Fitch Downgr Cox Enterprises Sr Debt Rtg To `BBB+' From `A-'

    CHICAGO--May 14, 2001--Fitch has downgraded the senior debt rating of Cox Enterprises, Inc. (Cox), to `BBB+' from `A-' while retaining the company's `F2' commercial paper rating.
    The Rating Outlook is Stable.
    The rating action reflects the increase in leverage associated with acquisition activity in 2000 and in early 2001, including the $750 million acquisition of ADT Automotive by the company's Manheim Auctions division and other smaller acquisitions. These acquisitions have increased overall debt levels and have moved the company outside its total debt-to-EBITDA target ratio of 2.5 times (x)(excluding its majority owned subsidiaries, Cox Communications and Cox Radio). At year-end 2000, Cox had $3.2 billion in debt as compared with $2.2 billion at year-end 1999 and year-end debt/EBITDA was approximately 3.5x. The previous rating of `A-' Rating Watch Negative, reflected the possibility that acquisition-related debt would be partially offset by investment/asset sales which would have enabled the company to maintain a leverage profile close to its original target. As such sales were minimal and the value of the remaining non-core investment portfolio is modest relative to the acquisition-related debt, leverage is expected to remain above target for a sustained period.
    Higher debt levels and currently weaker earnings trends will limit the ability of the company to reestablish previous credit targets over the intermediate term. Major advertising categories at Cox's newspapers are presently showing declines and higher newsprint prices will further constrain margins. Earnings at the television stations will also be pressured by lower spot advertising rates as compared to 2000, which benefited from the strong economy, good ratings, and political advertising in the fall. While less cyclically sensitive than the newspaper and television operations, auto auctions is also susceptible to slowing sales as automotive OEMs discount new vehicle prices.
    Free cash flow is also expected to decline in 2001 as a result of both pressure on earnings and a significant increase in capital expenditures. Capital expenditures are expected to increase by more than $100 million in 2001 from the $343 million in 2000, as the company upgrades many ADT auction sites and pursues major press projects at the newspapers.
    Given the current slow down in the domestic economy, credit protection measures are expected to remain below average for the rating over the near term. The Stable Outlook for the rating reflects expectations that credit protection measures will improve with earnings and EBITDA growth resuming as the economy emerges from the cyclical trough. Further, anticipated declines in capital expenditures in 2002, should produce material improvements in free cash flow which should provide management with the financial flexibility to reestablish its leverage targets.
    The `BBB+' rating recognizes the company's good business diversity, substantial investment values and historically conservative capitalization. Primary support for the rating comes from Cox Enterprises' wholly owned businesses in newspaper publishing, television broadcasting and automobile auctions. The rating is buttressed by the company's substantial investment portfolio. These interests include a 68% ownership interest in Cox Communications, Inc., the fifth-largest cable television company, and a 63% interest in Cox Radio, Inc, the fourth-largest radio station group. These majority interests are separately incorporated and financed. (Cox Communications, Inc. is rated `BBB+' with a Negative Outlook by Fitch). In addition, the company has other significant minority interest investments.
    Risks in the rating focus the potential for additional debt-financed acquisitions. The company remains interested in opportunistic acquisitions and potential regulatory changes could make such acquisitions more attractive. Business operations are also susceptible to protracted weakness in advertising markets.