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Non-Tech : GTECH Holdings Corporation (GTK)

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From: JakeStraw6/22/2005 8:14:44 AM
   of 8
GTECH Announces Fiscal Year 2006 First Quarter Results

Wednesday June 22, 7:35 am ET

WEST GREENWICH, R.I., June 22 /PRNewswire-FirstCall/ -- GTECH Holdings Corporation (NYSE: GTK) today announced first quarter earnings for fiscal year 2006, which ended May 28, 2005.

"GTECH delivered another strong financial performance in the first quarter," said GTECH President and CEO W. Bruce Turner. "We also scored several key wins and made significant strategic progress. We are pleased to report that we also saw progress in Brazil in the first quarter, where it appears we are one step closer to a resolution of what has been a difficult situation for GTECH."

"We are pleased with the underlying strength of the business," said GTECH Senior Vice President and CFO Jaymin B. Patel. "Our continued financial, operational, and strategic successes provide further confidence in our ability to drive profitable growth for our shareholders in both the near term and over the next several years."

Operating Results

Revenues for the first quarter of fiscal 2006 were $326.4 million, up 16.5% over revenues of $280.2 million in the first quarter of fiscal 2005. Net income was $54.8 million, or $0.43 per diluted share, compared to net income of $53.6 million, or $0.40 per diluted share for the same period last year. Net income in the first quarter of the prior year includes a one-time, after-tax gain of $6.9 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.

Prior year earnings and dividends per share reflect the 2-for-1 common stock split declared in June 2004.

Cash Flow and Investments

During the first quarter of fiscal 2006, the Company generated $121.6 million of cash from operations. This cash was principally used to fund $40.6 million of systems, equipment, and other assets relating to contracts; to repurchase $32.1 million, or 1.3 million shares of the Company's common stock; and to pay cash dividends of $9.8 million. At May 28, 2005, the Company had $125.6 million of cash and cash equivalents and $209.5 million of short-term investment securities on hand.

At the end of the first quarter of fiscal 2006, the Company had no borrowings under its $500 million senior revolving credit facility.

Financial Outlook

The Company provided guidance for the full year and second quarter of fiscal 2006.

For the fiscal year ending February 25, 2006, the Company expects service revenue growth in the range of 11% to 13%, reflecting the net effect of a new contract in Brazil and the return of a portion of fiscal year 2005 Brazil revenues previously held in escrow. It expects product sales in the range of $180 million to $210 million.

The Company expects that service margins will be in the range of 40% to 42%, and product sale margins to be in the range of 38% to 40%.

Based upon this outlook, it now expects earnings per share for fiscal 2006 to be in the range of $1.64 to $1.70 on a fully-diluted basis.

For the second quarter of fiscal 2006, ending August 27, 2005, the Company expects service revenue growth in the range of 10% to 12% and product sales in the range of $30 million to $35 million. The Company expects service and product sale margins in the range of 38% to 40%. Accordingly, the Company expects earnings per share to be in the range of $0.37 to $0.40 per share for the quarter.

First Quarter Highlights

In the first quarter of 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 was selected by the Pennsylvania Department of Revenue for a gaming central control system. The system will monitor and control up to 61,000 gaming devices at approximately 14 venues throughout the state. In addition, GTECH was named the preferred vendor to provide a video gaming monitoring system and site controllers for the Louisiana Department of Public Safety & Corrections video gaming program. Both of these awards follow highly competitive procurements.

Also in the quarter, GTECH received an order for 2,400 Instant Ticket Vending Machines (ITVMs) to be provided to the Pennsylvania Lottery. The Hoosier Lottery in Indiana also selected GTECH to negotiate a contract for 680 ITVMs.

Internationally, GTECH received a one-year contract from the Company's customer in Brazil, Caixa Economica Federal, through May 14, 2006. In Denmark, GTECH signed a two-year contract extension with Dansk Tipstjeneste, the operator of the Danish National Lottery. The Company was also granted an 18-year agreement to operate The Barbados Lottery, which was recently consolidated from three lotteries into one.

GTECH further strengthened its management team with the appointments of Dr. Joseph Nadan as Senior Vice President and Chief Technology Officer, and Bruce Rowe as Vice President of Business Strategy for Gaming Solutions, and General Manager of Nevada Operations.

Also in the first quarter, GTECH announced that it formed a strategic alliance with Harrah's Operating Company, Inc., a subsidiary of Harrah's Entertainment, Inc., whereby GTECH will supply Harrah's properties with gaming machines, and the two companies will work together to develop new game content.

Over the next two years, GTECH will place 200 leased video gaming machines in Harrah's properties around the country. The companies will also explore opportunities to expand the relationship with additional slot products in future years, depending upon the performance of the machines installed during the initial period.

"Our long-term strategy remains the same. We will work to drive new growth through acquisition and partnerships, and we will continue to focus on M&A transactions that enhance our offerings in the online and instant channels, monitor games, gaming machines, and the full range of interactive channels," continued Mr. Turner. "All of these activities will bring us closer to achieving our ultimate goal: to become a fully-diversified, world- class gaming company. This will ensure that we have a wealth of opportunities to fuel our continued growth."
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