We had a strong third quarter, achieving solid operating cash flow (OCF) growth of 12%, despite weaker advertising sales than forecasted. Advertising sales have been slow all year due to the uncertain economy, but the business disruption caused by the events of the September 11th national tragedies contributed further to this issue, said Jim Robbins, President and Chief Executive Officer.

Bundling continues to be a successful strategy for attracting and retaining customers. We now have 956,000 households taking at least two Cox products. We had our highest net-gain in bundled customers this quarter, which is indicative of the increasing popularity of our bundled marketing strategy.

Run rates and demand for new services in the third quarter of 2001 remained unabated, even in the face of the tragic events that occurred in September. We attribute that partly to a very effective third quarter marketing campaign and to the fact that, even in times of economic uncertainty, our customers receive significant value from Cox services.

Robbins continued: We now have a total of 2.4 million new-service revenue generating units (RGUs), fueled by the record gain of 322,000 new-service RGUs in the third quarter versus 271,000 and 244,000 new-service RGUs in the first and second quarters of 2001, respectively. Seasonality clearly turned in our favor in the third quarter, as we added 40,000 basic customers versus a loss of 47,000 basic customers in the second quarter of 2001.

Robbins said that although the slower advertising sales and associated impact of September 11th are expected to have a continuing effect on advertising revenues in the fourth quarter, the company expects revenue growth of 14% and OCF growth of 12% for the full year 2001. The OCF guidance does not include undetermined transitional costs related to the re-structuring of our high-speed data network pursuant to the bankruptcy of Excite@Home. He added that the company still anticipates strong RGU growth and expects to end the year with over 1.1 million new-service RGU additions, exceeding the previous guidance of 1.0 to 1.1 million additions. He further stated that the company continues to expect basic customer growth of about 1% for the full year 2001.

Total revenues for the three months ended September 30, 2001 were $1,032.0 million, a 14% increase over revenues of $902.2 million for the three months ended September 30, 2000. Total residential revenues for the third quarter of 2001 increased 15% to $905.2 million compared to the same period in 2000. Basic customers were 6,206,737, a 0.7% increase over September 30, 2000.

Residential video revenues increased to $762.6 million, a 7% increase over the comparable period in 2000, primarily due to digital customer growth and rate increases implemented in the fourth quarter of 2000 and the first quarter of 2001. Residential data and residential telephony revenues for the third quarter of 2001 doubled to $75.2 million and $55.9 million, respectively, from $36.3 million and $27.7 million, respectively, in 2000 due to customer growth.

Commercial revenues for the third quarter of 2001 increased to $38.2 million from $27.6 million for the comparable period in 2000 due to growth in both high-speed data and telephony customers. Advertising revenues increased slightly to $88.6 million reflecting a slight increase in national advertising sales, which is offset by a general economic slowdown affecting local and national advertising spending.

Programming costs were $242.3 million for the three months ended September 30, 2001, an increase of 12% over the same period in 2000 due to programming rate increases implemented in October 2000 and January 2001, digital customer growth and channel additions. Selling, general and administrative expenses for the third quarter of 2001 increased 19% to $393.4 million due primarily to increased employee headcount, a national marketing campaign implemented in the third quarter of 2001 and other costs associated with the continued rollout of residential and commercial digital video, high-speed data and telephony services, partially offset by a revised cost component factor used to capitalize indirect costs relating to network construction activity.

Operating cash flow increased 12% to $396.3 million for the third quarter of 2001. The operating cash flow margin (operating cash flow as a percentage of revenues) for the current quarter was 38.4%, a decrease from 39.2% for the third quarter of 2000.

Depreciation and amortization increased to $368.6 million from $319.3 million in the third quarter of 2000 due to Cox continuing to invest significantly in its broadband network in order to deliver additional programming and services. Interest expense increased slightly to $136.3 million primarily due to the issuance of notes and debentures in the fourth quarter of 2000 and the first quarter of 2001.

Income related to indexed debt of $249.9 million for the third quarter of 2000 represents the net change in the contingent settlement amount of the exchangeable subordinated debentures which are indexed to the market value of the underlying Sprint PCS common stock. Upon adoption of Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, on January 1, 2001 income or expense related to indexed debt is classified as a component of loss on derivative instruments, net. For the three months ended September 30, 2001, Cox recorded a $90.3 million pre-tax loss on derivative instruments due to a decrease of approximately $61.8 million in the fair value of certain derivative instruments embedded in the exchangeable subordinated debentures issued by Cox and a decrease of approximately $28.5 million in the fair value of certain derivative instruments associated with Cox’s investments.

Net gain on investments of $470.1 million is primarily due to a $436.1 million pre-tax gain related to the sale of Cox’s interests in Outdoor Life, Speedvision and Cable Network Services to Fox Sports and a $41.7 million pre-tax gain as a result of the change in market value of Cox’s investment in Sprint PCS common stock – Series 2 classified as trading.

Included in net gain on investments for the comparable period in 2000 are pre-tax gains related to the sale of 4.6 million shares of Sprint PCS – Series 2 and the transaction whereby Cox received a right to put its Excite@Home shares to AT&T.

Minority interest of $14.0 million primarily represents distributions on Cox’s obligated capital and preferred securities of subsidiary trusts, referred to as FELINE PRIDES and RHINOS. Net income for the current quarter was $143.0 million, as compared to net income of $838.1 million for the third quarter of 2000.