Gemstar Restates Earnings Again

The yearlong plunge in Gemstar-TV Guide International Inc.’s stock accelerated Monday when it once again restated earnings and reported a larger-than-expected fourth-quarter loss of $1.3 billion -- the last bad news executives said they would deliver from their review of the company’s accounting practices.

Gemstar has been hit hard by disclosures that it overstated revenue generated from ads and its interactive television programming guide. On Monday, in a filing with the Securities and Exchange Commission, the Pasadena-based company met a deadline to recalculate several years of earnings. It has issued four earnings restatements since November as part of its accounting review.

The bottom line for last year: a net loss of $6.2 billion, or $15.17 a share. In 2001, the loss was nearly $751 million, or $1.83 a share.

“We firmly believe we’ve done everything humanly possible over the last few months to make sure that our numbers are correct and our disclosures are complete,” Gemstar Chief Executive Jeff Shell said during a conference call with analysts.

Shell took over late last year for Gemstar founder Henry C. Yuen, who, along with former Chief Financial Officer Elsie Leung, was ousted by Gemstar’s largest shareholder, News Corp., amid concerns over financial irregularities. The two sued the SEC on Monday to gain quick access to portions of their multimillion-dollar severance packages.

Despite Shell’s assurances, Wall Street remained wary, sending Gemstar shares down from $3.72 at the start of Nasdaq trading to $3.20 in after-hours action, a 14% drop.

Much of the red ink in 2002, Shell said, flowed from large write-downs of over-valued assets, accounting changes, one-time charges and slumping revenue from the company’s flagship TV Guide magazine, which recently hired a new publisher, editor in chief and circulation director.

With average sales of 9 million copies, it is the largest weekly magazine in the nation but has seen its business decline over the last decade. Magazine revenue dropped 15% during 2002 to $420 million.

Shell said some of the new team’s initial efforts have paid off at TV Guide. Fourth-quarter advertising revenue jumped 33%, although overall revenue still was down 11%, in part because of a reader backlash over increased subscription prices. The company hopes to reverse the magazine’s fortunes by pouring $20 million into a new prototype and redoubling promotion efforts.

“Turning around the magazine is ... critical because it is the driver of our brand and is the key element in driving our electronic products as well,” Shell said. TV Guide Channel, the electronic guide that reaches 57 million cable television subscribers, also is being given a new look.

For Gemstar as a whole, revenue was $1 billion for 2002, down $158 million, or about 14%, from the year before. In the fourth quarter, revenue was down 18% to nearly $245 million.

In refiguring the year’s first three quarters, the company simply shifted charges worth more than $1 billion to the fourth quarter. Shell said that is why the quarterly loss -- of $3.19 a share -- was so much deeper than expected. In the same period in 2001, Gemstar suffered a loss of $211.9 million, or 52 cents a share.

“It’s a huge milestone for us, getting through this and filing with the SEC and being back to normal,” Shell said of the exhaustive financial analysis and overhaul.

He added that he hoped the dark days were over for the company, which has been under federal investigation for alleged accounting misdeeds. In May, Gemstar will take another step: It said it will convene a shareholder meeting as required by Nasdaq to remain listed.

In February, Gemstar agreed to pay a record $5.67-million penalty to settle antitrust allegations that Gemstar and TV Guide Inc. fixed prices and divided up their markets before the companies merged in mid-2000. As part of the settlement, the company admitted no wrongdoing. Gemstar remains under investigation by the SEC for its accounting practices.

The suit by Gemstar’s founder and ex-CFO accuses the SEC of improperly withholding a portion of $37.64 million in severance payments by placing the money in a restricted escrow account. The payments were negotiated as part of a corporate restructuring that allowed News Corp., a 42% owner of Gemstar, to assume management control.

In return, Yuen and Leung stepped down. The two executives contend in their federal court suit that the SEC violated their constitutional rights to due process by impounding the money. The SEC had no comment.

In the last year, Gemstar shares have fallen more than 70% from $14.75.

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Times staff writer Sallie Hofmeister contributed to this article.