##### 



FORM 10-Q SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 (Mark One) [x]
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934For the quarterly period ended September 30, 2004
 [  ]
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934For the transition period
from to
 Commission File Number 1-5846 THE LIBERTY CORPORATION 
 South Carolina
    
    57-0507055(State or other jurisdiction of
    
    (IRS Employerincorporation or organization)
    
    identification No.)
 135 South Main Street, Greenville, SC 29601 
  Registrants telephone number, including area code: 864/241-5400 Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [  ] Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No [  ] Indicate the number of shares outstanding of each of the Registrants classes
of common stock as of the latest practicable date. Number of shares OutstandingTitle of each class
    
    as of September 30, 2004Common Stock
    
    
    18,769,893




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##### 



PART I, ITEM 1 
 THE LIBERTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED AND CONDENSED BALANCE SHEETS September 30,
    
    December 31,(In 000s)
    
    2004
    
    2003(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    37,665
    
    
    $
    62,177Receivables (net of allowance for doubtful accounts)
    
    
    39,535
    
    
    
    42,364Program rights
    
    
    6,554
    
    
    
    4,564Prepaid and other current assets
    
    
    6,250
    
    
    
    3,013Deferred income taxes
    
    
    2,746
    
    
    
    2,183Total current assets
    
    
    92,750
    
    
    
    114,301Property, plant, and equipmentLand
    
    
    5,637
    
    
    
    5,657Buildings and improvements
    
    
    42,876
    
    
    
    48,969Furniture and equipment
    
    
    178,107
    
    
    
    167,775Less: Accumulated depreciation
    
    
    (136,077
    )
    
    
    (125,417
    )90,543
    
    
    
    96,984Intangible assets subject to amortization (net of
$653 and $841 accumulated amortization
in 2004 and 2003, respectively)
    
    
    281
    
    
    
    270FCC licenses
    
    
    304,525
    
    
    
    304,525Goodwill
    
    
    101,387
    
    
    
    101,387Investments and other assets
    
    
    26,857
    
    
    
    44,798Total assets
    
    $
    616,343
    
    
    $
    662,265LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued expenses
    
    $
    19,088
    
    
    $
    19,283Dividends payable
    
    
    4,573
    
    
    
    4,534Program contract obligations
    
    
    6,534
    
    
    
    4,734Accrued income taxes
    
    
    4,777
    
    
    
    3,874Total current liabilities
    
    
    34,972
    
    
    
    32,425Unearned revenue
    
    
    13,453
    
    
    
    11,802Deferred income taxes
    
    
    82,197
    
    
    
    89,417Other liabilities
    
    
    7,072
    
    
    
    6,621Revolving credit facility
    
    
    50,000
    
    
    
    Total liabilities
    
    
    187,694
    
    
    
    140,265Shareholders equityCommon stock
    
    
    62,181
    
    
    
    71,788Unearned stock compensation
    
    
    (18,621
    )
    
    
    (4,405
    )Retained earnings
    
    
    385,089
    
    
    
    454,379Unrealized investment gains
    
    
    
    
    
    
    238Total shareholders equity
    
    
    428,649
    
    
    
    522,000Total liabilities and shareholders equity
    
    $
    616,343
    
    
    $
    662,265
 See Notes to Consolidated and Condensed Financial Statements. 2




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##### 



THE LIBERTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED AND CONDENSED STATEMENTS OF OPERATIONS Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,(In 000s, except per share data)
    
    2004
    
    2003
    
    2004
    
    2003(Unaudited)REVENUESStation revenues (net of commissions)
    
    $
    49,915
    
    
    $
    45,836
    
    
    $
    145,653
    
    
    $
    134,777Cable advertising and other revenues
    
    
    3,691
    
    
    
    3,524
    
    
    
    10,821
    
    
    
    10,178Net revenues
    
    
    53,606
    
    
    
    49,360
    
    
    
    156,474
    
    
    
    144,955EXPENSESOperating expenses (exclusive of depreciation
and amortization shown separately below)
    
    
    32,045
    
    
    
    30,286
    
    
    
    94,725
    
    
    
    89,790Amortization of program rights
    
    
    1,786
    
    
    
    1,776
    
    
    
    5,302
    
    
    
    5,236Depreciation and amortization of intangibles
    
    
    5,321
    
    
    
    4,758
    
    
    
    14,860
    
    
    
    13,580Corporate, general, and administrative expenses
    
    
    5,206
    
    
    
    3,424
    
    
    
    14,391
    
    
    
    10,249Total operating expenses
    
    
    44,358
    
    
    
    40,244
    
    
    
    129,278
    
    
    
    118,855Operating income
    
    
    9,248
    
    
    
    9,116
    
    
    
    27,196
    
    
    
    26,100Net investment income (loss)
    
    
    (22
    )
    
    
    674
    
    
    
    (5,411
    )
    
    
    (74
    )Interest expense
    
    
    (253
    )
    
    
    
    
    
    
    (515
    )
    
    
    Income before income taxes
    
    
    8,973
    
    
    
    9,790
    
    
    
    21,270
    
    
    
    26,026Provision for (Benefit from) income taxes
    
    
    (3,229
    )
    
    
    3,671
    
    
    
    1,382
    
    
    
    9,760NET INCOME
    
    $
    12,202
    
    
    $
    6,119
    
    
    $
    19,888
    
    
    $
    16,266BASIC EARNINGS PER COMMON SHARE:
    
    $
    0.67
    
    
    $
    0.32
    
    
    $
    1.07
    
    
    $
    0.85DILUTED EARNINGS PER COMMON SHARE:
    
    $
    0.66
    
    
    $
    0.32
    
    
    $
    1.07
    
    
    $
    0.84Dividends per common share
    
    $
    0.25
    
    
    $
    0.24
    
    
    $
    0.75
    
    
    $
    0.72Special dividend per common share
    
    $
    
    
    
    $
    
    
    
    $
    4.00
    
    
    $
    
 See Notes to Consolidated and Condensed Financial Statements. 3




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##### 



THE LIBERTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED AND CONDENSED STATEMENTS OF CASH FLOWS Nine Months Ended September 30,(In 000s)
    
    2004
    
    2003(Unaudited)OPERATING ACTIVITIESNet income
    
    $
    19,888
    
    
    $
    16,266Adjustments to reconcile net income to net cash
provided by (used in) operating activities:Loss on sale of operating assets
    
    
    118
    
    
    
    285Realized investment losses
    
    
    6,382
    
    
    
    1,149Depreciation
    
    
    14,722
    
    
    
    13,395Amortization of intangibles
    
    
    138
    
    
    
    185Provision for bad debts
    
    
    620
    
    
    
    614Amortization of program rights
    
    
    5,302
    
    
    
    5,236Cash paid for program rights
    
    
    (5,492
    )
    
    
    (5,317
    )Provision for (Benefit from) deferred income taxes
    
    
    (7,783
    )
    
    
    3,183Changes in operating assets and liabilities:Receivables
    
    
    2,209
    
    
    
    3,630Other assets
    
    
    (960
    )
    
    
    3,431Accounts payable and accrued expenses
    
    
    1,446
    
    
    
    (725
    )Accrued income taxes
    
    
    2,086
    
    
    
    96Unearned revenue
    
    
    1,651
    
    
    
    2,041Other liabilities
    
    
    451
    
    
    
    51All other operating activities
    
    
    425
    
    
    
    (587
    )NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
    
    
    41,203
    
    
    
    42,933INVESTING ACTIVITIESPurchase of property, plant, and equipment
    
    
    (9,226
    )
    
    
    (17,556
    )Proceeds from sale of property, plant, and equipment
    
    
    163
    
    
    
    70Investments acquired
    
    
    (750
    )
    
    
    (5,900
    )Investments sold
    
    
    11,257
    
    
    
    Proceeds from sale of investment properties
    
    
    1,055
    
    
    
    3,562NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
    
    
    2,499
    
    
    
    (19,824
    )FINANCING ACTIVITIESProceeds from borrowings
    
    
    105,000
    
    
    
    Principal payments on debt
    
    
    (55,000
    )
    
    
    Dividends paid
    
    
    (89,142
    )
    
    
    (13,836
    )Proceeds from the exercise of stock options
    
    
    4,095
    
    
    
    1,376Repurchase of common stock
    
    
    (33,167
    )
    
    
    (12,321
    )NET CASH PROVIDED BY(USED IN) FINANCING ACTIVITIES
    
    
    (68,214
    )
    
    
    (24,781
    )DECREASE IN CASH
    
    
    (24,512
    )
    
    
    (1,672
    )Cash at beginning of period
    
    
    62,177
    
    
    
    67,917CASH AT END OF PERIOD
    
    $
    37,665
    
    
    $
    66,245
 See Notes to Consolidated and Condensed Financial Statements. 4




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##### 



THE LIBERTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS
September 30, 2004
(Unaudited)  1.
    
    BASIS OF PRESENTATIONThe accompanying unaudited consolidated and condensed financial statements
of The Liberty Corporation and Subsidiaries have been prepared in accordance
with accounting principles generally accepted in the United States for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements.The information included is not necessarily indicative of the annual results
that may be expected for the year ended December 31, 2004, but does reflect
all adjustments (which are of a normal and recurring nature) considered, in
the opinion of management, necessary for a fair presentation of the results
for the interim periods presented. In addition, the Companys revenues are
usually subject to seasonal fluctuations. The advertising revenues of the
stations are generally highest in the second and fourth quarters of each
year, due in part to increases in consumer advertising in the spring and
retail advertising in the period leading up to and including the holiday
season. Additionally, advertising revenues in even-numbered years tend to be
higher as they benefit from advertising placed by candidates for political
offices and demand for advertising time in Olympic broadcasts.The December 31, 2003 financial information was derived from the Companys
previously filed 2003 Form 10-K. For further information, refer to the
consolidated financial statements and footnotes thereto included in The
Liberty Corporation annual report on Form 10-K for the year ended December
31, 2003.  2.
    
    COMPREHENSIVE INCOMEThe components of comprehensive income, net of related income taxes, for the
three and six month periods ended September 30, 2004 and 2003, respectively,
are as follows: Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,(In 000s)
    
    2004
    
    2003
    
    2004
    
    2003Net income
    
    $
    12,202
    
    
    $
    6,119
    
    
    $
    19,888
    
    
    $
    16,266Unrealized gains
(losses) on
securities
    
    
    (196
    )
    
    
    (6
    )
    
    
    (238
    )
    
    
    86Comprehensive income
    
    $
    12,006
    
    
    $
    6,113
    
    
    $
    19,650
    
    
    $
    16,352
 5




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##### 



3.
    
    SEGMENT REPORTINGThe Company operates primarily in the television broadcasting and cable
advertising businesses. The Company currently owns and operates fifteen
television stations, primarily in the Southeast and Midwest. Each of the
stations is affiliated with a major network, with eight NBC affiliates, five
ABC affiliates, and two CBS affiliates. The Company evaluates segment
performance based on income before income taxes, excluding unusual, or
non-operating items.The following table summarizes financial information by segment for the
three and nine month periods ended September 30, 2004 and 2003: Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,(In 000s)
    
    2004
    
    2003
    
    2004
    
    2003Revenues (net of commissions)Broadcasting
    
    $
    49,915
    
    
    $
    45,836
    
    
    $
    145,653
    
    
    $
    134,777Cable advertising
    
    
    3,668
    
    
    
    3,487
    
    
    
    10,744
    
    
    
    9,957Other
    
    
    23
    
    
    
    37
    
    
    
    77
    
    
    
    221Total net revenues
    
    $
    53,606
    
    
    $
    49,360
    
    
    $
    156,474
    
    
    $
    144,955Income before income taxesBroadcasting
    
    $
    14,358
    
    
    $
    12,520
    
    
    $
    41,523
    
    
    $
    36,774Cable advertising
    
    
    506
    
    
    
    444
    
    
    
    1,289
    
    
    
    797Corporate and other
    
    
    (5,891
    )
    
    
    (3,174
    )
    
    
    (21,542
    )
    
    
    (11,545
    )Total income before income taxes
    
    $
    8,973
    
    
    $
    9,790
    
    
    $
    21,270
    
    
    $
    26,026
  There were no material changes in assets by segment from those disclosed in
the Companys 2003 annual report. The goodwill that appears on the face of
the balance sheet arose through the acquisition of certain television
stations, and therefore has been assigned in its entirety to the
Broadcasting segment.4.
    
    EMPLOYEE BENEFITSThe Company has a postretirement plan that provides medical and life
insurance benefits for qualified retired employees. The postretirement
medical plan is generally contributory with retiree contributions adjusted
annually to limit employer contributions to predetermined amounts. The
postretirement life plan provides free insurance coverage for retirees and
is insured with an unaffiliated company.The information presented in this footnote does not reflect the Medicare
Prescription Drug Improvement and Modernization Act of 2003 (the Act)
signed into law December 8, 2003.
Specifically, the measures of Net Periodic Postretirement Benefit cost shown
do not reflect this Act. Specific authoritative guidance on the accounting
treatment of the Act is pending and upon issuance, may require a change in
previously reported information. 6




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##### 



Net periodic postretirement benefit cost included the following components: Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,(In 000s)
    
    2004
    
    2003
    
    2004
    
    2003Service cost
    
    $
    6
    
    
    $
    7
    
    
    $
    19
    
    
    $
    20Amortization of prior service cost
    
    
    1
    
    
    
    1
    
    
    
    2
    
    
    
    2Amortization of actuarial net gain
    
    
    6
    
    
    
    
    
    
    
    16
    
    
    
    Interest cost
    
    
    33
    
    
    
    27
    
    
    
    100
    
    
    
    83Net periodic postretirement benefit cost
    
    $
    46
    
    
    $
    35
    
    
    $
    137
    
    
    $
    105
 5. EARNINGS PER SHARE The calculation of basic and diluted earnings per common share from
continuing operations is as follows: Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,(In 000s except per share data)
    
    2004
    
    2003
    
    2004
    
    2003Numerator  Earnings:Net income
    
    $
    12,202
    
    
    $
    6,119
    
    
    $
    19,888
    
    
    $
    16,266Effect of dilutive securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Numerator for basic and diluted
earnings per common share
    
    $
    12,202
    
    
    $
    6,119
    
    
    $
    19,888
    
    
    $
    16,266Denominator  Average Shares
Outstanding:Denominator for basic earnings
per common share  weighted average shares
    
    
    18,314
    
    
    
    19,119
    
    
    
    18,527
    
    
    
    19,153Effect of dilutive securities:Stock options
    
    
    94
    
    
    
    131
    
    
    
    134
    
    
    
    120Denominator for diluted earnings
per common share
    
    
    18,408
    
    
    
    19,250
    
    
    
    18,661
    
    
    
    19,273Basic earnings per common share
    
    $
    0.67
    
    
    $
    0.32
    
    
    $
    1.07
    
    
    $
    0.85Diluted earnings per common share
    
    $
    0.66
    
    
    $
    0.32
    
    
    $
    1.07
    
    
    $
    0.84
 7




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##### 



6. EQUITY COMPENSATION In accordance with the provisions of Statement of Financial
Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation, the Company has elected to follow Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees (APB No. 25) and related interpretations in accounting
for its equity compensation plans and does not recognize compensation
expense for its stock-based compensation plans other than for awards
of restricted shares. Expense is recognized over the vesting period
of the restricted shares. Under APB No. 25, because the exercise price of the Companys
employee stock options at least equals the market price of the
underlying stock on the date of the grant, no compensation expense is
recognized. Pro forma information regarding net income and earnings
per share is required by SFAS No. 123, and has been determined as if
the Company had accounted for its employee stock options under the
Black-Scholes fair value method described in that statement. The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options that have no vesting
restrictions and are fully transferable. In addition, option
valuation models require the input of highly subjective assumptions
including the expected stock price volatility. The Companys
employee stock options have characteristics significantly different
from those of traded options, and changes in the subjective input
assumptions can materially affect the fair value estimate. For purposes of pro forma disclosures, the estimated fair value of
the options is amortized to expense over the options vesting
periods. The Companys pro forma information is as follows: For the Three Months
    
    For the Nine MonthsEnded September 30,
    
    Ended September 30,(In 000s, except per share amounts)
    
    2004
    
    2003
    
    2004
    
    2003Stock-based compensation cost
included in net income (net of
taxes)
    
    $
    760
    
    
    $
    236
    
    
    $
    1,501
    
    
    $
    969Net income:As reported
    
    $
    12,202
    
    
    $
    6,119
    
    
    $
    19,888
    
    
    $
    16,266Pro forma compensation expense (net
of taxes)
    
    
    (203
    )
    
    
    (206
    )
    
    
    (605
    )
    
    
    (569
    )Pro forma net income
    
    $
    11,999
    
    
    $
    5,913
    
    
    $
    19,283
    
    
    $
    15,697Basic earnings per share:As reported
    
    $
    0.67
    
    
    $
    0.32
    
    
    $
    1.07
    
    
    $
    0.85Pro forma
    
    
    0.66
    
    
    
    0.31
    
    
    
    1.04
    
    
    
    0.82Diluted earnings per share:As reported
    
    $
    0.66
    
    
    $
    0.32
    
    
    $
    1.07
    
    
    $
    0.84Pro forma
    
    
    0.65
    
    
    
    0.31
    
    
    
    1.03
    
    
    
    0.82
 8




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##### 



7. COMMON STOCK The following table summarizes the Common Stock activity from the
date of the Companys most recently audited annual financial
statements to the end of the period covered by this report: CommonShares
    
    Common(In 000s)
    
    Outstanding
    
    StockBalance as of 12/31/03
    
    
    18,931
    
    
    $
    71,788Stock issued for employee
benefit and performance
incentive compensation
programs
    
    
    528
    
    
    
    22,377Income tax benefit
resulting from employee
exercise of options
    
    
    
    
    
    
    1,183Stock repurchased
    
    
    (689
    )
    
    
    (33,167
    )Balance as of 9/30/04
    
    
    18,770
    
    
    $
    62,181
 During the first quarter of 2004, the Company funded the accrued 2003
discretionary contribution to its employee retirement and savings
plan. Half of this funding, approximately $1.6 million, was in the
form of approximately 32,000 shares of Liberty common stock. 8. CREDIT FACILITY On March 21, 2001, the Company entered into a $100 million unsecured
364-day revolving credit facility with a bank. On February 2,
2004, the Company renewed the facility through May 18, 2005, on
substantially similar terms. The Company currently has $50 million
drawn under such facility. Interest is payable quarterly at 2.4%. 9. IMPAIRMENT OF INVESTMENTS During the second quarter of 2004, the Company recorded a $5.3
million impairment on one of its strategic investments, a developer
of digital entertainment to be viewed at existing movie theaters. The
Company fully reserved this investment due to the investee companys
current inadequate cash balances and inability to secure financing
from additional investors. 10. PROVISION FOR INCOME TAXES It is the Companys policy to establish reserves for income taxes
that may become payable in future years as a result of an examination
by tax authorities. The Company establishes the reserves based upon
managements assessment of exposures related to the recognition of
revenue or the deductions in its tax returns. The reserves are
analyzed periodically, and adjustments are made as events occur to
warrant adjustment to the reserve. For example, if the statutory
period for assessing tax on a given tax return or period lapses, the
reserve associated with that period may be adjusted. In addition,
the adjustment to the reserve may reflect additional exposure based
on current calculations. To the extent the Company were to prevail
in matters for which accruals have been established, statutory
periods for assessing taxes lapse, or it be required to pay amounts
in excess of reserves, the Companys effective tax rate in a given
financial statement period could be materially affected. During the third quarter of 2004, management reassessed its potential
liability related to current examinations, and the statute of
limitations expired related to certain previous tax years. As a
result the Company recorded a benefit from income taxes for the third
quarter of 2004. The Companys effective tax rate exclusive of this
reserve adjustment is expected to be approximately 38% for 2004. 9




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##### 



11. COMMITMENTS AND CONTINGENCIES In November of 2000, the Company sold its insurance operations to a
third party. Under the purchase agreement, subject to certain
limitations, the Company agreed to indemnify the buyer for damages
(as defined in the purchase agreement) relating to certain tax
matters, preexisting litigation and regulatory proceedings. The
indemnification relating to the tax matters is in effect until the
expiration of the relevant statutes of limitation. The
indemnifications relating to the other matters are in effect until
the final resolution of such matters. The Company believes that the
likelihood of it being required to make payments as a result of any
of these indemnifications is remote, and therefore has no liability
recorded related to these indemnifications. The limit of amounts
recoverable by the acquirer will not exceed one-half the purchase
price, or approximately $324 million. 12. VARIABLE INTEREST ENTITIES Variable interest entities are accounted for in accordance with
Interpretation of Financial Standards (FIN) No. 46 Consolidation
of Variable Interest Entities (FIN 46). The Interpretation
requires the consolidation of entities by the party that is
determined to be the primary beneficiary (as defined in FIN 46), as
a result of its ownership, contractual or other financial interests
in another entity. As noted in the Companys Form 10-K for the year ended December 31, 2003,
the Company performed an evaluation of its investments to determine if
any investee companies were variable interest entities as defined by
FIN 46. One investment was determined to be a variable interest entity.
Liberty is a third party investor of the variable interest entity and has
no other relationship with it or its management. Liberty acquired its
interests from time to time since 2002 through the purchase of
convertible notes. At no point has Liberty been the primary
beneficiary of this entity. During the third quarter of 2004, Liberty was informed by the management
of its sole variable interest entity of their intentions to cease
operations and wind up the entitys business. Liberty has no further
obligations with respect to this entity. The Company had previously fully impaired this investment (see Note No. 9
above). 13. NEW ACCOUNTING PRONOUNCEMENTS At the September 29-30, 2004 Emerging Issues Task Force meeting, the SEC
Staff Announcement Use of Residual Method to Value Acquired Assets Other
Than Goodwill (the Announcement) was announced. The Announcement
requires registrants to use a direct value method for valuing intangible
assets in all acquisitions completed after September 29, 2004. In
addition, registrants who have applied the residual method to the
valuation of intangible assets for purposes of impairment testing are
required to perform an impairment test using a direct value method on all
intangible assets that were previously valued using the residual method
by no later than the beginning of their first fiscal year beginning after
December 15, 2004, which would be as of the beginning of the first
quarter of 2005 for the Company. Impairments of intangible assets
recognized upon application of a direct value method by entities
previously applying the residual method will be reported as a non-cash charge related to the cumulative
effect of a change in accounting principle. 10




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Liberty has, in the past, used the residual method to value certain of
its intangibles, most notably FCC licenses, and as such the Announcement
applies to the Company. While the impact of the adoption of the
Announcement is currently unknown, the Company believes that it may have
a material impact to its financial statements. 14. RECLASSIFICATIONS Certain reclassifications have been made in the previously reported
financial statements to make the prior year amounts comparable to those
of the current year. 11




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PART I, ITEM 2
MANAGEMENTS DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Unaudited) The Liberty Corporation is a holding company with operations primarily in the
television broadcasting industry. The Companys television broadcasting
subsidiary, Cosmos Broadcasting, consists of fifteen network-affiliated
stations located in the Southeast and Midwest, along with other ancillary
businesses. Eight of the Companys television stations are affiliated with NBC,
five with ABC, and two with CBS. SEASONALITY OF TELEVISION REVENUES The Companys revenues are usually subject to seasonal fluctuations. The
advertising revenues of the stations are generally highest in the second and
fourth quarters of each year, due in part to increases in consumer advertising
in the spring and retail advertising in the period leading up to and including
the holiday season. Additionally, advertising revenues in even-numbered years
tend to be higher as they benefit from advertising placed by candidates for
political offices and demand for advertising time in Olympic broadcasts. RESULTS OF OPERATIONS Three Months Ended September 30, 2004 Compared to Three Months Ended September 30, 2003 Total net revenue increased
$4.2 million on a year-over-year basis.
Station net revenue increased $4.1 million for the same period. Cable and
other net revenue increased $0.1 million as compared to the prior year quarter. Local revenue was up
$2.5 million, while national revenue was flat on a year-over-year basis. Sales in the automotive, healthcare, and
financial institution categories had healthy increases over 2003 levels,
while most of the other categories tracked by the Company had more modest
growth. Political revenue for the third quarter of 2004 was $5.3  million
as compared to $3.3 million in the third quarter of 2003. This is
consistent with the Companys historical experience that advertising revenues
in even-numbered years tend to be higher than in odd-numbered years due to
advertising placed by or on behalf of candidates running for political offices.
The Company expects the cyclicality of political advertising revenues to
continue to affect its revenues in future periods. The Company does not,
however, know whether the increase in advertising spending by auto
manufacturers and dealers, financial institutions, or healthcare providers will
continue at similar rates in future periods. Operating expenses (including amortization of program rights) increased $1.8
million. Operating expenses increased due mainly to planned annual
increases in employee compensation, higher commissions paid to the Companys
sales staff as a result of increased local revenues, and expenses related to
sales incentive trips for clients to the Olympics. While the Company
would expect continued increases in employee compensation related to annual
increases, higher levels of commissions paid to the Companys sales staff will
be dependent upon the realization of increased revenues. From time to time the
Company may offer incentive trips to its clients. The future use of sales
incentives will be evaluated based on the market conditions at that time. 12




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Corporate expenses were $5.2 million in the third quarter of 2004, an
increase of $1.8 million as compared to the $3.4 million reported for
the third quarter of 2003. The increase in corporate expenses is due mainly to
planned annual increases in employee compensation, amortization expense related
to restricted stock grants made during 2004, increased legal fees, and
additional accounting and professional fees related to Sarbanes-Oxley Section
404 compliance initiatives. The Company would expect continued
increases in employee compensation of similar amounts in future periods. The
Company would expect the increased expenses related to its Sarbanes-Oxley
Section 404 compliance initiatives to continue through the first quarter of
2005. During the third quarter of 2004, management reassessed its potential liability
related to current examinations, and the statute of limitations expired related
to certain previous tax years. As a result the Company recorded a benefit from
income taxes for the third quarter of 2004. The Companys effective tax rate
exclusive of this reserve adjustment is expected to be approximately
38% for 2004. Nine Months Ended September 30, 2004 Compared to Nine Months Ended September 30, 2003 Total net revenue increased
$11.5 million on a year-over-year basis.
Station net revenue increased $10.9 million for the same period.
Cable and other net revenue increased $0.6 million as compared to the
prior year-to-date period. Local revenue was up
$5.6 million, and national revenue was up $1.8
million on a year-over-year basis. Sales in the automotive, retail,
healthcare, and financial institution categories had healthy increases over
2003 levels, while most of the other categories tracked by the Company had more
modest growth. Political revenue for the first nine months of 2004 was
$11.8 million as compared to $6.0 million for the same period of
2003. This is consistent with the Companys historical experience that
advertising revenues in even-numbered years tend to be higher than in
odd-numbered years due to advertising placed by or on behalf of candidates
running for political offices. The Company expects the cyclicality of
political advertising revenues to continue to affect its revenues in future
periods. The Company does not, however, know whether the increase in
advertising spending by auto manufacturers and dealers, retailers, healthcare
providers or financial institutions will continue in future periods. Operating expenses (including amortization of program rights) increased $5.0
million. Operating expenses increased due mainly to increased
medical insurance costs, increased programming costs, planned annual increases
in employee compensation, higher commissions paid to the Companys sales staff
as a result of increased local revenues, and expenses related to sales
incentive trips for clients to the Olympics. While the Company would
expect continued increases in employee compensation related to annual salary
increases and similar increases in medical insurance costs in future periods,
higher levels of commissions paid to the Companys sales staff will be
dependent upon the realization of increased revenues. From time to time the
Company may offer incentive trips to its clients. The future use of sales
incentives will be evaluated based on the market conditions at that time. Corporate expenses were $14.4 million in the first nine months of
2004, an increase of $4.2 million as compared to the $10.2
million reported for the same period of 2003. The increase in
corporate expenses is due mainly to planned annual increases in employee
compensation, amortization expense related to restricted stock grants made
during 2004, increased legal fees, additional accounting and professional fees
related to Sarbanes-Oxley Section 404 compliance initiatives, and the $1.6
million charge taken related to the settlement of all outstanding issues
associated with the terminated GNS media (GNS) transaction. During
2003, the Company announced that it was in negotiations with GNS for the
purpose of entering into certain agreements associated with GNSs proposed
purchase of a television station. Those negotiations were subsequently terminated. The
Company would expect continued increases in employee compensation 13




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of similar amounts in future periods. The Company would expect the increased expenses
related to its Sarbanes-Oxley Section 404 compliance initiatives to continue
through the first quarter of 2005. Net investment income for the first nine months of 2004 was a loss of $5.4
million. Interest earned on cash balances and notes receivable, and
$0.7 million gain on the sale of an investment in the Companys venture capital
portfolio were offset by $6.4 million of impairments taken during the first and
second quarters of 2004. During the third quarter of 2004, management reassessed its potential liability
related to current examinations, and the statute of limitations expired related
to certain previous tax years. As a result the Company recorded a benefit from
income taxes for the third quarter of 2004. The Companys effective tax rate
exclusive of this reserve adjustment is expected to be approximately 38%
for 2004. Capital, Financing and Liquidity At September 30, 2004,
the Company had cash of $37.7 million,
outstanding debt of $50.0 million, and $50.0 million available under its
$100 million credit facility. During the first quarter of 2004, the Company
declared a special dividend of $4.00 per share, approximately $75 million, in
addition to its normal recurring quarterly dividend of $0.25 per share. The
special dividend was paid during the second quarter of 2004 using a significant
portion of the Companys then available cash balance. The Company borrowed
$55.0 million under its credit facility to partially assist in funding the
special dividend. The revolving credit facility has both an interest coverage and a leverage
coverage covenant. These covenants, which involve debt levels, interest
expense, EBIT, and EBITDA (measures of cash earnings defined in the revolving
credit agreement), can affect the interest rate on current and future
borrowings. The Company was in compliance with all covenants throughout the
quarter. The Companys current credit facility restricts payments for dividends and
repurchases of its common stock to no more than $180 million during the period
January 1, 2004 through December 31, 2004, and for periods after January 1,
2005 to $100 million plus fifty percent of cumulative net income of the Company
for all fiscal periods beginning January 1, 2004. The Company anticipates that its primary sources of cash, those being current
cash balances, operating cash flow, and the available line of credit will be
sufficient to finance the Companys operating requirements and anticipated
capital expenditures, for both the next 12 months and the foreseeable future
thereafter. Cash Flows The Companys net cash flow provided by operating activities was $41.2
million for the first nine months of 2004 compared to $42.9
million for the same period of the prior year. The Companys net
cash provided by investing activities was $2.5 million for the
nine-month period ended September 30, 2004, as compared to net cash used in
investing activities of $19.8 million for the same period of 2003. The increase
in net cash provided by investing activities is attributable to lower levels of
fixed asset purchases related to digital television broadcasting and lower
levels of investments made during 2004 as compared to 2003, and the cash
realized on the sale of investments in the Companys venture capital and strategic investment portfolios during 2004 that were not present
during 2003. Net cash used in financing activities for the nine months ended
September 30, 2004 was $68.2 million compared to
$24.8 million for the first nine months of 2003. During 2004, the Company borrowed $55.0
million under its previously unused $100 million line of credit 14




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to partially fund the payment of the special dividend. During the third quarter the Company
repaid $5.0 million, reducing its outstanding borrowings to $50.0
million. Excluding the effect of the borrowings, the increase in net cash used
in financing activities is due mainly to the special dividend of $4.00 per
share, approximately $75 million, paid during the second quarter of 2004, and
to higher levels of repurchase activity in the Companys stock buy-back program
during 2004 as compared to 2003. 15




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Forward Looking Information The Private Securities Litigation Reform Act of 1995 provides a safe harbor
for forward-looking statements. Certain information contained herein or in any
other written or oral statements made by, or on behalf of the Company, is or
may be viewed as forward-looking. The words expect, believe, anticipate
or similar expressions identify forward-looking statements. Although the
Company has used appropriate care in developing any such forward-looking
information, forward-looking information involves risks and uncertainties that
could significantly impact actual results. These risks and uncertainties
include, but are not limited to, the following: changes in national and local
markets for television advertising; changes in general economic conditions,
including the performance of financial markets and interest rates; competitive,
regulatory, or tax changes that affect the cost of or demand for the Companys
products; and adverse litigation results. The Company undertakes no obligation
to publicly update or revise any forward-looking statements, whether as a
result of new information, future developments, or otherwise. 16




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PART I, ITEM 4  The Company carried out an evaluation, under the supervision and with the
participation of the Companys management, including the Companys Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of the Companys disclosure controls and procedures
pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that as of the end of
the period covered by this report the Companys disclosure controls and
procedures are effective in timely alerting them to material information
relating to the Company required to be included in the Companys periodic SEC
filings. During the Companys last fiscal quarter, there has been no change in
the Companys internal control over financial reporting that has materially
affected, or is reasonably likely to materially affect, the registrants
internal control over financial reporting. 17




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PART II, ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 Total
    
    
    
    
    
    Total Number of
    
    Maximum NumberNumber of
    
    
    
    
    
    Shares (or Units)
    
    of Shares that MayShares (or
    
    Average Price
    
    Purchased as Part of
    
    Yet Be PurchasedUnits)
    
    Paid per Share
    
    Publicly Announced
    
    Under the Plans orPeriod
    
    Purchased
    
    (or Unit)
    
    Plans or Programs
    
    ProgramsJuly 1 31, 2004
    
    
    837
    
    
    $
    45.80
    
    
    
    
    
    
    
    3,327,700August 1  31, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,327,700September 1  30, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,327,700Total
    
    
    837
    
    
    $
    45.80
    
    
    
    
    
    
    
    3,327,700
 During the quarter the Company acquired 837 shares as satisfaction of
withholding tax obligations for restricted stock that vested during the period,
in accordance with provisions of the Companys Performance Incentive
Compensation plan. On February 3, 2004 Libertys Board of Directors extended to February 28, 2005
the Companys authorization to purchase from time to time up to 4,000,000
shares of stock in the open market or directly negotiated transactions. PART II, ITEM 6. EXHIBITS
 INDEX TO EXHIBITS EXHIBIT 11
    
    Consolidated Earnings Per Share Computation (included in Note 5
of Notes to Consolidated and Condensed Financial Statements)EXHIBIT 31
    
    Rule 13a-14(a)/15d-14(a) CertificationsEXHIBIT 32
    
    Section 1350 Certifications
 18




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SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized. THE LIBERTY CORPORATION
(Registrant)
    
    Date: November 3, 2004/s/ Howard L. Schrott

Howard L. Schrott
Chief Financial Officer/s/ Martha G. Williams

Martha G. Williams
Vice President, General Counsel and Secretary
 19