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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-K/A (Amendment No. 1) (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, 2004
 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 
 COMMUNICATIONS
 Cox Communications, Inc.
 (Exact name of
registrant as specified in its charter)
 Delaware
    
    58-2112281(State or other jurisdiction of incorporation or organization )
    
    (I.R.S. Employer Identification No.)1400 Lake Hearn Drive, Atlanta, Georgia
    
    30319(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code: (404) 843-5000 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
The principal exchange for the following securities is the New York Stock Exchange:
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, 2004, the last business day of the registrants most recently completed second
fiscal quarter, the aggregate market value of the registrants
then outstanding Class A Common
Stock, par value $1.00 per share, held by non-affiliates of
the registrant was $6,604,649,573 based on the closing price on the New York Stock Exchange on such
date. There
were 556,170,238 shares of Class A Common Stock, par value $0.01
per share, and 27,597,792 shares of Class C Common
Stock outstanding as of February 28, 2005.




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COX COMMUNICATIONS, INC.
2004 FORM 10-K/A AMENDMENT TO ANNUAL REPORT
TABLE OF CONTENTS  
 PagePART IConsolidated Balance Sheets
    
    
    1Consolidated Statements of Operations
    
    
    2Consolidated Statements of Shareholders Equity
    
    
    3Consolidated Statements of Cash Flows
    
    
    4Notes to Consolidated Financial Statements
    
    
    5Report of Independent Registered Public Accounting Firm
    
    
    44Managements Report on Internal Controls Over Financial Reporting
    
    
    45Report of Independent Registered Public Accounting Firm on Internal
Control Over
Financial Reporting
    
    
    46PART IVExhibits and Financial Statement Schedules
    
    48Signatures
    
    
    51EX-23 CONSENT OF DELOITTE & TOUCHE LLPEX-31.1 SECTION 302 CERTIFICATION OF THE CEOEX-31.2 SECTION 302 CERTIFICATION OF THE CFOEX-32.1 SECTION 906 CERTIFICATION OF THE CEOEX-32.2 SECTION 906 CERTIFICATION OF THE CFO




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Explanatory Note This amendment to Coxs annual report on Form 10-K/A is being filed primarily to correct a typographical printing error.
In the original report on Form 10-K, the reported amount for Intangible assets on the Consolidated
Balance Sheet as of December 31, 2004 was incorrectly stated as $19,369,452 (in
thousands). This amendment provides the correct amount of Intangible assets as of December 31,
2004 of $19,329,452 (in thousands) and includes an updated consent of the independent registered
public accounting firm as well as updated certifications of Coxs chief executive officer and chief
financial officer. Accordingly, pursuant to Rule 12b-15 under the Securities and Exchange Act of
1934, this amendment contains the complete text of Item 8. Consolidated Financial Statements and
Supplementary Data and Item 15. Exhibits and Financial Statement Schedules as amended.




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ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA COX COMMUNICATIONS, INC. 
 CONSOLIDATED BALANCE SHEETS
 December 312004
    
    
    2003(Thousands of Dollars)AssetsCurrent assetsCash
    
    $
    76,339
    
    
    $
    83,841Accounts and notes receivable, less allowance for doubtful
accounts of $26,482 and $26,175
    
    
    394,540
    
    
    
    370,832Other current assets
    
    
    136,386
    
    
    
    131,106Total current assets
    
    
    607,265
    
    
    
    585,779Net plant and equipment
    
    
    7,942,699
    
    
    
    7,907,561Investments
    
    
    1,171,647
    
    
    
    109,380Intangible assets
    
    
    19,329,452
    
    
    
    15,697,495Goodwill
    
    
    106,889
    
    
    
    Other noncurrent assets
    
    
    95,789
    
    
    
    117,361Total assets
    
    $
    29,253,741
    
    
    $
    24,417,576Liabilities and shareholders equityCurrent liabilitiesAccounts payable and accrued expenses
    
    $
    797,553
    
    
    $
    778,708Other current liabilities
    
    
    339,742
    
    
    
    450,553Cash obligation to untendered shareholders
    
    
    483,603
    
    
    
    Current portion of long-term debt
    
    
    59,962
    
    
    
    48,344Amounts due to CEI
    
    
    5,573
    
    
    
    3,980Total current liabilities
    
    
    1,686,433
    
    
    
    1,281,585Deferred income taxes
    
    
    8,326,574
    
    
    
    6,388,970Other noncurrent liabilities
    
    
    148,733
    
    
    
    164,070Long-term debt, less current portion
    
    
    12,965,773
    
    
    
    6,963,456Total liabilities
    
    
    23,127,513
    
    
    
    14,798,081Commitments and contingencies (Note 18)Minority interest in equity of consolidated subsidiaries
    
    
    
    
    
    
    139,519Shareholders equitySeries 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: 0 and 4,836,372
    
    
    
    
    
    
    4,836Class A common stock, $1 par value; 671,000,000 shares
authorized; shares issued: 0 and 598,481,602; shares
outstanding: 0 and 592,958,582
    
    
    
    
    
    
    598,482Class A common stock, $0.01 par value; 671,000,000 shares
authorized; shares issued and outstanding: 556,170,238 and 0
    
    
    5,562
    
    
    
    Class C common stock, $1 par value; 62,000,000 shares
authorized; shares issued and outstanding: 0 and 27,597,792
    
    
    
    
    
    
    27,598Class C common stock, $0.01 par value; 62,000,000 shares
authorized; shares issued and outstanding: 27,597,792 and 0
    
    
    276
    
    
    
    Additional paid-in capital
    
    
    4,802,117
    
    
    
    4,545,635Retained earnings.
    
    
    1,318,218
    
    
    
    4,500,621Accumulated other comprehensive income
    
    
    55
    
    
    
    15,548Class A common stock in treasury, at cost: 0 and
5,523,020 shares
    
    
    
    
    
    
    (212,744
    )Total shareholders equity
    
    
    6,126,228
    
    
    
    9,479,976Total liabilities and shareholders equity
    
    $
    29,253,741
    
    
    $
    24,417,576
 See notes to consolidated financial statements. 1




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COX COMMUNICATIONS, INC. 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Year Ended December 312004
    
    
    2003
    
    
    2002(Thousands of Dollars)Revenues
    
    $
    6,424,990
    
    
    $
    5,758,868
    
    
    $
    5,038,598Costs and expensesCost of services (excluding depreciation and amortization)
    
    
    2,609,788
    
    
    
    2,391,310
    
    
    
    2,112,155Selling, general and administrative expenses (excluding
depreciation and amortization)
    
    
    1,427,391
    
    
    
    1,250,686
    
    
    
    1,147,204Depreciation and amortization
    
    
    1,627,064
    
    
    
    1,505,475
    
    
    
    1,357,906Impairment of intangible assets
    
    
    2,415,889
    
    
    
    25,000
    
    
    
    Loss (gain) on sale and exchange of cable systems
    
    
    5,021
    
    
    
    (469
    )
    
    
    3,916Operating (loss) income
    
    
    (1,660,163
    )
    
    
    586,866
    
    
    
    417,417Interest expense
    
    
    (429,058
    )
    
    
    (467,753
    )
    
    
    (549,858
    )(Loss) gain on derivative instruments, net
    
    
    (127
    )
    
    
    (22,567
    )
    
    
    1,125,588Gain (loss) on investments, net
    
    
    28,364
    
    
    
    165,194
    
    
    
    (1,317,158
    )Loss on extinguishment of debt
    
    
    (7,006
    )
    
    
    (450,069
    )
    
    
    (787
    )Other, net
    
    
    (8,923
    )
    
    
    (3,557
    )
    
    
    (5,080
    )Loss before income taxes, minority interest, equity in net
losses of affiliated companies, and cumulative
effect of change in accounting principle
    
    
    (2,076,913
    )
    
    
    (191,886
    )
    
    
    (329,878
    )Income tax benefit
    
    
    (916,510
    )
    
    
    (68,299
    )
    
    
    (113,001
    )Loss before minority interest, equity in net losses of
affiliated companies, and cumulative effect
of change in accounting principle
    
    
    (1,160,403
    )
    
    
    (123,587
    )
    
    
    (216,877
    )Minority interest
    
    
    (1,203
    )
    
    
    (6,116
    )
    
    
    (37,272
    )Equity in
net losses of affiliated companies, net of tax of $2,073, $4,975 and
$12,285, respectively
    
    
    (3,509
    )
    
    
    (8,098
    )
    
    
    (19,890
    )Loss before cumulative effect of change in
accounting principle
    
    
    (1,165,115
    )
    
    
    (137,801
    )
    
    
    (274,039
    )Cumulative
effect of change in accounting principle, net of tax of 813,130
    
    
    (1,210,190
    )
    
    
    
    
    

    
    Net loss
    
    $
    (2,375,305
    )
    
    $
    (137,801
    )
    
    $
    (274,039
    )
 See notes to consolidated financial statements. 2




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COX COMMUNICATIONS, INC. 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
 Class AAccumulated
    
    
    CommonSeries A
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    Other
    
    
    Stock inPreferred
    
    
    Common Stock
    
    
    Paid-in
    
    
    Retained
    
    
    Comprehensive
    
    
    Treasury,
    
    
    
    
    
    
    
    ComprehensiveStock
    
    
    Class A
    
    
    Class C
    
    
    Capital
    
    
    Earnings
    
    
    Income
    
    
    at Cost
    
    
    Total
    
    
    
    Loss(Thousands of Dollars)December 31, 2001...
    
    
    4,836
    
    
    
    578,493
    
    
    
    27,598
    
    
    
    3,891,157
    
    
    
    4,912,461
    
    
    
    473,135
    
    
    
    (211,889
    )
    
    
    9,675,791Net 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,457Issuance of stock for settlement of FELINE PRIDES
    
    
    
    
    
    
    18,738
    
    
    
    
    
    
    
    631,261
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    649,999Shares 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
    )
    
    
    9,685,090Net 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,786Shares 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
    )
    
    $
    9,479,976Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,375,305
    )
    
    
    
    
    
    
    
    
    
    
    (2,375,305
    )
    
    
    $
    (2,375,305
    )Issuance of stock related to stock compensation plans (including tax benefit
on stock options exercised)
    
    
    
    
    
    
    2,157
    
    
    
    
    
    
    
    69,319
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71,476Shares surrendered in connection with vesting of restricted stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (330
    )
    
    
    (330
    )Conversion of Series A Preferred Stock to Class A Common Stock
    
    
    (4,836
    )
    
    
    11,212
    
    
    
    
    
    
    
    225,243
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    231,619Cancellation of Class A Common Stock, in treasury
    
    
    
    
    
    
    (5,533
    )
    
    
    
    
    
    
    (207,541
    )
    
    
    
    
    
    
    
    
    
    
    213,074
    
    
    
    Cancellation of $1 par Class A Common Stock and $1 par value Class C
Common Stock and Issuance of $0.01 par value Class A Common Stock
and $0.01 par value Class C Common Stock
    
    
    
    
    
    
    (600,756
    )
    
    
    (27,322
    )
    
    
    628,078Elimination of 37.96% of Cox shareholders equity pursuant to the
going-private transaction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,981,919
    )
    
    
    (807,098
    )
    
    
    
    
    
    
    
    
    
    
    (2,789,017
    )Funding and expenses incurred pursuant to the going-private transaction
paid by CEI on behalf of Cox
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,523,302
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,523,302Change in net accumulated unrealized gain on securities, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,493
    )
    
    
    
    
    
    
    (15,493
    )
    
    
    
    (15,493
    )Other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,493
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (2,390,798
    )December 31, 2004
    
    $
    
    
    
    $
    5,562
    
    
    $
    276
    
    
    $
    4,802,117
    
    
    $
    1,318,218
    
    
    $
    55
    
    
    $
    
    
    
    $
    6,126,228
 See notes to consolidated financial statements. 3




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##### Table of Contents



COX COMMUNICATIONS, INC. 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year Ended December 312004
    
    
    2003
    
    
    2002(Thousands of Dollars)Cash flows from operating activitiesNet loss
    
    $
    (2,375,305
    )
    
    $
    (137,801
    )
    
    $
    (274,039
    )Adjustments to reconcile net loss to net cash provided
by operating activities:Depreciation and amortization
    
    
    1,627,064
    
    
    
    1,505,475
    
    
    
    1,357,906Impairment of intangible assets
    
    
    2,415,889
    
    
    
    25,000
    
    
    
    Loss
(gain) on sale and exchange of cable systems
    
    
    5,021
    
    
    
    (469
    )
    
    
    3,916Deferred income taxes
    
    
    (827,650
    )
    
    
    (327,668
    )
    
    
    205,373Loss (gain) on derivative instruments, net
    
    
    127
    
    
    
    22,567
    
    
    
    (1,125,588
    )(Gain) loss on investments, net
    
    
    (28,364
    )
    
    
    (165,194
    )
    
    
    1,317,158Equity in net losses of affiliated companies
    
    
    3,509
    
    
    
    8,098
    
    
    
    19,890Loss on extinguishment of debt
    
    
    7,006
    
    
    
    450,069
    
    
    
    787Minority interest, net of tax
    
    
    1,203
    
    
    
    6,116
    
    
    
    37,272Other, net
    
    
    (994
    )
    
    
    108,698
    
    
    
    182,321Cumulative effect of change in accounting principle, net of tax
    
    
    1,210,190
    
    
    
    
    
    
    
    (Increase) decrease in accounts and notes receivable
    
    
    (14,661
    )
    
    
    (15,922
    )
    
    
    52,918Decrease in other assets
    
    
    532
    
    
    
    41,328
    
    
    
    60,502Increase in
accounts payable and accrued expenses
    
    
    54,247
    
    
    
    22,650
    
    
    
    99,805(Decrease) increase in taxes payable
    
    
    (68,729
    )
    
    
    331,439
    
    
    
    (159,915
    )Decrease in other liabilities
    
    
    (30,569
    )
    
    
    (6,415
    )
    
    
    (5,467
    )Net cash provided by operating activities
    
    
    1,978,516
    
    
    
    1,867,971
    
    
    
    1,772,839Cash flows from investing activitiesCapital expenditures
    
    
    (1,389,931
    )
    
    
    (1,561,331
    )
    
    
    (1,932,416
    )Investments in affiliated companies
    
    
    (17,805
    )
    
    
    (22,270
    )
    
    
    (18,800
    )Proceeds from the sale and exchange of investments
    
    
    70,230
    
    
    
    246,417
    
    
    
    1,345,952Decrease (increase) in amounts due from CEI
    
    
    
    
    
    
    21,109
    
    
    
    (7,864
    )Proceeds for the sale of cable systems
    
    
    53,076
    
    
    
    822
    
    
    
    12,574Acquisition of minority interest
    
    
    (153,016
    )
    
    
    
    
    
    
    Other, net
    
    
    43,813
    
    
    
    (3,883
    )
    
    
    (7,616
    )Net cash used in investing activities
    
    
    (1,393,633
    )
    
    
    (1,319,136
    )
    
    
    (608,170
    )Cash flows from financing activitiesRevolving credit facilities borrowings, net
    
    
    1,650,000
    
    
    
    
    
    
    
    Commercial paper (repayments) borrowings, net
    
    
    (209,228
    )
    
    
    300,941
    
    
    
    (727,384
    )Proceeds from issuance of debt, net of debt issuance costs
    
    
    7,968,724
    
    
    
    1,330,750
    
    
    
    985,546Repayment of debt
    
    
    (3,566,148
    )
    
    
    (2,310,074
    )
    
    
    (704,951
    )Payment to acquire Coxs former public stock not beneficially owned by CEI
    
    
    (6,422,908
    )
    
    
    
    
    
    
    Redemption of preferred securities of subsidiary trust
    
    
    
    
    
    
    
    
    
    
    (502,610
    )Proceeds from the exercise of stock options
    
    
    5,219
    
    
    
    6,768
    
    
    
    24,291Increase in amounts due to CEI, net
    
    
    1,593
    
    
    
    3,980
    
    
    
    Distributions paid on capital and preferred securities of subsidiary trusts
    
    
    
    
    
    
    
    
    
    
    (47,764
    )Payment to repurchase remarketing option
    
    
    
    
    
    
    (43,734
    )
    
    
    (25,951
    )Other, net
    
    
    (19,637
    )
    
    
    17,671
    
    
    
    (24,002
    )Net cash used in financing activities
    
    
    (592,385
    )
    
    
    (693,698
    )
    
    
    (1,022,825
    )Net (decrease) increase in cash
    
    
    (7,502
    )
    
    
    (144,863
    )
    
    
    141,844Cash at beginning of period
    
    
    83,841
    
    
    
    228,704
    
    
    
    86,860Cash at end of period
    
    $
    76,339
    
    
    $
    83,841
    
    
    $
    228,704
 See notes to consolidated financial statements. 4




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COX COMMUNICATIONS, INC. 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. Organization and Basis of Presentation Cox
is a multi-service broadband communications company serving
approximately 6.6 million
customers nationwide. Cox is the nations third-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. Prior
to December 2004, Cox Communications, Inc. was an indirect, majority-owned subsidiary of
Cox Enterprises, Inc. (CEI). In October 2004, CEI and two of its
wholly-owned subsidiaries entered into an Agreement and Plan of Merger with Cox. Pursuant to this merger
agreement, Cox and one of the CEI subsidiaries commenced a joint tender offer to purchase all of
the shares of Cox Class A common stock not beneficially owned by CEI.
On December 8, 2004, CEI completed the tender offer to purchase
all of the common stock associated with the 37.96% minority interest
of Cox. Following the purchase, Cox was merged with a CEI subsidiary, with Cox as the surviving corporation.
Accordingly, at December 31, 2004, Cox was a wholly-owned subsidiary of CEI. 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 atBeginning of
    
    
    Charged to Costs
    
    
    Write-offs,Net of
    
    
    Balance atEnd ofPeriod
    
    
    and Expenses
    
    
    Recoveries
    
    
    Period(Thousands of Dollars)Year Ended December 312002
    
    $
    33,514
    
    
    $
    87,447
    
    
    $
    87,354
    
    
    $
    33,6072003
    
    
    33,607
    
    
    
    74,150
    
    
    
    81,582
    
    
    
    26,1752004
    
    
    26,175
    
    
    
    80,732
    
    
    
    80,425
    
    
    
    26,482
 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 $1.6 billion, $1.5 billion, and $1.4 billion for the years
ended December 31, 2004, 2003 and 2002, 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 5




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COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 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. Investments in which Cox is deemed to have the ability to exercise significant
influence over the operating and financial policies of the investee or where Coxs investment is
deemed to be more than minor are accounted for under the equity method. 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 6. Investments. 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 Securitiesand Emerging Issues
Task Force (EITF) Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments. 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. 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 6




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COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS lives, which consist primarily of franchise value. At December 31, 2004, the weighted-average
remaining useful life of intangible assets that are being amortized is six years. See Note 5.
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 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 7. 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 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. 104,
Revenue Recognition. In accordance with SAB No. 104, 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. Revenue by product and service was as follows: For the year endingDecember 312004
    
    
    2003
    
    
    2002Video
    
    
    60
    %
    
    
    64
    %
    
    
    68
    %Data
    
    
    17
    %
    
    
    15
    %
    
    
    11
    %
 7




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##### Table of Contents



COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the year endingDecember 312004
    
    
    2003
    
    
    2002Telephony
    
    
    9
    %
    
    
    8
    %
    
    
    7
    %Other
    
    
    2
    %
    
    
    1
    %
    
    
    1
    %Commercial
    
    
    6
    %
    
    
    5
    %
    
    
    5
    %Advertising
    
    
    6
    %
    
    
    7
    %
    
    
    8
    %
 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 12.
Retirements Plans. Stock Compensation Plans At December 31, 2004 and 2003, Cox had one stock-based compensation plan for employees, a
Long-Term Incentive Plan (LTIP), and at December 31, 2003, Cox also had an Employee Stock Purchase
Plan (ESPP). Both of these plans are more fully described in Note 13. Stock Compensation Plans.
Cox accounts for these 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. All options granted under the LTIP had an
exercise price equal to or greater than the market value of the underlying Class A common stock,
par value $1.00 per share (former public stock), on the grant date; therefore, no employee
compensation cost is reflected in net income with respect to options. 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 income (loss) if Cox had applied the fair
value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation, to
stock-based employee compensation.
The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option pricing model with the following assumptions used
for grants made in 2004, 2003 and 2002: weighted average expected volatilities
at each grant date averaging 22.9%, 30.3% and 27.6%, 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%, 3.2% and 5.0%,
respectively. Year Ended December 312004
    
    
    2003
    
    
    2002(Thousands of Dollars)Net loss, as reported
    
    $
    (2,375,305
    )
    
    $
    (137,801
    )
    
    $
    (274,039
    )Add: Stock-based compensation, as
reported, net of tax
    
    
    24,361
    
    
    
    
    
    
    
    Deduct: Total stock based compensation
determined under fair value based method
for all awards, net of tax
    
    
    (51,351
    )
    
    
    (22,859
    )
    
    
    (18,902
    )Pro forma net loss
    
    $
    (2,402,295
    )
    
    $
    (160,660
    )
    
    $
    (292,941
    )
 Derivative Financial Instruments 8




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COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 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 In March 2004, the EITF ratified its consensus related to the application guidance within EITF
Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments. EITF Issue No. 03-1 applies to investments in debt and equity securities within the
scope of SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, and
equity securities that are not subject to the scope of SFAS No. 115 and not accounted for under the
equity method under APB Opinion 18 and related interpretations. EITF Issue No. 03-1 requires that a
three-step model be applied in determining when an investment is considered impaired, whether that
impairment is other than temporary and the measurement of an
impairment loss. EITF Issue No. 03-1 originally required that
adoption of the recognition provisions prospectively to all
current and future investments during the quarter ended
September 30, 2004. However, on September 30,
2004, the Financial Accounting Standards Board (FASB) issued FASB
Staff Position (FSP) EITF No. 03-1-1, Effective Date of
Paragraph 16 of EITF Issue No. 03-1, which delayed the
effective date of the
recognition provisions of EITF Issue No. 03-1 until the issuance
of the final FSP EITF Issue 03-1-a,
Implementation Guidance for the Application of Paragraph 16 of EITF
Issue No. 03-1. Until the final FSP
is issued, Cox is not able to evaluate whether the adoption of the
recognition provisions under such
guidance will have a material effect on its results of operations or
financial position. In May 2004, the Financial Accounting Standards Board issued FASB Staff Position (FSP) 106-2,
Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and
Modernization Act of 2003(the Medicare Act). FSP 106-2 requires measures of the accumulated
postretirement benefit obligation and net periodic postretirement benefit costs to reflect the
effects of the Medicare Act and became effective for Cox on July 1, 2004. The adoption of FSP
106-2 did not have a material impact on Coxs financial position or results of operations. In September 2004, the Securities and Exchange Commission (SEC) announced that a direct value
method should be used to determine the fair value of all intangible assets required to be
recognized under SFAS No. 141, Business Combinations,and that registrants should apply a direct
value method to such assets acquired in business combinations completed after September 29, 2004.
Further, registrants who have applied the residual method to the valuation of intangible assets for
purposes of impairment testing shall perform a transition impairment test using a direct value
method on all intangible assets that were previously valued using the residual method under SFAS
No. 142 no later than the beginning of their first fiscal year beginning after December 15, 2004.
Impairments of intangible assets recognized upon application of a direct value method by entities
previously applying the residual method, including the related deferred tax effects, should be
reported as a cumulative effect of a change in accounting principle. 9




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COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Consistent with this SEC position
as codified in EITFD-108,Use of the Residual Method to Value
Acquired Assets Other Than Goodwill,
Cox began applying a direct value method to determine the
fair value of its indefinite-lived intangible assets comprised of cable franchise rights, acquired
prior to September 29, 2004. During the fourth quarter of 2004, Cox performed a transition
impairment test, which resulted in a charge of approximately
$2.0 billion ($1.2 billion, net of tax), which is reported within Cumulative effect of change in accounting principle, net of tax
in the accompanying Consolidated Statements of Operations.
The pro forma effects of retroactively applying a direct value method to
determine the fair value of cable franchise rights can not be computed or
reasonably estimated for the prior periods presented, primarily due to the
inability to develop the assumptions necessary to execute a direct value
methodology. In December 2004, the
FASB issued SFAS No.
123(Revised), Share-Based Payment. This statement replaces SFAS No. 123, Accounting for Stock-Based
Compensationand supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. SFAS
123(R) requires companies to apply a fair-value-based measurement method in accounting for
share-based payment transactions with employees and to record compensation cost for all stock
awards granted after the required effective date and to awards modified, repurchased, or cancelled
after that date. In addition, Cox is required to record compensation expense (as previous awards
continue to vest) for the unvested portion of previously granted awards that remain outstanding at
the date of adoption. SFAS 123(R) will be effective for quarterly periods beginning after June 15,
2005. Cox is currently assessing the impact of this statement on its consolidated financial
statements. Reclassifications Certain amounts in the 2003 and 2002 consolidated financial statements have been reclassified
for comparative purposes with 2004. 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 $65.5 million and $84.5 million existed at December 31,
2004 and 2003, respectively, as a result of checks outstanding. These book overdrafts are
included in as accounts payable and are considered financing activities in the Consolidated
Statements of Cash Flows. 4. Going-Private Transaction On December 8, 2004, CEI completed the tender offer to purchase all of the common stock
associated with the 37.96% minority interest of Cox and the subsequent short-form merger and Cox became a
wholly owned subsidiary of CEI. The aggregate purchase price (exclusive of estimated fees and
expenses) approximated $8.4 billion. The purchase price was funded by both CEI and Cox. Of the
total $8.4 billion, CEI paid approximately $1.5 billion, with Cox paying the remaining approximate
$6.9 billion, which was funded primarily through a term loan and various issuances of senior notes
of varying maturities. Approximately
50.2 million shares of common stock were not validly tendered in the
tender offer. These shares were converted into the right to receive
$34.75 per share in cash, without interest, and cancelled as part of the short-form
merger. As of December 31, 2004, Cox had a remaining cash obligation to purchase the untendered shares of approximately $483.6 million, which is reflected as Cash obligation to untendered
shareholders in the accompanying balance sheet. CET elected to apply push-down basis accounting with respect to shares acquired in the
going-private transaction. Accordingly, the aggregate $8.4 billion purchase price has been
pushed-down to the consolidated financial statements of Cox. Accordingly, the net
tangible and intangible assets of Cox at December 31, 2004 have been stepped-up to fair value
to the extent of the 37.96% minority interest acquired in the going-private transaction pursuant to
the purchase method of accounting for business combinations. The aggregate purchase price was as follows: (Thousands of Dollars)Cash consideration to acquire Coxs former public stock at $34.75 per share and to settle
the outstanding vested. in-the-money Cox employee stock options
    
    $
    8,405,713Transaction fees and expenses
    
    
    23,336Total purchase price
    
    
    8,429,049Less: Carrying value of net assets acquired at historical cost
    
    
    (2,789,017
    )Aggregate purchase price in excess of historical cost of net assets acquired
    
    $
    5,640,032
 10




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##### Table of Contents



The aggregate purchase price in excess of historical cost of net assets acquired
was allocated based on preliminary estimated fair values of the net tangible and intangible assets
as of the acquisition date. These initial purchase price allocations may be adjusted within one
year of the purchase date for changes in estimates of the fair value of assets acquired and
liabilities assumed based on the results of an independent appraisal process expected to be
completed during 2005. The following represents the preliminary allocation of the purchase price:

(Thousands of Dollars)Current assets
    
    $
    247,718Net plant and equipment
    
    
    3,165,983Intangible assets:Customer relationships (estimated useful life of 6 years)
    
    
    583,781Trade name (indefinite useful life)
    
    
    380,844Franchise value (indefinite useful life)
    
    
    11,343,927Goodwill
    
    
    106,889Other assets
    
    
    1,171,853Total assets required
    
    
    17,000,995
    (a)Current liabilities
    
    
    564,104Long-term debt
    
    
    2,523,080Deferred income taxes
    
    
    5,481,394Other liabilities
    
    
    3,368Total liabilities assumed
    
    
    8,571,946
    (b)Aggregate purchase price
    
    $
    8,429,049
    (a)-(b)


The following summarizes unaudited pro forma financial information for the years ending
December 31, 2004 and 2003, assuming the acquisition of the minority interest had occurred on
January 1, 2003. The majority of the increase in net loss is due to depreciation, amortization and
interest expense associated with the amortization of the fair value step-up of the net assets.
This unaudited pro forma financial information does not necessarily represent the operating results
that would have occurred had the transaction been consummated at the beginning of the period, as
the acquisition has been given effect below, or results that should be expected in future periods,
as follows:

Year Ended December 312004
    
    
    2003(Thousands of Dollars)Revenues
    
    $
    6,424,990
    
    
    $
    5,758,868Loss before cumulative effect of change in accounting principle
    
    
    (1,279,715
    )
    
    
    (252,401
    )Cumulative effect of change in accounting principle
    
    
    (1,210,190
    )
    
    
    Net loss
    
    $
    (2,489,905
    )
    
    $
    (252,401
    )


This unaudited pro forma financial information does not reflect any operating efficiencies and
cost savings that Cox may achieve.

5. 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,
2004, Cox held 751 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, 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. Accordingly, in connection with the adoption of SFAS No. 142, Cox did
not believe it had 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 prior
to 2002 was 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

11



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COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 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. Prior to September 2004, Cox assessed franchise value for impairment under SFAS No. 142
by utilizing a residual approach whereby Cox measured 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 subsequent impairment tests in accordance with SFAS No.
142 in August 2003 and August 2004. The subsequent impairment tests indicated no impairment of
franchise value. In September 2004, the SEC announced that a direct value method should be used to determine
the fair value of all intangible assets required to be recognized under SFAS No. 141, and that
registrants should apply a direct value method to such assets acquired in business combinations
completed after September 29, 2004. Further, registrants who have applied the residual method to
the valuation of intangible assets for purposes of impairment testing shall perform an impairment
test, the transition test, using a direct value method on all intangible assets that were
previously valued using the residual method under SFAS No. 142 no later than the beginning of their
first fiscal year beginning after December 15, 2004. Impairments of intangible assets recognized
upon application of a direct value method by entities previously applying the residual method,
including the related deferred tax effects, should be reported as a cumulative effect of a change
in accounting principle. Consistent with this SEC position, Cox began applying a direct value method to determine the
fair value of its indefinite-lived intangible assets comprised of cable franchise rights, acquired
prior to September 29, 2004. During the fourth quarter of 2004, Cox performed a transition
impairment test, which 12




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COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS resulted in a charge of
approximately $2.0 billion ($1.2 billion, net of tax), which is reported within Cumulative effect of change in accounting principle, net of tax
in the accompanying Consolidated Statements of Operations. Additionally,
as a result of the going-private transaction, Cox revised its marketplace
assumption surrounding its estimated cost of capital. In accordance with SFAS No. 142, Cox
performed an impairment test, which along with the revised estimated
cost of capital, included a revised long-range operating forecast. As
a result of the impairment test, Cox recognized an impairment charge
of approximately $2.4 billion related to its cable franchise
rights, as calculated using a direct value method. This impairment
charge is reflected as Impairment on intangible assets in the
accompanying Consolidated Statement of Operations. As discussed in Note 4. Going-private transaction, Cox
recorded both customer relationship
trade name intangibles and goodwill. The trade name intangible asset, which represent the value associated
with the Cox name, are deemed to have an indefinite useful life. Customer relationship intangible assets, which represent the value attributable to Cox
customers, are deemed to have a finite useful life of six years. 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 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. 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, 2004
    
    
    December 31, 2003Gross
    
    
    
    
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    NetCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    CarryingValue
    
    
    Amortization
    
    
    Value
    
    
    Value
    
    
    Amortization
    
    
    Value(Thousands of Dollars)Intangible
assets subject
to amortization
    
    $
    659,967
    
    
    $
    30,743
    
    
    $
    629,224
    
    
    $
    58,526
    
    
    $
    21,855
    
    
    $
    36,671Trade name
    
    
    
    
    
    
    
    
    
    
    380,844
    
    
    
    
    
    
    
    
    
    
    
    Franchise value
    
    
    
    
    
    
    
    
    
    
    18,319,384
    
    
    
    
    
    
    
    
    
    
    
    15,660,824Goodwill
    
    
    
    
    
    
    
    
    
    
    106,889
    
    
    
    
    
    
    
    
    
    
    
    Total
intangible assets
    
    
    
    
    
    
    
    
    
    $
    19,436,341
    
    
    
    
    
    
    
    
    
    
    $
    15,697,495
 Aggregate intangible asset amortization expense was $15.1 million for the year ended
December 31, 2004. Cox estimates amortization expense to be $87.0 million in 2005, $86.2 million
in 2006, $85.4 million in 2007, $85.1 million in 2008 and $85.0 million in 2009, primarily related
to customer relationships. 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. 6. Investments 13




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COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 312004
    
    
    2003(Thousands of Dollars)Investments stated at fair value:Available-for-sale
    
    $
    339
    
    
    $
    66,376Derivative instruments
    
    
    939
    
    
    
    1,269Equity method investments
    
    
    1,159,290
    
    
    
    31,088Investments stated at cost
    
    
    11,079
    
    
    
    10,647Total
investments
    
    $
    1,171,647
    
    
    $
    109,380
 Investments Stated at Fair Value The aggregate cost of Coxs investments stated at fair value at December 31, 2004 and 2003 was
$1.6 million and $42.5 million, respectively. Gross unrealized gains on investments were $0.1
million and $25.3 million at December 31, 2004 and 2003, respectively. Gross realized gains and losses on investments are as follows: Year Ended December 312004
    
    
    2003
    
    
    2002(Millions of Dollars)Realized gains
    
    $
    29.1
    
    
    $
    181.8
    
    
    $
    112.0Realized losses
    
    $
    0.8
    
    
    
    16.7
    
    
    
    1,400.0
 Sprint PCS.Sprint Corporation offers personal communications services through its PCS group. 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. These prepaid forward contracts were hybrid
instruments, comprised of a zero-coupon debt instrument, as the host contract, and an embedded
derivative. 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 14




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COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS recognized a pre-tax loss of approximately $29.5
million as a result of this termination. See Note 8. 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. In March 2004, Cox sold 0.1 million shares of Sprints PCS Group preferred stock for aggregate
net proceeds of approximately $56.9 million. Cox recognized a pre-tax gain of $19.5 million on the
sale of these shares. In April 2004, Sprint eliminated its PCS tracking stock by mandating the exchange of its PCS
shares for shares of its FON common stock. Cox held approximately 330,000 PCS shares and received
approximately 165,000 FON shares in the mandatory exchange. In June 2004, Cox sold the FON shares
for net proceeds of approximately $3.0 million. Cox recognized a pre-tax gain of approximately
$2.3 million on the sale of these shares. As a result of the sale, Cox no longer holds any shares
of Sprint stock. 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. In June 2002, Cox sold 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. Cox no longer holds any shares of Motorola common stock. 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 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, 2004, 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. 15




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COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As part of the going-private transaction and the related push-down basis accounting pursuant
to the purchase method of accounting for business combinations, as further described in Note. 4,
Going-private transaction, Coxs investment in Discovery was stepped-up to fair value to the
extent of the 37.96% minority interest acquired in the going-private transaction. Accordingly, a
purchase price adjustment of approximately $1.1 billion is reflected in the accompanying
consolidated balance sheet as of December 31, 2004. Summarized combined financial information for all equity method investments and Coxs
proportionate share (determined using Coxs ownership interest in each investment) for 2004, 2003
and 2002 is as follows: Combined Financial Information
    
    
    Coxs Proportionate ShareYear Ended December 31
    
    
    Year Ended December 312004
    
    
    2003
    
    
    2002
    
    
    2004
    
    
    2003
    
    
    2002(Thousands of Dollars)Revenues
    
    $
    3,338,217
    
    
    $
    2,291,103
    
    
    $
    2,069,282
    
    
    $
    769,917
    
    
    $
    547,304
    
    
    $
    477,294Operating income (loss)
    
    
    482,828
    
    
    
    278,283
    
    
    
    (182,194
    )
    
    
    119,458
    
    
    
    71,971
    
    
    
    (48,967
    )Net income (loss)
    
    
    145,319
    
    
    
    18,309
    
    
    
    (196,479
    )
    
    
    36,629
    
    
    
    7,450
    
    
    
    (49,341
    )
 Combined Financial InformationDecember 312004
    
    
    2003(Thousands of Dollars)Current assets
    
    $
    1,287,914
    
    
    $
    1,001,136Noncurrent assets
    
    
    2,667,590
    
    
    
    2,351,827Current liabilities
    
    
    1,159,360
    
    
    
    1,644,316Noncurrent liabilities
    
    
    3,093,036
    
    
    
    2,052,011
 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, 2004 and 2003. 7. Income Taxes Current and deferred income tax (benefits) expenses are as follows: Year Ended December 312004
    
    
    2003
    
    
    2002(Thousands of Dollars)CurrentFederal
    
    $
    (96,395
    )
    
    $
    263,658
    
    
    $
    (292,716
    )State
    
    
    7,535
    
    
    
    (4,289
    )
    
    
    (25,658
    )Total current
    
    
    (88,860
    )
    
    
    259,369
    
    
    
    (318,374
    )
 16




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COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Year Ended December 312004
    
    
    2003
    
    
    2002(Thousands of Dollars)DeferredFederal
    
    
    (590,702
    )
    
    
    (318,475
    )
    
    
    192,621State
    
    
    (236,948
    )
    
    
    (9,193
    )
    
    
    12,752Total deferred
    
    
    (827,650
    )
    
    
    (327,668
    )
    
    
    205,373Net income tax (benefit) expense
    
    $
    (916,510
    )
    
    $
    (68,299
    )
    
    $
    (113,001
    )
 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 312004
    
    
    2003
    
    
    2002(Thousands of Dollars)Federal tax (benefit) expense at statutory rates on
income before income taxes
    
    $
    (726,920
    )
    
    $
    (67,159
    )
    
    $
    (115,458
    )State income (benefit) taxes, net of federal
benefit
    
    
    (89,187
    )
    
    
    (21,744
    )
    
    
    4,645Change in state tax rate, net
    
    
    (59,931
    )
    
    
    12,981
    
    
    
    (13,033
    )Adjustments and settlements, net
    
    
    (48,259
    )
    
    
    5,400
    
    
    
    19,700Tax basis adjustment in equity investment
    
    
    
    
    
    
    6,648
    
    
    
    Dividends received deduction
    
    
    (204
    )
    
    
    (407
    )
    
    
    (7,083
    )Other,
net
    
    
    7,991
    
    
    
    (4,018
    )
    
    
    (1,772
    )Net income tax (benefit) expense
    
    $
    (916,510
    )
    
    $
    (68,299
    )
    
    $
    (113,001
    )
 Significant components of Coxs net deferred tax liability are as follows: December 312004
    
    
    2003(Thousands of Dollars)Plant and equipment
    
    $
    (1,551,003
    )
    
    $
    (1,363,762
    )Intangible assets
    
    
    (6,324,831
    )
    
    
    (4,759,863
    )Investments
    
    
    (501,509
    )
    
    
    (285,579
    )Other, net
    
    
    84,757
    
    
    
    54,627(8,292,586
    )
    
    
    (6,354,577
    )Less current portion
    
    
    33,988
    
    
    
    34,393Net deferred tax liability
    
    $
    (8,326,574
    )
    
    $
    (6,388,970
    )
 Income tax benefit was $916.5 million for the year ended December 31, 2004. The effective tax
rate for 2004 was 44.1% compared to 35.6% for 2003. The change in the effective tax rate was
primarily due to the recognition of a tax benefit due to the favorable resolution of federal income
tax audits for the years 1995-2001 and an adjustment to reduce state deferred taxes. Other factors
affecting the tax rate include the impact of varying state tax rates across Coxs operations, along
with current year investing and financing transactions. Gross deferred tax assets as of December 31, 2004 include $117.5 million of state net
operating loss and credit carryforwards. A valuation allowance has
been recorded on $93.0 million of
these state carryforwards due to the uncertainty that future taxable income will be realized in the
appropriate jurisdiction. The remaining state carryforwards expire beginning in 2022. Cox has concluded a federal income tax audit for the years 1998  2001 and expects to pay
approximately $40.0 million related to certain cable system acquisitions and certain financing
arrangements completed during the audit period. In addition, Cox expects to file amended tax
returns, and receive 17




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COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS refunds of approximately $30.0 million, for the effect of these adjustments in
later years. Cox believes that the majority of the payments and the refunds will occur during
2005. Cox has also concluded the field examination phase of a federal income tax audit for the years
1995-1997. Because Cox was a member of an affiliated group filing a consolidated U.S. federal
income tax return during the audit period, Cox will not be able to fully conclude the audit until
issues associated with all affiliated members have been resolved. Cox received refunds of
approximately $3.0 million for various adjustments that were concluded during the field examination.
Cox does not expect that any unresolved issues will result in significant payments or refunds. In
2004, as a result of the favorable resolution of the 1995-1997 and
1998-2001 audits, Cox
has reversed previously accrued taxes, reducing the tax provision by $64.0 million. In
the normal course of business, Coxs tax returns are subject to examination by various taxing
authorities. Such examinations may result in future tax and interest assessments by these taxing
authorities, and liability is accrued when Cox believes that an
assessment is probable. 8. Debt December 312004
    
    
    2003(Thousands of Dollars)Revolving credit facilities
    
    $
    1,650,000
    
    
    $
    Commercial paper
    
    
    96,142
    
    
    
    302,283Term loan
    
    
    2,000,000
    
    
    
    Medium-term notes
    
    
    264,429
    
    
    
    364,359Notes and debentures
    
    
    8,765,359
    
    
    
    6,078,904Exchangeable Subordinated Debentures due November 15, 2029
    
    
    
    
    
    
    7,846Exchangeable Subordinated Debentures due March 14, 2030
    
    
    
    
    
    
    107Exchangeable Subordinated Discount Debentures due April 19, 2020
    
    
    19,546
    
    
    
    18,185Capitalized lease obligations
    
    
    209,576
    
    
    
    217,992Other
    
    
    20,683
    
    
    
    22,12413,025,735
    
    
    
    7,011,800Less current portion
    
    
    59,962
    
    
    
    48,344Total long-term debt
    
    $
    12,965,773
    
    
    $
    6,963,456
 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. As part of the going-private transaction and the related push-down basis accounting pursuant
to the purchase method of accounting for business combinations, as further described in Note. 4,
Going-private transaction, the fixed-rate long-term debt instruments that are not reflected at
fair value on an on-going basis were stepped-up to fair value to the extent of the 37.96% minority
interest acquired in the going-private transaction. Accordingly, the table above reflects an
aggregate purchase price adjustment to increase debt by approximately $126.2 million, classified within Notes and
debentures. The adjustment will be amortized over the remaining lives of the debt instruments as a
component of interest expense. Revolving Credit Agreements In June 2004, Cox entered into a new five-year, unsecured revolving bank credit facility with
a capacity of $1.25 billion which will be available through June 4, 2009. This credit facility
replaced Coxs $900.0 million 364-day and $900.0 million five-year revolving bank credit
facilities. In December 2004, Cox 18




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COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS entered into a second five-year, unsecured revolving bank credit
facility with a capacity of $1.5 billion. Also in December 2004, Cox amended and restated its June
2004 facility to conform the terms with the new facility. At Coxs election, the interest rate on
the credit agreements is based on London Interbank Offered Rate (LIBOR), the Federal funds rate or
an alternate base rate. The credit agreements also impose commitment fees on the unused portion of
the total amounts available based on Coxs corporate credit ratings. At December 31, 2004, Cox had
outstanding borrowings of $907.5 million and $742.5 million under the $1.5 billion facility and the
$1.25 billion facility, respectively. Cox had no borrowings outstanding under any of its credit
agreements at December 31, 2003. Commercial Paper Cox had approximately $96.1 million and $302.3 million commercial paper outstanding at
December 31, 2004 and 2003, respectively. The weighted-average interest rate for outstanding
commercial paper was 1.2% and 1.3% for the years ended December 31, 2004 and 2003, respectively.
Coxs commercial paper is backed by amounts available under its revolving credit agreements. Bridge Loan Credit Facility In December 2004, Cox entered into and
drew down upon an 18-month, $3.0 billion term loan
(Bridge Loan) to finance a portion of Coxs going-private transaction. Cox incurred
offering costs of approximately $10.1 million related to the Bridge Loan. During the same month,
the net proceeds from an offering of three series of senior notes were used to repay the borrowing
under the Bridge Loan (see 2004 Issuances and Repaymentsunder the heading Notes and Debentures).
All unamortized offering costs were expensed in conjunction with the repayment. These amounts are
included within Interest expense in the accompanying consolidated statement of operations. Term Loan In December 2004, Cox entered into a new credit agreement for a five-year, $2.0 billion term
loan (Term Loan) to finance the going-private transaction. At Coxs election, the interest rate on
the Term Loan is based on LIBOR, the Federal funds rate or an alternate base rate. Cox incurred
offering costs of approximately $6.0 million related to the Term Loan. At December 31, 2004, $2.0
billion was outstanding under the Term Loan. Medium-Term Notes At December 31, 2004 and 2003, Cox had outstanding borrowings of $264.4 million and $364.4
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 6.9% to 7.2% per annum. Notes and Debentures Cox had outstanding borrowings under several fixed-rate notes and debentures of approximately
$8.8 billion and $6.1 billion at December 31, 2004 and 2003, 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 Issuances and Repayments.In December 2004, Cox issued $3.0 billion aggregate principal
amount of senior notes in order to repay the Bridge Loan, which funded a portion of the tender
offer to purchase all of the former public stock that CEI did not beneficially own. Included in
the issuance were: (i) a series of floating rate senior notes due 2007 with an aggregate principal
amount of $500.0 million; (ii) a series of 4.625% senior notes due 2010 with an aggregate principal
amount of $1.25 billion; and, (iii) a series of 5.450% senior notes due 2014 with an aggregate
principal amount of $1.25 billion. After 19




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COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS underwriting discounts and commissions, estimated
offering costs and other fees of $15.8 million in aggregate, Cox received net proceeds of
approximately $2.98 billion. The floating rate senior notes mature on December 14, 2007; the
4.625% senior notes mature on January 15, 2010; and, the 5.450% senior notes mature on December 15,
2014. All three series of senior notes are unsecured and rank equally with Coxs other senior
unsecured indebtedness. In addition, both series of fixed-rate 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 of the fixed-rate notes, or (y) the present value of the principal amount and the
remaining scheduled interest payments on the fixed-rate notes plus a make-whole premium, plus in
either case (x) or (y), accrued and unpaid interest. Interest on both series of fixed-rate notes
is payable on a semi-annual basis. Cox may not redeem the floating rate notes prior to maturity. In September 2004, Cox repaid its $100 million principal amount of 6.69% medium-term notes due
September 20, 2004 upon their maturity. In August 2004, Cox repaid its $375 million principal
amount of 7.5% notes due August 15, 2004 upon their maturity. 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 20




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COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 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. 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 was paid quarterly, and at 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 was indexed to the trading price of Sprint PCS common stock. Upon
issuance, the number of shares of Sprint PCS common stock attributable to each PRIZES was two
shares. In June 2004, Sprint eliminated its PCS tracking stock by mandating the exchange of its PCS
shares for shares of its FON common stock. Subsequently, one share of FON common stock was
attributable to each PRIZES. The payment upon maturity of the PRIZES was to 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 were
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 was payable semi-annually
at a rate of 3% per year on the original principal amount. Upon issuance, each Premium PHONES was
indexed to the trading price of 16.28 shares of Sprint PCS common stock. Subsequent to the
elimination of Sprint PCS common stock discussed above, each Premium PHONES was indexed to the
trading price of 8.14 shares of FON common stock. The Premium PHONES, as amended, could 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 had the option to
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 were 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%. Upon issuance, each Discount Debenture was indexed to the
trading price of shares of Sprint common stock. Subsequent to the elimination of Sprint PCS common
stock discussed above, each Discount Debenture is indexed to the trading price of 3.7954 shares of
FON 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 FON common stock or a combination
of both. The 21




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COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. 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. 2004 Purchases. In June 2004, Cox redeemed all of the remaining outstanding PRIZES and
Premium PHONES for aggregate cash consideration of $14.7 million. The redemption resulted in a
$7.0 million pre-tax loss, which is reflected as Loss on extinguishment of debt in the accompanying
consolidated statements of operations. Exchangeable subordinated debentures at December 31, 2004
were comprised of $62.3 million aggregate principal amount at maturity of Discount Debentures. 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. 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. The 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 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 22




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COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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, these counterparties are major financial
institutions, rated investment grade or better. Accordingly, 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 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. 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. The following table summarizes the notional amounts, weighted average interest rate data and
maturities for Coxs interest rate swaps at December 31, 2004 and 2003: December 312004
    
    
    2003Notional amount (in thousands)
    
    $
    1,375,000
    
    
    $
    1,750,000Weighted-average fixed interest rate received
    
    
    7.35
    %
    
    
    7.38
    %Weighted-average floating interest rate paid
    
    
    4.37
    %
    
    
    3.27
    %Maturity
    
    
    2005 - 2009
    
    
    
    2004 - 2009
 As a result of the settlements under these agreements, interest expense was reduced by $57.0
million and $64.0 million during the years ended December 31, 2004 and 2003, respectively. Maturities Excluding commercial paper, maturities of long-term debt for each of the five years subsequent
to December 31, 2004 and thereafter, are $437.5 million, $465.0 million, $500.0 million, $450.0
million, $4.1 billion, and $6.7 billion, respectively. Maturities of obligations under capital
leases are $49.8 million, $28.9 million, $21.6 million, $17.0 million, $13.2 million for each of
the five years subsequent to December 31, 2004, respectively, and $70.5 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. Cox
has the ability to refinance the long-term debt instruments maturing
in the twelve months subsequent to December 31, 2004 under its
revolving credit facilities. These amounts are classified as a
contra account within debt and were approximately $69.3 million and $31.6 million at December 31,
2004 and 2003, 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 liens, mergers, the
payment of dividends and the disposition of assets. The
credit 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 covenants for both its
credit facilities and debt instruments for all periods presented. 9. Derivative Instruments and Hedging Activities 23




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COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Cox accounts for derivative instruments in accordance with SFAS No. 133, 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. 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 $0.1 million for the year ended
December 31, 2004, a pre-tax loss on derivative instruments of $22.6 million for the year ended
December 31, 2003, and a pre-tax gain on derivative instruments of $1.1 billion for the year ended
December 31, 2002. The following is a detail of Coxs (loss) gain on derivative instruments for
the years ended December 31, 2004, 2003 and 2002 followed by a summary of Coxs derivative
instruments. Year Ended December 312004
    2003
    2002(Millions of Dollars)Equity collar arrangements
    
    $
    
    
    
    $
    
    
    
    $
    268.8Zero-coupon debt
    
    
    
    
    
    
    (18.7
    )
    
    
    359.3Exchangeable subordinated debentures
    
    
    
    
    
    
    0.5
    
    
    
    583.1Stock purchase warrants
    
    
    (0.1
    )
    
    
    (4.4
    )
    
    
    (85.6
    )Total derivative (loss) gain
    
    $
    (0.1
    )
    
    $
    (22.6
    )
    
    $
    1,125.6
 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 methodof
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 $16.4 million and $61.2 million at
December 31, 2004 and 2003, respectively. 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 24




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COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 6. Investments. Zero-Coupon Debt As discussed in Note 8. 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. Exchangeable Subordinated Debentures Cox had three series of exchangeable subordinated debentures outstanding, referred to as
PRIZES, Premium PHONES and Discount Debentures, as further described in Note 8. Debt. In June
2004, Cox redeemed all of its remaining PRIZES and Premium PHONES; therefore, all remaining
exchangeable subordinated debentures outstanding at December 31, 2004 were comprised of Discount
Debentures. 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 at December 31, 2004 and 2003. As a result
of Coxs purchase of PRIZES, Premium PHONES and Discount Debentures pursuant to its tender offers
described in Note 8. Debt, $62.3 million aggregate principal amount at maturity of Discount
Debentures remain outstanding at December 31, 2004. 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 $0.9 million and $1.3 million at December 31,
2004 and 2003, respectively, and have been classified as a component of investments in the
Consolidated Balance Sheets. 10. Fair Value of Financial Instruments Cox has estimated the fair value of its financial instruments as of December 31, 2004 and 2003
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 25




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COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 6. Investments. Except as discussed in Note 6. 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 6. Investments. The fair value of interest rate swaps used for hedging purposes was approximately $16.4
million and $61.2 million at December 31, 2004 and 2003, respectively, and represents the estimated
amount that Cox would receive upon termination of the swap agreements. The estimated fair value of Coxs fixed-rate notes and debentures and exchangeable
subordinated debentures at December 31, 2004 and 2003 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, 2004 and 2003 is as follows: December 312004
    
    
    2003Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairValue
    
    
    Value
    
    
    Value
    
    
    Value(Millions of Dollars)Fixed-rate notes and
debentures
    
    $
    8,760.0
    
    
    $
    9,092.6
    
    
    $
    6,683.4
    
    
    $
    7,323.0Exchangeable subordinated
debentures
    
    
    19.5
    
    
    
    31.4
    
    
    
    26.1
    
    
    
    35.6
 11. Financial Instruments with Characteristics of both Liabilities and Equity 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); however, 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. As of
December 31, 2003, Cox consolidated a 75% majority-owned interest in a limited-life partnership.
The estimated liquidation value of the 25% minority interest was approximately $229.0 million as of
December 31, 2003. On September 17, 2004, Cox purchased the 25% minority interest in the limited-life partnership
for total cash consideration of approximately $153.0 million. This acquisition was accounted for
as a purchase business combination, consistent with the provisions of SFAS No. 141. After giving
effect to the minority interests share of the partnership net assets at historical cost, Cox
recorded $12.6 million of customer relationship intangibles in conjunction with the purchase. 12. Retirement Plans 26




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COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 for the year ended December 31, 2002. The funded status
of the post-retirement plan covering the employees of Cox was not determinable. 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. Obligations and Funded Status Year Ended December 31Pension Benefits
    
    
    Other Benefits2004
    
    
    2003
    
    
    2004
    
    
    2003(Thousands of Dollars)Change in Benefit ObligationBenefit obligation at beginning of year
    
    $
    293,392
    
    
    $
    216,243
    
    
    $
    46,568
    
    
    $
    Plan initiation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,685Service cost
    
    
    31,797
    
    
    
    25,540
    
    
    
    5,484
    
    
    
    4,301Interest cost
    
    
    20,823
    
    
    
    17,348
    
    
    
    3,381
    
    
    
    2,794Actuarial loss
    
    
    33,175
    
    
    
    37,316
    
    
    
    6,455
    
    
    
    2,555Benefits paid
    
    
    (3,742
    )
    
    
    (3,055
    )
    
    
    (1,326
    )
    
    
    (767
    )Plan participants contributions
    
    
    
    
    
    
    
    
    
    
    42
    
    
    
    Benefit obligation at end of the year
    
    
    375,445
    
    
    
    293,392
    
    
    
    60,604
    
    
    
    46,568Change in Plan AssetsFair value of plan assets at beginning of year
    
    
    274,705
    
    
    
    176,571
    
    
    
    14,087
    
    
    
    Actual return on plan assets
    
    
    31,947
    
    
    
    45,274
    
    
    
    1,943
    
    
    
    1,279Employer contributions
    
    
    10,000
    
    
    
    55,915
    
    
    
    3,725
    
    
    
    13,575Benefits paid
    
    
    (3,742
    )
    
    
    (3,055
    )
    
    
    (1,326
    )
    
    
    (767
    )Plan participants contributions
    
    
    
    
    
    
    
    
    
    
    42
    
    
    
    Fair value of plan assets at end of year
    
    
    312,910
    
    
    
    274,705
    
    
    
    18,471
    
    
    
    14,087Funded status of plan
    
    
    (62,535
    )
    
    
    (18,687
    )
    
    
    (42,133
    )
    
    
    (32,481
    )Unrecognized actuarial losses
    
    
    46,555
    
    
    
    58,386
    
    
    
    6,560
    
    
    
    5,258Unrecognized prior service cost
    
    
    822
    
    
    
    1,590
    
    
    
    
    
    
    
    Prepaid (accrued) benefit cost
    
    $
    (15,158
    )
    
    $
    41,289
    
    
    $
    (35,573
    )
    
    $
    (27,223
    )
 27




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COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Year Ended December 31Pension Benefits
    
    
    Other Benefits2004
    
    
    2003
    
    
    2004
    
    
    2003(Thousands of Dollars)Amounts recognized in the Consolidated
Balance Sheets consist of:Prepaid benefit cost
    
    $
    
    
    
    $
    41,289
    
    
    $
    
    
    
    $
    Accrued benefit cost
    
    
    (15,158
    )
    
    
    
    
    
    
    (35,573
    )
    
    
    (27,223
    )Net amount recognized
    
    $
    (15,158
    )
    
    $
    41,289
    
    
    $
    (35,573
    )
    
    $
    (27,223
    )
 As part of the going-private transaction and the related push-down basis accounting pursuant
to the purchase method of accounting for business combinations, as further described in Note. 4,
Going-private transaction, the retirement plans obligations were stepped-up to fair value to the
extent of the 37.96% minority interest acquired in the going-private transaction. Accordingly, the
table above reflects adjustments of $33.0 million and $4.3 million to Pension Benefits and Other
Benefits, respectively. The adjustments were made to the plans unrecognized actuarial losses and
unrecognized prior service costs. The accumulated benefit obligation for the pension plans was $290.8 million and $229.4 million
at December 31, 2004 and 2003, respectively. There were no pension plans with an accumulated
benefit obligation in excess of plan assets. Components of Net Periodic Benefit Cost Year Ended December 312004
    2003
    2002Pension Benefits
    
    
    Other Benefits
    
    
    Pension Benefits
    
    
    Other Benefits
    
    
    Pension Benefits
    
    
    Other Benefits(Thousands of Dollars)Service
cost
    
    $
    31,797
    
    
    $
    5,484
    
    
    $
    25,540
    
    
    $
    4,301
    
    
    $
    20,073
    
    
    $
    N/AInterest
cost
    
    
    20,823
    
    
    
    3,381
    
    
    
    17,348
    
    
    
    2,794
    
    
    
    13,739
    
    
    
    N/AExpected return on
plan assets
    
    
    (24,758
    )
    
    
    (1,493
    )
    
    
    (19,418
    )
    
    
    
    
    
    
    (16,287
    )
    
    
    N/APrior service cost
amortization
    
    
    215
    
    
    
    
    
    
    
    215
    
    
    
    
    
    
    
    215
    
    
    
    N/AActuarial (gain)
loss amortization
    
    
    3,862
    
    
    
    198
    
    
    
    1,567
    
    
    
    (89
    )
    
    
    
    
    
    
    N/ATransition amount
amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (153
    )
    
    
    N/ANet periodic
benefit cost
    
    $
    31,939
    
    
    $
    7,570
    
    
    $
    25,252
    
    
    $
    7,006
    
    
    $
    17,587
    
    
    $
    N/A
 N/A denotes not applicable, as benefits were provided by CEI prior to 2003. Weighted-Average Assumptions The following table sets forth the weighted-average assumptions used to determine benefit
obligations: At December 312004
    
    
    2003Pension
    
    
    Other
    
    
    Pension
    
    
    OtherBenefits
    
    
    Benefits
    
    
    Benefits
    
    
    BenefitsDiscount rate
    
    
    6.00
    %
    
    
    5.75
    %
    
    
    6.25
    %
    
    
    6.25
    %Rate of compensation increase
    
    
    4.25
    %
    
    
    N/A
    
    
    
    4.00
    %
    
    
    4.00
    %
 28




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COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table sets forth the weighted-average assumptions used to determine net periodic
benefit cost: Year Ended December 312004
    
    
    2003
    
    
    2002Pension
    
    
    Other
    
    
    Pension
    
    
    Other
    
    
    Pension
    
    
    OtherBenefits
    
    
    Benefits
    
    
    Benefits
    
    
    Benefits
    
    
    Benefits
    
    
    BenefitsDiscount rate
    
    
    6.25
    %
    
    
    6.25
    %
    
    
    6.75
    %
    
    
    6.75
    %
    
    
    7.25
    %
    
    
    N/ARate of compensation increase
    
    
    4.00
    %
    
    
    N/A
    
    
    
    4.50
    %
    
    
    N/A
    
    
    
    5.00
    %
    
    
    N/AExpected long-term return on plan
assets
    
    
    9.00
    %
    
    
    9.00
    %
    
    
    9.00
    %
    
    
    9.00
    %
    
    
    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
historical long-term 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 2005, gradually
decreasing to 5.0% by the year 2010, 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, 2004: 1% Increase
    
    
    1% Decrease(Thousands of Dollars)Effect on service and interest cost
components
    
    $
    14
    
    
    $
    (12
    )Effect on postretirement benefit
obligations
    
    
    271
    
    
    
    (237
    )
 Expected Benefits Payments Pension
    
    
    OtherBenefits
    
    
    Benefits(Thousands of Dollars)2005
    
    $
    3,832
    
    
    $
    1,5392006
    
    
    4,696
    
    
    
    1,6462007
    
    
    5,740
    
    
    
    1,9122008
    
    
    7,081
    
    
    
    2,8032009
    
    
    8,849
    
    
    
    3,6622010-2014
    
    
    79,352
    
    
    
    30,979
 Plan Assets The contributions made to the pension plans and other postretirement benefit plans are held in
the CEI Master Trust. The following table sets forth the weighted-average asset allocations at
December 31, 2004 and 2003, and long-term target allocations for 2005: 29




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COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Percentage of Plan Assets
    
    
    TargetAt December 31
    
    
    Allocations2004
    
    
    2003
    
    
    2005Equity Securities
    
    
    62
    %
    
    
    63
    %
    
    
    62
    %Debt Securities
    
    
    36
    %
    
    
    36
    %
    
    
    36
    %Other
    
    
    2
    %
    
    
    1
    %
    
    
    2
    %Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 The long-term strategy for setting target allocations is to develop a combination of assets
which best serves the plan participants 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 targeted 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 $85.1
million (5.7% of total plan assets) and $85.3 million (6.4% of total plan assets) at December 31,
2004 and 2003, respectively. Contributions Cox accelerated its total 2003 plan year contributions for the funded pension plans into 2003. In
December 2004, Cox contributed $10.0 million of its overall 2004 minimum required contribution; the
remaining $28.8 million will be contributed during 2005. Cox expects to contribute $6.0 million to
its other postretirement benefit plans during 2005. Other In December 2003,
the Medicare Act was enacted. The Medicare Act established a prescription
drug benefit under Medicare, known as Medicare Part D, and a federal subsidy to sponsors of
retiree health care benefit plans that provide a prescription drug benefit that is at least
actuarially equivalent to Medicare Part D. Cox anticipates that benefits provided to some groups
of plan participants will be actuarially equivalent to Medicare Part D and, therefore, entitle Cox
to a federal subsidy. In May 2004,
the FASB issued FSP 106-2. FSP 106-2 provides definitive
guidance on the recognition of the effects of the Medicare Act and related disclosure requirements
for the
employers that sponsor prescription drug benefit plans for retirees. In the quarter beginning
July 1, 2004, Cox adopted FSP 106-2 retroactively to January 1, 2004. The expected subsidy reduced
the accumulated postretirement benefit obligation (APBO) as of January 1, 2004 by $0.1 million and
the net periodic cost for 2004 by a nominal amount, as compared to the amount calculated without
considering the effects of the subsidy. 30




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COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 $18.3 million, $17.3 million and
$16.2 million for the years ended December 31, 2004, 2003 and 2002, respectively. Cox provides eligible employees the opportunity to defer a percentage of annual compensation
under the Cox Communications, Inc. Savings Plus Restoration Plan. Cox matches each dollar of
compensation deferred by the employee by 50%, up to 6%, the maximum being $6,000, reduced by the
amount matched by Cox under its 401(k) plan. The amounts due each participant represent the
deferred compensation and Coxs matching deferral, plus an annual rate of return on such amounts
determined by Cox which in no event shall be less than an annual rate of 5%. Amounts payable under
this plan represent unsecured general obligations of Cox. Prior to
July 1, 2004, the Savings Plus Restoration Plan was
administered by CEI. During 2004, Cox recorded $1.2 million of expense related to the plan. 13. Stock Compensation Plans At December 31, 2004, Cox had one
stock-based compensation plan for employees, a LTIP. Cox
does not expect to issue additional awards under the LTIP. During 2004, Cox also had an ESPP
that ended on June 30, 2004. Long-Term Incentive Plan Under the LTIP, executive officers and selected key employees received 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. The LTIP is administered by
the Compensation Committee of the Board of Directors or its designee. Options granted were Incentive Stock Options or Nonqualified Stock Options. The exercise
prices of the options were determined by the Compensation Committee when the options were granted,
subject to a minimum price of the fair market value of the former public stock on the date of
grant. 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 was estimated on the date of grant using the Black-Scholes
option pricing model with the following assumptions used for grants made in 2004, 2003 and 2002:
weighted average expected volatilities at each grant date averaging 22.9%, 30.3% and 27.6%,
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%, 3.2% and 5.0%, respectively. A summary of the status of Coxs stock options granted under the LTIP as of December 31, 2004,
2003 and 2002 and changes during the years then ended is presented below: 2004
    
    
    2003
    
    
    2002Weighted-
    
    
    
    
    
    
    Weighted-
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding at beginning
of year
    
    
    14,994,603
    
    
    
    34.26
    
    
    
    10,860,838
    
    
    $
    36.09
    
    
    
    7,541,036
    
    
    $
    33.66Granted
    
    
    4,589,898
    
    
    
    31.29
    
    
    
    5,177,530
    
    
    
    30.18
    
    
    
    4,043,053
    
    
    
    41.23Exercised
    
    
    (2,865,840
    )
    
    
    16.38
    
    
    
    (268,455
    )
    
    
    12.44
    
    
    
    (157,520
    )
    
    
    17.71Canceled
    

    
    (728,722
    )
    
    
    37.64
    
    
    
    (775,310
    )
    
    
    40.29
    
    
    
    (565,731
    )
    
    
    45.51
 31




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##### Table of Contents



COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2004
    
    
    2003
    
    
    2002Weighted-
    
    
    
    
    
    
    Weighted-
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding at end of year
    
    
    15,989,939
    
    
    
    $36.46
    
    
    
    14,994,603
    
    
    
    34.26
    
    
    
    10,860,838
    
    
    
    36.09Options exercisable at
year-end
    
    
    2,341,343
    
    
    
    47.33
    
    
    
    3,881,550
    
    
    $
    24.72
    
    
    
    3,310,409
    
    
    $
    17.35Weighted-average grant date
fair value of options
granted
during the year
    
    $
    9.33
    
    
    
    
    
    
    $
    10.81
    
    
    
    
    
    
    $
    15.61
 The following table summarizes information about stock options outstanding and exercisable at
December 31, 2004: Options Outstanding
    
    
    Options ExercisableWeighted-
    
    
    
    
    
    
    
    
    
    
    Weighted-Average
    
    
    Weighted-
    
    
    
    
    
    
    Average
    
    
    Weighted-Remaining
    
    
    Average
    
    
    
    
    
    
    Remaining
    
    
    AverageRange of
    
    Number
    
    
    Contractual
    
    
    Exercise
    
    
    Number
    
    
    Contractual
    
    
    ExerciseExercise Prices
    
    Outstanding
    
    
    Life
    
    
    Price
    
    
    Exercisable
    
    
    Life
    
    
    Price$25.19
 $31.27
    
    
    9,114,452
    
    
    
    8.7
    
    
    $
    30.68
    
    
    
    0
    
    
    
    0.0
    
    
    $
    0.0032.13  39.66
    
    
    345,380
    
    
    
    6.9
    
    
    
    35.18
    
    
    
    133,656
    
    
    
    4.6
    
    
    
    37.3840.06  43.45
    
    
    3,425,799
    
    
    
    7.0
    
    
    
    41.56
    
    
    
    101,539
    
    
    
    5.6
    
    
    
    41.5745.31  51.44
    
    
    3,104,308
    
    
    
    5.6
    
    
    
    47.93
    
    
    
    2,106,148
    
    
    
    5.6
    
    
    
    48.2415,989,939
    
    
    
    7.7
    
    
    
    36.46
    
    
    
    2,341,343
    
    
    
    5.5
    
    
    
    47.33
 Employee Stock Purchase Plan 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 former public stock. The 2002
ESPP had four alternate entry dates: July 1, 2002, January 1, 2003, July 1, 2003, and January 1,
2004. Employees were eligible to participate in the 2002 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 2002
ESPP, the purchase price for each entry date was the lower of 85% of the fair market value of the
former public stock on the grant date (the initial purchase price) or 90% of the fair market value
of the former public stock on June 30, 2004 ($25.86), 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 were allowed to purchase the shares via payroll
deductions through June 30, 2004, at which time 482,025 shares were issued to the remaining 2002
ESPP participants. During 2002, 2003 and 2004, 263 shares, 5,183 shares and 7,838 shares,
respectively, were issued under the 2002 ESPP 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. 14. 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. 32




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##### Table of Contents



COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Convertible Preferred Stock In June 2004, all 4,836,372 issued and outstanding shares of Coxs Series A convertible
preferred stock were converted into 11,212,121 shares of Coxs Class A common stock, in accordance
with the terms of the Series A convertible preferred stock. 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. In accordance with SFAS No. 141, Cox recorded additional franchise value of
$365.6 million, which includes the related deferred tax effects, representing the appreciation
realized upon conversion of the Series A convertible preferred stock as contingent purchase price
related to the acquisition. Upon conversion, all of the issued and outstanding shares of Series A
convertible preferred stock were retired. Prior to June 2004, the holders of Series A convertible
preferred stock were entitled to one vote per share on all matters upon which holders of Class A
common stock were entitled to vote and pay dividends to the extent declared by Coxs Board of
Directors. Common Stock As a part of the going-private transaction, all shares of Coxs former public stock and Class
C common stock, par value $1.00 per share were cancelled. Also as a part of the going-private
transaction, Cox issued 556,170,238 shares of Class A common stock, $0.01 par value per share, and
27,597,792 shares of Class C common stock, $0.01 par value per share. 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s former public stock
to holders of its Income PRIDES and Growth PRIDES in settlement of such holders underlying
obligation to purchase Coxs former public stock. In April 2000, Cox approved a stock repurchase program whereby Cox was authorized to purchase
up to $500.0 million of its outstanding Class A common stock on the open market or through private
transactions. During 2004, 2003 and 2002, Cox did not repurchase any shares of its Class A common
stock under the stock repurchase program. As a result of the going-private transaction, no further
shares will be repurchased under the stock repurchase program. Other At December 31, 2004, CEI owned 100% of the outstanding shares of Cox common stock. At
December 31, 2003, CEI owned approximately 63.4% of the outstanding shares of Cox common stock and
held 73.9% of the voting power of Cox. 15. 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. The services and transactions
described below have been reviewed by Coxs Audit Committee (or, in the case of the going-private
transaction, a special committee comprised of the members of the Audit Committee), which has
determined that such services and transactions are or were fair and in the best interests of Cox. 33




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##### Table of Contents



COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
    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 $5.6 million and $4.0 million at December 31, 2004 and
2003, respectively; and, and the associated interest rate was 2.4% and 1.3% at December
31, 2004 and 2003, respectively. Included in amounts due from CEI are the following
transactions: (Thousands of Dollars)Intercompany due from CEI, December 31, 2001
    
    $
    13,245Cash transferred to
CEI
    
    
    92,061Net operating expense allocations and reimbursements
    
    
    (84,197
    )Intercompany due from CEI, December 31, 2002
    
    
    21,109Cash transferred to CEI
    
    
    221,117Net operating expense allocations and reimbursements
    
    
    (246,206
    )Intercompany due to CEI, December 31, 2003
    
    
    (3,980
    )Cash transferred to CEI
    
    
    288,821Net operating expense allocations and reimbursements
    
    
    (290,414
    )Intercompany due to CEI, December 31, 2004
    
    $
    (5,573
    )
  
    
    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, 2004, 2003 and 2002 of approximately $7.4 million, $6.0 million
and $6.2 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 $32.0 million, $32.0 million and $27.2 million for 2004, 2003 and 2002, respectively. 34




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COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
    Coxs employees participate in certain CEI employee benefit plans, and Cox made
payments to CEI in 2004, 2003 and 2002 for the costs incurred by reason of such
participation, including self-insured employee medical insurance costs of approximately
$110.4 million, $86.7 million and $77.5 million, respectively; postemployment benefits of
$10.2 million, $8.4 million and $7.3 million, respectively; and executive pension plan
payments of approximately $6.4 million in 2004 and 2003 and $2.8 million in 2002. 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
of approximately $3.9 million 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. Cox paid approximately $1.2 million during 2004 and 2003 and $0.7 million
during 2002 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 the headquarters 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 was $9.9 and $11.2 million for
the years ended December 31, 2004 and 2003, respectively. Prior to 2003, related rent and
occupancy expense was allocated based on occupied space, and for the year ended December
31, 2002, was approximately $7.4 million.
    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 had agreed to pay all fees and expenses associated with
Coxs performance under these registration rights agreements. These registration rights
agreements have terminated in accordance with their terms. 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, 2004, 2003
and 2002 were approximately $92.9 million, $86.2 million
and $78.8 million, respectively, the majority of which were paid
to Discovery Communications, Inc. 35




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COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CEI and two of its wholly-owned subsidiaries entered into an Agreement and Plan of Merger with
Cox in October 2004. Pursuant to this merger agreement, Cox and one of the CEI subsidiaries
commenced a joint tender offer to purchase the shares of Cox Class A common stock not beneficially
owned by CEI, and in December 2004, the CEI subsidiary acquired approximately 190.5 million shares
of Class A common stock in accordance with the terms of the tender offer. Following that purchase,
Cox was merged with a CEI subsidiary, with Cox as the surviving corporation. Accordingly, at
December 31, 2004, Cox was a wholly-owned subsidiary of CEI. 16. Other Comprehensive Loss The following represents the components of other comprehensive loss and related tax effects
for the years ended December 31, 2004, 2003 and 2002: Year Ended December 312004
    
    
    2003
    
    
    2002(Thousands of Dollars)Unrealized gains (losses), net of taxes of $(498), $(19,301) and
$611,326 in 2004, 2003 and 2002, respectively
    
    $
    796
    
    
    $
    30,831
    
    
    $
    (976,533
    )Recognition of previously unrealized (gains) losses on available-
for-sale securities, net of taxes of $10,197, $59,314 and
$(364,880) in 2004, 2003 and 2002, respectively
    
    
    (16,289
    )
    
    
    (94,748
    )
    
    
    582,863Total other comprehensive loss
    
    $
    (15,493
    )
    
    $
    (63,917
    )
    
    $
    (393,670
    )
 Components of accumulated other comprehensive income consisted of net unrealized gain on
securities of $0.1 million ($0.1 million, net of tax) and $25.3 million ($15.5 million, net of tax)
at December 31, 2004 and 2003, respectively. 17. Supplemental Financial Statement Information Supplemental Consolidated Balance Sheet Information December 312004
    
    
    2003(Thousands of Dollars)Plant and equipmentLand
    
    $
    114,529
    
    
    $
    107,677Buildings and building improvements
    
    
    647,197
    
    
    
    590,658Transmission and distribution plant
    
    
    11,899,827
    
    
    
    11,032,896Other equipment
    
    
    1,009,771
    
    
    
    919,055Capital leases
    
    
    455,209
    
    
    
    423,565Construction in progress
    
    
    154,180
    
    
    
    159,575Plant and equipment, at cost
    
    
    14,280,713
    
    
    
    13,233,426Less accumulated depreciation
    
    
    (6,338,014
    )
    
    
    (5,325,865
    )Net plant and equipment
    
    $
    7,942,699
    
    
    $
    7,907,561
 36




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COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 312004
    
    
    2003(Thousands of Dollars)Other current assetsInventory
    
    $
    68,221
    
    
    $
    49,137Prepaid assets
    
    
    31,974
    
    
    
    37,600Deferred income tax asset
    

    
    33,988
    
    
    
    34,393Other
    
    
    2,203
    
    
    
    9,976Total other current assets
    
    $
    136,386
    
    
    $
    131,106Other current liabilitiesDeposits and advances
    
    
    103,800
    
    
    
    92,008Income tax payable
    
    
    121,269
    
    
    
    215,926Other
    
    
    114,673
    
    
    
    142,619Total other current
liabilities
    
    $
    339,742
    
    
    $
    450,553
 Supplemental Disclosure of Non-cash Investing and Financing Activities Year Ended December 312004
    
    
    2003
    
    
    2002(Thousands of Dollars)Significant non-cash transactionsSettlement of FELINE PRIDES
    
    $
    
    
    
    $
    
    
    
    $
    649,999Conversion of Series A preferred
stock to Class A common
stock
    
    
    365,635
    
    
    
    
    
    
    
    Additional cash flow informationCash paid for interest
    
    $
    379,090
    
    
    $
    374,030
    
    
    $
    409,396Cash received for income
taxes
    
    
    19,663
    
    
    
    69,875
    
    
    
    201,011
 18. Commitments and Contingencies Cox leases land, office facilities and various items of equipment under noncancellable
operating leases. Rental expense under operating leases amounted to $21.4 million, $21.9 million
and $21.8 million in 2004, 2003 and 2002, respectively. Future minimum lease payments for each of
the five years
subsequent to December 31, 2004 are $19.1 million, $15.2 million, $11.0 million, $6.9 million
and $3.6 million, respectively, and $11.2 million thereafter for all noncancellable operating
leases. At December 31, 2004, Cox had outstanding purchase commitments totaling approximately $133.8
million for additions to plant and equipment and $997.4 million to rebuild certain existing cable
systems. In addition, Cox had unused letters of credit outstanding totaling $5.1 million at
December 31, 2004. In connection with certain of Coxs 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, 2004, 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 37




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COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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) was a defendant in a
putative subscriber class action suit in Louisiana state court filed on November 5, 1997. The suit
challenged 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 sought injunctive relief and
damages under certain claimed state law causes of action. On March 29, 2004, the parties entered
into a settlement agreement. This settlement was approved by the court and became final in August
2004. The settlement has now been fully implemented and all class consideration disbursed. The
settlement did not have a material impact on Coxs operations or liquidity. 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. (CoxCom), 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. 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 alleged 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. On August 12, 2004, the court granted
Coxs and Cox @Homes motion and dismissed the Section 16(b) claim. Cox and Cox @Home, among
others, subsequently entered into an agreement with Excite@Home tolling the
statute of limitations on the remaining claim for purported breach of fiduciary duty, and on
December 3, 2004, the court dismissed that claim without prejudice. On January 4, 2005, plaintiff
noticed its appeal of the dismissal of the Section 16(b) claim to the United States Court of the
Appeals for the Second Circuit. 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 38




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COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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, and briefing of the appeal has concluded. 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 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
subsequently was 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. On March 10, 2005, the Court
issued an order certifying a class of all persons and entities who
purchased
the publicly traded common stock of Excite@Home during the period
March 28, 2000 through September 28, 2001, and directing
that notice of the certification be given to the class. The class
excludes the
defendants in the action and certain of their related persons.
 The complaint 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 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. On April 5, 2004, Cox and certain other defendants jointly filed a motion to dismiss the
Section 14(a) cause of action that was added in plaintiffs amended complaint. On August 9, 2004,
the District Court granted defendants motion, and dismissed the Section 14(a) cause of action.
Cox intends to defend this action vigorously. The outcome cannot be predicted at this time. On June 14, 2004, Acacia Media Technologies Corporation filed a lawsuit against Cox and
Hospitality Network, Inc., (a wholly-owned subsidiary of Cox) among others, in the United States
District Court for the Northern District of California asserting claims for patent infringement.
The complaint seeks preliminary and permanent injunctive relief and damages in an unspecified
amount. On July 7, 2004, Acacia Media filed an amended complaint to its lawsuit to add CoxCom as a
defendant. Cox and CoxCom timely filed their answer to the amended complaint on October 21, 2004.
On November 11, 2004, Acacia Media filed a motion before the Multi-District Litigation Panel to
transfer related patent actions under 28 U.S.C. § 1407. That motion sought to transfer several
related cases brought by Acacia in other jurisdictions to a 39




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COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS single court. All of the defendants
opposed that motion. A hearing on the motion was held on January 27, 2005. On February 24, 2005,
the Multi-District Litigation Panel transferred all of the Acacia litigation to Judge Ware in the Northern District of
California. CoxCom and Hospitality Network intend to defend the action vigorously. The outcome
cannot be predicted at this time. Eighteen putative class action lawsuits were filed, purportedly on behalf of the public
stockholders of Cox, challenging CEIs August 2, 2004 proposal to acquire all of the issued and
outstanding shares of Cox Class A common stock not beneficially owned by CEI, for $32.00 in cash
per share. Fifteen of the lawsuits were filed in the Court of Chancery of the State of Delaware.
Following a hearing held on August 24, 2004, the Delaware court consolidated the actions under the
caption In re Cox Communications, Inc. Shareholders Litigation, Consolidated C.A. No. 613-N. The
Delaware complaint names as defendants Cox, CEI, Cox Holdings, Barbara Cox Anthony and Anne Cox
Chambers, and the members of the Cox Board of Directors. The Delaware complaint alleges, among
other things, that the price proposed to be paid in the proposed transaction was unfairly low, that
the initiation and timing of the proposed transaction were in breach of the defendants purported
duties of loyalty and constituted unfair dealing, that the structure of the proposed transaction
was inequitably coercive, that defendants caused materially misleading and incomplete information
to be disseminated to the public holders of the Cox shares, and that the Board defendants would
breach their duty of care and good faith by approving the proposed transaction and by purportedly
attempting to disenfranchise the holders of the Cox shares by circumventing certain alleged
contractual voting rights. The Delaware complaint seeks an injunction against the proposed
transaction, or, if it is consummated, rescission of the transaction and imposition of a
constructive trust, as well as money damages, an accounting, attorneys fees, expenses and other
relief. The remaining three putative class action lawsuits were filed in the Superior Court of Fulton
County, Georgia, styled Brody v. Cox Communications, Inc., et al., 2004CV89198, Golombuski v. Cox
Communications, Inc., et al., 2004CV89216, and Durgin v. Cox Communications, Inc., et al.,
2004CV89301. The Georgia actions were purportedly brought on behalf of the public holders of
shares of Cox Class A common stock against Cox, CEI and the Cox Board, although four counts of the
Golombuski complaint were brought derivatively on behalf of Cox against the Cox Board and CEI.
With the exception of the Durgin action, which did not assert claims against CEI, the Georgia
actions each allege that CEI and the Cox Board breached their fiduciary duties in connection with
the proposed transaction, which plaintiffs allege proposed a purchase price which was below the
fair value of the Cox shares. On August 18, 2004, plaintiffs in the Georgia actions moved for
entry of a case management order to consolidate the Georgia Actions under the caption In re Cox
Communication, Inc. Shareholder Litigation, C.A. No. 2004-CV-89198. On October 19, 2004, CEI and Cox publicly announced that they had entered into a Merger
Agreement pursuant to which the shares of Cox Class A common stock not beneficially owned by CEI
would be proposed to be acquired for $34.75 per share by means of a tender offer and follow-on
merger. On October 18, 2004, prior to the announcement of the Merger Agreement, the parties to the
Delaware action agreed upon and executed a memorandum of understanding. Pursuant to the Delaware
memorandum of understanding, the parties to the Delaware action agreed, subject to the conditions
set forth therein, to enter into a stipulation of settlement, to cooperate in public disclosures
related to the Merger Agreement, and to use their best efforts to gain approval of the proposed
settlement terms by the Delaware court. Also on October 18, 2004, the parties to the Georgia actions entered into a memorandum of
understanding which set forth the agreement by the parties for the dismissal of the Georgia
actions. The Georgia memorandum of understanding provides, among other things, that if the
Delaware actions are dismissed in accordance with the Delaware memorandum of understanding and the
dismissal becomes non-appealable, the parties to the Georgia actions will jointly seek, within two
business days thereof, to effect the dismissal with prejudice of the Georgia actions without
further notice to holders of the Cox shares. Pursuant to the Delaware memorandum of understanding and the Georgia memorandum of
understanding, defendants provided plaintiffs counsel in the Delaware action and the Georgia
actions with confirmatory discovery relating to the Merger Agreement, including additional document
production and 40




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COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS depositions, and that the parties agreed to suspend all other proceedings in the
actions except any settlement related proceedings in Delaware and Georgia. On November 18, 2004, the court entered a scheduling order in the Delaware action. The
scheduling order preliminarily certified the Delaware action as a class action on behalf of a class
consisting of all record and beneficial holders of Cox shares (other than CEI and its
subsidiaries), from and including August 2, 2004 through and including the date of the consummation
of the merger, and certain persons related to the class members. The defendants in the Delaware
action are excluded from the class. The scheduling order also initially set a settlement hearing
for January 26, 2005 to consider, among other things, whether (i) the Settlement embodied in the
Stipulation is fair to the class, (ii) the Delaware action should be dismissed with prejudice, and
the claims that were settled in the Stipulation of Settlement released, (iii) the class should be
finally certified, and (iv) the attorneys fees sought by plaintiffs counsel in the Delaware
action should be awarded. On January 13, 2005, an individual shareholder and several mutual funds who purportedly were
members of the plaintiff class filed a joint objection to the requested attorneys fees sought by
plaintiffs counsel, but did not object to the proposed settlement itself. The court subsequently
determined to postpone consideration of the objection to the request for attorneys fees, and, at
the January 26, 2005 settlement hearing, the court continued consideration of the settlement to
March 16, 2005, at which time the request for attorneys fees also was to be considered. However,
on February 23, 2005, at the request of the plaintiffs, among others, the court again continued
consideration of the request for attorneys fees (but not the settlement itself) until May 9, 2005. If the Settlement ultimately is not approved by the Delaware court, the Delaware action and
the Georgia actions could proceed and the plaintiffs in those actions could seek the relief sought
in their respective complaints. Accordingly, there can be no assurance that the Settlement, or the
dismissal of the Delaware action and the Georgia actions, will be completed on the terms described
above. If the Settlement is not approved or if the Delaware action or any of the Georgia actions
are not dismissed, the Company intends to continue to defend these actions vigorously. The outcome
of this matter 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. 41




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COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 19. 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. 20041st
    
    
    2nd
    
    
    3rd
    
    
    4thQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter(Millions of Dollars)Revenues
    
    $
    1,540.4
    
    
    $
    1,595.2
    
    
    $
    1,618.1
    
    
    $
    1,671.3Cost of services (excluding
depreciation and amortization)
    
    
    635.8
    
    
    
    644.6
    
    
    
    667.0
    
    
    
    662.4Selling, general and administrative (excluding depreciation and amortization
    
    
    337.3
    
    
    
    334.6
    
    
    
    366.4
    
    
    
    389.1Depreciation and amortization
    
    
    392.1
    
    
    
    397.1
    
    
    
    400.9
    
    
    
    437.0Impairment
on intangible assets

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,415.9Loss on sale of cable system
    
    
    
    
    
    
    5.0
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    175.2
    
    
    
    213.9
    
    
    
    183.8
    
    
    
    (2,233.1
    )Net income (loss) before
cumulative effect of change in
accounting principle
    
    
    57.7
    
    
    
    62.7
    
    
    
    42.0
    
    
    
    (1,327.5
    )Cumulative effect of change in
accounting principle, net of
tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,210.2
    )Net (loss) income
    
    $
    57.7
    
    
    $
    62.7
    
    
    $
    42.0
    
    
    $
    (2,537.7
    )
 20031st
    
    
    2nd
    
    
    3rd
    
    
    4thQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter(Millions of Dollars)Revenues
    
    $
    1,366.3
    
    
    $
    1,423.9
    
    
    $
    1,460.2
    
    
    $
    1,508.5Cost of services (excluding
depreciation and amortization)
    
    
    579.8
    
    
    
    590.1
    
    
    
    617.0
    
    
    
    604.4Selling, general and administrative (excluding depreciation and amortization)
    
    
    307.1
    
    
    
    301.7
    
    
    
    299.7
    
    
    
    342.2Depreciation and amortization
    
    
    359.3
    
    
    
    364.3
    
    
    
    382.1
    
    
    
    399.8Impairment
on intangible assets
    
    
    25.0
    
    
    
    
    
    
    
    
    
    
    
    Gain on sale of cable system
    
    
    
    
    
    
    0.5
    
    
    
    
    
    
    
    Operating income
    
    
    95.1
    
    
    
    168.3
    
    
    
    161.4
    
    
    
    162.1Net (loss) income
    
    $
    (29.2
    )
    
    $
    117.7
    
    
    $
    (215.1
    ) (a)
    
    $
    (11.2
    )
 42




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COX COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (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. 20. Subsequent Events In October 2004, a verdict in the case of Gardner v. Cox Communications, Inc. and Cox
Classic Cable, Inc. in the Probate Court of Galveston County, Texas, assessed damages against
Cox in the amount of $16.4 million, plus pre-judgment interest and attorneys fees totaling
approximately $5.6 million, which arose out of an acquisition by TCA Cable of three cable systems
formerly owned by the plaintiffs. Cox is successor to TCA Cable as a result of Coxs 1999
acquisition of TCA Cable. Coxs motion for a new trial was granted and on February 4, 2005, a
settlement was reached between the parties. A final judgment was entered in the case on February
23, 2005, pursuant to which Cox paid an undisclosed amount to the plaintiffs. Through December 31,
2004, Cox had incurred legal expenses of approximately $2.5 million in defending this action. The
payment pursuant to the judgment and the legal expenses are recorded within Selling, general and
administrative expenses in the accompanying consolidated statements of operations. On March 7, 2005, Cox announced it is exploring a sale of four cable operations serving
approximately 900,000 subscribers. Systems under consideration for sale include West Texas; North
Carolina; Humboldt County, California; and much of Middle America Cox (MAC). 43




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 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, 2004 and 2003, and the related consolidated statements of operations,
shareholders equity, and cash flows for each of the three years in the period ended December 31,
2004. These consolidated financial statements are the responsibility
of Coxs management.
Our responsibility is to express an opinion on these consolidated financial statements based on our
audits. We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). 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, such consolidated financial statements present fairly, in all material
respects, the financial position of Cox as of December 31, 2004 and 2003, and the
consolidated results of its operations and its cash flows for each of the three years in the period
ended December 31, 2004, in conformity with accounting principles generally accepted in the United
States of America. As
discussed in Note 5 to the consolidated financial statements,
effective in 2002, Cox changed its method of accounting for goodwill and other intangible assets to conform with
Statement of Financial Accounting Standards No. 142. As discussed in Note 5 to the consolidated
financial statements, effective in 2004, Cox changed its method of
valuing indefinite lived intangible assets other than goodwill to conform with Emerging Issues Task
Force Task Force Topic No. D-108. We have also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the effectiveness of Coxs internal control over financial
reporting as of December 31, 2004, based on the criteria established in Internal ControlIntegrated
Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission and our
report dated March 16, 2005 expressed an unqualified opinion on managements assessment of the
effectiveness of Coxs internal control over financial reporting and an unqualified opinion
on the effectiveness of Coxs internal control over financial reporting. /s/ Deloitte & Touche
LLPAtlanta, Georgia
March 16, 2005 44




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Management Report on Internal Control Over Financial Reporting

Cox Communications, Inc.s management is responsible for establishing and maintaining adequate
internal control over financial reporting. Pursuant to the rules and regulations of the Securities
and Exchange Commission, internal control over financial reporting is a process designed by, or
under the supervision of, Coxs principal executive and principal financial officers and effected
by Coxs board of directors, management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles and includes those
policies and procedures that:



| |  | Pertain to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of the assets of Cox;                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of Cox are being made only in accordance
with authorizations of management and directors of Cox; and
|
| |  | Provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of Coxs assets that could have a material effect on the
financial statements.                                                                                                                       

Management has evaluated the effectiveness of its internal control over financial reporting as of
December 31, 2004 based on the control criteria established in a report entitled Internal
ControlIntegrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on such evaluation, we have concluded that Coxs internal control over financial
reporting is effective as of December 31, 2004.

The registered independent public accounting firm of Deloitte & Touche LLP, as auditors of Coxs
consolidated financial statements, has issued an attestation report on managements assessment of
Coxs internal control over financial reporting, which report is included herein.

/s/
James O. Robbins
James O. Robbins
President and Chief Executive Officer
    
    

/s/
Jimmy W. Hayes
Jimmy W. Hayes
Executive Vice President, Finance
Chief Financial Officer


45



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of
Cox Communications, Inc. We have audited managements assessment, included in the accompanying Management Report on
Internal Control Over Financial Reporting, that Cox Communications,
Inc. (the Cox) maintained
effective internal control over financial reporting as of December 31, 2004, based on the Internal
ControlIntegrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway
Commission. Coxs management is responsible for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of internal control over
financial reporting. Our responsibility is to express an opinion on managements assessment and an
opinion on the effectiveness of Coxs internal control over financial reporting based on
our audit. We conducted our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating managements assessment, testing and evaluating the
design and operating effectiveness of internal control, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis
for our opinions. A companys internal control over financial reporting is a process designed by, or under the
supervision of, the companys principal executive and principal financial officers, or persons
performing similar functions, and effected by the companys board of directors, management, and
other personnel to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A companys internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the financial statements. Because of the inherent limitations of internal control over financial reporting, including
the possibility of collusion or improper management override of controls, material misstatements
due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any
evaluation of the effectiveness of the internal control over financial reporting to future periods
are subject to the risk that the controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, managements assessment that Cox maintained effective internal control
over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based
on the criteria established in Internal ControlIntegrated Frameworkissued by the Committee of
Sponsoring Organizations of the Treadway Commission. Also in our opinion, Cox maintained,
in all material respects, effective internal control over financial reporting as of December 31,
2004, based on the criteria established in Internal ControlIntegrated Frameworkissued by the
Committee of Sponsoring Organizations of the Treadway Commission. We have also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated financial
statements as of and for the year ended December 31, 2004 of Cox and our report dated
March 16, 2005 46




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##### Table of Contents



expresses an unqualified opinion on those consolidated financial statements and includes an
explanatory paragraph relating to the adoption, effective in 2004, of Emerging Issues Task Force
Topic No. D-108. /s/  Deloitte &
Touche LLP
 
Atlanta, Georgia
March 16, 2005 47




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##### Table of Contents



PART IV 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES  (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, 2004 and 2003;
    Consolidated Statements of Operations for the Years Ended December 31, 2004,
2003 and 2002;
    Consolidated Statements of Shareholders Equity for the Years Ended December
31, 2004, 2003 and 2002; 48




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##### Table of Contents




    Consolidated Statements of Cash Flows for the Years Ended December 31, 2004,
2003 and 2002; 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): ExhibitNumber
    
    Description3.1 
    
    Certificate of Incorporation of Cox Communications, Inc., as
amended (incorporated by reference to exhibit 3.1 to Coxs
Registration Statement on Form S-4, file no. 333-122050, filed on
January 14, 2005).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.
333-122050, filed on January 14, 2005).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 
    
    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).4.3 
    
    Seventh Supplemental Indenture, dated as of December 15, 2004,
between Cox Communications, Inc. and The Bank of New York Trust
Company, N.A., as Trustee (incorporated by reference to exhibit 4.1
to Coxs Current Report on Form 8-K, filed on December 16, 2004).4.4 
    
    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).4.5 
    
    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).4.6 
    
    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 (incorporated by reference to exhibit 4.10 to Coxs
Annual Report on Form 10-K, filed on February 27, 2004).4.7 
    
    Registration Rights Agreement, dated as of December 15, 2004, by
and among Cox Communications, Inc. and Citigroup Global Markets,
J.P. Morgan Securities Inc., Lehman Brothers Inc. and Wachovia
Capital Markets, LLC, as representatives of the Initial Purchasers
for Coxs Floating Rate Notes due 2007 (incorporated by reference
to exhibit 4.2 to Coxs Current Report on Form 8-K, filed on
December 16, 2004).4.8 
    
    Registration Rights Agreement, dated as of December 15, 2004, by
and among Cox Communications, Inc. and Citigroup Global Markets,
J.P. Morgan Securities Inc., Lehman Brothers Inc. and Wachovia
Capital Markets, LLC, as representatives of the Initial Purchasers
for Coxs 4.625% Notes due 2010 (incorporated by reference to
exhibit 4.3 to Coxs Current Report on Form 8-K, filed on December
16, 2004).
 49




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##### Table of Contents



ExhibitNumber
    
    Description4.9 
    
    Registration Rights Agreement, dated as of December 15, 2004, by
and among Cox Communications, Inc. and Citigroup Global Markets,
J.P. Morgan Securities Inc., Lehman Brothers Inc. and Banc of
America Securities LLC, as representatives of the Initial
Purchasers for Coxs 5.450% Notes due 2014 (incorporated by
reference to exhibit 4.4 to Coxs Current Report on Form 8-K, filed
on December 16, 2004).10.1 
    
    Amended and Restated Five-Year Credit Agreement, dated as of June
4, 2004 and amended and restated as of December 3, 2004, among Cox
Communications, Inc., the lenders party thereto and JPMorgan Chase
Bank, N.A., as administrative agent for the lenders, Bank of
America, N.A., as co-syndication agent, Wachovia Bank, National
Association, as co-syndication agent, J.P. Morgan Securities Inc.,
as co-lead arranger and joint bookrunner, and Banc Of America
Securities, LLC, as co-lead arranger and joint bookrunner
(incorporated by reference to exhibit 10.2 to Coxs Current Report
on Form 8-K, filed on December 3, 2004).10.2 
    
    Credit Agreement, dated December 3, 2004, among Cox Communications,
Inc., the lenders party thereto and JPMorgan Chase Bank, N.A., as
administrative agent for the lenders, Citicorp North America, Inc.
and Lehman Commercial Paper Inc., as syndication agents, and
Citigroup Global Markets Inc., Lehman Brothers Inc. and J.P. Morgan
Securities Inc., as joint lead arrangers and joint bookrunners
(incorporated by reference to exhibit 10.1 to Coxs Current Report
on Form 8-K, filed on December 3, 2004).10.3 
    
    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).10.4 
    
    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).10.5 
    
    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).10.6 
    
    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).10.7 
    
    Cox Communications, Inc. Savings Plus Restoration Plan (management
contract or compensatory plan) (incorporated by reference to
exhibit 10.6 to Coxs Registration Statement on Form S-4, file no.
333-122050, filed on January 14, 2005).10.8 
    
    Amendment No. 1 to Cox Communications, Inc. Savings Plus
Restoration Plan (management contract or compensatory plan)
(incorporated by reference to exhibit 10.7 to Coxs Registration
Statement on Form S-4, file no. 333-122050, filed on January 14,
2005).10.9 
    
    Share Conversion Agreement, dated as of June 23, 2004, by and among
(1) Brian L. Greenspun, Trustee of the Unified Credit Trust of the
Declaration of Trust for the Greenspun Family, dated December 6,
1988, G.C. Investments, LLC (f/k/a G.C. Investments, a Limited
Liability Company), Greenspun Legacy Limited Partnership, and 3G
Capital, LLC, and (2) Cox Communications, Inc. (incorporated by
reference to exhibit 10.2 to Coxs Current Report on Form 8-K,
filed on June 23, 2004).12 
    
    Computation of Ratio of Earnings to
Fixed Charges (incorporated by reference to exhibit 12 to Coxs
Annual Report on Form 10-K, filed March 16, 2005).21 
    
    Subsidiaries of Cox Communications, Inc. (incorporated by reference
to exhibit 21.1 to Coxs Registration Statement on Form S-4, file
no. 333-122050, filed on January 14, 2005).23 
    
    Consent of Deloitte & Touche LLP.24 
    
    Powers of Attorney (included on the
signatures page of the original Form 10-K).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.
 50




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##### Table of Contents



SIGNATURES Pursuant to the requirements of Section 13 or15(d)of the Securities Exchange Act of 1934,
Cox Communications, Inc. has duly caused this amended report to be signed on its behalf by the
undersigned, thereunto duly authorized. COX COMMUNICATIONS, INC.By:

/s/
James O. RobbinsJames O. RobbinsPresident and Chief Executive Officer Date: March 17, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934, this amended 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*
    
    Chairman of the Board of
Directors
    
    March 17, 2005James C. KennedyPresident and Chief Executive
    
    March 17, 2005/s/
James O. Robbins
    
    Officer; DirectorJames O. Robbins
    
    (principal executive officer)Executive Vice President, Finance
    
    March 17, 2005/s/
Jimmy W. Hayes
    
    Chief Financial OfficerJimmy W. Hayes
    
    (principal financial officer)Vice President of Accounting
    
    March 17, 2005/s/
William J. Fitzsimmons
    
    & Financial PlanningWilliam J. Fitzsimmons
    
    (principal accounting officer)*
    
    Director
    
    March 17, 2005Janet M. Clarke*
    
    Director
    
    March 17, 2005G. Dennis Berry*
    
    Director
    
    March 17, 2005Rodney W. Schrock*
    
    Director
    
    March 17, 2005Robert C. OLeary*
    
    Director
    
    March 17, 2004Andrew J. Young
 * POWER OF ATTORNEY Jimmy W. Hayes, by signing his name hereto, does sign this document on behalf of each of the
persons indicated above for whom he is attorney-in-fact pursuant to a power of attorney duly
executed by such person and filed with the Securities and Exchange Commission. By:

/s/
Jimmy W. HayesJimmy W. HayesExecutive Vice President, Finance
and Chief Financial Officer 51