As the attached Combined Statements of Operations and Comprehensive
Earnings do not include the results of the above non-consolidated entities,
except, in certain cases, as they affect Liberty’s interest in the earnings or
losses of affiliates, such combined statements are not necessarily indicative
of the underlying results of all the businesses in which Liberty owns an
economic interest. As a supplement to the attached combined statements of
operations and comprehensive earnings, the following is a presentation of
operating results for Liberty’s privately held assets including:
Liberty’s Corporate Cash and Liquid Investments and Corporate Debt
balances increased compared to December 31, 2000 due primarily to proceeds
from the issuances during the first quarter of 2001 of the Motorola 3.5%
Senior Exchangeable Debentures due 2031 and the Viacom 3.25% Senior
Exchangeable Debentures due 2031. These increases were offset primarily by
other investment activity.
Starz Encore Developed revenue and cash flow increased by 19% and 22%,
respectively. Operating expense increased by 17%. Total subscription
units increased by 54% due to a 17% increase in STARZ! units and a
68% increase in Encore/Thematic Multiplex units, respectively.
The increase in revenue was due to increases in subscription units from
all forms of distribution. Subscription units grew at a faster rate
than revenue primarily due to the following: (1) AT&T units, which
represent 20% of total units, increased by 32% and are covered by the
AT&T Broadband contract discussed below; and (2) contractual incentives
associated with growth in Encore and Thematic Multiplex distribution.
Under its affiliation agreement with AT&T Broadband, Starz Encore
receives fixed monthly payments in exchange for unlimited access to all
of the existing Encore and STARZ! services through 2022. The amount of
the payments is adjusted under certain circumstances in the event of
acquisitions and dispositions.
As a result of AT&T’s acquisition of MediaOne Group, Inc., the contracted payment amount increased by approximately 20% as of June 15, 2000. After adjusting for the elimination of the former MediaOne contract, the net payment amount from the combined AT&T companies increased by approximately 10%.
The 17% increase in operating expense was primarily due to an increase in affiliate marketing support, national branding and programming license fees related to improved performance at the box office of output product played during the first quarter of 2001 compared to last year.