Activities.SFAS No. 149 requires that contracts with
comparable characteristics be accounted for similarly. The
statement is effective for contracts entered into or modified
after June 30, 2003 and for hedging relationships
designated after June 30, 2003. The provisions of
SFAS No. 149 generally are to be applied prospectively
only. The adoption of SFAS No. 149 did not have a
material impact on Coxs results of operations or financial
position.

In May 2003, the FASB issued
SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity.SFAS No. 150 establishes standards for
classification and measurement by an issuer of certain financial
instruments with characteristics of both liabilities and equity.
The statement requires that an issuer classify a financial
instrument that is within its scope as a liability (or

61



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##### Table of Contents



COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)

asset in some circumstances). This statement is
effective for financial instruments entered into or modified
after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after
June 15, 2003, except as it relates to consolidated
limited-life subsidiaries. The FASB indefinitely deferred the
effective date of this statement as it relates to certain
mandatorily redeemable non-controlling interests in consolidated
limited-life subsidiaries. Cox currently consolidates a 75%
majority-owned interest in a limited-life partnership. The
estimated liquidation value of the 25% minority interest is
approximately $229.0 million as of December 31, 2003.
The adoption of the effective provisions of
SFAS No. 150 did not have a material impact on
Coxs results of operations or financial position.

In December 2003, the FASB issued
SFAS No. 132 (revised 2003), Employers
Disclosures about Pensions and Other Postretirement Benefits.SFAS No. 132 (revised 2003) revises
employers disclosures about pension plans and other
postretirement benefit plans. The statement does not change the
measurement or recognition of those plans required by
SFAS No. 87, Employers Accounting for
Pensions, SFAS No. 88, Employers
Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits, and
SFAS No. 106, Employers Accounting for
Postretirement Benefits Other Than Pensions.The revised
statement retains the disclosure requirements contained in the
original SFAS No. 132 and requires additional
disclosures about the assets, obligations, cash flows, and net
periodic benefit cost of defined benefit pension plans and other
defined benefit postretirement plans. The revised statement is
effective for fiscal years ending after December 15, 2003.
The additional disclosure requirements are included in
Note 11. Retirement Plans.

Reclassifications

Certain amounts in the 2002 and 2001 consolidated
financial statements have been reclassified for comparative
purposes with 2003.



|   |                       
|-- | ----------------------
|3. | Cash Management System

Cox participates in CEIs cash management
program, whereby CEI transfers funds from Coxs depository
accounts and transfers funds to financial institutions upon
daily notification of checks presented for payment. Book
overdrafts of $84.5 million and $66.8 million existed
at December 31, 2003 and 2002, respectively, as a result of
checks outstanding. These book overdrafts are reclassified as
accounts payable and are considered financing activities in the
Consolidated Statements of Cash Flows.



|   |                  
|-- | -----------------
|4. | Intangible Assets

Cox constructs and operates its cable systems
under non-exclusive cable franchises that are granted by state
or local governmental authorities for varying lengths of time.
As of December 31, 2003, Cox held 855 franchises in areas
located throughout the United States. Cox obtained these
franchises primarily through acquisitions of cable systems
accounted for as purchase business combinations. These
acquisitions have primarily been for the purpose of acquiring
existing franchises and related infrastructure and, as such, the
primary asset acquired by Cox has historically been cable
franchises.

On January 1, 2002, Cox adopted
SFAS No. 142, Goodwill and Other Intangible
Assets, which requires that goodwill and certain intangible
assets with indefinite useful lives no longer be amortized, but
instead be tested for impairment at least annually. The standard
also requires the completion of a transitional impairment test
with any resulting impairment identified treated as a cumulative
effect of a change in accounting principle.

Prior to the adoption of SFAS No. 142,
Cox described the excess purchase price over the fair value of
the identified net assets acquired associated with its
acquisitions as either goodwill or franchise value and amortized
these assets over 40 years. Cox believes that the
franchises, although contractually non-exclusive, provide
economic exclusivity for broadband video services to an
incumbent cable operator.

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COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)

Accordingly, Cox does not believe it has any
goodwill separate and distinct from the value of its cable
franchises, and, as such, the nature of the recorded excess
purchase price associated with Coxs acquisitions is more
appropriately characterized as franchise value. Therefore, in
connection with the adoption of SFAS No. 142, Cox
reclassified the net carrying value of its goodwill of
$3.7 billion to franchise value in order to eliminate the
distinction between these two assets. In connection with this
reclassification, Cox recorded an additional deferred tax
liability and a corresponding increase to franchise value of
$2.2 billion, in accordance with the provisions of
SFAS No. 109, Accounting for Income Taxes,
related to the difference in the tax basis compared to the book
basis of franchise value. The reclassification and the related
deferred tax effects had no impact on Coxs consolidated
statements of operations.

In addition, Cox assessed the expected useful
life of each of its cable franchises upon adoption of
SFAS No. 142, and concluded that all of its cable
franchises have an indefinite useful life. Accordingly, Cox
ceased amortizing its franchise value effective January 1,
2002. Cox reached its conclusion regarding the indefinite useful
life of its cable franchises principally because (i) there
are no legal, regulatory, contractual, competitive, economic, or
other factors limiting the period over which these rights will
continue to contribute to Coxs cash flows (ii) Cox
has never had a cable franchise right revoked, and has never
been denied a franchise renewal (iii) as an incumbent
franchisee, Coxs renewal applications are granted by the
local franchising authority on their own merits and not as part
of a comparative process with competing applications and
(iv) under the 1984 Cable Act, a local franchising
authority may not unreasonably withhold the renewal of a cable
system franchise. Cox will continue to reevaluate the expected
life of its cable franchise rights each reporting period to
determine whether events and circumstances continue to support
an indefinite useful life.

In connection with the adoption of
SFAS No. 142, Cox completed a transitional impairment
test of its franchise value as of January 1, 2002. Based on
the guidance prescribed in Emerging Issues Task Force (EITF)
Issue No. 02-7, Unit of Accounting for Testing of
Impairment of Indefinite-Lived Intangible Assets, Cox
determined that the unit of accounting for testing franchise
value for impairment resides at the cable system cluster level,
consistent with Coxs management of its business as
geographic clusters. Cox assesses franchise value for impairment
under SFAS No. 142 by utilizing a residual approach
whereby Cox measures the implied fair value of each franchise
value intangible asset subject to the same unit of accounting by
deducting from the fair value of each cable system cluster the
fair value of the cable system clusters other net assets,
including previously unrecognized intangible assets. Upon
adoption of SFAS No. 142, Cox determined that no
impairment of franchise value intangible assets existed as of
January 1, 2002.

In completing subsequent impairment tests in
accordance with SFAS No. 142, Cox considers the
guidance in EITF Issue No. 02-17, Recognition of Customer
Relationship Intangible Assets Acquired in a Business
Combination, which was issued in October 2002. When applying
the guidance in EITF Issue No. 02-17, Cox considers
assumptions that marketplace participants would consider, such
as expectations of future contract renewals and other benefits
related to the intangible asset, when measuring the fair value
of the cable system clusters other net assets. The January
2003 impairment test in accordance with SFAS No. 142
resulted in a non-cash impairment charge of approximately
$25.0 million, which is classified within amortization
expense in Coxs Consolidated Statement of Operations. Cox
completed its next impairment test in accordance with
SFAS No. 142 in August 2003. The August 2003 test
indicated no impairment of franchise value.

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COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)

Had Cox been accounting for intangible assets
under SFAS No. 142 for all periods presented,
Coxs reported (loss) income before cumulative effect in
change in accounting principle, net (loss) income and net (loss)
income per share would have been as follows:

|                                                                                      |  |                           |          |      |  |      |          |   |  |   |           | 
|------------------------------------------------------------------------------------- |  | ------------------------- | -------- | ---- |  | ---- | -------- | - |  | - | --------- | 
|                                                                                      |  |                          
|                                                                                      |  | Year Ended December 31   
|                                                                                      |  |                          
|                                                                                      |  | 2003                      |          | 2002 |  | 2001
|                                                                                      |  |                           |          |      |  |     
|                                                                                      |  |                          
|                                                                                      |  | (Thousands of Dollars,   
|                                                                                      |  | excluding per share data)
|Reported (loss) income before cumulative effect
    of change in accounting principle |  | $                         | (137,801 | )    |  | $    | (274,039 | ) |  | $ | 37,911    | 
|Franchise value amortization, net of tax                                              |  |                           |         |      |  |      |         |   |  |   | 250,214   | 
|                                                                                      |  |                           |          |      |  |      |          |   |  |   |           | 
|Adjusted (loss) income before cumulative effect
    of change in accounting principle |  |                           | (137,801 | )    |  |      | (274,039 | ) |  |   | 288,125   | 
|Cumulative effect of change in accounting
    principle                               |  |                           |         |      |  |      |         |   |  |   | 717,090   | 
|                                                                                      |  |                           |          |      |  |      |          |   |  |   |           | 
|Adjusted net (loss) income                                                            |  | $                         | (137,801 | )    |  | $    | (274,039 | ) |  | $ | 1,005,215 | 
|                                                                                      |  |                           |          |      |  |      |          |   |  |   |           | 
|Basic net (loss) income per share:                                                    |  |                           |          |      |  |      |          |   |  |   |           | 
|Reported (loss) income before cumulative effect
    of change in accounting principle |  | $                         | (0.22    | )    |  | $    | (0.45    | ) |  | $ | 0.06      | 
|Add back franchise value amortization, net of tax                                     |  |                           |         |      |  |      |         |   |  |   | 0.42      | 
|                                                                                      |  |                           |          |      |  |      |          |   |  |   |           | 
|Adjusted (loss) income before cumulative effect
    of change in accounting principle |  |                           | (0.22    | )    |  |      | (0.45    | ) |  |   | 0.48      | 
|Cumulative effect of change in accounting
    principle                               |  |                           |         |      |  |      |         |   |  |   | 1.20      | 
|                                                                                      |  |                           |          |      |  |      |          |   |  |   |           | 
|Adjusted basic net (loss) income per share                                            |  | $                         | (0.22    | )    |  | $    | (0.45    | ) |  | $ | 1.68      | 
|                                                                                      |  |                           |          |      |  |      |          |   |  |   |           | 
|Diluted net (loss) income per share:                                                  |  |                           |          |      |  |      |          |   |  |   |           | 
|Reported (loss) income before cumulative effect
    of change in accounting principle |  | $                         | (0.22    | )    |  | $    | (0.45    | ) |  | $ | 0.06      | 
|Add back franchise value amortization, net of tax                                     |  |                           |         |      |  |      |         |   |  |   | 0.41      | 
|                                                                                      |  |                           |          |      |  |      |          |   |  |   |           | 
|Adjusted (loss) income before cumulative effect
    of change in accounting principle |  |                           | (0.22    | )    |  |      | (0.45    | ) |  |   | 0.47      | 
|Cumulative effect of change in accounting
    principle                               |  |                           |         |      |  |      |         |   |  |   | 1.18      | 
|                                                                                      |  |                           |          |      |  |      |          |   |  |   |           | 
|Adjusted diluted net (loss) income per share                                          |  | $                         | (0.22    | )    |  | $    | (0.45    | ) |  | $ | 1.65      | 
|                                                                                      |  |                           |          |      |  |      |          |   |  |   |           | 

Coxs other intangible assets that have a
finite useful life are comprised primarily of non-compete
agreements, contractual rights and cable franchise renewal
costs. These other intangible assets are amortized on a
straight-line basis over the term of the related agreement. Cox
evaluates the useful lives of its finite lived intangible assets
each reporting period to determine whether events or
circumstances warrant revised estimates of useful lives.

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COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)

Summarized below are the carrying value and
accumulated amortization of intangible assets that will continue
to be amortized under SFAS No. 142, as well as the
carrying value of those intangible assets, which will no longer
be amortized:

|                                          |                         |                        |        |                   |  |          |        |          |  |              |            |            |  |   |        |  |  |   |        |  |  |   |            |            | 
|----------------------------------------- | ----------------------- | ---------------------- | ------ | ----------------- |  | -------- | ------ | -------- |  | ------------ | ---------- | ---------- |  | - | ------ |  |  | - | ------ |  |  | - | ---------- | ---------- | 
|                                          |                         |                        |        |                  
|                                          |                         | December 31, 2003      |        | December 31, 2002
|                                          |                         |                        |        |                  
|                                          |                         | Gross                  |        |                   |  | Net      |        | Gross    |  |              |            | Net       
|                                          |                         | Carrying               |        | Accumulated       |  | Carrying |        | Carrying |  | Accumulated  |            | Carrying  
|                                          |                         | Value                  |        | Amortization      |  | Value    |        | Value    |  | Amortization |            | Value     
|                                          |                         |                        |        |                   |  |          |        |          |  |              |            |           
|                                          |                         |                       
|                                          |                         | (Thousands of Dollars)
|Intangible assets subject to amortization |                         | $                      | 58,526 |                   |  | $        | 21,855 |          |  | $            | 36,671     |            |  | $ | 47,095 |  |  | $ | 15,788 |  |  | $ | 31,307     |           
|Franchise value                           |                         |                        |        |                   |  |          |        |          |  | $            | 15,660,824 |            |  |   |        |  |  |   |        |  |  | $ | 15,692,981 |           
|                                          |                         |                        |        |                   |  |          |        |          |  |              |            |            |  |   |        |  |  |   |        |  |  |   |            |           
|                                          | Total intangible assets |                        |        |                   |  |          |        |          |  |              | $          | 15,697,495 |  |   |        |  |  |   |        |  |  |   | $          | 15,724,288 | 
|                                          |                         |                        |        |                   |  |          |        |          |  |              |            |            |  |   |        |  |  |   |        |  |  |   |            |           

Aggregate intangible asset amortization expense
was $5.7 million for the year ended December 31, 2003.
Cox estimates amortization expense to be $3.7 million in
2004, $3.1 million in 2005, $2.3 million in 2006,
$2.2 million in 2007 and $2.0 million in 2008,
primarily related to contractual rights and other agreements.
Actual amortization expense to be reported in future periods
could differ from these estimates as a result of new intangible
asset acquisitions, changes in useful lives and other relevant
factors.



|   |            
|-- | -----------
|5. | Investments

|                                  |                        |                        |         |        |  |   |         |         | 
|--------------------------------- | ---------------------- | ---------------------- | ------- | ------ |  | - | ------- | ------- | 
|                                  |                        |                       
|                                  |                        | December 31           
|                                  |                        |                       
|                                  |                        | 2003                   |         | 2002  
|                                  |                        |                        |         |       
|                                  |                        |                       
|                                  |                        | (Thousands of Dollars)
|Investments stated at fair value: |                        |                        |         |        |  |   |         |        
|                                  | Available-for-sale     |                        | $       | 66,376 |  |   | $       | 262,939 | 
|                                  | Trading securities     |                        |         |       |  |   |         | 85,410  | 
|                                  | Derivative instruments |                        |         | 1,269  |  |   |         | 6,137   | 
|Equity method investments         |                        |                        | 31,088  |        |  |   | 31,714  |        
|Investments stated at cost        |                        |                        | 10,647  |        |  |   | 11,235  |        
|                                  |                        |                        |         |        |  |   |         |        
|Total Investments                 |                        | $                      | 109,380 |        |  | $ | 397,435 |        
|                                  |                        |                        |         |        |  |   |         |        

Investments Stated at Fair Value

The aggregate cost of Coxs investments
stated at fair value at December 31, 2003 and 2002 was
$42.5 million and $175.0 million, respectively. Gross
unrealized gains on investments were $25.3 million at
December 31, 2003, and gross unrealized gains and losses on
investments were $129.6 million and $0.4 million,
respectively, at December 31, 2002. Gross realized gains
and losses on investments were $181.8 million and
$16.7 million, respectively, for the year ended
December 31, 2003; $112.0 million and
$1.4 billion, respectively, for the year ended
December 31, 2002; and $1.3 billion and
$188.0 million, respectively, for the year ended
December 31, 2001.

Sprint PCS.Sprint
Corporation offers personal communications services through its
PCS group. In January 2001, Cox entered into a series of prepaid
forward contracts to sell up to 19.5 million shares of its
Sprint PCS common stock  Series 2. These prepaid
forward contracts were hybrid instruments, comprised of a
zero-coupon debt instrument, as the host contract, and an
embedded derivative. In contemplation of this transaction, Cox
recognized a $239.3 million pre-tax gain associated with a
one-time reclassification of the 19.5 million shares of
Coxs investment in Sprint PCS common stock from
available-for-sale securities to trading securities upon
adoption of SFAS No. 133.

65



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COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)

In March and April 2001, Cox entered into a
series of costless equity collar arrangements to manage its
exposure to market price fluctuations in approximately
15.8 million shares of its Sprint PCS common stock with an
aggregate fair value of $350.1 million. Also during 2001,
Cox sold a total of 12.8 million shares of its Sprint PCS
common stock for net proceeds of approximately
$318.2 million and recognized a pre-tax gain of
$213.5 million.

In February and March 2002, Cox terminated its
series of costless equity collar arrangements, which managed its
exposure to market price fluctuations of 15.8 million
shares of Sprint PCS common stock, for aggregate proceeds of
approximately $151.6 million and recognized an aggregate
pre-tax derivative gain of approximately $168.9 million. In
connection with the terminations, Cox also sold the
15.8 million shares of Sprint PCS common stock covered by
the collar arrangements for aggregate net proceeds of
approximately $155.9 million. In addition, Cox sold
9.4 million shares of Sprint PCS common stock that were not
covered by the collar arrangements for aggregate net proceeds of
approximately $82.8 million. Cox recognized an aggregate
pre-tax gain of $32.8 million on the sale of these shares.

Cox recognized an aggregate pre-tax investment
loss of $390.6 million during 2002 and an aggregate pre-tax
investment gain of $77.4 million during 2001 as a result of
the change in market value of its investment in shares of Sprint
PCS common stock classified as trading. In addition, during
2002, Cox recorded an aggregate pre-tax impairment charge of
approximately $795.7 million on its investment in shares of
Sprint PCS common stock classified as available-for-sale as a
result of a decline in market value that was considered other
than temporary. This charge is included in net gain (loss) on
investments in Coxs Consolidated Statement of Operations.

In April 2003, Cox sold its Sprint PCS warrants,
which were exercisable for approximately 6.3 million shares
of Sprint PCS common stock, for nominal consideration. Cox
recognized a pre-tax loss of $0.4 million as a result of
the sale.

In June 2003, Cox sold 32.9 million shares
of Sprint PCS common stock for aggregate net proceeds of
approximately $161.7 million. Cox recognized an aggregate
pre-tax gain of $97.2 million on the sale of these shares.

In August 2003, Cox terminated its series of
prepaid forward contracts to sell up to 19.5 million shares
of its Sprint PCS common stock. In connection with the
termination, Cox sold the 19.5 million shares of Sprint PCS
common stock, which had been pledged to secure its obligations
pursuant to these prepaid forward contracts and were classified
as trading. Cox recognized a pre-tax loss of approximately
$29.5 million as a result of this termination. See
Note 7. Debt for a discussion of the accounting
for the termination of these prepaid forward contracts.

In September 2003, Cox sold 13.9 million
shares of Sprint PCS common stock for aggregate net proceeds of
approximately $84.7 million. Cox recognized an aggregate
pre-tax gain of $57.3 million on the sale of these shares.

At December 31, 2003, Coxs investment
in Sprint PCS was comprised of 0.3 million shares of Sprint
PCS common stock and 0.1 million shares of convertible
preferred stock which are convertible into approximately
4.0 million shares of Sprint PCS common stock. The
estimated fair value of Coxs investment in Sprint PCS was
$59.9 million and $349.2 million at December 31,
2003 and December 31, 2002, respectively.

Excite@Home.Excite@Home was both an Internet
service provider and supplier of comprehensive Internet
navigation services. In August 2000, Cox consummated an
agreement with Excite@Home and AT&T Corp. pursuant to which
the ownership, voting control and management of Excite@Home were
restructured. In addition, as part of this agreement, Cox agreed
to extend its distribution of certain Excite@Home services
through June 2006, subject to certain termination rights.
Pursuant to this agreement,

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COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)

Cox was entitled to warrants to purchase two
shares of Excite@Home Series A common stock for each home
its cable systems passed as of March 28, 2000, subject to
adjustment under certain circumstances.

Cox also received the right, under certain
circumstances, to sell its shares in Excite@Home to AT&T,
with a maximum amount payable to Cox of approximately
$1.4 billion in cash or shares of AT&T common stock, as
elected by Cox. In January 2001, Cox exercised its right to sell
Excite@Home shares to AT&T. After further discussion, in May
2001, AT&T issued 75.0 million shares of AT&T
common stock to Cox, Cox retained its Excite@Home common stock
and Coxs right to sell its Excite@Home shares to AT&T
was deemed satisfied in full. Cox recognized a
$307.4 million pre-tax gain in the second quarter of 2001
associated with the deemed satisfaction of the right-to-sell
agreement.

In September 2001, Excite@Home, Coxs
primary high-speed Internet provider at that time, filed for
protection under Chapter 11 of the U.S. Bankruptcy
Code. Subsequently, Cox and Excite@Home entered into two
separate agreements so that Cox would continue to receive
high-speed Internet access services from Excite@Home for
existing and new customers through February 28, 2002 and so
that Excite@Home would provide minimal services to Cox related
to the transition of Coxs customers to Cox High Speed
Internet service. Pursuant to one of these agreements, Cox paid
Excite@Home $160.0 million. Of this amount, approximately
$150.2 million was recognized in 2001 in Coxs
Consolidated Statement of Operations and approximately
$9.8 million was attributable to services provided in 2002.
In February 2002, Cox completed the transition of its customers
from Excite@Homes high-speed Internet access service to
Cox High Speed Internet service.

AT&T and AT&T Wireless Services,
Inc.AT&T provides voice, video
and data communications to businesses, consumers and government
agencies. AT&T Wireless provides wireless voice and data
services to consumers and businesses. In February and March
2002, Cox terminated its costless equity collar arrangements
which managed its exposure to market price fluctuations of
22.5 million shares of AT&T common stock and
17.2 million shares of AT&T Wireless common stock for
aggregate proceeds of approximately $112.8 million and
recognized an aggregate pre-tax derivative gain of
$99.9 million. In connection with the terminations, Cox
also sold the 22.5 million shares of AT&T common stock
and 17.2 million shares of AT&T Wireless common stock
covered by these collar arrangements for aggregate net proceeds
of approximately $527.0 million. In addition, Cox sold
12.5 million shares of AT&T common stock and
6.7 million shares of AT&T Wireless common stock that
were not covered by collar arrangements for aggregate net
proceeds of approximately $263.8 million. Cox recognized an
aggregate pre-tax loss of $170.1 million on the sale of
these shares.

As a result of these transactions, Cox no longer
holds any shares of AT&T common stock or AT&T Wireless
common stock. Cox had accounted for its interests in AT&T
and AT&T Wireless common stock at fair value as
available-for-sale securities.

Motorola, Inc.Motorola provides integrated communications solutions and
embedded electronic solutions, including end-to-end systems for
the delivery of interactive digital video, voice and high-speed
data solutions for broadband operators. During 2000 and 2001,
Cox acquired shares of Motorola common stock through the
exercise of warrants. In June 2002, Cox sold its remaining
1.7 million shares of Motorola common stock for aggregate
net proceeds of approximately $24.5 million and recognized
aggregate pre-tax loss of $1.5 million.



| |                          
| | -------------------------
| | Equity Method Investments

Discovery Communications,
Inc.The principal businesses of
Discovery are the advertiser-supported basic cable networks The
Discovery Channel, The Learning Channel, Animal Planet Network,
The Travel Channel and Discovery Europe and the retail
businesses of Discovery.com. In 2000, Cox ceased applying the
equity method on its investment in Discovery as Coxs
cumulative proportionate share of equity in net losses

67



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COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)

exceeded the carrying amount of the investment.
In 2001, Cox funded Discovery with an additional contribution of
$23.9 million, however, since previously unrecognized
equity in net losses exceeded the amount of the additional
funding, Cox recognized equity in net losses on its investment
in Discovery of $23.9 million. In September 2002, Cox
received a $27.1 million partial return on its investment
from Discovery. Since Coxs carrying value of its
investment in Discovery had been reduced to zero, this resulted
in a pre-tax gain of $27.1 million. As of December 31,
2003, Cox has not resumed applying the equity method on its
investment in Discovery, as Coxs proportionate share of
equity in net income has not exceeded its share of net losses
not recognized during the period in which the equity method has
been suspended.

Outdoor Life/ Speedvision.In July 2001, Cox sold its equity
interests in Outdoor Life Network L.L.C., Speedvision Network,
L.L.C. and Cable Network Services, L.L.C. to Fox Sports, L.L.C.
and Fox Sports CNS, L.L.C. for an aggregate cash purchase price
of $439.7 million and recognized a pre-tax gain of
$436.1 million.

Summarized combined financial information for all
equity method investments and Coxs proportionate share
(determined using Coxs ownership interest in each
investment) for 2003, 2002 and 2001 is as follows:

|                        |  |                                |           |                           |  |      |           |      |  |      |           |      |  |   |         |  |  |   |         |   |  |   |         |  
|----------------------- |  | ------------------------------ | --------- | ------------------------- |  | ---- | --------- | ---- |  | ---- | --------- | ---- |  | - | ------- |  |  | - | ------- | - |  | - | ------- | -
|                        |  |                                |           |                          
|                        |  | Combined Financial Information |           | Coxs Proportionate Share
|                        |  | Year Ended December 31         |           | Year Ended December 31   
|                        |  |                                |           |                          
|                        |  | 2003                           |           | 2002                      |  | 2001 |           | 2003 |  | 2002 |           | 2001
|                        |  |                                |           |                           |  |      |           |      |  |      |           |     
|                        |  |                               
|                        |  | (Thousands of Dollars)        
|Revenues                |  | $                              | 2,291,103 |                           |  | $    | 2,069,282 |      |  | $    | 1,940,486 |      |  | $ | 547,304 |  |  | $ | 477,294 |   |  | $ | 494,591 |  
|Operating income (loss) |  |                                | 278,283   |                           |  |      | (182,194  | )    |  |      | (139,236  | )    |  |   | 71,971  |  |  |   | (48,967 | ) |  |   | (38,791 | )
|Net income (loss)       |  |                                | 18,309    |                           |  |      | (196,479  | )    |  |      | (184,127  | )    |  |   | 7,450   |  |  |   | (49,341 | ) |  |   | (50,106 | )

|                       |  |                        |           |      |  |   |           | 
|---------------------- |  | ---------------------- | --------- | ---- |  | - | --------- | 
|                       |  |                       
|                       |  | Combined Financial    
|                       |  | Information           
|                       |  | December 31           
|                       |  |                       
|                       |  | 2003                   |           | 2002
|                       |  |                        |           |     
|                       |  |                       
|                       |  | (Thousands of Dollars)
|Current assets         |  | $                      | 1,001,136 |      |  | $ | 702,293   | 
|Noncurrent assets      |  |                        | 2,351,827 |      |  |   | 2,762,644 | 
|Current liabilities    |  |                        | 1,644,316 |      |  |   | 893,331   | 
|Noncurrent liabilities |  |                        | 2,052,011 |      |  |   | 3,405,987 | 

Coxs proportionate share of the net losses
stated above is not equal to the equity in net losses of
affiliated companies as reported in the Consolidated Statements
of Operations primarily due to discontinuing the application of
equity method accounting for certain investments when aggregate
net losses from the investments have exceeded their carrying
value and amortization of other expenses.

Other

Cox has several other fair value, equity and cost
method investments that are not, individually or in the
aggregate, significant in relation to the Consolidated Balance
Sheets at December 31, 2003 and 2002.

68



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COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)



|   |             
|-- | ------------
|6. | Income Taxes

Current and deferred income tax (benefits)
expenses are as follows:

|         |         |                                  |   |          |          |      |   |          |          |   |   |          |          |  
|-------- | ------- | -------------------------------- | - | -------- | -------- | ---- | - | -------- | -------- | - | - | -------- | -------- | -
|         |         |                                 
|         |         | Year Ended December 31          
|         |         |                                 
|         |         | 2003                             |   | 2002     |          | 2001
|         |         |                                  |   |          |          |     
|         |         |                                 
|         |         | (Thousands of Dollars)          
|Current  |         |                                  |   |          |          |      |   |          |          |   |   |         
|         | Federal |                                  | $ | 258,998  |          |      | $ | (324,171 | )        |   | $ | 408,770  |         
|         | State   |                                  |   | 1,107    |          |      |   | 4,515    |          |   |   | (7,917   | )       
|         |         |                                  |   |          |          |      |   |          |          |   |   |         
|         |         | Total current                    |   |          | 260,105  |      |   |          | (319,656 | ) |   |          | 400,853  |  
|         |         |                                  |   |          |          |      |   |          |          |   |   |         
|Deferred |         |                                  |   |          |          |      |   |          |          |   |   |         
|         | Federal |                                  |   | (323,406 | )        |      |   | 183,059  |          |   |   | (199,731 | )       
|         | State   |                                  |   | (9,973   | )        |      |   | 11,311   |          |   |   | (107,083 | )       
|         |         |                                  |   |          |          |      |   |          |          |   |   |         
|         |         | Total deferred                   |   |          | (333,379 | )    |   |          | 194,370  |   |   |          | (306,814 | )
|         |         |                                  |   |          |          |      |   |          |          |   |   |         
|         |         | Net income tax (benefit) expense |   | $        | (73,274  | )    |   | $        | (125,286 | ) |   | $        | 94,039   |  
|         |         |                                  |   |          |          |      |   |          |          |   |   |         

The difference between net income tax expense and
income taxes expected at the U.S. statutory federal income
tax rate of 35% are as indicated below:

|                                                                                   |                                  |                        |         |         |   |      |          |          |   |   |        |        | 
|---------------------------------------------------------------------------------- | -------------------------------- | ---------------------- | ------- | ------- | - | ---- | -------- | -------- | - | - | ------ | ------ | 
|                                                                                   |                                  |                       
|                                                                                   |                                  | Year Ended December 31
|                                                                                   |                                  |                       
|                                                                                   |                                  | 2003                   |         | 2002    |   | 2001
|                                                                                   |                                  |                        |         |         |   |     
|                                                                                   |                                  |                       
|                                                                                   |                                  | (Thousands of Dollars)
|Federal tax (benefit) expense at statutory rates
    on income before income taxes |                                  | $                      | (71,735 | )       |   | $    | (126,719 | )        |   | $ | 71,087 |       
|State income (benefit) taxes, net of federal
    benefit                           |                                  |                        | (5,763  | )       |   |      | 10,288   |          |   |   | (8,593 | )     
|Tax basis adjustment in equity investment                                          |                                  |                        | 6,648   |         |   |      |         |          |   |   |       |       
|Dividends received deduction                                                       |                                  |                        | (407    | )       |   |      | (7,083   | )        |   |   | (407   | )     
|Amortization of acquisition adjustments                                            |                                  |                        |        |         |   |      |         |          |   |   | 33,575 |       
|Other, net                                                                         |                                  |                        | (2,017  | )       |   |      | (1,772   | )        |   |   | (1,623 | )     
|                                                                                   |                                  |                        |         |         |   |      |          |          |   |   |        |       
|                                                                                   | Net income tax (benefit) expense |                        | $       | (73,274 | ) |      | $        | (125,286 | ) |   | $      | 94,039 | 
|                                                                                   |                                  |                        |         |         |   |      |          |          |   |   |        |       

Significant components of Coxs net deferred
tax liability are as follows:

|                       |                            |                        |            |            |   |   |            |            |  
|---------------------- | -------------------------- | ---------------------- | ---------- | ---------- | - | - | ---------- | ---------- | -
|                       |                            |                       
|                       |                            | December 31           
|                       |                            |                       
|                       |                            | 2003                   |            | 2002      
|                       |                            |                        |            |           
|                       |                            |                       
|                       |                            | (Thousands of Dollars)
|Plant and equipment    |                            | $                      | (1,363,762 | )          |   | $ | (1,138,701 | )         
|Intangible assets      |                            |                        | (4,759,863 | )          |   |   | (4,660,872 | )         
|Investments            |                            |                        | (257,776   | )          |   |   | (345,138   | )         
|Derivative instruments |                            |                        | (37,422    | )          |   |   | (592,829   | )         
|Other, net             |                            |                        | 64,246     |            |   |   | (2,905     | )         
|                       |                            |                        |            |            |   |   |            |           
|                       |                            |                        | (6,354,577 | )          |   |   | (6,740,445 | )         
|Less current portion   |                            |                        | 34,393     |            |   |   | 10,190     |           
|                       |                            |                        |            |            |   |   |            |           
|                       | Net deferred tax liability |                        | $          | (6,388,970 | ) |   | $          | (6,750,635 | )
|                       |                            |                        |            |            |   |   |            |           

Cox is currently subject to various federal and
state income tax audits. Cox does not believe that current
income tax audits will have a material impact on its financial
statements.

69



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##### Table of Contents



COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)

As of December 31, 2003, Cox had net
operating loss carryforwards under the laws of various state
jurisdictions in which it operates in the amount of
$56.0 million. These net operating loss carryforwards
expire on various dates through 2022. Cox believes that these
net operating loss carryforwards will be utilized within the
allowable periods.



|   |     
|-- | ----
|7. | Debt

|                                                                     |                      |                        |           |           |  |   |           |           | 
|-------------------------------------------------------------------- | -------------------- | ---------------------- | --------- | --------- |  | - | --------- | --------- | 
|                                                                     |                      |                       
|                                                                     |                      | December 31           
|                                                                     |                      |                       
|                                                                     |                      | 2003                   |           | 2002     
|                                                                     |                      |                        |           |          
|                                                                     |                      |                       
|                                                                     |                      | (Thousands of Dollars)
|Revolving credit facilities                                          |                      | $                      |          |           |  | $ |          |          
|Commercial paper                                                     |                      |                        | 302,283   |           |  |   |          |          
|Medium-term notes                                                    |                      |                        | 364,359   |           |  |   | 391,274   |          
|Notes and debentures                                                 |                      |                        | 6,078,904 |           |  |   | 5,352,489 |          
|Exchangeable Subordinated Debentures due
    November 15, 2029       |                      |                        | 7,846     |           |  |   | 671,809   |          
|Exchangeable Subordinated Debentures due
    March 14, 2030          |                      |                        | 107       |           |  |   | 122,346   |          
|Exchangeable Subordinated Discount Debentures due
    April 19, 2020 |                      |                        | 18,185    |           |  |   | 501,915   |          
|Zero-coupon debt                                                     |                      |                        |          |           |  |   | 41,377    |          
|Capitalized lease obligations                                        |                      |                        | 217,992   |           |  |   | 219,217   |          
|Other                                                                |                      |                        | 22,124    |           |  |   | 15,570    |          
|                                                                     |                      |                        |           |           |  |   |           |          
|                                                                     |                      |                        | 7,011,800 |           |  |   | 7,315,997 |          
|Less current portion                                                 |                      |                        | 48,344    |           |  |   | 393,040   |          
|                                                                     |                      |                        |           |           |  |   |           |          
|                                                                     | Total long-term debt |                        | $         | 6,963,456 |  |   | $         | 6,922,957 | 
|                                                                     |                      |                        |           |           |  |   |           |          

The exchangeable subordinated debentures and
zero-coupon debt are presented net of certain embedded
derivative instruments. See Note 9. Derivative
Instruments and Hedging Activities for a more detailed
discussion.



| |                            
| | ---------------------------
| | Revolving Credit Agreements

In June 2003, Cox renewed its 364-day credit
agreement, which is now available through June 26, 2004.
The 364-day credit agreement also allows Cox to extend the
agreement for an additional two years at maturity. The capacity
of this credit agreement was reduced from $1.1 billion to
$900.0 million. Cox also has a $900.0 million 5-year
credit agreement available through September 26, 2005. At
Coxs election, the interest rate on these credit
agreements is based on London Interbank Offered Rate (LIBOR),
the certificate of deposit rate plus varying percentages or an
alternate base rate. These credit agreements also impose a
commitment fee on the unused portion of the total amount
available based on a ratio of debt to operating cash flow, a
measure of performance not calculated in accordance with GAAP,
and a utilization fee based on the level of borrowings. Cox had
no borrowings outstanding under either credit agreement at
December 31, 2003 and 2002.



| |                 
| | ----------------
| | Commercial Paper

Cox had approximately $302.3 million
commercial paper outstanding at December 31, 2003. Cox had
no commercial paper outstanding at December 31, 2002. The
weighted-average interest rate for outstanding commercial paper
was 1.3% for the year ended December 31, 2003. Coxs
commercial paper is backed by amounts available under its
revolving credit agreements.

70



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##### Table of Contents



COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)



| |                  
| | -----------------
| | Medium-Term Notes

At December 31, 2003 and 2002, Cox had
outstanding borrowings of $364.4 million and
$391.3 million, respectively, under several fixed rate
medium-term notes due in varying amounts through 2028 that pay
interest in cash at fixed rates ranging from 6.7% to
7.2% per annum.



| |                     
| | --------------------
| | Notes and Debentures

Cox had outstanding borrowings under several
fixed-rate notes and debentures of approximately
$6.1 billion and $5.4 billion at December 31,
2003 and 2002, respectively. The fixed-rate notes and debentures
are due in varying amounts through 2028 and pay interest in cash
at rates ranging from 3.9% to 7.9% per annum. Also included
in notes and debentures is Coxs convertible senior notes
due 2021, as described below.

2004 Repayments.In
accordance with the terms of the indenture governing Coxs
convertible senior notes due 2021, Cox became obligated to
purchase for cash convertible notes tendered and not withdrawn
before the close of business on February 23, 2004. Cox
repurchased $19.0 million aggregate principal amount at
maturity of the convertible notes that had been properly
tendered and not withdrawn, for aggregate cash consideration of
$13.9 million, which represented the accreted value of the
repurchased notes. As a result, no convertible notes remain
outstanding. Cox used commercial paper borrowings to fund the
repurchase of the tendered convertible notes.

2003 Issuances and
Repayments.In accordance with the
terms of the indenture governing Coxs convertible senior
notes due 2021, Cox became obligated to purchase for cash
convertible notes tendered and not withdrawn before the close of
business on February 24, 2003. Cox repurchased
$422.7 million aggregate principal amount at maturity of
the convertible notes that had been properly tendered and not
withdrawn, for aggregate cash consideration of
$304.2 million, which represented the accreted value of the
repurchased notes.

In May 2003, Cox issued a series of
4.625% senior notes due 2013 with an aggregate principal
amount of $600.0 million, less underwriting discounts and
commissions and estimated offering costs of $7.7 million.
The 4.625% senior notes mature on June 1, 2013, are
unsecured and rank equally with Coxs other senior
unsecured indebtedness. In addition, the 4.625% senior
notes may be redeemed by Cox, in whole or in part, at any time
prior to maturity at the greater of (x) 100% of the
principal amount and (y) the present value of the principal
amount and the remaining scheduled interest payments plus a
make-whole premium, plus in either case (x) or (y), accrued
and unpaid interest. Interest is payable on a semi-annual basis.

On August 1, 2003, Coxs
$250.0 million aggregate principal amount of 6.15% REset
Put Securities due 2033 (REPS) was subject to mandatory
tender to the remarketing dealer. However, the remarketing
dealer and Cox mutually agreed to terminate the remarketing
dealers right to remarket the REPS and, in accordance with
the terms of the REPS, Cox repurchased the REPS on
August 1, 2003. The total aggregate consideration paid to
repurchase the REPS was $301.4 million, which amount
included $257.7 million principal amount and accrued
interest paid to the holders and $43.7 million remarketing
option value paid to the remarketing dealers. Cox recognized a
pre-tax loss of approximately $1.5 million in connection
with the repurchase of the REPS.

In September 2003, Cox issued $750.0 million
aggregate principal amount of senior notes, including a series
of 3.875% senior notes due 2008 with an aggregate principal
amount of $250.0 million and a series of 5.5% senior
notes due 2015 with an aggregate principal amount of
$500.0 million. After underwriting discount and commissions
and estimated offering costs of $9.6 million in aggregate,
Cox received net proceeds of approximately $740.4 million.
The 3.875% senior notes mature on October 1, 2008 and
the 5.5% senior notes mature on October 1, 2015. Both
series of senior notes are unsecured and rank equally with
Coxs other senior unsecured indebtedness. In addition,
both series of senior notes may be redeemed by Cox, in whole or
in part, at any time prior to maturity at the greater of
(x) 100% of the principal amount and (y) the present
value of

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COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)

the principal amount and the remaining scheduled
interest payments plus a make-whole premium, plus in either case
(x) or (y), accrued and unpaid interest. Interest on both
series is payable on a semi-annual basis.

In October 2003, Cox repaid its
$27.0 million 7.17% medium-term notes due October 1,
2003 upon their maturity.

2002 Issuances and
Repayments.In accordance with the
terms of the indenture governing Coxs convertible senior
notes due 2021, Cox became obligated to purchase for cash
convertible notes tendered and not withdrawn before the close of
business on February 22, 2002. Cox repurchased
$329.1 million aggregate principal amount at maturity of
the convertible notes that had been properly tendered and not
withdrawn, for aggregate cash consideration of
$232.8 million, which represented the accreted value of the
repurchased notes. In addition, Cox made an aggregate cash
payment of $7.5 million to the remaining holders of the
convertible notes who elected not to require Cox to repurchase
their notes.

In September 2002, Cox issued a series of
7.125% senior notes due October 1, 2012 with an
aggregate principal amount of $1.0 billion, less offering
costs and underwriting commissions of $13.9 million. The
7.125% senior notes are unsecured and rank equally with
Coxs other senior unsecured indebtedness. In addition, the
7.125% senior notes may be redeemed by Cox, in whole or in
part, at any time prior to maturity at 100% of the principal
amount plus accrued and unpaid interest and a make-whole
premium. Interest is payable on a semi-annual basis beginning
April 1, 2003.

On November 7, 2002, Coxs
$200.0 million aggregate principal amount of Floating Rate
MOPPRS/CHEERS was subject to mandatory tender to the remarketing
dealers. However, the remarketing dealers did not elect to
remarket the MOPPRS/ CHEERS, and Cox repurchased the
MOPPRS/CHEERS on November 7, 2002. The total aggregate
consideration paid to repurchase the MOPPRS/CHEERS was
$227.2 million, which amount included the remarketing
option value paid to the remarketing dealers and accrued
interest paid to the holders. Accordingly, Cox recognized a
pre-tax extinguishment loss, classified as a component of
interest expense, of $27.2 million upon settlement of these
securities.

Also in November 2002, Cox repaid its
$200.0 million aggregate principal amount of 6.5% senior
notes due November 15, 2002 upon their maturity.



| |                                     
| | ------------------------------------
| | Exchangeable Subordinated Debentures

Exchangeable Subordinated Debentures due
November 15, 2029.In November
1999, Cox issued 14,375,000 PRIZES in a registered public
offering for aggregate net proceeds of approximately
$1.3 billion, less offering costs and underwriting
commissions of approximately $35.0 million. Interest on the
PRIZES is payable quarterly, and as of November 15, 2002,
the rate decreased from 7.75% to 2% per year on the
original principal amount in accordance with the terms of the
PRIZES. The original principal amount of each PRIZES is indexed
to the trading price of Sprint PCS common stock. The number of
shares of Sprint PCS common stock attributable to each PRIZES is
two shares.

The payment upon maturity of the PRIZES will be
the maximum of either the aggregate principal amount or the
current market value of the number of reference shares
attributable to each PRIZES, plus a final period distribution
premium, as defined. Prior to maturity, the PRIZES are
exchangeable at the holders option at any time for an
amount of cash equal to the current market value of the number
of reference shares attributable to each PRIZES, subject to
adjustment under certain circumstances.

Exchangeable Subordinated Debentures due
March 14, 2030.In March 2000,
Cox issued $275.0 million aggregate principal amount of
Premium PHONES in a registered public offering for net proceeds
of approximately $269.5 million. Interest on the Premium
PHONES is payable semi-annually at a rate of 3% per year on
the original principal amount. Each Premium PHONES is indexed to
the trading price of 16.28 shares of Sprint PCS common
stock.

72



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##### Table of Contents



COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)

The Premium PHONES, as amended, can be exchanged
by the holder based on the market value of the underlying shares
for cash. In addition, on or after March 17, 2004, Cox may
redeem the Premium PHONES for cash based on the maximum of
either the aggregate principal amount or the current market
value of the underlying shares, plus accrued and unpaid interest
and a final period distribution premium, as defined.

At maturity, holders of the Premium PHONES are
entitled to receive cash equal to the maximum of either the
aggregate principal amount or the then exchange market value of
the underlying shares plus accrued and unpaid interest and a
final period distribution, as defined.

Exchangeable Subordinated Discount Debentures
due April 19, 2020.In April
2000, Cox issued $1.8 billion aggregate principal amount at
maturity of Discount Debentures in a registered public offering
for proceeds of approximately $764.0 million, net of
offering costs and underwriting commissions of
$18.7 million and original issue discount of
$1.1 billion. Interest on the Discount Debentures is
payable semi-annually at a rate of 1% per annum on the
original issue price of each debenture. The accretion of the
original issue discount plus the 1% interest payments result in
an annualized yield to maturity of 5%. Each Discount Debenture
is indexed to the trading price of 7.5908 shares of Sprint
PCS common stock.

The Discount Debentures can be exchanged by the
holder based on the market value of the underlying shares for,
at Coxs election, cash, shares of Sprint PCS common stock
or a combination of both. The holders may also require Cox to
repurchase these securities on April 19, 2005,
April 19, 2010 and April 19, 2015 at a purchase price
equal to the adjusted principal amount, as defined, plus any
accrued and unpaid cash interest. Cox may pay in cash, shares of
Sprint PCS common stock or a combination of both.

On or after April 19, 2005, Cox may redeem
some or all of the Discount Debentures for cash at a redemption
price per debenture equal to the adjusted principal amount, plus
any accrued and unpaid cash interest.

2003 Purchases.In
June 2003, Cox purchased $1.3 billion original principal
amount of PRIZES and $274.9 million original principal
amount of Premium PHONES pursuant to Coxs tender offers
for such securities for aggregate cash consideration of
$755.1 million, representing the tender offer consideration
plus accrued and unpaid interest for each security. Cox
recognized a pre-tax gain of approximately $3.9 million in
connection with the purchase of the PRIZES and Premium PHONES.
As a result, $14.6 million aggregate original principal
amount of PRIZES and $0.1 million aggregate original
principal amount of Premium PHONES remain outstanding.

In September 2003, Cox purchased
$1.8 billion original principal amount at maturity of
Discount Debentures pursuant to Coxs tender offer for such
securities for aggregate cash consideration of
$908.8 million, representing the tender offer consideration
and, as applicable, the early tender premium, plus accrued and
unpaid interest. Cox recognized a pre-tax loss of approximately
$412.8 million in connection with the purchase of the
Discount Debentures. As a result, $62.3 million aggregate
principal amount at maturity of Discount Debentures remains
outstanding.

The PRIZES, Premium PHONES and Discount
Debentures are unsecured, subordinated obligations, ranking
junior in right of payment to all of Coxs existing and
future senior indebtedness. These instruments are accounted for
as derivative instruments pursuant to SFAS No. 133.
See Note 9. Derivative Instruments and Hedging
Activities.

Zero-Coupon Debt

In January 2001, Cox entered into a series of
prepaid forward contracts to sell up to 19.5 million shares
of its Sprint PCS common stock with an aggregate fair value as
of the respective trade dates of $502.0 million for
proceeds of $389.4 million, which was net of an original
issue discount of $112.6 million. These contracts matured
at various dates between 2004 and 2006 and, at Coxs
election, could be settled in cash or shares of

73



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##### Table of Contents



COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)

Sprint PCS common stock. Cox accounted for these
contracts as zero-coupon debt instruments and was accreting the
$112.6 million original issue discount through the
respective contract maturity dates using the effective interest
method. In August 2003, Cox terminated its series of prepaid
forward contracts and the zero-coupon debt was extinguished upon
the termination. In connection with the termination, Cox sold
the 19.5 million shares of Sprint PCS common stock, which
had been pledged to secure its obligations pursuant to the
series of prepaid forward contracts and were classified as
trading. Proceeds from this sale, net of the payment made to the
prepaid forward contracts counterparty and customary fees, were
approximately $0.1 million. Cox recognized a pre-tax loss
of approximately $29.5 million in connection with the net
settlement of the zero-coupon debt instruments.

Embedded in each of the contracts was an equity
collar agreement, which allowed Cox to manage its exposure to
fluctuations in the fair value of the Sprint PCS common stock
through the contract maturity dates. The equity collar
agreements embedded in the contracts were accounted for as
derivative instruments in accordance with the requirements of
SFAS No. 133, and the change in fair value of these
derivatives between measurement dates was recognized through
earnings. See Note 9. Derivative Instruments and
Hedging Activities.

Interest Rate Swaps

Cox utilizes interest rate swap agreements to
manage its exposure to changes in interest rates associated with
certain of its fixed-rate debt obligations whereby these
fixed-rate debt obligations are effectively converted into
floating-rate debt obligations. The variable rates with respect
to Coxs interest rate swaps are adjusted quarterly or
semi-annually based on LIBOR. The notional amounts with respect
to the interest rate swaps do not quantify risk, but are used in
the determination of cash settlements under the interest rate
swap agreements. Cox is exposed to a credit loss in the event of
nonperformance by the counterparties; however, Cox does not
anticipate nonperformance by the counterparties. For a further
discussion regarding Coxs accounting for interest rate
swaps, see Note 9. Derivative Instruments and Hedging
Activities.

In March 2003, Cox entered into two interest rate
swap agreements with an aggregate notional amount of
$200.0 million. The swaps have been designated as fair
value hedges of the underlying debt, as defined in
SFAS No. 133, and relate to debt maturing in 2008.

In June and July 2003, Cox entered into a series
of interest rate swap agreements with an aggregate notional
amount of $400.0 million. These swaps have been designated
as fair value hedges of the underlying debt, as defined in
SFAS No. 133, and relate to debt maturing in 2009.

The following table summarizes the notional
amounts, weighted average interest rate data and maturities for
Coxs interest rate swaps at December 31, 2003 and
2002:

|                                              |  |             |             |      |  |   |             |  
|--------------------------------------------- |  | ----------- | ----------- | ---- |  | - | ----------- | -
|                                              |  |            
|                                              |  | December 31
|                                              |  |            
|                                              |  | 2003        |             | 2002
|                                              |  |             |             |     
|Notional amount (in thousands)                |  | $           | 1,750,000   |      |  | $ | 1,150,000   |  
|Weighted-average fixed interest rate received |  |             | 7.38        | %    |  |   | 7.38        | %
|Weighted-average floating interest rate paid  |  |             | 3.27        | %    |  |   | 3.10        | %
|Maturity                                      |  |             | 2004  2009 |      |  |   | 2004  2006 |  

As a result of the settlements under these
agreements, interest expense was reduced by $64.0 million
and $48.3 million during the years ended December 31,
2003 and 2002, respectively.

Maturities

Excluding commercial paper, maturities of
long-term debt for each of the five years subsequent to
December 31, 2003 and thereafter, are $490.1 million,
$375.0 million, $465.0 million, $0,
$450.0 million and

74



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##### Table of Contents



COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)

$4.7 billion, respectively. Maturities of
obligations under capital leases are $61.3 million,
$48.6 million, $38.4 million, $20.2 million,
$13.6 million for each of the five years subsequent to
December 31, 2003, respectively, and $56.4 million
thereafter. The maturities of long-term debt represent future
contractual obligations and are reported gross of any related
discounts, premiums and other adjustments, such as embedded
derivatives, necessary to comply with accounting principles
generally accepted in the U.S. These amounts are classified
as a contra account within debt and were approximately
$31.6 million and $2.6 billion at December 31,
2003 and 2002, respectively. Certain debt obligations are
subject to repurchase prior to maturity or may be settled with
shares of Sprint PCS common stock upon exchange.

Debt Covenants

Certain of Coxs debt instruments and credit
agreements contain covenants which, among other provisions,
contain certain restrictions on the payment of dividends and the
repurchase of capital stock. Certain of these agreements contain
financial covenants that require certain leverage ratios and
interest coverage (as defined in the covenants) be maintained.
Compliance with these ratios limits Coxs ability to incur
unlimited indebtedness. Cox was in compliance with all financial
covenants for all periods presented.



|   |                                                                        
|-- | -----------------------------------------------------------------------
|8. | Cox-Obligated Capital and Preferred Securities
    of Subsidiary Trusts

FELINE PRIDES

Cox Trust II (the Trust), a statutory
business trust formed under the laws of the State of Delaware
and a consolidated subsidiary of Cox, issued 13 million
FELINE PRIDES and 1.3 million Trust capital securities in
August 1999 for aggregate proceeds of $650.0 million, less
offering costs of $19.5 million. The Trust invested the
proceeds in 7% Senior Debentures due 2004 (the Debentures)
issued by Cox, which represented the sole assets of the Trust.
The obligations of the Trust related to the FELINE PRIDES and
the Trust capital securities were guaranteed by Cox.

The FELINE PRIDES consisted of 11.7 million
Income PRIDES and 1.3 million Growth PRIDES. Each Income
PRIDES consisted of a capital security of the Trust and a
forward purchase contract under which the holder was required to
purchase Class A common stock from Cox on August 16,
2002. The Trust capital securities forming a part of the Income
PRIDES and the stand-alone Trust capital securities paid
interest, in the form of distributions, at an annual rate of 7%
payable in cash on a quarterly basis. Each Growth PRIDES
consisted of a 5% undivided beneficial ownership interest in a
zero-coupon U.S. Treasury security, with a principal amount
at maturity equal to $1,000, and a forward purchase contract
under which the holder was required to purchase Class A
common stock from Cox on August 16, 2002. The forward
purchase contracts forming a part of the Growth PRIDES entitled
the holders to unsecured contract adjustment payments of .25% of
$50 per year payable in cash on a quarterly basis. The
zero-coupon U.S. Treasury securities were pledged to Cox to
secure the holders obligations under the forward purchase
contracts forming a part of the Growth PRIDES. The forward
purchase contracts forming a part of the Income and Growth
PRIDES required the holder to purchase a minimum of
1.1962 shares and a maximum of 1.4414 shares of Cox
Class A common stock per forward purchase contract
depending upon the average closing price per share of Coxs
Class A common stock for a 20 consecutive day period ending
on the third trading day immediately preceding August 16,
2002.

On August 16, 2002, Cox issued approximately
18.7 million shares of Cox Class A common stock to
holders of its Income PRIDES and Growth PRIDES in settlement of
such holders underlying obligation to purchase Cox
Class A common stock. Also on August 16, 2002, Cox
retained approximately $590.4 million

75



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##### Table of Contents



COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)

aggregate principal amount (out of the original
$650.0 million aggregate principal amount) of the
Debentures securing the purchase contract obligations of the
Income PRIDES holders in full satisfaction of such holders
obligations to purchase Cox Class A common stock. On
September 3, 2002, Cox repurchased approximately
$58.6 million of the remaining Debentures, funded primarily
with the proceeds from maturing Treasury securities received
upon settlement of the Growth PRIDES. After such repurchase,
approximately $1.0 million aggregate principal amount of
the Debentures remains outstanding. The reset interest rate,
effective August 16, 2002, for the remaining Debentures is
4.05%. As a result of the foregoing, approximately
$650.0 million previously classified as Cox-obligated
capital securities of subsidiary trusts attributable to the
FELINE PRIDES has been settled with the issuance of Cox
Class A common stock. Additionally, Cox wrote off
approximately $7.9 million of unamortized issuance costs
upon settlement.



| |       
| | ------
| | RHINOS

Cox RHINOS Trust (the RHINOS Trust), a statutory
business trust formed under the laws of the State of Delaware
and a consolidated subsidiary of Cox, issued 500,000 RHINOS to a
special purpose entity in October 1999 for aggregate proceeds of
$500.0 million, less offering costs of $11.3 million.
The RHINOS were long-term auction rate reset preferred
securities, representing undivided beneficial interests in the
assets of the RHINOS Trust. The RHINOS Trust invested the
proceeds in Senior Notes due 2029 (the Notes) issued by Cox,
which represented the sole assets of the RHINOS Trust. The
obligations of the RHINOS Trust related to the RHINOS were
unconditionally guaranteed by Cox. The Notes paid interest and,
thus, the RHINOS paid distributions, at a floating rate based on
LIBOR plus 75 points per year payable in cash on a
quarterly basis. The weighted-average interest rate for the
Notes was 2.64% and 5.08% for the years ended December 31,
2002 and 2001, respectively.

On August 28, 2002, Cox, Cox RHINOS Trust
and the holder of the RHINOS amended the terms of the RHINOS. As
a result of these amendments, among other things, Cox obtained
the discretionary right to redeem the Notes, in whole or in
part, at any time from August 28, 2002 to and including
October 1, 2002. On September 26, 2002, Cox redeemed
the Notes, which, in turn, resulted in Cox RHINOS Trust
repurchasing all of the outstanding RHINOS for
$502.6 million, which amount included interest accrued to
the redemption date. As a result of the RHINOS repurchase, Cox
no longer has any Cox-obligated preferred securities of
subsidiary trusts. Additionally, Cox wrote off approximately
$10.2 million of unamortized issuance costs upon repurchase.

The corresponding distributions on the FELINE
PRIDES, stand-alone Trust capital securities and RHINOS, as well
as the contract adjustment payments described above, totaled
$33.0 million and $68.5 million, net of tax, for the
years ended December 31, 2002 and 2001, respectively, and
have been presented as minority interest in the Consolidated
Statement of Operations.



|   |                                                  
|-- | -------------------------------------------------
|9. | Derivative Instruments and Hedging
    Activities

Cox accounts for derivative instruments in
accordance with SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended,
which requires all freestanding and embedded derivative
instruments to be measured at fair value and recognized on the
balance sheet as either assets or liabilities. In addition, all
derivative instruments used in hedging relationships must be
designated, reassessed and accounted for as either fair value
hedges or cash flow hedges pursuant to the provisions of
SFAS No. 133. Upon adoption of SFAS No. 133
on January 1, 2001, Cox recognized a one-time after-tax
transition adjustment that increased earnings by approximately
$717.1 million and reduced accumulated other comprehensive
income by approximately $194.0 million. These amounts have
been presented as a cumulative effect of change in accounting
principle, net of tax, in the accompanying Consolidated
Statement of Operations and Consolidated Statement of
Shareholders Equity for the year ended December 31,
2001.

76



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##### Table of Contents



COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)

Cox does not hold or issue derivative instruments
for trading purposes and is not a party to leveraged
instruments. From time to time, however, Cox uses derivative
instruments to manage its exposure to changes in the fair value
of certain of its assets or liabilities or to manage its
exposure to changes in interest rates or equity prices. These
derivative instruments are designated and accounted for by Cox
as hedges of the underlying exposure being managed, as
prescribed by SFAS No. 133. In addition, upon adoption
of SFAS No. 133, certain of Coxs debt
instruments and investments contained embedded or freestanding
derivatives, as defined. Cox has not designated these embedded
and freestanding derivatives as hedges under
SFAS No. 133 and, as such, changes in their fair value
are being recognized in earnings as derivative gains or losses.
Coxs use of derivative instruments may result in
short-term gains or losses and may increase volatility in its
earnings.

The credit risks associated with Coxs
derivative financial instruments are controlled through the
evaluation and monitoring of the creditworthiness of the
counterparties. Although Cox may be exposed to losses in the
event of nonperformance by the counterparties, Cox does not
expect such losses, if any, to be significant.

Cox recorded a pre-tax loss on derivative
instruments of $22.6 million for the year ended
December 31, 2003, a pre-tax gain on derivative instruments
of $1.1 billion for the year ended December 31, 2002,
and a pre-tax loss on derivative instruments of
$212.0 million for the year ended December 31, 2001.
Derivative adjustments in accordance with SFAS No. 133
have historically had a material impact on reported
indebtedness. As a result of Coxs purchase of its
exchangeable subordinated debentures, net settlement of its
zero-coupon debt and sale of Sprint PCS stock during 2003,
SFAS No. 133 adjustments did not significantly impact
reported indebtedness at December 31, 2003. Cumulative
derivative adjustments made in accordance with
SFAS No. 133, reduced reported indebtedness by
approximately $1.4 billion at December 31, 2002. The
following is a detail of Coxs (loss) gain on derivative
instruments for the years ended December 31, 2003, 2002 and
2001 followed by a summary of Coxs derivative instruments.

|                                     |                              |                        |       |       |   |      |       |         |  |   |        |        |  
|------------------------------------ | ---------------------------- | ---------------------- | ----- | ----- | - | ---- | ----- | ------- |  | - | ------ | ------ | -
|                                     |                              |                       
|                                     |                              | Year Ended December 31
|                                     |                              |                       
|                                     |                              | 2003                   |       | 2002  |   | 2001
|                                     |                              |                        |       |       |   |     
|                                     |                              |                       
|                                     |                              | (Millions of Dollars) 
|Equity collar arrangements           |                              | $                      |      |       |   | $    | 268.8 |         |  | $ | (4.4   | )     
|Zero-coupon debt                     |                              |                        | (18.7 | )     |   |      | 359.3 |         |  |   | 40.8   |       
|Exchangeable subordinated debentures |                              |                        | 0.5   |       |   |      | 583.1 |         |  |   | (279.8 | )     
|Stock purchase warrants              |                              |                        | (4.4  | )     |   |      | (85.6 | )       |  |   | (14.9  | )     
|Right-to-sell agreement              |                              |                        |      |       |   |      |      |         |  |   | 46.3   |       
|                                     |                              |                        |       |       |   |      |       |         |  |   |        |       
|                                     | Total derivative (loss) gain |                        | $     | (22.6 | ) |      | $     | 1,125.6 |  |   | $      | (212.0 | )
|                                     |                              |                        |       |       |   |      |       |         |  |   |        |       



| |                              
| | -----------------------------
| | Interest Rate Swap Agreements

Cox utilizes interest rate swap agreements
designed to assist Cox in maintaining a mix of fixed and
floating rate debt by converting a portion of existing fixed
rate debt into a floating rate obligation. Cox has designated
and accounted for its interest rate swap agreements as fair
value hedges whereby the fair value of the related interest rate
swap agreements are classified as a component of other assets
with the corresponding fixed-rate debt obligations being
classified as a component of debt in the Consolidated Balance
Sheets. Cox has assumed no ineffectiveness with regard to these
interest rate swap agreements as the agreements qualify for the
short-cut method of accounting for fair value hedges of
debt instruments, as prescribed by SFAS No. 133.
Coxs interest rate swap agreements approximated a
derivative asset of $61.2 million and $112.1 million
at December 31, 2003 and 2002, respectively.

77



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##### Table of Contents



COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)



| |                           
| | --------------------------
| | Equity Collar Arrangements

Cox had a series of costless equity collar
arrangements to manage its exposure to market price fluctuations
of approximately 15.8 million shares of its Sprint PCS
common stock. Cox also had costless equity collar arrangements
to manage its exposure to market price fluctuations of
17.2 million shares of its AT&T Wireless common stock
and of 22.5 million shares of its AT&T common stock.
Cox had designated and accounted for all of these costless
equity collars as fair value hedges. During the first quarter of
2002, Cox terminated these equity collar arrangements for
aggregate proceeds of $264.4 million and recognized a
pre-tax derivative gain of approximately $268.8 million.
For a further discussion of these transactions, see Note 5.
Investments.



| |                 
| | ----------------
| | Zero-Coupon Debt

As discussed in Note 7. Debt,
Cox terminated its series of prepaid forward contracts to sell
up to 19.5 million shares of its Sprint PCS common stock.
Prior to the termination, these contracts met the definition of
a hybrid instrument, as prescribed by SFAS No. 133.
These hybrid instruments were comprised of a zero-coupon debt
instrument, as the host contract, and an embedded derivative,
which derived its value, in part, based on the trading price of
Sprint PCS common stock. Cox did not designate these embedded
derivatives as a hedge of its investment in Sprint PCS common
stock. As a result, changes in the fair value of these embedded
derivatives were recognized in earnings and classified within
gain (loss) on derivative instruments in the Consolidated
Statements of Operations. As of December 31, 2002, the
aggregate fair value of these embedded derivatives approximated
a derivative asset of $400.1 million and was classified as
a component of the zero-coupon debt instruments. Accordingly,
the carrying value of the zero-coupon debt instruments, net of
the embedded derivative assets, amounted to a net liability of
$41.4 million at December 31, 2002 and was classified
within debt in the Consolidated Balance Sheets.

Exchangeable Subordinated Debentures

Cox has three series of exchangeable subordinated
debentures outstanding, referred to as PRIZES, Premium PHONES
and Discount Debentures, as further described in Note 7.
Debt. The exchangeable subordinated debentures meet
the definition of a hybrid instrument, as prescribed by
SFAS No. 133. These hybrid instruments are comprised
of an exchangeable subordinated debt instrument, as the host
contract, and an embedded derivative, which derives its value in
part, based on the trading price of Sprint PCS common stock,
U.S. Treasury rates and Coxs credit spreads. Cox has
not designated these embedded derivatives as a hedge of its
investment in Sprint PCS common stock. As a result, changes in
the fair value of these embedded derivatives are recognized in
earnings and classified within gain (loss) on derivative
instruments in the Consolidated Statements of Operations. The
aggregate fair value of these embedded derivatives approximated
a derivative obligation of $0 and $0.6 million at
December 31, 2003 and 2002, respectively, and has been
classified as a component of the corresponding exchangeable
subordinated debentures. Accordingly, the aggregate carrying
value of the exchangeable subordinated debentures, including the
embedded derivative obligations, amounted to $26.1 million
and $1.3 billion at December 31, 2003 and 2002,
respectively, and has been classified within debt in the
Consolidated Balance Sheets. As a result of Coxs purchase
of PRIZES, Premium PHONES and Discount Debentures pursuant to
its tender offers described in Note 7. Debt,
$14.6 million of aggregate original principal amount of
PRIZES, $0.1 million aggregate original principal amount of
Premium PHONES and $62.3 million aggregate principal amount
at maturity of Discount Debentures remain outstanding and,
therefore, the carrying values for such securities at
December 31, 2003 are significantly less than the carrying
values at December 31, 2002.

78



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##### Table of Contents



COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)



| |                        
| | -----------------------
| | Stock Purchase Warrants

Cox holds warrants to purchase equity securities
of certain publicly-traded and privately-held entities. Warrants
that can be exercised and settled by the delivery of net shares
such that Cox pays no cash upon exercise are deemed freestanding
derivative instruments, as prescribed by SFAS No. 133.
Cox has not designated net share warrants as hedging
instruments; accordingly, changes in the fair value of these
warrants are recognized in earnings and classified within gain
(loss) on derivative instruments in the Consolidated Statements
of Operations. The aggregate fair value of these warrants
approximated a derivative asset of $1.3 million and
$6.1 million at December 31, 2003 and 2002,
respectively, and have been classified as a component of
investments in the Consolidated Balance Sheets.

Right-to-Sell Agreement

Cox received the right to sell its shares of
Excite@Home common stock to AT&T in conjunction with the
restructuring of Excite@Home in August 2000, as further
described in Note 5. Investments. Cox exercised
this right in January 2001 for shares of AT&T common stock
and completed this transaction, as restructured, in May 2001 in
deemed satisfaction of Coxs right-to-sell agreement. Prior
to the adoption of SFAS No. 133, Cox accounted for the
right-to-sell agreement at fair value as an investment,
classified as available-for-sale, and recognized changes in the
fair value as a component of accumulated other comprehensive
income. Upon adoption of SFAS No. 133, the
right-to-sell agreement met the definition of a freestanding
derivative instrument and, as a result, on January 1, 2001,
Cox reclassified the unrealized gain on its right to sell
agreement of approximately $151.3 million, net of tax, from
accumulated other comprehensive income into earnings, as a
component of the cumulative effect of change in accounting
principle in the Consolidated Statement of Operations. Prior to
the consummation of the transaction with AT&T, Cox accounted
for the right-to-sell agreement as a derivative instrument
whereby it was measured at fair value and classified as a
component of investments in the Consolidated Balance Sheet. In
addition, Cox did not designate the right-to-sell agreement as a
hedge of its investment in shares of Excite@Home common stock.
Therefore, changes in the fair value of this derivative were
recognized in earnings and classified as a component of gain or
loss on derivative instruments in the Consolidated Statement of
Operations. During the year ended December 31, 2001, Cox
recognized a net gain on derivative instruments as a result of
changes in the fair value of the right-to-sell agreement of
approximately $46.3 million.



|    |                                    
|--- | -----------------------------------
|10. | Fair Value of Financial Instruments

Cox has estimated the fair value of its financial
instruments as of December 31, 2003 and 2002 using
available market information or other 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 amount of cash, accounts and other
receivables, accounts and other payables and amounts due to/from
CEI approximates fair value because of the short maturity of
those instruments. The fair value of Coxs investments
stated at fair value is estimated and recorded based on quoted
market prices as discussed in Note 5.
Investments. The fair value of Coxs equity
method investments and investments stated at cost cannot be
estimated without incurring excessive costs. Cox is exposed to
market price risk volatility with respect to investments in
publicly traded and privately held entities. Additional
information pertinent to the value of those investments is
discussed in Note 5. Investments.

The fair value of interest rate swaps used for
hedging purposes was approximately $61.2 million and
$112.1 million at December 31, 2003 and 2002,
respectively, and represents the estimated amount that Cox would
receive upon termination of the swap agreements.

79



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##### Table of Contents



COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)

The estimated fair value of Coxs fixed-rate
notes and debentures and exchangeable subordinated debentures at
December 31, 2003 and 2002 are based on quoted market
prices or a discounted cash flow analysis using Coxs
incremental borrowing rate for similar types of borrowing
arrangements and dealer quotations. A summary of the carrying
value and fair value of the fixed-rate instruments at
December 31, 2003 and 2002 is as follows:

|                                     |  |                       |         |       |  |          |         |       |  |   |         |  |  |   |         | 
|------------------------------------ |  | --------------------- | ------- | ----- |  | -------- | ------- | ----- |  | - | ------- |  |  | - | ------- | 
|                                     |  |                      
|                                     |  | December 31          
|                                     |  |                      
|                                     |  |                       |         |      
|                                     |  | 2003                  |         | 2002 
|                                     |  |                       |         |      
|                                     |  | Carrying              |         | Fair  |  | Carrying |         | Fair 
|                                     |  | Value                 |         | Value |  | Value    |         | Value
|                                     |  |                       |         |       |  |          |         |      
|                                     |  |                      
|                                     |  | (Millions of Dollars)
|Fixed-rate notes and debentures      |  | $                     | 6,683.4 |       |  | $        | 7,323.0 |       |  | $ | 5,978.6 |  |  | $ | 6,386.5 | 
|Exchangeable subordinated debentures |  |                       | 26.1    |       |  |          | 35.6    |       |  |   | 1,296.1 |  |  |   | 1,409.1 | 



|    |                 
|--- | ----------------
|11. | Retirement Plans

Cox maintains a funded, qualified defined benefit
pension plan covering substantially all employees (under the
heading Pension Benefits in the table below). In addition,
certain key employees of Cox participate in an unfunded,
nonqualified supplemental pension plan of CEI. The plans call
for benefits to be paid to eligible employees at retirement
based primarily upon years of service with Cox and compensation
rates near retirement. Coxs current policy is to fund its
qualified retirement plan in an amount that falls between the
minimum contribution required by ERISA and the maximum tax
deductible contribution.

Prior to 2003, CEI provided certain health care
and life insurance benefits (under the heading Other Benefits in
the table below) to substantially all retirees of Cox.
Post-retirement expense allocated to Cox by CEI was
$3.9 million and $3.0 million for the years ended
December 31, 2002 and 2001, respectively. The accumulated
post-retirement benefit obligation (APBO) attributable to
Coxs employees and retirees was $35.6 million and
$24.5 million at December 31, 2002 and 2001,
respectively. The funded status of the post-retirement plan
covering the employees of Cox was not determinable. The APBO for
the post-retirement plan of CEI substantially exceeded the fair
value of the assets held in the plan at December 31, 2002
and 2001. In January 2003, Cox adopted its own post-retirement
medical plan to provide benefits to substantially all retirees
of Cox. Previously, Cox had participated in the postretirement
medical plan sponsored by CEI, and in January 2003 the CEI plan
was split and Cox assumed its share of the plan obligations. In
conjunction with this transaction, Cox received a payment of
$15.1 million from CEI representing previous payments from
Cox to CEI associated with Coxs participation in the CEI
plan. Upon assumption of the plan, Cox recorded a postretirement
benefit liability of $37.7 million, and a net-of-tax
reduction in equity to the extent this amount exceeded the cash
received from CEI. Coxs policy is to fund benefits to the
extent contributions are tax deductible. In general, retiree
health benefits are paid as covered expenses are incurred.

Cox uses a measurement date of December 31
for its pension and postretirement benefit plans.

80



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##### Table of Contents



COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)

Obligations and Funded Status

|                                                                      |                                                |                        |         |                |   |      |         |         |   |   |         |         |   |   |     |     | 
|--------------------------------------------------------------------- | ---------------------------------------------- | ---------------------- | ------- | -------------- | - | ---- | ------- | ------- | - | - | ------- | ------- | - | - | --- | --- | 
|                                                                      |                                                |                       
|                                                                      |                                                | Year Ended December 31
|                                                                      |                                                |                       
|                                                                      |                                                |                        |         |               
|                                                                      |                                                | Pension Benefits       |         | Other Benefits
|                                                                      |                                                |                        |         |               
|                                                                      |                                                | 2003                   |         | 2002           |   | 2003 |         | 2002   
|                                                                      |                                                |                        |         |                |   |      |         |        
|                                                                      |                                                |                       
|                                                                      |                                                | (Thousands of Dollars)
|Change in Benefit Obligation                                          |                                                |                        |         |                |   |      |         |         |   |   |         |         |   |   |     |    
|                                                                      | Benefit obligation at beginning of year        |                        | $       | 216,243        |   |      | $       | 179,011 |   |   | $       |        |   |   | $   | N/A | 
|                                                                      | Plan initiation                                |                        |         |               |   |      |         |        |   |   |         | 37,685  |   |   |     | N/A | 
|                                                                      | Service cost                                   |                        |         | 25,540         |   |      |         | 20,073  |   |   |         | 4,301   |   |   |     | N/A | 
|                                                                      | Interest cost                                  |                        |         | 17,348         |   |      |         | 13,739  |   |   |         | 2,794   |   |   |     | N/A | 
|                                                                      | Actuarial loss                                 |                        |         | 37,316         |   |      |         | 6,075   |   |   |         | 2,555   |   |   |     | N/A | 
|                                                                      | Benefits paid                                  |                        |         | (3,055         | ) |      |         | (2,655  | ) |   |         | (767    | ) |   |     | N/A | 
|                                                                      |                                                |                        |         |                |   |      |         |         |   |   |         |         |   |   |     |    
|                                                                      | Benefit obligation at end of the year          |                        |         | 293,392        |   |      |         | 216,243 |   |   |         | 46,568  |   |   |     | N/A | 
|                                                                      |                                                |                        |         |                |   |      |         |         |   |   |         |         |   |   |     |    
|Change in Plan Assets                                                 |                                                |                        |         |                |   |      |         |         |   |   |         |         |   |   |     |    
|                                                                      | Fair value of plan assets at beginning of year |                        |         | 176,571        |   |      |         | 158,101 |   |   |         |        |   |   |     | N/A | 
|                                                                      | Actual return on plan assets                   |                        |         | 45,274         |   |      |         | (7,323  | ) |   |         | 1,279   |   |   |     | N/A | 
|                                                                      | Employer contributions                         |                        |         | 55,915         |   |      |         | 28,448  |   |   |         | 13,575  |   |   |     | N/A | 
|                                                                      | Benefits paid                                  |                        |         | (3,055         | ) |      |         | (2,655  | ) |   |         | (767    | ) |   |     | N/A | 
|                                                                      |                                                |                        |         |                |   |      |         |         |   |   |         |         |   |   |     |    
|                                                                      | Fair value of plan assets at end of year       |                        |         | 274,705        |   |      |         | 176,571 |   |   |         | 14,087  |   |   |     | N/A | 
|                                                                      |                                                |                        |         |                |   |      |         |         |   |   |         |         |   |   |     |    
|Funded status of plan                                                 |                                                |                        | (18,687 | )              |   |      | (39,672 | )       |   |   | (32,481 | )       |   |   | N/A |    
|Unrecognized actuarial losses                                         |                                                |                        | 58,386  |                |   |      | 48,493  |         |   |   | 5,258   |         |   |   | N/A |    
|Unrecognized prior service cost                                       |                                                |                        | 1,590   |                |   |      | 1,804   |         |   |   |        |         |   |   | N/A |    
|                                                                      |                                                |                        |         |                |   |      |         |         |   |   |         |         |   |   |     |    
|Prepaid (accrued) benefit cost                                        |                                                | $                      | 41,289  |                |   | $    | 10,625  |         |   | $ | (27,223 | )       |   | $ | N/A |    
|                                                                      |                                                |                        |         |                |   |      |         |         |   |   |         |         |   |   |     |    
|Amounts recognized in the Consolidated Balance
    Sheets consist of: |                                                |                        |         |                |   |      |         |         |   |   |         |         |   |   |     |    
|                                                                      | Prepaid benefit cost                           |                        | $       | 41,289         |   |      | $       | 10,625  |   |   | $       |        |   |   | $   | N/A | 
|                                                                      | Accrued benefit cost                           |                        |         |               |   |      |         |        |   |   |         | (27,223 | ) |   |     | N/A | 
|                                                                      |                                                |                        |         |                |   |      |         |         |   |   |         |         |   |   |     |    
|Net amount recognized                                                 |                                                | $                      | 41,289  |                |   | $    | 10,625  |         |   | $ | (27,223 | )       |   | $ | N/A |    
|                                                                      |                                                |                        |         |                |   |      |         |         |   |   |         |         |   |   |     |    



---

N/A denotes not applicable, as benefits were
provided by CEI prior to 2003.

The accumulated benefit obligation for the
pension plans was $229.4 million and $163.5 million at
December 31, 2003 and 2002, respectively. There were no
pension plans with an accumulated benefit obligation in excess
of plan assets.

81



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##### Table of Contents



COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)

Components of Net Periodic Benefit
Cost

|                                   |  |                        |         |          |  |          |       |          |  |          |         |          |  |   |     |  |  |   |         |   |  |   |     | 
|---------------------------------- |  | ---------------------- | ------- | -------- |  | -------- | ----- | -------- |  | -------- | ------- | -------- |  | - | --- |  |  | - | ------- | - |  | - | --- | 
|                                   |  |                       
|                                   |  | Year Ended December 31
|                                   |  |                       
|                                   |  |                        |         |          |  |         
|                                   |  | 2003                   |         | 2002     |  | 2001    
|                                   |  |                        |         |          |  |         
|                                   |  | Pensions               |         | Other    |  | Pension  |       | Other    |  | Pension  |         | Other   
|                                   |  | Benefits               |         | Benefits |  | Benefits |       | Benefits |  | Benefits |         | Benefits
|                                   |  |                        |         |          |  |          |       |          |  |          |         |         
|Service cost                       |  | $                      | 25,540  |          |  | $        | 4,301 |          |  | $        | 20,073  |          |  | $ | N/A |  |  | $ | 19,674  |   |  | $ | N/A | 
|Interest cost                      |  |                        | 17,348  |          |  |          | 2,794 |          |  |          | 13,739  |          |  |   | N/A |  |  |   | 12,114  |   |  |   | N/A | 
|Expected return on plan assets     |  |                        | (19,418 | )        |  |          |      |          |  |          | (16,287 | )        |  |   | N/A |  |  |   | (13,671 | ) |  |   | N/A | 
|Prior service cost amortization    |  |                        | 215     |          |  |          |      |          |  |          | 215     |          |  |   | N/A |  |  |   | 127     |   |  |   | N/A | 
|Actuarial (gain) loss amortization |  |                        | 1,567   |          |  |          | (89   | )        |  |          |        |          |  |   | N/A |  |  |   |        |   |  |   | N/A | 
|Transition amount amortization     |  |                        |        |          |  |          |      |          |  |          | (153    | )        |  |   | N/A |  |  |   | (239    | ) |  |   | N/A | 
|                                   |  |                        |         |          |  |          |       |          |  |          |         |          |  |   |     |  |  |   |         |   |  |   |     | 
|Net periodic benefit cost          |  | $                      | 25,252  |          |  | $        | 7,006 |          |  | $        | 17,587  |          |  | $ | N/A |  |  | $ | 18,005  |   |  | $ | N/A | 
|                                   |  |                        |         |          |  |          |       |          |  |          |         |          |  |   |     |  |  |   |         |   |  |   |     | 

Weighted-Average Assumptions

The following table sets forth the
weighted-average assumptions used to determine benefit
obligations:

|                              |  |                |      |          |  |          |      |          |  |  |      |   |  |  |     | 
|----------------------------- |  | -------------- | ---- | -------- |  | -------- | ---- | -------- |  |  | ---- | - |  |  | --- | 
|                              |  |               
|                              |  | At December 31
|                              |  |               
|                              |  |                |      |         
|                              |  | 2003           |      | 2002    
|                              |  |                |      |         
|                              |  | Pension        |      | Other    |  | Pension  |      | Other   
|                              |  | Benefits       |      | Benefits |  | Benefits |      | Benefits
|                              |  |                |      |          |  |          |      |         
|Discount rate                 |  |                | 6.25 | %        |  |          | 6.25 | %        |  |  | 6.75 | % |  |  | N/A | 
|Rate of compensation increase |  |                | 4.00 | %        |  |          | 4.00 | %        |  |  | 4.50 | % |  |  | N/A | 

The following table sets forth the
weighted-average assumptions used to determine net periodic
benefit cost:

|                                         |  |                        |      |          |  |          |      |          |  |          |      |          |  |  |     |  |  |  |      |   |  |  |     | 
|---------------------------------------- |  | ---------------------- | ---- | -------- |  | -------- | ---- | -------- |  | -------- | ---- | -------- |  |  | --- |  |  |  | ---- | - |  |  | --- | 
|                                         |  |                       
|                                         |  | Year Ended December 31
|                                         |  |                       
|                                         |  |                        |      |          |  |         
|                                         |  | 2003                   |      | 2002     |  | 2001    
|                                         |  |                        |      |          |  |         
|                                         |  | Pension                |      | Other    |  | Pension  |      | Other    |  | Pension  |      | Other   
|                                         |  | Benefits               |      | Benefits |  | Benefits |      | Benefits |  | Benefits |      | Benefits
|                                         |  |                        |      |          |  |          |      |          |  |          |      |         
|Discount rate                            |  |                        | 6.75 | %        |  |          | 6.75 | %        |  |          | 7.25 | %        |  |  | N/A |  |  |  | 7.50 | % |  |  | N/A | 
|Rate of compensation increase            |  |                        | 4.50 | %        |  |          | 5.00 | %        |  |          | 5.00 | %        |  |  | N/A |  |  |  | 5.25 | % |  |  | N/A | 
|Expected long-term return on plan assets |  |                        | 9.00 | %        |  |          | 9.00 | %        |  |          | 9.00 | %        |  |  | N/A |  |  |  | 9.00 | % |  |  | N/A | 

The 9.0% expected long-term return on plan assets
(ROA) assumption was developed with the use of an efficient
frontier model (a model utilized to determine the most efficient
mix of assets), using risk (defined as standard deviation),
return and correlation expectations. The return expectations are
created using long-term historical return premiums with
adjustments based on levels and forecasts of inflation, interest
rates and economic growth. The models return expectations
do not include a premium for active investment management versus
passive, indexed investments. Therefore, when an appropriate
premium is added for active investment management and for asset
rebalancing (as more fully described below), a range of ROA
expectations is produced, the bottom of which contains the 9.0%
assumption. This 9.0% expectation is consistent with the
long-term historical rates of return achieved on plan assets.

The weighted-average annual assumed rate of
increase in the per capita cost of covered health care benefits
(i.e., health care cost trend rate) for retirees is 10.0% in
2004, gradually decreasing to 5.0% by the

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COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)

year 2009, and remaining level thereafter.
Assumed health care cost trend rates have a significant effect
on the amounts reported for the health care plans. A one-percent
change in the assumed health care cost trend rate would have the
following effects as of December 31, 2003:

|                                               |  |                        |     |             |  |   |      |  
|---------------------------------------------- |  | ---------------------- | --- | ----------- |  | - | ---- | -
|                                               |  | 1% Increase            |     | 1% Decrease
|                                               |  |                        |     |            
|                                               |  |                       
|                                               |  | (Thousands of Dollars)
|Effect on service and interest cost components |  | $                      | 16  |             |  | $ | (14  | )
|Effect on postretirement benefit obligations   |  |                        | 239 |             |  |   | (211 | )

Plan Assets

Plan assets are held in the CEI Master Trust. The
following table sets forth the weighted-average asset
allocations at December 31, 2003 and 2002, and long-term
target allocations for 2004:

|                  |       |               |    |             |   |      |    |     |   |  |    |     |  
|----------------- | ----- | ------------- | -- | ----------- | - | ---- | -- | --- | - |  | -- | --- | -
|                  |       |               |    |            
|                  |       | Percentage of |    |            
|                  |       | Plan Assets   |    |            
|                  |       | At            |    |            
|                  |       | December 31   |    | Target     
|                  |       |               |    | Allocations
|                  |       | 2003          |    | 2002        |   | 2004
|                  |       |               |    |             |   |     
|Equity Securities |       |               | 63 | %           |   |      | 59 | %   |   |  | 61 | %  
|Debt Securities   |       |               | 36 | %           |   |      | 41 | %   |   |  | 39 | %  
|Other             |       |               | 1  | %           |   |      | 0  | %   |   |  | 0  | %  
|                  |       |               |    |             |   |      |    |     |   |  |    |    
|                  | Total |               |    | 100         | % |      |    | 100 | % |  |    | 100 | %

The long-term strategy for setting target
allocations is to develop a combination of assets that best
serves the plans and funds the benefit obligations at the
overall lowest cost to CEI. Utilizing the efficient frontier
model described above, incorporating the same return, risk and
correlation expectations, the resulting range of asset
combinations is examined. The selection of the desired target
mix is made by analyzing the range of asset combinations in
conjunction with the plans benefit obligations and costs.
Once long-term target ranges are established, they are
maintained by rebalancing at the individual investment manager
level (liquidating investments that have appreciated above their
targets to buy investments that are below their targets). In an
effort to minimize trading costs, rebalancing is generally
performed only when there have been meaningful market movements
and large cash inflows. Market timing is not an element of the
investment policy or strategy, and derivative instruments are
not deployed to gain exposure away from the long-term targets at
the overall fund level. Investment risk is mitigated through
prudent diversification of the investment mix, and additional
return is provided through the actions of active investment
managers. Active investment managers are allowed, on a limited
basis, to invest in return-enhancing investments, such as
emerging market debt and equity and lower rated corporate
securities.

The active investment managers are prohibited
from investing in Cox securities. The plan assets are indirectly
exposed to the performance of Cox through the investment in CEI
private stock, whose returns are impacted by the financial
performance of Cox, as well as the performance of the other
diversified CEI entities. The plan assets include CEI stock in
the amounts of $85.3 million (6.4% of total plan assets)
and $78.4 million (7.7% of total plan assets) at
December 31, 2003 and 2002, respectively.



| |              
| | -------------
| | Contributions

Cox contributed its total planned 2003 plan year
contributions for the funded pension plans during 2003. Due to
this accelerated contribution, Cox does not anticipate
additional contributions during 2004 for the funded pension
plans.

Cox contributed $2.4 million on
January 7, 2004 into its 401(h) account to fund
post-retirement welfare benefits. Additional contributions, if
any, will be determined later in 2004.

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COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)

Other

The disclosures in this footnote do not reflect
any impact of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003. On December 8, 2003, Present
Bush signed into law the Medicare Prescription Drug, Improvement
and Modernization Act of 2003 (the Act). The Act provides for a
federal subsidy to certain sponsors of retiree health care
plans. Pursuant to FASB Staff Position No. FAS 106-1,
Accounting and Disclosure Requirements Related to the
Medicare Prescription Drug, Improvement and Modernization Act of
2003, Cox has chosen to defer recognition of the Act in
these 2003 disclosures. Therefore, all measures of the
accumulated postretirement benefit obligation and the net
periodic postretirement benefit cost included in the financial
statements and accompanying notes do not reflect the effects of
the Act on the plans. Specific authoritative guidance on the
accounting for the federal subsidy under the Act is pending and
that guidance, when issued, could require Cox to change
previously reported information.

Substantially all of Coxs employees are
eligible to participate in the Savings and Investment plan.
Under the terms of the plan, Cox matches 50% of employee
contributions up to a maximum of 6% of the employees base
salary. Coxs expense under the plan was
$17.3 million, $16.2 million and $13.7 million
for the years ended December 31, 2003, 2002 and 2001,
respectively.



|    |                         
|--- | ------------------------
|12. | Stock Compensation Plans

At December 31, 2003, Cox had two
stock-based compensation plans for employees, a Long-Term
Incentive Plan (LTIP) and an Employee Stock Purchase Plan
(ESPP).

Long-Term Incentive Plan

Under the LTIP, executive officers and selected
key employees are eligible to receive awards of various forms of
equity-based incentive compensation, including stock options,
stock appreciation rights, stock bonuses, restricted stock
awards, performance units and phantom stock. Cox has reserved
36,000,000 shares of Class A common stock for issuance
under the LTIP. The LTIP is to be administered by the
Compensation Committee of the Board of Directors or its designee.

Options granted may be Incentive Stock
Options or Nonqualified Stock Options. The
exercise prices of the options are determined by the
Compensation Committee when the options are granted, subject to
a minimum price of the fair market value of the Class A
common stock on the date of grant. These options vest over a
period of three to five years from the date of grant and expire
10 years from the date of grant.

The fair value of each option grant is estimated
on the date of grant using the Black-Scholes option pricing
model with the following assumptions used for grants made in
2003, 2002 and 2001: weighted average expected volatilities at
each grant date averaging 30.3%, 27.6% and 35.0%, respectively,
no payment of dividends, expected life of six years and weighted
average risk-free interest rates calculated at each grant date
and averaging 3.2%, 5.0% and 4.9%, respectively.

84



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COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)

A summary of the status of Coxs stock
options granted under the LTIP as of December 31, 2003,
2002 and 2001 and changes during the years then ended is
presented below:

|                                                                              |           |        |            |           |   |        |       |           |  |        |            |           |   |   |       |       |  |   |           |           |   |   |       |       | 
|----------------------------------------------------------------------------- | --------- | ------ | ---------- | --------- | - | ------ | ----- | --------- |  | ------ | ---------- | --------- | - | - | ----- | ----- |  | - | --------- | --------- | - | - | ----- | ----- | 
|                                                                              |           |        |            |           |   |       
|                                                                              |           | 2003   |            | 2002      |   | 2001  
|                                                                              |           |        |            |           |   |       
|                                                                              |           |        |            | Weighted- |   |        |       | Weighted- |  |        |            | Weighted-
|                                                                              |           |        |            | Average   |   |        |       | Average   |  |        |            | Average  
|                                                                              |           |        |            | Exercise  |   |        |       | Exercise  |  |        |            | Exercise 
|                                                                              |           | Shares |            | Price     |   | Shares |       | Price     |  | Shares |            | Price    
|                                                                              |           |        |            |           |   |        |       |           |  |        |            |          
|Outstanding at beginning of year                                              |           |        | 10,860,838 |           |   | $      | 36.09 |           |  |        | 7,541,036  |           |   | $ | 33.66 |       |  |   | 5,975,792 |           |   | $ | 26.45 |      
|                                                                              | Granted   |        |            | 5,177,530 |   |        |       | 30.18     |  |        |            | 4,043,053 |   |   |       | 41.23 |  |   |           | 2,654,845 |   |   |       | 46.09 | 
|                                                                              | Exercised |        |            | (268,455  | ) |        |       | 12.44     |  |        |            | (157,520  | ) |   |       | 17.71 |  |   |           | (742,032  | ) |   |       | 13.43 | 
|                                                                              | Canceled  |        |            | (775,310  | ) |        |       | 40.29     |  |        |            | (565,731  | ) |   |       | 45.51 |  |   |           | (347,569  | ) |   |       | 47.81 | 
|                                                                              |           |        |            |           |   |        |       |           |  |        |            |           |   |   |       |       |  |   |           |           |   |   |       |      
|Outstanding at end of year                                                    |           |        | 14,994,603 |           |   |        | 34.26 |           |  |        | 10,860,838 |           |   |   | 36.09 |       |  |   | 7,541,036 |           |   |   | 33.66 |      
|                                                                              |           |        |            |           |   |        |       |           |  |        |            |           |   |   |       |       |  |   |           |           |   |   |       |      
|Options exercisable at year-end                                               |           |        | 3,881,550  |           |   | $      | 24.72 |           |  |        | 3,310,409  |           |   | $ | 17.35 |       |  |   | 3,436,856 |           |   | $ | 17.43 |      
|Weighted-average grant date fair value of options
    granted during the year |           | $      | 10.81      |           |   |        |       |           |  | $      | 15.61      |           |   |   |       |       |  | $ | 19.86     |           |   |   |       |      

The following table summarizes information about
stock options outstanding and exercisable at December 31,
2003:

|                         |               |                     |           |                     |  |           |           |             |  |             |       |           |  |  |           |           |  |  |           |     |  |   |       |       | 
|------------------------ | ------------- | ------------------- | --------- | ------------------- |  | --------- | --------- | ----------- |  | ----------- | ----- | --------- |  |  | --------- | --------- |  |  | --------- | --- |  | - | ----- | ----- | 
|                         |               |                     |           |                    
|                         |               | Options Outstanding |           | Options Exercisable
|                         |               |                     |           |                    
|                         |               |                     |           | Weighted-           |  |           |           |             |  | Weighted-   |       |          
|                         |               |                     |           | Average             |  | Weighted- |           |             |  | Average     |       | Weighted-
|                         |               |                     |           | Remaining           |  | Average   |           |             |  | Remaining   |       | Average  
|                         |               | Number              |           | Contractual         |  | Exercise  |           | Number      |  | Contractual |       | Exercise 
|Range of Exercise Prices |               | Outstanding         |           | Life                |  | Price     |           | Exercisable |  | Life        |       | Price    
|                         |               |                     |           |                     |  |           |           |             |  |             |       |          
|$ 8.49 - 11.31           |               |                     | 1,744,600 |                     |  |           | 2.1 years |             |  | $           | 10.03 |           |  |  | 1,744,600 |           |  |  | 2.1 years |     |  | $ | 10.03 |      
|                         | 19.50 - 30.15 |                     |           | 5,528,638           |  |           |           | 8.7         |  |             |       | 29.00     |  |  |           | 605,434   |  |  |           | 4.1 |  |   |       | 19.86 | 
|                         | 32.13 - 39.66 |                     |           | 843,622             |  |           |           | 6.1         |  |             |       | 34.30     |  |  |           | 627,058   |  |  |           | 5.2 |  |   |       | 34.29 | 
|                         | 40.06 - 43.45 |                     |           | 3,575,730           |  |           |           | 8.0         |  |             |       | 41.56     |  |  |           | 84,541    |  |  |           | 6.9 |  |   |       | 41.31 | 
|                         | 45.31 - 51.44 |                     |           | 3,302,013           |  |           |           | 6.6         |  |             |       | 47.95     |  |  |           | 819,917   |  |  |           | 6.1 |  |   |       | 50.52 | 
|                         |               |                     |           |                     |  |           |           |             |  |             |       |           |  |  |           |           |  |  |           |     |  |   |       |      
|                         |               |                     |           | 14,994,603          |  |           |           | 7.1         |  |             | $     | 34.26     |  |  |           | 3,881,550 |  |  |           | 3.9 |  |   | $     | 24.72 | 
|                         |               |                     |           |                     |  |           |           |             |  |             |       |           |  |  |           |           |  |  |           |     |  |   |       |      

Employee Stock Purchase Plans

In April 2000, Cox began administering its third
ESPP (the 2000 ESPP), under which Cox was authorized to issue
purchase rights totaling 2,000,000 shares of Class A
common stock. The 2000 ESPP had four alternate entry dates, two
of which commenced in 2000 and two in 2001. Employees were
eligible to participate in the 2000 ESPP as of the first entry
date on which they were employed and were regularly scheduled to
work at least 20 hours per week and were employed as of the
grant date corresponding to one of the entry dates. Under the
terms of the 2000 ESPP, the purchase price for each entry date
was the lower of 85% of the fair market value of the
Class A common stock on the grant date (the initial
purchase price) or 90% of the fair market value of the
Class A common stock on March 31, 2002 ($34.36), the
end of the 2000

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COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)

ESPP. The initial purchase price was set at
$42.67, $34.72, $40.61 and $34.50 for the first, second, third
and fourth entry dates, respectively. Purchase rights totaling
741,457, 98,833, 41,861, and 17,477 shares were issued
under the 2000 ESPP for the first, second, third and fourth
entry dates, respectively. Employees were allowed to purchase
the shares via payroll deductions through March 31, 2002,
at which time 558,264 shares were issued to the remaining
Plan participants. During 2002, 2001 and 2000,
2,097 shares, 9,295 shares and 1,420 shares,
respectively, were issued under the 2000 ESPP due to
cancellation of employees participation or termination of
employment. The weighted-average fair value of each purchase
right granted was $13.18, $7.96, $10.78 and $8.43 for the first,
second, third and fourth entry dates, respectively. The fair
value of the employees purchase rights granted in 2001 and
2000 was determined using the Black-Scholes model with the
following assumptions for the first, second, third and fourth
entry dates: expected volatility of 30.0%, 34.0%, 35.4% and
34.2%, respectively, no payment of dividends, expected life of
2.08 years, 1.54 years, 1.04 years and
0.54 years, respectively, and risk-free interest rate of
6.46%, 5.83%, 3.61% and 2.53%, respectively.

In July 2002, Cox began administering its fourth
ESPP (the 2002 ESPP), under which Cox is authorized to issue
purchase rights totaling 3,000,000 shares of Class A
common stock. The 2002 ESPP has four alternate entry dates:
July 1, 2002, January 1, 2003, July 1, 2003, and
January 1, 2004. Employees are eligible to participate in
the 2002 ESPP as of the first entry date on which they are
employed and are regularly scheduled to work at least
20 hours per week and are employed as of the grant date
corresponding to one of the entry dates. Under the terms of the
2002 ESPP, the purchase price for each entry date is the lower
of 85% of the fair market value of the Class A common stock
on the grant date (the initial purchase price) or 90% of the
fair market value of the Class A common stock on
June 30, 2004, the end of the 2002 ESPP. The initial
purchase price was set at $29.80, $24.19, $27.89, and $28.24 for
the first, second, third and fourth entry date, respectively.
Purchase rights totaling 647,155 shares,
33,695 shares, 17,959 shares, and 9,054 shares
were issued in 2002, 2003 and 2004 for the first, second, third,
and fourth entry dates, respectively. Employees are allowed to
purchase the shares via payroll deductions through June 30,
2004, at which time the shares will be purchased. During 2002
and 2003, 263 shares and 5,183 shares, respectively,
were issued under the Plan due to cancellation of
employees participation or termination of employment. The
weighted average fair value of each purchase right granted in
2002, 2003 and 2004 was $7.44, $8.26, $7.92, and $7.28 for the
first, second, third, and fourth entry dates, respectively. The
fair value of the employees purchase rights granted in
2002, 2003 and 2004 was determined using the Black-Scholes model
with the following assumptions for the first, second, third and
fourth entry dates: expected volatility of 28.76%, 30.95%,
29.77%, and 25.38%, respectively, no payment of dividends,
expected life of 2.04 years, 1.54 years,
1.05 years, and .55 years, respectively, and risk-free
interest rate of 2.83%, 1.60%, .72%, and 1.13%, respectively.



|    |                     
|--- | --------------------
|13. | Shareholders Equity

Cox is authorized to issue 10,000,000 shares
of preferred stock, 671,000,000 shares of Class A
common stock and 62,000,000 shares of Class C common
stock.

Convertible Preferred Stock

The holders of Series A convertible
preferred stock are entitled to one vote per share on all
matters upon which holders of Class A common stock are
entitled to vote and pay dividends to the extent declared by
Coxs Board of Directors. In addition, any time after
October 1, 2028 or upon the occurrence of certain events,
as defined, Cox may redeem the Series A convertible
preferred stock at the original issue price of $22.14 per
share, plus accrued and unpaid dividends. At any time after
October 1, 2003, the Series A convertible preferred
stock is convertible into registered shares of Class A
common stock at the option of the holder, based upon a
conversion formula specified in the agreement. Also, these
shares may automatically convert upon the occurrence of certain
events, including the sale of substantially all of Coxs
assets, as defined. Cox issued the Series A convertible
preferred stock in October 1998 in conjunction with its
acquisition of a cable system located in Las Vegas, Nevada. Cox
expects to account for any appreciation realized upon conversion
of the

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COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)

Series A convertible preferred stock as
contingent purchase price in accordance with SFAS No. 141,
Business Combinations.

Common Stock

Coxs Class A common stock and
Class C common stock are identical except with respect to
certain voting, transfer and conversion rights. Holders of
Class A common stock are entitled to one vote per share and
holders of Class C common stock are entitled to ten votes
per share. The Class C common stock is subject to
significant transfer restrictions and is convertible on a share
for share basis into Class A common stock at the option of
the holder.

On August 16, 2002, Cox issued approximately
18.7 million shares of Cox Class A common stock to
holders of its Income PRIDES and Growth PRIDES in settlement of
such holders underlying obligation to purchase Cox
Class A common stock. See Note 8. Cox-Obligated
Capital and Preferred Securities of Subsidiary Trusts for
more information.



| |                   
| | ------------------
| | Earnings Per Share

The following table reconciles the numerator and
the denominator of the basic and diluted earnings per share
computations for the years ended December 31, 2003, 2002
and 2001:

|                                                                                         |                                                                    |                                            |          |       |   |      |          |       |   |   |         |       | 
|---------------------------------------------------------------------------------------- | ------------------------------------------------------------------ | ------------------------------------------ | -------- | ----- | - | ---- | -------- | ----- | - | - | ------- | ----- | 
|                                                                                         |                                                                    |                                           
|                                                                                         |                                                                    | Year Ended December 31                    
|                                                                                         |                                                                    |                                           
|                                                                                         |                                                                    | 2003                                       |          | 2002  |   | 2001
|                                                                                         |                                                                    |                                            |          |       |   |     
|                                                                                         |                                                                    |                                           
|                                                                                         |                                                                    | (Thousands of Dollars, excluding per share
|                                                                                         |                                                                    | data)                                     
|(Loss) income before cumulative effect of change
    in accounting principle(A)          |                                                                    | $                                          | (137,801 | )     |   | $    | (274,039 | )     |   | $ | 37,911  |      
|                                                                                         |                                                                    |                                            |          |       |   |      |          |       |   |   |         |      
|Basic weighted average shares outstanding(B)                                             |                                                                    |                                            | 620,327  |       |   |      | 608,293  |       |   |   | 600,366 |      
|Effect of dilutive securities:                                                           |                                                                    |                                            |          |       |   |      |          |       |   |   |         |      
|                                                                                         | Employee stock options                                             |                                            |          |      |   |      |          |      |   |   |         | 643   | 
|                                                                                         | Employee stock purchase plan                                       |                                            |          |      |   |      |          |      |   |   |         | 596   | 
|                                                                                         | Convertible preferred stock                                        |                                            |          |      |   |      |          |      |   |   |         | 7,138 | 
|                                                                                         | Forward purchase contracts forming a part of the
    FELINE PRIDES |                                            |          |      |   |      |          |      |   |   |         | 74    | 
|                                                                                         |                                                                    |                                            |          |       |   |      |          |       |   |   |         |      
|Diluted weighted average shares outstanding(C)                                           |                                                                    |                                            | 620,327  |       |   |      | 608,293  |       |   |   | 608,817 |      
|                                                                                         |                                                                    |                                            |          |       |   |      |          |       |   |   |         |      
|(Loss) earnings per share before cumulative
    effect of change in accounting principle |                                                                    |                                            |          |       |   |      |          |       |   |   |         |      
|                                                                                         | Basic (loss) earnings per share (A/ B)                             |                                            | $        | (0.22 | ) |      | $        | (0.45 | ) |   | $       | 0.06  | 
|                                                                                         |                                                                    |                                            |          |       |   |      |          |       |   |   |         |      
|                                                                                         | Diluted (loss) earnings per share (A/ C)                           |                                            | $        | (0.22 | ) |      | $        | (0.45 | ) |   | $       | 0.06  | 
|                                                                                         |                                                                    |                                            |          |       |   |      |          |       |   |   |         |      

For the years ended December 31, 2003 and
2002, 25.3 million and 27.9 million Class A
common shares, respectively, related to employee stock-based
compensation plans, convertible senior notes and convertible
preferred stock were not included in the computation of diluted
EPS, because such effects would have been antidilutive for the
periods.

For the year ended December 31, 2001,
17.6 million Class A common shares related to
convertible senior notes and RHINOS were not included in the
computation of diluted EPS, because such effects would have been
antidilutive for the period.

87



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COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)

In April 2000, Cox approved a stock repurchase
program whereby Cox is authorized to purchase up to
$500.0 million of its outstanding Class A common stock
on the open market or through private transactions. During 2003,
2002 and 2001, Cox did not repurchase any shares of its
Class A common stock under the stock repurchase program.



| |      
| | -----
| | Other

At both December 31, 2003 and 2002, CEI
owned approximately 63.4% of the outstanding shares of Cox
common stock and held 73.9% of the voting power of Cox.



|    |                                           
|--- | ------------------------------------------
|14. | Transactions with Affiliated
    Companies

Cox receives certain services from, and has
entered into certain transactions with, CEI. Costs of the
services that are allocated to Cox are based on actual direct
costs incurred or on CEIs estimate of expenses relative to
the services provided to other subsidiaries of CEI. Cox believes
that these allocations were made on a reasonable basis, and that
receiving these services from CEI creates cost efficiencies;
however, there has been no study or any attempt to obtain quotes
from third parties to determine what the cost of obtaining such
services from third parties would have been.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Cox receives day-to-day cash management services
    from CEI, with settlements of outstanding balances between Cox
    and CEI occurring periodically at market interest rates. The
    amounts due to CEI are generally due on demand and represent the
    net balance of the intercompany transactions. Prior to
    May 2, 2003, outstanding amounts due from CEI bore interest
    equal to CEIs current commercial paper borrowing rate and
    outstanding amounts due to CEI bore interest at 50 basis
    points above CEIs current commercial borrowing rate as
    payment for the services provided. From and after May 2,
    2003, both outstanding amounts due from and to CEI bear interest
    equal to CEIs current commercial paper borrowing rate as
    payment for the services provided. Amounts due to CEI from Cox
    were approximately $4.0 million at December 31, 2003
    and amounts due from CEI to Cox were approximately
    $21.1 million at December 31, 2002, and the interest
    rate was 1.3% and 1.8% at December 31, 2003 and 2002,
    respectively. Included in amounts due from CEI are the following
    transactions:

|                                             |                                                          |                        |        |          |  
|-------------------------------------------- | -------------------------------------------------------- | ---------------------- | ------ | -------- | -
|                                             |                                                          | (Thousands of Dollars)
|                                             |                                                          |                       
|Intercompany due from CEI, December 31, 2000 |                                                          | $                      | 5,808  |         
|                                             | Cash transferred to CEI                                  |                        |        | 151,260  |  
|                                             | Net operating expense allocations and
    reimbursements |                        |        | (143,823 | )
|                                             |                                                          |                        |        |         
|Intercompany due from CEI, December 31, 2001 |                                                          |                        | 13,245 |         
|                                             | Cash transferred to CEI                                  |                        |        | 92,061   |  
|                                             | Net operating expense allocations and
    reimbursements |                        |        | (84,197  | )
|                                             |                                                          |                        |        |         
|Intercompany due from CEI, December 31, 2002 |                                                          |                        | 21,109 |         
|                                             | Cash transferred to CEI                                  |                        |        | 221,117  |  
|                                             | Net operating expense allocations and
    reimbursements |                        |        | (246,206 | )
|                                             |                                                          |                        |        |         
|Intercompany due to CEI, December 31, 2003   |                                                          | $                      | (3,980 | )       
|                                             |                                                          |                        |        |         



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Cox receives certain management services from CEI
    including legal, corporate secretarial, tax, internal audit,
    risk management, employee benefit (including pension plan)
    administration, fleet and other support services. Cox was
    allocated expenses for the year ended December 31, 2003,
    2002 and 2001 of approximately $6.0 million,
    $6.2 million and $5.3 million, respectively, related
    to these services.

88



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COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In connection with these management services, Cox
    reimburses CEI for payments made to third-party vendors for
    certain goods and services provided to Cox under arrangements
    made by CEI on behalf of CEI and its affiliates, including Cox.
    Cox believes such arrangements result in Cox receiving such
    goods and services at more attractive pricing than Cox would be
    able to secure separately. Such reimbursed expenditures include
    insurance premiums for coverage through the CEI insurance
    program, which provides coverage for all of its affiliates,
    including Cox. Rather than self-insuring these risks, CEI
    purchases insurance for a fixed-premium cost from several
    insurance companies, including an insurance company indirectly
    owned by descendants of Governor James M. Cox, the founder of
    CEI, including James C. Kennedy, Chairman of Coxs Board of
    Directors, and his sister, who each own 25%. This insurance
    company is an insurer and reinsurer on various insurance
    policies purchased by CEI, and it employs an independent
    consulting actuary to calculate the annual premiums for
    general/auto liability and workers compensation insurance based
    on Coxs loss experience, consistent with insurance
    industry practice. Coxs portion of these insurance costs
    was approximately $33.0 million, $27.2 million and
    $23.7 million for 2003, 2002 and 2001, respectively.
|
| |  | Coxs employees participate in certain CEI
    employee benefit plans, and Cox made payments to CEI in 2003,
    2002 and 2001 for the costs incurred by reason of such
    participation, including self-insured employee medical insurance
    costs of approximately $86.7 million, $77.5 million
    and $48.2 million, respectively; postemployment benefits of
    approximately $8.4 million, $7.3 million, and
    $5.1 million respectively; and executive pension plan
    payments of approximately $6.4 million, $2.8 million
    and $5.1 million, respectively. In January 2003, Cox
    adopted its own post-retirement medical plan to provide benefits
    to substantially all eligible Cox retirees. Prior to January
    2003, all eligible retirees of Cox participated in the CEI
    post-retirement medical plan. Cox made payments to CEI in 2002
    and 2001 of approximately $3.9 million and
    $3.0 million, respectively, for the costs incurred by
    reason of such participation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | Cox and CEI share resources relating to aircraft
    owned by each company. Depending on need, each occasionally uses
    aircraft owned by the other, paying a cost-based hourly rate.
    CEI also operates and maintains two airplanes owned by Cox. Cox
    pays CEI on a quarterly basis for fixed and variable operations
    and maintenance costs relating to these two airplanes. During
    2003, 2002 and 2001, Cox paid approximately $1.2 million,
    $0.7 million and $0.9 million, respectively, for use
    of CEIs aircraft and maintenance of Coxs aircraft by
    CEI, net of aircraft costs paid by CEI to Cox for use of
    Coxs aircraft.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | Cox pays rent and certain other occupancy costs
    to CEI for its corporate headquarters building. CEI holds the
    long-term lease of the Cox headquarters building and prior to
    2002, Cox and CEI and its other affiliates shared occupancy of
    the headquarters building. During 2002, CEI and its other
    affiliates moved to a new facility and Cox purchased from CEI
    business equipment located in that building at its depreciated
    net book value of approximately $7.2 million, which is
    believed to approximate fair value. Cox is now the sole occupant
    of its headquarters building. Rent for 2003 was approximately
    $11.2 million. Prior to 2003, related rent and occupancy
    expense was allocated based on occupied space, and for the year
    ended December 31, 2002 and 2001, was approximately
    $7.4 million and $7.2 million, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | From 1997 through 2002, Cox entered into a series
    of local joint ventures with Cox Interactive Media, Inc., an
    indirect wholly owned subsidiary of CEI, to develop, operate and
    promote advertising supported local Internet content, or
    City Sites, in the markets where Cox operates cable
    television systems featuring high-speed Internet access. Cox
    contributed approximately $41.1 million in the aggregate to
    the joint ventures for the period from inception through
    May 31, 2002 to fund its share of operating costs. During
    2002, Cox and Cox Interactive Media agreed to terminate the
    relationship and entered into a transition services agreement
    under which Cox paid Cox Interactive Media approxi-                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

89



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COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | mately $7.0 million to continue to operate
    Coxs city sites during a transition period. The joint
    venture entities were dissolved as of December 31, 2002,
    and pursuant to a separate agreement dated December 31,
    2002, Cox purchased certain assets used in the operation of the
    City Sites for insignificant cash consideration. Cox will use
    those assets to develop the City Sites as part of Cox High Speed
    Internet service. Cox Interactive Media agreed to reimburse Cox
    approximately $0.2 million for certain expenses incurred in
    connection with obtaining certain software licenses related to
    the City Sites.                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | In connection with CEIs sale of shares of
    Cox Class A common stock to two private investors in 2001,
    Cox entered into agreements providing the two private investors
    with certain demand and piggyback registration rights. CEI has
    agreed to pay all fees and expenses associated with Coxs
    performance under these registration rights agreements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | In September 2002, Cox and CEI amended their tax
    allocation agreement to provide that if one of CEI or Cox has
    overpaid its taxes and the other has underpaid, the underpaid
    taxpayer may apply the overpayment to its taxes if such credit
    is permitted by the respective tax authority. The underpaid
    party will be obligated to immediately repay the borrowed amount
    to the overpaid party, to pay interest from the effective date
    of the credit until repayment, and to bear any other expenses
    incurred. The underpaid party will indemnify the overpaid party
    if subsequent tax adjustments cause any detriment to the
    overpaid party as a result of use of the credit by the underpaid
    party. For the tax year 2001, Cox overpaid, and CEI underpaid,
    its estimated federal income taxes. Pursuant to the amended
    agreement, on September 3, 2002, $20.0 million of
    Coxs overpayment of its 2001 federal income taxes was
    applied to CEIs 2001 federal income taxes, and CEI
    contemporaneously paid Cox $20.0 million, plus

|          | 
|--------- | 
|interest. | 

Cox pays fees to certain entities in which it has
an ownership interest in exchange for cable programming.
Programming fees paid to such affiliates for the years ended
December 31, 2003, 2002 and 2001 were approximately
$86.2 million, $78.8 million and $69.7 million,
respectively.



|    |                         
|--- | ------------------------
|15. | Other Comprehensive Loss

The following represents the components of other
comprehensive loss and related tax effects for the years ended
December 31, 2003, 2002 and 2001:

|                                                                                                                                                                                         |  |                        |         |      |  |      |          |   |  |   |          |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | ------- | ---- |  | ---- | -------- | - |  | - | -------- | -
|                                                                                                                                                                                         |  |                       
|                                                                                                                                                                                         |  | Year Ended December 31
|                                                                                                                                                                                         |  |                       
|                                                                                                                                                                                         |  | 2003                   |         | 2002 |  | 2001
|                                                                                                                                                                                         |  |                        |         |      |  |     
|                                                                                                                                                                                         |  |                       
|                                                                                                                                                                                         |  | (Thousands of Dollars)
|Unrealized gains (losses), net of taxes of
    $(19,301), $611,326, and $(81,801) in 2003, 2002 and 2001,
    respectively                                                               |  | $                      | 30,831  |      |  | $    | (976,533 | ) |  | $ | 130,669  |  
|Recognition of previously unrealized
    (gains) losses on available-for-sale securities, net of
    taxes of $59,314, $(364,880), and $157,372 in 2003, 2002 and
    2001, respectively |  |                        | (94,748 | )    |  |      | 582,863  |   |  |   | (251,390 | )
|Cumulative effect of change in accounting
    principle, net of tax of $121,422 in 2001                                                                                                  |  |                        |        |      |  |      |         |   |  |   | (193,960 | )
|                                                                                                                                                                                         |  |                        |         |      |  |      |          |   |  |   |          |  
|Total other comprehensive loss                                                                                                                                                           |  | $                      | (63,917 | )    |  | $    | (393,670 | ) |  | $ | (314,681 | )
|                                                                                                                                                                                         |  |                        |         |      |  |      |          |   |  |   |          |  

Components of accumulated other comprehensive
income consisted of net unrealized gain on securities of
$25.3 million ($15.5 million, net of tax) and
$129.2 million ($79.5 million, net of tax) at
December 31, 2003 and 2002, respectively.

90



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COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)



|    |                                                 
|--- | ------------------------------------------------
|16. | Supplemental Financial Statement
    Information



| |                                                        
| | -------------------------------------------------------
| | Supplemental Consolidated Balance Sheet
    Information

|                                    |                              |                        |            |            |  |   |            |            | 
|----------------------------------- | ---------------------------- | ---------------------- | ---------- | ---------- |  | - | ---------- | ---------- | 
|                                    |                              |                       
|                                    |                              | December 31           
|                                    |                              |                       
|                                    |                              | 2003                   |            | 2002      
|                                    |                              |                        |            |           
|                                    |                              |                       
|                                    |                              | (Thousands of Dollars)
|Plant and equipment                 |                              |                        |            |            |  |   |            |           
|Land                                |                              | $                      | 107,677    |            |  | $ | 101,056    |           
|Buildings and building improvements |                              |                        | 590,658    |            |  |   | 519,879    |           
|Transmission and distribution plant |                              |                        | 11,032,896 |            |  |   | 9,853,102  |           
|Other equipment                     |                              |                        | 919,055    |            |  |   | 810,362    |           
|Capital leases                      |                              |                        | 423,565    |            |  |   | 382,924    |           
|Construction in progress            |                              |                        | 159,575    |            |  |   | 260,545    |           
|                                    |                              |                        |            |            |  |   |            |           
|                                    | Plant and equipment, at cost |                        |            | 13,233,426 |  |   |            | 11,927,868 | 
|Less accumulated depreciation       |                              |                        | (5,325,865 | )          |  |   | (4,134,690 | )         
|                                    |                              |                        |            |            |  |   |            |           
|                                    | Net plant and equipment      |                        | $          | 7,907,561  |  |   | $          | 7,793,178  | 
|                                    |                              |                        |            |            |  |   |            |           

|                          |                                 |                        |         |         |  |   |         |         | 
|------------------------- | ------------------------------- | ---------------------- | ------- | ------- |  | - | ------- | ------- | 
|                          |                                 |                       
|                          |                                 | December 31           
|                          |                                 |                       
|                          |                                 | 2003                   |         | 2002   
|                          |                                 |                        |         |        
|                          |                                 |                       
|                          |                                 | (Thousands of Dollars)
|Other current assets      |                                 |                        |         |         |  |   |         |        
|Inventory                 |                                 | $                      | 49,137  |         |  | $ | 96,967  |        
|Income tax receivable     |                                 |                        |        |         |  |   | 119,754 |        
|Prepaid assets            |                                 |                        | 37,600  |         |  |   | 41,522  |        
|Deferred income tax asset |                                 |                        | 34,393  |         |  |   | 10,190  |        
|Other                     |                                 |                        | 9,976   |         |  |   | 9,098   |        
|                          |                                 |                        |         |         |  |   |         |        
|                          | Total other current assets      |                        | $       | 131,106 |  |   | $       | 277,531 | 
|                          |                                 |                        |         |         |  |   |         |        
|Other current liabilities |                                 |                        |         |         |  |   |         |        
|Deposits and advances     |                                 | $                      | 92,008  |         |  | $ | 80,816  |        
|Income tax payable        |                                 |                        | 215,926 |         |  |   |        |        
|Other                     |                                 |                        | 142,619 |         |  |   | 145,609 |        
|                          |                                 |                        |         |         |  |   |         |        
|                          | Total other current liabilities |                        | $       | 450,553 |  |   | $       | 226,425 | 
|                          |                                 |                        |         |         |  |   |         |        



| |                                                                           
| | --------------------------------------------------------------------------
| | Supplemental Disclosure of Non-cash Investing
    and Financing Activities

|                                  |                                          |                        |   |         |   |      |   |          |   |  |   |           | 
|--------------------------------- | ---------------------------------------- | ---------------------- | - | ------- | - | ---- | - | -------- | - |  | - | --------- | 
|                                  |                                          |                       
|                                  |                                          | Year Ended December 31
|                                  |                                          |                       
|                                  |                                          | 2003                   |   | 2002    |   | 2001
|                                  |                                          |                        |   |         |   |     
|                                  |                                          |                       
|                                  |                                          | (Thousands of Dollars)
|Significant non-cash transactions |                                          |                        |   |         |   |      |   |          |   |  |   |          
|                                  | Settlement of FELINE PRIDES              |                        | $ |        |   |      | $ | 649,999  |   |  | $ |          | 
|                                  | Deemed satisfaction of Excite@Home right |                        |   |        |   |      |   |         |   |  |   | 1,282,789 | 
|Additional cash flow information  |                                          |                        |   |         |   |      |   |          |   |  |   |          
|                                  | Cash paid for interest                   |                        | $ | 374,030 |   |      | $ | 409,396  |   |  | $ | 476,355   | 
|                                  | Cash (received) paid for income taxes    |                        |   | (69,875 | ) |      |   | (201,011 | ) |  |   | 79,942    | 

91



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##### Table of Contents



COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)



|    |                              
|--- | -----------------------------
|17. | Commitments and Contingencies

Cox leases land, office facilities and various
items of equipment under noncancellable operating leases. Rental
expense under operating leases amounted to $21.9 million,
$21.8 million and $21.1 million in 2003, 2002 and
2001, respectively. Future minimum lease payments for each of
the five years subsequent to December 31, 2003 are
$18.4 million, $14.0 million, $10.2 million,
$7.2 million and $5.0 million, respectively, and
$9.6 million thereafter for all noncancellable operating
leases.

At December 31, 2003, Cox had outstanding
purchase commitments totaling approximately $145.8 million
for additions to plant and equipment and $584.7 million to
rebuild certain existing cable systems. In addition, Cox had
unused letters of credit outstanding totaling $4.3 million
at December 31, 2003.

In connection with certain of Coxs recent
acquisitions and other transactions, Cox has provided certain
indemnities to the respective counterparties with respect to
future claims that may arise from state or federal taxing
authorities. The nature and terms of these indemnities vary by
transaction and generally remain in force through the requisite
statutory review periods. In addition, the events or
circumstances that would require Cox to perform under these
indemnities are transaction and circumstance specific. As of
December 31, 2003, Cox believes the likelihood that it will
be required to perform under these indemnities is remote and
that the maximum potential future payments that Cox could be
required to make under these indemnifications are not
determinable at this time, as any future payments would be
dependent on the type and extent of the related claims, and all
available defenses, which are not reasonably estimable. Cox has
not historically incurred any material costs related to
performance under these types of indemnities.

Coxs subsidiary Cox Communications
Louisiana L.L.C. (Cox Louisiana) is a defendant in a putative
subscriber class action suit in Louisiana state court filed on
November 5, 1997. The suit challenges the propriety of late
fees charged by Cox Louisiana in the greater New Orleans area to
customers who fail to pay for services in a timely manner. The
suit seeks injunctive relief and damages under certain claimed
state law causes of action. The action is being defended
vigorously. The outcome of this matter cannot be predicted at
this time.

On November 14, 2000, GTE.NET, L.L.C. d/b/a
Verizon Internet Solutions and Verizon Select Services, Inc.
filed suit against Cox in the United States District Court for
the Southern District of California. Verizon alleged that Cox
has violated various sections of the Communications Act of 1934
by allegedly refusing to provide Verizon with broadband
telecommunications service and interconnection, among other
things. On November 29, 2000, Verizon amended its complaint
to add CoxCom, Inc., a subsidiary of Cox, as an additional
defendant. On January 8, 2002, Verizon filed a second
amended complaint, dropping its claims for interconnections and
damages. Verizon seeks various forms of relief, including
declaratory and injunctive relief. On January 29, 2002, the
Court granted defendants motion to stay the case on
primary jurisdiction grounds. Cox and CoxCom intend to defend
this action vigorously. The outcome cannot be predicted at this
time.

On August 23, 2002, plaintiff Redefining
Progress, on behalf of itself and all others similarly situated,
sued Fax.com, Inc., Cox Business Services, L.L.C. and others in
United States District Court for the Northern District of
California, alleging that Fax.com has sent numerous unsolicited
advertisements by facsimile in violation of a federal statute.
The complaint alleges that Cox Business Services, which provides
telecommunications services to Fax.com, is also liable for the
facsimiles in violation of the Telephone Consumer Protection Act
of 1991 (TCPA), Sections 206 and 207 of the
Telecommunications Act of 1996 and certain state laws. The suit
seeks an award of statutory damages in the amount of $500 for
each violation of the TCPA, treble damages, injunctive relief,
the establishment of a constructive trust and other relief. On
October 11, 2002, Cox Business Services moved to dismiss
for lack of subject matter jurisdiction, for failure to state a
claim, and based on the primary jurisdiction of the FCC. On
March 3, 2003, the court granted Cox Business
Services motion to dismiss for lack of subject matter
jurisdiction. The time for appeal has expired;

92



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COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)

therefore, the matter is concluded. A nearly
identical federal court suit was filed in the United States
District Court for the Northern District of California on
September 4, 2002 by plaintiff Daniel David, on behalf of
himself and all others similarly situated, against Fax.com, Cox
Business Services and others, but was not served until
December 4, 2002. The David suit was reassigned to the same
judge presiding over the suit filed by Redefining Progress, and
it asserts substantially the same claims and seeks substantially
the same relief. The David suit was stayed pending the outcome
of Cox Business Services motion to dismiss the Redefining
Progress suit. On May 3, 2003, the court entered an order
dismissing this case in light of its ruling in the Redefining
Progress suit, and that ruling was not appealed. The matter thus
is concluded.

In addition, on September 8, 2002, plaintiff
Daniel David, on behalf of himself and all others similarly
situated, filed a nearly identical case against Fax.com, Cox
Business Services and others in the Superior Court of
California, Alameda County. The complaint asserts various causes
of action including violation of the TCPA, trespass to chattels,
violation of Section 17-200 of the California Business and
Professions Code and unjust enrichment. The suit seeks damages
and injunctive relief similar to that sought in the related
federal suits. This action was stayed until October 2003. On
October 24, 2003, Cox Business Services filed an amended
demurrer and set it for hearing on December 6, 2003. On
December 9, 2003, pursuant to a stipulation of Cox Business
Services and plaintiff, the court entered an order sustaining
the demurrer as to Cox Business Services and dismissing Cox
Business Services from the case effective as of
December 16, 2003. Thus, the matter is concluded.

Cox @Home, Inc., a wholly-owned subsidiary of
Cox, is a stockholder of At Home Corporation, also called
Excite@Home, formerly a provider of high-speed Internet access
and content services, which filed for bankruptcy protection in
September 2001. On September 24, 2002, a committee of
bondholders of Excite@Home sued Cox, Cox @Home and Comcast
Corporation, among others, in the United States District Court
for the District of Delaware. The suit alleges the realization
of short-swing profits under Section 16(b) of the
Securities Exchange Act of 1934 from purported transactions
relating to Excite@Home common stock involving Cox, Comcast and
AT&T Corp., and purported breaches of fiduciary duty. The
suit seeks disgorgement of short-swing profits allegedly
received by the Cox and Comcast defendants totaling at least
$600.0 million, damages for breaches of fiduciary duties in
an unspecified amount, attorneys fees, pre-judgment
interest and post-judgment interest. On November 12, 2002,
Cox, Cox @Home, and David Woodrow filed a motion to dismiss or
transfer the action for improper venue or, in the alternative,
to transfer the action pursuant to 28 U.S.C.
Sec. 1404. On September 30, 2003, the Delaware
District Court ordered the action transferred to the United
States District Court for the Southern District of
New York. On December 22, 2003, Cox and Cox@Home filed
a motion to dismiss, or, in the alternative, for judgment on the
pleadings, with respect to the Section 16(b) claim. That
motion is pending. Cox and Cox @Home intend to defend this
action vigorously. The outcome cannot be predicted at this time.

Jerrold Schaffer and Kevin J. Yourman, on
May 26, 2000 and May 30, 2000, respectively, filed
class action lawsuits in the Superior Court of California,
San Mateo County, on behalf of themselves and all other
stockholders of Excite@Home as of March 28, 2000, seeking
(a) to enjoin consummation of a March 28, 2000 letter
agreement among Excite@Homes principal investors,
including Cox, and (b) unspecified compensatory damages.
Cox and David Woodrow, Coxs former Executive Vice
President, Business Development, among others, are named
defendants in both lawsuits. Mr. Woodrow formerly served on
the Excite@Home board of directors. The plaintiffs assert that
the defendants breached purported fiduciary duties of care,
candor and loyalty to the plaintiffs by entering into the letter
agreement and/or taking certain actions to facilitate the
consummation of the transactions contemplated by the letter
agreement. On February 26, 2001, the Court stayed both
actions, which had been previously consolidated, on grounds of
forum non-conveniens. A related suit styled Linda Ward,
et al. v. At Home Corporation (No. 418233) was
filed on September 6, 2001, in the same court. On
February 7, 2002, the Court consolidated the Ward action
with the Schaffer/ Yourman action, thereby also staying the Ward
action. On June 18, 2002, the court granted
plaintiffs motion to lift the stay and authorized
discovery to proceed regarding Coxs pending motion to

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COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)

dismiss for lack of personal jurisdiction. On
September 10, 2002, the United States Bankruptcy Court for
the Northern District of California in the Excite@Home
bankruptcy proceeding held that the claims in the suits were
derivative and, thus, constituted the exclusive property of the
Excite@Home bankruptcy estate. The Bankruptcy Court thereafter
ordered the plaintiffs to dismiss the suits. Plaintiffs
subsequently appealed the Bankruptcy Courts decision to
the United States District Court for the Northern District of
California. On September 29, 2003, the District Court
affirmed the order of the Bankruptcy Court. On October 27,
2003, plaintiffs filed a notice of appeal of the District
Courts decision to the United States Court of Appeals for
the Ninth Circuit. Cox intends to defend this action vigorously.
The outcome cannot be predicted at this time.

On April 26, 2002, Frieda and Michael Eksler
filed an amended complaint naming Cox as a defendant in a
putative class action lawsuit in the United States District
Court for the Southern District of New York against
AT&T Corp. and certain former officers and directors of
Excite@Home, among others. Cox was served on May 10, 2002.
This case has been consolidated with a related case captioned
Semen Leykin v. AT&T Corp., et al., and another
related case, and an amended complaint in the consolidated case,
naming Cox as a defendant, was filed and served on
November 7, 2002. The putative class includes persons who
purchased and held shares of Excite@Home common stock between
the time period March 28, 2000 and September 28, 2001.
The sole count against Cox asserts a claim against Cox as an
alleged controlling person of Excite@Home under
Section 20(a) of the Securities Exchange Act for violations
of Section 10(b) of the Securities Exchange Act and
Rule 10b-5 thereunder. The suit seeks from Cox unspecified
monetary damages, statutory compensation and other relief. In
addition, a claim against Coxs former Executive Vice
President, David Woodrow, who formerly served on
Excite@Homes board of directors, is asserted for breach of
purported fiduciary duties. The suit seeks from Woodrow
unspecified monetary and punitive damages. On February 11,
2003, Cox and Woodrow filed a dispositive motion to dismiss on
various grounds, including failure to state a claim. On
September 17, 2003, the District Court granted the motion
in part and denied it in part. Specifically, the Court dismissed
several purported statements by Excite@Home as bases for
potential liability because they were merely generalized
expressions of confidence and optimism constituting
puffery, dismissed the fiduciary duty claim against
Mr. Woodrow as pre-empted by the federal securities laws,
and denied the motions as to the remaining allegations of the
complaint. On October 7, 2003, Cox and Mr. Woodrow
sought reconsideration of a portion of the Courts order.
On December 24, 2003, the plaintiffs moved to certify a
class of persons who purchased Excite@Home stock between
March 28, 2000 and September 28, 2001, or held such
stock as of April 28, 2000. Both these motions are pending.
On February 17, 2004, the Court granted plaintiffs leave to
file a motion to amend the complaint to add an additional claim
for relief against all defendants under Section 14(a) of
the Securities Exchange Act in connection with an allegedly
false or misleading proxy statement issued by Excite@Home. On
February 24, 2004, the Court granted Coxs and
Mr. Woodrows motion for reconsideration and dismissed
plaintiffs allegations that Cox and Mr. Woodrow were
control persons with respect to primary violations
of Rule 10b-5 alleged to have occurred after
August 28, 2000. Cox intends to defend this action
vigorously. The outcome cannot be predicted at this time.

On July 3, 2003, Leo James filed a putative
class action lawsuit against Cox and David Woodrow, among
others, in the United States District Court for the Southern
District of New York. Cox was served on October 27,
2003. Mr. James is represented by the same attorneys who
represent the individuals who were previously designated lead
plaintiffs in the Leykin action described above. The complaint
in the James action asserts claims substantially similar to the
operative allegations in the Leykin action described above.
Accordingly, the sole count against Cox asserts a claim against
Cox as an alleged controlling person of Excite@Home
under Section 20(a) of the Securities Exchange Act for
violations of Section 10(b) of the Securities Exchange Act
and Rule 10b-5 thereunder and seeks from Cox unspecified
monetary damages, statutory compensation and other relief. On
November 17, 2003, Cox and certain other defendants jointly
filed a motion to dismiss the James action on the grounds that,
among other things, it was duplicative of the Leykin

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COX COMMUNICATIONS, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS   (Continued)

action. That motion is pending. Cox intends to
defend the action vigorously. The outcome cannot be predicted at
this time.

Cox and its subsidiaries are parties to various
other legal proceedings that are ordinary and incidental to
their businesses. Management does not expect that any of these
other currently pending legal proceedings will have a material
adverse impact on Coxs consolidated financial position,
results of operations or cash flows.



|    |                                              
|--- | ---------------------------------------------
|18. | Unaudited Quarterly Financial
    Information

The following table sets forth selected
historical quarterly financial information for Cox. This
information is derived from unaudited quarterly financial
statements of Cox and includes, in the opinion of management,
only normal and recurring adjustments that management considers
necessary for a fair presentation of the results for such
periods.

|                                          |  |                                                 |         |         |  |         |         |         |  |   |         |      |  |   |         |  
|----------------------------------------- |  | ----------------------------------------------- | ------- | ------- |  | ------- | ------- | ------- |  | - | ------- | ---- |  | - | ------- | -
|                                          |  |                                                
|                                          |  | 2003                                           
|                                          |  |                                                
|                                          |  | 1st                                             |         | 2nd     |  | 3rd     |         | 4th    
|                                          |  | Quarter                                         |         | Quarter |  | Quarter |         | Quarter
|                                          |  |                                                 |         |         |  |         |         |        
|                                          |  |                                                
|                                          |  | (Millions of Dollars, excluding per share data)
|Revenues                                  |  | $                                               | 1,366.3 |         |  | $       | 1,423.9 |         |  | $ | 1,460.2 |      |  | $ | 1,508.4 |  
|Cost of services (excluding depreciation) |  |                                                 | 579.8   |         |  |         | 590.1   |         |  |   | 617.0   |      |  |   | 604.4   |  
|Selling, general and administrative       |  |                                                 | 307.1   |         |  |         | 301.7   |         |  |   | 299.7   |      |  |   | 342.2   |  
|Depreciation and amortization             |  |                                                 | 384.3   |         |  |         | 364.3   |         |  |   | 382.1   |      |  |   | 399.8   |  
|Gain on sale of cable system              |  |                                                 |        |         |  |         | 0.5     |         |  |   |        |      |  |   |        |  
|                                          |  |                                                 |         |         |  |         |         |         |  |   |         |      |  |   |         |  
|Operating income                          |  |                                                 | 95.1    |         |  |         | 168.3   |         |  |   | 161.4   |      |  |   | 162.0   |  
|                                          |  |                                                 |         |         |  |         |         |         |  |   |         |      |  |   |         |  
|Net (loss) income                         |  | $                                               | (29.2   | )       |  | $       | 117.7   |         |  | $ | (215.1  | )(a) |  | $ | (11.3   | )
|                                          |  |                                                 |         |         |  |         |         |         |  |   |         |      |  |   |         |  
|Basic net (loss) income per share         |  | $                                               | (0.05   | )       |  | $       | 0.19    |         |  | $ | (0.35   | )    |  | $ | (0.02   | )
|                                          |  |                                                 |         |         |  |         |         |         |  |   |         |      |  |   |         |  
|Diluted net (loss) income per share       |  | $                                               | (0.05   | )       |  | $       | 0.19    |         |  | $ | (0.35   | )    |  | $ | (0.02   | )
|                                          |  |                                                 |         |         |  |         |         |         |  |   |         |      |  |   |         |  

|                                          |  |                                                 |         |         |  |         |         |         |  |   |         |   |  |   |         | 
|----------------------------------------- |  | ----------------------------------------------- | ------- | ------- |  | ------- | ------- | ------- |  | - | ------- | - |  | - | ------- | 
|                                          |  |                                                
|                                          |  | 2002                                           
|                                          |  |                                                
|                                          |  | 1st                                             |         | 2nd     |  | 3rd     |         | 4th    
|                                          |  | Quarter                                         |         | Quarter |  | Quarter |         | Quarter
|                                          |  |                                                 |         |         |  |         |         |        
|                                          |  |                                                
|                                          |  | (Millions of Dollars, excluding per share data)
|Revenues                                  |  | $                                               | 1,178.0 |         |  | $       | 1,244.6 |         |  | $ | 1,275.0 |   |  | $ | 1,340.9 | 
|Cost of services (excluding depreciation) |  |                                                 | 507.4   |         |  |         | 524.0   |         |  |   | 540.9   |   |  |   | 558.7   | 
|Selling, general and administrative       |  |                                                 | 278.5   |         |  |         | 278.8   |         |  |   | 280.7   |   |  |   | 290.4   | 
|Depreciation and amortization             |  |                                                 | 325.8   |         |  |         | 337.7   |         |  |   | 343.0   |   |  |   | 351.3   | 
|Loss on sale of cable system              |  |                                                 |        |         |  |         | 3.9     |         |  |   |        |   |  |   |        | 
|                                          |  |                                                 |         |         |  |         |         |         |  |   |         |   |  |   |         | 
|Operating income                          |  |                                                 | 66.3    |         |  |         | 100.2   |         |  |   | 110.4   |   |  |   | 140.5   | 
|                                          |  |                                                 |         |         |  |         |         |         |  |   |         |   |  |   |         | 
|Net income (loss)                         |  | $                                               | 135.6   |         |  | $       | (516.2  | )       |  | $ | (73.1   | ) |  | $ | 179.6   | 
|                                          |  |                                                 |         |         |  |         |         |         |  |   |         |   |  |   |         | 
|Basic net income (loss) per share         |  | $                                               | 0.23    |         |  | $       | (0.86   | )       |  | $ | (0.12   | ) |  | $ | 0.29    | 
|                                          |  |                                                 |         |         |  |         |         |         |  |   |         |   |  |   |         | 
|Diluted net income (loss) per share       |  | $                                               | 0.22    |         |  | $       | (0.86   | )       |  | $ | (0.12   | ) |  | $ | 0.28    | 
|                                          |  |                                                 |         |         |  |         |         |         |  |   |         |   |  |   |         | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Net loss for the third quarter of 2003 includes a
    $450.1 million pre-tax loss on extinguishment of debt
    primarily related to a $412.8 million pre-tax loss
    resulting from the purchase of $1.8 billion aggregate
    principal amount at maturity of the Discount Debentures pursuant
    to Coxs offer to purchase any and all Discount Debentures.

95



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##### Table of Contents



INDEPENDENT AUDITORS REPORT

To the Board of Directors and Shareholders of

Cox Communications, Inc.


We have audited the accompanying consolidated
balance sheets of Cox Communications, Inc. (Cox) as
of December 31, 2003 and 2002, and the related consolidated
statements of operations, shareholders equity, and cash
flows for each of the three years in the period ended
December 31, 2003. These financial statements are the
responsibility of Coxs management. Our responsibility is
to express an opinion on these financial statements based on our
audits.

We conducted our audits in accordance with
auditing standards generally accepted in the United States of
America. 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 audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial
statements referred to above present fairly, in all material
respects, the financial position of Cox at December 31,
2003 and 2002, and the consolidated results of its operations
and its cash flows for each of the three years in the period
ended December 31, 2003, in conformity with accounting
principles generally accepted in the United States of America.

As discussed in Note 4 to the consolidated
financial statements, on January 1, 2002 Cox changed its
method of accounting for goodwill and other intangible assets to
conform to Statement of Financial Accounting Standards
(SFAS) No. 142. In addition, as discussed in
Note 9 to the consolidated financial statements, effective
January 1, 2001, Cox changed its method of accounting for
derivative instruments and hedging activities to conform to
SFAS No. 133, as amended.

DELOITTE & TOUCHE LLP

Atlanta, Georgia

February 27, 2004


96



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##### Table of Contents








|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
    ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.






|         |                                   
|-------- | ----------------------------------
|Item 9A. | DISCLOSURE CONTROLS AND PROCEDURES

The Chief Executive Officer and the Chief
Financial Officer of Cox (its principal executive officer and
principal financial officer, respectively) have concluded, based
on their evaluation as of December 31, 2003, that
Coxs disclosure controls and procedures: are effective to
ensure that information required to be disclosed by Cox in the
reports filed or submitted by it under the Securities Exchange
Act of 1934, as amended, is recorded, processed, summarized and
reported within the time periods specified in the SECs
rules and forms; and include controls and procedures designed to
ensure that information required to be disclosed by Cox in such
reports is accumulated and communicated to Coxs
management, including the Chief Executive Officer and the Chief
Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure.

There have been no significant changes in
Coxs internal controls or in other factors that could
significantly affect internal controls subsequent to the date
the Chief Executive Officer and the Chief Financial Officer
carried out their evaluation.

Coxs disclosure controls and procedures are
designed to provide a reasonable level of assurance of reaching
Coxs desired disclosure control objectives and are
effective in reaching that level of reasonable assurance.




PART III






|         |                                                       
|-------- | ------------------------------------------------------
|Item 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE
    REGISTRANT

The information required by this Item is
incorporated by reference to Coxs Proxy Statement for the
2004 Annual Meeting of Stockholders.






|         |                       
|-------- | ----------------------
|Item 11. | EXECUTIVE COMPENSATION

The information required by this Item is
incorporated by reference to Coxs Proxy Statement for the
2004 Annual Meeting of Stockholders.






|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|Item 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
    OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this Item is
incorporated by reference to Coxs Proxy Statement for the
2004 Annual Meeting of Stockholders.






|         |                                                   
|-------- | --------------------------------------------------
|Item 13. | CERTAIN RELATIONSHIPS AND RELATED
    TRANSACTIONS

The information required by this Item is
incorporated by reference to Coxs Proxy Statement for the
2004 Annual Meeting of Stockholders.






|         |                                           
|-------- | ------------------------------------------
|Item 14. | PRINCIPAL ACCOUNTANT FEES AND
    SERVICES

The information required by this Item is
incorporated by reference to Coxs Proxy Statement for the
2004 Annual Meeting of Stockholders.

97



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##### Table of Contents






PART IV






|         |                                                                    
|-------- | -------------------------------------------------------------------
|Item 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
    REPORTS ON FORM 8-K



|    |                                                                  
|--- | -----------------------------------------------------------------
|(a) | Documents incorporated by reference or filed with
    this Report



| |     |                                                                                      
| | --- | -------------------------------------------------------------------------------------
| | (1) | Listed below are the financial statements which
    are filed as part of this report:



| |   |                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------
| |  | Consolidated Balance Sheets at December 31,
    2003 and 2002;                                           
|
| |  | Consolidated Statements of Operations for the
    Years Ended December 31, 2003, 2002 and 2001;          
|
| |  | Consolidated Statements of Shareholders
    Equity for the Years Ended December 31, 2003, 2002 and 2001;
|
| |  | Consolidated Statements of Cash Flows for the
    Years Ended December 31, 2003, 2002 and 2001; and      
|
| |  | Notes to Consolidated Financial Statements.                                                              



| |     |                                                                                                                                                                                                                                                                     
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | No financial statement schedules are required to
    be filed by Items 8 and 14(d) of this report because they
    are not required or are not applicable, or the required
    information is set forth in the applicable financial statements
    or notes thereto.
|
| | (3) | Exhibits required to be filed by Item 601 of
    Regulation S-K:                                                                                                                                                                                                    

Listed below are the exhibits which are filed as
part of this Report (according to the number assigned to them in
Item 601 of Regulation S-K):

|        |   |    |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------- | - | -- |  | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |   |    |  |            
|Number  |   |    |  | Description
|        |   |    |  |            
|        | 3 | .1 |  |            |  | Certificate of Incorporation of Cox
    Communications, Inc., as amended (incorporated by reference to
    exhibit 3.1 to Coxs Quarterly Report on Form 10-Q,
    filed on November 14, 2000).                                                                                                                                                                                                                                                                                                                                                                                                                          
|        | 3 | .2 |  |            |  | Bylaws of Cox Communications, Inc. (incorporated
    by reference to exhibit 3.2 to Coxs Registration
    Statement on Form S-4, file no. 33-80152, filed on
    December 16, 1994).                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 4 | .1 |  |            |  | Indenture, dated as of June 27, 1995,
    between Cox Communications, Inc. and The Bank of New York,
    as Trustee, relating to the debt securities (incorporated by
    reference to exhibit 4.1 to Coxs Registration
    Statement on Form S-1, file no. 33-99116, filed on
    November 8, 1995) (global notes representing Coxs
    senior unsecured non-convertible debt have not been filed or
    incorporated by reference in accordance with
    Item 601(b)(4)(iii) of Regulation S-K, and Cox agrees to
    furnish copies of such instruments to the Securities and
    Exchange Commission upon request).
|        | 4 | .2 |  |            |  | First Supplemental Indenture, dated as of
    August 12, 1999, between Cox Communications, Inc. and The
    Bank of New York, as Trustee. (incorporated by reference to
    exhibit 4.4 to Coxs Current Report on Form 8-K, dated
    August 12, 1999 and filed with the Commission on
    August 23, 1999).                                                                                                                                                                                                                                                                                                            
|        | 4 | .3 |  |            |  | Second Supplemental Indenture, dated as of
    March 14, 2000, between Cox Communications, Inc. and The
    Bank of New York, as Trustee (incorporated by reference to
    exhibit 4.9 to Coxs Annual Report on Form 10-K, filed
    on March 23, 2000).                                                                                                                                                                                                                                                                                                                                                                
|        | 4 | .4 |  |            |  | Third Supplemental Indenture, dated as of
    April 19, 2000, by and between Cox Communications, Inc. and
    The Bank of New York, as Trustee (incorporated by reference
    to exhibit 4.1 to Coxs Current Report on Form 8-K,
    filed on April 24, 2000).                                                                                                                                                                                                                                                                                                                                                          
|        | 4 | .5 |  |            |  | Fourth Supplemental Indenture, dated as of
    February 23, 2001, between Cox Communications, Inc. and The
    Bank of New York, as Trustee (incorporated by reference to
    exhibit 4.13 to Coxs Annual Report on Form 10-K,
    filed on March 19, 2001).                                                                                                                                                                                                                                                                                                                                                            
|        | 4 | .6 |  |            |  | Sixth Supplemental Indenture, dated as of
    May 5, 2003, between Cox Communications, Inc. and The Bank
    of New York, as Trustee (incorporated by reference to
    exhibit 4.4 to Coxs Form 8-A/A, filed on
    May 7, 2003).                                                                                                                                                                                                                                                                                                                                                                                       

98



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|        |    |     |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------- | -- | --- |  | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |     |  |            
|Number  |    |     |  | Description
|        |    |     |  |            
|        | 4  | .7  |  |            |  | Form of PRIZES (incorporated by reference to
    exhibit 4.2 to Coxs Registration Statement on Form
    8-A, filed on November 24, 1999).                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 4  | .8  |  |            |  | Indenture, dated as of January 30, 1998,
    between TCA Cable TV, Inc. and Chase Bank of Texas, National
    Association, as Trustee (incorporated by reference to
    exhibit 4(a) to TCAs Registration Statement on
    Form S-3, file no. 333-32015, filed on July 24, 1997).                                                                                                                                                                                                                                                                                                 
|        | 4  | .9  |  |            |  | First Supplemental Indenture, dated as of
    August 12, 1999, among TCA Cable TV, Inc., Cox Classic
    Cable, Inc. and Chase Bank of Texas, National Association, as
    Trustee (incorporated by reference to exhibit 4.2 to
    Coxs Current Report on Form 8-K, filed on August 25,
    1999).                                                                                                                                                                                                                                                                               
|        | 4  | .10 |  |            |  | Second Supplemental Indenture, dated as of
    December 1, 2003, between Cox Classic Cable, Inc., CoxCom,
    Inc. and JPMorgan Chase Bank (as successor to Chase Bank of
    Texas, National Association), as Trustee.                                                                                                                                                                                                                                                                                                                                                            
|        | 4  | .11 |  |            |  | Registration Rights Agreement, dated as of
    October 1, 1998, between Cox Communications, Inc., on the
    one hand, and G.C. Investments and Barbara J. Greenspun as
    Trustee of the Unified Credit Trust created under a Declaration
    of Trust dated December 6, 1998 (the Barbara
    Greenspun Trust), on the other hand (incorporated by
    reference as exhibit 10.1 to Coxs current report on
    Form 8-K, filed on October 15, 1998).                                                                                                                         
|        | 4  | .12 |  |            |  | Joinder Agreement and Acknowledgement of Rights
    and Obligations, dated as of August 31, 2002, by and among
    G.C. Investments, the Barbara Greenspun Trust, Greenspun Legacy
    Limited Partnership, 3G Capital, LLC and Cox Communications,
    Inc. (incorporated by reference to exhibit 10.1 to
    Coxs Quarterly Report on Form 10-Q, filed on
    November 12, 2002).                                                                                                                                                                                               
|        | 4  | .13 |  |            |  | Registration Rights Agreement, dated as of
    February 23, 2001, by and among Cox Communications, Inc.
    and Salomon Smith Barney Inc., Merrill Lynch, Pierce,
    Fenner & Smith Incorporated, Banc of America Securities
    LLC, Credit Suisse First Boston Corporation, Morgan
    Stanley & Co. Incorporated, ABN AMRO Rothschild LLC,
    Fleet Securities, Inc., J.P. Morgan Securities Inc. and SG
    Cowen Securities Corporation (incorporated by reference to
    exhibit 4.1 to Coxs current report on Form 8-K/A,
    filed on March 8, 2001).                   
|        | 4  | .14 |  |            |  | Registration Rights Agreement, dated as of
    October 29, 2001, among Cox Communications, Inc., Cox
    Enterprises, Inc. and Cascade Investment LLC (incorporated by
    reference to exhibit 4.1 to Coxs Quarterly Report on
    Form 10-Q/A, filed on January 23, 2002).                                                                                                                                                                                                                                                                                                      
|        | 4  | .15 |  |            |  | Registration Rights Agreement, dated as of
    October 29, 2001, among Cox Communications, Inc., Cox
    Enterprises, Inc. and Bill & Melinda Gates Foundation
    (incorporated by reference to exhibit 4.2 to Coxs
    Quarterly Report on Form 10-Q/A, filed on January 23, 2002).                                                                                                                                                                                                                                                                                             
|        | 10 | .1  |  |            |  | Amended and Restated 364-Day Credit Agreement,
    dated as of June 27, 2003, among Cox Communications, Inc.,
    the banks party thereto, JPMorgan Chase Bank, as administrative
    agent, and Bank of America, N.A. and Wachovia Bank, National
    Association as syndication agents (incorporated by reference to
    exhibit 10.2 to Coxs Quarterly Report on Form 10-Q,
    filed August 8, 2003).                                                                                                                                                                         
|        | 10 | .2  |  |            |  | Five-Year Credit Agreement, dated as of
    September 26, 2000, by and among Cox Communications, Inc.,
    the banks party thereto, The Chase Manhattan Bank, as
    Administrative Agent, Bank of America National Trust and Savings
    Association, as Syndication Agent, The Bank of New York and
    Wachovia Bank, N.A., as Co-Documentation Agents and Chase
    Securities Inc., as Sole Advisor, Arranger and Book Manager
    (incorporated by reference to exhibit 10.2 to Coxs
    Quarterly Report on Form 10-Q, filed with the Commission on
    November 14, 2000).
|        | 10 | .3  |  |            |  | First Amendment dated as of June 29, 2001 in
    respect of the Five-Year Credit Agreement dated as of
    September 26, 2000, among Cox Communications, Inc., the
    banks party thereto, The Chase Manhattan Bank, as administrative
    agent, The Bank of New York and Wachovia Bank, N.A., as
    co-documentation agents and Bank of America, N.A., as
    syndication agent (incorporated by reference to
    exhibit 10.2 to Coxs Registration Statement on
    Form S-3, File No. 333-65102, filed with the
    Commission on July 13, 2001).                           

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|        |    |     |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------- | -- | --- |  | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |     |  |            
|Number  |    |     |  | Description
|        |    |     |  |            
|        | 10 | .4  |  |            |  | Second Amendment dated as of June 28, 2002
    in respect of the Five-Year Credit Agreement, dated as of
    September 26, 2000, by and among Cox Communications, Inc.,
    the banks party thereto, JPMorgan Chase Bank, as administrative
    agent, The Bank of New York and Wachovia Bank, National
    Association, as co-documentation agents, and Bank of America,
    N.A., as syndication agent (incorporated by reference to
    exhibit 10.4 to Coxs Registration Statement on
    Form S-3/A, File No. 333-65102, filed with the
    Commission on December 20, 2002).
|        | 10 | .5  |  |            |  | Third Amendment dated as of June 27, 2003 in
    respect of the Five-Year Credit Agreement, dated as of
    September 26, 2000, by and among Cox Communications, Inc.,
    the banks party thereto, JPMorgan Chase Bank, as administrative
    agent, The Bank of New York and Wachovia Bank, National
    Association, as co-documentation agents, and Bank of America,
    N.A., as syndication agent (incorporated by reference to
    exhibit 10.3 to Coxs Quarterly Report on Form 10-Q,
    filed August 8, 2003).                                                          
|        | 10 | .6  |  |            |  | Cox Executive Supplemental Plan of Cox
    Enterprises, Inc. (incorporated by reference to
    exhibit 10.5 to Coxs Registration Statement on
    Form S-4, File No. 33-80152, filed with the Commission
    on December 16, 1994) (management contract or compensatory
    plan).                                                                                                                                                                                                                                                                                                
|        | 10 | .7  |  |            |  | Cox Communications, Inc. Second Amended and
    Restated Long-Term Incentive Plan. (incorporated by reference to
    Appendix B of Coxs Definitive Proxy Statement on Schedule
    14A, filed with the Commission on April 4, 2003)
    (management contract or compensatory plan).                                                                                                                                                                                                                                                                                               
|        | 10 | .8  |  |            |  | Cox Communications, Inc. Restricted Stock Plan
    for Non-Employee Directors. (incorporated by reference to
    exhibit 10.9 to Coxs Registration Statement on
    Form S-4, File No. 33-80152, filed with the Commission
    on December 16, 1994) (management contract or compensatory
    plan).                                                                                                                                                                                                                                                                              
|        | 10 | .9  |  |            |  | Cox Communications, Inc. Stock Option Plan for
    Non-Employees (management contract or compensatory plan)
    (incorporated by reference to exhibit 10.15 to Coxs
    Annual Report on Form 10-K, filed March 31, 2003).                                                                                                                                                                                                                                                                                                                                                        
|        | 10 | .10 |  |            |  | Revolving Promissory Notes, dated as of
    May 2, 2003 (incorporated by reference to exhibit 10.1
    to Coxs Quarterly Report on Form 10-Q, filed
    August 8, 2003).                                                                                                                                                                                                                                                                                                                                                                                                          
|        | 10 | .11 |  |            |  | Termination of Remarketing Agreement, dated as of
    June 25, 2003, by and between Cox Communications, Inc. and
    Morgan Stanley Co. Incorporated (incorporated by reference to
    exhibit 10.4 to Coxs Quarterly Report on Form 10-Q,
    filed August 8, 2003).                                                                                                                                                                                                                                                                                                             
|        | 13 |     |  |            |  | Portions of the 2003 Summary Annual Report to
    Shareholders (expressly incorporated by reference in
    Part II, Item 5 of this report).                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        | 21 |     |  |            |  | Subsidiaries of Cox Communications, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | 23 |     |  |            |  | Consent of Deloitte & Touche LLP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | 24 |     |  |            |  | Powers of Attorney (included on the signatures
    page to this report).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | 31 | .1  |  |            |  | Certification of Chief Executive Officer,
    pursuant to Rule 13a-14 of the Securities Exchange Act of 1934,
    as amended.                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        | 31 | .2  |  |            |  | Certification of Chief Financial Officer,
    pursuant to Rule 13a-14 of the Securities Exchange Act of 1934,
    as amended.                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        | 32 | .1  |  |            |  | Certification of Chief Financial Officer Pursuant
    to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 32 | .2  |  |            |  | Certification of Chief Financial Officer Pursuant
    to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                         

(b) Reports on Form 8-K filed during
the quarter ended December 31, 2003:

None.

100



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SIGNATURES

Pursuant to the requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934,
Cox Communications, Inc. has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.



| |                         
| | ------------------------
| | COX COMMUNICATIONS, INC.



| |     |                     
| | --- | --------------------
| | By: | /s/ JAMES O. ROBBINS

| |                                          
| | -----------------------------------------
| |                                          
| | James O. Robbins                         
| | President and Chief Executive
    Officer

Date: February 27, 2004

POWER OF ATTORNEY

Cox Communications, Inc., a Delaware corporation,
and each person whose signature appears below, constitutes and
appoints James O. Robbins and Jimmy W. Hayes, and
either of them, with full power to act without the other, such
persons true and lawful attorneys-in-fact, with full power
of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign this Annual
Report on Form 10-K and any and all amendments to such
Annual Report on Form 10-K and other documents in
connection therewith, and to file the same, and all exhibits
thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to
do and perform each and every act and thing necessary or
desirable to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, thereby
ratifying and confirming all that said attorneys-in-fact, or any
of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the
following persons on behalf of Cox Communications, Inc. and in
the capacities and on the dates indicated.

|                                                 |  |                                                                                            |  |                   |  | 
|------------------------------------------------ |  | ------------------------------------------------------------------------------------------ |  | ----------------- |  | 
|                                                 |  |                                                                                            |  |                  
|Signature                                        |  | Title                                                                                      |  | Date             
|                                                 |  |                                                                                            |  |                  
|                                                
|/s/ JAMES C. KENNEDYJames C. Kennedy             |  | Chairman of the Board of Directors                                                         |  | February 27, 2004
|                                                
|/s/ JAMES O. ROBBINSJames O. Robbins             |  | President and Chief Executive
    Officer; Director(principal executive officer)           |  | February 27, 2004
|                                                
|/s/ JIMMY W. HAYESJimmy W. Hayes                 |  | Executive Vice President, Finance Chief Financial
    Officer(principal financial officer) |  | February 27, 2004
|                                                
|/s/ WILLIAM J. FITZSIMMONSWilliam J. Fitzsimmons |  | Vice President of Accounting & Financial
    Planning(principal accounting officer)        |  | February 27, 2004

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|                                       |  |          |  |                   |  | 
|-------------------------------------- |  | -------- |  | ----------------- |  | 
|                                       |  |          |  |                  
|Signature                              |  | Title    |  | Date             
|                                       |  |          |  |                  
|                                      
|/s/ JANET M. CLARKEJanet M. Clarke     |  | Director |  | February 27, 2004
|                                      
|/s/ G. DENNIS BERRYG. Dennis Berry     |  | Director |  | February 27, 2004
|                                      
|/s/ RODNEY W. SCHROCKRodney W. Schrock |  | Director |  | February 27, 2004
|                                      
|/s/ ROBERT C. OLEARYRobert C. OLeary |  | Director |  | February 27, 2004
|                                      
|/s/ ANDREW J. YOUNGAndrew J. Young     |  | Director |  | February 27, 2004

102



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