---

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SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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Form 10-Q

(Mark One)

|/x/ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|--- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 31, 2001

OR

|/ / | Transition Report Pursuant to Section 13 Or 15(d) of the Securities Exchange Act of 1934
|--- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission file number: 0-1461

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LIBERTY LIVEWIRE CORPORATION(Exact name of registrant as specified in its charter)

Delaware

13-1679856(State or other jurisdiction
of incorporation)

(I.R.S. Employer
Identification No.)


520 Broadway, Santa Monica, CA 90401(Address of principal executive offices) (Zip Code)

Registrant's
telephone number, including area code:(310) 434-7000

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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 such filing requirements for the past
90 days. Yes /x/  No / /

The
number of shares of common stock outstanding at May 7, 2001 was 5,362,418 Class A shares and 32,297,292 Class B shares.

---

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LIBERTY LIVEWIRE CORPORATION

Quarterly Report on Form 10-Q
March 31, 2001

Index

|                                                                                             |                                                                                                                             |    | Page
|-------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------- | -- | ----
|Part IFinancial Information                                                                 |                                                                                                                             |   
|Item 1Financial Statements                                                                  |                                                                                                                             |   
|                                                                                             | The following financial statements are filed herewith:                                                                      |    |     
|                                                                                             | Condensed Consolidated Balance Sheets, March 31, 2001 (Unaudited) and December 31, 2000 (Audited)                           |    | 3   
|                                                                                             | Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2001 and February 29, 2000 (Unaudited) |    | 5   
|                                                                                             | Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2001 and February 29, 2000 (Unaudited) |    | 6   
|                                                                                             | Notes to Condensed Consolidated Financial Statements                                                                        |    | 8   
|Item 2Management's Discussion and Analysis of Financial Condition and Results of Operations |                                                                                                                             | 13
|Item 3Quantitative and Qualitative Disclosures About Market Risk                            |                                                                                                                             | 16
|Part IIOther Information                                                                    |                                                                                                                             |   
|Item 1Legal Proceedings                                                                     |                                                                                                                             | 17
|Item 6Exhibits and Reports on Form 8-K                                                      |                                                                                                                             | 17
|Signature                                                                                    |                                                                                                                             | 18

2

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LIBERTY LIVEWIRE CORPORATION

Condensed Consolidated Balance Sheets
(Amounts in thousands, except share and per share amounts)

Assets

|                                                                                                                                               |                                                                                                                        | March 31, 2001 |           | December 31, 2000
|---------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------- | -------------- | --------- | -----------------
|
|Current assets:                                                                                                                                |                                                                                                                        |                |           |                  
|                                                                                                                                               | Cash and cash equivalents                                                                                              |                | $         | 13,499           
|                                                                                                                                               | Marketable securities                                                                                                  |                |           | 3,788            
|                                                                                                                                               | Trade receivables (net of allowance for doubtful accounts of $8,899 at March 31, 2001 and $5,567 at December 31, 2000) |                |           | 112,169          
|                                                                                                                                               | Inventories                                                                                                            |                |           | 4,723            
|                                                                                                                                               | Deferred income taxes, net                                                                                             |                |           | 6,707            
|                                                                                                                                               | Prepaid deposits and other                                                                                             |                |           | 16,261           
|                                                                                                                                               |                                                                                                                        |                |           |                  
|                                                                                                                                               | Total current assets                                                                                                   |                |           | 157,147          
|                                                                                                                                               |                                                                                                                        |                |           |                  
|Property, plant and equipment (net of accumulated depreciation and amortization of $50,763 at March 31, 2001 and $35,076 at December 31, 2000) |                                                                                                                        |                | 404,437   |                  
|Due from parent                                                                                                                                |                                                                                                                        |                | 8,609     |                  
|Goodwill and identifiable intangible assets (net of accumulated amortization of $31,831 at March 31, 2001 and $21,356 at December 31, 2000)    |                                                                                                                        |                | 685,019   |                  
|Other assets (net of accumulated amortization of $828 at March 31, 2001 and $555 at December 31, 2000)                                         |                                                                                                                        |                | 16,024    |                  
|                                                                                                                                               |                                                                                                                        |                |           |                  
|                                                                                                                                               |                                                                                                                        | $              | 1,271,236 |                  
|                                                                                                                                               |                                                                                                                        |                |           |                  

See
notes to condensed consolidated financial statements

3

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LIBERTY LIVEWIRE CORPORATION

Condensed Consolidated Balance Sheets (Continued)
(Amounts in thousands, except share and per share amounts)

Liabilities and Stockholders' Equity

|                                             |                                                                                                                                                    | March 31, 2001 |           | December 31, 2000 |  
|-------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------- | -------------- | --------- | ----------------- | -
|
|Current liabilities:                         |                                                                                                                                                    |                |           |                   |  
|                                             | Accounts payable and accrued liabilities                                                                                                           |                | $         | 93,023            |  
|                                             | Interest rate swap and accrued interest                                                                                                            |                |           | 5,110             |  
|                                             | SARs compensation payable                                                                                                                          |                |           | 6,023             |  
|                                             | Current maturities of long-term debt and capital lease obligations                                                                                 |                |           | 22,093            |  
|                                             |                                                                                                                                                    |                |           |                   |  
|                                             | Total current liabilities                                                                                                                          |                |           | 126,249           |  
|                                             |                                                                                                                                                    |                |           |                   |  
|Long-term debt and capital lease obligations |                                                                                                                                                    |                | 419,527   |                   |  
|Convertible subordinated debt                |                                                                                                                                                    |                | 151,975   |                   |  
|Other liabilities                            |                                                                                                                                                    |                | 2,708     |                   |  
|Deferred income taxes, net                   |                                                                                                                                                    |                | 10,138    |                   |  
|                                             |                                                                                                                                                    |                |           |                   |  
|                                             | Total liabilities                                                                                                                                  |                |           | 710,597           |  
|                                             |                                                                                                                                                    |                |           |                   |  
|Commitments and contingencies                |                                                                                                                                                    |                |           |                   |  
|Stockholders' equity:                        |                                                                                                                                                    |                |           |                   |  
|Common stock:                                |                                                                                                                                                    |                |           |                   |  
|                                             | Class A; authorized 300,000,000 shares of $0.01 par value; issued 5,362,418 at March 31, 2001 and 5,384,506 at December 31, 2000                   |                |           | 54                |  
|                                             | Class B; authorized 100,000,000 shares of $0.01 par value; issued and outstanding 32,297,292 at March 31, 2001 and 31,612,716 at December 31, 2000 |                |           | 323               |  
|Additional paid-in capital                   |                                                                                                                                                    |                | 597,218   |                   |  
|Retained deficit                             |                                                                                                                                                    |                | (23,287   | )                 |  
|Deferred tax asset to be utilized by parent  |                                                                                                                                                    |                | (2,382    | )                 |  
|Accumulated other comprehensive loss         |                                                                                                                                                    |                | (11,030   | )                 |  
|Other stockholders' equity                   |                                                                                                                                                    |                | (257      | )                 |  
|                                             |                                                                                                                                                    |                |           |                   |  
|Total stockholders' equity                   |                                                                                                                                                    |                | 560,639   |                   |  
|                                             |                                                                                                                                                    |                |           |                   |  
|                                             |                                                                                                                                                    | $              | 1,271,236 |                   | $
|                                             |                                                                                                                                                    |                |           |                   |  

See
notes to condensed consolidated financial statements

4

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LIBERTY LIVEWIRE CORPORATION

Condensed Consolidated Statements of Operations (Unaudited)
(Amounts in thousands, except share and per share amounts)

|                                                      |                                    | Post Todd Merger         |            | Pre Todd Merger |        
|----------------------------------------------------- | ---------------------------------- | ------------------------ | ---------- | --------------- | -------
|
|
|
|Revenues                                              |                                    | $                        | 154,303    |                 | $      
|                                                      |                                    |                          |            |                 |        
|Costs and expenses:                                   |                                    |                          |            |                 |        
|                                                      | Operating costs and other expenses |                          |            | 122,634         |        
|                                                      | Non-cash compensation expense      |                          |            | 5,129           |        
|                                                      | Depreciation and amortization      |                          |            | 30,746          |        
|                                                      | Interest                           |                          |            | 13,590          |        
|                                                      | Other expensenet                  |                          |            | 126             |        
|                                                      |                                    |                          |            |                 |        
|                                                      |                                    | Total costs and expenses |            |                 | 172,225
|                                                      |                                    |                          |            |                 |        
|Loss before benefit for income taxes                  |                                    |                          | (17,922    | )               |        
|Benefit for income taxes                              |                                    |                          | (4,428     | )               |        
|                                                      |                                    |                          |            |                 |        
|Net loss                                              |                                    | $                        | (13,494    | )               | $      
|                                                      |                                    |                          |            |                 |        
|Weighted average shares outstandingbasic and diluted |                                    |                          | 37,003,316 |                 |        
|                                                      |                                    |                          |            |                 |        
|Net loss per common sharebasic and diluted           |                                    | $                        | (0.36      | )               | $      
|                                                      |                                    |                          |            |                 |        

See
notes to condensed consolidated financial statements

5

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LIBERTY LIVEWIRE CORPORATION

Condensed Consolidated Statements of Cash Flows (Unaudited)
(Amounts in thousands)

|                                                     |                                                             | Post Todd Merger |          | Pre Todd Merger |  
|---------------------------------------------------- | ----------------------------------------------------------- | ---------------- | -------- | --------------- | -
|
|
|
|Net cash flows provided by operating activities      |                                                             | $                | 5,616    |                 | $
|                                                     |                                                             |                  |          |                 |  
|Cash Flows from Investing Activities:                |                                                             |                  |          |                 |  
|                                                     | Purchase of marketable securities and investments           |                  |          |                |  
|                                                     | Proceeds from sale of marketable securities and investments |                  |          | 4,471           |  
|                                                     | Investment in LNS                                           |                  |          | (300            | )
|                                                     | Cash paid for GWNS, net of cash received                    |                  |          | (107,902        | )
|                                                     | Capital expenditures                                        |                  |          | (15,708         | )
|                                                     |                                                             |                  |          |                 |  
|Net cash flows used in investing activities          |                                                             |                  | (119,439 | )               |  
|                                                     |                                                             |                  |          |                 |  
|Cash Flows from Financing Activities:                |                                                             |                  |          |                 |  
|                                                     | Borrowings of long-term debt                                |                  |          | 15,000          |  
|                                                     | Borrowings under convertible subordinated debt, net         |                  |          | 95,801          |  
|                                                     | Payments of long-term debt                                  |                  |          | (2,249          | )
|                                                     | Payments for SARs exercised                                 |                  |          | (85             | )
|                                                     | Proceeds from sale/leaseback transaction                    |                  |          |                |  
|                                                     | Proceeds from exercise of stock options                     |                  |          |                |  
|                                                     |                                                             |                  |          |                 |  
|Net cash flows provided by financing activities      |                                                             |                  | 108,467  |                 |  
|Effect of exchange rate changes on cash              |                                                             |                  | (611     | )               |  
|                                                     |                                                             |                  |          |                 |  
|Net (decrease) increase in cash and cash equivalents |                                                             |                  | (5,967   | )               |  
|Cash and cash equivalents at beginning of period     |                                                             |                  | 19,466   |                 |  
|                                                     |                                                             |                  |          |                 |  
|Cash and cash equivalents at end of period           |                                                             | $                | 13,499   |                 | $
|                                                     |                                                             |                  |          |                 |  

See
notes to condensed consolidated financial statements

6

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LIBERTY LIVEWIRE CORPORATION

Condensed Consolidated Statements of Cash Flows (Unaudited)
(Amounts in thousands)
(Continued)

Supplemental Disclosures of Non Cash Investing and Financing Activities:

The Company recorded a discount of $23 million on the borrowing under the convertible subordinated debt agreement as a result of a beneficial conversion rate
at the date of the borrowing.

The
Company recorded a liability in the amount of $4.1 million for changes in the fair value of its interest rate swap.

Pursuant
to the Company's convertible subordinated debt agreement, the Company issued Class B common stock valued at $3.8 million to Liberty Media in lieu of interest.

On
February 1, 2001, the Company acquired substantially all of the U.S. assets of the business unit known as Group W Network Services and 100% of the outstanding capital stock
of its wholly owned subsidiaries Asia Broadcast Centre Pte., Ltd. and Group W Yarra Broadcast Pte., Ltd. In connection with the acquisition, the Company paid cash as follows:

Assets acquired:Property, plant and equipmentnet

$
46,622Trade and other receivablesnet


7,203Prepaid deposits and other


3,681Other assets


2,625Goodwill


60,782Liabilities assumed:Accounts payable and accrued expenses


(6,378
)Long-term debt and capital lease obligations


(6,633
)Cash paid in acquisition, net of cash received

$
107,902


See
notes to condensed consolidated financial statements

7

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LIBERTY LIVEWIRE CORPORATION

Notes To Condensed Consolidated Financial Statements

1. Change in Control and Basis of Presentation

Change in Control

On June 9, 2000 Liberty Media Corporation ("Liberty Media") acquired a controlling interest in The Todd-AO Corporation ("Todd-AO") from its existing
shareholders ("Todd Merger"). For financial statement purposes, the acquisition by Liberty Media is deemed to have occurred on June 1, 2000. In connection with the Todd Merger, the shareholders
of Todd-AO approved the change of the Company's name to Liberty Livewire Corporation ("Livewire" or, the "Company"). Liberty Media owns 100% of Livewire's Class B Common Stock. Liberty Media's
aggregate ownership interest in the Company's equity, which consists of both Class A Common Stock and Class B Common Stock, as of March 31, 2001, represents approximately 85.7% of the
Company's outstanding equity and 98.4% of its voting control.

Liberty
Media is an indirect wholly owned subsidiary of AT&T. It's former parent, Tele-Communications, Inc ("TCI"), was acquired by AT&T by merger in March 1999. Liberty Media
and its subsidiaries constitute substantially all of the businesses and assets of the Liberty Media Group. Liberty Media Group Class A ("LMGA") and Class B ("LMGB") Common Stock are
tracking stocks of AT&T that are intended to reflect the economic performance of the Liberty Media Group.

Basis of Presentation.

Due to the level of ownership of the Company obtained by Liberty Media as a result of the merger as discussed above, and the contribution of Four Media Company
("4MC") to Livewire, Liberty Media has applied "push down" accounting and transferred to the Company the preliminary fair value adjustments relating to the assets of Todd-AO at June 9, 2000.
The assets and liabilities of 4MC have been recorded at Liberty Media's historical value including fair value adjustments resulting from the acquisition of 4MC by Liberty Media.

The
accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The condensed consolidated financial
statements for the three months ended February 29, 2000 represent the consolidated financial condition and results of operations of Todd-AO before the acquisition by Liberty Media. For further
information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2000 as amended by
Amendment No. 1 on Form 10-K/A.

The
condensed consolidated financial statements include the Company and its wholly owned subsidiaries. All significant inter-company accounts and transactions have been eliminated in
consolidation. In the opinion of management for the Company, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation have been included.

Certain
reclassifications have been made to the prior periods' condensed consolidated financial statements to conform to the current period's presentation.

2. Restatement

The Company has restated the financial statement information of Todd-AO for the three months ended February 29, 2000 to include additional depreciation
expense of $272,000 and to reclassify $238,000 of interest expense to operating costs and other expenses.

8

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3. Acquisitions

On January 5, 2001, Livewire entered into an Ownership Interest Purchase Agreement (the "Purchase Agreement") with ANS Acquisition Sub, Inc.
("ANS"), a direct, wholly owned subsidiary of Livewire, and Ascent Entertainment Group, Inc. ("AEG"). Liberty Media is the sole stockholder of AEG. Pursuant to the Purchase Agreement, on
January 5, 2001, (i) Ascent Network Services, a division of AEG, contributed all of its assets to Livewire Network Services, LLC ("LNS"), a direct, wholly owned subsidiary of AEG,
(ii) ANS purchased a 1% ownership interest in LNS from AEG in exchange for $300,000 in cash, and (iii) ANS and AEG entered into the Operating Agreement of LNS (the "Operating
Agreement").

Under
the Operating Agreement, ANS is appointed as manager of LNS. The Operating Agreement also contains a put-call provision, pursuant to which ANS may elect to purchase from AEG, or
AEG may elect to sell to ANS, at certain times during the 2001 calendar year, the remaining 99% of the ownership interests of LNS owned by AEG (the "Put-Call"). The purchase price under the Put-Call
will be payable in cash and will total $29.7 million plus an additional return on that amount accrued at the annual rate of 10% from the date of the Purchase Agreement to the date of acquisition of
the 99% interest.

On
February 1, 2001, the Company acquired substantially all of the U.S. assets of the business unit known as Group W Network Services and 100% of the outstanding capital stock
of Asia Broadcast Centre Pte., Ltd. and Group W Yarra Broadcast Pte., Ltd. (collectively "GWNS") for $107.9 million in cash, subject to certain post-closing purchase price adjustments, from
Viacom, Inc. The consideration was allocated based on the preliminary fair values of the assets and liabilities acquired with the excess consideration of $60.8 million recorded as goodwill.
Livewire financed the acquisition with debt from the Liberty Media convertible subordinated debt in the amount of $82 million, borrowings from Liberty Media evidenced by additional non-convertible
subordinated notes in the aggregate amount of $13.8 million and an additional $13.4 million from the Company's revolving credit facility. GWNS, with operations in Stamford, CT, Minneapolis, MN and
Singapore is a leading technical service provider in the broadcast industry, providing a wide array of program channel origination, studio production, post production, graphics and satellite
transmission services to both domestic and international broadcasters.

The
acquisition of GWNS was accounted for under the purchase method of accounting. The Company is currently in the process of obtaining additional information, including appraisals,
in order to finalize the purchase price and purchase price allocation. The following unaudited pro forma consolidated financial information for the three months ended March 31, 2001 and
February 29, 2000 is presented as if all of the acquisitions made by the Company subsequent to December 1, 1999 had occurred on December 1, 1999. Pro forma adjustments are
primarily for amortization of goodwill, depreciation adjustments, interest expense on borrowings in connection with the acquisition, and income taxes. No pro forma adjustments have been included for
the pre-acquisition time periods for potential fluctuations in the liability recorded for the stock appreciation rights granted in the 4MC acquisition, including effects of market fluctuations or
estimates of exercises.

(Amounts in thousands)

2001

2000Revenues

$
157,993

$
161,598Net loss

$
(14,648
)
$
(12,230
)Net loss per common shareBasic and Diluted

$
(0.39
)
$
(0.34
)


9

---

4. Comprehensive Income

Comprehensive income is defined as all changes in shareholders' equity, except those resulting from investments by or distributions to shareholders. The
Company's comprehensive income is as follows:

Post Todd Merger

Pre Todd MergerLivewire

Todd-AOThree Months Ended March 31, 2001

Three Months Ended February 29, 2000(Amounts in thousands)Net loss

$
(13,494
)
$
(715
)Unrealized gain on marketable securities


1,607


742Mark-to-market loss for derivative transactions


(4,093
)

Foreign currency translation adjustments


(1,610
)

(315
)Comprehensive loss

$
(17,590
)
$
(288
)


5. Segment Reporting

Since the change in control of the Company pursuant to the Todd Merger in June 2000, the Company's business units have been aggregated into four
reportable operating segments: Content Preparation, Content Management, Content Distribution and Europe. Other includes corporate related items and income and expenses not allocated to reportable
segments. The Company's reportable operating segments have been determined in accordance with the Company's internal management structure, which is organized based on operating activities. The Company
evaluates performance based upon several factors, including segment EBITDA. EBITDA is defined by the Company as earnings before interest, taxes, depreciation, amortization, and excludes gains and
losses on asset sales, non-cash compensation, and non-recurring charges.

Periods
prior to June 1, 2000 have been restated to conform to the current reportable operating segments.

Summarized
financial information concerning the Company's reportable segments is shown in the following tables:

|Post Todd Merger
Livewire                        |                                       | Content Preparation |   | Content Management |  | Content Distribution |        | Europe |   | Other  |  | Total
|------------------------------------------------ | ------------------------------------- | ------------------- | - | ------------------ |  | -------------------- | ------ | ------ | - | ------ |  | -----
|
|Three Months Ended March 31, 2001 (Unaudited):   |                                       |                     |   |                    |  |                      |        |        |   |        |  |      
|                                                 | Revenues                              |                     | $ | 77,187             |  | $                    | 18,438 |        | $ | 33,277 |  | $    
|                                                 | EBITDA                                |                     |   | 18,652             |  |                      | 6,319  |        |   | 7,658  |  |      
|                                                 | Capital expenditures                  |                     |   | 7,130              |  |                      | 317    |        |   | 2,859  |  |      
|                                                 | Depreciation and amortization expense |                     |   | 11,184             |  |                      | 2,712  |        |   | 3,573  |  |      
|
|Three Months Ended February 29, 2000 (Unaudited) |                                       |                     |   |                    |  |                      |        |        |   |        |  |      
|                                                 | Revenues                              |                     | $ | 19,260             |  | $                    | 3,565  |        |   |       |  | $    
|                                                 | EBITDA                                |                     |   | 2,118              |  |                      | 703    |        |   |       |  |      
|                                                 | Capital expenditures                  |                     |   | 2,208              |  |                      | 139    |        |   |       |  |      
|                                                 | Depreciation and amortization expense |                     |   | 2,274              |  |                      | 332    |        |   |       |  |      

10

---

The following table reconciles segment EBITDA to the Company's consolidated net loss:

Post Todd Merger

Pre Todd MergerLivewire

Todd-AOThree Months Ended March 31, 2001

Three Months Ended February 29, 2000(Amounts in thousands)EBITDA

$
31,669

$
4,309Depreciation and amortization


(30,746
)

(3,990
)Interest expense


(13,590
)

(1,001
)Non-cash compensation


(5,129
)

Other expense


(126
)

(175
)Income tax benefit


4,428


142Net loss

$
(13,494
)
$
(715
)


6. Accounting Standards

Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (FAS No. 133), which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging
activities. All derivatives, whether designated in hedging relationships or not, are required to be recorded on the balance sheet at fair value. If the derivative is designated as a cash flow hedge,
the effective portions of changes in the fair value of the derivative are recorded in other comprehensive income (OCI) and are recognized in the income statement when the hedged item affects earnings.
Ineffective portions of changes in the fair value of cash flow hedges are recognized in earnings. If the derivative is not designated as a hedge, changes in the fair value of the derivative are
recognized in earnings. Derivative gains and losses included in OCI are reclassified into earnings at the time of sale or termination of the respective financial instrument.

The
adoption of FAS No. 133 on January 1, 2001 did not have a material effect on the Company's financial statements. The Company has only one derivative instrument, an interest
rate swap, which was outstanding at December 31, 2000. The fair value of the interest rate swap was not significant at December 31, 2000 as it was cashless when entered into on
December 28, 2000. The interest rate swap, as amended, has an 18-month term with Bank of America, N.A. for a notional amount of $365 million. Under the agreement as amended, the Company is
obligated to pay 5.61% in exchange for receiving three-month LIBOR on the notional amount. Settlements are quarterly and the contract expires June 28, 2002.

The
Company uses this interest rate swap to hedge certain LIBOR based interest rate payments required under certain indebtedness. The Company monitors interest rates and the credit
quality of the counter-party.

For
the three months ended March 31, 2001, OCI included a loss of $4.1 million for changes in the fair value of the interest rate swap.

7. Related Party Transactions

Liberty Media and Livewire are parties to a First Amended and Restated Credit Agreement dated as of December 22, 2000 (the "Liberty Subordinated Credit
Agreement"). The agreement currently provides for aggregate credit commitments of at least $145 million and up to $213.6 million, depending on the availability of additional commitments under the
Senior Credit Agreement with its institutional lenders and subject to the completion of proposed transactions as defined in the agreement. Funds are available at Livewire's option in whole or in part
at any time during the 4-year period June 9, 2000 to

11

---

June 9, 2004 and mature on June 30, 2008. The notes issued under the Liberty Agreement (the "convertible notes") are unsecured senior subordinated obligations, ranking junior to
Livewire's Senior Credit Agreement with its institutional lenders. The convertible notes bear interest at 10% per annum, payable quarterly in arrears either in cash or shares, at Livewire's option of
Livewire's Class B common stock or a combination thereof, subject to certain limits. To the extent interest is paid in shares of Class B common stock, such shares will be valued at 95%
of the trailing ten day average closing price of the Class A common stock of Livewire on the interest payment date. The convertible notes are convertible at the option of Liberty Media into
shares of Livewire's Class B Common Stock at a conversion price of $10.00 per share. At March 31, 2001, the Company had $174.5 million outstanding under the Liberty Subordinated Credit
Agreement, exclusive of a $23 million discount on convertible debt.

The
Company filed its own consolidated federal income tax return until May 31, 2000. Starting June 1, 2000, the Company is included in the consolidated tax return of
AT&T pursuant to the terms of a Tax Liability Allocation and Indemnification Agreement to be entered into with the Company's parent, Liberty Media (the "Tax Sharing Agreement").

The
income tax provision for the Company is calculated based on a hypothetical tax liability determined as if the Company filed a separate tax return.

Under
the Tax Sharing Agreement, the Company will record a current intercompany tax benefit from Liberty Media in periods when it generates taxable losses and such losses are utilized
by Liberty Media to reduce its income tax liability. In periods when the Company generates taxable income, the Company will record current intercompany tax expense. Liberty Media will pay cash to the
Company if the Company becomes disaffiliated for any reason from the combined group that files the joint return and when one of the following occurs: a tax refund is received by Liberty Media that is
determined to relate to amounts paid by Livewire, or the Company has a tax liability under a separate return and had a net cumulative benefit for net operating losses or credits that were utilized by
the Liberty Media Group to the extent of the separate return liability and which would not have expired at the time of the filing of the separate return. Additionally, if the Liberty Media Group does
not own 20% of the voting power (loss of control) of Livewire, Liberty Media will pay Livewire an amount equal to the cumulative net tax benefit utilized by the Liberty Media Group that would not have
expired at the time of loss of control.

8. Stock Options and Stock Appreciation Rights

Pursuant to the acquisition of 4MC by Liberty Media each outstanding 4MC stock option was converted into a stock appreciation right ("SARs"). Upon the election
to exercise, holders of vested SARs have the option of receiving any net cash appreciation of LMGA stock over the exercise price or may exercise into shares of LMGA stock. The accrued expense at
December 31, 2000 was $1 million and the accrued expense at March 31, 2001 is $6.1 million. The condensed consolidated statement of
income for the three months ended March 31, 2001 reflects an expense of $5.1 million due to the increase in the stock price underlying the SARs as of that date.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis provides information concerning our results of operations and financial condition and should be read in conjunction with
the accompanying condensed consolidated financial statements and notes. Additionally, the following discussion and analysis should be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations and financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2000 as amended by Amendment No. 1 on Form
10-K/A. The following discussion focuses on material trends, risks and uncertainties affecting our results of operations and financial condition.

When
used in this document, the words "believes," "expects," "anticipates," "intends" and similar expressions are intended to identify forward looking statements. Such statements are
subject to a number of known, as well as unknown, risks and uncertainties. Actual results in the future could differ materially from those described in the forward looking statements. Such risks and
uncertainties include, but are not limited to, industry-wide market factors such as the timing of, and spending on, feature film and television programming production, foreign and domestic television
advertising, and foreign and domestic spending by broadcasters, cable companies and syndicators on first run and existing content libraries. In addition, our failure to maintain relationships with key
customers and certain key personnel, more rapid than expected technological obsolescence, and failure to integrate acquired operations in expected time frames could also cause actual results to differ
materially from those described in forward looking statements.

Overview of Business

We provide audio and video post-production, transmission, library services, Internet hosting, and audio/video distribution services via satellite and fiber for
the major television producers, motion picture studios, cable and broadcast networks, advertising agencies, and other entertainment content companies. We also provide interactive television services.
Our services integrate and apply a variety of systems and processes to enhance the creation and distribution of entertainment content.

Livewire
is the result of the combination of certain key companies with long standing track records and respected brand names offering "cradle-to-grave" services to our industry. Key
companies acquired include Todd-AO, 4MC, the sound, post-production and certain related businesses of SounDelux, VSC, Group W Network Services and other smaller niche players. Livewire is under the
direction of a management team with extensive experience running worldwide operations in both traditional and new
media Content Preparation (post-production sound and visual effects), Content Management (film, tape, and digital libraries), and Content Distribution (freight, fiber, satellite, and Internet)
services.

We
believe that EBITDA is an important measure of our financial performance. "EBITDA" is defined as earnings before interest, taxes, depreciation, amortization, and excludes gains and
losses on asset sales, non-cash compensation, and non-recurring charges. Our investments in new infrastructure, machine capacity, technology and goodwill arising from our significant acquisition
activity have produced a relatively high depreciation and amortization expense and will remain a significant non-cash charge to earnings. EBITDA is calculated before depreciation and amortization
charges and, in businesses with significant non-cash expenses, is widely used as a measure of cash flow available to pay interest and repay debt, and, to the extent available after debt service and
other required uses, to make acquisitions or invest in capital equipment and new technologies. As a result, we intend to report EBITDA as a measure of financial performance. EBITDA does not represent
cash generated from operating activities in accordance with generally accepted accounting principles ("GAAP") and should not be considered in isolation or as a substitute for other measures of
performance prepared in accordance with GAAP. EBITDA does not reflect capital expenditures that may be required to maintain our market share, revenues and leadership position in our industry.
Moreover, not all

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EBITDA will be available to pay interest or repay debt. Our presentation of EBITDA may not be comparable to similarly titled measures reported by other companies.

In
the following analysis and discussion, Livewire's operations are compared with reference to the segments as described in Note 5 to the accompanying financial statements as well as
to the combination of key companies acquired through merger and acquisitions.

The
operations of Livewire prior to the acquisition and merger in June 2000 are referred to as the operations of Todd-AO (the former name of Livewire prior to the acquisition)
for the purpose of these analysis and discussion and include only a portion of our Content Preparation, Content Management and Europe segments.

The
three months ended March 31, 2001 represent the combined operations of Livewire and the three months ended February 29, 2000 represent only the operations of
Todd-AO. The operating results for the Todd-AO operations are not comparable between the three month periods as the three months ended February 29, 2000 does not include the effects of purchase
accounting adjustments related to the Todd Merger and the three months ended March 31, 2001 includes the effects of purchase accounting adjustments related to the Todd Merger.

Material Changes in Results of Operations

Three Months Ended March 31, 2001 compared to Three Months Ended February 29, 2000

Revenues increased $123.2 million from $31.1 million to $154.3 million. Increases in Content Preparation ($57.9 million), Content Management ($14.9 million),
Content Distribution ($33.3 million) and Europe Operations ($17.1 million) were primarily the result of the merger and post merger acquisitions of 4MC ($71.5 million), SounDelux ($7.2 million),
Triumph ($4.8 million), Soho ($4.8 million), Visiontext ($2 million), VSC ($24.8 million) and GWNS ($7.1 million) which represented $122.2 million of the increase.

Operating
costs and other expenses increased $101 million from $26.8 million to $127.8 million. Increases in Content Preparation ($41.4 million), Content Management ($9.3 million),
Content Distribution ($25.7 million), Europe Operations ($13.9 million) and Other Corporate costs ($10.7 million) were primarily the result of the acquisitions described above. In connection with the
acquisition of 4MC, Liberty Media SARs were recorded by the Company. Due to an increase in the underlying stock price of Liberty Media, an expense of $5.1 million was recorded for the period.

As
a result of the above, EBITDA, as defined by the Company, increased $27.4 million from $4.3 million to $31.7 million for the newly combined Livewire.

Depreciation
and amortization increased $26.7 million from $4 million to $30.7 million. The increase is primarily due to equipment, goodwill and identifiable intangibles acquired in
acquisitions and to the increase in goodwill and identifiable intangibles as a result of the purchase accounting adjustments made in connection with the Todd Merger.

Interest
expense increased $12.6 million from $1 million to $13.6 million. The increase is attributable to additional borrowings under the Credit Facility, the Liberty Media
convertible subordinated debt, and non-convertible subordinated debt primarily for the funding of acquisitions and capital expenditures.

Benefit
for income taxes increased $4.3 million from $142,000 to $4.4 million. The Company's effective tax benefit rate for the current year is approximately 24% primarily due to
permanent differences of approximately $3.5 million arising from disallowed tax deductions for goodwill amortization and disallowed interest.

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Other Business Information

The existing collective bargaining agreement governing contracts and agreements with members of the Screen Actors Guild is set to expire on June 30,
2001. In the event that the collective bargaining agreement is allowed to expire and a strike occurs, dependent upon the length of the strike, such strike could have a materially adverse effect on the
operations, cash flows and financial position of the Company during 2001.

Material Changes in Financial Condition

Liquidity and Capital Resources

Cash Flows

For the three months ended March 31, 2001, the Company generated $5.6 million from operating activities compared to $3.5 million in the three months
ended February 29, 2000. The increase in net cash provided by operations in fiscal 2001 was primarily attributable to increased EBITDA.

Net
cash provided by financing activities was $108.5 million for the three months ended March 31, 2001 compared to $1 million for the three months ended February 29,
2000.

Credit Agreements

Under a new long-term credit agreement, dated December 22, 2000 with several banks and other financial institutions, including Banc of America
Securities, LLC, as agent and a lender (the "Credit Facility"), Livewire may borrow up to $415 million in term and revolving loans, subject to compliance with certain financial covenants and other
borrowing conditions. We may add new lenders to the
agreement (with the consent of the current lenders) increasing the available borrowings by an additional $135 million for a total commitment of $550 million.

At
December 31, 2000, $377 million was outstanding under the Credit Facility. During the three months ended March 31, 2001, the Company borrowed an additional $15
million under the revolving portion of the Credit Facility to fund the GWNS acquisition and general working capital requirements. As of March 31, 2001, $392 million was outstanding under the
Credit Facility and $23 million was available (exclusive of the potential $135 million increase in the total commitment). The Credit Facility is available to refinance existing debt and for general
corporate purposes, capital expenditures and acquisitions.

On
February 1, 2001, the Company drew upon the Liberty Subordinated Credit Agreement for the sum of $82 million to fund the acquisition of GWNS. On the date of the draw, the
fair value of Livewire's Class A common stock exceeded the conversion price by $2.81 per share. The beneficial conversion of $23.0 million was recorded as a discount on convertible debt and an
increase of additional paid in capital. The discount on convertible debt will be amortized as interest expense over the earlier of the remaining term of the Credit Agreement through June 30,
2008 or date of conversion by Liberty Media. Additionally, and in accordance with provisions under the Bank Agreement, the Company borrowed $13.8 million from Liberty Media to fund the acquisition of
GWNS. The indebtedness is evidenced by two (2) non-convertible subordinated notes; one in the principal amount of $9.4 million and the second in the principal amount of $4.4 million. As of
March 31, 2001, $188.3 million was due to Liberty Media under the Liberty Media convertible subordinated debt and non-convertible subordinated debt, exclusive of a $23 million discount on
convertible debt.

The
Company believes that the cash flow from operations, combined with our borrowing capabilities under the Credit Facility and other debt instruments will be sufficient to meet our
anticipated working capital and capital expenditure requirements through the end of 2001.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risks

The Company has only one derivative instrument, an interest rate swap, which was outstanding at December 31, 2000. The fair value of the interest rate
swap was not significant at December 31, 2000 as
it was cashless when entered into on December 28, 2000. The interest rate swap, as amended, has an 18-month term with Bank of America, N.A. for a notional amount of $365 million. Under the
agreement as amended, the Company is obligated to pay 5.61% in exchange for receiving three-month LIBOR on the notional amount. Settlements are quarterly and the contract expires June 28, 2002.

The
Company uses this interest rate swap to manage LIBOR based interest rate payments required under certain indebtedness. The Company monitors interest rates and the credit quality
of the counter-party, a major financial institution, and does not anticipate nonperformance by the counter-party.

The
interest rate swap is designed as a cash flow hedge and is 100% effective. For the three months ended March 31, 2001, Other Comprehensive Income included a loss of $4.1
million for changes in the fair value of the interest rate swap.

Foreign Exchange Rate Risks

We do not, at present, have a policy for managing foreign exchange rate risk beyond the utilization of local currency borrowings to fund foreign acquisitions
whenever possible.

Substantially
all of our foreign transactions are denominated in foreign currencies, including the liabilities of our foreign subsidiaries. Although our foreign transactions are not
generally subject to significant foreign exchange transactions gains or losses, the financial statements of our foreign subsidiaries are translated into United States dollars as part of our
consolidated financial reporting. Fluctuations in the exchange rate therefore will affect our consolidated balance sheets and income statements. Until recently, the British pound and the Singapore
dollar have been stable relative to the United States dollar. However, during the year ended December 31, 2000, the British pound lost approximately 7.7% and the Singapore dollar lost
approximately 4% of their value relative to the US dollar and during the three months ended March 31, 2001, the British pound lost approximately 5.1% and the Singapore dollar lost approximately
4% of their value relative to the US dollar.

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PART IIOTHER INFORMATION

Item 1. Legal Proceedings

We are involved in litigation and similar claims incidental to the conduct of our business. None of the pending actions is likely to have a material adverse
impact on our financial position or results of operations.

Item 2. Changes in Securities and Use of Proceeds

Effective March 31, 2001, the Company issued to Liberty Media 684,576 shares of the Company's Class B Common Stock in payment of $3.8 million in
interest under the Liberty Subordinated Debt Agreement. Such issuance was not registered under the Securities Act of 1933, as amended, pursuant to the exemption from registration afforded by Section
4(2) of that Act. Shares of Class B Common Stock are convertible into shares of the Company's Class A Common Stock, on a one-for-one basis, at any time at the option of the
holder.

Item 6. Exhibits and Reports on Form 8-K





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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

|                 |  |  |  | LIBERTY LIVEWIRE CORPORATION
|---------------- |  |  |  | ----------------------------
|                 |  |  |  |                             
|May 14, 2001Date |  |  |  | By:                         

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