Important Notice: Liberty Media Corporation ("Liberty") (NYSE: L,
LMCB) President and CEO, Greg Maffei, and Chairman, John Malone,
will discuss Liberty's earnings release in a conference call which
will begin at 11:00 a.m. (ET) March 8, 2006. The call can be
accessed by dialing (913) 981-4911 or (800) 819-9193 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 8, 2006 through 5:00 p.m.
(ET) March 15, 2006, by dialing (719) 457-0820 or (888) 203-1112
plus the pass code 4157605#. The call will also be broadcast live
across the Internet and archived on our website until April 10,
2006. To access the web cast go to
http://www.libertymedia.com/investor_relations/default.htm. Links
to this press release will also be available on the Liberty Media
web site. ENGLEWOOD, Colo., March 8 /PRNewswire-FirstCall/ --
Liberty Media Corporation reported today that QVC experienced 14%
revenue growth for both the fourth quarter and full year 2005.
QVC's operating cash flow grew 14% in the fourth quarter and 16% in
2005. Starz Entertainment Group reported continued subscriber
growth for the year as Starz' average subscription units increased
7% in 2005 and Encore's average subscription units grew 8%. Liberty
had many highlights during the fourth quarter. In November, the
company announced its plan to create a tracking stock to follow the
performance of its interactive assets. Also in November, Liberty
announced that it had reached agreement to acquire 51% of Fun
Technologies. In December, Liberty reached an agreement to purchase
100% of Provide Commerce. Also during the quarter, Liberty
announced the appointment of Michael George to replace Doug Briggs
as the President and CEO of QVC and the appointment of Greg Maffei
as Dob Bennett's successor as President and CEO of Liberty. Liberty
owns a broad range of electronic retailing, media, communications
and entertainment businesses and investments. Its businesses
include some of the world's most recognized and respected brands
and companies, including QVC, Starz Entertainment,
IAC/InterActiveCorp, Expedia and News Corporation. For 2005,
Liberty identified the following businesses, which were privately
held entities owned by or in which Liberty held an interest at
December 31, 2005, as its principal operating segments: * QVC,
Inc., a consolidated, 98.4% owned subsidiary; and * Starz
Entertainment Group LLC (SEG), a consolidated, wholly-owned
subsidiary. QVC QVC's revenue increased 14% Q/Q to $2.1 billion and
14% Y/Y to $6.5 billion. QVC's operating cash flow increased 14%
Q/Q to $469 million and 16% Y/Y to $1.4 billion. Revenue from QVC's
domestic businesses increased 14% Q/Q to $1.5 billion and 12% Y/Y
to $4.6 billion. Operating cash flow increased 8% Q/Q to $360
million and 11% Y/Y to $1.1 billion. The domestic revenue increase
was attributed to increased sales to existing subscribers primarily
in the home area for the quarter and primarily in the apparel and
accessories areas for the year. The domestic operations shipped
approximately 37.0 million units during the quarter, an increase of
11%, and approximately 114.9 million units during the year, an
increase of 9%. The average selling price increased 4% from $41.86
to $43.48 Q/Q and increased 4% from $41.61 to $43.17 Y/Y. QVC.com
sales as a percentage of domestic sales grew from 17% in the fourth
quarter of 2004 to 19% in 2005. For the fiscal year, QVC.com sales
as a percentage of domestic sales grew from 15% in 2004 to 18% in
2005. The domestic operating cash flow margins decreased 150 basis
points for the quarter and 20 basis points for the year due
primarily to a reduction in the gross margins. Gross margins
decreased in both periods due to a higher obsolescence provision
required on the December 31, 2005 inventory balance compared to an
$8 million inventory obsolescence credit recorded in the fourth
quarter of 2004. QVC's international operations experienced
positive results for the quarter and year due to a combination of
greater sales to existing subscribers as well as new subscriber
growth offset by unfavorable foreign currency exchange rates.
Revenue from international operations increased 14% Q/Q to $541
million and 20% Y/Y to $1.9 billion as a result of strong
performances from each of the international divisions. Excluding
the effect of exchange rates, international revenue increased 24%
Q/Q and 22% Y/Y. The operating cash flow of the international
operations increased from $77 million to $109 million, or 42%, Q/Q
and increased from $253 million to $338 million, or 34%, Y/Y due
primarily to increased revenue. Excluding the effect of exchange
rates, QVC's international operating cash flow increased 53% Q/Q
and 35% Y/Y. The international cash flow margin increased from 16%
to 20% Q/Q and from 16% to 18% Y/Y due to improved gross margins
and operating leverage. Gross margins increased in both periods due
to a lower obsolescence provision required on the December 31, 2005
inventory balance. QVC's outstanding bank debt was $800 million at
December 31, 2005. SEG SEG's revenue was relatively flat Q/Q at
$247 million and increased 4% Y/Y to $1.0 billion. SEG's operating
cash flow decreased 37% Q/Q to $29 million and 28% Y/Y to $171
million. The fluctuations in revenue are primarily due to an
increase in the average number of subscription units for SEG's
services, partially offset by a decrease in the effective rate
charged for such services. SEG's Starz and Encore movie services
are the primary drivers of SEG's revenue. Starz average
subscriptions increased 7% and Encore average subscriptions
increased 8% Y/Y. While the average subscription units increased in
2005, as compared to 2004, most of this growth occurred in late
2004, and SEG's Starz and Encore units remained relatively flat for
most of 2005. SEG believes that this trend was due to a number of
factors including (1) certain cable operators shifting their
marketing efforts away from the addition of premium video
subscribers to promotion of other services; (2) a reduction in the
rate of growth of digital subscribers; and (3) a loss of
subscribers due to the hurricane damage in the Gulf Coast region in
the third quarter of 2005. SEG's operating expenses increased 8%
Q/Q and 15% Y/Y. The increases for both periods were due primarily
to higher programming costs, which increased from $564 million for
the full year 2004 to $668 million for the full year 2005, and
increases in S,G&A expenses. The programming increases were due
to an increase in the percentage of first-run movie exhibitions
utilized (which have a relatively higher cost per title) as
compared to the number of library product exhibitions in 2005 and
higher costs per title as a result of new rate cards for movie
titles under certain of SEG's license agreements. In 2004 and 2005,
SEG launched via the Internet, Starz Ticket and Vongo,
respectively, which are comprised of Starz and Starz on Demand and
other movie and entertainment content. S,G&A expenses increased
for both periods primarily due to consulting and marketing expenses
incurred in connection with SEG's 2005 development and 2006 launch
of Vongo and a $12 million credit recorded by SEG in 2004 related
to the recovery of certain accounts receivable from Adelphia
Communications and other customers for which a reserve had
previously been provided. These increases were partially offset by
a $16 million decrease in sales and marketing as SEG participated
in fewer national marketing campaigns and obtained a reduction in
marketing commitments under the new affiliation agreement with
Comcast in 2005. Operating cash flow decreased due to increased
expenses. NOTES As a supplement to Liberty's consolidated
statements of operations included in its 10-K, the preceding is a
presentation of financial information on a stand-alone basis for
QVC and Starz Entertainment. Unless otherwise noted, the foregoing
discussion compares financial information for the twelve months and
three months ended December 31, 2005 to the same periods in 2004.
Three month comparisons are referenced by "Q/Q", and twelve month
comparisons are referenced by "Y/Y." Please see page 6 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
Liberty's consolidated segment operating cash flow for its
operating segments to consolidated earnings from continuing
operations before income taxes and minority interests. Schedule 2
to this press release provides a reconciliation of the operating
cash flow for each privately held entity presented herein to that
entity's operating income for the same period, as determined under
GAAP. Certain prior period amounts have been reclassified for
comparability with the 2005 presentation. Fair Value of Public
Holdings and Derivatives December September December (amounts in
millions and include the 31, 2004 30, 2005 31, 2005 value of
derivatives) News Corporation $9,457 8,122 8,181 InterActiveCorp
$3,824 1,755 1,960 Expedia (1) $ -- 1,371 1,659 Non Strategic
Public Holdings $8,612 7,897 7,513 (1) Represents fair value of
Liberty's investment in Expedia. In accordance with GAAP, Liberty
accounts for this investment using the equity method of accounting
and includes this investment in its consolidated balance sheet at
cost. Cash and Debt The following presentation is provided to
separately identify cash and liquid investments and debt
information. December September December (amounts in millions) 31,
2004 30, 2005 31, 2005 Cash and Cash Related Investments: (1)
Consolidated Cash (GAAP) $1,387 1,709 1,946 Consolidated Short-Term
Investments (2) 3 11 9 Consolidated Long-Term Marketable Securities
(3) 301 366 380 Total Consolidated Cash and Liquid Investments
$1,691 2,086 2,335 Debt: Senior Notes and Debentures (4) $6,188
4,808 4,476 Senior Exchangeable Debentures (5) 4,588 4,588 4,580
Other 109 908 905 Total Debt $10,885 10,304 9,961 Less: Unamortized
Discount Attributable To Call Option Obligations (2,289) (2,223)
(2,194) Unamortized Discount (20) (19) (17) Consolidated Debt
(GAAP) $8,576 8,062 7,750 (1) Cash and cash related investments of
Ascent Media Group, Inc. have been excluded for all periods as
these assets were spun off as part of Discovery Holding Company.
(2) Represents short-term marketable debt securities which are
included in other current assets in Liberty's consolidated balance
sheet. (3) 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. (4)
Represents face amount of Senior Notes and Debentures with no
reduction for the unamortized discount. (5) 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 increased $249 million and Total Debt decreased $343
million compared to September 30, 2005. 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. Debt
repayments made in 2005 were the final debt repayments to be made
under the debt reduction plan. Total Consolidated Cash and Liquid
Investments increased due to cash flows from operations of
Liberty's subsidiaries and proceeds from the expiration of certain
equity collars which were partially offset by the debt repayments.
Liberty's Total Consolidated Cash and Liquid Investments increased
$644 million and Total Debt decreased $924 million compared to
December 31, 2004. The decrease in Total Debt was due to the tender
offer executed in April 2005 and other repayments of corporate debt
as part of the aforementioned debt reduction plan, offset partially
by borrowings against the QVC bank credit facility. Total
Consolidated Cash and Liquid Investments increased due to cash
flows from operations of Liberty's subsidiaries and proceeds from
the expiration of certain equity collars which were partially
offset by the debt repayments, interest expense and the $200
million cash contribution related to the Discovery Holding Company
spin off. OUTSTANDING SHARES At December 31, 2005, there were
approximately 2.803 billion outstanding shares of L and LMC.B and
83 million shares of L and LMC.B reserved for issuance pursuant to
warrants and employee stock options. At December 31, 2005, there
were 13 million options that had a strike price that was lower than
the closing stock price. Exercise of these options would result in
aggregate proceeds of approximately $48 million. 2006 OUTLOOK On
November 9, 2005, Liberty announced its intention to create,
subject to stockholder approval, two new tracking stocks. Liberty
Interactive will reflect the separate performance of our businesses
engaged in video and on- line commerce, including our subsidiaries,
QVC and Provide Commerce and our interests in IAC/InterActiveCorp
and Expedia. Liberty Capital will reflect the separate performance
of all of our assets and businesses not attributed to Liberty
Interactive. This event is expected to occur in early May of 2006.
Liberty is in the process of refining its disclosure of financial
data for each of the two groups and will provide guidance for 2006
before the tracking stocks are issued. Certain statements in this
press release may constitute "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of
1995, including the statement under the heading "2006 Outlook."
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-K
of Liberty; general economic and business conditions and industry
trends including in the advertising and retail markets; the
continued strength of the industries in which such businesses
operate; continued consolidation of the broadband distribution and
movie studio industries; uncertainties inherent in proposed
business strategies and development plans; changes in distribution
and viewing of television programming, including the expanded
deployment of personal video recorders and IP television and their
impact on television advertising revenue and home shopping
networks; increased digital television penetration and the impact
on channel positioning of our networks; 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 press 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. SUPPLEMENTAL INFORMATION As a supplement to
Liberty's consolidated statements of operations, the following is a
presentation of quarterly and annual financial information and
operating metrics on a stand-alone basis for the two largest
privately held businesses (QVC, Inc. and Starz Entertainment Group
LLC) owned by or in which Liberty held an interest at December 31,
2005. Please see below 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 2005 of
operating cash flow to operating income, as determined under GAAP,
for each identified entity. QUARTERLY SUMMARY (amounts in millions)
4Q04 1Q05 2Q05 3Q05 4Q05 QVC, INC. (98.4%) Revenue - Domestic
$1,347 1,025 1,034 1,039 1,542 Revenue - International 476 439 445
436 541 Revenue - Total $1,823 1,464 1,479 1,475 2,083 OCF -
Domestic $334 241 248 235 360 OCF - International 77 82 76 71 109
OCF - Total $411 323 324 306 469 Operating Income $290 200 193 179
349 Gross Margin - Domestic 36.8% 37.3% 38.0% 36.5% 35.8% Gross
Margin - International 34.0% 38.2% 36.7% 35.3% 36.3% Homes Reached
- Domestic 88.4 89.1 89.9 90.5 90.8 Homes Reached - International
66.0 68.2 69.8 70.3 71.9 STARZ ENTERTAINMENT GROUP LLC (100%)
Revenue $248 254 258 245 247 OCF $46 48 47 47 29 Operating Income
(Loss) $1 36 36 35 (2) Subscription Units - Starz 14.1 14.0 14.1
13.9 14.1 Subscription Units - Encore 24.5 24.5 24.9 25.3 25.8
ANNUAL SUMMARY (amounts in millions) 2004 2005 QVC, INC. (98.4%)
Revenue - Domestic $4,141 4,640 Revenue - International 1,546 1,861
Revenue - Total $5,687 6,501 OCF - Domestic $977 1,084 OCF -
International 253 338 OCF - Total $1,230 1,422 Operating Income
$760 921 Gross Margin - Domestic 37.0% 36.8% Gross Margin -
International 36.3% 36.6% STARZ ENTERTAINMENT GROUP LLC (100%)
Revenue $963 1,004 OCF $239 171 Operating Income $148 105 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 entities of Liberty included herein
together with a reconciliation of that non-GAAP measure to the
privately held entity'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 consolidated segment operating
cash flow to consolidated earnings from continuing operations
before income taxes and minority interest (Schedule 1) and a
reconciliation, for QVC and Starz Entertainment, of each identified
entity's operating cash flow to its operating income calculated in
accordance with GAAP (Schedule 2). LIBERTY MEDIA CORPORATION
SCHEDULE 1 The following table provides a reconciliation of
consolidated segment operating cash flow to earnings from
continuing operations before income taxes and minority interest for
the years ended December 31, 2004 and 2005. (amounts in millions)
2004 2005 QVC $1,230 1,422 SEG 239 171 Corporate & Other (30)
(5) Consolidated segment operating cash flow $1,439 1,588
Consolidated segment operating cash flow $1,439 1,588 Stock
compensation (98) (52) Litigation Settlement 42 -- Depreciation and
amortization (658) (639) Interest expense (615) (623) Realized and
unrealized gains (losses) on financial instruments, net (1,284) 257
Gains (losses) on dispositions, net 1,406 (365) Nontemporary
declines in fair value of investments (129) (449) Other, net 121
119 Earnings (loss) from continuing operations before income taxes
and minority interest $224 (164) LIBERTY MEDIA CORPORATION SCHEDULE
2 The following tables provide reconciliation, for QVC and Starz
Entertainment, of operating cash flow to operating income
calculated in accordance with GAAP for the three months ended
December 31, 2004, March 31, 2005, June 30, 2005, September 30,
2005 and December 31, 2005 and the years ended December 31, 2004
and 2005, respectively. (amounts in millions) 4Q04 1Q05 2Q05 3Q05
4Q05 QVC, INC. (98.4%) Operating Cash Flow $411 323 324 306 469
Depreciation and Amortization (113) (115) (114) (117) (103) Stock
Compensation Expense (8) (8) (17) (10) (17) Operating Income $290
200 193 179 349 STARZ ENTERTAINMENT GROUP LLC (100%) Operating Cash
Flow $46 48 47 47 29 Depreciation and Amortization (22) (12) (11)
(12) (14) Stock Compensation Expense (23) -- -- -- (17) Operating
Income (Loss) $1 36 36 35 (2) (amounts in millions) 2004 2005 QVC,
INC. (98.4%) Operating Cash Flow $1,230 1,422 Depreciation and
Amortization (437) (449) Stock Compensation Expense (33) (52)
Operating Income $760 921 STARZ ENTERTAINMENT GROUP LLC (100%)
Operating Cash Flow $239 171 Depreciation and Amortization (63)
(49) Stock Compensation Expense (28) (17) Operating Income $148 105
DATASOURCE: Liberty Media Corporation CONTACT: John Orr of Liberty
Media Corporation, +1-720-875-5622 Web site: http://qvc.com/ Web
site: http://www.libertymedia.com/investor_relations/default.htm
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