Revenues Increased 51%; Net Income Increased 80% to $20 million; Earnings per Diluted Share were $0.22
Scientific Games Corporation today announced results for the first quarter ended March 31, 2004. Revenues for the first quarter of 2004 increased 51% to $185.5 million compared to $123.2 million for the first quarter of 2003. Income before the preferred stock dividend was $20.4 million, an increase of 80% over 2003 first quarter income of $11.3 million, and diluted earnings per share increased 69% to $0.22 in the first quarter of 2004 from $0.13 per diluted share in of the first quarter of 2003.
EBITDA (earnings before interest, taxes, depreciation and amortization -- see the following EBITDA reconciliation) was $53.0 million in the first quarter of 2004 versus $34.8 million for the first quarter of 2003, an increase of 52%.
Increases in revenue were primarily due to the contribution from IGT OnLine Entertainment Systems, Inc. (OES) acquired in November of 2003, the additional revenues from new lottery customers such as Tennessee and North Dakota, continued strong instant ticket sales especially in states using our Cooperative Services, and sales of lottery terminals to The Ontario Lottery Corporation. Together with the preceding factors, the increase in net income also reflects a decrease in our effective tax rate to 31.5%.
"We had a very busy and successful first quarter helping both the Tennessee Lottery and the North Dakota Lottery with their start ups," said Lorne Weil, Chairman and CEO of Scientific Games. "We got the Tennessee Lottery started three weeks early and in those three weeks it sold almost $100 million worth of instant tickets. North Dakota started its Powerball® online game on March 25th with about 400 retailers and achieved the highest per capita launch in Powerball history. Never before has a new lottery launched with its online game first and we did it in record time. The North Dakota Lottery is expected to add two more multi-state online games, Hot Lotto and Wild Card 2, shortly."
"During the first quarter we made important strides integrating the OES operations into ours. We have begun transitioning customers over to our centralized customer service center in Georgia, and making equipment and software upgrades, both of which should reduce costs and improve service for these lottery customers and their retailers, as well as stimulate growth in revenue. We are also establishing centralized support for customer networks, software and quality control."
Mr. Weil continued, "Once again instant ticket sales were very strong in our Cooperative Service states. Although the industry figures have not yet been published for the first quarter, we see no retreat from recent quarters' 9-10% sales growth. In a continuing effort to maximize efficiencies we have ordered a new short run press for our Alpharetta, Georgia facility that will allow us to better manage production and handle increasing commercial orders. In addition we are in the process of shifting phone card production to our facility in Chile and increasing our instant ticket capability in the UK."
Scientific Games said it has begun to introduce five new online games to customers and the reception has been very positive. Pennsylvania in particular is experiencing robust sales of its new Match 6(TM) online game.
Mr. Weil continued, "During the first quarter, we introduced our newest vending solutions, PlayCentral(TM) and ConvenienceCentral(TM), to most of our customers in the US and abroad. PlayCentral, targeted at supermarkets, and ConvenienceCentral, designed for convenience stores and other smaller retailers, allow lotteries to increase the efficiency of existing retail outlets as well as expand into new distribution points. Both should lead to notably higher ticket sales. Currently our backlog stands at 2,450 vending machines."
"The pari-mutuel and venue management business segments are just now entering their strongest seasons. During the first quarter we continued conversion to our new Linux-based Quantum(TM) system, providing unprecedented throughput, distribution and security. We signed an agreement with Youbet.com to provide pari-mutuel services including a centralized wagering network, maintenance and security services - a contract worth nearly $7 million over its five-year term and containing a three-year option to renew."
"Magna Entertainment extended its contract for our account wagering platform Trackplay(TM), used to run Magna's XpressBet(TM) Internet site. Finally we obtained new racing customers in Ghana, Kenya and Armenia for pari-mutuel services and began offering our new proprietary V 75(TM) wagers in The Netherlands."
"Our Venue Management subsidiary launched its first cable racing show in February and we will be expanding its broadcast hours and subscriber base throughout the rest of the year. For the first quarter of 2004, call volume during the hours of the show increased 70% over the prior year. Wagering through our On The Wire® account wagering hub was $29 million in 2003. We are also in preliminary discussions with several Native American tribes and casino ships to establish race books within their operations, similar to our enormously successful race book at the Mohegan Sun. Although we can offer no assurance that such agreements will in fact be completed, we are excited about the possibilities."
Guidance
We are maintaining our previous 2004 guidance for revenue of $690 million to $720 million, EBITDA of $195 million to $205 million and net income per diluted share of $0.76 to $0.83.
As a reminder, Scientific Games previously announced its intention to discontinue guidance beginning in 2005.
Conference Call Details
Scientific Games Corporation invites you to join its conference call at 8:30 am EDT on April 23, 2004 by dialing 877-407-8035 or 201-689-8035 for international callers. There will also be a live webcast accessible through www.scientificgames.com on the Investor Relations page.
A replay of the conference call will be available until midnight on Friday, April 30, 2004 at 877-660-6853 or for international callers 201-612-7415, Conference ID 99040 and Account Number 1628. The webcast will be archived on www.scientificgames.com for 30 days.
About Scientific Games
Scientific Games Corporation is the leading integrated supplier of instant tickets, systems and services to lotteries, and the leading supplier of wagering systems and services to pari-mutuel operators. It is also a licensed pari-mutuel gaming operator in Connecticut and The Netherlands and is a leading supplier of prepaid phone cards to telephone companies. Scientific Games' customers are in the United States and more than 60 other countries. For more information about Scientific Games, please visit our web site at www.scientificgames.com.
Safe Harbor
This press release includes statements that constitute forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. This information involves risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. For certain information regarding these risks and uncertainties, reference is made to Scientific Games' Annual Report on Form 10-K for the fiscal year ended December 31, 2003.
SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31, 2003 and 2004
(Unaudited, in thousands, except per share amounts)
2003 2004
Operating revenues:
Services $ 105,267 141,633
Sales 17,951 43,832
123,218 185,465
Operating expenses (exclusive of depreciation and
amortization shown below):
Services 57,628 75,885
Sales 12,407 30,656
Amortization of service contract software 1,267 1,434
71,302 107,975
Total gross profit 51,916 77,490
Selling, general and administrative expenses 18,342 25,920
Depreciation and amortization 9,781 13,760
Operating income 23,793 37,810
Other deductions:
Interest expense 6,232 7,390
Other (income) expense (104) 608
6,128 7,998
Income before income tax expense 17,665 29,812
Income tax expense 6,344 9,391
Net income 11,321 20,421
Convertible preferred stock dividend 1,847 1,982
Net income available to common stockholders $ 9,474 18,439
Basic and diluted net income per share:
Basic net income available to common stockholders $ 0.16 0.30
Diluted net income available to common stockholders $ 0.13 0.22
Weighted average number of shares used in per share
calculations:
Basic shares 59,450 61,942
Diluted shares 87,932 91,825
SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
SELECTED CONSOLIDATED BALANCE SHEET DATA
December 31, 2003 and March 31, 2004
(Unaudited, in thousands)
December 31, March 31,
2003 2004
Assets:
Cash and cash equivalents $ 79,373 92,573
Other current assets 157,992 154,348
Property and equipment, net 228,730 237,386
Long-term assets 496,894 488,467
Total assets $962,989 972,774
Liabilities and Stockholders' Equity:
Current portion of long-term debt $ 6,327 7,261
Other current liabilities 152,096 139,541
Long-term debt, excluding current portion 525,836 524,541
Other long-term liabilities 41,578 40,108
Stockholders' equity 237,152 261,323
Total liabilities and stockholders'
equity: $ 962,989 972,774
SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
CONSOLIDATED SEGMENT OPERATING DATA
Three Months Ended March 31, 2003 and 2004
(Unaudited, in thousands,)
Quarter Ended March 31, 2003
Telecom-
Pari- Venue munications
Lottery Mutuel Management Products
Group Group Group Group Totals
Service revenues $70,964 18,930 15,373 - 105,267
Sales revenues 6,047 2,040 - 9,864 17,951
Total revenues 77,011 20,970 15,373 9,864 123,218
Cost of service 36,331 10,748 10,549 - 57,628
Cost of sales 4,485 1,253 - 6,669 12,407
Amortization of service
contract software 661 606 - - 1,267
Total operating
expense 41,477 12,607 10,549 6,669 71,302
Gross profit 35,534 8,363 4,824 3,195 51,916
Selling, general and
administrative expenses 9,233 2,232 902 1,214 13,581
Depreciation and
amortization 5,673 2,769 503 647 9,592
Segment operating
income $20,628 3,362 3,419 1,334 28,743
Unallocated corporate
expense 4,950
Consolidated operating
income $23,793
Quarter Ended March 31, 2004
Telecom-
Pari- Venue munications
Lottery Mutuel Management Products
Group Group Group Group Totals
Service revenues $107,294 19,043 15,296 - 141,633
Sales revenues 29,565 689 - 13,578 43,832
Total revenues 136,859 19,732 15,296 13,578 185,465
Cost of service 55,010 9,994 10,881 - 75,885
Cost of sales 20,247 409 - 10,000 30,656
Amortization of
service contract
software 793 641 - - 1,434
Total operating
expense 76,050 11,044 10,881 10,000 107,975
Gross profit 60,809 8,688 4,415 3,578 77,490
Selling, general and
administrative
expenses 16,562 1,839 1,004 1,482 20,887
Depreciation and
amortization 9,507 2,820 490 733 13,550
Segment operating
income $34,740 4,029 2,921 1,363 43,053
Unallocated corporate
expense 5,243
Consolidated operating
income $37,810
SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
RECONCILIATION OF NET INCOME BEFORE PREFERRED
STOCK DIVIDENDS TO EBITDA
(Unaudited, in thousands)
Quarter Ended
March 31,
2003 2004
Net income before preferred stock dividends $ 11,321 20,421
Add: Income tax expense 6,344 9,391
Add: Depreciation and amortization expense 11,048 15,194
Add: Interest expense 6,232 7,390
Add: Other (income) expense (104) 608
EBITDA $ 34,841 53,004
EBITDA, as included herein, represents operating income plus depreciation and amortization expenses. EBITDA is included in this document as it is a basis upon which we assess our financial performance, and it provides useful information regarding our ability to service our debt. EBITDA should not be considered in isolation or as an alternative to net income, cash flows from operations, or other consolidated income or cash flow data prepared in accordance with generally accepted accounting principles as measures of our profitability or liquidity. EBITDA as defined in this document may differ from similarly titled measures presented by other companies.
Company Contact: Lisa D. Lettieri
Scientific Games Corporation
212-754-2233
Media Contact: Shelley Spector
Spector Associates, Inc.
212-943-5858
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ok. who here cares?
That is not a good message to be sending here. Scientific Games is one of the two major players in the lottery industry, and many visitors here DO care about the lottery industry. You will not ingratiate yourself to others by posting junk like that.
Dr EW might have thought the info was not up the alley of most Lottery Posters.