Exhibit 99.1
LIBERTY MEDIA REPORTS RECORD FOURTH QUARTER REVENUE
AND OPERATING CASH FLOW
Announces $1 Billion Self Tender Offer on Liberty Capital Shares
QVC Achieves 7% Revenue Growth and 19% Operating Cash Flow Growth in Fourth Quarter
Liberty Shows Continued Progress Toward Conversion to Operating Company
Englewood, Colorado, February 28, 2007 — Liberty Media Corporation (“Liberty”) reported record fourth quarter results for both its Liberty Interactive Group and Liberty Capital Group.
LIBERTY INTERACTIVE GROUP - Liberty Interactive Group’s revenue increased 11% for the quarter and 13% for the year and operating cash flow1 increased 21% for the quarter and 19% for the year due to continued growth at QVC and the additions of Provide Commerce and BUYSEASONS which were acquired during the year.
QVC
QVC’s total revenue increased 7% in the fourth quarter to $2.24 billion and 9% overall in 2006 to $7.07 billion. QVC’s operating cash flow increased 19% during the quarter to $557 million and 16% in 2006 to $1.66 billion, aided in part by certain one-time events.
QVC’s CEO Mike George said, “We are pleased with the overall performance for 2006. We had tough comparisons to the fourth quarter of 2005 and although the fourth quarter growth slowed in relation to the second and third quarter of 2006, we were able to produce results within guidance previously announced for Liberty’s Interactive Group. We remain confident about the long-term prospects of the business and believe we will continue to perform in line with the long-term guidance for Liberty Interactive.”
QVC’s domestic revenue increased 4% during the quarter to $1.60 billion and 7% for the year to $4.98 billion. Domestic operating cash flow increased 16% in the fourth quarter to $417 million and 13% for the
1. 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 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.
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full year to $1.23 billion. The domestic revenue growth for the quarter and the year was mainly attributable to increased sales to existing subscribers primarily in the areas of accessories and apparel. The total number of units shipped increased 1% in the fourth quarter and 5% during the year and the average selling price increased 3% for both periods. QVC.com sales as a percentage of domestic sales grew from 19% in the fourth quarter of 2005 to 22% in the fourth quarter of 2006 and from 18% in 2005 to 20% in 2006. The domestic operating cash flow margin increased 267 basis points to 26% for the quarter and 132 basis points to 25% for the year primarily due to slightly improved gross margins, lower commissions, favorable bad debt experience on the company’s private label credit card and a $15 million one-time reversal of franchise tax reserves related to an audit settlement.
QVC’s international revenue increased 17% in the fourth quarter to $632 million and 12% for the year to $2.09 billion due to greater sales to existing subscribers as well as new subscriber growth in each of our international markets. Foreign currency exchange rates were favorable for the quarter but unfavorable for the year. Excluding the effect of exchange rates, international revenue increased 10% in the quarter and 13% for the year. International operating cash flow increased from $109 million to $140 million, or 28% during the quarter and increased from $338 million to $426 million, or 26% for the year primarily due to the increased revenue, improved gross margins and operating leverage. International cash flow margins increased from 20% to 22% quarter over quarter and from 18% to 20% year over year primarily due to a higher initial gross product margin and a lower obsolescence provision required on the December 31, 2006 inventory balance. Excluding the effect of exchange rates, QVC’s international operating cash flow increased 23% in the fourth quarter and 27% in 2006.
QVC’s outstanding bank debt was $3.225 billion at December 31, 2006; the increase of $2.4 billion during the year was due to repayments of $1.369 billion of publicly-traded debt attributed to Liberty Interactive and repurchases of Liberty Interactive Series A common stock.
QVC recently announced that Meade Rudasill joined the company as chief operating officer, effective February 5, 2007. This newly created position is the result of a restructuring of responsibilities held by executives Bill Costello and Tom Downs who will both retire on March 31, 2007, as previously announced. Mr. Rudasill joins QVC with significant retail and operational experience. Most recently, he served as president and chief operating officer of Express, a specialty apparel chain. In his new role at QVC, Mr. Rudasill will be responsible for various departments including Affiliate Relations, Human Resources, Information Technology, Legal, Customer Service, Distribution, Facilities and Planning, Quality Assurance and New Business Development. Additionally, effective February 5, 2007, Dan O’Connell was promoted to the position of Chief Financial Officer, a role held by Mr. Costello. Mr. O’Connell, who joined QVC in 1987, has most recently served as Senior Vice President and Controller.
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Liberty Interactive Long-Term Outlook
Liberty expects that the combined compound annual growth rate in revenue and OCF for the Liberty Interactive Group’s attributed operating businesses over the next three to five years will be high single to low double digits %.
The foregoing estimates assume with respect to QVC, among other factors, that its product mix and foreign currency exchange rates affecting its international businesses are consistent from year to year. These estimated growth rates are not expected to be achieved ratably on a quarterly basis as the Liberty Interactive Group’s attributed businesses will likely experience different quarter over quarter growth rates for each calendar quarter of each year.
Share Repurchases
During the fourth quarter, Liberty repurchased approximately 10.2 million shares of Liberty Interactive Series A common stock at an average cost per share of $21.90 for aggregate cash consideration of $223 million. Since the creation of the Liberty Interactive tracking stock in May 2006, Liberty has repurchased approximately 51.6 million shares, at an average cost per share of $18.49 for aggregate cash consideration of $954 million. These repurchases represent over 7.3% of the shares outstanding at the time of creation of the Liberty Interactive tracking stock.
The businesses and assets attributed to Liberty Interactive Group are engaged in, or are ownership interests in companies that are engaged in, sales of goods and services primarily through television programming and the Internet, and currently include its subsidiaries QVC, Provide Commerce and BUYSEASONS and its approximate 20% interests in IAC/InterActiveCorp, Expedia and GSI Commerce. Liberty has identified QVC, Inc., a consolidated, wholly owned subsidiary, as the principal operating segment of Liberty Interactive Group.
LIBERTY CAPITAL GROUP — During the quarter, Liberty announced that it had entered into a definitive agreement with News Corporation to exchange Liberty’s 16.3% stake in News Corporation for a corporate subsidiary of News Corporation that holds a 38.5% stake in DIRECTV Group, Inc., regional sports networks in Denver, Pittsburgh and Seattle and $550 million in cash. Subsequent to December 31, 2006, Liberty announced that it had entered into a definitive agreement whereby it will exchange its approximately 7.6
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million CBS common shares for a corporate subsidiary of CBS which holds CBS’ Green Bay television station and approximately $170 million in cash.
“2006 was a productive year at Liberty, and we made progress toward simplifying our portfolio of assets,” commented Liberty President and CEO, Greg Maffei. “During the year we announced the sale of our stakes in OpenTV, On Command and Court TV and announced exchange agreements with News Corporation, CBS Corporation and IDT. These transactions result in the tax-efficient disposition of substantial investment assets for strategic operating assets and cash.” Maffei concluded, “Given our progress and the cash generated, today we are announcing a $1 billion Dutch Auction tender offer for Liberty Capital stock.”
Starz Entertainment, LLC
Starz Entertainment, LLC (“Starz Entertainment”) revenue increased 4% in the fourth quarter to $257 million and 3% for the year to $1.03 billion. Operating cash flow increased 72% during the quarter to $50 million and 9% for the year to $186 million. The growth in revenue for the year was driven by a $56 million increase resulting from growth in the average number of subscription units for Starz Entertainment’s services. Starz’ average subscription units increased 6% during 2006 while Encore average subscription units increased 7% during 2006. These increases and the resulting revenue growth were partially offset by a $27 million decrease stemming from a decrease in the effective rate charged for such services. The decline in the effective rate resulted from certain fixed-rate affiliation agreements that Starz Entertainment has entered into in recent years.
Starz Entertainment’s operating expenses decreased 5% for the quarter and increased 2% for the year. The increase for the year was due to higher programming costs, which increased 5% from $668 million in 2005 to $703 million in 2006, partially offset by a decrease in SG&A expenses. The programming increases were primarily due to $63 million of additional amortization of deposits made under certain of Starz Entertainment’s output arrangements. The decrease in SG&A expenses was due to a decrease in sales and marketing resulting from less marketing activity with Starz’ affiliates partially offset by new marketing expenses related to the commercial launch of Vongo. The decrease in operating expenses for the quarter was due to lower costs across the board. Starz Entertainment programming costs were lower for the quarter and Starz expects this trend to continue in 2007.
During 2006, Liberty acquired IDT Entertainment from IDT Corporation. Subsequent to the acquisition, the name of IDT Entertainment was changed to Starz Media. Starz Media’s operations include DVD distribution, animated feature film production, proprietary live action and animated series production and contracted 2D animation production. With this acquisition, Starz will have the capability to create a wide
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array of animated and live action programming for domestic and international distribution in all major channels, including broadcast syndication, premium television, theatrical, and home video/DVD.
Commenting on 2006, Robert B. Clasen, Starz Entertainment CEO stated, “This past year Starz made major moves to broaden its business. The acquisition of Starz Media and the creation of Overture Films allow us to aggregate audiences across multiple platforms including theatrical, television, video distribution, foreign distribution and digital. We are very pleased with our position in the market as we embark on 2007.”
Tender Offer
Liberty intends to purchase up to $1 billion of its Liberty Capital Series A and Series B common stock at a range of $105 to $113. The low end of that range represents a 1.2% premium and the high end represents a 9.0% premium to the Liberty Capital Series A closing share price on Tuesday, February 27, 2007. The Shares of both series purchased in the tender offer will be acquired at the same price per share. We expect to launch the offer within the next week.
The businesses and assets attributed to Liberty Capital Group are all of Liberty Media’s businesses and assets other than those attributed to Liberty Interactive Group and include its subsidiaries Starz Entertainment, LLC; Starz Media, LLC; FUN Technologies, Inc. and TruePosition, Inc., its equity affiliates GSN LLC and WildBlue Communications, Inc. and its interests in News Corporation, Time Warner, Inc. and Sprint Nextel Corporation. Liberty identified Starz Entertainment, LLC, a consolidated, wholly owned subsidiary, as the principal operating segment of Liberty Capital Group.
NOTES
Liberty Media Corporation operates and owns interests in a broad range of video and on-line commerce, media, communications and entertainment businesses. Those interests are attributed to two tracking stock groups: Liberty Interactive Group and Liberty Capital Group.
As a supplement to Liberty’s consolidated statements of operations included in its 10-K, the following is a presentation of financial information on a stand-alone basis for QVC and Starz Entertainment which have been identified as the principal operating segments of Liberty Interactive and Liberty Capital, respectively.
Unless otherwise noted, the foregoing discussion compares financial information for the twelve months and three months ended December 31, 2006 to the same periods in 2005. 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 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 2006 presentation. Liberty completed the sale of its controlling interest in OpenTV and announced the sale
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