WEST GREENWICH, R.I., June 22 /PRNewswire-FirstCall/ -- GTECH
Holdings Corporation (NYSE:GTK) today announced earnings for its
first quarter of fiscal year 2007, which ended May 27, 2006. "We
had a successful quarter across all three GTECH vertical markets --
Lottery, Gaming Solutions, and Commercial Services," said GTECH
President and CEO W. Bruce Turner. "We completed the industry's
fastest lottery system implementation in North Carolina in 58 days
with more than 5,000 terminals. Gaming Solutions secured its first
significant placement of the new WinWave gaming machine platform in
two government jurisdictions. POLCARD experienced a 31 percent
increase in bankcard acquiring turnover, and BillBird saw an 86
percent increase in bill payment and prepaid top-up transaction
volume, from the same period last year." "We are pleased with the
performance of the business, despite the difficult
quarter-over-quarter comparisons created by nonrecurring events in
both periods," said GTECH Senior Vice President and CFO Jaymin B.
Patel. "The fundamentals of our business remain strong, and we are
well positioned to capture new opportunities in each of the markets
we serve." Operating Results Revenues for the first quarter of
fiscal 2007 were $315.9 million, compared to revenues of $326.4
million in the first quarter of fiscal 2006. Net income was $45.7
million, or $0.35 per diluted share in the first quarter of fiscal
2007, compared to net income of $54.8 million, or $0.43 per diluted
share for the same period last year. For the quarter, service
revenues were $290.2 million, comparable to the first quarter of
last fiscal year, despite a year-over-year reduction of
approximately $12.6 million of revenues from Brazil, which was
principally related to the court-ordered return of revenues
withheld in fiscal year 2005. Excluding the higher revenues from
Brazil in fiscal 2006, service revenues for the first quarter of
fiscal year 2007 increased $11.4 million or approximately 4 percent
year-over-year, driven by the continued strength of the U.S.
lottery market. Product sales for the quarter were $25.7 million,
compared to $35.0 million in the first quarter of last year.
Service margins were 39.4%, reflecting lower revenues from Brazil.
Product margins increased 3.1 percentage points to 41.4% in the
most recent quarter, reflecting a change in product mix. The first
quarter results include one-time costs of $6.8 million associated
with the pending transaction with Lottomatica S.p.A. Excluding
transaction-related costs, the Company would have reported net
income of $52.5 million and fully diluted earnings per share of
$0.40. This compares to net income of $46.8 million and fully
diluted earnings per share of $0.36, excluding the higher revenues
from Brazil in the first quarter of last fiscal year. Cash Flow and
Investments During the first quarter of fiscal 2007, the Company
generated $102.3 million of cash from operations. This cash was
principally used to fund $80.2 million of systems, equipment, and
other assets relating to contracts, including new systems in North
Carolina, Arizona, and Washington State, and to pay cash dividends
of $10.8 million. At May 27, 2006, the Company had $185.2 million
of cash and cash equivalents and $323.1 million of short-term
investment securities on hand. At the end of the first quarter of
fiscal 2007, the Company had $499.5 million available under its
senior revolving credit facility. First Quarter Highlights In the
first quarter of fiscal year 2007, GTECH continued to execute
against its strategic objectives of maintaining and expanding the
core lottery business, winning new customers, and growing perimeter
businesses. Domestically, GTECH was selected by the Virginia
Lottery to provide a new central system, terminals, an IP wireless
communications network, and ongoing services under a seven-year
integrated services contract. The Company also celebrated the
success of the fastest, and smoothest, instant ticket launch in
GTECH history in North Carolina on March 30, 2006. On May 30, 2006,
GTECH launched North Carolina's online game offering, Powerball.
Internationally, GTECH signed a three-year contract extension with
the Beijing Welfare Lottery Center to provide a new central system,
terminals, and ongoing software licensing and support. In Brazil,
Caixa Economica Federal approved a 90-day contract extension with
the Company. GTECH's subsidiary Spielo delivered 540 WinWave(TM)
terminals to Svenska Spel in Sweden, and 300 WinWave terminals to
Atlantic Lottery Corporation in Canada. Also during the quarter,
GTECH launched Pick 'n Play(TM) in Illinois. Pick 'n Play is 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. Since the inaugural launch in
March 2006, sales in Illinois have topped the $11 million mark. The
state of Illinois was also the first in the United States to
receive GTECH's ISYS(TM) Text-to-Speech (TTS) application that
enables a visually-impaired retailer's personal computer to audibly
"read" the text that is displayed on the ISYS terminal. In effect,
the ISYS can now "talk" to the visually-impaired lottery clerk. The
Text-to-Speech application is easily configurable for all ISYS
terminals currently in the field worldwide. GTECH will work with
customers on an individual basis to determine how best to implement
the application for visually-impaired retailers in other
jurisdictions. "We remain committed to helping customers drive
revenue through new content and new technology," continued Mr.
Turner. "With the addition of Connie Laverty as GTECH's Senior Vice
President and Chief Marketing Officer, we will continue to identify
market trends and long-range market opportunities for product
development, content development, sales, and potential
acquisitions." Other Business Developments After the close of the
quarter, GTECH shareholders voted to approve the
previously-announced merger agreement providing for the acquisition
of GTECH by Lottomatica S.p.A., at a special meeting of
shareholders. Subject to the satisfaction or waiver of the
remaining conditions set forth in the merger agreement, the
proposed merger is expected to be completed in mid-2006. If the
proposed merger is completed, GTECH will become an indirect
wholly-owned subsidiary of Lottomatica and each outstanding share
of GTECH common stock will be converted into the right to receive
$35.00 in cash, without interest. 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 (a) 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, and (b) the expected timing, completion,
and effects of the proposed merger. 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 possibility of adverse determinations
in legal proceedings in Brazil; (iii) the continued ability of the
Company to retain and extend its existing contracts and win new
contracts; (iv) the possibility of slower than expected growth or
declines in sales of lottery and gaming goods and services; (v)
economic, political and social instability risks inherent in doing
business in foreign jurisdictions; (vi) exposure to foreign
currency exchange rate fluctuations; (vii) the relatively large
percentage of the Company's revenues attributable to a relatively
small number of the Company's customers; (viii) the possibility of
significant fluctuation of quarterly operating results; (ix) the
intensity of competition in the lottery and gaming industries; (x)
the possibility of substantial penalties under the Company's
contracts; (xi) the ability of the Company to respond to
technological change and to satisfy the future technological
demands of its customers; (xii) acquisitions by the Company; (xiii)
opposition to the expansion of lottery and gaming; (xiv) the
Company's ability to attract and retain qualified employees; (xv)
the Company's heavy dependence upon the integrity of its employees
and executives and the security of its systems; (xvi) the Company's
dependence upon certain suppliers and the related risk of
implementation delays; (xvii) the Company's non-lottery ventures,
which are an increasingly important part of its business, given the
Company's relative lack of experience in markets outside of its
core lottery market and the difficulty in obtaining non-lottery
gaming licenses; (xviii) the Company's ability to protect its
intellectual property or prevent its use by third parties; (xix)
third party infringement claims; (xx) network interruption risks;
and (xxi) the ability of Lottomatica and the Company to complete
the proposed merger. 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 401-392-7452 Consolidated
financial statements to follow: GTECH HOLDINGS CORPORATION AND
SUBSIDIARIES CONSOLIDATED INCOME STATEMENTS (Unaudited) Three
Months Ended May 27, May 28, 2006 2005 (Dollars in thousands,
except per share amounts) Revenues: Services $290,175 $291,364
Sales of products 25,671 35,035 315,846 326,399 Costs and expenses:
Costs of services 175,821 168,917 Costs of sales 15,051 21,604
190,872 190,521 Gross profit 124,974 135,878 Selling, general and
administrative 39,275 32,019 Research and development 10,797 12,938
Operating expenses 50,072 44,957 Operating income 74,902 90,921
Other income (expense): Interest income 4,389 2,045 Equity in
earnings of unconsolidated affiliates 601 1,787 Other expense (75)
(1,794) Interest expense (7,453) (7,265) (2,538) (5,227) Income
before income taxes 72,364 85,694 Income taxes 26,702 30,850 Net
income $45,662 $54,844 Basic earnings per share $0.36 $0.48 Diluted
earnings per share $0.35 $0.43 Weighted average shares outstanding
- basic 127,279 114,646 Weighted average shares outstanding -
diluted 130,436 129,707 Cash dividends declared per common share
$0.085 $0.085 GTECH HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited) May 27, February 25, 2006
2006 ASSETS (Dollars in thousands) CURRENT ASSETS: Cash and cash
equivalents $185,177 $235,191 Investment securities available-for-
sale 323,125 260,725 Trade and other receivables, net 151,449
183,561 Refundable performance deposit 8,000 8,000 Inventories
108,539 88,024 Deferred income taxes 27,783 26,398 Other current
assets 55,003 47,819 TOTAL CURRENT ASSETS 859,076 849,718 SYSTEMS,
EQUIPMENT AND OTHER ASSETS RELATING TO CONTRACTS, net 731,266
692,545 GOODWILL 346,096 346,096 PROPERTY, PLANT AND EQUIPMENT, net
108,693 101,416 INTANGIBLE ASSETS, net 61,589 64,212 OTHER ASSETS
43,789 45,915 TOTAL ASSETS $2,150,509 $2,099,902 LIABILITIES AND
SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $78,698
$93,205 Accrued expenses 49,123 46,220 Employee compensation 23,792
31,804 Advance payments from customers 79,287 63,768 Deferred
revenue and advance billings 31,354 17,889 Income taxes payable
64,852 67,098 Taxes other than income taxes 16,887 17,106 Short
term borrowings 1,748 - Current portion of long-term debt 6,326
9,148 TOTAL CURRENT LIABILITIES 352,067 346,238 LONG-TERM DEBT,
less current portion 539,769 542,259 OTHER LIABILITIES 114,142
106,671 DEFERRED INCOME TAXES 97,765 99,362 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, 127,381,252 and 127,179,225 shares issued and
outstanding at May 27, 2006 and February 25, 2006, respectively
1,274 1,272 Additional paid-in capital 449,302 444,810 Accumulated
other comprehensive loss (33,551) (35,662) Retained earnings
629,741 594,952 1,046,766 1,005,372 TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $2,150,509 $2,099,902 GTECH HOLDINGS
CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) Three Months Ended May 27, May 28, 2006 2005 (Dollars
in thousands) OPERATING ACTIVITIES Net income $45,662 $54,844
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation 42,008 42,023 Intangibles
amortization 2,444 2,485 Other amortization 430 156 Stock-based
compensation expense 2,556 2,523 Deferred income taxes (2,982)
4,372 Excess tax benefit from stock option exercises (842) 3,044
Minority interest 720 1,309 Equity in earnings of unconsolidated
affiliates, net of dividends received 266 (1,787) Other 1,987 5,183
Changes in operating assets and liabilities: Trade and other
receivables, net 30,410 17,820 Inventories (20,515) 13,486 Other
current assets (6,984) (4,631) Accounts payable (13,015) (32,448)
Employee compensation (8,984) 3,188 Advance payments from customers
15,519 (192) Deferred revenue and advance billings 13,465 (5,101)
Income taxes payable (1,404) 11,558 Other assets and liabilities
1,562 3,744 NET CASH PROVIDED BY OPERATING ACTIVITIES 102,303
121,576 INVESTING ACTIVITIES Purchases of systems, equipment and
other assets relating to contracts (80,235) (40,562) Purchases of
available-for-sale investment securities (63,500) (85,000)
Maturities and sales of available- for-sale investment securities
1,100 72,325 Purchases of property, plant and equipment (2,986)
(2,394) Decrease in restricted cash - 5,080 Other (163) 296 NET
CASH USED FOR INVESTING ACTIVITIES (145,784) (50,255) FINANCING
ACTIVITIES Dividends paid (10,822) (9,770) Principal payments on
long-term debt (2,553) (1,317) Proceeds from stock options 330
3,322 Excess tax benefit from stock option exercises 842 -
Purchases of treasury stock - (32,051) Other 3,201 863 NET CASH
USED FOR FINANCING ACTIVITIES (9,002) (38,953) Effect of exchange
rate changes on cash 2,469 (1,180) INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (50,014) 31,188 Cash and cash equivalents at
beginning of period 235,191 94,446 CASH AND CASH EQUIVALENTS AT END
OF PERIOD $185,177 $125,634 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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