Scientific Games Reports Results

1 Mar 2006

NEW YORK – (PRESS RELEASE) --Scientific Games Corporation (Nasdaq: SGMS) today reported that fourth quarter 2005 revenues were $202.9 million, up 11 percent from $182.6 million in the fourth quarter of 2004. Net income was $10.4 million or $0.11 per diluted share, after reductions for $19.4 million of unusual charges, compared to net income of $4.4 million or $0.05 per diluted share in the fourth quarter of 2004. Excluding the unusual charges, non-GAAP adjusted fourth quarter net income would have been $25.1 million or $0.27 per diluted share, compared to previously reported non-GAAP adjusted net income of $22.5 million or $0.25 per diluted share for the fourth quarter of 2004.

EBITDA for the fourth quarter of 2005 (earnings before interest, taxes, depreciation and amortization - see the following EBITDA reconciliation) was $39.4 million compared to $51.2 million in the fourth quarter of 2004. Excluding the unusual charges, adjusted EBITDA for the fourth quarter of 2005 would have been $58.8 million, compared to adjusted EBITDA for the fourth quarter of 2004 of $54.3 million.

Full year 2005 revenues increased 8 percent to $781.7 million from the $725.5 million reported in 2004. Net income rose 15 percent to $75.3 million, or $0.81 per diluted share, after reductions for $26.8 million of unusual charges in the third and fourth quarters, compared to net income before preferred stock dividend of $65.7 million or $0.72 per diluted share in 2004. Excluding the unusual charges, 2005 non-GAAP adjusted net income would have been $95.3 million or $1.03 per diluted share.

EBITDA was $197.8 million in 2005, compared to $209.0 million in 2004. Excluding the unusual charges, adjusted EBITDA for the full year of 2005 would have been $224.6 million, compared to adjusted EBITDA for 2004 of $212.1 million.

Lorne Weil, Chairman and CEO, made the following comments. "Revenue performance in the fourth quarter was quite strong. Overall revenue increased 11%, and if Florida online revenues are eliminated from the 2004 numbers then the overall revenue growth was nearly 17%. More importantly, core lottery revenues increased by nearly 22%, from $125.6 million in 2004 to $153.1 million in 2005; here again, if the Florida online revenue is eliminated from the 2004 figure, then lottery revenue growth was 31%.

Business development since the end of the third quarter has been unusually active and we believe will further reinforce revenue momentum going forward. Our strategy of introducing instant ticket cooperative services in Germany took shape with the signing of the first two contracts in the German states of Lower Saxony and Hessen. Our video lottery system business unit continued to gain traction, receiving new system contracts in Delaware, New Mexico, and West Virginia. We were awarded multi-year instant ticket contracts in Vermont, Illinois, Ohio, Colorado and West Virginia, thereby maintaining an essentially perfect record at retaining existing instant ticket customers, and we were awarded a new online contract by the Maryland Lottery.

Televisa Group, the largest media company in the Spanish speaking world, chose Scientific Games to be its technology partner as part of its strategy to build a presence in the gaming industry. And most recently, we were selected to be the primary instant ticket supplier to the New York Lottery.

Under normal operating circumstances the magnitude and composition of revenue in the fourth quarter would have been sufficient to generate net income of at least $0.27 per diluted share, but this was not a normal quarter from several points of view. During the quarter we recorded:

-- a non-cash charge of $12.4 million to discontinue our SERP program, an action that will result in an earnings benefit of at least $2.0 million annually in 2006 and beyond;

-- a non tax-deductible charge of $1.7 million in connection with the earn-out on the Honsel acquisition (future earn-out payments will be treated as additional purchase price rather than a charge to earnings);

-- unanticipated legal and related consulting and severance expenses of $3.0 million in connection with non-recurring matters in North Carolina, Chile, New Jersey and elsewhere;

-- Start-up expenses of approximately $1.0 million in connection with the opening of our new instant ticket production facility in the UK; losses of about $1.0 million due to the start up of new lottery contracts in Catalonia;

-- write-offs of about $1.0 million in our pari-mutuel systems business, primarily to withdraw from the market in Poland.

During the month of January we announced our agreement to acquire the online lottery assets of Essnet and our non-binding letter of intent for Global Draw. The acquisition of Essnet will significantly strengthen our position in the European and Australian lottery systems arena, as well as provide significant support to our instant ticket strategy in Germany; with seven German lotteries under contract, Essnet is the leader in the German lottery market. Global Draw would give us a major presence as a technology systems and services supplier to the British licensed betting shop market, thereby fulfilling a strategic objective we have had for some time. It will also provide us with central determination, server- based gaming systems capability with which to pursue the very rapidly growing government sponsored video gaming market in Europe."

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	Scientific Games Reports Results 1 Mar 2006 NEW YORK – (PRESS RELEASE) --Scientific Games Corporation (Nasdaq: SGMS) today reported that fourth quarter 2005 revenues were $202.9 million, up 11 percent from $182.6 million in the fourth quarter of 2004. Net income was $10.4 million or $0.11 per diluted share, after reductions for $19.4 million of unusual charges, compared to net income of $4.4 million or $0.05 per diluted share in the fourth quarter of 2004. Excluding the unusual charges, non-GAAP adjusted fourth quarter net income would have been $25.1 million or $0.27 per diluted share, compared to previously reported non-GAAP adjusted net income of $22.5 million or $0.25 per diluted share for the fourth quarter of 2004. EBITDA for the fourth quarter of 2005 (earnings before interest, taxes, depreciation and amortization - see the following EBITDA reconciliation) was $39.4 million compared to $51.2 million in the fourth quarter of 2004. Excluding the unusual charges, adjusted EBITDA for the fourth quarter of 2005 would have been $58.8 million, compared to adjusted EBITDA for the fourth quarter of 2004 of $54.3 million. Full year 2005 revenues increased 8 percent to $781.7 million from the $725.5 million reported in 2004. Net income rose 15 percent to $75.3 million, or $0.81 per diluted share, after reductions for $26.8 million of unusual charges in the third and fourth quarters, compared to net income before preferred stock dividend of $65.7 million or $0.72 per diluted share in 2004. Excluding the unusual charges, 2005 non-GAAP adjusted net income would have been $95.3 million or $1.03 per diluted share. EBITDA was $197.8 million in 2005, compared to $209.0 million in 2004. Excluding the unusual charges, adjusted EBITDA for the full year of 2005 would have been $224.6 million, compared to adjusted EBITDA for 2004 of $212.1 million. Lorne Weil, Chairman and CEO, made the following comments. "Revenue performance in the fourth quarter was quite strong. Overall revenue increased 11%, and if Florida online revenues are eliminated from the 2004 numbers then the overall revenue growth was nearly 17%. More importantly, core lottery revenues increased by nearly 22%, from $125.6 million in 2004 to $153.1 million in 2005; here again, if the Florida online revenue is eliminated from the 2004 figure, then lottery revenue growth was 31%. Business development since the end of the third quarter has been unusually active and we believe will further reinforce revenue momentum going forward. Our strategy of introducing instant ticket cooperative services in Germany took shape with the signing of the first two contracts in the German states of Lower Saxony and Hessen. Our video lottery system business unit continued to gain traction, receiving new system contracts in Delaware, New Mexico, and West Virginia. We were awarded multi-year instant ticket contracts in Vermont, Illinois, Ohio, Colorado and West Virginia, thereby maintaining an essentially perfect record at retaining existing instant ticket customers, and we were awarded a new online contract by the Maryland Lottery. Televisa Group, the largest media company in the Spanish speaking world, chose Scientific Games to be its technology partner as part of its strategy to build a presence in the gaming industry. And most recently, we were selected to be the primary instant ticket supplier to the New York Lottery. Under normal operating circumstances the magnitude and composition of revenue in the fourth quarter would have been sufficient to generate net income of at least $0.27 per diluted share, but this was not a normal quarter from several points of view. During the quarter we recorded: -- a non-cash charge of $12.4 million to discontinue our SERP program, an action that will result in an earnings benefit of at least $2.0 million annually in 2006 and beyond; -- a non tax-deductible charge of $1.7 million in connection with the earn-out on the Honsel acquisition (future earn-out payments will be treated as additional purchase price rather than a charge to earnings); -- unanticipated legal and related consulting and severance expenses of $3.0 million in connection with non-recurring matters in North Carolina, Chile, New Jersey and elsewhere; -- Start-up expenses of approximately $1.0 million in connection with the opening of our new instant ticket production facility in the UK; losses of about $1.0 million due to the start up of new lottery contracts in Catalonia; -- write-offs of about $1.0 million in our pari-mutuel systems business, primarily to withdraw from the market in Poland. During the month of January we announced our agreement to acquire the online lottery assets of Essnet and our non-binding letter of intent for Global Draw. The acquisition of Essnet will significantly strengthen our position in the European and Australian lottery systems arena, as well as provide significant support to our instant ticket strategy in Germany; with seven German lotteries under contract, Essnet is the leader in the German lottery market. Global Draw would give us a major presence as a technology systems and services supplier to the British licensed betting shop market, thereby fulfilling a strategic objective we have had for some time. It will also provide us with central determination, server- based gaming systems capability with which to pursue the very rapidly growing government sponsored video gaming market in Europe."