Gemstar-TV Guide Announces First Quarter Results

    Business Editors

    LOS ANGELES--(BUSINESS WIRE)--May 5, 2005--Gemstar-TV Guide International, Inc. (NASDAQ:GMST) announced that for the first quarter ended March 31, 2005, the Company reported revenues of $175.4 million, a decrease of $17.8 million from revenues of $193.2 million in the first quarter of 2004, which included settlement payments received from certain consumer electronics manufacturers of $19.4 million.
    Operating income for the first quarter of 2005 was $3.3 million, which included stock compensation, depreciation, and amortization charges of $7.2 million, compared with operating income of $26.6 million for the first quarter ended March 31, 2004, which included stock compensation, depreciation, and amortization charges of $8.8 million and the settlements of $19.4 million noted above.
    The Company reported a loss from continuing operations of $(3.7) million, or $(0.01) per share, for the first quarter of 2005, compared with $(13.4) million, or $(0.03) per share, for the first quarter of 2004. For the first quarter of 2005, the Company's net loss was $(3.7) million, or $(0.01) per share, compared with a net loss of $(39.8) million, or $(0.09) per share, in the first quarter of 2004.
    The Company's Chief Executive Officer Richard Battista commented, "While there is still much work ahead of us and challenges to overcome, Gemstar-TV Guide made progress on certain strategic business initiatives since we reported 2004 year-end results in February. On April 21st, we launched our new weekly publication Inside TV. Later this quarter, we expect to launch TV Guide Spot, the new on-demand network featuring entertaining guidance programming, for which we have already secured significant distribution and a charter advertiser. Finally, our new programming and marketing initiatives at the TV Guide Channel have begun to positively impact the network's ratings and advertising results."
    Mr. Battista continued, "As we continue to strengthen our infrastructure, streamline our operations and make focused investments, we believe our current efforts will generate long-term returns for the Company."

    Operational Highlights

GEMSTAR-TV GUIDE INTERNATIONAL, INC. CONSOLIDATED CONTINUING SEGMENT PERFORMANCE (1) (In thousands)

Three Months Ended March 31, ----------------- 2005 2004 -------- -------- Publishing Segment: Revenues $82,334 $98,362 Operating Expenses(2) 90,184 90,409 -------- -------- Adjusted EBITDA(3) (7,850) 7,953 -------- -------- Cable and Satellite Segment: Revenues 64,813 42,128 Operating Expenses(2) 44,513 27,191 -------- -------- Adjusted EBITDA(3) 20,300 14,937 -------- -------- CE Licensing Segment: Revenues 28,250 52,689 Operating Expenses(2) 14,719 20,345 -------- -------- Adjusted EBITDA(3) 13,531 32,344 -------- -------- Corporate Segment: Operating Expenses(2) 15,429 19,768 -------- -------- Adjusted EBITDA(3) (15,429) (19,768) -------- -------- Consolidated: Revenues 175,397 193,179 Operating Expenses(2) 164,845 157,713 -------- -------- Adjusted EBITDA(3) 10,552 35,466 Stock compensation (25) (203) Depreciation and amortization (7,215) (8,628) -------- -------- Operating income 3,312 26,635 Interest income (expense), net 3,304 (587) Other income, net 278 45 -------- -------- Income from continuing operations before income taxes $6,894 $26,093 ======== ========

(1) Segment information for 2005 and 2004 is presented and reconciled to consolidated loss from continuing operations before income taxes in accordance with SFAS No. 131.

(2) Operating expenses means operating expenses, excluding stock compensation, and depreciation and amortization and impairment of intangible assets.

(3) Adjusted EBITDA is defined as operating income, excluding stock compensation, depreciation and amortization and impairment of intangible assets. We believe adjusted EBITDA to be relevant and useful information as adjusted EBITDA is the primary measure used by our chief operating decision maker to evaluate the performance of and allocate resources to the industry segments.

Certain financial statement items for the prior period have been reclassified to conform to the 2005 presentation.

Intersegment revenues and expenses have been eliminated from segment financial information as transactions between reportable segments are excluded from the measure of segment profit and loss reviewed by the chief operating decision maker.

    Publishing Segment

    For the three months ended March 31, 2005, revenues for the Publishing Segment were $82.3 million, a decrease of $16.0 million, or 16.3%, from revenues of $98.4 million in the prior year's quarter. This decrease in revenues was primarily due to a decline in newsstand and subscriber circulation revenue of $11.9 million and a $4.5 decrease in advertising revenue, primarily from the pharmaceutical industry and the broadcast networks, at TV Guide magazine.
    For the three months ended March 31, 2005, adjusted EBITDA for the Publishing Segment was a negative $(7.9) million, a decrease of $15.8 million from adjusted EBITDA of $8.0 million in the prior year's quarter. The decrease was due to the $16.0 million decline in revenues noted above, and a $3.7 million increase in subscriber acquisition expenses for TV Guide magazine and approximately $1.0 million in pre-launch expenses related to Inside TV, the Company's new magazine, offset by reduced production costs at TV Guide magazine of $5.5 million.

    Cable and Satellite Segment

    For the three months ended March 31, 2005, revenues for the Cable and Satellite Segment were $64.8 million, an increase of $22.7 million, or 53.8%, from revenue of $42.1 million in the prior year's quarter. The increase in revenues was primarily attributable to increased subscriber and licensing revenues at TV Guide Interactive of $13.9 million, an increase in advertising revenues at TV Guide Channel of $5.6 million, and $2.8 million of increased revenues at TV Games, primarily from increased wagering and licensing revenues.
    For the three months ended March 31, 2005, adjusted EBITDA for the Cable and Satellite Segment was $20.3 million, an increase of $5.4 million from adjusted EBITDA of $14.9 million in the prior year's quarter. The increase was due to the $22.7 million increase in revenues noted above, offset primarily by increases in marketing, sales and promotional expenses of $8.6 million, and a $2.2 million increase in compensation expenses primarily due to severance costs at TV Guide Channel, increased costs at TVG Network of $2.3 million, due to increased wagering volumes and increased content and programming expenses, and $1.0 million in pre-launch expenses related to the Company's new on demand channel business, TV Guide Spot.

    Consumer Electronics Licensing Segment

    For the three months ended March 31, 2005, revenues for the Consumer Electronics Licensing Segment were $28.3 million, a decrease of $24.4 million, or 46.4%, from revenues of $52.7 million in the prior year's quarter. The decrease was primarily due to the absence of $22.9 million in settlements from certain CE manufacturers and DBS licensing revenues. This, along with a decline in VCR Plus+ revenue of $4.3 million, was partially offset by increases in licensing revenue from incorporating our Guide Plus+ technology of $1.9 million. Since the first quarter of 2004, the Company ceased recording any significant amount of DBS licensing revenues as the Company's agreement with DirecTV to pay recurring license fees based initially on new subscribers replaces manufacturers' per unit license fees.
    For the three months ended March 31, 2005, adjusted EBITDA for the Consumer Electronics Licensing Segment was $13.5 million, a decrease of $18.8 million, from adjusted EBITDA of $32.3 million in the prior year's quarter. This decrease was primarily related to the $24.4 million decline in revenue noted above, and a $1.5 million increase in compensation expenses, primarily do to severance costs, offset by a $7.7 million reduction in legal costs due the ongoing settlement discussions with Scientific-Atlanta, Inc.

    Corporate Segment

    For the three months ended March 31, 2005, adjusted EBITDA for the Corporate Segment was $(15.4) million, an improvement of $4.3 million from adjusted EBITDA of $(19.8) million in the prior year's quarter. The improvement was primarily due to lower legal expenses of $4.1 million.
    Consolidated legal costs for the first quarter was $6.5 million compared with $18.2 million for the same period in 2004. Although outside legal expenses declined in the quarter, we continue to expect outside legal expenses to be significant for the foreseeable future. The Company is a party to several significant pending legal proceedings and various proceedings for which we are required to reimburse the legal fees and expenses incurred by our former officers remain unresolved. Accordingly, while certain expenses associated with these matters were lower in the first quarter of the year, we anticipate that we may incur significantly higher legal expenses in connection with such matters during the remainder of this year.

    Discussion of Cash and Liquidity

    As of March 31, 2005, the Company's cash, cash equivalents and current marketable securities were $544.7 million, excluding restricted cash of $39.0 million. Outstanding capital lease obligations - both short and long term - were $13.7 million, resulting in cash and cash equivalents and current marketable securities in excess of capital lease obligations of $531.0 million, excluding $39.0 million in restricted cash.

    Conference Call

    Gemstar-TV Guide will host a conference call with the financial community today, Thursday, May 5, 2005, at 2 p.m. PDT (5 p.m. EDT). Richard Battista, chief executive officer, and Brian D. Urban, chief financial officer, will present management's review of the first quarter's results, followed by a question and answer period.
    The conference call will also be broadcast live via both teleconference and Internet web cast. Investors and analysts may connect to the call by dialing 800-901-5218 (domestic) or 617-786-4511 (international). The pass code is "24185713". To listen via web cast, link to the Company's Website http://ir.gemstartvguide.com.
    Investors unable to listen to the call live may access an audio replay, which will be hosted for one week following the conclusion of the call. To access the replay, call 888-286-8010 (domestic) or 617-801-6888 (international). The pass code is "97198004". An audio archive will also be hosted on the Company's investor relations Website at http://ir.gemstartvguide.com. Replays will be available approximately two hours following the conclusion of the call.

    About Gemstar-TV Guide International, Inc.

    Gemstar-TV Guide International, Inc. (the "Company"), is a leading media and technology company that develops, licenses, markets and distributes technologies, products and services targeted at the television guidance and home entertainment needs of consumers worldwide. The Company's businesses include: television media and publishing properties; interactive program guide services and products; and technology and intellectual property licensing. Additional information about the Company can be found at www.gemstartvguide.com.

    Forward-Looking Statements

    Except for historical information contained herein, the matters discussed in this news release contains forward-looking statements that involve risks and uncertainties, including risks and uncertainties related to declines in our magazine publishing business; timely availability and market acceptance of products and services incorporating the Company's technologies and content; our initiatives aimed at increasing advertising revenues at the TV Guide Channel; our investment in new and existing businesses, including our new magazine and our on-demand network; limitations on our ability to control certain joint venture or partnership businesses; dependence on the cooperation of third party providers and delivery mechanisms; interruption or failure of communications and transmissions systems and mechanisms; the impact of competitive products and pricing; ongoing and potential future litigation; and the other risks detailed from time to time in the Company's SEC reports, including the most recent reports on Forms 10-K, 10-Q and 8-K, each as it may be amended from time to time. The Company assumes no obligation to update these forward-looking statements.

    Note to Editors: Gemstar(R), TV Guide(R), TV Guide Channel(R), and TV Guide Interactive(R) are trademarks or registered trademarks of Gemstar-TV Guide International, Inc. and/or its subsidiaries. The names of other companies and products used herein are for identification purposes only and may be trademarks of their respective owners.

GEMSTAR-TV GUIDE INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS--UNAUDITED (In thousands, except per share data)

Three Months Ended March 31, ------------------- 2005 2004 --------- ---------

Revenues: Publishing $ 82,334 $ 98,362 Cable and satellite 64,813 42,128 Consumer electronics licensing 28,250 52,689 --------- --------- 175,397 193,179 --------- --------- Operating expenses: Publishing 90,184 90,409 Cable and satellite 44,513 27,191 Consumer electronics licensing 14,719 20,345 Corporate 15,429 19,768 --------- --------- Operating expenses, exclusive of expenses shown below 164,845 157,713 Stock compensation 25 203 Depreciation and amortization 7,215 8,628 --------- --------- 172,085 166,544 --------- --------- Operating income 3,312 26,635 Interest income (expense) 3,304 (587 ) Other income, net 278 45 --------- --------- Income from continuing operations before income taxes 6,894 26,093 Income tax expense 10,643 39,535 --------- --------- Loss from continuing operations (3,749 ) (13,442 ) --------- --------- Discontinued operations: Income from discontinued operations - 14,339 Loss on disposal of discontinued operations - (28,882 ) Income tax expense - 11,791 --------- --------- Loss from discontinued operations - (26,334 ) --------- --------- Net loss $ (3,749 )$(39,776 ) ========= =========

Basic and diluted loss per share: Loss from continuing operations $ (0.01 )$ (0.03 ) Loss from discontinued operations - (0.06 ) --------- --------- Net loss $ (0.01 )$ (0.09 ) ========= =========

Weighted average shares outstanding - basic and diluted 424,287 420,032 ========= =========

See Notes to Condensed Consolidated Financial Statements as filed in the Company's Form 10-Q.

GEMSTAR-TV GUIDE INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except per share data)

March 31, December 31, 2005 2004 ------------ ------------ (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 528,494 $ 558,529 Restricted cash 39,023 38,880 Marketable securities 16,220 11,191 Receivables, net 112,108 123,981 Deferred tax assets, net 6,986 3,863 Current income taxes receivable 16,670 21,333 Other current assets 27,991 30,950 ------------ ------------ Total current assets 747,492 788,727 Property and equipment, net 44,547 45,483 Indefinite-lived intangible assets 66,272 66,272 Finite-lived intangible assets, net 119,439 123,349 Goodwill 259,524 259,524 Income taxes receivable 40,996 40,998 Other assets 34,367 38,020 ------------ ------------ $ 1,312,637 $ 1,362,373 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 40,743 $ 62,284 Accrued liabilities 154,082 171,621 Current income taxes payable 11,650 232 Current portion of capital lease obligation 526 515 Current portion of deferred revenue 160,923 161,687 ------------ ------------ Total current liabilities 367,924 396,339 Deferred tax liabilities, net 28,274 28,274 Capital lease obligation, less current portion 13,138 13,274 Deferred revenue, less current portion 471,513 485,941 Other liabilities 123,241 127,753 Commitments and contingencies Stockholders' equity: Preferred stock, par value $0.01 per share -- -- Common stock, par value $0.01 per share 4,337 4,337 Additional paid-in capital 8,475,732 8,478,540 Accumulated deficit (8,081,449 ) (8,077,700 ) Accumulated other comprehensive income, net of tax 440 659 Treasury stock, at cost (90,513 ) (95,044 ) ------------ ------------ Total stockholders' equity 308,547 310,792 ------------ ------------ $ 1,312,637 $ 1,362,373 ============ ============

See Notes to Condensed Consolidated Financial Statements as filed in the Company's Form 10-Q.

GEMSTAR-TV GUIDE INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS--UNAUDITED (In thousands)

Three Months Ended March 31, -------------------- 2005 2004 --------- ---------

Cash flows from operating activities: Net loss $ (3,749 )$(39,776 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 7,215 8,628 Deferred income taxes (3,123) (33,152 ) Loss on disposal of discontinued operations - 28,882 Transfer to restricted cash - (42,500 ) Other 1,008 1,330 Changes in operating assets and liabilities: Receivables 12,275 18,757 Income taxes receivable 4,665 (113 ) Other assets 5,528 (3,972 ) Accounts payable, accrued expenses and other liabilities (43,687 ) (25,288 ) Income taxes payable 11,418 80,860 Deferred revenue (15,192 ) 216,968 --------- --------- Net cash (used in) provided by operating activities (23,642 ) 210,624 --------- --------- Cash flows from investing activities: Investments and acquisitions - (15,000 ) Purchases of marketable securities (5,099 ) (4,502 ) Maturities of marketable securities 7 4,775 Proceeds from sale of assets 11 2,322 Additions to property and equipment (2,491 ) (3,058 ) --------- --------- Net cash used in investing activities (7,572 ) (15,463 ) --------- --------- Cash flows from financing activities: Repayment of capital lease obligations (125 ) (566 ) Proceeds from exercise of stock options 1,403 25,883 Distributions to minority interests - (1,060 ) --------- --------- Net cash provided by financing activities 1,278 24,257 --------- --------- Effect of exchange rate changes on cash and cash equivalents (99 ) (16 ) --------- --------- Net (decrease) increase in cash and cash equivalents (30,035 ) 219,402 Cash and cash equivalents at beginning of period 558,529 257,360 --------- --------- Cash and cash equivalents at end of period $528,494 $476,762 ========= =========

See Notes to Condensed Consolidated Financial Statements as filed in the Company's Form 10-Q.

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CONTACT: Gemstar-TV Guide International, Inc. Robert L. Carl, 323-817-4600 (Analysts and Shareholders) or Bo Park, 212-852-7589 (Media)

KEYWORD: CALIFORNIA INDUSTRY KEYWORD: COMPUTERS/ELECTRONICS ADVERTISING/MARKETING PUBLISHING TELEVISION/RADIO CABLE EARNINGS CONFERENCE CALLS SOURCE: Gemstar-TV Guide International, Inc.

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