Gemstar-TV Guide International Inc. Reports Financial Results for the Quarter Ended June 30, 2001
PASADENA, Calif.--(BUSINESS WIRE)--Aug. 13, 2001--Gemstar-TV Guide International Inc. (Nasdaq:GMST - news; ``Gemstar-TV Guide'' or the ``company'') today reported its results of operations for the quarter ended June 30, 2001.
For the quarter ended June 30, 2001, consolidated EBITDA was $108.0 million, or $0.24 per diluted share, on consolidated revenues of $334.2 million, compared with consolidated EBITDA of $36.4 million on consolidated revenues of $63.2 million for the same quarter in the prior year. The increase in revenues and EBITDA for the quarter as compared with the prior year is primarily a result of the acquisition of TV Guide Inc. (``TV Guide''), as well as growth in the company's historical businesses. For the quarter ended June 30, 2001, amortization of intangible assets recorded as a part of the acquisition of TV Guide was $223.8 million, leading to a net loss of $(134.8) million, or $(0.33) per diluted share. For the same quarter in the prior year, the company reported earnings of $28.9 million, or $0.12 per diluted share.
Gemstar-TV Guide was formed by the merger of Gemstar International Group Limited (``Gemstar'') and TV Guide on July 12, 2000. In order to permit a meaningful comparison with the same quarter in the prior year, the company also reported pro forma results for the quarter ended June 30, 2000, as though Gemstar and TV Guide had been combined as of Jan. 1, 2000. These pro forma results also exclude the operating results of certain businesses disposed of during 2000 and 2001.
The company is organized in three sectors: the Technology and Licensing Sector, the Interactive Platform Sector, and the Media and Services Sector.
Technology and Licensing Sector
The Technology and Licensing Sector is responsible for developing, licensing and protecting the company's intellectual property and technology. Revenues in this sector are composed of license fees paid by third-party licensees for the company's proprietary technologies and patents primarily related to video recording, interactive program guide (``IPG'') products and services and electronic books. The company's licensing activities cover multiple industries, including consumer electronics, cable and satellite operators, Internet, personal computers and publications worldwide. Sector operations include research and development, and the creation, protection and licensing of patents and proprietary technologies.
For the quarter ended June 30, 2001, revenues for the Technology and Licensing Sector were $80.2 million, and EBITDA was $53.2 million, reflecting a margin of 66 percent. Compared with the pro forma results for the same quarter in 2000, revenues increased by 36 percent and EBITDA increased by 43 percent. The increase in revenues is primarily attributed to the continued growth of licensing revenues derived from the company's IPG technology.
For the six months ended June 30, 2001, revenues for the Technology and Licensing Sector were $161.6 million, and EBITDA was $113.2 million, reflecting a margin of 70 percent. Compared with the pro forma results for the same period in 2000, and excluding non-recurring General Instruments/Motorola revenues of $22 million in the 2000 period, revenues increased by 36 percent and EBITDA increased by 49 percent.
Interactive Platform Sector
The Interactive Platform Sector derives recurring income from advertising, interactive services, content sales and e-commerce on the company's proprietary IPG and eBook products and services, and through revenue sharing under license agreements. Sector activities include the construction and operation of the infrastructure for the delivery of services and advertising to the interactive platforms, media research and trafficking, tracking and billing of advertising. The company's rapidly growing IPG products and services are integrated into various devices, including television sets, VCRs and set-top boxes (cable, satellite, telco, Internet) and are marketed under the GUIDE Plus+®, TV Guide Interactive(SM) and StarSight® brands. The company also operates tvguide.com.
For the quarter ended June 30, 2001, revenues for the Interactive Platform Sector were $20.5 million, and expenses were $28.5 million. Compared with the pro forma results for the same quarter in the prior year, revenues increased by 500 percent, compared with an increase in expenses of 77 percent.
For the six months ended June 30, 2001, revenues for the Interactive Platform Sector were $35.2 million, and expenses were $53.4 million. Compared with the pro forma results for the same quarter in the prior year, revenues increased by 510 percent, compared with an increase in expenses of 71 percent.
Media and Services Sector
The Media and Services Sector operates the TV Guide® magazines and the TV Guide Channel(SM). Other operations include providing programming to C-band subscribers, the TVG Network(SM) and data transmission services. The sector also operates a media sales group responsible for selling advertising for all of the company's platforms. Revenues in this sector are principally composed of subscription fees and advertising revenues of the TV Guide magazines and the TV Guide channel and programming package revenues from C-band subscribers.
For the quarter ended June 30, 2001, pro forma revenues in the Media and Services sector were $234.7 million, and pro forma EBITDA was $62.6 million. Compared with the pro forma results in 2000, EBITDA was down slightly by 3 percent despite a 16 percent decline in revenues, which was anticipated due to decreasing circulation of the magazines and declines in the number of households subscribing to C-band programming.
For the six months ended June 30, 2001, pro forma revenues in the Media and Services sector were $485.5 million, and pro forma EBITDA was $125.5 million. Compared with the pro forma results in 2000, EBITDA was down slightly by 3 percent despite a 14 percent decline in revenues.
Consolidated Results
Consolidated pro forma revenues for the quarter ended June 30, 2001, were $334.0 million, and consolidated pro forma EBITDA was $107.8 million. Compared with the pro forma results for the same quarter last year, EBITDA increased by 21 percent despite a 2 percent decrease in revenues.
Consolidated revenues for the six months ended June 30, 2001, were $679.3 million, and consolidated EBITDA was $220.6 million. Compared with the pro forma results for the same quarter last year, and excluding non-recurring General Instruments/Motorola revenues of $22 million last year, EBITDA increased by 23 percent despite a 2 percent decrease in revenues.
EBITDA per basic and diluted share for the quarter was $0.26, based on a weighted-average basic share count of 411 million shares, or $0.24, based on a diluted share count of 452 million shares. Compared with the results for the same quarter in the prior year, EBITDA per basic share based on a weighted average basic share count increased by 18 percent, and EBITDA per diluted share based on a diluted share count increased by 20 percent.
EBITDA per share for the six months ended June 30, 2001, was $0.54, based on a weighted-average basic share count of 411 million shares, or $0.49, based on a diluted share count of 453 million shares. Compared with the results for the same period in the prior year, excluding non-recurring General Instrument/Motorola revenues of $22 million for the 2000 period, EBITDA per share based on a weighted average basic share count increased by 23 percent, and EBITDA per share based on a diluted share count increased by 26 percent.
``I am very pleased with Gemstar-TV Guide's financial performance in the second quarter. Once again, we have met or exceeded analysts' expectations and our own targets for the quarter,'' said Henry C. Yuen, chairman and chief executive officer. ``We continue to experience strong growth in both the Technology and Licensing Sector and the Interactive Platform Sector, and despite a generally soft advertising market in the United States, the revenues in our Media and Services Sector exceeded the consensus expectations of our financial analysts.''
During the second quarter, the company consummated several major agreements to provide its interactive program guide (``IPG'') products and services to U.S. and Canadian cable MSOs. In April, the company signed a 10-year agreement with Cogeco Cable Inc., the third-largest cable MSO in Canada. In May, the company completed a long-term agreement with Shaw Cablesystems, Canada's largest cable MSO. In June, the company consummated a 20-year agreement with Adelphia Communications, the country's sixth-largest cable television operator. In aggregate, these agreements added more than 9.4 million subscribers into long-term agreement status with the company.
The company's IPG platform continues to gain acceptance in the advertising community and has enjoyed the support of a growing number of advertisers. In May, the company announced an 18-month advertising program with the Ford Division of Ford Motor Co. and its advertising agency, J. Walter Thompson (Detroit). In July, the company announced a 12-month agreement with Sears. These two marquee advertisers join a growing list of premier product and service marketers that have selected the Gemstar-TV Guide IPG platform as their advertising medium of choice in interactive television. Major companies advertising in the second quarter included American Home Products (Advil), Century 21, Columbia House, Daimler Chrysler, Fantasy Sports, Ford, Liz Claiborne, Motorola, RCA, SC Johnson and the Wall Street Journal. Programmer advertisers included AMC, CBS, FOX, FX, NBC and WGN, among others.
On May 14, 2001, the company announced that it had entered into an agreement to acquire all of the outstanding common stock of SkyMall Inc., the multichannel specialty retailer based in Phoenix, Ariz. On July 18, the company announced that it had completed this acquisition.
``While SkyMall is best known for its inflight catalog, our greatest motivation for the transaction is SkyMall's seamless commerce model customized for conducting transactions without owning any inventory,'' said Yuen. ``We believe that the superb back-office commerce engine, its extensive contacts with branded retailers, and its intimate knowledge of consumer purchase behavior will help to jumpstart our efforts and accelerate our readiness for t-commerce in preparation for the advent of two-way capability in our platforms.''
On May 17, 2001, the company announced that it had commenced a tender offer for cash to purchase any and all of the outstanding 8-1/8 percent Senior Subordinated Notes due 2009 of its wholly owned subsidiary, TV Guide Inc. At March 31, 2001, approximately $71 million of these notes were outstanding. As of June 30, 2001, the company had repurchased substantially all of the notes. Also during the quarter, the company repaid an additional $162 million in outstanding bank lines of credit, taking the company's total indebtedness down to $394.1 million at June 30, 2001, from $628.1 million at March 31, 2001. At the end of the quarter, the company reported cash, cash equivalents and current marketable securities of $482.3 million.
The company's electronic book (``Gemstar eBook(TM)'') business continues to enjoy the support of major publishers and consumers alike. During the past quarter, the company offered consumers 12 major first-class titles that were available exclusively on the Gemstar eBook platform prior to their release in any other electronic format. These included titles from such best-selling authors as James Patterson, Andrew Greeley, Elizabeth Lowell, Ridley Pearson and Wilbur Smith, and more.
The company also continued its tradition of innovation, building its intellectual property portfolio during the quarter to 172 U.S. patents with 4,184 claims and 197 foreign patents with 2,730 claims. Since April 1, 2001, the company was awarded five patents, including two broad and fundamental patents, one covering the virtually indispensable picture-in-guide feature and the other covering the broad concept of retrieving information from the Internet through the IPG.
About Gemstar-TV Guide International Inc.
Gemstar-TV Guide International Inc. is a leading global technology and media company focused on consumer entertainment. The company has three major business sectors: the Technology and Licensing Sector, which is responsible for developing, licensing and protecting the company's intellectual property and technology; the company's technology includes the VCR Plus+® system, interactive program guide (``IPG'') products and services marketed under the GUIDE Plus+® and TV Guide Interactive(SM) brands and the electronic book (``Gemstar eBook(TM)''); the Interactive Platform Sector, which derives recurring income from advertising, interactive services, content sales and e-commerce on the company's proprietary platforms, including IPG, eBook and tvguide.com; and the Media and Services Sector, which operates the TV Guide® magazines, TV Guide Channel(SM), TVG Network(SM), and other television media properties, provides programming and data services and operates a media sales group that services all of the company's media properties.
The IPG products are integrated into various devices, including televisions, VCRs and set-top boxes (cable, satellite, telco, Internet) and can display a multi-day television program guide on the television screen from which the consumer can view, select, tune to or record programs. The Gemstar eBook is a reading device that can store tens of thousands of pages, and permits a user to purchase and receive instant delivery of any book, magazine or newspaper over a standard telephone line.
The company's media properties reach more than 100 million U.S. homes, and its products and services are available in more than 60 countries worldwide.
The company's services, technology and intellectual property are licensed to major technology, media and communication companies in the consumer electronics, Internet, personal computer, satellite, cable television and telco industries. Licensees and customers include Adelphia, AOL Time Warner, AT&T, Cablevision, Charter, Comcast, Cox, Matsushita, Microsoft, Mitsubishi, Motorola, Philips, Shaw, Sony, Thomson Multimedia, Zenith and others. The company has more than 170 issued U.S. patents in the general area of audio-visual technologies with more than 4,200 claims, more than 190 issued foreign patents, and continues to actively pursue a worldwide intellectual property program and currently has roughly 300 U.S. and 800 foreign patent applications pending.
Except for historical information contained here, the matters discussed in this news release contain forward-looking statements that involve risks and uncertainties, including the timely availability and acceptance of new products and services; the impact of competitive products and pricing; the management of growth; and the other risks detailed from time to time in the company's SEC reports, including the most recent reports on Form 10-K, 8-K and 10-Q, each as it may be amended from time to time. The forward-looking statements included in this release are made only as of the date of this release, and the company undertakes no obligation to update the forward-looking statements to reflect subsequent events or circumstances.
Note to Editors: Gemstar, TV Guide, Gemstar eBook, GUIDE Plus+, TV Guide Interactive, VCR Plus+, PlusCode, TVG Network and SkyMall are trademarks of Gemstar-TV Guide International Inc. Other product names used herein are for identification purposes only and may be trademarks of their respective companies.
GEMSTAR-TV GUIDE INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
--------- --------- --------- ---------
Revenues $ 334,230 $ 63,230 $ 686,698 $ 147,223
Operating expenses:
Operating expenses,
excluding stock
compensation,
depreciation and
amortization and
nonrecurring
expenses 226,250 26,803 458,744 53,831
Stock compensation 8,012 -- 17,157 --
Depreciation and
amortization 240,295 1,417 478,863 3,009
Nonrecurring
expenses -- -- -- 15,895
--------- --------- --------- ---------
474,557 28,220 954,764 72,735
--------- --------- --------- ---------
Operating (loss)
income (140,327) 35,010 (268,066) 74,488
Interest expense (7,551) -- (19,102) --
Other (expense)
income, net (820) 4,633 1,054 8,473
--------- --------- --------- ---------
(Loss) income before
income taxes and
extraordinary item (148,698) 39,643 (286,114) 82,961
(Benefit) provision
for income taxes (16,041) 10,704 (30,217) 26,691
--------- --------- --------- ---------
(Loss) income before
extraordinary item (132,657) 28,939 (255,897) 56,270
Extraordinary loss on
debt extinguishment,
net (2,100) -- (2,100) --
--------- --------- --------- ---------
Net (loss) income $(134,757) $ 28,939 $(257,997) $ 56,270
========= ========= ========= =========
Basic (loss)
earnings per share:
(Loss) income before
extraordinary item $ (0.32) $ 0.14 $ (0.62) $ 0.27
Extraordinary item (0.01) -- (0.01) --
Net (loss) income (0.33) 0.14 (0.63) 0.27
Diluted (loss)
earnings per share:
(Loss) income before
extraordinary item $ (0.32) $ 0.12 $ (0.62) $ 0.22
Extraordinary item (0.01) -- (0.01) --
Net (loss) income (0.33) 0.12 (0.63) 0.22
Weighted average
shares outstanding 411,461 208,399 411,329 207,710
Dilutive effect of
stock options -- 41,727 -- 43,659
--------- --------- --------- ---------
Weighted average
shares outstanding,
assuming dilution 411,461 250,126 411,329 251,369
========= ========= ========= =========
GEMSTAR-TV GUIDE INTERNATIONAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED
(In thousands, except per share amounts)
June 30, December 31,
2001 2000
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 433,958 $ 488,046
Marketable securities 48,315 63,425
Receivables, net 337,447 342,904
Deferred tax asset 25,268 15,969
Other current assets 32,671 36,817
------------ ------------
Total current assets 877,659 947,161
Property, plant and equipment, net 89,473 92,382
Intangible assets, net 8,966,434 9,516,764
Marketable securities and
other investments 205,912 204,588
Other assets 27,076 28,582
------------ ------------
Total assets $ 10,166,554 $ 10,789,477
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 225,961 $ 221,395
Current portion of long-term debt and
capital lease obligations 61,952 62,674
Current portion of deferred revenue 348,485 276,915
------------ ------------
Total current liabilities 636,398 560,984
Deferred tax liability 1,248,608 1,375,650
Long-term debt and capital lease
obligations, less current portion 332,158 586,485
Deferred revenue, less current portion 123,157 200,217
Other liabilities 6,469 10,178
Stockholders' equity:
Common stock, $.01 par value 4,148 4,137
Additional paid-in capital 8,306,387 8,290,627
Accumulated deficit (430,254) (172,257)
Accumulated other comprehensive
income, net of tax 20,482 31,612
Unearned compensation (52,560) (69,717)
Treasury stock, at cost (28,439) (28,439)
------------ ------------
Total stockholders' equity 7,819,764 8,055,963
------------ ------------
Total liabilities and
stockholders' equity $ 10,166,554 $ 10,789,477
============ ============
GEMSTAR-TV GUIDE INTERNATIONAL INC.
PRO FORMA (a) OPERATING RESULTS BY BUSINESS SECTOR
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
--------- --------- --------- ---------
Technology and
Licensing Sector
Revenues (b) $ 80,236 $ 59,075 $ 161,569 $ 118,988
Expenses 27,055 21,805 48,329 43,107
--------- --------- --------- ---------
EBITDA (b)(c) $ 53,181 $ 37,270 $ 113,240 $ 75,881
========= ========= ========= =========
Interactive
Platform Sector
Revenues $ 20,484 $ 3,413 $ 35,182 $ 5,767
Expenses 28,546 16,173 53,353 31,263
--------- --------- --------- ---------
EBITDA (c) $ (8,062) $ (12,760) $ (18,171) $ (25,496)
========= ========= ========= =========
Media and
Services Sector
Revenues $ 234,664 $ 280,030 $ 485,516 $ 566,543
Expenses 172,021 215,577 360,023 437,002
--------- --------- --------- ---------
EBITDA (c) $ 62,643 $ 64,453 $ 125,493 $ 129,541
========= ========= ========= =========
Consolidated (after
eliminations)
Revenues $ 334,029 $ 342,518 $ 679,332 $ 691,298
Expenses 226,267 253,555 458,770 511,372
--------- --------- --------- ---------
EBITDA (c) $ 107,762 $ 88,963 $ 220,562 $ 179,926
========= ========= ========= =========
EBITDA Per
Share (b)(d) $ 0.24 $ 0.20 $ 0.49 $ 0.39
Cash Earnings (b)(e) $ 53,072 $ 45,690 $ 115,766 $ 95,644
Cash Earnings
Per Share (b)(d) $ 0.12 $ 0.10 $ 0.26 $ 0.21
Shares Outstanding
Basic 411,461 408,854 411,329 408,165
Diluted 451,600 454,802 452,677 456,569
(a) Effective July 12, 2000, the company's consolidated operating
results include the operating results of TV Guide, Inc. ("TV
Guide"). TV Guide was acquired in a transaction accounted for as a
purchase. The pro forma results are presented as though Gemstar
and TV Guide had been combined for all periods and exclude
merger-related and nonrecurring charges. The pro forma results
also exclude the operating results of certain businesses disposed
of during 2000 and 2001.
(b) Amounts for the six months ended June 30, 2000 exclude the impact
of $22 million of nonrecurring General Instrument/Motorola
revenues.
(c) EBITDA means operating income before stock compensation expense,
depreciation and amortization and nonrecurring expenses.
(d) Based on diluted shares outstanding.
(e) Cash earnings represents pro forma net income before stock
compensation expense and amortization of intangible assets
recorded as a part of the TV Guide acquisition, net of associated
tax benefits, and certain other nonrecurring charges, net of tax.
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Contact:
Gemstar-TV Guide International Inc.
Elsie Leung/Linda Lloyd Da Silva, 626/792-5700 (Analysts)
Lauren Snyder, 212/852-7585 (Media)
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