<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________________ TO __________________
COMMISSION FILE NUMBER 0-26878
-----------------------------
GEMSTAR INTERNATIONAL GROUP LIMITED
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
BRITISH VIRGIN ISLANDS N/A
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
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 [X] NO [ ]
As of September 30, 1998, there were outstanding 48,886,000 shares of the
Registrants' Ordinary Shares, par value $0.01 per share.
<PAGE>
GEMSTAR INTERNATIONAL GROUP LIMITED AND SUBSIDIARIES
INDEX
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PAGE
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets--September 30, 1998 and March 31, 1998.............. 1
Condensed Consolidated Statements of Operations--Three and Six Months Ended
September 30, 1998 and 1997............................................................... 2
Condensed Consolidated Statements of Cash Flows--Six Months Ended September 30,
1998 and 1997............................................................................. 3
Notes to Condensed Consolidated Financial Statements...................................... 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..... 5
PART II OTHER INFORMATION
Item 1. Legal Proceedings......................................................................... 8
Item 6. Exhibits and Reports on Form 8-K.......................................................... 9
SIGNATURES................................................................................ 12
</TABLE>
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GEMSTAR INTERNATIONAL GROUP LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
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<CAPTION>
SEPTEMBER 30, MARCH 31,
1998 1998
------------- -------------
(UNAUDITED)
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ASSETS
Current assets:
Cash and cash equivalents.......................... $184,203 $153,517
Marketable securities.............................. 3,900 4,343
Prepaid expenses and other current assets.......... 9,290 5,580
-------- --------
Total current assets............................ 197,393 163,440
Property and equipment, net.......................... 3,065 3,769
Intangible assets, net............................... 15,835 16,543
Other assets......................................... 2,315 2,326
-------- --------
$218,608 $186,078
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses.............. $ 30,173 $ 29,766
Current portion of deferred revenue................ 25,141 23,228
-------- --------
Total current liabilities....................... 55,314 52,994
Deferred revenue, less current portion............... 4,719 14,877
Deferred income taxes................................ 17,722 13,664
Other liabilities.................................... 1,464 1,061
Shareholders' equity:
Ordinary Shares and additional paid-in capital..... 209,822 197,695
Accumulated deficit................................ (65,636) (94,081)
Accumulated other comprehensive loss............... (254) (132)
Treasury stock, at cost............................ (4,543) --
-------- --------
Net shareholders' equity........................ 139,389 103,482
-------- --------
$218,608 $186,078
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
1
<PAGE>
GEMSTAR INTERNATIONAL GROUP LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues.................................................. $37,032 $27,677 $70,931 $53,302
Operating costs and expenses:
Selling and marketing................................... 8,018 7,576 15,715 15,019
Research and development................................ 3,511 3,124 6,892 6,621
General and administrative.............................. 5,743 4,239 10,688 8,829
Nonrecurring expenses................................... 1,851 -- 1,851 11,713
------- ------- ------- -------
Operating income.......................................... 17,909 12,738 35,785 11,120
Other income, net......................................... 2,258 1,540 4,276 3,086
------- ------- ------- -------
Income before income taxes................................ 20,167 14,278 40,061 14,206
Income taxes.............................................. 5,848 3,855 11,616 7,004
------- ------- ------- -------
Net income................................................ $14,319 $10,423 $28,445 $ 7,202
======= ======= ======= =======
Basic earnings per share.................................. $0.29 $0.22 $0.59 $0.15
======= ======= ======= =======
Diluted earnings per share................................ $0.26 $0.21 $0.51 $0.15
======= ======= ======= =======
Weighted average shares outstanding....................... 48,750 47,308 48,605 47,076
Dilutive effect of:
Stock options........................................... 6,309 2,167 6,336 1,901
Warrants................................................ 422 316 427 281
------- ------- ------- -------
Weighted average shares outstanding, assuming dilution.... 55,481 49,791 55,368 49,258
======= ======= ======= =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
2
<PAGE>
GEMSTAR INTERNATIONAL GROUP LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30,
----------------
1998 1997
-------------- --------------
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Cash flows from operating activities:
Net income.................................................................. $ 28,445 $ 7,202
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................................ 2,305 1,795
Deferred income taxes.................................................... 4,058 4,371
Amortization of unearned compensation.................................... -- 268
Tax benefit associated with stock options................................ 4,100 --
Changes in assets and liabilities........................................ (11,134) 9,449
-------- --------
Net cash provided by operating activities.......................... 27,774 23,085
-------- --------
Cash flows from investing activities:
Net maturities of marketable securities..................................... 443 23,919
Additions to property and equipment......................................... (201) (442)
Additions to intangible assets.............................................. (692) (2,585)
-------- --------
Net cash provided by (used in) investing activities................ (450) 20,892
-------- --------
Cash flows from financing activities:
Proceeds from exercise of stock options..................................... 8,027 13,709
Purchases of treasury stock................................................. (4,543) --
-------- --------
Net cash provided by financing activities.......................... 3,484 13,709
-------- --------
Effect of exchange rate changes on cash and cash equivalents.................. (122) --
-------- --------
Net increase in cash and cash equivalents..................................... 30,686 57,686
Cash and cash equivalents at beginning of period.............................. 153,517 59,909
-------- --------
Cash and cash equivalents at end of period.................................... $184,203 $117,595
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
GEMSTAR INTERNATIONAL GROUP LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The Condensed Consolidated Financial Statements have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. These financial statements should be read in conjunction with the
Consolidated Financial Statements and related Notes thereto included in the
Company's Annual Report on Form 10-K for the year ended March 31, 1998.
The Condensed Consolidated Financial Statements reflect all adjustments,
consisting of normal recurring adjustments, which are, in the opinion of
management, necessary to present fairly the financial position, results of
operations and cash flows for such periods. The results of operations for the
period ended September 30, 1998 are not necessarily indicative of the results
that may be expected for the entire year ending March 31, 1999.
(2) EARNINGS PER SHARE
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 128, Earnings per Share ("SFAS No. 128") during fiscal year 1998
and has restated earnings per share information for all periods presented to
conform to the requirements of SFAS No. 128. Basic earnings per share is
computed using the weighted average number of Ordinary Shares outstanding during
the period. Diluted earnings per share includes the dilutive effect of stock
options and warrants using the treasury stock method.
(3) COMPREHENSIVE INCOME
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income ("SFAS No. 130") as of the
first quarter of fiscal year 1999. SFAS No. 130 establishes standards for
reporting and displaying comprehensive income and its components in financial
statements, however it has no impact on the Company's net income or
shareholders' equity. The components of comprehensive income, net of tax, are as
follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
1998 1997 1998 1997
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Net income........................................... $14,319 $10,423 $28,445 $7,202
Change in cumulative translation adjustments......... (69) 15 (122) --
------- ------- ------- ------
Comprehensive income................................. $14,250 $10,438 $28,323 $7,202
======= ======= ======= ======
</TABLE>
Accumulated other comprehensive loss presented on the accompanying condensed
consolidated balance sheets consists of cumulative translation adjustments.
(4) RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the American Institute of Certified Public Accountants issued
SOP 98-1, Accounting for the Costs of Computer Software Developed or Obtained
for Internal Use. The statement provides guidance on when costs incurred for
internal use computer software are to be capitalized, and on accounting for the
proceeds of computer software originally developed or obtained for internal use
subsequently marketed and sold to the public. It identifies the characteristics
of internal use software and states that internal costs incurred for upgrades
and enhancements should be expensed during the preliminary project stage. SOP
98-1 is effective for fiscal years beginning after December 15, 1998. The
Company believes that adoption of this standard will not have a significant
effect on its consolidated results of operations.
4
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Consolidated
Financial Statements and related Notes thereto and with Management's Discussion
and Analysis of Financial Condition and Results of Operations contained in the
Company's Annual Report on Form 10-K for the year ended March 31, 1998.
OVERVIEW
The Company develops, markets and licenses proprietary technologies and
systems that simplify and enhance consumers' interaction with electronics
products and other platforms that deliver video, programming information and
other data. The Company seeks to have its technologies widely licensed,
incorporated and accepted as the technologies and systems of choice by consumer
electronics manufacturers; service providers such as owners or operators of
cable systems, telephone networks, Internet service providers, direct broadcast
satellite providers, wireless systems and other multi-channel video programming
distributors; software developers; and consumers.
The Company's first proprietary system, VCR Plus+, was introduced in 1990 and
is widely accepted as a de facto industry standard for programming VCRs and is
currently incorporated into virtually every major brand of VCR sold worldwide.
VCR Plus+ enables consumers to record a television program by simply entering a
PlusCode Number (a proprietary one to eight digit number) into a VCR or
television equipped with the VCR Plus+ technology. PlusCode Numbers are printed
next to television program listings in over 1,800 publications worldwide, with a
combined circulation of over 330 million.
The Company has also developed and acquired a large portfolio of technologies
and intellectual property necessary to implement interactive program guides (the
"Gemstar Guide Technology"), which enable consumers to navigate through, sort,
select and record television programming. The Gemstar Guide Technology has been
licensed for, or incorporated into, televisions, VCRs, TV-VCR combination units,
cable set top boxes, integrated satellite receiver decoders, personal computers,
PCTVs and Internet appliances. The Company believes that with the increase in
programming content and number of accessible channels, the Gemstar Guide
Technology will become an increasingly important tool for assisting consumers in
sorting, selecting, and recording television programming. The Company further
believes that its interactive program guides will provide an attractive vehicle
for the delivery of advertising and other content to consumers.
The Company generates revenues through licensing of its technologies and
intellectual property to consumer electronics manufacturers, service providers,
software developers, microchip makers and Internet appliance manufacturers, as
well as to newspapers and television guide publishers through a combination of
up front, non-refundable license payments and per unit license fees. Revenues
from up front license fees are recognized ratably over the term of the
particular license and revenues from on-going per unit license fees are
recognized when payments are due, and generally, when payments are actually
received from licensees. The Company is pursuing an additional revenue model for
its Gemstar Guide Technology wherein the Company would receive revenues from the
sale of advertising and promotion displayed on the guides, from sponsorship of
guide pages and from data services and interactive transactions accessed through
the guide, however, to date, the Company has not derived any revenue from such
model.
The Company believes that successful implementation of its technology into a
broad range of platforms requires the Company to coordinate the activities of
companies in many industries. Accordingly, the Company seeks long-term
relationships with a broad range of consumer electronics and other
manufacturers, television broadcasters, cable companies and software developers.
5
<PAGE>
RESULTS OF OPERATIONS
Revenues for the quarter ended September 30, 1998 were $37 million, an
increase of 34% when compared with revenues for the year-ago period of $27.7
million. Revenues for the six months ended September 30, 1998 were $70.9
million, an increase of 33% when compared with revenues for the year-ago period
of $53.3 million. The increase in revenues was due primarily to the continued
growth in worldwide licensing income from the Company's proprietary technologies
and intellectual property in the interactive program guide and VCR Plus+ fields.
Total operating expenses, excluding nonrecurring expenses, for the quarter
ended September 30, 1998 were $17.3 million, comprised of selling and marketing
expenses of $8 million, research and development expenses of $3.5 million, and
general and administrative expenses of $5.7 million. Compared with the year-ago
period, total operating expenses, excluding nonrecurring expenses, for the
current quarter increased 16%. Total operating expenses, excluding nonrecurring
expenses, for the six months ended September 30, 1998 were $33.3 million,
comprised of selling and marketing expenses of $15.7 million, research and
development expenses of $6.9 million, and general and administrative expenses of
$10.7 million. Compared with the year-ago period, total operating expenses,
excluding nonrecurring expenses, for the six months ended September 30, 1998
increased 9%. Operating margins, excluding nonrecurring expenses, increased to
53% for the six months ended September 30, 1998, from 43% for the year-ago
period.
The Company recorded nonrecurring expenses totaling $1.9 million in the
quarter ended September 30, 1998, related to the Company's defense against the
takeover attempt by United Video Satellite Group, Inc. These expenses were
comprised primarily of fees for financial advisors and attorneys. As a result of
the acquisition of StarSight Telecast, Inc., the Company recorded merger related
costs totaling $11.7 million in the quarter ended June 30, 1997. These costs
were comprised of fees for financial advisors, attorneys and accountants;
severance and other transaction costs.
Income taxes were $5.8 million for the quarter ended September 30, 1998 and
$3.9 million for the year-ago period. Income taxes were $11.6 million for the
six months ended September 30, 1998 and $7 million for the year-ago period. The
Company's effective tax rate was 29% for the current quarter and the six months
ended September 30, 1998. 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, 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 year to year.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1998, the Company had cash and cash equivalents and short-
term marketable securities totaling $188.1 million. Net cash provided by
operating activities was $27.8 million and $23.1 million for the six months
ended September 30, 1998 and 1997, respectively. The increase in net cash
provided by operating activities was primarily the result of increased earnings
and the timing of payments. Net cash used in investing activities was $450,000
for the six months ended September 30, 1998, comprised of proceeds from net
maturities of marketable securities of $443,000 offset by additions to property
and equipment and intangible assets of $893,000. Net cash provided by financing
activities was $3.5 million for the six months ended September 30, 1998,
comprised of proceeds from stock option exercises of $8 million offset by
purchases of treasury stock of $4.5 million.
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 and capital
expenditure requirements in the foreseeable future.
6
<PAGE>
RECENT ACCOUNTING PRONOUNCEMENTS
Recent accounting pronouncements are discussed in the Notes to Condensed
Consolidated Financial Statements.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field and cannot distinguish 21st
century dates from 20th century dates. These date code fields will need to
distinguish 21st century dates from 20th century dates and, as a result, many
companies' software and computer systems may need to be upgraded or replaced in
order to comply with such "Year 2000" requirements. Significant uncertainty
exists concerning the potential effects associated with compliance.
Although the Company believes that its systems and products are Year 2000
compliant in all material respects, there can be no assurance that the Company's
current systems and products do not contain undetected errors or defects with
Year 2000 date functions that could result in a material adverse effect on the
Company's business, results of operations and financial condition.
Although the Company is not aware of any material operational issues or costs
associated with its internal systems for the Year 2000, there can be no
assurances that the Company will not experience unanticipated negative
consequences and/or material costs caused by undetected errors or defects in the
technology used in its internal systems.
The Company's proprietary technologies and systems are licensed and
incorporated by third parties, such as consumer electronics manufacturers,
service providers and software developers into electronics products and
platforms that deliver video, programming information and other data. Failure
of such third party products, software or content to operate properly with
regard to the Year 2000 could require the Company to incur unanticipated
expenses to remedy any problems. There can be no assurance that the systems of
other companies on which the Company's products may rely will be Year 2000
compliant or that such failure by other companies to become Year 2000 compliant
would not have an adverse effect on the Company's business, results of
operations and financial condition. In addition, the Company utilizes third
party equipment, software and content that may not be Year 2000 compliant.
Failure of such third party equipment, software or content to operate properly
with regard to the Year 2000 and thereafter, could require the Company to incur
unanticipated expenses to remedy any problems, which could have a material
adverse effect on the Company's business, results of operations and financial
condition.
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 and other portions of this report on 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, including the following: the statement that the
Company believes that with the increase in programming content and number of
accessible channels, the Gemstar Guide Technology will become an increasingly
important tool for assisting consumers in sorting, selecting, and recording
television programming; the statement that the Company believes that its
interactive program guides will provide an attractive vehicle for the delivery
of advertising and other content to consumers; the statement that the Company
believes that successful implementation of its technology into a broad range of
platforms requires the Company to coordinate the activities of companies in many
industries; and the statement that the Company's systems and products are
believed to be Year 2000 compliant in all material respects. In addition,
statements containing expressions such as "believes," "anticipates," "plans" or
"expects" used in the Company's periodic reports on Forms 10-K and 10-Q filed
with the Securities and Exchange Commission 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 and 10-Q 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 in the
"Certain Factors Affecting Business, Operating Results and Financial Condition"
section of the Company's Annual Report on Form 10-K for the year ended March 31,
1998. This report on Form 10-Q should be read in conjunction with the "Certain
Factors Affecting Business, Operating Results and Financial Condition" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" sections contained in the Annual Report on Form 10-K.
7
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In October 1993, United Video Satellite Group, Inc. ("United Video") and its
Tracker, Inc. subsidiary brought suit against StarSight, a now wholly owned
subsidiary of the Company, in the United States District Court for the Northern
District of Oklahoma, seeking a declaratory judgment that its interactive
program guide products do not infringe certain of StarSight's patents. StarSight
counterclaimed charging infringement of one of the patents. Through subsequent
procedural motions, the lawsuit expanded to include a total of ten patents to
which StarSight has rights and to federal antitrust claims. The Court has
deferred consideration of all of the other claims and counterclaims pending the
resolution of the infringement, validity and enforceability issues of one of the
patents. A phased bench trial began on May 8, 1996, with United Video
essentially presenting its case in chief on the validity and enforceability
issues related to this patent. In subsequent proceedings, StarSight presented
witnesses relating to the validity, enforceability and infringement of this
patent. To date there has been no ruling from the Court on this issue. Closing
arguments with respect to this patent were heard by the Court on November 12,
1998.
On May 17, 1997, StarSight filed a Demand for Arbitration with the American
Arbitration Association in San Francisco, California, and by such action
commenced an arbitration action against General Instrument, Inc. ("GI"). The
claims in the arbitration center upon GI's alleged delay in deploying StarSight-
capable set-top boxes, and GI's development of a competing interactive program
guide which allegedly uses StarSight patented technology, confidential
information and technical information in violation of a License and Technical
Assistance Agreement executed by the parties on October 1, 1992. The arbitration
is scheduled to commence on March 22, 1999 in San Francisco, California.
The Company's report on Form 10-K for the year ended March 31, 1998, described
an arbitration proceeding between StarSight and TV Data Technologies, Inc. ("TV
Data"). Effective August 30, 1998, StarSight and TV Data settled the dispute.
The settlement provides for a continuation of the business relationship between
StarSight and TV Data but did not require the payment of any damages.
On July 24, 1998, the Company, together with SuperGuide, Inc. and StarSight
Telecast, Inc., filed a patent infringement action against Prevue Networks, Inc.
and Telecommunications, Inc. in the United States District Court, Northern
District of California, San Jose Division. The suit seeks damages and injunctive
relief based upon the alleged infringement by the defendants of United States
Patent Nos. 4,751,578 and 4,706,121. The defendants have moved to transfer the
action to the United States District Court, Northern District of Oklahoma, and
the motion is under submission.
8
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
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2.1** Parent Significant Shareholder Agreement, dated as of December 23, 1996, by and among StarSight
Telecast, Inc., a California corporation, and certain significant shareholders of Gemstar
International Group Limited.
2.2** Agreement and Plan of Merger, dated as of December 23, 1996, by and among Gemstar
International Group Limited, a British Virgin Islands corporation, StarSight Telecast, Inc., a
California corporation, and G/S Acquisition Subsidiary, a California corporation.
3.1***** Amended and Restated Memorandum of Association of the Company.
3.2***** Amended and Restated Articles of Association of the Company.
10.1* Patent Assignment Agreement, dated as of March 15, 1994, between Gemstar Development
Corporation and Roy J. Mankovitz. (Confidential treatment requested).
10.2* Contract Engineering Agreement (undated) between Hilite, Inc. and Gemstar Development
Corporation. (Confidential treatment requested).
10.3* Contract Engineering Agreement (undated) between Hilite, Inc. and Gemstar Holdings Limited.
(Confidential treatment requested).
10.4* Contract Engineering Agreement (undated) between Hilite, Inc. and Index Systems, Inc.
(Confidential treatment requested).
10.5* Form of Option Exercise and Assignment Agreement, dated March 16, 1994, between Gemstar
Development Corporation and each of Henry C. Yuen, Wilson K.C. Cho and Daniel S.W. Kwoh.
10.6(a)* Exclusive Representation Agreement, dated July 30, 1990, between Gemstar Development
Corporation and United Feature Syndicate, Inc. (Confidential treatment requested).
10.6(b)* Exclusive Representation Agreement, dated May 20, 1991, between Gemstar Development
Corporation and United Feature Syndicate, Inc., together with First Amendment to Exclusive
Representation Agreement, dated March 4, 1994 (Confidential treatment requested).
10.6(c)* Exclusive Representation Agreement, dated March 21, 1994 between Gemstar Development
Corporation and United Feature Syndicate, Inc. (Confidential treatment requested).
10.7* Registration Rights Agreement, dated August 16, 1995, between Gemstar International Group
Limited and the Shareholders of E Guide, Inc.
10.8** Company Significant Shareholder Agreement, dated as of December 23, 1996, by and among
Gemstar International Group Limited, a British Virgin Islands corporation, and certain
significant shareholders of StarSight Telecast, Inc.
10.9** Company Option Agreement, dated as of December 23, 1996, by and between StarSight Telecast,
Inc., a California corporation, and Gemstar International Group Limited, a British Virgin Islands
corporation.
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
10.10** Parent Option Agreement, dated as of December 23, 1996, by and between StarSight Telecast, Inc.,
a California corporation, and Gemstar International Group Limited, a British Virgin Islands
corporation.
10.11*** TDN, Inc., Stockholders Agreement, dated as of October 31, 1997, by and among TDN, Inc., a
Delaware corporation, Gemstar Marketing, Inc., a California corporation, and Thomson
Consumer Electronics, Inc., a Delaware corporation.
10.12*** Cost and Reimbursement Support Agreement, dated as of October 31, 1997, by and among TDN,
Inc., a Delaware corporation, and Gemstar International Group Limited.
10.13*** Definitive Agreement, dated as of January 9, 1998, by and among Gemstar International Group
Limited, StarSight Telecast, Inc., a California corporation, and Microsoft Corporation, a
Washington corporation.
10.14*** Rescission Agreement, dated as of January 9, 1998, by and between StarSight Telecast, Inc., a
California corporation and Microsoft Corporation, a Washington corporation.
27****** Financial Data Schedule.
99.1* 1994 Stock Incentive Plan, as amended.
99.2* Employment Agreement, dated April 1, 1994, between Gemstar Development Corporation and
Henry C. Yuen, as amended. (Confidential treatment requested).
99.3* Employment Agreement, dated August 1995, between Gemstar International Group Limited and
Thomas L.H. Lau.
99.4* Employment Agreement, dated April 1, 1994, between Gemstar Development Corporation and
Daniel S.W. Kwoh, as amended. (Confidential treatment requested).
99.5* Employment Agreement, dated April 1, 1994, between Gemstar Development Corporation and
Roy J. Mankovitz, as amended. (Confidential treatment requested).
99.6* Employment Agreement, dated August 16, 1995, between Pros Technology Limited and Wilson
K.C. Cho. (Confidential treatment requested).
99.7* Employment Agreement, dated April 1, 1994, between Gemstar Development Corporation and
Elsie Ma Leung, as amended.
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
99.8* Employment Agreement, dated April 1, 1994, between Gemstar Development Corporation and
Larry Goldberg, as amended.
99.9* Amendment to Subsection 1.4(a) of 1994 Stock Incentive Plan, as amended.
99.10**** Amendment to 1994 Stock Incentive Plan, as amended, adopted on March 12, 1998.
99.11**** Amended and Restated Employment Agreement, effective as of January 7, 1998, among Gemstar
International Group Limited, Gemstar Development Corporation and Henry C. Yuen.
99.12**** Amended and Restated Employment Agreement, dated as of March 31, 1998, among Gemstar
International Group Limited, Gemstar Development Corporation and Elsie Leung.
</TABLE>
* Previously filed as part of Form F-1 Registration Statement of the
Company (33-79016), which was declared effective on October 10, 1995,
and incorporated herein by reference.
** Previously filed as part of Form F-4 Registration Statement of the
Company (333-6790), which was declared effective on April 15, 1997, and
incorporated herein by reference.
*** Previously filed as part of Form 8-K dated January 12, 1998, as amended
on June 11, 1998, and incorporated herein by reference. Certain
information in this exhibit has been omitted pursuant to a request for
Confidential Treatment granted by the Securities and Exchange
Commission.
**** Previously filed as part of Form 10-K for the fiscal year ended March
31, 1998, and incorporated herein by reference. Certain information in
this exhibit has been omitted pursuant to a request for Confidential
Treatment which was filed with the Securities and Exchange Commission.
***** Previously filed as part of Form F-1 Registration Statement of the
Company (33-79016), which was declared effective on October 10, 1995,
and incorporated herein by reference. Further amendments were filed in
connection with the Company's report on Form 8-K on July 13, 1998.
****** Filed herewith.
(b) Reports on Form 8-K
(1) The Company filed a report on Form 8-K on July 13, 1998, related to the
adoption of a shareholder rights plan, amendments to the Company's Amended
and Restated Articles of Association and the Company's Amended and Restated
Memorandum of Association, and a press release dated July 12, 1998
regarding the shareholder rights plan and the amendments to the Articles
and Memorandum of Association.
(2) The Company filed a report on Form 8-K on August 20, 1998, related to a
press release dated August 18, 1998 announcing that the Company's board of
directors had authorized the repurchase by the Company of up to $100
million of its outstanding shares.
11
<PAGE>
SIGNATURES
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.
Gemstar International Group Limited
(Registrant)
By: /s/ Elsie Leung
-------------------------------
Elsie Leung
Chief Financial Officer
Date: November 16, 1998
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AND THE CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS INCLUDED IN THE COMPANY'S FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER
30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 184,203
<SECURITIES> 3,900
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 197,393
<PP&E> 13,464
<DEPRECIATION> 10,399
<TOTAL-ASSETS> 218,608
<CURRENT-LIABILITIES> 55,314
<BONDS> 0
0
0
<COMMON> 209,822
<OTHER-SE> (70,433)
<TOTAL-LIABILITY-AND-EQUITY> 218,608
<SALES> 0
<TOTAL-REVENUES> 70,931
<CGS> 0
<TOTAL-COSTS> 33,295
<OTHER-EXPENSES> 1,851
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 40,061
<INCOME-TAX> 11,616
<INCOME-CONTINUING> 28,445
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,445
<EPS-PRIMARY> .59
<EPS-DILUTED> .51
</TABLE>
