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EXHIBIT 99.1
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Combined Financial Statements
for Gemstar-TV Guide International, Inc. (the "Pro Forma Statements") give
effect to the merger using the purchase method of accounting as if the merger
had been completed on March 31, 2000 for balance sheet purposes and on April 1,
1999 for statement of operations purposes, subject to the assumptions and
adjustments described in the accompanying Notes to Unaudited Pro Forma Condensed
Combined Financial Statements.
The pro forma adjustments contained in the Pro Forma Statements, including
the amounts used in the preliminary purchase price allocation, are based upon
the best information available to management as of the date of this Current
Report on Form 8-K/A, in part utilizing preliminary assessments by independent
valuation consultants. The pro forma adjustments are preliminary and have been
made solely for purposes of developing such Pro Forma Statements. In most cases,
these estimates have relied heavily on assessments by TV Guide's management in
light of TV Guide's business model. The business activities of the combined
company have been and are currently being evaluated in light of existing facts
and circumstances. As a result of that assessment, there is a possibility that
certain of the businesses of TV Guide could be substantially changed. The impact
of such potential changes are not reflected in the Pro Forma Statements. As a
result, the final allocation of the purchase price and the amounts and lives of
the intangible assets, including goodwill, could be different from the amounts
and lives used in the Pro Forma Statements and such differences could be
material to the results of operations of the combined company following the
merger.
The fiscal year ends for Gemstar and TV Guide are different. For purposes
of preparing the Unaudited Pro Forma Condensed Combined Statement of Operations
for the year ended March 31, 2000, Gemstar's operating results for that period
have been combined with the operating results of TV Guide for the year ended
December 31, 1999. On March 31, 1999, TV Guide acquired from a subsidiary of The
News Corporation Ltd. the stock of certain corporations that publish TV Guide
magazine and other printed television program listings guides in a transaction
accounted for using the purchase method of accounting. Accordingly, the TV Guide
operating results include the results of operations of the TV Guide magazine
businesses commencing on March 1, 1999. The results of operations of the TV
Guide magazine businesses for the period from January 1, 1999 to February 28,
1999 were not material to the Unaudited Pro Forma Condensed Combined Statement
of Operations.
The Pro Forma Statements have been derived from the historical consolidated
financial statements of Gemstar and TV Guide and are qualified in their entirety
by reference to, and should be read in conjunction with, such historical
consolidated financial statements and related notes thereto.
The Pro Forma Statements are presented for illustrative purposes only and
do not purport to be indicative of the operating results or financial position
that would have actually occurred if the merger had occurred on the dates
indicated, nor are they necessarily indicative of future operating results or
financial position of the combined company. The Pro Forma Statements do not give
effect to any cost savings or synergies which may result from the integration of
the Gemstar and TV Guide operations.
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GEMSTAR-TV GUIDE INTERNATIONAL, INC.
(FORMERLY GEMSTAR INTERNATIONAL GROUP LIMITED)
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
March 31, 2000
(In millions)
<TABLE>
<CAPTION>
Gemstar TV Guide Pro Forma
Historical Historical Adjustments Pro Forma
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash, cash equivalents and
marketable securities $286 $ 116 $ (28) (1) $ 324
(50) (2)
Accounts receivable and other
current assets 72 310 -- 382
------ ------- ------- ---------
Total current assets 358 426 (78) 706
Property, plant and equipment, net 5 81 -- 86
Intangible assets, net 19 2,731 7,277 (1) 10,027
Other assets, net 85 57 (3) (1) 136
(3) (3)
------ ------- ------- ---------
$467 $3,295 $7,193 $10,955
====== ======= ======= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable, accrued expenses
and current debt $ 41 $ 168 $ -- $ 209
Deferred revenue 3 294 -- 297
------ ------- ------- ---------
Total current liabilities 44 462 -- 506
Deferred income taxes 35 638 939 (1) 1,612
Long-term debt -- 648 (50) (2) 598
Other liabilities 2 69 -- 71
Shareholders' equity:
Capital stock and additional
paid-in capital 336 1,289 6,584 (1) 8,206
(3) (3)
Retained earnings 41 183 (183) (1) 41
Accumulated other comprehensive
income, net of tax 37 6 (6) (1) 37
Unearned compensation -- -- (88) (1) (88)
Treasury stock, at cost (28) -- -- (28)
------ ------- ------- ---------
Net shareholders' equity 386 1,478 6,304 8,168
------ ------- ------- ---------
$467 $3,295 $7,193 $10,955
====== ======= ======= =========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
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GEMSTAR-TV GUIDE INTERNATIONAL, INC.
(FORMERLY GEMSTAR INTERNATIONAL GROUP LIMITED)
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
Year Ended March 31, 2000
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Gemstar TV Guide Pro Forma
Historical Historical (a) Adjustments Pro Forma
---------------- ------------------ --------------------- -----------
<S> <C> <C> <C> <C> <C>
Revenues $ 241 $1,135 $ -- $1,376
Operating expenses, excluding
depreciation and amortization 124 912 37 (4) 1,073
Depreciation and amortization 6 136 492 (5) 634
-------------- ------------------ ------------------ -------
Operating income (loss) 111 87 (529) (321)
Other income (expense), net 13 (56) -- (43)
-------------- ------------------ ------------------ -------
Income (loss) before income taxes 124 31 (529) (374)
Provision (benefit) for income taxes 43 26 (76) (6) --
7 (7)
-------------- ------------------ ------------------ -------
Net income (loss) $ 81 $ 5 $(460) $ (374)
============== ================== ================== =======
Earnings (loss) per share:
Basic $0.40 $(0.92)
Diluted $0.33 $(0.92)
Number of shares:
Basic 205 405
Diluted 248 405
</TABLE>
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(a) Amounts presented for TV Guide Historical are for the year ended December
31, 1999.
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Note 1 - Pro Forma Adjustments
The Pro Forma Statements give effect to the following pro forma
adjustments:
(1) To record the merger using the purchase method of accounting, reflecting the
estimated purchase price and purchase price allocation noted below (in
millions, except share and per share amounts).
<TABLE>
<CAPTION>
Estimated Purchase Price:
<S> <C>
Shares of TV Guide common stock outstanding at March 31, 2000 304,779,320
Exchange ratio per share .6573
-----------
Equivalent Gemstar shares 200,331,447
Gemstar share price based on the average closing price for
two days before and after the merger was agreed to and
announced $38.21
-----------
Consideration for TV Guide outstanding common stock $ 7,655
Fair value of TV Guide stock options assumed by Gemstar 218
Estimated transaction costs 31
-----------
Total estimated purchase price $ 7,904
===========
Purchase Price Allocation:
Historical net book value of TV Guide $ 1,478
Estimated fair value adjustments relating to:
Contracts 839
Patents and trademarks 633
Customer subscriber lists 981
Unearned compensation 88
Deferred income taxes (939)
Preliminary goodwill 4,824
-----------
Total $ 7,904
===========
</TABLE>
On a pro forma basis as of March 31, 2000, intangible assets are comprised of
the following amounts (in millions) and estimated average useful lives:
<TABLE>
<S> <C> <C>
Publishing rights $ 1,231 40 years
Contracts 839 10 years
Patents and trademarks 1,053 15 and 40 years, respectively
Customer subscriber lists 1,053 15 years
Goodwill 5,851 15 years
-------
$10,027
=======
</TABLE>
The above purchase price allocation and the lives assigned to the assets are
preliminary and have been made solely for the purpose of developing the Pro
Forma Statements. The Company, with the assistance of valuation consultants,
is in the process of evaluating the fair value and the lives of the assets
acquired. Accordingly, the allocation of the purchase price and the lives of
the assets acquired, which are based on preliminary estimates, may differ
from the final purchase price allocation and the final lives assigned to the
assets.
(2) As of March 31, 2000, TV Guide has outstanding $400 million of 8.125% senior
subordinated notes due 2009 that contain provisions whereby upon the
occurrence of a change in control, such as will result in the merger, the
noteholders will have the right to require TV Guide to repurchase all or any
part of such noteholders' securities at a purchase price equal to 101% of
the principal amount of the notes plus accrued and unpaid interest through
the repurchase date. The Pro Forma Statements assume that the noteholders
will require TV Guide to repurchase the notes and the cost of the repurchase
in excess of the principal amount of the notes plus
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accrued interest, $4 million, has been included in the estimated transaction
costs above. TV Guide has a secured bank credit facility comprised of a $300
million six-year revolving credit facility and a $300 million 364-day
revolving credit facility that converts into a five year term loan under
which $240.3 million of borrowings are outstanding as of March 31, 2000. The
Pro Forma Statements assume that TV Guide will finance the repurchase of the
notes using its existing secured bank credit facility and $50 million in
cash. However, TV Guide may elect to obtain financing to fund the repurchase
from an alternate source or to fund all or additional amounts of the
repurchase out of then available cash.
An increase of 25 basis points in the historical interest rates, assuming
$600 million of borrowings under the secured bank credit facility remain
outstanding, would result in an additional interest expense of $1.5 million
annually.
(3) To reflect the costs incurred to register the Gemstar common stock to be
issued in the merger.
(4) To reflect the amortization of the unearned compensation related to the
unvested TV Guide stock options assumed by Gemstar.
(5) To reflect the amortization of the identified intangible assets and
preliminary goodwill resulting from the merger. The intangible assets and
goodwill will be amortized on a straight-line basis over their estimated
useful lives as described above. The Company, with the assistance of
valuation consultants, is in the process of evaluating the fair value and
the lives of the assets acquired. Accordingly, the allocation of the
purchase price and the lives of the assets acquired, which are based on
preliminary estimates, may differ from the final purchase price allocation
and the final lives assigned to the assets. The Company will continually
evaluate the periods of amortization to determine whether later events and
circumstances warrant revised estimates of useful lives.
(6) To reflect the statutory tax effects of the pro forma adjustments.
(7) In February 2000, as part of the merger plan with TV Guide, Gemstar effected
a domestication from the British Virgin Islands to the State of Delaware.
This adjustment reflects the statutory tax effects as if the domestication
of Gemstar had occurred on April 1, 1999.
The following information reconciles the number of shares used to compute
Gemstar's historical basic and diluted earnings per share to pro forma basic and
diluted earnings per share (in millions):
<TABLE>
<CAPTION>
Basic Diluted
----- -------
<S> <C> <C>
Weighted average number of shares--historical 205 248
Exclude historical dilutive potential shares
of common stock as shares would be antidilutive -- (43)
Common shares to be issued in connection with
the merger 200 200
--- ---
Weighted average number of shares--pro forma 405 405
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