Gemstar-TV Guide Announces Third Quarter 2007 Results

Business Wire, Nov 1, 2007

LOS ANGELES -- Gemstar-TV Guide International, Inc. (NASDAQ:GMST) announced that for the quarter ended September 30, 2007, the Company reported revenues of $159.6 million, an increase of 7% versus the prior year's quarter.

Operating income for the third quarter of 2007 was $5.0 million, compared with operating income of $12.9 million for the third quarter of 2006. The Company's operating income was impacted by an increase in programming and associated marketing costs at TV Guide Network and a national cross-platform consumer marketing campaign which launched in late September, both as previously planned. These costs were partially offset by a 20% increase in revenues in the Guidance Technology and Solutions segment and further significant decreases in operating expenses at TV Guide magazine.

Net income for the third quarter of 2007 increased to $123.2 million, or $0.29 per share, compared with net income of $17.5 million, or $0.04 per share in the third quarter of 2006. Net income in the quarter benefited from the reversal of approximately $115 million in valuation allowance against the Company's deferred tax assets. For the third quarter of 2007, the non-cash benefit from reversing the deferred tax assets valuation allowance, on a per share basis, was approximately $0.27 per share.

Gemstar TV Guide's Chief Executive Officer Rich Battista said, "I am encouraged by the progress we made again this quarter executing on our business initiatives. The quarter was one of investment in key areas, particularly in programming for our TV Guide Network; the further development of My TV Guide, our suite of personalized cross-platform guidance products and services; and the launch of our national cross-platform consumer marketing campaign. I am pleased with the continued expansion of our IPG patent licensing both internationally and to new media platforms. To that end, we recently announced new agreements with MediaFlo in the mobile arena, as well as with Sky Italia, Italy's leading digital TV service, and with three German consumer electronics companies. I am also pleased with the performance of TV Guide magazine, where ad paging was up 25% and losses were down significantly from Q3 2006. We remain focused on our business objectives while we continue to review strategic alternatives for the company with the goal of maximizing shareholder value."

THIRD QUARTER AND FIRST NINE MONTHS 2007 SEGMENT FINANCIAL PERFORMANCE

The schedule below reflects Gemstar-TV Guide's performance for the third quarter and the first nine months of 2007 and 2006 by segment. The following segment information is presented and reconciled to consolidated income from continuing operations before income taxes. More detailed information is contained in the Company's Form 10-Q for the quarter ended September 30, 2007, which was filed with the Securities Exchange Commission today.

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FIRST NINE MONTHS 2007 CONSOLIDATED FINANCIAL PERFORMANCE

For the nine months ended September 30, 2007, total revenues were $471.9 million, an increase of $45.6 million, or 11%, compared with revenues of $426.3 million for the nine months ended September 30, 2006. The increase was primarily due to a $39.2 million increase in IPG Patent Licensing revenue and a $12.0 million increase in IPG Products and Services revenue, partially offset by a $5.7 million decline in VCR Plus revenue.

Operating income for the nine months ended September 30, 2007 was $71.8 million, which included depreciation and amortization charges of $29.4 million, an increase of 101% compared with operating income of $35.8 million for the nine months ended September 30, 2006, which included depreciation and amortization charges of $25.0 million. This was primarily due to a $20.3 million decrease in TV Guide magazine production costs, partially offset by a $6.6 million increase in TV Guide Network programming and associated marketing costs. The nine months ended September 30, 2007 also included a benefit of $10.7 million from the reversal of accrued liabilities relating to a patent rights agreement with a former CEO of the Company and $3.2 million in costs relating to the exploration of strategic alternatives. The nine months ended September 30, 2006 included the benefits of both a $8.9 million reversal of accrued liabilities due to a settlement agreement with a former CFO of the Company and a $1.7 million benefit from the reversal of accrued legal costs relating to a former CEO.

Net income for the nine months ended September 30, 2007 increased to $178.4 million, or $0.42 per share, compared with net income of $40.7 million, or $0.10 per share, for the nine months ended September 30, 2006 mainly due to the reversal of the valuation allowance against the Company's deferred tax assets mentioned above. The Company now has a history of generating, and accurately forecasting, pre-tax book income. The 2008 annual budget and long-range plan process, which coincided with the preparation and review of the Company's interim financial statements for the third quarter of 2007, projects adequate future taxable income to utilize its deferred tax assets. These factors make the realization of the Company's deferred tax assets more likely than not, and therefore in accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, the valuation allowance is no longer necessary.