10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2002

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 0-24218

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Delaware	95-4782077
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

135 North Los Robles Avenue, Suite 800, Pasadena, California 91101

(Address of principal executive offices including zip code)

(626) 792-5700

(Registrant’s telephone number, including area code)

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  ¨        No  x

As of November 4, 2002, there were outstanding 408,155,584 shares of the registrant’s Common Stock, par value $0.01 per share.

EXPLANATORY NOTE

This Amendment No. 1 to the Quarterly Report on Form 10-Q/A (“Amendment No. 1”) for Gemstar-TV Guide International, Inc. (the “Company”) for the quarterly period ended September 30, 2002, is being filed to amend and restate the items described below contained in the Company’s Quarterly Report on Form 10-Q (the “Form 10-Q”) originally filed with the Securities and Exchange Commission (“SEC”) on November 14, 2002.

This Amendment No. 1 makes changes to Item 1, Financial Statements, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Item 6, Exhibits and Reports on Form 8-K, for the following purposes:

• To restate the Company’s Unaudited Condensed Consolidated Financial Statements included herein to reclassify or restate certain licensing and interactive programming guide revenues, and to restate certain other transactions and to make certain other adjustments, as more fully described in Note 2, “Restatement,” to the Company’s Unaudited Condensed Consolidated Financial Statements included in Item 1;

• To amend Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, to take into account the effects of the restatement;

• To include in Note 14, “Events Subsequent to Balance Sheet Date,” to the Unaudited Condensed Consolidated Financial Statements information with respect to events that occurred subsequent to the original filing of the Form 10-Q; and

• To furnish the certifications required by Section 906 of the Sarbanes-Oxley Act.

In order to preserve the nature and character of the disclosures set forth in such Items as originally filed, this Amendment No. 1 continues to speak as of the date of the original filing of the Form 10-Q on November 14, 2002, and the Company has not updated the disclosures in this report to speak as of a later date (except for Note 14, “Events Subsequent to Balance Sheet Date” to the Unaudited Condensed Consolidated Financial Statements with respect to subsequent events through the date of this Amendment No. 1 and “Certain Factors Affecting Business, Operating Results and Financial Condition” included in Item 2). All information contained in this Amendment No. 1 is subject to updating and supplementing as provided in the Company’s reports filed with the SEC, as amended, for periods subsequent to the date of the original filing of the Form 10-Q.

In the fourth quarter of 2002, the Company announced that it had engaged a new independent accounting firm to review certain financial statements of the Company, including the Unaudited Condensed Consolidated Financial Statements included in this Amendment No. 1. Additionally, the Company announced that it would be reviewing its accounting policies to ensure compliance with accounting principles generally accepted in the United States. On November 14, 2002, the Company filed the Form 10-Q with the SEC for the purpose, among other things, of restating the Unaudited Condensed Consolidated Financial Statements included therein. Because the Unaudited Condensed Consolidated Financial Statements included in the Form 10-Q did not comply with the requirements of the Securities Exchange Act of 1934, as amended, and the regulations promulgated thereunder, the Company’s new Chief Executive Officer and Acting Chief Financial Officer, who had been appointed on November 7, 2002, were unable to make the certifications required by Section 906 of the Sarbanes-Oxley Act.

The Company has completed its accounting policy review and its new independent accounting firm has completed its review of the Unaudited Condensed Consolidated Financial Statements. This Amendment No. 1 is being filed to reflect the restatements described above, to file the Company’s restated Unaudited Condensed Consolidated Financial Statements and to furnish the certifications required by Section 906 of the Sarbanes-Oxley Act.

There are certain recent developments that have occurred between September 30, 2002 and the date of filing this Amendment No. 1, which could have a material impact on the Company’s business, results of operations and financial condition, as described in Note 14, “Events Subsequent to Balance Sheet Date,” to the Unaudited Condensed Consolidated Financial Statements included in Item 1 of this Amendment No. 1.

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GEMSTAR-TV GUIDE INTERNATIONAL, INC.

INDEX

		Page
PART I.    FINANCIAL INFORMATION
Item 1.	Financial Statements
	Unaudited Condensed Consolidated Balance Sheets (Restated)	4
	Unaudited Condensed Consolidated Statements of Operations (Restated)	5
	Unaudited Condensed Consolidated Statements of Stockholders’ Equity (Restated)	6
	Unaudited Condensed Consolidated Statements of Cash Flows (Restated)	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	58
Item 4.	Controls and Procedures	58
PART II.    OTHER INFORMATION
Item 6.	Exhibits and Reports on Form 8-K	59
Signature		61

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GEMSTAR-TV GUIDE INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS—UNAUDITED

(In thousands, except per share data)

	Restated September 30, 2002			Restated December 31, 2001(1)
ASSETS
Current assets:
Cash and cash equivalents	$	354,750		$	349,250
Marketable securities		28,395			41,940
Receivables, net		212,024			278,947
Deferred tax asset, net		33,942			28,500
Other current assets		30,024			31,117
Total current assets		659,135			729,754
Property and equipment, net		67,439			86,070
Goodwill		1,455,667			5,633,183
Indefinite-lived intangible assets		401,873			795,341
Finite-lived intangible assets, net		602,531			1,934,093
Marketable securities and other investments		68,232			102,025
Other assets		21,359			61,047
	$	3,276,236		$	9,341,513
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	99,749		$	172,378
Current portion of long-term debt and capital lease obligation		84,810			62,201
Current portion of deferred revenue		226,493			254,824
Total current liabilities		411,052			489,403
Deferred tax liability		295,238			1,008,670
Long-term debt and capital lease obligation, less current portion		186,918			271,029
Deferred revenue, less current portion		171,458			192,746
Other liabilities		3,880			5,411
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock, par value $.01 per share.		—			—
Common stock, par value $.01 per share		4,182			4,179
Additional paid-in capital		8,390,679			8,387,761
Accumulated deficit		(6,100,447	)		(982,666	)
Accumulated other comprehensive income, net of tax		16,183			25,011
Unearned compensation		(4,641	)		(25,188	)
Treasury stock, at cost		(98,266	)		(34,843	)
Total stockholders’ equity		2,207,690			7,374,254
	$	3,276,236		$	9,341,513

(1) Restated in Amendment No. 3 to the 2001 Form 10-K/A filed on March 31, 2003.

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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GEMSTAR-TV GUIDE INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS—UNAUDITED

(In thousands, except per share data)

	Restated						Restated
	Three Months Ended September 30,						Nine Months Ended September 30,
	2002			2001			2002			2001
Revenues	$	236,890		$	274,465		$	756,664		$	860,326
Operating expenses:
Operating expenses, excluding stock compensation, depreciation and amortization, write-down and impairment charges		194,794			220,995			603,225			671,441
Stock compensation		1,318			6,833			19,812			25,200
Depreciation and amortization		72,865			233,430			288,064			704,332
Impairment of intangible assets		—			—			1,305,339			—
		268,977			461,258			2,216,440			1,400,973
Operating (loss) income		(32,087	)		(186,793	)		(1,459,776	)		(540,647	)
Interest expense		(1,282	)		(4,918	)		(4,688	)		(24,020	)
Other (expense) income, net		(4,436	)		(13,013	)		(15,386	)		(82,229	)
(Loss) before income taxes, extraordinary loss on debt extinguishment and cumulative effect of an accounting change		(37,805	)		(204,724	)		(1,479,850	)		(646,896	)
Income tax (benefit)		(41,682	)		(23,213	)		(550,106	)		(110,254	)
(Loss) income before extraordinary loss on debt extinguishment and cumulative effect of an accounting change		3,877			(181,511	)		(929,744	)		(536,642	)
Extraordinary loss on debt extinguishment, net of tax		—			—			—			(2,100	)
Cumulative effect of an accounting change, net of tax		—			—			(4,188,037	)		—
Net (loss) income	$	3,877		$	(181,511	)	$	(5,117,781	)	$	(538,742	)
Basic (loss) earnings per share:
(Loss) income before extraordinary item	$	0.01		$	(0.44	)	$	(2.26	)	$	(1.30	)
Extraordinary loss on debt extinguishment, net		—			—			—			(0.01	)
Cumulative effect of accounting change, net of tax		—			—			(10.18	)		—
Net (loss) income	$	0.01		$	(0.44	)	$	(12.44	)	$	(1.31	)
Diluted (loss) earnings per share:
(Loss) income before extraordinary item	$	0.01		$	(0.44	)	$	(2.26	)	$	(1.30	)
Extraordinary loss on debt extinguishment, net		—			—			—			(0.01	)
Cumulative effect of accounting change, net of tax		—			—			(10.18	)		—
Net (loss) income	$	0.01		$	(0.44	)	$	(12.44	)	$	(1.31	)
Weighted average shares outstanding		408,151			412,361			411,428			411,673
Dilutive effect of:
Stock options		2,963			—			—			—
Warrants		—			—			—			—
Weighted average shares outstanding, assuming dilution		411,114			412,361			411,428			411,673

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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GEMSTAR-TV GUIDE INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY—UNAUDITED

(In thousands)

	Restated Three Months Ended September 30,						Restated Nine Months Ended September 30,
	2002			2001			2002			2001
Balance at beginning of period	$	2,207,472		$	7,690,762		$	7,374,254		$	8,019,418
Net loss		3,877			(181,511	)		(5,117,781	)		(538,742	)
Other comprehensive loss, net of taxes		(4,979	)		(8,505	)		(8,828	)		(14,067	)
Comprehensive loss		(1,102	)		(190,016	)		(5,126,609	)		(552,809	)
Issuance of common stock for acquisitions		—			—			—			—
Purchases of treasury stock		—			—			(63,423	)		—
Other, principally shares issued pursuant to stock option plans, including tax benefit, and amortization of unearned compensation		1,320			50,824			23,468			84,961
Balance at end of period	$	2,207,690		$	7,551,570		$	2,207,690		$	7,551,570

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

6

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS—UNAUDITED

(In thousands)

	Restated
	Nine Months Ended September 30,
	2002			2001
Cash flows from operating activities:
Net loss	$	(5,117,781	)	$	(538,742	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Cumulative effect of an accounting change, net of tax		4,188,037			—
Depreciation and amortization		288,064			704,332
Deferred income taxes		(579,126	)		(102,557	)
Tax benefit associated with stock options		1,651			18,173
Stock compensation expense		19,812			25,200
Impairment of intangible assets		1,305,339			—
Investment write-down		17,676			89,925
Loss on asset dispositions		580			390
Changes in operating assets and liabilities:
Receivables		119,691			50,911
Other assets		(13,611	)		1,640
Accounts payable, accrued expenses and other liabilities		(53,303	)		(94,076	)
Deferred revenue		(49,501	)		(32,319	)
Net cash provided by operating activities		127,528			122,877
Cash flows from investing activities:
Investments and acquisitions		(2,077	)		(33,158	)
Purchases of marketable securities		(45,677	)		(85,363	)
Sales and maturities of marketable securities		72,582			85,730
Sales of assets		3			107,011
Additions to property and equipment		(6,368	)		(14,341	)
Additions to intangible assets		(3,202	)		—
Net cash (used in) provided by investing activities		15,261			59,879
Cash flows from financing activities:
Repayments of borrowings under bank credit facilities and capital lease obligations		(61,503	)		(206,940	)
Repayment of senior subordinated notes		—			(71,134	)
Purchases of treasury stock		(63,423	)		—
Proceeds from exercise of stock options		1,270			13,737
Distributions to minority interests		(14,069	)		(15,191	)
Net cash used in financing activities		(137,725	)		(279,528	)
Effect of exchange rate changes on cash and cash equivalents		436			(276	)
Net increase (decrease) in cash and cash equivalents		5,500			(97,048	)
Cash and cash equivalents at beginning of period		349,250			487,062
Cash and cash equivalents at end of period	$	354,750		$	390,014
Supplemental disclosures of cash flow information:
Cash paid for income taxes	$	55,527		$	69,967
Cash paid for interest		8,001			27,194

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1)  Organization and Basis of Presentation

Gemstar-TV Guide International, Inc., a Delaware corporation (“Gemstar” or together with its consolidated subsidiaries, 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 accompanying Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the accounting policies described in the Company’s 2001 Annual Report on Form 10-K, as amended, and the interim period reporting requirements of Form 10-Q. Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Company’s Annual Report on Form 10-K, as amended, for the year ended December 31, 2001.

The Company’s unaudited condensed consolidated statements of operations and cash flows for the three and nine months ended September 30, 2001 and its unaudited condensed consolidated balance sheet as of December 31, 2001 have been restated (see Note 2). All related dollar and per share amounts have also been restated throughout the notes to the Unaudited Condensed Consolidated Financial Statements.

Certain financial statement items for prior periods have been reclassified to conform with the 2002 presentation. (See Note 5.)

(2)  Restatement

On November 14, 2002, the Company restated certain of its previously filed consolidated financial statements as reflected in filings with the SEC on such date, including the Form 10-Q/A for the quarterly period ended September 30, 2002.”

Following the recommendation of management and the concurrence of the Audit Committee of the Board of Directors and of the Board of Directors, the Company made a determination to further restate its previously filed consolidated financial statements as of September 30, 2002 and 2001 and for the quarters ended September 30, 2002 and 2001. The restated transactions which the Company believes are the more significant are described in detail below and have been grouped under headings for convenience only:

    Revenues

• During the nine months ended September 30, 2002 and 2001, certain customers were either (i) charged in 2001 for Interactive Program Guide (“IPG”) advertising and were provided with advertising of an approximately equal value on the Company’s print or online platforms at no additional cost or (ii) in 2002 provided with discounts that often equaled or exceeded the stated value of the IPG advertising. Significant portions of the revenue associated with these transactions were recorded as revenue in the Interactive Platform Sector. The Company has determined that these revenues should be reclassified as revenues of other sectors, primarily Media and Services, to comply with multi-element accounting principles under SAB No. 101. In addition, previously recorded barter revenue which did not meet the requirements of EITF No 99-17 “Accounting for Advertising Barter Transactions” was reversed, as were certain other transaction where there was an insufficient basis to recognize revenue. As a result of the reclassifications, revenues in the Interactive Platform Sector have decreased by $4.8 million and $0.9 million and revenues in the Media and Services sector have increased by $4.8 million and decreased by $0.2 million for the nine months ended September 30, 2002 and September 30, 2001, respectively.

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GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

• In connection with the sale of the WGN Superstation distribution business in April 2001, the Company secured a six-year $100.0 million advertising commitment pursuant to which the Company will be required to run advertising until 2007. The WGN Superstation distribution business was originally acquired in July 2000 as a part of the acquisition of TV Guide, Inc. Because the transaction included the sale of assets and an advertising revenue commitment, the accounting for this multiple-element transaction was covered by both APB 16, “Business Combinations,” and our revenue recognition policy on multiple-element arrangements. As a result, $10.0 million has been ascribed to the magazine advertising element and will be recognized as the advertising is run, the remainder of the value ($75.0 million on a discounted basis) has been ascribed to assets sold, and $15.0 million will be recognized as interest over the six-year contract term. As there is no persuasive or objective evidence of change in economic value of the asset sold during the period of its ownership by Gemstar, there is no gain or loss from the disposal recorded through Gemstar’s income statement and the adjusted distribution asset value is recorded as part of the purchase price allocation of the TV Guide transaction for accounting purposes. As a result of this restatement, (i) revenues in the Interactive Platform Sector decreased by $4.5 million and $5.0 million in the three months ended September 30, 2002 and 2001, respectively and decreased by $14.0 million and $9.0 million for the nine months ended September 30, 2002 and 2001, respectively; (ii) revenues in the Media and Services Sector decreased by $0.2 million and $1.2 million for the three and nine months ended September 30, 2002, respectively.

• During the nine months ended September 30, 2002 and 2001, the Company recognized licensing revenues under expired license agreements with certain consumer electronic manufacturing licensees. The Company has determined that there is insufficient contemporaneous evidence of such licensees’ intent to pay to satisfy the collectibility criteria of SAB No. 101. Therefore, the revenues should be recorded in the periods that the related cash was received by the Company. As a result of this restatement, revenues and pre-tax income in the Technology and Licensing Sector decreased by $0.1 million and $3.4 million for the three months ended September 30, 2002 and 2001, respectively. In addition, revenues and pre-tax income have increased by $15.3 million and decreased by $6.1 million for the nine months ended September 30, 2002 and 2001, respectively.

• During the year ended March 31, 2000, the Company won a binding arbitration award against a cable set-top box manufacturer. The Company was awarded $58.0 million, which included damages of $16.0 million and recovery of legal and interest expenses of $11.0 million. The Company originally recognized $40.0 million in revenue for the year ended March 31, 2000, and an additional $6.0 million in revenue between April 1, 2000 and the date of the October 2000 settlement described below. The Company has subsequently determined that its gain contingency under Statement of Financial Accounting Standards (“SFAS”) No. 5 was realized upon the date of the binding arbitration ruling, with consideration of the other party’s ability to pay, and that an estimate of the entire award should be recognized as of such date and classified in the statement of operations in accordance with the award. As a result of this restatement, revenues and pre-tax income in the Technology and Licensing sector have decreased by $4.3 million and $16.2 million for the three months ended September 30, 2002 and 2001, respectively. In addition, revenues and pre-tax income have also decreased by $17.2 million and $41.5 million for the nine months ended September 30, 2002 and 2001, respectively.

In October 2000, the Company entered into an agreement to settle all other outstanding claims with the same cable set-top box manufacturer. The Company received a cash payment of $188.0 million, which included payment of the $58.0 million arbitration award described above. Of this amount, $117.5 million was recorded as a prepayment of a 10-year technology licensing agreement, $17.5 million was recorded as a prepayment of a commitment to advertise on the Company’s IPG platform, and $53.0 million was determined to be in payment for damages for the above-mentioned settlement. The cash payment, to the extent not previously recognized as revenue, was recorded as

9

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

deferred revenue on the settlement date. Of the $117.5 million licensing payment, an aggregate of $7.6 million and $14.4 million was recognized as licensing revenue for the three months ended September 30, 2002 and 2001, respectively, and $23.8 million and $45.5 million for the nine months ended September 30, 2002 and 2001, respectively. The Company has determined that the licensing revenue should be recognized based on a straight-line method over the 10-year term of the license for each period because the Company has continuing obligations under the contract. Of the $17.5 million advertising payment, $5.0 million was recognized as revenue as the advertising was run for the three months ended September 30, 2001 and $3.1 million and $12.4 million for the nine months ended September 30, 2002 and 2001, respectively. The Company has determined that the advertisement component and the licensing component were subject to multi-element accounting under SAB No. 101, and that the $17.5 million in advertising payments should be combined with the technology and licensing component and recognized as licensing revenue over the 10-year term of the license agreement. Accordingly, as a result of these restatements, (i) revenues in the Technology and Licensing Sector have decreased by $4.3 million and $11.2 million for the three months ended September 30, 2002 and 2001, respectively, and $14.1 million and $35.7 million for the nine months ended September 30, 2002 and 2001, respectively; (ii) revenues in the Interactive Platform Sector have decreased by $5.0 million for the three months ended September 30, 2001 and $3.1 million and $12.4 million for the nine months ended September 30, 2002 and 2001, respectively; and (iii) pre-tax income decreased $4.3 million and $16.2 million for the three months ended September 30, 2002 and 2001, respectively and $17.1 million and $48.2 million for the nine months ended September 30, 2002 and 2001, respectively.

• During the nine months ended September 30, 2001, the Company recognized IPG advertising revenues from SkyMall, a company it acquired in July 2001. The Company has determined that the facts and circumstances do not support revenue recognition, due to SkyMall’s unwillingness to pay, and the uncertainty of collectibility of the revenue, in the absence of the closing of the acquisition. As a result of this restatement, revenues in the Interactive Platform sector have decreased by $2.2 million and $1.3 million for the nine and three months ended September 30, 2001, respectively.

• During the nine months ended December 31, 2000, the Company recognized revenues of $5.0 million under a licensing agreement with a software provider. The Company has determined that SAB No. 101 was not satisfied at the time the revenue was accrued because of a dispute regarding whether delivery had occurred or service was rendered and insufficient evidence of intent to pay. As a result of this restatement, pre-tax income in the Technology and Licensing Sector has increased by $5.0 million for the nine months ended September 30, 2002.

• In January 1998 and May 1999, the Company entered into eight-year and twenty-year license agreements with two customers, respectively, under which the Company received upfront license fees of $47.5 million in the aggregate. As of December 31, 2001, all of the pre-paid license fees had been recognized as revenue. The Company has determined that such license fees should have been recognized over the term of the agreements on a straight-line basis because of the Company’s continuing performance obligations under both agreements. As a result of this restatement, revenues in the Technology and Licensing sector have increased by $1.0 million in each of the three months ended September 30, 2002 and 2001. In addition, revenues in the Technology and Licensing sector have increased by $3.0 million in each of the nine months ended September 30, 2002 and 2001.

• During the nine months ended September 30, 2002 and September 30, 2001, respectively, the Company recorded the advertising sold on its behalf by a customer as revenue and recorded the customer’s share of such revenue, pursuant to the terms of a revenue sharing agreement, as an operating expense. The Company has determined that the customer’s share of such revenue should be netted against the

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GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

corresponding revenue under EITF No. 99-19, “Reporting Revenue Gross as a Principal versus Net as an Agent”. As a result of this restatement, revenues and operating expenses in the Interactive Platform Sector each have decreased by $0.3 million and $1.4 million for the three and nine months ended September 30, 2001, respectively.

• The Company classified certain ad sharing payments to, and advertising purchases from, certain MSOs as expenses in the Interactive Platform sector. The Company has determined that these expenses should be classified as reductions in revenues in the Technology and Licensing sector in accordance with SAB No. 101, because the expenses constituted an essential element of the license fee paid by the MSO, and consequently the license fee was not fixed or determinable until the ad sharing payments and advertising purchases were made. As a result of this reclassification, expenses in the Interactive Platform Sector and revenues in the Technology and Licensing Sector each have decreased $4.4 and $3.5 million, for the three months ended September 30, 2002 and 2001, respectively, and $15.5 million and $8.9 million for the nine months ended September 30, 2002 and 2001, respectively.

• During the nine months ended September 30, 2002, the Company recognized revenue at a discounted rate with respect to an existing technology licensing agreement in an attempt to negotiate a renewal of the agreement. The customer subsequently decided not to renew its license agreement and the Company determined to reverse the allowance to revenue. As a result of these restatements, revenues in the Technology and Licensing sector have increased by $0.6 million and $5.0 million for the three and nine months ended September 30, 2002, respectively.

• In the quarter ended March 31, 2002, the Company made a commitment to pay an aggregate of $2.5 million per quarter in marketing expenses to a consumer electronics manufacturer during 2002 and 2003. The Company did not accrue any such expenses during the first three quarters of 2002. The manufacturer agreed to purchase an aggregate of $2.5 million per quarter in IPG advertising from the Company during 2002 and 2003. During the first and second quarter of 2002, the Company recognized $2.5 million in IPG revenues per quotes. The Company has determined that the $2.5 million in marketing expense paid by the Company should have been accrued per quotes and that, under SOP 97-2 and SAB No. 101 governing multiple-element arrangements, the IPG advertising revenues received by the Company should have been recorded as a reduction in such marketing expenses. As a result of this restatement, revenues in the Interactive Platform Sector have decreased by $2.5 million and $7.5 million in the three and nine months ended September 30, 2002, respectively.

• During the three and nine months ended September 30, 2001, the Company recognized $2.8 million and $5.6 million, respectively, in IPG advertising revenue from the same manufacturer, and recognized an aggregate of $2.8 million and $5.6 million, respectively, in marketing expenses which were paid by the Company to the manufacturer. These payments were made pursuant to reciprocal promissory notes between the parties in the amount of $20.0 million. Under SOP 97-2 and SAB No. 101 governing multiple-element arrangements, the Company has determined that the IPG advertising revenue should not be recognized and that such revenues should be recorded as a reduction in the marketing expenses paid by the Company to the manufacturer.

During the year ended December 31, 2001, the Company also purchased certain assets from the same manufacturer for a purchase price of $11.6 million. At the same time, the manufacturer agreed to purchase $6.8 million in IPG advertising, of which the Company recognized revenue of approximately $1.2 million and $3.5 million for the three and nine months ended September 30, 2002. The Company has determined that (i) the fair value of the assets acquired was $4.8 million and (ii) the IPG revenues should be recognized in 2002 because the barter accounting criteria of EITF No. 99-17, “Accounting for Advertising Barter Transactions,” were not met. In addition to reversing the revenue previously recognized, $5.6 million of the original write-down was reversed during the nine months ended September 30, 2002.

11

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

• During the three months ended March 31, 2001, the Company entered into a multi-year licensing agreement with a certain consumer electronics manufacturer, which also required the manufacturer to purchase IPG advertising over a four-year period. The Company has determined that IPG advertising revenue should not be recognized and that such revenues should be recorded as a reduction in the marketing expenses related to the licensing agreement. As a result, during the three months ended September 30, 2002 and the nine months ended September 30, 2002, revenue in the Interactive Platform Sector decreased by $0.3 million and $0.9 million respectively.

    Expenses

In allocating the purchase price for the acquisition of TV Guide, the Company recorded approximately $12.6 million in deferred subscription acquisition costs related to TV Guide magazine as an asset on the July 2000 purchase date. The Company deferred subscription acquisition costs in future periods and amortized such costs over a one year period. The Company has determined that such costs, did not meet the criteria for capitalization under Statement of Position (“SOP”) 93-7, “Reporting on Advertising Costs,” and should not have been capitalized. As a result of this restatement, the Company has (i) reversed the $12.6 million recorded on the opening balance sheet resulting in an increase to goodwill as of the acquisition date and (ii) written off advertising costs as incurred subsequent to that date. As a result, pre-tax income increased $0.4 million and decreased $0.5 million for the three months ended September 30, 2002 and 2001, respectively. Pre-tax income for the nine months ended September 30, 2002 and 2001 increased $2.5 million and $3.0 million, respectively.

• During the nine months ended September 30, 2001, the Company recorded accruals to fund future marketing initiatives. During the three and nine months ended September 30, 2002, $1.5 million and $10.2 million, respectively, in accruals were reversed into income because the Company determined that there was no basis for recording the liability and no amounts had been paid. The Company has also determined that no expense should have been recorded in the earlier periods and has reversed the accrual. As a result of this restatement, pre-tax income has decreased by $1.5 million and increased by $0.8 million in the three months ended September 30, 2002 and 2001, respectively, and decreased by $10.2 million and increased by $1.2 million in the nine months ended September 30, 2002 and 2001, respectively.

• During the year ended December 31, 2001, the nine months ended December 31, 2000, and the year ended March 31, 2000, the Company capitalized patent prosecution costs and patent litigation costs. During the same periods, the Company recognized expenses relating to the amortization of patent prosecution costs and patent litigation costs. The Company has determined that it should not capitalize any patent prosecution or litigation costs and that such costs should be expensed as incurred. With respect to patent prosecution costs, the Company has determined that its underlying accounting records for patent prosecution costs were not sufficient to maintain accountability for the recorded assets or to make assessments relative to useful lives or potential impairment on individual patents or patent groups. With respect to patent costs, the Company’s previous policy was to expense patent litigation costs as incurred. During the year ended March 31, 2000, the Company changed to a method to capitalize and amortize such costs over estimated useful lives, which constituted a discretionary change to a less preferable accounting method. The Company has expensed all such previously capitalized costs in the periods in which such costs were incurred. As a result of this restatement, operating expenses increased by $5.3 million and $13.3 million, in the three months ended September 30, 2002 and September 30, 2001 respectively. In addition, operating expenses have also increased by $31.4 million and $28.1 million in the nine months ended September 30, 2002 and September 30, 2001, respectively.

12

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

• During the nine months ended September 30, 2001, the Company accrued a liability for certain retailer promotion expenses. The Company has determined that there was insufficient substantiation for the amounts accrued and that the expenses should have been recorded at the time they were paid. As a result of this restatement, pre-tax income has increased by $4.5 million for the three months ended September 30, 2001. In addition, pretax income has decreased by $5.7 million and increased by $7.2 million in the nine months ended September 30, 2002 and 2001, respectively.

    Stock Compensation

• In January 1998, the Company granted options to purchase the Company’s common stock to its former CEO which were subject to stockholder approval. The approval was obtained in March 1998. On the date of stockholder approval, the market price of the underlying stock exceeded the exercise price of the options by approximately $25.0 million. The Company has determined, under APB No. 25, that the $25.0 million excess constituted unearned compensation expense as of the date of stockholder approval. As a result of this restatement, $0.3 million and $1.5 million in compensation expense has been recorded in the three and nine months ended September 30, 2001.

    Investments

• In June 2001, the Company wrote down the value assigned to an investment acquired by the Company as part of its acquisition of TV Guide in July 2000. The write-down was recorded as a $69.6 million reduction in goodwill through an adjustment to the purchase price allocation for TV Guide. The Company subsequently recognized an other-than-temporary impairment charge of $48.1 million on this same investment. The Company has determined that the $69.6 million write-down should have been charged against earnings, not goodwill, because the charge reflected an impairment in the value of the asset that occurred subsequent to the acquisition date. In addition, the Company has restated its accounting for the warrant portion of the investment, which was overvalued by $7 million, by adjusting goodwill in purchase accounting. Accordingly, the Company has recorded $59.3 million of the $69.6 million as a charge for the nine months ended September 30, 2001 and has adjusted amortization expense for all periods subsequent to the TV Guide acquisition to reflect the offsetting increase to goodwill.

• In May 2001, the Company entered into an agreement pursuant to which it received warrants to purchase an equity interest in the other party, in exchange for a long-term content and patent license expiring in 2019. The Company has exercised one of the warrants for a de minimus exercise price and owns approximately 17% of the equity of the other party. The Company retains warrants to purchase up to 51% of equity of the other party for an aggregate exercise price of $41.1 million. The warrants were recorded under the cost method at $10.8 million with an offset to deferred revenue. In subsequent years, the investment was written down as a result of an other than temporary decline in its value. The Company shares in certain revenues and other fees earned by the other party, and has the right to representation on its board of directors. The Company has determined that, as it had the ability to exercise significant influence at the time of the transaction, the equity method should be applied and the investment should be recorded based on the consideration paid, which was de minimis. Accordingly, the initial entry to record the $10.8 million investment and related deferred revenue, and subsequent entry to write-off $5.2 million of carrying value in the investment in the warrants and to

13

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

recognize license fee revenue over the term of the agreement have been reversed. As a result of this restatement, pre-tax income has decreased by $0.2 million in each of the three months ended September 30, 2002 and September 30, 2001. In addition, pre-tax income increased by $3.2 million and decreased $0.2 million in the nine months ended September 30, 2002 and 2001, respectively.

• During the nine months ended September 30, 2001, the Company accrued a liability for certain retailer promotion expenses. The Company has determined that there was insufficient substantiation for the in the licensee. As a result of this restatement, pre-tax income has decreased by $5.1 million in the nine months ended September 30, 2001.

    Impairment of Goodwill and Other Intangible Assets

• As part of the Company’s purchase price allocation for its TV Guide acquisition consummated on July 12, 2000, with the assistance of an outside valuation expert, the Company allocated the purchase price to the acquired net assets, including identifiable intangibles and goodwill. The Company has determined that restatements are required to reflect (i) certain of the restatements noted above that impact the values of the assets acquired and liabilities assumed in the acquisition, and (ii) adjustments to the methodology used to determine the fair value of certain identifiable intangible assets which decreased by $109.6 million as of the acquisition date. Accordingly, amortization expense increased by $9.8 million for the three months ended September 30, 2001, and decreased $11.8 million for the nine months ended September 30, 2001.

    Other

• During the year ended March 31, 2000, the Company expensed $2.0 million with respect to investment banking services rendered but not paid for, in connection with two transactions that closed during the year, which were accounted for as pooling of interests. In 2001, in connection with a subsequent acquisition accounted for as a purchase, the Company re-characterized the fees as a direct cost of the subsequent acquisition. The Company has determined that no re-characterization should have occurred and has reversed the $2.0 million credit to income recorded in the year ended December 31, 2001 and reduced goodwill by the same amount, thereby decreasing pre-tax income by $2.0 million in the nine months ended September 30, 2001.

• The Company has adjusted its income tax accounts to reflect appropriate amounts of its various tax liabilities, as well as to reflect the tax impacts of the restatement adjustments described in this footnote. As a result, the tax benefit has increased by $34.9 million and $1.0 million for the three months ended September 30, 2002 and 2001, respectively. For the nine months ended September 30, 2002 and 2001, the tax provision was adjusted by $26.9 million and $42.7 million, respectively.

• The Company has determined that for the three and nine months ended September 30, 2002 and 2001 and as of September 30, 2002 and December 31, 2001, certain restatements should also be made for numerous other items that are individually not material to the periods presented. These items include certain adjustments accruals, reserves and timing changes in recording of transactions and are reflected in the Unaudited Condensed Consolidated Financial Statements.

14

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Unaudited Condensed Consolidated Financial Statements as of September 30, 2002 and December 31, 2001 and for the nine months ended September 30, 2002 and 2001 and notes thereto have been restated to include the items described above. The following financial statement line items were impacted:

UNAUDITED CONSOLIDATED BALANCE SHEETS

(In thousands)

	Restated September 30, 2002			As previously Reported September 30, 2002(1)			Restated December 31, 2001			As previously Reported December 31, 2001(1)
Cash	$	354,750		$	354,865		$	n/a		$	n/a
Marketable securities		28,395			30,646			42,212			41,940
Receivables, net		212,024			159,256			278,947			285,076
Future tax assets, net		33,942			19,506			28,500			14,957
Deferred tax assets, net		33,942			19,506			28,500			14,957
Other current assets		30,024			38,356			31,117			38,391
Total current assets		659,135			602,629			729,754			729,886
Property and equipment, net		67,439			68,533			86,070			87,950
Goodwill		1,455,667			346,372			5,633,183			5,485,807
Indefinite-lived intangible assets		401,873			568,414			795,341			893,425
Finite-lived intangible assets		602,531			722,490			1,934,093			2,242,503
Marketable securities and other investments		68,232			69,772			102,025			107,569
Other assets		21,359			23,969			61,047			25,888
Total assets		3,276,236			2,402,179			9,341,513			9,573,028
Accounts payable and accrued expenses		99,749			186,020			172,378			285,761
Current portion of deferred revenue		226,493			209,363			254,824			261,420
Total current liabilities		411,052			480,193			489,403			609,382
Deferred tax liability		295,238			424,549			1,008,670			1,086,724
Deferred revenue, less current portion		171,458			93,645			192,746			109,507
Other liabilities		3,880			5,519			5,411			6,286
Accumulated deficit		(6,100,447	)		(7,069,555	)		(982,666	)		(838,638	)
Accumulated other comprehensive income, net of tax		16,183			16,428			25,011			24,101
Unearned compensation		n/a			n/a			(25,188	)		(24,988	)
Total stockholders’ equity		2,207,690			1,211,355			7,374,254			7,490,100
Total liabilities and stockholders’ equity		3,276,236			2,402,179			9,341,513			9,573,028
Additional paid-in capital		8,390,679			8,363,207			8,387,761			8,360,289

(1) Reflects previous restatements that were included in filings with the SEC on November 14, 2002. Some of these previous restatements have been further adjusted in the current restatements reflected above.

“n/a” means the line item was not impacted by the restatement.

15

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

	Restated Three months Ended September 30, 2002			As previously Reported Three months Ended September 30, 2002(1)			Restated Nine months ended September 30, 2002			As previously Reported Nine months ended September 30, 2002(1)
Revenues	$	236,890		$	253,350		$	756,664		$	815,454
Operating expenses, excluding stock compensation, depreciation and amortization, write-down and impairment charges		194,794			190,836			603,225			597,692
Depreciation and amortization		72,865			76,558			288,064			313,834
Impairment of intangible assets		n/a			n/a			1,305,339			1,259,147
Total operating expenses		268,977			268,712			2,216,440			2,234,709
Operating (loss) income		(32,087	)		(15,362	)		(1,459,776	)		(1,419,255	)
Other (expense) income, net		(4,436	)		(6,431	)		(15,386	)		(23,811	)
(Loss) before income taxes, extraordinary loss on debt extinguishment and cumulative effect of an accounting change		(37,805	)		(24,070	)		(1,479,850	)		(1,450,869	)
(Benefit) provision for income taxes		(41,682	)		(6,764	)		(550,106	)		(523,228	)
(Loss) income before extraordinary item		3,877			(17,306	)		(929,744	)		(927,636	)
Net (loss) income		3,877			(17,306	)		(5,117,781	)		(6,230,917	)
Basic (loss) earnings per share:
(Loss) income before extraordinary item		.01			(.04	)		(2.26	)		(2.25	)
(Loss) income before income taxes and extraordinary item		(37,805	)		(24,070	)		(1,479,850	)		(1,450,864	)
Net (loss) income		.01			(.04	)		(12.44	)		(15.14	)
Cumulative effect of an accounting change, net of tax		n/a			n/a			(10.18	)		(12.89	)
Diluted (loss) earnings per share:
(Loss) income before extraordinary item		.01			(.04	)		(2.26	)		(2.25	)
Cumulative effect of an accounting change, net of tax		n/a			n/a			(10.18	)		(12.89	)
Net (loss) income		.01			(.04	)		(12.44	)		(15.14	)

(1) Reflects previous restatements that were included in filings with the SEC on November 14, 2002. Some of these previous restatements have been further adjusted in the current restatements reflected above.

“n/a” means the line item was not impacted by the restatement.

16

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

	Restated Three months Ended September 30, 2001			As previously Reported Three months Ended September 30, 2001(1)			Restated Nine months ended September 30, 2001			As previously Reported Nine months ended September 30, 2001(1)
Revenues	$	274,465		$	299,863		$	860,326		$	917,498
Operating expenses, excluding stock compensation, depreciation and amortization, write down and impairment charges	$	220,995		$	208,213		$	671,441		$	642,956
Stock compensation		6,833			6,534			25,200			23,691
Depreciation and amortization		233,430			235,199			704,332			709,062
Total operating expenses		461,258			449,946			1,400,973			1,375,709
Operating (loss) income		(186,793	)		(150,083	)		(540,647	)		(458,211	)
Interest expense		(4,918	)		(4,880	)		(24,020	)		(23,982	)
Other (expense) income, net		(13,013	)		(7,840	)		(82,299	)		(6,786	)
(Loss) before income taxes, extraordinary loss on debt extinguishment and cumulative effect of an accounting change		(204,724	)		(162,803	)		(646,896	)		(488,979	)
(Loss) income before extraordinary loss on debt extinguishment and cumulative effect of an accounting change		(204,724	)		(162,803	)		(646,896	)		(488,979	)
(Loss) income before extraordinary loss on debt extinguishment and cumulative effect of an accounting change		(181,511	)		(140,251	)		(536,642	)		(421,407	)
(Benefit) provision for income taxes		(23,213	)		(22,552	)		(110,254	)		(67,572	)
Net (loss) income		(181,511	)		(140,251	)		(538,742	)		(423,507	)
Basic (loss) earnings per share:
(Loss) income before extraordinary item		(0.44	)		(0.34	)		(1.30	)		(1.02	)
Net (loss) income		(0.44	)		(0.34	)		(1.31	)		(1.03	)
Diluted (loss) earnings per share:
(Loss) income before extraordinary item		(0.44	)		(0.34	)		(1.30	)		(1.02	)
Net (loss) income		(0.44	)		(0.34	)		(1.31	)		(1.03	)

(1) Reflects previous restatements that were included in filings with the SEC on November 14, 2002. Some of these previous restatements have been further adjusted in the current restatements reflected above.

17

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND

COMPREHENSIVE INCOME (LOSS)

(In thousands)

	Restated Three Months Ended September 30, 2002			As previously Reported Three Months ended September 30, 2002(1)			Restated Nine Months ended September 30, 2002			As previously Reported Nine Months ended September 30, 2002(1)
Balance at beginning of period	$	2,207,472		$	1,232,739		$	7,374,254		$	7,490,100
Net loss		3,877			(17,306	)		(5,117,781	)		(6,230,917	)
Other comprehensive income, net of tax		(4,979	)		(5,398	)		(8,828	)		(7,673	)
Comprehensive loss		(1,102	)		(22,704	)		(5,126,609	)		(6,238,590	)
Purchase of treasury stock								(63,423	)		(63,423	)
Other, principally shares issued pursuant to stock options plans, including tax benefit, and amortization of unearned compensation		1,320			1,320			23,468			23,268
Balance at end of period		2,207,690			1,211,355			2,207,690			1,211,355

	Restated Three Months Ended September 30, 2001			As previously Reported Three Months ended September 30, 2001(1)			Restated Nine Months ended September 30, 2001			As previously Reported Nine Months ended September 30, 2001(1)
Balance at beginning of period	$	7,690,762		$	7,763,782		$	8,019,418		$	8,025,240
Net loss		(181,511	)		(140,251	)		(538,742	)		(423,507	)
Other comprehensive income, net of tax		(8,505	)		(9,665	)		(14,067	)		(20,795	)
Comprehensive loss		(190,016	)		(149,916	)		(552,809	)		(444,302	)
Issuance of common stock for acquisitions					27,851						27,851
Purchase of treasury stock
Other, principally shares issued pursuant to stock options plans, including tax benefit, and amortization of unearned compensation		50,824			22,673			84,961			55,601
Balance at end of period		7,551,570			7,664,390			7,551,570			7,664,390

18

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Restated Nine months ended September 30, 2002			As previously Reported Nine months ended September 30, 2002(1)			Restated Nine months ended September 30, 2001			As previously Reported Nine months ended September 30, 2001(1)
Cash flows from operating activities:
Net (loss) income	$	(5,117,781	)	$	(6,230,917	)	$	(538,742	)	$	(423,507	)
Adjustment to reconcile net (loss) income to net cash provided by operating activities:
Cumulative effect of accounting changes, net of tax		4,188,037			5,303,281			n/a			n/a
Stock compensation expenses		19,812			19,612			25,200			23,691
Write down and capitalized patent litigation costs		n/a			44,424			n/a			n/a
Depreciation and amortization		288,064			313,834			704,332			709,062
Deferred income taxes		(579,126	)		(553,693	)		(102,557	)		(103,232	)
Investment write down		17,676			12,216			89,925			6,000
Impairment of intangible assets		1,305,339			1,259,147			n/a			n/a
Changes in operating assets and liabilities, net of the effect of acquisitions:
Receivables		119,691			124,596			50,911			24,436
Other assets		(13,611	)		1,720			1,640			8,943
Accounts payable, accrued expenses and other liabilities		(53,303	)		(78,196	)		(94,076	)		(38,958	)
Deferred revenue		(49,501	)		(67,387	)		(32,319	)		(69,528	)
Cash flows from operating activities		127,528			150,868			122,877			155,470
Cash flows from investing activities:
Investments and acquisitions		(2,077	)		(3,617	)		(33,158	)		(30,908	)
Additions to intangible assets		(3,202	)		(25,131	)		n/a			(34,593	)
Cash flows from investing activities		15,261			(8,208	)		59,879			26,302
Effect of exchange rate charges on cash and cash equivalents		436			680			n/a			n/a
Cash and cash equivalents at beginning of period		n/a			n/a			487,062			488,046
Cash and cash equivalents at end of period		354,750			354,865			n/a			n/a

n/a means the line item was not impacted by the restatement.

(1) Reflects previous restatements that were included in filings with the SEC on November 14, 2002. Some of these previous restatements have been further adjusted in the current restatements reflected above.

19

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(3)  Accounting Change—Goodwill and Intangible Assets

The Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 142, Goodwill and Other Intangible Assets (“Statement 142”), effective January 1, 2002. Under Statement 142, goodwill and certain other intangible assets are no longer systematically amortized but instead are reviewed for impairment at least annually and any excess in carrying value over the estimated fair value is charged to results of operations. The previous method for determining impairment utilized an undiscounted cash flow approach for the initial impairment assessment, while Statement 142 utilizes a fair value approach. The indefinite-lived intangible asset and goodwill impairment charges discussed below are the result of the change in the accounting method for determining the impairment of goodwill and certain intangible assets.

The Company, primarily through the acquisition of TV Guide on July 12, 2000, has a significant amount of goodwill and indefinite-lived intangible assets, consisting of trademark and publishing rights.

In connection with the adoption of Statement 142, the Company determined that the Company’s trademark, trade name and publishing rights have indefinite useful lives. Pursuant to the transitional rules of Statement 142, the Company performed an impairment test of these assets, which resulted in an impairment charge of $369.0 million ($223.2 million, net of tax) as of January 1, 2002. The impairment charge represents the excess of the carrying amount of a trademark over its estimated fair value as determined by the Company, with the assistance of a third party valuation expert, utilizing the relief from royalty valuation method. This method estimates the benefit to the Company resulting from owning rather than licensing the trademark.

Also in connection with the adoption of Statement 142, the Company completed the transitional goodwill impairment test during the second quarter of 2002 and recorded an impairment charge of $3,964.8 million as of January 1, 2002. A third party valuation expert, considering both income and market approaches, estimated the enterprise values of certain reporting units. The impaired goodwill is not deductible for tax purposes, and as a result, no tax benefit was recorded in relation to the impairment charge.

In total, the charges to goodwill and indefinite-lived intangible assets have been recorded as the cumulative effect of an accounting change in the amount of $4,188.0 million, net of tax as of January 1, 2002 in the accompanying unaudited condensed consolidated statements of operations.

20

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Prior to the adoption of Statement 142, the Company amortized goodwill and indefinite-lived intangible assets over their estimated useful lives ranging from 5 to 40 years. Had the Company not amortized goodwill and indefinite-lived intangible assets consistent with the provisions of Statement 142 in prior periods, the Company’s net loss would have been affected as follows (in thousands, except per share data):

	Restated Three Months Ended September 30,					Restated Nine Months Ended September 30,
	2002		2001			2002			2001
Reported loss before cumulative effect of an accounting change	$	3,877	$	(181,511	)	$	(929,744	)	$	(536,642	)
Add back: Goodwill amortization		—		119,582			—			344,844
Add back: Indefinite-lived intangible assets amortization, net of tax		—		4,204			—			12,578
Adjusted loss before cumulative effect of an accounting change	$	3,877	$	(57,725	)	$	(929,744	)	$	(179,220	)
Basic and diluted loss per share before cumulative effect of an accounting change:
Reported	$	0.01	$	(0.44	)	$	(2.26	)	$	(1.30	)
Add back: Goodwill amortization		—		0.29			—			0.84
Add back: Indefinite-lived intangible assets amortization, net of tax		—		0.01			—			0.02
Adjusted basic and diluted loss per share before cumulative effect of an accounting change	$	0.01	$	(0.14	)	$	(2.26	)	$	(0.44	)

Changes in the carrying amount of goodwill and intangible assets with indefinite lives for the nine months ended September 30, 2002 and 2001 are as follows (in thousands):

	Restated 2002									Restated 2001
	Goodwill			Trademark and Trade Name			Publishing Rights			Goodwill			Trademark and Trade Name			Publishing Rights
Balance at December 31,	$	5,633,183		$	647,388		$	147,953		$	6,247,443		$	662,165		$	158,886
Current period additions and adjustments to purchase price allocation		(5,897	)		2,500			—			(118,139	)		2,000			—
Amortization expense		—			—			—			(344,843	)		(12,590	)		(8,200	)
Transitional impairment charge		(3,964,812	)		(346,016	)		(22,952	)		—			—			—
Interim impairment charge (Note 4)		(206,807	)		(27,000	)		—			—			—			—
Balance at September 30,	$	1,455,667		$	276,872		$	125,001		$	5,784,461		$	651,575		$	150,686

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In conjunction with the adoption of Statement 142, the Company reassessed the useful lives and residual values of its finite-lived intangible assets acquired in purchase business combinations and determined that no revisions were necessary. Intangible assets with finite lives at September 30, 2002 and December 31, 2001 are as follows (in thousands):

	Cost(1)		Accumulated Amortization			Net Balance		Amortization Period (Years)
September 30, 2002—Restated
Intangible assets with finite lives:
Contracts	$	582,416	$	(332,676	)	$	249,740	5–10
Customer lists		732,780		(486,886	)		245,894	3–5
Patents		134,485		(28,268	)		106,217	5–15
Other		1,467		(787	)		680	5
	$	1,451,148	$	(848,617	)	$	602,531
December 31, 2001—Restated
Intangible assets with finite lives:
Contracts	$	1,641,000	$	(242,031	)	$	1,398,969	5–10
Customer lists		732,780		(321,504	)		411,276	3–5
Patents		143,701		(21,266	)		122,435	5–15
Other		2,000		(587	)		1,413	5
	$	2,519,481	$	(585,388	)	$	1,934,093

(1)  Cost net of impairment charge.

Amortization expense was $65.5 million and $225.7 million (restated) for the nine months ended September 30, 2002 and 2001, respectively. Estimated amortization expense for the remainder of 2002 and the succeeding five years is expected to be as follows: $61.4 million—2002 (remainder); $151.2 million—2003; $53.4 million—2004; $35.6 million—2005; $15.4 million—2006; and $15.4 million—2007.

(4)  Impairment Charges (Restated)

In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“Statement 144”), the Company records impairment losses on long-lived assets used in operations when events and circumstances indicate that long-lived assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. During the second quarter of 2002, an unfavorable ruling in a proceeding before the United States International Trade Commission (“ITC”) (see Note 10) coupled with a sustained decline in the Company’s market capitalization triggered an interim assessment by the Company to determine whether certain of its finite-lived intangible assets may be impaired. Accordingly, the Company estimated the undiscounted future net cash flows to be generated by these finite-lived intangible assets to be less than their carrying amount of $1,326.4 million. The cash flow projections related to these finite-lived intangible assets as of June 30, 2002 reflected certain anticipated changes in the Company’s advertising delivery mechanism on TV Guide Interactive and anticipated consolidation in the cable television industry. The Company, with the assistance of a third party valuation expert, then estimated the fair value of these finite-lived intangible assets at $266.0 million using the traditional approach under Statement 144 as a measure of fair value. This resulted in a pre-tax impairment loss of $1,060.4 million.

Under Statement 142, in addition to an annual test, goodwill and indefinite-lived intangible assets must be tested on an interim basis if events or circumstances indicate that the estimated fair value of the asset has

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

decreased below its carrying value. During the second quarter of 2002, the unfavorable ruling in the ITC proceeding and the sustained decline in the Company’s market capitalization triggered an interim assessment by the Company to determine whether the fair value of goodwill and indefinite-lived intangible assets may be less than their carrying values as of June 30, 2002. The Company, with the assistance of a third-party valuation expert, estimated the fair values of the Company’s indefinite-lived intangible assets and certain reporting units as of June 30, 2002. As a result, the Company determined that impairment charges of $206.8 million and $27.0 million should be recorded to goodwill and trademark, respectively, as of June 30, 2002.

In total, pre-tax interim impairment charges of $1.3 billion were recorded as operating expenses in the accompanying condensed consolidated statements of operations for the nine months ended September 30, 2002.

(5)  Reclassification—Cooperative Advertising and Product Placement Costs (Restated)

In November 2001, the Financial Accounting Standards Board’s (“FASB’s”) Emerging Issues Task Force (“EITF”) reached a consensus on EITF Issue No. 01-09, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products). EITF No. 01-09, which is effective for periods commencing after December 31, 2001, clarifies the income statement classification of costs incurred by a vendor for certain cooperative advertising and product placement paid to a vendor’s customers. As a result of the Company’s adoption of the EITF consensus, certain of the Company’s cooperative advertising and product placement costs previously classified as operating expenses have been reflected as a reduction of revenues earned from that activity. Where applicable, amounts presented in prior periods have been reclassified to conform with the income statement classifications for the current period. Such reclassifications resulted in decreases in both revenues and expenses for the three and nine-month periods ended September 30, 2001 of $3.0 million and $10.7 million, respectively.

(6)  Acquisitions and Sales (Restated)

TV Guide—Purchase Reserves

For the nine months ended September 30, 2002, approximately $11.6 million ($8.0 million in third-party contract termination costs and $3.6 million in separation costs) has been charged against the reserve for third-party contract termination and separation costs included in the purchase price allocation from the acquisition of TV Guide. Additionally, for the same period, the reserve was reduced by approximately $2.4 million and credited against goodwill. The reserve had an outstanding balance of $17.0 million at December 31, 2001. See the Company’s Annual Report on Form 10-K/A (Amendment No. 3) for the year ended December 31, 2001, as amended, for a description of the transaction. The Company expects that the remaining reserve for third-party contract termination and separation costs of $3.0 million at September 30, 2002 will be expended by year end.

WGN Superstation Transaction (Restated)

In April 2001, the Company sold the business that distributes the WGN Superstation signal for $106 million in cash. Concurrent with this transaction, the Company received a $100.0 million advertising commitment for the magazine and its other platforms from the acquirer pursuant to which the Company will be required to run advertising until 2007. The business that distributes the WGN Superstation signal was originally acquired in July 2000, as a part of the acquisition of TV Guide. Because the April 2001 transaction included the sale of assets and an advertising revenue commitment, this multiple element transaction was covered by both APB 16, “Business Combination”, and our revenue recognition policy on multiple element arrangements. As a result, $10.0 million has been ascribed to the magazine advertising element as the advertising is run, and the remainder of the value ($75.0 million on a discounted basis) has been ascribed to the book value of the assets sold and $15.0 million will

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

be recognized as interest income over the six year contract term. As there is no persuasive or objective evidence of change in economic value of the assets sold during the period of their ownership by the Company, there is no gain or loss from the disposal recorded through the Company’s income statement and the adjusted distribution asset value is recorded as part of the purchase price allocation of the TV Guide transaction for accounting purposes. During the three and nine months ended September 30, 2002 the Company has recorded $1.0 million and $3.2 million, respectively, of interest income. For the three and nine months ended September 30, 2001, the Company recorded interest expense of $1.3 million and $2.5 million, respectively. At September 30, 2002 the Company had a receivable related to this transaction of $56.4 million.

SkyMall Transaction

On July 18, 2001, the Company acquired all of the outstanding common stock of SkyMall. Under the terms of the agreement, SkyMall’s stockholders received 0.03759 shares of Gemstar common stock and $1.50 for each share of SkyMall common stock outstanding. The Unaudited Condensed Consolidated Financial Statements include the results of operations of SkyMall from July 18, 2001. SkyMall is a specialty retailer that provides a large selection of premium-quality products and services to consumers from a wide variety of merchants and partners.

The aggregate purchase price of the SkyMall Transaction was $50.1 million, which included cash of $22.2 million and approximately 741,000 shares of Gemstar common stock issued to SkyMall stockholders at $36.58 per share, the average price of the Company’s common stock over the two-day period before and after the SkyMall Transaction was agreed to and announced.

The purchase price also included $742,000, representing the fair value of unexercised SkyMall options and warrants assumed by Gemstar and certain transaction costs.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition (in thousands). The Company finalized the allocation of the purchase price during the second quarter of 2002.

Assets
Current assets	$	8,464
Property and equipment		7,207
Intangible assets		2,000
Other assets		23
Goodwill		66,355
		84,049
Liabilities
Current liabilities		33,961
Net purchase price	$	50,088

The Company finalized its allocation of the purchase price to the fair value of the acquired trade name at $4.5 million. The trade name is considered an indefinite-lived intangible asset and is not subject to amortization.

The Company finalized its allocation of goodwill ($66.4 million) to its applicable reporting unit in accordance with Statement 142. Goodwill generated in this transaction is not subject to amortization in accordance with Statement 142 and is not deductible for tax purposes. In connection with the adoption of

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Statement 142, the Company recorded an impairment charge of $37.7 million as of January 1, 2002 related to the goodwill from the acquisition of SkyMall. The goodwill balance at September 30, 2002 from this acquisition was $24.0 million (see Note 3).

The following unaudited pro forma financial information reflects the Company’s results of operations for the three and nine-month periods ended September 30, 2001 as though the SkyMall transaction had been completed as of January 1, 2001 (in thousands, except per share amounts):

	Restated Three Months Ended September 30,					Restated Nine Months Ended September 30,
	2002		2001			2002			2001
Revenues	$	236,890	$	279,459		$	756,664		$	887,072
Net loss		3,877		(185,813	)		(5,117,781	)		(502,399	)
Basic and diluted loss per share		0.01		(0.45	)		(12.44	)		(1.22	)

Magazine Distribution Business

In June 2002, the Company exited from its magazine distribution business by assigning its existing distribution contracts to a third party and contracting with the same party for distribution of TV Guide Magazine. The Company recognized approximately $3.3 million in exit costs, which are included as operating expenses in the accompanying condensed consolidated statements of operations. No gain or loss was recognized as a result of this transaction.

(7)  Receivables, net

At September 30, 2002, approximately $52.5 million, or 25%, of the Company’s net receivables are due from five entities.

(8)  Credit Arrangements

The Company’s wholly owned subsidiary, TV Guide, has a $300.0 million six-year revolving credit facility and a $300.0 million four-year term loan, both expiring in February 2005 with a group of banks. Borrowings under the credit facilities bear interest (2.81% at September 30, 2002) either at the banks’ prime rate or LIBOR, both plus a margin based on a sliding scale tied to TV Guide’s leverage ratio, as defined in the facility. The credit facilities are guaranteed by certain subsidiaries of TV Guide and the stock of TV Guide’s subsidiaries is pledged as collateral. The credit facilities impose restrictions on TV Guide’s ability to pay dividends to Gemstar tied to TV Guide’s leverage ratio. This restriction does not apply to Gemstar’s ability to pay dividends. As of September 30, 2002, TV Guide had available borrowing capacity under the six-year revolving credit facility of $160.6 million. Principal payments of $15.0 million in the remainder of 2002, $90.0 million in 2003 and $23 million in 2004 are due under the $300.0 million amortizing term loan. Outstanding borrowings at September 30, 2002 were $138.4 million under the revolving credit facility and $128.0 million under the term loan. At September 30, 2002, the Company had an outstanding letter of credit issued under the revolving credit facility for $1.0 million. The Company has determined that there is a reasonable likelihood that TV Guide will be unable to maintain compliance with a financial covenant in its term loan agreement during the coming twelve months. The Company is currently evaluating options to maintain compliance or mitigate the effects of any noncompliance.

The Company is a party to a loan guaranty to assist a printing services supplier in obtaining a line of credit and term loans with a bank. The maximum exposure to the Company created by this guaranty is $10.0 million.

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GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(9)  Legal Proceedings

The following is a description of material legal proceedings known to the Company that have been filed subsequent to the Company’s Form 10-K for the year ended December 31, 2001, Form 10-Q for the period ended March 31, 2002 and Form 10-Q for the period ended June 30, 2002 or material proceedings previously described in such filings that have undergone significant changes.

On April 26, 1999, the Judicial Panel on Multi-District Litigation (“MDL Panel”) ordered that certain patent infringement lawsuits be coordinated or consolidated for pretrial proceedings in the Northern District of Georgia (the “MDL Transfer Order”). These lawsuits are more fully described in the Company’s Form 10-K filing for the year ended December 31, 2001, as amended. These cases involve Scientific-Atlanta and Pioneer Corporation, among other parties and involve several patents. On August 30, 2002, the Company received an Order from that court finding that two of the patents involved in these cases were not infringed by certain digital set-top box products produced by Scientific-Atlanta and Pioneer. On November 4, 2002, the court ruled that the remaining Scientific-Atlanta and Pioneer products at issue in this proceeding were not infringed by the two patents that were the subject of the August 30th ruling. The Company intends to seek review of these decisions at the appropriate juncture.

The MDL proceedings also involve three patents which were involved in a case in the United States District Court for the Western District of North Carolina entitled SuperGuide Corporation v. DirecTV Enterprises, Inc., et al. (the “SuperGuide case”), described more fully herein. The Company is a third-party defendant in the SuperGuide case and has joined in SuperGuide’s infringement allegations against EchoStar. In two orders dated July 2, 2002 and July 25, 2002, the North Carolina court ruled that the products of the defendants in the SuperGuide case, including EchoStar’s, did not infringe the patents at issue. This ruling was based in part on a previous ruling of that court interpreting the scope of the patents at issue.

On October 25, 2002, the Georgia court hearing the MDL cases ruled that it was obligated to accept the North Carolina court’s previous ruling interpreting the scope of the patents at issue without deciding whether the underlying ruling was correct as a matter of law. The Georgia court has not ruled on Scientific-Atlanta’s infringement of these three patents under this interpretation. The Company has previously announced that it is appealing the SuperGuide case to the United States Court of Appeals for the Federal Circuit.

On October 18, 1999, a former employee of ODS Technologies, L.P. (“ODS”), now a majority owned subsidiary of the Company, filed a complaint against ODS and TV Guide the U.S. District Court of the Southern District of Florida complaint was amended on November 12, 1999, asserting causes of action for violations of certain federal statutes governing pension plans and for equitable estoppel. The amended complaint sought an unspecified amount of damages for benefits allegedly due to the plaintiff under his employment agreement with ODS. On April 22, 2002, the court granted ODS and TV Guide summary judgment dismissing the case. The former employee appealed the grant of summary judgment, but the appeal subsequently was dismissed. The plaintiff has filed a motion for reinstatement and this case is currently pending on appeal.

On January 18, 2000, the Company’s StarSight subsidiary filed a patent infringement action against TiVo Inc. (“TiVo”) in the U.S. District Court for the Northern District of California. The suit claims, among other matters, that TiVo willfully infringed certain StarSight intellectual property by virtue of TiVo’s deployment, marketing, offers to sell and sale of personalized video recorder devices containing an unlicensed IPG. StarSight is seeking an injunction and monetary damages. On February 25, 2000, TiVo answered StarSight’s Complaint, and also filed counterclaims against the Company and StarSight alleging, among others, that the Company has violated federal antitrust law and the California unfair business practices act. In its counterclaims, TiVo seeks, among other relief, damages and an injunction. On August 5, 2002, the court entered a stipulation at the parties’

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GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

request to stay the proceeding pending resolution of the investigation before the ITC, described below, and the court has accepted that agreement. After the resolution of any and all appeals stemming from the ITC investigation (including any appeal to the United States Court of Appeals for the Federal Circuit), we expect the court will be notified of this fact and expect the case to be re-activated at that point.

During July and August 2000, TV Guide was served with more than 20 class action complaints filed primarily in the U.S. District Court for the Southern District of New York on behalf of magazine subscribers. These complaints, which have been consolidated into a single action, allege that TV Guide, the Magazine Publishers Association (“MPA”), and 12 other publishers of consumer magazines have violated federal antitrust laws by conspiring to limit the discounting of magazine subscription prices by means of rules adopted by the MPA and the Audit Bureau of Circulation. The plaintiffs seek injunctive relief, unspecified damages (trebled), and attorneys’ fees and costs. Plaintiffs filed a motion for partial summary judgment. After oral argument was heard on January 10, 2001, the parties entered into settlement discussions. Settlement negotiations continued over the next several months and in April 2002, the defendants submitted final settlement documents to plaintiffs for their approval. Subsequently, the parties signed a settlement agreement, and on July 3, 2002, plaintiffs filed a motion for preliminary approval of the settlement. On August 29, 2002, the court held a hearing at which the pending motion was discussed. The court entered an order on September 20, 2002, granting the motion for preliminary approval.

On November 17, 2000, Pioneer Digital Technologies, Inc. filed suit against the Company and various of its subsidiaries in Los Angeles County Superior Court. On January 12, 2001, Pioneer Digital Technologies filed its first amended complaint which claims, among other matters, that the Company and certain of its subsidiaries have violated state antitrust and unfair competition laws. Pioneer Digital Technologies is seeking damages and injunctive relief against the Company. The parties are in pretrial proceedings. In May 2002, the court set trial for September 2003.

On February 14, 2001, the Company and its StarSight subsidiary filed a complaint requesting that the ITC commence an investigation pursuant to Section 337 of the Tariff Act of 1930, as amended, 19 U.S.C. Section 1337 (“Section 337”), regarding imports of certain set-top boxes and components thereof. The complaint alleges that Pioneer Corporation, Pioneer Digital Technologies, Inc., Pioneer North America, Inc., Pioneer New Media Technologies, Inc., Scientific-Atlanta, Inc., EchoStar Communications Corporation and SCI Systems, Inc. (collectively “Respondents”), are violating Section 337 by their unlawful importation into the United States, sale for importation into the United States, and/or sale in the United States after importation, of set-top boxes and/or components that infringe, directly, contributorily or by inducement, of certain patents owned by the Company. The complaint requests an order excluding from entry into the United States all imported set-top boxes and components that infringe, directly, contributorily or by inducement, any claims of the patents in suit, and directing Respondents to cease and desist from importing, marketing, advertising, demonstrating, warehousing, distributing, selling and/or using set-top boxes or components that so infringe. On or about March 16, 2001, the ITC instituted the requested investigation referred to as “In the Matter of Certain Set-Top Boxes and Components Thereof, Investigation No. 337-TA-454 (ITC)”. An administrative hearing was held during December 2001. On June 21, 2002, the Administrative Law Judge issued his initial determination (“ID”), finding that all of the patents were valid, that none of the patents at issue had been infringed by any of the Respondents, that one of the patents at issue was unenforceable both because it had been misused by the Company and also because a co-inventor had not been named on the patent, and that the Company failed to establish the technical prong of the ITC’s domestic industry requirement, which requires the Company to practice its inventions covered by the patents in suit. The Company believes the ID is erroneous in many respects and that the proper application of the law does not support it. On July 5, 2002, the Company and StarSight filed their Petition for Review by the ITC of the ID. Respondents and ITC Staff also filed Petitions for Review of certain aspects of the ID. On August 29, 2002, the ITC determined not to review the ID and entered an additional finding with regard to the technical

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GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

prong of the domestic industry requirement on one claim of one of the patents. The Commission took no position on the patent misuse findings of the Administrative Law Judge. The Company filed a notice of appeal of the ITC determination to the United States Court of Appeals for the Federal Circuit on October 25, 2002.

On March 23, 2001, Gemstar Development Corporation, a wholly owned subsidiary of the Company, was added as a third-party defendant in the lawsuit of SuperGuide Corporation v. DirecTV Enterprises, Inc., et al., in the U.S. District Court for the Western District of North Carolina. The original claims brought by SuperGuide Corporation against the defendants in this lawsuit are for patent infringement with respect to three patents (the “SuperGuide Patents”). In 1993, Gemstar Development Corporation received a license to the SuperGuide Patents from SuperGuide Corporation within certain defined fields of use. Defendants asked the court to join Gemstar Development Corporation to these proceedings as a necessary party. After it was added as a party, Gemstar Development Corporation brought claims for declaratory relief and breach of contract against SuperGuide in this lawsuit relating to the 1993 license agreement between SuperGuide and Gemstar Development Corporation. In addition, Gemstar Development Corporation has asserted claims against EchoStar for infringing the SuperGuide Patents within Gemstar’s defined fields of use. By orders dated July 2, 2002 and July 25, 2002, the District Court granted defendants’ motion for summary judgment finding that defendants do not infringe the SuperGuide Patents based upon the manner in which the court previously construed the SuperGuide Patents and dismissed all remaining claims in the case without prejudice. The Company has filed a notice of appeal to the United States Court of Appeals for the Federal Circuit.

On November 2, 2001, Thomson multimedia, Inc. (“Thomson”) sought leave to add the Company and certain subsidiaries into a case captioned Pegasus Development Corporation and Personalized Media Communications, L.L.C. v. DirecTV, Inc., Hughes Electronics Corporation, Thomson Consumer Electronics, Inc. and Philips Electronics North America Corporation; Thomson multimedia, Inc. v. Pegasus Development Corporation, Personalized Media Communications, L.L.C., TVG-PMC, Inc., StarSight Telecast, Inc., and Gemstar-TV Guide International, Inc., United States District Court for the District of Delaware, Case No. 00-1020 (GMS). At that time, Thomson asserted a declaratory judgment claim against the Gemstar parties seeking a declaration of noninfringement and invalidity of certain patents as to which the Company is a licensee. In addition to its claim for declaratory relief (discussed above), Thomson has now also added a claim for antitrust violations under federal and state law. On April 22, 2002, Thomson also filed a tag-along notice with the Judicial Panel for Multi-District Litigation (the “MDL Panel”) requesting that this entire action be transferred to Georgia for coordinated pretrial proceedings with the MDL proceedings discussed in the Company’s Form 10-K for the period ended December 31, 2001, as amended. On June 3, 2002, the MDL Panel issued a Conditional Transfer Order and Simultaneous Separation and Remand of Certain Claims conditionally transferring Thomson’s antitrust claims to Georgia, but separating and remanding the balance of the claims in this case to Delaware. In response, Thomson filed a motion with the MDL Panel to transfer the entire case to Georgia. On October 16, 2002, the MDL Panel issued an Order of Transfer and Simultaneous Separation and Remand of Certain Claims in which it denied Thomson’s motion to transfer the entire case to Georgia. In so ruling, the MDL Panel adopted its decision in the June 3, 2002 Conditional Transfer Order and transferred Thomson’s antitrust claims to Georgia, but separated and remanded the balance of the claims in this case to Delaware.

On November 30, 2001, Thomson initiated an arbitration with the American Arbitration Association against the Company. The Statement of Claims filed by Thomson alleges that the Company has breached certain obligations under a group of agreements signed by the parties as of December 31, 1999 relating to a joint venture between the parties for revenue sharing of advertising on electronic programming guides. On January 7, 2002, the Company filed an Answering Statement and Counterclaim denying all allegations of the claims filed by Thomson and asserting counterclaims against Thomson and Thomson multimedia, S.A. (“Thomson S.A.”) alleging, among other things, that Thomson S.A. had breached certain of its obligations under one of the agreements signed by the parties as of December 31, 1999 relating to the introduction of electronic programming

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

guides in Europe. In May 2002, the Company signed a binding Letter of Intent with Thomson, and the arbitration was stayed pending the execution of a definitive agreement.

In April and May 2002, the Company and its principal executive officers and directors were served with a number of complaints, filed in the United States District Court for the Central District of California, alleging violations of the Securities Exchange Act of 1934 (the “1934 Act”) and the Securities Act of 1933 (the “1933 Act”). Also named in several of the complaints is The News Corporation Limited (“News Corporation”), a shareholder of the Company. The complaints name some or all of the same parties as defendants, and purport to state claims on behalf of all persons who purchased the Company’s common stock during various periods, the broadest of which is August 11, 1999 through April 4, 2002. More particularly, the alleged claims are brought under Sections 10(b) and 20(a) of the 1934 Act, Section 11 of the 1933 Act and SEC Rule 10b-5. The essence of the allegations is that the defendants allegedly intentionally failed to properly account for revenue accrued from Scientific-Atlanta; failed to properly account for a non-monetary transaction, pursuant to which intellectual property rights were obtained, in exchange for cash and advertising credits; and failed to properly record the fair value of technology investments and marketable securities acquired in connection with the Company’s acquisition of TV Guide, Inc. Plaintiffs allege that this had the effect of materially overstating the Company’s reported financial results. Pursuant to the parties’ stipulation, the District Court has consolidated all of the lawsuits (and any subsequently filed lawsuits) into one case known as In re Gemstar-TV Guide International Securities Litigation, Master File No. 02-2775, NM (PLAx) (C.D. Cal.) Several groups of plaintiffs and their counsel filed motions to be appointed lead plaintiff and lead plaintiff’s counsel. Pursuant to an amended order dated August 9, 2002, the Court appointed the Teachers Retirement System of Louisiana and the General Retirement System of the City of Detroit as co-lead plaintiffs, and appointed Bernstein, Litowitz, Berger & Grossman, L.L.P., as lead plaintiffs’ counsel. Plaintiff Georgica Advisors has requested that the court reconsider that decision and appoint it as lead plaintiff. The motion is scheduled to be heard on November 18, 2002. Lead plaintiffs are expected to file their consolidated complaint on or before December 12, 2002 Defendants’ response to the consolidated complaint is expected to be due on or before February 14, 2003. In addition, an Oklahoma limited partnership filed a lawsuit in the United States District Court for the Northern District of Oklahoma on October 7, 2002 against some of the same defendants, including the Company, based on the same core allegations and purported causes of action alleged in the consolidated class action. Also, the Company learned on or about November 1, 2002 that, based on these same core allegations, a separate lawsuit was filed in the federal district court for the Central District of California against the Company and some of the same defendants. The lawsuit alleges state law based derivative claims, including those based on various breaches of fiduciary duty. The Company intends to defend these actions vigorously.

In April and May 2002, the Company, along with several of its principal executive officers and directors, were also sued in four purported shareholder derivative actions. Three of these actions were filed in the Superior Court of the State of California for the County of Los Angeles and one action was filed in the Court of Chancery of the State of Delaware, County of New Castle. These purported derivative lawsuits allege various breaches of fiduciary duty and violations of the California Corporations Code based upon the same general set of alleged facts and circumstances as the federal shareholder suits. Pursuant to the parties’ stipulation, the California actions have been consolidated into one case before a single judge. Plaintiffs are required to file their consolidated amended complaint by late December 2002. On October 31, 2002, the Company was served with another purported shareholder derivative action, this one in the United States District Court for the Central District of California, based upon the same general set of alleged facts and circumstances. The Company intends to defend the actions vigorously.

On August 22, 2002, Scientific-Atlanta filed an adversary complaint in the United States Bankruptcy Court for the Northern District of California. The Complaint alleged that by seeking to acquire certain assets (including certain patents) owned by DIVA Systems Corporation (“DIVA”), the Company would be in violation of a federal

29

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

antitrust statute, Clayton Act §7, 15 U.S.C. § 18. DIVA currently is a debtor-in-possession pursuant to Chapter 11 of the bankruptcy code. Also on August 22, 2002, Scientific-Atlanta filed a tag along notice with the MDL Panel, seeking to have its complaint concerning the acquisition of DIVA assets transferred to the U.S. District Court for the Northern District of Georgia, the court overseeing the cases subject to the MDL Transfer Order described above. On October 2, 2002, the Bankruptcy Court dismissed Scientific-Atlanta’s adversary complaint. Shortly thereafter, Scientific-Atlanta notified the MDL Panel that the Bankruptcy Court had dismissed its adversary complaint.

On September 6, 2002, TV Guide Distribution, Inc. (“TVGD”), together with six other plaintiffs comprising national distributors of magazines, filed an action entitled TV Guide Distribution, Inc. et al. v. Ronald E. Scherer et al., in the Court of Common Pleas, Franklin County, Ohio (Case No. 02CVH09 9891). The complaint named more than thirty defendants, made up of principals and shareholders of United Magazine Company, Inc. (“Unimag”) and their affiliates, regional wholesalers of magazines that went out of business in September 1999, leaving more than $100 million of outstanding receivables due and owing to the national distributor plaintiffs. The complaint alleges that defendants engaged in a course of conduct that violated Ohio statutes prohibiting fraudulent conveyances and other unlawful payments designed to hinder, delay or defraud TVGD and the other plaintiffs, Unimag’s creditors. An initial status conference was scheduled for November 21, 2002. See the Company’s Form 10-Q for the quarter ended March 31, 2002, as amended, for a discussion of other ongoing litigation involving Unimag and TVGD.

On September 25, 2002, the Company notified DIVA that it had elected not to proceed with the purchase of DIVA’s assets. In response, on September 30, 2002, DIVA filed an adversary complaint against the Company for breach of contract and other claims purportedly based upon the Company’s decision not to acquire DIVA’s assets. After DIVA filed its complaint, at DIVA’s request, the Bankruptcy Court ordered an expedited trial on DIVA’s claims against the Company for breach of contract and specific performance. Trial of these claims was scheduled to begin in late October 2002. However, on October 17, 2002, DIVA withdrew its request for an expedited trial, and agreed to dismiss its specific performance claim. On October 17, 2002, the Company responded to certain of DIVA’s claims denying liability to DIVA, including any liability purportedly based upon the Company’s decision to terminate the asset purchase agreement. At the same time, the Company filed counterclaims against DIVA and Scientific-Atlanta for declaratory relief relating to the Company’s decision not to purchase DIVA’s assets. Now that the Bankruptcy Court has vacated the expedited trial date, the parties are in pretrial proceedings. On November 1, 2002, DIVA filed a First Amended Complaint against the Company and certain of its senior executives. This First Amended Complaint adds additional claims purportedly based upon the DIVA purchase agreement, as well as the Company’s decision not to acquire DIVA’s assets.

On November 6, 2002, Scientific-Atlanta and PowerTV, Inc. (“S-A”) filed a counterclaim against the Company and certain of its subsidiaries in a case captioned Personalized Media Communications, L.L.C. v. Scientific-Atlanta, Inc., and PowerTV, Inc., United States District Court for the Northern District of Georgia, Atlanta Division, Civil Action No. 02-CV-824 (CAP). At that time, S-A asserted declaratory relief claims against the Gemstar parties seeking a declaration of noninfringement, invalidity and unenforceability of certain patents as to which the Company is a licensee. On November 6, 2002, S-A also filed a motion with the MDL Panel to transfer this action to Delaware for consolidation of pretrial proceedings with the Pegasus Development Corporation, et al. v. DirecTV, Inc., et al. matter discussed above.

On November 7, 2002, the Company received a letter from the United States Department of Justice (“DOJ”). The DOJ has indicated they believe that Gemstar International Group Limited and TV Guide, Inc. may have engaged in unlawful coordination of activities prior to their merger on July 12, 2000. The Company has reason to believe that the DOJ may initiate an action against the Company under federal antitrust laws in the near future. The DOJ has also indicated that it would be willing to enter into negotiated agreement with the Company

30

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

and has provided the Company with a possible settlement structure, including the imposition of a fine and certain other conditions and restrictions.

(10)  Related Party Transactions and Other Significant Relationships

In connection with the acquisition of TV Guide in 2000, News Corporation became a stockholder of the Company. As of September 30, 2002, News Corporation directly and indirectly owns approximately 43% of the Company’s outstanding common stock and has the right to designate six directors on the Company’s board. The Company earned advertising revenues of $3.2 million and $2.4 million for the three months ended September 30, 2002 and 2001, respectively, and $11.7 million and $15.2 million for the nine months ended September 30, 2002 and 2001, respectively, from entities controlled by News Corporation. In addition, the Company acquired programming from News Corporation controlled entities of $837,000 and $3.1 million for the three months ended September 30, 2002 and 2001, respectively, and $3.6 million and $8.6 million for the nine months ended September 30, 2002 and 2001, respectively. Prior to its acquisition of TV Guide, the Company did not have any significant transactions with News Corporation. As of September 30, 2002 and December 31, 2001, the Company had receivables due from News Corporation controlled entities totaling $3.7 million and $4.6 million, respectively, and payables due to News Corporation controlled entities totaling $262,000 and $302,000, respectively. The Company reimburses News Corporation for facilities and other general and administrative costs incurred on the Company’s behalf. Expenses associated with these costs approximated $1.1 million and $1.3 million for the three months ended September 30, 2002 and 2001, respectively, and $3.1 million and $2.5 million for the nine months ended September 30, 2002 and 2001, respectively. Expenses for the nine months ended September 30, 2001 included a rent and facilities credit of $345,000 from News Corporation. In addition, the Company purchases paper through a paper procurement arrangement with News Corporation at negotiated prices with paper suppliers based on the combined paper requirements of the two organizations.

Liberty Media Corporation (“Liberty Media”), formerly an indirect wholly owned subsidiary of AT&T Corp., directly or indirectly owned approximately 21% of the issued and outstanding common stock of the Company from the date of the acquisition of TV Guide in 2000 until May 2, 2001, the date Liberty Media sold its interest in the Company to News Corporation. For the period January 1, 2001 to May 2, 2001, the date Liberty Media ceased to be considered a related party of the Company, the Company purchased programming from Liberty Media controlled affiliates of $4.5 million. During the same period, the Company also sold video, program promotion and guide services of $6.7 million to AT&T Broadband and Internet Services (“BIS”) and its consolidated affiliates. In addition, during the same period, the Company purchased production services and was provided satellite transponder facilities and uplink services from BIS consolidated affiliates of $2.4 million. BIS is also wholly owned by AT&T Corp. Prior to its acquisition of TV Guide, the Company did not have any significant transactions with Liberty Media or BIS.

The Company has included in the amounts discussed above transactions with News Corporation, BIS, and Liberty Media and all known entities in which BIS, Liberty Media and News Corporation have an interest greater than 50%. In addition, the Company has transactions with entities in which BIS, Liberty Media and News Corporation own, directly or indirectly, 50% or less.

(11)  Segment Information (Restated)

The Company organizes its businesses into three groups which also represent its reportable business segments: the Technology and Licensing Sector, which is responsible for the development, licensing and protection of intellectual property and proprietary technologies (the Company’s technologies include the video recording technology currently marketed under the VCR Plus+ system brand, interactive program guides marketed under the GUIDE Plus+ and TV Guide Interactive, and the electronic book technology currently

31

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

marketed under the Gemstar eBook and other brands); the Interactive Platform Sector, which is responsible for advertising brand and e-commerce on the Company’s proprietary interactive platforms; and the Media and Services Sector, which operates TV Guide Magazine, TV Guide Channel, TVG Network, SkyMall catalog sales, Superstar/Netlink Group, UVTV, SpaceCom and other non-interactive platforms and media properties.

The Company’s reportable segments are strategic business units that offer different products and services and compete in different industries. The Company’s chief operating decision maker uses EBITDA (operating income before stock compensation expense, depreciation and amortization, write-down and impairment charges) to evaluate the performance of the three segments. Assets of the reportable segments are not relevant for management of the businesses.

Segment information for the three and nine months ended September 30, 2002 and 2001 is as follows (in thousands):

	Restated Three Months Ended September 30,						Restated Nine Months Ended September 30,
	2002			2001			2002			2001
Technology and Licensing Sector
Revenues(4)	$	33,263		$	41,918		$	119,190		$	124,652
Operating expenses(1)(3)(4)		24,559			29,113			68,235			88,266
EBITDA(2)	$	8,704		$	12,805		$	50,955		$	36,386
Interactive Platform Sector
Revenues	$	11,554		$	7,157		$	31,664		$	19,634
Operating expenses(1)(3)		15,901			22,898			49,058			56,374
EBITDA(2)	$	(4,347	)	$	(15,741	)	$	(17,394	)	$	(36,740	)
Media and Services Sector
Revenues(3)	$	192,073		$	225,390		$	605,810		$	716,040
Operating expenses(1)(3)		154,334			168,984			485,932			526,801
EBITDA(2)	$	37,738		$	56,406		$	119,878		$	189,239
Consolidated
Revenues(3)(4)	$	236,890		$	274,465		$	756,664		$	860,326
Operating expenses(1)(3)(4)		194,794			220,995			603,225			671,441
EBITDA(2)	$	42,095		$	53,470		$	153,439		$	188,885

(1) Operating expenses means operating expenses excluding provision for bad debts, stock compensation expense, depreciation and amortization, write-down and impairment charges.

(2) EBITDA means operating (loss) income before stock compensation, depreciation and amortization, write-down and impairment charges. Commencing January 1, 2002, goodwill and certain other intangible assets are no longer subject to amortization. However, other intangible assets acquired in transactions accounted for as purchases are still amortized and such amortization is significant. Accordingly, the Company’s business sectors are measured based on EBITDA. EBITDA is presented supplementally as the Company believes it is a standard measure commonly reported and widely used by analysts, investors and others associated with its industry. However, EBITDA does not take into account substantial costs of doing business, such as income taxes, interest expense and depreciation and amortization. While many in the financial community consider EBITDA to be an important measure of comparative operating performance, it should be considered in addition to, but not as a substitute for, operating income, net income, cash flow

32

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

provided by operating activities and other measures of financial performance prepared in accordance with accounting principles generally accepted in the United States that are presented in the Unaudited Condensed Consolidated Financial Statements included in this report. Additionally, the Company’s calculation of EBITDA may be different than the calculation used by other companies and, therefore, comparability may be affected.

(3) Commencing January 1, 2002, the operating costs of the media sales group have been allocated to the various business units based on advertising revenue dollars earned. Prior period results, which included media sales group commissions reported as revenues by the Media and Services Sector have been reclassified to reflect such commission revenues as a reduction of expenses in the Media and Services Sector. Effective January 1, 2002, the Company revised its method of allocating corporate expenses to the business sectors concurrent with a reorganization of certain corporate functions.

(4) The Company’s financial statements are presented in accordance with the guidance provided by EITF No. 01-09. Where applicable, amounts presented in the prior period have been reclassified to conform with the income statement classifications for the current period. Such reclassifications resulted in decreases in both revenues and expenses for the three and nine-month periods ended September 30, 2001 of $3.0 million and $10.7 million, respectively, for the Technology and Licensing Sector.

(12)  Income Taxes (Restated)

The income tax benefit for the three and nine months ended September 30, 2002 was $41.7 million and $550.1 million, respectively, which reflects an effective tax rate of 110% and 37% for each of the respective periods. The income tax benefit for the three and nine months ended September 30, 2001 (restated) was $23.2 million and $110.3 million, respectively, which reflects an effective tax rate of 11% and 17% for each of the respective periods. The net increase in the effective tax rate is primarily due to the change in the treatment of amortization of goodwill in accordance with Statement 142, which has no associated impact on the provision for income taxes. In addition, the overall effective tax rate reported by the Company in any single period is impacted by, among other things, the country in which earnings or losses arise, applicable statutory tax rates and withholding tax requirements for particular countries, the availability of net operating loss carry forwards and the availability of tax credits for taxes paid in certain jurisdictions. Because of these factors, it is expected that the Company’s future tax expense as a percentage of income before income taxes may vary from period to period.

(13)  Stock Repurchase Program

In April 2002, the Company’s Board of Directors authorized an extension of its authorization granted in September 2001 to repurchase up to $300.0 million of the Company’s outstanding shares of common stock. The authorization permitted the Company to purchase shares in the open market at prevailing prices, or in privately negotiated transactions at then prevailing prices, provided that the Company complied with SEC regulations regarding such purchases. The extension expired on September 18, 2002. During the period subsequent to the date the extension was granted through September 30, 2002, the Company repurchased 6.9 million shares of the Company’s common stock for an aggregate price of $63.4 million. Since September 2001, the Company has repurchased a total of 7.2 million shares for an aggregate price of $69.8 million.

33

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(14)  Events Subsequent to Balance Sheet Date

Management Restructuring

On November 7, 2002, the Company entered into various management restructuring agreements with Dr. Yuen and Ms Leung (the “Former Executives”). Dr. Yuen resigned from his duties as President and Chief Executive Officer, and Ms. Leung, as Co-President, Co-Chief Operating Officer and Chief Financial Officer, and both became non-executive officers of a new wholly owned international-focused business unit. The Former Executives terminated their existing employment agreements and replaced them with new five- and three-year employment agreements, respectively, which provide for annual salaries totaling $2.5 million and certain other benefits. Under Dr. Yuen’s new employment agreement, Dr. Yuen assigned to the company all intellectual property related to the business of the Company that he previously developed. Dr. Yuen has a contractual right to serve as a non-executive chairman of the Board of Directors during the term of his employment agreement and Ms. Leung will continue as a non-executive member of the Board of Directors and has agreed to resign effective as of the end of her current term. In addition, Dr. Yuen entered into a Patent Rights Agreement granting the Company the option to acquire certain inventions of Dr. Yuen and requiring certain payments by the Company and other obligations more fully described below.

In connection with the above agreements, the Former Executives:

• cancelled 20.2 million stock options, which represents all options granted after March 1998. In accordance with their 1998 employment agreements, their remaining 33.2 million options vested in full and became exercisable for their full remaining term. In 1998 a new measurement date occurred and no additional compensation expense was required for the vesting modification, however the extension modification resulted in a potential compensation charge of up to $34 million. Compensation expense is recognized only to the extent the individuals actually benefit from this modification and that amount would be charged as compensation expense over the remaining vesting period. As of December 31, 2002, the Company does not believe it is probable that the Former Executives will benefit from this modification and therefore have not recognized any compensation expense. The Company will continue to evaluate whether the Former Executives will benefit from this modification, which would occur should the Former Executives cease to be employees prior to the expiration of the 33.2 million options;

• will be issued 7.9 million shares of restricted stock upon amendment to the Stock Incentive Plan (“SIP”), which requires shareholder approval to allow for issuance of restricted stock. If the approval is not obtained, the Company will issue stock units with similar terms and rights. Each share or unit will cliff-vest one-third annually beginning on November 7, 2003. The aggregate market value of the restricted stock was $31.2 million and consistent with the Company’s past policy is recorded as unearned compensation and charged to expense using the accelerated method over the vesting period. Stock compensation expense related to this award of $2.9 million was recognized during the year ended December 31, 2002;

• may be reimbursed for potential tax consequences, as defined in an umbrella agreement, related to the delayed issuance of the restricted stock until shareholder approval is obtained. At December 31, 2002, this contingency is limited to $1.3 million and as the liability is not probable, no amount is accrued for this contingent liability as of this date;

• will be granted an aggregate of 8.7 million options on certain dates after May 7, 2003 at the market price on the date of grant. Once granted, the options will vest one-third on the date of grant, one-third on the first anniversary and one-third on the second anniversary, except for 0.2 million options which vest on the grant date and except for 333,333 options for Ms. Leung which will be granted on November 7, 2004 and will vest one-third on the date of grant and two-thirds on the first anniversary of such grant; and

34

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

• will be paid an aggregate termination fee of $29.4 million and accrued and unpaid salary, bonus and vacation totaling $8.2 million, of which $0.5 million was paid out through December 31, 2002 in accordance with the agreement. The Company has deposited $37.1 million into a segregated interest bearing account (identified as Restricted Cash on the consolidated balance sheet as of December 31, 2002) equal to the sum of the termination fee, unpaid salaries, bonuses and vacation. These funds will remain the property of the Company until the earlier of May 6, 2003 or an agreement between the SEC and the Former Executives.

The vesting of the restricted stock and options is contingent on continued employment under the new employment agreement and no material breach of intellectual property provisions in the termination and new employment agreements. In addition, all options will be granted and will fully vest in the event of disability, death, termination without cause or constructive termination and change of control, as defined in the agreement.

Pursuant to the Patent Rights Agreement, the Company has the option to acquire certain of Dr. Yuen’s inventions during the period commencing upon the expiration (November 7, 2007) or earlier termination of his employment agreement and ending on November 7, 2009. The Company agreed to grant the Dr. Yuen a license to use any acquired inventions outside of certain specified fields of use and Dr. Yuen agreed not compete with the Company within the fields of interactive program guides and interactive televisions. In addition to a standard purchase amount for each invention acquired by the Company, the Dr. Yuen will receive (i) annual compensation of $0.2 million, (ii) an acquisition fee of $0.3 million for each acquired invention, (iii) a 2% royalty on net sales generated during the term of the patent rights agreement from the sale of specified products and services with a guaranteed minimum of $1.3 million and a maximum of $2.8 million annually and (iv) 200,000 stock options per year at the market price on the date of grant during the term of this agreement.

Securities and Exchange Commission Investigation

On October 17, 2002, the United States Securities and Exchange Commission (“SEC”) issued a formal order of investigation to determine whether there have been violations of the federal securities laws by the Company and/or others involved with the Company. As previously disclosed, the Audit Committee of the Board of Directors conducted an internal review of the Company’s revenue recognition practices relating to certain transactions. The Company previously disclosed that it has been in discussions with the SEC regarding this internal review and the Company’s and the Audit Committee’s ongoing review of its accounting policies and the application of those policies to various transactions. The Company intends to continue to fully cooperate with the SEC as it moves forward in its investigation.

Nasdaq Delisting Proceeding

On August 19, 2002, the Company received a Nasdaq Staff Determination that its securities are subject to delisting from the Nasdaq Stock Market because the Company failed to file its Form 10-Q for the quarter ended June 30, 2002, on or before August 14, 2002. On November 8, 2002, the Nasdaq Listing Qualifications Panel granted the Company’s request for an exception to continue its listing on the Nasdaq Stock Market, subject to certain conditions. The Company has satisfied these conditions. However, in order to fully comply with the terms of the exception, the Company must be able to demonstrate compliance with all requirements for continued listing on the Nasdaq Stock Market.

35

GEMSTAR-TV GUIDE INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Department of Justice Settlement

On February 6, 2003, the United States Department of Justice (“DOJ”) filed a complaint against the Company relating to the DOJ’s belief that the Company engaged in unlawful coordination of activities prior to the merger between the Company’s predecessor, Gemstar International Group Limited, and TV Guide on July 12, 2000. Simultaneously, the Company and the DOJ entered into a settlement with regard to this matter. This settlement included a stipulated final judgment, but did not include an admission of wrongdoing by the Company. Also as part of the settlement, the Company has agreed to pay the government a civil penalty in the amount of $5.7 million. The Company has also agreed to implement an antitrust compliance program and to refrain from prohibited pre-merger conduct in the future. In addition, the Company has agreed to offer eight small service providers that entered into interactive program guide agreements with TV Guide between June 10, 1999 and July 12, 2000 the option to terminate those agreements without penalty. The settlement is expected to become final after a 60-day public comment period.

Litigation

The Company is a party to certain proceedings consolidated in the United States District Court for the Northern District of Georgia by the Judicial Panel on Multi-District Litigation (the “MDL Cases”) against Scientific-Atlanta Inc. (“SA”), among other parties. These proceedings involve several of the Company’s patents, including three patents which were also involved in a case in the SuperGuide Case. The Company is a third-party defendant in the SuperGuide Case and has joined in SuperGuide’s infringement allegations against EchoStar. In two Orders dated July 2, 2002 and July 25, 2002, the North Carolina Court ruled that the products of the defendants in the SuperGuide case, including EchoStar’s, did not infringe the patents at issue. This ruling was based in part on a previous ruling of that Court interpreting the scope of the patents at issue. The Company then filed a notice of appeal to the Federal Circuit. Briefing of the appeal to the Federal Circuit has recently concluded. The Company expects that the next step in the proceeding will be oral argument before the Federal Circuit.

On October 25, 2002, the Georgia Court hearing the MDL Cases ruled that it was obligated to accept the North Carolina Court’s previous ruling interpreting the scope of the patents at issue without deciding whether the underlying ruling was correct as a matter of law. The Georgia Court has not ruled on SA’s infringement of these three patents under this interpretation.

On February 28, 2003, the Company received a letter from a senior executive of one of its subsidiaries asserting a variety of claims relating generally to the executive’s acquisition of the Company’s stock in connection with the Company’s acquisition of that subsidiary. The Company is not aware of any legal proceeding that has been filed against the Company by this executive. If any such proceedings are filed, the Company intends to defend them vigorously.

In addition to the items listed above, the Company is a party to various legal actions, claims and proceedings incidental to its business.

DIVA Transaction

On May 22, 2002, the Company entered into an Asset Purchase Agreement with DIVA Systems Corporation (“DIVA”), a provider of server-based technology and software systems for cable television, to acquire substantially all of its assets for approximately $4.0 million as part of a bankruptcy proceeding. The transaction was not completed. The Company is currently engaged in litigation over the Asset Purchase Agreement related to the DIVA transaction.

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ITEM  2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

The Company completed several transactions during 2001 that affect the comparability of the results of operations.

• In April 2001, the Company sold the business that distributes the WGN superstation signal. Accordingly, the Unaudited Condensed Consolidated Financial Statements do not include the results of operations of WGN subsequent to that date.

• In July 2001, the Company acquired 100% of the outstanding common stock of SkyMall. The acquisition was accounted for as a purchase. Accordingly, the Unaudited Condensed Consolidated Financial Statements include the results of operations of SkyMall from July 2001.

The following table sets forth certain unaudited financial information for the Company for the three and nine months ended September 30, 2002 and 2001 (in thousands).

	Restated Three Months Ended September 30,						Restated Nine Months Ended September 30,
	2002			2001(1)(3)			2002			2001(1)(3)
Statement of Operations Data:
Revenues	$	236,890		$	274,465		$	756,664		$	860,326
Operating expenses:
Operating expenses, excluding stock compensation, depreciation and amortization, write-down and impairment charges		194,794			220,995			603,225			671,441
Stock compensation		1,318			6,833			19,812			25,200
Depreciation and amortization		72,865			233,430			288,064			704,332
Impairment of intangible assets(4)		—			—			1,305,339
		268,977			461,258			2,216,440			1,400,973
Operating loss		(32,087	)		(186,793	)		(1,459,776	)		(540,647	)
Interest expense		(1,282	)		(4,918	)		(4,688	)		(24,020	)
Other expense, net		(4,436	)		(13,013	)		(15,386	)		(82,229	)
Loss before income taxes, extraordinary loss on debt extinguishment and cumulative effect of an accounting change		(37,805	)		(204,724	)		(1,479,850	)		(646,896	)
Income tax benefit		(41,682	)		(23,213	)		(550,106	)		(110,254	)
Loss before extraordinary loss on debt extinguishment and cumulative effect of an accounting change		3,877			(181,511	)		(929,744	)		(536,642	)
Extraordinary loss on debt extinguishment, net of tax		—			—			—			(2,100	)
Cumulative effect of an accounting change, net of tax		—			—			(4,188,037	)		—
Net loss	$	3,877		$	(181,511	)	$	(5,117,781	)	$	(538,742	)
Other Financial Data:
Net cash provided by (used in):
Operating activities	$	(9,518	)	$	16,808		$	127,528		$	122,877
Investing activities		(1,757	)		(38,307	)		15,261			59,879
Financing activities		(34,994	)		(22,083	)		(137,725	)		(279,528	)
EBITDA(2)		42,096			53,470			153,439			188,885

37

(1) Effective July 18, 2001, the Company’s consolidated operating results include the operating results of SkyMall. SkyMall was acquired in a transaction accounted for as a purchase. Effective April 2001, the consolidated operating results exclude the operating results of the business that distributes the WGN superstation signal, which was sold.

(2) EBITDA means operating (loss) income before stock compensation, depreciation and amortization, write-down and impairment charges. Commencing January 1, 2002, goodwill and certain other intangible assets are no longer subject to amortization. However, other intangible assets acquired in transactions accounted for as purchases are still amortized and such amortization is significant. Accordingly, the Company’s business sectors are measured based on EBITDA. EBITDA is presented supplementally as the Company believes it is a standard measure commonly reported and widely used by analysts, investors and others associated with its industry. However, EBITDA does not take into account substantial costs of doing business, such as income taxes, interest expense and depreciation and amortization. While many in the financial community consider EBITDA to be an important measure of comparative operating performance, it should be considered in addition to, but not as a substitute for, operating income, net income, cash flow provided by operating activities and other measures of financial performance prepared in accordance with accounting principles generally accepted in the United States that are presented in the Unaudited Condensed Consolidated Financial Statements included in this report. Additionally, the Company’s calculation of EBITDA may be different than the calculation used by other companies and, therefore, comparability may be affected.

(3) The Company’s financial statements are presented in accordance with the guidance provided by EITF No. 01-09. Where applicable, amounts presented in the prior period have been reclassified to conform with the income statement classifications for the current period. Such reclassifications resulted in decreases in both revenues and expenses for the three and nine-month periods ended September 30, 2001 of $3.0 million and $10.7 million, respectively, for the Technology Licensing Sector.

(4) Impairment of intangible assets represents a write-down of the carrying value of goodwill, finite-lived intangible assets and trademarks.

Overview of Significant Events

The Company’s normal and customary business practice is to assess whether certain events necessitate a change in assumptions and estimates as they relate to its established accounting policies on revenue recognition, allowances, and the carrying value of intangible assets. The Company has assessed the impact of certain significant events that occurred during the nine months ended September 30, 2002 to determine their effect on the Company’s financial results.

On June 21, 2002, an Administrative Law Judge issued an ID in a United States International Trade Commission (“ITC”) proceeding denying the Company’s request for an exclusionary order to prevent further importation of certain set-top boxes containing IPGs which the Company believes infringe some of its patents. The ITC determined not to review this decision on August 29, 2002. On July 2, 2002, the United States District Court for the Western District of North Carolina in SuperGuide case ruled that certain of the defendants’ products did not infringe the SuperGuide Patents, and on July 25, 2002, the court dismissed all remaining claims in the case. The Company was a third party defendant in this matter and had joined in SuperGuide’s infringement allegations against EchoStar. The Company has now appealed the ITC and SuperGuide rulings. (See Note 9, “Legal Proceedings,” to the Unaudited Condensed Consolidated Financial Statements.)

Under the requirements of Statement 142, goodwill and indefinite-lived intangible assets must be tested on an interim basis if events or circumstances indicate that the estimated fair value of the assets has decreased below their carrying value. Also, under the requirements of Statement 144, the Company is required to record impairment losses on long-lived assets used in operations when events and circumstances indicate that long-lived assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. In view of the above-mentioned adverse ruling in the ITC proceeding and

38

the additional fact that the Company has experienced a sustained decline in its market capitalization (expressed as its share price multiplied by the number of shares outstanding) during 2002 from $11.5 billion at January 1, 2002 to $2.2 billion at June 30, 2002, the Company performed an interim impairment analysis of its goodwill, indefinite-lived intangible assets and certain finite-lived intangible assets as of June 30, 2002, with the assistance of a third-party valuation expert, with the following results:

• Based on an interim impairment analysis under Statement 142, the Company recorded pre-tax impairment charges to its goodwill and trademark of $206.8 million and $27.0 million, respectively, during the quarter ended June 30, 2002. These charges were recorded as operating expenses in the accompanying Unaudited Condensed Consolidated Statements of Operations.

• Based on an impairment analysis under Statement 144, the Company recognized a pre-tax impairment loss of $1,060.4 million during the quarter ended June 30, 2002, after it was determined that the carrying value of certain finite-lived intangible assets exceeded their fair value.

Transitional Intangible Asset Impairment

The Company completed its transitional indefinite-lived intangible asset and goodwill impairment tests during the three-month periods ended March 31, 2002 and June 30, 2002, respectively. The Company recorded an impairment charge of $223.2 million, net of tax, to its indefinite-lived intangible assets and $3,964.8 million to goodwill, resulting in a total transitional impairment charge of $4,188.0 million, net of tax. The charge has been recorded as the cumulative effect of an accounting change as of January 1, 2002 in the accompanying unaudited condensed consolidated statements of operations.

Consolidated Results of Operations

Revenues for the three months ended September 30, 2002 were $236.9 million, a decrease of $37.6 million, or 14%, compared to the same period in 2001. The decrease for the three months ended September 30, 2002 was attributable to a $11.1 million decrease in TV Guide Magazine’s newsstand and subscription revenues, a $3.3 million decrease in advertising revenues, primarily at TV Guide Magazine, a $13.6 million decrease in SNG C-band revenues due to continued declines in subscribers, and a decrease of $8.6 million in licensing revenues as a result of declining set-top box shipments from Thompson and the expiration of our contract with Hughes.

For the nine months ended September 30, 2002, revenues were $756.7 million, a decrease of $103.7 million, or 12%, compared to the same period in 2001. The decrease for the nine months was attributable to a $38.9 million decrease in TV Guide Magazine’s newstand and subscription revenues, a $21.7 million decline in advertising revenues and a $44.0 million decrease in SNG C-band subscriber revenues.

The Company’s total advertising revenues for the three months ended September 30, 2002 were $49.8 million, a decrease of $3.3 million, or 6%, compared to the same period in 2001. For the nine months ended September 30, 2002, advertising revenues were $156.9 million, a decrease of $21.7 million, or 12%, compared to the same period in 2001. The general weakness in the advertising market, combined with declining circulation at TV Guide Magazine, continue to impact the Company’s advertising revenues.

Operating expenses, excluding stock compensation, depreciation and amortization, write-down and impairment charges, were $194.8 million for the quarter ended September 30, 2002, a decrease of $26.2 million, or 12%, when compared to the same period in the prior year. For the nine months ended September 30, 2002, operating expenses were $603.2 million, a decrease of $68.2 million, or 10%, compared to the same period in the prior year. The decrease in operating expenses for both periods was a result of the general cost controls in effect throughout the Company. The decreases were also attributable to reductions in TV Guide Magazine production expenses for paper, printing, and postage and reduced programming costs for SNG. The decrease for the nine-month period was partially offset by additional expenses attributable to SkyMall.

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Stock compensation expense reflects amortization of the portion of the purchase price of acquired businesses assigned to unearned compensation for unvested stock options assumed by the Company. The unearned compensation is being amortized over the remaining vesting period of the options. Stock compensation expense for the quarter ended September 30, 2002 was $1.3 million, a decrease of $5.5 million primarily due to the separation of four senior officers and two executive officers from the Company in the first six months of 2002. For the nine months ended September 30, 2002, stock compensation expense was $19.8 million which, also included $12.9 million of accelerated unearned compensation amortization resulting from an executive officer who separated from the Company during the period.

Depreciation and amortization during the quarter ended September 30, 2002 was $72.9 million, a decrease of $160.6 million compared to the same period in 2001. For the nine months ended September 30, 2002, depreciation and amortization was $288.1 million, a decrease of $416.3 million compared to the same period in the prior year. The decrease in depreciation and amortization for the three and nine-month periods was primarily a result of the adoption of the provisions of Statement 142, which became effective January 1, 2002. Statement 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead be tested for impairment at least annually in accordance with the provisions of Statement 142. (See Notes 3 and 4 “Accounting Change-Goodwill and Intangible Assets” and “Impairment Charge” to the Unaudited Condensed Consolidated Financial Statements.) Other intangible assets acquired in transactions accounted for as purchases are still amortized and such amortization is significant.

Impairment of intangible assets represents a write-down of the carrying amount of finite-lived intangible assets ($1.1 billion), goodwill ($4.0 billion) and trademark ($0.3 billion) to their fair values based on analyses performed as of June 30, 2002.

Interest expense was $1.3 million for the three months ended September 30, 2002 and $4.9 million for the nine months ended September 30, 2002, compared to $4.7 million and $24.0 million, respectively, for the same periods in the prior year. The decreases in interest expense during the three and nine-month periods were attributable to lower debt levels coupled with lower interest rates.

Other expense, net decreased to $4.4 million for the three months ended September 30, 2002 from $13.0 million for the same period in 2001. For the nine months ended September 30, 2002, other expense, net was $15.4 million as compared to $82.2 million for the prior year period. The decrease in other expense, net for the three-month period was primarily attributable to a $6.8 million write-down of certain investments during the quarter ended September 30, 2001 as compared with a $2.0 million write-off of an asset in the same period of 2002. Additionally, the Company earned $2.9 million less interest income on cash balances during the 2002 quarterly period primarily due to lower interest rates. The decrease in other expense, net for the nine-month period was primarily due to a $12.6 million decrease in interest income coupled with a write-down of certain marketable securities held by one of the Company’s equity-method investees. The decline in the fair value of such securities was determined to be other than temporary.

The provision for income tax benefit as a percentage of loss before income taxes, extraordinary loss on debt extinguishment and cumulative effect of an accounting change for the three and nine months ended September 30, 2002 was 110% and 11%, respectively, compared to 37% for the three months ended September 30, 2002 and 17% for the nine months ended December 31, 2002. The income tax benefit for the three and nine months ended September 30, 2002 was $41.7 million and $550.1 million, respectively. The income tax benefit for the three and nine months ended September 30, 2001 was $23.2 million and $110.3 million, respectively. The net increase in the effective tax rate is primarily due to the change in the treatment of amortization of goodwill in accordance with Statement 142, which has no associated impact on the provision for income taxes. In addition, the overall effective tax rate reported by the Company in any single period is impacted by, among other things, the country in which earnings or losses arise, applicable statutory tax rates and withholding tax requirements for particular countries, the availability of net operating loss carry forwards and the availability of tax credits for taxes paid in certain jurisdictions. Because of these factors, it is expected that the Company’s future tax expense as a percentage of income before income taxes may vary from period to period.

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The cumulative effect of an accounting change relates to the Company’s adoption of Statement 142 effective January 1, 2002. The Company is required to test goodwill and any intangible assets identified as having an indefinite useful life for impairment in accordance with the provisions of Statement 142 and report any transitional impairment loss as the cumulative effect of a change in accounting principle as of January 1, 2002 in the unaudited condensed consolidated statement of operations. The transitional impairment loss for goodwill and indefinite-lived intangible assets from application of these new rules was $4,188.0 million, net of tax.

Sector Results of Operations

The Company categorizes its businesses into three principal business sectors: the Technology and Licensing Sector, which is responsible for the development, licensing and protection of intellectual property and proprietary technologies (the Company’s technology includes the VCR Plus+ System, the IPG’s marketed under brands such as Guide Plus+ and TV Guide Interactive brands); the Interactive Platform Sector, which derives recurring income from advertising, interactive services and e-commerce on the Company’s proprietary interactive platforms; and the Media and Services Sector, which operates TV Guide Magazine, TV Guide Channel, TVG, SkyMall catalog sales, SNG and other non-interactive platforms and media properties. The Company’s business sectors represent strategic business units that offer different products and services and compete in different industries.

The following table sets forth certain financial information for the Company’s business sectors for the three and nine-month periods ended September 30, 2002 and 2001 (in thousands). The Company’s business sectors are measured based on EBITDA (operating income before stock compensation expense, depreciation and amortization, write-down and impairment charges).

	Restated Three Months Ended September 30,						Restated Nine Months Ended September 30,
	2002			2001			2002			2001
Technology and Licensing Sector
Revenues(4)	$	33,263		$	41,918		$	119,190		$	124,652
Operating expenses(1)(3)(4)		24,559			29,113			68,235			88,266
EBITDA(2)	$	8,704		$	12,805		$	50,955		$	36,386
Interactive Platform Sector
Revenues	$	11,554		$	7,157		$	31,664		$	19,634
Operating expenses(1)(3)		15,901			22,898			49,058			56,374
EBITDA(2)	$	(4,347	)	$	(15,741	)	$	(17,394	)	$	(36,740	)
Media and Services Sector
Revenues(3)	$	192,073		$	225,390		$	605,810		$	716,040
Operating expenses(1)(3)		154,334			168,984			485,932			526,801
EBITDA(2)	$	37,738		$	56,406		$	119,878		$	189,239
Consolidated
Revenues(3)(4)	$	236,890		$	274,465		$	756,664		$	860,326
Operating expenses(1)(3)(4)		194,794			220,995			603,225			671,441
EBITDA(2)	$	42,095		$	53,470		$	153,439		$	188,885

(1) Operating expenses means operating expenses excluding provision for bad debts, stock compensation expense, depreciation and amortization, write-down and impairment charges.

(2) EBITDA means operating income (loss) before stock compensation, depreciation and amortization, write-down and impairment charges. Commencing January 1, 2002, goodwill and certain other intangible assets are no longer subject to amortization. However, other intangible assets acquired in transactions accounted

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for as purchases are still amortized and such amortization is significant. Accordingly, the Company’s business sectors are measured based on EBITDA. EBITDA is presented supplementally as the Company believes it is a standard measure commonly reported and widely used by analysts, investors and others associated with its industry. However, EBITDA does not take into account substantial costs of doing business, such as income taxes, interest expense and depreciation and amortization. While many in the financial community consider EBITDA to be an important measure of comparative operating performance, it should be considered in addition to, but not as a substitute for, operating income, net income, cash flow provided by operating activities and other measures of financial performance prepared in accordance with accounting principles generally accepted in the United States that are presented in the Unaudited Condensed Consolidated Financial Statements included in this report. Additionally, the Company’s calculation of EBITDA may be different than the calculation used by other companies and, therefore, comparability may be affected.

(3) Commencing January 1, 2002, the operating costs of the media sales group have been allocated to the various business units based on advertising revenue dollars earned. Prior period results, which included media sales group commissions reported as revenues by the Media and Services Sector have been reclassified to reflect such commission revenues as a reduction of expenses in the Media and Services Sector. Effective January 1, 2002, the Company revised its method of allocating corporate expenses to the business sectors concurrent with a reorganization of certain corporate functions.

(4) The Company’s financial statements are presented in accordance with the guidance provided by EITF No. 01-09. Where applicable, amounts presented in the prior period have been reclassified to conform to the income statement classifications for the current period. Such reclassifications resulted in decreases in both revenues and expenses for the three and nine-month periods ended September 30, 2001 of $3.0 million and $10.7 million, respectively, for the Technology and Licensing Sector.

The following discussion of each of the Company’s segments is based on the unaudited financial information provided above.

Technology and Licensing Sector

The Technology and Licensing Sector is responsible for the development, licensing and protection of intellectual property and proprietary technologies. Revenues in this sector are comprised of license fees paid by third-party licensees for the Company’s proprietary technologies and patents primarily related to video recording and electronic books. The Company’s licensing activities cover multiple industries including consumer electronics, cable, satellite, Internet appliances, personal computers, and publications worldwide. Sector operations include research and development, and the creation, protection and licensing of patents and proprietary technologies.

For the three months ended September 30, 2002, revenues for the Technology and Licensing Sector were $33.3 million, a decrease of $8.6 million, or 21%, when compared to revenues for the same period in 2001. For the nine months ended September 30, 2002, revenues for this sector were $119.2 million, a decrease of $5.4 million, or 4%, when compared to revenues for the same period in 2001.

In October 2000, the Company received $188.0 million in cash from a set-top box manufacturer to settle outstanding arbitration and litigation proceedings. Of the $188.0 million cash received, approximately $117.5 million was in prepayment of a 10-year technology licensing agreement. This prepayment is being amortized straight line into income over the term of the license. Revenues in the Technology and Licensing Sector for the three-month periods ended September 30, 2002 and 2001 include $3.2 million and $3.2 million, respectively, recognized in connection with the agreement, while the corresponding nine-month periods included

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$9.7 million and $9.7 million, respectively. At September 30, 2002, $103.7 million remained to be recognized over the remaining term of the agreement.

Beginning in June 2002, one of the Company’s licensees in the Technology and Licensing Sector stopped making payments required under its license agreement. That licensee, which is in the process of being acquired, has informed the Company that it will make no payments going forward based upon a dispute over certain provisions of the agreement. This dispute does not affect any payments previously received by the Company under the agreement. At the time the payments were terminated, revenues under this agreement were approximately $800,000 per month. The Company has not recognized any revenue under this agreement in the three months ended September 30, 2002. The Company is presently evaluating its options with regard to this dispute and plans to address this matter with the licensee’s acquiring entity upon the completion of the acquisition.

Operating expenses in the sector decreased by $4.6 million, or 16%, for the three months ended September 30, 2002 when compared to the same period in 2001. For the nine months ended September 30, 2002 operating expenses decreased by $20.0 million, or 23% as compared with the same period in the prior year. The decrease for the three-month period was primarily due to general and administrative expenses as well as legal expenses resulting from the Company’s decision to expense all costs associated with the SuperGuide and ITC cases subsequent to June 30, 2002.

Management believes that due to increasing fragmentation in the providers of digital cable applications, our costs of integrating our IPG technology with all of these providers has and will continue to increase. Moreover, because the IPG industry has become increasingly competitive, the Company believes that it will need to continue to invest significantly in its products and services to maintain its competitive position.

Interactive Platform Sector

The Interactive Platform Sector is responsible for and derives recurring revenues from advertising and electronic commerce on our interactive platforms and interactive wagering relating to TVG Network. Interactive Platform Sector activities include the construction and operation of the infrastructure for the delivery of services and advertising to the interactive platforms, media research, and the trafficking, tracking and billing of advertising. The Company’s IPG platform currently is comprised of television sets incorporating the GUIDE Plus+ IPG and digital cable set-top boxes incorporating the TV Guide Interactive IPGs as well as the website www.tvguide.com. The electronic commerce conducted on our www.skymall.com and www.tvguide.com websites is also included in the Interactive Platform Sector.

For the three months ended September 30, 2002, revenues for the Interactive Platform Sector were $11.6 million, an increase of $4.4 million, or 61% when compared to revenues for the same period in 2001. The increase in revenues was attributable to increased e-commerce revenues from SkyMall and increased interactive wagering revenues at TV Games, coupled with an increase in IPG advertising sales.

For the nine months ended September 30, 2002, revenues for this sector were $31.7 million, an increase of $12.0 million, or 61%, when compared to revenues for the same period in 2001. The increase in revenues was attributable to increased e-commerce revenues attributable to SkyMall and increased interactive wagering activities, coupled with an increase in IPG advertising sales. Such increases were partially offset by a decrease in revenues from advertising on tvguide.com.

Expenses for this sector were $15.9 million for the quarter ended September 30, 2002, a decrease of $7.0 million, or 31%, compared to $22.9 million for the same period in 2001. The decrease was due to cost controls implemented at eBook, IPG, and online businesses, resulting in an overall reduction of approximately $7.4 million. For the nine months ended September 30, 2002, expenses for this sector were $49.1 million, a decrease of $7.3 million, or 13%, when compared to expenses for the same period in 2001. The decrease was due

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to cost controls implemented at eBook, IPG, and online businesses, resulting in an aggregate reduction of approximately $16.3 million, offset by increases in SkyMall expenses of $7.0 million, which was acquired in July 2001.

Media and Services Sector

The Media and Services Sector operates TV Guide Magazine, TV Guide Channel, TVG, SkyMall catalog sales, SNG and other non-interactive platforms and media properties. 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 households. The Company sold the business that distributes the WGN superstation signal in April 2001 and acquired SkyMall in July 2001.

For the three and nine months ended September 30, 2002, revenues for the Media and Services Sector were $192.1 million and $605.8 million, respectively, compared to $225.4 million and $716.0 million, respectively, for the same periods in 2001. Revenues in this sector decreased by $33.3 million and $110.2 million for those periods, respectively, primarily due to decreased revenues earned by TV Guide Magazine and SNG.

The following table shows the breakdown of the revenues in the Media and Services Sector by revenue source (in thousands):

	Three Months Ended September 30, 2002		Three Months Ended September 30, 2001		Increase (Decrease)			Nine Months Ended September 30, 2002		Nine Months Ended September 30, 2001		Increase (Decrease)
TV Guide Magazine	$	100,042	$	117,351	$	(17,309	)	$	313,845	$	378,868	$	(65,023	)
SNG		56,012		69,629		(13,617	)		176,311		220,285		(43,974	)
TV Guide Channel		22,990		23,321		(331	)		72,435		68,722		3,713
SkyMall		5,816		5,929		(113	)		19,236		5,929		13,307
Other		7,213		9,160		(1,947	)		23,983		42,236		(18,253	)
Total	$	192,073	$	225,390	$	(33,317	)	$	605,810	$	716,040	$	(110,230	)

TV Guide Magazine continues to face declines in paid circulation due to difficulty in attracting new subscribers and reduced newsstand sales, largely due to the increasing costs of acquiring new subscribers and the proliferation of competing products and emerging technology. The reduced revenues from new subscribers are being slightly offset by improved renewal rates from existing subscribers. At September 30, 2002, TV Guide Magazine had a total circulation of 9.0 million copies, relatively unchanged from the same point in time in 2001, but 9% lower than at December 31, 2000. Circulation of bulk copies has increased to 2.4 million copies at September 30, 2002 from 1.3 million copies at September 30, 2001; bulk sold subscriptions produce little or no circulation contribution and are of substantially lesser economic value than other sources of circulation.

The C-band direct-to-home satellite market, in which SNG operates, continues to decline due to the growth of the newer generation direct broadcast satellite systems and continued cable system expansions. During the nine months ended September 30, 2002, the number of C-band subscribers in the industry decreased by 23% to approximately 637,000 subscribers. At September 30, 2002, SNG provided service to 399,000 of these subscribers, a decrease of 27% from the subscribers served by SNG as of December 31, 2001.

On November 2, 1999, SNG signed an agreement with EchoStar whereby SNG promotes and solicits orders for EchoStar’s direct broadcast subscription service, the DISH Network. In exchange, SNG receives an initial commission for each current or past SNG subscriber who subscribes to the DISH Network and a monthly residual commission over the life of the agreement. Revenues recognized from this arrangement totaled $11.0 million and $30.7 million for the three and nine months ended September 30, 2002, respectively, as compared to $7.7 million and $27.0 million in the corresponding periods of 2001. This agreement has resulted in an acceleration of the decline in the number of SNG subscribers and this effect is expected to continue.

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Expenses for this sector were $154.3 million for the quarter ended September 30, 2002, a decrease of $14.6 million, or 9%, when compared to expenses for the same period in 2001. For the nine-month period ended September 30, 2002, expenses for this sector were $485.9 million, a decrease of $40.9 million, or 8%, when compared to expenses for the same period in 2001. The decrease for the three and nine-month periods was primarily due to cost reductions of $12.9 million and $46.8 million, respectively, at SNG as a result of declining numbers of subscribers and decreases of $8.1 million and $23.1 million, respectively, at TV Guide Magazine as a result of ongoing production cost reduction efforts for paper, printing and postage. The decrease for the nine-month period was partially offset by $29.2 million of expenses attributable to SkyMall and exit costs related to the magazine distribution business as described below.

The Company has traditionally operated a magazine distribution business, which was responsible for distributing approximately 90 titles with a combined circulation of approximately 410 million copies per year in addition to the TV Guide Magazine. These magazines were distributed through magazine wholesalers, who in turn sold them to retailers. The magazine wholesaler segment of this distribution chain, reacting to increased competition and demands by retailers, experienced significant consolidation over the last several years. As such, the credit risk and credit concentration increased dramatically for distributors, effectively reducing the risk-adjusted returns for TV Guide’s distribution business. Due to this change in business environment, and following the general approach of discontinuing non-core activities in order to focus on its core business, the Company contracted with a third party for distribution of TV Guide Magazine and assigned the existing distribution contracts to that same party. The distribution business generated approximately $12.6 million in annual revenue during 2001 with no significant impact on EBITDA. The Company recognized approximately $3.3 million in costs related to its exit from the distribution business in the second quarter of 2002. Such costs are included in operating expenses for the nine months ended September 30, 2002 in the Sector Results of Operations for the Media and Services Sector.

In connection with the acquisition of TV Guide in 2000, News Corporation became a stockholder of the Company. As of September 30, 2002, News Corporation directly and indirectly owns approximately 43% of the Company’s outstanding common stock and has the right to designate six directors on the Company’s board. The Company earned advertising revenues of $3.2 million and $2.4 million for the three months ended September 30, 2002 and 2001, respectively, and $11.7 million and $15.2 million for the nine months ended September 30, 2002 and 2001, respectively, from entities controlled by News Corporation. In addition, the Company acquired programming from News Corporation controlled entities of $837,000 and $3.1 million for the three months ended September 30, 2002 and 2001, respectively, and $3.6 million and $8.6 million for the nine months ended September 30, 2002 and 2001, respectively. Prior to its acquisition of TV Guide, the Company did not have any significant transactions with News Corporation. As of September 30, 2002 and December 31, 2001, the Company had receivables due from News Corporation controlled entities totaling $3.7 million and $4.6 million, respectively, and payables due to News Corporation controlled entities totaling $262,000 and $302,000, respectively. The Company reimburses News Corporation for facilities and other general and administrative costs incurred on the Company’s behalf. Expenses associated with these costs approximated $1.1 million and $1.3 million for the three months ended September 30, 2002 and 2001, respectively, and $3.1 million and $2.5 million for the nine months ended September 30, 2002 and 2001, respectively. Expenses for the nine months ended September 30, 2001 included a rent and facilities credit of $345,000 from News Corporation. In addition, the Company purchases paper through a paper procurement arrangement with News Corporation at negotiated prices with paper suppliers based on the combined paper requirements of the two organizations.

Liberty Media Corporation (“Liberty Media”), formerly an indirect wholly owned subsidiary of AT&T Corp., directly or indirectly owned approximately 21% of the issued and outstanding common stock of the Company from the date of the acquisition of TV Guide in 2000 until May 2, 2001, the date Liberty Media sold its interest in the Company to News Corporation. For the period January 1, 2001 to May 2, 2001, the date Liberty Media ceased to be considered a related party of the Company, the Company purchased programming from Liberty Media controlled affiliates of $4.5 million. During the same period, the Company also sold video, program promotion and guide services of $6.7 million to AT&T Broadband and Internet Services (“BIS”) and its

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consolidated affiliates. In addition, during the same period, the Company purchased production services and was provided satellite transponder facilities and uplink services from BIS consolidated affiliates of $2.4 million. BIS is also wholly owned by AT&T Corp. Prior to its acquisition of TV Guide, the Company did not have any significant transactions with Liberty Media or BIS.

The Company has included in the amounts discussed above, transactions with News Corporation, BIS, and Liberty Media and all known entities in which BIS, Liberty Media and News Corporation have an interest greater than 50%. In addition, the Company has transactions with entities in which BIS, Liberty Media and News Corporation own, directly or indirectly, 50% or less.

The Company has multiple transactions with Thomson multimedia, Inc., including Thomson’s licensing of the Company’s VCR Plus+, GUIDE Plus+ and eBook technologies, Thomson’s advertising on the Company’s platforms, primarily the IPG platforms, the Company’s participation in marketing and promotion campaigns on Thomson products carrying the Company’s technology, and a joint venture for the sale of advertising on electronic program guides on televisions. During the three months ended September 30, 2002 and 2001, revenues earned from the relationship with Thomson were $4.7 million and $8.9 million, respectively. During the nine months ended September 30, 2002 and 2001, revenues earned from the relationship with Thomson were $12.9 million and $25.3 million, respectively. As of September 30, 2002, the Company had receivables due from and a payable due to Thomson totaling $16.9 million and $10.7 million, respectively.

In May 2002, the Company signed a Letter of Intent with Thomson to broaden areas included in their strategic partnership and to also settle all issues raised in an arbitration between the parties (See Note 10, “Legal Proceedings,” to the Notes to the Unaudited Condensed Consolidated Financial Statements). The Company suspended recognition of licensing revenue relating to the GUIDE Plus+ portion of the agreement during the quarter ended September 30, 2002 as the Company and Thomson are in process of renegotiating the terms thereof.

Liquidity and Capital Resources

For the nine months ended September 30, 2002, net cash flows from operating activities were $127.5 million. This cash flow, plus existing cash resources and proceeds from the exercise of stock options of $1.3 million, was used to fund $61.5 million for repayment of long-term debt and capital lease obligations, $6.4 million for capital expenditures, $3.2 million for additions to intangible assets, $14.1 million for distributions to minority interests, primarily in SNG, and $63.4 million to repurchase outstanding shares of the Company’s common stock.

At September 30, 2002, the Company’s cash, cash equivalents and marketable securities classified as current assets aggregated $383.1 million, which includes cash and cash equivalents of $167.3 million domiciled outside the United States.

At September 30, 2002, approximately $52.5 million, or 25%, of the Company’s receivables are due from five entities. The Company currently believes these receivables to be realizable; however, events may occur in the future which could cause the Company to change its assessment of the amount of recoverability.

The Company’s wholly owned subsidiary, TV Guide, has a $300.0 million six-year revolving credit facility and a $300.0 million four-year term loan, both expiring in February 2005 with a group of banks. Borrowings under the credit facilities bear interest (2.81% at September 30, 2002) either at the banks’ prime rate or LIBOR, both plus a margin based on a sliding scale tied to TV Guide’s leverage ratio, as defined in the facility. The credit facilities are guaranteed by certain subsidiaries of TV Guide and the stock of TV Guide’s subsidiaries is pledged as collateral. The credit facilities impose restrictions on TV Guide’s ability to pay dividends to Gemstar tied to TV Guide’s leverage ratio. This restriction does not apply to Gemstar’s ability to pay dividends. As of September 30, 2002, TV Guide had available borrowing capacity under the six-year revolving credit facility of $160.6

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million. Principal payments of $15.0 million in the remainder of 2002, $90.0 million in 2003 and $23.0 million in 2004 are due under the $300.0 million amortizing term loan. Outstanding borrowings at September 30, 2002 were $138.4 million under the revolving credit facility and $128.0 million under the term loan. At September 30, 2002, the Company had an outstanding letter of credit issued under the revolving credit facility for $1.0 million. The Company has determined that there is a reasonable likelihood that TV Guide will be unable to maintain compliance with a financial covenant in its term loan agreement during the coming twelve months. The Company is currently evaluating options to maintain compliance or mitigate the effects of any noncompliance.

The Company is a party to a loan guaranty to assist a printing services supplier in obtaining a line of credit and term loans with a bank. The maximum exposure to the Company created by this guaranty is $10.0 million.

The Company collects in advance a majority of its TV Guide magazine subscription fees, SNG subscription fees and certain of its UVTV superstation revenues. In addition, the Company receives nonrefundable prepaid license fees from certain licensees. The Company’s liability for prepaid magazine subscriptions is limited to the unearned prepayments in the event customers cancel their subscriptions. The Company’s liability for other prepayments is limited to a refund of unearned prepayments in the event that the Company is unable to provide service. No material refunds have been paid to date.

As of September 30, 2002, deferred revenue totaled $398.0 million, a decrease of $127.9 million when compared to $525.9 million at December 31, 2001. The decrease in deferred revenue was attributable to declines in circulation of TV Guide Magazine coupled with the decline in the subscriber base of the C-band industry and the recognition of nonrefundable prepaid license fees.

The Company does not have any material commitments for capital expenditures. The Company believes that the anticipated cash flows from operations, and existing cash, cash equivalents and short-term marketable securities balances, will be sufficient to satisfy its expected working capital, capital expenditure and debt requirements in the foreseeable future.

In April 2002, the Company’s Board of Directors authorized an extension of its authorization granted in September 2001 to repurchase up to $300.0 million of the Company’s outstanding shares of common stock. The authorization permitted the Company to purchase shares in the open market at prevailing prices, or in privately negotiated transactions at then prevailing prices, provided that the Company complied with SEC regulations regarding such purchases. The extension expired on September 18, 2002. During the period subsequent to the date the extension was authorized through September 30, 2002, the Company repurchased 6.9 million shares for an aggregate price of $63.4 million. Since September 2001, the Company has repurchased a total of 7.2 million shares for an aggregate price of $69.8 million.

The terms of an option agreement entered into in connection with the Company’s acquisition of the intellectual property of a privately held company require the Company to exercise an option to acquire substantially all of the assets of such company for $3.0 million if it achieves certain financial and operating goals. The Company received notice that such goals have been met and is exercising the option.

On May 22, 2002, the Company entered into an agreement with DIVA, a provider of server-based technology and software systems for cable television, to acquire substantially all of its assets as part of a bankruptcy proceeding for approximately $40.0 million, payable primarily in shares of the Company’s common stock. The transaction has not been completed. On September 25, 2002, the Company notified DIVA that it had elected not to proceed with the purchase of DIVA’s assets. DIVA subsequently filed a complaint against the Company for breach of contract and other claims based upon the Company’s decision not to acquire DIVA’s assets. The Company later filed counterclaims against DIVA. The parties are presently in pretrial proceedings.

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Recent Accounting Pronouncements

In November 2001, the Financial Accounting Standards Board’s (“FASB’s”) Emerging Issues Task Force (“EITF”) reached a consensus on EITF Issue No. 01-09, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products). EITF No. 01-09, which is effective for periods commencing after December 31, 2001, clarifies the income statement classification of costs incurred by a vendor for certain cooperative advertising and product placement paid to a vendor’s customers. As a result of the Company’s adoption of EITF consensus, certain of the Company’s cooperative advertising and product placement costs previously classified as operating expenses have been reflected as a reduction of revenues earned from that activity. Where applicable, amounts presented in prior periods have been reclassified to comply with the income statement classifications for the current period. Such reclassifications resulted in decreases in both revenues and expenses for the three and nine-month periods ended September 30, 2001 of $3.0 million and $10.7 million, respectively.

In July 2001, the FASB issued Statement 142, Goodwill and Other Intangible Assets. Statement 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead be tested for impairment at least annually in accordance with the provisions of Statement 142. The Company adopted the provisions of Statement 142 effective January 1, 2002. In connection with the adoption of Statement 142, the Company evaluated its existing intangible assets that were acquired in prior purchase business combinations, and made any necessary reclassifications in order to conform with the criteria outlined in SFAS No. 141, Business Combinations, for recognition apart from goodwill. In addition, the Company reassessed the useful lives and residual values of all intangible assets acquired in purchase business combinations, and made any necessary amortization period adjustments. Finally, the Company tested goodwill and any intangible assets identified as having an indefinite useful life for impairment in accordance with the provisions of Statement 142. As a result of the application of these new rules, the Company reported a transitional impairment charge for goodwill and indefinite-lived intangible assets as the cumulative effect of an accounting change of $             million, net of tax as of January 1, 2002 in the accompanying unaudited condensed consolidated statements of operations.

In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. This statement replaces Statement No. 121. However, it retains the fundamental provisions of Statement No. 121 for recognition and measurement of the impairment of long-lived assets to be held and used and for measurement of long-lived assets to be disposed of by sale. This statement applies to all long-lived assets, including discontinued operations, and replaces the provisions of APB Opinion No. 30, Reporting Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, for the disposal of segments of a business. This statement requires that those long-lived assets be measured at the lower of carrying amount or fair value less cost to sell, whether reported in continuing operations or in discontinued operations. The Company adopted this statement effective January 1, 2002. Adoption of this statement did not have a material impact on the Unaudited Condensed Consolidated Financial Statements at January 1, 2002.

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement 13, and Technical Corrections (“Statement 145”). In addition to amending or rescinding other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions, Statement 145 precludes companies from recording gains and losses from the extinguishment of debt as an extraordinary item. The Company must implement Statement 145 in the first quarter of 2003 and all comparative financial statements will be reclassified to conform to the 2003 presentation. The anticipated effect of the statement includes the reclassification of an extraordinary loss on debt extinguishment to net loss of $2.1 million ($0.01 per share) for the nine months ended September 30, 2001. There will be no effect on net loss or net loss per share.

On June 30, 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities (“Statement 146”). Statement 146 nullifies EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a

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Restructuring). It requires that a liability be recognized for those costs only when the liability is incurred, that is, when it meets the definition of a liability in the FASB’s conceptual framework. Statement 146 also establishes fair value as the objective for initial measurement of liabilities related to exit or disposal activities. Statement 146 is effective for exit or disposal activities that are initiated after December 31, 2002, with earlier adoption encouraged. The Company does not expect that the adoption of Statement 146 will have a material impact on its financial position or results of operations.

In September 2002, the EITF reached a consensus on EITF Issue No. 02-13, Deferred Income Tax Considerations in Applying the Goodwill Impairment Test in FASB Statement No. 142, Goodwill and Other Intangible Assets (“EITF 02-13”). EITF 02-13, which is effective for goodwill impairment tests performed after September 12, 2002, requires that deferred income taxes, if any, be included in the carrying amount of a reporting unit for the purposes of the first step of the SFAS 142 goodwill impairment test. It also provides guidance for determining whether to estimate the fair value of a reporting unit by assuming that the unit could be bought or sold in a non-taxable transaction versus a taxable transaction and the income tax bases to use based on this determination. The Company does not expect that the adoption of EITF 02-13 will have a material impact on its financial position or results of operations.

Reconciliation of EBITDA to Consolidated Operating (Loss) Income

EBITDA is defined as operating (loss) income excluding stock compensation, depreciation and amortization, and impairment of intangibles. We believe EBITDA to be relevant and useful information as these are the primary measures used by our management to measure the operating profit or loss of our business. EBITDA is one of several metrics used by our management to measure the cash generated from our operations. EBITDA should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with accounting principles generally accepted in the United States. EBITDA, as we have defined it, may not be comparable to similarly titled measures reported by other companies.

Reconciliation of EBITDA to Loss before income taxes, extraordinary item and cumulative effect of an accounting change (in thousands):

	Restated Three Months Ended September 30,						Restated Nine Months Ended September 30,
	2002			2001			2002			2001
EBITDA	$	42,096		$	53,470		$	153,439		$	188,885
Stock compensation		(1,318	)		(6,833	)		(19,812	)		(25,200	)
Depreciation and amortization		(72,865	)		(233,430	)		(288,064	)		(704,332	)
Impairment of intangible assets		—			—			(1,305,339	)		—
Interest expense		(1,282	)		(4,918	)		(4,688	)		(24,020	)
Other (expense) income, net		(4,436	)		(13,013	)		(15,386	)		(82,229	)
Loss before income taxes, extraordinary item and cumulative effect of an accounting change	$	(37,805	)	$	(204,724	)	$	(1,479,850	)	$	(646,896	)

Cautionary Statement for Purposes of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995

The foregoing “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and other portions of this Form 10-Q contain various “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which represent the Company’s expectations or beliefs concerning future events. Statements containing expressions such as “may,” “will,” “continues,” “believes,” “intends,” “anticipates,” “estimates”, “plans” or “expects” used in the Company’s periodic reports on Forms 10-K, 10-K/A, 10-Q, 10-Q/A and 8-K

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filed with the SEC are intended to identify forward-looking statements. The Company cautions that these and similar statements included in this report and in previously filed periodic reports including reports filed on Forms 10-K, 10-K/A, 10-Q, 10-Q/A and 8-K are further qualified by important factors that could cause actual results to differ materially from those in the forward-looking statement, including, without limitation, those referred to below in “Certain Risks Affecting Business, Operating Results and Financial Condition” and elsewhere in this Form 10-Q. Such statements reflect the current views of the Company or its management with respect to future events and are subject to certain risks, uncertainties and assumptions including, but not limited to those discussed below. Such factors, together with the other information in this Form 10-Q, should be considered carefully in evaluating an investment in the Company’s common stock. The cautionary statements contained or referred to in this section should be considered in connection with any subsequent written or oral forward-looking statements that the Company or persons acting on the Company’s behalf may issue. The Company undertakes no obligation to review or confirm analysts’ expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.

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CERTAIN RISKS AFFECTING BUSINESS,

OPERATING RESULTS AND FINANCIAL CONDITION

This section highlights specific risks affecting our business, operating results and financial condition. The order in which the risks appear is not intended as an indication of their relative weight or importance.

Risks Related to Recent Developments

Our senior management team only recently joined the Company.

Recently, our senior management team has undergone major changes with the addition of a new Chief Executive Officer and Acting Chief Financial Officer and several other senior executives, including a new senior management team at TV Guide Magazine. We are currently conducting a search for a permanent Chief Financial Officer. The structure of our Board of Directors also has been significantly changed. We are subject to certain risks associated with this new management structure, including, among others, risks relating to employee and business relations, managerial efficiency and effectiveness and overall familiarity with our business and operations. We cannot assure you that this major restructuring of our Board of Directors and senior management team will not adversely affect our results of operations.

Our new management has spent considerable time and effort dealing with internal and external investigations.

In addition to the challenges of the SEC investigation, class-action and related lawsuits and ongoing patent and antitrust litigation described below, our new management has spent considerable time and effort dealing with internal and external investigations involving our previous accounting policies, disclosure controls and procedures and corporate governance procedures. We cannot assure you that the significant time and effort spent will not adversely affect our operations.

We cannot assure you that we will not discover additional instances of historical breakdowns in controls, policies and procedures affecting our previously issued financial statements.

Following our management and corporate governance restructuring, we have made significant changes in our internal controls; our disclosure controls, policies and procedures; and our corporate governance policies and procedures. While the Company believes that the restructuring and our newly implemented controls, policies and procedures will prevent the occurrence of financial reporting problems in the future, there can be no assurance that we will not discover additional instances of historical breakdowns in our internal controls, policies and procedures of the types that led to the recent restatements of our historical financial results.

We face risks related to an SEC investigation and securities litigation.

The SEC has issued a formal order of investigation to determine whether the Company has violated the Federal securities laws. Although the Company has fully cooperated with the SEC in this matter and intends to continue to fully cooperate, the SEC may determine that the Company has violated Federal securities laws. We cannot predict when this investigation will be completed or its outcome. If the SEC makes a determination that the Company has violated Federal securities laws, the Company may face sanctions, including, but not limited to, significant monetary penalties and injunctive relief.

In addition, the Company has been named a defendant in a number of class-action and related lawsuits. The findings and outcome of the SEC investigation may affect the class-action and derivative lawsuits that are pending. We are generally obliged, to the extent permitted by law, to indemnify our directors and our former directors and officers who are named defendants in some of these lawsuits. We are unable to estimate what our liability in these matters may be, and we may be required to pay judgments or settlements and incur expenses in aggregate amounts that could have a material adverse effect on our financial condition or results of operations.

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Our common stock may be delisted from the Nasdaq Stock Market.

On August 19, 2002, the Company received a Nasdaq Staff Determination that its securities are subject to delisting from the Nasdaq Stock Market because the Company failed to file its Form 10-Q for the quarter ended June 30, 2002 on or before August 14, 2002. On November 8, 2002, the Nasdaq Listing Qualifications Panel (“Nasdaq Panel”) granted the Company’s request for an exception to continue its listing on the Nasdaq Stock Market subject to satisfying certain conditions. The Company has satisfied these conditions as of the date hereof. However, to remain in compliance with Nasdaq’s order, the Company must solicit proxies and hold an annual meeting of stockholders on or before June 30, 2003. The Company has scheduled an annual meeting for May 20, 2003, and expects to mail proxy materials in April.

Furthermore, to fully comply with the terms of this exception, the Company must be able to demonstrate compliance with all requirements for continued listing on the Nasdaq Stock Market. If the Company fails to meet any of these conditions, our securities may be delisted from the Nasdaq Stock Market. In addition, the Nasdaq Panel reserved the right to modify, alter or extend the terms of this exception. If the Nasdaq Panel altered or modified the terms of this exception and the Company was unable to meet the modified terms, our securities may be delisted from the Nasdaq Stock Market.

Risks Related to Our Business

The marketing and market acceptance of our interactive program guides may not be as rapid as we expected.

The market for our IPGs has only recently begun to develop, is rapidly evolving and is increasingly competitive. Demand and market acceptance for our IPGs are subject to uncertainty and risk. We cannot predict whether, or how fast, this market will grow or how long it can be sustained. For GUIDE Plus+ and TV Guide On Screen, which are incorporated in consumer electronics products, the deployment rate will depend on the strength or weakness of the consumer electronics industry, and in particular, the sale of television sets, hard disk recorders and DVD recorders. For TV Guide Interactive, which is incorporated into digital set-top boxes, the deployment rate will be dependent on the growth of digital cable television subscribers and our penetration for the market for IPGs for these subscribers. Purchases of consumer electronics products and digital cable television subscriptions are largely discretionary and may be affected by general economic trends in the countries or regions in which such products or subscriptions are offered. If the market for our IPGs develops more slowly than expected or becomes saturated with competitors, our operating results could be adversely impacted. We are re-evaluating the strategy for our U.S. cable and satellite IPG business in light of increased competition, slower than expected growth in distribution and advertising revenue, and unexpected adverse rulings in certain cases.

We depend on revenues from digital cable subscribers.

We derive subscription revenues and other revenue streams from the carriage of our IPG and TVG Network on digital cable systems. Digital cable television subscriptions are generally priced at a premium to analog cable television service and represent discretionary expenditures for consumers. Consequently, general economic trends may result in fluctuations in the number of subscribers and the amount of revenue received by the Company under this recurring revenue model.

VCR Plus+ revenues have declined and may decline further due to full penetration of the product in a declining market.

Revenues derived from VCR Plus+ have declined and may decline further due to the fact that virtually all major VCR manufacturers have licensed the VCR Plus+ technology and the fact that we have already expanded into most major markets worldwide. The worldwide shipment of VCRs is expected to decline as VCRs are replaced by digital recording devices such as hard disk recorders and DVD recorders. Although VCR Plus+ is now being incorporated into some digital recording devices, there is no assurance that this practice will become widespread. In addition, our IPG technology may be more relevant than our VCR Plus+ technology for these digital recording devices.

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TV Guide Magazine, which is a significant business, has experienced significant declines in circulation and operating results and such declines may continue.

We provide TV Guide Magazine to households and newsstands and customized monthly program guides to customers of cable and satellite service providers. TV Guide Magazine has seen circulation decline significantly over the past several years. The primary cause of this decline is increased competition from free television listings included in local newspapers, electronic program guides incorporated into digital cable and satellite services, and other sources. Declines in TV Guide Magazine’s circulation and operating results may continue and could be significant.

Our C-band business, which is a significant business, is declining as a result of competition from superior technologies.

We market and distribute entertainment programming to C-band satellite dish owners in the United States through our approximately 80% owned subsidiary, Superstar/Netlink. The C-band business is declining primarily as a result of competition from DBS and cable television systems. DBS providers such as DISH Network and DirecTV transmit on the Ku band, which uses a higher power signal than C-band satellites, enabling DBS customers to use smaller, less obtrusive satellite dishes. In addition, DBS and digital cable operators transmit digital signals that allow for a larger number of channels, including local network stations, with better audio and video quality than analog systems.

In 1999, Superstar/Netlink entered into a marketing alliance agreement to promote and solicit orders for DISH Network. In exchange, Superstar/Netlink receives an initial commission for each Superstar/Netlink subscriber who subscribes to DISH Network and a monthly residual commission over the life of the agreement, which expires at the end of 2005. We expect the decline in our C-band business to continue and this decline may be accelerated by our agreement with DISH Network.

Continued consolidation of the cable and satellite broadcasting industry could change the terms of existing agreements; the impact of these changes is not certain.

We have entered into agreements with a large number of cable MSOs for distribution of our IPGs. If, as expected, consolidation of the cable and satellite broadcasting industry continues, some of these agreements may be affected by mergers, acquisitions or system swaps. Although the Company has sought to protect itself against any negative consequences resulting from such transactions with provisions in our agreements with cable MSOs, it is conceivable that certain combinations of events could change the terms of the agreements and such changes could negatively affect our results of operations. In addition, some of our agreements with MSOs allow for the agreement to be terminated prior to the scheduled expiration date at the option of the service provider. The exercise of such unilateral termination rights could have a material adverse effect on the amount of revenue received by the Company under these agreements.

Our business may be adversely affected by fluctuations in demand for consumer electronics devices employing our technologies.

We derive significant revenues from manufacturer license fees for our VCR Plus+ and IPG technologies based on the number of units shipped. We do not manufacture hardware, but rather depend on the cooperation of consumer electronics manufacturers to incorporate our technology into their products. Many of our license agreements do not require manufacturers to include our technology in any specific number or percentage of units, and only a few of these agreements guarantee a minimum aggregate licensing fee. Demand for new consumer electronics devices, such as television sets, VCRs, integrated satellite receiver decoders, DVD recorders, hard disk recorders, personal computers and Internet appliances, may be adversely impacted by increasing market saturation, durability of products in the marketplace, new competing products and alternate consumer entertainment options. As a result, our future operating results may be adversely impacted by fluctuations in sales of consumer electronics devices employing our technologies.

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Dependence on the cooperation of cable systems, television broadcasters, publications and data providers could adversely affect our revenues.

IPG program data and advertising data is delivered to network headends, cable headends, and broadcast stations for inclusion in the VBI of television signals for delivery to consumer electronics devices and to local affiliate cable systems for delivery to set-top boxes in subscribers’ homes via the out-of-band frequencies of local cable systems. There can be no assurance that these delivery mechanisms will distribute the data without error or that the agreements governing certain of these relationships can be maintained on economical terms. To populate consumer products devices, we have arrangements for carriage of our data in the VBI of television stations included in the public broadcasting network, independently owned stations, and stations owned and operated by various station group owners. Our contract related to the public broadcasting network stations covers substantially all of the territory required to be covered to effectively transmit our data for delivery to consumer product devices incorporating our IPGs. We nevertheless continue to rely on arrangements, which are not long-term, with station group owners and operators and independently-owned stations for VBI carriage of our program guide and advertising data. Until we fully deploy our VBI carriage contract related to the public broadcasting network stations, we cannot assure you that our carriage arrangements with station group owners and operators and independently owned operators will continue. Furthermore, even if we have full deployment, our data broadcast through the VBI can be, and has been in the past in certain markets, deleted or modified by some of the local cable systems. Widespread deletion or modification of such data could have a material adverse impact on the Company’s GUIDE Plus+ or TV Guide On Screen business.

In addition, we purchase some of our program guide information from commercial vendors. The quality, accuracy or timeliness of such data may not continue to meet our standards or be acceptable to consumers. Our VCR Plus+ system relies on consumer access to PlusCode numbers through licensed publications. We are dependent on the maintenance and renewal of agreements governing the PlusCode publications to ensure the distribution of the PlusCodes.

Distribution of TV Guide Channel is subject to voluntary arrangements with service providers.

The success of TV Guide Channel is dependent upon achieving broad distribution by MSOs and other service providers. The majority of TV Guide Channel’s service-provider customers are not under long-term license agreements, which could result in termination of the service at anytime with minimal prior notice of such discontinuation. A significant decline in distribution of the TV Guide Channel could have a material adverse effect on the amount of licensing and advertising revenue received by the Company.

Seasonality and variability of consumer electronic product shipments and newsstand sales of our print products may affect our revenues and results of operations on a quarterly or annual basis.

Shipments of consumer electronics products tend to be higher in the third and fourth calendar quarters. General advertising also tends to be higher in the fourth quarter. In addition, manufacturer shipments vary from quarter to quarter depending on a number of factors, including retail inventory levels and retail promotional activities. Newsstand sales of our print products tend to be higher in the first and fourth calendar quarters. As a result, we may experience variability in our licensing and advertising revenues.

Paper and postal price increases can materially raise our costs associated with the production and delivery of the TV Guide print products, including TV Guide Magazine.

The price of paper can be a significant factor affecting TV Guide Magazine’s operating performance. We do not hedge against increases in paper costs. If paper prices do increase and we cannot pass these costs on to our customers, the increases may have a material adverse effect on us. Postage for product distribution and direct mail solicitations is also a significant, uncontrollable expense to us. Postal rates increased in February 2001, July 2001 and again in June 2002 and are likely to increase in the future.

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We may not be able to comply with our bank covenants.

Our wholly owned subsidiary, TV Guide, Inc. (“TV Guide”), has a $300.0 million six-year revolving credit facility and a $300.0 million term loan. The credit facility and the term loan expire in February 2005 and contain certain financial covenants with which we must comply. The debt level and the covenants contained in these debt instruments could limit our flexibility in planning for or reacting to changes in our business because certain financing options may be limited or prohibited. In particular, TV Guide may not be able to maintain compliance with a financial covenant in its term loan agreement during the coming twelve months. While the Company believes that its current financial position provides adequate liquidity to refinance the loans or seek other alternatives before the financial covenant is violated, we cannot assure you that any measures taken to maintain compliance or to mitigate the effects of any noncompliance will be successful.

Our stock price has been volatile.

The market price of our common stock has historically been volatile. It is likely that the market price of our common stock will continue to be subject to significant fluctuations. We believe that future announcements concerning us, our competitors or our principal customers, including technological innovations, new product introductions, governmental regulations, litigation or changes in earnings estimated by analysts or any future decision to restate any of our financial statements may cause the market price of our common stock to fluctuate substantially in the future. Sales of substantial amounts of outstanding common stock in the public market could materially and adversely affect the market price of our common stock. Further, in recent years the stock market has experienced extreme price fluctuations in equity securities of technology and media companies. Such price and volume fluctuations often have been unrelated to the operating performance of those companies. These fluctuations, as well as general economic, political and market conditions, such as armed hostilities, acts of terrorism, civil disturbances, recessions, international currency fluctuations, or tariffs and other trade barriers, may materially and adversely affect the market price of our common stock.

Any infringement by us on patent rights of others could result in litigation.

Patents of third parties may have an important bearing on our ability to offer certain products and services. Many of our competitors as well as other companies and individuals have obtained, and may be expected to obtain in the future, patents that concern products or services related to the types of products and services we plan to offer. We cannot provide assurance that we will be aware of all patents containing claims that may pose a risk of infringement by our products and services. In addition, patent applications in the United States are generally confidential until a patent is issued, so we cannot evaluate the extent to which our products and services may be covered or asserted to be covered by claims contained in pending patent applications. If one or more of our products or services is found to infringe patents held by others, we may be required to stop developing or marketing the products or services, to obtain licenses to develop and market the products or services from the holders of the patents or to redesign the products or services in such a way as to avoid infringing the patent claims. We cannot assess the extent to which we may be required in the future to obtain licenses with respect to patents held by others, whether the licenses would be available or, if available, whether we would be able to obtain the licenses on commercially reasonable terms. If we were unable to obtain the licenses, we might not be able to redesign our products or services to avoid infringement.

An unfavorable outcome of intellectual property litigation or other legal proceedings may adversely affect our business and operating results.

Our results may be affected by the outcome of pending and future litigation and the protection and validity of patents and other intellectual property rights. Our patents and other intellectual property rights are important competitive tools and many generate income under license agreements. We cannot assure you that our intellectual property rights will not be challenged, invalidated or circumvented in the United States or abroad.

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Furthermore, we are subject to various antitrust claims asserted by third parties in connection with pending intellectual property litigation. Some of these matters involve potential compensatory, punitive or treble damage claims, or sanctions that, if granted, could have a material adverse effect on the Company. Unfavorable rulings in the Company’s legal proceedings, including those described in Item 3, “Legal Proceedings,” and in Note 13, “Legal Proceedings,” to Consolidated Financial Statements, may have a negative impact on the Company that may be greater or smaller depending on the nature of the rulings. In addition, we are currently, and from time to time in the future may be, subject to various other claims, investigations, legal and administrative cases and proceedings (whether civil or criminal) or lawsuits by governmental agencies or private parties. If the results of such investigations, proceedings or suits are unfavorable to us or if we are unable to successfully defend against third party lawsuits, we may be required to pay money damages or may be subject to fines, penalties, injunctions or other censure that could have a material adverse effect on our business, financial condition and operating results. Even if we adequately address the issues raised by an investigation or proceeding or successfully defend a third-party lawsuit or counterclaim, we may have to devote significant money and management resources to address these issues, which could harm our business, financial condition and operating results.

We do not have a comprehensive disaster recovery plan or back-up system, and a disaster could severely damage our operations.

We currently do not have a comprehensive disaster recovery plan in effect and do not have fully redundant systems for certain critical operations. Although we have some technology redundancy and back-up capabilities for our production, publishing and transmission capabilities, there are single points of failure within our processes and technology that, in the event of a catastrophic disruption, would cause us to lose our ability to provide transmission or publishing capabilities. In that event, we would have to operate at reduced service levels that could severely negatively affect our relationships with our customers, our revenue generation and our brand.

There are initiatives underway to prioritize our recovery requirements and we are developing strategies for our mission critical business operations and technology. This will be the basis for the development and implementation of business continuity and disaster recovery plans.

Our interests may diverge from those of substantial stockholders.

News Corporation has significant influence over our business because of its beneficial ownership of our common stock and the number of its executives who serve on our Board of Directors. There can be no assurance that its interests are aligned with that of the Company’s other shareholders. Investor interests can differ from each other and from other corporate interests and it is possible that this significant stockholder with a stake in corporate management may have interests that differ from those of other stockholders and of the Company itself. If News Corporation were to sell large amounts of its holdings, our stock price could decline and we could find it difficult to raise capital through the sale of additional equity securities. In addition, this concentration of ownership could delay or prevent a third party from acquiring control over us at a premium over the then-current market price of our common stock.

Risks Related to Our Industry

We face competition in many areas and the competition could negatively impact our operating results.

We face competition from a wide range of other companies in the communications, advertising, media, entertainment, publishing, information, Internet services, software and technology fields. The competitive environment could, among other results, require price reductions for our products, require increased spending on marketing and product development, limit our ability to develop new products and services, limit our ability to expand our customer base or even result in attrition in our customer base. Any of these occurrences could negatively impact our operating results. Many of our competitors have greater financial and human resources than we do. As a result, these competitors can compete more effectively by offering customers better pricing and other terms and conditions, including indemnifying customers against patent infringement claims.

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New products and rapid technological change may adversely affect our operations.

The emergence of new consumer entertainment products and technologies, changes in consumer preferences and other factors may limit the life cycle of our technologies and any future products we might develop. Our future operations could be adversely impacted by our ability to identify emerging trends in our markets and to develop and market new products and services that respond to competitive offerings, technological changes and changing consumer preferences in a timely manner and at competitive costs. Although we believe that we will continue to develop attractive new products, the industry in which we operate is characterized by rapid changes, including technological changes. The process of developing and marketing new products is inherently complex and uncertain, and there are a number of risks, including the following:

• we cannot assure you that we will have adequate funding and resources necessary for investments in new products and technologies;

• we cannot assure you that our long-term investments and commitment of significant resources will result in successful new products or technologies;

• we cannot assure you that we can anticipate successfully the new products and technologies which will gain market acceptance and that such products can be successfully marketed;

• we cannot assure you that our newly developed products or technologies can be successfully protected as proprietary intellectual property rights or will not infringe the intellectual property rights of others; and

• our products may become obsolete due to rapid advancements in technology and changes in consumer preferences.

Our failure to anticipate adequately changes in the industry and the market, and to develop attractive new products, including any of the risks described above, may reduce our future growth and profitability and may adversely affect our business results and financial condition.

Digital recapture could adversely affect carriage of our analog products.

Cable television is transmitted on a limited frequency spectrum that must be allocated between multiple analog and digital channels. As digital penetration increases, MSOs are reclaiming analog bandwidth to launch more digital networks and interactive television services, and are likely to continue this recapture until such time as they rebuild their plants to increase bandwidth or there is stability in the mix of analog and digital carriage. If this trend continues, digital recapture may result in a significant decline in the distribution of our analog TV Guide Channel, which could negatively impact our operating results.

Government regulations may adversely affect our business.

The satellite transmission, cable and telecommunications industries are subject to federal regulatory conditions, including FCC licensing and other requirements. These industries are also often subject to extensive regulation by local and state authorities. While most cable and telecommunications industry regulations do not apply directly to the Company, they affect programming distributors, a primary customer for our products and services. Certain programming sold by our Superstar/Netlink subsidiary is subject to the Satellite Home Viewer Improvement Act of 1999. In 2001, the FCC issued a Notice of Inquiry concerning interactive television services, which may indicate that the FCC intends to promulgate rules that could directly or indirectly affect our IPG business. In addition, our TVG Network is subject to certain state and Federal laws and regulations applicable to pari-mutuel wagering on horse races and its growth may be significantly affected by such laws and regulations. Future developments relating to any of these regulatory matters may adversely affect our business.

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ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to the impact of interest rate changes and changes in the market values of its investments. The Company’s exposure to market rate risk for changes in interest rates relates primarily to its investment portfolio and variable rate debt issued under TV Guide’s $300.0 million six-year revolving credit facility and $300.0 million term loan. The Company has not used derivative financial instruments in its investment portfolio or to hedge for interest rate fluctuations on its debt. The Company invests its excess cash in debt instruments of the U.S. Government and its agencies, and in high-quality corporate issuers and, by policy, limits the amount of credit exposure to any one issuer. The Company protects and preserves its invested funds by limiting default, market and reinvestment risk. Investments in both fixed rate and floating rate interest earning instruments carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Due in part to these factors, the Company’s future investment income may fall short of expectations due to changes in interest rates or the Company may suffer losses in principal if forced to sell securities which have declined in market value due to changes in interest rates. Because the interest rates on the credit facilities are variable, based upon the banks’ prime rate or LIBOR, the Company’s interest expense and cash flow are impacted by interest rate fluctuations. At September 30, 2002, the Company had $266.4 million in outstanding borrowings under the credit facilities. If interest rates were to increase or decrease by 100 basis points, the result, based upon the existing outstanding debt, would be an annual increase or decrease of $2.7 million in interest expense and a corresponding decrease or increase of $2.7 million in the Company’s operating cash flow.

ITEM 4.    CONTROLS AND PROCEDURES

Review of Disclosure Controls and Changes in Management

The Company recently completed a previously-announced management restructuring pursuant to which its Chief Executive Officer, Dr. Henry Yuen, and its Co-President, Co-Chief Operating Officer and Chief Financial Officer, Elsie Leung, resigned. Effective November 7, 2002, Jeff Shell and Paul Haggerty were appointed Chief Executive Officer and Acting Chief Financial Officer, respectively.

During the week since their appointment, Messrs. Shell and Haggerty have commenced a review of the Company’s disclosure controls and procedures, and are in the process of evaluating whether the Company’s disclosure controls and procedures have been designed to ensure that (a) information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is gathered and made known to the Company’s management, including these officers, but other employees of the Company and its subsidiaries, as appropriate to allow timely decisions regarding required disclosure, and (b) this information is recorded, processed, summarized, evaluated and reported, as applicable, within the time periods specified in the SEC’s rules and forms.

As of November 14, 2002, Messrs. Shell and Haggerty have not concluded their evaluation and, accordingly, are not yet able to conclude whether or not the design and operation of the Company’s controls and procedures are sufficient to accomplish the foregoing purposes. Prior to the management restructuring, the Company, under the supervision of its former Chief Executive Officer and Chief Financial Officer, commenced the process of reviewing the Company’s disclosure controls and procedures related to the recording, processing, summarization and reporting of information in the Company’s periodic reports that are filed with the SEC. The Company was unable to complete the evaluation prior to the resignations of Dr. Yuen and Ms. Leung. Messrs. Shell and Haggerty expect to complete their evaluations concurrently with the completion of the reaudit of the Company’s financial statements for the years ended December 31, 2001, December 31, 2000, and nine months ended March 31, 2000, and the review of the Company’s financial statements for the quarters ended March 31, 2002, June 30, 2002 and September 30, 2002, by the Company’s new independent auditors.

58

PART II.    OTHER INFORMATION

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K.

a.  Exhibits

3.1	Amended and Restated By-laws of Gemstar-TV Guide International, Inc. (Incorporated by reference to Exhibit 3.1 to Gemstar’s Form 8-K, filed November 12, 2002)
10.1	Umbrella Agreement, dated November 7, 2002, by and among The News Corporation Limited, Henry C. Yuen, Elsie Ma Leung and Gemstar-TV Guide International, Inc. (Incorporated by reference to Exhibit 10.1 to Gemstar’s Form 8-K, filed November 12, 2002)
10.2	Termination Agreement, entered into on November 7, 2002, by and between Gemstar-TV Guide International, Inc., Gemstar Development Corporation, and Henry C. Yuen (Incorporated by reference to Exhibit 10.2 to Gemstar’s Form 8-K, filed November 12, 2002) (Certain information in this exhibit has been omitted, pursuant to a request for Confidential Treatment, which was filed with the Securities and Exchange Commission)
10.3	Patent Rights Agreement, entered into on November 7, 2002, by and between Gemstar-TV Guide International, Inc. and Henry C. Yuen (Incorporated by reference to Exhibit 10.3 to Gemstar’s Form 8-K, filed November 12, 2002) (Certain information in this exhibit has been omitted, pursuant to a request for Confidential Treatment, which was filed with the Securities and Exchange Commission)
10.4	Amendment No. 1 to the Stockholders’ Agreement, entered into on November 7, 2002, by and among The News Corporation Limited, Henry C. Yuen, and Gemstar-TV Guide International, Inc. (Incorporated by reference to Exhibit 10.4 to Gemstar’s Form 8-K, filed November 12, 2002)
10.5	Employment Agreement, entered into on November 7, 2002, by and between Gemstar-TV Guide International, Inc. and Henry C. Yuen (Incorporated by reference to Exhibit 10.5 to Gemstar’s Form 8-K, filed November 12, 2002)
10.6	Letter Agreement, dated November 7, 2002, between Gemstar-TV Guide International, Inc. and Dr. Henry Yuen (Incorporated by reference to Exhibit 10.6 to Gemstar’s Form 8-K, filed November 12, 2002)
10.7	Termination Agreement, entered into on November 7, 2002, by and between Gemstar-TV Guide International, Inc. and Elsie Ma Leung (Incorporated by reference to Exhibit 10.7 to Gemstar’s Form 8-K, filed November 12, 2002)
10.8	Employment Agreement, entered into on November 7, 2002, by and between Gemstar-TV Guide International, Inc. and Elsie Ma Leung (Incorporated by reference to Exhibit 10.8 to Gemstar’s Form 8-K filed November 12, 2002)
10.9	Letter Agreement, dated November 7, 2002, between Gemstar-TV Guide International, Inc. Elsie Ma Leung (Incorporated by reference to Exhibit 10.9 to Gemstar’s Form 8-K, filed November 12, 2002)
10.10	Employment Agreement, dated October 8, 2002 between Gemstar-TV Guide International, Inc. and Mr. Jeff Shell (Incorporated by reference to Gemstar’s Form 10-Q for the quarter ended September 30, 2002)
10.11	Employment Agreement, dated September 9, 2002, between Gemstar-TV Guide International, Inc. and John Loughlin
99.1	CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.2	CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

59

b.  Reports on Form 8-K

The Company filed a report of Form 8-K under Item 5 on August 16, 2002, announcing that the Company would delay the earnings release and the filing of Form 10-Q for the quarter ended September 30, 2002 and would restate the 2001 financial results.

The Company filed a report on Form 8-K under Item 9 on September 26, 2002, relating to sworn statements of Henry Yuen and Elsie Leung submitted to the Securities and Exchange Commission (“SEC”).

The Company filed a report on Form 8-K under Item 5 on September 26, 2002, releasing preliminary financial information for the quarter ended June 30, 2002.

60

SIGNATURE

Pursuant to the requirements 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.

Date: March 31, 2003

GEMSTAR-TV GUIDE INTERNATIONAL, INC. (Registrant)
By:	/S/    PAUL HAGGERTY
	Paul Haggerty Acting Chief Financial Officer (Principal Financial Officer

61

10-Q CERTIFICATION

Gemstar-TV Guide International, Inc.

SARBANES-OXLEY ACT SECTION 302(a) CERTIFICATION

I, Jeff Shell, certify that:

1.  I have reviewed this amendment to quarterly report on Form 10-Q/A of Gemstar-TV Guide International, Inc.;

2.  Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.  Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.  The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)  designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)  evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c)  resented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.  The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)  all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b)  any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.  The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: March 31, 2003

                              /S/     JEFF SHELL        

Jeff Shell

Chief Executive Officer

(Principal Executive Officer)

62

10-Q CERTIFICATION

Gemstar-TV Guide International, Inc.

SARBANES-OXLEY ACT SECTION 302(a) CERTIFICATION

I, Paul Haggerty, certify that:

1.  I have reviewed this amendment to quarterly report on Form 10-Q/A of Gemstar-TV Guide International, Inc.;

2.  Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.  Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.  The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)  designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)  evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c)  presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.  The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)  all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b)  any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.  The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: March 31, 2003

                              /S/     PAUL HAGGERTY        

Paul Haggerty

Acting Chief Financial Officer

(Principal Executive Officer)

63

EX-10.11

                                                                   Exhibit 10.11

                              EMPLOYMENT AGREEMENT

        This Employment Agreement (the "Agreement") is entered into by and
between Gemstar TV-Guide International, Inc. (the "Company") and John Loughlin
("Employee"), as of the 9th day of September 2002 ("Effective Date").

I.      EMPLOYMENT.

        The Company hereby employs Employee and Employee hereby accepts such
employment, upon the terms and conditions hereinafter set forth, from September
9, 2002, to and including September 8, 2005 (the "Term"). This Agreement is
subject to renewal only as set forth in Section VI below. In the event the
Agreement is renewed pursuant to Section VI below, reference to the Term in this
Agreement shall also refer to such renewal term.

II.     DUTIES.

        A.      Employee shall serve during the course of his employment as
President of TV Guide Publishing Group and shall have such other duties and
responsibilities as are consistent with those generally performed by the
president of a company as the Chief Executive Officer of the Company shall
determine from time to time. The Company acknowledges that TV Guide Publishing
Group is an operating division of the Company, provided however that the Company
retains absolute discretion to reorganize the Company from time to time and that
nothing in this Agreement shall in any way affect or limit such discretion.

        B.      Employee agrees to devote substantially all of his time, energy
and ability to the business of the Company. Nothing herein shall prevent
Employee, upon approval of the Board of Directors of the Company, from serving
as a director or trustee of other corporations or businesses which are not in
competition with the business of the Company or in competition with any present
or future affiliate of the Company. Nothing herein shall prevent Employee from
(i) investing in real estate for his own account, (ii) becoming a partner or a
stockholder in any corporation, partnership or other venture not in competition
with the business of the Company or in competition with any present or future
affiliate of the Company, or (iii) becoming up to a 5% stockholder in any
publicly held corporation whether or not in competition with the business of the
Company or in competition with any present or future affiliate of the Company,
The Company acknowledges that Employee currently serves as Trustee of St.
Lawrence University and consents to Employee's continuing to serve St. Lawrence
University in that capacity, provided however that such service does not
substantially interfere with Employee's performance of his duties and
responsibilities as President of TV Guide Publishing Group.

        C.      For the Term of this Agreement, Employee shall report to the
Chief Executive Officer of the Company.




III.    COMPENSATION.

        A.      The Company will pay to Employee a base salary at the annual
rate of $700,000 from September 9, 2002 through September 8, 2003, $725,000 from
September 9, 2003 through September 8, 2004, and $750,000 from September 9, 2004
through September 8, 2005. Such salary shall be earned monthly and shall be
payable in periodic installments no less frequently than monthly in accordance
with the Company's customary practices. Amounts payable shall be reduced by
standard withholding and other authorized deductions. The Company may in its
discretion increase Employee's salary beyond these set amounts but it may not
reduce it during the time he serves as President of TV Guide Publishing Group.

        B.      Annual Bonus. Employee shall be paid an annual bonus (the
"Bonus") at the Company's sole discretion based upon the performance of TV Guide
Publishing Group and of Gemstar TV-Guide International, Inc. with a target bonus
of fifty percent (50%) of salary, such bonus to be determined and paid on a
calendar year basis. Notwithstanding the foregoing, Employee shall be paid a
Bonus of at least $120,000 on December 31, 2002, at least $300,000 on December
31, 2003, and at least $250,000 on December 31, 2004. In the event the Agreement
terminates without renewal as set forth in Section VI., the Company shall
determine and pay a pro rata bonus for the 2005 calendar year in its sole
discretion, with a target bonus of fifty percent (50%) of salary, within 30 days
of expiration of the Agreement, provided however, that in the event the Company
elects not to renew the Agreement, the minimum bonus for 2005 shall be $150,000.

        C.      Welfare Benefit Plans. Employee and/or his family, as the case
may be, shall be eligible for participation in and shall receive all benefits
under welfare benefit plans, practices, policies and programs provided by the
Company (including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent applicable generally
to other peer executives of the Company.

        D.      Expenses. Employee shall be entitled to receive prompt
reimbursement for all reasonable employment expenses incurred by him in
accordance with the policies, practices and procedures as in effect generally
with respect to other peer executives of the Company.

        E.      Fringe Benefits. Employee shall be entitled to fringe benefits
in accordance with the plans, practices, programs and policies as in effect
generally with respect to other peer executives of the Company.

        F.      Vacation. Employee shall be entitled to four (4) weeks paid
vacation each year which shall be taken in accordance with the policies and
practices as in effect generally with respect to other peer executives of the
Company.

        G.      Stock Options. The Company shall grant to Employee, subject to
Compensation Committee approval and the vesting provisions described in this
Agreement, nonqualified stock options (the "Options") under the Company's 1994
Stock Incentive Plan,

                                        2




as amended (the "Plan"), to acquire two hundred and fifty thousand (250,000)
shares of the Company's Common Stock ("Common Shares"). Each Option shall
represent the right to acquire one (1) Common Share. Subject to earlier
termination of the Options as described below, the Options shall vest as
follows: (i) fifty thousand (50,000) Options shall vest in full and become
immediately exercisable on the first anniversary of the Effective Date, (ii)
fifty thousand (50,000) Options shall vest in full and become immediately
exercisable on the second anniversary of the Effective Date, (iii) fifty
thousand (50,000) Options shall vest in full and become immediately exercisable
on the third anniversary of the Effective Date, (iv) fifty thousand (50,000)
Options shall vest in full and become immediately exercisable on the fourth
anniversary of the Effective Date, and (v) fifty thousand (50,000) Options shall
vest in full and become immediately exercisable on the fifth anniversary of the
Effective Date. The Options shall expire on the first to occur of (i) the close
of business on the last business day of the Company coinciding with or
immediately preceding the day before the tenth anniversary of the Effective
Date, (ii) the termination of the Options pursuant to Section 4.2 of the 1994
Plan, or (iii) the termination of the Options in connection with a termination
of Employee's employment with the Company as contemplated by the Option
Agreement (as such term is defined below) and as modified by Section IV-D-3
below. The exercise price per Common Share under each Option shall equal the
closing price for a Common Share on the NASDAQ National Market Reporting System
on lower of September 9, 2002 or the date of Compensation Committee's approval
of the grant of Options. The Options shall be evidenced by a written option
agreement in the form attached hereto as Exhibit A (the "Option Agreement") and
shall, except as expressly provided in this Section III-G and in Sections IV-E-1
and IV-E-3 below, be subject to the terms and conditions set forth in the Plan
and the Option Agreement. Additional annual Option grants may be made at
Company's sole discretion.

        H.      Car Allowance. The Company shall provide Employee with a car
allowance of one thousand five hundred dollars ($1,500.00) per month to be used
for the purchase, lease and maintenance of an appropriate automobile for his use
during the term of the Agreement.

        I.      The Company reserves the right to modify, suspend or discontinue
any and all of the above plans, practices, policies and programs at any time
without recourse by Employee so long as such action is taken generally with
respect to other similarly situated peer executives and does not single out
Employee.

IV.     TERMINATION.

        A.      Death or Disability. Employee's employment shall terminate
automatically upon Employee's death. If a Disability of Employee has occurred
(pursuant to the definition of Disability set forth below), the Company may give
to Employee written notice of its intention to terminate Employee's employment.
In such event, Employee's employment with the Company shall terminate effective
on the 120th day after receipt of such notice by Employee, provided that, within
the 120 days after such receipt, Employee shall not have returned to full-time
performance of his duties. For purposes of this Agreement, "Disability" shall
mean either (i) a physical or mental impairment which substantially limits a
major life activity of Employee and which renders Employee unable to perform the
essential functions

                                        3



of his position, even with reasonable accommodation which does not impose an
undue hardship on the Company for an aggregate of 120 days in any twelve-month
period or (ii) Employee becomes eligible to receive benefits under any Long Term
Disability Insurance provided by the Company. The determination of disability
under subsection (i) of the preceding sentence, shall be based upon information
supplied by Employee and/or his medical personnel, as well as information from
medical personnel (or others) selected by the Company. In the event Employee's
health care provider and the Company do not agree as to whether Employee has a
Disability, Employee and the Company shall appoint a third-party qualified
physician who shall evaluate Employee and provide a determination of whether
Employee has a Disability.

        B.      Cause. The Company may terminate Employee's employment for
"Cause" in the event the Employee has engaged in or committed: willful
misconduct; gross negligence; theft, or fraud; refusal or unwillingness to
perform his duties; sexual harassment; insubordination; any willful act that is
likely to and which does in fact have the effect of injuring the reputation,
business or a business relationship of the Company; violation of any fiduciary
duty; violation of any duty of loyalty; and breach of any term of this
Agreement. In the event the Company determines that Cause for termination exists
based upon willful misconduct, gross negligence or refusal or unwillingness to
perform duties and if such ground is curable, Employee shall be given thirty
(30) days to cure such ground for termination for Cause. After the expiration of
any such cure period, the Company shall make a determination as to whether
Employee has cured such ground for termination for Cause.

        C.      Good Reason. Employee may terminate employment for Good Reason.
For purposes of this Agreement, "Good Reason" shall mean any of the following:
(i) the Company requires Employee to relocate his principal office more than 50
miles of New York, New York without Employee's consent; (ii) the Company assigns
Employee to a position other than President of TV Guide Publishing Group without
Employee's consent; (iii) the Company requires Employee to report directly to
any officer other than the Chief Executive Officer without Employee's consent;
(iv) the Company substantially diminishes Employee's duties or responsibilities;
or (v) the occurrence of a Change in Control of the Company. For purposes of
this Agreement, a "Change in Control" shall mean either (1) the accumulation or
acquisition of a majority of the Common Shares of the Company by any person or
entity which, as of the Effective Date, owned less than ten percent (10%) of the
Common Shares or (2) the purchase of substantially all of the assets of the
Company by any person or entity which, as of the Effective Date, owned less than
ten percent (10%) of the Common Shares. Before terminating his employment with
Good Reason under subsections (i)-(iv), Employee shall give the Company
written notice of his intent to terminate for Good Reason and the basis
therefor, and the Company shall have thirty (30) days to cure (the "Cure
Period"). If the Company fails to cure the Good Reason within the Cure Period,
Employee may terminate his employment and this Agreement upon an additional ten
(10) days' written notice. In the event Employee intends to terminate his
employment upon a Change in Control, Employee must give the Company written
notice of such termination within ninety (90) days after the Change in Control
occurrence. For all purposes under this Agreement, any termination by Employee
with Good Reason shall be treated as a termination without

                                        4



Cause and Employee shall be entitled to the payments and benefits set forth in
Section IV-E-3 pursuant to its terms.

        D.      Other than Cause or Death or Disability. The Company may
terminate Employee's employment at any time, with or without cause, upon 30
days' written notice.

        E.      Obligations of the Company Upon Termination.

                1.      Death or Disability. If Employee's employment is
                terminated by reason of Employee's Death or Disability, this
                Agreement shall terminate without further obligations to
                Employee or his legal representatives under this Agreement,
                other than for (a) payment of the sum of (i) Employee's annual
                base salary through the date of termination to the extent not
                theretofore paid, (ii) Employee's pro rata bonus for the
                calendar year during which the Employee's Death or Disability
                occurs, and (iii) any compensation previously deferred by
                Employee (together with any accrued interest or earnings
                thereon) and any accrued vacation pay, in each case to the
                extent not theretofore paid (the sum of the amounts described in
                clauses (i), (ii), and (iii) shall be hereinafter referred to as
                the "Accrued Obligations"), which shall be paid to Employee or
                his estate or beneficiary, as applicable, in a lump sum in cash
                within 30 days of the date of termination; and (b) payment to
                Employee or his estate or beneficiary, as applicable, any
                amounts due pursuant to the terms of any applicable welfare
                benefit plans. Upon a termination as a result of death or
                Disability, the Options, and any other options granted to
                Employee by the Company during his employment, to the extent
                outstanding and not previously vested at the time of such
                termination, shall thereupon vest in full and shall, subject to
                earlier termination pursuant to Section 4.2 of the Plan,
                continue to be exercisable for a period of three (3) years after
                such termination

                2.      Cause. If Employee's employment is terminated by the
                Company for Cause, this Agreement shall terminate without
                further obligations to Employee other than for the timely
                payment of Accrued Obligations. If it is subsequently determined
                that the Company did not have Cause for termination under
                Section IV-B, then the Company's decision to terminate shall be
                deemed to have been made under Section IV-D and the amounts
                payable under Section IV-E-3 shall be the only amounts Employee
                may receive for his termination.

                3.      Other than Cause or Death or Disability. If the Company
                terminates Employee's employment for other than Cause or Death
                or Disability, or if Employee terminates his employment with
                Company for Good Reason, this Agreement shall terminate without
                further obligations to Employee other than (a) the timely
                payment of Accrued Obligations; (b) upon Employee's execution,
                and non-revocation, of a release substantially in the form
                attached hereto as Exhibit B, payment to Employee of a lump sum
                equal to the greater of (i) eighteen months of his then current
                salary, or (ii) the balance of base

                                        5



                salary payments for all remaining years of this Agreement,
                including any renewal term if the Agreement has been renewed
                prior to the termination; and (c) payment to Employee of any
                remaining guaranteed bonus, less standard withholdings and other
                authorized deductions. Furthermore, if the Company terminates
                Employee's employment for other than Cause, Death or Disability,
                or if Employee terminates his employment with Company for Good
                Reason, the Options, and any other options granted to Employee
                by the Company during his employment, to the extent outstanding
                and not previously vested at the time of such termination, shall
                thereupon vest in full and shall, subject to earlier termination
                pursuant to Section 4.2 of the Plan, continue to be exercisable
                for a period of three (3) years after such termination.

                4.      Termination By Employee Other than for Good Reason.
                Employee may terminate his employment with Company upon 30 days'
                written notice. For all purposes under this Agreement, any such
                termination by Employee shall be treated as a termination for
                Cause.

                5.      Exclusive Remedy; Mitigation. Employee agrees that the
                payments contemplated by this Agreement shall constitute the
                exclusive and sole remedy for any termination of his employment
                and Employee covenants not to assert or pursue any other
                remedies, at law or in equity, with respect to any termination
                of employment. The Company agrees that the payments contemplated
                by the Agreement shall not be reduced by any compensation
                Employee may receive as a result of employment by any other
                person or entity after the termination of his employment.

                                        6



V.      ARBITRATION.

        Any controversy arising out of or relating to this Agreement, its
enforcement or interpretation, or because of an alleged breach, default, or
misrepresentation in connection with any of its provisions, or any other
controversy arising out of Employee's employment, including, but not limited to,
any state or federal statutory claims, shall be submitted to arbitration in New
York, New York, before a sole arbitrator selected from the American Arbitration
Association ("AAA"), and shall be conducted in accordance with the AAA rules for
the resolution of Employment Disputes as the exclusive forum for the resolution
of such dispute; provided, however, that provisional injunctive relief may, but
need not, be sought by either party to this Agreement in a court of law while
arbitration proceedings are pending, and any provisional injunctive relief
granted by such court shall remain effective until otherwise modified by the
Arbitrator; provided, however, that such provisional injunctive relief shall be
sought in aid and in advance of the arbitration only. Final resolution of any
dispute through arbitration may include any remedy or relief which the
Arbitrator deems just and equitable, including any and all remedies provided by
applicable state or federal statutes. At the conclusion of the arbitration, the
Arbitrator shall issue a written decision that sets forth the essential findings
and conclusions upon which the Arbitrator's award or decision is based. Any
award or relief granted by the Arbitrator hereunder shall be final and binding
on the parties hereto and may be enforced by any court of competent
jurisdiction. The parties acknowledge and agree that they are hereby waiving any
rights to trial by jury in any action, proceeding or counterclaim brought by
either of the parties against the other in connection with any matter whatsoever
arising out of or in any way connected with this Agreement or Employee's
employment. Employee and Company agree that in any proceeding to enforce the
terms of this Agreement, the prevailing party shall be entitled to its or his
reasonable attorneys' fees and costs (including forum costs associated with the
arbitration) incurred by it or him in connection with resolution of the dispute
in addition to any other relief granted.

VI.     RENEWAL.

        This Agreement shall automatically renew for one additional term of
three (3) years, commencing September 9, 2005, unless either Employee or the
Company gives the other written notice on or before August 9, 2005, of an intent
not to renew. In the event the Company notifies Employee of its election not to
renew, this Agreement shall expire and terminate on September 8, 2005, and such
termination shall be treated for all purposes under this Agreement as a
termination by the Company without cause. In the event Employee notifies the
Company of his election not to renew, this Agreement shall expire and terminate
on September 8, 2005, and such termination shall be treated for all purposes
under this Agreement as a termination by Employee without Good Reason.

VII.    ANTISOLICITATION.

        Employee promises and agrees that during the term of this Agreement or
renewal in accordance with Section VI above, and for a period of twelve (12)
months thereafter, he will not influence or attempt to influence any cable
operator or satellite television provider which distributes TV Guide to its
subscribers, either electronically or in hard copy, to cease

                                        7



distribution of TV Guide to its subscribers and replace TV Guide in its
distribution system with any competitor of TV Guide.

IX.     SOLICITING EMPLOYEES.

        Employee promises and agrees that he will not, during the term of this
Agreement and for a period of twelve (12) months following termination of his
employment or the expiration of this Agreement or renewal in accordance with
Section VI above, directly or indirectly solicit any of the Company employees
who earned annually $50,000 or more as a Company employee during the last six
months of his or her own employment to work for any business, individual,
partnership, firm, corporation, or other entity then in Competition with the
business of the Company or any subsidiary of the Company. For the purposes of
this provision, "indirectly solicit" shall mean that Employee has provided
name(s) or other identifying information to aid in the solicitation of such
person.

X.      CONFIDENTIAL INFORMATION.

        A.      Employee, in the performance of Employee's duties on behalf of
the Company, shall have access to, receive and be entrusted with confidential
information, including but in no way limited to development, marketing,
organizational, financial, management, administrative, production, distribution
and sales information, data, specifications and processes presently owned or at
any time in the future developed, by the Company or its agents or consultants,
or used presently or at any time in the future in the course of its business
that is not otherwise part of the public domain (collectively, the "Confidential
Material"). All such Confidential Material is considered secret and will be
available to Employee in confidence. Except in the performance of duties on
behalf of the Company, Employee shall not, directly or indirectly for any reason
whatsoever, disclose or use any such Confidential Material, unless such
Confidential Material ceases (through no fault of Employee's) to be confidential
because it has become part of the public domain. All records, files, drawings,
documents, equipment and other tangible items, wherever located, relating in any
way to the Confidential Material or otherwise to the Company's business, which
Employee prepares, uses or encounters, shall be and remain the Company's sole
and exclusive property and shall be included in the Confidential Material. Upon
termination of this Agreement by any means, or whenever requested by the
Company, Employee shall promptly deliver to the Company any and all of the
Confidential Material, not previously delivered to the Company, that may be or
at any previous time has been in Employee's possession or under Employee's
control, provided however, that Employee may retain in his possession any
Confidential Material that reflects the terms of his employment with the Company
or the terms or amount of his compensation and benefits.

XI.     SUCCESSORS.

        A.      This Agreement is personal to Employee and shall not, without
the prior written consent of the Company, be assignable by Employee.

        B.      This Agreement may not be assigned by the Company without
Employee's prior written consent, unless such assignment is made in connection
with a Change in

                                        8



Control, in which case, this Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns and any such successor
or assignee shall be deemed substituted for the Company under the terms of this
Agreement for all purposes. With respect to any assignment of this Agreement by
Company requiring Employee's prior written consent, no such permitted assignment
shall relieve the Company of its obligations or liability hereunder unless
Employee otherwise agrees in writing.

XII.    WAIVER.

        No waiver of any breach of any term or provision of this Agreement shall
be construed to be, nor shall be, a waiver of any other breach of this
Agreement. No waiver shall be binding unless in writing and signed by the party
waiving the breach.

XIII.   MODIFICATION.

        This Agreement may not be amended or modified other than by a written
agreement executed by Employee and the Company's Chief Executive Officer.

XIV.    SAVINGS CLAUSE.

        If any provision of this Agreement or the application thereof is held
invalid, the invalidity shall not affect other provisions or applications of the
Agreement which can be given effect without the invalid provisions or
applications and to this end the provisions of this Agreement are declared to be
severable.

XV.     COMPLETE AGREEMENT.

        This Agreement constitutes and contains the entire agreement and final
understanding concerning Employee's employment with the Company and the other
subject matters addressed herein between the parties. It is intended by the
parties as a complete and exclusive statement of the terms of their agreement.
It supersedes and replaces all prior negotiations and all agreements proposed or
otherwise, whether written or oral, concerning the subject matter hereof. Any
representation, promise or agreement not specifically included in this Agreement
shall not be binding upon or enforceable against either party. This is a fully
integrated agreement.

                                        9



XVI.    GOVERNING LAW.

        This Agreement shall be deemed to have been executed and delivered
within the State of New York, and the rights and obligations of the parties
hereunder shall be construed and enforced in accordance with, and governed by,
by the laws of the State of New York without regard to principles of conflict of
laws.

XVII.   CONSTRUCTION.

        Each party has cooperated in the drafting and preparation of this
Agreement. Hence, in any construction to be made of this Agreement, the same
shall not be construed against any party on the basis that the party was the
drafter. The captions of this Agreement are not part of the provisions hereof
and shall have no force or effect.

XVIII.  COMMUNICATIONS.

        All notices, requests, demands and other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered or if
mailed by registered or certified mail, postage prepaid, addressed to Employee
at ___________________________ or addressed to the Company at
____________________________. Either party may change the address at which
notice shall be given by written notice given in the above manner.

XIX.    EXECUTION.

        This Agreement is being executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. Photographic copies of such signed counterparts may
be used in lieu of the originals for any purpose.

        In witness whereof, the parties hereto have executed this Agreement as
of the date first above written.

                                          GEMSTAR-TV GUIDE INTERNATIONAL, INC.

                                          By /s/ Jeff Shell
                                            ----------------------------
                                          Its CEO
                                            ----------------------------

                                          JOHN LOUGHLIN

                                          /s/ John Loughlin
                                          ------------------------------

                                       10



                                    EXHIBIT A
                                OPTION AGREEMENT

                                       11



                                    EXHIBIT B
                            General Release Agreement

        This General Release Agreement (the "Agreement") is entered into as of
______, 200_, by and between John Loughlin (the "Employee") and GEMSTAR TV GUIDE
INTERNATIONAL, INC. (the "Company"). Employee and the Company are parties to an
Employment Agreement dated as of September 9, 2002 (the "Employment Agreement").

        Employee's employment with the Company will terminate effective on
_______, 200_ (the "Termination Date"). In exchange for the severance pay and
other severance benefits provided to Employee under Section IV-E-3 of the
Employment Agreement, and except for the obligations of Company under such
Section IV-E-3, Employee hereby covenants not to sue and releases the Company,
and its subsidiaries, parent and affiliated entities, past and present, and each
of them, as well as their respective trustees, directors, officers, agents,
employees, shareholders, assignees, successors, attorneys, and insurers, past
and present, and each of them (individually and collectively referred to herein
as "Releasees"), from any and all claims, wages, agreements, contracts,
obligations, covenants, demands, costs, expenses, attorneys' fees, rights,
debts, liens, and causes of action, known or unknown, suspected or unsuspected,
arising out of or in any way connected with his employment or any other
transactions, occurrences, acts or omissions, or any loss, damage or injury
whatsoever, known or unknown, suspected or unsuspected, resulting from any act
or omission by or on the part of said Releasees, or any of them, committed or
omitted, prior to the execution of this Agreement, whether based on contract,
tort, common law, or statute. Employee acknowledges by the execution of this
Agreement that he has no further claims against the Releasees other than for the
performance of the obligations set forth in Section IV-E-3 of the Employment
Agreement.

        The Employee hereby acknowledges that he has read this Agreement,
understands its contents and agrees to its terms and conditions knowingly,
voluntarily and of his own free will. Specifically, the Employee agrees: (a)
that he is releasing any and all claims under the Age Discrimination in
Employment Act of 1967, as amended by the Older Workers Benefit Protection Act,
and any federal, state or local fair employment acts arising up to the date of
the execution of this Agreement; (b) that the consideration being received by
the Employee is greater than he would have been entitled to receive before
signing this Agreement; (c) that the Employee is hereby advised to consult an
attorney of his choice prior to the execution of this Agreement; (d) that the
Employee was given twenty-one (21) days from the date of receipt of this
Agreement to decide whether or not to execute it; and (e) that the Employee has
seven (7) days from the execution of this Agreement to revoke its execution and
this Agreement will become null and void if he elects revocation during that
time. Any revocation must be in writing and must be received by the Company
during the seven-day revocation period. In the event of such revocation, the
Company will not have any obligations under this Agreement or Section IV-E-3 of
the Employment Agreement except for the payment of Accrued Obligations as
defined in the Employment Agreement.

                                       12



        If any provision of this Agreement or its application is held invalid,
the invalidity shall not affect other provisions or applications of the
Agreement which can be given effect without the invalid provisions or
application and, therefore, the provisions of this Agreement are declared to be
severable.

        The undersigned have read and understand the consequences of this
Agreement and voluntarily sign it.

        IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
________ day of ______ 200_.

                                          JOHN LOUGHLIN


                                          ------------------------------


                                          GEMSTAR-TV GUIDE INTERNATIONAL, INC.


                                          By
                                            ----------------------------
                                          Its
                                            ----------------------------

                                       13

EX-99.1

Exhibit 99.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

I, Jeff Shell, Chief Executive Officer of Gemstar-TV Guide International, Inc. (the “Company”), do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(i)  the quarterly report on Form 10-Q/A of the Company for the quarter ended September 30, 2002, as filed with the Securities and Exchange Commission (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(ii)  the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 31, 2003

/s/    Jeff Shell

Jeff Shell

Chief Executive Officer

(Principal Executive Officer)

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-99.2

Exhibit 99.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

I, Paul Haggerty, Acting Chief Financial Officer of Gemstar-TV Guide International, Inc. (the “Company”), do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(i)  the quarterly report on Form 10-Q/A of the Company for the quarter ended September 30, 2002, as filed with the Securities and Exchange Commission (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(ii)  the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 31, 2003

/s/    Paul Haggerty

Paul Haggerty

Acting Chief Financial Officer

(Principal Financial Officer)

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.