Exhibit 99.1
55 Technology Way
West Greenwich, Rhode Island 02817 USA
Telephone: 401 392-1000
Fax: 401 392-1234
Website: WWW.GTECH.COM
For Immediate Release | Contact: Robert K. Vincent |
December 16, 2005 | Public Affairs |
| GTECH Corporation |
| 401-392-7452 |
GTECH ANNOUNCES STRONG THIRD QUARTER RESULTS
WEST GREENWICH, RI – (December 16, 2005) – GTECH Holdings Corporation (NYSE: GTK) today announced third quarter earnings for fiscal year 2006, which ended November 26, 2005.
“We are pleased with GTECH’s performance in the third quarter and we remain on track to meet our financial objectives for the full fiscal year,” said GTECH President and CEO W. Bruce Turner. “Our financial results were at the high end of our targeted expectations. We won several key new contracts, new game content is driving new revenues, and we continue to make progress in our Gaming Solutions strategy.”
“We believe the contributions from new contracts won over the past 12 to 18 months, combined with the impact of our acquisitions, will help drive our continued success, and we remain excited about the long-term growth prospects of the business,” said GTECH Senior Vice President and CFO Jaymin B. Patel.
-more-
1
Operating Results
Revenues for the third quarter of fiscal 2006 were $300.1 million, down 4.9% from revenues of $315.6 million in the third quarter of fiscal 2005. Net income was $47.8 million, or $0.37 per diluted share, compared to net income of $45.9 million, or $0.35 per diluted share for the same period last year.
Revenues for the first nine months of fiscal 2006 were $936.5 million, up 1.9% over revenues of $919.4 million in the first nine months of fiscal 2005. Net income was $151.6 million, or $1.17 per diluted share, compared to net income of $152.6 million, or $1.16 per diluted share for the same period last year. Net income in the first nine months of the prior year 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.
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 nine months of fiscal 2006, the Company generated $308.5 million of cash from operations. This cash was principally used to fund $92.4 million of systems, equipment, and other assets relating to contracts; to repurchase $32.1 million, or 1,326,100 shares of the Company’s common stock; and to pay cash dividends of $30.9 million. At November 26, 2005, the Company had $167.6 million of cash and cash equivalents and $261.3 million of short-term investment securities on hand.
-more-
2
At the end of the third quarter of fiscal 2006, the Company had $493 million available under its senior revolving credit facility.
Financial Outlook
The Company provided guidance for the fourth quarter and full year of fiscal 2006.
For the fourth quarter of fiscal 2006, the Company expects service revenue growth in the range of 5% to 7% and product sales in the range of $85 million to $95 million. The Company expects service margins in the range of 39% to 41% and product sale margins in the range of 41% to 43%. Accordingly, the Company expects diluted earnings per share to be in the range of $0.45 to $0.48 per share for the quarter.
For the fiscal year ending February 25, 2006, the Company expects service revenue growth in the range of 9% to 10% and product sales in the range of $190 million to $200 million.
The Company expects service margins to be in the range of 40% to 41%, and product sale margins to be in the range of 40% to 42%.
Based upon this outlook, the Company now expects earnings per share for fiscal 2006 to be in the range of $1.63 to $1.66 on a fully-diluted basis.
-more-
3
Third Quarter Highlights
In the third quarter, GTECH continued to execute against its growth strategy. The Company defended its core lottery business by receiving contract awards from customers in New Jersey and Arizona, following competitive procurements. In California, GTECH received an order for a variety of lottery products including additional Altura® terminals, Instant Ticket Vending Machines (ITVMs), and other self-service lottery solutions.
Additionally, the Company signed a five-year contract extension with Supreme Ventures Limited to continue providing online lottery products and services in Jamaica through January 11, 2016.
Also in the quarter, GTECH introduced its “Dynamic Floor Management” system at the Global Gaming Expo (G2E) in Las Vegas, Nevada. The system will give casino operators the flexibility to select the game, denomination, and mode of play for a single machine or a group of machines, thus allowing casinos to better serve their customers’ needs based on the time of day or the type of players they are expecting.
Moreover, the Company recently entered into an agreement with a leading gaming company, Aristocrat Technologies, to distribute some of its most popular products in Rhode Island. In the quarter, GTECH installed approximately 280 Aristocrat machines at Lincoln Park in Rhode Island, which are performing at more than 115% efficiency. This Aristocrat-supported installation augments product placements from Spielo and Atronic International (existing GTECH subsidiary and partner, respectively), under GTECH’s 20-year master contract with the State of Rhode Island.
-more-
4
The Company also announced a partnership with Dresser Wayne for GTECH’s Lottery Inside solution. This will integrate lottery ticket sales with Dresser Wayne’s Nucleus®, the leading petroleum retail point-of sale platform.
Lotteries in New York, California, and Georgia launched GTECH’s “KING KONG”-themed games. The New York Lottery introduced its “KING KONG” Millions online game in early November. By the time the game concluded on December 5, sales had exceeded $20 million. The California and Georgia lotteries joined New York by offering “KING KONG” themed instant-ticket offerings with multiple price points.
The Company further strengthened its senior management team by appointing Atul Bali Vice President of Corporate Development and Strategic Planning, reporting directly to Mr. Patel.
In addition, GTECH was named Corporation of the Year by the Florida Department of Management Services, Office of Supplier Diversity, for its subcontracting of minority- and women-owned businesses in support of the Florida Lottery’s operations.
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.
-more-
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
5
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 $1.25 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.
* “KING KONG” is copyrighted by Universal Studios and licensed to GTECH Corporation by Universal Studios Licensing LLLP. All Rights Reserved.
-000-
Consolidated financial statements to follow:
6
GTECH HOLDINGS CORPORATION AND SUBSIDIARIES | |
| | |
CONSOLIDATED INCOME STATEMENTS | | |
| | |
| (Unaudited) |
| Three Months Ended |
| November 26, | November 27, |
| 2005 | 2004 |
| (Dollars in thousands, |
| except per share amounts) |
Revenues: | | |
Services | $ 270,889 | $ 251,945 |
Sales of products | 29,249 | 63,702 |
| 300,138 | 315,647 |
Costs and expenses: | | |
Costs of services | 164,984 | 155,962 |
Costs of sales | 17,330 | 44,187 |
| 182,314 | 200,149 |
| | |
Gross profit | 117,824 | 115,498 |
| | |
Selling, general and administrative | 33,751 | 29,740 |
Research and development | 11,446 | 13,007 |
Operating expenses | 45,197 | 42,747 |
| | |
Operating income | 72,627 | 72,751 |
| | |
Other income (expense): | | |
Interest income | 2,836 | 642 |
Equity in earnings of unconsolidated affiliates | 817 | 810 |
Other expense | (1,018) | (2,070) |
Interest expense | (7,892) | (3,688) |
| (5,257) | (4,306) |
| | |
Income before income taxes | 67,370 | 68,445 |
Income taxes | 19,537 | 22,590 |
| | |
Net income | $ 47,833 | $ 45,855 |
Basic earnings per share | $ 0.38 | $ 0.40 |
Diluted earnings per share | $ 0.37 | $ 0.35 |
Weighted average shares outstanding - basic | 125,333 | 115,708 |
Weighted average shares outstanding - diluted | 130,875 | 131,435 |
Cash dividends declared per common share | $ 0.085 | $ 0.085 |
7
GTECH HOLDINGS CORPORATION AND SUBSIDIARIES | |
| | |
CONSOLIDATED INCOME STATEMENTS | | |
| | |
| (Unaudited) |
| Nine Months Ended |
| November 26, | November 27, |
| 2005 | 2004 |
| (Dollars in thousands, |
| except per share amounts) |
Revenues: | | |
Services | $ 828,594 | $ 753,385 |
Sales of products | 107,885 | 165,982 |
| 936,479 | 919,367 |
Costs and expenses: | | |
Costs of services | 495,525 | 451,736 |
Costs of sales | 63,678 | 103,978 |
| 559,203 | 555,714 |
| | |
Gross profit | 377,276 | 363,653 |
| | |
Selling, general and administrative | 95,608 | 87,264 |
Research and development | 35,627 | 38,741 |
Operating expenses | 131,235 | 126,005 |
| | |
Operating income | 246,041 | 237,648 |
| | |
Other income (expense): | | |
Interest income | 6,986 | 2,958 |
Equity in earnings of unconsolidated affiliates | 3,135 | 2,409 |
Other income (expense) | (3,450) | 6,531 |
Interest expense | (23,162) | (11,743) |
| (16,491) | 155 |
| | |
Income before income taxes | 229,550 | 237,803 |
| | |
Income taxes | 77,921 | 85,252 |
| | |
Net income | $ 151,629 | $ 152,551 |
| | |
Basic earnings per share | $ 1.26 | $ 1.30 |
| | |
Diluted earnings per share | $ 1.17 | $ 1.16 |
| | |
Weighted average shares outstanding - basic | 120,277 | 117,133 |
| | |
Weighted average shares outstanding - diluted | 130,257 | 133,050 |
| | |
Cash dividends declared per common share | $ 0.255 | $ 0.255 |
8
GTECH HOLDINGS CORPORATION AND SUBSIDIARIES | | |
CONSOLIDATED BALANCE SHEETS | | |
| (Unaudited) | |
| November 26, | February 26, |
| 2005 | 2005 |
ASSETS | (Dollars in thousands) |
CURRENT ASSETS: | | |
Cash and cash equivalents | $ 167,587 | $ 94,446 |
Investment securities available-for-sale | 261,275 | 196,825 |
Trade accounts receivable, net | 159,324 | 168,706 |
Sales-type lease receivables | 3,138 | 3,461 |
Refundable performance deposit | 8,000 | 8,000 |
Inventories | 86,958 | 61,135 |
Deferred income taxes | 24,416 | 31,435 |
Other current assets | 32,902 | 26,646 |
TOTAL CURRENT ASSETS | 743,600 | 590,654 |
| | |
SYSTEMS, EQUIPMENT AND OTHER ASSETS RELATING TO CONTRACTS, net | 685,832 | 720,438 |
GOODWILL, net | 345,809 | 331,022 |
PROPERTY, PLANT AND EQUIPMENT, net | 94,454 | 74,558 |
INTANGIBLE ASSETS, net | 68,645 | 70,839 |
REFUNDABLE PERFORMANCE DEPOSIT | 12,000 | 12,000 |
SALES-TYPE LEASE RECEIVABLES | 2,722 | 4,756 |
OTHER ASSETS | 41,870 | 50,874 |
TOTAL ASSETS | $ 1,994,932 | $ 1,855,141 |
| | |
LIABILITIES AND SHAREHOLDERS' EQUITY | | |
CURRENT LIABILITIES: | | |
Accounts payable | $ 58,802 | $ 99,234 |
Accrued expenses | 56,516 | 54,227 |
Employee compensation | 33,383 | 21,862 |
Advance payments from customers | 55,493 | 42,865 |
Deferred revenue and advance billings | 40,377 | 29,705 |
Income taxes payable | 45,966 | 16,499 |
Taxes other than income taxes | 17,867 | 16,572 |
Short term borrowings | - | 334 |
Current portion of long-term debt | 2,518 | 2,476 |
TOTAL CURRENT LIABILITIES | 310,922 | 283,774 |
| | |
LONG-TERM DEBT, less current portion | 561,850 | 726,329 |
OTHER LIABILITIES | 99,946 | 83,260 |
DEFERRED INCOME TAXES | 92,034 | 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, 126,366,782 and 116,551,144 shares issued; 126,366,782 and 115,006,751 shares outstanding at November 26, 2005 and February 26, 2005, respectively | 1,264 | 1,166 |
Additional paid-in capital | 427,528 | 278,204 |
Accumulated other comprehensive loss | (44,950) | (43,227) |
Retained earnings | 546,338 | 455,537 |
| 930,180 | 691,680 |
Less cost of 1,544,393 shares in treasury at February 26, 2005 | - | (35,912) |
| 930,180 | 655,768 |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ 1,994,932 | $ 1,855,141 |
9
GTECH HOLDINGS CORPORATION AND SUBSIDIARIES | | |
CONSOLIDATED STATEMENTS OF CASH FLOWS | | |
| (Unaudited) |
| Nine Months Ended |
| November 26, | November 27, |
| 2005 | 2004 |
| (Dollars in thousands) |
OPERATING ACTIVITIES | | |
Net income | $ 151,629 | $ 152,551 |
Adjustments to reconcile net income to net cash provided by | | |
operating activities: | | |
Depreciation | 125,081 | 105,645 |
Intangibles amortization | 7,945 | 9,127 |
Deferred income taxes | 4,407 | 28,213 |
Tax benefit related to stock award plans | 7,110 | 10,889 |
Minority interest | 2,287 | 2,178 |
Equity in earnings of unconsolidated affiliates, net of dividends received | (612) | 1,071 |
Gain on sale of investments | (751) | (10,924) |
Other | 16,718 | 12,695 |
Changes in operating assets and liabilities: | | |
Trade accounts receivable | 2,532 | (27,832) |
Inventories | (25,884) | 4,207 |
Accounts payable | (35,873) | (8,695) |
Employee compensation | 10,083 | (10,433) |
Advance payments from customers | 12,628 | (13,762) |
Deferred revenue and advance billings | 10,672 | 15,158 |
Income taxes payable | 29,456 | 14,232 |
Other assets and liabilities | (8,906) | (5,844) |
NET CASH PROVIDED BY OPERATING ACTIVITIES | 308,522 | 278,476 |
| | |
INVESTING ACTIVITIES | | |
Acquisitions (net of cash acquired) | (21,869) | (200,764) |
Purchases of systems, equipment and other assets relating to contracts | (92,382) | (189,374) |
Purchases of available-for-sale investment securities | (147,275) | (50,150) |
Maturities and sales of available-for-sale investment securities | 82,825 | 272,000 |
Purchases of property, plant and equipment | (6,712) | (9,134) |
License fee | (1,750) | - |
Investments in and advances to unconsolidated subsidiaries | (1,488) | (2,503) |
(Increase) decrease in restricted cash | 5,080 | (5,138) |
Proceeds from sale of investment | 3,000 | 11,773 |
NET CASH USED FOR INVESTING ACTIVITIES | (180,571) | (173,290) |
| | |
FINANCING ACTIVITIES | | |
Net proceeds from issuance of long-term debt | - | 343,254 |
Principal payments on long-term debt | (2,259) | (142,657) |
Purchases of treasury stock | (32,051) | (100,536) |
Dividends paid | (30,921) | (29,988) |
Premiums and fees paid in connection with the early retirement of debt | - | (10,610) |
Proceeds from stock options | 9,406 | 11,810 |
Other | 594 | 2,339 |
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES | (55,231) | 73,612 |
Effect of exchange rate changes on cash | 421 | 1,464 |
INCREASE IN CASH AND CASH EQUIVALENTS | 73,141 | 180,262 |
| | |
Cash and cash equivalents at beginning of period | 94,446 | 129,339 |
| | |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ 167,587 | $ 309,601 |
10
