Cox Adds Up Katrina Rebuild Costs

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Cox Communications Inc. is now estimating that rebuild costs relating to the damage to its New Orleans system from Hurricane Katrina will total about $45.5 million in the fourth quarter.

Cox, which had about 270,000 cable subscribers in New Orleans before Katrina hit on Aug. 29, said in a quarterly securities report filed on Nov. 10 that it also expected to lose about $44.9 million in revenue in the fourth quarter as a result of the devastating hurricane.

While it is likely that the total costs of rebuilding the New Orleans system will be substantially higher, Cox spokesman David Grabert said the fourth-quarter figures are a snapshot of where Cox is at the moment.

“We’re not by any means complete with the assessment of the damages in New Orleans,” Grabert said.

INSURANCE BACKING

Cox said in the filing that it is fully insured for losses related to hurricane damage, less a $6 million deductible. Cox treasury manager Stacey Link said most of those costs — and the lost revenue — will be recovered through insurance over time.

Cox did not disclose how many customers it lost as a result of the hurricane, nor did it release detailed subscriber numbers in the report.

Cox said in the filing that it has 6.2 million basic-cable subscribers, but said that number is an approximation as it continues to assess the effect of population loss in New Orleans in the wake of the storm.

“The long-term effect of Hurricane Katrina on the population of New Orleans, and therefore Cox’s cable systems in New Orleans, remains uncertain,” Cox said in the 10-Q.

While the number of subscriber losses in New Orleans has not yet been determined, Grabert said the population of Baton Rouge, La. — about 80 miles northwest of the city — has doubled, and Cox is racing to connect new customers there.

For the third quarter, Cox said that revenue was up 8% to $1.755 billion. Operating cash flow increased 16.5% to $681.4 million.

Grabert said that the fourth quarter will be the last in which the MSO is required to file reports with the Securities and Exchange Commission.

Cox Communications was taken private in an $8.5 billion transaction in December, but was still required to make public filings because it had outstanding public debt. According to SEC rules, companies with public debt are only required to file public financial statements for one year after the debt is issued.

BONDHOLDERS HAVE SHRUNK

In addition, once the number of public debt holders falls below 300, the company is no longer required to file public documents. Grabert said that after the fourth quarter, Cox expects the number of its public bondholders to fall below that mark.

“That doesn’t mean we’re not going to provide financial data to our bondholders and prospective investors,” Grabert said. “We will, but it will likely not be through this type of public reporting.”

Grabert said just what Cox will disclose to the public is still being determined.

Cox also said in the report that Cebridge Connections paid $2.5 billion in cash for 940,000 Cox subscribers in six states. That deal was announced on Nov. 1 and is expected to close in the second quarter of next year.

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