WEST GREENWICH, R.I., April 12 /PRNewswire-FirstCall/ -- GTECH
Holdings Corporation (NYSE:GTK) today announced fourth quarter and
year-end earnings for the fiscal year which ended February 25,
2006. "GTECH delivered solid financial results in both the quarter
and the full fiscal year, meeting or exceeding our previous
outlook," said GTECH President and CEO W. Bruce Turner. "In
addition, we enjoyed strategic success in each of our verticals by
growing our core business, aggressively developing international
market opportunities, and leveraging our core competencies into
related gaming solutions and transaction-processing business
opportunities." "GTECH delivered another strong year of operating
results and substantial free cash flows, resulting in significant
value creation for our shareholders and positioning us well for
future successes," said GTECH Senior Vice President and CFO Jaymin
B. Patel. Operating Results Revenues for the fourth quarter of
fiscal 2006 were $368.3 million, up 9% over revenues of $337.9
million in the fourth quarter of fiscal 2005. Net income was $59.4
million, or $0.45 per diluted share, compared to net income of
$43.8 million, or $0.34 per diluted share for the same period last
year. For the quarter, service revenues were up 11.3%, reflecting
continued strength in same store sales, strong jackpot activity,
and higher revenues from Brazil. Product sales were $74.3 million,
comparable to the fourth quarter of fiscal 2005. Service margins
increased approximately 150 basis points, to 39.1%, driven by the
strength in service revenues, partially offset by higher
depreciation and amortization expenses. Product margins increased
significantly, from 26.6% in the fourth quarter of fiscal 2005 to
45.6% in the most recent quarter, reflecting a change in product
mix. The fourth quarter results include one-time costs of $6.1
million associated with the pending transaction with Lottomatica
S.p.A. Excluding transaction-related costs, the Company would have
reported net income of $65.5 million and fully diluted earnings per
share of $0.50. Revenues for fiscal 2006 were $1.3 billion, up 3.8%
over revenues of $1.26 billion in fiscal 2005. Net income was
$211.0 million, or $1.63 per diluted share, compared to net income
of $196.4 million, or $1.50 per diluted share, for the same period
last year. Net income in fiscal 2005 includes a one-time, after-tax
gain of $7.0 million, or approximately $0.05 per diluted share,
associated with the sale of the Company's 50% interest in Gaming
Entertainment (Delaware) L.L.C. Net income in fiscal 2006 includes
one-time costs of $8.0 million associated with the pending
Lottomatica transaction, or $0.06 per diluted share. Prior year
earnings and dividends per share reflect the 2-for-1 common stock
split declared in June 2004. Cash Flow and Investments During
fiscal 2006, the Company generated $429.6 million of cash from
operations. This cash was principally used to fund $137.3 million
of systems, equipment, and other assets relating to contracts; to
purchase an additional 11.681% of POLCARD S.A. for $21.5 million;
to repurchase $32.1 million, or 1,326,100 shares of the Company's
common stock; and to pay cash dividends of $41.7 million. At
February 25, 2006, the Company had $495.9 million of cash balances
and short-term investment securities on hand. At the end of fiscal
2006, the Company had $494 million available under its senior
revolving credit facility. Business Highlights During fiscal 2006,
GTECH continued to successfully execute against the Company's
strategic objectives of maintaining and expanding the core lottery
business, and winning new customers. Domestically, GTECH signed a
seven-year integrated services agreement with the North Carolina
Education Lottery (NCEL) for a complete end-to-end online/instant
ticket lottery solution. The Company implemented the NCEL in 58
days with approximately 5,000 terminals at startup, making it the
fastest instant ticket launch in lottery history. In addition,
GTECH was awarded multi-year online lottery contracts in Washington
State and Arizona, and signed an agreement for additional lottery
products in California. The Company was also selected as the
preferred vendor for new gaming central control systems in
Pennsylvania and Louisiana. In New Jersey, GTECH was selected for a
new integrated online/instant lottery system, terminals, and
communications network. The award of the New Jersey contract to
GTECH is currently being contested by another vendor.
Internationally, GTECH signed a number of contracts including an
agreement to provide a new gaming system and terminals for New
Zealand Lotteries Commission, and a five-year agreement to provide
equipment and services for the national online lottery in Thailand,
through its joint venture LOXLEY GTECH Technology Co. Ltd. The
Company also began deploying 2,000 WinWave(TM) video lottery
terminals (VLTs) to Svenska Spel in Sweden. In conjunction with the
VLTs, Svenska Spel is also utilizing GTECH's Enterprise Series(TM)
Video central system, which includes functionality designed to
allow lotteries unprecedented flexibility to change denomination
and download games remotely. "All told, GTECH secured new contracts
and extensions with 22 customers in fiscal 2006, representing
approximately $1 billion in revenues to GTECH over the life of the
contracts," continued Mr. Turner. "These wins are a clear
validation of GTECH's business strategy, our technology, and above
all, our understanding of what lotteries, retailers, and players
are looking for today and in the future." Also during the fiscal
year, California joined the Mega Millions multi-state game in an
effort to boost lottery ticket sales. California expects Mega
Millions to generate approximately $200 million to $300 million in
net annual incremental total sales for the Lottery, equating to
$2.5 million to $4.0 million in annual incremental revenue to
GTECH. Overseas, the multi-jurisdictional game EuroMillions
continues to perform well. For calendar year 2005, per capita sales
averaged $0.40 per week. On a year-to-date basis, calendar year
2006 weekly per capita sales more than doubled, due in part to a
record-breaking jackpot in February. "EuroMillions has become a
solid contributor for GTECH. It continues to grow, with 10
jurisdictions now participating in the game, three of which are
GTECH facilities management customers," said Mr. Turner. "In fact,
EuroMillions now has the largest player base of any
multi-jurisdictional game in the world, with more than 200 million
players." GTECH also deployed 35 new/modified games in more than 20
jurisdictions worldwide. Pick 'n Play(TM), the Company's new game
concept designed to combine the appeal of instant gratification and
multiple chances to win with the security and integrity of an
online game, was recently launched in Illinois. Several other
lotteries around the world are currently considering Pick 'n Play
as a new revenue source and complementary product line to add to
their existing game portfolios. "We're excited about the evolution
of our game content, and Pick 'n Play is just one example of how
fresh games can keep lottery play fun and exciting and stimulate
incremental sales," concluded Mr. Turner. Other Business
Developments On January 10, 2006, the Company entered into an
agreement with Lottomatica S.p.A, an Italian corporation and the
exclusive license holder and operator of Italy's Lotto, and De
Agostini S.p.A., a privately held Italian diversified industrial
and financial holding group that is Lottomatica's majority
shareholder, pursuant to which Lottomatica will acquire GTECH for
$35.00 in cash per outstanding GTECH share. The all cash
transaction, which is subject to financing as well as regulatory,
customer, and shareholder approvals, is expected to close in mid-
2006. The total enterprise value of the transaction is
approximately $4.8 billion. Fiscal 2006 Fourth Quarter and Full
Year Financial Slides For additional information on GTECH's fourth
quarter and year-end results, please visit the Investors section of
http://www.gtech.com/. Certain statements contained in this press
release are forward looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. The Company identifies forward
looking statements by words such as "may," "will," "should,"
"could," "expect," "plan," "anticipate," "intend," "believe,"
"estimate," "continue," or similar words that refer to the future.
Such statements include, without limitation, statements relating to
the prospects and financial outlook for the Company, which reflect
management assumptions regarding: (i) the future prospects for and
stability of the lottery industry and other businesses in which the
Company is engaged or expects to be engaged, (ii) the future
operating and financial performance of the Company (including,
without limitation, expected future growth in revenues, profit
margins and earnings per share), and (iii) the ability of the
Company to retain existing business and to obtain and retain new
business. Such forward looking statements reflect management's
assessment based on information currently available, but are not
guarantees and are subject to risks and uncertainties that could
cause actual results to differ materially from those contemplated
in the forward looking statements. These risks and uncertainties
include, but are not limited to, those set forth above, in the
Company's subsequent press releases and on reports by the Company
on Forms 10-K, 10-Q and 8-K, and other reports and filings with the
Securities and Exchange Commission, as well as risks and
uncertainties respecting: (i) the potential impact of extensive and
evolving government regulations upon the Company's business; (ii)
the ability of the Company to continue to retain and extend its
existing contracts and win new contracts; (iii) the possibility of
slower than expected growth or declines in sales of lottery and
gaming goods and services by the Company or the Company's
customers; (iv) exposure to foreign currency fluctuations; (v)
risks and uncertainties inherent in doing business in foreign
jurisdictions; (vi) the relatively large percentage of the
Company's revenues attributable to a relatively small number of the
Company's customers; (vii) the possibility of significant
fluctuation of quarterly operating results; (viii) the intensity of
competition in the lottery and gaming industries; (ix) the
possibility of substantial penalties under and/or termination of
the Company's contracts; (x) the ability of the Company to respond
to technological change and to satisfy the future technological
demands of its customers; (xi) opposition to expansion of lottery
and gaming; (xii) the Company's ability to attract and retain key
employees; and (xiii) the possibility of adverse determinations in
pending legal proceedings. GTECH is a leading gaming technology and
services company. With more than $1.3 billion in annual revenues
and 5,300 people in over 50 countries, GTECH provides integrated
technology, creative content, and business services to effectively
manage and grow today's evolving gaming markets. In targeted
emerging economies, GTECH also leverages its operational presence
and infrastructure to supply commercial transaction processing
services. For more information about the Company, please visit
GTECH's website at http://www.gtech.com/. Contact: Robert K.
Vincent Public Affairs GTECH Corporation +1-401-392-7452
Consolidated financial statements to follow: GTECH HOLDINGS
CORPORATION AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENTS Fourth
Quarter Fiscal Year Ended February 25, February 26, 2006 2005
(Dollars in thousands, except per share amounts) Revenues: Services
$294,074 $264,298 Sales of products 74,253 73,570 368,327 337,868
Costs and expenses: Costs of services 179,003 164,897 Costs of
sales 40,359 53,996 219,362 218,893 Gross profit 148,965 118,975
Selling, general and administrative 40,107 29,989 Research and
development 14,242 13,818 Operating expenses 54,349 43,807
Operating income 94,616 75,168 Other income (expense): Interest
income 3,926 1,657 Equity in earnings (loss) of unconsolidated
affiliates (1,194) 403 Other expense (891) (1,175) Interest expense
(7,631) (7,470) (5,790) (6,585) Income before income taxes 88,826
68,583 Income taxes 29,410 24,740 Net income $59,416 $43,843 Basic
earnings per share $0.47 $0.38 Diluted earnings per share $0.45
$0.34 Weighted average shares outstanding -- basic 126,708 115,555
Weighted average shares outstanding -- diluted 130,772 131,075
Dividends per share -- common stock $0.085 $0.085 GTECH HOLDINGS
CORPORATION AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENTS Fiscal
Year Ended February 25, February 26, February 28, 2006 2005 2004
(Dollars in thousands, except per share amounts) Revenues: Services
$1,122,668 $1,017,683 $957,471 Sales of products 182,138 239,552
93,859 1,304,806 1,257,235 1,051,330 Costs and expenses: Costs of
services 674,528 616,633 537,839 Costs of sales 104,037 157,974
59,226 778,565 774,607 597,065 Gross profit 526,241 482,628 454,265
Selling, general and administrative 135,715 117,253 109,092
Research and development 49,869 52,559 57,318 Operating expenses
185,584 169,812 166,410 Operating income 340,657 312,816 287,855
Other income (expense): Interest income 10,912 4,615 5,733 Equity
in earnings of unconsolidated affiliates 1,941 2,812 6,236 Other
income (expense) (4,341) 5,356 1,889 Interest expense (30,793)
(19,213) (10,919) (22,281) (6,430) 2,939 Income before income taxes
318,376 306,386 290,794 Income taxes 107,331 109,992 107,594 Net
income $211,045 $196,394 $183,200 Basic earnings per share $1.73
$1.68 $1.57 Diluted earnings per share $1.63 $1.50 $1.40 Weighted
average shares outstanding -- basic 121,884 116,739 116,464
Weighted average shares outstanding -- diluted 130,385 132,559
132,625 Cash dividends declared per common share $0.34 $0.34 $0.255
GTECH HOLDINGS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE
SHEETS February 25, February 26, 2006 2005 ASSETS (Dollars in
thousands) CURRENT ASSETS: Cash and cash equivalents $235,191
$94,446 Investment securities available-for-sale 260,725 196,825
Trade and other receivables, net 183,561 172,167 Refundable
performance deposit 8,000 8,000 Inventories 88,024 61,135 Deferred
income taxes 26,398 31,435 Other current assets 47,819 26,646 TOTAL
CURRENT ASSETS 849,718 590,654 SYSTEMS, EQUIPMENT AND OTHER ASSETS
RELATING TO CONTRACTS, net 692,545 720,438 GOODWILL 346,096 331,022
PROPERTY, PLANT AND EQUIPMENT, net 101,416 74,558 INTANGIBLE
ASSETS, net 64,212 70,839 OTHER ASSETS 45,915 67,630 TOTAL ASSETS
$2,099,902 $1,855,141 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT
LIABILITIES: Accounts payable $93,205 $99,234 Accrued expenses
46,220 54,227 Employee compensation 31,804 21,862 Advance payments
from customers 63,768 42,865 Deferred revenue and advance billings
17,889 29,705 Income taxes payable 67,098 16,499 Taxes other than
income taxes 17,106 16,572 Short-term borrowings - 334 Current
portion of long-term debt 9,148 2,476 TOTAL CURRENT LIABILITIES
346,238 283,774 LONG-TERM DEBT, less current portion 542,259
726,329 OTHER LIABILITIES 106,671 83,260 DEFERRED INCOME TAXES
99,362 106,010 COMMITMENTS AND CONTINGENCIES - - SHAREHOLDERS'
EQUITY: Preferred Stock, par value $.01 per share -- 20,000,000
shares authorized, none issued - - Common Stock, par value $.01 per
share - 200,000,000 shares authorized, 127,179,225 and 116,551,144
shares issued; 127,179,225 and 115,006,751 shares outstanding at
February 25, 2006 and February 26, 2005, respectively 1,272 1,166
Additional paid-in capital 444,810 278,204 Accumulated other
comprehensive loss (35,662) (43,227) Retained earnings 594,952
455,537 1,005,372 691,680 Less cost of 1,544,393 shares in treasury
at February 26, 2005 - (35,912) 1,005,372 655,768 TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY $2,099,902 $1,855,141 GTECH HOLDINGS
CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal Year Ended February 25, February 26, February 28, 2006 2005
2004 (Dollars in thousands) OPERATING ACTIVITIES Net income
$211,045 $196,394 $183,200 Adjustments to reconcile net income to
net cash provided by operating activities: Depreciation 166,768
145,999 115,324 Intangibles amortization 10,582 12,616 3,735 Other
amortization 154 - - Deferred income taxes 11,309 34,740 59,457 Tax
benefit related to stock award plans 6,670 11,254 10,432 Minority
interest 1,673 3,799 4,502 Equity in earnings of unconsolidated
affiliates, net of dividends received 582 3,461 1,672 Gain on sale
of investments (751) (10,924) - Non-cash gain from consolidation of
West Greenwich Technology Associates, L.P. - - (5,292) Other 26,991
16,438 10,726 Changes in operating assets and liabilities: Trade
and other receivables, net (17,420) (42,745) 9,634 Inventories
(27,003) 28,522 3,030 Other current assets (14,029) 1,654 (4,913)
Accounts payable (4,854) 14,248 2,186 Employee compensation 8,295
(15,118) (4,231) Advance payments from customers 20,903 (33,994)
51,601 Deferred revenue and advance billings (11,816) 15,037
(2,979) Income taxes payable 54,675 11,484 (27,649) Other assets
and liabilities (14,150) (17,656) 4,632 NET CASH PROVIDED BY
OPERATING ACTIVITIES 429,624 375,209 415,067 INVESTING ACTIVITIES
Acquisitions (net of cash acquired) (23,084) (200,730) (74,442)
Purchases of systems, equipment and other assets relating to
contracts (137,316) (245,592) (268,010) Purchases of
available-for-sale investment securities (147,275) (246,975)
(242,050) Maturities and sales of available-for-sale investment
securities 83,375 272,000 20,200 Purchases of property, plant and
equipment (9,656) (12,875) (12,772) License fees (1,750) - (12,500)
Investments in and advances to unconsolidated subsidiaries (1,488)
(2,071) (2,885) Refundable performance deposit 8,000 - (20,000)
(Increase) decrease in restricted cash 5,080 (5,112) - Proceeds
from sale of investments 3,000 11,773 - NET CASH USED FOR INVESTING
ACTIVITIES (221,114) (429,582) (612,459) FINANCING ACTIVITIES Net
proceeds from issuance of long-term debt - 343,254 252,588
Principal payments on long-term debt (2,302) (167,692) (33,293)
Purchases of treasury stock (32,051) (120,658) - Dividends paid
(41,672) (39,830) (29,977) Premiums and fees paid in connection
with the early retirement of debt - (10,610) (731) Proceeds from
stock options 9,473 13,546 23,943 Other (4,439) (505) (6,324) NET
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES (70,991) 17,505
206,206 Effect of exchange rate changes on cash 3,226 1,975 4,351
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 140,745 (34,893)
13,165 Cash and cash equivalents at beginning of year 94,446
129,339 116,174 CASH AND CASH EQUIVALENTS AT END OF YEAR $235,191
$94,446 $129,339 DATASOURCE: GTECH Holdings Corporation CONTACT:
Robert K. Vincent, Public Affairs of GTECH Corporation,
+1-401-392-7452 Web site: http://www.gtech.com/
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