<PAGE>
 
                                                                 EXHIBIT 13

=============================================================================== 
                     Selected Consolidated Financial Data
===============================================================================
                           COX COMMUNICATIONS, INC.

The following selected historical financial information for each of the five
years in the period ended December 31, 1996 has been derived from and should be
read in conjunction with the Consolidated Financial Statements and notes
thereto and Management's Discussion and Analysis of  Financial Condition and
Results of Operations.

        The following selected pro forma data give effect to the Merger (as
defined herein) and related transactions as if they occurred on January 1, 1994.
The pro forma data do not purport to represent what Cox's results of operations
or financial condition would actually have been had the Merger occurred on such
date and are not necessarily indicative of future operating results or financial
condition.

<TABLE> 
<CAPTION> 
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Year Ended December 31,                                                                                              Pro Forma

(Millions of Dollars, except per share data)         1996            1995       1994       1993       1992        1995       1994
<S>                                                <C>            <C>        <C>        <C>        <C>         <C>        <C> 
Income Statement Data:                                                    
  Revenues                                         $1,460.3       $1,286.2   $  736.3   $  708.0   $   652.1   $1,328.1   $1,235.2
  Operating income                                    221.7          226.0      139.8      179.7       179.2      231.3      219.8
  Interest expense                                    146.1          132.3       46.1       12.9        13.4      140.1      148.9
  Equity in net losses of affiliated companies        170.4           79.7       43.9       28.2         0.5       79.7       54.2
  Gain on issuance of stock by affiliated companies    50.1              -          -          -           -          -          -
  Gain on sale of affiliated companies                  4.6          188.8          -          -           -      188.8          -
  Income (loss) before cumulative                                         
   effect of accounting changes                       (51.6)         103.8       26.6       77.1        93.0      101.2      (12.8)
  Net income (loss)                                   (51.6)         103.8       26.6       97.8        93.0      101.2      (12.8)
  Net income (loss) per share                      $  (0.19)             -          -          -           -   $   0.39   $  (0.05)
                                                                          
Other Operating and Financial Data/(a)/:                                  
  Operating cash flow                              $  556.9       $  493.3   $  268.5   $  295.7   $   275.1   $  510.4   $  473.6
  Operating cash flow margin                           38.1%          38.4%      36.5%      41.8%       42.2%      38.4%      38.3%
  Debt to operating cash flow ratio                     5.2x/(b)/      5.2x       2.9x       2.0x        1.6x       5.0x       4.5x

Balance Sheet Data:
December 31,
(Millions of Dollars)
  Total assets                                      $5,784.6       $5,555.3   $1,874.7   $1,527.4    $1,300.2   $5,555.3   $4,460.7
  Total debt (including amounts due to CEI)          2,881.0        2,575.3      787.8      595.6       428.7    2,575.3    2,150.9
 ...................................................................................................................................

Customer Data:
December 31,
  Homes passed                                     5,016,749      5,005,858  2,878,857  2,838,197   2,745,491  5,005,858  4,956,055
  Basic customers                                  3,259,384      3,248,759  1,851,726  1,784,337   1,722,007  3,248,759  3,126,634
  Premium service units                            2,000,673      1,827,068  1,203,606  1,205,587   1,249,673  1,827,068  1,984,561
  Basic penetration                                     65.0%          64.9%      64.3%      62.9%       62.7%      64.9%      63.1%

  PrimeStar customers                                130,606         56,822     17,894          -           -     56,822     17,894
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</TABLE> 
(a) Operating cash flow (operating income before depreciation and amortization)
    is a commonly used financial analysis tool for measuring and comparing cable
    television companies in several areas, such as liquidity, operating
    performance and leverage. Operating cash flow should not be considered by
    the reader as an alternative to net income as an indicator of Cox's
    performance or as an alternative to cash flows from operating activities as
    a measure of liquidity.

(b) Using the fourth quarter annualized operating cash flow, the ratio was 4.9.
<PAGE>
 
=============================================================================== 
                     Management's Discussion And Analysis
===============================================================================

                           COX COMMUNICATIONS, INC.


Recent Acquisitions, Dispositions and Investments 

U.S. Broadband Networks 

On February 1, 1995, Cox Communications, Inc. ("Cox"), Cox Enterprises, Inc.
("CEI"), The Times Mirror Company ("Times Mirror") and New TMC Inc. ("New Times
Mirror") consummated a merger (the "Merger"), pursuant to which Times Mirror
(which, at the time of the Merger, was engaged only in the cable television
business) merged with and into Cox. In connection with the Merger, Cox Class A
Common Stock became publicly traded on the New York Stock Exchange. Following
the Merger, New Times Mirror changed its name to "The Times Mirror Company." As
a result of the Merger, the former Times Mirror stockholders received a total
of approximately 54,904,252 shares of Cox Class A Common Stock. Subsidiaries of
CEI received 181,296,833 shares of Cox Class A Common Stock and 13,798,896
shares of Cox Class C Common Stock.

        In September 1995, Cox sold its cable television system serving
approximately 13,000 customers in Bullhead City, Arizona for $20 million. No
gain or loss resulted from this transaction.

        In January 1996, Cox acquired a cable television system serving
approximately 51,000 customers in Newport News, Virginia, for approximately
$122.3 million. Cox operates this system as part of its cluster of systems in
the Hampton Roads, Virginia area. 

        In January 1996, Cox sold its cable television system in Texarkana,
Texas. The system, which was acquired as part of the Merger, served
approximately 23,400 customers. No gain or loss resulted from this transaction.

        In April 1996, Cox exchanged its Williamsport, Pennsylvania cable
television system for $13 million and a cable television system in East
Providence, Rhode Island. The Williamsport system, which was acquired as part
of the Merger, served approximately 24,500 customers in Williamsport. The East
Providence system serves approximately 15,500 customers. No gain or loss
resulted from this transaction.

        In April 1996, Cox sold certain cable television systems in the Ashland,
Kentucky and Defiance, Ohio area for $136 million. These systems, which were
acquired as a result of the Merger, together served approximately 78,600
customers. No gain or loss resulted from this transaction.

        In October 1996, Cox and Time Warner Entertainment/Advance-Newhouse
("Time Warner") entered into an agreement whereby Cox agreed to exchange its
Myrtle Beach, South Carolina cable television system serving approximately
42,230 customers for Time Warner's Hampton and Williamsburg, Virginia cable
television systems serving approximately 45,300 customers. The transaction also
includes a Texas cable television system serving approximately 7,000 customers
to be purchased by Cox and then immediately traded to Time Warner. Cox
anticipates this transaction will be consummated during the first quarter of
1997. In addition, Cox anticipates that it will recognize a book gain on this
transaction.

        In January 1997, Cox and Tele-Communications, Inc. ("TCI") exchanged
certain cable television systems owned by Cox serving approximately 319,000
customers for certain cable television systems owned by TCI serving
approximately 296,000 customers. As a result of the transaction, Cox received
TCI's systems in Bellevue/ LaVista, Nebraska and Council Bluffs, Iowa;
Chesapeake, Virginia; Scottsdale, Arizona; North Attleboro/Taunton,
Massachusetts; Lincoln, Rhode Island; and St. Bernard, Louisiana. In exchange,
TCI received Cox's systems in the greater Pittsburgh area; Spokane, Washington;
Springfield, Illinois; Cedar Rapids, Iowa and the Quad Cities area of Illinois
and Iowa; and Saginaw, Michigan. No gain or loss resulted from this transaction.

        In January 1997, Cox and Continental Cablevision ("Continental"), which
manages the domestic cable properties of U S WEST Media Group, exchanged
certain cable television systems, each serving approximately 48,000 customers.
Cox received Continental's systems in James City and York County, Virginia and
Pawtucket, Rhode Island and Continental received Cox's systems in western
Massachusetts and Weymouth, Massachusetts. No gain or loss resulted from this
transaction.
<PAGE>
 
=============================================================================== 
               Management's Discussion And Analysis (continued)
===============================================================================
                           COX COMMUNICATIONS, INC.


Telephony Investments

In October 1994, subsidiaries of Cox, TCI, Comcast Corporation ("Comcast")
and Sprint Corporation ("Sprint") formed a partnership known as"WirelessCo" to
engage in the business of providing wireless communications services, primarily
personal communication services ("PCS"). WirelessCo, of which Cox owns a 15%
interest, was the successful bidder for 29 broadband PCS licenses in the
auction conducted by the Federal Communications Commission ("FCC") from
December 1994 through March 1995. The total purchase price for the 29 licenses
was approximately $2.1 billion. 

        In March 1995, Cox, TCI, Comcast and Sprint formed Sprint Spectrum
Holding Company L.P. ("Sprint PCS") to which the partners contributed all of
their respective interests in WirelessCo. The partnership agreement of Sprint
PCS contemplates that the partners in the aggregate may be required to make cash
capital contributions (including cash contributions previously made to
WirelessCo) of up to $4.2 billion. Cox recorded $56.5 million, $7.9 million and
$0.5 million in equity of net losses of affiliated companies for the years ended
December 31, 1996, 1995 and 1994, respectively, for its ownership interest in
Sprint PCS and its predecessor, WirelessCo.

        Cox also owns a 17.6% interest in "PhillieCo," a partnership formed by
subsidiaries of Cox, TCI and Sprint. PhillieCo was the successful bidder for a
broadband PCS license for the Philadelphia Major Trading Area ("MTA"). The
purchase price of the license was approximately $85 million.

        Cox was the successful bidder for a broadband PCS license for the Omaha
MTA. The purchase price for the license was approximately $5.1 million. In
February 1997, with FCC approval Cox contributed the Omaha PCS license to
Sprint PCS.

        Cox was awarded a broadband PCS license for the Los Angeles-San Diego
MTA under the FCC's pioneer preference program. The amount payable by Cox for
its license is $251.9 million and was included in outstanding debt at December
31, 1996.

        In December 1996, pursuant to previous agreements, Cox, CEI, TCI,
Comcast and Sprint formed Cox Communications PCS, L.P. ("PioneerCo") to operate
the PCS system in the Los Angeles-San Diego MTA. PioneerCo is owned 49% by
Sprint PCS as limited partner and 51% by Cox Pioneer Partnership ("CPP") as
general partner. CPP is a jointly controlled partnership owned approximately 78%
by Cox and approximately 22% by CEI. Cox, as managing general partner of CPP,
has day-to-day management authority over PioneerCo. Upon FCC approval, which is
expected in the first quarter 1997, the PCS license for the Los Angeles-San
Diego MTA and the related obligation to the FCC will be transferred from Cox to
PioneerCo. Upon the earlier of December 31, 1997 or completion of the FCC's
buildout requirement, CPP has the right to put its interest to Sprint PCS at
fair market value over a five-year period. In addition, CPP has the right to put
its entire interest from the fifth through the eighth anniversaries of the
earlier of December 31, 1997 or completion of buildout, and Sprint PCS has a
call on CPP's interest from the fourth to the eighth anniversaries of completion
of the buildout requirement. Cox funded the development of the PCS business in
the Los Angeles-San Diego MTA prior to the formation of PioneerCo and received a
full reimbursement of $162.3 million on December 31, 1996. Cox recorded $60.7
million and $6 million of equity in net losses in affiliated companies for the
years ended December 31, 1996 and 1995, respectively, related to the operations
of the PCS system prior to the formation of PioneerCo.

        Prior to June 1996, Cox held a 30.06% interest in each of Teleport
Communications Group, Inc. ("TCGI") and Teleport Communications Group Partners
("TCGP"), which both own and operate fiber optic networks serving several U.S.
markets and provide point-to-point digital communications links to
telecommunications-intensive businesses and long-distance carriers. In June
1996, TCGI entered into a reorganization under which, among other things, its
four stockholders, Cox, Comcast, Continental and TCI (collectively, the "Cable
Stockholders") contributed to TCGI all of their partnership interests in 

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<PAGE>
 
TCGP, any additional interests in local joint ventures and debt and accrued
interest owed by TCGI to the Cable Stockholders (the "Reorganization").
Following the Reorganization, TCGI conducted an initial public offering in which
it sold 27,025,000 shares (the "TCGI IPO"). Upon completion of the
Reorganization and TCGI IPO, Cox owns 39,087,594 shares of TCGI's Class B Common
Stock representing 29.8% of TCGI's Class B Common Stock, 24.6% of total shares
outstanding and a 29.1% voting interest. Each share of Class B Common Stock is
convertible into one share of Class A Common Stock. As a result of the TCGI IPO,
Cox recorded a pre-tax gain of $50.1 million to recognize Cox's proportionate
increase in its share of the underlying net assets of TCGI. Cox recorded $28.5
million, $19.3 million and $9.5 million of equity in net losses in affiliated
companies for the years ended December 31, 1996, 1995 and 1994, respectively,
for its ownership interests in TCGI, TCGP and related joint ventures.

International Broadband Networks

At December 31, 1996, Cox had a 14.7% ownership interest in TeleWest
Communications plc ("TeleWest"), a company that is currently operating and
constructing cable television and telephony systems in the United Kingdom
("U.K."). Cox acquired this interest in October 1995, through the merger of SBC
CableComms (UK) ("CableComms"), which was 50% owned by Cox, with TeleWest (the
"TeleWest Merger"). As a result of the TeleWest Merger, Cox recognized a pre-tax
net gain of $174.8 million.

Cable Television Programming and Other Investments 

In August 1996, Cox acquired a 14.2% interest in At Home Corporation ("@Home").
@Home is a national Internet "backbone" service that allows customers to access
the Internet through cable modems at speeds up to hundreds of times faster than
currently available over traditional telephone modems.

        In March 1996, Syntellect, Inc. ("Syntellect") merged with the
operations of Telecorp Systems, Inc. ("Telecorp"). As a result of this merger,
Cox received an 8.6% interest in Syntellect in exchange for its 24.5% interest
in Telecorp. Cox recognized a pre-tax gain of $4.6 million related to this
transaction.

        In October 1995, Cox acquired a 41% interest in the Outdoor Life Network
("Outdoor Life") and a 39% interest in the Speedvision Network ("Speedvision"),
two new U.S. programming services. Outdoor Life's programming consists
primarily of outdoor recreation, adventure and wildlife themes; Speedvision's
programming consists of a broad variety of material for automobile, boat and
airplane enthusiasts. Cox recorded $18.7 million and $3 million of equity in
net losses of affiliated companies for the years ended December 31, 1996 and
1995, respectively, for its ownership interests in both Outdoor Life and
Speedvision.

Results of Operations

1996 Compared with 1995

The historical results discussed below for 1995 include the results of
operations for the former Times Mirror cable television systems from the Merger
date of February 1, 1995.

        Total revenues for the year ended December 31, 1996 increased 14% over
1995 to $1,460.3 million. Basic customers at December 31, 1996 were 3,259,384.
Adjusting for the acquisitions and sales of cable systems during 1996, basic
customers grew 2.3% in 1996.

        Complete basic revenues grew 11% to $995.1 million in 1996 due to the
larger customer base and rate increases resulting from the 1996 channel
additions and pass-through of inflation adjustments. Premium service revenues
for 1996 were $189 million, a 2% increase over 1995. Although premium units
increased 10% to 2,000,673 at December 31, 1996, the average rate per unit was
lower in the current year due to a three-for-one premium channel promotion
launched in spring 1996. Pay-per-view revenues grew 8% to $45.6 million in 1996
primarily due to the Tyson/Bruno and Tyson/Holyfield boxing events in 1996.
<PAGE>
 
               Management's Discussion And Analysis (continued)

                           COX COMMUNICATIONS, INC.


Advertising revenues increased 14% to $81.5 million in 1996 reflecting continued
gains in national account revenue and new customers such as Sprint.

        Revenues from satellite operations (Cox Satellite Programming and
PrimeStar) for 1996 were $83.2 million compared to $41.1 million in 1995. This
increase is due to strong growth as PrimeStar customers more than doubled
during the current year to 130,606 at December 31, 1996 from 56,822 at December
31, 1995.

        Programming costs were $352.8 million in 1996, a 12% increase over 1995
due to Cox's larger customer base and the offering of additional channels in
1996. Plant operations expenses increased 10% in 1996 as a result of Cox's
increased focus on customer retention programs and repairs of storm damage in
certain systems. Marketing costs were up 14% in 1996 due to the sales programs
associated with the premium channel promotion and an increase in overall Cox
advertising. General and administrative expenses were $291 million in 1996, a
10% increase over 1995 due in part to direct costs associated with the
development of new high-speed data and telephony services and higher property
taxes resulting from the continued upgrade and rebuild of the broadband network
in preparation for the delivery of these new services.

        Depreciation increased 33% in 1996 to $264.2 million reflecting
accelerated depreciation expensed in the current year as a result of the upgrade
and rebuild of the broadband network. Operating income for 1996 was $221.7
million, a 2% decrease compared to 1995.

        Interest expense increased $13.8 million due primarily to the increase
in total debt outstanding. Equity in net losses of affiliated companies
increased $90.7 million due to increased losses from Sprint PCS, PioneerCo,
Outdoor Life and Speedvision. During 1996, SprintPCS and PioneerCo's losses
increased as a result of developing and constructing their PCS networks in
preparation for their commercial launch of PCS services in December 1996.
Outdoor Life and Speedvision, which were launched as new cable programming
networks during 1995 and 1996, respectively, incurred higher losses in the
current year due to the development of their customer base and program content.
A gain on issuance of stock by affiliated companies of $50.1 million was
recognized as a result of the initial public offering of TCGI. A gain on sale of
affiliated companies of $4.6 million was recognized as a result of the merger of
Telecorp and Syntellect. Net loss for the year was $51.6 million as compared to
net income of $103.8 million in 1995.

        Operating cash flow (operating income before depreciation and
amortization) is a commonly used financial analysis tool for measuring and
comparing cable television companies in several areas, such as liquidity,
operating performance and leverage. Operating cash flow for 1996 was $556.9
million, a 13% increase over operating cash flow of $493.3 million in 1995. The
consolidated operating cash flow margin (operating cash flow as a percentage of
revenues) was 38.1% for 1996 as compared to 38.4% for 1995. The core video
business operating cash flow margin, which excludes satellite and competitive
access operations and the direct costs resulting from the development of new
data and residential telephony services, was 40.4% for 1996, an increase from
39.8% for 1995. Operating cash flow should not be considered as an alternative
to net income as an indicator of Cox's performance or as an alternative to cash
flows from operations as a measure of liquidity.

Pro Forma 1995 Compared with Pro Forma 1994

The pro forma results discussed below reflect the Merger and related
transactions as if these transactions had occurred on January 1, 1994.

        Revenues for the year ended December 31, 1995 increased 8% over 1994 to
$1,328.1 million. Basic customers at December 31, 1995 were 3,248,759, a 3.9%
increase over basic customers at December 31, 1994. Adjusting for the sale of
the Bullhead City system, basic customer growth was 4.3% for 1995.

 22
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<PAGE>
 
                           COX COMMUNICATIONS, INC.


        Complete basic revenues grew 9% to $929.6 million due to rate increases
and a larger customer base. These average annual rate increases of approximately
$1.80 per month per subscriber reflect programming additions and the pass-
through allowed by the FCC for inflation adjustments and external costs,
primarily programming fee increases.

        Premium service revenues for 1995 were $190.6 million, down 6% from
1994, reflecting the January 1995 launch of The Disney Channel ("TDC") on the
cable programming services ("CPS") tier. TDC was previously offered as a premium
service. The introduction of TDC enhances the customer value of the CPS tier and
provides a comparable offering to that provided by direct broadcast satellite
competitors. Excluding the impact of this change, premium service revenues
increased 4% due to unit growth in other premium services. Premium service units
at December 31, 1995 were 1,827,068, an 8.0% decrease from premium service units
at December 31, 1994, due to the transfer of TDC.

        Pay-per-view revenues grew 14% to $43.9 million in 1995 primarily due to
an increase in the number of pay-per-view channels offered, the Tyson/McNeeley
boxing event and continued interest in national and regional sporting events.
Advertising revenues increased 19% to $73.6 million reflecting continued gains
in national account revenue and new customers such as Sprint.

        Revenues from satellite operations (Cox Satellite Programming and
PrimeStar) for 1995 were $41.1 million, an 86% increase over revenues of $22.1
million in 1994 due to strong customer growth. PrimeStar customers increased
from 17,894 at December 31, 1994 to 56,822 at December 31, 1995 as a result of
increased customer awareness and advertising and a May 1995 retail price
restructuring.

        Operating, selling, general and administrative expenses increased 7% to
$812.6 million due to costs directly associated with larger basic customer
levels and higher programming costs. Additionally, in 1995, Cox recorded
severance and related charges of $5.1 million relating to planned 1996 staff
reductions resulting from the restructuring and integration of certain
accounting and MIS functions. Operating income for 1995 was $231.3 million, an
increase of 5% from 1994.

        Interest expense decreased $8.8 million due to lower interest rates
during 1995. Equity in net losses of affiliated companies increased $25.5
million due to increased losses of TCGI, Sprint PCS and several start-up
ventures. The gain on sale of affiliated companies primarily represents a $174.8
million pre-tax net gain recognized as a result of the TeleWest Merger. Income
tax expense reflects significant nondeductible amortization resulting from the
Merger. As a result of the factors discussed above, net income increased from a
loss of $12.8 million to $101.2 million.

        Operating cash flow for 1995 was $510.4 million, an 8% increase over
operating cash flow of $473.6 million in 1994. Operating cash flow margin was
38.4% for 1995 as compared to 38.3% for 1994. Excluding the satellite and
competitive access operations, the core video operating cash flow margin was
39.8% for 1995 as compared to 39.1% for 1994. 

Historical 1995 Compared with Historical 1994

Revenues for 1995 increased 75% as compared with 1994. Operating, selling,
general and administrative and satellite expenses increased 68% and
depreciation and amortization increased 108% as compared to 1994. Operating
income for 1995 increased $86.2 million, or 62%. These increases were primarily
attributable to the Merger.

        Interest expense for 1995 increased $86.2 million over 1994 due to debt
assumed in connection with the Merger. Equity in net losses of affiliated
companies increased $35.8 million due to the purchase of an additional 25%
interest in CableComms, increased losses in TCGI, Sprint PCS and losses in
several start-up ventures. The gain on sale of affiliated companies primarily
represents a $174.8 million pre-tax net gain recognized as a result of the
TeleWest Merger. As a result of the factors discussed above, net income
increased $77.2 million.
<PAGE>
 
               Management's Discussion And Analysis (continued)

                           COX COMMUNICATIONS, INC.


Liquidity and Capital Resources

Uses of Cash

As part of Cox's ongoing strategic plan, Cox has invested, and will continue
to invest, significant amounts of capital to enhance the reliability and
capacity of its broadband network in preparation for the offering of new
services and to make investments in affiliated companies primarily focused on
telephony, programming and communications-related activities.

        During 1996, Cox made capital expenditures of $578.9 million. These
expenditures were primarily directed at upgrading and rebuilding its broadband
network in preparation for the delivery of high-speed data and telephony.
Capital expenditures for 1997 are expected to range between $625 million and
$675 million. Capital expenditures for 1998, 1999 and 2000 are expected to
range between $725 million and $775 million, $600 million and $650 million and
$350 million and $400 million, respectively.

        In addition to expenditures in existing systems, Cox made strategic
investments in businesses focused on telephony, programming and
communications-related activities. Investments made in 1996 in affiliated
companies included $268 million to Sprint PCS and $70 million to Outdoor Life,
Speedvision, PrimeStar Partners, @Home and other interests. Future funding
requirements for investments in affiliated companies are expected to be
approximately $173 million for Sprint PCS and PhillieCo and $33 million for
programming, PrimeStar and other investments. Additionally, upon the transfer
to PioneerCo of the PCS license for the Los Angeles-San Diego MTA and the
related obligation to the FCC, Cox will be committed to fund $165 million for
the operations of PioneerCo.

        The capital requirements for investments in telephony affiliates may
vary significantly from the amounts stated above and will depend on numerous
factors, such as other financing alternatives for Sprint PCS. In addition, many
of these affiliates are growing businesses and specific financing requirements
will change depending on the evolution of these businesses.

        Cox's current credit facilities contain covenants which, among other
provisions, restrict the payment of cash dividends or the repurchase of capital
stock if certain requirements are not met as to the ratio of debt to operating
cash flow. Historically, Cox has not paid dividends nor does Cox intend to pay
dividends in the foreseeable future but to reinvest future earnings, consistent
with Cox's business strategy. Although Cox was in compliance with its credit
facility covenants at December 31, 1996, Cox was prohibited from paying
dividends under certain requirements.

Sources of Cash

During 1996, Cox generated $309.1 million from operations. Additionally, net
cash provided by financing activities was $246.2 million and included the
proceeds from the issuance of medium-term notes and commercial paper. 

        At December 31, 1996, Cox had a $1,200 million revolving credit facility
which matures on December 20, 2000. In addition, Cox had an $800 million
revolving credit facility which matures on October 9, 1997, at which time any
outstanding borrowings convert to a long-term loan due October 9, 2000. These
facilities are committed to back outstanding commercial paper.

        In June 1996, Cox entered into a commercial paper program under which
Cox may borrow $750 million. At December 31, 1996, there was $718.7 million
outstanding, net of unamortized discount of $3.3 million, under the commercial
paper program.

        In April 1996, Cox filed a Form S-3 Registration Statement (the "Shelf
Registration") with the Securities and Exchange Commission under which Cox may
from time to time offer and issue debentures, notes, bonds or other evidence of
indebtedness for a maximum aggregate amount of $750 million. During 1996, Cox
sold $125 million of medium-term notes under the Shelf Registration. The notes
are due in varying amounts 

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<PAGE>
 
                           COX COMMUNICATIONS, INC.


through November 2006 with interest at fixed rates ranging from 6.94% to 7.19%.

        During 1996, Cox received proceeds from affiliated companies of $162.3
million related to a reimbursement from Cox Communications PCS of 1995 and 1996
funding. In addition, $201.8 million was received for the sales of the
Texarkana and the Ashland and Defiance cable television systems and the trade
of the Williamsport cable television system for an East Providence cable
television system.

        CEI continues to perform day-to-day cash management services for Cox
with settlements of balances between Cox and CEI occurring periodically at
market interest rates.

        At December 31, 1996, Cox had approximately $2,881 million of
outstanding indebtedness, including amounts due to CEI and had approximately
$1,453 million available under its revolving credit facilities and Shelf
Registration. Cox's Notes and Debentures issued during 1996 are rated Baa2 by
Moody's and A- by Standard & Poor's.

        Cox expects that the cost of its cable upgrades and investment activity
will exceed Cox's funds from operations and, therefore, additional capital will
be necessary. Cox believes it will be able to meet its capital needs with
unused amounts available under existing revolving agreements and the Shelf
Registration. In addition, Cox is pursuing alternatives to monetize certain
unconsolidated investments.

Rate Regulation

Many franchising authorities have become certified by the FCC to regulate
rates charged by Cox for basic cable service and associated basic cable service
equipment. Some local franchising authority decisions have been rendered that
were adverse to Cox. In addition, a number of such franchising authorities and
customers of Cox filed complaints with the FCC regarding the rates charged for
cable programming services. In December 1995, the FCC approved a Resolution of
all outstanding rate complaints covering the Cox and former Times Mirror cable
television systems. The Resolution, among other things, provided for the
payment of refunds of $7.1 million plus interest to one million customers 
in January 1996, and the removal of additional outlet charges for regulated
services from all of the former Times Mirror cable television systems. The
Resolution also stated that Cox's CPS tier rates as of June 30, 1995 were not
unreasonable. Refunds under the Resolution were fully provided for in Cox's
financial statements at December 31, 1995. In January 1996, the City of Irvine
and six other cities located in California filed an appeal to set aside the
Resolution in the United States Court of Appeals for the Ninth Circuit. The FCC
is a party to the appeal and Cox has been granted leave to intervene. Cox
cannot predict the outcome of this appeal.

        The Telecommunications Competition and Deregulation Act of 1996 ("the
1996 Act") became effective in February 1996. The 1996 Act is intended to
promote substantial competition in the delivery of video and other services by
local telephone companies (also known as local exchange carriers or "LECs") and
other service providers, and permits cable television operators to provide
telephone services. Among other provisions, the 1996 Act deregulates the CPS
tier of large cable operators on March 31, 1999 and upon enactment the CPS rates
of small cable operators serving 50,000 or fewer subscribers, revises the
procedures for filing a CPS complaint, and adds a new effective competition
test.
<PAGE>
 
============================================================================
                          Consolidated Balance Sheets
============================================================================
                           COX COMMUNICATIONS, INC.
<TABLE> 
<CAPTION> 
-------------------------------------------------------------------------------------------------------------
December 31,                                                                          1996             1995
(Thousands of Dollars)                                               
<S>                                                                              <C>               <C> 
Assets                                                               
Cash                                                                             $   42,349        $   39,166
Accounts and notes receivable, less allowance for doubtful                             
  accounts of $7,778 and $6,804                                                     122,574           117,885
Net plant and equipment                                                           1,531,811         1,213,857
Investments                                                                       1,219,082         1,201,253
Intangible assets                                                                 2,728,955         2,775,903
Other assets                                                                        139,819           207,193
 ............................................................................................................. 
    Total assets                                                                 $5,784,590        $5,555,257
=============================================================================================================
                                                                     
Liabilities and shareholders' equity                                                                  
Accounts payable and accrued expenses                                            $  220,859        $  202,204
Deferred income                                                                      29,440            40,900
Deferred income taxes                                                               294,453           288,039
Other liabilities                                                                    97,526           116,771
Debt                                                                              2,823,853         2,392,725
Amounts due to Cox Enterprises, Inc. ("CEI")                                         57,147           182,605
 ............................................................................................................. 
    Total liabilities                                                             3,523,278         3,223,244
 ............................................................................................................. 
Commitments and contingencies (Note 16)                              
                                                                     
Shareholders' equity                                                                                  
  Preferred Stock, $1 par value; 5,000,000 shares authorized; none issued                 -                 -    
  Class A Common Stock, $1 par value; 286,000,000 shares authorized;                       
    shares issued and outstanding: 256,463,651 and 256,365,194                      256,464           256,365
  Class C Common Stock, $1 par value; 14,000,000 shares authorized;                                      
    shares issued and outstanding: 13,798,896                                        13,799            13,799
  Additional paid-in capital                                                      1,742,121         1,739,422
  Retained earnings                                                                 216,097           267,648
  Foreign currency translation adjustment                                            23,424            (3,413)
  Net unrealized gain on securities                                                   9,407            58,192
 ............................................................................................................. 
    Total shareholders' equity                                                    2,261,312         2,332,013
 ............................................................................................................. 
    Total liabilities and shareholders' equity                                   $5,784,590        $5,555,257
=============================================================================================================
</TABLE> 
See notes to consolidated financial statements.

 26
----
 27
<PAGE>
 
================================================================================
                     Consolidated Statements Of Operations
================================================================================
                           COX COMMUNICATIONS, INC.

<TABLE> 
<CAPTION> 
--------------------------------------------------------------------------------------------------------------------------
Year Ended December 31,                                                           1996             1995             1994
(Thousands of Dollars)                                               
<S>                                                                         <C>              <C>              <C> 
Revenues
 Complete basic                                                             $    995,085     $    898,329     $    487,556
 New product tier                                                                 14,222           10,085            4,077
 Premium service                                                                 189,039          185,080          133,764
 Pay-per-view                                                                     45,610           42,343           19,606
 Advertising                                                                      81,520           71,590           37,675
 Satellite                                                                        83,164           41,084           22,100
 Other                                                                            51,645           37,735           31,530
 .......................................................................................................................... 
   Total revenues                                                              1,460,285        1,286,246          736,308

Costs and expenses
 Programming costs                                                               352,834          314,440          167,790
 Plant operations                                                                140,777          128,201           77,803
 Marketing                                                                        43,054           37,731           33,812
 General and administrative                                                      291,043          265,753          165,446
 Satellite operating and administrative                                           75,680           41,682           22,931
 Restructuring charge                                                                  -            5,139                -
 Depreciation                                                                    264,188          198,788          106,864
 Amortization                                                                     70,973           68,524           21,910
 .......................................................................................................................... 
Operating income                                                                 221,736          225,988          139,752

Interest expense                                                                (146,077)        (132,308)         (46,128)
Equity in net losses of affiliated companies                                    (170,435)         (79,734)         (43,905)
Gain on issuance of stock by affiliated companies                                 50,100                -                -
Gain on sale of affiliated companies                                               4,640          188,806                -
Other, net                                                                        11,531              951            2,627
 .......................................................................................................................... 
Income (loss) before income taxes                                                (28,505)         203,703           52,346

Income taxes                                                                      23,046           99,894           25,780
 .......................................................................................................................... 
Net income (loss)                                                           $    (51,551)    $    103,809     $     26,566
==========================================================================================================================
Per share data (Note 4)
 Net loss per share                                                         $      (0.19)               -                -
 Weighted-average shares outstanding                                         270,240,757                -                -
==========================================================================================================================
</TABLE> 
See notes to consolidated financial statements.
<PAGE>
 
=============================================================================== 
                Consolidated Statements Of Shareholders' Equity
=============================================================================== 
                           COX COMMUNICATIONS, INC.
<TABLE> 
<CAPTION> 

                                                                                                                Net       
                                                                                                 Foreign     unrealized   
                                                      Common   Stock      Additional             currency       gain      
                                          Preferred -----------------      paid-in    Retained  translation  (loss) on    
(Thousands of Dollars)                      Stock   Class A   Class C      capital    earnings  adjustment   securities     Total
====================================================================================================================================
<S>                                       <C>      <C>       <C>        <C>          <C>         <C>         <C>         <C>  
Balance at December 31, 1993                   -          -         -   $  581,037   $ 137,273   $ (1,720)      -        $  716,590
  Net income                                                                            26,566                               26,566
  Debt assigned by CEI                                                    (204,727)                                        (204,727)
  Capital contributions by CEI                                             294,185                                          294,185
  Foreign currency translation                                                                                          
    adjustment                                                                                        499                       499
  Change in net unrealized gain                                                                                         
    (loss) on securities                                                                                     $  1,712         1,712
----------------------------------------------------------------------------------------------------------------------------------- 
Balance at December 31, 1994                   -          -         -      670,495     163,839     (1,221)      1,712       834,825
                                                                                                                        
  Net income                                                                           103,809                              103,809
  Issuance of stock related to                                                                                           
    Merger                                         $ 236,201 $ 13,799      682,001                                          932,001
  Issuance of stock related to                                                                                           
    public offering and private                                                                                         
    placement                                         19,799               337,231                                          357,030
  Issuance of stock related to                                                                                           
    stock compensation plans                             365                 5,851                                            6,216
  Capital contribution by CEI                                               43,844                                           43,844
  Foreign currency translation                                                                                           
    adjustment                                                                                     (2,192)                   (2,192)
  Change in net unrealized gain                                                                                          
    (loss) on securities                                                                                       56,480        56,480
----------------------------------------------------------------------------------------------------------------------------------- 
Balance at December 31, 1995                   -     256,365   13,799    1,739,422     267,648     (3,413)     58,192     2,332,013
                                                                                                                        
  Net  loss                                                                            (51,551)                             (51,551)
  Issuance of stock related to                                                                                          
    stock compensation plans                              99                 1,591                                            1,690
  Capital contribution by CEI                                                1,108                                            1,108
  Foreign currency translation                                                                                          
    adjustment                                                                                     26,837                    26,837
  Change in net unrealized gain                                                                                         
    (loss) on securities                                                                                      (48,785)      (48,785)
----------------------------------------------------------------------------------------------------------------------------------- 
Balance at December 31, 1996                   -   $ 256,464  $13,799   $1,742,121   $ 216,097   $ 23,424    $  9,407    $2,261,312
===================================================================================================================================
</TABLE> 
See notes to consolidated financial statements.

 28
----
 29
<PAGE>
 
                     ------------------------------------- 
                     Consolidated Statements Of Cash Flows
                     -------------------------------------

<TABLE> 
<CAPTION> 
--------------------------------------------------------------------------------------------------------
Year Ended December 31,                                                1996         1995         1994
(Thousands of Dollars)
<S>                                                                <C>          <C>            <C> 
Cash flows from operating activities

Net income (loss)                                                  $  (51,551)   $  103,809    $  26,566
Adjustments to reconcile net income (loss) to net cash provided
  by operating activities, net of effects of acquisitions:
  Depreciation                                                        264,188       198,788      106,864
  Amortization                                                         70,973        68,524       21,910
  Equity in net losses of affiliated companies                        170,435        79,734       43,905
  Deferred income taxes                                               (52,519)       22,730       (3,471)
  Gain on issuance of stock by affiliated companies                   (50,100)            -            -
  Gain on sale of affiliated companies                                 (4,640)     (188,806)           -
  Net loss on write down of investments                                     -        20,662            -
Increase in accounts receivable                                        (4,222)      (25,372)      (7,655)
Increase in accounts payable and accrued expenses                      31,161        15,666       10,271
Increase (decrease) in taxes payable                                  (32,762)       25,389        1,596
Other, net                                                            (31,826)        3,786        5,054
 ........................................................................................................
    Net cash provided by operating activities                         309,137       324,910      205,040
 ........................................................................................................
Cash flows from investing activities

Capital expenditures                                                 (578,926)     (369,557)    (188,178)
Acquisitions, net of cash acquired                                          -      (102,909)      (5,000)
Investments in affiliated companies                                  (338,402)     (527,922)    (181,575)
Proceeds from affiliated companies                                    162,287       113,222            -
Proceeds from sales of business                                       201,791        20,000            -
Other, net                                                              1,085         1,632        2,538
 ........................................................................................................
    Net cash used in investing activities                            (552,165)     (865,534)    (372,215)
 ........................................................................................................
Cash flows from financing activities
Revolving credit borrowings (repayments), net                        (418,364)   (1,191,902)     750,000
Net proceeds from sale of commercial paper                            718,704             -            -
Proceeds from issuance of debt                                        124,279     1,203,662            -
Repayment of debt                                                      (8,104)      (19,990)           -
Proceeds from exercise of options                                       1,275             -       
Increase (decrease) in amounts due to CEI                            (126,764)      175,770     (606,709)
Proceeds from issuance of common stock                                      -       357,030            -
Increase (decrease) in book overdrafts                                (44,815)       51,874       12,986
 ........................................................................................................
    Net cash provided by financing activities                         246,211       576,444      156,277
 ........................................................................................................
Net increase (decrease) in cash                                         3,183        35,820      (10,898)
Cash at beginning of period                                            39,166         3,346       14,244
 ........................................................................................................
Cash at end of period                                              $   42,349    $   39,166    $   3,346
--------------------------------------------------------------------------------------------------------
</TABLE> 
See notes to consolidated financial statements.
<PAGE>
 
                  Notes To Consolidated Financial Statements

Note 1 
Organization and Basis of 
Presentation

Cox Communications, Inc. ("Cox"), an indirect 75.3% owned subsidiary of CEI,
is among the nation's five largest multiple system operators, serving some 3.3
million customers. Cox is a fully integrated, diversified broadband
communications company with interests in domestic and United Kingdom ("U.K.")
cable distribution systems, programming networks and telecommunications
technology. In May 1994, CEI and certain of its subsidiaries transferred
ownership of its cable television operations and related investments to Cox.
CEI's historical basis in the assets and liabilities of the operations and
investments transferred has been carried over to Cox. The consolidated
financial statements of Cox represent the combined operations of the cable
television systems and related investments owned by CEI or its other
subsidiaries. The historical financial statements do not necessarily reflect
the results of operations or financial position that would have existed had Cox
been an independent company. All significant intercompany accounts have been
eliminated in the consolidated financial statements of Cox.

Note 2 
Summary of Significant 
Accounting Policies

Revenue Recognition   
Cox bills its customers in advance; however, revenue is recognized as cable
television services are provided. Receivables are generally collected within 30
days. Credit risk is managed by disconnecting services to customers who are
delinquent generally greater than 75 days. Other revenues are recognized as
services are provided. Revenues obtained from the connection of customers to
the cable television systems are less than related direct selling costs;
therefore, such revenues are recognized as received.

Plant and Equipment
Depreciation is computed using principally the straight-line method at rates
based upon estimated useful lives of five to 20 years for buildings and
building improvements, five to 12 years for cable television systems and three
to 10 years for other plant and equipment.

        The costs of initial cable television connections are capitalized as
cable plant at standard rates for Cox's labor and at actual costs for materials
and outside labor. Construction costs of new buildings, cable television systems
and equipment include capitalized interest. 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 written off.

Investments   
Investments in affiliates are accounted for under the equity method or cost
basis depending upon the level of ownership in the investment and/or Cox's
ability to exercise significant influence over the operating and financial
policies of the investee. Equity method investments are recorded at cost and
adjusted periodically to recognize Cox's proportionate share of the investees'
undistributed income or losses.

        Cost method investments in publicly traded companies are classified as
available-for-sale and are stated at fair market value with the unrealized
gains and losses recorded, net of taxes, as a separate component of
shareholders' equity. Cost method investments in privately held companies are
stated at cost adjusted for any known diminution in value determined to be
other than temporary in nature.

Intangible Assets   
Intangible assets consist primarily of goodwill, franchise costs and
personal communications services ("PCS") licenses including capitalized
interest. Goodwill and franchise costs recorded in business combinations
generally are amortized on a straight-line basis over 40 years. PCS licenses
including capitalized interest and other intangible assets are amortized on a
straight-line basis over the estimated life of the asset. Cox assesses on an
on-going basis the recoverability of intangible assets based on estimates of
future undiscounted cash flows for the applicable business acquired compared to
net book value. If the future undiscounted cash flow estimate is less than net
book value, net book value is then reduced to the undiscounted cash flow
estimate. Cox also evaluates the amortization periods of intangible assets to
determine whether events or circumstances warrant revised estimates of useful
lives.

 30
----
 31
<PAGE>
 
Impairment of Long-Lived Assets   
Effective January 1996, Cox adopted Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of." This Statement requires that
long-lived assets and certain intangibles be reviewed for impairment when
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable, with any impairment losses being reported in the
period in which the recognition criteria are first applied based on the fair
value of the asset. Long-lived assets and certain intangibles to be disposed of
are required to be reported at the lower of carrying amount or fair value less
cost to sell. There was no impact on the financial statements upon adoption of
SFAS No. 121.

Income Taxes    
The accounts of Cox historically have been included in the consolidated
federal income tax return and certain state income tax returns of CEI. Current
federal and state income tax expenses and benefits have been allocated on a
separate return basis to Cox based on the current year tax effects of the
inclusion of its income, expenses and credits in the consolidated income tax
returns of CEI or based on separate state income tax returns.

        Deferred income tax assets and liabilities arise from differences in
recording certain income and expenses for financial reporting and income tax
purposes and are principally related to depreciation and amortization and
equity in net losses of affiliated companies. 

Pension, Postretirement and Postemployment Benefits  
Cox generally provides defined pension benefits to all employees based on
years of service and compensation during those years. Cox provides certain
health care and life insurance benefits to substantially all retirees and
employees through certain CEI plans.  Expense related to the CEI plans is
allocated to Cox through the intercompany account. The amount of the
allocations is generally based on actuarial determinations of the effects of
Cox employees' participation in the plans.

Stock Compensation Plans    
As described in Note 11, Cox accounts for stock compensation plans using the
intrinsic value method prescribed in APB Opinion 25, "Accounting for Stock
Issued to Employees," and discloses the pro forma effect on net income and
earnings per share of using the fair value method as required by SFAS No. 123,
"Accounting for Stock-Based Compensation."

Net Income (Loss) Per Common Share   
Net income (loss) per common share is based on the weighted average number
of common shares and, as appropriate, dilutive common stock equivalents
outstanding for the period. 

        Cox Class A Common Stock became publicly traded on the New York Stock
Exchange effective February 1, 1995. Earnings per common share calculations for
the years ended December 31, 1995 and 1994 have not been disclosed because the
dissimilarity of the previous capital structure of Cox precludes a meaningful
comparison. Pro forma earnings per common share for 1995 and 1994 are presented
for comparative purposes in Note 4 assuming the shares issued in the merger
with the former Times Mirror cable television systems had been outstanding for
all periods.

Restructuring Charge  
During December 1995, Cox recorded a $5,139,000 pre-tax restructuring
charge. This charge principally represents severance, benefits and other
related costs associated with the elimination of 202 accounting and MIS staff
positions during 1996. At December 31, 1996 and 1995, the balance of the
restructuring liability was $1,698,000 and $3,737,000, respectively.  The
majority of the remaining liability as of December 31, 1996 is expected to be
paid or settled during 1997.

Foreign Currency Translation   
The financial statements of Cox's non-U.S. investments are translated into
U.S. dollars in accordance with SFAS No. 52, "Foreign Currency Translation."
Net assets of non-U.S. investments whose functional currencies are other than
the U.S. dollar are translated at the current rate of exchange. Income and
expense items are translated at the average exchange rate for the year. The
resulting translation adjustments are recorded, net of taxes, directly into a
separate component of shareholders' equity.
<PAGE>
 
================================================================================
            Notes To Consolidated Financial Statements (continued)
================================================================================

                           COX COMMUNICATIONS, INC.
 
Interest Rate Hedges   
Gains and losses related to qualifying hedges of anticipated debt
transactions are deferred and are recognized as adjustments of carrying amounts
when the hedged transactions occur. In the Consolidated Statements of Cash
Flows, realized gains and losses are classified along with the related debt
transaction as financing activities. Such gains or losses are amortized using
the interest method over the life of the related debt as adjustments to
interest expense.

Capitalized Interest 
Interest is capitalized as part of the historical cost of acquiring
qualifying assets, including self-constructed assets and advances to equity
method investees used to acquire qualifying assets while the investee has
activities in progress necessary to commence its planned principal operations.
Interest capitalized for the years ended December 31, 1996, 1995 and 1994 was
$43,183,000,  $14,188,000 and $70,000, respectively.

Use of Estimates    
The preparation of financial statements in conformity with generally
accepted accounting principles 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.

Reclassifications   
Certain amounts in the 1995 and 1994 financial statements have been
reclassified for comparative purposes.

NOTE 3 
CASH MANAGEMENT SYSTEM

Cox participates in CEI's cash management system, whereby the bank sends
daily notification of checks presented for payment. CEI transfers funds from
other sources to cover the checks presented for payment. Book overdrafts of 
$23,663,000 and $68,442,000 existed at December 31, 1996 and 1995,
respectively, as a result of checks outstanding. These book overdrafts were
reclassified as accounts payable and are considered financing activities in the
Consolidated Statements of Cash Flows.

NOTE 4
ACQUISITIONS, DISPOSITIONS 
AND EXCHANGES OF BUSINESSES

Effective February 1, 1995, Cox, CEI, The Times Mirror Company ("Times
Mirror") and New TMC Inc. ("New Times Mirror") consummated a merger (the
"Merger"), pursuant to which Times Mirror (which, at the time of the Merger,
was engaged only in the cable television business) merged with and into Cox. In
connection with the Merger, Cox Class A Common Stock became publicly traded on
the New York Stock Exchange. Following the Merger, New Times Mirror changed its
name to "The Times Mirror Company." As a result of the Merger, the former Times
Mirror stockholders received a total of approximately 54,904,252 shares of Cox
Class A Common Stock.  Subsidiaries of CEI received 181,296,833 shares of Cox
Class A Common Stock and 13,798,896 shares of Cox Class C Common Stock.

        The Merger was accounted for by the purchase method of accounting,
whereby the purchase price was allocated to the assets and liabilities assumed
based on their estimated fair values at the date of acquisition as follows:
<TABLE> 
<CAPTION> 
--------------------------------------------------------------------------
(Thousands of Dollars)
<S>                                                         <C> 
Purchase Price:
  Debt assumed                                              $1,364,000
  Stock issued                                                 932,000
  Net working capital deficit and other 
    net liabilities assumed                                    151,110
  Merger costs                                                  43,696
 ..........................................................................
                                                             2,490,806

Fair Market Value of Assets and Liabilities Acquired: 
  Plant and equipment                                          379,014
  Investments                                                   28,300
  Deferred taxes related to plant and equipment write-down      38,389
  Other assets, net of deferred taxes                            2,643
 ..........................................................................
                                                               448,346
 ..........................................................................
Purchase Price over Fair Value of Net Assets Acquired       $2,042,460
--------------------------------------------------------------------------
</TABLE> 
<PAGE>
 
                           COX COMMUNICATIONS, INC.
 
        The excess of the purchase price over the fair value of net assets
acquired has been recorded as goodwill and is being amortized on a straight-line
basis over 40 years. Results of operations have been included in the
consolidated financial statements from the date of acquisition.

        The following unaudited table sets forth selected pro forma consolidated
results of operations as if the Merger had occurred at the beginning of the
periods presented and does not purport to be indicative of the operating
results that would have occurred if the Merger had been consummated as of those
dates nor is it necessarily indicative of the future operating results.

<TABLE> 
<CAPTION> 

--------------------------------------------------------------------------
Year Ended December 31,                              1995           1994
<S>                                              <C>            <C> 
(Thousands of Dollars, except per share data)
Revenues                                         $1,328,122     $1,235,159
Depreciation and amortization                       279,114        253,809
Operating income                                    231,289        219,756
Net income (loss)                                   101,239        (12,752)

Pro forma per share data:
 Net income (loss) per share                     $     0.39     $    (0.05)
 Pro forma weighted-average 
   shares outstanding                           260,788,241    250,364,240
--------------------------------------------------------------------------
</TABLE> 

        The above pro forma information does not include, due to immateriality,
the effects of the following transactions:

        In September 1995, Cox sold its cable television system serving
approximately 13,000 customers in Bullhead City, Arizona for $20,000,000. No
gain or loss resulted from this transaction.

        In January 1996, Cox acquired a cable television system serving
approximately 51,000 customers in Newport News, Virginia, for approximately
$122,250,000. Cox operates this system as part of its cluster of systems in the
Hampton Roads, Virginia area. 

        In January 1996, Cox sold its cable television system in Texarkana,
Texas. The system, which was acquired as part of the Merger, served
approximately 23,400 customers. No gain or loss resulted from this transaction.

        In April 1996, Cox exchanged its Williamsport, Pennsylvania cable
television system for $13,000,000 and a cable television system in East
Providence, Rhode Island. The Williamsport system, which was acquired as part of
the Merger, served approximately 24,500 customers in Williamsport. The East
Providence system serves approximately 15,500 customers. No gain or loss
resulted from this transaction.

        In April 1996, Cox sold certain cable television systems in the Ashland,
Kentucky and Defiance, Ohio area for $136,000,000. These systems, which were
acquired as a result of the Merger, together served approximately 78,600
customers.  No gain or loss resulted from this transaction.

        In October 1996, Cox and Time Warner Entertainment/Advance-Newhouse
("Time Warner") entered into an agreement whereby Cox agreed to exchange its
Myrtle Beach, South Carolina cable television system serving approximately
42,230 customers for Time Warner's Hampton and Williamsburg, Virginia cable
television systems serving approximately 45,300 customers. The transaction also
includes a Texas cable television system serving approximately 7,000 customers
to be purchased by Cox and then immediately traded to Time Warner. Cox
anticipates this transaction will be consummated during the first quarter of
1997. In addition, Cox anticipates that it will recognize a book gain on this
transaction.

        In January 1997, Cox and Tele-Communications, Inc. ("TCI") exchanged
certain cable television systems owned by Cox serving approximately 319,000
customers for certain cable television systems owned by TCI serving
approximately 296,000 customers. As a result of the transaction, Cox received
TCI's systems in Bellevue/LaVista, Nebraska and Council Bluffs, Iowa;
Chesapeake, Virginia; Scottsdale, Arizona; North Attleboro/Taunton,
Massachusetts; Lincoln, Rhode Island; and St. Bernard, Louisiana.  In exchange,
TCI received Cox's systems in the greater Pittsburgh area; Spokane, Washington;
Springfield, Illinois; Cedar Rapids, Iowa and the Quad Cities area of Illinois
and Iowa; and Saginaw, Michigan. No gain or loss resulted from this transaction.

        In January 1997, Cox and Continental Cablevision ("Continental"), which
manages the domestic cable properties of U S WEST Media Group, exchanged
certain cable television systems, each serving approximately 48,000 customers.
Cox received Continental's systems in James City and York County, Virginia and
Pawtucket, Rhode Island and Continental received Cox's systems in western
Massachusetts and Weymouth, Massachusetts.   No gain or loss resulted from this
transaction.
<PAGE>
 
            Notes To Consolidated Financial Statements (continued)

                           COX COMMUNICATIONS, INC.


NOTE 5
PLANT AND EQUIPMENT

<TABLE> 
<CAPTION> 
--------------------------------------------------------------------------------
December 31,                                          1996            1995

(Thousands of Dollars)
<S>                                               <C>             <C> 
Land                                              $   26,649      $   21,072
Buildings and building improvements                   90,522          72,407
Transmission and distribution plant                1,923,729       1,758,056
Miscellaneous equipment                              187,496         150,350
Construction in progress                             114,627          79,615
 ................................................................................
  Plant and equipment, at cost                     2,343,023       2,081,500
Less accumulated depreciation                       (811,212)       (867,643)
 ................................................................................
  Net plant and equipment                         $1,531,811      $1,213,857
--------------------------------------------------------------------------------
</TABLE> 

NOTE 6
INVESTMENTS

<TABLE> 
<CAPTION> 
--------------------------------------------------------------------------------
December 31,                                          1996            1995

(Thousands of Dollars)
<S>                                               <C>             <C> 
Equity method investments                         $  713,500      $  647,217
Cost method investments:
  Publicly traded companies                          474,396         517,250
  Privately held companies                            31,186          36,786
 ................................................................................
    Total investments                             $1,219,082      $1,201,253
--------------------------------------------------------------------------------
</TABLE> 

Summarized combined unaudited financial information for all equity method
investments and Cox's proportionate share (determined based on Cox's ownership
interest in each investment) for 1996 and 1995 is as follows:

<TABLE> 
<CAPTION> 
--------------------------------------------------------------------------------
Year Ended December 31,                                       Cox's
(Thousands of Dollars)                                    Proportionate 
                              Combined                        Share
                       1996            1995            1996            1995
<S>                <C>             <C>               <C>             <C> 
Revenues           $1,569,634      $1,171,741        $359,926        $318,534
Operating loss       (283,539)        (92,289)        (82,637)        (31,960)
Net loss             (566,626)       (217,285)       (159,415)        (66,884)

--------------------------------------------------------------------------------
</TABLE> 
<TABLE> 
<CAPTION> 

December 31,                                  Combined
(Thousands of Dollars)                  1996             1995
<S>                                <C>                <C> 
Current assets                     $1,925,686         $  431,140
Noncurrent assets                   6,144,486          3,768,691
Current liabilities                   925,633            355,771
Noncurrent liabilities              3,497,226          1,175,551
Equity                              3,647,313          2,668,509
--------------------------------------------------------------------------------
</TABLE> 

        The summarized unaudited financial information presented below for these
significant equity method investments served as the basis for which Cox
recorded its share of equity in net losses:

<TABLE> 
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
(Thousands of Dollars)                Sprint                                          Outdoor                          GEMS
Year Ended December 31, 1996            PCS              PioneerCo       TCGI          Life       Speedvision       Television
<S>                               <C>                  <C>          <C>             <C>           <C>               <C>  
Revenues                                    -          $       692  $    267,669    $   2,479       $  1,966        $   8,666
Operating loss                    $  (274,475)             (45,588)      (53,362)     (22,196)       (29,996)          (8,818)
Net loss                             (388,575)             (60,725)     (114,849)     (22,196)       (29,996)         (12,304)
 ..................................................................................................................................
<CAPTION> 
December 31, 1996                                      
<S>                               <C>                  <C>          <C>             <C>           <C>               <C>  
Current assets                    $   324,831          $     5,480  $    796,619    $  14,357       $  5,832        $   7,051
Noncurrent assets                   3,770,826              197,797     1,260,866        1,644          3,215           14,856
Current liabilities                   196,408              128,486       253,112        3,817          3,994            3,410
Noncurrent liabilities              1,394,931              141,502     1,007,503            -              -           15,413
Equity                              2,504,318              (66,711)      796,870       12,184          5,053            3,084
----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>                                              
(Thousands of Dollars)                                 
Year Ended December 31, 1995                           
<S>                               <C>                  <C>          <C>             <C>           <C>               <C>  
Revenues                                    -                    -  $    166,169            -              -        $   6,409
Operating loss                    $   (64,520)         $    (5,581)      (15,261)   $  (3,473)      $ (2,430)          (9,771)
Net loss                             (110,428)              (5,953)      (53,804)      (3,470)        (2,428)         (13,558)
 ..................................................................................................................................
<CAPTION>                                              
December 31, 1995                                      
<S>                               <C>                  <C>          <C>             <C>           <C>               <C>  
Current assets                    $     1,651          $     4,017  $     50,206    $   2,020       $  2,667        $   5,466
Noncurrent assets                   2,242,692                8,965       564,587        5,912          3,347           17,287
Current liabilities                    49,417                6,587        97,289        1,655          1,199            3,131
Noncurrent liabilities                 11,856               12,348       392,156            -              -            5,352
Equity                              2,183,070               (5,953)      125,348        6,277          4,815           14,270
----------------------------------------------------------------------------------------------------------------------------------
</TABLE> 

 34
----
 35
<PAGE>
 
                           COX COMMUNICATIONS, INC.

        Cox's share of the net losses as stated above is not equal to the net
losses from equity investments reported in the Consolidated Statements of
Operations due to amortization and other expenses. At December 31, 1996, the
aggregate unamortized excess of Cox's investments over its equity in the
underlying net assets of the affiliates was approximately $42,472,000 and is
being amortized over periods ranging from five to 40 years. Amortization
included in equity in net losses of affiliates for the years ended December 31,
1996, 1995 and 1994 was $4,272,000, $5,622,000 and $5,163,000, respectively.

        The investment balances above include investments in and advances to
affiliated companies. The advances are generally interest-bearing, long-term
notes receivable totaling $72,175,000 and $136,534,000 at December 31, 1996 and
1995, respectively. Interest income recognized on notes receivable was
$11,951,000, $9,496,000 and $5,237,000 in 1996, 1995 and 1994, respectively.

        Cox has classified its cost method investments in publicly traded
companies as available-for-sale which have an aggregate cost of $425,332,000. At
December 31, 1996 and 1995, the unrealized gain for these investments was
$15,787,000 ($9,407,000 net-of-tax) and $96,986,000 ($58,192,000 net-of-tax),
respectively. The carrying value of publicly traded companies at December 31,
1996 includes a $33,277,000 foreign currency translation adjustment related to
Cox's interest in TeleWest Communications plc ("TeleWest"), a publicly traded
company in the U.K. Fair market values of publicly traded investments are based
on quoted market prices. At February 19, 1997, the fair market value of Cox's
publicly traded investments was $415,429,000.

        At December 31, 1996 and 1995, cost method investments in privately held
companies were carried at an aggregate cost of $31,186,000 and $36,786,000,
respectively. It was not practicable to estimate the fair values of privately
held investments due to lack of quoted market prices and the excessive cost
involved in determining such fair values. During 1995, certain investments were
written down by $20,662,000 to their net realizable value. 

Telephony   

Cox was awarded a broadband PCS license for the Los Angeles-San Diego Major
Trading Area ("MTA") in 1995 under the Federal Communications Commission's
("FCC") pioneer preference program. The amount payable by Cox for the license is
$251,918,000 and was included in outstanding debt at December 31, 1996 and 1995.

        In December 1996, pursuant to previous agreements, Cox, CEI, TCI,
Comcast Corporation ("Comcast") and Sprint Corporation ("Sprint") formed Cox
Communications PCS, L.P. ("PioneerCo") to operate the PCS system in the Los
Angeles-San Diego MTA. PioneerCo is owned 49% by Sprint Spectrum Holding Company
L.P. ("Sprint PCS") as limited partner and 51% by Cox Pioneer Partnership
("CPP") as general partner. CPP is a jointly controlled partnership owned
approximately 78% by Cox and approximately 22% by CEI. Cox, as managing general
partner of CPP, has day-to-day management authority over PioneerCo. Upon FCC
approval, which is expected in the first quarter 1997, the PCS license for the
Los Angeles-San Diego MTA and the related obligation to the FCC will be
transferred from Cox to PioneerCo. Upon the earlier of December 31, 1997 or
completion of the FCC's buildout requirement, CPP has the right to put its
interest to Sprint PCS at fair market value over a five-year period. In
addition, CPP has the right to put its entire interest from the fifth through
the eighth anniversaries of the earlier of December 31, 1997 or completion of
the buildout, and Sprint PCS has a call on CPP's interest from the fourth to the
eighth anniversaries of the earlier of December 31, 1997 or completion of the
buildout requirement. Cox funded the development of the PCS business in the Los
Angeles-San Diego MTA prior to the formation of PioneerCo and received a full
reimbursement of $162,300,000 on December 31, 1996. Cox recorded $60,700,000 and
$6,000,000 of equity in net losses in affiliated December 31, 1996 and 1995,
respectively, related to the operations of the PCS system prior to the formation
of PioneerCo.

        Prior to June 1996, Cox held a 30.06% interest in each of Teleport
Communications Group, Inc. ("TCGI") and Teleport Communications Group Partners
("TCGP"), which both own and operate fiber optic networks serving several U.S.
markets and provide point-to-point digital communications links to
telecommunications-intensive businesses and long-distance carriers. In June
1996, TCGI entered into a reorganization under which, among other things, its
four stockholders, Cox, Comcast, Continental and TCI (collectively, the "Cable
Stockholders") contributed to TCGI all of 
<PAGE>
 
================================================================================
            Notes To Consolidated Financial Statements (continued)
================================================================================

                           COX COMMUNICATIONS, INC.
 
their partnership interests in TCGP, any additional interests in local joint
ventures and debt and accrued interest owed by TCGI to the Cable Stockholders
(the "Reorganization"). Following the Reorganization, TCGI conducted an initial
public offering in which it sold 27,025,000 shares (the "TCGI IPO"). Upon
completion of the Reorganization and the TCGI IPO, Cox owns 39,087,594 shares
of TCGI's Class B Common Stock representing 29.8% of TCGI's Class B Common
Stock, 24.6% of total shares outstanding and a 29.1% voting interest. Each
share of Class B Common Stock is convertible into one share of Class A Common
Stock.   As a result of the TCGI IPO, Cox recorded a pre-tax gain of
$50,100,000 to recognize Cox's proportionate increase in its share of the
underlying net assets of TCGI. Cox recorded $28,500,000, $19,300,000 and
$9,500,000 of equity in net losses of affiliated companies for the years ended
December 31, 1996, 1995 and 1994, respectively, for its ownership interests in
TCGI, TCGP and related joint ventures.

        In October 1994, subsidiaries of Cox, TCI, Comcast and Sprint formed a
partnership known as "WirelessCo" to engage in the business of providing
wireless communications services, primarily PCS. WirelessCo, of which Cox owns
a 15% interest, was the successful bidder for 29 broadband PCS licenses in the
auction conducted by the FCC from December 1994 through March 1995. The total
purchase price for the 29 licenses was approximately $2.1 billion. In March
1995, Cox, TCI, Comcast and Sprint formed Sprint PCS to which the partners
contributed all of their respective interests in WirelessCo. Cox recorded
$56,500,000, $7,900,000 and $450,000 of equity in net losses in affiliated
companies for the years ended December 31, 1996, 1995 and 1994, respectively,
for its ownership interest in Sprint PCS and its predecessor, WirelessCo.

        During 1994, subsidiaries of Cox, TCI and Sprint also formed a separate
partnership ("Phillieco"), in which Cox owns a 17.6% interest. Phillieco was
the successful bidder for a broadband PCS license for the Philadelphia MTA, for
which the purchase price was approximately $85,000,000.

International Broadband Networks   

At December 31, 1996, Cox had an ownership interest of 14.7% in TeleWest, a
company that is currently operating and constructing cable television and
telephony systems in the U.K. Cox acquired this interest in October 1995
through the merger of SBC CableComms (UK) ("CableComms"), which was 50% owned by
Cox, with TeleWest (the "TeleWest Merger"). As a result of the TeleWest Merger,
Cox recognized a pre-tax net gain of $174,833,000. At December 31, 1996 and
1995, the carrying value of Cox's investment in TeleWest was $440,398,000 and
$500,335,000, respectively.

        In May 1995, Cox sold its 50% interest in STOFA A/S, a private operator
of cable television systems in Denmark for $13,300,000 resulting in a pre-tax
gain of approximately $10,200,000.

Cable Television Programming and Other Investments 

In August 1996, Cox acquired a 14.2% interest in At Home Corporation
("@Home"). @Home is a national Internet "backbone" service that allows
customers to access the Internet through cable modems at speeds up to hundreds
of times faster than currently available over traditional telephone modems.

        In March 1996, Syntellect, Inc. ("Syntellect") merged with the
operations of Telecorp Systems, Inc. ("Telecorp"). As a result of this merger,
Cox received an 8.6% interest in Syntellect in exchange for its 24.5% interest
in Telecorp. Cox recognized a pre-tax gain of $4,640,000 related to this
transaction.

        In October 1995, Cox acquired a 41% interest in the Outdoor Life Network
("Outdoor Life") and a 39% interest in the Speedvision Network ("Speedvision"),
two new U.S. programming services. Outdoor Life's  programming consists
primarily of outdoor recreation, adventure and wildlife themes; Speedvision's
programming consists of a broad variety of material for automobile, boat and
airplane enthusiasts. Cox recorded $18,700,000 and $3,000,000 of equity in net
losses of affiliated companies for the years ended December 31, 1996 and 1995,
respectively, for its ownership interests in both Outdoor Life and Speedvision.

        Cox also owns: a 50% interest in TWC Cable Partners, which owns cable
television systems in Staten Island, New York, and Fort Walton Beach, Florida;
a 38% interest in UK Gold and a 49.6% interest in UK Living, satellite
programming networks serving the U.K.; a 24.6% interest in Discovery
Communications, Inc., a documentary programming network that operates The
Discovery Channel and The Learning Channel; a 50% interest in GEMS Television, 
a Spanish-language network in North and South America; and various other
programming networks and cable television businesses.

 36
----
 37
<PAGE>
 
                           COX COMMUNICATIONS, INC.

<TABLE> 
<CAPTION> 

NOTE 7
INTANGIBLE ASSETS
----------------------------------------------------------------
<S>                              <C>             <C> 
December 31,                        1996             1995
(Thousands of Dollars)
Goodwill                         $2,659,258      $2,672,227
Franchise costs                      79,195          77,547
PCS licenses including 
 capitalized interest               277,176         257,023
Other                                17,671          29,888
 ................................................................
  Total                           3,033,300       3,036,685
Less accumulated amortization      (304,345)       (260,782)
 ................................................................
  Net intangible assets          $2,728,955      $2,775,903
----------------------------------------------------------------
</TABLE> 


NOTE 8
INCOME TAXES

<TABLE> 
<CAPTION> 

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

----------------------------------------------------------------
<S>                       <C>             <C>           <C> 
Year Ended December 31,       1996          1995          1994
(Thousands of Dollars)
Current:
  Federal                 $  41,694       $59,029       $24,035
  State                      33,871        18,135         5,216
 ................................................................
    Total current            75,565        77,164        29,251
 ................................................................
Deferred:
  Federal                   (38,340)       22,806        (2,754)
  State                     (14,179)          (76)         (717)
 ................................................................    
    Total deferred          (52,519)       22,730        (3,471)
 ................................................................
    Net income tax 
     expense              $  23,046       $99,894       $25,780
----------------------------------------------------------------
</TABLE> 

        Income tax expense differs from the amount computed by applying the U.S.
statutory federal income tax rate (35%) to income (loss) before income taxes as
a result of the following items:

<TABLE> 
<CAPTION> 
----------------------------------------------------------------
<S>                        <C>            <C>           <C> 
Year Ended December 31,      1996          1995          1994
(Thousands of Dollars)
Computed tax expense 
 (benefit) at federal 
 statutory rates on 
 income (loss) before 
 income taxes              $ (9,977)      $71,296       $18,321
State income taxes, 
 net of  federal tax 
 benefit                     12,793        11,738         2,924
Amortization of 
 acquisition adjustments     19,075        19,257         5,977
Benefit arising from 
 low income 
 housing credits             (3,494)       (4,532)       (2,876)
Nondeductible preferred 
 stock dividends of a 
 subsidiary                   2,339         2,339         2,339
Other, net                    2,310          (204)         (905)
 ................................................................    
   Net income tax 
    expense                 $23,046       $99,894       $25,780
----------------------------------------------------------------
</TABLE> 

<TABLE> 
<CAPTION> 

        Significant components of the net deferred tax liability consist of the
following:

----------------------------------------------------------------
<S>                                    <C>            <C> 
December 31,                               1996          1995
(Thousands of Dollars)
Plant and equipment                    $(266,219)     $(225,338)
Equity in net losses of 
 affiliated companies                    (27,921)       (25,946)
Unrealized gain on securities             (6,341)       (38,794)
Other                                      6,028          2,039
 ................................................................
   Net deferred tax liability          $(294,453)     $(288,039)
----------------------------------------------------------------
</TABLE> 
<PAGE>
 
================================================================================
            Notes To Consolidated Financial Statements (Continued)
================================================================================
                           COX COMMUNICATIONS, INC.



        Various consolidated federal income tax returns of CEI and state income
tax returns filed by Cox are presently under audit. However, in the opinion of
management, any additional tax liabilities resulting from these audits would not
have a material adverse impact on the consolidated financial position or
operating results of Cox.


NOTE 9
DEBT

<TABLE> 
<CAPTION> 

----------------------------------------------------------------
<S>                              <C>               <C> 
December 31,                         1996              1995

(Thousands of Dollars)
Revolving credit facilities      $  449,999        $  866,800
Commercial Paper, net of 
  unamortized discount of $3,296    718,704                 -
Medium-term notes                   166,082            41,804
6.375% Notes, due June 15, 2000, 
  net of unamortized discount 
  of $821 and $1,056                424,179           423,944
6.5% Notes, due November 15, 2002, 
  net of unamortized discount 
  of $517 and $605                  199,483           199,395
6.875% Notes, due June 15, 2005, 
  net of unamortized discount and  
  hedging of $13,661 and $14,765    361,339           360,235
7.25% Debentures, due 
  November 15, 2015, net of 
  unamortized discount 
  of $880 and $934                   99,120            99,066
7.625% Debentures, due June 15, 2025, 
  net of unamortized discount and  
  hedging of $18,128 and $18,291    131,872           131,709
Obligation to the FCC               251,918           251,918
Capitalized lease obligations        21,157            17,854
 ................................................................
    Total debt                  $ 2,823,853       $ 2,392,725
----------------------------------------------------------------
</TABLE> 

Revolving Credit Facilities   

At December 31, 1996, Cox had a $1,200 million revolving credit facility
which matures on December 20, 2000. In addition, Cox had an $800 million
revolving credit facility which matures on October 9, 1997, at which time any
outstanding borrowings convert to a long-term loan due October 9, 2000. These
facilities are committed to back outstanding commercial paper as discussed
below.

        At Cox's option, the interest rates on borrowings under the revolving
credit agreement are based on the London Interbank Offered Rate or the
certificate of deposit rate plus varying percentages or an alternate base rate.
In addition, the $1,200 million facility permits up to $500 million in
borrowings in any G-7 currency, with interest thereon based on the interbank
domestic eurocurrency rate for such currency. Interest rates under the revolving
credit facilities ranged from 5.69% to 6.94% and 6.31% to 6.69% during the years
ended December 31, 1996 and 1995, respectively. The credit facilities impose a
commitment fee on the unused portion of the total amount available of .09% to
 .375% based on the ratio of debt to operating cash flow and a utilization fee of
 .0625% to .1250% based on the level of borrowings.

        These facilities contain covenants which, among other provisions, limit
Cox's ability to pay dividends and sell assets and require Cox to meet certain
requirements as to the ratio of debt to operating cash flow and the ratio of
operating cash flow to debt service. Historically, Cox has not paid dividends,
nor does Cox intend to pay dividends in the foreseeable future but to reinvest
future earnings, consistent with Cox's business strategy. Although Cox was in
compliance with its credit facility covenants, at December 31, 1996 Cox was
prohibited from paying dividends under certain requirements.

Commercial Paper

In June 1996, Cox entered into a commercial paper program under which Cox may
borrow $750 million. The commercial paper program is backed by amounts available
under the revolving credit facilities. The outstanding notes have maturities up
to 270 days and interest rates based on market. The interest rates for
outstanding commercial paper at December 31, 1996 ranged from 5.52% to 5.80%.

38
39
<PAGE>
 
                           COX COMMUNICATIONS, INC.
 
Medium-Term Notes 

In April 1996, Cox filed a Form S-3 Registration Statement (the "Shelf
Registration") with the Securities and Exchange Commission under which Cox may
from time to time offer and issue debentures, notes, bonds or other evidence of
indebtedness for a maximum aggregate amount of $750 million. During 1996, Cox
sold $125 million of medium-term notes under the Shelf Registration. The notes
are due in varying amounts through November 2006 with interest at fixed rates
ranging from 6.94% to 7.19%. The net proceeds to Cox were approximately $124.3
million and the unamortized discount at December 31, 1996 was $0.7 million.

         In addition, at December 31, 1996 and 1995, Cox had outstanding
borrowings under several fixed rate medium- term notes totaling $41.8 million.
The notes are due in varying amounts through 2023 and interest is fixed at rates
ranging from 7.125% to 8.875%.

6.375% Notes Due 2000
6.875% Notes Due 2005
7.625% Debentures Due 2025
In June 1995, Cox issued $425 million of unsecured 
6.375% Notes Due 2000, $375 million of unsecured 
6.875% Notes Due 2005 and $150 million of unsecured
7.625% Debentures Due 2025. In anticipation of the issuance of these debt
securities, Cox had entered into a series of transactions under a forward
treasury lock agreement in order to hedge its interest rate exposure. Such
hedging transactions totaled a notional amount of $100 million for the Notes Due
2005 and $100 million for the Debentures Due 2025. The hedging transactions were
settled at a total cost of approximately $32.3 million, which will be reflected
as adjustments to interest expense over the life of the Notes Due 2005 and
Debentures Due 2025. Amortization of the market discounts, underwriting
discounts and commissions and hedging and other issuance costs will increase the
effective interest rates on the Notes Due 2005 and Debentures Due 2025 to 7.452%
and 8.784%, respectively.

         The debt securities may not be redeemed by Cox prior to maturity, nor
is Cox required to make mandatory redemption or sinking fund payments prior to
maturity. In addition, the debt securities contain certain restrictive covenants
relating to, among other things, liens on assets, indebtedness of restricted
subsidiaries, designation of restricted subsidiaries and mergers and sales of
assets. 
6.5% Notes Due 2002 
7.25% Debentures Due 2015 
In November 1995, Cox issued $200 million of unsecured 6.5% Notes Due 2002 and
$100 million of unsecured
7.25% Debentures Due 2015. Amortization of the market discounts,
underwriting discounts and commissions and other issuance costs increased the
effective interest rates to 6.724% and 7.431%, respectively. Net proceeds to Cox
from the issuance of the debt securities were approximately $296 million after
market discounts, underwriting discounts and commissions and other issuance
costs.

         The debt securities are redeemable in whole or in part, at Cox's
option, at fixed redemption prices. Cox is not required to make mandatory
redemption or sinking fund payments prior to maturity. In addition, the debt
securities contain certain restrictive covenants relating to, among other
things, liens on assets, indebtedness of restricted subsidiaries, designation of
restricted subsidiaries and mergers and sales of assets.

Obligation to the FCC

In March 1995, Cox was awarded a broadband PCS license for the Los Angeles-San
Diego MTA under the FCC's pioneer preference program at a cost to Cox of $251.9
million. Payments for the license are due in equal installments over 1998, 1999
and 2000, with a fixed interest rate of 7.75%.

Other

Maturities of long-term debt, including debt discount, for each of the five
years following December 31, 1996, are: $8.2 million, $89.3 million, $110.4
million, $1,686.5 million and $42.9 million, respectively. Commercial paper
outstanding at December 31, 1996 is classified as long-term as Cox intends to
refinance these borrowings on a long-term basis either through continued
commercial paper borrowings or utilization of other available credit facilities.
Included in the maturities of long-term debt are obligations under capital
leases of $5.9 million, $5.4 million, $4.5 million, $3.4 million and $1.7
million for each of the five years following December 31, 1996, respectively.

<PAGE>
 
================================================================================
            Notes To Consolidated Financial Statements (continued)
================================================================================

                           COX COMMUNICATIONS, INC.
 
Fair Value of Financial Instruments

In accordance with the requirements of SFAS No. 107, "Disclosures About Fair
Value of Financial Instruments," Cox estimated the fair value of its debt
instruments. The estimates are based on discounted cash flow analyses using
Cox's incremental borrowing rate for similar types of borrowing arrangements and
dealer quotations. Borrowings under current maturities, the revolving credit
agreements and commercial paper at December 31, 1996 and 1995 bear interest at
current market rates and, thus, approximate fair value. Remaining debt with a
carrying amount of $1,645.3 million and $1,519.8 million is estimated to have a
fair value of $1,671.6 million and $1,601.3 million at December 31, 1996 and
1995, respectively.


Note 10
Retirement Plans

Qualified Pension Plan

Effective January 1, 1996, Cox established the Cox Communications, Inc. Pension
Plan (the "CCI Plan"), a qualified noncontributory defined benefit pension plan.
The employees of the former Times Mirror cable television systems became
participants in the CCI Plan retroactive to the Merger date of February 1, 1995.
The remaining Cox employees, excluding certain key employees, participated in
the qualified noncontributory defined benefit pension plan of CEI (the "CEI
Plan") until August 1, 1996, when they entered the CCI Plan and plan assets were
transferred to the CCI Plan from CEI. Times Mirror also transferred plan assets
to the CCI Plan during 1996. Plan assets consist primarily of common stock,
investment-grade corporate bonds, cash and cash equivalents and U.S. government
obligations. The CCI Plan calls for benefits to be paid to eligible employees at
retirement based primarily upon years of service with Cox and compensation rates
near retirement. Current policy is to fund the CCI Plan in an amount that falls
between the minimum contribution required by ERISA and maximum tax deductible
contribution.

         Total pension expense attributable to Cox employees' participation in
the CCI Plan and the CEI Plan was $5,180,000, $3,972,000 and $2,189,000 for the
years ended December 31, 1996, 1995 and 1994, respectively.

The reconciliation of the funded status of the CCI Plan at December 31, 1996 is 
as follows:

<TABLE> 
<CAPTION> 

--------------------------------------------------------------------------------
<S>                                                                    <C> 
(Thousands of Dollars) 
Actuarial present value of:
   Vested benefit obligation                                           $ 22,212
   Nonvested benefit obligation                                           1,259
--------------------------------------------------------------------------------
Accumulated benefit obligation                                         $ 23,471
--------------------------------------------------------------------------------
Plan assets at fair value                                              $ 78,425
Projected benefit obligation                                             68,486
--------------------------------------------------------------------------------
Plan assets in excess of projected benefit obligation                     9,939
Unrecognized:
   Net gain on plan assets                                               (8,285)
   Prior service costs                                                      535
   Net transition asset                                                  (1,346)
--------------------------------------------------------------------------------
Prepaid pension cost                                                   $    843
--------------------------------------------------------------------------------
</TABLE> 

The assumptions used in the actuarial computations at December 31, 1996 were:

<TABLE> 
<CAPTION> 
--------------------------------------------------------------------------------
<S>                                                                        <C> 
Discount rate                                                              7.75%
Rate of increase in compensation levels                                    5.50
Expected long-term rate of return on plan assets                           9.00
--------------------------------------------------------------------------------
</TABLE> 

Nonqualified Pension Plan

Certain key employees of Cox participate in an unfunded, nonqualified
supplemental pension plan of CEI (the "Nonqualified CEI Plan") which has
generally the same benefit payout formula as the CCI Plan. Total pension expense
for Cox attributable to the Nonqualified CEI Plan was $1,386,000, $895,000 and
$713,000 for the years ended December 31, 1996, 1995 and 1994, respectively.

Other Retirement Plans

CEI provides certain health care and life insurance benefits to substantially
all retirees of Cox. Postretirement expense allocated to Cox by CEI was
$1,060,000, $888,000 and $1,013,000 for the years ended December 31, 1996, 1995
and 1994, respectively. Cox's accumulated postretirement benefit obligation
("APBO") at December 31, 1996 was $8,443,277. The funded status of the
postretirement plan covering the employees of Cox is not determinable. The APBO
for the postretirement plan of CEI substantially exceeded the fair value of
assets held in the plan at December 31, 1996.

 40
----
 41

<PAGE>
 
                           COX COMMUNICATIONS, INC.


     Actuarial assumptions used to determine the APBO include a discount rate of
7.75% and an expected long-term rate of return on plan assets of 9%. The assumed
health care cost trend rate for retirees is 11.5%. For participants prior to age
65, the trend rate gradually decreases to 5.5% by year 2007 and remains level 
thereafter. For retirees at age 65 or older, this rate decreases to 5.0% by year
2008. Increasing the assumed health care cost trend rate by one percentage point
would have resulted in an increase in the CEI plan's APBO of approximately 6.5% 
and an increase in the aggregrate of the service cost and interest cost 
components of the net periodic postretirement benefit cost of approximately 5.1%
for 1996.

     In addition, substantially all of Cox's employees are eligible to 
participate in the savings and investment plan of CEI. 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 $4,504,000, $3,881,000 
and $2,479,000 for the years ended December 31, 1996, 1995 and 1994, 
respectively.

NOTE 11
STOCK COMPENSATION PLANS

At December 31, 1996, Cox had two stock-based compensation plans; a Long-Term 
Incentive Plan ("LTIP") and an Employee Stock Purchase Plan ("ESPP"). Cox 
applies APB Opinion 25 in accounting for its plans and, accordingly, since the 
issue price of stock compensation awards equals or exceeds the current market 
price, no compensation cost was recognized in 1996 and 1995 for these plans. Had
compensation cost for the LLP and ESPP been determined based on the fair value 
at the grant dates for awards in 1996 and 1995 consistent with the provisions of
SFAS No. 123, "Accounting for Stock-Based Compensation," Cox's net income 
(loss) and net income (loss) per share would have been reduced (increased) to 
the pro forma amounts indicated below:

--------------------------------------------------------------------------------

<TABLE> 
<CAPTION> 

Year ended December 31,                       1996            1995

(Thousands of Dollars)
<S>                                        <C>             <C> 
Net income (loss) - As reported            $(51,551)       $103,809
Net income (loss) - Pro Forma               (55,807)         99,192

Net income (loss) per share - As reported    $(0.19)            N/A
Net income (loss) per share - Pro Forma       (0.21)            N/A
--------------------------------------------------------------------------------
</TABLE> 

     Effective upon consummation of the Merger, Cox adopted a LTIP under which 
executive officers and selected key employees are eligible to receive awards of 
various forms of equity-based incentive compensation, including stock options, 
stock appreciation rights, stock bonuses, restricted stock awards, performance 
units and phantom stock. Cox has reserved 6,000,000 shares of Class A Common 
Stock for issuance under the LTIP. The LTIP is to be administered by the 
Compensation Committee of the Cox Board of Directors or its designee.

     Options granted may be "Incentive Stock Options" or "Nonqualified Stock 
Options." The exercise prices of the options are determined by the Compensation 
Committee when the options are granted, subject to a minimum price of the fair 
market value of teh Class A Common Stock on the date of grant. These options 
become execisable over a period of three to five years from the date of grant 
and expire 10 years from the date of grant. An accelerated vesting schedule has 
been provided such that the options become fully vested if the market value of 
the shares exceeds the exercise price by 140% for ten consecutive trading days.

     The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following assumptions used for 
grants in 1996 and 1995; expected volatility of 28%, no payment of dividends, 
expected life of four years and risk-free interest rates of 5.6% and 7.0%, 
respectively.

     A summary of the status of Cox's stock options granted under the LTIP as of
December 31, 1996 and 1995 and changes during the years ending on those dates is
presented below:

--------------------------------------------------------------------------------

<TABLE> 
<CAPTION> 
  
                                            1996                       1995
                                           Wighted-                  Weighted
                                           Average                   Average
                             Shares    Exercise Price    Shares   Exercise Price
<S>                        <C>             <C>        <C>                <C> 
Outstanding at
  beginning of year        1,506,253       $17.03            --              --
Granted                      706,930        20.94     1,530,202          $17.03
Exercised                    (59,210)       16.98            --              --
Cancelled                   (146,278)       17.98       (23,949)          16.98
--------------------------------------------------------------------------------
Outstanding at
  end of year              2,007,695       $18.34     1,506,253          $17.03
--------------------------------------------------------------------------------
Options exercisable
  at year-end                 18,851                     59,277

Weighted-average fair
  value of options
  granted during
  the year                     $9.17                      $6.28
--------------------------------------------------------------------------------
</TABLE> 
<PAGE>
 
================================================================================
            Notes To Consolidated Financial Statements (continued)
================================================================================

                           COX COMMUNICATIONS, INC.

 
The following table summarizes information about stock options outstanding at
December 31, 1996:

<TABLE> 
<CAPTION> 

-----------------------------------------------------------------------------------------------------------------------------
<S>                    <C>              <C>                      <C>                   <C>                  <C> 
                                        Options Outstanding
                                          Weighted-Average                                     Options Exercisable
Range of                  Number             Remaining           Weighted-Average         Number           Weighted-Average
Exercise Prices        Outstanding        Contractual Life        Exercise Price        Exercisable         Exercise Price
$16.98                  1,317,512              8.25                   $16.98              11,858                $16.98
$20.44 - $21.63           690,183              8.98                    20.94               6,993                 20.94
-----------------------------------------------------------------------------------------------------------------------------
$16.98 - $21.63         2,007,695              8.50                   $18.34              18,851                $18.44
-----------------------------------------------------------------------------------------------------------------------------
</TABLE> 

      In June 1995, Cox adopted an ESPP, under which Cox was authorized and
did issue purchase rights totaling 750,000 shares of Class A Common Stock to
substantially all employees who had completed six months of service. Under the
terms of the ESPP, the purchase price was 90% of the market value on June 1,
1995 and employees were allowed to purchase the shares via payroll deductions
through August 31, 1997, at which time the shares will be issued to the
employees. During 1996 and 1995, 20,203 and 1,095 shares, respectively, were
issued to employees under the ESPP due to cancellation of employees'
participation in the ESPP or termination of employment. The fair value of the
employees' purchase rights granted in 1995 was estimated using the Black-Scholes
model with the following assumptions: expected volatility of 28%, no payment of
dividends, expected life of 2.25 years and risk-free interest rate of 5.8%. The
weighted-average fair value of each purchase right granted in 1995 was $4.38.

      Prior to the Merger, certain of the executives and key employees of Cox
participated in certain CEI Unit Appreciation Plans ("UAP") that provided for
payment of benefits in the form of shares of CEI common stock, cash, or both,
generally five years after the date of award. The cost of awards made under the
plans was allocated to Cox by CEI over the applicable vesting periods and was
charged to operating expense. Amounts charged to expense for Cox employees for
the year ended December 31, 1994 was $4,419,000.

      Units awarded under the UAP that would have matured in 1995, 1996 and
1997 were converted to 365,954 shares of restricted stock issued under the LTIP
in 1995. These restricted shares vested on January 1, 1997 following the end of
the original five-year UAP appreciation period, except that 34,684 shares vested
and 5,533 shares were canceled during 1995 and 1996 due to the retirement or
termination of certain participants.

Note 12
Shareholders' Equity

Cox is authorized to issue 286,000,000 shares of Class A Common Stock and
14,000,000 shares of Class C Common Stock. Except with respect to voting,
transfer and convertibility, shares of Class A Common Stock and Class C Common
Stock are identical in all respects. 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. In addition, Cox is authorized to
issue 5,000,000 shares of Preferred Stock. There are no issued or outstanding
shares of Preferred Stock at December 31, 1996.

      In June 1995, Cox completed a public offering of 11,500,000 shares of
Class A Common Stock at a price of $18.875 per share. Cox also sold 8,298,755
shares of Class A Common Stock for $150,000,000 in a private placement to CEI.
Total proceeds to Cox were approximately $357,031,000, net of underwriting
discounts and commissions and other issuance costs of approximately $10,032,000.

      As of December 31, 1996 and 1995, CEI owned approximately 75.3% of the
outstanding shares of Cox Common Stock and 83.1% of the voting power of Cox.

 42
----
 43

<PAGE>
 
                           COX COMMUNICATIONS, INC.
 
NOTE 13
TRANSACTIONS WITH AFFILIATED COMPANIES

Cox borrows funds for working capital and other needs from CEI. Certain
management services are provided to Cox by CEI. Such services include legal,
corporate secretarial, tax, treasury, internal audit, risk management, benefits
administration and other support services. Cox was allocated expenses for the
years ended December 31, 1996, 1995 and 1994 of approximately $2,493,000,
$2,000,000 and $800,000, respectively, related to these services. Cox pays rent
and certain other occupancy costs to CEI for its headquarters office facilities,
which amounts approximated $3,000,000, $2,600,000 and $2,300,000 for the years
ended December 31, 1996, 1995 and 1994, respectively. Allocated expenses are
based on CEI's estimate of expenses related to the services provided to Cox in
relation to those provided to other divisions of CEI. Rent and occupancy expense
is allocated based on occupied space. Management believes that these allocations
were made on a reasonable basis. However, the allocations are not necessarily
indicative of the level of expenses that might have been incurred had Cox
contracted directly with third parties. Management has not made a 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 fees and
expenses to be paid by Cox to CEI are subject to change.

      In August 1996, CEI transferred to the CCI Plan a prepaid pension cost
of $1,816,000 which represents the excess of the plan assets over the projected
benefit obligation attributable to the Cox employees that had previously
participated in the CEI Plan. This transfer resulted in a contribution to
capital of $1,108,000, net of federal and state deferred tax liabilities of
$708,000.

      In connection with the Merger, during 1995, CEI made additional capital
contributions to Cox of $43,844,000 by forgiving indebtedness in such amount
which Cox owed CEI.

      In June 1995, CEI purchased 8,298,755 shares of Cox Class A Common Stock
for $150,000,000 in a private placement at a price per share equal to the public
offering price of the June 27, 1995 public offering less the underwriting
discounts thereon.

      The amounts due to CEI are generally due on demand and represent the
net of various transactions, including those described above. Outstanding
amounts to CEI bear interest at fifty basis points above CEI's current
commercial paper borrowings. This rate as of December 31, 1996 and 1995 was 6.2%
and 6.6%, respectively.

      Included in amounts due to (from) CEI are the following transactions:

<TABLE> 
<CAPTION> 

--------------------------------------------------------------------------------
<S>                                                                  <C> 
(Thousands of Dollars)
Intercompany due to CEI, December 31, 1994                           $  37,813
         Cash transferred  from CEI                                     65,906
         Net operating expense allocations
                  and reimbursements.                                  122,730
         Contribution to capital                                       (43,844)
--------------------------------------------------------------------------------
Intercompany due to CEI, December 31, 1995                             182,605
         Cash transferred to CEI                                      (282,829)
         Net operating expense allocations
                  and reimbursements                                   158,479
         Contribution to capital                                        (1,108)
--------------------------------------------------------------------------------
Intercompany due to CEI, December 31, 1996                           $  57,147

--------------------------------------------------------------------------------
</TABLE> 

         In accordance with the requirements of SFAS No. 107, "Disclosures About
Fair Value of Financial Instruments," Cox has estimated the fair value of its
intercompany advances and notes payable. Given the short-term nature of these
advances, the carrying amounts reported in the balance sheets approximate fair
value.

         Cox pays fees to certain entities in which it has an ownership interest
in exchange for cable television programming. Programming fees paid to such
affiliates for the years ended December 31, 1996, 1995 and 1994 were
approximately $24,535,000, $28,178,000 and $9,100,000, respectively.


NOTE 14
SUBSIDIARY PREFERRED STOCK

At December 31, 1996, a subsidiary of Cox has $177,000,000 of nonvoting
redeemable preferred stock outstanding. In exchange for the stock, the
subsidiary of Cox received $10,000,000 in cash upon issuance of the stock in
1990 and a note receivable due in January 2001 of $167,000,000.

<PAGE>
 

================================================================================
            Notes To Consolidated Financial Statements (continued)
================================================================================


                           COX COMMUNICATIONS, INC.


         The long-term notes receivable from the outside investor have been
netted against the preferred stock due to a right of offset. The net amount,
$10,000,000 at December 31, 1996 and 1995, has been included in other
liabilities in the Consolidated Balance Sheets.

         The subsidiaries pay annual dividends of approximately $6,700,000 in
the aggregate on the outstanding preferred stock, which have been recorded as a
reduction of interest income on the notes.

NOTE 15
SUPPLEMENTAL DISCLOSURE
OF NONCASH INVESTING
AND FINANCING ACTIVITIES

<TABLE> 
<CAPTION> 

--------------------------------------------------------------------------
<S>                              <C>         <C>              <C> 
Year Ended December 31,              1996         1995             1994
(Thousands of Dollars)
Significant noncash
transactions:
  Debt assigned by CEI                  -            -         $204,727
  Capital contributions
    by CEI                       $  1,108    $  43,844          294,185
  Cox Common Stock
    issued in connection
    with the Merger                     -      932,000                -
  Debt assumed in
    connection with Merger              -    1,364,000                -
  Purchase of PCS license               -      251,918                -
  TeleWest Merger
    stock exchange                      -      407,800                -
  Capitalized lease
    obligations                    11,408       17,177 
  Additional cash flow
    information:
  Cash paid for interest       $  143,094  $   141,692       $   43,584
  Cash paid for income
     taxes                        108,964       52,135           32,563
--------------------------------------------------------------------------
</TABLE> 

NOTE 16
COMMITMENTS AND CONTINGENCIES

Cox leases land, office facilities and various items of equipment under
noncancellable operating leases. Rental expense under operating leases amounted
to $19,009,000 in 1996, $15,660,000 in 1995 and $11,551,000 in 1994. Future
minimum lease payments as of December 31, 1996 for all noncancellable operating
leases are as follows:

<TABLE> 
<CAPTION> 

-------------------------------------------------------------
<S>                                     <C> 
(Thousands of Dollars)
1997                                    $   6,151,000
1998                                        5,417,000
1999                                        4,352,000
2000                                        4,058,000
2001                                        3,604,000
Thereafter                                 16,718,000
-------------------------------------------------------------
         Total                          $  40,300,000
-------------------------------------------------------------
</TABLE> 

         At December 31, 1996, Cox had outstanding purchase commitments totaling
approximately $42,529,000 for additions to plant and equipment and $86,820,000
to rebuild certain existing cable systems. Other commitments include
approximately $173,000,000 to fund the operations of Sprint PCS and PhillieCo.
This amount may vary significantly depending on numerous factors, such as
financing alternatives for Sprint PCS. Additionally, upon the transfer to
PioneerCo of the PCS license for the Los Angeles-San Diego MTA and the related
obligation to the FCC, as discussed in Note 6, Cox will be committed to fund
$165,000,000 for the operations of PioneerCo.


 44
----
 45
<PAGE>
 
                           COX COMMUNICATIONS, INC. 
 
         Cox has guaranteed borrowings of certain affiliates totaling
approximately $2,519,000 at December 31, 1996. Cox has unused letters of credit
outstanding totaling $3,494,000 at December 31, 1996, as required under
agreements with its franchise authorities.

         Many franchising authorities have become certified by the FCC to
regulate rates charged by Cox for basic cable service and associated basic cable
service equipment. Some local franchising authority decisions have been rendered
that were adverse to Cox. In addition, a number of such franchising authorities
and customers of Cox filed complaints with the FCC regarding the rates charged
for cable programming services. In December 1995, the FCC approved a Resolution
of all outstanding rate complaints covering the Cox and former Times Mirror
cable television systems. The Resolution, among other things, provided for the
payment of refunds of $7,120,000 plus interest to one million customers in
January 1996, and the removal of additional outlet charges for regulated
services from all of the former Times Mirror cable television systems. The
Resolution also stated that Cox's cable programming services tier rates as of
June 30, 1995 were not unreasonable. Refunds under the Resolution were fully
provided for in Cox's financial statements at December 31, 1995. In January
1996, the City of Irvine and six other cities located in California filed an
appeal to set aside the Resolution in the United States Court of Appeals for the
Ninth Circuit. The FCC is a party to the appeal and Cox has been granted leave
to intervene. Cox cannot predict the outcome of this appeal.

         Cox is a party to various other legal proceedings that are ordinary and
incidental to its business. Management does not expect that any legal
proceedings currently pending will have a material adverse impact on Cox's
consolidated financial position or consolidated results of operations.

<PAGE>
 
Note 17
Unaudited Quarterly Financial Information

The following table sets forth selected historical quarterly financial
information for Cox. This information is derived from unaudited financial
statements of Cox and includes, in the opinion of management, all normal and
recurring adjustments that management considers necessary for a fair
presentation of the results for such periods.
<TABLE> 
<CAPTION> 
--------------------------------------------------------------------------------
                                                     1996 
                                          1st     2nd     3rd    4th
                                        Quarter Quarter Quarter Quarter 
<S>                                     <C>     <C>     <C>     <C>
(Millions of Dollars, except                            
per share data)                                         
Complete basic                          $247.6   $246.5   $245.9   $ 255.1
New product tier                           3.2      3.4      3.5       4.1
Premium service                           47.6     47.8     47.3      46.3
Pay-per-view                              12.9     9.9      10.2      12.6
Advertising                               17.3     18.7     21.5      24.0
Satellite                                 17.7     19.2     22.1      24.2
Other                                     11.2     11.9     13.3      15.3
 ................................................................................
   Total revenues                        357.5    357.4    363.8     381.6
                                                                 
Programming costs                         89.0     85.7     88.0      90.1
Plant operations                          34.8     34.5     35.8      35.7
Marketing                                 10.7     11.7     11.0      9.7
General and administrative                70.9     72.3     71.6      76.2
Satellite operating and administrative    15.7     17.6     19.3      23.1
Depreciation                              55.9     63.2     61.0      84.1(a)
Amortization                              18.5     17.6     17.5      17.4
 ................................................................................
  Operating income                     $  62.0  $  54.8  $  59.6   $  45.3
--------------------------------------------------------------------------------
  Net income (loss)                    $   7.3  $  27.0  $ (28.1)  $ (57.8)
  Net income (loss) per share          $  0.03  $   0.10 $ (0.10)  $ (0.21)
--------------------------------------------------------------------------------
</TABLE> 
(a) Depreciation for the fourth quarter of 1996 includes accelerated
depreciation of $18.5 million as a result of the upgrade and rebuild of the
broadband network. 

 46
----
 47
<PAGE>
 
<TABLE> 
<CAPTION> 
                                                     1995
                                          1st     2nd     3rd     4th
                                        Quarter Quarter Quarter Quarter 
<S>                                     <C>     <C>     <C>     <C>
(Millions of Dollars, except per 
share data)
Complete basic                          $191.0  $229.4  $234.1  $243.8
New product tier                           1.8     2.8     3.2     2.3
Premium service                           42.5    48.1    47.5    47.0
Pay-per-view                               7.1    12.7    12.7     9.8
Advertising                               12.5    16.8    17.7    24.6
Satellite                                  8.1     9.1    10.5    13.4
Other                                      8.2     9.2     9.4    10.9
 ................................................................................
   Total revenues                        271.2   328.1   335.1   351.8

Programming costs                         67.5    81.0    81.2    84.7
Plant operations                          29.2    33.8    32.0    33.2
Marketing                                  7.4    10.5    11.3     8.5
General and administrative                55.5    67.1    72.3    70.9
Satellite operating and administrative     8.8    10.2     9.9    12.8
Restructuring charge                         -       -       -     5.1
Depreciation                              43.8    45.4    51.3    58.3
Amortization                              13.1    19.3    18.2    17.9
 ................................................................................
   Operating income                     $ 45.9  $ 60.8  $ 58.9  $ 60.4
--------------------------------------------------------------------------------
   Net income (loss)                    $  1.8  $  5.0  $(14.0) $111.0
   Net income (loss) per share             N/A  $ 0.02  $(0.05) $ 0.41
--------------------------------------------------------------------------------
</TABLE> 

<PAGE>
 
The Board of Directors and Shareholders
Cox Communications, Inc.

We have audited the accompanying consolidated balance sheets of Cox
Communications, Inc. (Cox) as of December 31, 1996 and 1995, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of Cox's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Cox
Communications, Inc. at December 31, 1996 and 1995, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.

        During 1994, Cox changed its method of accounting for certain
investments in equity securities to conform with Statement of Financial
Accounting Standards No. 115.


/s/ Deloitte & Touche LLP

Atlanta, Georgia
February 7, 1997

 48
----
 49
<PAGE>
 
                            Shareholder Information
 
(Back Cover)

Shareholder Information
Corporate Headquarters: 
Cox Communications, Inc.
1400 Lake Hearn Dr., NE 
Atlanta, GA 30319 
404-843-5000
http://www.cox.com

Stock Data: Cox's Class A Common Stock is traded on the New York Stock
Exchange. Ticker symbol: COX. Daily newspaper stock table listing: CoxComm A.
As of February 1, 1997, there were 3,726 shareholders of record of Cox's Class
A Common Stock and two shareholders of record of the Class C Common Stock.
There is no established trading market for Cox's Class C Common Stock. There
have been no stock dividends paid on any of Cox's equity securities. Cox does
not intend to pay cash dividends in the foreseeable future. See "Management's
Discussion and Analysis - Liquidity and Capital Resources - uses of Cash," page
23.

Quarterly Market Information:
        Class A Common Stock
                         High    Low
1996
First Quarter           $24 1/8  $18 7/8
Second Quarter           23 1/4   19 3/4
Third Quarter            22 3/8   17 5/8
Fourth Quarter           23 1/8   16 5/8
1995
First Quarter           $18      $15 3/4
Second Quarter           20 1/4   14
Third Quarter            21 1/2   19
Fourth Quarter           20 5/8   17 3/4

Transfer Agent and Registrar: 
First Chicago Trust Company of New York 
P.O. Box 2500
Jersey City, NJ 07303-2500 
201-324-1225
http://www.fctc.com  
fctc@em.fcnbd.com
Annual Meeting of Shareholders: 
April 17, 1997, 9 a.m.
Cox Corporate Headquarters
1400 Lake Hearn Dr., NE
Atlanta, GA 30319

Form 10-K: Cox Communications' Annual Report on Form 10-K as filed with the
Securities and Exchange Commission is available free upon written request to:
Finance Department, Cox Communications, Inc., at the address above.

Company Information: Communications regarding stock transfers, lost
certificates or account changes should be directed to the transfer agent, First
Chicago Trust Company of New York. For other information, contact one of the
following:

Analysts/Institutional Investors: Dallas Clement, Treasurer, 404-843-5677,
fax: 404-843-5939

Individual Shareholders: Anthony Surratt, Manager of Communications,
404-843-5124, fax: 404-843-5777

News Media: Ellen East, Director of Communications, 404-843-5854, fax:
404-843-5777

Independent Auditors: 
Deloitte & Touche LLP
100 Peachtree St.
Suite 1700
Atlanta, GA 30303-1943
404-220-1500

[COX LOGO APPEARS HERE]

1400 Lake Hearn Drive, NE
Atlanta, Georgia 30319
404-843-5000
http://www.cox.com