March 'Magness' Hits Liberty as Director Quits

Meanwhile, the three independent directors on Liberty's audit committee include Donne Fisher, a longtime TCI executive, an executor of Bob Magness' estate and the target of Kim Magness' lawsuit.

Another independent director is Paul Gould, a banker at Allen & Co. His firm, says Liberty, has worked for some of its subsidiaries; Gould was also a longtime adviser to TCI and a frequent sailing buddy of Malone's, according to the Malone biography Cable Cowboy.

Waiting

The disclosures come as Liberty investors await word of what the wheeler-dealer Malone might do with a chunk of change he's scrounging up by selling bonds backed by part of his stake in AOL Time Warner (AOL).

Outsiders have speculated that Liberty is readying at least one major transaction: purchasing DirecTV operator Hughes Electronics (GMH), acquiring the stake in home shopping network QVC owned by partner Comcast, or buying entertainment assets controlled by Vivendi (V). On a conference call with analysts Tuesday, Liberty CEO Dob Bennett acknowledged that the company could be making at least one major transaction. "At the moment, we have a couple of large transactions in front of us," he said, which could "potentially affect the look and feel and capacity of the company going forward."

In the meantime, Liberty has continued a program of buying back its shares. The company bought 25.7 million shares last year for an average price of roughly $10.93. Bennett said the company bought an additional 17 million shares in the first quarter of the year, a time when its stock has ranged from $8.45 to $10.38.

Liberty's shares, which hit $30 three years ago, are trading at 1998 levels.

Challenging

For the fourth quarter ended Dec. 31, Discovery reported revenue of $546 million, up 20% from pro forma figures for the fourth quarter of 2001. Ebitda, or operating cash flow, rose 42%. For the year, revenue rose nearly 10% to $1.7 billion, while operating cash flow rose 52% to $379 million. U.S. ad sales showed particularly strong performance compared to 2001's "challenging marketplace," says Liberty.

For full-year 2003, Liberty forecasts percentage revenue growth in the low teens for Discovery, with operating cash flow increasing 15% to 20%.

Liberty reported that its Starz Encore unit generated $371 million in ebitda for 2002, or $102 million in the fourth quarter. Merrill Lynch analyst Jessica Reif Cohen, for one, had estimated annual ebitda of $372 million for the unit. Liberty, in a legal tussle with Comcast over programming fees, said last week it had cut the revenue Starz Encore was recognizing from Comcast in 2002 and 2003.

Assuming conservative revenue recognition from Comcast, Liberty forecasts 2003 revenue for Starz Encore that's even with 2002 or up in the low single digits. Operating cash flow will remain flat, says Liberty.

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