2008: Solid Performances and Strategic Decisions

In what was truly the most difficult economic environment of most, if not all, of our careers, we are proud to report that Cox did well, even in the face of such challenges. We outperformed our peers and competitors and remained a profitable company. Our overall revenues continued to grow. Cox Communications and AutoTrader.com posted strong year-over-year growth. Manheim and many of our media businesses maintained leadership positions in their markets. The credit for these performances goes directly to Cox managers and frontline employees whose talents and ingenuity we so value.

Our priority is to ensure that we have the financial strength and liquidity to perform well, even during challenging times, and to fund strategic growth opportunities. For this reason, we decided in 2008 to offer some of our newspaper properties for sale, including the Austin American-Statesman, our community newspapers in North Carolina, Colorado and Texas, and Valpak, our direct mail advertising company. We also exited the majority of our print automotive classified publications in early 2009, as consumers continue to shift from traditional print to online sources of information. These decisions were not easy ones — newspaper businesses are an integral part of Cox's heritage, while the Auto Trader brand has been a pioneer in the publishing of print automotive classified advertising — but these decisions were the right ones for our long-term future.

Transforming Businesses

We remain committed to the newspaper businesses we operate, and they are now part of a new business unit, Cox Media Group, which also encompasses Cox Radio, Cox Television and Cox Reps. Cox Media Group offers our media businesses the best of both worlds. They remain separate operations, but will benefit from the inherent efficiencies and expertise that come with shared corporate resources. This group of businesses is truly powerful — virtually every station and newspaper is among the top-ranked in its market — and we are excited about the potential to realize new sales and operating synergies going forward.

Our automotive presence is equally strong. The online counterparts of the former Auto Trader publications have been incorporated into our AutoTrader.com organization, which celebrated its 10th anniversary in 2008. Today, this site attracts more than 14 million unique monthly visitors and lists 3.5 million new and used vehicles. AutoTrader.com is a great example of our success in evolving long-established businesses and brands in new technological directions. Similarly, online wholesale vehicle sales at Manheim have accounted for more than three million transactions since they started in 1996. These online wholesale marketplaces now allow dealers to access a virtual inventory instead of stocking a large number of vehicles on their lots.

New Investment for a New Era

The pace of the entire company is quickening as all of our businesses move toward a new era of technology and innovation. Today, nearly every established Cox business has a digital component. There are, for example, more than 100 digital services within the Cox Media Group businesses alone. These interactive ventures demonstrate how we are extending our vast knowledge of advertising into innovative services that meet the needs of digital advertisers and audiences in a 21st-century marketplace.

Among these services is a growing number of new Internet-focused Cox businesses. In 2008, Cox Communications, Inc. (CCI) acquired Adify Corporation, a leader in vertical online advertising that enables media companies and others to build and operate large, targeted ad networks. Another of our businesses, Cox Cross Media, the largest local online media solution provider, helps national online advertisers target more than 45 million unique local visitors a month. Kudzu.com, in its fourth year of operation, continues to expand as consumers turn to the site for advice and recommendations on more than 12 million service businesses across the country.

Of course, technological leadership has long been the foundation of Cox Communications. In 2009, this telecommunications industry leader is set to launch a state-of-the-art wireless offering. With the addition of wireless, CCI will span the gamut of voice, video and data service offerings to provide its customers with an even more compelling bundled value proposition. Indeed, the increase in PDA devices and other mobile communications offers us the opportunity to once again leverage Cox's existing customer relationships and should prove to be a significant growth opportunity in the years to come.

Enduring Values That Define Cox

Clearly, much change is under way at Cox. However, much remains the same — namely, those values that define us as a company. Put another way, our products and services may evolve, but the way we do business does not. As a Cox customer, whether you are placing a media ad or signing up for high-speed Internet service, you can always expect a good experience, one that effectively delivers on our promise of performance every single time.

Our ability to provide a great customer experience lies with the highly skilled and motivated Cox people in every one of our operating units. Nothing supercedes our belief at Cox that every employee is valued and every person is respected. When we make people our top priority, then strong performance simply tends to follow.

Two more values that will never change at Cox are our commitment to serving our communities and protecting our environment. During trying economic times for many of our customers, it is especially important that we continue to provide our time, talents and resources to the hundreds of communities in which we live and work. Cox Conserves, our 10-year commitment to reduce our carbon footprint by 20 percent, also continues as we make our operations greener, more sustainable and more energy-efficient.

Finally, we know that 2008 was a far more turbulent year for many other people and companies around the world than for Cox. So, it was with much gratitude for our enduring strengths that we quietly marked our 110th anniversary. Fiscal conservatism, calculated risk-taking and dedicated employees are all factors that have helped to build a business that is strong, resilient and disciplined. We will continue our long-held practice of balancing prudent investment in new ventures with debt reduction and careful attention to the bottom line.

The year ahead will no doubt bring even more change in the world around us. As we have done time and again throughout our history, we will embrace this change, and we are confident that it will bring out the very best in Cox and our people. We look forward to breaking a lot more new ground in the years ahead. Thank you for your continued support.

Jim Kennedy
Chairman

Jimmy Hayes
President and Chief Executive Officer