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SECURITIES AND EXCHANGE COMMISSION
Washington, 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, 2002
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

LIBERTY LIVEWIRE CORPORATION

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(Exact name of registrant as specified in its charter)


|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|State of 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  [   ]

The number of shares of common stock outstanding at
May 1, 2002 was 5,320,465
Class A Common Stock and 35,272,649 Class B Common Stock.



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TABLE OF CONTENTS



|                            |                                                                                               |                                                             |  |  |  |  |  | 
|--------------------------- | --------------------------------------------------------------------------------------------- | ----------------------------------------------------------- |  |  |  |  |  | 
|                            |                                                                                               | 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                           
|PART II  OTHER INFORMATION
|                            | Item 1. Legal Proceedings                                                                    
|                            | Item 2. Changes in Securities and Use of Proceeds                                            
|                            | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURE                  
|EXHIBIT 10.1               
|EXHIBIT 10.2               
|EXHIBIT 10.3               



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LIBERTY LIVEWIRE CORPORATION

Report on Form 10-Q for the Three Months Ended March 31, 2002

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|Part I           |  | FINANCIAL INFORMATION                                                                 |  |           |                                                                                                                | 
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|Item 1.           |  | Financial Statements                                                                  |  |           |                                                                                                                | 
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|                  |  |                                                                                       |  |           | Condensed Consolidated Balance Sheets, March 31,
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(Unaudited) |  |    | 4 | 
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(Unaudited) |  |    | 5 | 
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|Item 2.           |  | Managements Discussion and Analysis of Financial Condition
and Results of Operations |  |           | 13                                                                                                             | 
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|Item 3.           |  | Quantitative and Qualitative Disclosures About Market Risk                            |  |           | 19                                                                                                             | 
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|Part II          |  | OTHER INFORMATION                                                                     |  |           |                                                                                                                | 
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|Item 1.           |  | Legal Proceedings                                                                     |  |           | 19                                                                                                             | 
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|Item 2.           |  | Changes in Securities and Use of Proceeds                                             |  |           | 19                                                                                                             | 
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|Item 6.           |  | Exhibits and Reports on Form 8-K                                                      |  |           | 20                                                                                                             | 
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|                  |  |                                                                                       |  | Signature |                                                                                                                |  | 20 |  



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LIBERTY LIVEWIRE CORPORATION
Condensed Consolidated Balance Sheets
(Amounts in thousands, except share data)

|                                                                                                                                                                                     |                                                                                                                                                     |                                                                                                                                                                                |          |             |         |              |          |        |         | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------- | ----------- | ------- | ------------ | -------- | ------ | ------- | 
|                                                                                                                                                                                     |                                                                                                                                                     |                                                                                                                                                                                |          | March 31,   |         | December 31,
|                                                                                                                                                                                     |                                                                                                                                                     |                                                                                                                                                                                |          | 2002        |         | 2001        
|                                                                                                                                                                                     |                                                                                                                                                     |                                                                                                                                                                                |          |             |         |             
|                                                                                                                                                                                     |                                                                                                                                                     |                                                                                                                                                                                |          | (Unaudited) |         | (Audited)   
|Current Assets:                                                                                                                                                                      |                                                                                                                                                     |                                                                                                                                                                                |          |             |         |              |          |       
|                                                                                                                                                                                     | Cash and cash equivalents                                                                                                                           |                                                                                                                                                                                | $        | 14,938      |         |              | $        | 23,433 |        
|                                                                                                                                                                                     | Trade receivables, net of allowance for doubtful accounts of
$10.2 million and $12.0 million, at March 31, 2002 and
December 31, 2001, respectively |                                                                                                                                                                                |          | 89,147      |         |              |          | 96,696 |        
|                                                                                                                                                                                     | Inventories                                                                                                                                         |                                                                                                                                                                                |          | 4,027       |         |              |          | 4,016  |        
|                                                                                                                                                                                     | Deferred income taxes, net                                                                                                                          |                                                                                                                                                                                |          | 3,922       |         |              |          | 5,006  |        
|                                                                                                                                                                                     | Prepaid deposits and other                                                                                                                          |                                                                                                                                                                                |          | 13,584      |         |              |          | 14,237 |        
|                                                                                                                                                                                     |                                                                                                                                                     |                                                                                                                                                                                |          |             |         |              |          |       
|                                                                                                                                                                                     |                                                                                                                                                     | Total current assets                                                                                                                                                           |          |             | 125,618 |              |          |        | 143,388 | 
|                                                                                                                                                                                     |                                                                                                                                                     |                                                                                                                                                                                |          |             |         |              |          |       
|Property, plant and equipment, at cost, net of accumulated
depreciation and amortization of $158.5 million and $147.8
million, at March 31, 2002 and
December 31, 2001, respectively |                                                                                                                                                     |                                                                                                                                                                                | 314,956  |             |         |              | 316,077  |       
|Goodwill and identifiable intangible assets, net                                                                                                                                     |                                                                                                                                                     |                                                                                                                                                                                | 428,046  |             |         |              | 448,909  |       
|Other assets, net                                                                                                                                                                    |                                                                                                                                                     |                                                                                                                                                                                | 11,248   |             |         |              | 11,317   |       
|                                                                                                                                                                                     |                                                                                                                                                     |                                                                                                                                                                                |          |             |         |              |          |       
|                                                                                                                                                                                     |                                                                                                                                                     | Total assets                                                                                                                                                                   |          | $           | 879,868 |              |          | $      | 919,691 | 
|                                                                                                                                                                                     |                                                                                                                                                     |                                                                                                                                                                                |          |             |         |              |          |       
|Current Liabilities:                                                                                                                                                                 |                                                                                                                                                     |                                                                                                                                                                                |          |             |         |              |          |       
|                                                                                                                                                                                     | Current maturities of long-term debt and capital lease obligations                                                                                  |                                                                                                                                                                                | $        | 18,331      |         |              | $        | 19,129 |        
|                                                                                                                                                                                     | Accounts payable                                                                                                                                    |                                                                                                                                                                                |          | 35,244      |         |              |          | 38,906 |        
|                                                                                                                                                                                     | Accrued expenses and other liabilities                                                                                                              |                                                                                                                                                                                |          | 64,274      |         |              |          | 76,345 |        
|                                                                                                                                                                                     | Due to parent company, net                                                                                                                          |                                                                                                                                                                                |          | 4,161       |         |              |          | 5,439  |        
|                                                                                                                                                                                     |                                                                                                                                                     |                                                                                                                                                                                |          |             |         |              |          |       
|                                                                                                                                                                                     |                                                                                                                                                     | Total current liabilities                                                                                                                                                      |          |             | 122,010 |              |          |        | 139,819 | 
|                                                                                                                                                                                     |                                                                                                                                                     |                                                                                                                                                                                |          |             |         |              |          |       
|Long-term debt and capital lease obligations                                                                                                                                         |                                                                                                                                                     |                                                                                                                                                                                | 422,715  |             |         |              | 424,556  |       
|Convertible subordinated notes, net                                                                                                                                                  |                                                                                                                                                     |                                                                                                                                                                                | 184,664  |             |         |              | 183,685  |       
|Deferred income taxes, net                                                                                                                                                           |                                                                                                                                                     |                                                                                                                                                                                | 4,236    |             |         |              | 5,006    |       
|Other liabilities                                                                                                                                                                    |                                                                                                                                                     |                                                                                                                                                                                | 12,662   |             |         |              | 13,177   |       
|                                                                                                                                                                                     |                                                                                                                                                     |                                                                                                                                                                                |          |             |         |              |          |       
|                                                                                                                                                                                     |                                                                                                                                                     | Total liabilities                                                                                                                                                              |          |             | 746,287 |              |          |        | 766,243 | 
|                                                                                                                                                                                     |                                                                                                                                                     |                                                                                                                                                                                |          |             |         |              |          |       
|Commitments and contingencies                                                                                                                                                        |                                                                                                                                                     |                                                                                                                                                                                |          |             |         |              |          |       
|Stockholders Equity:                                                                                                                                                                |                                                                                                                                                     |                                                                                                                                                                                |          |             |         |              |          |       
|                                                                                                                                                                                     | Common Stock:                                                                                                                                       |                                                                                                                                                                                |          |             |         |              |          |        |        
|                                                                                                                                                                                     |                                                                                                                                                     | Class A; authorized 300,000,000 shares of $0.01 par value;
5,335,530 issued; 5,319,279 and 5,334,022 outstanding at March
31, 2002 and December 31, 2001, respectively         |          |             | 53      |              |          |        | 53      | 
|                                                                                                                                                                                     |                                                                                                                                                     | Class B; convertible, authorized 100,000,000 shares of $0.01
par value; 35,272,649 and 34,393,330 issued and outstanding at
March 31, 2002 and December 31, 2001, respectively |          |             | 353     |              |          |        | 344     | 
|Additional paid-in capital                                                                                                                                                           |                                                                                                                                                     |                                                                                                                                                                                | 623,826  |             |         |              | 617,933  |       
|Treasury stock; 16,251 and 1,508 shares, at cost, at March 31, 2002
and December 31, 2001, respectively                                                                              |                                                                                                                                                     |                                                                                                                                                                                | (124     | )           |         |              | (28      | )     
|Accumulated deficit                                                                                                                                                                  |                                                                                                                                                     |                                                                                                                                                                                | (472,448 | )           |         |              | (446,082 | )     
|Other                                                                                                                                                                                |                                                                                                                                                     |                                                                                                                                                                                | (406     | )           |         |              | (1,356   | )     
|Accumulated other comprehensive loss                                                                                                                                                 |                                                                                                                                                     |                                                                                                                                                                                | (17,673  | )           |         |              | (17,416  | )     
|                                                                                                                                                                                     |                                                                                                                                                     |                                                                                                                                                                                |          |             |         |              |          |       
|                                                                                                                                                                                     |                                                                                                                                                     | Total stockholders equity                                                                                                                                                     |          |             | 133,581 |              |          |        | 153,448 | 
|                                                                                                                                                                                     |                                                                                                                                                     |                                                                                                                                                                                |          |             |         |              |          |       
|Total liabilities and stockholders equity                                                                                                                                           |                                                                                                                                                     | $                                                                                                                                                                              | 879,868  |             |         | $            | 919,691  |       
|                                                                                                                                                                                     |                                                                                                                                                     |                                                                                                                                                                                |          |             |         |              |          |       

See notes to condensed consolidated financial statements.



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LIBERTY LIVEWIRE CORPORATION
Condensed Consolidated Statements of Operations (Unaudited)
(Amounts in thousands, except share data)

|                                                                            |                                            |                          |         |                    |        |      |         |            |        | 
|--------------------------------------------------------------------------- | ------------------------------------------ | ------------------------ | ------- | ------------------ | ------ | ---- | ------- | ---------- | ------ | 
|                                                                            |                                            |                          |         | Three Months Ended
|                                                                            |                                            |                          |         | March 31,         
|                                                                            |                                            |                          |         |                   
|                                                                            |                                            |                          |         | 2002               |        | 2001
|                                                                            |                                            |                          |         |                    |        |     
|Net revenues                                                                |                                            | $                        | 135,383 |                    |        | $    | 154,303 |           
|Cost of services                                                            |                                            |                          | 81,687  |                    |        |      | 91,640  |           
|                                                                            |                                            |                          |         |                    |        |      |         |           
|                                                                            |                                            | Gross profit             |         |                    | 53,696 |      |         |            | 62,663 | 
|                                                                            |                                            |                          |         |                    |        |      |         |           
|Operating expenses:                                                         |                                            |                          |         |                    |        |      |         |           
|                                                                            | Selling, general and administrative        |                          |         | 31,627             |        |      |         | 30,994     |       
|                                                                            | Depreciation and amortization              |                          |         | 17,315             |        |      |         | 30,746     |       
|                                                                            | Non-cash compensation (income) expense     |                          |         | (903               | )      |      |         | 5,129      |       
|                                                                            |                                            |                          |         |                    |        |      |         |           
|                                                                            |                                            | Total operating expenses |         |                    | 48,039 |      |         |            | 66,869 | 
|                                                                            |                                            |                          |         |                    |        |      |         |           
|Income (loss) from operations                                               |                                            |                          | 5,657   |                    |        |      | (4,206  | )         
|                                                                            |                                            |                          |         |                    |        |      |         |           
|                                                                            | Interest expense, net                      |                          |         | 15,632             |        |      |         | 13,590     |       
|                                                                            | Other (income) expense, net                |                          |         | (3,621             | )      |      |         | 126        |       
|                                                                            |                                            |                          |         |                    |        |      |         |           
|Loss before income taxes and change in accounting principle                 |                                            |                          | (6,354  | )                  |        |      | (17,922 | )         
|Income tax benefit                                                          |                                            |                          | (215    | )                  |        |      | (4,428  | )         
|                                                                            |                                            |                          |         |                    |        |      |         |           
|Loss before change in accounting principle                                  |                                            |                          | (6,139  | )                  |        |      | (13,494 | )         
|Change in accounting principle, net of income tax benefit                   |                                            |                          | (20,227 | )                  |        |      |        |           
|                                                                            |                                            |                          |         |                    |        |      |         |           
|Net loss                                                                    |                                            | $                        | (26,366 | )                  |        | $    | (13,494 | )         
|                                                                            |                                            |                          |         |                    |        |      |         |           
|Weighted average number of common and common equivalent
shares outstanding: |                                            |                          |         |                    |        |      |         |           
|                                                                            | Basic and diluted                          |                          |         | 39,742,265         |        |      |         | 37,003,316 |       
|Net loss per common share  basic and diluted                               |                                            |                          |         |                    |        |      |         |           
|                                                                            | Loss before change in accounting principle |                          | $       | (0.15              | )      |      | $       | (0.36      | )     
|                                                                            | Change in accounting principle             |                          |         | (0.51              | )      |      |         |           |       
|                                                                            |                                            |                          |         |                    |        |      |         |           
|                                                                            | Net loss per common share                  |                          | $       | (0.66              | )      |      | $       | (0.36      | )     
|                                                                            |                                            |                          |         |                    |        |      |         |           

See notes to condensed consolidated financial statements.



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

|                                                          |                                                              |   |                    |         |      |   |          |          |  
|--------------------------------------------------------- | ------------------------------------------------------------ | - | ------------------ | ------- | ---- | - | -------- | -------- | -
|                                                          |                                                              |   | Three Months Ended
|                                                          |                                                              |   | March 31,         
|                                                          |                                                              |   |                   
|                                                          |                                                              |   | 2002               |         | 2001
|                                                          |                                                              |   |                    |         |     
|Net cash flows provided by operating activities           |                                                              | $ | 11,981             |         |      | $ | 5,616    |         
|                                                          |                                                              |   |                    |         |      |   |          |         
|Cash flows from investing activities:                     |                                                              |   |                    |         |      |   |          |         
|                                                          | Proceeds from sales of marketable securities and investments |   |                    |        |      |   |          | 4,471    |  
|                                                          | Capital expenditures                                         |   |                    | (15,893 | )    |   |          | (15,708  | )
|                                                          | Acquisitions, net                                            |   |                    |        |      |   |          | (108,166 | )
|                                                          | Other, net                                                   |   |                    |        |      |   |          | (36      | )
|                                                          |                                                              |   |                    |         |      |   |          |         
|Net cash flows used in investing activities               |                                                              |   | (15,893            | )       |      |   | (119,439 | )       
|                                                          |                                                              |   |                    |         |      |   |          |         
|Cash flows from financing activities:                     |                                                              |   |                    |         |      |   |          |         
|                                                          | Borrowings of long-term debt                                 |   |                    |        |      |   |          | 15,000   |  
|                                                          | Payments of long-term debt and capital lease obligations     |   |                    | (2,651  | )    |   |          | (2,249   | )
|                                                          | Borrowings under convertible subordinated notes, net         |   |                    |        |      |   |          | 95,801   |  
|                                                          | Other, net                                                   |   |                    | (96     | )    |   |          | (85      | )
|                                                          |                                                              |   |                    |         |      |   |          |         
|Net cash flows provided by (used in) financing activities |                                                              |   | (2,747             | )       |      |   | 108,467  |         
|                                                          |                                                              |   |                    |         |      |   |          |         
|Effect of exchange rate changes on cash                   |                                                              |   | (1,836             | )       |      |   | (611     | )       
|                                                          |                                                              |   |                    |         |      |   |          |         
|Net decrease in cash and cash equivalents                 |                                                              |   | (8,495             | )       |      |   | (5,967   | )       
|Cash and cash equivalents at beginning of period          |                                                              |   | 23,433             |         |      |   | 19,466   |         
|                                                          |                                                              |   |                    |         |      |   |          |         
|Cash and cash equivalents at end of period                |                                                              | $ | 14,938             |         |      | $ | 13,499   |         
|                                                          |                                                              |   |                    |         |      |   |          |         

See notes to condensed consolidated financial statements.



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LIBERTY LIVEWIRE CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)

1. Description of Business

Liberty Livewire Corporation (Liberty Livewire or the Company)
provides services necessary to complete the creation of original 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 existing content libraries; and services
necessary to assemble and distribute programming for cable and broadcast
networks via fiber, satellite and the Internet.

The Companys assets and operations are primarily comprised of the
historical business of the Company, formally known as The Todd-AO Corporation,
and ten companies acquired during 2001 and 2000: Four Media Company (4MC);
Virgin Media Group Limited (Virgin); Soundelux, the sound post-production and
certain related businesses of SounDelux Entertainment Group of Delaware, Inc.
(Soundelux); Triumph Communications, Inc. (Triumph); Video Services
Corporation (VSC); Group W Network Services, including 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 (Cinram-POP). The combination and integration of the acquired entities
allows the Company to offer its clients a complete range of services, from
image capture to last mile delivery.

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, 2001. 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 June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No.
141 requires that all business combinations initiated after June 30, 2001 be
accounted for under the purchase method. SFAS No. 142 addresses the financial
accounting and reporting for acquired goodwill and other intangible assets.
Under the new rules, the Company is no longer required to amortize goodwill and
other intangible assets with indefinite lives, but will be subject to periodic
testing for impairment. SFAS No. 142 also requires that intangible assets with
estimable useful lives be amortized over their respective estimated useful
lives to their estimated residual values, and be reviewed for impairment.

Effective January 1, 2002, the Company adopted SFAS No. 142 and in
accordance with its provisions, the Company recorded a transitional impairment
charge of $20.2 million against goodwill held at the Entertainment Television
reporting unit which is part of the Companys Pictures Group. The charge has
been reflected as a cumulative effect of a change in accounting principle in
the three months ended March 31, 2002. Fair value of each reporting unit was
obtained through an outside valuation consultant. The consultant used both the
income approach and market approach in determining fair value.



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LIBERTY LIVEWIRE CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)

As of March 31, 2002, the Companys goodwill and other intangible assets
with indefinite lives totaled $420.7 million, including $419.0 of goodwill and
$1.7 million of tradenames. The following table presents the changes in
goodwill allocated to the reportable segments during the first three months of
fiscal year 2002 (in thousands):

|                                |                                                  |   |          |         |       |   |          |       |       |   |         |       |   |   |         |         |  
|------------------------------- | ------------------------------------------------ | - | -------- | ------- | ----- | - | -------- | ----- | ----- | - | ------- | ----- | - | - | ------- | ------- | -
|                                |                                                  |   | Pictures |         | Media |   | Networks |       | Total
|                                |                                                  |   |          |         |       |   |          |       |      
|Balance as of December 31, 2001 |                                                  | $ | 201,061  |         |       | $ | 83,451   |       |       | $ | 137,158 |       |   | $ | 421,670 |        
|                                | Transitional impairment charge                   |   |          | (20,227 | )     |   |          |      |       |   |         |      |   |   |         | (20,227 | )
|                                | Reclassification of acquired
assembled workforce |   |          | 8,767   |       |   |          | 4,261 |       |   |         | 4,482 |   |   |         | 17,510  |  
|                                | Adjustments                                      |   |          |        |       |   |          |      |       |   |         | 1,024 |   |   |         | 1,024   |  
|                                | Effect of foreign exchange rates                 |   |          | (506    | )     |   |          | (237  | )     |   |         | (251  | ) |   |         | (994    | )
|                                |                                                  |   |          |         |       |   |          |       |       |   |         |       |   |   |         |        
|Balance as of March 31, 2002    |                                                  | $ | 189,095  |         |       | $ | 87,475   |       |       | $ | 142,413 |       |   | $ | 418,983 |        
|                                |                                                  |   |          |         |       |   |          |       |       |   |         |       |   |   |         |        

The following table presents identifiable intangible assets that are
subject to amortization and estimated future amortization under the provisions
of SFAS No. 142 as of March 31, 2002 (in thousands):

|                                          |                                                              |   |        |        |  
|----------------------------------------- | ------------------------------------------------------------ | - | ------ | ------ | -
|Intangible assets subject to amortization |                                                              |   |        |       
|                                          | Employment agreements                                        |   | $      | 8,188  |  
|                                          | Non-compete agreements                                       |   |        | 3,414  |  
|                                          |                                                              |   |        |       
|                                          |                                                              |   | 11,602 |       
|                                          | Accumulated amortization                                     |   |        | (4,233 | )
|                                          |                                                              |   |        |       
|                                          |                                                              | $ | 7,369  |       
|                                          |                                                              |   |        |       
|Estimated amortization expense            |                                                              |   |        |       
|                                          | 2002                                                         |   | $      | 2,309  |  
|                                          | 2003                                                         |   |        | 2,309  |  
|                                          | 2004                                                         |   |        | 2,309  |  
|                                          | 2005                                                         |   |        | 1,109  |  
|                                          |                                                              |   |        |       
|                                          |                                                              |   | 8,036  |       
|                                          | Less: Amortization for the three months ended March 31, 2002 |   |        | (667   | )
|                                          |                                                              |   |        |       
|                                          |                                                              | $ | 7,369  |       
|                                          |                                                              |   |        |       

The Company has ceased amortizing goodwill and other intangible assets
with indefinite lives as of the beginning of fiscal year 2002. As a result, for
the three months ended March 31, 2002, the Company did not recognize $6.7
million of amortization expense that would have been recognized had the
previous standards been in effect. The following table presents the impact of
SFAS No. 142 on net loss and net loss per share had the standard been in effect
for the first quarter of fiscal year 2001 (amounts in thousands, except per
share data):

|                                                |                                                                |                 |         |                    |   |      |         |        |       | 
|----------------------------------------------- | -------------------------------------------------------------- | --------------- | ------- | ------------------ | - | ---- | ------- | ------ | ----- | 
|                                                |                                                                |                 |         | Three Months Ended
|                                                |                                                                |                 |         | March 31,         
|                                                |                                                                |                 |         |                   
|                                                |                                                                |                 |         | 2002               |   | 2001
|                                                |                                                                |                 |         |                    |   |     
|Reported net loss                               |                                                                | $               | (26,366 | )                  |   | $    | (13,494 | )     
|                                                | Amortization of goodwill                                       |                 |         |                   |   |      |         | 7,901  |      
|                                                | Amortization of acquired assembled workforce intangible assets |                 |         |                   |   |      |         | 1,512  |      
|                                                | Income tax effect                                              |                 |         |                   |   |      |         | (1,331 | )    
|                                                |                                                                |                 |         |                    |   |      |         |       
|                                                |                                                                | Net adjustments |         |                    |  |      |         |        | 8,082 | 
|                                                |                                                                |                 |         |                    |   |      |         |       
|Adjusted net loss                               |                                                                | $               | (26,366 | )                  |   | $    | (5,412  | )     
|                                                |                                                                |                 |         |                    |   |      |         |       
|Reported net loss per share  basic and diluted |                                                                | $               | (0.66   | )                  |   | $    | (0.36   | )     
|                                                |                                                                |                 |         |                    |   |      |         |       
|Adjusted net loss per share  basic and diluted |                                                                | $               | (0.66   | )                  |   | $    | (0.15   | )     
|                                                |                                                                |                 |         |                    |   |      |         |       



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LIBERTY LIVEWIRE CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)

In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets,which establishes a single
accounting model for the impairment or disposal of long-term assets, including
discontinued operations. SFAS No. 144 superseded SFAS No. 121 and APB Opinion
No. 30, Reporting the Results of Operations  Reporting the Effects of Disposal
of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions.The provisions of SFAS No. 144 are effective
in fiscal years beginning after December 15, 2001, with early adoption
permitted, and in general are to be applied prospectively. The Companys
adoption of SFAS No. 144, effective January 1, 2002, did not have a material
impact on its results of operations and financial position.

4. Acquisitions

On February 1,
2001, the Company acquired GWNS from Viacom, Inc.
and certain of its subsidiaries. On August 23, 2001, the Company acquired from
Cinram U.S. Holdings, Inc. the 51% interest in Cinram-POP that it did not already own. On September 6, 2001, the Company
acquired the remaining 99% interest in LNS that
it did not already own, thereby acquiring the operations of Ascent Network
Services.

In accordance with the requirements of SFAS No. 141, Business
Combinations, the following unaudited pro forma interim consolidated financial
information is presented as if each acquisition was consummated on January 1,
2001. The unaudited pro forma interim information includes the results of operations
for the period prior to the acquisitions, adjusted for depreciation
and amortization of
assets, interest expense on borrowings incurred to fund the
acquisitions, and income taxes. The unaudited pro forma information is not
necessarily indicative of the results of operations had these events actually
occurred on January 1, 2001, nor is it necessarily indicative of future results
(in thousands, except per share data):

|                                                                                |  |                    |         |      |  |   |         |  
|------------------------------------------------------------------------------- |  | ------------------ | ------- | ---- |  | - | ------- | -
|                                                                                |  | Three Months Ended
|                                                                                |  | March 31,         
|                                                                                |  |                   
|                                                                                |  | 2002               |         | 2001
|                                                                                |  |                    |         |     
|Net revenues                                                                    |  | $                  | 135,383 |      |  | $ | 163,208 |  
|                                                                                |  |                    |         |      |  |   |         |  
|Loss before change in accounting principle                                      |  | $                  | (6,139  | )    |  | $ | (14,575 | )
|                                                                                |  |                    |         |      |  |   |         |  
|Net loss                                                                        |  | $                  | (26,366 | )    |  | $ | (14,575 | )
|                                                                                |  |                    |         |      |  |   |         |  
|Loss per common share before change in accounting
principle  basic and diluted |  | $                  | (0.15   | )    |  | $ | (0.39   | )
|                                                                                |  |                    |         |      |  |   |         |  
|Net loss per common share  basic and diluted                                   |  | $                  | (0.66   | )    |  | $ | (0.39   | )
|                                                                                |  |                    |         |      |  |   |         |  



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LIBERTY LIVEWIRE CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)

5. Comprehensive Income

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

|                                                                                |  |                    |         |      |  |   |         |  
|------------------------------------------------------------------------------- |  | ------------------ | ------- | ---- |  | - | ------- | -
|                                                                                |  | Three Months Ended
|                                                                                |  | March 31,         
|                                                                                |  |                   
|                                                                                |  | 2002               |         | 2001
|                                                                                |  |                    |         |     
|Net loss                                                                        |  | $                  | (26,366 | )    |  | $ | (13,494 | )
|Unrealized gain on available for sale securities                                |  |                    |        |      |  |   | 1,883   |  
|Unrealized loss on cash flow hedge                                              |  |                    |        |      |  |   | (4,093  | )
|Loss on foreign currency translation                                            |  |                    | (2,273  | )    |  |   | (1,610  | )
|Reclassification adjustment for realized gains on
available for sale securities |  |                    |        |      |  |   | (276    | )
|Reclassification adjustment for amortization of
loss on cash flow hedge         |  |                    | 2,016   |      |  |   |        |  
|                                                                                |  |                    |         |      |  |   |         |  
|Net loss recognized in other comprehensive income                               |  |                    | (257    | )    |  |   | (4,096  | )
|                                                                                |  |                    |         |      |  |   |         |  
|Total comprehensive loss                                                        |  | $                  | (26,623 | )    |  | $ | (17,590 | )
|                                                                                |  |                    |         |      |  |   |         |  

6. Long-Term Debt

On March 26, 2002, the Company finalized Amendment No. 2 to its Senior
Credit Agreement under which new lenders may be added to the agreement, with
the consent of current lenders at any time prior to September 30, 2002,
potentially increasing the available borrowings by an additional $60.0 million
from $415.0 million to $475.0 million, subject to borrowing tests. In addition,
the amendment provides the Company with greater financial flexibility by
modifying various financial covenants including adjustments to its total
leverage ratio, fixed charge ratio and indebtedness limitations. As of March
31, 2002, $391.7 million was outstanding under the Senior Credit Agreement and
$20.0 million was available for future borrowings.

7. Stock Appreciation Rights

The accrued expense attributed to stock appreciation rights was $1.3
million as of March 31, 2002, and $3.2 million as of December 31, 2001. The
Companys statements of operations for the three months ended March 31, 2002
and 2001 include non-cash income of $1.9 million and non-cash expense of $5.1
million, respectively, due to changes in the stock price underlying the stock
appreciation rights during each period presented.

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 not included in the computation of diluted earnings per share because to
do so would have been antidilutive.



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LIBERTY LIVEWIRE CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)

9. Financial Instruments

The Companys statement of operations for the three months ending March
31, 2002 includes $3.2 million of non-cash income related to mark-to-market
adjustments on interest rate swap agreements which had a combined fair market
value of $11.5 million and $14.7 million as of March 31, 2002 and December 31,
2001, respectively, in favor of our counterparties. Additionally, during the
three months ended March 31, 2002, the Company realized non-cash interest
expense of $2.0 million related to the $6.4 million of unrealized losses
included in accumulated other comprehensive income as of December 31, 2001. The
remaining $4.4 million of unrealized losses will be recorded during the
remainder of fiscal year 2002.

10. Business Segment Information

The Companys business units have been aggregated into three reportable
segments: the Pictures Group, the Media Group, and the Networks Group. The
Pictures 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, television commercials, music videos,
promotional and identity campaigns and corporate communications programming.
The Media Group provides services necessary to facilitate the global
maintenance, management and distribution of existing content libraries; access
to physical and virtual content, restoration and preservation of damaged
content and creation of high resolution professional masters from original
camera negative for global home, broadcast, pay-per-view and emerging new media
channels. The Media Groups results also include the Companys Digital Media
Management initiative, a developing business. The Networks Group provides
services necessary to assemble and distribute programming for cable and
broadcast networks via fiber, satellite and the Internet to viewers in North
America, Europe and Asia. Additionally, the Networks Group includes the results
of the Companys Bandwidth Management initiative, a new and developing
business. Corporate related items and unallocated income and expenses are
reflected in the Corporate and Other column listed below. Corporate and Other
includes the results of the Companys Interactive Media business, a new and
developing business initiative.

The Company evaluates performance based on several factors, including
segment income (loss) before income taxes, interest, depreciation and
amortization of intangibles. The Company believes that EBITDA is an important
measure of our financial performance. The Company defines EBITDA as earnings before
interest, taxes, depreciation and amortization, excluding gains and losses on
asset sales and unusual charges such as restructuring, integration and
impairment. 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. EBITDA is
calculated before depreciation and amortization charges and, in businesses with
significant non-cash expenses, is widely used as a measure of cash flow
available to pay interest and repay debt, and, to the extent available after
debt service and other required uses, to make acquisitions or invest in capital
equipment and new technologies. As a result, the Company intends to report
EBITDA as a measure of financial performance. EBITDA does not represent cash
generated from operating activities in accordance with GAAP and should not be
considered in isolation or as a substitute for other measures of performance
prepared in accordance with GAAP. EBITDA does not reflect that portion of its
capital expenditures that may be required to maintain its market share,
revenues and leadership position in its industry. Moreover, not all EBITDA will
be available to pay interest or repay debt. The Companys presentation of
EBITDA may not be comparable to similarly titled measures reported by other
companies. Certain reclassifications have been made to the prior periods
reported herein to conform to the current periods presentation.



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LIBERTY LIVEWIRE CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)

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

|                                 |                     |   |                    |         |      |   |         |        |  
|-------------------------------- | ------------------- | - | ------------------ | ------- | ---- | - | ------- | ------ | -
|                                 |                     |   | Three Months Ended
|                                 |                     |   | March 31,         
|                                 |                     |   |                   
|                                 |                     |   | 2002               |         | 2001
|                                 |                     |   |                    |         |     
|Revenues from external customers |                     |   |                    |         |      |   |         |       
|                                 | Pictures Group      |   | $                  | 73,430  |      |   | $       | 91,896 |  
|                                 | Media Group         |   |                    | 24,704  |      |   |         | 25,972 |  
|                                 | Networks Group      |   |                    | 37,249  |      |   |         | 36,389 |  
|                                 | Corporate and Other |   |                    |        |      |   |         | 46     |  
|                                 |                     |   |                    |         |      |   |         |       
|                                 |                     | $ | 135,383            |         |      | $ | 154,303 |       
|                                 |                     |   |                    |         |      |   |         |       
|EBITDA                           |                     |   |                    |         |      |   |         |       
|                                 | Pictures Group      |   | $                  | 14,553  |      |   | $       | 20,386 |  
|                                 | Media Group         |   |                    | 6,857   |      |   |         | 7,977  |  
|                                 | Networks Group      |   |                    | 10,828  |      |   |         | 11,537 |  
|                                 | Corporate and Other |   |                    | (10,169 | )    |   |         | (8,231 | )
|                                 |                     |   |                    |         |      |   |         |       
|                                 |                     | $ | 22,069             |         |      | $ | 31,669  |       
|                                 |                     |   |                    |         |      |   |         |       

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

|         |                                                           |   |                    |        |      |   |         |        |  
|-------- | --------------------------------------------------------- | - | ------------------ | ------ | ---- | - | ------- | ------ | -
|         |                                                           |   | Three Months Ended
|         |                                                           |   | March 31,         
|         |                                                           |   |                   
|         |                                                           |   | 2002               |        | 2001
|         |                                                           |   |                    |        |     
|Net loss |                                                           | $ | (26,366            | )      |      | $ | (13,494 | )     
|Add:     |                                                           |   |                    |        |      |   |         |       
|         | Change in accounting principle, net of income tax
benefit |   |                    | 20,227 |      |   |         |       |  
|         | Depreciation and amortization                             |   |                    | 17,315 |      |   |         | 30,746 |  
|         | Non-cash compensation (income) expense                    |   |                    | (903   | )    |   |         | 5,129  |  
|         | Interest expense, net                                     |   |                    | 15,632 |      |   |         | 13,590 |  
|         | Other (income) expense, net                               |   |                    | (3,621 | )    |   |         | 126    |  
|         | Income tax benefit                                        |   |                    | (215   | )    |   |         | (4,428 | )
|         |                                                           |   |                    |        |      |   |         |       
|EBITDA   |                                                           | $ | 22,069             |        |      | $ | 31,669  |       
|         |                                                           |   |                    |        |      |   |         |       

11. Related Party Transactions

For the quarter ended March 31, 2002, the Company issued 879,319 shares of
its Class B Common Stock to Liberty Media and its affiliates in payment of $5.0
million in interest under the Liberty Subordinated Debt Agreement. Shares of
Class B Common Stock are convertible into shares of the Companys Class A
Common Stock, on a one-for-one basis, at any time at the option of the holder.

During the three months ended March 31, 2002, the Company repaid $1.6
million of its balance due to Liberty Media. There were no repayments during
the quarter ended March 31, 2001. Expenses, including salaries
and related costs, interest and other charges allocated from Liberty Media to the Company
totaled $260,000 and $281,000 during the three months ended March 31, 2002 and
2001, respectively.



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LIBERTY LIVEWIRE CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)

12. Subsequent Event

In May 2002, the Company announced that it contributed certain assets and
liabilities of The Post Edge, Inc., a wholly-owned subsidiary doing
business as Manhattan Transfer-Miami, to a newly formed
post-production company called BVI-Miami, LLC (BVI-Miami). BVI-Miami will be
40% owned by Liberty Livewire and will be accounted for by Liberty Livewire
under the equity method of accounting. The Company is in the process of
finalizing the impact of this transaction on its financial position and results
of operations, which is not expected to be material.



12



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##### Table of Contents






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, 2001. The following
discussion focuses on material trends, risks and uncertainties affecting our
results of operations and financial condition.

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

Overview

Liberty Livewire Corporation 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 the historical
business of our predecessor, The Todd-AO Corporation, and ten companies
acquired during 2001 and 2000. The unique combination and integration of these
acquired entities allows us to offer our clients a complete range of services,
from image capture to last mile distribution, unmatched by most other
competitors in the industry. We are able to offer outsourcing solutions for
the technical and creative requirements of our clients that lower operating
costs, reduce cycle times and increase reliability and quality. We have
organized our facilities and operations into the three business segments, that
we call Groups, as described below.

Pictures Group.Our Pictures Group provides services necessary to
complete the creation of original content including feature films, television
shows, television commercials, music videos, promotional and identity campaigns
and corporate communications programming. Our services begin once raw images
are captured and are completed when a final product is delivered to the last
mile distributor such as broadcast network, cable channel or an IP
distributor. The Pictures Group has three divisions: Entertainment Television,
Commercial Television and Audio.

Media Group.Our Media Group provides the services necessary to
facilitate the global maintenance, management and distribution of existing
content libraries. Through our facilities, we provide immediate access to
physical and virtual content, we restore and preserve damaged content, and we
create high resolution professional masters from original camera negative for
global home video, broadcast, pay-per-view and emerging new media distribution
channels.

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



13



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Acquisitions in 2001

On February 1, 2001, we acquired Group W Network Services, including 100%
of the outstanding capital stock of Asia Broadcast Centre Pte. Ltd. and Group W
Broadcast Pte. Ltd. (collectively, GWNS) from Viacom, Inc. and certain of its
subsidiaries. On August 23, 2001, we acquired from Cinram U.S. Holdings, Inc.
the 51% interest in Cinram-POP DVD Center LLC (Cinram-POP) that we did not
already own. On September 6, 2001, we acquired the remaining 99% interest in
Livewire Network Services (LNS) that we did not already own, thereby
acquiring the operations of Ascent Network Services.

Earnings Before Interest Taxes Depreciation and Amortization

We believe that Earnings Before Interest Taxes Depreciation and
Amortization, or EBITDA, is an important measure of our financial performance.
We define EBITDA as earnings before interest, taxes, depreciation and
amortization, excluding gains and losses on asset sales and unusual charges
such as restructuring, integration and impairment. Our investments in new
infrastructure, machine capacity, technology and goodwill arising from our
significant acquisition activity have produced a relatively high depreciation
and amortization expense and have historically been a significant annual
non-cash charge to earnings. EBITDA is calculated before depreciation and
amortization charges and, in businesses with significant non-cash expenses, is
widely used as a measure of cash flow available to pay interest and repay debt,
and, to the extent available after debt service and other required uses, to
make acquisitions or invest in capital equipment and new technologies. As a
result, we view EBITDA as an important measure of our financial performance and
valuation and intend to report EBITDA as a measure of financial performance.
EBITDA does not represent cash generated from operating activities in
accordance with generally accepted accounting principles (GAAP) and should
not be considered in isolation or as a substitute for other measures of
performance prepared in accordance with GAAP. EBITDA does not reflect that
portion of our capital expenditures that may be required to maintain our market
share, revenues and leadership position in our industry. Moreover, not all
EBITDA will be available to pay interest or repay debt. Additionally, our
presentation of EBITDA may not be comparable to similarly titled measures
reported by other companies.

Critical Accounting Policies

Valuation of Goodwill, Other Intangible Assets and Long-lived Assets. We
will perform goodwill impairment tests on an annual basis and on an interim
basis if an event or circumstance indicates that it is more likely than not
that an impairment has been incurred. In response to changes in industry and
market conditions, we may strategically realign our resources and consider
restructuring, disposing of, or otherwise exiting businesses, which could
result in impairment of goodwill, other intangible assets and long-lived
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 is not recoverable from its undiscounted cash flows.
Impairment of long-lived assets is measured as the difference between the
carrying amount and fair value of the asset.

Valuation of Trade Receivables. We must make estimates of the
collectability of our trade receivables. Our management analyzes the
collectability 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 $89.1 million and
$96.7 million, net of allowance for doubtful accounts of $10.2 million and
$12.0 million, as of March 31, 2002 and December 31, 2001, respectively.

Amortization of goodwill

Effective January 1, 2002, we adopted SFAS No. 142 and in accordance with
its provisions, we recorded a transitional impairment charge of $20.2 million
against goodwill held at the Entertainment Television reporting unit, part of
our Pictures Group. The charge has been reflected as a cumulative effect of a
change in accounting principle in the three months ended March 31, 2002. Fair
value of each reporting unit was obtained through an outside valuation
consultant. The consultant used both the income approach and market approach in
determining fair value.



14



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##### Table of Contents



In accordance with SFAS No. 142, we ceased amortizing goodwill and other
intangible assets with indefinite lives totaling $420.7 million as of the
beginning of fiscal year 2002, including $419.0 million of goodwill and $1.7
million of tradename related intangible assets. As a result, for the three
months ended March 31, 2002, we did not recognize $6.7 million of amortization
expense that would have been recognized had the previous standards been in
effect. There can be no assurances that future goodwill impairment tests will
not result in charges to earnings. For additional information regarding SFAS
No. 142, see Note 3 to the Notes to Condensed Consolidated Financial
Statements.

Results of Operations

The Pictures Groups revenues are primarily generated from fees for audio
and video post production, audio and video special effects and editorial
services for the television, film and advertising industries. The Media Group
provides owners of film libraries a broad range of restoration, preservation,
archiving, professional mastering and duplication services. The Media Groups
results also include our Digital Media Management initiative, a developing
business. The Networks 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, satellite and the Internet. The
Network Groups results also include our Bandwidth Management initiative, a new
and developing business. Corporate related items and unallocated revenues and
expenses are reflected in Corporate and Other, below. Additionally, Corporate
and Other includes the results of our Interactive Media business, a new and
developing business initiative. Cost and expenses include costs of services,
which consist primarily of production wages, facility costs and other direct
costs; selling, general and administrative expenses; depreciation and
amortization; interest expense and income taxes.

Our consolidated results of operations for the three months ended March
31, 2002, include the results of GWNS, Cinram-POP and LNS. Our consolidated
results of operations for the three months ended March 31, 2001 include the
results of GWNS from its February 1, 2001 acquisition date but do not include
consolidated results for Cinram-POP or LNS as those acquisitions occurred in
August and September 2001, respectively. As a result, reported operating
results are not comparable between the periods presented.

Comparison of Reported Results (unaudited) for the Three Months Ended March 31,
2002 to the Reported Results for the Three Months Ended March 31, 2001
(unaudited).

|                 |                     |      |                    |         |   |   |         |         |  
|---------------- | ------------------- | ---- | ------------------ | ------- | - | - | ------- | ------- | -
|                 |                     |      | Three Months Ended
|                 |                     |      | March 31,         
|                 |                     |      |                   
|(in thousands)   |                     | 2002 |                    | 2001   
|                 |                     |      |                    |        
|Segment Revenues |                     |      |                    |         |   |   |         |        
|                 | Pictures Group      |      | $                  | 73,430  |   |   | $       | 91,896  |  
|                 | Media Group         |      |                    | 24,704  |   |   |         | 25,972  |  
|                 | Networks Group      |      |                    | 37,249  |   |   |         | 36,389  |  
|                 | Corporate and Other |      |                    |        |   |   |         | 46      |  
|                 |                     |      |                    |         |   |   |         |        
|                 |                     | $    | 135,383            |         |   | $ | 154,303 |        
|                 |                     |      |                    |         |   |   |         |        
|Segment EBITDA   |                     |      |                    |         |   |   |         |        
|                 | Pictures Group      |      | $                  | 14,553  |   |   | $       | 20,386  |  
|                 | Media Group         |      |                    | 6,857   |   |   |         | 7,977   |  
|                 | Networks Group      |      |                    | 10,828  |   |   |         | 11,537  |  
|                 | Corporate and Other |      |                    | (10,169 | ) |   |         | (8,231  | )
|                 |                     |      |                    |         |   |   |         |        
|                 |                     | $    | 22,069             |         |   | $ | 31,669  |        
|                 |                     |      |                    |         |   |   |         |        
|                 | Net loss            |      | $                  | (26,366 | ) |   | $       | (13,494 | )
|                 |                     |      |                    |         |   |   |         |        

Revenues decreased $18.9 million, or 12.2%, to $135.4 million for the
three months ended March 31, 2002 from $154.3 million for the three months
ended March 31, 2001. The acquisitions of GWNS, Cinram-POP and LNS contributed
$5.2 million of additional revenues. Pictures Group revenues decreased by $18.5
million resulting from unfavorable comparisons to 2001, which benefited from
increased television and feature film production primarily as a result of the
threatened actors and writers strikes combined with reduced television
advertising spending continuing into the first quarter of 2002. Media Group
revenues decreased by $1.3 million as a result of lower



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demand from larger studio clients for services, partially offset by an
increase of $365,000 resulting from the impact of the Cinram-POP acquisition.
Networks Group revenues increased by $860,000 primarily driven by an increase
of $4.8 million due to the impact of the acquisitions of GWNS and LNS and an
increase of $815,000 from our Bandwidth Management initiative offset by a
decrease of $4.7 million attributed to the timing of various large network
construction and installation projects. Networks Group revenues include $5.6
million related to Bandwidth Management for the three months ended March 31,
2002 compared to $4.8 million for the three months ended March 31, 2001.

Costs of services decreased $10.0 million, or 10.9%, to $81.7 million for
the three months ended March 31, 2002, from $91.6 million for the three months
ended March 31, 2001. The acquisitions of GWNS, Cinram-POP and LNS contributed
$3.4 million of costs; however, these increases were offset by decreases across
all of our Groups primarily in material, personnel and equipment expenses.

Selling, general and administrative expenses increased $633,000, or 2.0%,
to $31.6 million for the three months ended March 31, 2002 from $31.0 million
for the three months ended March 31, 2001. The increase is attributed to higher
expenses primarily associated with corporate centralization activities and
increased professional and legal fees, partially offset by reduced costs and
expenses associated with our Interactive Media initiative.

As a result of the above, EBITDA, as we define it, decreased $9.6 million,
or 30.3%, to $22.1 million for the three months ended March 31, 2002, from
$31.7 million for the three months ended March 31, 2001. Pictures Group EBITDA
decreased $5.8 million due to the lower revenues described above offset by cost
savings. Media Group EBITDA decreased $1.1 million due to lower revenues
described above and investment in our Digital Media Management initiative of
$265,000. Networks Group EBITDA decreased $709,000 driven by lower revenues
described above and an additional investment of $2.7 million in our Bandwidth
Management initiative offset by cost savings. The EBITDA loss for the Bandwidth
Management initiative was $2.1 million for the three months ended March 31,
2002 compared to positive EBITDA of $638,000 for the three months ended March
31, 2001. Corporate and Other EBITDA decreased $1.9 million due to a $2.8
million increase in expenses, primarily associated corporate centralization
activities and increased professional and legal fees partially offset by an
$850,000 decrease in EBITDA losses related to our Interactive Media business.
The EBITDA loss for our Interactive Media initiative was $1.7 million for the
three months ended March 31, 2002 compared to $2.5 million for the three months
ended March 31, 2001.

Depreciation and amortization decreased $13.4 million, or 43.7%, to $17.3
million for the three months ended March 31, 2002, from $30.7 million for the
three months ended March 31, 2001. Approximately $9.3 million of the decrease
is attributed to our adoption of SFAS No. 142 pursuant to which
goodwill and other identifiable intangible assets with indefinite lives are no
longer amortized. The rest of the decrease primarily reflects reduced
depreciation expense associated with the asset impairment charge recorded in
the fourth quarter of 2001.

Non-cash compensation expense decreased $6.0 million to $903,000 in income
for the three months ended March 31, 2002, from $5.1 million in expense
reported for the three months ended March 31, 2001. Results for the three
months ended March 31, 2002, included income of $1.9 million relating to a
decline in the value of the underlying financial instruments used to value
employee stock appreciation rights or SARs, partially offset by compensation
expense of $1.0 million relating to the issuance of in-the-money stock
options pursuant to our 2001 incentive compensation plan. The expense recorded
in the three months ended March 31, 2001, related primarily to the increase in
value of the underlying financial instruments used to value employee SARs.

Interest expense increased $2.0 million, or 15.0%, to $15.6 million for
the three months ended March 31, 2002, from $13.6 million for the three months
ended March 31, 2001. The increase is attributable to additional interest on
borrowings under the Liberty Subordinated Credit Agreement related to the
funding of fiscal year 2001 acquisitions. Interest expense for the three months
ended March 31, 2002, included $5.0 million of non-cash expense related to
interest under the Liberty Subordinated Credit Agreement, which we paid by
delivering 879,319 shares of our convertible Class B Common Stock. Other non-cash interest
expenses include $4.1 million related to interest rate swaps, and $1.2 million
of amortization of debt discounts and debt issuance costs.

Other income increased $3.7 million to $3.6 million for the three months
ended March 31, 2002, from $126,000 of expense for the three months ended March
31, 2001. The increase was primarily due to $3.2 million related to the
increase in the market value of certain freestanding interest rate swap
instruments.



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As a result of the above, the loss before income taxes and change in
accounting principle decreased $11.5 million to $6.4 million for the three
months ended March 31, 2002 from $17.9 million for the three months ended March
31, 2001.

The benefit for income taxes decreased $4.2 million, or 95.1%, to $215,000
for the three months ended March 31, 2002, from $4.4 million for the three
months ended March 31, 2001. The change is a result of an increase in the
valuation allowance. Our effective income tax rate for the three months ended
March 31, 2002, was 0.81% primarily due to disallowed deductions for goodwill
and interest expense of $17.4 million and $5.9 million, respectively, and
valuation allowances of $7.8 million.

Effective January 1, 2002, we adopted SFAS No. 142 and, in accordance with
its provisions, we recorded a transitional impairment charge of $20.2 million,
net of tax benefit, which has been reflected as a cumulative effect of a change
in accounting principle in the three months ended March 31, 2002.

As a result of the above, our net loss increased $12.9 million to $26.4
million for the three months ended March 31, 2002, from $13.5 million for the
three months ended March 31, 2001.

Liquidity and Capital Resources

Cash provided by operating activities for the three months ended March 31,
2002, was $12.0 million as compared to $5.6 million for the three months ended
March 31, 2001. Cash and cash equivalents were $14.9 million at March 31, 2002,
a decrease of $8.5 million from December 31, 2001. This decrease relates
primarily to cash used for capital expenditures and payments on long-term debt
and capital lease obligations, partially offset by cash provided by operating
activities.

Net cash used in investing activities was $15.9 million for the three
months ended March 31, 2002, compared to $119.4 million for the three months
ended March 31, 2001. During the three months ended March 31, 2002, we invested
$15.9 million in property, plant and equipment, as compared to $15.7 million
for the three months ended March 31, 2001. In addition, during the three months
ended March 31, 2001, we acquired GWNS for $108.2 million, invested $300,000 to
acquire 1% of LNS and realized proceeds of $4.5 million from sales of
marketable securities. For a description of our acquisitions, see Part I, Item
1, BusinessChange of Control and Post Change of Control Acquisitions and
Note 4 in the Notes to Consolidated Financial Statements, both as included in
our Annual Report on Form 10-K for the year ended December 31, 2001.

During the three months ended March 31, 2002, net cash used in financing
activities was $2.7 million compared to net cash provided by financing
activities of $108.5 million for the three months ended March 31, 2001. During
the three months ended March 31 2002, there were no additional borrowings under
our Senior Credit Agreement or our Liberty Subordinated Credit Agreement.
During the three months ended March 31, 2002, we repaid $2.7 million of debt
that matured during the period related to capital leases, mortgage notes and
other borrowings. These repayments were funded by cash generated from
operations. Cash provided by financing activities during the three months ended
March 31, 2001, was mostly used to acquire GWNS in February 2001.

At March 31, 2002, $391.7 million was outstanding under our Senior Credit
Agreement, $206.2 million was outstanding under our Liberty Subordinated Credit
Agreement and $20.0 million was available for future borrowings. In accordance
with terms of the Senior Credit Agreement, as amended March 26, 2002, new
lenders may be added to the agreement, with the consent of the current lenders
at any time prior to September 30, 2002, potentially increasing the available
borrowings by an additional $60.0 million for a total commitment of $475.0
million, subject to borrowing tests. In addition, the amendment provides us
with greater financial flexibility by modifying various financial covenants
including adjustments to our total leverage ratio, fixed charge ratio and
indebtedness limitations.

As of March 31, 2002, borrowings related to real property mortgages
totaled $21.3 million, capital lease obligations totaled $19.5 million, and
other notes payable totaled $8.5 million. As of March 31, 2002, $5.6 million
was available for future borrowings under two real property mortgage notes.
Proceeds from these notes are restricted in use to funding capital expenditure
initiatives for our United Kingdom operations.



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We believe that our cash flow from operations, together with cash on hand
and currently available borrowings under our Senior Credit Facility of $20.0
million at March 31, 2002, provide adequate resources to fund ongoing operating
requirements and future capital expenditures through the next twelve months.

We continue to monitor the credit markets in the event 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,
including the duration and severity of the post September 11, 2001 economic
environment.

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, and spending
on, feature film and television programming production, foreign and domestic
television advertising, and foreign and domestic spending by broadcasters,
cable companies and syndicators on first run and existing content libraries,
and the possibility of an industry-wide strike or other job action by or
affecting the Writers Guild, Screen Actors Guild, International Alliance of
Theatrical and Stage Employees or other major entertainment industry union. In
addition, our failure to maintain relationships with key customers and certain
key personnel, more rapid than expected technological obsolescence, and failure
to integrate acquired operations in expected time frames could also cause
actual results to differ materially from those described in forward-looking
statements.

In connection with several of our recent acquisitions described above, we
have incurred significant indebtedness to fund these transactions. 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 over the last two years. These
businesses have experienced varying profitability or losses in recent periods.
Since the aforementioned 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. For additional information see Part I, Item I of our Annual Report
on Form 10-K for the year ended December 31, 2001.



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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
$391.7 million of variable rate debt primarily associated with our Senior
Credit Agreement. At March 31, 2002, we had three interest rate swap agreements
with a combined fair market value of $11.5 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. The two remaining swap agreements have a combined notional amount of
$365.0 million, in which we receive fixed and pay variable interest rate
payments. All three swap agreements mature on June 30, 2003. For further
information regarding our borrowings and financial instruments, see Notes 6 and
13 in the Notes to Consolidated Financial Statements included in our Annual
Report on Form 10-K for the year ended December 31, 2001.

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, 2002, 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.




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, 2001, filed April 1, 2002,
with the Securities and Exchange Commission. In addition, there have
been no new reportable events during the three months ended
March 31, 2002.




Item 2. Changes in Securities and Use of Proceeds

For the quarter ended March 31, 2002, we issued 879,319 shares of our
convertible Class B Common Stock to Liberty Media and its affiliates in payment
of $5.0 million in interest under the Liberty Subordinated Debt Agreement. Such
issuance was not registered under the Securities Act of 1933, as amended,
pursuant to the exemption from registration afforded by Section 4(2) of that
Act. Shares of Class B Common Stock are convertible into shares of our Class A
Common Stock, on a one-for-one basis, at any time at the option of the holder.



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Item 6. Exhibits and Reports on Form 8-K



| | (a) |  | Exhibits
| | --- |  | --------



| | 10.1 |  | Amendment No. 2, dated as of
March 26, 2002, to the Credit
Agreement, among Liberty Livewire Corporation, as Borrower, the
Several Lenders from Time to Time Parties Thereto; Banc of America
Securities LLC, as Lead Arranger and Book Manager; Bank of America,
N.A., as Issuer and Swingline Lender; Bank of America, N.A., as
Administrative Agent; Salomon Smith Barney Inc., as Syndication
Agent; and The Bank of New York Company, Inc., as Documentation
Agent (the Senior Credit Agreement).
| | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 10.2 |  | Employment Agreement, dated as of March 25, 2002, by and
between Liberty Livewire Corporation and Aidan P. Foley.                                                                                                                                                                                                                                                                                                                                                                                       
|
| | 10.3 |  | Employment Agreement, dated as of April 25, 2002, by and
between Liberty Livewire Corporation and William W. Goodmen.                                                                                                                                                                                                                                                                                                                                                                                   



| | (b) |  | Reports on Form 8-K.
| | --- |  | --------------------
|
| |     |  | None                




SIGNATURE

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



| | LIBERTY LIVEWIRE CORPORATION
| | ----------------------------



|May 14, 2002  Date |  | /s/     George C. Platisa

George C. Platisa
Executive Vice President and Chief Financial Officer
|------------------ |  | -------------------------------------------------------------------------------------------------



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