GTECH Announces Developments in Brazil and Adjusts Earnings Guidance
June 29 2004 - 6:48PM
PR Newswire (US)
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/
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