CasinoCityTimes.com

Gurus
News
Newsletter
Search News Subscribe
Stay informed with the
NEW Casino City Times newsletter!
Newsletter Signup
Stay informed with the
NEW Casino City Times newsletter!

Gaming News

 

4th Quarter and Year-End Results for GTECH

11 April 2000

WEST GREENWICH, R.I., April 11 (Press Release) - GTECH Holdings Corporation (NYSE: GTK) today announced earnings for the fourth quarter and fiscal year ending February 26, 2000.

Operating Results Revenues for the fourth quarter of fiscal 2000 totaled $267.2 million, an increase of approximately 5% over the $255.4 million of revenues in the fourth quarter of fiscal 1999. Net income was $30.1 million, or $.87 per basic share, compared with $22.1 million, or $.55 per basic share, for the sam eperiod last year.

Revenues for fiscal 2000 improved 4% to $1.01 billion, compared with revenues of $972.9 million in fiscal 1999. Net income was $93.6 million, or$2.58 per basic share, compared with net income of $89.1 million, or $2.17 per basic share in fiscal 1999.

In the fourth quarter of fiscal 2000, the Company released $1.1 million of the $15 million special charge recorded in the fourth quarter of fiscal 1999,as a result of prudent management of severance costs and attrition at the Company's Transactive subsidiary.

"I believe fiscal year 2000 will prove to be a watershed year for GTECH," said William Y. O'Connor, Chairman and CEO. "We defended and expanded our core businesses, won a significant number of new customers, expanded our perimeter businesses in the Internet lottery space and social and venue space and continued to add applications that leverage our infrastructure."

Fourth Quarter Service revenues were $218.3 million in the fourth quarter, representing a 2% increase over the $214.8 million of service revenues in the same quarter last year. This increase reflects a 6% increase in international lottery service revenues, partially offset by a 2% decline in domestic lottery service revenues. Had last year's average foreign exchange rates prevailed throughout the most recent quarter, total service revenues would have increased 4%.

Product sales were $48.9 million, compared with $40.6 million in the same quarter last year. This increase was primarily due to radio and terminal sales to South Africa. Service gross margins for the quarter increased to 37.7% from 32.0% in the same quarter last year primarily due to a financial services rate increase in Brazil and higher domestic jackpot activity.

Product margins improved to 35.6% in the fourth quarter of fiscal 2000 compared to 27.1% in the fourth quarter of last year, again as the result of radio and terminal sales to South Africa. Other income of $20.7 million in the fourth quarter of fiscal 1999 included non-recurring gains associated with the Company's global asset protection and foreign exchange management programs. As a result of the material devaluation that took place in Brazil in January 1999, and the hedging strategy that the Company had in place at that time, the Company recognized a one-time gain of approximately $17 million in the fourth quarter of fiscal 1999.

"Fourth quarter results marked the first quarter-over-quarter increase in service revenues in more than a year. Domestic lottery sales stabilized, due in part to the continued recovery of instant ticket sales in Texas. Strong underlying growth in international service revenues made a significant difference for the period," said Mr. O'Connor.

Full Year Service revenues were $860.4 million in fiscal 2000, down 3% compared to service revenues of $887.4 million in fiscal 1999. This decrease reflects a6% decline in domestic lottery service revenues, partially offset by a 1% improvement in international lottery service revenues. Had last year's average foreign exchange rates prevailed throughout the most recent fiscal year, total service revenues would have increased 4%.

As anticipated, product sales increased from $85.5 million in fiscal 1999to $150.4 million in fiscal 2000. This increase was driven by equipment sales to South Africa and the sale of a new online lottery system to Israel. The Company sold approximately 13,300 lottery terminals in fiscal 2000, compared to 4,900 lottery terminals in fiscal 1999. Service gross margins increased to 35.2% from 33.3% last year primarily due to improved margins from the Company's lottery operations in Brazil. Product margins improved to 32.2% in fiscal 2000 from 30.1% in fiscal 1999 as a result of radio and terminal sales to South Africa.

Selling, general and administrative expenses were $126.6 million, compared to $124.4 million in fiscal 1999. This modest increase was attributable to the Company's customer and industry conference held in July, 1999. Research and development expenses were $46.1 million, an increase of $5.9 million over fiscal 1999 spending of $40.2 million. This increase reflects development activities associated with the Company's next-generation lottery operating system and terminals along with increased spending by the Company's Dreamport subsidiary on new products in the development pipeline.

"Our commitment to increasing our research and development investment --more than the rest of the industry combined -- is paying dividends by enhancing our competitive position both in terms of exciting new products that drive the existing core business and innovative solutions for the re-bid and new customer markets," continued Mr. O'Connor.

Equity earnings were $2.8 million in fiscal 2000, a decrease of$4.3 million from the $7.1 million earned during fiscal 1999. This decrease resulted principally from the sale, in fiscal 1999, of the Company's equity interest in Camelot. Other expenses of $1.3 million in fiscal 2000 is comprised of net foreign exchange losses associated with the Company's global asset protection and foreign exchange management programs designed to protect future cash flows, partially offset by the amortization of the gain on the sale of Camelot.

The Company's effective income tax rate decreased from 41% in fiscal 1999 to 40% in fiscal 2000 principally due to lower state taxes and increased research and development tax credits. Cash Flow and Investments During fiscal 2000, the Company generated $230.8 million of cash from operations. This cash was used principally to fund the purchase of $128.6million of systems, equipment and other assets relating to contracts and to repurchase $98.7 million of the Company's common stock.

Approximately four million shares of the Company's common stock were repurchased in fiscal 2000, representing approximately 10% of the outstanding shares at the beginning of the fiscal year. At the end of fiscal 2000, the Company has $355 million of revolving credit available under its $400 million credit facility.

Business Highlights and Strategy In fiscal 2000

GTECH defended its core lottery business by signing contracts with existing customers in Buenos Aires, Argentina and Puerto Rico and the DC Lottery and Charitable Games Control Board. The Company was also selected following competitive procurements to negotiate new long-term comprehensive facilities management agreements with the New York State and Illinois Lotteries. Additionally, GTECH entered into extension agreements with customers in Trinidad & Tobago and Washington State, as well as An Post National Lottery Company, the operator of the Irish National Lottery and Boldt/Ivisa, the operator of the Argentine National Lottery. The Company expanded internationally, signing contracts with new customers in South Africa, France, Italy, Colombia and Morocco.

GTECH continues to expand its core offerings in several jurisdictions with the installation of Player Express (TM), a self-service lottery terminal designed and developed for supermarket checkout lanes, with customers in Nebraska, California, Ohio, Quebec and New Zealand. Player Express is currently in operation in seven jurisdictions, with several more installations planned during fiscal 2001.

Additionally, GTECH signed its first stand-alone communications contract in the District of Columbia. In addition, Dreamport, GTECH's gaming and entertainment subsidiary, signed a contract with Entitat Autonoma de Jocs I Apostes to operate the SuperTOC bingo game, a wide-area bingo game that creates high jackpots by linking together 70 bingo halls, in Catalunya, Spain.

Launched in fiscal year 1999, GTECH's Internet-based gaming business unit, UWin! (TM), signed its first contracts in fiscal 2000 with An Post National Lottery Company and Dansk Tipstjeneste, Denmark's National Lottery operator. The Company expanded the number of commercial applications over its networks in Brazil to include tax payments and phone card purchases.

GTECH remains committed to further expanding and leveraging its existing network capabilities in other jurisdictions throughout the world. "In the fiscal year, we made great strides toward our goal of becoming the multinational provider of systems and services to the lottery, gaming and entertainment businesses. We posted record revenues, expanded our business to a sixth continent and signed our first Internet lottery customers. And we built our platform for continued growth by realigning our businesses to our customers' requirements through restructuring our operation, positioning us to enhance our capabilities in creating sustainable value for our shareholders," said Mr. O'Connor.

Other Business Developments In fiscal year 2000

GTECH successfully completed its Y2K remediation program, the single largest project in the Company's history, managing GTECH's systems, numerous other lotteries and third-party systems, as well as telecommunications networks in 37 different countries, with no service interruption.

"Overall, we have strong and profitable core businesses, and an enhanced organizational structure. Our depth of industry knowledge and experience is unmatched. Our goal is to use these strengths to enhance our position as the number one resource for solving customer problems and generating new growth, both domestically and internationally. We are continuing to execute against our strategic objectives, laying a solid foundation for the future," concluded Mr. O'Connor.

< Gaming News