GTECH Announces Strong Third Quarter Results Company Indicates
Fiscal Year 2005 Outlook Remains on Track; Offers Preliminary
Guidance for Fiscal Year 2006 WEST GREENWICH, R.I., Dec. 21
/PRNewswire-FirstCall/ -- GTECH Holdings Corporation (NYSE:GTK)
today announced third quarter earnings for fiscal year 2005 ended
November 27, 2004. "GTECH enjoyed a solid and productive third
quarter. We met both our revenue and earnings targets, and we made
significant progress towards ensuring our continued long-term
growth," said GTECH President and CEO W. Bruce Turner. "Our
business was strong, leading to a number of key wins around the
world. On the operational side, we continued to improve the
efficiency of our business, and we furthered our strategic progress
in both Commercial Services and Gaming Solutions with the
announcements of two solid acquisitions." "We are pleased with the
continued strength of our business and excited about the future,"
said GTECH Senior Vice President and CFO Jaymin B. Patel. "At this
stage of the planning process, we are comfortable that the outlook
for fiscal 2006 is shaping up well, giving us confidence that we
remain on track in terms of achieving our long-term goals for
growth, profitability, and value creation for our shareholders."
Operating Results Earnings and dividends per share for the three
and nine month periods of the prior year have been restated to
reflect the 2-for-1 common stock split effected in the form of a
stock dividend, which was distributed on July 30, 2004, to
shareholders of record as of July 1, 2004. Revenues for the third
quarter of fiscal 2005 were $315.6 million, up 23.8% over revenues
of $254.9 million in the third quarter of fiscal 2004. Net income
was $45.9 million, or $0.35 per diluted share, comparable to the
same period last year. Revenues for the first nine months of fiscal
2005 were $919.4 million, up 19.1% over revenues of $771.8 million
in the first nine months of fiscal 2004. Net income was $152.6
million, or $1.16 per diluted share, up 12.7% over net income of
$135.4 million, or $1.06 per diluted share, for the same period
last year. Net income in the first nine months of fiscal 2005
includes a net, one- time, after-tax gain of $6.5 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., net of charges associated with the early retirement of the
remainder of the Company's 2007 private placement notes. Net income
in the first nine months of fiscal 2004 includes a one-time, after-
tax gain of $3.3 million, or approximately $0.03 per diluted share,
from the consolidation of the partnership that owns the Company's
corporate headquarters in West Greenwich, Rhode Island. Cash Flow
and Investments During the first nine months of fiscal 2005, the
Company generated $278.5 million of cash from operations. This
cash, along with cash generated by the sale of available-for-sale
investment securities, was principally used to fund the Spielo
Manufacturing Incorporated, Leeward Islands Lottery Holding
Company, Inc., and BillBird S.A. acquisitions of $200.8 million and
to fund $189.4 million of systems, equipment, and other assets
relating to contracts. In addition, the Company issued $300 million
of Senior Notes during the third quarter of fiscal 2005; repaid the
remaining $90.0 million of the Company's 7.87% Senior Notes;
repurchased $100.5 million, or 4,409,500 shares of the Company's
common stock; and paid cash dividends of $30.0 million. At November
27, 2004, the Company had $309.6 million of cash and cash
equivalents on hand, which includes the net proceeds from the
issuance of $300 million of Senior Notes. During the fiscal 2005
third quarter, GTECH entered into a new $500 million senior
revolving credit facility. The new credit facility is unsecured and
matures in October 2009. At the end of the current fiscal quarter,
GTECH had no borrowings under the credit facility. Financial
Outlook The Company also updated the guidance for fiscal year
ending February 26, 2005. The Company continues to expect total
revenue growth of approximately 19%, with service revenue growth in
the range of 6% to 7%. The Company expects product sales to be in
the range of $240 million to $250 million. The Company expects
service margins to be approximately 40% and product margins in the
range of 34% to 36%. Based on the current operational outlook,
GTECH now expects earnings per share for fiscal year 2005 to be in
the range of $1.46 to $1.48 on a fully- diluted basis, rather than
the previously announced $1.43 to $1.48 per share. Earnings per
diluted share for the fourth quarter are expected to be in the
range of $0.31 to $0.33. For fiscal year 2006, ending February 25,
2006, the Company expects service revenue growth in the range of 7%
to 9%, reflecting a 5% to 6% increase in same store sales, the net
effect of contract wins and the impact of acquisitions, offset by a
number of factors, including contractual rate changes. The Company
expects product sales in the range of $215 million to $235 million.
The Company expects service margins of approximately 40% and
product margins in the range of 37% to 39%. Based upon the
preliminary outlook, the Company believes that earnings per share
will be in the range of $1.53 to $1.58 for fiscal year 2006. Third
Quarter Highlights In the third quarter of fiscal year 2005, GTECH
continued to successfully execute against the Company's strategic
objectives of maintaining and expanding the core lottery business,
winning new customers, and growing perimeter businesses.
Domestically, GTECH signed a three-year contract extension with the
Minnesota State Lottery commencing in February 2008. The Colorado
Lottery granted GTECH a 90-day extension, which commenced November
1, 2004, in order to provide the new vendor additional time to
convert the system. Lotteries in Arizona and New Mexico also
extended GTECH's Instant Ticket Vending Machine (ITVM) contracts
for three and two years, respectively. Outside of the U.S., GTECH
signed a new six-year integrated services contract in Mexico with
Pronosticos para la Asistencia Publica. In addition, GTECH's joint
venture in Thailand, LOXLEY GTECH Technology Co. Ltd., was named
the preferred bidder for a national online lottery. In Finland,
GTECH's lottery customer, Veikkaus Oy, selected the Company to
provide a new interactive software solution, central system, and
terminals. Societe de la Loterie de la Suisse Romande chose GTECH
for a new integrated online and instant ticket system, as well as
new terminals and a wireless communications network. GTECH was also
selected by Atlantic Lottery Corporation for a new video lottery
central system and ongoing services. Singapore Pools PTY Ltd.
signed a five-year contract with GTECH for ES Connect(TM), which
will enable the existing lottery system to support internet
protocol (IP) networks and IP lottery terminals. In addition, GTECH
will provide Singapore Pools with ES Connect(TM) B2B, providing an
interface for third-party systems. "Our successes throughout this
year, combined with our ongoing commitment to improving
efficiencies, our increased financial flexibility, and the prudent
investment of shareholder capital have positioned us for continued
success in fiscal 2006," said Mr. Turner. Also in the quarter,
GTECH's majority-owned subsidiary, PolCard, completed the
acquisition of privately-held BillBird S.A., the leading provider
of electronic bill payment services in Poland, making GTECH the
Commercial Services leader in Poland. After the close of the
quarter, GTECH announced it was acquiring a 50 percent controlling
equity position in the Atronic group of companies owned by the
Gauselmann Group, based in Germany. Atronic is one of the five
largest slot machine makers globally, and is a market leader in
Europe, Russia, and Latin America, with a solid presence in the
United States. Also after the close of the quarter, GTECH was
awarded a seven-year integrated services contract to supply new
equipment and services to the Missouri Lottery, and signed an
agreement with its customer in Germany,
Lotterie-Treuhandgesellschaft mbH Thuringen, for a new central
system and terminals. Earlier today, GTECH announced it was
selected by the Multi-State Lottery Association (MUSL) to supply
equipment, software, services, and communications network for the
first ever multi-vendor, multi-state video lottery Wide Area
Progressive (WAP) solution. 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, a leading global information
technology company with over $1 billion in revenues and more than
5,400 people in over 50 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/. Consolidated financial statements to follow:
GTECH HOLDINGS CORPORATION AND SUBSIDIARIES CONSOLIDATED INCOME
STATEMENTS (Unaudited) Three Months Ended November 27, November 22,
2004 2003 (Dollars in thousands, except per share amounts)
Revenues: Services $251,945 $231,225 Sales of products 63,702
23,697 315,647 254,922 Costs and expenses: Costs of services
155,962 131,991 Costs of sales 44,187 13,094 200,149 145,085 Gross
profit 115,498 109,837 Selling, general and administrative 29,740
28,167 Research and development 13,007 12,926 Operating expenses
42,747 41,093 Operating income 72,751 68,744 Other income
(expense): Interest income 642 1,494 Equity in earnings of
unconsolidated affiliates 810 1,500 Other income (expense) (2,070)
4,052 Interest expense (3,688) (2,986) (4,306) 4,060 Income before
income taxes 68,445 72,804 Income taxes 22,590 26,937 Net income
$45,855 $45,867 Basic earnings per share $0.40 $0.39 Diluted
earnings per share $0.35 $0.35 Weighted average shares outstanding
- basic 115,708 117,640 Weighted average shares outstanding -
diluted 131,435 133,853 Dividends per share - common stock $0.085
$0.085 GTECH HOLDINGS CORPORATION AND SUBSIDIARIES CONSOLIDATED
INCOME STATEMENTS (Unaudited) Nine Months Ended November 27,
November 22, 2004 2003 (Dollars in thousands, except per share
amounts) Revenues: Services $753,385 $692,782 Sales of products
165,982 78,972 919,367 771,754 Costs and expenses: Costs of
services 451,736 391,593 Costs of sales 103,978 50,533 555,714
442,126 Gross profit 363,653 329,628 Selling, general and
administrative 87,264 79,498 Research and development 38,741 41,422
Operating expenses 126,005 120,920 Operating income 237,648 208,708
Other income (expense): Interest income 2,958 3,703 Equity in
earnings of unconsolidated affiliates 2,409 6,120 Other income
6,531 3,337 Interest expense (11,743) (6,997) 155 6,163 Income
before income taxes 237,803 214,871 Income taxes 85,252 79,502 Net
income $152,551 $135,369 Basic earnings per share $1.30 $1.17
Diluted earnings per share $1.16 $1.06 Weighted average shares
outstanding - basic 117,133 115,764 Weighted average shares
outstanding - diluted 133,050 128,712 Dividends per share - common
stock $0.255 $0.17 GTECH HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited) November 27, February 28,
2004 2004 ASSETS (Dollars in thousands) CURRENT ASSETS: Cash and
cash equivalents $309,601 $129,339 Investment securities
available-for- sale - 221,850 Trade accounts receivable, net
150,747 118,902 Sales-type lease receivables 8,268 7,705
Inventories 86,345 76,784 Deferred income taxes 25,846 34,396 Other
current assets 28,289 24,426 TOTAL CURRENT ASSETS 609,096 613,402
SYSTEMS, EQUIPMENT AND OTHER ASSETS RELATING TO CONTRACTS, net
697,285 591,362 GOODWILL, net 334,227 188,612 PROPERTY, PLANT AND
EQUIPMENT, net 68,281 57,576 INTANGIBLE ASSETS, net 73,187 28,231
REFUNDABLE PERFORMANCE DEPOSIT 20,000 20,000 SALES-TYPE LEASE
RECEIVABLES 12,797 17,653 OTHER ASSETS 47,630 42,295 TOTAL ASSETS
$1,862,503 $1,559,131 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT
LIABILITIES: Accounts payable $82,484 $80,004 Accrued expenses
49,894 47,428 Employee compensation 24,649 33,981 Advance payments
from customers 63,097 104,128 Deferred revenue and advance billings
29,759 14,459 Income taxes payable 22,033 12,394 Taxes other than
income taxes 20,215 19,459 Short term borrowings 483 - Current
portion of long-term debt 4,199 106,319 TOTAL CURRENT LIABILITIES
296,813 418,172 LONG-TERM DEBT, less current portion 754,888
463,215 OTHER LIABILITIES 79,771 53,736 DEFERRED INCOME TAXES
96,244 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 - 200,000,000 shares authorized, 116,551,144 and 184,590,808
shares issued; 115,648,332 and 118,395,168 shares outstanding at
November 27, 2004 and February 28, 2004, respectively (shares
adjusted to reflect July 2004 two-for-one stock split and treasury
stock retirement) 1,166 923 Additional paid-in capital 277,839
266,320 Accumulated other comprehensive loss (48,105) (70,508)
Retained earnings 424,317 839,270 655,217 1,036,005 Less cost of
902,812 and 66,195,640 shares in treasury at November 27, 2004 and
February 28, 2004, respectively (shares adjusted to reflect July
2004 two-for-one stock split and treasury stock retirement)
(20,430) (473,716) 634,787 562,289 TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,862,503 $1,559,131 GTECH HOLDINGS
CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) Nine Months Ended November 27, November 22, 2004 2003
(Dollars in thousands) OPERATING ACTIVITIES Net income $152,551
$135,369 Adjustments to reconcile net income to net cash provided
by operating activities: Depreciation 105,645 81,449 Intangibles
amortization 9,839 2,662 Deferred income taxes benefit 28,213 - Tax
benefit related to stock award plans 10,889 11,871 Non-cash gain
from consolidation of West Greenwich Technology Associates, L.P. -
(5,292) Gain on sale of investment (10,924) - Equity in earnings of
unconsolidated affiliates, net of dividends received 1,071 (263)
Other 14,161 7,189 Changes in operating assets and liabilities:
Trade accounts receivable (27,832) 2,358 Inventories 4,207 22,879
Accounts payable (8,695) 670 Employee compensation (10,433) (5,923)
Advance payments from customers (13,762) 43,414 Deferred revenue
and advance billings 15,158 (7,189) Income taxes payable 14,232
11,437 Other assets and liabilities (5,844) 9,305 NET CASH PROVIDED
BY OPERATING ACTIVITIES 278,476 309,936 INVESTING ACTIVITIES
Acquisitions (net of cash acquired) (200,764) (74,174) Purchases of
systems, equipment and other assets relating to contracts (189,374)
(211,867) Purchases of available-for-sale investment securities
(50,150) - Maturities and sales of available- for-sale investment
securities 272,000 - Proceeds from sale of investment 11,773 -
Purchases of property, plant and equipment (9,134) (8,506) Increase
in restricted cash (5,138) - Investments in and advances to
unconsolidated subsidiaries (2,503) (1,185) Refundable performance
deposit - (20,000) License fee - (12,500) NET CASH USED FOR
INVESTING ACTIVITIES (173,290) (328,232) FINANCING ACTIVITIES Net
proceeds from issuance of long- term debt 343,254 251,138 Principal
payments on long-term debt (142,657) (31,688) Purchases of treasury
stock (100,536) - Dividends paid (29,988) (19,928) Redemption
premium paid in connection with the early retirement of debt
(10,610) - Proceeds from stock options 11,810 22,068 Other 2,339
(2,194) NET CASH PROVIDED BY FINANCING ACTIVITIES 73,612 219,396
Effect of exchange rate changes on cash 1,464 3,262 INCREASE IN
CASH AND CASH EQUIVALENTS 180,262 204,362 Cash and cash equivalents
at beginning of period 129,339 116,174 CASH AND CASH EQUIVALENTS AT
END OF PERIOD $309,601 $320,536 DATASOURCE: GTECH Holdings
Corporation CONTACT: Robert K. Vincent, Public Affairs of GTECH
Corporation, +1-401-392-7452 Web site: http://www.gtech.com/
Copyright
Gtech (NYSE:GTK)
Historical Stock Chart
From Jun 2024 to Jul 2024
Gtech (NYSE:GTK)
Historical Stock Chart
From Jul 2023 to Jul 2024