Gtech (NYSE:GTK)
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GTECH Announces Developments in Brazil and Adjusts Earnings
Guidance
WEST GREENWICH, R.I., June 29 /PRNewswire-FirstCall/ -- GTECH Holdings
Corporation (NYSE:GTK) has coincidentally been informed of rulings in two
previously-announced pending legal matters in Brazil.
Civil Suit Update
As previously reported, a civil action has been initiated by the Public
Ministry in the Federal Court of Brasilia against GTECH Brazil. It is the
Company's understanding that the Judge has granted a procedural injunction
ordering that 30% of payments due to GTECH from Caixa Economica Federal (Caixa)
will be withheld and deposited in an account maintained by the Court. The judge
held that as a foreign company doing business in Brazil, GTECH does not have
adequate in-country holdings to satisfy the potential claim should the
plaintiff prevail in this suit. The order allows for a process to change that
percentage based on a determination of the effective cost of servicing the
contract. The Court also ordered that all assets of GTECH Brazil be identified
to the Court so as to prevent their transfer or disposition.
The injunction was granted as part of a confidential ex parte proceeding in
which GTECH was not afforded an opportunity to participate. The Company
intends to appeal the decision to an appellate court. Pending the outcome of
that appeal, the Company will undertake a comprehensive review of service and
investment levels in Brazil.
With regard to the underlying civil action, the Company continues to maintain
that it has good and adequate defenses that it intends to vigorously pursue.
Criminal Proceedings Update
GTECH has also learned that a Judge has refused a request by the Public
Prosecutor to initiate criminal charges against nine individuals including four
officers of Caixa and two individuals related to GTECH -- one a former employee
and the other a present employee. The Judge chose not to accept any elements
of the charges as was his prerogative, but instead, granted a request by the
Federal Police to continue the investigation which had been suspended by the
actions of the Public Prosecutor's Office. The Judge's order pertained to
procedural aspects and not the merits of the charges.
GTECH is not the subject of the investigation nor can it be charged under
Brazilian law. The Company has cooperated fully with the investigation and has
encouraged related individuals to do the same. GTECH is currently conducting
an internal investigation that is nearing its completion. The Company is
satisfied from preliminary findings that it acted appropriately.
In denying the request, the Judge cited the Prosecutor's rush to bring charges
in response to the pressure of public opinion as a contributing factor to his
decision to return the investigation to the Federal Police.
Earnings Guidance
GTECH expects this development to reduce service revenues by approximately $20
million for the remainder of the fiscal year ending February 26, 2005. Based
upon this, the Company is adjusting the guidance provided on June 22, 2004.
The Company now expects earnings per share for fiscal 2005 to be in the range
of $2.85 to $2.95 on a fully-diluted basis, rather than the previous guidance
of $3.05 to $3.15 per diluted share.
For the second quarter, the Company now expects earnings per share to be in the
range of $0.70 to $0.75 per share for the quarter, compared with previous
guidance of $0.75 to $0.80, and the $0.74 reported in the same period last
year. This guidance is provided on a pre-split basis.
Certain statements contained in this press release are forward looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Such statements include,
without limitation, statements relating to the prospects and financial outlook
for the Company, which reflect management assumptions regarding: (i) the
future prospects for and stability of the lottery industry and other businesses
in which the Company is engaged or expects to be engaged, (ii) the future
operating and financial performance of the Company (including, without
limitation, expected future growth in revenues, profit margins and earnings per
share), and (iii) the ability of the Company to retain existing business and to
obtain and retain new business. Such forward looking statements reflect
management's assessment based on information currently available, but are not
guarantees and are subject to risks and uncertainties that could cause actual
results to differ materially from those contemplated in the forward looking
statements.
These risks and uncertainties include, but are not limited to, those set forth
above, in the Company's subsequent press releases and on reports by the Company
on Forms 10-K, 10-Q and 8-K, and other reports and filings with the Securities
and Exchange Commission, as well as risks and uncertainties respecting: (i)
the potential impact of extensive and evolving government regulations upon the
Company's business; (ii) the ability of the Company to continue to retain and
extend its existing contracts and win new contracts; (iii) the possibility of
slower than expected growth or declines in sales of lottery and gaming goods
and services by the Company or the Company's customers; (iv) exposure to
foreign currency fluctuations; (v) risks and uncertainties inherent in doing
business in foreign jurisdictions; (vi) the relatively large percentage of the
Company's revenues attributable to a relatively small number of the Company's
customers; (vii) the possibility of significant fluctuation of quarterly
operating results; (viii) the intensity of competition in the lottery and
gaming industries; (ix) the possibility of substantial penalties under and/or
termination of the Company's contracts; (x) the ability of the Company to
respond to technological change and to satisfy the future technological demands
of its customers; (xi) opposition to expansion of lottery and gaming; (xii) the
Company's ability to attract and retain key employees; and (xiii) the
possibility of adverse determinations in pending legal proceedings.
GTECH, a leading global information technology company with over $1 billion in
revenues and more than 5,500 people in 45 countries, provides software,
networks, and professional services that power high-performance, transaction
processing solutions. The Company's core market is the lottery industry, with
a growing presence in commercial gaming technology and financial services
transaction processing. For more information about the Company, please visit
GTECH's website at http://www.gtech.com/.
Contact:
Robert K. Vincent
Public Affairs
GTECH Corporation
401-392-7452
DATASOURCE: GTECH Holdings Corporation
CONTACT: Robert K. Vincent, Public Affairs of GTECH Corporation,
+1-401-392-7452
Web site: http://www.gtech.com/