##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549
 FORM 10-K (Mark One)þ
    
    ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934For the fiscal year ended December 31, 2004o
    

TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934For the transition period from  to
 Commission File Number 1-5846 THE LIBERTY CORPORATION 
  South Carolina
    
    
    
    57-0507055(State or other jurisdiction of
    
    
    
    (I.R.S. Employerincorporation or organization)
    
    
    
    Identification No.)
 Post Office Box 502, 135 South Main Street, Greenville, S. C. 29602(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code (864) 241-5400 Securities registered pursuant to Section 12(b) of the Act: Name of Each ExchangeTitle of Each Class
    
    on Which RegisteredCommon Stock, no par value per share
    
    New York Stock ExchangeRights to Purchase Series A Participating Cumulative Preferred Stock
    
    New York Stock Exchange
 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file such reports), and (2) has been
subject to the filing requirements for the past 90 days. Yes þ No o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein and will not be contained, to the best of Registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. þ Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes þ No o The aggregate market value of the voting stock held by non-affiliates of the Registrant as of June 30, 2004: Common Stock, No Par Value
    
    $881,276,383
 The number of shares outstanding of each of Registrants classes of common stock as of February 15, 2005: Common Stock, No Par Value
    
    18,477,855
 DOCUMENTS INCORPORATED BY REFERENCE Portions of The Liberty Corporation Proxy Statement for the Annual Meeting of Shareholders on
May 3, 2005 are incorporated into Part III, Items 10, 11, 12, 13, and 14 by reference. This report is comprised of pages 1 through 57. The exhibit index is on page 45.




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Part I Item 1. Business General The Registrant, The Liberty Corporation (Liberty or the Company) is a holding company with
operations primarily in the television broadcasting industry. The Companys television broadcasting
subsidiary, Cosmos Broadcasting, consists of fifteen network-affiliated television stations (the
stations) principally located in the South and Midwest, a cable advertising company, and a
professional broadcast equipment dealership. Eight of the Companys television stations are
affiliated with NBC, five with ABC, and two with CBS. The Companys principal executive offices are
in Greenville, South Carolina. Additional information concerning Libertys subsidiaries and divisions is included in
Managements Discussion and Analysisincluded in Item 7 of this report and incorporated herein by
reference. Television Broadcasting and Related Operations The following table shows data on the stations owned by the Company as of December 31, 2004: PercentageNetwork
    
    
    
    
    
    
    of U.S.Market
    
    
    
    
    
    
    
    
    
    
    Contract
    
    
    Station
    
    
    televisionRank
    
    
    
    
    
    
    Network
    
    
    Expiration
    
    
    Rank
    
    
    households
    
    
    Date
    
    
    DateMarket
    
    Station
    
    
    (1)
    
    
    Channel
    
    
    Affiliation
    
    
    (2)
    
    
    (3)
    
    
    (4)
    
    
    Formed
    
    
    AcquiredLouisville, KY
    
    WAVE-TV
    
    
    50
    
    
    
    3
    
    
    NBC
    
    
    2011
    
    
    
    3
    
    
    
    0.58
    %
    
    
    1948
    
    
    
    1981Toledo, OH
    
    WTOL-TV
    
    
    70
    
    
    
    11
    
    
    CBS
    
    
    2014
    
    
    
    1
    
    
    
    0.40
    
    
    
    1958
    
    
    
    1965Columbia, SC
    
    WIS-TV
    
    
    83
    
    
    
    10
    
    
    NBC
    
    
    2011
    
    
    
    1
    
    
    
    0.34
    
    
    
    1953
    
    
    
    1953Jackson, MS
    
    WLBT-TV
    
    
    91
    
    
    
    3
    
    
    NBC
    
    
    2011
    
    
    
    2
    
    
    
    0.30
    
    
    
    1953
    
    
    
    2000Harlingen, TX
    
    KGBT-TV
    
    
    93
    
    
    
    4
    
    
    CBS
    
    
    2014
    
    
    
    3
    
    
    
    0.29
    
    
    
    1955
    
    
    
    1998Evansville, IN
    
    WFIE-TV
    
    
    99
    
    
    
    14
    
    
    NBC
    
    
    2011
    
    
    
    1
    
    
    
    0.26
    
    
    
    1953
    
    
    
    1981Tyler, TX
    
    KLTV-TV
    
    
    111
    
    
    
    7
    
    
    ABC
    
    
    2002
    *
    
    
    1
    
    
    
    0.23
    
    
    
    1954
    
    
    
    2000Lufkin, TX
(satellite of KLTV)
    
    KTRE-TV
    
    
    111
    
    
    
    9
    
    
    ABC
    
    
    2002
    *
    
    
    1
    
    
    
    0.23
    
    
    
    1955
    
    
    
    2000Montgomery, AL
    
    WSFA-TV
    
    
    113
    
    
    
    12
    
    
    NBC
    
    
    2011
    
    
    
    1
    
    
    
    0.23
    
    
    
    1959
    
    
    
    1959Wilmington, NC
    
    WWAY-TV
    
    
    140
    
    
    
    3
    
    
    ABC
    
    
    2013
    
    
    
    2
    
    
    
    0.15
    
    
    
    1964
    
    
    
    1998Lubbock, TX
    
    KCBD-TV
    
    
    145
    
    
    
    11
    
    
    NBC
    
    
    2011
    
    
    
    1
    
    
    
    0.14
    
    
    
    1953
    
    
    
    2000Albany, GA
    
    WALB-TV
    
    
    147
    
    
    
    10
    
    
    NBC
    
    
    2011
    
    
    
    1
    
    
    
    0.14
    
    
    
    1954
    
    
    
    1998Biloxi, MS
    
    WLOX-TV
    
    
    156
    
    
    
    13
    
    
    ABC
    
    
    2013
    
    
    
    1
    
    
    
    0.13
    
    
    
    1962
    
    
    
    1995Lake Charles, LA
    
    KPLC-TV
    
    
    177
    
    
    
    7
    
    
    NBC
    
    
    2011
    
    
    
    1
    
    
    
    0.09
    
    
    
    1954
    

    
    
    1986Jonesboro, AR
    
    KAIT-TV
    
    
    179
    
    
    
    8
    
    
    ABC
    
    
    2004
    
    
    
    1
    
    
    
    0.09
    
    
    
    1963
    
    
    
    1986
   *
    KLTV-TV and KTRE-TV have been operating under short term renewals of their existing ABC
affiliation contracts since their original expiration date in 2002. The Company is currently
engaged in negotiations for affiliation contracts for these stations. It is anticipated that
these negotiations will result in a long term contract being executed during 2005.(1)
    Market rank is based on the relative size of the designated market areas among the 212
generally recognized designated market areas in the U.S.(2)
    Contracts may be subject to renewal provisions that effectively extend the expiration date.(3)
    Station rank in its market area based on Nielsen Media Research average 3 book estimates
(February, May, and November) 2004 ratings (Sun.  Sat.; 6:00A-2:00A).(4)
    Based on BIA Research, Inc. estimates. 2




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The Company currently owns and operates fifteen network-affiliated television stations in the
South and Midwest, thirteen of which were ranked No. 1 or No. 2 in their markets based on Nielsen
Media Research average 3 book estimates (February, May, and November) 2004 ratings (Sun.  Sat.;
6:00A-2:00A). Eight of its stations are affiliated with NBC, five with ABC, and two with CBS. The
fifteen stations cover approximately 3.35% of U.S. households. The fifteen stations operate in designated market areas ranked 50 to 179. The Companys
stations are located in geographically diverse and growing markets. Eleven of the fifteen stations
are located in university centers. Many of the stations are also located in markets that are home
to a mixture of large manufacturing plants, state capitals, transportation hubs, and United States
military bases. None of the TV markets represented more than 11% of the revenues or 15% of
operating income for the fiscal year ending December 31, 2004. The Company has a program to leverage its scale as a group broadcaster through the
centralization of certain sales, business office and other operational functions. It has installed
technology for accounting, traffic and billing, and sales management which allow it to perform
certain functions on an aggregated basis. In addition to the operational efficiencies gained, the
Company uses its leverage as an owner of fifteen television stations to negotiate contracts for
certain of the products and services used by its stations on a group basis, rather than on an
individual station-by-station basis. The Company believes that it is able to negotiate more
favorable terms for the group as a whole for these products and services than it would on an
individual station-by-station basis. The Company continues to examine other methods of realizing
the benefits of the station group as a whole, and will continue to further refine its operational
structure and procedures as additional opportunities are identified. The Company also operates a cable advertising company, CableVantage, Inc. (Cable Vantage),
through which it represents nine independent cable operators in 17 locations that, in combination,
reach approximately 450,000 subscribers. Network Affiliations Each of the stations is affiliated with a major network. The NBC affiliation contracts with
each of the NBC affiliated stations have been continuously in effect for over forty years. The CBS
and ABC affiliation contracts have each been continuously in effect for over thirty years. The affiliation contracts provide that the network will offer to the affiliated station a
variety of network programs, for which the station has the right of first refusal against any other
television station located in its community. The network typically retains the rights to sell a
substantial majority of the advertising time during such broadcasts. The major networks typically
provide programming for approximately 90 hours of the average 135 hours per week broadcast by their
affiliated stations. Historically, the networks have paid local stations, in accordance with the terms of their
network affiliation contracts, for airing network programming. This is called network compensation.
During 2001, the Company completed negotiations with NBC regarding its network affiliation
contracts, and entered into a ten year agreement that calls for compensation payments from NBC for
the first five years and is compensation neutral thereafter. The Company renegotiated its CBS
network affiliation contracts during 2003, and entered into a compensation neutral eleven year
agreement. During 2004, the Company completed negotiations with ABC regarding the terms of three
of its five network affiliation contracts. The term sheet calls for a nine year agreement,
includes compensation payments from ABC during the first four years, and is compensation neutral
thereafter. While the Company is currently operating under the terms of its existing ABC network
affiliation contacts at KLTV and KTRE, it is anticipated that new affiliation contract negotiations
will be completed. At this time, it is not known what the exact outcome of these negotiations will
be; however, the Company doe anticipates continuing its relationship with the network. Each network has the right to terminate its affiliation contract in the event of a material
breach of such agreement by a station and in certain other circumstances. 3




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Sources of Television Operating Revenues The following table shows the approximate percentage of the Companys gross television station
revenues by source for the three years ended December 31, 2004:  2004
    
    
    2003
    
    
    2002Local and regional advertising
    
    
    56
    %
    
    
    59
    %
    
    
    55
    %National spot advertising
    
    
    28
    
    
    
    31
    
    
    
    29Network compensation
    
    
    2
    
    
    
    2
    
    
    
    2Political advertising
    
    
    11
    
    
    
    5
    
    
    
    12Other
    
    
    3
    
    
    
    3
    
    
    
    2


Local and regional advertising is sold by each stations own sales representatives to local
and other non-national advertisers or agencies. Generally, these contracts are short-term,
although occasionally, longer-term packages will be sold. National spot advertising (generally a
series of spot announcements between programs or within the stations own programs) is sold by the
station or its sales representatives directly to agencies representing national advertisers. Most
of these national sales contracts are also short-term, often covering spot campaigns running for
thirteen weeks or less. Network compensation is the amount paid by the network to its affiliated
stations for broadcasting network programs. Political advertising is generated by national and
local elections, which can vary greatly from both market to market and year to year.

A television stations rates are primarily determined by the estimated number of television
homes it can provide for an advertisers message. The estimates of the total number of television
homes in a market and the stations share of those homes are based on the Nielsen Media Research
industry-wide television rating service. The demographic make-up of the viewing audience is
equally important to advertisers. A stations rate card for national and local advertisers takes
into account, in addition to audience delivered, such variables as the length of the commercial
announcements and the quantity purchased. Because television stations rely on advertising
revenues, they are sensitive to cyclical changes in the national and local economy. The size of
advertisers budgets, which are affected by broad economic trends, affect the broadcast industry in
general. The strength of the local economy in each stations market also significantly impacts
revenues. The advertising revenues of the stations are generally highest in the second and fourth
quarters of each year, due in part to increases in consumer advertising in the spring and retail
advertising in the period leading up to and including the holiday season. Additionally,
advertising revenues in even-numbered years can benefit from demand for advertising time in Olympic
broadcasts and advertising placed by candidates for political offices. A stations local market
strength, especially in local news ratings, is the primary factor that buyers use when placing
political advertising. From time to time, proposals have been advanced in Congress to require
television broadcast stations to provide some advertising time to political candidates at no
charge, which would potentially reduce advertising revenues from political candidates.

The Company also has ancillary operations in cable advertising sales. Revenues from these
operations amount to $14.6 million, $13.9 million and $14.1 million for calendar years 2004, 2003,
and 2002, respectively. The cable advertising sales are generated by CableVantage, a marketing
company designed to assist local cable operators in the sale of commercial time available in cable
network programs. CableVantage was formed in 1994 to create business opportunities with cable
operators and build revenues from programs and services specifically produced for cable.

Competition

The television broadcasting industry competes with other leisure time activities for the time
of viewers and with all other advertising media for advertising dollars. Within its coverage area,
a television station competes with other stations and with other advertising media serving the same
area. The outcome of the competition among stations for advertising dollars in a market depends
principally on share of audience, advertising rates, and the effectiveness of the sales effort.

The stations compete for television viewers against other local network affiliated and
independent stations, as well as against cable and alternate methods of television transmission.
The primary basis of this competition is program popularity. A majority of daily programming is
supplied by the network with which each station is affiliated. In time periods in which the network
provides programming, stations are primarily dependent upon the performance of the network programs
in attracting viewers. Stations compete in non-network time periods based on the performance of
their programming during such time periods, using a
combination of self-produced news, public affairs, and other entertainment programming,
including syndicated programs, which the

4



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stations believe will be attractive to viewers. The
Company believes that its stations have strong competitive positions in their local markets,
enabling them to deliver a high percentage of the local television audience to advertisers. The
Companys commitment to local news programming is an important element in maintaining its current
market positions. The competition includes cable television, which brings additional television programming,
including pay cable (HBO, Showtime, Movie Channel, etc.), into subscribers homes in a television
stations service area. Other sources of competition include home entertainment systems (including
video cassette recorders and playback systems, videodiscs, and television game devices), the
Internet, multichannel multipoint distribution systems, wireless cable, satellite master antenna
television systems, and some low power in-home satellite services. Stations also face competition
from high-powered direct broadcast satellite services, such as Echostar and Direct-TV, which
transmit programming directly to homes equipped with special receiving antennas. Stations compete
with these services both on the basis of service and product performance (quality of reception and
number of channels that may be offered) and price (the relative cost to utilize these systems
compared to broadcast television viewing). The direct broadcast satellite companies have begun to
extend their services to those size markets in which Libertys stations operate. Liberty has
negotiated retransmission consents, including fee payments based on the number of subscribers, with
both Echostar and Direct-TV for a number of its markets. By the end of 2004, ten of Libertys
stations were receiving compensation from one or both of Echostar or Direct-TV, in exchange for the
right to use their signals. Further advances in technology and further consolidation in the broadcast industry may
increase competition for household audiences and advertisers. Video compression techniques, now in
use with direct broadcast satellites and in development for cable and wireless cable, are expected
to permit greater numbers of channels to be carried within existing bandwidth. These technological
developments, which are applicable to all video delivery systems including over-the-air
broadcasting, have the potential to allow additional programming to highly targeted audiences. The
ability to reach narrowly defined audiences may further fragment viewers and influence advertiser
spending. The television broadcasting industry is continually faced with such technological change
and innovation. The Company is unable to predict the effect that technological changes will have on
the broadcast television industry in general, or more specifically to its own operations.
Consolidation in the broadcast television industry introduces new, large competitors. Many of the
current and potential competitors have greater financial, marketing, programming, and broadcasting
resources than Liberty. Mandated Conversion to Digital Technology Unless exempted by a specific FCC extension, all station affiliates of ABC, CBS, NBC, FOX, and
other non-affiliated commercially licensed stations were required to transmit a digital signal on
their approved channels by May 1, 2002. Many television stations, including some of the Companys,
were granted two six-month extensions for tower construction delays or equipment unavailability.
These extensions granted a delay in the deadline to May 1, 2003. Eleven of Libertys 15 stations
were broadcasting their digital signals by May 1, 2003. Four others received extensions because of
FCC administrative delays in processing requests for channel changes. Of those four, WSFA in
Montgomery, AL began broadcasting a digital signal in July of 2004. The remaining three stations
are expected to be broadcasting digital signals by the end of the third quarter of 2005. Liberty
expects no FCC penalties as a result of these administrative delays. As the Company develops its digital technology, given its dominant presence in its markets,
the Company believes it will be attractively positioned as a potential partner for new digital or
data stream businesses that wish to develop in its markets. The Company estimates that an
additional $7.0 million may be required over the next nine to twelve months for towers, antenna
systems, transmitters, transmitter buildings, and other related equipment. This investment will
establish basic full power digital television pass through at our fifteen stations, including
simulcasting existing analog programming. Federal Regulation of Broadcasting The following is a brief discussion of certain provisions of the Communications Act of 1934,
as amended (the Communications Act), and of FCC regulations and policies that affect the business
operations of the Company. Reference should be made to the Communications Act, FCC rules and the
public notices and rulings of the FCC, on which this discussion is based, for further information
concerning the nature and extent of FCC regulation of television broadcasting stations. 5




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FCC Regulation.The ownership, operation, and sale of television stations are subject to the
jurisdiction of the FCC by authority granted it under the Communications Act. The FCC has the
power to impose penalties, including fines or license revocations, upon a licensee of a television
station for violations of the FCCs rules and regulations. Matters subject to FCC oversight
include, but are not limited to:  
    the assignment of frequency bands of broadcast television;
    the approval of a television stations frequency, location, and operating power;
    the issuance, renewal, revocation or modification of a television stations FCC license;
    the approval of changes in the ownership or control of a television stations license;
    the regulation of equipment used by television stations; and
    the adoption and implementation of regulations and policies concerning the ownership
and operation of television stations. License Renewals, Assignments, and Transfers.Television broadcast licenses are granted for a
maximum term of eight years (five years prior to 1996) and are subject to renewal upon application
to the FCC. The FCC prohibits the assignment of a license or the transfer of control of a
broadcasting licensee without prior FCC approval. In determining whether to grant or renew a
broadcasting license, the FCC considers a number of factors pertaining to the applicant, including
compliance with a variety of ownership limitations and compliance with character and technical
standards. During certain limited periods when a renewal application is pending, petitions to deny
a license renewal may be filed by interested parties, including members of the public. Such
petitions may raise various issues before the FCC. The FCC is required to hold evidentiary,
trial-type hearings on renewal applications if a petition to deny renewal of such license raises a
substantial and material question of fact as to whether the grant of the renewal application
would be inconsistent with public interest, convenience and necessity. The FCC must grant the
renewal application if, after notice and opportunity for a hearing, it finds that the incumbent has
served the public interest and has not committed any serious violation of FCC requirements. If the
incumbent fails to meet that standard, and if it does not show other mitigating factors warranting
a lesser sanction, the FCC has authority to deny the renewal application and consider a competing
application. WWAY (Wilmington, NC), WIS (Columbia, SC), WSFA (Montgomery, AL), and WALB (Albany, GA) filed
renewal applications during 2004. KAIT (Jonesboro, AR), KPLC (Lake Charles, LA), WLBT (Jackson,
MS), WLOX (Biloxi, MS), WFIE (Evansville, IN), WAVE (Louisville, KY), and WTOL (Toledo, OH) will
file renewal applications during 2005. KCBD (Lubbock, TX), KGBT (Harlingen, TX), and KLTV/KTRE
(Tyler/Lufkin, TX), will file renewal applications during 2006. While the Companys renewal
applications have historically been granted without a hearing, the Company cannot guarantee that
there will not be any challenges to the renewal of its FCC licenses. Multiple and Cross-Ownership Rules. On a national level, the FCC rules generally prevent an
entity or individual from having an attributable interest in television stations with an aggregate
audience reach in excess of 39% of all U.S. households. On a local level, the duopoly rule
prohibits or restricts attributable interests in two or more television stations with overlapping
service areas and the one-to-a-market rule restricts such interests in television and radio
stations serving the same market. In 2003, the FCC released its bi-annual review of media ownership rules. Under the new rules,
the duopoly, one-to-a-market, and newspaper-television cross-ownership prohibition rules were
relaxed to allow broadcasters to own, under certain circumstances, more than one television
station, or certain combinations of television stations, radio stations, and daily newspapers, in
the same local area. Shortly after their publication the relaxed rules were challenged in court by
media companies, media trade associations, activist groups, and other interested parties. In the
fall of 2004, the Federal Appeals Court in Philadelphia issued its findings on the legal challenges
these groups. The Courts findings upheld many of the FCCs revised rules, threw out some, and
asked for modification of others. The FCC has decided to follow the directives of the Appeals
Court and will not ask the US Supreme Court for a further review. Various individual media
companies and trade associations, as well as activist groups, are expected to appeal the
Philadelphia Courts ruling to the US Supreme Court. It is possible that the absence of a federal
agency in the appeal process could lessen the US Supreme Courts inclination to hear the case.
Until the situation is clarified, the FCCs old rules for media ownership remain in effect. 6




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The FCC generally applies its ownership limits only to attributable interests held by an
individual, corporation, partnership or other association. In the case of corporations holding
broadcast licenses, the interest of officers, directors, and those who, directly or indirectly,
have the right to vote 5% or more of the corporations voting stock (or 10% or more of such stock
in the case of insurance companies, mutual funds, bank trust departments, and certain other passive
investors that are holding stock for investment purposes only) are generally deemed to be
attributable, as are positions as an officer or director of a corporate parent of a broadcast
licensee. Because of these multiple and cross-ownership rules, a purchaser of the common stock who
acquires an attributable interest in the Company may violate the FCCs rules if that purchaser also
has an attributable interest in other television stations, radio stations, daily newspapers, or
cable systems, depending on the number and location of those radio or television stations or daily
newspapers or cable systems. Such a purchaser also may be restricted in the companies in which it
may invest to the extent that those investments give rise to an attributable interest. If an
attributable stockholder of the Company violates any of these ownership rules or if a proposed
acquisition by the Company would cause such a violation, the Company may be unable to obtain from
the FCC one or more authorizations needed to conduct its television station business and may be
unable to obtain FCC consents for certain future acquisitions. Alien Ownership.Under the Communications Act, broadcast licenses may not be granted to or
held by any corporation having more than one-fifth of its capital stock owned of record or voted by
non-U.S. citizens (including a non-U.S. corporation), foreign governments or their representatives
(collectively, Aliens) or having an Alien as an officer or director. The Communications Act also
prohibits a corporation, without an FCC public interest finding, from holding a broadcast license
if that corporation is controlled, directly or indirectly, by another corporation, any officer of
which is an Alien, or more than one-fourth of the directors of which are Aliens, or more than
one-fourth of the capital stock of which is owned of record or voted by Aliens, unless the FCC
finds that such ownership would be in the public interest. The FCC has issued interpretations of
existing law under which these restrictions in modified form apply to other forms of business
organizations, including general and limited partnerships. As a result of these provisions, since
the Company serves as a holding company for the various television station licensee subsidiaries,
it cannot have more than 25% of the capital stock owned of record or voted by Aliens, cannot have
an officer who is an Alien, and cannot have more than one fourth of its Board of Directors
consisting of Aliens. Restrictions on Broadcast Advertising.The advertising of cigarettes on broadcast stations
has been banned for many years. The broadcast advertising of smokeless tobacco products has also
been banned by Congress. Certain Congressional committees have, in the past, examined legislative
proposals to eliminate or severely restrict the advertising of beer and wine. The Company cannot
predict whether any or all of the present proposals will be enacted into law and, if so, what the
final form of such a law might be. The elimination of all beer and wine advertising could have a
material adverse effect on the Companys revenues and operating profits as well as the revenues and
operating profits of other stations that carry beer and wine advertising. In recent years, some
television stations, including Liberty stations in selected markets, have experimented with
advertising for hard liquor products. It is not possible for the Company to predict how Congress
might act legislatively in response to the airing of hard liquor advertising. The FCC has lifted its prohibition of broadcast advertising by casinos in markets where the
state does not have its own prohibition. The Company has several stations in states where casino
gambling is legal and no such state prohibition exists. The Bipartisan Campaign Reform Act of 2002 restricts the availability of soft money in
election campaigns and prevents an organization from using general revenues to fund issue ads
before an election. Cable and Satellite Must-Carry or Retransmission Consent Rights.The 1992 Cable Act,
enacted in October 1992, requires television broadcasters to make an election to exercise either
certain must-carry or retransmission consent rights in connection with their carriage by cable
television systems in the stations local market. If a broadcaster chooses to exercise its
must-carry rights, it may demand carriage on a specified channel on cable systems within its
designated market area. Must-carry rights are not absolute, and their exercise is dependent on
variables such as the number of activated channels on, and the location and size of, the cable
system, and the amount of duplicative programming on a broadcast station. Under certain
circumstances, a cable system may decline to carry a given station. If a broadcaster chooses to
exercise its retransmission consent rights, it may prohibit cable systems from carrying its signal,
or permit carriage under a negotiated compensation arrangement. Generally, the stations have
requested must-carry status from the cable operators in their outlying coverage areas and have
negotiated retransmission consent agreements with the
cable operators in their metro coverage areas. Certain of the Companys stations are
currently in negotiation with various cable television systems to 7




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extend their retransmission
agreements. At this time, it is not known what the exact outcome of these negotiations will be.
However, the Company does not anticipate encountering any significant difficulties during this
process. Cable operators are not currently required to carry both a stations analog and digital signal
at the same time. Nor are they required to carry more than one program stream from a stations
digital signal. However, it is anticipated that the Company will eventually be able to negotiate
the retransmission of its analog and digital signal, or signals, with the cable television systems
in its markets. Under the Satellite Home Improvement Act, satellite carriers are permitted to retransmit a
local television stations signal into its local market with the consent of the local television
station. If a satellite carrier elects to carry one local station in a market, the satellite
carrier must carry the signals of all local television stations that also request carriage. Advanced Television Technology.At present, U.S. television stations broadcast signals using
the NTSC system, an analog transmission system named for the National Television Systems
Committee, an industry group established in 1940 to develop the first U.S. television technical
broadcast standards. In late 1996, the FCC approved a new digital television (DTV) technical
standard to be used by television broadcasters, television set manufacturers, the computer
industry, and the motion picture industry. This DTV standard will allow the simultaneous
transmission of multiple streams of video programming and data on the bandwidth presently used by a
single normal analog channel. The FCC presently plans for the DTV transition period to end by 2006, or upon 85% market
penetration of DTV sets. At that time, broadcasters will be required to discontinue analog
operations and to return their present channels to the FCC. Given that the penetration of DTV sets
in 2006 will likely be below the threshold Congress has set for returning the analog spectrum, it
is probable that broadcasters will continue to utilize both analog and digital spectrum beyond
2006. The FCC is expected to apply to DTV certain of the rules applicable to analogous services in
other contexts, including certain rules that require broadcasters to serve the public interest, and
may seek to impose additional programming or other requirements on DTV service. The Telecom Act
requires the FCC to impose fees upon broadcasters if they choose to use the DTV channel to provide
paid subscription services to the public. The FCC has determined that broadcasters should pay a
fee of 5% of gross revenues received for such subscription services should the broadcaster provide
subscription services on their DTV channels. In some cases, conversion to DTV operations may reduce a stations geographical coverage area.
In addition, the FCCs current implementation plan would maintain the secondary status of low-power
stations in connection with its allotment of DTV channels. The DTV channel allotment will result in
displacement of a substantial number of existing low-power stations, particularly in major
television markets. Accordingly, the low-power broadcast stations may be materially adversely
affected. The Company does not currently own any low-power stations. Recent Developments, Proposed Legislation, and Regulation.Congress and the FCC currently
have under consideration, and may in the future adopt, new laws, regulations, and policies
regarding a wide variety of matters that could affect, directly or indirectly, the operation and
ownership of the Companys broadcast properties. In addition to the changes and proposed changes
noted above, these matters include, for example, additional spectrum use fees, political
advertising rates, potential restrictions on the advertising of certain products like hard liquor,
beer, and wine, and revised rules and policies governing equal employment opportunity. Other
matters that could affect its broadcast properties include technological innovations and
development generally affecting competition in the mass communications industry. The foregoing does not purport to be a complete summary of all the provisions of the
Communications Act, the Telecom Act, or the regulations and policies of the FCC under either act.
Proposals for additional or revised regulations and requirements are pending before, and are being
considered by, Congress and federal regulatory agencies from time-to-time. Management is unable at
this time to predict the outcome of any of the pending FCC rulemaking proceedings referenced above,
the outcome of any reconsideration or appellate proceedings concerning any changes in FCC rules or
policies noted above, the possible outcome of any proposed or pending Congressional legislation, or
the impact of any of those changes on its broadcast operations. Other Business.In addition to the operating subsidiaries, the Company has other minor
organizations. These include the Companys administrative staff, a property development and
management company, and transportation operations. 8




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##### 



Industry Segment Data.Information concerning the Companys industry segments is contained in
Note 14 of the Consolidated Financial Statements and is incorporated in this Item 1 by reference. Employees.At December 31, 2004 the Company had approximately 1,400 full-time employees. Internet
Address.The Company maintains its Internet website at
www.libertycorp.com. The
Company makes available free of charge through its Internet website, or upon written request, its
annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, amendments
to those reports, its Code of Ethics, any amendments or waivers to its Code of Ethics, its
Corporate Governance Policy, and all Board Committee charters. Other Information.The Company has submitted to the New Your Stock Exchange a certificate of
the Chief Executive Officer of the Company certifying that he is not aware of any violation by the
Company of New York Stock Exchange corporate governance listing standards. Item 2. Properties The Company leases the space for its main office, which is located at 135 South Main
Street, Greenville, SC. The Company owns its television broadcast studios, office buildings and main transmitter sites
in Columbia, SC; Montgomery, AL; Toledo, OH; Louisville, KY; Evansville, IN; Jonesboro, AR; Lake
Charles, LA; Biloxi, MS; Albany, GA; Harlingen, TX; Lubbock, TX; Wilmington, NC; Jackson, MS;
Tyler, TX; and Lufkin, TX. Item 3. Legal Proceedings The Company is not currently engaged in legal proceedings of material consequence other
than ordinary routine litigation incidental to its business. Any proceedings reported in prior
filings have been settled or otherwise satisfied. Item 4.   Submission of Matters to a Vote of Security Holders None during the fourth quarter of 2004. 9




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##### 



PART II Item 5. Market for the Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities The Liberty Corporations Common Stock is listed on the New York Stock Exchange under the
symbol LC. As of December 31, 2004, 860 shareholders of record in 37 states, the District of
Columbia, Australia, and Canada held the 18,468,949 Common Stock shares outstanding. Quarterly high
and low stock prices and dividends per share as reported by New York Stock Exchange Composite Price
History were:  2004
    
    
    2003
    
    
    2002Quarterly
    
    
    
    
    
    
    
    
    
    
    Quarterly
    
    
    
    
    
    
    
    
    
    
    QuarterlyMarket Price Per Share
    
    
    Dividend
    
    
    Market Price Per Share
    
    
    Dividend
    
    
    Market Price Per Share
    
    
    DividendHigh
    
    
    Low
    
    
    Per Share
    
    
    High
    
    
    Low
    
    
    Per Share
    
    
    High
    
    
    Low
    
    
    Per ShareFourth Quarter
    
    $
    44.83
    
    
    $
    38.50
    
    
    $
    0.25
    
    
    $
    47.25
    
    
    $
    41.89
    
    
    $
    0.24
    
    
    $
    40.50
    
    
    $
    32.10
    
    
    $
    0.22Third Quarter
    
    
    47.22
    
    
    
    39.13
    
    
    
    0.25
    
    
    
    45.00
    
    
    
    40.91
    
    
    
    0.24
    
    
    
    40.08
    
    
    
    28.50
    
    
    
    0.22Second Quarter
    
    
    48.00
    
    
    
    43.70
    
    
    
    0.25
    
    
    
    45.30
    
    
    
    40.46
    
    
    
    0.24
    
    
    
    45.00
    
    
    
    39.00
    
    
    
    0.22First Quarter
    
    
    51.79
    
    
    
    45.20
    
    
    
    4.25
    *
    
    
    43.60
    
    
    
    37.85
    
    
    
    0.24
    
    
    
    42.51
    
    
    
    39.20
    
    
    
    0.22
   *
    
    Includes a special dividend of $4.00 per share. The Company expects to continue its policy of paying regular cash dividends, although there is
no assurance as to future dividends, as they are dependent on future earnings, capital
requirements, and the Companys financial condition. As of December 31, 2004, the Companys credit facility restricted payments for dividends and
purchases of its common stock to no more than $180 million during the period January 1, 2004
through December 31, 2004, and for periods after January 1, 2005 to $100 million plus fifty percent
of cumulative net income of the Company for all fiscal periods beginning January 1, 2004. Subsequent to December 31, 2004, the Company amended the credit facility. The amended credit
facility restricts payments for dividends and purchases of common stock to no more than $180
million during the period January 1, 2005 through December 31, 2005, and for periods after January
1, 2006 to $100 million plus fifty percent of cumulative net income of the Company for all fiscal
periods beginning January 1, 2005.  Registrar and Transfer Agent
American Stock Transfer & Trust Company
59 Maiden Lane
New York, NY 10038
Telephone (800) 937-5449, extension 6820 For a free copy of the 10-K or other information, contact:
The Liberty Corporation Shareholder Relations
Box 502
Greenville, SC 29602
Telephone (864) 241-5400 Written shareholder correspondence and requests for
transfer should be sent to:
American Stock Transfer & Trust Company
Attn: Shareholder Relations
6201 15th Avenue, Floor 3L
Brooklyn, NY 11219
 Dividend Reinvestment and Direct Stock Purchase and Sale Plan
A brochure describing this service may be obtained by writing or
calling:
American Stock Transfer & Trust Company
P.O. Box 922
New York, NY 10269-0560
Telephone: (877) 322-4926 (toll free)
Internet: www.investpower.com Direct Deposit of Cash Dividends
For information on this service, call American Stock Transfer &
Trust Company toll free at 800-937-5449, extension 6820.
   10




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##### 



ISSUER PURCHASES OF EQUITY SECURITIES Total
    
    
    
    
    
    
    
    
    Total Number of
    
    
    
    Maximum NumberNumber of
    
    
    
    
    
    
    
    
    Shares (or Units)
    
    
    
    of Shares that MayShares (or
    
    
    
    Average Price
    
    
    
    purchased as Part of
    
    
    
    Yet Be PurchasedUnits)
    
    
    
    per Share Paid
    
    
    
    Publicly Announced
    
    
    
    Under the Plans orPeriod
    
    
    Purchased
    
    
    
    (or Unit)
    
    
    
    Plans or Programs
    
    
    
    ProgramsOctober 1  31, 2004
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    
    
    3,327,700November 1  30, 2004
    
    
    
    142,600
    
    
    
    $
    43.04
    
    
    
    
    142,600
    
    
    
    
    3,185,100December 1  31, 2004
    
    
    
    160,400
    
    
    
    $
    42.97
    
    
    
    
    160,400
    
    
    
    
    3,024,700Total
    
    
    
    303,000
    
    
    
    $
    43.00
    
    
    
    
    303,000
    
    
    
    
    3,024,700
 On February 3, 2004 Libertys Board of Directors extended to February 28, 2005 the Companys
authorization to purchase from time to time up to 4,000,000 shares of stock in the open market or
directly negotiated transactions. On February 8, 2005 Libertys Board of Directors extended to February 28, 2006 the Companys
authorization to purchase from time to time up to 4,000,000 shares of stock in the open market or
directly negotiated transactions. 11




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##### 



Item 6. Selected Financial Data  Years Ended December 31,(In $000s, except per share data)
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Net revenues *
    
    $
    219,057
    
    
    $
    200,284
    
    
    $
    206,678
    
    
    $
    178,431
    
    
    $
    173,672Income from continuing operations
    
    $
    38,590
    
    
    $
    23,897
    
    
    $
    32,995
    
    
    $
    16,576
    
    
    $
    24,995Income from discontinued operations**
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,563Cumulative effect of a change in accounting
principle***
    
    
    (40,586
    )
    
    
    
    
    
    
    (47,388
    )
    
    
    
    
    
    
    Net income (loss)
    
    $
    (1,996
    )
    
    $
    23,897
    
    
    $
    (14,393
    )
    
    $
    16,576
    
    
    $
    53,558Adjusted net income (loss)****
    
    $
    38,590
    
    
    $
    23,897
    
    
    $
    32,995
    
    
    $
    25,947
    
    
    $
    57,715Income from continuing operations per diluted share
    
    $
    2.08
    
    
    $
    1.24
    
    
    $
    1.68
    
    
    $
    0.84
    
    
    $
    1.27Income from discontinued operations per diluted share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.45Cumulative effect of a change in accounting
principle per diluted share***
    
    
    (2.19
    )
    
    
    
    
    
    
    (2.41
    )
    
    
    
    
    
    
    Net income (loss) per diluted share
    
    $
    (0.11
    )
    
    $
    1.24
    
    
    $
    (0.73
    )
    
    $
    0.84
    
    
    $
    2.72Adjusted net income per diluted share****
    
    $
    2.08
    
    
    $
    1.24
    
    
    $
    1.68
    
    
    $
    1.32
    
    
    $
    2.93Regular dividends per common share
    
    $
    1.00
    
    
    $
    0.96
    
    
    $
    0.88
    
    
    $
    0.88
    
    
    $
    0.88Special dividends per common share
    
    $
    4.00
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Assets
    
    $
    527,839
    
    
    $
    662,265
    
    
    $
    670,751
    
    
    $
    730,195
    
    
    $
    896,007Revolving credit facility
    
    $
    20,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Shareholders equity
    
    $
    390,320
    

    
    $
    522,000
    
    
    $
    538,236
    
    
    $
    581,671
    
    
    $
    580,993
   *
    
    During 2000, the Company acquired four television stations located in Texas and
Mississippi.**
    
    In November of 2000, the Company sold it insurance operations.***
    
    See Note 4 of the Consolidated Financial Statements regarding the cumulative effect of a
change in accounting principle related to the adoption of EITF Topic No. D-108 Use of the
Residual Method to Value Acquired Assets Other Than Goodwill, (EITF Topic No. D-108) in the
fourth quarter of 2004 and Statement of Financial Accounting Standards No. 142 Goodwill and
Other Intangible Assets (SFAS No. 142), which was adopted during 2002.****
    
    Includes adjustments to reflect the effect of SFAS No. 142 and EITF Topic
No. D-108, had they been effective as of January 1, 2000. Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations The Liberty Corporation is a holding company with operations primarily in the television
broadcasting industry. The Companys television broadcasting subsidiary, Cosmos Broadcasting,
consists of fifteen network-affiliated television stations principally located in the Southeast and
Midwest, and a cable advertising company. Eight of the Companys television stations are affiliated
with NBC, five with ABC, and two with CBS. FORWARD-LOOKING INFORMATION The Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements. Certain information contained herein or in any other written or oral
statements made by, or on behalf of the Company, are or may be viewed as forward-looking. The
words expect, believe, anticipate or similar expressions identify forward-looking statements.
Although the Company has used appropriate care in developing any such forward-looking information,
forward-looking information involves risks and uncertainties that could significantly impact actual
results. These risks and uncertainties include, but are not limited to, the following: changes in
national and local markets for television advertising; changes in general economic conditions,
including the performance of financial markets and interest rates; competitive, regulatory, or tax
changes that affect the cost of or demand for the Companys services; and adverse litigation
results. The Company undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future developments, or otherwise. 12




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##### 



EXECUTIVE SUMMARY Net revenues increased approximately $18.8 million on a year-over-year basis, primarily due to
a significant increase in political revenues. The year 2004 was a presidential election year that
saw significant amounts of political spending by politicians and groups supporting their positions
and specific social issues. The Company recognized $25.8 million of revenue from political
spending during 2004, an increase of $15.0 million over 2003 levels. The year 2003 was an
off-cycle year for national elections, and as such, lower political revenues were to be expected.
Increases in local and national revenue augmented the impact of the increased level of political
revenue in 2004. Operating expenses increased due mainly to planned annual increases in employee
compensation, higher commissions paid to the Companys sales staff as a result of increased local
revenues, and increased medical insurance costs. These increases were partially offset by reduced
levels of losses on disposal in 2004 as compared to 2003. During the third quarter of 2004, the statute of limitations expired related to reserves
established for certain previous tax years, and accordingly such reserves were released. In
addition, during the fourth quarter of 2004, the reserve for a specific examination was released
due to managements estimate of an expected favorable outcome. As a result, the full year 2004
effective tax rate is lower than it would be absent these events. In 2004, the Company adopted EITF Topic No. D-108, Use of the Residual Method to Value
Acquired Assets Other Than Goodwill (EITF Topic D-108). Under EITF Topic D-108, registrants are
required to use a direct value method for the impairment testing of indefinite lived intangible
assets. Impairments of intangible assets recognized upon application of a direct value method by
entities previously applying the residual method are to be reported as a cumulative effect of a
change in accounting principle. As the Company has, in the past, used the residual method to value
its FCC licenses, in connection with the adoption of Topic D-108, the Company reduced the carrying
value of its FCC licenses by $62.8 million ($40.6 million net of income taxes) as the cumulative
effect of a change in accounting principle. During 2004, the Company had capital expenditures of approximately $12.6 million, paid a
special dividend of approximately $75.1 million in addition to its regular quarterly dividends, and
purchased $46.2 million of its common stock. At December 31, 2004, the Company had cash and cash
equivalents of approximately $16.4 million and $20.0 million of debt outstanding under its
revolving credit facility. Subsequent to December 31, 2004, the Company amended its revolving credit facility. The
amendment, among other things, extends the term of the facility through May 17, 2006 and increases
the aggregate facility commitment from $100 million to $150 million. Also subsequent to December
31, 2004, the Companys Board of Directors declared a special dividend of $4.00 per share, or
approximately $74.0 million. The Company will use its credit facility to fund the special
dividend. CRITICAL ACCOUNTING POLICIES AND ASSUMPTIONS Financial statements prepared in accordance with accounting principles generally accepted
in the United States require management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying notes to the consolidated
financial statements. Critical accounting policies comprise those policies that require the
Companys most difficult, subjective and complex judgments. These policies require estimates of
matters that are inherently uncertain. Some of the more significant, and the most sensitive, of the Companys accounting policies and
assumptions relate to the consolidation of variable interest entities, as governed by Financial
Accounting Standards Board Interpretation 46 (FIN 46), the procedures the Company uses to value
its FCC licenses and goodwill in accordance with Statement of Financial Accounting Standards No.
142 Goodwill and Other Intangible Assets (SFAS No. 142) and EITF Topic No. D-108 Use of the
Residual Method to Value Acquired Assets Other Than Goodwill (EITF Topic D-108), the procedures
to evaluate certain of its investments for impairment, the assumptions used to determine the
recoverability of deferred tax assets, and the assumptions and estimates used to establish reserves
for income taxes that may become payable in future years as a result of examinations by tax
authorities. FIN 46 requires the Company to use estimates and assumptions to determine if an investment or
other relationship with a third party qualifies as a variable interest entity, and if it does
qualify, to determine if that entity should be consolidated into the Companys financial
statements. The estimates may include, among other things, the future cash
flows of the third party, terminal multiples for assumed liquidation values, and discount
rates to be used in present value calculations. 13




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##### 



SFAS No. 142 and EITF Topic D-108 require the Company to use estimates and assumptions to
determine the estimated fair value of its individual FCC licenses and its station group as a whole.
The estimates and assumptions may include, among other things, the future cash flows to be
generated by its stations, terminal multiples for assumed station sales, discount rates to be used
in present value calculations, assumed values for fixed assets and network affiliation contracts,
and future capital expenditure levels. The Company establishes impairments on specific assets at the time the Company determines the
assets to have been impaired. The majority of the Companys investments are in private debt and
equity securities, and venture capital funds. For private debt securities the Company reviews information provided to it by the investee
companies for indicators of impairment. Additionally, the Company will from time to time contact
the management of the investee company and discuss its current situation and future prospects. The
Company estimates the fair value of its investments in private debt securities by discounting the
expected future cash flows using a current market rate appropriate for the yield, credit quality,
and maturity of such investments. If the estimated fair value is determined to be less than the
carrying value, the Company evaluates the impairment to determine if it is other-than-temporary.
The Company evaluates the severity of the impairment and its ability and intent to hold the
investment to maturity in determining if the impairment is other-than-temporary. As part of this
analysis, the collectibility of the debt instrument is evaluated based on the most recent
historical and projected financial information provided to the Company by the issuer and on the
conversations with the investee companys management, if applicable. For Cost method securities, equity investments in non-public entities that are not required to
be accounted for under the equity method of accounting, the Company reviews the information
provided to it by the investee companies for indicators of impairment (e.g. decreasing cash flows,
decreasing sales or profitability, declining future prospects, or a significant write down of asset
values). If such indicators exist, the Company performs an analysis to estimate the current fair
value of the investment. Once it is determined that an impairment does exist, the Company
considers the magnitude, severity, and duration of the impairment in determining if it is
other-than-temporary. Deferred tax assets and liabilities are based on estimated timing differences between the book
and tax basis of certain assets and liabilities. These estimates may be affected by future changes
in enacted tax legislation and the results of regulatory review. Realization of deferred tax
assets is principally dependent upon the achievement of projected future taxable income. The
Companys judgments regarding future profitability may change due to future market conditions,
among other factors. It is the Companys policy to establish reserves for income taxes that may become payable in
future years as a result of an examination by tax authorities. The Company establishes the
reserves based upon managements assessment of exposures related to the recognition of revenue or
the deductions in its tax returns and the probability of payment. The reserves are analyzed
periodically, and adjustments are made as events occur to warrant adjustment to the reserve. For
example, if the statutory period for assessing tax on a given tax return or period lapses, the
reserve associated with that period may be adjusted. In addition, the adjustment to the reserve may
reflect additional exposure based on current calculations. To the extent the Company were to
prevail in matters for which accruals have been established, statutory periods for assessing taxes
lapse, or it be required to pay amounts in excess of reserves, the Companys effective tax rate in
a given financial statement period could be materially affected. Please see Note 2 to the Consolidated Financial Statements for information relating to other
less sensitive accounting policies and estimates used by the Company. SEASONALITY OF TELEVISION REVENUES The Companys revenues are usually subject to seasonal fluctuations. The advertising
revenues of the stations are generally highest in the second and fourth quarter of each year, due
in part to increases in consumer advertising in the spring and retail advertising in the period
leading up to and including the holiday season. Additionally, advertising revenues in even-numbered
years tend to be higher, as they benefit from advertising placed by candidates for political
offices and demand for advertising time in Olympic broadcasts. From time to time, proposals have been advanced in the U.S. Congress and at the FCC to require
television broadcast stations to provide advertising time to political candidates at no or reduced
charge, which would eliminate, in whole or in part, advertising revenues from political candidates. 14




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##### 



SUMMARY OF CONSOLIDATED RESULTS The Year 2004 Compared With 2003  (In $000s)
    
    2004
    
    
    2003
    
    
    ChangeNational
    
    $
    67,887
    
    
    $
    67,238
    
    
    $
    649Local and regional
    
    
    133,991
    
    
    
    128,532
    
    
    
    5,459Political
    
    
    25,761
    
    
    
    10,722
    
    
    
    15,039Network
    
    
    3,707
    
    
    
    4,229
    
    
    
    (522
    )Other broadcasting
    
    
    7,987
    
    
    
    7,107
    
    
    
    880Gross station revenues
    
    
    239,333
    
    
    
    217,828
    
    
    
    21,505Agency commissions
    
    
    (34,976
    )
    
    
    (31,783
    )
    
    
    (3,193
    )Station revenues (net
of commissions)
    
    
    204,357
    
    
    
    186,045
    
    
    
    18,312Cable and other (net
of commissions)
    
    
    14,700
    
    
    
    14,239
    
    
    
    461Net revenues
    
    $
    219,057
    
    
    $
    200,284
    
    
    
    18,773
 Net revenues for the year ended December 31, 2004 were $219.1 million, an increase of
$18.8 million from the $200.3 million reported for 2003. The most significant component of the
increase in revenues is related to the higher levels of political revenue in 2004 as compared to
2003. Political revenue for 2004 was $25.8 million as compared to $10.7 million for 2003. This is
consistent with the Companys historical experience that advertising revenues in even-numbered
years tend to be higher than in odd-numbered years due to advertising placed by or on behalf of
candidates running for political offices. The Company expects the cyclicality of political
advertising revenues to continue to affect its revenues in future periods. In addition to the significant increase in political revenue, national, and local revenues
also increased. Local revenue was up $5.5 million, and national revenue was up $0.6 million on a
year-over-year basis. Sales in the automotive, fast-food, and financial institution categories had
increases over their 2003 levels, while most of the other categories tracked by the Company were
flat or down from their 2003 levels. The Company does not know whether the increase in advertising
spending by auto manufacturers and dealers, fast-food restaurants, or financial institutions will
continue in future periods. Operating expenses increased $5.5 million on a year-over-year basis. Planned annual increases
in employee compensation, higher commissions paid to the Companys sales staff as a result of
increased local revenues, and increased medical insurance costs were partially offset by reduced
levels of losses on disposal. During 2003, a significant portion of the Companys DTV equipment
came on line, and significant amounts of other equipment were upgraded to digital. The new
equipment and upgrades necessitated the retirement of a number of assets that were not yet fully
depreciated, resulting in charges of approximately $2.2 million during 2003. While the Company
would expect continued increases in employee base compensation related to annual salary increases
and similar increases in medical insurance costs in future periods, higher levels of commissions
paid to the Companys sales staff will be dependant upon the realization of increased revenues. Corporate expenses were $19.5 million in 2004, an increase of $5.1 million as compared to the
$14.4 million reported for 2003. The increase in corporate expenses is due mainly to planned
annual increases in employee compensation, amortization expense related to restricted stock grants
made during 2004, increased legal fees, additional accounting and professional fees related to
Sarbanes Oxley compliance initiatives, and the $1.6 million charge taken related to the settlement
of all outstanding issues associated with the terminated GNS media (GNS) transaction. During
2003, the Company announced that it was in negotiations with GNS for the purpose of entering into
certain agreements associated with GNSs proposed purchase of a television station. Those
negotiations were subsequently terminated. The Company would expect continued increases in
employee compensation of similar amounts in future periods. The Company would expect the
increased expenses related to its Sarbanes Oxley compliance initiatives to continue through the
first quarter of 2005. Net investment income for 2004 was a loss of $4.8 million. Interest earned on cash balances
and notes receivable, and gains on the sale of investments in the Companys venture capital
portfolio were offset by $7.2 million of impairment charges taken mainly during the first and
second quarters of 2004. 15




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##### 



During the third quarter of 2004, the statute of limitations expired related to reserves
established for certain previous tax years, and accordingly such reserves were released. In
addition, during the fourth quarter of 2004, the reserve for a specific examination was released
due to managements estimate of an expected favorable outcome. As a result, the full year 2004
effective tax rate is lower than it would be absent these events. The Companys effective tax
rate, excluding these adjustments was 36.2% for 2004. The effective tax rate for 2003 was 37.5% The Year 2003 Compared With 2002  (In $000s)
    
    2003
    
    
    2002
    
    
    ChangeNational
    
    $
    67,238
    
    
    $
    64,342
    
    
    $
    2,896Local and regional
    
    
    128,532
    
    
    
    124,190
    
    
    
    4,342Political
    
    
    10,722
    
    
    
    27,320
    
    
    
    (16,598
    )Network
    
    
    4,229
    
    
    
    4,324
    
    
    
    (95
    )Other broadcasting
    
    
    7,107
    
    
    
    6,312
    
    
    
    795Gross station revenues
    
    
    217,828
    
    
    
    226,488
    
    
    
    (8,660
    )Agency commissions
    
    
    (31,783
    )
    
    
    (34,320
    )
    
    
    2,537Station revenues (net
of commissions)
    
    
    186,045
    
    
    
    192,168
    
    
    
    (6,123
    )Cable and other (net
of commissions)
    
    
    14,239
    
    
    
    14,510
    
    
    
    (271
    )Net revenues
    
    $
    200,284
    
    
    $
    206,678
    
    
    
    (6,394
    )
 Net revenues for the year ended December 31, 2003 were $200.3 million, a decrease of $6.4
million from the $206.7 million reported for 2002. The most significant component of the decrease
in revenues is related to the lower levels of political revenue in 2003 as compared to 2002. This
is consistent with the Companys historical experience that advertising revenues in odd-numbered
years tend to be lower than in even-numbered years due to advertising placed by or on behalf of
candidates running for political offices. Although political revenue was down in 2003 as compared
to 2002, national and local revenues increased. National revenue increased $2.9 million on a year-over-year basis due mainly to increases in
automotive advertising by the auto manufacturers. Local and regional advertising was up $4.3
million, due mainly to increases in automotive advertising by local auto dealerships and increases
in healthcare and retail advertising. Political revenue for 2003 was $10.7 million as compared to
$27.3 million in 2002. The year 2002 was a national election year and had record political
revenues, as soft money was expected to be banned following that election cycle, and political
support groups employed a use it or lose it philosophy. Operating expenses (including the amortization of program rights) increased $5.6 million from
2002, or five percent. The increase in operating expenses is mainly attributable to increases in
medical costs, planned annual increases in employee compensation, training and travel related to
the installation of new traffic and billing software, and net losses on the disposal of fixed
assets. During the year, a significant portion of the Companys DTV equipment came on line, and
significant amounts of other equipment were upgraded to digital. The new equipment and upgrades
necessitated the retirement of a number of assets that were not yet fully depreciated. In
addition, during the fourth quarter of 2003 the Company recorded a charge of $0.7 million related
to a change in the estimates of the useful lives used to account for back-up and redundant
equipment. The new estimates resulted in the retirement of all assets that had not been utilized
in the last twelve to twenty-four months. This early retirement of assets and the changes in
accounting estimates resulted in $2.2 million of net losses on disposal during 2003. Depreciation and amortization was $18.5 million for the year ended December 31, 2003, an
increase of $0.7 million from the $17.8 million reported for 2002. The increase in depreciation
expense is partially attributable to the depreciation recorded on the DTV equipment that came on
line during 2002 and 2003. Corporate, general, and administrative expenses were $14.4 million for the year ended December
31, 2003, an increase of $0.9 million over the $13.5 million reported for 2002. Reductions in
workers compensation expenses and legal and other 16




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##### 



professional fees were offset by higher
directors and officers insurance premiums and onetime charges related to the wind up of contract
obligations with the Companys previous traffic and billing software vendor. During the fourth
quarter of 2003, the Company negotiated an exit from the contract with its previous software
vendor, making a payment of approximately $0.4 million in satisfaction of a portion of the
remaining term of the contract. Net investment income for 2003 was a loss of $0.3 million, as compared to a gain of $0.6
million in 2002. Interest earned on cash balances and notes receivable was offset by impairments
in the Companys venture capital, and strategic investment portfolios. During 2003 the Company
reduced the carrying amounts of certain investments in its venture capital portfolio based on fair
value information provided by the investment funds managers, and in its strategic investment
portfolio based on an investee company receiving a going concern opinion on its 2002 audited
financial statements. The effective tax rate was 37.5% for both 2003 and 2002. INVESTMENTS During the year ended December 31, 2004, the Company had net investment losses of $4.8
million. Interest earned on cash balances and notes receivable was offset by impairments in the
Companys venture capital and strategic investment portfolios. During the second quarter of 2004,
the Company recorded a $5.3 million impairment on one of its strategic investments, a developer of
digital entertainment to be viewed at existing movie theaters. The Company fully reserved this
investment due to the investee companys inadequate cash balances and inability to secure financing
from additional investors. During 2003, the Company reduced the carrying amounts of certain investments in its venture
capital portfolio based on fair value information provided by the investment funds managers, and
in its strategic investment portfolio based on an investee company receiving a going concern
opinion from its auditors on its 2002 audited financial statements. At December 31, 2004, other long-term investments, included in the caption investments and
other assets on the balance sheet, was comprised of approximately 22% private equity securities,
32% private debt securities, 14% venture capital limited partnerships, 14% low income housing tax
credits, and 18% other long term assets. The Company has determined that it is not practicable to estimate the fair values of its
private equity, venture capital, and low income housing tax credit investments because of a lack of
primary and secondary market prices and the inability to estimate fair values without incurring
excessive costs. Fair values for private debt securities are estimated by discounting the expected
future cash flows using a current market rate applicable to the yield, credit quality, and maturity
of the investments. Further discussion of investments and valuation is contained in Notes 2, 5,
and 13 to the Consolidated Financial Statements. LIQUIDITY AND CAPITAL RESOURCES The Companys short-term cash needs consist primarily of working capital requirements,
expenditures associated with the initial implementation of DTV broadcast operations, regular
quarterly dividends to shareholders, purchase of its common stock, and special dividends to
shareholders, if and when declared by the Companys Board of Directors. Historically, Libertys
operations have provided sufficient liquidity to fund the operations of the Company and its regular
quarterly dividends. While exact costs are not presently known, the additional capital
expenditures required over the next nine to twelve months to comply with the FCC mandated DTV
implementation are anticipated to be approximately $7 million. Subsequent to December 31, 2004, the Company amended its credit facility to among other
things, extend the term of the facility through May 17, 2006 and increase the aggregate facility
commitment from $100 million to $150 million. On February 8, 2005, the Companys Board of Directors declared a special dividend of $4.00 per
share, or approximately $74.0 million. It is anticipated that the Company will use its credit
facility to fund some or all of the special dividend. The Companys primary long-term cash need is the possible need for capital should the Company
identify an appropriate acquisition opportunity. On a consolidated basis, Libertys net cash provided by operating activities was $69.6 million
for 2004, compared to $61.7 million for 2003, and $91.8 million in 2002. The increase in cash
provided by operating activities in 2004 is due mainly to higher revenues, primarily from political
advertising, in 2004 as compared to 2003. The decrease in cash 17




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##### 



provided by operating activities in
2003 is due mainly to the lower level of revenues from political advertising in 2003 as compared to
2002 and effect of deferred taxes in 2002. Libertys
net cash provided by investing activities was $0.5 million in 2004
compared to cash used in investing activities $24.0
million in 2003 and $27.7 million in 2002. The decrease in net cash used in investing activities
is due primarily to funds received on the sale of one of the Companys strategic investments during
2004, lower levels of investing activity during 2004, and lower levels of capital expenditures in
2004 as compared to 2003. Capital expenditure levels during 2003 and 2002 were elevated due to the
majority of the conversion to DTV expenditures being in those years. The decrease in net cash used
in investing activities in 2003 is due to lower levels of net investing activity. During 2003, the
Company made $5.9 million of strategic investments, as compared to $13.1 million in 2002. The
strategic investments made during 2003 were mainly follow-on investments in the Companys existing
strategic investment portfolio. Net cash used in financing activities for 2004 was $115.9 million versus $43.4 million and
$31.6 million in 2003 and 2002, respectively, due mainly to the payment of a special dividend
during 2004 and increased activity in the Companys share buy-back program . During the first
quarter of 2004, the Company declared a special dividend of $4.00 per share, approximately $75.1
million, in addition to its normal recurring quarterly dividend. The Company initially borrowed
$55.0 million under its revolving credit facility to partially assist in funding the special
dividend. During 2004, the Company had net repayments of $35.0 million, leaving $20.0 million of
outstanding debt at the end of 2004. In addition, the Company purchased approximately 992,000
shares of its common stock for approximately $46.2 million during 2004 compared to approximately
625,000 shares for approximately $26.6 million during 2003. Net cash used in financing activities was higher in 2003 as compared to 2002 due mainly to
increased activity in the Companys share buy-back program. During 2003, the Company purchased
approximately 625,000 shares of its common stock for approximately $26.6 million as compared to
approximately 404,000 shares for approximately $15.3 million during 2002. On February 8, 2005, the Board of Directors of the Company extended to February 28, 2006, the
Companys authorization to purchase from time to time up to 4 million shares of stock in the open
market or through directly negotiated transactions. Also on February 8, 2005, the Companys Board
of Directors declared a special dividend of $4.00 per share, or approximately $74.0 million. The
Company will use its credit facility to fund the special dividend. At December 31, 2004 the Company had $20.0 million of outstanding debt. At December 31, 2003,
the Company had no outstanding debt. In March 2001, the Company entered into a $100 million
unsecured 364-day revolving credit facility with a bank. The Company renewed the facility on
substantially similar terms in each of the years 2002, 2003, and 2004. Subsequent to December 31,
2004, the Company amended the credit facility. The amendment, among other things, extends the term
of the facility through May 17, 2006 and increases the aggregate facility commitment from $100
million to $150 million. At the end of the term of the facility, any outstanding principal and
interest will come due, unless the bank, in its sole discretion, otherwise extends the facility.
The facility provides that the funds drawn may be used for working capital and other general
corporate purposes, capital expenditures, dividends, purchases of common stock, acquisitions, and
investments. The revolving credit facility has both an interest coverage and a leverage coverage covenant.
These covenants, which involve debt levels, interest expense, EBIT, and EBITDA (measures of cash
earnings defined in the revolving credit
agreement), can affect the interest rate on current and future borrowings. The Company was in
compliance with all covenants throughout 2004. As of December 31, 2004, the Companys current credit facility restricted payments for
dividends and purchases of its common stock to no more than $180 million during the period January
1, 2004 through December 31, 2004, and for periods after January 1, 2005 to $100 million plus fifty
percent of cumulative net income of the Company for all fiscal periods beginning January 1, 2004. The amended credit facility restricts payments for dividends and purchases of common stock to
no more than $180 million during the period January 1, 2005 through December 31, 2005, and for
periods after January 1, 2006 to $100 million plus fifty percent of cumulative net income of the
Company for all fiscal periods beginning January 1, 2005. 18




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##### 



The Company believes that its current level of cash, expected future cash flows from
operations, and its credit facility are sufficient to meet the needs of its businesses. If
suitable opportunities arise for additional acquisitions, the Company believes it can arrange for
additional debt financing or use Common Stock or Preferred Stock as payment for all or part of the
consideration for such acquisitions, or the Company may seek additional funds in the equity or debt
markets. Other Company commitments are shown in Note 15 to the Consolidated Financial Statements. OFF-BALANCE SHEET ARRANGEMENTS As of December 31, 2004, the Company had no off-balance sheet arrangements. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS  Payments Due By PeriodContractual Obligations
    
    
    
    
    
    Less
    
    
    
    
    
    
    
    
    
    
    MoreThan 1
    
    
    1-3
    
    
    3-5
    
    
    Than 5(In $000s)
    
    Total
    
    
    Year
    
    
    Years
    
    
    Years
    
    
    YearsLong-Term Debt
    
    $
    20,000
    
    
    $
    
    
    
    $
    20,000
    
    
    $
    
    
    
    $
    Capital Lease Obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating Lease Obligations
    
    
    1,207
    
    
    
    674
    
    
    
    495
    
    
    
    34
    
    
    
    4Programming Contract Obligations
    
    
    17,165
    
    
    
    1,927
    
    
    
    11,333
    
    
    
    3,755
    
    
    
    150Purchase Obligations
    
    
    37,956
    
    
    
    14,722
    
    
    
    15,745
    
    
    
    5,232
    
    
    
    2,257Other Long-Term Liabilities
Reflected on the Registrants
Balance Sheet Under GAAP
    
    
    7,097
    
    
    
    
    
    
    
    1,820
    
    
    
    487
    
    
    
    4,790Total
    
    $
    83,425
    
    
    $
    17,323
    
    
    $
    49,393
    
    
    $
    9,508
    
    
    $
    7,201
 The above table does not reflect amounts related to cash income taxes to be paid in
future years. Please see Note 10 to the Consolidated Financial Statements for additional
information on historical cash taxes paid. Item 7A. Quantitative and Qualitative Disclosures about Market Risk The Company is subject to the risk of fluctuating interest rates in the normal course of
business, primarily as a result of the variable rate borrowings under its credit facility and fixed
interest rates on notes receivable. Loans under the revolving credit facility bear interest at LIBOR plus an applicable margin, as
stated in the credit agreement. The applicable margin is based on the Companys leverage ratio, as
defined in the credit agreement. As of December 31, 2004, the Company had $20,000,000 outstanding
under its revolving credit facility and the variable interest rate associated with the revolving
credit facility was 3.04%. Subsequent to December 31, 2004, the Companys Board of Directors
declared a special dividend of $4.00 per share, or approximately $74.0 million. The Company will
use its credit facility to fund the special dividend, and as such will have larger balances
outstanding under its credit facility during 2005 than it does as of December 31, 2004. In the
last three years, the Company has not used derivative financial instruments to manage interest rate
risk. Portions of the Companys investment portfolio may be exposed to interest rate risk. As all
of the Companys private debt securities are classified as available-for-sale, its exposure to
interest rate risk is mitigated if such investments are held until their maturity date. Based on a
hypothetical 10% adverse movement in interest rates, the potential losses in future earnings and
cash flows are immaterial if these investments are held to maturity. In the last three years, the
Company has not used derivative financial instruments in its investment portfolio to manage
interest rate risk. Portions of the Companys investment portfolio may be exposed to equity price risk. While the
Company held no marketable equity securities at December 31, 2004 or 2003, it may from time to time
have investments in marketable equity securities acquired either through direct purchases or as a
result of distributions from its venture capital funds. In the last 19




---



##### 



three years, the Company has not used derivative financial instruments in its investment
portfolio to manage market price risks. As of December 31, 2003, real estate related investments totaled $2.7 million. During 2004,
the Company substantially completed the liquidation of these investments. These investments
consisted primarily of residential land and lots in various stages of development and completion,
and receivables related to prior land sales. The Company does not plan to make any future
investments in real estate. Additional disclosures concerning the fair values in relation to the carrying values of the
Companys financial instruments are included in Notes 5 and 13 to the Consolidated Financial
Statements. 20




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##### 



Item 8. Financial Statements and Supplementary Data CONSOLIDATED BALANCE SHEETS
THE LIBERTY CORPORATION AND SUBSIDIARIES(In $000s, except share data) As of December 31,2004
    
    
    2003ASSETSCurrent assets:Cash and cash equivalents
    
    $
    16,389
    
    
    $
    62,177Receivables (net of allowance for doubtful
accounts of $2,319 and $1,738 in 2004 and
2003, respectively)
    
    
    41,576
    
    
    
    42,364Program rights
    
    
    4,766
    
    
    
    4,564Prepaid and other current assets
    
    
    6,077
    
    
    
    3,013Deferred income taxes
    
    
    2,453
    
    
    
    2,183Total current assets
    
    
    71,261
    
    
    
    114,301Property, plant, and equipment:Land
    
    
    5,636
    
    
    
    5,657Buildings and improvements
    
    
    44,073
    
    
    
    48,969Furniture and equipment
    
    
    172,993
    
    
    
    167,775Less: Accumulated depreciation
    
    
    (134,133
    )
    
    
    (125,417
    )88,569
    
    
    
    96,984Intangible assets subject to amortization (net
of $701 and $841 accumulated amortization in
2004 and 2003, respectively)
    
    
    234
    
    
    
    270FCC licenses
    
    
    241,866
    
    
    
    304,525Goodwill
    
    
    101,387
    
    
    
    101,387Investments and other assets
    
    
    24,522
    
    
    
    44,798Total assets
    
    $
    527,839
    
    
    $
    662,265LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued expenses
    
    $
    25,906
    
    
    $
    23,817Program contract obligations
    
    
    4,791
    
    
    
    4,734Accrued income taxes payable
    
    
    3,573
    
    
    
    3,874Total current liabilities
    
    
    34,270
    
    
    
    32,425Unearned revenue
    
    
    15,965
    
    
    
    11,802Deferred income taxes
    
    
    60,187
    
    
    
    89,417Other liabilities
    
    
    7,097
    
    
    
    6,621Revolving credit facility
    
    
    20,000
    
    
    
    Total liabilities
    
    
    137,519
    
    
    
    140,265Shareholders equity:Common stock (authorized  50,000,000
shares, no par value, shares issued and
outstanding  18,468,949 shares in 2004,
18,930,500 shares in 2003)
    
    
    49,273
    
    
    
    71,788Unearned stock compensation
    
    
    (17,396
    )
    
    
    (4,405
    )Retained earnings
    
    
    358,575
    
    
    
    454,379Unrealized investment gains (losses)
    
    
    (132
    )
    
    
    238Total shareholders equity
    
    
    390,320
    
    
    
    522,000Total liabilities and shareholders equity
    
    $
    527,839
    
    
    $
    662,265
 See notes to consolidated financial statements. 21




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##### 



CONSOLIDATED STATEMENTS OF INCOME
THE LIBERTY CORPORATION AND SUBSIDIARIES(In $000s, except per share data) For the Years Ended December 31,2004
    
    
    2003
    
    
    2002REVENUESStation revenues (net of commissions)
    
    $
    204,357
    
    
    $
    186,045
    
    
    $
    192,168Cable advertising (net of commissions) and other revenues
    
    
    14,700
    
    
    
    14,239
    
    
    
    14,510Net revenues
    
    
    219,057
    
    
    
    200,284
    
    
    
    206,678EXPENSESOperating expenses (exclusive of depreciation and amortization
shown separately below)
    
    
    127,139
    
    
    
    121,642
    
    
    
    115,979Amortization of program rights
    
    
    7,213
    
    
    
    7,214
    
    
    
    7,281Depreciation and amortization of intangibles
    
    
    19,760
    
    
    
    18,462
    
    
    
    17,762Corporate, general, and administrative expenses
    
    
    19,485
    
    
    
    14,382
    
    
    
    13,481Total operating expenses
    
    
    173,597
    
    
    
    161,700
    
    
    
    154,503Operating income
    
    
    45,460
    
    
    
    38,584
    
    
    
    52,175Net investment income (loss)
    
    
    (4,764
    )
    
    
    (348
    )
    
    
    616Interest expense
    
    
    (783
    )
    
    
    
    
    
    
    Income before income taxes and the cumulative effect of a change
in accounting principle
    
    
    39,913
    
    
    
    38,236
    
    
    
    52,791Provision for income taxes
    
    
    1,323
    
    
    
    14,339
    
    
    
    19,796INCOME BEFORE THE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING
PRINCIPLE
    
    
    38,590
    
    
    
    23,897
    
    
    
    32,995Cumulative effect of a change in accounting principle (net
of income taxes of $22,216 and $29,045 in 2004 and 2002
respectively)
    
    
    (40,586
    )
    
    
    
    
    
    
    (47,388
    )NET INCOME (LOSS)
    
    $
    (1,996
    )
    
    $
    23,897
    
    
    $
    (14,393
    )BASIC EARNINGS (LOSS) PER COMMON SHARE:From continuing operations
    
    $
    2.09
    
    
    $
    1.25
    
    
    $
    1.68From the cumulative effect of a change in accounting principle
    
    
    (2.20
    )
    
    
    
    
    
    
    (2.41
    )Basic earnings (loss) per common share
    
    $
    (0.11
    )
    
    $
    1.25
    
    
    $
    (0.73
    )DILUTED EARNINGS (LOSS) PER COMMON SHARE:From continuing operations
    

    $
    2.08
    
    
    $
    1.24
    
    
    $
    1.68From the cumulative effect of a change in accounting principle
    
    
    (2.19
    )
    
    
    
    
    
    
    (2.41
    )Diluted earnings (loss) per common share
    
    $
    (0.11
    )
    
    $
    1.24
    
    
    $
    (0.73
    )
 See notes to consolidated financial statements. 22




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##### 



CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
THE LIBERTY CORPORATION AND SUBSIDIARIES(In 000s, except per share data) Common
    
    
    
    
    
    
    Unearned
    
    
    Unrealized
InvestmentShares
    
    
    Common
    
    
    Stock
    
    
    Gains
    
    
    RetainedOutstanding
    
    
    Stock
    
    
    Compensation
    
    
    (Losses)
    
    
    Earnings
    
    
    Total(1)Balance at January 1, 2002
    
    
    19,750
    
    
    $
    104,865
    
    
    $
    (3,687
    )
    
    $
    (63
    )
    
    $
    480,556
    
    
    $
    581,671Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,393
    )
    
    
    (14,393
    )Net unrealized investment gains (losses), net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    236
    
    
    
    
    
    
    
    236Dividends  Common Stock  $0.88 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,276
    )
    
    
    (17,276
    )Stock issued for employee benefit and performance incentive
compensation programs
    
    
    77
    
    
    
    3,321
    
    
    
    (115
    )
    
    
    
    
    
    
    
    
    
    
    3,206Income tax benefit resulting from employee exercise of options
    
    
    
    
    
    
    73
    
    
    

    
    
    
    
    
    
    
    
    
    
    
    
    73Stock purchased
    
    
    (404
    )
    
    
    (15,281
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,281
    )Balance at December 31, 2002
    
    
    19,423
    
    
    
    92,978
    
    
    
    (3,802
    )
    
    
    173
    
    
    
    448,887
    
    
    
    538,236Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,897
    
    
    
    23,897Net unrealized investment gains (losses), net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65
    
    
    
    
    
    
    
    65Dividends  Common Stock  $0.96 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,405
    )
    
    
    (18,405
    )Stock issued for employee benefit and performance incentive
compensation programs
    
    
    133
    
    
    
    5,167
    
    
    
    (603
    )
    
    
    
    
    
    
    
    
    
    
    4,564Income tax benefit resulting from employee exercise of options
    
    
    
    
    
    
    226
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    226Stock purchased
    
    
    (625
    )
    
    
    (26,583
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (26,583
    )Balance at December 31, 2003
    
    
    18,931
    
    
    
    71,788
    
    
    
    (4,405
    )
    
    
    238
    
    
    
    454,379
    
    
    
    522,000Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,996
    )
    
    
    (1,996
    )Net unrealized investment gains (losses), net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (370
    )
    
    
    
    
    
    
    (370
    )Dividends  Common Stock  $5.00 per share (including a special
dividend of $4.00 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (93,808
    )
    
    
    (93,808
    )Stock issued for employee benefit and performance incentive
compensation programs
    
    
    530
    
    
    
    22,441
    
    
    
    (12,991
    )
    
    
    
    
    
    
    
    
    
    
    9,450Income tax benefit resulting from employee exercise of options
    
    
    
    
    
    
    1,241
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,241Stock purchased
    
    
    (992
    )
    
    
    (46,197
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (46,197
    )Balance at December 31, 2004
    
    
    18,469
    
    
    $
    49,273
    
    
    $
    (17,396
    )
    
    $
    (132
    )
    
    $
    358,575
    
    
    $
    390,320
  (1)
    Comprehensive income (loss), which includes the aggregate of net income (loss) and net unrealized investment gains (losses), was $(2,366), $23,962, and $(14,157), for 2004, 2003, and 2002, respectively. See notes to consolidated financial statements. 23




---



##### 



CONSOLIDATED STATEMENTS OF CASH FLOWS
THE LIBERTY CORPORATION AND SUBSIDIARIES(In $000s) For the Years Ended December 31,2004
    
    
    2003
    
    
    2002OPERATING ACTIVITIESNet income (loss)
    
    $
    (1,996
    )
    
    $
    23,897
    
    
    $
    (14,393
    )Cumulative effect of a change in accounting principle
    
    
    40,586
    
    
    
    
    
    
    
    47,388Income before the cumulative effect of a change in accounting principle
    
    
    38,590
    
    
    
    23,897
    
    
    
    32,995Adjustments to reconcile income before the cumulative effect of a change in
accounting principle to net cash provided by (used in) operating activities:Loss on disposal of operating assets
    
    
    274
    
    
    
    2,160
    
    
    
    296Realized investment losses
    
    
    6,040
    
    
    
    1,729
    
    
    
    3,544Depreciation
    
    
    19,575
    
    
    
    18,223
    
    
    
    17,063Amortization of intangibles
    
    
    185
    
    
    
    239
    
    
    
    699Provision for bad debts
    
    
    958
    
    
    
    757
    
    
    
    1,215Amortization of program rights
    
    
    7,213
    
    
    
    7,214
    
    
    
    7,281Cash paid for program rights
    
    
    (7,358
    )
    
    
    (7,097
    )
    
    
    (7,499
    )Provision for deferred income taxes
    
    
    (7,284
    )
    
    
    2,153
    
    
    
    11,900Changes in operating assets and liabilities, net of effects of acquisitions:Receivables
    
    
    (170
    )
    
    
    (1,052
    )
    
    
    (3,249
    )Other assets
    
    
    1,745
    
    
    
    4,049
    
    
    
    17,638Accounts payable and accrued expenses
    
    
    3,756
    
    
    
    888
    
    
    
    4,757Accrued income taxes
    
    
    940
    
    
    
    3,874
    
    
    
    Unearned revenue
    
    
    4,163
    
    
    
    6,165
    
    
    
    4,756Other liabilities
    
    
    476
    
    
    
    (73
    )
    
    
    (293
    )All other operating activities, net
    
    
    458
    
    
    
    (1,426
    )
    
    
    695NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
    
    
    69,561
    
    
    
    61,700
    
    
    
    91,798INVESTING ACTIVITIESPurchase of property, plant, and equipment
    
    
    (12,552
    )
    
    
    (21,971
    )
    
    
    (24,704
    )Proceeds from sale of property, plant, and equipment
    
    
    205
    
    
    
    262
    
    
    
    385Investment securities sold
    
    
    11,972
    
    
    
    
    
    
    
    8,083Investment securities acquired
    
    
    (750
    )
    
    
    (5,900
    )
    
    
    (13,110
    )Proceeds from sale of investment properties
    
    
    1,630
    
    
    
    3,578
    
    
    
    1,619NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
    
    
    505
    
    
    
    (24,031
    )
    
    
    (27,727
    )FINANCING ACTIVITIESProceeds from borrowings
    
    
    205,000
    
    
    
    
    
    
    
    Principal payments on debt
    
    
    (185,000
    )
    
    
    
    
    
    
    Dividends paid
    
    
    (93,832
    )
    
    
    (18,405
    )
    
    
    (17,276
    )Stock issued for employee benefit and compensation programs
    
    
    4,175
    
    
    
    1,579
    
    
    
    914Purchase of common stock
    
    
    (46,197
    )
    
    
    (26,583
    )
    
    
    (15,281
    )NET CASH
PROVIDED BY (USED IN) FINANCING ACTIVITIES
    
    
    (115,854
    )
    
    
    (43,409
    )
    
    
    (31,643
    )INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    (45,788
    )
    
    
    (5,740
    )
    
    
    32,428Cash at beginning of year
    
    
    62,177
    
    
    
    67,917
    
    
    
    35,489CASH AND CASH EQUIVALENTS AT END OF YEAR
    
    $
    16,389
    
    
    $
    62,177
    
    
    $
    67,917
 See notes to consolidated financial statements. 24




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##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSTHE LIBERTY CORPORATION AND SUBSIDIARIES
  1. Nature of Operations The Liberty Corporation and Subsidiaries, (Liberty or the Company), through its operating
subsidiary, Cosmos Broadcasting (Cosmos), owns fifteen network-affiliated television stations
(the stations), principally located in the South and Midwest. In addition, Cosmos owns Cable
Vantage, a cable advertising sales subsidiary, and Broadcast Merchandising Corporation, a
professional broadcast equipment dealership. 2. Summary of Significant Accounting Policies Principles of Consolidation The accompanying consolidated financial statements of The Liberty Corporation and Subsidiaries
include the accounts of the Company after elimination of all significant intercompany balances and
transactions. Variable interest entities are accounted for in accordance with Interpretation of Financial
Standards (FIN) No. 46 Consolidation of Variable Interest Entities(FIN 46). The
Interpretation requires the consolidation of entities by the party that is determined to be the
primary beneficiary (as defined in FIN 46), as a result of its ownership, contractual or other
financial interests in another entity. The Company evaluated each of its investments, as of
December 31, 2004 and December 31, 2003, to determine if consolidation of the investee company
would be required at that time. This analysis required the Company to use a number of estimates.
These estimates may include, among other things, the future cash flows to be generated by the
investee company, terminal multiples for assumed liquidation values, and discount rates to be used
in present value calculations. Based on these analyses, it was determined that none of the
Companys investments at December 31, 2004 met the definition of a variable interest entity, and
that one investment met the definition of a variable interest entity at December 31, 2003. Variable Interest Entities As noted above, the Company performed an evaluation of its investments to determine if any
investee companies were variable interest entities as defined by FIN 46. At December 31, 2003 one
investment was determined to be a variable interest entity. This entity ceased operations during
2004 and the Company wrote-off its investment at that time. Liberty was a third party investor of
the variable interest entity and had no other relationship with it or its management. The
investee company was engaged in the development of digital entertainment to be viewed at existing
movie theaters. Liberty acquired its interests from time to time since 2002 through the purchase
of convertible notes. As of December 31, 2003, the carrying value of those notes, and the
associated accrued interest, was approximately $4.9 million. Libertys maximum exposure to loss as
a result of its involvement with this entity was limited to the value of its investment. Use of Estimates and Assumptions Financial statements prepared in accordance with accounting principles generally accepted in
the United States require management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying notes to the consolidated
financial statements. Actual results could differ from those estimates and assumptions.
 Cash and Cash Equivalents The Company includes with cash and cash equivalents all highly liquid investments which mature
within three months of the date of acquisition. The Company routinely enters into repurchase
agreements with banks whereby the Company makes overnight purchases of government securities using
its available cash balances. The following day, the bank is required to repurchase the investments
from the Company. The Company generally does not require collateral for these investments.
Overnight investments of $8,223,000 and $15,772,000 were included in cash and cash equivalents at
December 31, 2004 and 2003, respectively. Receivables Receivables, net of allowance for doubtful accounts, are carried at cost, which approximates
fair value. The Company calculates its allowance for doubtful accounts based on an estimation
process. The Company uses a mathematical calculation coupled with the specific identification of
certain accounts to estimate its allowance for doubtful accounts. Estimates of the likelihood of
collection are made based on a multi-year historical average of the actual collections experience
at each station. The Company charges accounts receivable off against its allowance for doubtful
accounts when it deems them to be uncollectible on a specific identification basis. Portions of the
Companys accounts receivable are due from local and national advertising agencies. Such amounts
are generally unsecured. No individual advertising agency accounted for ten percent or more of the
Companys accounts receivable at December 31, 2004 or 2003. Program Rights Program rights result from license agreements under which the Company has acquired rights to
broadcast certain television program material, and are stated at cost less amortization. The cost
of rights acquired is recorded as an asset and a liability when the program material has been
accepted and made available for broadcast. Amortization is determined using both straight-line and
accelerated methods over the terms of the license agreements. Carrying amounts are regularly
reviewed by management for indications of impairment and are adjusted when appropriate to estimated
amounts recoverable from future broadcasts of the applicable program material. FCC Licenses and Goodwill FCC licenses and goodwill are accounted for in accordance with Statement of Financial
Accounting Standards (SFAS) No. 142 Goodwill and Other Intangible Assets (SFAS No. 142) and
Emerging Issues Task Force 02-7 Unit of Accounting for Testing Impairment of Indefinite-Lived
Intangible Assets( EITF 02-7). SFAS No. 142, which the Company adopted during the first quarter
of 2002, requires that intangible assets with indefinite lives and goodwill no longer be amortized
to earnings, but instead be reviewed for impairment at least annually. In accordance with EITF
02-7, the Company evaluates its FCC licenses at the individual asset level and its goodwill at the
reporting unit level. As the goodwill arose from the acquisition of television stations, it has
been allocated for impairment testing entirely to the television broadcasting segment. Prior to 2004, the Company used the residual method to estimate the value of its FCC
licenses. In 2004, the Company adopted EITF Topic No. D-108, Use of the Residual Method to Value
Acquired Assets Other Than Goodwill (EITF Topic D-108). Under EITF Topic D-108,
registrants are required to
   25




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSTHE LIBERTY CORPORATION AND SUBSIDIARIES
  use a direct value method for the impairment testing of indefinite lived intangible assets. Both SFAS No. 142 and EITF Topic D-108 require management to make certain estimates to
determine the estimated fair value of the individual FCC licenses and the station group as a whole.
These estimates include, among other things, the future cash flows to be generated by the stations
and their FCC licenses, terminal multiples for assumed station sales, discount rates to be used in
present value calculations, assumed values for fixed assets and network affiliation contracts, and
assumed future capital expenditure levels. Actual results and future market conditions could
differ from the estimates and assumptions used. Private Debt Securities Private debt securities, included in the caption Investments and Other Assets on the face of
the balance sheet, are classified as available-for-sale and are stated at fair value with
unrealized gains and losses, after adjustment for deferred income taxes, reported directly in
shareholders equity in accumulated other comprehensive income (loss). Interest income is recorded
as earned over the life of the instrument and included in net investment income on the face of
the income statement. The Company reviews information provided to it by the investee companies for indicators of
impairment. Additionally, the Company will from time to time contact the management of the investee
company and discuss its current situation and future prospects. The Company estimates the fair
value of its investments in private debt securities by discounting the expected future cash flows
using a current market rate appropriate for the yield, credit quality, and maturity of such
investments. If the estimated fair value is determined to be less than the carrying value, the
Company evaluates the impairment to determine if it is other-than-temporary. The Company evaluates
the severity of the impairment and its ability and intent to hold the investment to maturity in
determining if the impairment is other-than-temporary. As part of this analysis, the
collectibility of the debt instrument is evaluated based on the most recent historical and
projected financial information provided to the Company by the issuer and on the conversations with
the investee companys management, if applicable. The Company charges private debt securities off
when it deems them to be uncollectible on a specific identification basis. Charges related to
impaired private debt securities, included in the caption net investment income on the income
statement were $6,296,000 in 2004. There were no such charges during 2003 or 2002. Cost Method Securities The Company has investments in cost method securities, equity investments in non-public
entities that are not required to be accounted for under the equity method of accounting. Cost
method securities, included in the caption Investments and Other Assets on the face of the
balance sheet, include provisions for impaired value when appropriate. The Company reviews the
information provided to it by the investee companies for indicators of impairment (e.g. decreasing
cash flows, decreasing sales or profitability, declining future prospects, or a significant write
down of asset values). If such indicators exist, the Company performs an analysis to estimate the
current fair value of the investment. Once it is determined that an impairment does exist, the
Company considers the magnitude, severity, and duration of the impairment in determining if it is
other-than-temporary. The cost of securities sold is based on the specific identification method.
Charges related to impaired cost method securities,
 included in the caption net investment income
on the income statement were $868,000, $2,048,000, and $3,546,000 in 2004, 2003, and 2002,
respectively. Real Estate Related Investments Realized gains and losses on the sale of real estate acquired for development and resale are
included in net investment income. Realized gains and losses include write-downs for impaired
values of investment assets. The Company establishes impairments on specific assets at the time
the Company determines that the assets have been impaired and the impairment can be estimated. In
performing this determination management utilizes, among other things, mathematical models and
market information to determine if an impairment exists. Program Contract Obligations Program contract obligations represent the gross amounts to be paid to program suppliers over
the life of the contracts. Program rights acquired through the assumption of program contract
obligations were approximately $7,415,000 and $7,345,000 for 2004 and 2003, respectively.
Commitments for license agreements that were executed but were not reported in the accompanying
balance sheets because they were not available for broadcast were $17,165,000 and $12,815,000 for
2004 and 2003, respectively. Property, Plant, and Equipment Property, plant, and equipment are recorded at cost. Depreciation over the estimated useful
lives of the properties is determined principally using the straight-line method with lives ranging
from 3 to 44 years. During the fourth quarter of 2003, the Company changed the estimates of the
useful lives used to account for back-up and redundant equipment. The new estimate results in the
retirement of all assets that have not been utilized in the last twelve to twenty-four months. The
changes in estimates resulted in a charge of $671,000 in the fourth quarter of 2003. Station Revenues Station revenues are generated primarily from the sale of television advertising time, and are
recognized in the period during which the advertising spots are aired. Station revenues are
presented net of agency commissions of $34,976,000, $31,783,000, and $34,320,000 in 2004, 2003, and
2002, respectively. Station revenues also include revenues from the sale of advertising space on
the stations internet web sites and from network affiliation contracts. Revenues from internet
advertising and network affiliation contracts are recognized as earned over the lives of the
contracts. Cash payments received in excess of revenue earned to-date on network affiliation
contracts are recorded as unearned revenue. Cable Advertising Revenues Cable advertising revenues are generated primarily from assisting local cable operators with
the sale of commercial time available in cable network programs. Revenues are recognized in the
period during which the advertising spots sold by the Company are aired by the local cable
operator. Cable advertising and other revenues are presented net of commissions of $2,805,000,
$2,493,000, and, $2,539,000 in 2004, 2003, and 2002, respectively.
   26




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##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSTHE LIBERTY CORPORATION AND SUBSIDIARIES
  Barter Transactions Revenue from barter transactions is recognized when advertisements are broadcast. Barter
revenue is recognized based on the fair value of merchandise or services received by the Company.
Revenue from barter transactions was $4,041,000, $3,576,000, and $2,976,000 for the years 2004,
2003, and 2002, respectively. Merchandise or services received are charged to cost and expense when received or used.
Expense related to barter transactions was $3,814,000, $3,320,000, and $3,079,000 for the years
2004, 2003, and 2002, respectively. Income Taxes Income taxes are computed using the liability method as required by SFAS No. 109, Accounting
for Income Taxes(SFAS No 109). Under SFAS No. 109, deferred tax assets and liabilities are
determined based on the differences between the financial reporting and tax basis of assets and
liabilities and are measured using the enacted tax rates and law that will be in effect when the
differences are expected to reverse. Equity Compensation In accordance with the provisions of SFAS No. 123, Accounting for Stock-Based Compensation
(SFAS No. 123), the Company has elected to follow the intrinsic value method to account for
stock-based compensation. Under the intrinsic value method, because the exercise price of the
Companys employee stock options at least equals the market price of the underlying stock on the
date of the grant, no compensation expense is recognized. Pro forma information regarding net income and earnings per share is required by SFAS No. 123,
and has been determined as if the Company had accounted for its employee stock options under the
fair value method of that statement. Please see Note 9 Stock Ownership and Stock Option Plansfor
a tabular presentation of this information and additional important disclosures regarding the
Companys equity compensation programs. The Company accounts for awards of restricted stock in accordance with SFAS No. 123. The
Company recognizes compensation expense equal to the grant date fair value of the restricted stock
awards as compensation expense over the vesting period of the restricted shares. Reclassifications Reclassifications have been made in the 2003 and 2002 Consolidated Financial Statements to
conform to the 2004 presentation. 3. Intangible Assets Subject to Amortization At December 31, 2004 and December 31, 2003, the Companys intangible assets subject to
amortization were comprised of leases acquired through station purchases for space on certain of
its towers and loan costs associated with the Companys line of credit. Estimated amortization expense resulting from intangible assets subject to amortization for
the five year period ending 2009 is expected to be as follows:  Estimated(In $000s)
    
    Amortization2005
    
    $
    2982006
    
    $
    2452007
    
    $
    2432008
    
    $
    2422009
    
    $
    241
 4. FCC Licenses and Goodwill FCC licenses and goodwill are accounted for in accordance with SFAS No. 142 Goodwill and
Other Intangible Assets (SFAS No. 142). SFAS No. 142, which the Company adopted during the
first quarter of 2002, requires that intangible assets with indefinite lives and goodwill no
longer be amortized to earnings, but instead be reviewed for impairment. In connection with
the adoption of SFAS No. 142, the Company reduced the carrying value of its FCC licenses by $76.4
million ($47.4 million net of income taxes) as a cumulative effect of a change in accounting
principle. EITF Topic No. D-108 Use of the Residual Method to Value Acquired Assets Other Than
Goodwill (Topic D-108), issued in September 2004, requires registrants who have applied the
residual method to the valuation of intangible assets for purposes of impairment testing to perform
an impairment test using a direct value method on all intangible assets that were previously valued
using the residual method. Impairments of intangible assets recognized upon application of a
direct value method by entities previously applying the residual method are to be reported as a
cumulative effect of a change in accounting principle. During the fourth quarter of 2004, the Company adopted Topic D-108. The Company performed its
impairment test using an independent third-party appraiser following the guidance of Topic D-108.
As the Company has, in the past, used the residual method to value its FCC licenses, in connection
with the adoption of Topic D-108, the Company reduced the carrying value of its FCC licenses by
$62.8 million ($40.6 million net of income taxes) as the cumulative effect of a change in
accounting principle during the fourth quarter of 2004. At December 31, 2004 and December 31, 2003, the Companys intangible assets not subject to
amortization were comprised of FCC licenses and goodwill. The Company includes these assets in the
broadcasting segment in Note 14 Segment Information,as they arose from the acquisition of
television stations. 5. Investments and Other Assets The Company had no sales of available-for-sale securities during 2004 or 2003. The Company
realized $8,083,000 of proceeds, $401,000 in gains and $147,000 in losses on the sale of
available-for-sale securities in 2002. Gains and losses on the sale of available-for-sale
securities are reported in net investment income on the face of the income statement. The major classifications of investments and other assets are as follows:  December 31,(In $000s)
    
    2004
    
    
    2003Private equity investments
    
    $
    5,298
    
    
    $
    11,629Private debt securities (at fair value)
    
    
    7,768
    
    
    
    16,774Real estate related investments
    
    
    28
    
    
    
    2,687Venture capital funds
    
    
    3,371
    
    
    
    5,733Investments in low income housing tax credits
    
    
    3,355
    
    
    
    5,310Other
    
    
    4,702
    
    
    
    2,665Total investments and other assets
    
    $
    24,522
    
    
    $
    44,798
   27




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##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSTHE LIBERTY CORPORATION AND SUBSIDIARIES
  Investments in debt securities and marketable equity securities are accounted for in
accordance with SFAS No. 115 Accounting for Certain Investments in Debt and Equity Securities
(SFAS No. 115). SFAS No. 115 requires that all debt and marketable equity securities be
classified into one of three categories  held to maturity, available-for-sale, or trading. The
Company currently has no securities classified as held to maturity or trading. Investments are generally held in the Corporate segment and are reported on the following
basis:  
    Private equity investments, all of which represent a voting
interest of less than 20%, are carried at cost, which includes
provisions for impaired value when appropriate.  
    Private debt securities classified as available-for-sale are
stated at fair value with unrealized gains and losses, after
adjustment for deferred income taxes, reported directly in
shareholders equity in accumulated other comprehensive income
(loss). Fair values for private debt securities are estimated by
discounting the expected future cash flows using a current market
rate applicable to the yield, credit quality, and maturity of the
investments.  
    Real estate related investments consist primarily of residential
land and lots in various stages of development and completion, and
receivables related to prior land sales. The Companys real estate
properties were held for sale at December 31, 2004 and 2003, and
accordingly are carried at the lower of cost or fair market value
less costs to sell.  
    Venture capital funds are generally carried at cost, which
includes provisions for impaired value where appropriate.  
    Investments in low income housing tax credits are accounted for
using the cost method, in accordance with Emerging Issues Task
Force 94-1 Accounting for Tax Benefits Resulting from Investments
in Affordable Housing Projects. Under the cost method, any
excess of the carrying amount of the investment over its estimated
residual value is amortized over the remaining period during which
the Company is to receive tax credits. The following table shows the gross unrealized losses and fair value of the Companys
investments with unrealized losses that are not deemed to be other-than-temporarily impaired,
aggregated by investment category and length of time that individual securities have been in a
continuous unrealized loss position, at December 31, 2004:  (In $000s)As of December 31, 2004
    
    Less Than
    
    
    12 Months12 Months
    
    
    or GreaterFair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDescription of Securities
    
    Value
    
    
    Loss
    
    
    Value
    
    
    LossPrivate debt securities
    
    $
    7,768
    
    
    $
    211
    
    
    
    
    
    
    
    Venture capital funds,
carried at cost
    
    
    3,371
    
    
    
    29
    
    
    
    
    
    
    
    Total
    
    $
    11,139
    
    
    $
    240
    
    
    
    
    
    
    
    
 The unrealized loss on the Companys investments in private debt securities was caused by
interest rate increases. The contractual terms of the note do not permit the issuer to settle the
note at a price less than the face value of the investment. Because the Company has the ability
and intent to hold this investment until a recovery of fair value, which may be maturity, the
Company does not consider this investment to be other-than-temporarily impaired at December 31,
2004.
 The aggregate cost of the Companys cost method investments totaled $12,024,000 at December
31, 2004. Investments with an aggregate cost of $11,818,000 were not evaluated for impairment
because (a) the Company did not estimate the fair value of those investments in accordance with
paragraphs 14 and 15 of Statement of Financial Accounting Standards No. 107 Disclosures about Fair
Value of Financial Instruments and (b) the Company did not identify any events or changes in
circumstances that may have had a significant adverse effect on the fair value of those
investments. The remaining $206,000 of cost method investments consist of one venture capital
fund. That investment was evaluated for impairment because of an adverse change in valuation as
estimated by that partnerships general partner. As a result of that evaluation, the Company
identified an unrealized loss of $29,000. The Company evaluated the severity of the impairment
(fair value is approximately 14% percent less than cost) and the duration of the impairment (less
than 12 months), coupled with the Companys ability an intent to hold the investment for a
reasonable period of time sufficient for a recovery of fair value, in its determination that this
investment is not other-than-temporarily impaired at December 31, 2004. The following table shows the gross unrealized losses and fair value of the Companys
investments with unrealized losses that are not deemed to be other-than-temporarily impaired,
aggregated by investment category and length of time that individual securities have been in a
continuous unrealized loss position, at December 31, 2003:  (In $000s)As of December 31, 2003
    
    Less Than
    
    
    12 Months12 Months
    
    
    or GreaterFair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDescription of Securities
    
    Value
    
    
    Loss
    
    
    Value
    
    
    LossVenture capital
funds, carried at
cost
    
    $
    5,733
    
    
    $
    198
    
    
    
    
    
    
    
    Total
    
    $
    5,733
    
    
    $
    198
    
    
    
    
    
    
    
    
 Certain of the Companys private equity and debt securities have conversion, anti-dilution,
demand registration, and other features typical for instruments of these types. In addition,
certain of these instruments have warrants attached that, if exercised, would allow the Company to
purchase additional shares in certain of its investee companies at predetermined prices. These
securities have maturities of up to five years. See Note 13 Fair Values of Financial Instrumentsfor further discussion of the methods used to
estimate the fair values of the Companys financial instruments. 6. Revolving Credit Facility In March 2001, the Company entered into a $100 million unsecured 364-day revolving credit
facility with a bank. The Company renewed the facility on substantially similar terms in each of
the years 2002, 2003, and 2004. At the end of the term of the facility, any outstanding principal
and interest will come due, unless the bank, in its sole discretion, otherwise extends the
facility. The facility provides that the funds drawn may be used for working capital and other
general corporate purposes, capital expenditures, purchases of common stock, acquisitions, and
investments. The Company had $20 million of debt outstanding at December 31, 2004. The Company
paid $768,000 of interest during 2004. The Company had no outstanding debt, nor interest
   28




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##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSTHE LIBERTY CORPORATION AND SUBSIDIARIES
  expense, during 2003 or 2002. As of December 31, 2004 interest is payable at 3.04%. The revolving credit facility has both an interest coverage and a leverage coverage covenant.
These covenants, which involve debt levels, interest expense, EBIT, and EBITDA (measures of cash
earnings defined in the revolving credit agreement), can affect the interest rate on current and
future borrowings. The Company was in compliance with all covenants throughout 2004. As of December 31, 2004, the Companys credit facility restricted payments for dividends and
purchases of its common stock to no more than $180 million during the period January 1, 2004
through December 31, 2004, and for periods after January 1, 2005 to $100 million plus fifty percent
of cumulative net income of the Company for all fiscal periods beginning January 1, 2004. Subsequent to December 31, 2004, the Company amended the credit facility. The amendment,
among other things, extends the term of the facility through May 17, 2006 and increases the
aggregate facility commitment from $100 million to $150 million. The amended credit facility
restricts payments for dividends and purchases of common stock to no more than $180 million during
the period January 1, 2005 through December 31, 2005, and for periods after January 1, 2006 to $100
million plus fifty percent of cumulative net income of the Company for all fiscal periods beginning
January 1, 2005. 7. Shareholders Equity The Company has adopted a Shareholder Rights Plan and declared a dividend of one preferred
stock purchase right for each outstanding share of common stock. Upon becoming exercisable, each
right entitles the holder to purchase for a price of $150.00 one one-hundredth of a share of Series
A Participating Cumulative Preferred Stock. All of the rights may be redeemed by the Company at a
price of $0.01 per right until ten business days (or such later date as the Board of Directors
determines) after the public announcement that a person or group has acquired beneficial ownership
of 20 percent or more of the outstanding common shares (Acquiring Person). Upon existence of
an Acquiring Person, the Company may redeem the rights only with the concurrence of a majority of
the directors not affiliated with the Acquiring Person. The rights, which do not have voting power
and are not entitled to dividends, expire on August 7, 2010. The rights are not exercisable until
ten business days after the public announcement that a person has become an Acquiring Person or
after the commencement of a tender offer or exchange offer if, upon consummation, such person or
group would become an Acquiring Person. If, after the rights become exercisable, the Company
becomes involved in a merger or certain other major corporate transactions, each right will entitle
its holder, other than the Acquiring Person, to receive common shares with a deemed market value of
twice such exercise price. There are 10,000,000 shares of preferred stock, no par value per share
authorized for issuance. At December 31, 2004 and December 31, 2003, there were 140,000 shares of
preferred stock that were reserved for issuance in connection with the Shareholder Rights Plan. The Company acquired 991,834, 625,600, and 404,400 shares of its common stock during 2004,
2003, and 2002, respectively.
 The components of unrealized appreciation (depreciation) on fixed maturity securities
available for sale (see Notes 5 and 13) in the balance sheet caption Unrealized Investment Gains
and Losses as of December 31 are as follows:  (In $000s)
    
    2004
    
    
    2003Carrying value of securities
    
    $
    7,768
    
    
    $
    16,774Amortized cost of securities
    
    
    (7,979
    )
    
    
    (16,390
    )Net unrealized appreciation (depreciation)
    
    
    (211
    )
    
    
    384Deferred income taxes
    
    
    79
    
    
    
    (146
    )Total
    
    $
    (132
    )
    
    $
    238
 Subsequent to December 31, 2004, the Companys Board of Directors declared a special
dividend of $4.00 per share, or approximately $74.0 million. 8. Employee Benefits The Company has a postretirement plan that provides medical and life insurance benefits for
qualified retired employees. The postretirement medical plan is generally contributory with retiree
contributions adjusted annually to limit employer contributions to predetermined amounts. The
postretirement life plan provides free insurance coverage for retirees and is insured with an
unaffiliated company. The information presented in this footnote does not reflect the Medicare Prescription Drug
Improvement and Modernization Act of 2003 (the Act) signed into law December 8, 2003.
Specifically, the measures of the Accumulated Postretirement Benefit Obligation and the Net
Periodic Postretirement Benefit cost shown do not reflect the Act. Specific authoritative guidance
on the accounting treatment of the Act is pending and upon issuance, may require a change in
previously reported information. The information set forth in the tables below is based upon a measurement date of December 31,
of each respective year. Net periodic postretirement benefit cost included the following
components:  (In $000s)
    
    2004
    
    
    2003
    
    
    2002Service cost
    
    $
    25
    
    
    $
    27
    
    
    $
    29Amortization of prior service cost
    
    
    3
    
    
    
    2
    
    
    
    3Amortization of actuarial net (gain) loss
    
    
    21
    
    
    
    
    
    
    
    (3
    )Interest cost
    
    
    134
    
    
    
    111
    
    
    
    137Net periodic postretirement benefit cost
    
    $
    183
    
    
    $
    140
    
    
    $
    166
 The following schedule reconciles the accumulated postretirement benefit obligation included
in other liabilities on the balance sheets as of December 31:  (In $000s)
    
    2004
    
    
    2003Benefit obligation at beginning of year
    
    $
    2,259
    
    
    $
    1,723Service cost
    
    
    25
    
    
    
    27Interest cost
    
    
    134
    
    
    
    111Plan participants contributions
    
    
    181
    
    
    
    165Benefits paid
    
    
    (457
    )
    
    
    (407
    )Change in plan provisions
    
    
    27
    
    
    
    Actuarial gain (loss )
    
    
    (67
    )
    
    
    640Benefit obligation at end of year
    
    $
    2,102
    
    
    $
    2,259
   29




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##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSTHE LIBERTY CORPORATION AND SUBSIDIARIES
  The following schedule reconciles the status of the Companys plan with the unfunded
postretirement benefit obligation included in its balance sheets at December 31:  (In $000s)
    
    2004
    
    
    2003Funded status
    
    $
    2,102
    
    
    $
    2,259Unrecognized prior service cost
    
    
    (43
    )
    
    
    (18
    )Unrecognized net gain (loss)
    
    
    (399
    )
    
    
    (488
    )Accrued postretirement benefit obligation
    
    $
    1,660
    
    
    $
    1,753
 The weighted-average discount rate is 6.0% and 6.25% for 2004 and 2003, respectively. At
December 31, 2004, a 5.5% annual rate of increase in the per capita cost of covered medical
benefits is assumed for 2005. The rate is to remain at 5.5% in 2006 and thereafter. At December
31, 2003, a 5.5% annual rate of increase in the per capita cost of covered medical benefits was
assumed for 2004. The rate was to remain at 5.5% in 2005 and thereafter. Assumed health care
cost trend rates have a significant effect on the amounts reported for the medical plans. The
Company expects its contributions to the Plan for the year 2005 to be approximately $200,000. A one-percentage-point change in assumed health care cost trend rates would have the following
effects:  1%
    
    
    1%(In $000s)
    
    Increase
    
    
    DecreaseEffect on total of service
and interest rate
components
    
    $
    1
    
    
    $
    (1
    )Effect on postretirement
benefit obligation
    
    $
    10
    
    
    $
    (10
    )
 The estimated benefits expected to be paid in each of the next five fiscal years, and in the
aggregate for the five fiscal years thereafter is as follows:  Estimated(In $000s)
    
    Benefits2005
    
    $
    2002006
    
    $
    1942007
    
    $
    1892008
    
    $
    1842009
    
    $
    1762010 - 2014
    
    $
    803
 The Company has a retirement and savings plan for substantially all of its employees. The
Plan has features of both a profit sharing plan and a voluntary thrift plan qualified under Section
401(k) of the Internal Revenue Code. The profit sharing component of the Plan allows for
contributions to be made to the Plan at the discretion of the Board of Directors, of which up to
50% may be made in the form of Company common stock. Contributions for this component of the Plan
were $3,294,000, $2,997,000, and $3,022,000 in 2004, 2003, and 2002, respectively. The 401(k)
component of the Plan allows employees to contribute to the Plan and the Company will make a
matching contribution of up to 3% of the employees compensation. The Companys matching
contribution percentage may be changed at the discretion of the Companys Board of Directors. The
Companys contributions for this component of the Plan were $1,791,000, $1,619,000, and $1,551,000
in 2004, 2003, and 2002, respectively.
 9. Stock Ownership and Stock Option Plans The Company has a Performance Incentive Compensation Program (the Program) which provides
that the Compensation Committee of the Board of Directors may grant: (a) incentive stock options
within the meaning of Section 422 of the Internal Revenue Code; (b) non-qualified stock options;
(c) performance units; (d) awards of restricted shares of the Companys common stock; (e) awards of
unrestricted shares of the Companys common stock; (f) phantom stock units; (g) or any combination
of the foregoing to outside directors, officers and key employees provided, however, that
non-employee directors are not eligible to receive incentive stock options. Only common stock, not
to exceed 5,000,000 shares, may be delivered under the Program; shares so delivered will be made
available from the authorized but unissued shares or from shares reacquired by the Company,
including shares purchased in the open market. The aggregate number of shares that may be acquired
by any participant in the Program is limited to a maximum of 400,000 stock options during a single
calendar year and a maximum of 100,000 shares of other stock-based awards during a single calendar
year. As of December 31, 2004, 53 employees, officers and outside directors were participants in
the Program. Restricted shares awarded to participants under the Program generally vest either in equal
annual installments or as a lump sum, generally over a five-year period commencing on the date the
shares are awarded. Vesting of restricted shares may be contingent on the achievement of certain
performance goals as established by the Compensation Committee at the time of the grant.
Non-vested shares may not be assigned, transferred, pledged or otherwise encumbered or disposed of.
During the applicable restriction period, the Company retains possession of the restricted shares.
Participants are entitled to dividends and voting rights with respect to the restricted shares. Stock options under the Program are issued at least at 100% of the market price on the date of
grant, are vested over such period of time, which generally may not be less than one year, as may
be established by the Compensation Committee, and expire no more than ten years after the grant. Of the non-qualified options outstanding, 592,284 were exercisable at December 31, 2004;
562,958 were exercisable at December 31, 2003; and 454,259 were exercisable at December 31, 2002.
The options expire on various dates beginning in May 2006, and ending in June 2012. In accordance with the provisions of SFAS No. 123 Accounting for Stock-Based Compensation,
the Company has elected to follow Accounting Principles Board Opinion No. 25 Accounting for Stock
Issued to Employees (APB No. 25) and related interpretations in accounting for its plans and
does not recognize compensation expense for its stock-based compensation plans other than for
awards of restricted shares. Expense is recognized on a straight-line basis over the vesting
period of the restricted shares. Expense related to restricted shares totaled $3,651,000,
$1,928,000, and $990,000 for the years ended December 31, 2004, 2003, and 2002 respectively. Under APB No. 25, because the exercise price of the Companys employee stock options at least
equals the market price of the underlying stock on the date of the grant, no compensation expense
is recognized. Pro forma information regarding net income and earnings per share is required by
SFAS No. 123, and is determined as if the Company accounted for its employee stock options under
the fair value method of that statement. The Company granted no stock options during 2004 or 2003. The weighted average grant-date
estimated fair value of grants
   30




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##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSTHE LIBERTY CORPORATION AND SUBSIDIARIES
  made during 2002 using a Black-Scholes option valuation model, and
the weighted average assumptions used to determine the estimated fair value were as follows:  2002Estimated fair value
    
    $
    9.55Underlying assumptions used to determine estimated fair value:Risk free interest rate
    
    
    4.40
    %Dividend yield
    
    
    2.2
    %Expected stock price volatility
    
    
    0.23Weighted average expected life
    
    6 years
 The Black-Scholes option valuation model was developed for use in estimating the fair
value of traded options that have no vesting restrictions and are fully transferable. In addition,
option valuation models require the input of highly subjective assumptions including the expected
stock price volatility. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to
expense on a straight-line basis over the options vesting periods. The Companys pro forma
information is as follows:  (In $000s, except per share amounts)
    
    2004
    
    
    2003
    
    
    2002Stock-based compensation cost
included in net income (net of
taxes)
    
    $
    2,225
    
    
    $
    1,205
    
    
    $
    619Net income (loss):As reported
    
    $
    (1,996
    )
    
    $
    23,897
    
    
    $
    (14,393
    )Pro forma compensation expense
(net of taxes)
    
    
    (794
    )
    
    
    (774
    )
    
    
    (901
    )Pro forma net income (loss)
    
    $
    (2,790
    )
    
    $
    23,123
    
    
    $
    (15,294
    )Basic earnings (loss) per share:As reported
    
    $
    (0.11
    )
    
    $
    1.25
    
    
    $
    (0.73
    )Pro forma
    
    
    (0.15
    )
    
    
    1.21
    
    
    
    (0.78
    )Diluted earnings (loss) per share:As reported
    
    $
    (0.11
    )
    
    $
    1.24
    
    
    $
    (0.73
    )Pro forma
    
    
    (0.15
    )
    
    
    1.20
    
    
    
    (0.78
    )
 The following table summarizes information concerning currently outstanding and
exercisable stock options:  Wtd.
    
    
    
    
    
    
    Wtd.Number
    
    
    Wtd. Avg.
    
    
    Avg.
    
    
    Number
    
    
    Avg.Range of
    
    Out-
    
    
    Remaining
    
    
    Exercise
    
    
    Exercis-
    
    
    ExerciseExercise Prices
    
    standing
    
    
    Life
    
    
    Price
    
    
    able
    
    
    Price$31.25 - $34.99
    
    
    673,945
    
    
    
    6.18
    
    
    $
    33.28
    
    
    
    392,345
    
    
    $
    33.24$35.00 - $39.99
    
    
    81,585
    
    
    
    6.30
    
    
    $
    38.98
    
    
    
    48,089
    
    
    $
    38.78$40.00 - $51.00
    
    
    151,850
    
    
    
    2.90
    
    
    $
    42.70
    
    
    
    151,850
    
    
    $
    42.70Total or
wtd. average
    
    
    907,380
    
    
    
    5.64
    
    
    $
    35.37
    
    
    
    592,284
    
    
    $
    36.67
 At December 31, 2004, there were 297,513 shares of the Companys stock reserved for future
grants under the Program.
 The following table summarizes activity in the Program during the three years ending December
31, 2004:  Non-QualifiedRestricted Shares
    
    
    Stock OptionsMarketNumber
    
    
    Price at
    
    
    
    
    
    
    Averageof
    
    
    Date
    
    
    Number
    
    
    ExerciseShares
    
    
    Granted
    
    
    of Options
    
    
    PriceOutstanding
at January 1, 2002
    
    
    125,000
    
    
    
    
    
    
    
    1,144,538
    
    
    $
    34.94Awarded
    
    
    32,500
    
    
    $
    34.00
    
    
    
    35,100
    
    
    $
    39.50Vested
    
    
    (25,000
    )
    
    $
    35.55Exercised
    
    
    
    
    
    
    
    
    
    
    (27,344
    )
    
    $
    33.44Forfeited
    
    
    
    
    
    
    
    
    
    
    (4,550
    )
    
    $
    45.50Outstanding at
December 31, 2002
    
    
    132,500
    
    
    
    
    
    
    
    1,147,744
    
    
    $
    35.07Awarded
    
    
    60,300
    
    
    $
    42.07
    
    
    
    
    
    
    
    Vested
    
    
    (46,300
    )
    
    $
    39.98Exercised
    
    
    
    
    
    
    
    
    
    
    (45,184
    )
    
    $
    34.99Forfeited
    
    
    
    
    
    
    
    
    
    
    (68,350
    )
    
    $
    34.83Outstanding at
December 31, 2003
    
    
    146,500
    
    
    
    
    
    
    
    1,034,210
    
    
    $
    35.09Awarded
    
    
    372,225
    

    
    $
    44.71
    
    
    
    
    
    
    
    Vested
    
    
    (40,600
    )
    
    $
    36.94Exercised
    
    
    
    
    
    
    
    
    
    
    (126,230
    )
    
    $
    33.07Forfeited
    
    
    
    
    
    
    
    
    
    
    (600
    )
    
    $
    39.50Outstanding at
December 31, 2004
    
    
    478,125
    
    
    
    
    
    
    
    907,380
    
    
    $
    35.37
 10. Provision for Income Taxes The provision for income taxes from continuing operations consists of the following:  (In $000s)
    
    2004
    
    
    2003
    
    
    2002Current:Federal
    
    $
    26,026
    
    
    $
    10,614
    
    
    $
    7,274State and local
    
    
    4,928
    
    
    
    1,572
    
    
    
    622Total current
    
    
    30,954
    
    
    
    12,186
    
    
    
    7,896Deferred:Federal
    
    
    (26,721
    )
    
    
    2,052
    
    
    
    10,960State and local
    
    
    (2,910
    )
    
    
    101
    
    
    
    940Total deferred
    
    
    (29,631
    )
    
    
    2,153
    
    
    
    11,900Total tax provision
    
    $
    1,323
    
    
    $
    14,339
    
    
    $
    19,796Cumulative effect of a
change in accounting
principle
    
    $
    (22,216
    )
    
    $
    
    
    
    $
    (29,045
    )
 Deferred income taxes reflect the tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for income
tax purposes. In addition, accruals for potential tax exposure items are included in the deferred
income tax liabilities.
   31




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##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSTHE LIBERTY CORPORATION AND SUBSIDIARIES
  Significant components of the Companys deferred tax liabilities and assets as of December 31,
2004 and 2003 are as follows:  (In $000s)
    
    2004
    
    
    2003Deferred tax liabilities:Basis in fixed assets
    
    $
    16,341
    
    
    $
    12,603Basis in intangible assets
    
    
    53,400
    
    
    
    75,301Reserve for contingent tax liabilities
    
    
    2,861
    
    
    
    15,986Other
    
    
    304
    
    
    
    Total deferred tax liabilities
    
    
    72,906
    
    
    
    103,890Deferred tax assets:Bad debts
    
    
    898
    
    
    
    657Long term receivables
    
    
    2,488
    
    
    
    2,420Net operating losses/tax credits/
capital losses
    
    
    6,347
    
    
    
    7,222Employee benefits
    
    
    5,658
    
    
    
    3,936Impairment of assets
    
    
    3
    
    
    
    357Unearned revenue
    
    
    3,833
    
    
    
    4,458Book over tax partnership losses
    
    
    590
    
    
    
    586Valuation allowances
    
    
    (4,645
    )
    
    
    (2,980
    )Total deferred tax assets
    
    
    15,172
    
    
    
    16,656Net deferred tax liability
    
    $
    57,734
    
    
    $
    87,234
 The following table reconciles income tax from continuing operations computed at the U.S.
federal statutory tax rates to income tax expense:  (In $000s)
    
    2004
    
    
    2003
    
    
    2002Federal income tax rate
    
    
    35
    %
    
    
    35
    %
    
    
    35
    %Rate applied to pre-tax income
    
    $
    13,966
    
    
    $
    13,383
    
    
    $
    18,476State taxes, net of federal tax
benefit
    
    
    1,185
    
    
    
    2,118
    
    
    
    2,275Tax credits
    
    
    (1,309
    )
    
    
    (1,331
    )
    
    
    (1,000
    )Changes in contingent tax
liabilities
    
    
    (13,125
    )
    
    
    
    
    
    
    Changes in valuation allowances
    
    
    1,665
    
    
    
    1,530
    
    
    
    Other
    
    
    (1,059
    )
    
    
    (1,361
    )
    
    
    45Provision for income taxes
    
    $
    1,323
    
    
    $
    14,339
    
    
    $
    19,796
 It is the Companys policy to establish contingent tax liabilities for income taxes that may
become payable in future years as a result of an examination by tax authorities. The Company
establishes the contingent tax liabilities based upon managements assessment of exposures related
to the recognition of revenue or the deductions in its tax returns and the probability of payment.
The contingent tax liabilities are analyzed periodically, and adjustments are made as events occur
to warrant adjustment to the reserve. For example, if the statutory period for assessing tax on a
given tax return or period lapses, the contingent tax liability associated with that period may be
adjusted. In addition, the adjustment to the contingent tax liability may reflect additional
exposure based on current calculations. To the extent the Company were to prevail in matters for
which accruals have been established, statutory periods for assessing taxes lapse, or it be
required to pay amounts in excess of reserves, the Companys effective tax rate in a given
financial statement period could be materially affected. During 2004, the Company reassessed its contingent tax liabilities and made adjustments
related to, among other things, the statute of limitations expiring for certain previous tax
years, and managements estimate of an expected favorable outcome of a current examination. At
December 31, 2004, the Company increased its valuation allowances related to deferred tax assets
 associated with certain operating loss carryforwards, and income tax refunds, as the available
objective evidence creates sufficient uncertainty regarding the realizability of these assets. The Company has state operating loss carryforwards of approximately $125,185,000 expiring from
2005 to 2024. The Company utilized state operating loss carryforwards of approximately $14,319,000
and $21,460,000 in 2004 and 2003, respectively. Income taxes paid were approximately $5,941,000,
$8,176,000, and $8,954,000 in 2004, 2003, and 2002, respectively. 11. Quarterly Results of Operations (Unaudited) During the third quarter of 2004, the statute of limitations expired related to contingent tax
liabilities established for certain previous tax years, and accordingly approximately $5,645,000 of
contingent tax liabilities were released. In addition, during the fourth quarter of 2004,
approximately $7,500,000 related to a specific examination was released due to managements
estimate of an expected favorable outcome. During the fourth quarter of 2003, the Company changed the estimates of the useful lives used
to account for back-up and redundant equipment. The new estimate results in the retirement of all
assets that have not been utilized in the last twelve to twenty-four months. The change in
estimate resulted in a charge of $671,000 in the fourth quarter of 2003. Quarterly results of operations for each of the years ended December 31, 2004 and 2003 are as
follows:  (In $000s, except pershare data)
    
    
    
    
    
    Quarter Ended 2004March 31
    
    
    June 30
    
    
    Sept. 30
    
    
    Dec. 31Net revenues
    
    $
    47,831
    
    
    $
    55,037
    
    
    $
    53,606
    
    
    $
    62,583Operating income
    
    $
    8,062
    
    
    $
    9,886
    
    
    $
    9,248
    
    
    $
    18,264Income before the
cumulative effect of
a change in
accounting principle
    
    $
    4,620
    
    
    $
    3,066
    
    
    $
    12,202
    
    
    $
    18,702Cumulative effect of
a change in
accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (40,586
    )Net income (loss)
    
    $
    4,620
    
    
    $
    3,066
    
    
    $
    12,202
    
    
    $
    (21,884
    )Basic earnings per
share before the
cumulative effect
of a change in
accounting
principle
    
    $
    0.25
    
    
    $
    0.17
    
    
    $
    0.67
    
    
    $
    1.03Diluted earnings per
share before the
cumulative effect of
a change in
accounting principle
    
    $
    0.24
    
    
    $
    0.16
    
    
    $
    0.66
    
    
    $
    1.02
  (In $000s, except pershare data)
    
    
    
    
    
    Quarter Ended 2003March 31
    
    
    June 30
    
    
    Sept. 30
    
    
    Dec. 31Net revenues
    
    $
    43,934
    
    
    $
    51,661
    
    
    $
    49,360
    
    
    $
    55,329Operating income
    
    $
    5,472
    
    
    $
    11,512
    
    
    $
    9,116
    
    
    $
    12,484Net income
    
    $
    3,355
    
    
    $
    6,792
    
    
    $
    6,119
    
    
    $
    7,631Basic earnings
per share
    
    $
    0.17
    
    
    $
    0.36
    
    
    $
    0.32
    
    
    $
    0.40Diluted earnings
per share
    
    $
    0.17
    
    
    $
    0.35
    
    
    $
    0.32
    
    
    $
    0.40
   32




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##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSTHE LIBERTY CORPORATION AND SUBSIDIARIES
  12. Earnings Per Share The following tables reconcile the numerators and denominators for the basic and diluted
earnings from continuing operations per share calculations for the years ended December 31, 2004,
2003, and 2002:  (In $000s, except per share data)Shares
    
    
    PerIncome
    
    
    (Denom-
    
    
    ShareFor the Year Ended 2004
    
    (Numerator)
    
    
    inator)
    
    
    AmountBasic EPS:Income before the cumulative
effect of a change in accounting
principle available to common
shareholders
    
    $
    38,590
    
    
    
    18,452
    
    
    $
    2.09Effect of Dilutive Securities:Stock options
    
    
    
    
    
    
    123Diluted EPS:Income before the cumulative
effect of a change in accounting
principle available to common
shareholders plus assumed
conversions
    
    $
    38,590
    
    
    
    18,575
    
    
    $
    2.08
  (In
$000s, except per share data)Shares
    
    
    PerIncome
    
    
    (Denom-
    
    
    ShareFor the Year Ended 2003
    
    (Numerator)
    
    
    inator)
    
    
    AmountBasic EPS:Income before the cumulative
effect of a change in accounting
principle available to common
shareholders
    
    $
    23,897
    
    
    
    19,123
    
    
    $
    1.25Effect of Dilutive Securities:Stock options
    
    
    
    
    
    
    125Diluted EPS:Income before the cumulative
effect of a change in accounting
principle available to common
shareholders plus assumed
conversions
    
    $
    23,897
    
    
    
    19,248
    
    
    $
    1.24
  (In
$000s, except per share data)Shares
    
    
    PerIncome
    
    
    (Denom-
    
    
    ShareFor the Year Ended 2002
    
    (Numerator)
    
    
    inator)
    
    
    AmountBasic EPS:Income before the cumulative
effect of a change in accounting
principle available to common
shareholders
    
    $
    32,995
    
    
    
    19,610
    
    
    $
    1.68Effect of Dilutive Securities:Stock options
    
    
    
    
    
    
    84Diluted EPS:Income before the cumulative
effect of a change in accounting
principle available to common
shareholders plus assumed
conversions
    
    $
    32,995
    
    
    
    19,694
    
    
    $
    1.68
 The diluted income from continuing operations per common share calculation excludes the effect
of potentially dilutive shares when the inclusion of those shares in the calculation would have an
anti-dilutive effect. For the years ended December 31, 2004, 2003, and 2002, the Company had

approximately 28,000, 29,000 and 235,000 weighted average options which were not included in the
diluted income from continuing operations per common share calculation as their effect was
anti-dilutive. 13. Fair Values of Financial Instruments SFAS No. 107, Disclosures about Fair Value of Financial Instruments requires the disclosure
of the estimated fair value of all financial instruments, including both assets and liabilities,
unless specifically exempted. The following methods were used to estimate the fair values of the
Companys financial instruments.  
    Cash and cash equivalents: The carrying amounts reported in the
balance sheet for these instruments approximate their fair values.  
    Receivables and accounts payable: The carrying amounts reported in
the balance sheet for these instruments approximate their fair
value due to the short maturity of these items.  
    Program contract obligations: Fair values of program contract
obligations are estimated to approximate their carrying value as a
result of their short term nature.  
    Private debt securities: The carrying amounts reported in the
balance sheet for these securities approximate their fair value.
Fair values are estimated by discounting the expected future cash
flows using a current market rate applicable to the yield, credit
quality, and maturity of the investments.  
    Marketable equity securities: The fair values for the
available-for-sale marketable equity securities are based on
quoted market prices.  
    Revolving credit facility: The carrying amount reported in the
balance sheet approximates the fair value due to the floating
interest rate associated with the facility.  
    Investments in private equity securities, venture capital funds,
and low income housing tax credits: The Company determined that it
was not practicable to estimate the fair values of its private
equity, venture capital, and low income housing tax credit
investments because of a lack of primary and secondary market
prices and the inability to estimate fair values without incurring
excessive costs. See Note 5 Investments and Other Assetsfor additional information on investments and their
carrying values. 14. Segment Information The Company operates primarily in the television broadcasting and cable advertising
businesses. The Company currently owns and operates fifteen television stations, located
principally in the South and Midwest. Each of the stations is affiliated with a major network,
with eight NBC affiliates, five ABC affiliates, and two CBS affiliates. The Company evaluates
segment performance based on operating income, excluding unusual or non-operating items.
   33




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##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSTHE LIBERTY CORPORATION AND SUBSIDIARIES
  The following tables summarize financial information by segment for the periods ended December
31, 2004, 2003, and 2002, respectively:  (In $000s)As of and For the Year
    
    
    
    
    
    
    
    
    
    CorporateEnded December 31, 2004
    
    Broadcasting
    
    
    Cable
    
    
    & Other
    
    
    TotalRevenues (net of
commissions)
    
    $
    204,357
    
    
    $
    14,613
    
    
    $
    87
    
    
    $
    219,057Expenses:Operating
    
    
    122,014
    
    
    
    12,151
    
    
    
    19,672
    
    
    
    153,837Depreciation and
amortization
    
    
    17,836
    
    
    
    436
    
    
    
    1,488
    
    
    
    19,760Total operating expenses
    
    
    139,850
    
    
    
    12,587
    
    
    
    21,160
    
    
    
    173,597Operating income (loss)
    
    
    64,507
    
    
    
    2,026
    
    
    
    (21,073
    )
    
    
    45,460Net investment income
(loss)
    
    
    
    
    
    
    
    
    
    
    (4,764
    )
    
    
    (4,764
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    (783
    )
    
    
    (783
    )Income before income taxes
and the cumulative effect
of a change in
accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    39,913Segment assets
    
    $
    493,099
    
    
    $
    3,431
    
    
    $
    31,309
    
    
    $
    527,839Expenditures for property,
plant, and equipment
    
    $
    11,736
    
    
    $
    71
    
    
    $
    745
    
    
    $
    12,552
  (In $000s)As of and For the Year
    
    
    
    
    
    
    
    
    
    CorporateEnded December 31, 2003
    
    Broadcasting
    
    
    Cable
    
    
    & Other
    
    
    TotalRevenues (net of
commissions)
    
    $
    186,045
    
    
    $
    13,925
    
    
    $
    314
    
    
    $
    200,284Expenses:Operating
    
    
    116,776
    
    
    
    11,822
    
    
    
    14,640
    
    
    
    143,238Depreciation and
amortization
    
    
    16,215
    
    
    
    499
    
    
    
    1,748
    
    
    
    18,462Total operating expenses
    
    
    132,991
    
    
    
    12,321
    
    
    
    16,388
    
    
    
    161,700Operating income (loss)
    
    
    53,054
    
    
    
    1,604
    
    
    
    (16,074
    )
    
    
    38,584Net investment income
(loss)
    
    
    
    
    
    
    
    
    
    
    (348
    )
    
    
    (348
    )Income before income taxes
and the cumulative effect
of a change in accounting
principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    38,236Segment assets
    
    $
    557,535
    
    
    $
    4,039
    
    
    $
    100,691
    
    
    $
    662,265Expenditures for property,
plant, and equipment
    
    $
    20,755
    
    
    $
    289
    
    
    $
    927
    
    
    $
    21,971
  (In $000s)As of and For the Year
    
    
    
    
    
    
    
    
    
    CorporateEnded December 31, 2002
    
    Broadcasting
    
    
    Cable
    
    
    & Other
    
    
    TotalRevenues (net of
commissions)
    
    $
    192,168
    
    
    $
    14,100
    
    
    $
    410
    
    
    $
    206,678Expenses:Operating
    
    
    110,672
    
    
    
    11,900
    
    
    
    14,169
    
    
    
    136,741Depreciation and
amortization
    
    
    15,858
    
    
    
    578
    
    
    
    1,326
    
    
    
    17,762Total operating expenses
    
    
    126,530
    
    
    
    12,478
    
    
    
    15,495
    
    
    
    154,503Operating income (loss)
    
    
    65,638
    
    
    
    1,622
    
    
    
    (15,085
    )
    
    
    52,175Net investment income
(loss)
    
    
    
    
    
    
    
    
    
    
    616
    
    
    
    616Income before income taxes
and the cumulative effect
of a change in
accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    52,791Expenditures for property,
plant, and equipment
    
    $
    21,472
    
    
    $
    253
    
    
    $
    2,979
    
    
    $
    24,704
 15. Commitments and Contingencies The Company and its subsidiaries are defendants in various lawsuits arising in the ordinary
course of business. It is the opinion of management and legal counsel that these actions will not
have a material effect on the financial position or results of operations of the Company. The
Company has lease agreements for broadcast, data processing, and telephone equipment, along with
rent for certain office space. Most of these agreements have optional renewal provisions covering
additional periods of one to ten years. All leases were made in the ordinary course of business
and contain no significant restrictions or obligations. Annual rental expense amounted to
approximately $1,510,000, $1,343,000, and $1,023,000 in 2004, 2003, and 2002, respectively. Future commitments under operating leases are shown below:  Year
    
    (In $000s)2005
    
    $
    6742006
    
    
    4142007
    
    
    812008
    
    
    292009
    
    
    5Thereafter
    
    
    4Total
    
    $
    1,207
 The Company has also entered into commitments for various television programming rights for
which the license periods have not yet commenced. See the caption Program Contract Obligation
included in Note 2 for further details. In November of 2000, the Company sold its insurance operations to a third party. Under the
purchase agreement, subject to certain limitations, the Company agreed to indemnify the buyer for
damages (as defined in the purchase agreement) relating to certain tax matters, preexisting
litigation and regulatory proceedings. The indemnification relating to the tax matters is in
effect until the expiration of the relevant statutes of limitation. The indemnifications relating
to the other matters are in effect until the final resolution of such matters. The Company believes
that the likelihood of it being required to make payments as a result of any of these
indemnifications is remote, and therefore has no liability recorded related to these
indemnifications. The limit of amounts recoverable by the acquirer will not exceed one-half the
purchase price, or approximately $324 million. 16. New Accounting Pronouncements On December 16, 2004, the Financial Accounting Standards Board issued Statement No. 123
(Revised 2004), Share-Based Payment (Statement No. 123(R)), which is a revision of FASB Statement
No. 123, Accounting for Stock-Based Compensation.Statement 123(R) supersedes APB Opinion No. 25,
Accounting for Stock Issued to Employees, and amends FASB Statement No. 95, Statement of Cash
Flows.Generally, the approach in
Statement 123(R) is similar to the approach described in
Statement 123. However, Statement 123(R) requires all share-based payments to employees, including
grants of employee stock options, to be recognized in the income statement based on their fair
values. Pro forma disclosure is no longer an alternative. Statement
123(R) is required to be
adopted no later than July 1, 2005. Early adoption will be permitted in periods in which financial
statements have not yet been issued.
   34




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##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSTHE LIBERTY CORPORATION AND SUBSIDIARIES
  Statement
123(R) permits public companies to adopt its requirements using one of two methods:  1.
    A modified prospective method in which compensation cost is recognized beginning with the
effective date (a) based on the requirements of Statement 123(R) for all share-based payments
granted after the effective date and (b) based on the requirements of Statement 123 for all
awards granted to employees prior to the effective date of Statement
123(R) that remain
unvested on the effective date.  2.
    A modified retrospective method which includes the requirements of the modified prospective
method described above, but also permits entities to restate based on the amounts previously
recognized under Statement 123 for purposes of pro forma disclosures either (a) all prior
periods presented or (b) prior interim periods of the year of adoption. The
Company plans to adopt Statement 123(R) using the modified prospective method. As permitted by Statement 123, the Company currently accounts for share-based payments to
employees using APB Opinion 25s intrinsic value method and, as such, generally recognizes no
compensation cost for employee stock options. The Company has not granted stock options to its
employees since June of 2002. While authorized under its incentive compensation program to grant
stock options, at this time the Company does not intend to make future stock option grants.
Therefore, the Company anticipates that the effect of Statement 123(R) will be limited to expensing
the remaining value of it previously granted but unvested options. The Company believes that the
estimated effect of Statement 123(R) on net income will be approximately $400,000, $230,000, and
$20,000 in the years 2005, 2006, and 2007 respectively.
   35




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##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Shareholders of
The Liberty Corporation: We have audited the accompanying consolidated balance sheets of The Liberty Corporation and
Subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of
income, shareholders equity and cash flows for each of the three years in the period ended
December 31, 2004. Our audits also included the financial statement schedule listed in the
index at item 15(a). These financial statements and schedule are the responsibility of the
Companys management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of The Liberty Corporation and
Subsidiaries at December 31, 2004 and 2003, and the consolidated results of their operations
and their cash flows for each of the three years in the period ended December 31, 2004, in
conformity with U.S. generally accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the information set
forth therein. As discussed in Note 4 to the consolidated financial statements, the
Company adopted Emerging Issues Task Force Topic No. D-108, Use of the Residual Method to
Value Acquired Assets Other Than Goodwill during the fourth quarter of 2004 and changed the
method of accounting used to value its indefinite lived intangible assets other than goodwill. We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the effectiveness of The Liberty Corporations internal
control over financial reporting as of December 31, 2004, based on criteria established in
Internal Control-Integrated Frameworkissued by the Committee of Sponsoring Organizations of
the Treadway Commission and our report dated March 2, 2005, expressed an unqualified opinion
thereon. /s/ Ernst & Young LLP Greenville, South Carolina
March 2, 2005 36




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##### 



Item 9. Changes in and Disagreements with Accountant on Accounting and Financial Disclosure None. Item 9A. Controls and Procedures Disclosure Controls and Procedures The Company carried out an evaluation, under the supervision and with the participation of the
Companys management, including the Companys Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of the Companys disclosure controls and
procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that, as of the end of the period covered by this
report, the Companys disclosure controls and procedures are effective to ensure that information
required to be disclosed in the Companys reports filed or submitted under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified in the SECs rules
and forms, and are also effective to ensure that information required to be disclosed in the
Companys reports filed or submitted under the Exchange Act is accumulated and communicated to the
Companys management, including the principal executive and principal financial officers, to allow
timely decisions regarding required disclosure. Managements Report on Internal Control over Financial Reporting The management of the Company is responsible for establishing and maintaining adequate
internal control over financial reporting. Internal control over financial reporting is defined in
Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process
designed by, or under the supervision of, the Companys principal executive and principal financial
officers and effected by the Companys board of directors, management, and other personnel, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted accounting
principles and includes those policies and procedures that:  
    Pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of the assets of
the Company;
    Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of the
Company are being made only in accordance with authorizations of management and
directors of the Company; and
    Provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of the Companys assets that could
have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate. The Companys management assessed the effectiveness of the Companys internal control over
financial reporting as of December 31, 2004. In making this assessment, the Companys management
used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in Internal Control-Integrated Framework. Based on our assessment, management believes that, as of December 31, 2004, the Companys
internal control over financial reporting is effective based on those criteria. The Companys independent registered public accounting firm has issued an audit report on our
assessment of the Companys internal control over financial reporting. The independent registered
public accounting firms report follows this report. 37




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##### 



Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders of
The Liberty Corporation: We have audited managements assessment, included in the accompanying Managements Report on
Internal Control over Financial Reporting, that The Liberty Corporation maintained effective
internal control over financial reporting as of December 31, 2004, based on criteria established in
Internal Control-Integrated Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission (the COSO criteria). The Liberty Corporations management is responsible for
maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting. Our responsibility is to express an
opinion on managements assessment and an opinion on the effectiveness of the companys internal
control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating managements assessment, testing and evaluating the
design and operating effectiveness of internal control, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis
for our opinion. A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a material effect on the
financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate. In our opinion, managements assessment that The Liberty Corporation maintained effective internal
control over financial reporting as of December 31, 2004, is fairly stated, in all material
respects, based on the COSO criteria. Also, in our opinion, The Liberty Corporation maintained, in
all material respects, effective internal control over financial reporting as of December 31, 2004,
based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of The Liberty
Corporation and Subsidiaries as of December 31, 2004 and 2003,
and the related consolidated statements of income, shareholders
equity, and cash flows for each of the three years in the period
ended December 31, 2004 of The Liberty Corporation and
our report dated March 2, 2005, expressed an unqualified opinion thereon. /s/ Ernst & Young LLP Greenville, South Carolina
March 2, 2005 38




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##### 



Changes in internal control over financial reporting. During the fourth fiscal quarter, there has been no change in the Companys internal control
over financial reporting that has materially affected, or is reasonably likely to materially
affect, the registrants internal control over financial reporting. Item 9B. Other Information None. PART III Item 10. Directors and Executive Officers of the Registrant Information concerning Directors of the Company is contained in The Liberty Corporation
Proxy Statement for the May 3, 2005 Annual Meeting of Shareholders and is incorporated in this Item
10 by reference. Executive Officers The following is a list of the Executive Officers of the Registrant indicating their age and
certain biographical data. W. HAYNE HIPP, Age 65Chairman of the Board of Liberty since May, 1995Chairman of the Board of Cosmos since May, 1995Chief Executive Officer of Liberty since January, 1979HOWARD L. SCHROTT, Age 50Chief Financial Officer of Liberty since January, 2001Chief Financial Officer of Wink Communications Inc., a provider of complete end-to-end systems
for low-cost electronic commerce on television, from May, 1999 to December, 2000Chief Financial Officer of Emmis Communications Corporation, a diversified media company, from
1991, to May, 1999JAMES M. KEELOR, Age 62President of Liberty since February, 2002President of Cosmos since February, 1992Vice President, Operations, of Cosmos from December, 1989 to February, 1992MARTHA G. WILLIAMS, Age 63Vice President, General Counsel & Secretary of Liberty since January, 1982Secretary and Counsel of Cosmos since February, 1982JONATHAN W. NORWOOD, Age 36Controller of Liberty since April, 2001Chief Financial Officer of TeamVest, a provider of 401(k) retirement plan services, from
January, 2000 to March, 2001Director of Finance of TeamVest from March, 1996 to December, 1999
 Item 11. Executive Compensation Information concerning Executive Compensation and transactions is contained in The
Liberty Corporation Proxy Statement for the May 3, 2005 Annual Meeting of Shareholders and is
incorporated in this Item 11 by reference. 39




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##### 



Item 12. Security Ownership of Certain Beneficial Owners and Management Information concerning Security Ownership of Certain Beneficial Owners and Management is
contained in The Liberty Corporation Proxy Statement for the May 3, 2005 Annual Meeting of
Shareholders and is incorporated in this Item 12 by reference. Equity Compensation Plan Information  Number of SecuritiesRemaining Available ForNumber of Securities To Be
    
    
    Weighted-Average
    
    
    Future Issuance UnderIssued Upon Exercise of
    
    
    Exercise Price of
    
    
    Equity Compensation PlansOutstanding Options,
    
    
    Outstanding Options,
    
    
    (Excluding SecuritiesWarrants, and Rights
    
    
    Warrants, and Rights
    
    
    Reflected in Column(a))Plan Category
    
    (a)
    
    
    (b)
    
    
    (c)Equity compensation
plans approved by
security holders
    
    
    907,380
    
    
    $
    35.37
    
    
    
    297,513Equity compensation
plans not approved
by security holders
    
    
    
    
    
    
    N/A
    
    
    
    N/ATotal
    
    
    907,380
    
    
    $
    35.37
    
    
    
    297,513
 Item 13. Certain Relationships and Related Transactions Information concerning Certain Relationships and Related Transactions is contained in The
Liberty Corporation Proxy Statement for the May 3, 2005 Annual Meeting of Shareholders and is
incorporated in this Item 13 by reference. Item 14. Principal Accounting Fees and Services Information concerning Principal Accounting Fees and Services is contained in The Liberty
Corporation Proxy Statement for the May 3, 2005 Annual Meeting of Shareholders and is incorporated
in this Item 14 by reference. PART IV Item 15. Exhibits, Financial Statement Schedules. (a) (1) and (2). List of Financial Statements and Financial Statement Schedules The following consolidated financial statements of The Liberty Corporation and
Subsidiaries for the three years ended December 31, 2004 are submitted in Part II, Item 8 of this
report: Consolidated Balance Sheets  December 31, 2004 and 2003Consolidated Statements of Income  For the three years ended December 31, 2004Consolidated Statements of Shareholders Equity  For the three years ended December 31, 2004Consolidated Statements of Cash Flows  For the three years ended December 31, 2004Notes to Consolidated Financial Statements  December 31, 2004
 The following consolidated financial statement schedule of The Liberty Corporation and
Subsidiaries is included in Item 15(c): II  Valuation and Qualifying Accounts and Reserves All schedules for which provision is made in the applicable accounting regulation of the
Securities and Exchange Commission, but which are excluded from this report, are not required under
the related instructions or are inapplicable, and therefore have been omitted. 40




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(a)(3). List of Exhibits  3.1
    Restated Articles of Incorporation, as amended through May 6, 1997 (filed with the
Registrants Quarterly Report on Form 10Q/A for the period ended March 31, 1997 and
incorporated herein by reference)3.2
    Bylaws, as amended through August 3, 1999, filed as Exhibit 3.2 to the Registrants
Form 10-Q for the quarter ended June 30, 1999, and incorporated herein by reference.4.1
    See Articles 4, 5, 7 and 9 of the Companys Restated Articles of Incorporation (filed
as Exhibit 3.1) and Articles I, II and VI of the Companys Bylaws (filed as Exhibit 3.2).4.2
    See the Form of Rights Agreement dated as of August 7, 1990 between The Liberty
Corporation and The Bank of New York, as Rights Agent, which includes as Exhibit B thereto
the form of Right Certificate (filed as Exhibits 1 and 2 to the Registrants Form 8-A,
dated August 10, 1990, and incorporated herein by reference) with respect to the Rights to
purchase Series A Participating Cumulative Preferred Stock, and the Registrants Form 8-A,
dated October 12, 2000 amending the Form of Rights Agreement to, among other things,
appoint a successor rights agent (American Stock Transfer & Trust Company), and extend the
expiration date to August 7, 2010, also incorporated herein by reference.4.3
    See Credit Agreement dated March 21, 2001 (filed as Exhibit 10 to the Registrants
Quarterly Report on Form 10Q for the quarter ended June 30, 2001, and incorporated herein
by reference) ,the related Third Amendment To Credit Agreement dated May 20, 2002 (filed as
Exhibit 10 to the Registrants Quarterly Report on Form 10Q for the quarter ended June 30,
2002, and incorporated herein by reference), the Fourth Amendment To Credit Agreement dated
May 19, 2003 (filed as Exhibit 10 to the Registrants Quarterly Report on Form 10Q for the
quarter ended June 30, 2003, and incorporated herein by reference) and the Sixth Amendment
To Credit Agreement dated January 26, 2005 (filed as Exhibit 10.01 to the Registrants
Current Report on Form 8-K dated January 26, 2005, and incorporated herein by reference).10.1
    See Credit Agreement dated March 21, 2001, and the related Third Amendment To Credit
Agreement dated May 20, 2002, Fourth Amendment To Credit Agreement dated May 19, 2003 and
the Sixth Amendment To Credit Agreement dated January 26, 2005 (filed as Exhibit 4.3).10.2
    The Liberty Corporation Performance Incentive Compensation Program, as amended and
restated on February 1, 2000, filed as Exhibit 10.2 to the Registrants Form 10-Q for the
quarter ended March 31, 2000, and incorporated herein by reference.10.3
    The Liberty Corporation Supplemental Executive Savings Plan as Amended and Restated
Effective December 31, 200411.
    The Liberty Corporation and Subsidiaries Consolidated Earnings per Share Computation
included in Note 12 of the Notes to Consolidated Financial Statements filed on page 33 of
this report.21.
    The Liberty Corporation and Subsidiaries, List of Subsidiaries23.
    Consent of Independent Registered Public Accounting Firm24.
    Powers of Attorney applicable for certain signatures of members of the Board of
Directors in Registrants10-K filed for the years ended December 31, 1983, 1985, 1989,
1994, 1995, 1996, 1997 1998, 1999, 2000, and 2001.31.
    Rule 13a-14(a)/15d-14(a) Certifications32.
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 41




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##### 



(b). Exhibits Filed With This Report  10.3
    The Liberty Corporation Supplemental Executive Savings Plan as Amended and Restated
Effective December 31, 200411.
    The Liberty Corporation and Subsidiaries Consolidated Earnings per Share Computation
included in Note 12 of the Notes to Consolidated Financial Statements filed on page 33 of
this report.21.
    The Liberty Corporation and Subsidiaries, List of Subsidiaries23.
    Consent of Independent Registered Public Accounting Firm31.
    Rule 13a-14(a)/15d-14(a) Certifications32.
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 42




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##### 



(c). Consolidated Financial Statement Schedule Filed With This Report II
 Valuation and Qualifying Accounts and Reserves  For the Three Years Ended December 31, 2004 THE LIBERTY CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE THREE YEARS ENDED DECEMBER 31, 2004
(In $000s) AdditionsBalance at
    
    
    Charged to
    
    
    Charged to
    
    
    
    
    
    
    Balance atBeginning
    
    
    Costs and
    
    
    Other
    
    
    
    
    
    
    EndDeducted From Asset Accounts
    
    of Period
    
    
    Expenses
    
    
    Accounts
    
    
    Deductions
    
    
    of PeriodYear Ended December 31, 2004Accounts receivable -
reserve for bad debts
    
    $
    1,738
    
    
    $
    958
    
    
    $
    
    
    
    $
    377
    (a)
    
    $
    2,319Deferred income taxes -
reserve for deferred tax assets
    
    $
    2,980
    
    
    $
    1,665
    
    
    $
    
    
    
    $
    
    
    
    $
    4,645Year Ended December 31, 2003Accounts receivable -
reserve for bad debts
    
    $
    1,963
    
    
    $
    757
    
    
    $
    
    
    
    $
    982
    (a)
    
    $
    1,738Deferred income taxes -
reserve for deferred tax assets
    
    $
    1,450
    
    
    $
    1,530
    
    
    $
    
    
    
    $
    
    
    
    $
    2,980Year Ended December 31, 2002Accounts receivable -
reserve for bad debts
    
    $
    2,250
    
    
    $
    1,215
    
    
    $
    
    
    
    $
    1,502
    (a)
    
    $
    1,963Deferred income taxes -
reserve for deferred tax assets
    
    $
    1,450
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,450
 Notes:
(a) Uncollectible accounts written off, net of recoveries. 43




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##### 



SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized, as of the 2nd day of March, 2005. THE LIBERTY CORPORATION
    
    
    
    By:
    
    /s/ Hayne HippRegistrant
    
    
    
    
    
    Hayne HippChief Executive Officer
 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the capacities indicated,
as of the 2nd day of March, 2005. By:
    
    /s/ Howard L. Schrott
    
    
    
    *By:
    
    /s/ Frank E. MeltonHoward L. Schrott
    
    
    
    
    
    Frank E. MeltonChief Financial Officer
    
    
    
    
    
    Director*By:
    
    /s/ Edward E. Crutchfield
    
    
    
    *By:
    
    /s/ John H. Mullin IIIEdward E. Crutchfield
    
    
    
    
    
    John H. Mullin IIIDirector
    
    
    
    
    
    Director*By:
    
    /s/ John R. Farmer
    
    
    
    *By:
    
    /s/ J. Thurston RoachJohn R. Farmer
    
    
    
    
    
    J. Thurston RoachDirector
    
    
    
    
    
    DirectorBy:
    
    /s/ Hayne Hipp
    
    
    
    *By:
    
    /s/ Eugene E. Stone, IVHayne Hipp
    
    
    
    
    
    Eugene E. Stone, IVDirector
    
    
    
    
    
    Director*By:
    
    /s/ William O. McCoy
    
    
    
    *By:
    
    /s/ William B. TimmermanWilliam O. McCoy
    
    
    
    
    
    William B. TimmermanDirector
    
    
    
    
    
    Director*By:
    
    /s/ Martha G. Williams*Martha G. Williams,as Special Attorney in Fact
 44




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##### 



Annual Report on Form 10-K
The Liberty Corporation
December 31, 2004 Index to Exhibits PageEXHIBITS
    
    Number10.3
    
    The Liberty Corporation Supplemental Executive Savings Plan as
Amended and Restated Effective December 31, 2004
    
    
    4611.
    
    The Liberty Corporation and Subsidiaries Consolidated Earnings Per Share
Computation (incorporated herein by reference to Note 12 of the Notes to
Consolidated Financial Statements included in Part II Item 8 of this
report).
    
    
    3321.
    
    The Liberty Corporation and Subsidiaries, List of Significant Subsidiaries
    
    
    5323
    
    Consent of Independent Registered Public Accounting Firm
    
    
    5431
    
    Rule 13a-14(a)/15d-14(a) Certifications
    
    
    55-5632
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
    
    
    57
 45