GTECH Holdings Corporation Announces Strong First Quarter Results

GTECH Holdings Corporation Announces Strong First Quarter Results
Full Year Outlook Remains Positive 


WEST GREENWICH, R.I., June 22  /PRNewswire-FirstCall/ -- GTECH Holdings
Corporation (NYSE:GTK) today announced first quarter earnings for fiscal year
2005 ended May 29, 2004.

"It was a quarter of continued progress at GTECH, with our financial,
operational, and strategic plans all moving forward as expected," said GTECH
President and CEO W. Bruce Turner.  "Both revenue and earnings were in line
with our expectations, and we continued to see steady growth in same-store
sales.  The first quarter marked the eighth consecutive quarter of meaningful
growth in same-store sales."

"We continue to be encouraged by the positive trends we have been seeing in the
business," said GTECH Senior Vice President and Chief Financial Officer Jaymin
B. Patel.  "We are pleased with the strength of our core business and excited
about the opportunities our new acquisitions offer.  Based upon our current
outlook, we are confident we can achieve our goals and objectives in fiscal
2005 and beyond."

Operating Results

Revenues for the first quarter of fiscal 2005 were $280.2 million, up 17.0%
over revenues of $239.6 million in the first quarter of fiscal 2004. Net income
was $53.6 million, or $0.80 per diluted share, up 30.7% over net income of
$41.0 million, or $0.68 per diluted share, for the same period last year.  Net
income in the first quarter of fiscal 2005 includes a net, one- time, after-tax
gain of $6.4 million, or approximately $0.09 per diluted share, associated with
the sale of the Company's 50% interest in Gaming Entertainment (Delaware)
L.L.C., net of charges associated with the early retirement of the remainder of
the Company's 2007 private placement notes.

Cash Flow and Investments

During the first quarter of fiscal 2005, the Company generated $85.8 million of
cash from operations which, along with other sources of liquidity, was
principally used to fund the Spielo Manufacturing Incorporated and Leeward
Islands Lottery Holding Company, Inc. acquisitions of $193.0 million, and to
purchase systems, equipment, and other assets relating to contracts of $53.9
million.  In addition, in the first quarter, the Company repaid the remaining
$90.0 million of its 7.87% Senior Notes; repurchased $28.3 million, or 545,000
shares, of the Company's common stock; and paid cash dividends of $10.1
million.

At the end of the first quarter of fiscal 2005, GTECH had no borrowings under
its $300.0 million credit facility.

Recent Development

This morning, the Company announced that its Board of Directors approved a
2-for-1 stock split of the Company's common stock.  The stock split will be
effected in the form of a stock dividend to be distributed on July 30, 2004, to
shareholders of record on July 1, 2004, with shareholders receiving one
additional share of common stock for each share held.  The Company had
58,993,004 shares of common stock outstanding as of May 29, 2004.

Financial Outlook

The Company also revised its guidance upward for fiscal year ending February
26, 2005.

The Company continues to expect total revenue growth of 20% to 21%, with
service revenue growth in the range of 7% to 9%, and product sales in the range
of $210 million to $220 million.

The Company continues to expect that service profit margins will be in the
range of 41% to 43%, and product sale profit margins to be in the range of 36%
to 38%.

The Company now expects a reduction in the effective tax rate from 37% to 36%
for the fiscal year, and it expects to effect this change in the second half of
the fiscal year.

Based upon this outlook, the Company now expects earnings per share for fiscal
2004 to be in the range of $3.05 to $3.15 on a fully-diluted basis, rather than
the previous guidance of $3.00 to $3.10 per diluted share.

For the second quarter of fiscal 2005 ending August 28, 2004, the Company
expects service revenue growth in the range of 7% to 9%, and product sales in
the range of $80 million to $90 million.  The Company expects service margins
in the range of 40% to 42%, and product margins in the range of 38% to 40%. The
Company expects the effective tax rate to be comparable to the first quarter of
fiscal 2005.  Accordingly, the Company expects earnings per share to be in the
range of $0.75 to $0.80 per share for the quarter, compared with $0.74 reported
in the same period last year.

  This guidance is provided on a pre-split basis.

  First Quarter Highlights


During the first quarter, GTECH continued to execute against its growth
strategy by signing new contracts and contract extensions both abroad and
domestically.  Oeuvre Nationale de Secours Grande-Duchesse Charlotte, the
operator of Loterie Nationale of Luxembourg, signed a five-year extension with
the Company to provide new lottery terminals, products, and ongoing services
through October 2012.  In addition, South Australian Lotteries Commission
(SALC) extended its contract with GTECH through June 26, 2007.  Under this
extension, GTECH will continue to provide SALC with software licensing for both
online and instant ticket lottery systems, and a keno game.  GTECH's customer
in Turkey, Milli Piyango, also extended its contract with GTECH through
November 10, 2005, as did Spain's Loto Catalunya for an additional year through
March 2005.

Domestically, the Company was notified of the Virginia Lottery's intent to
award a seven-year contract to Oberthur Gaming Technologies Corporation (OGT)
under which GTECH will be subcontracted to provide new Instant Ticket Vending
Machines (ITVMs) and management of warehousing and distribution of instant
tickets.  The contract, which was recently executed and commenced earlier this
month, includes options to renew for up to three years.

Additionally, GTECH was awarded contracts with the Illinois Lottery and
Washington Lottery for Instant Ticket Dispensing Machines (ITDMs) and Lottery
Product Vending Machines (LPVMs), respectively.

Also in the quarter, GTECH's wholly-owned subsidiary, Spielo Manufacturing
Incorporated, announced that it would provide the Oregon Lottery with
approximately 2,000 PowerStation 5(TM) video lottery terminals (VLTs).  GTECH
completed the acquisition of Spielo in April 2004.

In the last month of the quarter, GTECH closed on the acquisition of Leeward
Islands Lottery Holding Company, a lottery operating company headquartered on
the Caribbean islands of Antigua and St. Croix.

"We successfully launched the online games in Tennessee in April and debuted
HotTrax, a new 3D, animated monitor game, at 50 locations in Rhode Island in
late May," continued Mr. Turner.  "HotTrax holds much promise for GTECH and
raises the bar in new game development.  It is just one of several initiatives
that will help drive continued growth in same-store sales."

Other initiatives include e-scratch(TM), an innovative web-based, interactive
suite of scratch and reveal games; the development of new instant online games
along the lines of Extra(TM) and Bingo(TM); as well as branded games, beginning
with the Monopoly brand the Company recently licensed from Hasbro Properties
Group, the intellectual property development arm of Hasbro, Inc.

After the close of the quarter, Organizacion Nacional de Ciegos Espanoles
(ONCE) exercised an option in its existing agreement with GTECH for the
provision of 7,000 additional handheld lottery terminals for visually-impaired
retailers in Spain.  This will bring the total count of hand-held terminals to
14,000 by the end of the calendar year.

Other Business Developments

In April, GTECH was notified that its selection as the apparent successful
vendor to provide equipment and services for a new online lottery system and
associated telecommunications network in Mexico to Pronosticos para la
Asistencia Publica (Pronosticos) was retracted.  As part of a ruling by the
Mexican Comptroller Ministry on a protest filed by unsuccessful competitors,
GTECH's bid was declared non-compliant and disqualified.  Subsequently,
Pronosticos announced that it disqualified the sole remaining bidder as also
being non-compliant and formally ended the procurement.

GTECH believes that it submitted a fully compliant bid to Pronosticos that was
in the best interest of the lottery.  The Company is pursuing all appropriate
avenues available to contest the Comptroller's decision in this matter.  In the
interim, as the incumbent lottery vendor, GTECH will continue to operate the
lottery under its existing contract.

In May, GTECH was notified by Lotería Electronica de Puerto Rico of its intent
to negotiate a contract to provide equipment and services for a new online
lottery system, terminals, and associated telecommunications network with
another vendor.  In an effort to understand the rationale behind the decision,
GTECH filed a petition with the Court of Appeals to obtain a copy of the
evaluation report, which was withheld by Loteria Electronica.  GTECH also
requested, and was granted, a stay of contract negotiations between Loteria
Electronica and the apparent successful vendor.  The Company is currently
awaiting the court's decision.

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.  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, a leading global information technology company with over $1 billion in
revenues and more than 5,500 people in 45 countries, provides software,
networks, and professional services that power high-performance, transaction
processing solutions.  The Company's core market is the lottery industry, with
a growing presence in commercial gaming technology and financial services
transaction processing.  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 29,           May 24,
                                                 2004              2003
                                                 (Dollars in thousands,
                                                except per share amounts)
  Revenues:
    Services                                    $253,326          $223,538
    Sales of products                             26,879            16,047
                                                 280,205           239,585
  Costs and expenses:
    Costs of services                            147,293           126,797
    Costs of sales                                15,917             8,629
                                                 163,210           135,426

  Gross profit                                   116,995           104,159

  Selling, general and administrative             27,635            24,280
  Research and development                        13,087            14,390
      Operating expenses                          40,722            38,670

  Operating income                                76,273            65,489

  Other income (expense):
    Interest income                                1,335             1,188
    Equity in earnings of unconsolidated
     affiliates                                    1,306             1,929
    Other income (expense)                        10,525            (1,180)
    Interest expense                              (4,336)           (2,306)
                                                   8,830              (369)

  Income before income taxes                      85,103            65,120

  Income taxes                                    31,488            24,094

  Net income                                     $53,615           $41,026

  Basic earnings per share                         $0.90             $0.72

  Diluted earnings per share                       $0.80             $0.68

  Weighted average shares outstanding -
   basic                                          59,312            56,904

  Weighted average shares outstanding -
   diluted                                        67,489            60,228

  Dividends per share - common stock               $0.17              $-




                 GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

                         CONSOLIDATED BALANCE SHEETS

                                               (Unaudited)
                                                 May 29,        February 28,
                                                  2004              2004
  ASSETS                                          (Dollars in thousands)
  CURRENT ASSETS:
    Cash and cash equivalents                    $60,241          $129,339
    Investment securities available-for-
     sale                                         12,145           221,850
    Trade accounts receivable, net               130,431           118,902
    Sales-type lease receivables                   8,201             7,705
    Inventories                                   97,368            76,784
    Deferred income taxes                         32,314            34,396
    Other current assets                          29,886            24,426
       TOTAL CURRENT ASSETS                      370,586           613,402

  SYSTEMS, EQUIPMENT AND OTHER ASSETS
   RELATING TO CONTRACTS, net                    620,700           591,362

  GOODWILL, net                                  312,676           188,612

  PROPERTY, PLANT AND EQUIPMENT, net              63,634            57,576

  INTANGIBLE ASSETS, net                          97,562            28,231

  REFUNDABLE PERFORMANCE DEPOSIT                  20,000            20,000

  SALES-TYPE LEASE RECEIVABLES                    15,801            17,653

  OTHER ASSETS                                    38,540            42,295
       TOTAL ASSETS                           $1,539,499        $1,559,131


  LIABILITIES AND SHAREHOLDERS' EQUITY
  CURRENT LIABILITIES:
    Accounts payable                             $75,808           $80,004
    Accrued expenses                              49,465            47,428
    Employee compensation                         21,963            33,981
    Advance payments from customers              127,238           104,128
    Deferred revenue and advance billings         30,628            14,459
    Income taxes payable                          21,395            12,394
    Taxes other than income taxes                 20,171            19,459
    Current portion of long-term debt              5,816           106,319
       TOTAL CURRENT LIABILITIES                 352,484           418,172

  LONG-TERM DEBT, less current portion           453,463           463,215

  OTHER LIABILITIES                               55,898            53,736

  DEFERRED INCOME TAXES                           89,443            61,719

  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 - 150,000,000 shares
     authorized, 92,295,404 and 92,295,404 shares
     issued; 58,993,004 and 59,197,584
     shares outstanding at May 29, 2004 and
     February 28, 2004, respectively                 923               923
    Additional paid-in capital                   271,570           266,320
    Accumulated other comprehensive loss         (71,836)          (70,508)
    Retained earnings                            884,700           839,270
                                               1,085,357         1,036,005
    Less cost of 33,302,400 and
     33,097,820 shares in treasury at
     May 29, 2004 and February 28, 2004,
     respectively                               (497,146)         (473,716)
                                                 588,211           562,289
       TOTAL LIABILITIES AND SHAREHOLDERS'
        EQUITY                                $1,539,499        $1,559,131




                 GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                      (Unaudited)
                                                   Three Months Ended
                                                May 29,           May 24,
                                                  2004              2003
                                                  (Dollars in thousands)
  OPERATING ACTIVITIES
  Net income                                     $53,615           $41,026
  Adjustments to reconcile net income
   to net cash provided by
  operating activities:
    Depreciation                                  33,379            25,692
    Intangibles amortization                       1,633               447
    Deferred income taxes benefit                  7,237                 -
    Tax benefit related to stock award
     plans                                         5,250             4,415
    Gain on sale of investment                   (10,924)                -
    Interest rate swap gains                     (10,103)                -
    Equity in earnings of unconsolidated
     affiliates, net of dividends
     received                                       (494)             (959)
    Other                                          2,955             3,284
    Changes in operating assets and
     liabilities:
       Trade accounts receivable                  (6,417)           11,447
       Inventories                               (10,340)          (12,426)
       Accounts payable                           (7,020)           (2,049)
       Employee compensation                     (13,802)          (17,438)
       Advance payments from customers            22,610            10,941
       Deferred revenue and advance billings      16,169             2,920
       Income taxes payable                        9,899            (2,799)
       Other assets and liabilities               (7,823)           (1,532)
    NET CASH PROVIDED BY OPERATING
     ACTIVITIES                                   85,824            62,969

  INVESTING ACTIVITIES
  Acquisitions (net of cash acquired)           (193,018)                -
  Purchases of systems, equipment and
   other assets relating to contracts            (53,932)          (58,663)
  Purchases of available-for-sale
   investment securities                         (49,895)                -
  Maturities and sales of available-
   for-sale investment securities                259,600                 -
  Proceeds from sale of investment                11,773                 -
  Other                                           (2,748)           (1,186)
  NET CASH USED FOR INVESTING
   ACTIVITIES                                    (28,220)          (59,849)

  FINANCING ACTIVITIES
  Net proceeds from issuance of long-
   term debt                                          14             1,409
  Principal payments on long-term debt           (91,239)             (866)
  Proceeds from stock options                      3,508             8,406
  Purchases of treasury stock                    (28,275)                -
  Dividends paid                                 (10,103)                -
  Other                                              769               (52)
  NET CASH PROVIDED BY (USED FOR)
   FINANCING ACTIVITIES                         (125,326)            8,897

  Effect of exchange rate changes on
   cash                                           (1,376)            3,285
  INCREASE (DECREASE) IN CASH AND CASH
   EQUIVALENTS                                   (69,098)           15,302

  Cash and cash equivalents at
   beginning of period                           129,339           116,174

  CASH AND CASH EQUIVALENTS AT END OF
   PERIOD                                        $60,241          $131,476


DATASOURCE: GTECH Holdings Corporation



CONTACT:  Robert K. Vincent, Public Affairs of GTECH Corporation,

[phone]



Web site:  http://www.gtech.com/ 

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