Gateway 2005 'As-Reported' Income Adjusted to Reflect Effects of Two
Significant Prior-Year Events After the Close of the Quarter - The HP
Agreement and Increase in a Tax Reserve
IRVINE, Calif., March 14 /PRNewswire-FirstCall/ -- Gateway, Inc.
(NYSE: GTW) today filed its annual report on Form 10-K with the U.S.
Securities and Exchange Commission that included a revision in its as-reported
earnings for 2005, based on two significant prior-year events that occurred
after the quarter's close but before the filing of the 10-K.
Earlier this month, Gateway announced an agreement with the Hewlett-
Packard Company (HP) to cross-license each other's patent portfolios for a
period of seven years and, as part of the agreement, a global settlement and
mutual release of all claims in litigation against the other company. As a
result of the agreement with HP, Gateway took a $16.7 million charge against
2005 earnings.
Also earlier this month, the company increased, as of December 31, 2005,
its sales, income and franchise tax reserves by $27 million for historical tax
liability, because Gateway now believes, based on the outcome of a recent
court decision against another company in a similar tax litigation case, it is
probable that it will be required to make a substantial portion of these tax
payments.
"We expect this to be but the first of many revisions of our tax liability
accruals, both positive and negative, this year as we resolve certain tax
liabilities for prior years," said John Goldsberry, Gateway senior vice
president and chief financial officer. "We believe that the net total effect
of these tax audit adjustments will ultimately be favorable to the company's
bottom line."
"It's important to note that these specific tax adjustments predominantly
date back to the mid- to late-1990s, and therefore should not detract from the
operating successes Gateway enjoyed in 2005, including posting its first
full-year profit in a half-decade," said Rick Snyder, Gateway's chairman and
interim chief executive officer.
Therefore, Gateway has revised its previously announced net income for
2005 from the $49.5 million that was reported on Feb. 2, 2006 to $6.2 million
or $0.02 per diluted share.
About Gateway
Since its founding in 1985, Irvine, Calif.-based Gateway (NYSE: GTW) has
been a technology pioneer, offering award-winning PCs and related products to
consumers, businesses, government agencies and schools. After acquiring
eMachines in early 2004, Gateway is now the third largest PC company in the
U.S. and among the top ten worldwide. The company's value-based eMachines
brand is sold exclusively by leading retailers worldwide, while the premium
Gateway line is available at major retailers, over the web and phone, and
through its direct and indirect sales force. See http://www.gateway.com for
more information.
Special note
This press release contains forward-looking statements that involve risks
and uncertainties, as well as assumptions that, if they do not materialize or
prove incorrect, could cause Gateway's results to differ materially from those
expressed or implied by such forward-looking statements. All statements, other
than statements of historical fact, are statements that could be forward-
looking statements, including any projections or preliminary estimates of
earnings, revenues, or other financial items; any statements of plans,
strategies and objectives of management for future operations; the extent of
seasonal changes in demand; any statements regarding proposed new products,
services or developments; any statements regarding future economic conditions
or performance; statements of belief and any statement of assumptions
underlying any of the foregoing. The risks that contribute to the uncertain
nature of these statements include, among others, risks related to shifting
our distribution model to third-party retail; competitive factors and pricing
pressures, including the impact of aggressive pricing cuts by larger
competitors; general conditions in the personal computing industry, including
changes in overall demand and average selling prices, shifts from desktops to
mobile computing products and information appliances and the impact of new
microprocessors and operating software; the ability to simplify the company's
business, change its distribution model and restructure its operations and
cost structure; component supply shortages; short product cycles; the ability
to access new technology; infrastructure requirements; risks of international
business; foreign currency fluctuations; risks relating to new or acquired
businesses, joint ventures and strategic alliances; risks related to financing
customer orders; changes in accounting rules; the impact of litigation and
government regulation generally; inventory risks due to shifts in market
demand; the impact of employee reductions and management changes and
additions; and general economic conditions, and other risks described from
time to time in Gateway's Securities and Exchange Commission periodic reports
and filings. Gateway assumes no obligation to update any forward-looking
statements to reflect events that occur or circumstances that exist after the
date on which they were made.
SOURCE Gateway, Inc.
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Related links:
http://www.gateway.com
CONTACT:
Media, David Hallisey, +1-949-471-7703,
david.hallisey@gateway.com, or John W. Spelich, +1-949-471-7710,
john.spelich@gateway.com, or Investors, Marlys Johnson,
+1-605-232-2709, marlys.johnson@gateway.com, all of Gateway, Inc.
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