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[LOGO]
LIBERTY MEDIA CORPORATION EXHIBIT 99.1
FOURTH QUARTER EARNINGS RELEASE
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IMPORTANT NOTICE: Liberty Media Corporation ("Liberty") (NYSE: L, LMC.B)
President and CEO, Robert Bennett, will discuss Liberty's earnings release in a
conference call which will begin at 11:00 a.m. (ET) March 15, 2005. The call can
be accessed by dialing (913) 981-4903 or (800) 811-8824 at least 10 minutes
prior to the start time. Replays of the conference call can be accessed from
2:00 p.m. (ET) on March 15, 2005 through 5:00 p.m (ET) March 22, 2005, by
dialing (719) 457-0820 or (888) 203-1112 plus the pass code 6539442#. The call
will also be broadcast live across the Internet. To access the web cast go to
http://www.libertymedia.com/investor_relations/default.htm. Links to this press
release and replays of the call will also be available on the Liberty web site.
Englewood, Colorado - On March 14, 2005, Liberty filed its Form 10-K with the
Securities and Exchange Commission for the year ended December 31, 2004. The
following release is being provided to supplement the information provided to
investors in Liberty's Form 10-K as filed with the SEC.
Liberty is a holding company owning interests in a broad range of electronic
retailing, media, communications and entertainment businesses. Our businesses
are organized by operating groups with the two largest groups being the
Interactive Group and Networks Group, as shown below.
Interactive Group Networks Group
- ------------------------------- ----------------------------------------
CONSOLIDATED SUBSIDIARIES CONSOLIDATED SUBSIDIARIES
QVC, Inc. Starz Entertainment Group LLC (SEG)
Ascent Media Group EQUITY AFFILIATES
On Command Corporation Discovery Communications, Inc.
OpenTV Corporation CourtTV
COST METHOD INVESTMENTS GSN
InterActiveCorp COST METHOD INVESTMENTS
News Corporation
The following discussion of the combined results of our Groups presents 100% of
the revenue, expenses and operating cash flow of each of the consolidated
subsidiaries and equity affiliates in each Group even though we may own less
than 100% of these businesses. The following discussion excludes financial
results from our cost method investments. Unless otherwise noted, the following
discussion compares financial information for the twelve months and three months
ended December 31, 2004 to the same periods in 2003. Three month comparisons are
referenced by "Q/Q", and twelve month comparisons are referenced by "Y/Y."
Please see page 10 of this press release for the definition of operating cash
flow and a discussion of management's use of this performance measure. Schedule
1 to this press release provides a reconciliation of combined results for the
Groups to consolidated earnings from continuing operations before income taxes
and minority interests. Certain prior period amounts have been reclassified for
comparability with the 2004 presentation.
INTERACTIVE GROUP
Interactive Group's combined revenue increased 16% to $6.6 billion and operating
cash flow increased 23% to $1.4 billion for the year. Increases in revenue and
operating cash flow were primarily due to increases at QVC and Ascent Media.
Following is a more detailed discussion of operating results at QVC and Ascent
Media.
QVC
QVC's revenue increased 16% Q/Q and Y/Y. QVC's operating cash flow increased 18%
Q/Q to $411 million and 21% Y/Y to $1.2 billion.
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Revenue from QVC's domestic businesses increased 9% Q/Q to $1.3 billion and 8%
Y/Y to $4.1 billion. Operating cash flow increased 14% Q/Q to $334 million and
10% Y/Y to $977 million. The domestic revenue increase was attributed to
increased sales volume across each product category for the quarter and
primarily in the areas of apparel and accessories for the year. The domestic
operations shipped approximately 33.3 million units during the quarter, an
increase of 6%, and approximately 105.2 million units during the year, an
increase of 9%. The average selling price increased 3.2% from $40.55 to $41.86
Q/Q and decreased 1.1% from $42.08 to $41.61 Y/Y. The domestic operating cash
flow margins increased 110 basis points for the quarter and 50 basis points for
the year due primarily to gross margin improvement and a lower provision for
statutory local sales and use tax. The gross margin increase in both periods was
primarily due to a lower inventory obsolescence provision.
QVC's international operations experienced positive results for the quarter and
year due to a combination of increased sales to existing subscribers, new
subscriber growth and favorable foreign currency exchange rates. Revenue from
international operations increased 40% Q/Q to $476 million and 48% Y/Y to $1.5
billion as a result of a strong performance from each of the international
divisions. Excluding the effect of exchange rates, the international revenue
increased 30% Q/Q and 35% Y/Y. Operating cash flow for the international
operations increased from $56 million to $77 million, or 38%, Q/Q and increased
from $125 million to $253 million, or two-fold Y/Y due primarily to increased
revenue. The international cash flow margin decreased from 16.5% to 16.2% Q/Q
due primarily to a lower gross margin resulting from a higher inventory
obsolescence provision. For the year, the international cash flow margin
increased from 12% to 16% due to improvements in gross margin and operating
leverage. Excluding the effect of exchange rates, QVC's international operating
cash flow increased by 20% Q/Q and 77% Y/Y.
ASCENT MEDIA
Ascent Media's revenue increased 23% Q/Q to $173 million and 24% Y/Y to $631
million. Ascent Media's operating cash flow increased 35% Q/Q to $27 million and
31% Y/Y to $98 million. The increases for both periods were primarily due to
acquisitions and organic growth related to new projects within Ascent Media's
Networks Group. Excluding the effects of the acquisitions, revenue increased 10%
Q/Q and 12% Y/Y and operating cash flow increased 10% Q/Q and 16% Y/Y. Organic
revenue growth for both periods was driven by strength in the networks
origination business, the U.S. media business and the creative services business
and audio business worldwide.
NETWORKS GROUP
Networks Group's combined revenue increased 15% to $3.7 billion and operating
cash flow increased 3% to $949 million for the year. The increase in revenue is
primarily due to increases at SEG and Discovery. The increase in operating cash
flow was primarily due to an increase of 31% at Discovery partially offset by a
35% decrease at SEG. For further details of SEG's and Discovery's operating
results see the detailed discussion below.
SEG
SEG's revenue increased 6% Q/Q to $248 million and 6% Y/Y to $963 million. SEG's
operating cash flow decreased 54% Q/Q to $46 million and 35% Y/Y to $239
million. The increases in revenue were primarily due to a 15% increase in the
number of subscription units since the end of 2003. While the majority of the
increase in subscription units was related to SEG's Thematic Multiplexes, which
have lower subscription rates than other SEG services, SEG also saw important
increases in the more profitable Starz and Encore units. SEG had a 15% increase
in Starz units and a 12% increase in Encore units during 2004. The increases in
subscription units were due in part to increased participation with distributors
in national marketing campaigns, new affiliation agreements with certain
distributors and other marketing strategies. Under these new affiliation
agreements, SEG obtained benefits such as more favorable promotional offerings
of SEG's services and increased co-operative marketing commitments.
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SEG's operating expenses increased 49% Q/Q and 35% Y/Y. The increases were due
primarily to higher programming costs, which increased from $398 million for the
full year 2003 to $564 million for the full year 2004. Such increases were due
to higher cost per title due to new rate cards for certain of these movie titles
and amortization of deposits previously made under the output agreements. SEG
also had higher sales and marketing expenses as a result of the aforementioned
marketing campaigns. Increased programming and sales and marketing costs were
partially offset by lower general and administrative costs, including bad debt
expense. Bad debt expense was lower in 2004 due to the recovery of $12 million
of receivables for which a reserve had previously been provided.
DISCOVERY
DCI's revenue increased 15% Q/Q to $693 million and 19% Y/Y to $2.4 billion.
DCI's operating cash flow increased 21% Q/Q to $182 million and 31% Y/Y to $663
million. DCI's affiliated networks reach over one billion total cumulative
worldwide subscription units.
Domestic Networks revenue increased 11% Q/Q and 19% Y/Y due to increases in both
affiliate and advertising revenue. Affiliate revenue increased 39% Q/Q and 37%
Y/Y as aggregate subscription units increased by 7% Y/Y. Affiliate revenue grew
at a faster rate than subscription units primarily due to a significant number
of digital subscription units coming off of free periods in 2004 and the
extension of carriage arrangements with large affiliates that reduced the
amortization of launch costs during the period. Advertising revenue was flat Q/Q
and increased 9% Y/Y due to growth in the overall advertising market and higher
advertising sell out and rates. Operating expenses increased 7% Q/Q and 16% Y/Y
due to increased investment in first run premier programming, and related
marketing and sales expenses. Operating cash flow increased by 20% to $140
million Q/Q and 23% to $600 million Y/Y.
International Networks revenue increased 25% Q/Q and 23% Y/Y due to increases in
affiliate revenue, advertising revenue, and favorable exchange rates.
Advertising revenue increased 21% Q/Q and 31% Y/Y driven by higher advertising
rates and higher viewership ratings in the U.K. and Latin America and increased
distribution in Asia. Affiliate revenue increased by 27% Q/Q and 20% Y/Y as
cumulative subscription units increased by 28% Y/Y. Subscription units grew at a
faster rate than revenue primarily due to a disproportionate increase in
subscription units of branded blocks of programming in Asia that do not accrue
license fees. Operating expenses increased 27% Q/Q and 20% Y/Y while operating
cash flow increased 13% to $26 million Q/Q and increased 43% to $97 million Y/Y.
The Q/Q operating cash flow growth rate was less than the Y/Y growth rate
primarily due to an initiative at the International Networks that began in the
fourth quarter and is expected to run into 2006. The International Networks
began an investment program designed to highlight and strengthen its Lifestyles
category, particularly in Europe. Discovery expects to spend approximately $100
million over a two-year period on this initiative. Excluding the effect of
exchange rates, revenue increased 19% Q/Q and 16% Y/Y and operating cash flow
increased 13% Q/Q and 35% Y/Y.
Commerce, Education and other revenue increased 16% Q/Q and 4% Y/Y. Operating
cash flow improved 45% Q/Q to $16 million and the operating cash flow deficit
improved 28% Y/Y to $34 million primarily due to an increase in licensing
revenues and the closure of underperforming stores.
DCI's outstanding debt balance was $2.5 billion at December 31, 2004.
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FAIR VALUE OF PUBLIC HOLDINGS AND DERIVATIVES
<Table>
<Caption>
December 31, September 30, December 31,
(AMOUNTS IN MILLIONS AND INCLUDE THE VALUE OF DERIVATIVES) 2004 2004 2003
------------ ------------- ------------
News Corporation $ 9,516 8,037 7,631
InterActiveCorp $ 3,824 3,048 4,697
Non Strategic Public Holdings $ 9,584 8,953 9,363
</Table>
CASH AND DEBT
The following presentation is provided to separately identify cash and liquid
investments and debt information.
<Table>
<Caption>
December 31, September 30, December 31,
(AMOUNTS IN MILLIONS) 2004 2004 2003
------------ ------------- ------------
CASH AND CASH RELATED INVESTMENTS:
Consolidated Cash (GAAP) $ 1,421 1,298 2,974
Consolidated Short-Term Investments(1) 3 27 266
Consolidated Long-Term Marketable Securities(2) 300 412 320
-------- -------- --------
TOTAL CONSOLIDATED CASH AND LIQUID INVESTMENTS $ 1,724 1,737 3,560
======== ======== ========
DEBT:
Senior Notes and Debentures(3) $ 6,188 6,745 7,138
Senior Exchangeable Debentures(4) 4,588 4,588 4,638
Other 109 95 91
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TOTAL DEBT 10,885 11,428 11,867
Less: Unamortized Discount Attributable To Call Option Obligations (2,289) (2,310) (2,411)
Unamortized Discount (20) (22) (24)
-------- -------- --------
CONSOLIDATED DEBT (GAAP) $ 8,576 9,096 9,432
======== ======== ========
</Table>
(1) Represents short-term marketable debt securities which are included in
other current assets in Liberty's consolidated balance sheet.
(2) Represents long-term marketable debt securities which are included in
investments in available-for-sale securities and other cost investments in
Liberty's consolidated balance sheet.
(3) Represents face amount of Senior Notes and Debentures with no reduction for
the unamortized discount.
(4) Represents face amount of Senior Exchangeable Debentures with no reduction
for the unamortized discount attributable to the embedded call option
obligation.
Liberty's Total Consolidated Cash and Liquid Investments decreased slightly and
Total Debt decreased by $543 million from September 30, 2004. The decrease in
Total Debt was due to repayments of corporate debt as part of the debt reduction
plan announced in the fourth quarter of 2003. Total Consolidated Cash and Liquid
Investments decreased slightly as cash flow from operations of Liberty's
subsidiaries and the proceeds from the expiration of certain equity collars and
stock sales were offset by the debt repayments.
Liberty's Total Consolidated Cash and Liquid Investments decreased by $1.8
billion and Total Debt decreased by $982 million from December 31, 2003. The
decrease in Total Debt was due to repayments of corporate debt as part of the
aforementioned debt reduction plan offset by an increase in capital leases at
our subsidiaries. Cash provided by the operations of Liberty's subsidiaries, the
proceeds from the unwinding of certain equity collars, and the sale of News
Corp. shares and certain other investments were offset by debt repayments,
interest payments, the purchase of News Corp. shares and the Comcast
transaction, in which Liberty exchanged $547 million in cash and certain assets
for 120.3 million shares of Liberty Media Series A common stock from Comcast.
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2005 OUTLOOK
QVC - 2005 GUIDANCE
The following estimates assume primarily, among other factors, the product mix,
foreign currency exchange rates and domestic growth rates are consistent as
compared to 2004, and international growth rates experience a slight slowdown.
For full year 2005 versus 2004, QVC operating results are expected to increase
as follows:
o Revenue by high single digits %.
o Operating cash flow by low double digits %.
o Operating income by low double digits %.
SEG - 2005 GUIDANCE
The following estimates assume, among other factors, that SEG continues to
experience positive trends under its affiliation agreements, SEG's distributors
continue to see growth in digital subscribers consistent with that experienced
in 2004, the quantity and the timing of receipt of output product from the
studios does not materially change from that experienced in 2004, and Starz
subscription units continue to increase. These estimates further assume that
SEG's 2005 programming costs increase between $115 million and $135 million over
amounts expensed in 2004.
For full year 2005, SEG operating results are expected as follows:
o Revenue between $1,000 and $1,050 million.
o Operating cash flow between $150 and $170 million.
o Operating income between $64 and $84 million.
DCI - 2005 GUIDANCE
The following estimates assume, among other factors, continued increase in the
amount of advertising dollars spent with cable networks as compared to broadcast
networks, stabilized ratings at TLC, investment in the international lifestyles
and education initiatives, and a stable national retail environment.
For full year 2005 versus 2004, DCI consolidated operating results are expected
to increase as follows:
o Revenue by mid teens %.
o Operating cash flow by low double digits %.
o Operating income by approximately 10%.
OUTSTANDING SHARES
At December 31, 2004, there were approximately 2.8 billion outstanding shares of
L and LMC.B and 85 million shares of L and LMC.B reserved for issuance pursuant
to warrants and employee stock options. At December 31, 2004, 33 million options
had a strike price that was lower than the closing stock price. Exercise of
these options would result in aggregate proceeds of approximately $161 million.
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CERTAIN STATEMENTS IN THIS PRESS RELEASE MAY CONSTITUTE "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES AND OTHER IMPORTANT FACTORS THAT COULD CAUSE THE ACTUAL RESULTS,
PERFORMANCE OR ACHIEVEMENTS OF THE OPERATING BUSINESSES OF LIBERTY INCLUDED
HEREIN OR INDUSTRY RESULTS, TO DIFFER MATERIALLY FROM ANY FUTURE RESULTS,
PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING
STATEMENTS. SUCH RISKS, UNCERTAINTIES AND OTHER FACTORS INCLUDE, AMONG OTHERS:
THE RISKS AND FACTORS DESCRIBED IN THE PUBLICLY FILED DOCUMENTS OF LIBERTY,
INCLUDING THE MOST RECENTLY FILED FORM 10-Q OF LIBERTY; GENERAL ECONOMIC AND
BUSINESS CONDITIONS AND INDUSTRY TRENDS INCLUDING IN THE ADVERTISING AND RETAIL
MARKETS; SPENDING ON DOMESTIC AND FOREIGN ADVERTISING; THE CONTINUED STRENGTH OF
THE INDUSTRIES IN WHICH SUCH BUSINESSES OPERATE; CONTINUED CONSOLIDATION OF THE
BROADBAND DISTRIBUTION INDUSTRY; UNCERTAINTIES INHERENT IN PROPOSED BUSINESS
STRATEGIES AND DEVELOPMENT PLANS; RAPID TECHNOLOGICAL CHANGES; FUTURE FINANCIAL
PERFORMANCE, INCLUDING AVAILABILITY, TERMS AND DEPLOYMENT OF CAPITAL;
AVAILABILITY OF QUALIFIED PERSONNEL; THE DEVELOPMENT AND PROVISION OF
PROGRAMMING FOR NEW TELEVISION AND TELECOMMUNICATIONS TECHNOLOGIES; CHANGES IN,
OR THE FAILURE OR THE INABILITY TO COMPLY WITH, GOVERNMENT REGULATION,
INCLUDING, WITHOUT LIMITATION, REGULATIONS OF THE FEDERAL COMMUNICATIONS
COMMISSION, AND ADVERSE OUTCOMES FROM REGULATORY PROCEEDINGS; ADVERSE OUTCOMES
IN PENDING LITIGATION; CHANGES IN THE NATURE OF KEY STRATEGIC RELATIONSHIPS WITH
PARTNERS AND JOINT VENTURES; COMPETITOR RESPONSES TO SUCH OPERATING BUSINESSES'
PRODUCTS AND SERVICES, AND THE OVERALL MARKET ACCEPTANCE OF SUCH PRODUCTS AND
SERVICES, INCLUDING ACCEPTANCE OF THE PRICING OF SUCH PRODUCTS AND SERVICES; AND
THREATENED TERRORIST ATTACKS AND ONGOING MILITARY ACTION, INCLUDING ARMED
CONFLICT IN THE MIDDLE EAST AND OTHER PARTS OF THE WORLD. THESE FORWARD-LOOKING
STATEMENTS SPEAK ONLY AS OF THE DATE OF THIS RELEASE. LIBERTY EXPRESSLY
DISCLAIMS ANY OBLIGATION OR UNDERTAKING TO DISSEMINATE ANY UPDATES OR REVISIONS
TO ANY FORWARD-LOOKING STATEMENT CONTAINED HEREIN TO REFLECT ANY CHANGE IN
LIBERTY'S EXPECTATIONS WITH REGARD THERETO OR ANY CHANGE IN EVENTS, CONDITIONS
OR CIRCUMSTANCES ON WHICH ANY SUCH STATEMENT IS BASED.
Contact: Mike Erickson (877) 772-1518
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SUPPLEMENTAL INFORMATION
As a supplement to Liberty's consolidated statements of operations, the
following is a presentation of annual and quarterly financial information and
operating metrics on a stand-alone basis for Liberty's three largest privately
held businesses (QVC, Inc., Starz Entertainment Group LLC and Discovery
Communications, Inc.).
Please see page 10 for the definition of operating cash flow (OCF) and Schedule
2 at the end of this document for reconciliations for the applicable periods in
2004 and 2003 of operating cash flow to operating income, as determined under
GAAP, for each identified entity.
The selected financial information presented for DCI was obtained directly from
DCI. Liberty does not control the decision-making processes or business
management practices of DCI. Accordingly, Liberty relies on DCI's management to
provide accurate financial information prepared in accordance with generally
accepted accounting principles that Liberty uses in the application of the
equity method. Liberty is not aware, however, of any errors in or possible
misstatements of the financial information provided to it by DCI that would have
a material effect on Liberty's consolidated financial statements. Further,
Liberty could not, among other things, cause DCI to distribute to Liberty its
proportionate share of the revenue or OCF of DCI.
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QUARTERLY SUMMARY
<Table>
<Caption>
(AMOUNTS IN MILLIONS) 4Q04 3Q04 2Q04 1Q04 4Q03
------ ------ ------ ------ ------
QVC, INC. (98.3%)
Revenue - Domestic $1,347 932 930 932 1,233
Revenue - International 476 360 359 351 340
------ ------ ------ ------ ------
Revenue - Total $1,823 1,292 1,289 1,283 1,573
------ ------ ------ ------ ------
OCF - Domestic $ 334 210 221 212 292
OCF - International 77 61 57 58 56
------ ------ ------ ------ ------
OCF - Total $ 411 271 278 270 348
------ ------ ------ ------ ------
Operating Income $ 290 153 164 153 229
Gross Margin - Domestic 36.8% 36.8% 37.8% 36.6% 35.6%
Gross Margin - International 34.0% 37.6% 37.0% 37.3% 37.0%
Homes Reached - Domestic 88.4 87.8 87.3 87.0 85.9
Homes Reached - International 66.0 64.8 63.4 61.4 59.4
STARZ ENTERTAINMENT GROUP LLC (100%)
Revenue $ 248 245 238 232 235
OCF $ 46 62 62 69 99
Operating Income (Loss) $ 1 46 48 53 (2)
Subscription Units - Starz! 14.1 13.7 13.3 12.3 12.3
Subscription Units - Encore 24.5 23.9 23.4 21.9 21.9
Subscription Units - Thematic Multiplex & Other 134.4 129.7 127.2 120.1 116.8
------ ------ ------ ------ ------
Subscription Units - Total(1) 173.0 167.3 163.9 154.3 151.0
------ ------ ------ ------ ------
DISCOVERY COMMUNICATIONS, INC. (50.0%)
Revenue - U.S. Networks(2) $ 414 386 423 382 374
Revenue - International Networks(3), (4) 170 145 142 126 136
Revenue - Commerce, Education & Other(5) 109 26 23 19 94
------ ------ ------ ------ ------
Revenue - Total $ 693 557 588 527 604
------ ------ ------ ------ ------
OCF - U.S. Networks(2) $ 140 152 169 139 117
OCF - International Networks(3), (4) 26 25 30 16 23
OCF - Commerce, Education & Other(5) 16 (16) (16) (18) 11
------ ------ ------ ------ ------
OCF - Total(6) $ 182 161 183 137 151
------ ------ ------ ------ ------
Operating Income $ 159 129 118 78 103
Subscription Units - U.S. Networks(2) 667 663 648 625 625
Subscription Units - International Networks(3), (4) 565 548 455 445 440
------ ------ ------ ------ ------
Subscription Units - Total(7) 1,232 1,211 1,103 1,070 1,065
------ ------ ------ ------ ------
</Table>
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ANNUAL SUMMARY
<Table>
<Caption>
(AMOUNTS IN MILLIONS) 2004 2003
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QVC, INC. (98.3%)
Revenue - Domestic $ 4,141 3,845
Revenue - International 1,546 1,044
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Revenue - Total $ 5,687 4,889
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OCF - Domestic $ 977 888
OCF - International 253 125
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OCF - Total $ 1,230 1,013
------- -------
Operating Income $ 760 785
STARZ ENTERTAINMENT GROUP LLC (100%)
Revenue $ 963 906
OCF $ 239 368
Operating Income $ 148 266
DISCOVERY COMMUNICATIONS, INC. (50.0%)
Revenue - U.S. Networks(2) $ 1,605 1,351
Revenue - International Networks(3), (4) 583 474
Revenue - Commerce, Education & Other(5) 177 170
------- -------
Revenue - Total $ 2,365 1,995
------- -------
OCF - U.S. Networks(2) $ 600 487
OCF - International Networks(3), (4) 97 68
OCF - Commerce, Education & Other(5) (34) (47)
------- -------
OCF - Total(6) $ 663 508
------- -------
Operating Income $ 484 314
------- -------
</Table>
(1) SEG SUBSCRIPTION UNITS: Total subscription units represent the number of
SEG services which are purchased by cable, DTH and other distribution media
customers.
(2) DCI - DISCOVERY NETWORKS U.S.: Discovery Channel, TLC, Animal Planet,
Travel Channel, Discovery Health Channel, Fit TV, Discovery Kids,
BBC-America Representation, The Science Channel, Discovery Times, Discovery
Home (f/k/a Discovery Home & Leisure Channel), Military Channel (f/k/a
Discovery Wings) Discovery en Espanol, Discovery HD Theater and online
initiatives.
DISCOVERY NETWORKS U.S. JOINT VENTURES - DISCOVERY TIMES, DISCOVERY HEALTH
CHANNEL, ANIMAL PLANET (US) - CONSOLIDATED:
DCI owns a 50% interest in Discovery Times, a 90% interest in Discovery
Health Channel and a 60% interest in Animal Planet (US). These ventures are
controlled by DCI and consolidated into the results of Discovery Networks
U.S. Due to certain contractual redemption rights of the outside partners
in the ventures, no losses of these ventures are allocated to the outside
partners.
(3) DCI - DISCOVERY NETWORKS INTERNATIONAL: Discovery Channels in UK, Europe,
Latin America, Asia, India, Africa, Middle East; Discover Kids in UK, Latin
America; Discovery Travel & Adventure in UK, Europe, Latin America, Asia,
Middle East; Discovery Travel & Living in India; Discovery Health in UK,
Latin America, Asia; Discovery Home & Leisure in UK, Asia; Discovery
Civilization in UK, Europe, Middle East; The Science Channel in UK, Europe,
Asia, Middle East; Discovery Wings in UK; Animal Planet in UK and
consolidated BBC/DCI joint venture networks (Animal Planet networks in
Europe, Latin America, Asia, Africa; People + Arts in Latin America and
Spain).
DISCOVERY NETWORKS INTERNATIONAL JOINT VENTURES - CONSOLDIATED
Discovery Networks International joint venture networks (Animal Planet
networks in Europe, Latin America, Asia, Africa; People + Arts in Latin
America and Spain) are composed of joint ventures with British Broadcasting
Corporation. These ventures are controlled by DCI and consolidated into the
results of Discovery Networks International. The equity in the assets of
these joint ventures are predominantly held 50/50 by DCI and BBC.
Exceptions involve participants related to the local market in which a
specific network operates.
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(4) DCI - DISCOVERY NETWORKS INTERNATIONAL - EQUITY AFFILIATES: DCI accounts
for its interests in joint ventures it does not control as equity method
investments. The operating results of joint ventures that DCI does not
control, including Discovery Channel Canada, Discovery Channel Japan,
Animal Planet Canada, Animal Planet Japan, and Joint Venture Programming,
are not consolidated and are not reflected in the results presented above.
(5) DCI - COMMERCE, EDUCATION AND OTHER: Commerce, Education & Other is
comprised of a North American chain of 115 Discovery Channel retail stores,
mail-order catalog business, an on-line shopping site, a global licensing
business, and an educational business that reaches 36 million students in
the U.S.
(6) DCI PATENT SALE: In the third quarter of 2004 DCI sold patents in the
amount of $22 million. Third quarter and total year 2004 results exclude
the impact of this one time gain.
(7) DCI SUBSCRIPTION UNITS: Subscription units include (1) multiple networks
received in the same household that subscribe to more than network, (2)
subscribers to joint venture networks, (3) subscribers that are reached
through branded programming blocks, which are provided without charge, and
(4) households that receive DCI programming networks without charge
pursuant to various pricing plans that include free periods and/or free
carriage.
NON-GAAP FINANCIAL MEASURES
This press release includes a presentation of operating cash flow, which is a
non-GAAP financial measure, for each of the privately held assets of Liberty
included herein together with a reconciliation of that non-GAAP measure to the
privately held asset's operating income, determined under GAAP. Liberty defines
operating cash flow as revenue less cost of sales, operating expenses, and
selling, general and administrative expenses (excluding stock and other
equity-based compensation). Operating cash flow, as defined by Liberty, excludes
depreciation and amortization, stock and other equity-based compensation and
restructuring and impairment charges that are included in the measurement of
operating income pursuant to GAAP.
Liberty believes operating cash flow is an important indicator of the
operational strength and performance of its businesses, including the ability to
service debt and fund capital expenditures. In addition, this measure allows
management to view operating results and perform analytical comparisons and
benchmarking between businesses and identify strategies to improve performance.
Because operating cash flow is used as a measure of operating performance,
Liberty views operating income as the most directly comparable GAAP measure.
Operating cash flow is not meant to replace or supercede operating income or any
other GAAP measure, but rather to supplement the information to present
investors with the same information as Liberty's management considers in
assessing the results of operations and performance of its assets. Please see
the attached schedules for a reconciliation of segment operating cash flow to
earnings (loss) before income taxes and minority interest (Schedule 1) and a
reconciliation, for our two largest consolidated subsidiaries and our largest
equity affiliate, of operating cash flow to operating income calculated in
accordance with GAAP (Schedule 2).
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LIBERTY MEDIA CORPORATION
SCHEDULE 1
The following table provides a reconciliation of consolidated segment operating
cash flow to earnings (loss) from continuing operations before income taxes and
minority interest for the years ended December 31, 2004 and 2003.
<Table>
<Caption>
(AMOUNTS IN MILLIONS) 2004 2003
------- -------
INTERACTIVE GROUP
Combined operating cash flow $ 1,375 1,119
Eliminate equity method affiliates -- (579)
------- -------
CONSOLIDATED OPERATING CASH FLOW 1,375 540
------- -------
NETWORKS GROUP
Combined operating cash flow 949 920
Eliminate equity method affiliates (713) (552)
------- -------
CONSOLIDATED OPERATING CASH FLOW 236 368
------- -------
Corporate & Other consolidated operating cash flow (74) (108)
------- -------
CONSOLIDATED SEGMENT OPERATING CASH FLOW $ 1,537 800
======= =======
Consolidated segment operating cash flow $ 1,537 800
Stock compensation (101) 88
Litigation Settlement 42 --
Depreciation and amortization (736) (465)
Impairment of long-lived assets -- (1,362)
Interest expense (615) (529)
Share of earnings of affiliates 97 45
Realized and unrealized losses on derivative instruments, net (1,284) (662)
Gains on dispositions, net 1,406 1,125
Nontemporary declines in fair value of investments (129) (22)
Other, net 107 109
------- -------
EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY
INTEREST $ 324 (873)
======= =======
</Table>
11
<Page>
LIBERTY MEDIA CORPORATION
SCHEDULE 2
The following tables provide a reconciliation, for our two largest consolidated
subsidiaries and our largest equity affiliate, of operating cash flow to
operating income calculated in accordance with GAAP for the quarters ended
December 31, 2004, September 30, 2004, June 30, 2004, March 31, 2004 and
December 31, 2003 and the years ended December 31, 2004 and 2003, respectively.
<Table>
<Caption>
(AMOUNTS IN MILLIONS) 4Q04 3Q04 2Q04 1Q04 4Q03
----- ----- ----- ----- -----
QVC, INC. (98.2%)
Operating Cash Flow $ 411 271 278 270 348
Depreciation and Amortization (113) (110) (106) (108) (114)
Stock Compensation Expense (8) (8) (8) (9) (5)
Other -- -- -- -- --
----- ----- ----- ----- -----
OPERATING INCOME $ 290 153 164 153 229
===== ===== ===== ===== =====
STARZ ENTERTAINMENT GROUP LLC (100%)
Operating Cash Flow $ 46 62 62 69 99
Depreciation and Amortization (22) (14) (14) (13) (20)
Stock Compensation Expense (23) (2) -- (3) 76
Other -- -- -- -- (157)
----- ----- ----- ----- -----
OPERATING INCOME (LOSS) $ 1 46 48 53 (2)
===== ===== ===== ===== =====
DISCOVERY COMMUNICATIONS, INC. (50.0%)
Operating Cash Flow $ 182 161 183 137 151
Depreciation and Amortization (32) (28) (38) (31) (32)
Long-Term Incentive Plans 9 (26) (27) (28) (16)
Other -- 22 -- -- --
----- ----- ----- ----- -----
OPERATING INCOME $ 159 129 118 78 103
===== ===== ===== ===== =====
</Table>
<Table>
<Caption>
(AMOUNTS IN MILLIONS) 2004 2003
------- -------
QVC, INC. (98.2%)
Operating Cash Flow $ 1,230 1,013
Depreciation and Amortization (437) (222)
Stock Compensation Expense (33) (6)
Other -- --
------- -------
OPERATING INCOME $ 760 785
======= =======
STARZ ENTERTAINMENT GROUP LLC (100%)
Operating Cash Flow $ 239 368
Depreciation and Amortization (63) (75)
Stock Compensation Expense (28) 130
Other -- (157)
------- -------
OPERATING INCOME $ 148 266
======= =======
DISCOVERY COMMUNICATIONS, INC. (50.0%)
Operating Cash Flow $ 663 508
Depreciation and Amortization (129) (120)
Long-Term Incentive Plans (72) (74)
Other 22 --
------- -------
OPERATING INCOME $ 484 314
======= =======
</Table>
12