FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 24, 2001
Commission file number 1-11250
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GTECH Holdings Corporation
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(Exact name of registrant as specified in its charter)
Delaware 05-0450121
- ----------------------------------------------- ---------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
55 Technology Way, West Greenwich, Rhode Island 02817
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (401) 392-1000
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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
----- -----
At December 29, 2001, there were 28,647,130 shares of the registrant's Common
Stock outstanding.
INDEX
GTECH HOLDINGS CORPORATION AND SUBSIDIARIES
Page
PART I. FINANCIAL INFORMATION Number
- ------- --------------------- ------
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Income Statements 4-5
Consolidated Statements of Cash Flows 6
Consolidated Statements of Shareholders' Equity 7
Notes to Consolidated Financial Statements 8-13
Item 2. Management's Discussion and Analysis of Financial Condition 14-22
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk 22
PART II. OTHER INFORMATION
- ------- ------------------
Item 1. Legal Proceedings 23
Item 6. Exhibits and Reports on Form 8-K 24
SIGNATURES 25
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EXHIBITS
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PART 1. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
GTECH HOLDINGS CORPORATION AND SUBSIDIARIES (Unaudited)
November 24, February 24,
2001 2001
------------ ------------
ASSETS (Dollars in thousands)
CURRENT ASSETS
Cash and cash equivalents $ 11,433 $ 46,948
Trade accounts receivable 94,359 118,721
Sales-type lease receivables 7,972 8,722
Inventories 105,734 117,789
Deferred income taxes 26,850 26,850
Other current assets 19,324 18,798
-----------
TOTAL CURRENT ASSETS 265,672 337,828
SYSTEMS, EQUIPMENT AND OTHER ASSETS RELATING TO CONTRACTS 1,340,536 1,283,414
Less: Accumulated Depreciation (953,640) (922,080)
----------- -----------
386,896 361,334
GOODWILL 118,321 122,325
OTHER ASSETS 92,923 116,673
----------- -----------
TOTAL ASSETS $ 863,812 $ 938,160
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short term borrowings $ 2,541 $ 2,316
Accounts payable 38,827 49,267
Accrued expenses 69,530 65,571
Employee compensation 32,041 31,898
Advance payments from customers 79,794 55,418
Income taxes payable 66,030 64,573
Current portion of long-term debt 3,583 3,512
----------- -----------
TOTAL CURRENT LIABILITIES 292,346 272,555
LONG-TERM DEBT, less current portion 325,938 316,961
OTHER LIABILITIES 33,487 29,883
DEFERRED INCOME TAXES 4,399 4,399
SHAREHOLDERS' EQUITY
Preferred Stock, par value $.01 per share--20,000,000 shares authorized, none issued -- --
Common Stock, par value $.01 per share--150,000,000 shares authorized,
46,039,390 and 44,507,315 shares issued, 29,080,025 and
34,257,527 shares outstanding at November 24, 2001 and February
24, 2001, respectively 460 445
Additional paid-in capital 225,296 183,294
Equity carryover basis adjustment (7,008) (7,008)
Accumulated other comprehensive loss (100,542) (85,852)
Retained earnings 534,566 479,305
----------- -----------
652,772 570,184
Less cost of 16,959,365 and 10,249,788 shares in treasury at
November 24, 2001 and February 24, 2001, respectively (445,130) (255,822)
----------- -----------
207,642 314,362
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 863,812 $ 938,160
=========== ===========
See Notes to Consolidated Financial Statements
-3-
CONSOLIDATED INCOME STATEMENTS
GTECH HOLDINGS CORPORATION AND SUBSIDIARIES
(Unaudited)
Three Months Ended
----------------------------
November 24, November 25,
2001 2000
------------ ------------
(Dollars in thousands,
except per share amounts)
Revenues:
Services $ 196,427 $ 213,827
Sales of products 67,152 7,204
------------ ------------
263,579 221,031
Costs and expenses:
Costs of services 138,346 145,338
Costs of sales 51,147 7,272
------------ ------------
189,493 152,610
------------ ------------
Gross profit 74,086 68,421
Selling, general and administrative 26,692 24,575
Research and development 7,980 11,912
Goodwill amortization 1,493 1,473
------------ ------------
Operating expenses 36,165 37,960
------------ ------------
Operating income 37,921 30,461
Other income (expense):
Interest income 1,070 1,343
Equity in earnings of unconsolidated affiliates 1,255 520
Other income 250 4,771
Interest expense (5,624) (7,116)
------------ ------------
Income before income taxes 34,872 29,979
Income taxes 13,251 11,692
------------ ------------
Net income $ 21,621 $ 18,287
============ ============
Basic earnings per share $ .75 $ .53
============ ============
Diluted earnings per share $ .73 $ .53
============ ============
See Notes to Consolidated Financial Statements
-4-
CONSOLIDATED INCOME STATEMENTS
GTECH HOLDINGS CORPORATION AND SUBSIDIARIES
(Unaudited)
Nine Months Ended
---------------------------
November 24, November 25,
2001 2000
------------ ------------
(Dollars in thousands,
except per share amounts)
Revenues:
Services $ 616,597 $ 640,667
Sales of products 118,531 49,970
------------ ------------
735,128 690,637
Costs and expenses:
Costs of services 426,430 430,723
Costs of sales 94,747 52,698
------------ ------------
521,177 483,421
------------ ------------
Gross profit 213,951 207,216
Selling, general and administrative 83,343 89,373
Research and development 23,949 38,189
Goodwill amortization 4,556 4,691
Special charge -- 40,018
------------ ------------
Operating expenses 111,848 172,271
------------ ------------
Operating income 102,103 34,945
Other income (expense):
Interest income 4,324 4,312
Equity in earnings of unconsolidated affiliates 3,830 2,614
Other income 743 7,212
Interest expense (18,475) (20,804)
------------ ------------
Income before income taxes 92,525 28,279
Income taxes 35,159 11,029
------------ ------------
Net income $ 57,366 $ 17,250
============ ============
Basic earnings per share $ 1.93 $ .50
============ ============
Diluted earnings per share $ 1.89 $ .50
============ ============
See Notes to Consolidated Financial Statements
-5-
CONSOLIDATED STATEMENTS OF CASH FLOWS
GTECH HOLDINGS CORPORATION AND SUBSIDIARIES
(Unaudited)
Nine Months Ended
---------------------------
November 24, November 25,
2001 2000
------------ ------------
(Dollars in thousands)
OPERATING ACTIVITIES
Net income $ 57,366 $ 17,250
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 118,483 121,473
Intangibles amortization 6,356 9,351
Goodwill amortization 4,556 4,691
Special charge -- 40,018
Equity in losses of unconsolidated affiliates,
net of dividends received (588) (922)
Other 3,970 (815)
Changes in operating assets and liabilities:
Trade accounts receivable 27,654 25,839
Inventories 12,055 (30,977)
Special charge (6,272) (23,599)
Other assets and liabilities 31,016 (13,447)
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 254,596 148,862
INVESTING ACTIVITIES
Purchases of systems, equipment and other assets relating to contracts (146,117) (107,916)
Investments in and advances to unconsolidated subsidiaries 3,786 (14,275)
Other 7,267 (9,220)
------------ ------------
NET CASH USED FOR INVESTING ACTIVITIES (135,064) (131,411)
FINANCING ACTIVITIES
Net proceeds from issuance of long-term debt 186,000 92,500
Principal payments on long-term debt (182,298) (100,066)
Purchases of treasury stock (194,389) (13,995)
Proceeds from stock options 40,968 325
Other (1,056) 5,587
------------ ------------
NET CASH USED FOR FINANCING ACTIVITIES (150,775) (15,649)
Effect of exchange rate changes on cash (4,272) (3,150)
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DECREASE IN CASH AND CASH EQUIVALENTS (35,515) (1,348)
Cash and cash equivalents at beginning of period 46,948 11,115
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 11,433 $ 9,767
============ ============
See Notes to Consolidated Financial Statements
-6-
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - (Unaudited)
GTECH HOLDINGS CORPORATION AND SUBSIDIARIES
Equity Accumulated
Additional Carryover Other
Outstanding Common Paid-in Basis Comprehensive Retained Treasury
Shares Stock Capital Adjustment Income (Loss) Earnings Stock Total
----------- ------ ---------- ---------- ------------- -------- ---------- ---------
(Dollars in thousands)
Balance at February 24, 2001 34,257,527 $ 445 $ 183,294 $ (7,008) $ (85,852) $479,305 $(255,822) $ 314,362
Comprehensive income:
Net income -- -- -- -- -- 57,366 -- 57,366
Other comprehensive income
(loss), net of tax:
Foreign currency translation -- -- -- -- (14,929) -- -- (14,929)
Net gain on derivative instruments -- -- -- -- 281 -- -- 281
Unrealized loss on investments -- -- -- -- (42) -- -- (42)
--------
Comprehensive income 42,676
Treasury shares repurchased (6,907,900) -- -- -- -- -- (194,389) (194,389)
Shares reissued under employee
stock purchase and stock
award plans 198,323 -- -- -- -- (2,105) 5,081 2,976
Shares issued upon exercise of
stock options 1,532,075 15 40,953 -- -- -- -- 40,968
Other stock based compensation -- -- 1,049 -- -- -- -- 1,049
----------- ------ ---------- ---------- ------------- -------- --------- ---------
Balance at November 24, 2001 29,080,025 $ 460 $ 225,296 $ (7,008) $ (100,542) $534,566 $(445,130) $ 207,642
=========== ====== ========== ========== ============= ======== ========= =========
See Notes to Consolidated Financial Statements
-7-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
GTECH HOLDINGS CORPORATION AND SUBSIDIARIES
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of GTECH Holdings
Corporation (the "Company"), the parent of GTECH Corporation, have been prepared
in accordance with generally accepted accounting principles ("GAAP") for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by GAAP for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
nine-month period ended November 24, 2001 are not necessarily indicative of the
results that may be expected for the full fiscal year ending February 23, 2002.
The balance sheet at February 24, 2001 has been derived from the audited
financial statements at that date. For further information refer to the
Consolidated Financial Statements and footnotes thereto included in the
Company's fiscal 2001 Annual Report on Form 10-K.
Certain reclassifications have been made to the prior years' financial
statements to conform to the current year presentation.
NOTE B -- INVENTORIES November 24, February 24,
2001 2001
------------ ---------------
(Dollars in thousands)
Inventories consist of:
Raw materials $ 4,031 $ 45,689
Work in progress 92,242 57,210
Finished goods 9,461 14,890
------------ ---------------
$ 105,734 $ 117,789
============ ===============
NOTE C -- LONG-TERM DEBT November 24, February 24,
2001 2001
------------ ---------------
(Dollars in thousands)
Long-term debt consists of:
7.75% Series A Senior Notes due 2004 $ 150,000 $ 150,000
7.87% Series B Senior Notes due 2007 150,000 150,000
Revolving credit facility 8,000 ---
Other 21,521 20,473
------------ ---------------
329,521 320,473
Less current portion 3,583 3,512
------------ ---------------
$ 325,938 $ 316,961
============ ===============
In the second quarter of fiscal 2002, the Company refinanced its revolving
credit facility with a syndicate of nine banks led by The Bank of America, which
provides for an unsecured revolving line of credit of $300 million maturing in
June 2006 (the "Credit Facility"). At November 24, 2001, the weighted average
interest rate for outstanding borrowings under the Credit Facility was 2.77%.
-8-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(continued)
On December 10, 2001, after the close of the Company's fiscal 2002 third
quarter, the Company announced that it has launched an offer to purchase up to
$150 million aggregate principal amount of its 7.75% Series A Senior Notes due
2004 and its 7.87% Series B Guaranteed Senior Notes due 2007 (collectively, the
"Senior Notes") issued by GTECH Corporation. The offer expires on January 9,
2002, unless extended or earlier terminated, and is conditioned on, among other
things, raising debt to finance such purchases.
On December 18, 2001, after the close of the Company's fiscal 2002 third
quarter, the Company issued, through a private placement, $175 million of 1.75%
Convertible Debentures due 2021. The debentures will be convertible into shares
of the Company's common stock initially at a conversion price of approximately
$55.00 if the sale price of the Company's common stock exceeds 120% of the
conversion price over specified periods, and in certain other circumstances. At
the initial conversion price, each $1,000 principal amount of debentures will be
convertible into 18.1818 shares of the Company's common stock. The initial
conversion price represents a 30.3% premium over the closing price of the
Company's common stock on December 12, 2001, which was $42.20 per share. In
addition, the debentures will be redeemable at the Company's option beginning in
December 2006, and the holders may require the Company to repurchase the
debentures on December 15, 2004, 2006, 2011 and 2016, and in certain other
circumstances. Certain of the Company's subsidiaries guarantee its obligations
under the debentures.
The Company intends to use the net proceeds from the sale of the debentures,
along with additional borrowings under its credit facility, if needed, for the
repayment of certain of the Senior Notes, pursuant to the offer to purchase,
including payment of any applicable premiums, fees and expenses, and the
repurchase of up to $40 million of the Company's common stock under its share
repurchase program.
NOTE D -- INCOME TAXES
The Company's effective income tax rate is greater than the statutory rate
primarily due to state income taxes and certain expenses that are not deductible
for income tax purposes.
NOTE E -- COMMITMENTS AND CONTINGENCIES
See "Legal Proceedings" in Part II, Item 1 and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in Part I, Item 2
herein.
-9-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(continued)
NOTE F--EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
Three Months Ended Nine Months Ended
---------------------------- ---------------------------
November 24, November 25, November 24, November 25,
2001 2000 2001 2000
------------- ------------ ------------ ------------
(Dollars and shares in thousands, except per share amounts)
Numerator:
Net income $ 21,621 $ 18,287 $ 57,366 $ 17,250
============= ============ ============ ============
Denominator:
Weighted average shares-Basic 28,895 34,471 29,731 34,714
Effect of dilutive securities:
Employee stock options and
unvested restricted shares 699 22 633 25
------------- ------------ ------------ ------------
Weighted average shares-Diluted 29,594 34,493 30,364 34,739
============= ============ ============ ============
Basic earnings per share $ .75 $ .53 $ 1.93 $ .50
============= ============ ============ ============
Diluted earnings per share $ .73 $ .53 $ 1.89 $ .50
============= ============ ============ ============
NOTE G -- COMPREHENSIVE INCOME
The following table sets forth the components of comprehensive income:
Three Months Ended Nine Months Ended
--------------------------- ---------------------------
November 24, November 25, November 24, November 25,
2001 2000 2001 2000
------------ ------------ ------------ ------------
(Dollars in thousands)
Net income $ 21,621 $ 18,287 $ 57,366 $ 17,250
Other comprehensive income (loss), net of tax:
Foreign currency translation (1,598) (7,917) (14,929) (14,288)
Net gain (loss) on derivative instruments 2,413 (201) 281 (175)
Unrealized gain (loss) on investments (6) 78 (42) 78
------------ ------------ ------------ ------------
Comprehensive income $ 22,430 $ 10,247 $ 42,676 $ 2,865
============ ============ ============ ============
-10-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(continued)
NOTE H -- SEGMENT INFORMATION
The Company presently has one reportable segment, the Lottery segment, which
provides online, high speed, highly secured transaction processing systems to
the worldwide lottery industry. Executive management of the Company evaluates
segment performance based on net operating profit after income taxes. The "All
Other" category (as reported below) is comprised of the Company's Transactive
and IGI/Europrint subsidiaries.
The Company's business segment data is summarized below:
Three Months Ended Nine Months Ended
----------------------------- -------------------------------
November 24, November 25, November 24, November 25,
2001 2000 2001 2000
------------ ------------ ------------ ------------
(Dollars in thousands)
Revenues from external sources:
Lottery $ 258,218 $ 209,925 $ 717,157 $ 658,115
All other 5,361 11,106 17,971 32,522
------------ ------------ ------------ ------------
Consolidated $ 263,579 $ 221,031 $ 735,128 $ 690,637
============ ============ ============ ============
Net operating profit (loss) after income taxes:
Lottery $ 25,772 $ 22,339 $ 71,954 $ 56,662
All other 253 1,016 (857) 404
------------ ------------ ------------ ------------
Consolidated $ 26,025 $ 23,355 $ 71,097 $ 57,066
============ ============ ============ ============
A reconciliation of net operating profit after income taxes to net income as
reported on the Consolidated Income Statements is as follows:
Three Months Ended Nine Months Ended
------------------------------ -------------------------------
November 24, November 25, November 24, November 25,
2001 2000 2001 2000
------------ ------------ ------------ ------------
(Dollars in thousands)
Net operating profit after income taxes $ 26,025 $ 23,355 $ 71,097 $ 57,066
Reconciling items, net of tax:
Special charge -- -- -- (24,411)
Interest expense (3,486) (4,340) (11,454) (12,690)
Other (918) (728) (2,277) (2,715)
------------ ------------ ------------ ------------
Net income $ 21,621 $ 18,287 $ 57,366 $ 17,250
============ ============ ============ ============
-11-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(continued)
NOTE I -- SPECIAL CHARGES
In fiscal 2001, the Company recorded special charges of $42.3 million in
connection with certain contractual obligations and a value assessment of the
Company's business operations. The major components of the special charges
consisted of $14.0 million for a workforce reduction that eliminated
approximately 255 Company positions worldwide, $11.5 million for contractual
obligations in connection with the departures in July 2000 of the Company's
former Chairman and Chief Executive Officer and former President and Chief
Operating Officer, $8.5 million for costs associated with the exit of certain
business acquisition strategies and product lines and $8.3 million for the
termination of consulting agreements and facility exit costs, net of gains on
the disposition of Company aircraft.
A summary of the special charge activity, which is included in accrued expenses
in the Company's Consolidated Balance Sheets, is as follows:
Exit of Certain
Worldwide Executive Business
Workforce Contractual Strategies and
Reduction Obligations Product Lines Other Total
----------- ----------- --------------- -------- --------
(Dollars in thousands)
Special charges $ 13,958 $ 11,518 $ 8,536 $ 8,258 $ 42,270
Cash expenditures (6,032) (9,965) (4,140) (3,289) (23,426)
Noncash charges -- -- (4,396) (4,017) (8,413)
----------- ----------- ----------- -------- --------
Balance at February 24, 2001 7,926 1,553 -- 952 10,431
Change in estimate (510) (55) -- 565 --
Cash expenditures (4,329) (504) -- (1,439) (6,272)
----------- ----------- ----------- -------- --------
Balance at November 24, 2001 $ 3,087 $ 994 $ -- $ 78 $ 4,159
=========== =========== =========== ======== ========
NOTE J -- STOCK REPURCHASE
During the first nine months of fiscal 2002, the Company repurchased 6,907,900
shares of its common stock for $194.4 million.
On December 4, 2001, after the close of the Company's fiscal 2002 third quarter,
the Board of Directors authorized a new share repurchase program for up to an
aggregate amount of $75 million of the Company's common stock through February
2003. The new program is in addition to the unused capacity of approximately $16
million remaining in the Company's existing program, which was scheduled to
expire on June 30, 2002. The Company plans to periodically repurchase the shares
in the open market based on market conditions and corporate considerations.
-12-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(continued)
NOTE K - NEW ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards ("SFAS") No. 141, "Business Combinations", and
No. 142, "Goodwill and Other Intangible Assets", effective for fiscal years
beginning after December 15, 2001. Under the new rules, goodwill and indefinite
lived intangible assets are no longer amortized but are reviewed annually for
impairment. Separable intangible assets that are not deemed to have an
indefinite life will continue to be amortized over their useful lives. The
amortization provisions of SFAS No. 142 apply to goodwill and intangible assets
acquired after June 30, 2001. With respect to goodwill and intangible assets
acquired prior to July 1, 2001, the Company will apply the new accounting rules
beginning in the first quarter of fiscal 2003 (the quarter ended May 25, 2002).
The Company is currently evaluating the effect these new standards will have on
the earnings and the financial position of the Company.
NOTE L - ASSET IMPAIRMENT
During the second quarter of fiscal 2002, the Company wrote-off its $9.3 million
cost method investment in the common stock of an Internet security developer.
This amount is included in the other income line item in the Company's
Consolidated Income Statements.
-13-
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain statements contained in this section and elsewhere in this report are
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Securities Exchange Act of 1934. Such statements may
include, without limitation, statements relating to (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, (iii) the ability of the Company to retain existing
business and to obtain and retain new business, and (iv) the results and effects
of legal proceedings and investigations. 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, the
following: (i) governmental regulations and other actions affecting the online
lottery industry could have a negative effect on the Company's business, (ii)
the Company's lottery operations are dependent upon its continued ability to
retain and extend its existing contracts (including with respect to several of
the Company's significant online lottery service contracts which are the subject
of competitive procurement procedures over the next 14 months) and win new
contracts, (iii) slow growth or declines in sales of online lottery goods and
services could adversely affect the Company's future revenues and profitability,
(iv) the Company has significant foreign exchange exposure, (v) the Company is
subject to the economic, political and social instability risks of doing
business in foreign jurisdictions, (vi) the Company has a concentrated customer
base, and the loss of any of its larger customers could harm its results, (vii)
the Company's quarterly operating results may fluctuate significantly, (viii)
the Company operates in a highly competitive environment, (ix) the Company is
subject to substantial penalties for failure to perform under its contracts, (x)
the Company may not be able to respond to technological changes or satisfy
future technological demands of its customers, (xi) expansion of the gaming
industry faces opposition which may limit the legalization, or expansion, of
online gaming to the detriment of the Company's business, financial condition,
results and prospects, (xii) the Company's business prospects and future success
depend upon its ability to attract and retain qualified employees, (xiii) the
Company may be subject to adverse determinations in pending legal proceedings,
and (xiv) other risks and uncertainties set forth below and elsewhere in this
report, in the Company's fiscal 2001 Form 10-K, and in the Company's subsequent
press releases and Form 10-Q's and other reports and filings with the Securities
and Exchange Commission.
General
The Company operates on a 52- to 53-week fiscal year ending on the last Saturday
in February and fiscal 2002 ends on February 23, 2002.
The Company has derived substantially all of its revenues from the rendering of
services and the sale or supply of computerized online lottery systems and
components to government-authorized lotteries. Service revenues have been
derived primarily from lottery service contracts. These contracts are typically
at least five years in duration, and generally provide compensation to the
Company based upon a percentage of a lottery's gross online lottery sales. These
percentages vary depending on the size of the lottery and the scope of services
provided to the lottery. Product sale revenues have been derived primarily from
the installation of new online lottery systems, installation of new software and
sales of lottery terminals and equipment in connection with the expansion of
existing lottery systems. The Company's gross margins on product sales fluctuate
depending on the mix, volume and timing of product sales contracts. The size and
timing of these transactions have resulted in variability in product sale
revenues from period to period. The Company currently anticipates that product
sales during fiscal 2002 will be in a range of $168 million to $173 million.
-14-
The Company has taken steps to broaden its offerings of high-volume transaction
processing services outside of its core business of providing online lottery
services. For example, in May 2000 and December 2000, the Company entered into
agreements that permit bill payments over its Brazilian and Chilean lottery
networks, respectively.
The Company's business is highly regulated, and the competition to secure new
government contracts is often intense. Awards of contracts to the Company are,
from time to time, challenged by competitors. Further, there have been and may
continue to be investigations of various types, including grand jury
investigations, conducted by governmental authorities into possible
improprieties and wrongdoing in connection with efforts to obtain and/or the
awarding of lottery contracts and related matters. In light of the fact that
such investigations frequently are conducted in secret, the Company would not
necessarily know of the existence of an investigation that might involve the
Company. Because the Company's reputation for integrity is an important factor
in its business dealings with lottery and other government agencies, if
government authorities were to make an allegation of, or if there were to be a
finding of, improper conduct on the part of or attributable to the Company in
any matter, such an allegation or finding could have a material adverse effect
on the Company's business, including its ability to retain existing contracts
and to obtain new or renewal contracts. In addition, continuing adverse
publicity resulting from these investigations and related matters could have
such a material adverse effect. See "Legal Proceedings" in Part II, Item 1
herein; and Part I, Item 1 - "Certain Factors That May Affect Future Performance
- - Maintenance of Business Relationships and Certain Legal Matters", Part I, Item
3 - "Legal Proceedings" and Note F to the Consolidated Financial Statements in
the Company's fiscal 2001 Annual Report on Form 10-K, for further information
concerning these matters and other contingencies.
The Company is a global business and derives a substantial portion of its
revenues from operations outside of the United States. In particular, in fiscal
2001, the Company derived approximately 44% of its revenues from its
international operations and approximately 12% of its revenues from its
Brazilian operations alone. In addition, a substantial portion of the Company's
assets are held outside of the United States. At November 24, 2001, the Company
had approximately $15.8 million of accounts receivable and net fixed assets
associated with customers in Argentina. The recent economic instability in
Argentina and any associated devaluation of the peso could have a material
adverse effect not only on the value of the Company's assets in that country,
but also on a customer's ability to pay the Company.
Upcoming Significant Contract Rebids
A significant portion of the Company's revenues and cash flow is derived from
its portfolio of long-term online lottery service contracts, each of which in
the ordinary course of the Company's business periodically is the subject of
competitive procurement or renegotiation. Through fiscal 2003 (which ends in
February 2003), several of the Company's larger contracts, as measured by annual
revenues, will be the subject of competitive procurements to select contractors
to supply lottery goods and services upon the termination of the Company's
current contracts. Among these is the National Lottery of Brazil, the Company's
largest contract, which accounted for 12.1% of the Company's consolidated
revenues in fiscal 2001 (which ended in February 2001). Caixa Economica Federal,
the operator of Brazil's national lottery, has indicated that upon expiration of
the Company's current contract, it may choose to handle internally some
non-lottery operations currently performed by the Company under its contract
and, with regard to the remaining lottery operations, may seek to proceed with a
competitive procurement process calculated to result in multiple vendors to
administer the national lottery, which is presently administered solely by the
Company. Other large contracts that will be subject to competitive procurement
through fiscal 2003 include the California and Georgia lottery contracts. See
Part I, Item 1 -- "Certain Factors That May Affect Future Performance -
Strengthening of Competition" and "Lottery Contract Awards and Related
Significant Developments" in the Company's fiscal 2001 Annual Report on Form
10-K for further information concerning these matters.
-15-
Effect of New Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards ("SFAS") No. 141, "Business Combinations", and
No. 142, "Goodwill and Other Intangible Assets", effective for fiscal years
beginning after December 15, 2001. Under the new rules, goodwill and indefinite
lived intangible assets are no longer amortized but are reviewed annually for
impairment. Separable intangible assets that are not deemed to have an
indefinite life will continue to be amortized over their useful lives. The
amortization provisions of SFAS No. 142 apply to goodwill and intangible assets
acquired after June 30, 2001. With respect to goodwill and intangible assets
acquired prior to July 1, 2001, the Company will apply the new accounting rules
beginning in the first quarter of fiscal 2003 (the quarter ended May 25, 2002).
The Company is currently evaluating the effect these new standards will have on
the earnings and the financial position of the Company.
Prior Year Special and Additional Charges
During fiscal 2001, the Company estimated and recorded a $42.3 million special
charge, of which $40 million, or $0.70 per diluted share, was recorded in the
first nine months of fiscal 2001, in connection with certain contractual
obligations and a value assessment of the Company's business operations. The
Company also recorded, during the first nine months of fiscal 2001, as part of
selling, general & administrative expenses, additional charges of $5.1 million,
or $0.09 per diluted share, primarily attributable to the implementation of the
Company's restricted stock plan. See Note P to the Consolidated Financial
Statements in the Company's fiscal 2001 Annual Report on Form 10-K, for further
information concerning this matter.
Results of Operations
Third Quarter
Revenues for the third quarter of fiscal 2002 were $263.6 million, representing
a $42.6 million, or 19.2%, increase over revenues of $221.0 million in the third
quarter of fiscal 2001.
Service revenues, including lottery and other services, in the fiscal 2002 third
quarter were $196.4 million, representing a $17.4 million, or 8.1%, decrease
from service revenues of $213.8 million in the third quarter of fiscal 2001.
This decrease was primarily driven by a reduction in international lottery
service revenues of $10.6 million, along with the expiration of certain
electronic benefit transfer contracts.
The Company's international lottery service revenues in the third quarter of
fiscal 2002 were $82.3 million, an 11.4% decrease from the $92.9 million
recorded in the third quarter of fiscal 2001, primarily due to the combined
effect of the weakening of the Brazilian real against the United States dollar
and contractual rate changes. This decrease was partially offset by an increase
in sales by several of the Company's international lottery customers and the
launch of the national lotteries in Jamaica and Colombia. Had average foreign
exchange rates in the third quarter of the prior year prevailed in the third
quarter of this year, the Company estimates that international service revenues
for the fiscal 2002 third quarter would have been $91.8 million, or 1.2% lower
than reported in the third quarter of last year.
-16-
The Company's fiscal 2002 third quarter domestic lottery service revenues of
$112.0 million were comparable to the third quarter of fiscal 2001. Same store
sales growth, combined with the impact of net contract wins, generated growth of
2%, which was fully offset by lower jackpot activity.
Product sales in the third quarter of fiscal 2002 were $67.2 million, an
increase of $60.0 million over the $7.2 million of product sales in the third
quarter of fiscal 2001. Product sales in the fiscal 2002 third quarter included
sales of terminals and software to our customer in the United Kingdom.
Gross margins on service revenues were 29.6% in the third quarter of fiscal 2002
compared to 32.0% in the third quarter of fiscal 2001. This decrease was
primarily driven by the weakening of the Brazilian real against the United
States dollar.
Gross margins on product sales fluctuate depending on the mix, volume and timing
of product sales contracts. Gross margins on product sales in the third quarter
of fiscal 2002 were 23.8% compared to negative (0.9%) in the same period last
year, primarily due to the large volume of sales of terminals and software to
our customer in the United Kingdom. In addition, cost over-runs on system
installations in New South Wales, Australia adversely impacted the fiscal 2001
third quarter margins.
Operating expenses in the third quarter of fiscal 2002 were $36.2 million,
representing a $1.8 million, or 4.7%, decrease, when compared to the $38.0
million of operating expenses incurred in the third quarter of fiscal 2001. This
decrease was primarily attributable to cost reductions driven by the continued
execution of the value assessment initiatives implemented in fiscal 2001 and the
Company's increased emphasis on improving productivity and efficiency. As a
percentage of revenues, operating expenses were 13.7% and 17.2% during the third
quarters of fiscal 2002 and 2001, respectively.
Other income in the third quarter of fiscal 2002 decreased from $4.8 million in
the third quarter of fiscal 2001 to $0.3 million in the third quarter of fiscal
2002, due primarily to the expiration of the amortization of the gain on the
sale of the Company's 22.5% equity interest in Camelot Group plc ("Camelot"),
which was sold in April 1998, and which was amortized over the remaining period
of Camelot's first operating license which expired in September 2001. In
addition, the prior year third quarter included a gain on the sale of the
Company's remaining investment in Suffolk Downs of $1.6 million.
The Company's effective income tax rate decreased from 39% in the third quarter
of fiscal 2001 to 38% in the third quarter of fiscal 2002 principally due to
lower state taxes and a reduction in non-deductible expenses.
Year to Date
Revenues for the first nine months of fiscal 2002 were $735.1 million,
representing a $44.5 million, or 6.4%, increase over revenues of $690.6 million
in the first nine months of fiscal 2001.
Service revenues, including lottery and other services, in the first nine months
of fiscal 2002 were $616.6 million, representing a $24.1 million, or 3.8%,
decrease from service revenues of $640.7 million in the first nine months of
fiscal 2001. This decrease was primarily driven by a reduction in international
lottery service revenues of $18.3 million, along with the expiration of certain
electronic benefit transfer contracts, partially offset by higher domestic
lottery service revenues.
The Company's international lottery service revenues in the first nine months of
fiscal 2002 were $250.4 million, an $18.3 million, or 6.8% decrease, from the
$268.7 million recorded in the first nine months of fiscal 2001, primarily due
to the combined effect of the weakening of the Brazilian real against the United
States dollar and contractual rate changes. This decrease was partially offset
by an increase in
-17-
sales by several of the Company's international lottery customers and the launch
of the national lotteries in Colombia and Jamaica. Had average foreign exchange
rates in the first nine months of the prior year prevailed in the first nine
months of this year, the Company estimates that international service revenues
for the first nine months of fiscal 2002 would have been $278.8 million, or
approximately 3.8% higher, than reported in the first nine months of last year.
The Company's domestic lottery service revenues were $357.4 million in the first
nine months of fiscal 2002, an increase of $8.9 million, or 2.5%, over the
$348.5 million recorded in the same period of fiscal 2001. This increase was
primarily due to higher multi-state jackpot activity.
Product sales in the first nine months of fiscal 2002 were $118.5 million, an
increase of $68.5 million over the $50.0 million of product sales in the first
nine months of fiscal 2001. This increase was driven by sales of terminals and
software to our customer in the United Kingdom.
Gross margins on service revenues were 30.8% in the first nine months of fiscal
2002 compared to 32.8% in the first nine months of fiscal 2001, primarily driven
by the weakening of the Brazilian real against the United States dollar, along
with start-up losses on new lottery system installations in Ukraine and
Colombia.
Gross margins on product sales fluctuate depending on the mix, volume and timing
of product sales contracts. Gross margins on product sales in the first nine
months of fiscal 2002 were 20.1% compared to negative (5.5%) in the same period
last year, primarily due to the large volume of sales of terminals and software
to our customer in the United Kingdom. In addition, cost over-runs on system
installations in New South Wales, Australia and Israel adversely impacted prior
year margins.
Operating expenses in the first nine months of fiscal 2002 were $111.8 million,
representing a $60.5 million, or 54.1%, decrease, when compared to the $172.3
million of operating expenses incurred in the first nine months of fiscal 2001.
This decrease was principally due to the absence of $45.1 million of prior year
special and additional charges, along with $15.4 million of reductions driven by
the continued execution of the value assessment initiatives implemented in
fiscal 2001 and the Company's increased emphasis on improving productivity and
efficiency. As a percentage of revenues, exclusive of the prior year special and
additional charges, operating expenses were 15.2% and 19.1% during the first
nine months of fiscal 2002 and 2001, respectively.
Other income declined from $7.2 million in the first nine months of fiscal 2001
to $0.7 million in the first nine months of fiscal 2002. This decline was
primarily due to the write-off of the Company's $9.3 million cost method
investment in the common stock of an Internet security developer which was
partially offset by a $3.9 million gain on the sale of a majority interest in
the Company's subsidiary in the Czech Republic, which owns certain lottery
assets.
The Company's effective income tax rate decreased from 39% in the first nine
months of fiscal 2001 to 38% in the first nine months of fiscal 2002 principally
due to lower state taxes and a reduction in non-deductible expenses.
-18-
Recent Developments
On December 10, 2001, after the close of the Company's fiscal 2002 third
quarter, the Company announced that it has launched an offer to purchase up to
$150 million aggregate principal amount of its 7.75% Series A Senior Notes due
2004 and its 7.87% Series B Guaranteed Senior Notes due 2007 (collectively, the
"Senior Notes") issued by GTECH Corporation. The offer expires on January 9,
2002, unless extended or earlier terminated, and is conditioned on, among other
things, raising debt to finance such purchases.
On December 18, 2001, after the close of the Company's fiscal 2002 third
quarter, the Company issued, through a private placement, $175 million of 1.75%
Convertible Debentures due 2021. The debentures will be convertible into shares
of the Company's common stock initially at a conversion price of approximately
$55.00 if the sale price of the Company's common stock exceeds 120% of the
conversion price over specified periods, and in certain other circumstances. At
the initial conversion price, each $1,000 principal amount of debentures will be
convertible into 18.1818 shares of the Company's common stock. The initial
conversion price represents a 30.3% premium over the closing price of the
Company's common stock on December 12, 2001, which was $42.20 per share. In
addition, the debentures will be redeemable at the Company's option beginning in
December 2006, and the holders may require the Company to repurchase the
debentures on December 15, 2004, 2006, 2011 and 2016, and in certain other
circumstances. Certain of the Company's subsidiaries guarantee its obligations
under the debentures.
The Company intends to use the net proceeds from the sale of the debentures,
along with additional borrowings under its credit facility, if needed, for the
repayment of certain of the Senior Notes, pursuant to the offer to purchase,
including payment of any applicable premiums, fees and expenses, and the
repurchase of up to $40 million of the Company's common stock under its share
repurchase program.
The Company expects to record an extraordinary charge against fiscal 2002 fourth
quarter earnings in the range of $11 to $14 million, net of taxes, or $0.35 to
$0.46 per diluted share, as a result of tender premiums and prepayment fees
associated with the early retirement of the Senior Notes and refinancing of the
Company's World Headquarters facilities by an unconsolidated partnership in
which the Company is a limited partner.
Changes in Financial Position, Liquidity and Capital Resources
During the first nine months of fiscal 2002, the Company generated $254.6
million of cash from operations. This cash, together with $186.0 million of
borrowings under the Company's Credit Facility, was primarily used to fund the
purchase of $146.1 million of systems, equipment and other assets relating to
contracts, to repay $182.3 million of long-term debt, and to repurchase $194.4
million of the Company's common stock.
Trade accounts receivable decreased by $24.3 million, from $118.7 million at
February 24, 2001 to $94.4 million at November 24, 2001, primarily due to
collections of receivables related to product sales recorded in the fourth
quarter of fiscal 2001, along with the payment of certain disputed amounts by
the Company's customer in the Czech Republic.
Inventories decreased by $12.1 million, from $117.8 million at February 24, 2001
to $105.7 million at November 24, 2001, primarily due to the shipment of
inventory for new system installations in New York and Ohio, partially offset by
increased inventory related to product sales expected to be delivered during the
remainder of fiscal 2002 and the first half of fiscal 2003.
-19-
Other assets decreased by $23.8 million, from $116.7 million at February 24,
2001 to $92.9 million at November 24, 2001, primarily due to the write-off of
the Company's cost method investment in the common stock of an Internet security
developer, along with scheduled payments received on long-term sales type
leases.
Included in other assets at November 24, 2001 were investments in and advances
to unconsolidated affiliates totaling $13.4 million. The Company periodically
evaluates the net realizable value of these investments to determine if a
permanent impairment exists and, in the opinion of management, no such
impairment existed at November 24, 2001. However, should future events and
circumstances indicate a permanent impairment has occurred with regard to one or
more of these investments, a charge to expense would be recorded at that time to
reflect the adjustment in the net realizable value of the underlying investment.
Accounts payable decreased by $10.5 million, from $49.3 million at February 24,
2001 to $38.8 million at November 24, 2001, primarily due to the timing of
payments relating to ongoing lottery system installations.
Advance payments from customers increased by $24.4 million, from $55.4 million
at February 24, 2001 to $79.8 million at November 24, 2001, primarily due to
advances received from customers related to product sales expected to be
delivered during the remainder of fiscal 2002 and the first half of fiscal 2003.
At November 24, 2001, the Company's current liabilities exceeded its current
assets by $26.7 million, principally due to the $79.8 million of advance
payments from customers.
The Company's business is capital-intensive. Although it is not possible to
estimate precisely, the Company currently anticipates that the level of capital
expenditures for systems, equipment and other assets relating to contracts
required during fiscal 2002 will be in a range of $190 million to $200 million.
The principal sources of liquidity for the Company are expected to be cash
generated from operations and borrowings under the Company's Credit Facility. On
June 22, 2001, the Company refinanced its Credit Facility with a syndicate of
nine banks led by The Bank of America. The new credit facility provides for an
unsecured revolving line of credit of $300 million and matures in June 2006. As
of November 24, 2001, the Company had utilized approximately $8 million of its
$300 million Credit Facility. The Company currently expects that its cash flow
from operations and available borrowings under its Credit Facility will be
sufficient for the foreseeable future to fund its anticipated working capital
and ordinary capital expenditure needs, to service its debt obligations, to fund
anticipated internal growth and to repurchase shares of the Company's common
stock, from time to time, under the Company's open market share repurchase
program.
On December 4, 2001, after the close of the Company's fiscal 2002 third quarter,
the Board of Directors authorized a new share repurchase program for up to an
aggregate amount of $75 million of the Company's common stock through February
2003. The new program is in addition to the unused capacity of approximately $16
million remaining in the Company's existing program, which was scheduled to
expire on June 30, 2002. The Company plans to periodically repurchase the shares
in the open market based on market conditions and corporate considerations.
-20-
Market Risk Disclosures
The primary market risk inherent in the Company's financial instruments and
exposures is the potential loss arising from adverse changes in interest rates
and foreign currency rates. The Company's exposure to commodity price changes is
not considered material and is managed through its procurement and sales
practices. The Company did not own any marketable equity securities during the
first nine months of fiscal 2002.
Interest rates
Interest rate market risk is estimated as the potential change in the fair value
of the Company's total debt or current earnings resulting from a hypothetical
10% adverse change in interest rates. At November 24, 2001, after taking into
consideration $150 million of interest rate swaps, the estimated fair value of
the Company's $300 million of fixed rate debt approximated $309.3 million. At
November 24, 2001, after taking into consideration $150 million of interest rate
swaps, a hypothetical 10% increase in interest rates would increase the
estimated fair value of the Company's fixed rate debt to $310.6 million and a
hypothetical 10% decrease in interest rates would reduce the estimated fair
value of the Company's fixed rate debt to $307.9 million. An independent
investment banker determined the estimated fair value amounts.
A hypothetical 10% adverse or favorable change in interest rates applied to
variable rate debt would not have a material effect on current earnings.
The Company uses various techniques to mitigate the risk associated with future
changes in interest rates, including entering into interest rate swaps. In June
2001, the Company entered into two interest rate swaps for an aggregate amount
of $150 million, which effectively entitle the Company to exchange fixed rate
payments for variable rate payments from the period June 6, 2001 to May 15,
2007.
Foreign Currency Exchange Rates
Foreign exchange exposures arise from current and anticipated transactions
denominated in currencies other than the Company's functional currency (United
States dollars) and from the translation of foreign currency balance sheet
accounts into United States dollar balance sheet accounts.
The Company seeks to manage its foreign exchange risk by securing payment from
its customers in United States dollars, by sharing risk with its customers, by
utilizing foreign currency borrowings, by leading and lagging receipts and
payments and by entering into foreign currency exchange and option contracts. In
addition, a significant portion of the costs attributable to the Company's
foreign currency revenues are payable in the local currencies. Whenever
possible, the Company negotiates clauses into its contracts that allow for price
adjustments should a material change in foreign exchange rates occur.
The Company, from time to time, enters into foreign currency exchange and option
contracts to reduce the exposure associated with current transactions and
anticipated transactions denominated in foreign currencies. However, the Company
does not engage in currency speculation. At November 24, 2001, a hypothetical
10% adverse change in foreign exchange rates would result in a translation loss
of $12.9 million that would be recorded in the equity section of the Company's
balance sheet.
At November 24, 2001, a hypothetical 10% adverse change in foreign exchange
rates would result in a net transaction loss of $3.2 million that would be
recorded in current earnings after considering the effects of foreign exchange
contracts currently in place.
-21-
At November 24, 2001, a hypothetical 10% adverse change in foreign exchange
rates would result in a net reduction of cash flows from anticipatory
transactions in fiscal 2002 of $1.8 million. The percentage of fiscal 2002
anticipatory cash flows that were hedged varied throughout the third quarter of
fiscal 2002, but averaged 70%.
As of November 24, 2001, the Company had contracts for the sale of foreign
currency of approximately $114.6 million (primarily pounds sterling, Australian
dollars, euro, Brazilian real, and Moroccan dirhams) and the purchase of foreign
currency of approximately $16.8 million (primarily pounds sterling and Mexican
pesos).
Item 3. Quantitative and Qualitative Disclosures about Market Risk
See "Market Risk Disclosures" above.
-22-
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
As previously reported, the Company, W. Bruce Turner, the Company's former
Chairman and Chief Executive Officer, and its former Chief Operating Officer,
have been named as defendants in a shareholder class action suit, Sandra
Kafenbaum, v. GTECH Holdings Corporation, et al, brought in the U.S. District
Court of Rhode Island. In April 2001, the Company and the other defendants moved
to dismiss the amended complaint in this lawsuit on the grounds that the
allegations made in the amended complaint are unsupported by fact and fail, in
any event, to state a cause of action under the federal securities laws. Oral
argument for the Company's motion was held on October 19, 2001 and the motion is
pending. While the Company believes that it has good defenses to the claims made
in this lawsuit, at the present time the Company is unable to predict the
outcome, or the financial statement impact, if any, of this lawsuit.
As previously reported, in May 2000, Sazka, a.s., a lottery customer of the
Company in the Czech Republic ("Sazka"), filed a Request for Arbitration with
the International Arbitral Centre of the Austrian Federal Economic Chamber of
Commerce in Vienna, Austria, seeking to arbitrate certain business and
contractual issues under the Company's online lottery contract with Sazka and in
March 2001, the Company entered into an agreement with Sazka which, among other
things, resolved the arbitration. As part of this settlement agreement, the
Company had agreed to sell Sazka all of the membership interests in the limited
liability company which owned the material communications assets in the Czech
Republic by the end of 2005, and the Company has since sold Sazka approximately
75% of the membership interests in that company.
For information respecting these and certain other legal proceedings, refer to
Part I, Item 1 - "Certain Factors That May Affect Future Performance -
Maintenance of Business Relationships and Certain Legal Matters", Part I, Item 3
- - "Legal Proceedings" and Note F to Consolidated Financial Statements, in the
Company's fiscal 2001 Annual Report on Form 10-K, and Part II, Item 1 "Legal
Proceedings" included in the Company's Quarterly Reports on Form 10-Q for the
quarterly periods ended, respectively, May 26, 2001 and August 25, 2001.
-23-
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - The exhibits to this report are as follows:
4.1 Indenture, dated as of December 18, 2001, by and among the
Company, GTECH Corporation, GTECH Rhode Island Corporation and
GTECH Latin America Corporation, and The Bank of New York.
4.2 Registration Rights Agreement, dated December 18, 2001, by and
among Credit Suisse First Boston Corporation, Banc of America
Securities LLC and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as representatives, and the Company, GTECH
Corporation, GTECH Rhode Island Corporation and GTECH Latin
America Corporation.
10.1 Contract for Lottery Operations and Services, dated October
10, 2001, by and between the Texas Lottery Commission and the
Company.
10.2 Amendment No. 1 to Contract for Lottery Operations and
Services, dated October 18, 2001, by and between the Texas
Lottery Commission and the Company.
10.3 Severance Agreement and Release, dated as of December 21,
2001, by and between Jean-Pierre Desbiens and the Company.
10.4 1998 Employee Stock Purchase Plan of the Company, as amended
and restated as of November 1, 2001.
(b) The Company did not file any reports on form 8-K during the quarter to
which this report relates
-24-
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.
GTECH HOLDINGS CORPORATION
Date: January 3, 2002 By /s/ Jaymin B. Patel
------------------------------------------------
Jaymin B. Patel, Senior Vice President and Chief
Financial Officer (Principal Financial Officer)
Date: January 3, 2002 By /s/ Robert J. Plourde
------------------------------------------------
Robert J. Plourde, Vice President and Corporate
Controller (Principal Accounting Officer)
-25-
EXHIBIT INDEX
Exhibit No. Description
4.1 Indenture, dated as of December 18, 2001, by and among the
Company, GTECH Corporation, GTECH Rhode Island Corporation and
GTECH Latin America Corporation, and The Bank of New York.
4.2 Registration Rights Agreement, dated December 18, 2001, by and
among Credit Suisse First Boston Corporation, Banc of America
Securities LLC, and Merrill Lynch, Pierce Fenner & Smith
Incorporated, as representatives, and the Company, GTECH
Corporation, GTECH Rhode Island Corporation and GTECH Latin
America Corporation.
10.1 Contract for Lottery Operations and Services, dated October
10, 2001, by and between the Texas Lottery Commission and the
Company.
10.2 Amendment No. 1 to Contract for Lottery Operations and
Services, dated October 18, 2001, by and between the Texas
Lottery Commission and the Company.
10.3 Severance Agreement and Release, dated as of December 21,
2001, by and between Jean-Pierre Desbiens and the Company.
10.4 1998 Employee Stock Purchase Plan of the Company, as amended
and restated as of November 1, 2001.