GTECH Reports Solid Results

WEST GREENWICH, Rhode Island – (PRESS RELEASE) -- GTECH Holdings Corporation (NYSE: GTK) today announced fourth quarter and year-end earnings for the fiscal year which ended February 25, 2006.

"GTECH delivered solid financial results in both the quarter and the full fiscal year, meeting or exceeding our previous outlook," said GTECH President and CEO W. Bruce Turner. "In addition, we enjoyed strategic success in each of our verticals by growing our core business, aggressively developing international market opportunities, and leveraging our core competencies into related gaming solutions and transaction-processing business opportunities."

"GTECH delivered another strong year of operating results and substantial free cash flows, resulting in significant value creation for our shareholders and positioning us well for future successes," said GTECH Senior Vice President and CFO Jaymin B. Patel.

Operating Results

Revenues for the fourth quarter of fiscal 2006 were $368.3 million, up 9% over revenues of $337.9 million in the fourth quarter of fiscal 2005. Net income was $59.4 million, or $0.45 per diluted share, compared to net income of $43.8 million, or $0.34 per diluted share for the same period last year. For the quarter, service revenues were up 11.3%, reflecting continued strength in same store sales, strong jackpot activity, and higher revenues from Brazil. Product sales were $74.3 million, comparable to the fourth quarter of fiscal 2005. Service margins increased approximately 150 basis points, to 39.1%, driven by the strength in service revenues, partially offset by higher depreciation and amortization expenses. Product margins increased significantly, from 26.6% in the fourth quarter of fiscal 2005 to 45.6% in the most recent quarter, reflecting a change in product mix.

The fourth quarter results include one-time costs of $6.1 million associated with the pending transaction with Lottomatica S.p.A. Excluding transaction-related costs, the Company would have reported net income of $65.5 million and fully diluted earnings per share of $0.50.

Revenues for fiscal 2006 were $1.3 billion, up 3.8% over revenues of $1.26 billion in fiscal 2005. Net income was $211.0 million, or $1.63 per diluted share, compared to net income of $196.4 million, or $1.50 per diluted share, for the same period last year. Net income in fiscal 2005 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. Net income in fiscal 2006 includes one-time costs of $8.0 million associated with the pending Lottomatica transaction, or $0.06 per diluted share.

Prior year earnings and dividends per share reflect the 2-for-1 common stock split declared in June 2004.

Cash Flow and Investments

During fiscal 2006, the Company generated $429.6 million of cash from operations. This cash was principally used to fund $137.3 million of systems, equipment, and other assets relating to contracts; to purchase an additional 11.681% of POLCARD S.A. for $21.5 million; to repurchase $32.1 million, or 1,326,100 shares of the Company's common stock; and to pay cash dividends of $41.7 million. At February 25, 2006, the Company had $495.9 million of cash balances and short-term investment securities on hand.

At the end of fiscal 2006, the Company had $494 million available under its senior revolving credit facility.

Business Highlights

During 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 signed a seven-year integrated services agreement with the North Carolina Education Lottery (NCEL) for a complete end-to-end online/instant ticket lottery solution. The Company implemented the NCEL in 58 days with approximately 5,000 terminals at startup, making it the fastest instant ticket launch in lottery history.

In addition, GTECH was awarded multi-year online lottery contracts in Washington State and Arizona, and signed an agreement for additional lottery products in California. The Company was also selected as the preferred vendor for new gaming central control systems in Pennsylvania and Louisiana.

In New Jersey, GTECH was selected for a new integrated online/instant lottery system, terminals, and communications network. The award of the New Jersey contract to GTECH is currently being contested by another vendor.

Internationally, GTECH signed a number of contracts including an agreement to provide a new gaming system and terminals for New Zealand Lotteries Commission, and a five-year agreement to provide equipment and services for the national online lottery in Thailand, through its joint venture LOXLEY GTECH Technology Co. Ltd. The Company also began deploying 2,000 WinWave(TM) video lottery terminals (VLTs) to Svenska Spel in Sweden. In conjunction with the VLTs, Svenska Spel is also utilizing GTECH's Enterprise Series(TM) Video central system, which includes functionality designed to allow lotteries unprecedented flexibility to change denomination and download games remotely.

"All told, GTECH secured new contracts and extensions with 22 customers in fiscal 2006, representing approximately $1 billion in revenues to GTECH over the life of the contracts," continued Mr. Turner. "These wins are a clear validation of GTECH's business strategy, our technology, and above all, our understanding of what lotteries, retailers, and players are looking for today and in the future."

Also during the fiscal year, California joined the Mega Millions multi-state game in an effort to boost lottery ticket sales. California expects Mega Millions to generate approximately $200 million to $300 million in net annual incremental total sales for the Lottery, equating to $2.5 million to $4.0 million in annual incremental revenue to GTECH.

Overseas, the multi-jurisdictional game EuroMillions continues to perform well. For calendar year 2005, per capita sales averaged $0.40 per week. On a year-to-date basis, calendar year 2006 weekly per capita sales more than doubled, due in part to a record-breaking jackpot in February.

"EuroMillions has become a solid contributor for GTECH. It continues to grow, with 10 jurisdictions now participating in the game, three of which are GTECH facilities management customers," said Mr. Turner. "In fact, EuroMillions now has the largest player base of any multi-jurisdictional game in the world, with more than 200 million players."

GTECH also deployed 35 new/modified games in more than 20 jurisdictions worldwide. Pick 'n Play(TM), the Company's new game concept designed to combine the appeal of instant gratification and multiple chances to win with the security and integrity of an online game, was recently launched in Illinois. Several other lotteries around the world are currently considering Pick 'n Play as a new revenue source and complementary product line to add to their existing game portfolios.

"We're excited about the evolution of our game content, and Pick 'n Play is just one example of how fresh games can keep lottery play fun and exciting and stimulate incremental sales," concluded Mr. Turner.

Other Business Developments

On January 10, 2006, the Company entered into an agreement with Lottomatica S.p.A, an Italian corporation and the exclusive license holder and operator of Italy's Lotto, and De Agostini S.p.A., a privately held Italian diversified industrial and financial holding group that is Lottomatica's majority shareholder, pursuant to which Lottomatica will acquire GTECH for $35.00 in cash per outstanding GTECH share.

The all cash transaction, which is subject to financing as well as regulatory, customer, and shareholder approvals, is expected to close in mid- 2006. The total enterprise value of the transaction is approximately $4.8 billion.