Gateway Files 10-K That Includes Revision to Previously Reported 2005 Financial Results
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 / / -- 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 $0.2 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 www.gateway.com for
more information.
SOURCE Gateway, Inc.
Web site: 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.http://www.metrofuser.com or call 908-245-2100 Ext 107.
