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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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, 2003
|     
|      |  | 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

|                                                       |  | 
|------------------------------------------------------ |  | 
|ASCENT MEDIA GROUP, INC.                              
|                                                      
|(Exact Name of Registrant as Specified in Its Charter)

|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 13-1679856                          
|                                                               |  |                                     
|(State or Other Jurisdiction of
Incorporation or Organization) |  | (I.R.S. Employer Identification No.)

|                                           |  |           
|------------------------------------------ |  | ----------
|520 Broadway, Fifth Floor
Santa Monica, CA |  | 90401     
|                                           |  |           
|(Address of Principal Executive Offices)   |  | (Zip Code)

|                                                     |  | 
|---------------------------------------------------- |  | 
|(310) 434-7000                                      
|                                                    
|(Registrants Telephone Number, Including Area Code)

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 [   ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [   ]  No [X]

The number of shares of Common Stock outstanding at May 12, 2003
was 4,884,565 shares of Class A Common Stock and 56,450,469 shares of Class B Common Stock.





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TABLE OF CONTENTS



|                               |                                                                                               |                                                             |  |  |  |  |  | 
|------------------------------ | --------------------------------------------------------------------------------------------- | ----------------------------------------------------------- |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION
|                               |                                                                                               | Condensed Consolidated Balance Sheets                      
|                               |                                                                                               | Condensed Consolidated Statements of Operations (Unaudited)
|                               |                                                                                               | Condensed Consolidated Statements of Cash Flows (Unaudited)
|                               |                                                                                               | Notes to Condensed Consolidated Financial Statements       
|                               | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                               | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|                               | Item 4. Controls and Procedures                                                              
|PART II  OTHER INFORMATION   
|                               | Item 1. Legal Proceedings                                                                    
|                               | Item 2. Changes in Securities and Use of Proceeds                                            
|                               | Item 4. Submission of matters to a vote of security holders.                                 
|                               | Item 5. Other Information                                                                    
|                               | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURE                     
|CERTIFICATIONS                
|EX-99.1                       



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ASCENT MEDIA GROUP, INC.

Report on Form 10-Q for the Period Ended March 31, 2003

|                                                                                              |                                                                                                                      |      |    |    | 
|--------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------- | ---- | -- | -- | 
|Table of Contents                                                                             |                                                                                                                      | Page
|                                                                                              |                                                                                                                      |     
|Part I  FINANCIAL INFORMATION                                                                |                                                                                                                      |      |    |   
|Item 1. Financial Statements                                                                  |                                                                                                                      |      |    |   
|                                                                                              | Condensed Consolidated Balance Sheets, March 31, 2003 (Unaudited) and December 31, 2002 (Audited)                    |      |    | 3  | 
|                                                                                              | Condensed
Consolidated Statements of Operations for the Three Months Ended
March 31, 2003 and
      2002 (Unaudited) |      |    | 4  | 
|                                                                                              | Condensed
Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2003 and
      2002 (Unaudited) |      |    | 5  | 
|                                                                                              | Notes to Condensed Consolidated Financial Statements                                                                 |      |    | 6  | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations |                                                                                                                      |      | 14 |   
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                            |                                                                                                                      |      | 21 |   
|Item 4. Controls and Procedures                                                               |                                                                                                                      |      | 22 |   
|Part II  OTHER INFORMATION                                                                   |                                                                                                                      |      |    |   
|Item 1. Legal Proceedings                                                                     |                                                                                                                      |      | 22 |   
|Item 2. Changes in Securities and Use of Proceeds                                             |                                                                                                                      |      | 22 |   
|Item 4. Submission of Matters to a Vote of Security Holders                                   |                                                                                                                      |      | 22 |   
|Item 5. Other Information                                                                     |                                                                                                                      |      | 22 |   
|Item 6. Exhibits and Reports on Form 8-K                                                      |                                                                                                                      |      | 23 |   
|                                                                                              | Signature                                                                                                            |      |    | 24 | 
|                                                                                              | Certifications                                                                                                       |      |    | 25 | 

2



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PART I  FINANCIAL
INFORMATION




ASCENT MEDIA GROUP, INC.Condensed Consolidated Balance Sheets
(Amounts in thousands, except share data)

|                                                                                                                                                                               |                                                                                                          |                            |          |             |         |              |          |        |         | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------------------------------------------------------------------------------------- | -------------------------- | -------- | ----------- | ------- | ------------ | -------- | ------ | ------- | 
|                                                                                                                                                                               |                                                                                                          |                            |          | March 31,   |         | December 31,
|                                                                                                                                                                               |                                                                                                          |                            |          | 2003        |         | 2002        
|                                                                                                                                                                               |                                                                                                          |                            |          |             |         |             
|                                                                                                                                                                               |                                                                                                          |                            |          | (Unaudited) |         | (Audited)   
|Current Assets:                                                                                                                                                                |                                                                                                          |                            |          |             |         |              |          |       
|                                                                                                                                                                               | Cash and cash equivalents                                                                                |                            | $        | 8,964       |         |              | $        | 11,998 |        
|                                                                                                                                                                               | Trade receivables, net of allowance for doubtful accounts of $8.3
million and $9.0 million, respectively |                            |          | 99,534      |         |              |          | 98,794 |        
|                                                                                                                                                                               | Inventories                                                                                              |                            |          | 4,688       |         |              |          | 4,314  |        
|                                                                                                                                                                               | Deferred income taxes, net                                                                               |                            |          | 5,382       |         |              |          | 6,176  |        
|                                                                                                                                                                               | Prepaid deposits and other                                                                               |                            |          | 13,348      |         |              |          | 13,159 |        
|                                                                                                                                                                               |                                                                                                          |                            |          |             |         |              |          |       
|                                                                                                                                                                               |                                                                                                          | Total current assets       |          |             | 131,916 |              |          |        | 134,441 | 
|                                                                                                                                                                               |                                                                                                          |                            |          |             |         |              |          |       
|Property, plant and equipment, at cost, net of accumulated
depreciation and amortization of $90.6 million and $81.2 million,
respectively                                      |                                                                                                          |                            | 285,105  |             |         |              | 300,497  |       
|Goodwill and identifiable intangible assets, net of accumulated
amortization of $6.2 million and $39.0 million, respectively                                                   |                                                                                                          |                            | 341,253  |             |         |              | 343,057  |       
|Other assets, net                                                                                                                                                              |                                                                                                          |                            | 14,707   |             |         |              | 15,331   |       
|                                                                                                                                                                               |                                                                                                          |                            |          |             |         |              |          |       
|                                                                                                                                                                               |                                                                                                          | Total assets               |          | $           | 772,981 |              |          | $      | 793,326 | 
|                                                                                                                                                                               |                                                                                                          |                            |          |             |         |              |          |        |        
|Current Liabilities:                                                                                                                                                           |                                                                                                          |                            |          |             |         |              |          |       
|                                                                                                                                                                               | Current maturities of long-term debt and capital lease obligations                                       |                            | $        | 17,999      |         |              | $        | 18,928 |        
|                                                                                                                                                                               | Accounts payable                                                                                         |                            |          | 26,498      |         |              |          | 31,280 |        
|                                                                                                                                                                               | Accrued expenses and other liabilities                                                                   |                            |          | 53,790      |         |              |          | 61,266 |        
|                                                                                                                                                                               | Due to parent company, net                                                                               |                            |          | 15,448      |         |              |          | 14,107 |        
|                                                                                                                                                                               |                                                                                                          |                            |          |             |         |              |          |       
|                                                                                                                                                                               |                                                                                                          | Total current liabilities  |          |             | 113,735 |              |          |        | 125,581 | 
|                                                                                                                                                                               |                                                                                                          |                            |          |             |         |              |          |       
|Long-term debt and capital lease obligations                                                                                                                                   |                                                                                                          |                            | 380,704  |             |         |              | 383,056  |       
|Convertible subordinated notes, net                                                                                                                                            |                                                                                                          |                            | 206,164  |             |         |              | 205,299  |       
|Deferred income taxes, net                                                                                                                                                     |                                                                                                          |                            | 783      |             |         |              | 1,506    |       
|Other liabilities                                                                                                                                                              |                                                                                                          |                            | 9,087    |             |         |              | 9,661    |       
|                                                                                                                                                                               |                                                                                                          |                            |          |             |         |              |          |       
|                                                                                                                                                                               |                                                                                                          | Total liabilities          |          |             | 710,473 |              |          |        | 725,103 | 
|                                                                                                                                                                               |                                                                                                          |                            |          |             |         |              |          |       
|Commitments and contingencies                                                                                                                                                  |                                                                                                          |                            |          |             |         |              |          |       
|Stockholders Equity:                                                                                                                                                          |                                                                                                          |                            |          |             |         |              |          |       
|                                                                                                                                                                               | Common Stock:                                                                                            |                            |          |             |         |              |          |        |        
|Class A; authorized 300,000,000 shares of $0.01 par value;
4,884,565 and 4,884,559 outstanding as of March 31, 2003 and
December 31, 2002, respectively                        |                                                                                                          |                            | 49       |             |         |              | 49       |       
|Class B; convertible, authorized 100,000,000 shares of $0.01 par
value; 56,450,469 and 52,341,164 issued and outstanding at
March 31, 2003 and December 31, 2002, respectively |                                                                                                          |                            | 565      |             |         |              | 523      |       
|Additional paid-in capital                                                                                                                                                     |                                                                                                          |                            | 660,164  |             |         |              | 653,842  |       
|Treasury stock; 16,251 shares at cost at March 31, 2003 and
December 31, 2002, respectively                                                                                    |                                                                                                          |                            | (124     | )           |         |              | (124     | )     
|Accumulated deficit                                                                                                                                                            |                                                                                                          |                            | (590,607 | )           |         |              | (581,268 | )     
|Other                                                                                                                                                                          |                                                                                                          |                            | 164      |             |         |              | 161      |       
|Accumulated other comprehensive loss                                                                                                                                           |                                                                                                          |                            | (7,703   | )           |         |              | (4,960   | )     
|                                                                                                                                                                               |                                                                                                          |                            |          |             |         |              |          |       
|                                                                                                                                                                               |                                                                                                          | Total stockholders equity |          |             | 62,508  |              |          |        | 68,223  | 
|                                                                                                                                                                               |                                                                                                          |                            |          |             |         |              |          |       
|Total liabilities and stockholders equity                                                                                                                                     |                                                                                                          | $                          | 772,981  |             |         | $            | 793,326  |       
|                                                                                                                                                                               |                                                                                                          |                            |          |             |         |              |          |       

See notes to condensed consolidated financial statements

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ASCENT MEDIA GROUP, INC.Condensed Consolidated Statements of Operations (Unaudited)
(Amounts in thousands, except share data)

|                                                                            |                                            |                          |         |                    |        |      |         |            |        | 
|--------------------------------------------------------------------------- | ------------------------------------------ | ------------------------ | ------- | ------------------ | ------ | ---- | ------- | ---------- | ------ | 
|                                                                            |                                            |                          |         | Three Months Ended
|                                                                            |                                            |                          |         | March 31,         
|                                                                            |                                            |                          |         |                   
|                                                                            |                                            |                          |         | 2003               |        | 2002
|                                                                            |                                            |                          |         |                    |        |     
|Net revenues                                                                |                                            | $                        | 121,439 |                    |        | $    | 135,383 |           
|Cost of services                                                            |                                            |                          | 72,422  |                    |        |      | 81,687  |           
|                                                                            |                                            |                          |         |                    |        |      |         |           
|                                                                            |                                            | Gross profit             |         |                    | 49,017 |      |         |            | 53,696 | 
|                                                                            |                                            |                          |         |                    |        |      |         |           
|Operating expenses:                                                         |                                            |                          |         |                    |        |      |         |           
|                                                                            | Selling, general and administrative        |                          |         | 29,717             |        |      |         | 31,627     |       
|                                                                            | Depreciation and amortization              |                          |         | 16,466             |        |      |         | 17,315     |       
|                                                                            | Non-cash compensation expense (income)     |                          |         | 835                |        |      |         | (903       | )     
|                                                                            | Gain on the sale of fixed assets           |                          |         | (1,691             | )      |      |         |           |       
|                                                                            | Restructuring and other charges            |                          |         | 2,061              |        |      |         |           |       
|                                                                            |                                            |                          |         |                    |        |      |         |           
|                                                                            |                                            | Total operating expenses |         |                    | 47,388 |      |         |            | 48,039 | 
|                                                                            |                                            |                          |         |                    |        |      |         |           
|Income from operations                                                      |                                            |                          | 1,629   |                    |        |      | 5,657   |           
|                                                                            |                                            |                          |         |                    |        |      |         |           
|                                                                            | Interest expense, net                      |                          |         | 15,038             |        |      |         | 15,632     |       
|                                                                            | Other Income, net                          |                          |         | (3,534             | )      |      |         | (3,621     | )     
|                                                                            |                                            |                          |         |                    |        |      |         |           
|Loss before income taxes and change in accounting principle                 |                                            |                          | (9,875  | )                  |        |      | (6,354  | )         
|Income tax benefit                                                          |                                            |                          | (536    | )                  |        |      | (215    | )         
|                                                                            |                                            |                          |         |                    |        |      |         |           
|Loss before change in accounting principle                                  |                                            |                          | (9,339  | )                  |        |      | (6,139  | )         
|Change in accounting principle                                              |                                            |                          |        |                    |        |      | (20,227 | )         
|                                                                            |                                            |                          |         |                    |        |      |         |           
|Net loss                                                                    |                                            | $                        | (9,339  | )                  |        | $    | (26,366 | )         
|                                                                            |                                            |                          |         |                    |        |      |         |           
|Weighted average number of common and common equivalent
shares outstanding: |                                            |                          |         |                    |        |      |         |           
|                                                                            | Basic and diluted                          |                          |         | 56,635,541         |        |      |         | 39,742,265 |       
|                                                                            |                                            |                          |         |                    |        |      |         |           
|Net loss per common share  basic and diluted                               |                                            |                          |         |                    |        |      |         |           
|                                                                            | Loss before change in accounting principle |                          | $       | (0.16              | )      |      | $       | (0.15      | )     
|                                                                            | Change in accounting principle             |                          |         |                   |        |      |         | (0.51      | )     
|                                                                            |                                            |                          |         |                    |        |      |         |           
|                                                                            | Net loss per common share                  |                          | $       | (0.16              | )      |      | $       | (0.66      | )     
|                                                                            |                                            |                          |         |                    |        |      |         |           

See notes to condensed consolidated financial statements

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ASCENT MEDIA GROUP, INC. Condensed Consolidated Statements of Cash Flows (Unaudited)
(Amounts in thousands)

|                                                 |                                                          |   |                    |        |      |   |         |         |  
|------------------------------------------------ | -------------------------------------------------------- | - | ------------------ | ------ | ---- | - | ------- | ------- | -
|                                                 |                                                          |   | Three Months Ended
|                                                 |                                                          |   | March 31,         
|                                                 |                                                          |   |                   
|                                                 |                                                          |   | 2003               |        | 2002
|                                                 |                                                          |   |                    |        |     
|Net cash flows provided by operating activities  |                                                          | $ | 141                |        |      | $ | 11,981  |        
|                                                 |                                                          |   |                    |        |      |   |         |        
|Cash flows from investing activities:            |                                                          |   |                    |        |      |   |         |        
|                                                 | Proceeds from disposal of fixed assets                   |   |                    | 4,178  |      |   |         |        |  
|                                                 | Capital expenditures                                     |   |                    | (4,335 | )    |   |         | (15,893 | )
|                                                 |                                                          |   |                    |        |      |   |         |        
|Net cash flows used in investing activities      |                                                          |   | (157               | )      |      |   | (15,893 | )      
|                                                 |                                                          |   |                    |        |      |   |         |        
|Cash flows from financing activities:            |                                                          |   |                    |        |      |   |         |        
|                                                 | Borrowings of long-term debt                             |   |                    | 2,539  |      |   |         |        |  
|                                                 | Payments of long-term debt and capital lease obligations |   |                    | (5,461 | )    |   |         | (2,651  | )
|                                                 | Other                                                    |   |                    |       |      |   |         | (96     | )
|                                                 |                                                          |   |                    |        |      |   |         |        
|Net cash flows used in financing activities      |                                                          |   | (2,922             | )      |      |   | (2,747  | )      
|                                                 |                                                          |   |                    |        |      |   |         |        
|Effect of exchange rate changes on cash          |                                                          |   | (96                | )      |      |   | (1,836  | )      
|                                                 |                                                          |   |                    |        |      |   |         |        
|Net decrease in cash and cash equivalents        |                                                          |   | (3,034             | )      |      |   | (8,495  | )      
|Cash and cash equivalents at beginning of period |                                                          |   | 11,998             |        |      |   | 23,433  |        
|                                                 |                                                          |   |                    |        |      |   |         |        
|Cash and cash equivalents at end of period       |                                                          | $ | 8,964              |        |      | $ | 14,938  |        
|                                                 |                                                          |   |                    |        |      |   |         |        

See notes to condensed consolidated financial statements

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ASCENT MEDIA GROUP, INC.Notes to Condensed Consolidated Financial Statements
March 31, 2003
(Unaudited)

1. Description of Business

Ascent Media Group, Inc. (Ascent Media or the Company) provides
creative and technical media services to the media and entertainment
industries, including: services necessary to complete the creation of content
including feature films, television shows, television commercials, music
videos, promotional and identity campaigns and corporate communications
programming; services necessary to facilitate the global maintenance,
management and distribution of content libraries; and services necessary to
assemble and distribute programming. The Companys clients include the major
motion picture studios, independent producers, broadcast networks, cable
channels, advertising agencies and other companies that produce, own and/or
distribute entertainment, news, sports, corporate, educational, industrial and
advertising content.

The Companys assets and operations are primarily comprised of the
historical business of the Company, formerly known as the Todd-AO Corporation
and nine companies acquired during 2001 and 2000: Four Media Company (4MC);
Virgin Media Group Limited (Virgin); the sound post-production and certain
related businesses of Soundelux Entertainment Group of Delaware, Inc.
(Soundelux); Video Services Corporation (VSC); Group W Network Services and
100% of the capital stock of Asia Broadcast Centre Pte. Ltd. and Group W
Broadcast Pte. Ltd. (collectively GWNS); Livewire Network Services, LLC
(LNS); Soho Group Limited (Soho); Visiontext Limited (Visiontext); and
Cinram-POP DVD Center LLC now known as Stream Santa Monica (Stream). The
combination and integration of these acquired entities allow the Company to
offer integrated outsourcing solutions for the technical and creative
requirements of the Companys clients, from content creation to distribution of
the final product.

2. Basis of Presentation

The accompanying interim condensed consolidated financial statements are
unaudited but, in the opinion of management, reflect all adjustments
(consisting of those of a normal recurring nature) necessary for a fair
presentation of the results for such periods. The results of operations for any
interim period are not necessarily indicative of results for the full year.
These condensed consolidated financial statements should be read in conjunction
with the Consolidated Financial Statements and Notes thereto contained in the
Companys Annual Report on Form 10-K for the year ended December 31, 2002. The
preparation of financial statements in conformity with generally accepted
accounting principles (GAAP) requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates. Certain reclassifications have been made to prior period balances in
order to conform to the current period presentation.

The condensed consolidated financial statements include the accounts of
the Company and its subsidiaries after elimination of all significant
intercompany transactions and accounts.

3. Recent Accounting Pronouncements

In November 2002, the FASB issued Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others,which addresses the disclosure to be made
by a guarantor in its interim and annual financial statements about its
obligations under guarantees. The disclosure requirements are effective for
interim and annual financial statements ending after December 15, 2002. The
Company does not have any guarantees that require disclosure under FIN 45.

FIN 45 also requires the recognition of a liability by a guarantor at the
inception of certain guarantees. FIN 45 requires the guarantor to recognize a
liability for the non-contingent component of a guarantee, which is the
obligation to stand ready to perform in the event that specified triggering
events or conditions occur. The initial measurement of this liability is the
fair value of the guarantee at inception. The recognition of the liability is
required even if it is not probable that payments will be required under the
guarantee or if the guarantee was issued with a premium payment or as part of a
transaction with multiple elements. The initial recognition and measurement
provisions are effective for all guarantees within the scope of FIN 45 issued
or modified after December 31, 2002.

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As noted above the Company has adopted the disclosure requirements of FIN
45 and will apply the recognition and measurement provisions for all guarantees
entered into or modified after December 31, 2002. For the quarter ended March
31, 2003, the Company has not entered into any guarantees within the purview of
FIN 45.

In February 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities,which addresses the consolidation by business
enterprises of variable interest entities, which have one or both of the
following characteristics: (1) the equity investment at risk is not sufficient
to permit the entity to finance its activities without additional financial
support from other parties, or (2) the equity investors lack one or more of the
following essential characteristics of a controlling financial interest: (a)
the direct or indirect ability to make decisions about the entitys activities
through voting or similar rights, (b) the obligation to absorb the expected
losses of the entity if they occur, or (c) the right to receive the expected
residual returns of the entity if they occur. FIN 46 will have a significant
effect on existing industry practice because it requires existing variable
interest entities to be consolidated if those entities do not effectively
disburse risks among parties involved. In addition, FIN 46 contains detailed
disclosure requirements. FIN 46 applies immediately to variable interest
entities created after January 31, 2003, and to variable interest entities in
which an enterprise obtains an interest after that date. It applies in the
first fiscal year or interim period beginning after June 15, 2003, to variable
interest entities in which an enterprise holds a variable interest that it
acquired before February 1, 2003. This Interpretation may be applied
prospectively with a cumulative-effect adjustment as of the date on which it is
first applied or by restating previously issued financial statements for one or
more years with a cumulative-effect adjustment as of the beginning of the first
year restated. The Company believes the adoption of FIN 46 will not have a
material impact on our financial statements. As of March 31, 2003, the Company
does not have any Variable Interest Entities.

In November 2002, the FASBs Emerging Issues Task Force issued EITF 00-21,
Revenue Arrangements with Multiple Deliverables. EITF 00-21 addresses certain
aspects of the accounting by a vendor for arrangements under which it will
perform multiple revenue-generating activities. Specifically, EITF 00-21
addresses how to determine whether an arrangement involving multiple
deliverables contains more than one unit of accounting. In applying EITF 00-21,
separate contracts with the same entity or related parties that are entered
into at or near the same time are presumed to have been negotiated as a package
and should, therefore, be evaluated as a single arrangement in considering
whether there are one or more units of accounting. That presumption may be
overcome if there is sufficient evidence to the contrary. EITF 00-21 also
addresses how arrangement consideration should be measured and allocated to the
separate units of accounting in the arrangement. The guidance in this Issue is
effective for revenue arrangements entered into in fiscal periods beginning
after June 15, 2003. Alternatively, companies may elect to report the change in
accounting as a cumulative-effect adjustment. Early application of this
consensus is permitted. The Company believes the adoption of EITF 00-21 will
not have a material impact on our financial statements.

4. Policy for Stock Based Compensation

Accounting for Stock Based Compensation.In December 2002, the FASB
issued SFAS No. 148, Accounting for Stock Based Compensation  Transition and
Disclosure. SFAS 148 amends SFAS 123, Accounting for Stock Based Compensation,
to provide alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock based employee compensation. In
addition, SFAS No. 148 amends the disclosure requirements of SFAS 123 to
require prominent disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee compensation and the
effect of the method used on reported results.

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The Company has one stock-based employee compensation plan. The Company
applies the intrinsic-value-based method of accounting prescribed by Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees,and related interpretations including FASB Interpretation No. 44,
Accounting for Certain Transactions involving Stock Compensation, an
interpretation of APB Opinion No. 25, issued in March 2000, to account for its
fixed-plan stock options. Under this method, compensation expense is recorded
on the date of grant only if the then current market price of the underlying
stock exceeded the exercise price. SFAS No. 123, Accounting for Stock-Based
Compensation,established accounting and disclosure requirements using a
fair-value-based method of accounting for stock-based employee compensation
plans. As allowed by SFAS No. 123, the Company has elected to continue to apply
the intrinsic-value-based method of accounting described above, and has adopted
only the disclosure requirements of SFAS No. 123. The following table
illustrates the effect on net loss and loss per share if the Company had
applied the fair-value-based method as amended by SFAS 148 (in thousands,
except per share data).

|                                                   |                               |   |                       |         |      |   |         |         |  
|-------------------------------------------------- | ----------------------------- | - | --------------------- | ------- | ---- | - | ------- | ------- | -
|                                                   |                               |   | Three Months Ended   
|                                                   |                               |   | March 31, (unaudited)
|                                                   |                               |   |                      
|                                                   |                               |   | 2003                  |         | 2002
|                                                   |                               |   |                       |         |     
|Net loss reported                                  |                               | $ | (9,339                | )       |      | $ | (26,366 | )      
|Less: compensation expense under fair value method |                               |   | (1,468                | )       |      |   | (1,416  | )      
|Add: compensation expense reported                 |                               |   | 797                   |         |      |   | 1,038   |        
|                                                   |                               |   |                       |         |      |   |         |        
|                                                   | Pro forma net loss            |   | $                     | (10,010 | )    |   | $       | (26,744 | )
|                                                   |                               |   |                       |         |      |   |         |        
|Net loss per share                                 |                               |   |                       |         |      |   |         |        
|                                                   | As reported basic and diluted |   | $                     | (0.16   | )    |   | $       | (0.66   | )
|                                                   |                               |   |                       |         |      |   |         |        
|                                                   | Pro forma basic and diluted   |   | $                     | (0.18   | )    |   | $       | (0.67   | )
|                                                   |                               |   |                       |         |      |   |         |        

5. Restructuring Charges

During the quarter ended March 31, 2003, the Company completed certain
restructuring activities designed to improve operating efficiencies and
effectiveness and to strengthen its competitive position in the marketplace
primarily through cost and expense reductions. In connection with these
integration and consolidation initiatives, the Company recorded a charge of
$2.1 million for consolidation of facilities and closure related costs in the
Creative Services Group both domestically and in the United Kingdom. The
restructuring charge includes $1.2 million for employee severance, $715,000
related to excess lease commitments as a result of facility closures and
$176,000 for contract exit costs.

The following table provides the activity and balances of the 2003
restructuring reserve account for the quarter ended March 31, 2003 (in
thousands):

|                      |  |         |   |           |  |            |       |         |  |   |      |   |  |   |       | 
|--------------------- |  | ------- | - | --------- |  | ---------- | ----- | ------- |  | - | ---- | - |  | - | ----- | 
|                      |  | Opening |   |           |  |            |       |         |  |   |      |   |  |  
|                      |  | Balance |   | Additions |  | Deductions |       | 3/31/03
|                      |  |         |   |           |  |            |       |        
|Employee separations  |  | $       |  |           |  |            | 1,170 |         |  |   | (865 | ) |  |   | 305   | 
|Excess facility costs |  |         |  |           |  |            | 715   |         |  |   | (32  | ) |  |   | 683   | 
|Contract exit costs   |  |         |  |           |  |            | 176   |         |  |   | (64  | ) |  |   | 112   | 
|                      |  |         |   |           |  |            |       |         |  |   |      |   |  |   |       | 
|                      |  | $       |  |           |  | $          | 2,061 |         |  | $ | (961 | ) |  | $ | 1,100 | 
|                      |  |         |   |           |  |            |       |         |  |   |      |   |  |   |       | 

During the fourth quarter of 2001, the Company recorded a charge of $5.6
million for restructuring, which included $5.2 million related to excess lease
commitments as a result of facility closures and $425,000 for employee
severance.

The following table provides the activity and balances of the 2001
restructuring reserve account for the quarter ended March 31, 2003 (in
thousands):

|                      |  |          |       |           |  |            |   |         |  |   |      |   |  |   |       | 
|--------------------- |  | -------- | ----- | --------- |  | ---------- | - | ------- |  | - | ---- | - |  | - | ----- | 
|                      |  | 12/31/02 |       | Additions |  | Deductions |   | 3/31/03
|                      |  |          |       |           |  |            |   |        
|Excess facility costs |  | $        | 2,227 |           |  | $          |  |         |  | $ | (148 | ) |  | $ | 2,079 | 
|Employee separations  |  |          |      |           |  |            |  |         |  |   |     |   |  |   |      | 
|                      |  |          |       |           |  |            |   |         |  |   |      |   |  |   |       | 
|                      |  | $        | 2,227 |           |  | $          |  |         |  | $ | (148 | ) |  | $ | 2,079 | 
|                      |  |          |       |           |  |            |   |         |  |   |      |   |  |   |       | 

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The Companys continuing efforts to integrate acquired businesses may
require further charges for facility closures and employee separation plans.

6. Comprehensive Loss

Comprehensive loss is defined as all changes in shareholders equity,
except those resulting from investments by or distributions to shareholders.
The Companys comprehensive loss is as follows (amounts in thousands):

|                         |                                                                         |   |                       |        |      |   |         |        |  
|------------------------ | ----------------------------------------------------------------------- | - | --------------------- | ------ | ---- | - | ------- | ------ | -
|                         |                                                                         |   | Three Months Ended   
|                         |                                                                         |   | March 31, (unaudited)
|                         |                                                                         |   |                      
|                         |                                                                         |   | 2003                  |        | 2002
|                         |                                                                         |   |                       |        |     
|Net loss                 |                                                                         | $ | (9,339                | )      |      | $ | (26,366 | )     
|                         | Unrealized loss on cash flow hedge                                      |   |                       | (125   | )    |   |         |       |  
|                         | Loss on foreign currency translation                                    |   |                       | (2,618 | )    |   |         | (2,273 | )
|                         | Reclassification adjustment for amortization of
loss on cash flow hedge |   |                       |       |      |   |         | 2,016  |  
|                         |                                                                         |   |                       |        |      |   |         |       
|                         | Net loss recognized in other comprehensive income                       |   |                       | (2,743 | )    |   |         | (257   | )
|                         |                                                                         |   |                       |        |      |   |         |       
|Total comprehensive loss |                                                                         | $ | (12,082               | )      |      | $ | (26,623 | )     
|                         |                                                                         |   |                       |        |      |   |         |       

7. Long-Term Debt

Senior Credit Agreement

At March 31, 2003, $360.3 million (including letters of credit of
$600,000) was outstanding under the Senior Credit Agreement, dated
December 22, 2000, as amended, among
the Company, various lenders who are parties thereto, Banc of America
Securities LLC, as lead arranger and book manager, BANK OF AMERICA, N.A., as
administrative agent for the lenders, Salomon Smith Barney, Inc., as
syndication agent, and The Bank of New York Company, Inc., as documentation
agent (the Senior Credit Agreement), and $3.6 million was available for
future borrowings, subject to the terms of the Senior Credit Agreement. During
the quarter ended March 31, 2003, the Company repaid $3.6 million under the
Senior Credit Agreement. No borrowings were made under the Senior Credit
Agreement in the first quarter. The Senior Credit Agreement loans are
collateralized by substantially all of the operating assets of the Company.

The Senior Credit Agreement requires financial ratios to be maintained and
contains other restrictive covenants including restrictions on incurring
additional indebtedness. As of March 31, 2003, the Company was in compliance
with all covenants in the Senior Credit Agreement.

Under the Senior Credit Agreement, the Companys Total Leverage Ratio may
not exceed 4.55 to 1.00 for any measurement period from December 31, 2002 to
June 30, 2003 and is reduced over subsequent measurement periods until it
reaches a Total Leverage Ratio of 3.50 to 1.00 for measurement periods after
January 1, 2005. At March 31, 2003, the Companys Total Leverage Ratio was 4.43
to 1.00. Additionally, the Companys Interest Coverage Ratio may not be less
than 2.50 to 1.00 for any quarter ending prior to December 31, 2003, and may
not be less than 3.00 to 1.00 for any quarter thereafter. The Companys
Interest Coverage Ratio at March 31, 2003 was 3.11 to 1.00. For any
measurement period beginning January 1, 2003, the Companys Fixed Charge
Coverage Ratio may not be less than 0.85 to 1.00, and increases over the
succeeding two quarters until October 1, 2003, when the Companys Fixed Charge
Coverage Ratio may not be less than 1.00 to 1.00 for the remainder of the term
of the Senior Credit Agreement. At March 31, 2003, the Companys Fixed Charge
Coverage Ratio was 1.14 to 1.00.

As of March 31, 2003, the outstanding borrowings under the Senior Credit
Agreement consisted of Term loan A in the amount of $117.6 million, Term loan B
in the amount of $56.8 million and a revolving credit facility (the Revolver)
in the amount of $185.9 million (which includes outstanding letters of credit
in the amount of $600,000).

Interest related to the Senior Credit Agreement is paid monthly,
bi-monthly or quarterly in arrears and is based on the Alternate Base Rate or
the Eurodollar Rate, whichever is applicable to the loan, plus applicable
margins. The Alternate Base Rate is a daily fluctuating rate per annum equal to
the higher of the Federal Funds Rate plus 0.5% or the Prime Rate. The
Eurodollar Rate is the rate

9



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per annum equal to the average British Bankers Association Interest
Settlement Rate for deposits in the relevant currency or an alternate base, as
defined in the agreement, if that rate is unavailable. As of March 31, 2003,
the effective interest rates on Term loan A, Term loan B and the Revolver
borrowings were 4.54%, 5.29% and 4.55%, respectively.

Liberty Subordinated Credit Agreement

At March 31, 2003, $224.3 million was outstanding under the First Amended
and Restated Credit Agreement, as amended and supplemented, between the Company
and Liberty Media Corporation (Liberty Media) (the Liberty Subordinated
Credit Agreement) and $81.9 million was available for future borrowings under
the terms of the Liberty Subordinated Credit Agreement with the consent of, and
on terms determined by, Liberty Media.

Of the $224.3 million outstanding at March 31, 2003 under the Liberty
Subordinated Credit Agreement: (1) $206.2 million is represented by convertible
subordinated notes, which are convertible at the option of Liberty Media at any
time prior to maturity into shares of the Companys Class B common stock
(Convertible Notes) at a conversion price of $10.00 per share, (2) $8.8
million is represented by Convertible Notes having a conversion price of $3.50
per share, (3) $5.3 million is represented by a Convertible Note having a
conversion price of $1.94 per share, and (4) $4.0 million is represented by a
Convertible Note having a conversion price of $1.56 per share. Interest
accrues on each of the Convertible Notes at a rate of 10% per annum, payable
quarterly either in cash, shares of the Companys Class B common stock (valued
at 95% of the ten-day trailing average closing price of shares of the Companys
Class A common stock ending one trading day prior to interest payment date) or
a combination thereof, at the Companys discretion, subject to certain limits.

During the three months ended March 31, 2003, the Company issued 4,109,305
shares of its Class B common stock to Liberty Media and its affiliates in
payment of $5.5 million in interest under the Liberty Subordinated Credit
Agreement. Shares of the Companys 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.

Property Mortgages and Other Debt

At March 31, 2003, the Company owed $7.7 million under an existing
mortgage loan with Bank of the West. Interest under the loan accrues at a
three-month London interbank market rate (LIBOR) plus 2.25% per annum and the
effective interest rate at March 31, 2003 was 3.65%.

At March 31, 2003, the Company owed $6.3 million to Heller Financial
Leasing Inc. pursuant to an existing loan secured by certain equipment.
Interest on the loan is based on the relevant three-month LIBOR plus 3.25%, and
the effective interest rate at March 31, 2003 was 4.58% per annum.

At March 31, 2003, three of the Companys subsidiaries in the United
Kingdom owed to National Westminster Bank Plc. an aggregate of $18.0 million
under four existing mortgage loans. The aggregate amount includes $2.5 million
in borrowings under these loans, which was borrowed during the quarter ended
March 31, 2003. Interest on each of these loans is calculated based on the
relevant one, two, three or six-month LIBOR plus 1.25%, and as of March 31,
2003, the effective interest rate on the loans was 6.43% per annum.

At March 31, 2003, the Company was a party to capital leases in the
aggregate amount of $6.8 million related to purchases of equipment with a
weighted average interest rate of 13.72%.

8. Earnings Per Share

As a result of losses, convertible subordinated notes, warrants and stock
options that could potentially dilute basic earnings per share in the future
were excluded in the computation of diluted earnings per share because to
include them would have had an antidilutive effect.

9. Financial Instruments

The Companys statement of operations for the three months ending March
31, 2003 includes $3.0 million of non-cash income related to mark-to-market
adjustments on interest rate swap agreements which had a combined fair market
value of $3.4 million at

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March 31, 2003 in favor of our counterparties. Additionally, during the
three months ended March 31, 2003, the Company realized non-cash interest
expense of $44,000.

10. Business Segment Information

The Companys business units have been aggregated into three reportable
segments: the Creative Services Group, the Media Management Services Group, and
the Network Services Group. Corporate related items and unallocated income and
expenses are reflected in the Corporate and Other column listed below.
Additionally, Corporate and Other includes the results of our New Products
Group which is leading our efforts in Interactive Media and other new business
initiatives.

The Creative Services Group is comprised of the Companys Entertainment
Television, Commercial Television and Audio divisions, which earn revenues by
providing services necessary to complete the creation of original content
including feature films, television shows, movies of the week/mini series,
television commercials, music videos, promotional and identity campaigns and
corporate communications programming. The Media Management Services Group
provides facilities and services necessary to optimize, archive, manage and
repurpose media assets for global distribution via freight, satellite, fiber
and the Internet; access to all forms of content, duplication and formatting
services, language conversions and laybacks, restoration and preservation of
old or damaged content, mastering from motion picture film to high resolution
or data formats, digital audio and video encoding services and digital media
management services for global home video, broadcast, pay-per-view and emerging
new media distribution channels. Additionally, the Media Management Services
Group also includes the results of the Companys Digital Media Management
initiative. The Network Services Group provides services necessary to assemble
and distribute programming for cable and broadcast networks via fiber and
satellite to viewers in North America, Europe and Asia. Additionally, during
2002 the Network Services Group included the result of the Companys bandwidth
management initiative, Triumph, which was sold on December 23, 2002.

The Companys management identified its reportable segments based upon the
following factors: (1) the Companys Chief Operating Decision Maker (Chief
Executive Officer) reviews the results of operations for each of the following
segments and each Group President is accountable for such results, (2) a Group
Presidents overall compensation is based upon the related segments results,
and (3) the Companys organizational structure contains senior executives that
oversee all of these segments.

The accounting policies of the segments are the same as those described in
the summary of significant accounting policies and are consistent with GAAP.
The Company evaluates segment performance based upon several factors, however,
segment Adjusted EBITDA as defined below is the primary measure of segment
performance as it most directly reflects operating results that are managed and
controlled by segment management.

Adjusted EBITDA is defined by the Company as earnings before interest,
taxes, depreciation and amortization, and excludes non-cash compensation
expense, restructuring charges, gain (loss) on disposal of
assets, asset impairment and other non-cash charges, other income
(expense) and changes in accounting
principle. The Companys investments in new infrastructure, machine capacity,
technology and goodwill arising from its significant acquisition activity have
produced a relatively high depreciation and amortization expense and have
historically been a significant annual non-cash charge to earnings. Because
depreciation and amortization reflect primarily the effects of past capital
expenditures and investments, the Companys executive management and Board of
Directors use and historically have used Adjusted EBITDA as a measure of
current operating performance of the Companys business segments and, accordingly, the
primary measure for determining the incentive compensation of individuals in
charge of such segments and assisting management in strategic
planning and allocating corporate resources. Because the Companys executive management
and Board of Directors use Adjusted EBITDA for such purposes, items which are
not within the control of a Groups President or which would affect the
comparability of the segments performance with past periods are excluded from
the definition of Adjusted EBITDA. Adjusted EBITDA does not reflect interest
expense, changes in working capital and certain other cash requirements of the
Companys business segments, and, as a result, it is not intended to represent
cash flows for the period, or to reflect funds available for reinvestment or
other discretionary uses. Adjusted EBITDA has not been presented as an
alternative to income (loss) from operations, net income (loss) or cash flows from operating activities and should not be
considered in isolation or as a substitute for measures of performance prepared
in accordance with GAAP. The Companys presentation of Adjusted EBITDA for its
segments may not be comparable to similarly titled measures reported by other
companies.

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The following table reconciles the
Companys net loss to total segment adjusted
EBITDA (in thousands):

|                              |                                |   |                       |        |      |   |         |        |  
|----------------------------- | ------------------------------ | - | --------------------- | ------ | ---- | - | ------- | ------ | -
|                              |                                |   | Three Months Ended   
|                              |                                |   | March 31, (unaudited)
|                              |                                |   |                      
|                              |                                |   | 2003                  |        | 2002
|                              |                                |   |                       |        |     
|Net loss                      |                                | $ | (9,339                | )      |      | $ | (26,366 | )     
|Add:                          |                                |   |                       |        |      |   |         |       
|                              | Depreciation and amortization  |   |                       | 16,466 |      |   |         | 17,315 |  
|                              | Interest expense               |   |                       | 15,038 |      |   |         | 15,632 |  
|                              | Non cash compensation expense  |   |                       | 835    |      |   |         | (903   | )
|                              | Restructuring charges          |   |                       | 2,061  |      |   |         |       |  
|                              | Gain on disposal of assets     |   |                       | (1,691 | )    |   |         |       |  
|                              | Change in accounting principle |   |                       |       |      |   |         | 20,227 |  
|                              | Other income                   |   |                       | (3,534 | )    |   |         | (3,621 | )
|                              | Benefit for taxes              |   |                       | (536   | )    |   |         | (215   | )
|                              |                                |   |                       |        |      |   |         |       
|Total
segment Adjusted EBITDA |                                | $ | 19,300                |        |      | $ | 22,069  |       
|                              |                                |   |                       |        |      |   |         |       

Summarized financial information concerning the Companys reportable
segments is shown in the following table (in thousands):

|                        |                                 |   |                       |        |      |   |         |         |  
|----------------------- | ------------------------------- | - | --------------------- | ------ | ---- | - | ------- | ------- | -
|                        |                                 |   | Three Months Ended   
|                        |                                 |   | March 31, (unaudited)
|                        |                                 |   |                      
|                        |                                 |   | 2003                  |        | 2002
|                        |                                 |   |                       |        |     
|Segment Revenues        |                                 |   |                       |        |      |   |         |        
|                        | Creative Services Group         |   | $                     | 67,223 |      |   | $       | 73,430  |  
|                        | Media Management Services Group |   |                       | 24,320 |      |   |         | 24,704  |  
|                        | Networks Services Group         |   |                       | 29,896 |      |   |         | 37,249  |  
|                        |                                 |   |                       |        |      |   |         |        
|                        |                                 | $ | 121,439               |        |      | $ | 135,383 |        
|                        |                                 |   |                       |        |      |   |         |        
|Segment Adjusted EBITDA |                                 |   |                       |        |      |   |         |        
|                        | Creative Services Group         |   | $                     | 10,531 |      |   | $       | 14,553  |  
|                        | Media Management Services Group |   |                       | 4,877  |      |   |         | 6,857   |  
|                        | Networks Services Group         |   |                       | 11,355 |      |   |         | 10,828  |  
|                        | Corporate and Other             |   |                       | (7,463 | )    |   |         | (10,169 | )
|                        |                                 |   |                       |        |      |   |         |        
|                        |                                 | $ | 19,300                |        |      | $ | 22,069  |        
|                        |                                 |   |                       |        |      |   |         |        

11. Related Party Transactions

Liberty Subordinated Credit Agreement

At March 31, 2003, $224.3 million was outstanding under the Liberty
Subordinated Credit Agreement and $81.9 million was available for future
borrowings under the terms of the Liberty Subordinated Credit Agreement with
the consent of, and on terms determined by, Liberty Media.

During the three months ended March 31, 2003, the Company issued 4,109,305
shares of its Class B common stock to Liberty Media and its affiliates in
payment of $5.5 million in interest under the Liberty Subordinated Credit
Agreement. Shares of the Companys 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.

Services Received From Liberty Media

Liberty Media allocates to the Company a portion of salaries, benefits,
and certain other expenses for Liberty Media employees (including the Companys
President and Chief Executive Officer) who provide services to the Company. In
addition, the Company reimburses Liberty Media for certain expenses, such as
employee medical costs and property, casualty and financial insurance paid by

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Liberty Media on behalf of the Company. The Company has determined the
allocated and reimbursed amounts to be reasonable and equal to the fair value
of the expenses charged. Amounts allocated from Liberty Media to the Company
totaled $3.3 million for the quarter ended March 31, 2003.

Services Agreements with On Command Corporation

Beginning
in September 2002, the Company began supplying On Command Corporation (On Command), a controlled subsidiary of Liberty
Media, with uplink and
satellite transport services at a cost of $150,000 through
March 31, 2003 pursuant to a short-term agreement with On Command.
On Command was utilizing the Companys services to test the satellite
delivery of content updates to On Commands downlink sites at various hotels.
The Company executed a Content Preparation and Distribution Services Agreement,
dated March 24, 2003, with a wholly-owned subsidiary of On Command, under which
the Company will provide uplink and satellite transport services for a monthly
fee of $36,000, subject to adjustment, for a period of five years and content
preparation services valued at a negotiated rate for each use of covered
services for a period of five years at On Commands request. The parties also
entered into a Services Agreement, dated April 1, 2003, for the installation by
the Company of satellite equipment at On Commands downlink sites at hotels for
a fee of $500 per installation completed.

12. Sale of Property

On February 28, 2003, the Company sold one of its domestic real estate
property for $4.2 million, net of expenses, and recognized a
gain on sale of fixed assets of $1.7
million.

13. Divestiture

On December 23, 2002, the Company sold to Leafco Communications, Inc. all
of its equity interest in Triumph Communications for nominal consideration plus
the assumption of net liabilities in the amount of $4.0 million. In connection
with this sale, the Company entered into an agreement to loan the buyer an
amount not to exceed $4.0 million. As of March 31, 2003, such loan agreement
has been terminated by the parties and the buyer has repaid to the Company all
monies advanced to buyer pursuant to this loan. In connection with this loan
termination, the Company entered into an agreement to loan Rapco Enterprises,
Inc., an affiliate of Leafco Communications, Inc., $2.0 million. The above
transactions, in the aggregate, resulted in a gain from the divestiture of $1.6
million, which was recorded in the quarter ended December 31, 2002.

14. Subsequent Event

Acquisition by Liberty Media

On April 25, 2003, Liberty Media announced that it has adopted a plan of
merger to acquire all the issued and outstanding shares of the Company that it
does not already own. Pursuant to the terms of the merger, the Companys
stockholders would receive 0.1147 shares of Liberty Media Series A common stock
for each share of the Companys Class A common stock. Liberty Media currently
owns all the issued and outstanding shares of the Companys Class B common
stock. The transaction is intended to be taxable to the public holders of the
Companys common stock, for U.S. federal income tax purposes.

Because Liberty Media owns in excess of 90% of the outstanding common
stock of the Company, the merger is expected to be accomplished as a short
form merger under Delaware law. As a result, neither the approval of the
Companys board of directors nor a vote of its stockholders is required to
effect the merger; however, statutory appraisal rights will be available to
stockholders of the Company who elect to assert such rights, subject to
compliance with the procedures established by Delaware law. The transaction is
not subject to any substantive regulatory conditions, other than the filing and
effectiveness of a registration statement covering the shares of Liberty Media
Series A common stock to be issued in the merger. Liberty Media may terminate
the plan of merger at any time prior to closing if it determines, in its sole
discretion, that the merger is no longer in its best interest. The merger is
expected to close during the third quarter of 2003.

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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
thereto. 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, 2002. The following
discussion focuses on material trends, risks and uncertainties affecting our
results of operations and financial condition.

Certain statements in this quarterly report on Form 10-Q constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. To the extent that such statements are not
recitations of historical fact, such statements constitute forward-looking
statements that, by definition, involve risks and uncertainties. Where, in any
forward-looking statement, the Company expresses an expectation or belief as to
future results or events, such expectation or belief is expressed in good faith
and believed to have a reasonable basis, but there can be no assurance that the
statement of expectation or belief will result or be achieved or accomplished.
The following include some but not all of the factors that could cause actual
results or events to differ materially from those anticipated:



|· |  |  | industry-wide market factors such as the timing of, and spending on, feature film and television production;                                                      
|- |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|· |  |  | foreign and domestic television advertising;                                                                                                                      
| 
|· |  |  | foreign and domestic spending by broadcasters, cable companies and
syndicators on first run and existing content libraries;                                       
| 
|· |  |  | the possibility of an industry-wide strike or other job action by or
affecting the Writers Guild, Screen Actors Guild or other major
entertainment industry union;
| 
|· |  |  | failure to maintain relationships with key customers and certain key personnel;                                                                                   
| 
|· |  |  | more rapid than expected technological obsolescence;                                                                                                              
| 
|· |  |  | failure to integrate acquired operations in expected time frames;                                                                                                 
| 
|· |  |  | continuing negative economic conditions potentially impacting our
ability to maintain compliance with our debt covenants.                                         

These forward-looking statements and such risks, uncertainties and other
factors speak only as of the date of this quarterly report, and the Company
expressly disclaims any obligation or undertaking to disseminate any updates or
revisions to any forward-looking statement contained herein, to reflect any
change in our expectations with regard thereto, or any other change in events,
conditions or circumstances on which any such statement is based. For a
discussion of additional factors which may affect future results of operations,
see Factors That May Affect Future Results of Operations below.

Overview

Ascent Media Group provides technical and creative services to the
entertainment industry. Our clients include the major motion picture studios,
independent producers, broadcast networks, cable channels, advertising agencies
and other companies that produce, own and/or distribute entertainment content.
Our assets and operations are primarily comprised of ten companies acquired
during 2001 and 2000. The combination and integration of these acquired
entities allow us to offer our clients a complete range of services, from image
capture to last mile distribution. We are able to offer outsourcing solutions
for the technical and creative requirements of our clients. We have organized
our facilities and operations into the three business segments, that we call
Groups, as described below.

Creative Services Group.Our Creative Services Group provides services
necessary to complete the creation of original content including feature films,
television shows, movies of the week/mini series for television, television
commercials, music videos, promotional and identity campaigns and corporate
communications programming. Our services begin after principal photography and
cover a wide range of services necessary to complete a project. This may
include film to video tape transfers, color correction, creative editorial
services, graphics and title sequences, electronic assembly, two-dimension
compositing, creation of computer generated images, sound editorial, sound
mixing, music composition, sound design and integration of interactive program
elements. The Creative Services Group has three divisions: Entertainment
Television, Commercial Television and Audio.

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Media Management Services Group.Our Media Management Services Group
optimizes, archives, manages and repurposes media assets for global
distribution. We provide access to all forms of content, duplication and
formatting services, language conversions and laybacks, restoration and
preservation of old or damaged content, mastering from motion picture film to
high resolution or data formats, digital audio and video encoding services and
digital media management services for global home video, broadcast, pay-per-view, video-on-demand, streaming media and other emerging new media
distribution channels.

Network Services Group.Our Network Services Group provides the services
necessary to assemble and distribute programming for cable and broadcast
networks via fiber and satellite to audiences in North America, Europe and
Asia. Our Network Services Group primarily provides dedicated facilities and
resources designed for specific client requirements on the basis of contractual
agreements.

Adjusted Earnings Before Interest Taxes Depreciation and Amortization for
Business Segments

Adjusted EBITDA is defined by the Company as earnings before interest,
taxes, depreciation and amortization, and excludes non-cash compensation
expense, restructuring charges, gain (loss) on disposal of
assets, asset impairment and other non-cash charges, other income
(expense) and changes in accounting
principle. The Companys investments in new infrastructure, machine capacity,
technology and goodwill arising from its significant acquisition activity have
produced a relatively high depreciation and amortization expense and have
historically been a significant annual non-cash charge to earnings. Because
depreciation and amortization reflect primarily the effects of past capital
expenditures and investments, the Companys executive management and Board of
Directors use and historically have used Adjusted EBITDA as a measure of
current operating performance of the Companys business segments and, accordingly, the
primary measure for determining the incentive compensation of individuals in
charge of such segments and assisting management in strategic
planning and allocating corporate resources. Because the Companys executive management
and Board of Directors use Adjusted EBITDA for such purposes, items which are
not within the control of a Groups President or which would affect the
comparability of the segments performance with past periods are excluded from
the definition of Adjusted EBITDA. Adjusted EBITDA does not reflect interest
expense, changes in working capital and certain other cash requirements of the
Companys business segments, and, as a result, it is not intended to represent
cash flows for the period, or to reflect funds available for reinvestment or
other discretionary uses. Adjusted EBITDA has not been presented as an
alternative to income (loss) from operations, net income (loss) or cash flows from operating activities and should not be
considered in isolation or as a substitute for measures of performance prepared
in accordance with GAAP. The Companys presentation of Adjusted EBITDA for its
segments may not be comparable to similarly titled measures reported by other
companies.

A Note On Adjusted EBITDA for
Business Segments

The Securities and Exchange Commission promulgated new rules regarding the
use of non-GAAP financial measures in January 2003. Under these new rules, a
non-GAAP financial measure is defined generally as a numerical measure of a
registrants historical or future financial performance, financial position or
cash flows that: (1) excludes amounts, or is subject to adjustments that have
the effect of excluding amounts, that are included in the most directly
comparable measure calculated and presented in accordance with GAAP; or (2)
includes amounts, or is subject to adjustments that have the effect of
including amounts, that are excluded from the most directly comparable measure
calculated and presented in accordance with GAAP. Among other exceptions,
non-GAAP financial measures do not include financial measures which are
required to be disclosed by GAAP. Because we have reported segment Adjusted
EBITDA pursuant to and in accordance with SFAS No. 131, such financial measures
are not considered to be non-GAAP financial measures. We, in common with other
registrants, are still in the process of interpreting such rules and monitoring
developments and guidance by the SEC with respect to such rules to ensure
continued compliance. While we believe that the presentation in this report
complies with the new rules, we can give no assurance that we will be able to
provide the same or comparable measures of our segments in future reports of
the Company.

Critical Accounting Policies

Valuation of Long-lived Assets and Amortizable Other Intangible Assets.
We perform impairment tests for our long-lived assets if an event or
circumstance indicates that the carrying amount of our long-lived assets may
not be recoverable. In response to changes in industry and market conditions,
we may also strategically realign our resources and consider restructuring,
disposing of, or otherwise exiting businesses. Such activities could result in
impairment of our long-lived assets or other intangible assets. We are subject
to the possibility of impairment of long-lived assets arising in the ordinary
course of business. We regularly consider the likelihood of impairment and
recognize impairment if the carrying amount of a long-lived asset or intangible
asset is not recoverable from its undiscounted cash flows in accordance with
SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets.
Impairment is measured as the difference between the carrying amount and the
fair value of the asset.

Valuation of Goodwill and Non-amortizable Other Intangible Assets.We
assess the impairment of goodwill annually and

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whenever events or changes in circumstances indicate that the carrying
value may not be recoverable. Factors we consider important which could trigger
an impairment review include significant underperformance to historical or
projected future operating results, substantial changes in our strategy or the
manner of use of our assets, and significant negative industry or economic
trends. Effective January 1, 2002, we adopted SFAS No. 142 and in accordance
with its provisions, during the first quarter of fiscal year 2002, we recorded
a transitional impairment charge of $20.2 million against goodwill related to
our Entertainment Television reporting unit, which is part of our Creative
Services Group. Such charge has been reflected as a cumulative effect of a
change in accounting principle.

Accounting for Stock Based Compensation.In December 2002, the FASB
issued SFAS No. 148, Accounting for Stock Based Compensation  Transition and
Disclosure. SFAS 148 amends SFAS 123, Accounting for Stock Based Compensation,
to provide alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock based employee compensation. In
addition, SFAS No. 148 amends the disclosure requirements of SFAS 123 to
require prominent disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee compensation and the
effect of the method used on reported results.

We have one stock-based employee compensation plan. We apply the
intrinsic-value-based method of accounting prescribed by Accounting Principles
Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees,and
related interpretations including FASB Interpretation No. 44, Accounting for
Certain Transactions involving Stock Compensation, an interpretation of APB
Opinion No. 25, issued in March 2000, to account for our fixed-plan stock
options. Under this method, compensation expense is recorded on the date of
grant only if the current market price of the underlying stock exceeded the
exercise price. SFAS No. 123, Accounting for Stock-Based Compensation,
established accounting and disclosure requirements using a fair-value-based
method of accounting for stock-based employee compensation plans. As allowed by
SFAS No. 123, we have elected to continue to apply the intrinsic-value-based
method of accounting described above, and have adopted only the disclosure
requirements of SFAS No. 123.

Valuation of Trade Receivables.We must make estimates of the
collectibility of our trade receivables. Our management analyzes the
collectibility based on historical bad debts, customer concentrations, customer
credit-worthiness, current economic trends and changes in our customer payment
terms. We record an allowance for doubtful accounts based upon specifically
identified receivables that we believe are uncollectible. In addition, we also
record an amount based upon a percentage of each aged category of our trade
receivables. These percentages are estimated based upon our historical
experience of bad debts. Our trade receivables balance was $99.5 million, net
of allowance for doubtful accounts of $8.3 million, as of March 31, 2003.

Valuation of Deferred Tax Assets.In accordance with SFAS No. 109,
Accounting for Income Taxes, we review the nature of each component of our
deferred income taxes for reasonableness. We have determined that it is more
likely than not that we will not realize a portion of our tax benefits
associated with certain cumulative net operating loss carry forwards and
impairment reserves, and as such, we have reserved for a portion of our
deferred income tax assets and incurred charges of $.3 million and $2.9 million
during the three months ended March 31, 2003 and 2002.

Results of Operations

The Creative Services Groups revenues are primarily generated from fees
for video and audio post production, special effects and editorial services for
the television, film and advertising industries. The Media Management Services
Group provides owners of film libraries a broad range of restoration,
preservation, archiving, professional mastering and duplication services. The
Media Management Services Groups results also include our Digital Media
Management initiative. The Network Services Groups revenues consist of fees
relating to facilities and services necessary to assemble and distribute
programming for cable and broadcast networks across the world via fiber and
satellite. During 2002, the Network Services Groups results also included our
Bandwidth Management initiative, Triumph, which was sold on December 23, 2002.
Corporate related items and unallocated revenues and expenses are reflected in
Corporate and Other, below. Additionally, Corporate and Other includes the
results of our New Products Group which is leading our efforts in developing
new products and businesses such as VOD and SVOD, Interactive Television and
Store and Forward. Cost of services and operating expenses consists primarily
of production wages, facility costs and other direct costs, selling, general
and administrative expenses, depreciation and amortization and impairment
charges.

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Comparison of Reported Results for the Three Months Ended March 31, 2003 and 2002 (in thousands).

|                        |                                 |   |                       |        |      |   |         |         |  
|----------------------- | ------------------------------- | - | --------------------- | ------ | ---- | - | ------- | ------- | -
|                        |                                 |   | Three Months Ended   
|                        |                                 |   | March 31, (unaudited)
|                        |                                 |   |                      
|                        |                                 |   | 2003                  |        | 2002
|                        |                                 |   |                       |        |     
|Segment Revenues        |                                 |   |                       |        |      |   |         |        
|                        | Creative Services Group         |   | $                     | 67,223 |      |   | $       | 73,430  |  
|                        | Media
Management Services Group |   |                       | 24,320 |      |   |         | 24,704  |  
|                        | Network Services Group          |   |                       | 29,896 |      |   |         | 37,249  |  
|                        |                                 |   |                       |        |      |   |         |        
|                        |                                 | $ | 121,439               |        |      | $ | 135,383 |        
|                        |                                 |   |                       |        |      |   |         |        
|Segment Adjusted EBITDA |                                 |   |                       |        |      |   |         |        
|                        | Creative Services Group         |   | $                     | 10,531 |      |   | $       | 14,553  |  
|                        | Media
Management Services Group |   |                       | 4,877  |      |   |         | 6,857   |  
|                        | Network Services Group          |   |                       | 11,355 |      |   |         | 10,828  |  
|                        | Corporate and Other             |   |                       | (7,463 | )    |   |         | (10,169 | )
|                        |                                 |   |                       |        |      |   |         |        
|                        |                                 | $ | 19,300                |        |      | $ | 22,069  |        
|                        |                                 |   |                       |        |      |   |         |        
|Net Loss                |                                 | $ | (9,339                | )      |      | $ | (26,366 | )      
|                        |                                 |   |                       |        |      |   |         |        

The following table reconciles the Companys net loss to total segment
Adjusted EBITDA (in thousands):

|                              |                                |   |                       |        |      |   |         |        |  
|----------------------------- | ------------------------------ | - | --------------------- | ------ | ---- | - | ------- | ------ | -
|                              |                                |   | Three Months Ended   
|                              |                                |   | March 31, (unaudited)
|                              |                                |   |                      
|                              |                                |   | 2003                  |        | 2002
|                              |                                |   |                       |        |     
|Net loss                      |                                | $ | (  9,339              | )      |      | $ | (26,366 | )     
|Add:                          |                                |   |                       |        |      |   |         |       
|                              | Depreciation and amortization  |   |                       | 16,466 |      |   |         | 17,315 |  
|                              | Interest expense               |   |                       | 15,038 |      |   |         | 15,632 |  
|                              | Non cash compensation expense  |   |                       | 835    |      |   |         | (903   | )
|                              | Restructuring charges          |   |                       | 2,061  |      |   |         |       |  
|                              | Gain on disposal of assets     |   |                       | (1,691 | )    |   |         |       |  
|                              | Change in accounting principle |   |                       |       |      |   |         | 20,227 |  
|                              | Other income                   |   |                       | (3,534 | )    |   |         | (3,621 | )
|                              | Benefit for taxes              |   |                       | (536   | )    |   |         | (215   | )
|                              |                                |   |                       |        |      |   |         |       
|Total segment Adjusted EBITDA |                                | $ | 19,300                |        |      | $ | 22,069  |       
|                              |                                |   |                       |        |      |   |         |       

Revenues decreased $14.0 million, or 10.3%, to $121.4 million for the
three months ended March 31, 2003 from $135.4 million for the three months
ended March 31, 2002. Creative Services Group revenues decreased by $6.2
million primarily in our Entertainment Television and Audio operations.
Entertainment Television revenues were lower due to the abnormally early
cancellation of several episodic television shows in the current season and
lower than historical mid-season replacement activity and higher levels of
reality-based programming that typically requires less post production
services. Further, a planned facility closure resulted in reduced capacity in
our Audio business as we continued to streamline our operations. Media
Management Services Group revenues decreased marginally by $.4 million.
Network Services Group revenues decreased by $7.4 million, $5.6 million
resulting from the sale of Triumph and $1.8 million resulting from the negative
impact of some renegotiated contracts offset by new business.

Costs of services decreased $9.3 million, or 11.3%, to $72.4 million for
the three months ended March 31, 2003 from $81.7 million for the three months
ended March 31, 2002. The decrease reflects a decline across all of our Groups
primarily in production material, production personnel and equipment expenses
as a result of the decreased production activity noted above.

Selling, general and administrative expenses decreased $1.9 million, or
6.0%, to $29.7 million for the three months ended March 31, 2003 from $31.6
million for the three months ended March 31, 2002. The decrease is primarily
attributed to lower professional and legal fees, facility charges and other
discretionary expenses.

As a
result of the above, Adjusted EBITDA, as defined, for all business
segments decreased $2.8
million, or 12.7%, to $19.3 million for the three months ended March 31, 2003,
from $22.1 million for the three months ended March 31, 2002. Creative Services
Group Adjusted EBITDA decreased $4.0 million, or 27.6%, to $10.5 million as a
result of decreased revenues described above and lower margin reality based
programming replacing mid-season cancelled episodic television shows. The
negative impact was offset by higher margin DVD business and cost savings.
Media Management Services Group Adjusted EBITDA decreased $2.0 million, or
28.9%, to $4.9 million resulting from lower margin business, timing of major
customer activity, and higher quarter over quarter labor and facility costs. Network
Services Group Adjusted EBITDA increased $.5 million, or 4.6%, to $11.4 million
due to the sale of Triumph, offset by reduced margins as a result of
renegotiated large contracts and a $500,000 legal settlement during the
quarter. Corporate and Other Adjusted EBITDA increased from
($10.2 million) to ($7.5 million) primarily due to reduced costs resulting from
timing of expenditures associated with legal and professional fees and the
consolidation of our corporate facilities.

Depreciation and amortization decreased $849,000, or 4.9%, to $16.5
million for the three months ended March 31, 2003, from $17.3 million for the
three months ended March 31, 2002. The decrease is primarily attributed to the
Network Services Group as a result of the sale of Triumph and
Corporate and Other as a result of the sale of certain domestic real
estate property.

Non-cash compensation expense increased $1.7 million to $835,000 for the
three months ended March 31, 2003, from $903,000 in income reported for the
three months ended March 31, 2002. Results for the three months ended March
31, 2003 primarily included

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expense of $800,000 relating to stock
options issued to employees in all segments pursuant to our 2001
incentive compensation plan. The income recorded in the three months ended
March 31, 2002 related primarily to the decline in value of the underlying
stock used to value employee SARs of $1.9 million offset by expense of $1.0
million relating to stock options issued pursuant to our 2001 incentive
compensation plan.

Corporate
and Other disposed of certain domestic real estate property for
$4.2 million net of expenses resulting in a gain on sale of
fixed assets of $1.7 million.

During the three months ended March 31, 2003, we recognized a
restructuring charge of $2.1 million related to consolidation of facilities and
closure-related costs in the Creative Services Group both domestically and in
the UK. The restructuring charge includes $1.2 million for employee severance,
$715,000 related to excess lease commitments as a result of planned facility
closures and $176,000 for contract exit costs.

Interest expense decreased $594,000, or 3.8%, to $15.0 million for the
three months ended March 31, 2003, from $15.6 million for the three months
ended March 31, 2002. The decrease in interest expense is primarily attributed to
no longer amortizing unrealized losses on terminated interest rate
swaps in the three months ended March 31, 2003, which were
amortized in the three months ended March 31, 2002, resulting in
a lower non-cash interest expense. Such
decrease was offset by higher cash interest expense due to increased
pricing margins on our Senior Credit Agreement, effective as of the
third amendment of the Senior Credit Agreement dated
November 13, 2002, and higher non-cash interest expense due to
increased borrowings under the Liberty Subordinated Credit Agreement. Interest expense
for the quarter ended March 31, 2003 included $5.5 million of non-cash expense
related to payments under the Liberty Subordinated Credit Agreement,
$4.2 million related to interest under our Senior Credit Agreement, $3.2 million
related to interest rate swaps, $1.3 million of interest related
to capital leases, notes and mortgages, and $866,000 of
amortization of debt discount and debt issuance cost.

Other income decreased $87,000, or 2.4%, to $3.5 million for the three
months ended March 31, 2003 from $3.6 million for the three months ended March
31, 2002. For the three months ended March 31, 2003, other income primarily
includes $3.0 million related to the increase in the market value of certain
freestanding interest rate swap instruments compared to the $3.2 million
increase for the three months ended March 31, 2002.

As a result of the above, the loss before income taxes and change in
accounting principle increased $3.5 million, or 54.7%, to $9.9 million for the
three months ended March 31, 2003 from $6.4 million for the three months ended
March 31, 2002.

The benefit for income taxes increased $321,000, to $536,000 for the three
months ended March 31, 2003, from $215,000 for the three months ended March 31,
2002, primarily due to additional benefits recorded for our foreign operations.
Our effective income tax benefit rate for the three months ended March 31, 2003
was approximately 5.42% primarily due to disallowed deductions for interest
expense of $6.4 million.

On January 1, 2002, we had adopted SFAS No. 142 and in accordance with its
provisions, we had recorded a transitional impairment charge of $20.2 million,
which was reflected as a cumulative effect of a change in accounting principle
in the three months ended March 31, 2002. This change primarily
related to goodwill at the Creative Services Group. No impairment was recognized for the
three months ended March 31, 2003.

As a result of the above, our net loss decreased $17.1 million, or 64.8%,
to $9.3 million for the three months ended March 31, 2003 from $26.4 million
for the three months ended March 31, 2002.

Liquidity and Capital Resources

Overview

We continue to monitor the credit markets and other sources of capital in
case we are unable to generate sufficient cash flow from operations to service
our indebtedness or to make capital expenditures and other discretionary
investments. If we are required to raise capital in the future, there can be no
assurance that we will be able do so on favorable terms. If we are unable to
generate sufficient cash flow from operations in the future to service our debt
and working capital needs, we may be required to reduce capital expenditures,
sell assets or refinance all or a portion of our existing debt or obtain
additional financing. Our ability to make scheduled principal debt payments, to
pay interest or to refinance our indebtedness depends on our future financial
position and results of operations, which, to a certain extent, are subject to
general conditions in or affecting our industry and our customers and to
general economic, political, financial, competitive, legislative and regulatory
factors beyond our control.

We expect to fund our capital expenditure requirements with cash flows
from operating activities and, to the extent permitted by the Senior Credit
Agreement, proceeds derived from leasing transactions and sales of
non-strategic assets. To the extent that such cash flows, leasing transactions
and proceeds may be insufficient (after servicing our existing indebtedness and
funding our working capital

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requirements) to provide adequate funds for planned capital expenditures,
we are exploring alternatives to funding capital expenditures consistent with
the restrictions contained in the Senior Credit Agreement, such as loans and
equity investments. Although we monitor the credit markets and other sources of
capital, there can be no assurance that we will be able to secure funds for
capital expenditures or that, if such funds are available, such funds will be
available on favorable terms. If we cannot obtain additional funds for our
capital expenditures, and the cash flows, leasing transactions and proceeds
described above are insufficient (after servicing our existing indebtedness and
funding our working capital requirements) to provide adequate funds for planned
capital expenditures, we may be required to reduce our planned capital
expenditures. Any such reduction in capital expenditures may have a negative
effect on our business.

Cash Flows

Cash provided by operating activities for the three months ended March 31,
2003, was $141,000 as compared to $11.9 million for the three months ended
March 31, 2002. The decrease in net cash flows provided from operations is
primarily attributable to lower revenue and changes in working capital. Cash
and cash equivalents were $9.0 million at March 31, 2003, a decrease of $6.0
million from March 31, 2002. This decrease relates primarily to cash used for
payments on long-term debt and capital lease obligations.

Net cash used in investing activities was $157,000 for the three months
ended March 31, 2003 compared to $15.9 million for the three months ended March
31, 2002. During the three months ended March 31, 2003, we invested $4.3
million in property, plant and equipment and sold one of our domestic real
estate property for $4.2 million, net of expenses. For the three months
ended March 31, 2002, we invested $15.9 million in property, plant and
equipment.

Net cash used in financing activities was $2.9 million for the three
months ended March 31, 2003 compared to $2.7 million for the three months ended
March 31, 2002. During the three months ended March 31, 2003, we repaid $5.5
million of principal borrowings, $3.6 million under the Senior Credit Agreement
and $1.9 million in mortgages and capital lease obligations. Additionally, we
borrowed $2.5 million under an existing building mortgage. No borrowings were
made under the Liberty Subordinated Credit Agreement or the Senior Credit
Agreement during the three months ended March 31, 2003.

Senior Credit Agreement

At March 31, 2003, $360.3 million
(including letters of credit of
$600,000) was outstanding under the Senior Credit Agreement, dated
December 22, 2000, as amended, among
the Company, various lenders who are parties thereto, Banc of America
Securities LLC, as lead arranger and book manager, BANK OF AMERICA, N.A., as
administrative agent for the lenders, Salomon Smith Barney, Inc., as
syndication agent, and The Bank of New York Company, Inc., as documentation
agent (the Senior Credit Agreement), and $3.6 million was available for
future borrowings, subject to the terms of the Senior Credit Agreement. During
the quarter ended March 31, 2003, the Company repaid $3.6 million under the
Senior Credit Agreement. No borrowings were made under the Senior Credit
Agreement in the first quarter. The Senior Credit Agreement loans are
collateralized by substantially all of the operating assets of the
Company.

The Senior Credit Agreement requires financial ratios to be maintained and
contains other restrictive covenants including restrictions on incurring
additional indebtedness. As of March 31, 2003, the Company was in compliance
with all covenants in the Senior Credit Agreement.

Under the Senior Credit Agreement, the Companys Total Leverage Ratio may
not exceed 4.55 to 1.00 for any measurement period from December 31, 2002 to
June 30, 2003 and is reduced over subsequent measurement periods until it
reaches a Total Leverage Ratio of 3.50 to 1.00 for measurement periods after
January 1, 2005. At March 31, 2003, the Companys Total Leverage Ratio was 4.43
to 1.00. Additionally, the Companys Interest Coverage Ratio may not be less
than 2.50 to 1.00 for any quarter ending prior to December 31, 2003, and may
not be less than 3.00 to 1.00 for any quarter thereafter. The Companys
Interest Coverage Ratio at March 31, 2003 was 3.11 to 1.00. For any
measurement period beginning January 1, 2003, the Companys Fixed Charge
Coverage Ratio may not be less than 0.85 to 1.00, and increases over the
succeeding two quarters until October 1, 2003, when the Companys Fixed Charge
Coverage Ratio may not be less than 1.00 to 1.00 for the remainder of the term
of the Senior Credit Agreement. At March 31, 2003, the Companys Fixed Charge
Coverage Ratio was 1.14 to 1.00.

As of March 31, 2003, the outstanding borrowings under the Senior Credit
Agreement consisted of Term loan A in the amount of $117.6 million, Term loan B
in the amount of $56.8 million and a revolving credit facility (the Revolver)
in the amount of $185.9 million (which includes outstanding letters of credit
in the amount of $600,000).

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Interest related to the Senior Credit Agreement is paid monthly,
bi-monthly or quarterly in arrears and is based on the Alternate Base Rate or
the Eurodollar Rate, whichever is applicable to the loan, plus applicable
margins. The Alternate Base Rate is a daily fluctuating rate per annum equal to
the higher of the Federal Funds Rate plus 0.5% or the Prime Rate. The
Eurodollar Rate is the rate per annum equal to the average British Bankers
Association Interest Settlement Rate for deposits in the relevant currency or
an alternate base, as defined in the agreement, if that rate is unavailable. As
of March 31, 2003, the effective interest rates on Term loan A, Term loan B and
the Revolver borrowings were 4.54%, 5.29% and 4.55%, respectively.

Liberty Subordinated Credit Agreement

At March 31, 2003, $224.3 million was outstanding under the First Amended
and Restated Credit Agreement, as amended and supplemented, between the Company
and Liberty Media Corporation (Liberty Media) (the Liberty Subordinated
Credit Agreement) and $81.9 million was available for future borrowings under
the terms of the Liberty Subordinated Credit Agreement with the consent of, and
on terms determined by, Liberty Media.

Of the $224.3 million outstanding at March 31, 2003 under the Liberty
Subordinated Credit Agreement: (1) $206.2 million is represented by
convertible subordinated notes, which are convertible at the option of Liberty
Media at any time prior to maturity into shares of the Companys Class B common
stock (Convertible Notes) at a conversion price of $10.00 per share, (2) $8.8
million is represented by Convertible Notes having a conversion price of $3.50
per share, (3) $5.3 million is represented by a Convertible Note having a
conversion price of $1.94 per share, and (4) $4.0 million is represented by a
Convertible Note having a conversion price of $1.56 per share. Interest
accrues on each of the Convertible Notes at a rate of 10% per annum, payable
quarterly either in cash, shares of the Companys Class B common stock (valued
at 95% of the ten-day trailing average closing price of shares of the Companys
Class A common stock ending one trading day prior to interest payment date) or
a combination thereof, at the Companys discretion, subject to certain limits.

During the three months ended March 31, 2003, the Company issued 4,109,305
shares of its Class B common stock to Liberty Media and its affiliates in
payment of $5.5 million in interest under the Liberty Subordinated Credit
Agreement. Shares of the Companys 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.

Property Mortgages and Other Debt

At March 31, 2003, the Company owed $7.7 million under an existing
mortgage loan with Bank of the West. Interest under the loan accrues at a
three-month London interbank market rate (LIBOR) plus 2.25% per annum and the
effective interest rate at March 31, 2003 was 3.65%.

At March 31, 2003, the Company owed $6.3 million to Heller Financial
Leasing Inc. pursuant to an existing loan secured by certain equipment. Interest on the loan is based on
the relevant three-month LIBOR plus 3.25%, and the effective interest rate at
March 31, 2003 was 4.58% per annum.

At March 31, 2003, three of the Companys subsidiaries in the United
Kingdom owed to National Westminster Bank Plc. an aggregate of $18.0 million
under four existing mortgage loans. The aggregate amount includes $2.5 million
in borrowings under these loans, which was borrowed during the quarter ended
March 31, 2003. Interest on each of these loans is calculated based on the
relevant one, two, three or six-month LIBOR plus 1.25%, and as of March 31,
2003, the effective interest rate on the loans was 6.43% per annum.

At March 31, 2003, the Company was a party to capital leases in the
aggregate amount of $6.8 million related to purchases of equipment with a
weighted average interest rate of 13.72%.

Factors That May Affect Future Results of Operations

Factors that may affect future results of operations include, but are not
limited to, industry-wide market factors such as the timing of, spending on,
and technological, regulatory or other developments in feature film and
television programming production, foreign and domestic television advertising
production, 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,
the possibility of an industry-wide strike or other job action by a major
entertainment industry union, more rapid than expected technological
obsolescence, significant capital expenditure investments prior to generating
revenue, and any failure to

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compete in the highly-competitive post-production business could also
cause actual results to differ materially from those described in
forward-looking statements.

We have incurred significant indebtedness to fund past acquisitions. This
indebtedness may result in a significant percentage of our cash flow being
applied to the payment of interest, and there can be no assurance that our
operations will generate sufficient cash flow to service the indebtedness. This
indebtedness, as well as any indebtedness we may incur in the future, may
adversely affect our ability to finance operations, as financial covenant
limitations reach their maximum, which could limit our ability to pursue
business opportunities that may be in our best interests and that of our
stockholders.

As part of our business strategy, we have acquired substantial operations
in several different geographic locations in 2001 and 2002. These businesses
have experienced varying profitability or losses in recent periods. Since the
dates of acquisition, we have continued to work extensively on the integration
of these businesses. However, there can be no assurances regarding the ultimate
success of our integration efforts or regarding our ability to maintain or
improve the results of operations of these businesses.

We derive our revenue primarily from services provided to the motion
picture and television production industries and the content distribution
industry. Fundamental changes in the business practices of any of these client
industries, whether due to regulatory, technological or other developments,
could cause a material reduction in demand by our clients for the services
offered by us. Any reduction in demand would have a material adverse effect on
our results of operations. The post-production industry is characterized by
technological change, evolving customer needs and emerging technical standards,
and the content distribution industry is highly competitive with several
companies providing services similar to ours. Our existing credit agreements
currently limit our ability to make capital investments. There are no
assurances that we will be able to obtain or fund the implementation of any of
these technologies, that we will be able to effectively implement these
technologies on a cost-effective or timely basis or that such technologies will
not render obsolete our role as a provider of motion picture and television
production services. If our competitors have technology that enables them to
provide services that are more reliable, faster, less expensive, reach more
customers or have other advantages over the services we provide, then the
demand for our services may decrease.

We incur substantial incremental costs (primarily labor) and make
significant capital expenditures prior to generating revenues. For example, we
have expanded our operations through various acquisitions of key companies,
which has increased labor and depreciation expenses significantly, through the
addition of new personnel and the purchase of new equipment and the
construction and maintenance of infrastructure. We incur such costs before the
equipment and infrastructure generate revenues or achieve capacity utilization.
The incurrence of incremental costs prior to the generation of revenues will
have an adverse effect on our net income. In addition, we may elect to
discontinue services that fail to generate sufficient levels of revenue and
write off the net book value of the assets related to such services. Our
failure to generate anticipated levels of revenue or the write-off of assets
would have an adverse effect on our results of operations and financial
condition.

A number of our services are provided on a non-contractual basis. Clients
may desire to accelerate, postpone or cancel previously scheduled services
prior to the commencement of the project. As a result, we are susceptible to
scheduling changes and cancellations by customers and may not be able to
reschedule or secure additional work to replace previously scheduled projects.
The rescheduling or cancellation of several significant projects may have a
material effect on our quarterly and/or annual operating results.




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Interest Rate Risks

We seek to reduce cash flow volatility associated with changes in interest
rates by entering into financial arrangements intended to provide a hedge
against a portion of the risks associated with such volatility. We continue to
have exposure to such risks to the extent they are not hedged. We assess
interest rate cash flow risk by continually identifying and monitoring changes
in interest rate exposures that may adversely impact expected future cash flows
and by evaluating hedging opportunities. Interest rate swap agreements are the
primary instruments used to manage interest rate fluctuation affecting our
$383.4 million of variable rate debt primarily associated with our Senior
Credit Agreement. At March 31, 2003, we had three interest rate swap agreements
with a combined fair market value of $4.1 million in favor of our
counterparties. In one swap agreement, we receive variable interest rate
payments and make fixed interest rate payments on a notional amount of $365.0
million. This swap agreement matures on June 30, 2003. In addition, we have
two interest rate swap agreements in the UK with a fair value of $700,000 in
favor of our counterparties. These swap agreements mature on
March 10, 2016. These swap agreements have the effect of
creating a fixed interest rate with respect to $372.0 million of
our $383.4 million floating (or variable) interest rate debt. Had market
interest rates been 100 basis points higher throughout the three months ended
March 31, 2003, we would have recorded an increase of
approximately $958,435 of additional interest expense on our floating
(variable) rate debt, offset by a reduction of interest expense of
approximately $930,054 on our interest rate swaps.

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Foreign Currency Risk

We continually monitor our economic exposure to changes in foreign
exchange rates and may enter into foreign exchange agreements where and when
appropriate. Whenever possible, we utilize local currency borrowings to fund
foreign acquisitions. At March 31, 2003, we did not have any foreign exchange
agreements. 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 transaction gains or losses, the financial statements of our
foreign subsidiaries are translated into United States dollars as part of our
consolidated financial reporting. As a result, fluctuations in exchange rates
affect our financial position and results of operations.




ITEM 4. CONTROLS AND PROCEDURES.

The Companys chief executive officer and chief financial officer
performed an evaluation of the Companys disclosure controls and procedures (as
defined in Rule 13a-14(c) and Rule 15d-14(c) of the Securities Exchange Act of
1934, as amended) as of a date within 90 days prior to the filing of this
report. Based on this evaluation, the Companys chief executive officer and
chief financial officer conclude that such controls and procedures effectively
insure that information required to be disclosed in this report is
appropriately recorded, processed and reported. There have been no significant
changes in the Companys internal controls or in other factors that could
significantly affect these controls subsequent to the date of their evaluation.




PART II  OTHER INFORMATION




Item 1. Legal Proceedings

There have been no material developments that have not been previously
reported in our legal proceedings disclosure in Part I, Item 3 of our Annual
Report on Form 10-K for the year ended December 31, 2002, filed March 27, 2003,
with the Securities and Exchange Commission. In addition, there have been no
new reportable events during the quarter ended March 31, 2003.




Item 2. Changes in Securities and Use of Proceeds

During the quarter ended March 31, 2003, the Company issued 4,109,305
shares of its Class B common stock to Liberty Media and its affiliates in
payment of $5.5 million in interest under the Liberty Subordinated Credit
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 the Companys 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 4. Submission of matters to a vote of security holders.

For a description of matters submitted to a vote of the Companys
stockholders during the period covered by this report, see Item 4. Submission
of Matters to a Vote of Security Holders in the Companys Annual Report on
Form 10-K for the fiscal year ended December 31, 2002.




Item 5. Other Information

Acquisition by Liberty Media

On April 25, 2003, Liberty Media announced that it has adopted a plan of
merger to acquire all the issued and outstanding shares of the Company that it
does not already own. Pursuant to the terms of the merger, the Companys
stockholders would receive 0.1147 shares of Liberty Media Series A common stock
for each share of the Companys Class A common stock. Liberty Media currently
owns all the issued and outstanding shares of the Companys Class B common
stock. The transaction is intended to be taxable to the public holders of the
Companys common stock, for U.S. federal income tax purposes.

Because Liberty Media owns in excess of 90% of the outstanding common
stock of the Company, the merger is expected to be accomplished as a short
form merger under Delaware law. As a result, neither the approval of the
Companys board of directors nor a vote of its stockholders is required to
effect the merger; however, statutory appraisal rights will be available to
stockholders of the Company who elect to assert such rights, subject to
compliance with the procedures established by Delaware law. The transaction is

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not subject to any substantive regulatory conditions, other than the
filing and effectiveness of a registration statement covering the shares of
Liberty Media Series A common stock to be issued in the merger. Liberty Media
may terminate the plan of merger at any time prior to closing if it determines,
in its sole discretion, that the merger is no longer in its best interest. The
merger is expected to close during the third quarter of 2003.




Item 6. Exhibits and Reports on Form 8-K

|             |                                                                                                                                                                                                                                        | 
|------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|(a) Exhibits |                                                                                                                                                                                                                                        | 
|             |                                                                                                                                                                                                                                        | 
|99.1         | Certification pursuant to section 906 of the Sarbanes-Oxley Act of
2002. Pursuant to Commission Release 34-47551, this certification
shall not be deemed to be filed with the Commission but shall be
deemed to accompany this report.

(b)  Reports on Form 8-K.

None.

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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.

|             |  |                                                                        |                      
|------------ |  | ---------------------------------------------------------------------- | ---------------------
|             |  | ASCENT MEDIA GROUP, INC.                                              
|             |  |                                                                        |                      
|May 15, 2003 |  | By:                                                                    | /s/ George C. Platisa
|             |  |                                                                        |                      
|Date         |  | George C. Platisa
Executive Vice President and Chief Financial Officer

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CERTIFICATIONS

Certification of Chief Executive Officer

I, William R. Fitzgerald, certify that:



| | 1. |  | I have reviewed this quarterly report on Form 10-Q of Ascent
Media Group, Inc. (the registrant);                                                                                                                                                                                                                            
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;
|
| | 3. |  | Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report;                   
|
| | 4. |  | The registrants other certifying officers and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for
the registrant and we have:                                                                                                     

| |    |  |                                                                                                                                                                                                                                                                                                
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) |  | designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;
|
| | b) |  | evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the
Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date;                                                                                                                        
|

| | 5. |  | The registrants other certifying officers and I have
disclosed, based on our most recent evaluation, to the registrants
auditors and the audit committee of registrants board of directors
(or persons performing the equivalent function):
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |    |  |                                                                                                                                                                                                                                                                                               
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | a) |  | all significant deficiencies in the design or
operation of internal controls which could adversely affect the
registrants ability to record, process, summarize and report
financial data and have identified for the registrants auditors
any material weaknesses in internal controls; and
|
| | b) |  | any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                        
|

| | 6. |  | The registrants other certifying officers and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of our
most recent evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: May 15, 2003

/s/ William R. Fitzgerald
William R. Fitzgerald
Chief Executive Officer

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Certification of Chief Financial Officer

I, George C. Platisa, certify that:



| | 1. |  | I have reviewed this quarterly report on Form 10-Q of Ascent
Media Group, Inc. (the registrant);                                                                                                                                                                                                                            
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;
|
| | 3. |  | Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report;                   
|
| | 4. |  | The registrants other certifying officers and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for
the registrant and we have:                                                                                                     
|

| |    |  |                                                                                                                                                                                                                                                                                                
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a. |  | designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;
|
| | b. |  | evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the
Evaluation Date); and                                                                                                  
|
| | c. |  | presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date;                                                                                                                        

| | 5. |  | The registrants other certifying officers and I have
disclosed, based on our most recent evaluation, to the registrants
auditors and the audit committee of registrants board of directors
(or persons performing the equivalent function):
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |    |  |                                                                                                                                                                                                                                                                                               
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a. |  | all significant deficiencies in the design or
operation of internal controls which could adversely affect the
registrants ability to record, process, summarize and report
financial data and have identified for the registrants auditors
any material weaknesses in internal controls; and
|
| | b. |  | any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                        

| | 6. |  | The registrants other certifying officers and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of our
most recent evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: May 15, 2003

/s/ George C. Platisa
George C. Platisa
Chief Financial Officer

26