GTECH Announces Fiscal Year 2006 First Quarter Results

GTECH Announces Fiscal Year 2006 First Quarter Results 


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."

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 $1.2
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


               GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED INCOME STATEMENTS

                                                        (Unaudited)
                                                    Three Months Ended
                                                 May 28,           May 29,
                                                  2005              2004
                                                  (Dollars in thousands,
                                                 except per share amounts)
  Revenues:
   Services                                     $291,364          $253,326
   Sales of products                              35,035            26,879
                                                 326,399           280,205
  Costs and expenses:
   Costs of services                             168,917           147,293
   Costs of sales                                 21,604            15,917
                                                 190,521           163,210

  Gross profit                                   135,878           116,995

  Selling, general and administrative             32,019            27,635
  Research and development                        12,938            13,087
   Operating expenses                             44,957            40,722

  Operating income                                90,921            76,273

  Other income (expense):
   Interest income                                 2,045             1,335
   Equity in earnings of unconsolidated
    affiliates                                     1,787             1,306
   Other income (expense)                         (1,794)           10,525
   Interest expense                               (7,265)           (4,336)
                                                  (5,227)            8,830

  Income before income taxes                      85,694            85,103

  Income taxes                                    30,850            31,488

  Net income                                     $54,844           $53,615

  Basic earnings per share                         $0.48             $0.45

  Diluted earnings per share                       $0.43             $0.40

  Weighted average shares outstanding -
   basic                                         114,646           118,624

  Weighted average shares outstanding -
   diluted                                       129,707           134,977

  Cash dividends declared per common
   share                                          $0.085            $0.085


               GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

                       CONSOLIDATED BALANCE SHEETS

                                                       (Unaudited)
                                                 May 28,      February 26,
                                                  2005              2005
  ASSETS                                          (Dollars in thousands)
  CURRENT ASSETS:
   Cash and cash equivalents                    $125,634           $94,446
   Investment securities available-for-
    sale                                         209,500           196,825
   Trade accounts receivable, net                148,509           168,706
   Sales-type lease receivables                    3,271             3,461
   Refundable performance deposit                  8,000             8,000
   Inventories                                    47,638            61,135
   Deferred income taxes                          24,538            31,435
   Other current assets                           31,286            26,646
        TOTAL CURRENT ASSETS                     598,376           590,654

  SYSTEMS, EQUIPMENT AND OTHER ASSETS
   RELATING TO CONTRACTS, net                    714,085           720,438

  GOODWILL, net                                  330,726           331,022

  PROPERTY, PLANT AND EQUIPMENT, net              77,595            74,558

  INTANGIBLE ASSETS, net                          68,190            70,839

  REFUNDABLE PERFORMANCE DEPOSIT                  12,000            12,000

  SALES-TYPE LEASE RECEIVABLES                     3,942             4,756

  OTHER ASSETS                                    49,975            50,874
        TOTAL ASSETS                          $1,854,889        $1,855,141


  LIABILITIES AND SHAREHOLDERS' EQUITY
  CURRENT LIABILITIES:
   Accounts payable                              $62,424           $99,234
   Accrued expenses                               57,852            54,227
   Employee compensation                          26,240            21,862
   Advance payments from customers                42,673            42,865
   Deferred revenue and advance billings          24,604            29,705
   Income taxes payable                           28,057            16,499
   Taxes other than income taxes                  17,012            16,572
   Short term borrowings                              20               334
   Current portion of long-term debt               3,567             2,476
        TOTAL CURRENT LIABILITIES                262,449           283,774

  LONG-TERM DEBT, less current portion           721,425           726,329

  OTHER LIABILITIES                               89,696            83,260

  DEFERRED INCOME TAXES                          103,485           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, 116,551,144 shares issued;
    114,491,856 and 115,006,751 shares
    outstanding at May 28, 2005 and
    February 26, 2005, respectively                1,166             1,166
   Additional paid-in capital                    281,248           278,204
   Accumulated other comprehensive loss          (47,435)          (43,227)
   Retained earnings                             492,438           455,537
                                                 727,417           691,680
   Less cost of 2,059,288 and 1,544,393
    shares in treasury at May 28, 2005
   and February 26, 2005, respectively           (49,583)          (35,912)
                                                 677,834           655,768
        TOTAL LIABILITIES AND
         SHAREHOLDERS' EQUITY                 $1,854,889        $1,855,141


               GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

                  CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                        (Unaudited)
                                                    Three Months Ended
                                                 May 28,           May 29,
                                                  2005              2004
                                                   (Dollars in thousands)
  OPERATING ACTIVITIES
  Net income                                     $54,844           $53,615
  Adjustments to reconcile net income
   to net cash provided by operating activities:
    Depreciation                                  42,023            33,379
    Intangibles amortization                       2,641             1,633
    Deferred income taxes                          4,372             7,237
    Tax benefit related to stock award
     plans                                         3,044             5,250
    Minority interest                              1,309               353
    Equity in earnings of unconsolidated
     affiliates, net of dividends received        (1,787)             (494)
    Gain on sale of investment                        --           (10,924)
    Other                                          7,706             3,123
    Changes in operating assets and liabilities:
     Trade accounts receivable                    16,924            (6,417)
     Inventories                                  13,486           (10,340)
     Accounts payable                            (32,448)           (7,020)
     Employee compensation                         3,188           (13,802)
     Advance payments from customers                (192)           22,610
     Deferred revenue and advance billings        (5,101)           16,169
     Income taxes payable                         11,558             9,899
     Other assets and liabilities                      9            (7,823)
  NET CASH PROVIDED BY OPERATING ACTIVITIES      121,576            96,448

  INVESTING ACTIVITIES
  Acquisitions (net of cash acquired)                296          (193,018)
  Purchases of systems, equipment and
   other assets relating to contracts            (40,562)          (53,932)
  Purchases of available-for-sale
   investment securities                         (85,000)          (49,895)
  Maturities and sales of available-
   for-sale investment securities                 72,325           259,600
  Purchases of property, plant and
   equipment                                      (2,394)           (1,973)
  Decrease in restricted cash                      5,080                --
  Proceeds from sale of investment                    --            11,773
  Investments in and advances to
   unconsolidated subsidiaries                        --              (775)
  NET CASH USED FOR INVESTING ACTIVITIES         (50,255)          (28,220)

  FINANCING ACTIVITIES
  Principal payments on long-term debt            (1,317)          (91,239)
  Purchases of treasury stock                    (32,051)          (28,275)
  Dividends paid                                  (9,770)          (10,103)
  Premiums and fees paid in connection
   with the early retirement of debt                  --           (10,610)
  Proceeds from stock options                      3,322             3,508
  Other                                              863               769
  NET CASH USED FOR FINANCING ACTIVITIES         (38,953)         (135,950)

  Effect of exchange rate changes on cash         (1,180)           (1,376)
  INCREASE (DECREASE) IN CASH AND
   CASH EQUIVALENTS                               31,188           (69,098)

  Cash and cash equivalents at
   beginning of period                            94,446           129,339

  CASH AND CASH EQUIVALENTS AT END OF
   PERIOD                                       $125,634           $60,241


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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