Lottomatica Bilancio ING

Transcription

2009 ANNUAL REPORT
2009 ANNUAL REPORT
Consolidated Financial Statements 2009
CHAIRMAN’S MESSAGE
2009 Annual Report
Dear Shareholders,
we have just closed a particularly intense year for the Lottomatica Group. In this uncertain and varying context that has impacted the world markets the Lottomatica
Group has known how to ride the wave of novelty in a significantly developing sector. We’ve closed the year with a growing trend and had considerable successes.
In this exceptionally difficult period characterized by one of the worst economic recessions of the last decades, the constant support of the shareholders and the
Lottomatica Group management team have been determinant to the continuous development of the company and have been the leverage to reaching our goals
successfully.
Now as in the past, the Group’s and companies’ objectives overlap keeping as central focus point the social responsibility towards each stakeholder and the
consolidation of our competitive culture which is the base that generates trust in our capability to reach for ambitious objectives.
Thanks to everyone’s constant support, we can continue driving the development of the gaming sector taking the guiding role and reasserting our leadership.
The lottery and gaming businesses still have an enormous potential that include advanced, developed and developing countries. Our sector is in increasingly
viewed by all governments as an important source of revenues, especially in order to compensate the tax income decline resulting from the economic crisis.
In order to better respond to the necessities of our customers, Lottomatica Group has further pushed an integrated organization that is able to pursue new
business opportunities in any country in the world.
The 2009 results have demonstrated the potential of our company. The Lottomatica Group generated €2.18 billion in revenues in 2009, which is a 5.7% increase
compared to 2008. EBITDA increased by 3.7% reaching €783.7 million.
A focal point for this success is in Italy where total revenues increased by 15% compared to 2008 and totaled approximately €1.2 billion.
Instant lotteries annual wagers increased from €9.2 billion in 2008 to approximately €9.4 billion in 2009.
Lottery revenues in 2009 totaled €695.9 million compared to €705.2 million in 2009. The Lotto and Instant lottery wagers in 2009 reached €15 billion which is in
line with the previous year. The revenues generated by sports betting grew by 28.8%, from €144.7 million in 2008 reaching €186.5 million in 2009. Such growth is
attributable to an 18% increase in wagers from €785.5 million in 2008 to €933.3 million in 2009.
Furthermore, Lottomatica continues to maintain a solid presence in the Italian market through the direct management of gaming machines (AWP), and in 2010
we will see the launch of commercial operations regarding the video lottery terminal program. Lottomatica intends to obtain a significant role in this segment both
as a concessionaire and as a provider through its subsidiaries.
With regards to the other markets, GTEch’s contribution this year has been fundamental. Our goal is to export the Italian business model while taking advantage
of GTech’s global presence, commercial relationships and technological competence. GTEch will continue to globally supply technology, terminals and infrastructure
of the management of lotteries and gaming and, where the regulations will permit it, become an operator.
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GTEch has also confirmed its capacity to generate value even in the midst of a global economic crisis. Throughout 2009, our subsidiary has been awarded two
important contracts in the lottery segments, the New York Lottery and ONcE in Spain. Overall, GTEch has been awarded six long term lottery contracts and has
obtained contract extensions from twelve customers throughout the world. As a matter of fact, GTEch has launched new lotteries in Mauritius, the Dominican
Republic and Nigeria and has successfully converted the lottery systems of Great Britain, chile, South Dakota and West Virginia. consequently, the Group operated
in more than 50 countries throughout the world.
These results offer a clear demonstration of our solidity. The presentation of an offer in the renewal tender for the Scratch & Win concession is an ulterior display
of our sturdiness. Following the ruling of the TAR of Lazio that annulled the tender, the Group decided to appeal before the council of State which ruled the tender
system to be correct and in favor of reopening the tender.
There is no doubt that we’ll be ready to operate in any scenario as well as that the Group is prepared to safeguard the general interest in tax income. Some numbers
may help to size up our efforts: from the beginning of our management of Scratch &Win in 2004 to today, wagers have grown from €200 million to over €9 billion
ensuring tax income of over €1.8 billion only in 2009.
In reviewing the Group’s activities, I cannot forego the fundamental aspect of our Governance model. The path taken by the Lottomatica Group this year is also
highlighted by the Social Report, an integral part of our sustainability strategy that demonstrates our commitment to the communities in which we operate. Ours is
the first Social Report to be presented by an Italian company in the gaming industry and it responds to our commitments to our stakeholders to not only report the
economic consequences but also the social, cultural and environmental. The initiative derives from the social responsibilities that guide our operations.
Dear Shareholders, in conclusion I’d like to remind you that our company began with one single concession and then evolved following a precise path guided by
strong competitive dynamics. The long list of successes would not have been made possible without your precious support and without a vision that foresaw the
complete transformation of our organization model and the careful diversification of our operating processes. We are firmly present in each sector of our activities.
In these first months of 2010 the complex phase of the markets led me to be prudent but the results obtained by Lottomatica Group in 2009 push me to be confident
in the future and that we’ll know how to interpret positively the challenges that lay ahead.
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Virtus Roma
Elecom
Milano Baseball
FIPAV
Federazione Italiana Pallavolo
Canottieri Aniene
“A juxtaposition of individuals, a regrouping or a bringing together of people, is
not a group. In order for it to become so, three conditions are required: a
common interest; direct communication and feed-back; and a ‘praxis’ - a
common action aimed at reaching a shared goal or against a common enemy.”
Rugby Capitolina
(J.P. Sartre - Philosopher)
2009 Annual Report
TABLE OF cONTENTS
Operating and Financial Report - December 31, 2009
Management Discussion and Analysis
Lottomatica Group S.p.A. Profile
10
Overview
142
Lottomatica Group
12
Revenue analysis
142
Operating and Financial Review
13
Operating costs and EBITDA analysis
143
Significant Business Developments
24
Investments
145
Risks and Uncertainties
25
Events following the closing of the period
145
Predictable Developments
27
Predictable Developments
145
Lottomatica Stock Information
27
Significant events for the year ended December 31, 2009
145
Long term incentive plan
147
Business Overview
Italian Operations Segment
28
Shareholding of strategic management
GTEch’s Lottery Segment
30
Lottomatica shareholding structure
150
Gaming Solutions Segment
33
Regulatory Framework Reference
151
GTEch G2 Segment
33
Environmental commitments
34
Statement required by article 2.6.2, subsections 12 and 13
of the Italian Stock Exchange regulation
151
Significant contract Developments
36
compliance Model under Legislative Decree no. 231/01
151
Tables of customer contracts
39
compliance Model under Legislative Decree no. 262/05
152
Processing of personal data
152
Shareholders’ Meeting Proposals
152
Exhibit 3c-ter - certification of the annual
financial statements, pursuant to Article 81-ter
of the cONSOB Regulations no. 11971/1999
153
Long Term Incentive Plans
45
Processing of Personal Data
47
. 149
consolidated Financial Statements and Footnotes
Statements of Financial Position
50
Income Statements
51
Statements of comprehensive Income
52
Statements of cash Flows
53
Statements of changes in Equity
54
Notes to Financial Statements
55
Audit Firm Fees
124
Summary Schedule of Essential Data of consolidated
companies Pursuant toArticle 2429 of Italian civil code
125
Additional Disclosures Pursuant to Specific Italian Requirements
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certification Pursuant to Law 262
128
List of Subsidiaries and Affiliates
132
Financial Statements and Footnotes – December 31, 2009
Statements ofEquity and Financial Position
156
Income statements
157
Statements of comprehensive income
158
cash Flow Statements
159
Statements of changes in Equity
160
Footnotes
161
Net Financial Position
199
Related Parties Disclosure
200
Guarantees
205
Significant Judicial and Arbitration proceedings
as of December 31, 2009
205
Financial risk management objectives and policies
209
Fair value hedges
211
Leases
212
Executive Management benefits
212
Management Stock Option Plans
213
Management Retention Plans and and Performance Share Plans
214
Remuneration of the members
of the Board of Directors and the Board of Statutory Auditors
215
Audit firm fees
216
Personnel
216
Events following the closing of year
216
Receipts and Payments
(Presidential Decree n. 560 of September 16, 1996)
216
De Agostini S.p.A. Financial Statement
217
List of Subsidiaries
218
Independent Auditor’s Report
220
Board of Statutory Auditors Report
222
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2009 Annual Report
LOTTOMATIcA GROUP SPA PROFILE
Subject to the direction and coordination of De Agostini S.p.A.
Company Name
Lottomatica Group - Società per Azioni
Fiscal Code, VAT no. and no. of enrollment with the Register of enterprises of Rome
08028081001
Share Capital
As of December 31, 2009: €180,857,821 authorized ordinary shares,
€1.00 par value per share; 172,015,373 shares paid and subscribed
Registered Office
Roma - Viale del campo Boario 56/d
Board of Directors (1)
Chairman
Lorenzo PELLIcIOLI
Vice Chairman
Robert DEWEY Jr. *
Managing Director and C.E.O.
Marco SALA
Board Members
Pietro BOROLI
Paolo cERETTI
Marco DRAGO
Jeremy hANLEY, KcMG*
James MccANN *
Jaymin PATEL
Anthony RUYS *
Severino SALVEMINI *
Gianmario TONDATO DA RUOS **
William Bruce TURNER
General Manager (2)
Renato AScOLI
Board of Statutory Auditors (1)
Chairman
Sergio DUcA
Regular Members
Angelo GAVIANI
Francesco MARTINELLI
Substitute Members
Gian Piero BALDUccI
Giulio GASLOLI
Umile Sebastiano IAcOVINO
Guido MARTINELLI
Marco SGUAZZINI VIScONTINI
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Independent Auditors
Reconta Ernst & Young S.p.A.
Members of the Executive Committee (3)
Lorenzo PELLIcIOLI (chairman)
Pietro BOROLI
Paolo cERETTI
Marco DRAGO
Jaymin PATEL
Marco SALA
Members of the Audit and Compliance Committee (3)
Severino SALVEMINI (chairman)
Jeremy hANLEY, KcMG
Anthony RUYS
Members of the Remuneration Committee (3)
Gianmario TONDATO DA RUOS (chairman)
Robert DEWEY Jr.
James MccANN
Note:
* Denotes Independent Directors
** Denotes Lead Independent Director
(1) As enacted by the shareholders at a meeting held on April 15, 2008
(2) As enacted by the Board of Directors at a meeting held on April 28, 2009
(3) As enacted by the Board of Directors at a meeting held on April 15, 2008
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2009 Annual Report
LOTTOMATIcA GROUP
enabled, and the lottery authority. GTEch currently operates, provides online
equipment and services to, or has been awarded and/or has entered into, contracts
Lottomatica Group S.p.A. is one of the leading gaming operators in the world
to operate or provide equipment and services in the future to, 25 of the 44 lottery
based on total wagers and, through its subsidiary GTEch corporation, is a leading
authorities in the United States, and 53 non U.S. lottery authorities.
provider of lottery and gaming technology solutions worldwide. It is the goal of
The Group operates in the gaming machine market through Lottomatica’s
Lottomatica Group to be the leading commercial operator and provider of
Italian subsidiary Lottomatica Videolot Rete S.p.A., its canadian subsidiary Spielo
technology in the regulated worldwide gaming markets, by delivering market
Manufacturing, ULc (“Spielo”), a leading provider of video lottery terminals
leading products and services, with a steadfast commitment to the highest levels
(“VLTs”) and related products and services to the global gaming industry, and its
of integrity, responsibility and growth.
Lottomatica is listed on the Stock
Atronic group of companies (“Atronic”). Lottomatica Videolot Rete operates on
Exchange of Milan under the trading symbol “LTO” and has a Sponsored Level 1
its networks with amusement with prize machines (“AWPs”). Atronic, a leading
American Depository Receipt (ADR) program listed on the United States over the
video gaming machine provider in Europe, Asia and Latin America, operates in
counter market under the trading symbol “LTTOY”.
the United States and is licensed in approximately 208 worldwide gaming
In this report, the term “Lottomatica” refers to Lottomatica Group S.p.A., the
jurisdictions.
parent entity, and its subsidiaries excluding GTEch; the term “GTEch” refers to
The Group provides technology, games and a full suite of e-commerce services
GTEch corporation and its subsidiaries; and the terms “Group”, “we”, “our” and
to government sponsored lottery markets and regulated commercial sports
“us” refer to Lottomatica and all subsidiaries included in this report.
betting and Internet gaming markets through GTEch G2, a division of GTEch
As further described in the Business Overview section of this report, the Group
comprised of its Finsoft, Boss Media and St. Minver groups of subsidiaries.
operates in the publicly regulated gaming market consisting of online, instant
Additionally, the Group has leveraged its distribution and transaction
and traditional lotteries, sports pools, fixed-odds and pari-mutuel betting,
processing competence to expand its activities to include commercial services
machine gaming and interactive gaming.
through its networks worldwide.
Lottomatica, the principal Italian operating entity of the Group, has built an
On January 1, 2009 the Group adopted International Financial Reporting
extensive distribution network in Italy, with approximately 248,000 terminals in
Standard (“IFRS”) 8 - Operating Segments, which requires certain disclosures
about 109,400 points of sale (including approximately 26,100 points of sale where
regarding reportable operating segments in our consolidated financial
Lottomatica provides processing services for third parties), comprised of
statements for the year ended December 31, 2009. For management purposes,
tobacconists, bars, petrol stations, newspaper stands and motorway restaurants.
the Group’s operating segments are organized and managed separately
Since 1993, Lottomatica has been the sole concessionaire for the Italian Lotto game.
according to the nature of the products and services provided, with each segment
Since 2004, Lottomatica has operated instant and traditional lottery games, which
representing a strategic business unit.
in recent years has been a high growth area. In 2006, Lottomatica received
The Group’s reportable segments are as follows:
authorization to distribute online instant lottery games. In 2007, Lottomatica began
The Italian Operations segment operates and provides a full range of gaming
operating fixed odds sports betting and sports pools through a retail network. Prior
services, including online, instant and traditional lotteries, scratch and win,
to this license, Lottomatica had operated only sports pools with a concession that
sports betting, machine gaming, interactive skill games and non-lottery
began in 2003 and expired in December 2007. Lottomatica, in order to develop the
commercial transactions;
Italian sports betting/interactive market, has continued to acquire further points of
sale. As of December 31, 2009, 1,685 points of sale were acquired.
GTEch is the world’s leading operator of highly secure online lottery transaction
The GTEch Lottery segment operates and provides a full range of services,
technology and products to government sponsored online, instant and
traditional lotteries;
processing systems, doing business in more than 50 countries worldwide. GTEch
The Gaming Solutions segment operates and provides solutions, products and
designs, sells and operates a complete suite of lottery enabled point-of-sale
services relating to VLTs and associated systems for the government sponsored
terminals that are electronically linked with a centralized transaction processing
market and video and traditional mechanical reel slot machines and systems
system that reconciles lottery funds between the retailer, where a transaction is
for the commercial gaming markets; and
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The GTEch G2 segment provides digitally-distributed, multi-channel gaming
that included a share capital increase. These activities provide the Group with a
entertainment products and services, including sports betting, lottery, bingo,
solid capital structure that allows it to respond to opportunities, including the
poker, casino games and quick games, as well as retail solutions for real-time
bid for the Italian Scratch & Win license.
transaction processing and information systems for the sports-betting market.
Due to the commercial success of the Group, the visibility and sustainability
of its results has improved. Assuming all options to extend contracts are exercised
The Group has operations in more than 50 countries worldwide on six
continents and had 7,672 employees as of December 31, 2009.
For additional information on the Group, please go to its website at:
www.gruppolottomatica.it/eng/aboutus/index.htm.
and we are successful in purchasing video lottery terminal (“VLT”) licenses in Italy,
approximately 64% of the service revenues generated by the Group’s worldwide
commercial portfolio is under contract for at least four years. The weighted
average length of the Group’s service contracts is five years.
The “Report on corporate governance and ownership structure” for the year 2009,
Should the Group be awarded the license of Scratch & Win as the sole bidder,
pursuant to art. 123-bis of TUF, is available on the website www.lottomaticagroup.com,
approximately 83% of service revenues would be under contract for at least four
Section Governance - Documentation corporate - corporate Governance Report.
years and the weighted average length of the Group’s service contracts would
increase to seven years.
OPERATING AND FINANcIAL REVIEW
The Group’s Italian operations continued to make significant contributions
in 2009 but it has become evident that the lottery market in Italy is maturing. To
The following operating and financial review is provided as a supplement to, and
address this trend, the Group has introduced new games, increased price points
should be read in conjunction with, the Group’s financial statements and
and improved marketing. Management is confident that these efforts will be
accompanying notes.
successful but the growth the Group has experienced, particularly in Scratch &
As described earlier in this report, after adopting IFRS 8 Operating Segments,
Win, has moderated.
the Group’s four reportable operating segments in 2009 are: (i) Italian Operations;
Other sectors of the Italian gaming market have experienced significant
(ii) GTEch Lottery; (iii) Gaming Solutions; and (iv) GTEch G2. comparative
growth. There have been high levels of growth in the Italian machine gaming,
information for 2008 has been revised for the 2009 presentation.
sports betting, and interactive sectors. The Group has made substantial
The gaming industry experienced a dynamic year in 2009 during which there
investments in these sectors and, in a relatively short time, has achieved market
were significant developments. Lottomatica Group produced good results off of
leadership positions in each. contributions from the on-going expansion in these
a solid operating performance. The Group’s core businesses, GTEch Lottery and
sectors are expected to become meaningful to the Group over the next few years.
Lottomatica’s Italian operations, continued to perform well while producing
Machine Gaming, Sports Betting and Interactive account for approximately one
reliable and sustainable contributions.
third of Italian Operations segment revenues and management expects those
The Group’s Gaming Solutions business began to recover from a severe
sectors to be the primary drivers of future growth.
downturn in the machine gaming markets. While not fully rebounded, there are
In regards to some of the developments in the Italian market, it is important to
encouraging signs of improvement in the Gaming Solutions business, particularly
note that investments made to acquire new VLT licenses in 2009 and 2010 will produce
in the government-sponsored markets.
results over the nine year license term. The rate of return on this investment over that
In the Interactive and Sports Betting space, the Group is benefiting from “first-
period is very attractive. It is expected that VLTs will begin making measurable
mover” advantages as the interactive market begins to take form. Interactive
contributions in 2011. It is of interest that the new VLTs will be introduced in different
projects with lottery customers in Belgium and Switzerland, along with the launch
types of retail spaces than that of the Group’s other AWP installed base of forty-eight
of a unified on-line lottery and sports betting platform for a lottery customer in
thousand (48,000) machines. The impact of new VLTs on our existing AWP machines
chile, have begun to establish the Group’s credentials in this area.
should be minimized due to the differing retail placement.
The Group has been able to navigate through the current difficult economic
The traditional online lottery segment, in which GTEch continues to hold its
conditions with a steadfast commitment to maintaining an investment grade
leadership
position,
experienced
some
encouraging
trends.
Operator
credit rating. During 2009, financings were undertaken for a total of €1.1 billion
opportunities are becoming more prevalent. In particular, we expect to launch a
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2009 Annual Report
new lottery in Spain during the third quarter of 2010 in which GTEch will
performance stands in contrast to those trends.
essentially serve as the operator in partnership with our customer ONcE. Spain is
Against the backdrop of encouraging results, the Group did take a non-cash
becoming a significant base of operations for GTEch. There is also a good deal
impairment charge of approximately €76 million principally related to its GTEch G2
of potential for interactive operator opportunities there as well. In the United
segment. The interactive market continues to grow but at a lower rate than
States, the Illinois Lottery is proceeding with a kind of outsourcing that will
previous years and new regulatory frameworks are emerging which are impacting
engage an operator to help drive greater returns. Done properly, that could be
the timing of some of the Group’s expected contributions from this area.
a game changing concept in the United States.
In a highly promoted launch in January 2010, the two United States (“US”)
multi-state jackpot games, PowerBall and Mega Millions, began cross selling one
The following is a review of the performance of the operating segments of
the Group’s business: Italian Operations, GTEch Lottery, Gaming Solutions and
GTEch G2.
another’s games. Initial results are promising. Thirty-three states joined in the
Lottomatica’s Italian operations had another good year. Total revenues were
effort. Due to the unpredictability of jackpots, it will take a few quarters to be
up by 15%. New games are being introduced in Scratch & Win and Lotto that are
able to judge the full impact of cross-selling. There are still some states, such as
helping to create some excitement and bolster sales.
california and Florida that have yet to adopt the program. Nevertheless, the
Supported by a network of almost 1,700 retail locations offering either fixed
cooperation of the two sponsoring groups is very encouraging and increases the
odds or sports pools betting, revenues from Sports Betting in 2009 increased by
potential for the introduction of new national games in the US.
29% over 2008.
GTEch Printing has made good progress. It recently signed its first primary
Machine Gaming wagers reached the €4 billion mark in 2009, up
contract with the New Mexico Lottery. That is significant because while GTEch
approximately 13% over 2008. The introduction and launch of VLTs is anticipated
Printing had been gaining a prominent foothold with many customers as a
to take place in July 2010.
secondary printer, the New Mexico award signals their emergence as a major
competitor for primary contracts. Also this year, a new printing press has been put
into service that can print eleven billion tickets annually. That is the highest
capacity of any press in the instant ticket industry.
In the interactive space, which is still in the investment stage, wagers of
approximately €355 million were taken in, primarily from online poker.
Service revenues from GTEch Lottery operations in 2009 were up 3.3% over
2008. Total revenues from GTEch Lottery in 2009 were not comparable to 2008
In addition, revenue starved governments are looking to their lottery
due to the timing of product sales. In 2008, GTEch had some large products sales
programs for more contributions. Numerous US states, including Maryland,
that were not replicated in 2009. As a rule, management prefers to look to service
Pennsylvania and Kansas, have introduced government sponsored machine
revenues which are a more reliable indicator and a direct driver of the
gaming programs that have created opportunities for the Group’s Spielo
profitability and sustainability of results.
subsidiary.
GTEch had a successful year commercially, winning a re-bid in New York and
From the perspective of management, 2009 was a year of fairly dynamic
a major new operator contract in Spain as well as 12 extensions of contracts.
change in the gaming industry. Markets in Europe began to liberalize. The Italian
GTEch Printing continued to increase its market presence, winning 10 new
market emerged as a model for expansion into new exciting growth sectors. The
contracts and increasing its customer base to 43 lotteries.
US market began developing a national platform for lottery games and operator
Gaming Solutions reinforced its leadership position in the central monitoring
opportunities in all segments and geographies of the gaming market are
systems space with a contract win in Maryland. The New York lottery extended its
beginning to take form. The Group has invested, prepared well and is ready to
relationship with Gaming Solutions by seven years. In another example of the
capture the opportunities these developments and trends will bring.
complementary nature of the Group’s business units, Gaming Solutions will also
A review of the Group’s operating results demonstrates that the
fundamentals of the Group’s business remain strong despite significant
be offering gaming products to other machine operators in Italy through an
arrangement with Lottomatica’s machine gaming subsidiary there.
recessionary hurdles. Full year revenues were up approximately 6% and EBITDA
In the GTEch G2 segment, nationally regulated markets are beginning to
rose approximately 4%. At a time when the economies of many regions in which
form in Europe, a region in which GTEch’s lottery customers enjoy significant
the Group conducts business were down by two to six percent, the Group’s
brand awareness and trust.
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Presented below are the Group’s key performance indicators (in thousands
EBITDA and EBIT
of euros, except per share amounts).
(thousands of euros)
Key Performance indicators
Revenue
EBITDA
Operating income
EBIT
Net income
Diluited earnings per share
For the year ended
December 31,
Increase (decrease)
2009
2008
€
%
2,176,857
783,683
366,421
336,246
112,354
0.45
2,058,940
755,876
339,995
352,016
137,870
0.62
117,917
27,807
26,426
(15,770)
(25,516)
(0.17)
5.7
3.7
7.8
(4.5)
(18.5)
(27.4)
consolidated revenue in 2009 increased 5.7% over 2008. Service revenue grew
For the year ended
December 31,
Increase (decrease)
2009
2008
€
%
Operating income
Depreciation
Amortization
Impairment loss
Other
366,421
236,601
94,400
76,025
10,235
339,995
225,461
86,095
100,778
3,547
26,426
11,140
8,305
(24,753)
6,688
7.8
4.9
9.6
(24.6)
118.6
EBITDA
783,682
755,876
27,806
3.7
Operating income
Equity loss
Other income
Other expense
Foreign exchange gain(loss), net
366,421
(1,833)
4,172
(16,690)
(15,824)
339,995
(1,825)
6,193
(2,699)
10,352
26,426
(8)
(2,021)
(13,991)
(26,176)
7.8
(0.4)
(32.6)
>200.0
>200.0
EBIT
336,246
352,016
(15,770)
(4.5)
approximately 11% to €2.1 billion and product sales in 2009 totaled €161.4
million, compared to €240.7 million in 2008 when significant product sales were
Acquisitions
recorded from Finland and the United Kingdom.
Business combination activity in the Italian Operations segment consists of
EBITDA increased 3.7% driven by growth in the Italian Operations segment.
strategic investments to exploit growth opportunities in the Sports Betting and
Operating income increased €26.4 million resulting from a €96.2 million
Machine Gaming markets. The aim is to acquire additional sports betting rights
increase in the Gaming Solutions segment, principally due to non-cash impairment
or to increase our directly-managed gaming machine base (amusement with prize
charges in 2008 that did not recur in the current year and a €16.8 million increase
machines). In keeping with this strategy, the material business combination
in the Italian Operations segment due to growth in its Machine Gaming, Sports
activity that occurred during 2009 is described below.
Betting and Interactive markets. Offsetting these increases was €25.8 million and
€65.3 million of lower operating income in the GTEch Lottery and GTEch G2
Labet
segments, respectively. GTEch Lottery was impacted by the cyclicality of product
On June 25, 2009, Lottomatica acquired 100% of the shares of Labet, an Italian
sales as described above and in 2009, GTEch G2 incurred non-cash impairment
entity that is engaged in the sports betting business for a cash purchase price of
charges due to potential changes in the regulation of online gaming in Europe.
€20.2 million.
EBITDA and EBIT
Europa Gestione
EBITDA and EBIT are considered alternative performance measures that are not
On June 4, 2009, Lottomatica acquired 100% of the shares of Europa Gestione,
defined measures under IFRS and may not take into account the recognition,
an Italian entity that owns and operates amusement with prize machines for a
measurement and presentation requirements associated with IFRS. We believe
cash purchase price of €12.2 million.
that EBITDA and EBIT assist in explaining trends in our operating performance,
provide useful information about our ability to incur and service indebtedness
Topolino
and are commonly used measures of performance by securities analysts and
On January 7, 2009, Lottomatica acquired 100% of the shares of Topolino S.r.l.
investors in the gaming industry. EBITDA and EBIT should not be considered as
(“Topolino”), an Italian entity that owns and operates amusement with prize
alternatives to operating income as indicators of our performance or to cash
machines, for a cash purchase price of €3.5 million.
flows as measures of our liquidity. As we define them, EBITDA and EBIT may not
be comparable to other similarly titled measures used by other companies.
EBITDA and EBIT are computed as follows:
The initial accounting for these acquisitions is provisional because they are
based on preliminary estimates and assumptions. Revisions to the fair values,
which may be significant, will be recorded when the Group receives final
P 15
2009 Annual Report
information, including appraisals and other analyses, but not later than one year
concessionaires (sports betting and pools, horse-race betting and pools, gaming
from their respective acquisition dates.
machines, skill game wagers such as online poker, and transaction processing of
non-lottery commercial transactions).
comparison of 2009 with 2008
A substantial portion of revenue from the Italian Operations segment
consolidated revenue in 2009 increased 5.7% over 2008 as detailed by operating
is derived from the Lotto concession under which Lottomatica manages all
segment below.
of the activities along the lottery value chain including collecting wagers,
paying out prizes, managing all accounting and other back-office
functions,
consolidated revenues
Italian Operations
GTEch Lottery
Gaming Solutions
GTEch G2
advertising
and
promotions,
operating
data
transmission networks and processing centers, training staff, providing
For the year ended
December 31,
Increase (decrease)
2009
2008
€
%
running
1,176,091
780,612
152,549
71,132
1,022,634
865,440
142,790
48,350
153,457
(84,828)
9,759
22,782
15.0
(9.8)
6.8
47.1
2,180,384
2,079,214
101,170
4.9
(3,851)
324
(20,274)
(3,851)
20,598
101.6
2,176,857
2,058,940
117,917
5.7
retailers with assistance and supplying materials for the game. Revenues
are typically based on a percentage of wagers. For the Lotto game this
percentage of wagers decreases as the total wagers increase during an
annual period.
A detailed analysis of the 2009 performance of each product and service
reported within the Italian Operations segment as compared to 2008 is described
below.
Elimination of intersegment revenue
Purchase accounting (a)
Total revenue
Lotto
Lotto revenue declined 3.9% due to a corresponding decline in Lotto wagers
(a) Represents the amortization of acquired tangible and intangible assets in connection
with the August 2006 acquisition of GTECH by Lottomatica.
as detailed in the table below. Wagers on a new keno-style game, 10 and
Lotto, which launched in June 2009, partially offset the decline in Lotto
wagers.
Italian Operations segment
consolidated revenue includes the following amounts for the Italian Operations
segment:
Lotto
Italian Operation segment
(millions of euros)
For the year ended
December 31,
Increase (decrease)
2009
2008
€
%
core wagers
Wagers for late numbers
For the year ended
December 31,
Increase (decrease)
2009
2008
€
%
4,620.1
1,043.7
5,045.8
806.2
(425.7)
237.5
(8.4)
29.5
5,663.8
5,852.0
(188.2)
(3.2)
Lotto
Instant tickets
Other
364,124
329,088
2,473
378,827
323,789
2,580
(14,703)
5,299
(107)
(3.9)
1.6
(4.1)
Instant tickets
Lottery
695,685
705,196
(9,511)
(1.3)
Instant ticket revenue increased 1.6% primarily due to higher sales of Scratch and
Sports Betting
Machine Gaming
Interactive
commercial Services
186,461
160,883
38,937
94,125
144,726
89,204
83,508
41,735
71,679
38,937
10,617
28.8
80.4
12.7
1,176,091
1,022,634
153,457
15.0
Total revenue
The Italian Operations segment includes all Italian licenses related activities
including
P 16
our
exclusive
concessionaires
(lotteries)
and
multi-provider
Win tickets as detailed in the table below. The €194.2 million increase in instant
ticket sales was principally driven by the continued success of existing tickets
(€5 Il Miliardario, €10 Il Megamiliardario and €10 Tesoro del Faraone), and the
introduction a new ticket, €20 Magico Natale, in October 2009.
GTECH Lottery segment
Instant tickets
consolidated revenue includes the following amounts for the GTEch Lottery
(millions of euros)
Total tickets sold (in million)
Total sales (in million euros)
Average price points (euros)
For the year ended
December 31,
Increase (decrease)
2009
2008
€
%
2,413.0
9,371.9
3.88
2,531.0
9,177.7
3.63
(118.0)
194.2
0.25
(4.7)
2.1
6.9
Sports Betting
segment:
GTEch Lottery segment
Sports betting revenue increased 28.8% due to the strong performance of fixed odds
For the year ended
December, 31
Increase (decrease)
2009
2008
€
%
sports-betting operations (20.3% market share, in terms of total wagers, as of
United States
International
440,408
278,028
417,434
277,750
22,974
278
5.5
01
December 31, 2009) as detailed in the table below. As of December 31, 2009, 1,189
Service revenue
718,436
695,184
23,252
3.3
United States
International
9,699
52,477
9,803
160,453
(104)
(107,976)
(1.1)
(67.3)
Product sales
62,176
170,256
(108,080)
(63.5)
United States
International
450,107
330,505
427,237
438,203
22,870
(107,698)
5.4
(24.6)
Total revenue
780,612
865,440
(84,828)
(9.8)
fixed odds sports betting and 496 sports pool points of sale locations were operational.
Sports Betting
(millions of euros)
For the year ended
December 31,
Increase (decrease)
2009
2008
€
%
Fixed odds sports betting wagers
Sports pool wagers
819.5
113.8
635.0
150.5
184.5
(36.7)
29.1
(24.4)
933.3
785.5
147.8
18.8
GTEch Lottery revenue is principally comprised of service revenue derived
primarily from lottery service contracts, which are typically at least five to seven
years in duration for the base contract term with one to five years of extension
options. These contracts generally provide compensation to GTEch based upon
Machine Gaming
Machine Gaming revenue increased 80.4% primarily driven by a €463.1 million
a percentage of a lottery’s gross online and instant ticket sales. These percentages
vary depending on the size of the lottery and the scope of services provided to
increase in wagers on AWPs as detailed in the table below.
the lottery. GTEch Lottery product sale revenue is derived primarily from the
installation of new online lottery and gaming systems, installation of new
Machine gaming
software and sales of lottery and gaming terminals and equipment in connection
For the year ended
December 31,
Increase (decrease)
2009
2008
€
%
AWP wagers (in millions)
AWP machine installed
4,011.3
48,226
3,548.2
48,991
463,1
(765)
13.1
(1.6)
with the expansion of existing lottery and gaming systems. GTEch’s product sale
revenue from period to period may not be comparable due to the size and timing
of product sale transactions.
GTEch has developed and continues to develop new lottery games, licenses new
game brands and installs a range of new lottery distribution devices, all of which
Interactive
are designed to maintain a strong level of same store sales growth for its
During 2009, €38.9 million of revenue was generated from €354.9 million of skill
customers.
game wagers, principally from online poker.
Service Revenue
Commercial Services
United States lottery service revenue increased 5.5% primarily due to the
commercial Services revenue increased 12.7% principally due to an increase in
weakening euro against the US dollar.
bill payment services and electronic top-up services for prepaid mobile.
International lottery service revenue was comparable to the prior year.
P 17
2009 Annual Report
Organic growth and revenue from new contracts was partially offset by lower jackpot
GTEch G2 service revenue increased 52.1% over the same period last year due to
activity and fluctuations in foreign currency exchange rates against the euro.
four additional months of revenue from Boss Media and St. Minver (which were
acquired on April 24, 2008 and April 30, 2008, respectively).
Product Sales
International lottery product sale revenue decreased 67.3% from the prior year.
Product sale revenue from year to year fluctuates due to the mix, volume and
consolidated operating costs
timing of product sale transactions. Product sales in 2009 included the sale of new
lottery terminals to our customer in Denmark and a new online lottery system to
our customer in Belarus. Product sales in 2008 included a new lottery central system
consolidated revenue includes the following amounts for the Gaming Solutions
Raw materials,
services and other costs
Personnel
Depreciation
Amortization
Impairment loss
capitalization of internal
construction cost - labor
and overhead
segment:
Total operating costs
to our customer in Finland, 28,500 lottery terminals to our customer in the United
Kingdom and a central system to our customer in Saxony, Germany.
Gaming Solutions segment
Percentage of total revenue (%)
Gaming solutionS segment
Service Revenue
Product sales
Total revenue
For the year ended
December 31,
Increase (decrease)
2009
2008
€
%
1,052,429
428,305
236,601
94,400
76,025
991,247
410,513
225,461
86,095
100,778
61,182
17,792
11,140
8,305
(24,753)
6.2
4.3
4.9
9.6
(24.6)
(77,324)
(95,149)
17,825
18.7
1,810,436
1,718,945
91,491
5.3
83.2
83.5
consolidated operating costs during 2009 increased 5.3% over 2008 principally
For the year ended
December 31,
Increase (decrease)
2009
2008
€
%
58,007
94,542
56,465
86,325
1,542
8,217
2.7
9.5
152,549
142,790
9,759
6.8
due to higher costs related to the 5.7% increase in revenue; higher costs related
to the effect of the weakening euro against the US dollar; and four additional
months of costs from Boss Media and St. Minver (which were acquired on April
24, 2008 and April 30, 2008, respectively). These cost increases were offset by
lower costs related to lower product sale revenue in 2009.
The €76.0 million of impairment loss in 2009 principally relates to impairment
Product sales were €8.2 million higher during 2009 when compared to 2008. Product
losses in the GTEch G2 segment due to potential changes in the regulation of
sales in 2009 included the sale of new video lottery terminals to our customers in
online gaming in Europe. A significant recent European court decision has upheld
Oregon and Sweden. Product sales in 2008 included the sale of video slot/electronic
the interest of numerous European States in creating Nationally Regulated
bingo gaming terminals and associated bingo system to our customer in Manitoba
Gaming Markets under which cross-border online gaming operators may be
and new video lottery terminals to our customer in Sweden.
required to apply for jurisdiction specific online gaming licenses. Given the
uncertain timeline of new licenses and impact to cross-border transactions, we
GTECH G2 segment
estimate that growth in this segment will continue but at a slower pace.
consolidated revenue includes the following amounts for the GTEch G2 segment:
The €100.8 million of impairment loss in 2008 includes €74.0 million of
goodwill and other impairment losses primarily related to Atronic America’s
operations in the Gaming Solutions segment and €26.8 million related to a lottery
GTEch G2 segment
system we deployed for an international customer in the Lottery segment that
For the year ended
December 31,
Increase (decrease)
2009
2008
€
%
Service Revenue
Product sales
66,502
4,630
43,730
4,620
22,772
10
52.1
0.2
Total revenue
71,132
48,350
22,782
47.1
P 18
encountered a sustained period of political instability that prevented the lottery
system from launching.
The Group devotes substantial resources to enhance our present products and
Foreign exchange gain (loss) net
systems and develop new products. The aggregate amount of research and
development expenditures recognized as expense during 2009 and 2008 was
€62.4 million and €62.5 million, respectively.
The Group’s worldwide employees are comprised of the following personnel:
cash foreign exchange loss
Non-cash foreign exchange loss
For the year ended
December 31,
Increase (decrease)
2009
2008
€
%
(18,970)
3,146
(5,984)
16,336
12,986
13,190
>200.0
80.7
(15,824)
10,352
26,176
>200.0
Personnel
Personnel description
Number of employees
December 31,
Average
2009
2008
2009
Executives
Middle management
All other permanent employees
Employees with temporary employment contracts
400
977
6,131
164
398
933
5,975
190
397
963
6,098
195
7,672
7,496
7,653
Cash foreign exchange loss
In order to better match future cash flows with the Group’s revenue
concentration from European countries (which has increased in recent years),
GTEch borrowed in euro under the GTEch Senior credit Facilities in 2009. These
euro denominated borrowings resulted in approximately €19.0 million of cash
foreign exchange loss when in December 2009, a portion of the proceeds from
the Notes were used to reimburse the outstanding euro borrowings under the
GTEch Senior credit Facilities.
Other expense
For the year ended
December 31,
Increase (decrease)
2009
2008
€
%
Debt issuance costs
Termination of interest rate swap
Other
(5,391)
(3,936)
(7,363)
(2,699)
5,391
3,936
4,664
172.8
(16,690)
(2,699)
13,991
>200.0
Non-cash foreign exchange gain (loss)
Non-cash foreign exchange gain (loss) was incurred on the following:
Non-cash foreign exchange gain (loss)
In December 2009, the Group issued €750 million of guaranteed notes due
December 5, 2016 (the “Notes”). The proceeds of the Notes, net of associated
Polish zloty loan
Other
fees and costs, were used to reimburse the LTO Term Loan Facility, a portion of
For the year ended
December 31,
Increase (decrease)
2009
2008
€
%
6,043
(2,897)
14,734
1,602
8,691
4,499
59.0
>200.0
3,146
16,336
13,190
80.7
the GTEch Senior credit Facilities and other debt, extending the average maturity
of the Group’s debt while adding further diversity to the Group’s capital structure.
Polish zloty loan
As a result, unamortized debt issuance costs and interest rate swaps associated
During 2007, in connection with GTEch’s sale of POLcARD S.A. to First Data
with the reimbursed debt were written off.
International, GTEch’s Polish subsidiary, GTEch Polska Sp. z o.o. (“GTEch
Polska”), loaned Polish zloty 255.6 million (at market interest rates) to GTEch
Foreign exchange gain (loss), net
Global Services corporation Limited (“GGSc”), whose functional currency is the
Foreign exchange gains and losses are classified as realized (cash) or unrealized
US dollar. GGSc repaid this loan in 2009 principally using the proceeds of non-cash
(non-cash) as follows:
dividends from GTEch Polska. Non-cash foreign exchange gains incurred on this
loan resulted from fluctuations in the Polish zloty to US dollar exchange rate.
P 19
2009 Annual Report
Interest expense
generated from operating activities, existing sources of committed liquidity,
access to capital markets, and other sources of capital. Our corporate debt ratings
of Baa3 from Moody’s and BBB- from Standard and Poor’s contribute to our
Interest expense
capital securities
GTEch Senior credit Facility
Lottomatica Term and Revolving
FacilitIES
Notes
4.8% Bonds
Other
ability to access capital markets at attractive prices.
For the year ended
December 31,
Increase (decrease)
2009
2008
€
%
(64,658)
(57,139)
(64,403)
(70,777)
255
(13,638)
0.4
(19.3)
(14,984)
(3,030)
(11,707)
(7,781)
(17,303)
(17,291)
7,203
3,030
(17,303)
(5,584)
92.6
(100.0)
(32.3)
(151,518)
(177,555)
(26,037)
(14.7)
Summary statements of cash Flows
695,442
680,804
Purchases of systems, equipment and other assets related to contracts
Purchases of intangible assets
Acquisitions
Acquisitions - cash acquired
Purchases of property, plant and equipment
contingent consideration
Other investing activities, net
(253,059)
(102,775)
(44,737)
196
(15,848)
(2,171)
1,210
(195,178)
(18,439)
(249,667)
39,689
(26,176)
(13,415)
2,806
Net cash flows used in investing activities
(417,184)
(460,380)
2009, it did not have any material effect on weighted average diluted shares in
Proceeds from issuance of Notes
Proceeds from issuance of ordinary share capital
Debt and share issuance costs
Dividends paid - non-controlling interest
Dividends paid
Interest paid
Net repayments of debt
Treasury share purchases
Other financing activities, net
750,000
350,000
(12,976)
(43,560)
(100,940)
(153,776)
(703,011)
(1,535)
(9,113)
(31,357)
(125,393)
(159,850)
(149,598)
(74,830)
3,208
2009.
Net cash flows from (used in) financing activities
84,202
(546,933)
362,460
(326,509)
The decrease in interest expense was principally due to lower interest rates on
variable rate debt, partially offset by the weakening euro against the US dollar.
Weighted Average Diluted Shares
Weighted average diluted shares during 2009 totaled 150.4 million shares,
comparable to 2008.
On November 24, 2009, the Group raised €350 million through the issue of
19.7 million shares as discussed below. Because this transaction occurred late in
Income Taxes
The Group’s effective income tax rate during 2009 was 40.3% compared to 25.6%
during 2008. The rate increase was primarily due to the impairment of certain
investments, termination of the Group’s intercompany debt funding structure,
and losses in certain foreign subsidiaries without any associated tax benefit.
Liquidity, capital Resources and Financial Position
The Group’s objective is to maintain adequate liquidity and flexibility through
the use of cash generated from operating activities, bank overdrafts and bank
loans. We believe our ability to generate excess cash from operations to reinvest
in our business is one of our fundamental financial strengths and combined with
our committed borrowing capacity, we expect to meet our financial obligations
and operating needs in the foreseeable future. We expect to use cash generated
primarily from operating activities to meet contractual obligations and to pay
dividends. Our growth is expected to be financed through a combination of cash
P 20
Net cash flows from operating activities
For the year ended
December 31,
2009
2008
Net cash flows
Analysis of Cash Flows
During 2009, we generated €695.4 million of net cash flows from operating
activities, an increase of €14.6 million over 2008, primarily due to changes in net
working capital.
The €253.1 million of capital additions for systems, equipment and other
assets were principally related to spending in Italy, New York, New Jersey, chile
and West Virginia. Intangible asset additions of €102.8 million were principally
related to the non-refundable payment representing 50% of the total cost of
10,761 video lottery terminal (“VLT”) rights in Italy. By the end of April 2010,
Lottomatica may elect to reduce the total number of VLT rights that it intends to
purchase and if it does not make such an election, the payment for the remaining
50% of such VLT rights is due on June 30, 2010. As a result of the purchase of the
VLT rights, Lottomatica’s license to operate in the VLT market is extended until
2019.
Although acquisition activity in 2008 was significant with the acquisitions of
credit Revolving Facilities and LTO Revolving credit Facility. These facilities have
Boss Media AB, the Atronic group of companies and St. Enodoc holdings, in 2009,
covenants and restrictions including, among other things, requirements relating
we continue to make strategic investments to exploit growth opportunities in
to the maintenance of certain financial ratios, limitations on capital expenditures
the Sports Betting and Machine Gaming markets in the Italian Operations
and acquisitions and limitations on dividends, none of which are expected to
segment.
impact the Group’s liquidity or capital resources. At December 31, 2009, we were
On November 24, 2009, the Group raised €350 million through the issuance
in compliance with all applicable covenants.
of 19.7 million shares to Mediobanca International (Luxembourg) S.A.
We currently expect that our excess cash flow from operations, existing cash,
(“Mediobanca”) at a 15% premium to market, the proceeds of which will support
undrawn capacity under existing borrowing facilities and access to additional
development plans in Italy, primarily for the renewal of the Gratta & Vinci (Scratch
sources of capital will be sufficient, for the foreseeable future, to fund our
& Win) concession and the purchase of VLT rights.
anticipated working capital and ordinary capital expenditure needs, to service
In order to raise the funds necessary to subscribe for the shares, Mediobanca
our debt obligations, to fund anticipated internal growth, to fund all or a portion
commissioned UBI Banca International S.A. to issue mandatory exchangeable
of the cash needed for potential acquisitions and to pay dividends. We may also
bonds (“the Bonds”) which, upon maturity on October 29, 2012, must be
seek alternative sources of financing to fund future potential acquisitions and
exchanged into Lottomatica ordinary shares. The Bonds were placed with
other growth opportunities.
qualified investors on a private placement basis and bear interest at 8.75% per
annum payable semi-annually in arrears in equal installments on October 29th
and April 29th of each year, commencing on April 29, 2010.
Summary Statements of Financial Position
Lottomatica entered into a swap agreement with Mediobanca whereby
Mediobanca paid an upfront fixed amount to Lottomatica of €46 million,
December 31,
2009
2008
Increase (decrease)
€
%
Systems, equipment and other
assets related to contracts, net
Goodwill
Intangible assets, net
Deferred income taxes
Other non-current assets
774,558
3,006,783
822,886
6,030
118,966
758,717
3,074,571
847,281
23,633
113,886
15,841
(67,788)
(24,395)
(17,603)
5,080
2.1
(2.2)
(2.9)
(74.5)
4.5
Total non-current assets
4,729,223
4,818,088
(88,865)
(1.8)
134,080
791,803
469,335
74,258
129,560
773,595
109,274
91,102
4,520
18,208
360,061
(16,844)
3.5
2.4
>200.0
(18.5)
5,890
7,456
(1,566)
(21.0)
6,204,589
5,929,075
275,514
4.6
Equity
1,896,807
Long-term debt, less current portion 2,621,990
134,127
Non-current financial liabilities
142,317
Other non-current liabilities
78,154
1,649,832
2,573,802
229,621
134,604
75,381
246,975
48,188
(95,494)
7,713
2,773
15.0
1.9
(41.6)
5.7
3.7
capital Securities and GTEch Senior credit Facilities. At December 31, 2009, we
Total non-current liabilities
2,976,588
3,013,408
(36,820)
(1.2)
had €469.3 million of cash and cash equivalents on hand.
under the GTEch Senior credit Revolving Facilities (totaling US$500 million) and
Accounts payable
Short-term borrowings
current financial liabilities
current portion of long-term debt
Income tax payable
Other current liabilities
905,677
5,079
59,885
67,186
20,945
272,422
800,653
60,848
12,741
61,109
49,457
281,027
105,024
(55,769)
47,144
6,077
(28,512)
(8,605)
13.1
(91.7)
>200.0
9.9
(57.7)
(3.1)
LTO Revolving credit Facility (totaling €300 million). At December 31, 2009, there
Total equity and liabilities
6,204,589
5,929,075
275,514
4.6
corresponding to the 15% premium to market. Lottomatica will pay fixed
payments semi-annually to Mediobanca that correspond to interest on the Bonds
that are not converted at any interest payment date. The present value of these
payments has been recorded as a financial liability in the consolidated statement
of financial position (the “Swap Liability”).
(along with other general corporate purposes), extending the average maturity
Inventories
Trade and other receivables
cash and cash equivalents
Other current assets
Non-current assets classified as held
for sale
Total assets
fees and costs, were used to repay a portion of the existing debt of the Group
The Notes received a rating of Baa3 and BBB- by Moody’s Investors Service Limited
and Standard & Poor’s Rating Service, respectively, and are listed on the
Luxembourg Stock Exchange.
Interest paid of €153.8 million in the current year principally relates to the
Our business is capital-intensive. We expect our principal sources of liquidity
to be existing cash balances, cash generated from operations and borrowings
was €643.7 million of committed undrawn capacity under the GTEch Senior
P 21
2009 Annual Report
The Group changed the December 31, 2008 statement of financial position to:
parent and €43.6 million of dividends paid to non-controlling shareholders.
(i) adjust the presentation of foreign currency translation associated with the
The €48.2 million increase in long-term debt, less current portion was
July 2, 2007 acquisition of Finsoft Limited to properly reflect the functional
principally due to €750 million of proceeds from the Notes, which was
currency as British pounds sterling; and (ii) to offset deferred income tax
partially used to repay amounts due under the LTO Term Loan Facility and
assets and deferred income tax liabilities in accordance with IAS 12 Income
GTEch Senior credit Facilities. This net increase was partially offset by the
Taxes.
reclassification of debt coming due within twelve months to current portion
Accordingly, (i) Goodwill and Intangible assets, net, decreased €11.7
of long-term debt, and €43.9 million of foreign currency translation.
million and €5.9 million, respectively, which was offset by a corresponding
The €95.5 million decrease in deferred income taxes was primarily due to
€17.6 million decrease in Equity; and (ii) deferred income tax assets and
the recognition of deferred tax assets relating to foreign operating losses,
liabilities decreased by €211.8 million.
provisions currently not deductible for income tax purposes and the
The €15.8 million increase in systems, equipment and other assets related
amortization of acquired intangibles.
to contracts, net was principally due to €258.4 million of capital additions,
The €7.7 million increase in non-current financial liabilities was primarily
which was partially offset by €224.1 million of depreciation and €14.6 million
due to €56.4 million of Swap Liability related to the share capital increase,
of foreign currency translation.
partially offset by a €21.1 million improvement in the fair value of interest
The €67.8 million decrease in goodwill was principally due to €67.2
million of foreign currency translation; €23.8 million of impairment loss
rate swaps and the €22.2 million reclassification of the Boss Media contingent
liability and Finsoft contingent consideration to current financial liabilities.
primarily relating to the GTEch G2 segment; €7.7 million resulting from the
The €105.0 million increase in accounts payable was principally due to the
finalization of the Royal Gold and Atronic purchase accounting; and €8.4
timing of payments in Italy and for GTEch’s ongoing lottery system
million of changes in the fair value of contingent liabilities related to the
implementations, along with an increase in accounts payable primarily
Finsoft Limited, St. Enodoc holdings Limited and Boss Media AB acquisitions.
related to higher sales of Scratch and Win tickets.
These decreases were partially offset by €39.3 million of acquisition activity
during 2009 (primarily Labet and Europa Gestione).
The €55.8 million decrease in short-term borrowings was principally due to
repayments of outstanding amounts due under uncommitted lines of credit.
The €24.4 million decrease in intangible assets, net was principally due to
The €47.1 million increase in current financial liabilities was primarily due
€94.5 million of amortization; €49.8 million of impairment loss primarily
to €29.9 million of Swap Liability related to the share capital increase and
related to the GTEch G2 segment; and €13.6 million of foreign currency
the reclassification of the Boss Media contingent liability and Finsoft
translation. These decreases were partially offset by €102.8 million of
contingent consideration, which are expected to be settled within the next
intangible assets acquired during 2009 (primarily the purchase of VLT rights);
twelve months, from non-current financial liabilities as described above.
€15.7 million of 2009 acquisition activity (primarily Labet); and €15.0 million
The €6.1 million increase in current portion of long-term debt was
principally resulting from the finalization of the Royal Gold and Atronic
primarily due to the reclassification of debt coming due within twelve months
purchase accounting.
as described above, partially offset by €50 million of debt repayments by
The €17.6 million decrease in deferred income taxes was principally due
to the acceleration of tax amortization in excess of book amortization with
respect to the Atronic group of companies.
utilizing a portion of the proceeds of the Notes.
The €28.5 million decrease in income taxes payable was primarily due to
the timing of estimated tax payments.
The €18.2 million increase in trade and other receivables was principally
due to increased sales and timing of collections in the Italian Operations
Consolidated Net Financial Position
segment.
The Group’s consolidated net financial position at December 31, 2009 improved
The €247.0 million increase in equity was primarily due to the share
€291.0 million from its net financial position at December 31, 2008 principally
capital increase and €112.4 million of net income. These increases were
due to the November 2009 share capital increase. consolidated net financial
partially offset by €100.9 million of dividends paid to shareholders of the
position is calculated as follows:
P 22
consolidated Net Financial Position
Reconciliation of Group Equity
The reconciliation of Lottomatica Group S.p.A. stand alone equity with the equity
December 31,
2009
2008
Change
cash on hand
cash at bank
453
468,882
392
108,882
61
360,000
Cash and cash equivalents
469,335
109,274
360,061
4,613
20,288
(15,675)
46,618
29,924
21,782
17,521
467
15,838
46,491
11,384
58,803
18,020
127
29,924
10,398
17,521
(58,336)
(2,182)
132,150
134,698
(2,548)
Net current financial debt (cash)
(341,798)
5,136
(346,934)
GTEch Senior credit Facility
Notes
capital securities
Swap liabilities
Interest rate swaps
Atronic related debt
LTO Term Loan Facilities
Lottomatica Senior credit Revolving Facility
Boss Media contingent liability
Other
1,145,100
740,821
733,180
56,391
53,094
2,803
32,918
1,359,888
730,525
73,740
69,793
353,354
50,000
14,252
56,854
(214,788)
740,821
2,655
56,391
(20,646)
(66,990)
(353,354)
(50,000)
(14,252)
(23,936)
Non current financial debt
2,764,307
2,708,406
55,901
Net financial position
2,422,509
2,713,542
(291,033)
Current financial receivables
capital securities
Swap liability
Short term borrowings
Other
Current financial debt
of the consolidated Group is as follows:
Reconciliation of group equity
Attributable to owners
of the parent
Lottomatica
All other
Group S.p.A.
subsidiaries
Non-controlling
interests Consolidated
Balance at January 1, 2009
1,812,808
Fair value of interest rate swaps
Amortization of unrecognized gain
on interest rate swap
(570)
Unrecognized net loss on derivate
instruments
Unrecognized net loss on available
for sale investment
Foreign currency traslation
Net income for the year
110,603
Ordinary share capital issued
350,000
Share issuance costs
(7,073)
Swap liability associated with
share issuance
(58,018)
Dividend distribution
(100,940)
Share-based payment
916
Atronic/Spielo intragroup sale
(26,462)
Put/call option arising from
business combination
Other movements in equity
-
(221,404)
13,147
58,428
-
1,649,832
13,147
-
-
(570)
(732)
-
(732)
(78)
(22,499)
(42,454)
-
44,205
-
(78)
(22,499)
112,354
350,000
(7,073)
26,462
(43,560)
-
(58,018)
(144,500)
916
-
4,169
(141)
-
4,169
(141)
Balance at December 31, 2009
(243,530)
59,073
1,896,807
2,081,264
Transactions with Related Parties
Financial risk management objectives and policies
During 2009 there were no significant transactions, including intragroup, with
Our principal financial instruments, other than derivatives, are comprised of debt
related parties which qualified as unusual or atypical. Any related party
and cash and cash equivalents. The main purpose of these financial instruments
transactions formed part of the normal business activities of the companies in
is to fund the capital needs of the Group’s operations. We have various other
the Group, including GTEch’s sale to Lottomatica of its interests in Atronic and
financial assets and liabilities, such as trade receivables and trade payables, which
Spielo. Such transactions were concluded at standard market terms for the nature
arise directly from operations.
of goods and/or services offered.
The primary risk inherent in our financial instruments is the market risk arising
Information on transactions with related parties, including specific disclosures
from adverse changes in interest rates and foreign currency exchange rates. We
required by cONSOB, is provided in Footnote 38 of the consolidated Financial
enter into derivative transactions, including principally interest rate swaps and
Statements included herein.
forward currency contracts, for the purpose of managing interest rate and
currency risks arising from our operations and its sources of financing. It is, and
has been throughout the year under review, our policy not to engage in currency
or interest rate speculation. Detailed information on our financial risk
management objectives and policies, including specific disclosures required by
cONSOB, is provided in Footnote 41 of the consolidated Financial Statements
included herein.
P 23
2009 Annual Report
SIGNIFIcANT BUSINESS DEVELOPMENT
In September 2009, the Shareholders’ Meeting of Invest Games, S.A. (“Invest
Games”), the Luxembourg-based company wholly owned by Lottomatica Group
Since the start of 2009, the Group has reported a number of significant business
S.p.A., approved a share capital increase to service the contribution into Invest
developments, in addition to significant contract developments discussed later
Games of an amount of GTEch holdings corporation shares equal to the entire
in this report.
participation of Lottomatica Group S.p.A. in GTEch holdings corporation.
GTEch holdings corporation is the parent company of GTEch corporation. The
Developments During 2009
transaction simplified and streamlined the Group’s corporate structure, and in
particular concentrated in Invest Games the GTEch holdings corporation
Business Developments
participation.
In June 2009, Lottomatica announced that it had become the first Italian operator
At the same Shareholders’ Meeting, approval was granted for an additional
to receive certification of compliance with the responsible gaming standards
share capital increase to Invest Games directed to GTEch corporation in order to
established by the European Lotteries Association.
accommodate the transfer of the assets of Lottomatica International hungary
In July 2009, the shareholders resolved in ordinary session to adopt the 2009-
Kft., a company incorporated under the laws of hungary and wholly owned,
2013 Share Allocation Plan and the 2009-2015 Stock Option Plan, both reserved
directly and through Lottomatica International S.r.l., by Lottomatica Group S.p.A.
for employees of Lottomatica and/or of its subsidiaries. Both plans had been
This latter transaction resulted in the reduction of the indebtedness of GTEch
previously announced and made available to the public.
corporation and the improvement of its capital structure.
The 2009-2013 Share Allocation Plan is comprised of an aggregate maximum
In October 2009, Lottomatica applied to the Amministrazione Autonoma
of 673,729 ordinary shares, subject to increase to correspond in terms of value to
Monopoli di Stato (“AAMS”) to buy up to 10,761 VLT rights in Italy, and made a
the gross total dividends and reserves actually distributed by Lottomatica to
non-refundable payment representing 50% of the total cost of such VLT rights By
holders of ordinary shares in the period commencing on notification to the
the end of April 2010, Lottomatica may elect to reduce the total number of VLT
beneficiaries of their participation in the plan to the actual allocation of shares.
rights that it intends to purchase and if it does not make such an election, the
The Board of Directors has identified beneficiaries and set the maximum number
payment for the remaining 50% of such VLT rights is due on June 30, 2010. As a
of shares to grant to each one. The allocation of shares will be conditioned on
result of the purchase of the VLT rights, Lottomatica’s license to operate in the
Lottomatica’s reaching a total consolidated EBITDA level for the combined
VLT market is extended until 2019.
financial years of 2009, 2010 and 2011, as well as meeting a certain ratio between
In October 2009, the World Lottery Association (the “WLA”) conferred level
consolidated net financial debt and consolidated EBITDA, which will be more
4 certification to Lottomatica following review of Lottomatica’s submission under
specifically set by the Board of Directors. Distribution of shares will occur after
the WLA Responsible Gaming Framework. Level 4 certification signifies that
shareholder approval of the annual accounts for the financial year ended
Lottomatica has a mature and well established responsible gaming program in
December 31, 2011, with ability to partially postpone the distribution to 2013.
place and that Lottomatica is implementing its plan to integrate specific
The plan will terminate on December 31, 2013.
responsible gaming program elements into its daily operations. It further attests
The 2009-2015 Stock Option Plan is comprised of an aggregate maximum
that Lottomatica is also integrating the considerations of its external stakeholders
number of 1,850,510 options assigned. The Board of Directors has determined the
and has in place the human resources and processes necessary for continuous
number of options to be assigned to each beneficiary. Options were granted to
improvement.
beneficiaries and will be exercisable at the end of the three-year vesting period.
In October 2009, Lottomatica’s 18-month share buy-back program expired.
The exercise of options by the beneficiaries will be subject to Lottomatica’s reaching
Under the program, a total of 3,943,022 ordinary shares were bought for a total
a total consolidated EBITDA level for the combined financial years of 2009, 2010
consideration of €74.8 million, 596,832 shares of which were allocated to the
and 2011, as well as meeting a certain ratio between consolidated net financial
share-based management compensation plans.
debt and consolidated EBITDA, which will be more specifically determined by the
Board of Directors. The plan will terminate on December 31, 2015.
P 24
In October 2009, following the procedure contemplated in the open and
competitive tender for a new Scratch & Win concession in Italy, consorzio Lotterie
Nazionali (a consortium in which Lottomatica owns a 63% interest and which
and Standard & Poor’s Rating Service, respectively, and are listed on the
was created for Scratch & Win in Italy) made the only formal offer for a license
Luxembourg Stock Exchange.
to operate the national instant lotteries in Italy for a period of nine (9) years. In
November 2009, the judgment by the Regional Administrative court of Lazio was
Managerial Developments
filed and made known to the public, granting the challenge filed by Sisal S.p.A.
In April 2009, Lottomatica announced that its Board of Directors had accepted the
for the annulment of the above-mentioned tender for the management of the
resignation of Lorenzo Pellicioli as chief Executive Officer of the Group, and
national instant lotteries. Both the AAMS and consorzio Lotterie Nazionali filed
unanimously approved his recommendation of Marco Sala as the new Group cEO.
an appeal requesting an annulment of the decision by the Regional
Mr. Pellicioli remained as chairman. It was also announced that Renato Ascoli,
Administrative court of Lazio. Sisal filed its own appeal asking for a referral to
head of the Business Division at Lottomatica, was named General Manager of
the European court of Justice.
Lottomatica responsible for the Italian market.
On November 24, 2009, Lottomatica raised €350 million by issuing 19,728,536
shares to Mediobanca International (Luxembourg) S.A. (“Mediobanca”) for
Developments After close of calendar Year 2009
€17.7408 per share (a 15% premium to the market price of €15.4268), the
With regard to the tender for a new Scratch & Win concession in Italy discussed
proceeds of which will support development plans in Italy, primarily for the
above, after a hearing held on March 9, 2010 the State council accepted the
renewal of the Gratta & Vinci (Scratch &Win) concession and the purchase of
appeal submitted by AAMS and by consorzio Lotterie Nazionali and a portion of
video lottery terminal rights.
the appeal submitted by Sisal, and ruled that Article 21, Paragraph 5 of the law
102/2009 regulating the tender, as well as the clauses of the tender reflecting
such article, are not applicable. Paragraph 5 of said law is related to the interim
period during which consorzio Lotterie Nazionali would continue to manage the
exchanged into Lottomatica ordinary shares.
existing instant lotteries through January 2012.
The Bonds were placed with qualified investors on a private placement basis
On March 30, 2010, AAMS issued a decree to reopen the prior public tender
and bear interest at 8.75% per annum payable semi-annually in arrears in equal
for the new Scratch & Win concession and to remove from that tender the clauses
installments on October 29th and April 29th of each year, commencing on April
which the State council had found to be inapplicable in its March 9, 2010 ruling.
29, 2010.
AAMS has set a date of May 10, 2010 for submission of bids to participate in the
reopened tender.
As described in Footnotes 6 and 40 of the consolidated Financial Statements
corresponding to the 15% premium. Mediobanca will also pay semi-annually to
included herein, GTEch Global Services corporation Limited (“GGSc”) has an
Lottomatica an amount corresponding to the fees due under a stock lending
87.454% interest in GEMed AB and GGSc has the option, which it may exercise
agreement regarding certain shares owned by Lottomatica. Lottomatica will pay
between April 1, 2010 and June 30, 2010 to require Medströms Invest AB
fixed payments semiannually to Mediobanca that correspond to interest on the
(“Medströms”) to sell its 12.546% interest in GEMed to GGSc and Medströms has
Bonds that are not converted at any interest payment date. The present value of
an identical put right.
these interest payments has been recorded as a financial liability in the
consolidated statement of financial position (the “Swap Liability”).
On April 1, 2010, Medströms exercised its put right and on April 12, 2010,
GGSc paid Medstrom SEK 200 million (€205 million at the transaction date) for
the remaining 12.546% interest in GEMed.
fees and costs, were used to repay a portion of the existing debt of the Group
RISK AND UNcERTAINTIES
(along with other general corporate purposes), extending the average maturity
We believe that a system of well defined policies, processes and controls are
The Notes received a rating of Baa3 and BBB- by Moody’s Investors Service Limited
imperative to effectively manage the various risks that we encounter and
P 25
2009 Annual Report
manage. The main risks that the Group is managing are the following:
Market Risk: Market risk is the risk that changes in interest rates and foreign
of governmental policies, new foreign exchange controls regulating the flow
of money into or out of a country, failure of a government to honor existing
currency exchange rates will negatively impact the value of assets and
contracts, changes in tax laws and corruption, as well as global risk aversion
liabilities.
driven by political unrest, war and terrorism. Finally, social instability risks
A portion of the Group’s debt portfolio is exposed to changes in market
include high crime in certain of the countries in which Lottomatica operates
interest rates. changes in interest rates generally will not significantly impact
due to poor economic and political conditions, riots, unemployment and poor
the fair market value of such indebtedness, but could have a material effect
on Lottomatica Group’s results of operations, business, financial condition or
health conditions.
Operational Risk: Operational risk is the risk that external events or internal
prospects.
factors will result in losses. The Group’s Italian concessions, lottery contracts
Lottomatica is a global business and derives a substantial portion of its
in the United States and in other jurisdictions, and other service contracts
revenues from operations outside of the European Union. Our financial
often require substantial performance bonds to secure its performance under
statements could be materially different from period to period if there is a
such contracts and require the Group to pay substantial monetary liquidated
significant movement in the euro versus other currencies.
damages in the event of non-performance by the Group.
Credit Risk: credit risk is the risk of a financial loss arising from a customer or
claims on
performance bonds, drawings on letters of credit and/or payment of
counterparty not meeting their contractual obligations. A significant portion
liquidated damages could have a material adverse effect on the Group’s
of the Group’s revenue is derived from concessions with Amministrazione
results of operations, business, financial condition or prospects.
Autonoma dei Monopoli di Stato (AAMS), resulting in significant
Legal Proceedings: Due to the nature of its business, the Group is involved in
concentration of credit risk exposure. Management believes that in the
a number of legal, regulatory and arbitration proceedings regarding, among
future, a significant portion of its business and profitability will continue to
other matters, claims by and against it as well as injunctions by third parties
depend upon concessions with AAMS.
arising out of the ordinary course of its business and is subject to
Liquidity Risk: Liquidity risk is the risk that suitable sources of funding for the
investigations and compliance inquires related to its ongoing operations. The
Group’s operations may not be available. In recent years, certain contracts in
outcome of these proceedings and similar future proceedings cannot be
Italy have required an upfront payment for a license to operate the contract.
predicted with certainty. Unfavourable resolution of such proceedings or
GTEch contracts typically require upfront capital expenditures. The ability
significant delays in adjudicating such proceedings could have a material
of the Group to maintain existing contracts upon their renewal and invest in
adverse effect on the Group’s results of operations, business, financial
new contracts opportunities depends on the ability of the Group to access
condition or prospects. For a description of certain legal proceedings to which
new sources of capital to fund these investments.
the Group is a party, see Note 39 to the consolidated financial statements.
Country Risk: country risk is the risk that changes to regulations or laws, or
Government Relations: The Group’s activities are subject to extensive and
in the economy of a country in which we conduct business, will negatively
complex governmental regulation which varies from jurisdiction to
impact expected returns. Lottomatica is a global business and derives a
jurisdiction where the Group operates, which includes individual suitability
substantial portion of its revenues from operations outside of Italy. Risks
standards for officers, directors, major shareholders and key employees. The
associated with Lottomatica’s international operations include increased
Group believes that it has developed procedures designed to comply with
governmental regulation of the on-line lottery industry in the markets where
such regulatory requirements. however, any failure by the Group to so comply
it operates; exchange controls or other currency restrictions; and significant
and/or inability to obtain required suitability findings could lead regulatory
political instability. Other economic risks that Lottomatica’s international
authorities to seek to restrict the Group’s business in their jurisdictions.
activity subjects it to might include inflation, foreign exchange risks (both
depreciation and devaluation), illiquid foreign exchange markets, high
In addition, the Group is subject to extensive background investigations in its
interest rates, debt default, unstable capital markets and foreign direct
lottery business. Authorities generally conduct such investigations prior to and
investment restrictions. Political risks include change of leadership, change
after the award of a lottery contract. Authorities are generally empowered to
P 26
disqualify the Group from receiving a lottery contract or operating a lottery
in revenue and EBITDA. It is worth noting that we serve many customers around
system as a result of any such investigation. The Group’s failure, or the failure of
the world (mostly governments or government-related entities) that are looking
any of its personnel, systems or machines, in obtaining or retaining a required
for opportunities to grow their funding sources in times when tax income is
license or approval in one jurisdiction could negatively impact its ability to obtain
substantially reduced, generating severe budget shortfalls. In our traditional
or retain required licenses and approvals in other jurisdictions. Any such failure
Italian market, many changes are taking place, with new games being launched
would decrease the geographic areas where the Group may operate and as a
(both numerical games and VLT operations have been authorized), and new
result could have a material adverse effect on the Group’s results of operations,
licenses for instant lottery being awarded; further positive opportunities for the
business, financial condition or prospects.
Group may emerge in other countries relative to the business model adopted by
Further, there have been, are currently and may in the future continue to be,
states to operate lotteries.
investigations of various types, conducted by governmental authorities into
The Group has the needed resources, both in terms of capital and know-how,
possible improprieties and wrongdoing in connection with efforts to obtain
to play a leading role in this evolving landscape. We believe the Group is very
and/or the awarding of lottery contracts and related matters. Because such
well placed to retain its position in all geographies where we operate.
investigations frequently are conducted in secret, the Group may not necessarily
know of the existence of an investigation in which it might be involved. Because
the Group’s reputation for integrity is an important factor in its business dealings
with lottery and other governmental agencies, a governmental allegation or a
finding of improper conduct by or attributable to the Group in any manner or the
prolonged investigation of these matters by governmental or regulatory
authorities could have a material adverse effect on the Group’s results of
operations, business, financial condition or prospects, including its ability to retain
existing contracts or to obtain new or renewal contracts. In addition, adverse
publicity resulting from any such proceedings could have a material adverse effect
The Group’s strategic goal is to maintain its global leadership position in the
public gaming markets, further developing the initiatives already identified.
The Group’s strategy is summarized as follows:
continue to accelerate same-store sales growth;
Win new jurisdictions and bid for operator opportunities;
Grow instant ticket printing capabilities;
Roll out new distribution platforms, focusing particularly on interactive
channels; and
Timely launch VLT program in Italy, proposing its turnkey solutions to other
concessionaires.
on the Group’s reputation, results of operations, business, financial condition or
prospects.
LOTTOMATIcA STOcK INFORMATION
PREDIcTABLE DEVELOPMENTS
Shareholding structure
The financial crisis and the consequential economic downturn have caused
substantial changes around the world. Although some signs of recovery have
Shareholder
recently emerged, the economic rebound has yet to manifest its influence.
De Agostini Group
Mediobanca (1)
Assicurazioni Generali
In 2009, governments around the globe supported a strategy of increased
liquidity to ease credit conditions and avoid further perturbations; these policies,
which have proven to be effective on the financial markets, have left unresolved
the issue of employment levels in several countries. In early 2010, another wave
Number
of shares
% of outstanding
shares
102,629,324
21,918,941
4,989,596
59.663
12.742
2.901
(1) Approximately 11.47% of Mediobanca’s 12.742% share ownership is being held solely
and exclusively to serve the conversion of certain Mandatory Exchangeable Bonds issued
by UBI Banca International SA in 2009. Mediobanca has relinquished all of the voting,
administrative, beneficial and economic rights related to that 11.47% interest.
of instability was created by developments in some European states that have
severe deficits, and which require a tight financial discipline by governments.
Lottomatica owns 3,346,190 treasury shares, equal to about 1.945% of share capital.
Our industry has been, and continues to be, resilient to economic downturns.
Underwritten and paid up share capital as of December 31, 2009 amounts to
We were able to confirm previous performance; due to the selective investment
€172,015,373, composed of 172,015,373 ordinary shares with a nominal value of
strategy implemented in recent years, we have experienced continuous growth
€1 each.
P 27
2009 Annual Report
Authorized share capital amounts to €180,857,821, composed of 180,857,821
training staff, providing retailers with assistance and supplying materials for the
ordinary shares with a nominal value of €1 each.
game.
Lottomatica stock performance for the period ended
December 31, 2009
through computerized systems in which lottery or gaming terminals are
The average price of the stock for the twelve months ended December 31, 2009
players select their own numbers, such as Lotto, and off-line lotteries, which are
was €14.6. Over 190 million shares were traded in 2009, with a daily exchange of
games involving preprinted paper tickets and are not computerized (except for
approximately 752,047 shares.
ticket distribution and validation purposes).
Lottomatica operates both online lotteries and games, which are conducted
connected to a central computer system and which are generally games where
Lottomatica’s capitalization was approximately €2.1 billion on December 31,
2009 (€2.4 billion market capitalization, including 19.7 million shares issued but
A list of Lottomatica’s concessions in Italy is set forth on Table 1 of this
report.
not listed until February 2010).
Online Lottery
2 Gennaio 2009 =100
Lotto is a traditional game that was played off-line for centuries and that
130
Ftse Eurotop 100 +20.6%
Dow Jones Industrial +15.4%
120
FTSE Italia All-share +16.1%
110
6.000.00
Lotto Istantaneo, a game that allows players an option to participate in an instant
Lottomatica -20.2%
4.500.00
draw game using the same numbers selected for the Lotto game.
3.000.00
equal to a percentage of the amount wagered.
1.500.00
to 0.3% of total wagers to the Amministrazione Autonoma dei Monopoli di Stato
100
As compensation for its management of Lotto, Lottomatica receives a fee
90
80
Lottomatica is required to provide a performance bond in an amount equal
70
60
50
(“AAMS”) to guarantee performance of Lottomatica’s obligations pursuant to
40
Gen-09
originated roughly 500 years ago in Genoa. In July 2006, Lottomatica introduced
0
Feb-09
Mar-09
Apr-09
Mag-09
Giu-09
Lug-09
Ago-09
Set-09
Ott-09
Nov-09
Dic-0
(Source: Bloomberg Borsa Italiana)
the Lotto concession.
Upon termination of the Lotto concession, Lottomatica is required to transfer,
free of charge, to the AAMS upon its request, ownership of the entire automated
BUSINESS OVERVIEW
systems which relate to the operation of the Lotto game. A similar requirement
exists with respect to the termination of the other concessions as well.
The Group operates worldwide in the gaming market, proposing its range of
products and know-how according to the specific needs of each individual
Instant and Traditional Lotteries
customer. The following is a description of the Group’s products and brands by
In October 2003, the Ministry of Economy and Finances granted to consorzio
the Group’s four reportable operating segments: Italian Operations, GTEch
Lotterie Nazionali, a consortium 63% owned by Lottomatica, the exclusive
Lottery; Gaming Solutions and GTEch G2.
concession to operate instant and traditional Lotteries, which prior to that time
had been operated by AAMS. The remaining quotas of the consortium are held
Italian operations segment
by Scientific Games International, Inc. (20%), Arianna 2001 S.p.A. (15%) and
Since 1993, Lottomatica has been the sole concessionaire for the Italian Lotto
others (2%). The concession expires in March 2010, with respect to traditional
game, a traditional game that was played off-line for centuries. Lottomatica has
lotteries, and in May 2010, with respect to instant lotteries, unless such terms are
gained substantial experience managing all the activities along the lottery value
extended at the discretion of the AAMS. Instant and traditional lotteries are
chain, such as collecting wagers through its network, paying out prizes, managing
available at over 47,300 points of sale (of which approximately 33,810 are also
all accounting and other back office functions, running advertising and
Lotto points of sale), mainly consisting of tobacconists but also at bars, motorway
promotion, operating data transmission networks and processing centers,
restaurants and newspaper stands. The Lotto, Sports Pools and Other Pari-Mutual
P 28
Betting and Services networks and terminals also support the instant and
hotels to a central system. Lottomatica has agreements with approximately 640
traditional lotteries, for which Lottomatica provides a dedicated data processing
operators who have connected to approximately 48,000 machines.
center.
In October 2009, Lottomatica applied to the AAMS to purchase up to
As compensation for its management of the traditional and instant
10,761 VLT rights in Italy, and made a non-refundable payment representing
lotteries, Lottomatica receives a fee equal to a percentage of the amount
50% of the total cost of such VLT rights. By the end of April 2010, Lottomatica
wagered. As discussed under “Significant Business Developments During
may elect to reduce the total number of VLT rights that it intends to purchase
2009”, in an open and competitive tender for a new Scratch & Win concession
and if it does not make such an election, the payment for the remaining 50%
in Italy, consorzio Lotterie Nazionale (a consortium in which Lottomatica owns
of such VLT rights is due on June 30, 2010. As a result of the purchase of the
63%) made the only formal offer for a license to operate the national instant
VLT rights, Lottomatica’s license to operate in the VLT market is extended until
lotteries in Italy.
2019.
Sports Betting
commercial Services
Following a competitive tender completed in the last quarter of 2006,
Leveraging its distribution network and transaction processing experience,
Lottomatica has been awarded a non-exclusive concession by the AAMS to
Lottomatica offers high-volume transaction processing of non-lottery
operate sports betting, and the right to operate sports betting over the Internet.
commercial transactions such as prepaid cellular telephone recharges, bill
Since 2007, Lottomatica has extended its presence in the sports betting
payments, electronic tax payments, utility payments and retail-based
market following several acquisitions of domestic traditional sports betting
operators. In particular, in 2008, Lottomatica acquired Totosi, the leading Italian
programs.
commercial Services.
Lottomatica distributes services for commercial
sports betting operator online, with the object of protecting its existing customer
operators including electronic top-up services for prepaid mobile and fixed-line
base and acquiring new customers through the Internet. On the retail side, in
telephone accounts, ticketing for sporting and musical events, and collects
2009 Lottomatica entered the betting shop market, to acquire locations fully
payments from end-users for which it retains a fee.
dedicated to betting locations so that its betting competencies cover all types of
Payment Services. Lottomatica provides collection and payment services in
locations and cater to all customer needs. The betting shop deployment plan will
Italy for the payment of utility bills, local fines and duties and also collects
be completed by the end of the second quarter of 2010. This has allowed
payments due on behalf of creditors.
Lottomatica to further strengthen its leadership position in the Italian market.
Processing Services. Lottomatica provides a processing and network service
Overall, in 2009 the Italian sports betting market reached more than €4 billion
on behalf of third parties, without collecting amounts due. The most important
and is still growing, in terms of licensed operators becoming second worldwide
of these services are telephone top-ups and digital Terrestrial TV cards, payment
only to the United Kingdom market.
of car road taxes, fidelity card services and stamp duties services.
Lottomatica has also been granted rights to operate horse betting.
In Italy, Lottomatica’s services network comprises over 66,875 points of sale
(including approximately 26,084 points of sale where Lottomatica provides only
Interactive
processing services for third-parties and about 40,791 which overlap with Lotto
Starting at the end of December 2008, Lottomatica entered into the Interactive
points of sale) comprised of tobacconists, bars, petrol stations, newspaper stands
business, providing poker on-line and skill games such as board games, soft games
and motorway restaurants. Lottomatica has over 102,240 POS terminals installed
and fantacalcio.
at these locations and approximately 32,000 Lis Printers installed at tobacconists.
The Lis Printer is a proprietary dedicated terminal for printing stamp duties. All
Machine Gaming
services are provided through Lottomatica’s own separate services network (other
Lottomatica was granted, in July 2004, a license by the AAMS to activate and
than car road tax processing, which continues to be handled through the Lotto
operate a network in Italy that links amusement and entertainment machines
terminals). Not all points of sale with a POS terminal offer all services provided
installed in outlets consisting of bars, licensed betting halls, tobacconists and
by Lottomatica in Italy.
P 29
2009 Annual Report
GTEch lottery segment
extensions or commence a new competitive bidding process. Internationally,
GTEch delivers value added services and technology solutions to its customers
lottery authorities do not typically utilize as formal a bidding process, but rather
worldwide. As a global leader in the online lottery business, GTEch is a full
negotiate proposals with one or more potential vendors.From time to time, there
service technology partner catering to all of the systems and support needs of
are challenges or other proceedings relating to the awarding of the lottery
online lottery operators worldwide. GTEch also operates several lotteries in the
contracts.
caribbean through its LILhco subsidiary.
GTEch provides instant ticket
management systems to securely operate the instant ticket programs of more
GTEch’S lottery contracts
than 40 lottery jurisdictions. Although most lotteries look to GTEch for online
GTEch serves online government sponsored lotteries under facilities
transaction processing of instant tickets, GTEch entered into the instant ticket
management or product sales contractual arrangements which are described in
printing business in 2007 and continues to grow that business through its
more detail below.
subsidiary GTEch Printing corporation.
GTEch provides complete gaming
systems technology to government-sponsored machine gaming venues. GTEch
Facilities Management Contracts
also operates in the high growth interactive gaming and sports betting segments
GTEch’s Facilities Management contracts typically require GTEch to construct,
of the global gaming market.
install and operate the lottery system for an initial term, which is typically at least
five to seven years, and usually contain options permitting the lottery authority
contract award process
to extend the contract under the same terms and conditions for one or more
In the United States, lottery authorities generally commence the contract award
additional periods, generally ranging from one to five years. In addition, GTEch’s
process by issuing a request for proposals from various lottery vendors. The
customers occasionally renegotiate extensions on different terms and conditions.
request for proposals usually indicates certain requirements specific to the
GTEch’s revenues under Facilities Management contracts are generally a
jurisdiction, such as the number of terminals and breadth of services desired, the
variable amount of monthly or weekly service fees which are paid to GTEch
particular games which will be required, particular pricing mechanisms, the
directly from the lottery authority based on a percentage of such lottery’s gross
experience required of the vendor and the amount of any performance bonds
online and instant ticket sales. The level of lottery ticket sales within a given
that must be furnished. After the bids have been evaluated and a particular
jurisdiction is determined by many factors, including population density, the types
vendor’s bid has been accepted, the lottery authority and the vendor generally
of games played and the games’ design, the number of terminals, the size and
negotiate a contract in more detailed terms.
frequency of prizes, the nature of the lottery’s marketing efforts and the length
Once the contract has been
finalized, the vendor begins to install the lottery system.
of time the online lottery system has been in operation.
GTEch’s marketing efforts for its lottery products and services frequently
Under GTEch’s Facilities Management contracts, GTEch typically retains title
involve senior management in addition to its professional marketing staff. These
to the lottery system and provides its customers with the services necessary to
efforts consist primarily of marketing presentations to the lottery authorities of
operate and manage the lottery system.
jurisdictions in which requests for proposals have been issued.
operations of a lottery system after being awarded a Facilities Management
GTEch installs and commences
Marketing of GTEch’s lottery products and services to lottery authorities
contract and, following the start-up of the lottery system, GTEch is responsible
outside the United States is often performed in conjunction with licensees and
for all aspects of the system’s operations. GTEch typically operates lottery systems
consultants with whom GTEch contracts for representation in specific market
in each jurisdiction on a stand-alone basis through the installation of two or more
areas. Although generally neither a condition of their contracts with GTEch nor
dedicated central computer systems, although in a few instances several
a condition of their contracts with lottery authorities, such licensees and
jurisdictions share the same central system. In addition, in most jurisdictions
consultants often agree with GTEch to provide on-site services after installation
GTEch employs a work force consisting of a site director, marketing personnel,
of the online lottery system.
computer
After the expiration of the initial or extended contract term, a lottery
authority in the United States generally may either seek to negotiate further
P 30
operators,
communications
specialists
and
customer
service
representatives who service and maintain most aspects of the system.
Under certain of GTEch’s Facilities Management contracts the lottery
authority has the right to purchase GTEch’s lottery system (including the central
historically, product sales revenues have been derived from the installation of
system, terminals, software and communications network) during the contract
new online lottery systems, installation of new software and the sale of lottery
term at a predetermined price, which is calculated so that it exceeds the net book
terminals and equipment in connection with the expansion of existing lottery
value of the lottery system at the time the right is exercisable. In addition, some
systems. The size and timing of these transactions at times have resulted in
of GTEch’s lottery contracts permit the lottery authority to acquire title to
variability in product sales revenues from period to period.
GTEch’s system-related equipment and software during the term of the contract
A list of GTEch’s direct or indirect customers that since January 2008 have
or upon the expiration or earlier termination of the contract, in some cases (i.e.,
purchased (or have agreed to purchase) from GTEch new online lottery systems,
were GTEch to materially breach or be unable to perform under certain
software and/or terminals and equipment in connection with the expansion or
circumstances) without paying GTEch any compensation related to the transfer
replacement of existing lottery systems is set forth on Table 3 of this report.
of that equipment and software to the lottery authority. GTEch’s role, if any,
with respect to the continued operation of a lottery system in the event of the
Online products and services
exercise of such a purchase option generally is not specified in such contracts and
thus would be subject to negotiation.
Under many of GTEch’s Facilities
A Suite of Solutions for Lotteries Worldwide
Management contracts, the lottery authority also has the option to require
GTEch’s lottery systems consist of lottery terminals, central computer systems,
GTEch to install additional terminals and/or add new lottery games. Such
communications and game software, and communications equipment which
installations may require significant expenditures by GTEch. however, since
connect the terminals and the central computer systems. The systems’ terminals
GTEch’s revenues under such contracts generally depend on the level of lottery
are typically located in high-traffic retail outlets, such as newsstands, convenience
ticket sales, such expenditures have generally been recovered through the
stores, food stores, tobacco shops and liquor stores. GTEch’s broad spectrum of
revenues generated by the additional equipment or games and revenues from
solutions enables it to support lotteries at every stage of their development, from
existing equipment.
the smallest “start-up” to a fully matured operation.
Under a number of GTEch’s lottery contracts, in addition to constructing,
Terminals. GTEch designs, manufactures and provides the point-of-sale terminals
installing and operating the lottery systems in these jurisdictions, GTEch is
used in its online lottery systems. GTEch’s first model terminals were introduced
providing a wide range of support services and equipment for the lottery’s
in 1985. Since then, GTEch has developed an entire suite of industry-leading
instant-ticket games, such as marketing, distribution and automation of
flexible retail solutions that support the wide range of retailer needs across a
validation, inventory and accounting systems, for which GTEch receives fees
variety of retail trade channels. This includes a family of clerk-operated terminals,
based upon a percentage of the sales of instant-ticket games.
player self-service terminals including instant ticket vending machines (ITVMs)
A list of GTEch’s Facilities Management contracts is set forth on Table 2 of this
report.
and hand-held terminals, to support each unique lottery sales environment. A list
of GTEch’s ITVM contracts is set forth on Table 4 of this report.
Software. GTEch designs and provides, or licenses from third parties, all
Product Sales Contracts
applications solutions for its lottery systems. GTEch’s highly sophisticated and
Under Product Sales contracts, GTEch constructs, sells, delivers and installs
specialized software is designed to provide the following characteristics: rapid
turnkey lottery systems or lottery equipment and licenses the computer software
processing; storage and retrieval of transaction data in high volumes and in
for a fixed price, and the lottery authority subsequently operates the lottery
multiple applications; the ability to down-line load (i.e., to reprogram the lottery
system. GTEch also sells additional terminals and central computers to expand
terminals from the central computer installation via the communications system
existing systems and/or replace existing equipment under Product Sales contracts.
to add new games and other solutions); a high degree of security and redundancy
In connection with GTEch’s Product Sales contracts, GTEch generally designs
to guard against unauthorized access and tampering and to ensure continued
the lottery system, trains the lottery authority’s personnel and provides other
operations without data loss; and a comprehensive management information
services required to make and keep the system operational. GTEch also generally
and control system. GTEch’s Enterprise Series has an open architecture that it
licenses its software to its customers for a fixed additional fee.
believes sets the industry standard for the development, deployment, integration
P 31
2009 Annual Report
and support of next-generation online lottery solutions, including those which
its lottery systems and has contributed to increases in the revenues of many of its
permit sales of lottery products via secure infrastructure over the Internet,
customers. GTEch currently has a substantial number of variations of lottery
without compromising the integrity of the games. The open system architecture
games in its software library and new games under development. GTEch believes
of the Enterprise Series allows lotteries to upgrade their systems, and integrate
that this game library and the “know how” and experience accumulated by its
a broad spectrum of third-party hardware and software solutions to achieve
professionals since its inception make it possible for GTEch to meet the
greater performance.
requirements of its customers for specifically tailored games on a timely and
Central Computers. Each of GTEch’s lottery systems contains one or more central
comprehensive basis.
computer sites to which the lottery terminals are connected. GTEch’s central
Marketing. In Facilities Management jurisdictions in which GTEch has been
computer systems are primarily manufactured by IBM corporation and hewlett-
awarded a lottery contract, GTEch is frequently asked to assist the lottery
Packard company.
The specifications for the configuration of its central
authority in the marketing of lottery games to the public. Because GTEch
computer installations are designed to provide continuous availability, a high
revenues under Facilities Management contracts are based on a percentage of
throughput rate and maximum security. central computer installations typically
the lottery’s gross online and/or instant ticket sales, the value of GTEch’s
include: redundant mainframe computers, various peripheral devices (such as
marketing efforts can have an impact in driving revenue for both GTEch and the
magnetic storage devices, management terminals and hard copy printers), and
lottery. The full breadth of marketing expertise and services are offered to
various safety, environmental control and security subsystems (including back-up
support lottery efforts. Marketing assistance generally includes:
power supplies), which are all manufactured by third parties, and a
microcomputer-based communication and switching subsystem. In addition,
GTEch supplies management information systems that provide lottery personnel
access to important financial and operational data without compromising the
security of the online system. Based upon the development of its Enterprise
Series, GTEch is able to integrate qualified third party software applications.
Game Portfolio Management
Business Development
Marketing Development
Sales Development
corporate Social Responsibility
Professional/consulting Services
Communications. GTEch’s lottery terminals are typically connected to the central
Retailer terminal distribution and optimization, including utilization of
computer installations by dedicated communications channels. Due to the
GTEch’s “GMark”, a computerized marketing analysis system used to
varying nature of telecommunications services available in lottery jurisdictions,
determine optimal placement of lottery terminals in retail locations
GTEch has developed the capability to utilize and interface with a wide range of
Market Research, including Focus Group Testing of new games and products,
communications technologies to provide a reliable and secure data
primary and secondary research studies, Annual Worldwide Player Survey, and
communications pathway between the lottery terminals and the central
computers. These technologies include: VSAT, GPRS, cDMA, EDGE, EVDO, DSL,
Annual customer Satisfaction Survey
Retail Expansion and Development.
Frame Relay, cable, ATM, MPLS and FIOS. According to industry sources that
GTEch regards as reliable, GTEch is also the largest single enterprise user of
Instant ticket printing business
satellite technology for point-of-sale devices in the world.
GTECH Printing Corporation (GPC) is a rapidly growing and technologically
Games. An important factor in maintaining and increasing public interest in
advanced instant game supplier. GPc has 43 customers worldwide. GPc also
lottery games is the development of innovative and compelling new game
currently employs approximately 130 employees. As an end-to-end provider of
content. In conjunction with lottery authorities, GTEch utilizes principles of
instant tickets and related services, GPc specializes in the fast delivery of high-
demographics, sociology, psychology, mathematics and computer technology to
quality instant ticket games. With the industry’s largest, fastest, and highest
design customized lottery games which are intended to appeal to the populations
quality press and the utmost commitment to customer service, GPc seeks to
served by its lottery systems. The principal characteristics of game design include:
provide customers with instant tickets as well as development of initial marketing
frequency of drawing, size of pool, cost per play and setting of appropriate odds.
plans throughout the processes of entire graphic design, programming,
GTEch believes that its expertise in game design has enhanced the marketing of
production, packaging, shipping and delivery.
P 32
The Facility & Press
for online central systems, system design, jackpot and bonusing solutions,
GTEch Printing corporation has invested over $45 million to create the most
terminals and game-content. Gaming Solutions is typically compensated either
advanced instant game facility in the world. The facility is located in Lakeland,
on a “participation” basis whereby the Group retains the title to the equipment
Florida, with access to all major highways and international shipping ports in
and receives a percentage of sales or “net win” per machine or on a product sales
Florida. GPc’s Gallus press is capable of printing 48,000 tickets per minute and
basis whereby the Group receives a purchase price for the equipment.
more than 11 billion tickets annually. GTEch Printing has the capacity to package
The Gaming Solutions segment includes the Atronic group, a leading
90 million tickets per day. Engineered for maximum production flexibility,
international provider of gaming machines, systems and game-content to
precision, security and speed, the new press features 22 individually servo-
commercial gaming operators in Europe, Asia and Latin America, and Spielo, a
controlled stations for high quality registration, color control, and bar code
global leader in the video lottery markets focused on North America and Europe
imaging. GPc’s in-line finishing technology is a multi-purpose system that aims to
with an emerging presence in the U.S. commercial gaming markets. Both
improve efficiency, enhances design capabilities, and allows for new games ideas
companies benefit from the increasing convergence of the global gaming
to be entered into the market.
spaces as they pursue the integration of their technology and content
GPc also has a backup facility located in Plant city, Florida. With these two
competencies.
facilities, GTEch Printing now has approximately 20% of the world’s instant game
GTEch G2 segment
printing capacity.
Instant tickets are sold at numerous types of retail outlets but most
Since the mid 1980’s, GTEch has been providing certain customers with sports
successfully in grocery and convenience stores. GTEch anticipates that new
betting technology solutions. Since 2002, GTEch has been delivering interactive
methods of distribution and game play including Internet-based promotions and
solutions that allow its lottery customers to provide Internet, mobile and
games will provide additional growth opportunities. Government sponsored
interactive digital television access by their players.
lotteries grant printing contracts on both an exclusive and non-exclusive basis
In 2007 GTEch acquired 100% of Finsoft Limited (a leading sports betting
where there is typically one primary vendor and one or more secondary vendors.
technology provider in Europe), and in 2008 acquired approximately 87.45% of
A primary contract permits the vendor to supply the majority of the lottery’s
Boss Media AB and its subsidiaries (a provider of digital gaming software and
ticket printing needs and includes the complete production process from concept
services for poker, casino and bingo), and 90% of St. Enodoc, the parent of St.
development through production and shipment.
It also typically includes
Minver (a Gibraltar-based operator of white-label gaming services). collectively,
marketing and research support. A primary printing contract can also include
these subsidiaries form GTEch G2, which provides digitally-distributed, multi-
any or all of the following services: warehousing, distribution, telemarketing, and
channel gaming entertainment products and services, including sports betting,
sales/field support. A secondary printing contract includes providing back up
lottery, bingo, poker, casino games and quick games, as well as retail solutions for
printing services and alternate product sources. It may or may not include a
real-time transaction processing and information systems in the sports-betting
guarantee of a minimum or maximum number of games.
market.
Instant ticket contracts are priced on a percent of instant ticket sales or on a
GTEch G2 has over 700 employees in Europe and Asia. The segment has over
price per unit basis and generally range from 2-5 years with extension
150 gaming or media customers operating under license in various European
opportunities.
jurisdictions. The business model varies by product but is broadly a fixed upfront
and recurring licenses fee for sports betting technology, which varies by size
Gaming solution segment
(number of cPUs/Web Servers, seats per call center and retail POS), software
The Group’s Gaming Solutions segment operates and provides solutions, products
integration and support fees (per diem). For games, online casino, poker and
and services related to video lottery terminals (VLTs) and associated systems for
end-to-end sports book trading/risk management services, a revenue share based
the government sponsored and commercial gaming markets.
on the Gross Gaming Yield (or GGY) is charged to the gaming operator/media
The Gaming
Solutions segment is the world’s leading provider of central systems for
government sponsored machine gaming programs and is a single source provider
company.
GTEch G2 operates 4 poker networks in Europe with over 100,000 persons
P 33
2009 Annual Report
playing on these networks each day. It has 32 sports betting customers and over
Environmental Impacts
50 bingo customers on Europe’s third largest bingo network. Its online casino
Use of resources:
customers handled more than €3.5 billion through 850 million wagers in 2009.
The casino and games suite has also been leveraged to support leading server
based machine gaming software, currently operating on more than 9,000 gaming
Paper.
combustible materials.
Electricity.
machines in central and Eastern Europe.
Water.
ENVIRONMENTAL cOMMITMENTS
Waste water discharges.
Atmospheric emissions.
Waste production.
Lottomatica’s Environment commitments in Italy
The activities normally managed by the Lottomatica Group in Italy can be
Identification of Areas of Intervention
defined as having low environmental impact. Nevertheless the company
As a result of the identification of impacts and its initial analysis of the available
recognizes the importance of supporting efforts on environmental issues
data, the company identified the following areas of intervention in which it
together with those already undertaken in other areas of corporate social
endeavoured to improve its environmental commitment during 2009.
responsibility. Therefore, since 2008 Lottomatica has undertaken to finalize its
own environmental policy and has commenced programs of monitoring and
reducing the environmental consequences of its activities and products. The
Group’s programs are primarily related to locations in Italy and the United
Knowing and Managing
Structuring an efficient and reliable process for collecting and analyzing
environmental data.
States, where 60% of the workforce is concentrated, but its commitments are
relevant to all locations worldwide.
Reducing the Impacts
The Environmental Initiatives of Lottomatica
Increasing waste collection in the offices.
In early 2009 Lottomatica identified the main impacts of its 2008 activities and
those areas in which to focus in developing the environmental policy. On the basis
Efficient use of office paper and choice of ecological paper.
Introduction of rules for the efficient use of electricity.
Purchase of a share of energy from renewable energy sources.
of findings from this phase of analysis and preliminary evaluation, it is in the
course of defining its environmental policy and a plan of action for the mitigation
and safeguarding of the environment.
A first step, already taken and whose consolidation was a priority in 2009, is
Involvement and Awareness
Spread of best practices for an environmentally friendly office.
Information on the environmental impacts of the Group’s activities.
the establishment of a systematic process and a structured collection and analysis
Reduction of cO2 emissions: compensation of cO2 emissions generated by
of environmental data in order to make the measurement of performance
production of the Lotto Game play slips through reforestation activities in a
reliable and efficient.
national park, according to the principles of Kyoto Protocol.
The Identification of Impacts
GTEch’s Environmental commitments
The main environmental impacts of Lottomatica’s activities are associated with
GTEch is committed to minimizing its impact on the environment as it carries out
use of paper as a raw material, energy consumption and transport of persons and
its activities around the world and continually strives to improve its
goods. The company is also responsible for consumption of water resources and
environmental goals.
for waste generation. These impacts are due to the activities of corporate offices,
to play slips and other printing activities by Lottomatica’s subsidiary Pcc Giochi e
Guiding Principles
Servizi S.p.A., and to the management activities of the business.
GTEch corporation is committed to:
P 34
conducting our operations in a manner that protects the environment, our
employees and our neighbors.
complying with all laws, regulations and permits applicable to our products
and operations, and with our own more stringent standards whenever
necessary to implement this policy.
Applying continual improvement and pollution prevention principles to costeffectively reduce the environmental impacts of our manufacturing processes
and of our products.
Establishing and regularly reviewing environmental objectives and targets.
Making available to the public the environmental performance of our
operations.
Ensuring that our employees have the knowledge, resources and authority
to implement these guiding principles.
continuing GTEch’s compliance with the RohS (Restriction of hazardous
Substances) regulations implemented by the European Parliament and
council Directive on the Restrictions of the Use of certain hazardous
Substances in Electrical and Electronic Equipment (2002/95/Ec), in order to:
Protect human health and the environment by restricting the use of
Elimination of all Styrofoam products at its cafes, including ceasing use of
disposable and paper beverage cups and replacement of them with recyclable
and reusable mugs.
Reducing paper usage by programming all copy machines to print documents
double-sided.
Reducing use of colored ink by printing in black and white where possible.
Distributing information to new employees via electronic media, as opposed
to paper handouts.
Installing timers to shut down high-energy use areas overnight.
Applying automatic energy conservation settings to company desktop
computers; application to laptop computers still in testing phase, but
anticipated rollout in 2010.
Partnering with local recyclers to collect and recycle used personal and
business computers and electronics.
Installation of a secure bike rack to encourage employee commuting by
bicycle/scooter; and
A GREENovation contest that offered rewards to GTEch employees for
innovative ideas implemented as part of the GREEN GTEch pledge.
certain hazardous substances in new equipment; and
complement the Waste Electrical and Electronic Equipment (WEEE)
Directive
(2002/96/Ec).
In building new facilities, GTEch has sought to use energy saving lighting systems,
air conditioning plants, electrical circuits and materials with a high energy
efficiency factor. Its new Data Processing center in West Greenwich, Rhode Island
In 2008, GTEch implemented a new corporate initiative named “GREEN: A GTEch
was designed according to these parameters.
Pledge”, with the straightforward and simple mission statement: To help reduce
GTEch’s manufacturing facilities comply with all applicable laws and
waste and protect the environment. This program is intended to promote
regulations, including RohS. They do not generate any harmful waste, whether
environmentally-friendly habits at all GTEch sites and subsidiaries worldwide,
chemical or in the air. Further, GTEch has converted from non-biodegradable
and is undertaking to increase awareness by its employees on the best practices
bubble wrap and Styrofoam peanuts to biodegradable packaging material for
of energy saving and resource conservation, recycling procedures and overall
shipment of certain equipment such as spare parts.
protection of the environment. GTEch created a “Green committee” comprised
GTEch’s instant ticket printing subsidiary, GTEch Printing corporation (GPc),
of employees who will continually look for ways to save energy and promote
uses 100% recyclable paper, none of which are designated as hazardous waste.
environmental responsibility.
Its printing facility exceeds the compliance of all state and federal air and water
In its Rhode Island facilities, the environmental measures that have been
taken by GTEch include the following:
Recycling of white paper and cardboard; hardware in information technology
and in manufacturing; metals and cardboard in the production process; lamps
and fluorescent tubes; grease; bottles and cans; and batteries.
Reduction of trash sent to landfill by 8% as compared to 2008.
Intelligent management of market fluctuations when purchasing energy used
at its premises.
regulatory bodies, and its primary and backup facilities do not discharge any
process liquids. GPc has:
Eliminated the use of all solvent based overprint inks with the conversion to
water-based systems.
Replaced all solvent-based graphic inks with Ultraviolet cured graphic ink
systems.
Developed and implemented the use of a 100% water based system for base
coat and overprint coating systems.
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2009 Annual Report
Replaced all solvent-based security seal and release varnishes with UV-curable
systems.
Replaced its solvent-based plate making system with an all digital process;
and
Entered into agreements to recycle 100% of its offset printing plates.
GTEch expects to commence receiving revenues under the contract in June 2010.
In June 2009, GTEch Printing corporation announced that the Arizona
Lottery had chosen it for instant ticket printing services. The five (5) year contract,
which followed a competitive procurement provides for five one-year extension
options.
In July 2009, GTEch Printing corporation entered into a contract with Loteria
As a result, GPc has reduced its Volatile Organic compounds (VOc) emissions to
Nacional de Nicaragua for instant ticket printing services. The two (2) year
less than 20% of the current maximum operating limit allowed, and in fact has
contract followed a competitive procurement.
reduced its emitted VOcs even further with the development of a water based
In July 2009, GTEch entered into a contract amendment with the Wisconsin
Lottery to continue providing online lottery technology and services for an
black scratch off system.
additional two (2) year period ending in June 2013.
SIGNIFIcANT cONTRAcT DEVELOPMENTS
In August 2009, GTEch entered into a contract with the North carolina
Education Lottery to continue providing online lottery technology and services,
Developments During 2009
as well as new products, for an additional four (4) year period ending in March
In March 2009, GTEch entered into a contract amendment with the Tennessee
2017.
Education Lottery corporation to continue providing online lottery technology,
In September 2009, GTEch entered into a contract amendment with
as well as new self-service products and related services, for an additional four (4)
Washington’s Lottery to continue providing online lottery technology and
year period, commencing in April 2011.
ongoing services, as well as new self-service products and software
In March 2009, GTEch signed a three year contract extension to continue to
enhancements, for an additional four (4) year period ending in June 2016.
provide online lottery technology, as well as additional self-service and
In September 2009, GTEch entered into a contract amendment with the
multimedia products, for the Minnesota Lottery. GTEch expects to commence
Oregon State Lottery to continue providing video lottery central system
receiving revenues under the contract extension in February 2013.
technology and services for an additional two (2) year period ending in October
In April 2009, GTEch announced that it had been chosen by the Arizona
2012.
Lottery to provide a new instant ticket product management and distribution
In October 2009, GTEch entered into a contract amendment with the
system and related services. The five year contract, which followed a competitive
california Lottery to continue to provide gaming system equipment and related
procurement, commenced in January 2010 and provides for five one-year
services for an additional one (1) year period ending in October 2014, as well as
extension options.
new messaging devices and enhanced player services.
In May 2009, following a competitive procurement, GTEch entered into a
In October 2009, GTEch entered into a contract amendment with the Arizona
contract with Société de la Loterie de la Suisse Romande for the implementation
Lottery to continue providing online lottery technology and ongoing services for
of a comprehensive interactive gaming platform. GTEch will also provide four (4)
an additional three (3) year period ending in August 2014.
In October 2009, GTEch Global Lottery SLU and Spain’s leading integrated
years of ongoing support services.
In May 2009, GTEch’s subsidiary, GTEch Printing corporation, entered into a
logistics operator, Logista S.A., entered into a contract with Organizacion
three (3) year, secondary instant ticket printing services contract with the
Nacional de ciegos de Espana (ONcE) to provide end-to-end lottery technology,
Massachusetts State Lottery commission.
marketing services, logistics and retailer services for a complementary retailer
The contract, which followed a
competitive procurement, has two one-year extension options.
network. The joint venture created by GTEch and Logista was awarded a multi-
In June 2009, following a competitive procurement, GTEch signed a seven-
year contract following a competitive procurement. The contract, which is subject
year integrated services contract with the New York Lottery to provide new online
to positive verification of related game regulation modifications by the
lottery solutions and services. The Lottery has the option to extend the contract
Protectorate Board, the government administrative body that supervises relevant
for an additional three years. Final approval was granted in September 2009.
acts of ONcE, will continue through December 2020.
P 36
In October 2009, following a competitive procurement, GTEch signed a
contract to provide the Atlantic Lottery corporation in canada with 3,000
technology. GTEch expects to complete the installation of the equipment by
November 2010.
IMAGINE™ online lottery terminals and messaging display technology.
In October 2009, Lottomatica’s subsidiary, Spielo Manufacturing ULc, entered
Developments After the close of 2009
into a contract with Gamenet S.p.A. in Italy to provide a new server-based gaming
In January 2010, GTEch signed a five-year contract extension with SAZKA, a.s.,
central system, retailer terminals, several thousand video lottery terminals (VLTs),
the operator of lottery and betting games in the czech Republic, to continue
game content and services, under a multi-year agreement. Operations are
providing online lottery products and services, as well as install and operate a
expected to commence in the first half of 2010.
new IP-telecommunications network. The contract extension will commence on
In November 2009, GTEch Printing corporation was selected to provide
January 1, 2018.
instant ticket services to TIPOS national lottery company, a.s. in the Slovak
In February 2010, Lottomatica announced that GTEch Printing corporation
Republic. The ten year contract commenced in November and was the result of
was chosen as the primary instant ticket vendor for the New Mexico Lottery. The
a competitive procurement. The contract has unlimited options for extensions.
contract award was the result of a competitive procurement and is anticipated to
In November 2009, Spielo Manufacturing ULc signed a seven year extension
of its current video lottery terminal (VLT) participation agreement with the New
commence in March 2010. The term of the proposed contract will be four (4)
years with four (4) one-year extension options available.
York Lottery. The contract extension will commence on January 1, 2011 and will
run through December 31, 2017.
In November 2009, GTEch Printing corporation was awarded a two year
instant ticket printing services contract with the Wisconsin Lottery. The contract,
which is the result of a competitive procurement, commenced in November 2009.
In addition to the initial two year term, the contract has three one-year mutual
contract extensions.
In November 2009, GTEch signed a five-year and five-month contract with
the Maryland State Lottery commission to supply, operate and support the
central system that will monitor as many as 15,000 video lottery terminals at up
to five casinos as part of the state’s new gaming program. The contract, which
followed a competitive procurement, was approved by the Maryland State
Lottery commission, the Maryland Department of Information Technology and,
in January 2010, by the Maryland Board of Public Works, thus finalizing the
agreement. The central system is expected to be operational by mid-2010. The
contract includes the potential for a five-year extension.
In December 2009, GTEch signed a three year contract extension to provide
additional lottery terminals and services to Boldt Gaming SA, which in turn will
provide such products and services to Instituto Provincial De Loterias Y casinos
(IPLc) of the Province of Buenos Aires in Argentina. The contract between IPLc
and Boldt Gaming, and the contract between Boldt Gaming and GTEch, have
been extended through November 2012.
In December 2009, GTEch signed a contract amendment with Washington’s
Lottery for the provision of GTEch’s latest self-service lottery vending machine,
Gemini™, as well as additional instant ticket vending devices and multimedia
P 37
TABLES OF CUSTOMER CONTRACTS
“Given that human beings are fundamentally animals
that aim at cooperation, forming groups is
a vital part of their social structure.”
(Wikipedia)
2009 Annual Report
The table below sets forth Lottomatica’s Italian concessions as of December 31, 2009.
Table 1 - Italian concessions
Holder
Purpose
Date of Commencement
of current contract (1)
Date of expiration
current contract
Current extention
option(2)
Lottomatica Group S.p.A.
Activation and operation of the network for the Lotto Game
March 1993
June 2016(3)
Not renewable
consorzio Lotterie Nazionali
Operation of the National Lotteries for instant and periodic
drawings
October 2003
March 14, 2010 for lotteries
with periodic drawings May 30, 2010 for lotteries
with instant drawings
Renewable
Experimental Operation - as central operator - of the
on-line Scratch and Win Lotteries
November 2006
October 2009
Not Applicable
Lottomatica Videolot Rete S.p.A.
Activation and operation of the network for the telematic
operation of legalized amusement with prize machine
(Video Lotteries)
July 2004
October 2010
Renewable only for
1 year at AAMS
discretion
Lottomatica Scommesse S.r.l.
Activation and operation of the network for sports gaming,
toto betting and sports betting, operated through interactive
channel also for the operation of Skill Games. No. 4032
March 2007
June 2016
Not renewable
Activation and operation of the new horse gaming,
toto betting and horse betting. No. 4313
March 2007
June 2016
Not renewable
Activation and operation of the new horse gaming,
toto betting and horse betting. No. 4803
August 2009
June 2016
Not renewable
Activation and operation of sports betting.
Seventeen concessions(4)
March 2009 (only no. 3146)
May 2009
December 2009 (only no. 3302)
June 2012
Not renewable
Activation and operation of horse betting.
Seven concessions(5)
May 2009
December 2009
June 2012
Not renewable
Toto carovigno S.p.A.
concession No. 1100
January 2007
June 2012
Not renewable
Two concessions(6)
April and August 2007
June 2012
Not renewable
L.S. ALPhA S.r.l.
Seven concessions(7)
November and December 2008 June 2012
Not renewable
L.S. ALPhA S.r.l.
Nine concessions(8)
November 2008
June 2012
Not renewable
LABET S.r.l.
Activation and operation of the network for sports betting,
toto betting and sports betting, operated through interactive
channel also for the operation of Skill Games. No. 4113
June 2009
June 2016
Not renewable
LABET S.r.l.
Activation and operation of horse betting. One concession(9)
June 2009
June 2012
Not renewable
LABET S.r.l.
Seventeen concessions(10)
June 2009
June 2012
Not renewable
(1) Reflects the date upon which the contract became effective.
(2) Reflects extensions available to the governmental authority under the same terms as
the current contract.
(3) As discussed in Note 39 to the Notes to the Consolidated Financial Statements
concerning litigation, the indicated expiration date is under dispute with AAMS.
(4) Concessions no. 3146, 3155, 3165, 3169, 3180, 3184, 3192, 3199, 3264, 3480, 3674,
3672, 3705, 3732, 3733, 3742 and 3302.
P 40
(only no. 1612)
(5) Concessions no. 1038, 1045, 1055, 1056, 1058, 1062, 1239 and 1612.
(6) Concessions no. 3067 and no. 3673 also through interactive channel.
(7) Concessions no. 1014, 1089, 1095, 1101, 1106, 1120 and 1191.
(8) Concessions no. 3173, 3413, 3414, 3416, 3475, 3558, 3559, 3651 and 3751.
(9) Concession no. 1531.
(10) Concessions no. 3064, 3065, 3066, 3103, 3119, 3167, 3504, 3514, 3515, 3516, 3517,
3519, 3520, 3521, 3522, 3523 and 3621.
Unless otherwise indicated, the table below sets forth the lottery authorities with
supplier of central computers and terminals and material services. The table also
which GTEch had Facilities Management contracts as of December 31, 2009 for
sets forth information regarding the term of each contract and, as of December 31,
the installation and operation of lottery systems, and as to which GTEch is the sole
2009, the approximate number of terminals installed in each jurisdiction.
Table 2 - Facilities Management contracts
Approximate
number of lottery
terminals installed(1)
Date of commencement
of current contract*
Date of expiration
of current contract term
Current extention
Options**
2,700
21,400
600
13,700
8,800
7,300
1,900
2,800
2,800
11,100
3,100
4,600
6,100
16,400
6,000
3,500
1,200
620
4,950
17,300
5,300
4,600
1,700
3,800
November 2005
October 2003
June 1999
January 2005
September 2003
April 2000
July 2008
April 1997
June 1997
January 2009
June 2002
December 2004
January 2009
November 2000
January 2006
October 2007
January 1997
August 2009
January 2004
October 2001
June 2006
July 2006
June 2009
November 2003
August 2014
October 2014
November 2010
March 2011
September 2013
October 2010
June 2018
June 2011
June 2010
January 2015
February 2016
June 2012
September 2017
August 2010
March 2017
November 2015
June 2023
August 2014
April 2015
August 2011
October 2014
June 2016
June 2014
June 2012 (7)
2 one-year
(3)
2 two-year
6 one-year
3 one-year and additional 5 years
Up to 3 years
3 one-year
5 one-year
-3 one-year or 1 three-year
2 one-year
1 one-year (7)
16
50
May 2007
September 1996
May 2017
September 2016
-
900
4,300
November 1993
November 1999
January 2010
November 2010
-
Barbados
- LILhco
240
June 2005
June 2023
-
Bermuda
- LILhco
1
-
-
Automatic annual renewal
chile
- Pollo chilena de Beneficencia
2,600
September 2008
August 2016
Up to 24 months
china
- Beijing Welfare Lottery
- Shenzhen Welfare Lottery
2,180
188
February 2004
July 2005
December 2015
December 2015
Automatic 3 one-year
-
colombia
- ETESA (9)
- Apuestas En Linea, S.A.
5,000
3,000
December 1999
March 2007
January 2011
September 2012
1 five-year
-
czech Republic
- SAZKA
7,000
October 1992
December 2017 (10)
-
Jurisdiction
United States
Arizona (2)
california
D.c. (4)
Florida
Georgia
Illinois
Kansas
Kentucky
Louisiana
Michigan
Minnesota
Missouri
New Jersey
New York (5)
North carolina
Oregon (6)
Rhode Island
South Dakota
Tennessee
Texas
Virginia
Washington
West Virginia
Wisconsin
International
Anguilla
- LILhco Antigua/Barbuda
- LILhco
Argentina
- Loteria National Sociedad del Estado (8)
- Boldt IPLc (8)
P 41
2009 Annual Report
Approximate
number of lottery
terminals installed(1)
of current contract*
Date of expiration
of current contract term
Current extention
Options**
Dominican Republic
- Loto Real Del cibao, c.X.A.
1,000
August 2008
August 2028
-
Ireland
- An Post Nat’l Lottery company
3,700
June 2002
December 2011
-
Jamaica
- Supreme Ventures Limited
1,100
November 2000
January 2016
-
530
June 2001
October 2012
-
Mexico
- Pronosticos Para La Assistencia Publica
9,400
September 2005
September 2012
1 two-year
Morocco
- La Societe de Gestion de la Loterie Nationale
and La Marocaine des Jeux et Les Sports
2,000
August 1999
August 2010
Two year extension option
3,500 (12)
November 2008
December 2016 (12)
10 years (12)
11,700
May 2001
December 2011
1 one-year
2,250
March 1996
December 2013
-
St. Kitts/Nevis
- LILhco
45
April 1996
February 2004 (13)
April 2016
February 2014 (13)
1 ten-year (13)
St. Maarten
- LILhco
47
September 2007
September 2017
1 ten-year (14)
900
800
April 2008
December 1993
December 2013
September 2011
-
4,070
February 1996
(16)
(16)
29,000
February 2009
January 2019
-
70
December 2001
December 2011
2 five-year
Jurisdiction
Luxembourg
- Loterie Nationale (11)
Nigeria
- National Sports Lottery plc.
Poland
- Totalizator Sportowy
Slovak Republic
- TIPOS a.s.
Taiwan
- Taiwan Sport Lottery corp. (15)
- Trinidad & Tobago National Lotteries control Board
Turkey
- Turkish National Lottery (16)
United Kingdom
- The National Lottery (17)
U.S. Virgin Islands
- LILhco
*
**
(1)
(2)
(3)
(4)
P 42
Reflects the date upon which the contract became effective.
Reflects extensions available to the lottery authority under the same terms as the
current contract. Lottery authorities occasionally negotiate extensions on different
terms and conditions.
Total does not include instant-ticket validation terminals or instant ticket vending
machines.
GTECH and the Arizona Lottery entered into a separate contract effective January 10,
2010 for the provision of an instant ticket management and distribution system and
related services. The agreement will be for a 5 year term with 5 one-year extension
options.
At the end of the final extension option period, the contract will remain in effect
under the same terms and conditions until either party provides at least 2 years notice
of termination.
Operated by Lottery Technology Enterprises, a joint venture in which GTECH has a 1%
interest, and to which GTECH supplies lottery goods and services.
(5)
(6)
(7)
In June 2009, GTECH executed a new integrated services contract with the New York
Lottery to provide new online lottery solutions and services. Final approval was
granted in September 2009. System conversion under the new contract is expected to
occur in June 2010. The term of the contract will be for a seven-year period following
system conversion and will include an option by the Lottery to extend for an
additional three years.
GTECH is also a party to a separate Video Central Computer System Lease entered into
with the Oregon State Lottery Commission in November 1995. GTECH provides
maintenance services pursuant to that agreement. The term of the agreement has
been extended to October 2012. The parties may extend the agreement for an
additional one (1) year period thereafter on mutual agreement.
Effective July 2009, the contract between GTECH and the Wisconsin Department of
Revenue, Lottery Division, was extended to June 2012. The amendment further
provides that effective June 2012, the term of the contract will be extended to June
2013.
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
Under these contractual arrangements, the lottery authorities purchased the lottery
system and related software license from GTECH at the commencement of the
respective contracts.
GTECH’s contract with the Colombia ETESA lottery authority is not a true facilities
management contract in that title to the equipment vests in ETESA at the end of the
term.
After the close of 2009, GTECH entered into a five-year contract extension with
SAZKA, a.s., such extension to commence on January 1, 2018.
The Luxembourg lottery authority can extend the software license granted by GTECH
for up to 10 years after the end of the initial term and any extensions of the contract.
No further extensions may be exercised after October 2012.
The terminals in use in this contract are not GTECH terminals, but are the National
Sports Lottery’s handheld terminals. GTECH’s contract expires on the date of expiry
of the National Sports Lottery’s license, which is in December 2016 with an option to
extend for 10 years.
Due to a form of devolution within the political structure of the twin island
federation of St. Kitts and Nevis, there is a separate license term for the island of Nevis
which is not synchronous with the term applicable in St. Kitts.
The extension option for this contract may be exercised on mutual agreement of the
parties.
Operated by Taiwan Sport Lottery Corporation, a joint venture in which GTECH has a
24.5% interest and to which GTECH supplies lottery goods and services.
The term of the contract with the Turkey lottery authority renews for successive oneyear extension terms unless either party gives timely notice of non-renewal. In
addition, the Turkey lottery authority has the option to assume responsibility for the
provision of certain lottery services at any time after the second anniversary of system
start up.
Operated by Camelot Group plc on a facilities management basis.
The table below lists certain of GTEch’s direct and indirect customers that since
January 2008 have purchased (or have agreed to purchase) from GTEch new
online systems, software and/or terminals and equipment in connection with the
expansion or replacement of existing lottery systems.
It does not include
jurisdictions in which GTEch has a facilities management contract with the lottery
authorities unless the product sale is set forth in a separate contract.
Table 3 - Product sales contract
Jurisdiction
Customer
Argentina
Boldt - Instituto Provincial de Loterias y casinos de la
Provincia de Buenos Aires
Lotteries commission of New South Wales
Lotterywest (f/k/a Western Australia Lotteries commission)
Lotteries commission of South Australia
Sport-Pari
Loterie Nationale de Belgique
Atlantic Lottery corporation
British columbia Lottery corporation
Western canada Lottery corporation
SAZKA. A.S.
Danske Spil A/S
Veikkaus Oy
La Francaise des Jeux
Scientific Games Inc,
Westdeutsche Lotterie Gmbh & co,
Sachsische Lotto - Gmbh
Lotterie Treuhandgesellschaft mbh Thuringen
hoosier Lottery
Mifal hapayis
UAB Olifèja
Loterie Nationale
Maryland State Lottery commission
Massachusetts State Lottery commission
Lottotech Ltd,
Stichting De nationale Sporttotalisator
New Zealand Lotteries commission
Scientific Games OES Online Entertainment System. Inc,
Totalizator Sportowy Sp, Zo,o
Santa casa de Misericordia de Lisboa
Singapore Pools (Pte) Ltd,
Organizacion Nacional de ciegos Espanoles
Temporary Union of companies Logista-GTEch UTE
Loterie de la Suisse Romande
Ukraine National Lottery
camelot Group plc
Virginia Lottery
Australia
Belarus
Belgium
canada
czech Republic
Denmark
Finland
France
Georgia
Germany
Indiana
Israel
Lituania
Luwembourg
Maryland
Massachusetts
Mauritius
Netherland
New Zeland
Pennsylvania
Poland
Portugal
Singapore
Spain
Switzerland
Ukraine
United Kingdom
Virginia
The table below sets forth the lottery authorities with which GTEch has ITVM
Facilities Management contracts (“FMcs”). This table also provides (except where
noted by footnote) historical information respecting the number of ITVMs that
are currently in service, under various ITVM Product Sales contracts (“PScs”).
Finally, the table below sets forth information regarding the term of each FMc,
as well as the approximate number of ITVMs installed in each FMc jurisdiction, as
of December 31, 2009.
P 43
2009 Annual Report
Table 4 - ITVM contracts
Jurisdiction
FMC or PSC
Approximate
number of
ITVMs in service
Arizona
(1)
FMc (2)
PSc
(1)
PSc
(1)
PSc
FMc
PSc
PSc
FMc
FMc
(4)
PSc
PSc
(1)
(1)
FMc
PSc
(1)
(6)
FMc
PSc
PSc
(1)
FMc
PSc
FMc
(1)
PSc
(1)
(1)
(10)
FMc
(1)
(1)
850
4,200
1,000
575
230
25
3,470
1,570
500
1,500
130
150
1,000
2,200
1,350
110
620
250
200
5,200
660
500
3,800
150
(7)
(8)
(9)
50
75
600
1,320
2,000
1,000
500
california
Florida
France
Georgia
Iceland
Illinois
Indiana
Italy
Kentucky
Luxembourg
Maine
Maryland
Massachusetts
Michigan
Minnesota
Missouri
New hampshire
New Jersey
New York
North carolina
Oregon
Pennsylvania
Rhode Island
Romania
Singapore Pools
Slovenia
South Dakota
Switzerland
Tennesee
Texas
Virginia
Washington
Wisconsin
*
**
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
P 44
of current FMC contract*
Date of expiration
of current FM
contract term
Current extension options**
(2)
July 2004
December 2007
September 2005
September 2004
March 2007
June 2005
(6)
January 2006
(7)
(8)
May 2009
June 2004
November 2004
(11)
-
(2)
September 2010
Dicember 2010 (3)
October 2012
June 2011
June 2012
June 2010
(6)
March 2017
(7)
(8)
(9)
June 2011
November 2010
-
(2)
1 three-year
2 one-year
(5)
3 one-year or 1 three-year
-
Reflects the date upon which the contract became effective.
Reflects extensions available to the lottery authority under the same terms as the current contract. Lottery authorities occasionally negotiate extensions on different terms and conditions.
Represents ITVMs installed under an on-line lottery Facilities Management Contract. See Facilities Management Contracts table above for additional information.
See Footnote 2 of Table 2. By amendment to the instant ticket management and distribution contract dated September 2009, the Arizona Lottery elected to exercise certain options,
including the provision by GTECH of ITVMs.
The contract contains a different term for the lease of the equipment than for the contract term itself, running from the date of acceptance of the equipment with 2 one-year
extensions at the option of the Kentucky Lottery Corporation. The current date of expiration of the equipment lease is March 2011.
GTECH’s contract with the Maine Department of Administrative & Financial Services, Bureau of Alcoholic Beverages & Lottery Operations, is not a traditional facilities management
contract, but rather is a lease agreement for a monthly fee in which GTECH provides related services.
The contract is renewable on a year-to-year basis following the initial term on mutual agreement of the parties.
GTECH provides maintenance services for ITVMs which are owned by the New York lottery authority. The term of this agreement will expire with regard to certain ITVMs in June
2010 when the new on-line system is fully implemented as determined on a month-to-month basis, and in June 2011 or when the new on-line system is implemented as determined
on a month-to-month basis with regard to any non-interconnected ITVMs owned by the New York Lottery. The agreement may be extended beyond June 2011 for any noninterconnected ITVMs for a period of up to 1 year. Any such extensions are subject to the prior approval of the New York State Attorney General and the State Comptroller.
GTECH and Compania Nationala Loteria Romana SA entered into an ITVM Pilot Agreement in 2008 for the provision of ITVMs for a term ending 13 weeks after completion of the
installation of the ITVMs. The terminals are in the process of being removed.
GTECH and Singapore Pools entered into an ITVM Pilot Agreement in February 2009 for the provision of ITVMs manufactured by Sadamel Ticketing Systems, a Swiss corporation for
which GTECH Far East Pte. Limited is the world-wide distributor, for a term ending 52 weeks after the date of installation of the first ITVM.
GTECH and Loteria Slovenije, d.d. entered into a pilot agreement for the provision of ITVMs for a term ending 15 weeks after installation of the ITVMs has been completed. The
ITVMs have not yet been installed.
The Virginia Lottery entered into a seven-year contract with Oberthur Gaming Technologies Corporation (OGT) under which GTECH has subcontracted to provide 1,500 ITVMs and management
of warehousing and distribution of instant tickets. Additionally, 200 ITVMs have been provided by GTECH under the Facilities Management Contract which is described in Table 2.
In December 2009 GTECH amended its Lottery Gaming System contract with Washington’s Lottery to provide for the supply of Lottery Vending Machines at each lottery retailer at
which an ITVM is currently installed.
LONG TERM INcENTIVE PLANS
increase the share capital by a maximum amount of €1,500,000 by issuing up to
1,500,000 new ordinary shares with a par value of €1 each, with ordinary rights,
Long term incentive plans adopted by Lottomatica in favour of directors and/or
excluding the right of option under Article 2441, paragraph 4, second sentence
employees of Lottomatica and/or its direct or indirect subsidiaries provide for
of the Italian civil code to be subscribed by December 31, 2014, serving the
stock option grants and restricted stock awards to their directors, executives and
exercise of 1,188,600 options assigned on the same date by the Board of
key employees. The principal purpose of granting long-term incentives is to assist
Directors’ Meeting and within the framework of the stock option plan 2006-2014
the Group in attracting and retaining directors, officers and other key employees,
reserved for employees of Lottomatica and/or its subsidiaries. As of December 31,
to provide a market competitive total compensation package and to motivate
2009 there are 690,509 options outstanding under the Plan.
recipients to increase shareholder value by enabling them to participate in the
value which has been created. Most of the plans are based upon three year
2007 - 2015 Plan
performance measurements, generally based upon Lottomatica’s EBITDA. In
The Lottomatica Board of Directors’ Meeting of May 3, 2007 resolved to increase
general, the total value delivered is allocated 65% to stock options and 35% to
the share capital against payments, in one or more tranches and in divisible form,
restricted stock, except for the plans approved during 2009 in which the value is
by a maximum amount of €1,973,790 by issuing up to 1,973,790 new ordinary
allocated 35% to stock options and 65% to restricted stock. The following are
shares with a par value of €1 each, with ordinary rights, excluding the right of
summaries of the long term incentive plans in force as of December 31, 2009.
option under Article 2441, paragraph 4, second sentence of the Italian civil code,
to be subscribed by December 31, 2015, serving the exercise of 1,973,790 options
Stock Option Plans
assigned on the same date by the Board of Directors’ Meeting and not yet due
within the framework of the stock option plan 2007-2015 reserved for employees
2005 - 2010 Plans
of Lottomatica and/or its subsidiaries, other than 115,200 options that may be
The September 21, 2005 Extraordinary Shareholders’ Meeting of Lottomatica also
exercised prior to the vesting period pursuant to the resolution of the
resolved to set December 31, 2010, as the expiration date for the following
Lottomatica Board of Directors of December 11, 2007. As of December 31, 2009
subscriptions:
there are 1,459,280 options outstanding under the Plan.
a maximum of €297,580, for a maximum of 297,580 new ordinary shares, par
value of €1 each, with ordinary rights, excluding the right of option under
2008 - 2016 Plan
Article 2441, paragraph 5, of the Italian civil code. To date 297,580 options
The Lottomatica Board of Directors’ Meeting of April 22, 2008 resolved to
have been issued, of which 191,280 remain exercisable and 106,300 have been
increase the share capital against payment, in one or more tranches and in
cancelled;
divisible form, by a maximum amount of €2,318,045 by issuing up to 2,318,045
new ordinary shares with a par value of €1 each, with ordinary rights, excluding
the right of option under Article 2441, paragraph 4, second sentence of the
Article 2441, paragraph 5, of the Italian civil code. To date none of the 57,016
Italian civil code, to be subscribed by December 31, 2016, serving the exercise of
options have been issued;
2,318,045 options assigned on the same date by the Board of Directors’ Meeting
and not yet due within the framework of the stock option plan 2008-2016
reserved for employees of Lottomatica and/or its subsidiaries. As of December 31,
Article 2441, paragraph 5, of the Italian civil code serving to the exercise of
2009 there are 2,133,662 options outstanding under the Plan.
219,812 options assigned by Lottomatica, of which 95,336 remain exercisable
and 124,476 have been cancelled.
2009 - 2015 Plan
The Lottomatica Board of Directors’ Meeting of July 30, 2009 resolved to
2006 - 2014 Plan
increase the share capital against payment, in one or more tranches and in
The Lottomatica Board of Directors’ Meeting of October 18, 2006 resolved to
P 45
2009 Annual Report
new ordinary shares with a par value of €1 each, with ordinary rights,
2009-2013 Share Allocation Plan, Reserved for Employees of Lottomatica
excluding the right of option under Article 2441, paragraph 4, second sentence
and/or its subsidiaries, approved by the Shareholders’ Meeting of
of the Italian civil code, to be subscribed by December 31, 2015, serving the
Lottomatica of July 2, 2009.
exercise of 1,850,510 options assigned on the same date by the Board of
Directors’ Meeting and not yet due within the framework of the stock option
Originally Approved Grants
plan 2009-2015 reserved for employees of Lottomatica and/or its subsidiaries.
The Board of Directors’ Meeting of Lottomatica of October 18, 2006 resolved to
As of December 31, 2009 there are 1,840,220 options outstanding under the
assign up to 733,125 of ordinary shares within the framework of the time-based
Plan.
plan 2006-2011, of which the Board of Directors’ resolved:
On May 3 and December 11, 2007 an increase in share capital, for an overall
Restricted Stock
(a) Executive Purchase of Shares at the Rights Offering Price
The Lottomatica Board of Directors’ Meeting of August 29, 2006 resolved
to increase the share capital against payment, in divisible form, by a
maximum nominal amount of €154,752 by issuing up to 154,752 new ordinary
shares, with a par value of €1 each, with ordinary rights;
On July 31, 2008 and on July 30, 2009, to assign an overall maximum amount
of 192,645 Lottomatica owned shares.
maximum amount of €2,000,000 by issuing up to 2,000,000 new ordinary
shares with a par value of €1 each, with ordinary rights, excluding the
The Board of Directors’ Meeting of Lottomatica of May 3, 2007 resolved to assign
right of option under Article 2441 of the Italian civil code, to be assigned
up to 285,130 ordinary shares within the framework of the 2007-2010 Share
by December 15, 2007, to employees of Lottomatica and/or its subsidiaries
Allocation Plan, of which the Board of Directors’ resolved:
for the price of €24.425 each. Of the 2,000,000 shares, 1,528,582 have
On December 11, 2007 and on April 22, 2008 an increase in share capital, for
been assigned with a sale restriction period ranging from one to three
an overall maximum nominal amount of €108,842 by issuing up to 108,842
years from August 29, 2006 depending upon the employee’s position at
new ordinary shares, with a par value of €1 each, with ordinary rights;
Lottomatica or at its subsidiaries. The restriction has expired on August 29,
2009.
(b) Share Allocation Plans (article 2349 of the Italian civil code)
2006-2011 Share Allocation Time Based Plan, Reserved for Employees of
On April 28, 2009 to assign a maximum amount of 67,337 Lottomatica owned
shares.
The Board of Directors’ Meeting of Lottomatica of April 22, 2008 resolved to
assign up to 286,916 ordinary shares within the framework of the 2008-2011
Lottomatica and/or its subsidiaries, approved by the Shareholders’
Share Allocation Plan, of which the Board of Directors’ on April 28, 2009 resolved
Meeting of Lottomatica of October 18, 2006;
to assign a maximum amount of 76,765 Lottomatica owned shares.
The Board of Directors’ Meeting of Lottomatica of July 30, 2009 resolved to
Lottomatica of April 23, 2007 that, at the same time, empowered the
Share Allocation Plan.
Board of Directors for five years to increase the share capital in one or
more tranches by a maximum amount of €3,200,000 by issuing up to
current Plan Balances
3,200,000 new ordinary shares, with a par value of €1 each;
As of December 31, 2009, the following numbers of shares are outstanding in
ordinary shares in the framework of the 2007-2010 Plan, 190,620 ordinary shares
Lottomatica of April 15, 2008 that, at the same time, empowered the
in the framework of the 2008-2011 Plan and 669,976 ordinary shares in the
Board of Directors to purchase a maximum number of company owned
framework of 2009-2013 Plan.
shares equal to 10% of the share capital also available for the
implementation of the stock plans;
P 46
each plan: 188,557 in the framework of the time-based 2006-2011, 62,332
PROcESSING OF PERSONAL DATA
Article 34 of Legislative Decree No. 196 of June 30, 2003, requires certain security
measures to be taken in the event of the electronic processing of personal data,
according to the procedures set forth in the technical specifications under Annex
B to the law. Among these requirements is the one specified in letter (g) for “an
updated Security Policy Statement” (DPS, Documento Programmatico sulla
Sicurezza).
DPS, in compliance with the law, specifies the technical and organizational
security measures adopted on the basis of risk analysis as well as task and
responsibility distribution within the data processing structure in order to protect
personal data regarding their correct storage and handling.
Lottomatica Group S.p.A. regularly reviews and updates the DPS which it did
most recently on March 31, 2009 in accordance with Legislative Decree No.
196/03.
P 47
il 2007 è stato un anno di lavoro molto intenso e ricco di risultati per Lottomatica. La Società non solo ha raggiunto gli obiettivi prefissati,Consolidated
ma ha avviato Financial
con successo
nuove linee
di business che ha
Statements
2009
migliorato la nostra posizione competitiva.
Tali positivi risultati sono da attribuirsi anche ad un modello operativo, organizzativo e gestionale che ha caratterizzato il Gruppo, soprattutto negli ultimi cinque anni.
Lottomatica, con la integrazione di Gtech ormai completata, si è definitivamente trasformata da azienda nazionale “monoprodotto”, con un’incidenza del Gioco del Lotto sul fattur
dell’88% nel 2002, ad azienda multinazionale leader nel settore Giochi e Servizi, dove, nell’anno appena concluso, l’incidenza del Gioco del Lotto si è attestata al 24%.
I ricavi per il 2007 sono stati pari a € 1,66 miliardi, di cui € 839,8 milioni per le attività di Gtech e € 821,6 per le attività italiane.
L’EBITDA è stato pari a € 701,5 milioni e il margine EBITDA si è attestato a 42,2%. Il Risultato Operativo per il 2007 è stato pari a € 394,9 milioni con un margine del 23,8%. L’utile netto
il periodo chiuso al 31 dicembre 2007 è stato pari a € 106,0 milioni (€ 74 milioni come quota di pertinenza del Gruppo).
In Italia, Lottomatica ha prodotto significativi risultati. In un mercato progressivamente più competitivo, il volume totale della raccolta di Lottomatica nel segmento giochi è stato di €1
miliardi. I ricavi per il 2007 sono stati pari a € 821,6 milioni, registrando un aumento di circa il 26,5% rispetto ai € 649,6 milioni dello stesso periodo del 2006.
L’eccellente performance del Gratta e Vinci è proseguita con una raccolta pari a circa € 7,8 miliardi, rispetto alla raccolta di circa € 3,9 miliardi nel 2006 con un aumento quindi del 101,5%
L’ingresso nel settore delle Scommesse Sportive si è rivelato un importante successo per Lottomatica. In soli quattro mesi si è infatti raggiunta una quota mercato del 12% diventando il seco
operatore del settore, con una raccolta di € 126,2 milioni per € 32,5 milioni di ricavi. In questa start up Lottomatica ha dimostrato una superiore capacità di esecuzione associata ad un mod
organizzativo in grado di integrare con successo nuove competenze, in particolare la gestione del rischio, fondamentali per operare nel business. E’ importante segnalare che da fine Otto
2007 l’offerta di scommesse sportive è stata estesa con successo alla piattaforma internet.
Il bilancio relativo all’esercizio 2007 è stato molto positivo anche per Gtech. I ricavi sono stati pari a €839,8 milioni, con circa €745,0 milioni provenienti dal segmento Lotterie, €72,8 mil
da quello delle Gaming Solutions e circa €22,0 milioni da quello dei Servizi commerciali.
Per quel che attiene alle attività di Gtech nell’offerta di soluzioni tecnologiche per l’automatizzazione delle lotterie, la controllata di Lottomatica ha mantenuto la sua posizione di leader
business vincendo nuovi contratti e continuando le attività già esistenti sia negli USA, sia a livello internazionale.
CONSOLIDATED FINANCIAL STATEMENTS AND FOOTNOTES
Sono stati rinnovati contratti a lungo termine per le lotterie on-line con i clienti consolidati nel Regno Unito, Oregon, Kansas e, allo stesso tempo, sono state ottenute estensioni contrattuali co
lotterie di New York, New Jersey, Illinois e della Finlandia.
Lorenzo Pellicioli
“A group of people becomes a real team when all its member
are confident and know how to contribute to it in order to
maximize each participants contribution.”
(Anonymous)
P 49
2009 Annual Report
Lottomatica Group and subsidiaries - consolidated Statements of Financial Position
Notes
2009
December 31,
2008
8
9
10
11
774,558
88,522
3,006,783
822,886
443
22,692
7,309
6,030
758,717
86,023
3,074,571
847,281
6,093
21,380
390
23,633
4,729,223
4,818,088
134,080
791,803
61,577
4,613
8,068
469,335
129,560
773,595
65,160
20,288
5,654
109,274
1,469,476
1,103,531
5,890
7,456
TOTAL ASSETS
6,204,589
5,929,075
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Issued capital
Share premium
Treasury shares
Retained earnings
Other reserves
172,015
1,404,252
(63,502)
66,807
258,162
152,287
1,139,071
(73,184)
95,647
277,583
1,837,734
1,591,404
59,073
58,428
1,896,807
1,649,832
2,621,990
134,127
22,970
55,184
142,317
2,573,802
229,621
27,042
48,339
134,604
2,976,588
3,013,408
905,677
5,079
270,564
59,885
67,186
1,858
20,945
800,653
60,848
278,751
12,741
61,109
2,276
49,457
Total current liabilities
1,331,194
1,265,835
TOTAL EQUITY AND LIABILITIES
6,204,589
5,929,075
ASSETS
Non-current assets
Systems, equipment and other assets related to contracts, net
Property, plant and equipment, net
Goodwill
Investments in associates
Non-current financial assets
13
14
15
Current assets
Inventories
current financial assets
Income taxes receivable
16
17
13
14
18
Total current assets
Non-current assets classified as held for sale
19
20
Non-controlling interests
Total equity
Non-current liabilities
Long-term debt, less current portion
Long-term provisions
21
15
22
23
14
Current liabilities
Accounts payable
Short-term provisions
Income taxes payable
P 50
21
23
14
21
22
Lottomatica Group and subsidiaries - consolidated Income Statements
Notes
Service revenue
Product sales
Total revenue
Raw materials, services and other costs
Personnel
Depreciation
Amortization
Impairment loss
capitalization of internal construction costs - labor and overhead
2,015,452
161,405
1,818,267
240,673
7
2,176,857
2,058,940
24
25
26
27
28
1,052,429
428,305
236,601
94,400
76,025
(77,324)
991,247
410,513
225,461
86,095
100,778
(95,149)
1,810,436
1,718,945
7
366,421
339,995
29
30
31
3,468
(1,833)
4,172
(16,690)
(15,824)
(151,518)
10,955
(1,825)
6,193
(2,699)
10,352
(177,555)
(178,225)
(154,579)
188,196
185,416
75,842
47,546
112,354
137,870
68,149
44,205
93,748
44,122
112,354
137,870
€ 0,45
€ 0,45
€ 0,62
€ 0,62
Total costs
Operating income
Interest income
Equity loss
Other income
Other expense
Foreign exchange gain (loss), net
Interest expense
Income before income tax expense
Income tax expense
15
Net income
Attributable to:
Owners of the parent
Earnings per share/ADRs
Basic - net income attributable to owners of the parent
Diluted - net income attributable to owners of the parent
For year ended December 31,
2009
2008
32
32
P 51
2009 Annual Report
Lottomatica Group and subsidiaries - consolidated Statements of comprehensive Income
Notes
Net income
2009
2008
112,354
137,870
20,859
(7,712)
(62,641)
22,716
13,147
(39,925)
(570)
(1,047)
315
(570)
1,192
(585)
(732)
607
(78)
(30,013)
7,514
88
51,621
(14,984)
(22,499)
36,637
Other comprehensive loss for the year, net of tax
(10,732)
(3,163)
Total comprehensive income for the year, net of tax
101,622
134,707
57,417
44,205
90,585
44,122
101,622
134,707
Other comprehensive income
Net gain (loss) on interest rate swaps (cash flow hedges)
Income tax benefit (expense)
Amortization of gain on interest rate swap on discontinued cash flow hedge
Net gain (loss) on derivative instruments (cash flow hedges)
Net gain (loss) on available-for-sale financial assets
Net gain (loss) on translation of foreign operations
Attributable to:
P 52
33
33
33
Lottomatica Group and subsidiaries - consolidated Statements of cash Flows
Operating activities
Non-cash adjustments to reconcile income before income tax expense to net cash flows
Depreciation
Intangibles amortization
Other amortization
Impairment loss
Interest income
Interest expense
Non-cash foreign exchange gain
Share-based payment expense
Other non-cash items
Income tax paid
Notes
2009
2008
188,196
185,416
236,601
94,522
(122)
76,025
(3,468)
151,518
(3,146)
916
20,048
(145,202)
225,461
86,276
(181)
100,778
(10,955)
177,555
(16,336)
14,682
7,575
(135,071)
Cash flows before changes in operating assets and liabilities
615,888
635,200
changes in operating assets and liabilities
Inventories
Accounts payable
Advance payments from customers
Taxes other than income taxes
Other assets and liabilities
(3,429)
(24,514)
121,975
(16,960)
(20,703)
23,185
35,513
(56,978)
122,539
(43,914)
(35,516)
23,960
Net cash flows from operating activities
695,442
680,804
(253,059)
(102,775)
(44,737)
196
(15,848)
(3,078)
(2,964)
(1,989)
(182)
4,621
5,427
(2,796)
(195,178)
(18,439)
(249,667)
39,689
(26,176)
(6,187)
(4,368)
11,056
(13,415)
2,305
Net cash flows used in investing activities
(417,184)
(460,380)
Financing activities
Proceeds from issuance of long-term debt
Proceeds from issuance of ordinary share capital
Debt issuance costs
Share issuance costs
Dividends paid - Non-controlling interests
Net proceeds from (repayment of) short-term borrowings
Dividends paid
Interest paid
Principal payments on long-term debt
Proceeds from exercise of stock options
Treasury share purchases
Other
750,000
350,000
(3,479)
(9,497)
(43,560)
(49,124)
(100,940)
(153,776)
(653,887)
(1,535)
763,440
(9,113)
(31,357)
44,542
(125,393)
(159,850)
(957,580)
2,915
(74,830)
293
84,202
(546,933)
Net increase (decrease) in cash and cash equivalents
Effect of exchange rate changes on cash
362,460
(2,399)
(326,509)
1,718
cash and cash equivalents at the beginning of the year
109,274
434,065
469,335
109,274
Investing activities
Purchases of systems, equipment and other assets related to contracts
Purchases of intangible assets
Acquisitions
Acquisitions - cash acquired
Purchases of property, plant and equipment
Other investments
Loans receivable, net of repayments
Dynamite Design and Marketing Limited contingent consideration
St Enodoc holdings Limited contingent consideration
Toto carovigno S.p.A. advance and escrow refund (payment)
Interest received
Finsoft Limited contingent consideration
Other
26
27
27
28
31
30
35
11
6
6
40
40
40
36
Net cash flows from (used in) financing activities
Cash and cash equivalents at the end of the year
18
P 53
2009 Annual Report
Lottomatica Group and subsidiaries - consolidated Statement of changes in Equity
For the year ended December 31, 2009
Attributable to owners of the parent
Issued
Capital
Share
Premium
Treasury
Shares
Retained
Earnings
Other
Reserves
(Note 20)
Total
Non-Controlling
Interests
Total
Equity
152,287
1,139,071
(73,184)
95,647
277,583
1,591,404
58,428
1,649,832
Other comprehensive loss
-
-
-
68,149
-
(10,732)
68,149
(10,732)
44,205
-
112,354
(10,732)
Total comprehensive income
-
-
-
68,149
(10,732)
57,417
44,205
101,622
19,728
-
330,272
(7,073)
-
-
-
350,000
(7,073)
-
350,000
(7,073)
-
(58,018)
-
9,682
-
(100,940)
(77)
4,169
(141)
77
916
(9,682)
-
(58,018)
(100,940)
916
4,169
(141)
(43,560)
-
(58,018)
(100,940)
916
(43,560)
4,169
(141)
172,015
1,404,252
(63,502)
66,807
258,162
1,837,734
59,073
1,896,807
Share issuance costs, net of €3,4 million of tax benefit
Swap liability associated with share issuance,
net of €27,7 million of tax benefit
Dividend distribution (€0,68 per share) (Note 36)
Appropriation of 2008 income in accordance with Italian law
Share-based payment (Note 35)
Shares issued under stock award plans
Put/call option arising from business combination
Lottomatica Group and subsidiaries - consolidated Statement of changes in Equity
For the year ended December 31, 2008 (Restated)
Attributable to owners of the parent
Issued
Capital
Share
Premium
Treasury
Shares
Retained
Earnings
Other
Reserves
(Note 20)
Total
Non-Controlling
Interests
Total
Equity
151,899
1,574,956
-
75,471
(114,277)
1,688,049
45,142
1,733,191
Other comprehensive loss
-
-
-
93,748
-
(3,163)
93,748
(3,163)
44,122
-
137,870
(3,163)
Total comprehensive income
-
-
-
93,748
(3,163)
90,585
44,122
134,707
233
155
-
(56,471)
(456,926)
74,830
2,682
-
(74,830)
1,646
-
(68,922)
(77)
(5,461)
888
456,926
(74,830)
77
14,682
(1,801)
(31)
(125,393)
(74,830)
2,915
14,682
(5,461)
857
(31,357)
521
(125,393)
(74,830)
2,915
14,682
(31,357)
(5,461)
1,378
152,287
1,139,071
(73,184)
95,647
277,583
1,591,404
58,428
1,649,832
Dividend distribution (€0,825 per share) (Note 36)
Treasury share purchase plan
Treasury shares purchased (3,943,022 shares)
Shares issued upon exercise of stock options
Share-based payment (Note 35)
Put/call option arising from business combination
P 54
LOTTOMATIcA GROUP AND SUBSIDIARIES
IFRS 7 Financial Instruments: Disclosures
The Group adopted an amendment to IFRS 7 on January 1, 2009 that requires
Notes to the consolidated Financial Statements
additional disclosures about fair value measurement and liquidity risk. Fair value
measurements related to items recorded at fair value are to be disclosed by source
1. corporate information
of inputs using a three level fair value hierarchy, by class, for all financial
Lottomatica Group S.p.A. is one of the leading gaming operators in the world
instruments recognized at fair value. In addition, reconciliation between the
based on total wagers and, through its subsidiary GTEch corporation, is a leading
beginning and ending balance for level 3 fair value measurements is now
provider of lottery and gaming technology solutions worldwide. The principal
required, as well as significant transfers between levels in the fair value hierarchy.
activities of the Group are described in Note 7.
The amendment also clarifies the requirements for liquidity risk disclosures with
In these notes, the term “Lottomatica” refers to Lottomatica Group S.p.A.,
respect to derivative transactions and assets used for liquidity management. The
the parent entity, and its subsidiaries excluding GTEch; the term “GTEch” refers
adoption of this amendment had no material impact on the financial position or
to GTEch corporation and its subsidiaries; and the terms “Group, “we,” “our,”
performance of the Group.
and “us” refer to Lottomatica and all subsidiaries included in the consolidated
financial statements.
IFRS 8 Operating Segments
Lottomatica is a joint stock company incorporated and domiciled in the
The Group adopted IFRS 8 on January 1, 2009 that replaces IAS 14 Segment
Republic of Italy, and its registered office is located at Viale del campo Boario,
Reporting upon its effective date. IFRS 8 requires disclosure of information about
Rome, Italy. Lottomatica is majority owned by the De Agostini Group, a century-
the Group’s operating segments and replaces the requirement to determine
old publishing, media, and financial services company and is publicly traded on
primary (business) and secondary (geographical) reporting segments of the
the Stock Exchange of Milan under the trading symbol “LTO”. Lottomatica has a
Group. The IFRS 8 disclosures are provided in Note 7, including the related revised
Sponsored Level 1 American Depository Receipt (ADR) program listed on the
comparative information. The adoption of this standard had no material impact
United States over the counter market under the trading symbol “LTTOY”.
on the financial position or performance of the Group.
The consolidated financial statements for the year ended December 31, 2009
were approved for issuance in accordance with a resolution of the Board of
IAS 1 Presentation of Financial Statements (Revised)
Directors on March 3, 2010. On this date, the Board of Directors also proposed to
The Group adopted the Revised IAS 1 on January 1, 2009 that requires owner and
distribute a dividend of €0.74 per share.
non-owner changes in equity to be separated. The statement of changes in equity
includes only details of transactions with owners, with non-owner changes in
2. Adoption of new and revised International Financial
Reporting Standards
equity presented as a single line. In addition, the Standard introduces the
The Group’s accounting policies are consistent with those of the previous financial year
and expense, either in one single statement, or in two linked statements. The
except the Group adopted new, amended and revised International Accounting
Group has elected to present two statements. The adoption of this amendment
Standards Board (IASB) and International Financial Reporting Interpretations committee
had no material impact on the financial position or performance of the Group.
statement of comprehensive income: it presents all items of recognized income
(IFRIc) Standards and Interpretations as of January 1, 2009 as described below.
IAS 23 Borrowing Costs (Revised)
IFRS 2 Share-Based Payment: Vesting Conditions and Cancellations (Revised)
The Group adopted the Revised IAS 23 on January 1, 2009 that requires
The Group adopted the Revised IFRS 2 on January 1, 2009 that clarifies the
capitalization of borrowing costs that are directly attributable to the acquisition,
definition of vesting conditions and prescribes the treatment for an award that
construction or production of a qualifying asset. The Group’s previous policy was
is effectively cancelled because a non-vesting condition is not satisfied. The
to expense borrowing costs as they were incurred. In accordance with the
adoption of this amendment had no material impact on the financial position or
transitional provisions of the amendment, the Group has adopted the standard
performance of the Group.
on a prospective basis. Therefore, borrowing costs are capitalized on qualifying
P 55
2009 Annual Report
assets with a commencement date on or after January 1, 2009. The adoption of
entity must then use either to connect the customer to a network or to provide
this amendment had no material impact on the financial position or performance
the customer with ongoing access to a supply of goods or services (such as a
of the Group.
supply of electricity, gas or water). The adoption of this interpretation had no
material impact on the financial position or performance of the Group.
IAS 27 Consolidated and Separate Financial Statements
The Group adopted an amendment to IAS 27 on January 1, 2009 that requires all
Improvements to IFRSs issued in May 2008
dividends from a subsidiary, jointly controlled entity or associate to be recognized
In May 2008 the IASB issued an omnibus of amendments to its standards,
in the income statement in the separate financial statement and will have to be
primarily with a view of removing inconsistencies and clarifying wording. There
applied prospectively. The new requirements affect only the parent’s separate
are separate transitional provisions for each standard. The adoption of the
financial statement and do not have an impact on the consolidated financial
following amendments resulted in changes to accounting policies but did not
statements.
have any material impact on the financial position or performance of the Group.
IAS 32 Financial Instruments: Presentation and IAS 1 Presentation of Financial
IAS 1 Presentation of Financial Statements
Statements - Puttable Financial Instruments and Obligations Arising on Liquidation
The Group adopted an amendment to IAS 1 on January 1, 2009 clarifying that
The Group adopted amendments to IAS 32 and IAS 1 on January 1, 2009 that
assets and liabilities classified as held for trading in accordance with IAS 39
allow a limited scope exception for puttable financial instruments to be classified
Financial Instruments: Recognition and Measurement are not automatically
as equity if they fulfill a number of specified criteria. The adoption of these
classified as current in the statement of financial position. The Group amended
amendments had no material impact on the financial position or performance
its accounting policy accordingly and analyzed whether management’s
of the Group.
expectation of the period of realization of financial assets and liabilities differed
from the classification of the instrument. This did not result in any reclassification
IFRIC 9 Reassessment of Embedded Derivatives and IAS 39 Financial
of financial instruments between current and non-current in the statement of
Instruments: Recognition and Measurement
financial position. The adoption of this amendment had no material impact on
The Group adopted amendments to IFRIc 9 and IAS 39 on January 1, 2009 that
the financial position or performance of the Group.
requires an entity to assess whether an embedded derivative must be separated
from a host contract when the entity reclassifies a hybrid financial asset out of the
IAS 16 Property, Plant and Equipment
fair value through profit or loss category. This assessment is to be made based on
The Group adopted an amendment to IAS 16 on January 1, 2009 that replaced the
circumstances that existed on the later of the date the entity first became a party
term “net selling price” with “fair value less costs to sell” in the definition of
to the contract and the date of any contract amendments that significantly change
recoverable amount. The adoption of this amendment had no material impact on
the cash flows of the contract. IAS 39 now states that if an embedded derivative
the financial position or performance of the Group.
cannot be reliably measured, the entire hybrid instrument must remain classified as
at fair value through profit or loss. The adoption of these amendments had no
IAS 20 Accounting for Government Grants and Disclosures of Government
material impact on the financial position or performance of the Group.
Assistance
The Group adopted an amendment to IAS 20 on January 1, 2009 requiring that
IFRIC 18 Transfers of Assets from Customers
the benefit of a government loan at a below-market rate of interest be treated
The Group adopted IFRIc 18 for transfers of assets from customers received on or
as a government grant. The adoption of this amendment had no material impact
after July 1, 2009. The interpretation, which is particularly relevant to the utility
sector, provides additional guidance on accounting for transfers of assets from
customers. It clarifies the requirements of IFRSs for agreements in which an entity
IAS 23 Borrowing costs
receives an item of property, plant and equipment from a customer that the
The Group adopted an amendment to IAS 23 on January 1, 2009 that revised the
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definition of borrowing costs to consolidate the two types of items that are
3. Significant accounting policies
considered components of “borrowing costs” into one, which is the interest
expense calculated using the effective interest rate method calculated in
3.1 Statement of compliance
accordance with IAS 39. The adoption of this amendment had no material impact
The consolidated financial statements of the Group have been prepared in
accordance with International Financial Reporting Standards (IFRS) as adopted
by the European Union.
IAS 36 Impairment of Assets
The Group adopted an amendment to IAS 36 on January 1, 2009 that requires
3.2 Basis of preparation
when discounted cash flows are used to estimate “fair value less cost to sell”,
The consolidated financial statements have been prepared on a historical cost
additional disclosure is required about the discount rate, consistent with
basis, except for those items measured at fair value as disclosed in the accounting
disclosures required when the discounted cash flows are used to estimate “value
policies below. The consolidated financial statements are presented in euros and
in use”. The adoption of this amendment had no material impact on the financial
all values are rounded to the nearest thousand (€000) (except share and per share
position or performance of the Group.
data) unless otherwise indicated.
IAS 38 Intangible Assets
Format of the consolidated financial statements
The Group adopted an amendment to IAS 38 on January 1, 2009 that requires
The Group presents current and non-current assets, and current and non-current
expenditures on advertising and promotional activities to be recognized as an
liabilities as separate classifications in its consolidated statements of financial
expense when the Group either has the right to access the goods or has received
position.
the service. In addition, the reference to there being rarely, if ever, persuasive
The consolidated income statements are presented using a classification
evidence to support an amortization method of intangible assets other than a
based on the nature of expenses, rather than based on their function of expense,
straight-line method has been removed. The adoption of this amendment had
as management believes this presentation provides information that is more
no material impact on the financial position or performance of the Group.
relevant.
Other amendments resulting from Improvements to IFRSs issued in May 2008
The consolidated statements of changes in equity include only details of
to the following standards did not have any impact on the accounting policies,
transactions with owners, with non-owner changes in equity presented as a single
financial position or performance of the Group.
line (i.e. comprehensive income). comprehensive income is presented in two
IAS 8 Accounting Policies, change in Accounting Estimates and Errors
IAS 10 Events after the Reporting Period
statements; a separate income statement and consolidated statement of
comprehensive income.
The consolidated statements of cash flows are presented using the indirect
IAS 18 Revenue
method.
IAS 27 consolidated and Separate Financial Statements
3.3 Basis of consolidation
IAS 29 Financial Reporting in hyperinflationary Economies
Basis of consolidation
IAS 19 Employee Benefits
IAS 28 Investments in Associates
IAS 31 Interest in Joint Ventures
IAS 34 Interim Financial Reporting
IAS 39 Financial Instruments: Recognition and Measurement
IAS 40 Investment Property
IAS 41 Agriculture
The consolidated financial statements include the financial statements of
Lottomatica and its subsidiaries as of December 31 each year.
Subsidiaries are fully consolidated from the date of acquisition, being the
date on which the Group obtains control, and continue to be consolidated until
the date that such control ceases. The financial statements of the subsidiaries are
prepared for the same reporting period as the parent company, using consistent
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2009 Annual Report
accounting policies. All intra-group balances, transactions, income and expenses,
3.5 Business combinations and goodwill
unrealized gains and losses and dividends resulting from intra-group transactions
Business combinations are accounted for using the purchase method. The cost of
are eliminated.
an acquisition is measured as the fair value of the assets given, equity instruments
Non-controlling interests represent the portion of profit or loss and net assets
issued and liabilities incurred or assumed at the date of exchange, plus costs
not held by the Group and are presented separately in the consolidated income
directly attributable to the acquisition. Identifiable assets acquired and liabilities
statement and within equity in the consolidated statement of financial position,
and contingent liabilities assumed in a business combination are measured
separately from parent shareholders’ equity. Acquisitions of non-controlling
initially at fair values at the date of acquisition, regardless of the extent of any
interests are accounted for using the entity method, whereby the difference
non-controlling interest.
between the consideration and the book value of the share of net assets acquired
is recognized in equity.
For business combinations where the Group has a put option with respect to
the non-controlling interest shares, the Group determines whether it has a
present ownership interest in those shares. If the Group determines that it has a
3.4 Reclassifications
present ownership interest in the shares, the acquisition is accounted for as an
acquisition of those underlying shares and non-controlling interest is not
December 31, 2008 consolidated statement of financial position
recognized. The cost of the acquisition includes the estimated fair value of the
The Group changed the December 31, 2008 statement of financial position for the
liability to the non-controlling interest shareholders. Following the initial
following:
accounting, all changes in the carrying amount of the liability are adjusted
To adjust the presentation of foreign currency translation associated with the
July 2, 2007 acquisition of Finsoft Limited to properly reflect the functional
currency as British pounds sterling; and
To offset deferred income tax assets and deferred income tax liabilities in
accordance with IAS 12 Income Taxes.
against goodwill, except for the unwinding of the discount due to the passage of
time which is recognized in the income statement.
If the Group determines it does not have a present ownership interest in the
non-controlling interest shares, the non-controlling interest is attributed its share
of profits and losses of the acquiree after the business combination. At each
reporting date, the amount of the non-controlling interest is presented in the
The effect of these reclassifications is summarized below.
statement of financial position as a financial liability. Any difference between the
present value of the amount payable to the minority shareholders and the noncontrolling interest is reclassified to equity.
Reclassifications
Finsoft adjustment
Assets
Goodwill
Equity
Other reserves
Goodwill is initially measured at cost, being the excess of the cost of the
December 31, 2008
As previusly
As adjusted
reported Reclassification
business combination over the Group’s share in the net fair value of the acquiree’s
identifiable assets, liabilities and contingent liabilities. If the cost of an acquisition
is less than the fair value of the net assets of the subsidiary acquired, the
3,074,571
847,281
3,086,297
853,146
(11,726)
(5,865)
277,583
295,174
(17,591)
difference is recognized directly in the income statement.
Following initial recognition, goodwill is measured at cost less accumulated
impairment loss. For the purpose of impairment testing, goodwill acquired in a
business combination is, from the acquisition date, allocated to each of the
Deferred income tax adjustment
Assets
Liabilities
Group’s cash-generating units, or groups of cash-generating units, that are
23,633
235,421
(211,788)
229,621
441,409
(211,788)
expected to benefit from the synergies of the combination, regardless of whether
other assets or liabilities of the acquiree are assigned to those units or groups of
units.
The Group’s principal accounting policies are described below.
Where goodwill forms part of a cash-generating unit and part of the
operation within that unit is disposed of, the goodwill associated with the
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operation disposed of is included in the carrying amount of the operations when
between the recoverable amount of the associate and its carrying value and
determining the gain or loss on disposal of the operation. Goodwill disposed of
recognizes the amount in the income statement.
in this circumstance is measured based on the relative values of the operation
disposed of and the portion of the cash-generating unit retained.
Upon loss of significant influence over an associate, the Group measures and
recognizes any remaining investment at its fair value. Any difference between
the carrying amount of an associate upon loss of significant influence and the
3.6 Investments in associates
fair value of the remaining investment and proceeds from disposal is recognized
An associate is an entity over which the Group has significant influence and that
in the income statement.
is neither a subsidiary nor an interest in a joint venture. Significant influence is the
A joint venture is a contractual arrangement whereby the Group and other
power to participate in the financial and operating policy decisions of the
parties undertake an economic activity that is subject to joint control. Joint
investee but is not control or joint control over those policies. The Group’s
control is when the strategic financial and operating policy decisions relating to
investments in associates are accounted for using the equity method of
the activities of the joint venture requires the unanimous consent of the parties
accounting, except when the investment is classified as held for sale, in which
sharing control.
case it is accounted for in accordance with IFRS 5 Non-current Assets held for Sale
and Discontinued Operations.
Joint venture arrangements that involve the establishment of a separate
entity in which each venturer has an interest are referred to as jointly
Under the equity method, the investment in the associate is carried in the
controlled entities. The Group reports its interests in jointly controlled entities
statement of financial position at cost plus post acquisition changes in the Group’s
using the proportionate consolidation method, except when the investment is
share of net assets of the associate. Goodwill relating to the associate is included
classified as held for sale, in which case it is accounted for in accordance with
in the carrying amount of the investment and is neither amortized nor separately
IFRS 5 Non-current Assets held for Sale and Discontinued Operations. The
tested for impairment. The income statement reflects the Group’s share of the
Group combines its proportionate share of each of the assets, liabilities, income
results of operations of the associate. Where there has been a change recognized
and expenses of the joint venture with similar items, line by line, in its
directly in the equity of the associate, the Group recognizes its share of any
consolidated financial statements. The financial statements of the joint venture
changes and discloses this, when applicable, in the statement of changes in
are prepared for the same reporting period as the parent company.
equity. Unrealized gains and losses resulting from transactions between the
Adjustments are made where necessary to bring the accounting policies in line
Group and the associate are eliminated to the extent of the interest in the
with those of the Group.
associate.
Adjustments are made in the Group’s consolidated financial statements to
The share of profit or loss of associates is included in equity income (loss) on
eliminate the Group’s share of intragroup balances, income and expenses and
the face of the income statement. This is the profit or loss attributable to equity
unrealized gains and losses on transactions between the Group and jointly
holders of the associate and therefore is profit or loss after tax and non-
controlled entities. Losses on transactions are recognized immediately if the
controlling interests in the subsidiaries of the associates.
loss provides evidence of a reduction in the net realizable value of current
The financial statements of the associate are prepared for the same reporting
assets or an impairment loss. The joint venture is proportionately consolidated
year as the parent company. Where necessary, adjustments are made to bring the
until the date on which the Group ceases to have joint control over the joint
accounting policies in line with those of the Group.
venture.
3.7 Interests in joint ventures
does not become a subsidiary or associate, the Group measures and recognizes its
After application of the equity method, the Group determines whether it is
remaining investment at its fair value. Any difference between the carrying
necessary to recognize an additional impairment loss on the Group’s investment
amount of the former jointly controlled entity upon loss of joint control and the
in its associates. The Group determines at each reporting date whether there is
fair value of the remaining investment and proceeds from disposal is recognized
any objective evidence that the investment in the associate is impaired. If this is
in the income statement. When the remaining investment constitutes significant
the case, the Group calculates the amount of impairment as the difference
influence, it is accounted for as investment in an associate.
Upon loss of joint control and provided the former jointly controlled entity
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2009 Annual Report
3.8 Non-current assets held for sale and discontinued
operations
Foreign operations
Non-current assets and disposal groups are classified as held for sale if their
rate of exchange prevailing at the reporting date and their income statements
carrying amount will be recovered principally through a sale transaction rather
are translated at average exchange rates for the period. The exchange differences
than through continuing use. This condition is regarded as met only when the
arising on the translation are recognized in other comprehensive income. On
sale is highly probable and the non-current asset or disposal group is available
disposal of a foreign operation, the component of other comprehensive income
for immediate sale in its present condition. Management must be committed to
relating to that particular foreign operation is recognized in the income
the sale, which should be expected to qualify for recognition as a completed
statement.
The assets and liabilities of foreign operations are translated into euros at the
sale within one year from the date of classification. Non-current assets and
Any goodwill arising on the acquisition of a foreign operation and any fair
disposal groups classified as held for sale are measured at the lower of carrying
value adjustments to the carrying amounts of assets and liabilities arising on the
amount and fair value less costs to sell. Property, plant and equipment and
acquisition are treated as assets and liabilities of the foreign operation and
intangible assets once classified as held for sale are not depreciated or
translated at the closing rate.
amortized.
3.10 Revenue recognition
3.9 Foreign currency translation
Revenue is recognized to the extent that it is probable the economic benefits
The Group’s consolidated financial statements are presented in euros, which is
associated with the transaction will flow to the Group and the amount of revenue
the Group’s functional and presentation currency. Each entity in the Group
can be reliably measured. Revenue is measured at the fair value of the
determines its own functional currency and items included in the financial
consideration received, excluding discounts. Specific recognition criteria must also
statements of each entity are measured using that functional currency.
be met before revenue is recognized as discussed below.
Transactions and balances
Lottery, gaming, sports betting, interactive, and non-lottery commercial
Transactions in currencies other than the entity’s functional currency (foreign
transaction processing services
currencies) are initially recorded by the Group entities at their respective
We generally conduct our business under three types of contractual
functional currency rates prevailing at the date of the transaction. At the end of
arrangements: Operating contracts, Facilities Management contracts and Product
each reporting period, foreign currency monetary items are retranslated at the
Sales contracts.
functional currency spot exchange rate in effect at the reporting date. The
resulting foreign currency exchange differences are recorded in our consolidated
Operating contracts
income statement with the exception of differences that arise on monetary items
certain of our revenue, primarily revenue from Italian Operations, are derived
that provide an effective hedge for a net investment in a foreign operation (such
from operating contracts. Under operating contracts, we manage all the activities
as intragroup loans where settlement is neither planned nor likely to occur in the
along the lottery value chain including collecting wagers, paying out prizes,
foreseeable future). These are recognized in other comprehensive income until
managing all accounting and other back-office functions, running advertising
the disposal of the net investment, at which time they are recognized in the
and promotions, operating data transmission networks and processing centers,
income statement. Tax charges and credits attributable to exchange differences
on those monetary items are also recorded in equity.
game. We also provide sports pools and sports betting services. Under sports pools
Non-monetary items that are measured in terms of historical cost in a
arrangements, we manage the sports pool whereby the sports pool prizes are
foreign currency are translated using the exchange rates as of the date of the
divided among those players who select the correct outcome. There are no odds
initial transaction. Non-monetary items measured at fair value in a foreign
involved in sports pools and each winner’s payoff depends on the number of
currency are translated using the exchange rates at the date when the fair value
players and the size of the pool. We also set odds and assume risks under fixed
is determined.
odds sports betting contracts.
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Fees earned under operating contracts are recognized as revenue in the
period earned and are classified as service revenue in our consolidated income
In instances where customer acceptance of the product or system is required,
revenue is deferred until all the acceptance criteria have been met.
statement when all of the following criteria are met:
Persuasive evidence of an arrangement exists, which is typically when a
customer contract has been signed
Services have been rendered
Our fee is deemed to be fixed or determinable and free of contingencies or
significant uncertainties
collectibility is reasonably assured
Product sales contracts
Under multiple element product sales contracts, we generally construct, sell,
deliver and install a turnkey system or deliver equipment, and license the
computer software for a fixed price, and our customer subsequently operates the
system. Product sale contracts generally include customer acceptance provisions
and general customer rights to terminate the contract if we are in breach of the
contract.
Under sports pools arrangements, we collect the wagers, pay prizes, pay a
Because
product
sales
contracts
include
significant
customization,
percentage fee to retailers, withhold our fee, and remit the balance to the respective
modification and other services prior to customer acceptance that are considered
regulatory agency. We assume no risk associated with sports pool wagering. We
essential to the software inherent in our systems, revenue is recognized using
record revenue net of prize payouts, taxes, retailer commissions and remittances to
contract accounting upon customer acceptance as long as the cost to deliver
state authorities, because we are acting as an agent to the authorities.
remaining obligations or elements to the customer can be reasonably estimated.
In sports betting contracts, we establish and assume the risks related to the
Upon revenue recognition, sufficient revenue is deferred associated with
odds. Under fixed odds betting, the potential payout is fixed at the time bets are
estimated costs to deliver any remaining elements to the customer. Multiple
placed and we bear the risk of odds setting. We are responsible for collecting the
elements are generally recorded as a single unit of accounting at an overall
wagers, paying prizes, and paying fees to retailers. We retain the remaining cash
blended margin. customer acceptance milestones typically coincide with phases
as profits. Under these arrangements, we record revenue net, calculated as total
of delivery resulting in a percentage of completion recognition of product sales
wagers less the estimated payout for prizes, because the betting contract is
revenues. Amounts due to us and costs incurred by us in constructing the system
considered a derivative and is required to be recorded at fair value. Taxes and
prior to customer acceptance are deferred. We recognize losses, if any, on fixed
retailer commissions are shown as expenses.
price contracts when the amount of the loss is probable and determinable.
Revenue attributable to the system is classified as product sales in our
Facilities management contracts
consolidated income statement and is recognized upon customer acceptance as
A substantial portion of our revenue is derived from facilities management
long as there are no substantial doubts regarding collectibility.
contracts, under which we construct, install, operate and retain ownership of the
Revenues attributable to any ongoing services provided subsequent to
online system. These contracts generally provide for a variable amount of
customer acceptance are classified as service revenue in our consolidated income
monthly or weekly service fees paid to us directly from our customer based on a
statement in the period earned.
percentage of sales or net machine income.
In certain product sale contracts (primarily the stand alone sale of lottery or
Fees earned under facilities management contracts are recognized as revenue
video lottery terminals and software deliverables that do not involve significant
in the period earned and are classified as service revenue in our consolidated
customization of software) where we are not responsible for installation, we
income statement when all of the following criteria are met:
recognize revenue when all of the following criteria are met:
Services have been rendered
The product has been delivered
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2009 Annual Report
In instances where customer acceptance of the product is required, revenue is
Deferred revenue and liquidated damage assessments
deferred until any acceptance criteria have been met.
Amounts received from customers in advance of revenue recognition are
For those product sale contracts not recognized under contract accounting,
recorded in other current liabilities in our consolidated statements of financial
in instances where post contract support (PcS) is included, up front revenue is
position. We generally record liquidated damage assessments, which are penalties
deferred over the contracted PcS period if defined, or over the average expected
incurred due to a failure to meet specified deadlines or performance standards,
customer relationship period if the PcS period is not defined or not substantial,
as a reduction of revenue in the period they become probable and estimable.
unless a fair value revenue amount is determinable. In the cases where a fair value
revenue amount is determinable, that amount is deferred and recognized over
Interest income
the remaining contracted PcS period.
Revenue is recognized as interest accrues using the effective interest method.
Our typical payment terms under product sale contracts include customer
progress payments based on specific contract milestones with final payment due
3.11 Income taxes
on or shortly after customer acceptance.
In those cases where we provide extended payment terms to our customer,
Current income tax
we consider the standard business environment of the customer and industry to
current income tax assets and liabilities for the current and prior periods are
determine if extended payment terms are a common practice. Where extended
measured at the amount expected to be recovered from or paid to the taxation
payment terms are not our typical profile, terms that extend substantially beyond
authorities. The tax rates and tax laws used to compute the amount are those
the date the product is delivered, may result in the necessity to defer revenue
that are enacted or substantively enacted, by the reporting date, in the countries
(no more than 12 months payment extension would be acceptable). In such cases,
where the Group operates and generates taxable income.
it is presumed that the fee is not fixed or determinable. In other cases where it is
current income tax relating to items recognized directly in equity is
an industry practice to provide extended payment terms, we consider the impact
recognized in equity and not in the consolidated income statement. Management
of the extended payment terms on the ability to reliably measure revenue and
periodically evaluates positions taken in the income tax returns with respect to
costs due to the time value of money, credit risk associated with the extended
situations in which applicable tax regulations are subject to interpretation and
payment terms, the potential for fee reductions, and the risk of future
establishes provisions where appropriate.
concessions. Depending on these considerations, revenue recognition for
transactions with extended payment terms may be permitted whereby the
Deferred income tax
nominal amount of the revenue is recorded at a discount to take into
Deferred income tax is provided using the liability method on temporary
consideration the time value of money. We are not currently recording any
differences at the reporting date between the tax bases of assets and liabilities
revenue upfront.
and their carrying amounts for financial reporting purposes.
Non-lottery commercial transaction processing services
differences, carry forward of unused tax credits and unused tax losses, to the
We offer high-volume transaction processing services outside of our core market
extent that it is probable that taxable income will be available against which the
of providing online lottery services that consist of the acquiring, processing and
deductible temporary differences, and the carry forward of unused tax credits
transmission of commercial non-lottery transactions. Such transactions include
and unused tax losses can be utilized except:
Deferred income tax assets are recognized for all deductible temporary
bill payments, electronic tax payments, utility payments, prepaid cellular
telephone recharges and retail-based programs.
We earn a fee for processing commercial non-lottery transactions that is
transaction-based (a fixed fee per transaction or a fee based on a percentage of
monetary volume processed). We recognize these fees as service revenue at the
time a transaction is processed based on the net amount retained.
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Where the deferred income tax asset relating to the deductible temporary
difference arises from the initial recognition of an asset or liability in a transaction
that is not a business combination and, at the time of the transaction, affects
neither the accounting income nor taxable income or loss; and
In respect of deductible temporary differences associated with investments in
subsidiaries, associates and interests in joint ventures, deferred income tax
assets are recognized only to the extent that it is probable that the temporary
benefits are funded only to the extent paid to the external funds. The cost of
differences will reverse in the foreseeable future and taxable income will be
providing benefits under the plan, for those employees that participate in the
available against which the temporary differences can be utilized.
unfunded plan within the Group, is determined using the projected unit credit
actuarial valuation method. The cost of providing benefits for those employees
The carrying amount of deferred income tax assets is reviewed at each reporting
that choose to transfer their plan to independent external funds are considered
date and reduced to the extent that it is no longer probable that sufficient
as defined contributions and are accrued as the employees render the related
taxable income will be available to allow all or part of the deferred income tax
service. Actuarial gains and losses are immediately recognized in the consolidated
asset to be utilized. Unrecognized deferred income tax assets are reassessed at
income statement. The defined benefit liability represents the present value of
each reporting date and are recognized to the extent that it has become probable
the Group’s defined benefit plan obligation.
that future taxable income will allow the deferred income tax asset to be
recovered.
Deferred tax liabilities are recognized for all taxable temporary differences,
except:
Where the deferred tax liability arises from the initial recognition of goodwill
3.13 Share-based payment transactions
Employees of the Group may receive remuneration in the form of share-based
payment transactions, whereby employees render services as consideration for
equity instruments (equity-settled transactions). The cost of equity-settled
or of an asset or liability in a transaction that is not a business combination
transactions with employees is measured by reference to the fair value on the
and, at the time of the transaction, affects neither the accounting income
date they are granted. The fair value is determined using a binomial model,
nor taxable income or loss; and
further details of which are provided in Note 35.
In respect of taxable temporary differences associated with investments in
The cost of equity-settled transactions is recognized, together with a
subsidiaries, associates and interests in joint ventures, where the timing of
corresponding increase in equity, over the period in which the performance and/or
the reversal of the temporary differences can be controlled and it is probable
service conditions are fulfilled, ending on the date in which the relevant employees
that the temporary differences will not reverse in the foreseeable future.
become fully entitled to the award (vesting date). The cumulative expense
recognized for equity-settled transactions at each reporting date until the vesting
Deferred income tax assets and liabilities are measured at the tax rates that are
date reflects the extent to which the vesting period has expired and the Group’s
expected to apply to the year when the asset is realized or the liability is settled,
best estimate of the number of equity instruments that will ultimately vest. The
based on tax rates (and tax laws) that have been enacted or substantively enacted
income statement expense or credit for a period represents the movement in
at the reporting date.
cumulative expense recognized as of the beginning and end of that period.
Deferred income tax relating to items recognized outside income or loss is
No expense is recognized for awards that do not ultimately vest, except for
recognized in correlation to the underlying transaction either in other
equity-settled transactions where vesting is conditional upon a market or non-
comprehensive income or directly in equity.
vesting condition, which are treated as vesting irrespective of whether or not the
Deferred income tax assets and deferred income tax liabilities are offset, if a
legally enforceable right exists to set off current income tax assets against current
income tax liabilities and the deferred income taxes relate to the same taxable
entity and the same taxation authority.
market or non-vesting condition is satisfied, provided that all other performance
and/or service conditions are satisfied.
Where the terms of an equity-settled transaction award are modified, the
minimum expense recognized is the expense as if the terms had not been
modified, if the original terms of the award are met. An additional expense is
3.12 Post employment benefits
recognized for any modification that increases the total fair value of the share-
The Group has a defined benefit plan (staff severance fund) to provide certain
based payment transaction, or is otherwise beneficial to the employee as
post employment benefits to Italian employees following termination from the
measured at the date of modification.
Group. Italian employees may choose to participate in an unfunded plan within
Where an equity-settled award is cancelled, it is treated as if it had vested on
the Group or transfer their plan balance to independent external funds. These
the date of cancellation, and any expense not yet recognized for the award is
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2009 Annual Report
recognized immediately. This includes any award where non-vesting conditions
Financial assets at fair value through profit or loss
within the control of either the entity or the employee are not met. however, if
Financial assets at fair value through profit or loss include financial assets held for
a new award is substituted for the cancelled award, and designated as a
trading and financial assets designated upon initial recognition at fair value
replacement award on the date that it is granted, the cancelled and new awards
through profit or loss. Financial assets are classified as held for trading if they are
are treated as if they were a modification of the original award, as described in
acquired for the purpose of selling or repurchasing in the near term. This category
the previous paragraph. All cancellations of equity-settled transaction awards are
includes derivative financial instruments entered into by the Group that are not
treated equally.
designated as hedging instruments in hedge relationships as defined by IAS 39.
The dilutive effect of outstanding options is reflected as additional share
Derivatives, including separated embedded derivatives are also classified as held
dilution in the computation of diluted earnings per share, further details of which
for trading unless they are designated as effective hedging instruments. Financial
are provided in Note 32.
assets at fair value through profit and loss are carried in the statement of financial
position at fair value with changes in fair value recognized in the income
3.14 Financial instruments - initial recognition and subsequent
measurement
statement.
Loans and receivables
a) Financial assets
Loans and receivables are non-derivative financial assets with fixed or
Initial recognition and measurement
determinable payments that are not quoted in an active market. After initial
Financial assets within the scope of IAS 39 Financial Instruments: Recognition and
measurement, such financial assets are subsequently measured at amortized cost
Measurement are classified as financial assets at fair value through profit or loss,
using the effective interest rate method, less impairment. Amortized cost is
loans and receivables, held-to-maturity investments, available-for-sale financial
calculated by taking into account any discount or premium on acquisition and
assets, or as derivatives designated as hedging instruments in an effective hedge,
fees or costs that are an integral part of the effective interest rate method. The
as appropriate. The Group determines the classification of its financial assets at
effective interest rate method amortization and losses arising from impairment
initial recognition.
are recognized in the consolidated income statement.
Financial assets are recognized initially at fair value, plus, in the case of
investments not at fair value through profit or loss, directly attributable
Held-to-maturity investments
transaction costs.
Non-derivative financial assets with fixed or determinable payments and fixed
The Group’s financial assets include cash and cash equivalents, trade and
maturities are classified as held-to-maturity when the Group has the positive
other receivables, loans and other receivables, available-for-sale financial
intention and ability to hold them to maturity. After initial measurement, held-
investments, and derivative financial instruments.
to-maturity investments are measured at amortized cost using the effective
interest method, less impairment. Amortized cost is calculated by taking into
Subsequent measurement
account any discount or premium on acquisition and fees or costs that are an
The subsequent measurement of financial assets depends on their classification
integral part of the effective interest method. The effective interest rate method
as follows:
amortization and losses arising from impairment are recognized in the
Financial assets at fair value through profit or loss;
Loans and receivables;
held-to-maturity investments; or
Available-for-sale financial investments
consolidated income statement. The Group did not have any held-to-maturity
investments during the years ended December 31, 2009 and 2008.
Available-for-sale financial investments include equity and debt securities. Equity
investments classified as available-for sale are those, which are neither classified
as held for trading nor designated at fair value through profit or loss. Debt
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securities in this category are those which are intended to be held for an
When the Group has transferred its rights to receive cash flows from an asset or
indefinite period of time and which may be sold in response to needs for liquidity
has entered into a pass-through arrangement, and has neither transferred nor
or in response to changes in the market conditions.
retained substantially all the risks and rewards of the asset nor transferred control
After initial measurement, available-for-sale financial investments are
of the asset, the asset is recognized to the extent of the Group’s continuing
subsequently measured at fair value with unrealized gains or losses recognized
involvement in the asset. In that case, the Group also recognizes an associated
as other comprehensive income in the net unrealized gain/(loss) reserve until the
liability. The transferred asset and the associated liability are measured on a basis
investment is derecognized, at which time the cumulative gain or loss is
that reflects the rights and obligations that the Group has retained. continuing
recognized in the income statement, or determined to be impaired, at which time
involvement that takes the form of a guarantee over the transferred asset is
the cumulative loss is recognized in the income statement and removed from the
measured at the lower of the original carrying amount of the asset and the
net unrealized gain/(loss) reserve.
maximum amount of consideration that the Group could be required to repay.
The Group evaluated its available-for-sale financial investments to determine
whether the ability and intention to sell them in the near term is still appropriate.
b) Impairment of financial assets
When the Group is unable to trade these financial assets due to inactive markets
The Group assesses at each reporting date whether there is any objective
and management’s intent significantly changes to do so in the foreseeable future,
evidence that a financial asset or a group of financial assets is impaired. A
the Group may elect to reclassify these financial assets in rare circumstances.
financial asset or a group of financial assets is deemed to be impaired if, and only
Reclassification to loans and receivables is permitted when the financial asset
if, there is objective evidence of impairment as a result of one or more events
meets the definition of loans and receivables and the Group has the intent and
that has occurred after the initial recognition of the asset (an incurred “loss
ability to hold these assets for the foreseeable future or maturity. The
event”) and that loss event has an impact on the estimated future cash flows of
reclassification to held-to-maturity is permitted only when the entity has the
the financial asset or the group of financial assets that can be reliably estimated.
ability and intent to hold the financial asset accordingly.
Evidence of impairment may include indications that the debtors or a group of
For a financial asset reclassified out of the available-for-sale category, any
debtors is experiencing significant financial difficulty, default or delinquency in
previous gain or loss on that asset that has been recognized in equity is amortized
interest or principal payments, the probability that they will enter bankruptcy or
to profit or loss over the remaining life of the investment using the effective interest
other financial reorganization and where observable data indicate that there is
rate method. Any difference between the new amortized cost and the expected
a measurable decrease in the estimated future cash flows, such as changes in
cash flows is also amortized over the remaining life of the asset using the effective
arrears or economic conditions that correlate with defaults.
interest rate method. If the asset is subsequently determined to be impaired, then
the amount recorded in equity is reclassified to the income statement.
Financial assets carried at amortized cost
For financial assets carried at amortized cost, the Group first assesses individually
Derecognition
whether objective evidence of impairment exists individually for financial assets
A financial asset (or where applicable, a part of a financial asset or part of a group
that are individually significant, or collectively for financial assets that are not
of similar financial assets) is derecognized when:
individually significant. If the Group determines that no objective evidence of
The rights to receive cash flows from the asset have expired;
The Group has transferred its rights to receive cash flows from the asset or has
impairment exists for an individually assessed financial asset, whether significant
or not, it includes the asset in a group of financial assets with similar credit risk
assumed an obligation to pay the received cash flows in full without material
characteristics and collectively assesses them for impairment. Assets that are
delay to a third party under a “pass through” arrangement; and either
individually assessed for impairment and for which an impairment loss is, or
the Group has transferred substantially all the risks and rewards of the
asset; or
the Group has neither transferred nor retained substantially all the risks
and rewards of the asset, but has transferred control of the asset.
continues to be recognized, are not included in a collective assessment of
impairment.
If there is objective evidence that an impairment loss has been incurred, the
amount of the loss is measured as the difference between the asset’s carrying
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2009 Annual Report
amount and the present value of estimated future cash flows (excluding future
Future interest income continues to be accrued based on the reduced
expected credit losses that have not yet been incurred). The present value of the
carrying amount of the asset and is accrued using the rate of interest used to
estimated future cash flows is discounted at the financial assets original effective
discount the future cash flows for the purpose of measuring the impairment
interest rate. If a loan has a variable interest rate, the discount rate for measuring
loss. The interest income is recognized in the income statement. If, in a
any impairment loss is the current effective interest rate.
subsequent year, the fair value of a debt instrument increases and the increase
The carrying amount of the asset is reduced through the use of an allowance
can be objectively related to an event occurring after the impairment loss was
account and the amount of the loss is recognized in the income statement. Interest
recognized in the income statement, the impairment loss is reversed through
income continues to be accrued on the reduced carrying amount and is accrued
the income statement.
using the rate of interest used to discount the future cash flows for the purpose of
measuring the impairment loss. The interest income is recorded in the income
c) Financial liabilities
statement. Loans together with the associated allowance are written off when
there is no realistic prospect of future recovery and all collateral has been realized
Initial recognition and measurement
or has been transferred to the Group. If, in a subsequent year, the amount of the
Financial liabilities within the scope of IAS 39 are classified as financial liabilities
estimated impairment loss increases or decreases because of an event occurring
at fair value through profit or loss, loans and borrowings, or as derivatives
after the impairment was recognized, the previously recognized impairment loss is
designated as hedging instruments in an effective hedge, as appropriate. The
increased or reduced by adjusting the allowance account. If a future write-off is
Group determines the classification of its financial liabilities at initial recognition.
later recovered, the recovery is recorded in the income statement.
Financial liabilities are recognized initially at fair value and, in the case of
loans and borrowings, directly attributable debt issuance costs.
The Group’s financial liabilities include accounts and other payables, bank
For available-for-sale financial investments, the Group assesses at each reporting
overdrafts, loans and borrowings, financial guarantee contracts, finance lease
date whether there is objective evidence that an investment or a group of
obligations, loan guarantees, Swap Liability and derivative financial
investments is impaired.
instruments.
In the case of equity investments classified as available-for-sale, objective
evidence would include a significant or prolonged decline in the fair value of the
Subsequent measurement
investment below its cost. ‘Significant’ is to be evaluated against the original cost
The subsequent measurement of financial liabilities depends on their
of the investment and ‘prolonged’ against the period in which the fair value has
classification as follows:
been below its original cost. Where there is evidence of impairment, the
cumulative loss, measured as the difference between the acquisition cost and the
Financial liabilities at fair value through profit or loss; or
Loans and borrowings
current fair value, less any impairment loss on that investment previously
recognized in the income statement, is removed from other comprehensive
Financial liabilities at fair value through profit or loss
income and recognized in the income statement. Impairment loss on equity
Financial liabilities at fair value through profit or loss include financial liabilities
investments is not reversed through the income statement; increases in their fair
held for trading and financial liabilities designated upon initial recognition as at
value after impairment are recognized directly in other comprehensive income.
fair value through profit or loss. Financial liabilities are classified as held for
In the case of debt instruments classified as available-for-sale, impairment is
trading if they are acquired for the purpose of selling in the near term. This
assessed based on the same criteria as financial assets carried at amortized cost.
category includes derivative financial instruments entered into by the Group that
however, the amount recorded for impairment is the cumulative loss measured
are not designated as hedging instruments in hedge relationships as defined by
as the difference between the amortized cost and the current fair value, less any
IAS 39. Separated embedded derivatives are also classified as held for trading
impairment loss on that investment previously recognized in the income
unless they are designated as effective hedging instruments. Gains or losses on
statement.
liabilities held for trading are recognized in the income statement.
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reporting date is determined by reference to quoted market bid prices or dealer
After initial recognition, interest bearing loans and borrowings are subsequently
price quotations (bid price for long position and ask price for short positions),
measured at amortized cost using the effective interest rate method. Gains and
without any deduction for transaction costs. For financial instruments not traded
losses are recognized in the consolidated income statement when the liabilities are
in an active market, the fair value is determined using appropriate valuation
derecognized as well as through the effective interest rate method amortization
techniques. Such techniques may include using recent arm’s length market
process. Amortized cost is calculated by taking into account any discount or
transactions; reference to the current fair value of another instrument that is
premium on acquisition and fees or costs that are an integral part of the effective
substantially the same; discounted cash flow analysis; or other valuation models.
interest rate method. The effective interest rate method amortization is included
An analysis of fair values of financial instruments and further details as to how
in interest expense in the consolidated income statement.
they are measured are provided in Note 14.
Financial guarantee contracts
f) Derivative financial instruments and hedge accounting
Financial guarantee contracts issued by the Group are those contracts that require
a payment to be made to reimburse the holder for a loss it incurs because the
Initial recognition and subsequent measurement
specified debtor fails to make a payment when due in accordance with the terms
The Group uses derivative financial instruments such as forward currency
of a debt instrument. Financial guarantee contracts are recognized initially as a
contracts and interest rate swaps to hedge its foreign currency risks and interest
liability at fair value, adjusted for transaction costs that are directly attributable to
rate risks, respectively. Such derivative financial instruments are initially
the issuance of the guarantee. Subsequently, the liability is measured at the higher
recognized at fair value on the date on which a derivative contract is entered
of the best estimate of the expenditure required to settle the present obligation
into and are subsequently remeasured at fair value. Derivatives are carried as
at the reporting date and the amount recognized less cumulative amortization.
financial assets when the fair value is positive and as financial liabilities when the
fair value is negative.
Derecognition
Any gains or losses arising from changes in fair value on derivatives are taken
A financial liability is derecognized when the obligation under the liability is
directly to the income statement, except for the effective portion of cash flow
discharged or cancelled or expires.
hedges and hedges of a net investment in a foreign operation, which are
When an existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an existing liability are
recognized in other comprehensive income.
For the purpose of hedge accounting, hedges are classified as:
substantially modified, such an exchange or modification is treated as a
Fair value hedges when hedging the exposure to changes in the fair value of
derecognition of the original liability and the recognition of a new liability, and
a recognized asset or liability or an unrecognized firm commitment (except
the difference in the respective carrying amounts is recognized in the income
for foreign currency risk); or
statement.
cash flow hedges when hedging exposure to variability in cash flows that is
either attributable to a particular risk associated with a recognized asset or
d) Offsetting of financial instruments
liability or a highly probable forecast transaction or the foreign currency risk
Financial assets and financial liabilities are offset and the net amount reported in
in an unrecognized firm commitment; or
the consolidated statement of financial position if, and only if, there is a currently
hedges of a net investment in a foreign operation.
enforceable legal right to offset the recognized amounts and there is an intention
to settle on a net basis, or to realize the assets and settle the liabilities
At the inception of a hedge relationship, the Group formally designates and
simultaneously.
documents the hedge relationship to which the Group wishes to apply hedge
accounting and the risk management objective and strategy for undertaking the
e) Fair value of financial instruments
hedge. The documentation includes identification of the hedging instrument,
The fair value of financial instruments that are traded in active markets at each
the hedged item or transaction, the nature of the risk being hedged and how
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2009 Annual Report
the entity will assess the effectiveness of changes in the hedging instrument’s fair
the cumulative gain or loss previously recognized in equity are transferred to the
value in offsetting the exposure to changes in the hedged item’s fair value or
income statement. If the hedging instrument expires or is sold, terminated or
cash flows attributable to the hedged risk. Such hedges are expected to be highly
exercised without replacement or rollover, or if its designation as a hedge is
effective in achieving offsetting changes in fair value or cash flows and are
revoked, any cumulative gain or loss previously recognized in other
assessed on an ongoing basis to determine that they actually have been highly
comprehensive income remains in other comprehensive income until the forecast
effective throughout the financial reporting periods for which they were
transaction or firm commitment affects income or loss.
designated.
hedges which meet the strict criteria for hedge accounting are accounted for
as follows:
Hedges of a net investment in a foreign operation
hedges of a net investment in a foreign operation, including a hedge of a
monetary item that is accounted for as part of the net investment, are accounted
Fair value hedges
for in a way similar to cash flow hedges. Gains or losses on the hedging
The change in the fair value of an interest rate hedging derivative is recognized
instrument relating to the effective portion of the hedge are recognized as other
in the income statement. The change in the fair value of the hedged item
comprehensive income while any gains or losses relating to the ineffective
attributable to the risk hedged is recorded as a part of the carrying value of the
portion are recognized in the income statement. On disposal of the foreign
hedged item and is also recognized in the income statement.
operation, the cumulative value of any such gains or losses recorded in equity is
For fair value hedges relating to items carried at amortized cost, the
transferred to the income statement.
adjustment to the carrying value may be amortized, using the effective interest
method, as soon as the adjustment exists (through the income statement over
current versus non-current classification
the remaining term to maturity) or may begin no later than when the hedged
Derivative instruments that are not a designated and effective hedging
item ceases to be adjusted for changes in its fair value attributable to the risk
instrument are classified as current or non-current or separated into a current
being hedged.
and non-current portion based on an assessment of the facts and circumstances
If the hedge item is derecognized, the unamortized fair value is recognized
immediately in the income statement.
(i.e. the underlying contracted cash flows).
Where the Group will hold a derivative as an economic hedge (and does not
When an unrecognized firm commitment is designated as a hedged item, the
apply hedge accounting), for a period beyond 12 months after the reporting
subsequent cumulative change in the fair value of the firm commitment
date, the derivative is classified as non-current (or separated into current and
attributable to the hedged risk is recognized as an asset or liability with a
non-current portions) consistent with the classification of the underlying item.
corresponding gain or loss recognized in the income statement.
Embedded derivatives that are not closely related to the host contract are
classified consistent with the cash flows of the host contract.
cash flow hedges
Derivative instruments that are designated as, and are effective hedging
The effective portion of the gain or loss on the hedging instrument is recognized
instruments, are classified consistent with the classification of the underlying
directly as other comprehensive income in the net unrealized gain/(loss) reserve,
hedged item. The derivative instrument is separated into a current portion and
while any ineffective portion is recognized immediately in the income statement.
non-current portion only if a reliable allocation can be made.
Amounts recognized as other comprehensive income are transferred to the
income statement when the hedged transaction affects income or loss, such as
3.15 Treasury shares
when the hedged financial income or financial expense is recognized or when a
Lottomatica’s own equity instruments that are reacquired (treasury shares) are
forecast sale occurs. Where the hedged item is the cost of a non-financial asset
recognized at cost and deducted from equity. No gain or loss is recognized in the
or non-financial liability, the amounts recognized as other comprehensive income
income statement on the purchase, sale, issue or cancellation of the Group’s own
are transferred to the initial carrying amount of the non-financial asset or liability.
equity instruments. Any difference between the carrying amount and the
If the forecast transaction or firm commitment is no longer expected to occur,
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consideration paid or received is recognized in other reserves.
3.16 Systems, equipment and other assets related to contracts, net
difference between the net disposal proceeds and the carrying amount of
Systems, equipment and other assets related to contracts are stated on the basis
the asset) is included in the income statement in the year the asset is
of cost, net of accumulated depreciation and/or accumulated impairment loss, if
derecognized. The assets’ residual values, useful lives and methods of
any. The cost is depreciated over the estimated useful life of the assets using the
depreciation are reviewed at each financial year end and adjusted
straight-line method depending on the type of cost. cost is comprised of two
prospectively if appropriate.
categories:
hard
costs
(for
example:
terminals,
mainframe
computers
and
communications equipment) and;
soft costs (for example: software development).
3.18 Leases
The determination of whether an arrangement is, or contains a lease, is based on
the substance of the arrangement at the inception date and whether the
fulfillment of the arrangement is dependent on the use of a specific asset or
hard costs are generally depreciated over the base term of the contract plus
assets and the arrangement conveys a right to use the asset.
extension years provided for in the contract but not to exceed 10 years. Soft costs
For arrangements entered into prior to January 1, 2005, the date of inception
are depreciated using the straight line method over the base term of the contract,
is deemed to be January 1, 2005 in accordance with the transitional requirements
but not to exceed 10 years. Repair and maintenance costs are recognized in the
of IFRIc 4.
income statement as incurred.
The carrying values of systems, equipment and other assets related to
Finance leases
contracts are reviewed for impairment when events or changes in circumstances
Finance leases, which transfer to the Group substantially all the risks and benefits
indicate that the carrying value may not be recoverable.
incidental to ownership of the leased item, are capitalized at the inception of
Systems, equipment and other assets related to contracts are derecognized
the lease at the fair value of the leased property or, if lower, at the present value
upon disposal or when no future economic benefits are expected from the assets’
of the minimum lease payments. Lease payments are apportioned between
use or disposal. Any gain or loss arising on derecognition of the asset (calculated
finance charges and reduction of the lease liability so as to achieve a constant
as the difference between the net disposal proceeds and the carrying amount of
rate of interest on the remaining balance of the liability. Finance charges are
the asset) is included in the income statement in the year the asset is
recognized in the income statement.
derecognized. The assets’ residual values, useful lives and methods of
Leased assets are depreciated over the useful life of the asset. however, if
depreciation are reviewed at each financial year end and adjusted prospectively
there is no reasonable certainty that the Group will obtain ownership by the end
if appropriate.
of the lease term, the asset is depreciated over the shorter of the estimated useful
life of the asset and the lease term.
3.17 Property, plant and equipment, net
Property, plant and equipment is stated on the basis of cost. The cost, excluding
Operating leases
land, is depreciated over the estimated useful life of the assets using the straight-
Operating lease payments are recognized as an expense in the consolidated
line method. The estimated useful lives are generally 40 years for buildings and
income statement on a straight line basis over the lease term.
five to 10 years for furniture and equipment. Repair and maintenance costs are
recognized in the income statement as incurred.
3.19 Borrowing costs
The carrying values of property, plant and equipment are reviewed for
Borrowing costs directly attributable to the acquisition, construction or
impairment when events or changes in circumstances indicate that the carrying
production of an asset that necessarily takes a substantial period of time to get
value may not be recoverable.
ready for its intended use or sale are capitalized as part of the cost of the
Property, plant and equipment is derecognized upon disposal or when
respective assets. All other borrowing costs are expensed in the period incurred.
no future economic benefits are expected from the assets’ use or disposal.
Borrowing costs consist of interest and other costs that an entity incurs in
Any gain or loss arising on derecognition of the asset (calculated as the
connection with the borrowing of funds.
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2009 Annual Report
3.20 Intangible assets
Following initial recognition of the development expenditure as an asset, the
Intangible assets acquired separately are measured on initial recognition at cost.
cost model is applied requiring the asset to be carried at cost less any accumulated
The cost of intangible assets acquired in a business combination is its fair value
amortization and accumulated impairment loss. Amortization of the asset begins
at the date of acquisition. Following initial recognition, intangible assets are
when development is complete and the asset is available for use. It is amortized
carried at cost less any accumulated amortization and accumulated impairment
over the period of expected future benefit from the related project. The carrying
loss. Internally generated intangible assets, excluding capitalized development
value of development costs is reviewed for impairment annually when the asset
costs, are not capitalized and any expenditure is reflected in the income
is not yet in use or more frequently when an indication of impairment arises
statement in the year in which the expenditure is incurred.
during the year.
The useful lives of intangible assets are assessed to be either finite or
indefinite. Intangible assets with finite lives are amortized over their useful
3.22 Inventories
economic life and assessed for impairment whenever there is an indication that
Inventories are valued at the lower of cost (under the first in, first out method or
the intangible asset may be impaired. The amortization period and the
specific cost basis as considered necessary in the specific circumstances) or net
amortization method for an intangible asset with a finite useful life is reviewed
realizable value. Net realizable value is the estimated selling price in the ordinary
at least annually, during the fourth quarter ending on December 31. changes in
course of business, less estimated costs of completion and the estimated costs
the expected useful life or the expected pattern of consumption of future
necessary to make the sale. Inventories include amounts we manufacture or
economic benefits embodied in the asset is accounted for by changing the
assemble for our long-term service contracts, which are transferred to systems,
amortization period or method, as appropriate, and are treated as changes in
equipment and other assets related to contracts, net upon shipment. Inventories
accounting estimates. Amortization expense on intangible assets with finite lives
also include amounts related to product sales contracts, including product sales
is recorded in our consolidated income statement.
under long-term contracts.
Intangible assets with indefinite useful lives are not amortized, but are tested
for impairment annually, during the fourth quarter ending on December 31,
3.23 Impairment of non-financial assets
either individually or at the cash generating unit level, as appropriate. The
The Group assesses at each reporting date whether there is an indication that an
assessment of indefinite life is reviewed annually to determine whether the
asset may be impaired. If any such indication exists, or when annual impairment
indefinite life assessment continues to be supportable. If not, the change in the
testing for an asset is required, the Group estimates the asset’s recoverable
useful life assessment from indefinite to finite is made on a prospective basis.
amount. An asset’s recoverable amount is the higher of an asset’s or cash-
Gains or losses arising from derecognition of an intangible asset are measured
generating unit’s (cGU) fair value less costs to sell and its value in use, and is
as the difference between the net disposal proceeds and the carrying amount of
determined for an individual asset, unless the asset does not generate cash
the asset and are recognized in the income statement when the asset is
inflows that are largely independent of those from other assets or groups of
derecognized.
assets. Where the carrying amount of an asset or cGU exceeds its recoverable
amount, the asset is considered impaired and is written down to its recoverable
3.21 Research and development costs
amount. In assessing value in use, the estimated future cash flows are discounted
Research costs are expensed as incurred. Development expenditures on an
to their present value using a pre-tax discount rate that reflects current market
individual project are recognized as an asset when the Group can demonstrate:
assessments of the time value of money and the risks specific to the asset. In
the technical feasibility of completing the asset so that it will be available for
use or sale;
its intention to complete and its ability to use or sell the asset;
how the asset will generate future economic benefits;
the availability of resources to complete the asset; and
the ability to measure reliably the expenditure during the development.
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determining fair value less costs to sell, an appropriate valuation model is used.
These calculations are corroborated by valuation multiples, quoted share prices
for publicly traded subsidiaries or other available fair value indicators. Impairment
loss is recorded in the consolidated income statement.
For assets excluding goodwill, an assessment is made at each reporting date
as to whether there is any indication that a previously recognized impairment
loss may no longer exist or may have decreased. If such indication exists, the
probable and estimable. Short-term receivables are not discounted because the
Group estimates the asset’s or cGU’s recoverable amount. A previously recognized
effect of discounting cash flows is not material, unless extended payment terms
impairment loss is reversed only if there has been a change in the assumptions
are granted.
used to determine the asset’s recoverable amount since the last impairment loss
was recognized. The reversal is limited so that the carrying amount of the asset
3.26 Provisions
does not exceed its recoverable amount, nor exceed the carrying amount that
Provisions are recognized when the Group has a present obligation (legal or
would have been determined, net of depreciation or amortization, had no
constructive) as a result of a past event and it is probable that an outflow of
impairment loss been recognized for the assets in prior years. Such reversal is
resources embodying economic benefits will be required to settle the obligation
recognized in the income statement unless the asset is carried at a revalued
and a reliable estimate can be made of the amount of the obligation. When the
amount, in which case the reversal is treated as a revaluation increase.
Group expects some or all of a provision to be reimbursed, for example under an
The following criteria are also applied in assessing impairment of goodwill
and intangible assets.
insurance contract, the reimbursement is recognized as a separate asset but only
when the reimbursement is virtually certain. The expense relating to any
provision is presented in the consolidated income statement net of any
Goodwill
reimbursement. If the effect of the time value of money is material, provisions are
Goodwill is tested for impairment annually, as of December 31, or more
discounted using a current pre-tax rate that reflects, where appropriate, the risks
frequently when circumstances indicate that the carrying value may be impaired.
specific to the liability. Where discounting is used, the increase in the provision
Impairment is determined for goodwill by assessing the recoverable amount
due to the passage of time is recognized as a finance cost.
of each cGU (or group of cGU’s) to which the goodwill relates. Where the
loss is recognized. Impairment loss relating to goodwill cannot be reversed in
4. Significant accounting judgments, estimates and
assumptions
future periods.
The preparation of the Group’s consolidated financial statements requires
recoverable amount of the cGU is less than its carrying amount, an impairment
management to make judgments, estimates and assumptions that affect the
Intangible assets
reported amounts of revenues, expenses, assets, liabilities, and the disclosure of
Intangible assets with indefinite useful lives are tested for impairment annually,
contingent liabilities, at the reporting period. however, uncertainty about these
as of December 31, either individually or at the cGU level, as appropriate, and
assumptions and estimates could result in outcomes that may require a material
when circumstances indicate that the carrying value may be impaired.
adjustment to the carrying amount of the asset or liability affected in the future.
3.24 cash and cash equivalents
Judgments
cash and cash equivalents in the consolidated statement of financial position are
In the process of applying the Group’s accounting policies, management has
comprised of cash at banks and on hand and short-term, highly liquid investments
made the following judgment, apart from those involving estimations, that has
with an original maturity of three months or less at the date of purchase.
the most significant effect on the amounts recognized in the consolidated
financial statements:
3.25 Trade and other receivables
Trade accounts receivable are reported net of allowances for doubtful accounts
Finance and operating lease commitments
and liquidated damages (penalties incurred due to a failure to meet specified
The Group leases the GTEch world headquarters facility (land and building) in
deadlines or performance standards). Allowances for doubtful accounts are
Providence, Rhode Island, USA. The Group determined that the present value of
generally recorded when there is objective evidence that we may not be able to
the future minimum lease payments for the building amounts to substantially all
collect the related receivables. Bad debts are written off when identified.
of the fair value relating to the Group’s portion of the building and therefore
Allowances for liquidated damages are generally recorded when they are
accounts for its portion of the building as a finance lease. The Group also
P 71
2009 Annual Report
determined that since title to the land will never transfer to the Group, the land
Share-based payment transactions
is accounted for as an operating lease.
The Group measures the cost of equity-settled transactions with employees by
reference to the fair value of the equity instruments on the date they are granted.
Estimates and assumptions
Estimating fair value for share-based payment transactions requires determining
The key assumptions concerning the future and other key sources of estimation
the most appropriate valuation model, which is dependent on the terms and
uncertainty at the reporting date that have a significant risk of causing a material
conditions of the grant. This estimate also requires determining the most
adjustment to the carrying amounts of assets and liabilities within the next
appropriate inputs to the valuation model including the expected life of the
financial year are discussed below.
option, volatility and dividend yield and making assumptions about them. The
assumptions and models used for estimating fair value for share-based payment
Impairment of Systems, Equipment and Other Assets Related to contracts
transactions are disclosed in Note 35.
The carrying values of systems, equipment and other assets related to contracts
are reviewed for impairment when events or changes in circumstances indicate
Income taxes
that the carrying value may not be recoverable. This requires management to
Uncertainties exist with respect to the interpretation of complex tax regulations
make an estimate of the expected future cash flows from the assets and also
and the amount and timing of future taxable income. Given the wide range of
to choose a suitable discount rate in order to calculate the present value of
international business relationships and the long-term nature and complexity of
those cash flows. The carrying amount of systems, equipment and other assets
existing contractual agreements, differences arising between the actual results
related to contracts at December 31, 2009 and December 31, 2008 was €774.6
and the assumptions made, or future changes to such assumptions, could
million and €758.7 million, respectively. Further details are provided in Note 8
necessitate future adjustments to taxable income and income tax expense already
and 28.
recorded. The Group establishes provisions, based on reasonable estimates, for
possible consequences of audits by the tax authorities of the respective countries
Impairment of Goodwill
in which it operates. The amount of such provisions is based on various factors,
The Group determines whether goodwill is impaired at least on an annual basis.
such as experience of previous tax audits and differing interpretations of tax
This requires an estimation of the “value in use” or “fair value less costs to sell”
regulations by the taxable entity and the responsible tax authority. Such
of the cash-generating units to which the goodwill is allocated. Estimating a value
differences of interpretation may arise on a wide variety of issues depending on
in use or fair value less costs to sell amount requires management to make an
the conditions prevailing in the respective Group company’s domicile.
estimate of the expected future cash flows from the cash-generating unit and
Deferred tax assets are recognized for all unused tax losses to the extent that
also to choose a suitable discount rate in order to calculate the present value of
it is probable that taxable income will be available against which the losses can
those cash flows. The carrying amount of goodwill at December 31, 2009 and
be utilized. Significant management judgment is required to determine the
December 31, 2008 was €3.0 billion and €3.1 billion, respectively. Further details
amount of deferred tax assets that can be recognized, based upon the likely
are provided in Note 10 and 28.
timing and level of future taxable income together with future tax planning
strategies. The carrying value of recognized tax losses and unrecognized tax losses
Impairment of Intangible Assets
at December 31, 2009 was €78.9 million and €23.1 million, respectively. The
The Group determines whether intangible assets with indefinite useful lives are
carrying value of recognized tax losses and unrecognized tax losses at December
impaired at least on an annual basis. This requires management to make an
31, 2008 was €45.4 million and €3.7 million, respectively. Further details on
estimate of the expected future cash flows from the assets and also to choose a
income taxes are disclosed in Note 15.
suitable discount rate in order to calculate the present value of those cash flows.
The carrying amount of intangible assets at December 31, 2009 and December 31,
Fair value measurement of contingent consideration
2008 was €822.9 million and €847.3 million, respectively. Further details are
contingent consideration resulting from business combinations is valued at fair
provided in Note 11 and 28.
value at the acquisition date as part of the business combination. Where the
P 72
contingent consideration meets the definition of a derivative and thus financial
IFRS 9 Financial Instruments
liability, it is subsequently remeasured to fair value at each reporting date. The
IFRS 9 was issued in November 2009 and becomes effective for annual periods
determination of the fair value is based on discounted cash flows. The key
beginning on or after January 1, 2013. The standard is the first step in the IASB’s
assumptions take into consideration the probability of meeting each performance
project to replace IAS 39 Financial Instruments: Recognition and Measurement
target and the discount factor.
and introduces new requirements for classifying and measuring financial assets.
The IASB intends to expand the standard during 2010 to add new requirements
5. International Financial Reporting Standards issued but not
yet effective
for classifying and measuring financial liabilities, derecognition of financial
The new, amended and revised Standards and Interpretations that were issued by
impact the standard will have on the consolidated financial statements when
the IASB and IFRIc but not yet effective up to the date of issuance of the Group’s
adopted on January 1, 2013.
instruments, impairment and hedge accounting. The Group is evaluating the
financial statements are described below.
IAS 24 Related Party Disclosures (Revised)
IFRS 2 Share-Based Payment: Group Cash-Settled Share-Based Payment
The Revised IAS 24 was issued in November 2009 and becomes effective for
Transactions (Revised)
annual periods beginning on or after January 1, 2011. The revised standard
The Revised IFRS 2 was issued in June 2009 and becomes effective for annual
simplifies the definition of a related party, clarifying its intended meaning and
periods beginning on or after January 1, 2010. The amendment clarifies the scope
eliminating inconsistencies from the definition and provides a partial exemption
and the accounting for group cash-settled share-based payment transactions. The
form the disclosure requirements for government-related entities. The Group is
Group is evaluating the impact the amendment will have on the consolidated
evaluating the impact the standard will have on the consolidated financial
financial statements when adopted on January 1, 2010.
statements when adopted on January 1, 2011.
IFRS 3 Business Combinations (Revised) and IAS 27 Consolidated and Separate
IAS 39 Financial Instruments: Recognition and Measurement - Eligible Hedged
Financial Statements (Revised)
Items
The Revised IFRS 3 and IAS 27 were issued in January 2008 and become effective for
The amendment to IAS 39 was issued in August 2008 and becomes effective
financial years beginning on or after July 1, 2009. The amendment to IFRS 3
for financial years beginning on or after July 1, 2009. The amendment
introduces significant changes in the accounting for business combinations occurring
clarifies that an entity is permitted to designate a portion of the fair value
after this date. The changes affect the valuation of non-controlling interests, the
changes or cash flow variability of a financial instrument as a hedged item.
accounting for transaction costs, the initial recognition and subsequent measurement
This also covers the designation of inflation as a hedged risk in particular
of contingent consideration and business combinations achieved in stages. These
situations. The Group is evaluating the impact the amendments to the
changes will impact the amount of goodwill recognized, the reported results in the
standard will have on the consolidated financial statements when adopted on
period that an acquisition occurs and future reported results. The amendment to IAS
January 1, 2010.
27 requires that a change in the ownership interest of a subsidiary (without loss of
control) is accounted for as a transaction with owners in their capacity as owners.
Improvements to IFRSs issued in May 2008
Therefore, such transactions will no longer give rise to goodwill, nor will they give rise
to a gain or loss. Furthermore, the amended standard changes the accounting for
losses incurred by the subsidiary as well as the loss of control of a subsidiary. The
are separate transitional provisions for each standard. One of these amendments
changes by these amendments will affect future acquisitions or loss of control and
becomes effective for periods starting after the date of these financial statements
transactions with non-controlling interests. The standards may be early applied. The
and therefore has yet to be adopted by the Group as described below. The Group
Group is evaluating the impact the amendment will have on the consolidated
anticipates that this change will not have a material effect on the consolidated
financial statements when adopted on January 1, 2010.
financial statements when adopted.
P 73
2009 Annual Report
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations - This
IAS 17 Leases - This amendment becomes effective for annual periods
amendment becomes effective for annual periods beginning on or after July
beginning on or after January 1, 2010 and clarifies that when a lease includes
1, 2009 and clarifies that assets and liabilities of a subsidiary should be
both land and building elements, an entity assesses the classification of each
classified as held for sale if the parent is committed to a plan involving loss of
element as a finance or operating lease separately.
control of the subsidiary, regardless of whether the entity will retain a noncontrolling interest after the sale.
IAS 18 Revenue - This amendment provides additional guidance on how to
determine whether an entity is acting as a principal or as an agent. The
features to consider are whether the entity:
Improvements to IFRSs issued in April 2009
In April 2009 the IASB issued an omnibus of amendments to twelve of its
standards, primarily with a view of removing inconsistencies and clarifying
wording. There are separate transitional provisions for each standard that are
has primary responsibility for providing the goods or service
has inventory risk
has discretion in establishing prices
Bears the credit risk
effective for periods starting after the date of these financial statements and
IAS 36 Impairment of Assets - This amendment becomes effective for annual
therefore have yet to be adopted by the Group as described below. The Group
periods beginning on or after January 1, 2010 and clarifies that the largest
anticipates that these changes will not have a material effect on the consolidated
unit permitted for allocating goodwill acquired in a business combination is
financial statements when adopted.
the operating segment as defined in IFRS 8 before aggregation for reporting
IFRS 2 Share-Based Payment - This amendment becomes effective for annual
purposes.
periods beginning on or after July 1, 2009 and confirms that contributions of
IAS 38 Intangible Assets - Two amendments to IAS 38 become effective for
a business on the formation of a joint venture and common control
annual periods beginning on or after July 1, 2009 and January 1, 2010,
transactions are excluded from the scope of IFRS 2.
respectively. The first amendment clarifies the accounting for intangible
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations - This
assets acquired in a business combination and the second amendment clarifies
amendment becomes effective for annual periods beginning on or after
the description of valuation techniques commonly used when measuring the
January 1, 2010 and clarifies that the disclosures required in respect of non-
fair value of intangible assets acquired in a business combination that are not
current assets and disposal groups classified as held for sale or discontinued
traded in active markets.
operations are only those set out in IFRS 5. The disclosure requirements of
IAS 39 Financial Instruments: Recognition and Measurement - This
other IFRSs only apply if specifically required for such non-current assets or
discontinued operations.
January 1, 2010 and clarifies the type of forward contracts the guidance
IFRS 8 Operating Segments - This amendment becomes effective for annual
periods beginning on or after January 1, 2010 and clarifies that segment
applies to and provides additional guidance regarding embedded
prepayment penalties and hedging transactions.
assets and liabilities need only be reported when those assets and liabilities
IFRIC 9 Reassessment of Embedded Derivatives - This amendment becomes
are included in measures that are used by the chief operating decision maker.
effective for annual periods beginning on or after July 1, 2009 and clarifies
IAS 1 Presentation of Financial Statements - This amendment becomes
effective for annual periods beginning on or after January 1, 2010 and
clarifies that the potential settlement of a liability by the issue of equity is
not relevant to its classification as current or non-current.
IAS 7 Statement of Cash Flows - This amendment becomes effective for
that the scope of IFRIc 9 excludes contracts with embedded derivatives
acquired in a combination between entities under common control or in the
formation of a joint venture.
IFRIC 16 Hedges of a Net Investment in a Foreign Operation - This
annual periods beginning on or after January 1, 2010 and explicitly states
July 1, 2009 and removes the restriction on the entity that can hold hedging
that only expenditures that result in recognizing an asset in the statement
instruments.
of financial position can be classified as a cash flow from investing
activities.
P 74
Amendment to IFRIC 14 Prepayments of a Minimum Funding Requirement
Acquisitions in 2009
The amendment to IFRIc 14 was issued in November 2009 and becomes effective
for annual periods beginning on or after January 1, 2011. The amendment applies
Labet
Europa
Gestione
Other
Total
to pension accounting in the limited circumstances when an entity is subject to
cash purchase price
cash acquisition costs
20,183
144
12,210
149
12,776
1,001
45,169
1,294
cover those requirements. The amendment permits such an entity to treat the
Total cash acquisition costs
20,327
12,359
13,777
46,463
benefit of an early payment as an asset. The adoption of this amendment is not
Payable to acquired companies
4,678
Liability to minority shareholder
Receivable from acquired companies
-
3,390
(967)
6,570
1,229
210
14,638
1,229
(757)
Total non-cash acquisition cost
4,678
2,423
8,009
15,110
minimum funding requirements and makes an early payment of contributions to
expected to have a material impact on the financial position or performance of
the Group when adopted on January 1, 2011.
IFRIC 17 Distributions of Non-Cash Assets to Owners
Total acquisition cost
25,005
14,782
21,786
61,573
IFRIc 17 was issued in November 2008 and becomes effective for annual periods
cash acquisition cost
cash acquisition cost paid in 2008
cash acquisition cost paid in 2009
Net cash acquired
20,327
(1,180)
19,147
(5)
12,359
(134)
12,225
(71)
13,777
(412)
13,365
(120)
46,463
(1,726)
44,737
(196)
Net cash outflow
19,142
12,154
13,245
44,541
beginning on or after July 1, 2009. The interpretation provides guidance on how
to account for non-cash distributions to owners and clarifies when to recognize
a liability, how to measure it and the associated assets, and when to derecognize
the assets and liability. The adoption of this interpretation is not expected to
have a material impact on the financial position or performance of the Group
Business combination activity in the Italian Operations segment consists of
when adopted on January 1, 2010.
strategic investments to exploit growth opportunities in the Sports Betting and
Machine Gaming markets. The aim is to acquire additional sports betting rights
IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments
or to increase our directly-managed gaming machine base (amusement with prize
machines). In keeping with this strategy, the material business combination
beginning on or after July 1, 2010. The interpretation provides guidance on the
activity that occurred during 2009 is described below.
accounting by an entity when the terms of a financial liability are renegotiated
and result in the entity issuing equity instruments to a creditor of the entity to
Labet
extinguish all or part of the financial liability. The adoption of this interpretation
On June 25, 2009, Lottomatica acquired 100% of the shares of Labet, an Italian
is not expected to have a material impact on the financial position or
entity that is engaged in the sports betting business for a cash purchase price of
performance of the Group when adopted on January 1, 2011.
€20.2 million. The following table summarizes the provisional fair values of
Labet’s assets acquired and liabilities assumed at the date of the acquisition:
6. Business combinations
The Group’s business combination activity during 2009, which occurred in the
Italian Operations segment, is summarized as follows:
P 75
2009 Annual Report
Labet
Europa Gestione
Fair
value
Carrying
value
Identifiable assets and liabilities on the date of acquisition
Systems, equipment and other assets relating to contracts, net
Goodwill
current assets
284
9,912
37
618
284
22,707
2,601
37
618
10,851
26,247
2,446
1,435
1,435
Total liabilities assumed
3,881
1,435
Fair value of net assets acquired
Goodwill arising on acquisition
6,970
18,035
24,812
25,005
Total assets acquired
Fair
value
Carrying
value
current assets
1,334
88
1,334
88
1,422
1,422
14
13
14
13
27
27
1,395
13,387
14,782
1,395
The results of Europe Gestione’s operations have been included in the
The results of Labet’s operations have been included in the consolidated financial
consolidated financial statements since June 4, 2009 and include the following:
statements since June 25, 2009 and include the following:
Europa Gestione - Operating income
Labet - Operating Loss
Total revenue
Total cost
2,137
855
Operating income
1,282
Total revenue
Total cost
7,678
7,942
Operating loss
(264)
Other
Other acquisitions during 2009 primarily relate to the January 7, 2009 acquisition of
Europa Gestione
100% of the shares of Topolino S.r.l. (“Topolino”), an Italian entity that owns and
On June 4, 2009, Lottomatica acquired 100% of the shares of Europa Gestione,
operates amusement with prize machines, for a cash purchase price of €3.5 million.
an Italian entity that owns and operates amusement with prize machines for a
The initial accounting for the Labet, Europa Gestione and Topolino
cash purchase price of €12.2 million. The following table summarizes the
acquisitions are provisional because they are based on preliminary estimates and
provisional fair values of Europa Gestione’s assets acquired and liabilities assumed
assumptions. Revisions to the fair values, which may be significant, will be
at the date of the acquisition (in thousands of euros):
recorded when the Group receives final information, including appraisals and
other analyses.
The goodwill arising on the acquisitions described above is attributable to
the expected synergies and other benefits from combining their assets and
activities with the Group.
The 2009 acquisitions are individually and in the aggregate, immaterial to
the Group, and accordingly, pro forma financial information has not been
presented. Refer to Notes 10 and 11 for disclosures regarding goodwill and
intangible assets, net related to these acquisitions.
P 76
The Group’s business combination activity during 2008 is summarized as follows:
(thousands of euos)
Atronic
Boss Media
St. Minver
Toto Carovigno
Other
Total
cash purchase price
cash acquisition costs
32,000
1,362
133,873
2,667
36,045
484
35,757
309
7,055
115
244,730
4,937
Total cash acquisition cost
33,362
136,540
36,529
36,066
7,170
249,667
Receivable from acquired companies
Payable to acquired companies
Escrow payment in 2006
Liability to minority shareholder
Present value of contingent consideration
Accrued acquisition costs
Interest expense accretion
Equity loss
20,000
56
(227)
-
15,778
51
(485)
5,323
38
-
-
24,935
20,760
-
24,935
20,760
20,000
15,778
5,323
145
(227)
(485)
Total non-cash acquisition cost
19,829
15,344
5,361
-
45,695
86,229
53,191
151,884
41,890
36,066
52,865
335,896
cash acquisition cost
Net cash acquired
33,362
(1,527)
136,540
(33,567)
36,529
(3,478)
36,066
(565)
7,170
(552)
249,667
(39,689)
Net cash outflow
31,835
102,973
33,051
35,501
6,618
209,978
Atronic
On January 31, 2008, GTEch acquired a 50% controlling interest in the Atronic
group of companies (“Atronic”) owned by Paul and Michael Gauselmann (the
“Gauselmanns”) for €20 million, which was previously paid into escrow in October
2006. Atronic is a video gaming machine manufacturer and also develops video
machine games and customized solutions for dynamic gaming operations. On
May 13, 2008, GTEch paid €32 million for the remaining 50% interest in Atronic
and also paid €37.2 million to the Gauselmanns related to amounts owed to the
Gauselmanns by Atronic, which is included in current portion of long-term debt
at the January 31, 2008 acquisition date.
The purchase accounting for Atronic was finalized in January 2009.
The following table summarizes the final fair values of Atronic’s assets
acquired and liabilities assumed at the date of the acquisition:
P 77
2009 Annual Report
Atronic
Boss Media AB
On February 1, 2008, GTEch Global Services corporation (“GGSc”) and
Fair
value
Carrying
value
18,317
13,156
37,120
3,622
549
77,375
16,003
12,738
4,299
3,622
491
69,692
, respectively) announced a public cash offer to the shareholders of Boss Media
150,139
106,845
“BOSS.ST.” The public cash offer resulted in GEMed acquiring approximately 94%
80,084
1,201
1,085
11,499
43,040
39,507
80,084
1,165
1,085
11,499
43,626
40,828
of the outstanding shares of Boss Media. Pursuant to Swedish law, on March 10,
176,416
178,287
Fair value of net liabilities acquired
(26,277)
(71,442)
current assets
Medströms Invest AB (“Medströms”), through GEMed AB (a Swedish private
limited liability company owned 87.454% and 12.546% by GGSc and Medströms
AB (“Boss Media”). Boss Media is a leading developer of innovative software and
systems for digitally-distributed gaming entertainment and until April 18, 2008,
was listed on the OMX Nordic Exchange Stockholm under the ticker symbol
2008 GGSc and Medströms commenced a process to compel the sale of the
untendered shares, which was completed on September 8, 2008 for a total cost
of €9.7 million. On April 18, 2008, Boss Media was delisted from the OMX Nordic
Exchange Stockholm.
From February 1, 2008 through March 5, 2008, GEMed (through GGSc)
purchased approximately 46.3 million shares of Boss Media for approximately
Escrow payment in 2006 (a)
Payment in excess of fair value (a)
44,812
20,000
14,710
SEK 1.2 billion (€124.2 million) resulting in GGSc owning approximately 82% of
53,245
Board of Directors of Boss Media was reconstituted such that GEMed was able to
Goodwill arising on acquisition:
At December 31, 2009
44,812
47,858
Boss Media. On April 24, 2008, GEMed obtained control of Boss Media when the
utilize the voting rights attached to the shares acquired.
GGSc has the option, which it may exercise between April 1, 2010 and June
30, 2010 to require Medströms to sell its 12.546% stake in GEMed to GGSc and
Change in goodwill due to finalization of purchase accounting
(3,046)
Total acquisition cost:
2009 cash acquisition costs
53,191
54
53,245
(a) The escrow payment in 2006 and the payment in excess of fair value were both fully
offset by reserves established in the August 29, 2006 purchase accounting related to the
acquisition of GTECH. The payment in excess of fair value resulted in €0.3 million of
excess reserves which was included in other income in our consolidated income
statement at December 31, 2008.
Medströms has an identical put right. The price at which the put/call may be
exercised is equal to ten times EBITDA for the period January 1, 2009 through
December 31, 2009, such product to be multiplied by Medströms’ 12.546% stake
in GEMed. The price is subject to both a floor (SEK 108 million) and a cap (SEK 287
million); or approximately €11.6 million floor and €30.8 million cap at the April
24, 2008 SEK to euro exchange rate.
The acquisition has been accounted for on the basis that we have present
ownership access to the shares owned by Medströms which are subject to the
put/call option and therefore, a non-controlling interest has not been recorded.
Accordingly, the cost of the business combination includes the €17.0 million fair
value of the estimated liability to Medströms for these shares. The cost of the
acquisition has been reduced by €0.5 million, representing GEMed’s share of Boss
Media’s results during the period February 1, 2008 through April 24, 2008.
The purchase accounting for Boss Media was finalized in April 2009. The
following table summarizes the final fair values of Boss Media’s assets acquired
and liabilities assumed at the date of the acquisition:
P 78
estimated contingent consideration based on the performance of the business in
Boss Media
Fair
value
Carrying
value
2,494
53,824
3,378
45,064
2,494
4,427
6,712
3,378
45,064
104,760
62,075
14,378
2,718
31,859
1,237
2,718
31,726
48,955
35,681
55,805
26,394
97,382
Goodwill
current assets
2008 and 2009 (of which €5.7 million was paid in 2008). In addition, the
acquisition has been accounted for on the basis that we do not have present
ownership access to the shares owned by Mr. Shaw which are subject to the
put/call option. Accordingly, we record a charge to equity for the difference
between the fair value of the estimated liability to Mr. Shaw for these shares and
the non-controlling interest. The non-controlling interest is included in noncurrent financial liabilities in our consolidated statement of financial position.
The purchase accounting for St. Minver was finalized in April 2009. The
following table summarizes the final fair values of St. Minver’s assets acquired
St. Enodoc
Fair
value
Carrying
value
current assets
649
27,716
881
6,883
2,720
217
881
6,883
36,129
10,701
767
8,390
7,048
767
7,048
16,205
7,815
19,924
2,886
Limited and its subsidiaries including St. Minver Limited (collectively “St. Minver”),
Minority interest
23,960
(1,994)
the leading provider of end-to-end white label gaming services for £23.8 million
41,890
153,187
97,382
96,124
1,258
2009 change in liability to minority shareholder
151,884
1,229
74
153,187
St. Enodoc holdings Limited
On April 30, 2008, GGSc acquired 90% of Gibraltar-based St. Enodoc holdings
current liabilities
in cash (€30.4 million at the April 30, 2008 exchange rate). In consideration of
performance targets that were met in 2008 and 2009, contingent consideration
of £4.5 million (€5.7 million) and £0.2 million (€0.2 million) was paid in October
On August 29, 2008, Lottomatica acquired 100% of the shares of Toto carovigno
2008 and December 2009, respectively. Ten percent of St. Minver remains with
S.p.A., (“Toto carovigno”), the owner of the Totosi sports-betting brand and the
Gary Shaw, Founder and chairman, until at least 2012, at which point both Mr.
leading Italian online betting company concessionaire for sports and horse race
Shaw and GGSc have the right to cause GGSc to acquire Mr. Shaw’s shares at a
betting, for a total cash purchase price of €35.8 million. In addition, a refundable
price equal to fair value to be determined by an independent appraisal as of the
payment of €4.4 million was paid into escrow during 2008 and refunded to the
date of exercise. GGSc may exercise the call right and Mr. Shaw may exercise the
Group in 2009.
put right at any time after December 31, 2011 and before March 31, 2012 or
during each subsequent yearly period between December 31st and March 31st.
The cost of the acquisition includes the €11.0 million fair value of the
The purchase accounting for Toto carovigno was finalized in August 2009.
The following table summarizes the final fair values of Toto carovigno’s assets
acquired and liabilities assumed at the date of the acquisition:
P 79
2009 Annual Report
Toto carovigno
Royal Gold
Fair
value
Carrying
value
current assets
908
15,842
621
1,949
9,681
908
285
621
1,949
9,681
29,001
13,444
5,828
4,551
170
16,011
Fair
value
Carrying
value
Goodwill
5,331
9,296
5,331
410
-
14,627
5,741
2,962
-
872
4,551
170
16,011
2,962
-
1,665
9,759
5,741
26,560
21,604
21,424
2,441
(8,160)
9,759
16,065
(6,306)
34,674
37,115
34,674
33,625
The 2008 acquisitions are individually and in the aggregate, immaterial to the
Group, and accordingly, pro forma financial information has not been presented.
1,049
36,066
1,049
37,115
Refer to Notes 10 and 11 for disclosures regarding goodwill and intangible assets,
net related to these acquisitions.
7. Operating segment information
For management purposes, the Group’s operating segments have changed and are
Other
now organized and managed separately according to the nature of the products
Other acquisitions during 2008 primarily relate to the December 5, 2008
and services provided, with each segment representing a strategic business unit. The
acquisition of 100% of the shares of Royal Gold S.r.l. (“Royal Gold”), an Italian
Group is comprised of the following four reportable operating segments:
entity that owns and operates amusement with prize machines, for a purchase
price of €21.4 million.
The purchase accounting for Royal Gold was finalized in September 2009. The
following table summarizes the final fair values of Royal Gold’s assets acquired
The Italian Operations segment operates and provides a full range of gaming
services, including online, instant and traditional lotteries, scratch and win,
sports betting, machine gaming, interactive skill games and non-lottery
commercial transactions.
The GTEch Lottery segment operates and provides a full range of services,
technology and products to government sponsored online, instant and
traditional lotteries.
The Gaming Solutions segment operates and provides solutions, products and
services relating to VLTs and associated systems for the government sponsored
market and video and traditional mechanical reel slot machines and systems
for the commercial gaming markets.
The GTEch G2 segment provides digitally-distributed, multi-channel gaming
P 80
entertainment products and services, including sports betting, lottery, bingo,
The following tables present depreciation, amortization and impairment
poker, casino games and quick games, as well as retail solutions for real-time
information regarding the Group’s reportable operating segments for the years
transaction processing and information systems for the sports-betting market.
ended December 31, 2009 and 2008, respectively.
Non operating segments have been aggregated to form the above reportable
Segments - Depreciation, Amortization and Impairment
operating segments. Sales between segments are made at prices that
approximate market prices.
Management monitors the operating results of its operating segments separately
for the purpose of making decisions about resource allocation and performance
assessment. Segment performance is evaluated based on operating income.
December 31, 2009
Amortization
Depreciation
Impairment
Operating segments
Italian Operations
GTEch lottery
Gaming solutions
GTEch G2
61,543
131,474
16,482
2,694
24,438
3,135
5,304
7,389
2,478
1,920
1,804
62,891
212,193
40,266
69,093
24,408
54,134
6,842
236,601
94,400
75,935
The following tables present revenue and operating income (loss)
information regarding the Group’s reportable operating segments for the years
ended December 31, 2009 and 2008, respectively. Prior period amounts have been
reclassified to conform to the current year presentation.
Revenues and operating income (loss)
December 31, 2009
Intersegment
Third-party Operating
revenue
revenue income(loss)
Total
revenue
Operating segments
Italian Operations
GTEch lottery
Gaming solutions
GTEch G2
1,175,091
780,612
152,549
71,132
(3,851)
1,175,091
780,612
152,549
67,281
416,302
114,493
(16,551)
(62,658)
2,179,384
(3,851)
2,175,533
451,586
(3,851)
324
3,851
-
324
(85,165)
2,175,857
-
2,175,857
366,421
Eliminations
December 31, 2008
Amortization
Depreciation
Operating segments
Italian Operations
GTEch lottery
Gaming solutions
GTEch G2
50,367
121,809
22,657
1,560
13,797
3,169
8,795
6,210
20
13,638
73,167
-
196,393
31,971
86,825
29,068
54,124
13,953
225,461
86,095
100,778
Impairment
(a) Represents the depreciation, amortization and impairment of acquired tangible and
intangible assets in connection with the August 2006 acquisition of GTECH by Lottomatica.
Geographic information
The following table presents revenue information by geography regarding the
Total
revenue
Operating segments
Italian Operations
GTEch lottery
Gaming solutions
GTEch G2
1,022,634
865,440
142,790
48,350
December 31, 2008
Intersegment
Third-party Operating
revenue
revenue income(loss)
-
1,022,634
865,440
142,790
48,350
399,544
140,285
(112,770)
2,623
Group’s reportable operating segments. Revenue from external customers is
based on the geographical location of the Group’s customers.
Geographical info - Revenues
Eliminations
2,079,214
-
2,079,214
429,682
(20,274)
-
(20,274)
(89,687)
2,058,940
-
2,058,940
339,995
(a) Principally represents the depreciation, amortization and impairment of acquired
tangible and intangible assets in connection with the August 2006 acquisition of GTECH
by Lottomatica.
Total Revenue
Italy
United States
United Kingdom
Sweden
Poland
Other
December 31,
2009
2008
1,177,378
535,303
63,216
48,077
42,115
310,768
1,023,984
493,735
118,367
35,610
52,835
334,409
2,176,857
2,058,940
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2009 Annual Report
The following table presents non-current asset information by geography
8. Systems, equipment and other assets related to contracts, net
regarding the Group’s reportable operating segments. Non-current assets are
based on the geographical location of the Group’s assets or, in the case of
Land and
building
Terminals Furniture and
and Systems
Equipment
Contracts
in progress
Total
goodwill and intangible assets, net, location of the entity acquired.
Net book value
Acquisitions
Additions
Depreciation (Note 26)
Impairment loss (Note 28)
Disposals
Foreign currency translation
Transfers
Other
20,204
9
1,900
(3,767)
24
-
641,925
31,690
53,316
(196,675)
(18,228)
(6,085)
19,506
87,955
(24)
42,720
600
15,379
(13,240)
(261)
435
1,780
14
35,411
226
131,659
(1,158)
(1,482)
4,609
(89,725)
-
740,260
32,525
202,254
(213,682)
(19,386)
(7,828)
24,574
10
(10)
18,370
613,380
47,427
79,540
758,717
Non-current assets consist of the following items in the consolidated statements
Acquisitions
Additions
Disposals
Transfers
Other
79
5,043
(4,283)
(12)
-
2,077
65,124
(205,871)
6
(1,122)
(17,206)
160,519
(2,477)
360
16,249
(13,934)
(110)
(114)
(364)
311
111
172,028
(924)
2,981
(162,554)
(76)
2,516
258,444
(224,088)
(104)
(2,160)
(14,601)
(1,724)
(2,442)
of financial position:
Balance at December 31, 2009 19,197
614,430
49,936
90,995
774,558
Non current assets
cost
34,640
Accumulated depreciation
(16,270)
1,220,551
(607,171)
76,387
-
18,370
613,380
47,427
cost
39,746
(20,549)
1,368,519
(754,089)
90,857
(40,921)
614,430
49,936
Geographical info - Non current assets
Non-current assets
United States
Italy
Sweden
United Kingdom
Germany
Other
Non-current assets
Systems, equipment and other assets related to contracts, net
Goodwill
December 31,
2009
2008
3,272,918
1,114,487
112,324
76,065
20,358
119,289
3,424,627
973,300
128,760
119,088
25,055
117,142
4,715,441
4,787,972
December 31,
2009
2008
774,558
88,522
3,006,783
822,886
22,692
758,717
86,023
3,074,571
847,281
21,380
4,715,441
4,787,972
Net book value
Net book value
19,197
79,540 1,411,118
(28,960) (652,401)
79,540
758,717
90,995 1,590,117
- (815,559)
90,995
774,558
The amount of borrowing costs capitalized during the year ended December 31,
2009 was €1.6 million. The rate used to determine the amount of borrowing costs
eligible for capitalization was approximately 5%, which is the effective interest
rate of all borrowings.
P 82
9. Property, plant and equipment, net
Net book value
Acquisitions
Additions
Disposals
Non-current assets classified
as held for sale (Note 19)
Transfers
Land and
building
10. Goodwill
Furniture and Construction
Equipment
in progress
Total
30,080
12,158
14
(2,070)
(37)
30,115
5,253
5,438
(9,709)
(1,628)
(560)
2,934
20,859
-
63,129
17,411
26,311
(11,779)
(1,628)
(597)
(10,028)
1,187
-
1,732
1,456
295
(1,466)
(10,028)
3,214
(10)
31,304
32,097
22,622
86,023
Additions
Disposals
Transfers
Other
64
(1,554)
(56)
(419)
136
6
10,189
(10,959)
(415)
(1,046)
28,729
1
5,595
(631)
(27,141)
-
15,848
(12,513)
(471)
(2,096)
1,724
7
29,481
58,596
445
88,522
cost
35,842
(4,538)
50,881
(18,784)
22,622
-
109,345
(23,322)
Net book value
31,304
32,097
22,622
86,023
cost
35,485
(6,004)
87,926
(29,330)
445
-
123,856
(35,334)
Net book value
29,481
58,596
445
88,522
Balance at beginning of year
Acquisitions (Note 6)
Labet
Europa Gestione
Boss Media
Atronic
Toto carovigno
St. Minver
Royal Gold
Other
December 31,
2009
2008
3,074,571
2,793,186
18,035
13,387
7,835
96,124
47,858
33,625
23,960
16,065
14,012
39,257
231,644
(67,141)
(8,341)
(4,668)
(3,046)
(23,849)
95,824
2,267
367
(48,717)
(107,045)
49,741
Balance at end of year
3,006,783
3,074,571
cost
Accumulated impairment loss
3,123,288
(48,717)
2,793,186
-
3,074,571
2,793,186
3,079,349
(72,566)
3,123,288
(48,717)
3,006,783
3,074,571
Adjustments
Subsequent changes in fair value of contingent liabilities
Revisions to fair value of other assets and liabilities acquired
Revisions to fair value of Atronic assets and liabilities acquired
cLS-GTEch company Limited
cost
Accumulated impairment loss
The amount of borrowing costs capitalized during the year ended December 31,
2009 was €0.5 million. The rate used to determine the amount of borrowing costs
eligible for capitalization was approximately 5%, which is the effective interest
rate of all borrowings.
As described in Note 3.4, goodwill of €3.1 billion at December 31, 2008, as previously
reported, has been revised to properly reflect the functional currency associated
with the July 2, 2007 acquisition of Finsoft Limited as British pounds sterling.
Goodwill of €39.3 million arising from acquisitions during 2009 primarily
relates to the Labet and Europa Gestione acquisitions which occurred on June 25,
2009 and June 4, 2009, respectively (See Note 6). Goodwill related to these
acquisitions is provisional because they are based on preliminary estimates and
assumptions. Revisions to the fair values will be recorded when the Group
receives final information, including appraisals and other analyses, but not later
than one year from their respective acquisition dates.
Subsequent changes in fair value of contingent liabilities primarily resulted
from changes in estimated contingent consideration related to the Finsoft
Limited (“Finsoft”) and St. Enodoc holdings Limited acquisitions along with
P 83
2009 Annual Report
changes in estimated put/call payments related to the Boss Media AB acquisition.
11. Intangible assets, net
Goodwill related to these acquisitions is provisional as the costs of the acquisitions
include contingent consideration and put/call payments. See Note 40.
Revisions to fair value of other assets and liabilities acquired primarily resulted
December 31,
2009
2008
847,281
740,613
15,767
-
64,811
19,360
30,559
26,715
1,387
1,235
15,767
144,067
88,092
9,271
1,963
3,449
2,572
7,420
5,105
3,342
102,775
18,439
Total intangible assets acquired
Revisions to fair value of assets and liabilities acquired
customer contracts - cLS-GTEch
Amortization (Note 27)
118,542
15,034
(13,632)
(49,817)
(94,522)
162,506
15,250
18,203
(3,015)
(86,276)
822,886
847,281
1,074,762
(227,481)
879,524
(138,911)
847,281
740,613
1,121,489
(298,603)
1,074,762
(227,481)
822,886
847,281
from the finalization of the Royal Gold S.r.l. (“Royal Gold”) purchase accounting,
which occurred during September 2009.
Revisions to fair value of Atronic assets and liabilities acquired resulted from
the finalization of the Atronic purchase accounting, which occurred during
January 2009.
The Group reviews goodwill for impairment annually, during its fourth
Intangible assets acquired during the year
Purchase business combination related:
customer contracts
Networks
capitalized computer software
Trademarks
Licenses
Other
quarter ending on December 31, or more frequently if events or changes in
circumstances indicate that the carrying value may be impaired. The €23.8 million
impairment loss recorded during 2009 relates primarily to the GTEch G2 segment
and the €48.7 million impairment loss recorded during 2008 relates to the Gaming
All other intangible assets acquired
concessions and licenses
Patents
Sports betting rights and horse racing betting rights
Other
Solutions segment. See Notes 12 and 28 for further discussion.
cost
Accumulated amortization and impairment loss
cost
Accumulated amortization and impairment loss
As described in Note 3.4, intangible assets of €853.1 million at December 31,
2008, as previously reported, has been revised to properly reflect the functional
currency associated with the July 2, 2007 acquisition of Finsoft Limited as British
pounds sterling.
Purchase business combination related intangible assets in 2009 principally
resulted from the Labet acquisition. The intangible assets are provisional because
they are based on preliminary estimates and assumptions. Revisions to the fair
values, which may be significant, will be recorded when the Group receives final
information, including appraisals and other analyses, but not later than June 25,
2010 for this acquisition.
Other intangible assets acquired in 2009 principally relate to the non-
P 84
refundable payment representing 50% of the total cost of 10,761 video lottery
2008 Intagible assets net
terminal (“VLT”) rights in Italy.
Revisions to fair value of assets and liabilities acquired primarily resulted from
the finalization of the Atronic and Royal Gold purchase accounting, which
Weighted average
amortization period
(years)
As of December 31, 2008
Gross
Net
carrying
Accumulated current
amount
amortization amount
occurred during January 2009 and September 2009, respectively. See Notes 6 and
10 for additional information.
Purchase business combination related intangible assets in 2008 principally
resulted from the Atronic, Boss Media AB, St. Enodoc holdings Limited and Toto
carovigno S.p.A. acquisitions.
Intangible assets that are subject to amortization are being amortized ratably
over their estimated useful lives, with no estimated residual values. certain
Subject to amortization
customer contracts
Sports and horse racing betting rights
Proprietary hardware
Patents
concessions & licenses
Trademarks
Networks
Other
trademarks and networks were determined to have indefinite lives and are not
subject to amortization. The Group expects to make use of the trademarks on
existing and future business, and no economic, legal or contractual limitation of
Not subject to amortization
Trademarks
Networks
14.1
10.1
7.5
14.0
3.0
3.0
6.1
2.0
9.6
681,332
99,446
61,959
20,244
65,529
15,787
3,574
3,123
10,596
119,310
22,498
9,961
3,370
56,561
12,560
566
163
2,492
562,022
76,948
51,998
16,874
8,968
3,227
3,008
2,960
8,104
961,590
227,481
734,109
96,918
16,254
-
96,918
16,254
113,172
-
113,172
1,074,762
227,481
847,281
their useful lives is anticipated. The following tables present detailed information
for intangible assets.
2009 Intagible assets net
The reduction in trademarks and networks as of December 31, 2009 compared to
December 31, 2008 relates to the impairment loss recorded in the GTEch G2
Weighted average
Gross
Net
amortization period
carrying
Accumulated current
(years)
amount
amortization amount
Subject to amortization
customer contracts
concessions & licenses
Sports and horse racing betting rights
Patents
Proprietary hardware
Networks
Trademarks
Other
Not subject to amortization
Trademarks
13.9
7.9
10.4
6.8
3.0
14.0
1.3
5.0
7.7
627,424
105,095
92,911
65,353
77,281
19,081
7,431
4,574
33,428
154,263
15,052
34,965
17,656
62,703
4,570
3,675
1,188
4,531
473,161
90,043
57,946
47,697
14,578
14,511
3,756
3,386
28,897
1,032,578
298,603
733,975
88,911
-
88,911
88,911
-
88,911
1,121,489
298,603
822,886
segment as described in Note 28.
12. Impairment testing of goodwill and intangibles with
indefinite lives
Goodwill and other intangible assets with indefinite lives acquired through
business combinations have been allocated to the cash generating units for
impairment testing as described in the table below. The carrying amount of
goodwill, trademarks and networks at December 31, 2009 and 2008 are as
follows:
P 85
2009 Annual Report
carrying amount for goodwill, trademarks and network
beyond the five year period were extrapolated using an annual growth rate of 4.0%
which reflects the estimated sustainable long-term growth rate of Gaming Solutions.
Italian Operations
Italian Operations
Italian Operations
Italian Operations
Italian Operations
(Lottery)
(commercial Services)
(Sports Betting)
(Machine)
Goodwill
2009
2008
Trademarks
and networks
2009
2008
445,175
218,437
58,668
35,599
443,515
220,098
41,890
21,812
-
-
757,879
727,315
-
-
2,007,715 2,076,586
125,423 131,898
115,766 138,772
69,633
13,497
5,781
70,355
17,877
24,940
3,006,783 3,074,571
88,911
113,172
GTECH G2
For GTEch G2, the recoverable amounts have been determined based on fair value
less costs to sell using the discounted cash flow method of the income approach to
value. Under this method we utilized cash flow projections based on financial
forecasts approved by senior management covering a period of five years. cash flows
beyond the five year period were extrapolated using an annual growth rate of 4.5%,
GTEch Lottery
Gaming Solutions
GTEch G2
which reflects the estimated sustainable long-term growth rate of GTEch G2.
Key assumptions used in the value in use and fair value less costs to sell
calculations
Italian Operations
The calculation of value in use and fair value less costs to sell for the cash-
For Italian Operations, the recoverable amounts for the Lottery, commercial
generating units described above are most sensitive to the following key
Services, Sports Betting and Machine Gaming cash generating units have been
assumptions on which management has based its cash flow projections to
determined based on a value in use calculation using cash flow projections from
undertake impairment testing of goodwill, trademarks and networks.
financial forecasts approved by senior management. These forecasts cover a period
of approximately seven years for the Lottery and Sports Betting units and
approximately four years for the Machine Gaming and commercial Services units,
which are based on the weighted average contractual life of customer contracts in
Service revenue and related profit;
Product sales and related profit;
Discount rates; and
Growth rates used to extrapolate cash flow projections
Lottomatica’s portfolio. cash flows beyond the five year period were extrapolated
using a growth rate of 2% for the Lottery, Sports Betting and Machine Gaming
Service revenue and related profit
cash-generating units and 3.2% for the commercial Services cash-generating unit,
Projected cash flows from service revenue assumes the continuation of recent
which were based on historical trends and expected future performance.
historical trends adjusted for expected new contract wins, anticipated contract
renewal pricing pressures, and the expected impact of sales and marketing
GTECH Lottery
initiatives that are being developed or expected to be developed.
For GTEch Lottery, the recoverable amounts have been determined based on fair
value less costs to sell using the discounted cash flow method of the income approach
Product sales and related profit
to value. Under this method we utilized cash flow projections based on financial
Projected cash flows from product sales assumes renewal orders from existing
customers in connection with known upcoming procurements, along with orders
beyond the five year period were extrapolated using an annual growth rate of 3.5%,
from new or developing customers and markets at selling prices generally in line
which reflects the estimated sustainable long-term growth rate of GTEch Lottery.
with historical experiences adjusted for expected competitive pressures.
Gaming Solutions
Discount rates
For Gaming Solutions, the recoverable amounts have been determined based on fair
Discount rates were calculated based on the estimated cost of equity capital and
value less costs to sell using the discounted cash flow method of the income approach
debt capital considering data and factors relevant to the economy, the industry,
to value. Under this method we utilized cash flow projections based on financial
and the cash-generating units. These costs were then weighted in terms of a
typical industry capital structure to arrive at an estimated weighted average cost
P 86
of capital. The after-tax discount rates applied to the cash flow projections for the
14. Financial instruments
cash-generating units described above were as follows:
Fair values
Set out below is a comparison by class of the carrying amounts and fair values of
Discount rates
%
Italian Operations
Italian Operations
Italian Operations
Italian Operations
Gtech Lottery
Gaming Solutions
GTEch G2
(Lottery)
(commercial Services)
(Sports Betting)
(Machine Gaming)
8.3
8.4
8.0
8.5
7.0
9.5
11.0
Growth rate used to extrapolate cash flows beyond the five-year forecast period
Growth rates are based on the estimated sustainable long-term growth rates of
our financial instruments.
Financial instruments - Non-current and current assets
Other loans and receivables
December 31, 2008
Carrying
Fair
amount
value
1,864
1,864
-
-
1,864
1,864
-
-
Other available-for-sale financial investments 5,445
5,445
390
390
5,445
5,445
390
390
7,309
7,309
390
390
469,335
469,335
109,274
109,274
469,335
469,335
109,274
109,274
445
133
-
445
133
-
4,211
1,343
4,211
1,343
578
578
5,554
5,554
6
4,029
6
4,029
8,776
468
3,440
8,776
468
3,440
4,035
4,035
12,684
12,684
-
-
2,050
2,017
-
-
2,050
2,017
4,613
4,613
20,288
20,255
the cash-generating units.
Sensitivity to changes in assumptions
December 31, 2009
Carrying
Fair
amount
value
With the exception of the GTEch G2 cash generating unit, management believes
that any reasonably possible change in any of the key assumptions on which the
cash generating unit’s recoverable amounts is based would not cause the unit’s
carrying amount to exceed its recoverable amount. Because the fair value of
GTEch G2’s cash generating unit is equal to its carrying value, any adverse change
Current financial assets
in a key assumption may cause a further impairment loss to be recognized.
During 2009, €22.3 million of goodwill impairment losses related to GTEch
G2’s cash generating unit were recorded. See Note 28 for further discussion.
Derivatives
Foreign currency forward contracts
Swap receivable
Net investment hedge
13. Other assets (non-current and current)
Long-term deferred asset
Long-term customer receivables
Deposits
Long-term prepaid expenses
Sales-type lease receivables
Share of non-current assets of joint ventures
Other
Other receivables
Prepaid expenses
Value-added tax receivable
Other tax receivables
Share of other current assets of joint ventures
Other
December 31, December 31,
2009
2008
6,978
6,517
3,470
3,075
1,113
1,539
8,971
3,235
2,725
1,842
1,974
2,633
22,692
21,380
Escrow and other deposits
Loan guarantees
Other loans and receivables
Investment in government securities
2009
2008
28,104
10,429
10,188
9,676
299
2,881
26,263
10,048
15,043
10,239
1,416
2,151
61,577
65,160
cash and cash equivalents are stated at cost, which approximates fair value, and
earn interest at market rates.
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2009 Annual Report
Financial instruments - Non current liabilities
GTEch Senior credit Facilities
capital Securities
Notes (Note 21)
LTO Revolving credit Facility
LTO Term Loan Facility
Joint venture related debt
Other loans
December 31, 2009
Carrying
Fair
amount
value
Financial instruments - current liabilities
December 31, 2008
Carrying
Fair
amount
value
1,145,100
733.180
740,821
2,889
1,122,734
673,854
761,764
2,889
1,359,888
730,525
50,000
353,354
10,142
69,893
1.370,698
433,652
50,000
360,000
10,142
69,893
2,621,990
2,561,241
2.573.802
2.294.385
53,094
53,094
73,739
73,739
53,094
53,094
73,739
73,739
Other financial liabilities
Swap Liability (Note 20)
56,391
Acquisition related liabilities
2,629
World headquarters finance lease (Note 40) 18,693
Other finance lease obligations
11,510
56,200
2,629
16,081
11,510
29,312
19,882
11,671
29,312
18,653
11,671
89,223
86,420
60,865
59,636
142,317
139,514
134,604
133,375
Derivatives
Interest rate swaps
December 31, 2009
Carrying
Fair
amount
value
Current financial liabilities
capital Securities
Notes (Note 21)
Joint venture related debt
Other loans
December 31, 2008
Carrying
Fair
amount
value
203
46,618
3,147
22
22,275
203
42,846
3,236
22
22,275
2,565
46,491
95
601
2,878
69,327
2,565
27,598
95
601
2,878
69,327
72,265
68,582
121,957
103,064
664
1,107
599
664
1,107
599
1,492
1,492
2,370
2,370
1,492
1,492
Other financial liabilities
29,924
22,842
World headquarters finance lease (Note 40)
513
Other finance lease obligations
4,236
Loan guarantees
-
29,896
22,842
441
4,236
-
6,769
454
3,558
468
6,769
426
3,558
468
57,515
57,415
11,249
11,221
59,885
59,785
12,741
12,713
Derivatives
Interest rate swaps
Net investment hedge
Foreign currency forward contracts
The fair values of our financial instruments were determined using the following
methods and assumptions:
Foreign currency forward contracts and net investment hedge are calculated
by reference to current forward exchange rates for contracts with similar
maturity profiles;
Escrow and other deposits are stated at cost, which approximates fair value,
and earn interest at market rates;
capital Securities, Notes and interest rate swaps were calculated by
independent investment bankers using market interest rates;
GTEch Senior credit Facilities was calculated by reference to a third party
forecast of the applicable variable rate and quotation of the spread for a loan
of similar risk and maturity profile;
LTO Revolving credit Facility and LTO Term Loan Facility approximate their
carrying amounts, excluding the effect of debt issuance costs;
Swap Liability was calculated using a market interest rate;
Acquisition related liabilities and loan guarantees were determined using
discounted cash flows;
P 88
World headquarters finance lease is recorded at the present value of the lease
payments based on current market interest rates; and
Other finance lease obligations are based on current market interest rates.
For the purpose of determining and disclosing the fair value of financial
instruments by valuation technique, derivatives and available-for-sale financial
investments are considered Level 2, whereby other techniques for which all inputs
which have a significant effect on the recorded fair value are observable, either
directly or indirectly.
15. Income tax
Income before income tax expense consists of the following:
Income tax
Italy
Foreign
deferred tax assets and liabilities consist of the following:
Deferred tax assets and liabilities
Fair value hierarchy
The tax effects of temporary differences and carryforwards that give rise to
December 31,
2009
2008
311,736
(123,540)
312,301
(126,885)
188,196
185,416
Deferred tax assets
Provisions not currently deductible for tax purposes
Depreciation and amortization
Net operating loss carryforward
Interest rate swaps
cash collected in excess of revenue recognized
Inventory reserves
Tax credit carryforward
Other
99,491
76,737
75,803
20,137
12,362
5,122
3,250
1,169
4,227
48,354
83,218
45,607
28,469
3,384
13,008
4,969
1,210
7,202
298,298
235,421
326,274
97,437
2,684
335,745
104,030
1,634
426,395
441,409
Net deferred tax liabilities
(128,097)
(205,988)
Reconciliation to the statement of financial position
Deferred income tax assets
Deferred income tax liabilities
6,030
(134,127)
23,633
(229,621)
(128,097)
(205,988)
Deferred tax liabilities
Acquired intangible assets
Depreciation and amortization
Other
The significant components of income tax expense are as follows:
December 31,
2009
2008
December 31,
2009
2008
Reconciliation of net deferred tax liabilities
Net deferred tax liabilities at December 31, 2009
Net deferred tax liabilities at December 31, 2008
(128,097)
(205,988)
Current
Italy
Foreign
108,173
23,237
109,080
45,632
Net change on the balance sheet
77,891
Total current
131,410
154,712
Deferred tax benefit recorded to the income statement
Other deferred tax benefit recorded to equity
Deferred tax expense recorded to goodwill
55,568
23,948
(1,625)
Deferred
Italy
Foreign
7,090
(62,658)
(793)
(106,373)
Totale deferred
(55,568)
(107,166)
75,842
47,546
Income tax expense
77,891
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2009 Annual Report
The effective income tax rate on income before income tax expense differed from
asset of €17.6 million for these state net operating losses.
At December 31, 2009, the Group had unrecognized foreign net operating
the Italian statutory tax rate for the following reasons:
losses of €44.9 million that expire at various dates through 2027. The Group also
Effective tax rate
Italian statutory tax rate (%)
Theoretical provision for income taxes
had unrecognized US tax credit carry forwards of €21.1 million that expire at
December 31,
2009
2008
On February 4, 2010, the US Internal Revenue Service completed an
188,196
27.50
185,416
27.50
examination of the Group’s consolidated income tax returns for 2003 to 2006
51,754
50,989
Joint committee on Taxation. As a result of the approved RAR, during the first
resulting in a signed Revenue Agent Report (“RAR”), which was approved by the
quarter of 2010, the Group expects to receive a cash refund of approximately
Reconciliation of the theoretical and effective provision for income taxes:
€1.5 million and also expects to record approximately €8.9 million of tax benefits.
Permanent differences
Italian local tax (IRAP)
Nondeductible expense
Foreign tax rate differential
Substitutive tax basis benefit
Other
23,800
10,763
(5,547)
(4,928)
24,051
9,167
(25,879)
(10,191)
(591)
Total tax provision
75,842
47,546
40.3
25.6
Effective tax rate (%)
various dates through 2018.
16. Inventories
Raw materials
Work in progress
Finished goods
December 31,
2009
2008
25,374
48,665
60,041
28,419
50,633
50,508
134,080
129,560
At December 31, 2009, a (€492.0) million deficit existed in undistributed earnings
of foreign subsidiaries. Accordingly, no undistributed earnings existed that would
have required the consideration of a deferred tax liability if such earnings were
forecasted to be distributed in the foreseeable future. If undistributed earnings
had existed at December 31, 2009, an associated deferred tax liability would not
have been required because there is no intention by the Group to remit foreign
earnings in the foreseeable future.
At December 31, 2009, the Group has recognized deferred tax assets related
to operating losses of €78.9 million (United States, state and Italian net operating
losses) and recognized deferred tax assets related to tax credits of €1.2 million.
The recognition of these assets is based on expectations that sufficient taxable
income will be generated in future years to utilize the tax loss carry forwards.
The total cost of inventory related to product sales that were recognized as an
expense during 2009 and 2008 was €122.3 million and €191.5 million, respectively,
which is included in raw materials, services and other costs in our consolidated
income statement.
The amount of write-down of inventories recognized as an expense during
2009 and 2008 was €7.0 million and €7.7 million, respectively, which is included
in raw materials, services and other costs in our consolidated income statement.
17. Trade and other receivables
The Group also has €23.1 million of unrecognized deferred tax assets related to
net operating losses and €21.1 million of unrecognized deferred tax assets related
to tax credits. These deferred tax assets were not recorded because realization of
these assets is uncertain.
At December 31, 2009, the Group had Italian net operating loss carry forwards
for income tax purposes of €9.1 million that expire at various dates through 2014.
Trade receivables
Receivables from intermediaries
Related party receivables (Note 38)
Sales-type lease receivables
Allowance for doubtful accounts (Note 41)
December 31,
2009
2008
584,331
268,967
2,647
666
(64,808)
491,088
325,139
744
656
(44,032)
791,803
773,595
The Group also has United States (US) federal net operating loss carry forwards
of €174.5 million that expire at various dates through 2029.
At December 31, 2009, the Group had US state net operating losses that will
expire at various dates through 2029. The Group has recorded a deferred tax
P 90
Receivables from intermediaries represent amounts due from tobacconists, bars,
petrol stations, newspaper stands and motorway restaurants in which
Lottomatica provides third-party processing services related to their commercial
services network. Trade receivables and receivables from intermediaries are non-
Non current assets classified as held for sale
interest bearing.
18. consolidated net financial position
December 31,
2009
2008
Building
Land
3,957
3,499
5,360
4,668
7,456
10,028
(179)
(1,387)
(2,572)
5,890
7,456
December 31,
2009
2008
cash on hand
cash at bank
453
468,882
392
108,882
Asset impairment loss
469,335
109,274
Non-current assets classified as held for sale
4,613
20,288
46,618
29,924
21,782
17,521
467
15,838
46,491
11,384
58,803
18,020
132,150
134,698
Net current financial debt (cash)
(341,798)
5,136
Notes (Note 21)
capital Securities
Interest rate swaps
Other
1,145,100
740,821
733,180
56,391
53,094
2,803
32,918
1,359,888
730,525
73,740
69,793
353,354
50,000
14,252
56,854
Non current financial debt
2,764,307
2,708,406
Net financial position
2,422,509
2,713,542
Total indebtedness included in net financial position
2,694,255
2,695,759
capital Securities
Other
Current financial debt
The Group recorded an impairment loss of €1.4 million (€0.9 million net of tax
benefit) and €2.6 million (€1.6 million net of tax benefit) on the remeasurement
to fair value less costs to sell for this property during the fourth quarter of 2009
and 2008, respectively.
20. Issued capital and reserves
Issued shares
(authorized shares)
Authorized shares
Ordinary shares of € 1,00 par value per share
18,857,821
Ordinary shares outstanding, issued and fully paid
Shares issued upon exercise of stock options
151,899,196
232,400
155,241
152,286,837
19. Non-current assets classified as held for sale
December 31,
2009
2008
159,278,775
19,728,536
172,015,373
In August 2008, the Group classified certain property acquired in connection with
its acquisition of Atronic (Gaming Solutions segment) located in Scottsdale,
Approximately 1.5 million and 1.5 million ordinary shares were reserved to satisfy
Arizona, USA as held for sale. Under the direction of management, the property
rights in respect of our various share-based payment plans at December 31, 2009
is being actively marketed for sale at a price that is reasonable given changes in
market conditions. The major classes of assets held for sale are as follows:
On November 24, 2009, Lottomatica raised €350 million by issuing 19,728,536
shares to Mediobanca International (Luxembourg) S.A. (“Mediobanca”) for
€17.7408 per share (a 15% premium to the market price of €15.4268), the
proceeds of which will support development plans in Italy, primarily for the
renewal of the Gratta & Vinci (Scratch &Win) concession and the purchase of
video lottery terminal rights.
P 91
2009 Annual Report
corresponding to the 15% premium to market. Lottomatica will pay fixed
exchanged into Lottomatica ordinary shares. The Bonds were placed with
payments semi-annually to Mediobanca that correspond to interest on the Bonds
qualified investors on a private placement basis and bear interest at 8.75% per
that are not converted at any interest payment date. The present value of these
annum payable semi-annually in arrears in equal installments on October 29th
payments has been recorded as a financial liability in the consolidated statement
and April 29th of each year, commencing on April 29, 2010.
of financial position (the “Swap Liability”).
Other reserves at December 31, 2009 consist of the following:
2009 Other reserves
Legal
Reserve
Stock Option
and Restricted
Stock Reserve
Share Based
Payment
Reserve
Ex art.
2349
Reserve
Net Unrealized
Gain(Loss)
Reserve
Translation
Reserve
Treasury
Share
Reserve
Total
Amortization of unrecognized gain on interest rate swap
Unrecognized net loss on derivative instruments
Unrecognized net loss on available for sale investment
Share-based payment
30,380
77
-
34,066
(2,608)
26,540
916
(7,074)
1,834
-
(43,987)
13,147
(570)
(732)
(78)
-
(153,346)
(22,499)
-
382,096
-
277,583
13,147
(570)
(732)
(78)
(22,499)
77
916
(9,682)
30,457
31,458
20,382
1,834
(32,220)
(175,845)
382,096
258,162
Legal
Reserve
Stock Option
and Restricted
Stock Reserve
Share Based
Payment
Reserve
Ex art.
2349
Reserve
Net Unrealized
Gain(Loss)
Reserve
Translation
Reserve
Treasury
Share
Reserve
Total
Amortization of unrecognized gain on interest rate swap
Unrecognized net gain on derivative instruments
Unrecognized net gain on available for sale investment
Treasury share purchase plan
Treasury shares purchased
Share-based payment
30,303
77
-
25,536
8,530
-
22,034
14,682
(10,176)
-
1,989
(155)
-
(4,187)
(39,925)
(570)
607
88
-
(189,952)
36,637
(31)
456,926
(74,830)
-
(114,277)
(39,925)
(570)
607
88
36,637
456,926
(74,830)
77
14,682
(1,801)
(31)
30,380
34,066
26,540
1,834
(43,987)
(153,346)
382,096
277,583
Other reserves at December 31, 2008 consist of the following:
2008 Other reserves
As described in Note 3.4, other reserves of €295.2 million at December 31, 2008, as previously reported, has been revised to properly reflect the functional currency
associated with the July 2, 2007 acquisition of Finsoft Limited as British pounds sterling.
P 92
Nature and purpose of other reserves
Treasury share reserve
The treasury share reserve was established upon the approval at the April 2008
Legal reserve
Shareholders’ Meeting, of the plan to repurchase Lottomatica ordinary shares up
The legal reserve is required by Italian law and must be increased by a minimum of
to a maximum amount of 10% of share capital within an 18-month time period.
5% of net income for the year until the balance represents 20% of share capital.
In October 2009, the 18-month buy-back period expired. Decreases result from
the actual purchase of treasury shares.
Stock option and restricted stock reserve
The stock option and restricted stock reserve is used to record the fair value of
21. Debt
stock options granted to employees that have been exercised and stock awards
that vested during the year.
Share-based payment reserve
The share-based payment reserve is used to record the increase in equity where
goods or services are received in equity-settled share-based payment transactions.
Decreases relate to the fair value of stock awards that vested during the year.
Ex Art 2349 reserve
Notes
capital Securities
Other
Share of non-current debt of joint ventures
The ex art 2349 reserve was established by shareholders’ resolution in accordance
December 31,
2009
2008
1,145,100
740,821
733,180
2,889
1,359,888
730,525
353,354
50,000
69,893
2,621,990
2,563,660
-
10,142
2,621,990
2,573,802
5,079
-
59,866
982
5,079
60,848
46,618
3,147
203
22
17,196
46,491
2,565
95
601
9,461
67,186
59,213
-
1,896
67,186
61,109
2,694,255
2,695,759
with Lottomatica’s by-laws, as appropriated from income of the Group, to serve
share-based payment plans. Decreases relate to stock awards granted to
employees that vested during the year.
Net unrealized gain/(loss) reserve
The net unrealized gain/(loss) reserve is used to record:
the deferred gain, net of amortization, related to our agreement to lock in
interest rates to hedge €750 million of capital securities;
the fair value of interest rate swaps assessed to be highly effective; and
Share of short-term borrowings of joint ventures
Current portion of long-term debt
capital Securities
Notes
Other
the unrecognized net gain or loss on other derivative instruments assessed
as being highly effective and available for sale investments.
Share of current portion of long-term debt of joint ventures
Translation reserve
The translation reserve is used to record:
exchange differences that arise from the translation of the financial
Total indebtedness
GTECH Senior Credit Facilities
statements of foreign subsidiaries, joint ventures and investments valued at
GTEch is a party to an agreement with a syndicate of financial institutions for senior
equity; and
exchange differences that arise on monetary items that, in substance, form
unsecured credit facilities (the “GTEch Senior credit Facilities”) which expire on
part of the net investment in foreign operations (such as intragroup loans
and are fully and unconditionally guaranteed by Lottomatica, GTEch holdings
where settlement is neither planned nor likely to occur in the foreseeable
corporation (“holdings”), GTEch Rhode Island corporation (“GTEch Rhode Island”),
future).
Lottomatica International hungary Kft. (“Lottomatica hungary”) and Invest Games
August 29, 2012. The GTEch Senior credit Facilities are unsecured and unsubordinated
P 93
2009 Annual Report
S.A. (“Invest Games”) (holdings, GTEch Rhode Island, Lottomatica hungary and Invest
Notes
Games are collectively referred to herein as the “Other Guarantors”).
In December 2009, Lottomatica issued €750 million of guaranteed notes due
December 5, 2016 (the “Notes”). The Notes are unconditionally and irrevocably
The GTEch Senior credit Facilities consist of the following facilities
guaranteed by GTEch and the Other Guarantors. The Notes, which have received a
rating equal to a Baa3 and a BBB- by Moody’s Investors Service Limited and Standard
GTEch Senior credit Facility:
(thousands in US$)
& Poor’s Rating Service, respectively, are listed on the Luxembourg Stock Exchange.
Committed amount available
Amount borrowed at
December 31, 2008
December 31, 2009
December 31, 2009
Term Facility A
Term Facility B
Revolver A
Revolver B
Interest is payable annually in arrears, with the first payment due on December
5, 2010, at 5.375% per annum, and is subject to adjustment from time to time in
1,310,950
421,650
250,000
250,000
1,256,018
403,982
250,000
250,000
1,256,018
403,982
4,857 (a)
the event of a step up rating change or step down rating change. In the event of
2,232,600
2,160,000
1,664,857
Notes will the interest rate be higher than 6.625% or lower than the initial rate
(a) Represents letters of credit that reduce the amount available under Revolver B
a step up or step down rating change, the interest rate shall be increased or
decreased by 1.25% per annum, provided that at no time during the term of the
of interest of 5.375%.
Unless previously redeemed or purchased and cancelled, the Notes will be
The GTEch Senior credit Facilities require that GTEch repay Term Facility A and
redeemed at 100% of their principal amount on December 5, 2016. The Notes
Term Facility B (Term Facility A and Term Facility B are collectively referred to as
may be redeemed at any time after January 4, 2010 by the Issuer, in whole but not
the “GTEch Term Facilities”) pursuant to the following schedule:
in part, at the greater of (i) 100% of their principal amount together with any
accrued interest or (ii) an amount specified in the terms and conditions to the
Notes. The Notes may also be redeemed in whole, but not in part, at 100% of
(thousands in US$)
2011
2012
180,000
1,480,000
Total
1,660,000
their principal amount at the option of the Issuer in the event of certain changes
affecting taxation in Italy, the United States, hungary or Luxembourg. holders
of the Notes may require Lottomatica to redeem the Notes in whole or in part at
100% of their principal amount plus accrued interest following the occurrence of
Interest is generally payable three months in arrears at rates determined by
certain events specified in the terms and conditions of the Notes.
reference to LIBOR plus a margin based on the Group’s ratio of total net debt to
The proceeds of the Notes, net of associated fees and costs, were used to
earnings before interest, taxes, depreciation and amortization, and the Group’s
repay the LTO Term Loan Facility (as defined below), a portion of the GTEch
senior unsecured long-term debt rating. A facility fee is payable quarterly at a
Senior credit Facilities and other debt.
rate of 0.24% per annum on the total available commitment of Revolver A and
Revolver B. At December 31, 2009, the effective interest rate on the GTEch Senior
Debt issuance costs associated with the Notes are being amortized over
approximately seven years beginning December 2009.
credit Facilities was 0.85%.
The GTEch Senior credit Facilities have covenants and restrictions including,
Capital Securities
among other things, requirements relating to the maintenance of certain
In May 2006, Lottomatica issued €750 million of subordinated interest-deferrable
financial ratios, limitations on capital expenditures and acquisitions, and
capital securities due March 2066 (the “capital Securities”). The capital Securities
limitations on dividends. Violation of these covenants may result in the full
have a fixed interest rate of 8.25% payable annually through March 31, 2016 and
principal amount of the GTEch Senior credit Facilities becoming immediately
thereafter have a variable interest rate of six-month EURIBOR plus 505 basis
payable upon written notice. At December 31, 2009 and December 31, 2008, we
points payable semi-annually. The capital Securities have received a rating equal
were in compliance with all covenants and restrictions.
to a BB and Ba3 by Standard & Poor’s Rating Service and Moody’s Investors Service
Debt issuance costs associated with the GTEch Senior credit Facilities are
being amortized over approximately six years beginning September 2006.
P 94
Limited, respectively. The capital Securities are listed on the Luxembourg Stock
Exchange.
The capital Securities are redeemable at maturity, at par value after March 31,
to earnings before interest, taxes, depreciation and amortization, and the Group’s
2016, upon the occurrence of certain tax events, through open market purchases,
senior unsecured long-term debt rating. A facility fee is payable quarterly at a
by public cash tender offer, or if a change of control event occurs.
rate of 0.36% per annum on the total available commitment of the LTO Revolving
Debt issuance costs associated with the capital Securities are being amortized
over ten years beginning May 2006.
credit Facility.
The LTO Revolving credit Facility has covenants and restrictions including,
The capital Securities allow Lottomatica to optionally defer interest payments
among other things, requirements relating to the maintenance of certain
and mandates deferral of interest payments if Lottomatica is in breach of the
financial ratios, limitations on capital expenditures and acquisitions, and
interest coverage ratio as defined in the capital Securities agreement. Under
limitations on dividends. Violation of these covenants may result in the full
circumstances described in the capital Securities trust deed, Lottomatica is
principal amount becoming immediately payable upon written notice. At
required to settle deferred interest payments in cash or equity. During 2009 and
December 31, 2009 and December 31, 2008, we were in compliance with all
2008, €61.9 million and €62.1 million, respectively, of interest on the capital
covenants and restrictions.
Securities was paid.
The terms of the capital Securities require Lottomatica to authorize the
issuance of ordinary shares in accordance with a resolution approved by
Lottomatica shareholders. At each annual general meeting, the value of the
Debt issuance costs associated with the LTO Revolving credit Facility are being
amortized over approximately four years beginning May 2008.
As of December 31, 2009, there was no outstanding balance under the LTO
Revolving credit Facility.
ordinary shares authorized for issuance must be at least equivalent to the
interest payments due during the following two-year period. As of December
Letters of Credit
31, 2009, the authorization was in place for the issuance of capital up to €170
In connection with certain customer contracts, we are required to issue letters of
million. Interest payments over the next two years are approximately €124
credit for the benefit of our customers. The letters of credit primarily secure our
million.
performance under the customer contracts. At December 31, 2009, €619.9 million
of letters of credit were outstanding with a weighted average annual cost of
0.79%. At December 31, 2008, €425.1 million of letters of credit were outstanding
In December 2008, Lottomatica entered into an agreement with a syndicate
with a weighted average annual cost of 0.55%.
of financial institutions for a €360 million senior unsecured term loan facility
(the “LTO Term Loan Facility”). On December 3, 2009, the outstanding
22. Provisions
balance of the LTO Term Loan Facility was paid with the proceeds of the
Legal
Matters
Tax
Matters
Other
Total
Arising during the year
Utilized
Unused amounts reversed
Other
15,717
796
(5,840)
466
7,693
(470)
1,600
315
3,632
1,103
(243)
(1,997)
198
-
27,042
1,899
(6,553)
(1,997)
1,798
781
In May 2008, Lottomatica entered into an agreement with a syndicate of financial
11,139
9,138
2,693
22,970
institutions for a €300 million senior unsecured revolving credit facility (the “LTO
Short-term provisions
Arising during the year
Utilized
Unused amounts reversed
1,125
126
(13)
-
-
1,151
345
(522)
(380)
26
2,276
471
(535)
(380)
26
1,238
-
620
1,858
Notes. As a result, unamortized debt issuance costs and interest rate swaps
associated with the LTO Term Loan Facility were written off to other expense
in the consolidated income statement, further details of which are provided
in Note 29.
LTO Revolving Credit Facility
Revolving credit Facility”). The LTO Revolving credit Facility expires on August
29, 2012. The LTO Revolving credit Facility is unsecured and unsubordinated and
is fully and unconditionally guaranteed by GTEch and the Other Guarantors.
Interest is generally payable monthly in arrears at rates determined by
reference to EURIBOR plus a margin based on the Group’s ratio of total net debt
P 95
2009 Annual Report
Legal matters
24. Raw materials, services and other costs
Provisions relate primarily to the legal matters discussed in Note 39 and are
calculated based on management’s expectations of settlement determined with
the assistance of legal counsel.
Operating expenses
Outside services
consumables
cost of product sales
Insurance, miscellaneous taxes and other
Telecommunications
Occupancy
Travel
Tax matters (other than income taxes)
Provisions relate primarily to disputed tax assessments and reserves for regulatory
audits and are calculated based on assessed taxes and expected payment of tax
December 31,
2009
2008
based on statutory rates.
Other
479,406
144,704
110,881
99,423
77,956
62,375
47,551
30,133
394,109
124,322
98,711
196,276
40,300
67,525
42,638
27,366
1,052,429
991,247
25. Personnel
Other provisions relate primarily to warranty obligations, which generally extend
for 12 months, on equipment sales and prizes on certain lottery games. Provisions
are calculated based on historical cost information and expected prize payouts.
Settlement on prizes varies according to the terms of each individual game.
23. Other liabilities (non-current and current)
Deferred revenue
contingent liabilities related to GTEch acquisition
Staff severance fund (Note 37)
Other
Accrued expenses
Employee compensation
Taxes other than income taxes
Deferred revenue
Advance payments from customers
Advance billings
Other
December 31,
2009
2008
27,628
13,503
8,082
5,971
18,321
15,169
7,755
7,094
55,184
48,339
99,763
56,841
49,763
38,259
18,647
7,291
-
71,403
49,956
58,872
53,619
36,726
7,383
792
270,564
278,751
Personnel costs
December 31,
2009
2008
Payroll
Statutory benefits
company benefits
Incentive compensation
Stock compensation (Note 35)
Other
333,466
31,288
23,306
24,336
916
11,993
280,389
29,405
44,789
30,093
14,682
11,157
428,305
410,515
The Group’s worldwide employees are comprised of the following personnel:
Personnel Description
(number of employees)
As of December 31,
2009
2008
2009
Average
Executives
Middle Management
All other permanent employees
Employees with temporary employment contracts
400
977
6,131
164
398
933
5,975
190
397
963
6,098
195
7,672
7,496
7,653
26. Depreciation
Systems, equipment and other assets
related to cotracts, net (Note 8)
Property, plant and equipment, net (Note 9)
P 96
December 31,
2009
2008
224,088
12,513
213,682
11,779
236,601
225,461
The impairment loss represents the write-down of goodwill and intangible
27. Amortization
assets to their recoverable amounts. The recoverable amounts were based on fair
December 31,
2009
2008
Intangibles amortization (Note 11)
Other
94,522
(122)
86,276
(181)
94,400
86,095
value less costs to sell and were determined using after-tax discount rates ranging
from 9% to 11%.
GTEch Lottery segment
The 2009 impairment loss recorded in this segment principally relates to the lower
28. Impairment
expected profitability of a new lottery contract. The impairment loss represents
During 2009 and 2008, the Group recorded impairment losses as detailed below.
the write-down of an intangible asset to its recoverable amount. The recoverable
amount was based on fair value less costs to sell and was determined using a
6.65% after-tax discount rate.
Impairment
Italian
GTECH
Gaming
GTECH
Operations
Lottery solutions
G2
The 2009 impairment loss recorded in this segment principally relates to lower
Total
assets related to contracts, net (Note 8)
110
Goodwill (Note 10)
1,500
Intangible assets, net (Note 11)
868
Assets classified as held for sale (Note 19)
-
6,585
-
(6)
2,600
1,387
22,349
40,632
-
104
23,849
49,817
868
1,387
2,478
6,585
3,981
62,981
76,025
expected revenues associated with Atronic and the remeasurement to fair value
less costs to sell of the Atronic property held for sale (See Note 19). The
impairment loss associated with the write-down of intangible assets to their
recoverable amounts were based on fair value less costs to sell and were
determined using a 12.7% after-tax discount rate.
2008 impairment
Italian
GTECH
Gaming
GTECH
Operations
Lottery solutions
G2
Lottery segment
Total
assets related to contracts, net (Note 8)
Property, plant and equipment, net (Note 9) Goodwill (Note 10)
Intangible assets, net (Note 11)
Other assets, net
20
Assets classified as held for sale (Note 19)
-
1,293
25,440
-
19,386
1,628
48,717
1,722
2,572
-
20
26,733
74,025
- 100,778
19,386
1,628
48,717
3,015
25,460
2,572
The 2008 impairment loss recorded in the Lottery segment relates to a lottery
system we deployed for an international customer that had encountered a
sustained period of political instability that has prevented the lottery system from
launching.
The 2008 impairment loss recorded in the Gaming Solutions segment relates to
2009 impairment
our acquisition of Atronic. The United States (“US”) casino market had entered
into a period of substantial contraction and Atronic America’s operations, which
GTEch G2 segment
were in the early stages of its entry into the US market, could not be sustained in
The 2009 impairment loss recorded in this segment relates to potential changes in
the face of significantly diminishing demand, including financial constraints
the regulation of online gaming in Europe. A significant recent European court
affecting highly-leveraged customers. Accordingly, we made the decision to
decision has upheld the interest of numerous European States in creating Nationally
curtail Atronic Americas activities and fold them into our Spielo operations.
Regulated Gaming Markets under which cross-border online gaming operators may
The impairment loss related to systems, equipment and other assets related
be required to apply for jurisdiction specific online gaming licenses. Given the
to contracts, property, plant and equipment and intangible assets represent the
uncertain timeline of new licenses and impact to cross-border transactions, we
write-down to their recoverable amounts. The recoverable amounts were based
estimate that growth in this segment will continue but at a slower pace.
on value in use and were determined using a 9.2% pre-tax discount rate.
P 97
2009 Annual Report
29. Other expense
Debt issuance costs
Termination of interest rate swaps
Other
For the year ended
December 31,
2009
2008
(5,391)
(3,936)
(7,363)
(2,699)
(16,690)
(2,699)
Polish zloty loan
Other
For the year ended
December 31,
2009
2008
6,043
(2,897)
14,734
1,602
3,146
16,336
Polish zloty loan
In December 2009, Lottomatica issued €750 million of guaranteed notes due
fees and costs, were used to reimburse the LTO Term Loan Facility, a portion of
the GTEch Senior credit Facilities and other debt, extending the average maturity
As a result, unamortized debt issuance costs and interest rate swaps associated
with the reimbursed debt were written off.
During 2007, in connection with GTEch’s sale of POLcARD S.A. to First Data
International, GTEch’s Polish subsidiary, GTEch Polska Sp. z o.o. (“GTEch
Polska”), loaned Polish zloty 255.6 million (at market interest rates) to GTEch
Global Services corporation Limited (“GGSc”), whose functional currency is the
US dollar. GGSc repaid this loan in 2009 principally using the proceeds of non-cash
dividends from GTEch Polska. Non-cash foreign exchange gains incurred on this
loan resulted from fluctuations in the Polish zloty to US dollar exchange rate.
30. Foreign exchange gain (loss), net
31. Interest expense
Foreign exchange gains and losses are classified as realized (cash) or unrealized
The Group incurred interest expense on the following components of debt:
(non-cash) as follows:
Interest expense
Foreign exchange gain(loss), net
cash foreign exchange loss
For the year ended
December 31,
2009
2008
(18,970)
3,146
(5,984)
16,336
(15,824)
10,352
capital Securities
LTO Term and Revolving Facility
Notes
4.80% Bonds
Other
Cash foreign exchange loss
In order to better match future cash flows with the Group’s revenue
concentration from European countries (which has increased in recent years),
GTEch borrowed in euro under the GTEch Senior credit Facilities in 2009. These
euro denominated borrowings resulted in approximately €19.0 million of cash
foreign exchange loss when in December 2009, a portion of the proceeds from
the Notes were used to reimburse the outstanding euro borrowings under the
GTEch Senior credit Facilities.
Non-cash foreign exchange gain (loss) was incurred on the following:
P 98
See Note 21 for details of the debt facilities.
For the year ended
December 31,
2009
2008
(64,658)
(57,139)
(14,984)
(3,030)
(11,707)
(64,403)
(70,777)
(7,781)
(17,303)
(17,291)
(151,518)
(177,555)
32. Earnings per share
33. components of other comprehensive income
Basic and diluted earnings per share are calculated as follows:
Earnings per share
For the year ended
December 31,
2009
2008
Numerator
Net income for the year attributable to owners of the parent
68,149
93,748
Numerator for basic and diluted earnings per share
68,149
93,748
Denominator
Basic weighted average number of ordinary shares
Potential dilutive effect of stock options and restricted shares
150,336
88
150,215
329
Diluted weighted average number of ordinary shares
150,424
150,544
0.45
0.45
0.62
0.62
Basic earnings per share/ADRs (€)
Diluted earnings per share/ADRs (€)
Lottomatica’s American depositary receipts (ADRs) are negotiable certificates
representing ordinary shares of Lottomatica. The ratio of Lottomatica shares to
ADRs is 1:1.
Basic earnings per share/ADRs amounts are calculated by dividing net income
for the year attributable to equity holders of the parent by the weighted average
number of ordinary shares outstanding during the year.
Diluted earnings per share/ADRs amounts are calculated by dividing net
income for the year attributable to equity holders of the parent by the weighted
average number of ordinary shares outstanding during the year along with the
weighted average number of ordinary shares that would be issued upon the
conversion of all potentially dilutive ordinary shares into ordinary shares.
There were approximately 1.0 million and 1.2 million potential ordinary
shares at December 31, 2009 and 2008, respectively, that were excluded from the
weighted average number of ordinary shares for the purposes of diluted earnings
per share because their effect would have been anti-dilutive.
Interest rate swaps (cash flow hedges)
Gains (losses) arising during the year
Reclassification adjustments for losses
included in the income statement
Derivative instruments (cash flow hedges)
Gains arising during the year
Reclassification adjustments for gains (losses)
included in the income statement
Translation of foreign operations
Gains (losses) arising during the year
Reclassification adjustments relating
to foreign operations disposed in the year
For the year ended
December 31,
2009
2008
24,795
(62,641)
(3,936)
-
20,859
(62,641)
467
259
(1,514)
933
(1,047)
1,192
(30,013)
51,827
-
(206)
(30,013)
51,621
34. Research and development costs
The aggregate amount of research and development expenditures recognized
as expense during 2009 and 2008 was €62.4 million and €62.5 million, respectively.
35. Share-based payment plans
The Group has three types of equity-settled share-based payment plans for
employees: performance based stock options, performance based restricted
shares and time based restricted shares as described below.
Stock Option Plans
The Group has various stock option plans whereby stock options are granted to
certain directors, executives, and other key employees of the Group as approved
by the Board of Directors. The exercise price of the options is generally equal to
the average price of the Group’s ordinary shares one month prior to the grant
date. The options vest subject to the satisfaction of performance conditions
relating to the Group’s EBITDA (earnings before interest, taxes, depreciation and
amortization) over a three-year period, net financial debt and to the employees
remaining in service to the Group. Options partially vest upon achievement of
90% or more of the performance conditions and if the performance conditions
are not met, the options are forfeited. The contractual life of the options range
from five to eight years (depending on the plan) and there are no cash settlement
alternatives.
P 99
2009 Annual Report
Restricted Stock Plans
Stock option movements in the year
2009
Performance based awards
2008
Shares
under
options
Weighted
average
exercise price
Shares
under
options
Weighted
average
exercise price
conditions relating to the Group’s EBITDA over a three-year period, net financial
Outstanding at January 1
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
4,724,018
1,850,510
(164,241)
-
€ 25.11
14.03
25.09
-
2,861,526
2,248,772
(153,880)
(232,400)
-
€ 27.89
20.29
25.43
12.54
-
debt and to the employees remaining in service to the Group. Awards partially
Outstanding at December 31
6,410,287
21.91
4,724,018
25.11
Exercisable at December 31
1,092,325
€ 27.90
541,356
€ 26.19
The Group has various performance based share award plans whereby restricted
stock is granted to certain employees of the Group as approved by the Board of
Directors. Recipients of the awards do not pay the Group any cash consideration
for the awards. The awards vest subject to the satisfaction of performance
vest upon achievement of 90% or more of the performance conditions and if the
performance conditions are not met, the awards are forfeited. The contractual
life of the awards is three to four years and they may be settled in cash at the
Group’s option. The Group does not have a past practice of cash settlement and
does not plan to cash settle awards in the future.
The weighted average share price for stock options exercised during 2008 was
€19.07.
The range of exercise prices and weighted average remaining contractual life
for stock options outstanding under the stock option plans as of December 31,
Time based awards
2009 and 2008 are as follows:
The Group has a time based share award plan whereby restricted stock is granted
to certain employees of the Group as approved by the Board of Directors.
Recipients of the awards do not pay the Group any cash consideration for the
awards. The awards generally vest over a five-year period and are subject to the
employees remaining in service to the Group. The contractual life of the awards
is five years and they may be settled in cash at the Group’s option. The Group
does not have a past practice of cash settlement and does not plan to cash settle
awards in the future.
Modifications
During the second quarter of 2009, modifications were made to the performance
conditions of certain of our performance based plans. These modifications, along
Range of exercise price and weighted average
Weighted
Exercise
average
price or
remaining
range of
contractual
exercise
Options
life
prices (€)
outstanding
(years)
14.03
20.29
23.17
29.45 - 30.40
1,840,220
2,133,662
286,616
2,149,789
5.33
6.33
0.03
5.01
Weighted
Exercise
average
price or
remaining
range of
contractual
exercise
Options
life
prices (€)
outstanding
(years)
20.29
23.17
29.45 - 30.40
6,410,287
2,188,902
298,456
2,236,660
7.33
1.33
5.99
4,724,018
with adjustments for current vesting expectations, resulted in a net reduction of
stock compensation expense. The modifications did not result in any incremental
Fair value measurement of stock options
fair value required to be recognized as cost.
The fair value of equity-settled stock option grants is estimated at the date of
There were no modifications to any share-based payment plans during 2008.
grant using a binomial model, taking into account the terms and conditions upon
which the stock options were granted. The weighted average fair value of stock
Stock option movements in the year
options granted during 2009 and 2008 was €2.99 per share and €2.75 per share,
The following table illustrates the number and weighted average exercise prices
respectively. The following tables list the inputs to the binomial model used for
of, and movements in, stock options during the year:
the years ended December 31, 2009 and 2008.
P 100
Measurement of stock option
Year ended December 31, 2009
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of options (in years)
Weighted average share price (€)
Exercise price (€)
36. Dividends paid
4.62
26.32
3.50
4.50
15.45
14.03
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of options (in years)
Weighted average share price (€)
Exercise price (€)
4.24
22.78
4.50
4.66
19.26
20.29
Cash dividend declared and paid on ordinary shares
Dividend for 2009: €0.68 per share (2008: €0.825 per share)
December 31,
2009
2008
100,940
125,393
37. Employee benefits
The expected life of the stock option is based on historical data and is not
necessarily indicative of exercise patterns that may occur. The expected volatility
Staff Severance Fund
reflects the assumption that the historical volatility is indicative of future trends,
The Group has a defined benefit plan (staff severance fund) to provide certain post
which may not be the actual outcome. No other features of stock option grants
employment benefits to Italian employees following termination from the Group.
were incorporated into the measurement of fair value.
Italian employees may choose to participate in an unfunded plan within the Group
or transfer their plan balance to independent external funds. These benefits are
Restricted stock grants
funded only to the extent paid to the external funds. The cost of providing benefits
Restricted share awards granted during 2009 and 2008 and their weighted
under the plan, for those employees that participate in the unfunded plan within
average fair value at the date of grant (which represents the average share price
the Group, is determined using the projected unit credit actuarial valuation method.
during the employee grant acceptance period) are as follows:
The cost of providing benefits for those employees that choose to transfer their
plan to independent external funds are considered as defined contributions and
are accrued as the employees render the related service. The defined benefit liability
Restricted stock grants
(thousands of euro)
Granted during the year
Weighted average fair value
at the date of the grant (€)
represents the present value of the Group’s defined benefit obligation.
Performance based
2009
2008
Time based
2009
2008
673,729
277,753
-
24,000
15.45
19.26
-
21.09
The following table summarizes the components of net benefit expense
recognized during the year for the staff severance fund, which is included in
personnel in our consolidated income statement.
Net benefit expense
Expense charged to income statement
The expense recognized during the year arising from employee share-based
payment plans and included in personnel in our consolidated income statement
was as follows:
December 31,
2009
2008
current service cost
Net actuarial loss recognized in the year
3,660
518
3,355
103
Net benefit expense
4,178
3,458
Expense charged to income statement
Equity settled share-based payment
cash settled share-based payment
December 31,
2009
2008
916
-
14,682
-
916
14,682
P 101
2009 Annual Report
changes in the present value of the defined benefit obligation are as follows:
38. Related party disclosures
Related parties
December 31,
2009
2008
Balance at January 1
Actuarial losses
Benefits paid
Balance at December 31
7,755
3,660
518
(3,851)
7,838
3,355
103
(3,541)
8,082
7,755
The present value of the defined benefit obligation for the years ended 2007,
2006, and 2005 was €7.8 million, €8.8 million, and €7.6 million, respectively.
December 31,
2009
2008
Accounts receivable
De Agostini Group
Spain UTE
Taiwan Sports Lottery corporation
2,096
456
95
658
86
2,647
744
43,232
24,903
Accounts payable
De Agostini Group
The principal assumptions used in determining the defined benefit obligation
are shown below:
Related parties
Principal assumptions
(value %)
Assumed inflation rate
Discount rate
Future salary increases
Up to age 40
Age between 40 and 55
Age greater than 55
December 31, 2009
Other
Managers Employees
December 31, 2008
Other
Managers Employees
2.00
4.10
2.00
4.10
2.20
4.80
2.20
4.80
2.75
2.50
2.25
2.50
2.25
2.00
2.95
2.70
2.45
2.70
2.45
2.20
December 31,
2009
2008
Service revenue and product sales
Taiwan Sports Lottery corporation
1,691
2,069
1,691
2,069
261
325
633
254
586
887
De Agostini Editore S.p.A. - service fees
De Agostini S.p.A. - management fees
Termination Benefits
De Agostini Group
Termination benefits expense, primarily related to salary continuation, continued
The De Agostini Group includes De Agostini S.p.A (“De Agostini”), the majority
medical benefits coverage and expense related to accelerated share based
shareholder of Lottomatica and De Agostini Editore S.p.A, a subsidiary of De
payment awards for employees who were terminated during the year was €5.9
Agostini. Outstanding accounts receivable balances at December 31, 2009 and
million and €4.7 million in 2009 and 2008, respectively.
December 31, 2008 are non-interest bearing.
Spain UTE
GTEch has a 50% interest in a Spanish joint venture (“Spain UTE”) which is
accounted for using the proportionate consolidation method. Spain UTE will
provide to the National Organization of the Spanish Blind (“ONcE”), end-to-end
lottery technology, marketing services, logistics, and retailer services for a
complementary lottery retailer network that will complement ONcE’s existing
lottery network. ONcE is authorized by the Spanish government to administer
lottery and wagering games in Spain.
P 102
Taiwan Sports Lottery Corporation
GTEch has a 24.5% interest in Taiwan Sports Lottery corporation (“TSLc”) which
is accounted for using the equity method of accounting. TSLc is the agency
commissioned by Taipei Fubon Bank (the sports lottery license holder through
December 2013) to be Taiwan’s sport betting solutions and services provider.
Compensation of Key Management Personnel
The amounts recognized as expense during the year related to key management
personnel are as follows:
compensation of key Management Personnel
December 31,
2009
2008
Short term employee benefits
Post-employement benefits
Share-based payments
7,664
159
492
6,799
146
4,477
8,315
11,422
P 103
2009 Annual Report
Remuneration paid to Lottomatica Group S.p.A. board members, Statutory Auditors
and managers with strategic responsibilities are as follows (amounts in euros):
Remuneration of Board of Directors and Board of Statutory Auditors
Position
Period
in the
position
End of term
Emoluments
chairman
cEO
Executive committee - chairman
1/2009-12/2009
1/2009-12/2009
1/2009-12/2009
Approv. Fin. Stat. 2010
60,000
Vice chairman
Remuneration committee - Member
1/2009-12/2009
1/2009-12/2009
75,000
40,000
Generral Manager
Managing Director
cEO
Executive committee - Member
1/2009-12/2009
1/2009-12/2009
4/2009-12/2009
1/2009-12/2009
Approv.
Approv.
Approv.
Approv.
2010
2010
2010
2010
60,000
57,500
Pietro Boroli
Board Member
1/2009-12/2009
1/2009-12/2009
60,000
47,500
Paolo ceretti
Board Member
1/2009-12/2009
1/2009-12/2009
60,000
50,000
Marco Drago
Board Member
1/2009-12/2009
1/2009-12/2009
60,000
47,500
Board Member
Audit committee - Member
1/2009-12/2009
1/2009-12/2009
80,000
46,250
10,000
Board Member
1/2009-12/2009
1/2009-12/2009
75,000
35,000
10,000
Board Member
1/2009-12/2009
1/2009-12/2009
60,000
52,500
Board Member
1/2009-12/2009
1/2009-12/2009
80,000
36,250
Board Member
Surveillance Body
1/2009-12/2009
1/2009-12/2009
1/2009-12/2009
130,000
43,750
Board Member
1/2009-12/2009
50,000
32,500
Board Member
1/2009-12/2009
1/2009-12/2009
85,000
32,500
Board of Statutory Auditors - chairman
1/2009-12/2009
112,500
Francesco Martinelli
Board of Statutory Auditors - Member
1/2009-12/2009
75,000
Angelo Gaviani
Board of Statutory Auditors - Member
Surveillance Body
1/2009-12/2009
1/2009-12/2009
75,000
10,000
Name and Surname
Lorenzo Pellicioli
Robert Dewey
Marco Sala
Jeremy hanley
James Mccann
Jaymin Patel
Anthony Ruys
Severino Salvemini
Bruce Turner
Gianmario Tondato Da Ruos
Sergio Duca
Fin.
Fin.
Fin.
Fin.
Stat.
Stat.
Stat.
Stat.
Bonus
Other
55,000
10,000
38,440
8,209
1,534,874
799,502
662,571
511,184
10,000
10,000
1,783,750
P 104
Non monetary
benefits
10,000
46,649
2,334,376
1,233,755
Stock options assigned to Lottomatica Group S.p.A. board members, statutory
auditors and managers with strategic responsibilities are as follows:
Stock option
Stock Option
Plan
2005
2006
2007
2008
2009
-
2010
2014
2015
2016
2015
Options outstanding
Number of
Exercise
options
price (€)
95,336
134,500
320,000
412,812
-
3.17
29.45
30.40
20.29
-
962,648
During 2009
Options granted
Number of
Exercise
options
price (€)
706,284
Options expired
or forfeited
Options
exercised
-
-
95,336
134,500
320,000
412,812
706,284
-
-
1,668,932
14.03
706,284
39. Litigation
December 31, 2009
Options outstanding
Number of
Exercise
options
price (€)
23.17
29.45
30.40
20.29
14.03
In the interim, on January 18, 2008, upon AAMS’s request to advance said
hearing, the court of Appeal advanced the hearing date to January 15, 2009.
Lottomatica’s Italian Business
On January 15, 2009 Lottomatica appeared before the court of Appeal and
requested that the file be suspended on the grounds that the same file is pending
1. Lotto Game concession: Lottomatica/AAMS Arbitration - Stanley
ruling before the TAR (Regional Administrative court) of Lazio. Lottomatica
International Betting Limited Appeal - Sisal Appeal
specified in its response to the charges brought forth by AAMS that it is of the
opinion that they are groundless.
Arbitration Lottomatica/AAMS
Pursuant to the arbitration clause set out in article 30 of the Lotto concession,
At the July 2, 2009 hearing, the court of Appeal deferred the hearing to
September 26, 2011.
Lottomatica initiated an arbitration proceeding to ascertain the effective initial
date of said concession. Lottomatica asked the Board of Arbitrators to ascertain
Stanley International Betting/AAMS/Lottomatica Appeal
and state that the initial starting date of the Lotto concession was June 8, 1998
On June 18, 2007, Stanley International Betting Limited filed an appeal before the
(date in which the European commission in Brussels was notified that the
TAR of Lazio (Regional Administrative court) to AAMS and Lottomatica asking for
infringement procedure no. 91/0619 was closed) and that, as a result, the final
the cancellation and/or disapplication of the Lotto Game concession deeds
expiration date of the Lotto concession is June 8, 2016.
because in violation of the rules regarding the tacit renewal of public contracts,
Lottomatica had reached said conclusion as a result of the Ministerial Decree
as well as the April 19, 2007 notice with which AAMS rejected the plaintiff’s
dated November 8, 1993 that envisaged the concession to be enforced only
motion to jointly operate the Lotto Game on the assumption that the concession
subject to the condition that the EU commission deem the concession not to be
is still effective for Lottomatica. The hearing to discuss the case at issue has been
in violation of the provisions of the Treaty of Rome.
set to March 10, 2010.
The Arbitration Award issued by the Board of Arbitrators accepted
Lottomatica’s request by lodging its award on August 1, 2005. AAMS challenged
The counsels assisting Lottomatica are of the opinion that the challenge
initiated by Stanley is groundless.
the Arbitration Award before the Rome court of Appeal (pursuant to art. 828 of
the Italian code of civil procedure) by serving a deed to defending counsel on
Sisal/AAMS/Lottomatica Appeal
December 15, 2005, and to Lottomatica on December 30, 2005. The first hearing
On July 13, 2007 Sisal filed with AAMS and Lottomatica an appeal under article
was held on April 20, 2006, and was adjourned to January 28, 2010 to hear the
25 of Law no. 241 of August 7, 1990, before the TAR of Lazio requesting that
conclusions.
their right to access documents relating to the awarding of the Lotto concession,
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2009 Annual Report
the subsequent extensions and/or renewals, the AAMS - Lottomatica arbitration
On December 3, 2003, Ticket One also commenced civil proceedings before
award and the correspondence between AAMS and the European commission
the court of Appeal of Rome, substantially repeating the same claims made in the
be ascertained.
administrative proceedings before the TAR of Lazio. In addition, Ticket One
Sisal argued to have learned only in recent months of the arbitration award
requested €10 million in damages for alleged unfair competition and illegal use
setting the expiration date for the Lotto concession to 2016 in favor of
of the network by Lottomatica and LIS, and an order enjoining them from
Lottomatica, and to have then filed with AAMS a formal request for access aimed
committing any further acts of unfair competition and, alternatively, access to
at obtaining copies of the aforementioned documents on May 11, 2007. AAMS
Lottomatica’s electronic network.
never responded to said request.
Lottomatica and LIS responded to both lawsuits and, since Ticket One had
Lottomatica duly appeared at the October 10, 2007 hearing, during which
filed the same claims with two different courts, filed an appeal with the Supreme
Sisal stated that it was not interested in pursuing the appeal anymore due to
court sitting in joint session, requesting a preliminary proceeding to resolve the
another challenge it was about to serve.
issue of jurisdiction and the suspension of the proceedings.
On October 12, 2007 Sisal served an appeal on AAMS and Lottomatica before
At the hearing on June 24, 2004, the TAR of Lazio accepted the request filed
the TAR of Lazio for the annulment of the provision indicated in the July 9, 2007
by Lottomatica and Lottomatica Italia Servizi S.p.A. and suspended the
notice setting out that AAMS ignored the request made by plaintiff for the
proceeding, arranging for the documents to be sent to the Supreme court of
concession relating to the Lotto game operation, as well as of any prior,
cassation. The Supreme court declared Lottomatica and LIS’s appeal to be
consequent deed relating and/or connected to the aforementioned AAMS notice
inadmissible on February 9, 2006. As a result of the Supreme court’s declaration,
and, in particular, of the Ministerial Decree dated March 17, 1993 and any
Ticket One motioned for a hearing set for October 28, 2009 during which the TAR
subsequent and related deed including the renewal of the Lotto concession in
of Lazio closed the presentation of the arguments by the parties. To date the TAR
favor of Lottomatica. Stanley has intervened in the appeal in support of Sisal.
of Lazio has not issued a ruling.
Lottomatica has made an appearance in the case at issue. The hearing to discuss
the case at issue has been set to March 10, 2010.
On November 19, 2007 the TAR of Lazio ordered AAMS to lodge the
According to the opinion of Lottomatica’s counsels the request to set the
hearing brought forth by Ticket One is insufficient and therefore it is not possible
to proceed.
documents relating to the awarding of the Lotto concession within 60 days.
As for the procedure before the court of Appeal, the civil Judge after
Specifically, AAMS must lodge the following: assignment deeds and the renewal
reserving on the request of suspension of the proceeding raised by Lottomatica
and/or extension of the concession to the prosecuting company, a copy of the
and LIS, by order dated July 28, 2004 rejected it and postponed the hearing to
arbitration award of AAMS vs. Lottomatica, and the deeds issued by the European
June 21, 2006. At this hearing, where admitted witnesses were to be deposed, the
community regarding the matter in issue.
Judge declared a suspension because of the merger of Lottomatica into
counsels are of the opinion that the challenge brought forth by Sisal is
groundless.
NewGames S.p.A. On June 23, 2006, Ticket One presented a petition to revoke the
suspension decision. On October 27, 2006, the court of Rome revoked the
decision whereby the action had come to a halt and postponed the hearing to
2. Ticket One S.p.A. Litigation
January 26, 2007 for the examination of witnesses.
On August 12, 2003, Ticket One S.p.A. (“Ticket One”), which operates in the
The testimonies of Elisabetta cragnotti (former SS Lazio soccer team
services business sector primarily in the ticketing services area, filed a suit with the
manager) and Fabrizio conti (Milan Indoor Tennis championship organizer) were
TAR of Lazio against Lottomatica and Lottomatica Italia Servizi S.p.A (LIS ) to
heard on January 26, 2007. At the July 5, 2007 hearing the Judge, having taken
obtain, among other things, an order requiring Lottomatica to offer its network
note of Ticket One’s waiver to depose additional witnesses, upon the parties’
to third parties under the same conditions as those offered to the controlled
request adjourned the case to the December 18, 2008 hearing for stating his
company Lottomatica Italia Servizi S.p.A..
conclusions. As of the December 18, 2008 hearing, the Judge has closed the
Before serving the appeal dated March 12, 2003, Ticket One had asked
Lottomatica for the right to use its network. Lottomatica rejected Ticket One’s request.
P 106
presentation of the arguments by the parties.
The Judge issued the ruling on June 25 - August 4, 2009 stating that
Lottomatica has no obligation to allow third parties use of its network and
AAMS to not make the awarding until the administrative judge rendered his
therefore dismissing all charges brought forth by Ticket One.
decision.
3. Instant and Traditional Lotteries
In the opinion of Lottomatica, upon advice from its counsel, the appeal by Poste
Lottomatica participated, as a representative of a temporary joint venture, in the
Italiane S.p.A. and ETI cannot have any effect on the award to RTI Lottomatica of
call for tenders organized by the AAMS for the management of the national
the operation of Instant and Traditional Lotteries, which occurred following the
Traditional and Instant Lotteries. In a letter dated July 30, 2001, the AAMS
abandonment of the main action by Snai and Venturini and is thus unappealable.
informed Lottomatica that the tender had been awarded to the aforesaid joint
In point of fact, the appeal by Poste Italiane S.p.A. and ETI is against the
venture (comprised of Scientific Games, Arianna 2001 S.p.A., Poligrafico
AAMS letter of January 21, 2003 to not proceed with the awarding and not
calcografica & cartevalori S.p.A., Eis, Tecnost Sistemi S.p.A. and Servizi Base 2001
against the awarding itself. Again in the opinion of the counsels assisting
S.p.A, in addition to Lottomatica).
Lottomatica, the invitation made by Poste Italiane S.p.A. and ETI heads into a
The award of the concession to the joint venture has been the subject of a
completely different direction with respect to that affirmed in the appeal, i.e. to
number of challenges by the other participants to the tender as summarized
not further delay the awarding. As a result, the separate appeal by Poste Italiane
below:
S.p.A. and ETI can only end with the case being dismissed.
a) appeal brought forth by Sisal: Sisal abandoned this suit at the April 10, 2002
Further, as already confirmed by Lottomatica counsel, the deadline has passed
hearing, therefore this action may be considered definitively concluded;
for Poste Italiane S.p.A. and ETI to contest the awarding to the Lottomatica
b) appeal filed by the consortium (comprised of Autogrill, GTEch corporation,
temporary joint venture, with the result that they cannot continue with the
Oberthur Gaming Technologies S.a.S. and others). The appeal was delisted
lawsuit.
on October 28, 2004, and has been declared expired by the council of State
on March 30, 2007, since no motion for scheduling a hearing has been filed
4. Summons to Formula Giochi Shareholders
within the required term;
On October 26, 2005, the companies Karissa holding S.A., cored International
c) appeal of the Esultalia consortium, (comprised of Snai, Venturini e c S.p.A.,
S.A., Mr. Massimo Maci and shareholders of Formula Giochi S.p.A. in liquidation
Poste Italiane S.p.A. and Ente ETI): Poste Italiane S.p.A. and ETI intervened in
(operating in the gaming collection and wagering market) served summons on
an ad adiuvandum appeal filed by Snai and Venturini with the purpose of
Lottomatica and Sisal, to appear - on January 30, 2006- before the court of
contesting the award of the tender on July 30, 2001. At the May 14, 2003
Appeal of Rome.
hearing, Poste Italiane S.p.A. and ETI requested that the case be delisted. On
The plaintiffs requested the assessment of the liability of Lottomatica and
July 21, 2003, Snai and Venturini notified all parties involved that they
Sisal S.p.A. for engaging in the anticompetitive conduct enjoined by the order of
intended to forgo the appeal, making the award unappealable, after which
the Italian Antitrust Authority of November 23, 2004, which conduct, the
the concession agreement was signed by the Lottomatica temporary joint
plaintiffs allege, was responsible for (i) their inability to sell their stake (for €3.0
venture. In December 2002, Snai, Venturini, Poste Italiane and ETI asked the
million) and (ii) Formula Giochi S.p.A.’s inability to enter the gaming and
AAMS to award the contract to them. In a letter dated January 21, 2003, the
wagering market, which caused the business value of Formula Giochi to decrease
AAMS responded that it could not award the contract to them prior to the
by €34.2 million.
resolution of the dispute. This letter was then challenged by Snai and
The plaintiffs also requested, that Lottomatica and Sisal S.p.A. be ordered,
Venturini on grounds that are additional to the previously filed appeal, and
jointly and severally, to pay directly to the plaintiffs’ damages totaling €37.2
by Poste Italiane S.p.A. and ETI in a separate appeal. On July 17, 2003, Poste
million in the aggregate.
Italiane S.p.A. and ETI filed a motion to schedule a hearing to resolve the
On January 10, 2006 Lottomatica presented before the court of Appeal that
dispute having as object the January 21, 2003 deed under which the
apart from a number of prejudicial issues concerning, inter alia, plaintiff
Administration refused to proceed with the awarding in favor of the Esultalia
legitimacy, the documents of the proceedings initiated by the Italian Antitrust
consortium. On July 25, 2003, Poste Italiane S.p.A. and ETI requested the
do not indicate that Lottomatica’s conduct was prejudicial and detrimental to
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2009 Annual Report
Formula Giochi. conversely, the documents in the trial dossier, literally transposed
gaming market;
in the Authority order to close the case, and in particular, the statements made
c) if the response to point 2 was positive, whether it was possible to quantify the
during the November 10, 2003 hearing by the managing director of Formula
damages suffered by Formula Giochi for having missed said opportunity,
Giochi, show that “the dissolution of the recently established third pole” derives
referring to valid economic parameters and according to rational methods
from causes that are not related to Lottomatica.
leading to statistically plausible conclusions, and a prudent evaluation.
Lottomatica duly appeared on January 10, 2006. Formula Giochi S.p.A.
appeared through its receiver at the January 30, 2006 hearing. At the February
The expert opinion presented on February 21, 2008 included:
6, 2006 hearing the Appeal court granted the parties 30 days to submit their
“the financial reports of Formula Giochi and its subsidiaries demonstrate that
remarks. By order of March 15, 2006 the court of Appeal granted the parties 30
at the launch of the strategic plan in March 2003 the group did not generate
days to file their briefs as well as to state and amend their claims, objections and
revenues and was in a liquidity crisis which resulted in serious financial
conclusions already made in addition to 30 more days for their replies.
tensions”, “the group was in need of an immediate injection of over €4
In a brief dated March 31, 2006, Karissa and others, by presenting their
million only to cover the losses incurred in 2002 and was therefore not able
motions consequent to the occurred appearance of Formula Giochi S.p.A. have
to independently undertake an operation in the ex coni gaming market”.
acknowledged the entrance into a settlement agreement between the same
The expert witness further includes that based on the economic information
Formula Giochi and Sisal S.p.A. to settle the lawsuit pending between them. This
supplied by Lottomatica regarding the management of ex coni games, the
agreement envisaged payment of €0.5 million to Formula Giochi.
Formula Giochi group would not have generated any profits if it had been
In a brief duly filed by Lottomatica, Lottomatica asserted that Karissa holding
granted free access to the ex coni gaming market;
S.A.’s active legitimacy no longer existed following the appearance of Formula
“the absence of Formula Giochi from the ex coni games tender resulted from
Giochi, as well as the non-admissibility of the action by Formula Giochi, to be
the group’s financial difficulties, the lack of authorization of the strategic
added to the already-formulated preliminary and merit objections.
plan and the lack of financial support from the shareholders”.
It was noted how, in the merit, the €0.5 million settlement between Sisal and
Formula Giochi against claims by the latter amounting to €34.0 million provided
The expert witness included that Lottomatica and Sisal did not cause any damage
an idea of Formula Giochi’s claims, so much so that it attributed the failure of
to Formula Giochi and that it was the company’s financial and economic
the third pole to Sisal, who had a Director, in common with Formula Giochi. Such
difficulties which prevented the company from participating in the ex cONI
circumstances do not exist for Lottomatica, which had no relations with Sisal with
games tender.
regard to Formula Giochi (as shown by the Authority order), nor with Formula
Giochi itself.
On November 29, 2006, the court of Appeals, accepting the request made by
Due to the extremely favorable outcome of the expert opinion, Lottomatica
and its legal representatives retained that it was not necessary to deposit their
reasoning regarding the expert opinion.
the opposing party, designated Angelo Novellino as expert witness in order to
At the June 9, 2008 hearing the court of Appeals reserved any observations
estimate any damages. The hearing was postponed to February 19, 2007 for the
regarding some objections presented by Formula Giochi pertaining to the expert
swearing and queries formulation.
witness testimony. The court of Appeals claimed that the objections should be
After hearing the expert witness’s testimony, the court of Appeals admitted
the following queries:
however included during the decision-making process. The closing hearing has
been set to October 4, 2010.
a) the profits which Formula Giochi would have earned if it had had access to
the gaming market according to conservative criteria which took into account
5. Network Tender Appeal
the company’s size, its ability to penetrate the market and its investment
On October 27, 2005, the joint venture composed of Albacom-Fastweb served an
capacities;
appeal on Lottomatica before the TAR of Lazio challenging the tender process
b) whether Formula Giochi had suffered any damages from the inability to
relating to, and seeking the annulment, after suspension, of a contract for data
present itself as an operator other than Sisal and Lottomatica in the Italian
transmission services on the private Lotto network operated by Lottomatica in
P 108
favor of Telecom Italia; and requested that Lottomatica be sentenced to pay
damages.
Lottomatica filed an appearance requesting that the claims made by plaintiff
be rejected.
At the hearing of November 23, 2005, the JV Albacom-Fastweb withdrew its
suspension request. The hearing was scheduled for October 11, 2006, at which
Lottomatica filed a motion to suspend the hearing due to the merger of
Lottomatica into NewGames S.p.A. The appeal was sent for a decision specifically
in the notices printed on the back of the tickets (about €250.00 per position);
c) 29 rulings which rejected the main claim to pay winning tickets, but the
consortium was sentenced to reimburse the cost of the tickets, in addition to
damage payment (about €300.00 per position), for it was not proven during
the trial that the game regulations had been put up in the individual retailers’
premises;
d) 79 rulings accepted payment of the prize amount in addition to claim
compensation.
highlighting the cause of the suspension, on which the TAR of Lazio reserved to
decide. On October 11, 2006 the TAR of Lazio decided to interrupt after taking
With regard to unfavorable rulings, the consortium instructed its counsels to file
note of the merger of Lottomatica into NewGames S.p.A.
an appeal.
On January 9, 2007 the RTI Albacom - Fastweb notified resumption of the
proceeding. According to the legal counsel of Lottomatica, the resumption of the
7. AAAvanti vs. Lottomatica Italia Servizi
appeal was notified late. Furthermore, on November 4, 2008 Fastweb notified its
On August 1, 2005 the company known as AAAvanti S.r.l. brought a case against
withdrawal from the appeal.
Lottomatica Italia Servizi S.p.A. before the civil court of Rome regarding noncompliance with the ticketing contract related to the 1st Festival Internazionale
6. “LAS VEGAS” Instant Lottery Petition
di Musica ed Arte contemporanea operated by Lottomatica Italia Servizi S.p.A.
Non-winning “Las Vegas” instantaneous lotteries (Scratch and Win) tickets have
and entered into on June 6 - 8, 2006. Due to the aforesaid non-compliance, the
been presented to the consorzio Lotterie Nazionali (National Lottery consortium)
company AAAvanti requested reparations for exemplary damages totaling €0.5
for payment starting from April 2006.
million. Lottomatica Italia Servizi S.p.A. appeared contesting the ex adverso
To date 415 petitions and 102 requests for injunctive payments have been
conclusions. The first presentation hearing was held on February 16, 2006. After
presented to the consorzio Lotterie Nazionali for a total sum of €5.8 million.
ascertaining cross-examination correctness, the Judge scheduled a hearing for
There have also been numerous requests for out-of court payments. All the claims
October 10, 2006. On the hearing of October 10, 2006 the Judge decided to
(whether in or out of court) are identical in all the payment requests of non-
postpone to May 4, 2007 and thus giving until March 5, 2007 to deposit the new
winning tickets. The players claim that according to their interpretation of the
requests and until April 20, 2007 to bring in the evidence.
Game Regulations established with the Finance Ministry Decree of February 16,
At the December 18, 2007 hearing, the court postponed the case to May 29,
2005, the amounts corresponding to the winnings indicated in the various areas
2009 for final ruling. On May 29, 2009 the final hearing was held and the parties
of the tickets are paid every time cards with symbols from 10 to K appear even if
submitted their statements of legal positions. The parties are awaiting the court’s
the regulations state that all the cards must have the same points. As a matter of
ruling.
fact, the players argue that cards from 10 to K are worth the same in all French
card games.
The LIS legal counsel is of the opinion that the case may have a negative
outcome.
The consortium deems these requests to be unfounded in that they do not
follow the Game Regulations which explicitly describe the qualifications of a
8. AAMS Tender for the Awarding of Sporting Rights
winning ticket.
On February 26, 2007, Aycons (Società consortile a Responsabilità Limitata),
To date, the following rulings have been issued:
a) 187 rulings fully accepting the reasons put forward by the counsels assisting
the consorzio Lotterie Nazionali during the trial;
b) 15 rulings in which, although rejecting the main claim to pay winning tickets,
the Judge accepted the damage compensation claim for deceptive advertising
served a notice of appeal to the Regional Administrative Tribunal of Lazio (TAR)
challenging the Decree of December 21, 2006, published in the Official Journal of
the Italian Republic (GURI) on December 28, 2006, which finally awarded the
point of sale rights for sporting games as well the activation of the online
sporting game network.
P 109
2009 Annual Report
Lottomatica, on behalf of a company to be incorporated, was awarded the
In the hearing of May 24, 2006, the Arbitration Board approved the expert
following: the concession of the gaming rights according to article 38 of the
witness Mr. Enrico Proia to make a technical-accounting review of the documents
Legislative Decree n.223/06, the sale rights according to law n. 248 of August 4,
produced by Totobit on request by Navale Assicurazioni, and scheduled the
2006 and the rights to activate the online sporting game network.
following hearing for June 7, 2006.
On April 16, 2007, through a filing reporting additional reasons, Aycons
served a notice to Lottomatica requesting the suspension of (i) the notice of
On January 22, 2007 the Arbitration Award partly accepted the requests made
by Totobit and ruled Navale Assicurazioni S.p.A. to pay the sum of €239,911.66.
February 23, 2007 with which AAMS communicated to Lottomatica Scommesse
The amount refers exclusively to enforcement actions prior to April 28, 2005.
the final award of the concession and (ii) the agreement for the concession of
The Arbitration Award partly accepted the counterclaim of Navale Assicurazioni
the public games as awarded to Lottomatica Scommesse.
S.p.A. regarding some requests of payment made by Totobit. The Arbitration
Aycons claims that Lottomatica, as sole stockholder of the company to be
Board resulted in the sentencing of Totobit to pay the sum of €200,654.19. half
established, in violation of article 4.2 of the tender, still held 35% of the cogetech
the arbitration proceeding expenses are equally divided between both parties;
share capital on the expiry date for the presentation of the tender participation
the other half is to be borne by Totobit.
application (October 20, 2006) through its subsidiary GTEch.
On March 16, 2007 Lottomatica appeared before the TAR of Lazio denying
Aycons and submitted document demonstrating that GTEch (100% owed by
Lottomatica and its counsels lodged the appeal for the sentencing in
question. At the June 6, 2008 hearing the court of Appeals of Rome set the pretrial evidentiary hearing to November 18, 2011.
Lottomatica), further to authorization from AAMS, had sold its share of cogetech
on October 16, 2006 and therefore before the said deadline of October 20, 2006.
10. Videolotteries Litigation on the AAMS Authorization
As result, when Lottomatica presented its application to participate in the tender,
Following the modifications made by the 2006 Budget Law to article 110, section
there was no connection with and/or control of cogetech by Lottomatica.
6 of the R.D. no. 773 of 1931 TULPS (consolidated Public Safety Act) where
As of yet, Aycons has not requested to set a merit hearing and it can therefore
be deduced that the plaintiff will not continue the case.
appropriate gaming machine is defined as that connected to the data
transmission network as per article 14-bis, section 4 of Presidential Decree no.
640 of 1972 - AAMS confirmed -with the communications of October 25 and
9. TOTOBIT - Navale Assicurazioni Arbitration
November 2, 2005- that all the gaming machines which had been authorized for
Totobit Informatica Software e Sistemi S.p.A. (“Totobit”), a company of the
activation, but not connected to the data transmission network managed by the
Lottomatica Group, within the scope of its business activities enters into contracts
concessionaires, had to be removed from the retailing premises where they were
regarding IT services (cellular phone top-ups) with third party retailers.
located and placed in the warehouse after launching the blockage procedure.
On January 23, 2002 Totobit executed with Navale Assicurazioni S.p.A. an
Furthermore, on June 1, 2006 AAMS notified all the concessionaires that as of
insurance policy in order to guarantee the fulfillment of payment obligations
July 1, 2006 it would have revoked the permits related to the non connected
under the corresponding contracts regarding the above mentioned activities
gaming machines with a fine ranging from €1,000 to €6,000 for each gaming
performed by the retailers. The insurance policy had a 3 year duration beginning
machines which said resulted to be unconnected for more than 30 days, as
from January 28, 2002. According to the policy provisions, any breach on the part
foreseen in article 110, section 9, let. c) of the said TULPS.
of the retailers may be reported by Totobit to Navale Assicurazioni within and not
The above mentioned article 110 of TULPS provides that the additional
later than 3 months of the policy’s annual expiration; the guarantee outside this
sanctions for said violations result in the lack of authorization from AAMS for
deadline would no longer be valid.
the installment of new amusement with prize machines to the violator for a
On November 22, 2004 Navale Assicurazioni sent Totobit a notice informing
period of 5 years.
the same that the policy would be terminated effective as of January 28, 2005,
In order to verify the compliance with the above mentioned laws, AAMS sent
thus blocking the settlement of claims allegedly reported late by Totobit for a
its own inspectors to ensure that the adjustments were adhered to. In the cases
total of €1.5 million. In view of said missed payment, the arbitration proceeding
where the owner of the terminals did not carry out the necessary modifications
was initiated on November 8, 2005.
and where AAMS held it was also the concessionaire’s responsibility and fault, it
P 110
has filed a claim, including Lottomatica Videolot Rete S.p.A., for having
request lodged by AAMS for the payment of €4.0 billion by Lottomatica Videlot
“permitted the use of terminals which do not conform to the prescriptions as in
Rete.
the previously stated point 6”.
On January 8, 2008, the Regional Public Prosecutor for the Audit Department
Lottomatica Videolot Rete S.p.A. at first contested such claims but
served notice to Lottomatica Videolot Rete regarding the charges brought forth
subsequently, in order to not risk being subject to the above mentioned
which partially reduced the penalties to approximately €3 billion, breaking down
additional sanction, decided to no longer contest the violations claimed by AAMS.
to:
The further benefit for Lottomatica Videolot Rete of such decision is that when
1) €400,000.00 plus interests for the “delay in the launch of the online network”
payment of the sanctions is made it will be in a reduced amount.
(which should have been launched by September 13, 2004 - effective launch
date was October 31, 2004);
11. Request for conclusions from the Audit Department on the Setting-Up and
2) €1.0 million plus interests for the “delay in the activation of the network”
Operation of a Screen-Based Gaming Management Network
(which should have been completed by October 31, 2004 - effective
On June 1, 2007, the Regional Public Prosecutor of the Government Audit
completion date was December 31, 2004);
Department (corte dei conti) served Lottomatica Videolot Rete S.p.A., and all
3) €991,456.00 plus interests for the “delay in the connection of the gaming
other nine concessionaires for the operation of gaming machines, an invitation
machines to the online network” (which should have occurred no later than
to submit their briefs with regard to an investigation on possible damages to the
State Treasury.
The Regional Prosecutor contested that Lottomatica Videolot Rete S.p.A., in
December 31, 2004 - effective completion date was February 2, 2006);
4) €3.0 billion plus interests for “not having fulfilled all service level obligations
provided for in section 2, letter b) of the concession”.
conjunction with some AAMS officials, inaccurately did not fulfill a number of
obligations relating to the concession and failed to comply with certain service
The first hearing before the Audit Department was set to December 4, 2008.
levels. The damage to the State Treasury supposedly caused by Lottomatica
At the same time, on March 13, 2008 AAMS and Lottomatica Videolot Rete
Videolot Rete S.p.A., in conjunction with said AAMS officials, is alleged to add up
signed an amendment to the original concession contract, more favourable to
to approximately €4.0 billion.
the concessionaires.
Lottomatica Videolot Rete S.p.A. filed a motion on June 27, 2007, contesting
With regard to the indications set forth by the above mentioned TAR ruling
the outcome of the Regional Prosecutor and arguing to have always complied
and based on the above mentioned additional clause signed between the parties,
with its obligations as concessionaire and requesting the dismissal of the case.
AAMS, with letters dated as of May 23 and 27, 2008 notified Lottomatica Videolot
At the same time, AAMS served Lottomatica Videolot Rete and the other nine
Rete the start of investigations with reference to the inaccurately fulfilling the
concessionaires the same charges as those filed by the Regional Prosecutor and
online activation and management obligations relating to the concession and
requested the payment of damages for the same amount.
failure to comply with service levels. As specified in the letter dated May 27, 2008
Lottomatica Videolot Rete challenged the charges brought forth by AAMS
and appealed before the TAR of Lazio requesting the annulment of the above.
Through court order dated July 25, 2007 the TAR of Lazio accepted the
appeals brought forth by Lottomatica Videolot Rete and the other
concessionaires and annulled the request for damages presented by AAMS. The
hearing to discuss the merit was set to January 23, 2008. Lottomatica Videolot
the failure to comply with the obligation to “supply responses to the request for
gaming wagers data” presented by AAMS through its access gateway.
AAMS
further stated that in order to calculate damages, the Ministry of Finance
nominated an ad hoc technical commission.
To date, AAMS has not yet issued any communication regarding the 4th
penalty.
Rete presented a technical report prepared by sector experts demonstrating its
Regarding the letter dated May 23, 2008, AAMS presented the terms within
complete adherence to the concession contract obligations. The report illustrates
which the concessionaires would have to launch the online network (Article 3,
how Lottomatica Videolot Rete implemented a complete gaming system that is
section 1, letter b) of the concession), complete its activation (Article 3, section
efficient and entirely functional.
1, letter d)) and connect the remaining 5% of gaming machines (Article 3,
On April 1, 2008 the TAR of Lazio issued a ruling annulling the damages
section 3).
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2009 Annual Report
On June 6, 2008 AAMS further challenged Lottomatica Videolot Rete for the
pending ruling of the Audit Department. The Regional Prosecutor has six month’s
violation of the obligations set forth in Article 3, section 1, letters b) and d), and
time to reactivate the case before the Audit Department. To date, Lottomatica
sections 2 and 3 of the concession. Lottomatica Videolot Rete responded to the
Videolot Rete has not been notified if the case has been reactivated.
challenges stating that:
(i) The charges presented by AAMS regarding the failure to comply to the
12. SUPERENALOTTO Tender Appeal
obligation to launch the online network within 65 days of the release date of
On October 24, 2007, Stanley International Betting Limited served an appeal on
the concessionaire list are ungrounded in so far as Lottomatica Videolot Rete
AAMS, Lottomatica, Sisal and Snai before the TAR of Lazio asking for the
notified AAMS the completion of the launch with the letter dated September
annulment, upon measure of suspension, of the deeds of the tender launched
13, 2004. The testing on the network was carried out on October 11, 2004;
by AAMS on June 29, 2007 for granting the exclusive concession for operating
and
SuperEnalotto. Stanley believes that the tender deeds are in conflict with
(ii) Reiterating that the launching activating and initial activation of the
communication systems resulted to be much more complex than originally
expected and that the complexity was impossible to foresee.
European community rules and principles with regards to freedom of
establishment and service provision.
A similar appeal, which however has not been served on Lottomatica but to
AAMS and Sisal, was filed by Index Group.
Through letters dated September 1, 2008, October 1 and October 16, 2008 AAMS
On November 21, 2007, the TAR of Lazio declared the appeal brought forth
communicated the completion of the investigation and application the following
by Stanley to be inadmissible in part and rejected it in part upon merits. Stanley
fines:
contested the TAR of Lazio’s ruling before the council of State, presenting again
a) €33,490.00 for the failure to comply with the timing obligations to launch
the same arguments as presented before the TAR and requested the suspension
the online network;
b) €152,768.00 for the failure to comply with the obligations to complete the
activation of the online network;
c) €216,565.00 for the failure to comply with the obligations to connect the
remaining 5% of the gaming machines.
of the tender deeds because near to the conclusion.
On January 26, 2008, upon the completion of opening of the envelopes
containing the economic offers, the tender was awarded to Sisal S.p.A. On
February 11, 2008 Stanley appealed the awarding procedure.
On July 8, 2008 the council of State denied the appeal issued by Stanley and
claimed the reasons set forth by said appeal to be inadmissible.
Though the above fines do not regard the 4th and largest fine (calculated by the
Regional Prosecutor as €3.0 billion) they nevertheless have been significantly
reduced compared to the original calculation presented by AAMS and dismissed
by both the TAR of Lazio and the Audit Department Prosecutor.
The Lottomatica Videolot Rete filed the appeals against the above indicated
3 fines before the Regional Administrative court (TAR) of Lazio.
The TAR of Lazio dismissed the motions filed by Lottomatica Videolot Rete on
November 30, 2009 and in January, 2010 Lottomatica Videolot Rete filed the
appeal before the State council.
The award of the tender was also challenged by Snai who claimed of errors
in the valuations carried out by the Tender Award commission.
On June 6, 2008 Lottomatica filed an appeal with the TAR of Lazio
challenging
the
April
2,
2008
AAMS
communication
(protocol
no.
2008/12798/giochi/Ena) in which Lottomatica was notified of the definitive
awarding of the tender to Sisal. With said appeal, Lottomatica challenged the
offer presented by Sisal. Stanley included its statement in the appeal brought
forth by Lottomatica. Snai has filled its own separate appeal.
At the October 8, 2008 hearing, the TAR of Lazio postponed the negotiation
At the same time, Lottomatica Videolot Rete filed before the Supreme court
for the preliminary motion brought forth by Lottomatica to October 22, 2008 in
a motion whether the application of the penalties provided for the concession fall
order to obtain all necessary deeds relating to the awarding procedure (the
within the “administrative reserve” of AAMS. The declaration of jurisdiction of
discussion of the same preliminary motion brought forth by Snai was set for the
the TAR of Lazio would therefore exclude that of the Audit Department.
same date).
On December 4, 2009 the Supreme court declared the jurisdiction to be that
The award of the tender to Sisal was also challenged by Snai on the grounds
of the Audit Department resulting in the annulment of the suspension of the
of erroneous evaluations carried out by the Awarding commission. The TAR of
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Lazio issued a court order on June 4, 2008 requesting the tender documentation
from AAMS.
On October 22, 2008 the TAR of Lazio issued a court order granting
Lottomatica and Snai the opportunity to examine all tender deeds.
The three plaintiffs claim that AAMS violated both Italian and European
regulations by extending the testing period of the online lotteries without a
public tender given that said lotteries were not included in the concession signed
with the National Lottery consortium on October 14, 2003.
On April 16, 2009 AAMS sent Lottomatica an official copy of Decree of April 7,
The National Lottery consortium stated that the concession in question is still
2009 which constituted a specific committee to control the anomalies in the offer
valid and that the online instant lotteries offer the same games through a new
presented by Sisal. Said committee communicated the conclusion of its review and
channel. Therefore given that instant lotteries are included in the consortium’s
evaluation of the offer in question on May 25, 2009. In addition AAMS notified
activity then the online instant lotteries should thus be operated by the same
Lottomatica on June 23, 2009 of the Decree of June 10, 2009 with which the final
consortium.
review of the tender award to Sisal was completed with a positive outcome.
AAMS presented the said conclusions regarding the offer presented by Sisal
at the May 27, 2009 hearing. SNAI has already submitted additional claims
against the above mentioned evaluation of the Sisal offer. Lottomatica is doing
the same.
The discussion hearing of the precautionary measure was set to September
24, 2008 during which the TAR of Lazio deferred directly to the merit discussion
set for January 28, 2009.
At the January 28, 2009 hearing, the TAR of Lazio closed the presentation of
the arguments by the parties.
The April 16, 2009 appeal brought forth by Lottomatica requested the TAR of
The TAR of Lazio denied the appeal brought forth by Intralot Italia S.p.A.,
Lazio to ascertain its right to review the administrative documents requested on
Eurobet Italia S.r.l. and Sisal Match Point S.p.A. on January 28, 2009. The ruling
February 24 and March 19, 2009 (Sisal and points of sale contract and AAMS
was appealed before the Administrative court (consiglio di Stato) by Sisal Match
authorization, as well as documentation regarding AAMS review). AAMS denied
Point S.p.A. and Intralot Italia S.p.A. and a hearing to discuss the matter was set
Lottomatica access to said documents on March 20, 2009. The ruling issued on
to July 28, 2009 then postponed to November 10, 2009 at which time the
June 10, 2009 by the TAR of Lazio admitted the appeal presented by Lottomatica
Administrative court (consiglio di Stato ) dismissed both appeals.
and ordered AAMS to grant Lottomatica access to said documents.
The decree extending the experimental period of the online instant lotteries
was also appealed by Snai S.p.A. on the grounds of the illegitimacy of the
13. Online Instant Lotteries
Authorities activities given that Snai is also a concessionaire and that it was
On April 13, 2006 AAMS issued a decree providing for a preliminary experimental
neither notified nor included in the measure.
phase for the collection of online lottery wagers via internet, television, terrestrial
According to Snai, the lack of participation in and procedure of the regulation
digital channels and satellite. Given that the National Lottery consortium
would “reflect on the correct yielding of the power to prolong [the trial period]
(consorzio Lotterie Nazionali) operates the traditional and instant lotteries, it
under both a judicial and legal profile.”
was selected by AAMS to manage the experimental technical and organizational
system for the production and sale of online lotteries. Said decree further granted
On September 11, 2008 the TAR of Lazio denied the suspension request
brought forth by Snai.
the role of intermediary to the entities with the concessions to operate gaming,
sports pools and betting.
14. Instant Lotteries Tender Appeal
The experimental period was set with a duration of 18 (eighteen) months
The Amministrazione Autonoma Monopoli di Stato (AAMS) issued a tender on
effective as of the launch date of the first online lottery. AAMS was given the
August 19, 2009 for a new nine-year Scratch & Win concession effective as of June
option whether to extend the testing period up to another 18 (eighteen) months.
10, 2010. The deadline to present an offer was October 12, 2009.
The above mentioned period was in fact extended on March 20, 2008 with the
issuing of a decree by the Gaming General Director of AAMS.
Prior to said deadline Sisal requested the annulment of the tender before the
Regional Administrative court (TAR) of Lazio on October 9.
Sisal Match Point S.p.A, Intralot Italia S.p.A. and Eurobet Italia S.r.l. separately
The Sisal request about the adoption of precautionary measures was denied;
appealed said decree before the TAR of Lazio and requested the suspension of
but on November 11, 2009 the TAR admitted the appeal against consorzio
the ruling by the TAR of Lazio.
Lotterie Nazionali/AAMS deciding the annulment of all acts of said tender .
P 113
2009 Annual Report
AAMS and consorzio Lotterie Nazionali filed an appeal before the Supreme
In June 2004, the judge reviewing these charges prior to their being filed
Administrative court (consiglio di Stato) against the TAR of Lazio decision by
refused to initiate the criminal charges against the nine individuals but instead
asking for the annulment of the same.
granted a request by the Brazilian Federal Police to continue the investigation
which had been suspended upon the recommendation of the Public Ministry
GTECH’s Business
Attorneys that criminal charges be brought. The Brazilian Federal Police
subsequently ended their investigation and presented a report of their findings
1. cEF contract Proceedings
to the court. This report did not recommend that indictments be issued against
Messrs. Rocha or Rovai, or against any current or former employee of GTEch or
Background
GTEch Brazil. The Public Ministry Attorneys have since requested that the
In January 1997, caixa Economica Federal (“cEF”), the operator of Brazil’s
Brazilian Federal Police reopen their investigation. GTEch understands that
National Lottery, and Racimec Informática Brasileira S.A. (“Racimec”), the
investigations by the Brazilian Federal Police may be ongoing, including an
predecessor of GTEch Brazil entered into a four-year contract pursuant to which
investigation respecting the award of, and performance under, the 1997 contract
GTEch Brazil agreed to provide on-line lottery services and technology to cEF
and the 2000 contract.
(the “1997 contract”). In May 2000, cEF and GTEch Brazil terminated the 1997
contract and entered into a new agreement (the “2000 contract”) obliging
GTEch is cooperating fully with the investigations by Brazilian authorities
and has encouraged Messrs. Rocha and Rovai to do the same.
GTEch Brazil to provide lottery goods and services and additional financial
Notwithstanding the favourable resolution of the Brazilian Federal Police’s
transaction services to cEF for a contract term that, as subsequently extended,
initial investigation, on June 21, 2006, a special investigating panel of the
was scheduled to expire in April 2003. In April 2003, GTEch Brazil entered into an
Brazilian congress issued a report and voted, among other things, to ask the
agreement with cEF (the “2003 contract Extension”) pursuant to which: (a) the
Public Ministry Attorneys to indict 84 individuals, including one current and three
term of the 2000 contract was extended into May 2005, and (b) fees payable to
former employees of GTEch Brazil, alleging that the individuals helped GTEch
GTEch Brazil under the 2000 contract were reduced by 15%. On August 13, 2006,
Brazil to illegally obtain the 2003 contract Extension. GTEch found nothing in the
all agreements between GTEch and cEF terminated in accordance with their
congressional report to cause it to believe that any present or former employee
terms.
of GTEch or GTEch Brazil committed any criminal offence in connection with
obtaining the 2003 contract Extension.
Criminal Allegations Against Certain Employees
GTEch conducted an internal investigation of the 2003 contract Extension
In late March 2004, federal attorneys with Brazil’s Public Ministry (the “Public
under the supervision of the independent directors of GTEch holdings
Ministry Attorneys”) recommended that criminal charges be brought against nine
corporation. GTEch found no evidence that GTEch, GTEch Brazil, or any of their
individuals, including four senior officers of cEF, Antonio carlos Rocha, the former
current or former employees violated any law, or is otherwise guilty of any
Senior Vice President of GTEch and President of GTEch Brazil, and Marcelo Rovai,
wrongdoing in connection with these matters.
then GTEch Brazil’s marketing director and currently employed at GTEch’s site in
chile.
Civil Action By The Public Ministry Attorneys
The Public Ministry Attorneys had recommended that Messrs. Rocha and
In April 2004 the Public Ministry Attorneys initiated a civil action in the Federal
Rovai be charged with offering an improper inducement in connection with the
court of Brasilia against GTEch Brazil; 17 former officers and employees of cEF;
negotiation of the 2003 contract Extension, and co-authoring, or aiding and
the former president of Racimec; Antonio carlos Rocha; and Marcos Andrade,
abetting, certain allegedly fraudulent or inappropriate management practices of
another former officer of GTEch Brazil. This civil action alleges that the
the cEF management who agreed to enter into the 2003 contract Extension.
defendants acted illegally in entering into, amending and performing, the 1997
Neither GTEch nor GTEch Brazil is the subject of this criminal investigation, and
contract, and the 2000 contract.
under Brazilian law, entities cannot be subject to criminal charges in connection
with this matter.
P 114
This lawsuit seeks to impose damages equal to the sum of all amounts paid
to GTEch Brazil under the 1997 contract and the 2000 contract, and certain
other permitted amounts, minus GTEch’s proven investment costs. The
above, and are accordingly unlikely to represent an independent potential source
applicable statute also permits the assessment of interest and, in the discretion
of liability for GTEch.
of the court, penalties of up to three times the amount of the damages
imposed. GTEch estimates that through the date of the lawsuit, GTEch Brazil
2. IcMS Tax
received under the 1997 contract and the 2000 contract a total of
On July 26, 2005, the State of São Paulo challenged GTEch Brazil for classifying
approximately 1.5 billion Brazilian Reals (or approximately €596.9 million at
the remittances of printing ribbons, rolls of paper and wagering slips
currency exchange rates in effect as of December 31, 2009). In addition,
(“consumables”) to lottery outlets in Brazil as non-taxable shipments. The tax
although it is unclear how investment costs would be determined for purposes
authorities disagree with that classification and argue that these consumables
of this lawsuit, GTEch estimates that its investment costs through the date of
would be subject to IcMS tax as opposed to the lower rate ISS tax that GTEch
the lawsuit were approximately between 1.2 billion and 1.4 billion Brazilian
Brazil paid. The tax authorities argue that in order for printed matter to be
Reals (or approximately between €477.5 million and €557.1 million at currency
considered non-taxable it has to be “personalized.” To be considered
exchange rates in effect as of December 31, 2009) in aggregate; however, these
personalized, the consumables must be intended for the exclusive use of the
investment costs could be disputed by cEF, and are ultimately subject to
one ordering them. GTEch Brazil filed its defense against the Tax Assessment
approval by the court.
Notice, which was dismissed. GTEch Brazil filed an Ordinary Appeal and a
GTEch has been advised by Brazilian counsel that these proceedings are likely
Special Appeal to the court of Taxes and Fees, both of which were not granted.
to take several years, and could take longer than 15 years in certain circumstances
The State Treasury of São Paulo has filed a tax foreclosure to collect the tax
to litigate through the appellate process to final judgment. GTEch believes that
obligation. GTEch Brazil is preparing to file an appeal of this matter with the
these claims are groundless.
First District court of the State Treasury (Barueri). Prior to filing the appeal, it
is likely that GTEch Brazil will be required to provide security for the tax
TCU Audit
obligation in the event it is unsuccessful in the appeal. GTEch Brazil has been
In June 2005, the Federal court of Accounts (“TcU”) issued a preliminary
advised by Brazilian counsel that these proceedings are likely to take several
report (the “TcU Audit Report”) with respect to GTEch Brazil’s contracts with
years, and could take longer than seven years to litigate through the appellate
cEF. While GTEch Brazil has not been formally served with a copy of the TcU
process to final judgment. GTEch Brazil believes that these claims are
Audit Report, GTEch understands that its central allegations are that the
groundless.
1997 contract was improperly transferred from Racimec to GTEch Brazil; it
was accorded certain payment increases respecting financial services
3. Import Duties
transactions that were not contemplated by the procurement process
In 1998, the Brazilian Internal Revenue Service (“BIRS”) provided SB Industria
respecting the 1997 contract or otherwise permitted under applicable
e comercio Ltda. (“SB”), a subsidiary of GTEch, with notice of a tax
Brazilian law; and the 2003 contract Extension was entered into a manner
assessment of 17.8 million Brazilian Reals (or approximately €7.08 million at
inconsistent with Brazilian law and the procurement process respecting the
currency exchange rates in effect at December 31, 2009) for improperly
1997 contract. The TcU Audit Report alleges that as a result of these
claiming tax credits in 1996 and 1997. On October 27, 1998, SB filed its
considerations, cEF overpaid GTEch Brazil under the 1997 contract and the
defense in an administrative proceeding that the taxes were not due because
2000 contract. The TcU Audit Report seeks payment from GTEch of a base
during the applicable period, SB manufactured and assembled terminals in a
amount determined on a preliminary basis by TcU to be approximately 400
tax free zone in the State of Amazonas. The administrative lower court has
million Brazilian Reals (approximately €159.16 million at currency exchange
twice rejected the BIRS’s documents. GTEch has been advised that the matter
rates in effect as of December 31, 2009).
was determined favorably to SB in the lower administrative court which BIRS
GTEch believes that these claims are without merit. GTEch further believes
that the claims and determinations of the TcU Audit Report will, in essence, be
appealed. The appellate court has ruled in SB’s favour, and GTEch now
considers this matter closed.
merged into the civil action instituted by the Public Ministry Attorneys described
P 115
2009 Annual Report
40. commitments and contingencies
Acquisition of St. Enodoc holdings Limited
On April 30, 2008, GTEch acquired 90% of Gibraltar-based St. Enodoc holdings
Commitments
Limited and its subsidiaries including St. Minver Limited (collectively “St. Minver”),
the leading provider of end-to-end white label gaming services for £23.8 million
Acquisition of Finsoft Limited
in cash (€30.4 million at the April 30, 2008 exchange rate). In consideration of
On July 2, 2007, we acquired Finsoft Limited (“Finsoft”), a provider of real-time
performance targets that were met in 2008 and 2009, contingent consideration
transaction and information management systems for the commercial sports-
of £4.5 million (€5.7 million) and £0.2 million (€0.2 million) was paid in October
betting market for a cash purchase price of 29.6 million (€43.9 million at the July
2008 and December 2009, respectively.
2, 2007 exchange rate). In consideration of performance targets which were met
Ten percent of St. Minver remains with Gary Shaw, Founder and chairman,
for Finsoft’s fiscal year ended September 30, 2007, contingent consideration of
until at least 2012, at which point both Mr. Shaw and GTEch have the right to
10.3 million (€13.4 million) was paid in May 2008. If maximum performance
cause GTEch to acquire Mr. Shaw’s shares at a price equal to fair value to be
targets are met for Finsoft’s fiscal years ended September 30, 2008 and 2009, a
determined by an independent appraisal as of the date of exercise. GTEch may
further 18.5 million (€20.8 million at the December 31, 2009 exchange rate)
exercise the call right and Mr. Shaw may exercise the put right at any time after
would be paid during the first half of 2010.
December 31, 2011 and before March 31, 2012 or during each subsequent yearly
period between December 31st and March 31st.
Acquisition of Dynamite Design and Marketing Limited
On April 1, 2008, Boss Media, a GTEch subsidiary, acquired 100% of Dynamite
Design and Marketing Limited, a developer and supplier of unique, innovative
On December 19, 2007, GTEch Global Services corporation Ltd. (“GGSc”)
online interactive betting games for £5.9 million in cash (€7.4 million at the April
acquired 50% of Tabcorp International hong Kong Limited, subsequently
1, 2008 exchange rate). In consideration of performance targets which were met
renamed cLS-GTEch company Limited (“cLS-GTEch”), for the purpose of
in 2009, contingent consideration of £0.6 million (€0.7 million), £0.7 million (€0.8
providing a nationwide KENO system for Welfare lotteries throughout china.
million) and £0.4 million (€0.5 million) was paid in January 2009, August 2009
cLS-GTEch had been formed as a joint venture between Tabcorp International
and December 2009, respectively. If maximum performance targets are met in
No.1 Pty Limited (“Tabcorp”) and china LotSynergy Limited (“cLS”) in 2005, and
the first quarter of 2010, a further £2.2 million (€2.4 million at the December 31,
had launched a trial of the KENO system. cLS acquired Tabcorp’s interest in the
2009 exchange rate) would be paid during the second quarter of 2010.
partnership immediately after which GTEch acquired a 50% interest in the joint
venture for US$20 million (€13.9 million at the December 19, 2007 exchange rate).
Medströms AB Put/call
In addition, GGSc has made a capital commitment to cLS-GTEch of AUD$7.5
GTEch Global Services corporation (“GGSc”) has an 87.454% interest in GEMed
million (€4.5 million at the December 19, 2007 exchange rate) in the form of a
AB (“GEMed”), a Swedish private limited liability company that owns 100% of
promissory note to be repaid at the discretion of the cLS-GTEch board of
Boss Media AB, a leading developer of innovative software and systems for
directors. On August 11, 2008, the outstanding commitment remaining under the
digitally-distributed gaming entertainment. GGSc has the option, which it may
promissory note was converted from AUD$6.4 million to US$5.4 million. At
exercise between April 1, 2010 and June 30, 2010 to require Medströms Invest
December 31, 2009, the outstanding commitment was US$3.8 million (€2.6 million
AB (“Medströms”) to sell its 12.546% interest in GEMed to GTEch and Medströms
at the December 31, 2009 exchange rate). The investment in cLS-GTEch has been
has an identical put right. The price at which the put/call may be exercised is equal
accounted for under proportionate consolidation in the Group’s financial
to ten times EBITDA for the period January 1, 2009 through December 31, 2009,
statements.
such product to be multiplied by Medströms’ 12.546% interest in GEMed. The
price is subject to both a floor (SEK 108 million) and a cap (SEK 287 million), or
Loto Real Del cibao, c.X.A.
approximately €11.6 million floor and €30.8 million cap at the April 24, 2008 SEK
On August 28, 2008, GTEch and GGSc entered into a 20-year contract with Loto
to euro exchange rate.
Real Del cibao, c.X.A. (“Loto Real”) to be the exclusive technology provider to
P 116
Loto Real for an online lottery system, terminals, and future commercial services
conditions of the Facilities. GTEch’s guarantee obligations commenced in July
and other gaming opportunities in the Dominican Republic. The contract has a
2005 and were scheduled to terminate six months following the start-up of the
provision that allows GTEch the right to acquire 35% of the outstanding capital
on-line lottery system in Thailand. The maximum amounts guaranteed and the
of Loto Real within sixty days after receiving audited financial statements and
outstanding balances at December 31, 2009 are as follows:
applicable due diligence for the year ended December 31, 2012.
GTEch Guarantees
Guarantees and indemnifications
Performance and other bonds In connection with certain contracts and
procurements, we have been required to deliver performance bonds for the
benefit of our customers and bid and litigation bonds for the benefit of potential
customers, respectively. These bonds give the beneficiary the right to obtain
(in millions)
Performance Bonds from
Trade Finance Facilities
Bath
€
Maximum amounts guaranteed by GTEch
Amounts outstanding at December 31, 2009
375.0
375.0
7.8
7.8
payment and/or performance from the issuer of the bond if certain specified
events occur. In the case of performance bonds, which generally have a term of
During the fourth quarter of 2009, LGT repaid their outstanding loan amounts to
one year, such events include our failure to perform our obligations under the
the commercial lender with funding provided by GTEch and the other
applicable contract. To obtain these bonds, we are required to indemnify the
shareholder in LGT, resulting in the termination of GTEch’s guarantee obligations
issuers against the costs they incur if a beneficiary exercises its rights under a bond
on the loan.
and we do not currently anticipate they will do so. The following table provides
information related to potential commitments for bonds outstanding at
Lottery Technology Enterprises guarantee
December 31, 2009:
GTEch has a 1% interest in Lottery Technology Enterprises (“LTE”), a joint venture
between GTEch, New Tech Games, Inc. (“New Tech”) and Opportunity Systems, Inc.
(“OSI”). The joint venture agreement terminates on December 31, 2019. LTE recently
Performance and other bonds
Performance bonds
Litigation bonds
All other bonds
extended its contract with the District of columbia Lottery and charitable Games
Total Bonds
212,974
6,004
1,482
control Board (“DcLB”) through November 22, 2010, extending LTE’s 10 year
contract with the DcLB, which expired on November 22, 2009. Under Washington,
D.c. law, by virtue of our 1% interest in LTE, GTEch may be jointly and severally
liable, with New Tech and OSI, for the obligations of the joint venture.
220,460
commonwealth of Pennsylvania indemnification
Loxley GTEch Technology co., LTD guarantee
GTEch has a 49% interest in Loxley GTEch Technology co., LTD (“LGT”), which is
accounted for using proportionate consolidation. LGT is a corporate joint venture
GTEch will indemnify the commonwealth of Pennsylvania and any related state
agencies for claims made relating to the state’s approval of GTEch’s
manufacturer’s license in the commonwealth of Pennsylvania.
that was formed to provide an online lottery system in Thailand. On March 29,
2005, in order to assist LGT with obtaining the financing they required to enable
Leases
them to perform under their obligation to operate the online lottery system in
Thailand, GTEch guaranteed, along with the 51% shareholder in LGT, loans and
performance bonds from trade finance facilities made to LGT by an unrelated
commercial lender (collectively the “Facilities”).
GTEch is jointly and severally liable with the other shareholder in LGT for this
guarantee. GTEch would be required to perform under the guarantee should
LGT fail to make interest or principal payments in accordance with the terms and
Operating Leases
The Group leases certain facilities and equipment under operating leases that
expire at various dates through 2023. certain of these leases have escalation
clauses and renewal options. We are generally required to pay all maintenance
costs, taxes and insurance premiums relating to our leased assets. There are no
restrictions placed upon us by entering into these leases.
P 117
2009 Annual Report
Future minimum lease payments for operating leases are as follows:
Finance leases
Operating leases
current
After one year but no more than five years
More than five years
December 31,
2009
2008
24,963
52,607
2,714
20,238
44,926
2,156
80,284
67,320
Rental expense for operating leases was €29.6 million and €25.6 million in 2009
December 31, 2009
Present
Minimum
value of
payments payments
current
December 31, 2008
Present
Minimum
value of
payments payments
2,034
513
2,066
454
After one year but no more than five years
More than five years
8,529
22,700
2,945
15,749
8,664
25,768
2,661
17,221
Non-current
31,229
18,694
34,432
19,882
Total minimum lease payment
33,263
Less amounts representing finance charges (14,056)
19,207
-
36,498
(16,162)
20,336
-
Present value of minimum lease payment
19,207
20,336
20,336
19,207
At December 31, 2009 and 2008, the net carrying amount of the World
Finance Leases
The Group leases the GTEch world headquarters facility in Providence, Rhode
Island, USA (the “World headquarters”) under a finance lease. Under GTEch’s
Master contract with the State of Rhode Island, GTEch was required to invest
headquarters finance lease asset is €16.1 million and €17.9 million, respectively,
and is recorded in property, plant and equipment, net in the consolidated
statements of financial position. The carrying amount of the liability is recorded
in the consolidated statements of financial position as follows:
(or cause to be invested) at least US$100 million in the State of Rhode Island,
in the aggregate, by December 31, 2008. This investment commitment included
the development of the new World headquarters by December 31, 2006.
Finance leases
GTEch entered into (i) a development agreement with US Real Estate Limited
December 31,
2009
2008
Partnership (the “Developer”), whereby the Developer developed and owns
the World headquarters; and (ii) an office lease with the developer, whereby
18,694
513
19,882
454
Present value of minimum lease payment
19,207
20,336
GTEch leases a portion of the World headquarters from the Developer for 20
years. GTEch occupied the World headquarters in November 2006, but only
began paying rent on March 1, 2007. GTEch has the right to cancel the lease
after June 30, 2023 if the Master contract with the State of Rhode Island is not
Sale and Leaseback Transactions
renewed, in exchange for a termination fee equal to six months of base rent
GTEch sold its technology center facility in December 2006 and entered into a
plus operating expenses. The lease includes two ten year extension options.
sale-lease back agreement with the new owners for a base term of ten years,
GTEch has the unilateral right to extend the lease under the two extension
beginning December 2006, including four consecutive three-year extension
options under the same terms as in the base term. The lease contains a
options. The lease payments under the extension periods are equal to 102% of
restriction which does not allow GTEch to assign the lease or sublease their
the previous years rent. The lease contains an option for GTEch to cancel the
portion of the building without the lessor’s approval, which is not to be
lease after seven years in exchange for a termination fee equal to nine months
unreasonably withheld. As of December 31, 2009, GTEch had no sublease
of base rent, taxes, and operating expenses. The lease is accounted for as an
arrangements.
operating lease and future minimum lease payments are included in the
Future minimum lease payments under the finance lease together with the
operating leases section above.
present value of the minimum lease payments are as follows:
41. Financial risk management objectives and policies
Our principal financial instruments, other than derivatives, are comprised of debt
P 118
and cash and cash equivalents. The main purpose of these financial instruments
Past due trade and other receivables
is to fund the capital needs of the Group’s operations. We have various other
financial assets and liabilities, such as trade receivables and trade payables, which
arise directly from operations.
The primary risk inherent in our financial instruments is the market risk arising
from adverse changes in interest rates and foreign currency exchange rates. We enter
into derivative transactions, including principally interest rate swaps and forward
current
Past due
1-30 days
31-60 days
61-90 days
Over 90 days
currency contracts, for the purpose of managing interest rate and currency risks arising
December 31, 2009
€
%
December 31, 2008
€
%
642,572
81.2
624,926
80.8
117,353
15,131
4,421
12,326
14.8
1.9
0.6
1.6
116,646
14,464
6,525
11,034
15.1
1.9
0.8
1.4
149,231
18.8
148,669
19.2
791,803
100.0
773,595
100.0
from our operations and its sources of financing. It is, and has been throughout the
year under review, our policy not to engage in currency or interest rate speculation.
Total trade and other receivables
Our accounting policies regarding derivatives are set out in Note 3.14.
Credit risk
Allowance for doubtful accounts
The Group’s primary credit risk is derived from cash and trade accounts receivable
balances. We maintain cash deposits and trade with only recognized,
creditworthy third parties. We evaluate the collectibility of trade accounts and
sales-type lease receivables on a customer-by-customer basis and we believe our
reserves are adequate. A significant amount of our trade accounts receivable are
from government lottery entities from which we have historically experienced
December 31,
2009
2008
Provisions
Utilization
Acquisitions
Translation
Other
(44,032)
(25,355)
4,025
20
534
(19,636)
(28,315)
7,923
(4,524)
228
292
(64,808)
(44,032)
insignificant write-offs. Trade accounts receivable are reported net of allowances
for doubtful accounts and liquidated damages. Allowances for doubtful accounts
are generally recorded when there is objective evidence we will not be able to
collect the receivable. Bad debts are written off when identified.
With respect to credit risk arising from the other financial assets which
comprise cash, available-for-sale financial assets, and certain derivative
instruments, our exposure to credit risk arises from default of the counterparty,
with a maximum exposure equal to the carrying amount of these instruments
(see Note 14). We manage our exposure to counterparty credit risk by entering
into financial instruments with major, financially sound counterparties with highgrade credit ratings, and by limiting exposure to any one counterparty.
At December 31, 2009 and 2008, approximately 80% of total trade and other
receivables are from Italy. Approximately 46% and 57% of receivables from Italy
relate to our lottery instant ticket business at December 31, 2009 and 2008,
respectively.
Liquidity risk
The Group’s primary liquidity risk is derived from required debt service on our
debt and on-going working capital needs. The Group’s objective in managing
this risk is to maintain adequate liquidity and flexibility through the use of cash
generated by operating activities, bank overdrafts, and bank loans. We believe
our ability to generate excess cash from operations to reinvest in our business
is one of our fundamental financial strengths and combined with our
committed borrowing capacity, we expect to meet our financial obligations and
operating needs in the foreseeable future. We expect to use cash generated
primarily from operating activities to meet contractual obligations and to pay
dividends. Our growth is expected to be financed through a combination of
cash generated from operating activities, existing sources of committed
liquidity, access to capital markets, and other sources of capital. Our corporate
Past due financial assets
The following is an analysis of the Group’s past due financial assets which are
comprised entirely of trade and other receivables, net of related allowance for
doubtful accounts.
debt ratings of Baa3 from Moody’s and BBB- from Standard and Poor’s
contribute to our ability to access capital markets at attractive prices, therefore,
we do not believe the Group is exposed to a significant concentration of
liquidity risk.
P 119
2009 Annual Report
The following tables set out the contractual maturities of the Group’s
financial liabilities based on contractual undiscounted payments:
2009 contractual maturities
Fixed rate
capital Securities
Notes
Swap Liability
World headquarters finance lease
Floating rate
Other
Within 1 year
1 - 2 years
2 - 3 years
3 - 4 years
More than 4 years
Total
46,618
3,147
30,625
2,034
30,625
2,072
30,625
2,112
2,152
750,000
750,000
24,893
796,618
753,147
91,875
33,263
82,424
32,697
32,737
2,152
1,524,893
1,674,903
203
22
22,842
22,275
124,948
2,889
1,027,350
2,628
-
-
-
1,152,501
22
25,470
25,164
45,342
127,837
1,029,978
-
-
1,203,157
127,766
160,534
1,062,715
2,152
1,524,893
2,878,060
Within 1 year
1 - 2 years
2 - 3 years
3 - 4 years
More than 4 years
Total
46,491
2,066
2,105
2,145
2,186
750,000
27,996
796,491
36,498
48,557
2,105
2,145
2,186
777,996
832,989
2,565
601
95
6,769
30,610
23,101
150,895
132,000
-
1,189,193
132,000
50,000
6,211
96,000
-
1,373,263
360,601
50,095
36,081
69,327
53,064
1,004
1,164
14,661
139,220
79,357
106,775
283,899
1,378,568
110,661
1,959,260
127,914
108,880
286,044
1,380,754
888,657
2,792,249
Fixed rate
capital securities
World headquarters finance lease
Floating rate
Other
P 120
We seek to manage our foreign exchange risk by securing payment from our
Market risk
customers in euros, by sharing risk with our customers, by utilizing foreign currency
Interest rate market risk
borrowings, by leading and lagging receipts and payments, and by entering into
Our exposure to changes in market interest rates relates primarily to our net debt
foreign currency exchange and option contracts. In addition, a significant portion
obligations with floating interest rates. Our definition of net debt is variable rate
of the costs attributable to our foreign currency revenues are payable in the local
debt less variable rate cash investments. Our policy is to manage interest cost
currencies. In limited circumstances, but whenever possible, we negotiate clauses
using a mix of fixed and variable rate debt. We use various techniques to mitigate
into our contracts that allow for price adjustments should a material change in
the risks associated with future changes in interest rates, including entering into
foreign exchange rates occur.
interest rate swap and treasury rate lock agreements. As of December 31, 2009
From time to time, we enter into foreign currency exchange and option
there were US$1.4 billion (notional value) in interest rate swaps outstanding
contracts to reduce the exposure associated with certain firm commitments, variable
(US$1.5 billion at December 31, 2008) and approximately 12% and 30% of our net
service revenues, and certain assets and liabilities denominated in foreign currencies,
debt portfolio was exposed to interest rate fluctuations at the end of 2009 and
but we do not engage in foreign currency speculation. These contracts generally
2008, respectively. The interest rate swaps outstanding at the end of 2009 begin
have maturities of 12 months or less and are regularly renewed to provide
to expire in June 2010, as further described in the interest rate swap section that
continuing coverage throughout the year. It is our policy to negotiate the terms of
follows.
the hedge derivatives to match the terms of the hedged item to maximize hedge
Taking into consideration interest rate swaps outstanding at December 31,
effectiveness.
2009, the following demonstrates the sensitivity to a reasonably possible change
As of December 31, 2009, we had contracts for the sale of approximately
in interest rates, with all other variables held constant, of the Group’s income
US$353.2 million of foreign currency (primarily euro, Swedish krona, British pounds,
before income tax expense and equity associated with our floating rate debt over
colombian pesos, and czech koruna) and the purchase of approximately US$183.9
the next year:
million of foreign currency (primarily euro, Swedish krona, British pounds, Polish
zlotys and canadian dollars).
As of December 31, 2008, we had contracts for the sale of approximately
Market risk
US$58.4 million of foreign currency (primarily British pounds, Danish krona, czech
Increase (decrease)
in basis point
Effect on income
before income tax
expense (€/000s)
Effect on
equity (€/000s)
10
(290)
2,077
(10)
290
(2,069)
10
(725)
3,130
(10)
725
(3,225)
2009
2008
koruna, and Swiss francs) and the purchase of approximately US$192.7 million of
foreign currency (primarily euro, Polish zlotys, British pounds, and canadian dollars).
The following demonstrates the sensitivity to a reasonably possible change in
the euro to US dollar exchange rate, with all other variables held constant, of the
Group’s income before income tax expense and equity associated with our foreign
currency denominated receivables and payables and foreign currency forward
contracts over the next year:
Foreign currency exchange rate risk
As a result of significant operations worldwide, our consolidated statement of
Financial risk
financial position can be affected significantly by movements in exchange rates due
to the translation of foreign currency balance sheet accounts into euro balance sheet
accounts. We also have transactional currency exposures arising from current and
2009
anticipated transactions denominated in currencies other than our functional
Increase (decrease)
in exchange rate (%)
Effect on income
before income tax
expense (€/000s)
Effect on
equity (€/000s)
10
9,500
227,180
(10)
(9,500)
(227,180)
10
13,900
204,000
(10)
(13,900)
(232,000)
currency, which is the euro. Translation amounts in other reserves (Note 20) in our
consolidated statements of financial position are derived primarily from our US
dollar functional currency subsidiaries.
2008
P 121
2009 Annual Report
commodity price risk
Our exposure to commodity price changes is not considered material and is
The contractual maturities of the notional amount of these swaps are as
follows:
managed through our procurement and sales practices.
Hedging activities and derivatives
Derivatives not designated as hedging instruments
The Group uses forward foreign currency contracts to manage some of its
transaction exposures and future foreign currency net cash flows that the Group
2009 swap contractual maturities
(US$ in thousands)
Notional amount
June 30, 2010
December 31, 2010
June 30, 2011
December 31, 2011
March 31, 2012
51,740
51,740
51,740
51,740
1,174,284
expects to generate through its operations. These forward foreign currency
1.381.244
contracts are not designated as cash flow, fair value, or net investment hedges
and are typically matched with current transactions or forecasted foreign
currency transactions to be derived from operations. The aggregate fair value of
the contracts at December 31, 2009 and 2008 was (€0.1) million and €2.4 million,
respectively.
At December 31, 2008, the Group held US$1.5 billion notional amount of interest
rate swaps (“swaps”), with an aggregate fair value of (€73.4) million ((US$102.1)
million at the December 31, 2008 exchange rate), which were designated as
hedges of floating interest rates on the GTEch Senior credit Facilities. These
Cash flow hedges
swaps effectively convert US$1.5 billion of the GTEch Senior credit Facilities’
variable interest rate debt to fixed rate debt. Under the terms of these swaps,
Foreign exchange contracts
At December 31, 2009 and 2008, the Group held forward currency contracts
designated as hedges of future foreign currency net cash flows that the Group
expects to generate through its operations. The terms of the currency contracts
are typically matched with the forecasted foreign currency transactions to be
derived from operations up to a period of 12 months. At December 31, 2009 and
December 31, 2008, the aggregate fair value of these contracts was not material.
Interest rate swaps
the Group is required to make fixed interest payments based on rates ranging
between 2.89% and 5.02% and receives variable interest payments from its
counterparties based on three-month Libor with settlement occurring quarterly.
During 2008, we recorded an unrealized loss to equity of €39.9 million, net of
€22.7 million of income tax benefit, principally associated with these swaps.
The contractual maturities of the notional amount of these swaps are as
follows :
2008 swap contractual maturities
At December 31, 2009, the Group held US$1.4 billion notional amount of
interest rate swaps (“swaps”), with an aggregate fair value of (€52.2) million
(US$75.2) million at the December 31, 2009 exchange rate), which were
designated as hedges of floating interest rates on the GTEch Senior credit
Facilities. These swaps effectively convert US$1.4 billion of the GTEch Senior
credit Facilities’ variable interest rate debt to fixed rate debt. Under the terms
(US$ in thousands)
Notional amount
June 30, 2009
December 31, 2009
June 30, 2010
December 31, 2010
June 30, 2011
December 31, 2011
June 30, 2012
44,348
44,348
51,740
51,740
51,740
51,740
1,174,284
of these swaps, the Group is required to make fixed interest payments based
1,469,940
on rates ranging between 2.89% and 5.02% and receives variable interest
payments from its counterparties based on three-month Libor with settlement
occurring quarterly. During 2009, we recorded an unrealized loss to equity of
€13.1 million, net of €7.7 million of income tax benefit, principally associated
with these swaps.
P 122
Fair value hedges
At December 31, 2009, the Group held €100 million notional amount of interest
rate swaps (“swaps”) with an aggregate fair value of (€0.7) million, which were
designated as hedges of fixed interest rates on the €750 million of senior notes
due 2016 (the “Notes”). These swaps effectively convert €100 million of the Notes
42. Supplemental cash flow information
fixed interest rate debt to variable rate debt. Under the terms of these swaps,
Non-cash investing and financing activities are excluded from the consolidated
the Group is required to make variable rate interest payments based on a 6
statement of cash flows and are summarized as follows:
month floating Euribor plus a flat spread rate, collectively ranging between
3.263% and 3.276% as of December 31, 2009, and receives fixed interest
payments from its counterparties based on a fixed rate of 5.375%. The Euribor
Supplemental cash flow information
rate resets on a semi-annual basis, but settlement occurs annually. Because these
swaps convert fixed rate debt to variable rate debt they are considered fair value
hedges. With fair value hedges, both the swaps and the hedged item (the Notes)
Non-cash purchase price costs related to acquisition activity
are recorded at fair value, with the offset being recorded in interest expense.
December 31,
2009
2008
15,110
86,229
15,110
86,229
During 2009, we recorded a swap unrealized loss of €0.7 million with an
offsetting debt unrealized gain of €0.9 million, with the difference of €0.2 million
See Note 6 for detailed information on 2009 and 2008 acquisition activity.
recorded as a reduction to interest expense.
The Group did not have any fair value hedges as of December 31, 2008.
43. Events after the reporting period
Hedges of a net investment in a foreign operation
Instant Lotteries Tender Appeal
At December 31, 2009, the Group held SEK 1.0 billion (€96.9 million at the
As discussed in Note 39, AAMS issued a tender in August 2009 for a new nine-year
December 31, 2009 exchange rate) of foreign currency forward contracts, with an
Scratch & Win license to operate the national instant lotteries in Italy. Sisal
aggregate fair value of (€1.1) million, designated as a hedge against the net
requested and was granted an annulment of the tender before the TAR of Lazio.
investment in Boss Media. During 2009, (€0.9) million of ineffectiveness arising
AAMS and consorzio Lotterie Nazionali filed an appeal before the Supreme
from this hedge was recognized in foreign exchange gain (loss), net in our
Administrative court requesting an annulment of the decision by the TAR of
consolidated income statement.
Lazio. Sisal filed its own appeal asking for a referral to the European court of
At December 31, 2008, the Group held €100.0 million of foreign currency
Justice.
forward contracts, with an aggregate fair value of €1.3 million, designated as
After a hearing held on March 9, 2010, the State council accepted the appeal
a hedge against the net investment in Boss Media. During 2008, no
submitted by AAMS and by consorzio Lotterie Nazionali and a portion of the
ineffectiveness has been recognized in our consolidated income statement
appeal submitted by Sisal, and ruled that Article 21, Paragraph 5 of the law
from this hedge.
102/2009 regulating the tender, as well as the clauses of the tender reflecting
such article, are not applicable. Paragraph 5 of said law is related to the interim
capital management
period during which consorzio Lotterie Nazionali would continue to manage the
The primary goal of the Group’s capital management strategy is to ensure strong
existing instant lotteries through January 2012.
credit ratings and healthy financial ratios in order to support its business while
On March 30, 2010, AAMS issued a decree to reopen the prior public tender
maximizing corporate value and reducing the Group’s financial risks. We consider
for the new Scratch & Win concession and to remove from that tender the clauses
all equity and debt to be managed capital of the Group.
which the State council had found to be inapplicable in its March 9, 2010 ruling.
The Group manages its capital structure and makes adjustments based on
long term strategy decisions in light of changes in economic conditions.
AAMS set a date of May 10, 2010 for submission of bids to participate in the
reopened tender.
Additionally, the Group seeks to preserve an optimal weighted average cost of
capital and maintain sufficient financial flexibility to pursue growth
Medströms AB Put/Call
opportunities. There were no changes in the objectives, policies, or processes
As described in Notes 6 and 40, GGSc has an 87.454% interest in GEMed and
during the years ended December 31, 2009 and 2008.
GGSc has the option, which it may exercise between April 1, 2010 and June 30,
P 123
2009 Annual Report
2010 to require Medströms to sell its 12.546% interest in GEMed to GGSc and
Medströms has an identical put right.
On April 1, 2010, Medströms exercised its put right and on April 12, 2010,
GGSc paid Medström SEK 200 million (€20.5 million at the transaction date) for
the remaining 12.546% interest in GEMed.
Audit firm fees
Audit services
International statutory audit fees
Other services
Agreed upon procedures
Accounting consultations
Total
P 124
Audit Firm
of the Parent Company
Audit Firm’s
Network
of the Parent Company
331
-
2,170
610
745
-
215
1,076
2,995
Summary Schedule of Essential Data of consolidated - companies pursuant to Article 2429 of Italian civil code
Name
Aitken Spence GTEch (Private) Limited
Revenue
Thousands of euro
Net Income
Assets
Revenue
Percentage
Net Income
Assets
-
(35)
29
0.0
0.0
0.0
Anguilla Lottery and Gaming company Limited
251
(132)
146
-
(0.1)
-
Antigua Lottery company Limited
473
(193)
246
-
(0.2)
-
25,251
(1,571)
12,125
1.0
(1.6)
0.1
Atronic Americas, LLc
Atronic Argentina, S.r.l.
598
(94)
537
-
(0.1)
-
Atronic Asia Limited
-
-
-
-
-
-
Atronic Australia Pty, Ltd.
-
69
18
-
0,1
-
Atronic Australien Gmbh
-
194
2
-
0.2
-
Atronic Austria Gmbh
40,317
(367)
21,255
1.7
(0.4)
0.2
Atronic Austria holding AG
-
(229)
11,266
-
(0.2)
0.1
Atronic International Gmbh
45,696
(16,176)
101,568
1.9
(16.9)
0.8
Atronic Nevada, LLc
3,685
1,227
4,609
0.2
1.3
-
Atronic Peru S.A.
2,649
(91)
3,881
0.1
(0.1)
-
Atronic Russia o.o,o,
497
(1,068)
567
-
(1.1)
-
Atronic Systems B.V.
191
(6,445)
10,016
-
(6.7)
0.1
Atronic Systems Gmbh
22,354
1,794
9,455
0.9
1.9
0.1
Atronic Systems S.A.M.
5,926
(7)
2,617
0.2
-
-
-
2
70
-
-
-
699
10
129
-
-
-
14,970
1,597
13,704
0.6
1.7
0.1
-
Atronic Systems, Inc,
Beijing GTEch computer Technology company Limited
BillBird S.A.
Boss casinos N.V.
3,539
19
588
0.1
-
970
1,415
1,053
-
1,5
-
34,337
2,854
31,641
1.4
3.0
0.2
25
(3)
7
-
-
-
-
-
81
-
-
-
Boss Media Malta casino Ltd,
3,880
101
2,796
0.2
0.1
-
Boss Media Malta Poker Ltd.
9,792
268
10,085
0.4
0.3
0.1
2
-
159
-
-
-
caribbean Lottery Services, Inc.
2,052
(341)
740
0.1
(0.4)
-
cartalis Imel S.p.A.
Boss holdings Ltd.
Boss Media AB
Boss Media Antigua Ltd.
Boss Media Investments AB
cAM Galaxy Group Ltd.
2,641
(2,382)
24,335
0.1
(2.5)
0.2
cLS-GTEch Australia Pty Ltd.
-
-
-
-
-
-
123
(387)
6,093
-
(0.4)
-
-
-
-
-
-
-
328,832
123,347
576,011
13.6
128.5
4.4
consorzio Lottomatica Giochi Sportivi
5
-
432
-
-
-
curacao Lottery company, N.V.
-
-
-
-
-
-
D&D Electronic and Software Gmbh
-
-
-
-
-
-
Data Transfer Systems, Inc.
-
(2)
-
-
-
-
926
289
135
-
0.3
-
Dreamport do Brasil Ltda.
-
6
216
-
-
-
Dreamport Suffolk corporation
-
-
2,173
-
-
-
Dreamport, Inc.
-
-
5,591
-
-
-
2,252
905
4,049
0.1
0.9
-
East Luck Investments Limited
-
-
-
-
-
-
Edrin Ltd.
-
-
19
-
-
-
2,992
981
2,873
0.1
1.0
-
cLS-GTEch Technology (Beijing) co., Ltd.
DataTrans Sp. z.o.o.
Dynamite Design & Marketing Limited
Europa Gestione S.r.l.
P 125
2009 Annual Report
Name
Europrint (Games) Limited
Europrint holdings Limited
Europrint Promotions Limited
Finsoft Limited
GEMed AB
GTEch corporation
GTEch Asia corporation
Revenue
Thousands of euro
Net Income
Assets
Revenue
Percentage
Net Income
Assets
2,442
125
222
0.1
0.1
-
33
263
3,051
-
0.3
-
1,370
102
561
0.1
0.1
-
18,981
956
11,116
0.8
1.0
0.1
522
(1,321)
154,221
-
(1.4)
1.2
701,311
(171,742)
1,916,684
29.0
(179.0)
14.6
-
17
9,283
-
-
0.1
GTEch Australasia corporation
5,021
763
11,695
0.2
0.8
0.1
GTEch Avrasya Teknik hizmetler Ve Musavirlik A.S.
4,297
71
703
0.2
0.1
-
558
(2,114)
20,144
-
(2.2)
0.2
12,580
1,416
15,764
0.5
1.5
0.1
-
-
33
-
-
-
1,146
(10)
558
-
-
-
GTEch corporation (Utah)
-
-
-
-
-
-
GTEch cote D’Ivoire
-
-
2
-
-
-
GTEch czech Republic LLc
4,875
738
5,426
0.2
0.8
-
GTEch czech Services s.r.o.
36
3
59
-
-
-
GTEch Espana corporation
-
-
-
-
-
-
GTEch Europe
-
1
421
-
-
-
3,905
953
3,589
0.2
1.0
-
30,997
1,614
51,330
1.3
1.7
0.4
681
49
511
-
0.1
-
-
-
129,500
-
-
1.0
GTEch Brasil Ltda.
GTEch colombia Ltda.
GTEch computer Systems Sdn Bhd
GTEch comunicaciones colombia Ltda.
GTEch Far East Pte Ltd
GTEch Foreign holdings corporation
GTEch France SARL
GTEch German holdings corporation Gmbh
GTEch Global Lottery S.L.U.
GTEch Global Services corporation Limited
GTEch Gmbh
GTEch holdings corporation
GTEch Ireland Operations Limited
GTEch Lanka (Private) Limited
GTEch Latin America corporation
7,111
621
2,508
0.3
0.6
-
233,425
34,275
491,996
9.6
36.7
3.7
2,065
107
2,722
0.1
0.1
-
-
-
2,683,167
-
-
20.4
12.594
4,704
6,313
0.5
4.9
-
-
(64)
1,093
-
(0.1)
-
10,631
4,746
4,149
0.4
4.9
-
GTEch Management P.I. corporation
-
-
93
-
-
-
GTEch Mexico S,A, de c.V.
-
(184)
2,868
-
(0.2)
-
1,830
124
1,752
0.1
0.1
-
GTEch Polska Sp. z.o.o.
44,219
8,518
31,697
1.8
8.9
0.2
GTEch Printing corporation
10,813
(7,604)
37,210
0.4
(7.9)
0.3
GTEch Rhode Island corporation
47,325
22,102
900,882
2.0
23.0
6.9
5,958
235
588
0.2
0.2
-
-
125
1,026
-
0.1
0.5
GTEch Northern Europe corporation
GTEch Slovakia corporation
GTEch Southern Africa (Propietary) Limited
GTEch Sports Betting Solutions Limited
-
369
62,449
-
0.4
GTEch Sweden AB
1,561
145
476
0.1
0.2
-
GTEch U,K, Limited
14,298
1,008
3,078
0.6
1.1
-
240
359
86
-
0.4
-
-
-
-
-
-
-
16
(420)
2,990
-
(0.4)
-
-
-
1,016
-
-
-
798
(200)
-
-
(0.2)
-
-
12
379
-
-
-
1,023
134
166
-
0.1
-
GTEch Ukraine
GTEch WaterPlace Park company, LLc
GTEch West Africa Lottery Limited
GTEch West Greenwich Technology Associates GP, LLc
GTEch Worldwide Services corporation
Innoka Oy
Interactive Games International Limited
P 126
Name
International Poker Network Ltd.
Invest Games S.A.
JSJ Ltd.
Labet S.r.l.
Leeward Islands Lottery holding company, Inc.
Revenue
Thousands of euro
Net Income
Assets
Revenue
Percentage
Net Income
Assets
994
595
1,176
-
0.6
-
-
871
2,689,459
-
0.9
20.5
4
2
338
-
-
-
7,918
(2,818)
26,617
0.3
(2.9)
0.2
1,767
(948)
19,080
0.1
(1.0)
0.1
21,838
2,972
137,526
0.9
3.1
1.0
Lottery Equipment company
-
-
323
-
-
-
Lottomatica Bingo S.r.l.
-
24
1,689
-
-
-
Lottomatica International hungary
-
50,845
860,047
-
53.0
6.5
Lottomatica International S.r.l.
-
23,673
620,371
-
24.7
4.7
Lottomatica Italia Servizi S.p.A.
49,452
10,561
282,590
2.0
11.0
2.1
195,838
9,222
224,949
8.1
9.6
1.7
22,244
(1,520)
37,291
0.9
(1.6)
0.3
160,690
15,648
334,557
6.6
16.3
2.5
-
(515)
19,778
-
(0.5)
0.2
7,770
(1,128)
10,253
0.3
(1.2)
0.1
-
-
-
-
-
-
On-Line Lottery License and Lease B.V.
1,561
185
786
0.1
0.2
-
Online Transaction Technologies SARL a Associe Unique
9,579
956
6,533
0.4
1.0
-
Oy GTEch Finland Ab
7,825
996
3,248
0.3
1.0
-
10,455
989
27,859
0.4
1.0
0.2
699
(93)
344
-
(0.1)
-
34
34
86
-
-
-
-
286
1,450
-
0.3
-
39,349
5,687
32,401
1.6
5.9
0.2
Lis Finanziaria S.p.A.
Lottomatica Sistemi S.p.A.
Loxley GTEch Technology co., Ltd.
LS Alpha S.r.l.
MIS International France SAS
Pcc Giochi e Servizi S.p.A.
Prodigal Lottery Services, N.V.
Retail Display and Service handlers, LLc
SB Industria e comércio Ltda.
SED Multitel S.r.l.
Siam GTEch company Limited
299
26
126
-
-
-
50,469
(27,187)
182,413
2.1
(28.3)
1.4
Spielo USA Incorporated
7,100
(4,475)
2,230
0.3
(4.7)
-
Springboard Technologies Private Limited
1,330
103
285
0.1
0.1
-
-
-
3,564
-
-
-
557
(124)
273
-
(0.1)
-
Spielo Manufacturing ULc
St. Kitts and Nevis Lottery company, Limited
St. Minver (UK) Limited
St. Minver Limited
Technology Risk Management Services, Inc.
1,885
120
188
0.1
0.1
-
19,512
1,526
10,675
0.8
1.6
0.1
-
258
4,037
-
0.3
-
23,137
1,498
35,165
1.0
1.6
0.3
Totobit Informatica Software E Sistemi S.p.A.
34,899
4,943
113,958
1.4
5.2
0.9
-
-
-
-
-
-
3,136
(114)
1,017
0.1
(0.1)
-
200
6
355
-
-
-
1,606
1,585
1
0.1
1.7
-
Tranco Investment Limited
TTS S.r.l.
Tulipano S.r.l.
Turks and caicos Lottery company Ltd.
UTE Logista - GTEch
WebDollar AB
West Greenwich Technology Associates, L.P.
-
(644)
1,362
-
(0.7)
-
1,569
1,234
16,423
0.1
1.3
0.1
-
(265)
2,899
-
(0,3)
-
P 127
2009 Annual Report
ADDITIONAL DIScLOSURES PURSUANT TO SPEcIFIc ITALIAN REqUIREMENTS
EXhIBIT 3c-ter
certification of the consolidated annual financial statements, pursuant to Article 81-ter
of the cONSOB Regulations no. 11971 of May 14, 1999 with any following amendments
1. The undersigned, Marco Sala, Managing Director and chief Executive Officer, and Stefano Bortoli, chief Financial Officer and Manager in charge of preparing
corporate reports and financial documents of Lottomatica Group S.p.A., also taking into account Article 154-bis, Section 3 and 4 of the Legislative Decree no. 58
of February 24, 1998, certify:
the adequacy - with respect to the characteristic of Lottomatica, and;
the effective application,
of the administrative and accounting procedures relating to the preparation of the consolidated annual financial statements throughout the year ended December
31, 2009.
2. With reference to the above, no material issues were identified.
3. It is further certified that:
3.1 The consolidated annual financial statements:
a. are prepared in accordance to the applicable international financial reporting standards admitted by the European community pursuant to European
Regulation (cE) no. 1606/2002 of July 19, 2002, of the European Parliament and council;
b. correspond to the accounting books and entries; and
c.
are suitable to offer truthful and accurate representations of the assets, financial position and result of operations of Lottomatica and of the Group
consolidated entities.
3.2 The Operating and Financial Review contains a reliable analysis of the ongoing business and results, as well as of the status of Lottomatica and of the Group
consolidated entities, jointly with a description of the main risks and uncertainties to which they are exposed.
March 3, 2010
Managing Director and cEO
cFO and Manager in charge of preparing
corporate reports and financial documents
P 128
LOTTOMATICA GROUP AND SUBSIDIARIES
“A group consists of people who pursue a common goal
and have explicitly or implicitly, reciprocating relationships.”
(Anonymous)
2009 Annual Report
List of Lottomatica Group SpA Subsidiaries and Affiliates
Name
Jurisdiction
Share Capital *
Ownership (%)
Shareholder
Italy
16,000
63
Lottomatica Group
Italy
2,582
100
Lottomatica Group
Italy
20,000
100
Lottomatica Group
Lottomatica Videolot Rete S.p.A. (1)
Italy
3,226
100
Lottomatica Group
SED Multitel S.r.l.
Italy
800
100
Lottomatica Group
Lottomatica Sistemi S.p.A. (11)
Italy
5,165
100
Lottomatica Group
Lottomatica International S.r.l. (11)
Italy
100
100
Lottomatica Group
Nevada, USA
13.3
100
Lottomatica Group
Atronic Australien Gmbh (2)
Germany
1,120
100
Lottomatica Group
GTEch German holdings corporation Gmbh (2)
Germany
25
100
Lottomatica Group
Delaware, USA
75
100
Lottomatica Group
Nova Scotia, canada
278,498
100
Lottomatica Group
Italy
25,120
13.33
Lottomatica Group
United Kingdom
2,100
5
Lottomatica Group
Totobit Informatica Software e Sistemi S.p.A.
Italy
3,043
100
Lottomatica Italia Servizi
cartaLIS IMEL S.p.A.
Italy
10,000
85
Italy
500
100
Lottomatica Scommesse
Italy
50
100
L.S. Alpha S.r.l.
Italy
118
95
LABET S.r.l. (3)
Italy
100
100
United Kingdom
19
100
Tulipano S.r.l. (4)
Italy
20
100
Lottomatica Videolot Rete
Europa Gestione S.r.l. (5)
Italy
50
100
Empoli Giochi S.r.l. (6) ***
Italy
100
100
Pcc Giochi e Servizi S.p.A. (11)
Italy
21,000
100
Lottomatica Sistemi
LIS Finanziaria S.p.A.
Italy
1,000
100
Totobit Informatica
TTS S.r.l.
Italy
100
100
Totobit Informatica
Easy Nolo S.p.A.****
Italy
1,900
10
Totobit Informatica
Nevada, USA
10
100
Atronic Americas, LLc
Atronic Australia Pty Ltd. (2)
Australia
2,000
100
Atronic International Gmbh (2)
Germany
302
100
Atronic Austria holding AG (7)
Austria
300
100
Atronic Americas LLc (2)
Spielo USA Incorporated (2)
Spielo Manufacturing ULc (2)
Banca ITB S.p.A. (già IT Bank S.p.A.)****
Neurosoft S.A.****
Edrin Ltd.
Atronic Nevada, LLc (2)
P 132
Name
Jurisdiction
Share Capital *
Ownership (%)
Shareholder
Germany
26
50
Argentina
30
80
Peru
**
98
Atronic Systems B.V. (2)
Netherland
18
100
Atronic Russia o.o.o. (2)
Russia
3,018.20
50
Austria
300
100
china
10
100
France
40
100
Monaco
150
98
Nevada, USA
**
100
Austria
36.4
100
South Africa
**
100
Italy
100
90
Lottomatica Group (85%);
Totobit Informatica (5%)
Luxembourg
31,000
100
Lottomatica Group (65.27%);
Lottomatica International hungary (34.73%)
1,250
100
Lottomatica International (80%);
Lottomatica Group (20%)
D&D Electronic & Software Gmbh (2)
Atronic Argentina S.r.l.
Atronic Peru S.A. (2)
Atronic Austria Gmbh (2)
Atronic Asia Limited (2)
MIS International France SAS (2)
Atronic Systems S.A.M. (2)
Atronic Systems Inc. (2)
Atronic Systems Gmbh (2)
Grips RSA (7)
consorzio Lottomatica Giochi Sportivi (8)
Invest Games S.A. (9)
Lottomatica International hungary Korlátolt
Felelősségű Társaság (KFT) (11)
hungary
GTEch holdings corporation (10)
Delaware, USA
2,755,881.481
100
Invest Games S.A.
GTEch corporation
Delaware, USA
**
100
GTEch holdings corporation
Sri Lanka
33,660
50
Anguilla Lottery and Gaming company, Ltd.
Anguilla
10
100
Antigua Lottery company, Ltd.
Antigua
**
100
china (PRc)
150
100
Poland
4,490.368
100
Boss casinos N.V.
curacao
67
100
Boss Media AB
Boss Media AB
Sweden
1,141.3
100
GEMed AB
Antigua & Barbuda
77
100
Boss Media AB
Malta
15
99.99
Boss Media AB
Sweden
100
100
Boss Media AB
Boss Media Malta casino Ltd.
Malta
80
99.99
Boss holdings Ltd.
Boss Media Malta Poker Ltd.
Malta
40
99.99
Boss holdings Ltd.
cLS-GTEch Australia Pty Ltd. (12)
Australia
**
100
Tranco Investment Limited
cLS-GTEch company Limited (12)
British Virgin Islands
30,000
50
china (PRc)
2,700
100
Aitken Spence GTEch (Private) Limited
Beijing GTEch computer Technology company Ltd.
BillBird S.A.
Boss Media Antigua Ltd.
Boss holdings Ltd.
Boss Media Investments AB
cLS-GTEch Technology (Beijing) co., Ltd. (12)
P 133
2009 Annual Report
Name
Jurisdiction
Share Capital *
Ownership (%)
Shareholder
United Kingdom
100
100
GTEch corporation
caribbean Lottery Services, Inc.
U.S. Virgin Islands
**
100
curacao Lottery company, N.V.
Netherlands Antilles
200
100
Poland
50
100 GTEch corporation (80%); GTEch Polska Sp. z o.o. (20%)
Data Transfer Systems, Inc.
Delaware, USA
**
100
GTEch corporation
Dreamport, Inc.
Delaware, USA
**
100
GTEch corporation
Brazil
3,434.133
100
Dreamport, Inc. (99.75%);
GTEch Foreign holdings corporation (0.25%)
Delaware, USA
**
100
GTEch corporation
United Kingdom
**
100
Boss Media AB
British Virgin Islands
**
100
Europrint (Games) Ltd.
United Kingdom
20
100
Europrint holdings Ltd.
United Kingdom
90,908
100
cam Galaxy Group (40%);
JSJ Ltd. (60%)
Europrint Promotions Ltd.
United Kingdom
**
100
Finsoft Limited
United Kingdom
1,172
100
GEMed AB (20)
Sweden
100
87.45
GTEch Asia corporation
Delaware, USA
**
100
GTEch corporation
GTEch Australasia corporation
Delaware, USA
**
100
GTEch corporation
Turkey
280
99.6
Brazil
96,582.428
100
GTEch corporation (99.75%);
GTEch colombia Ltda.
colombia
6,884,500
100
GTEch Global Services corporation Limited (99.998%);
GTEch comunicaciones colombia Ltda. (0.007%);
Alvaro Gomez Munoz (0.007%) (Nominee share)
GTEch comunicaciones colombia Ltda.
colombia
10,000
100
GTEch Foreign holdings corporation (99.99%);
Alvaro Rivas (0.01%) (Nominee share)
Malaysia
**
100
GTEch corporation
GTEch corporation
Utah, USA
**
100
GTEch corporation
GTEch cote d’Ivoire
Ivory coast
1,000
100
GTEch czech Services s.r.o.
czech Republic
1,000
100
GTEch Global Services corporation Limited (98%);
GTEch Ireland Operations Limited (2%)
GTEch czech Republic, LLc (18)
Delaware, USA
100
25
GTEch corporation (25%)
GTEch Espana corporation
Delaware, USA
**
100
GTEch corporation
Belgium
1,250
100
Singapore
25
100
Delaware, USA
**
100
GTEch corporation
cam Galaxy Group Ltd.
DataTrans Sp. z o.o.
Dreamport do Brasil Ltda.
Dreamport Suffolk corporation
Dynamite Design & Marketing Limited
East Luck Investments Limited (12)
GTEch Avrasya Teknik hizmetler Ve Musavirlik A.S. (17)
GTEch Brasil Ltda.
GTEch computer Systems Sdn Bhd
GTEch Europe
GTEch Far East Pte Ltd
P 134
Jurisdiction
Share Capital V
Ownership (%)
Shareholder
France
50
100
Germany
500
100
Spain
1,346
100
GTEch Global Services corporation Limited (14)
cyprus
458,881.574
100
GTEch corporation
GTEch Ireland Operations Limited
Ireland
100
100
Sri Lanka
1,000,000
100
GTEch Global Services corporation Limited (99.9%);
GTEch corporation (0.1%)
GTEch Latin America corporation
Delaware, USA
**
100
GTEch corporation
GTEch Management P.I. corporation
Delaware, USA
**
100
GTEch corporation
Mexico
50,000
100
GTEch Foreign holdings corporation (0.343297%);
GTEch Latin America corporation (0.000007%)
Delaware, USA
**
100
GTEch corporation
Poland
47,445
100
Delaware, USA
**
100
GTEch corporation
Rhode Island, USA
**
100
GTEch corporation
Delaware, USA
**
100
GTEch corporation
South Africa
**
100
GTEch corporation
United Kingdom
**
100
Sweden
**
100
GTEch Global Services corporation
United Kingdom
200
100
GTEch corporation
Ukraine
19,066.264
100
GTEch Asia corporation (99%);
GTEch Management P.I . corporation (1%)
Delaware, USA
**
100
GTEch corporation
Nigeria
10,000
100
GTEch Ireland Operations Limited (25%)
GTEch West Greenwich Technology Associates GP, LLc
Delaware, USA
**
100
GTEch corporation
GTEch Worldwide Services corporation
Delaware, USA
**
100
GTEch corporation
Finland
20
81
United Kingdom
**
100
Malta
40
99.99
Boss holdings Ltd.
United Kingdom
690
100
GTEch corporation
St. Kitts & Nevis
13,600.637
100
Ukraine
87,747.8
100
GTEch Asia corporation (99.994%);
GTEch Management P.I . corporation (0.006%)
Thailand
100,000
49
GTEch corporation (10%)
Netherlands
90
100
GTEch corporation
Name
GTEch France SARL
GTEch Gmbh
GTEch Global Lottery S.L.U. (16)
GTEch Lanka (Private) Ltd.
GTEch Mexico S.A. de c.V
GTEch Northern Europe corporation
GTEch Polska Sp.z o.o.
GTEch Printing corporation
GTEch Rhode Island corporation
GTEch Slovakia corporation
GTEch Southern Africa (Pty) Ltd.
GTEch Sweden AB
GTEch U.K. Limited
GTEch Ukraine
GTEch WaterPlace Park company, LLc
GTEch West Africa Lottery Limited
Innoka Oy
Interactive Games International Ltd.
International Poker Network Ltd.
JSJ Ltd.
Lottery Equipment company
Loxley GTEch Technology co., Ltd. (12)
P 135
2009 Annual Report
Name
Jurisdiction
Share Capital *
Ownership (%)
Shareholder
Morocco
500
100
Finland
8
100
GTEch corporation
Netherlands Antilles
10
100
Delaware, USA
**
100
GTEch corporation
SB Indústria e comércio Ltda.
Brazil
4,138.646
100
Siam GTEch company Limited
Thailand
2,000
99.97
GTEch corporation
India
**
90
Gibraltar
15,701
90
St. Endellion Limited (13)
Gibraltar
2
30
St. Kitts & Nevis
**
100
Gibraltar
**
100
United Kingdom
**
100
Republic of china
500,000
24.5
Delaware, USA
**
100
GTEch corporation
hong Kong
**
100
East Luck Investments Limited
Turks & caicos
50
100
Spain
2,000
50
GTEch Global Lottery S.L.U.
Sweden
100
100
Boss Media AB
Rhode Island, USA
**
100
GTEch corporation (50%);
GTEch West Greenwich Technology Associates GP, LLc (50%)
Online Transaction Technologies SARL à Associé Unique (15)
Oy GTEch Finland Ab
Prodigal Lottery Services, N.V.
Retail Display and Service handlers, LLc
Springboard Technologies Private Limited
St. Kitts and Nevis Lottery company, Ltd.
St. Minver Limited
St. Minver (UK) Limited
Taiwan Sport Lottery corporation (13)
Technology Risk Management Services, Inc.
Tranco Investment Limited (12)
Turks and caicos Lottery company Ltd.
UTE Logista-GTEch (19)
WebDollar AB
West Greenwich Technology Associates, L.P.
P 136
Unless otherwise noted, the consolidation method for all subsidiaries listed above is on a line-byline basis.
*
**
***
****
All Share Capital amounts are stated in local currency amounts and in thousands.
Share Capital is less than €1,000.
Companies not consolidated and carried at cost.
Companies not consolidated.
(1)
On December 11, 1009, Lottomatica Videolot Gestione S.p.A., Topolino Service S.r.l.
and Royal Gold S.r.l. were merged into the parent company, Lottomatica Videolot
Rete S.p.A.
On July 1, 2009, Lottomatica Group S.p.A. acquired from GTECH 100% of Atronic
Americas, LLC and its subsidiary, GTECH German Holding Corporation GmbH and its
subsidiaries, Atronic Australien GmbH and its subsidiary, Spielo USA Incorporated and
Spielo Manufacturing ULC.
On June 25, 2009, Lottomatica Scommesse S.r.l. acquired 100% of LABET S.r.l.’s
interest participation.
On June 12, 2009, Lottomatica Videolot Rete S.p.A. acquired 100% of Tulipano S.r.l.’s
interest participation from Euromatic S.r.l.
On June 4, 2009, Lottomatica Videolot Rete S.p.A. acquired 100% of Europa Gestione
S.r.l.’s interest participation from Eurobet.
On December 29, 2009, Lottomatica Videolot Rete S.p.A. acquired 100% of Empoli
Giochi S.r.l.’s interest participation from Novamatic Group S.r.l.
On May 20, 2009, Grips Management GmbH was merged into Atronic Systems GmbH.
In liquidation.
As of September 16, 2009, Invest Games S.A. is owned by Lottomatica Group S.p.A.
(65.27%) and Lottomatica International Hungary Kft (34.73%).
As of September 16, 2009, GTECH Holdings Corporation is 100% owned by Invest
Games S.A.
Effective January 1, 2010, after the close of 2009, Lottomatica Sistemi S.p.A. and
Lottomatica International S.r.l. were merged into Lottomatica Group S.p.A. As a
result of such merger, Lottomatica Group S.p.A. is the sole shareholder of both PCC
Giochi e Servizi S.p.A. and Lottomatica International Hungary Korlátolt Felelősségű
Társaság (KFT).
The Consolidation method is proportionate consolidation.
Accounted for by the equity method of accounting.
On July 5, 2009, GTECH Global Services Corporation Limited increased its share capital
to US$458,881,574.
Under decision of the sole shareholder dated October 9, 2009, the share capital of
Online Transaction Technologies SARL was reduced to DH500,000.
Under decision of the sole shareholder dated October 9, 2009, the share capital of
GTECH Global Lottery, S.L. was increased to €1,346,000.
On December 18, 2009, GTECH Avrasya Teknik Hismetler Ve Musavirlik amended its
Articles of Association to adapt its share capital to the new Turkish monetary system.
On January 13, 2010, after the close of 2009, GTECH Corporation acquired an
additional 12,000 units of GTECH Czech Republic, LLC from Sazka, a.s., thereby
increasing its percentage of ownership to 37%.
The Compañia de Distribución Integral Logísta S.A.U. and GTECH Global Lottery
S.L.U., Union Temporal de Empresas, Law 18/1982 of 26th May, Number 1 (“UTE
Logísta-GTECH”) is a Temporary Union of Entities formed under Spanish law. It was
formed for the purposes of carrying out the obligations unde the Agreement with
National Organisation for the Blind in Spain (ONCE) dated October 19, 2009.
On April 12, 2010, after the close of 2009, GTECH Global Services Corporation Limited
purchased the remaining 12.546% interest in GEMed AB, increasing is percentage of
owneship to 100%.
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
(18)
(19)
(20)
P 137
2009 Annual Report
P 138
P 139
LOTTOMATICA SPA 2009 ANNUAL REPORT
“Being together is the beginning,
staying together is progress...
working together is a success.”
(Henry Ford)
2009 Annual Report
OPERATING AND FINANcIAL REVIEW
Income Statement Reclassified
Overview
(euro)
Lottomatica Group S.p.A. (sometimes referred to as “Lottomatica” or the
December
2009
December
2008
“company”) is one of the largest lottery operators in the world, based on total
Sales revenues
Other Revenues
362,382,858 372,771,017
94,355,365 92,828,294
wagers, and a leader in the Italian gaming industry.
Total Revenues
456,738,223 465,599,311
Cost of goods and services
Change in Inventories
212,660,358 197,185,965
207,534
-
Added Value
243,870,331 268,413,346
On August 29, 2006, Lottomatica completed its acquisition of GTEch
holdings corporation (“GTEch”), the world’s leading operator of gaming and
services technology and systems.
GTEch’s core market is the lottery industry, for which it designs, sells, and
operates a complete suite of lottery-enabled point-of-sale terminals. The GTEch
terminals are electronically linked with a centralized transaction processing
system, which mediates lottery funds between the retailers where transactions
are enabled, and the lottery authorities.
Lottomatica and GTEch together (sometimes referred to collectively with their
respective subsidiaries as the “Lottomatica Group”) comprise a fully integrated
Personnel cost
Management expense
Other provisions
Receivable depreciation
Gross Operating Margin (EBITDA)
Intangible amortization
Tangible amortization
Fixed asset depreciation
68,830,151
2,937,573
203,494
68,000
71,013,503
3,776,542
65,345
1,184,000
171,831,113 192,373,956
6,156,448
26,305,838
-
3,511,159
29,527,274
-
lottery operator and gaming technology solutions provider – a combined company
with worldwide scale, considerable financial strength, and industry-leading
Operating Result (EBIT)
customer solutions. The combination of Lottomatica and GTEch has positioned the
Financial Earnings (Expenses)
company to provide a complete offering of technology and services to manage the
Financial asset value adjustment
139,368,827 159,335,523
(5,509,575) (10,935,179)
(867,790)
-
entire chain of actual and potential clients in the lottery sector. The newly formed
Lottomatica group capitalizes on the convergence of operator programs (video
Gross Result (EBT)
lotteries) and commercial activities (casinos) in the world of machine gaming
Income Taxes
through a wide variety of video terminals, game systems and game content while
Net Profit
132,991,462 148,400,344
22,386,116
32,864,131
110,605,346 115,536,213
offering commercial applications over existing infrastructure networks. These goals
are achieved by maximizing the competitive advantages derived form the
economies of scale in research and development and in access to capital markets
resulting from the global dimensions of its own operations.
Lottomatica is majority owned by the De Agostini Group, a century-old
publishing, media, and financial services company. Lottomatica is publicly traded
on the Italian Stock Exchange (LTO).
At December 31, 2009, Lottomatica had 878 employees (compared to 868 at
December 31, 2008).
The “Report on corporate governance and ownership structure” for the year 2009,
pursuant to art. 123-bis of TUF, is available on the website www.lottomaticagroup.com,
Section Governance - Documentation corporate - corporate Governance Report.
Lotto
The figures as of December 31, 2009 showed a decrease compared to the same
period of the previous year, both in terms of the overall wagers placed and
revenues for the fees due to Lottomatica. There are two main types of wagers:
“normal” wagers (so-called “core”), which remain structurally stable over time
and allow Lottomatica to achieve significant economic results, and “speculative”
bets made on late numbers (meaning those numbers that have not been drawn
for more than 100 drawings), where some players concentrate an additional
amount of bets, with unit values considerably higher than average.
Annual wagers total €5.66 billion, a decrease of 3.2% compared to the year
ended December 31, 2008. The wagers on late numbers total €1.043 million for
Revenue Analysis
the year ended December 31, 2009 which is an increase of €806 compared to the
Net income for Lottomatica Group S.p.A for the year ended December 31, 2009
same period of the previous year. “core wagers” decreased from €5.046 million
total €/000 110,605 (€/000 115,536 at 12/31/2008).
in the year ended December 31, 2008 to €4.425 million in the year ended
Sales revenues for the years ended December 31, 2009 and 2008 respectively
total €/000 362,383 and €/000 372,771.
P 142
December 31, 2009.
Lottomatica Group spa - Financial Statements 2009
Lotto
€/000 (4,454):
related to the decrease in Lotto wagers and to the
renegotiation of point of sale assistance contracts.
First quarter 2009
First quarter 2008
Delta (%)
Second quarter 2009
Second quarter 2008
Delta %
Decrease in labor costs of €/000 (2,183): due to a reduction in costs relating
Wagers
(€/000)
Bets
x1,000
Revenues
(€/000)
1,433,575
1,487,287
592,730
610,185
93,077
96,545
Decrease in network costs €/000 (29,081): due to transferring the
(3.61)
(2.86)
(3.59)
management of the online network to the subsidiary SED Multitel, owner of
1,420,491
1,510,451
564,937
574,728
91,453
97,199
Increase in Group costs €/000 30,818: determined principally by the
(5.96)
(1.70)
(5.91)
intercompany invoices Sed Multitel, owner of the OLO license, for online
1,379,424
1,436,725
580,950
567,394
88,533
92,168
(3.99)
2.39
(3.94)
existing products. Another increase is attributed to the increase in
1,430,304
1,417,540
561,059
588,962
89,065
86,284
professional activities supplied by Lottomatica Group S.p.A. to the other
0.90
(4.74)
3.22
5,663,794
5,852,003
2,299,676
2,341,269
362,128
372,196
(3.22)
(1.78)
(2.71)
to stock option plans.
the OLO license.
network management of Lotto network.
Third quarter 2009
Third quarter 2008
Increase in consulting costs €/000 8,038: due principally to the reinforcement
of sales structure and business in order to launch new products and to support
Delta %
Fourth quarter 2009
Fourth quarter 2008
companies in the group (as evident from intercompany revenues).
Delta %
December 31, 2009
December 31, 2008
Delta %
The promotional advertising activities carried out in 2009 aimed at:
Maintaining the stability in the Lotto wagers;
Implement the customer base through the introduction of the new game
10eLotto.
The total number of bets was approximately 2.4 billion in both periods ended
December 31, 2009 and 2008.
In order to fulfil the above objectives:
As a result of a 3.2% decrease in wagers, revenues generated by Lotto
Two communication campaigns for the launch of 10eLotto in June-July and
totalled €362.1 million for the year ended December 31, 2009 compared to
August-September through TV commercials (30” and 15” commercials),
€372.2 in 2008.
newspaper advertising and Radio spots;
Other revenues mainly attributable to the intercompany transactions issued
One communication campaign in November-December through newspapers
by the parent company Lottomatica SpA to the subsidiaries in the Group total
and radios. The radio campaigns included 30” and 15” spots as well as
€94.4 million for the year ended December 31, 2009 compared to €92.8 million
advertising on the program hosted by Gerry Scotti on R101 that interpreted
in 2008.
Operating cost and EBITDA analysis
Operating costs for the year ended December 31, 2009 total €/000 284,632
(€/000 272,041 at 12/31/2008).
EBITDA for the years ended 31 December 2009 and 2009 respectively total
€/000 171,899 and €/000 193,558
Sales revenue margins passed from 41.5% in 2008 to 37.5% in 2009.
Increase in operating costs for €12.591 million is mainly due to:
Increase in advertisement costs of €/000 6,302: due to sales and promotional
activities supporting the launch of new games (10eLotto)
Decrease in costs (logistics, paper materials, and other variable costs) of
the winning numbers throughout the day.
An incentive program for the points of sale (Obiettivo 10) with the goal of
supporting the Lotto wagers and to push players to try out the new game
10eLotto;
Two in store Promotion activities through Point of Sale hostess had direct
contact with players and offered both information and educational products
on the game helping to increase the overall wagers (periods: June-July and
September-October);
Promotional material for the Points of Sale to support the launch of the new
game 10eLotto;
continuous Media Relation (for both Lotto and 10eLotto) through press
P 143
2009 Annual Report
releases, press events (Open day Mondadori, Press release for the launch of
Interest expenses on financing
10eLotto and 5 minute press release on 10eLotto 5) and special events (Roma
(euro)
film festival, Facebook).
The company’s financial position had a negative balance of €/000 5,510
(financial liabilities of €/000 10.935 at 12/31/2008), consisting of:
Financial Income and expenses
(euro)
12.31.2009
12.31.2008
Delta
Total Financial Income
Dividends received
Bank interest income
Foreign exchange gain
Loan Interest income on financing
Other financial income
97,690,382
84,750,617
283,027
355,696
11,984,885
316,157
88,538,372
65,532,661
4,644,983
837,382
17,270,754
252,592
9,152,010
19,217,956
(4,361,956)
(481,686)
(5,285,869)
63,565
(103,199,957)
756,429
92,783,698
1,020,106
6,868,154
1,771,570
(99,473,551)
1,841,184
88,911,008
171,198
8,477,772
72,389
(3,726,406)
(1,084,755)
3,872,690
848,908
(1,609,618)
1,699,181
(5,509,575)
(10,935,179)
5,425,604
Total Financial loss
Bank interest liabilities
Interest on Bond /hybrid/Swap/Senior
Foreign exchange losses
Other financial expenses
Total
12.31.2009
12.31.2008
Delta
cirmatica S.A.
GTEch corporation
Invest Games S.A.
Lottomatica Videolot Gestione S.p.A.
Totobit Informatica S.p.A.
LIS Finanziaria S.r.l.
SED Multitel S.r.l.
1,255,114
2,440,280
256,162
1,020,815
42,071
28,206
560,709
266,008
848,432
106,276
44,081
707,770
91,849
4,098
61,803
329,794
127,148
2,041,259
1,000,749
3,723,343
187,964
201,995
547,344
(91,849)
2,436,182
256,162
959,012
(287,723)
(127,148)
28,206
(1,480,550)
(734,741)
(2,874,911)
(81,688)
(157,914)
Total
6,868,154
8,477,772
(1,609,618)
Foreign exchange losses for €/000 1.020 (€/000 171 at 12/31/2008), of which
€/000 240 (€/000 142 al 12/31/2008) are non-realized (non-monetary) and refer
to valorization of foreign exchange towards GTEch and €/000 764 refer to
foreign exchange losses on derivatives relative to acquisition operations in
USD negotiate in order to hedge for foreign exchange rate fluctuations
regarding USD transactions made by consorzio Lotterie Nazionali.
The negative balance derives largely from interest payments on capital
Securities for €/000 92,784 (€/000 88,911 at 12/31/2008), partially compensated
€/000 92,784 (€/000 88,911 at 12/31/2008) for interests on capital Securities
and other loans.
by dividends received for €/000 84,751 (€/000 65,533 at 12/31/2008).
Interests on capital securities and other
Dividends
(euro)
12.31.2009
12.31.2008
Delta
cirmatica S.A.
74.170,277
4,580,340
6,000,000
-
52,792,575
10,233,464
2,506,622
21,377,702
4,580,340
6,000,000
(10,233,464)
(2,506,622)
Total
84,750,617
65,532,661
19,217,956
Total financial liabilities total €/000 103,200 (€/000 99,474 at 12/31/2008). The
most important sum refers to :
€/000 6,868 (€/000 8,478 at 12/31/2008) for interest payments on borrowings
by Group companies.
P 144
(euro)
12.31.2009
12.31.2008
Delta
Capital Securities
Interests
Swap option
Debt issuance cost amortization
750 Euro Bond
Interests
Bond 360
Interests
Issuance fee
Long Term Facility
Interests
Other
Revolving Facility
Interests
Interest withholding
GTECH cost capitalization
IRS
Interests
Other
64,088,471
62,002,801
(570,000)
2,655,670
3,217,870
3,146,857
71,013
18,694,406
12,041,517
1,261,755
5,391,134
1,579,055
252,509
1,326,546
99,515
5,104,381
1,801,733
3,302,648
63,832,920
61,747,250
(570,000)
2,655,670
17,303,509
16,806,577
189,074
307,858
814,246
210,528
603,718
6,633,966
130,860
6,503,106
311,642
14,725
-
255,551
255,551
3,217,870
3,146,857
71,013
(17,303,509)
(16,806,577)
(189,074)
(307,858)
17,880,160
11,830,989
658,037
5,391,134
(5,054,911)
121,649
(5,176,560)
(212,127)
(14,725)
5,104,381
1,801,733
3,302,648
Total
92,783,698
88,911,008
3,872,690
Investments
no research and development activities were directly carried out during the
Investments for the year ended December 31, 2009 refer to:
course of the year.
Intangible assets: total €/000 6,216 (€/000 6,384 at 12/31/2008), and refer to
The company is included in the National Tax consolidation of B&D holding
Patens (€/000 4,332) for Lotto and 10eLotto software updates, and for license
of Marco Drago & c. S.a.p.A., which has issued a new National Tax consolidation
purchasing (€/000 1,884).
Regulation in effect as of 2008.
Fixed assets: total €/000 10,846 (€/000 6,880 at 12/31/2008), composed of:
FDA goods: €/000 5,185,refer to hardware and point of sale promotional
material for the new game “10eLotto”;
Non FDA goods: €/000 5,661 and refer to investments on office furniture
(€/000 4,081) and hardware (€/000 1,580).
Financial assets: The increase of €/000 1,645,548 refers to the following
operations:
Events following the closing of the period ended
December 31, 2009
In order to simplify the interest share chain and relative management expenses,
the following mergers were made within the group in the first months of 2010:
On February 17, 2010 Tulipano S.r.l. and Europa Gestione S.r.l. merged into
Lottomatica Videolot Rete S.p.A.;
An increase in interest shares in Invest Games S.A. for €/000 1,488,506 as
On December 18, 2009 Lottomatica Sistemi S.p.A. and Lottomatica
a result of the acquisition of controlling interest in GTEch corporation
International S.r.l. merged into Lottomatica Group S.p.A. Legal effects
(€/000 1,234,506);
The acquisition of interest shares in Atronic and Spielo controlled by
GTEch corporation for €/000 148,024;
The €/000 6,620 increase in interest share in Lottomatica Videolot Rete
resulting from the merger operation begin as of January 1, 2010.
In February 2010 Lottomatica International hungary kft merged into
Lottomatica Group S.p.A., effective as of January 1, 2010. The merger was
made based on the financial situation at July 31, 2009.
following the merger of Lottomatica Videolot Gestione. On July 24, 2009
the Shareholders’ Meeting established the incorporation of Lottomatica
Predictable developments
Videolot Gestione, Royal Gold and Topolino Service into Lottomatica
Promotional and advertising activities in 2010 will aim at increasing current high
Videlot Rete.
spending player fidelity through greater media visibility thanks to the return of
the TV program “Lotto alle Otto” (on Rai 2, Monday through Saturday from 20
Further information is provided below.
to 20.30 starting February 8, 2010) and to continuous Media Relations activities.
Activity of Control and Direction
advertising campaigns on traditional media, as well as media relations and
Pursuant to Article 2497-bis of the Italian civil code, a summary report of the
direct/street marketing activities with the goal to:
The communication strategy for the new game 10eLotto is composed of
most recent financial statements approved at the De Agostini S.p.A.
Shareholders’ Meeting is presented herein. De Agostini is the controlling parent
consolidate the wager performance of current 10eLotto evolution;
Increase 10eLotto evolution network;
company of Lottomatica.
create a distinct and well-defined brand image.
Related Party Disclosure
Significant events for thr year ended December 31, 2009
Please refer to the present financial statements for the financial information
Since the start of 2009, the company has reported a number of significant
between Lottomatica, company that carries out the activity of direction and
business developments.
control, and the Group subsidiaries pursuant to Article 2497-bis of the Italian
civil code.
On July 1, 2009, GTEch and certain of its subsidiaries sold to Lottomatica
their interests in Spielo Manufacturing ULc, Spielo USA Incorporated, Atronic
Americas, LLc, Atronic Australien Gmbh and GTEch German holdings
Other Information
As specifically required by the statutory legislation, the company informs that
corporation Gmbh for a total of €/000 148,024.
As a result, GTEch’s interest in the entire Atronic group of companies, Spielo
P 145
2009 Annual Report
Manufacturing ULc and Spielo USA Incorporated was transferred to
shares with €1.00 par value, reserved for Mediobanca International
Lottomatica.
(Luxembourg) S.A., at an issue price of €15.4268. Mediobanca is the depository
The operation is part of a Group-wide interest share simplification project.
It also simplifies the development of the VLT project in the Italian market.
bank for the capital increase operation.
On November 24, 2009 Mediobanca subscribed the 19,728,536 according to
The accounting of the above described interest shares in the Lottomatica
the commitments signed with Lottomatica on October 20, 2009. The share
Group financial statements, for which IFRS 3 is not applicable, was carried out
capital increase supports a three-year mandatory exchangeable bond issued by
with a continuation of the book value (applicable for interest shares under
UBI Banca International SA for a total amount of €350 million.
common control) and resulted in an equity reserve (€/000 19,513) from the
The Mandatory Exchangeable Bond issued bed UBI Banca International S.A.
difference between the net book value and the price paid. The Lottomatica
was placed with qualified investors in Italy and abroad on October 20, 2009. The
Group also recapitalized German holding and Atronic Americas for a total of
notes will not be and have not been registered under the US Securities Act of
€/000 128,700.
1933, as amended (the “Securities Act”) and may not be sold in the United
In November 2009, the Shareholders’ Meeting
of Invest Games S.A.,
Luxemburg company that is entirely owned by Lottomatica, deliberated a
capital increase for the transfer of the GTEch holdings corporation shares from
States absent registration or pursuant to an exemption from registration under
the Securities Act.
Mediobanca has the role of Global coordinator and Bookrunner,
while
Lottomatica to Invest Games. The operation is part of a simplification project for
Bayerische hypo und Vereinsbank AG - Milano office (“Unicredit hVB”) has the
the interest share structure of the Group and is specifically concentrated on
role of co-Lead Manager. Both Mediobanca and Unicredit hVB have guaranteed
GTEch holdings corporation. An additional capital increase was deliberated for
a goof outcome for the placement of the Mandatory Exchangeable Bond.
the transfer of Lottomatica International hungary Kft assets to Lottomatica. The
operation aims at reducing the debt structure of GTEch corporation and to
improve its capital structure.
In November 2009, Lottomatica successfully concluded the placement
among qualified investors of a €750 million 7-year senior unsecured nonconvertible bond. The proceeds of the bond issue, which were and will be used
to refinance a portion of the existing debt of the Group, and for general
corporate purposes, will extend the average maturity of the Group’s debt while
The Bond is compliant to Luxemburg laws and has the following
characteristics:
total nominal value of €350 million;
3 year duration with maturity upon October 29, 2012;
interest at 8.75% per annum payable semi-annually in arrears in equal
installments for sums over 98.625% of dividends issued;
the convertible shares are priced at €17.7408, the average Lottomatica share
price - €15.4268 (four-day average) – plus a bonus of 15% of share price;
adding further diversity to the Group’s capital structure. The notes have a
right of investors to convert the bonds into Lottomatica shares up to 25 days
denomination per unit of €50,000, a due date of December 5, 2016, an annual
prior to the maturing of the bond, unless predetermined conditions occur
coupon rate of 5.375%, and an issue price of 99.504%.
(for example, change of control, UBI Banca International, S.A default);
In December 2009 were stipulated: (i) the merger of Lottomatica Sistemi
S.p.A and Lottomatica International S.r.l. in Lottomatica Group S.p.A., effective
upon maturing, UBI Banca International will exchange the shares physically
presented by the investors for cash money.
as of January 1, 2010; (ii) the merger of Lottomatica Videolot Gestione S.p.A.,
Royal Gold S.r.l. e Topolino Service S.r.l. in Lottomatica Videolot Rete S.p.A..
In February 2010 the merger of Tulipano S.r.l. and Europa Gestione S.r.l. in
Lottomatica Videolot Rete S.p.A. is stipulated. The merger took place based on
the financial situations of the companies as of January 1, 2009.
On October 29, 2009, Lottomatica signed a Swap contract with Mediobanca
International called the
company Swap Agreement. The conditions of the
agreement are summarized below:
Increase by payment of Lottomatica share capital by approximately €304
million with option rights exclusion realized through the issuing of no.
Capital Increase and issuance of Mandatory Exchangeable Bond (Swap Liability)
On November 20, 2009, a €304,348,179.165 capital increase was deliberated by
the Lottomatica Shareholders’ Meeting through the issue of 19,728,536 ordinary
P 146
19,728,536 shares reserved to Mediobanca Int. as the Depository Bank;
The subscription of Lottomatica shares is reserved to Mediobanca Int.;
Shares subscribed by Mediobanca Int. are necessary for the issuing of a €350
million Mandatory Exchangeable Bond (for institutional investors) by UBI
Long term incentive plans
Banca International (Luxemburg) as the Fiduciary Bank. The Bond is a
Long term incentive plans adopted by Lottomatica in favor of directors and/or
convertible upon reaching the third year;
employees of Lottomatica and/or its direct or indirect subsidiaries provide for
The convertible shares are priced at €17.7408, the average Lottomatica share
price - €15.4268 (four-day average) – plus a bonus of 15% of share price;
Lottomatica has signed a company Swap contract under Luxemburg law with
Mediobanca Int. stating:
Mediobanca Int. must pay upfront the Fixed Amount to Lottomatica for
a total of €46 million – 15% of share issuance price;
Mediobanca Int. must pay Lottomatica share earnings every semester;
Lottomatica must pay matured interests on existing and to-date non-
stock option grants and restricted stock awards to their directors, executives and
key employees. The principal purpose of granting long-term incentives is to
assist Lottomatica in attracting and retaining within its group directors, officers
and other key employees, to provide a market competitive total compensation
package and to motivate recipients to increase shareholder value by enabling
them to participate in the value which has been created. Most of the plans are
based upon 3 year performance measurements, generally based upon
Lottomatica’s EBITDA. In general, the total value delivered is allocated 65% to
converted Bonds every semester (so-called “Fixed Interest Amount”). The
stock options and 35% to restricted stock, except for the plans approved during
maximum payment amount totals approximately €91 million.
2009 in which the value is allocated 35% to stock options and 65% to restricted
stock. The following are summaries of the long term incentive plans in force as
The company Swap agreement has the same duration as the Bonds issued (max
of December 31, 2009.
3 years). If the bonds are converted prior to their expiration, the company swap
agreement will automatically terminate since Lottomatica will no longer have to
Stock Option Plans
make the period payment object to the agreement.
2005-2010 Plans
Company Swap financial reporting – Fixed Interest Amount and Fixed Amount
The September 21, 2005 Extraordinary Shareholders’ Meeting of Lottomatica
The following financial reporting has been indicated for the operation in
also resolved to set December 31, 2010, as the expiration date for the following
question.
subscriptions:
Share capital Increase
value of €1.00 each, with ordinary rights, excluding the right of option under
Lottomatica executes a share capital increase of approximately €304 million
Article 2441, paragraph 5, of the Italian civil code. To date 297,580 options
reporting it as equity under the item “Bank”;
have been issued, of which 191,280 remain exercisable and 106,300 have been
cancelled;
company Swap
With reference to the reporting of both entry and exit flows originating from
the company Swap, Lottomatica proceeds as follows:
Article 2441, paragraph 5, of the Italian civil code. To date none of the 57,016
Fixed Amount: directly attributed as an increase in “Share premium reserve”
and compensated by an increase in Bank/cash (approximately €46 million);
Fixed Interest Amount: directly attributed as a decrease in “Share premium
options have been issued;
reserve” and compensated by an increase in liabilities for an equal value to
Article 2441, paragraph 5, of the Italian civil code serving to the exercise of
the actualization (approximately €84 million) of the total payment amount
219,812 options assigned by Lottomatica, of which 95,336 remain exercisable
due by Lottomatica for the 3 year Bond duration (approximately €91 million);
and 124,476 have been cancelled.
Entry of gradual release of the above-mentioned actualization liability in the
Statements of comprehensive income item “interest liabilities/assimilated
2006-2014 Plan
expenses.”
The Lottomatica Board of Directors’ Meeting of October 18, 2006 resolved to
P 147
2009 Annual Report
increase the share capital by a maximum amount of €1,500,000 by issuing up to
divisible form, by a maximum amount of €1,850,510.00 by issuing up to
1,500,000 new ordinary shares with a par value of €1.00 each, with ordinary
1,850,510 new ordinary shares with a par value of €1.00 each, with ordinary
rights, excluding the right of option under Article 2441, paragraph 4, second
rights, excluding the right of option under Article 2441, paragraph 4, second
sentence of the Italian civil code to be subscribed by December 31, 2014, serving
sentence of the Italian civil code, to be subscribed by December 31, 2015,
the exercise of 1,188,600 options assigned on the same date by the Board of
serving the exercise of 1,850,510 options assigned on the same date by the
Directors’ Meeting and within the framework of the stock option plan 2006-
Board of Directors’ Meeting and not yet due within the framework of the stock
2014 reserved for employees of Lottomatica and/or its subsidiaries. As of
option plan 2009-2015 reserved for employees of Lottomatica and/or its
December 31, 2009 there are 690,509 options outstanding under the Plan.
subsidiaries. As of December 31, 2009 there are 1,840,220 options outstanding
under the Plan.
2007-2015 Plan
The Lottomatica Board of Directors’ Meeting of May 3, 2007 resolved to increase
Restricted Stock
the share capital against payments, in one or more trances and in divisible form,
by a maximum amount of €1,973,790 by issuing up to 1,973,790 new ordinary
(a) Executive Purchase of Shares at the Rights Offering Price
shares with a par value of €1.00 each, with ordinary rights, excluding the right
The Lottomatica Board of Directors’ Meeting of August 29, 2006 resolved to
of option under Article 2441, paragraph 4, second sentence of the Italian civil
increase the share capital against payment, in divisible form, by a maximum
code, to be subscribed by December 31, 2015, serving the exercise of 1,973,790
amount of €2,000,000 by issuing up to 2,000,000 new ordinary shares with a par
options assigned on the same date by the Board of Directors’ Meeting and not
yet due within the framework of the stock option plan 2007-2015 reserved for
Article 2441 of the Italian civil code, to be assigned by December 15, 2007, to
employees of Lottomatica and/or its subsidiaries, other than 115,200 options
employees of Lottomatica and/or its subsidiaries for the price of €24.425 each.
that may be exercised prior to the vesting period pursuant to the resolution of
Of the 2,000,000 shares, 1,528,582 have been assigned with a sale restriction
the Lottomatica Board of Directors of December 11, 2007. As of December 31,
period ranging from one to three years from August 29, 2006 depending upon
2009 there are 1,459,280 options outstanding under the Plan.
the employee’s position at Lottomatica or at its subsidiaries. The restriction has
expired on August 29, 2009.
2008-2016 Plan
The Lottomatica Board of Directors’ Meeting of April 22, 2008 resolved to
(b) Share Allocation Plans (article 2349 of the Italian civil code)
increase the share capital against payment, in one or more trances and in
2006-2011 Share Allocation Time Based Plan, Reserved for Employees of
Lottomatica and/or its subsidiaries, approved by the Shareholders’ Meeting of
new ordinary shares with a par value of €1.00 each, with ordinary rights,
Lottomatica of October 18, 2006;
excluding the right of option under Article 2441, paragraph 4, second
sentence of the Italian civil code, to be subscribed by December 31, 2016,
and/or its subsidiaries, approved by the Shareholders’ Meeting of Lottomatica
serving the exercise of 2,318,045 options assigned on the same date by the
of April 23, 2007 that, at the same time, empowered the Board of Directors
Board of Directors’ Meeting and not yet due within the framework of the
for 5 years to increase the share capital in one or more trances by a maximum
stock option plan 2008-2016 reserved for employees of Lottomatica and/or its
amount of €3,200,000 by issuing up to 3,200,000 new ordinary shares, with a
subsidiaries. As of December 31, 2009 there are 2,133,662 options outstanding
par value of €1.00 each;
under the Plan.
2009-2015 Plan
of April 15, 2008 that, at the same time, empowered the Board of Directors
The Lottomatica Board of Directors’ Meeting of July 30, 2009 resolved to
to purchase a maximum number of own shares equal to 10% of the share
increase the share capital against payment, in one or more trances and in
capital also available for the implementation of the stock plans;
P 148
Shareholding of strategic management
of July 2, 2009.
Originally Approved Grants
The Board of Directors’ Meeting of Lottomatica of October 18, 2006 resolved to
assign up to 733,125 of ordinary shares within the framework of the time-based
plan 2006-2011, for of which the Board of Directors’ resolved:
On May 3 and December 11, 2007 an increase in share capital, for an overall
Surname and Name
Sala Marco
Salvemini Severino
Bortoli Stefano
Pellicioli Lorenzoenzo
Patel Jaymin
ceretti Paolo
Ascoli Renato
Shares at
12.31.2008
Shares
purchased
Shares
sold
Shares free of
charge assigned
Shares
12.31.2009
376,012
8,000
3,803
70,000
196,701
3,000
4,551(*)
2,000
-
62,123
9,447
23,059
16,457
106,902
16,074
53,025
27,802
420,791
10,000
10,430
70,000
226,667(**)
3,000
15,896
(*) Different from that released in the 2008 annual report, the correct number of shares
owned by Renato Ascoli at December 31, 2008 is 4,551 instead of 6,526.
maximum nominal amount of €154,752 by issuing up to 154,752 new ordinary
shares, with a par value of €1.00 each, with ordinary rights;
On July 31, 2008 and on July 30, 2009, to assign an overall maximum amount
(**) Different from that released in the Disclosure Report of February 2010, the correct
number of shares owned by Jaymin Patel in February 2010 is 226,667 instead of
196,701.
of 192,645 Lottomatica owned shares.
The Board of Directors’ Meeting of Lottomatica of May 3, 2007 resolved to
Lottomatica Group shareholding structure
(Based on most recent filings as of February 19, 2010)
Share Allocation Plan, for of which the Board of Directors’ resolved:
On December 11, 2007 and on April 22, 2008 an increase in share capital,
for an overall maximum nominal amount of €108,842 by issuing up to
108,842 new ordinary shares, with a par value of €1.00 each, with
Shareholder
De Agostini Group
Mediobanca
Assicurazioni Generali
Number
of Shares
% of Outstanding
Shares
102,629,324
21,918,941
4,989,596
59.663
12.744
2.901
ordinary rights;
On April 28, 2009 to assign a maximum amount of 67,337 Lottomatica owned
shares.
Lottomatica owns 3,346,190 treasury shares, equal to about 1.945% of share
capital.
The Board of Directors’ Meeting of Lottomatica of April 22, 2008 resolved
to assign up to 286,916 ordinary shares within the framework of the 20082011 Share Allocation Plan, for of which the Board of Directors’ on April 28,
2009 resolved to assign a maximum amount of 76,765 Lottomatica owned
shares.
The Board of Directors’ Meeting of Lottomatica of July 30, 2009 resolved to
Share Allocation Plan.
Current Plan Balances
As of December 31, 2009, the following numbers of shares are outstanding in
each plan:
188,557 in the framework of the time-based 2006-2011, 62,332
ordinary shares in the framework of the 2007-2010 Plan, 190,620 ordinary shares
in the framework of the 2008-2011 Plan and 669,976 ordinary shares in the
framework of 2009-2013 Plan.
P 149
2009 Annual Report
Regulatory Framework Reference
Decree of February 25, 2009
Guidelines for instant lottery “Il tesoro del faraone”.
Decree of November 27, 2008
Guidelines for instant lottery “Prendi tutto”.
Law of February 27, 2009
conversion into law of Decree no. 207 of December 30, 2007 regarding the
Decree of December 11, 2008
Events for 2009 National Lotteries .
changes to the awarding of 2008 Lotteria Italia prizes.
extension of PREU tax payments.
Decree of March 2, 2009
Guidelines for online instant lottery “Il segreto di Leonardo online”.
Guidelines and regulations for the awarding of “centenario del Giro d’Italia - La
Guidelines for online instant lottery “Prendi tutto online”.
solidarietà una tappa da vincere” prices.
Guidelines for online instant lottery “Ramino online.
changes to the application of Decree of February 28, 2007 regarding online
Guidelines for online instant lottery “Affari tuoi online”.
Bingo.
Law no. 39 of April 28, 2009
Emergency measures for areas damaged by the earthquake in Abruzzo (in April
2009) – refers to lotto, lotteries, betting, skill games and VLT).
Guidelines and regulations for the awarding of “Sanremo 2009 – Adotta un
angelo” lottery prizes.
Law no. 2 of January 28, 2009
Decree of May 5, 2009
Regulations for “10eLotto” game.
conversion into law of Decree no. 185 of November 29, 2008 regarding anti-
crisis emergency measures (gaming tax operations).
Guidelines for instant lottery “Gratta quiz”.
Decree of January 29, 2009
Guidelines for the acceptance of fixed odds and pari mutuel sports betting for
Guidelines for horse racing sports pool called V7.
both sporting and non sporting events in 2009.
Technical guidelines for fixed odds horse race betting and pari mutuel horse
race betting concessions.
Guidelines for online instant lottery “Gratta quiz online” (09A06323).
Decree of June 10, 2009
Gioco del Lotto Drawing site concentration (09A06841).
Forfeit tax on gaming machines for 2009.
Determination of game wagers and minimum playslip amounts.
Guidelines for instant lottery “Nuovo Fai Scopa”.
Guidelines for online instant lottery “caccia al jolly online”.
Guidelines for online instant lottery “Tuffati nell’oro online”.
Raising maximum price limit of instant lotteries .
P 150
Law no. 78 of July 1, 2009
Decree October 8, 2009
Anti-crisis measure referring to Lotto, lotteries, betting, skill games and VLT.
changes to tax payables regarding Bingo.
Law no. 88 of July 7, 2009
Decree of October 8, 2009
European community obligations for online gaming.
cash flow management for sports pools and pari mutuel betting on non horse-
Decree of July 7, 2009
Guidelines for instant lottery “caccia ai tesori”.
New guidelines for Gioco del Lotto (09A08568).
racing events.
Decree of October 22, 2009
Reimbursement of guarantee deposit for 2008, 2009 and 2010 online.
Guidelines for online instant lottery “Nuovo Fai Scopa online”.
changes to Decree of May, 2009 regarding guidelines for instant lottery «Gratta
quiz».
changes to guidelines for online Bingo.
Guidelines for online instant lottery “Poker Texano online”.
changes to guidelines for 2009 Lotteria Italia.
Decree of August 6, 2009
Launch of game system according to Article 110, comma 6, letter b) of T.U.L.P.S.
Guidelines for instant lottery “quadrifoglio d’oro” (09A14784).
(09A09909).
Guidelines to the awarding of 2009 Lotteria Italia prizes.
Determination of gaming machine network controls.
Decree of September 9, 2009
STATEMENT REqUIRED BY ARTIcLE 2.6.2,
SUBSEcTIONS 12 AND 13 OF ThE ITALIAN STOcK
EXchANGE REGULATION ABOUT cOMPLIANcE
WITh cONDITIONS SET FORTh IN ARTIcLES 36 AND
37 OF cONSOB RESOLUTION NO. 16191 OF
OcTOBER 29, 2007 (SO-cALLED “MARKET
REGULATIONS”)
Guidelines for online instant lottery “Spacca 9 online”.
Lottomatica meets the conditions for the listing of companies with subsidiaries
Authorization guidelines and guarantees.
incorporated pursuant to and governed by the laws of non-EU countries, as
provided for by Section 36 of the Market Regulations, and the conditions for the
listing of companies subject to management and coordination by other
Launch of selection process.
companies, as provided for by Section 37 of the Market Regulations.
Guidelines for instant lottery “Magico Natale”.
compliance Model Under Legislative Decee no. 231/01
Lottomatica first enacted the compliance Model in November of 2004, pursuant to
Decree no. 151 of September 25, 2009
Legislative Decree No, 231 of June 8, 2001 as subsequently amended and
European community directives (09G0163).
integrated. The Decree introduced “administrative” legal liability in Italy,
comparable in many respects to criminal liability, arising from specific crimes
committed in the interest or to the advantage of entities (including the company).
Guidelines for online instant lottery “Megamiliardario online”.
P 151
2009 Annual Report
The Model conforms to the guidelines set out by qualified associations and
Manager is required to issue a declaration (in a form prescribed by the Italian
with best practices. It represents an additional step of transparency and is aimed
Stock
at inspiring a sense of responsibility in internal and external relations, and
communications released to the market regarding accounting information,
therefore simultaneously offers to the shareholders an adequate guarantee of
including interim information, and certifies that such information corresponds
the management’s efficiency and strength for legality.
to what is recorded in the company’s documents, accounting records and books.
Exchange)
that
accompanies
the
corporate
documents
and
The Model has been periodically amended to reflect the new corporate
Art. 154-bis further provides that the delegated members of the
structure and to comply with the new provisions of law. The Model has been
administrative body and the Accounting Manager also certify in a report (in a
adopted also by Lottomatica’s Italian subsidiaries in October 2007.
form prescribed by consob) attached to first half, annual and annual stand
In March 2009, the Board of Directors of Lottomatica adopted a new Group
code of conduct.
alone financial statements of the parent company, (i) the adequacy and actual
application of the administrative and accounting procedures during the period
to which such accounting documents refer, and (ii) the correspondence of such
compliance Model Under Legislative Decee no. 262/05
documents to the accounting records and their suitability for providing a
In 2006, 2007 and 2008 the company updated its By-laws and launched the
truthful and accurate representation of the company’s assets, financial position
“262-Plan” to comply with Law no, 262/05. The “262-Plan” applied the cOSO
and result of operations, for both stand alone and in consolidation.
(committee on Sponsoring Organization) Internal control – Integrated
Framework and includes the following:
Processing of Personal Data
Risk Assessment - A risk assessment was conducted to provide the basis for
Article 34 of Legislative Decree No. 196 of June 30, 2003, requires certain
selecting priority financial reporting elements and the processes supporting
security measures to be taken in the event of the electronic processing of
those elements.
personal data, according to the procedures set forth in the technical
Documentation Phase - Documentation was created for each of the critical
specifications under Annex B to the law. Among these requirements is the one
processes including the identification of process risks and related controls.
specified in letter (g) for “an updated Security Policy Statement” (DPS,
Evaluation Phase - An assessment of the controls design and operating
Documento Programmatico sulla Sicurezza).
effectiveness was performed.
DPS, in compliance with the law, specifies the technical and organizational
Reporting Phase - Design and operating deficiencies identified to date have
security measures adopted on the basis of risk analysis as well as task and
been reported to Management and remediation Action Plans developed. A
responsibility distribution within the data processing structure in order to
mechanism to monitor execution of corrective action has been implemented.
protect personal data regarding their correct storage and handling.
On May 3, 2007 the Board of Directors, after receiving the opinion of the
Lottomatica Group S.p.A. regularly reviews and updates the DPS which it did
Board of Statutory Auditors, appointed as the manager in charge of drafting
most recently on March 31, 2009 in accordance with Legislative Decree No. 196/03.
corporate reports and financial documents (hereinafter the “Accounting
Manager”) the company’s chief Financial Officer effective as of June 30, 2007.
Shareholders’ Meeting Proposals
Pursuant to Article 154-bis of the Legislative Decree no, 58 of February 24,
The publication of the Lottomatica 2009 Annual report was authorized by the
1998, introduced by Law no.262 of December 28, 2005, the duty of the
Board of Directors on March 3, 2010. The distribution of dividends for €0.74 per
Accounting Manager is to establish appropriate administrative and accounting
share was also deliberated.
procedures for the preparation of the financial statements of the parent
company, the consolidated financial statements and all other financial
documents. The Board of Directors is responsible for ensuring that the
For the Board of Directors
Accounting Manager has adequate powers and means to carry out these
chairman
functions, and that the administrative and accounting procedures that the
Accounting Manager establishes are actually observed. The Accounting
P 152
EXhIBIT 3c-ter
certification of the annual stand alone financial statements, pursuant to Article 81-ter of the consob
Regulations no. 11971 of May 14, 1999 with any following amendments
1. The undersigned, Marco Sala, Managing Director and chief Executive Officer, and Stefano Bortoli, chief Financial Officer and Manager in charge of drawing up
corporate reports and financial documents of Lottomatica Group S.p.A., also taking into account Article 154-bis, Section 3 and 4 of the Legislative Decree no.
58 of February 24, 1998, certify:
the adequacy - with respect to the characteristic of Lottomatica, and;
the effective application,
of the administrative and accounting procedures relating to the preparation of the annual stand alone financial statements throughout the year ended
December 31, 2009.
2. With reference to the above, material issues were identified..
3. It is further certified that:
3.1 The annual stand alone financial statements:
a. are prepared in accordance to the applicable international financial reporting standards admitted by the European community pursuant to European
Regulation (cE) no. 1606/2002 of July 19, 2002, of the European Parliament and council;
b. correspond to the accounting books and entries; and
c.
are suitable to offer truthful and accurate representations of the assets, financial position and result of operations of Lottomatica.
3.2 The management report contains a reliable analysis of the ongoing business and results, as well as of the status of Lottomatica, jointly with a description of the
main risks and uncertainties to which it is exposed.
March 3, 2010
Managing Director and cEO
cFO and Manager in charge of preparing
corporate reports and financial documents
P 153
FINANCIAL STATEMENTS AND FOOTNOTES - DECEMBER 31, 2009
“...or we’ll win as a group,
or we’ll be annihilated as individuals!”
(Al Pacino: from the vovie “Any given sunday”)
2009 Annual Report
Statement of Equity and Financial Position
(euro)
ASSETS
Non-current assets
System, equipment and other assets
Goodwill
Securities and Equity investments
Notes
December 2009
1
2
3
4
5
43,327,870
622,896,606
4,950,608
2,828,424,974
675,562
59,470,126
622,896,606
5,902,940
2,447,445,913
766,622
3,500,275,620
3,136,482,207
Current Assets
Inventories
current financial assets
Income tax receivables
Related party
transaction 2009
Note 33
7
8
6
9
10
11
Total current assets
1,843,552
93,560,982
417,075,799
9,836,072
1,637,225
375,163,819
79,600,466
416,943,124
December 2008
3,298,492
104,846,737
228,766,961
13,822,030
122,351
28,846,084
899,117,449
379,702,655
TOTAL ASSETS
4,399,393,069
3,516,184,862
EQUITY AND LIABILITIES
Equity
Share capital
Legal Reserve
Share Premium Reserve
Treasury Shares
Gaming Solution reserve
Other Reserve
Profits (loss) carried forward
Profit (loss) for the period
172,015,373
30,457,367
1,404,251,887
(63,501,857)
(19,512,685)
439,378,968
14,518,492
110,605,346
152,286,837
30,379,839
1,139,070,823
(73,184,181)
448,715,673
115,536,214
Total Equity
12
2,088,212,891
1,812,805,205
Non-current liabilities
Long-term Debt, less current portion
Staff Severance Fund (TFR)
Deferred tax liability
13
14
15
16
1,532,949,530
4,906,888
21,289,785
11,406,846
1,135,916,577
4,809,816
31,791,872
9,567,466
1,570,553,049
1,182,085,731
Current liabilities
Trade and other payables
Income tax payables
Total current liabilities
TOTAL EQUITY AND LIABILITIES
P 156
17
13
13
18
19
101,660,912
535,456,948
78,812,102
23,550,168
1,147,000
45,517,432
535,456,948
80,861,867
367,348,044
46,490,351
26,593,664
-
740,627,129
521,293,926
4,399,393,069
3,516,184,862
Related party
transaction 2008
Note 33
94,108,828
228,766,961
22,446,009
316,512,955
Income Statements
(euro)
Revenues
Other revenues
Notes
December 2009
Related party
transaction 2009
Note 33
20
21
362,382,858
94,355,365
93,592,307
Total revenues
Raw material, services and other costs
Personnel
Depreciation, Amortization and Write-downs
456,738,223
22
23
24
216,008,959
68,830,151
32,530,286
December 2008
Related party
transaction 2008
Note 33
372,771,017
92,828,294
85,220,742
465,599,311
69,517,084
201,027,852
71,013,503
34,222,433
Total costs
317,368,827
306,263,788
Operating income
139,368,827
159,335,523
84,750,617
599,184
(1,771,570)
(664,410)
5,116,731
(92,783,698)
(756,429)
65,532,661
4,897,575
(72,389)
666,184
8,792,982
(88,911,008)
(1,841,184)
Dividends
Interest income and other incomes
Other financial expenses
Foreign exchange gains (loss)
Intercompany interests, net
Interest expenses on Bond/capital Securities
Interest expenses
25
26
27
28
(5,509,575)
Financial assets value adjustments
29
Gross income
132,182
5,116,731
(867,790)
-
132,991,462
148,400,344
30
(22,386,116)
(32,864,131)
Net income
31
110,605,346
115,536,213
67,093,203
43,512,143
78,564,625
36,971,588
110,605,346
115,536,213
0.45
0.45
0.52
0.52
Earning per share/ADRs
Basic - net income attributable to owners of the parent (€)
Diluited - net income attributable to owners of the parent (€)
362,765
8,892,982
(10,935,179)
Income taxes
Attributable to
37,764,837
P 157
2009 Annual Report
December 31,
(thousands of euro)
2009
2008
110,605
115,536
-
-
-
-
(570)
(570)
Net gain (loss) on derivative instruments (cash flow hedges)
-
-
Net gain (loss) on available-for-sale financial assets
Net gain (loss) on translation of foreign operations
-
-
-
-
(570)
(570)
110,035
114,966
66,747
43,288
78,177
36,789
110,035
114,966
Net income
Other comprehensive income
Net gain (loss) on interest rate swaps (cash flow hedges)
Amortization of gain on interest rate swap
on discontinued cash flow hedge
Other comprehensive loss for the year, net of tax
Total comprehensive income for the year, net of tax
Attributable to
P 158
cash Flow Statements
(euro)
Operating activities
Profit before taxes
Adjustments to reconcile gross earnings with net financial flows
Fixed asset amortizations and depreciations
Intangible assets amortizations and depreciations
Bond issuance and cost amortization
Stock option
Swap Option depreciation
Financial assetDepreciation
Dividends
Interest income
Intersts on intercompany borrowings
Net Interest income
Bank interest expense
Other interest intercompany
Net Accrued interest expences
Other non monetary items
Unrealized exchange gains
Using long-term funds
TFR
Non monetary Subtotal
Realized foreign Exchange(gain)
Taxes paid
Cash flow from operating activities before changes in net working capital
Changes in net working capital
Inventories
Intercompany Receivables
Trade liability
Other
Trade payables
Intercompany Payables
Taxes on income for the period as per the Statements of comprehensive income
Payable/receivables for taxes
Trade Vat and other taxes
Net cash flow operating activities
Investing activities
Purchases of fixed assets
Purchases of intangibile assets
Purchases of financial assests
Proceeds from sale of financial assets
Proceeds from sale of intangible assets
Net cash flow used in investing activities
cash flow from financing activities
Interest paid
Interest paid intercompany
Interest paid hybrid
Repayment credits
Repayment Long term revolving
Interest paid on Long Term Revolving
Repayment Revolving
Interest paid on Revolving
Dividends paid
Interest incomes collected
Intercompany interests collected
Dividends collected
capital increase
Bond
Payments of short term debts
Proceeds from Stock Options
Buy back
Net cash flow from financing activities
Net increase (decrease) in cash and cash equivalents
cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
December 31, 2009
December 31, 2008
132,991,456
148,400,344
26,305,838
6,156,448
(82,428)
(570,000)
867,790
(84,750,617)
(283,027)
(11,984,885)
(12,267,912)
894,118
6,126,188
7,020,306
29,527,275
3,511,158
3,152,602
14,680,133
(570,000)
(65,532,661)
(4,644,983)
(17,270,754)
(21,915,737)
80,395,009
8,031,856
88,426,865
139,582
2,108,623
97,072
(54,975,298)
(238,818)
(8,895,963)
68,881,377
(220,638)
(2,588,872)
(117,030)
48,353,095
(445,546)
(21,840,944)
174,466,949
1,454,940
(506,138)
1,934,144
12,657,371
520,593
(23,041,462)
(216,835)
(2,173,142)
23,071,423
(4,027,623)
(18,358,493)
28,840,116
(3,367,083)
108,696,195
9,961
(4,900,998)
17,024,271
(26,597,871)
(6,266,260)
11,172,400
7,830,368
149,711,813
(10,846,332)
(6,216,333)
(385,003,654)
533,381
1,694,967
(399,837,971)
(2,218,245)
(6,373,470)
(318,164,845)
1,119,931
(325,636,629)
(894,118)
(2,433,472)
(61,876,000)
(50,835,089)
(360,000,000)
(12,643,000)
(50,000,000)
(1,400,000)
(100,940,193)
283,027
5,401,800
107,787,143
350,000,000
750,000,000
65,009,413
637,459,511
346,317,735
28,846,084
375,163,819
(81,123,984)
(125,393,313)
5,508,098
55,335,341
161,369,617
2,914,459
(74,829,728)
(56,219,510)
(232,144,326)
260,990,410
28,846,084
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2009 Annual Report
Statement of changes in Equity
(euro)
Balance at Decenber 31, 2007
Distribution
Dividend distribution (€0.825 per share)
Others
Legal reserve
Stock Option Exercise
Free of charge assignments
Vested shares
Swap amortization
Stock option costs
Buy back
Net income
Distribution
Others
Legal reserve
capital increase 11/24/2009
Free of charge assignments
Swap amortization
Stock option costs
Gaming Solution Transaction
Net income
P 160
Share
Capital
Share
Premium
Reserve
Treasury
reserves
151,899,196
1,574,955,576
-
84,613,316
232,400
155,241
-
(56,470,923)
(456,925,620)
2,682,059
74,829,728
-
1,645,547
(74,829,728)
-
152,286,837
1,139,070,820
19,728,536
172,015,373
Other
Net income
reserves carried forward
Net income
Total
-
68,999,730
1,880,467,818
456,925,620
77,339
(155,241)
(1,645,547)
(570,000)
14,679,755
(74,829,728)
-
-
(68,922,391)
(77,339)
115,536,213
(125,393,314)
2,914,459
(570,000)
14,679,755
(74,829,728)
115,536,213
(73,184,181)
479,095,514
-
115,536,213
1,812,805,203
265,181,067
-
9,682,324
-
77,528
(9,682,324)
(570,000)
915,400
(19,512,686)
-
14,518,492
-
(100,940,193)
(14,518,492)
(77,528)
110,605,346
(100,940,193)
284,909,603
(570,000)
915,400
(19,512,686)
110,605,346
1,404,251,887
(63,501,857)
450,323,432
14,518,492
110,605,346
2,088,212,674
AccOUNTING PRINcIPLES AND FOOTNOTES
IFRS 2 Share-based Payment (Revised)
The IASB issued an amendment to IFRS 2 clarifies the definition of a vesting
1. corporate Information
condition and prescribes the treatment for an award that is effectively
Lottomatica Group S.p.A. (“Lottomatica”) is one of the largest lottery operators
cancelled. The adoption of this standard had no effect on the financial position,
in the world, based on total wagers, and a leader in the Italian gaming industry.
performance or cash flows of the company or requires additional disclosures
Lottomatica has leveraged its distribution and processing competence to expand
since the company has no share based payment plans.
its activities beyond gaming and also provides commercial, payment and other
processing services through its extensive terminal network.
Lottomatica is licensed by the Italian Government to manage Lotto and
The amended standard requires additional disclosures about fair value
other public games, as well as the parent company of a Group active in the
measurement and liquidity risk. Fair value measurements related to items
gaming, automated services and ticketing services markets. In addition,
recorded at fair value are to be disclosed by source of inputs using a three level
Lottomatica has extensive know-how in the following areas:
fair value hierarchy, by class, for all financial instruments recognized at fair
gaming systems and products;
hardware and software (terminals and systems) to process sports pools and
horse-race betting; and
assistance to the operations management of the Italian National horse Racing
Pari-Mutuel System help Desk.
value. In addition, a reconciliation between the beginning and ending balance
for level 3 fair value measurements is now required, as well as significant
transfers between levels in the fair value hierarchy. The amendments also clarify
the requirements for liquidity risk disclosures with respect to derivative
transactions and assets used for liquidity management.
On August 29, 2006, Lottomatica acquired GTEch holdings corporation, the
IFRS 8 Operating Segments
world’s leading provider of highly-secure online lottery transaction processing
IFRS 8, which replaced IAS 14 Segment Reporting, specifies how an entity should
systems.
report information about its operating and reportable segments in annual and
Lottomatica is a joint stock company incorporated and domiciled in Italy,
whose registered office is located at Viale del campo Boario, Rome, Italy.
interim financial statements. It also defines requirements for related disclosures
about products and services, geographical areas and major customers.
The majority shareholder of company interests is De Agostini S.p.A., whose
wholly owned by Marco Drago’s B&D holding and c. S.a.p.A. Pursuant to Article
IAS 1 Presentation of Financial Statements (Revised)
2497 of the Italian civil code, the company is subject to the management and
The revised standard separates owner and non-owner changes in equity. The
coordination of De Agostini S.p.A., and is publicly traded on the Italian Stock
statement of changes in equity includes only details of transactions with owners,
Exchange (LTO).
with non-owner changes in equity presented in a reconciliation of each
The financial statements for the year ended December 31, 2009 were
component of equity. In addition, the standard introduces the statement of
authorized for issuance in accordance with a resolution of the Board of Directors
comprehensive income: it presents all items of recognized income and expense,
on March 3, 2010.
either in one single statement, or in two linked statements.
2. Significant accounting principles and standards
IAS 23 Borrowing Costs (Revised)
The company’s accounting policies are consistent with those of the previous
The revised IAS 23 requires capitalization of borrowing costs that are directly
financial year except the company’s adopted new International Accounting
attributable to the acquisition, construction or production of a qualifying asset.
Standards Board (IASB) and International Financial Reporting Interpretations
In accordance with the transitional provisions of the amended IAS 23.
committee (IFRIc) standards, amendments and interpretations as of January 1,
2009 as described below. Adoption of these Standards and Interpretations did not
IAS 27 Consolidated and Separate Financial Statements
have a material effect on the financial position or performance of the company.
The company adopted an amendment to IAS 27 on January 1, 2009 that requires
P 161
2009 Annual Report
all dividends from a subsidiary, jointly controlled entity or associate to be
classified as current in the statement of financial position.
recognized in the income statement in the separate financial statement and will
have to be applied prospectively. The new requirements affect only the parent’s
IAS 7 Statements of Cash Flow
separate financial statement.
This amendment becomes effective for annual periods beginning on or after
January 1, 2010 and explicitly states that only expenditures that result in
IAS 32 Financial Instruments: Presentation and IAS 1 Puttable Financial
recognizing an asset in the statement of financial position can be classified as a
Instruments and Obligations arising on Liquidation
cash flow from investing activities.
The standards have been amended to allow a limited scope exception for
puttable financial instruments to be classified as equity if they fulfil a number of
IAS 16 Property, Plant and Equipment
specified criteria.
IAS 16 replaces the term “net selling price” with “fair value less costs to sell” in
the definition of recoverable amount.
IFRIC 9 Reassessment of Embedded Derivatives and IAS 39 Financial
Instruments: Recognition and measurement
This amendment to IFRIc 9 requires an entity to assess whether an embedded
Assistance
derivative must be separated from a host contract when the entity reclassifies a
The company adopted an amendment to IAS 20 on January 1, 2009 requiring
hybrid financial asset out of the fair value through profit or loss category. This
that the benefit of a government loan at a below-market rate of interest be
assessment is to be made based on circumstances that existed on the later of the
treated as a government grant. The adoption of this amendment had no
date the entity first became a party to the contract and the date of any contract
material impact on the financial position or performance of the company.
amendments that significantly change the cash flows of the contract. IAS 39
now states that if an embedded derivative cannot be reliably measured, the
IAS 23 Borrowing Costs
entire hybrid instrument must remain classified as at fair value through profit or
IAS 23 revises the definition of borrowing costs to consolidate the two types of
loss.
items that are considered components of “borrowing costs” into one, which is
the interest expense, calculated using the effective interest rate method
IFRIC 18 Transfers of Assets from Customers
calculated in accordance with IAS 39.
IFRIc 18 requires entities to apply the Interpretation prospectively to transfers of
assets from customers received on or after July 1, 2009. IFRIc 18 is likely to be
particularly relevant for the utility sector. The adoption had no effect on the
The company adopted an amendment to IAS 36 on January 1, 2009 that requires
financial position, performance or cash flows of the company.
when discounted cash flows are used to estimate “fair value less cost to sell”,
additional disclosure is required about the discount rate, consistent with
Improvements to IFRSs
disclosures required when the discounted cash flows are used to estimate “value
in use”. The adoption of this amendment had no material impact on the
financial position or performance of the company
are separate transitional provisions for each standard. The company has not
adopted yet the following amendments. No material impacts are expected to
IAS 38 Intangible Assets
the financial position or performance of the company.
IAS 38 requires expenditures on advertising and promotional activities to be
recognized as an expense when the company either has the right to access the
IAS 1 Presentation of Financial Statements
goods or has received the service. In addition, the reference to there being
Assets and liabilities classified as held for trading in accordance with IAS 39
rarely, if ever, persuasive evidence to support an amortization method of
Financial Instruments: Recognition and Measurement are not automatically
intangible assets other than a straight-line method has been removed.
P 162
The adoption of this amendment had no material impact on the financial
position or performance of the company.
IFRS 2 Share-based payments
IFRS 5 Non-current Assets held for Sale and Discontinued Operations
IFRS 8 Operating segments
IAS 8 Accounting Policies, change in Accounting Estimates and Errors
IAS 10 Events after the Reporting Period
IAS 18 Revenue
IAS 19 Employee Benefits
Assistance
IAS 27 consolidated and Separate Financial Statements
IAS 28 Investments in Associates
IAS 31 Interest in Joint Ventures
IAS 34 Interim Financial Reporting
IAS 39 Financial Instruments: Recognition and Measurement
IAS 40 Investment Property
IFRIc 9 Reassessment of Embedded Derivatives
IFRIc 16 hedges of a Net Investment in a Foreign Operation
IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments
beginning on or after July 1, 2010. The interpretation provides guidance on the
accounting by an entity when the terms of a financial liability are renegotiated
and result in the entity issuing equity instruments to a creditor of the entity to
extinguish all or part of the financial liability. The adoption of this
interpretation is not expected to have a material impact on the financial
position or performance of the company when adopted on January 1, 2011.
3. Basis of preparation
The financial statements have been prepared on a historical cost basis, except as
disclosed in the accounting policies below. Investment properties, derivative
instruments and available-for-sale assets have been measured at fair value. The
carrying values of recognised assets and liabilities that are hedged items in fair
value hedges, and are otherwise carried at cost, are adjusted to record changes
in the fair values attributable to the risks that are being hedged.
Statement of Compliance
The financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS), as adopted by the European Union, as well
as the amendments of the Legislative Decree no. 38/2005, Article 9, and cONSOB
resolutions.
Amendment to IFRIC 14 Prepayments of a Minimum Funding Requirement
The amendment to IFRIc 14 was issued in November 2009 and becomes effective
for annual periods beginning on or after January 1, 2011. The amendment
applies to pension accounting in the limited circumstances when an entity is
subject to minimum funding requirements and makes an early payment of
contributions to cover those requirements. The amendment permits such an
entity to treat the benefit of an early payment as an asset. The adoption of this
The financial statements are prepared in accordance with the following:
current and non-current assets, as well as current and non-current liabilities,
are reported separately in the Statements of financial position;
cost analysis is carried out based on the nature of the cost in the Statements
of comprehensive income;
the indirect method is used for the cash flow statement;
IAS 1 (Revised) standard is used for the statement of equity changes.
amendment is not expected to have a material impact on the financial position
or performance of the company when adopted on January 1, 2011.
The financial statements are presented in euros and all values are rounded to
the nearest thousand (€/000) (except share and per share data) unless otherwise
IFRIC 17 Distributions of Non-cash Assets to Owners
This interpretation which is effective for annual periods beginning on or after July
1, 2009 with early application permitted. It provides guidance on how to account
indicated.
The 2009 Annual Report has been prepared in accordance with the principle
of corporate continuity.
for non-cash distributions to owners. The interpretation clarifies when to recognise
The exchange rates used are those supplied by the Italian Exchange Rate
a liability, how to measure it and the associated assets, and when to derecognise
Office (Ufficio Italiano cambi) for the specific reference dates, pursuant to the
the asset and liability. The adoption of this interpretation is not expected to have
principles of the De Agostini Group.
an impact on the financial position, performance or cash flows of the company.
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2009 Annual Report
2.3 International Financial Reporting Standards to be adopted in 2010 and later
effective for financial years beginning on or after July 1, 2009. The company has
The International Accounting Standards Board and IFRIc issued additional
concluded that the amendment will have no impact on its financial position,
standards and interpretations which are effective for periods starting after the
performance or cash flows, as cLN has not entered into any such instruments as
date of these financial statements and therefore have yet to be adopted by
accounting hedges.
Lottomatica as described below.
4. Summary of significant accounting policiesS
IFRS 2 Share-based Payment: Group Cash-settled Share-based Payment
Transactions
Reclassifications in 2008
The amendment to IFRS 2 is applicable on a yearly basis as of July 1, 2009. It
clarifies that contributing to the creation of a joint venture and controlling
Trade receivables and payables
common operations do not fall within the scope of IFRS 2.
The company modified the presentation and classification of some items in the
financial statements ended December 31, 2008 in order to conform to the
IFRS 3 Business Combinations (Revised) and IAS 27 Consolidated and Separate
consolidated financial statements and to better reflect their commercial nature,
Financial Statements (Amended)
specifically Other current assets and Other current liabilities. Furthermore, in
The revised standards were issued in January 2008 and become effective for
order to conform the financial statements to the year ended December 31, 2009,
financial years beginning on or after July 1, 2009. IFRS 3 (Revised) introduces
the following items in the Statements of financial position were reclassified:
significant changes in the accounting for business combinations occurring after
July 1, 2009, its effective date. changes affect the valuation of non-controlling
interest, the accounting for transaction costs, the initial recognition and
€/000 827 from Other current assets to trade receivables;
€/000 47 from Other current liabilities to trade payables, referring to payables
due to AAMS.
subsequent measurement of a contingent consideration and business
combinations achieved in stages. These changes will impact the amount of
goodwill recognised, the reported results in the period that an acquisition
occurs and future reported results.
Effect of reclassification of financial statements
for year anded December 31, 2008
IAS 27 (Revised) requires that a change in the ownership interest of a
subsidiary (without loss of control) is accounted for as a transaction with owners
in their capacity as owners. Therefore, such transactions will no longer give rise
to goodwill or give rise to a gain or loss. Furthermore, the amended standard
changes the accounting for losses incurred by the subsidiary as well as the loss
of control of a subsidiary.
(euro)
Assets
Trade receivables
Liabilities
Trade payables
December 2008
reclassified
December 2008
presented
Reclassifications
104,846,737
9,479,631
104,019,612
10,306,756
827,125
(827,125)
80,909,353
23,193,727
80,861,867
23,241,213
47,486
(47,486)
The changes by IFRS 3 (Revised) and IAS 27 (Revised) will affect future
acquisitions or loss of control of subsidiaries and transactions with noncontrolling interests, if any.
IAS 39 Financial Instruments: Recognition and Measurement – Eligible
hedged Items
Assets net of deferred taxes
In application of IAS 12, assets net of deferred tax assets have been
compensated with liabilities net of deferred tax liabilities where legally possible.
The amendment addresses the designation of a one-sided risk in a hedged
In order to conform the years ended December 31, 2008 and 2009, an analogous
item, and the designation of inflation as a hedged risk or portion in particular
compensation was made to 2008. Net deferred taxes for €/000 31,792 were
situations. It clarifies that an entity is permitted to designate a portion of the
presented instead of €/000 14,278 in deferred tax assets in Equity and deferred
fair value changes or cash flow variability of a financial instrument as the
tax liabilities for €/000 46,070 in liabilities. The net balance of deferred taxes
hedged item. This amendment to IAS 39 was issued in August 2008 and becomes
total €/000 31,792
P 164
Below are the values for the year ended December 31, 2008 prior to the
above mentioned compensations:
Net deferred tax assets total €/000 14,278 (€/000 36,720 at 12/31/2007). The
(euro)
most significant amounts refer to the following:
Write down of trade receivables;
65,897,487
Increases
Decreases
Tax amortization of So.Ge.I. goodwill;
ax effect derived from eliminating the costs related to the establishment
10,256,724
(30,084,281)
46,069,930
and expansion of intangible assets, pursuant to international accounting
Financial income and expenses
standards;
Unrealized foreign exchanges losses; and
The company reclassified €/000 446 from Other finance expenses to Interest
Allowances for litigation proceedings currently in course.
expense on financing related to consorzio Lotterie Nazionali for the reversal of
costs related to the supply of credit Mediofactoring. In detail (in euros):
The difference of €/000 25,957 in deferred tax assets between December 31,
2007 and December 31, 2008 is mainly due to the the deficit resulting from the
merger of Lottomatica into Tyche which was calculated in 2001 as a result of the
difference of the tax accounts and statutory reports. In further detail:
Effects of reclassification of income statements for
the year ended December 31, 2008
(euro)
Deferred tax assets
Financial income and expenses
Other financing expenses
(euro)
December 2008 December 2008
reclassified
presented
8,477,772
72,389
Reclassification
8,031,855
518,306
445,917
(445,917)
36,720,274
Increases
Decreases
3,514,541
(25,956,757)
14,278,058
Foreign exchange rates
The functional currency of the company is the Euro and its financial statements
are presented accordingly. The transactions in foreign currency are initially
recognized at the foreign exchange rate (referring to the functional currency)
Deferred tax liabilities total €/000 46,070 (€/000 65,897 at 12/31/2007) and
are converted to the functional currency at the foreign exchange rate at the
include the following:
Deferred tax liabilities on goodwill for €/000 45,577 (€/000 50,246 at
closing of the financial statement. Statements of comprehensive income
transactions are converted at an average weighed exchange rate. Gains or losses
12/31/2007);
TFR actualization pursuant to IAS of ad €/000 223
at the date of the transaction. Monetary assets and liabilities in foreign currency
(€/000 250 at
12/31/2007);
Profits from unrealized exchange rates €/000 105 (€/000 2 at 12/31/2007).
resulting from foreign exchange transactions are reported through profit and
loss. At December 31, 2009 the US$/Euro exchange rate was 1.4406 (US$/Euro
1.3916 at December 31, 2008) – source the Italian Exchange Office.
The deferred tax liabilities decreases by €/000 19,828 as a result of the
Systems, equipment and other assets
combination of deferred taxes matured in the course of the year €/000 10,257)
Plant and machinery are stated on the basis of historical cost, net of their
and the reversal of the subscriptions provided for in previous years (€/000
ordinary maintenance, less any accumulated amortization and any accumulated
30,084). As a result of this adjustment, the tax fund has decreased to €/000
impairment losses.
30,084 which refer principally to the deferred tax liabilities from amortizations
relative to previous years and to Tyche goodwill. In further detail:
The amortizations calculated in the Statements of comprehensive income
are systematically and consistently based on rates believed to be representative
P 165
2009 Annual Report
of the estimated useful life for each single asset category. The figures for asset
benefit from the synergies of the combination, irrespective of whether other
amortizations have been calculated on a straight line method with reference to
assets or liabilities are assigned to those units or groups of units. Each unit or
the date on which these assets entered into service.
group of units to which the goodwill is so allocated:
The tangible asset values do not include either repair costs or ordinary
maintenance costs required to keep the assets in efficient working condition
represents the lowest level within the company at which the goodwill is
monitored for internal management purposes; and
and therefore to ensure their expected useful life, their working capacity and
is not larger than a segment based on either the group’s primary or secondary
original productivity. Repair and maintenance costs are charged to the
reporting format determined in accordance with IAS 14 Segment Reporting.
Statements of comprehensive income only for the periods in which these costs
have been incurred.
Impairment is determined by assessing the recoverable amount of the cash-
costs incurred for the improvement of assets that are not Lottomatica’s
generating unit to which the goodwill relates. Where the recoverable amount
property have been entered as an increase of the same nature as the asset to
of the cash-generating unit is less than the carrying amount, an impairment loss
which they refer. The amortization period corresponds to the lesser of the
is recognized. Where goodwill forms part of a cash-generating unit and part of
tangible asset’s residual life or the residual duration of the lease.
the operation within that unit is disposed of, the goodwill associated with the
The carrying values of property, plant and equipment are reviewed for
operation disposed of is included in the carrying amount of the operation when
impairment when events or changes in circumstances indicate that the carrying
determining the gain or loss on disposal of the operation. Goodwill disposed of
value may not be recoverable. If the presumed market value of an asset is
in this circumstance is measured based on the relative values of the operation
greater than its book value, then the asset is written down to correctly reflect
disposed of and the portion of the cash-generating unit retained.
its market value.
Fixed assets under construction include purchase costs and down payments
Intangible Assets, net
to vendors for the acquisition of property, plant and equipment. The
Intangible assets acquired separately are measured on initial recognition at cost.
amortization of these costs will be carried out upon the effective use of the
The cost of intangible assets acquired in a business combination is fair value as
assets.
of the date of acquisition. Following initial recognition, intangible assets are
The book value of property, plant and equipment is reduced by public
carried at cost less any accumulated amortization and any accumulated
capital grants as regulated by IAS 20. The contribution, recognized in the
impairment losses. Internally generated intangible assets, excluding capitalized
financial year in which it becomes collectable, is deducted from the book value
development costs, are not capitalized and any expenditure is reflected in the
of the asset which it refers to. The Statements of comprehensive income is
consolidated statements of comprehensive income in the year in which the
therefore affected by the reduction of the asset’s amortization cost.
expenditure is incurred.
Useful lives of intangible assets are assessed to be either definite or
Goodwill
indefinite. Intangible assets with definite lives are amortized over the useful
Goodwill acquired in a business combination is initially measured at cost, being
economic life and assessed for impairment whenever there is an indication that
the excess of the cost of the business combination over the company’s interest
the intangible asset may be impaired. The amortization period and the
in the fair value of the identifiable assets, liabilities and contingent liabilities.
amortization method for an intangible asset with a definite useful life are
Following initial recognition, goodwill is measured at cost less any accumulated
reviewed at least annually at year-end.
impairment losses. Goodwill is reviewed for impairment annually, as of
changes in the expected useful life or the expected pattern of consumption
December 31, or more frequently if events or changes in circumstances indicate
of future economic benefits embodied in the asset is accounted for by changing
that the carrying value may be impaired.
the amortization period or method, as appropriate, and are treated as changes
For the purpose of impairment testing, goodwill acquired in a business
in accounting estimates. Amortization expense on intangible assets with
combination is, from the acquisition date, allocated to each of the cash-
definite lives is recorded in the expense category of depreciation, amortization
generating units, or groups of cash-generating units, that are expected to
and write-downs in our consolidated statements of comprehensive incomes.
P 166
Intangible assets with indefinite useful lives are tested for impairment
are recognized initially at fair value plus transaction costs.
annually, as of December 31, either individually or at the cash-generating unit
Lottomatica determines the classification of its financial assets at initial
level, as appropriate. Such intangibles are not amortized. The useful life of an
recognition and, where allowed and appropriate, re-evaluates this designation
intangible asset with an indefinite life is reviewed annually to determine
at each financial year-end.
whether the indefinite life assessment continues to be supportable. If not, the
change in the useful life assessment from indefinite to definite is made on a
Investment in subsidiaries and affiliated companies
prospective basis.
Investment in subsidiaries and affiliated companies are measured at cost
Specifically:
“Patents” mainly include costs incurred for application software acquired by
way of purchase, costs for application software acquired under license for use
for an indefinite time, and costs for protected application software internally
generated;
“concessions, licenses, trademarks and similar rights” mainly include software
adjusted in presence of the loss value. The positive difference, resulting at the
time of acquisition, between the cost of acquisition and the current net equity
value is included in the book value of the financial asset.
Equity holdings in subsidiaries and affiliated companies are submitted to
annual impairment tests, or more frequently if deemed necessary, to verify any
eventual loss in value. In the case that a loss of value arises, it is then reported
acquired in which the purchase price is paid upfront and the license is
in the statements of comprehensive income as depreciation. If the company
available over a predetermined period of time;
quote of loss value of the subsidiary exceeds the book value, the equity value is
“Fixed assets under development” relate to purchases that have not entered
into service or been tested as of the reporting date.
annulled and the resulting surplus is registered in the liabilities provisions. In
case that the loss of value is less or reduced, it is reported in statements of
comprehensive income as a value restoration of the cost limits.
Impairment of assets
Available-for-sale financial assets are those non-derivative financial assets
The company assesses at each reporting date whether there is an indication that
that are designated as available-for-sale. After initial recognition, available-for-
an asset may be impaired. If any such indication exists, or when annual
sale financial assets are measured at fair value with gains or losses being
impairment testing for an asset is required, the company estimates the asset’s
recognized as a separate component of equity until the investment is
recoverable amount. An asset’s recoverable amount is the higher of an asset’s or
derecognized or until the investment is determined to be impaired, at which
cash-generating unit’s fair value less costs to sell and its value in use, and is
time the cumulative gain or loss previously reported in equity is included in the
determined for an individual asset, unless the asset does not generate cash
statements of comprehensive income.
inflows that are largely independent of those from other assets or groups of
assets. Where the carrying amount of an asset exceeds its recoverable amount,
Loans and Receivables
the asset is considered impaired and is written down to its recoverable amount.
Loans and receivables are non-derivative financial assets with fixed or
In assessing value in use, the estimated future cash flows take into account the
determinable payments that are not quoted in an active market. Such assets are
risks specific to the asset and are discounted to their present value using a pre-
carried at amortized cost using the effective interest method.
tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset. Impairment losses are recorded in the
Gains and losses are recognized in income when the loans and receivables
are derecognized or impaired, as well as through the amortization process.
expense category of depreciation, amortization and write-downs in our
consolidated statements of comprehensive incomes.
Fair value
The fair value of investments that are actively traded in organized financial
Investments and financial Assets
markets is determined by reference to quoted market bid prices at the close of
Financial assets in the scope of IAS 39 are classified as either financial assets at
business on the Statements of financial position date. For investments where
fair value through profit or loss; held-to-maturity investments; loans and
there is no active market, fair value is determined using valuation techniques.
receivables; or available-for-sale financial assets, as appropriate. Financial assets
Such techniques include using recent arm’s length market transactions;
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2009 Annual Report
reference to the current market value of another instrument, which is
assumed an obligation to pay them in full without material delay to a third
substantially the same; discounted cash flow analysis; and option pricing models.
party under a “pass through” arrangement; or
the company has transferred its rights to receive cash flows from the asset
Inventories
and either has transferred substantially all the risks and rewards of the asset
Inventories are stated at the lower of original cost and market value. Inventories
or has neither transferred nor retained substantially all the risks and rewards
include amounts we manufacture or assemble for our long-term service
of the asset, but has transferred control of the asset.
contracts, which are transferred to systems, equipment and other assets related
to contracts, net upon shipment. The cost method used is the estimated average
Financial liabilities
cost.
A financial liability is derecognized when the obligation under the liability is
discharged or cancelled or expires.
Trade receivables and other receivables
Trade accounts receivable, which generally have 30 day terms, are reported net
Provisions
of allowances for doubtful accounts and liquidated damages (penalties incurred
Provisions are recognized when the company has a present obligation (legal or
due to a failure to meet specified deadlines or performance standards).
constructive) as a result of a past event, it is probable that there will be an
Allowances for doubtful accounts are generally recorded when there is objective
economic loss resulting from settlement of an obligation and a reliable estimate
evidence that we will not be able to collect the related receivables. Bad debts
can be made of the amount of the obligation. Whenever the company expects
are written off when identified. Allowances for liquidated damages are
some or all of a provision to be reimbursed as, for example, under an insurance
recorded when they are probable and estimable.
contract, the reimbursement is recognized as a separate asset but only when the
reimbursement is virtually certain. The expense relating to any provision is
presented in the statements of comprehensive income net of any
cash and cash equivalents in the Statements of financial positions are comprised
reimbursement. If the effect of the time value of money is material, provisions
of cash at banks and on hand and short-term, highly liquid investments with an
are discounted using a current pre-tax rate that reflects, where appropriate, the
original maturity of three months or less at the date of purchase.
risks specific to the liability. Where discounting is used, the increase in the
provision due to the passage of time is recognized as a borrowing cost.
Debt
All debt is initially recorded at the fair value of the consideration received less
Post employment benefits
directly attributable debt issuance costs. Following initial recognition, debt is
The company has a defined benefit plan (staff severance fund) to provide
subsequently measured at amortized cost using the effective interest method.
certain post employment benefits to employees following termination from the
Gains and losses are recorded in the consolidated statements of comprehensive
company. Employees may choose to participate in an unfunded plan within the
income when the liabilities are extinguished as well as through the amortization
company or transfer their plan balance to independent external funds. These
process.
benefits are funded only to the extent paid to the external funds. The cost of
providing benefits under the plan is determined using the projected unit credit
Derecognition of financial assets and liabilities
actuarial valuation method. Actuarial gains and losses are immediately
recognized in the consolidated statements of comprehensive income. The
Financial assets
defined benefit liability represents the present value of the company’s defined
A financial asset (or, where applicable a part of a financial asset or part of a
benefit plan obligation.
group of similar financial assets) is derecognized when:
the rights to receive cash flows from the asset have expired;
the company retains the right to receive cash flows from the asset, but has
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Employees of the Group may receive remuneration in the form of share-based
payment transactions, whereby employees render services as consideration for
Operating contracts
equity instruments (“equity-settled transactions”).
certain of our revenue, primarily revenue from Italian operations, are derived
The cost of equity-settled transactions with employees is measured by
reference to the fair value at the date on which they are granted. The fair value
is determined using a binomial model.
from operating contracts.
Under operating contracts, we manage all the activities along the lottery
value chain including collecting wagers, paying out prizes, managing all
The cost of equity-settled transactions is recognized, together with a
accounting and other back-office functions, running advertising and
corresponding increase in equity, over the period in which the performance
promotions, operating data transmission networks and processing centers,
and/or service conditions are fulfilled, ending on the date on which the relevant
employees become fully entitled to the award (“vesting date”). The cumulative
game. Fees earned under operating contracts are recognized as revenue in the
expense recognized for equity-settled transactions at each reporting date until
period earned and are classified as service revenue in our consolidated
the vesting date reflects the extent to which the vesting period has expired and
statements of comprehensive incomes when all of the following criteria are met:
the Group’s best estimate of the number of equity instruments that will
ultimately vest. The statements of comprehensive income charge or credit for a
period represents the movement in cumulative expense recognized as of the
beginning and end of that period. No expense is recognized for awards that do
not ultimately vest.
Where the terms of an equity-settled award are modified, at a minimum, an
persuasive evidence of an arrangement exists, which is typically when a
customer contract has been signed;
services have been rendered;
our fee is deemed to be fixed or determinable and free of contingencies or
significant uncertainties;
collectibility is reasonably assured.
expense is recognized as if the terms had not been modified. In addition, an
expense is recognized for any modification, which increases the total fair value
The amount to be received is discounted in cases where customers are given
of the share-based payment arrangement, or is otherwise beneficial to the
time to pay without incurring interest. The difference between current value
employee as measured at the date of modification.
and amount received represents financial income recorded in the accounts on
Where an equity-settled award is cancelled, it is treated as if it had vested
an accruals basis.
on the date of cancellation, and any expense not yet recognized for the award
is recognized immediately. however, if a new award is substituted for the
Revenues and costs are recognized net of VAT, except when this tax applied to
cancelled award, and designated as a replacement award on the date that it is
the purchase of goods or services is not deductible, then it is recognized as a
granted, the cancelled and new awards are treated as if they were a
part of the asset’s purchase cost or a part of the cost item recognized in the
modification of the original award, as described in the previous paragraph.
statements of comprehensive income.
Operating leases
Dividends
Operating lease payments are recognized as an expense in the statements of
Dividends are recognised when the Shareholder’s right to receive payment is
comprehensive income over the lease term.
established.
Revenue recognition
Derivative financial instruments and hedge accounting
Revenue is recognized to the extent that it is probable that the economic
Lottomatica uses derivative financial instruments such as interest rate swaps to
benefits will flow to the company and the revenue can be reliably measured.
hedge its foreign currency risks and interest rate risks, respectively. Such
Revenue is measured at the fair value of the consideration received, excluding
derivative financial instruments are initially recognized at fair value on the date
discounts, rebates, and other sales taxes or duty. The following specific
on which a derivative contract is entered into and are subsequently remeasured
recognition criteria must also be met before revenues can be entered into the
at fair value. Derivatives are carried as financial assets when the fair value is
Statements of comprehensive income:
positive and as financial liabilities when the fair value is negative. Any gains or
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2009 Annual Report
losses arising from changes in fair value on derivatives not appropriate for
in respect of deductible temporary differences associated with investments in
hedge accounting are recorded directly in the statements of comprehensive
subsidiaries, associates and interests in joint ventures, deferred tax assets are
income. The fair value of foreign exchange rate contracts is determined with
recognized only to the extent that it is probable that the temporary
reference to current exchange rate for contracts with similar profiles.
differences will reverse in the foreseeable future and taxable profit will be
available against which the temporary differences can be utilized.
Income taxes
The carrying amount of deferred income tax assets is reviewed at each
current taxes
Statements of financial position date and reduced to the extent that it is no
current tax assets and liabilities for the current and prior periods are measured at
longer probable that sufficient taxable profit will be available to allow all or
the amount expected to be recovered from or paid to the taxation authorities. The
part of the deferred income tax asset to be utilized. Unrecognized deferred
tax rates and tax laws used to compute the amount are those that are enacted or
income tax assets are reassessed at each Statements of financial position date
substantively enacted by the Statements of financial position date.
and are recognized to the extent that it has become probable that future
current income taxes relating to items recognized directly in equity are
recognized in equity and not in the statements of comprehensive income.
taxable profit will allow the deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that
are expected to apply to the year when the asset is realized or the liability is
Deferred taxes
settled, based on tax rates (and tax laws) that have been enacted or
Deferred income tax is determined using the liability method on temporary
substantively enacted at the Statements of financial position date.
differences at the Statements of financial position date between the tax bases
of assets and liabilities and their carrying amounts for financial reporting
purposes.
Deferred tax liabilities are recognized for all taxable temporary differences,
Tax assets and liabilities for deferred taxes are compensated when there is a
legal right to do so.
Income tax relating to items recognized directly in equity is recognized in
equity and not in the statements of comprehensive income.
except:
where the deferred tax liability arises from the initial recognition of goodwill or of
an asset or liability in a transaction that is not a business combination and, at the time
Transactions in currencies other than the entity’s functional currency (foreign
of the transaction, affects neither the accounting profit nor taxable profit or loss;
currencies) are initially recorded by the Group entities at their respective
in respect of taxable temporary differences associated with investments in
functional currency rates prevailing at the date of the transaction. At the end of
subsidiaries, associates and interests in joint ventures, where the timing of
each reporting period, foreign currency monetary items are retranslated at the
the reversal of the temporary differences can be controlled and it is probable
functional currency spot exchange rate in effect at the reporting date. The
that the temporary differences will not reverse in the foreseeable future.
resulting foreign currency exchange differences are recorded in the statements
of comprehensive income. Non-monetary items that are measured in terms of
Deferred income tax assets are recognized for all deductible temporary
historical cost in a foreign currency are translated using the exchange rates as of
differences, carry-forward of unused tax credits and unused tax losses, to the
the date of the initial transaction.
extent that it is probable that taxable profit will be available against which the
deductible temporary differences, and the carry-forward of unused tax credits
and unused tax losses can be utilized except:
where the deferred income tax asset relating to the deductible temporary
5. Significant accounting judgements, estimates and
assumptions
The preparation of the company’s financial statements requires management to
difference arises from the initial recognition of an asset or liability in a
make judgments, estimates and assumptions that affect the reported amounts
transaction that is not a business combination and, at the time of the
of revenues, expenses, assets, liabilities, and the disclosure of contingent
transaction, affects neither the accounting profit nor taxable profit or loss;
liabilities, at the reporting date. however, uncertainty about these assumptions
P 170
and estimates could result in outcomes that could require a material adjustment
by reference to the fair value of the equity instruments at the date at which they
to the carrying amount of the asset or liability affected in the future.
are granted. Estimating fair value requires determining the most appropriate
valuation model for a grant of equity instruments, which is dependent on the
Judgments
terms and conditions of the grant. This also requires determining the most
In the process of applying the company’s accounting policies, management has
appropriate inputs to the valuation model including the expected life of the
made the following judgment, apart from those involving estimations, which
option, volatility and dividend yield and making assumptions about them.
has the most significant effect on the amounts recognized in the financial
statements.
Deferred Tax Assets
Deferred tax assets are recognized for all unused tax losses to the extent that it
Estimates and Assumption
is probable that taxable profit will be available against which the losses can be
The key assumptions concerning the future other sources of uncertainty at the
utilized. Significant management judgment is required to determine the
Statements of financial position date that have a significant risk of causing a
amount of deferred tax assets that can be recognized, based upon the likely
material adjustment to the carrying amounts of assets and liabilities within the
timing and level of future taxable profits together with future tax planning
next financial year are discussed below.
strategies.
Accounting principles effective in 2010
Doubtful accounts recovery is evaluated based on the risk of insolvency, age and
International Accounting Standards Board (IASB) and IFRIc issued. during the
losses previously incurred on similar types of accounts.
year, additional standards and interpretations that will take effect for periods
after the date December 31, 2009 and are therefore still waiting to be adopted
Impairment of Goodwill
by the company in accordance as described below.
Lottomatica determines whether goodwill is impaired on at least an annual
basis. This requires an estimation of the “value in use” of the cash-generating
IFRS 2 Share-Based Payment: Group cash-Settled Share-Based Payment
units to which the goodwill is allocated.
Transactions (Revised)
Estimating a value in use amount requires management to make an
The Revised IFRS 2 was issued in June 2009 and becomes effective for annual
estimate of the expected future cash flows from the cash-generating unit and
periods beginning on or after January 1, 2010. The amendment clarifies the
also to choose a suitable discount rate in order to calculate the present value of
scope and the accounting for group cash-settled share-based payment
those cash flows. The carrying value of goodwill at December 31, 2009 and 2008
transactions. The company is evaluating the impact the amendment will
is €622,896,606. For further information please refer to Note 2.
have on the consolidated financial statements when adopted on January 1,
2010.
Impairment of Intangible Assets
The company determines whether intangible assets with indefinite useful lives
IFRS 3 Business combinations (Revised) and IAS 27 consolidated and Separate
are impaired at least on an annual basis. This requires management to make an
Financial Statements (Revised)
estimate of the expected future cash flows from the assets and also to choose a
The Revised IFRS 3 and IAS 27 were issued in January 2008 and become effective
suitable discount rate in order to calculate the present value of those cash flows.
for financial years beginning on or after July 1, 2009. The amendment to IFRS 3
The carrying value of intangible assets at December 31, 2009 and 2008 is €/000
introduces significant changes in the accounting for business combinations
4,951 and €/000 5,903. For further information please refer to Note 3.
occurring after this date. The changes affect the valuation of non-controlling
interests, the accounting for transaction costs, the initial recognition and
subsequent measurement of contingent consideration and business combinations
The company measures the cost of equity-settled transactions with employees
achieved in stages. These changes will impact the amount of goodwill recognized,
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2009 Annual Report
the reported results in the period that an acquisition occurs and future reported
simplifies the definition of a related party, clarifying its intended meaning and
results. The amendment to IAS 27 requires that a change in the ownership interest
eliminating inconsistencies from the definition and provides a partial exemption
of a subsidiary (without loss of control) is accounted for as a transaction with
form the disclosure requirements for government-related entities. The company
owners in their capacity as owners. Therefore, such transactions will no longer
is evaluating the impact the standard will have on the consolidated financial
give rise to goodwill, nor will they give rise to a gain or loss. Furthermore, the
statements when adopted on January 1, 2011.
amended standard changes the accounting for losses incurred by the subsidiary as
well as the loss of control of a subsidiary. The changes by these amendments will
IAS 39 Financial Instruments: Recognition and Measurement - Eligible hedged
affect future acquisitions or loss of control and transactions with non-controlling
Items
interests. The standards may be early applied. The company is evaluating the
The amendment to IAS 39 was issued in August 2008 and becomes effective for
impact the amendment will have on the consolidated financial statements when
financial years beginning on or after July 1, 2009. The amendment clarifies that
adopted on January 1, 2010.
an entity is permitted to designate a portion of the fair value changes or cash
flow variability of a financial instrument as a hedged item. This also covers the
IAS 24 Related Party Disclosures (Revised)
designation of inflation as a hedged risk in particular situations. The company
The Revised IAS 24 was issued in November 2009 and becomes effective for
is evaluating the impact the amendments to the standard will have on the
annual periods beginning on or after January 1, 2011. The revised standard
consolidated financial statements when adopted on January 1, 2010.
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FOOTNOTES LOTTOMATICA GROUP SPA
“A group consists of individuals who perceive themselves as
part of a whole, in one way or another.”
(NewSociology Dictionary - Edizioni Paoline)
2009 Annual Report
STATEMENTS OF FINANcIAL POSITION
1. Systems, equipment and other assets
Systems, equipment and other assets for the year ended December 31, 2009
total €/000 43,328 (€/000 59,470 at 12/31/2008), of which €/000 23,926 (€/000
37,054 at 12/31/2008) are attributable to Freely distributed assets” (“FDA”).
Fixed assets: €/000 19,402 (€/000 22,416 at 12/31/2008). The table below
reports the historical costs and the changes for the years ended December
31, 2009 and December 31, 2008.
Period ended December 31, 2008:
2008 Fixed assets
(euro)
Opening
Increase
Amortization
Decrease
Reclassification
Total
Property
Plant and equipment
Other assets
23,101,134
38,798,620
3,335,036
1,900,063
4,068,125
634,501
-
35,000
7,699,386
19,168
1,154,331
-
24,966,197
36,321,690
3,950,369
Historical cost
65,234,790
6,602,689
-
7,753,554
1,154,331
65,238,256
Property
Plant and equipment
Other assets
10,331,897
24,717,347
1,100,353
-
3,296,584
5,721,841
412,993
9,693
3,069,626
12,911
333,395
-
13,618,788
27,702,957
1,500,435
Amortization
36,149,597
-
9,431,418
3,092,230
333,395
42,822,180
Property
Plant and equipment
Other assets
12,769,237
14,081,273
2,234,683
1,900,063
4,068,125
634,501
3,296,584
5,721,841
412,993
25,307
4,629,760
6,257
820,936
-
11,347,409
8,618,733
2,449,934
Net value
29,085,193
6,602,689
9,431,418
4,661,324
820,936
22,416,076
Opening
Increase
Amortization
Decrease
Total
Property
Plant and equipment
Other assets
24,966,197
36,321,690
3,950,370
3,527,296
1,579,869
553,866
-
20,883,536
264
28,493,493
17,018,023
4,503,972
Historical cost
65,238,257
5,661,031
-
20,883,800
50,015,488
Property
Plant and equipment
Other assets
13,618,788
27,702,958
1,500,435
-
3,778,512
3,743,734
470,299
20,200,868
182
17,397,300
11,245,824
1,970,552
Amortization
42,822,181
-
7,992,545
20,201,050
30,613,676
Property
Plant and equipment
Other assets
11,347,409
8,618,733
2,449,934
3,527,296
1,579,869
553,866
3,778,512
3,743,734
470,299
682,668
82
11,096,193
5,772,200
2,533,419
Net value
22,416,076
5,661,031
7,992,545
682,750
19,401,812
2009 Fixed assets
(euro)
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Acquisitions for the year ended December 31, 2009 total €/000 5,661, and refer
almost entirely to investments for furnishing the new office location (€/000
4,081) and to the acquisition of equipment used in the business (€/000 1,580).
Sales for the period ended December 31, 2009 for €/000 683 refer to the sale
of obsolete machinery.
Freely distributed assets: €/000 23,926 (€/000 37,054 at 12/31/2008).
The “Freely distributed assets” refer predominately to the company assets
leased by third parties.
These refer to fixed assets used to carry out activities related to Lotto and
which are to be returned to the Ministry of Finance upon the expiration of the
license.
The table below reports the historical costs and accumulated amortizations
for the periods ended December 31, 2009 and December 31, 2008.
2008 Fixed assets FDA
(euro)
Opening
Increase
Amortization
Decrease
Reclassification
Total
Plant and Machinery - FDA
Other assets - FDA
Assets under construction - FDA
241,504,996
1,848,933
17,841
276,879
-
-
11,730,170
59,306
-
(1,154,331)
-
228,897,374
1,789,627
17,841
Historical cost
243,371,770
276,879
-
11,789,476
(1,154,331)
230,704,842
Other assets - FDA
183,837,940
1,839,867
-
20,093,419
2,437
11,730,171
59,305
(333,395)
-
191,867,793
1,782,999
Amortizations
185,677,807
-
20,095,856
11,789,476
(333,395)
193,650,792
Other assets - FDA
57,667,056
9,066
17,841
276,879
-
20,093,419
2,437
-
(1)
1
-
(820,936)
-
37,029,581
6,628
17,841
Net value
57,693,963
276,879
20,095,856
-
(820,936)
37,054,050
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2009 Annual Report
2009 Fixed assets FDA
(euro)
Opening
Increase
Amortization
Decrease
Reclassification
Total
Other assets - FDA
228,897,374
1,789,627
17,841
1,869,919
3,120,028
195,354
-
25,596
8,376
-
1,875
(1,875)
230,743,572
4,901,279
211,320
Historical cost
230,704,842
5,185,301
-
33,972
-
235,856,171
Other assets - FDA
191,867,793
1,782,999
-
18,265,122
48,171
25,596
8,376
-
210,107,319
1,822,794
Amortizations
193,650,792
-
18,313,293
33,972
-
211,930,113
Other assets - FDA
37,029,581
6,628
17,841
1,869,919
3,120,028
195,354
18,265,122
48,171
-
-
1,875
(1,875)
20,636,253
3,078,485
211,320
Net value
37,054,050
5,185,301
18,313,293
-
-
23,926,058
Increases (€/000 5,185) are referred to the business of “10eLotto” game.
Decreases are referred to assets in dismissal.
discounted rate. The carrying value of goodwill has not changed in the periods
ended December 31, 2009 and 2008.
The amortization periods for the individual categories are reported below:
According to the international accounting principles, specifically IFRS 3 and
IFRS 36, goodwill is no longer subject to amortization. The company annually
Fixed Assets
1)
2)
3)
4)
Property
Plant and Equipment
Industrial and commercial equipment
Other assets
Amortization Period
Duration of lease
15%-20%
25%
12%
2. Goodwill
Goodwill for the period ended December 31, 2009 totals €/000 622,897 (€/000
622,897 at 12/31/2008) composed of the following:
goodwill of €/000 404,016 (€/000 404,016 at 12/31/2008) from the merger by
incorporation of Lottomatica into Tyche in 2002;
goodwill of €/000 2,116 (€/000 2,116 at 12/31/2008)connected to the acquisition
of the Games division of Eis S.p.A. and Twin S.p.A. (pari-mutuel system);
goodwill of €/000 216,765 (€/000 216,765 at 12/31/2008) from the merger
transaction between New Games, FinEuroGames and Lottomatica completed
on December 20, 2005.
Goodwill is subject to annual testing for impairment based on an estimated
value of use of the segment to which the goodwill is attributed, the estimated
cash flows forecasted for the segment and on their actualization based on a
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reviews goodwill for impairment in order to verify if the asset has been
impaired. In case the asset results to be impaired the company depreciates the
goodwill of the asset. The value of use is used in the determination of the
recoverable value of the cash generating unit.
The impairment test carried out in order to verify the initial goodwill value
uses the unit generating financial flows as a point of reference.
The 2009-2011 budget for units generating financial flows has been
prepared according to the following criteria:
compound Annual Revenue Growth Rate of (1.48)%;
compound Annual Operating cost Growth Rate of 2.29%.
An estimate of the terminal value has also been included in addition to the
value of the flows deriving from the specific projecting period.
The 2016 forecasted EBIT was used in order to calculate the terminal
value.
The Weighted Average cost of capital used was 8.30%.
This impairment test showed that the discounted cash flows are higher than
the carrying amount, so that it was not necessary to make any reduction in
value: no impairment loss was therefore recognized.
3. Intangible Assets
Increases in 2009 total €/000 6,216 and refer to Patents (€/000 4,332) for the
Intangible assets for the period ended December 31, 2009 total €/000 4,951
updating of Lotto software and other licenses.
Decreases in 2009 total €/000 1,012 and refer to an adjustment of €/000 71
(€/000 5,903 at 12/31/2008) and consist of:
Patents, €/000 3,456 (€/000 2,055 at 12/31/2008);
in Other intangible assets regarding a one-time payment made to Telecom Italia
Concessions and licenses, €/000 1,495 (€/000 889 at 12/31/2008);
for the improvement of the data transmission network.
Other Intangible Assets, zero (€/000 2,959 at 12/31/2008).
The amortization period for each category of asset is reported in the table
below:
The following table reports the composition of intangible assets with separate
indications for the historical cost and the accumulated amortization for the
periods ended December 31, 2009 and December 31, 2008:
Intangible Assets
Amortization Period
Patents
Other Intangible Assets
3 years
3 years
1 year
2008 Intangible assets
(euro)
Opening
Increase
Amortization
Decrease
Total
Patents
Other
43,558,243
9,402,444
-
2,497,863
764,004
3,122,104
-
54,000
-
46,002,106
10,166,448
3,122,104
Historical cost
52,960,687
6,383,971
-
54,000
59,290,658
Patents
Other
41,624,449
8,295,610
-
-
2,366,133
981,787
163,239
43,500
-
43,947,082
9,277,397
163,239
Amortizations
49,920,059
-
3,511,159
43,500
53,387,718
Patents
Other
1,933,794
1,106,834
-
2,497,863
764,004
3,122,104
2,366,133
981,787
163,239
10,500
-
2,055,024
889,051
2,958,865
Net value
3,040,628
6,383,971
3,511,159
10,500
5,902,940
Opening
Increase
Amortization
Decrease
Total
Patents
Other
46,002,064
10,166,488
3,122,104
4,332,245
1,884,088
-
-
2,113,667
789,081
71,104
48,220,642
11,261,495
3,051,000
Historical cost
59,290,656
6,216,333
-
2,973,852
62,533,137
Patents
Other
43,947,081
9,277,396
163,239
-
2,269,275
999,412
2,887,761
1,451,435
510,200
-
44,764,921
9,766,608
3,051,000
Amortizations
53,387,716
-
6,156,448
1,961,635
57,582,529
Patents
Other
2,054,983
889,092
2,958,865
4,332,245
1,884,088
-
2,269,275
999,412
2,887,761
662,232
278,881
71,104
3,455,721
1,494,887
-
Net value
5,902,940
6,216,333
6,156,448
1,012,217
4,950,608
2009 Intangible assets
(euro)
P 179
2009 Annual Report
4. Interest shares in subsidiaries and other companies
Interest shares for the period ended December 31, 2009 total €/000 2,828,425
(€/000 2,447,446 at 12/31/2008) and consist of:
Subsidiaries, €/000 2,823,663 (€/000 2,443,678 at 12/31/2008).
The increase of €/000 1,488,506 refers to the following operations:
An increase in interest shares in Invest Games S.A. for €/000 1,488,506
merger into Lottomatica Videolot Rete;
GTEch corporation value reduction for €/000 1,233,626 following the transfer
into Invest Games S.A. Following the operation, Invest Games S.A. acquired
100% of GTEch corporation.
Other companies, €/000 4,762 (€/000 3,768 at 12/31/2008), refer to
as a result of the acquisition of controlling interest in GTEch
The 13.33% share in Banca ITB (previously Ayperos Technology S.p.A.) for
corporation (€/000 1,234,506); as result of that contribution, Invest
€/000 2,482 (€/000 3,768 at 12/31/2008 for 15% share). On July 28, 2009
Games SA acquired full control of the investment in GTEch
418,667 shares were sold at a price of €1.274 per share. The total cash in
corporation, the remainder amounting, €/000 254,000, refers to a
of €/000 533 resulted in a surplus of €/000 115 given the unit value of the
payment made on December 3, 2009 by the company to Invest
Games.
The acquisition of interest shares in Australien, GTEch German, Spielo
shares was €1.00 per share.
Acquisition of 5% share in Neurosoft S.A., a Greek gaming, betting and
factoring company, for €/000 2,280 on May 8, 2008.
USA e Spielo Manufactoring controlled by GTEch corporation for
€/000 148,024;
The €/000 6,620 increase in interest share in Lottomatica Videolot Rete
following the merger of Lottomatica Videolot Gestione. On July 24,
2009 the Shareholders’ Meeting established the incorporation of
Lottomatica Videolot Gestione, Royal Gold and Topolino Service into
Lottomatica Videolot Rete.
The acquisition of the GTEch companies falls in the simplification process in the
Gaming Machines segment. On July 1, 2009 Lottomatica Group S.p.A. formalized
the acquisition of German holding, Atronic Australien, Atronic Americas and
Spielo USA owned directly by GTEch holding, and Spielo Manufacturing owned
directly by GTEch Global corporation for a total of €/000 38,837. The operation
is part of a Group-wide interest share simplification project. It also simplifies the
development of the VLT project in the Italian market.
The accounting of the above described interest shares in the Lottomatica
Group financial statements, for which IFRS 3 is not applicable, was carried out
with a continuation of the book value (applicable for interest shares under
common control) and resulted in an equity reserve (€/000 19,513) from the
difference between the net book value and the price paid. The Lottomatica
Group also recapitalized German holding and Atronic Americas for a total of
€/000 128,700.
The decrease of €/000 1,263,283 consist of the following operations:
collection of Lottomatica International dividends on March 30, 2009 for €/000
23,027;
Lottomatica Videolot Gestione value reduction for €/000 6,620 following the
P 180
The table below reports the changes that occurred during the period as required
by Article 2426, section 4 of the Italian civil code.
Securities and equity investments
12.31.2008
Financial instruments
Changes
Increases
Decreases
12.31.2009
18,064
8,719
consorzio Giochi Sportivi
85
10,080
6,620
7,216
20,000
619,015
150,000
Sed Multitel S.r.l.
10,004
Invest Games S.A.
360,249
GTEch corporation
1,206,510
GTEch corporation - Stock-Option
27,116
GTEch German holding
Atronic Americas S.r.l.
Spielo Manufactoring
Spielo USA
Banca ITB (Ayperos Technology S.p.A.) 3,768
Neurosoft SA
-
117
6,620
1,488,507
41,715
28,373
76,032
1,904
2,280
(6,620)
(23,037)
(1,206,510)
(27,116)
(1,286)
-
18,181
8,719
85
10,080
13,836
20,000
595,978
150,000
10,004
1,848,756
41,715
28,373
76,032
1,904
2,482
2,280
Total
1,645,548
(1,264,569)
2,828,425
2,447,446
Financial assets
December 31, 2009
Carrying
Fair
Amount
Value
December 31, 2009
Carrying
Fair
Amount
Value
375,164
375,164
28,846
28,846
375,164
375,164
28,846
28,846
46,253
369,088
1,602
133
46,253
369,088
1,602
133
300
212,767
15,600
100
-
300
212,767
15,600
100
-
417,076
417,076
228,767
228,767
Financial liabilities
Interest bearing loans and borrowings
capital Securities
733,181
750 Euro Bond
741,719
Swap Liability
56,391
Long term debts
Other
1,659
733,181
741,719
56,391
1,659
730,525
403,355
2,037
730,525
403,355
2,037
1,532,950
1,532,950
1,135,917
1,135,917
6,650
81,002
429,291
190
18,324
-
6,650
81,002
429,291
190
18,324
-
12,991
288,072
4,967
10,483
50,835
12,991
288,072
4,967
10,483
50,835
535,457
535,457
367,348
367,348
3,147
75,665
3,147
75,665
46,490
46,490
78,812
78,812
46,490
46,490
Intercompany financing
cash pooling
Interests
Other intercompany
Other
5. Other non current assets
Other non current assets for the period ended December 31, 2009 total €/000
676 (€/000 767 at 12/31/2008) and refer to guarantee deposits for tenders, total
€/000 55 (€/000 51 at 12/31/2008) and other assets, total €/000 621 (€/000 716 at
12/31/2008).
6. Financial Instruments
Fair Value
Set out below is a comparison by class of the carrying amounts and fair values
Current financial liabilities
Intercompany financing
Gaming solution
cash pooling
Interests
Other intercompany
Other
Short term liabilities
Obligations
Other
of our financial instruments (thousands of euro):
current financial assets for the period ended December 31, 2009 total €/000
417,076 (€/000 228,767 at 12/31/2008) and consist of receivables for cash pooling
towards subsidiaries for €/000 416,943 (€/000 212,767 at 12/31/2008).
Details of the receivables from principal subsidiaries is as follows:
P 181
2009 Annual Report
Reicevaibles from subsidiaries
Lottomatica
Sistemi
Lottomatica
Videolot Rete
Lottomatica
Scommesse
Consorzio
Lotterie Nazionali
GTECH
Corporation
Lis
Finanziaria
Consorzio
Giochi Sportivi
Total
Financing
cash-Pooling
Interests
21,222
296
219,465
760
103,983
386
879
132
45,074
-
24,418
28
300
-
46,253
369,088
1,602
Total
21,518
220,225
104,369
1,011
45,074
24,446
300
416,943
The fair value of the financial assets shown above, considering their nature, is
approximate to their book value.
The fair values of our financial instruments were determined using the
following methods and assumptions:
Foreign currency forward contracts and net investment hedge are calculated by
reference to current forward exchange rates for contracts with similar maturity profiles;
Escrow and other deposits are stated at cost, which approximates fair value,
and earn interest at market rates;
capital Securities, Notes and interest rate swaps were calculated by
independent investment bankers using market interest rates;
LTO Revolving credit Facility and LTO Term Loan Facility approximate their
carrying amounts, excluding the effect of debt issuance costs;
Swap Liability was calculated using a market interest rate;
Acquisition related liabilities and loan guarantees were determined using
discounted cash flows; and
Other finance lease obligations are based on current market interest rates.
Fair value hierarchy
For the purpose of determining and disclosing the fair value of financial instruments by
Receivables towards sales network for €/000 278 (€/000 827 at 12/31/2008)
net of depreciation for €/000 1,298 (€/000 872 at 12/31/2008) relating to sums
due from Giochi Sportivi and Tris that are no longer managed by Lottomatica
following the reorganization of public games. The allowance for doubtful
accounts is enough to cover any losses incurred. For further information on
the allowance for doubtful accounts please refer to Note 31.
Trade receivables towards subsidiaries for €/000 79,600 (€/000 94,109 at
12/31/2008) consisting mainly of the charge-back of marketing costs, network
services (related to the activation, connection and assistance to the points of
sales), back-office services, administrative services for activities of
management in the ordinary course of business, and contracts with the
subsidiaries in normal market conditions.
Tax receivables towards Parent for €/000 1,851 (zero at 12/31/2008) towards B&D
holding of Marco Drago & co S.a.p.A., of which €/000 846 refer to the
participation in the VAT liquidation with the De Agostini Group and €/000 1,005
as credit regarding the IRAP reimbursement for the years 2004, 2005, 2006 e 2007.
Trade receivables
valuation technique, derivatives and available-for-sale financial investments are
considered Level 2, whereby other techniques for which all inputs which have a
significant effect on the recorded fair value are observable, either directly or indirectly.
7. Inventories
Inventories for the period ended December 31, 2009 total €/000 1,844 (€/000
3,298 at 12/31/2008) and consist almost entirely of Lotto playslips and receipts.
8. Trade and other receivables
(euro)
2009
2008
Receivables towards customers
Trade
Receivables towards sales network
Trade
Receivables towards Subsidiaries
Trade
Receivables towards Parents
Taxes
11,831,410
13,044,448
(1,213,038)
278,115
1,576,067
(1,297,952)
79,600,466
79,600,466
1,850,991
1,850,991
9,910,784
11,664,822
(1,754,038)
827,125
1,699,224
(872,099)
94,108,828
94,108,828
-
Total
93,560,982
104,846,737
Trade and other receivables for the period ended December 31, 2009 total €/000
93,561 (€/000 104,846 at 12/31/2008) and refer to:
Receivables from customers for €/000 11,831 (€/000 9,911 at 12/31/2008), net
of allowance for bad credit for €/000 1,213 (€/000 1,754 at 12/31/2008).
P 182
The company modified the presentation and classification of some items in the
financial statements ended December 31, 2008 in order to conform to the
consolidated financial statements and to better reflect their commercial nature,
specifically Other current assets and Other current liabilities. Other Furthermore,
Tax receivables
in order to conform the financial statements to the year ended December 31,
2009, €/000 827 was reclassified from current assets to trade receivables.
For further information on the allowance for doubtful accounts please refer
to Note 36.
(euro)
2009
2008
IRES
IRAP
78,930
1,558,294
122,352
Total
1,637,224
122,352
9. Other current assets
Other current assets for the period ended December 31, 2009 total €/000 9,836
(€/000 13,822 at 12/31/2008) and include:
Receivables for €/000 356 from social security institutions Asfalisis with
11. cash and cash equivalents
cash and cash equivalents for the year ended December 31, 2009 total €/000
375,164 (€/000 28,846 at 12/31/2008).
reference to advanced payments to the pension funds.
Other Receivables for €/000 7,208 (€/000 7,137 at 12/31/2008) of which €/000
6,388 (€/000 6,253 at 12/31/2008) include credits deriving from the
withholdings of the intercompany loan with GTEch holdings corporation
2009
2008
regarding liquidated interests due to Lottomatica. According to bilateral
(euro)
agreements between the US and Italy, such amounts will be transferred to
cash at bank
cash on hand
375,143,551
20,268
28,826,842
19,242
Total
375,163,819
28,846,084
the Parent company under the national tax consolidation contract;
A positive balance of €/000 2,024 (€/000 2,009 at 12/31/2008) of which €/000
675 (€/000 927 at 12/31/2008) are financial assets.
12. Equity
Equity for the year ended December 31, 2009 totals €/000 2,088,213 (€/000
(euro)
1,812,805 at 12/31/2008) and is composed of:
2009
2008
Share Capital: €/000 172,015 (€/000 152,287 at 12/31/2008) composed of
172,015,373 shares of €1.00 value:
Receivables to Social Security Institutions
Other assets
Tax withholdings on asset interests
Other receivable
Antitrust penalty reduction
Employee receivables
Accrued interest income
356,441
9,479,631
75,170
7,207,997
172,850
2,023,614
240,790
13,581,240
1,114,225
7,137,262
3,047,000
273,779
2,008,974
Share capital
Total
9,836,072
13,822,030
Nr of Shares at 12.31.2007
compared to the year ended December 31, 2008 the company’s credit situation
(€/000 3,047) towards the Antitrust Authorities for the sanctions for €/000 8,000
issued on September 7, 2005 has been extinguished. The sum was fully paid by
Lottomatica and then the sanction was reduced to €/000 4,953 following the
Audit court’s ruling.
(Nr of shares)
Stock-Option January
Stock-Option February
Stock-Option March
Stock-Option June
Stock-Option July
Treasury share attraction
Stock-Option September
Stock-Option October
Stock-Option December
10. Tax receivables
cap. increase 11.24.2009
Tax receivables for the year ended December 31, 2009 total €/000 1,637 (€/000 122
151,899,196
15,100
10,700
66,900
5,700
4,400
155,241
9,400
9,400
110,800
152,286,837
19,728,536
172,015,373
at 12/31/2008) and refer to IRAP (€/000 1,558) and IRES (€/000 79) tax receivables.
P 183
2009 Annual Report
Pursuing its strategy to maintain its leadership position in the gaming market,
According to the Lottomatica Shareholders’ Meeting of April 28, 2009, with
on November 20, 2009, Lottomatica share capital was increased by
regards to the year ended December 31, 2008 the distribution of net income for
€304,348,179.165 through the issue of 19,728,536 ordinary shares reserved for
€/000 115,536 is presented below:
Mediobanca International (Luxembourg) S.A., at an issue price of €15.4268. The
share capital increase will support a three-year mandatory exchangeable bond
(Swap Liability) issued by UBI Banca International SA and placed with qualified
investors, and its proceeds will support development plans in Italy, including a
new investment in video lottery terminal rights. Upon maturity in 2012, the
2008 Dividend distribution
Shareholders meeting of April 28, 2009
(euro)
bonds will be exchanged with the Lottomatica Group newly issued shares held
by Mediobanca International (Luxembourg) S.A. as depositary bank.
Based on the agreements signed by Lottomatica and Mediobanca
International, and by Mediobanca International and UBI Banca International S.A.:
Profit carried forward
Legal reserve
100,940,193
14,518,492
77,528
Total
115,536,213
Share premium reserve totals €/000 1,404,252 (€/000 1,139,071 at 12/31/2008).
bonds (“the Bonds”) which, upon maturity in 2012, must be exchanged into
The reserve was increased by €/000 265.181 following the capital increase
Lottomatica ordinary shares;
operation of November 11, 2009.
Treasury Reserve: totals €/000 63,502 (€/000 73,184 at 12/31/2008) represents
a similar amount used for the buy-back operation (€/000 73,184), adjusted by
corresponding to the 15% premium. Mediobanca will also pay semi-annually
€/000 9,682 for the fair value of the restricted stock of the portfolio. At
to Lottomatica an amount corresponding to the fees due under a stock
lending agreement regarding certain shares owned by Lottomatica.
Lottomatica will pay semi-annually to Mediobanca fixed interest payments
on the Bonds that are not converted at any interest payment date. The
present value of these interest payments has been recorded as a financial
liability in the consolidated statement of financial position (the “Swap
Liability”).
In application of the international accounting principles (specifically IAS 32), the
interest payments that Lottomatica will make to Mediobanca International
semi-annually according to the Swap agreement are accounted as debt issuance
costs relating to the capital increase. As a result, IAS 32.37 was applied. The
payments made by the closing of the year ended December 31, 2009 are entered
in Liability.
Legal Reserve: €/000 30,457 (€/000 30,380 at 12/31/2008) and as a result of
the April 28, 2009 Shareholders’’ Meeting resolution it has increased
by €/000 77.
The Lottomatica Shareholders’ Meeting of April 28, 2009 approved a resolution
to supply a dividend of €0.68 per share for a total amount of €/000 100,940.
P 184
December 31, 2009, the number of Treasury shares is 3,346,190.
Other Reserve totals €/000 450,323 (€/000 479,096 at 12/31/2008) detailed
below:
Other reserves
Regal
reserve
Share
based
payment
reserve
Other
reserve
Financial
reserves
Share
Premium
reserve
Article 2349
reserve
Swap
options
reserve
Total
30,303
22,036
25,535
-
-
1,989
4,750
84,613
77
-
(10,176)
14,679
-
8,532
-
-
456,926
(74,830)
-
(155)
-
(570)
77
456,926
(1,644)
(155)
(74,830)
14,679
(570)
30,380
26,539
34,067
-
382,096
1,834
4,180
479,096
77
-
(7,075)
915
-
(2,607)
-
(19,513)
-
-
-
(570)
77
(9,682)
915
(19,513)
(570)
30,457
20,379
31,460
(19,513)
382,096
1,834
3,610
450,323
Balance at Jenuary 1, 2008
Legal reserve
constitution
Free share attribution
Other
Reconstitution of Share Premium Reserve for buy back
Stock option costs
Swap amortization
Legal reserve
Free share attribution
Stock option costs
Gaming transaction solution
Swap amortization
Share-based Payment Reserve: €/000 20,380 (€/000 26,539 at 12/31/2008).;
which includes an amount related to the authorization of the existing
Swap Option Reserve: totals €/000 3,610 (€/000 4,180 at 12/31/2008) and
has decreased by €/000 570 as a result of the amortization.
stock option plan and the free allocation plan of January 1, 2009 (€/000
26,539), net of freely attributed treasury shares for €/000 7,075. It also
Prior to the issuance of the capital Securities in May 2006, Lottomatica
accepts the value of stock option and free allocation plans for FY 2009
entered into swap option contracts for €375 million with financial
(€/000 915). Specifically, the stock option plans and free share attribution
institutions that effectively limited the company’s exposure to movements
reserved to the Lottomatica employees have been recorded in the
in interest rates from the date it entered into the swap option contracts to
Statements of comprehensive income as an increase in the Personnel cost,
the date that pricing was fixed on the capital Securities issuance. The swap
while those reserved to GTEch employees have been recorded as an
option contracts were terminated during May 2006 for earnings of
increase in the investment in Invest Games. Lottomatica Italia Servizi
approximately €5.7 million, which was recorded to in Other Reserves in the
participation is increased for personnel costs, too.
consolidated Statement of changes in Equity and is being amortized over 10
Other reserve: totals €/000 31,460 (€/000 34,067 at 12/31/2008). The
difference in the period derives from the fair value for restricted stock
assigned to the portfolio.
Ex Art. 2349 Reserve: totals €/000 1,834 (€/000 1,834 at 12/31/2008). The
years.
Reserve or purchase of own shares: equal to €/000 382,096 (€/000 382,096
12.31.2008) formed as a result of the resolution by the shareholders on April
15, 2008
ex Art. 2349 Reserve was established by shareholders’ resolution issued
Retained earnings and profit for the year: €/000 125,123 (€/000 115,536 at
at the Shareholders’ Meeting of April 23, 2007 in accordance with
12/31/2008) and includes net income for the year ended December 31, 2009
company by-laws, for the destination of company for share-based
for €/000 110,605 (€/000 115,536 at 12/31/2008) and profits carried forward for
payment plans. Decreases relate to the number of stock awards granted
€/000 14,518. The share price is €0.643 per share (€0.7587 at 12/31/2008).
to employees that vested during the year.
Financial Reserves: totals €/000 (19,513) and are referred to Atronic,
Spielo and GTEch German acquisitions.
The captions of the Equity holders of the parent indicating the usage in term of
dividends distribution are reported below:
P 185
2009 Annual Report
OIc Prospects
13. Debts
Amount
Use
Distribution
quota
capital
Future capital increase reserve
capital reserves
Merger reserve
Share premium reserve
Other reserves
Earning Reserves
Legal reserve
Net Income
172,015
-
A-B
-
1,404,252
370,883
A-B-c
A-B-c
A-B
1,377,539
-
A-B-c
106,660
Total Reserves
1,916.,198
A:
B:
C:
30,457
110,605
Trade receivables
Long term debts, less current portion
capital securities
750 Euro Bond
Swap Liability
Interest rate swap
Other
2009
2008
733,181
741,719
56,390
843
816
730,525
403.355
2,037
1,532,949
1,135,917
535,457
-
316,513
50,835
535,457
367,348
78,812
46,490
78,812
46,490
1,484,198
Capital increase
Loss Reorganization
Distribution
Intercompany debts
Other
The reserves and retained earnings are non-distributable to the members totals
€432.0 million (€409.6 million at 12/31/2008) and refer to:
Legal Reserve;
Corrent portion of long-term debt
capital securities and other
Share Premium Reserve of €26.7 million (€3.7 million at 12/31/2008) regarding
the unrealized deferred taxes for secondary expenses related the capital
increase;
Buy-back reserve of €318.6 million (€308.9 million at 12/31/2008) as resolved
by the Shareholders’ Meeting of April 15, 2008;
Profit for the period of €3.9 million (€0.08 million at 12/31/2008) allotted to
the Legal Reserve pursuant to Article 2430 of the Italian civil code;
Reserve generated by stock compensation expenses still to be vested, €51.8
million (€60.6 million at 12/31/2008);
Swap option reserve (for the part still to be amortized) amount to €0.057
million (€4.1 million at 12/31/2008);
Capital Securities
On May 17, 2006, Lottomatica issued €750 million of subordinated interestdeferrable capital Securities due March 2066 (“capital Securities”) in order to
complete the GTEch acquisition. The capital Securities have a fixed coupon rate
of 8.25% (midswap at 10 years plus 405 basis points) payable annually through
March 31, 2016 and thereafter, have a variable interest rate of six-month
EURIBOR plus 505 basis points payable semi-annually. The capital Securities have
received a rating equal to a BB and Ba3 by Standard & Poor’s Rating Service and
€1.8 million (€1.8 million at 12/31/2008) allotted to the restricted plan for
Moody’s Investors Service Limited, respectively. The capital Securities as defined
Restricted stock option plan for company employees approved at the
the United States to certain institutional investors, or within the United States
Shareholders’ Meeting of April 23, 2007;
to or for the account or benefit of U.S. persons in favor of qualified institutional
€14.5 million (zero at 12/31/2008) refered to 2008 profit carried forward as
resolved by the Shareholders’ Meeting of April 28, 2009;
€(19.5) million (zero at 12/31/2008) related to Financial reserves Financial
Reserves referred to Atronic, Spielo and GTEch German acquisitions.
by Rule 144 of the U.S. Securities Act of 1933 may be offered or sold only outside
buyers. The capital Securities are listed on the Luxembourg Stock Exchange.
Debt issuance costs associated with the capital Securities are being
amortized over 10 years.
The capital Securities allow Lottomatica to optionally defer coupon
payments and mandates deferral of coupon payments if Lottomatica is in breach
of the interest coverage ratio as defined in the capital Securities agreement.
Under circumstances described in the capital Securities agreement, Lottomatica
is required to settle deferred coupon payments in cash or equity. Lottomatica is
restricted from paying any dividend prior to settling deferred coupon payments.
P 186
The terms of the capital Securities require Lottomatica to authorize the
also be redeemed in whole, but not in part, at 100% of their principal amount
issuance of ordinary shares in order to adhere to the obligation of maintaining
at the option of the Issuer in the event of certain changes affecting taxation.
a minimum amount of capital available defined as “Sufficient Authorized
holders of the Notes may require Lottomatica to redeem the Notes in whole or
Equity”. The authorization to issue ordinary shares is in accordance with a
in part at 100% of their principal amount plus accrued interest following the
resolution approved by Lottomatica shareholders. At each annual general
occurrence of certain events specified in the terms and conditions of the Notes.
meeting, the value of the ordinary shares authorized for issuance must be
The proceeds of the Notes, net of associated fees and costs, were used to repay
equivalent to the coupon payments due during the following two-year period.
long term debt of €/000 360.000, a portion of the GTEch Senior credit Facilities
As of December 2009, the issuance of shares was authorized for €/000 170.000.
and other debt. Debt issuance costs associated with the Notes are being
Accumulated interest for the two-year period total approximately €/000
amortized over approximately seven years beginning December 2009.
124.000.
The Notes are composed of the following:
capital Securities is composed of the following in line with accumulated
amortizations:
750 Euro Bond
capital securities
Nominal value
Debt issuance
Accumulated amortization
750,000
(8,281)
741,719
Nominal value
Debt issuance
750,000
(26,557)
9,737
Net value at 12/31/2009
Net value at 12/31/2009
733,180
Long term Facility
In December 2008, Lottomatica entered into an agreement with a syndicate of
750 Euro Bond (Notes)
financial institutions for a €360 million senior unsecured term loan facility. On
In December 2009, Lottomatica successfully concluded the placement among
December 3, 2009, the outstanding balance was paid with the proceeds of the
qualified investors of a €750 million 7-year senior unsecured non-convertible
Euro Bond 750 (Notes). As a result, unamortized debt issuance costs and interest
bond. The Notes are unconditionally and irrevocably guaranteed by GTEch and
rate swaps associated with the LTO Term Loan Facility were written off to other
the Other Guarantors. The Notes, which have received a rating equal to a Baa3
expense in the consolidated statements of comprehensive income
and a BBB- by Moody’s Investors Service Limited and Standard & Poor’s Rating
Service, respectively, are listed on the Luxembourg Stock Exchange. The notes
LTO Revolving Credit Facility
have an issue price of 99.504%. Interest is payable annually in arrears, with the
In May 2008, Lottomatica entered into an agreement with a syndicate of
first payment due on December 5, 2010, at 5.375% per annum, and is subject to
financial institutions for a €300 million senior unsecured revolving credit facility
adjustment from time to time in the event of a step up rating change or step
(the “LTO Revolving credit Facility”). The LTO Revolving credit Facility expires
down rating change. In the event of a step up or step down rating change, the
on August 29, 2012. The LTO Revolving credit Facility is unsecured and
interest rate shall be increased or decreased by 1.25% per annum, provided that
unsubordinated and is fully and unconditionally guaranteed by GTEch and the
at no time during the term of the Notes will the interest rate be higher than
Other Guarantors. Interest is generally payable monthly in arrears at rates
6.625% or lower than the initial rate of interest of 5.375%. Unless previously
determined by reference to EURIBOR plus a margin based on the Group’s ratio
redeemed or purchased and cancelled, the Notes will be redeemed at 100% of
of total net debt to earnings before interest, taxes, depreciation and
their principal amount on December 5, 2016. The Notes may be redeemed at any
amortization, and the Group’s senior unsecured long-term debt rating. Th e LTO
time after January 4, 2010 by the Issuer, in whole but not in part, at the greater
Revolving credit Facility has covenants and restrictions including, among other
of (i) 100% of their principal amount together with any accrued interest or (ii)
things, requirements relating to the maintenance of certain financial ratios,
an amount specified in the terms and conditions to the Notes. The Notes may
limitations on capital expenditures and acquisitions, and limitations on
P 187
2009 Annual Report
dividends. As of December 31, 2009, there was no outstanding balance under
Interest Rate Swap
the LTO Revolving credit Facility. Debt issuance costs associated with the LTO
At December 31, 2009 the total interest rate swap mark to market converting a
Revolving credit Facility are being amortized over approximately four years
portion of the new bond from fixed to variable interest rate is €/000 843.
beginning May 2008.
Long term portion of Company Swap
Short term borrowings for the year ended December 31, 2009 total €/000
On November 20, 2009, the Shareholders’ Meeting approved an increase in
535,457 (€/000 367,348 at 12/31/2008).
Lottomatica share capital of €304,348,179.165 through the issue of 19,728,536
ordinary shares reserved for Mediobanca International (Luxembourg) S.A., at an
issue price of €15.4268. The share capital increase will support a three-year
mandatory exchangeable bond (Swap Liability) issued by UBI Banca
International SA and placed with qualified investors, and its proceeds will
support development plans in Italy, including a new investment in video lottery
(euro)
2009
2008
Banks
Subsidiaries
535,456,948
50,835,089
316,512,955
Total
535,456,948
367,348,044
terminal rights. Upon maturity in 2012, the bonds will be exchanged with the
Lottomatica Group newly issued shares held by Mediobanca International
(Luxembourg) S.A. as depositary bank.
On November 24, 2009 Mediobanca subscribed the 19,728,536 according to
the commitments signed with Lottomatica on October 20, 2009. The share
capital increase supports a 3-year mandatory exchangeable bond (Swap
Liability) issued by UBI Banca International SA for a total amount of €350
million.
The Swap Liability issued bed UBI Banca International S.A. was placed with
qualified investors in Italy and abroad on October 20, 2009. The convertible
shares are priced at €17.7408, the average Lottomatica share price €15.4268
(four-day average) – plus a bonus of 15% of share price. Lottomatica entered
into a swap agreement with Mediobanca whereby Mediobanca paid an upfront
fixed amount to Lottomatica corresponding to the 15% of this increase.
Mediobanca will also pay semi-annually to Lottomatica a variable amount,
related to the fees due under a stock lending agreement regarding certain
shares owned by Lottomatica. Lottomatica will pay semi-annually to
Mediobanca fixed interest payments on the Bonds that are not converted at any
interest payment date. The long term portion totals €/000 56,390. The discount
effect is recorded as a financial liability in the financial position under “Other
The most significant Subsidiary Payables refer to a:
Payables towards consorzio Lotterie Nazionali, consisting of cash pooling for
€/000 247.591 (€/000 129,346 at 12/31/2008), including €/000 2 (€/000 125 at
12/31/2008) in interests and €/000 13,463 (€/000 1,336 at 12/31/2008) in
collections by Lottomatica on behalf of the consorzio points of sale and the
transfer of costs referring to the Mediofactoring credit operation for €/000
744.
cash pooling for Lottomatica Italia Servizi for €/000 125,846 (€/000 116,370 at
12/31/2008) including €/000 3 (€/000 1,818 at 12/31/2008) in interests and €/000
2,840 (€/000 8,636 at 12/31/2008) for services rendered by Lottomatica on
behalf of Lottomatica Italia Servizi;
cash pooling for Totobit Informatica for €/000 47,474 (€/000 47,137 at
12/31/2008), including €/000 2 (€/000 1,702 at 12/31/2008)in interests;
€/000 81,006 towards GTEch, including €/000 2 in interests relating to the
Gaming Solution transaction between Lottomatica and GTEch holdings
corporation which resulting in the acquisition of a group of companies held
by the subsidiary.
financial costs”.
Payables towards Invest Games S.A. (€/000 256) and Lottomatica International
hungary (€/000 1,021) refer mainly to new borrowings fees.
P 188
Subsidiary payables
Lottomatica
Italia
Servizi spa
Consorzio Lottomatica
Lotterie
Videolot
Nazionali Gestione spa
GTECH
Corporation
Invest
Games spa
Lis
Finanziaria spa
Lottomatica
International
Hungary
PCC spa
Sed
Multitel srl
Totobit
Informatica spa
Total
Financing
cash Pooling
Gaming solution
Interests
Other
123,003
3
2,840
247,591
2
14,207
28
-
81,002
4
-
256
1
-
1,021
6,650
106
-
11,225
44
-
47,472
2
-
6,650
429,291
81,002
190
18,324
Total
125,846
261,800
28
81,006
256
1
1,021
6,756
11,269
47,474
535,457
Short term payments on long term loans
paid to each employee subscribing to the program as a result of retirement,
Short term payments on long term loans total €/000 78,812 (€/000 46,490 at
death, invalidity, resignation etc. The estimate of future benefits also included
12/31/2008) and consist of:
any further increases related to seniority that may have accrued, as well as a
interest matured on the capital Securities for €/000 46,618;
short term payment due to Mediobanca as part of semi-annual interest
presumed increase in the remuneration level earned at the time of valuation;
at the time of valuation, the present average value of future benefits was
payments on Bond for €/000 29,924
calculated, on the basis of the annual interest rate applied and the likelihood
Interests accrued on new 750 Euro Bond for €/000 3,147;
of single benefits being actually paid;
Short term payment LTO Revolving credit Facility for €/000 22;
the liability for the company was established by identifying the share of the
Short term Swap payment for €/000 (898).
present average value of future benefits in relation to service already accrued
by the employee with the company at the time of valuation;
the reserve recognized as valid for IAS purposes was identified on the basis
14. Staff Severance Fund (TFR)
The total cost, at net value, for the annual Staff Severance Fund for the years
of the liability established using the method outlined in the paragraph above
ended December 31, 2009 and 2008 is summarized in the following table:
and the reserve set-aside for the purposes of the Italian statutory financial
statements.
(thousands of euro)
Balance at January 1,
Actuarial gain (loss) and “curtailment” effect
Other
Balance at December 31,
December
2009
December
2008
4,811
2,565
310
(2,779)
4,927
2,337
100
(2,553)
4,907
4,811
Financial hypothesis
(%)
Increase in cost of Living
Discount Rate
compensation Increase
40 years old and under
over 40 years old up to 55
over 55 years old
12.31.2009
Executive
Staff
12.31.2008
Executive
Staff
2.00
4.10
2.00
4.10
2.20
4.80
2.20
4.80
2.75
2.50
2.25
2.50
2.25
2.00
2.95
2.70
2.45
2.70
2.45
2.20
The Staff Severance Fund is a defined benefit plan. The cost of providing benefits
under the plan is determined using the projected unit credit actuarial valuation
method.
This method involves the following procedures:
projections were made based on a series of financial assumptions (increase in
the cost of living, increase in wages, etc), any future benefits that could be
P 189
2009 Annual Report
Demographic hypothesis
12.31.2009
12.31.2008
(%)
Executive
Staff
Executive
Staff
Probability of Death
Mortality Table RG48
published by Ragioneria
Generale dello Stato
Probability of invalidity
Unisex Table edited by c.N.R.
and reduced by 70%
and reduced by 70%
and reduced by 70%
and reduced by 70%
Probability of Resignation
up to 50 years old
over 50 years old
4% each year
none
3% each year
none
4% each year
none
3% each year
None
Probability of Retirement
upon reaching 60 years old
up to 65 years old
upon turning 65 years old
35% (100% for women)
20% each year
100%
10% each year
100%
20% each year
100%
10% each year
100%
Probability of receiving an anticipated
Severance Fund of up to 70% at the
beginning of the year
3% each year
3% each year
3% each year
3% each year
The financial hypothesis for the year ended December 31, 2009 were adjusted
in the year ended December 31, 2009 are represented below:
compared to the same period of the previous year. These adjustments were introduced
in order to reflect the variations in interest rates in the financial market. There has been
no adjustment taken into consideration regarding a demographic hypothesis.
The impact of the new legislation issued in the course of the year for
companies exceeding no. 50 employees is valuated with the “Traditional Unit
credit Method” in adherence to IAS 19.
15. Deferred tax liabilities
Deferred tax assets
(euro)
Balance at 12.31.2008
14,278,058
Decreases
Increases
(8,244,567)
25,378,821
31,412,312
Deferred tax liabilities for the year ended December 31, 200 total €/000 21,290
(€/000 31,792 at 12/31/2008). In application of IAS 23, deferred tax assets have
Deferred tax liabilities total €/000 52,702 and refer principally to:
Deferred tax liabilities on goodwill;
been compensated by deferred tax liabilities where legally possible.
TFR actualization pursuant to IAS;
Profits from unrealized exchange rates.
(euro)
Increases
Decreases
The movements in the year ended December 31, 2009 are represented below:
31,791,872
6,632,166
(17,134,253)
21,289,785
Below are described the pre-compensation values:
Deferred tax assets total €/000 31,412 and refer principally to debt issuance
costs, allowance for doubtful accounts and risk allowances. The movements
P 190
(euro)
46,069,930
Increases
Decreases
10,125,441
(3,493,275)
52,702,096
16. Long term provisions
the VAT liquidation procedure pursuant to Article 73, last point, of
Long term provisions for the year ended December 31, 2009 total €/000 11,407
Presidential Decree no. 633/1972. It also includes tax payables for the year
(€/000 9,567 at 12/31/2008).
ended December 31, 2009 for €/000 1.633 (€/000 2.462 at 12/31/2008) since
the company has repaid the receivables due to D&D holding in accordance
with the National Tax consolidation of the De Agostini Group companies,
Long term provisions
following the deliberation of the Board of Directors Meeting of September
9, 2004. The National Tax consolidation Regulation for the companies of the
12.31.2008
Increases
Utilized
12.31.2009
Legal
Tax
Other
7,181
2,070
316
1,600
253
(13)
-
7,168
3,670
569
Meeting of October 20, 2004. It regulates the relations between the B&D
Total
9,567
1,853
(13)
11,407
Lottomatica, and aims to attain and ascribe the advantages derived from the
De Agostini Group was approved by the De Agostini Board of Directors
holding and the companies which adhere to said regulation including
application of the national tax consolidation pursuant to articles 117 to 129
Increases for €/000 1,853 refer essentially to allotments made for sports pools.
of Presidential Decree no, 917 of December 22, 1986 and as modified by the
The risk allowance in the present financial statement are not affected the
cited Legislative Decree no, 344/2003 and Ministerial Decree of June 9, 2004.
actualization insofar as the actualization itself is not significant.
The new Regulation for the De Agostini Group issued in order to safeguard
the economic/financial interests of the individual sub holdings is in effect as
17. Trade and other payables
of January 1, 2008 and was approved in the Lottomatica BoD meeting on
Trade and other payables for the year ended at December 31, 2009 total €/000
April 28, 2009.
101,661 (€/000 80,909 at 12/31/2008) and consist of:
Trade payables are normally settled in 30-60-90 days
Trade payables total €/000 56,143 (€/000 58,416 at 12/31/2008) consisting of
unpaid invoices recorded as of July 31, 2009, and debts matured during the
year ended December 31, 2009. The payables are connected to the purchase
Trade payables
of goods and services for the activities of the period and investment programs
under way
Payables to subsidiaries total €/000 36,796 (€/000 17,558 at 12/31/2008) for
normal activities carried out regarding management and for contracts signed
with the subsidiaries in accordance with market conditions. Significantly,
payables relative to Lottomatica Sistemi, for €/000 11,131 (€/000 8,114 at
12/31/2008) for the management services of its call center ; SED Multitel for
€/000 8,555 (€/000 6,748 at 12/31/2008); Pcc Giochi e Servizi for €/000 727
(euro)
2009
2008
Payable towards suppliers
Trade
Payable towards sales network
Payables towards Subsidiaries
Trade
Payables towards the Parent
Trade
Tax
Total
56,143,480
56,143,480
36,796,018
36,796,018
8,721,414
3,816,818
4,904,596
58,415,858
58,415,858
47,486
17,558,319
17,558,319
4,887,690
599,505
4,288,185
101,660,912
80,909,353
(€/000 1,177 at 12/31/2008) for the production of paper materials; Totobit, for
€/000 6,013 (€/000 2,876 at 12/31/2008), in network management services and
18. Other current liabilities
€/000 9,683 (€/000 3,485 at 12/31/2008) for general services rendered by the
Other current liabilities for the year ended December 31, 2009 total €/000 23,550
subsidiary GTEch holdings corporation under normal market conditions.
(€/000 26,594 at 12/31/2008) and refer to:
Payables to the Parent total €/000 3,817 (€/000 600 at 12/31/2008), for services
rendered to De Agostini S.p.A. under normal market conditions, of which
€/000 3,415 towards Dea Factor for credit recovery services;
Payables to Social Security Institutions: total €/000 2,217 (€/000 2,363 at
12/31/2008) and refer almost exclusively to the payables due to social security
institutions regarding the employee pension funds.
Tax payables to Parent total €/000 4,905 (€/000 4,288 at 12/31/2008) and
Defined Contribution Plans: total €/000 577 (€/000 571 at 12/31/2008) and
includes €/000 3.272 (€/000 1.826 at 12/31/2008) in VAT debt as participant in
specifically includes the Staff Severance Fund (TFR) quota matured as of
P 191
2009 Annual Report
January 1, 2007 to-date and deposited in the “Treasury Fund” managed by
STATEMENTS OF cOMPREhENSIVE INcOME
INPS, as well as to the complementary pension funds which are considered as
“Defined contribution Plans” according to IAS 19 - Employee benefits.
Other liabilities: total €/000 20,756 (€/000 23,660 at 12/31/2008).
20. Revenues
Revenues for the period ended December 31, 2009 total €/000 362,383 (€/000
The most significant amounts refer to:
Payables to Personnel: total €/000 14,031 (€/000 12,779 at 12/31/2008).
372,771 at 12/31/2008) and relate almost entirely to the Lotto business.
which consist of payables to personnel matured as of December 31, 2009
in terms of productivity awards and accumulated unused vacation days.
Tax payables: for €/000 1,865 (€/000 4,352 at 12/31/2008) regarding
payables towards the State treasury for the payment of taxes regarding
deductions accounted for in the year ended December 31, 2008.
Other payables: total €/000 2,514 (€/000 3,326 at 12/31/2008) and consists
Revenues
(euro)
12.31.2009
12.31.2008
Delta
Lotto collection revenues
Betting service revenues
Lottery point of sale revenues
Other revenues (cONI sports pools)
362,126,736
256,122
-
372,196,067
186,188
382,838
5,924
(10,069,331)
(186,188)
(126,716)
(5,924)
Total
362,382,858
372,771,017
(10,388,159)
of derived payables resulting from network service contracts for €/000
1,382 (€/000 2,773 at 12/31/2008) and €/000 20 in guarantee deposits.
For an in-depth analysis of revenues for the periods ended December 31, 2009
(euro)
and 2008, please refer to the Operating and Financial Review.
2009
2008
Payables to Social Security Institutions
Defined Contribution Plans
Other payables within 12 months
Personnel
Other payables
Substitute tax
VAT
Irpef
Other tax payables
2,217,181
577,404
20,755,583
14,030,829
2,514,235
1,865,031
2,189,148
156,340
2,362,523
571,107
23,660,035
12,779,094
3,326,615
4,351,739
754,368
2,314,599
133,620
Total
23,550,168
26,593,665
19. Income Tax Payables
21. Other revenues
Other revenues for the period ended December 31, 2009 total €/000 94,355
(€/000 92,828 at 12/31/2008) due principally to:
Group Revenues: €/000 93,567 (€/000 85,221 at 12/31/2008), consisting of
proceeds resulting from services provided to various subsidiaries for the
accounting services, employee secondment, IP network activation, etc, and
€/000 2,063 (€/000 1,416 as of 12/31/2008) from revenues resulting from
intercompany bank guarantees.
Other Revenues: €/000 741 (€/000 2,130 at 12/31/2008).
Revenues carried forward: €/000 47 (€/000 2,296 at 12/31/2008).
Income tax payables for the year ended December 31, 2009 total €/000 1,970
(zero at 12/31/2008) and refer to payables towards the State Treasury regarding
2007 taxes.
P 192
Other revenues
(euro)
12.31.2009
12.31.2008
Delta
Intercompany revenues
Other revenues
Revenues from previous year
Surplus
93,567,307
741,181
46,877
-
85,220,742
2,129,847
2,295,973
3,181,732
8,346,565
(1,388,666)
(2,249,096)
(3,181,732)
Total
94,355,365
92,828,294
1,527,071
22. Raw Materials, Services and Other costs
Service costs
Raw metrials, services and other costs for the period ended December 31, 2009
Service costs for the period ended December 31, 2009 total €/000 191,787 (€/000
total €/000 216,009 (€/000 201,028 at 12/31/2008).
177,309 at 12/31/2008).
Service costs
(euro)
12.31.2009
12.31.2008
Delta
Differences in inventories
Raw material costs
Service costs
Other operating costs
207,534
20,873,495
191,786,863
3,141,067
19,876,732
177,309,233
3,841,887
207,534
996,763
14,477,630
(700,820)
Total
216,008,959
201,027,852
14,981,107
The individual items are detailed below.
Differences in Inventory
Total €/000 208 (zero at 12/31/2008).
(euro)
12.31.2009
12.31.2008
Delta
Service costs
Network management
Maintenance
Office location costs
Point of sale assistance
Advertisement and promotional costs
consulting costs
BoD costs
Group costs
Banking service expenses
Financial Statement certification
Other service costs
Leased assets
Rents paid
Miscellaneous rents
183,675,088
22,465,297
12,245,495
7,701,002
7,721,837
50,648,831
26,694,341
1,858,539
41,919,441
2,435,795
383,449
9,601,061
8,111,775
6,628,346
1,483,429
170,020,436
51,578,650
10,466,234
6,784,429
13,173,423
44,346,655
19,753,806
1,416,443
11,101,381
1,826,835
757,288
8,815,292
7,288,797
6,079,411
1,209,386
13,654,652
(29,113,353)
1,779,261
916,573
(5,451,586)
6,302,176
6,940,535
442,096
30,818,060
608,960
(373,839)
785,769
822,978
548,935
274,043
Total
191,786,863
177,309,233
14,477,630
Raw materials and consumables used
Raw materials and other consumables used for the period ended December 31,
Network costs for the period ended December 31, 2009 total €/000 22,465
2009 total €/000 20.873 (€/000 19.877 at 12/31/2008).
compared to the €/000 51,579 for the same period of the previous year. The
decrease is attributable the management of the network transferred to the
subsidiary SED Multitel, which caused an increase in Group costs from €/000
Raw material costs
11,101 at December 31, 2008 to €/000 41,919 for the same period in 2009.
(euro)
12.31.2009
12.31.2008
Delta
Network management costs of €/000 22,465 for the period ended December 31,
Paper products
EDP materials and consumables
Other
17,603,515
3,035,012
234,968
16,940,683
2,516,380
419,669
662,832
518,632
(184,701)
2009 refer principally to costs associated to the management of the Data
Total
20,873,495
19,876,732
996,763
Processing centers by the subsidiary Lottomatica Sistemi for €/000 21,473 (€/000
21,052 at 12/31/2008).
The increase in advertising costs from €/000 44,347 at December 31, 2008 to
The stock of paper products total €/000 17,604 (€/000 16,941 at 12/31/2008) and
refer to playslips and receipts purchased.
Other costs for €/000 235 (€/000 420 at 12/31/2008) refer principally to gas
and oil expenses for €/000 209 (€/000 386 at 12/31/2008).
€/000 50,649 for the period ended December 31, 2009 are principally due to
investments on the new game 10eLotto.
Other service costs for the period ended December 31, 2009 total €/000 9,601
(€/000 8,815 at 12/31/2008) referring principally to business travel expenses for
€/000 3,561 (€/000 3,732 at 12/31/2008), pre-paid restaurant certificates for €/000
1,616 (€/000 1,520 at 12/31/2008), insurance for €/000 1,375 (€/000 1,116 at
12/31/2008) and €/000 1,131 (€/000 621 at 12/31/2008) for transportation costs.
Leasing costs for the period ended December 31, 2009 €/000 6,628 (€/000
6,079 at 12/31/2008) for refer principally to the rents paid for the Group
company offices.
P 193
2009 Annual Report
for according to the procedures set forth under IFRS 2 and break down as
Other operating costs for the period ended December 31, 2009 total €/000 3,141
follows:
(€/000 3,842 at 12/31/2008).
€/000 954 (€/000 1,465 at 12/31/2008)for Retention plans;
€/000 788 (€/000 4,278 at 12/31/2008)for Restricted stock plans;
€/000 (1,824) (€/000 1,394 at 12/31/2008) for stock compensation costs.
(euro)
12.31.2009
12.31.2008
Delta
The information for the period ended December 31, 2009 refer to the 2005-2010
charity
Annual fees
Various taxes
Non deductible VAT
Other expenses
Other allocations
664,481
90,529
72,615
(1,131,552)
3,241,500
203,494
485,200
223,173
361,478
1,131,553
1,575,138
65,345
179,281
(132,644)
(288,863)
(2,263,105)
1,666,362
138,149
Stock Option Plan as well as to new plans issued as of August 29, 2006. For
3,141,067
3,841,887
(700,820)
Total
further information please refer to the other sections in the present document.
At December 31, 2009 the company was composed of 878 employees (868
at 12/31/2008).
Employees
Total operating costs include losses for €/000 (1,132) that refer to the recovery
(unit)
of non deductible VAT costs in the period ended December 31, 2008.
Other costs include €/000 756 (€/000 871 at 12/31/2008) of costs carried
forward. The consistent decrease compare to the previous year is due principally
to lower costs incurred in network management.
12.31.2009
12.31.2008
Delta
Executives
Middle Management
Office Staff
59
122
697
55
116
697
4
6
-
Total
878
868
10
Other allocations for €/000 203 (€/000 65 at 12/31/2008) include for the most
part provisions set aside in order to cover any possible legal disputes and
24. Depreciation and Amortization
litigations in which the company may be involved.
Depreciations and amortizations for the period ended December 31, 2009 total
€/000 32,530 (€/000 34,222 at 12/31/2008) and refer to:
Intangible asset amortizations: €/000 6,156 (€/000 3,511 at 12/31/2008).
23. Personnel costs
Personnel costs for the period ended December 31, 2009 total €/000 68,830
(€/000 71,014 at 12/31/2008).
including €/000 18,313 (€/000 20,096 at 12/31/2008) for FDA assets.
Personnel costs
Depreciation, Amortization and write-down
(euro)
12.31.2009
12.31.2008
Delta
Wages and Salaries
Social Security
Stock Option expense
Other
50,058,366
14,733,296
2,876,514
(82,427)
1,244,402
44,699,523
15,090,274
2,436,315
7,136,840
1,650,551
5,358,843
(356,978)
440,199
(7,219,267)
(406,149)
Total
68,830,151
71,013,503
(2,183,352)
In addition to normal personnel costs, Wages and Salaries and Social Security
costs include early severance packages.
Staff severance fund costs include the effects of actualization.
Stock options costs for €/000 (82) (€/000 7,137 at 12/31/2008) were accounted
P 194
Fixed asset amortizations: €/000 26,306 (€/000 29,527 at 12/31/2008),
(euro)
12.31.2009
12.31.2008
Delta
Receivable depreciation
Ordinary Fixed Assets Depreciation
Property depreciation
Plant and Machinery depreciation
Other asset depreciation
Fixed Assets Depreciation FDA
Plant and Machinery depreciation
Other asset depreciation
Intangible Assets Amortization
Patent amortization
concession and license amortization
Other asset amortization
68,000
7,992,545
3,778,512
3,743,734
470,299
18,313,293
18,265,122
48,171
6,156,448
2,269,275
999,412
2,887,761
1,184,000
9,431,418
3,296,584
5,721,841
412,993
20,095,856
20,093,419
2,437
3,511,159
2,366,133
981,787
163,239
(1,116,000)
(1,438,873)
481,928
(1,978,107)
57,306
(1,782,563)
(1,828,297)
45,734
2,645,289
(96,858)
17,625
2,724,522
Total
32,530,286
34,222,433
(1,692,147)
25. Dividends received
27. Intercompany interests, net
For the period ended December 31, 2009 they total €/000 84,751 (€/000 65,533
Interest income/expense on borrowings, net for the period ended December 31,
at 12/31/2008) and refer to:
2009 total €/000 5,117 (€/000 8,793 at 12/31/2008) and refer to:
Dividends
Intercompany interest, net
(euro)
12.31.2009
12.31.2008
Delta
cirmatica S.A.
74,170,277
4,580,340
6,000,000
-
52,792,575
10,233,464
2,506,622
21,377,702
4,580,340
6,000,000
(10,233,464)
(2,506,622)
Total
84,750,617
65,532,661
19,217,956
26. Foreign exchange gain (loss), net
Foreign exchange gain (loss), net for the period ended December 31, 2009 total
€/000 664 (€/000 666 at 12/31/2008) and include:
Foreign exchange gains for €/000 356 (€/000 837 at 12/31/2008), of which
€/000 355 (€/000 528 al 12/31/2008) are realized (monetary) gains and entirely
almost refer to earnings realized on payments made by the subsidiary GTEch
and fees relative to intercompany guarantees for current borrowings;
Foreign exchange losses for €/000 1.020 (€/000 171 at 12/31/2008), of which
€/000 240 (€/000 142 al 12/31/2008) are non-realized (non-monetary) and refer
to valorization of foreign exchange towards GTEch and €/000 764 refer to
(euro)
12.31.2009
12.31.2008
Delta
Interest income on financing
GTEch corporation
SED Multitel S.r.l.
11,984,885
908,147
2,117,004
2,966,258
5,342
138,622
5,365,372
2,826
481,314
17,270,754
5,254,584
4,515,291
3,378,740
(310,000)
38,292
126,254
3,165,124
1,102,469
(5,285,869)
(4,346,437)
(2,398,287)
(412,482)
310,000
(32,950)
12,368
2,200,248
2,826
(621,155)
Interest expense on financing
cirmatica S.A.
GTEch corporation
Invest Games S.A.
SED Multitel S.r.l.
(6,868,154)
(1,255,114)
(2,440,280)
(256,162)
(1,020,815)
(42,071)
(28,206)
(560,709)
(266,008)
(848,432)
(106,276)
(44,081)
(8,477,772)
(707,770)
(91,849)
(4,098)
(61,803)
(329,794)
(127,148)
(2,041,259)
(1,000,749)
(3,723,343)
(187,964)
(201,995)
1,609,618
547,344
(91,849)
2,436,182
256,162
959,012
287,723
(127,148)
28,206
(1,480,550)
(734,741)
(2,874,911)
(81,688)
(157,914)
5,116,731
8,792,982
(3,676,251)
Total
foreign exchange losses on derivatives, relative to acquisition operations in
USD negotiate in order to hedge for foreign exchange rate fluctuations
regarding USD transactions made by consorzio Lotterie Nazionali.
Interest payable to the consorzio Lotterie Nazionali includes €/000 774 (€/000
446 at 12/31/2008) for the reversal of costs related to the supply of credit
Mediofactoring.
The company has modified the presentation and classification of specific
items in the financial report for the year ended December 3,1 2008 in order to
conform them to the financial statement for the year ended December 31, 2009.
consequently, €/000 446 has been reclassified from other financial liabilities to
interest expense on borrowings. The amount refers the transfer of costs relating
to the termination of Mediofactoring receivables which were incorrectly
classified in 2008.
28. Interests on capital securities and other
Interests on loans total €/000 92,784 (€/000 88,911 at 12/31/2008) and include
€/000 3,218 relative to the new 750 Euro Bond. Other costs include /000 5,391
relative to termination of the Term Loan Facility.
P 195
2009 Annual Report
Interests on capital securities and other
Taxes
(euro)
12.31.2009
12.31.2008
Delta
Capital Securities
Interests
Swap option
750 Euro Bond
Interests
360 Bond
Interests
Issuance fee
Long Term Facility
Interests
Other
Revolving Facility
Interests
Interest withholding
GTECH cost capitalization
IRS
Interests
Other
64,088,471
62,002,801
(570,000)
2,655,670
3,217,870
3,146,857
71,013
18,694,406
12,041,517
1,261,755
5,391,134
1,579,055
252,509
1,326,546
99,515
5,104,381
1,801,733
3,302,648
63,832,920
61,747,250
(570,000)
2,655,670
17,303,509
16,806,577
189,074
307,858
814,246
210,528
603,718
6,633,966
130,860
6,503,106
311,642
14,725
-
255,551
255,551
3,217,870
3,146,857
71,013
(17,303,509)
(16,806,577)
(189,074)
(307,858)
17,880,160
11,830,989
658,037
5,391,134
(5,054,911)
121,649
(5,176,560)
(212,127)
(14,725)
5,104,381
1,801,733
3,302,648
Total
92,783,698
88,911,008
3,872,690
(euro)
IRAP
IRES
Deferred tax assets
current tax assets
current tax liabilities
Total
12/31/2009
12/31/2008
Delta
7,123,194
1,632,577
8,774,212
9,584,281
(10,690,658)
5,962,510
8,746,080
16,911,159
3,018,591
3,247,669
(18,493,455)
19,434,087
(1,622,886)
(15,278,582)
5,755,621
6,336,612
7,802,797
(13,471,577)
22,386,116
32,864,131
(10,478,015)
The tables on the following pages show a breakdown of the deferred tax assets and
liabilities as well as the reconciliation between the ordinary and effective tax rates.
Deferred tax assets
Balance sheet
2009
Assets
Economic
differences differences Balance sheet
2008-2009 2008-2009
2008
Sogei goodwill amortization
cOS goodwill amortization
266
289
-
(664)
-
930
289
29. Adjustments to financial assets
Goodwill amortization
555
-
(664)
1,219
The adjustment for €/000 868 (zero at 12/31/2008) is relative to the depreciation
Goodwill write-down
-
-
-
-
11
152
of the ITB Banca interest share in order to accurately reflect the losses sustained
for the period ended December 31, 2009 which are considered impaired.
Amortizations
163
Asset write downs
3
-
(4)
7
30. Income taxes
Write downs
3
-
(4)
7
Income taxes for the period ended December 31, 2009 total €/000 22,386 (€/000
Accruals provisions
Allowance for doubtful accounts accrual
Other provisions
2,093
1,481
5
-
232
(503)
(4)
1,861
1,984
9
Provisions
3,579
-
(275)
3,854
26,713
24,867
(1,847)
3,693
Startup and expansion costs
-
-
(16)
16
Tax loss
-
-
(1,598)
1,598
Bonus + MBO
Entertainment expenses
Unrealized exchange losses
BoD compensation
Other
59
84
89
169
-
(3,088)
(46)
30
89
(324)
3,088
105
54
493
Other temporary differences
401
-
(3,339)
3,740
31,414
24,867
(7,732)
14,279
32,864 at 12/31/2008) and consist of the following:
Current taxes total €/000 8,756 (€/000 25,657 at 12/31/2008), of which €/000 1,633
(€/000 16,911 at 12/31/2008) refer to IRES and €/000 7,123 (€/000 8,746 at 12/31/2008)
refer to IRAP. Both IRES and IRAP are calculated based on tax legislations in vigor.
Deferred tax assets total €/000 8,774 (€/000 3,019 at 12/31/2008) due
principally to the combined effect produced by the deferred tax assets in 2009
for €/000 237 (€/000 3,515 at 12/31/2008), the use of deferred tax assets from
previous years for €/000 2,794 (€/000 25,957 at 12/31/2008) and €/000 6,217 in
deferred tax assets from debt issuance costs for the 2008 capital increase.
Deferred tax liabilities total €/000 9,584 (€/000 13,611 at 12/31/2008) due
principally to the combined effect produced by the deferred tax liabilities in
2009 for €/000 10,125 (€/000 10,227 at 12/31/2008) and recovery from
previous years for €/000 541 (€/000 6,980 at 12/31/2008;
Taxes assets carried forward for €/000 10,691 (€/000 18,493 at 12/31/2008)
and tax liabilities carried forward for €/000 5,963 (€/000 19,434 at 12/31/2008).
P 196
CAPITAL INCREASE
Total
Balance sheet
2009
Assets
differences
2008-2009
Goodwill amortizations
Write downs
52,211
103
-
6,634
48
45,577
55
Total write downs
52,314
-
6,682
45,632
-
-
(1)
1
Unrealized exchange revenues
Receivables write downs
Actuarial gain/loss on
133
111
-
28
-
105
111
144
-
(79)
223
Other temporary differences
388
-
(51)
439
52,702
-
6,630
46,072
(21,288)
24,867
(14,362)
(31,793)
Interest incomes
Total
Net deferred tax liabilities
Total net deferred tax liabilities on
Economic
differences Balance sheet
2008-2009
2008
(1,102)
P 197
2009 Annual Report
Reconciliation of effective income tax rate
(euro)
12.31.2009
%
12.312008
%
132,991
100.00
148,400
100.00
IRES
IRAP
(1,633)
(7,123)
(1.23)
(5.36)
(16,911)
(8,746)
(11.40)
(5.89)
current income taxes
contingents
Deferred tax assets
(8,756)
4,728
(8,774)
(9,584)
(6.58)
3.56
(6.60)
(7.21)
(25,657)
(941)
6,980
(13,246)
(17.29)
(0.63)
4.70
(8.93)
Total
(22,386)
(16.83)
(32,864)
(22.15)
Net income
110,605
83.17
115,536
77.85
Profit before income tax
Effective tax rate (%)
(euro)
(16.8)
(22.15)
Base
%
Tax
%
Base
%
Tax
%
132,991
13,010
(81,878)
1,136
(59,322)
27.50
27.50
27.50
27.50
27.50
(36,573)
(3,578)
22,516
(312)
16,314
(27.50)
(2.69)
16.93
(0.23)
12.27
148,400
16,186
(62,256)
12,852
(53,687)
27.50
27.50
27.50
27.50
27.50
(40,810)
(4,451)
17,120
(3,534)
14,764
(27.50)
(3.00)
11.54
(2.38)
9.95
(1,633)
(1.23)
61,495
(16,911)
(11.40)
(6,410)
(3,638)
(757)
1,302
(462)
2,842
(4.82)
(2.74)
(0.57)
0.98)
(0.35)
2.14
148,400
63,041
25,112
(12,092)
(43,007)
(7,153)
(3,039)
(1,210)
583
2,073
(4.82)
(2.05)
(0.82)
0.39
1.40
(7,123)
(5.36)
181,454
(8,746)
(5.89)
Total current taxes
(8,756)
(6.58)
(25,657)
(17.29)
Deferred tax liabilities IRAP
Reversal deferred tax liabilities IRAP
Deferred tax liabilities IRES
Reversal deferred tax liabilities IRES
(1,506)
462
(8,620)
79
(1.13)
0.35
(6.48)
0.06
(1,506)
(8,751)
29
(1.01)
(5.90)
0.02
Total deferred tax liabilities
(9,584)
(7.21)
(10,227)
(6.89)
Deferred tax assets IRAP
Reversal deferred tax assets IRAP
Deferred tax assets IRES
Reversal deferred tax assets IRES
3
(1,334)
233
(7,677)
(1.00)
0.18
(5.77)
1
(485)
3,505
(6,040)
(0.33)
2.36
(4.07)
Total deferred tax assets
(8,774)
(6.60)
(3,019)
(2.03)
Nominal IRES tax rate
IRES differences on permanent increases
IRES differences on permanent decreases
IRES differences on temporary increases
IRES differences on temporary decreases
5,937
Ordinary IRAP rate on gross income
Taxable base adjustments
IRAP differences on permanent increases
IRAP differences on permanent decreases
IRAP differences on temporary increases
IRAP differences on temporary decreases
132,991
75,479
15,706
(27,011)
9,591
(58,973)
147,784
Deferred tax assets
Contingents
Total
P 198
4.82
4.82
4.82
4.82
4.82
4.82
-
4.82
4.82
4.82
4.82
4.82
4.82
6,980
4,728
3.56
(941)
(0.63)
(22,386)
(16.83)
(32,864)
(26.85)
31. Net operating income
The principal elements of current financial assets totaling €/000 417,076 (€/000
The net operating income of Lottomatica Group S.p.A. for the period ended
228,767 at 12/31/2008) refer principally to intercompany receivables (€/000
December 31, 2009 totals €/000 110,605 (€/000115,536 at 12/31/2008).
416,943) of which:
Financial receivables from Lottomatica Sistemi for cash pooling and
32. Net Financial Position
intercompany financing for €/000 21,518 (€/000 19,995 at 12/31/2008)
Lottomatica has a net financial position of €/000 1,354,979 (€/000 1,290,105 at
including interests for €/000 296 (€/000 578 at 12/31/2008)
12/31/2008) consisting of the following sub-categories:
Short term receivables, net for €/000 177,838 (short term debt for €/000
Financial receivables from Lottomatica Videolot Rete for cash pooling and
including interest for €/000 760 (€/000 2.940 at 12/31/2008);
156,225 at 12/31/2008);
Financial receivables from Lottomatica Scommesse for cash pooling and
Long term debt for €/000 1,532,949 (€/000 1,133,880 at 12/31/2008).
including interests for €/000 386 (€/000 2,943 at 12/31/2008);
Financial receivables from GTEch holdings corporation for €/000 45,074.
December 2009 December 2008
Delta
The principal elements of the current financial liabilities of €/000 614,269 (€/000
cash on hand
cash at bank
20
375,144
19
28,827
1
346,317
375,164
28,846
346,318
current financial receivables from subsidiaries
Other current financial receivables
416,943
133
228,767
-
188,176
133
417,076
228,767
188,176
current financial payables to subsidiaries
Bank loans
535,457
78,812
316,513
50,835
46,490
218,944
(50,835)
32,322
Short-term Financial payables
614,269
413,838
200,431
Financial payables to Lottomatica Italia Servizi for cash pooling for €/000
(177,971)
156,225
(334,063)
125,846 (€/000 116,370 at 12/31/2008), including interests for €/000 3
733,181
741,719
56,390
843
816
730,525
403,355
-
2,656
741,719
56,390
(403,355)
843
816
(€/000 1,818 at 12/31/2008) and collections carried out by Lottomatica on
Financial payables to Totobit for cash pooling for €/000 47,474 (€/000
Long-term loans
1,532,949
1,133,880
(400,699)
47,137 at 12/31/2008), including interests for €/000 2 (€/000 1.702 at
Long-term debt, net
1,532,949
1,133,880
(400,699)
Financial payables to GTEch for €/000 81,006 including interests for €/000
1,354,978
1,290,105
(734,762)
2 for the Gaming Solution transaction between Lottomatica and GTEch
413,838 at 12/31/2008):
Intercompany financial payables total €/000 535,457 (€/000 316,513 at
Payables to consorzio Lotterie Nazionali consist of cash pooling for €/000
247,591 (€/000 129,346 at 12/31/2008) including interests for €/000 2 (€/000
125 at 12/31/2008), and collections that Lottomatica makes on behalf of
consorzio Lotterie Nazionali through its point of sale network for €/000
13,463 (€/000 1,336 at 12/31/2008);
Short-term debt, net
capital securities
750 Euro Bond
Swap Liability
Bank loans
Interest rate swap
Other
behalf of Lottomatica Italia Servizi for €/000 2,840 (€/000 8,636 at
12/31/2008);
12/31/2008);
holdings corporation.
Short term receivables (debt), net for €/000 177,971 (€/000 (156,225) at
12/31/2008) consist of:
cash and cash equivalents for €/000 375,164 (€/000 28,846 at 12/31/2008);
current financial assets for €/000 416,943 (€/000 228,767 at 12/31/2008);
Short term financial liabilities for €/000 614,269 (€/000 413,838 at 12/31/2008).
Short term payments on long term loans total €/000 78.812 (€/000 46.490 at
interest matured on the capital Securities for €/000 46,618;
short term payment due to Mediobanca as part of semi-annual interest
payments on Bond for €/000 29,924
P 199
2009 Annual Report
Interests accrued on new 750 Bond for €/000 3,147;
€/000 100,000. According to fair value hedge principles, this amount is
Short term payment LTO Revolving credit facility for €/000 22;
recorded in the equity statements net of the swap portion that is already
Short term Swap payment for €/000 (898).
expired.
Long term debt for the period ended December 31, 2009 totals €/000 1,532,949
33. Related Party Discloures
(€/000 1,133,880 at 12/31/2008) and consists of:
Lottomatica plays the operative role in the industry’s service sector, with
capital Securities for €/000 733,180 (€/000 730,525 at 12/31/2008) totaling
majority shares in the following companies:
effective debt of €/000 750,000 plus debt issuance costs for €/000 -26,557
CartaLIS Imel S.p.A. - Established by LIS - Lottomatica Italia Servizi S.p.A
(€/000 -26,557 at 12/31/2008) and accumulated amortizations for €/000 9,737
(holding 85% of share capital) and by Banca Sella S.p.A. (holding 15% of
(€/000 7,082 at 12/31/2008):
share capital) on September 12, 2005. Its main activity is to issue electronic
money through immediate conversion of funds received, as well as the
related and instrumental activities within the limits laid down by law,
capital securities
pursuant to art. 114-bis and ss. of the Legislative Decree n. 385/1993, and
related implementing provisions issued by the Bank of Italy, in accordance
Nominal value
Issuance costs
750,000
(26,557)
9,737
Net value at 12.31.2009
733,180
with the LIS business plan.
Consorzio Lotterie Nazionali - 63% owned by Lottomatica. On December 10,
2003 Lottomatica, Scientific Games International Inc., Arianna 2001 S.p.A.,
Olivetti Tecnost S.p.A (Tecnost Sistemi S.p.A after the merger) and Servizi in
750 Euro Bond, for €/000 741,719, The notes have a denomination per unit of
Rete S.p.A. established the consorzio Lotterie Nazionali which took over the
€750,000, a due date of December 5, 2016, an annual coupon rate of 5.375%,
Consorzio Lottomatica Giochi Sportivi (in liquidation) - 85% owned by
and an issue price of 99.504%. The 750 Euro Bond is represented net of
issuance costs (€3,720 for issuance, €/000 3,000 for commissions and other
fees):
national lottery contract signed October 14, 2003.
Lottomatica. On June 3, 2003, the consorzio Lottomatica Giochi Sportivi was
created between Lottomatica and Totobit Informatica Software e Sistemi
S.p.A., consorzio Totocom – Agenzie online, and Telcos S.p.A.. Its
headquarters are located in Rome and its objective is to manage the business
specified as “a license to assign activities and public functions regarding sports
750 Euro Bond
pools as well as any other games related to sporting events”. Operations
began with the first competition of Totocalcio (Soccer pools) on August 17,
Nominal value
Issuance costs
750,000
(8,281)
-
Net value at 12.31.2009
741,719
2003. The liquidation process of the consorzio Lottomatica Giochi Sportivi
will begin upon the approval of the FY2007 Annual Report. The sports pools
wagers will be transferred to the subsidiary Lottomatica Scommesse S.r.l. in
connection to the sports betting concession granted by AAMS.
€/000 56,390 from long term portion of the Swap Liability. Lottomatica signed
a company Swap contract with Mediobanca whereby Lottomatica will pay
semi annually to Mediobanca fixed interest payments on the Bonds that are
not converted at any interest payment date; the short term portion of the
financial liability regarding the Swap Liability totals €/000 56,390.
Interest rate swap for €/000 843. Relative to the two interest rate swap mark
to market operations completed before the end of the year for a total of
P 200
Labet S.r.l. - On June 25, 2009, Lottomatica Scommesse purchased 100% of
Labet.
Lottomatica Bingo S.r.l. - Established on July 7, 2008 by Lottomatica
Scommesse S.r.l. Its main activity is to organize, carry out, manage and accept
betting via bookmakers and/or totalizzators of any kind, accept sports pools
and/or other totalizzator games including “Bingo.”
Lottomatica International S.r.l. - owned 100% by Lottomatica as of June 15,
2007. Its main activity exclusively regards the acquisition of shares and
managing its own processing centers and through outsourcing, for the typical
participations in companies and other entities.
transaction activities of the online services offered offers transaction and
Lottomatica International Hungary KFT - owned 80% by Lottomatica
International S.r.l. and 20% by Lottomatica, as of August 28, 2007. Its main
activity regards the “Business and Management consulting”.
Lottomatica Italia Servizi S.p.A. - Wholly owned (100%) by Lottomatica,
execution services for the Group.
Toto Carovigno S.p.A. - Acquired on August 29. 2008 and wholly owned 100%
by Lottomatica Scommesse S.r.l., Toto carovigno is the owner of the TotoSì
brand and AAMS-authorized concessionaire with 1,100 horse race betting
providing services for citizens, businesses and sporting ticket services,
points of sale and 3,673 sports betting points of sale in Italy, Toto carovigno
Lottomatica Italia Servizi consolidated its position in the service industry with
is also a leader in the Italian online gaming market and was the first in Italy
the acquisition of the Totobit Group in December 2003.
to offer sports betting via telephone and online.
Lottomatica Scommesse S.r.l. - Established in 2006 and wholly (100%) owned
Totobit Informatica Software e Sistemi S.p.A. - 100% owned by the subsidiary
by Lottomatica. The company became operative in July 2007 in the fixed odds
Lottomatica Italia Servizi S.p.A. The company operates a network of multi-
betting sector after the awarding of the concession in 2006.
functional mini-terminals installed at outlets such as bars, betting collection
Lottomatica Sistemi S.p.A. - Established on December 10, 1999 and currently
points, gas stations, newsstands, etc.
wholly owned (100%) by Lottomatica. Lottomatica Sistemi S.p.A was created
TTS S.r.l. - 100% owned by Totobit Informatica Software e Sistemi S.p.A. It
to manage the centro di Elaborazione Multizona (Multi-Area Data Processing
develops and distributes the software product to process and develop gaming
center) of Naples and to provide technical and commercial assistance. On
system at bet collection points. It provides client with thorough
January 28, 2008 a new agreement between Lottomatica and Lottomatica
technical/system service, both by phone (through an in-house call center) and
Sistemi was formalized resulting in the transferring of the Data Processing
on site. It gathers subscription contracts throughout the territory for the
center and technical and commercial assistance areas to Rome under
services provided by the Parent company. Furthermore, in 2006 it signed under
Lottomatica and the transferring of the contact center management
contract Points of Sale that directly manage the sale of cellular top-ups.
activities and additional customer support services for betting and e-money
services to Lottomatica Sistemi;
Lottomatica Videolot Rete S.p.A. - 100% owned by Lottomatica. The company
LIS Finanziaria S.p.A. - 100% owned by the subsidiary Totobit Informatica
Software e Sistemi S.p.A., specifically established and registered with the
Financial Brokers Register (pursuant to Article 106 of TULB (Testo Unico delle
was established on February 1, 2005 to take over the concession from the
Leggi in materia bancaria e creditizia - consolidation Act of Banking and
temporary joint venture which it headed. On February 1, 2007 the
credit Laws).The company is responsible for managing the Lottomatica Group
Shareholders’ Meeting deliberated the change of name from “RTI Videolot
financial services. The utilities bill payment service was the first service to be
S.p.A.” to “Lottomatica Videolot Rete S.p.A.”.
fully operational.
L.S. Alpha S.r.l. - On December 5, 2008 Lottomatica Scommesse S.r.l. acquired
Europa Gestione S.r.l. - On June 4, 2009 Lottomatica Videolot Rete purchased
95% of the share capital of the company. L.S Alpha holds horse racing and
from Eurobet 100% of Europa Gestione S.r.l., owner of approximately 2,350
sports betting concessions.
gaming machines.
PCC Giochi e Servizi S.p.A. - The company is entirely (100%) owned by the
Tulipano S.r.l. - On June 12, 2009 Lottomatica Videolot Rete purchasedfrom
subsidiary Lottomatica Sistemi S.p.A. The objective of the company is to
Euromatica S.r.l. 100% of Tulipano, owner of 70 authorizations connected to
produce and supply specialized paper supports (betting forms, print-outs,
the Lottomatica Videolot Rete online network and has a temporary
travel tickets, betting and gaming slips). Its operating headquarters are
concession for the management of new slot machines.
located in Tito, a town in the district of Potenza.
SED Multitel S.r.l. - established on November 28, 2002. 100% owned by
Empoli Giochi S.r.l. - On December 29, 2009, Lottomatica Videolot Rete
purchased from Novarmatic Group S.r.l. 100% of Empoli Giochi
Lottomatica as of June 9, 2008 after acquiring the 80% owned by Totobit
Edrin Ltd. - English company established on November 3, 2008 and owned
Informatica S.p.A. The company operates in Italy through its Services center
100% by Lottomatica Scommesse. The company manages a gaming machine
and ensures the necessary technological support, by coordinating and
business.
P 201
2009 Annual Report
Invest Games S.A. - A company incorporated under Luxembourg law,
GTECH Holdings Corporation - An American company located in Delaware,
established on December 27, 2005, and is entirely owned (100%) by
established in January 2006 and wholly owned (100%) by Lottomatica. It is
Lottomatica. Its organization is connected with the acquisition of the GTEch
controlled 100% by Invet Games S.A: and its established is relative to the
Group.
acquisition of the GTEch Group.
Atronic Americas LLS, GTECH German Holdings Co. GmbH, Spielo USA Inc.,
Spielo Manufacturing ULC - As of July 1, 2009 Lottomatica Group S.p.A. owns
The related party disclosures of Lottomatica as of December 31, 2009 are
100% of Atronic Americas LLc, GTEch German holdings corporation Gmbh,
detailed below:
Spielo USA Incorporated and Spielo Manufacturing ULc.
P 202
Related parties - comprehensive income statement
Subsidiaries
Nature of transaction
Other revenues
Labet S.r.l.
LS Alpha S.r.l.
De Agostini Editore S.p.A.
SED Multitel S.r.l.
GTEch corporation
Administrative and professional services
Administrative. professional and back office services
cONI services
Administrative services
Guarantees and cash pooling operations
Guarantees
AD Magnolia emoluments
Total Other reserves
Financial income
SED Multitel S.r.l.
GTEch corporation
GTEch holdings
Interest incomes on cash pooling
Interest incomes on financing
Unrealized foreign exchange gain
Total Financial income
Raw material, services and other costs
SED Multitel S.r.l.
TTS srl
De Agostini S.p.A.
De Agostini Periodoci S.p.A.
GTEch corporation
Advertisement and professional services
contribution
Raw materials
Total Raw material, services and other costs
Financial expenses
SED Multitel S.r.l.
Invest Game S.A.
Lottomatica International
cirmatica Gaming S.A.
GTEch holdings
GTEch holdings
Total Financial expenses
Interest expences on cash pooling
Interest expences on cash pooling and financing
Interest expences on financing
Financial expenses
Unrealized foreign exchange loss
Amuont
2009
2008
4,029
3,835
66,385
5,182
10
1,338
291
6,625
16
74
25
2,963
1,844
516
457
4,141
3,819
65,925
6
4,583
20
5
1,229
164
4,432
10
79
536
277
93,590
85,226
481
908
5
2,966
140
2,117
3
355
5,365
1,102
5,255
38
3,379
126
4,515
310
363
3,165
12,340
18,253
338
22,177
5,524
28,578
6,192
1,060
72
12
14
498
5,048
5
-
383
21,657
541
1004
5,647
1,021
648
68
101
2,444
61
4,999
69,518
38,574
848
1,255
28
106
44
561
266
256
42
2,440
224
1,021
3,723
708
127
188
202
2,041
1001
91
50
62
6,867
8,193
% on
2009
4.30
4.10
70.93
5.54
0.01
1.43
0.31
7.08
0.02
0.08
0.03
3.17
1.97
0.55
0.49
3.90
7.36
0.04
24.04
1.13
17.16
0.02
2.88
43.48
0.49
31.90
7.95
41.11
8.91
1.52
0.10
0.02
0.02
0
7.26
0.01
-
11.96
11.70
0.39
1.49
0.62
7.91
3.75
3.61
0.59
34.41
3,16
14.40
P 203
2009 Annual Report
Related parties - Statement of financial position
Amuont
2009
2008
(thousands of euro)
Subsidiaries
Nature of transaction
Trade receivables and other receivables
TTS S.r.l.
De Agostini S.p.A.
GTEch corporation
SED Multitel S.r.l.
LS Alpha S.r.l.
Labet S.r.l.
Fees
cost charge-back
Guarantees and cash pooling operations
Intercompany VAT
Advances
Advances on payments
2,255
2,103
49,832
2,600
4
5
798
12,041
1,316
244
930
2,888
6
20
4,432
130
2,218
2,075
71,276
4
2,733
1,017
3
2
851
229
1,046
275
545
132
6,748
2,480
3
3,243
2.83%
2.64%
62.60%
3.27%
0.01%
0.01%
1.00%
15.13%
1.65%
0.31%
1.17%
3.63%
0.01%
0.03%
5.57%
0.16%
79,604
94,880
21,518
1,011
301
220,225
24,446
104,369
45,074
35
19,956
5,255
318
94,444
1,023
104,278
3,803
5.16%
0.24%
0.07%
52.82%
5.86%
25.03%
10.81%
416,944
229,112
61
11,131
5
72
8,555
727
6,013
548
9,683
3,415
5,307
51
8,114
45
61
943
1,177
2,876
527
3
3,485
415
4,288
45,517
21,985
125,845
261,798
81,009
1
28
1,021
6,756
11,269
256
47,474
-
116,370
129,346
4
612
3,412
6,838
6,058
47,137
6,671
535,457
316,448
Total Trade receivables and other receivables
GTEch corporation
Other services
cash pooling and interest incomes on financing
Interest incomes on financing and cash polling
Intercompany financing and interest incomes
cash pooling and interest incomes on financing
cash pooling and interest incomes
cash pooling and interest incomes
Guarantees
Total Current financial assets
Trade payables and other payables
TTS srl
SED Multitel S.r.l.
GTEch corporation
DEA Factor
De Agostini S.p.A.
Administrative. professional and back office
Losses coverage
Raw material and administrative services
Advances on payment
credit transfer
Income tax payables
Total Trade payables and other trades
consorzio Lottoerie Nazionali
GTEch corporation
SED Multitel S.r.l.
INVEST GAME S.A.
Total Short term borrowings
P 204
cash
cash
cash
cash
cash
cash
cash
cash
cash
cash
cash
cash
pooling
pooling
pooling
pooling
pooling
pooling
pooling
pooling
pooling
pooling
pooling
pooling
and
and
and
and
and
and
and
and
and
and
and
and
interest
interest
interest
interest
interest
interest
interest
interest
interest
interest
interest
interest
expenses
expenses
expenses
expenses
expenses
expenses
expenses
expenses
expenses
expenses
expenses
expenses
services
services
services
services
services
% on
2009
0.13%
24.45%
0.01%
0.16%
18.80%
1.60%
13.21%
1.20%
21.27%
7.50%
11.66%
23.50%
48.89%
15.13%
0.01%
0.19%
1.26%
2.10%
0.05%
8.87%
-
All operations engaged in with the related parties, including the intra-group
Lottomatica had reached said conclusion as a result of the Ministerial Decree
operations, are executed at terms and conditions that are consistent with the
dated November 8, 1993 that envisaged the concession to be enforced only
market and refer to mutual administrative, financial and organizational
subject to the condition that the EU commission deem the concession not to be
rendered services.
in violation of the provisions of the Treaty of Rome.
There are not any financial guarantees, granted or received, for payables or
receivables with related parties.
For the period ended December 31, 2009 the company did not register any
allowance for doubtful accounts accrual on amounts due from related parties.
The Arbitration Award issued by the Board of Arbitrators accepted Lottomatica’s
request by lodging its award on August 1, 2005. AAMS challenged the Arbitration
Award before the Rome court of Appeal (pursuant to art. 828 of the Italian code of
civil procedure) by serving a deed to defending counsel on December 15, 2005, and
to Lottomatica on December 30, 2005. The first hearing was held on April 20, 2006,
34. Guarantees
The nature of the Lottomatica business requires the issuance of various bank
guarantees. The beneficiaries of the bank guarantees are for the most part
and was adjourned to January 28, 2010 to hear the conclusions.
In the interim, on January 18, 2008, upon AAMS’ request to advance said
hearing, the court of Appeal advanced the hearing date to January 15, 2009.
the AAMS as well as the services and utilities companies that use the Group’s
On January 15, 2009 Lottomatica appeared before the court of Appeal and
network to collect revenues. Lottomatica negotiates the terms and conditions
requested that the file be suspended on the grounds that the same file is
of the guarantee on behalf of the all Lottomatica Group companies when it
pending ruling before the TAR (Regional Administrative court) of Lazio.
is necessary to serve a guarantee to a third party. The costs related to the
Lottomatica specified in its response to the charges brought forth by AAMS that
issuance are however transferred to the subsidiary benefiting of the
it is of the opinion that they are groundless.
guarantee.
The bank guarantees requested by Lottomatica in December 2009 total
At the July 2, 2009 hearing, the court of Appeal deferred the hearing to
September 26, 2011.
approximately €/000 463,564 (€/000 383.312 at 12/31/2008). A significant amount
of the guarantees, €/000 286,060 (€/000 248.327 at 12/31/2008), are stipulated to
Stanley International Betting/AAMS/Lottomatica Appeal
service companies, among which telephone operators and AAMS, for €/000
On June 18, 2007, Stanley International Betting Limited filed an appeal before
171,602 (€/000 123.336 at 12/31/2008).
the TAR of Lazio (Regional Administrative court) to AAMS and Lottomatica
Regarding the new Scratch & Win concession in Italy, Lottomatica
guaranteed €/000 73,600 to AAMS.
asking for the cancellation and/or disapplication of the Lotto Game concession
deeds because in violation of the rules regarding the tacit renewal of public
contracts, as well as the April 19, 2007 notice with which AAMS rejected the
35. Litigations
plaintiff’s motion to jointly operate the Lotto Game on the assumption that the
concession is still effective for Lottomatica. The hearing to discuss the case at
1. Lotto Game Concession: Lottomatica/AAMS Arbitration – Stanley
International Betting Limited Appeal – Sisal Appeal
issue has been set to March 10, 2010.
The counsels assisting Lottomatica are of the opinion that the challenge
initiated by Stanley is groundless.
Arbitration Lottomatica/AAMS
Pursuant to the arbitration clause set out in article 30 of the Lotto concession,
Sisal/AAMS/Lottomatica Appeal
Lottomatica initiated an arbitration proceeding to ascertain the effective initial
On July 13, 2007 Sisal filed with AAMS and Lottomatica an appeal under article
date of said concession. Lottomatica asked the Board of Arbitrators to ascertain
25 of Law no. 241 of August 7, 1990, before the TAR of Lazio requesting that
and state that the initial starting date of the Lotto concession was June 8, 1998
their right to access documents relating to the awarding of the Lotto
(date in which the European commission in Brussels was notified that the
concession, the subsequent extensions and/or renewals, the AAMS - Lottomatica
infringement procedure no. 91/0619 was closed) and that, as a result, the final
arbitration award and the correspondence between AAMS and the European
expiration date of the Lotto concession is June 8, 2016.
commission be ascertained.
P 205
2009 Annual Report
Sisal argued to have learned only in recent months of the arbitration award
the administrative proceedings before the TAR of Lazio. In addition, Ticket One
setting the expiration date for the Lotto concession to 2016 in favor of
requested €10 million in damages for alleged unfair competition and illegal use
Lottomatica, and to have then filed with AAMS a formal request for access
of the network by Lottomatica and LIS, and an order enjoining them from
aimed at obtaining copies of the aforementioned documents on May 11, 2007.
committing any further acts of unfair competition and, alternatively, access to
AAMS never responded to said request.
Lottomatica’s electronic network.
Lottomatica duly appeared at the October 10, 2007 hearing, during which
Lottomatica and LIS responded to both lawsuits and, since Ticket One had
Sisal stated that it was not interested in pursuing the appeal anymore due to
filed the same claims with two different courts, filed an appeal with the
another challenge it was about to serve.
Supreme court sitting in joint session, requesting a preliminary proceeding to
On October 12, 2007 Sisal served an appeal on AAMS and Lottomatica
resolve the issue of jurisdiction and the suspension of the proceedings.
before the TAR of Lazio for the annulment of the provision indicated in the July
At the hearing on June 24, 2004, the TAR of Lazio accepted the request filed
9, 2007 notice setting out that AAMS ignored the request made by plaintiff for
by Lottomatica and Lottomatica Italia Servizi and suspended the proceeding,
the concession relating to the Lotto game operation, as well as of any prior,
arranging for the documents to be sent to the Supreme court of cassation. The
consequent deed relating and/or connected to the aforementioned AAMS
Supreme court declared Lottomatica and LIS’s appeal to be inadmissible on
notice and, in particular, of the Ministerial Decree dated March 17, 1993 and any
February 9, 2006. As a result of the Supreme court’s declaration, Ticket One
subsequent and related deed including the renewal of the Lotto concession in
motioned for a hearing set for October 28, 2009 during which the TAR of Lazio
favor of Lottomatica. Stanley has intervened in the appeal in support of Sisal.
closed the presentation of the arguments by the parties. To date the TAR of
Lottomatica has made an appearance in the case at issue. The hearing to discuss
Lazio has not issued a ruling.
the case at issue has been set to March 10, 2010.
On November 19, 2007 the TAR of Lazio ordered AAMS to lodge the
documents relating to the awarding of the Lotto concession within 60 days.
According to the opinion of Lottomatica’s counsels the request to set the
hearing brought forth by Ticket One is insufficient and therefore it is not
possible to proceed.
Specifically, AAMS must lodge the following: assignment deeds and the renewal
As for the procedure before the court of Appeal, the civil Judge after
and/or extension of the concession to the prosecuting company, a copy of the
reserving on the request of suspension of the proceeding raised by Lottomatica
arbitration award of AAMS vs. Lottomatica, and the deeds issued by the
and LIS, by order dated July 28, 2004 rejected it and postponed the hearing to
European community regarding the matter in issue.
June 21, 2006. At this hearing, where admitted witnesses were to be deposed,
counsels are of the opinion that the challenge brought forth by Sisal is
groundless.
the Judge declared a suspension because of the merger of Lottomatica into
NewGames S.p.A. On June 23, 2006, Ticket One presented a petition to revoke
the suspension decision. On October 27, 2006, the court of Rome revoked the
2. Ticket One S.P.A. Litigation
decision whereby the action had come to a halt and postponed the hearing to
On August 12, 2003, Ticket One S.p.A. (“Ticket One”), which operates in the
January 26, 2007 for the examination of witnesses.
services business sector primarily in the ticketing services area, filed a suit with
The testimonies of Elisabetta cragnotti (former SS Lazio soccer team
the TAR of Lazio against Lottomatica and Lottomatica Italia Servizi S.p.A (LIS) to
manager) and Fabrizio conti (Milan Indoor Tennis championship organizer)
obtain, among other things, an order requiring Lottomatica to offer its network
were heard on January 26, 2007. At the July 5, 2007 hearing the Judge, having
to third parties under the same conditions as those offered to the controlled
taken note of Ticket One’s waiver to depose additional witnesses, upon the
company Lottomatica Italia Servizi .
parties’ request adjourned the case to the December 18, 2008 hearing for
Before serving the appeal dated March 12, 2003, Ticket One had asked
Lottomatica for the right to use its network. Lottomatica rejected Ticket One’s
request.
On December 3, 2003, Ticket One also commenced civil proceedings before
the court of Appeal of Rome, substantially repeating the same claims made in
P 206
stating his conclusions. As of the December 18, 2008 hearing, the Judge has
closed the presentation of the arguments by the parties.
The Judge issued the ruling on June 25 – August 4, 2009 stating that
Lottomatica has no obligation to allow third parties use of its network and
therefore dismissing all charges brought forth by Ticket One.
4. Summons to Formula Giochi Shareholders
It was noted how, in the merit, the €0.5 million settlement between Sisal and
On October 26, 2005, the companies Karissa holding S.A., cored International
Formula Giochi against claims by the latter amounting to €34 million provided
S.A., Mr. Massimo Maci and shareholders of Formula Giochi S.p.A. in liquidation
an idea of Formula Giochi’s claims, so much so that it attributed the failure of
(operating in the gaming collection and wagering market) served summons on
the third pole to Sisal, who had a Director, in common with Formula Giochi. Such
Lottomatica and Sisal S.p.A., to appear - on January 30, 2006- before the court
circumstances do not exist for Lottomatica, which had no relations with Sisal
of Appeal of Rome.
with regard to Formula Giochi (as shown by the Authority order), nor with
The plaintiffs requested the assessment of the liability of Lottomatica and Sisal
Formula Giochi itself.
for engaging in the anticompetitive conduct enjoined by the order of the Italian
On November 29, 2006, the court of Appeals, accepting the request made
Antitrust Authority of November 23, 2004, which conduct, the plaintiffs allege, was
by the opposing party, designated Angelo Novellino as expert witness in order
responsible for (i) their inability to sell their stake (for €3.0 million) and (ii) Formula
to estimate any damages. The hearing was postponed to February 19, 2007 for
Giochi S.p.A.’s inability to enter the gaming and wagering market, which caused
the swearing and queries formulation.
the business value of Formula Giochi to decrease by €34.2 million.
The plaintiffs also requested, that Lottomatica and Sisal be ordered, jointly
and severally, to pay directly to the plaintiffs’ damages totaling €37.2 million in
the aggregate.
On January 10, 2006 Lottomatica presented before the court of Appeal that
apart from a number of prejudicial issues concerning, inter alia, plaintiff
After hearing the expert witness’s testimony, the court of Appeals admitted
the following queries:
a) the profits which Formula Giochi would have earned if it had had access to
the gaming market according to conservative criteria which took into
account the company’s size, its ability to penetrate the market and its
investment capacities;
legitimacy, the documents of the proceedings initiated by the Italian Antitrust
b) whether Formula Giochi had suffered any damages from the inability to
do not indicate that Lottomatica’s conduct was prejudicial and detrimental to
present itself as an operator other than Sisal and Lottomatica in the Italian
Formula Giochi. conversely, the documents in the trial dossier, literally
gaming market;
transposed in the Authority order to close the case, and in particular, the
c) if the response to point 2 was positive, whether it was possible to quantify
statements made during the November 10, 2003 hearing by the managing
the damages suffered by Formula Giochi for having missed said opportunity,
director of Formula Giochi, show that “the dissolution of the recently
referring to valid economic parameters and according to rational methods
established third pole” derives from causes that are not related to Lottomatica.
leading to statistically plausible conclusions, and a prudent evaluation.
Lottomatica duly appeared on January 10, 2006. Formula Giochi S.p.A.
appeared through its receiver at the January 30, 2006 hearing. At the February
The expert opinion presented on February 21, 2008 included:
6, 2006 hearing the Appeal court granted the parties 30 days to submit their
“the financial reports of Formula Giochi and its subsidiaries demonstrate that
remarks. By order of March 15, 2006 the court of Appeal granted the parties 30
at the launch of the strategic plan in March 2003 the group did not generate
days to file their briefs as well as to state and amend their claims, objections and
revenues and was in a liquidity crisis which resulted in serious financial
conclusions already made in addition to 30 more days for their replies.
tensions”, “the group was in need of an immediate injection of over €4
In a brief dated March 31, 2006, Karissa and others, by presenting their
million only to cover the losses incurred in 2002 and was therefore not able
motions consequent to the occurred appearance of Formula Giochi S.p.A. have
to independently undertake an operation in the ex coni gaming market”.
acknowledged the entrance into a settlement agreement between the same
The expert witness further includes that based on the economic information
Formula Giochi and Sisal to settle the lawsuit pending between them. This
supplied by Lottomatica regarding the management of ex coni games, the
agreement envisaged payment of €0.5 million to Formula Giochi.
Formula Giochi group would not have generated any profits if it had been
In a brief duly filed by Lottomatica, Lottomatica asserted that Karissa
granted free access to the ex coni gaming market;
holding S.A.’s active legitimacy no longer existed following the appearance of
“the absence of Formula Giochi from the ex coni games tender resulted from
Formula Giochi, as well as the non-admissibility of the action by Formula Giochi,
the group’s financial difficulties, the lack of authorization of the strategic
to be added to the already-formulated preliminary and merit objections.
plan and the lack of financial support from the shareholders”.
P 207
2009 Annual Report
The expert witness included that Lottomatica and Sisal did not cause any
European community rules and principles with regards to freedom of
damage to Formula Giochi and that it was the company’s financial and economic
establishment and service provision.
difficulties which prevented the company from participating in the ex cONI
games tender.
A similar appeal, which however has not been served on Lottomatica but to
AAMS and Sisal, was filed by Index Group.
Due to the extremely favorable outcome of the expert opinion, Lottomatica
On November 21, 2007, the TAR of Lazio declared the appeal brought forth
and its legal representatives retained that it was not necessary to deposit their
by Stanley to be inadmissible in part and rejected it in part upon merits. Stanley
reasoning regarding the expert opinion.
contested the TAR of Lazio’s ruling before the council of State, presenting again
At the June 9, 2008 hearing the court of Appeals reserved any observations
regarding some objections presented by Formula Giochi pertaining to the expert
the same arguments as presented before the TAR and requested the suspension
of the tender deeds because near to the conclusion.
witness testimony. The court of Appeals claimed that the objections should be
On January 26, 2008, upon the completion of opening of the envelopes
however included during the decision-making process. The closing hearing has
containing the economic offers, the tender was awarded to Sisal S.p.A. On
been set to October 4, 2010.
February 11, 2008 Stanley appealed the awarding procedure.
5. Network Tender Appeal
claimed the reasons set forth by said appeal to be inadmissible.
On July 8, 2008 the council of State denied the appeal issued by Stanley and
On October 27, 2005, the joint venture composed of Albacom-Fastweb served an
appeal on Lottomatica before the TAR of Lazio challenging the tender process
relating to, and seeking the annulment, after suspension, of a contract for data
The award of the tender was also challenged by Snai who claimed of errors
in the valuations carried out by the Tender Award commission.
On June 6, 2008 Lottomatica filed an appeal with the TAR of Lazio
transmission services on the private Lotto network operated by Lottomatica in favor
challenging
of Telecom Italia; and requested that Lottomatica be sentenced to pay damages.
2008/12798/giochi/Ena) in which Lottomatica was notified of the definitive
Lottomatica filed an appearance requesting that the claims made by
plaintiff be rejected.
At the hearing of November 23, 2005, the JV Albacom-Fastweb withdrew its
the
April
2,
2008
AAMS
communication
(protocol
no.
awarding of the tender to Sisal. With said appeal, Lottomatica challenged the
offer presented by Sisal. Stanley included its statement in the appeal brought
forth by Lottomatica. Snai has filled its own separate appeal.
suspension request. The hearing was scheduled for October 11, 2006, at which
At the October 8, 2008 hearing, the TAR of Lazio postponed the negotiation for
Lottomatica filed a motion to suspend the hearing due to the merger of
the preliminary motion brought forth by Lottomatica to October 22, 2008 in order
Lottomatica into NewGames S.p.A. The appeal was sent for a decision
to obtain all necessary deeds relating to the awarding procedure (the discussion of
specifically highlighting the cause of the suspension, on which the TAR of Lazio
the same preliminary motion brought forth by Snai was set for the same date).
reserved to decide. On October 11, 2006 the TAR of Lazio decided to interrupt
after taking note of the merger of Lottomatica into NewGames S.p.A.
On January 9, 2007 the RTI Albacom – Fastweb notified resumption of the
proceeding. According to the legal counsel of Lottomatica, the resumption of
the appeal was notified late. Furthermore, on November 4, 2008 Fastweb
The award of the tender to Sisal was also challenged by Snai on the grounds
of erroneous evaluations carried out by the Awarding commission. The TAR of
Lazio issued a court order on June 4, 2008 requesting the tender documentation
from AAMS.
On October 22, 2008 the TAR of Lazio issued a court order granting
notified its withdrawal from the appeal.
Lottomatica and Snai the opportunity to examine all tender deeds.
5. SUPERENALOTTO Tender Appeal
7, 2009 which constituted a specific committee to control the anomalies in the
On October 24, 2007, Stanley International Betting Limited served an appeal on
offer presented by Sisal. Said committee communicated the conclusion of its
AAMS, Lottomatica, Sisal and Snai before the TAR of Lazio asking for the
review and evaluation of the offer in question on May 25, 2009. In addition
annulment, upon measure of suspension, of the deeds of the tender launched
AAMS notified Lottomatica on June 23, 2009 of the Decree of June 10, 2009
by AAMS on June 29, 2007 for granting the exclusive concession for operating
with which the final review of the tender award to Sisal was completed with a
SuperEnalotto. Stanley believes that the tender deeds are in conflict with
positive outcome.
On April 16, 2009 AAMS sent Lottomatica an official copy of Decree of April
P 208
AAMS presented the said conclusions regarding the offer presented by Sisal
at the May 27, 2009 hearing. SNAI has already submitted additional claims
As of yet, Aycons has not requested to set a merit hearing and it can
therefore be deduced that the plaintiff will not continue the case.
against the above mentioned evaluation of the Sisal offer. Lottomatica is doing
the same.
36. Financial risk management objectives and policies
The April 16, 2009 appeal brought forth by Lottomatica requested the TAR
The company’s principal financial instruments, other than derivatives, are
of Lazio to ascertain its right to review the administrative documents requested
comprised of debt and cash and cash equivalents. The main purpose of these
on February 24 and March 19, 2009 (Sisal and points of sale contract and AAMS
financial instruments is to fund the capital needs of the Group’s operations. We
authorization, as well as documentation regarding AAMS review). AAMS denied
have various other financial assets and liabilities, such as trade receivables and
Lottomatica access to said documents on March 20, 2009. The ruling issued on
trade payables, which arise directly from operations. The primary risk inherent
June 10, 2009 by the TAR of Lazio admitted the appeal presented by Lottomatica
in our financial instruments is the market risk arising from adverse changes in
and ordered AAMS to grant Lottomatica access to said documents.
interest rates and foreign currency exchange rates. The company is not exposed
significantly in foreign currency and is therefore not subject to foreign exchange
6. AAMS Tender for the Awarding of Sporting Rights
risk.
On February 26, 2007, Aycons (Società consortile a Responsabilità Limitata),
served a notice of appeal to the Regional Administrative Tribunal (TAR) of Lazio
Credit risk
challenging the Decree of December 21, 2006, published in the Official Journal
The company’s primary credit risk is derived from cash and trade accounts
of the Italian Republic (GURI) on December 28, 2006, which finally awarded the
receivable balances. We maintain cash deposits and trade with only recognized,
point of sale rights for sporting games as well the activation of the online
creditworthy third parties. We evaluate the collectibility of trade accounts and
sporting game network.
sales-type lease receivables on a customer-by-customer basis and we believe our
Lottomatica, on behalf of a company to be incorporated, was awarded the
reserves are adequate. A majority of our trade accounts receivable are from
following: the concession of the gaming rights according to article 38 of the
government lottery entities from which we have historically experienced
Legislative Decree n.223/06, the sale rights according to law n. 248 of August 4,
insignificant write-offs. Trade accounts receivable are reported net of
2006 and the rights to activate the online sporting game network.
allowances for doubtful accounts and liquidated damages. Allowances for
On April 16, 2007, through a filing reporting additional reasons, Aycons
doubtful accounts are generally recorded when there is objective evidence we
served a notice to Lottomatica requesting the suspension of (i) the notice of
will not be able to collect the receivable. Bad debts are written off when
February 23, 2007 with which AAMS communicated to Lottomatica Scommesse
identified.
the final award of the concession and (ii) the agreement for the concession of
the public games as awarded to Lottomatica Scommesse.
With respect to credit risk arising from the other financial assets which
comprise cash, available-for-sale financial assets, and certain derivative
Aycons claims that Lottomatica, as sole stockholder of the company to be
instruments, our exposure to credit risk arises from default of the counterparty,
established, in violation of article 4.2 of the tender, still held 35% of the
with a maximum exposure equal to the carrying amount of these instruments.
cogetech share capital on the expiry date for the presentation of the tender
We manage our exposure to counterparty credit risk by entering into financial
participation application (October 20, 2006) through its subsidiary GTEch.
instruments with major, financially sound counterparties with high-grade credit
On March 16, 2007 Lottomatica appeared before the TAR of Lazio denying
ratings, and by limiting exposure to any one counterparty.
Aycons and submitted document demonstrating that GTEch (100% owed by
Lottomatica), further to authorization from AAMS, had sold its share of
Past due financial assets
cogetech on October 16, 2006 and therefore before the said deadline of
The following is an analysis of the company’s past due financial assets which are
October 20, 2006. As result, when Lottomatica presented its application to
comprised entirely of trade and other receivables and net of related allowance
participate in the tender, there was no connection with and/or control of
for doubtful accounts.
cogetech by Lottomatica.
P 209
2009 Annual Report
Past due trade receivables
changes in the allowance for doubtful account
December 31, 2009
€
%
December 31, 2008
€
%
December
2009
December
2008
Balance at the beginning of the year
Reclassifications
Provisions
Utilization
872
609
(183)
2,243
65
1,436)
Balance at the end of the year
1,298
872
current
Past due
1-30 days
31-60 days
61-90 days
Over 90 days
Total Trade and other receivables
11,811
99.8
9,864
99.5
20
0.2
43
4
-
0.4
-
20
0.2
47
0.5
11,831
100.0
9,911
100.0
Liquidity risk
The company’s primary liquidity risk is derived from required debt service on our
Variations in the allowance for doubtful accounts are reported below
debt and on-going working capital needs. The company’s objective in managing
(thousands of Euros):
this risk is to maintain adequate liquidity and flexibility through the use of cash
generated by operating activities, bank overdrafts, and bank loans. We believe
our ability to generate excess cash from operations to reinvest in our business is
changes in the allowance for doubtful account
one of our fundamental financial strengths and combined with our committed
December
2009
December
2008
Balance at the beginning of the year
Provision
Reclassifications
Utilizations
1.754
68
(609)
-
1.670
1.184
(1.100)
Balance at the end of the year
1.213
1.754
borrowing capacity, we expect to meet our financial obligations and operating
needs in the foreseeable future. We expect to use cash generated primarily from
operating activities to meet contractual obligations and to pay dividends. Our
growth is expected to be financed through a combination of cash generated
from operating activities, existing sources of committed liquidity, access to
capital markets, and other sources of capital. Our corporate debt ratings of Baa3
from Moody’s and BBB- from Standard and Poor’s contribute to our ability to
Past due financial assets that refer entirely to other current assets are reported
below (thousands of Euros):
access capital markets at attractive prices, therefore, we do not believe the
company is exposed to a significant concentration of liquidity risk.
Lottomatica’s Liquidity Policy considers the maturity of both its financial
investments and assets and projected cash flows from operations. The objective
Past due other receivables
current
Past due
1-30 days
31-60 days
61-90 days
Over 90 days
Total Other receivables
is to maintain a balance between continuity of funding and flexibility. This
December 31, 2009
€
%
December 31, 2008
€
%
policy measures the “risk dimensions” according to the following metrics:
expiration (never more than 18 months), minimum credit ratings (P-2/A-2/F-2,
228
82.0
-
-
50
18.0
827
100.0
instruments are specifically outlined in the policy.
50
18.0
827
100.0
techniques were used to mitigate the risks associated with changes in interest
278
100.0
827
100.0
A3/A-/A-), and country (Euro area, Switzerland, UK, USA). Authorized
In 2006, Lottomatica had interest rate exposure relating to planned
financing activities in connection with the GTEch acquisition. Various
rates including interest rate swap option agreements. The company’s financial
management strategy includes a mix of fixed and variable rate debt
Movements in the allowance for doubtful accounts for the year (thousands of
Euros):
instruments.
The following tables set out the contractual maturities of the company’s
financial liabilities:
P 210
contractual maturities
(thousands of euro)
Fixed rate
capital Securities
750 Euro Bond
Swap Liability
Floating rate
Lottomatica Revolving credit Facility
Within 1 year
1-2 years
2-3 years
3-4 years
More than 4 years
Total
46,618
3,147
30,625
30,625
30,625
-
750,000
750,000
-
796,618
753,147
91,875
80,390
30,625
30,625
1,500,000
1,641,640
22
-
-
-
-
22
-
-
-
22
1,500,000
1,641,662
22
Fixed rate
capital Securities
Floating rate
Lottomatica Term Loan Facility
Lottomatica Revolving credit Facility
80,412
30,625
30,625
46,491
-
-
-
750,000
796,491
46,491
-
-
-
750,000
796,491
601
95
-
132,000
-
132,000
50,000
96,000
-
360,601
50,095
696
-
132,000
182,000
96,000
410,696
47,187
-
132,000
182,000
846,000
1,207,187
Market risk
capital management
The primary goal of the company’s capital management strategy is to ensure
Interest rate market risk
strong credit ratings and healthy financial ratios in order to support its business
The relevant differences between long and short term interest rates result in an
while maximizing corporate value and reducing the company’s financial risks.
interesting opportunity which the company has decided to take advantage of
We consider all equity and debt to be managed capital of the Group.
by shifting part of short term debt portions through interest rate swap
The company manages its capital structure and makes adjustments based on
operations. The €/000 100,000 contracts “swap” part of the company’s debt
long term strategy decisions in light of changes in economic conditions.
from the issuance of the €750 million Bond (Notes) from a fixed interest rate to
Additionally, the company seeks to preserve an optimal weighted average cost
a variable interest rate plus spread(company credit risk measure). As a result of
of capital and maintain sufficient financial flexibility to pursue growth
this operation, the company has changed €100 million of its debt from a fixed
opportunities. No changes have been made in the objectives, policies, or
to a variable interest rate (EURIBOR), taking advantage of the exceptionally low
processes.
interest rates without excessively increasing its risk. Market interest rates are not
expected to increase in the short term. The management of the interest rate
Fair value hedges
market risk is nevertheless dynamic and can be adjusted at any time rates begin
At December 31, 2009, the Group held €100 million notional amount of interest
to increase significantly.
rate swaps (“swaps”) with an aggregate fair value of (€0.7) million, which were
designated as hedges of fixed interest rates on the €750 million of senior notes
Foreign currency exchange rate risk
due 2016 (the “Notes”). These swaps effectively convert €100 million of the
The company is not exposed to foreign currency exchange rate risk.
Notes fixed interest rate debt to variable rate debt. Under the terms of these
swaps, the Group is required to make variable rate interest payments based on
P 211
2009 Annual Report
a 6 month floating Euribor plus a flat spread rate, collectively ranging between
Operating lease
3.263% and 3.276% while bank counterparties are bound by contract to carry
out fixed payments for Lottomatica Group S.p.A. on a fixed rate of 5.375%. The
Euribor rate resets on a semi-annual basis, but settlement occurs annually.
Because these swaps convert fixed rate debt to variable rate debt they are
considered fair value hedges. With fair value hedges, both the swaps and the
Not later than one year
Later than one year and not later than five years
Later than five years
hedged item (the Notes) are recorded at fair value, with the offset being
December 31,
2009
2008
8,388
22,707
-
5,717
13,294
183
31,096
19,194
recorded in interest expense. During 2009, we recorded a swap unrealized loss
of €0.7 million with an offsetting debt unrealized gain of €0.9 million, with the
difference of €0.2 million recorded as a reduction to interest expense.
The Group did not have any fair value hedges as of December 31, 2008.
Executive management benefits
(euro)
37. Leases
Operating Leases
The company has leased from rental costs to provide various maturities until
2015. here are the fees for future minimum operating lease. There are no
restrictions placed upon us by entering into these leases.
Future minimum lease payments for operating leases are as follows:
P 212
Short-term benefits
Retirement benefits and post-employment assistance
Staff Severance Fund benefits
12.31.2009 12.31.2008
4,898,409
153,872
-
4,468,305
140,859
-
Management Stock Options Plans (Article 78 of Issuing Regulations - chart 2 Exibit 3c)
Outstandings stock options
at the beginning of the period
(January 1, 2009) (granted without
rights cancelled and without
executions in the previous years)
New strike
Strike
price
Number
price
(applied
stock
as the
from
options regulation June 2006)*
Stock Option 2005-2010
Managing Director Plan
Managers Plan
Managers Plan
Managers Plan
Managers Plan
Top Managers Plan (*)
Total
Nr stock
Rights
options granted cancelled
during the period (December
(December 2008)
2008)
Outstandings stock
options at the end of
the period (12.31.2009)
(s.o. vested plans
2005-2010 granted
2007-2015 and
2008-2016) without
executions during
the period
Executions
during the period
(December 2008)
Number
stock
options
Strike
price
Number
stock
options
Number
stock
options
Strike
price
Number
stock
options
Strike
price
Number
stock
options
Strike
price
95,336
26.47
23.1681
-
-
-
-
-
95,336
23.1681
95,336
23.1681
203,120
26.47
23.1681
-
-
11,840
-
-
191,280
23.1681
191,280
23.1681
160,000
30.40
-
-
-
-
-
-
160,000
30.40
-
393,200
30.40
-
-
-
7,200
-
-
386,000
30.40
-
748,365
20.29
-
-
-
19,170
-
-
729,195
20.29
-
237,958
20.29
-
-
-
-
-
-
237,958
20.29
-
-
-
-
316,875
14.03
5,000
-
-
311,875
14.03
-
-
-
-
702,778
14.03
-
-
-
702,778
14.03
-
23.8003
1,019,653
14.03
43,210
-
2,814,422
20.2876
286,616
1,837,979
Weighted
average
exercise
price
(*)
Number stock
options exercitable
Weighted
average
exercise
price
23.1681
Weighted
average
exercise
price
Resolution of Board of Directors (date 04/27/2006) and after capital stock increased established by Board of Directors (date 05/18/2006)
P 213
2009 Annual Report
Retention plans and performance share plans December 31, 2009
Outstanding shares
at the beginning
of the period
(1 Jan 2009) *
Nr. dividends
Nr. share granted Nr. share released
shares released
during the period during the period during the period
(ytd Dec 2009)
(ytd Dec 2009)
(ytd Dec 2009)
Shares Dividends shares
not released
not released
during the period during the period
(ytd Dec 2009)
(ytd Dec 2009)
due to no
due to no
vesting **
vesting **
Cancelled
during
the period
(ytd Dec 2009)
resignations
Outstanding
shares
at the end
of thr period
(Dec 2009) *
Performance share (2006-2009)
Managers
123,462
-
118,828
13,556
2,118
202
2,516
-
Executives
57,703
-
44,560
5,087
13,143
1,275
-
-
Managers
37,262
-
17,992
2,046
-
-
704
18,576
Executives
15,678
-
7,722
881
-
-
-
7,956
Managers
93,128
-
25,373
1,114
4,833
212
2,211
65,544
Executives
30,482
-
8,450
371
1,609
71
-
22,032
Managers
-
112,131
-
-
-
-
1,823
110,308
Top Managers
-
255,555
-
-
-
-
-
255,555
357,715
367,686
222,925
23,055
21,703
1,760
7,254
479,961
Retention Plan (2006-2011)
Managers
51,000
-
17,000
1,710
-
-
-
34,000
Retention Plan (2006-2011)
Executives
81,500
-
35,750
4,081
-
-
-
45,750
132,500
-
52,750
5,791
-
-
-
79,750
Total
Total
(*) The number non included additional shares
(**) Includes the shares of resigned recipients
P 214
chart 1 - Exibit 3c - Issuing Regulations
Remuneration of the members of the Board of Directors and the Board of Statutory Auditors of Lottomatica
Non
monetary
benefits
Name and Surname
Position
Period
in the position
Lorenzo Pellicioli
President
cEO
Executive committee - chairman
1/2009-12/2009
1/2009-12/2009
4/2009-12/2009
2010 Report approval
60,000
Vice chairman
1/2009-12/2009
1/2009-12/2009
75,000
40,000
General Manager
Managing Director
cEO
1/2009-12/2009
1/2009-12/2009
4/2009-12/2009
1/2009-12/2009
2010
2010
2010
2010
approval
approval
approval
approval
60,000
Pietro Boroli
BoD Member
1/2009-12/2009
1/2009-12/2009
60,000
47,500
Paolo ceretti
BoD Member
1/2009-12/2009
1/2009-12/2009
60,000
50,000
Marco Drago
BoD Member
1/2009-12/2009
1/2009-12/2009
60,000
47,500
Jeremy hanley
BoD Member
1/2009-12/2009
1/2009-12/2009
80,000
46,250
10,000
BoD Member
1/2009-12/2009
1/2009-12/2009
75,000
35,000
10,000
BoD Member
1/2009-12/2009
1/2009-12/2009
60,000
52,500
BoD Member
1/2009-12/2009
1/2009-12/2009
80,000
36,250
BoD Member
Surveillance Body - Member
1/2009-12/2009
1/2009-12/2009
1/2009-12/2009
130,000
43,750
Bruce Turner
BoD Member
1/2009-12/2009
50,000
32,500
Gianmario Tondato Da Ruos
BoD Member
1/2009-12/2009
1/2009-12/2009
85,000
32,500
Sergio Duca
Board of Statutory Auditors - chairman
1/2009-12/2009
2010 Rport approval
112,500
Francesco Martinelli
Board of Statutory Auditors - Regular member
1/2009-12/2009
75,000
Angelo Gaviani
Board of Statutory Auditors - Regular member
Surveillance Body - Member
1/2009-12/2009
1/2009-12/2009
75,000
10,000
Robert Dewey
Marco Sala
James Mccann
Jaymin Patel
Anthony Ruys
Severino Salvemini
Duration
Report
Report
Report
Report
Emoluments
Bonus
Other
55,000
57,500
10,000
38,440
8,209
1,534,874
799,502
662,571
511,184
10,000
10,000
1,783,750
10,000
46,649
2,334,376
1,233,755
P 215
2009 Annual Report
Audit firm fees
Audit services
compensation for tax consulting
Other services:
certification procedures
Accounting consultancy
Total
12.31.2009
Fees
12.31.2008
331
-
400
-
745
-
163
-
1,076
563
Events following the closing of the period ended
December 31, 2009
In order to simplify the interest share chain and relative management expenses,
the following mergers were made within the group in the first months of 2010:
On February 17, 2010 Tulipano S.r.l. and Europa Gestione S.r.l. merged into
Lottomatica Videolot Rete S.p.A..
On December 18, 2009 Lottomatica Sistemi S.p.A. and Lottomatica
International S.r.l. merged into Lottomatica Group S.p.A. Legal effects
resulting from the merger operation begin as of January 1, 2010.
In February 2010 Lottomatica International hungary kft merged into
Personnel
Pursuant to Article 2427, c.1 n.15 of the Italian civil code, the average number
Lottomatica Group S.p.A., effective as of January 1, 2010. The merger was
of employees totals 875.7 (797.3 at 12/31/2008):
made based on the financial situation at July 31, 2009.
Average labor force for 2009
REcEIPTS AND PAYMENTS
(PRESIDENTIAL DEcREE N. 560 OF SEPTEMBER 16, 1996)
(unit)
The management of receipts and payments for the period ended December 31,
Executives
Middle Management
Office Staff
Manual workers
58,3
122,3
695,2
-
2009 total €/000 39,782 and consist of the following:
Total
875,8
Total receivables for the period ended December 31, 2009 from points of sale
Receivables
for the sums to be paid, net fees and expenses, were €/000 1,163.
cash and cash equivalents at December 31, 2009 total €/000 38,619 and reflect
the administered receipts held in bank and postal accounts:
€/000 31,184 in a specific current account held with Banca Intesa S.p.A.; and
€/000 7,435 in a specific postal account.
Payables
Payables for the period ended December 31, 2009 total €/000 39,782 and consist
of:
€/000 (5,365) tax earnings as of December 31, 2009 to pay to AAMS;
€/000 19,760 due to the Ministry of Finance’s pension fund;
€/000 11,813 for the premium on the last five drawings made over the period
ended December 31, 2009 to be paid to the licensee;
€/000 13,574 for winnings not paid as of December 31, 2009.
P 216
De Agostini S.p.A. Financial Statements
A summary report of De Agostini S.p.A.’s most recent financial statement,
certified according to Italian accounting principles, is presented below. The
Parent company De Agostini S.p.A., pursuant to Article 2497-bis of the Italian
civil code, carries out the activity of direction and control. The financial
statements are prepared according to IAS/IFRS international accounting
principles and approved by the Shareholders’ Meeting
De Agostini S.p.A. - December 31, 2008
BALANCE SHEET
ASSETS
A) Due from shareholders for unpaid capital
B) Fixed Assets
c) current Assets
D) Accrued income and prepaid axpenses
2,970,358
1,143,694
23,764
Total Assets
4,137,816
LIABILITY
A) Shareholders Equity
Share capital
Legal Reserve
Other reserves
44,000
8,400
3,153,444
10,334
3,216,178
B) Risk and expense allowance
c) Staff Severance Fund
D) Debts
E) Accrued expenses and deferred incomes
Total Liability
153,015
1,563
763,030
1,030
4,134,816
INCOME STATEMENT
A) Value of production
B) Production costs
c) Financial assets and liabilities
D) Value adjustments to financial assets
E) Extraordinary incomes and costs
Income tax for the period
2,675
35,510
16,611
(420)
364
(26,614)
10,334
P 217
2009 Annual Report
List of Lottomatica Group SpA Subsidiaries and affiliates
Name
Jurisdiction
Share Capital **
% Ownership
Shareholder
Italy
16,000
63
Lottomatica Group
Italy
2,582
100
Lottomatica Group
Italy
20,000
100
Lottomatica Group
Lottomatica Videolot Rete S.p.A. (1)
Italy
3,226
100
Lottomatica Group
SED Multitel S.r.l.
Italy
800
100
Lottomatica Group
Italy
5,165
100
Lottomatica Group
Italy
100
100
Lottomatica Group
Nevada, USA
13,300
100
Lottomatica Group
Atronic Australien Gmbh (2)
Germany
1,120
100
Lottomatica Group
Gtech German holdings corporation Gmbh (2)
Germany
25,000
100
Lottomatica Group
Delaware, USA
75,000
100
Lottomatica Group
New Scotland, canada
278,498
100
Lottomatica Group
Italy
25,120
13.33
Lottomatica Group
United Kingdom
2,100
5
Lottomatica Group
Totobit Informatica Software e Sistemi S.p.A.
Italy
3,043
100
Italy
10,000
85
Italy
500
100
Italy
50
100
L.S. Alpha S.r.l.
Italy
118
95
Labet S.r.l. (3)
Italy
100
100
United Kingdom
19
100
Tulipano S.r.l. (4)
Italy
20
100
Europa Gestione S.r.l. (5)
Italy
50
100
Empoli Giochi S.r.l. (6) **
Italy
100
100
Italy
21,000
100
Lottomatica Sistemi
Italy
1,000
100
Totobit Informatica
TTS S.r.l.
Italy
100
100
Totobit Informatica
Easy Nolo S.p.A.***
Italy
1,900
10
Totobit Informatica
Nevada, USA
10,000
100
Atronic Americas LLc
Atronic Australia Pty Ltd.(2)
Australia
2,000
100
Atronic International Gmbh (2)
Germany
302,000
100
Atronic Americas LLc (2)
Spielo USA Incorporated (2)
Spielo Manufacturing ULc (2)
Banca ITB S.p.A (prev. IT Bank S.p.A.)***
Neurosoft S.A.***
Edrin Ltd.
Atronic Nevada LLc (2)
List of Lottomatica Group SpA Subsidiaries and affiliates
Name
Jurisdiction
Share Capital **
% Ownership
Shareholder
Austria
300,000
100
Germany
26,000
50
Argentina
30,000
80
Perù
****
98
Atronic Systems B.V. (2)
Netherland
18,000
100
Atronic Russia o.o.o.(2)
Russia
3.018,20
50
Austria
300,000
100
china
10,000
100
France
40,000
100
Monaco
150,000
98
USA
****
100
Austria
36,400
100
South Africa
****
100
Italy
100
90
Lottomatica.Group (85%)
Totobit Informatica (5%)
Lux
31,000
100
Lottomatica Group (65.27%)
Lottomatica International hungary (34.73%)
hungary
1,250
100
Lottomatica International (80%)
Lottomatica Group (20%)
Delaware, USA
2,756,544.81
100
Invest Games S.A.
Atronic Austria holding AG (2)
D&D Elettronic & Software Gmbh (2)
Atronic Argentina S.r.l.(2)
Atronic Perù S.A. (2)
Atronic Austria Gmbh (2)
Atronic Asia Limited (2)
MIS International France SAS (2)
Atronic Systems S.A.M. (2)
Atronic Systems Inc. (2)
Atronic Systems Gmbh (2)
Grips RSA (7)
consorzio Lottomatica Giochi Sportivi (8)
Invest Games S.A. (9)
Lottomatica International hungary Korlátolt Felelősségű Társaság (KFT)
Gtech holdings corporation (10)
Unless otherwise noted, the consolidation method for all subsidiaries listed above is on a
line-by-line basis.
(3)
(4)
*
**
***
****
All Share Capital amounts are stated in local currency amounts and in thousand
Companies not consolidated and carried at cost
Companies not consolidated
Share Capital is less than €1,000
(1)
On December 11, 1009, Lottomatica Videolot Gestione S.p.A., Topolino Service
S.r.l. and Royal Gold S.r.l. were merged into the parent company, Lottomatica
Videolot Rete S.p.A.
On July 1, 2009, Lottomatica Group S.p.A. acquired from GTECH 100% of Atronic
Americas, LLC and its subsidiary, GTECH German Holding Corporation GmbH and
its subsidiaries, Atronic Australien GmbH and its subsidiary, Spielo USA
Incorporated and Spielo Manufacturing ULC.
(2)
(5)
(6)
(7)
(8)
(9)
(10)
On June 25, 2009, Lottomatica Scommesse S.r.l. acquired 100% of LABET S.r.l.’s
interest participation.
On June 12, 2009, Lottomatica Videolot Rete S.p.A. acquired 100% of Tulipano
S.r.l.’s interest participation from Euromatic S.r.l.
On June 4, 2009, Lottomatica Videolot Rete S.p.A. acquired 100% of Europa
Gestione S.r.l.’s interest participation from Eurobet.
On December 29, 2009, Lottomatica Videolot Rete S.p.A. acquired 100% of
Empoli Giochi S.r.l.’s interest participation from Novamatic Group S.r.l.
On May 20, 2009, Grips Management GmbH was merged into Atronic Systems
GmbH.
In liquidation.
As of September 16, 2009, Invest Games S.A. is owned by Lottomatica Group
S.p.A. (65.27%) and Lottomatica International Hungary Kft (34.73%).
As of September 16, 2009, GTECH Holdings Corporation is 100% owned by Invest
Games S.A.
P 219
2009 Annual Report
P 220
P 221
2009 Annual Report
LOTTOMATICA GROUP S.p.A.
Registered Office in Rome, Viale del Campo Boario, 56/d
Share Capital: €152,286,837.00
___________________________________________________________________________
REPORT OF THE BOARD OF AUDITORS
to the Shareholders’ Meeting of Lottomatica Group S.p.A.
To the Shareholders,
Pursuant to Articles 2429 and 2403 (1) of the Italian civil code, and Article 153 (1) of Legislative Decree no. 58 of February 24, 1998, we inform you that during
the year ended December 31, 2009 we performed our oversight activities in accordance with the provisions of the Italian civil code, with Articles 148 and
subsequent articles of the aforementioned Legislative Decree, and with the instructions issued by the companies and Stock Exchange commission (cONSOB),
taking into account, moreover, the rules of conduct recommended by the National council of Accountants and Bookkeepers.
considering the above, we present our report on oversight activities required by law and performed by this Board during the year ended December 31, 2009.
Specifically,
•
We attended all meetings of the Board of Directors, totalling 10 in number, and of the Executive Board, totalling 4 in number, during which we were
informed of the company’s activities and notified of all major operations or transactions carried out by the company and its subsidiaries;
•
We held 10 periodical meetings during which information was mutually exchanged with the independent auditors and with the Directors, and we
ascertained that no imprudent or risky operations or transactions were undertaken, nor any that might create conflicts of interest or run counter to the
resolutions of the shareholders’ meeting and thereby jeopardise the company’s capital soundness;
•
We continued to monitor the company’s organisational structure and the administrative-accounting system, finding both to be adequate for their
respective purposes;
•
We received the information form the Internal control committee on its current activity, on its controlling schedule and on its plans for implementing
the internal control system;
•
We reviewed the Internal control committee annual report;
•
We acquired information from the Remuneration committee and with the Lead Independent Director regarding their activities;
•
We obtained from the Board of Directors, within the time prescribed by the law, the draft of the 2009 financial statements, the consolidated balance sheet
and the Directors’ report;
•
P 222
We ascertained that the annual report and interim consolidated financial statements were prepared pursuant to the laws in vigour regarding the adoption
of IAS-IFRS principles. The consolidation criteria and the consolidation are described in detail in the notes to the financial statements;
•
We examined the documents pertaining to the intra-group financial and industrial transactions and supporting operations, which are reasonably
considered to be in compliance with the principals of sound management, compatible with the company by-laws and consistent with the applicable
legislation;
•
We verified that the Directors, in compliance with the instructions issued by cONSOB, drew their attention to all operations or transactions conducted
with companies belonging to the Group and related parties. On our part, we verified, with the assistance of the company’s administrative officers, the
observance of all procedures designed to ensure that such operations or transactions were conducted under the appropriate conditions and in the
company’s interests;
•
We ascertained that no atypical or unusual transactions, as defined in the cONSOB note no. 1025564 dated April 6, 2001 and No. DEM/6064293 dated
July 28, 2006, took place wither among the group, with related parties or with third parties, finding proof thereof in the information provided by the
Board of Directors, by independent auditors and by persons responsible for the internal control;
•
We ascertained that the company complied with the self-discipline code of the committee for corporate Governance of Listed companies. We monitored
the manner in which the corporate governance rules, set out in the self-discipline code, were implemented. We have no observations to make with
regards to the self-discipline code implementation. We also inform you that the assessment criteria and procedures adopted by the Board of Directors
to evaluate the independence of its members were correctly applied;
•
We ascertained that the company continued to update the organisational management and control model as per Legislative Decree 231/01, taking into
account the guidelines issued by trade associations as well as relevant legislative developments, also applying this model to subsidiary companies and
consortia belonging to the Group.
•
Through our continuous contact with the independent auditors as well as due to our own periodic controls not only in Italy but at the Providence offices
as well, we ascertained that the relevant non-European subsidiaries as defined by Title VI, section II of the cONSOB regulation adopted with the resolution
no. 11971 in 1999:
o
have an administrative-accounting system that is able to regularly send the necessary economic and financial information for the preparation of the
consolidated financial statements to the company and to the independent auditors;
o
Regularly provide the necessary information to carry out the controlling activities regarding the annual and quarterly reviews to the independent
auditors.
We further declare that:
•
The Board of Auditors was notified on November 23, 2009 of an accusation (as defined by Article 2408 of the Italian civil code) on behalf of a minority
shareholder Mr. Giuseppe Lupo (holds approx. 4,500 shares). The accusation regarded some aspects of the capital increase operation with the option right
exclusion pursuant to Article 2441 (5) of the civil code approved by the company. After having received the necessary documentation from the company,
the Board of Auditors reviewed all aspects regarding the incident in the course of 3 meetings. In agreement with the conclusions made by the Board of
Directors, competent company departments as well as the chiomenti legal studio, the Board of Auditors holds the accusation to be groundless;
•
We have not received any report of further offences as per Article 2408 of the Italian civil code;
P 223
2009 Annual Report
•
We did not issue any legal opinions as defined by the law during the year;
•
The company Reconta Ernst & Young, or parties linked to it under continuous agreement, was appointed not only to audit the financial statements for
the year, including the signing of the tax returns, but also to perform the following:
o
All activities required for the issuance of the seven-year €750 million senior unsecured bond (Eurobond offering) - €295,000.00
o
All activities required for the issuance of legal opinion pursuant to Article 158 of the Draghi law and Article 2441 (6) of the Italian civil code €350,000.00
o
complete review of the Scientific Games corp. annual report pursuant to SEc requirements - €145,000.00
o
Restricted review of quarterly situation (SAS 100 reviews) in order to ensure the compliance of the Scientific Games corp. annual report to SEc
requirements - €48,000.00
o
Statutory FS and reporting package as of December 31, 2008 - €8,000.00
o
Review stand-alone statements of subsidiaries - €609,918.00
o
Accounting consultancy - €214,852.00
Within the scope of our authority we verified that:
•
The company complied with the provisions of the law and by-laws and with the principles of sound management;
•
The company’s organisational structure, internal control system and administrative-accounting systems are satisfactory insofar as their effective operation
is concerned;
•
The provisions of the laws in force including Legislative Decree No. 87 of January 26, 1992 and the subsequent cONSOB recommendations, the preparation
and structure of the financial statements and the Director’s report were carried out appropriately and included the performance of direct checks and
information obtained from the independent auditors;
•
The instructions given by the company to its subsidiaries were appropriate in compliance with Article 114, point 2 of Legislative Decree 58/1998;
•
The control of the effective independence of the independent auditors;
•
The report submitted by the independent auditors regarding the consolidated annual and interim financial statements for the year ended December 31,
2009 communicates that no reprehensible facts emerged in the course of the auditing process of the financial statements and accounts, thereby declaring
that such statements comply with the applicable regulations and the Italian civil code and hence with the accounts as well as national, international and
group accounting standards and principles. The independent auditors communicated that in the course of their activities no questionable events arose;
The Board of Auditors would like to report that the Independent Auditors have issued a favourable opinion in terms of the coherence of the Lottomatica Group
S.p.A. financial statements for the year ended December 31, 2009 as required by Article 156, section 4-bis, letter d) of Legislative Decree no. 58/1998.
In the opinion of this Board there are no proposals to submit to the Shareholders’ Meeting pursuant to Article 153 (2) of Legislative Decree no. 58/1998.
In view of the above, we therefore recommend the approval of the financial statements for the year ended December 31, 2009 presented by the Board of
Directors together with this report and the proposal to distribute dividends.
P 224
Pursuant to Article 144-quinquiesdecies of the stock exchange regulations for listed companies, the present report includes the list of administrative and auditing
roles carried out by the members of the Board of Auditors at companies as defined by Book V, Title V, chapters V, VI and VII of the Italian civil code as of March
24, 2010.
Rome, March 24, 2010
ThE BOARD OF AUDITORS
Mr. Sergio Duca
Mr. Angelo Gaviani
Mr. Francesco Martinelli
This report as been traslated into the English language solely for the convenience of international readers.
P 225
2009 Annual Report
List of the various roles held by Lottomatica Group S.p.A. Board of Statutory Auditors members as per book
V, Title V, sections V, VI and VII of the Italian civil code, drawn up under Article 144-quinquiesdecies the
Issuers Regulation, adopted by consob with resolution no 11971/99 and later modifications and additions
Dr. Sergio Duca
No.
Company name
Position
End of term
1
Lottomatica Group S.p.A.*
chairman of Board of Statutory Auditors
12/31/2010
2
Orizzonte S.g.r. S.p.A.
chairman of Board of Directors
12/31/2009
3
Exor S.p.A.
Member of Surveillance committee
12/31/2011
4
Fondazione Silvio Tronchetti Provera
chairman of Board of Independent Auditors
12/31/2009
5
ISPI
Independent Auditor
12/31/2009
6
Associazione Amici dell’Università di Scienze Gastronomiche of Pollenzo
chairman
Dimission 01/14/2010
7
Università di Scienze Gastronomiche of Pollenzo
Member of Board of Directors and Executive committee
Dimission 01/14/2010
8
Tosetti Value SIM S.p.A.
12/31/2010
9
Fondazione Intesa San Paolo Onlus
Independent Auditor
12/31/2010
10
compagnia di San Paolo
Independent Auditor
12/31/2011
11
Sella Gestioni SGR Gruppo Banca Sella
Member of Board of Directors
12/31/2011
12
Telecom Italia Audit & compliance Services S.c.a.a.r.l
Member of Board of Directors
12/31/2011
*
Issuing Company
Number of positions in issuing Companies: only Lottomatica Group S.p.A.
Total number of positions: 12
P 226
Dr. Angelo Gaviani
No.
Company name
Position
End of term
1
Regular member of Board of Statutory Auditors
12/31/2010
2
B&D holding di Marco Drago e c. S.a.p.A.
12/31/2010
3
De Agostini S.p.A.
12/31/2011
4
12/31/2010
5
De Agostini Edizioni Scolastiche S.p.A.
12/31/2010
6
Dea capital S.p.A.*
12/31/2009
7
Dea Factor S.p.A.
12/31/2009
8
Dea Partecipazioni S.p.A.
31/12/2011
9
First Atlantic RE SGR S.p.A.
12/31/2010
10
First Atlantic Real Estate S.p.A.
12/31/2010
11
Fondazione De Agostini
Auditor
12/31/2009
12
Istituto Geografico De Agostini S.p.A.
12/31/2009
13
12/31/2011
14
12/31/2009
15
12/31/2009
16
Utet S.p.A.
12/31/2010
17
Banca Popolare di Novara S.p.A.
12/31/2010
18
M.Dis Distribuzione Media S.p.A.
12/31/2011
19
Mineral Resources S.r.l.
12/31/2010
20
Spig S.p.A.
12/31/2010
21
Stoppa Antonio e Figli S.p.A.
12/31/2010
*
Issuing Company
Number of positions in issuing Companies: 1, other than Lottomatica Group S.p.A.
P 227
2009 Annual Report
Dr. Francesco Martinelli
No.
Company name
Position
1
Annual report 12/31/2010
2
camfin S.p.A.*
3
Alicos S.p.A.
4
Almaviva S.p.A.
5
Almaviva consulting S.p.A.
6
Almaviva contact S.p.A.
Third quarter report 09/30/2011
7
Almaviva Finance S.p.A.
8
Almaviva Technologies S.r.l.
9
G. Matica S.r.l.
10
T.S.F. Tele Sistemi Ferroviari S.p.A.
11
Arianna 2001 S.p.A.
12
Press & Image S.p.A.
13
Servizi In Rete 2001 S.p.A.
14
TNET 2001 S.p.A.
15
cFN – compagnia Fondiaria Nazionale S.p.A.
16
Eurispes Italia S.p.A.
17
Immo Finanziaria S.p.A.
18
Melior Trust S.p.A.
19
Reteitalia Internazionale S.r.l.
20
Servizio Italia S.r.l.
21
cartaLIS Imel S.p.A.
22
23
24
LIS - Lottomatica Italia Servizi S.p.A.
25
26
27
28
*
Issuing Company
Number of positions in issuing Companies: 1, other than Lottomatica Group S.p.A.
P 228
End of term
Graphic design and lay-out
Lottomatica - corporate Graphic Design and Brand Book Management
Photos
Our grateful thanks for kindly granting us the usage of images:
Virtus Pallacanestro Roma
Elecom Sport Associazione Sporiva Dilettantistica Onlus
Milano Baseball 1946 AS
FIPAV - Federazione Italiana Pallavolo
Unione Rugby capitolina
canottieri Aniene
Print
Pcc Giochi e Servizi SpA
Finished printing 2010 May
P 229
W W W . L O T T O M A T I C A G R O U P. C O M

Lottomatica Bilancio ING

Transcription

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